Building
Rewarding
Relationships
2021
Annual
Report
2021 ANNUAL REPORT
Flushing Financial Corporation
(Nasdaq: FFIC) is the holding company for Flushing Bank®, an FDIC insured, New York
State-chartered commercial bank that operates banking offices in Queens, Brooklyn,
Manhattan, and on Long Island. The Bank has been building relationships with families,
business owners, and communities since 1929. Today, it offers the products, services,
and conveniences associated with large commercial banks, including a full complement
of deposit, loan, equipment finance, and cash management services. Rewarding
customers with personalized attention and bankers who can communicate in the
languages prevalent within these multicultural markets is what makes the Bank uniquely
different. As an Equal Housing Lender and leader in real estate lending, the Bank’s
experienced lending teams create mortgage solutions for real estate owners and
property managers both within and outside the New York City metropolitan area. The
Bank also fosters relationships with consumers nationwide through its online banking
division with the iGObanking® and BankPurely® brands.
“FlushingBankSupports
LocalCommunities
ThroughItsContinued
ParticipationintheSBA
PaycheckProtection
Program”
— January 4, 2021
Financial Highlights
(Dollars in thousands, except per share data)
At or for the years ended
December 31,
Selected Financial Condition Data
Total assets
Loans, net
Securities held to maturity
Securities available for sale
Total Securities
Noninterest-bearing deposits
Other core deposits
Certificates of deposits
Total Deposits1
Stockholders’ equity
Book value per common share
Tangible book value per common share
Selected Operating Data
Net interest income
Net income
Diluted earnings per common share
Dividends paid per common share
2021
2020
$ 8,045,911
$ 6,600,970
$ 7,976,394
$ 6,659,521
$
57,868
$ 777,236
$ 835,104
$ 967,621
$ 4,471,249
$ 946,575
$
$
$
$
57,832
647,974
705,806
778,672
$ 4,219,322
$ 1,138,361
$ 6,385,445
$ 6,136,355
$ 679,628
$
$
22.26
21.61
$ 247,969
$
$
$
81,793
2.59
0.84
$
$
$
$
$
$
$
618,997
20.11
19.45
195,199
34,674
1.18
0.84
Selected Financial Ratios and Other Data
Return on average assets
Return on average equity
Net interest rate spread, FTE
Net interest margin, FTE
Efficiency ratio
Equity to total assets
Nonperforming assets to total assets
Allowance for loan losses to gross loans
Allowance for loan losses to total nonperforming loans
Net loan charge-offs to average loans
1.00 %
12.60 %
3.14 %
3.24 %
55.72 %
8.45 %
0.19 %
0.56 %
248.66 %
0.05 %
0.48 %
5.98 %
2.70 %
2.85 %
58.69 %
7.76 %
0.26 %
0.67 %
214.27 %
0.06 %
1 Includes mortgagors’ escrow deposits
1
To Fellow Shareholders,
2021 was a memorable year in many respects. The Company had record earnings and
achieved several other key milestones, but what we are most proud of is the commitment
of employees to our customers and communities while successfully navigating the various
phases of COVID-19. Our people are the Company’s competitive advantage as they
execute every day on our strategic objectives. Their accomplishments were many in
2021, including achieving record earnings, record annual net revenue, and record low
cost of deposits. To reward employees for their achievements and performance through
the pandemic, we recognized a one-time increase in compensation expense.
Additionally, the Empire Bancorp integration was completed, and we delivered or
exceeded on our promises for EPS accretion, costs savings, and improvement in loan
and deposit metrics. For the sixth consecutive year, we reaffirmed our investment grade
rating from the Kroll Bond Rating Agency, which allowed us to issue subordinated debt
with a coupon rate lower than the outstanding debt. All of this translated into a 46% stock
appreciation in 2021, which outperformed the 14% rise in the Russell 2000 Index and the
33% increase in the KBW Regional Bank Index.
In 2021, the Company executed well on four primary strategic objectives, which included:
Manage cost of funds and continue to improve funding mix—The cost of deposits
reached a record low of 0.32% in 2021, compared to 0.82% in 2020, and the cost of
funds declined 51 basis points to 0.55% in 2021. Average noninterest-bearing deposits
increased 58% year over year and composed 14% of total average deposits.
Manage credit risk—The Company has outperformed the industry in managing credit
losses over the long term, and this continued in 2021. Net charge-offs were five basis
points in 2021 compared to 25 basis points for the industry.1 Nonperforming assets,
along with classified and criticized loans, declined in 2021.
Deposits
(in millions)
Net Interest Income
(in millions)
Net Income
(in millions)
Net Interest Margin
(percent)
$7,000
$250
$7,000
$250
$100
3.50%
$100
$3.50
6,000
5,000
4,000
3,000
2,000
1,000
0
200
150
100
50
0
6,000
5,000
4,000
3,000
2,000
1,000
0
’17 ’18 ’19 ’20 ’21
200
150
100
50
0
’17 ’18 ’19 ’20 ’21
80
60
40
20
0
’17 ’18 ’19 ’20 ’21
3.00
2.50
2.00
1.50
1.00
0.50
0
’17 ’18 ’19 ’20 ’21
80
60
40
20
0
3.00
2.50
2.00
1.50
1.00
0.50
0.0
1 “Industry” includes FDIC insured institutions from “FDIC Statistics at a Glance” through December 31, 2021
2
Resume historical loan growth while achieving appropriate risk-adjusted returns—
Average net loans increased 11% in 2021, while period-end loans, excluding Paycheck
Protection Program (PPP) loans, were up slightly. Loan yields were stable year over year.
Enhance core earnings power by improving scalability and efficiency—The Company’s
digital banking platform continued to expand the number of active users and enrollments.
We have made a strategic investment in JAM FINTOP, which allows an early look at
emerging technology, and have expanded the use of the Numerated platform, which
we used for PPP.
Communities
Customers
Employees
Regulators
Rewarding
Relationships
Investors
While 2021 was a very successful year, it also positioned us well to take advantage of
the market in 2022. Our strategic objectives remain intact, and we have key initiatives
planned for this year, including:
Capitalize on merger disruption. There were eight bank merger announcements or
closings within our core markets in 2021. Of the $328 billion of deposits in Queens,
Kings, Nassau, and Suffolk counties, $60 billion, or 18%, involve a merger participant.
The Company has already hired 24 people from these institutions, of which nine are
revenue producers. We will continue to look for ways to capitalize on these opportunities
and drive growth over the short, medium, and long term.
Communicate our “Rewarding Relationships” corporate brand promise. We have
built our business on relationships and delivering relevant value to all stakeholders,
including customers, communities, employees, regulators, and investors. The Company
is committed to building rewarding relationships as we expand our business.
Enable customers to purchase and sell bitcoin. This initiative should help attract new
customers, increase noninterest-bearing deposits, and supplement noninterest income.
3
Expand fintech partnerships. When the pandemic started and the government
approved PPP, we engaged Numerated to help process the second round of loan
applications. This partnership provided a better customer experience. Based on this,
we have expanded our offering with Numerated to other products and will look to
enhance this relationship and add other partnerships in 2022.
Enhance environmental, social, and governance (ESG) strategies and initiatives.
The Company has focused on its customers, communities, and employees since its
founding in 1929. While community events have changed during the pandemic, the
Company continued its support of Neighborhood Housing Services of New York City,
United Way of Long Island, and Asian Americans For Equality, as well as other
organizations. We will continue to actively support the communities, customers, and
employees in our multicultural markets, while remaining a responsible corporate citizen.
“ Our people are the Company’s competitive advantage as they
execute every day on our strategic objectives.”
As you can see, the Company has a bright future and will continue to work to benefit
all stakeholders. Building off the momentum generated in 2021, our strong brand,
experienced leadership team, and proven strategy are expected to deliver solid results
in 2022 and beyond. Our people are our most important asset, and they have done an
incredible job navigating the pandemic while servicing clients and communities. We
thank our clients for considering us as a trusted advisor and for the opportunity to serve
them. To our valued shareholders, we will continue to work diligently for you every day,
and we thank you for your trust and support.
Alfred A. DelliBovi
Chairman of the Board
John R. Buran
President and Chief Executive Officer
4
“FlushingBankMakes
DonationtoAsian
AmericansforEquality
(AAFE)”
— April 12, 2021
Building Rewarding Relationships
Founded in 1929, Flushing Bank knows the power of community banking throughout
periods of economic downturns and booms, and we are here to make sure our communities
thrive. We have never wavered from our tried-and-true, community-based approach and
are connected to the communities we serve—and in which we work and call home—
supporting diversity and inclusion and helping them to flourish.
Going beyond what multicultural communities typically expect from a banking partner,
we staff our branches with bankers who can communicate in the languages and dialects
prevalent within our customer base to help ensure a first-rate experience. Across
Queens, Brooklyn, Manhattan, and Long Island, we have distinguished ourselves as a
leader in serving multicultural neighborhoods, and we proudly sponsor cultural and
charitable events throughout our markets.
As a community bank with the products and services of a large bank, Flushing Bank
can provide exceptional customer service with a highly personalized touch. We pride
ourselves on being a bank that cares about our customers and communities, and invite
you to learn more about Flushing Bank, where at the heart of our approach to banking
relationships is the philosophy that we are “Small enough to know you. Large enough to
help you.®” At Flushing Bank, we are committed to building rewarding relationships
while expanding our business.
5
“FlushingBankParticipating
inFederalHomeLoanBank
ofNewYork’s(FHLBNY)
SmallBusinessRecovery
GrantProgramtoAssist
LocalSmallBusinessesand
Non-ProfitOrganizations”
— May 6, 2021
Flushing Bank can help you bank better, connect with your money more easily,
and work to achieve your financial goals. From personal and business banking to
lending and government banking, we offer an array of financial services and
experienced professionals who are ready to help.
Personal Banking
Our personal banking products make banking easy while helping you save time
and money. We are here to help you achieve what is important to you, your
family, and your financial future, with a full line of personal services to choose
from supported by the latest digital innovations. Our retail branch network
focuses on providing a consistent and superior customer experience and
expanding relationships with our customers in the New York metropolitan area.
Our online banks, iGObanking and BankPurely, strive for the same while serving
consumers nationwide.
Business Banking
Our business banking products are designed to simplify banking so you can
focus on growing your business or professional practice. We offer a full range of
financial solutions for companies and practices, large and small. Our business
6
team takes the time to understand your unique situation and gives you options
to keep your business moving in the right direction. From everyday banking to
specialized professional services, we remain committed to bringing you the tools
you need to succeed.
Lending—Business and Real Estate
Our diverse portfolio of lending options can help you finance new business
opportunities and real estate purchases. Whether you are an entrepreneur, real
estate owner, or property manager, financing can be an integral part of your
plan for success. We offer a host of lending solutions, customized to your needs,
with competitive rates and terms. Our experienced lending professionals have a
deep understanding of the New York market and will collaborate with you to
help secure the financing option that works best for you.
Government Banking
Our government banking team is composed of dedicated, experienced
professionals who focus exclusively on serving the unique needs of public
entities, municipalities, and public schools across the New York area. From
deposit products to cash management services and much more, you will have
access to a full suite of products—including operating and investment accounts,
traditional collateral options, letters of credit, and reciprocal deposits with full
FDIC coverage—designed to maximize revenues.
“FlushingBankSupports
FederationofIndian
PhysiciansAssociations
(FIPA)ofUSAinEfforts
toSend5,000Oxygen
ConcentratorstoIndia”
— May 21, 2021
7
“FlushingBankCelebrates
SponsorshipofHongKong
DragonBoatFestivalof
NewYorkandIndiaDay
ParadeinHicksville,NY”
— August 10, 2021
Our digital platforms provide a superior experience, with online and mobile
solutions that offer the latest technology and provide customers access to their
personal accounts when and where they need it. Explore how these simple solutions
can make your life easier and help you put more time back into your day.
Online Banking
Flushing Bank Online Banking features innovative, simple-to-use tools that give
you the flexibility to manage your account and conduct transactions at your
convenience, 24/7. Simplifying money management and keeping track of your
budget is easy. View balances and account history, set alerts, automate payments,
manage your accounts, and much more from one online account.
Mobile Banking
Flushing Bank Mobile Banking is the fast, secure, and easy way to manage your
money and monitor your accounts on the go. Bank when you want, wherever
you are, right from your smartphone or tablet.
8
Mobile Check Deposit
Enjoy the flexibility and convenience of depositing checks into your Flushing Bank
account anywhere, anytime with Flushing Bank Mobile Check Deposit. It is secure
and takes just minutes using your iPhone® or Android™ smartphone or tablet.
Digital Wallet
Contactless payment methods continue to gain popularity. Digital wallets allow
you to store your payment options, such as your Flushing Bank Debit Card, allowing
you to conveniently use your smartphone or smartwatch to make a purchase.
Zelle®
When timing is everything, send money with Zelle®, a fast, safe, and easy way
to send money to family and friends using just a U.S. mobile number or email
address. Available in the Flushing Bank Mobile Banking app.
Zelle® and the Zelle® related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
“FlushingBankAttends
RibbonCutting
CelebrationatSouth
AsianCouncilforSocial
Services(SACSS)
CommunityCenter”
—August 17, 2021
9
“FlushingBankPartnerswith
TheLonelyEntrepreneurto
OfferFreeEntrepreneur
LearningtoMinorityBusiness
Owners”
—December 8, 2021
Seamlessly manage your business while managing your bank accounts with
innovative, simple-to-use tools, all from your mobile device or computer.
Business Online Banking
Flushing Bank Business Online Banking supports your busy schedule by providing
online features that help you keep track of your budget and manage your money
efficiently. View your balance and transactions while going paperless with free
online eStatements and eBills. Simplify your financial agenda by accessing your
online Flushing Bank account anytime from your mobile device.
Business Mobile Banking
Experience a fast, secure, and effortless way to manage and monitor your
accounts with Flushing Bank Business Mobile Banking. The mobile banking app
gives you access to valuable tools and services. Take advantage of financial
flexibility that fits into your schedule—whenever, wherever.
10
Our goal is to be a reliable financial partner small enough to place the customer
at the center of everything we do yet large enough to offer accessibility to the
latest banking conveniences.
Remote Deposit
Allows business customers to deposit checks into their accounts from their
offices using a scanner attached to their computers. Save time and maintain
cash flow while enjoying the convenience of depositing checks anytime.
Cash Management Services
Provides Cash Manager Direct business customers online access to view their
account balances and transaction details and initiate transactions. Flushing Bank
Online Escrow is a state-of-the-art digital tool to assist in the management of
escrow and subaccount requirements.
Assisted Service Kiosk and Video Banker
These enhanced self-serving ATMs manage almost any type of transaction, from
cashing a check to providing cash in preferred denominations. Video Banker
enables our face-to-face live banker service at the touch of a screen through a
video-chat platform. Simply touch “Help” on the ATM screen to request assistance
with a range of financing tasks.
“FlushingBank
AnnouncesElimination
ofOverdraft,Insufficient
Funds,andTransferFees
onConsumerChecking
Accounts”
—January 12, 2022
11
“FlushingBanktoDonate
toBronxFireEmergency
ReliefFunds”
— January 20, 2022
Environmental, Social, and Governance (ESG)
As a community-focused organization that has distinguished itself as a leader in
serving multicultural neighborhoods, we advocate for and support the customers
and constituents who compose our diverse market. We have a comprehensive
understanding of our communities’ needs, because we live, work, and volunteer
in them.
Many of our managers participate as board members of local community
organizations, and their active participation helps to keep us connected with the
communities to support their economic and social vitality. We also work with an
advisory board composed of local business leaders and prominent community
members to guide our support. The Company recently formed Flushing Bank
Serves, a committee designed to connect employees with community organizations
that need volunteers.
At Flushing Bank, we believe it is all about opening doors for people in the
community and building something that is better for everyone. Our multifamily
lending is generally focused on properties with low- to moderate-income tenants.
We consider building code compliance and environmental impact studies for
construction loans, and review environmental reporting on commercial real estate
for adherence with American Society for Testing and Materials (ASTM) standards.
We promote diversity and inclusion and strive to be an inclusive and bias-free
company, where employees feel empowered to achieve their full potential. The
Company is committed to enhancing our ESG efforts and evolving our strategy
to support our vision of building relationships in our communities while delivering
rewarding value.
12
2021 FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
Commission file number 001-33013
FLUSHING FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
11-3209278
(I.R.S. Employer Identification No.)
220 RXR Plaza, Uniondale, New York 11556
(Address of principal executive offices)
(718) 961-5400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
FFIC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities
Act. Yes X No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes X No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. X Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). X Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer X
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. X Yes No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes X No
As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter; the aggregate market value
of the voting stock held by non-affiliates of the registrant was $628,986,000. This figure is based on the closing price on that date on the NASDAQ
Global Select Market for a share of the registrant’s Common Stock, $0.01 par value, which was $21.43.
The number of shares of the registrant’s Common Stock outstanding as of February 28, 2022 was 30,481,543 shares.
Portions of the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 18, 2021 are
incorporated herein by reference in Part III.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Item 1. Business.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a) 1. Financial Statements
(a) 2. Financial Statement Schedules
(a) 3. Exhibits Required by Securities and Exchange Commission Regulation S-K
SIGNATURES
POWER OF ATTORNEY
Page
1
46
56
56
56
56
56
59
59
73
74
142
142
142
143
143
143
143
143
143
144
144
144
145
i
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements contained in this Annual Report on Form 10-K (this “Annual Report”) 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 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, factors discussed under the captions “Business — General — Allowance for
Credit Losses” and “Business — General — Market Area and Competition” in Item 1 below, “Risk Factors” in Item 1A
below, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview” in
Item 7 below, and elsewhere in this Annual Report 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,”, “goals”, “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. We have no obligation to update these forward-looking statements.
PART I
As used in this Report, the words “we,” “us,” “our” and the “Company” are used to refer to Flushing Financial
Corporation (the “Holding Company”) and its direct and indirect wholly owned subsidiaries, Flushing Bank (the
“Bank”), Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, which was
dissolved as of June 30, 2021.
Item 1. Business.
Overview
GENERAL
The Holding Company is a Delaware corporation organized in 1994. The Bank was organized in 1929 as a New
York State-chartered mutual savings bank. Today the Bank operates as a full-service New York State commercial bank.
Our primary business is the operation of the Bank. The Bank owned three subsidiaries during all or a portion of 2021:
Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, which was dissolved as
of June 30, 2021. The Bank also operates an internet branch (the “Internet Branch”), which operates under the brands of
iGObanking.com® and BankPurely®. The activities of the Holding Company are primarily funded by dividends, if any,
received from the Bank, issuances of subordinated debt and junior subordinated debt, and issuances of equity securities.
The Holding Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “FFIC.”
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and
Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts formed to issue a total of
$60.0 million of capital securities and $1.9 million of common securities (which are the only voting securities). The
Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance of
these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in our
consolidated financial statements as we would not absorb the losses of the Trusts if losses were to occur.
Unless otherwise disclosed, the information presented in this Annual Report reflects the financial condition and
results of operations of the Company. Management views the Company as operating a single unit – a community bank.
Therefore, segment information is not provided. At December 31, 2021, the Company had total assets of $8.0 billion,
deposits of $6.3 billion and stockholders’ equity of $0.7 billion.
1
On October 30, 2020, the Company completed its acquisition of Empire Bancorp, Inc. (“Empire”), in a transaction
valued at $87.5 million upon closing, all outstanding shares of Empire voting and non-voting common stock were
exchanged for consideration consisting of $54.8 million in cash and 2,557,028 shares of Holding Company common stock.
Goodwill of $1.5 million was recorded as a result of the Empire acquisition. Under the terms of the merger agreement,
each share of Empire common stock was exchanged for either 0.6548 shares of the Company’s common stock or $14.04
in cash, based upon the election of each Empire shareholder, subject to the election and proration procedures specified in
the merger agreement (which provided for an aggregate split of total consideration of 50% Company common stock and
50% cash). In connection with the transaction, Empire National Bank (“Empire Bank”), a wholly-owned subsidiary of
Empire, merged with and into the Bank, with the Bank as the surviving entity.
Our principal business is attracting retail deposits from the general public and investing those deposits together
with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family
residential properties loans, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-
to-four family loans (focusing on mixed-use properties, which are properties that contain both residential dwelling units
and commercial units); (2) construction loans; (3) Small Business Administration (“SBA”) loans; (4) mortgage loan
surrogates such as mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and
other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. At
December 31, 2021, we had gross loans outstanding of $6,633.9 million (before the allowance for credit losses and net
deferred costs), with gross mortgage loans totaling $5,200.8 million, or 78.4% of gross loans, and non-mortgage loans
totaling $1,433.1 million, or 21.6% of gross loans. Mortgage loans are primarily multi-family, commercial and one-to-
four family mixed-use properties, which represent 73.3% of gross loans. Our revenues are derived principally from interest
on loans, our mortgage-backed securities portfolio, and interest and dividends on other investments in our securities
portfolio. Our primary sources of funds are deposits, Federal Home Loan Bank of New York (“FHLB-NY”) borrowings,
principal and interest payments on loans, mortgage-backed, other securities and to a lesser extent proceeds from sales of
securities and loans. The Bank’s primary regulator is the New York State Department of Financial Services (“NYDFS”),
and its primary federal regulator is the Federal Deposit Insurance Corporation (“FDIC”). Deposits are insured to the
maximum allowable amount by the FDIC. Additionally, the Bank is a member of the Federal Home Loan Bank (“FHLB”)
system.
Our operating results are significantly affected by changes in interest rates as well as national and local economic
conditions, including the strength of the local economy. The outbreak of the Coronavirus Disease 2019 (“COVID-19”)
pandemic has adversely impacted a broad range of industries in which the Company’s customers operate and impaired to
some extent the ability of some customers to fulfill their financial obligations to the Company. The spread of the outbreak
has caused significant disruptions in the U.S. economy and has disrupted banking and other financial activity in the areas
in which the Company operates.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law in
response to the coronavirus pandemic. This legislation provided relief for individuals and businesses negatively impacted
by the coronavirus pandemic. On December 27, 2020, the 2021 Consolidated Appropriations Act (“CAA”) was signed
into law, providing for, among other things, further suspension of the exception for loan modifications to not be classified
as “troubled debt restructuring” (“TDR”) if certain criteria are met, as described below.
The CARES Act, as amended, includes provisions for the Company to temporarily opt out of applying the TDR
accounting guidance in Accounting Standards Codification (“ASC”) 310-40 for certain loan modifications. Loan
modifications have been eligible for this relief if the related loans were not more than 30 days past due as of December
31, 2019. The Bank adopted this provision and at December 31, 2021, we had 20 active forbearances for loans with an
aggregate outstanding loan balance of approximately $71.9 million.
According to the New York Department of Labor, the unemployment rate for the New York City region decreased
to 8.8% at December 2021 from 12.0% at December 2020. Although, the unemployment rate improved year-over-year,
the rate is still elevated compared to many parts of the United States, primarily resulting from the increased impact COVID-
19 had on the New York City metropolitan area. Non-performing loans totaled $14.9 million, $21.1 million, and $13.3
million at December 31, 2021, 2020, and 2019, respectively. We had net charge-offs of impaired loans in 2021 totaling
$3.1 million compared to $3.6 million and $2.0 million for the years ended December 31, 2020, and 2019, respectively.
2
Additionally, primarily as a result of improved economic conditions, our (benefit) provision for credit losses decreased to
($4.9) million for the year ended December 31, 2021 from $23.1 million and $2.8 million for the years ended December
31, 2020 and 2019, respectively.
Market Area and Competition
We are a community oriented commercial bank offering a wide variety of financial services to meet the needs of
the communities we serve. The Bank’s main office and it’s executive offices are in Uniondale, New York, located in
Nassau County. At December 31, 2021, the Bank operated 24 full-service offices and the Internet Branch. We have offices
located in the New York City Boroughs of Queens, Brooklyn, and Manhattan, and in Nassau and Suffolk County, New
York. The vast majority of all of our mortgage loans are secured by properties located in the New York City metropolitan
area.
We face intense competition both in making loans and in attracting deposits. Our market area has a high density
of financial institutions, many of which have greater financial resources, name recognition and market presence than we
do, and all of which are competitors to varying degrees. Particularly intense competition exists for deposits, as we compete
with 113 banks and thrifts in the counties in which we have branch locations. Our market share of deposits, as of June 30,
2021, in these counties was 0.32% of the total deposits of these FDIC insured competing financial institutions, and we are
the 22nd largest financial institution. 1 In addition, we compete with credit unions, the stock market and mutual funds for
customers’ funds. Competition for deposits in our market and for national brokered deposits is primarily based on the
types of deposits offered and rate paid on the deposits. Particularly intense competition also exists in all of the lending
activities we emphasize.
In addition to the financial institutions mentioned above, we compete against mortgage banks and insurance
companies located both within our market and available on the internet. Competition for loans in our market is primarily
based on the types of loans offered and the related terms for these loans, including fixed-rate versus adjustable-rate loans
and the interest rate on the loan. For adjustable rate loans, competition is also based on the repricing period, the index to
which the rate is referenced, and the spread over the index rate. Also, competition is influenced by the ability of a financial
institution to respond to customer requests and to provide the borrower with a timely decision to approve or deny the loan
application. The internet banking arena also has many larger financial institutions which have greater financial resources,
name recognition and market presence than we do. Our future earnings prospects will be affected by our ability to compete
effectively with other financial institutions and to implement our business strategies. Our strategy for attracting deposits
includes using various marketing techniques, delivering enhanced technology and customer friendly banking services, and
focusing on the unique personal and small business banking needs of the multi-ethnic communities we serve. Our strategy
for attracting new loans is primarily dependent on providing timely response to applicants and maintaining a network of
quality brokers and other business sources. See “Risk Factors – The Markets in Which We Operate Are Highly
Competitive” included in Item 1A of this Annual Report.
For a discussion of our business strategies, see “Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Overview — Management Strategy” included in Item 7 of this Annual Report.
1 Per June 2021 FDIC Summary of Deposits for the New York State Counties of New York, Kings, Queens, Nassau and Suffolk
3
Lending Activities
Loan Portfolio Composition. Our loan portfolio consists primarily of mortgage loans secured by multi-family
residential, commercial real estate, one-to-four family mixed-use property, one-to-four family residential property, and
commercial business loans. In addition, we also offer construction loans, SBA loans and other consumer loans. The vast
majority of our mortgage loans are secured by properties located within our market area. At December 31, 2021, we had
gross loans outstanding of $6,633.9 million (before the allowance for credit losses and net deferred costs).
We have focused our loan origination efforts on multi-family residential mortgage loans, commercial real estate
and commercial business loans with full banking relationships. All of these loan types generally include prepayment
penalties that we collect if the loans pay in full prior to the contractual maturity. We expect to continue this emphasis
through marketing and by maintaining competitive interest rates and origination fees. Our marketing efforts include
frequent contact with mortgage brokers and other professionals who serve as referral sources.
Fully underwritten one-to-four family residential mortgage loans generally are considered by the banking industry
to have less risk than other types of loans. Multi-family residential, commercial real estate and one-to-four family mixed-
use property mortgage loans generally have higher yields than one-to-four family residential property mortgage loans and
shorter terms to maturity, but typically involve higher principal amounts and may expose the lender to a greater risk of
credit loss than one-to-four family residential property mortgage loans. The greater risk associated with multi-family
residential, commercial real estate and one-to-four family mixed-use property mortgage loans could require us to increase
our provisions for credit losses and to maintain an allowance for credit losses as a percentage of total loans in excess of
the allowance we currently maintain. We continually review the composition of our mortgage loan portfolio to manage
the risk in the portfolio. See “General – Overview” in this Item 1 of this Annual Report.
Our loan portfolio consists of adjustable rate (“ARM”) and fixed-rate loans. Interest rates we charge on loans are
affected primarily by the demand for such loans, the supply of money available for lending purposes, the rate offered by
our competitors and the creditworthiness of the borrower. Many of those factors are, in turn, affected by local and national
economic conditions, and the fiscal, monetary and tax policies of the federal, state and local governments.
In general, consumers show a preference for ARM loans in periods of high interest rates and for fixed-rate loans
when interest rates are low. In periods of declining interest rates, we may experience refinancing activity in ARM loans,
as borrowers show a preference to lock-in the lower rates available on fixed-rate loans. In the case of ARM loans we
originated, volume and adjustment periods are affected by the interest rates and other market factors as discussed above
as well as consumer preferences. We have not in the past, nor do we currently, originate ARM loans that provide for
negative amortization.
The majority of our commercial business loans are generated by the Company’s business banking group which
focuses on loan and deposit relationships to businesses located within our market area. These loans are generally personally
guaranteed by the owners, and may be secured by the assets of the business, which at times may include real estate. The
interest rate on these loans are generally adjustable based on a published index. These loans, while providing us a higher
rate of return, also present a higher level of risk. The greater risk associated with commercial business loans could require
us to increase our provision for credit losses, and to maintain an allowance for credit losses as a percentage of total loans
in excess of the allowance we currently maintain.
At times, we may purchase whole or participations in loans from banks, mortgage bankers and other financial
institutions when the loans complement our loan portfolio strategy. Loans purchased must meet our underwriting standards
when they were originated. Our lending activities are subject to federal and state laws and regulations. See “— Regulation.”
4
The following table sets forth the composition of our loan portfolio at the dates indicated:
2021
2020
At December 31,
2019
2018
2017
Amount
Percent
of Total Amount
Percent
of Total Amount
Percent
of Total Amount
Percent
of Total Amount
Percent
of Total
(Dollars in thousands)
Mortgage Loans:
$ 2,517,026
1,775,629
37.94 % $ 2,533,952
1,754,754
26.77
37.81 % $ 2,238,591
1,582,008
26.18
38.88 % $ 2,269,048
1,542,547
27.48
41.00 % $ 2,273,595
1,368,112
27.86
44.08 %
26.51
571,795
268,255
8,316
59,761
5,200,782
8.62
4.04
0.13
0.90
78.40
602,981
245,211
8,051
83,322
5,228,271
9.00
3.66
0.12
1.24
78.01
592,471
188,216
8,663
67,754
4,677,703
10.29
3.27
0.15
1.18
81.25
577,741
190,350
8,498
50,600
4,638,784
10.44
3.44
0.15
0.91
83.80
564,206
180,663
6,895
8,479
4,401,950
10.93
3.50
0.13
0.16
85.31
Multi-family residential
Commercial real estate
One-to-four family - mixed-use
property
One-to-four family - residential (1)
Co-operative apartment (2)
Construction
Gross mortgage loans
Non-mortgage loans:
Small Business Administration (3)
Taxi medallion
Commercial business and other
Gross non-mortgage loans
Gross loans
93,811
—
1,339,273
1,433,084
6,633,866
Unearned loan fees and deferred
costs, net
Less: Allowance for credit losses
Loans, net
4,239
(37,135)
$ 6,600,970
1.41
—
20.19
21.60
14,445
3,309
1,061,478
1,079,232
100.00 % 6,701,629 100.00 % 5,756,935
167,376
2,757
1,303,225
1,473,358
2.50
0.04
19.45
21.99
0.25
0.06
18.44
18.75
15,210
4,539
877,763
897,512
100.00 % 5,536,296
0.27
0.08
15.85
16.20
18,479
6,834
732,973
758,286
0.36
0.13
14.20
14.69
100.00 % 5,160,236 100.00 %
3,045
(45,153)
$ 6,659,521
15,271
(21,751)
$ 5,750,455
15,188
(20,945)
$ 5,530,539
16,763
(20,351)
$ 5,156,648
(1) One-to-four family residential mortgage loans also include home equity and condominium loans. At December 31, 2021, gross home equity loans
totaled $28.4 million and condominium loans totaled $29.0 million.
(2) Consists of loans secured by shares representing interests in individual co-operative units that are generally owner occupied.
(3)
Includes SBA Payment Protection Program (“SBA PPP”) loans totaling $77.4 million and $151.9 million at December 31, 2021 and 2020,
respectively.
5
The following table sets forth our loan originations (including the net effect of refinancing) and the changes in
our portfolio of loans, including purchases, sales and principal reductions for the years indicated:
(In thousands)
Mortgage Loans
At beginning of year
Mortgage loans originated:
Multi-family residential
Commercial real estate
One-to-four family mixed-use property
One-to-four family residential
Co-operative apartment
Construction
Total mortgage loans originated
Mortgage loans purchased:
Multi-family residential
Commercial real estate
One-to-four family residential
Construction
Total mortgage loans purchased
Acquisition of Empire loans:
Multi-family residential
Commercial real estate
One-to-four family mixed-use property
One-to-four family residential
Construction
Total mortgage loans acquired
Less:
Principal reductions
Mortgage loan sales
Charge-offs
Loans transferred to OREO
At end of year
Non-mortgage loans
At beginning of year
Loans originated:
Small Business Administration (1)
Commercial business
Other
Total other loans originated
Non-mortgage loans purchased:
Commercial business
Total non-mortgage loans purchased
Acquisition of Empire loans:
Small Business Administration (2)
Commercial business
Other
Total non-mortgage loans acquired
Less:
Non-mortgage loan sales
Principal reductions
Charge-offs
At end of year
For the years ended December 31,
2020
2019
2021
$
5,228,271
$
4,677,703
$
4,638,784
246,964
140,948
41,110
12,596
413
26,375
468,406
—
27,534
57,952
11,749
97,235
—
—
—
—
—
—
207,101
157,592
35,131
21,805
704
12,059
434,392
5,628
34,260
—
9,800
49,688
287,239
81,349
25,151
54,437
12,912
461,088
245,775
178,336
66,128
25,024
2,117
16,153
533,533
1,832
—
—
17,766
19,598
—
—
—
—
—
—
565,606
27,384
140
—
5,200,782
$
394,099
498
3
—
5,228,271
$
505,099
8,482
392
239
4,677,703
1,473,358
$
1,079,232
$
897,512
$
$
143,363
375,508
4,594
523,465
164,856
164,856
—
—
—
—
112,352
254,121
9,960
376,433
143,601
143,601
62,778
161,495
43
224,316
3,426
402,127
1,992
407,545
201,624
201,624
—
—
—
—
—
723,601
4,994
1,433,084
$
6,876
339,346
4,002
1,473,358
$
5,213
419,850
2,386
1,079,232
$
(1) Includes $138.7 million and $111.6 million of SBA PPP loans for the years ended December 31, 2021 and
2020, respectively.
(2) Includes $55.5 million of SBA PPP loans acquired from Empire at December 31, 2020.
6
Loan Maturity and Repricing. The following table shows the maturity of our total loan portfolio at December 31,
2021. Scheduled repayments are shown in the maturity category in which the payments become due.
Mortgage loans
Non-mortgage loans
(In thousands)
Amounts due within one year
Amounts due after one year:
One to two years
Two to three years
Three to five years
Five to fifteen years
Over fifteen years
Total due after one year
Multi-family Commercial mixed-use
residential real estate property residential apartment
Co-operative
Construction Administration and other Total loans
Small Business
Commercial
business
One-to-four
family
One-to-four
family
$
304,068 $
316,919 $
45,083 $
17,196 $
283
$
36,064 $
29,712 $
458,313 $ 1,207,638
267,807
240,565
226,995
208,956
1,268,635
2,212,958
225,765
190,783
179,467
151,399
711,296
1,458,710
43,359
41,338
42,360
42,534
357,121
526,712
17,676
17,044
15,863
15,352
185,124
251,059
296
303
314
7,120
— —
8,033
8,316
$
19,154
3,327
291
925
—
23,697
59,761 $
822,253
231,610
16,586
688,977
179,033
16,584
614,143
132,439
16,414
533,690
104,097
3,307
2,767,165
233,781
11,208
64,099
5,426,228
880,960
93,811 $ 1,339,273 $ 6,633,866
Total amounts due
$ 2,517,026 $ 1,775,629 $ 571,795 $ 268,255 $
Sensitivity of loans to changes in
interest rates - loans due after
one year :
Fixed rate loans
Adjustable rate loans
$
282,325 $
107,558 $ 164,361 $
1,930,633
1,351,152
362,352
24,300 $
226,759
677
7,356
$
— $
23,697
47,948 $
16,151
531,291 $ 1,158,460
4,267,769
349,669
Total loans due after one
year
$ 2,212,958 $ 1,458,710 $ 526,713 $ 251,059 $
8,033
$
23,697 $
64,099 $
880,960 $ 5,426,229
Multi-family Residential Lending. Loans secured by multi-family residential properties were $2,517.0 million, or
37.94% of gross loans at December 31, 2021. Our multi-family residential mortgage loans had an average principal balance
of $1.1 million at December 31, 2021, and the largest multi-family residential mortgage loan held in our portfolio had a
principal balance of $31.6 million. We offer both fixed-rate and adjustable-rate multi-family residential mortgage loans,
with maturities of up to 30 years.
In underwriting multi-family residential mortgage loans, we review the expected net operating income generated
by the real estate collateral securing the loan, the age and condition of the collateral, the financial resources and income
level of the borrower and the borrower’s experience in owning or managing similar properties. We typically require debt
service coverage of at least 125% of the monthly loan payment. We generally originate these loans up to only 75% of the
appraised value or the purchase price of the property, whichever is less. Any loan with a final loan-to-value ratio in excess
of 75% must be approved by the Board of Directors of the Bank (the “Bank Board of Directors”) or the Loan Committee
as an exception to policy. We generally rely on the income generated by the property as the primary means by which the
loan is repaid. However, personal guarantees may be obtained for additional security from these borrowers. We typically
order an environmental report on our multi-family and commercial real estate loans.
Loans secured by multi-family residential property generally involve a greater degree of risk than residential
mortgage loans and carry larger loan balances. The increased credit risk is the result of several factors, including the
concentration of principal in a smaller number of loans and borrowers, the effects of general economic conditions on
income producing properties and the increased difficulty in evaluating and monitoring these types of loans. Furthermore,
the repayment of loans secured by multi-family residential property is typically dependent upon the successful operation
of the related property, which is usually owned by a legal entity with the property being the entity’s only asset. If the cash
flow from the property is reduced, the borrower’s ability to repay the loan may be impaired. If the borrower defaults, our
only remedy may be to foreclose on the property, for which the market value may be less than the balance due on the
related mortgage loan. Loans secured by multi-family residential property also may involve a greater degree of
environmental risk. We seek to protect against this risk through obtaining an environmental report. See “Asset Quality —
Environmental Concerns Relating to Loans.”
7
At December 31, 2021, $2,145.9 million, or 85.26%, of our multi-family mortgage loans consisted of ARM loans.
We offer ARM loans with adjustment periods typically of five years and for terms of up to 30 years. Interest rates on ARM
loans currently offered by us are adjusted at the beginning of each adjustment period based upon a fixed spread above the
FHLB-NY corresponding Regular Advance Rate. From time to time, due to competitive forces, we may originate ARM
loans at an initial rate lower than the fully indexed rate as a result of a discount on the spread for the initial adjustment
period. Multi-family adjustable-rate mortgage loans generally are not subject to limitations on interest rate increases either
on an adjustment period or aggregate basis over the life of the loan; however, the loans generally contain interest rate
floors. We originated and purchased multi-family ARM loans totaling $188.7 million, $173.6 million, and $206.2 million
during 2021, 2020, and 2019, respectively.
At December 31, 2021, $371.1 million, or 14.74%, of our multi-family mortgage loans consisted of fixed rate
loans. Our fixed-rate multi-family mortgage loans are generally originated for terms up to 15 years and are competitively
priced based on market conditions and our cost of funds. We originated and purchased $58.3 million, $39.1 million, and
$41.4 million of fixed-rate multi-family mortgage loans in 2021, 2020, and 2019, respectively.
Commercial Real Estate Lending. Loans secured by commercial real estate were $1,775.6 million, or 26.77% of
gross loans, at December 31, 2021. Our commercial real estate mortgage loans are secured by properties such as office
buildings, hotels/motels, small business facilities, strip shopping centers and warehouses. At December 31, 2021, our
commercial real estate mortgage loans had an average principal balance of $2.3 million and the largest of such loans,
which is secured by a multi-tenant shopping center, had a principal balance of $40.1 million. Commercial real estate
mortgage loans are generally originated in a range of $100,000 to $10.0 million.
In underwriting commercial real estate mortgage loans, we employ the same underwriting standards and
procedures as are employed in underwriting multi-family residential mortgage loans.
Commercial real estate mortgage loans generally involve a greater degree of credit risk for the same reasons
applicable to multi-family residential mortgage loans.
At December 31, 2021, $1,549.5 million, or 87.26%, of our commercial mortgage loans consisted of ARM loans.
We offer ARM loans with adjustment periods of one to five years and generally for terms of up to 15 years. Interest rates
on ARM loans currently offered by us are adjusted at the beginning of each adjustment period based upon a fixed spread
above the FHLB-NY corresponding Regular Advance Rate. From time to time, we may originate ARM loans at an initial
rate lower than the index as a result of a discount on the spread for the initial adjustment period. Commercial adjustable-
rate mortgage loans generally are not subject to limitations on interest rate increases either on an adjustment period or
aggregate basis over the life of the loan; however, the loans generally contain interest rate floors. We originated and
purchased commercial ARM loans totaling $148.8 million, $134.0 million, and $158.0 million during 2021, 2020, and
2019, respectively.
At December 31, 2021, $226.1 million, or 12.74%, of our commercial mortgage loans consisted of fixed-rate
loans. Our fixed-rate commercial mortgage loans are generally originated for terms up to 20 years and are competitively
priced based on market conditions and our cost of funds. We originated and purchased $19.6 million, $57.9 million, and
$20.3 million of fixed-rate commercial mortgage loans in 2021, 2020, and 2019, respectively.
One-to-Four Family Mortgage Lending – Mixed-Use Properties. We offer mortgage loans secured by one-to-
four family mixed-use properties. These properties contain up to four residential dwelling units and include a commercial
component. We offer both fixed-rate and adjustable-rate one-to-four family mixed-use property mortgage loans with
maturities of up to 30 years and a general maximum loan amount of $1.0 million. One-to-four family mixed-use property
mortgage loans were $571.8 million, or 8.62% of gross loans, at December 31, 2021.
In underwriting one-to-four family mixed-use property mortgage loans, we employ the same underwriting
standards as are employed in underwriting multi-family residential mortgage loans.
8
At December 31, 2021, $384.3 million, or 67.20%, of our one-to-four family mixed-use property mortgage loans
consisted of ARM loans. We offer adjustable-rate one-to-four family mixed-use property mortgage loans with adjustment
periods typically of five years and for terms of up to 30 years. Interest rates on ARM loans currently offered by the Bank
are adjusted at the beginning of each adjustment period based upon a fixed spread above the FHLB-NY corresponding
Regular Advance Rate. From time to time, we may originate ARM loans at an initial rate lower than the index as a result
of a discount on the spread for the initial adjustment period. One-to-four family mixed-use property adjustable-rate
mortgage loans generally are not subject to limitations on interest rate increases either on an adjustment period or aggregate
basis over the life of the loan; however, the loans generally contain interest rate floors. We originated and purchased one-
to-four family mixed-use property ARM loans totaling $15.1 million, $10.0 million, and $22.4 million during 2021, 2020,
and 2019, respectively.
At December 31, 2021, $187.5 million, or 32.80%, of our one-to-four family mixed-use property mortgage loans
consisted of fixed-rate loans. Our fixed-rate one-to-four family mixed-use property mortgage loans are originated for terms
of up to 15 years and are competitively priced based on market conditions and the Bank’s cost of funds. We originated
and purchased $26.0 million, $25.2 million, and $43.8 million of fixed-rate one-to-four family mixed-use property
mortgage loans in 2021, 2020, and 2019, respectively.
One-to-Four Family Mortgage Lending – Residential Properties. We offer mortgage loans secured by one-to-
four family residential properties, including townhouses and condominium units. For purposes of the description contained
in this section, one-to-four family residential mortgage loans, co-operative apartment loans and home equity loans are
collectively referred to herein as “residential mortgage loans.” We offer both fixed-rate and adjustable-rate residential
mortgage loans with maturities of up to 30 years and a general maximum loan amount of $1.0 million. Residential
mortgage loans were $268.3 million, or 4.04% of gross loans, at December 31, 2021.
We generally originate residential mortgage loans in amounts up to 80% of the appraised value or the sale price,
whichever is less. Private mortgage insurance is required whenever loan-to-value ratios exceed 80% of the appraised value
of the property securing the loan.
At December 31, 2021, $241.1 million, or 89.89%, of our residential mortgage loans consisted of ARM loans.
We offer ARM loans with adjustment periods of one, three, five, seven or ten years. Interest rates on ARM loans currently
offered by us are adjusted at the beginning of each adjustment period based upon a fixed spread above the FHLB-NY
corresponding Regular Advance Rate. From time to time, we may originate ARM loans at an initial rate lower than the
index as a result of a discount on the spread for the initial adjustment period. ARM loans generally are subject to limitations
on interest rate increases of 2% per adjustment period and an aggregate adjustment of 6% over the life of the loan and have
interest rate floors. We originated and purchased residential ARM loans totaling $70.2 million, $18.3 million, and $22.6
million during 2021, 2020, and 2019, respectively.
The retention of ARM loans in our portfolio helps us reduce our exposure to interest rate risks. However, in an
environment of rapidly increasing interest rates, it is possible for the interest rate increase to exceed the maximum
aggregate adjustment on one-to-four family residential ARM loans and negatively affect the spread between our interest
income and our cost of funds.
ARM loans generally involve credit risks different from those inherent in fixed-rate loans, primarily because if
interest rates rise, the underlying payments of the borrower rise, thereby increasing the potential for default. However, this
potential risk is lessened by our policy of originating one-to-four family residential ARM loans with annual and lifetime
interest rate caps that limit the increase of a borrower’s monthly payment.
At December 31, 2021, $27.1 million, or 10.11%, of our residential mortgage loans consisted of fixed-rate loans.
Our fixed-rate residential mortgage loans typically are originated for terms of 15 and 30 years and are competitively priced
based on market conditions and our cost of funds. We originated and purchased $0.8 million, $4.2 million, and $2.4 million
in 15-year fixed-rate residential mortgages in 2021, 2020, and 2019, respectively. We did not originate or purchase any
30-year fixed-rate residential mortgages in 2021, 2020, and 2019.
9
At December 31, 2021, home equity loans totaled $28.4 million, or 0.43%, of gross loans. Home equity loans are
included in our portfolio of residential mortgage loans. These loans are offered as adjustable-rate “home equity lines of
credit” on which interest only is due for an initial term of 10 years and thereafter principal and interest payments sufficient
to liquidate the loan are required for the remaining term, not to exceed 30 years. These adjustable “home equity lines of
credit” may include a “floor” and/or a “ceiling” on the interest rate that we charge for these loans. These loans also may
be offered as fully amortizing closed-end fixed-rate loans for terms up to 15 years. The majority of home equity loans
originated are owner occupied one-to-four family residential properties and condominium units. To a lesser extent, home
equity loans are also originated on one-to-four residential properties held for investment and second homes. All home
equity loans are subject to an 80% loan-to-value ratio computed on the basis of the aggregate of the first mortgage loan
amount outstanding and the proposed home equity loan. They are generally granted in amounts from $25,000 to $300,000.
Construction Loans. At December 31, 2021, construction loans totaled $59.8 million, or 0.90%, of gross loans.
Our construction loans primarily are adjustable rate loans to finance the construction of one-to-four family residential
properties, multi-family residential properties and owner-occupied commercial properties. We also, to a limited extent,
finance the construction of commercial properties. Our policies provide that construction loans may be made in amounts
up to 70% of the estimated value of the developed property and only if we obtain a first lien position on the underlying
real estate. Construction loans are generally made with terms of two years or less. Advances are made as construction
progresses and inspection warrants, subject to continued title searches to ensure that we maintain a first lien position. We
originated and purchased construction loans totaling $38.1 million, $21.9 million, and $33.9 million during 2021, 2020,
and 2019, respectively.
Construction loans involve a greater degree of risk than other loans because, among other things, the underwriting
of such loans is based on an estimated value of the developed property, which can be difficult to ascertain in light of
uncertainties inherent in such estimations. In addition, construction lending entails the risk that the project may not be
completed due to cost overruns or changes in market conditions.
Small Business Administration Lending. At December 31, 2021, SBA loans totaled $93.8 million, representing
1.41%, of gross loans. These loans are extended to small businesses and are guaranteed by the SBA up to a maximum of
85% of the loan balance for loans with balances of $150,000 or less, and to a maximum of 75% of the loan balance for
loans with balances greater than $150,000. We also provide term loans and lines of credit up to $350,000 under the SBA
Express Program, on which the SBA provides a 50% guaranty. The maximum loan size under the SBA guarantee program
is $5.0 million, with a maximum loan guarantee of $3.75 million. All SBA loans are underwritten in accordance with SBA
Standard Operating Procedures which requires collateral and the personal guarantee of the owners with more than 20%
ownership from SBA borrowers. Typically, SBA loans are originated in the range of $25,000 to $2.0 million with terms
ranging from one to seven years and up to 25 years for owner occupied commercial real estate mortgages. SBA loans are
generally offered at adjustable rates tied to the prime rate (as published in the Wall Street Journal) with adjustment periods
of one to three months. At times, we may sell the guaranteed portion of certain SBA term loans in the secondary market,
realizing a gain at the time of sale, and retaining the servicing rights on these loans, collecting a servicing fee of
approximately 1%.
The CARES Act created the SBA PPP. The SBA guarantees 100% of the amounts loaned by preferred banks.
These loans are extended to small businesses with less than 500 employees that were in business prior to February 15,
2020 with loan amounts of $10.0 million or less to cover their payroll costs, health care benefits (including paid sick or
medical leave, and insurance premiums), mortgage interest obligations of business, rent obligations, utility payments,
interest on other debt obligations with terms ranging up to two years with no interest payments required for six months
from the date of disbursement. We originated and purchased $143.4 million (including $138.7 million of SBA PPP loans),
$112.4 million (including $111.6 million of SBA PPP loans), and $3.4 million of SBA loans during 2021, 2020, and 2019,
respectively.
10
Commercial Business and Other Lending. At December 31, 2021, commercial business and other loans totaled
$1,339.3 million, or 20.19%, of gross loans. We originate and purchase commercial business loans and other loans for
business, personal, or household purposes. Commercial business loans are provided to businesses in the New York City
metropolitan area with annual sales of up to $250.0 million. Our commercial business loans include lines of credit and
term loans including owner occupied mortgages. These loans are secured by business assets, including accounts
receivables, inventory, equipment and real estate and generally require personal guarantees. The Bank also enters into
participations/syndications on senior secured commercial business loans, which are serviced by other banks. Commercial
business loans are generally originated in a range of $100,000 to $10.0 million. We generally offer adjustable rate loans
with adjustment periods of five years for owner occupied mortgages and for lines of credit the adjustment period is
generally monthly. Interest rates on adjustable rate loans currently offered by us are adjusted at the beginning of each
adjustment period based upon a fixed spread above the FHLB-NY corresponding Regular Advance Rate for owner
occupied mortgages and a fixed spread above the London Interbank Offered Rate (“LIBOR”) or Prime Rate for lines of
credit. Beginning in mid-2023 these loans will no longer reprice using LIBOR and will reprice on an alternative index,
such as Secured Overnight Financing Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. SOFR is a broad
measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. Commercial business
adjustable-rate loans generally are not subject to limitations on interest rate increases either on an adjustment period or
aggregate basis over the life of the loan, however they generally are subject to interest rate floors. Our fixed-rate
commercial business loans are generally originated for terms up to 20 years and are competitively priced based on market
conditions and our cost of funds. We originated and purchased $540.4 million, $397.7 million, and $603.8 million of
commercial business loans during 2021, 2020, and 2019, respectively.
Other loans generally consist of overdraft lines of credit. Generally, unsecured consumer loans are limited to
amounts of $5,000 or less for terms of up to five years. We originated and purchased $4.6 million, $10.0 million, and $1.9
million of other loans during 2021, 2020, and 2019, respectively. The underwriting standards employed by us for consumer
and other loans include a determination of the applicant’s payment history on other debts and assessment of the applicant’s
ability to meet payments on all of his or her obligations. In addition to the creditworthiness of the applicant, the
underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.
Unsecured loans tend to have higher risk, and therefore command a higher interest rate.
Loan Extensions, Renewals, Modifications and Restructuring. Extensions, renewals, modifications or
restructuring a loan, other than a loan that is classified as a TDR, requires the loan to be fully underwritten in accordance
with our policy. The borrower must be current to have a loan extended, renewed or restructured. Our policy for modifying
a mortgage loan due to the borrower’s request for changes in the terms will depend on the changes requested. The borrower
must be current and have a good payment history to have a loan modified. If the borrower is seeking additional funds, the
loan is fully underwritten in accordance with our policy for new loans. If the borrower is seeking a reduction in the interest
rate due to a decline in interest rates in the market, we generally limit our review as follows: (1) for income producing
properties and commercial business loans, to a review of the operating results of the property/business and a satisfactory
inspection of the property, and (2) for one-to-four residential properties, to a satisfactory inspection of the property. Our
policy on restructuring a loan when the loan will be classified as a TDR requires the loan to be fully underwritten in
accordance with Company policy. The borrower must demonstrate the ability to repay the loan under the new terms. When
the restructuring results in a TDR, we may waive some requirements of Company policy provided the borrower has
demonstrated the ability to meet the requirements of the restructured loan and repay the restructured loan. While our formal
lending policies do not prohibit making additional loans to a borrower or any related interest of the borrower who is past
due in principal or interest more than 90 days, it has been our practice not to make additional loans to a borrower or a
related interest of the borrower if the borrower is past due more than 90 days as to principal or interest. During the most
recent three fiscal years, we did not make any additional loans to a borrower or any related interest of the borrower who
was past due in principal or interest more than 90 days. All extensions, renewals, restructurings and modifications must
be approved by the appropriate Loan Committee.
Covid-19 Modifications. Pursuant to the CARES Act and CAA, certain loan modifications are not classified as
TDRs if the related loans were not more than 30 days past due as of December 31, 2019. The Company has elected that
loans temporarily modified for borrowers directly impacted by COVID-19 are not considered TDR, assuming the above
criteria is met and as such, these loans are considered current and continue to accrue interest at its original contractual
terms. Deferrals granted under the Cares Act are deemed in accrual status and interest income is accrued until the end of
11
deferral period even if there are no payments being collected. When the forbearance period is over, borrowers are expected
to resume contractual payments. The determination of whether a loan is past due is based on the modified terms of the
agreement. Once the deferral period is over, the borrower will resume making payments and normal delinquency-based
non-accrual policies will apply. Loans modified after January 2, 2022 are no longer eligible to be modified under the
CARES Act or CAA.
Loan Approval Procedures and Authority. The Board of Directors of the Company (the “Board of Directors”)
approved lending policies establishing loan approval requirements for our various types of loan products. Our Residential
Mortgage Lending Policy (which applies to all one-to-four family mortgage loans, including residential and mixed-use
property) establishes authorized levels of approval. One-to-four family mortgage loans that do not exceed $750,000 require
two signatures for approval, one of which must be from either the President, Senior Executive Vice President Chief of
Real Estate Lending, the Executive Vice President of Residential, Mixed Use & Small Multi-family Lending or Executive
Vice President Real Estate Credit Center (collectively, “Authorized Officers”) and the other from a Senior Underwriter,
Manager, Underwriter or Junior Underwriter in the Residential Mortgage Loan Department (collectively, “Loan
Officers”), and ratification by the Management Loan Committee. For one-to-four family mortgage loans in excess of
$750,000 up to $2.0 million, three signatures are required for approval, at least two of which must be from Authorized
Officers, and the other one may be a Loan Officer, and ratification by the Management Loan Committee and the Director’s
Loan Committee. The Director’s Loan Committee or the Bank Board of Directors also must approve one-to-four family
mortgage loans in excess of $2.0 million up to and including $5.0 million after obtaining two signatures from authorized
officers and one signature from loan officers with Management Loan Committee approval. One-to-four family mortgage
loans in excess of $5.0 million may require Director’s inspection.
Pursuant to our Commercial Real Estate Lending Policy, loans secured by commercial real estate and multi-
family residential properties up to $2.0 million are approved by the Executive Vice President of Commercial Real Estate
and the Senior Executive Vice President, Chief of Real Estate Lending or Executive Vice President Credit Center Manager
and then ratified by the Management Loan Committee and/or the Director’s Loan Committee. Loans provided in excess
of $2.0 million and up to and including $5.0 million must be submitted with the two signatures of the officers to the
Management Loan Committee for final approval and then to the Director’s Loan Committee and/or Board of Directors for
ratification. Loans in excess of $5.0 million and up to and including $25.0 million must be submitted subsequently to the
Director’s Loan Committee and/ or the Board of Directors for approval. Loan amounts in excess of $25.0 million must be
approved by the Board of Directors.
In accordance with our Business Banking Credit Policy, commercial business and other loans require two
signatures from the Business Loan Committee for approval up to $0.5 million. All commercial business loans and SBA
loans over $0.5 million and up to $2.5 million must be approved by obtaining two signatures from the Business Loan
Committee and ratified by the Management Loan Committee with the exception of SBA PPP loans. SBA PPP loans were
approved by Business Loan Committee regardless of the lending limit and ratified by Management Loan Committee.
Commercial business loans and SBA loans in excess of $2.5 million up to $5.0 million must be approved by the
Management Loan Committee and ratified by the Director’s Loan Committee. Loans in excess of $5.0 million must be
submitted to the Director’s Loan Committee and/ or the Board of Directors for approval.
Our Construction Loan Policy requires construction loans up to and including $2.0 million must be approved by
the Senior Executive Vice President, Chief of Real Estate Lending and the Executive Vice President of Commercial Real
Estate, and ratified by the Management Loan Committee or the Director’s Loan Committee. Such loans in excess of $2.0
million up to and including $5.0 million require the same officer approvals, approval of the Management Loan Committee,
and ratification of the Director’s Loan Committee or the Bank Board of Directors. Loan proposals in excess of $5.0 million
up to and including $25.0 million that are approved by Management Loan Committee will subsequently be submitted to
either the Directors Loan Committee and/or the Board of Directors for their approval. Construction loans in excess of
$25.0 million require the subsequent approval of the Bank Board of Directors. Any loan, regardless of type, that deviates
from our written credit policies must be approved by the Director’s Loan Committee or the Bank Board of Directors.
For all loans originated by us, upon receipt of a completed loan application, a credit report is ordered and certain
other financial information is obtained. An appraisal of the real estate intended to secure the proposed loan is required to
be received. An independent appraiser designated and approved by us currently performs such appraisals. Our staff
12
appraisers review all appraisals. The Bank Board of Directors annually approves the independent appraisers used by the
Bank and approves the Bank’s appraisal policy. It is our policy to require borrowers to obtain title insurance and hazard
insurance on all real estate loans prior to closing. For certain borrowers, and/or as required by law, the Bank may require
escrow funds on a monthly basis together with each payment of principal and interest to a mortgage escrow account from
which we make disbursements for items such as real estate taxes and, in some cases, hazard insurance premiums.
Loan Concentrations. The maximum amount of credit that the Bank can extend to any single borrower or related
group of borrowers generally is limited to 15% of the Bank’s unimpaired capital and surplus, or $126.0 million at
December 31, 2021. Applicable laws and regulations permit an additional amount of credit to be extended, equal to 10%
of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include
real estate. See “-Regulation.” However, it is currently our policy not to extend such additional credit. At December 31,
2021, there were no loans in excess of the maximum dollar amount of loans to one borrower that the Bank was authorized
to make. At that date, the three largest concentrations of loans to one borrower consisted of loans secured by commercial
real estate, multi-family income producing properties and commercial business loans with an aggregate principal balance
outstanding of $93.8 million, $89.0 million, and $78.7 million for each of the three borrowers, respectively.
Loan Servicing. At December 31, 2021, we were servicing $34.1 million of loans for others. Our policy is to
retain the servicing rights to the mortgage and SBA loans that we sell in the secondary market, other than sales of
delinquent loans, which are sold with servicing released to the buyer. On mortgage loans and commercial business loan
participations purchased by us for whom the seller retains the servicing rights, we receive monthly reports with which we
monitor the loan portfolio. Based upon servicing agreements with the servicers of the loans, we rely upon the servicer to
contact delinquent borrowers, collect delinquent amounts and initiate foreclosure proceedings, when necessary, all in
accordance with applicable laws, regulations and the terms of the servicing agreements between us and our servicing
agents. The servicers are required to submit monthly reports on their collection efforts on delinquent loans. At
December 31, 2021 and 2020, we held $653.4 million and $788.9 million, respectively, of loans that were serviced by
others.
Asset Quality
Loan Collection. When a borrower fails to make a required payment on a loan, except for serviced loans as
described above, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to current
status. In the case of mortgage loans, personal contact is made with the borrower after the loan becomes 30 days delinquent.
We take a proactive approach to managing delinquent loans, including conducting site examinations and encouraging
borrowers to meet with one of our representatives. When deemed appropriate, we develop short-term payment plans that
enable borrowers to bring their loans current, generally within six to nine months. We review delinquencies on a loan by
loan basis, diligently exploring ways to help borrowers meet their obligations and return them back to current status.
In the case of commercial business or other loans, we generally send the borrower a written notice of non-payment
when the loan is first past due. In the event payment is not then received, additional letters and phone calls generally are
made in order to encourage the borrower to meet with one of our representatives to discuss the delinquency. If the loan
still is not brought current and it becomes necessary for us to take legal action, which typically occurs after a loan is
delinquent 90 days or more, we may attempt to repossess personal or business property that secures a SBA loan,
commercial business loan or consumer loan.
When the borrower has indicated that they will be unable to bring the loan current, or due to other circumstances
which, in our opinion, indicate the borrower will be unable to bring the loan current within a reasonable time, the loan is
classified as non-performing. All loans classified as non-performing, which includes all loans past due 90 days or more,
are on non-accrual status unless there is, in our opinion, compelling evidence the borrower will bring the loan current in
the immediate future. At December 31, 2021, there were no loans that were past due 90 days or more and still accruing
interest.
Upon classifying a loan as non-performing, we review available information and conditions that relate to the
status of the loan, including the estimated value of the loan’s collateral and any legal considerations that may affect the
borrower’s ability to continue to make payments. Based upon the available information, we will consider the sale of the
13
loan or retention of the loan. If the loan is retained, we may continue to work with the borrower to collect the amounts due
or start foreclosure proceedings. If a foreclosure action is initiated and the loan is not brought current, paid in full, or
refinanced before the foreclosure sale, the real property securing the loan is sold at foreclosure or by us as soon thereafter
as practicable.
Once the decision to sell a loan is made, we determine what we would consider adequate consideration to be
obtained when that loan is sold, based on the facts and circumstances related to that loan. Investors and brokers are then
contacted to seek interest in purchasing the loan. We have been successful in finding buyers for our non-performing loans
offered for sale that are willing to pay what we consider to be adequate consideration. Terms of the sale include cash due
upon closing of the sale, no contingencies or recourse to us, servicing is released to the buyer and time is of the essence.
These sales usually close within a reasonably short time period.
This strategy of selling non-performing loans has allowed us to optimize our return by quickly converting our
non-performing loans to cash, which can then be reinvested in earning assets. This strategy also allows us to avoid lengthy
and costly legal proceedings that may occur with non-performing loans. There can be no assurances that we will continue
this strategy in future periods, or if continued, we will be able to find buyers to pay adequate consideration.
The following table shows delinquent and non-performing loans sold during the periods indicated:
(Dollars in thousands)
Count
Proceeds
Net (charge-offs) recoveries
Gross gains
Gross losses
For the years ended December 31,
2020
2019
2021
33
2
11
$ 28,632 $
(121)
335
—
580 $ 13,048
(1)
—
756
—
42
—
Troubled Debt Restructured. For borrowers who are experiencing financial difficulties, we have restructured
certain problem loans by: reducing the interest rate until the next reset date, extending the amortization period thereby
lowering the monthly payments, deferring a portion of the interest payment, and/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. These restructurings have not included a reduction of principal balance. We believe that restructuring
these loans in this manner will allow certain borrowers to become and remain current on their loans. These restructured
loans are classified TDR. Loans which have been current for six consecutive months at the time they are restructured as
TDR remain on accrual status. Loans which were delinquent at the time they are restructured as a TDR are placed on non-
accrual status until they have made timely payments for six consecutive months. The CARES Act, as amended by the
CAA, includes provisions for the Company to temporarily opt out of applying the TDR accounting guidance in ASC 310-
40 for certain loan modifications.
14
The following table shows loans classified as TDR at amortized cost that are performing according to their
restructured terms at the periods indicated:
(In thousands)
Accrual Status:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Commercial business and other
Total
Non-Accrual Status:
One-to-four family - mixed-use property
Taxi medallion
Commercial business and other
Total
2021
2020
At December 31,
2019
2018
2017
$
1,690 $
7,572
1,375
483
1,340
12,460
1,700 $
7,702
1,459
507
1,588
12,956
1,873 $
—
1,481
531
—
3,885
1,916 $
—
1,692
552
279
4,439
2,518
1,986
1,753
572
462
7,291
261
—
41
302
272
440
2,243
2,955
—
1,668
941
2,609
—
3,926
—
3,926
—
5,916
—
5,916
Total performing troubled debt restructured
$ 12,762 $ 15,911 $
6,494 $
8,365 $ 13,207
Loans that are restructured as TDR but are not performing in accordance with the restructured terms are excluded
from the TDR table above, as they are placed on non-accrual status and reported as non-performing loans. At December 31,
2021, there were no loans which were restructured as TDR not performing in accordance with its restructured terms. At
December 31, 2020, there were 12 loans totaling $2.2 million which were restructured as TDR not performing in
accordance with their restructured terms.
Delinquent Loans and Non-performing Assets. We generally discontinue accruing interest on delinquent loans
when a loan is 90 days past due. At that time, previously accrued but uncollected interest is reversed from income. Loans
in default 90 days or more as to their maturity date but not their interest payments, however, continue to accrue interest as
long as the borrower continues to timely remit interest payments.
15
The following table shows our non-performing assets at the dates indicated. During the years ended December 31,
2021, 2020, and 2019, the amounts of additional interest income that would have been recorded on non-accrual loans, had
they been current, totaled $1.1 million, $1.4 million, and $1.1 million, respectively. These amounts were not included in
our interest income for the respective periods.
(Dollars in thousands)
2021
2020
At December 31,
2019
2018
2017
Loans 90 days or more past due and still accruing:
Multi-family residential
$
Commercial real estate
Total
Non-accrual mortgage loans:
Multi-family residential
Commercial real estate
One-to-four family mixed-use property (1)
One-to-four family residential
Total
Non-accrual non-mortgage loans:
Small Business Administration
Taxi medallion(1)
Commercial business and other (1)
Total
Total non-accrual loans
Total non-performing loans
Other non-performing assets:
Real Estate Owned
Other assets acquired through foreclosure
Total
Total non-performing assets
—
—
—
$
201
2,547
2,748
$
$
445
—
445
—
—
—
$
—
2,424
2,424
2,431
613
1,309
7,725
12,078
937
—
1,918
2,855
14,933
14,933
2,524
1,683
1,366
5,854
11,427
1,151
2,317
3,430
6,898
18,325
21,073
2,296
367
274
5,139
8,076
1,151
1,641
1,945
4,737
12,813
13,258
2,410
1,379
928
6,144
10,861
1,267
613
3,512
5,392
16,253
16,253
3,598
1,473
1,867
7,808
14,746
46
918
—
964
15,710
18,134
—
—
—
$ 14,933
—
35
35
$ 21,108
239
35
274
$ 13,532
—
35
35
$ 16,288
—
—
—
$ 18,134
Non-performing loans to gross loans
Non-performing assets to total assets
0.23 %
0.19 %
0.31 %
0.26 %
0.23 %
0.19 %
0.29 %
0.24 %
0.35 %
0.29 %
(1) Not included in the above analysis are the following non-accrual TDRs that are performing according to their
restructured terms: taxi medallion loans totaling $0.4 million, $1.7 million, $3.9 million and $5.9 million at
December 31, 2020, 2019, 2018 and 2017 respectively, One-to-four family mixed-use property loans totaling
$0.3 million at December 31, 2021 and 2020, and commercial business loans totaling less than $0.1 million, $2.2
million and $0.9 million at December 31, 2021, 2020 and 2019, respectively.
16
The following table shows our delinquent loans that are less than 90 days past due and still accruing interest at
the periods indicated:
December 31, 2021 December 31, 2020
60 - 89
days
days
days
30 - 59
30 - 59
60 - 89
days
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use property
One-to-four family ― residential
Construction
Small Business Administration
Commercial business and other
Total
$ 3,652 $ 4,193 $ 7,582 $ 3,186
5,123
1,132
805
—
—
1,273
$ 11,978 $ 4,457 $ 36,947 $ 11,519
17,903
5,673
3,087
750
1,823
129
5,743
2,319
163
—
—
101
—
—
224
—
—
40
Other Real Estate Owned. We aggressively market our Other Real Estate Owned (“OREO”) properties. At
December 31, 2021 and 2020, we held no OREO.
We may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via
foreclosure through an in-substance repossession. During the years ended December 31, 2021 and 2020, we did not
foreclose any real estate property. Included within net loans as of December 31, 2021 and 2020, was a recorded investment
of $8.7 million and $5.9 million, respectively, of consumer mortgage loans secured by residential real estate properties for
which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
Environmental Concerns Relating to Loans. We currently obtain environmental reports in connection with the
underwriting of commercial real estate loans, and typically obtain environmental reports in connection with the
underwriting of multi-family loans. For all other loans, we obtain environmental reports only if the nature of the current
or, to the extent known to us, prior use of the property securing the loan indicates a potential environmental risk. However,
we may not be aware of such uses or risks in any particular case, and, accordingly, there can be no assurance that real
estate acquired by us in foreclosure is free from environmental contamination nor that we will not have any liability with
respect thereto.
Classified Assets. Our policy is to review our assets, focusing primarily on the loan portfolio, OREO and the
investment portfolios, to ensure that the credit quality is maintained at the highest levels. When weaknesses are identified,
immediate action is taken to correct the problem through direct contact with the borrower or issuer. We then monitor these
assets, and, in accordance with our policy and current regulatory guidelines, we designate them as “Special Mention,”
which is considered a “Criticized Asset,” and “Substandard,” “Doubtful,” or “Loss” which are considered “Classified
Assets,” as deemed necessary. If a loan does not fall within one of the previous mentioned categories and management
believes weakness is evident then we designate the loan as “Watch”, all other loans would be considered “Pass”. These
loan designations are updated quarterly. We designate an asset as Substandard when a well-defined weakness is identified
that jeopardizes the orderly liquidation of the debt. We designate an asset as Doubtful when it displays the inherent
weakness of a Substandard asset with the added provision that collection of the debt in full, on the basis of existing facts,
is highly improbable. We designate an asset as Loss if it is deemed the debtor is incapable of repayment. We do not hold
any loans designated as loss, as loans that are designated as Loss are charged to the Allowance for Credit Losses. Assets
that are non-accrual are designated as Substandard, Doubtful or Loss. We designate an asset as Special Mention if the
asset does not warrant designation within one of the other categories, but contains a potential weakness that deserves closer
attention. Loans that are in forbearance pursuant to the CARES Act or CAA and continue to perform according to the
terms of the forbearance agreement, are generally reported in the same category as they were reported immediately prior
to modification. Our Criticized and Classified Assets totaled $78.6 million at December 31, 2021, an increase of $6.7
million from $71.9 million at December 31, 2020. At December 31, 2021, we had one investment security classified as
special mention that has an outstanding balance of $21.0 million.
17
The following table sets forth the Bank’s Criticized and Classified assets at December 31, 2021:
(In thousands)
Special Mention Substandard Doubtful Loss
Total
Loans:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Construction
Small Business Administration (1)
Commercial business and other
Total loans
Investment Securities:
Held-to-maturity securities
Total investment securities
$
4,787 $
794
1,130
354
856
48
17,988
25,957
3,021 $
1,053
1,835
7,661
873
957
14,878
30,278
— $
—
—
—
—
—
1,081
1,081
— $
—
—
—
—
—
—
—
7,808
1,847
2,965
8,015
1,729
1,005
33,947
57,316
20,977
20,977
—
—
—
—
—
—
20,977
20,977
Total
$
46,934 $
30,278 $
1,081 $
— $ 78,293
The following table sets forth the Bank’s Criticized and Classified assets at December 31, 2020:
(In thousands)
Special Mention Substandard Doubtful Loss
Total
$
Loans:
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Co-operative apartments
Construction
Small Business Administration (1)
Taxi medallion
Commercial business and other
Total
$
(1) Balance reported net of SBA Guaranteed portion.
Allowance for Credit Losses
4,367 $
6,473
2,523
1,673
48
3,336
50
—
3,363
21,833 $
2,778 $
12,015
2,324
5,702
—
—
1,174
2,597
22,224
48,814 $
— $
—
—
—
—
—
—
—
1,273
1,273 $
7,145
— $
18,488
—
4,847
—
7,375
—
48
—
3,336
—
1,224
—
2,597
—
—
26,860
— $ 71,920
The Allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the
financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are
charged off against that ACL when management believes that a loan balance is uncollectable based on quarterly analysis
of credit risk.
As of January 1, 2020, the Company adopted ASC Topic 326 “Credit Losses”. The amount of the ACL is based
upon a loss rate model that considers multiple factors which reflects management’s assessment of the credit quality of the
loan portfolio. Management estimates the allowance balance using relevant information, from internal and external
sources, relating to past events, current conditions, and reasonable and supportable forecasts. The factors are both
quantitative and qualitative in nature including, but not limited to, historical losses, economic conditions, trends in
delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes.
18
The quantitative allowance is calculated using a number of inputs and assumptions. The process and guidelines
were developed using, among other factors, the guidance from federal banking regulatory agencies and GAAP. The results
of this process, support management’s assessment as to the adequacy of the ACL at each balance sheet date.
The process for calculating the allowance for credit losses begins with our historical losses by portfolio segment.
The losses are then incorporated into reasonable and supportable forecast to develop the quantitative component of the
allowance for credit losses.
When calculating the ACL estimate for December 31, 2021, the reasonable and supportable forecast was for a
period of two quarters and the reversion period was six quarters which were based on the established framework for
transition periods. This resulted in the ACL for loans totaling $37.1 million at December 31, 2021.
Non-performing loans totaled $14.9 million and $21.1 million at December 31, 2021 and 2020, respectively. The
Bank’s underwriting standards generally require a loan-to-value ratio of no more than 75% at the time the loan is
originated. At December 31, 2021, the outstanding principal balance of our non-performing loans was 30.4% of the
estimated current value of the supporting collateral, after considering the charge-offs that have been recorded. We incurred
total net charge-offs of $3.1 million and $3.6 million during the years ended December 31, 2021 and 2020, respectively.
The Company recorded a (benefit) provision for credit losses on loans totaling ($4.9) million, and $22.6 million for
the years ended December 31, 2021 and 2020, respectively. The decrease in the provision for credit losses recorded in
the year ended December 31, 2021, was primarily due to improved economic conditions. We believe that at December 31,
2021, the allowance was sufficient to absorb losses inherent in our loan portfolio. The allowance for credit losses
represented 0.56% and 0.67% of gross loans outstanding at December 31, 2021 and 2020. The allowance for credit losses
represented 248.7% of non-performing loans at December 31, 2021 compared to 214.3% at December 31, 2020.
At December 31, 2021, we had one active forbearance for held-to-maturity securities with an outstanding balance
of $21.0 million. During the time this security is in forbearance, it is considered current and as such, continues to accrue
interest at its original contractual terms. This resulted in the ACL for held-to-maturity securities totaling $0.9 million at
December 31, 2021.
19
The following table sets forth changes in, and the balance of, our Allowance for credit losses.
(Dollars in thousands)
2021
2020
For the year ended December 31, For the year ended December 31,
Balance at beginning of period
Loans- CECL Adoption
Loans- Allowance recorded at the time of
Acquisition
Loans- Charge-off
Loans- Recovery
Loans- (Benefit) Provision
Allowance for Credit Losses - Loans
Balance at beginning of period
HTM Securities- CECL Adoption
HTM Securities- (Benefit) Provision
Allowance for HTM Securities losses
Balance at beginning of period
Off-Balance Sheet - CECL Adoption
Off-Balance Sheet- (Benefit) Provision
Allowance for Off-Balance Sheet losses
Allowance for Credit Losses
$
$
$
$
$
$
$
45,153 $
—
—
(5,134)
2,015
(4,899)
37,135 $
907 $
—
(45)
862 $
1,815 $
—
(606)
1,209 $
39,206 $
21,751
379
4,099
(4,005)
366
22,563
45,153
—
340
567
907
—
553
1,262
1,815
47,875
20
The following table sets forth changes in, and the balance of, our Allowance for credit losses - loans.
(Dollars in thousands)
2021
At and for the years ended December 31,
2020
2018
2019
2017
Balance at beginning of year
Allowance recorded at the time of Acquisition
CECL Adoption
(Benefit) provision for credit losses
$ 45,153
—
—
(4,899)
$ 21,751
4,099
379
22,563
$ 20,945
—
—
2,811
$ 20,351
—
—
575
$ 22,229
—
—
9,861
Loans charged-off:
Multi-family residential
Commercial real estate
One-to-four family mixed-use property
One-to-four family residential
SBA
Taxi medallion
Commercial business and other loans
Total loans charged-off
Recoveries:
Mortgage loans
SBA, commercial business and other loans
Taxi medallion
Total recoveries
(43)
(64)
(33)
—
—
(2,758)
(2,236)
(5,134)
—
—
(3)
—
(178)
(1,075)
(2,749)
(4,005)
(190)
—
(89)
(113)
—
—
(2,386)
(2,778)
300
258
1,457
2,015
188
178
—
366
291
348
134
773
(99)
—
(3)
(1)
(392)
(393)
(44)
(932)
711
97
143
951
(454)
(4)
(39)
(415)
(212)
(11,283)
(65)
(12,472)
595
138
—
733
Net (charge-offs) recoveries
Balance at end of year
(3,119)
$ 37,135
(3,639)
$ 45,153
(2,005)
$ 21,751
19
$ 20,945
(11,739)
$ 20,351
Ratio of net charge-offs (recoveries) during the year
to average loans outstanding during the year
Ratio of allowance for credit losses to gross loans at
end of the year
Ratio of allowance for credit losses to non-accrual
loans at the end of the year
Ratio of allowance for credit losses to non-
performing loans at the end of the year
Ratio of allowance for credit losses to non-
performing assets at the end of the year
0.05 %
0.06 %
0.04 %
— %
0.24 %
0.56 %
0.67 %
0.38 %
0.38 %
0.39 %
248.66 % 246.40 % 169.76 % 128.87 % 129.54 %
248.66 % 214.27 % 164.05 % 128.87 % 112.23 %
248.66 % 213.91 % 160.73 % 128.60 % 112.23 %
21
The following table sets forth our allocation of the allowance for credit losses to the total amount for loans in
each of the loan categories listed at the dates indicated. The numbers contained in the “Amount” column indicate the
allowance for credit losses allocated for each loan category. The numbers contained in the column entitled “Percentage of
Loans in Category to Total Loans” indicate the total amount of loans in each loan category as a percentage of our loan
portfolio.
2021
2020
At December 31,
2019
2018
2017
Percent
of Loans in
Category to
Percent
of Loans in
Category to
Amount Total loans Amount Total loans Amount Total loans Amount Total loans Amount Total loans
(Dollars in thousands)
Percent
of Loans in
Category to
Percent
of Loans in
Category to
Percent
of Loans in
Category to
$ 8,185
7,158
37.94 % $ 6,557
8,327
26.77
37.81 % $ 5,391
4,429
26.18
38.88 % $ 5,676
4,315
27.48
41.00 % $ 5,823
4,643
27.86
44.08 %
26.51
1,755
784
—
186
18,068
8.62
4.04
0.13
0.90
78.40
1,986
869
—
497
18,236
9.00
3.66
0.12
1.24
78.01
1,817
756
—
441
12,834
10.29
3.27
0.15
1.18
81.25
1,867
749
—
329
12,936
10.44
3.44
0.15
0.91
83.80
2,545
1,082
—
68
14,161
10.93
3.50
0.13
0.16
85.31
Loan Category
Mortgage loans:
Multi-family residential
Commercial real estate
One-to-four family mixed-use
property
One-to-four family residential
Co-operative apartment
Construction
Gross mortgage loans
Non-mortgage loans:
Small Business Administration
Taxi medallion
Commercial business and other
Gross non-mortgage loans
1,209
—
17,858
19,067
1.41
—
20.19
21.60
2,251
—
24,666
26,917
2.50
0.04
19.45
21.99
363
—
8,554
8,917
0.25
0.06
18.44
18.75
418
—
7,591
8,009
0.27
0.08
15.85
16.20
669
—
5,521
6,190
0.36
0.13
14.20
14.69
Total loans
$ 37,135
100.00 % $ 45,153
100.00 % $ 21,751
100.00 % $ 20,945
100.00 % $ 20,351
100.00 %
Investment Activities
General. Our investment policy is designed primarily to manage the interest rate sensitivity of our overall assets
and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement our
lending activities and to provide and maintain liquidity. In establishing our investment strategies, we consider our business
and growth strategies, the economic environment, our interest rate risk exposure, our interest rate sensitivity “gap”
position, the types of securities to be held, and other factors. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Overview—Management Strategy” in Item 7 of this Annual Report.
Although we have authority to invest in various types of assets, we primarily invest in mortgage-backed securities,
securities issued by mutual or bond funds that invest in government and government agency securities, municipal bonds,
corporate bonds and collateralized loan obligations (“CLO”). We did not hold any issues of foreign sovereign debt at
December 31, 2021 and 2020.
Our ALCO Investment Committee meets quarterly to monitor investment transactions and to establish investment
strategy. The Board of Directors reviews the investment policy on an annual basis and investment activity on a monthly
basis.
22
We classify our investment securities as available for sale when management intends to hold the securities for an
indefinite period of time or when the securities may be utilized for tactical asset/liability purposes and may be sold from
time to time to effectively manage interest rate exposure and resultant prepayment risk and liquidity needs. Securities are
classified as held-to-maturity when management intends to hold the securities until maturity. We carry some of our
investments under the fair value option, totaling $14.6 million and $14.5 million at December 31, 2021 and 2020,
respectively. Unrealized gains and losses for investments carried under the fair value option are included in our
Consolidated Statements of Income. Unrealized gains and losses on securities available for sale, are excluded from
earnings and included in accumulated other comprehensive loss, net of taxes. Securities held-to-maturity are carried at
their amortized cost basis. At December 31, 2021, we had $777.2 million in securities available for sale and $57.9 million
in securities held-to-maturity, which together represented 10.38% of total assets. These securities had an aggregate market
value at December 31, 2021 that was approximately 1.2 times the amount of our equity at that date.
The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical
information, current conditions and a reasonable and supportable forecast. The Company’s portfolio is made up of three
securities totaling $58.7 million (before allowance for credit losses): the first with an amortized cost of $29.9 million
structured similar to a commercial owner occupied loan and modeled for credit losses similar to commercial business loans
secured by real estate with an allowance for credit losses of $0.2 million at December 31, 2021; the second with an
amortized cost of $21.0 million that currently is under forbearance with an individually evaluated allowance for credit loss
of $0.6 million at December 31, 2021; and the third with an amortized cost of $7.9 million issued and guaranteed by Fannie
Mae, which is a government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S.
government. Accordingly, the Company assumes a zero loss expectation from the Fannie Mae security. The security
currently in forbearance is considered current and as such, continues to accrue interest at its original contractual terms.
23
The table below sets forth certain information regarding the amortized cost and market values of our securities
portfolio, interest-earning deposits and federal funds sold, at the dates indicated. Securities available for sale are recorded
at market value.
2021
At December 31,
2020
2019
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(In thousands)
Securities held-to-maturity
Bonds and other debt securities:
Municipal securities (1)
Total bonds and other debt securities
Mortgage-backed securities:
FNMA
Total mortgage-backed securities
$ 50,836 $ 53,362 $ 50,825 $ 54,538 $ 50,954 $ 53,998
53,998
50,954
54,538
50,836
53,362
50,825
7,894
7,894
8,667
8,667
7,914
7,914
8,991
8,991
7,934
7,934
8,114
8,114
Total securities held-to-maturity
58,730
62,029
58,739
63,529
58,888
62,112
Securities available for sale
Bonds and other debt securities:
U.S. government agencies
Municipal securities
Corporate debentures
Collateralized loan obligations
Total bonds and other debt securities
5,599
—
107,423
81,166
194,188
5,590
—
104,370
80,912
190,872
6,452
—
130,000
100,561
237,013
6,453
—
123,865
99,198
229,516
—
12,797
130,000
100,349
243,146
—
12,916
123,050
99,137
235,103
Mutual funds
12,485
12,485
12,703
12,703
12,216
12,216
Equity securities:
Common stock
Total equity securities
Mortgage-backed securities:
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
1,695
1,695
1,695
1,695
1,295
1,295
1,295
1,295
1,332
1,332
1,332
1,332
210,948
10,572
203,777
152,760
578,057
208,509
10,286
202,938
150,451
572,184
175,142
13,009
143,154
63,796
395,101
180,877
13,053
146,169
64,361
404,460
348,236
653
104,235
68,476
521,600
348,989
704
104,882
69,274
523,849
Total securities available for sale
786,425
777,236
646,112
647,974
778,294
772,500
Interest-earning deposits and Federal
funds sold
Total
51,699
36,511
$ 896,854 $ 890,964 $ 838,534 $ 845,186 $ 873,693 $ 871,123
51,699
133,683
133,683
36,511
(1) Does not include allowance for credit losses totaling $0.9 million for each of the years ended December 31, 2021 and 2020.
24
Mortgage-backed securities. At December 31, 2021, we had available for sale and held-to-maturity mortgage-
backed securities with a market value totaling $580.9 million, of which $11.5 million was invested in adjustable-rate
mortgage-backed securities. The mortgage loans underlying these adjustable-rate securities generally are subject to
limitations on annual and lifetime interest rate increases. We anticipate that investments in mortgage-backed securities
may continue to be used in the future to supplement mortgage-lending activities. Mortgage-backed securities are more
liquid than individual mortgage loans and may be used more easily to collateralize our obligations, including collateralizing
of the governmental deposits of the Bank.
The following table sets forth our available for sale mortgage-backed securities purchases, sales and principal
repayments for the years indicated:
For the years ended December 31,
2019
2020
2021
(In thousands)
Balance at beginning of year
$ 404,460 $ 523,849 $ 557,953
Purchases of mortgage-backed securities
340,789
308,078
128,001
Amortization of unearned premium, net of accretion of unearned discount
(2,943)
(4,100)
(3,145)
Net change in unrealized gains (losses) on mortgage-backed securities
available for sale
(15,232)
7,111
12,159
Net realized gains (losses) recorded on mortgage-backed securities carried at
fair value
(2)
23
2
Sales and maturities of mortgage-backed securities
(8,602)
(220,971)
(26,448)
Principal repayments received on mortgage-backed securities
(146,286)
(209,530)
(144,673)
Net increase (decrease) in mortgage-backed securities
167,724
(119,389)
(34,104)
Balance at end of year
$ 572,184 $ 404,460 $ 523,849
While mortgage-backed securities carry a reduced credit risk as compared to whole loans, such securities remain
subject to the risk that a fluctuating interest rate environment, along with other factors such as the geographic distribution
of the underlying mortgage loans, may alter the prepayment rate of such mortgage loans and so affect both the prepayment
speed and value of such securities.
25
The table below sets forth certain information regarding the amortized cost, fair value, annualized weighted
average yields and maturities of our investment in debt and equity securities and interest-earning deposits at December 31,
2021. The stratification of balances is based on stated maturities. Assumptions for repayments and prepayments are not
reflected for mortgage-backed securities. Securities available for sale are carried at their fair value in the consolidated
financial statements and securities held-to-maturity are carried at their amortized cost.
One year or Less
One to Five Years
Five to Ten Years
More than Ten Years
Total Securities
Weighted
Weighted
Weighted
Average
Weighted Remaining
Amortized Average Amortized Average Amortized Average Amortized Average
Cost
Cost
Yield
Yield
Yield
Yield
Cost
Cost
Years to Amortized
Maturity Cost
Fair
Value
Weighted
Average
Yield
(Dollars in thousands)
Securities held-to-maturity
Bonds and other debt securities:
Municipal securities (1)
$
Total bonds and other debt securities
Mortgage-backed securities:
FNMA
Total mortgage-backed securities
Securities available for sale
Bonds and other debt securities:
US govt. and agencies
Corporate debentures
CLO
Total bonds and other debt securities
—
—
—
—
—
—
—
—
— % $
—
—
—
— % $
—
—
—
— % $ 50,836
50,836
—
3.24 %
3.24
23.73 $ 50,836 $ 53,362
53,362
50,836
23.73
3.24 %
3.24
—
—
—
—
—
—
—
—
—
—
7,894
7,894
3.31
3.31
11.34
11.34
7,894
7,894
8,667
8,667
3.31
3.31
—
—
—
—
—
20,000
—
20,000
—
1.70
—
1.70
—
87,423
76,150
163,573
—
2.19
1.80
2.01
5,599
—
5,016
10,615
1.80
—
2.02
1.90
21.11
6.04
8.99
7.71
5,599
107,423
81,166
194,188
5,590
104,370
80,912
190,872
1.80
2.10
1.81
1.97
Mutual funds
Equity securities:
Common stock
Total equity securities
Mortgage-backed securities:
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
12,485
1.16
—
—
—
—
—
—
—
12,485
12,485
1.16
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,695
1,695
1.59
1.59
—
—
1,695
1,695
1,695
1,695
1.59
1.59
—
—
12,618
—
12,618
—
—
2.96
—
2.96
—
186
25,025
21,474
46,685
—
7.98
1.53
1.58
1.58
210,948
10,386
166,134
131,286
518,754
1.89
2.11
2.26
1.88
2.01
30.60
27.81
18.16
18.73
23.03
210,948
10,572
203,777
152,760
578,057
208,509
10,286
202,938
150,451
572,184
1.89
2.21
2.21
1.84
2.00
Interest-earning deposits
Total
51,699
$ 64,184
0.17
—
0.36 % $ 32,618
—
—
2.19 % $ 210,258
—
—
1.91 % $ 589,794
—
2.13 %
—
51,699
51,699
19.05 $ 896,854 $ 890,964
0.17
1.96 %
(1)
Does not include allowance for credit losses totaling $0.9 million.
Other Business Activities
The Company has recently contracted with New York Digital Investment Group (“NYDIG”) to offer bitcoin
services to the Bank’s customers as the customers’ request. NYDIG, through its subsidiaries, holds certain cryptocurrency
and money transmitter licenses and will be permitted to provide custody, execution, buying, selling, and holding bitcoin-
related services to the Bank’s customers. Pursuant to the proposed program, a customer of the Bank could establish a
customer account with NYDIG and buy, hold and sell bitcoin for that customer’s NYDIG account. Under the program,
the Bank will not provide bitcoin services directly itself but instead will allow access for its customers to such services
through NYDIG. One of the purposes of the Bank offering access to NYDIG’s services is for the Bank to attract new
customers. The Bank plans to launch this proposed program with NYDIG in the first quarter of 2022. See “Risk Factors –
Our New Arrangement with NYDIG to Offer NYDIG’s Bitcoin Services to Our Customers May expose us to Risks.”
Sources of Funds
General. Deposits, FHLB-NY borrowings, other borrowings, principal and interest payments on loans, mortgage-
backed and other securities, and proceeds from sales of loans and securities are our primary sources of funds for lending,
investing and other general purposes.
Deposits. We offer a variety of deposit accounts having a range of interest rates and terms. Our deposits primarily
consist of savings accounts, money market accounts, demand accounts, NOW accounts and certificates of deposit. We
26
have a relatively stable retail deposit base drawn from our market area through our 24 full-service offices and our Internet
Branch. Deposits held at certain full-service branches include deposits obtained by our government banking group. We
seek to retain existing depositor relationships by offering quality service and competitive interest rates, while keeping
deposit growth within reasonable limits. It is management’s intention to balance its goal to maintain competitive interest
rates on deposits while seeking to manage its cost of funds to finance its strategies.
In addition to our full-service offices we operate the Internet Branch and a government banking unit. The Internet
Branch currently offers savings accounts, money market accounts, checking accounts, and certificates of deposit. This
allows us to compete on a national scale without the geographical constraints of physical locations. At December 31, 2021
and 2020, total deposits at our Internet Branch were $188.0 million and $221.7 million, respectively. The government
banking unit provides banking services to public municipalities, including counties, cities, towns, villages, school districts,
libraries, fire districts, and the various courts throughout the New York City metropolitan area. At December 31, 2021 and
2020, total deposits in our government banking unit totaled $1,618.8 million and $1,615.4 million, respectively.
Our core deposits, consisting of savings accounts, NOW accounts, money market accounts, and non-interest
bearing demand accounts, are typically more stable and lower costing than other sources of funding. However, the flow of
deposits into a particular type of account is influenced significantly by general economic conditions, changes in prevailing
interest rates, and competition. We experienced an increase in our due to depositors’ during 2021 of $242.8 million,
primarily due to growth in our core deposits. During the year ended December 31, 2021, the cost of our interest-bearing
due to depositors’ accounts decreased 56 basis points to 0.38% from 0.94% for the year ended December 31, 2020. The
decrease in the cost of deposits was primarily due to the Company’s quick response to the Federal Reserve lowering rates.
While we are unable to predict the direction of future interest rate changes, if interest rates would rise during 2022, the
result could be an increase in our cost of deposits, which could reduce our net interest margin. Similarly, if interest rates
remain at their current level or decline in 2022, we could see a decline in our cost of deposits, which could increase our
net interest margin.
Included in deposits are certificates of deposit with balances of $250,000 or more (excluding brokered deposits
issued in $1,000 amounts under a master certificate of deposit) was $217.5 million and $266.9 million at December 31,
2021 and 2020, respectively.
We utilize brokered deposits as an additional funding source and to assist in the management of our interest rate
risk. At December 31, 2021 and 2020, we had $626.3 million and $1,074.1 million, respectively, classified as brokered
deposits. We have obtained brokered certificates of deposit when the interest rate on these deposits is below the prevailing
interest rate for non-brokered certificates of deposit with similar maturities in our market, or when obtaining them allowed
us to extend the maturities of our deposits at favorable rates compared to borrowing funds with similar maturities, when
we are seeking to extend the maturities of our funding to assist in the management of our interest rate risk. Brokered
certificates of deposit provide a large deposit for us at a lower operating cost as compared to non-brokered certificates of
deposit since we only have one account to maintain versus several accounts with multiple interest and maturity checks.
The Depository Trust Company is used as the clearing house, maintaining each deposit under the name of CEDE & Co.
These deposits are transferable just like a stock or bond investment and the customer can open the account with only a
phone call, just like buying a stock or bond. Unlike non-brokered certificates of deposit, where the deposit amount can be
withdrawn with a penalty for any reason, including increasing interest rates, a brokered certificate of deposit can only be
withdrawn in the event of the death, or court declared mental incompetence, of the depositor. This allows us to better
manage the maturity of our deposits and our interest rate risk. At times, we also utilized brokers to obtain money market
deposits. The rate we pay on brokered money market accounts is similar to the rate we pay on non-brokered money market
accounts, and the rate is agreed to in a contract between the Bank and the broker. These accounts are similar to brokered
certificates of deposit accounts in that we only maintain one account for the total deposit per broker, with the broker
maintaining the detailed records of each depositor.
We also offer access to FDIC insurance coverage in excess of $250,000 through the IntraFi Network which
arranges for placement of funds into certificate of deposit accounts, demand accounts or money market accounts issued
by other member banks of the network in increments of less than $250,000 to ensure that both principal and interest are
eligible for full FDIC deposit insurance. This allows us to accept deposits in excess of $250,000 from a depositor and to
place the deposits through the network to other member banks to provide full FDIC deposit insurance coverage. We may
27
receive deposits from other member banks in exchange for the deposits we place into the network. We may also obtain
deposits from other network member banks without placing deposits into the network. We will obtain deposits in this
manner primarily as a short-term funding source. We also can place deposits with other member banks without receiving
deposits from other member banks. Depositors are allowed to withdraw funds, with a penalty, from these accounts at one
or more of the member banks that hold the deposits. Additionally, we place a portion of our government deposits in IntraFi
Network money market and demand accounts which does not require us to provide collateral. This allows us to invest our
funds in higher yielding assets. At December 31, 2021 and 2020, the Bank held IntraFi Network deposits totaling $817.6
million and $1,452.7 million, respectively, of which $55.0 million and $720.1 million, respectively, were classified as
brokered deposits. The Company had interest rate swaps on brokered CDs totaling $75.0 million at December 31, 2021
and none at December 31, 2020. At December 31, 2021, the interest rate swaps on brokered CDs had an average cost of
0.52%.
The following table sets forth the distribution of our deposit accounts at the dates indicated and the weighted
average nominal interest rates on each category of deposits presented.
2021
Percent
of Total
Deposits
Amount
Weighted
Average
Nominal
At December 31,
2020
Weighted
Average
Nominal
Percent
of Total
Deposits
(Dollars in thousands)
2019
Percent
of Total
Deposits
Weighted
Average
Nominal
Rate
Rate
Amount
Rate
Amount
Savings accounts
NOW accounts (1)
Demand accounts (2)
Mortgagors' escrow deposits
Total
$
156,554
1,920,779
967,621
51,913
3,096,867
2.45 %
30.08
15.15
0.81
48.50
0.13 % $
0.11
0.00
0.01
0.07
168,183
2,323,172
778,672
45,622
3,315,649
2.74 %
37.86
12.69
0.74
54.03
0.18 % $
0.28
0.00
0.02
0.21
191,485
1,365,591
435,072
44,375
2,036,523
3.78 %
26.95
8.59
0.88
40.20
0.67 %
1.47
0.00
0.28
1.05
Money market accounts (3)
2,342,003
36.68
0.22
1,682,345
27.42
0.50
1,592,011
31.42
1.87
Certificate of deposit accounts with
original maturities of:
Less than 6 Months (4)
6 to less than 12 Months (5)
12 to less than 30 Months (6)
30 to less than 48 Months (7)
48 to less than 72 Months (8)
72 Months or more
Total certificate of deposit
accounts
128,745
161,624
530,273
52,726
70,030
3,177
2.02
2.53
8.30
0.83
1.10
0.05
0.12
0.33
0.45
0.83
2.64
0.50
113,537
349,621
523,815
37,250
84,970
29,168
1.85
5.70
8.54
0.61
1.38
0.46
0.05
0.48
1.01
2.44
2.51
3.17
140,939
257,408
779,964
117,028
113,622
28,929
2.78
5.08
15.39
2.31
2.24
0.57
1.86
1.85
2.36
2.24
2.27
3.13
946,575
14.82
0.57
1,138,361
18.55
0.97
1,437,890
28.38
2.22
Total deposits (9)
$ 6,385,445
100.00 %
0.20 % $ 6,136,355
100.00 %
0.43 % $ 5,066,424
100.00 %
1.64 %
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Includes brokered deposits of $178.9 million and $720.1 million at December 31, 2021 and 2020, respectively.
Includes brokered deposits of $2.1 million, and $145.0 million at December 31, 2020, and 2019, respectively.
Includes brokered deposits of $251.1 million and $102.9 million at December 31, 2021, and 2020, respectively.
Includes brokered deposits of $119.0 million, $116.5 million, and $138.3 million at December 31, 2021, 2020, and 2019, respectively.
Includes brokered deposits of $20.0 million, at December 31, 2020.
Includes brokered deposits of $67.9 million, $77.8 million, and $31.1 million at December 31, 2021, 2020, and 2019, respectively.
Includes brokered deposits of $25.4 million, and $49.7 million at December 31, 2020, and 2019 respectively.
Includes brokered deposits of $9.3 million, $9.3 million and $24.6 million at December 31, 2021, 2020 and 2019, respectively.
Include in the above balances are IRA and Keogh deposits totaling $208.6 million, $107.9 million, and $68.8 million at December 31, 2021, 2020,
and 2019, respectively.
28
The following table presents by various rate categories, the amount of time deposit accounts outstanding at the
dates indicated, and the years to maturity of the certificate accounts outstanding at the periods indicated:
At December 31,
2020
2019
Within
One to
One Year Three Years Thereafter
2021
At December 31, 2021
(In thousands)
Interest rate:
1.99% or less(1)
2.00% to 2.99%(2)
3.00% to 3.99%
Total
$ 878,744 $
37,917
29,914
949,274 $ 530,707 $ 742,857 $ 111,833 $ 24,054
450
12,772
131,239
—
245
57,848
$ 946,575 $ 1,138,361 $ 1,437,890 $ 755,874 $ 166,197 $ 24,504
847,804
59,379
24,695
29,669
(1)
(2)
Includes brokered deposits of $186.9 million, $213.6 million, and $153.7 million at December 31, 2021, 2020, and 2019, respectively.
Includes brokered deposits of $9.3 million, $35.4 million, and $90.0 million at December 31, 2021, 2020, and 2019, respectively.
The following table presents by remaining maturity categories the amount of certificate of deposit accounts with
balances of $250,000 or more at December 31, 2021 and their annualized weighted average interest rates.
Maturity Period:
Three months or less
Over three through six months
Over six through 12 months
Over 12 months
Total
Weighted
Amount Average Rate
(Dollars in thousands)
$ 68,360
44,365
47,583
57,220
$ 217,528
0.51 %
0.47
0.43
1.49
0.74 %
The following table presents the deposit activity, including mortgagors’ escrow deposits, for the periods indicated.
For the year ended December 31,
2019
2020
2021
(In thousands)
$ 228,642 $
342,126 $ 17,322
—
685,393
261
100
88,057
42,312
$ 249,090 $ 1,069,931 $ 105,640
—
124
20,324
Net deposits
Acquired in Empire acquisition
Amortization of premiums, net
Interest on deposits
Net increase in deposits
29
The following table sets forth the distribution of our average deposit accounts for the years indicated,
the percentage of total deposit portfolio, and the average interest cost of each deposit category presented. Average balances
for all years shown are derived from daily balances.
2021
Percent
of Total Average
Deposits Cost
Average
Balance
At December 31,
2020
Percent
of Total Average
Deposits Cost
Average
Balance
2019
Percent
of Total Average
Deposits Cost
Average
Balance
Savings accounts
NOW accounts
Demand accounts
Mortgagors' escrow deposits
Total
$ 157,640
2,165,762
922,741
77,552
3,323,695
2.45 %
30.08
15.15
0.81
48.50
0.16 % $ 176,443
1,603,402
0.25
583,235
—
0.01
70,829
2,433,909
0.17
2.74 %
37.86
12.69
0.74
54.03
0.28 % $ 198,374
1,434,440
0.58
407,450
—
70,209
0.06
2,110,473
0.40
3.96 %
28.61
8.13
1.40
42.10
0.69 %
1.64
—
0.33
1.19
(Dollars in thousands)
Money market accounts
2,059,431
36.68
0.35
1,561,496
27.42
0.92
1,370,038
27.33
2.03
Certificate of deposit accounts
Total deposits
1,033,187
$ 6,416,313
14.82
100.00 %
0.71
1,167,865
0.32 % $ 5,163,270
18.55
100.00 %
1.55
1,532,440
0.82 % $ 5,012,951
30.57
100.00 %
2.29
1.76 %
Borrowings. Although deposits are our primary source of funds, we also use borrowings as an alternative and
cost effective source of funds for lending, investing and other general purposes. The Bank is a member of, and is eligible
to obtain advances from, the FHLB-NY. Such advances generally are secured by a blanket lien against the Bank’s
mortgage portfolio and the Bank’s investment in the stock of the FHLB-NY. In addition, the Bank may pledge mortgage-
backed securities to obtain advances from the FHLB-NY. See “— Regulation — Federal Home Loan Bank System.” The
maximum amount that the FHLB-NY will advance fluctuates from time to time in accordance with the policies of the
FHLB-NY. The Bank may also enter into repurchase agreements with broker-dealers and the FHLB-NY. These
agreements are recorded as financing transactions and the obligations to repurchase are reflected as a liability in our
consolidated financial statements. In addition, we issued junior subordinated debentures with a total par of $61.9 million
in 2007. These junior subordinated debentures are carried at fair value in the Consolidated Statement of Financial
Condition. In 2021, the Company issued subordinated debt with an aggregated principal amount of $125.0 million,
receiving net proceeds totaling $122.8 million. The subordinated debt was issued at 3.125% fixed-to-floating rate maturing
in 2031. The debt is callable at par quarterly through its maturity date beginning December 1, 2026.
The Company uses interest rate swaps on borrowings to help mitigate the impact interest rate increases have on
our cost of funds. At December 31, 2021 and 2020, the Company had forward interest rate swaps on borrowings totaling
$921.5 million and $1,021.5 million, respectively. For the year ended December 31, 2021 and 2020, the interest rate swaps
on borrowings had an average cost of 2.31% and 2.05%, respectively.
The average cost of borrowings was 2.24%, 1.97%, and 2.31% for the years ended December 31, 2021, 2020,
and 2019, respectively. The average balances of borrowings were $905.1 million, $1,361.6 million, and $1,251.5 million
for the same years, respectively.
30
The following table sets forth certain information regarding our borrowings at or for the periods ended on the
dates indicated.
At or for the years ended December 31,
2020
(Dollars in thousands)
2019
2021
FHLB-NY Advances
Average balance outstanding
Maximum amount outstanding at any month end during the period
Balance outstanding at the end of period
Weighted average interest rate during the period
Weighted average interest rate at end of period
$ 694,824
786,736
611,186
$ 1,147,364
1,498,059
797,201
$ 1,133,025
1,334,304
1,118,528
1.96 %
0.38
1.77 %
0.56
1.95 %
1.85
Other Borrowings
Average balance outstanding
Maximum amount outstanding at any month end during the period
Balance outstanding at the end of period
Weighted average interest rate during the period
Weighted average interest rate at end of period
$ 210,270
449,776
204,358
$ 214,195
419,715
223,694
$ 118,427
152,224
118,703
3.30 %
2.61
3.05 %
2.78
5.78 %
5.06
Total Borrowings
Average balance outstanding
Maximum amount outstanding at any month end during the period
Balance outstanding at the end of period
Weighted average interest rate during the period
Weighted average interest rate at end of period
$ 905,094
1,236,512
815,544
$ 1,361,559
1,617,582
1,020,895
$ 1,251,452
1,452,490
1,237,231
2.24 %
0.94
1.97 %
1.05
2.31 %
2.16
Subsidiary Activities
At December 31, 2021, the Holding Company had four wholly owned subsidiaries: the Bank and the Trusts. In
addition, the Bank had two wholly owned subsidiaries: FSB Properties Inc and Flushing Service Corporation. In 2021,
Flushing Preferred Funding Corporation (“FPFC”) was dissolved.
FSB Properties Inc., which is incorporated in the State of New York, was formed in 1976 with the original
purpose of engaging in joint venture real estate equity investments. These activities were discontinued in
1986 and no joint venture property remains. FSB Properties Inc. is currently used solely to hold title to real
estate owned that is obtained via foreclosure.
Flushing Service Corporation, which is incorporated in the State of New York, was formed in 1998 to market
insurance products and mutual funds.
Flushing Preferred Funding Corporation, which was dissolved as of June 30, 2021, was incorporated in the
State of Delaware, was formed in 1997 as a real estate investment trust for the purpose of acquiring, holding
and managing real estate mortgage assets. It was available as an additional vehicle for access by the Company
to the capital markets for future opportunities.
Human Capital
At December 31, 2021, we had 523 full-time employees and 16 part-time employees. None of our employees is
represented by a collective bargaining unit, and we consider our relationship with our employees to be good. At the present
time, the Holding Company only employs certain officers of the Bank. These employees do not receive any extra
compensation as officers of the Holding Company.
31
Oversight & Governance. Our Board of Directors and Board committees provide oversight on certain human
capital matters, including our inclusion and diversity program and initiatives. The Board of Directors is responsible for
discussing evaluating and reviewing regular updates from management with regard to human capital matters. Our Board
of Directors is comprised of diverse cultures, ethnicity, and gender.
Learning and Development. The Company believes that it must find, develop and retain its employees. The
Company invests in its employees by providing quality training and learning opportunities, promoting inclusion and
diversity and upholding a high standard of ethics and respect for human rights.
Diversity, Equity & Inclusion. The Company is responsible for creating an equitable workplace ensuring diversity
at the management and board levels. We pride ourselves on establishing a diverse workforce that serves our diverse
customer base in the New York City metro area. At December 31, 2021, our employees were able to speak more than 20
different languages. Our inclusion and diversity program focuses on workforce (our team members), workplace (culture,
tools and programs) and community. We believe that our business is strengthened by a diverse workforce that reflects the
communities in which we operate. We believe all of our team members should be treated with respect and equality,
regardless of gender, ethnicity, sexual orientation, gender identity, religious beliefs, or other characteristics. We have
undertaken a series of initiatives to further enhance our existing diversity and inclusion programs, including Flushing Bank
Serves volunteer program and the creation of a Diversity & Inclusion Committee. We have also broadened our focus on
inclusion and diversity by including social and racial equity in our conversations and equipping and empowering our team
leaders with appropriate tools and training.
Total Rewards. The Company believes that our future success largely depends upon our continued ability to
attract and retain highly skilled employees. We provide our employees with a rich total rewards program which includes:
•
•
•
•
•
•
•
•
•
•
Competitive base salaries;
Incentive bonus opportunities;
Equity ownership;
401(k) plan access;
Healthcare and other insurance programs,
Health savings and flexible spending accounts
Paid time off;
Family leave;
Employee assistance program and,
Tuition assistance.
Omnibus Incentive Plan
The 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”) became effective on May 20, 2014 after adoption by
the Board of Directors and approval by the stockholders. The 2014 Omnibus Plan authorizes the Compensation Committee
of the Company’s Board of Directors (the “Compensation Committee”) to grant a variety of equity compensation awards
as well as long-term and annual cash incentive awards. To the extent that an award under the 2014 Omnibus Plan is
cancelled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number underlying the award, or
otherwise terminated without delivery of shares to a participant in payment of the exercise price or taxes relating to an
award, the shares retained by or returned to the Company will be available for future issuance under the 2014 Omnibus
Plan. The 2014 Omnibus Plan originally covered the issuance of 1,100,000 shares, which was increased. On May 31, 2017,
32
stockholders approved an amendment to the 2014 Omnibus Plan authorizing an additional 672,000 shares available for
future issuance. In addition, that amendment eliminated, in the case of stock options and stock appreciation rights, the
ability to recycle shares used to satisfy the exercise price or taxes for such awards. On May 18, 2021, stockholders approved
a further amendment of the 2014 Omnibus Plan to authorize an additional 1,100,000 shares for future issuance. Including
the additional shares authorized from the amendments, 1,171,675 shares remained available for future issuance under the
2014 Omnibus Plan at December 31, 2021.
For additional information concerning this plan, see “Note 12 (“Stock-Based Compensation”) of Notes to
Consolidated Financial Statements” in Item 8 of this Annual Report.
General
REGULATION
The Bank is a New York State-chartered commercial bank and its deposit accounts are insured under the Deposit
Insurance Fund (the “DIF”) of the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable legal limits. The
Bank is subject to extensive regulation and supervision by the New York State Department of Financial Services
(“NYDFS”), as its chartering agency, by the FDIC, as its insurer of deposits, and to a lesser extent by the Consumer
Financial Protection Bureau (the “CFPB”), which was created under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) in 2011 to implement and enforce consumer protection laws applying to banks.
The Bank must file reports with the NYDFS, the FDIC, and the CFPB concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions
of, other depository institutions. Furthermore, the Bank is periodically examined by the NYDFS and the FDIC to assess
compliance with various regulatory requirements, including safety and soundness considerations. This regulation and
supervision established a comprehensive framework of activities in which a commercial bank can engage and is intended
primarily for the protection of the FDIC insurance fund and depositors. The regulatory structure also gives the regulatory
authorities extensive discretion in connection with its supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets and the establishment of adequate loan loss allowances for
regulatory purposes. Any change in such regulation, whether by the NYDFS, the FDIC, or through legislation, could have
a material adverse impact on the Company, the Bank and its operations, and the Company’s shareholders. While the
regulatory environment has entered a period of rebalancing of the post financial crisis framework, we expect that our
business will remain subject to extensive regulation and supervision.
The Company is required to file certain reports under, and otherwise comply with, the rules and regulations of
the Federal Reserve Board of Governors (the “FRB”), the FDIC, the NYDFS, and the Securities and Exchange
Commission (the “SEC”) under federal securities laws. In addition, the FRB periodically examines the Company. Certain
of the regulatory requirements applicable to the Bank and the Company are referred to below or elsewhere herein.
However, such discussion is not meant to be a complete explanation of all laws and regulations and is qualified in its
entirety by reference to the actual laws and regulations.
COVID-19 Legislation
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic
Security Act (the “CARES Act”) in response to the coronavirus pandemic. This legislation aimed at providing relief for
individuals and businesses that have been negatively impacted by the coronavirus pandemic. On December 27, 2020, the
Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law, providing for, among other things, further
suspension of the exception for loan modifications to not be classified as TDRs if certain criteria are met, as described
below. The CARES Act, as amended by the CAA, includes a provision for the Company to opt out of applying the TDR
accounting guidance in Accounting Standards Codification (“ASC”) 310-40 for certain loan modifications. Loan
modifications made between March 1, 2020 and the earlier of i) January 2, 2022 or ii) 60 days after the President declares
a termination of the COVID-19 national emergency are eligible for this relief if the related loans were not more than 30
days past due as of December 31, 2019. The CARES Act includes the Paycheck Protection Program (“PPP”), a program
33
to aid small and medium- sized businesses through federally guaranteed loans distributed through banks and other financial
institutions. These loans were intended to guarantee eight weeks of payroll and other costs to help those businesses remain
viable and allow their workers to pay their bills.
Impact of COVID-19
Overview
In March 2020, the World Health Organization recognized the outbreak of the novel Coronavirus Disease 2019
(“COVID-19”) as a pandemic. The Spread of COVID-19 has created a global public health crisis that has resulted in
unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer
activity in the United States and globally, including the markets we serve. In response to the pandemic, the government
placed orders for shelter in place, maintaining social distancing and closed businesses that were not deemed essential.
During these tumultuous times, we were actively assisting our customers by providing short-term forbearances
in the form of deferrals of interest, principal and/or escrow for terms ranging from one to twelve months. At December
31, 2021, we had 20 active forbearances for loans with an aggregate outstanding loan balance of approximately $71.9
million resulting in total deferment of $4.8 million in principal, interest and escrow. Given the pandemic and current
economic environment, we continue to work with our customers to modify loans. We actively participated in the PPP,
closing $138.6 million and $111.6 million of these loans through December 31, 2021 and 2020, respectively. We are one
of nine banks in the State of New York participating in the Main Street Lending Program. We are also a proud participant
in the FHLB-NY Small Business Recovery Grant Program, helping our customers and communities navigate through the
current environment.
Impact on Our Financial Statements and Results of Operations
Financial institutions are dependent upon the ability of their loan customers to meet their loan obligations and the
availability of their workforce and vendors. Early in the second quarter of 2020, shelter-at-home mandates and other
remediation from the COVID-19 pandemic were enacted. The pandemic and these remediation measures have directly
impacted the communities we serve, where commercial activity decreased significantly. As of December 31, 2021, that
commercial activity had improved but not returned to pre-pandemic levels. This continuing impact on commercial activity
may have continuing adverse results, including on our customers’ ability to meet their obligations to us.
In addition, the economic pressures and uncertainties related to the COVID-19 pandemic have resulted in changes
in consumer spending behaviors in the communities we serve, which may negatively impact the demand for loans and
other services we offer. However, the Company’s capital and financial resources have not been materially impacted by the
pandemic, as our results of operations depend primarily on net interest income, which benefited from the actions taken by
the Federal Reserve to counteract the negative economic impact of the pandemic. Future operating results and near-and-
long-term financial condition are subject to significant uncertainty. Our funding sources have not changed significantly,
and we expect to continue to be able to timely service our debts and its obligations.
The Company has elected that loans temporarily modified for borrowers directly impacted by COVID-19 are not
considered TDR, assuming that CARES Act and/or CAA criteria are met and as such, these loans are considered current
and continue to accrue interest at its original contractual terms. Loans modified after January 2, 2022 are no longer eligible
to be modified under the CARES Act or CAA. The Company was quick to respond to the pandemic with new health and
safety measures, including social distancing, appointment banking and expansion of our remote capabilities. Our staff
responded to these changes in a superb fashion and continue to provide our customers with excellent service. Today our
staff is returning to work with A and B schedules to maintain social distancing. On any given day, as many as 85% of staff
have the capability to work from home.
34
The Dodd-Frank Act
The Dodd-Frank Act has significantly impacted the current bank regulatory structure and is expected to continue
to affect, into the immediate future, the lending and investment activities and general operations of depository institutions
and their holding companies. In addition to creating the CFPB, the Dodd-Frank Act requires the FRB to establish minimum
consolidated capital requirements for bank holding companies that are as stringent as those required for insured depository
institutions; the components of Tier 1 capital will be restricted to capital instruments that are currently considered to be
Tier 1 capital for insured depository institutions. In addition, the proceeds of trust preferred securities will be excluded
from Tier 1 capital unless (i) such securities are issued by bank holding companies with assets of less than $500 million,
or (ii) such securities were issued prior to May 19, 2010 by bank or savings and loan holding companies with assets of less
than $15 billion. The Dodd-Frank Act created a new supervisory structure for oversight of the U.S. financial system,
including the establishment of a new council of regulators, the Financial Stability Oversight Council, to monitor and
address systemic risks to the financial system. Non-bank financial companies that are deemed to be significant to the
stability of the U.S. financial system and all bank holding companies with $50 billion or more in total consolidated assets
will be subject to heightened supervision and regulation. The FRB will implement prudential requirements and prompt
corrective action procedures for such companies.
The Dodd-Frank Act made many additional changes in banking regulation, including: authorizing depository
institutions, for the first time, to pay interest on business checking accounts; requiring originators of securitized loans to
retain a percentage of the risk for transferred loans; establishing regulatory rate-setting for certain debit card interchange
fees; and establishing a number of reforms for mortgage lending and consumer protection.
The Dodd-Frank Act also broadened the base for FDIC insurance assessments not to be based on deposits, but on
the average consolidated total assets less the tangible equity capital of an insured institution. The Dodd-Frank Act also
permanently increased the maximum amount of deposit insurance for banks, savings institutions, and credit unions to
$250,000 per depositor, per FDIC insured bank, per ownership category.
Some of the provisions of the Dodd-Frank Act are not yet in effect. The Dodd-Frank Act requires various federal
agencies to promulgate numerous and extensive implementing regulations over the next several years.
Basel III
The Company and the Bank are subject to a comprehensive capital framework for U.S. banking organizations
that was issued by the FDIC and FRB in July 2013 (the “Basel III Capital Rules”), subject to phase-in periods for certain
components and other provisions. Under the Basel III Capital Rules, the minimum capital ratios are:
4.5% Common Equity Tier 1 (“CET1”) to risk-weighted assets;
6.0% Tier 1 capital that is CET1 plus Additional Tier 1 capital) to risk-weighted assets;
8.0% Total Capital that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known
as the “leverage ratio”).
The Basel III Capital Rules also introduced a “capital conservation buffer,” composed entirely of CET1, on top
of these minimum risk-weighted asset ratios. The capital conservation buffer currently is 2.5%. Banking institutions with
a ratio of CET1 to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer) will face
constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. As of December 31,
2021, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.
Together with the FDIC, the Federal Reserve has issued proposed rules that would simplify the capital treatment
of certain capital deductions and adjustments, and the final phase-in period for these capital deductions and adjustments
has been indefinitely delayed. In addition, in December 2018, the federal banking agencies finalized rules that would
35
permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new
current expected credit loss accounting rule on retained earnings over a period of three years.
Economic Growth, Regulatory Relief, and Consumer Protection Act
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), which
was signed into law on May 24, 2018, scales back certain requirements of the Dodd-Frank Act and provides other
regulatory relief. Title II of the Economic Growth Act provides regulatory relief to community banks, which are generally
characterized in the statute as banking organizations with less than $10 billion in total consolidated assets and with limited
trading activities. The Economic Growth Act required the federal banking agencies to develop a “community bank leverage
ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets
of less than $10 billion. A financial institution can elect to be subject to this new definition. The federal banking agencies,
including the FDIC, have issued a rule pursuant to the Economic Growth Act to establish for institutions with assets of
less than $10 billion a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated
assets) of 9% that such institutions may elect to use in lieu of the generally applicable leverage and risk-based capital
requirements under Basel III. Pursuant to the CARES Act, the federal banking agencies in August 2020 had set the
community bank leverage ratio at lower percentages until Jan. 1, 2022, when the community bank leverage ratio
requirement returned to 9%. As of December 31, 2021, the Bank had elected not to be subject to this new definition. See
“FDIC Regulations – Prompt Corrective Regulatory Action.”
The Truth in Lending Act (“TILA”) is the commonly used name for Title I of the Consumer Credit Protection
Act, passed by Congress in 1968, which is the consumer protection law specifying what information lenders must share
with borrowers before giving them a loan or line of credit. This information includes the annual percentage rate, loan
terms, and total cost of the loan. Section 101 of the Economic Growth Act amends the TILA to add a safe harbor for "plain
vanilla" mortgage loans originated by banking organizations and credit unions with less than $10 billion in total
consolidated assets under existing qualified mortgage and ability to pay rules. This amendment would allow community
banks to exercise greater discretion in lending decisions.
Section 619 of the Dodd-Frank Act, commonly referred to as the “Volcker Rule,” generally prohibits insured
depository institutions and any company affiliated with an insured depository institution from engaging in proprietary
trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge
fund or private equity fund. These prohibitions are subject to a number of statutory exemptions, restrictions, and
definitions. Under the Economic Growth Act, community banks, (which for this purpose are generally characterized in the
statute as banking organizations with less than $10 billion in total consolidated assets with limited trading activities), are
exempt from the Volcker Rule and its proprietary trading prohibitions.
New York State Law
The Bank derives its lending, investment, and other authority primarily from the applicable provisions of New
York State Banking Law and the regulations of the NYDFS, as limited by FDIC regulations. Under these laws and
regulations, banks, including the Bank, may invest in real estate mortgages, consumer and commercial loans, certain types
of debt securities (including certain corporate debt securities, and obligations of federal, state, and local governments and
agencies), certain types of corporate equity securities, and certain other assets. The lending powers of New York State-
chartered commercial banks are not subject to percentage-of-assets or capital limitations, although there are limits
applicable to loans to individual borrowers.
The exercise by an FDIC-insured commercial bank of the lending and investment powers under New York State
Banking Law is limited by FDIC regulations and other federal laws and regulations. In particular, the applicable provisions
of New York State Banking Law and regulations governing the investment authority and activities of an FDIC-insured
state-chartered savings bank and commercial bank have been effectively limited by the Federal Deposit Insurance
Corporation Improvement Act of 1991 (“FDICIA”) and the FDIC regulations issued pursuant thereto.
With certain limited exceptions, a New York State-chartered commercial bank may not make loans or extend
credit for commercial, corporate, or business purposes (including lease financing) to a single borrower, the aggregate
36
amount of which would be in excess of 15% of the bank’s net worth or up to 25% for loans secured by collateral having
an ascertainable market value at least equal to the excess of such loans over the bank’s net worth. The Bank currently
complies with all applicable loans-to-one-borrower limitations. At December 31, 2021, the Bank’s largest aggregate
amount of outstanding loans to one borrower was $93.8 million, all of which were performing according to their terms.
See “— General — Lending Activities.”
Under New York State Banking Law, New York State-chartered stock-form commercial banks may declare and
pay dividends out of its net profits, unless there is an impairment of capital, but approval of the NYDFS Superintendent
(the “Superintendent”) is required if the total of all dividends declared by the bank in a calendar year would exceed the
total of its net profits for that year combined with its retained net profits for the preceding two years less prior dividends
paid.
New York State Banking Law gives the Superintendent authority to issue an order to a New York State-chartered
banking institution to appear and explain an apparent violation of law, to discontinue unauthorized or unsafe practices,
and to keep prescribed books and accounts. Upon a finding by the NYDFS that any director, trustee, or officer of any
banking organization has violated any law, or has continued unauthorized or unsafe practices in conducting the business
of the banking organization after having been notified by the Superintendent to discontinue such practices, such director,
trustee, or officer may be removed from office after notice and opportunity to be heard. The Superintendent also has
authority to appoint a conservator or a receiver for a savings or commercial bank under certain circumstances.
The Superintendent of the NYDFS has the authority to appoint a receiver or liquidator of any state-chartered bank
or trust company under specified circumstances, including where (i) the bank is conducting its business in an unauthorized
or unsafe manner, (ii) the bank has suspended payment of its obligations, or (iii) the bank cannot with safety and
expediency continue to do business.
On February 16, 2017, the NYDFS issued the final version of its cybersecurity regulation, which has an effective
date of March 1, 2017. The regulation, which is detailed and broad in scope, covers five basic areas.
Governance: The regulation requires senior management and boards of directors to adopt a cybersecurity policy
for protecting information systems and most sensitive information. Covered companies are also required to designate a
Chief Information Security Officer, who must report to the board annually.
Testing: The regulation requires the conduct of cybersecurity tests and analyses, including a “risk assessment” to
“evaluate and categorize risks,” evaluate the integrity and confidentiality of information systems and non-public
information, and develop a process to mitigate any identified risks.
Ongoing Requirements: The regulation imposes substantial day-to-day and technical requirements. Among
others, we are required to develop and/or maintain access controls for our information systems, ensure the physical security
of our computer systems, encrypt or protect personally identifiable information, perform reviews of in-house and externally
created applications, train employees, and build an audit trail system.
Vendors: The new regulation also regulates third-party vendors with access to our information technology or non-
public information. We are required to develop and implement written policies and procedures to ensure the security of
our information technology systems or non-public information that can be accessed by our vendors, including identifying
the risks from third-party access, imposing minimum cybersecurity practices for vendors, and creating a due-diligence
process for evaluating those vendors.
Reports: The new regulation imposes a notification process for any material cybersecurity event. Within 72 hours,
a cybersecurity event that has a “reasonable likelihood” of “materially harming” us or that must be reported to another
government or self-regulating agency must be reported to the NYDFS. In addition, an annual compliance certification to
the NYDFS from either the board or a senior officer is required.
37
U.S Patriot Act and Money Laundering
The Bank is subject to the Bank Secrecy Act (“BSA”), which incorporates several laws, including the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(the “USA PATRIOT Act”) and related regulations. The USA PATRIOT Act gives the federal government powers to
address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance
powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the
BSA, Title III of the USA PATRIOT Act implemented measures intended to encourage information sharing among bank
regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on
a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and
parties registered under the Commodity Exchange Act.
Among other things, Title III of the USA PATRIOT Act and the related regulations require:
Establishment of anti-money laundering compliance programs that include policies, procedures, and internal
controls; the designation of a BSA officer; a training program; and independent testing;
Filing of certain reports to Financial Crimes Enforcement Network and law enforcement that are designated
to assist in the detection and prevention of money laundering and terrorist financing activities;
Establishment of a program specifying procedures for obtaining and maintaining certain records from
customers seeking to open new accounts, including verifying the identity of customers;
In certain circumstances, compliance with enhanced due diligence policies, procedures and controls designed
to detect and report money-laundering, terrorist financing and other suspicious activity;
Monitoring account activity for suspicious transactions; and
A heightened level of review for certain high-risk customers or accounts.
The USA PATRIOT Act also includes prohibitions on correspondent accounts for foreign shell banks and requires
compliance with record keeping obligations with respect to correspondent accounts of foreign banks.
The bank regulatory agencies have increased the regulatory scrutiny of the BSA and anti-money laundering
programs maintained by financial institutions. Significant penalties and fines, as well as other supervisory orders may be
imposed on a financial institution for non-compliance with these requirements. In addition, for financial institutions
engaging in a merger transaction, federal bank regulatory agencies must consider the effectiveness of the financial
institution’s efforts to combat money laundering activities. The Bank has adopted policies and procedures to comply with
these requirements.
FDIC Regulations
Capital Requirements. The FDIC has adopted risk-based capital guidelines to which the Bank is subject. The
guidelines establish a systematic analytical framework that makes regulatory capital requirements sensitive to differences
in risk profiles among banking organizations. The Bank is required to maintain certain levels of regulatory capital in
relation to regulatory risk-weighted assets. The ratio of such regulatory capital to regulatory risk-weighted assets is referred
to as a “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance-
sheet items to risk-weighted categories ranging from 0% to 1250%, with higher levels of capital being required for the
categories perceived as representing greater risk.
These guidelines divide an institution’s capital into two tiers. The first tier (“Tier 1”) includes common equity,
retained earnings, certain non-cumulative perpetual preferred stock (excluding auction rate issues), and minority interests
in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets (except mortgage servicing rights
38
and purchased credit card relationships subject to certain limitations). Supplementary (“Tier 2”) capital includes, among
other items, cumulative perpetual and long-term limited-life preferred stock, mandatorily convertible securities, certain
hybrid capital instruments, term subordinated debt, and the ALL, subject to certain limitations, and up to 45% of pre-tax
net unrealized gains on equity securities with readily determinable fair market values, less required deductions. See
“Prompt Corrective Regulatory Action” below.
The regulatory capital regulations of the FDIC and other federal banking agencies provide that the agencies will
take into account the exposure of an institution’s capital and economic value to changes in interest rate risk in assessing
capital adequacy. According to such agencies, applicable considerations include the quality of the institution’s interest rate
risk management process, overall financial condition, and the level of other risks at the institution for which capital is
needed. Institutions with significant interest rate risk may be required to hold additional capital. The agencies have issued
a joint policy statement providing guidance on interest rate risk management, including a discussion of the critical factors
affecting the agencies’ evaluation of interest rate risk in connection with capital adequacy. Institutions that engage in
specified amounts of trading activity may be subject to adjustments in the calculation of the risk-based capital requirement
to assure sufficient additional capital to support market risk.
Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe, for the
depository institutions under its jurisdiction, standards that relate to, among other things, internal controls; information
and audit systems; loan documentation; credit underwriting; the monitoring of interest rate risk; asset growth;
compensation; fees and benefits; and such other operational and managerial standards as the agency deems appropriate.
The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for Safety and
Soundness (the “Guidelines”) to implement these safety and soundness standards. The Guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails
to meet any standard prescribed by the Guidelines, the agency may require the institution to provide it with an acceptable
plan to achieve compliance with the standard, as required by the Federal Deposit Insurance Act, as amended, (the “FDI
Act”). The regulations establish deadlines for the submission and review of such safety and soundness compliance plans.
Real Estate Lending Standards. The FDIC and the other federal banking agencies have adopted regulations that
prescribe standards for extensions of credit that are (i) secured by real estate, or (ii) made for the purpose of financing
construction or improvements on real estate. The FDIC regulations require each institution to establish and maintain
written internal real estate lending standards that are consistent with safe and sound banking practices, and appropriate to
the size of the institution and the nature and scope of its real estate lending activities. The standards also must be consistent
with accompanying FDIC guidelines. The institution’s standards establish requirements for loan portfolio diversification,
prudent underwriting (including loan-to-value limits) that are clear and measurable, loan administration procedures,
documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the
federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies. Institutions are also permitted to make
a limited amount of loans that do not conform to the proposed loan-to-value limitations so long as such exceptions are
reviewed and justified appropriately. The FDIC guidelines also list a number of lending situations in which exceptions to
the loan-to-value standard are justified.
The FDIC and the FRB have also jointly issued the “Concentrations in Commercial Real Estate Lending, Sound
Risk Management Practices” (the “CRE Guidance”). The CRE Guidance, which addresses land development,
construction, and certain multi-family loans, as well as commercial real estate loans, does not establish specific lending
limits but rather reinforces and enhances these agencies’ existing regulations and guidelines for such lending and portfolio
management. Specifically, the CRE Guidance provides that a bank has a concentration in lending if (1) total reported loans
for construction, land development, and other land represent 100% or more of total risk-based capital; or (2) total reported
loans secured by multi-family properties, non-farm non-residential properties (excluding those that are owner-occupied),
and loans for construction, land development, and other land represent 300% or more of total risk-based capital and the
bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. If a concentration is
present, management must employ heightened risk management practices that address key elements, including board and
management oversight, strategic planning, portfolio management, development of underwriting standards, risk assessment
and monitoring through market analysis and stress testing, along with maintenance of increased capital levels as needed
to support the level of commercial real estate lending.
39
Dividend Limitations. The FDIC has authority to use its enforcement powers to prohibit a commercial bank from
paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice. Federal law
prohibits the payment of dividends that will result in the institution failing to meet applicable capital requirements on a
pro forma basis. The Bank is also subject to dividend declaration restrictions imposed by New York State law as previously
discussed under “New York State Law.”
Investment Activities. Since the enactment of FDICIA, all state-chartered financial institutions, including
commercial banks and their subsidiaries, have generally been limited to such activities as principal and equity investments
of the type, and in the amount, authorized for national banks. State law, FDICIA, and FDIC regulations permit certain
exceptions to these limitations. In addition, the FDIC is authorized to permit institutions to engage in state-authorized
activities or investments not permitted for national banks (other than non-subsidiary equity investments) for institutions
that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant
risk to the FDIC insurance fund. The Gramm-Leach-Bliley Act of 1999 (the “GLBA”) and FDIC regulations impose
certain quantitative and qualitative restrictions on such activities and on a bank’s dealings with a subsidiary that engages
in specified activities.
Prompt Corrective Regulatory Action. Federal law requires, among other things, that federal bank regulatory
authorities take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For
such purposes, the law establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized.
Under current FDIC regulations, a bank is deemed to be “well capitalized” if the bank has a total risk-based
capital ratio of 10% or greater, has a Tier 1 risk-based capital ratio of 8% or greater, has a common equity tier 1 capital
ratio of 6.5% or greater, has a leverage ratio of 5% or greater, and is not subject to any order or final capital directive by
the FDIC to meet and maintain a specific capital level for any capital measure. A bank may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital position if it received an unsatisfactory safety
and soundness examination rating. As of December 31, 2021, the Bank was a “well-capitalized” bank, as applicably
defined. The Dodd-Frank Act made permanent the standard maximum amount of FDIC deposit insurance at $250,000 per
depositor. In addition, the deposits of the Bank are insured up to applicable limits by the DIF. In this regard, insured
depository institutions are required to pay quarterly deposit insurance assessments to the DIF. Under the FDIC’s risk-
based assessment system, insured institutions are assigned to one of four risk categories based upon supervisory
evaluations, regulatory capital level, and certain other factors, with less risky institutions paying lower assessments based
on the assigned risk levels. An institution’s assessment rate depends upon the category to which it is assigned and certain
other factors. Assessment rates range from 1.5 to 40 basis points of the institution’s assessment base, which is calculated
as average total assets minus average tangible equity.
Enforcement. Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged
in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable
law, regulation, rule, order, or condition imposed by the FDIC. The FDIC has extensive enforcement authority to correct
unsafe or unsound practices and violations of law or regulation. Such authority includes the issuance of cease-and-desist
orders, assessment of civil money penalties and removal of officers and directors. The FDIC may also appoint a conservator
or receiver for a non-member bank under specified circumstances, such as where (i) the bank’s assets are less than its
obligations to creditors, (ii) the bank is likely to be unable to pay its obligations or meet depositors’ demands in the normal
course of business, or (iii) a substantial dissipation of bank assets or earnings has occurred due to a violation of law of
regulation or unsafe or unsound practices. Management does not know of any practice, condition, or violation that would
lead to termination of the deposit insurance for the Bank.
Brokered Deposits
FDIC and other regulations generally limit the ability of an insured depository institution to accept, renew or roll
over any brokered deposit unless the institution’s capital category is “well capitalized” or, with the FDIC’s approval,
“adequately capitalized.” Depository institutions that have brokered deposits in excess of 10% of total assets are subject
to increased FDIC deposit insurance premium assessments. However, for institutions that are well capitalized and have a
CAMELS composite rating of 1 or 2, reciprocal deposits are deducted from brokered deposits. Section 202 of the Economic
40
Growth Act amends the Federal Deposit Insurance Act to exempt a capped amount of reciprocal deposits from treatment
as brokered deposits for certain insured depository institutions.
Undercapitalized institutions are not permitted to accept brokered deposits. Pursuant to the regulations the Bank,
as a well-capitalized institution, may accept brokered deposits.
Incentive Compensation Guidance
Federal banking agencies and the NYDFS have issued comprehensive guidance intended to ensure that the
incentive compensation policies of banking organizations, including bank holding companies, do not undermine the safety
and soundness of those organizations by encouraging excessive risk-taking. The incentive compensation guidance sets
expectations for banking organizations concerning their incentive compensation arrangements and related risk-
management, control and governance processes. In addition, under the incentive compensation guidance, a banking
organization’s federal supervisor, which for the Bank is the FDIC and the Company is the FRB, may initiate enforcement
action if the organization’s incentive compensation arrangements pose a risk to the safety and soundness of the
organization. Further, provisions of Basel III described above limit discretionary bonus payments to bank and bank holding
company executives if the institution’s regulatory capital ratios fail to exceed certain thresholds. The scope and content of
the banking regulators’ policies on incentive compensation are likely to continue evolving.
Transactions with Affiliates
Sections 23A and 23B of the Federal Reserve Act and FRB’s Regulation W generally:
Limit the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one
affiliate;
Limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all
affiliates and;
Require that all such transactions be on terms substantially the same, or at least favorable to, the bank
or subsidiary, as those provided to a non-affiliate.
An affiliate of a bank is any company or entity which controls, is controlled by, or is under common control with
the bank. The term “covered transaction” includes the making of loans to the affiliate, the purchase of assets from the
affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate, and other
similar types of transactions.
A bank’s authority to extend credit to executive officers, directors and greater than 10 percent shareholders, as
well as entities controlled by such persons, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation
O promulgated thereunder by the FRB. Among other things, these loans must be made on terms (including interest rates
charged and collateral required) substantially the same as those offered to unaffiliated individuals or be made as part of a
benefit or compensation program and on terms widely available to employees and must not involve a greater than normal
risk of repayment. In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s
capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.
Community Reinvestment Act
Federal Regulation. Under the Community Reinvestment Act (“CRA”), as implemented by FDIC regulations, an
institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit
needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions, nor does it limit an institution’s discretion to develop the types
of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA
requires the FDIC, in connection with its examinations, to assess the institution’s record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain applications by such institution. The CRA
41
requires public disclosure of an institution’s CRA rating and further requires the FDIC to provide a written evaluation of
an institution’s CRA performance utilizing a four-tiered descriptive rating system. The Bank received a CRA rating of
“Outstanding” in its most recent completed CRA examination, which was completed as of June 25, 2018. Institutions that
receive less than a satisfactory rating may face difficulties in securing approval for new activities or acquisitions. The CRA
requires all institutions to make public disclosures of their CRA ratings.
New York State Regulation. The Bank is also subject to provisions of the New York State Banking Law that
impose continuing and affirmative obligations upon a banking institution organized in New York State to serve the credit
needs of its local community (the “NYCRA”). Such obligations are substantially similar to those imposed by the CRA.
The NYCRA requires the NYDFS to make a periodic written assessment of an institution’s compliance with the NYCRA,
utilizing a four-tiered rating system, and to make such assessment available to the public. The NYCRA also requires the
Superintendent to consider the NYCRA rating when reviewing an application to engage in certain transactions, including
mergers, asset purchases, and the establishment of branch offices or ATMs, and provides that such assessment may serve
as a basis for the denial of any such application.
Federal Home Loan Bank System
The Bank is a member of the FHLB-NY, one of 11 regional FHLBs comprising the FHLB system. Each regional
FHLB manages its customer relationships, while the 11 FHLBs use its combined size and strength to obtain its necessary
funding at the lowest possible cost. As a member of the FHLB-NY, the Bank is required to acquire and hold shares of
FHLB-NY capital stock. Pursuant to this requirement, at December 31, 2021, the Bank was required to maintain $35.9
million of FHLB-NY stock.
Holding Company Regulations
The Company is subject to examination, regulation, and periodic reporting under the Bank Holding Company
Act of 1956, as amended (the “BHCA”), as administered by the FRB. The Company is required to obtain the prior approval
of the FRB to acquire all, or substantially all, of the assets of any bank or bank holding company. Prior FRB approval
would be required for the Company to acquire direct or indirect ownership or control of any voting securities of any bank
or bank holding company if, after giving effect to such acquisition, it would, directly or indirectly, own or control more
than 5% of any class of voting shares of such bank or bank holding company. In addition before any bank acquisition can
be completed, prior approval thereof may also be required to be obtained from other agencies having supervisory
jurisdiction over the bank to be acquired, including the NYDFS.
FRB regulations generally prohibit a bank holding company from engaging in, or acquiring, direct or indirect
control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal
exceptions to this prohibition is for activities found by the FRB to be so closely related to banking or managing or
controlling Bank as to be a proper incident thereto. Some of the principal activities that the FRB has determined by
regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing
services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment, or financial advisor; (v) leasing
personal or real property; (vi) making investments in corporations or projects designed primarily to promote community
welfare; and (vii) acquiring a savings and loan association.
The FRB has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis). At
December 31, 2021, the Company’s consolidated capital exceeded these requirements. The Dodd-Frank Act required the
FRB to issue consolidated regulatory capital requirements for bank holding companies that are at least as stringent as those
applicable to insured depository institutions. Such regulations eliminated the use of certain instruments, such as cumulative
preferred stock and trust preferred securities, as Tier 1 holding company capital.
Bank holding companies are generally required to give the FRB prior written notice of any purchase or
redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined
with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10%
or more of the Company’s consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines
that the proposal would constitute an unsafe or unsound practice, or would violate any law, regulation, FRB order or
42
directive, or any condition imposed by, or written agreement with, the FRB. The FRB has adopted an exception to this
approval requirement for well-capitalized bank holding companies that meet certain other conditions.
The FRB has issued a policy statement regarding the payment of dividends by bank holding companies. In
general, the FRB’s policies provide that dividends should be paid only out of current earnings and only if the prospective
rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset
quality, and overall financial condition. The FRB’s policies also require that a bank holding company serve as a source of
financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to
those banks during periods of financial stress or adversity, and by maintaining the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks where necessary. The Dodd-Frank Act codifies
the source of financial strength policy and requires regulations to facilitate its application. Under the prompt corrective
action laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes
undercapitalized. These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage
in capital distributions.
Under the FDI Act, a depository institution may be liable to the FDIC for losses caused the DIF if a commonly
controlled depository institution were to fail. The Bank is commonly controlled within the meaning of that law.
The status of the Company as a registered bank holding company under the BHCA does not exempt it from
certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
The Company, the Bank, and their respective affiliates will be affected by the monetary and fiscal policies of
various agencies of the United States Government, including the Federal Reserve System. In view of changing conditions
in the national economy and in the money markets, it is difficult for management to accurately predict future changes in
monetary policy or the effect of such changes on the business or financial condition of the Company or the Bank.
Acquisition of the Holding Company
Under the Federal Change in Bank Control Act (“CIBCA”), a notice must be submitted to the FRB if any person
(including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s shares of outstanding
common stock, unless the FRB has found that the acquisition will not result in a change in control of the Company. Under
the CIBCA, the FRB generally has 60 days within which to act on such notices, taking into consideration certain factors,
including the financial and managerial resources of the acquirer; the convenience and needs of the communities served by
the Company and the Bank; and the anti-trust effects of the acquisition. Under the BHCA, any company would be required
to obtain approval from the FRB before it may obtain “control” of the Company within the meaning of the BHCA. Control
generally is defined to mean the ownership or power to vote 25% or more of any class of voting securities of the Company
or the ability to control in any manner the election of a majority of the Company’s directors. An existing bank holding
company would, under the BHCA, be required to obtain the FRB’s approval before acquiring more than 5% of the
Company’s voting stock. In addition to the CIBCA and the BHCA, New York State Banking Law generally requires prior
approval of the New York State Banking Board before any action is taken that causes any company to acquire direct or
indirect control of a banking institution that is organized in New York.
Consumer Financial Protection Bureau
Created under the Dodd-Frank Act, and given extensive implementation and enforcement powers, the CFPB has
broad rulemaking authority for a wide range of consumer financial laws that apply to all banks, including, among other
things, the authority to prohibit “unfair, deceptive, or abusive” acts and practices. Abusive acts or practices are defined as
those that (1) materially interfere with a consumer’s ability to understand a term or condition of a consumer financial
product or service, or (2) take unreasonable advantage of a consumer’s (a) lack of financial savvy, (b) inability to protect
himself in the selection or use of consumer financial products or services, or (c) reasonable reliance on a covered entity to
act in the consumer’s interests. The CFPB has the authority to investigate possible violations of federal consumer financial
law, hold hearings and commence civil litigation. The CFPB can issue cease-and-desist orders against banks and other
43
entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation of
federal consumer financial law in order to impose a civil penalty or an injunction.
Mortgage Banking and Related Consumer Protection Regulations
The retail activities of the Bank, including lending and the acceptance of deposits, are subject to a variety of
statutes and regulations designed to protect consumers. Interest and other charges collected or contracted for by the Bank
are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws
applicable to credit transactions, such as:
The federal Truth-In-Lending Act and Regulation Z issued by the FRB, governing disclosures of credit terms
to consumer borrowers;
The Home Mortgage Disclosure Act and Regulation C issued by the FRB, requiring financial institutions to
provide information to enable the public and public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the community it serves;
The Equal Credit Opportunity Act and Regulation B issued by the FRB, prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending credit;
The Fair Credit Reporting Act and Regulation V issued by the FRB, governing the use and provision of
information to consumer reporting agencies;
The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection
agencies; and
The guidance of the various federal agencies charged with the responsibility of implementing such federal
laws.
Deposit operations also are subject to:
The Truth in Savings Act and Regulation DD issued by the FRB, which requires disclosure of deposit terms
to consumers;
Regulation CC issued by the FRB, which relates to the availability of deposit funds to consumers;
The Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer
financial records and prescribes procedures for complying with administrative subpoenas of financial
records; and
The Electronic Funds Transfer Act and Regulation E issued by the FRB, which governs automatic deposits
to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
In addition, the Bank and its subsidiaries may also be subject to certain state laws and regulations designed to
protect consumers.
Many of the foregoing laws and regulations are subject to change resulting from the provisions in the Dodd-Frank
Act, which in many cases calls for revisions to implementing regulations. In addition, oversight responsibilities of these
and other consumer protection laws and regulations will, in large measure, transfer from the Bank’s primary regulators to
the CFPB. We cannot predict the effect that being regulated by a new, additional regulatory authority focused on consumer
financial protection, or any new implementing regulations or revisions to existing regulations that may result from the
establishment of this new authority, will have on our businesses.
44
Data Privacy
Federal and state law contains extensive consumer privacy protection provisions. The GLBA requires financial
institutions to periodically disclose their privacy practices and policies relating to sharing such information and enable
retail customers to opt out of the Bank’s ability to share certain information with affiliates and non-affiliates for marketing
and/or non-marketing purposes, or to contact customers with marketing offers. The GLBA also requires financial
institutions to implement a comprehensive information security program that includes administrative, technical, and
physical safeguards to ensure the security and confidentiality of customer records and information.
Cybersecurity
The Cybersecurity Information Sharing Act (the “CISA”) is intended to improve cybersecurity in the U.S. through
sharing of information about security threats between the U.S. government and private sector organizations, including
financial institutions such as the Bank. The CISA also authorizes companies to monitor their own systems, notwithstanding
any other provision of law, and allows companies to carry out defensive measures on their own systems from potential
cyber-attacks.
Federal Restrictions on Acquisition of the Company
Under the Federal Change in Bank Control Act (“CIBCA”), a notice must be submitted to the FRB if any person
(including a company), or group acting in concert, seeks to acquire 10% or more of the Company’s shares of outstanding
common stock, unless the FRB has found that the acquisition will not result in a change in control of the Company. Under
the CIBCA, the FRB generally has 60 days within which to act on such notices, taking into consideration certain factors,
including the financial and managerial resources of the acquirer; the convenience and needs of the communities served by
the Company, the Bank; and the anti-trust effects of the acquisition. Under the BHCA, any company would be required to
obtain approval from the FRB before it may obtain “control” of the Company within the meaning of the BHCA. Control
generally is defined to mean the ownership or power to vote 25% or more of any class of voting securities of the Company,
the ability to control in any manner the election of a majority of the Company’s directors, or the power to exercise a
controlling influence over the management or policies of the Company. Under the BHCA, an existing bank holding
company would be required to obtain the FRB’s approval before acquiring more than 5% of the Company’s voting stock.
See “Holding Company Regulations” earlier in this report.
Federal Securities Laws
The Company’s common stock is registered with the Securities and Exchange Commission (the “SEC”) and listed
for trading on The Nasdaq Stock Market (“Nasdaq”). Accordingly, the Company is subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934 and the rules
Nasdaq.
On August 6, 2021, the SEC approved new Nasdaq listing rules regarding board diversity and disclosure.
Beginning on the later of August 8, 2022, or the date on which the Company, as a Nasdaq-listed company, files its annual
meeting proxy statement with the SEC for its annual meeting of shareholders during 2022, the Company will commence
disclosing board diversity data annually. In addition, Nasdaq-listed companies, like the Company, that are listed on
Nasdaq’s Global Select Market, are required to have, or explain why they do not have, (i) one diverse director by the later
of August 6, 2023 or the date it files its annual meeting proxy statement with the SEC for its annual meeting of shareholders
during 2023, and (ii) two diverse directors by the later of August 6, 2025, or the date it files its annual meeting proxy
statement with the SEC for its annual meeting of shareholders during 2025. The Company may meet the diversity
requirements with two female directors, or with one female director and one director who is an underrepresented minority
or LGBTQ+.
45
Available Information
We are a reporting company and file annual, quarterly and current reports, proxy statements and other information
with the SEC. We make available free of charge on or through our web site at http://www.flushingbank.com our annual
reports on Form 10 K, quarterly reports on Form 10 Q, current reports on Form 8 K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC. Our SEC filings are also available to the public
free of charge over the Internet at the SEC’s web site at http://www.sec.gov.
You may also read and copy any document we file at the SEC’s public reference room located at 100 F. Street,
N.E., Room 1580, Washington, D.C. 20549. You may obtain information about the operation of the public reference room
by calling the SEC at 1 800 SEC 0330. You may request copies of these documents by writing to the SEC and paying a
fee for the copying cost.
Item 1A. Risk Factors.
In addition to the other information contained in this Annual Report, the following factors and other
considerations should be considered carefully in evaluating us and our business.
The COVID-19 Pandemic Has Significantly Impacted Our Financial Condition and Results of Operations
The Coronavirus Disease 2019 ("COVID-19") pandemic has adversely affected, and may continue to adversely
affect, us and our customers, employees and third-party service providers, as well as our business, financial position,
operations, liquidity, loans, asset quality, capital, results of operations and prospects. The extent to which the COVID-19
pandemic will continue to adversely affect us will depend on future developments that are highly uncertain and cannot be
predicted and many of which are outside of our control. These future developments may include the scope and duration of
the COVID-19 pandemic, the emergence of new variants of COVID-19, the possibility of future resurgences of the
COVID-19 pandemic, the continued effectiveness of the Company’s business continuity plan including work-from-home
arrangements and staffing at branches and certain other facilities, the direct and indirect impact of the COVID-19 pandemic
on the Company’s customers, employees, third-party service providers, as well as on other market participants, actions
taken, or that may yet be taken, by governmental authorities and other third parties in response to the COVID-19 pandemic,
and the effectiveness and public acceptance of vaccines for COVID-19.
Although financial markets have largely rebounded from the significant declines that occurred earlier in the
pandemic and global economic conditions have improved, many of the circumstances that arose or became more
pronounced after the onset of the COVID-19 pandemic persist. Those circumstances include:
supply chain issues remain unresolved for longer than anticipated and decreased consumer and business
confidence and economic activity, leading to certain lower loan demand and an increased risk of loan
delinquencies, defaults and foreclosures;
ratings downgrades, credit deterioration and defaults in many industries;
volatility in financial and capital markets, interest rates and exchange rates;
a reduction in the value of the assets that we manage or otherwise administer or service for others, affecting
demand for our services;
heightened cybersecurity, information security, and operational risks as cybercriminals attempt to profit from the
disruption resulting from the pandemic given increased online and remote activity, including as a result of work-
from-home arrangements;
disruptions to business operations experienced by counterparties and service providers;
increased risk of business disruption if our employees are unable to work effectively because of illness,
quarantines, government actions, failures in systems or technology that disrupt work-from-home arrangements,
or other effects of the COVID-19 pandemic; and
decreased demands for our products and services.
46
As a result, our credit, operational, and certain other risks are generally expected to remain elevated until the
COVID-19 pandemic subsides. Depending on the duration and severity of the COVID-19 pandemic going forward, the
conditions noted above could continue for an extended period and these or other adverse developments may occur or
reoccur. Governmental authorities have taken unprecedented measures both to contain the spread of the COVID-19
pandemic and to provide economic assistance to individuals and businesses, stabilize the markets, and support economic
growth. We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of
the COVID-19 pandemic and actions governmental authorities take in response to the COVID-19 pandemic. Further,
various government programs such as the U.S. Small Business Administration’s Paycheck Protection program (“PPP”)
are complex and our participation may lead to litigation and governmental, regulatory and third-party scrutiny, negative
publicity, and damage to our reputation.
The length of the COVID-19 pandemic and the efficacy of the extraordinary measures being put in place to
address it are unknown. There are no comparable recent events that provide guidance as to the economic recovery from
the effects of the COVID-19 pandemic or the effect the spread of COVID-19 as a global pandemic may have. Even after
the COVID-19 pandemic subsides, the U.S. economy may experience a recession. Our business could be materially and
adversely affected by a prolonged recession. To the extent the pandemic adversely affects our business, financial condition,
liquidity, capital, loans, asset quality or results of operations, it may also have the effect of heightening many of the other
risks described in this “Risk Factors” section of this Form 10-K.
.
Changes in Interest Rates May Significantly Impact Our Financial Condition and Results of Operations
Our primary source of income is net interest income, which is the difference between the interest income
generated by our interest-earning assets (consisting primarily of multi-family residential loans, commercial business loans
and commercial real estate mortgage loans) and the interest expense generated by our interest-bearing liabilities (consisting
primarily of deposits). The level of net interest income is primarily a function of the average balance of our interest-earning
assets, the average balance of our interest-bearing liabilities, and the spread between the yield on such assets and the cost
of such liabilities. These factors are influenced by both the pricing and mix of our interest-earning assets and our interest-
bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and
deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board (the “FOMC”), and
market interest rates. It is currently expected that during 2022 the FOMC will increase interest rates multiple times,
commencing in March 2022. The current consensus of expectations as to the magnitude of such increases already exceeds
that consensus as recently as of the end of 2021, although there can be no assurances as to any future FOMC conduct. A
significant portion of our loans have fixed interest rates (or, if adjustable, are initially fixed for periods of five to 10 years)
and longer terms than our deposits and borrowings. Our net interest income could be adversely affected if the rates we pay
on deposits and borrowings increase more rapidly than the rates we earn on loans. Our interest rate risk is exacerbated in
the short term by the fact that approximately 80% of our certificates of deposit accounts and borrowings will reprice or
mature during the next year.
As a result of our historical focus on the origination of multi-family residential mortgage loans, commercial
business loans and commercial real estate mortgage loans, the majority of our loans are adjustable rate, however, many
adjust at periods of five to 10 years. In addition, a large percentage of our investment securities and mortgage-backed
securities have fixed interest rates and are classified as available for sale. As is the case with many financial institutions,
our emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in our
interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant
earnings volatility because interest rates change over time and are currently at historical low levels. As interest rates
increase, our cost of funds will increase more rapidly than the yields on a substantial portion of our interest-earning assets.
In addition, the market value of our fixed-rate assets for example, our investment and mortgage-backed securities
portfolios, would decline if interest rates increase. In line with the foregoing, we have experienced and may continue to
experience an increase in the cost of interest-bearing liabilities primarily due to raising the rates we pay on some of our
deposit products to stay competitive within our market and an increase in borrowing costs from increases in the federal
funds rate.
Prevailing interest rates also affect the extent to which borrowers repay and refinance loans. In a declining interest
rate environment, the number of loan prepayments and loan refinancing may increase, as well as prepayments of mortgage-
47
backed securities. Call provisions associated with our investment in U.S. government agency and corporate securities may
also adversely affect yield in a declining interest rate environment. Such prepayments and calls may adversely affect the
yield of our loan portfolio and mortgage-backed and other securities as we reinvest the prepaid funds in a lower interest
rate environment. However, we typically receive additional loan fees when existing loans are refinanced, which partially
offset the reduced yield on our loan portfolio resulting from prepayments. In periods of low interest rates, our level of core
deposits also may decline if depositors seek higher-yielding instruments or other investments not offered by us, which in
turn may increase our cost of funds and decrease our net interest margin to the extent alternative funding sources are
utilized. An increasing interest rate environment would tend to extend the average lives of lower yielding fixed rate
mortgages and mortgage-backed securities, which could adversely affect net interest income. Also, in an increasing interest
rate environment, mortgage loans and mortgage-backed securities may prepay at slower rates than experienced in the past,
which could result in a reduction of prepayment penalty income. In addition, depositors tend to open longer term, higher
costing certificate of deposit accounts which could adversely affect our net interest income if rates were to subsequently
decline. Additionally, adjustable rate mortgage loans and mortgage-backed securities generally contain interim and
lifetime caps that limit the amount the interest rate can increase or decrease at repricing dates. Significant increases in
prevailing interest rates may significantly affect demand for loans and the value of bank collateral. See “— Local Economic
Conditions.
Our Lending Activities Involve Risks that May Be Exacerbated Depending on the Mix of Loan Types
At December 31, 2021, our gross loan portfolio was $6,633.9 million, of which 78.4% was mortgage loans
secured by real estate. The majority of these real estate loans were secured by multi-family residential property ($2,517.0
million), commercial real estate ($1,775.6 million) and one-to-four family mixed-use property ($571.8 million), which
combined represent 73.3% of our loan portfolio. Our loan portfolio is concentrated in the New York City metropolitan
area. Multi-family residential, one-to-four family mixed-use property, commercial real estate mortgage loans, commercial
business loans and construction loans, are generally viewed as exposing the lender to a greater risk of loss than fully
underwritten one-to-four family residential mortgage loans and typically involve higher principal amounts per loan. Multi-
family residential, one-to-four family mixed-use property and commercial real estate mortgage loans are typically
dependent upon the successful operation of the related property, which is usually owned by a legal entity with the property
being the entity’s only asset. If the cash flow from the property is reduced, the borrower’s ability to repay the loan may be
impaired. If the borrower defaults, our only remedy may be to foreclose on the property, for which the market value may
be less than the balance due on the related mortgage loan. We attempt to mitigate this risk by generally requiring a loan-
to-value ratio of no more than 75% at a time the loan is originated, except for one-to-four family residential mortgage
loans, where we require a loan-to value ratio of no more than 80%. Repayment of construction loans is contingent upon
the successful completion and operation of the project. The repayment of commercial business loans (the increased
origination of which is part of management’s strategy), is contingent on the successful operation of the related business.
Changes in local economic conditions and government regulations, which are outside the control of the borrower or lender,
also could affect the value of the security for the loan or the future cash flow of the affected properties. We continually
review the composition of our mortgage loan portfolio to manage the risk in the portfolio.
In assessing our future earnings prospects, investors should consider, among other things, our level of origination
of one-to-four family residential, multi-family residential, commercial real estate and one-to-four family mixed-use
property mortgage loans, and commercial business and construction loans, and the greater risks associated with such loans.
See “Business — Lending Activities” in Item 1 of this Annual Report.
Failure to Effectively Manage Our Liquidity Could Significantly Impact Our Financial Condition and Results of
Operations
Our liquidity is critical to our ability to operate our business. Our primary sources of liquidity are deposits, both
retail deposits from our branch network including our Internet Branch, brokered deposits, and borrowed funds, primarily
wholesale borrowing from the Federal Home Loan Bank of New York (the “FHLB-NY”). Funds are also provided by the
repayment and sale of securities and loans. Our ability to obtain funds are influenced by many external factors, including
but not limited to, local and national economic conditions, the direction of interest rates and competition for deposits in
the markets we serve. Additionally, changes in the FHLB-NY underwriting guidelines may limit or restrict our ability to
borrow. A decline in available funding caused by any of the above factors could adversely impact our ability to originate
48
loans, invest in securities, meet our expenses, or fulfill our obligations such as repaying our borrowings or meeting deposit
withdrawal demands.
Our Ability to Obtain Brokered Deposits as an Additional Funding Source Could be Limited
We utilize brokered deposits as an additional funding source and to assist in the management of our interest rate
risk. The Bank had $0.6 billion or 9.8% of total deposits and $1.1 billion, or 17.5% of total deposits, in brokered deposit
accounts at December 31, 2021 and 2020, respectively. We have obtained brokered certificates of deposit when the interest
rate on these deposits is below the prevailing interest rate for non-brokered certificates of deposit with similar maturities
in our market, or when obtaining them allowed us to extend the maturities of our deposits at favorable rates compared to
borrowing funds with similar maturities, when we are seeking to extend the maturities of our funding to assist in the
management of our interest rate risk. Brokered certificates of deposit provide a large deposit for us at a lower operating
cost as compared to non-brokered certificates of deposit since we only have one account to maintain versus several
accounts with multiple interest and maturity checks. Unlike non-brokered certificates of deposit where the deposit amount
can be withdrawn with a penalty for any reason, including increasing interest rates, a brokered certificate of deposit can
only be withdrawn in the event of the death or court declared mental incompetence of the depositor. This allows us to
better manage the maturity of our deposits and our interest rate risk. We also at times utilize brokers to obtain money
market account deposits. The rate we pay on brokered money market accounts is similar to the rate we pay on non-brokered
money market accounts, and the rate is agreed to in a contract between the Bank and the broker. These accounts are similar
to brokered certificates of deposit accounts in that we only maintain one account for the total deposit per broker, with the
broker maintaining the detailed records of each depositor. Additionally, we place a portion of our government deposits in
the IntraFi Network money market or demand product, which prior to 2018 was considered a brokered deposit, does not
require us to provide collateral. This allows us to invest our funds in higher yielding assets. The Bank had $178.9 million
in brokered NOW accounts and $251.1 million of brokered money market accounts at December 31, 2021. The Bank had
$720.1 million in brokered demand accounts and $102.9 million brokered money market accounts at December 31, 2020.
The FDIC has promulgated regulations implementing limitations on brokered deposits. Under the regulations,
well-capitalized institutions are not subject to brokered deposit limitations, while adequately capitalized institutions are
able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and subject to restrictions on the
interest rate that can be paid on such deposits. Undercapitalized institutions are not permitted to accept brokered deposits.
Pursuant to the regulation, the Bank, as a well-capitalized institution, may accept brokered deposits. Should our capital
ratios decline, this could limit our ability to replace brokered deposits when they mature. At December 31, 2021, the Bank
met or exceeded all applicable requirements to be deemed “well-capitalized” for purposes of these regulations. However,
there can be no assurance that the Bank will continue to meet those requirements. Limitations on the Bank’s ability to
accept brokered deposits for any reason (including regulatory limitations on the amount of brokered deposits in total or as
a percentage of total assets) in the future could materially adversely impact our funding costs and liquidity. Any limitation
on the interest rates the Bank can pay on deposits could competitively disadvantage us in attracting and retaining deposits
and have a material adverse effect on our business.
The maturity of brokered certificates of deposit could result in a significant funding source maturing at one time.
Should this occur, it might be difficult to replace the maturing certificates with new brokered certificates of deposit. We
have used brokers to obtain these deposits which results in depositors with whom we have no other relationships since
these depositors are outside of our market, and there may not be a sufficient source of new brokered certificates of deposit
at the time of maturity. In addition, upon maturity, brokers could require us to offer some of the highest interest rates in
the country to retain these deposits, which would negatively impact our earnings.
The Markets in Which We Operate Are Highly Competitive
We face intense and increasing competition both in making loans and in attracting deposits. Our market area has
a high density of financial institutions, many of which have greater financial resources, name recognition and market
presence than us, and all of which are our competitors to varying degrees. Particularly intense competition exists for
deposits and in all of the lending activities we emphasize. Our competition for loans comes principally from other
commercial banks, savings banks, savings and loan associations, mortgage banking companies, insurance companies,
finance companies and credit unions. Management anticipates that competition for mortgage loans will continue to
49
increase in the future. Our most direct competition for deposits historically has come from savings banks, other commercial
banks, savings and loan associations and credit unions. In addition, we face competition for deposits from products offered
by brokerage firms, insurance companies and other financial intermediaries, such as money market and other mutual funds
and annuities. Consolidation in the banking industry and the lifting of interstate banking and branching restrictions have
made it more difficult for smaller, community-oriented banks, such as us, to compete effectively with large, national,
regional and super-regional banking institutions. Our Internet Branch provides us access to consumers in markets outside
our geographic locations. The internet banking arena exposes us to competition with many larger financial institutions that
have greater financial resources, name recognition and market presence than we do.
Our Results of Operations May Be Adversely Affected by Changes in National and/or Local Economic Conditions
Our operating results are affected by national and local economic and competitive conditions, including changes
in market interest rates, the strength of the local economy, government policies and actions of regulatory authorities.
During the Great Recession, for example, unemployment increased, the housing market in the United States experienced
a significant slowdown, and foreclosures rose. Adverse economic conditions can result in borrowers defaulting on their
loans or withdrawing their funds on deposit at the Bank to meet their financial obligations. A decline in the local or national
economy or the New York City metropolitan area real estate market could adversely affect our financial condition and
results of operations, including through decreased demand for loans or increased competition for good loans, increased
non-performing loans and credit losses resulting in additional provisions for credit losses and for losses on real estate
owned. Many factors could require additions to our allowance for credit losses in future periods above those currently
maintained. These factors include, but are not limited to: (1) adverse changes in economic conditions and changes in
interest rates that may affect the ability of borrowers to make payments on loans, (2) changes in the financial capacity of
individual borrowers, (3) changes in the local real estate market and the value of our loan collateral, and (4) future review
and evaluation of our loan portfolio, internally or by regulators. The amount of our allowance for credit losses at any time
represents good faith estimates that are susceptible to significant changes due to changes in appraisal values of collateral,
national and local economic conditions, prevailing interest rates and other factors. See “Business — General — Allowance
for Credit Losses” in Item 1 of this Annual Report.
These same factors could cause delinquencies to increase for the mortgages which are the collateral for the
mortgage-backed securities we hold in our investment portfolio. Combining increased delinquencies with liquidity
problems in the market could result in a decline in the market value of our investments in privately issued mortgage-backed
securities. There can be no assurance that a decline in the market value of these investments will not result in other-than-
temporary impairment charges in our financial statements.
Changes in Laws and Regulations Could Adversely Affect Our Business
From time to time, legislation, such as the Dodd-Frank Act, is enacted or regulations are promulgated that have
the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive
balance between banks and other financial institutions. Proposals to change the laws and regulations governing the
operations and taxation of banks and other financial institutions are frequently made in Congress, in the New York
legislature and before various bank regulatory agencies. There can be no assurance as to the impact that any laws,
regulations or governmental programs that may be introduced or implemented in the future will have on the financial
markets and the economy, any of which could adversely affect our business. For a discussion of regulations affecting us,
see “Business —Regulation” and “Business—Federal, State and Local Taxation” in Item 1 of this Annual Report.
Current Conditions in, and Regulation of, the Banking Industry May Have a Material Adverse Effect on Our
Results of Operations
Financial institutions have been the subject of significant legislative and regulatory changes, including the
adoption of The Dodd Frank Act, which imposes a wide variety of regulations affecting us, and may be the subject of
further significant legislation or regulation in the future, none of which is within our control. Significant new laws or
regulations or changes in, or repeals of, existing laws or regulations, including those with respect to federal and state
taxation, may cause our results of operations to differ materially. In addition, the cost and burden of compliance, over
time, have significantly increased and could adversely affect our ability to operate profitably.
50
The Bank faces several minimum capital requirements imposed by federal regulation. Failure to adhere to these
minimums could limit the dividends the Bank may pay, including the payment of dividends to the Company, and could
limit the annual growth of the Bank. Under the Dodd Frank Act, banks with assets greater than $10.0 billion in total assets
are required to complete stress tests, which predict capital levels under certain stress levels. Although, our total assets are
currently $8.0 billion, as a best practice, we completed these tests. As of December 31, 2021, under all stress scenarios,
we remained well capitalized per current regulations. See “Regulation.” At the New York State level, the Bank is subject
to extensive supervision, regulation and examination by the New York State Department of Financial Services (“NYDFS”)
and the FDIC. The Company is subject to similar regulations and oversight by the Federal Reserve Bank. Such regulation
limits the manner in which the Company and Bank conduct business, undertake new investments and activities and obtain
financing. This regulation is designed primarily for the protection of the deposit insurance funds and the Bank’s depositors,
and not to benefit the Bank or its creditors. The regulatory structure also provides the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and examination policies, including policies
with respect to capital levels, the classification of assets and the establishment of adequate loan loss reserves for regulatory
purposes. Failure to comply with applicable laws and regulations could subject the Company and Bank to regulatory
enforcement action that could result in the assessment of significant civil money penalties against the Company and Bank.
The fiscal and monetary policies of the federal government and its agencies could have a material adverse effect
on the Company’s results of operations. The Federal Reserve regulates the supply of money and credit in the United States.
Its policies determine in significant part the cost of funds for lending and investing and the return earned on those loans
and investments, both of which affect the Company’s net interest margin. Governmental policies can also adversely affect
borrowers, potentially increasing the risk that they may fail to repay their loans. Changes in Federal Reserve or
governmental policies are beyond the Company’s control and difficult to predict; consequently, the impact of these changes
on the Company’s activities and results of operations is difficult to predict.
A Failure in or Breach of Our Operational or Security Systems or Infrastructure, or Those of Our Third Party
Vendors and Other Service Providers, Including as a Result of Cyber-attacks, Could Disrupt Our Business, Result
in the Disclosure or Misuse of Confidential or Proprietary Information, Damage Our Reputation, Increase Our
Costs and Cause Losses
We depend upon our ability to process, record and monitor our client transactions on a continuous basis. As client,
public and regulatory expectations regarding operational and information security have increased, our operational systems
and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. Our
business, financial, accounting and data processing systems, or other operating systems and facilities, may stop operating
properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially
beyond our control. For example, there could be electrical or telecommunications outages; natural disasters such as
earthquakes, tornadoes and hurricanes; disease pandemics; events arising from local or larger scale political or social
matters, including terrorist acts; and, as described below, cyber-attacks. Although we have business continuity plans and
other safeguards in place, our business operations may be adversely affected by significant and widespread disruption to
our physical infrastructure or operating systems that support our business and clients.
Information security risks for financial institutions such as ours have generally increased in recent years in part
because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct
financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists and
other external parties. As noted above, our operations rely on the secure processing, transmission and storage of
confidential information in our computer systems and networks. Our business relies on our digital technologies, computer
and email systems, software and networks to conduct its operations. In addition, to access our products and services, our
clients may use personal smartphones, tablet PC’s, personal computers and other mobile devices that are beyond our
control systems. Although we have information security procedures and controls in place, our technologies, systems,
networks and our clients’ devices may become the target of cyber-attacks or information security breaches that could result
in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential,
proprietary and other information, or otherwise disrupt our or our clients’ or other third parties’ business operations. We
may be subject to increasingly more risk related to security systems for our Internet Branch as we expand our suite of
online direct banking products, acquire new or outsource some of our business operations, expand our internal usage of
51
web-based products and applications, and otherwise attempt to keep pace with rapid technological changes in the financial
services industry.
We rely on external infrastructure, proprietary information technology and third-party systems and services to
conduct business, including customer service, marketing and sales activities, customer relationship management,
producing financial statements and technology/data centers. In addition, we store and process confidential and proprietary
business information on both company-owned and third-party and/or vendor managed systems, including cloud service
providers. We increasingly rely on the internet in order to conduct business and may be adversely impacted by outages in
critical infrastructure such as electric grids, undersea cables, satellites or other communications used by us or our third
parties. This reliance includes consumer access to the internet and communications systems due to more work taking place
outside of corporate locations. The failure of our or any third party’s information technology, infrastructure or other
internal and external systems, for any reason, could disrupt our operations, result in the loss of business and adversely
impact our profitability. Any compromise of the security of our or any third party’s systems that results in the disclosure
of personally identifiable customer or employee information could damage our reputation, deter customers from
purchasing our products and services, expose us to litigation, increase regulatory scrutiny and require us to incur significant
technical, legal and other expenses. We may also be adversely impacted by successful cyberattacks of our partners, third-
party vendors and others in our supply chain with whom we conduct business or share information.
Financial services companies are regularly targeted by cyber criminals, resulting in unauthorized access to
confidential information, theft of funds from online accounts, disruption or degradation of service or other damage. These
attacks may take a variety of forms, including web application attacks, denial of service attacks, ransomware, other
malware, and social engineering, including phishing. Information security incidents may also occur due to the failure to
control access to, and use of, sensitive systems or information by our workforce, with a potential increase in this threat
due to the increase in remote work. The failure of our controls (such as policies, procedures, security controls and
monitoring, automation and backup plans) designed to prevent, or limit the effect of, failure, inadvertent use or abuse could
result in disruptions or breaches beyond our control. Although to date we have not experienced any material losses relating
to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the
future. Our risk and exposure to these matters remains heightened because of the evolving nature of these threats. As a
result, cyber security and the continued development and enhancement of our controls, processes and practices designed
to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a focus
for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance
our protective measures or to investigate and remediate information security vulnerabilities.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients,
or cyberattacks or security breaches of the networks, systems or devices that our clients use to access our products and
services could result in significant legal and financial exposure, client attrition, regulatory fines, penalties or intervention,
reputational damage, reimbursement or other compensation costs and/or additional compliance costs, a loss of confidence
in the security of our systems, any of which may not be covered by insurance and could materially and adversely affect
our financial condition or results of operations.
In addition, in 2017, the NYDFS established comprehensive cybersecurity requirements for financial services
companies, including us. See Regulation – New York State Law.
Changes in Cybersecurity or Privacy Regulations may Increase our Compliance Costs, Limit Our Ability to Gain
Insight from Data and Lead to Increased Scrutiny
We collect, process, store, share, disclose and use information from and about our customers, plan participants
and website and application users, including personal information and other data. Any actual or perceived failure by us to
comply with our privacy policies, privacy-related obligations to customers or third parties, data disclosure and consent
obligations or privacy or security-related legal obligations may result in governmental enforcement actions, litigation or
public statements critical of us. Such actual or perceived failures could also cause our customers to lose trust in us, which
could have an adverse effect on our business.
Restrictions on data collection and use may limit opportunities to gain business insights useful to running our
business and offering innovative products and services.
52
We are subject to numerous federal, state and international regulations regarding the privacy and security of
personal information. These laws vary widely by jurisdiction. Privacy regulations with a significant impact on our
operations include the New York Department of Financial Services Part 500 cybersecurity requirements for financial
services companies. Similar legislation is being enacted around the world with requirements and protections specific to
data security requirements, notification requirements for data breaches, the right to access personal data and the right to
be forgotten. Changes in existing cybersecurity and privacy regulations or the enactment of new regulations may increase
our compliance costs and failure to comply with these regulations may lead to reputational damage, fines or civil damages
and increased regulatory scrutiny.
Our New Arrangement with NYDIG to Offer NYDIG’s Bitcoin Services to Our Customers May Expose Us to Risks
The Company has recently arranged with the New York Digital Investment Group (“NYDIG”) to offer bitcoin
services to the Bank’s customers at the customers’ request. NYDIG, through its subsidiaries, holds certain cryptocurrency
and money transmitter licenses and will be permitted to provide custody, execution, buying, selling, or holding bitcoin-
related services to the Bank’s customers. The Bank holds no such licenses and will provide no such services. Through the
arrangement, the Bank will offer its customers access to these services from NYDIG. Although we will not provide these
services to our customers and intend to limit our role to providing to our customers access to these services from NYDIG,
we may be exposed to risks surrounding this product offering. NYDIG is regulated by the NYDFS. One of the purposes
of the Bank offering access to NYDIG’s services is for the Bank to attract new customers.
Bitcoin is not generally widely accepted in commercial contexts, and the Bank’s association with bitcoin, albeit
indirectly, in the event of any adverse developments regarding cryptocurrencies in general, or bitcoin in particular, even if
not applicable directly to the Bank, could have an adverse effect on us. Such effect could be on our business, prospects,
reputation or operations and potentially the value of any bitcoin acquired or held by our customers, thus harming them
and, indirectly, us.
There are risks associated with bitcoin and such risks will continue to evolve and may increase. The Bank and
NYDIG will monitor these risks as they evolve and intend to respond accordingly.
NYDIG will charge directly to our customers transaction fees for its bitcoin-related services to those customers.
NYDIG will share a portion of those fees with us. Although the fees charged by NYDIG will be solely for the services it
will provide directly to our customers, our customers may misconstrue the Bank’s participation in, including earning fees
shared from, the arrangement as more than just offering our customers a convenience. In the event of customer
dissatisfaction with NYDIG for any reason, including poor performance by bitcoin in general or of NYDIG, there can be
no assurances that we would not be adversely impacted by such dissatisfaction reputationally.
There can be no assurances that our arrangement with NYDIG will sustain, be successful or not have unintended
or unforeseen adverse consequences. It is expected that similar arrangements by or among other financial institutions and
bitcoin service providers may emerge and compete with us and/or NYDIG, particularly as cryptocurrencies and crypto-
related products and services evolve and proliferate. Accordingly, there can be no assurances that adverse developments
in the public acceptance, perception, regulatory environment, licensure, holding, trading, custodianship, value or other
aspects of bitcoin and cryptocurrencies in general will not have a material adverse effect on us, including reputationally.
There can be no assurance that the arrangement with NYDIG will result in an increase in new customers or core
deposits.
We May Experience Increased Delays in Foreclosure Proceedings
Foreclosure proceedings face increasing delays. While we cannot predict the ultimate impact of any delay in
foreclosure sales, we may be subject to additional borrower and non-borrower litigation and governmental and regulatory
scrutiny related to our past and current foreclosure activities. Delays in foreclosure sales, including any delays beyond
those currently anticipated could increase the costs associated with our mortgage operations and make it more difficult for
us to prevent losses in our loan portfolio.
53
Our Inability to Hire or Retain Key Personnel Could Adversely Affect Our Business
Our success depends, in large part, on our ability to retain and attract key personnel. We face intense competition
from commercial banks, savings banks, savings and loan associations, mortgage banking companies, insurance companies,
finance companies and credit unions. As a result, it could prove difficult to retain and attract key personnel. The inability
to hire or retain key personnel may result in the loss of customer relationships and may adversely affect our financial
condition or results of operations.
We Are Not Required to Pay Dividends on Our Common Stock
Holders of shares of our common stock are only entitled to receive such dividends as our Board of Directors may
declare out of funds legally available for such payments. Although we have historically declared cash dividends on our
common stock, we are not required to do so and may reduce or eliminate our common stock dividend in the future. A
reduction or elimination of our common stock dividend could adversely affect the market price of our common stock.
There is Uncertainty Surrounding the Elimination of LIBOR and the Proposed Transition to SOFR or Other
Adjustable or Reference Rate Formulas
In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel
banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”). Consequently, LIBOR and
other inter-bank offered rates around the world are undergoing a transition to other reference rates. In March 2021, the
Financial Conduct Authority announced that LIBOR would no longer be published on a representative basis after
December 31, 2021, with the exception of the most commonly used tenors of U.S. dollar LIBOR, which will no longer be
published on a representative basis after June 30, 2023. The transition to other reference rates may affect the value of
certain derivatives, loans and floating rate securities we hold, floating rate financial instruments we have issued and the
profitability of certain lending activity. Additionally, pricing activities, models and the profitability of certain businesses
may also be impacted.
There is still uncertainty around how quickly different alternative rates will develop sufficient liquidity and
industry-wide usage, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-
indexed financial instruments. The U.S. Federal Reserve, based on the recommendations of the New York Federal
Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators),
began publishing in April 2018 a Secured Overnight Financing Rate (“SOFR”), which is intended to replace U.S. dollar
LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities.
Proposals for alternative reference rates have also been announced or have already begun publication. Markets are
developing in response to these new rates. We have undertaken an enterprise-wide effort to address the transition to
minimize the potential for adverse impacts.
The effect of any changes to LIBOR or discontinuation of LIBOR on new or existing financial instruments,
liabilities or operational processes will vary depending on a number of factors. Examples of potential factors include, but
are not limited to: fallback provisions in contracts; adoption of replacement language in contracts where such language is
currently absent; legislative remedies that address fallback provisions; potential changes in spreads causing valuation
changes; treatment of hedge effectiveness and impacts on models and systems. We are identifying, assessing and
monitoring market and regulatory developments; assessing agreement terms and continue to execute our operational
readiness.
We have loans, borrowings and other financial instruments with attributes that are either directly or indirectly
dependent on LIBOR. The transition from LIBOR could create additional costs and risks. Since proposed alternative rates
are calculated differently, payments under contracts referencing new rates may differ from those referencing LIBOR. The
transition will change our market risk profiles, requiring changes to risk and pricing models, systems, contracts, valuation
tools, and product design. Furthermore, failure to adequately manage this transition process with our customers could
adversely impact our reputation and potentially introduce additional legal risks. As of December 31, 2021, we have
exposure to approximately $2.3 billion of financial assets and liabilities, including off-balance sheet instruments, which
are LIBOR-based. We do not yet know whether, and if so the extent to which, the elimination of LIBOR will have any
material impact on these instruments.
54
Our Financial Results May be Adversely Impacted by Global Climate Changes.
Atmospheric concentrations of carbon dioxide and other greenhouse gases have increased dramatically since the
industrial revolution, resulting in a gradual increase in average global temperatures and an increase in the frequency and
severity of natural disasters. These trends are expected to continue in the future and have the potential to impact nearly all
sectors of the economy to varying degrees. We cannot predict the long-term impacts of climate change, but we will
continue to monitor new developments in the future.
Potential impacts may include the following:
Changes in temperatures and air quality may adversely impact the health, welfare, economic and other prospects
of customers in our target markets. For example, increases in the level of pollution and airborne allergens in local
industrial areas may cause an increase in upper respiratory and cardiovascular diseases. Such impacts may
adversely change the long-term prospects for the communities we serve and the investing and banking services
these communities seek.
Climate change may impact asset prices, as well as general economic conditions. For example, rising sea levels
may lead to decreases in real estate values in at-risk areas. Additionally, government policies to slow climate
change (e.g., setting limits on carbon emissions) may have an adverse impact on sectors such as utilities,
transportation and manufacturing. Changes in asset prices may impact the value of our fixed income, real estate
and commercial mortgage investments. Although we seek to manage our investment risks by maintaining a
diversified portfolio and monitor our investments on an ongoing basis, allowing us to adjust our exposure to
sectors and/or geographical areas that face severe risks due to climate change, there can be no assurances that our
efforts will be successful.
Our Financial Results May be Adversely Impacted by ESG Requirements
Our financial and operational results could be impacted by emerging risk and changes to the regulatory landscape
in areas like environmental, social and governance (“ESG”) requirements. We closely monitor and respond to topics
related to ESG that include longer lifespans, income and wealth inequalities, environmental challenges and opportunities
to expand global access to the financial system across all segments of the population. Updated and changing regulatory
and societal environment requirements could impact financial and operational results.
We currently obtain environmental reports in connection with the underwriting of commercial real estate loans,
and typically obtain environmental reports in connection with the underwriting of multi-family loans. For all other loans,
we obtain environmental reports only if the nature of the current or, to the extent known to us, prior use of the property
securing the loan indicates a potential environmental risk. However, we may not be aware of such uses or risks in any
particular case, and, accordingly, there can be no assurance that real estate acquired by us in foreclosure is free from
environmental contamination nor we will not have any liability with respect thereto.
Changes and uncertainty in United States legislation, policy or regulation regarding climate risk management or
other ESG practices may result in higher regulatory and compliance costs, increased capital expenditures, and changes in
regulations may impact security asset prices, resulting in realized or unrealized losses on our investments. Physical risks
and transitional risks could increase the Company’s cost of doing business and actual or perceived failure to adequately
address ESG expectations of our various stakeholders could lead to a tarnished reputation and loss of customers and clients.
55
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
At December 31, 2021, the Bank conducted its business through 24 full-service offices and its Internet Branch.
The Holding Company neither owns nor leases any property but instead uses the premises and equipment of the Bank.
Item 3. Legal Proceedings.
We are involved in various legal actions arising in the ordinary course of our business which, in the aggregate,
involve amounts which are believed by management to be immaterial to our financial condition, results of operations and
cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
The Holding Company’s Common Stock is traded on the NASDAQ Global Select Market® under the symbol
“FFIC.” As of December 31, 2021, we had approximately 872 shareholders of record, not including the number of persons
or entities holding stock in nominee or street name through various brokers and banks.
The following table sets forth information regarding the shares of common stock repurchased by us during the
quarter ended December 31, 2021:
Period
October 1 to October 31, 2021
November 1 to November 30, 2021
December 1 to December 31, 2021
Total
Total
Number
of Shares
Purchased
Average Price
Paid per Share
—
23.67
23.82
23.75
— $
69,665
81,311
150,976
Maximum
Number of
Total Number of
Shares Purchased Shares That May
as Part of Publicly Yet Be Purchased
Announced Plans Under the Plans
or Programs
or Programs
—
69,665
81,311
150,976
999,163
929,498
848,187
On February 27, 2018, the Company announced the authorization by the Board of Directors of a common stock
repurchase program, which authorizes the purchase of up to 1,000,000 shares of its common stock. This program was
completed in 2021 and on July 27, 2021, an additional 1,000,000 share authorization was announced. During the years
ended December 31, 2021 and 2020, the Company repurchased 436,619 shares and 142,405 shares, respectively, of the
Company’s common stock at an average cost of $22.88 per share and $16.45 per share, respectively. At December 31,
2021, 848,187 shares remain to be repurchased under the current stock repurchase program. Stock will be purchased under
the current stock repurchase program from time to time, in the open market or through private transactions subject to
market conditions and at the discretion of the management of the Company. There is no expiration or maximum dollar
amount under this authorization.
56
The following table sets forth securities authorized for issuance under all equity compensation plans of the
Company at December 31, 2021:
(c)
Number of securities
remaining available for
future issuance under
equity compensation
(a)
(b)
Number of securities to Weighted-average
be issued upon exercise
exercise price of
of outstanding options, outstanding options, securities reflected in
warrants and rights
warrants and rights
plans (excluding
column (a)
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
— $
—
— $
—
—
—
1,171,675
—
1,171,675
57
Stock Performance Graph
The following graph shows a comparison of cumulative total stockholder return on the Company’s common stock
since December 31, 2016 with the cumulative total returns of a broad equity market index as well as comparative published
industry indices. The broad equity market index chosen was the Nasdaq Composite and the comparative published industry
indices used in 2021 were the S&P U.S. MidCap Banks Index and the S&P U.S. BMI Banks - Mid-Atlantic Region Index.
In prior years the comparative published industry indices used were the SNL Bank $1 Billion to $5 Billion in Assets Index
and the SNL Mid-Atlantic Bank Index. These indexes discontinued publication in 2021. The S&P U.S. BMI Banks - Mid-
Atlantic Region Index was chosen for inclusion in the Company’s Stock Performance Graph because the Company
believes it provides valuable comparative information reflecting the Company’s geographic peer group. The S&P U.S.
MidCap Banks Index was chosen for inclusion in the Company’s Stock Performance Graph because it uses a broader
group of banks and therefore more closely reflects the Company’s size. The Company believes that both geographic area
and size are important factors in analyzing the Company’s performance against its peers. The graph below reflects
historical performance only, which is not indicative of possible future performance of the common stock.
The total return assumes $100 invested on December 31, 2016 and all dividends reinvested through the end of
the Company’s fiscal year ended December 31, 2021. The performance graph above is based upon closing prices on the
trading date specified.
Period Ending
Index
Flushing Financial Corporation
NASDAQ Composite Index
S&P U.S. MidCap Banks Index
S&P U.S. BMI Banks - Mid-Atlantic Region Index
12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21
100.38
304.85
172.41
169.99
66.34
249.51
118.47
134.59
81.00
172.18
119.79
148.90
96.06
129.64
113.70
122.56
100.00
100.00
100.00
100.00
77.60
125.96
90.82
104.72
58
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used in this discussion and analysis, the words “we,” “us,” “our” and the “Company” are used to refer to
Flushing Financial Corporation (the “Holding Company”) and its direct and indirect wholly owned subsidiaries, Flushing
Bank (the “Bank”), Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation,
which was dissolved as of June 30, 2021. Discussion and analysis of our 2020 fiscal year specifically, as well as the year-
over-year comparison of our 2020 financial performance to 2019, are located under Part II, Item 7 – Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2020, filed with the SEC on March 16, 2021, which is available on our investor relations
website at FlushingBank.com and the SEC’s website at sec.gov.
General
We are a Delaware corporation organized in 1994. The Bank was organized in 1929 as a New York State-
chartered mutual savings bank. Today the Bank operates as a full-service New York State commercial bank. The primary
business of the Holding Company has been the operation of the Bank. The Bank owned three subsidiaries during all or a
portion of 2021: Flushing Service Corporation, FSB Properties Inc., and Flushing Preferred Funding Corporation, which
was dissolved as of June 30, 2021. The Bank also operates an internet branch, which operates under the brands of
iGObanking® and BankPurely® (the “Internet Branch”). The Bank’s primary regulator is the New York State Department
of Financial Services, and its primary federal regulator is the Federal Deposit Insurance Corporation (“FDIC”). The Bank’s
deposits are insured to the maximum allowable amount by the FDIC.
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and
Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts formed during 2007 to issue
a total of $60.0 million of capital securities, and $1.9 million of common securities (which are the only voting securities).
The Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance
of these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in
our consolidated financial statements, as we would not absorb the losses of the Trusts if losses were to occur.
The following discussion of financial condition and results of operations includes the collective results of the
Holding Company and its subsidiaries (collectively, the “Company”), but reflects principally the Bank’s activities.
Management views the Company as operating as a single unit - a community bank. Therefore, segment information is not
provided.
Overview
Our principal business is attracting retail deposits from the general public and investing those deposits together
with funds generated from ongoing operations and borrowings, primarily in (1) originations and purchases of multi-family
residential properties, commercial business loans, commercial real estate mortgage loans and, to a lesser extent, one-to-
four family (focusing on mixed-use properties, which are properties that contain both residential dwelling units and
commercial units); (2) construction loans; (3) Small Business Administration (“SBA”) loans; (4) mortgage loan
surrogates such as mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and
other marketable securities. We also originate certain other consumer loans including overdraft lines of credit. Our results
of operations depend primarily on net interest income, which is the difference between the income earned on its interest-
earning assets and the cost of our interest-bearing liabilities. Net interest income is the result of our interest rate margin,
which is the difference between the average yield earned on interest-earning assets and the average cost of interest-bearing
liabilities, adjusted for the difference in the average balance of interest-earning assets as compared to the average balance
59
of interest-bearing liabilities. We also generate non-interest income from loan fees, service charges on deposit accounts,
mortgage servicing fees, and other fees, income earned on Bank Owned Life Insurance (“BOLI”), dividends on Federal
Home Bank of New York (“FHLB-NY”) stock and net gains and losses on sales of securities and loans. Our operating
expenses consist principally of employee compensation and benefits, occupancy and equipment costs, other general and
administrative expenses and income tax expense. Our results of operations also can be significantly affected by our
periodic provision for credit losses and specific provision for losses on real estate owned.
Management Strategy. Our strategy is to continue our focus on being an institution serving consumers, businesses,
and governmental units in our local markets. In furtherance of this objective, we intend to:
manage cost of funds and continue to improve funding mix;
resume historical loan growth while achieving appropriate risk adjusted returns;
enhance earnings power by improving scalability and efficiency;
manage credit risk;
remain well capitalized;
increase our commitment to the multi-cultural marketplace, with a particular focus on the Asian community;
attract, retain and develop human capital; and
manage enterprise-wide risk.
There can be no assurance that we will be able to effectively implement this strategy. Our strategy is subject to
change by the Board of Directors.
Manage cost of funds and continue to improve funding mix. We have a relatively stable retail deposit base drawn
from our market area through our full-service offices. Although we seek to retain existing deposits and maintain depositor
relationships by offering quality service and competitive interest rates to our customers, we also seek to keep deposit
growth within reasonable limits and our strategic plan. In order to implement our strategic plan, we have built multi-
channel deposit gathering capabilities. In addition to our full-service branches we gather deposits through our Internet
Branch and a government banking unit. The Internet Branch currently offers savings accounts, money market accounts,
checking accounts, and certificates of deposit. This allows us to compete on a national scale without the geographical
constraints of physical locations. At December 31, 2021 and 2020, total deposits at our Internet Branch were $188.0
million and $221.7 million, respectively.
The government banking unit provides banking services to public municipalities, including counties, cities,
towns, villages, school districts, libraries, fire districts, and the various courts throughout the New York City metropolitan
area. At December 31, 2021 and 2020, total deposits in our government banking unit totaled $1,618.8 million and $1,615.4
million, respectively. Additionally, we have a business banking group which was designed specifically to develop full
business relationships thereby bringing in lower-costing checking and money market deposits. At December 31, 2021 and
2020, deposits balances in the business banking group were $540.4 million and $298.9 million, respectively. We also
obtain deposits through brokers and the IntraFi Network.
Management intends to balance its goal to maintain competitive interest rates on deposits while seeking to manage
its overall cost of funds to finance its strategies. We generally rely on our deposit base as our principal source of funding.
During 2021, we realized an increase in due to depositors of $242.8 million, as core deposits increased $434.6 million and
certificates of deposit decreased $191.8 million.
60
We continue to focus on obtaining additional deposits from our lending customers and originating additional
loans to our deposit customers. Product offerings were expanded and are expected to be further expanded to accommodate
perceived customer demands. In addition, specific employees are assigned responsibilities of generating these additional
deposits and loans by coordinating efforts between lending and deposit gathering departments.
Resume historical loan growth while achieving appropriate risk adjusted returns. During 2021, gross loans
declined by $67.8 million, or 1.0% to $6,633.9 million at December 31, 2021 from $6,701.6 million at December 31, 2020.
The decrease was primarily PPP loan forgiveness by the SBA.
We have emphasized the strategic growth of multi-family residential mortgage loans, non-owner occupied
commercial mortgage loans and floating rate commercial business loans. The commercial business and other loans have
increased to 20.19% of the gross loan portfolio as of December 31, 2021 compared to 19.45% at December 31, 2020. In
the multi-family portfolio, we allowed loans to prepay rather than refinance at a rate below our criteria. We no longer
originate or hold taxi medallion loans.
The following table shows loan originations and purchases during 2021, and loan balances as of December 31,
2021.
Loan
Loan Balances
Originations and December 31, Percent of
Purchases
2021
Gross Loans
$
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use property
One-to-four family ― residential
Co-operative apartment
Construction
Small Business Administration
Taxi medallion
Commercial business and Other
Total
$
(Dollars in thousands)
2,517,026
1,775,629
571,795
268,255
8,316
59,761
93,811
—
1,339,273
6,633,866
246,964 $
168,482
41,110
70,548
413
38,124
143,363
—
544,958
1,253,962 $
37.94 %
26.77
8.62
4.04
0.13
0.90
1.41
—
20.19
100.00 %
At December 31, 2021, multi-family residential, commercial business and other loans and commercial real estate
loans, totaled 84.9% of our gross loans. We have repositioned our loan growth to reduce credit risk; however, our
concentration in these types of loans could require us to increase our provisions for credit losses and to maintain an
allowance for credit losses as a percentage of total loans in excess of the allowance currently maintained.
Enhance earnings power by improving scalability and efficiency. We are improving scalability and efficiency by
converting our branches to the Universal Banker model with our unique video banker service that gives customers face-
to-face video chat access from 7am to 11pm daily via at our ATM terminals. The Universal Banker model provides
customers with cutting-edge technology, including state-of-the-art ATMs and a higher-quality service experience, all while
further reducing overall costs. We have been rolling this model out across our network as branches are renovated and new
branches are opened. In the branches that have been converted to the Universal Banker model, almost 50% of customer
transactions were completed at our high powered ATMs.
61
Manage credit risk. By adherence to our conservative underwriting standards, we have been able to minimize net
losses from non-performing loans. We recorded net charge-offs of $3.1 million for the year ended December 31, 2021,
compared to net charge-offs of $3.6 million for the year ended December 31, 2020. The net charge-offs recorded in 2021
were primarily due to the write-off of our remaining taxi medallion portfolio. We seek to minimize losses by adhering to
our defined underwriting standards, which among other things generally requires a debt service coverage ratio of at least
125% and loan to value ratio of 75% or less. The average loan to value for the real estate dependent loan portfolio was
less than 38% and the average loan to value for non-performing loans collateralized by real estate was 30.4% at
December 31, 2021. We seek to maintain our loans in performing status through, among other things, disciplined collection
efforts, and consistently monitoring non-performing assets in an effort to return them to performing status. To this end, we
review the quality of our loans and report to the Loan Committee of the Board of Directors of the Bank on a monthly basis.
We sold 33 delinquent loans totaling $28.6 million, 2 delinquent loans totaling $0.6 million, and 11 delinquent loans
totaling $13.0 million during the years ended December 31, 2021, 2020, and 2019, respectively. There can be no
assurances that we will continue this strategy in future periods, or if continued, we will be able to find buyers to pay
adequate consideration. Non-performing loans totaled $14.9 million and $21.1 million at December 31, 2021 and 2020,
respectively. Non-performing assets as a percentage of total assets were 0.19% and 0.26% at December 31, 2021 and 2020,
respectively.
Remain well capitalized. The Bank faces several minimum capital requirements imposed by federal regulation.
Failure to adhere to these minimums could limit the dividends the Bank is allowed to pay, including the payment of
dividends to the Holding Company, and could limit the annual growth of the Bank. Under the Dodd Frank Act, banks with
assets greater than $10 billion in total assets are required to complete stress tests, which predict capital levels under certain
stress levels. Although, our total assets are currently $8.0 billion, as a best practice, we completed these tests. As of
December 31, 2021, under all stress scenarios, we remained well capitalized per current regulations.
Increase Our Commitment to the Multi-Cultural Marketplace, with a Particular Focus on the Asian Community.
Our branches are all located in the New York City metropolitan area with particular concentration in the borough of
Queens. Queens is characterized with a high level of ethnic diversity. An important element of our strategy is to service
multi-ethnic consumers and businesses. We have a particular presence and concentration in Asian communities, including
in particular the Chinese and Korean populations. Both groups are noted for high levels of savings, education and
entrepreneurship. In order to service these and other important ethnic groups in our market, our staff speaks more than 20
languages. We have an Asian advisory board to help broaden our links to the community by providing guidance and
fostering awareness of our active role in the local community. In the fourth quarter of 2020, we completed our acquisition
of Empire, which expanded our branch footprint in Long Island. As of December 31, 2021, we had six branches which
have a particular focus on the Asian community, of which four are in the borough of Queens, one is in the borough of
Manhattan and one on Long Island, with deposits and loans totaling in excess of $966.4 million and $709.3 million,
respectively, in these locations.
Manage Enterprise-Wide Risk. We identify, measure and attempt to mitigate risks that affect, or have the potential
to affect, our business. Due to past economic crises and recent increases in government regulation, we devote significant
resources to risk management. We have a seasoned risk officer to provide executive risk leadership, and an enterprise-
wide risk management program. Several enterprise risk management analytical products are in use which include key risk
indicators. We also have had a chief information security officer even before one was required by NYDFS rulemaking.
Our management of enterprise-wide risk enables us to recognize and monitor risks and establish procedures to disseminate
the risk information across our organization and to our Board of Directors. The objective is to have a robust and focused
risk management process capable of identifying and mitigating emerging threats to the Bank’s safety and soundness.
Trends and Contingencies. Our operating results are significantly affected by national and local economic and
competitive conditions, including changes in market interest rates, the strength of the local regional economy, government
policies and actions of regulatory authorities. We have remained strategically focused on the origination of multi-family
residential mortgages, commercial mortgages and commercial business loans with a full banking relationship. Because of
this strategy, we were able to continue to achieve a higher yield on our mortgage portfolio than we would have otherwise
experienced.
62
Loan originations and purchases were $1,254.0 million, $1,004.1 million, and $1,162.3 million for the years
ended December 31, 2021, 2020, and 2019, respectively. While we primarily rely on originating our own loans, we
purchased $262.1 million, $193.3 million, and $221.2 million during the years ended December 31, 2021, 2020, and 2019,
respectively. We purchase loans when the loans complement our loan portfolio strategy. Loans purchased must meet our
underwriting standards when they were originated.
During the three-year period ended December 31, 2021, the allocation of our loan portfolio has remained fairly
consistent with a steady increase in non-mortgage loans. The majority of our loans are collateralized by real estate, which
comprised 78.4% of our portfolio at December 31, 2021 compared to 78.0% at December 31, 2020 and 81.3% at
December 31, 2019, while non-mortgage loans comprised 21.6% of our portfolio at December 31, 2021 compared to
22.0% at December 31, 2020 and 18.7% at December 31, 2019.
Due to depositors increased $242.8 million, $1,068.7 million, and $106.1 million in 2021, 2020, and 2019,
respectively. Lower-costing core deposits increased $434.6 million, $1,368.2 million, and $231.5 million in 2021, 2020,
and 2019, respectively. Higher-costing certificates of deposit decreased $191.8 million during 2021 compared to decreases
of $299.5 million in 2020 and $125.4 million in 2019. Brokered deposits represented 9.8%, 17.5%, and 7.7% of total
deposits at December 31, 2021, 2020, and 2019, respectively. During 2018, Section 29 of the Federal Deposit Insurance
Act was amended to no longer consider reciprocal deposits held by an FDIC-insured depository institution brokered
deposits. At December 31, 2021, 2020, and 2019, reciprocal deposits totaled $763.7 million, $735.4 million, and $805.6
million, respectively.
Prevailing interest rates affect the extent to which borrowers repay and refinance loans. In a declining interest
rate environment, the number of loan prepayments and loan refinancing tends to increase, as do prepayments of mortgage-
backed securities. Call provisions associated with our investments in U.S. government agency and corporate securities
may also adversely affect yield in a declining interest rate environment. Such prepayments and calls may adversely affect
the yield of our loan portfolio and mortgage-backed and other securities as we reinvest the prepaid funds in a lower interest
rate environment. However, we typically receive additional loan fees when existing loans are refinanced, which partially
offsets the reduced yield on our loan portfolio resulting from prepayments. In periods of low interest rates, our level of
core deposits also may decline if depositors seek higher-yielding instruments or other investments not offered by us, which
in turn may increase our cost of funds and decrease our net interest margin to the extent alternative funding sources, are
utilized. By contrast, an increasing interest rate environment would tend to extend the average lives of lower yielding fixed
rate mortgages and mortgage-backed securities, which could adversely affect net interest income. In addition, depositors
tend to open longer term, higher costing certificate of deposit accounts which could adversely affect our net interest income
if rates were to subsequently decline. Additionally, adjustable rate residential mortgage loans and mortgage-backed
securities generally contain interim and lifetime caps that limit the amount the interest rate can increase at re-pricing dates.
Net interest income increased $52.8 million or 27.0% to $248.0 million for the twelve months ended December
31, 2021 from $195.2 million for the prior year, as a 39 basis points increase in the net interest margin to 3.24% for the
twelve months ended December 31, 2021 was coupled with balance sheet growth. The increase in the net interest margin
for 2021 was primarily due to a decrease in our funding costs, partially offset by a decrease in the yield of our interest-
earning assets. The decrease in the yield of our interest earning assets was primarily due to loans being both originated
and repriced at lower rates. During 2021, the cost of borrowed funds increased 27 basis points to 2.24% from 1.97% in the
comparable period while the cost of interest-bearing deposits decreased 55 basis points to 0.37% from 0.92% for the
prior year. The cost of money market, NOW and certificates of deposits accounts decreased 57 basis points, 33 basis points
and 84 basis points, respectively, for the twelve months ended December 31, 2021 from the prior year. The cost of deposits
declined as we decreased the rates we pay resulting from the Federal Reverse lowering rates.
We are unable to predict the direction or timing of future interest rate changes. Approximately 80% of our
certificates of deposit accounts and borrowings will reprice or mature during the next year. Also, in an increasing interest
rate environment, mortgage loans and mortgage-backed securities may prepay at slower rates than experienced in the past,
which could result in a reduction of prepayment penalty income.
63
On October 30, 2020, the Company completed its acquisition of 100% of the outstanding voting and non-voting
shares of Empire. The shareholders of Empire received total consideration of $87.5 million which consisted of $54.8
million in cash and 2,557,028 shares of Flushing Financial Corporation common stock. As of December 31, 2021, the
combined company has $8.0 billion in assets, $6.6 billion in loans, $6.3 billion in deposits, and 24 branches in Queens,
Brooklyn, Manhattan, and on Long Island.
Interest Rate Risk
Economic Value of Equity Analysis. The Consolidated Statements of Financial Position have been prepared in
accordance with generally accepted accounting principles in the United States of America (“GAAP”), which require the
measurement of financial position and operating results in terms of historical dollars without considering the changes in
fair value of certain investments due to changes in interest rates. Generally, the fair value of financial investments such as
loans and securities fluctuates inversely with changes in interest rates. As a result, increases in interest rates could result
in decreases in the fair value of the Company’s interest-earning assets which could adversely affect the Company’s results
of operations if such assets were sold, or, in the case of securities classified as available for sale, decreases in the
Company’s stockholders’ equity, if such securities were retained.
The Company quantifies the net portfolio value should interest rates immediately go up 200 basis points or down
100 basis points, assuming the yield curves of the rate shocks will be parallel to each other. Net portfolio value is defined
as the market value of assets net of the market value of liabilities. The market value of assets and liabilities is determined
using a discounted cash flow calculation. The net portfolio value ratio is the ratio of the net portfolio value to the market
value of assets. The changes in value are measured as percentage changes from the net portfolio value at the base interest
rate scenario. The base interest rate scenario assumes interest rates at December 31, 2021 and 2020. Various estimates
regarding prepayment assumptions are made at each level of rate shock. At December 31, 2021 and 2020, the Company
was within the guidelines set forth by the Board of Directors for each interest rate level.
The following table presents the Company’s interest rate shock as of December 31, 2021 and 2020:
Change in Interest Rate
-100 basis points
Base interest rate
+100 basis points
+200 basis points
Net Portfolio Value
2020
2021
Net Portfolio Value Ratio
2021
2020
(4.36)
—
(5.41)
(11.33)
6.55
—
(15.66)
(24.55)
11.53
12.27
11.86
11.36
10.27
9.93
8.67
7.98
Income Simulation Analysis. The Company manages the mix of interest-earning assets and interest-bearing
liabilities on a continuous basis to maximize return and adjust its exposure to interest rate risk. On a quarterly basis,
management provides a report for review by the ALCO Investment Committee of the Board of Directors. This report
quantifies the potential changes in net interest income and net portfolio value through various interest rate scenarios.
The starting point for the net interest income simulation is an estimate of the next twelve month’s net interest
income assuming that both interest rates and the Company’s interest-sensitive assets and liabilities remain at period-end
levels. The net interest income simulation assumes that changes in interest rates change gradually in equal increments over
the twelve-month period. Prepayment penalty income is excluded from this analysis. Based on these assumptions, net
interest income would be reduced by 4.2% from a 100 basis point increase in rates over the next twelve months. Actual
results could differ significantly from these estimates.
At December 31, 2021, the Company had a derivative portfolio with a notional value totaling $1.5 billion. This
portfolio is designed to provide protection against rising interest rates. See Note 21 (“Derivative Financial Instruments”)
of the Notes to the Consolidated Financial Statements.
64
A portion of this portfolio is comprised of forward swaps on certain short-term advances and brokered CDs
totaling $996.5 million. At December 31, 2021, $591.5 million of the forward swaps are effective swaps at a weighted
average rate of 1.95% that largely mature by the end of 2023 and $405.0 million of the forward swaps become effective
at different points through 2024, at an average rate of 0.77%. A summary of maturity dates and effective dates of our
forward swaps on short-term advances and brokered CDs held at December 31, 2021, are shown in the table below:
(Dollars in thousands)
Notional
Weighted
Average
Rate
Weighted
Average
Rate
Notional
Weighted
Average
Rate
Notional
Weighted
Average
Rate
Notional
2022
2023
2024
2025
Effective Swaps Maturity
Forward Starting Swaps
$ 125,000
125,000
1.86 % $ 321,000
230,000
0.88
2.09 % $ 121,000
50,000
0.70
1.96 % $
0.80
25,000
—
0.47 %
—
The net interest income simulation incorporates the next twelve months (through December 31, 2022) and only
a portion of the effective swap maturities and the forward starting swaps are included in this period. Assuming another
equal increment ramp of 100 basis points increase in rates in the second year (through December 31, 2023), for a total of
200 basis points over two years, the total derivative portfolio has a 1.7% benefit to net interest income (versus the base
case) in the first year and a cumulative benefit of 4.9% by the second year.
65
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning assets and expense on interest-
bearing liabilities. Net interest income depends upon the relative amount of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them.
The following table sets forth certain information relating to our Consolidated Statements of Financial Condition
and Consolidated Statements of Income for the years ended December 31, 2021, 2020, and 2019, and reflects the average
yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income
or expense by the average balance of assets or liabilities, respectively, for the periods shown. Average balances are derived
from average daily balances. The yields include amortization of fees that are considered adjustments to yields.
2021
For the year ended December 31,
2020
2019
Interest-earning deposits and federal funds sold
Total interest-earning assets
Other assets
Assets
Interest-earning assets:
Mortgage loans, net (1)(2)
Other loans, net (1)(2)
Total loans, net
Taxable securities:
Mortgage-backed securities
Other securities
Total taxable securities
Tax-exempt securities: (3)
Other securities
Total tax-exempt securities
Total assets
Liabilities and Equity
Interest-bearing liabilities:
Deposits:
Savings accounts
NOW accounts
Money market accounts
Certificate of deposit accounts
Total due to depositors
Mortgagors' escrow accounts
Total interest-bearing deposits
Borrowings
Total interest-bearing liabilities
Non interest-bearing demand deposits
Other liabilities
Total liabilities
Equity
Total liabilities and equity
Average
Balance
Interest Cost
Yield/
Average
Balance
Yield/
Interest Cost
Average
Balance
Yield/
Interest Cost
(Dollars in thousands)
$ 5,146,195 $ 217,580
56,751
274,331
1,498,122
6,644,317
4.23 % $ 4,798,232 $ 202,722
45,431
3.79
248,153
4.13
1,207,715
6,005,947
4.22 % $ 4,609,439 $ 203,440
48,304
3.76
251,744
4.13
1,011,594
5,621,033
4.41 %
4.78
4.48
550,136
239,208
789,344
8,335
4,001
12,336
2,142
2,142
203
289,012
50,831
50,831
188,462
7,672,954
470,418
$ 8,143,372
1.52
1.67
1.56
4.21
4.21
0.11
3.77
450,065
249,533
699,598
8,730
5,178
13,908
2,419
2,419
355
264,835
56,530
56,530
100,723
6,862,798
413,224
$ 7,276,022
1.94
2.08
1.99
4.28
4.28
0.35
3.86
572,223
243,324
815,547
15,468
8,102
23,570
2,580
2,580
1,604
279,498
60,971
60,971
84,922
6,582,473
365,408
$ 6,947,881
2.70
3.33
2.89
4.23
4.23
1.89
4.25
255
5,453
7,271
7,340
20,319
5
20,324
20,269
40,593
0.16
0.25
0.35
0.71
0.38
0.01
0.37
2.24
0.63
$ 157,640
2,165,762
2,059,431
1,033,187
5,416,020
77,552
5,493,572
905,094
6,398,666
922,741
173,019
7,494,426
648,946
$ 8,143,372
$ 176,443
1,603,402
1,561,496
1,167,865
4,509,206
70,829
4,580,035
1,361,559
5,941,594
583,235
171,126
6,695,955
580,067
$ 7,276,022
495
9,309
14,368
18,096
42,268
44
42,312
26,816
69,128
0.28
0.58
0.92
1.55
0.94
0.06
0.92
1.97
1.16
$ 198,374
1,434,440
1,370,038
1,532,440
4,535,292
70,209
4,605,501
1,251,452
5,856,953
407,450
122,189
6,386,592
561,289
$ 6,947,881
1,378
23,553
27,819
35,078
87,828
229
88,057
28,959
117,016
0.69
1.64
2.03
2.29
1.94
0.33
1.91
2.31
2.00
Net interest income / net interest rate spread (4)
$ 248,419
3.14 %
$ 195,707
2.70 %
$ 162,482
2.25 %
Net interest-earning assets / net interest margin
(5)
Ratio of interest-earning assets to interest-
bearing liabilities
$ 1,274,288
3.24 % $ 921,204
2.85 % $ 725,520
2.47 %
1.20 X
1.16 X
1.12 X
(1) Average balances include non-accrual loans.
(2) Loan interest income includes loan fee income (which includes net amortization of deferred fees and costs, late charges, and prepayment penalties)
of approximately $10.6 million, $2.3 million, and $2.0 million for the years ended December 31, 2021, 2020, and 2019, respectively. In addition,
it includes net gains (losses) from fair value adjustments in qualifying hedges of $2.1 million, $(1.2) million and $(1.7) million for December 31,
2021, 2020 and 2019.
Interest and yields are calculated on the tax equivalent basis using statutory federal income tax rate of 21% for the years ended December 31, 2021,
2020, and 2019.
Interest rate spread represents the difference between the average rate on interest-earning assets and the average cost of interest-bearing liabilities.
(4)
(5) Net interest margin represents net interest income before the provision for credit losses divided by average interest-earning assets.
(3)
66
Rate/Volume Analysis
The following table presents the impact of changes in interest rates and in the volume of interest-earning assets
and interest-bearing liabilities on the Company’s interest income and interest expense during the periods indicated.
Information is provided in each category with respect to (1) changes attributable to changes in volume (changes in volume
multiplied by the prior rate), (2) changes attributable to changes in rate (changes in rate multiplied by the prior volume)
and (3) the net change. The changes attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
Increase (Decrease) in Net Interest Income for the years ended December 31,
2021 vs. 2020
Due to
2020 vs. 2019
Due to
Volume Rate
Net
Volume Rate
Net
(Dollars in thousands)
$ 14,388 $
10,957
1,715
(204)
(238)
470 $ 14,858 $
363
(2,110)
(973)
(39)
11,320
(395)
(1,177)
(277)
8,187 $ (8,905) $
8,456
(2,906)
201
(190)
(11,329)
(3,832)
(3,125)
29
(718)
(2,873)
(6,738)
(2,924)
(161)
186
26,804
(338)
(2,627)
(152)
24,177
254
14,002
(1,503)
(28,665)
(1,249)
(14,663)
(48)
2,565
3,637
(1,888)
3
(9,866)
(5,597)
(192)
(6,421)
(10,734)
(8,868)
(42)
3,319
(22,938)
(240)
(3,856)
(7,097)
(10,756)
(39)
(6,547)
(28,535)
(138)
2,492
3,453
(7,201)
2
2,382
990
(745)
(16,736)
(16,904)
(9,781)
(187)
(4,525)
(48,878)
(883)
(14,244)
(13,451)
(16,982)
(185)
(2,143)
(47,888)
Interest-Earning Assets:
Mortgage loans, net
Other loans, net
Mortgage-backed securities
Other securities
Tax-Exempt securities
Interest-earning deposits and federal
funds sold
Total interest-earning assets
Interest-Bearing Liabilities:
Deposits:
Savings accounts
NOW accounts
Money market accounts
Certificate of deposit accounts
Mortgagors' escrow accounts
Borrowings
Total interest-bearing liabilities
Net change in net interest income
$ 32,401 $ 20,311 $ 52,712 $ 13,012 $ 20,213 $ 33,225
Comparison of Operating Results for the Years Ended December 31, 2021 and 2020
General. Net income for the twelve months ended December 31, 2021 was $81.8 million, an increase of $47.1
million, or 135.9%, compared to $34.7 million for the twelve months ended December 31, 2020. Diluted earnings per
common share were $2.59 for the twelve months ended December 31, 2021, an increase of $1.41, or 119.5%, from $1.18
for the twelve months ended December 31, 2020. Return on average equity increased to 12.60% for the twelve months
ended December 31, 2021, from 5.98% for the comparable prior year period. Return on average assets increased to 1.00%
for the twelve months ended December 31, 2021 from 0.48% for the comparable prior year period.
Interest Income. Interest income increased $24.2 million, or 9.2%, to $288.6 million for the year ended December
31, 2021 from $264.3 million for the year ended December 31, 2020. The increase in interest income was primarily due
to an increase of $810.2 million in the average balance of interest-earning assets to $7,673.0 million for the year ended
December 31, 2021 from $6,862.8 million for the year ended December 31, 2020, partially offset by a decrease of 9 basis
points in the yield of interest-earning assets to 3.77% for the year ended December 31, 2021 from 3.86% for the year ended
December 31, 2020. The 9 basis point decrease in the yield of interest-earning assets was primarily due to a 44 basis point
decrease in the yield of total securities to 1.72% for the year ended December 31, 2021 from 2.16% for the year ended
December 31, 2020 and a decline in the yield on interest-earning deposits and federal funds sold of 24 basis points to
0.11% in for the year ended December 31, 2021 from 0.35% in for the comparable prior year period, as the yield on loans
67
was stable at 4.13% in both periods. Excluding prepayment penalty income from loans and securities, net
recoveries/(reversals) of interest from non-accrual loans, net gains (losses) from fair value adjustments on qualifying
hedges, and purchase accounting adjustments, the yield on total loans, net, decreased 12 basis points to 3.95% for the year
ended December 31, 2021 from 4.07% for the year ended December 31, 2020.
Interest Expense. Interest expense decreased $28.5 million, or 41.3%, to $40.6 million for the year ended
December 31, 2021 from $69.1 million for the year ended December 31, 2020. The decrease in interest expense was
primarily due to a decrease of 53 basis points in the average cost of interest-bearing liabilities to 0.63% for the year ended
December 31, 2021 from 1.16% for the year ended December 31, 2020. The 53 basis point decrease in the cost of interest-
bearing liabilities was primarily due to the 55 basis point decline in the yield on interest-bearing deposits to 0.37% for the
year ended December 31, 2021 from 0.92% for the year ended December 31, 2020. Additionally, the cost of interest-
bearing liabilities decreased due to a decline of $456.5 million in the average balance of higher costing borrowed funds to
$905.1 million for the year ended December 31, 2021 from $1,361.6 million for the comparable prior year period.
Net Interest Income. Net interest income for the year ended December 31, 2021 totaled $248.0 million, an increase
of $52.8 million, or 27.0%, from $195.2 million for the year ended December 31, 2020. The increase in net interest income
was primarily due to a 44 basis point increase in the net interest spread to 3.14% for the twelve months ended December
31, 2021 from 2.70% for the comparable prior year period. The cost of interest-bearing liabilities decreased 53 basis points
to 0.63% for the year ended December 31, 2021 from 1.16% for the comparable prior year period, partially offset by a
decrease in the yield on interest-earning assets of nine basis points to 3.77% for the year ended December 31, 2021, from
3.86% for the year ended December 31, 2020. This resulted in the net interest margin increasing 39 basis points to 3.24%
for the year ended December 31, 2021 from 2.85% for the year ended December 31, 2020. Included in net interest income
was prepayment penalty income from loans and securities totaling $6.4 million and $3.7 million for the year ended
December 31, 2021 and 2020, respectively, net recovered interest from non-accrual loans totaling $0.3 million and $0.8
million for the year ended December 31, 2021 and 2020, respectively, net gains (losses) from fair value adjustments on
qualifying hedges totaling $2.1 million and ($1.2) million for the year ended December 31, 2021 and 2020, respectively,
and purchase accounting income adjustments of $3.0 million for the year ended December 31, 2021. Excluding all of these
items, the net interest margin for the year ended December 31, 2021 was 3.08%, an increase of 28 basis points, from to
2.80% for the year ended December 31, 2020.
(Benefit) Provision for Credit Losses. Benefit for credit losses was $4.9 million for the year ended December 31,
2021, compared to a provision for credit losses of $23.1 million during the prior year. The change was primarily the result
of an improving economy. During the twelve months ended December 31, 2021, non-accrual loans decreased $3.4 million
to $14.9 million from $18.3 million at December 31, 2020. During the twelve months ended December 31, 2021, the Bank
recorded net charge-offs totaling $3.1 million. The average loan-to-value ratio for our non-performing loans collateralized
by real estate was 30.4% at December 31, 2021. The Bank continues to maintain conservative underwriting standards.
Non-Interest Income. Non-interest income for the twelve months ended December 31, 2021 was $3.7 million, a
decrease of $7.4 million, or 66.6%, from $11.0 million for the twelve months ended December 31, 2020. Non-interest
income decreased primarily due to an increase in non-cash net losses from fair value adjustments of $10.9 million, partially
offset by an increase of $2.1 million in other income for the year ended December 31, 2021 compared to the comparable
prior year period.
Non-Interest Expense. Non-interest expense was $147.3 million for the twelve months ended December 31, 2021,
an increase of $9.4 million, or 6.8%, from $137.9 million for the twelve months ended December 31, 2020. The increase
in non-interest expense was primarily due to a $14.1 million increase in salaries and employee benefits and a $4.2 million
increase in other operating expense primarily due to the growth of the Bank.
Income Tax Provisions. Income tax expense for the year ended December 31, 2021 increased $17.0 million, or
161.6%, to $27.5 million, compared to $10.5 million for the year ended December 31, 2020. The increase was primarily
due to the $64.1 million increase in income before income taxes for the year ended December 31, 2021 from the
comparable prior year period. The effective tax rate for the year ended December 31, 2021 was 25.2% compared to 23.3%
for the year ended December 31, 2020.
68
Comparison of Operating Results for the Years Ended December 31, 2020 and 2019 (1)
Liquidity, Regulatory Capital and Capital Resources
Liquidity and Capital Resources. Liquidity is the ability to economically meet current and future financial
obligations. The Company’s primary objectives in terms of managing liquidity is to maintain the ability to originate and
purchase loans, repay borrowings as they mature, satisfy financial obligations that arise in the normal course of business
and meet our customer’s deposit withdrawal needs. Our primary sources of funds are deposits, borrowings, principal and
interest payments on loans, mortgage-backed and other securities, and proceeds from sales of securities and loans. Deposit
flows and mortgage prepayments, however, are greatly influenced by general interest rates, economic conditions and
competition. The Company has other sources of liquidity, including unsecured overnight lines of credit, brokered deposits
and other types of borrowings.
Liquidity management is both a short and long-term function of business management. During 2021, funds were
provided by the Company’s operating activities, which were used to fund our investing and financing activities. Our most
liquid assets are cash and cash equivalents, which include cash and due from banks, overnight interest-earning deposits
and federal funds sold with original maturities of 90 days or less. The level of these assets is dependent on our operating,
financing, lending and investing activities during any given period. At December 31, 2021, cash and cash equivalents
totaled $81.7 million, a decrease of $75.7 million from December 31, 2020. We also held marketable securities available
for sale with a market value of $777.2 million at December 31, 2021.
At December 31, 2021, the Bank was able to borrow up to $3,635.2 million from the FHLB-NY in Federal Home
Loan Bank advances and letters of credit. As of December 31, 2021, the Bank had $1,429.6 million outstanding in
combined balances of FHLB-NY advances and letters of credit. At December 31, 2021, the Bank also has unsecured lines
of credit with other commercial banks totaling $593.0 million, with $25.0 million outstanding amount. In addition, the
Holding Company has subordinated debentures with a principal balance totaling $125.0 million and junior subordinated
debentures with a face amount of $61.9 million and a carrying amount of $56.5 million (which are both included in
Borrowed Funds). (See Note 10 (“Borrowed Funds”) of Notes to the Consolidated Financial Statements in Item 8 of this
Annual Report.) Management believes its available sources of funds are sufficient to fund current operations.
At December 31, 2021, we had commitments to extend credit (principally real estate mortgage loans) of $88.7
million and open lines of credit for borrowers (principally business lines of credit and home equity loan lines of credit) of
$384.2 million. Since generally all of the loan commitments are expected to be drawn upon, the total loan commitments
approximate future cash requirements, whereas the amounts of lines of credit may not be indicative of our future cash
requirements. The loan commitments generally expire in 90 days, while construction loan lines of credit mature within 18
months and home equity loan lines of credit mature within 10 years. We use the same credit policies in making
commitments and conditional obligations as we do for on-balance-sheet instruments.
Our total interest expense and non-interest expense in 2021 were $40.6 million and $147.3 million, respectively.
We maintain three postretirement defined benefit plans for our employees: a noncontributory defined benefit
pension plan which was frozen as of September 30, 2006, a contributory medical plan, and a noncontributory life insurance
plan. The life insurance plan was amended to discontinue providing life insurance benefits to future retirees after January
1, 2010 and the medical plan was frozen to future retirees as of January 1, 2011. We also maintain a noncontributory
defined benefit plan for certain of our non-employee directors, which was frozen as of January 1, 2004. The employee
pension plan is the only plan that we have funded. During 2021, we incurred cash expenditures of $0.1 million for each of
the medical and life insurance plans and the non-employee director plan. We did not make a contribution to the employee
pension plan in 2021. We expect to pay similar amounts for these plans in 2022. (See Note 13 (“Pension and Other
Postretirement Benefit Plan”) of Notes to Consolidated Financial Statements in Item 8 of this Annual Report.)
(1) – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2020, filed with the SEC on March 16, 2021, which is available on our investor relations website at
www.flushingbank.com and the SEC’s website at www.sec.gov
69
The amounts reported in our financial statements are obtained from reports prepared by independent actuaries
and are based on significant assumptions. The most significant assumption is the discount rate used to determine the
accumulated postretirement benefit obligation (“APBO”) for these plans. The APBO is the present value of projected
benefits that employees and retirees have earned to date. The discount rate is a single rate at which the liabilities of the
plans are discounted into today’s dollars and could be effectively settled or eliminated. The discount rate used is based on
the FTSE Pension Discount Curve (formerly the Citigroup Pension Liability Index) and reflects a rate that could be earned
on bonds over a similar period that we anticipate the plans’ liabilities will be paid. An increase in the discount rate would
reduce the APBO, while a reduction in the discount rate would increase the APBO. During the past several years, when
interest rates have been at historically low levels, the discount rate used for our plans has declined from 7.25% for 2001
to 2.58% for 2021. This decline in the discount rate has resulted in an increase in our APBO.
The Company’s actuaries use several other assumptions that could have a significant impact on our APBO and
periodic expense for these plans. These assumptions include, but are not limited to, expected rate of return on plan assets,
future increases in medical and life insurance premiums, turnover rates of employees, and life expectancy. The accounting
standards for postretirement plans involve mechanisms that serve to limit the volatility of earnings by allowing changes in
the value of plan assets and benefit obligations to be amortized over time when actual results differ from the assumptions
used, there are changes in the assumptions used, or there are plan amendments. At December 31, 2021, our employee
pension plan had an unrecognized loss of $1.4 million and the medical and life insurance plan had an unrecognized loss
of $0.9 million. At December 31, 2021, the non-employee director plan had an unrecognized gain of $0.4 million due to
experience different from what had been estimated and changes in actuarial assumptions. The employee pension plan’s
and medical and life insurance plan’s unrecognized losses are primarily attributed to the reduction in the discount rate. In
addition, the medical and life insurance plan has a past service credit of less than $0.1 million due to plan amendments.
The net after tax effect of the unrecognized gains and losses associated with these plans has been recorded in accumulated
other comprehensive loss in stockholders’ equity, resulting in a reduction of stockholders’ equity of $1.3 million as of
December 31, 2021.
The change in the discount rate, the pension plan’s mortality table and the reduction in medical premiums are the
only significant changes made to the assumptions used for these plans for each of the three years ended December 31,
2021. During the years ended December 31, 2021, 2020, and 2019, the actual (loss) return on the employee pension plan
assets was approximately (154%), 311%, and 372%, respectively, of the assumed return used to determine the periodic
pension expense for that respective year.
The market value of the assets of our employee pension plan is $26.1 million at December 31, 2021, which is
$4.0 million more than the projected benefit obligation. We do not anticipate a change in the market value of these assets
which would have a significant effect on liquidity, capital resources, or results of operations.
At the time of the Bank’s conversion from a federally chartered mutual savings bank to a federally chartered
stock savings bank, the Bank was required by its primary regulator to establish a liquidation account which is reduced as
and to the extent that eligible account holders reduce their qualifying deposits. Upon completion of the merger, the
liquidation account was assumed by the Bank. The balance of the liquidation account at December 31, 2021 was $0.4
million. In the unlikely event of a complete liquidation of the Bank, each eligible account holder will be entitled to receive
a distribution from the liquidation account. The Bank is not permitted to declare or pay a dividend or to repurchase any of
its capital stock if the effect would be to cause the Bank’s regulatory capital to be reduced below the amount required for
the liquidation account but approval of the NYDFS Superintendent is required if the total of all dividends declared by the
Bank in a calendar year would exceed the total of its net profits for that year combined with its retained net profits for the
preceding two years less prior dividends paid. The Holding Company is subject to the same regulatory restrictions on the
declaration of dividends as the Bank.
We have significant obligations that arise in the normal course of business. We finance our assets with deposits
and borrowings. We also use borrowings to manage our interest-rate risk. Borrowings with call provisions are included in
the period of the next call date. We have the means to refinance these borrowings as they mature or are called through
financing arrangements with the FHLB-NY and our ability to arrange repurchase agreements with broker-dealers and the
FHLB-NY. (See Note 9 (“Deposits”) and Note 10 (“Borrowed Funds”) of Notes to Consolidated Financial Statements in
Item 8 of this Annual Report. At December 31, 2021, we had borrowings obligations of $815.5 million of which $653.7
70
million represents our current obligations within one year. At December 31, 2021, we had deposits obligations of $6.385.4
million of which $6,194.7 million represents our current obligations within one year.
We focus our balance sheet growth on the origination of loans. At December 31, 2021, we had commitments to
extend credit and lines of credit of $472.9 million for mortgage and other loans. These loans will be funded through
principal and interest payments received on existing loan portfolio and mortgage-backed securities, growth in customer
deposits, and, when necessary, additional borrowings. (See Note 17 (“Commitments and Contingencies”) of Notes to
Consolidated Financial Statements in Item 8 of this Annual Report.)
At December 31, 2021, the Bank had 24 branches, which were all leased. In addition, we lease our executive
offices. We currently outsource our data processing, loan servicing and check processing functions. We believe that this
is the most cost effective method for obtaining these services. These arrangements are usually volume dependent and have
varying terms. The contracts for these services usually include annual increases based on the increase in the consumer
price index. At December 31, 2021 we had Operating lease and purchasing obligations totaling $85.4 million.
Pension and other postretirement benefits reflects our directors’ pension plan and amounts due under our plan for
medical and life insurance benefits for retired employees. At December 31, 2021 we had pension and other postretirement
benefits obligations totaling $5.4 million.
We currently provide a non-qualified deferred compensation plan for officers who have achieved the designated
level and completed one year of service. However, certain officers who have not reached the designated level but were
already participants remain eligible to participate in the Plan. In addition to the amounts deferred by the officers, we match
50% of their contributions, generally up to a maximum of 5% of the officer’s salary. These plans generally require the
deferred balance to be credited with earnings at a rate earned by certain mutual funds. At December 31, 2021 we had
deferred compensation plan obligations of $24.8 million. This expense is provided in the Consolidated Statements of
Income, and the liability has been provided in the Consolidated Statements of Financial Condition.
Regulatory Capital Position. Under applicable regulatory capital regulations, the Bank and the Company are
required to comply with each of four separate capital adequacy standards: leverage capital, common equity Tier I risk-
based capital, Tier I risk-based capital and total risk-based capital. Such classifications are used by the FDIC and other
bank regulatory agencies to determine matters ranging from each institution’s quarterly FDIC deposit insurance premium
assessments, to approvals of applications authorizing institutions to grow their asset size or otherwise expand business
activities. At December 31, 2021 and 2020, the Bank and the Company exceeded each of their four regulatory capital
requirements. (See Note 15 (“Regulatory Capital”) of Notes to Consolidated Financial Statements included in Item 8 of
this Annual Report.)
Critical Accounting Estimates
The preparation of our consolidated financial statement in accordance with generally accepted accounting
principles in the United States requires us to make estimates, judgments and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses. Actual results may differ materially from these estimates and changes in
assumptions could have a significant effect on the consolidated financial statements. Our critical accounting policies that
require us to make significant judgments or estimates are described below. For more information on these critical
accounting policies and other significant accounting policies, see the Note titled “Summary of Significant Accounting
Policies – Use of Estimates” in the Notes to the Consolidated Financial Statements.
The Company’s accounting policies are integral to understanding the results of operations and statement of
financial condition. These policies are described in the Notes to Consolidated Financial Statements. Several of these
policies require management’s judgment to determine the value of the Company’s assets and liabilities. The Company has
established detailed written policies and control procedures to ensure consistent application of these policies. The
Company has identified four accounting policies that require significant management valuation judgment: the allowance
for credit losses, fair value of financial instruments, goodwill impairment and income taxes.
71
Allowance for Credit Losses. An allowance for credit losses (“ACL”) is provided to absorb probable estimated
losses inherent in the loan portfolio. Management reviews the adequacy of the ACL by reviewing individual loans when
it has disparate risk characteristics from the rest of the loan portfolio. These loans include non-accrual and troubled debt
restructuring (“TDR”) loans, while the remainder of the portfolio is grouped by categories with similar risk characteristics.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management’s
assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using relevant
information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable
forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical losses,
economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and
internal loan processes Judgment is required to determine how many years of historical loss experience are to be included
when reviewing historical loss experience. A full credit cycle must be used, or loss estimates may be inaccurate. This
evaluation is inherently subjective, as it requires estimates that are susceptible to significant revisions as more information
becomes available.
The quantitative allowance is calculated using a number of inputs and assumptions. The process and guidelines
were developed using, among other factors, the guidance from federal banking regulatory agencies and GAAP. The results
of this process, support management’s assessment as to the adequacy of the ACL at each balance sheet date.
Notwithstanding the judgment required in assessing the components of the ACL, the Company believes that the
ACL is adequate to cover losses inherent in the loan portfolio. The policy has been applied on a consistent basis for all
periods presented in the Consolidated Financial Statements. See Notes 2 (“Summary of Significant Accounting Policies”)
and 4 (“Loans and Allowance for Credit Losses”) of Notes to Consolidated Financial Statements included in Item 8 of this
Annual Report.
Fair Value of Financial Instruments. The Company carries certain financial assets and financial liabilities at fair
value under the fair value option. Fair value is considered the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date.
The securities portfolio also consists of mortgage-backed and other securities for which the fair value election
was not selected. These securities are classified as available for sale or held-to-maturity. Securities classified as available
for sale are carried at fair value in the Consolidated Statements of Financial Condition, with changes in fair value recorded
in accumulated other comprehensive loss. Securities held-to-maturity are carried at their amortized cost in the Consolidated
Statements of Financial Condition.
Financial assets and financial liabilities reported at fair value are required to be measured based on the following
alternatives: (1) quoted prices in active markets for identical financial instruments (Level 1), (2) significant other
observable inputs (Level 2), or (3) significant unobservable inputs (Level 3). Judgment is required in selecting the
appropriate level to be used to determine fair value. The majority of financial assets and financial liabilities for which the
fair value election was made, and the majority of investments classified as available for sale and held-to-maturity, were
measured using Level 2 inputs, which require judgment to determine the fair value. The trust preferred securities held in
the investment portfolio, and the Company’s junior subordinated debentures, were measured using Level 3 inputs due to
the inactive market for these securities. The significant inputs used in the fair value measurement of the Company’s trust
preferred securities and junior subordinated debentures are the effective yields used in a cash flow models. See Notes 2
(“Summary of Significant Accounting Policies”), 7 (“Securities”) and 20 (“Fair Value of Financial Instruments”) of
Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
Goodwill Impairment. Goodwill is presumed to have an indefinite life and is tested for impairment, rather than
amortized, on at least an annual basis. For the purpose of goodwill impairment testing, management has concluded that
Company has one reporting unit. If the fair value of the reporting unit exceeds its carrying amount, there is no impairment
of goodwill.
Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for
measurement, when available. Other acceptable valuation methods include an asset approach, which determines a fair
value based upon the value of assets net of liabilities, an income approach, which determines fair value using one or more
72
methods that convert anticipated economic benefits into a present single amount, and a market approach, which determines
a fair value based on the similar businesses that have been sold.
As described above, fair value of our reporting unit is derived using a combination of an asset approach, an
income approach and a market approach. These valuation techniques consider several other factors beyond our market
capitalization, such as the estimated future cash flows of our reporting unit, the discount rate used to present value such
cash flows and the market multiples of comparable companies. Changes to input assumptions used in the analysis could
result in materially different evaluations of goodwill impairment. See Notes 2 (“Summary of Significant Accounting
Policies”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
Income Taxes. The Company estimates its income taxes payable based on the amounts it expects to owe to the
various taxing authorizes (i.e., federal, state and local). In estimating income taxes, management assesses the relative
merits and risks of the tax treatment of transactions, taking into account statutory, judicial and regulatory guidance in the
context of the Company’s tax position. Management also relies on tax opinions, recent audits, and historical experience.
The Company also recognizes deferred tax assets and liabilities for the future tax consequences of differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A
valuation allowance is required for deferred tax assets that the Company estimates are more likely than not to be
unrealizable, based on evidence available at the time the estimate is made. These estimates can be affected by changes to
tax laws, statutory tax rates, and future income levels. See Notes 2 (“Summary of Significant Accounting Policies”) and
11 (“Income Taxes”) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
This information is contained in the section captioned “Interest Rate Risk” under Item. 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations and in Notes 20 (“Fair Value of Financial
Instruments”) and 21 (“Derivative Financial Instruments”) of the Notes to Consolidated Financial Statements in Item 8 of
this Annual Report.
73
Item 8. Financial Statements and Supplementary Data.
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
Assets
Cash and due from banks
Securities held-to-maturity:
Mortgage-backed securities (include assets pledged of $5,643 and $5,853 at December 31, 2021 and 2020,
respectively; fair value of $8,667 and $8,991 at December 31, 2021 and 2020, respectively)
Other securities, net of allowance of $862 and $907 at December 31, 2021 and 2020 respectively; (none
pledged; fair value of $53,362 and $54,538 at December 31, 2021 and 2020, respectively)
Securities available for sale, at fair value:
Mortgage-backed securities (including assets pledged of $212,388 and $264,968 at December 31, 2021 and
2020, respectively; $388 and $505 at fair value pursuant to the fair value option at December 31, 2021 and
2020, respectively)
Other securities (including assets pledged of $0 and $6,453 at December 31, 2021 and 2020, respectively;
$14,180 and $13,998 at fair value pursuant to the fair value option at December 31, 2021 and 2020,
respectively)
Loans, net of fees and costs
Less: Allowance for credit losses
Net loans
Interest and dividends receivable
Bank premises and equipment, net
Federal Home Loan Bank of New York stock, at cost
Bank owned life insurance
Goodwill
Core deposit intangibles
Right of use asset
Other assets
Total assets
Liabilities
Due to depositors:
Non-interest bearing
Interest-bearing
Total Due to depositors
Mortgagors' escrow deposits
Borrowed funds:
Federal Home Loan Bank advances and other borrowings
Subordinated debentures
Junior subordinated debentures, at fair value
Total borrowed funds
Operating lease liability
Other liabilities
Total liabilities
Commitments and contingencies (Note 17)
December 31,
2021
December 31,
2020
(Dollars in thousands, except per share data)
$
81,723
$
157,388
7,894
49,974
7,914
49,918
572,184
404,460
$
$
205,052
6,638,105
(37,135)
6,600,970
38,698
23,338
35,937
210,754
17,636
2,562
50,200
148,989
8,045,911
967,621
5,365,911
6,333,532
51,913
636,187
122,885
56,472
815,544
54,155
111,139
7,366,283
$
$
243,514
6,704,674
(45,153)
6,659,521
44,041
28,179
43,439
181,710
17,636
3,172
50,743
84,759
7,976,394
778,672
5,312,061
6,090,733
45,622
887,579
90,180
43,136
1,020,895
59,100
141,047
7,357,397
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; 34,087,623 shares issued at both December
31, 2021 and 2020; 30,526,353 shares and 30,775,854 shares outstanding at December 31, 2021 and 2020,
respectively)
Additional paid-in capital
Treasury stock, at average cost (3,561,270 shares and 3,311,769 shares at December 31, 2021 and 2020,
respectively)
Retained earnings
Accumulated other comprehensive loss, net of taxes
Total stockholders' equity
—
—
341
263,375
(75,293)
497,889
(6,684)
679,628
341
261,533
(69,400)
442,789
(16,266)
618,997
Total liabilities and stockholders' equity
$
8,045,911
$
7,976,394
The accompanying notes are an integral part of these consolidated financial statements.
74
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Interest and dividend income
Interest and fees on loans
Interest and dividends on securities:
Interest
Dividends
Other interest income
Total interest and dividend income
Interest expense
Deposits
Other interest expense
Total interest expense
Net interest income
(Benefit) provision for credit losses
Net interest income after benefit provision for credit losses
Non-interest income
Banking services fee income
Net gain on sale of loans
Net gain on disposition of assets
Net gain (loss) on sale of securities
Net gain on sale of assets
Net loss from fair value adjustments
Federal Home Loan Bank of New York stock dividends
Life insurance proceeds
Bank owned life insurance
Other income
Total non-interest income
Non-interest expense
Salaries and employee benefits
Occupancy and equipment
Professional services
FDIC deposit insurance
Data processing
Depreciation and amortization of bank premises and equipment
Other real estate owned / foreclosure expense
Net loss from sales of real estate owned
Prepayment penalty on borrowings
Other operating expenses
Total non-interest expense
Income before income taxes
Provision for income taxes
Federal
State and local
Total provision for income taxes
Net income
Basic earnings per common share
Diluted earnings per common share
For the years ended December 31,
2019
2020
(In thousands, except per share data)
2021
$ 274,331 $ 248,153 $ 251,744
13,999
29
203
288,562
15,776
43
355
264,327
25,535
73
1,604
278,956
20,324
20,269
40,593
247,969
(4,944)
252,913
42,312
26,816
69,128
195,199
23,129
172,070
88,057
28,959
117,016
161,940
2,811
159,129
5,965
335
621
113
—
(12,995)
2,097
—
4,044
3,507
3,687
88,310
14,002
7,439
2,951
7,044
6,425
323
—
—
20,828
147,322
109,278
4,500
48
—
(701)
—
(2,142)
3,453
659
3,814
1,412
11,043
3,723
870
—
(15)
770
(5,353)
3,589
462
3,534
1,891
9,471
74,228
12,134
9,374
2,676
8,586
6,212
216
36
7,834
16,635
137,931
45,182
67,765
11,328
8,358
869
5,878
5,930
204
—
—
14,937
115,269
53,331
20,078
7,407
27,485
81,793 $
2.59 $
2.59 $
9,188
1,320
10,508
34,674 $
1.18 $
1.18 $
10,439
1,613
12,052
41,279
1.44
1.44
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
75
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
$
Net income
Other comprehensive income (loss), net of tax:
Amortization of prior service credits, net of taxes of $27, $26 and $26 for
the years ended December 31, 2021, 2020 and 2019, respectively
Amortization of net actuarial losses, net of taxes of ($159), ($120) and
($40) for the years ended December 31, 2021, 2020 and 2019, respectively
Unrecognized actuarial gains (losses), net of taxes of ($109), $484 and
($290) for the years ended December 31, 2021, 2020 and 2019,
respectively
Change in net unrealized gains (losses) on securities available for sale, net
of taxes of $3,455, ($2,169) and ($5,211) for the years ended
December 31, 2021, 2020 and 2019, respectively
Reclassification adjustment for net losses included in net income, net of
taxes of $35, ($216) and ($5) for the years ended December 31, 2021, 2020
and 2019, respectively
Net unrealized (loss) gain on cash flow hedges, net of taxes of ($7,126),
$5,177 and $4,353 for the years ended December 31, 2021, 2020 and 2019,
respectively
Change in fair value of liabilities related to instrument-specific credit risk,
net of taxes of ($237), ($367) and ($74) for the years ended
December 31, 2021, 2020 and 2019, respectively
For the years ended December 31,
2019
2020
2021
(in thousands)
81,793 $
34,674 $
41,279
(58)
341
(59)
270
(59)
88
319
(1,112)
661
(7,484)
4,787
11,657
(78)
485
10
16,115
(11,658)
(9,567)
427
828
155
Total other comprehensive income (loss), net of tax
9,582
(6,459)
2,945
Comprehensive net income
$
91,375 $
28,215 $
44,224
The accompanying notes are an integral part of these consolidated financial statements.
76
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Balance at December 31, 2018
$
549,464 $
315 $
222,720 $
(75,146) $
414,327 $
(12,752)
Total
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated Other
Comprehensive Loss
(Dollars in thousands, except per share data)
Impact of adoption of ASC 842 - Leases
Net income
Award of shares released from Employee Benefit
Trust (154,746 shares)
Vesting of restricted stock unit awards (297,559
shares)
Exercise of stock options (300 shares)
Stock-based compensation expense
Purchase of treasury shares (40,000 shares)
Repurchase of shares to satisfy tax obligation
(84,290 shares)
Dividends on common stock ($0.84 per share)
Other comprehensive income, net of tax
Balance at December 31, 2019
$
Adoption of ASC 326- Credit Losses
Net income
Shares issued in acquisition of Empire Bancorp,
Inc. (2,557,028 shares)
Award of shares released from Employee Benefit
Trust (145,447 shares)
Vesting of restricted stock unit awards (281,636
shares)
Stock-based compensation expense
Purchase of treasury shares (142,405 shares)
Repurchase of shares to satisfy tax obligation
(77,611 shares)
Dividends on common stock ($0.84 per share)
Other comprehensive loss, net of tax
Balance at December 31, 2020
$
Net Income
Award of shares released from Employee Benefit
Trust (22,936 shares)
Vesting of restricted stock unit awards (261,628
shares)
Stock-based compensation expense
Purchase of treasury shares (436,619 shares)
Repurchase of shares to satisfy tax obligation
(74,510 shares)
Dividends on common stock ($0.84 per share)
Other comprehensive income, net of tax
Balance at December 31, 2021
$
2,716
41,279
2,307
—
3
7,763
(771)
—
—
—
—
—
—
—
—
—
2,307
(6,099)
—
7,763
—
—
—
—
6,309
6
—
(771)
2,716
41,279
—
(210)
(3)
—
—
—
—
—
—
—
—
—
(1,885)
(24,149)
2,945
579,672 $
—
—
—
315 $
—
—
—
226,691 $
(1,885)
—
—
(71,487) $
—
(24,149)
—
433,960 $
—
—
2,945
(9,807)
(875)
34,674
32,705
1,520
—
6,450
(2,342)
(1,535)
(24,813)
(6,459)
618,997 $
81,793
321
—
6,829
(9,988)
(1,382)
(26,524)
9,582
679,628 $
—
—
26
—
—
—
—
—
—
—
341 $
—
—
—
—
—
—
—
—
—
—
32,679
1,520
(5,807)
6,450
—
—
—
—
—
5,964
—
(2,342)
(875)
34,674
—
—
(157)
—
—
—
—
—
—
—
—
—
—
—
—
261,533 $
(1,535)
—
—
(69,400) $
—
(24,813)
—
442,789 $
—
—
(6,459)
(16,266)
—
321
(5,308)
6,829
—
—
—
—
—
—
5,477
—
(9,988)
(1,382)
—
—
81,793
—
(169)
—
—
—
(26,524)
—
—
—
—
—
—
—
—
9,582
(6,684)
341 $
263,375 $
(75,293) $
497,889 $
The accompanying notes are an integral part of these consolidated financial statements.
77
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
(Benefit) provision for credit losses
Depreciation and amortization of premises and equipment
Net gain on sales of loans
Net (gain) loss on sales of securities
Net loss on sales of OREO
Net gain on sale and disposition of assets
Amortization of premium, net of accretion of discount
Fair value adjustments for financial assets and financial liabilities
Net (gain) loss from fair value adjustments of qualifying hedges
Income from bank owned life insurance
Life insurance proceeds
Stock-based compensation expense
Deferred compensation
Amortization of core deposit intangibles
Deferred income tax
Decrease (increase) in other assets
(Decrease) increase in other liabilities
Net cash provided by operating activities
Investing Activities
Purchases of premises and equipment
Net redemptions of Federal Home Loan Bank-NY shares
Purchases of securities held-to-maturity
Proceeds from calls of securities held-to-maturity
Proceeds from prepayments of securities held-to-maturity
Purchases of securities available for sale
Proceeds from sales and calls of securities available for sale
Proceeds from maturities and prepayments of securities available for sale
Proceeds from sale of assets
Purchase of bank owned life insurance
Proceeds from life insurance
Net repayments (originations) of loans
Purchases of loans
Proceeds from sale of loans
Proceeds from sale of OREO, net
Cash used in acquisition of Empire Bancorp, Inc.
Cash provided by acquisition of Empire Bancorp, Inc.
Net cash (used in) provided by investing activities
For the years ended December 31,
2019
2020
2021
(In thousands)
$
81,793 $
34,674 $ 41,279
(4,944)
6,425
(335)
(113)
—
(621)
(987)
12,995
(2,079)
(4,044)
—
6,829
(4,002)
610
(1,725)
563
(1,767)
88,598
23,129
6,212
(48)
701
36
—
6,446
2,142
1,185
(3,814)
(659)
6,450
(4,403)
108
(4,637)
2,605
1,151
71,278
(3,680)
7,502
—
—
—
(538,350)
64,613
330,701
—
(25,000)
—
290,890
(262,091)
28,632
—
—
—
(106,783)
(2,512)
14,617
—
180
603
(217,405)
232,970
271,533
—
—
2,477
(55,276)
(193,289)
7,493
203
(54,836)
86,340
93,098
2,811
5,930
(870)
15
—
(770)
7,110
5,353
1,677
(3,534)
(462)
7,763
(3,078)
—
(3,895)
706
3,735
63,770
(4,213)
361
(30,030)
2,568
583
(146,183)
65,493
144,673
813
(25,000)
3,071
(800)
(221,222)
15,117
—
—
—
(194,769)
Continued
The accompanying notes are an integral part of these consolidated financial statements.
78
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Financing Activities
Net increase in non interest-bearing deposits
Net increase in interest-bearing deposits
Net increase (decrease) in mortgagors' escrow deposits
Net proceeds from short-term borrowed funds
Proceeds from long-term borrowings
Repayment of long-term borrowings
Purchases of treasury stock
Proceeds from issuance of common stock upon exercise of stock options
Cash dividends paid
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental Cash Flow Disclosure
Interest paid
Income taxes paid
Taxes paid if excess tax benefits on stock-based compensation were not tax
deductible
Non-cash activities:
Loans transferred to other real estate owned
Right-of-use assets
Operating lease liabilities
For the years ended December 31,
2019
2020
2021
(In thousands)
$ 188,949 $ 174,104 $
3,974
6,291
—
122,843
(341,643)
(11,370)
—
(26,524)
(57,480)
(75,665)
157,388
39,591
(5,159)
—
215,378
(451,999)
(3,877)
—
(24,813)
(56,775)
107,601
49,787
81,723 $ 157,388 $
21,325
84,540
(486)
15,750
225,000
(257,102)
(2,656)
3
(24,149)
62,225
(68,774)
118,561
49,787
$
$
40,564 $
28,225
71,380 $ 115,616
15,369
17,919
27,889
17,764
15,403
—
—
—
—
—
—
239
42,869
51,780
Continued
The accompanying notes are an integral part of these consolidated financial statements.
79
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Acquisition of Empire Bancorp, Inc. non-cash activities
Assets acquired:
Securities available for sale
Net loans
Interest and dividends receivable
Bank premises and equipment, net
Federal Home Loan Bank of New York stock, at cost
Bank owned life insurance
Core deposit Intangibles
Right of Use Asset
Other assets
Liabilities assumed:
Due to depositors:
Non-interest bearing
Interest-bearing
Mortgagors' escrow deposits
Borrowed funds
Operating lease liability
Other liabilities
Goodwill recorded
Common stock issued
For the year
ended
December 31,
2020
(In thousands)
$
159,369
669,682
5,394
3,203
1,135
21,992
3,280
9,993
22,300
896,348
169,496
685,393
6,406
21,215
11,039
3,108
896,657
$
$
1,509
32,705
80
FLUSHING FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
1. Nature of Operations
Flushing Financial Corporation (the “Holding Company”), a Delaware business corporation, is the bank holding
company of its wholly-owned subsidiary Flushing Bank (the “Bank”). The Holding Company and its direct and indirect
wholly-owned subsidiaries, including the Bank, Flushing Service Corporation (“FSC”), FSB Properties Inc.
(“Properties”), and Flushing Preferred Funding Corporation (“FPFC”), which was dissolved as of June 30, 2021, and are
collectively herein referred to as the “Company.”
The Company’s principal business is attracting deposits from public entities and the general public, while
investing those deposits together with funds generated from ongoing operations and borrowings, primarily in (1)
originations and purchases of multi-family residential properties, commercial business loans, commercial real estate
mortgage loans and, to a lesser extent, one-to-four family (focusing on mixed-use properties, which are properties that
contain both residential dwelling units and commercial units); (2) construction loans, primarily for residential properties;
(3) Small Business Administration (“SBA”) loans and other small business loans; (4) mortgage loan surrogates such as
mortgage-backed securities; and (5) U.S. government securities, corporate fixed-income securities and other marketable
securities. The Bank also originates certain other consumer loans including overdraft lines of credit. The Bank primarily
conducts its business through twenty-four full-service banking offices, nine of which are located in Queens County, four
in Nassau County, three in Suffolk County, five in Kings County (Brooklyn), and three in New York County (Manhattan),
New York. The Bank also operates an internet branch, which operates under the brands of iGObanking® and BankPurely®
(the “Internet Branch”), offering checking, savings, money market and certificates of deposit accounts.
2. Summary of Significant Accounting Policies
The accounting and reporting policies of the Company follow accounting principles generally accepted in the
United States of America (“GAAP”) and general practices within the banking industry. The policies which materially
affect the determination of the Company’s financial position, results of operations and cash flows are summarized below.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of the Holding Company and the
following direct and indirect wholly-owned subsidiaries of the Holding Company: the Bank, FPFC, FSC, and Properties.
FPFC, which was dissolved as of June 30, 2021, was a real estate investment trust formed to hold a portion of the Bank’s
mortgage loans to facilitate access to capital markets. FSC was formed to market insurance products and mutual funds.
Properties is currently used to hold title to real estate owned acquired via foreclosure. Amounts held in a rabbi trust for
certain non-qualified deferred compensation plans are included in the consolidated financial statements. All intercompany
transactions and accounts are eliminated in consolidation.
The Holding Company also owns Flushing Financial Capital Trust II, Flushing Financial Capital Trust III, and
Flushing Financial Capital Trust IV (the “Trusts”), which are special purpose business trusts formed to issue a total of
$60.0 million of capital securities and $1.9 million of common securities (which are the only voting securities). The
Holding Company owns 100% of the common securities of the Trusts. The Trusts used the proceeds from the issuance of
these securities to purchase junior subordinated debentures from the Holding Company. The Trusts are not included in our
consolidated financial statements as we would not absorb the losses of the Trusts if losses were to occur. See Note 10,
“Borrowed Funds,” for additional information regarding these trusts.
When necessary, certain reclassifications were made to prior-year amounts to conform to the current-year
presentation.
81
Use of Estimates:
In December 2019, Coronavirus Disease 2019 (“COVID-19”) was reported in China, and, in March 2020, the
World Health Organization declared it a pandemic. The outbreak of COVID-19 has adversely impacted a broad range of
industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations to
the Company. The World Health Organization has declared COVID-19 to be a global pandemic indicating that almost all
public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate
of new infections. The spread of the outbreak has caused significant disruptions in the U.S. economy and has disrupted
banking and other financial activity in the areas in which the Company operates.
As a result of the emergence of the pandemic and the uncertainty, it is not possible to determine the overall impact
of the pandemic on the Company’s business. However, if the pandemic continues for an extended period of time, there
could be a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief and Economic
Security (“CARES”) Act in response to the coronavirus pandemic. This legislation aims at providing relief for individuals
and businesses that have been negatively impacted by the coronavirus pandemic. On December 27, 2020, the 2021
Consolidated Appropriations Act (“CAA”) was signed into law, providing for, among other things, further suspension of
the exception for loan modifications to not be classified as “troubled debt restructuring” (“TDR”) if certain criteria are
met, as described below.
The CARES Act includes a provision for the Company to opt out of applying the TDR accounting guidance in
Accounting Standards Codification (“ASC”) 310-40 for certain loan modifications. Loan modifications made between
March 1, 2020 and the earlier of i) December 31, 2020 or ii) 60 days after the President declares a termination of the
COVID-19 national emergency are eligible for this relief if the related loans were not more than 30 days past due as of
December 31, 2019. The Bank adopted this provision and at December 31, 2021, we have 20 active forbearances for loans
with an aggregate outstanding loan balance of approximately $71.9 million resulting in total deferment of $4.8 million in
principal, interest and escrow, as disclosed more fully in Note 4 (“Loans and Allowance for Credit Losses”) of the Notes
to the Consolidated Financial Statements. Loans modified after December 31, 2021 are no longer eligible to be modified
under the CARES Act or CAA.
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Estimates
that are particularly susceptible to change in the near term, including COVID-19 related changes, are used in connection
with the determination of the allowance for credit losses, the evaluation of goodwill for impairment, the review of the need
for a valuation allowance of the Company’s deferred tax assets and the fair value of financial instruments.
Cash and Cash Equivalents:
For the purpose of reporting cash flows, the Company defines cash and due from banks, overnight interest-earning
deposits and federal funds sold with original maturities of 90 days or less as cash and cash equivalents. At December 31,
2021 and 2020, the Company’s cash and cash equivalents totaled $81.7 million and $157.4 million, respectively. Included
in cash and cash equivalents at those dates were $51.7 million and $133.7 million, respectively, in interest-earning deposits
in other financial institutions, primarily due from the Federal Reserve Bank of New York and the Federal Home Loan
Bank of New York (“FHLB-NY”). At December 31, 2021 and 2020, the Company’s cash and cash equivalents included
restricted cash totaling $21.5 million and $63.5 million, respectively. These funds are pledged as collateral for unrealized
losses on interest-rate swaps.
Securities:
Securities are classified as held-to-maturity when management intends to hold the securities until maturity. Held-
to-maturity securities are stated at amortized cost, adjusted for unamortized purchase premiums and discounts and an
allowance for credit losses. Securities are classified as available for sale when management intends to hold the securities
82
for an indefinite period of time or when the securities may be utilized for tactical asset/liability purposes and may be sold
from time to time to effectively manage interest rate exposure and resultant prepayment risk and liquidity needs.
Unrealized gains and losses on securities available for sale are excluded from earnings and reported as part of accumulated
other comprehensive loss, net of taxes. Premiums and discounts are amortized or accreted, respectively, using the level-
yield method. Realized gains and losses on the sales of securities are determined using the specific identification method.
The Company’s estimate of expected credit losses for held-to-maturity debt securities is based on historical
information, current conditions and a reasonable and supportable forecast. At December 31, 2021 and 2020, the
Company’s portfolio is made up of three securities: the first structured similar to a commercial owner occupied loan and
modeled for credit losses similar to commercial business loans secured by real estate; the second is under forbearance and
is individually evaluated for allowance for credit loss; and the third issued and guaranteed by Fannie Mae, which is a
government sponsored enterprise that has a credit rating and perceived credit risk comparable to the U.S. government.
Accordingly, the Company assumes a zero loss expectation from the Fannie Mae security.
The Company reviewed each available for sale debt security that had an unrealized loss at December 31, 2021
and December 31, 2020. The Company does not have the intent to sell these securities and it is more likely than not the
Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. If the Company
evaluates any decline in the fair value is due to credit loss factors and this valuation indicates that a credit loss exists, then
the present value of cash flows is expected to be collected from the security is compared to the amortized cost basis of
security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss
exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than
the amortized cost basis.
The Company recorded tax exempt interest income totaling $1.7 million, $1.9 million, and $2.0 million during
the years ended December 31, 2021, 2020, and 2019, respectively.
Goodwill:
Goodwill represents the excess purchase price over the value assigned to tangible and identifiable intangible
assets, and liabilities assumed of business acquired. Goodwill is presumed to have an indefinite life and is tested annually
for impairment, or more frequently when certain conditions are met. If the fair value of the reporting unit is greater than
the carrying value, no further evaluation is required. If the fair value of the reporting unit is less than the carrying value,
further evaluation would be required to compare the fair value of the reporting unit to the carrying value and determine if
impairment is required.
Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for
measurement, when available. Other acceptable valuation methods include an asset approach, which determines a fair
value based upon the value of assets net of liabilities, an income approach, which determines fair value using one or more
methods that convert anticipated economic benefits into a present single amount, and a market approach, which determines
a fair value based on the similar businesses that have been sold.
If the fair value of our reporting unit does not exceed the market price of our stock, fair value of our reporting
unit is derived using a combination of an asset approach, an income approach and a market approach as described above.
These valuation techniques consider several other factors beyond our market capitalization, such as the estimated future
cash flows of our reporting unit, the discount rate used to present value such cash flows and the market multiples of
comparable companies. Changes to input assumptions used in the analysis could result in materially different evaluations
of goodwill impairment. We qualitatively assess whether the carrying value of our reporting unit exceeds fair value. If this
qualitative assessment determines that it is more likely than not that the carrying value exceeds fair value, further
qualitative evaluation for impairment would be required to compare the fair value of the reporting unit to the carrying
value and determine if impairment is required.
In performing the goodwill impairment testing, the Company has identified a single reporting unit. The Company
performed the qualitative assessment in reviewing the carrying value of goodwill as of December 31, 2021 and 2019, and
the quantitative assessment as of December 31, 2020, concluding that there was no goodwill impairment in any period. At
83
December 31, 2021 and 2020, the carrying amount of goodwill totaled $17.6 million at each period. The identification of
additional reporting units, the use of other valuation techniques and/or changes to input assumptions used in the analysis
could result in materially different evaluations of goodwill impairment.
Loans:
Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan
fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Loan fees and certain loan
origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into
interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans
which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.
Interest on loans is recognized on the accrual basis. Accrued interest receivable totaled $35.8 million and $41.5
million at December 31, 2021 and 2020, respectively and was reported in “Interest and dividends receivable” on the
Consolidated Statements of Financial Condition. The accrual of income on loans is generally discontinued when certain
factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of
such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time
the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency
returns to less than 90 days delinquent. Payments received on non-accrual loans that do not bring the loan to less than 90
days delinquent are recorded on a cash basis. Payments can also be applied first as a reduction of principal until all principal
is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due
is likely to occur.
Pursuant to the CARES Act, loan modifications made between March 1, 2020 and the earlier of i) December 30,
2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are not classified as
TDRs if the related loans were not more than 30 days past due as of December 31, 2019. On December 27, 2020, the CAA
was signed into law, providing for, among other things, further suspension of the exception for loan modifications to not
be classified as TDR if certain criteria are met, as described below. The Company has elected that loans temporarily
modified for borrowers directly impacted by COVID-19 are not considered TDR, assuming the above criteria is met and
as such, these loans are considered current and continue to accrue interest at its original contractual terms. Deferrals
granted under the CARES Act are deemed in accrual status and interest income is accrued until the end of deferral period
even if there are no payments being collected. When the forbearance period is over, borrowers are expected to resume
contractual payments. The determination of whether a loan is past due is based on the modified terms of the agreement.
Once the deferral period is over, the borrower will resume making payments and normal delinquency-based non-accrual
policies will apply. Loans modified after December 31, 2021 are no longer eligible to be modified under the CARES Act
or CAA.
The Company recognizes a loan as non-performing when the borrower has demonstrated the inability to bring
the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to
bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due
90 days or more, are classified as non-accrual unless the loan is well secured and there is, in our opinion, compelling
evidence the borrower will bring the loan current in the immediate future. Prior to a real estate secured loan becoming 90
days delinquent, an updated appraisal is ordered and/or an internal evaluation is prepared.
The Company may purchase loans to supplement originations. Loan purchases are evaluated at the time of
purchase to determine the appropriate accounting treatment. Performing loans purchased at a premium/discount are
recorded at the purchase price with the premium/discount being amortized/accreted into interest income over the life of
the loan. All loans purchased during the years ended December 31, 2021 and 2020 were performing loans that did not
display credit deterioration from origination at the time of purchase and therefore, exclusive of the acquisition of Empire
National Bank, were not considered impaired when purchased. The Company purchased loans totaling $262.1 million,
$193.3 million, and $221.2 million during the years ended December 31, 2021, 2020, and 2019. The Company sold loans
totaling $27.4 million, $7.4 million, and $13.7 million during the years ended December 31, 2021, 2020, and 2019.
84
Allowance for Credit Losses:
The Allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the
financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are
charged off against that ACL when management believes that a loan balance is uncollectable based on quarterly analysis
of credit risk.
The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects
management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using
relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and
supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical
losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio
mix, and internal loan processes.
The quantitative allowance is calculated using a number of inputs and assumptions. The results of this process,
support management’s assessment as to the adequacy of the ACL at each balance sheet date.
The process for calculating the allowance for credit losses begins with our historical losses by portfolio segment.
The losses are then incorporated into reasonable and supportable forecast to develop the quantitative component of the
allowance for credit losses.
The Bank has established an Asset Classification Committee which carefully evaluates loans which are past due
90 days and/or are classified. The Asset Classification Committee thoroughly assesses the condition and circumstances
surrounding each loan meeting the criteria. The Bank also has a Delinquency Committee that evaluates loans meeting
specific criteria. The Bank’s loan policy requires loans to be placed into non-accrual status once the loan becomes 90 days
delinquent unless there is, compelling evidence the borrower will bring the loan current in the immediate future.
For the quantitative measurement, the Company’s portfolio consists of mortgage loans secured by real estate
(both commercial and retail) and non-mortgage loans, which are primarily commercial business term loans and line of
credit. Based on the Company’s evaluation of the loan portfolio, listed below are the pools that were established as a
baseline level of segmentation with their primary risk factor. The Company confirms this data remains relevant in absence
of changes to the composition of the portfolio.
The mortgage portfolio is a substantial component of Company’s portfolio and it is a focus of the Company’s
lending strategy, primarily focusing on multi-family and commercial real estate. While the mortgage portfolio consists of
real-estate secured loans, the source of repayment and types of properties securing these loans varies and thus the Company
first considered these differences as follows:
One-to-four family residential property – These loans are secured by residential properties for which the
primary source of repayment is the income generated by the residential borrower. Delinquency status is considered a risk
factor in this pool.
One-to-four family mixed use – These loans are secured by residential properties for which the primary source
of repayment is the income generated by the property. Unlike the one-to-four residential credits, properties securing mixed
use loans include a commercial space component. Delinquency status is considered a risk factor in this pool.
Multi-family residential – These loans are secured by multi-unit residential buildings for which the primary
source of repayment is the income generated by the property. Properties securing multi-family loans have five or more
residential units and thus a greater number of cash flow streams compared to one-to-four mixed use loans. Delinquency
status and risk rating are considered risk factors in this pool.
Commercial real estate (CRE) – These loans are secured by properties for commercial use for which the primary
source of repayment is the income generated by the property. Delinquency status, risk rating and collateral type are
considered risk factors in this pool.
85
Construction – These loans are provided to fund construction projects for both residential and commercial
properties. These loans are inherently different from all others as they represent “work in progress” and expose the
Company to risk from non-completion and less recovery value should the sponsor of an unfinished property default.
Delinquency status and risk rating are considered risk factors in this pool.
Relative to the non-mortgage portfolio, the Company considered the following categories as a baseline for
evaluation:
Commercial Business – These loans are not typically secured by real estate. The primary source of repayment
is cash flows from operations of the borrower’s business. Within this category are SBA credits and equipment finance
credits. Delinquency status, risk rating and industry are considered a risk factors in this pool.
Commercial Business secured by real estate – These loans are secured by properties used by the borrower for
commercial use where the primary source of repayment is expected to be the income generated by the borrower’s business
use of the property. As a result of the Coronavirus pandemic and the strain placed upon many businesses, the Company
recognized in circumstances where the borrower is not performing, the real estate collateral would be the source of
repayment. The Company considers these credits to be less risky than commercial business loans, however, riskier than
commercial real estate loans. Delinquency status, risk rating and industry are considered risk factors in this pool.
Taxi Medallions – These loans consist primarily of loans made to New York taxi medallion owners and are
secured by liens on the taxi medallions. No new taxi medallions have been originated since 2014, the remaining portfolio
has been charged-off in 2021.
Overdrafts – These are unsecured consumer lines of credits and are an immaterial component of the Company’s
portfolio.
For the qualitative measurement, the Company aggregated the portfolio segments according to three business
units: business banking, residential and commercial real estate. In accordance with the interagency statement and SEC
guidance, Management evaluates nine qualitative risk factors to determine if the risk is captured elsewhere in the ACL
process. If not captured elsewhere, the Company has identified specific risk factors to evaluate and incorporate into its
Qualitative Framework. Some risk factors include time to maturity, origination loan-to-value, loan type composition, the
value of underlying collateral, changes in policies and procedures for lending strategies and underwriting standards,
collection and recovery practices, internal credit review, changes in personnel, divergence between the levels of NYC and
national unemployment, divergence between the NYC GDP and national GDP, industry concentrations and riskiness and
large borrower concentrations.
The Company recorded a (benefit) provision for credit losses on loans totaling ($4.9) million, $22.6 million, and
$2.8 million for the years ended December 31, 2021, 2020, and 2019, respectively. The decrease in the provision in 2021
was primarily due to improving economic conditions. The Company specifies both the reasonable and supportable forecast
and reversion periods in three economic conditions (expansion, transition, contraction). The Company made an adjustment
to decrease the reasonable and supportable forecast period and increase the reversion period to adjust for the model using
a more favorable forecast based on national statistics compared to the Bank’s primary market area, the New York Tri-
State area, where economic improvements lag behind the nation.
The Company may restructure loans that are not directly impacted by COVID-19 to enable a borrower
experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term
interest. This restructure may include reducing the interest rate or amount of the monthly payment for a specified period
of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans
as TDR.
These restructurings have not included a reduction of principal balance. The Company believes that restructuring
these loans in this manner will allow certain borrowers to become and remain current on their loans. All loans classified
as TDR are individually evaluated, however TDR loans which have been current for six consecutive months at the time
they are restructured as TDR remain on accrual status and are not included as part of non-performing loans. Loans which
86
were delinquent at the time they are restructured as a TDR are placed on non-accrual status and reported as non-accrual
performing TDR loans until they have made timely payments for six consecutive months. These restructurings have not
included a reduction of principal balance.
Purchased Financial Assets with Credit Deterioration:
Purchased financial assets with credit deterioration (“PCD”) assets are acquired in an acquisition and which have
experienced more-than-insignificant deterioration in credit quality since origination. PCD assets are initially recognized
at their amortized cost with an allowance for expected credit losses. The difference between the amortized cost less the
allowance for credit losses and the purchase price is recognized as a non-credit discount, which is accreted into interest
income over the life of the loans using the level yield method. At October 30, 2020, the Company acquired PCD assets
with a fair value totaling $286.1 million. The Company recorded Day 1 ACL of $4.1 million resulting from PCD loans.
Loans Held for Sale:
Loans held for sale are carried at the lower of cost or estimated fair value. At December 31, 2021 and 2020, there
were no loans classified as held for sale.
Bank Owned Life Insurance:
Bank owned life insurance (“BOLI”) represents life insurance on the lives of certain current and past employees
who have provided positive consent allowing the Company to be the beneficiary of such policies. BOLI is carried in the
Consolidated Statements of Financial Condition at its cash surrender value. Increases in the cash value of the policies, as
well as proceeds received, are recorded in other non-interest income, and are not subject to income taxes. During 2021,
the Company purchased BOLI totaling $25.0 million. There were no purchases during 2020.
Other Real Estate Owned:
Other Real Estate Owned (“OREO”) consists of property acquired through foreclosure. At the time of foreclosure
these properties are acquired at fair value and subsequently carried at the lower of cost or fair value, less estimated selling
costs. The fair value is based on appraised value through a current appraisal, or at times through an internal review,
additionally adjusted by the estimated costs to sell the property. This determination is made on an individual asset basis.
If the fair value of a property is less than the carrying amount of the loan, the difference is recognized as a charge to the
ACL. Further decreases to the estimated value will be recorded directly to the Consolidated Statements of Income. Included
within net loans as of December 31, 2021 and 2020, was $8.7 million and $5.9 million, respectively, of consumer mortgage
loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to
local requirements of the applicable jurisdiction. At December 31, 2021 and 2020, we did not hold any OREO.
Bank Premises and Equipment:
Bank premises and equipment are stated at cost, less depreciation accumulated on a straight-line basis over the
estimated useful lives of the related assets, recorded in Depreciation and amortization of bank premises and equipment in
the Consolidated Statements of Income. For equipment and furniture the useful life is between 3 to 10 years.
As of December 31, 2021 and 2020, the Bank leased all branches and its executive offices. Leasehold
improvements are amortized on a straight-line basis over the term of the related leases or the lives of the assets, whichever
is shorter. Maintenance, repairs and minor improvements are charged to non-interest expense in the period incurred.
87
Federal Home Loan Bank Stock:
The FHLB-NY has assigned to the Company a mandated membership stock ownership requirement, based on its
asset size. In addition, for all borrowing activity, the Company is required to purchase shares of FHLB-NY non-marketable
capital stock at par. Such shares are redeemed by FHLB-NY at par with reductions in the Company’s borrowing levels.
The Company carries its investment in FHLB-NY stock at historical cost. The Company periodically reviews its FHLB-
NY stock to determine if impairment exists. At December 31, 2021, the Company considered among other things the
earnings performance, credit rating and asset quality of the FHLB-NY. Based on this review, the Company did not consider
the value of our investment in FHLB-NY stock to be impaired at December 31, 2021.
Income Taxes:
Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method.
Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences
between book and tax basis of the various balance sheet assets and liabilities. A deferred tax liability is recognized on all
taxable temporary differences and a deferred tax asset is recognized on all deductible temporary differences and operating
losses and tax credit carry-forwards. A valuation allowance is recognized to reduce the potential deferred tax asset, if it is
“more likely than not” that all or some portion of that potential deferred tax asset will not be realized. Uncertain tax
positions that meet the more likely than not recognition threshold are measured to determine the amount to recognize. An
uncertain tax position is measured at the amount that management believes has a greater than 50% likelihood of realization
upon settlement. The Company must also take into account changes in tax laws or rates when valuing the deferred income
tax amounts it carries on its Consolidated Statements of Financial Condition.
Stock Compensation Plans:
The Company accounts for its stock-based compensation using a fair-value-based measurement method for share-
based payment transactions with employees and directors. The Company measures the cost of employee and directors
services received in exchange for an award of an equity instrument based on the grant date fair value of the award. That
cost is recognized over the period during which the employee and directors are required to provide services in exchange
for the award. The requisite service period is usually the vesting period. Forfeitures are recorded in the period they occur.
Benefit Plans:
The Company sponsors a qualified pension, 401(k), and profit sharing plan for its employees. The Company also
sponsors postretirement health care and life insurance benefits plans for its employees, a non-qualified deferred
compensation plan for certain senior officers, and a non-qualified pension plan for its outside directors.
The Company recognizes the funded status of a benefit plan – measured as the difference between plan assets at
fair value and the benefit obligation – in the Consolidated Statements of Financial Condition, with the unrecognized credits
and charges recognized, net of taxes, as a component of accumulated other comprehensive loss. These credits or charges
arose as a result of gains or losses and prior service costs or credits that arose during prior periods but were not recognized
as components of net periodic benefit cost.
Treasury Stock:
The Company records treasury stock at cost. Treasury stock is reissued at average cost.
Derivatives:
Derivatives are recorded on the Consolidated Statements of Financial Condition at fair value on a gross basis in
“Other assets” and/or “Other liabilities”. The accounting for changes in value of a derivative depends on the type of hedge
and on whether or not the transaction has been designated and qualifies for hedge accounting. Derivatives that are not
designated as hedges are reported and measured at fair value through earnings and included in Net gain (loss) from fair
value adjustments on the Consolidated Statements of Income.
88
To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the
exposure being hedged. In addition, for a derivative to be designated as a hedge, the risk management objective and strategy
must be documented. Hedge documentation must identify the derivative hedging instrument, the asset or liability or
forecasted transaction and type of risk to be hedged, and how the effectiveness of the derivative is assessed prospectively
and retrospectively. The extent to which a derivative has been, and is expected to continue to be, effective at offsetting
changes in the fair value of the hedged item must be assessed at least quarterly. For cash flow hedges, the changes in the
fair value of the derivative is recorded as a component of accumulated other comprehensive income or loss, net of tax, and
subsequently reclassified into earnings when the hedged transaction effects earnings. For fair value hedges, the gain or
loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, is recognized
in earnings on the same line as hedged item. If it is determined that a derivative is not highly effective at hedging the
designated exposure, hedge accounting is discontinued. Changes in the fair value of derivatives are disclosed in the
Consolidated Statements of Cash Flows within operating activities in the line items Fair value adjustments for financial
assets and financial liabilities and Net (gain) loss from fair value adjustments on qualifying hedges.
Leases:
The Company determines whether an arrangement contains a lease at inception. An arrangement contains a lease
if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in
exchange for consideration. As a lessee, we recognize include operating right-of-use (“ROU”) leases in Right of use asset
and operating lease liabilities in Operating lease liability on the Consolidated Statements of Financial Condition.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized upon
commencement of the lease based on the present value of the lease payments over the lease term. As most of the
Company’s leases do not provide an implicit interest rate, we generally use the Company’s incremental borrowing rate
based on the estimated rate of interest for fully collateralized and fully amortizing borrowings over a similar term of the
lease payments at commencement date to determine the present value of lease payments. When readily determinable, we
use the implicit rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably
certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the
lease term.
The Company has elected the short-term lease recognition exemption such that the Company will not recognize
Right of use assets (“ROU”) or lease liabilities for leases with a term of less than 12 months from the commencement date.
The Company’s operating lease expense for building and equipment rental totaled $8.6 million, $7.7 million, and $7.6
million and was recorded in Occupancy and equipment on the Consolidated Statements of Income for the years ended
December 31, 2021, 2020, and 2019 respectively. The Company’s operating lease expense for vehicles totaled $0.1 million
for each of the years ended December 31, 2021, 2020, and 2019 respectively, was recorded in Other Operation Expenses
on the Consolidated Statements of Income.
The Company has agreements that qualify as a short-term leases with expense totaling $0.2 million, $0.1 million,
and $0.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, included in Professional services
on the Consolidated Statements of Income. The Company’s variable lease payments, which include insurance and real
estate tax expenses was recorded in Occupancy and equipment on the Consolidated Statements of Income and totaled $1.1
million, $1.1 million and $1.0 million for the years ended December 31, 2021, 2020 and 2019. At December 31, 2021, the
weighted-average remaining lease term for our operating leases is approximately seven years and the weighted average
discount rate is 3.1%. Our lease agreements do not contain any residual value guarantees.
Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-
cancelable operating lease agreements expire through 2036.
Comprehensive Income:
Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive
income (loss) includes (i) unrealized gains and losses on securities available for sale and reclassification adjustments for
89
realized gains and losses on securities available for sale; (ii) unrealized gains and losses on derivatives in cash flow hedge
relationships and reclassifications of deferred gains and losses when the hedge item impacts earnings; (iii) adjustments to
net periodic pension costs; and (iv) changes in the fair value of instrument-specific credit risk from the Company’s
liabilities carried at fair value pursuant to the fair value option.
Segment Reporting:
Management views the Company as operating as a single unit, a community bank. Therefore, segment
information is not provided.
Advertising Expense:
Costs associated with advertising are expensed as incurred. The Company recorded advertising expenses of $2.5
million, $1.8 million, and $2.2 million for the years ended December 31, 2021, 2020, and 2019, respectively, recorded in
the professional services in the Consolidated Statements of Income.
Earnings per Common Share:
Basic earnings per common share is computed by dividing net income available to common shareholders by the
total weighted average number of common shares outstanding, which includes unvested participating securities. Unvested
share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and as such are included in the calculation of earnings per share. The Company’s
unvested restricted stock unit awards are considered participating securities. Therefore, weighted average common shares
outstanding used for computing basic earnings per common share includes common shares outstanding plus unvested
restricted stock unit awards. The computation of diluted earnings per share includes the additional dilutive effect of stock
options outstanding and other common stock equivalents during the period. Common stock equivalents that are anti-
dilutive are not included in the computation of diluted earnings per common share. The numerator for calculating basic
and diluted earnings per common share is net income available to common shareholders. The shares held in the Company’s
Employee Benefit Trust are not included in shares outstanding for purposes of calculating earnings per common share.
Earnings per common share have been computed based on the following, for the years ended December 31:
Net income, as reported
Divided by:
Weighted average common shares outstanding
Weighted average common stock equivalents
Total weighted average common shares
outstanding and common stock equivalents
Basic earnings per common share
Diluted earnings per common share
Dividend Payout ratio
2021
2020
(In thousands, except per share data)
$ 41,279
$ 34,674
$ 81,793
2019
31,550
—
29,301
—
28,709
—
$
$
31,550
$
2.59
2.59
$
32.4 %
29,301
$
1.18
1.18
$
71.2 %
28,709
1.44
1.44
58.3 %
There were no options that were anti-dilutive for the years ended December 31, 2021, 2020, and 2019.
3. Business Combination
On October 30, 2020, the Company completed its acquisition of 100% of the outstanding voting and non-voting
shares of Empire Bancorp, Inc. (“Empire”). In connection with the transaction, Empire National Bank (“Empire Bank”),
a wholly-owned subsidiary of Empire, merged with and into Flushing Bank, with Flushing Bank as the surviving entity.
90
The shareholders of Empire received total consideration of $87.5 million which consisted of $54.8 million in cash and
2,557,028 shares of Flushing Financial Corporation common stock.
The merger was accounted for under the acquisition method of accounting. The excess of the fair value of the
consideration paid over the preliminary net fair value of Empire’s assets and liabilities resulted in recognition of goodwill
totaling $1.5 million, none of which is deductible for tax purposes. Upon closing of the merger, the Company’s assets
increased by $982.7 million and four new branch locations were added, which expanded our presence on Long Island with
having entrance to Suffolk County.
The assets acquired and liabilities assumed in the merger were recorded at their estimated fair values based on
management’s best estimates, using the information available at the date of merger, including the use of third party
valuation specialists. The fair values are subject to adjustment for up to one year after the closing date of the transaction.
There were no adjustments made from the original estimates recorded.
The following table summarizes the consideration paid:
(Dollars in thousands)
Consideration Paid :
Company stock issued ( 2,557,028 shares )
Cash payment
Total consideration paid
Amount
$
$
32,705
54,836
87,541
The following table summarizes the estimated fair value of the acquired assets and liabilities assumed at October
30, 2020:
(Dollars in thousands)
Assets acquired:
Cash and Cash Equivalents
Securities available for sale
Net loans
Interest and dividends receivable
Bank premises and equipment, net
Federal Home Loan Bank of New York stock, at cost
Bank owned life insurance
Core deposit Intangibles
Right of use asset
Other assets
Liabilities assumed:
Due to depositors:
Non-interest bearing
Interest-bearing
Mortgagors' escrow deposits
Borrowed funds
Operating lease liability
Other liabilities
Goodwill recorded
91
Amount
86,340
159,369
669,682
5,394
3,203
1,135
21,992
3,280
9,993
22,300
982,688
169,496
685,393
6,406
21,215
11,039
3,108
896,657
1,509
$
$
$
$
Investments were measured upon quoted market prices, where available. If a quoted market price was not
available, fair value was estimated using quoted market prices for similar securities and adjusted for differences between
the quoted instrument and the instrument being valued.
Loans acquired were recorded at fair value and subsequently accounted for, as described in Note 2 (“Significant
Accounting Policies”). The fair values of the loans were estimated utilizing the cash flow projections based on the
remaining maturities and repricing terms. Cash flows were adjusted for estimated future credit losses and estimated
prepayments. Projected cash flows were then discounted to present value, utilizing the Company’s CECL model. The
Company recorded Day 1 ACL of $4.1 million resulting from PCD loans and non credit discount of $7.6 million.
Core deposit intangibles (“CDI”) were recorded at fair value estimated based on discounted cash flow
methodology that gave appropriate consideration to expected client attrition rates, cost of deposit base, reserve
requirements, net maintenance cost attributable to client deposits and an estimate of the cost associated with alternative
funding sources. The discount rates used for CDI assets are based on market rates. The CDI is being amortized over 10
years based upon the estimated economic benefit received using sum of months digit method.
Deposits were recorded at fair value calculated based on discounted cash flow calculation using the current
interest rate being offered to the contractual interest rates on such deposits.
Long-term debt was recorded at fair value based on current incremental borrowing rates for similar type of
instruments.
4. Loans and Allowance for Credit Losses
The composition of loans is as follows at December 31:
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use property
One-to-four family ― residential
Co-operative apartments
Construction
Small Business Administration (1)
Taxi medallion
Commercial business and other
Gross loans
Net unamortized premiums and unearned loan fees
Total loans, net of fees and costs
2021
2020
(In thousands)
$ 2,517,026 $ 2,533,952
1,754,754
602,981
245,211
8,051
83,322
167,376
2,757
1,303,225
6,701,629
3,045
$ 6,638,105 $ 6,704,674
1,775,629
571,795
268,255
8,316
59,761
93,811
—
1,339,273
6,633,866
4,239
(1) Includes $77.4 million, and $151.9 million of SBA Payment Protection Program (“SBA PPP”) loans at
December 31, 2021, and 2020, respectively.
92
The majority of our loan portfolio is invested in multi-family residential, commercial real estate and commercial
business and other loans, which totaled 84.9% and 83.4% of our gross loans at December 31, 2021 and 2020, respectively.
Our concentration in these types of loans increases the overall level of credit risk inherent in our loan portfolio. The greater
risk associated with these types of loans could require us to increase our allowance and provision for credit losses and to
maintain an ACL as a percentage of total loans in excess of the allowance currently maintained. In addition to our loan
portfolio, at December 31, 2021, we were servicing $34.1 million of loans for others.
Loans secured by multi-family residential property and commercial real estate generally involve a greater degree
of risk than residential mortgage loans and generally carry larger loan balances. The increased credit risk is the result of
several factors, including the concentration of principal in a smaller number of loans and borrowers, the effects of general
economic conditions on income producing properties and the increased difficulty in evaluating and monitoring these types
of loans. Furthermore, the repayments of loans secured by these types of properties are typically dependent upon the
successful operation of the related property, which is usually owned by a legal entity with the property being the entity’s
only asset. If the cash flow from the property is reduced, the borrower’s ability to repay the loan may be impaired. If the
borrower defaults, our only remedy may be to foreclose on the property, for which the market value may be less than the
balance due on the related mortgage loan.
Loans secured by commercial business and other loans involve a greater degree of risk for the same reasons as
for multi-family residential and commercial real estate loans with the added risk that many of the loans are not secured by
improved properties.
To minimize the risks involved in the origination of multi-family residential, commercial real estate and
commercial business and other loans, the Company adheres to defined underwriting standards, which include reviewing
the expected net operating income generated by the real estate collateral securing the loan, the age and condition of the
collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing
similar properties. We typically require debt service coverage of at least 125% of the monthly loan payment. We generally
originate these loans up to a maximum of 75% of the appraised value or the purchase price of the property, whichever is
less. Any loan with a final loan-to-value ratio in excess of 75% must be approved by the Bank’s Board of Directors or the
Loan Committee as an exception to policy. We generally rely on the income generated by the property as the primary
means by which the loan is repaid. However, personal guarantees may be obtained for additional security from these
borrowers. Additionally, for commercial business and other loans which are not secured by improved properties, the Bank
will secure these loans with business assets, including accounts receivables, inventory and real estate and generally require
personal guarantees.
The following tables show loans modified and classified as TDR during the periods indicated:
(Dollars in thousands)
Commercial business and other
Total
For the year ended
December 31, 2021
Number Balance
Modification description
3 $
3 $
702 Loan amortization extension.
702
(Dollars in thousands)
Commercial real estate
One-to-four family - mixed-use property
Total
Modification description
Loan received a below market interest rate
and had an amortization extension
7,583
270 Loan received a below market interest rate.
7,853
For the year ended
December 31, 2020
Number Balance
1 $
1
2 $
93
(Dollars in thousands)
Commercial business and other
Total
For the year ended
December 31, 2019
Number Balance
Modification description
3 $
3 $
951 Loan amortization extension.
951
The recorded investment of the loans modified and classified as TDR, presented in the tables above, were
unchanged as there was no principal forgiven in these modifications. In 2020, there were seven loans that were acquired
as TDR in the Empire acquisition totaling $3.5 million.
The following table shows our recorded investment for loans classified as TDR at amortized cost that are
performing according to their restructured terms at the periods indicated:
(Dollars in thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Commercial business and other
Total performing
(Dollars in thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Taxi medallion
Commercial business and other
Total performing
December 31, 2021
Number
of contracts
Amortized
Cost
6
1
5
3
5
20
$
$
1,690
7,572
1,636
483
1,381
12,762
December 31, 2020
Number
of contracts
Amortized
Cost
6
1
5
3
2
8
25
$
$
1,700
7,702
1,731
507
440
3,831
15,911
The following table shows our recorded investment for loans classified as TDR at amortized cost that are not
performing according to their restructured terms at the periods indicated. The Company did not have any loans classified
as TDR at amortized cost that was not performing according to their restructured terms at December 31, 2021.
(Dollars in thousands)
Taxi medallion
Commercial business and other
Total TDR's that subsequently defaulted
December 31, 2020
Number
of contracts
Recorded
investment
11
1
12
$
$
1,922
279
2,201
During the years ended December 31, 2021, 2020 and 2019 there were no defaults of TDR loans within 12 months
of their modification date.
94
The following tables show our non-accrual loans at amortized cost with no related allowance and interest income
recognized for loans ninety days or more past due and still accruing for periods shown below:
At or for the year December 31, 2021
Non-
accrual
amortized
cost
beginning
of the
reporting
period
Non-
accrual
amortized
cost ending
of the
reporting
period
Non-
accrual
with no
related
Interest
income
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property (1)
One-to-four family - residential
Small Business Administration
Taxi medallion(2)
Commercial business and other(1)
Total
$
$
2,576 $
1,766
1,706
1,168
2,758
5,660
20,947 $
2,652 $
640
1,582
7,482
952
—
1,945
15,253 $
allowance
2,652 $
640
1,582
7,482
952
—
305
13,613 $
recognized
19 $
—
6
1
—
—
78
104 $
(1)
31, 2021. Commercial business and other contains a non-accrual performing TDR totaling less than $0.1 million at December 31, 2021.
Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million at December
(2)
Taxi Medallion loans were completely charged off during the year ended December 31, 2021.
At or for the year December 31, 2020
Non-
accrual
amortized
cost
beginning
of the
reporting
period
Non-
accrual
amortized
cost ending
of the
reporting
period
Non-
accrual
with no
related
Interest
income
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property (1)
One-to-four family - residential
Small Business Administration
Taxi medallion(1)
Commercial business and other(1)
Total
$
$
2,723 $
2,714
1,704
9,992
1,169
2,318
7,406
28,026 $
2,576 $
1,766
1,706
5,313
1,168
2,758
5,660
20,947 $
allowance
2,576 $
1,766
1,706
5,313
1,168
2,758
1,593
16,880 $
recognized
— $
—
—
—
—
—
58
58 $
Loans
ninety days
or more past
due and still
accruing:
—
—
—
—
—
—
—
—
Loans
ninety days
or more past
due and still
accruing:
201
2,547
—
—
—
—
—
2,748
(1)
Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million, non-accrual
performing TDR taxi medallion loans totaling $0.4 million and non-accrual performing TDR commercial business loans totaling $2.2 million at
December 31, 2020.
95
The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the years
ended December 31:
Interest income that would have been recognized had the loans performed in
accordance with their original terms
Less: Interest income included in the results of operations
Total foregone interest
$
$
1,691 $
620
1,071 $
1,845 $
412
1,433 $
1,546
418
1,128
The following tables shows the aging of the amortized cost basis in past-due loans at the period indicated by class
of loans at December 31, 2021:
2021
2020
(In thousands)
2019
(in thousands)
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use
property
One-to-four family ― residential
Co-operative apartments
Construction
Small Business Administration
Commercial business and other
Total
$
Greater
than
Total Past
30 - 59 Days 60 - 89 Days
Past Due
$
Past Due
3,652 $
5,743
90 Days Due
Total Loans
4,193 $ 2,652 $ 10,497 $ 2,508,730 $ 2,519,227
1,777,375
Current
1,770,992
6,383
640
—
2,319
163
—
—
—
101
11,978 $
—
224
—
—
—
40
574,936
269,496
8,316
59,473
91,836
1,337,446
4,457 $ 14,433 $ 30,869 $ 6,607,236 $ 6,638,105
571,296
261,626
8,316
59,473
90,884
1,335,919
1,321
7,482
—
—
952
1,386
3,640
7,870
—
—
952
1,527
The following table shows by delinquency an analysis of our recorded investment in loans at December 31, 2020:
(in thousands)
Multi-family residential
Commercial real estate
One-to-four family ― mixed-use
property
One-to-four family ― residential
Co-operative apartments
Construction
Small Business Administration
Taxi medallion
Commercial business and other
Total
$
Greater
than
Total Past
30 - 59 Days 60 - 89 Days
Past Due
$
Past Due
7,582 $
17,903
90 Days Due
Total Loans
3,186 $ 2,777 $ 13,545 $ 2,522,432 $ 2,535,977
1,758,384
5,123
Current
1,731,045
27,339
4,313
5,673
3,087
—
750
1,823
—
129
36,947 $
606,885
1,132
244,640
805
8,051
—
—
83,161
165,570
—
2,597
—
1,299,409
1,273
11,519 $ 18,915 $ 67,381 $ 6,637,293 $ 6,704,674
598,647
235,435
8,051
82,411
162,579
279
1,296,414
1,433
5,313
—
—
1,168
2,318
1,593
8,238
9,205
—
750
2,991
2,318
2,995
96
The following tables show the activity in the allowance for credit losses for the periods indicated:
For the year ended December 31, 2021
One-to-four
family -
Multi-family Commercial mixed-use
property
residential
real estate
One-to-four
family -
residential
Co-operative Construction Small Business
loans
apartments
Administration medallion
Taxi
Commercial
business and
other
Total
(in thousands)
Allowance for credit
losses:
Beginning balance
Charge-off's
Recoveries
Provision (benefit)
$
Ending balance
$
(in thousands)
Allowance for credit
losses:
Beginning balance
Impact of CECL
Adoption
Impact of Day 1 PCD -
Empire Acquisition
Charge-off's
Recoveries
Provision (benefit)
Ending balance
$
(in thousands)
Allowance for credit
losses:
Beginning balance
Charge-off's
Recoveries
Provision (benefit)
Ending balance
$
6,557 $
(43)
10
1,661
8,185 $
8,327 $
(64)
—
(1,105)
7,158 $
1,986 $
(33)
133
(331)
1,755 $
869 $
—
157
(242)
784 $
— $
—
—
—
— $
497 $
—
—
(311)
186 $
For the year ended December 31, 2020
— $
2,251 $
—
34
(1,076)
1,209 $
(2,758)
1,457
1,301
— $
24,666 $ 45,153
(5,134)
(2,236)
2,015
224
(4,796)
(4,899)
17,858 $ 37,135
One-to-four
family -
Multi-family Commercial mixed-use
property
residential
real estate
One-to-four
family -
residential
Co-operative Construction Small Business
loans
apartments
Administration medallion
Taxi
Commercial
business and
other
Total
$
5,391 $
4,429 $
1,817 $
756 $
— $
441 $
363 $
— $
8,554 $ 21,751
(650)
1,170
(55)
(160)
—
(279)
1,180
—
(827)
379
444
—
38
1,334
6,557 $
587
—
—
2,141
8,327 $
183
(3)
138
(94)
1,986 $
158
—
12
103
869 $
—
—
—
—
— $
20
—
—
315
497 $
278
(178)
70
538
2,251 $
124
(1,075)
—
951
— $
4,099
2,305
(4,005)
(2,749)
366
108
17,275
22,563
24,666 $ 45,153
For the year ended December 31, 2019
One-to-four
family -
Multi-family Commercial mixed-use
property
residential
real estate
One-to-four
family -
residential
Co-operative Construction Small Business
loans
apartments
Administration medallion
Taxi
Commercial
business and
other
Total
$
5,676 $
(190)
44
(139)
5,391 $
4,315 $
—
37
77
4,429 $
1,867 $
(89)
197
(158)
1,817 $
749 $
(113)
13
107
756 $
— $
—
—
—
— $
329 $
—
—
112
441 $
418 $
—
60
(115)
363 $
— $
—
134
(134)
— $
7,591 $ 20,945
(2,778)
(2,386)
773
288
3,061
2,811
8,554 $ 21,751
In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,”
which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified
Loans”. If a loan does not fall within one of the previous mentioned categories and management believes weakness is
evident then we designate the loan as “Watch”, all other loans would be considered “Pass.” Loans that are non-accrual are
designated as Substandard, Doubtful, or Loss. These loan designations are updated quarterly. We designate a loan as
Substandard when a well-defined weakness is identified that may jeopardize the orderly liquidation of the debt. We
designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that
collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed
the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated
as Loss are charged to the Allowance for Credit Losses. We designate a loan as Special Mention if the asset does not
warrant classification within one of the other classifications, but contains a potential weakness that deserves closer
attention. Loans that are in forbearance pursuant to the CARES Act or CAA generally continued to be reported in the same
category as they were reported immediately prior to modification.
97
The following table summarizes the risk category of mortgage and non-mortgage loans by loan portfolio segments and
class of loans by year of origination:
For the year ended
$
$
$
$
2021
— $
2018
2017
2019
2020
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
300
—
—
680
—
—
—
—
523
1,119
—
—
4,197
—
—
2,446
—
—
1,249
—
1,119
9,659
—
—
3,632
—
—
9,630
—
—
—
—
1,841
4,524
—
—
4,524 $
1,993 $
4,033
856
873
7,755 $
$ 314,345 $ 236,768 $ 330,360 $ 426,016 $ 347,616 $
$ 188,980 $ 161,570 $ 252,976 $ 259,257 $ 180,992 $
$ 45,767 $ 35,397 $ 68,349 $ 74,057 $ 56,310 $
$ 45,767 $ 35,397 $ 68,349 $ 74,580 $ 56,990 $
5,022 $ 11,515 $ 14,800 $
—
—
—
5,022 $ 11,515 $ 14,800 $
8,917 $ 30,674 $ 48,238 $ 32,105 $ 24,550 $
727
—
—
9,217 $ 30,674 $ 48,965 $ 33,946 $ 26,918 $
(In thousands)
1-4 Family Residential
Pass
Watch
Special Mention
Substandard
Total 1-4 Family Residential
1-4 Family Mixed-Use
Pass
Watch
Special Mention
Substandard
Total 1-4 Family Mixed Use
Commercial Real Estate
Pass
Watch
Special Mention
Substandard
Total Commercial Real Estate $ 193,177 $ 165,202 $ 262,635 $ 268,887 $ 183,438 $
Construction
Pass
Watch
Special Mention
Substandard
Total Construction
Multi-family
Pass
Watch
Special Mention
Substandard
Total Multi-family
Commercial Business - Secured
by RE
Pass
Watch
Special Mention
Substandard
Total Commercial Business -
Secured by RE
Commercial Business
Pass
Watch
Special Mention
Substandard
Doubtful
Total Commercial Business
Small Business Administration
Pass
Watch
Special Mention
Substandard
Total Small Business
Administration
Other
Pass
Total Other
Total Loans
Total Pass
Total Watch
Total Special Mention
Total Substandard
Total Doubtful
Total Loans
$ 127,543 $ 50,439 $ 68,031 $ 67,520 $ 26,589 $
22,531
—
31
—
$ 176,376 $ 92,336 $ 38,215 $ 45,348 $ 22,644 $
51,300
591
—
$ 176,376 $ 115,214 $ 90,106 $ 64,033 $ 34,790 $
$ 315,464 $ 238,873 $ 334,068 $ 441,121 $ 348,770 $
$ 129,157 $ 58,386 $ 90,593 $ 91,595 $ 63,191 $
1,529 $
2,578
—
—
729 $
57
—
—
21,344
2,423
308
—
68,450
4,076
5,673
—
87,982
591
31
—
29,314
2,351
4,897
—
31,819
40
4,743
—
56,083
40
6,814
—
1,668
1,382
4,897
—
1,596
18
—
—
7,212
18
—
—
$ 63,695 $ 17,034 $
$ 63,695 $ 17,034 $
12,180
797
2,128
18,685
—
—
22,878
—
—
12,146
—
—
1,136
969
—
3,708
—
—
2,065
—
952
1,154
—
—
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
—
—
—
—
—
—
—
—
—
3,644 $
4,107 $
$
$
786 $
627 $
Revolving Loans,
Amortized Cost
Basis
Lines of Credit
converted to
term loans
Total
Prior
94,407 $
1,129
130
3,935
99,601 $
286,040 $
5,371
1,130
1,312
293,853 $
632,138 $
70,051
794
1,053
704,036 $
— $
—
—
—
— $
823,451 $
7,702
3,021
742
834,916 $
92,725 $
46,279
—
3,609
11,141 $
—
—
—
11,141 $
15,798 $
562
224
766
17,350 $
265,830
3,967
354
7,661
277,812
— $
—
—
—
— $
— $
—
—
—
— $
15,857 $
—
—
—
15,857 $
5,864 $
—
—
151
6,015 $
— $
—
—
—
— $
565,920
6,051
1,130
1,835
574,936
— $ 1,675,913
99,615
—
794
—
—
1,053
— $ 1,777,375
— $
—
—
—
— $
49,187
8,557
856
873
59,473
— $ 2,484,420
26,999
—
4,787
—
—
3,021
— $ 2,519,227
— $
—
—
—
— $
—
—
—
467,644
151,288
591
3,609
142,613 $
— $
— $
623,132
37,016 $
15
—
400
—
37,431 $
1,693 $
824
48
5
217,110 $
11,199
13,534
890
1,081
243,814 $
— $
—
—
—
— $
—
—
—
—
— $
594,248
90,172
17,397
11,269
1,081
714,167
— $
—
—
—
85,307
5,524
48
957
2,570 $
— $
— $
91,836
51 $
51 $
96 $
96 $
— $
— $
147
147
131,371
5,123
11,056
—
250,068 $
11,199
13,534
1,041
1,081
276,923 $
15,798 $ 6,188,616
392,173
25,957
30,278
1,081
17,350 $ 6,638,105
562
224
766
—
$ 930,645 $ 635,733 $ 821,698 $ 907,825 $ 659,328 $ 1,967,521 $
$ 937,875 $ 672,295 $ 910,302 $ 986,024 $ 722,265 $ 2,115,071 $
98
The following table presents types of collateral-dependent loans by class of loan:
December 31, 2021
December 31, 2020
Collateral Type
(In thousands)
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
One-to-four family - residential
Small Business Administration
Commercial business and other
Taxi Medallion
Total
Off-Balance Sheet Credit Losses
Real Estate
$
2,652 $
1,158
1,582
7,482
—
—
—
12,874 $
Business Assets Real Estate Business Assets
—
—
—
—
1,168
3,482
2,758
7,408
2,576 $
2,994
1,706
5,313
—
—
—
12,589 $
— $
—
—
—
952
1,427
—
2,379 $
$
Also included within scope of the CECL standard are off-balance sheet loan commitments, which includes the
unfunded portion of committed lines of credit and commitments “in-process”. Commitments “in‐process” reflect loans not
in the Company’s books but rather negotiated loan / line of credit terms and rates that the Company has offered to
customers and is committed to honoring. In reference to “in‐process” credits, the Company defines an unfunded
commitment as a credit that has been offered to and accepted by a borrower, which has not closed and by which the
obligation is not unconditionally cancellable.
The Company estimates expected credit losses over the contractual period in which the company is exposed to
credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the
Company. The allowance for credit losses on off-balance sheet exposures is adjusted as a provision for credit loss expense.
The Company uses similar assumptions and risk factors that are developed for collectively evaluated financing receivables.
This estimates includes consideration of the likelihood that funding will occur and an estimate of expected credit losses
on commitments to be funded over its estimated life.
At December 31, 2021 and 2020, allowance for off-balance-sheet credit losses was $1.2 million and $1.8 million,
respectively, which is included the “Other liabilities” on the Consolidated Statements of Financial Condition. During the
year ended December 31, 2021, and 2020 the Company has ($0.6) million and $1.3 million, respectively, in credit loss
(benefit) expense for off-balance-sheet items, which is included in the “Other operating expenses” on the Consolidated
Statements of Income.
The following table presents the activity in the allowance for off balance sheet credit losses:
(In thousands)
Balance at beginning of period
Off-Balance Sheet - CECL Adoption
Off-Balance Sheet- Provision (benefit)
Allowance for Off-Balance Sheet - Credit losses (1)
For the year ended December 31,
2021
2020
1,815
—
(606)
1,209
$
—
553
1,262
1,815
$
$
(1)
Included in “Other liabilities” on the Consolidated Statements of Financial Condition.
99
5. Loans held for sale
At December 31, 2021 and 2020, the Company did not have any loans held for sale.
The Company has implemented a strategy of selling certain delinquent and non-performing loans. Once the
Company has decided to sell a loan, the sale usually closes in a short period of time, generally within the same quarter.
Loans designated held for sale are reclassified from loans held for investment to loans held for sale. Terms of sale include
cash due upon the closing of the sale, no contingencies or recourse to the Company and servicing is released to the buyer.
Additionally, at times the Company may sell participating interests in performing loans.
The following tables show loans sold during the period indicated:
(Dollars in thousands)
Delinquent and non-performing loans
Multi-family residential
Commercial
One-to-four family - mixed-use property
Total
(Dollars in thousands)
Delinquent and non-performing loans
Multi-family residential
One-to-four family - mixed-use property
Total
Performing loans
Commercial business and other
Small Business Administration
Total
(Dollars in thousands)
Delinquent and non-performing loans
Multi-family residential
Commercial real estate
One-to-four family - mixed-use property
Commercial business and other
Total
Performing loans
Small Business Administration
Total
For the year ended December 31, 2021
Loans sold
Proceeds
Net charge-offs Net gain (loss)
13 $
4
16
33 $
14,269 $
7,380
6,983
28,632 $
(43) $
(64)
(14)
(121) $
112
104
119
335
Loans sold
For the year ended December 31, 2020
Proceeds
Net charge-offs Net gain (loss)
1 $
1
2 $
1
1 $
2 $
284 $
296
580 $
6,139
774 $
6,913 $
— $
—
— $
—
— $
— $
42
—
42
(62)
68
6
Loans sold
For the year ended December 31, 2019
Proceeds
Net charge-offs Net gain
5 $
2
3
1
11 $
2,115 $
6,800
885
3,248
13,048 $
3 $
3 $
2,069 $
2,069 $
— $
—
(1)
—
(1) $
— $
— $
367
383
6
—
756
114
114
100
6. Other Real Estate Owned
The following table shows the activity in OREO during the periods indicated:
Balance at beginning of year
Additions
Reductions to carrying value
Sales
Balance at end of year
For the years ended December 31,
2019
2020
2021
(In thousands)
$
$
— $
—
—
—
— $
239 $
—
(31)
(208)
— $
—
239
—
—
239
The following table shows the gross gains, gross losses and write-downs of OREO reported in the Consolidated
Statements of Income during the periods presented:
Gross gains
Gross losses
Write-down of carrying value
Total income
7. Securities
For the years ended December 31,
2019
2020
2021
(In thousands)
$
$
— $
—
—
— $
— $
(5)
(31)
(36) $
—
—
—
—
The Company did not hold any trading securities at December 31, 2021 and 2020. Securities available for sale
are recorded at fair value. Securities held-to-maturity are recorded at amortized cost.
The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2021:
Amortized
Cost
Fair Value
Gains
(In thousands)
Gross
Gross
Unrecognized Unrecognized
Securities held-to-maturity:
Municipals
Total municipals
$ 50,836 $ 53,362 $
50,836
53,362
2,526
2,526
$
FNMA
Total mortgage-backed securities
7,894
7,894
8,667
8,667
773
773
Allowance for Credit Losses
Total
(862)
—
$ 57,868 $ 62,029 $
—
3,299
$
101
Losses
—
—
—
—
—
—
The following table summarizes the Company’s portfolio of securities held-to-maturity at December 31, 2020:
Amortized
Cost
Fair Value
Gains
(In thousands)
Gross
Gross
Unrecognized Unrecognized
Securities held-to-maturity:
Municipals
Total municipals
$ 50,825 $ 54,538 $
50,825
54,538
3,713
3,713
$
FNMA
Total mortgage-backed securities
7,914
7,914
8,991
8,991
1,077
1,077
Allowance for Credit Losses
Total
(907)
—
$ 57,832 $ 63,529 $
—
4,790
$
Losses
—
—
—
—
—
—
The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2021:
Amortized
Gross
Unrealized
Cost
Fair Value Gains
Gross
Unrealized
Losses
$
5,599 $
(In thousands)
5,590 $
— $
107,423
12,485
81,166
1,695
208,368
210,948
10,572
203,777
152,760
578,057
786,425 $
104,370
12,485
80,912
1,695
205,052
208,509
10,286
202,938
150,451
572,184
777,236 $
136
—
1
—
137
1,217
30
1,321
326
2,894
3,031 $
9
3,189
—
255
—
3,453
3,656
316
2,160
2,635
8,767
12,220
U.S. government agencies
Corporate
Mutual funds
Collateralized loan obligations
Other
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total securities available for sale
$
102
The following table summarizes the Company’s portfolio of securities available for sale at December 31, 2020:
Amortized
Gross
Gross
Unrealized Unrealized
Cost
Fair Value Gains
Losses
U.S. government agencies
Corporate
Mutual funds
Collateralized loan obligations
Other
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
$
6,452 $
(In thousands)
6,453 $
2 $
130,000
12,703
100,561
1,295
251,011
175,142
13,009
143,154
63,796
395,101
646,112 $
123,865
12,703
99,198
1,295
243,514
180,877
13,053
146,169
64,361
404,460
647,974 $
131
—
—
—
133
5,735
66
3,046
648
9,495
9,628 $
1
6,266
—
1,363
—
7,630
—
22
31
83
136
7,766
Total mortgage-backed securities
Total securities available for sale
$
The corporate securities held by the Company at December 31, 2021 and 2020 are issued by U.S. banking
institutions. The CMOs held by the Company at December 31, 2021 and 2020 are either fully guaranteed or issued by a
government sponsored enterprise.
The following table details the amortized cost and fair value of the Company’s securities classified as held-to-
maturity at December 31, 2021, by contractual maturity. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties:
Due after ten years
Total other securities
Mortgage-backed securities
Allowance for credit losses
Total securities held-to-maturity
Amortized
$
Cost
Fair Value
(In thousands)
50,836 $
50,836
7,894
58,730
53,362
53,362
8,667
62,029
(862)
57,868 $
-
62,029
$
103
The amortized cost and fair value of the Company’s securities, classified as available for sale at December 31,
2021, by contractual maturity, are shown below:
Due after one year through five years
Due after five years through ten years
Due after ten years
Total other securities
Mutual funds
Mortgage-backed securities
Total securities available for sale
Amortized
Cost
Fair Value
(In thousands)
20,000 $
163,572
12,311
195,883
12,485
578,057
786,425 $
19,865
160,417
12,285
192,567
12,485
572,184
777,236
$
$
The following table shows the Company’s securities with gross unrealized losses and their fair value, aggregated
by category and length of time that individual securities have been in a continuous unrealized loss position, at
December 31, 2021:
Total
Less than 12 months
12 months or more
Unrealized
Unrealized
Unrealized
Count Fair Value Losses
Fair Value Losses
(Dollars in thousands)
Fair Value Losses
Available for sale securities
U.S. government agencies
Corporate
CLO
Total other securities
REMIC and CMO
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total securities available for sale
2 $
5,577 $
9 $
1,130 $
5 $
4,447 $
13
4
19
94,234
31,012
130,823
3,189
255
3,453
65,453
10,000
76,583
1,970
1
1,976
28,781
21,012
54,240
124,131
9,924
171,109
129,115
434,279
15
4
25
18
62
81 $ 565,102 $ 12,220 $ 435,634 $
105,959
1,138
153,657
98,297
359,051
3,656
316
2,160
2,635
8,767
2,800
16
1,587
1,448
5,851
7,827 $ 129,468 $
18,172
8,786
17,452
30,818
75,228
4
1,219
254
1,477
856
300
573
1,187
2,916
4,393
The following table shows the Company’s available for sale securities with gross unrealized losses and their fair
value, aggregated by category and length of time that individual securities have been in a continuous unrealized loss
position, at December 31, 2020:
Total
Less than 12 months
12 months or more
Unrealized
Unrealized
Unrealized
Count Fair Value Losses
Fair Value Losses
(Dollars in thousands)
Fair Value Losses
Available for sale securities
U.S. government agencies
Corporate
CLO
Total other securities
GNMA
FNMA
FHLMC
Total mortgage-backed securities
Total securities available for sale
1 $
4,988 $
14
13
28
113,734
99,199
217,921
1 $
4,988 $
—
7,441
12,429
6,266
1,363
7,630
1 $
— $
—
52
53
113,734
91,758
205,492
1
5
3
9
10,341
32,463
30,095
72,899
22
31
83
136
10,341
23,864
30,095
64,300
37 $ 290,820 $
7,766 $ 76,729 $
22
28
83
133
186 $ 214,091 $
—
8,599
—
8,599
104
—
6,266
1,311
7,577
—
3
—
3
7,580
The Company reviewed each available for sale debt security that had an unrealized loss at December 31, 2021
and December 31, 2020. The Company does not have the intent to sell these securities and it is more likely than not the
Company will not be required to sell the securities before recovery of the securities’ amortized cost basis. This conclusion
is based upon considering the Company’s cash and working capital requirements and contractual and regulatory
obligations, none of which the Company believes would cause the sale of the securities. All of these securities are rated
investment grade or above and have a long history of no credit losses. It is not anticipated that these securities would be
settled at a price that is less than the amortized cost of the Company’s investment.
In determining the risk of loss for available for sale securities, the Company considered that mortgage-backed
securities are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and
perceived credit risk comparable to U.S. government, the tranche of the purchased collateralized loan obligations (“CLO”)
and the issuer of Corporate securities are global systematically important banks. Each of these securities is performing
according to its terms and, in the opinion of management, will continue to perform according to its terms. Based on this
review, management believes that the unrealized losses have resulted from other factors not deemed credit-related and no
allowance for credit loss was recorded.
Accrued interest receivable on held-to-maturity debt securities totaled $0.1 million each at December 31, 2021
and 2020 and is excluded from the estimate of credit losses. Accrued interest receivable on available-for-sale debt securities
totaled $1.5 million and $1.3 million at December 31, 2021 and 2020 respectively and is excluded from the estimate of
credit losses.
The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity:
Other Securities
For the year ended December 31,
2021
2020
Beginning balance
CECL adoption
Provision (benefit) for credit losses
Allowance for credit losses - securities
$
$
907
—
(45)
862
$
$
—
340
567
907
The Company did not have any allowance for credit losses for mortgage-backed securities for the year ended
December 31, 2021 and 2020.
The Company sold available for sale securities with carrying values at the time of sale totaling $45.0 million,
$221.0 million, and $26.4 million during the years ended December 31, 2021, 2020, and 2019, respectively. The Company
purchased mortgage-backed available for sale securities totaling $340.8 million, $308.1 million, and $128.0 million during
the years ended December 31, 2021, 2020, and 2019, respectively.
The following table represents the gross gains and gross losses realized from the sale of securities available for
sale for the periods indicated:
Gross gains from the sale of securities
Gross losses from the sale of securities
Net losses from the sale of securities
2021
For the years ended
December 31,
2020
(In thousands)
2019
$
$
123 $
(10)
113 $
1,499 $
(2,200)
(701) $
423
(438)
(15)
105
Included in “Other assets” within our Consolidated Statements of Financial Condition are amounts held in a rabbi
trust for certain non-qualified deferred compensation plans totaling $26.3 million and $22.6 million at December 31, 2021
and 2020, respectively.
8. Bank Premises and Equipment, net
Bank premises and equipment are as follows at December 31:
Leasehold improvements
Equipment and furniture
Total
Less: Accumulated depreciation and amortization
Bank premises and equipment, net
9. Deposits
2021
2020
(In thousands)
44,621 $
30,822
75,443
52,105
23,338 $
44,984
29,202
74,186
46,007
28,179
$
$
Total deposits at December 31, 2021 and 2020 and the weighted average rate on deposits at December 31, 2021,
are as follows:
Interest-bearing deposits:
Certificate of deposit accounts
Savings accounts
Money market accounts
NOW accounts
Total interest-bearing deposits
Non-interest bearing demand deposits
Total due to depositors
Mortgagors' escrow deposits
Total deposits
Weighted
Average
Rate
2021
2021
2020
(Dollars in thousands)
$
946,575 $ 1,138,361
156,554
168,183
1,682,345
2,342,003
2,323,172
1,920,779
5,312,061
5,365,911
967,621
778,672
6,090,733
6,333,532
45,622
51,913
$ 6,385,445 $ 6,136,355
0.57 %
0.13
0.22
0.11
0.01
The aggregate amount of time deposits with denominations of $250,000 or more (excluding brokered deposits
issued in $1,000 amounts under a master certificate of deposit) was $217.5 million and $266.9 million at December 31,
2021 and 2020, respectively. The aggregate amount of brokered deposits was $626.3 million and $1,074.1 million and at
December 31, 2021 and 2020, respectively.
At December 31, 2021 and 2020, reciprocal deposits totaled $763.7 million and $735.4 million, respectively.
Government deposits are collateralized by either securities, letters of credit issued by FHLB-NY or are placed in
the IntraFi Network which arranges for placement of funds into certificate of deposit accounts, demand accounts or money
market accounts issued by other member banks of the network in increments of less than $250,000 to ensure that both
principal and interest are eligible for full FDIC deposit insurance. The letters of credit are collateralized by mortgage loans
pledged by the Company.
At December 31, 2021, government deposits totaled $1,618.8 million, of which $710.2 million were IntraFi
Network deposits and $908.6 million were collateralized by $190.3 million in securities and $818.4 million of letters of
credit. At December 31, 2020, government deposits totaled $1,615.4 million, of which $524.0 million were IntraFi
106
Network deposits and $1,091.4 million were collateralized by $260.3 million in securities and $855.4 million of letters of
credit.
Interest expense on deposits is summarized as follows for the years ended December 31:
2021
2020
(In thousands)
2019
Certificate of deposit accounts
Savings accounts
Money market accounts
NOW accounts
Total due to depositors
Mortgagors' escrow deposits
Total interest expense on deposits
$
7,340 $ 18,096 $ 35,078
1,378
27,819
23,553
87,828
229
$ 20,324 $ 42,312 $ 88,057
495
14,368
9,309
42,268
44
255
7,271
5,453
20,319
5
Scheduled remaining maturities of certificate of deposit accounts are summarized as follows for the years ended
December 31:
Within 12 months
More than 12 months to 24 months
More than 24 months to 36 months
More than 36 months to 48 months
More than 48 months to 60 months
More than 60 months
Total certificate of deposit accounts
2021
2020
(In thousands)
$ 755,874 $ 923,235
139,088
58,125
14,488
3,394
31
$ 946,575 $ 1,138,361
122,366
43,830
22,249
1,092
1,165
107
10. Borrowed Funds
Borrowed funds are summarized as follows at December 31:
2021
Weighted
Average
Amount Rate
Amount
(Dollars in thousands)
2020
Weighted
Average
Rate
FHLB-NY advances - fixed rate:
Due in 2021
Due in 2022
Due in 2023
Total FHLB-NY advances
Other Borrowings:
Due in 2022
Subordinated debentures
Due in 2025
Due in 2026
Due in 2031
Total Subordinated debentures
$
—
572,186
39,001
611,187
—
0.37
0.48
0.38
$
702,515
55,685
39,001
797,201
0.57
0.52
0.48
0.56
25,000
0.11
90,378
0.35
—
—
122,885
122,885
—
—
3.52
3.52
15,523
74,657
—
90,180
6.12
5.27
—
5.42
Junior subordinated debentures - adjustable rate Due in 2037
56,472
1.74
43,136
2.35
Total borrowings
$ 815,544
0.94 % $ 1,020,895
1.05 %
The FHLB-NY advances are fixed rate borrowings with no call provisions. The borrowings terms range from one
day to five years.
At December 31, 2021, the Company was able to borrow up to $3,635.2 million from the FHLB-NY in Federal
Home Loan Bank advances and letters of credit. As of December 31, 2021, the Company had $1,429.6 million outstanding
in combined balances of FHLB-NY advances and letters of credit. At December 31, 2021, the Company also has unsecured
lines of credit with other commercial banks totaling $593.0 million, with $25.0 million outstanding at December 31, 2021.
Subordinated Debentures
During the year ended December 31, 2021, the Holding Company issued subordinated debt with an aggregated
principal amount of $125.0 million, receiving net proceeds totaling $122.8 million. The subordinated debt was issued at
3.125% fixed-to-floating rate maturing in 2031. The debt is fixed-rate for the first five years, after which it resets quarterly.
Additionally, the debt is callable at par quarterly through its maturity date beginning December 1, 2026. The subordinated
debentures the Company holds qualify as Tier 2 capital for regulatory purposes. Subordinated debt totaled $122.9 million
at December 31, 2021, which included $2.1 million of unamortized debt issuance costs. These costs are being amortized
to interest expense using the level yield method through the first call date of the debt.
A portion of the funds received from the issuance of subordinated debt was used to call $90.3 million of previously
issued and outstanding subordinated debentures. The $90.3 million was comprised of three separate issues of $75.0 million,
$7.8 million and $7.5 million. All three issues were called in December 2021, with two of the issues called at par and the
$7.5 million issue being called at a premium of 102.5. The premium paid upon call totaled $0.2 million and was recorded
in the Consolidated Statements of Income in Other operating expenses.
108
The following table shows the terms of the subordinated debt issued or acquired by the Holding Company:
Amount
Issue Date
Initial Rate
First Reset Date
First Call Date
Holding Type
Spread over 3-month SOFR
Maturity Date
Subordinated
Debentures
(Dollars in thousands)
125,000
$
November 22, 2021
3.125 %
December 01, 2026
December 01, 2026
Variable
2.035 %
December 01, 2031
The subordinated debentures issued by the Company may not be redeemed prior to December 1, 2026, except
that the Company may redeem the subordinated debentures at any time, at its option, in whole but not in part, subject to
obtaining any required regulatory approvals, if (i) a change or prospective change in law occurs that could prevent the
Company from deducting interest payable on the subordinated debt for U.S. federal income tax purposes, (ii) a subsequent
event occurs that precludes the subordinated debt from being recognized as Tier 2 capital for regulatory capital purposes,
or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as
amended, in each case, at a redemption price equal to 100% of the principal amount of the subordinated debt plus any
accrued and unpaid interest through, but excluding, the redemption date.
Junior Subordinated Debentures
The Holding Company has three trusts formed under the laws of the State of Delaware for the purpose of issuing
capital and common securities, and investing the proceeds thereof in junior subordinated debentures of the Holding
Company. Each of these trusts issued $20.6 million of securities which had a fixed-rate for the first five years, after which
they reset quarterly based on a spread over 3-month London Interbank Offered Rate (“LIBOR”). The securities were first
callable at par after five years, and pay cumulative dividends. The Holding Company has guaranteed the payment of these
trusts’ obligations under their capital securities. The terms of the junior subordinated debentures are the same as those of
the capital securities issued by the trusts. The junior subordinated debentures issued by the Holding Company are carried
at fair value in the consolidated financial statements.
The table below shows the terms of the securities issued by the trusts.
Flushing Financial Flushing Financial Flushing Financial
Capital Trust II
Capital Trust IV
Capital Trust III
Issue Date
Initial Rate
First Reset Date
Spread over 3-month LIBOR
Maturity Date
June 20, 2007
June 21, 2007
July 3, 2007
7.14 %
6.89 %
6.85 %
September 01, 2012
June 15, 2012
July 30, 2012
1.41 %
1.44 %
1.42 %
September 01, 2037 September 15, 2037
July 30, 2037
The consolidated financial statements do not include the securities issued by the trusts, but rather include the
junior subordinated debentures of the Holding Company.
11. Income Taxes
Flushing Financial Corporation files consolidated Federal and combined New York State and New York City
income tax returns with its subsidiaries, with the exception of the trusts, which file separate Federal income tax returns as
trusts, and FPFC, which files a separate Federal income tax return as a real estate investment trust. In 2021, FPFC was
109
dissolved and filed its final tax return. The Bank also files various other state tax returns. The Company is undergoing
examinations of New York City income tax returns for years ending December 31, 2015 through 2017 and New York
State income tax returns for years ending December 31, 2015 through 2019. Additionally, the Company remains subject
to examination for its Federal and various other states income tax returns for the years ending on or after December 31,
2018. The Company believes it has accrued for all potential amounts that may be due to all taxing authorities.
Income tax provisions are summarized as follows for the years ended December 31:
2021
2020
(In thousands)
2019
Federal:
Current
Deferred
Total federal tax provision
State and Local:
Current
Deferred
Total state and local tax provision
Total provision for income taxes
$ 21,206 $ 14,178 $ 12,404
(1,965)
10,439
(1,128)
20,078
(4,990)
9,188
8,004
(597)
7,407
3,543
(1,930)
1,613
$ 27,485 $ 10,508 $ 12,052
967
353
1,320
The income tax provision in the Consolidated Statements of Income has been provided at effective rates of 25.2%,
23.3%, and 22.7 % for the years ended December 31, 2021, 2020, and 2019, respectively. The effective rates differ from
the statutory federal income tax rate as follows for the years ended December 31:
Taxes at federal statutory rate
Increase (reduction) in taxes resulting
from:
State and local income tax, net of
Federal income tax benefit
Tax exempt
Nondeductible merger expense
Other
Taxes at effective rate
2021
2020
(Dollars in thousands)
2019
$ 22,948
21.0 % $
9,489
21.0 % $ 11,200
21.0 %
6,865
(1,150)
—
(1,178)
$ 27,485
1,043
6.3
(875)
(1.0)
543
—
(1.1)
308
25.2 % $ 10,508
2.3
(1.9)
1.2
0.7
1,274
(878)
328
128
23.3 % $ 12,052
2.4
(1.6)
0.6
0.3
22.7 %
110
The components of the net deferred tax assets are as follows at December 31:
Deferred tax assets:
Postretirement benefits
Allowance for credit losses
Operating lease liabilities
Stock based compensation
Depreciation
Unrealized loss on securities available for sale
Fair value adjustment on financial assets carried at fair value
Fair value hedges
Adjustment required to recognize funded status of postretirement
pension plans
Cashflow hedges
Deferred loan income
Fair Value of Loans from Empire acquisition
Net operating loss (NYS)
Net operating loss (NYC)
Other
Deferred tax assets
Deferred tax liabilities:
2021
2020
(In thousands)
$ 10,588 $
13,013
18,977
3,501
2,765
2,917
16
394
8,331
15,221
19,922
3,119
2,421
—
23
2,988
596
653
2,200
2,820
—
684
4,269
63,393
837
7,780
2,192
3,798
29
1,896
3,740
72,297
FPFC deferred income
Right of Use Asset
Fair value adjustment on financial liabilities carried at fair value
Entity specific fair value
Unrealized gains on securities
Deferred loan cost
State and local taxes
Other
Deferred tax liabilities
—
17,570
754
1,058
—
6,999
3,016
2,130
31,527
2,188
17,080
4,968
821
573
7,044
3,768
1,599
38,041
Net deferred tax asset included in other assets
$ 31,866 $ 34,256
The deferred tax asset represents the anticipated net federal, state and local tax benefits expected to be realized in
future years upon the utilization of the underlying tax attributes comprising this balance. The Company has reported
taxable income for each of the past three years. In management’s opinion, in view of the Company’s previous, current and
projected future earnings trend, the probability that some of the Company’s $31.5 million deferred tax liability can be used
to offset a portion of the deferred tax asset it is more likely than not that the deferred tax asset will be fully realized.
Accordingly, no valuation allowance was deemed necessary for the deferred tax asset at December 31, 2021 and 2020.
The Company does not have uncertain tax positions that are deemed material. The Company’s policy is to
recognize interest and penalties on income taxes in tax expense. During the three years ended December 31, 2021, the
Company did not recognize any material amounts of interest or penalties on income taxes.
12. Stock-Based Compensation
For the years ended December 31, 2021, 2020, and 2019, the Company’s net income, as reported, includes $7.9
million, $6.0 million, and $7.9 million, respectively, of stock-based compensation costs, including the benefit or expense
of phantom stock awards, and $2.0 million, $1.4 million, and $1.8 million, respectively, of income tax benefits related to
the stock-based compensation plans.
111
No stock options have been granted by the Company since 2009. At December 31, 2021 and 2020, there are no
stock options outstanding.
The 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”) became effective on May 20, 2014 after adoption by
the Board of Directors and approval by the stockholders. The 2014 Omnibus Plan authorizes the issuance of 1,100,000
shares. To the extent that an award under the 2014 Omnibus Plan is cancelled, expired, forfeited, settled in cash, settled
by issuance of fewer shares than the number underlying the award, or otherwise terminated without delivery of shares to
a participant in payment of the exercise price or taxes relating to an award, the shares retained by or returned to the
Company will be available for future issuance under the 2014 Omnibus Plan. On May 31, 2017, stockholders approved an
amendment to the 2014 Omnibus Plan (the “Amendment”) authorizing an additional 672,000 shares available for future
issuance. In addition, to increasing the number of shares for future grants, the Amendment eliminated, in the case of stock
options and SARs, the ability to recycle shares used to satisfy the exercise price or taxes for such awards. On May 18,
2021, stockholders approved an additional 1,100,000 shares available for future issuance. Including the additional shares
authorized from the Amendment, 1,171,675 shares were available for future issuance under the 2014 Omnibus Plan at
December 31, 2021. To fund restricted stock unit awards or option exercises, shares are issued from treasury stock, if
available; otherwise new shares are issued. Options, stock appreciation rights, restricted stock, restricted stock units and
other stock-based awards granted under the 2014 Omnibus Plan are generally subject to a minimum vesting period of three
years with stock options having a 10-year maximum contractual term. Other awards do not have a contractual term of
expiration. The Compensation Committee is authorized to grant awards that vest upon a participant’s retirement. These
amounts are included in stock-based compensation expense at the time of the participant’s retirement eligibility.
The Company has a long-term incentive compensation program for certain Company executive officers that
includes grants of performance-based restricted stock units (“PRSUs”) in addition to time-based restricted stock units
(“RSU”). Under the terms of the PRSU Agreement, the number of PRSUs that may be earned depends on the extent to
which performance goals for the award are achieved over a three-year performance period, as determined by the
Compensation Committee of the Board. The number of PRSUs that may be earned ranges from 0% to 150% of the target
award, with no PRSUs earned for below threshold-level performance, 50% of PRSUs earned for threshold-level
performance, 100% of PRSUs earned for target-level performance, and 150% of PRSUs earned for maximum-level
performance. As of December 31, 2021, PRSU’s granted in 2020 are being accrued at target and PRSU’s granted in 2021
and 2019 are being accrued above target. The different levels of accrual are commensurate with the projected performance
of the respective grant.
The Company uses the fair value of the common stock on the date of award to measure compensation cost for
restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight line
method. There were 238,985, 173,528, and 263,574 RSU's granted for the years ended December 31, 2021, 2020, and
2019, respectively, and 94,185, 72,143, and 67,352 PRSU’s granted for the year ended December 31, 2021, 2020 and
2019, respectively.
112
The following table summarizes the Company’s RSU and PRSU awards under the 2014 Omnibus Plan for
the year ended December 31, 2021:
RSU Awards
PRSU Awards
Weighted-Average
Grant-Date
Fair Value
Weighted-Average
Grant-Date
Fair Value
Shares
Shares
Non-vested at
December 31, 2020
Granted
Vested
Forfeited
Non-vested at
December 31, 2021
Vested but unissued at
December 31, 2021
336,898 $
238,985
(259,856)
(5,597)
23.48
18.44
21.26
21.36
66,580 $
94,185
(57,845)
—
310,430 $
21.49
102,920 $
21.26
18.46
18.91
—
20.02
232,709 $
21.13
124,960 $
20.22
As of December 31, 2021, there was $4.6 million of total unrecognized compensation cost related to RSU and
PRSU awards granted under the 2014 Omnibus Plan. That cost is expected to be recognized over a weighted-average
period of 2.3 years. The total fair value of awards vested for the years ended December 31, 2021, 2020, and 2019 were
$5.9 million, $5.7 million, and $7.4 million, respectively. The vested but unissued RSU awards consist of awards made to
employees and directors who are eligible for retirement. The vested but unissued PRSU awards consist of awards made to
employees who are eligible for retirement. According to the terms of these awards, which provide for vesting upon
retirement, these employees and directors have no risk of forfeiture. These shares will be issued at the original contractual
vesting and settlement dates.
Phantom Stock Plan: The Company maintains a non-qualified phantom stock plan as a supplement to its profit
sharing plan for officers who have achieved the designated level and completed one year of service. Awards are made
under this plan on certain compensation not eligible for contributions made under the profit sharing plan, due to the terms
of the profit sharing plan and the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Employees
receive awards under this plan proportionate to the amount they would have received under the profit sharing plan, but for
limits imposed by the profit sharing plan and the Internal Revenue Code. The awards are made as cash awards, and then
converted to common stock equivalents (phantom shares) at the then current fair value of the Company’s common stock.
Dividends are credited to each employee’s account in the form of additional phantom shares each time the Company pays
a dividend on its common stock. In the event of a change of control (as defined in this plan), an employee’s interest is
converted to a fixed dollar amount and deemed to be invested in the same manner as their interest in the Bank’s non-
qualified deferred compensation plan. Employees vest under this plan 20% per year for the first 5 years of employment
and are 100% vested thereafter. Employees also become 100% vested upon a change of control. Employees receive their
vested interest in this plan in the form of a cash lump sum payment or installments, as elected by the employee, after
termination of employment. The Company adjusts its liability under this plan to the fair value of the shares at the end of
each period.
The following table summarizes the Company’s Phantom Stock Plan at or for the year ended December 31, 2021:
Phantom Stock Plan
Outstanding at December 31, 2020
Granted
Forfeited
Distributions
Outstanding at December 31, 2021
Vested at December 31, 2021
113
Shares
120,248 $
11,336
(11)
(2,692)
128,881 $
128,818 $
Fair Value
16.64
20.28
18.25
19.17
24.30
24.30
The Company recorded stock-based compensation expense (benefit) for the phantom stock plan of $1.1 million,
($0.4) million, and $0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. The total fair value
of distributions from the phantom stock plan were $52,000, $10,000, and $31,000 for the years ended December 31, 2021,
2020 and 2019, respectively.
13. Pension and Other Postretirement Benefit Plans
The amounts recognized in accumulated other comprehensive loss, on a pre-tax basis, consist of the following,
as of December 31:
Net Actuarial
Loss (Gain)
2021
2020
2019
2021
Prior Service
Cost (Credit)
2020
(In thousands)
2019
Total
2020
2021
2019
$
1,414 $
1,775 $
2,273 $
— $
— $
— $
1,414 $
1,775 $
2,273
932
(440)
1,906 $
1,333
(274)
2,834 $
(265)
(380)
1,628 $
(27)
—
(27) $
(112)
—
(112) $
(198)
—
(198) $
905
(440)
1,879 $
1,221
(274)
2,722 $
(463)
(380)
1,430
$
Employee Retirement Plan
Other Postretirement Benefit
Plans
Outside Directors Plan
Total
Employee Retirement Plan:
The Company has a funded noncontributory defined benefit retirement plan covering substantially all of its
salaried employees who were hired before September 1, 2005 (the “Retirement Plan”). The benefits are based on years of
service and the employee’s compensation during the three consecutive years out of the final ten years of service, which
was completed prior to September 30, 2006, the date the Retirement Plan was frozen, that produces the highest average.
The Bank’s funding policy is to contribute annually the amount recommended by the Retirement Plan’s actuary. At
December 31, 2021 and 2020, the Bank's Retirement Plan is invested 100% in fixed income funds. The Company did not
make a contribution to the Retirement Plan during the years ended December 31, 2021, 2020, and 2019. The Company
uses a December 31 measurement date for the Retirement Plan.
The following table sets forth, for the Retirement Plan, the change in benefit obligation and assets, and for the
Company, the amounts recognized in the Consolidated Statements of Financial Condition at December 31:
Change in benefit obligation:
Projected benefit obligation at beginning of year
Interest cost
Actuarial (gain) loss
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Market value of assets at beginning of year
Actual return on plan assets
Benefits paid
Market value of plan assets at end of year
2021
2020
(In thousands)
$
24,227 $
512
(1,562)
(1,068)
22,109
22,443
652
2,109
(977)
24,227
27,720
(593)
(1,068)
26,059
25,505
3,192
(977)
27,720
Accrued pension asset included in other assets
$
3,950 $
3,493
114
Assumptions used to determine the Retirement Plan’s benefit obligations are as follows at December 31:
Weighted average discount rate
Rate of increase in future compensation levels
2021
2020
2.58 %
n/a
2.18 %
n/a
The mortality assumptions for 2021 were based on the Pri-2012 Total Dataset with Scale MP-2021 and the
mortality assumptions for 2020 were based on the Pri-2012 Total Dataset with Scale MP-2020.
The components of the net pension (benefit) expense for the Retirement Plan are as follows for the years ended
December 31:
Interest cost
Amortization of unrecognized loss
Expected return on plan assets
Net pension (benefit) expense
$
2021
2020
(In thousands)
2019
512 $
488
(1,096)
(96)
652 $
444
(1,028)
68
797
269
(1,088)
(22)
Current year actuarial loss (gain)
Amortization of actuarial loss
Total recognized in other comprehensive income
Total recognized in net pension benefit and other comprehensive loss
$
127
(488)
(361)
(457) $
(54)
(444)
(498)
(430) $
(696)
(269)
(965)
(987)
Assumptions used to develop periodic pension cost for the Retirement Plan for the years ended December 31:
Weighted average discount rate
Rate of increase in future compensation levels
Expected long-term rate of return on assets
2021 2020 2019
4.06 %
n/a
5.25 %
2.18 %
n/a
4.75 %
3.00 %
n/a
4.75 %
The following benefit payments are expected to be paid by the Retirement Plan for the years ending December 31:
2022
2023
2024
2025
2026
2027-2031
Future Benefit
Payments
(In thousands)
$
1,273
1,206
1,197
1,188
1,186
5,943
The long-term rate of return on assets assumption was set based on historical returns earned by fixed income
securities, adjusted to reflect expectations of future returns as applied to the plan’s target allocation of asset classes. Fixed
income securities were assumed to earn real rates of return in the ranges of 3-5%. When these overall return expectations
are applied to the plans target allocation, the result is an expected rate return of 4.75% for 2021.
115
The Retirement Plan’s weighted average asset allocations by asset category at December 31:
Equity securities
Debt securities
2021
2020
— %
100 %
— %
100 %
At December 31, 2021, Plan assets are invested in a diversified mix of fixed income funds.
The long-term investment objectives are to maintain plan assets at a level that will sufficiently cover long-term
obligations and to generate a return on plan assets that will meet or exceed the rate at which long-term obligations will
grow. At December 31, 2021, the plan's assets were 100% invested in fixed income securities. Adjustments to this mix are
made periodically based on current capital market conditions and plan funding levels. Performance of the investment fund
managers is monitored on an ongoing basis using modern portfolio risk analysis and appropriate index benchmarks.
The Company does not expect to make a contribution to the Retirement Plan in 2022.
The following table sets forth the Retirement Plan’s assets at the periods indicated:
Pooled Separate Accounts
Long duration bond fund (a)
Long corporate bond fund (b)
Prudential short term (c)
Mutual Fund
Investment grade bond fund (d)
Total
At December 31,
2020
2021
(In thousands)
$ 11,700 $ 12,229
5,587
286
5,157
150
9,052
9,618
$ 26,059 $ 27,720
a. Comprised of fixed income securities with durations of longer than six years that seek to maximize total return
consistent with the preservation of capital and prudent investment management.
b. Comprised of corporate bonds with an average duration within 0.25 years of the benchmark and its average credit
quality is no lower than BBB. The fund seeks to outperform the Bloomberg Barclays Long Corporate Bond Index.
c. Comprised of money market instruments with an emphasis on safety and liquidity.
d. Comprised of high quality corporate bonds diversified broadly across industries, issuers and regions. The funds
primary benchmark is the Bloomberg Barclays U.S. Credit Index.
The fair value of the mutual fund is determined daily using quoted market prices in an open market (level 1). The
fair value of the pooled separate accounts is determined by the investment manager and is based on the value of the
underlying assets held at December 31, 2021 and 2020. These are measured at net asset value under the practical expedient
with future redemption dates.
The fair values of the Plan’s investments in pooled separate accounts are calculated each business day. All
investments can be redeemed on a daily basis without restriction. The investments in pooled separate accounts, which are
valued at net asset value, have not been classified in the fair value hierarchy in accordance with Accounting Standards
Update (“ASU”) No. 2015-07 “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share
(or Its Equivalent)”.
116
Other Postretirement Benefit Plans:
The Company sponsors two unfunded postretirement benefit plans (the “Postretirement Plans”) that cover all
retirees hired prior to January 1, 2011, who were full-time permanent employees with at least five years of service, and
their spouses. Effective January 1, 2011, the Postretirement Plans are no longer available for new hires. One plan provides
medical benefits through a 50% cost sharing arrangement. Effective January 1, 2000, the spouses of future retirees were
required to pay 100% of the premiums for their coverage. The other plan provides life insurance benefits and is
noncontributory. Effective January 1, 2010, life insurance benefits are not available for future retirees. Under these
programs, eligible retirees receive lifetime medical and life insurance coverage for themselves and lifetime medical
coverage for their spouses. The Company reserves the right to amend or terminate these plans at its discretion.
Comprehensive medical plan benefits equal the lesser of the normal plan benefit or the total amount not paid by
Medicare. Life insurance benefits for retirees are based on annual compensation and age at retirement. As of December 31,
2021, the Company has not funded these plans. The Company used a December 31 measurement date for these plans.
The following table sets forth, for the Postretirement Plans, the change in benefit obligation and assets, and for
the Company, the amounts recognized in the Consolidated Statements of Financial Condition at December 31:
2021
2020
(In thousands)
Change in benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Market value of assets at beginning of year
Employer contributions
Benefits paid
Market value of plan assets at end of year
$ 10,799 $
293
233
(370)
(102)
10,853
8,762
274
259
1,599
(95)
10,799
—
102
(102)
—
—
95
(95)
—
Accrued pension cost included in other liabilities
$ 10,853 $ 10,799
Assumptions used in determining the actuarial present value of the accumulated postretirement benefit obligations
at December 31 are as follows:
Discount rate
Rate of increase in health care costs
Initial
Ultimate (year 2026)
Annual rate of salary increase for life insurance
2021
2020
2.58 %
2.18 %
7.50 %
5.00 %
n/a
7.50 %
5.00 %
n/a
117
The mortality assumptions for 2021 were based on the Pri-2012 with Scale MP-2021 and the mortality
assumptions for 2020 were based on the Pri-2012 with Scale MP-2020.
The resulting net periodic postretirement expense consisted of the following components for the years ended
December 31:
Service cost
Interest cost
Amortization of unrecognized loss
Amortization of past service credit
Net postretirement benefit expense
Current year actuarial (gain) loss
Amortization of actuarial loss
Amortization of prior service credit
Total recognized in other comprehensive income
Total recognized in net postretirement expense and other
comprehensive loss
2021
2020
(In thousands)
2019
$ 293 $
233
30
(85)
471
274 $ 280
341
259
—
—
(85)
(85)
536
448
(370)
(31)
85
(316)
1,599
—
85
1,684
(301)
—
85
(216)
$ 155 $ 2,132 $ 320
Assumptions used to develop periodic postretirement expense for the Postretirement Plans for the years ended
December 31:
Rate of return on plan assets
Discount rate
Rate of increase in health care costs
Initial
Ultimate (year 2026)
Annual rate of salary increase for life insurance
2021 2020 2019
n/a
2.58 %
n/a
3.00 %
n/a
4.06 %
7.50 %
5.00 %
n/a
7.50 %
5.00 %
n/a
7.00 %
5.00 %
n/a
The following benefit payments under the Postretirement Plan, which reflect expected future service, are expected
to be paid for the years ending December 31:
2022
2023
2024
2025
2026
2027-2031
Defined Contribution Plans:
Future Benefit
Payments
(In thousands)
251
$
261
298
323
343
2,189
The Bank maintains a tax qualified 401(k) plan which covers substantially all salaried employees who have
completed one year of service. Currently, annual matching contributions under the Bank’s 401(k) plan equal 50% of the
employee’s contributions, up to a maximum of 3% of the employee’s base salary. In addition, the 401(k) plan includes the
Defined Contribution Retirement Plan (“DCRP”), under which the Bank contributes an amount equal to 4% of an
employee’s eligible compensation as defined in the plan, and the Profit Sharing Plan (“PSP”), under which at the discretion
of the Company’s Board of Directors a contribution is made. Contributions for the DCRP and PSP are made in the form
118
of Company common stock at or after the end of each year. Annual contributions under these plans are subject to the limits
imposed under the Internal Revenue Code. Contributions by the Company into the 401(k) plan vest 20% per year over the
employee’s first five years of service. Contributions to these plans are 100% vested upon a change of control (as defined
in the applicable plan). Compensation expense recorded by the Company for these plans amounted to $7.4 million, $3.7
million, and $3.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.
The Bank provides a non-qualified deferred compensation plan as an incentive for officers who have achieved
the designated level and completed one year of service. In addition to the amounts deferred by the officers, the Bank
matches 50% of their contributions, generally up to a maximum of 5% of the officers’ base salary. Matching contributions
under this plan vest 20% per year for five years. The non-qualified deferred compensation plan assets are held in a rabbi
trust totaling $18.2 million and $16.6 million at December 31, 2021 and 2020, respectively. Contributions become 100%
vested upon a change of control (as defined in the plan). Compensation expense recorded by the Company for this plan
amounted to $0.5 million for each of the years ended December 31, 2021, 2020, and 2019.
Employee Benefit Trust:
An Employee Benefit Trust (“EBT”) has been established to assist the Company in funding its benefit plan
obligations. Dividend payments received are used to purchase additional shares of common stock. Shares released are used
solely for funding matching contributions under the Bank’s 401(k) plan, contributions to the 401(k) plan for the DCRP,
and contributions to the PSP. For the years ended December 31, 2021, 2020, and 2019, the Company funded $0.5 million,
$2.6 million, and $3.4 million, respectively, of employer contributions to the 401(k), DCRP and profit sharing plans from
the EBT.
Upon a change of control (as defined in the EBT), the EBT will terminate and any trust assets remaining after
certain benefit plan contributions will be distributed to all full-time employees of the Company with at least one year of
service, in proportion to their compensation over the four most recently completed calendar years plus the portion of the
current year prior to the termination of the EBT.
As shares are released from the suspense account, the Company reports compensation expense equal to the current
market price of the shares, and the shares become outstanding for earnings per share computations.
The EBT shares are as follows at December 31:
Shares owned by Employee Benefit Trust, beginning balance
Shares purchased
Shares released and allocated
Shares owned by Employee Benefit Trust, ending balance
2021
39,861
1,039
2020
181,611
3,697
(22,936) (145,447)
39,861
17,964
Market value of unallocated shares
$ 436,525 $ 663,287
119
Outside Director Retirement Plan:
The Bank has an unfunded noncontributory defined benefit Outside Director Retirement Plan (the “Directors’
Plan”), which provides benefits to each non-employee director who became a non-employee director before January 1,
2004. Upon termination an eligible director will be paid an annual retirement benefit equal to $48,000. Such benefit will
be paid in equal monthly installments for 120 months. In the event of a termination of Board service due to a change of
control, an eligible non-employee director will receive a cash lump sum payment equal to 120 months of benefit. In the
event of the director’s death, the surviving spouse will receive the equivalent benefit. No benefits will be payable to a
director who is removed for cause. The Holding Company has guaranteed the payment of benefits under the Directors’
Plan, for this reason the Bank has assets held in a rabbi trust totaling $1.9 million and $4.2 million at December 31, 2021
and 2020, respectively. The Bank uses a December 31 measurement date for the Directors’ Plan.
The following table sets forth, for the Directors’ Plan, the change in benefit obligation and assets, and for the
Company, the amounts recognized in the Consolidated Statements of Financial Condition at December 31:
Change in benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Market value of assets at beginning of year
Employer contributions
Benefits paid
Market value of plan assets at end of year
2021
2020
(In thousands)
$
2,276 $
16
46
(184)
(144)
2,010
2,290
15
64
51
(144)
2,276
—
144
(144)
—
—
144
(144)
—
Accrued pension cost included in other liabilities
$
2,010 $
2,276
The components of the net pension expense for the Directors’ Plan are as follows for the years ended
December 31:
2021
2019
2020
(In thousands)
15 $
64
(55)
24
16 $
46
(18)
44
(184)
18
(166)
51
55
106
39
86
(141)
(16)
44
141
185
$ (122) $
130 $ 169
Service cost
Interest cost
Amortization of unrecognized gain
Net pension expense (benefit)
$
Current actuarial (gain) loss
Amortization of actuarial gain
Total recognized in other comprehensive income
Total recognized in net pension expense and other
comprehensive income
120
Assumptions used to determine benefit obligations and periodic pension expense for the Directors’ Plan for
the years ended December 31:
Weighted average discount rate for the benefit obligation
Weighted average discount rate for periodic pension benefit expense
Rate of increase in future compensation levels
2021
2020
2019
2.58 %
2.18 %
n/a
2.18 %
3.00 %
n/a
3.00 %
4.06 %
n/a
The following benefit payments under the Directors’ Plan, which reflect expected future service, are expected to
be paid for the years ending December 31:
2022
2023
2024
2025
2026
2027 - 2031
14. Stockholders’ Equity
Dividend Restrictions on the Bank:
Future Benefit
Payments
(In thousands)
288
$
256
220
192
192
592
In connection with the Bank’s conversion from mutual to stock form in November 1995, a special liquidation
account was established at the time of conversion, in accordance with the requirements of its primary regulator, which was
equal to its capital as of June 30, 1995. The liquidation account is reduced as and to the extent that eligible account holders
have reduced their qualifying deposits. Subsequent increases in deposits do not restore an eligible account holder’s interest
in the liquidation account. In the event of a complete liquidation of the Bank, each eligible account holder will be entitled
to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances
for accounts then held. As of December 31, 2021 and 2020, the Bank’s liquidation account was $0.4 million for both
periods, and was presented within retained earnings.
In addition to the restriction described above, New York State and Federal banking regulations place certain
restrictions on dividends paid by the Bank to the Holding Company. The total amount of dividends which may be paid at
any date is generally limited to the net income of the Bank for the current year and prior two years, less any dividends
previously paid from those earnings. As of December 31, 2021, the Bank had $74.0 million in retained earnings available
to distribute to the Holding Company in the form of cash dividends.
In addition, dividends paid by the Bank to the Holding Company would be prohibited if the effect thereof would
cause the Bank’s capital to be reduced below applicable minimum capital requirements.
As a bank holding company, the Holding Company is subject to similar dividend restrictions.
121
Treasury Stock Transactions:
The Holding Company repurchased 436,619 common shares at an average cost of $22.88 and 142,405 common
shares at an average cost of $16.45 during the years ended December 31, 2021 and 2020, respectively. At December 31,
2021, 848,187 shares remained subject to repurchase under the authorized stock repurchase program. Stock will be
purchased under the authorized stock repurchase program from time to time, in the open market or through private
transactions, subject to market conditions and at the discretion of the management of the Company. There is no expiration
or maximum dollar amount under this authorization.
Accumulated Other Comprehensive Loss:
The following are changes in accumulated other comprehensive loss by component, net of tax, for the years
ended:
December 31, 2021
Unrealized Gains Unrealized Gains
(Losses) on
Available for Sale
Securities
(Losses) on
Cash flow
Hedges
Fair Value
Defined Benefit Option Elected
Pension Items on Liabilities Total
(In thousands)
Beginning balance, net of tax
$
1,290 $
(17,521) $
(1,884) $
1,849 $ (16,266)
Other comprehensive income before reclassifications, net
of tax
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Net current period other comprehensive income, net of tax
Ending balance, net of tax
$
(7,484)
8,819
319
427
2,081
(78)
(7,562)
(6,272) $
7,296
16,115
(1,406) $
283
602
(1,282) $
—
427
7,501
9,582
2,276 $ (6,684)
December 31, 2020
Unrealized Gains Unrealized Gains
(Losses) on
Available for Sale
Securities
(Losses) on
Cash flow
Hedges
Fair Value
Defined Benefit Option Elected
Pension Items on Liabilities Total
(In thousands)
Beginning balance, net of tax
$
(3,982) $
(5,863) $
(983) $
1,021 $ (9,807)
Other comprehensive income before reclassifications, net
of tax
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Net current period other comprehensive income, net of tax
Ending balance, net of tax
$
4,787
(14,924)
(1,112)
828
(10,421)
485
5,272
1,290 $
3,266
(11,658)
(17,521) $
211
(901)
(1,884) $
—
828
3,962
(6,459)
1,849 $ (16,266)
December 31, 2019
Unrealized Gains Unrealized Gains
(Losses) on
Available for Sale
Securities
(Losses) on
Cash flow
Hedges
Defined Benefit
Fair Value
Option Elected
Pension Items on Liabilities Total
(In thousands)
Beginning balance, net of tax
$
(15,649) $
3,704 $
(1,673) $
866 $ (12,752)
Other comprehensive income before reclassifications, net
of tax
Amounts reclassified from accumulated other
comprehensive income (loss), net of tax
Net current period other comprehensive income, net of tax
Ending balance, net of tax
$
11,657
(8,606)
661
155
3,867
10
11,667
(3,982) $
(961)
(9,567)
(5,863) $
29
690
(983) $
—
155
(922)
2,945
1,021 $ (9,807)
122
The following tables set forth significant amounts reclassified out of accumulated other comprehensive loss by
component for the periods indicated:
Details about Accumulated Other
Comprehensive Income Components
Unrealized gains (losses) on available for sale securities:
Amounts Reclassified from
Accumulated Other
Comprehensive Income
(Dollars in thousands)
$
For the Year Ended December 31, 2021
Cash flow hedges:
Interest rate swaps
Amortization of defined benefit pension items:
Actuarial losses
Prior service credits
$
$
$
$
$
Cash flow hedges:
Interest rate swaps
Amortization of defined benefit pension items:
Actuarial losses
Prior service credits
$
$
$
$
$
Affected Line Item in the Statement
Where Net Income is Presented
113 Net gain (loss) on sale of securities
(35) Tax expense
78 Net of tax
(10,623)
Interest (expense)
3,327 Tax benefit
(7,296) Net of tax
(500)(1) Other operating expense
85 (1) Other operating expense
(415) Total before tax
132 Tax benefit
(283) Net of tax
Affected Line Item in the Statement
Where Net Income is Presented
(701) Net loss on sale of securities
216 Tax expense
(485) Net of tax
Interest expense
(4,732)
1,466 Tax expense
(3,266) Net of tax
(390)(1) Other operating expenses
85 (1) Other operating expenses
(305) Total before tax
94 Tax expense
(211) Net of tax
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension
cost (see Note 13 (“Pension and Other Postretirement Benefit Plan”) of the Notes to Consolidated Financial
Statements “Pension and Other Postretirement Benefit Plans”
Details about Accumulated Other
Comprehensive Income Components
Unrealized gains (losses) on available for sale securities:
Amounts Reclassified from
Accumulated Other
Comprehensive Income
(Dollars in thousands)
$
For the Year Ended December 31, 2020
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension
cost (see Note 13 (“Pension and Other Postretirement Benefit Plan”) of the Notes to Consolidated Financial
Statements “Pension and Other Postretirement Benefit Plans”)
123
Details about Accumulated Other
Comprehensive Income Components
Unrealized gains (losses) on available for sale securities:
Amounts Reclassified from
Accumulated Other
Comprehensive Income
(Dollars in thousands)
$
For the Year Ended December 31, 2019
Cash flow hedges:
Interest rate swaps
Amortization of defined benefit pension items:
Actuarial losses
Prior service credits
$
$
$
$
$
Affected Line Item in the Statement
Where Net Income is Presented
(15) Net loss on sale of securities
5 Tax expense
(10) Net of tax
Interest expense
1,392
(431) Tax expense
961 Net of tax
(128)(1) Other operating expenses
85 (1) Other operating expenses
(43) Total before tax
14 Tax expense
(29) Net of tax
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension
cost (see Note 13 (“Pension and Other Postretirement Benefit Plan”) of the Notes to Consolidated Financial
Statements “Pension and Other Postretirement Benefit Plans”).
15. Regulatory Capital
Under current capital regulations, the Bank is required to comply with four separate capital adequacy standards.
As of December 31, 2021, the Bank continued to be categorized as “well-capitalized” under the prompt corrective action
regulations and continued to exceed all regulatory capital requirements. The Bank is also required to comply with a Capital
Conservation Buffer (“CCB”). The CCB is designed to establish a capital range above minimum capital requirements and
impose constraints on dividends, share buybacks and discretionary bonus payments when capital levels fall below
prescribed levels. The minimum CCB is 2.5%. The CCB for the Bank at December 31, 2021 and 2020 was 6.13% and
4.30%, respectively.
Set forth below is a summary of the Bank’s compliance with banking regulatory capital standards.
Tier I (leverage) capital:
Capital level
Requirement to be well capitalized
Excess
Common Equity Tier I risk-based capital:
Capital level
Requirement to be well capitalized
Excess
Tier I risk-based capital:
Capital level
Requirement to be well capitalized
Excess
Total risk-based capital:
Capital level
Requirement to be well capitalized
Excess
December 31, 2021
December 31, 2020
Percent of
Percent of
Amount
Assets
Amount
Assets
$
$
$
$
840,105
404,366
435,739
840,105
402,100
438,005
840,105
494,892
345,213
874,400
618,615
255,785
(Dollars in thousands)
10.39 % $
5.00
5.39
733,010
395,510
337,500
13.58 % $
6.50
7.08
733,010
408,929
324,081
13.58 % $
8.00
5.58
733,010
503,297
229,713
14.13 % $
10.00
4.13
773,807
629,121
144,686
9.27 %
5.00
4.27
11.65 %
6.50
5.15
11.65 %
8.00
3.65
12.30 %
10.00
2.30
124
The Holding Company is subject to the same regulatory capital requirements as the Bank. As of December 31,
2021, the Holding Company continues to be categorized as “well-capitalized” under the prompt corrective action
regulations and continues to exceed all regulatory capital requirements. The CCB for the Holding Company at
December 31, 2021 and 2020 was 5.75% and 4.54%, respectively.
Set forth below is a summary of the Holding Company’s compliance with banking regulatory capital standards.
December 31, 2021
December 31, 2020
Percent of
Percent of
Amount
Assets
Amount
Assets
$
$
$
$
726,174
404,422
321,752
671,494
401,836
269,658
726,174
494,568
231,606
885,469
618,210
267,259
(Dollars in thousands)
8.98 % $
5.00
3.98
662,987
395,439
267,548
10.86 % $
6.50
4.36
621,247
408,694
212,553
11.75 % $
8.00
3.75
662,987
503,008
159,979
14.32 % $
10.00
4.32
794,034
628,760
165,274
8.38 %
5.00
3.38
9.88 %
6.50
3.38
10.54 %
8.00
2.54
12.63 %
10.00
2.63
Tier I (leverage) capital:
Capital level
Requirement to be well capitalized
Excess
Common Equity Tier I risk-based capital:
Capital level
Requirement to be well capitalized
Excess
Tier I risk-based capital:
Capital level
Requirement to be well capitalized
Excess
Total risk-based capital:
Capital level
Requirement to be well capitalized
Excess
16. Leases
The Company has 28 operating leases for branches (including the corporate headquarters) and office spaces, 10
operating leases for vehicles, and one operating lease for equipment. Additionally, one of our leased locations is subleased.
Our leases have remaining lease terms ranging from one month to approximately 15 years, none of which has a renewal
option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term.
Supplemental balance sheet information related to leases was as follows:
(Dollars in thousands)
Operating lease ROU assets
Operating lease liabilities
Weighted-average remaining lease term-operating leases
Weighted average discount rate-operating leases
December 31, 2021 December 31, 2020
$
$
50,200
54,155
$
$
7.4 years
3.1%
50,743
59,100
8.3 years
3.2%
125
The components of lease expense and cash flow information related to leases were as follows:
(Dollars in thousands)
Lease Cost
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilities
Right-of-use assets obtained in acquisition
For the year ended
December 31, 2021 December 31, 2020 December 31, 2019
$
$
$
$
$
8,689 $
164
1,065
9,918 $
7,725 $
139
1,128
8,992 $
12,811 $
6,570 $
— $
8,316 $
5,484 $
9,993 $
7,575
136
1,020
8,731
8,051
1,576
—
The Company’s minimum annual rental payments at December 31, 2021 for Bank facilities due under non-cancelable
leases are as follows:
Years ended December 31:
2022
2023
2024
2025
2026
Thereafter
Total minimum payments required
Less: implied interest
Total lease obligations
17. Commitments and Contingencies
Commitments:
Minimum Rental
(In thousands)
$
$
9,129
9,488
9,322
8,660
7,769
16,277
60,645
6,490
54,155
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial instruments include commitments to extend credit and lines of
credit. The instruments involve, to varying degrees, elements of credit and market risks in excess of the amount recognized
in the consolidated financial statements.
The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial
instrument for loan commitments and lines of credit is represented by the contractual amounts of these instruments.
126
Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally business
lines of credit and home equity lines of credit) amounted to $88.7 million and $384.2 million, respectively, at December 31,
2021. Included in these commitments were $67.4 million of fixed-rate commitments at a weighted average rate of 3.38%
and $405.5 million of adjustable-rate commitments with a weighted average rate of 3.71%, as of December 31, 2021.
Since generally all of the loan commitments are expected to be drawn upon, the total loan commitments approximate
future cash requirements, whereas the amounts of lines of credit may not be indicative of the Company’s future cash
requirements. The loan commitments generally expire in 90 days, while construction loan lines of credit mature within
eighteen months and home equity lines of credit mature within ten years. The Company uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are legally binding agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates and require payment of a
fee. The Company evaluates each customer’s creditworthiness on a case-by-case basis. Collateral held consists primarily
of real estate.
The Bank collateralized a portion of its deposits with letters of credit issued by FHLB-NY. At December 31,
2021 and 2020, there were $818.4 million and $855.4 million, respectively, of letters of credit outstanding. The letters of
credit are collateralized by mortgage loans pledged by the Bank.
The Company had purchase obligations totaling $24.8 million and $17.4 million as of December 31, 2021 and
2020, which are primarily related to contracts with data processing, loan servicing and check processing services provided
by third-party vendors.
The Trusts issued capital securities with a par value of $61.9 million in June and July 2007. The Holding
Company has guaranteed the payment of the Trusts’ obligations under these capital securities.
Contingencies:
The Company is a defendant in various lawsuits. Management of the Company, after consultation with outside
legal counsel, believes that the resolution of these various matters will not result in any material adverse effect on the
Company’s consolidated financial condition, results of operations or cash flows.
18. Concentration of Credit Risk
The Company’s lending is concentrated in the New York City metropolitan area. The Company evaluates each
customer’s creditworthiness on a case-by-case basis under the Company’s established underwriting policies. The collateral
obtained by the Company generally consists of first liens on one-to-four family residential, multi-family residential, and
commercial real estate. At December 31, 2021, the largest amount the Bank could lend to one borrower was approximately
$126.0 million, and at that date, the Bank’s largest aggregate amount of outstanding loans to one borrower was $93.8
million, all of which were performing according to their terms.
19. Related Party Transactions
At December 31, 2021 and 2020, there were no outstanding loans to a related party. Deposits of related parties
totaled $10.9 million and $13.4 million at December 31, 2021 and 2020, respectively.
127
20. Fair Value of Financial Instruments
The Company carries certain financial assets and financial liabilities at fair value in accordance with GAAP which
defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. GAAP permits entities to choose to measure many financial instruments and
certain other items at fair value. At December 31, 2021, the Company carried financial assets and financial liabilities under
the fair value option with fair values of $14.6 million and $56.5 million, respectively. At December 31, 2020, the Company
carried financial assets and financial liabilities under the fair value option with fair values of $14.5 million and $43.1
million, respectively. The Company did not purchase or sell any financial assets or liabilities under the fair value option
during the years ended December 31, 2021 and 2020.
Management selected the fair value option for certain investment securities, and certain borrowed funds as the
yield, at the time of election, on the financial assets was below-market, while the rate on the financial liabilities was above-
market rate. Management also considered the average duration of these instruments, which, for investment securities, was
longer than the average for the portfolio of securities, and, for borrowings, primarily represented the longer-term
borrowings of the Company. Choosing these instruments for the fair value option adjusted the carrying value of these
financial assets and financial liabilities to their current fair value, and more closely aligned the financial performance of
the Company with the economic value of these financial instruments. Management believed that electing the fair value
option for these financial assets and financial liabilities allows them to better react to changes in interest rates. At the time
of election, Management did not elect the fair value option for investment securities and borrowings with shorter duration,
adjustable rates, and yields that approximated the then current market rate, as management believed that these financial
assets and financial liabilities approximated their economic value.
The following table presents the financial assets and financial liabilities reported at fair value under the fair value
option at December 31, 2021 and 2020, and the changes in fair value included in the Consolidated Statement of Income –
Net loss from fair value adjustments:
Description
(Dollars in thousands)
Mortgage-backed securities
Other securities
Borrowed funds
Net gain (loss) from fair value adjustments (1)
Fair Value
Measurements
at December 31, at December 31,
Fair Value
Measurements
2021
2020
Changes in Fair Values For Items Measured at Fair Value
Pursuant to Election of the Fair Value Option
For the year ended December 31,
2020
2019
2021
$
388 $
505 $
14,180
56,472
13,998
43,136
$
(5)
36
(14,004)
(13,973)
$
$
3
230
(50)
183
$
$
3
427
(2,802)
(2,372)
(1) The net gain (loss) from fair value adjustments presented in the above table does not include net gains (losses) of $1.0 million, ($2.3) million, and
($3.0) million from the change in fair value of derivative instruments during the years ended December 31, 2021, 2020, and 2019, respectively.
Included in the fair value of the financial assets and financial liabilities selected for the fair value option is the
accrued interest receivable or payable for the related instrument. The Company reports as interest income or interest
expense in the Consolidated Statement of Income, the interest receivable or payable on the financial instruments selected
for the fair value option at their respective contractual rates.
The borrowed funds have a contractual principal amount of $61.9 million at December 31, 2021 and 2020. The
fair value of borrowed funds includes accrued interest payable of $0.1 million at December 31, 2021 and 2020.
128
The Company generally holds its earning assets, other than securities available for sale, to maturity and settles its
liabilities at maturity. However, fair value estimates are made at a specific point in time and are based on relevant market
information. These estimates do not reflect any premium or discount that could result from offering for sale at one time
the Company’s entire holdings of a particular instrument. Accordingly, as assumptions change, such as interest rates and
prepayments, fair value estimates change and these amounts may not necessarily be realized in an immediate sale.
Disclosure of fair value does not require fair value information for items that do not meet the definition of a
financial instrument or certain other financial instruments specifically excluded from its requirements. These items include
core deposit intangibles and other customer relationships, premises and equipment, leases, income taxes and equity.
Further, fair value disclosure does not attempt to value future income or business. These items may be material
and accordingly, the fair value information presented does not purport to represent, nor should it be construed to represent,
the underlying “market” or franchise value of the Company.
Financial assets and financial liabilities reported at fair value are required to be measured based on either:
(1) quoted prices in active markets for identical financial instruments (Level 1); (2) significant other observable inputs
(Level 2); or (3) significant unobservable inputs (Level 3).
A description of the methods and significant assumptions utilized in estimating the fair value of the Company’s
assets and liabilities that are carried at fair value on a recurring basis are as follows:
Level 1 – where quoted market prices are available in an active market. At December 31, 2021 and 2020, Level
1 included one mutual fund.
Level 2 – when quoted market prices are not available, fair value is estimated using quoted market prices for
similar financial instruments and adjusted for differences between the quoted instrument and the instrument being valued.
Fair value can also be estimated by using pricing models, or discounted cash flows. Pricing models primarily use market-
based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates,
equity or debt prices and credit spreads. In addition to observable market information, models also incorporate maturity
and cash flow assumptions. At December 31, 2021 and 2020, Level 2 included mortgage related securities, corporate debt,
municipals and interest rate swaps.
Level 3 – when there is limited activity or less transparency around inputs to the valuation, financial instruments
are classified as Level 3. At December 31, 2021 and 2020, Level 3 included trust preferred securities owned and junior
subordinated debentures issued by the Company.
The methods described above may produce fair values that may not be indicative of net realizable value or
reflective of future fair values. While the Company believes its valuation methods are appropriate and consistent with
those of other market participants, the use of different methodologies, assumptions and models to determine fair value of
certain financial instruments could produce different estimates of fair value at the reporting date.
129
The following table sets forth the Company’s assets and liabilities that are carried at fair value on a recurring
basis, including those reported at fair value under the fair value option, and the level that was used to determine their fair
value, at December 31:
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
2021
2020
Significant Other
Observable Inputs
(Level 2)
Significant Other
Unobservable Inputs
(Level 3)
2021
2020
2021
2020
Total carried at fair value
on a recurring basis
2020
2021
(In thousands)
Assets:
Securities available for sale
Mortgage-backed
Securities
Other securities
Interest rate swaps
$
— $
— $ 572,184 $ 404,460 $
— $
12,485
—
12,703
—
190,872
10,683
229,516
1,319
1,695
—
— $ 572,184 $ 404,460
243,514
1,319
205,052
10,683
1,295
—
Total assets
$
12,485 $
12,703 $ 773,739 $ 635,295 $
1,695 $
1,295 $ 787,919 $ 649,293
Liabilities:
Borrowings
Interest rate swaps
$
— $
—
— $
—
— $
— $
25,071
60,987
56,472 $
—
43,136 $
—
56,472 $
25,071
43,136
60,987
Total liabilities
$
— $
— $
25,071 $
60,987 $
56,472 $
43,136 $
81,543 $ 104,123
There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2021 and 2020.
The following tables set forth the Company’s assets and liabilities that are carried at fair value on a recurring
basis, classified within Level 3 of the valuation hierarchy for the periods indicated:
For the year ended
December 31, 2021
December 31, 2020
Trust preferred Junior subordinated Trust preferred Junior subordinated
securities
debentures
securities
debentures
$
1,295 $
43,136 $
1,332 $
44,384
(In thousands)
400
—
—
—
14,004
(4)
(34)
—
(3)
$
—
1,695 $
(664)
56,472 $
—
1,295 $
—
50
(103)
(1,195)
43,136
$
— $
3,334 $
— $
2,670
Beginning balance
Net (loss) gain from fair value
adjustment of financial assets (1)
Net loss from fair value adjustment of
financial liabilities (1)
Decrease in accrued interest
Change in unrealized losses included in
other comprehensive loss
Ending balance
Changes in unrealized gains held at
period end
(1) These totals in the table above are presented in the Consolidated Statement of Income under Net loss from fair value
adjustments.
130
The following tables present the qualitative information about recurring Level 3 fair value of financial instruments
and the fair value measurements at the periods indicated:
December 31, 2021
Fair Value Valuation Technique Unobservable Input Range Weighted Average
(Dollars in thousands)
Assets:
Trust preferred securities
$
1,695 Discounted cash flows
Discount rate
n/a
2.2 %
Liabilities:
Junior subordinated
debentures
Assets:
$ 56,472 Discounted cash flows
Discount rate
n/a
2.2 %
December 31, 2020
Fair Value Valuation Technique Unobservable Input Range Weighted Average
(Dollars in thousands)
Trust preferred securities
$
1,295 Discounted cash flows
Discount rate
n/a
4.2 %
Liabilities:
Junior subordinated
debentures
$ 43,136 Discounted cash flows
Discount rate
n/a
4.2 %
The significant unobservable inputs used in the fair value measurement of the Company’s trust preferred
securities and junior subordinated debentures valued under Level 3 at December 31, 2021 and 2020, are the effective yields
used in the cash flow models. Significant increases or decreases in the effective yield in isolation would result in a
significantly lower or higher fair value measurement.
The following table sets forth the Company’s assets that are carried at fair value on a non-recurring basis, and the
level that was used to determine their fair value, at December 31:
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Other
Unobservable Inputs
(Level 3)
Total carried at fair value
on a non-recurring basis
2021
2020
2021
2020
2021
2020
2021
2020
(In thousands)
Assets:
Non-accrual loans
Other repossessed assets
$
— $
—
— $
—
— $
—
— $ 11,026 $ 11,980 $ 11,026 $ 11,980
—
—
—
—
—
Total assets
$
— $
— $
— $
— $ 11,026 $ 11,980 $ 11,026 $ 11,980
131
The following tables present the qualitative information about non-recurring Level 3 fair value measurements of
financial instruments at the periods indicated:
Fair Value
Valuation Technique
At December 31, 2021
Unobservable Input
(Dollars in thousands)
Range
Weighted Average
Assets:
Non-accrual loans $
10,579 Sales approach
Reduction for planned expedited disposal
8.0% to 15.0 %
11.9 %
Non-accrual loans $
447 Discounted
Discount Rate
Cashflow
Fair Value
Valuation Technique
Assets:
Probability of Default
At December 31, 2020
Unobservable Input
(Dollars in thousands)
4.3 %
35.0 %
4.3 %
35.0 %
Range
Weighted Average
Non-accrual loans $
10,690 Sales approach
Reduction for planned expedited disposal
-100.0% to 15.0 %
6.8 %
Non-accrual loans $
1,290 Discounted
Discount Rate
4.3% to 5.5 %
Cashflow
Probability of Default
20.0% to 35.0 %
4.9 %
27.4 %
The Company did not have any liabilities that were carried at fair value on a non-recurring basis at December 31,
2021 and 2020.
The methods and assumptions used to estimate fair value at December 31, 2021 and 2020 are as follows:
Securities:
The fair values of securities are contained in Note 7 (“Securities”) of Notes to Consolidated Financial Statements.
Fair value is based upon quoted market prices, where available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities and adjusted for differences between the quoted instrument and
the instrument being valued. When there is limited activity or less transparency around inputs to the valuation, securities
are valued using discounted cash flows.
Non-accrual Loans:
For non-accruing loans, fair value is generally estimated by discounting management’s estimate of future cash
flows with a discount rate commensurate with the risk associated with such assets or, for collateral dependent loans, 85%
of the appraised or internally estimated value of the property, except for taxi medallion loans. The fair value of the
underlying collateral of taxi medallion loans is the most recent reported arm’s length transaction. When there is no recent
sale activity, the fair value is calculated using capitalization rates.
Other Real Estate Owned and Other Repossessed Assets:
The fair value for OREO is based on appraised value through a current appraisal, or sometimes through an internal
review, additionally adjusted by the estimated costs to sell the property. The fair value for other repossessed assets are
based upon the most recently reported arm’s length sales transaction. When there is no recent sale activity, the fair value
is calculated using capitalization rates.
132
Junior Subordinated Debentures:
The fair value of the junior subordinated debentures was developed using a credit spread based on the
subordinated debt issued by the Company adjusting for differences in the junior subordinated debt’s credit rating, liquidity
and time to maturity. The unrealized net gain/loss attributable to changes in our own credit risk was determined by
adjusting the fair value as determined in the proceeding sentence by the average rate of default on debt instruments with a
similar debt rating as our junior subordinated debentures, with the difference from the original calculation and this
calculation resulting in the instrument-specific unrealized gain/loss.
Interest Rate Swaps:
The fair value of interest rate swaps is based upon broker quotes.
The following tables set forth the carrying amounts and fair values of selected financial instruments based on the
assumptions described above used by the Company in estimating fair value at the periods indicated:
Assets:
Cash and due from banks
Securities held-to-maturity
Mortgage-backed securities
Other securities
Securities available for sale
Mortgage-backed securities
Other securities
Loans
FHLB-NY stock
Accrued interest receivable
Interest rate swaps
Liabilities:
Deposits
Borrowings
Accrued interest payable
Interest rate swaps
Assets:
Cash and due from banks
Securities held-to-maturity
Mortgage-backed securities
Other securities
Securities available for sale
Mortgage-backed securities
Other securities
Loans
FHLB-NY stock
Accrued interest receivable
Interest rate swaps
Liabilities:
Deposits
Borrowings
Accrued interest payable
Interest rate swaps
Carrying
Amount
Fair
Value
December 31, 2021
Level 1
(In thousands)
Level 2 Level 3
$
81,723 $
81,723 $
81,723 $
— $
-
7,894
49,974
8,667
53,362
—
—
8,667
—
-
53,362
572,184
205,052
6,638,105
35,937
38,698
10,683
572,184
205,052
6,687,125
35,937
38,698
10,683
—
12,485
—
—
—
—
572,184
190,872
—
35,937
1,574
10,683
-
1,695
6,687,125
-
37,124
—
$ 6,385,445 $ 6,385,276 $ 5,438,870 $ 946,406 $
815,544
4,777
25,071
816,012
4,777
25,071
—
—
—
759,540
4,777
25,071
—
56,472
—
—
Carrying
Amount
Fair
Value
December 31, 2020
Level 1
Level 2
Level 3
(In thousands)
$ 157,388 $ 157,388 $ 157,388 $
— $
—
7,914
49,918
8,991
54,538
—
—
8,991
—
—
54,538
404,460
243,514
6,704,674
43,439
44,041
1,319
404,460
243,514
6,793,985
43,439
44,041
1,319
—
12,703
—
—
2
—
404,460
229,516
—
43,439
1,389
1,319
—
1,295
6,793,985
—
42,650
—
$ 6,136,355 $ 6,141,775 $ 4,997,994 $ 1,143,781 $
1,020,895
4,755
60,987
1,017,573
4,755
60,987
—
—
—
974,437
4,755
60,987
—
43,136
—
—
133
21. Derivative Financial Instruments
At December 31, 2021 and 2020, the Company’s derivative financial instruments consist of interest rate swaps.
The Company’s interest rate swaps are used for three purposes: 1) to mitigate the Company’s exposure to rising interest
rates on certain fixed rate loans totaling $299.6 million and $316.1 million at December 31, 2021 and December 31, 2020,
respectively; 2) to facilitate risk management strategies for our loan customers with $228.0 million of swaps outstanding,
which include $114.0 million with customers and $114.0 million with bank counterparties at December 31, 2021 and
$125.6 million of swaps outstanding, which include $62.8 million with customers and $62.8 million with bank
counterparties at December 31, 2020; and 3) to mitigate exposure to rising interest rates on certain short-term advances
and brokered CDs totaling $996.5 million and $1,021.5 million at December 31, 2021 and December 31, 2020,
respectively. Additionally, at December 31, 2020, the Company had swaps outstanding to mitigate the Company’s
exposure to rising interest rates on a portion ($18.0 million) of its floating rate junior subordinated debentures that have a
contractual value of $61.9 million. These swaps were terminated during the year ended December 31, 2021, realizing a
loss of $4.7 million upon termination.
The Company’s derivative instruments are carried at fair value in the Company’s financial statements as part of
Other assets for derivatives with positive fair values and Other liabilities for derivatives with negative fair values. The
accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies and has
been designated as a hedge for accounting purposes, and further, by the type of hedging relationship.
At December 31, 2021 and 2020, we held derivatives designated as cash flow hedges, fair value hedges and
certain derivatives not designated as hedges.
At December 31, 2021 and 2020, derivatives with a combined notional amount of $228.0 million and $143.6
million, respectively, were not designated as hedges. At December 31, 2021 and 2020, derivatives with a combined
notional amount of $299.6 million and $316.1 million were designated as fair value hedges. At December 31, 2021 and
2020, derivatives with a combined notional amount of $996.5 million and $1,021.5 million, respectively, were designated
as cash flow hedges.
For cash flow hedges, the changes in the fair value of the derivative is reported in accumulated other
comprehensive income (loss), net of tax. Amounts in accumulated other comprehensive income (loss) are reclassified into
earnings in the same period during which the hedged forecasted transaction effects earnings. During the year ended
December 31, 2021, $10.6 million was reclassified from accumulated other comprehensive income (loss) to interest
expense. The estimated amount to be reclassified in next 12 months out of accumulated other comprehensive income (loss)
into earnings is $10.6 million.
Changes in the fair value of interest rate swaps not designated as hedges are reflected in “Net loss from fair value
adjustments” in the Consolidated Statements of Income.
134
The following table sets forth information regarding the Company’s derivative financial instruments at the periods
indicated:
Interest rate swaps (cash flow hedge)
Interest rate swaps (non-hedge)
Interest rate swaps (fair value hedge)
Interest rate swaps (cash flow hedge)
Interest rate swaps (non-hedge)
Total derivatives
December 31, 2021
December 31, 2020
Notional
Amount
Notional
Fair Value (1) Amount
Fair Value (1)
$ 355,000 $
113,988
299,555
641,500
113,988
$ 1,524,031 $
(In thousands)
—
7,328 $
62,779
3,355
316,051
(12,329)
1,021,500
(9,387)
(3,355)
80,779
(14,388) $ 1,481,109
$
$
—
1,319
(28,689)
(25,300)
(6,998)
(59,668)
(1) Derivatives in a net positive position are recorded as “Other assets” and derivatives in a net negative position are
recorded as “Other liabilities” in the Consolidated Statements of Financial Condition.
The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income for
the periods indicated:
(In thousands)
Financial Derivatives:
Interest rate swaps (non-hedge)
Affected Line Item in the
Statement Where Net
income is Presented
Other interest expense
Net gain (loss) from fair
value adjustments
For the years ended
December 31,
2021
2020
2019
$
(305) $
(434) $
(140)
978
673
(2,325)
(2,759)
(2,981)
(3,121)
Interest rate swaps (fair value hedge)
Interest and fees on loans
(3,481)
(5,226)
(837)
Interest rate swaps (cash flow hedge)
Other interest (expense)
income
(10,693)
(6,703)
1,232
Net loss
$ (13,501) $ (14,688) $
(2,726)
The Company’s interest rate swaps are subject to master netting arrangements between the Company and its three
designated counterparties. The Company has not made a policy election to offset its derivative positions.
135
The following tables present the effect of the master netting arrangements on the presentation of the derivative
assets and liabilities in the Consolidated Statements of Condition as of the dates indicated:
December 31, 2021
Gross Amount Offset in
Net Amount of Assets
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
(In thousands)
Gross Amount of
Recognized Assets
the Statement of
Condition
Presented in the Statement of
Condition
Cash
Collateral
Instruments Received
Financial
Net Amount
Interest rate swaps
$
10,683 $
— $
10,683 $
— $
— $
10,683
Gross Amount of
Gross Amount Offset in Net Amount of Liabilities
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
(In thousands)
Recognized
Liabilities
the Statement of
Condition
Presented in the Statement of
Condition
Financial
Instruments
Cash
Collateral
Pledged
Net Amount
Interest rate swaps
$
25,071 $
— $
25,071 $
— $
21,527 $
3,544
December 31, 2020
Gross Amount Offset in
Net Amount of Assets
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
(In thousands)
Gross Amount of
Recognized Assets
the Statement of
Condition
Presented in the Statement of
Condition
Cash
Collateral
Instruments Received
Financial
Net Amount
Interest rate swaps
$
1,319 $
— $
1,319 $
— $
— $
1,319
Gross Amount of
Gross Amount Offset in Net Amount of Liabilities
Gross Amounts Not Offset in the
Consolidated Statement of
Condition
(In thousands)
Recognized
Liabilities
the Statement of
Condition
Presented in the Statement of
Condition
Financial
Instruments
Cash
Collateral
Pledged
Net Amount
Interest rate swaps
$
60,987 $
— $
60,987 $
99 $
63,517 $
(2,629)
22. New Authoritative Accounting Pronouncements
Accounting Standards Pending Adoption:
In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform” (Topic 848), which clarifies that
certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to
derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in
ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative
instruments affected by discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied
through December 31, 2022.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform” (Topic 848), which provides
optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other
transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions
that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan
agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be
considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be
amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement
with no reassessments of the lease classification and the discount rate or re-measurements of lease payments that otherwise
would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional
136
expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity
may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an
interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available
to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must
be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU
will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022
that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather
than extinguishment of the old contract resulting in writing off unamortized fees/costs. We are evaluating the impacts of
this ASU and have not yet determined whether LIBOR transition and this ASU will have material effects on our business
operations and consolidated financial statements. The amendments in this Update apply to contract modifications that
replace a reference rate reform and contemporaneous modifications of other terms related to the replacement of the
reference rate.
23. Parent Company Only Financial Information
Earnings of the Bank are recognized by the Holding Company using the equity method of accounting.
Accordingly, earnings of the Bank are recorded as increases in the Holding Company’s investment, any dividends would
reduce the Holding Company’s investment in the Bank, and any changes in the Bank’s unrealized gain or loss on securities
available for sale, net of taxes, would increase or decrease, respectively, the Holding Company’s investment in the Bank.
The condensed financial statements for the Holding Company are presented below:
Condensed Statements of Financial Condition
Assets:
Cash and due from banks
Securities available for sale:
Other securities
Investment in Bank
Goodwill
Other assets
Total assets
Liabilities:
Subordinated debentures
Junior subordinated debentures, at fair value
Other liabilities
Total liabilities
Stockholders' Equity:
Common stock
Additional paid-in capital
Treasury stock, at average cost (3,561,270 shares and 3,311,769 at December 31,
2021 and 2020, respectively)
Retained earnings
Accumulated other comprehensive loss, net of taxes
Total equity
Total liabilities and equity
137
December 31, December 31,
2021
2020
(Dollars in thousands)
$
16,038 $
28,033
$
$
1,695
843,866
2,185
2,791
866,575 $
1,295
726,802
2,185
839
759,154
122,885 $
56,472
7,590
186,947
90,180
43,136
6,841
140,157
341
263,375
(75,293)
497,889
(6,684)
679,628
341
261,533
(69,400)
442,789
(16,266)
618,997
$
866,575 $
759,154
For the years ended December 31,
2019
2021
2020
(In thousands)
$
5,000 $
145
(6,215)
(13,604)
(1,844)
(16,518)
5,403
(11,115)
92,908
81,793
9,582
91,375 $
78,833 $
466
(5,858)
(85)
(3,975)
69,381
2,274
71,655
(36,981)
34,674
(6,459)
28,215 $
32,000
250
(6,677)
(2,725)
(2,833)
20,015
3,173
23,188
18,091
41,279
2,945
44,224
$
For the years ended December 31,
2019
2021
2020
(In thousands)
$
81,793 $
34,674 $
41,279
(92,908)
(3,939)
13,604
6,829
2,927
8,306
36,981
(291)
85
6,450
3,490
81,389
(18,091)
(769)
2,725
7,763
3,945
36,852
(15,000)
—
—
(15,000)
—
(54,836)
15,769
(39,067)
—
—
—
—
122,843
(90,250)
(11,370)
(26,524)
—
(5,301)
—
—
(3,877)
(24,813)
—
(28,690)
—
—
(2,656)
(24,149)
3
(26,802)
(11,995)
28,033
16,038 $
$
13,632
14,401
28,033 $
10,050
4,351
14,401
Condensed Statements of Income
Dividends from the Bank
Interest income
Interest expense
Net loss from fair value adjustments
Other operating expenses
(Loss) income before taxes and equity in undistributed earnings of subsidiary
Income tax benefit
(Loss) income before equity in undistributed earnings of subsidiary
Equity in undistributed earnings of the Bank
Net income
Other comprehensive income (loss), net of tax
Comprehensive net income
Condensed Statements of Cash Flows
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in undistributed earnings of the Bank
Deferred income tax benefit
Fair value adjustments for financial assets and financial liabilities
Stock-based compensation expense
Net change in operating assets and liabilities
Net cash provided by operating activities
Investing activities:
Investment in Bank
Cash used in acquisition of Empire
Cash provided by acquisition of Empire
Net cash used in investing activities
Financing activities:
Proceeds from long-term borrowings
Repayment of long-term borrowings
Purchase of treasury stock
Cash dividends paid
Stock options exercised
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
138
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
Flushing Financial Corporation
Uniondale, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial condition of Flushing Financial
Corporation and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of
income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period
ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States
of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) and our report dated March 7, 2022 expressed an unqualified
opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
139
Allowance for Credit losses
As described in Notes 2 and 4 to the Company's consolidated financial statements, the Company had a gross loan
portfolio of $6.6 billion and related allowance for credit losses of $37.1 million as of December 31, 2021. The allowance
for credit losses consists of quantitative and qualitative components. The Company considers historical loss experience,
current economic and business conditions, as well as reasonable and supportable forecasts to develop the quantitative
component. This quantitative component is then adjusted for qualitative risk factors. These components involve significant
estimates and assumptions that require a high degree of management’s judgment.
We identified the significant assumptions used to develop the quantitative component of the allowance, including
the reasonable and supportable forecast period, and the reversion to historical loss period, as well as assumptions around
the determination of qualitative risk factors as a critical audit matter. Auditing these assumptions involved especially
challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters,
including the extent of specialized skill and knowledge needed.
The primary procedures we performed to address this critical audit matter included:
Testing the design and operating effectiveness of controls over the significant assumptions used to develop the
quantitative component of the allowance, including a reasonable and supportable forecast period, and reversion to
historical loss period, as well as assumptions around the determination of qualitative risk factors.
Testing the completeness and accuracy of the input data used in determining the qualitative risk factors and
evaluating the sources of data used, considering contradictory evidence, in developing the quantitative component.
Utilizing the engagement team’s specialized skills and knowledge of the banking industry and local and regional
economy to perform an independent assessment of the qualitative risk factors using similar and alternative source
data, and then comparing the results to management’s qualitative risk factors.
Utilizing personnel with specialized skill and knowledge in valuation to assist with evaluating the appropriateness
of the reasonable and supportable forecast period, and the reversion to historical loss period assumptions used to
develop the quantitative component.
/S/ BDO USA, LLP
We have served as the Company’s auditor since 2015.
New York, New York
March 7, 2022
140
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Flushing Financial Corporation
Uniondale, New York
Opinion on Internal Control over Financial Reporting
We have audited Flushing Financial Corporation and Subsidiaries’ (the “Company’s”) internal control over
financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated statements of financial condition of the Company as of December 31, 2021
and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated
March 7, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A,
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/S/ BDO USA, LLP
New York, New York
March 7, 2022
141
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The Company carried out, under the supervision and with the participation of the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this Annual Report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, the design and operation of these
disclosure controls and procedures were effective. During the period covered by this Annual Report, there have been no
changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting,
and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities
Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and
principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Management performed an assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2021 based upon criteria in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”). Based on this
assessment, management concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2021 based on those criteria issued by COSO.
BDO USA, LLP, the Company’s independent registered public accounting firm that audited the Company’s
consolidated financial statements included in this Annual Report on Form 10-K, has issued a report on the effectiveness
of the Company’s internal control over financial reporting as of December 31, 2021, as stated in its report.
Item 9B. Other Information.
None.
142
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Other than the disclosures below, information regarding the directors and executive officers of the Company
appears in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held May 17, 2022 (“Proxy
Statement”) under the captions “Board Nominees,” “Continuing Directors,” “Executive Officers Who Are Not Directors”
and “Meeting and Committees of the Board of Directors – Audit Committee” and is incorporated herein by this reference.
Information regarding Section 16(a) beneficial ownership appears in the Company’s Proxy Statement under the caption
“Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by this reference.
Code of Ethics. The Company has adopted a Code of Business Conduct and Ethics that applies to all of its
the Company’s website at:
directors, officers and employees. This code
https://s28.q4cdn.com/653305835/files/doc_downloads/governance/Code_of_Business_Conduct_Ethics.pdf
is publicly available on
Any substantive amendments to the code and any grant of a waiver from a provision of the code requiring
disclosure under applicable SEC or NASDAQ rules will be disclosed in a report on Form 8-K.
Audit Committee Financial Expert. The Board of Directors of the Company has determined that Louis C. Grassi,
the Chairman of the Audit Committee, is an “audit committee financial expert” as defined under Item 401(h) of Regulation
S-K, and that he is independent as defined under applicable NASDAQ listing standards. Mr. Grassi is a certified public
accountant and a certified fraud examiner.
Item 11. Executive Compensation.
Information regarding executive compensation appears in the Proxy Statement under the caption “Executive
Compensation” and is incorporated herein by this reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information regarding security ownership of certain beneficial owners appears in the Proxy Statement under the
caption “Stock Ownership of Certain Beneficial Owners” and is incorporated herein by this reference.
Information regarding security ownership of management appears in the Proxy Statement under the caption
“Stock Ownership of Management” and is incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding certain relationships and related transactions and directors independence appears in the
Proxy Statement under the captions “Compensation Committee Interlocks and Insider Participation” and “Related Party
Transactions” and is incorporated herein by this reference.
Item 14. Principal Accounting Fees and Services.
Information regarding fees paid to the Company’s independent auditor appears in the Proxy Statement under the
caption “Schedule of Fees to Independent Auditors” and is hereby incorporated by this reference.
143
Item 15. Exhibits, Financial Statement Schedules.
(a) 1. Financial Statements
PART IV
The following financial statements are included in Item 8 of this Annual Report and are incorporated herein by
this reference:
Consolidated Statements of Financial Condition at December 31, 2021 and 2020
Consolidated Statements of Income for each of the three years in the period ended December 31, 2021
Consolidated Statements of Comprehensive Income for each of the three years in the period ended
December 31, 2021
Consolidated Statements of Changes in Stockholders’ Equity for each of the three years in the period ended
December 31, 2021
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm (BDO USA, LLP; New York, New York;
PCAOB ID 243)
2. Financial Statement Schedules
Financial Statement Schedules have been omitted because they are not applicable or the required information is
shown in the Consolidated Financial Statements or Notes thereto included in Item 8 of this Annual Report and are
incorporated herein by this reference.
144
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
Exhibit
Number
Description
3.1 P
3.2
3.3
3.4
4.1
Certificate of Incorporation of Flushing Financial Corporation (1)
Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (5)
Certificate of Amendment to Certificate of Incorporation of Flushing Financial Corporation (10)
Amended and Restated By-Laws of Flushing Financial Corporation (12)
Indenture, dated November 22, 2021, between Flushing Financial Corporation and Wilmington Trust,
National Association, as trustee. (19)
4.2
First Supplemental Indenture, dated November 22, 2021, between Flushing Financial Corporation and
Wilmington Trust, National Association, as trustee. (19)
4.3
10.1*
Description of Securities (18)
Form of Amended and Restated Employment Agreement between Flushing Bank and Certain Officers
(11)
10.2*
Form of Amended and Restated Employment Agreement between Flushing Financial Corporation and
Certain Officers (11)
10.3*
Amended and Restated Employment Agreement between Flushing Financial Corporation and John R.
Buran (11)
10.4*
10.5*
10.6*
10.7*
10.8*
Amended and Restated Employment Agreement between Flushing Bank and John R. Buran (11)
Amended and Restated Employment Agreement between Flushing Financial Corporation and Maria A.
Grasso (11)
Amended and Restated Employment Agreement between Flushing Bank and Maria A. Grasso (11)
Employment Agreement between Flushing Financial Corporation and Susan K. Cullen (15)
Flushing Bank Specified Officer Change in Control Severance Policy (as Amended Effective January 1,
2016) (14)
10.9*
Employee Severance Compensation Plan for Vice Presidents and Assistant Vice Presidents of Flushing
Bank (Effective as of January 1, 2016) (14)
10.10*
10.11*
10.12*
10.13*
Amended and Restated Outside Director Retirement Plan (7)
Amended and Restated Flushing Bank Outside Director Deferred Compensation Plan (4)
Amended and Restated Flushing Bank Supplemental Savings Incentive Plan (13)
Form of Indemnity Agreement among Flushing Bank, Flushing Financial Corporation, and each Director
(2)
10.14*
Form of Indemnity Agreement among Flushing Bank, Flushing Financial Corporation, and Certain
Officers (2)
10.15* P
10.16*
10.17* P
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25
10.26*
10.27*
10.28*
10.29*
10.30
10.31
21.1
Employee Benefit Trust Agreement (1)
Amendment to the Employee Benefit Trust Agreement (3)
Guarantee by Flushing Financial Corporation (1)
Form of Outside Director Restricted Stock Award Letter (6)
Form of Outside Director Restricted Stock Unit Award Letter (14)
Form of Employee Restricted Stock Award Letter (6)
Form of Employee Restricted Stock Unit Grant Letter Agreement (14)
Amended and Restated Flushing Financial Corporation 2005 Omnibus Incentive Plan (8)
Amendment to Flushing Financial Corporation 2005 Omnibus Incentive Plan (9)
Annual Incentive Plan for Executives and Senior Officers (10)
Lease agreement between Flushing Bank and Rexcorp Plaza SPE LLC (12)
Flushing Financial Corporation 2014 Omnibus Incentive Plan (15)
Form of Employee Performance Restricted Stock Unit Award Letter (16)
Form of Director Restricted Stock Unit Award Letter With One Year Vesting (16)
Flushing Bank Supplemental Savings Incentive Plan, Amended and Restated as of November 1, 2018 (16)
Employment Agreement between Flushing Financial Corporation and Thomas M. Buonaiuto (17)
Consulting Agreement between Flushing Bank and Douglas C. Manditch (17)
Subsidiaries information incorporated herein by reference to Part I – Subsidiary Activities
145
23.1
31.1
Consent of Independent Registered Public Accounting Firm (filed herewith)
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer
(filed herewith)
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer
(filed herewith)
32.1
Certification Pursuant to 18 U.S.C, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 by the Chief Executive Officer (furnished herewith)
32.2
Certification Pursuant to 18 U.S.C, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 by the Chief Financial Officer (furnished herewith)
Inline XBRL Instance Document (filed herewith)
Inline XBRL Taxonomy Extension Schema Document (filed herewith)
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
Indicates compensatory plan or arrangement.
*
† Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Flushing Financial hereby undertakes to
furnish supplemental copies of any of the omitted schedules upon request by the U.S. Securities and Exchange
Commission.
(1) Incorporated by reference to Exhibits filed with the Registration Statement on Form S-1 filed September 1, 1995,
Registration No. 33-96488. (P: Indicates a filing submitted in paper)
(2) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 1996.
(3) Incorporated by reference to Exhibits filed with Form 10-K for the year ended December 31, 1997.
(4) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 2000.
(5) Incorporated by reference to Exhibits filed with Form S-8 filed May 31, 2002.
(6) Incorporated by reference to Exhibits filed with Form 10-K for the year ended December 31, 2004.
(7) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended March 31, 2006.
(8) Incorporated by reference to Appendices filed with Proxy Statement on Schedule 14A filed April 7, 2011.
(9) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended September 30, 2011.
(10) Incorporated by reference to Exhibits filed with Form 10-K for the year ended December 31, 2011.
(11) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended June 30, 2013.
(12) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended June 30, 2014.
(13) Incorporated by reference to Exhibits filed with Form 10-K for the year ended December 31, 2014.
(14) Incorporated by reference to Exhibits filed with Form 10-K for the year ended December 31, 2015.
(15) Incorporated by reference to Exhibits filed with Form 10-Q for the quarter ended March 31, 2016
(16) Incorporated by reference to Exhibits filed with Form 10-K for the year ended December 31, 2018.
(17) Incorporated by reference to Exhibit filed with Form 8-K filed October 28, 2019.
(18) Incorporated by reference to Exhibit filed with Form 10-K filed December 31, 2019.
(19) Incorporated by reference to Exhibits filed with Form 8-K filed November 22, 2021.
146
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the Company has duly
caused this report, to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on
March 7, 2022.
SIGNATURES
FLUSHING FINANCIAL CORPORATION
By /S/JOHN R. BURAN
John R. Buran
President and CEO
POWER OF ATTORNEY
We, the undersigned directors and officers of Flushing Financial Corporation (the “Company”) hereby severally
constitute and appoint John R. Buran and Susan K. Cullen as our true and lawful attorneys and agents, each acting alone
and with full power of substitution and re-substitution, to do any and all things in our names in the capacities indicated
below which said John R. Buran or Susan K. Cullen may deem necessary or advisable to enable the Company to comply
with the Securities Exchange Act of 1934, and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this report on Form 10-K, or amendment thereto, including specifically, but not limited
to, power and authority to sign for us in our names in the capacities indicated below the report on this report on Form 10-K,
or amendment thereto; and we hereby approve, ratify and confirm all that said John R. Buran or Susan K. Cullen shall do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K, has been signed
by the following persons in the capacities and on the dates indicated.
Signature
Title
Director, President (Principal Executive
Officer)
Date
March 7, 2022
/S/JOHN R. BURAN
John R. Buran
/S/ALFRED A. DELLIBOVI
Alfred A. DelliBovi
/S/SUSAN K. CULLEN
Susan K. Cullen
/S/ JAMES D. BENNETT
James D. Bennett
/S/STEVEN J. D’IORIO
Steven J. D’Iorio
/S/LOUIS C. GRASSI
Louis C. Grassi
/S/SAM S. HAN
Sam S. Han
/S/JOHN J. MCCABE
John J. McCabe
Director, Chairman
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
Treasurer (Principal Financial and
Accounting Officer)
Director
Director
Director
Director
Director
147
/S/DONNA M. O’BRIEN
Donna M. O’Brien
/S/MICHAEL J. RUSSO
Michael J. Russo
/S/MICHAEL A. AZARIAN
Michael A. Azarian
/S/CAREN C. YOH
Caren C. Yoh
/S/DOUGLAS C. MANDITCH
Douglas C. Manditch
Director
Director
Director
Director
Director
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
148
Corporate Information
Executive and Senior Management
John R. Buran
President,
Chief Executive Officer
Barbara A. Beckmann
Executive Vice President,
Director of Operations
Michael Bingold
Senior Executive Vice President,
Chief Retail & Client Development
Officer
Allen M. Brewer
Senior Executive Vice President,
Chief Information Officer
Thomas M. Buonaiuto
Senior Executive Vice President,
Chief of Staff & Deposit Channel
Executive
Susan K. Cullen
Senior Executive Vice President,
Treasurer & Chief Financial Officer
Maria A. Grasso
Senior Executive Vice President,
Chief Operating Officer &
Corporate Secretary
Francis W. Korzekwinski
Senior Executive Vice President,
Chief of Real Estate Lending
Douglas J. McClintock
Senior Executive Vice President,
General Counsel
Board of Directors
Alfred A. DelliBovi
Chairman of the Board
Retired President & CEO of the
Federal Home Loan Bank of New York
John R. Buran
President & Chief Executive Officer
Michael A. Azarian
Retired Managing Director
Citigroup
James D. Bennett
Attorney in Nassau County, New York
Steven J. D’Iorio
Executive Managing Director
Cushman & Wakefield
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders
of Flushing Financial Corporation will
be held at 1:00 p.m., May 17, 2022.
The meeting will be hosted virtually at
www.virtualshareholdermeeting.com/
FFIC2022.
On April 7, 2022, a Notice of Internet
Availability was mailed or electronically
delivered to shareholders containing
instructions on how to access our proxy
materials.
Astrid Burrowes
Executive Vice President,
Chief Accounting Officer
Ruth E. Filiberto
Executive Vice President,
Director of Human Resources
Vincent E. Giovinco
Executive Vice President,
Director of Commercial
Real Estate Lending
James P. Jacovatos
Executive Vice President,
Real Estate Credit Center Manager
Jeoung Yun Jin
Executive Vice President,
Director of Residential &
Mixed-Use Lending
Theresa Kelly
Executive Vice President,
Director of Business Banking
Gary P. Liotta
Executive Vice President,
Chief Risk Officer
Rosina Manzi
Executive Vice President,
Chief Audit Officer
Patricia Mezeul
Executive Vice President,
Director of Government Banking
William M. Gianakos
Senior Vice President,
Director of Retail Banking
Theodoros Kalogiannis
Senior Vice President,
Director of Portfolio Management
Douglas Liang
Senior Vice President,
Chief Investment Officer
Yan Nuriyev
Senior Vice President,
Chief Technology Officer
Joanne Orelli
Senior Vice President,
Loan Servicing Collections &
Foreclosure Manager
Albert H. Savastano
Senior Vice President,
Director of Investor Relations
Patricia Tiffany
Senior Vice President,
Director of Marketing
Richard White
Senior Vice President,
Chief Information Security Officer
Louis C. Grassi
Managing Partner & Chief Executive
Officer of Grassi & Co.
Donna M. O’Brien
President
Strategic Visions in Healthcare, LLC
Sam S. Han
Founder & President
The Korean Channel, Inc.
Douglas C. Manditch
Former Chairman and Chief
Executive Officer of Empire
Bancorp, Inc.
John J. McCabe
Retired Chief Equity Strategist
Shay Assets Management
Michael J. Russo
Consulting Engineer, CEO
Fresh Meadow Mechanical Corp. and
President & Director of Operations for
Northeastern Aviation Corp.
Caren C. Yoh
President, CPA
Accounting Firm
Stock Listing
NASDAQ Global Select MarketSM
Symbol: FFIC
Transfer Agent and Registrar
Computershare Trust Company NA
P.O. Box 30170
College Station, TX 77842-3170
800-426-5523
www.Computershare.com
Shareholder Relations
Susan K. Cullen
718-961-5400
Independent Registered
Public Accounting Firm
BDO USA, LLP
100 Park Avenue
New York, NY 10017
212-885-8000
Legal Counsel
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, NY 10004
212-837-6000
ASTORIA
31-16 30th Avenue
sQueens
n
e
e
u
Q
BAYSIDE
61-14 Springfield Boulevard
213-03 Northern Boulevard
ELMHURST
85-15 Queens Boulevard*
FLUSHING
147-42 Northern Boulevard
164-20 Northern Boulevard
44-43 Kissena Boulevard
136-41 Roosevelt Avenue
FOREST HILLS
107-11 Continental Avenue
JAMAICA
89-12 Sutphin Boulevard
*Opening spring 2022
l
n
y
k
o
o
r
B
Brooklyn
AVENUE J
1402 Avenue J
BAY RIDGE
7102 Third Avenue
BOROUGH PARK
4616 13th Avenue
MONTAGUE
186 Montague Street
WILLIAMSBURG
217 Havemeyer Street
Manhattan
CHINATOWN
183 Canal Street
PARK AVENUE
99 Park Avenue
PARK AVENUE SOUTH
225 Park Avenue South
n
a
t
t
a
h
n
a
M
d
n
a
l
s
I
g
n
o
L
Long Island
GARDEN CITY
1122 Franklin Avenue
HICKSVILLE
268 North Broadway
ISLANDIA
1707 Veterans Memorial Highway
NEW HYDE PARK
661 Hillside Avenue
PORT JEFFERSON STATION
4747 Nesconset Highway
SHIRLEY
1044 William Floyd Parkway
UNIONDALE
260E RXR Plaza
Flushing Bank 220 RXR Plaza, Uniondale, NY 11556
718-961-5400 FlushingBank.com
© 2022 Flushing Financial Corporation. All rights reserved. BRANR0322
Annual Report Design by Curran & Connors, Inc.