FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Index
Page(s)
Report of Independent Accountants 2
Financial statements:
Statements of net assets available for plan benefits with fund
information as of December 31, 1998 and 1997 3
Statements of changes in net assets available for benefits
for the year ended December 31, 1998 4
Notes to financial statements 5- 7
Supplemental schedules:
Item 27a - Schedule of assets held for investment purposes
as of December 31, 1998 8
Item 27d - Schedule of reportable transactions for the year
ended December 31, 1998 9
<PAGE>
Report of Independent Accountants
To the Directors' Examining Committee and
Benefits Committee of Flushing Financial Corporation
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available for
benefits of the FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN IN RSI RETIREMENT
TRUST (the "Plan") as of December 31, 1998 and 1997, and the changes in net
assets available for benefits for the year ended December 31, 1998 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Plan's trustees; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedules, listed on the
accompanying index on page 1, are presented for the purpose of additional
analysis and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The Fund Information in the statements of net assets
available for benefits and the statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for benefits of each fund. The supplemental schedules and Fund Information have
been subjected to the auditing procedures applied in the audits of the basic
financial statements, and in our opinion, are fairly stated in all material
respects, in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
New York, New York
October 14, 1999
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Statements of Net Assets Available for Plan Benefits with Fund
Information
As of December 31, 1998 and 1997
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------------------------------------------------------------------------------------
Flushing
Retirement Financial
Emerging Short- Intermediate Actively System Group Corporation
Core Growth Value Term Term Managed Inc. Common 1998
Equity Equity Equity Investment Bond Bond Common Loans to Stock Totals
Fund* Fund* Fund* Fund* Fund Fund Stock Participants Fund*
--------- ---------- ---------- --------- ---------- --------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at fair value:
Participant directed
Investments $1,285,589 $356,403 $437,243 $296,768 $50,106 $107,790 $2,448 $1,251,979 $3,788,326
Participant loans $199,974 199,974
Benefits Payable (475) (475)
--------- ---------- ---------- --------- ---------- --------- ------------ ---------- --------- ---------
Net assets available for
plan benefits $1,285,114 $356,403 $437,243 $296,768 $50,106 $107,790 $2,448 $199,974 $1,251,979 $3,987,825
========= ========== ========== ========= ========== ========= ============ ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------------------------------------------------------------------------------------------------
Flushing
Retirement Financial
Emerging Short- Intermediate Actively System Group Corporation
Core Growth Value Term Term Managed Inc. Common 1997
Equity Equity Equity Investment Bond Bond Common Loans to Stock Totals
Fund* Fund* Fund* Fund* Fund Fund Stock Participants Fund*
--------- ---------- ---------- --------- ---------- --------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at fair value:
Participant directed
Investments $1,020,002 $381,443 $352,062 $274,960 $56,509 $122,762 $2,734 $1,546,135 $3,756,607
Participant loans $149,957 149,957
--------- ---------- ---------- --------- ---------- --------- ------------ ---------- --------- ---------
Net assets available for
plan benefits $1,020,002 $381,443 $352,062 $274,960 $56,509 $122,762 $2,734 $149,957 $1,546,135 $3,906,564
========= ========== ========== ========= ========== ========= ============ ========== ========= =========
</TABLE>
* Represents 5% or more of net assets available for plan benefits.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Statement of Changes in Net Assets Available for Plan Benefits with Fund
Information
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Flushing
Retirement Financial
Emerging Short- Intermediate Actively System Group Corporation
Core Growth Value Term Term Managed Inc. Common
Equity Equity Equity Investment Bond Bond Common Loans to Stock
Fund Fund Fund Fund Fund Fund Stock Participants Fund Totals
-------- --------- ------- --------- --------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Net appreciation(depreciation)
in the fair value
of investments 270,665 (20,495) 68,525 16,186 4,257 10,534 224 -- (3,211) 346,685
Contributions:
Employer, net of
forteitures 25,828 8,320 7,458 6,785 1,365 2,601 -- -- 70,476 122,833
Participants 110,195 48,523 41,457 36,862 6,432 12,972 -- -- 56,092 312,533
-------- --------- ------- --------- --------- --------- ----------- --------- --------- ---------
Total additions 406,688 36,348 117,440 59,833 12,054 26,107 224 123,357 782,051
Distributions to
participants (94,874) (44,678) (33,327) (37,182) (15,426) (36,417) (510) (18,233) (419,668) (700,315)
Net transfers among
funds (13,873) (11,254) 11,208 4,833 (519) (695) -- -- 10,300 --
Net loan activity (32,354) (5,456) (10,140) (5,676) (2,512) (3,967) -- 68,250 (8,145) --
Benefits payable (475) -- -- -- -- -- -- -- -- (475)
-------- --------- ------- --------- --------- --------- ----------- --------- --------- ---------
Net increase(decrease) in
net assets available for
plan benefits 265,112 (25,040) 85,181 21,808 (6,403) (14,972) (286) 50,017 (294,156) 81,261
Net assets available for plan Benefits
-December 31, 1997 1,020,002 381,443 352,062 274,960 56,509 122,762 2,734 149,957 1,546,135 3,906,564
--------- --------- ------- --------- --------- --------- ----------- --------- --------- ---------
Net assets available for plan Benefits
-December 31, 1998 $1,285,114 $356,403 $437,243 $296,768 $50,106 $107,790 $2,448 $199,974 $1,251,979 $3,987,825
========= ========= ======= ========= ======== ======== =========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Notes to Financial Statements
1. Description of Plan:
The following description of the Flushing Savings Bank, FSB 401(k) Savings
Plan in RSI Retirement Trust (the "Plan") provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
a. General:
The Plan is a tax-deferred savings plan which began on September 1,
1987, and covers all salaried employees of Flushing Savings Bank, FSB
(the "Bank") who have completed one year of service and are twenty-one
years of age or older. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
b. Contributions:
Participant contributions can be no less than 2% nor greater than 10% of
their base compensation for each plan year and cannot exceed $10,000
annually for the plan year ended December 31, 1998, adjusted as
prescribed under the Internal Revenue Code. The Bank will match 50% of
each participant's basic contributions up to a maximum of 3% of the
participant's base compensation. Of the 50% match, one half of the match
will be invested into the Flushing Financial Corporation Common Stock
Fund. The remaining half of the march will be invested into
corresponding participant directed investment accounts. Currently,
contributions to the Plan are not subject to Federal, state, or local
income taxes until withdrawn from the Plan. Participant forfeitures
serve to reduce the contribution due from the Bank.
c. Participant accounts:
Each participant's account is credited with the participant's
contributions and the Bank's matching contributions. The plan assets are
held by the RSI Retirement Trust ("RSI") and are segregated into eight
investment accounts: Core Equity Fund, Emerging Growth Equity Fund,
Value Equity Fund, Intermediate-Term Bond Fund, Actively Managed bond
Fund, Short-Term Investment Fund, RSI Common Stock Fund and Flushing
Financial Corporation Common Stock Fund.
Certain assets are not allocated to the above investment accounts. Those
unallocated amounts represent contributions pending allocation to the
designed investment accounts. In accordance with the provisions of the
Plan, net assets are to be valued from time to time, but not less often
than monthly, and the increase or decrease in such value since the last
valuation date is allocated among the participants' accounts so as to
preserve each participant's beneficial interest in the Plan.
d. Vesting:
Participants are immediately 100 percent vested in their salary deferral
contributions plus earnings thereon. Vesting of employer contributions
on behalf of each participant is based on years of service. A
participant is 100 percent vested after six years of credited service.
At December 31, 1998, forfeited nonvested accounts totaled $6,611, which
will be used to reduce future employer contributions.
Continued
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Notes to Financial Statements, Continued
e. Investment options:
Upon enrollment in the Plan, a participant may direct employee
contributions in one percent increments into the eight investment
accounts.
f. Payment of benefits:
Upon termination of service, a participant is entitled to receive a lump
sum or, in certain circumstances, quarterly, semi-annual, or annual
installments, equal to the value of his or her account to the extent
such funds are vested.
g. Loans to participants:
Loans are made available to all participants on a uniform and
nondiscriminatory basis. All loans must be adequately collateralized and
amortized over a period not to exceed five years unless the loan is to
purchase the principle residence of a participant, in which case, the
term cannot exceed ten years. Loans must bear a reasonable rate of
interest (currently prime rounded to the nearest one quarter of one
percent). Loans are limited by the Internal Revenue Code Section 72(p)
and may not exceed the lesser of (i) 50% of the net value of a
participant's vested account balance or (ii) $50,000 reduced by the
largest outstanding loan balance in the Plan during the preceding 12
months. At December 31, 1998, outstanding loans bore interest rates in
the range of 6% to 10%.
2. Summary of Significant Accounting Policies:
a.INVESTMENT VALUATION:
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at quoted market prices which represent
the net asset value of shares held by the Plan at year-end. Participant
notes receivable are valued at cost which approximates fair value.
The Plan presents in the statement of changes in net assets available
for plan benefits the net appreciation (depreciation) in the fair value
of its funds and common stock, which consists of the realized gains or
losses, unrealized appreciation (depreciation) and dividend or interest
income on securities held by those funds. Dividend and interest income
on investments held by the funds are reinvested by each fund.
b. EXPENSES:
Administrative expenses are paid by the Bank at the discretion of
the Plan Administrator.
c. OTHER:
Interest income on loans is recorded as earned on an accrual basis.
d. PAYMENT OF BENEFITS:
Benefit payments to participants are recorded upon distribution.
Continued
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Notes to Financial Statements, Continued
e. ESTIMATES:
The preparation of the Plan's financial statements in conformity with
generally accepted accounting principles requires the Plan
Administrator to make estimates and assumptions that affect the
reported amounts of net assets available for benefits at the date of
the financial statements and the changes in net assets available for
benefits during the period and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
f. RISKS AND UNCERTAINTIES:
The Plan provides for various investment options in any combination
of mutual funds and other investment securities.Investment securities
are exposed to various risks, such as interest rate, market, and credit
risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the
values of investment will occur in the near term and that such changes
could materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits.
3. Plan Termination:
Although it has not expressed any intent to do so, the Bank specifically
reserves the right, at any time, to terminate the Plan or to amend, in
whole or in part, any or all of the provisions of the Plan, subject to the
provisions of ERISA and approval of the Directors. In the event of
termination or partial termination of the Plan or upon complete
discontinuance of contributions under the Plan, the accounts of each
affected participant shall become 100% vested and fully distributable, in
accordance with the Internal Revenue Code and all income tax regulations
promulgated thereunder.
4. Federal Tax Status:
The Internal Revenue Service has determined and informed the Company by a
signed letter dated January 5, 1998 that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
However, the Plan administrator and the Plan's tax counsel believe that
the Plan is designed and is currently being operated in compliance with
the applicable requirements of the Internal Revenue Code.
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Item 27a - Schedule of Assets Held for Investment Purposes
As of December 31, 1998
<TABLE>
<CAPTION>
Number of Market
Units or Value Per
Shares Description of Cost* Fair Unit/Share
Investment Value
- ----------- ----------------------- --------- ---------- -----------
<S> <C> <C> <C> <C>
13,429.024 Core Equity Fund $439,129 $1,285,114 $95.69
5,241.219 Emerging Growth
Equity Fund 281,820 356,403 68.00
6,421.550 Value Equity Fund 377,459 437,243 68.09
13,148.796 Short-Term Investment 296,242 296,768 22.57
Fund
2,854.596 Actively Managed Bond 103,964 107,790 37.76
Fund
1,462.083 Intermediate-Term 49,404 50,106 34.27
Bond Fund
490.588 Retirement System 2,409 2,448 4.99
Group, Inc.
-- Loans to 199,974 199,974 --
participants**
59,234.378 Flushing Financial 712,060 1,251,979 21.136
Corporation
Stock Fund
--------- ---------
Total $2,462,461 $3,987,825
--------- ---------
</TABLE>
* Represents the Plan's percentage of each fund's historical cost.
** Loans bear a rate of interest of prime rounded to the nearest
one quarter of one percent.
Interest rate range of 6% to 10% for all outstanding loans to participants
as of December 31, 1998.
<PAGE>
FLUSHING SAVINGS BANK, FSB 401(k) SAVINGS PLAN
in RSI RETIREMENT TRUST
Item 27d - Schedule of Reportable Transactions
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Net
Purchases Sales Gain
Description of Assets Number Cost Number Proceeds (Loss)
- ------------------------ -------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Marine Midland Bank Short Term
Investment Fund 75 179,395 35 178,621 --
RSI Retirement Trust
Core Equity Fund 80 167,955 48 170,156 4,294
</TABLE>
These items represent transactions that either individually or when aggregated
equaled or exceeded 5% of the beginning net assets available for plan benefits.
