FLIC First of Long Island Corporation

The First of Long Island Corporation (Nasdaq: FLIC, the “Company” or the “Corporation”), the parent of The First National Bank of Long Island (the “Bank”), reported earnings for the three and six months ended June 30, 2024.

President and Chief Executive Officer Chris Becker commented on the Company's results: "We are encouraged by a quarter of increase in many financial metrics, including both deposit and loan growth during the quarter.  At the end of the first quarter of this year, I commented that we believe our margin should be at the bottom.  A one basis point increase in the margin during the second quarter is reflective of that guidance.  Our noninterest income and noninterest expense beat our guidance for the second straight quarter.  Finally, our credit quality results remained strong."

Analysis of Earnings - Six Months Ended June 30, 2024

Net income and earnings per share for the six months ended June 30, 2024, were $9.2 million and $0.41, respectively, compared to $13.4 million and $0.59, respectively, for the comparable period in 2023. The principal drivers of the change in earnings were a decline in net interest income of $8.9 million, or 19.5%, and an increase in the provision for credit losses of $1.6 million, partially offset by a loss on sales of securities of $3.5 million in the first quarter of 2023 and decreases in noninterest expense of $1.0 million and income tax expense of $1.4 million. The six months ended 2024 produced a return on average assets of 0.44%, return on average equity of 4.93%, net interest margin of 1.80%, and an efficiency ratio of 75.00%.

Net interest income declined when comparing the six months of 2024 and 2023 due to an increase in interest expense of $18.8 million that was only partially offset by a $9.9 million increase in interest income. The cost of interest-bearing liabilities increased 128 basis points while the yield on interest-earning assets increased 45 basis points when comparing the six-month periods. The Bank's balance sheet remains liability sensitive but the pace of repricing of average interest earning assets is beginning to match the pace of repricing of average interest-bearing liabilities, which stabilized the net interest margin over the first half of 2024.

The Bank recorded a provision for credit losses of $570,000 for the six months ended 2024, compared to a provision reversal of $1.1 million in the same period of 2023. The decline in the reserve was driven largely by declines in historical loss rates and specific reserves, partially offset by a deterioration in current and forecasted economic conditions, including adjustments for rent stabilization status of multifamily properties. The reserve coverage ratio remained stable at 0.88% of total loans at June 30, 2024 as compared to 0.88% at March 31, 2024 and 0.89% at December 31, 2023. Past due loans and nonaccrual loans were at $942,000 and $2.4 million, respectively, on June 30, 2024. Overall credit quality of the loan and investment portfolios remain strong.

Noninterest income, excluding the loss on sales of securities in the 2023 period, increased $454,000, or 8.8%, when comparing the first six months of 2024 and 2023. Recurring components of noninterest income including bank-owned life insurance (“BOLI”) and service charges on deposit accounts had increases of 7.8% and 10.5%, respectively. Other noninterest income increased 8.2% and included increases of $287,000 in merchant card services and $121,000 in pension income, which were partially offset by a gain on disposition of premises and fixed assets of $240,000 in 2023.

Noninterest expense declined $1.0 million, or 3.1%, for the six months of 2024, as compared to the same period in 2023. Reductions in occupancy and equipment expense of $397,000, telecommunication expense of $285,000, professional fees of $268,000 and salaries and employee benefits of $145,000 drove the decline. The decrease in occupancy and equipment expense was largely due to the ongoing branch optimization strategy, which resulted in the closing of various locations. Telecom expense decreased mainly due to efficiencies associated with system upgrades. Salaries and employee benefits declined largely due to a decrease in incentives compensation expense.

Income tax expense decreased $1.4 million, and the effective tax rate declined to 3.9% for the six months ended 2024 as compared to 11.6% for the same period in prior year. The decline in the effective tax rate is mainly due to an increase in the percentage of pre-tax income derived from the Bank’s real estate investment trust and BOLI. The decrease in income tax expense reflects the lower effective tax rate and a decline in pre-tax income.

Analysis of Earnings – Second Quarter 2024 Versus Second Quarter 2023

Net income for the second quarter of 2024 decreased $2.1 million as compared to the second quarter of last year.  The decrease is mainly attributable to a $3.4 million decline in net interest income for substantially the same reasons discussed above with respect to the six-month periods along with a $570,000 increase in the provision for credit losses.  Partially offsetting the decrease in net interest income was reductions in salaries and employee benefits and occupancy and equipment expense of $354,000 and $286,000, respectively, for substantially the same reasons previously discussed.  The quarter produced a return on average assets of 0.45%, return on average equity of 5.15%, net interest margin of 1.80%, and an efficiency ratio of 73.55%.

Analysis of Earnings – Second Quarter 2024 Versus First Quarter 2024

Net income for the second quarter of 2024 increased $363,000 compared to the first quarter of 2024. The increase was partially due to an increase in net interest income of $270,000, primarily due to an increase in interest income on loans and taxable investment securities along with decreases in borrowings outweighing the increase in interest expense on savings, NOW and money market deposits.  Also contributing to the favorable earnings over the linked quarter is a decrease in salaries and employee benefits of $474,000 partially offset by an increase in the provision for credit losses of $570,000. Salaries and employee benefit expenses were lower in the second quarter of 2024 due to a decline in incentive compensation and payroll related expenses.  

The increase in the net interest margin to 1.80% in the second quarter of 2024 from 1.79% in the first quarter of 2024 was largely due to the stabilization of our wholesale funding cost that is essentially repriced to current market rates. Additionally, average interest-bearing deposits increased $73.1 million and average higher cost borrowings decreased $52 million.

Liquidity

Total average deposits declined by $81.0 million, or 2.4%, when comparing the first halves of 2024 to 2023, reflecting industry trends. On June 30, 2024, overnight advances and other borrowings were down by $70.0 million and $42.5 million, respectively, from year-end 2023. The Bank had $1.1 billion in collateralized borrowing lines with the Federal Home Loan Bank of New York and the Federal Reserve Bank, as well as a $20 million unsecured line of credit with a correspondent bank. We also had $282.5 million in unencumbered cash and securities. In total, we had approximately $1.4 billion of available liquidity on June 30, 2024.

Capital

The Corporation’s capital position remains strong with a leverage ratio of approximately 9.91% on June 30, 2024. Book value per share was $16.71 on June 30, 2024, versus $16.22 on June 30, 2023. The accumulated other comprehensive loss component of stockholders’ equity is mainly comprised of a net unrealized loss in the available-for-sale securities portfolio due to higher market interest rates. The Company declared its quarterly cash dividend of $0.21 per share during the quarter. There were no share repurchases during the quarter. The Board and management continue to evaluate both capital management tools to provide the best opportunity to maximize shareholder value.

Forward Looking Information

This earnings release contains various “forward-looking statements” within the meaning of that term as set forth in Rule 175 of the Securities Act of 1933 and Rule 3b-6 of the Securities Exchange Act of 1934. Such statements are generally contained in sentences including the words “may” or “expect” or “could” or “should” or “would” or “believe” or “anticipate”. The Corporation cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that could cause future results to vary from current management expectations include, but are not limited to, changing economic conditions; legislative and regulatory changes; monetary and fiscal policies of the federal government; changes in interest rates; deposit flows and the cost of funds; demand for loan products; competition; changes in management’s business strategies; changes in accounting principles, policies or guidelines; changes in real estate values; and other factors discussed in the “risk factors” section of the Corporation’s filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements are made as of the date of this press release, and the Corporation assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

For more detailed financial information please see the Corporation’s quarterly report on Form 10-Q for the quarter ended June 30, 2024. The Form 10-Q will be available through the Bank’s website at www.fnbli.com on or about August 1, 2024, when it is anticipated to be electronically filed with the SEC. Our SEC filings are also available on the SEC’s website at www.sec.gov.

CONSOLIDATED BALANCE SHEETS(Unaudited)
		6/30/2024				12/31/2023
		(dollars in thousands)
Assets:
Cash and cash equivalents		$	67,289			$	60,887
Investment securities available-for-sale, at fair value			657,989				695,877
Loans:
Commercial and industrial			150,587				116,163
Secured by real estate:
Commercial mortgages			1,936,691				1,919,714
Residential mortgages			1,122,866				1,166,887
Home equity lines			39,665				44,070
Consumer and other			1,330				1,230
			3,251,139				3,248,064
Allowance for credit losses			(28,484	)			(28,992	)
			3,222,655				3,219,072
Restricted stock, at cost			27,530				32,659
Bank premises and equipment, net			30,687				31,414
Right-of-use asset - operating leases			21,270				22,588
Bank-owned life insurance			115,317				114,045
Pension plan assets, net			10,527				10,740
Deferred income tax benefit			31,628				28,996
Other assets			24,432				19,622
		$	4,209,324			$	4,235,900
Liabilities:
Deposits:
Checking		$	1,123,244			$	1,133,184
Savings, NOW and money market			1,628,078				1,546,369
Time			612,119				591,433
			3,363,441				3,270,986
Overnight advances			—				70,000
Other borrowings			430,000				472,500
Operating lease liability			23,553				24,940
Accrued expenses and other liabilities			16,134				17,328
			3,833,128				3,855,754
Stockholders' Equity:
Common stock, par value $0.10 per share:
Authorized, 80,000,000 shares;
Issued and outstanding, 22,517,881 and 22,590,942 shares			2,252				2,259
Surplus			78,537				79,728
Retained earnings			355,674				355,887
			436,463				437,874
Accumulated other comprehensive loss, net of tax			(60,267	)			(57,728	)
			376,196				380,146
		$	4,209,324			$	4,235,900

CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
		Six Months Ended								Three Months Ended
		6/30/2024				6/30/2023				6/30/2024				6/30/2023
		(dollars in thousands)
Interest and dividend income:
Loans		$	67,653			$	61,888			$	34,110			$	31,483
Investment securities:
Taxable			14,472				9,283				7,479				5,614
Nontaxable			1,917				2,972				957				1,027
			84,042				74,143				42,546				38,124
Interest expense:
Savings, NOW and money market deposits			21,520				13,386				11,437				7,611
Time deposits			14,036				7,301				7,059				4,232
Overnight advances			267				546				4				438
Other borrowings			11,627				7,435				5,615				4,002
			47,450				28,668				24,115				16,283
Net interest income			36,592				45,475				18,431				21,841
Provision (credit) for credit losses			570				(1,056	)			570				—
Net interest income after provision (credit) for credit losses			36,022				46,531				17,861				21,841
Noninterest income:
Bank-owned life insurance			1,697				1,574				857				794
Service charges on deposit accounts			1,701				1,540				821				753
Net loss on sales of securities			—				(3,489	)			—				—
Other			2,240				2,070				1,186				1,135
			5,638				1,695				2,864				2,682
Noninterest expense:
Salaries and employee benefits			19,474				19,619				9,500				9,854
Occupancy and equipment			6,324				6,721				3,110				3,396
Other			6,257				6,748				3,239				3,267
			32,055				33,088				15,849				16,517
Income before income taxes			9,605				15,138				4,876				8,006
Income tax expense			372				1,758				78				1,107
Net income		$	9,233			$	13,380			$	4,798			$	6,899
Share and Per Share Data:
Weighted Average Common Shares			22,515,464				22,522,663				22,510,359				22,551,568
Dilutive restricted stock units			62,161				59,910				50,494				33,309
			22,577,625				22,582,573				22,560,853				22,584,877
Basic EPS		$	0.41			$	0.59			$	0.21			$	0.31
Diluted EPS			0.41				0.59				0.21				0.31
Cash Dividends Declared per share			0.42				0.42				0.21				0.21
FINANCIAL RATIOS
(Unaudited)
ROA			0.44	%			0.64	%			0.45	%			0.66	%
ROE			4.93				7.27				5.15				7.44
Net Interest Margin			1.80				2.25				1.80				2.17
Dividend Payout Ratio			102.44				71.19				100.00				67.74
Efficiency Ratio			75.00				64.31				73.55				66.61

PROBLEM AND POTENTIAL PROBLEM LOANS AND ASSETS(Unaudited)
		6/30/2024				12/31/2023
		(dollars in thousands)
Loans including modifications to borrowers experiencing financial difficulty:
Modified and performing according to their modified terms		$	426			$	431
Past due 30 through 89 days			942				3,086
Past due 90 days or more and still accruing			—				—
Nonaccrual			2,370				1,053
			3,738				4,570
Other real estate owned			—				—
		$	3,738			$	4,570
Allowance for credit losses		$	28,484			$	28,992
Allowance for credit losses as a percentage of total loans			0.88	%			0.89	%
Allowance for credit losses as a multiple of nonaccrual loans			12.0	x			27.5	x

AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL(Unaudited)
		Six Months Ended June 30,
		2024												2023
		Average				Interest/				Average				Average				Interest/				Average
(dollars in thousands)		Balance				Dividends				Rate				Balance				Dividends				Rate
Assets:
Interest-earning bank balances		$	83,341			$	2,271				5.48	%		$	44,889			$	1,067				4.79	%
Investment securities:
Taxable (1)			629,958				12,201				3.87				533,866				8,216				3.08
Nontaxable (1) (2)			153,001				2,427				3.17				234,036				3,762				3.21
Loans (1) (2)			3,236,620				67,653				4.18				3,270,722				61,890				3.78
Total interest-earning assets			4,102,920				84,552				4.12				4,083,513				74,935				3.67
Allowance for credit losses			(28,639	)											(30,811	)
Net interest-earning assets			4,074,281												4,052,702
Cash and due from banks			32,751												30,388
Premises and equipment, net			31,093												32,024
Other assets			120,772												116,229
		$	4,258,897											$	4,231,343
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits		$	1,576,447				21,520				2.75			$	1,675,355				13,386				1.61
Time deposits			638,028				14,036				4.42				510,461				7,301				2.88
Total interest-bearing deposits			2,214,475				35,556				3.23				2,185,816				20,687				1.91
Overnight advances			9,560				267				5.62				20,845				546				5.28
Other borrowings			487,541				11,627				4.80				374,285				7,435				4.01
Total interest-bearing liabilities			2,711,576				47,450				3.52				2,580,946				28,668				2.24
Checking deposits			1,131,917												1,241,566
Other liabilities			39,137												37,541
			3,882,630												3,860,053
Stockholders' equity			376,267												371,290
		$	4,258,897											$	4,231,343
Net interest income (2)						$	37,102											$	46,267
Net interest spread (2)											0.60	%											1.43	%
Net interest margin (2)											1.80	%											2.25	%

(1) The average balances of loans include nonaccrual loans. The average balances of investment securities exclude unrealized gains and losses on available-for-sale securities.

(2) Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt loans and investment securities had been made in loans and investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of $1.00 of nontaxable income was $1.27 for each period presented using the statutory federal income tax rate of 21%.

AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL(Unaudited)
		Three Months Ended June 30,
		2024												2023
		Average				Interest/				Average				Average				Interest/				Average
(dollars in thousands)		Balance				Dividends				Rate				Balance				Dividends				Rate
Assets:
Interest-earning bank balances		$	111,565			$	1,520				5.48	%		$	40,668			$	520				5.13	%
Investment securities:
Taxable (1)			621,059				5,959				3.84				599,558				5,094				3.40
Nontaxable (1) (2)			152,585				1,212				3.18				165,559				1,300				3.14
Loans (1)			3,229,796				34,110				4.22				3,253,952				31,483				3.87
Total interest-earning assets			4,115,005				42,801				4.16				4,059,737				38,397				3.78
Allowance for credit losses			(28,330	)											(30,204	)
Net interest-earning assets			4,086,675												4,029,533
Cash and due from banks			33,798												29,768
Premises and equipment, net			30,929												32,263
Other assets			120,660												117,288
		$	4,272,062											$	4,208,852
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits		$	1,618,812				11,437				2.84			$	1,673,101				7,611				1.82
Time deposits			632,201				7,059				4.49				513,414				4,232				3.31
Total interest-bearing deposits			2,251,013				18,496				3.30				2,186,515				11,843				2.17
Overnight advances			275				4				5.85				32,747				438				5.36
Other borrowings			470,824				5,615				4.80				378,654				4,002				4.24
Total interest-bearing liabilities			2,722,112				24,115				3.56				2,597,916				16,283				2.51
Checking deposits			1,137,244												1,201,585
Other liabilities			38,259												37,391
			3,897,615												3,836,892
Stockholders' equity			374,447												371,960
		$	4,272,062											$	4,208,852
Net interest income (2)						$	18,686											$	22,114
Net interest spread (2)											0.60	%											1.27	%
Net interest margin (2)											1.80	%											2.17	%

(1) The average balances of loans include nonaccrual loans. The average balances of investment securities exclude unrealized gains and losses on available-for-sale securities.

(2) Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt investment securities had been made in investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of $1.00 of nontaxable income was $1.27 for each period presented using the statutory federal income tax rate of 21%.

For More Information Contact:

Janet Verneuille, SEVP and CFO

(516) 671-4900, Ext. 7462