The First of Long Island Corporation Announces Increases in Net Income for the Nine and Three Months Ended September 30, 2011
November 04 2011 - 11:45AM
The First of Long Island Corporation (Nasdaq:FLIC) reported net
income of $14.7 million, or $1.66 per share, for the first nine
months of 2011 versus $14.3 million, or $1.85 per share, for the
same period last year. Gains on sales of securities were $122,000
versus $1.7 million for the same period last year. Excluding these
gains from each period, net income is up $1.4 million, or 10.3%.
Earnings per share for the current period includes the dilutive
effect of 1.4 million shares of common stock sold in July 2010,
while the same period last year only includes the dilutive effect
of such sale for most of the third quarter. Net income for the
third quarter of 2011 was $5.3 million, or $.60 per share, as
compared to $4.7 million, or $.55 per share, for the same quarter
last year.
The increase in net income for the first nine months of this
year is primarily attributable to an increase in net interest
income of $2.2 million and a reduction in income tax expense of
$585,000. Income tax expense declined primarily because of an
increase of $1.5 million, or 20.7%, in tax-exempt income on
municipal securities and, to a much lesser extent, a small decrease
in income before income taxes. Largely offsetting the positive
impact of the aforementioned items was the decrease in gains on
sales of securities and an increase in occupancy and equipment
expense of $479,000. The increase in net income for the third
quarter of this year was largely driven by an increase in net
interest income of $967,000 and management's ability to contain
expenses despite growth in the Bank's branch distribution
system.
The increase in net interest income for the nine-month period is
primarily attributable to growth in the average balances of all
categories of interest-earning assets as partially offset by a
fifteen basis point decline in net interest margin. Loans and
municipal securities, the Bank's two highest yielding asset
categories, grew by $85.1 million or 9.9%, and $58.7 million, or
25.1%, respectively, while taxable securities, the Bank's lowest
yielding asset category, grew by only $21.5 million, or 4.5%. On an
overall basis, total average interest-earning assets increased by
$168.5 million, or 10.7%, and, from the standpoint of
profitability, the mix of such assets improved. Funding the growth
in interest-earning assets were increases in noninterest-bearing
checking deposits of $47.3 million, capital of $36.2 million,
savings, NOW and money market deposits of $70.4 million and
long-term debt of $34.9 million. Checking deposits and capital are
both desirable funding sources from the standpoint that neither has
an associated interest cost. Net interest margin declined primarily
because the negative impact of market driven declines in yield on
both the Bank's securities and loan portfolios outweighed the
positive impact of management's successful efforts to lower the
overall rate paid by the Bank on interest-bearing liabilities. The
reduction in such overall rate would have been greater had
management not engaged in a liability extension strategy. This
strategy involved the promotion of higher cost, longer-term time
deposits, additional long-term borrowings, and being less
aggressive in pricing money market and shorter-term time deposits.
This strategy results in paying more for funding today in exchange
for possibly reducing the negative impact that future increases in
interest rates could have on the Bank's earnings.
Occupancy and equipment expense increased when comparing the
nine-month periods largely due to branch expansion. Since the
beginning of 2010, the Bank opened six new branches. Despite the
cost of personnel needed to staff the new branches and the impact
of normal annual salary increases, salaries for the first nine
months of 2011 were only slightly higher than the same period last
year and employee benefit expense declined by $210,000, or 5.0%.
Salary expense was contained by partially staffing the new branches
with experienced personnel from existing branches and through staff
reductions due to attrition. As a result of these efficiency
measures, the number of full-time-equivalent employees was
unchanged when comparing the end of the current nine-month period
to the same period last year. Management believes that these
efficiency measures were executed without compromising internal
controls or service quality. A significant portion of the decrease
in employee benefit expense is attributable to a decrease in
retirement plan expense.
The Bank's allowance for loan losses to gross loans ("reserve
coverage ratio") was 1.55% and 1.60%, respectively at the beginning
and end of the current nine-month period compared to 1.25% and
1.41%, respectively, at the beginning and end of the comparable
period last year. The $2.6 million provision for loan losses for
the first nine months of this year is primarily attributable to
loan growth, the impact of a $1.3 million chargeoff on one loan
transferred to the held for sale category and the 5 basis point
increase in the reserve coverage ratio. The $2.4 million provision
for the first nine months of last year was also attributable to
loan growth and, additionally, the 16 basis point increase in the
reserve coverage ratio. The increases in the reserve coverage ratio
during each nine month period were largely driven by management's
assessment of national and local economic conditions. The credit
quality of the Bank's loan portfolio remains excellent as evidenced
by, among other things, a low level of delinquent loans. Total
delinquent loans amounted to $3.8 million at September 30, 2011,
comprised of loans past due 30 to 89 days of $777,000 and
nonaccrual loans of $3.0 million. In addition, although troubled
debt restructurings increased by $2.8 million during the current
nine-month period, they remain low at $5.4 million. Of these loans,
$3.7 million are performing in accordance with their modified terms
and $1.7 million are delinquent. The credit quality of the Bank's
securities portfolio also remains excellent. The Bank's mortgage
securities are backed by mortgages underwritten on conventional
terms, and almost all of these securities are full faith and credit
obligations of the U.S. government. The remainder of the Bank's
securities portfolio consists principally of municipal securities
rated AA or better by major rating agencies.
The Bank's Tier 1 leverage, Tier 1 risk-based and total
risk-based capital ratios were 8.93%, 20.46% and 21.72%,
respectively, at September 30, 2011. The strength of the
Corporation's balance sheet, from both a capital and asset quality
perspective, positions the Bank for continued growth in a measured
and disciplined fashion. Key strategic initiatives with respect to
the Bank's earnings prospects will continue to include loan growth
and expansion of the Bank's branch distribution system both on Long
Island and in New York City. However, interest rates are currently
very low, loan demand by borrowers meeting the Bank's underwriting
guidelines is modest and future growth of the Bank's municipal
securities portfolio could be limited by the alternative minimum
tax. The persistence of these factors would likely result in a
decline in net interest margin. If that were to occur, and
management is unable to offset the negative impact of the decline
with increased revenue from existing or new product offerings,
expense savings or other measures, the Bank's profitability could
decline.
Thus far in 2011, the Bank opened two full service branches on
Long Island, one in Point Lookout and one in Massapequa. There are
no additional branch openings scheduled for the balance of
2011.
BALANCE SHEET
INFORMATION |
|
|
|
|
9/30/11 |
12/31/10 |
|
(in thousands) |
|
|
|
Total Assets |
$ 1,940,018 |
$ 1,711,023 |
|
|
|
Loans: |
|
|
Commercial and industrial |
43,454 |
39,055 |
Secured by real estate: |
|
|
Commercial mortgages |
449,235 |
416,946 |
Residential
mortgages |
365,154 |
334,768 |
Home equity |
100,226 |
103,829 |
Consumer |
4,766 |
5,790 |
|
962,835 |
900,388 |
Net deferred loan
origination costs |
2,739 |
2,571 |
|
965,574 |
902,959 |
Allowance for loan losses |
(15,483) |
(14,014) |
|
950,091 |
888,945 |
Investment Securities: |
|
|
U.S. government agencies |
5,155 |
5,155 |
State and municipals |
334,083 |
264,906 |
Pass-through mortgage
securities |
85,145 |
91,496 |
Collateralized mortgage
obligations |
475,271 |
378,136 |
|
899,654 |
739,693 |
Deposits: |
|
|
Checking |
422,807 |
386,797 |
Savings, NOW and money
market |
804,062 |
637,975 |
Time, $100,000 and over |
179,482 |
178,901 |
Time, other |
97,666 |
89,265 |
|
1,504,017 |
1,292,938 |
|
|
|
Borrowed Funds |
230,085 |
253,590 |
|
|
|
Stockholders' Equity |
185,900 |
156,694 |
|
|
|
Share and Per Share Data: |
|
|
Common Shares Outstanding at
Period End |
8,786,910 |
8,707,665 |
Book Value Per Share |
$21.16 |
$17.99 |
Tangible Book Value Per
Share |
$21.13 |
$17.97 |
|
|
|
|
|
INCOME STATEMENT
INFORMATION |
|
|
|
|
|
|
Nine Months Ended |
Three Months Ended |
|
9/30/11 |
9/30/10 |
9/30/11 |
9/30/10 |
|
(dollars in thousands, except
per share data) |
|
|
|
|
|
Net Interest Income |
$ 43,676 |
$ 41,481 |
$ 15,021 |
$ 14,054 |
Provision for Loan Losses |
2,637 |
2,423 |
754 |
825 |
Net Interest Income after
Loan |
|
|
|
|
Loss Provision |
41,039 |
39,058 |
14,267 |
13,229 |
|
|
|
|
|
Gains on Sales of Securities |
122 |
1,719 |
-- |
-- |
Other Noninterest Income |
4,729 |
4,931 |
1,569 |
1,778 |
Noninterest Expense |
27,243 |
26,877 |
9,040 |
8,945 |
Income Before Income Taxes |
18,647 |
18,831 |
6,796 |
6,062 |
Income Tax Expense |
3,918 |
4,503 |
1,510 |
1,357 |
Net Income |
$ 14,729 |
$ 14,328 |
$ 5,286 |
$ 4,705 |
|
|
|
|
|
Share and Per Share Data: |
|
|
|
|
Weighted Average Common
& |
|
|
|
|
Common Equivalent
Shares |
8,849,204 |
7,735,215 |
8,852,398 |
8,505,970 |
Basic EPS |
$1.68 |
$1.88 |
$.60 |
$.56 |
Diluted EPS |
$1.66 |
$1.85 |
$.60 |
$.55 |
Cash Dividends Declared |
$.67 |
$.62 |
$.23 |
$.22 |
Dividend Payout Ratio |
40.36% |
33.51% |
38.33% |
40.00% |
|
|
|
|
|
Financial Ratios: |
|
|
|
|
ROA |
1.09% |
1.17% |
1.10% |
1.13% |
ROE |
11.56% |
14.29% |
11.75% |
11.83% |
Net Interest Margin |
3.67% |
3.82% |
3.59% |
3.86% |
|
|
|
ASSET QUALITY
INFORMATION |
|
|
|
|
9/30/11 |
12/31/10 |
|
(dollars in thousands) |
|
|
|
Loan held for sale |
$ -- |
$ 1,000 |
|
|
|
Delinquent and nonaccrual loans*: |
|
|
Past due 30 through 89
days |
$ 777 |
$ 1,660 |
Past due 90 days or more
and still accruing |
-- |
-- |
Nonaccrual |
3,012 |
2,936 |
|
$ 3,789 |
$ 4,596 |
|
|
|
Troubled debt restructurings: |
|
|
Not included in
delinquent and nonaccrual loans |
$ 3,772 |
$ 2,433 |
Included in delinquent
and nonaccrual loans |
1,658 |
193 |
|
$ 5,430 |
$ 2,626 |
|
|
|
Other real estate owned |
$ -- |
$ -- |
|
|
|
Allowance for loan losses |
$ 15,483 |
$ 14,014 |
Allowance for loan losses as a percentage of
total loans |
1.60% |
1.55% |
Allowance for loan losses as a multiple of
nonaccrual loans |
5.1 |
4.8 |
|
|
|
* Excludes loan held for sale |
|
|
|
|
|
|
|
|
|
AVERAGE BALANCE SHEET,
INTEREST RATES AND INTEREST DIFFERENTIAL |
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
2011 |
2010 |
|
Average |
Interest/ |
Average |
Average |
Interest/ |
Average |
|
Balance |
Dividends |
Rate |
Balance |
Dividends |
Rate |
Assets |
(dollars in
thousands) |
|
|
|
|
|
Interest-bearing bank balances |
$ 17,967 |
$ 31 |
.23% |
$ 14,823 |
$ 24 |
.22% |
Investment Securities: |
|
|
|
|
|
|
Taxable |
495,744 |
12,253 |
3.30 |
474,198 |
12,913 |
3.63 |
Nontaxable (1) |
292,410 |
13,111 |
5.98 |
233,695 |
10,859 |
6.20 |
Loans (1) (2) |
940,346 |
35,762 |
5.07 |
855,257 |
34,115 |
5.32 |
Total interest-earning assets |
1,746,467 |
61,157 |
4.67 |
1,577,973 |
57,911 |
4.89 |
Allowance for loan losses |
(14,764) |
|
|
(11,526) |
|
|
Net interest-earning assets |
1,731,703 |
|
|
1,566,447 |
|
|
Cash and due from banks |
26,177 |
|
|
25,996 |
|
|
Premises and equipment, net |
21,315 |
|
|
20,342 |
|
|
Other assets |
30,379 |
|
|
28,538 |
|
|
|
$1,809,574 |
|
|
$1,641,323 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
|
Savings, NOW & money market deposits |
$ 718,230 |
2,936 |
.55 |
$ 647,799 |
3,165 |
.65 |
Time deposits |
272,888 |
4,501 |
2.21 |
288,747 |
4,544 |
2.10 |
Total interest-bearing deposits |
991,118 |
7,437 |
1.00 |
936,546 |
7,709 |
1.10 |
Short-term borrowings |
27,699 |
76 |
.37 |
31,958 |
91 |
.38 |
Long-term debt |
196,916 |
5,488 |
3.73 |
162,000 |
4,920 |
4.06 |
Total interest-bearing liabilities |
1,215,733 |
13,001 |
1.43 |
1,130,504 |
12,720 |
1.50 |
Checking deposits |
413,525 |
|
|
366,236 |
|
|
Other liabilities |
10,015 |
|
|
10,495 |
|
|
|
1,639,273 |
|
|
1,507,235 |
|
|
Stockholders' equity |
170,301 |
|
|
134,088 |
|
|
|
$1,809,574 |
|
|
$1,641,323 |
|
|
|
|
|
|
|
|
|
Net interest income (1) |
|
$ 48,156 |
|
|
$ 45,191 |
|
Net interest spread (1) |
|
|
3.24% |
|
|
3.39% |
Net interest margin (1) |
|
|
3.67% |
|
|
3.82% |
(1) 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 $1.52 in each period presented based on a
Federal income tax rate of 34%. (2) For the purpose of these
computations, nonaccruing loans are included in the daily average
loan amounts outstanding.
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." The Corporation cautions that
these forward-looking statements are subject to numerous
assumptions, risks and uncertainties, and therefore actual results
could differ materially from those contemplated by the
forward-looking statements. In addition, the Corporation assumes no
duty to update forward-looking statements.
For more detailed financial information please see the
Corporation's Form 10-Q for the quarterly period ended September
30, 2011. The Form 10-Q will be available through the Bank's
Internet website at www.fnbli.com on or about November 9, 2011,
after it is electronically filed with the Securities and Exchange
Commission ("SEC"). Our SEC filings are also available on the SEC's
Internet website at www.sec.gov. You may also read and copy any
document we file with the SEC at the SEC's public reference room at
100 F Street, N.E., Room 1580, Washington, DC 20549. You should
call 1-800-SEC-0330 for more information on the public reference
room.
CONTACT: Mark D. Curtis, Senior Vice President and Treasurer
(516) 671-4900, Ext. 556
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