The First of Long Island Corporation (Nasdaq:FLIC), the parent
company of The First National Bank of Long Island, reported net
income of $19.5 million, or $2.20 per share, for 2011 versus $18.4
million, or $2.30 per share, for 2010. Returns on average assets
and average equity were 1.05% and 11.15%, respectively, for 2011
versus 1.11% and 12.94%, respectively, for 2010. Gains on sales of
securities were $138,000 in 2011 versus $1.7 million last year.
Excluding the gains from each year, net income is up $2.0 million,
or 11.6%, versus the reported increase of $1.1 million, or 5.8%.
Earnings per share for 2011 includes the dilutive effect of 1.4
million shares of common stock sold in July 2010, while 2010
earnings per share only include the dilutive effect of this sale
from the date of sale through the close of the year. Net income for
the fourth quarter of 2011 was $4.7 million, or $.53 per share, as
compared to $5.3 million, or $.60 per share, for the preceding
quarter and $4.1 million, or $.46 per share, for the same quarter
last year.
Analysis of Full Year 2011
Earnings
The increase in net income for 2011 is primarily attributable to
an increase in net interest income of $3.1 million and a reduction
in income tax expense of $427,000. Income tax expense declined
primarily because of an increase of $2.0 million, or 20.4%, in
tax-exempt income on municipal securities. Partially
offsetting the positive impact of the aforementioned items was the
$1.6 million decrease in gains on sales of securities and an
increase in occupancy and equipment expense of $662,000, or
10.2%.
The increase in net interest income for the year is primarily
attributable to growth in the average balances of all categories of
interest-earning assets as partially offset by an eighteen basis
point decline in net interest margin. On an overall basis, total
average interest-earning assets grew by $195.6 million, or
12.3%. Loans and municipal securities, the Bank's two highest
yielding asset categories, grew by $83.1 million or 9.6%, and $61.8
million, or 25.5%, respectively, while taxable securities and
interest-bearing bank balances, the Bank's two lowest yielding
asset categories, grew by $45.8 million, or 9.7%, and $4.9 million,
or 33.4%, respectively. Funding this growth were increases in
noninterest-bearing checking deposits of $47.5 million, or 12.7%,
capital of $32.3 million, or 22.7%, savings, NOW and money market
deposits of $94.4 million, or 14.5%, and long-term debt of $34.6
million, or 21.0%. From the standpoint of net interest income,
checking deposits and capital are the most desirable funding
sources because neither has an associated interest cost. The 2011
decrease in net interest margin occurred primarily because the
negative impact of market driven declines in yield on the Bank's
securities and loan portfolios far outweighed the positive impact
of management's successful efforts to lower the Bank's overall
funding cost. The funding cost reduction would have been
greater had management not engaged in a liability extension
strategy involving additional long-term borrowings and extending
the duration of the Bank's 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 Corporation's earnings.
Occupancy and equipment expense increased when comparing the
current to the prior year largely because of the cost of opening
six new branches since the beginning of 2010. Despite the cost
of personnel needed to staff the new branches and the impact of
normal annual salary increases, salary expense for 2011 was only
2.1% higher than 2010 and employee benefits expense declined by
$237,000, or 4.5%. Salary expense was contained by partially
staffing the new branches with experienced personnel from existing
branches and staff reductions through attrition. As a
result of these efficiency measures, which management believes were
executed without compromising internal controls or service quality,
the number of full-time-equivalent employees was virtually
unchanged when comparing year-end 2011 to 2010. A significant
portion of the decrease in employee benefit expense is attributable
to a decrease in retirement plan expense.
Analysis of Fourth Quarter 2011
Earnings
The increase in net income for the fourth quarter of 2011 versus
the same quarter last year was primarily attributable to an
increase in net interest income of $921,000 and an increase in
noninterest income, before gains on sales of securities, of
$276,000. The positive impact of these items was partially
offset by an increase in noninterest expense of $517,000. Net
interest income is up for the same reasons discussed with respect
to the full year. Noninterest income is up largely because
the fourth quarter of 2010 included a $300,000 charge to establish
a valuation allowance on one loan held for sale. The increase
in noninterest expense occurred largely because the fourth quarter
of this year included charges for litigation and real estate taxes
paid by the Bank to protect its interest in problem
loans.
The decline in net income for the fourth quarter of 2011 versus
the preceding quarter is primarily attributable to an increase in
the provision for loan losses of $670,000 and the aforementioned
charges for litigation and problem loan expense. The fourth
quarter 2011 provision for loan losses resulted from a combination
of loan growth, $335,000 in net chargeoffs, an increase of $172,000
in reserves allocated to loans individually deemed to be impaired
and an increase in collective impairment reserves on pools of loans
primarily due to management's current assessment of national and
local economic conditions.
Asset Quality
The Bank's allowance for loan losses to gross loans ("reserve
coverage ratio") grew by 13 basis points in 2011 from 1.55% at the
beginning of the year to 1.68% by year-end. This compares to
30 basis points of growth during 2010 from 1.25% at the beginning
of the year to 1.55% by year-end. The $4.1 million provision for
loan losses for 2011 is primarily attributable to loan growth, the
impact of $1.5 million in net chargeoffs and the 13 basis point
increase in the reserve coverage ratio. Net chargeoffs for
2011 are largely comprised of a $1.3 million chargeoff on one loan
that was transferred to the held for sale category and subsequently
sold. The $4.0 million provision for 2010 was primarily
attributable to loan growth, the impact of $305,000 of net
chargeoffs, an increase of $852,000 in specific reserves allocated
to problem loans and the 30 basis point increase in the reserve
coverage ratio. The increase in the reserve coverage ratio
during each year was largely driven by management's assessment of a
variety of qualitative factors including national and local
economic conditions. The credit quality of the Bank's loan
portfolio remains excellent, with delinquent and nonaccrual loans
amounting to only $4.0 million, or .4% of total loans, at December
31, 2011. Such loans are comprised of loans past due 30 to 89
days of $740,000 and nonaccrual loans of $3.2 million. In
addition, although troubled debt restructurings increased by $2.8
million during the current year, they remain relatively low at $5.4
million. Of these loans, $3.6 million are performing in
accordance with their modified terms and $1.8 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.
Capital
The Bank's Tier 1 leverage, Tier 1 risk-based and total
risk-based capital ratios were 8.80%, 20.31% and 21.57%,
respectively, at December 31, 2011. The strength of the Bank'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
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. In 2011, the Bank opened
two full service branches on Long Island, one in Point Lookout and
one in Massapequa. In 2012 the Bank is currently planning to
open one full service branch in Lindenhurst, Long Island.
Challenges We Face
Interest rates are currently very low and there is significant
price competition for loans in the Bank's marketplace. The
persistence of these factors will likely result in a decline in net
interest margin. If that were to occur, and management is
unable to offset the impact by increasing the volume of
interest-earning assets, expense savings or other measures, the
Bank's profitability could decline.
Commercial and residential real estate values have been
negatively impacted by persistently high levels of unemployment,
foreclosures and commercial vacancies. These factors present
threats to the maintenance of loan quality.
The banking industry is currently faced with an ever-increasing
number of new and complex regulatory requirements which are putting
downward pressure on revenues and upward pressure on the cost of
doing business.
BALANCE SHEET
INFORMATION |
|
|
|
|
12/31/11 |
12/31/10 |
|
(in thousands) |
Total Assets |
$ 2,022,407 |
$ 1,711,023 |
|
|
|
Loans: |
|
|
Commercial and industrial |
42,572 |
39,055 |
Secured by real estate: |
|
|
Commercial mortgages |
459,875 |
416,946 |
Residential mortgages |
372,477 |
334,768 |
Home equity |
103,513 |
103,829 |
Consumer |
4,596 |
5,790 |
|
983,033 |
900,388 |
Net deferred loan origination
costs |
2,826 |
2,571 |
|
985,859 |
902,959 |
Allowance for loan losses |
(16,572) |
(14,014) |
|
969,287 |
888,945 |
Investment Securities: |
|
|
U.S. government agencies |
5,113 |
5,155 |
State and municipals |
356,286 |
264,906 |
Pass-through mortgage
securities |
80,637 |
91,496 |
Collateralized mortgage
obligations |
514,005 |
378,136 |
|
956,041 |
739,693 |
Deposits: |
|
|
Checking |
435,517 |
386,797 |
Savings, NOW and money
market |
796,009 |
637,975 |
Time, $100,000 and over |
174,691 |
178,901 |
Time, other |
96,651 |
89,265 |
|
1,502,868 |
1,292,938 |
|
|
|
Borrowed Funds |
309,727 |
253,590 |
|
|
|
Stockholders' Equity |
189,347 |
156,694 |
|
|
|
Share and Per Share Data: |
|
|
Common Shares Outstanding at
Period End |
8,793,932 |
8,707,665 |
Book Value Per Share |
$21.53 |
$17.99 |
Tangible Book Value Per
Share |
$21.51 |
$17.97 |
|
CONSOLIDATED STATEMENTS
OF INCOME |
|
|
|
|
|
|
Twelve Months Ended |
Three Months Ended |
|
12/31/11 |
12/31/10 |
12/31/11 |
12/31/10 |
|
(dollars in thousands, except
per share data) |
Interest and dividend income: |
|
|
|
|
Loans |
$ 47,777 |
$ 45,660 |
$ 12,037 |
$ 11,563 |
Investment securities: |
|
|
|
|
Taxable |
16,662 |
16,879 |
4,378 |
3,942 |
Nontaxable |
11,873 |
9,864 |
3,220 |
2,697 |
|
76,312 |
72,403 |
19,635 |
18,202 |
Interest expense: |
|
|
|
|
Savings, NOW and money market
deposits |
4,035 |
4,049 |
1,099 |
884 |
Time deposits |
6,052 |
5,977 |
1,551 |
1,433 |
Short-term borrowings |
93 |
108 |
17 |
17 |
Long-term debt |
7,387 |
6,640 |
1,899 |
1,720 |
|
17,567 |
16,774 |
4,566 |
4,054 |
Net interest income |
58,745 |
55,629 |
15,069 |
14,148 |
Provision for loan losses |
4,061 |
3,973 |
1,424 |
1,550 |
Net interest income after
provision for loan losses |
54,684 |
51,656 |
13,645 |
12,598 |
|
|
|
|
|
Noninterest income: |
|
|
|
|
Investment Management Division
income |
1,539 |
1,465 |
378 |
302 |
Service charges on deposit
accounts |
3,186 |
3,465 |
749 |
819 |
Net gains on sales of
available-for-sale securities |
138 |
1,719 |
16 |
-- |
Other |
1,563 |
1,284 |
432 |
162 |
|
6,426 |
7,933 |
1,575 |
1,283 |
Noninterest expense: |
|
|
|
|
Salaries |
15,785 |
15,458 |
3,959 |
3,771 |
Employee benefits |
5,066 |
5,303 |
1,104 |
1,131 |
Occupancy and equipment
expense |
7,148 |
6,486 |
1,742 |
1,559 |
Other operating
expenses |
8,710 |
8,579 |
2,661 |
2,488 |
|
36,709 |
35,826 |
9,466 |
8,949 |
|
|
|
|
|
Income before income taxes |
24,401 |
23,763 |
5,754 |
4,932 |
Income tax expense |
4,944 |
5,371 |
1,026 |
868 |
Net Income |
$ 19,457 |
$ 18,392 |
$ 4,728 |
$ 4,064 |
|
|
|
|
|
Share and Per Share Data: |
|
|
|
|
Weighted Average Common &
Common Equivalent Shares |
8,854,964 |
8,007,677 |
8,872,056 |
8,816,176 |
Basic EPS |
$2.22 |
$2.33 |
$.54 |
$.47 |
Diluted EPS |
$2.20 |
$2.30 |
$.53 |
$.46 |
Cash Dividends Declared |
$.90 |
$.84 |
$.23 |
$.22 |
|
|
|
|
|
FINANCIAL
RATIOS |
|
|
|
|
|
ROA |
1.05% |
1.11% |
0.95% |
0.95% |
ROE |
11.15% |
12.94% |
10.04% |
9.71% |
Net Interest Margin |
3.63% |
3.81% |
3.50% |
3.80% |
Dividend Payout Ratio |
40.91% |
36.52% |
43.40% |
47.83% |
|
ASSET QUALITY
INFORMATION |
|
|
|
|
12/31/11 |
12/31/10 |
|
(dollars in thousands) |
Loan held for sale |
$ -- |
$ 1,000 |
|
|
|
Delinquent and nonaccrual loans*: |
|
|
Past due 30 through 89
days |
$ 740 |
$ 1,660 |
Past due 90 days or more and
still accruing |
-- |
-- |
Nonaccrual |
3,211 |
2,936 |
|
$ 3,951 |
$ 4,596 |
|
|
|
Troubled debt restructurings: |
|
|
Not included in delinquent and
nonaccrual loans |
$ 3,549 |
$ 2,433 |
Included in delinquent and
nonaccrual loans |
1,846 |
193 |
|
$ 5,395 |
$ 2,626 |
|
|
|
Other real estate owned |
$ -- |
$ -- |
|
|
|
Allowance for loan losses |
$ 16,572 |
$ 14,014 |
Allowance for loan losses as a percentage of
total loans |
1.68% |
1.55% |
Allowance for loan losses as a multiple of
nonaccrual loans |
5.2 |
4.8 |
|
|
|
* Excludes loan held for
sale |
|
|
|
AVERAGE BALANCE SHEET,
INTEREST RATES AND INTEREST DIFFERENTIAL |
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31, |
|
2011 |
2010 |
|
Average Balance |
Interest/ Dividends |
Average Rate |
Average Balance |
Interest/ Dividends |
Average Rate |
Assets |
(dollars in thousands) |
Interest-bearing bank balances |
$ 19,398 |
$ 47 |
.24 % |
$ 14,536 |
$ 34 |
.23 % |
Investment Securities: |
|
|
|
|
|
|
Taxable |
517,856 |
16,615 |
3.21 |
472,039 |
16,845 |
3.57 |
Nontaxable (1) |
304,647 |
17,989 |
5.90 |
242,830 |
14,945 |
6.15 |
Loans (1) (2) |
947,309 |
47,806 |
5.05 |
864,163 |
45,683 |
5.29 |
Total interest-earning assets |
1,789,210 |
82,457 |
4.61 |
1,593,568 |
77,507 |
4.86 |
Allowance for loan losses |
(15,013) |
|
|
(11,954) |
|
|
Net interest-earning assets |
1,774,197 |
|
|
1,581,614 |
|
|
Cash and due from banks |
26,346 |
|
|
26,008 |
|
|
Premises and equipment, net |
21,410 |
|
|
20,442 |
|
|
Other assets |
30,658 |
|
|
29,332 |
|
|
|
$1,852,611 |
|
|
$1,657,396 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
|
Savings, NOW & money market deposits |
$ 745,916 |
4,035 |
.54 |
$ 651,506 |
4,049 |
.62 |
Time deposits |
272,458 |
6,052 |
2.22 |
285,213 |
5,977 |
2.10 |
Total interest-bearing deposits |
1,018,374 |
10,087 |
.99 |
936,719 |
10,026 |
1.07 |
Short-term borrowings |
26,798 |
93 |
.35 |
28,864 |
108 |
.37 |
Long-term debt |
199,584 |
7,387 |
3.70 |
164,959 |
6,640 |
4.03 |
Total interest-bearing liabilities |
1,244,756 |
17,567 |
1.41 |
1,130,542 |
16,774 |
1.48 |
Checking deposits |
421,273 |
|
|
373,788 |
|
|
Other liabilities |
12,124 |
|
|
10,926 |
|
|
|
1,678,153 |
|
|
1,515,256 |
|
|
Stockholders' equity |
174,458 |
|
|
142,140 |
|
|
|
$1,852,611 |
|
|
$1,657,396 |
|
|
|
|
|
|
|
|
|
Net interest income (1) |
|
$ 64,890 |
|
|
$ 60,733 |
|
Net interest spread (1) |
|
|
3.20 % |
|
|
3.38 % |
Net interest margin (1) |
|
|
3.63 % |
|
|
3.81 % |
|
|
|
|
|
|
|
(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. |
|
|
|
|
|
|
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". 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-K for 2011. The Form 10-K will be
available through the Bank's Internet website at www.fnbli.com on
or about March 15, 2012, 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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