The First of Long Island Corporation (Nasdaq:FLIC), the parent
company of The First National Bank of Long Island, reported net
income and earnings per share for the first quarter of 2014 of $6.0
million and $.64, respectively, representing increases over the
same quarter last year of 5.6% and 3.2%, respectively. Compared to
the fourth quarter of 2013, net income is up $782,000, or 15.1%,
and earnings per share are up $.08, or 14.3%, primarily because of
a decrease in the provision for loan losses of $1.2 million.
Dividends per share were $.26 for the first quarter of 2014, or
4.0% more than the $.25 per share declared in the same quarter last
year. Returns on average assets (ROA) and average equity (ROE) for
the first quarter of 2014 were 1.01% and 11.36%, respectively,
versus 1.09% and 11.10%, respectively, for the first quarter of
2013. Book value per share increased by 5%, or from $22.59 at
year-end 2013 to $23.72 at the close of the current quarter. The
credit quality of the Bank's loan portfolio remains excellent, and
management intends to continue taking advantage of lending and
branching opportunities in the Bank's marketplace.
Analysis of First Quarter
Earnings
Net income increased by $318,000 when comparing the first three
months of 2014 to the same period last year. The increase is
primarily attributable to increases in net interest income and
noninterest income of $925,000 and $173,000, respectively.
Partially offsetting these items were increases in noninterest
expense and income tax expense of $410,000 and $237,000,
respectively, and a decrease of $133,000 in the credit provision
for loan losses.
Although intermediate and long-term interest rates were
significantly higher in the first quarter of 2014 than the same
quarter last year, they are still relatively low. In this sustained
low interest rate environment, despite significant growth
quarter-over-quarter in the average balances of loans and
noninterest-bearing checking deposits of 29.2% and 18.3%,
respectively, net interest income only increased by 6.1%, or
$925,000. In addition, net interest margin declined by 26 basis
points from 3.31% in the first quarter of 2013 to 3.05% for the
current quarter. A low interest rate environment exerts downward
pressure on net interest income and net interest margin primarily
because: (1) the benefit of no cost funding in the form of
noninterest-bearing checking deposits and capital is reduced; (2)
cash received from payments and prepayments of higher yielding
loans and securities may be used to originate or purchase lower
yielding loans and securities; (3) some loans prepay in full
resulting in the immediate writeoff of deferred costs while the
rates on other loans are modified downward; and (4) prepayment
speeds on mortgage securities can be relatively high, thereby
necessitating the faster amortization of purchase premiums.
Average interest-earning assets increased by $299.9 million, or
14.8%, when comparing the first quarter of 2014 to the same quarter
last year. The increase is primarily comprised of increases in the
average balances of loans of $334.5 million, or 29.2%, and
nontaxable securities of $16.1 million, or 4.3%, as partially
offset by a decrease in the average balance of taxable securities
of $55.8 million, or 11.2%. From a yield perspective, the shift
from taxable securities to loans and nontaxable securities
partially mitigated the negative impact on net interest margin of
the persistently low interest rate environment. Loan growth, to the
extent not funded by the decline in taxable securities, was funded
by growth in the average balances of long-term borrowings of $147.4
million, or 101.7%, noninterest-bearing checking deposits of $94.0
million, or 18.3%, and interest-bearing deposits of $81.9 million,
or 7.2%. The $147.4 million increase in long-term borrowings
together with a quarter-over-quarter increase in the average
balance of time deposits of $28.6 million, or 11.3%, resulted from
management's desire to better match the duration of the Bank's
assets and liabilities and thereby hedge against an eventual
increase in interest rates.
The Bank's continued ability to grow loans is attributable to a
variety of factors including, among others, competitive pricing,
targeted solicitation efforts, advertising campaigns, and broker
relationships for both residential and multifamily commercial
mortgages. The Bank's continued ability to grow deposits is
attributable to, among other things, continued expansion of the
Bank's branch distribution system, targeted solicitation of local
commercial businesses and municipalities, new and expanded lending
relationships and the Bank's positive reputation in its
marketplace.
The $173,000 increase in noninterest income for the first three
months of 2014 versus the same period last year is largely
attributable to increases in service charges on deposit accounts of
$94,000, or 13.3%, Investment Management Division income of
$89,000, or 21.7%, and net gains on sales of securities of $65,000.
Partially offsetting these items was a decrease of $75,000 in other
noninterest income due primarily to the fact that the first quarter
of 2013 included a real estate tax refund of $73,000. The increase
in Investment Management Division income resulted from appreciation
in the market value of assets under management and new
business.
The $410,000 increase in noninterest expense is comprised of
increases in salaries of $229,000, or 5.5%, occupancy and equipment
expense of $239,000, or 12.0%, and other noninterest expense of
$141,000, or 6.5%, partially offset by a decrease in employee
benefits expense of $199,000, or 14.1%. The increase in salaries is
primarily due to higher stock-based compensation expense, normal
annual salary adjustments and additions to staff in the back
office. The increase in occupancy and equipment expense is largely
due to increases in general maintenance and repairs expense, snow
removal costs and the cost of servicing equipment. The increase in
other noninterest expense includes an increase in marketing expense
and a growth-related increase in FDIC insurance expense. The
decrease in employee benefits expense is largely attributable to a
decrease in pension expense, partially offset by an increase in
incentive compensation cost. Pension expense declined as a result
of changing market conditions which resulted in favorable
performance of plan assets and a decrease in the discounted value
of the plan's benefit obligation. Management continues to maintain
a strong focus on expense control measures and enhancements in
operating efficiency.
Asset Quality
The Bank's allowance for loan losses to total loans (reserve
coverage ratio) decreased by 3 basis points from 1.41% at year-end
2013 to 1.38% at the close of the current quarter. The decrease is
primarily due to a change in management's estimate of the impact of
current economic conditions on the required allowance for loan
losses and a decrease in specific reserves on loans individually
deemed to be impaired. The $59,000 credit provision for loan losses
in the first quarter of 2014 is primarily attributable to the
reduction in the reserve coverage ratio, as partially offset by net
chargeoffs and growth in the loan portfolio.
The Bank's reserve coverage ratio also decreased by 3 basis
points during the first quarter of 2013, or from 1.62% at year-end
2012 to 1.59% at March 31, 2013. The decrease is primarily due to a
reduction in historical loss rates and net recoveries on loans
previously charged off. The $192,000 credit provision for loan
losses in the first quarter of 2013 was primarily attributable to
the reduction in the reserve coverage ratio, as partially offset by
growth in the loan portfolio and an increase in specific reserves
on loans individually deemed to be impaired.
The credit quality of the Bank's loan portfolio remains
excellent. Nonaccruing loans, including loans held-for-sale,
amounted to $2.1 million, or .14% of total loans outstanding, at
March 31, 2014, compared to $4.5 million, or .30% of total loans
outstanding at December 31, 2013. Troubled debt restructurings
declined by $933,000 during the quarter to $2.2 million at March
31, 2014. Of this amount, $532,000 are performing in accordance
with their modified terms and $1.6 million are nonaccrual and
included in the aforementioned amount of nonaccrual loans. The
decrease in nonaccrual loans largely resulted from the sale of one
held-for-sale loan for its carrying value of $900,000 and the
restoration of one loan to an accruing status. The decrease in
troubled debt restructurings largely resulted from the disposition
of the loan held-for-sale. Loans past due 30 through 89 days at
March 31, 2014 amounted to $1.6 million, or .11% of total loans
outstanding.
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, with 82% of these
securities being full faith and credit obligations of the U.S.
government and the balance being obligations of U.S. government
sponsored entities. The remainder of the Bank's securities
portfolio principally consists of high quality, general obligation
municipal securities rated AA or better by major rating agencies.
In selecting municipal securities for purchase, the Bank uses
credit agency ratings for screening purposes only and then performs
its own credit analysis. On an ongoing basis, the Bank periodically
assesses the credit strength of the municipal securities in its
portfolio and makes decisions to hold or sell based on such
assessments.
Capital
The Corporation's Tier 1 leverage, Tier 1 risk-based and total
risk-based capital ratios were 8.79%, 16.13% and 17.39%,
respectively, at March 31, 2014. The strength of the Corporation's
balance sheet from both a capital and asset quality perspective
positions the Corporation for continued growth in a measured and
disciplined fashion.
Key Strategic Initiatives
Key strategic initiatives will continue to include loan and
deposit growth through effective relationship management, targeted
solicitation efforts, new product offerings and continued expansion
of the Bank's branch distribution system. Additionally, with
respect to loan growth, the Bank will continue to develop its
existing broker and correspondent relationships. All loans
originated through such relationships are underwritten by Bank
personnel. The Bank expects to open branches in Oceanside and
Manhasset, Long Island by the third quarter of 2014 and in
Greenlawn, Long Island during the first quarter of 2015. Management
is continuing its ongoing evaluation of additional sites for future
branch expansion.
Challenges We Face
Although intermediate and long-term interest rates are
significantly higher than they were one year ago, they are still
relatively low and could remain so for the foreseeable future. In
addition, there is significant price competition for loans in the
Bank's marketplace and there is little room for the Bank to further
reduce its deposit rates. The persistence of these factors could
result in a decline in net interest margin from its current level.
If that were to occur, and management is unable to offset the
resulting negative impact by increasing the volume of the Bank's
interest-earning assets, effecting a favorable change in the mix of
the Bank's interest-earning assets or interest-bearing liabilities,
reducing expenses or the employment of other measures, the Bank's
profitability could decline.
Commercial and residential real estate values have been
negatively impacted by persistently high levels of unemployment and
underemployment, the erosion of household disposable income,
foreclosures and commercial vacancies. Although economic conditions
seem to be improving, these factors still present meaningful
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 required
capital levels and the cost of doing business.
|
|
|
BALANCE SHEET
INFORMATION |
(Unaudited) |
|
|
|
|
3/31/14 |
12/31/13 |
|
(dollars in thousands,
except |
|
share and per share data) |
|
|
|
Total Assets |
$ 2,407,115 |
$ 2,399,892 |
|
|
|
Loans: |
|
|
Commercial and industrial |
69,700 |
71,818 |
Secured by real estate: |
|
|
Commercial mortgages |
713,088 |
716,011 |
Residential mortgages |
621,813 |
605,343 |
Home equity lines |
77,610 |
77,581 |
Consumer |
6,472 |
7,184 |
|
1,488,683 |
1,477,937 |
Allowance for loan losses |
(20,555) |
(20,848) |
|
1,468,128 |
1,457,089 |
Investment Securities: |
|
|
State and municipals |
397,256 |
384,521 |
Pass-through mortgage
securities |
148,389 |
153,696 |
Collateralized mortgage
obligations |
259,615 |
278,680 |
|
805,260 |
816,897 |
Deposits: |
|
|
Checking |
632,839 |
599,114 |
Savings, NOW and money
market |
933,514 |
917,974 |
Time, $100,000 and
over |
192,464 |
173,379 |
Time, other |
109,187 |
91,661 |
|
1,868,004 |
1,782,128 |
|
|
|
Borrowed Funds |
304,778 |
395,463 |
|
|
|
Stockholders' Equity |
218,062 |
206,556 |
|
|
|
Share and Per Share Data: |
|
|
Common Shares Outstanding
at Period End |
9,193,251 |
9,141,767 |
Book Value Per Share |
$23.72 |
$22.59 |
Tangible Book Value Per
Share |
$23.70 |
$22.57 |
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF INCOME |
(Unaudited) |
|
|
|
|
Three Months Ended |
|
3/31/14 |
3/31/13 |
|
(dollars in thousands,
except |
|
share and per share data) |
Interest and dividend income: |
|
|
Loans |
$ 14,059 |
$ 12,332 |
Investment securities: |
|
|
Taxable |
2,372 |
2,629 |
Nontaxable |
3,261 |
3,158 |
|
19,692 |
18,119 |
Interest expense: |
|
|
Savings, NOW and money market
deposits |
493 |
609 |
Time deposits |
1,417 |
1,282 |
Short-term borrowings |
50 |
67 |
Long-term debt |
1,637 |
991 |
|
3,597 |
2,949 |
Net interest income |
16,095 |
15,170 |
Provision for loan losses (credit) |
(59) |
(192) |
Net interest income after provision for
loan losses (credit) |
16,154 |
15,362 |
|
|
|
Noninterest income: |
|
|
Investment Management Division
income |
500 |
411 |
Service charges on deposit accounts |
803 |
709 |
Net gains on sales of securities |
69 |
4 |
Other |
475 |
550 |
|
1,847 |
1,674 |
Noninterest expense: |
|
|
Salaries |
4,430 |
4,201 |
Employee benefits |
1,213 |
1,412 |
Occupancy and equipment |
2,237 |
1,998 |
Other |
2,310 |
2,169 |
|
10,190 |
9,780 |
|
|
|
Income before income
taxes |
7,811 |
7,256 |
Income tax expense |
1,854 |
1,617 |
Net Income |
$ 5,957 |
$ 5,639 |
|
|
|
Share and Per Share Data: |
|
|
Weighted Average Common & Common
Equivalent Shares |
9,263,506 |
9,108,336 |
Basic EPS |
$.65 |
$.62 |
Diluted EPS |
$.64 |
$.62 |
Cash Dividends Declared |
$.26 |
$.25 |
|
|
|
FINANCIAL
RATIOS |
(Unaudited) |
|
|
|
ROA |
1.01% |
1.09% |
ROE |
11.36% |
11.10% |
Net Interest Margin |
3.05% |
3.31% |
Dividend Payout Ratio |
40.63% |
40.32% |
|
|
|
|
|
|
|
PROBLEM AND
POTENTIAL PROBLEM LOANS AND ASSETS |
(Unaudited) |
|
|
|
|
|
|
3/31/14 |
12/31/13 |
|
|
(dollars in thousands) |
|
|
|
|
|
Loans, excluding troubled debt
restructurings: |
|
|
|
Past due 30 through 89 days |
$ 1,623 |
$ 184 |
|
Past due 90 days or more and still
accruing |
-- |
-- |
|
Nonaccrual (including $400,000 of loans
held-for-sale at 3/31/14) |
453 |
1,948 |
|
|
2,076 |
2,132 |
|
Troubled debt restructurings: |
|
|
|
Performing according to their modified
terms |
532 |
541 |
|
Past due 30 through 89 days |
-- |
-- |
|
Past due 90 days or more and still
accruing |
-- |
-- |
|
Nonaccrual (including a $900,000 loan
held-for-sale at 12/31/13) |
1,624 |
2,548 |
|
|
2,156 |
3,089 |
|
Total past due, nonaccrual and restructured
loans: |
|
|
|
Restructured and performing according to
their modified terms |
532 |
541 |
|
Past due 30 through 89 days |
1,623 |
184 |
|
Past due 90 days or more and still
accruing |
-- |
-- |
|
Nonaccrual |
2,077 |
4,496 |
|
|
4,232 |
5,221 |
|
Other real estate owned |
-- |
-- |
|
|
$ 4,232 |
$ 5,221 |
|
|
|
|
|
Allowance for loan losses |
$ 20,555 |
$ 20,848 |
|
Allowance for loan losses as a percentage of
total loans |
1.38% |
1.41% |
|
Allowance for loan losses as a multiple of
nonaccrual loans |
9.9x |
4.6x |
|
|
|
|
|
|
AVERAGE BALANCE SHEET,
INTEREST RATES AND INTEREST DIFFERENTIAL |
(Unaudited) |
|
|
|
|
|
|
|
|
Three Months Ended March
31, |
|
2014 |
2013 |
|
Average |
Interest/ |
Average |
Average |
Interest/ |
Average |
|
Balance |
Dividends |
Rate |
Balance |
Dividends |
Rate |
Assets |
(dollars in thousands) |
Interest-bearing bank balances |
$ 16,338 |
$ 8 |
.20% |
$ 11,274 |
$ 6 |
.22% |
Investment Securities: |
|
|
|
|
|
|
Taxable |
440,186 |
2,364 |
2.15 |
495,964 |
2,623 |
2.12 |
Nontaxable (1) |
390,913 |
4,941 |
5.06 |
374,766 |
4,785 |
5.11 |
Loans (1) (2) |
1,481,098 |
14,063 |
3.80 |
1,146,630 |
12,338 |
4.31 |
Total interest-earning assets |
2,328,535 |
21,376 |
3.67 |
2,028,634 |
19,752 |
3.90 |
Allowance for loan losses |
(21,197) |
|
|
(18,982) |
|
|
Net interest-earning assets |
2,307,338 |
|
|
2,009,652 |
|
|
Cash and due from banks |
26,885 |
|
|
28,284 |
|
|
Premises and equipment, net |
25,098 |
|
|
24,690 |
|
|
Other assets |
42,746 |
|
|
36,061 |
|
|
|
$ 2,402,067 |
|
|
$ 2,098,687 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
|
Savings, NOW & money market deposits |
$ 931,416 |
493 |
.21 |
$ 878,125 |
609 |
.28 |
Time deposits |
282,362 |
1,417 |
2.04 |
253,761 |
1,282 |
2.05 |
Total interest-bearing deposits |
1,213,778 |
1,910 |
.64 |
1,131,886 |
1,891 |
.68 |
Short-term borrowings |
58,129 |
50 |
.35 |
80,420 |
67 |
.34 |
Long-term debt |
292,444 |
1,637 |
2.27 |
145,000 |
991 |
2.77 |
Total interest-bearing liabilities |
1,564,351 |
3,597 |
.93 |
1,357,306 |
2,949 |
.88 |
Checking deposits |
608,138 |
|
|
514,177 |
|
|
Other liabilities |
16,929 |
|
|
21,122 |
|
|
|
2,189,418 |
|
|
1,892,605 |
|
|
Stockholders' equity |
212,649 |
|
|
206,082 |
|
|
|
$ 2,402,067 |
|
|
$ 2,098,687 |
|
|
|
|
|
|
|
|
|
Net interest income (1) |
|
$ 17,779 |
|
|
$ 16,803 |
|
Net interest spread (1) |
|
|
2.74% |
|
|
3.02% |
Net interest margin (1) |
|
|
3.05% |
|
|
3.31% |
|
|
|
|
|
|
|
(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 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; demands 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" sections of Corporation's
filings with the Securities and Exchange Commission. The
forward-looking statements are made as of the date of this report,
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
March 31, 2014. The Form 10-Q will be available through the
Bank's website at www.fnbli.com on or about May 12, 2014, after it
is electronically filed with the Securities and Exchange Commission
("SEC"). Our SEC filings are also available on the SEC's
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: For More Information Contact:
Mark D. Curtis, EVP, CFO and Treasurer
(516) 671-4900, Ext. 556
First of Long Island (NASDAQ:FLIC)
Historical Stock Chart
From Jun 2024 to Jul 2024
First of Long Island (NASDAQ:FLIC)
Historical Stock Chart
From Jul 2023 to Jul 2024