The First of Long Island Corporation (Nasdaq: FLIC), the parent
company of The First National Bank of Long Island, reported
increases in net income and earnings per share for the three and
nine months ended September 30, 2018. In the highlights that
follow, all comparisons are of the current three or nine-month
period to the same period last year unless otherwise
indicated.
THIRD QUARTER HIGHLIGHTS
- Net Income increased 7.7% to $10.1 million from $9.3
million
- EPS increased 2.6% to $.39 from $.38
- Net Income includes an after-tax loss on the sale of
securities of $3.5 million, or $.14 per share
- Net Income also includes a tax benefit of $717,000, or
$.03 per share, resulting from accelerated tax
depreciation
- Steps taken to reduce margin compression have been
effective and additional steps are likely. Quarterly net interest
margin is expected to increase in the fourth quarter.
- Effective Tax Rate of 5.1% versus 26.4%
- Cash Dividends Per Share increased 13.3% to $.17 from
$.15
- The Credit Quality of the Bank’s loan and securities
portfolios remains excellent
NINE MONTH HIGHLIGHTS
- Net Income increased 14.3% to $31.5 million from $27.6
million
- EPS increased 9.7% to $1.24 from $1.13
- Book Value Per Share increased 6.3% to $14.96 at
9/30/18 from $14.07 at 9/30/17
- Effective Tax Rate of 9.3% versus 24.3%
Analysis of Earnings – Nine Months Ended
September 30, 2018
Net income for the first nine months of 2018 was
$31.5 million, an increase of $3.9 million, or 14.3%, over the same
period last year. The increase is attributable to increases
in net interest income of $4.2 million, or 5.8%, and noninterest
income, before securities gains and losses, of $1.1 million, or
15.1%, and decreases in the provision for loan losses and income
tax expense of $2.7 million and $5.6 million, respectively.
These items were partially offset by an increase in noninterest
expense of $4.6 million, or 11.5%, and securities losses of $5.0
million in the current nine-month period versus gains of $74,000 in
the same period last year.
The increase in net interest income is primarily
attributable to growth in the average balance of loans of $439.6
million, or 16.2%. Loans grew primarily because of increases
in commercial and residential mortgage loans. Growth in the
average balance of loans was funded by increases in the average
balances of noninterest-bearing checking deposits of $83.9 million,
or 9.8%, interest-bearing deposits of $297.9 million, or 15.4%,
borrowings of $74.4 million, or 13.8%, and stockholders’ equity of
$43.4 million, or 13.2%. Substantial contributors to the
growth in deposits were new branch openings, the Bank’s ongoing
municipal deposit initiative, deposit promotions with emphasis on
time deposits and the issuance of brokered certificates of deposit
toward the end of the first quarter. Substantial contributors
to the growth in stockholders’ equity were net income and the
issuance of shares under the Corporation’s Dividend Reinvestment
and Stock Purchase Plan (the “DRP Plan”), partially offset by cash
dividends declared and a decline in the after-tax value of
available-for-sale securities. During the nine and three
months ended September 30, 2018, the sale of shares under the DRP
Plan contributed $17.0 million and $1.2 million to capital,
respectively.
Net interest margin for the first nine months of
2018 was 2.63%, down 29 basis points from 2.92% for the same period
last year. The decrease in net interest margin is largely
attributable to: (1) yield curve flattening resulting from a
significant increase in the federal funds target rate with lesser
increases in intermediate and longer-term interest rates; (2)
timing differences between the repricing of interest-earning assets
and interest-bearing liabilities in a rising rate environment; (3)
competitive pressure to raise deposit rates to fund growth and
protect against deposit outflows; (4) a reduction in prepayment
penalties and late charges from $1.8 million for the first nine
months of 2017 to $793,000 for the current nine-month period, thus
reducing net interest margin by 4 basis points; and (5) a reduction
in the statutory federal income tax rate from 35% for the first
nine months of 2017 to 21% for the current nine-month period, thus
reducing the tax-equivalent amount of each dollar of tax-exempt
income and causing a 9 basis point decline in net interest
margin. When comparing the first nine months of this year to
the same period last year, these factors largely account for the
significant increases experienced by the Bank in the cost of its
non-maturity deposits and short-term borrowings of 26 basis points
and 119 basis points, respectively, with a much more modest
increase occurring in its loan portfolio yield of 1 basis point and
decrease in the securities portfolio yield of 15 basis
points. Unlike non-maturity deposits and short-term
borrowings, the Bank’s securities and almost all of its loans are
not subject to immediate repricing with changes in market interest
rates.
Beginning in the second quarter of this year,
management began implementing a variety of measures designed to
stabilize and improve net interest margin and reduce expenses.
Additional steps are likely. These measures include, among
others, reducing overall balance sheet growth by slowing loan
growth and the related need for funding, changing the mix of loans
being originated, restructuring the securities portfolio and
hedging a portion of overnight borrowings with an interest rate
swap. Slowing loan growth has resulted in reducing the
provision for loan losses. Diminished funding needs have
enabled management to mitigate growth in noninterest expense and
the cost of deposits by slowing the pace of new branch openings,
offering fewer deposit rate promotions and being more selective in
offering higher rates to new and existing customers.
Restructuring the securities portfolio, as discussed hereinafter,
is immediately accretive to net interest margin and hedging
overnight borrowings with an interest rate swap provides some net
interest margin protection in the event of an increase in overnight
borrowing rates. Management also continues to explore a
variety of cost saving measures aimed at further improving an
already very strong efficiency ratio.
The mortgage loan pipeline at quarter-end was a
modest $54 million, reflecting management’s decision to slow loan
growth. In an attempt to improve overall loan portfolio
yield, the mix of loan originations is being more heavily weighted
towards commercial mortgages and commercial and industrial loans
with less emphasis on residential mortgage loans.
We believe that the measures discussed above
contributed to a slower decline in net interest margin for the
third quarter than that which occurred in the first and second
quarters. Excluding the impact of prepayment penalties and
late charges and the aforementioned reduction in the statutory
federal income tax rate, the quarterly decline in net interest
margin was 6 basis points in the first quarter of 2018, 13 basis
points in the second quarter and 1 basis point in the third
quarter. The second quarter decline reflects the full quarter
impact of robust first quarter growth. Management believes
that fourth quarter net interest margin will be higher than that
reported for the third quarter.
Employing the measures discussed above and
assuming a continued flattening of the yield curve, net interest
margin could range from approximately 2.50% to 2.55% in 2019
and then begin to increase in 2020. If the yield curve
flattens less than anticipated or steepens, net interest margin
could be better than that currently anticipated for 2019.
The deliberate slowing of balance sheet growth
has eliminated the need to raise capital through the DRP
Plan. As a result, effective with the second quarter cash
dividend paid in July, the Corporation reduced the optional
quarterly cash purchase limit per shareholder from $75,000 to
$5,000. This change reduced the number of shares issued under
the DRP Plan from 269,361 and 322,420 in the first and second
quarters, respectively, to 48,053 and 59,792 in the third and
fourth quarters, respectively, resulting in less dilution to
earnings per share.
The reduction in the provision for loan losses
for the first nine months of 2018 versus the same period last year
is mainly due to improved economic conditions and historical loss
rates, less loan growth in the current year and a larger increase
in specific reserves in the 2017 period. The impact of these
items was partially offset by higher net chargeoffs in the current
nine-month period. Net chargeoffs in the first nine months of
2018 of $780,000 include chargeoffs of $382,000 on loans
transferred to held-for-sale and carried at fair value at September
30, 2018.
The increase in noninterest income, before
securities gains and losses, of $1.1 million, or 15.1%, is
primarily attributable to an increase of $432,000 in cash value
accretion on bank-owned life insurance (“BOLI”), a $565,000 BOLI
death benefit and an increase of $267,000 in the net credit
relating to the non-service cost components of the Bank’s defined
benefit pension plan. These increases were partially offset
by refunds of $155,000 related to sales tax and telecommunications
charges and the elimination of $77,000 in accrued circuit
termination charges in the 2017 period. Cash value accretion
increased because of purchases of BOLI during the first quarters of
2017 and 2018 of $25 million and $20 million, respectively.
These purchases contributed $22.1 million to the growth in average
other assets for the first nine months of 2018 compared to the same
period last year.
The increase in noninterest expense of $4.6
million, or 11.5%, is primarily attributable to increases in
salaries of $2.0 million, or 10.8%, employee benefits and other
personnel expense of $936,000, or 17.0%, occupancy and equipment
expense of $1.2 million, or 16.2%, other real estate owned (“OREO”)
expense of $124,000 and growth-related increases in the Bank’s FDIC
and OCC assessments amounting to $98,000. The increase in
salaries is primarily due to new branch openings, additions to
staff in the back office, normal annual salary adjustments and
special salary-related accruals in the second quarter of
2018. The increase in employee benefits and other personnel
expense is largely due to increases in group health insurance
expense of $281,000 resulting from increases in staff count and the
rates being charged by insurance carriers, placement and agency
fees of $101,000 relating to branch and back office staffing,
payroll tax expense of $152,000 and incentive compensation expense
of $230,000. The increase in occupancy and equipment expense
is primarily due to the operating costs of new branches, increases
in maintenance and repairs expense and a growth-related increase in
depreciation on the Bank’s facilities and equipment. OREO
expense of $124,000 in the 2018 period relates to one commercial
property acquired by deed-in-lieu of foreclosure during the fourth
quarter of 2017 and sold during the first quarter of 2018.
The decrease in income tax expense of $5.6
million is due to: (1) a reduction in the statutory federal income
tax rate from 35% last year to 21% effective January 1, 2018; (2)
recognition in the current nine-month period of tax benefits of New
York State and New York City net operating loss carryforwards that
originated in 2017 of $542,000; (3) recognition of $717,000 in tax
benefits related to accelerated tax depreciation resulting from a
cost segregation study; (4) higher tax benefits in the 2018 period
from BOLI; and (5) tax benefits of a $5.0 million securities loss
resulting from the restructuring of the securities portfolio in the
third quarter of 2018. These items resulted in lower
effective tax rates in the first three quarters of 2018 as compared
to the comparable 2017 periods. The Corporation’s effective
tax rate was 7.9% in the first quarter of this year, 14.4% in the
second quarter, 5.1% in the third quarter and 9.3% for the
nine-month period. This compares to 24.2% for the first
quarter of last year, 22.0% for the second quarter, 26.4% for the
third quarter and 24.3% for the nine-month period. Management
expects the Corporation’s quarterly effective tax rate to normalize
in the range of 14% to 16%.
Late in the third quarter of 2018, the Bank
restructured the available-for-sale securities portfolio by selling
$135 million of mortgage-backed securities and $39.6 million of
short-term municipal bonds with yields of 2.51% and 2.90%,
respectively, and reinvested the proceeds in mortgage-backed
securities and corporate bonds with an overall yield of
4.02%. The Bank recorded a loss of $5.0 million ($3.5 million
after-tax) on the sale and the payback period for the loss is
approximately 2.4 years. Because of the timing of this
restructuring, it had little impact on net interest margin for the
current quarter or nine-month period. On a going forward
basis, it will improve the Bank’s net interest margin by
approximately 5 basis points. The securities loss negatively
impacted ROA and ROE by 11 and 124 basis points, respectively, for
the first nine months of 2018, and 32 and 362 basis points,
respectively, for the third quarter of 2018. In early October
2018, the Bank further restructured the securities portfolio
by selling $61.6 million of mortgage-backed securities with a yield
of 2.51% at a loss of approximately $3.2 million ($2.3 million
after-tax) and used the proceeds to pay down overnight borrowings
with a cost of 2.47%. This transaction eliminated some
inefficient leverage and, on a full quarter basis, will add 4 basis
points to net interest margin.
Analysis of Earnings – Third Quarter 2018
Versus Third Quarter 2017
Net income for the third quarter of 2018 was
$10.1 million, representing an increase of $715,000, or 7.7%, over
$9.3 million earned in the same quarter of last year. The
increase is primarily attributable to increases in net interest
income of $588,000 and noninterest income, before securities gains
and losses, of $251,000, and decreases in the provision for loan
losses and income tax expense of $2.9 million and $2.8 million,
respectively. The positive impact on earnings of these items
was largely offset by an increase in noninterest expense of
$848,000, or 6.3%, and the aforementioned loss on the sale of
securities of $5.0 million. The increase in net interest
income was due to growth in the average balance of loans partially
offset by higher funding costs and a decline in prepayment
penalties and late charges of $825,000. The decrease in the
provision for loan losses was primarily attributable to improved
economic conditions and a decline in loans in the current quarter
versus an increase in the 2017 quarter, partially offset by higher
net chargeoffs in the 2018 quarter and a decrease in specific
reserves on loans individually deemed to be impaired in the 2017
period. The increase in noninterest income, before securities
gains and losses, is mainly due to higher cash value accretion on
BOLI and an increase in the net credit relating to the non-service
cost components of the Bank’s defined benefit pension plan in the
2018 quarter. The increase in noninterest expense is mainly
due to increases in salaries, employee benefits and other personnel
expense and occupancy and equipment expense for substantially the
same reasons discussed above with respect to the nine-month
periods. The decrease in income tax expense is mainly due to
lower pre-tax income in the current quarter as compared to the 2017
quarter, a lower statutory federal income tax rate, tax benefits
resulting from the aforementioned cost segregation study and
securities losses and higher tax benefits in the 2018 quarter from
the vesting and exercise of stock awards.
Analysis of Earnings – Third Quarter
Versus Second Quarter 2018
Net income for the third quarter of 2018
declined $258,000 from $10.3 million earned in the second quarter
of this year. The decrease is primarily attributable to a
decrease in net interest income of $594,000 and the aforementioned
securities loss in the third quarter of 2018 of $5.0 million.
The decrease in net interest income was mainly due to a 7
basis point increase in funding costs in the third quarter and a
reduction in prepayment penalties and late charges of $325,000.
The negative impact on net income of these items was largely
offset by a decrease in the provision for loan losses of $2.6
million, a decrease in income tax expense of $1.2 million, a
reduction in salaries expense of $656,000 mainly due to special
salary-related accruals recorded in the second quarter, a decline
in maintenance and repairs expense on the Bank’s facilities and
equipment of $144,000 and lower marketing expense of
$415,000. The decrease in the provision for loan losses in
the current quarter was mainly due to improved economic conditions
and lower loan growth, partially offset by higher net
chargeoffs. The decrease in income tax expense was due to
lower pre-tax income in the third quarter, higher tax benefits from
the vesting and exercise of stock awards and tax benefits in the
third quarter from the aforementioned cost segregation study and
securities losses.
Asset Quality
The Bank’s allowance for loan losses to total
loans (reserve coverage ratio) was 1.15% at year-end 2017, 1.12% at
March 31, 2018, 1.10% at June 30, 2018 and 1.04% at September 30,
2018. The decrease in the reserve coverage ratio during 2018
is primarily due to improved economic conditions and reductions in
historical loss rates and growth rates on certain pools of
loans. The provision for loan losses was $547,000 and $3.2
million in the first nine months of 2018 and 2017,
respectively. The provision in each period was driven mainly
by loan growth and net chargeoffs and, in the 2017 period, an
increase in specific reserves, partially offset by improved
economic conditions and reductions in historical losses.
The credit quality of the Bank’s loan portfolio
remains excellent. Nonaccrual loans amounted to $4.9 million,
or .15% of total loans outstanding, at September 30, 2018, compared
to $1.8 million, or .06%, at June 30, 2018 and $1.0 million, or
.03%, at December 31, 2017. The increase in nonaccrual loans
during the first nine months of 2018 is due to loans of $4.5
million transferred to nonaccrual status, largely consisting of
loans to one borrower, partially offset by paydowns, loan sales and
chargeoffs. Total nonaccrual loans at the end of the third
quarter include loans held-for-sale of $671,000 that are carried at
fair value. Troubled debt restructurings amounted to $1.3
million, or .04% of total loans outstanding at September 30,
2018. Of the troubled debt restructurings, $1.2 million are
performing in accordance with their modified terms and $88,000 are
nonaccrual and included in the aforementioned amount of nonaccrual
loans. Loans past due 30 through 89 days amounted to $1.1
million, or .04% of total loans outstanding, at September 30, 2018,
compared to $2.8 million, or .09%, at December 31, 2017.
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 81% 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 and investment grade corporate
bonds of large financial institutions. In selecting
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 securities in its portfolio and makes
decisions to hold or sell based on such assessments.
Capital
The Corporation’s Tier 1 leverage, Common Equity
Tier 1 risk-based, Tier 1 risk-based and Total risk-based capital
ratios were approximately 9.2%, 15.6%, 15.6% and 16.8%,
respectively, at September 30, 2018. The strength of the
Corporation’s balance sheet positions the Corporation for continued
growth in a measured and disciplined fashion.
Key Strategic Initiatives and Challenges
We Face
The Bank’s strategy remains focused on
increasing shareholder value through loan and deposit growth and
the maintenance of stellar credit quality, a strong efficiency
ratio and an optimal amount of capital. We will continue to
open new branches but at a slower pace.
As previously discussed, in response to the
flattening yield curve management has implemented a variety of
measures in an attempt to stabilize and improve net interest margin
and reduce operating expenses and thereby enable continued earnings
growth. Additional steps are likely. Quarterly net
interest margin is expected to increase in the fourth quarter of
2018 then be negatively impacted by additional increases in the
federal funds rate that the market expects in late 2018
and 2019. Management will continue to be measured and
disciplined in its approach to the extension of credit and will not
meaningfully loosen its underwriting standards in an attempt to
improve net interest margin.
With respect to its lending activities, the Bank
will continue to prudently manage concentration and credit risk and
maintain its broker and correspondent relationships.
Commercial mortgage loans will be emphasized over residential
mortgage loans. Small business credit scored loans, equipment
finance loans and SBA loans, along with the Bank’s traditional
commercial and industrial loan products, will be originated to
diversify the Bank’s loan portfolio and help mitigate the impact on
net interest margin of the flattening yield curve.
The Bank’s branch distribution system currently
consists of fifty-two branches in Nassau and Suffolk Counties, Long
Island and the New York City boroughs of Queens, Brooklyn and
Manhattan. The Bank expects to open more branches in the
foreseeable future. In addition, management is also focused
on growing noninterest income from existing and potential new
sources, which may include the development or acquisition of
fee-based businesses.
In the current environment, banking regulators
are concerned about, among other things, growth, commercial real
estate concentrations, underwriting of commercial real estate and
commercial and industrial loans, capital levels, liquidity, cyber
security and predatory sales practices. Regulatory
requirements, the cost of compliance and vigilant supervisory
oversight are exerting downward pressure on revenues and upward
pressure on required capital levels and operating expenses.
|
|
|
|
|
|
|
CONSOLIDATED BALANCE
SHEETS(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/30/18 |
|
12/31/17 |
|
|
|
|
|
(dollars in thousands) |
Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
50,462 |
|
|
$ |
69,672 |
|
|
|
|
|
|
|
|
Investment securities: |
|
|
|
|
|
|
Held-to-maturity, at amortized cost (fair value of
$6,902 and $7,749) |
|
|
6,845 |
|
|
|
7,636 |
|
Available-for-sale, at fair value |
|
|
802,839 |
|
|
|
720,128 |
|
|
|
|
809,684 |
|
|
|
727,764 |
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
671 |
|
|
|
— |
|
|
|
|
|
|
|
|
Loans: |
|
|
|
|
|
|
Commercial and industrial |
|
|
93,901 |
|
|
|
109,623 |
|
Secured by real estate: |
|
|
|
|
|
|
Commercial mortgages |
|
|
1,259,286 |
|
|
|
1,193,007 |
|
Residential mortgages |
|
|
1,788,145 |
|
|
|
1,558,564 |
|
Home equity lines |
|
|
74,079 |
|
|
|
83,625 |
|
Consumer and other |
|
|
5,884 |
|
|
|
5,533 |
|
|
|
|
3,221,295 |
|
|
|
2,950,352 |
|
Allowance for loan losses |
|
|
(33,551 |
) |
|
|
(33,784 |
) |
|
|
|
3,187,744 |
|
|
|
2,916,568 |
|
|
|
|
|
|
|
|
Restricted stock, at cost |
|
|
37,941 |
|
|
|
37,314 |
|
Bank premises and equipment, net |
|
|
39,825 |
|
|
|
39,648 |
|
Bank-owned life insurance |
|
|
80,380 |
|
|
|
59,665 |
|
Pension plan assets, net |
|
|
19,391 |
|
|
|
19,152 |
|
Deferred income tax benefit |
|
|
4,491 |
|
|
|
— |
|
Other assets |
|
|
19,406 |
|
|
|
24,925 |
|
|
|
$ |
4,249,995 |
|
|
$ |
3,894,708 |
|
Liabilities: |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Checking |
|
$ |
946,236 |
|
|
$ |
896,129 |
|
Savings, NOW and money market |
|
|
1,679,617 |
|
|
|
1,602,460 |
|
Time, $100,000 and over |
|
|
291,638 |
|
|
|
203,890 |
|
Time, other |
|
|
243,018 |
|
|
|
119,518 |
|
|
|
|
3,160,509 |
|
|
|
2,821,997 |
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
292,176 |
|
|
|
281,141 |
|
Long-term debt |
|
|
403,027 |
|
|
|
423,797 |
|
Accrued expenses and other liabilities |
|
|
14,013 |
|
|
|
10,942 |
|
Deferred income taxes payable |
|
|
— |
|
|
|
2,381 |
|
|
|
|
3,869,725 |
|
|
|
3,540,258 |
|
Stockholders' Equity: |
|
|
|
|
|
|
Common stock, par value $.10 per share: |
|
|
|
|
|
|
Authorized, 80,000,000 shares; |
|
|
|
|
|
|
Issued and outstanding, 25,422,995 and 24,668,390
shares |
|
|
2,542 |
|
|
|
2,467 |
|
Surplus |
|
|
145,023 |
|
|
|
127,122 |
|
Retained earnings |
|
|
244,173 |
|
|
|
224,315 |
|
|
|
|
391,738 |
|
|
|
353,904 |
|
Accumulated other comprehensive income (loss), net of tax |
|
|
(11,468 |
) |
|
|
546 |
|
|
|
|
380,270 |
|
|
|
354,450 |
|
|
|
$ |
4,249,995 |
|
|
$ |
3,894,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF INCOME(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Three Months Ended |
|
|
9/30/18 |
|
9/30/17 |
|
9/30/18 |
|
9/30/17 |
|
|
|
|
|
(dollars in thousands) |
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
83,641 |
|
|
$ |
71,810 |
|
$ |
28,471 |
|
|
$ |
25,173 |
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
8,275 |
|
|
|
5,883 |
|
|
3,065 |
|
|
|
1,806 |
Nontaxable |
|
|
10,193 |
|
|
|
10,112 |
|
|
3,323 |
|
|
|
3,358 |
|
|
|
102,109 |
|
|
|
87,805 |
|
|
34,859 |
|
|
|
30,337 |
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
|
8,823 |
|
|
|
4,974 |
|
|
3,125 |
|
|
|
1,909 |
Time deposits |
|
|
7,529 |
|
|
|
3,986 |
|
|
2,952 |
|
|
|
1,437 |
Short-term borrowings |
|
|
3,026 |
|
|
|
986 |
|
|
1,370 |
|
|
|
257 |
Long-term debt |
|
|
6,399 |
|
|
|
5,703 |
|
|
2,121 |
|
|
|
2,031 |
|
|
|
25,777 |
|
|
|
15,649 |
|
|
9,568 |
|
|
|
5,634 |
Net interest income |
|
|
76,332 |
|
|
|
72,156 |
|
|
25,291 |
|
|
|
24,703 |
Provision (credit) for loan losses |
|
|
547 |
|
|
|
3,203 |
|
|
(1,768 |
) |
|
|
1,122 |
Net interest income after provision (credit) for
loan losses |
|
|
75,785 |
|
|
|
68,953 |
|
|
27,059 |
|
|
|
23,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment Management Division income |
|
|
1,665 |
|
|
|
1,565 |
|
|
508 |
|
|
|
515 |
Service charges on deposit accounts |
|
|
1,945 |
|
|
|
2,119 |
|
|
658 |
|
|
|
725 |
Net gains (losses) on sales of securities |
|
|
(4,960 |
) |
|
|
74 |
|
|
(4,960 |
) |
|
|
16 |
Other |
|
|
5,096 |
|
|
|
3,877 |
|
|
1,569 |
|
|
|
1,244 |
|
|
|
3,746 |
|
|
|
7,635 |
|
|
(2,225 |
) |
|
|
2,500 |
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries |
|
|
20,895 |
|
|
|
18,855 |
|
|
6,596 |
|
|
|
6,386 |
Employee benefits and other personnel expense |
|
|
6,452 |
|
|
|
5,516 |
|
|
2,037 |
|
|
|
1,866 |
Occupancy and equipment |
|
|
8,742 |
|
|
|
7,524 |
|
|
2,864 |
|
|
|
2,503 |
Other |
|
|
8,728 |
|
|
|
8,314 |
|
|
2,745 |
|
|
|
2,639 |
|
|
|
44,817 |
|
|
|
40,209 |
|
|
14,242 |
|
|
|
13,394 |
Income before income taxes |
|
|
34,714 |
|
|
|
36,379 |
|
|
10,592 |
|
|
|
12,687 |
Income tax expense |
|
|
3,231 |
|
|
|
8,823 |
|
|
535 |
|
|
|
3,345 |
Net income |
|
$ |
31,483 |
|
|
$ |
27,556 |
|
$ |
10,057 |
|
|
$ |
9,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Three Months Ended |
|
|
|
9/30/18 |
|
9/30/17 |
|
9/30/18 |
|
9/30/17 |
|
|
|
|
|
|
|
(dollars in thousands, except per
share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
31,483 |
|
$ |
|
27,556 |
|
$ |
10,057 |
|
$ |
9,342 |
|
Income allocated to participating securities |
|
|
|
86 |
|
|
|
101 |
|
|
26 |
|
|
34 |
|
Income allocated to common stockholders |
|
$ |
|
31,397 |
|
$ |
|
27,455 |
|
$ |
10,031 |
|
$ |
9,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares |
|
|
|
25,236,889 |
|
|
|
24,096,079 |
|
|
25,409,087 |
|
|
24,332,939 |
|
Dilutive stock options and restricted stock
units |
|
|
|
174,095 |
|
|
|
253,715 |
|
|
144,933 |
|
|
247,127 |
|
|
|
|
|
25,410,984 |
|
|
|
24,349,794 |
|
|
25,554,020 |
|
|
24,580,066 |
|
Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
|
|
|
$1.24 |
|
|
|
$1.14 |
|
|
$.39 |
|
|
$.38 |
|
Diluted EPS |
|
|
|
1.24 |
|
|
|
1.13 |
|
|
.39 |
|
|
.38 |
|
Cash Dividends Declared |
|
|
.47 |
|
|
.43 |
|
|
.17 |
|
|
.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
RATIOS(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROA |
|
|
1.01 |
% |
|
1.01 |
% |
|
.94 |
% |
|
.99 |
% |
ROE |
|
|
11.34 |
% |
|
11.23 |
% |
|
10.50 |
% |
|
10.85 |
% |
Net Interest Margin |
|
|
2.63 |
% |
|
2.92 |
% |
|
2.57 |
% |
|
2.94 |
% |
Dividend Payout Ratio |
|
|
37.90 |
% |
|
38.05 |
% |
|
43.59 |
% |
|
39.47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROBLEM AND POTENTIAL
PROBLEM LOANS AND ASSETS(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/30/18 |
|
|
12/31/17 |
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
Loans, excluding troubled debt restructurings: |
|
|
|
|
|
|
|
|
Past due 30 through 89 days |
|
$ |
1,138 |
|
|
$ |
2,594 |
|
Past due 90 days or more and still accruing |
|
|
— |
|
|
|
— |
|
Nonaccrual (includes $671,000 in loans
held-for-sale at 9/30/18) |
|
|
4,765 |
|
|
|
900 |
|
|
|
|
5,903 |
|
|
|
3,494 |
|
Troubled debt restructurings: |
|
|
|
|
|
|
|
|
Performing according to their modified terms |
|
|
1,229 |
|
|
|
785 |
|
Past due 30 through 89 days |
|
|
— |
|
|
|
162 |
|
Past due 90 days or more and still accruing |
|
|
— |
|
|
|
— |
|
Nonaccrual |
|
|
88 |
|
|
|
100 |
|
|
|
|
1,317 |
|
|
|
1,047 |
|
Total past due, nonaccrual and restructured loans: |
|
|
|
|
|
|
|
|
Restructured and performing according to their
modified terms |
|
|
1,229 |
|
|
|
785 |
|
Past due 30 through 89 days |
|
|
1,138 |
|
|
|
2,756 |
|
Past due 90 days or more and still accruing |
|
|
— |
|
|
|
— |
|
Nonaccrual |
|
|
4,853 |
|
|
|
1,000 |
|
|
|
|
7,220 |
|
|
|
4,541 |
|
Other real estate owned |
|
|
— |
|
|
|
5,125 |
|
|
|
$ |
7,220 |
|
|
$ |
9,666 |
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
33,551 |
|
|
$ |
33,784 |
|
Allowance for loan losses as a percentage of total loans |
|
|
1.04 |
% |
|
|
1.15 |
% |
Allowance for loan losses as a multiple of nonaccrual loans |
|
|
6.9 |
x |
|
|
33.8 |
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCE SHEET,
INTEREST RATES AND INTEREST
DIFFERENTIAL(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September
30, |
|
|
2018 |
|
2017 |
|
|
Average |
|
Interest/ |
|
Average |
|
Average |
|
Interest/ |
|
Average |
(dollars in thousands) |
|
Balance |
|
Dividends |
|
Rate |
|
Balance |
|
Dividends |
|
Rate |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning bank balances |
|
$ |
30,096 |
|
|
$ |
400 |
|
1.78 |
% |
|
$ |
24,457 |
|
|
$ |
191 |
|
1.04 |
% |
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
354,530 |
|
|
|
7,875 |
|
2.96 |
|
|
|
337,941 |
|
|
|
5,692 |
|
2.25 |
|
Nontaxable (1) |
|
|
460,231 |
|
|
|
12,902 |
|
3.74 |
|
|
|
460,156 |
|
|
|
15,556 |
|
4.51 |
|
Loans (1) |
|
|
3,160,835 |
|
|
|
83,646 |
|
3.53 |
|
|
|
2,721,229 |
|
|
|
71,820 |
|
3.52 |
|
Total interest-earning assets |
|
|
4,005,692 |
|
|
|
104,823 |
|
3.49 |
|
|
|
3,543,783 |
|
|
|
93,259 |
|
3.51 |
|
Allowance for loan losses |
|
|
(35,382 |
) |
|
|
|
|
|
|
|
|
(31,604 |
) |
|
|
|
|
|
|
Net interest-earning assets |
|
|
3,970,310 |
|
|
|
|
|
|
|
|
|
3,512,179 |
|
|
|
|
|
|
|
Cash and due from banks |
|
|
36,931 |
|
|
|
|
|
|
|
|
|
31,791 |
|
|
|
|
|
|
|
Premises and equipment, net |
|
|
40,122 |
|
|
|
|
|
|
|
|
|
35,405 |
|
|
|
|
|
|
|
Other assets |
|
|
118,885 |
|
|
|
|
|
|
|
|
|
85,944 |
|
|
|
|
|
|
|
|
|
$ |
4,166,248 |
|
|
|
|
|
|
|
|
$ |
3,665,319 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW & money market deposits |
|
$ |
1,749,025 |
|
|
|
8,823 |
|
.67 |
|
|
$ |
1,627,152 |
|
|
|
4,974 |
|
.41 |
|
Time deposits |
|
|
477,535 |
|
|
|
7,529 |
|
2.11 |
|
|
|
301,499 |
|
|
|
3,986 |
|
1.77 |
|
Total interest-bearing deposits |
|
|
2,226,560 |
|
|
|
16,352 |
|
.98 |
|
|
|
1,928,651 |
|
|
|
8,960 |
|
.62 |
|
Short-term borrowings |
|
|
189,141 |
|
|
|
3,026 |
|
2.14 |
|
|
|
138,523 |
|
|
|
986 |
|
.95 |
|
Long-term debt |
|
|
425,712 |
|
|
|
6,399 |
|
2.01 |
|
|
|
401,889 |
|
|
|
5,703 |
|
1.90 |
|
Total interest-bearing liabilities |
|
|
2,841,413 |
|
|
|
25,777 |
|
1.21 |
|
|
|
2,469,063 |
|
|
|
15,649 |
|
.85 |
|
Checking deposits |
|
|
943,689 |
|
|
|
|
|
|
|
|
|
859,805 |
|
|
|
|
|
|
|
Other liabilities |
|
|
9,803 |
|
|
|
|
|
|
|
|
|
8,522 |
|
|
|
|
|
|
|
|
|
|
3,794,905 |
|
|
|
|
|
|
|
|
|
3,337,390 |
|
|
|
|
|
|
|
Stockholders' equity |
|
|
371,343 |
|
|
|
|
|
|
|
|
|
327,929 |
|
|
|
|
|
|
|
|
|
$ |
4,166,248 |
|
|
|
|
|
|
|
|
$ |
3,665,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (1) |
|
|
|
|
$ |
79,046 |
|
|
|
|
|
|
|
$ |
77,610 |
|
|
|
Net interest spread (1) |
|
|
|
|
|
|
|
2.28 |
% |
|
|
|
|
|
|
|
2.66 |
% |
Net interest margin (1) |
|
|
|
|
|
|
|
2.63 |
% |
|
|
|
|
|
|
|
2.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. For 2018, the
tax-equivalent amount of $1.00 of nontaxable income was $1.27 using
the statutory federal income tax rate of 21%. For 2017, the
tax-equivalent amount of $1.00 of nontaxable income was $1.54 using
the statutory federal income tax rate of 35%. |
|
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 September 30, 2018. The Form 10-Q will be available
through the Bank’s website at www.fnbli.com on or about November 9,
2018, after it is electronically filed with the 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.
For More Information Contact:Mark D. Curtis,
SEVP, CFO and Treasurer (516) 671-4900, Ext. 7413
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