FLIC First of Long Island Corporation

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 months ended March 31, 2022. In the highlights that follow, all comparisons are of the current three-month period to the same period last year unless otherwise indicated.  

FIRST QUARTER 2022 HIGHLIGHTS

• Net Income and EPS were $12.1 million and $.52, respectively, versus $11.3 million and $.47
• ROA and ROE were 1.19% and 11.94%, respectively, compared to 1.11% and 11.17%
• Net interest margin was 2.90% versus 2.69%
• Strong loan originations of $261 million
• Repurchased 202,886 shares at a cost of $4.5 million  

Analysis of First Quarter Earnings

Net income for the first quarter of 2022 was $12.1 million, an increase of $816,000, or 7.2%, versus the same quarter last year. The increase is due to growth in net interest income of $2.1 million, or 8.1%, and noninterest income, excluding $606,000 of gains on sales of securities in 2021, of $498,000, or 17.0%, and a decrease in noninterest expense of $680,000, or 4.1%. These items were partially offset by increases in the provision for credit losses of $1.4 million and income tax expense of $440,000.

The increase in net interest income reflects a favorable shift in the mix of funding as an increase in average checking deposits of $172.5 million, or 13.9%, and a decline in average interest-bearing liabilities of $144.4 million, or 6.0%, resulted in average checking deposits comprising a larger portion of total funding. Also contributing to the increase was a decline in interest expense of $1.1 million in 2022 due to the maturity of a $150 million interest rate swap in May 2021 and reductions in the rates paid on non-maturity and time deposits. The average cost of interest-bearing liabilities declined 28 basis points (“bps”) from .82% for the first quarter of 2021 to .54% for the current quarter. The increase in net interest income is also attributable to an increase of $147 million in average loans outstanding to $3.2 billion at March 31, 2022, largely driven by commercial mortgage originations. Although the average balance of loans increased, the loan portfolio yield declined from 3.55% for the 2021 quarter to 3.47% for the current quarter due to a decline in income from SBA Paycheck Protection Program (“PPP”) loans of $1.2 million which reduced the portfolio yield by 8 bps. PPP income for the current quarter was $743,000 with a weighted average yield of 14.8% and contributed 8 bps to the current quarter’s loan portfolio yield of 3.47%.      

Net interest margin for the first quarter of 2022 was 2.90% as compared to 2.86% and 2.69% for the 2021 fourth and first quarters, respectively. Income on PPP loans improved net interest margin by 6 bps, 11 bps and 9 bps in those quarters, respectively. The current yield curve is favorable to net interest margin. The direction of the margin for the remainder of 2022 is largely dependent on changes in the yield curve and balance sheet mix as well as competitive conditions.   

During the first quarter of 2022 we originated $261 million of loans with a weighted average rate of approximately 3.11% which includes $199 million of commercial mortgages at a weighted average rate of 3.13%. The mortgage loan pipeline was $175 million with a weighted average rate of 3.36% at March 31, 2022. While these rates are below the March 31, 2022 loan portfolio yield, current reinvestment rates for both the securities and loan portfolios are generally higher.

The provision for credit losses increased $1.4 million when comparing the first quarter periods from a credit of $986,000 in the 2021 quarter to a charge of $433,000 in the 2022 quarter. The provision for the current quarter was mainly due to an increase in outstanding mortgage loans partially offset by economic conditions and historical loss rates.

The increase in noninterest income of $498,000, excluding $606,000 of gains on sales of securities in 2021, is primarily attributable to a final transition payment of $477,000 from LPL Financial for the conversion of the Bank’s retail broker and advisory accounts. The increase also includes higher fees from debit and credit cards of $199,000 and income from bank-owned life insurance of $163,000. These amounts were partially offset by a decrease in investment services income of $323,000 as the shift to an outside service provider resulted in less assets under management.

The decrease in noninterest expense of $680,000 was primarily due to declines in salaries and benefits expense of $315,000 and occupancy and equipment expense of $326,000, and a decrease in the provision for unfunded commitments. The decrease in salaries and benefits is mainly due to a decline in overtime pay and branch closures in 2021. These decreases were partially offset by salary and benefit costs of our new branch locations and hiring additional experienced banking professionals. The decrease in occupancy and equipment expense was due to lower rent, depreciation and maintenance and repair costs from the 2021 branch closures.

Income tax expense increased $440,000 and the effective tax rate increased from 19.4% to 20.6% when comparing the first quarter of 2021 to the current quarter. The increase in the effective tax rate is mainly due to a decrease in the percentage of pre-tax income derived from tax-exempt assets in 2022. The increase in income tax expense reflects the higher effective tax rate and an increase in pre-tax earnings in the current quarter as compared to the 2021 quarter.

Analysis of Earnings – First Quarter 2022 Versus Fourth Quarter 2021

Net income for the first quarter of 2022 increased $3.1 million, or 34.1%, from $9.0 million earned in the fourth quarter of last year. The increase is mainly attributable to a $3.9 million decrease in noninterest expense attributed largely to our branch optimization and debt extinguishment expenses in the fourth quarter of 2021. The increase also includes growth in net interest income of $634,000 due to loan originations during the fourth and first quarters of 2021 and 2022, respectively, and higher noninterest income from the aforementioned transition payment. Partially offsetting these items was an increase in income tax expense of $1.5 million for the same reasons discussed above with respect to the first quarter periods.

Asset Quality

The Bank’s allowance for credit losses to total loans (reserve coverage ratio) was .94% on March 31, 2022 as compared to .96% at December 31, 2021. The decrease in the reserve coverage ratio was mainly due to economic conditions and historical loss rates. Nonaccrual loans, troubled debt restructurings and loans past due 30 through 89 days are at very low levels.

Capital

The Corporation’s balance sheet remains positioned for lending and growth with a Leverage Ratio of approximately 10.15% at March 31, 2022. The Corporation repurchased 202,886 shares of common stock during the first quarter of 2022 at a cost of $4.5 million. We expect to continue common stock repurchases during 2022. The increase in accumulated other comprehensive loss was due to an increase in interest rates which resulted in a net unrealized loss in the available-for-sale securities portfolio.

Key Initiatives

We continue focusing on strategic initiatives supporting the growth of our balance sheet and a profitable relationship banking business. Such initiatives include improving the quality of technology through continuing digital enhancements, optimizing our branch network across a larger geography, using new branding and “CommunityFirst” focus to improve name recognition, enhancing our website and social media presence including the promotion of FirstInvestments, and ongoing recruitment of additional experienced banking professionals to support our growth and technology initiatives.   We also continue to focus on the areas of cybersecurity, environmental, social and governance practices. The Bank began occupying its leased space at 275 Broadhollow Road in Melville, N.Y. in April 2022. The consolidation of back-office staff into this one facility will produce a more collaborative work environment and strengthened culture.  

CONSOLIDATED BALANCE SHEETS

(Unaudited)

		3/31/22				12/31/21
		(dollars in thousands)
Assets:
Cash and cash equivalents		$	85,811			$	43,675
Investment securities available-for-sale, at fair value			682,984				734,318
Loans:
Commercial and industrial			103,870				90,386
SBA Paycheck Protection Program			12,377				30,534
Secured by real estate:
Commercial mortgages			1,870,546				1,736,612
Residential mortgages			1,191,691				1,202,374
Home equity lines			45,820				44,139
Consumer and other			2,021				991
			3,226,325				3,105,036
Allowance for credit losses			(30,287	)			(29,831	)
			3,196,038				3,075,205
Restricted stock, at cost			18,123				21,524
Bank premises and equipment, net			37,971				37,523
Right of use asset - operating leases			8,006				8,438
Bank-owned life insurance			108,573				107,831
Pension plan assets, net			19,129				19,097
Deferred income tax benefit			15,338				3,987
Other assets			18,705				17,191
		$	4,190,678			$	4,068,789
Liabilities:
Deposits:
Checking		$	1,479,806			$	1,400,998
Savings, NOW and money market			1,736,821				1,685,410
Time			328,763				228,837
			3,545,390				3,315,245
Short-term borrowings			50,000				125,000
Long-term debt			186,322				186,322
Operating lease liability			10,609				11,259
Accrued expenses and other liabilities			8,896				17,151
			3,801,217				3,654,977
Stockholders' Equity:
Common stock, par value $.10 per share:
Authorized, 80,000,000 shares;
Issued and outstanding, 23,106,070 and 23,240,596 shares			2,311				2,324
Surplus			89,362				93,480
Retained earnings			327,785				320,321
			419,458				416,125
Accumulated other comprehensive loss, net of tax			(29,997	)			(2,313	)
			389,461				413,812
		$	4,190,678			$	4,068,789

CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

		Three Months Ended
		3/31/22			3/31/21
		(dollars in thousands)
Interest and dividend income:
Loans		$	27,386		$	26,706
Investment securities:
Taxable			1,668			1,833
Nontaxable			1,968			2,248
			31,022			30,787
Interest expense:
Savings, NOW and money market deposits			763			1,066
Time deposits			945			2,304
Short-term borrowings			441			350
Long-term debt			868			1,165
			3,017			4,885
Net interest income			28,005			25,902
Provision (credit) for credit losses			433			(986	)
Net interest income after provision (credit) for credit losses			27,572			26,888
Noninterest income:
Bank-owned life insurance			742			579
Service charges on deposit accounts			726			683
Net gains on sales of securities			—			606
Other			1,956			1,664
			3,424			3,532
Noninterest expense:
Salaries and employee benefits			9,755			10,070
Occupancy and equipment			2,951			3,277
Other			3,063			3,102
			15,769			16,449
Income before income taxes			15,227			13,971
Income tax expense			3,144			2,704
Net income		$	12,083		$	11,267
Share and Per Share Data:
Weighted Average Common Shares			23,178,475			23,781,326
Dilutive stock options and restricted stock units			99,214			83,423
			23,277,689			23,864,749
Basic EPS			$.52			$.47
Diluted EPS			$.52			$.47
Cash Dividends Declared per share			$.20			$.19
FINANCIAL RATIOS
(Unaudited)
ROA			1.19	%		1.11	%
ROE			11.94	%		11.17	%
Net Interest Margin			2.90	%		2.69	%
Dividend Payout Ratio			38.46	%		40.43	%

PROBLEM AND POTENTIAL PROBLEM LOANS AND ASSETS(Unaudited)

		3/31/22				12/31/21
			(dollars in thousands)
Loans, excluding troubled debt restructurings:
Past due 30 through 89 days		$	1,113			$	460
Past due 90 days or more and still accruing			—				—
Nonaccrual			1,235				1,235
			2,348				1,695
Troubled debt restructurings:
Performing according to their modified terms			547				554
Past due 30 through 89 days			—				—
Past due 90 days or more and still accruing			—				—
Nonaccrual			—				—
			547				554
Total past due, nonaccrual and restructured loans:
Restructured and performing according to their modified terms			547				554
Past due 30 through 89 days			1,113				460
Past due 90 days or more and still accruing			—				—
Nonaccrual			1,235				1,235
			2,895				2,249
Other real estate owned			—				—
		$	2,895			$	2,249
Allowance for credit losses		$	30,287			$	29,831
Allowance for credit losses as a percentage of total loans			.94	%			.96	%
Allowance for credit losses as a multiple of nonaccrual loans			24.5	x			24.2	x

AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL(Unaudited)

		Three Months Ended March 31,
		2022										2021
		Average				Interest/			Average			Average				Interest/			Average
(dollars in thousands)		Balance				Dividends			Rate			Balance				Dividends			Rate
Assets:
Interest-earning bank balances		$	27,675			$	14		.21	%		$	155,272			$	39		.10	%
Investment securities:
Taxable			418,871				1,654		1.58				401,531				1,794		1.79
Nontaxable (1)			321,335				2,491		3.10				361,715				2,846		3.15
Loans (1)			3,160,058				27,387		3.47				3,013,009				26,707		3.55
Total interest-earning assets			3,927,939				31,546		3.21				3,931,527				31,386		3.19
Allowance for credit losses			(29,850	)									(32,896	)
Net interest-earning assets			3,898,089										3,898,631
Cash and due from banks			32,482										32,951
Premises and equipment, net			37,882										38,700
Other assets			158,479										134,770
		$	4,126,932									$	4,105,052
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits		$	1,688,054				763		.18			$	1,707,546				1,066		.25
Time deposits			277,667				945		1.38				421,394				2,304		2.22
Total interest-bearing deposits			1,965,721				1,708		.35				2,128,940				3,370		.64
Short-term borrowings			124,333				441		1.44				58,661				350		2.42
Long-term debt			186,322				868		1.89				233,224				1,165		2.03
Total interest-bearing liabilities			2,276,376				3,017		.54				2,420,825				4,885		.82
Checking deposits			1,416,223										1,243,728
Other liabilities			24,031										31,401
			3,716,630										3,695,954
Stockholders' equity			410,302										409,098
		$	4,126,932									$	4,105,052
Net interest income (1)						$	28,529									$	26,501
Net interest spread (1)									2.67	%									2.37	%
Net interest margin (1)									2.90	%									2.69	%

(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 $1.27 for each period presented using the statutory federal income tax rate of 21%.

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”). In addition, the pandemic continues to present financial and operating challenges for the Corporation, its customers and the communities it serves. These challenges may adversely affect the Corporation’s business, results of operations and financial condition for an indefinite period. 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 March 31, 2022. The Form 10-Q will be available through the Bank’s website at www.fnbli.com on or about May 5, 2022, when it is electronically filed with the SEC. Our SEC filings are also available on the SEC’s website at www.sec.gov.

For More Information Contact:Jay McConie, EVP and CFO(516) 671-4900, Ext. 7404