The First of Long Island Corporation Reports Earnings for the Third Quarter of 2024
MELVILLE, N.Y., Oct. 24, 2024 (GLOBE NEWSWIRE) -- The First of Long Island Corporation (NASDAQ:FLIC, the "Company" or the "Corporation")), the parent of The First National Bank of Long Island (the "Bank"), reported earnings for the three and nine months ended September 30, 2024.
President and Chief Executive Officer Chris Becker commented on the Company's results: "We are encouraged by a second consecutive linked quarter showing improvements in key financial metrics. After an increase in the net interest margin of one basis point in the second quarter of 2024 from the first quarter of 2024, the margin increased nine basis points in the third quarter of 2024 when compared to second quarter of 2024. We are optimistic the trend will continue during the fourth quarter of this year. Excluding merger and branch consolidation expenses, our noninterest expense remains well controlled and in line with expectations. Finally, our credit quality results remained strong."
Analysis of Earnings - Nine Months Ended September 30, 2024
Net income and earnings per share ("EPS") for the nine months ended September 30, 2024, were $13.8 million and $0.61, respectively, as compared to $20.2 million and $0.89, respectively, in the same period of 2023. Adjusted net income and EPS for the current nine-month period, which exclude merger and branch consolidation expenses, were $14.8 million and $0.66, respectively (see "Non-GAAP Reconciliation" table at the end of this release). The principal drivers of the change in adjusted net income were a decline in net interest income of $11.7 million, or 17.5%, and a provision for credit losses of $740,000 as compared to a provision reversal of $1.2 million in the prior period, partially offset by a loss on sales of securities of $3.5 million in the first quarter of 2023, an increase in remaining noninterest income of $1.4 million, and decreases in noninterest expense of $1.2 million and income tax expense of $2.2 million. The nine months ended 2024 produced a return on average assets ("ROA") of 0.44%, a return on average equity ("ROE") of 4.88%, an efficiency ratio of 76.39%, and a net interest margin of 1.83%. Excluding merger and branch consolidation expenses, adjusted ROA and ROE were 0.47% and 5.23%, respectively, and the adjusted efficiency ratio was 74.21% (see "Non-GAAP Reconciliation" table at the end of this release).
Net interest income declined when comparing the first nine months of 2024 and 2023 due to an increase in interest expense of $23.4 million that was only partially offset by a $11.7 million increase in interest income. The cost of interest-bearing liabilities increased 109 basis points while the yield on interest-earning assets increased 38 basis points when comparing the nine-month periods. The Bank's balance sheet remains liability sensitive, however the pace of repricing of average interest-earning assets began outpacing the repricing of average interest-bearing liabilities in the third quarter.
The Bank recorded a provision for credit losses of $740,000 for the nine months ended 2024, compared to a provision reversal of $1.2 million in the same period of 2023. The allowance for credit losses declined when compared to year-end 2023 largely due to declines in historical loss rates and reserves on individually evaluated loans, partially offset by a deterioration in current and forecasted economic conditions, including adjustments for rent stabilization status of multifamily properties. The reserve coverage ratio remained stable at 0.88% of total loans at September 30, 2024 as compared to 0.88% at June 30, 2024 and 0.89% at December 31, 2023. Past due loans and nonaccrual loans were at $346,000 and $2.9 million, respectively, on September 30, 2024. Overall credit quality of the loan and investment portfolios remains strong.
Noninterest income, excluding the loss on sales of securities of $3.5 million in the 2023 period, increased $1.4 million, or 19.1%, when comparing the first nine months of 2024 and 2023. Recurring components of noninterest income including bank-owned life insurance ("BOLI") and service charges on deposit accounts had increases of 8.0% and 13.4%, respectively. Other noninterest income increased 33.2% and included increases of $469,000 in merchant card services, $232,000 in back-to-back swap fees, and $181,000 in pension income, which were partially offset by a gain on disposition of premises and fixed assets of $240,000 in 2023.
Noninterest expense increased $254,000, or 0.5%, for the nine months of 2024, as compared to the same period in 2023. Excluding merger and branch consolidation expenses, adjusted noninterest expense decreased by $1.2 million (See "Non-GAAP Reconciliation" table at the end of this release). Reductions in occupancy and equipment expense of $685,000 and telecommunication expense of $383,000 drove the decline in adjusted noninterest expense. The decrease in occupancy and equipment expense was largely due to the ongoing branch optimization strategy, which resulted in the closing of various locations. Telecom expense decreased mainly due to efficiencies associated with system upgrades.
Income tax expense decreased $2.7 million, and the effective tax rate declined to (0.3)% for the nine months ended 2024 as compared to 11.6% for the same period in prior year. The decline in the effective tax rate is mainly due to an increase in the percentage of pre-tax income derived from the Bank's real estate investment trust reducing the state and local income tax due. The decrease in income tax expense reflects the lower effective tax rate and a decline in pre-tax income.
Analysis of Earnings, Third Quarter 2024 Versus Third Quarter 2023
Net income for the third quarter of 2024 decreased $2.2 million as compared to the third quarter of last year. Adjusted net income for the third quarter decreased by $1.2 million (see "Non-GAAP Reconciliation" table at the end of this release). The change in adjusted net income is mainly attributable to a $2.8 million decline in net interest income for substantially the same reasons discussed above with respect to the nine-month periods along with a $341,000 increase in the provision for credit losses. Partially offsetting the decreases, was an increase in noninterest income of $966,000 for substantially the same reasons discussed above with respect to the nine-month periods. The quarter produced a ROA of 0.44%, a ROE of 4.77%, an efficiency ratio of 79.09%, and a net interest margin of 1.89%. On an adjusted basis, ROA and ROE were 0.53% and 5.79%, respectively, and the efficiency ratio was 72.69% (see "Non-GAAP Reconciliation" table at the end of this release).
Analysis of Earnings, Third Quarter 2024 Versus Second Quarter 2024
Net income for the third quarter of 2024 decreased $199,000 compared to the second quarter of 2024. Adjusted net income for the third quarter increased by $782,000 (see "Non-GAAP Reconciliation" table at the end of this release). The increase in adjusted net income was partially due to an increase in net interest income of $169,000, a decrease in the provision for credit losses of $400,000, and an increase in back-to-back swap fees of $232,000.
Net interest income increased due to an increase in net interest margin. The increase in the net interest margin to 1.89% in the third quarter of 2024 from 1.80% in the second quarter of 2024 was largely due to the repricing of wholesale funding at lower costs largely offsetting the increase in cost of other interest-bearing liabilities while the yield on interest-earning assets continued to rise. Additionally, average interest-bearing deposits decreased $35.8 million and average higher cost borrowings decreased $65.6 million.
The decrease in income tax expense was substantially due to the same reasons discussed above with respect to the nine-month periods.
Liquidity
Total average deposits declined by $89.6 million, or 2.6%, when comparing the nine-month periods of 2024 and 2023. On September 30, 2024, overnight advances and other borrowings were down by $70.0 million and $27.5 million, respectively, from year-end 2023. The Bank had $582.8 million in collateralized borrowing lines with the Federal Home Loan Bank of New York and the Federal Reserve Bank, as well as a $20 million unsecured line of credit with a correspondent bank. We also had $312.9 million in unencumbered cash and securities. In total, we had approximately $915.7 million of available liquidity on September 30, 2024. At September 30, 2024, uninsured deposits were 45.9% of total deposits.
Capital
The Corporation's capital position remains strong with a leverage ratio of approximately 10.13% on September 30, 2024. Book value per share was $17.25 on September 30, 2024, versus $16.83 on December 31, 2023. The accumulated other comprehensive loss component of stockholders' equity is mainly comprised of a net unrealized loss in the available-for-sale securities portfolio due to higher market interest rates. The Company declared its quarterly cash dividend of $0.21 per share during the quarter. There were no share repurchases during the quarter. The Board and management continue to evaluate the quarterly dividend to provide the best opportunity to maximize shareholder value.
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, 2024. The Form 10-Q will be available through the Bank's website at www.fnbli.com on or about October 28, 2024, when it is anticipated to be electronically filed with the SEC. Our SEC filings are also available on the SEC's website at www.sec.gov.
CONSOLIDATED BALANCE SHEETS(Unaudited)
9/30/2024
12/31/2023
(dollars in thousands)
Assets:
Cash and cash equivalents
$
78,568
$
60,887
Investment securities available-for-sale, at fair value
659,696
695,877
Loans:
Commercial and industrial
146,440
116,163
Secured by real estate:
Commercial mortgages
1,950,008
1,919,714
Residential mortgages
1,103,937
1,166,887
Home equity lines
36,962
44,070
Consumer and other
1,150
1,230
3,238,497
3,248,064
Allowance for credit losses
(28,647
)
(28,992
)
3,209,850
3,219,072
Restricted stock, at cost
28,191
32,659
Bank premises and equipment, net
30,180
31,414
Right-of-use asset - operating leases
20,359
22,588
Bank-owned life insurance
116,192
114,045
Pension plan assets, net
10,421
10,740
Deferred income tax benefit
27,779
28,996
Other assets
20,243
19,622
$
4,201,479
$
4,235,900
Liabilities:
Deposits:
Checking
$
1,121,871
$
1,133,184
Savings, NOW and money market
1,594,317
1,546,369
Time
610,876
591,433
3,327,064
3,270,986
Overnight advances
—
70,000
Other borrowings
445,000
472,500
Operating lease liability
22,876
24,940
Accrued expenses and other liabilities
17,958
17,328
3,812,898
3,855,754
Stockholders' Equity:
Common stock, par value $0.10 per share:
Authorized, 80,000,000 shares;
Issued and outstanding, 22,532,080 and 22,590,942 shares
2,253
2,259
Surplus
79,157
79,728
Retained earnings
355,541
355,887
436,951
437,874
Accumulated other comprehensive loss, net of tax
(48,370
)
(57,728
)
388,581
380,146
$
4,201,479
$
4,235,900
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
Nine Months Ended
Three Months Ended
9/30/2024
9/30/2023
9/30/2024
9/30/2023
(dollars in thousands)
Interest and dividend income:
Loans
$
102,679
$
94,706
$
35,026
$
32,818
Investment securities:
Taxable
20,701
15,877
6,229
6,594
Nontaxable
2,872
3,976
955
1,004
126,252
114,559
42,210
40,416
Interest expense:
Savings, NOW and money market deposits
33,637
22,188
12,117
8,802
Time deposits
20,748
13,086
6,712
5,785
Overnight advances
392
596
125
50
Other borrowings
16,283
11,782
4,656
4,347
71,060
47,652
23,610
18,984
Net interest income
55,192
66,907
18,600
21,432
Provision (credit) for credit losses
740
(1,227
)
170
(171
)
Net interest income after provision (credit) for credit losses
54,452
68,134
18,430
21,603
Noninterest income:
Bank-owned life insurance
2,573
2,383
876
809
Service charges on deposit accounts
2,543
2,243
842
703
Net loss on sales of securities
—
(3,489
)
—
—
Other
3,732
2,802
1,492
732
8,848
3,939
3,210
2,244
Noninterest expense:
Salaries and employee benefits
29,169
29,268
9,695
9,649
Occupancy and equipment
9,289
9,974
2,965
3,253
Merger expenses
866
—
866
—
Branch consolidation expenses
547
—
547
—
Other
9,635
10,010
3,378
