The First of Long Island Corporation Reports Earnings for the Quarter and Year Ended December 31, 2021

1/27, 2:30 PM (Source: GlobeNewswire)

GLEN HEAD, New York, Jan. 27, 2022 (GLOBE NEWSWIRE) -- 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 quarter and year ended December 31, 2021. In the highlights that follow, all comparisons are to the prior year or quarter unless otherwise indicated.

2021 HIGHLIGHTS

  • Net Income and EPS were $43.1 million and $1.81, respectively, versus $41.2 million and $1.72
  • ROA and ROE were 1.04% and 10.34%, respectively, compared to 1.00% and 10.47%
  • Net interest margin was 2.74% versus 2.64%
  • Repurchased 679,873 shares at a cost of $14.5 million

FOURTH QUARTER HIGHLIGHTS

  • Net interest margin improves to 2.86% versus 2.71% in the third quarter of 2021
  • Strong loan originations of $333 million
  • Recorded charges of $2.0 million related to our announced branch consolidations
  • Incurred debt extinguishment costs of $1.0 million and security gains of $498,000

Analysis of 2021 Earnings

Diluted earnings per share were $1.81 in 2021, an increase of 5.2% from $1.72 in 2020. Net income for 2021 was $43.1 million, an increase of $1.9 million, or 4.6%, as compared to 2020. The increase is due to growth in net interest income of $4.8 million, or 4.7%, and an improvement in the provision for credit losses of $5.6 million. These items were partially offset by increases in noninterest expense, net of debt extinguishment costs, of $6.6 million, or 10.8%, and income tax expense of $1.9 million.

The increase in net interest income reflects a favorable shift in the mix of funding due to an increase in average noninterest-bearing checking deposits of $242.5 million, or 22.0%, and a decline in average interest-bearing liabilities of $250.6 million, or 9.6%. The increase is also attributable to higher income from SBA Paycheck Protection Program (“PPP”) loans of $2.9 million and prepayment and late fees of $1.1 million.

Partially offsetting the favorable impact of the above items on net interest income was a decline in the average balance of loans of $134.5 million, or 4.3%. The average yield on interest-earning assets declined 22 basis points (“bps”) from 3.37% for 2020 to 3.15% for 2021. The negative impact of declining asset yields on net interest income was more than offset through reductions in non-maturity and time deposit rates. The average cost of interest-bearing liabilities declined 44 bps from 1.12% for 2020 to .68% for 2021 helped by the repayment of a maturing interest rate swap in May 2021 that lowered the cost of funds in 2021 by $2.5 million. Net interest margin for 2021 of 2.74% increased 10 bps as compared to 2.64% for 2020. Income from PPP loans and prepayment and late fees improved net interest margin by 7 bps and 2 bps, respectively. We currently anticipate going into 2022 with a net interest margin similar to 4Q21. The direction of the margin throughout 2022 is largely dependent on changes in the yield curve and competitive conditions.

PPP income for 2021 was $6.5 million driven by an average balance of $108.8 million and a weighted average yield of 6.0%.  As of December 31, 2021, the Bank had $30.5 million of outstanding PPP loans with unearned fees of $978,000. We expect most of the outstanding PPP loans will be fully satisfied during the first half of 2022.

Although low loan demand throughout most of the first half of 2021 put pressure on the pipeline and originations, the Bank successfully deployed excess cash during the second half of 2021 into loan originations of $459 million. The expansion of our lending teams helped grow commercial mortgages by $315.5 million during the year, which now comprise 58.2% of total mortgages compared to 50.9% a year ago. While commercial and industrial lines of credit have increased, line utilization remains historically low contributing to a decrease in commercial and industrial loans outstanding. The loan pipeline was $152 million on December 31, 2021 with a weighted average rate of approximately 3.2%.

The provision for credit losses decreased $5.6 million when comparing the full year periods from a provision of $3.0 million in 2020 to a credit of $2.6 million in 2021. The credit for the current year was mainly due to improvements in economic conditions, asset quality and other portfolio metrics, partially offset by an increase in outstanding commercial mortgage loans and net chargeoffs of $633,000. The net chargeoffs were mainly the result of discounted sales of eight mortgage loans with varying concerns.

Noninterest income, net of gains on sales of securities, decreased $60,000 in 2021 as compared to 2020. The decrease is mainly due to a decline in investment services income of $958,000 as the shift to an outside service provider resulted in less assets under management, and a transition payment received in 2020 of $370,000 for the conversion of the Bank’s retail broker and advisory accounts. These amounts were partially offset by increases in the non-service cost components of the Bank’s defined benefit pension plan of $550,000 and fees from debit and credit cards of $615,000. We currently anticipate noninterest income to be between $2.5 million to $3.0 million per quarter in 2022 excluding securities gains.

The increase in noninterest expense, net of debt extinguishment costs, of $6.6 million includes charges of $3.2 million related to closing eight branches under our branch optimization strategy. The $3.2 million includes severance-related salary and benefits expense of $123,000 and occupancy and equipment expense related to rent, depreciation and asset disposals of $3.1 million. The remaining increase in noninterest expense is related to normal increases and changes in operating expenses. We currently anticipate total 2022 noninterest expense to be in line with 2021 excluding debt extinguishment costs.

Income tax expense increased $1.9 million due to growth in pre-tax earnings in 2021 and an increase in the effective tax rate to 19.2% for 2021 from 16.8% for 2020. The increase in the effective tax rate is due to a decrease in the percentage of pre-tax income derived from tax-exempt municipal securities and bank-owned life insurance in 2021 and a change in New York State tax law to implement a capital tax in the second quarter of 2021. We currently anticipate the 2022 effective tax rate to be in line with 2021.

Analysis of Earnings – Fourth Quarter 2021 Versus Fourth Quarter 2020

Net income for the fourth quarter of 2021 of $9.0 million decreased $1.5 million, or 14.4%, from $10.5 million earned in the same quarter of last year. The decrease is mainly attributable to implementing our branch optimization strategy and debt extinguishment costs noted above, partially offset by higher net interest income due to commercial loan growth and gains on sales of securities. The Bank completed a deleveraging of the balance sheet that incurred debt extinguishment costs of $1.0 million on the repayment of $39.7 million of long-term debt with a weighted average rate of 2.71%. The Bank used cash on hand and sold $17.8 million of mortgage-backed securities with a yield of 2.54% at a gain of $498,000 to pay off the debt.

Analysis of Earnings – Fourth Quarter Versus Third Quarter 2021

Net income for the fourth quarter of 2021 decreased $2.4 million from $11.4 million in the third quarter. The decrease was mainly attributable to the same reasons discussed in the prior paragraph and an increase in the provision for credit losses due to higher mortgage loan originations. These items were partially offset by a decline in income tax expense mainly due to lower pre-tax earnings.

Asset Quality

The Bank’s allowance for credit losses to total loans (reserve coverage ratio) was .96% on December 31, 2021 as compared to 1.09% on December 31, 2020.  The decrease in the reserve coverage ratio was mainly due to improvements in economic conditions, asset quality and other portfolio metrics. Nonaccrual loans, troubled debt restructurings and loans past due 30 through 89 days remain at low levels.

Capital

The Corporation’s balance sheet remains positioned for growth with a leverage ratio of approximately 10.2% on December 31, 2021. The Corporation repurchased 378,608 shares of common stock during the fourth quarter of 2021 at a cost of $8.2 million and 679,873 shares during the year at a cost of $14.5 million. We expect to continue our repurchase program during 2022.

Key Initiatives

We continue focusing on strategic initiatives supporting the growth of our balance sheet with 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 seasoned banking professionals to support our growth initiatives. Renovations of our leased space at 275 Broadhollow Road in Melville, N.Y. for a state-of-the-art branch and office space are nearing completion with occupancy expected to begin during the first quarter of 2022. Our signage at the Melville location now visibly overlooks the LIE and Route 110. Management continues to focus on the areas of cybersecurity, environmental, social and governance practices.

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 annual report on Form 10-K for the year ended December 31, 2021. The Form 10-K will be available through the Bank’s website at www.fnbli.com on or about March 11, 2022, when it is electronically filed with the SEC. Our SEC filings are also available on the SEC’s website at www.sec.gov.

CONSOLIDATED BALANCE SHEETS
(Unaudited)
     
  12/31/21 12/31/20
  (dollars in thousands)
Assets:      
Cash and cash equivalents $43,675  $211,182 
Investment securities available-for-sale, at fair value  734,318   662,722 
       
Loans:      
Commercial and industrial  90,386   100,015 
SBA Paycheck Protection Program  30,534   139,487 
Secured by real estate:      
Commercial mortgages  1,736,612   1,421,071 
Residential mortgages  1,202,374   1,316,727 
Home equity lines  44,139   54,005 
Consumer and other  991   2,149 
   3,105,036   3,033,454 
Allowance for credit losses  (29,831)  (33,037)
   3,075,205   3,000,417 
       
Restricted stock, at cost  21,524   20,814 
Bank premises and equipment, net  37,523   38,830 
Right-of-use asset - operating leases  8,438   12,212 
Bank-owned life insurance  107,831   85,432 
Pension plan assets, net  19,097   20,109 
Deferred income tax benefit  3,987   1,375 
Other assets  17,191   16,048 
  $4,068,789  $4,069,141 
Liabilities:      
Deposits:      
Checking $1,400,998  $1,208,073 
Savings, NOW and money market  1,685,410   1,679,161 
Time  228,837   434,354 
   3,315,245   3,321,588 
       
Short-term borrowings  125,000   60,095 
Long-term debt  186,322   246,002 
Operating lease liability  11,259   13,046 
Accrued expenses and other liabilities  17,151   21,292 
   3,654,977   3,662,023 
Stockholders' Equity:      
Common stock, par value $.10 per share:      
Authorized, 80,000,000 shares;      
Issued and outstanding, 23,240,596 and 23,790,589 shares  2,324   2,379 
Surplus  93,480   105,547 
Retained earnings  320,321   295,622 
   416,125   403,548 
Accumulated other comprehensive income (loss), net of tax  (2,313)  3,570 
   413,812   407,118 
  $4,068,789  $4,069,141 


CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
             
  Twelve Months Ended Three Months Ended
  12/31/21 12/31/20 12/31/21 12/31/20
  (dollars in thousands)
Interest and dividend income:            
Loans $106,266  $109,492 $26,835 $26,143
Investment securities:            
Taxable  8,162   11,873  1,893  1,901
Nontaxable  8,531   9,851  1,996  2,331
   122,959   131,216  30,724  30,375
Interest expense:            
Savings, NOW and money market deposits  4,414   9,097  963  1,151
Time deposits  5,712   10,977  894  2,490
Short-term borrowings  1,427   1,574  365  355
Long-term debt  4,599   7,540  1,131  1,363
   16,152   29,188  3,353  5,359
Net interest income  106,807   102,028  27,371  25,016
Provision (credit) for credit losses  (2,573)  3,006  485  556
Net interest income after provision (credit) for credit losses  109,380   99,022  26,886  24,460
             
Noninterest income:            
Investment services income  1,222   2,180  188  560
Service charges on deposit accounts  2,925   2,962  755  695
Net gains on sales of securities  1,104   2,556  498  
Other  7,323   6,388  1,919  1,886
   12,574   14,086  3,360  3,141
Noninterest expense:            
Salaries and employee benefits  39,753   37,288  10,090  9,010
Occupancy and equipment  15,338   12,370  4,892  3,046
Debt extinguishment  1,021   2,559  1,021  
Other  12,535   11,364  3,625  2,868
   68,647   63,581  19,628  14,924
Income before income taxes  53,307   49,527  10,618  12,677
Income tax expense  10,218   8,324  1,606  2,148
Net income $43,089  $41,203 $9,012 $10,529
             
Share and Per Share Data:            
Weighted Average Common Shares  23,655,635   23,859,119  23,462,923  23,833,485
Dilutive stock options and restricted stock units  107,348   53,915  137,194  99,293
   23,762,983   23,913,034  23,600,117  23,932,778
             
Basic EPS $1.82  $1.73 $0.38 $0.44
Diluted EPS  1.81   1.72  0.38  0.44
Cash Dividends Declared per share  0.78   0.74  0.20  0.19
             
FINANCIAL RATIOS
(Unaudited)
             
ROA  1.04%  1.00%  .88%  1.03%
ROE  10.34%  10.47%  8.50%  10.40%
Net Interest Margin  2.74%  2.64%  2.86%  2.64%
Dividend Payout Ratio  43.09%  43.02%  52.63%  43.18%


PROBLEM AND POTENTIAL PROBLEM LOANS AND ASSETS
(Unaudited)
         
  12/31/21  12/31/20 
   (dollars in thousands) 
         
Loans, excluding troubled debt restructurings:        
Past due 30 through 89 days $460  $1,422 
Past due 90 days or more and still accruing      
Nonaccrual  1,235   628 
   1,695   2,050 
Troubled debt restructurings:        
Performing according to their modified terms  554   815 
Past due 30 through 89 days      
Past due 90 days or more and still accruing      
Nonaccrual     494 
   554   1,309 
Total past due, nonaccrual and restructured loans:        
Restructured and performing according to their modified terms  554   815 
Past due 30 through 89 days  460   1,422 
Past due 90 days or more and still accruing      
Nonaccrual  1,235   1,122 
   2,249   3,359 
Other real estate owned      
  $2,249  $3,359 
         
Allowance for loan losses $29,831  $33,037 
Allowance for loan losses as a percentage of total loans  .96%  1.09%
Allowance for loan losses as a multiple of nonaccrual loans  24.2x  29.4x


AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited)
                   
 Twelve Months Ended December 31,
 2021 2020
(dollars in thousands) Average
Balance
 Interest/
Dividends
 Average
Rate
 Average
Balance
 Interest/
Dividends
 Average
Rate
Assets:                  
Interest-earning bank balances $200,063  $261 .13% $135,475  $212 .16%
Investment securities:                  
Taxable  455,532   7,901 1.73   346,956   11,661 3.36 
Nontaxable (1)  345,688   10,799 3.12   373,500   12,470 3.34 
Loans (1)  2,976,061   106,271 3.57   3,110,512   109,498 3.52 
Total interest-earning assets  3,977,344   125,232 3.15   3,966,443   133,841 3.37 
Allowance for credit losses  (31,300)        (33,180)      
Net interest-earning assets  3,946,044         3,933,263       
Cash and due from banks  33,808         33,092       
Premises and equipment, net  38,700         39,403       
Other assets  133,025         135,109       
  $4,151,577        $4,140,867       
                   
Liabilities and Stockholders' Equity:                  
Savings, NOW & money market deposits $1,782,789   4,414 .25  $1,683,290   9,097 .54 
Time deposits  300,374   5,712 1.90   473,720   10,977 2.32 
Total interest-bearing deposits  2,083,163   10,126 .49   2,157,010   20,074 .93 
Short-term borrowings  54,416   1,427 2.62   75,805   1,574 2.08 
Long-term debt  226,775   4,599 2.03   382,134   7,540 1.97 
Total interest-bearing liabilities  2,364,354   16,152 .68   2,614,949   29,188 1.12 
Checking deposits  1,342,813         1,100,307       
Other liabilities  27,525         31,949       
   3,734,692         3,747,205       
Stockholders' equity  416,885         393,662       
  $4,151,577        $4,140,867       
Net interest income (1)    $109,080       $104,653   
Net interest spread (1)       2.47%       2.25%
Net interest margin (1)       2.74%       2.64%

(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%.

 AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited)
                   
   Three Months Ended December 31,
  2021 2020
(dollars in thousands) Average
Balance
 Interest/
Dividends
 Average
Rate
 Average
Balance
 Interest/
Dividends
 Average
Rate
Assets:                  
Interest-earning bank balances $148,320  $57 .15% $205,452  $53 .10%
Investment securities:                  
Taxable  453,420   1,836 1.62   318,496   1,848 2.32 
Nontaxable (1)  329,171   2,527 3.07   367,334   2,951 3.21 
Loans (1)  2,971,545   26,836 3.61   3,002,622   26,145 3.48 
Total interest-earning assets  3,902,456   31,256 3.20   3,893,904   30,997 3.18 
Allowance for credit losses  (29,507)        (32,866)      
Net interest-earning assets  3,872,949         3,861,038       
Cash and due from banks  33,160         32,944       
Premises and equipment, net  39,703         38,849       
Other assets  134,500         134,387       
  $4,080,312        $4,067,218       
                   
Liabilities and Stockholders' Equity:                  
Savings, NOW & money market deposits $1,706,945   963 .22  $1,671,119   1,151 .27 
Time deposits  229,024   894 1.55   436,607   2,490 2.27 
Total interest-bearing deposits  1,935,969   1,857 .38   2,107,726   3,641 .69 
Short-term borrowings  51,978   365 2.78   58,817   355 2.40 
Long-term debt  222,005   1,131 2.02   268,600   1,363 2.02 
Total interest-bearing liabilities  2,209,952   3,353 .60   2,435,143   5,359 .88 
Checking deposits  1,423,068         1,197,005       
Other liabilities  26,531         32,160       
   3,659,551         3,664,308       
Stockholders' equity  420,761         402,910       
  $4,080,312        $4,067,218       
Net interest income (1)    $27,903       $25,638   
Net interest spread (1)       2.60%       2.30%
Net interest margin (1)       2.86%       2.64%

(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%.

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


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