Close

The First of Long Island Corporation Reports Earnings for the Quarter and Year Ended December 31, 2020

January 29, 2021 8:30 AM EST

GLEN HEAD, N.Y., Jan. 29, 2021 (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, 2020. In the highlights that follow, all comparisons are of the current quarter or year to the same period last year unless otherwise indicated.

FOURTH QUARTER HIGHLIGHTS

  • Net Income and EPS were $10.5 million and $.44, respectively, compared to $9.2 million and $.38
  • ROA and ROE were 1.03% and 10.40%, respectively, compared to .88% and 9.32%
  • Net interest margin increased 7 basis points to 2.64% for the fourth quarter and full year periods
  • Cash Dividends Per Share increased 5.6% to $.19 from $.18
  • Cost of interest-bearing deposits declined 68 basis points to .69% and cost of interest-bearing liabilities declined 61 basis points to .88%
  • Restarted the repurchase program acquiring 115,500 shares at a cost of $2.0 million
  • Launched updated branding initiative and introduced a custom designed interactive website

2020 HIGHLIGHTS

  • Net Income and EPS were $41.2 million and $1.72, respectively, compared to $41.6 million and $1.67
  • ROA and ROE were 1.00% and 10.47%, respectively, compared to .99% and 10.61%

Analysis of 2020 Earnings

Net income for 2020 was $41.2 million, a decrease of $352,000, or .8%, as compared to 2019. The decrease is mainly due to an increase in the provision for credit losses of $3.0 million partially offset by increases in net interest income of $1.9 million, or 1.9%, and noninterest income, before securities gains, of $933,000, or 8.8%.  

The increase in net interest income is mainly attributable to a reduction in deposit rates in response to decreases in the Federal Funds Target Rate to near zero as well as significant declines in rates across the entire yield curve. The cost of savings, NOW and money market deposits declined 54 basis points to .54% and the cost of interest-bearing liabilities declined 42 basis points to 1.12%. These decreases far outpaced the 18 basis point decline in yield on securities and loans which are generally not subject to immediate repricing with changes in market interest rates. The increase in net interest income was also attributable to income from SBA Paycheck Protection Program (“PPP”) loans of $3.7 million and a favorable shift in the mix of funding as an increase in average checking deposits of $158.4 million and a decline in average interest-bearing liabilities of $214.6 million resulted in average checking deposits comprising a larger portion of total funding. Average checking deposits include a portion of the proceeds of PPP loans.

The decline in yield on securities and loans of 42 basis points and 12 basis points, respectively, was mainly attributable to an increase in prepayment speeds on mortgage-backed securities, lower yields available on securities purchases and loan originations, acceleration of loan prepayments and refinancing on residential mortgages and downward repricing of corporate bonds. While the economic impact of the COVID-19 pandemic (“pandemic”) caused the outstanding balance of loans to shrink during the first nine months of 2020, outstanding mortgage loans grew $26.7 million, or 1%, during the fourth quarter.   For the year, the average balance of loans decreased $107 million, or 3.3%, and the average balance of investment securities declined $52.2 million, or 6.8%. The average balance of loans includes $112.6 million of PPP loans at a weighted average yield earned in 2020 of 3.25%. Through year-end 2020, the Bank had $25.2 million, or 15%, of its PPP loans forgiven by the SBA. The decrease in loans and securities resulted in a notable increase in cash and cash equivalents on the Balance Sheet. Presuming economic activity improves and businesses return to normal operations in our marketplace, we expect mortgage originations to grow. The mortgage loan pipeline was $74 million at December 31, 2020.

Net interest margin for the fourth quarter and full year of 2020 was 2.64%, an increase of 7 basis points over the comparable periods of 2019. The increases were mainly attributable to our ability to reduce the rates paid on interest-bearing deposits faster than interest-earning assets repriced downward and the deleveraging transaction completed in the third quarter of 2020. However, the current low reinvestment rates on securities and loans, a highly competitive lending environment, and the elevated pace of prepayments and refinancings on residential mortgages could continue to exert downward pressure on net interest income and margin.

The provision for credit losses was $3.0 million for 2020 on a current expected credit loss (“CECL”) basis as compared to $33,000 for 2019 on an incurred loss basis. The $3.0 million provision for the current year was primarily attributable to the pandemic and includes $4.2 million related to higher historical loss rates and economic conditions and $2.1 million for net chargeoffs, partially offset by a decline in the outstanding loan balance of residential and commercial mortgages. The $33,000 provision for 2019 was driven mainly by net chargeoffs of $1.6 million partially offset by declines in outstanding loans and lower growth rate trends.

The increase in noninterest income, before securities gains, of $933,000 is primarily attributable to an increase in the non-service components of the Bank’s defined benefit pension plan of $1.0 million and income of $370,000 relating to a transition payment from an independent broker-dealer for the initial conversion of the Bank’s retail broker and advisory accounts. Partially offsetting these increases was a decrease in service charges on deposit accounts of $252,000 due to the pandemic. Management remains focused on revenue enhancement initiatives; however, the pandemic has negatively affected most categories of noninterest income.

Noninterest expense, before debt extinguishment costs, increased $58,000 in 2020 as compared to 2019. Excluding executive severance and retirement charges of $2.6 million in 2019, the increase over 2019 was $2.6 million. The $2.6 million increase was primarily due to increases in compensation and benefit costs mainly related to normal salary adjustments and hiring of lending and credit staff.

The increase in income tax expense of $96,000 is attributable to an increase in the effective tax rate from 16.5% in 2019 to 16.8% in 2020 as tax-exempt income from municipal securities and bank-owned life insurance in the current year declined as a percentage of pre-tax earnings when compared to 2019.

Analysis of Earnings – Fourth Quarter 2020 Versus Fourth Quarter 2019

Net income for the fourth quarter of 2020 was $10.5 million as compared to $9.2 million for the same quarter of 2019. The increase in earnings for the 2020 quarter was largely attributed to the executive severance and retirement charges in the 2019 period of $2.6 million partially offset by increases in the provision for credit losses and income tax expense of $802,000 and $496,000, respectively. The increase in the provision for credit losses was mainly due to an increase in historical loss rates. The increase in income tax expense reflects higher pre-tax earnings in the current quarter and an increase in the effective tax rate to 16.9%.

Analysis of Earnings – Fourth Quarter Versus Third Quarter 2020

Net income for the fourth quarter decreased $238,000 as compared to the third quarter mainly due to a decline in net interest income of $902,000. The decline in net interest income was primarily related to the downward repricing of corporate bonds and an increase in prepayments and refinancing of residential mortgage loans. These items also contributed to a 2 basis point decrease in net interest margin to 2.64% for the current quarter. The decline in net income was also due to a provision for credit losses of $556,000 in the current quarter related to higher historical loss rates and mortgage loan growth, partially offset by improved economic conditions and lower net chargeoffs. Partially offsetting the impact on net income of these items was the aforementioned income in the fourth quarter of $370,000 relating to a transition payment from an independent broker-dealer, a health insurance premium credit of $431,000 and lower income tax expense of $220,000 due to declines in the effective tax rate and pre-tax income.

Asset Quality

The Bank’s allowance for credit losses to total loans (reserve coverage ratio) on a CECL basis was 1.01% at January 1, 2020, 1.09% at March 31, 1.08% at June 30 and September 30 and 1.09% at December 31, 2020. Excluding PPP loans, the reserve coverage ratio increased 12 basis points during 2020 to 1.13% at year-end. The increase is mainly due to current and forecasted economic conditions and higher historical loss rates. Nonaccrual loans, troubled debt restructurings and loans past due 30 through 89 days remain at low levels. Gross loan chargeoffs and recoveries were $2.7 million and $584,000, respectively, for the year-ended December 31, 2020.  

Status of COVID-19 Loan Modifications

During the second and third quarters the Bank provided payment deferrals in the form of loan modifications to borrowers experiencing financial disruption and economic hardship as a result of the pandemic.   At December 31, 2020, all such loans have resumed making payment and are current except for seven loans that were charged-off totaling $440,000 and one loan that was past due 30 to 89 days in the amount of $41,000. Additionally, three loans totaling $862,000 were in nonaccrual status at year-end.  

Capital

The Corporation’s balance sheet remains positioned for lending and growth with a Leverage Ratio of approximately 10.0% at December 31, 2020. The Corporation restarted the share repurchase program during the fourth quarter of 2020 acquiring 115,500 shares at a cost of $2.0 million. We expect to continue repurchases during 2021.

Key Initiatives, Customer Service and Challenges We Face

Our strategy is focused on increasing shareholder value through loan and deposit growth, the maintenance of strong credit quality, a strong efficiency ratio and an optimal amount of capital. Key strategic initiatives include building on our relationship banking business, growing fee income, enhancing our brand, highlighting our digital offerings and refining our branch strategy.

During the fourth quarter we opened a new branch in Riverhead, Long Island, successfully introduced an updated branding initiative including launch advertising and a promotional campaign, and concurrently rolled out an interactive custom designed website to better support our customer’s electronic banking services and digital banking needs. In addition, the Bank recently partnered with an independent broker-dealer to enhance our customers' access to a comprehensive set of investment products as well as wealth management, trust and advisory services.

The interest rate and economic environment continues to exert substantial pressure on net interest income, net interest margin, earnings, profitability metrics, loans outstanding and the Bank’s ability to grow. These items could be negatively impacted by yield curve inversion, low yields available on loans and securities and potential credit losses arising from current economic conditions. The recent resurgence of the coronavirus and persistent economic challenges such as the level of short and long-term interest rates, elevated unemployment and underemployment, suboptimal gross domestic product measures, higher vacancies and delinquent rents are particular risks to future financial performance. Among other things, very low interest rates have caused an acceleration of residential mortgage loan repayments and repricing which are expected to continue into 2021.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

      
    
 12/31/20 12/31/19
    
 (dollars in thousands)
Assets:     
Cash and cash equivalents$211,182  $38,968 
Investment securities available-for-sale, at fair value 662,722   697,544 
      
Loans:     
Commercial and industrial 100,015   103,879 
SBA Paycheck Protection Program 139,487    
Secured by real estate:     
Commercial mortgages 1,421,071   1,401,289 
Residential mortgages 1,316,727   1,621,419 
Home equity lines 54,005   59,231 
Consumer and other 2,149   2,431 
  3,033,454   3,188,249 
Allowance for credit losses (33,037)  (29,289)
  3,000,417   3,158,960 
      
Restricted stock, at cost 20,814   30,899 
Bank premises and equipment, net 38,830   40,017 
Right-of-use asset - operating leases 12,212   14,343 
Bank-owned life insurance 85,432   83,119 
Pension plan assets, net 20,109   18,275 
Deferred income tax benefit 1,375   317 
Other assets 16,048   15,401 
 $4,069,141  $4,097,843 
Liabilities:     
Deposits:     
Checking$1,208,073  $911,978 
Savings, NOW and money market 1,679,161   1,720,599 
Time 434,354   511,439 
  3,321,588   3,144,016 
      
Short-term borrowings 60,095   190,710 
Long-term debt 246,002   337,472 
Operating lease liability 13,046   15,220 
Accrued expenses and other liabilities 21,292   21,317 
  3,662,023   3,708,735 
Stockholders' Equity:     
Common stock, par value $.10 per share:     
Authorized, 80,000,000 shares;     
Issued and outstanding, 23,790,589 and 23,934,632 shares 2,379   2,393 
Surplus 105,547   111,744 
Retained earnings 295,622   274,376 
  403,548   388,513 
Accumulated other comprehensive income, net of tax 3,570   595 
  407,118   389,108 
 $4,069,141  $4,097,843 

CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

            
            
 Twelve Months Ended Three Months Ended
 12/31/20 12/31/19 12/31/20 12/31/19
        
 (dollars in thousands)
Interest and dividend income:           
Loans$109,492 $117,171 $26,143 $28,789 
Investment securities:           
Taxable 11,873  15,212  1,901  3,486 
Nontaxable 9,851  11,467  2,331  2,648 
  131,216  143,850  30,375  34,923 
Interest expense:           
Savings, NOW and money market deposits 9,097  18,563  1,151  4,707 
Time deposits 10,977  14,494  2,490  3,133 
Short-term borrowings 1,574  3,261  355  692 
Long-term debt 7,540  7,363  1,363  1,805 
  29,188  43,681  5,359  10,337 
Net interest income 102,028  100,169  25,016  24,586 
Provision (credit) for credit losses 3,006  33  556  (246)
Net interest income after provision (credit) for credit losses 99,022  100,136  24,460  24,832 
            
Noninterest income:           
Investment Management Division income 2,180  2,010  560  508 
Service charges on deposit accounts 2,962  3,214  695  893 
Net gains on sales of securities 2,556  14    14 
Other 6,388  5,373  1,886  1,315 
  14,086  10,611  3,141  2,730 
Noninterest expense:           
Salaries and employee benefits 37,288  37,111  9,010  10,575 
Occupancy and equipment 12,370  11,904  3,046  3,192 
Debt extinguishment 2,559       
Other 11,364  11,949  2,868  2,956 
  63,581  60,964  14,924  16,723 
Income before income taxes 49,527  49,783  12,677  10,839 
Income tax expense 8,324  8,228  2,148  1,652 
Net income$41,203 $41,555 $10,529 $9,187 
            
Share and Per Share Data:           
Weighted Average Common Shares 23,859,119  24,663,726  23,833,485  24,094,474 
Dilutive stock options and restricted stock units 53,915  184,800  99,293  207,733 
  23,913,034  24,848,526  23,932,778  24,302,207 
            
Basic EPS $1.73  $1.68  $0.44  $0.38 
Diluted EPS 1.72  1.67  0.44  0.38 
Cash Dividends Declared per share 0.74  0.70  0.19  0.18 

FINANCIAL RATIOS
(Unaudited)

            
ROA1.00% .99% 1.03% .88%
ROE10.47% 10.61% 10.40% 9.32%
Net Interest Margin2.64% 2.57% 2.64% 2.57%
Dividend Payout Ratio43.02% 41.92% 43.18% 47.37%

PROBLEM AND POTENTIAL PROBLEM LOANS AND ASSETS(Unaudited)

        
        
 12/31/20  12/31/19 
      
  (dollars in thousands) 
        
Loans, excluding troubled debt restructurings:       
Past due 30 through 89 days$1,422  $2,928 
Past due 90 days or more and still accruing     
Nonaccrual 628   423 
  2,050   3,351 
Troubled debt restructurings:       
Performing according to their modified terms 815   1,070 
Past due 30 through 89 days     
Past due 90 days or more and still accruing     
Nonaccrual 494   465 
  1,309   1,535 
Total past due, nonaccrual and restructured loans:       
Restructured and performing according to their modified terms 815   1,070 
Past due 30 through 89 days 1,422   2,928 
Past due 90 days or more and still accruing     
Nonaccrual 1,122   888 
  3,359   4,886 
Other real estate owned     
 $3,359  $4,886 
        
Allowance for loan losses$33,037  $29,289 
Allowance for loan losses as a percentage of total loans 1.09%  0.92%
Allowance for loan losses as a multiple of nonaccrual loans 29.4x  33.0x

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

                    
                    
  Twelve Months Ended December 31,
  2020 2019
(dollars in thousands) Average Balance Interest/ Dividends Average Rate Average Balance Interest/ Dividends Average Rate 
Assets:                   
Interest-earning bank balances $135,475  $212 .16% $29,561  $638 2.16% 
Investment securities:                   
Taxable  346,956   11,661 3.36   367,157   14,574 3.97  
Nontaxable (1)  373,500   12,470 3.34   405,454   14,515 3.58  
Loans (1)  3,110,512   109,498 3.52   3,217,530   117,177 3.64  
Total interest-earning assets  3,966,443   133,841 3.37   4,019,702   146,904 3.65  
Allowance for credit losses  (33,180)        (30,080)       
Net interest-earning assets  3,933,263         3,989,622        
Cash and due from banks  33,092         36,482        
Premises and equipment, net  39,403         40,894        
Other assets  135,109         127,357        
  $4,140,867        $4,194,355        
                    
Liabilities and Stockholders' Equity:                   
Savings, NOW & money market deposits $1,683,290   9,097 .54  $1,721,604   18,563 1.08  
Time deposits  473,720   10,977 2.32   613,166   14,494 2.36  
Total interest-bearing deposits  2,157,010   20,074 .93   2,334,770   33,057 1.42  
Short-term borrowings  75,805   1,574 2.08   137,546   3,261 2.37  
Long-term debt  382,134   7,540 1.97   357,239   7,363 2.06  
Total interest-bearing liabilities  2,614,949   29,188 1.12   2,829,555   43,681 1.54  
Checking deposits  1,100,307         941,929        
Other liabilities  31,949         31,258        
   3,747,205         3,802,742        
Stockholders' equity  393,662         391,613        
  $4,140,867        $4,194,355        
Net interest income (1)    $104,653       $103,223    
Net interest spread (1)       2.25%       2.11% 
Net interest margin (1)       2.64%       2.57% 

(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, 
  2020 2019 
(dollars in thousands) Average Balance Interest/ Dividends Average Rate Average Balance Interest/ Dividends Average Rate 
Assets:                   
Interest-earning bank balances $205,452  $53 .10% $26,427  $108 1.62% 
Investment securities:                   
Taxable  318,496   1,848 2.32   360,130   3,378 3.75  
Nontaxable (1)  367,334   2,951 3.21   387,948   3,352 3.46  
Loans (1)  3,002,622   26,145 3.48   3,175,858   28,790 3.63  
Total interest-earning assets  3,893,904   30,997 3.18   3,950,363   35,628 3.61  
Allowance for credit losses  (32,866)        (29,714)       
Net interest-earning assets  3,861,038         3,920,649        
Cash and due from banks  32,944         34,635        
Premises and equipment, net  38,849         40,388        
Other assets  134,387         126,736        
  $4,067,218        $4,122,408        
                    
Liabilities and Stockholders' Equity:                   
Savings, NOW & money market deposits $1,671,119   1,151 .27  $1,753,114   4,707 1.07  
Time deposits  436,607   2,490 2.27   516,932   3,133 2.40  
Total interest-bearing deposits  2,107,726   3,641 .69   2,270,046   7,840 1.37  
Short-term borrowings  58,817   355 2.40   138,869   692 1.98  
Long-term debt  268,600   1,363 2.02   343,733   1,805 2.08  
Total interest-bearing liabilities  2,435,143   5,359 .88   2,752,648   10,337 1.49  
Checking deposits  1,197,005         945,524        
Other liabilities  32,160         33,342        
   3,664,308         3,731,514        
Stockholders' equity  402,910         390,894        
  $4,067,218        $4,122,408        
Net interest income (1)    $25,638       $25,291    
Net interest spread (1)       2.30%       2.12% 
Net interest margin (1)       2.64%       2.57% 

(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 is having an adverse impact on the Corporation, its customers and the communities it serves. The adverse effect of the pandemic on the Corporation, its customers and the communities where it operates may adversely affect the Corporation’s business, results of operations and financial condition for an indefinite period of time. 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, 2020. The Form 10-K will be available through the Bank’s website at www.fnbli.com on or about March 12, 2021 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

 

Source: The First of Long Island Corporation


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Globe Newswire, Press Releases

Related Entities

Dividend, Stock Buyback, Earnings