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
24.2
x
29.4
x
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
