10-Q: First of Long Island Corporation Reports First Quarter 2025 Results; Merger with ConnectOne Bancorp Anticipated in Second Quarter

First of Long Island Corporation's net income for Q1 2025 decreased to $3.8 million, or $0.17 per diluted share, compared to $4.4 million, or $0.20 per diluted share, for the same period in 2024.

Summary

• The First of Long Island Corporation reported a net income of $3.8 million, or $0.17 per diluted share, for the quarter ended March 31, 2025, compared to $4.4 million, or $0.20 per diluted share, for the same quarter in 2024.
• Net interest income increased by $661,000, but this was offset by an increase in the provision for credit losses of $168,000, an increase in noninterest expense of $922,000, and an increase in income tax expense of $193,000.
• The return on average assets (ROA) was 0.37%, the return on average equity (ROE) was 3.98%, and the net interest margin was 1.91%.
• Net interest income increased due to a $2.0 million decrease in interest expense, partially offset by a $1.4 million decrease in interest income.
• The decrease in interest expense resulted from a 16 basis points decrease in the cost of interest-bearing liabilities and a decrease in average interest-bearing liabilities of $92.9 million.
• The decrease in interest income resulted from a $156.6 million decrease in interest-earning assets, offset by a two basis points increase in the yield on interest-earning assets.
• The bank recorded a provision for credit losses of $168,000 in Q1 2025, compared to no provision in Q1 2024.
• The allowance for credit losses (ACL) remained relatively flat compared to year-end 2024, with a reserve coverage ratio of 0.89% at March 31, 2025.
• Noninterest income decreased by $57,000 due to nonrecurring items in 2024.
• Noninterest expense increased by $922,000, mainly due to expenses related to the pending merger with ConnectOne Bancorp, Inc.
• The effective tax rate increased from 6.2% in Q1 2024 to 11.5% in Q1 2025, mainly due to a decrease in the percentage of pre-tax income derived from the Bank's REIT.
• Total average deposits declined by $51.9 million compared to the first quarter of 2024.
• Other borrowings were down $75.0 million from year-end 2024.
• Available liquidity at March 31, 2025, totaled $878.1 million.
• Uninsured deposits were 49.5% of total deposits at March 31, 2025.
• The corporation's capital position remains strong, with a leverage ratio of approximately 10.29% at March 31, 2025.
• Book value per share was $16.91 at March 31, 2025, versus $16.77 at December 31, 2024.
• The bank declared a quarterly cash dividend of $0.21 per share.
• The merger with ConnectOne Bancorp, Inc. is expected to close in the second quarter of 2025.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company maintains a strong capital position and is proceeding with a merger, the decrease in net income and increase in expenses temper the outlook.

Positives

• Net interest income increased by $661,000 compared to Q1 2024.
• Available liquidity totaled $878.1 million at March 31, 2025.
• The leverage ratio was approximately 10.29% at March 31, 2025, indicating a strong capital position.
• Book value per share increased to $16.91 from $16.77 at year-end 2024.

Negatives

• Net income decreased to $3.8 million, or $0.17 per diluted share, compared to $4.4 million, or $0.20 per diluted share, in Q1 2024.
• Noninterest expense increased by $922,000 due to merger-related expenses.
• The effective tax rate increased to 11.5% from 6.2% in Q1 2024.
• Total average deposits declined by $51.9 million compared to the first quarter of 2024.

Risks

• The pending merger with ConnectOne Bancorp, Inc. is subject to regulatory approvals and customary closing conditions.
• Economic conditions on Long Island and in the boroughs of NYC could affect the financial strength of borrowers and the value of real estate collateral.
• Inflation, increasing interest rates, and government regulation pose economic challenges.
• Environmental impairment of properties securing the Bank's mortgage loans could affect future provisions and chargeoffs.
• Regulatory or strategic changes affecting access to and availability of funding from the FHLB and FRB could adversely impact the Bank's liquidity.

Future Outlook

The Corporation anticipates the merger with ConnectOne Bancorp, Inc. will close in the second quarter of 2025.

Industry Context

Community banks are facing increasing pressure to consolidate in order to compete with larger regional and national banks, and to deal with the increasing costs of regulatory compliance and technology.

Comparison to Industry Standards

• Comparing First of Long Island Corporation to similar community banks in the Northeast region, such as New York Community Bancorp and Dime Community Bancshares, reveals that its ROA of 0.37% is lower than the average ROA for these peers.
• The net interest margin of 1.91% is also relatively low compared to the industry average for community banks.
• However, the leverage ratio of 10.29% indicates a strong capital position, which is a positive sign for the bank's stability.
• The pending merger with ConnectOne Bancorp is a strategic move to increase scale and competitiveness, similar to other recent mergers in the community banking sector.

Legal Proceedings

• The Bank is defending against a lawsuit filed by a customer claiming monetary damages of approximately $11.1 million related to suspicious wire transfer activity.

Stakeholder Impact

• Shareholders will receive 0.5175 shares of ConnectOne common stock for each share of the Corporation's common stock upon closing of the merger.
• Employees may experience changes as a result of the merger, including potential job losses or changes in roles and responsibilities.
• Customers may benefit from the increased scale and resources of the combined entity.
• The merger could impact the competitive landscape for other financial institutions in the region.

Next Steps

• The Corporation anticipates the transaction with ConnectOne will close in the second quarter of 2025.
• The Corporation and Bank will continue to operate independently until the merger is completed.

Key Dates

Keywords

merger, ConnectOne Bancorp, net interest income, noninterest expense, liquidity, capital, loans, deposits, financial results, First of Long Island Corporation