8-K: First of Long Island Corporation Reports Lower 2024 Earnings Amidst Merger Preparations

The First of Long Island Corporation reported a decrease in net income for 2024, primarily due to a decline in net interest income and increased expenses, while preparing for a merger with ConnectOne Bancorp, Inc.

Summary

• The First of Long Island Corporation's net income for 2024 was $17.1 million, or $0.75 per diluted share, down from $26.2 million, or $1.16 per diluted share, in 2023.
• The decrease in net income was mainly due to a $13.6 million decline in net interest income and a $359,000 provision for credit losses, compared to a $326,000 reversal in 2023.
• These decreases were partially offset by a $3.5 million loss on securities in 2023, a $2.2 million increase in noninterest income, a $4.1 million increase in noninterest expense, and a $3.5 million decrease in income tax expense.
• The net interest margin for 2024 was 1.83%, and the efficiency ratio was 79.00%.
• Noninterest income, excluding a loss on securities in 2023, increased by 22.8%, driven by increases in bank-owned life insurance and service charges on deposit accounts.
• Noninterest expense increased by 6.4%, including $3.1 million in merger and branch consolidation expenses.
• The company's return on average assets (ROA) was 0.40% and return on average equity (ROE) was 4.49% for the year ended December 31, 2024.
• The fourth quarter of 2024 saw a net income decrease of $2.8 million compared to the same period in 2023, and a decrease of $1.4 million compared to the third quarter of 2024.
• The company had $868.5 million in available liquidity as of December 31, 2024, and a leverage ratio of approximately 10.12%.
• Book value per share was $16.77 on December 31, 2024, compared to $16.83 on December 31, 2023.

Sentiment

Score: 4

Explanation: The sentiment is negative due to the significant decrease in net income and key financial metrics, although the company highlights some positive aspects like noninterest income growth and strong asset quality. The focus on the upcoming merger also adds uncertainty.

Positives

• Noninterest income, excluding the loss on securities in 2023, increased by 22.8%, driven by growth in recurring fee income categories.
• The net interest margin began to recover during the year after bottoming out in the first quarter of 2024.
• Noninterest expense was well controlled, with an increase of only 1.6% when excluding merger and branch consolidation expenses.
• Asset quality remains strong, with past due loans at $270,000 and nonaccrual loans at $3.2 million.
• The company has a strong capital position with a leverage ratio of approximately 10.12%.
• The company has $868.5 million in available liquidity.

Negatives

• Net income decreased significantly in 2024 compared to 2023, from $26.2 million to $17.1 million.
• Net interest income declined by $13.6 million, or 15.7%, year-over-year.
• The company recorded a provision for credit losses of $359,000 in 2024, compared to a reversal of $326,000 in 2023.
• Noninterest expense increased by 6.4%, including $3.1 million in merger and branch consolidation expenses.
• The return on average assets (ROA) was 0.40% and return on average equity (ROE) was 4.49%, both down from the previous year.
• The efficiency ratio increased to 79.00% for the year ended December 31, 2024, compared to 65.52% in 2023.

Risks

• The company faces risks related to changing economic conditions, legislative and regulatory changes, and fluctuations in interest rates.
• The pending merger with ConnectOne Bancorp, Inc. introduces integration risks and uncertainties.
• The company's balance sheet remains liability sensitive, although the pace of repricing of average interest-earning assets began outpacing the repricing of average interest-bearing liabilities in the second half of the year.
• 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.

Future Outlook

The company is focused on positioning itself for the future and its pending merger with ConnectOne Bancorp, Inc. The company anticipates new opportunities for stockholders, customers, employees, and communities in 2025. The company cautions that 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.

Management Comments

• Our team is focused on best positioning our company for the future and its pending merger with ConnectOne Bancorp, Inc.
• Our net interest margin bottomed out during the first quarter of 2024 and began its recovery during the remainder of the year.
• Excluding loss on securities in 2023, noninterest income increased nearly 23% largely related to new and recurring fee income categories.
• Noninterest expense was well controlled with an increase of 1.6% when compared to the prior year after backing out $3.1 million of merger and branch consolidation expenses in 2024.
• Asset quality remains strong.
• We look forward to the changes to come in 2025, which will offer new and exciting opportunities to our stockholders, customers, employees and communities.

Industry Context

The results reflect challenges faced by many regional banks in 2024, including pressure on net interest margins due to rising interest rates and increased competition for deposits. The focus on merger preparations indicates a trend towards consolidation in the banking sector to achieve economies of scale and improve profitability.

Comparison to Industry Standards

• The company's ROA of 0.40% and ROE of 4.49% are below the industry average for regional banks, which typically aim for ROA above 1% and ROE above 10%.
• The efficiency ratio of 79.00% is higher than the industry benchmark, indicating higher operating costs relative to revenue.
• Compared to peers like New York Community Bancorp (NYCB) and Valley National Bancorp (VLY), which have also reported challenges in net interest income, FLIC's results show a similar trend of margin compression.
• The merger with ConnectOne Bancorp is a strategic move similar to other bank consolidations aimed at improving efficiency and market position, such as the merger between First Citizens BancShares and CIT Group.

Stakeholder Impact

• Shareholders will be impacted by the decrease in earnings and diluted EPS.
• Employees may experience changes due to the merger and branch consolidation.
• Customers may see changes in services and branch locations due to the merger and branch consolidation.
• The merger may impact suppliers and creditors through changes in business relationships.

Next Steps

• The company will file its Annual Report on Form 10-K for the year ended December 31, 2024, on or about March 12, 2025.
• The company will continue to focus on the pending merger with ConnectOne Bancorp, Inc.

Key Dates

Keywords

earnings, net interest income, noninterest income, merger, financial results, bank, liquidity, capital, ROA, ROE