8-K: First of Long Island Corporation Reports Mixed Q3 Earnings, Net Interest Margin Improves

The First of Long Island Corporation reported a decrease in net income for the third quarter of 2024 compared to the same period last year, but showed improvement in net interest margin.

Summary

• The First of Long Island Corporation (FLIC) announced its earnings for the third quarter of 2024, showing a net income of $4.599 million, down from $6.8 million in the same quarter of 2023.
• For the nine months ended September 30, 2024, net income was $13.8 million, compared to $20.2 million for the same period in 2023.
• The company's net interest margin increased by nine basis points in Q3 2024 compared to Q2 2024, reaching 1.89%.
• Adjusted net income, excluding merger and branch consolidation expenses, was $5.58 million for Q3 2024 and $14.8 million for the nine-month period.
• The company's return on average assets (ROA) was 0.44% and return on average equity (ROE) was 4.77% for the third quarter of 2024.
• The efficiency ratio was 79.09% for the third quarter of 2024, or 72.69% on an adjusted basis.
• The company's liquidity position remains strong with $915.7 million of available liquidity as of September 30, 2024.
• The leverage ratio was approximately 10.13% on September 30, 2024, and book value per share was $17.25.
• The company declared a quarterly cash dividend of $0.21 per share.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to decreased net income and EPS, but there are positive signs of improvement in net interest margin and cost control.

Positives

• The net interest margin showed a significant improvement in the third quarter of 2024.
• Adjusted net income increased in the third quarter of 2024 compared to the second quarter of 2024.
• The company maintains a strong liquidity position.
• The company's capital position remains strong with a leverage ratio of approximately 10.13%.
• Book value per share increased from the end of 2023.
• Noninterest income saw a notable increase for the nine-month period.
• The effective tax rate decreased significantly for the nine-month period.

Negatives

• Net income decreased for both the third quarter and the nine-month period compared to the same periods in 2023.
• Net interest income declined for both the third quarter and the nine-month period compared to the same periods in 2023.
• The provision for credit losses increased for the nine-month period compared to a reversal in the same period of 2023.
• Total average deposits declined by $89.6 million, or 2.6%, when comparing the nine-month periods of 2024 and 2023.

Risks

• The company is exposed to changing economic conditions, legislative and regulatory changes, and fluctuations in interest rates.
• There is a risk of changes in deposit flows and the cost of funds.
• The company faces competition and changes in management's business strategies.
• Changes in accounting principles, policies, or guidelines could impact the company.
• Fluctuations in real estate values could affect the company's performance.

Future Outlook

The company is optimistic that the trend of improving net interest margin will continue during the fourth quarter of 2024, but cautions that forward-looking statements are subject to numerous risks and uncertainties.

Management Comments

• President and Chief Executive Officer Chris Becker stated, 'We are encouraged by a second consecutive linked quarter showing improvements in key financial metrics.'
• Chris Becker also noted, 'We are optimistic the trend will continue during the fourth quarter of this year.'
• Chris Becker also commented, 'Excluding merger and branch consolidation expenses, our noninterest expense remains well controlled and in line with expectations.'
• Chris Becker also stated, 'Finally, our credit quality results remained strong.'

Industry Context

The report reflects the challenges faced by many regional banks in the current interest rate environment, with increased funding costs impacting net interest income. However, the company's focus on improving net interest margin and controlling noninterest expenses aligns with industry best practices.

Comparison to Industry Standards

• The company's net interest margin of 1.89% in Q3 2024 is below the average for US banks, which has been closer to 3% in recent periods, indicating room for improvement.
• The ROA of 0.44% is also below the industry average for US banks, which has been closer to 1% in recent periods, suggesting the company is underperforming in terms of asset utilization.
• The efficiency ratio of 79.09% is higher than the industry average, which is typically closer to 60%, indicating that the company has higher operating costs relative to its revenue.
• Compared to regional banks like New York Community Bancorp (NYCB) and Valley National Bancorp (VLY), FLIC's profitability metrics are generally lower, suggesting a need for operational improvements.
• The company's focus on branch optimization and system upgrades to reduce expenses is a common strategy among regional banks to improve efficiency.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and EPS, but encouraged by the improvement in net interest margin.
• Employees may be affected by the ongoing branch optimization strategy.
• Customers may experience changes due to branch closures and system upgrades.
• Creditors may be reassured by the company's strong liquidity and capital position.

Next Steps

• The company will file its quarterly report on Form 10-Q on or about October 28, 2024.
• The Board and management will continue to evaluate the quarterly dividend to maximize shareholder value.

Key Dates

Keywords

earnings, net interest margin, financial results, bank, liquidity, profitability, credit quality, noninterest income, noninterest expense, ROA, ROE