8-K/A: First of Long Island Corporation Reports Mixed Second Quarter Earnings Amidst Margin Stabilization

The First of Long Island Corporation reported a decrease in net income year-over-year for both the second quarter and first six months of 2024, but showed some positive trends including margin stabilization and growth in deposits and loans.

Summary

• The First of Long Island Corporation (FLIC) announced its earnings for the second quarter and first six months of 2024.
• Net income for the first six months of 2024 was $9.2 million, or $0.41 per share, down from $13.4 million, or $0.59 per share, in the same period of 2023.
• The decrease in net income was primarily due to a $8.9 million decline in net interest income and a $1.6 million increase in the provision for credit losses.
• These negative impacts were partially offset by a $3.5 million loss on sales of securities in the first quarter of 2023, a $1.0 million decrease in noninterest expense, and a $1.4 million decrease in income tax expense.
• The net interest margin for the first six months of 2024 was 1.80%, and the efficiency ratio was 75.00%.
• For the second quarter of 2024, net income decreased by $2.1 million compared to the second quarter of 2023, mainly due to a $3.4 million decline in net interest income and a $570,000 increase in the provision for credit losses.
• However, net income for the second quarter of 2024 increased by $363,000 compared to the first quarter of 2024, driven by a $270,000 increase in net interest income and a $474,000 decrease in salaries and employee benefits.
• The net interest margin for the second quarter of 2024 was 1.80%, and the efficiency ratio was 73.55%.
• Total average deposits declined by $81.0 million, or 2.4%, in the first half of 2024 compared to the first half of 2023.
• The company's leverage ratio was approximately 9.91% on June 30, 2024, and book value per share was $16.71.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While there are some positive aspects like margin stabilization and expense control, the overall financial results show a decline in profitability compared to the previous year. The company is facing challenges in net interest income and deposit growth, which are concerning.

Positives

• The net interest margin stabilized, increasing by one basis point in the second quarter.
• Noninterest income saw an increase of 8.8% in the first six months of 2024 compared to 2023, excluding a loss on sales of securities.
• Noninterest expenses decreased by 3.1% in the first six months of 2024 compared to the same period in 2023.
• The effective tax rate decreased to 3.9% for the first six months of 2024.
• The company maintains a strong capital position with a leverage ratio of approximately 9.91%.
• The company has $1.4 billion of available liquidity.
• The company's credit quality remains strong.

Negatives

• Net income for the first six months of 2024 decreased to $9.2 million from $13.4 million in the same period of 2023.
• Net interest income declined by $8.9 million, or 19.5%, in the first six months of 2024 compared to 2023.
• The provision for credit losses increased by $1.6 million in the first six months of 2024.
• Total average deposits declined by $81.0 million, or 2.4%, in the first half of 2024 compared to the first half of 2023.
• Net income for the second quarter of 2024 decreased by $2.1 million compared to the second quarter of 2023.

Risks

• The company is exposed to changing economic conditions, legislative and regulatory changes, and monetary and fiscal policies.
• Changes in interest rates, deposit flows, and the cost of funds could impact the company's performance.
• Demand for loan products and competition in the market are also potential risks.
• Changes in management's business strategies, accounting principles, and real estate values could affect the company.
• The company's available-for-sale securities portfolio has a net unrealized loss due to higher market interest rates.

Future Outlook

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. The company assumes no obligation to update these statements.

Management Comments

• President and Chief Executive Officer Chris Becker stated that they are encouraged by a quarter of increase in many financial metrics, including both deposit and loan growth.
• Chris Becker commented that the company believes their margin should be at the bottom, and the one basis point increase in the margin during the second quarter is reflective of that guidance.
• Chris Becker also noted that noninterest income and noninterest expense beat their guidance for the second straight quarter, and credit quality results remained strong.

Industry Context

The decrease in total average deposits reflects industry trends, indicating a broader challenge in deposit growth for financial institutions. The company's focus on margin stabilization and expense management aligns with common strategies in the current economic environment.

Comparison to Industry Standards

• The company's net interest margin of 1.80% is below the average for US banks, which has been closer to 3% in recent periods, indicating a potential area for improvement.
• The efficiency ratio of 73.55% for the second quarter is higher than the industry average, suggesting that the company may have higher operating costs compared to its peers.
• The return on average assets (ROA) of 0.45% is below the industry average, which is typically closer to 1%, indicating lower profitability relative to assets.
• The return on average equity (ROE) of 5.15% is also below the industry average, which is typically closer to 10%, suggesting lower returns for shareholders.
• Compared to regional banks like New York Community Bancorp (NYCB) and Valley National Bancorp (VLY), FLIC's profitability metrics are lower, indicating a need for improved performance.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and earnings per share.
• Employees may be affected by the ongoing branch optimization strategy and changes in incentive compensation.
• Customers may experience changes due to the branch optimization strategy.
• Creditors may be impacted by the company's financial performance and liquidity.

Next Steps

• The company will file its quarterly report on Form 10-Q for the quarter ended June 30, 2024, on or about August 1, 2024.
• The Board and management will continue to evaluate capital management tools to maximize shareholder value.

Key Dates

Keywords

earnings, net interest margin, noninterest income, noninterest expense, credit quality, liquidity, deposits, loans, financial results, banking