The First of Long Island (FLIC) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited statements show a slight asset increase to $4.10 billion and higher net income of $34.1 million for the nine-month period Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $4,096,856 | $4,069,141 | | Net Loans | $2,871,897 | $3,000,417 | | Investment Securities | $775,747 | $662,722 | | Total Deposits | $3,371,546 | $3,321,588 | | Total Liabilities | $3,676,973 | $3,662,023 | | Total Stockholders' Equity | $419,883 | $407,118 | - Total loans decreased from $3.03 billion at year-end 2020 to $2.90 billion as of September 30, 2021, primarily due to a reduction in residential mortgages and SBA Paycheck Protection Program (PPP) loans[7] - Total deposits increased, driven by growth in checking and savings accounts, which offset a significant decline in time deposits[7] Consolidated Statements of Income Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $79,436 | $77,012 | $26,608 | $25,918 | | Provision (Credit) for Credit Losses | $(3,058) | $2,450 | $(1,449) | $— | | Net Income | $34,077 | $30,674 | $11,422 | $10,767 | | Diluted EPS | $1.43 | $1.28 | $0.48 | $0.45 | - Net income for the nine months ended September 30, 2021, increased by 11.1% year-over-year, primarily due to a $5.5 million favorable swing in the provision for credit losses and a 3.1% increase in net interest income[11][99] Consolidated Statements of Changes in Stockholders' Equity - Stockholders' equity increased from $407.1 million at the beginning of 2021 to $419.9 million at September 30, 2021[15][156] - Key activities impacting equity during the first nine months of 2021 included: net income of $34.1 million, cash dividends declared of $13.7 million, and common stock repurchases totaling $6.3 million[15][156] Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $38,778 | $26,847 | | Net Cash from Investing Activities | $8,681 | $210,240 | | Net Cash from Financing Activities | $425 | $(112,203) | | Net Increase in Cash | $47,884 | $124,884 | - The significant decrease in cash from investing activities compared to the prior year is primarily due to a higher volume of investment securities purchases ($268.8 million in 2021 vs $120.9 million in 2020) and a smaller net decrease in loans[20] Notes to Unaudited Consolidated Financial Statements Investment Securities Portfolio (in thousands) | Security Type | Fair Value (Sep 30, 2021) | Fair Value (Dec 31, 2020) | | :--- | :--- | :--- | | State and municipals | $330,763 | $364,211 | | Pass-through mortgage securities | $212,762 | $131,720 | | Collateralized mortgage obligations | $113,438 | $53,711 | | Corporate bonds | $118,784 | $113,080 | | Total | $775,747 | $662,722 | Loan Portfolio Composition (in thousands) | Loan Type | Balance (Sep 30, 2021) | Balance (Dec 31, 2020) | | :--- | :--- | :--- | | Commercial mortgages | $1,506,382 | $1,421,071 | | Residential mortgages | $1,215,395 | $1,316,727 | | SBA PPP | $65,505 | $139,487 | | Commercial and industrial | $67,379 | $100,015 | | Other | $46,752 | $56,154 | | Total Loans | $2,901,413 | $3,033,454 | - The Allowance for Credit Losses (ACL) decreased from $33.0 million at year-end 2020 to $29.5 million at September 30, 2021, driven by a credit provision of $3.1 million reflecting improved economic conditions[49][106] - The company utilizes interest rate swaps to manage interest rate risk, with one swap remaining with a notional amount of $50 million as of September 30, 2021[89][91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 11.1% net income increase driven by higher net interest income and a credit for credit losses Key Performance Metrics (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Income | $34.1 million | $30.7 million | | Diluted EPS | $1.43 | $1.28 | | Return on Average Assets (ROA) | 1.09% | 0.98% | | Return on Average Equity (ROE) | 10.96% | 10.49% | | Net Interest Margin | 2.70% | 2.64% | - The increase in net interest income was driven by a favorable funding mix shift, with average checking deposits growing by $247.9 million, and higher income from SBA PPP loans of $3.2 million[100][120] - The company recorded a credit provision for credit losses of $3.1 million in the first nine months of 2021, compared to a $2.5 million provision in the same period of 2020[106] - Strategic initiatives include a branch optimization strategy, which resulted in $1.2 million of expenses in the period, with an additional $2.2 million expected in Q4 2021[107][114][128] - The Allowance for Credit Losses (ACL) to total loans ratio was 1.02% at September 30, 2021 (1.04% excluding PPP loans), down from 1.09% at year-end 2020[109][143] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk management focuses on the impact of interest rate changes on Net Interest Income and Economic Value of Equity Interest Rate Sensitivity Analysis (at Sep 30, 2021) | Rate Change Scenario | EVE % Change from Base | NII % Change from Base (1-Year) | | :--- | :--- | :--- | | +300 bps | -6.3% | -0.4% | | +200 bps | -3.2% | +0.2% | | +100 bps | -0.2% | +0.6% | | Base Case | — | — | | -100 bps | -11.6% | -5.1% | - The company's large base of noninterest-bearing checking deposits (34% of total assets) helps mitigate the negative impact of rising interest rates on net interest income[170] - A decrease in interest rates would negatively impact NII and EVE due to the inability to reduce deposit rates below zero[172] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that disclosure controls and procedures are effective as of September 30, 2021[177] - There were no material changes in internal control over financial reporting during the third quarter of 2021[178] PART II. OTHER INFORMATION Item 1. Legal Proceedings Ongoing legal actions are part of normal business and are not expected to have a material adverse impact - The company states that ongoing legal actions are not expected to have a material adverse impact[179] Item 1A. Risk Factors No material changes to risk factors were reported since the last annual filing - No material changes to risk factors were reported since the last Annual Report on Form 10-K[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 100,845 shares in Q3 2021 under its existing stock repurchase program Issuer Purchases of Equity Securities (Q3 2021) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2021 | — | — | | August 2021 | 100,845 | $21.816 | | September 2021 | — | — | | Total | 100,845 | $21.816 | - The total authorized stock repurchase program is for $65 million, of which $11.1 million remained available for purchase as of September 30, 2021[183] Item 6. Exhibits This section lists all exhibits filed with the report, including officer certifications and iXBRL data - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer, as well as iXBRL formatted financial statements[188]