Financial Data and Key Metrics Changes - Net income for Q4 2023 totaled $6.1 million, down $741,000 from the linked quarter, primarily due to lower net interest income of $1.5 million and an increase in the provision for credit losses of $1.1 million [13] - The bank's net interest margin was 2% in Q4 2023, compared to 2.13% in the linked quarter, reflecting a 13 basis point decrease due to seasonal outflows of lower-cost deposits [13] - For the full year 2023, net income totaled $26.2 million, with fully diluted earnings per share at $1.16, a decline from 2022's record net income of $46.9 million and earnings per share of $2.04 [23] Business Line Data and Key Metrics Changes - The bank's noninterest income for Q4 2023 was $2.4 million, consistent with prior guidance and previous quarters [13] - Noninterest expenses decreased by $1.4 million to $14.8 million compared to the linked quarter, mainly due to lower incentive and stock-based compensation expenses [13] - The bank's total commercial loan portfolio has grown by 12% per year on average since 2020, with a slight increase of $0.5 million over the same period [22] Market Data and Key Metrics Changes - Total deposits declined by 4.85% to $3.3 billion, primarily due to seasonal lower municipal and tax escrow deposits, replaced by overnight borrowings and FHLB advances [5] - The bank's total wholesale funding, including brokered deposits, was $648.7 million or 15% of total assets as of December 31, 2023, with a weighted average cost of funds of 4.6% [5] Company Strategy and Development Direction - The bank is transitioning to a more commercially focused institution, with a key objective of growing its commercial and industrial loan and owner-occupied mortgage business [3] - The bank's transformation strategy, initiated in 2020, has led to a more efficient branch network and enhanced technology, which is expected to improve customer experience and service capabilities [12] - The bank plans to resume its stock buyback program in 2024, contingent on strong capital levels [6] Management's Comments on Operating Environment and Future Outlook - Management noted that the yield curve has been inverted for approximately 18 months, complicating the bank's ability to leverage excess capital [5] - The bank anticipates that net interest margin will begin to recover as short-term rates decrease, projecting a bottoming out of the margin in the first half of 2024 [25] - Management expressed optimism about the future, citing a strong capital position and the potential for margin expansion once the Federal Reserve lowers rates [12][24] Other Important Information - The bank maintained $1.1 billion in collateralized borrowing lines and had $386 million in unencumbered cash and securities, totaling approximately $1.5 billion in available liquidity at the end of the quarter [6] - The effective tax rate for 2023 was 11%, down from 19.4% in 2022, attributed to an increase in income from the bank's real estate investment trust and bank-owned life insurance [23] Q&A Session Summary Question: What is the outlook for the loan portfolio in 2024? - Management expects some lower single-digit loan growth in 2024, with a more robust pipeline anticipated as rates stabilize [33] Question: What is the expected tax rate for 2024? - The projected tax rate for 2024 is between 12% and 13% [32] Question: How will the bank approach dividends going forward? - The bank plans to continue paying dividends at the current level, analyzing it quarterly [36][37] Question: What would trigger stock buybacks? - Stock buybacks will be considered based on capital levels and projected earnings, with no specific number provided at this time [38]
The First of Long Island (FLIC) - 2023 Q4 - Earnings Call Transcript