The First of Long Island Corporation, the parent company of The First National Bank of Long Island, has been a stalwart in the Long Island banking landscape for nearly a century. Established in 1927 as a local community bank, FLIC has steadily grown to become a leading financial institution serving the diverse needs of businesses and individuals across Long Island and the New York City boroughs.
History and Growth
FLIC's rich history is a testament to its unwavering commitment to customer service, sound financial management, and community engagement. Starting with a single branch in Glen Head, New York, the bank has meticulously expanded its footprint, strategically opening 41 branches across Nassau and Suffolk counties, as well as in the boroughs of Manhattan, Queens, and Brooklyn. This extensive network has enabled FLIC to forge deep-rooted relationships with its customer base, positioning the bank as a trusted partner for a wide range of financial services.
Originally headquartered in Glen Cove, New York, FLIC has weathered significant challenges throughout its history, including the banking industry consolidation of the 1980s and 1990s. During this period, the company successfully maintained its focus on serving small and medium-sized businesses and individual customers in its local markets. The 2000s marked a period of substantial growth for FLIC, both organically and through strategic acquisitions. The company expanded its branch network, enhanced its commercial lending capabilities, and invested in new technologies to better serve its customers. This period of expansion saw the company's total assets grow to over $4 billion.
In recent years, FLIC has had to adapt to a challenging interest rate environment and increased competition from larger regional and national banks. The company has responded by doubling down on its community banking model, emphasizing strong relationships with local businesses and individuals. This approach has allowed FLIC to maintain solid financial performance, with healthy levels of loans, deposits, and profitability.
Financials
The bank's financial performance has been consistently solid, with net income of $26.24 million and revenue of $92.96 million reported in the fiscal year ended December 31, 2023. Operating cash flow for 2023 was $32.16 million, with free cash flow of $29.30 million. FLIC has maintained a strong capital position, with a leverage ratio of approximately 10.13% as of September 30, 2024, well above the regulatory requirements for a well-capitalized institution. Additionally, the company's return on assets (ROA) and return on equity (ROE) for the first nine months of 2024 stood at 0.44% and 4.88%, respectively, highlighting the bank's ability to generate consistent profitability.
For the most recent quarter (Q3 2024), FLIC reported revenue of $45.4 million, net income of $4.6 million, operating cash flow of $11.03 million, and free cash flow of $10.57 million. Revenue was up 9.5% year-over-year, driven by increases in net interest income and noninterest income. However, net income declined 32.4% year-over-year due to a $2.8 million decrease in net interest income, a $341,000 increase in the provision for credit losses, and $1.4 million in merger and branch consolidation expenses recorded in Q3 2024.
Loan Portfolio
FLIC's loan portfolio has undergone a strategic transformation in recent years, with the bank actively shifting its focus towards relationship-based commercial lending. As of September 30, 2024, commercial and industrial (C&I) loans and owner-occupied commercial mortgages accounted for 12% of the total loan portfolio, up from a low of 7% just a few years ago. This shift has been a deliberate effort to diversify the bank's revenue streams and capitalize on the vibrant commercial activity within its service area.
The bank's commercial and industrial loan portfolio stood at $146.44 million as of September 30, 2024, while the commercial mortgage portfolio reached $1.95 billion, with multifamily loans comprising $862.02 million of that total. The residential mortgage portfolio totaled $1.10 billion, and the home equity portfolio was $36.96 million. FLIC also maintains a small consumer and other loan portfolio, which amounted to $1.15 million at the end of the third quarter of 2024.
Asset Quality
The bank's asset quality remains strong, with nonperforming loans and net charge-offs at low levels. As of September 30, 2024, FLIC's allowance for credit losses (ACL) stood at $28.6 million, or 0.88% of total loans, reflecting the bank's prudent risk management practices and the overall health of its loan portfolio. This represents a slight decrease from $28.99 million at the end of 2023, when the ACL to total loans ratio was 0.89%.
Liquidity
In the face of a challenging interest rate environment, FLIC has demonstrated its ability to navigate the landscape effectively. The bank's net interest margin (NIM) experienced a decline over the past several quarters, from 2.97% in the third quarter of 2022 to 1.79% in the first quarter of 2024. However, the second and third quarters of 2024 saw a stabilization and slight improvement in the NIM, reaching 1.80% and 1.89%, respectively. Management remains cautiously optimistic that the trend of NIM improvement will continue in the final quarter of 2024 and into 2025, aided by the bank's proactive balance sheet management and the potential for a more favorable interest rate environment.
FLIC's debt-to-equity ratio stood at 1.145 as of December 31, 2023. The company held $60.89 million in cash at the end of 2023, with additional liquidity available through $582.8 million in collateralized borrowing lines with the Federal Home Loan Bank of New York and Federal Reserve Bank, as well as a $20 million unsecured line of credit with a correspondent bank. The company's current ratio and quick ratio both stood at 0.463 as of December 31, 2023.
Innovation and Digital Transformation
FLIC's commitment to innovation and digital transformation has also been a key focus. The bank has invested in upgrading its core banking system and enhancing its digital banking capabilities, enabling it to better serve the evolving needs of its customer base. These technological advancements have not only improved the customer experience but have also driven efficiency gains within the organization.
Strategic Merger
The proposed merger with ConnectOne Bancorp, announced in September 2024, represents a significant milestone in FLIC's history. The all-stock transaction, valued at $284 million, will create a combined entity with approximately $14 billion in total assets, $11 billion in total deposits, and $11 billion in total loans. This strategic combination is expected to strengthen FLIC's position in the Long Island and New York City markets, providing enhanced scale, product capabilities, and growth opportunities.
Future Outlook
As FLIC navigates the ever-changing financial landscape, the company remains steadfast in its focus on delivering exceptional customer service, maintaining a strong risk management culture, and driving sustainable growth. With its deep roots in the community, experienced management team, and a proven track record of success, FLIC is poised to continue its legacy as a cornerstone of Long Island banking.
The company has provided guidance on various financial metrics for the upcoming quarters. FLIC expects the recent increases in monthly service charge revenue to remain stable and anticipates merchant card service income to trend consistently with the first two quarters for the last two quarters of 2024. Non-interest expenses for the last two quarters of 2024 are expected to be comparable to the first two quarters. The company estimates the annualized effective tax rate for 2024 will be approximately 4%, increasing to around 7% in 2025, depending on income levels.
Regarding the net interest margin, FLIC stated that each 25 basis point Federal Reserve rate cut could improve the margin by 4-5 basis points. With anticipated rate cuts, they expect to maintain the current NIM trend of stabilization. On loan growth, FLIC guided to low-single-digit net loan growth for 2024, as they continue their strategy of reducing residential mortgages while growing commercial lending.
Throughout its history, FLIC has remained committed to its local communities, supporting charitable organizations, sponsoring community events, and encouraging employee volunteerism. This dedication to its roots has been a key part of the company's identity and has helped it weather various industry and economic challenges over the decades. The company operates primarily in the New York metropolitan area, with 92% of deposits coming from Nassau and Suffolk counties on Long Island and the boroughs of New York City, underscoring its strong regional focus and deep community ties.