UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-32964

THE FIRST OF LONG ISLAND CORPORATION

(Exact name of registrant as specified in its charter)

New York	11-2672906
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
275 Broadhollow Road, Melville, NY	11747
(Address of principal executive offices)	(Zip Code)

(516) 671-4900

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, $0.10 par value per share	FLIC	Nasdaq

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒   No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☒
Non‑Accelerated Filer ☐	Emerging Growth Company ☐
Smaller Reporting Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒ 

As of July 31, 2024, the registrant had 22,531,272 shares of common stock, $0.10 par value per share, outstanding.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income (Loss)	3
	Consolidated Statements of Changes in Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	31
ITEM 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	33
ITEM 1A.	Risk Factors	33
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
ITEM 3.	Defaults Upon Senior Securities	33
ITEM 4.	Mine Safety Disclosures	33
ITEM 5.	Other Information	33
ITEM 6.	Exhibits	33
	Signatures	35

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30,			December 31,
(dollars in thousands)	2024			2023
Assets:
Cash and cash equivalents	$	67,289		$	60,887
Investment securities available-for-sale, at fair value		657,989			695,877
Loans:
Commercial and industrial		150,587			116,163
Secured by real estate:
Commercial mortgages		1,936,691			1,919,714
Residential mortgages		1,122,866			1,166,887
Home equity lines		39,665			44,070
Consumer and other		1,330			1,230
		3,251,139			3,248,064
Allowance for credit losses		(28,484	)		(28,992	)
		3,222,655			3,219,072
Restricted stock, at cost		27,530			32,659
Bank premises and equipment, net		30,687			31,414
Right-of-use asset - operating leases		21,270			22,588
Bank-owned life insurance		115,317			114,045
Pension plan assets, net		10,527			10,740
Deferred income tax benefit		31,628			28,996
Other assets		24,432			19,622
	$	4,209,324		$	4,235,900
Liabilities:
Deposits:
Checking	$	1,123,244		$	1,133,184
Savings, NOW and money market		1,628,078			1,546,369
Time		612,119			591,433
		3,363,441			3,270,986
Overnight advances		—			70,000
Other borrowings		430,000			472,500
Operating lease liability		23,553			24,940
Accrued expenses and other liabilities		16,134			17,328
		3,833,128			3,855,754
Stockholders' Equity:
Common stock, par value $0.10 per share:
Authorized, 80,000,000 shares;
Issued and outstanding, 22,517,881 and 22,590,942 shares		2,252			2,259
Surplus		78,537			79,728
Retained earnings		355,674			355,887
		436,463			437,874
Accumulated other comprehensive loss, net of tax		(60,267	)		(57,728	)
		376,196			380,146
	$	4,209,324		$	4,235,900

See notes to unaudited consolidated financial statements

1

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Six Months Ended					Three Months Ended
	June 30,					June 30,
(in thousands, except per share data)	2024		2023			2024		2023
Interest and dividend income:
Loans	$	67,653	$	61,888		$	34,110	$	31,483
Investment securities:
Taxable		14,472		9,283			7,479		5,614
Nontaxable		1,917		2,972			957		1,027
		84,042		74,143			42,546		38,124
Interest expense:
Savings, NOW and money market deposits		21,520		13,386			11,437		7,611
Time deposits		14,036		7,301			7,059		4,232
Overnight advances		267		546			4		438
Other borrowings		11,627		7,435			5,615		4,002
		47,450		28,668			24,115		16,283
Net interest income		36,592		45,475			18,431		21,841
Provision (credit) for credit losses		570		(1,056	)		570		—
Net interest income after provision (credit) for credit losses		36,022		46,531			17,861		21,841
Noninterest income:
Bank-owned life insurance		1,697		1,574			857		794
Service charges on deposit accounts		1,701		1,540			821		753
Net loss on sales of securities		—		(3,489	)		—		—
Other		2,240		2,070			1,186		1,135
		5,638		1,695			2,864		2,682
Noninterest expense:
Salaries and employee benefits		19,474		19,619			9,500		9,854
Occupancy and equipment		6,324		6,721			3,110		3,396
Other		6,257		6,748			3,239		3,267
		32,055		33,088			15,849		16,517
Income before income taxes		9,605		15,138			4,876		8,006
Income tax expense		372		1,758			78		1,107
Net income	$	9,233	$	13,380		$	4,798	$	6,899
Weighted average:
Common shares		22,515,464		22,522,663			22,510,359		22,551,568
Dilutive restricted stock units		62,161		59,910			50,494		33,309
		22,577,625		22,582,573			22,560,853		22,584,877
Earnings per share:
Basic	$	0.41	$	0.59		$	0.21	$	0.31
Diluted		0.41		0.59			0.21		0.31
Cash dividends declared per share		0.42		0.42			0.21		0.21

See notes to unaudited consolidated financial statements 

2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) 

	Six Months Ended						Three Months Ended
	June 30,						June 30,
(in thousands)	2024			2023			2024			2023
Net income	$	9,233		$	13,380		$	4,798		$	6,899
Other comprehensive loss:
Change in net unrealized holding losses on available-for-sale securities		(3,931	)		(5,197	)		(2,142	)		(10,617	)
Change in funded status of pension plan		400			509			200			255
Other comprehensive loss before income taxes		(3,531	)		(4,688	)		(1,942	)		(10,362	)
Income tax benefit		(992	)		(1,357	)		(595	)		(3,182	)
Other comprehensive loss		(2,539	)		(3,331	)		(1,347	)		(7,180	)
Comprehensive income (loss)	$	6,694		$	10,049		$	3,451		$	(281	)

See notes to unaudited consolidated financial statements 

3

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

	Six Months Ended June 30, 2024
													Accumulated
													Other
	Common Stock									Retained			Comprehensive
(dollars in thousands)	Shares			Amount			Surplus			Earnings			Loss			Total
Balance, January 1, 2024		22,590,942		$	2,259		$	79,728		$	355,887		$	(57,728	)	$	380,146
Net income											4,435						4,435
Other comprehensive loss														(1,192	)		(1,192	)
Repurchase of common stock		(167,526	)		(17	)		(2,003	)								(2,020	)
Shares withheld upon the vesting and conversion of RSUs		(19,530	)		(2	)		(250	)								(252	)
Common stock issued under stock compensation plans		46,926			5			9									14
Common stock issued under dividend reinvestment and stock purchase plan		27,116			3			305									308
Stock-based compensation								401									401
Cash dividends declared											(4,717	)					(4,717	)
Balance, March 31, 2024		22,477,928			2,248			78,190			355,605			(58,920	)		377,123
Net income											4,798						4,798
Other comprehensive loss														(1,347	)		(1,347	)
Shares withheld upon the vesting and conversion of RSUs		(513	)					(5	)								(5	)
Common stock issued under stock compensation plans		40,466			4			12									16
Stock-based compensation								340									340
Cash dividends declared											(4,729	)					(4,729	)
Balance, June 30, 2024		22,517,881		$	2,252		$	78,537		$	355,674		$	(60,267	)	$	376,196

See notes to unaudited consolidated financial statements

4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

	Six Months Ended June 30, 2023
													Accumulated
													Other
	Common Stock									Retained			Comprehensive
(dollars in thousands)	Shares			Amount			Surplus			Earnings			Loss			Total
Balance, January 1, 2023		22,443,380		$	2,244		$	78,462		$	348,597		$	(64,767	)	$	364,536
Net income											6,481						6,481
Other comprehensive income														3,849			3,849
Shares withheld upon the vesting and conversion of RSUs		(47,275	)		(5	)		(846	)								(851	)
Common stock issued under stock compensation plans		103,015			11			6									17
Common stock issued under dividend reinvestment and stock purchase plan		32,665			3			500									503
Stock-based compensation								499									499
Cash dividends declared											(4,727	)					(4,727	)
Balance, March 31, 2023		22,531,785			2,253			78,621			350,351			(60,918	)		370,307
Net income											6,899						6,899
Other comprehensive loss														(7,180	)		(7,180	)
Shares withheld upon the vesting and conversion of RSUs		(623	)					(7	)								(7	)
Common stock issued under stock compensation plans		25,834			3			12									15
Stock-based compensation								638									638
Cash dividends declared											(4,738	)					(4,738	)
Balance, June 30, 2023		22,556,996		$	2,256		$	79,264		$	352,512		$	(68,098	)	$	365,934

See notes to unaudited consolidated financial statements

5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 

	Six Months Ended June 30,
(in thousands)	2024			2023
Cash Flows From Operating Activities:
Net income	$	9,233		$	13,380
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for credit losses		570			(1,056	)
Credit provision for deferred income taxes		(1,640	)		(237	)
Depreciation and amortization of premises and equipment		1,558			1,524
Amortization of right-of-use asset - operating leases		1,318			1,337
Premium amortization on investment securities, net		1,200			939
Net loss on sales of securities		—			3,489
Stock-based compensation expense		741			1,137
Accretion of cash surrender value on bank-owned life insurance		(1,697	)		(1,574	)
Pension expense		613			746
Decrease in other liabilities		(2,566	)		(2,876	)
Other increases in assets		(5,315	)		(2,917	)
Net cash provided by operating activities		4,015			13,892
Cash Flows From Investing Activities:
Available-for-sale securities:
Proceeds from sales		—			145,451
Proceeds from maturities and redemptions		35,125			23,275
Purchases		(2,368	)		(171,122	)
Net (increase) decrease in loans		(4,153	)		41,051
Net decrease in restricted stock		5,129			983
Purchases of premises and equipment, net		(831	)		(2,246	)
Proceeds from disposition of premises and fixed assets		383			2,291
Proceeds from death benefit of bank-owned life insurance		576			—
Net cash provided by investing activities		33,861			39,683
Cash Flows From Financing Activities:
Net increase (decrease) in deposits		92,455			(11,919	)
Net decrease in overnight advances		(70,000	)		—
Proceeds from other borrowings		100,000			125,000
Repayment of other borrowings		(142,500	)		(153,500	)
Proceeds from issuance of common stock, net of shares withheld		52			(355	)
Repurchase of common stock		(2,020	)		—
Cash dividends paid		(9,461	)		(9,441	)
Net cash used in financing activities		(31,474	)		(50,215	)
Net increase in cash and cash equivalents		6,402			3,360
Cash and cash equivalents, beginning of year		60,887			74,178
Cash and cash equivalents, end of period	$	67,289		$	77,538
Supplemental Cash Flow Disclosures:
Cash paid for:
Interest	$	47,756		$	27,279
Income taxes		2,801			2,570
Operating cash flows from operating leases		1,761			1,301
Noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities		—			1,057
Cash dividends payable		4,729			4,738

See notes to unaudited consolidated financial statements

6

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1 - BASIS OF PRESENTATION 

The accounting and reporting policies of The First of Long Island Corporation (“Corporation”) reflect banking industry practice and conform to generally accepted accounting principles (“GAAP”) in the United States.

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The First National Bank of Long Island (“Bank”). The Bank has one wholly-owned subsidiary: FNY Service Corp., an investment company. The Bank and FNY Service Corp. jointly own another subsidiary, The First of Long Island REIT, Inc., a real estate investment trust. The consolidated entity is referred to as the “Corporation” and the Bank and its subsidiaries are collectively referred to as the “Bank.” All intercompany balances and amounts have been eliminated. For further information refer to the consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023.

The consolidated financial information included herein as of and for the periods ended June 30, 2024 and 2023 is unaudited. However, such information reflects all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The December 31, 2023 consolidated balance sheet was derived from the Corporation's  December 31, 2023 audited consolidated financial statements. When appropriate, items in the prior year financial statements are reclassified to conform to the current period presentation.

Use of Estimates. In preparing the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported asset and liability balances, revenue and expense amounts, and the disclosures provided, including disclosure of contingent assets and liabilities, based on available information. Actual results could differ significantly from those estimates. Information available which could affect these judgements include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers.

2 - COMPREHENSIVE INCOME

Comprehensive income includes net income and other comprehensive income (loss) (“OCI”). OCI includes revenues, expenses, gains and losses that under GAAP are included in comprehensive income but excluded from net income. OCI for the Corporation consists of unrealized holding gains or losses on available-for-sale (“AFS”) securities and changes in the funded status of the Bank’s defined benefit pension plan, all net of related income taxes. Accumulated OCI is recognized as a separate component of stockholders’ equity.

The following table sets forth the components of accumulated OCI, net of tax.

				Current
	Balance			Period			Balance
(in thousands)	12/31/2023			Change			6/30/2024
Unrealized holding loss on available-for-sale securities	$	(49,809	)	$	(2,816	)	$	(52,625	)
Unrealized actuarial loss on pension plan		(7,919	)		277			(7,642	)
Accumulated other comprehensive loss, net of tax	$	(57,728	)	$	(2,539	)	$	(60,267	)

7

 

The components of OCI and the related tax effects are as follows:

	Six Months Ended						Three Months Ended
	June 30,						June 30,
(in thousands)	2024			2023			2024			2023
Change in net unrealized holding gains or losses on available-for-sale securities:
Change arising during the period	$	(3,931	)	$	(8,686	)	$	(2,142	)	$	(10,617	)
Reclassification adjustment for losses included in net income (1)		—			3,489			—			—
		(3,931	)		(5,197	)		(2,142	)		(10,617	)
Tax effect		(1,115	)		(1,513	)		(656	)		(3,260	)
		(2,816	)		(3,684	)		(1,486	)		(7,357	)
Change in funded status of pension plan:
Amortization of net actuarial loss included in pension expense (2)		400			509			200			255
Tax effect		123			156			61			78
		277			353			139			177
Other comprehensive loss	$	(2,539	)	$	(3,331	)	$	(1,347	)	$	(7,180	)

(1) Represents net realized losses arising from the sale of AFS securities, included in the consolidated statements of income in the line item “Net loss on sales of securities.” See “Note 3 – Investment Securities” for the income tax benefit related to these net realized losses, included in the consolidated statements of income in the line item “Income tax expense.”

(2) Represents the amortization of net actuarial loss relating to the Corporation’s defined benefit pension plan. This item is a component of net periodic pension cost and is included in the consolidated statements of income in the line item “Other noninterest income.”

3 - INVESTMENT SECURITIES

The following tables set forth the amortized cost and estimated fair values of the Bank’s AFS investment securities at the dates indicated.

	June 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
State and municipals	$	152,412	$	17	$	(16,790	)	$	135,639
Pass-through mortgage securities		161,479		7		(29,219	)		132,267
Collateralized mortgage obligations		186,665		504		(22,238	)		164,931
SBA agency obligations		114,243		324		(918	)		113,649
Corporate bonds		119,000		—		(7,497	)		111,503
	$	733,799	$	852	$	(76,662	)	$	657,989

	December 31, 2023
State and municipals	$	155,294	$	317	$	(11,990	)	$	143,621
Pass-through mortgage securities		165,734		—		(27,131	)		138,603
Collateralized mortgage obligations		201,500		1,836		(21,074	)		182,262
SBA agency obligations		126,228		331		(1,083	)		125,476
Corporate bonds		119,000		—		(13,085	)		105,915
	$	767,756	$	2,484	$	(74,363	)	$	695,877

8

 

Small Business Administration (“SBA”) agency obligations are floating rate, government guaranteed securities backed by $87.7 million of commercial mortgages and $25.9 million of equipment finance loans at June 30, 2024.

At June 30, 2024 and December 31, 2023, investment securities with a carrying value of $301.3 million and $203.9 million, respectively, were pledged as collateral to secure public deposits and borrowed funds.

There were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity at June 30, 2024 and December 31, 2023.

There was no allowance for credit losses associated with the investment securities portfolio at June 30, 2024 or December 31, 2023.

Securities With Unrealized Losses. The following tables set forth securities with unrealized losses at the dates indicated presented by the length of time the securities have been in a continuous unrealized loss position.

	June 30, 2024
	Less than					12 Months
	12 Months					or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(in thousands)	Value		Loss			Value		Loss			Value		Loss
State and municipals	$	12,524	$	(230	)	$	117,327	$	(16,560	)	$	129,851	$	(16,790	)
Pass-through mortgage securities		2,717		(45	)		128,329		(29,174	)		131,046		(29,219	)
Collateralized mortgage obligations		18,960		(150	)		96,790		(22,088	)		115,750		(22,238	)
SBA agency obligations		—		—			92,615		(918	)		92,615		(918	)
Corporate bonds		—		—			111,503		(7,497	)		111,503		(7,497	)
Total temporarily impaired	$	34,201	$	(425	)	$	546,564	$	(76,237	)	$	580,765	$	(76,662	)

	December 31, 2023
State and municipals	$	29,522	$	(719	)	$	95,725	$	(11,271	)	$	125,247	$	(11,990	)
Pass-through mortgage securities		2,361		(1	)		134,558		(27,130	)		136,919		(27,131	)
Collateralized mortgage obligations		—		—			102,528		(21,074	)		102,528		(21,074	)
SBA agency obligations		98,879		(1,083	)		—		—			98,879		(1,083	)
Corporate bonds		—		—			105,915		(13,085	)		105,915		(13,085	)
Total temporarily impaired	$	130,762	$	(1,803	)	$	438,726	$	(72,560	)	$	569,488	$	(74,363	)

State and Municipals

At June 30, 2024, approximately $129.9 million of state and municipal bonds had an unrealized loss of $16.8 million. Substantially all the state and municipal bonds are considered high investment grade and rated Aa2/AA- or higher. The unrealized loss is attributable to changes in interest rates and illiquidity and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

Pass-through Mortgage Securities

At June 30, 2024, pass-through mortgage securities of approximately $131.0 million had an unrealized loss of $29.2 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

Collateralized Mortgage Obligations

At June 30, 2024, collateralized mortgage obligations of approximately $115.8 million had an unrealized loss of $22.2 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

9

 

SBA Agency Obligations

At June 30, 2024, SBA agency obligations of approximately $92.6 million had an unrealized loss of $918,000. These securities were issued by the SBA, a U.S. government agency and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuer continues to make timely principal and interest payments on the bonds. The Bank has the ability to hold these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. The fair value is expected to recover as the bonds approach maturity.

Corporate Bonds

At June 30, 2024, approximately $111.5 million of corporate bonds had an unrealized loss of $7.5 million. The corporate bonds represent senior unsecured debt obligations of six of the largest U.S. based financial institutions, including JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo. Each of the corporate bonds has a stated maturity of ten years and matures in 2028. The bonds reprice quarterly based on the ten year constant maturity swap rate.

Each of the financial institutions is considered upper medium investment grade and rated A3 or higher. The unrealized loss is attributable to changes in credit spreads and interest rates and the illiquid nature of the securities. The Bank does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. Each of these financial institutions has diversified revenue streams, is well capitalized and continues to make timely interest payments. Management evaluates the quarterly financial statements of each company to determine if full payment of principal and interest is in doubt and does not believe there is any impairment at June 30, 2024.

Sales of AFS Securities. Sales of AFS securities were as follows:

	Six Months Ended					Three Months Ended
	June 30,					June 30,
(in thousands)	2024		2023			2024		2023
Proceeds	$	—	$	145,451		$	—	$	—
Gains	$	—	$	—		$	—	$	—
Losses		—		(3,489	)		—		—
Net loss	$	—	$	(3,489	)	$	—	$	—

Income tax benefit related to the net realized losses for the six months ended June 30, 2023 was $1.1 million and is included in the consolidated statements of income in the line item “Income tax expense.” 

Maturities. The following table sets forth by maturity the amortized cost and fair value of the Bank’s state and municipal securities and corporate bonds at June 30, 2024 based on the earlier of their stated maturity or, if applicable, their pre-refunded date. The remaining securities in the Bank’s investment securities portfolio are mortgage and asset-backed securities, consisting of pass-through mortgage securities, collateralized mortgage obligations and SBA agency obligations. Although these securities are expected to have substantial periodic repayments, they are reflected in the table below in aggregate amounts.

(in thousands)	Amortized Cost		Fair Value
Within one year	$	1,077	$	1,076
After 1 through 5 years		135,740		127,180
After 5 through 10 years		36,864		33,266
After 10 years		97,731		85,620
Mortgage and asset-backed securities		462,387		410,847
	$	733,799	$	657,989

10

4 - LOANS

The following table sets forth the loans outstanding by class of loans at the dates indicated.

(in thousands)	June 30, 2024		December 31, 2023
Commercial and industrial	$	150,587	$	116,163
Commercial mortgages:
Multifamily		868,286		857,163
Other		819,682		829,090
Owner-occupied		248,723		233,461
Residential mortgages:
Closed end		1,122,866		1,166,887
Revolving home equity		39,665		44,070
Consumer and other		1,330		1,230
	$	3,251,139	$	3,248,064

Allowance for Credit Losses. Loans that do not share similar risk characteristics are evaluated on an individual basis. Such disparate risk characteristics may include internal or external credit ratings, risk ratings, collateral type, size of loan, effective interest rate, term, geographic location, industry or historical or expected loss pattern. For loans individually evaluated, an allowance for credit losses (“ACL” or “allowance”) is estimated based on either the fair value of collateral or the discounted value of expected future cash flows. In estimating the fair value of real estate collateral, management utilizes appraisals or evaluations adjusted for costs to dispose and a distressed sale adjustment, if needed. Estimating the fair value of collateral other than real estate is also subjective in nature and sometimes requires difficult and complex judgements. Determining expected future cash flows can be more subjective than determining fair values. Expected future cash flows could differ significantly, both in timing and amount, from the cash flows actually received over the loan’s remaining life. Individually evaluated loans are excluded from the estimation of credit losses for the pooled portfolio.

For loans collectively evaluated for credit loss, management segregates its loan portfolio into distinct pools, certain of which are combined in reporting loans outstanding by class of loans: (1) commercial and industrial; (2) small business; (3) multifamily; (4) owner-occupied; (5) other commercial real estate; (6) construction and land development; (7) closed end residential mortgage; (8) revolving home equity; (9) consumer; and (10) municipal loans. Historical loss information from the Bank’s own loan portfolio from December 31, 2007 to present provides a basis for management’s assessment of expected credit losses. The choice of a historical look-back period that begins in 2007 covers an entire economic cycle and impacts the average historical loss rates used to calculate the final ACL. Due to the extensive loss data available, management selected the vintage approach to measure the historical loss component of credit losses for most of its loan pools. For the revolving home equity and small business pools, the lifetime PD/LGD (probability of default/loss given default) method is used to measure historical losses.

Modifications to borrowers experiencing financial difficulty are initially included in loans collectively evaluated for credit loss. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. A charge to the allowance for credit losses is generally not recorded upon modification.

Management believes that the methods selected fairly reflect the historical loss component of expected losses inherent in the Bank’s loan portfolio. However, since future losses could vary significantly from those experienced in the past, on a quarterly basis management adjusts its historical loss experience to reflect current and forecasted conditions. In doing so, management considers a variety of general qualitative and quantitative factors (“Q-factors”) and then subjectively determines the weight to assign to each in estimating losses. Qualitative characteristics include differences in underwriting standards, policies, lending staff and environmental risks. Management also considers whether further adjustments to historical loss information are needed to reflect the extent to which current conditions and reasonable and supportable forecasts over a one year to two year forecasting horizon differ from the conditions that existed during the historical loss period. These quantitative adjustments reflect changes to relevant data such as changes in unemployment rates, gross domestic product (“GDP”), vacancies, average growth in pools of loans, rent regulation status, delinquencies or other factors associated with the financial assets. The immediate reversion method is applied for periods beyond the forecasting horizon. The Bank’s ACL allocable to pools of loans that are collectively evaluated for credit loss results primarily from these qualitative and quantitative adjustments to historical loss experience. Because of the nature of the Q-factors and the degree of judgement involved in assessing their impact, management’s resulting estimate of losses may not accurately reflect current and future losses in the portfolio.

11

 

Growth in commercial mortgages and commercial and industrial loans, allowances on individually evaluated loans and chargeoffs were the main drivers of the provision recorded in the first six months of 2024, partially offset by declines in historical loss rates and a deterioration in current and forecasted economic conditions, including adjustments for rent stabilization status of multifamily properties.

The following tables present the activity in the ACL for the periods indicated.

	Balance at							Provision (Credit) for			Balance at
(in thousands)	1/1/2024		Chargeoffs			Recoveries		Credit Losses			6/30/2024
Commercial and industrial	$	2,030	$	(915	)	$	37	$	488		$	1,640
Commercial mortgages:
Multifamily		6,817		(168	)		—		1,332			7,981
Other		7,850		—			—		(238	)		7,612
Owner-occupied		3,104		—			—		(62	)		3,042
Residential mortgages:
Closed end		8,838		—			—		(939	)		7,899
Revolving home equity		339		—			—		(47	)		292
Consumer and other		14		(32	)		—		36			18
	$	28,992	$	(1,115	)	$	37	$	570		$	28,484

	Balance at							Provision (Credit) for			Balance at
(in thousands)	4/1/2024		Chargeoffs			Recoveries		Credit Losses			6/30/2024
Commercial and industrial	$	1,375	$	(251	)	$	30	$	486		$	1,640
Commercial mortgages:
Multifamily		8,114		(168	)		—		35			7,981
Other		7,539		—			—		73			7,612
Owner-occupied		3,002		—			—		40			3,042
Residential mortgages:
Closed end		7,981		—			—		(82	)		7,899
Revolving home equity		309		—			—		(17	)		292
Consumer and other		15		(32	)		—		35			18
	$	28,335	$	(451	)	$	30	$	570		$	28,484

12

 

	Balance at							Provision (Credit) for			Balance at
(in thousands)	1/1/2023		Chargeoffs			Recoveries		Credit Losses			6/30/2023
Commercial and industrial	$	1,543	$	(320	)	$	33	$	227		$	1,483
Commercial mortgages:
Multifamily		8,430		—			—		(1,132	)		7,298
Other		7,425		—			—		597			8,022
Owner-occupied		3,024		—			—		137			3,161
Residential mortgages:
Closed end		10,633		(122	)		—		(892	)		9,619
Revolving home equity		362		—			—		7			369
Consumer and other		15		—			—		—			15
	$	31,432	$	(442	)	$	33	$	(1,056	)	$	29,967

	Balance at							Provision (Credit) for			Balance at
(in thousands)	4/1/2023		Chargeoffs			Recoveries		Credit Losses			6/30/2023
Commercial and industrial	$	1,390	$	(138	)	$	18	$	213		$	1,483
Commercial mortgages:
Multifamily		7,472		—			—		(174	)		7,298
Other		7,613		—			—		409			8,022
Owner-occupied		3,117		—			—		44			3,161
Residential mortgages:		—
Closed end		10,226		(122	)		—		(485	)		9,619
Revolving home equity		377		—			—		(8	)		369
Consumer and other		14		—			—		1			15
	$	30,209	$	(260	)	$	18	$	—		$	29,967

13

 

Aging of Loans. The following tables present the aging of loans past due and loans on nonaccrual status by class of loans.

	June 30, 2024
	Past Due						Nonaccrual
(in thousands)	30-59 Days		60-89 Days		90 Days or More and Still Accruing		With an Allowance for Credit Loss		With No Allowance for Credit Loss		Total Past Due Loans & Nonaccrual Loans		Current		Total Loans
Commercial and industrial	$	60	$	—	$	—	$	—	$	—	$	60	$	150,527	$	150,587
Commercial mortgages:
Multifamily		—		—		—		1,200		—		1,200		867,086		868,286
Other		—		—		—		—		—		—		819,682		819,682
Owner-occupied		106		—		—		—		—		106		248,617		248,723
Residential mortgages:
Closed end		776		—		—		—		1,170		1,946		1,120,920		1,122,866
Revolving home equity		—		—		—		—		—		—		39,665		39,665
Consumer and other		—		—		—		—		—		—		1,330		1,330
	$	942	$	—	$	—	$	1,200	$	1,170	$	3,312	$	3,247,827	$	3,251,139

	December 31, 2023
Commercial and industrial	$	73	$	—	$	—	$	722	$	—	$	795	$	115,368	$	116,163
Commercial mortgages:								—
Multifamily		—		—		—		—		—		—		857,163		857,163
Other		1,624		—		—		—		—		1,624		827,466		829,090
Owner-occupied		—		—		—		—		—		—		233,461		233,461
Residential mortgages:
Closed end		1,389		—		—		—		331		1,720		1,165,167		1,166,887
Revolving home equity		—		—		—		—		—		—		44,070		44,070
Consumer and other		—		—		—		—		—		—		1,230		1,230
	$	3,086	$	—	$	—	$	722	$	331	$	4,139	$	3,243,925	$	3,248,064

At June 30, 2024, there was one residential real estate loan for which formal foreclosure proceedings are in process with an amortized cost of $844,000. This loan is included in the column "Nonaccrual - With No Allowance for Credit Loss" in the June 30, 2024 table above. The Bank did not hold any foreclosed residential real estate property at  June 30, 2024. There were no loans in the process of foreclosure nor did the Bank hold any foreclosed residential real estate property at  December 31, 2023.

Accrued interest receivable from loans totaled $10.6 million and $10.4 million at  June 30, 2024 and December 31, 2023, respectively, and is included in the line item “Other assets” on the consolidated balance sheets.

14

 

Loan Modifications. The Bank did not modify the terms of any loans for borrowers experiencing financial difficulty in the form of principal forgiveness, an interest reduction, an other-than-insignificant payment delay or a term extension during the previous twelve months. 

Risk Characteristics. Credit risk within the Bank’s loan portfolio primarily stems from factors such as changes in the borrower’s financial condition, credit concentrations, changes in collateral values, economic conditions, rent regulation and environmental contamination of properties securing mortgage loans. The Bank’s commercial loans, including those secured by real estate mortgages, are primarily made to small and medium-sized businesses. Such loans sometimes involve a higher degree of risk than those to larger companies because such businesses may have shorter operating histories, higher debt-to-equity ratios and may lack sophistication in internal record keeping and financial and operational controls. In addition, most of the Bank’s loans are made to businesses and consumers on Long Island and in the boroughs of New York City (“NYC”), and a large percentage of these loans are mortgage loans secured by properties located in those areas. The primary sources of repayment for residential and commercial mortgage loans include employment and other income of the borrowers, the businesses of the borrowers and cash flows from the underlying properties. In the case of multifamily mortgage loans, a substantial portion of the underlying properties are rent stabilized or rent controlled. These sources of repayment are dependent on the strength of the local economy.

Credit Quality Indicators. The Bank categorizes loans into risk categories based on relevant information about the borrower’s ability to service their debt including, but not limited to, current financial information for the borrower and any guarantors, payment experience, credit underwriting documentation, public records, due diligence checks and current economic trends. Management analyzes loans individually and classifies them using risk rating matrices consistent with regulatory guidance as follows.

Watch: The borrower’s cash flow has a high degree of variability and subject to economic downturns. Liquidity is strained and the ability of the borrower to access traditional sources of credit is diminished.

Special Mention: The borrower has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to risk sufficient to warrant adverse classification.

Substandard: Loans are inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans have all the inherent weaknesses of those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on existing facts, conditions and values, highly questionable and improbable.

Risk ratings on commercial and industrial loans and commercial mortgages are initially assigned during the underwriting process and affirmed as part of the approval process. The ratings are periodically reviewed and evaluated based on borrower contact, credit department review or independent loan review.

The Bank's loan risk rating and review policy establishes requirements for the annual review of commercial real estate and commercial and industrial loans. The requirements include details of the scope of coverage and selection process based on loan-type and risk rating. The Bank reviews at least 80% of its commercial real estate loan portfolio on an annual basis and uses a third-party review firm as part of its credit quality monitoring program. Lines of credit are also reviewed annually at each proposed reaffirmation. The frequency of the review of other loans is determined by minimum principal balance thresholds and the Bank’s ongoing assessments of the borrower’s condition.

Residential mortgage loans, revolving home equity lines and other consumer loans are initially evaluated utilizing the borrower’s credit score. A credit score is a tool used in the Bank’s loan approval process, and a minimum score of 680 is generally required for new loans. Credit scores for each borrower are updated at least annually. However, regardless of credit score, loans may be classified, criticized or placed on management’s watch list if relevant information comes to light.

15

 

The following tables present the amortized cost basis of loans by class of loans, vintage and risk rating. Loans shown as Pass are all loans other than those risk rated Watch, Special Mention, Substandard or Doubtful. Also presented are gross chargeoffs and recoveries recorded in the current year-to-date period by year of origination.

	June 30, 2024
	Term Loans by Origination Year													Revolving
(in thousands)	2024		2023		2022		2021		2020		Prior			Loans (1)			Total
Commercial and industrial:
Risk rating:
Pass	$	57,213	$	24,535	$	18,655	$	20,235	$	9,622	$	8,102		$	9,496		$	147,858
Watch		—		100		—		2,629		—		—			—			2,729
Special Mention		—		—		—		—		—		—			—			—
Substandard		—		—		—		—		—		—			—			—
Doubtful		—		—		—		—		—		—			—			—
	$	57,213	$	24,635	$	18,655	$	22,864	$	9,622	$	8,102		$	9,496		$	150,587
Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	(915	)	$	(915	)
Current-period recoveries		—		—		—		—		—		—			37			37
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	(878	)	$	(878	)
Commercial mortgages – multifamily:
Risk rating:
Pass	$	30,349	$	41,791	$	189,647	$	174,937	$	34,191	$	394,274		$	125		$	865,314
Watch		—		—		—		—		—		1,772			—			1,772
Special Mention		—		—		—		—		—		—			—			—
Substandard		—		—		—		—		—		1,200			—			1,200
Doubtful		—		—		—		—		—		—			—			—
	$	30,349	$	41,791	$	189,647	$	174,937	$	34,191	$	397,246		$	125		$	868,286
Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	(168	)	$	—		$	(168	)
Current-period recoveries		—		—		—		—		—		—			—			—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	(168	)	$	—		$	(168	)
Commercial mortgages – other:
Risk rating:
Pass	$	13,965	$	72,608	$	194,172	$	216,103	$	98,619	$	203,902		$	22		$	799,391
Watch		—		—		—		—		—		—			—			—
Special Mention		—		—		—		—		—		—			—			—
Substandard		—		—		—		—		—		20,291			—			20,291
Doubtful		—		—		—		—		—		—			—			—
	$	13,965	$	72,608	$	194,172	$	216,103	$	98,619	$	224,193		$	22		$	819,682
Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Current-period recoveries		—		—		—		—		—		—			—			—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Commercial mortgages – owner-occupied:
Risk rating:
Pass	$	20,268	$	22,205	$	52,696	$	52,047	$	23,343	$	70,789		$	2,138		$	243,486
Watch		—		262		—		4,975		—		—			—			5,237
Special Mention		—		—		—		—		—		—			—			—
Substandard		—		—		—		—		—		—			—			—
Doubtful		—		—		—		—		—		—			—			—
	$	20,268	$	22,467	$	52,696	$	57,022	$	23,343	$	70,789		$	2,138		$	248,723
Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Current-period recoveries		—		—		—		—		—		—			—			—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—

16

 

	June 30, 2024
	Term Loans by Origination Year													Revolving
(in thousands)	2024		2023		2022		2021		2020		Prior			Loans (1)			Total
Residential mortgages (2):
Risk rating:
Pass	$	—	$	27,421	$	192,424	$	160,451	$	33,417	$	711,674		$	39,665		$	1,165,052
Watch		—		—		—		—		—		—			—			—
Special Mention		—		—		—		—		—		—			—			—
Substandard		—		—		—		—		—		1,170			—			1,170
Doubtful		—		—		—		—		—		—			—			—
	$	—	$	27,421	$	192,424	$	160,451	$	33,417	$	712,844		$	39,665		$	1,166,222
Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Current-period recoveries		—		—		—		—		—		—			—			—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Consumer and other:
Risk rating:
Pass	$	—	$	41	$	189	$	—	$	—	$	100		$	941		$	1,271
Watch		—		—		—		—		—		—			—			—
Special Mention		—		—		—		—		—		—			—			—
Substandard		—		—		—		—		—		—			—			—
Doubtful		—		—		—		—		—		—			—			—
Not Rated		—		—		—		—		—		—			59			59
	$	—	$	41	$	189	$	—	$	—	$	100		$	1,000		$	1,330
Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	(32	)	$	(32	)
Current-period recoveries		—		—		—		—		—		—			—			—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—		$	(32	)	$	(32	)
Total Loans	$	121,795	$	188,963	$	647,783	$	631,377	$	199,192	$	1,413,274		$	52,446		$	3,254,830
Total net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	(168	)	$	(910	)	$	(1,078	)

(1) Includes revolving lines converted to term of $2.5 million of commercial and industrial, $1.0 million of owner-occupied commercial mortgage and $7.0 million of residential home equity.

(2) Certain fixed rate residential mortgage loans are included in a fair value hedging relationship. The amortized cost excludes a contra asset of $3.7 million related to basis adjustments for loans in the closed portfolio under the portfolio layer method at June 30, 2024. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See "Note 7 - Derivatives" for more information on the fair value hedge.

17

 

5 - STOCK-BASED COMPENSATION 

The following table presents a summary of restricted stock units (“RSUs”) outstanding at June 30, 2024 and changes during the six month period then ended.

						Weighted-
				Weighted-		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Grant-Date		Contractual		Value
	RSUs			Fair Value		Term (yrs.)		(in thousands)
Outstanding at January 1, 2024		213,879		$	16.04
Granted		231,467			10.54
Converted		(84,607	)		14.04
Forfeited		(3,144	)		11.77
Outstanding at June 30, 2024		357,595		$	12.99		1.32	$	3,583

As of June 30, 2024, there was $3.0 million of unrecognized compensation cost related to non-vested RSUs. The total cost is expected to be recognized over a weighted-average period of 1.6 years.

6 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Recorded at Fair Value. When measuring fair value, the Corporation uses a fair value hierarchy, which is designed to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy involves three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation can access at the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Corporation’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

18

 

The fair values of the Corporation’s financial assets and liabilities measured at fair value on a recurring basis are set forth in the table that follows. The fair values of AFS securities are determined on a recurring basis using matrix pricing (Level 2 inputs). Matrix pricing, which is a mathematical technique widely used in the industry to value debt securities, does not rely exclusively on quoted prices for the specific securities but rather on the relationship of such securities to other benchmark quoted securities. Where no significant other observable inputs were available, Level 3 inputs were used. The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.

	Fair Value Measurements Using:
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2024:
Financial Assets:
Available-for-Sale Securities:
State and municipals	$	135,639	$	—	$	135,467	$	172
Pass-through mortgage securities		132,267		—		132,267		—
Collateralized mortgage obligations		164,931		—		164,931		—
SBA agency obligations		113,649		—		113,649		—
Corporate bonds		111,503		—		111,503		—
		657,989		—		657,817		172
Derivative - interest rate swaps		3,770		—		3,770		—
	$	661,759	$	—	$	661,587	$	172
December 31, 2023:
Financial Assets:
Available-for-Sale Securities:
State and municipals	$	143,621	$	—	$	143,429	$	192
Pass-through mortgage securities		138,603		—		138,603		—
Collateralized mortgage obligations		182,262		—		182,262		—
SBA agency obligations		125,476		—		125,476		—
Corporate bonds		105,915		—		105,915		—
		695,877		—		695,685		192
Derivative - interest rate swaps		582		—		582		—
	$	696,459	$	—	$	696,267	$	192

State and municipal AFS securities measured using Level 3 inputs. The Bank held three non-rated bond anticipation notes with a book value of $172,000 at June 30, 2024. These bonds have a one year maturity and are issued by local municipalities that are customers of the Bank. Due to the short duration of the bonds, book value approximates fair value at June 30, 2024.

Land and Buildings. Premises and facilities held-for-sale of  $383,000 were sold for their carrying value in the second quarter  of 2024. These assets were measured at the lower of cost or fair value on a nonrecurring basis and reported in the line item “Other assets” in the consolidated balance sheets at  December 31, 2023.

Financial Instruments Not Recorded at Fair Value. Fair value estimates are made at a specific point in time. Such estimates are generally subjective in nature and dependent upon a number of significant assumptions associated with each financial instrument or group of similar financial instruments, including estimates of discount rates, liquidity, risks associated with specific financial instruments, estimates of future cash flows, and relevant available market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument, or the income tax consequences of realizing gains or losses on the sale of financial instruments.

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The following table sets forth the carrying amounts and estimated fair values of financial instruments that are not recorded at fair value in the Corporation’s financial statements.

	Level of	June 30, 2024				December 31, 2023
	Fair Value	Carrying				Carrying
(in thousands)	Hierarchy	Amount		Fair Value		Amount		Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	67,289	$	67,289	$	60,887	$	60,887
Loans, net	Level 3		3,222,655		2,938,018		3,219,072		2,945,864
Restricted stock	n/a		27,530		n/a		32,659		n/a
Financial Liabilities:
Checking deposits	Level 1		1,123,244		1,123,244		1,133,184		1,133,184
Savings, NOW and money market deposits	Level 1		1,628,078		1,628,078		1,546,369		1,546,369
Time deposits	Level 2		612,119		606,939		591,433		586,856
Overnight advances	Level 1		—		—		70,000		70,000
Other borrowings	Level 2		430,000		428,506		472,500		471,276

7 – DERIVATIVES

As part of its asset liability management activities, the Corporation may utilize interest rate swaps to help manage its interest rate risk position. The notional amount of an interest rate swap does not represent the amount exchanged by the parties. The exchange of cash flows is determined by reference to the notional amount and the other terms of the interest rate swap agreements.

Fair Value Hedge. On March 16, 2023, the Bank entered into a three year interest rate swap with a notional amount totaling $300 million which was designated as a fair value hedge of certain fixed rate residential mortgages. The Bank pays a fixed rate of 3.82% and receives a floating rate based on the secured overnight financing rate (“SOFR”) for the life of the agreement without an exchange of the underlying notional amount. The hedge was determined to be effective during the quarter ended  June 30, 2024 and the Corporation expects the hedge to remain effective during the remaining term of the swap. The gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk is recognized in interest income.

The following table summarizes information about the interest rate swap designated as a fair value hedge.

	June 30, 2024
Notional amount	$300 million
Fixed pay rate	3.82%
Overnight SOFR receive rate	5.33%
Maturity	1.71 years

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The following table presents the amount recorded on the balance sheet related to cumulative basis adjustments for the fair value hedge as of the periods indicated.

	June 30,			December 31,
(in thousands)	2024			2023
Loans - Residential Mortgages:
Carrying amount of the hedged asset (1)	$	452,030		$	465,495
Fair value hedging adjustment included in the carrying amount of the hedged asset		(3,691	)		(506	)

(1) This amount represents the amortized cost basis of the closed loan portfolio used to designate the hedging relationship in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedge period. At June 30, 2024, the amortized cost basis of the closed portfolio used in this hedging relationship was $455.7 million. The cumulative basis adjustment associated with this hedging relationship was $3.7 million and the amount of the designated hedged item was $3.8 million.

During the first six months of 2024, the Bank recorded a $2.2 million credit from the swap transaction as a component of interest income in the consolidated statements of income.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of The First of Long Island Corporation’s financial condition and operating results during the periods included in the accompanying consolidated financial statements and should be read in conjunction with such financial statements. The Corporation’s financial condition and operating results principally reflect those of its wholly-owned subsidiary, The First National Bank of Long Island, and subsidiaries wholly-owned by the Bank, either directly or indirectly, FNY Service Corp. and The First of Long Island REIT, Inc. The consolidated entity is referred to as the Corporation and the Bank and its subsidiaries are collectively referred to as the Bank. The Bank’s primary service area is Nassau and Suffolk Counties on Long Island and the NYC boroughs of Queens, Brooklyn and Manhattan.

Overview

Net income and diluted earnings per share for the first six months of 2024 were $9.2 million and $0.41, respectively, compared to $13.4 million and $0.59, respectively, for the same period last year. Dividends per share remained flat at $0.42 for the first six months of 2024, as compared to the first six months of 2023. Returns on average assets (“ROA”) and average equity (“ROE”) for the first six months of 2024 were 0.44% and 4.93%, respectively, compared to 0.64% and 7.27%, respectively, for the same period last year. Book value per share was $16.71 at June 30, 2024 versus $16.83 at year-end 2023.

Analysis of Earnings - Six Month Periods. Net income and diluted earnings per share for the first six months of 2024 were $9.2 million and $0.41, respectively, compared to $13.4 million and $0.59, respectively, versus the same period last year. The principal drivers of the change in earnings were a decline in net interest income of $8.9 million and an increase in the provision for credit losses of $1.6 million, partially offset by a loss on the sales of securities of $3.5 million in the first six months of 2023 and decreases in noninterest expense of $1.0 million and income tax expense of $1.4 million. The first six months of 2024 produced an ROA of 0.44%, ROE of 4.93%, net interest margin of 1.80%, and an efficiency ratio of 75.00%.

Net interest income declined when comparing the first six months of 2024 and 2023 due to an increase in interest expense of $18.8 million that was partially offset by a $9.9 million increase in interest income. The cost of interest-bearing liabilities increased 128 basis points ("bps") while the yield on interest-earning assets increased 45 bps when comparing the six-month periods. The Bank's balance sheet remains liability sensitive but the pace of repricing of average interest-earning assets is beginning to match the pace of repricing of average interest-bearing liabilities, which stabilized the net interest margin over the first six months of 2024. 

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The Bank recorded a provision for credit losses of $570,000 for the first six months of 2024, compared to a provision reversal of $1.1 million in the same period last year. The decline in the ACL in 2024 was driven largely by declines in historical loss rates and allowances on individually evaluated loans, partially offset by a deterioration in current and forecasted economic conditions, including adjustments for rent stabilization status of multifamily properties. The Bank’s ACL to total loans (reserve coverage ratio) remained stable at 0.88% of total loans at June 30, 2024 as compared to 0.88% at March 31, 2024 and 0.89% at December 31, 2023. Past due loans and nonaccrual loans were $942,000 and $2.4 million, respectively, at June 30, 2024. Overall credit quality of the loan and investment portfolios remain strong.

Noninterest income, excluding the loss on the sales of securities in the 2023 period, increased $454,000 when comparing the six-month periods. Recurring components of noninterest income including bank-owned life insurance (“BOLI”) and service charges on deposit accounts had increases of 7.8% and 10.5%, respectively. Other noninterest income increased 8.2% and included increases of $287,000 in merchant card services and $121,000 in pension income, which were partially offset by a gain on disposition of premises and fixed assets of $240,000 in 2023.

Noninterest expense declined $1.0 million for the first six months of 2024, as compared to the first six months of 2023. Reductions in occupancy and equipment expense of $397,000, telecommunications expense of $285,000, professional fees of $268,000 and salaries and employee benefits of $145,000 drove the decline. The decrease in occupancy and equipment expense was largely due to the ongoing branch optimization strategy, which resulted in closing various locations. Telecommunications expense decreased mainly due to efficiencies associated with system upgrades. Salaries and employee benefits declined largely due to a decrease in incentive compensation expense. 

Income tax expense decreased $1.4 million and the effective tax rate (income tax expense as a percentage of pre-tax book income) declined from 11.6% to 3.9% when comparing the six-month periods. The decline in the effective tax rate is mainly due to an increase in the percentage of pre-tax income derived from the Bank’s REIT and BOLI. The decrease in income tax expense reflects the lower effective tax rate and a decline in pre-tax income.

Liquidity. Total average deposits declined by $81.0 million when comparing the first six months of 2024 and 2023, reflecting industry trends. At June 30, 2024, overnight advances and other borrowings were down $70.0 million and $42.5 million, respectively, from year-end 2023. 

The Bank had $1.1 billion in collateralized borrowing lines with the Federal Home Loan Bank ("FHLB") of New York and the Federal Reserve Bank ("FRB") at June 30, 2024, as well as a $20 million unsecured line of credit with a correspondent bank. We also had $282.5 million in unencumbered cash and securities. In total, we had approximately $1.4 billion of available liquidity at June 30, 2024.

Capital. The Corporation’s capital position remains strong with a Leverage Ratio of approximately 9.91% at June 30, 2024. Book value per share was $16.71 at June 30, 2024, versus $16.83 at December 31, 2023. The accumulated OCI component of stockholders’ equity is mainly comprised of a net unrealized loss in the AFS securities portfolio due to higher market interest rates. The Bank declared its quarterly cash dividend of $0.21 per share during the quarter. There were no share repurchases during the quarter. The Board and management continue to evaluate both capital management tools to provide the best opportunity to maximize shareholder value.

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Net Interest Income

Average Balance Sheet; Interest Rates and Interest Differential. The following tables set forth the average daily balances for each major category of assets, liabilities and stockholders’ equity as well as the amounts and average rates earned or paid on each major category of interest-earning assets and interest-bearing liabilities. The average balances of loans include nonaccrual loans. The average balances of investment securities exclude unrealized gains and losses on AFS securities.

	Six Months Ended June 30,
	2024								2023
	Average			Interest/		Average			Average			Interest/		Average
(dollars in thousands)	Balance			Dividends		Rate			Balance			Dividends		Rate
Assets:
Interest-earning bank balances	$	83,341		$	2,271		5.48	%	$	44,889		$	1,067		4.79	%
Investment securities:
Taxable		629,958			12,201		3.87			533,866			8,216		3.08
Nontaxable (1)		153,001			2,427		3.17			234,036			3,762		3.21
Loans (1)		3,236,620			67,653		4.18			3,270,722			61,890		3.78
Total interest-earning assets		4,102,920			84,552		4.12			4,083,513			74,935		3.67
Allowance for credit losses		(28,639	)							(30,811	)
Net interest-earning assets		4,074,281								4,052,702
Cash and due from banks		32,751								30,388
Premises and equipment, net		31,093								32,024
Other assets		120,772								116,229
	$	4,258,897							$	4,231,343
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits	$	1,576,447			21,520		2.75		$	1,675,355			13,386		1.61
Time deposits		638,028			14,036		4.42			510,461			7,301		2.88
Total interest-bearing deposits		2,214,475			35,556		3.23			2,185,816			20,687		1.91
Overnight advances		9,560			267		5.62			20,845			546		5.28
Other borrowings		487,541			11,627		4.80			374,285			7,435		4.01
Total interest-bearing liabilities		2,711,576			47,450		3.52			2,580,946			28,668		2.24
Checking deposits		1,131,917								1,241,566
Other liabilities		39,137								37,541
		3,882,630								3,860,053
Stockholders' equity		376,267								371,290
	$	4,258,897							$	4,231,343
Net interest income (1)				$	37,102							$	46,267
Net interest spread (1)							0.60	%							1.43	%
Net interest margin (1)							1.80	%							2.25	%

(1) Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt loans and investment securities had been made in loans and investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of $1.00 of nontaxable income was $1.27 in each period presented, using the statutory federal income tax rate of 21%.

23

	Three Months Ended June 30,
	2024								2023
	Average			Interest/		Average			Average			Interest/		Average
(dollars in thousands)	Balance			Dividends		Rate			Balance			Dividends		Rate
Assets:
Interest-earning bank balances	$	111,565		$	1,520		5.48	%	$	40,668		$	520		5.13	%
Investment securities:
Taxable		621,059			5,959		3.84			599,558			5,094		3.40
Nontaxable (1)		152,585			1,212		3.18			165,559			1,300		3.14
Loans		3,229,796			34,110		4.22			3,253,952			31,483		3.87
Total interest-earning assets		4,115,005			42,801		4.16			4,059,737			38,397		3.78
Allowance for credit losses		(28,330	)							(30,204	)
Net interest-earning assets		4,086,675								4,029,533
Cash and due from banks		33,798								29,768
Premises and equipment, net		30,929								32,263
Other assets		120,660								117,288
	$	4,272,062							$	4,208,852
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits	$	1,618,812			11,437		2.84		$	1,673,101			7,611		1.82
Time deposits		632,201			7,059		4.49			513,414			4,232		3.31
Total interest-bearing deposits		2,251,013			18,496		3.30			2,186,515			11,843		2.17
Overnight advances		275			4		5.85			32,747			438		5.36
Other borrowings		470,824			5,615		4.80			378,654			4,002		4.24
Total interest-bearing liabilities		2,722,112			24,115		3.56			2,597,916			16,283		2.51
Checking deposits		1,137,244								1,201,585
Other liabilities		38,259								37,391
		3,897,615								3,836,892
Stockholders' equity		374,447								371,960
	$	4,272,062							$	4,208,852
Net interest income (1)				$	18,686							$	22,114
Net interest spread (1)							0.60	%							1.27	%
Net interest margin (1)							1.80	%							2.17	%

(1) Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt investment securities had been made in investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of $1.00 of nontaxable income was $1.27 in each period presented, using the statutory federal income tax rate of 21%.

24

Rate/Volume Analysis. The following table sets forth the effect of changes in volumes and rates on tax-equivalent interest income, interest expense and net interest income. The changes attributable to the combined impact of volume and rate have been allocated to the changes due to volume and the changes due to rate.

	Six Months Ended June 30,									Three Months Ended June 30,
	2024 Versus 2023									2024 Versus 2023
	Increase (decrease) due to changes in:									Increase (decrease) due to changes in:
							Net									Net
(in thousands)	Volume			Rate			Change			Volume			Rate			Change
Interest Income:
Interest-earning bank balances	$	1,029		$	175		$	1,204		$	964		$	36		$	1,000
Investment securities:
Taxable		1,644			2,341			3,985			189			676			865
Nontaxable		(1,283	)		(52	)		(1,335	)		(104	)		16			(88	)
Loans		(717	)		6,480			5,763			(234	)		2,861			2,627
Total interest income		673			8,944			9,617			815			3,589			4,404
Interest Expense:
Savings, NOW & money market deposits		(811	)		8,945			8,134			(291	)		4,117			3,826
Time deposits		2,149			4,586			6,735			1,111			1,716			2,827
Overnight advances		(313	)		34			(279	)		(469	)		35			(434	)
Other borrowings		2,532			1,660			4,192			1,048			565			1,613
Total interest expense		3,557			15,225			18,782			1,399			6,433			7,832
Decrease in net interest income	$	(2,884	)	$	(6,281	)	$	(9,165	)	$	(584	)	$	(2,844	)	$	(3,428	)

Net Interest Income

Net interest income on a tax-equivalent basis for the six months ended June 30, 2024 was $37.1 million, a decrease of $9.2 million, or 19.8%, from the same period of 2023. Net interest income declined due to an increase in interest expense of $18.8 million that was partially offset by a $9.9 million increase in interest income. The cost of interest-bearing liabilities increased 128 bps while the yield on interest-earning assets increased 45 bps when comparing the first six months of 2024 and 2023. Net interest margin for the first six months of 2024 was 1.80% compared to 2.25% for the same period of 2023. 

Noninterest Income

Noninterest income includes BOLI, service charges on deposit accounts, gains or losses on sales of securities, and all other items of income, other than interest, resulting from the business activities of the Corporation.

Noninterest income, excluding the loss on the sales of securities in the 2023 period, increased $454,000 when comparing the six-month periods of 2024 and 2023. Recurring components of noninterest income including BOLI and service charges on deposit accounts had increases of 7.8% and 10.5%, respectively. Other noninterest income increased 8.2% and included increases of $287,000 in merchant card services and $121,000 in pension income, which were partially offset by a gain on disposition of premises and fixed assets of $240,000 in 2023.

25

Noninterest Expense

Noninterest expense is comprised of salaries and employee benefits, occupancy and equipment expense and other operating expenses incurred in supporting the various business activities of the Corporation.

Noninterest expense declined $1.0 million, or 3.1%, when comparing the six-month periods of 2024 and 2023. Reductions in occupancy and equipment expense of $397,000, telecommunications expense of $285,000, professional fees of $268,000 and salaries and employee benefits of $145,000 drove the decline. The decrease in occupancy and equipment expense was largely due to the ongoing branch optimization strategy, which resulted in closing various locations. Telecommunications expense decreased mainly due to efficiencies associated with system upgrades. Salaries and employee benefits declined largely due to a decrease in incentive compensation expense. 

Income Taxes

Income tax expense decreased $1.4 million and the effective tax rate declined from 11.6% to 3.9% when comparing the six-month periods of 2024 and 2023. The decline in the effective tax rate is mainly due to an increase in the percentage of pre-tax income derived from the Bank’s REIT and BOLI. The decrease in income tax expense reflects the lower effective tax rate and a decline in pre-tax income. 

Results of Operations - Second Quarter 2024 Versus Second Quarter 2023

Net income for the second quarter of 2024 of $4.8 million decreased $2.1 million, or 30.5%, from $6.9 million earned in the same quarter of last year. The decrease is mainly attributable to a $3.4 million decline in net interest income for substantially the same reasons discussed above with respect to the six-month periods along with a $570,000 increase in the provision for credit losses. Partially offsetting the decrease in net interest income was reductions in salaries and employee benefits and occupancy and equipment expense of $354,000 and $286,000, respectively, for substantially the same reasons previously discussed. The quarter produced an ROA of 0.45%, ROE of 5.15%, net interest margin of 1.80% and an efficiency ratio of 73.55%.

Critical Accounting Policies and Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported asset and liability balances and revenue and expense amounts. Our determination of the ACL is a critical accounting estimate because it is based on our subjective evaluation of a variety of factors at a specific point in time and involves difficult and complex judgements about matters that are inherently uncertain. In the event that management’s estimate needs to be adjusted based on additional information that comes to light after the estimate is made or changes in circumstances, such adjustment could result in the need for a significantly different ACL and thereby materially impact, either positively or negatively, the Bank’s results of operations.

The Bank’s Allowance for Credit Losses Committee (“ACL Committee”), which is a management committee chaired by the Chief Credit Officer, meets on a quarterly basis and is responsible for determining the ACL after considering the results of credit reviews performed by the Bank’s independent loan review consultants and the Bank’s credit department. In addition, and in consultation with the Bank’s Chief Financial Officer, the ACL Committee is responsible for implementing and maintaining accounting policies and procedures surrounding the calculation of the required allowance. The Loan Committee of the Board reviews and approves the Bank’s loan policy at least once each calendar year. The Bank’s ACL is reviewed and ratified by the Loan Committee on a quarterly basis and is subject to periodic examination by the Office of the Comptroller of the Currency (“OCC”) whose safety and soundness examination includes a determination as to the adequacy of the allowance to absorb current expected credit losses.

The ACL is a valuation amount that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the Bank’s loan portfolio. The allowance is established through provisions for credit losses charged against income. When available information confirms that specific loans, or portions thereof, are uncollectible, these amounts are charged against the ACL, and subsequent recoveries, if any, are credited to the allowance.

26

Management estimates the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical loss information from the Bank’s own loan portfolio has been compiled since December 31, 2007 and generally provides a starting point for management’s assessment of expected credit losses. A historical look-back period that begins in 2007 covers an entire economic cycle and impacts the average historical loss rates used to calculate the final ACL. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term as well as for current and potential future changes in economic conditions over a one year to two year forecasting horizon, such as unemployment rates, GDP, vacancy rates or other relevant factors. The immediate reversion method is applied for periods beyond the forecasting horizon. The ACL is an amount that management currently believes will be adequate to absorb expected lifetime losses in the Bank’s loan portfolio. The process for estimating credit losses and determining the ACL as of any balance sheet date is subjective in nature and requires material estimates and judgements. Actual results could differ significantly from those estimates.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. Management segregates its loan portfolio into distinct pools: (1) commercial and industrial; (2) small business; (3) multifamily; (4) owner-occupied; (5) other commercial real estate; (6) construction and land development; (7) residential mortgage; (8) revolving home equity; (9) consumer; and (10) municipal loans. The vintage method is applied to measure the historical loss component of lifetime credit losses inherent in most of its loan pools. For the revolving home equity and small business pools, the lifetime PD/LGD method is used to measure historical losses.

Management believes that the methods selected fairly reflect the historical loss component of expected losses inherent in the Bank’s loan portfolio. However, since future losses could vary significantly from those experienced in the past, on a quarterly basis management adjusts its historical loss experience to reflect current conditions and reasonable and supportable forecasts. In doing so, management considers a variety of Q-factors and then subjectively determines the weight to assign to each in estimating losses. The factors include: (1) changes in lending policies and procedures; (2) experience, ability and depth of lending staff; (3) trends in average loan growth and concentrations; (4) changes in the quality of the loan review function; (5) delinquencies; (6) environmental risks; (7) current and forecasted economic conditions as judged by things such as unemployment levels and GDP; (8) changes in the value of underlying collateral as judged by things such as median home prices and forecasted vacancy rates in the Bank’s service area; (9) rent regulation status of multifamily properties; and (10) direction and magnitude of risks in the portfolio. The Bank’s ACL allocable to its loan pools results primarily from these Q-factor adjustments to historical loss experience with the largest sensitivity of the ACL arising from loan growth, loan concentrations and economic forecasts of unemployment, GDP and vacancies. At June 30, 2024, the ACL was composed approximately 80% of Q-factors, 19% of historical losses and 1% reserves on individually evaluated loans. Because of the nature of the Q-factors and the difficulty in assessing their impact, management’s resulting estimate of losses may not accurately reflect lifetime losses in the portfolio.

Loans that do not share similar risk characteristics are evaluated on an individual basis. Such disparate risk characteristics may include internal or external credit ratings, risk ratings, collateral type, size of loan, effective interest rate, term, geographic location, industry or historical or expected loss pattern. Estimated losses for loans individually evaluated are based on either the fair value of collateral or the discounted value of expected future cash flows. For all collateral dependent loans evaluated on an individual basis, credit losses are measured based on the fair value of the collateral. In estimating the fair value of real estate collateral, management utilizes appraisals or evaluations adjusted for costs to dispose and a distressed sale adjustment, if needed. Estimating the fair value of collateral other than real estate is also subjective in nature and sometimes requires difficult and complex judgements. Determining expected future cash flows can be more subjective than determining fair values. Expected future cash flows could differ significantly, both in timing and amount, from the cash flows received over the loan’s remaining life. Individually evaluated loans are not included in the estimation of credit losses from the pooled portfolio.

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Asset Quality

Information about the Corporation’s risk elements is set forth below. Risk elements include nonaccrual loans, other real estate owned, loans that are contractually past due 30 days or more and modifications made to borrowers experiencing financial difficulty. These risk elements present more than the normal risk that the Corporation will be unable to eventually collect or realize their full carrying value.

	June 30,		December 31,
(in thousands)	2024		2023
Loans including modifications to borrowers experiencing financial difficulty:
Modified and performing according to their modified terms	$	426	$	431
Past due 30 through 89 days		942		3,086
Past due 90 days or more and still accruing		—		—
Nonaccrual		2,370		1,053
		3,738		4,570
Other real estate owned		—		—
	$	3,738	$	4,570

The disclosure of other potential problem loans can be found in “Note 4 – Loans” to the Corporation’s consolidated financial statements of this Form 10-Q.

At June 30, 2024 , commercial mortgages comprised $1.9 billion, or 60%, of total loans outstanding, with an average loan size of $2.4 million, a weighted average loan-to-value (“LTV”) of 50.7% and a weighted average debt service coverage ratio (“DSCR”) of 2.11x. Multifamily loans made up 45% of the commercial real estate portfolio, amounting to $868.3 million at June 30, 2024 . Multifamily loans had an average loan size of $2.4 million, a weighted average LTV of 50.7%, a weighted average DSCR of 1.90x and 53.3% were majority rent regulated.

Allowance and Provision for Credit Losses

The ACL is established through provisions for credit losses charged against income. When available information confirms that specific loans, or portions thereof, are uncollectible, these amounts are charged off against the ACL, and subsequent recoveries, if any, are credited to the ACL.

The ACL decreased $508,000 during the first six months of 2024, amounting to $28.5 million, or 0.88% of total loans, at June 30, 2024 compared to $29.0 million, or 0.89% of total loans, at December 31, 2023. During the first six months of 2024, the Bank had loan chargeoffs of $1.1 million, recoveries of $37,000 and recorded a provision for credit loss of $570,000. The decline in the ACL in 2024 was driven largely by declines in historical loss rates and allowances on individually evaluated loans, partially offset by a deterioration in current and forecasted economic conditions, including adjustments for rent stabilization status of multifamily properties. During the first six months of 2023, the Bank had loan chargeoffs of $442,000, recoveries of $33,000 and recorded a reversal of $1.1 million from the ACL. The reversal from the ACL in the 2023 period was mainly due to improvements in historical loss rates and declines in outstanding loans, average growth rates and concentrations of credit, partially offset by deteriorating economic conditions and net chargeoffs of $409,000.

The ACL is an amount that management currently believes will be adequate to absorb expected lifetime losses in the Bank’s loan portfolio. As more fully discussed in “Critical Accounting Policies and Estimates,” the process for estimating credit losses and determining the ACL as of any balance sheet date is subjective in nature and requires material estimates and judgements. Actual results could differ significantly from those estimates. Other detailed information on the Bank’s loan portfolio and ACL can be found in “Note 4 – Loans” to the Corporation’s consolidated financial statements included in this Form 10-Q.

The amount of future chargeoffs and provisions for credit losses will be affected by economic conditions on Long Island and in the boroughs of NYC. Such conditions could affect the financial strength of the Bank’s borrowers and will affect the value of real estate collateral securing the Bank’s mortgage loans. Loans secured by real estate represent approximately 95% of the Bank’s total loans outstanding at June 30, 2024. The majority of these loans are collateralized by properties located on Long Island and in the boroughs of NYC. While business activity in the New York metropolitan area has improved, inflation, increasing interest rates and government regulation pose economic challenges and may result in higher chargeoffs and provisions.

Future provisions and chargeoffs could also be affected by environmental impairment of properties securing the Bank’s mortgage loans. At the present time, management is not aware of any environmental pollution originating on or near properties securing the Bank’s loans that would materially affect the carrying value of such loans.

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Cash Flows and Liquidity

Cash Flows. The Bank’s primary sources of cash are deposits, maturities and amortization of loans and investment securities, operations and borrowings. The Bank uses cash from these and other sources to fund loan growth, purchase investment securities, repay deposits and borrowings, expand and improve its physical facilities and pay cash dividends to the Corporation. The Corporation uses dividends from the Bank to pay stockholder dividends, repurchase its common stock and for general corporate purposes.

The Corporation’s cash and cash equivalent position at June 30, 2024 was  $67.3  million versus  $60.9 million at December 31, 2023 . The increase occurred primarily because cash provided by sales, paydowns or repayments of securities and loans, deposit inflows, proceeds from borrowings and operations exceeded cash used to repay deposits and borrowings, purchase securities, originate loans and pay cash dividends.

Securities decreased  $37.9 million during the first  six months  of  2024 , from $695.9  million at year-end  2023 to  $658.0 million at June 30, 2024 . The decrease is primarily attributable to  $35.1  million in paydowns and maturities and an increase in the unrealized loss of $3.9 million . 

The Bank’s securities portfolio comprised 16% of total assets at June 30, 2024 and had a duration of approximately 3.7 years. Approximately 34% of the portfolio was comprised of floating rate assets, including $113.6  million of SBA agency obligations with a current yield of 5.79% that reprice quarterly based on the prime rate and $111.5  million of floating rate corporate bonds with a current yield of approximately 4.44% that reprice quarterly based on the ten year constant maturity swap rate.

Government agency fixed rate mortgage-backed securities, including collateralized mortgage obligations, were $297.2  million and comprised 45% of the investment portfolio at June 30, 2024 . This portfolio had a current yield of 2.60%. The Bank expects approximately $51.2 million of cash inflows from the investment securities portfolio over the next twelve months and will consider reinvesting them in higher yielding agency mortgage securities that provide some lock out protection when rates eventually decline. The remaining 21% of the portfolio is invested in tax exempt municipal bonds that currently yield 3.17% on a tax adjusted basis.

The $3.3 billion loan portfolio was comprised of $1.9 billion of commercial mortgages, $1.2 billion of residential mortgages and $150.6 million of commercial and industrial loans. Approximately $649 million, or 20.0%, will reprice by June 30,2025, of which $300 million is related to the three-year interest rate swap transaction previously discussed. The Bank expects an additional $240 million, or 7%, of the loan portfolio to reprice from approximately 3.51% to 7.31% from June 30,2025 to June 30, 2026 based on current rates. We expect approximately $361 million of cash inflows from the mortgage loan portfolio over the next twelve months.

During the first six months of 2024, total deposits grew $92.5 million or 2.8%, to $3.4 billion at June 30, 2024. The increase was attributable to growth in savings, NOW and money market deposits of $81.7 million and time deposits of $20.7 million, partially offset by a decline in noninterest-bearing checking deposits of $9.9 million. Noninterest-bearing checking deposits of $1.1 billion represent 33.4% of total deposits. Brokered time deposits increased $807,000 during the first six months of 2024, totaling $175.2 million, or 5.2%, of total deposits. Brokered time deposits have a weighted average cost of 4.90% and an average maturity of approximately eight months, of which $45.0 million, or 26%, will mature in the third quarter of 2024 with an average cost of 4.95%. Reciprocal deposits under the Insured Cash Sweep (“ICS”) program were $14.7 million at June 30, 2024. 

There were no overnight advances at June 30, 2024, compared to $70.0 million at year-end 2023. Other borrowings decreased $42.5 million, or 9.0%, during the first six months of 2024, to $430.0 million at June 30, 2024. Maturities of $142.5 million with a weighted average rate of 4.62% were partially offset by new borrowings of $100.0 million with a weighted average rate of 4.72%. Other borrowings at June 30, 2024 had a weighted average cost of 4.72% and an average maturity of nine months. 

Liquidity. The Bank has a board committee approved liquidity policy and liquidity contingency plan, which are intended to ensure that the Bank has sufficient liquidity to meet the ongoing needs of its customers in terms of credit and deposit outflows, take advantage of earnings enhancement opportunities and respond to liquidity stress conditions should they arise.

The Bank has both internal and external sources of liquidity that can be used to fund loan growth and accommodate deposit outflows. The Bank’s primary internal sources of liquidity are maturities and monthly payments from its investment securities and loan portfolios, operations and sales of investment securities designated as AFS. At June 30, 2024, the Bank had approximately $245.1 million of unencumbered AFS securities.

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The Bank is a member of the FRB of New York and the FHLB of New York and has a federal funds line with a commercial bank. In addition to customer deposits, the Bank’s primary external sources of liquidity are secured borrowings from the FRB of New York and FHLB of New York. In addition, the Bank can purchase overnight federal funds under its existing line and the Corporation can raise funds through its Dividend Reinvestment and Stock Purchase Plan ("DRIP"). However, the Bank’s FRB of New York membership, FHLB of New York membership and federal funds line do not represent legal commitments to extend credit to the Bank. The amount that the Bank can potentially borrow is currently dependent on the amount of unencumbered eligible securities and loans that the Bank can use as collateral and the collateral margins required by the lenders. In addition, the Corporation may not be successful in raising funds from the issuance of its stock under the DRIP or otherwise. The Bank’s borrowing capacity may be adjusted by the FRB of New York or the FHLB of New York and may take into account factors such as the Bank’s tangible common equity ratio, collateral margins required by the lender or other factors. A possible future downgrade of securities and loans pledged as collateral could also impact the amount of available funding. Regulatory or strategic changes affecting the access to and availability of funding from the FHLB and FRB could adversely impact the Bank's liquidity. 

The Bank had $1.1 billion available in collateralized borrowing lines with the FHLB of New York and the FRB of New York at June 30, 2024 , as well as a $20 million unsecured line of credit with a correspondent bank. We also had $282.5 million in unencumbered cash and securities. In total, we had approximately $1.4 billion of available liquidity, compared to an aggregate of uninsured and uncollateralized deposits of approximately $1.3 billion. Uninsured and uncollateralized deposits represented 38% of total deposits.

Capital

Stockholders’ equity was $376.2  million at June 30, 2024 versus $380.1  million at December 31, 2023 . The decrease was mainly due to an increase in the unrealized after-tax loss on the Bank’s AFS investment securities of $2.8  million, cash dividends declared of  $9.4 million and common stock repurchases of $2.0 million, partially offset by net income of  $9.2 million.

The Corporation’s ROA and ROE for the first  six months  of  2024 were  0.44% and 4.93% , respectively, compared to  0.64% and 7.27% , respectively, for the  2023 period. Book value per share was  $16.71 at June 30, 2024 , compared to  $16.83 at year-end 2023 . Based on the Corporation’s market value per share at June 30, 2024 of $10.02 , the dividend yield is 8.4% .

The Corporation and the Bank have elected to adopt the community bank leverage ratio (“CBLR”) framework, which requires a leverage ratio of greater than 9.00%. As a qualifying community banking organization, the Corporation and the Bank may opt out of the CBLR framework in any subsequent quarter by completing its regulatory agency reporting using the traditional capital rules. In addition, the Corporation and the Bank exclude accumulated OCI components from Tier 1 and Total regulatory capital, in accordance with the federal banking agencies’ regulatory capital guidelines.

The Corporation’s capital management policy is designed to build and maintain capital levels that exceed regulatory standards and appropriately provide for growth. The leverage ratio of the Corporation and the Bank at June 30, 2024 were 9.91% and 9.89%, respectively, and satisfies the well capitalized ratio requirements under the Prompt Corrective Action statutes. The Corporation and the Bank elected the optional five-year transition period provided by the federal banking agencies for recognizing the regulatory capital impact of the implementation of CECL.

The Corporation has a stock repurchase program under which it is authorized to purchase shares of its common stock from time to time through open market purchases, privately negotiated transactions, or in any other manner that is compliant with applicable securities laws. The stock repurchase program does not obligate the Corporation to purchase shares and there is no guarantee as to the exact number of shares that may be repurchased pursuant to this program, which is subject to market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity and other factors deemed appropriate. No shares were repurchased in the second quarter of 2024.  The Corporation can repurchase another $13.0 million under the Board-approved repurchase program.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Bank invests in interest-earning assets, which are funded by interest-bearing deposits and borrowings, noninterest-bearing deposits and capital. The Bank’s results of operations are subject to risk resulting from interest rate fluctuations generally and having assets and liabilities that have different maturity, repricing and prepayment/withdrawal characteristics. The Bank defines interest rate risk as the risk that the Bank's net interest income and/or economic value of equity (“EVE”) will change when interest rates change. The principal objective of the Bank’s asset liability management activities is to optimize current and future net interest income while at the same time maintain acceptable levels of interest rate and liquidity risk and facilitate the funding needs of the Bank.

The Bank monitors and manages interest rate risk through a variety of techniques including traditional gap analysis and the use of interest rate sensitivity models. Both gap analysis and interest rate sensitivity modeling involve a variety of significant estimates and assumptions and are done at a specific point in time. Changes in the estimates and assumptions made in gap analysis and interest rate sensitivity modeling could have a significant impact on projected results and conclusions. Therefore, these techniques may not accurately reflect the actual impact of changes in the interest rate environment on the Bank’s net interest income or EVE.

Through the use of interest rate sensitivity modeling, the Bank projects net interest income over a five-year period assuming a static balance sheet and no changes in interest rates from current levels. Utilization of a static balance sheet ensures that interest rate risk embedded in the Bank’s current balance sheet is not masked by assumed balance sheet growth or contraction. Net interest income is projected over a five-year time period utilizing various interest rate change scenarios, including both ramped and shocked changes as well as changes in the shape of the yield curve. The interest rate scenarios modeled are based on the shape of the current yield curve and the relative level of rates and management’s expectations as to potential future yield curve shapes and rate levels.

The Bank also uses interest rate sensitivity modeling to calculate EVE in the current rate environment assuming shock increases and decreases in interest rates. EVE is the difference between the present value of expected future cash flows from the Bank’s assets and the present value of the expected future cash flows from the Bank’s liabilities. Present values are determined using discount rates that management believes are reflective of current market conditions. EVE can capture long-term interest rate risk that would not be captured in a five-year projection of net interest income.

In utilizing interest rate sensitivity modeling to project net interest income and calculate EVE, management makes a variety of estimates and assumptions which include the following: (1) how much and when yields and costs on individual categories of interest-earning assets and interest-bearing liabilities will change in response to projected changes in market interest rates; (2) future cash flows, including prepayments of mortgage assets and calls of municipal securities; (3) cash flow reinvestment assumptions; (4) appropriate discount rates to be applied to loan, deposit and borrowing cash flows; and (5) decay or runoff rates for nonmaturity deposits such as checking, savings, NOW and money market accounts. The repricing of loans and borrowings and the reinvestment of loan and security cash flows are generally assumed to be impacted by the full amount of each assumed rate change, while the repricing of nonmaturity deposits is not. For nonmaturity deposits, management makes estimates of how much and when it will need to change the rates paid on the Bank’s various nonmaturity deposit products in response to changes in general market interest rates. These estimates are based on product type, management’s experience with needed deposit rate adjustments in prior interest rate change cycles, the results of a nonmaturity deposit study conducted by an independent consultant and updated on a periodic basis and management’s assessment of competitive conditions in its marketplace.

The information provided in the following table is based on a variety of estimates and assumptions that management believes to be reasonable, the more significant of which are set forth hereinafter. The base case information in the table shows: (1) a calculation of the Corporation’s EVE at June 30, 2024 arrived at by discounting estimated future cash flows at rates that management believes are reflective of current market conditions; and (2) an estimate of net interest income for the year ending  June 30, 2025 assuming a static balance sheet, the adjustment of repricing balances to current rate levels, and the reinvestment at current rate levels of cash flows from maturing assets and liabilities in a mix of assets and liabilities that is intended to reflect a static balance sheet. In addition, in calculating EVE, cash flows for nonmaturity deposits are assumed to have an overall life of 6.1  years based on the current mix of such deposits and the most recently updated nonmaturity deposit study.

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The rate change information in the following table shows estimates of net interest income for the year ending June 30, 2025 and calculations of EVE at June 30, 2024 assuming rate changes of plus and minus 100, 200 and 300 bps. The rate change scenarios were selected based on the relative level of current interest rates and: (1) are assumed to be shock or immediate changes for both EVE and net interest income; (2) occur uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities; and (3) impact the repricing and reinvestment of all assets and liabilities, except nonmaturity deposits, by the full amount of the rate change. In projecting future net interest income under the indicated rate change scenarios, activity is simulated by assuming that cash flows from maturing assets and liabilities are reinvested in a mix of assets and liabilities that is intended to reflect a static balance sheet. The changes in EVE from the base case have not been tax affected.

	Economic Value of Equity					Net Interest Income for
	at June 30, 2024					Year Ending June 30, 2025
			Percent Change					Percent Change
			From					From
Rate Change Scenario (dollars in thousands)	Amount		Base Case			Amount		Base Case
+ 300 basis point rate shock	$	381,067		-23.2	%	$	67,928		-12.7	%
+ 200 basis point rate shock		415,665		-16.2	%		71,092		-8.6	%
+ 100 basis point rate shock		459,493		-7.4	%		74,767		-3.9	%
Base case (no rate change)		496,251		—			77,786		—
- 100 basis point rate shock		528,250		6.4	%		80,594		3.6	%
- 200 basis point rate shock		540,189		8.9	%		82,143		5.6	%
- 300 basis point rate shock		533,571		7.5	%		82,964		6.7	%

As shown in the preceding table, assuming a static balance sheet, an immediate increase in interest rates of 100, 200 or 300 bps could negatively impact the Bank’s net interest income for the year ended June 30,2025 because the Bank might need to increase the rates paid on its nonmaturity deposits to remain competitive and any time deposits or borrowings that mature would reprice at a higher interest rate. In addition, the Bank’s securities portfolio, excluding corporate bonds and SBA agency obligations, and a large portion of its loan portfolio do not immediately reprice with changes in market rates. At June 30, 2024, approximately $874 million, or 22.4%, of the Bank's loans and securities reprice or mature within one year. An immediate decrease in interest rates of 100, 200 or 300 bps could positively impact the Bank’s net interest income for the same time period because the Bank would pay less for time deposits or borrowings that mature and reprice at a lower interest rate and would be able to reduce non-maturity deposit rates while the downward repricing of its assets would lag. The positive impact on net interest income of an immediate decrease in interest rates is somewhat constrained because the decrease is assumed to occur uniformly across the inverted yield curve. Changes in management’s estimates as to the rates that will need to be paid on nonmaturity deposits could have a material impact on the net interest income amounts shown for each scenario in the table.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated into it by reference contain or may contain various forward-looking statements. These forward-looking statements include statements of goals; intentions and expectations; estimates of risks and of future costs and benefits; assessments of expected future credit losses; assessments of market risk; and statements of the ability to achieve financial and other goals. Forward-looking statements are typically identified by words such as “would,” “should,” “could,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties which may change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from historical performance.

Our forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; fluctuations in the trading price of our common stock; changes in interest rates and the rate of inflation; changes in the shape of the yield curve; changes in deposit flows, and in the demand for deposit and loan products and other financial services; changes in real estate values; changes in the quality or composition of our loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; our ability to retain key members of management; changes in legislation, regulation, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. We provide greater detail regarding some of these factors in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, in Part I under “Item 1A. Our forward-looking statements may also be subject to other risks and uncertainties, including those that we may discuss elsewhere in other documents we file with the Securities and Exchange Commission ("SEC") from time to time.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Corporation’s Principal Executive Officer and Principal Financial Officer have evaluated the Corporation’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based upon that evaluation, they have concluded that the Corporation’s disclosure controls and procedures are effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the second quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Corporation is involved in various legal actions and claims arising in the normal course of its business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Corporation's financial condition and results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors, in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Stock Repurchases. The Corporation's Board of Directors approved a $30 million common stock repurchase program that was announced on January 31, 2022, pursuant to which the Corporation is authorized to purchase shares of its common stock from time to time through open market purchases, privately negotiated transactions, or in any other manner that is compliant with applicable securities laws. The Corporation did not repurchase any shares in the second quarter of 2024. The Corporation can repurchase another $13.0 million of its common stock under the Board-approved repurchase program and the program does not have a fixed expiration date. 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

(c) Securities Trading Plan of Directors and Executive Officers

During the three months ended June 30, 2024, none of the directors or executive officers of the Corporation adopted or terminated any contract, instruction or written plan for the purchase or sale of the Corporation's securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement," as that term is used in SEC regulations. 

ITEM 6. EXHIBITS

See Index of Exhibits that follows.

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INDEX OF EXHIBITS

Exhibit No.	Description of Exhibit
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and U.S.C. Section 1350
101	The following materials from the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE FIRST OF LONG ISLAND CORPORATION
	(Registrant)
Dated: August 1, 2024	By /s/ CHRISTOPHER BECKER
	Christopher Becker, President & Chief Executive Officer
	(principal executive officer)
	By /s/ JANET T. VERNEUILLE
	Janet T. Verneuille, Senior Executive Vice President,
	Chief Financial Officer & Treasurer
	(principal financial officer)

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