FIRST OF LONG ISLAND CORP - Quarter Report: 2022 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

____________

FORM 10-Q

(Mark One)

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

For the quarterly period ended

June 30, 2022

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

For the transition period from

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 x 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 x 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 x
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 x

As of July 29, 2022, the registrant had 22,853,604 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	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	19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	26
ITEM 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	28
ITEM 1A.	Risk Factors	28
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
ITEM 3.	Defaults Upon Senior Securities	29
ITEM 4.	Mine Safety Disclosures	29
ITEM 5.	Other Information	29
ITEM 6.	Exhibits	29
	Signatures	31

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)



	June 30,		December 31,
(dollars in thousands)	2022		2021
Assets:
Cash and cash equivalents	$	64,073	$	43,675
Investment securities available-for-sale, at fair value		689,269		734,318

Loans:
Commercial and industrial		108,049		90,386
SBA Paycheck Protection Program		4,427		30,534
Secured by real estate:
Commercial mortgages		1,948,321		1,736,612
Residential mortgages		1,228,607		1,202,374
Home equity lines		44,929		44,139
Consumer and other		1,214		991
		3,335,547		3,105,036
Allowance for credit losses		(30,865)		(29,831)
		3,304,682		3,075,205
Restricted stock, at cost		20,905		21,524
Bank premises and equipment, net		38,081		37,523
Right-of-use asset - operating leases		24,095		8,438
Bank-owned life insurance		109,320		107,831
Pension plan assets, net		19,161		19,097
Deferred income tax benefit		22,433		3,987
Other assets		18,565		17,191
	$	4,310,584	$	4,068,789
Liabilities:
Deposits:
Checking	$	1,469,969	$	1,400,998
Savings, NOW and money market		1,750,367		1,685,410
Time		385,039		228,837
		3,605,375		3,315,245
Short-term borrowings		10,000		125,000
Long-term debt		279,435		186,322
Operating lease liability		25,668		11,259
Accrued expenses and other liabilities		13,650		17,151
		3,934,128		3,654,977
Stockholders' Equity:
Common stock, par value $0.10 per share:
Authorized, 80,000,000 shares;
Issued and outstanding, 22,840,516 and 23,240,596 shares		2,284		2,324
Surplus		84,703		93,480
Retained earnings		335,697		320,321
		422,684		416,125
Accumulated other comprehensive loss, net of tax		(46,228)		(2,313)
		376,456		413,812
	$	4,310,584	$	4,068,789

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2022		2021		2022		2021
Interest and dividend income:
Loans	$	56,149	$	53,456	$	28,763	$	26,750
Investment securities:
Taxable		3,805		4,078		2,137		2,245
Nontaxable		3,962		4,462		1,994		2,214
		63,916		61,996		32,894		31,209
Interest expense:
Savings, NOW and money market deposits		1,564		2,260		801		1,194
Time deposits		2,100		3,897		1,155		1,593
Short-term borrowings		684		700		243		350
Long-term debt		1,868		2,311		1,000		1,146
		6,216		9,168		3,199		4,283
Net interest income		57,700		52,828		29,695		26,926
Provision (credit) for credit losses		1,159		(1,609)		726		(623)
Net interest income after provision (credit) for credit losses		56,541		54,437		28,969		27,549

Noninterest income:
Bank-owned life insurance		1,490		1,170		748		591
Service charges on deposit accounts		1,506		1,418		780		735
Net gains on sales of securities		—		606		—		—
Other		3,452		3,165		1,496		1,501
		6,448		6,359		3,024		2,827
Noninterest expense:
Salaries and employee benefits		19,736		19,915		9,981		9,845
Occupancy and equipment		6,307		6,344		3,356		3,067
Other		6,155		6,019		3,092		2,917
		32,198		32,278		16,429		15,829
Income before income taxes		30,791		28,518		15,564		14,547

Income tax expense		6,227		5,863		3,083		3,159
Net income	$	24,564	$	22,655	$	12,481	$	11,388

Weighted average:
Common shares		23,088,542		23,758,398		22,999,598		23,735,723
Dilutive restricted stock units		85,043		89,776		71,028		96,060
		23,173,585		23,848,174		23,070,626		23,831,783
Earnings per share:
Basic		$1.06		$0.95		$0.54		$0.48
Diluted		1.06		0.95		0.54		0.48

Cash dividends declared per share		0.40		0.38		0.20		0.19

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Net income	$	24,564	$	22,655	$	12,481	$	11,388
Other comprehensive income (loss):
Change in net unrealized holding gains or losses on ‎ available-for-sale securities		(65,217)		(4,120)		(23,661)		3,747
Change in net unrealized loss on derivative instruments		1,750		2,500		203		886
Other comprehensive income (loss) before income taxes		(63,467)		(1,620)		(23,458)		4,633
Income tax expense (benefit)		(19,552)		(432)		(7,227)		1,426
Other comprehensive income (loss)		(43,915)		(1,188)		(16,231)		3,207
Comprehensive income (loss)	$	(19,351)	$	21,467	$	(3,750)	$	14,595

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)



	Six Months Ended June 30, 2022
								Accumulated
								Other
	Common Stock					Retained		Comprehensive
(dollars in thousands)	Shares	Amount		Surplus		Earnings		Loss		Total
Balance, January 1, 2022	23,240,596	$	2,324	$	93,480	$	320,321	$	(2,313)	$	413,812
Net income							12,083				12,083
Other comprehensive loss									(27,684)		(27,684)
Repurchase of common stock	(202,886)		(20)		(4,480)						(4,500)
Shares withheld upon the vesting
and conversion of RSUs	(25,628)		(3)		(542)						(545)
Common stock issued under
stock compensation plans	75,483		8		8						16
Common stock issued under
dividend reinvestment and
stock purchase plan	18,505		2		380						382
Stock-based compensation					516						516
Cash dividends declared							(4,619)				(4,619)
Balance, March 31, 2022	23,106,070		2,311		89,362		327,785		(29,997)		389,461
Net income							12,481				12,481
Other comprehensive loss									(16,231)		(16,231)
Repurchase of common stock	(286,011)		(29)		(5,260)						(5,289)
Shares withheld upon the vesting
and conversion of RSUs	(618)				(12)						(12)
Common stock issued under
stock compensation plans	21,075		2		13						15
Stock-based compensation					600						600
Cash dividends declared							(4,569)				(4,569)
Balance, June 30, 2022	22,840,516	$	2,284	$	84,703	$	335,697	$	(46,228)	$	376,456

‎



	Six Months Ended June 30, 2021
								Accumulated
								Other
	Common Stock					Retained		Comprehensive
(dollars in thousands)	Shares	Amount		Surplus		Earnings		Income (Loss)		Total
Balance, January 1, 2021	23,790,589	$	2,379	$	105,547	$	295,622	$	3,570	$	407,118
Net income							11,267				11,267
Other comprehensive loss									(4,395)		(4,395)
Repurchase of common stock	(107,887)		(11)		(1,989)						(2,000)
Shares withheld upon the vesting
and conversion of RSUs	(16,918)		(2)		(318)						(320)
Common stock issued under
stock compensation plans	94,627		10		152						162
Common stock issued under
dividend reinvestment and
stock purchase plan	22,341		2		416						418
Stock-based compensation					390						390
Cash dividends declared							(4,518)				(4,518)
Balance, March 31, 2021	23,782,752		2,378		104,198		302,371		(825)		408,122
Net income							11,388				11,388
Other comprehensive income									3,207		3,207
Repurchase of common stock	(92,533)		(9)		(2,091)						(2,100)
Shares withheld upon the vesting
and conversion of RSUs	(1,431)				(31)						(31)
Common stock issued under
stock compensation plans	6,229		1		35						36
Stock-based compensation					525						525
Cash dividends declared							(4,503)				(4,503)
Balance, June 30, 2021	23,695,017	$	2,370	$	102,636	$	309,256	$	2,382	$	416,644

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Six Months Ended June 30,
(in thousands)	2022		2021
Cash Flows From Operating Activities:
Net income	$	24,564	$	22,655
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for credit losses		1,159		(1,609)
Provision for deferred income taxes		1,106		1,373
Depreciation and amortization of premises and equipment		1,763		2,062
Amortization of right-of-use asset - operating leases		1,217		1,036
Premium amortization on investment securities, net		847		1,178
Net gain on sales of securities		—		(606)
Stock-based compensation expense		1,116		915
Accretion of cash surrender value on bank-owned life insurance		(1,490)		(1,170)
Pension credit		(64)		(164)
Decrease in other liabilities		(4,136)		(2,260)
Other (increases) decreases in assets		(1,307)		1,032
Net cash provided by operating activities		24,775		24,442
Cash Flows From Investing Activities:
Available-for-sale securities:
Proceeds from sales		—		54,192
Proceeds from maturities and redemptions		27,496		65,648
Purchases		(48,511)		(268,008)
Net (increase) decrease in loans		(230,636)		79,589
Net decrease in restricted stock		619		913
Purchases of premises and equipment, net		(2,356)		(909)
Net cash used in investing activities		(253,388)		(68,575)
Cash Flows From Financing Activities:
Net increase in deposits		290,130		61,985
Net decrease in short-term borrowings		(115,000)		(5,095)
Proceeds from long-term debt		140,000		—
Repayment of long-term debt		(46,887)		(20,000)
Proceeds from issuance of common stock, net of shares withheld		(175)		200
Repurchase of common stock		(9,789)		(4,100)
Cash dividends paid		(9,268)		(9,037)
Net cash provided by financing activities		249,011		23,953
Net increase (decrease) in cash and cash equivalents		20,398		(20,180)
Cash and cash equivalents, beginning of year		43,675		211,182
Cash and cash equivalents, end of period	$	64,073	$	191,002
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	5,983	$	9,654
Cash paid for income taxes		4,579		4,759
Operating cash flows from operating leases		2,582		1,233
Noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities		16,874		—
Cash dividends payable		4,569		4,502

See notes to unaudited consolidated financial statements

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 two wholly-owned subsidiaries: FNY Service Corp. and The First of Long Island Agency, Inc. 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, 2021.

The consolidated financial information included herein as of and for the periods ended June 30, 2022 and 2021 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, 2021 consolidated balance sheet was derived from the Corporation's December 31, 2021 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.

Adoption of New Accounting Standards. In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-2 “Financial Instruments (Topic 326) Troubled Debt Restructurings and Vintage Disclosures” which affect entities that have adopted ASU 2016-13 “Measurement of Credit Losses on Financial Instruments” (“CECL”). The amendments in the ASU that relate to troubled debt restructurings (“TDRs”) eliminate the TDR recognition and measurement guidance and instead require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan, while also enhancing disclosure requirements. The amendments that relate to vintage disclosures require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of CECL. Gross write-offs must be included in the vintage disclosures required by CECL. For entities that have adopted CECL such as the Corporation, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should generally be applied prospectively. Early adoption is permitted, including adoption in an interim period. Management adopted ASU 2022-2 in the second quarter of 2022 effective as of January 1, 2022 using the modified retrospective transition approach. Its adoption modified the Corporation’s disclosures but did not have a material impact on its financial position or results of operations. Disclosures pertaining to the ASU can be found in “Note 4 – Loans” of these unaudited consolidated financial statements.

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



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Change in net unrealized holding gains or losses on
available-for-sale securities:
Change arising during the period	$	(65,217)	$	(3,514)	$	(23,661)	$	3,747
Reclassification adjustment for gains included in net income (1)		—		(606)		—		—
		(65,217)		(4,120)		(23,661)		3,747
Tax effect		(20,090)		(1,158)		(7,290)		1,153
		(45,127)		(2,962)		(16,371)		2,594
Change in unrealized loss on derivative instruments:
Amount of gain (loss) during the period		1,324		267		76		(33)
Reclassification adjustment for net interest expense
included in net income (2)		426		2,233		127		919
		1,750		2,500		203		886
Tax effect		538		726		63		273
		1,212		1,774		140		613
Other comprehensive income (loss)	$	(43,915)	$	(1,188)	$	(16,231)	$	3,207

(1) Represents net realized gains arising from the sale of AFS securities. These net gains are included in the consolidated statements of income in the line item “Net gains on sales of securities.”

(2) Represents the net interest expense recorded on derivative transactions and included in the consolidated statements of income under “Interest expense.”

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



			Current
	Balance		Period		Balance
(in thousands)	12/31/21		Change		6/30/22
Unrealized holding gains (losses) on available-for-sale securities	$	1,955	$	(45,127)	$	(43,172)
Unrealized actuarial loss on pension plan		(3,056)		—		(3,056)
Unrealized loss on derivative instruments		(1,212)		1,212		—
Accumulated other comprehensive loss, net of tax	$	(2,313)	$	(43,915)	$	(46,228)

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, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gains		Losses		Value
State and municipals	$	321,725	$	634	$	(14,349)	$	308,010
Pass-through mortgage securities		184,001		2		(25,184)		158,819
Collateralized mortgage obligations		126,937		115		(14,490)		112,562
Corporate bonds		119,000		—		(9,122)		109,878
	$	751,663	$	751	$	(63,145)	$	689,269

	December 31, 2021
State and municipals	$	315,747	$	11,600	$	(176)	$	327,171
Pass-through mortgage securities		187,494		54		(4,591)		182,957
Collateralized mortgage obligations		109,254		67		(3,239)		106,082
Corporate bonds		119,000		—		(892)		118,108
	$	731,495	$	11,721	$	(8,898)	$	734,318

At June 30, 2022 and December 31, 2021, investment securities with a carrying value of $387.2 million and $425.0 million, respectively, were pledged as collateral to secure public deposits, borrowed funds and derivative liabilities.

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, 2022 and December 31, 2021.

There was no allowance for credit losses associated with the investment securities portfolio at June 30, 2022 or December 31, 2021.

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



	June 30, 2022
	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	$	173,244	$	(12,585)	$	4,040	$	(1,764)	$	177,284	$	(14,349)
Pass-through mortgage securities		47,404		(4,874)		111,182		(20,310)		158,586		(25,184)
Collateralized mortgage obligations		21,050		(3,222)		63,477		(11,268)		84,527		(14,490)
Corporate bonds		81,540		(6,460)		28,338		(2,662)		109,878		(9,122)
Total temporarily impaired	$	323,238	$	(27,141)	$	207,037	$	(36,004)	$	530,275	$	(63,145)

	December 31, 2021
State and municipals	$	18,429	$	(176)	$	—	$	—	$	18,429	$	(176)
Pass-through mortgage securities		179,575		(4,529)		1,641		(62)		181,216		(4,591)
Collateralized mortgage obligations		99,305		(3,239)		—		—		99,305		(3,239)
Corporate bonds		87,620		(380)		30,488		(512)		118,108		(892)
Total temporarily impaired	$	384,929	$	(8,324)	$	32,129	$	(574)	$	417,058	$	(8,898)

State and Municipals

At June 30, 2022, approximately $177.3 million of state and municipal bonds had an unrealized loss of $14.3 million. Each of the state and municipal bonds are considered high investment grade and rated Aa2/AA- or higher. The decline in value 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 does not intend to sell 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, 2022, approximately $158.6 million of pass-through mortgage securities had an unrealized loss of $25.2 million. These securities were issued by U.S. government-sponsored agencies and are considered high investment grade. The decline in fair value 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 does not intend to sell 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, 2022, approximately $84.5 million of collateralized mortgage obligations had an unrealized loss of $14.5 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The decline in fair value 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 does not intend to sell 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, 2022, approximately $109.9 million of corporate bonds had an unrealized loss of $9.1 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, 2022.

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



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Proceeds	$	—	$	54,192	$	—	$	—

Gains	$	—	$	622	$	—	$	—
Losses		—		(16)		—		—
Net gain	$	—	$	606	$	—	$	—

Income tax expense related to the net realized gains for the six months ended June 30, 2021 was $187,000.

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, 2022 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-backed securities, consisting of pass-through mortgage securities and collateralized mortgage 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	$	10,854	$	10,892
After 1 through 5 years		87,723		87,683
After 5 through 10 years		210,440		199,821
After 10 years		131,708		119,492
Mortgage-backed securities		310,938		271,381
	$	751,663	$	689,269

4 - LOANS

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




(in thousands)	June 30, 2022		December 31, 2021
Commercial and industrial	$	108,049	$	90,386
SBA PPP		4,427		30,534
Commercial mortgages:
Multifamily		959,242		864,207
Other		772,922		700,872
Owner-occupied		216,157		171,533
Residential mortgages:
Closed end		1,228,607		1,202,374
Revolving home equity		44,929		44,139
Consumer and other		1,214		991
	$	3,335,547	$	3,105,036

Management identifies loans in the Bank’s portfolio that must be individually evaluated for loss due to disparate risk characteristics or information suggesting that the Bank will be unable to collect all the principal and interest due. For loans individually evaluated, a specific reserve 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 credit scored; (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; (10) municipal loans; and (11) Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) 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 allowance for credit losses (“ACL” or “allowance”). 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 credit scored pools, the PD/LGD (probability of default/loss given default) method is used to measure historical losses. No historical loss method was applied to the SBA PPP loan pool which is 100% guaranteed by the federal government. Modifications to borrowers experiencing financial difficulty are 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, delinquencies or other factors associated with the financial assets. The allowance for SBA PPP loans represents an estimate of potential loss due to documentation and processing deficiencies. 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.

Growth in commercial mortgages and commercial and industrial loans was the main driver of the provision recorded in the first half of 2022, partially offset by declines in historical loss rates, qualitative adjustments to current conditions and other portfolio metrics.

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



(in thousands)	Balance at ‎1/1/2022		Chargeoffs		Recoveries		Provision (Credit) for Credit Losses		Balance at ‎6/30/2022
Commercial and industrial	$	888	$	80	$	43	$	190	$	1,041
SBA PPP		46		—		—		(39)		7
Commercial mortgages:
Multifamily		8,154		—		—		723		8,877
Other		6,478		—		—		446		6,924
Owner-occupied		2,515		—		—		446		2,961
Residential mortgages:
Closed end		11,298		88		—		(516)		10,694
Revolving home equity		449		—		—		(99)		350
Consumer and other		3		—		—		8		11
	$	29,831	$	168	$	43	$	1,159	$	30,865



(in thousands)	Balance at ‎4/1/2022		Chargeoffs		Recoveries		Provision (Credit) for Credit Losses		Balance at ‎6/30/2022
Commercial and industrial	$	1,042	$	76	$	16	$	59	$	1,041
SBA PPP		19		—		—		(12)		7
Commercial mortgages:
Multifamily		8,384		—		—		493		8,877
Other		6,715		—		—		209		6,924
Owner-occupied		2,722		—		—		239		2,961
Residential mortgages:
Closed end		11,016		88		—		(234)		10,694
Revolving home equity		376		—		—		(26)		350
Consumer and other		13		—		—		(2)		11
	$	30,287	$	164	$	16	$	726	$	30,865



(in thousands)	Balance at ‎1/1/2021		Chargeoffs		Recoveries		Provision (Credit) for Credit Losses		Balance at ‎6/30/2021
Commercial and industrial	$	1,416	$	227	$	168	$	(349)	$	1,008
SBA PPP		209		—		—		(68)		141
Commercial mortgages:
Multifamily		9,474		252		—		(609)		8,613
Other		4,913		—		—		450		5,363
Owner-occupied		1,905		165		91		64		1,895
Residential mortgages:
Closed end		14,706		79		3		(1,314)		13,316
Revolving home equity		407		—		—		221		628
Consumer and other		7		—		1		(4)		4
	$	33,037	$	723	$	263	$	(1,609)	$	30,968



(in thousands)	Balance at ‎4/1/2021		Chargeoffs		Recoveries		Provision (Credit) for Credit Losses		Balance at ‎6/30/2021
Commercial and industrial	$	1,143	$	92	$	156	$	(199)	$	1,008
SBA PPP		269		—		—		(128)		141
Commercial mortgages:
Multifamily		9,074		2		—		(459)		8,613
Other		4,967		—		—		396		5,363
Owner-occupied		1,911		—		—		(16)		1,895
Residential mortgages:
Closed end		13,636		79		3		(244)		13,316
Revolving home equity		599		—		—		29		628
Consumer and other		5		—		1		(2)		4
	$	31,604	$	173	$	160	$	(623)	$	30,968

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



	June 30, 2022
	Past Due						Nonaccrual
							With an		With No		Total Past
					90 Days or		Allowance		Allowance		Due Loans &
					More and		for Credit		for Credit		Nonaccrual				Total
(in thousands)	30-59 Days		60-89 Days		Still Accruing		Loss		Loss		Loans		Current		Loans
Commercial and industrial	$	—	$	—	$	—	$	—	$	—	$	—	$	108,049	$	108,049
SBA PPP		—		193		—		—		—		193		4,234		4,427
Commercial mortgages:
Multifamily		—		—		—		—		—		—		959,242		959,242
Other		—		—		—		—		—		—		772,922		772,922
Owner-occupied		—		—		—		—		—		—		216,157		216,157
Residential mortgages:
Closed end		—		—		—		—		260		260		1,228,347		1,228,607
Revolving home equity		—		—		—		—		—		—		44,929		44,929
Consumer and other		—		—		—		—		—		—		1,214		1,214
	$	—	$	193	$	—	$	—	$	260	$	453	$	3,335,094	$	3,335,547

	December 31, 2021
Commercial and industrial	$	128	$	—	$	—	$	—	$	—	$	128	$	90,258	$	90,386
SBA PPP		259		—		—		—		—		259		30,275		30,534
Commercial mortgages:
Multifamily		—		—		—		—		—		—		864,207		864,207
Other		—		—		—		—		—		—		700,872		700,872
Owner-occupied		—		—		—		—		—		—		171,533		171,533
Residential mortgages:
Closed end		—		—		—		—		1,235		1,235		1,201,139		1,202,374
Revolving home equity		—		—		—		—		—		—		44,139		44,139
Consumer and other		73		—		—		—		—		73		918		991
	$	460	$	—	$	—	$	—	$	1,235	$	1,695	$	3,103,341	$	3,105,036

There were no loans in the process of foreclosure nor did the Bank hold any foreclosed residential real estate property at June 30, 2022 or December 31, 2021.

Accrued interest receivable from loans totaled $8.9 million and $8.0 million at June 30, 2022 and December 31, 2021, respectively, and is included in the line item “Other assets” on the consolidated balance sheets.

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 first six months of 2022 or 2021, nor did the Bank have commitments to lend additional amounts to such borrowers at June 30, 2022 or December 31, 2021.

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, among other things, 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 portfolio on an annual basis. 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.

‎

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 origination year.



	June 30, 2022
	Term Loans by Origination Year												Revolving
(in thousands)	2022		2021		2020		2019		2018		Prior		Loans (1)		Total
Commercial and industrial:
Risk rating:
Pass	$	14,388	$	37,178	$	13,971	$	7,311	$	8,469	$	9,564	$	16,900	$	107,781
Watch		—		—		268		—		—		—		—		268
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
	$	14,388	$	37,178	$	14,239	$	7,311	$	8,469	$	9,564	$	16,900	$	108,049

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	(80)	$	(80)
Current-period recoveries		—		—		—		—		—		—		43		43
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	(37)	$	(37)

SBA PPP:
Risk rating:
Pass	$	—	$	4,234	$	193	$	—	$	—	$	—	$	—	$	4,427
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
	$	—	$	4,234	$	193	$	—	$	—	$	—	$	—	$	4,427

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current-period recoveries		—		—		—		—		—		—		—		—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial mortgages – multifamily:
Risk rating:
Pass	$	167,476	$	182,443	$	40,105	$	137,117	$	140,252	$	282,881	$	225	$	950,499
Watch		—		—		—		—		2,375		—		—		2,375
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		6,368		—		6,368
Doubtful		—		—		—		—		—		—		—		—
	$	167,476	$	182,443	$	40,105	$	137,117	$	142,627	$	289,249	$	225	$	959,242

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current-period recoveries		—		—		—		—		—		—		—		—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial mortgages – other:
Risk rating:
Pass	$	135,167	$	226,470	$	112,845	$	36,121	$	44,350	$	210,094	$	—	$	765,047
Watch		—		—		—		—		943		1,169		—		2,112
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		5,763		—		5,763
Doubtful		—		—		—		—		—		—		—		—
	$	135,167	$	226,470	$	112,845	$	36,121	$	45,293	$	217,026	$	—	$	772,922

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current-period recoveries		—		—		—		—		—		—		—		—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial mortgages – owner-occupied:
Risk rating:
Pass	$	45,877	$	62,697	$	23,389	$	42,105	$	2,874	$	38,505	$	710	$	216,157
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
	$	45,877	$	62,697	$	23,389	$	42,105	$	2,874	$	38,505	$	710	$	216,157

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current-period recoveries		—		—		—		—		—		—		—		—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—



	June 30, 2022
	Term Loans by Origination Year												Revolving
(in thousands)	2022		2021		2020		2019		2018		Prior		Loans (1)		Total
Residential mortgages:
Risk rating:
Pass	$	133,132	$	174,177	$	37,843	$	17,429	$	190,953	$	674,336	$	44,929	$	1,272,799
Watch		—		—		—		—		—		477		—		477
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		260		—		260
Doubtful		—		—		—		—		—		—		—		—
	$	133,132	$	174,177	$	37,843	$	17,429	$	190,953	$	675,073	$	44,929	$	1,273,536

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	(88)	$	—	$	(88)
Current-period recoveries		—		—		—		—		—		—		—		—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	(88)	$	—	$	(88)

Consumer and other:
Risk rating:
Pass	$	267	$	—	$	—	$	100	$	—	$	113	$	556	$	1,036
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Not Rated		—		—		—		—		—		—		178		178
	$	267	$	—	$	—	$	100	$	—	$	113	$	734	$	1,214

Current-period gross chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current-period recoveries		—		—		—		—		—		—		—		—
Current-period net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total Loans	$	496,307	$	687,199	$	228,614	$	240,183	$	390,216	$	1,229,530	$	63,498	$	3,335,547
Total net chargeoffs	$	—	$	—	$	—	$	—	$	—	$	(88)	$	(37)	$	(125)

(1) Includes commercial and industrial and residential mortgage lines converted to term of $6.0 million and $9.0 million, respectively.

5 - STOCK-BASED COMPENSATION

The following table presents a summary of restricted stock units (“RSUs”) outstanding at June 30, 2022 and changes during the six-month period then ended. Of the 250,375 RSUs outstanding at quarter end, 92,048 are scheduled to vest during 2022.



				Weighted-
		Weighted-		Average		Aggregate
		Average		Remaining		Intrinsic
	Number of	Grant-Date		Contractual		Value
	RSUs	Fair Value		Term (yrs.)		(in thousands)
Outstanding at January 1, 2022	207,359	$	17.70
Granted	139,279		19.68
Converted	(94,991)		18.87
Forfeited	(1,272)		17.49
Outstanding at June 30, 2022	250,375	$	18.36		1.30	$	4,389

As of June 30, 2022, there was $3.1 million of total unrecognized compensation cost related to non-vested RSUs. The total cost is expected to be recognized over a weighted-average period of 1.8 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.

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, 2022:
Financial Assets:
Available-for-Sale Securities:
State and municipals	$	308,010	$	—	$	307,048	$	962
Pass-through mortgage securities		158,819		—		158,819		—
Collateralized mortgage obligations		112,562		—		112,562		—
Corporate bonds		109,878		—		109,878		—
	$	689,269	$	—	$	688,307	$	962

December 31, 2021:
Financial Assets:
Available-for-Sale Securities:
State and municipals	$	327,171	$	—	$	326,201	$	970
Pass-through mortgage securities		182,957		—		182,957		—
Collateralized mortgage obligations		106,082		—		106,082		—
Corporate bonds		118,108		—		118,108		—
	$	734,318	$	—	$	733,348	$	970
Financial Liabilities:
Derivative - interest rate swaps	$	1,750	$	—	$	1,750	$	—

State and municipal AFS securities measured using Level 3 inputs. The Bank held six non-rated bond anticipation notes with a book value of $1.0 million at June 30, 2022. 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, 2022.

Premises and Facilities. Premises and facilities held-for-sale of $3.8 million are reported in the line item “Other assets” in the consolidated balance sheets and are measured at lower of cost or fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021.

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.

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, 2022					December 31, 2021
	Fair Value	Carrying					Carrying
(in thousands)	Hierarchy	Amount		Fair Value			Amount		Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	64,073	$	64,073		$	43,675	$	43,675
Loans	Level 3		3,304,682		3,056,157	(1)		3,075,205		3,048,791
Restricted stock	n/a		20,905		n/a			21,524		n/a

Financial Liabilities:
Checking deposits	Level 1		1,469,969		1,469,969			1,400,998		1,400,998
Savings, NOW and money market deposits	Level 1		1,750,367		1,750,367			1,685,410		1,685,410
Time deposits	Level 2		385,039		377,539			228,837		232,973
Short-term borrowings	Level 1		10,000		10,000			125,000		125,000
Long-term debt	Level 2		279,435		276,746			186,322		188,413

(1) The decrease in fair value of loans is due to an increase in interest rates.

7 – DERIVATIVES

As part of its asset liability management activities, the Corporation utilized an interest rate swap 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 agreement.

The Bank entered into a five year interest rate swap with a notional amount totaling $50 million on January 17, 2019, which was designated as a cash flow hedge of certain Federal Home Loan Bank (“FHLB”) advances included in short-term borrowings on the consolidated balance sheets. On April 18, 2022, the swap was terminated and the FHLB advance was paid off. Termination fees were immaterial.

The following table summarizes information about the interest rate swap designated as a cash flow hedge at the periods indicated.



	June 30, 2022	December 31, 2021
Notional amount	—	$50 million
Weighted average fixed pay rate	—	2.62%
Weighted average 3-month LIBOR receive rate	—	0.13%
Weighted average maturity	—	2.05 Years

Interest expense recorded on swap transactions, which totaled $426,000 and $2.2 million for the six months ended June 30, 2022 and 2021, respectively, was recorded as a component of interest expense in the consolidated statements of income. Amounts reported in accumulated OCI related to swaps were reclassified to interest expense as interest payments were made on the Bank’s variable-rate liabilities. During the six months ended June 30, 2022, the Corporation had $426,000 of reclassifications to interest expense.

The following table presents the net gains and losses recorded in the consolidated statements of income and the consolidated statements of comprehensive income relating to interest rate swaps.



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Interest rate contracts:
Amount of gain (loss) recognized in OCI (effective portion)	$	1,324	$	267	$	76	$	(33)
Amount of loss reclassified from OCI to interest expense		426		2,233		127		919
Amount of loss recognized in other noninterest income (ineffective portion)		—		—		—		—

The following table reflects the amounts relating to the interest rate swap included in the consolidated balance sheets at the periods indicated.



	June 30, 2022						December 31, 2021
	Notional		Fair Value					Notional	Fair Value
(in thousands)	Amount		Asset		Liability			Amount	Asset		Liability
Included in other liabilities			$	—	$	—			$	—	$	1,750
Interest rate swap hedging FHLB advances	$	—					$	50,000

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., The First of Long Island REIT, Inc. and The First of Long Island Agency, 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 earnings per share for the first half of 2022 were $24.6 million and $1.06, respectively, compared to $22.7 million and $.95, respectively, for the same period last year. Dividends per share increased 5.3%, from $.38 for the first half of 2021 to $.40 for the current period. Returns on average assets (“ROA”) and average equity (“ROE”) for the first half of 2022 were 1.18% and 12.43%, respectively, compared to 1.10% and 11.09%, respectively, for the same period last year. Book value per share was $16.48 at the close of the current period, compared to $17.81 at year-end 2021.

Analysis of Earnings – Six Month Periods. Net income for the first six months of 2022 was $24.6 million, an increase of $1.9 million versus the same period last year. The increase is primarily due to growth in net interest income of $4.9 million and noninterest income of $695,000, excluding 2021 securities gains. These items were partially offset by increases in the provision for credit losses of $2.8 million and income tax expense of $364,000.

The increase in net interest income reflects a favorable shift in the mix of funding as an increase in average checking deposits and a decline in average interest-bearing liabilities resulted in average checking deposits comprising a larger portion of total funding. Also contributing to the increase was a decline in interest expense in 2022 related to the maturity and termination of the Bank’s interest rate swap and lower rates on non-maturity and time deposits. The average cost of interest-bearing liabilities declined 22 basis points (“bps”) from .76% for the first six months of 2021 to .54% for the current six-month period.

The increase in net interest income also reflects growth in average loans outstanding for the first six months of 2022 driven mainly by commercial mortgage originations. The loan portfolio yield declined from 3.55% for the 2021 period to 3.49% for the current period as most originations through June 30, 2022 were committed before the recent rate increases at yields lower than the overall loan portfolio and average SBA PPP loans declined $141 million. PPP income declined $2.9 million to $1.0 million when comparing the six-month periods. The weighted average yield on the PPP portfolio was 14.6% for the current six-month period.

During the second quarter of 2022, we originated $236 million of loans with a weighted average rate of approximately 3.51% which includes $152 million of commercial mortgages at a weighted average rate of 3.50%. The mortgage loan pipeline was $125 million with a weighted average rate of 4.40% at June 30, 2022. We currently anticipate new loan originations in the second half of 2022 will be lower than the first half of 2022.

Net interest margin for the first six months of 2022 was 2.93% versus 2.70% for the 2021 period. Significant increases in short-term interest rates due to major shifts in monetary policy could present challenges in maintaining or growing net interest income and margin. The direction of net interest income and margin for the remainder of 2022 is also largely dependent on changes in the yield curve and competitive and economic conditions. Customers are starting to seek higher deposit rates. Additional rate hikes by the Federal Reserve coupled with significant upward movements in the bond market yields could intensify the pressure on our cost of funds while offering better yields on securities purchased for our investment portfolio.

The provision for credit losses increased $2.8 million when comparing the six-month periods from a credit of $1.6 million in the 2021 period to a charge of $1.2 million in the 2022 period. The provision for the current six-month period was mainly due to an increase in outstanding mortgage loans partially offset by qualitative adjustments for current conditions and historical loss rates.

The increase in noninterest income of $695,000 is primarily attributable to a final transition payment from LPL Financial for the conversion of the Bank’s retail broker and advisory accounts. The increase also includes higher fees from debit and credit cards and income from bank-owned life insurance (“BOLI”). These amounts were partially offset by a decrease in investment services income as the shift to an outside service provider resulted in a revenue sharing agreement and less assets under management.

Noninterest expense remained flat at $32.2 million when comparing the six-month periods. Decreases in salaries and benefits expense due to a net reduction in branch locations and staff were partially offset by the hiring of seasoned banking professionals in lending, technology and other areas. Occupancy and equipment expense was stable as lower rent, depreciation and maintenance and repair costs from the 2021 branch closures were largely offset by the cost of new branch locations on the east end of Long Island and the relocation to new corporate office space in Melville, N.Y.

Income tax expense increased $364,000 and the effective tax rate (income tax expense as a percentage of pre-tax book income) decreased from 20.6% to 20.2% when comparing the six-month periods. The decrease in the effective tax rate is mainly due to the purchase of BOLI in December 2021 and the Corporation being in a capital tax position for New York State and NYC purposes. The increase in income tax expense is due to higher pre-tax earnings in the current six-month period as compared to the 2021 period partially offset by the lower effective tax rate.

Asset Quality. The Bank’s allowance for credit losses to total loans (reserve coverage ratio) was .93% at June 30, 2022 as compared to .96% at December 31, 2021. The decrease in the reserve coverage ratio was mainly due to qualitative adjustments for current conditions and historical loss rates. Nonaccrual and modified loans and loans past due 30 through 89 days are at very low levels.

Key Initiatives. We continue focusing on strategic initiatives supporting the growth of our balance sheet and a profitable relationship banking business. Such initiatives include improving the quality of technology through continuing digital enhancements, optimizing our branch network across a larger geography, using new branding and “CommunityFirst” focus to improve name recognition, enhancing our website and social media presence including the promotion of FirstInvestments, and ongoing recruitment of experienced banking professionals to support our growth and technology initiatives. We also continue to focus on the areas of cybersecurity, environmental, social and governance practices. The consolidation of our back-office staff into a single location at 275 Broadhollow Road in Melville, N.Y. took place in April 2022. During July 2022, the Bank entered into a conditional contract to sell substantially all of its Glen Head properties to a real estate investor.

Net Interest Income

Average Balance Sheet; Interest Rates and Interest Differential. The following table sets 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.



	Six Months Ended June 30,
	2022						2021
	Average		Interest/		Average		Average		Interest/		Average
(dollars in thousands)	Balance		Dividends		Rate		Balance		Dividends		Rate
Assets:
Interest-earning bank balances	$	33,674	$	97	.58	%	$	184,641	$	96	.10	%
Investment securities:
Taxable (1)		432,303		3,708	1.72			445,712		3,982	1.79
Nontaxable (1) (2)		315,418		5,015	3.18			357,924		5,648	3.16
Loans (1) (2)		3,220,953		56,151	3.49			3,008,594		53,459	3.55
Total interest-earning assets		4,002,348		64,971	3.25			3,996,871		63,185	3.16
Allowance for credit losses		(30,059)						(32,256)
Net interest-earning assets		3,972,289						3,964,615
Cash and due from banks		33,106						34,228
Premises and equipment, net		37,942						38,399
Other assets		144,329						133,715
	$	4,187,666					$	4,170,957
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits	$	1,713,883		1,564	.18		$	1,786,527		2,260	.26
Time deposits		319,206		2,100	1.33			371,919		3,897	2.11
Total interest-bearing deposits		2,033,089		3,664	.36			2,158,446		6,157	.58
Short-term borrowings		88,091		684	1.57			56,813		700	2.48
Long-term debt		196,268		1,868	1.92			229,593		2,311	2.03
Total interest-bearing liabilities		2,317,448		6,216	.54			2,444,852		9,168	.76
Checking deposits		1,442,398						1,285,761
Other liabilities		29,342						28,509
		3,789,188						3,759,122
Stockholders' equity		398,478						411,835
	$	4,187,666					$	4,170,957

Net interest income (2)			$	58,755					$	54,017
Net interest spread (2)					2.71	%					2.40	%
Net interest margin (2)					2.93	%					2.70	%

(1) The average balances of loans include nonaccrual loans. The average balances of investment securities include unrealized gains and losses on AFS securities in the 2021 period and exclude such amounts in the 2022 period. Unrealized gains and losses were immaterial in 2021.

(2) 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%.

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,
	2022 Versus 2021
	Increase (decrease) due to changes in:
					Net
(in thousands)	Volume		Rate		Change
Interest Income:
Interest-earning bank balances	$	(133)	$	134	$	1
Investment securities:
Taxable		(122)		(152)		(274)
Nontaxable		(676)		43		(633)
Loans		3,676		(984)		2,692
Total interest income		2,745		(959)		1,786
Interest Expense:
Savings, NOW & money market deposits		(89)		(607)		(696)
Time deposits		(496)		(1,301)		(1,797)
Short-term borrowings		300		(316)		(16)
Long-term debt		(321)		(122)		(443)
Total interest expense		(606)		(2,346)		(2,952)
Increase (decrease) in net interest income	$	3,351	$	1,387	$	4,738

Net Interest Income

Net interest income on a tax-equivalent basis for the six months ended June 30, 2022 was $58.8 million, an increase of $4.7 million, or 8.8%, from the same period of 2021. The increase in net interest income reflects a favorable shift in the mix of funding as an increase in average checking deposits of $156.6 million, or 12.2%, and a decline in average interest-bearing liabilities of $127.4 million, or 5.2%, resulted in average checking deposits comprising a larger portion of total funding. Also contributing to the increase was a decline in interest expense of $1.9 million related to the maturity and termination of the Bank’s interest rate swap and lower rates on nonmaturity and time deposits. The average cost of interest-bearing liabilities declined 22 bps from .76% for the first six months of 2021 to .54% for the current six-month period.

The increase in net interest income also reflects growth of $212.4 million in average loans outstanding to $3.2 billion for the first six months of 2022 driven mainly by commercial mortgage originations. The loan portfolio yield declined from 3.55% for the 2021 period to 3.49% for the current period as most originations through June 30, 2022 were committed before the recent rate increases at yields lower than the overall loan portfolio and average SBA PPP loans declined $141.3 million. PPP income declined $2.9 million to $1.0 million when comparing the six-month periods. The weighted average yield on the PPP portfolio was 14.6% for the current six-month period.

Net interest margin for the first six months of 2022 was 2.93% versus 2.70% for the 2021 period. Significant increases in short term interest rates due to major shifts in monetary policy could present challenges in maintaining or growing net interest income and margin. The direction of net interest income and margin for the remainder of 2022 is also largely dependent on changes in the yield curve and competitive and economic conditions. Customers are starting to seek higher deposit rates. Additional rate hikes by the Federal Reserve coupled with significant upward movements in the bond market yields could intensify the pressure on our cost of funds while also offering better yields on securities purchased for our investment portfolio.

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.

The increase in noninterest income of $695,000, excluding $606,000 of gains on sales of securities in 2021, is primarily attributable to a final transition payment of $477,000 from LPL Financial for the conversion of the Bank’s retail broker and advisory accounts. The increase also includes higher fees from debit and credit cards of $339,000 and income from BOLI of $320,000. These amounts were

partially offset by a decrease in investment services income of $472,000 as the shift to an outside service provider resulted in a revenue sharing agreement and less assets under management.

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 remained flat at $32.2 million when comparing the six-month periods of 2021 and 2022. Decreases in salaries and benefits expense of $179,000 due to a net reduction in branch locations and staff were partially offset by the hiring of seasoned banking professionals in lending, technology and other areas. Occupancy and equipment expense was stable at $6.3 million as lower rent, depreciation and maintenance and repair costs from the 2021 branch closures were largely offset by the costs of new branch locations on the east end of Long Island and the relocation to new corporate office space in Melville, N.Y.

Income Taxes

Income tax expense increased $364,000 and the effective tax rate decreased from 20.6% to 20.2% when comparing the six-month periods. The decrease in the effective tax rate is mainly due to the purchase of $20 million of BOLI in December 2021 and the Corporation being in a capital tax position for New York State and NYC purposes. The increase in income tax expense is due to higher pre-tax earnings in the current six-month period as compared to the 2021 period partially offset by the lower effective tax rate.

Results of Operations – Second Quarter 2022 Versus Second Quarter 2021

Net income for the second quarter of 2022 of $12.5 million increased $1.1 million, or 9.6%, from $11.4 million earned in the same quarter of last year. The increase is mainly due to growth in net interest income of $2.8 million, or 10.3%, for substantially the same reasons discussed above with respect to the six-month periods. Partially offsetting this was an increase in the provision for credit losses of $1.3 million mainly due to strong loan originations in the current quarter. Also offsetting the increase in net interest income was an increase of $600,000 in noninterest expense due to the hiring of seasoned banking professionals, the cost of new branch locations on the east end of Long Island and the relocation of corporate offices.

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 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.

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 eleven distinct pools: (1) commercial and industrial; (2) small business credit scored; (3) multifamily; (4) owner-occupied; (5) other commercial real estate; (6) construction and land development; (7) residential mortgage; (8) revolving home equity; (9) consumer; (10) municipal loans; and (11) SBA PPP 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 credit scored pools, the PD/LGD method is used to measure historical losses; no historical loss method was applied to the SBA PPP loan pool. 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 the nature and volume of loans; (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 national and local 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; and (9) direction and magnitude of changes in the economy. 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 and provision arising from loan growth and concentrations, credit quality and forecasts of unemployment, GDP, vacancies and economic conditions. 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.

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)	2022		2021
Loans including modifications to borrowers experiencing financial difficulty:
Modified and performing according to their modified terms	$	540	$	554
Past due 30 through 89 days		193		460
Past due 90 days or more and still accruing		—		—
Nonaccrual		260		1,235
		993		2,249
Other real estate owned		—		—
	$	993	$	2,249

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.

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 increased $1.0 million during the first half of 2022, amounting to $30.9 million, or .93% of total loans, at June 30, 2022 compared to $29.8 million, or .96% of total loans, at December 31, 2021. During the first half of 2022, the Bank had loan chargeoffs of

$168,000, recoveries of $43,000 and recorded a provision of $1.2 million. During the first half of 2021, the Bank had loan chargeoffs of $723,000, recoveries of $263,000 and recorded a credit provision of $1.6 million. The provision in the current period was mainly due to an increase in outstanding mortgage loans partially offset by qualitative adjustments for current conditions and historical loss rates. The credit provision in the 2021 period was mainly due to improvements in economic conditions, asset quality and other portfolio metrics and a decline in outstanding residential mortgage loans, partially offset by net chargeoffs.

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 97% of the Bank’s total loans outstanding at June 30, 2022. 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 and increasing rates pose new 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.

Cash Flows and Liquidity

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

The Corporation’s cash and cash equivalent position at June 30, 2022 was $64.1 million, up from $43.7 million at December 31, 2021. The increase occurred primarily because cash provided by deposit growth, paydowns or repayments of securities and loans, proceeds from long-term debt and operations exceeded cash used to repay borrowings, purchase securities, originate loans, repurchase common stock and pay cash dividends.

Securities decreased $45.0 million during the first six months of 2022, from $734.3 million at year-end 2021 to $689.3 million at June 30, 2022. The decrease is primarily attributable to maturities and redemptions of $27.5 million and unrealized losses of $65.2 million during the period, partially offset by purchases of $48.5 million.

During the first six months of 2022, total deposits grew $290.1 million, or 8.8%, to $3.6 billion at June 30, 2022. The increase was attributable to growth in checking deposits of $69.0 million, savings, NOW and money market deposits of $65.0 million and time deposits of $156.2 million. The increase in time deposits was due to the purchase of brokered CDs totaling $165 million.

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 at all times 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 overnight investments, maturities and monthly payments on its investment securities and loan portfolios, operations and investment securities designated as AFS. At June 30, 2022, the Bank had approximately $192.2 million of unencumbered AFS securities.

The Bank is a member of the Federal Reserve Bank (“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 draw funds under its existing line and the Corporation believes it can raise funds through its Dividend Reinvestment and Stock Purchase Plan. However, the Bank’s FRB of New York membership, FHLB of New York membership and unsecured 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. Based on the Bank’s unencumbered securities and loan collateral, a substantial portion of which is in place at the FRB of New York and FHLB of New York, the Bank had a borrowing capacity of approximately $1.8 billion at June 30, 2022.

Capital

Stockholders’ equity was $376.5 million at June 30, 2022 versus $413.8 million at December 31, 2021. The decrease was mainly due to net unrealized losses of $45.1 million on the Bank’s AFS investment securities, cash dividends declared of $9.2 million and common stock repurchases of $9.8 million, partially offset by net income of $24.6 million. The net unrealized losses of $45.1 million on the AFS investment securities portfolio were due to an increase in interest rates during the first half of 2022. The fair value of the AFS investment securities portfolio could continue to decline with further increases in interest rates.

ROE for the first half of 2022 was 12.43% compared to 11.09% for the same period last year. Book value per share was $16.48 at the close of the current period, compared to $17.81 at year-end 2021. The increase in ROE was due to higher net income as well as an increase in accumulated OCI due to a significant increase in the net unrealized loss in the AFS securities portfolio from higher interest rates. The losses in the AFS securities portfolio, which reduced the average balance of stockholders’ equity, accounted for 77 bps of the improvement in the ROE ratio when compared to the prior year period. The unrealized loss also accounted for a $1.89 reduction in book value per share at June 30, 2022.

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.

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 Ratios of the Corporation and the Bank at June 30, 2022 were 9.85% and 9.84%, respectively, and satisfy 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. During the first half of 2022, the Corporation repurchased 488,897 shares of its common stock at a total cost of $9.8 million. The Corporation can repurchase another $23.1 million under Board approved repurchase programs. We expect to continue common stock repurchases during the remainder of 2022.

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, 2022 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, 2023 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 substantially reflect the Bank’s strategic plan. In addition, in calculating EVE, cash flows for nonmaturity deposits are assumed to have an overall life of 6.2 years based on the current mix of such deposits and the most recently updated nonmaturity deposit study.

The rate change information in the following table shows estimates of net interest income for the year ending June 30, 2023 and calculations of EVE at June 30, 2022 assuming rate changes of plus 100, 200 and 300 bps and minus 100 bps. The rate change scenarios were selected based on 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 substantially reflect the Bank’s strategic plan. The changes in EVE from the base case have not been tax affected.



	Economic Value of Equity			Net Interest Income for
	at June 30, 2022			Year Ending June 30, 2023
			Percent Change			Percent Change
			From			From
Rate Change Scenario (dollars in thousands)	Amount		Base Case	Amount		Base Case
+ 300 basis point rate shock	$	666,604	-16.1%	$	107,971	-10.5%
+ 200 basis point rate shock		708,324	-10.8%		112,055	-7.1%
+ 100 basis point rate shock		757,853	-4.6%		116,630	-3.3%
Base case (no rate change)		794,313	—		120,587	—
- 100 basis point rate shock		783,396	-1.4%		118,178	-2.0%

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, 2023 because the Bank might need to increase the rates paid on its nonmaturity deposits to remain competitive and any long-term borrowings that mature would reprice at a higher interest rate. In addition, the Bank’s securities portfolio, excluding corporate bonds, and a significant portion of its loan portfolio does not immediately reprice with changes in market rates. An immediate decrease in interest rates of 100 bps could also negatively impact the Bank’s net interest income for the same time period due to the inability to reduce interest rates on deposit accounts below zero. Changes in management’s estimates as to the rates that will need to be paid on nonmaturity deposits could have a significant 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, 2021, in Part I under “Item 1A. Risk Factors.” 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 SEC from time to time.

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 2022 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, 2021.

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

(c) Stock Repurchases. 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 details of the Corporation’s purchases under the stock repurchase program in the second quarter of 2022 are set forth in the table that follows.

ISSUER PURCHASES OF EQUITY SECURITIES



				Total Number of Shares	Maximum Dollar Value of
	Total Number	Average		Purchased as Part of	Shares that May Yet
	of Shares	Price Paid		Publicly Announced	be Purchased Under
Period	Purchased	Per Share		Plans or Programs	the Plans or Programs (1)
April 2022	—		—	—		$28,353,157
May 2022	182,900		$18.274	182,900		$25,010,803
June 2022	103,111		$18.875	103,111		$23,064,539
Total	286,011		$18.491	286,011

(1) The Corporation’s Board of Directors approved a new $30 million common stock repurchase program which was announced on January 31, 2022. The Corporation’s stock repurchase 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

Not applicable

ITEM 6. EXHIBITS

See Index of Exhibits that follows.

‎

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, 2022, 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)

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 4, 2022	By /s/ CHRISTOPHER BECKER
	Christopher Becker, President & Chief Executive Officer
	(principal executive officer)

	By /s/ JAY P. MCCONIE
	Jay P. McConie, Executive Vice President, Chief
	Financial Officer & Treasurer
	(principal financial officer)

	By /s/ WILLIAM APRIGLIANO
	William Aprigliano, First Senior Vice President &
	Chief Accounting Officer
	(principal accounting officer)