Navigating Challenges: The First of Long Island Corporation's Q1 2025 Earnings Reveal Resilience Amid Headwinds

The First of Long Island Corporation’s Q1 2025 earnings report paints a picture of a bank grappling with economic uncertainty while maintaining core strengths. Despite a net income decline to $3.8 million ($0.17 per share) from $4.4 million ($0.20 per share) in Q1 2024, the report underscores both opportunities and risks for investors. Let’s dissect the numbers to assess the bank’s trajectory.

Financial Highlights: A Mixed Quarter

The bank’s net interest income rose 3.6% to $661,000, driven by a $2.0 million decrease in interest expense. This was achieved through a 16 basis point reduction in the cost of liabilities and a $92.9 million decline in average interest-bearing liabilities. However, interest income fell by $1.4 million due to a $156.6 million drop in average interest-earning assets, despite a slight yield increase.

Key metrics remain modest:
- Net Interest Margin (NIM): 1.91%, down from 2.01% in Q1 2024.
- ROA: 0.37%, below the industry average of ~1.0%.
- ROE: 3.98%, also trailing peers.

While the bank’s capital position remains robust—leverage ratio at 10.29% and book value per share rising to $16.91—the decline in net income underscores underlying pressures.

Credit Quality: A Cause for Caution

The report’s most concerning element is the deterioration in credit metrics. Past-due loans surged to $7.5 million from $270,000 in late 2024, and nonaccrual loans climbed to $3.5 million. The allowance for credit losses rose to 0.89% of total loans, up from 0.88% at year-end. Management attributed this to worsening economic conditions, though they maintained that overall credit quality remains “strong.”

Investors should monitor these trends closely. A 49.5% uninsured deposit ratio also raises liquidity concerns, though the bank’s total liquidity of $878.1 million (including collateralized borrowing lines and unencumbered securities) provides a buffer.

Expense Pressures and Tax Headwinds

Noninterest expenses increased by 5.7% year-over-year, driven by merger-related costs ($230,000), system conversions ($468,000), debit card charge-offs ($243,000), and higher legal fees. While salaries and benefits fell 2.6% due to branch consolidations, the overall trend suggests operational challenges.

Tax expense rose sharply, increasing $193,000 due to a higher effective tax rate (11.5% vs. 6.2% in Q1 2024), reflecting reduced tax benefits from real estate investment trust (REIT) activities. This underscores the bank’s reliance on specific tax advantages, which may not persist.

Comparisons and Forward-Looking Risks

Quarter-over-quarter, net income improved by $512,000, driven by higher net interest income and cost controls. However, this gain was partially offset by a $168,000 provision for credit losses (versus a $381,000 reversal in Q4 2024) and a $761,000 tax expense jump. Year-over-year comparisons are skewed by nonrecurring items in 2024, such as real estate tax refunds and bank-owned life insurance (BOLI) benefits.

The bank’s outlook cites risks including economic uncertainty, regulatory changes, interest rate fluctuations, and merger-related expenses. Investors must weigh these against its strong liquidity and dividend stability ($0.21 per share, unchanged).

Conclusion: A Bank Under Strain, but Not Yet Broken

The First of Long Island Corporation’s Q1 2025 results reflect a bank navigating a challenging environment. While its net interest income growth and stable capital position offer hope, the decline in net income, rising credit losses, and elevated expenses raise concerns about profitability and operational efficiency.

The 0.37% ROA and 3.98% ROE lag industry benchmarks, signaling a need for margin expansion or cost discipline. The surge in past-due loans demands scrutiny, as it could signal broader economic stress impacting the bank’s loan portfolio.

However, the bank’s liquidity reserves and unchanged dividend policy suggest management’s confidence in its core stability. Investors should focus on whether credit metrics stabilize, merger costs subside, and the net interest margin recovers.

For now, The First of Long Island Corporation remains a cautionary tale of a regional bank balancing growth with economic headwinds. Its performance in the coming quarters will determine whether it can regain its footing or becomes a cautionary example of the risks facing community banks in an uncertain economy.