The First of Long Island Corporation Annual Shareholders Meeting
Good morning.
Christopher Becker, President and Chief Executive Officer of first of all on the Island Corporation.
And I will act as the chairman of our 2023 annual meeting of stockholders.
I'll now open the meeting.
Welcome to those of an attack.
After the formal part of the meeting concludes I will give a presentation.
I will now take us through the formal part of the meeting beginning with the following announcements.
Due notice of meeting was mailed on March 17, 2023 to.
To shareholders of record at the close of business on March three 2023.
An affidavit of mailing has been filed.
The proxy votes have been counted and the certification was filed by the proxy.
The inspector of election has taken his oath of office and has been filed.
To date, we have received proxies, representing 78% of the total shares outstanding which constitutes a quorum.
Our proxy committee as the members of the board of directors, who are not standing for reelection.
Our inspector of election, as the chief Auditor of the company.
Robert.
Before I take you through the proposals please be aware that a registered participant can ask questions by typing them into the submit a question box.
Of this online meeting located by slowing down on the meeting portal.
Any questions on the proposals should be submitted now and I will address them after reading the proposals.
Voting on the proposals May also beat it may also take place during the meeting.
The proposals are already at today's meeting are proposal one.
To elect seven directors to hold office for two year terms and until their successors are duly elected and qualified.
<unk> direct Cousar, Christopher Becker J Abbott our Cooper.
John J Desman Ed.
Edward J K Louisa.
Luisa.
Belgrade Randy Taylor.
Walter C Eagle.
Proposal two.
To conduct a nonbinding advisory vote.
To approve the compensation paid to the corporation's named executive officers.
Proposal three.
To conduct a nonbinding advisory.
The advisory vote regarding the frequency of voting on the compensation paid to the corporation's named executive officers.
Proposal four to ratify the appointment of Crowe LLP.
As the corporation's independent registered public accounting firm for 2023.
Since no other matters are properly before the meeting.
That concludes the presentation of the proposals.
But what are you should now be completed.
Yes.
Since there are no questions.
Will the inspector of election kindly proceed to count the votes cast upon these proposals and report accordingly.
The inspector of election.
<unk> has delivered his report and <unk>.
Poses one two and four paas.
And stockholders chose a frequency of every year to hold a nonbinding advisory vote to approve the compensation paid to the corporation's named executive officers.
Having concluded all the business to be.
Brought before the stockholders I will now declare the annual meeting adjourn.
As I stated in my opening remarks, we have a presentation at today's meeting.
Please submit your questions during the presentation and I will address questions related to today's meeting App after the presentation.
On slide two.
Please note our safe Harbor statement on forward looking remarks.
On slide three you'll see our board of directors.
In addition to the directors elected at today's meeting.
With us today are quality can Eric.
Alexander out over Stephen Murphy.
Correct.
Denise strain.
And Eric J to better.
Yeah.
I appreciate the service and dedication of our directors.
Can assure you they are committed to meeting evolving corporate governance expectations and oversight of your investment in our company.
On slide four.
Our executives with us today.
<unk> sorry.
Internal counsel and Chief compliance officer.
Chris Hilton Chief lending officer.
Jay Makoni Chief Financial Officer.
Rick Perrault, Chief retail officer.
Suzanne Pfeffer Chief Information Officer.
My exposure rich Chief credit Officer.
And Janet for now Chief risk Officer.
On slide five.
On October one 2022, our banking subsidiary the first National Bank of long Island branded as first National Bank ally celebrated 95th anniversary and is currently long island's longer standing independent bank.
We think our local markets with our community first volunteerism program.
Our employees donated over 1000 hours of their time to a local charities and fighting food insecurity, helping seniors.
Caring for animals and building housing.
On slide six.
Each branch held in Nevada on the anniversary of its opening date.
To recognize our 90, <unk> anniversary and thanked thousands of loyal customers.
On slide seven.
In our 95th year.
Cut the ribbon on two new East end of long island locations in East Hampton in Southampton.
We have been warmly received has the new local bank in town.
Continuing our branch optimization plan, our Port Jefferson branch relocated to a new main street village location.
EMEA in Hauppauge will move into new space in the first half of 2023.
Our optimization plan is all about getting the right number of branches in the right locations with the right bankers.
On slide eight.
Year 95 also had a ribbon cutting ceremony at our new and more centrally located corporate headquarters at 275 broad Hollow Road in Melville New York.
Held in October .
We combine the Melville Grand opening with a 95th anniversary part.
A couple of hundred valued customers and friends stock BARDA wishes as well.
Not only did we pick a fantastic location on long island to consolidate our operations are.
Our occupancy expense is projected lower in 2023.
As the number of inefficient locations and Glenn had where salt.
On.
<unk> nine.
Our roots and Glenn had are an important part of our culture.
Our main office branch still stands at its original location in glad ahead since $19 27.
Hey, Glenn had community remains a gracious host for the best.
On slide 10.
We are proud of our growth over the past decade.
Record net income in 2022 up $46 9 million culminated our 10th consecutive year of earnings per share growth given our company is spot on the K VW bank on it.
We prioritize rewarding loyal shareholders. So we've increased our dividend per share for the past 10 years also.
On slide 11.
We believe shareholder value shareholders value, our consistent financial performance.
We're a long history, we have produced a steady return on average assets.
Harboring around the 1% Mark and return on average equity at the 10 plus percent more.
For 2022.
ROA and ROE.
We are the best they've been in over a decade.
On slide 12.
When measured against peer averages our metrics are generally as good or better than peers.
Always focus on remaining efficient.
And true to the conservative underwriting standards that meet maintain strong quality in our loan portfolio.
On slide 13.
The total return of <unk> stock.
Followed the trend of the group of peer bank holding companies listed in our proxy statement.
Even with the stock price is down due to numerous world events and 10 year returns of our stock with dividends reinvested remain attractive as we generated a 7% compound annual growth rate.
Which nearly doubled shareholders' investment over the decades.
On slide 14.
Our leverage capital ratio remains near 10%.
We believe our capital position benefits us in the current environment.
On slide 15.
A key initiative since the beginning of 2020 has been to remix the structure of our balance sheet.
Here, we highlight several of the changes that have helped improve our net interest margin and reflects the commercial relationship based organization, we strategize debate.
We have shifted the loan portfolio makeup to commercial from consumer.
Consumer consist mostly of residential mortgages, we replaced high cost more volatile promotional Cds and borrowings with noninterest bearing checking deposits.
On slide 16.
You can see the benefits of the remix in the balance sheet. After a long decline in the margin we have been able to show a three year positive trend. This bank has not seen an increase in margin in a decade.
On slide 17.
Remixing the balance sheet did present, some headwinds to growth in 2020 and 2021.
As we allowed approximately $600 million of residential mortgages to amortize down or pre tax.
But 2022 turned a corner as total loans grew nearly 7%.
And average loans outstanding grew 10%.
Long term growth rates remained well above 10% for total loans commercial loans continued their uninterrupted Klein for the past 10 years, which includes a nearly 14% compound annual growth rate.
On slide 18.
We also reached our target mix in the loan portfolio of at least 60% commercial.
Nearly opposite the mix of just three years ago.
Yes.
On slide 19.
Risk and commercial real estate exposure.
We're currently in the headlines as office vacancies and rate resets.
Our stress and cash flows.
In the left chart.
You see our property type exposure in the commercial real estate portfolio with our largest concentration in multifamily properties.
Please note over 60% of the multifamily portfolio.
Include a percentage of rent stabilized apartments generally considered to have lower vacancy rate.
Office exposure is limited to 13% of the commercial real estate portfolio.
And the right hand chart we.
We broke out our non owner occupied office exposure.
Just under $213 million of the one 9 billion outstanding.
A majority of our office exposure is in Suffolk, and Nassau counties.
We only have $1 million of non owner occupied office exposure in New York County, better known as Manhattan.
On slide 20.
Credit quality continues to produce industry leading numbers.
Non accruals were zero at December 31, 2022, and we're still zero at March 31 2023.
Net charge offs have been just two basis points of total loans for the past two years and our reserve coverage ratio has remained consistent.
On slide 21.
As of year end, we saw healthy long term growth rates and deposits near.
Nearly 8% over a 10 year period for total deposits and more importantly, nearly 10% over the same 10 year period for noninterest bearing checking deposits.
On slide 22.
Deposits reflects the same story as loans when compared to three years ago.
Moving to balance sheet to a more desired mix with.
Total deposits are up about $150 million over 2021 most importantly.
Our noninterest bearing checking balances ended the year at 38% of total deposits and averaged over 40% of total deposits throughout the year.
On slide 23.
Our overall funding mix has shifted towards noninterest bearing checking accounts.
Assistant with our focus on growing relationship business.
On.
Slide 24.
While 2022 was a year of celebration and success 2023 is proving to be most challenging.
Following supply change disruptions record U S government stimulus.
And the fed delaying rate increases insisting that inflation was transitory among other events resulted in inflation that approached 10% at its peak in 2022.
The fed responded with rate increases not seen in over 40 years.
The banking industry is now dealing with a one year shock up rate scenario up 475 basis points and an inverted yield curve from the three months to the 10 year of approximately 150 basis points.
The rate increases resulted in significant unrealized losses and bank investment securities portfolios.
In the case of Silicon Valley Bank.
One on deposits caused them to sell their entire investment portfolio at a one 8 billion after tax loss, resulting in the need to recapitalize their back.
Before that can happen regulatory agencies shut them down.
If our company sold its entire investment portfolio as of March 31, 2023.
Capital would remain strong and our leverage capital ratio would still be approximately eight 7%.
Recent bank failures will cost in par.
By rapid growth of large uninsured deposit exposures from venture capital Fintech and crypto currency firms.
First national Bank alloy purposely does not solicit or have exposure to these types of businesses.
We have just a handful of slides remain so if you wish to submit a question. Please do so net.
On slide 25.
The bank's deposit base remains stable throughout the turmoil of the first quarter of 2023.
Total deposits generally range from three four to $3 5 billion during the quarter and averaged $3 $4 7 billion.
As of yesterday, our deposits were 345 billion.
All numbers are in line with total deposits at year end 2022.
Our customers have been loyal and appreciate their relationship with our first national Bank alloy bankers.
On slide 26.
The bank's uninsured and uncollateralized deposits were 38% of total deposits at March 31 2023.
As a reference point.
At year end 2022 signature bank had uninsured and uncollateralized.
Clark collateralized deposits totaling 88% of total deposits.
You can see our uninsured and uncollateralized deposit levels have been consistent.
But trending lower over the past couple of years.
Many peers that operate in our market have very similar ratios of uninsured and uncollateralized part.
Mainly from working with businesses that need amounts greater than 250000.
And their accounts to operate and meet payroll.
The bank's liquidity position includes availability of one 5 billion.
Under collateralized borrowing lines at the Federal Reserve Bank.
And federal home loan Bank of New York.
We also had $143 million in cash on hand, and excess securities collateral available for pledging.
And uncollateralized and uncommitted line of $20 million for the correspondent bank.
Our borrowing lines are well in excess of our uninsured uncollateralized part.
On slide 27.
Recent events.
Have pushed bank stock prices down significantly.
The average stock price of our proxy peer group.
BW Regional Bank Index, and K VW Bank Index <expletive>.
<unk> declined 23%, 24% and 34% respectively from March 31, 2022 through March 31 2023.
Our stock price is down 31% during the same period.
We certainly do not like to see our stock down 30%.
It is consistent with the market decline in bank stock.
On slide 28.
The bank has taken the following steps in the first quarter of 2023.
To lessen our liability sensitivity and minimize margin contraction from future rate increases.
First we completed an interest rate swap to convert $300 million fixed rate residential mortgages to floating rate for three years.
Bank receives the overnight, so port floating rate and pays a fixed rate.
As of March 31, 2023.
<unk> was in the money by approximately 100 basis points.
And providing annual interest income of $2 9 million.
Second the.
The bank sold $145 million of municipal bonds with a tax equivalent yield of 332% and a duration of one five years and reinvested $135 million of the proceeds into U S government guaranteed SBA floating rate securities with an average.
<unk> of approximately 538% and a duration of three years.
The remaining proceeds were left in cash for liquidity purposes.
The bank recorded a pre tax loss of $3 $4 million.
The earn back on the loss at the time of the transaction, which just one to five years based on an increase in net interest income of $2 8 million.
While 2023 performance metrics will not measure up to our historical averages our deposit base has remained loyal.
Our asset quality always a hallmark of this company remains strong and.
And our leverage ratio at March 31, 2023.
Was 994% nearly double the definition of well capitalized capitalized of 5%.
Stockholders equity consist of common stock.
Surplus retained earnings and nothing else.
On slide 29.
Rates and the shape of the yield curve will eventually change.
Historically normal shaped yield curve is expected to benefit the bank and allow our performance metrics to normalize.
So let me remind you of our primary strategic initiatives, which are focused on long term performance.
Recruit banking professionals that build relationships structure, the balance sheet to optimize financial performance.
<unk> optimized the current 10 prospective branch network.
Improve the quality.
Utilization of technology.
Grow fee income and.
Improve the company's name recognition and community standing.
Attract and retain employees.
Support our objectives.
That concludes today's presentation.
Please bear with me briefly while we check for questions.
So we do have a question from a shareholder.
That there are many ceos in their in their vintage group that would love to move to F&B LOI, if the technology platform. The bank was improved.
So the bank is actually in the process in 2023.
Upgrading its technology, both in its and its core system.
Its platform and teller system.
And its commercial online banking system and that that's been a major project thats been going on since summer of 2022.
And it is currently projected to be completed in October of 2023.
It's a bank wide effort and and.
And we're very excited about it we think this is going to certainly.
Enhance our abilities our customers have been very very satisfied and we've heard very good feedback from our current systems, but we think it's very important to continue to upgrade and include the newest and latest technology that customers and certainly our business clients come to expect.
Yeah.
That concludes the questions that we have today, but shareholders are always welcome to contact me at the bank I'm happy to have those discussions and talk through any any questions and concerns.
And thank you all for attending our virtual meeting today.
The meeting will go on air and as scheduled time on the meeting web page.
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The meeting will go on air and to schedule time on the meeting web page.
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