# EDGAR Filing Document

**Accession Number:** 0000740663
**File Stem:** 0001562762-23-000110
**Filing Date:** 2023-3
**Character Count:** 381662
**Document Hash:** 33ac4bd58320be7b6d6bd6f1cadc74b4
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001562762-23-000110.hdr.sgml**: 20230309

**ACCESSION NUMBER**: 0001562762-23-000110

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 112

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230309

**DATE AS OF CHANGE**: 20230309

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** FIRST OF LONG ISLAND CORP
- **CENTRAL INDEX KEY:** 0000740663
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATIONAL COMMERCIAL BANKS [6021]
- **IRS NUMBER:** 112672906
- **STATE OF INCORPORATION:** NY
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-32964
- **FILM NUMBER:** 23718658

**BUSINESS ADDRESS:**
- **STREET 1:** 275 BROADHOLLOW ROAD
- **CITY:** MELVILLE
- **STATE:** NY
- **ZIP:** 11747
- **BUSINESS PHONE:** 5166714900

**MAIL ADDRESS:**
- **STREET 1:** 275 BROADHOLLOW ROAD
- **CITY:** MELVILLE
- **STATE:** NY
- **ZIP:** 11747

?xml version="1.0" encoding="utf-8"? flic-20221231x10k

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

**___________**

**FORM 10-K**

(Mark One)

🗷 **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

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| | |
|:---|:---|
| For the fiscal year ended | **December 31, 2022** |

---

OR

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

For the transition period from **____** to **____** 

Commission file number <u>001-32964</u>

**<u>THE FIRST OF LONG ISLAND CORPORATION</u>**

(Exact Name Of Registrant As Specified In Its Charter)

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| | |
|:---|:---|
| **<u>New York</u>** | **<u>11-2672906</u>**  |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
|  **<u>275 Broadhollow Road</u><u>,</u> <u>Melville</u><u>,</u> <u>NY</u>**  | **<u>11747</u>**  |
| (Address of Principal Executive Offices) | (Zip Code) |

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**<u>(</u><u>516</u><u>)</u> <u>671-4900</u>**

(Registrant's telephone number, including area code)

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

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| | |
|:---|:---|
| <u>Title of Each Class</u> | <u>Name of Each Exchange on Which Registered</u>  |
| Common stock, $0.10 par value per share <br> FLIC  | Nasdaq  |

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

  <br> <u>None</u> <br> <u>(Title of class)</u>

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;Yes ◻ No 🗷

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

&nbsp;&nbsp;&nbsp;&nbsp;Yes ◻ No 🗷

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 requirement for the past 90 days. Yes 🗷 No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 🗷 No ◻

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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| | |
|:---|:---|
| Large accelerated filer ◻  | Accelerated filer 🗷 |
| Non-accelerated filer ◻ | Smaller reporting company ◻ |
|  | Emerging growth 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 🗷

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ◻

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ◻ No 🗷

The aggregate market value of the Corporation's voting common stock held by nonaffiliates as of June 30, 2022, the last business day of the Corporation's most recently completed second fiscal quarter, was $382.3 million. This value was computed by reference to the price at which the stock was last sold on June 30, 2022 and excludes $18.1 million representing the market value of common stock beneficially owned by directors and executive officers of the registrant.

As of March 3, 2023, the registrant had 22,512,395 of shares of common stock, $0.10 par value per share, outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

**Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held April 18, 2023 are incorporated by reference into Part III.**

 **‎** 

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**TABLE O** **F CONTENTS**

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| | | |
|:---|:---|:---|
| [<u>PART I</u>](#Part_I) | [<u>PART I</u>](#Part_I) | [<u>PART I</u>](#Part_I) |
| [<u>ITEM 1.</u>](#Business) | [<u>Business</u>](#Business) | 1 |
| [<u>ITEM 1A.</u>](#Risk_Factors) | [<u>Risk Factors</u>](#Risk_Factors) | 8 |
| [<u>ITEM 1B.</u>](#Unresolved_Staff_Comments) | [<u>Unresolved Staff Comments</u>](#Unresolved_Staff_Comments) | 12 |
| [<u>ITEM 2.</u>](#Properties) | [<u>Properties</u>](#Properties) | 12 |
| [<u>ITEM 3.</u>](#Legal_Preceedings) | [<u>Legal Proceedings</u>](#Legal_Preceedings) | 13 |
| [<u>ITEM 4.</u>](#Mine_Safety_Disclosures) | [<u>Mine Safety Disclosures</u>](#Mine_Safety_Disclosures) | 13 |
| [<u>PART II</u>](#Part_II) |  |  |
| [<u>ITEM 5.</u>](#Market_for_Registrants_Common_Equity) | [<u>Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities</u>](#Market_for_Registrants_Common_Equity) | 13 |
| [<u>ITEM 6.</u>](#ITEM_6) | [<u>Reserved</u>](#ITEM_6) | 14 |
| [<u>ITEM 7.</u>](#MDA) | [<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#MDA) | 14 |
| [<u>ITEM 7A.</u>](#Quantitative_and_Qualitative_Disclosures) | [<u>Quantitative and Qualitative Disclosures About Market Risk</u>](#Quantitative_and_Qualitative_Disclosures) | 27 |
| [<u>ITEM 8.</u>](#Financial_Stmts_and_Supp_Data) | [<u>Financial Statements and Supplementary Data</u>](#Financial_Stmts_and_Supp_Data) | 29 |
| [<u>ITEM 9.</u>](#Changes_in_and_Disagreements) | [<u>Changes In and Disagreements With Accountants on Accounting and Financial Disclosure</u>](#Changes_in_and_Disagreements) | 65 |
| [<u>ITEM 9A.</u>](#Controls_and_Procedures) | [<u>Controls and Procedures</u>](#Controls_and_Procedures) | 65 |
| [<u>ITEM 9B.</u>](#Other_Information) | [<u>Other Information</u>](#Other_Information) | 65 |
| [<u>ITEM 9C.</u>](#ITEM_9C) | [<u>Disclosure Regarding Foreign Jurisdictions that Prevent Inspection</u>](#ITEM_9C) | 65 |
| [<u>PART III</u>](#Part_III) |  |  |
| [<u>ITEM 10.</u>](#Directors_Exec_ooficers_Corp_Governance) | [<u>Directors, Executive Officers and Corporate Governance</u>](#Directors_Exec_ooficers_Corp_Governance) | 65 |
| [<u>ITEM 11.</u>](#Executive_Compensation) | [<u>Executive Compensation</u>](#Executive_Compensation) | 66 |
| [<u>ITEM 12.</u>](#Security_Ownership_of_Certain_Owners) | [<u>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</u>](#Security_Ownership_of_Certain_Owners) | 66 |
| [<u>ITEM 13.</u>](#Certain_Relationships_Related_Trans) | [<u>Certain Relationships and Related Transactions and Director Independence</u>](#Certain_Relationships_Related_Trans) | 66 |
| [<u>ITEM 14.</u>](#Principal_Accountant_Fees_and_Services) | [<u>Principal Accountant Fees and Services</u>](#Principal_Accountant_Fees_and_Services) | 66 |
| [<u>PART IV</u>](#Part_IV) |  |  |
| [<u>ITEM 15.</u>](#Exhibits_and_Financial_Stmt_Schedules) | [<u>Exhibits and Financial Statement Schedules</u>](#Exhibits_and_Financial_Stmt_Schedules) | 66 |
| [<u>ITEM 16.</u>](#Form_10K_Summary) | [<u>Form 10-K Summary</u>](#Form_10K_Summary) | 66 |
|  | [<u>INDEX OF EXHIBITS</u>](#Index_of_Exhibits) | 67 |
|  | [<u>SIGNATURES</u>](#Signatures) | 68 |

---

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**PA** **RT I**

**ITEM 1. BU** **SINESS**

**General**

The First of Long Island Corporation ("Registrant"), a one-bank holding company, was incorporated on February 7, 1984 for the purpose of providing financial services through its wholly-owned subsidiary, The First National Bank of Long Island. The consolidated entity is referred to as the "Corporation," and the Bank and its subsidiaries are collectively referred to as the "Bank."

The Bank was organized in 1927 as a national banking association under the laws of the United States of America. The Bank has two wholly-owned subsidiaries: FNY Service Corp., an investment company, 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.

All the financial operations of the Corporation are aggregated in one reportable operating segment. All revenues are attributed to and all long-lived assets are located in the United States.

The Bank's revenues are derived principally from interest on loans and investment securities, service charges and fees on deposit accounts, income from investment management services and bank-owned life insurance ("BOLI").

The Bank did not commence, abandon or significantly change any of its lines of business during 2022.

**Markets Served and Products Offered**

The Bank serves the financial needs of small and medium-sized businesses, professionals, consumers, municipalities and other organizations primarily in Nassau and Suffolk Counties of Long Island, and the boroughs of New York City ("NYC"). The Bank has 41 branch locations including 17 branches in Nassau, 16 in Suffolk, five in Queens, two in Brooklyn and one in Manhattan. During 2022, the Bank opened one branch in eastern Suffolk County. The Bank continues to evaluate the strategic placement of its branch network and invests in digital channels to best serve customer demand both within and beyond its physical locations.

The Bank's loan portfolio is primarily comprised of loans to borrowers on Long Island and in the boroughs of NYC, and its real estate loans are principally secured by properties located in those areas. The Bank's investment securities portfolio is comprised of direct obligations of the U.S. government and its agencies, corporate bonds of large U.S. financial institutions and highly rated obligations of states and political subdivisions.

The Bank provides investment management, trust, estate and custody services and offers retail investment services through a partnership with Financial Resources Group, an affiliate of LPL Financial.

In addition to its loan, investment and deposit products, the Bank offers a wide array of banking services to its customers through its branch network, mobile applications and interactive website.

**Competition**

The Bank encounters substantial competition in its banking business from numerous other financial services organizations that have offices located in the communities served by the Bank. Principal competitors are large money center, regional and community banks located within the Bank's market area, mortgage brokers, brokerage firms, credit unions and fintech or e-commerce companies. The Bank competes for loans based on the quality of service it provides, loan structure, competitive pricing and branch locations. It also competes for deposits by offering a high level of customer service, paying competitive rates, maintaining a well designed website and through the geographic distribution of its branch system. Cash management tools and digital channels are increasingly essential to attract and retain core customer relationships.

**Investment Activities**

The Bank's investment policy, as approved by the Asset Liability Committee of the Board ("ALCO") and supervised by both the ALCO and the Management Investment Committee, is intended to promote investment practices which are both safe and sound and in full compliance with applicable regulations. Investment authority is granted and amended as necessary by the Board of Directors or ALCO.

The Bank's investment decisions seek to optimize income while keeping both credit and interest rate risk at acceptable levels, provide for the Bank's liquidity needs and provide securities that can be pledged, as needed, to secure deposits and borrowings.

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The Bank's investment policy generally limits individual maturities on municipal bonds to 20 years and estimated average lives on collateralized mortgage obligations ("CMOs") and other mortgage-backed securities to ten years. At the time of purchase, bonds of states and political subdivisions must generally be rated AA or better, notes of states and political subdivisions must generally be rated MIG-1 (or equivalent), commercial paper must be rated A-1 or P-1, and corporate bonds of large U.S. based financial institutions must have a rating of BBB+ or better. In addition, management periodically reviews the creditworthiness of all securities in the Bank's portfolio other than those issued by the U.S. government or its agencies. Any significant deterioration in the creditworthiness of an issuer is analyzed and action is taken if deemed appropriate.

At year end 2022 and 2021, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity.

The Bank's investment portfolio at December 31, 2022 was comprised of available-for-sale ("AFS") securities totaling $673.4 million and was made up of state and municipal securities of $305.2 million, pass-through mortgage securities of $148.5 million, CMOs of $113.4 million and corporate bonds of $106.3 million. Substantially all the municipal securities are rated AA or better. The pass-through mortgage securities and CMOs are issued by Government National Mortgage Association ("GNMA"), Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). GNMA is a U.S. government agency and FNMA and FHLMC are U.S. government-sponsored agencies. The corporate bonds are investment grade securities issued by large U.S. based financial institutions with variable rates that reset quarterly based on the ten-year swap rate.

The Bank has not engaged in the purchase and sale of securities for the primary purpose of producing trading profits and its current investment policy does not allow for such activity.

**Lending Activities**

***General.*** The Bank's lending is subject to written underwriting standards and loan origination procedures, as approved by the Loan Committee of the Board ("Loan Committee") and contained in the Bank's loan policy. The loan policy allows for exceptions and sets forth specific exception approval requirements. Decisions on loan applications are based on the borrower's credit history, the financial strength of the borrower, estimates of the borrower's ability to repay the loan and the value of the collateral and guarantees, if any. All real estate appraisals must meet the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank Act"), banking agency guidance and, for those loans in excess of $250,000, be reviewed by the Bank's independent appraisal review function.

The Bank's loan portfolio is primarily comprised of loans to small and medium-sized privately owned businesses, professionals and consumers on Long Island and in the New York ("NY") metropolitan area. The Bank offers a full range of lending services including commercial and residential mortgage loans, home equity lines/loans, commercial and industrial loans, small business credit scored loans, Small Business Administration ("SBA") loans, construction and land development loans, consumer loans and standby letters of credit. During 2022, commercial lending was emphasized over residential mortgage lending and supported by increases in credit and lending staff.

The Bank makes both fixed and variable rate loans. Variable rate loans reprice primarily with changes in the prime interest rate as published in The Wall Street Journal, U.S. Treasury rates and Federal Home Loan Bank of NY ("FHLBNY") advance rates.

***Commercial and Industrial Loans.*** Commercial and industrial loans include short-term business loans and lines of credit; revolving credit facilities, term and installment loans; loans secured by marketable securities, the cash surrender value of life insurance policies, deposit accounts or general business assets; small business credit scored loans as described hereinafter; equipment finance loans; and asset based loans/lines. The Bank makes commercial and industrial loans on a demand basis, short-term basis, installment or revolving basis. Short-term business loans are generally due and payable within one year and should be self-liquidating during the normal course of the borrower's business cycle. Lines of credit are reaffirmed annually and generally require an annual cleanup period. Revolving credit facilities, term and installment loans are usually due and payable within five years. Availability on certain lines of credit and revolving credit facilities may be subject to a borrowing-based formula. Generally, it is the policy of the Bank to request personal guarantees of principal owners on loans made to privately-owned businesses.

***Small Business Credit Scored Loans.*** The Bank makes small business credit scored loans to businesses that generally have annual sales at the time of application of less than $3.5 million and issues VISA<sup>®</sup> credit cards. Most of these loans are in the form of revolving credit lines and, depending on the type of business, the maximum amount generally ranges from $50,000 to $250,000. The Bank also originates installment loans to finance business automobiles, trucks and equipment and can be secured by the asset financed and/or deposit accounts. Both installment loans and revolving credit commitments generally have maturities up to 60 months. Business profile reports are used in conjunction with credit reports and FICO (Fair Isaac Corporation) small business score cards for loan underwriting and decision making purposes. Credit and FICO small business risk scores enable the Bank to quickly and efficiently identify and approve loans to low-risk business applicants and decline loans to high-risk business applicants.

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***Real Estate Mortgage Loans and Home Equity Lines.*** The Bank makes residential and commercial mortgage loans and establishes home equity lines of credit. Applicants for residential mortgage loans and home equity lines will be considered for approval provided they have satisfactory credit history and collateral and the Bank believes that there is sufficient monthly income to service both the loan or line applied for and existing debt. Applicants for commercial mortgage loans will be considered for approval provided they, as well as any guarantors, have satisfactory credit history and can demonstrate, through financial statements and otherwise, the ability to repay. Commercial and residential mortgage loans are made with terms not in excess of 30 years and are generally maintained in the Bank's portfolio. The residential mortgage loans made by the Bank in recent years consist of both fixed rate loans with terms ranging from 10 to 30 years and variable rate loans that reprice in five, seven or ten years and then every year thereafter. Commercial mortgage loans generally reprice within five to ten years and home equity lines generally mature within ten years. Depending on the type of property, the Bank will generally not lend more than 80% of appraised value on residential mortgage, home equity and commercial mortgage loans. The lending limitations with regard to appraised value are more stringent for loans on co-ops and condominiums.

In processing requests for commercial mortgage loans, the Bank generally requires an environmental assessment to identify the possibility of environmental contamination. The extent of the assessment procedures varies from property to property and is based on factors such as the use and location of the subject property and whether or not the property has a suspected environmental risk based on current or past use.

***Construction Loans.*** The Bank makes loans to finance the construction of both residential and commercial properties. The maturity of such loans is generally 24 months or less and advances are made as the construction progresses. The advances can require the submission of bills and lien waivers by the contractor, verification by a Bank-approved inspector that the work has been performed, and title insurance updates to ensure that no intervening liens have been placed. Variable rate construction and land development loans are included in commercial mortgages on the consolidated balance sheets.

***Consumer Loans and Lines*.** The Bank makes auto loans, home improvement loans and other consumer loans, establishes revolving overdraft lines of credit and issues VISA<sup>®</sup> credit cards. Consumer loans are generally made on an installment basis over terms not in excess of five years. In reviewing loans and lines for approval, the Bank generally considers the borrower's ability to repay, stability of employment and residence and past credit history.

**Sources of Funds**

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

The Bank offers checking and interest-bearing deposit products. In addition to business and small business checking, the Bank has a variety of personal checking products that differ in minimum balance requirements, monthly maintenance fees, and per check charges, if any. Interest-bearing deposit products, which have a wide range of interest rates and terms, consist of negotiable order of withdrawal ("NOW") accounts, interest on lawyer accounts, escrow service accounts, rent security accounts, personal and nonpersonal money market and savings accounts, time deposits, holiday club accounts and individual retirement accounts.

The Bank relies primarily on its branch network, customer service, calling programs, lending relationships, referral sources, competitive pricing, deposit rate promotions and advertising to attract and retain local deposits. The flow of deposits is influenced by general economic conditions, changes in interest rates and competition.

**Human Capital Resources**

We aspire to provide all employees equal opportunity to realize their maximum potential with the Bank and strive to be an inclusive and diverse workplace that encourages open and honest employee comment without retaliation. We seek to attract, recruit and retain a diverse workforce, which is reflective of the communities in which we live and work. By encouraging different viewpoints, styles, experiences, cultures, ethnicities, sexual orientations and gender identities, we build a more flexible, creative and competitive corporate culture while remaining socially accountable to our local communities. We recently conducted a bank wide employee engagement survey and implemented initiatives to improve communication and enhance employee development opportunities in response to the feedback.

***Employee Profile.*** At December 31, 2022, we had approximately 303 full time equivalent employees in locations across the NY metropolitan area. This represents a decrease of 15 employees, or 4.7%, from December 31, 2021 due to factors such as branch consolidations, relocations and fewer staff in the Bank's branches.

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***Total Rewards.*** As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent. In addition to base wages, additional programs include annual equity and/or cash incentive opportunities, a Company matched 401(k) plan, a defined benefit pension plan, healthcare and insurance benefits, health savings accounts, transit benefits, flexible spending accounts, paid time off, family leave and employee assistance programs.

***Health and Safety.*** The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees. We provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health. We provide tools and resources to help them and their families experience healthier living.

In response to the COVID-19 pandemic ("pandemic"), we implemented significant operating environment and worksite changes in the best interest of our employees, clients and communities. Supporting our employees and their families during these difficult times was a priority for both management and our Board of Directors.

***Training and Development.*** We are committed to the ongoing success and development of our employees at every level to promote and foster individual and organizational effectiveness. Employees take part in recurring training that covers regulatory compliance, cybersecurity, sales and retail strategies and other programs tailored to specific job functions. Additional professional development and leadership training is offered for growth opportunities.

***Talent.*** A core tenet of maintaining our highly skilled workforce is to foster career opportunities for existing staff while actively recruiting seasoned bankers for certain roles. Hiring entry level staff is also important as we prepare for our future. These approaches create loyalty in our employee base while also bringing in new perspectives and ideas to help us grow the business, expand our product lines and benefit our customers. We believe a favorable reputation in the marketplace and our new Corporate headquarters centrally located in Melville on Long Island allows us to attract highly skilled workers. We use internal and external resources to identify the best job candidates while encouraging employee referrals for open positions.

Our performance management framework includes annual reviews, a review of goals achieved and a discussion of future goals and employee development, including training opportunities, and annual merit-based salary adjustments.

Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a high-quality, efficient provider of financial services. We believe our commitment to core values, prioritizing concern for our employees' well-being, supporting our employees' career goals, offering competitive wages and providing valuable benefits aids in the retention of our employees.

**Supervision and Regulation**

***General.*** The banking industry is highly regulated. Statutory and regulatory controls are designed primarily for the protection of depositors and the banking system, and not for the purpose of protecting shareholders. The following discussion is not intended to be a complete list of all the activities regulated by banking laws or of the impact of such laws and regulations on the Corporation and the Bank. Changes in applicable laws or regulations and their interpretation and application by regulatory agencies cannot be predicted and may have a material effect on our business and results of operations.

As a registered bank holding company, the Corporation is regulated under the Bank Holding Company Act of 1956, as amended ("BHC Act"), and subject to inspection, examination and supervision by the Federal Reserve Bank ("FRB"). In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks, performing servicing activities for subsidiaries and engaging in activities that the FRB has determined, by order or regulation, are so closely related to banking as to be a proper incident thereto under the BHC Act. The Corporation is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the Securities and Exchange Commission ("SEC"). Our common stock is listed on the Capital Market tier of the NASDAQ Stock Market ("NASDAQ") under the symbol "FLIC" and is subject to NASDAQ rules for listed companies.

As a national bank, the Bank is subject to regulation and examination by the Office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC"). Insured banks, such as the Bank, are subject to extensive regulation of many aspects of their businesses. These regulations generally relate to: (1) the nature and amount of loans that may be made by the Bank and the rates of interest that may be charged; (2) types and amounts of other investments; (3) branching; (4) anti-money laundering; (5) permissible activities; (6) reserve requirements; and (7) dealings with officers, directors and affiliates.

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The Dodd-Frank Act made extensive changes in the regulation of depository institutions and their holding companies. For example, the Dodd-Frank Act created a new Consumer Financial Protection Bureau ("CFPB") as an independent bureau of the FRB. The CFPB has assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations, a function previously assigned to principal federal banking regulators, and has authority to impose new requirements. However, institutions of less than $10 billion in assets, such as the Bank, continue to be examined for compliance with consumer protection and fair lending laws and regulations by, and subject to the enforcement authority of, their primary federal regulator, although the CFPB has limited back-up authority to examine such institutions.

***Bank Holding Company Regulation.*** The BHC Act requires the prior approval of the FRB for the acquisition by a bank holding company of 5% or more of the voting stock or substantially all of the assets of any bank or bank holding company. Also, under the BHC Act, bank holding companies are prohibited, with certain exceptions, from engaging in, or from acquiring 5% or more of the voting stock of any company engaging in activities other than (1) banking or managing or controlling banks, (2) furnishing services to or performing services for their subsidiaries, or (3) activities that the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Bank holding companies that meet certain criteria specified by the FRB may elect to be regulated as a "financial holding company" and thereby engage in a broader array of financial activities including insurance and investment banking.

***Payment of Dividends.*** The source of the Corporation's liquidity is dividends from the Bank. Prior approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year would exceed the sum of the bank's net profits for that year and its retained net profits for the preceding two calendar years, less any required transfers to surplus. Under the foregoing dividend restrictions, and while maintaining its "well capitalized" status and absent affirmative governmental approvals, during 2023 the Bank could declare dividends to the Corporation of approximately $24.5 million plus any 2023 net profits retained to the date of the dividend declaration.

In addition, the Corporation and the Bank are subject to other regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimum capital levels. The FRB is authorized to determine under certain circumstances relating to the financial condition of a bank holding company or a bank that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. FRB guidance sets forth the supervisory expectation that bank holding companies will inform and consult with FRB staff in advance of declaring a dividend that exceeds earnings for the quarter and should inform the FRB and should eliminate, defer or significantly reduce dividends if (1) net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends, (2) the prospective rate of earnings retention is not consistent with the bank holding company's capital needs and overall current and prospective financial condition, or (3) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

***Stock Repurchases.*** Current FRB regulations provide that a bank holding company that is not well capitalized or well managed, as such terms are defined in the regulations, or that is subject to any unresolved supervisory issues, is required to give the FRB prior written notice of any repurchase or redemption of its outstanding equity securities if the gross consideration for repurchase or redemption, when combined with the net consideration paid for all such repurchases or redemptions during the preceding 12 months, will be equal to 10% or more of the company's consolidated net worth. The FRB may disapprove such a repurchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice or violate a law or regulation. FRB guidance generally provides for bank holding company consultation with FRB staff prior to engaging in a repurchase or redemption of a bank holding company's stock, even if a formal written notice is not required.

***Transactions with Affiliates.*** Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies. Regulations promulgated by the FRB limit the types and amounts of these transactions (including loans due and extensions of credit from their U.S. bank subsidiaries) that may take place and generally require those transactions to be on an arm's-length basis. In general, these regulations require that any "covered transactions" between a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company be limited to 10% of the bank subsidiary's capital and surplus and, with respect to such parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary's capital and surplus. Further, loans and extensions of credit to affiliates generally are required to be secured by eligible collateral in specified amounts.

***Source of Strength Doctrine.*** FRB policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd-Frank Act codified this policy as a statutory requirement. Under this requirement, the Corporation is expected to commit resources to support the Bank, including at times when the Corporation may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

***Capital Requirements.*** As a bank holding company, the Corporation is subject to consolidated regulatory capital requirements administered by the FRB. The Bank is subject to similar capital requirements administered by the OCC.

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The Corporation and the Bank are subject to the Basel III regulatory capital standards ("Basel III") issued by the FRB and the OCC. Under the Basel III capital requirements, the Corporation and the Bank are required to maintain minimum ratios of Tier 1 capital to average assets of 4.00%, Common equity tier 1 capital to risk weighted assets of 4.50%, Tier 1 capital to risk weighted assets of 6.00% and Total capital to risk weighted assets of 8.00%. Common equity tier 1 capital, Tier 1 capital, Total capital, risk weighted assets and average assets are defined in the Basel III rules. Failure to meet the minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the financial statements of the Corporation and Bank. The Corporation and the Bank opted to exclude accumulated other comprehensive income components from Tier 1 and Total regulatory capital.

Basel III also requires the Corporation and the Bank to maintain a capital conservation buffer of 2.50% in order to avoid being subject to limitations on capital distributions, including dividend payments, and discretionary bonus payments to executive officers. The capital ratio requirements, including the capital conservation buffer, for banks with $250 billion or less in total assets are 7.00% for Common equity tier 1 capital to risk weighted assets, 8.50% for Tier 1 capital to risk weighted assets and 10.50% for Total capital to risk weighted assets.

In accordance with the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies adopted a final rule whereby financial institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9% ("qualifying community banking organizations"), are eligible to opt into a community bank leverage ratio ("CBLR") framework. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% are considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies' capital rules and will be considered to have met the well capitalized ratio requirements under the prompt corrective action ("PCA") statutes. The agencies reserved the authority to disallow the use of the CBLR framework by a financial institution or holding company, based on the risk profile of the organization. On January 1, 2020, the CBLR framework became effective, and management elected to adopt the alternative framework. 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.

On April 6, 2020, the federal banking agencies issued interim final rules pursuant to section 4012 of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), temporarily lowering the CBLR requirement to 8.00% through the end of 2020, 8.50% for calendar year 2021 and 9.00% in 2022. The CARES Act also provided that, during the same time period, if a qualifying community banking organization fell no more than 1% below the CBLR, it would have a two-quarter grace period to satisfy the CBLR.

The Corporation's capital management policy is designed to build and maintain capital levels that exceed regulatory standards and appropriately provide for growth. The leverage ratio of the Corporation and the Bank at December 31, 2022 were 9.83% and 9.81%, respectively. 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 the current expected credit loss ("CECL") methodology.

***PCA Regulations.*** The Federal Deposit Insurance Act, as amended ("FDIA"), requires that the federal banking agencies take "prompt corrective action" with respect to banks that do not meet minimum capital requirements. The FDIA sets forth the following five capital tiers for purposes of implementing the PCA regulations: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." As of December 31, 2022, the Bank was well capitalized.

***Deposit Insurance.*** The FDIC imposes an assessment on financial institutions for deposit insurance. The assessment is based on the FDIC's statistical model for estimating the institution's probability of failure over a three-year period and the institution's average total assets and average tangible equity. The FDIC periodically adjusts the deposit insurance assessment rates, which may raise or lower the cost to an institution of maintaining FDIC insurance coverage.

The FDIC may terminate an institution's deposit insurance upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. Management is not aware of any practice, condition or violation that might lead to termination of the Bank's deposit insurance.

***Safety and Soundness Standards.*** The FDIA requires the federal bank regulatory agencies to prescribe standards, through regulations or guidelines, relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, stock valuation and compensation, fees and benefits, and such other operational and managerial standards as the agencies deem appropriate. Guidelines adopted by the federal bank regulatory agencies establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits. In general, the guidelines require appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder. In addition, the agencies

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adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not satisfying one or more of the safety and soundness standards to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the PCA provisions of the FDIA. If an institution fails to comply with such an order, the agency may seek to enforce such order in judicial proceedings and to impose civil money penalties.

***Community Reinvestment Act and Fair Lending Laws.*** The Community Reinvestment Act of 1977 ("CRA") requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by providing credit to low and moderate income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings. Banking regulators take into account CRA ratings when considering approval of proposed acquisition transactions. The Bank received a "Satisfactory" CRA rating on its most recent CRA examination. The Bank and the Corporation are firmly committed to the practice of fair lending and maintaining strict adherence to all federal and state fair lending laws which prohibit discriminatory lending practices.

On May 5, 2022, the federal banking agencies released a notice of proposed rulemaking to "strengthen and modernize" the CRA regulations and the related regulatory framework.

***Federal Home Loan Bank System.*** The Bank is a member of the Federal Home Loan Bank System ("FHLB System"), which consists of 11 regional Federal Home Loan Banks (each a "FHLB"). The FHLB System provides a central credit facility primarily for member banks. As a member of the FHLBNY, the Bank is required to acquire and hold shares of capital stock in the FHLB in an amount equal to 4.5% of its borrowings from the FHLB (transaction-based stock) plus .125% of the total principal amount at the beginning of the year of the Bank's unpaid residential real estate loans, commercial real estate loans, home equity loans, CMOs and other similar obligations (membership stock). At December 31, 2022, the Bank was in compliance with the FHLB's capital stock ownership requirement.

***Financial Privacy.*** Federal regulations require the Bank to disclose its privacy policy, including identifying with whom it shares "nonpublic personal information," to its customers at the time the customer establishes a relationship with the Bank and annually thereafter. In addition, we are required to provide our customers with the ability to "opt-out" of having the Bank share their nonpublic personal information with nonaffiliated third parties before we can disclose that information, subject to certain exceptions.

The federal banking agencies adopted guidelines establishing standards for safeguarding our customer information. The guidelines describe the agencies' expectation that regulated entities create, implement and maintain an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity and the nature and scope of our activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of customer records, and protect against unauthorized access to records or information that could result in substantial harm or inconvenience to customers. Additionally, the guidance states that banks, such as the Bank, should develop and implement a response program to address security breaches involving customer information, including customer notification procedures. The Bank has developed such a program.

***Anti-Money Laundering and the USA PATRIOT Act.*** A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 ("Patriot Act") substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued a number of regulations that apply various requirements of the Patriot Act to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Certain of those regulations impose specific due diligence requirements on financial institutions that maintain correspondent or private banking relationships with non-U.S. financial institutions or persons. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal, financial and reputational consequences for the institution. The Bank and the Corporation are firmly committed to maintaining strong policies, procedures and controls to ensure compliance with anti-money laundering laws and regulations and to combat money laundering and terrorist financing. In recent months, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department, has begun to promulgate regulations to establish a national beneficial owner registry for legal entities, as mandated under the Anti-Money Laundering Act of 2020 ("AMLA") and the Corporate Transparency Act ("CTA"). The AMLA and CTA are included in the National Defense Authorization Act of 2020, passed in December of 2020. The AMLA and CTA establish a federal beneficial ownership registry, new-and-enhanced Bank Secrecy Act penalties, expands the ability to subpoena foreign banks and creates an expanded whistleblower reward program.

***Legislative Initiatives and Regulatory Reform.*** From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to change substantially the financial institution regulatory

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system. Such legislation could change banking statutes and the operating environment in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. The Corporation cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on our financial condition or results of operations. A change in statutes, regulations or regulatory policies applicable to the Corporation could have a material effect on our business.

**Availability of Reports**

The Bank maintains a website at www.fnbli.com. The Corporation's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to these reports and proxy materials filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Bank's website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. To access these reports go to the homepage of the Bank's website and click on "Investor Relations," place the cursor over "Financial Information" and click on "SEC Filings." This will bring you to a listing of the Corporation's reports. Information on our website shall not be considered a part of this Annual Report on Form 10-K. Our SEC filings are also available on the SEC's website at www.sec.gov.

**ITEM 1A. RIS** **K FACTORS**

The Corporation is exposed to a variety of risks, some of which are inherent in the banking business. The more significant of these are addressed by the Corporation's written policies and procedures. While management is responsible for identifying, assessing and managing risk, the Board of Directors is responsible for risk oversight. The Board fulfills its risk oversight responsibilities largely through its committees. The following provides information regarding material risk factors faced by the Corporation. Additional risks and uncertainties not currently known to the Corporation, or that the Corporation currently deems to be immaterial, could also have a material impact on the Corporation's business, financial condition or results of operations.

**Economic and Market Area**

***A worsening of national or local economic conditions could adversely affect our financial condition and results of operations.***

Deteriorating economic conditions could significantly affect the markets in which we do business, the value of our loans and investments, the value of real estate collateral securing our mortgage loans, the financial strength of our borrowers and our on-going operations, costs and profitability. Declines in real estate values, sales volumes and employment levels together with increased vacancy rates, particularly in the NY metropolitan area, may result in greater loan delinquencies, increases in our nonperforming, criticized and classified assets and a decline in demand for our products and services. These events may cause us to increase our credit loss reserves, incur credit losses and may adversely affect our financial condition and results of operations. The majority of our loan portfolio is secured by real estate in NY.

***A concentration of loans in our primary market area may increase the risk of higher nonperforming assets.***

Our success depends primarily on the general economic conditions in Nassau and Suffolk Counties of Long Island, and the boroughs of NYC as nearly all of our loans are to customers in these markets. Accordingly, the local economic conditions in these market areas have a significant impact on the ability of our borrowers to repay loans as well as our ability to originate new loans. A decline in real estate values in these market areas would also lower the value of the collateral securing loans on properties in these market areas.

***Inflationary pressures and rising prices may affect our results of operations and financial condition.***

Inflation rose sharply at the end of 2021 and continued rising in 2022 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2023. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly. Furthermore, a prolonged period of inflation could cause wages and other operating costs to increase. These factors could adversely affect our results of operations and financial condition.

***Competition within our market area could limit our ability to increase interest-earning assets and noninterest income.***

Competition in the banking and financial services industry is intense. In our market area, we compete with numerous commercial banks, savings institutions, mortgage brokers, credit unions, finance companies, mutual funds, fintech or e-commerce companies, insurance companies and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have substantially greater resources and lending limits than we have and have greater name recognition and market presence that benefit them in attracting business. In addition, large competitors may be able to price loans and deposits more aggressively than we do, and some have recently eliminated certain noninterest income charges such as overdraft fees. Furthermore, fintech developments such as peer-to-peer platforms,

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blockchain and other distributed ledger technologies have the potential to disrupt the financial services industry and change the way banks do business. Competitive forces may limit our ability to increase our interest-earning assets or maintain the current level of noninterest income. Our profitability depends upon our continued ability to successfully compete in our market area. For additional information see "Item 1 – Business – Competition."

***Severe weather, acts of terrorism and other external events could impact our ability to conduct business.***

Weather-related events have adversely impacted our market area, especially areas located near coastal waters and flood prone areas. Such events that may cause significant flooding and other storm-related damage may become more common events in the future. Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems and the NY metropolitan area remains central targets for potential acts of terrorism. Such events could cause significant damage, impact the stability of our facilities and result in additional expenses, impair the ability of our borrowers to repay their loans, reduce the value of collateral securing repayment of our loans, and result in the loss of revenue. While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition.

Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health emergencies or pandemics, cyber attacks or campaigns, military conflict, terrorism or other geopolitical events. Global market fluctuations may affect our business liquidity. Also, any sudden or prolonged market downturn in the U.S. or abroad, resulting from the above factors or otherwise, could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels.

**Interest Rate and Asset Quality**

***Declines in the value of investment securities, loans and BOLI may result in impairment charges and may adversely affect our financial condition and results of operations.***

There is always the risk that the Bank will be unable to realize the full carrying value of our investment securities, loans and BOLI. Fluctuations in the market value of investment securities may be caused by changes in market interest rates, lower market prices, rating downgrades and limited investor demand. Management periodically reviews the creditworthiness of all securities in the Bank's portfolio, other than those issued by the U.S. government or its agencies, and all BOLI carriers. Any significant deterioration in the creditworthiness of an issuer or carrier will be analyzed and action taken if deemed appropriate. If an investment's value is deemed other-than-temporarily impaired, the Bank must write down the fair value of the debt security which may involve a charge to earnings.

The 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 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 NYC, and a large percentage of these loans are mortgage loans secured by properties located in those areas. At December 31, 2022, residential mortgage loans, including home equity lines of credit, amounted to approximately $1.3 billion and comprised approximately 39% of loans secured by real estate. The primary source of repayment for residential mortgage loans is cash flows from individual borrowers and co-borrowers. At December 31, 2022, multifamily loans amounted to approximately $906.5 million and comprised approximately 47% of the Bank's total commercial mortgage portfolio and approximately 28% of the Bank's total loans secured by real estate. The primary source of repayment for multifamily loans is cash flows from the underlying properties, which generally involves a greater risk than residential real estate loans because of legislation and government regulations involving rent control, rent stabilization and eviction, which are outside the control of the borrower or the Bank and could impair the value of the collateral for the loans. Cash flows for both residential mortgage and multifamily loans are dependent on the strength of the local economy.

Environmental impairment of properties securing mortgage loans is always a risk. However, the Bank is not aware of any existing loans in the portfolio where there is environmental pollution originating on or near the mortgaged properties that would materially affect the value of the portfolio.

***Changes in interest rates and the shape of the yield curve could negatively impact our earnings.***

The Bank's financial condition and results of operations are subject to risk resulting from interest rate fluctuations 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.

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In a period of rising interest rates, the interest income earned on the Bank's assets may not increase as rapidly as the interest paid on its liabilities such as deposits and FHLB advances. The Bank's cost of funds is expected to increase more rapidly than interest earned on its loan and investment portfolios as its primary source of funds is deposits and FHLB advances with generally shorter maturities or repricing characteristics than the maturities and repricing characteristics of its loans and investments. At December 31, 2022, 10.6% of the Bank's loans and securities reprice or mature within one year. This makes the balance sheet more liability sensitive in the short-term. In addition, in a period of rising interest rates, noninterest-bearing deposits may convert to interest-bearing deposits further increasing the Bank's funding costs. The current economic environment, characterized by a high rate of inflation, rapidly rising interest rates and an inverted yield curve, presents significant financial challenges to the Corporation.

When interest rates decline, borrowers may refinance higher rate loans to lower rates causing prepayments on mortgage loans and mortgage-backed securities to be elevated. Under those circumstances, the Bank may not be able to reinvest the resulting cash flows in new interest-earning assets with rates as favorable as those that prepaid. In addition, subject to the floors contained in many of the Bank's loan agreements, the Bank's loans at variable interest rates may adjust to lower rates at their reset dates. While lower rates may reduce the Bank's cost of funds on non-maturity deposits, certificates of deposit ("CDs") and FHLB advances, the cost savings could be somewhat constrained because decreases in the Bank's funding rates may occur more slowly than decreases in yields earned on the Bank's assets and a significant portion of the Bank's funding is currently derived from noninterest-bearing checking deposits and capital. In addition, in a prolonged low interest rate environment, the Bank's deposit products could reach an effective floor rate close to zero which would not allow for any further reduction in its cost of funds.

Changes in interest rates also affect the value of our interest-earning assets and in particular our securities and loan portfolios. Generally, the value of securities fluctuates inversely with changes in interest rates. At December 31, 2022, our AFS securities portfolio totaled $673.4 million. Unrealized gains and losses on AFS securities are reported as a separate component of stockholders' equity. Therefore, decreases in the fair value of AFS securities resulting from increases in interest rates could have an adverse effect on stockholders' equity.

In addition to the risks arising from changes in interest rates, the shape of the yield curve could create downward pressure on net interest income and net interest margin. In the current flat or inverted yield curve environment, asset growth could negatively impact the Bank's earnings and/or profitability metrics. As a result, the Bank may be unable to increase earnings, or maintain the current level of earnings, until the yield curve steepens.

**Regulatory Matters**

***Management's estimate of the Allowance for Credit Losses ("ACL" or "allowance") may not be sufficient and could result in increased provisions and adversely impact our financial condition and results of operations.***

The Bank maintains an ACL in an amount believed to be adequate to absorb current expected lifetime credit losses in its loan portfolio. The maintenance of the ACL is governed by a board committee approved ACL policy. In arriving at the ACL, an individual evaluation is performed on each loan with disparate risk characteristics or information suggesting that the Bank will be unable to collect all the principal and interest due according to contractual terms. In addition, current expected lifetime credit losses for all other loans in the Bank's portfolio are determined on a pooled basis using the CECL model and taking into account historical loss experience and numerous quantitative and qualitative factors ("Q-factors"), including current and forecasted economic conditions measured by such things as gross domestic product ("GDP"), unemployment levels, vacancies, changes in the value of underlying collateral, average growth in loan pools, concentrations of credit, changes in lending policies and procedures, experience, ability and depth of lending staff, changes in quality of the loan review function, environmental risks and loan risk ratings. Because estimating the ACL is highly subjective in nature and involves a variety of estimates and assumptions that are inherently uncertain, there is the risk that management's estimate may not accurately capture probable lifetime losses in the loan portfolio. The Bank's allowance may need to be increased based on additional information that comes to light after the estimate is made, changes in circumstances or a recommendation by bank regulators based on their review of the Bank's loan portfolio. The impact of one or more of these factors on the Bank's allowance could result in the need for a significant increase in the Bank's provision for credit losses and have a material adverse impact on the Bank's financial condition and results of operations.

***The Bank is subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.***

The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose non-discriminatory lending requirements on financial institutions. With respect to the Bank, the FRB, U.S. Department of Justice and other federal and state agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution's performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and restrictions on expansion. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on the Bank's business, financial condition and results of operations.

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***Changes in laws, government regulation and supervisory guidance could have a significant negative impact on our financial condition and results of operations.***

The Corporation and the Bank are subject to regulation, supervision and examination by, among others, the FRB, OCC and FDIC. The FDIC also insures the Bank's deposits. Regulation and supervision govern the activities in which a bank and its holding company may engage and are intended primarily for the protection of depositors. Regulatory requirements affect virtually all aspects of the Corporation's and the Bank's business, including investment and lending practices, deposit offerings and capital levels. The regulators have extensive discretion in connection with their supervisory and enforcement activities, including imposing restrictions on Bank operations and expansion plans, imposing deposit insurance premiums and other assessments, setting required levels for the ACL, capital and liquidity, and imposing restrictions on the ability to pay cash dividends and other capital distributions to stockholders. Changes in laws, regulations and supervisory guidance, or the Corporation's and the Bank's compliance with these laws and regulations as judged by the regulators, could have a significant negative impact on the Corporation's financial condition and results of operations.

***Increasing scrutiny and evolving expectations from customers, regulators, investors and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.***

Companies are facing increasing scrutiny from customers, regulators, investors and other stakeholders related to their environmental, social and governance ("ESG") practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or stakeholder expectations could negatively impact our reputation, ability to do business with certain partners and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory or voluntary reporting, diligence and disclosure.

**Business Issues**

***The Bank and Corporation may not have sufficient funds or funding sources to meet liquidity demands.***

Liquidity risk is the risk that the Bank will not have sufficient funds to accommodate loan growth, meet deposit outflows or make contractual payments on borrowing arrangements. The Bank encounters significant competition for deposits in its market area from larger banks, various community banks, credit unions and other financial services organizations. This competition for deposits, particularly in the current rapidly rising interest rate environment, could result in significant outflows and can exert upward pressure on the Bank's funding costs. In addition, the Bank's concentration of deposits with certain customers could limit our ability to favorably reprice deposits and grow net interest income, net interest margin and earnings.

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 and maturities and monthly payments on its investment securities and loan portfolios.

The Bank is a member of the FRB of NY ("FRBNY") and the FHLBNY. In addition to customer deposits, the Bank's primary external sources of liquidity are secured borrowings from the FHLBNY and FRBNY. In addition, the Corporation may raise funds through its Dividend Reinvestment and Stock Purchase Plan ("DRIP"). However, the Bank's FRBNY membership and FHLBNY membership 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. The Bank's borrowing capacity may be adjusted by the FRBNY or the FHLBNY and may take into account factors such as the Bank's tangible common equity ratio, collateral margins required by the lender or other factors. A possible future downgrade of securities and loans pledged as collateral could also impact the amount of available funding.

The Corporation relies on dividends from the Bank to fund its operating expenses, dividends to shareholders and repurchases of common stock. The OCC restricts the dividends the Bank may pay to the Corporation to its retained net profits for the preceding two calendar years plus current year retained net profits. These restrictions may limit the Corporation's ability to pay dividends or repurchase shares. In addition, the Corporation may not be successful in raising funds from the issuance of its stock under the DRIP or otherwise.

***A decline in the Corporation's market capitalization could negatively impact the price, trading volume and liquidity of our common stock.***

The Corporation's common stock is included in the Russell 3000 and Russell 2000 Indexes, which are reconstituted annually. Upon reconstitution in May 2022, the median market capitalization of the Russell 2000 index was $1.1 billion, the capitalization of the largest company in the index was $6.4 billion and the capitalization of the smallest company in the index was $240.1 million. The Corporation's market capitalization was approximately $404 million on December 31, 2022. If the Corporation's market capitalization falls below the minimum necessary to be included in the indexes at any future reconstitution date, the price, trading volume and liquidity of its common stock may be negatively impacted.

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***The Bank's internal controls and those of its third-party service providers ("TPSPs") may be ineffective or circumvented, resulting in significant financial loss, adverse action by governmental bodies and damaged reputation.***

The Corporation relies on its system of internal controls and the internal controls of its TPSPs to ensure that transactions are captured, recorded, processed and reported properly; confidential customer information is safeguarded; and fraud by employees and persons outside the Corporation is detected and prevented. The Corporation's internal controls and/or those of its TPSPs may prove to be ineffective or employees of the Corporation and/or its TPSPs may fail to comply with or override the controls, either of which could result in significant financial loss to the Corporation, adverse action by bank regulatory authorities or the SEC and damage to the Corporation's reputation.

***The Bank's inability to keep pace with technological advances could negatively impact our business, financial condition and results of operations.***

The delivery of financial products and services has increasingly become technology-driven. The Bank's ability to competitively meet the needs of its customers in a cost-efficient manner is dependent on its ability to keep pace with technological advances and to invest in new technology as it becomes available. The ability to keep pace with technological change is important, and failure to do so could have a material adverse impact on the Corporation's business, financial condition and results of operations.

***The inability to attract, motivate or retain qualified key personnel could negatively impact our performance.***

The Corporation's future success depends in part on the continued service of its executive officers and other key members of management and its staff, as well as its ability to continue to attract, motivate and retain highly qualified employees. The loss of services of key personnel and our inability to timely recruit or promote qualified replacements could have an adverse effect on the Bank's business, operating results and financial condition. Their skills, knowledge of the Bank's market and years of industry experience may be difficult to replace.

**Security** 

***System failures, interruptions and security breaches could negatively impact our customers, reputation and results of operations.***

The Bank outsources most of its data processing to TPSPs. If TPSPs encounter difficulties, or if the Bank has difficulty communicating with them, the Bank's ability to adequately process and account for customer transactions could be affected, and the Bank's business operations could be adversely impacted. Threats to information security also exist in the processing of customer information through TPSPs. The Bank's website and online banking products have been the target of cyber attacks in the past. While the Bank and its TPSPs believe they have successfully blocked attempts to infiltrate the Bank's systems, there is always the possibility that successful attacks have not yet been identified and future attacks may not be blocked. A significant cybersecurity incident may be determined to be material insider information and would prohibit corporate insiders from trading in the Corporation's stock until appropriate public disclosures are made.

Opportunistic cyberattacks and malicious financial crimes have been growing globally in number and complexity and increase the cost of technology, compliance and labor. The Bank makes use of logon and user access controls, multifactor and out of band authentication, transaction limits, firewalls, antivirus software, intrusion protection monitoring and vulnerability scans and conducts independent penetration testing and cybersecurity audits. Bank communications encourage employee and executive awareness of cybersecurity trends.

These precautions may not protect our systems from all compromises or breaches of security and there can be no assurance that such events will not occur or that they will be adequately addressed if they do. The Bank carries a cyber liability insurance policy to mitigate the amount of any financial loss. However, the occurrence of any systems failure, interruption or breach of security could damage the Bank's reputation and result in a loss of customers and business, could subject the Bank to additional regulatory scrutiny or could expose the Bank to civil litigation and possible financial liability beyond any insurance coverage. Any of these occurrences could have a material adverse effect on the Corporation's financial condition and results of operations.

**ITEM 1B. UNRES** **OLVED STAFF COMMENTS**

None.

**ITEM 2. PROPE** **RTIES**

The Corporation neither owns nor leases any real estate. Office facilities of the Corporation are located at 275 Broadhollow Road, Melville, NY and the Bank's main branch is located at 10 Glen Head Road, Glen Head, NY in office space leased by the Bank.

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As of December 31, 2022, the Bank owns 20 buildings and leases 31 other facilities, all of which are in Nassau and Suffolk Counties of Long Island and the NYC boroughs of Queens, Brooklyn and Manhattan. Included in the leased facilities is one branch location that was closed in 2021 and two closed in 2022 for which the Bank continues to be obligated to make lease payments. Two owned buildings were transferred to held-for-sale in the fourth quarter of 2022. The Corporation believes that the remaining physical facilities of the Bank are suitable and adequate at present and are being fully utilized.

**ITEM 3. LEG** **AL 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 4. MINE SAF** **ETY DISCLOSURES**

Not applicable.

**PA** **RT II**

**ITEM 5. MAR** **KET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

The Corporation's common stock trades on the NASDAQ Capital Market tier of the NASDAQ Stock Market under the symbol "FLIC." At December 31, 2022, there were 785 stockholders of record of the Corporation's common stock. The number of stockholders of record includes banks and brokers who act as nominees, each of whom may represent more than one stockholder. The Corporation declared cash dividends of $.82 per share for the year ended December 31, 2022, compared to cash dividends declared in 2021 of $.78 per share. The timing and amount of future dividends are at the discretion of the Board of Directors and will depend upon a number of economic and company-specific factors.

**Performance Graph**

The following performance graph compares the Corporation's total stockholder return with the NASDAQ U.S. Benchmark and NASDAQ U.S. Benchmark Banks Indexes over a five-year measurement period assuming $100 invested on January 1, 2018, and dividends reinvested in the Corporation's stock.

![Chart, line chart Description automatically generated](flic-20221231x10kg001.jpg)

 **‎** 

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**Issuer Purchase of Equity Securities**

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 Corporation's purchases under the stock repurchase program in the fourth quarter of 2022 are set forth in the table that follows.

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | 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) |
| October 1 - October 31, 2022 |  |  |  | $18964542 |
| November 1 - November 30, 2022 | 200545 | $18.3315 | 200545 | $15288258 |
| December 1 - December 31, 2022 | 16847 | $19.2248 | 16847 | $14964378 |
| Total | 217392 | $18.4007 | 217392 |  |

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(1) The Corporation's Board of Directors approved a $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 6. RESERVED**

**ITEM 7. MANAG** **EMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

The following selected financial data should be read in conjunction with the accompanying consolidated financial statements.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(dollars in thousands, except per share data)* | 2022 | 2021 | 2020 | 2019 | 2018 |
| **INCOME STATEMENT DATA:** |  |  |  |  |  |
| &nbsp;&nbsp;Interest Income | $134210 | $122959 | $131216 | $143850 | $138237 |
| &nbsp;&nbsp;Interest Expense | 18497 | 16152 | 29188 | 43681 | 35730 |
| &nbsp;&nbsp;Net Interest Income  | 115713 | 106807 | 102028 | 100169 | 102507 |
| &nbsp;&nbsp;Provision (Credit) for Credit Losses | 2331 | (2573) | 3006 | 33 | (1755) |
| &nbsp;&nbsp;Net Income  | 46932 | 43089 | 41203 | 41555 | 41573 |
| **PER SHARE DATA:** |  |  |  |  |  |
| &nbsp;&nbsp;Basic Earnings | $2.05 | $1.82 | $1.73 | $1.68 | $1.64 |
| &nbsp;&nbsp;Diluted Earnings  | 2.04 | 1.81 | 1.72 | 1.67 | 1.63 |
| &nbsp;&nbsp;Cash Dividends Declared  | .82 | .78 | .74 | .70 | .64 |
| &nbsp;&nbsp;Dividend Payout Ratio  | 40.20% | 43.09% | 43.02% | 41.92% | 39.26% |
| &nbsp;&nbsp;Book Value  | $16.24 | $17.81 | $17.11 | $16.26 | $15.27 |
| **BALANCE SHEET DATA AT YEAR END:** |  |  |  |  |  |
| &nbsp;&nbsp;Total Assets  | $4281511 | $4068789 | $4069141 | $4097843 | $4241060 |
| &nbsp;&nbsp;Loans | 3311733 | 3105036 | 3033454 | 3188249 | 3263399 |
| &nbsp;&nbsp;Allowance for Credit Losses | 31432 | 29831 | 33037 | 29289 | 30838 |
| &nbsp;&nbsp;Deposits | 3464634 | 3315245 | 3321588 | 3144016 | 3084972 |
| &nbsp;&nbsp;Borrowed Funds | 411000 | 311322 | 306097 | 528182 | 750950 |
| &nbsp;&nbsp;Stockholders' Equity  | 364536 | 413812 | 407118 | 389108 | 388187 |
| **AVERAGE BALANCE SHEET DATA:** |  |  |  |  |  |
| &nbsp;&nbsp;Total Assets  | $4247052 | $4151577 | $4140867 | $4194355 | $4177341 |
| &nbsp;&nbsp;Loans | 3276589 | 2976061 | 3110512 | 3217530 | 3177519 |
| &nbsp;&nbsp;Allowance for Credit Losses | 30604 | 31300 | 33180 | 30080 | 34960 |
| &nbsp;&nbsp;Deposits | 3536709 | 3425976 | 3257317 | 3276699 | 3168348 |
| &nbsp;&nbsp;Borrowed Funds | 289584 | 281191 | 457939 | 494785 | 623587 |
| &nbsp;&nbsp;Stockholders' Equity  | 386839 | 416885 | 393662 | 391613 | 374876 |
| **FINANCIAL RATIOS:**  |  |  |  |  |  |
| &nbsp;&nbsp;Return on Average Assets (ROA) | 1.11% | 1.04% | 1.00% | .99% | 1.00% |
| &nbsp;&nbsp;Return on Average Equity (ROE) | 12.13% | 10.34% | 10.47% | 10.61% | 11.09% |
| &nbsp;&nbsp;Average Equity to Average Assets  | 9.11% | 10.04% | 9.51% | 9.34% | 8.97% |

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**Overview – 2022 Versus 2021**

***Analysis of 2022 Earnings***. Net income and diluted earnings per share ("EPS") for 2022 were $46.9 million and $2.04, respectively. Dividends per share increased 5.1% from $.78 for 2021 to $.82 for 2022. ROA and ROE for 2022 were 1.11% and 12.13%, respectively, compared to 1.04% and 10.34%, respectively, for 2021.

Net income for 2022 was $46.9 million, an increase of $3.8 million, or 8.9%, as compared to 2021. The increase is primarily due to growth in net interest income of $8.9 million and a decrease in noninterest expense of $1.1 million. These items were partially offset by increases in the provision for credit losses of $4.9 million and income tax expense of $1.1 million.

The increase in net interest income reflects growth in interest income on loans of $10.1 million due to higher average loans outstanding of $300.5 million in 2022 offset by $2.3 million of growth in interest expense on total interest-bearing liabilities resulting from increases in short-term rates. Also contributing to the increase was a favorable shift in the mix of funding as an increase in average checking deposits of $96.1 million outpaced the growth in average interest-bearing liabilities of $23.0 million resulting in average checking deposits comprising a larger portion of total funding. Net interest margin for 2022 was 2.89% versus 2.74% for 2021. Net interest margin was 2.74% for the fourth quarter of 2022 and 2.66% for the month of December 2022 and will likely be significantly lower than the December number in 2023.

In 2022, we originated $656 million in mortgage loans at a weighted average rate of approximately 3.69% which includes $452 million and $204 million of commercial and residential mortgages at weighted average rates of 3.66% and 3.74%, respectively. The Bank's commercial and industrial loan portfolio grew $18.1 million to $108 million in 2022 and has a current weighted average rate of 6.34%. The Bank expects overall loan growth to slow in 2023 given the increase in interest rates, concerns for a possible recession and an inverted yield curve.

The provision for credit losses increased $4.9 million when comparing the full year periods from a credit of $2.6 million in 2021 to a charge of $2.3 million in 2022. The provision for the current year was mainly due to an increase in outstanding loans, deteriorating economic conditions and low net chargeoffs, partially offset by lower historical loss rates.

Total noninterest income remained flat from the prior year although several line items had ups and downs. BOLI and merchant card services revenues increased by $618,000 and $410,000, respectively. The Bank received a final transition payment of $477,000 for the conversion of the Bank's retail broker and advisory accounts. Service charges on deposit accounts increased $232,000. These increases were offset by a decrease in investment services income of $693,000 as the shift to an outside service provider resulted in a revenue sharing agreement and less assets under management. Also, there were no net gains on sales of securities in 2022 down from $1.1 million in 2021. Noninterest income is projected to be $2.5 million per quarter in 2023.

The decrease in noninterest expense of $1.1 million reflects the reduction in debt extinguishment costs from 2021. The Bank did have increases in noninterest expense during 2022. Salaries and benefits expense increased $1.3 million due to the hiring of seasoned banking professionals, competitive mid-year salary increases in 2022 and higher stock-based compensation expense. The Bank had a net loss of $553,000 on the disposition of premises and fixed assets relating to the Bank's former buildings in Glen Head and costs relating to the branding initiative in the Bank's branches of $531,000. Other items contributing to increases in noninterest expense include the cost of new branch locations on the east end of Long Island, two branch relocations, new corporate office space in Melville, NY, higher marketing expense and increases in other costs of operating the business. All increases in expenses were offset by branch optimization and back-office consolidation initiatives. Noninterest expense is projected to be between $16.5 million and $17 million per quarter in 2023.

Income tax expense increased $1.1 million and the effective tax rate (income tax expense as a percentage of pre-tax book income) increased from 19.2% to 19.4% when comparing the full year periods. The increase in the effective tax rate is mainly due to a decrease in the percentage of pre-tax income derived from tax-exempt sources. The increase in income tax expense is due to higher pre-tax earnings in the current year as compared to the prior year and the higher effective tax rate. We expect the effective tax rate in 2023 to be approximately 18.5%.

***Asset Quality.*** The Bank's ACL to total loans ("reserve coverage ratio") was .95% at December 31, 2022, compared to .96% at December 31, 2021. The decrease in the reserve coverage ratio was mainly due to improvements in historical loss rates, partially offset by current and forecasted economic conditions. Gross loan chargeoffs and recoveries were $884,000 and $154,000, respectively, for the year ended December 31, 2022.

The Bank had no nonaccrual loans at December 31, 2022, compared to $1.2 million, or .04% of total loans outstanding, at December 31, 2021. Troubled debt restructurings negotiated prior to 2022 amounted to $480,000, or .01% of total loans outstanding, at December 31, 2022, compared to $554,000, or .02%, at December 31, 2021. All such restucturings are performing in accordance with their modified terms at December 31, 2022. Loans past due 30 through 89 days amounted to $750,000, or .02% of total loans outstanding, at December 31, 2022, compared to $460,000, or .01%, at December 31, 2021.

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The Bank's mortgage securities are backed by mortgages underwritten on conventional terms, with 11% of these securities being full faith and credit obligations of the U.S. government and the balance being obligations of U.S. government sponsored entities. The remainder of the Bank's securities portfolio principally consists of high quality, general obligation municipal securities rated AA or better by major rating agencies and investment grade corporate bonds of large U.S. financial institutions. In selecting securities for purchase, the Bank uses credit agency ratings for screening purposes only and then performs its own credit analysis. On an ongoing basis, the Bank periodically assesses the credit strength of the securities in its portfolio and makes decisions to hold or sell based on such assessments.

***Key Strategic Initiatives and Challenges We Face.*** We continue focusing on the Corporation's strategic initiatives to expand primarily our commercial banking relationships and business, improve technology with software and hardware upgrades, enhance digital product offerings and optimize our branch network across a larger geography. By developing our branding efforts, including increasing our website and social media presence, we enhance name recognition including the promotion of FirstInvestments. Recruitment of experienced banking professionals support these initiatives. We also continue to track regulatory developments relative to cybersecurity, environmental, social and governance practices and expectations, and we are cognizant of our corporate responsibilities.

The current economic environment, characterized by a high rate of inflation, rapidly rising interest rates and an inverted yield curve presents significant financial challenges for the Corporation. While the yield on interest-earning assets grew faster during 2022 than the cost of interest-bearing liabilities, current funding costs are rising significantly faster than asset yields as depositors increasingly seek higher returns due to rising market interest rates. During the fourth quarter of 2022 increases in interest expense substantially outpaced the growth in interest income due to the Corporation's liability sensitive balance sheet. Our net interest margin decreased to 2.74% for the last three months of 2022, 23 basis points ("bps") lower than the prior two quarters.

**Overview – 2021 Versus 2020**

***Analysis of 2021 Earnings***. Net income and diluted EPS for 2021 were $43.1 million and $1.81, respectively. Dividends per share increased 5.4% from $.74 for 2020 to $.78 for 2021. ROA and ROE for 2021 were 1.04% and 10.34%, respectively, compared to 1.00% and 10.47%, respectively, for 2020.

Net income for 2021 was $43.1 million, an increase of $1.9 million, or 4.6%, as compared to 2020. The increase was mainly due to growth in net interest income of $4.8 million and an improvement in the provision for credit losses of $5.6 million. These items were partially offset by increases in noninterest expense, net of debt extinguishment costs, of $6.6 million and income tax expense of $1.9 million.

The increase in net interest income reflected a favorable shift in the mix of funding due to an increase in average noninterest-bearing checking deposits of $242.5 million and a decline in average interest-bearing liabilities of $250.6 million. The increase was also attributable to higher income from SBA Paycheck Protection Program ("PPP") loans of $2.9 million and prepayment and late fees of $1.1 million.

Partially offsetting the favorable impact of the above items on net interest income was a decline in the average balance of loans of $134.5 million. The average yield on interest-earning assets declined 22 bps from 3.37% for 2020 to 3.15% for 2021. The negative impact of declining asset yields on net interest income was more than offset through reductions in non-maturity and time deposit rates. The average cost of interest-bearing liabilities declined 44 bps to .68% for 2021 helped by the repayment of a maturing interest rate swap in May 2021 that lowered the cost of funds in 2021 by $2.5 million. Net interest margin for 2021 of 2.74% increased 10 bps as compared to 2020. Income from PPP loans and prepayment and late fees improved net interest margin by 7 bps and 2 bps, respectively.

PPP income for 2021 was $6.5 million driven by an average balance of $108.8 million and a weighted average yield of 6.0%. As of December 31, 2021, the Bank had $30.5 million of outstanding PPP loans with unearned fees of $978,000.

Although low loan demand throughout most of the first half of 2021 put pressure on the pipeline and originations, the Bank successfully deployed excess cash during the second half of 2021 into loan originations of $459 million. The expansion of our lending teams helped grow commercial mortgages by $315.5 million during in 2021, which comprised 58.2% of total mortgages compared to 50.9% in 2020. While commercial and industrial lines of credit increased, line utilization remained historically low contributing to a decrease in commercial and industrial loans outstanding.

The provision for credit losses decreased $5.6 million when comparing the full year periods from a provision of $3.0 million in 2020 to a credit of $2.6 million in 2021. The credit for 2021 was mainly due to improvements in economic conditions, asset quality and other portfolio metrics, partially offset by an increase in outstanding commercial mortgage loans and net chargeoffs of $633,000. The net chargeoffs were mainly the result of discounted sales of eight mortgage loans with varying concerns.

Noninterest income, net of gains on sales of securities, decreased $60,000 in 2021 as compared to 2020. The decrease was mainly due to a decline in investment services income of $958,000 as the shift to an outside service provider resulted in less assets under management, and a transition payment received in 2020 of $370,000 for the conversion of the Bank's retail broker and advisory accounts.

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These amounts were partially offset by increases in the non-service cost components of the Bank's defined benefit pension plan of $550,000 and fees from debit and credit cards of $615,000.

The increase in noninterest expense in 2021, net of debt extinguishment costs, of $6.6 million included charges of $3.2 million related to closing eight branches under our branch optimization strategy. The $3.2 million included severance-related salary and benefits expense of $123,000 and occupancy and equipment expense related to rent, depreciation and asset disposals of $3.1 million. The remaining increase in noninterest expense was related to normal increases and changes in operating expenses.

Income tax expense increased $1.9 million in 2021 due to growth in pre-tax earnings and an increase in the effective tax rate to 19.2% for 2021 from 16.8% for 2020. The increase in the effective tax rate was due to a decrease in the percentage of pre-tax income derived from tax-exempt municipal securities and BOLI in 2021 and a change in NY State tax law to implement a capital tax in the second quarter of 2021.

***Asset Quality.*** The Bank's reserve coverage ratio was .96% at December 31, 2021, compared to 1.09% at December 31, 2020. The decrease in the reserve coverage ratio was mainly due to improvements in economic conditions, asset quality and other portfolio metrics. Gross loan chargeoffs and recoveries were $1.2 million and $573,000, respectively, for the year ended December 31, 2021.

Nonaccrual loans amounted to $1.2 million, or .04% of total loans outstanding, at December 31, 2021, compared to $1.1 million, or .04%, at December 31, 2020. Modifications to borrowers experiencing financial difficulty amounted to $554,000, or .02% of total loans outstanding, at December 31, 2021, compared to $1.3 million, or .04%, at December 31, 2020. All such modifications were performing in accordance with their modified terms at December 31, 2021. Loans past due 30 through 89 days amounted to $460,000, or .01% of total loans outstanding, at December 31, 2021, compared to $1.4 million, or .05%, at December 31, 2020.

**Application of Critical Accounting Policies** 

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 judgments 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 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 ten 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; and (10) municipal loans. An additional pool was used for SBA PPP loans while those loans were outstanding. The vintage method is applied

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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 Lifetime 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 risks in the portfolio. The Bank's ACL allocable to its loan pools results primarily from these Q-factor adjustments to historical loss experience with the largest sensitivity of the ACL and provision arising from loan growth, loan concentrations and economic forecasts of unemployment, GDP and vacancies. Because of the nature of the Q-factors and the difficulty in assessing their impact, management's resulting estimate of losses may not accurately reflect lifetime losses in the portfolio.

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

‎

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**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. The average balances of loans include nonaccrual loans. The average balances of investment securities include unrealized gains and losses on AFS securities in the 2020 and 2021 periods and exclude such amounts in the 2022 period. Unrealized gains and losses were immaterial in 2021 and 2020.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 |
| *(dollars in thousands)* | Average<br>‎Balance | Interest/<br>‎Dividends | Average<br>‎Rate | Average<br>‎Balance | Interest/<br>‎Dividends | Average<br>‎Rate | Average<br>‎Balance | Interest/<br>‎Dividends | Average<br>‎Rate |
| **Assets:** |  |  |  |  |  |  |  |  |  |
| Interest-earning bank balances | $35733  | $674  | 1.89% | $200063  | $261  | .13% | $135475  | $212  | .16% |
| Investment securities: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Taxable | 442758  | 9121  | 2.06  | 455532  | 7901  | 1.73  | 346956  | 11661  | 3.36  |
| &nbsp;&nbsp;Nontaxable (1) | 318836  | 10206  | 3.20  | 345688  | 10799  | 3.12  | 373500  | 12470  | 3.34  |
| Loans (1) | 3276589  | 116357  | 3.55  | 2976061  | 106271  | 3.57  | 3110512  | 109498  | 3.52  |
| Total interest-earning assets | 4073916  | 136358  | 3.35  | 3977344  | 125232  | 3.15  | 3966443  | 133841  | 3.37  |
| Allowance for credit losses | (30604) |  |  | (31300) |  |  | (33180) |  |  |
| Net interest-earning assets | 4043312  |  |  | 3946044  |  |  | 3933263  |  |  |
| Cash and due from banks | 33471  |  |  | 33808  |  |  | 33092  |  |  |
| Premises and equipment, net | 37376  |  |  | 38700  |  |  | 39403  |  |  |
| Other assets | 132893  |  |  | 133025  |  |  | 135109  |  |  |
|  | $4247052  |  |  | $4151577  |  |  | $4140867  |  |  |
| **Liabilities and Stockholders'**  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;**Equity:** |  |  |  |  |  |  |  |  |  |
| Savings, NOW & money  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;market deposits | $1728897  | 7180  | .42  | $1782789  | 4414  | .25  | $1683290  | 9097  | .54  |
| Time deposits | 368922  | 5296  | 1.44  | 300374  | 5712  | 1.90  | 473720  | 10977  | 2.32  |
| Total interest-bearing deposits | 2097819  | 12476 | .59  | 2083163  | 10126  | .49  | 2157010  | 20074  | .93  |
| Short-term borrowings | 57119  | 1207  | 2.11  | 54416  | 1427  | 2.62  | 75805  | 1574  | 2.08  |
| Long-term debt | 232465  | 4814  | 2.07  | 226775  | 4599  | 2.03  | 382134  | 7540  | 1.97  |
| Total interest-bearing liabilities | 2387403  | 18497 | .77  | 2364354  | 16152  | .68  | 2614949  | 29188  | 1.12  |
| Checking deposits | 1438890  |  |  | 1342813  |  |  | 1100307  |  |  |
| Other liabilities | 33920  |  |  | 27525  |  |  | 31949  |  |  |
|  | 3860213  |  |  | 3734692  |  |  | 3747205  |  |  |
| Stockholders' equity | 386839  |  |  | 416885  |  |  | 393662  |  |  |
|  | $4247052  |  |  | $4151577  |  |  | $4140867  |  |  |
| Net interest income (1) |  | $117861  |  |  | $109080  |  |  | $104653  |  |
| Net interest spread (1) |  |  | 2.58% |  |  | 2.47% |  |  | 2.25% |
| Net interest margin (1) |  |  | 2.89% |  |  | 2.74% |  |  | 2.64% |

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

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***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 a combined impact of volume and rate have been allocated to the changes due to volume and the changes due to rate.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | 2022 versus 2021 | 2022 versus 2021 | 2022 versus 2021 | 2021 versus 2020 | 2021 versus 2020 | 2021 versus 2020 |
|  | Increase (decrease) due to changes in: | Increase (decrease) due to changes in: | Increase (decrease) due to changes in: | Increase (decrease) due to changes in: | Increase (decrease) due to changes in: | Increase (decrease) due to changes in: |
| *(in thousands)* | Volume | Rate | Net<br>‎Change | Volume | Rate | Net<br>‎Change |
| **Interest Income:** |  |  |  |  |  |  |
| Interest-earning bank balances | $(381) | $794 | $413 | $91 | $(42) | $49 |
| Investment securities: |  |  |  |  |  |  |
| &nbsp;&nbsp;Taxable | (244) | 1464 | 1220 | 2961 | (6721) | (3760) |
| &nbsp;&nbsp;Nontaxable | (855) | 262 | (593) | (887) | (784) | (1671) |
| Loans | 10707 | (621) | 10086 | (4767) | 1540 | (3227) |
| Total interest income | 9227 | 1899 | 11126 | (2602) | (6007) | (8609) |
| **Interest Expense:** |  |  |  |  |  |  |
| Savings, NOW & money market deposits | (98) | 2864 | 2766 | 498 | (5181) | (4683) |
| Time deposits | 1140 | (1556) | (416) | (3526) | (1739) | (5265) |
| Short-term borrowings | 67 | (287) | (220) | (503) | 356 | (147) |
| Long-term debt | 120 | 95 | 215 | (3152) | 211 | (2941) |
| Total interest expense | 1229 | 1116 | 2345 | (6683) | (6353) | (13036) |
| Increase (decrease) in net interest income | $7998 | $783 | $8781 | $4081 | $346 | $4427 |

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**Net Interest Income – 2022 Versus 2021**

Net interest income on a tax-equivalent basis was $117.9 million in 2022, an increase of $8.8 million, or 8.1%, from $109.1 million in 2021. The increase in net interest income reflects growth in interest income on loans of $10.1 million due to higher average loans outstanding of $300.5 million, or 10.1%, to $3.3 billion in 2022, offset by $2.3 million of growth in interest expense on total interest-bearing liabilities. Also contributing to the increase was a favorable shift in the mix of funding as an increase in average checking deposits of $96.1 million, or 7.2%, outpaced the growth in average interest-bearing liabilities of $23.0 million, or 1.0%, resulting in average checking deposits comprising a larger portion of total funding.

In 2022, we originated $656 million in mortgage loans at a weighted average rate of approximately 3.69% which includes $452 million and $204 million of commercial and residential mortgage loans at weighted average rates of 3.66% and 3.74%, respectively. The Bank's commercial and industrial loan portfolio grew $18.1 million, or 20%, to $108 million in 2022 and has a current weighted average rate of 6.34%.

**Net Interest Income – 2021 Versus 2020**

Net interest income on a tax-equivalent basis was $109.1 million in 2021, an increase of $4.4 million, or 4.2%, from $104.7 million in 2020. The increase in net interest income reflected a favorable shift in the mix of funding due to an increase in average noninterest-bearing checking deposits of $242.5 million, or 22.0%, and a decline in average interest-bearing liabilities of $250.6 million, or 9.6%. The increase was also attributable to higher income from SBA PPP loans of $2.9 million and prepayment and late fees of $1.1 million.

Partially offsetting the favorable impact of the above items on net interest income was a decline in the average balance of loans of $134.5 million, or 4.3%. The average yield on interest-earning assets declined 22 bps from 3.37% for 2020 to 3.15% for 2021. The negative impact of declining asset yields on net interest income was more than offset through reductions in non-maturity and time deposit rates. The average cost of interest-bearing liabilities declined 44 bps from 1.12% for 2020 to .68% for 2021 helped by the repayment of a maturing interest rate swap in May 2021 that lowered the cost of funds in 2021 by $2.5 million. Net interest margin for 2021 of 2.74% increased 10 bps as compared to 2.64% for 2020. Income from PPP loans and prepayment and late fees improved net interest margin by 7 bps and 2 bps, respectively.

PPP income for 2021 was $6.5 million driven by an average balance of $108.8 million and a weighted average yield of 6.0%. As of December 31, 2021, the Bank had $30.5 million of outstanding PPP loans with unearned fees of $978,000.

**Noninterest Income**

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

Total noninterest income in 2022 of $12.4 million remained flat from the prior year although several line items had ups and downs. BOLI and merchant card services revenues increased by $618,000 and $410,000, respectively. The Bank received a final transition

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payment of $477,000 for the conversion of the Bank's retail broker and advisory accounts. Service charges on deposit accounts increased $232,000. These increases were offset by a decrease in investment services income of $693,000 as the shift to an outside service provider resulted in a revenue sharing agreement and less assets under management. Also, there were no net gains on sales of securities in 2022 down from $1.1 million in 2021.

Noninterest income, net of gains on sales of securities, decreased $60,000 in 2021 as compared to 2020. The decrease was mainly due to a decline in investment services income of $958,000 as the shift to an outside service provider resulted in less assets under management, and a transition payment received in 2020 of $370,000 for the conversion of the Bank's retail broker and advisory accounts. These amounts were partially offset by increases in the non-service cost components of the Bank's defined benefit pension plan of $550,000 and fees from debit and credit cards of $615,000.

**Noninterest Expense**

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

Noninterest expense was $67.6 million in 2022, compared to $68.6 million in 2021. The decrease of $1.1 million reflects the reduction in debt extinguishment costs from 2021. The Bank did have increases in noninterest expense during 2022. Salaries and benefits expense increased $1.3 million due to the hiring of seasoned banking professionals, competitive mid-year salary increases in 2022 and higher stock-based compensation expense. The Bank had a net loss of $553,000 on the disposition of premises and fixed assets relating to the Bank's former buildings in Glen Head, NY and costs relating to the branding initiative in the Bank's branches of $531,000. Other items contributing to the increase in noninterest expense include the cost of new branch locations on the east end of Long Island, two branch relocations, new corporate office space in Melville, NY, higher marketing expense and increases in other costs of operating the business. All increases in expenses were offset by branch optimization and back-office consolidation initiatives.

The increase in noninterest expense, net of debt extinguishment costs, of $6.6 million in 2021 included charges of $3.2 million related to closing eight branches under our branch optimization strategy. The $3.2 million included severance-related salary and benefits expense of $123,000 and occupancy and equipment expense related to rent, depreciation and asset disposals of $3.1 million. The increase in noninterest expense also included higher salaries and employee benefits related to our two new branches, building our lending and credit teams, salary adjustments, incentive compensation, the service cost component of the Bank's pension plan and a health insurance premium credit in 2020. Also contributing to the increase was higher FDIC insurance expense due to deposit growth and an assessment credit in 2020.

**2020 Deleveraging and Securities Portfolio Restructuring Transactions**

During 2020, the Bank eliminated some inefficient leverage by selling mortgage-backed securities with a carrying value of $64.5 million and using the proceeds along with excess cash of $66.8 million to prepay long-term debt of $128.7 million. The transactions resulted in an overall net loss of $3,000 with the gain on sale of securities and loss on extinguishment of debt essentially the same at $2.6 million each. The deleveraging benefited net interest margin by approximately 10 bps beginning in the fourth quarter of 2020 and improved leverage capital.

**Income Taxes**

The Corporation's effective tax rate was 19.4% and 19.2% in 2022 and 2021, respectively. The effective tax rate reflects the tax benefits derived from the Bank's municipal securities portfolio, ownership of BOLI and maintenance of a captive REIT.

***2022 Versus 2021.*** Income tax expense increased $1.1 million due to higher pre-tax earnings in 2022 and an increase in the effective tax rate. The increase in the effective tax rate is mainly due to a decrease in the percentage of pre-tax income derived from tax-exempt municipal securities and BOLI in 2022.

***2021 Versus 2020.*** Income tax expense increased $1.9 million due to growth in pre-tax earnings in 2021 and an increase in the effective tax rate. The increase in the effective tax rate was due to a decrease in the percentage of pre-tax income derived from tax-exempt municipal securities and BOLI in 2021 and a change in NY State tax law to implement a capital tax in the second quarter of 2021.

**Financial Condition**

Total assets were $4.3 billion at December 31, 2022, an increase of $212.7 million, or 5.2%, from the previous year end. The increase was primarily attributable to growth in loans of $206.7 million, or 6.7%, partially offset by a decrease in securities of $60.9 million, or 8.3%. The growth in loans was also funded by growth in deposits of $149.4 million to $3.5 billion at December 31, 2022. Total borrowings increased $99.7 million, or 32.0%, due to an increase in long-term debt of $224.7 million offset by a decrease in short-term borrowings of $125.0 million. Stockholders' equity decreased $49.3 million, or 11.9%, from December 31, 2021. The decrease was

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primarily due to a decline in the after-tax value of the Bank's AFS investment securities of $58.0 million, cash dividends declared of $18.7 million and common stock repurchases of $17.9 million, partially offset by net income of $46.9 million. The aforementioned decline in value of the AFS investment securities portfolio was due to an increase in interest rates during 2022. The fair value of the AFS investment securities portfolio could continue to decline with further increases in interest rates.

***Investment Securities.*** The following table presents the estimated fair value of AFS securities at December 31, 2022 and 2021.

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| | | |
|:---|:---|:---|
| *(in thousands)* | 2022 | 2021 |
| State and municipals | $305247 | $327171 |
| Pass-through mortgage securities | 148520 | 182957 |
| Collateralized mortgage obligations | 113394 | 106082 |
| Corporate bonds  | 106252 | 118108 |
|  | $673413 | $734318 |

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The following table presents the maturities and weighted average tax equivalent yields of the Bank's AFS investment securities at December 31, 2022. Yields on AFS securities have been computed based on amortized cost.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Principal Maturing (1) | Principal Maturing (1) | Principal Maturing (1) | Principal Maturing (1) | Principal Maturing (1) | Principal Maturing (1) | Principal Maturing (1) | Principal Maturing (1) |
|  | Within<br>‎One Year | Within<br>‎One Year | After One But<br>‎Within Five Years | After One But<br>‎Within Five Years | After Five But<br>‎Within Ten Years | After Five But<br>‎Within Ten Years | After<br>‎Ten Years | After<br>‎Ten Years |
| *(dollars in thousands)* | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield |
| State and municipals | $20503 | 2.99% | $86019 | 3.12% | $85000 | 3.36% | $113725 | 3.25% |
| Pass-through mortgage securities  |  |  | 158 | 2.47 | 1 | 6.30 | 148361 | 1.59 |
| Collateralized mortgage obligations  |  |  |  |  |  |  | 113394 | 2.12 |
| Corporate bonds  |  |  |  |  | 106252 | 3.83 |  |  |
|  | $20503 | 2.99% | $86177 | 3.12% | $191253 | 3.62% | $375480 | 2.25% |

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(1) Maturities shown are stated maturities, except in the case of municipal securities, which are shown at the earlier of their stated maturity or pre-refunded dates. Securities backed by mortgages, which include pass-through mortgage securities and collateralized mortgage obligations, are expected to have substantial periodic repayments resulting in weighted average lives considerably shorter than the stated maturities shown in the table above.

During 2021 and 2020, the Bank sold $70.6 million and $61.9 million, respectively, of mortgage-backed securities at a gain of $1.1 million and $2.6 million, respectively. No securities were sold in 2022.

During 2022, the Bank received cash dividends of $1.1 million on its FRB and FHLB stock, representing an average yield of 5.34%.

***Loans.*** The composition of the Bank's loan portfolio is set forth below.

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| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 |
| Commercial and industrial  | $108493 | $90386 |
| SBA PPP |  | 30534 |
| Commercial mortgages: |  |  |
| &nbsp;&nbsp;Multifamily | 906498 | 864207 |
| &nbsp;&nbsp;Other | 789140 | 700872 |
| &nbsp;&nbsp;Owner-occupied | 220855 | 171533 |
| Residential mortgages: |  |  |
| &nbsp;&nbsp;Closed end | 1240144 | 1202374 |
| &nbsp;&nbsp;Revolving home equity | 45213 | 44139 |
| Consumer and other | 1390 | 991 |
|  | 3311733 | 3105036 |
| Allowance for credit losses  | (31432) | (29831) |
|  | $3280301 | $3075205 |

---

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Maturity information for loans outstanding at December 31, 2022 is set forth below. Variable rate loans have varying repricing dates.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Maturity | Maturity | Maturity | Maturity | Maturity | Maturity | Maturity | Maturity |
|  | Within<br>‎One Year | After One But Within<br>‎Five Years | After One But Within<br>‎Five Years | After Five But Within<br>‎Fifteen Years | After Five But Within<br>‎Fifteen Years | After<br>‎Fifteen Years | After<br>‎Fifteen Years | Total |
| *(in thousands)* |  | Fixed | Variable | Fixed | Variable | Fixed | Variable |  |
| Commercial and industrial  | $51542  | $26234  | $16763  | $13567  | $387  | $— | $— | $108493  |
| Commercial mortgages: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 54  | 23223  | 605  | 160265  | 483197  | 34952  | 204202  | 906498  |
| &nbsp;&nbsp;Other | 7922  | 74254  | 12387  | 334855  | 205061  | 23438  | 131223  | 789140  |
| &nbsp;&nbsp;Owner-occupied | 234  | 1519  | 3851  | 113463  | 31671  | 341  | 69776  | 220855  |
| Residential mortgages: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 444  | 12859  | 109  | 83945  | 17196  | 582601  | 542990  | 1240144  |
| &nbsp;&nbsp;Revolving home equity | 1260  |  | 15103  | 1626  | 27224  |  |  | 45213  |
| Consumer and other | 742  | 151  | 497  |  |  |  |  | 1390  |
|  | $62198  | $138240  | $49315  | $707721  | $764736  | $641332  | $948191  | $3311733  |

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

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| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 |
| Loans including modifications to borrowers experiencing financial difficulty: |  |  |
| &nbsp;&nbsp;Modified and performing according to their modified terms | $480 | $554 |
| &nbsp;&nbsp;Past due 30 through 89 days  | 750 | 460 |
| &nbsp;&nbsp;Past due 90 days or more and still accruing  |  |  |
| &nbsp;&nbsp;Nonaccrual  |  | 1235 |
|  | 1230 | 2249 |
| Other real estate owned |  |  |
|  | $1230 | $2249 |

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The past due status of a loan is based on the contractual terms in the loan agreement. Unless a loan is well secured and in the process of collection, the accrual of interest income is discontinued when a loan becomes 90 days past due as to principal or interest payments. The accrual of interest income on a loan is also discontinued when it is determined that the borrower will not be able to make principal and interest payments according to the contractual terms of the current loan agreement. When the accrual of interest income is discontinued on a loan, any accrued but unpaid interest is reversed against current period income.

***Loan Risk Ratings.*** Risk ratings of the Corporation's loans are set forth in the tables below. Risk ratings are defined in "Note C – Loans" to the Corporation's consolidated financial statements of this Form 10-K. Deposit account overdrafts are not assigned a risk rating and appear as "not rated" in the following tables.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Internally Assigned Risk Rating | Internally Assigned Risk Rating | Internally Assigned Risk Rating | Internally Assigned Risk Rating | Internally Assigned Risk Rating |  |  |
|  |  |  | Special |  |  |  |  |
| *(in thousands)* | Pass | Watch | Mention | Substandard | Doubtful | Not Rated | Total |
| Commercial and industrial  | $96154 | $12339 | $— | $— | $— | $— | $108493 |
| Commercial mortgages: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 900199 | 6299 |  |  |  |  | 906498 |
| &nbsp;&nbsp;Other | 781343 | 934 |  | 6863 |  |  | 789140 |
| &nbsp;&nbsp;Owner-occupied | 215576 | 5279 |  |  |  |  | 220855 |
| Residential mortgages: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 1239865 | 279 |  |  |  |  | 1240144 |
| &nbsp;&nbsp;Revolving home equity | 45213 |  |  |  |  |  | 45213 |
| Consumer and other | 1257 |  |  |  |  | 133 | 1390 |
|  | $3279607 | $25130 | $— | $6863 | $— | $133 | $3311733 |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Internally Assigned Risk Rating | Internally Assigned Risk Rating | Internally Assigned Risk Rating | Internally Assigned Risk Rating | Internally Assigned Risk Rating |  |  |
|  |  |  | Special |  |  |  |  |
| *(in thousands)* | Pass | Watch | Mention | Substandard | Doubtful | Not Rated | Total |
| Commercial and industrial  | $90124 | $262 | $— | $— | $— | $— | $90386 |
| SBA PPP | 30534 |  |  |  |  |  | 30534 |
| Commercial mortgages: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 856510 | 1260 |  | 6437 |  |  | 864207 |
| &nbsp;&nbsp;Other | 695040 |  |  | 5832 |  |  | 700872 |
| &nbsp;&nbsp;Owner-occupied | 171533 |  |  |  |  |  | 171533 |
| Residential mortgages: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 1199999 | 488 |  | 1887 |  |  | 1202374 |
| &nbsp;&nbsp;Revolving home equity | 44139 |  |  |  |  |  | 44139 |
| Consumer and other | 890 |  |  |  |  | 101 | 991 |
|  | $3088769 | $2010 | $— | $14156 | $— | $101 | $3105036 |

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***Allowance and Provision for Credit Losses.*** The ACL increased by $1.6 million during 2022 amounting to $31.4 million, or .95% of total loans, on December 31, 2022, compared to $29.8 million, or .96% of total loans, at December 31, 2021. The decrease in the reserve coverage ratio was mainly due to improvements in historical loss rates, partially offset by current and forecasted economic conditions. The increase in watch loans was mainly due to the impact of economic conditions on certain borrowers; all such borrowers continue to make timely payments of principal and interest. Nonaccrual loans, modifications to borrowers experiencing financial difficulty and loans past due 30 through 89 days remain at low levels.

During 2022, the Bank had loan chargeoffs of $884,000, recoveries of $154,000 and recorded a provision for credit losses of $2.3 million. The provision was mainly attributable to loan growth, economic conditions and net chargeoffs of $730,000, partially offset by improvements in historical loss rates.

During 2021, the Bank had loan chargeoffs of $1.2 million, recoveries of $573,000 and recorded a credit provision for credit losses of $2.6 million. The credit provision was largely attributable to improvements in current and forecasted economic conditions and historical loss rates, partially offset by net chargeoffs of $633,000 and growth in commercial mortgages.

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 the "Application of Critical Accounting Policies" section of this document, 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 C – Loans" to the Corporation's consolidated financial statements of this Form 10-K.

The following table sets forth balances and credit ratios of the Bank's loan portfolio.

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| | | | |
|:---|:---|:---|:---|
|  | December 31, | December 31, | December 31, |
| *(dollars in thousands)* | 2022 | 2021 | 2021 |
| Total loans outstanding | $3311733 | $3105036 |  |
| Average loans outstanding | 3276589 | 2976061 |  |
| Allowance for credit losses | 31432 | 29831 |  |
| Total nonaccrual loans |  | 1235 |  |
| Net chargeoffs | 730 | 633 |  |
| Allowance for credit losses as a percentage of total loans | .95% | .96 | % |
| Nonaccrual loans as a percentage of total loans |  | .04 | % |
| Net chargeoffs as a percentage of average loans outstanding | .02% | .02 | % |
| Allowance for credit losses as a multiple of nonaccrual loans |  | 24.2 | x |

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The following table sets forth net chargeoffs by loan type, average loans during the period and the percentage of net chargeoffs over average loans.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, | December 31, | December 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 |
|  | Net | Average | % of Average | Net | Average | % of Average |
| *(dollars in thousands)* | Chargeoffs | Loans | Loans | Chargeoffs | Loans | Loans |
| Commercial and industrial  | $357 | $104883 | 0.34% | $102 | $82749 | 0.12% |
| SBA PPP |  | 7565 |  |  | 108771 |  |
| Commercial mortgages: |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily |  | 922463 |  | 544 | 778349 | 0.07 |
| &nbsp;&nbsp;Other |  | 757119 |  |  | 553015 |  |
| &nbsp;&nbsp;Owner-occupied |  | 219449 |  | 74 | 156499 | 0.05 |
| Residential mortgages: |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 372 | 1218741 | 0.03 | 167 | 1245892 | 0.01 |
| &nbsp;&nbsp;Revolving home equity |  | 45429 |  | (254) | 50109 | (0.51) |
| Consumer and other | 1 | 940 | 0.11 |  | 677 |  |
|  | $730 | $3276589 | 0.02% | $633 | $2976061 | 0.02% |

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The following table sets forth the allocation of the Bank's total ACL by loan type.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2021 | 2021 |
| *(dollars in thousands)* | Amount | % of Loans<br>‎to Total<br>‎Loans | Amount | % of Loans<br>‎to Total<br>‎Loans |
| Commercial and industrial  | $1543 | 3.3% | $888 | 2.9% |
| SBA PPP |  |  | 46 | 1.0 |
| Commercial mortgages: |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 8430 | 27.4 | 8154 | 27.8 |
| &nbsp;&nbsp;Other | 7425 | 23.8 | 6478 | 22.6 |
| &nbsp;&nbsp;Owner-occupied | 3024 | 6.7 | 2515 | 5.6 |
| Residential mortgages: |  |  |  |  |
| &nbsp;&nbsp;Closed end | 10633 | 37.4 | 11298 | 38.7 |
| &nbsp;&nbsp;Revolving home equity | 362 | 1.4 | 449 | 1.4 |
| Consumer and other | 15 |  | 3 | .0 |
|  | $31432 | 100.0% | $29831 | 100.0% |

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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 December 31, 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 NY metropolitan area has improved, inflation and increasing interest 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.

***Deposits and Other Borrowings.*** Total deposits were $3.5 billion at December 31, 2022, compared to $3.3 billion at December 31, 2021. Growth in time deposits of $250.1 million was partially offset by decreases in noninterest-bearing checking deposits of $76.9 million, or 5.5%, and savings, NOW and money market deposits of $23.9 million, or 1.4%. The increase in time deposits includes the purchase of brokered CDs amounting to $175.7 million in 2022.

The aggregate amount of uninsured deposits (amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $2.0 billion at December 31, 2022 and 2021.

------

The following table sets forth the remaining maturity of uninsured time deposits, by account.

---

| | |
|:---|:---|
| *(in thousands)* | December 31, 2022 |
| 3 months or less | $8813 |
| Over 3 through 6 months | 8951 |
| Over 6 through 12 months | 20207 |
| Over 12 months | 6948 |
|  | $44919 |

---

Borrowings include short-term and long-term FHLB borrowings. Total borrowings increased $99.7 million from $311.3 million at year-end 2021 to $411.0 million at year-end 2022. The increase is comprised of an increase in long-term debt of $224.7 million, partially offset by a decrease in short-term borrowings of $125.0 million. The increase in long-term debt includes $300.0 million new FHLB advances partially offset by maturities of $75.3 million.

***Capital.*** Stockholders' equity totaled $364.5 million at December 31, 2022, a decrease of $49.3 million from $413.8 million at December 31, 2021. The decrease was primarily attributable to a decline in the after-tax value of the Bank's AFS investment securities of $58.0 million, cash dividends declared of $18.7 million and shares repurchased of $17.9 million, partially offset by net income of $46.9 million. The aforementioned decline in value of the AFS investment securities portfolio was due to an increase in interest rates during 2022. The fair value of the AFS investment securities portfolio could continue to decline with further increases in interest rates.

The Corporation and the Bank elected to adopt the CBLR framework in 2020. 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 ROE was 12.13%, 10.34% and 10.47% for the years ended December 31, 2022, 2021 and 2020, respectively and its ROA was 1.11%, 1.04% and 1.00%, respectively. Book value per share decreased 8.8% during 2022 to $16.24 at December 31, 2022, from $17.81 at December 31, 2021. The increase in ROE was due to higher net income as well as an increase in accumulated other comprehensive loss due to a significant increase in the net unrealized loss in the AFS securities portfolio from higher interest rates which reduced stockholders' equity. The losses in the AFS securities portfolio, which reduced the average balance of stockholders' equity, accounted for 1.17% of the improvement in the ROE ratio when compared to the prior year. The unrealized loss also accounted for a $2.50 reduction in the Corporation's book value per share at December 31, 2022. Based on the Corporation's market value per share at December 31, 2022 of $18.00, the dividend yield is 4.7%.

The Corporation's capital management policy is designed to build and maintain capital levels that exceed regulatory standards and appropriately provide for growth. The leverage ratio of the Corporation and the Bank at December 31, 2022 was 9.83% and 9.81%, respectively. The Corporation and the Bank elected the optional five-year transition period provided by the federal banking agencies for recognizing the regulatory capital impact of the implementation of CECL.

The Corporation has a stock repurchase program under which it is authorized to purchase shares of its common stock from time to time through open market purchases, privately negotiated transactions or in any other manner that is compliant with applicable securities laws. The stock repurchase program does not obligate the Corporation to purchase shares and there is no guarantee as to the exact number of shares that may be repurchased pursuant to this program, which is subject to market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity and other factors deemed appropriate. In 2022, the Corporation repurchased 915,868 shares at a cost of $17.9 million. The Corporation has approval to repurchase an additional $15 million.

**Cash Flows and Liquidity**

***Cash Flows.*** During 2022, the Corporation's cash and cash equivalent position increased by $30.5 million, from $43.7 million at December 31, 2021 to $74.2 million at December 31, 2022. The increase occurred primarily because cash provided by deposits, borrowings, paydowns of securities and loans and operations exceeded cash used to purchase securities, originate loans, repurchase common stock, pay cash dividends and cash used for general operating purposes.

***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.

Based on securities and loan collateral in place at the FRBNY and FHLBNY, the Bank had borrowing capacity of approximately $1.7 billion at December 31, 2022, which includes $216.4 million of unencumbered AFS securities. The Bank's borrowing capacity may be adjusted by the FRBNY or the FHLBNY and may take into account factors such as the Bank's tangible common equity ratio, collateral

------

margins required by the lender or other factors. A possible future downgrade of securities and loans pledged as collateral could also impact the amount of available funding.

***Off-Balance Sheet Arrangements and Contractual Obligations***. Commitments to extend credit and letters of credit arise in the normal course of the Bank's business of meeting the financing needs of its customers and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. Since some of the commitments to extend credit and letters of credit are expected to expire without being drawn upon and, with respect to unused home equity, small business credit scored and certain other lines, can be frozen, reduced or terminated by the Bank based on the financial condition of the borrower, the total commitment amounts do not necessarily represent future cash requirements.

The Bank's exposure to credit loss in the event of non-performance by the other party to financial instruments for commitments to extend credit and letters of credit is represented by the contractual notional amount of these instruments. The Bank uses the same credit policies in making commitments to extend credit, and generally uses the same credit policies for letters of credit, as it does for on-balance sheet instruments such as loans.

The Corporation believes that its current sources of liquidity are sufficient to fulfill the obligations it has at December 31, 2022 pursuant to off-balance sheet arrangements and contractual obligations.

**ITEM 7A. QUANTIT** **ATIVE 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 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 time 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 December 31, 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 December 31, 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 reflect a static balance sheet. In addition, in calculating EVE, cash flows for nonmaturity deposits are assumed to have an overall life of 6.0 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 December 31, 2023 and calculations of EVE at December 31, 2022 assuming rate changes of plus and minus 100, 200 and 300 bps. The rate change scenarios were selected based on the relative level of current interest rates and: (1) are assumed to be shock or immediate changes for both EVE and net interest income; (2) occur uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities; and (3) impact the repricing and reinvestment of all assets and liabilities, except nonmaturity deposits, by the full amount of the rate change. In projecting future net interest income under the indicated rate change scenarios, activity is simulated by assuming that cash flows from maturing assets and liabilities are reinvested in a mix of assets and liabilities that is intended to reflect a static balance sheet. The changes in EVE from the base case have not been tax affected.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Economic Value of Equity<br>‎at December 31, 2022 | Economic Value of Equity<br>‎at December 31, 2022 | Net Interest Income<br>‎for 2023 | Net Interest Income<br>‎for 2023 |
| Rate Change Scenario *(dollars in thousands)* | Amount | Percent Change<br>‎From Base Case | Amount | Percent Change<br>‎From Base Case |
| + 300 basis point rate shock | $512537 | -25.5% | $75571 | -20.7% |
| + 200 basis point rate shock | 566367 | -17.7% | 81813 | -14.2% |
| + 100 basis point rate shock | 631995 | -8.1% | 88743 | -6.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;Base case (no rate change) | 687784 |  | 95304 |  |
| - 100 basis point rate shock | 730542 | 6.2% | 100568 | 5.5% |
| - 200 basis point rate shock | 751361 | 9.2% | 103502 | 8.6% |
| - 300 basis point rate shock | 739495 | 7.5% | 102847 | 7.9% |

---

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 December 31, 2023 because the Bank might need to increase the rates paid on its nonmaturity deposits to remain competitive and any borrowings that mature would reprice at a higher interest rate. In addition, the Bank's securities portfolio, excluding corporate bonds, and a large portion of its loan portfolio do not immediately reprice with changes in market rates. An immediate decrease in interest rates of 100, 200 or 300 bps could positively impact the Bank's net interest income for the same time period because the Bank would immediately pay less for overnight borrowings and be able to reduce deposit rates while the downward repricing of its assets would lag. Changes in management's estimates as to the rates that will need to be paid on nonmaturity deposits could have a material impact on the net interest income amounts shown for each scenario in the table. The negative impact of rising interest rates on net interest income in 2023 could be more significant than the amounts shown in the table.

**Forward-Looking Statements**

This Annual Report on Form 10-K 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 probable loan 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: the recent and continuing global pandemic, 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; 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 Item 1A, "Risk Factors" included in this report. 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.

‎

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**ITEM 8. FINANCI** **AL STATEMENTS AND SUPPLEMENTARY DATA**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
| December 31 (dollars in thousands) | **2022** | 2021 |
| **Assets:** |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $**74178** | $43675 |
| &nbsp;&nbsp;Investment securities available-for-sale, at fair value | **673413** | 734318 |
| &nbsp;&nbsp;Loans: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial and industrial | **108493** | 90386 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SBA Paycheck Protection Program | **—** | 30534 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secured by real estate: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial mortgages | **1916493** | 1736612 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Residential mortgages | **1240144** | 1202374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Home equity lines | **45213** | 44139 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer and other | **1390** | 991 |
|  | **3311733** | 3105036 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses | **(31432)** | (29831) |
|  | **3280301** | 3075205 |
| &nbsp;&nbsp;Restricted stock, at cost | **26363** | 21524 |
| &nbsp;&nbsp;Bank premises and equipment, net | **31660** | 37523 |
| &nbsp;&nbsp;Right-of-use asset - operating leases | **23952** | 8438 |
| &nbsp;&nbsp;Bank-owned life insurance | **110848** | 107831 |
| &nbsp;&nbsp;Pension plan assets, net | **11049** | 19097 |
| &nbsp;&nbsp;Deferred income tax benefit | **31124** | 3987 |
| &nbsp;&nbsp;Other assets | **18623** | 17191 |
|  | $**4281511** | $4068789 |
| **Liabilities:** |  |  |
| &nbsp;&nbsp;Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Checking | $**1324141** | $1400998 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Savings, NOW and money market | **1661512** | 1685410 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time | **478981** | 228837 |
|  | **3464634** | 3315245 |
| &nbsp;&nbsp;Short-term borrowings | **—** | 125000 |
| &nbsp;&nbsp;Long-term debt | **411000** | 186322 |
| &nbsp;&nbsp;Operating lease liability | **25896** | 11259 |
| &nbsp;&nbsp;Accrued expenses and other liabilities | **15445** | 17151 |
|  | **3916975** | 3654977 |
| **Stockholders' Equity:** |  |  |
| &nbsp;&nbsp;Common stock, par value $0.10 per share:  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized, 80,000,000 shares; |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued and outstanding, 22,443,380 and 23,240,596 shares | **2244** | 2324 |
| &nbsp;&nbsp;Surplus | **78462** | 93480 |
| &nbsp;&nbsp;Retained earnings | **348597** | 320321 |
|  | **429303** | 416125 |
| &nbsp;&nbsp;Accumulated other comprehensive income (loss), net of tax | **(64767)** | (2313) |
|  | **364536** | 413812 |
|  | $**4281511** | $4068789 |

---

*See notes to consolidated financial statements ‎*

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**CONSOLIDATED STATEMENTS OF INCOME** 

---

| | | | |
|:---|:---|:---|:---|
| Year Ended December 31 (dollars in thousands, except per share data) | **2022** | 2021 | 2020 |
| **Interest and dividend income:** |  |  |  |
| &nbsp;&nbsp;Loans | $**116352** | $106266 | $109492 |
| &nbsp;&nbsp;Investment securities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxable | **9795** | 8162 | 11873 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nontaxable  | **8063** | 8531 | 9851 |
|  | **134210** | 122959 | 131216 |
| **Interest expense:** |  |  |  |
| &nbsp;&nbsp;Savings, NOW and money market deposits  | **7180** | 4414 | 9097 |
| &nbsp;&nbsp;Time deposits | **5296** | 5712 | 10977 |
| &nbsp;&nbsp;Short-term borrowings | **1207** | 1427 | 1574 |
| &nbsp;&nbsp;Long-term debt | **4814** | 4599 | 7540 |
|  | **18497** | 16152 | 29188 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income  | **115713** | 106807 | 102028 |
| **Provision (credit) for credit losses** | **2331** | (2573) | 3006 |
| &nbsp;&nbsp;Net interest income after provision (credit) for credit losses | **113382** | 109380 | 99022 |
| **Noninterest income:** |  |  |  |
| &nbsp;&nbsp;Bank-owned life insurance | **3017** | 2399 | 2313 |
| &nbsp;&nbsp;Service charges on deposit accounts | **3157** | 2925 | 2962 |
| &nbsp;&nbsp;Net gains on sales of securities | **—** | 1104 | 2556 |
| &nbsp;&nbsp;Other | **6242** | 6146 | 6255 |
|  | **12416** | 12574 | 14086 |
| **Noninterest expense:** |  |  |  |
| &nbsp;&nbsp;Salaries and employee benefits | **41096** | 39753 | 37288 |
| &nbsp;&nbsp;Occupancy and equipment  | **13407** | 15338 | 12370 |
| &nbsp;&nbsp;Loss on disposition of premises and fixed assets | **553** |  |  |
| &nbsp;&nbsp;Debt extinguishment | **—** | 1021 | 2559 |
| &nbsp;&nbsp;Other  | **12523** | 12535 | 11364 |
|  | **67579** | 68647 | 63581 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income before income taxes | **58219** | 53307 | 49527 |
| **Income tax expense** | **11287** | 10218 | 8324 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net income** | $**46932** | $43089 | $41203 |
| **Weighted average:** |  |  |  |
| &nbsp;&nbsp;Common shares | **22868658** | 23655635 | 23859119 |
| &nbsp;&nbsp;Dilutive stock options and restricted stock units  | **99895** | 107348 | 53915 |
|  | **22968553** | 23762983 | 23913034 |
| **Earnings per share:**  |  |  |  |
| &nbsp;&nbsp;Basic | **$2.05** | $1.82 | $1.73 |
| &nbsp;&nbsp;Diluted  | **$2.04** | $1.81 | $1.72 |
| **Cash dividends declared per share** | **$0.82** | $0.78 | $0.74 |

---

*See notes to consolidated financial statements ‎*

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**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

---

| | | | |
|:---|:---|:---|:---|
| Year Ended December 31 (in thousands) | **2022** | 2021 | 2020 |
| **Net income** | $**46932** | $43089 | $41203 |
| **Other comprehensive income (loss):** |  |  |  |
| &nbsp;&nbsp;Change in net unrealized holding gains (losses) on available-for-sale securities | **(83835)** | (10633) | 3543 |
| &nbsp;&nbsp;Change in funded status of pension plan | **(8176)** | (1341) | 1571 |
| &nbsp;&nbsp;Change in net unrealized loss on derivative instruments | **1750** | 3535 | (867) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) before income taxes | **(90261)** | (8439) | 4247 |
| **Income tax expense (benefit)** | **(27807)** | (2556) | 1272 |
| &nbsp;&nbsp;**Other comprehensive income (loss)** | **(62454)** | (5883) | 2975 |
| **Comprehensive income (loss)** | $**(15522)** | $37206 | $44178 |

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*See notes to consolidated financial statements ‎*

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**CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  | Accumulated |  |
|  |  |  |  |  | Other |  |
|  | Common Stock | Common Stock |  | Retained | Comprehensive |  |
| (dollars in thousands) | Shares | Amount | Surplus | Earnings | Income (Loss) | Total |
| Balance, January 1, 2020 | 23934632 | $2393 | $111744 | $272051 | $595 | $386783 |
| &nbsp;&nbsp;Net income |  |  |  | 41203 |  | 41203 |
| &nbsp;&nbsp;Other comprehensive income |  |  |  |  | 2975 | 2975 |
| &nbsp;&nbsp;Repurchase of common stock | (377200) | (38) | (7897) |  |  | (7935) |
| &nbsp;&nbsp;Shares withheld upon the vesting |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;and conversion of RSUs | (66142) | (6) | (1521) |  |  | (1527) |
| &nbsp;&nbsp;Common stock issued under stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;compensation plans | 249414 | 25 | 625 |  |  | 650 |
| &nbsp;&nbsp;Common stock issued under |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;dividend reinvestment and stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;purchase plan | 49885 | 5 | 808 |  |  | 813 |
| &nbsp;&nbsp;Stock-based compensation |  |  | 1788 |  |  | 1788 |
| &nbsp;&nbsp;Cash dividends declared |  |  |  | (17632) |  | (17632) |
| Balance, December 31, 2020 | 23790589 | 2379 | 105547 | 295622 | 3570 | 407118 |
| &nbsp;&nbsp;Net income |  |  |  | 43089 |  | 43089 |
| &nbsp;&nbsp;Other comprehensive loss |  |  |  |  | (5883) | (5883) |
| &nbsp;&nbsp;Repurchase of common stock | (679873) | (68) | (14433) |  |  | (14501) |
| &nbsp;&nbsp;Shares withheld upon the vesting |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;and conversion of RSUs | (18822) | (2) | (359) |  |  | (361) |
| &nbsp;&nbsp;Common stock issued under stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;compensation plans | 105674 | 11 | 259 |  |  | 270 |
| &nbsp;&nbsp;Common stock issued under |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;dividend reinvestment and stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;purchase plan | 43028 | 4 | 831 |  |  | 835 |
| &nbsp;&nbsp;Stock-based compensation |  |  | 1635 |  |  | 1635 |
| &nbsp;&nbsp;Cash dividends declared |  |  |  | (18390) |  | (18390) |
| Balance, December 31, 2021 | **23240596** | **2324** | **93480** | **320321** | **(2313)** | **413812** |
| &nbsp;&nbsp;Net income |  |  |  | **46932** |  | **46932** |
| &nbsp;&nbsp;Other comprehensive loss |  |  |  |  | **(62454)** | **(62454)** |
| &nbsp;&nbsp;Repurchase of common stock | **(915868)** | **(92)** | **(17797)** |  |  | **(17889)** |
| &nbsp;&nbsp;Shares withheld upon the vesting |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;and conversion of RSUs | **(27287)** | **(3)** | **(573)** |  |  | **(576)** |
| &nbsp;&nbsp;Common stock issued under stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;compensation plans | **100973** | **10** | **52** |  |  | **62** |
| &nbsp;&nbsp;Common stock issued under |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;dividend reinvestment and stock |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;purchase plan | **44966** | **5** | **834** |  |  | **839** |
| &nbsp;&nbsp;Stock-based compensation |  |  | **2466** |  |  | **2466** |
| &nbsp;&nbsp;Cash dividends declared |  |  |  | **(18656)** |  | **(18656)** |
| Balance, December 31, 2022 | **22443380** | $**2244** | $**78462** | $**348597** | $**(64767)** | $**364536** |

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*See notes to consolidated financial statements ‎*

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**CONSOLIDATED STATEMENTS OF CASH FLOWS**

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| | | | |
|:---|:---|:---|:---|
| Year Ended December 31 (in thousands) | **2022** | 2021 | 2020 |
| **Cash Flows From Operating Activities:** |  |  |  |
| Net income | $**46932** | $43089 | $41203 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
| &nbsp;&nbsp;Provision (credit) for credit losses  | **2331** | (2573) | 3006 |
| &nbsp;&nbsp;Provision (credit) for deferred income taxes  | **670** | (56) | (1331) |
| &nbsp;&nbsp;Depreciation and amortization of premises and equipment | **3612** | 4905 | 4195 |
| &nbsp;&nbsp;Amortization of right-of-use asset - operating leases | **2699** | 3774 | 2177 |
| &nbsp;&nbsp;Premium amortization on investment securities, net | **1578** | 2247 | 1852 |
| &nbsp;&nbsp;Net gain on sales of securities | **—** | (1104) | (2556) |
| &nbsp;&nbsp;Loss on debt extinguishment | **—** | 1021 | 2559 |
| &nbsp;&nbsp;Loss on disposition of premises and fixed assets | **553** | **—** | **—** |
| &nbsp;&nbsp;Stock-based compensation expense | **2466** | 1635 | 1788 |
| &nbsp;&nbsp;Accretion of cash surrender value on bank-owned life insurance | **(3017)** | (2399) | (2313) |
| &nbsp;&nbsp;Pension credit | **(129)** | (329) | (263) |
| &nbsp;&nbsp;Decrease in other liabilities | **(3770)** | (2522) | (3751) |
| &nbsp;&nbsp;Other decreases (increases) in assets | **(2501)** | 3093 | (531) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | **51424** | 50781 | 46035 |
| **Cash Flows From Investing Activities:** |  |  |  |
| &nbsp;&nbsp;Available-for-sale securities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales  | **—** | 71695 | 64453 |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from maturities and redemptions  | **45054** | 113736 | 146063 |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases  | **(69562)** | (268803) | (171447) |
| &nbsp;&nbsp;Net decrease (increase) in loans | **(207427)** | (72215) | 152649 |
| &nbsp;&nbsp;Net decrease (increase) in restricted stock | **(4839)** | (710) | 10085 |
| &nbsp;&nbsp;Proceeds from disposition of premises and fixed assets | **6601** |  |  |
| &nbsp;&nbsp;Purchases of bank-owned life insurance | **—** | (20000) |  |
| &nbsp;&nbsp;Purchases of premises and equipment, net | **(3598)** | (7697) | (3008) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) investing activities | **(233771)** | (183994) | 198795 |
| **Cash Flows From Financing Activities:** |  |  |  |
| &nbsp;&nbsp;Net increase (decrease) in deposits | **149389** | (6343) | 177572 |
| &nbsp;&nbsp;Net increase (decrease) in short-term borrowings | **(125000)** | 64905 | (130615) |
| &nbsp;&nbsp;Proceeds from long-term debt | **300000** |  | 120000 |
| &nbsp;&nbsp;Repayment of long-term debt | **(75322)** | (60701) | (214029) |
| &nbsp;&nbsp;Proceeds from issuance of common stock, net of shares withheld  | **263** | 607 | (188) |
| &nbsp;&nbsp;Repurchases of common stock | **(17889)** | (14501) | (7935) |
| &nbsp;&nbsp;Cash dividends paid | **(18591)** | (18261) | (17421) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | **212850** | (34294) | (72616) |
| Net increase (decrease) in cash and cash equivalents | **30503** | (167507) | 172214 |
| Cash and cash equivalents, beginning of year | **43675** | 211182 | 38968 |
| Cash and cash equivalents, end of period | $**74178** | $43675 | $211182 |
| **Supplemental Cash Flow Disclosures:** |  |  |  |
| &nbsp;&nbsp;Cash paid for interest | $**17142** | $16713 | $29500 |
| &nbsp;&nbsp;Cash paid for income taxes | **11610** | 11650 | 7582 |
| &nbsp;&nbsp;Operating cash flows from operating leases | **4148** | 2475 | 2796 |
| &nbsp;&nbsp;Noncash investing and financing activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use assets obtained in exchange for operating lease liabilities | **18386** |  | 923 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash dividends payable | **4713** | 4648 | 4519 |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank premises transferred to held-for-sale | **2407** | 3796 |  |

---

*See notes to consolidated financial statements*

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**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

***NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES***

The consolidated financial statements include the accounts of The First of Long Island Corporation and its wholly-owned subsidiary, The First National Bank of Long Island, and subsidiaries wholly-owned by the Bank, either directly or indirectly: The First of Long Island Agency, Inc.; FNY Service Corp.; and The First of Long Island REIT, Inc. ("REIT"). The Corporation's financial condition and operating results principally reflect those of the Bank and its subsidiaries. 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 have been eliminated.

The accounting and reporting policies of the Corporation reflect banking industry practice and conform to generally accepted accounting principles ("GAAP") in the United States. The following is a summary of the Corporation's significant accounting policies.

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 – Credit Losses (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 chargeoffs by year of origination for financing receivables and net investments in leases within the scope of CECL. Gross chargeoffs 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 C – Loans" of these unaudited consolidated financial statements.

**Cash and Cash Equivalents** 

Cash and cash equivalents include cash and deposits with other financial institutions that generally mature within 90 days.

**Investment Securities**

Current accounting standards require that investment securities be classified as held-to-maturity ("HTM"), available-for-sale ("AFS") or trading. The trading category is not applicable to any securities in the Bank's portfolio because the Bank does not buy or hold debt or equity securities principally for the purpose of selling in the near term. HTM securities, or debt securities which the Bank has the intent and ability to hold to maturity, are reported at amortized cost, net of allowance for credit losses ("ACL" or "allowance"), if any. AFS securities, or debt securities which are neither HTM securities nor trading securities, are reported at fair value, with unrealized gains and losses, net of the related income tax effect, included in other comprehensive income (loss) ("OCI"). Equity securities, if any, are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

Interest income includes amortization or accretion of purchase premium or discount. Premiums and discounts on securities are amortized or accreted using the level-yield method. Prepayments are anticipated for mortgage-backed securities. Premiums on municipal securities are amortized to the earlier of the stated maturity date or the first call date, while discounts on municipal securities are accreted to the stated maturity date. Realized gains and losses on the sale of securities are determined using the specific identification method.

Management measures expected credit losses on HTM debt securities, if any, on a collective basis by major security type. Accrued interest receivable on HTM debt securities is excluded from the estimate of credit losses.

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For AFS securities in an unrealized loss position, management first evaluates whether the decline in fair value has resulted from an actual or estimated credit loss event. Management considers the extent to which fair value is less than amortized cost, changes to the rating of the security, and adverse conditions specifically related to the security. If this assessment indicates that a credit loss is likely, management then assesses whether it has the intent to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost and determines the present value of cash flows expected to be collected from the security as compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, an allowance is recorded for the estimated credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance is recognized in OCI. Accrued interest receivable on AFS securities is excluded from the estimate of credit losses.

**Loans Held-for-Sale**

Loans held-for-sale are carried at the lower of cost or fair value. Any subsequent declines in fair value below the initial carrying value are recorded as a valuation allowance established through a charge to noninterest income.

**Loans and Allowance for Credit Losses** 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the principal balance outstanding plus or minus net deferred loan costs and fees. Accrued interest receivable is reported in "Other assets" on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest on loans is credited to income based on the principal amount outstanding. Direct loan origination costs, net of loan origination fees, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

The past due status of a loan is based on the contractual terms in the loan agreement. Unless a loan is well secured and in the process of collection, the accrual of interest income is discontinued when a loan becomes 90 days past due as to principal or interest payments. The accrual of interest income on a loan is also discontinued when it is determined that the borrower will not be able to make principal and interest payments according to the contractual terms of the current loan agreement. When the accrual of interest income is discontinued on a loan, any accrued but unpaid interest is reversed against current period income. Interest received on nonaccrual loans is applied to the outstanding principal balance until the loans qualify for return to an accrual status, if ever. Return to an accrual status occurs when all the principal and interest amounts contractually past due are brought current and all future payments are reasonably assured.

The ACL is a valuation account 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 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 against the ACL, and subsequent recoveries, if any, are credited to the ACL.

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; and (10) municipal loans. An additional pool was used for Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans while those loans were outstanding. Historical loss information from the Bank's own loan portfolio from December 31, 2007 to present provides a basis for management's assessment of expected credit losses. The choice of a historical look-back period that begins in 2007 covers an entire economic cycle and impacts the average historical loss rates used to calculate the final ACL. Due to the extensive loss data available, management selected the vintage approach to measure the historical loss component of credit losses for most of its loan pools. For the revolving home equity and small business credit scored pools, the Lifetime 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 was 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 represented 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.

The ACL is an amount that management currently believes will be adequate to absorb current expected credit 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. Actual results could differ significantly from those estimates.

**Transfers of Financial Assets**

Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Corporation does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

**Bank Premises and Equipment and Operating Leases**

Land is carried at cost. Other bank premises and equipment are carried at cost less accumulated depreciation and amortization. Buildings are depreciated using the straight-line method over their estimated useful lives, which range from 31 to 40 years. Building and leasehold improvements are depreciated using the straight-line method over the remaining lives of the buildings or leases, as applicable, or their estimated useful lives, whichever is shorter. The lives of the respective leases range from five years to fifteen years. Furniture, fixtures and equipment are depreciated using the straight-line method over their estimated useful lives, which range from three years to ten years. Premises and equipment held-for-sale, if any, is included in "other assets" on the Corporation's consolidated balance sheets and carried at the lower of cost or fair value. Writedowns upon transfer to held-for-sale are included in "other noninterest expense" on the consolidated income statements. Fair value is based on an appraisal, where available, adjusted for estimated costs to sell.

The Bank determines if an arrangement is a lease at inception and recognizes a right-of-use ("ROU") asset and lease liability at the commencement date based on the present value of lease payments over the lease term. As most of the Bank's leases do not provide an implicit interest rate, the Bank uses its incremental borrowing rate to determine the present value of the lease payments. The Bank's ROU asset and lease liability may include options to extend the lease when it is reasonably certain that the Bank will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

**Bank-owned Life Insurance**

The Bank is the owner and beneficiary of insurance policies on the lives of certain officers. Bank-owned life insurance ("BOLI") is recorded at the amount that can be realized under the contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement, if any.

**Restricted Stock**

The Bank is a member of and is required to own stock in the Federal Home Loan Bank of NY ("FHLBNY") and the Federal Reserve Bank of NY ("FRBNY"). The amount of FHLBNY stock held is based on membership and the level of FHLBNY advances. The amount of FRBNY stock held is based on the Bank's capital and surplus balances. These stocks do not have a readily determinable fair value, are carried at cost, classified as restricted stock and periodically evaluated for impairment based on the prospects for the ultimate recovery of cost. Cash dividends, if any, are reported as interest income on taxable investment securities.

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**Other Real Estate Owned**

Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is initially recorded at the lower of cost or fair value, less estimated selling costs and is included in "other assets" on the consolidated balance sheets. Chargeoffs recorded at the time of acquisition are charged to the ACL. Subsequently, decreases in the property's estimated fair value are charged to earnings and credited to a valuation allowance and recoveries in fair value are credited to earnings and charged to the valuation allowance. Such adjustments to earnings are included in other noninterest expense along with any additional property maintenance costs incurred in owning the property. Rental income received from tenants of other real estate owned is included in other noninterest income.

**Long-term Assets**

Premises and equipment, intangible assets, BOLI and other long-term assets, if any, are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

**Loan Commitments and Related Financial Instruments**

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, commercial letters of credit and standby letters of credit. The face amount of these items represents the exposure to loss, before considering collateral held or ability to repay. The Bank estimates credit losses on off-balance sheet credit exposures by considering the likelihood of an outstanding commitment converting into an outstanding loan and applying historical loss factors used on similar portfolio segments, unless the obligation is unconditionally cancellable by the Bank. The ACL on off-balance sheet credit exposures is recorded in the line item "Accrued expenses and other liabilities" in the consolidated balance sheets and totaled $421,000 and $492,000, respectively, at December 31, 2022 and 2021. The ACL is adjusted through a provision (credit) for credit loss expense which is included in the line item "other noninterest expense" in the consolidated statements of income and amounted to ($71,000), $82,000 and ($195,000) in 2022, 2021 and 2020, respectively. Off-balance sheet credit instruments are recorded on the balance sheet when they are funded or drawn down.

**Derivatives**

The Corporation records cash flow hedges at the inception of a derivative contract based on management's intentions and belief as to the likely effectiveness of the hedge. Cash flow hedges represent a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. For a cash flow hedge, the gain or loss on the derivative is recorded in OCI and is reclassified into earnings in the same period during which the hedged transaction affects earnings. The changes in the fair value of a derivative that is not highly effective in hedging the expected cash flows of the hedged item are recognized immediately as interest expense in the consolidated statements of income.

Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income or noninterest expense. Cash flows from hedges are classified in the consolidated statements of cash flows in the same manner as the items being hedged.

The Corporation formally documents the relationship between derivatives and hedged items, as well as the risk management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Corporation also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in cash flows of the hedged item. The Corporation discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in cash flows of the hedged item, the derivative is settled or terminated, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as interest expense. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that were accumulated in OCI are amortized into earnings over the same periods which the hedged transactions will affect earnings.

**Income Taxes**

A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current year. A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. The measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law. The effects of future changes in tax laws or rates are not considered. The Corporation recognizes interest and/or penalties related to income tax matters in noninterest income or noninterest expense as appropriate.

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**Retirement Plans**

Pension expense is the sum of service cost, interest cost, amortization of actuarial gains and losses and plan expenses, net of the expected return on plan assets and participant contributions. The service cost component of pension expense is included in salaries and employee benefits on the consolidated statements of income. All other components of pension expense are included in other noninterest income. Employee 401(k) plan expense is equal to the amount of the Corporation's matching contributions and is included in salaries and employee benefits in the consolidated statements of income.

**Loss Contingencies**

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

**Operating Segments**

While management monitors the revenue streams of the Bank's various products and services, the identifiable segments are not material and operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the financial operations of the Bank are aggregated in one reportable operating segment.

**Investment Services**

Assets held in a fiduciary capacity are not assets of the Corporation and, accordingly, are not included in the accompanying consolidated financial statements. The Bank records investment services fees on the accrual basis.

**Reclassifications**

When appropriate, items in the prior year financial statements are reclassified to conform to the current period presentation.

**Earnings Per Share**

The Corporation calculates basic and diluted earnings per share ("EPS") using the treasury stock method. Basic EPS excludes the dilutive effect of outstanding stock options and restricted stock units ("RSUs") and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if outstanding stock options and RSUs were converted into shares of common stock that then shared in the earnings of the Corporation. Diluted EPS is computed by dividing net income by the weighted average number of common shares and dilutive stock options and RSUs. 33,017 and 25,519 RSUs were excluded from the calculation of EPS at December 31, 2022 and 2020, because their inclusion would be anti-dilutive. There were no anti-dilutive RSUs at December 31, 2021. Other than the RSUs described in "Note I – Stock-Based Compensation," the Corporation has no securities that could be converted into common stock nor does the Corporation have any contracts that could result in the issuance of common stock.

**Stock-based Compensation** 

The Corporation's stock-based compensation plans are described in "Note I – Stock-Based Compensation." Compensation cost is determined for RSUs issued to employees and non-employee directors based on the grant date fair value of the award.

Compensation expense for RSUs is recognized over the applicable performance or service period, which is usually the vesting period. Compensation expense is adjusted at the end of the performance period, if applicable, to reflect the actual number of shares of the Corporation's common stock into which the RSUs will be converted. The Corporation accounts for forfeitures as they occur.

**Comprehensive Income**

Comprehensive income (loss) includes net income and 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 net unrealized holding gains or losses on 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.

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

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| | | | |
|:---|:---|:---|:---|
|  | Current Period Change due to | Current Period Change due to | Current Period Change due to |
|  |  | Other |  |
|  | Balance | Comprehensive | Balance |
| *(in thousands)* | 12/31/21 | Income (Loss) | 12/31/22 |
| Unrealized holding gains (losses) on AFS securities | $1955 | $(58010) | $(56055) |
| Unrealized actuarial losses on pension plan | (3056) | (5656) | (8712) |
| Unrealized loss on derivative instruments | (1212) | 1212 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss, net of tax | $(2313) | $(62454) | $(64767) |

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

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| | | | |
|:---|:---|:---|:---|
| *(in thousands)* | 2022 | 2021 | 2020 |
| Change in net unrealized holding gains (losses) on AFS securities: |  |  |  |
| &nbsp;&nbsp;Change arising during the period | $(83835) | $(9529) | $6099 |
| &nbsp;&nbsp;Reclassification adjustment for gains included in net income (1) |  | (1104) | (2556) |
|  | (83835) | (10633) | 3543 |
| &nbsp;&nbsp;Tax effect | (25825) | (3163) | 1063 |
|  | (58010) | (7470) | 2480 |
| Change in funded status of pension plan: |  |  |  |
| &nbsp;&nbsp;Unrecognized net gain (loss) arising during the period | (8176) | (1341) | 1571 |
| &nbsp;&nbsp;Tax effect | (2520) | (438) | 470 |
|  | (5656) | (903) | 1101 |
| Change in unrealized loss on derivative instruments: |  |  |  |
| &nbsp;&nbsp;Amount of gain (loss) recognized during the period | 1324 | 668 | (4835) |
| &nbsp;&nbsp;Reclassification adjustment for net interest expense included in |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;net income (2) | 426 | 2867 | 3968 |
|  | 1750 | 3535 | (867) |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax effect | 538 | 1045 | (261) |
|  | 1212 | 2490 | (606) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) | $(62454) | $(5883) | $2975 |

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

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

**Impact of Issued But Not Yet Effective Accounting Standards**

There were no issued but not yet effective pronouncements at December 31, 2022 that could materially impact the Corporation's financial position, results of operations or disclosures.

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***NOTE B – INVESTMENT SECURITIES***

The following tables set forth the amortized cost and estimated fair values of the Bank's AFS investment securities at December 31, 2022 and 2021.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2022 | 2022 |
| *(in thousands)* | Amortized<br>‎Cost | Gross<br>‎Unrealized<br>‎Gains | Gross <br>‎Unrealized<br>‎Losses | Fair<br>‎Value |
| State and municipals | $321700 | $136 | $(16589) | $305247 |
| Pass-through mortgage securities | 179655 |  | (31135) | 148520 |
| Collateralized mortgage obligations | 134070 |  | (20676) | 113394 |
| Corporate bonds  | 119000 |  | (12748) | 106252 |
|  | $754425 | $136 | $(81148) | $673413 |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 2021 | 2021 | 2021 | 2021 |
| State and municipals | $315747 | $11600 | $(176) | $327171 |
| Pass-through mortgage securities | 187494 | 54 | (4591) | 182957 |
| Collateralized mortgage obligations | 109254 | 67 | (3239) | 106082 |
| Corporate bonds  | 119000 |  | (892) | 118108 |
|  | $731495 | $11721 | $(8898) | $734318 |

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At December 31, 2022 and 2021, investment securities with a carrying value of $350.8 million and $425.0 million, respectively, were pledged as collateral to secure public deposits and borrowed funds.

There were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity at December 31, 2022 and 2021.

***Securities With Unrealized Losses.*** The following tables set forth securities with unrealized losses at December 31, 2022 and 2021 presented by length of time the securities had been in a continuous unrealized loss position.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 |
|  | Less than<br>‎12 Months | Less than<br>‎12 Months | 12 Months<br>‎or More | 12 Months<br>‎or More | Total | Total |
| *(in thousands)* | Fair<br>‎Value | Unrealized<br>‎Loss | Fair<br>‎Value | Unrealized<br>‎Loss | Fair<br>‎Value | Unrealized<br>‎Loss |
| State and municipals | $238157 | $(12047) | $13934 | $(4542) | $252091 | $(16589) |
| Pass-through mortgage securities | 12667 | (979) | 135853 | (30156) | 148520 | (31135) |
| Collateralized mortgage obligations  | 42560 | (1515) | 70834 | (19161) | 113394 | (20676) |
| Corporate bonds |  |  | 106252 | (12748) | 106252 | (12748) |
| &nbsp;&nbsp;Total temporarily impaired | $293384 | $(14541) | $326873 | $(66607) | $620257 | $(81148) |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | 2021 | 2021 | 2021 | 2021 | 2021 | 2021 |
| State and municipals | $18429 | $(176) | $— | $— | $18429 | $(176) |
| Pass-through mortgage securities | 179575 | (4529) | 1641 | (62) | 181216 | (4591) |
| Collateralized mortgage obligations  | 99305 | (3239) |  |  | 99305 | (3239) |
| Corporate bonds | 87620 | (380) | 30488 | (512) | 118108 | (892) |
| &nbsp;&nbsp;Total temporarily impaired | $384929 | $(8324) | $32129 | $(574) | $417058 | $(8898) |

---

Following is a discussion of unrealized losses by type of security, none of which are considered impaired at December 31, 2022.

**State and Municipals**

At December 31, 2022, approximately $252.1 million of state and municipal bonds had an unrealized loss of $16.6 million. Substantially all the state and municipal bonds are considered high investment grade and rated Aa2/AA- or higher. The unrealized loss is attributable to changes in interest rates and illiquidity and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank 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 December 31, 2022, pass-through mortgage securities of approximately $148.5 million had an unrealized loss of $31.1 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank 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. The fair value is expected to recover as the bonds approach maturity.

**Collateralized Mortgage Obligations** 

At December 31, 2022, collateralized mortgage obligations of approximately $113.4 million had an unrealized loss of $20.7 million. These securities were issued by U.S. government and government-sponsored agencies and are considered high investment grade. The unrealized loss is attributable to changes in interest rates and not credit quality. The issuers continue to make timely principal and interest payments on the bonds. The Bank 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. The fair value is expected to recover as the bonds approach maturity.

**Corporate Bonds**

At December 31, 2022, approximately $106.3 million of corporate bonds had an unrealized loss of $12.7 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 December 31, 2022.

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

---

| | | | |
|:---|:---|:---|:---|
| *(in thousands)* | 2022 | 2021 | 2020 |
| Proceeds | $— | $71695 | $64453 |
| Gains | $— | $1120 | $2556 |
| Losses |  | (16) |  |
| &nbsp;&nbsp;Net gains | $— | $1104 | $2556 |

---

The income tax expense related to these net realized gains was $340,000 and $766,000 in 2021 and 2020, respectively, and is included in the consolidated statements of income in the line item "Income tax expense."

***Sales of HTM Securities.*** The Bank did not have any securities classified as HTM in 2022, 2021 or 2020.

***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 December 31, 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<br>‎Cost | Fair Value |
| Within one year | $20590 | $20503 |
| After 1 through 5 years | 86981 | 86019 |
| After 5 through 10 years | 206044 | 191252 |
| After 10 years | 127085 | 113725 |
| Mortgage-backed securities | 313725 | 261914 |
|  | $754425 | $673413 |

---

------

***NOTE C – LOANS***

The following table sets forth the loans outstanding by class of loans for the periods indicated.

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 |
| Commercial and industrial  | $108493 | $90386 |
| SBA PPP |  | 30534 |
| Commercial mortgages: |  |  |
| &nbsp;&nbsp;Multifamily | 906498 | 864207 |
| &nbsp;&nbsp;Other | 789140 | 700872 |
| &nbsp;&nbsp;Owner-occupied | 220855 | 171533 |
| Residential mortgages: |  |  |
| &nbsp;&nbsp;Closed end | 1240144 | 1202374 |
| &nbsp;&nbsp;Revolving home equity | 45213 | 44139 |
| Consumer and other | 1390 | 991 |
|  | $3311733 | $3105036 |

---

The following tables present the activity in the ACL for the years ended December 31, 2022, 2021 and 2020.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(in thousands)* | Balance at<br>‎1/1/2022 | Chargeoffs | Recoveries | Provision<br>‎(Credit) for<br>‎Credit Losses | Balance at<br>‎12/31/2022 |
| Commercial and industrial  | $888 | $511 | $154 | $1012 | $1543 |
| SBA PPP | 46 |  |  | (46) |  |
| Commercial mortgages: |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 8154 |  |  | 276 | 8430 |
| &nbsp;&nbsp;Other | 6478 |  |  | 947 | 7425 |
| &nbsp;&nbsp;Owner-occupied | 2515 |  |  | 509 | 3024 |
| Residential mortgages: |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 11298 | 372 |  | (293) | 10633 |
| &nbsp;&nbsp;Revolving home equity | 449 |  |  | (87) | 362 |
| Consumer and other | 3 | 1 |  | 13 | 15 |
|  | $29831 | $884 | $154 | $2331 | $31432 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(in thousands)* | Balance at<br>‎1/1/2021 | Chargeoffs | Recoveries | Provision<br>‎(Credit) for<br>‎Credit Losses | Balance at<br>‎12/31/2021 |
| Commercial and industrial  | $1416 | $307 | $205 | $(426) | $888 |
| SBA PPP | 209 |  |  | (163) | 46 |
| Commercial mortgages: |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 9474 | 544 |  | (776) | 8154 |
| &nbsp;&nbsp;Other | 4913 |  |  | 1565 | 6478 |
| &nbsp;&nbsp;Owner-occupied | 1905 | 165 | 91 | 684 | 2515 |
| Residential mortgages: |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 14706 | 189 | 22 | (3241) | 11298 |
| &nbsp;&nbsp;Revolving home equity | 407 |  | 254 | (212) | 449 |
| Consumer and other | 7 | 1 | 1 | (4) | 3 |
|  | $33037 | $1206 | $573 | $(2573) | $29831 |

---

------

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| *(in thousands)* | Balance at<br>‎1/1/2020 | Impact of<br>‎ASC 326<br>‎Adoption | Chargeoffs | Recoveries | Provision<br>‎(Credit) for<br>‎Loan Losses | Balance at<br>‎12/31/2020 |
| Commercial and industrial  | $1493 | $(244) | $1283 | $519 | $931 | $1416 |
| SBA PPP |  |  |  |  | 209 | 209 |
| Commercial mortgages: |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily | 7151 | 1059 | 298 |  | 1562 | 9474 |
| &nbsp;&nbsp;Other | 3498 | (47) | 502 | 1 | 1963 | 4913 |
| &nbsp;&nbsp;Owner-occupied | 921 | 778 |  |  | 206 | 1905 |
| Residential mortgages: |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 15698 | 1356 | 558 | 32 | (1822) | 14706 |
| &nbsp;&nbsp;Revolving home equity | 515 | (6) | 86 | 30 | (46) | 407 |
| Consumer and other | 13 | (8) | 3 | 2 | 3 | 7 |
|  | $29289 | $2888 | $2730 | $584 | $3006 | $33037 |

---

The provision recorded in 2022 was mainly due to an increase in outstanding mortgage loans, chargeoffs and deteriorating economic conditions, partially offset by lower historical loss rates. The credit provision recorded in 2021 was mainly due to improvements in economic conditions, asset quality and other portfolio metrics, partially offset by an increase in outstanding commercial mortgage loans and net chargeoffs. The provision recorded in 2020 was mainly due to the effects of the COVID-19 pandemic.

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

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Past Due | Past Due | Past Due | Nonaccrual | 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  | $297  | $— | $— | $— | $— | $297  | $108196  | $108493  |
| SBA PPP |  |  |  |  |  |  |  |  |
| Commercial mortgages: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily |  |  |  |  |  |  | 906498  | 906498  |
| &nbsp;&nbsp;Other |  |  |  |  |  |  | 789140  | 789140  |
| &nbsp;&nbsp;Owner-occupied |  |  |  |  |  |  | 220855  | 220855  |
| Residential mortgages: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end | 452  |  |  |  |  | 452  | 1239692  | 1240144  |
| &nbsp;&nbsp;Revolving home equity |  |  |  |  |  |  | 45213  | 45213  |
| Consumer and other | 1  |  |  |  |  | 1  | 1389  | 1390  |
|  | $750  | $— | $— | $— | $— | $750  | $3310983  | $3311733  |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| Commercial and industrial  | $128  | $— | $— | $128  | $90258  | $90386  |
| SBA PPP | 259  |  |  | 259  | 30275  | 30534  |
| Commercial mortgages: |  |  |  |  |  |  |
| &nbsp;&nbsp;Multifamily |  |  |  |  | 864207  | 864207  |
| &nbsp;&nbsp;Other |  |  |  |  | 700872  | 700872  |
| &nbsp;&nbsp;Owner-occupied |  |  |  |  | 171533  | 171533  |
| Residential mortgages: |  |  |  |  |  |  |
| &nbsp;&nbsp;Closed end |  |  | 1235  | 1235  | 1201139  | 1202374  |
| &nbsp;&nbsp;Revolving home equity |  |  |  |  | 44139  | 44139  |
| Consumer and other | 73  |  |  | 73  | 918  | 991  |
|  | $460  | $— | $1235  | $1695  | $3103341  | $3105036  |

---

There were no loans in the process of foreclosure nor did the Bank hold any foreclosed residential real estate property at December 31, 2022, 2021 or 2020.

Accrued interest receivable from loans totaled $9.2 million and $8.0 million at December 31, 2022 and 2021, respectively, and is included in the line item "Other assets" on the consolidated balance sheets.

------

***Loans to Directors and Executive Officers.*** At December 31, 2022 and 2021, there were no outstanding loans to directors, including their immediate families and companies in which they are principal owners or executive officers.

***Loan Modifications.*** From time to time, the Bank may modify the terms of loans to borrowers experiencing financial difficulty in the form of principal forgiveness, an interest reduction, an other-than-insignificant payment delay or a term extension. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Bank performs the evaluation under its internal underwriting policy.

The Bank did not modify any loans to borrowers experiencing financial difficulty during 2022, 2021 or 2020. Loans modified in prior years (formerly troubled debt restructurings) with a total outstanding balance of $480,000 at December 31, 2022 were performing in accordance with their modified terms. The Bank had no commitments to lend additional amounts to such borrowers.

There were no modifications for which there was a payment default during 2022, 2021 and 2020 that were modified during the 12 month period prior to default. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

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

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

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

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

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

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

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

The Bank's loan risk rating and review policy establishes requirements for the annual review of commercial real estate and commercial and industrial loans. The requirements include details of the scope of coverage and selection process based on loan-type and risk rating. The Bank reviews at least 80% of its commercial real estate loan portfolio on an annual basis. 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 2022 by year of origination.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Revolving |  |
| *(in thousands)* | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Loans (1) | Total |
| Commercial and industrial: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass | $29913  | $27212  | $10747  | $5369  | $4352  | $3840  | $14721  | $96154  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Watch | 1998  | 10067  | 274  |  |  |  |  | 12339  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful  |  |  |  |  |  |  |  |  |
|  | $31911  | $37279  | $11021  | $5369  | $4352  | $3840  | $14721  | $108493  |
| &nbsp;&nbsp;Current-period gross chargeoffs | $— | $— | $— | $— | $— | $— | $(511) | $(511) |
| &nbsp;&nbsp;Current-period recoveries  |  |  |  |  |  |  | 154  | 154  |
| &nbsp;&nbsp;Current-period net chargeoffs | $— | $— | $— | $— | $— | $— | $(357) | $(357) |
| Commercial mortgages – multifamily: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass | $195614  | $180602  | $39687  | $125179  | $112456  | $246436  | $225  | $900199  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Watch |  |  |  |  |  | 6299  |  | 6299  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful  |  |  |  |  |  |  |  |  |
|  | $195614  | $180602  | $39687  | $125179  | $112456  | $252735  | $225  | $906498  |
| &nbsp;&nbsp;Current-period gross chargeoffs | $— | $— | $— | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;Current-period recoveries  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Current-period net chargeoffs | $— | $— | $— | $— | $— | $— | $— | $— |
| Commercial mortgages – other: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass | $191988  | $224005  | $99340  | $34448  | $43235  | $188327  | $— | $781343  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Watch |  |  |  |  | 934  |  |  | 934  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  | 6863  |  | 6863  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful  |  |  |  |  |  |  |  |  |
|  | $191988  | $224005  | $99340  | $34448  | $44169  | $195190  | $— | $789140  |
| &nbsp;&nbsp;Current-period gross chargeoffs | $— | $— | $— | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;Current-period recoveries  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Current-period net chargeoffs | $— | $— | $— | $— | $— | $— | $— | $— |
| Commercial mortgages – owner-occupied: | Commercial mortgages – owner-occupied: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass | $56771  | $56039  | $21199  | $41532  | $2763  | $35785  | $1487  | $215576  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Watch |  | 5279  |  |  |  |  |  | 5279  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful  |  |  |  |  |  |  |  |  |
|  | $56771  | $61318  | $21199  | $41532  | $2763  | $35785  | $1487  | $220855  |
| &nbsp;&nbsp;Current-period gross chargeoffs | $— | $— | $— | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;Current-period recoveries  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Current-period net chargeoffs | $— | $— | $— | $— | $— | $— | $— | $— |

---

(1) Includes commercial and industrial lines converted to term of $4.7 million.

‎

------

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Term Loans by Origination Year | Revolving |  |
| *(in thousands)* | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Loans (1) | Total |
| Residential mortgages: | Residential mortgages: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass | $203272  | $169522  | $35754  | $17030  | $182248  | $632039  | $45213  | $1285078  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Watch |  |  |  |  |  | 279  |  | 279  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful  |  |  |  |  |  |  |  |  |
|  | $203272  | $169522  | $35754  | $17030  | $182248  | $632318  | $45213  | $1285357  |
| &nbsp;&nbsp;Current-period gross chargeoffs | $— | $— | $— | $— | $— | $(372) | $— | $(372) |
| &nbsp;&nbsp;Current-period recoveries  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Current-period net chargeoffs | $— | $— | $— | $— | $— | $(372) | $— | $(372) |
| Consumer and other: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Risk rating: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass | $241  | $— | $— | $100  | $— | $72  | $844  | $1257  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Watch |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special Mention |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substandard |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doubtful  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not Rated  |  |  |  |  |  |  | 133  | 133  |
|  | $241  | $— | $— | $100  | $— | $72  | $977  | $1390  |
| &nbsp;&nbsp;Current-period gross chargeoffs | $— | $— | $— | $— | $— | $— | $(1) | $(1) |
| &nbsp;&nbsp;Current-period recoveries  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Current-period net chargeoffs | $— | $— | $— | $— | $— | $— | $(1) | $(1) |
| &nbsp;&nbsp;Total loans | $679797  | $672726  | $207001  | $223658  | $345988  | $1119940  | $62623  | $3311733  |
| &nbsp;&nbsp;Total net chargeoffs |  |  |  |  |  | (372) | (358) | (730) |

---

(1)Includes home equity lines converted to term of $8.1 million.

***NOTE D – PREMISES AND EQUIPMENT AND OPERATING LEASES***

***Premises and equipment.*** Bank premises and equipment consist of the following:

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 |
| Land  | $8552 | $8459 |
| Buildings and improvements | 22120 | 28838 |
| Leasehold improvements  | 12002 | 11421 |
| Furniture and equipment  | 36595 | 34782 |
| Construction in process | 433 | 493 |
|  | 79702 | 83993 |
| Accumulated depreciation and amortization  | (48042) | (46470) |
|  | $31660 | $37523 |

---

In 2022, the Bank incurred a net loss of $553,000 on the disposition of certain premises and fixed assets. The net loss includes a gain on sale of five Glen Head, NY buildings, a writedown and transfer to held-for-sale of a remaining building in Glen Head and a write-off of all related equipment and fixed assets including a nearby freestanding ATM location.

Land and buildings held-for-sale at December 31, 2022 and 2021 amounted to $2.4 million and $3.8 million, respectively.

***Operating Leases.*** The Bank leases certain branch and back-office locations under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2038 and had a weighted average remaining term of 11.79 and 5.81 years at December 31, 2022 and 2021, respectively. Many of the Bank's leases include renewal options of up to 10 years with the longest option extending to 25 years. The exercise of lease renewal options is at the Bank's sole discretion.

The weighted average discount rate for leases in place at December 31, 2022 and 2021 was 3.24% and 2.93%, respectively. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Bank had one such lease in 2022 and two during 2020 and recognized rent expense for these leases on a straight-line basis over the lease term. There were no short-term leases in 2021.

------

The Bank's branch optimization strategy resulted in charges of $905,000 in 2022, $3.1 million in 2021 and $148,000 in 2020 related to the closing or relocation of leased branch office space. The charges include rent and depreciation expenses, lease acceleration costs and asset disposal charges. These charges are included in the consolidated statements of income in "occupancy and equipment expense" and, in 2022, partially included in "loss on disposition of premises and fixed assets."

Rental payments required by the Bank's lease agreements may increase over time based on certain variable components such as real estate taxes and common area maintenance charges.

The components of rent expense were as follows:

---

| | | | |
|:---|:---|:---|:---|
| , |  |  |  |
|  | December 31, | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 | 2020 |
| Operating lease cost | $3271 | $4462 | $2605 |
| Variable lease cost  | 490 | 405 | 608 |
| Short-term lease cost | 10 |  | 103 |
|  | $3771 | $4867 | $3316 |

---

The following is a maturity analysis of the operating lease liability at December 31, 2022.

---

| | |
|:---|:---|
| Year *(dollars in thousands)* | Total |
| 2023 | $2954 |
| 2024 | 3284 |
| 2025 | 3142 |
| 2026 | 2878 |
| 2027 | 2592 |
| Thereafter | 16757 |
| &nbsp;&nbsp;Total lease payments | 31607 |
| &nbsp;&nbsp;Less: interest | 5711 |
|  | $25896 |

---

***NOTE E – DEPOSITS***

The following table sets forth the remaining maturities of the Bank's time deposits at December 31, 2022.

---

| | |
|:---|:---|
| Year *(dollars in thousands)* | Total |
| 2023 | $320710 |
| 2024 | 94564 |
| 2025 | 14418 |
| 2026 | 12936 |
| 2027 | 19473 |
| Thereafter | 16880 |
|  | $478981 |

---

Time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $104.7 million and $54.0 million at December 31, 2022 and 2021, respectively. Deposits from executive officers, directors and their affiliates at December 31, 2022 and 2021 were approximately $8.8 million and $9.1 million, respectively. Time deposits maturing in 2023 include $135.0 million of brokered deposits.

------

***NOTE F – BORROWED FUNDS***

Borrowings at December 31, 2022 and 2021 consisted of overnight and fixed rate Federal Home Loan Bank ("FHLB") advances as follows.

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 |
| Short-term borrowings: |  |  |
| &nbsp;&nbsp;FHLB overnight advances | $— | $75000 |
| &nbsp;&nbsp;FHLB 3 month advances |  | 50000 |
|  |  | 125000 |
| Long-term debt: |  |  |
| &nbsp;&nbsp;FHLB advances  | 411000 | 186322 |
|  | $411000 | $311322 |

---

Accrued interest payable on borrowed funds is included in "accrued expenses and other liabilities" in the consolidated balance sheets and amounted to $535,000 and $336,000 at December 31, 2022 and 2021, respectively.

FHLB advances are collateralized by a blanket lien on residential and commercial mortgage loans with a lendable value of $2.2 billion at December 31, 2022 and 2021. Each advance is non-amortizing and, for those advances with a term greater than one day, subject to a prepayment penalty. Short-term FHLB advances are those with original maturities of 90 days or less.

The following table sets forth as of December 31, 2022 the contractual maturities and weighted average interest rates of FHLB advances for each of the next five years. There are no FHLB advances with contractual maturities beyond four years at December 31, 2022.

---

| | | |
|:---|:---|:---|
| Contractual Maturity *(dollars in thousands)* | Amount | Weighted<br>‎Average<br>‎Rate |
| Overnight | $— | —% |
| 2023 | 213500 | 3.03 |
| 2024 | 187500 | 4.14 |
| 2025 |  |  |
| 2026 | 10000 | 2.12 |
| 2027 |  |  |
|  | 411000 | 3.51 |
|  | $411000 | 3.51% |

---

***NOTE G – INCOME TAXES***

The Corporation, the Bank and the Bank's subsidiaries, except for the REIT, file a consolidated federal income tax return. Income taxes charged to earnings in 2022, 2021 and 2020 had effective tax rates of 19.4%, 19.2% and 16.8%, respectively. The following table sets forth a reconciliation of the statutory federal income tax rate to the Corporation's effective tax rate.

---

| | | | |
|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
|  | 2022 | 2021 | 2020 |
| Statutory federal income tax rate  | 21.0% | 21.0% | 21.0% |
| State and local income taxes, net of federal income tax benefit  | 1.7 | 2.1 | 0.7 |
| Tax-exempt income, net of disallowed cost of funding  | (2.8) | (3.3) | (4.0) |
| BOLI income | (1.1) | (0.9) | (1.0) |
| Excess tax benefit of stock-based compensation |  | 0.1 |  |
| Non-deductible officer compensation | 0.1 |  |  |
| Other | 0.5 | 0.2 | 0.1 |
|  | 19.4% | 19.2% | 16.8% |

---

------

***Provision for Income Taxes***. The following table sets forth the components of the provision for income taxes.

---

| | | | |
|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
| *(in thousands)* | 2022 | 2021 | 2020 |
| Current: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Federal  | $9287 | $8807 | $8703 |
| &nbsp;&nbsp;&nbsp;&nbsp;State and local | 1330 | 1467 | 952 |
|  | 10617 | 10274 | 9655 |
| Deferred:  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Federal  | 358 | (76) | (747) |
| &nbsp;&nbsp;&nbsp;&nbsp;State and local | 312 | 20 | (584) |
|  | 670 | (56) | (1331) |
|  | $11287 | $10218 | $8324 |

---

***Net Deferred Tax Asset***. The following table sets forth the components of the Corporation's net deferred tax asset.

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
| *(in thousands)* | 2022 | 2021 |
| Deferred tax assets: |  |  |
| &nbsp;&nbsp;Unrealized loss on AFS securities | $24957 | $— |
| &nbsp;&nbsp;Allowance for credit losses and off-balance sheet credit exposure | 9767 | 9323 |
| &nbsp;&nbsp;Operating lease liability | 7951 | 3469 |
| &nbsp;&nbsp;Stock-based compensation | 865 | 689 |
| &nbsp;&nbsp;Contract incentive | 139 | 339 |
| &nbsp;&nbsp;Asset writedown | 51 | 51 |
| &nbsp;&nbsp;Accrued bonuses and severance | 50 | 1262 |
| &nbsp;&nbsp;Retirement expense | 38 | 44 |
| &nbsp;&nbsp;Interest on nonperforming loans | 6 | 38 |
| &nbsp;&nbsp;Unrealized loss on interest rate swaps |  | 538 |
| &nbsp;&nbsp;Net operating loss carryforwards |  | 54 |
|  | 43824 | 15807 |
| Valuation allowance |  |  |
|  | 43824 | 15807 |
| Deferred tax liabilities: |  |  |
| &nbsp;&nbsp;Right-of-use asset | 7354 | 2599 |
| &nbsp;&nbsp;Prepaid pension | 3370 | 5874 |
| &nbsp;&nbsp;Deferred loan costs | 1545 | 1529 |
| &nbsp;&nbsp;Depreciation | 272 | 791 |
| &nbsp;&nbsp;Prepaid expenses | 159 | 159 |
| &nbsp;&nbsp;Unrealized gains on AFS securities |  | 868 |
|  | 12700 | 11820 |
| Net deferred tax asset | $31124 | $3987 |

---

The Corporation had no material unrecognized tax benefits at December 31, 2022, 2021 or 2020. The Corporation has not taken any tax positions for which it is reasonably possible that unrecognized tax benefits will significantly increase within the next 12 months.

The Corporation is subject to Federal, NY State, NYC, New Jersey and Connecticut income taxes. The Corporation did not incur any amounts for interest and penalties due taxing authorities for calendar years 2022, 2021 or 2020. During 2020, the NY State Department of Taxation and Finance completed an examination of the Corporation's 2016, 2017 and 2018 state income tax returns with a de minimis amount due relating to 2016. The tax years 2020 through 2022 remain open to examination by the Internal Revenue Service, NY State, NYC, New Jersey and Connecticut.

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***NOTE H – REGULATORY MATTERS***

***Minimum Regulatory Capital Requirements*.** The Corporation and the Bank are subject to the Basel III regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action ("PCA") regulations, involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Failure to meet the minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the financial statements of the Corporation and Bank. The most recent regulatory notifications categorized the Bank as well capitalized under the PCA provisions and there are no conditions or events since that notification that management believes have changed that category.

In accordance with the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies adopted, effective January 1, 2020, a final rule whereby financial institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9% ("qualifying community banking organizations"), are eligible to opt into a community bank leverage ratio ("CBLR") framework. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% are considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies' capital rules and will be considered to have met the well capitalized ratio requirements under the PCA statutes. The agencies reserved the authority to disallow the use of the CBLR framework by a financial institution or holding company, based on the risk profile of the organization.

The Corporation and the Bank elected to adopt the CBLR framework. As a qualifying community banking organization, the Corporation and the Bank may opt out of the CBLR framework in any subsequent quarter by completing its regulatory agency reporting using the traditional capital rules. In April 2020, the federal banking agencies issued interim final rules pursuant to section 4012 of the Coronavirus Aid, Relief, and Economic Security Act, temporarily lowering the CBLR requirement to 8.00% through the end of 2020, 8.50% for calendar year 2021 and 9.00% in 2022.

The Corporation and the Bank exclude accumulated OCI components from Tier 1 and Total regulatory capital.

During 2020, 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's and the Bank's actual and required capital amounts and ratios under the CBLR rules at December 31, 2022 and 2021 are presented in the tables below.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2022 | 2022 |
|  | Actual Capital | Actual Capital | To Be Well Capitalized Under CBLR Framework | To Be Well Capitalized Under CBLR Framework |
| *(dollars in thousands)* | Amount | Ratio | Amount | Ratio |
| Tier 1 capital to average assets: |  |  |  |  |
| &nbsp;&nbsp;Consolidated | $430366 | 9.83% | $394017 | 9.00% |
| &nbsp;&nbsp;Bank | 429377 | 9.81 | 393883 | 9.00 |
|  | 2021 | 2021 | 2021 | 2021 |
|  | Actual Capital | Actual Capital | To Be Well Capitalized Under CBLR Framework | To Be Well Capitalized Under CBLR Framework |
| *(dollars in thousands)* | Amount | Ratio | Amount | Ratio |
| Tier 1 capital to average assets: |  |  |  |  |
| &nbsp;&nbsp;Consolidated | $417615 | 10.23% | $346965 | 8.50% |
| &nbsp;&nbsp;Bank | 417258 | 10.23 | 346751 | 8.50 |

---

***Other Matters.*** The source of funds for the Corporation's dividend payments to shareholders is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid by the Bank without prior approval of regulatory agencies. Under these regulations, the amount of dividends that the Bank may pay in any calendar year is limited to the current year's net profits, combined with the retained net profits of the preceding two years, subject to the minimum capital requirements described above. During 2023, the Bank could, without prior approval, declare dividends of approximately $24.5 million plus any 2023 net profits retained to the date of the dividend declaration.

Regulation D of the Board of Governors of The Federal Reserve System may require banks to maintain reserves against certain deposit balances. There was no reserve requirement in 2022 or 2021.

------

***NOTE I – STOCK-BASED COMPENSATION***

On April 20, 2021, the stockholders of the Corporation approved the 2021 Equity Incentive Plan ("2021 Plan"). Upon approval of the 2021 Plan, no further awards could be made under the 2014 Equity Incentive Plan ("2014 Plan").

***2021 Plan.*** Under the 2021 Plan, awards may be granted to employees and non-employee directors as stock options, restricted stock awards or RSUs, with a one year minimum vesting period for at least 95% of the awards granted. All awards granted under the 2021 Plan will immediately vest upon an involuntary termination following a change in control, total and permanent disability, as defined, or death.

The Corporation has 750,000 shares of common stock reserved for awards under the 2021 Plan, plus 23,167 shares that remained available for grant as full value RSUs or restricted stock awards under the 2014 Plan. RSUs granted under the 2014 Plan that expire or are forfeited after April 20, 2021 are added to the number of shares of common stock reserved for issuance of awards under the 2021 Plan. At December 31, 2022, 618,146 equity awards remain available to be granted under the 2021 Plan.

***2014 Plan.*** Under the 2014 Plan, awards were granted to employees and non-employee directors as non-qualified stock options, restricted stock awards and RSUs. Substantially all of the awards granted under the 2014 Plan were RSUs. All awards granted under the 2014 Plan will immediately vest upon an involuntary termination following a change in control, total and permanent disability, as defined, or death, and with certain exceptions, will immediately vest in the event of retirement, as defined.

***Details of RSUs.*** The following table summarizes the vesting schedule of RSUs outstanding at December 31, 2022.

---

| | |
|:---|:---|
|  | Total |
| Number of RSUs: |  |
| &nbsp;&nbsp;Vested and convertible at Dec 31, 2022 | 68476 |
| &nbsp;&nbsp;Scheduled to vest during: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;2023 | 87991 |
| &nbsp;&nbsp;&nbsp;&nbsp;2024 | 46005 |
| &nbsp;&nbsp;&nbsp;&nbsp;2025 | 37861 |
| &nbsp;&nbsp;&nbsp;&nbsp;2026 | 3332 |
| &nbsp;&nbsp;&nbsp;&nbsp;2027 | 3328 |
|  | 246993 |

---

The RSUs in the table above include performance-based RSUs with vesting based on the financial performance of the Corporation in 2022 and 2023 and service-based RSUs with various service-based vesting periods. The grant date fair value of RSUs is equal to the market price of the shares underlying the awards on the grant date, discounted for dividends that are not paid on these RSUs.

The fair values of awards made in 2022, 2021 and 2020, and the assumptions utilized in determining such values, are presented below.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2022 | 2022 |
|  | Performance-Based | Service-Based | Service-Based | Service-Based |
|  | Vesting | Vesting | Vesting | Vesting |
| Grant date fair value | $20.07 | $17.70 | to | $20.07 |
| Market price on grant date | $21.64 | $18.12 | to | $21.64 |
| Expected annual dividend | $0.80 | $0.42 | to | $0.80 |
| Expected term (in years) | 2.0 | 1.0 | to | 5.0 |
| Risk-free interest rate | 1.12% | 1.12% | to | 4.56% |
|  | 2021 | 2021 | 2021 | 2021 |
| Grant date fair value | $15.31 | $15.31 | to | $20.54 |
| Market price on grant date | $16.83 | $16.83 | to | $21.58 |
| Expected annual dividend | $0.76 | $0.76 | to | $0.80 |
| Expected term (in years) | 2.0 | 1.0 | to | 3.0 |
| Risk-free interest rate | 0.13% | 0.08% | to | 0.52% |
|  | 2020 | 2020 | 2020 | 2020 |
| Grant date fair value | $21.30 | $14.32 | to | $21.30 |
| Market price on grant date | $23.10 | $16.46 | to | $23.10 |
| Expected annual dividend | $0.72 | $0.72 | to | $0.76 |
| Expected term (in years) | 2.0 | 2.0 | to | 5.0 |
| Risk-free interest rate | 1.41% | 0.23% | to | 1.41% |

---

------

In January 2023, 142,280 RSUs were awarded under the 2021 Plan, including 83,028 performance-based RSUs and 59,252 service-based RSUs.

The following table presents a summary of RSUs outstanding at December 31, 2022 and changes during the year then ended.

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  | 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 | 207359 | $17.70 |  |  |
| Granted  | 140150 | 19.67 |  |  |
| Converted | (97658) | 18.85 |  |  |
| Forfeited | (2858) | 18.49 |  |  |
| Outstanding at December 31, 2022 | 246993 | $18.35 | 0.80 | $4446 |
| Vested and Convertible at December 31, 2022 | 68476 | $17.63 |  | $1233 |

---

RSUs outstanding at December 31, 2022 include 101,493 performance-based RSUs granted in 2022 and 2021, of which 68,476 are vested and convertible at year-end, and 145,500 service-based RSUs. The performance-based RSUs have a maximum payout potential of 1.50 shares of the Corporation's common stock for each RSU awarded. Based on the Corporation's performance in 2022, an additional 7,109 shares were earned on the performance-based RSUs. These additional shares are not reflected in the table above. Service-based RSUs have a maximum payout potential of one share of the Corporation's common stock for each RSU awarded.

The total intrinsic value of RSUs converted in 2022, 2021 and 2020 was $2.0 million, $1.6 million and $3.6 million, respectively.

***Stock Option Activity.*** During 2022, the 750 stock options outstanding at December 31, 2021 were forfeited. There were no stock options outstanding at December 31, 2022.

No stock options were exercised in 2022. The total intrinsic value of options exercised in 2021 and 2020 was $55,000 and $329,000, respectively. Cash received from option exercises in 2021 and 2020, was $133,000 and $526,000, respectively. Tax benefits from stock option exercises were $17,000 and $99,000 in 2021 and 2020, respectively.

***Compensation Expense.*** The Corporation recorded expense for share-based payments of $2.5 million, $1.6 million and $1.8 million in 2022, 2021 and 2020, respectively, and related income tax benefits of $760,000, $420,000 and $536,000, respectively.

***Unrecognized Compensation Cost.*** As of December 31, 2022, there was $1.9 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 1.73 years.

***Other.*** No cash was used to settle stock options in 2021 or 2020. The Corporation uses newly issued shares for the conversion of RSUs. During 2022, 2021 and 2020, 3,315, 6,580 and 7,785 shares, respectively, of the Corporation's common stock were issued to members of the Board of Directors in payment of director fees. In April 2020, the Corporation awarded 38,064 shares of common stock to its Directors under the 2014 Plan with immediate vesting and a total grant date fair value of $547,000.

***NOTE J – RETIREMENT PLANS***

The Bank has a 401(k) plan and a defined benefit pension plan ("Pension Plan" or "Plan"). Employees are immediately eligible to participate in the 401(k) plan provided they are at least 18 years of age. Participants may elect to contribute up to 100% of gross compensation, as defined, subject to the limitations of Section 401(k) of the Internal Revenue Code. The Bank may, at its sole discretion, make matching contributions to each participant's account based on the amount of the participant's contributions. Participants are fully vested in their elective contributions and, after five years of participation in the 401(k) plan, are fully vested (20% vesting per year) in the matching contributions, if any, made by the Bank. The Bank's expense for matching contributions was $530,000, $519,000 and $524,000 for 2022, 2021 and 2020, respectively.

An internal management committee (the "Committee") oversees the affairs of the Pension Plan and acts as named fiduciary. The Committee has retained Vanguard Group, Inc., including its subsidiaries and affiliates ("Vanguard"), to act as discretionary investment agent, trustee and custodian for the Plan. Vanguard has formulated investment recommendations customized to meet the Committee's objectives and, after approval by the Committee, such investment recommendations are incorporated into the investment guidelines and policies contained in the investment management agreement between the Bank and Vanguard (the "Investment Management Agreement"). The Committee utilizes a formal Investment Policy Statement which includes the investment guidelines and policies contained in the Investment Management Agreement. The Investment Policy Statement is periodically revised by the Committee as deemed appropriate.

------

Employees are eligible to participate in the Pension Plan after attaining 21 years of age and completing 12 full months of service. Pension benefits are generally based on a percentage of average annual compensation during the period of creditable service. The Bank makes contributions to the Pension Plan which, when taken together with participant contributions equal to 2% of their compensation, will be sufficient to fund these benefits. The Bank's funding method, the unit credit actuarial cost method, is consistent with the funding requirements of applicable federal laws and regulations which set forth both minimum required and maximum tax deductible contributions. Employees become fully vested after four years of participation in the Pension Plan (no vesting occurs during the four year period).

***Significant Actuarial Assumptions****.* The following table sets forth the significant actuarial assumptions used to determine the benefit obligation at December 31, 2022, 2021 and 2020 and the benefit cost for each of the Plan years then ended.

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| | | | |
|:---|:---|:---|:---|
|  | 2022 | 2021 | 2020 |
| Weighted average assumptions used to determine the |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;benefit obligation at year end: |  |  |  |
| &nbsp;&nbsp;Discount rate  | 5.44% | 2.97% | 2.67% |
| &nbsp;&nbsp;Rate of increase in compensation levels  | 3.50% | 3.50% | 3.50% |
| Weighted average assumptions used to determine net pension cost: |  |  |  |
| &nbsp;&nbsp;Discount rate  | 2.97% | 2.67% | 3.55% |
| &nbsp;&nbsp;Rate of increase in compensation levels  | 3.50% | 3.50% | 3.50% |
| &nbsp;&nbsp;Expected long-term rate of return on plan assets  | 5.25% | 5.25% | 5.50% |

---

The increase in the discount rate from 2.97% in 2021 to 5.44% in 2022 decreased the projected benefit obligation at December 31, 2022 by approximately $15.3 million. Changes due to experience, including changes in participant demographics, resulted in a net actuarial loss of approximately $1.6 million during 2022.

The increase in the discount rate from 2.67% in 2020 to 2.97% in 2021 decreased the projected benefit obligation at December 31, 2021 by approximately $2.4 million. In calculating the benefit obligation at December 31, 2021, the mortality table previously utilized, RP-2014 Healthy Annuitant/Employee Mortality Table with Projection Scale MP-2020, was adjusted to reflect Scale MP-2021. The updated mortality table increased the projected benefit obligation at December 31, 2021 by approximately $177,000.

***Net Pension Cost.*** The following table sets forth the components of net periodic pension cost.

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| | | | |
|:---|:---|:---|:---|
| *(in thousands)* | 2022 | 2021 | 2020 |
| Service cost plus expected expenses and net of expected plan |  |  |  |
| &nbsp;&nbsp;participant contributions | $2133 | $2131 | $1647 |
| Interest cost | 1641 | 1454 | 1647 |
| Expected return on plan assets | (3903) | (3914) | (3557) |
| Net pension cost (credit) | $(129) | $(329) | $(263) |

---

The components of net pension credit other than the service cost component were included in the line item "Other noninterest income" in the consolidated statements of income. The service cost component was included in the line item "Salaries and employee benefits" in the consolidated statements of income.

------

***Funded Status of the Plan.*** The following table sets forth the change in the projected benefit obligation and Plan assets for each year and, as of the end of each year, the funded status of the Plan and accumulated benefit obligation.

---

| | | | |
|:---|:---|:---|:---|
| *(in thousands)* | 2022 | 2021 | 2020 |
| Change in projected benefit obligation: |  |  |  |
| &nbsp;&nbsp;Projected benefit obligation at beginning of year | $56587 | $55642 | $47471 |
| &nbsp;&nbsp;Service cost  | 2357 | 2340 | 1844 |
| &nbsp;&nbsp;Interest cost | 1641 | 1454 | 1647 |
| &nbsp;&nbsp;Benefits paid | (2361) | (2264) | (1919) |
| &nbsp;&nbsp;Assumption changes | (15343) | (2173) | 5771 |
| &nbsp;&nbsp;Experience loss and other | 1579 | 1588 | 828 |
| Projected benefit obligation at end of year | 44460 | 56587 | 55642 |
| Change in fair value of plan assets: |  |  |  |
| &nbsp;&nbsp;Fair value of plan assets at beginning of year | 75684 | 75751 | 65746 |
| &nbsp;&nbsp;Actual return on plan assets | (18113) | 1906 | 11657 |
| &nbsp;&nbsp;Plan participant contributions | 425 | 413 | 383 |
| &nbsp;&nbsp;Benefits paid | (2361) | (2264) | (1919) |
| &nbsp;&nbsp;Expenses | (126) | (122) | (116) |
| Fair value of plan assets at end of year | 55509 | 75684 | 75751 |
| Funded status at end of year | $11049 | $19097 | $20109 |
| Accumulated benefit obligation | $41551 | $52362 | $51541 |

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During 2022, the Bank did not make a contribution to the Plan and the Bank has no minimum required pension contribution for the Plan year ending September 30, 2023. Its maximum tax-deductible contribution for the tax year beginning January 1, 2023 is $33.3 million. The Bank does not expect to make a contribution in 2023.

***Plan Assets.*** The objective for the Plan's assets is to generate long-term investment returns from both income and capital appreciation which outpaces the rate of inflation, while maintaining sufficient liquidity to ensure the Plan's ability to pay all anticipated benefit and expense obligations when due. The Plan will maintain a de minimis amount of cash equivalents, with the remaining assets allocated across two broadly-defined financial asset categories: (1) equity, both domestic and international; and (2) fixed income of various durations and issuer type. The goal of the equity allocation is to supplement the Bank's contributions to the Plan when the Plan is underfunded and increase surplus when the Plan is overfunded. The fixed income component will include longer-duration bonds designed to match and hedge the characteristics of the Plan's liabilities. Cash equivalents, under normal circumstances, will be temporary holdings for the purpose of paying expenses and monthly benefits.

For fixed income investments: (1) the minimum average credit quality shall be investment grade (Standard & Poor's BBB or Moody's Baa) or higher; and (2) no more than 5% of the portfolio may be invested in securities with ratings below investment grade, and none may be rated below investment grade at the time of purchase.

Reasonable precautions are taken to avoid excessive concentrations to protect the portfolio against unfavorable outcomes within an asset class. Specifically, the following guidelines are in place:

With the exception of fixed income investments explicitly guaranteed by the U.S. government, no single investment security shall represent more than 5% of total Plan assets; and

With the exception of passively managed investment vehicles seeking to match the returns of broadly diversified market indices or diversified investment vehicles chosen specifically to hedge the interest rate risk embedded in Plan liabilities, no single investment pool or investment company (mutual fund) shall comprise more than 10% of total plan assets.

The portfolio will be rebalanced to the target asset allocation, if needed, no less often than quarterly. Unless expressly authorized in writing by the Committee, the following investing activities are prohibited:

Purchasing securities on margin;

Pledging or hypothecating securities, except for loans of securities that are fully collateralized;

Purchasing or selling derivative securities for speculation or leverage; and

Engaging in investment strategies that have the potential to amplify or distort the risk of loss beyond a level that is reasonably expected given the objectives of the portfolio.

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The Plan's actual asset allocations, target allocations and expected long-term rates of return by asset category are set forth in the following tables.

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| | | | |
|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Target<br>‎Allocation | Percentage of<br>‎Plan Assets | Weighted <br>‎Average Expected<br>‎Long-term<br>‎Rates of Return |
| Cash equivalents | 0% - 1% | 0.3% | <1.00% |
| Equity mutual funds  | 20% - 30% | 24.8% | 6.3% to 8.8% |
| Fixed income mutual funds | 70% - 80% | 74.9% | 4.3% to 5.6% |
|  |  | 100.0% | 4.8% to 6.3% |
|  | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| Cash equivalents | 0% - 1% | 0.3% | <1.00% |
| Equity mutual funds  | 20% - 30% | 28.2% | 5.3% to 7.7% |
| Fixed income mutual funds | 70% - 80% | 71.5% | 2.5% to 3.7% |
|  |  | 100.0% | 3.3% to 4.8% |

---

The ranges for the weighted average expected long-term rates of return for equity funds, bond funds and total plan assets set forth in the preceding table represent expected 25<sup>th</sup> to 75<sup>th</sup> percentile returns provided by Vanguard. For these purposes Vanguard utilizes a proprietary capital markets model (the "model") developed and maintained by Vanguard's primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. The theoretical and empirical foundation of the model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk. At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available historical monthly financial and economic data.

At December 31, 2022, the equity and fixed income components of Plan assets consisted of the following Vanguard institutional funds:

***Equity***

Vanguard Total Stock Market Index Fund (VITSX). This fund seeks to track the performance of the Center for Research in Security Prices (CRSP) U.S. Total Market Index. The fund is passively managed using index sampling and consists of large, small and mid-cap equity securities diversified across growth and value styles.

Vanguard Total International Stock Index Fund (VTSNX). This fund seeks to track the performance of the Financial Times Stock Exchange (FTSE) Global All Cap ex U.S. Index. The fund is passively managed and includes broad exposure across developed and emerging non-U.S. equity markets.

***Fixed Income***

Vanguard Long-Term Investment-Grade Fund (VWETX). This fund seeks high and sustainable current income. Investments are selected using a fundamental, bottom-up credit selection process and consist of long-term, high-quality bonds broadly diversified by issuer and industry sector.

Vanguard Long-Term Treasury Index Fund (VLGIX). This fund seeks to track the performance of the Bloomberg Barclays U.S. Long Treasury Bond Index. The fund is passively managed using index sampling and includes long-term, fixed income securities issued by the U.S. Treasury.

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***Fair Value of Plan Assets.*** The fair value of Plan assets at December 31, 2022 and 2021 is summarized below.

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  | Fair Value Measurements Using: | Fair Value Measurements Using: | Fair Value Measurements Using: |
| *(in thousands)* | Total | Quoted Prices<br>‎in Active<br>‎Markets for<br>‎Identical Assets<br>‎(Level 1) | Significant<br>‎Other<br>‎Observable<br>‎Inputs<br>‎(Level 2) | Significant<br>‎Unobservable<br>‎Inputs<br>‎(Level 3) |
| **December 31, 2022:** |  |  |  |  |
| Cash equivalents: |  |  |  |  |
| &nbsp;&nbsp;Vanguard Prime Money Market Mutual Fund | $192 | $— | $192 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Total cash equivalents | 192 |  | 192 |  |
| Equity mutual funds: |  |  |  |  |
| &nbsp;&nbsp;Vanguard Total Stock Market Index Fund (VITSX) | 8131 | 8131 |  |  |
| &nbsp;&nbsp;Vanguard Total International Stock Index Fund (VTSNX) | 5663 | 5663 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total equity mutual funds | 13794 | 13794 |  |  |
| Fixed income mutual funds: |  |  |  |  |
| &nbsp;&nbsp;Vanguard Long-Term Investment Grade Fund (VWETX) | 30869 | 30869 |  |  |
| &nbsp;&nbsp;Vanguard Long-Term Treasury Index Fund (VLGIX) | 10654 | 10654 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total fixed income mutual funds | 41523 | 41523 |  |  |
| Total Plan Assets | $55509 | $55317 | $192 | $— |
| **December 31, 2021:** |  |  |  |  |
| Cash equivalents: |  |  |  |  |
| &nbsp;&nbsp;Vanguard Prime Money Market Mutual Fund | $195 | $— | $195 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Total cash equivalents | 195 |  | 195 |  |
| Equity mutual funds: |  |  |  |  |
| &nbsp;&nbsp;Vanguard Total Stock Market Index Fund (VITSX) | 12792 | 12792 |  |  |
| &nbsp;&nbsp;Vanguard Total International Stock Index Fund (VTSNX) | 8560 | 8560 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total equity mutual funds | 21352 | 21352 |  |  |
| Fixed income mutual funds: |  |  |  |  |
| &nbsp;&nbsp;Vanguard Long-Term Investment Grade Fund (VWETX) | 40183 | 40183 |  |  |
| &nbsp;&nbsp;Vanguard Long-Term Treasury Index Fund (VLGIX) | 13954 | 13954 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total fixed income mutual funds | 54137 | 54137 |  |  |
| Total Plan Assets | $75684 | $75489 | $195 | $— |

---

The fair values of the Vanguard mutual funds represent their net asset values ("NAV") at December 31, 2022 and 2021. On an ongoing basis, the Plan has the ability to readily redeem its investments in these funds at their NAV per share with no advance notification.

An explanation of matrix pricing and the definitions of Level 1, 2 and 3 fair value measurements are included in "Note M – Fair Value of Financial Instruments" to these consolidated financial statements.

At December 31, 2022 and 2021, the Plan's cash and cash equivalents amounted to 0.3% of the Plan's total assets and represented investments in the Vanguard Prime Money Market Mutual Fund.

***Estimated Future Benefit Payments.*** The following benefit payments, which reflect expected future service as appropriate, are expected to be made by the Plan.

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| | |
|:---|:---|
| Year *(in thousands)* | Amount |
| 2023 | $2594 |
| 2024 | 2798 |
| 2025 | 2996 |
| 2026 | 3109 |
| 2027 | 3226 |
| 2028 - 2032 | 17506 |

---

Retirement plan expense for a discontinued Supplemental Executive Retirement Plan was $157,000 in 2020.

------

***NOTE K – OTHER OPERATING EXPENSES***

Expenses included in other operating expenses that exceed one percent of the aggregate of total interest income and noninterest income in one or more of the years shown are as follows.

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| | | | |
|:---|:---|:---|:---|
| *(in thousands)* | 2022 | 2021 | 2020 |
| Telecommunications | $1669 | $1658 | $1564 |
| Computer services | 1501 | 1646 | 1619 |
| Director Fees | 1100 | 1375 | 1262 |

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***NOTE L – COMMITMENTS AND CONTINGENT LIABILITIES***

***Financial Instruments With Off-Balance-Sheet Risk.*** In the normal course of business, the Bank enters into various types of off-balance-sheet arrangements to meet the financing needs of its customers. These off-balance-sheet financial instruments include commitments to extend credit, standby letters of credit and commercial letters of credit. These instruments involve varying degrees of credit risk in excess of the amount recognized in the consolidated balance sheets and expose the Bank to credit loss in the event of nonperformance by the Bank's customers. The Bank's exposure to credit loss is represented by the contractual notional amount of these instruments. The Bank uses the same credit policies in making commitments to extend credit, and generally uses the same credit policies for letters of credit, as it does for on-balance sheet instruments such as loans.

Financial instruments whose contract amounts represent credit risk are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2021 | 2021 |
| *(in thousands)* | Fixed<br>‎Rate | Variable<br>‎Rate | Fixed<br>‎Rate | Variable<br>‎Rate |
| Commitments to extend credit | $27694 | $222470 | $52414 | $239924 |
| Standby letters of credit | 8706 |  | 3933 |  |

---

A commitment to extend credit is a legally binding agreement to lend to a customer as long as there is no violation of any condition established in the contract. Unused home equity, small business and commercial lines of credit are a large component of the Bank's variable rate loan commitments. Since some of the commitments to extend credit and letters of credit are expected to expire without being drawn upon and, with respect to unused lines of credit, can be frozen, reduced or terminated by the Bank based on the financial condition of the borrower, the total commitment amounts do not necessarily represent future cash requirements. Home equity lines generally expire ten years from their date of origination and small business lines generally have a three year term. Other real estate loan commitments generally expire within 60 to 90 days and commercial line commitments generally expire within one year. At December 31, 2022, the Bank's fixed rate loan commitments are to make loans with interest rates ranging from 5.74% to 6.24% and maturities of up to ten years. The amount of collateral obtained, if any, by the Bank upon extension of credit is based on management's credit evaluation of the borrower. Collateral held varies but may include mortgages on commercial and residential real estate, securities, deposit accounts with the Bank or other financial institutions and security interests in business assets and equipment.

Standby letters of credit are conditional commitments issued by the Bank to assure the performance or financial obligations of a customer to a third party. The Bank's standby letters of credit extend through September 2031. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. The Bank generally holds collateral and/or obtains personal guarantees supporting these commitments. The extent of collateral held for these commitments at December 31, 2022 varied from 84% to 100% of the contractual notional amount of each instrument, with the average amount of collateral totaling 99% of the aggregate outstanding notional amount. Standby letters of credit are considered financial guarantees and are recorded at fair value.

***Employment Agreements.*** At December 31, 2022, the Corporation's chief executive officer and executive vice presidents, collectively referred to as the senior executives, have employment agreements with the Corporation under which they are entitled to severance compensation in the event that their employment is terminated without cause or they terminate their employment following an event constituting Good Reason, as defined. The chief executive officer's employment agreement has a term of three years beginning January 1, 2020. Each of the other senior executives has an employment agreement with a term of two years and various effective dates. These two year and three year employment agreements automatically renew for an additional period of one year on January 1 of each year unless the Corporation gives written notice of non-renewal at least 30 days prior to such date. Notwithstanding the foregoing, each of these employment agreements expire on December 31 of the calendar year in which the executive attains normal retirement age ("Retirement Age Termination Date"), which for these purposes is age 65. At the appropriate time and at its option, the Corporation can extend the employment agreements for two years beyond their retirement age termination dates. The current aggregate annual salaries provided for in these employment agreements is $2.8 million.

***Litigation.*** From time to time the Corporation may be a named defendant in legal actions incidental to the business. For some of these actions there is always a possibility that the Corporation will sustain a financial loss. Management believes that none of the possible losses are material.

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***NOTE M – 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 Corporation deems transfers between levels of the fair value hierarchy to have occurred on the date of the event or change in circumstance that caused the transfer. There were no transfers between levels of the fair value hierarchy in either 2022 or 2021.

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: | Fair Value Measurements Using: | Fair Value Measurements Using: |
| *(in thousands)* | Total | Quoted Prices<br>‎in Active<br>‎Markets for<br>‎Identical Assets<br>‎(Level 1) | Significant<br>‎Other<br>‎Observable<br>‎Inputs<br>‎(Level 2) | Significant<br>‎Unobservable<br>‎Inputs<br>‎(Level 3) |
| **December 31, 2022:** |  |  |  |  |
| &nbsp;&nbsp;Financial Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;AFS Securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State and municipals | $305247 | $— | $304680 | $567 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass-through mortgage securities | 148520 |  | 148520 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collateralized mortgage obligations | 113394 |  | 113394 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate bonds | 106252 |  | 106252 |  |
|  | $673413 | $— | $672846 | $567 |
| **December 31, 2021:** |  |  |  |  |
| &nbsp;&nbsp;Financial Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;AFS Securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;State and municipals | $327171 | $— | $326201 | $970 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pass-through mortgage securities | 182957 |  | 182957 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collateralized mortgage obligations | 106082 |  | 106082 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate bonds | 118108 |  | 118108 |  |
|  | $734318 | $— | $733348 | $970 |
| &nbsp;&nbsp;Financial Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative - interest rate swap | $1750 | $— | $1750 | $— |

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***State and municipal AFS securities measured using Level 3 inputs.*** The Bank held five non-rated bond anticipation notes with a book value of $567,000 at December 31, 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 December 31, 2022.

***Land and Buildings.*** Premises and facilities held-for-sale of $2.4 million and $3.8 million at December 31, 2022 and 2021, respectively, 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.

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***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.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  | December 31, 2022 | December 31, 2022 |  | December 31, 2021 | December 31, 2021 |
| *(in thousands)* | Level of<br>‎Fair Value<br>‎Hierarchy | Carrying<br>‎Amount | Fair Value |  | Carrying<br>‎Amount | Fair Value |
| **Financial Assets:** |  |  |  |  |  |  |
| Cash and cash equivalents | Level 1 | $74178 | $74178 |  | $43675 | $43675 |
| Loans, net | Level 3 | 3280301 | 3064849 | (1) | 3075205 | 3048791 |
| Restricted stock | n/a | 26363 | n/a |  | 21524 | n/a |
| **Financial Liabilities:** |  |  |  |  |  |  |
| Checking deposits  | Level 1 | 1324141 | 1324141 |  | 1400998 | 1400998 |
| Savings, NOW and money market deposits  | Level 1 | 1661512 | 1661512 |  | 1685410 | 1685410 |
| Time deposits  | Level 2 | 478981 | 467986 |  | 228837 | 232973 |
| Short-term borrowings | Level 1 |  |  |  | 125000 | 125000 |
| Long-term debt | Level 2 | 411000 | 407890 |  | 186322 | 188413 |

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

***NOTE N – REVENUE FROM CONTRACTS WITH CUSTOMERS***

The noninterest income section of the consolidated statements of income includes the following types of revenues earned from the Bank's contracts with customers.

***Deposit Account Revenues.*** Fees are earned and collected on a monthly basis for account maintenance and activity-based service charges on deposit accounts. The services are performed for customers over time, requiring a time-based measure of progress. Customers may be required to maintain minimum balances and average balances. Additional fees may also be earned for overdrafts, replacement of debit cards, bill payment, lockbox services and ACH services and are earned and collected as transactions take place. All deposit account fees are accrued to income as earned, either monthly or at the point of sale, and included in the consolidated statements of income in the line item "Service charges on deposit accounts."

***Transaction and Branch Service Fees.*** The following revenue streams are components of "Other noninterest income" on the consolidated statements of income. These components totaled $2.9 million, $2.6 million and $2.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. Other items included in "Other noninterest income," such as non-service components of net pension cost, real estate tax refunds and gains on sales of fixed assets are outside of the scope of Accounting Standards Codification 606.

*Debit/Credit Card Revenues*. The Bank earns a fee when its customers use their debit or credit cards in point-of-sale transactions. These fees are generally known as interchange fees. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recorded daily, concurrently with the transaction processing services provided to the cardholder.

*Merchant Card Services.* Together with a third-party vendor, the Bank offers its small business customers debit/ credit card readers for them to accept and process card payments. The vendor aggregates the charges, collects the fees and remits the Bank's portion on a monthly basis. Fees are accrued to income as earned and collected.

*Branch Services Revenues.* The Bank charges fees for safe deposit box rentals, wire transfers, money orders, checkbook printing, official checks and ATM usage. Fees are earned, collected and generally recorded as revenue when the service is provided.

*Investment Services Revenues.* Customer assets are held in a fiduciary capacity and the Bank provides trust services to those customers as it transitions its remaining accounts to the LPL Financial platform. The services are performed for customers over time, requiring a time-based measure of progress. Fees are assessed based on market values of customer assets held as of a certain point in

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time, and income cannot be estimated prior to the end of the measurement period. Volatility in equity and other market values impacts the amount of revenue earned. Fees are generally earned and collected on a monthly or quarterly basis and accrued to income as earned.

*Investment Management Services.* The Bank provides investment management, trust, estate and custody services and offers retail investment services through a partnership with an outside service provider, LPL Financial. Fees are variable and based on various factors including the market value of financial assets under management. Fees are accrued to income as earned and collected.

***NOTE O – DERIVATIVES***

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

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 FHLB advances and included in short-term borrowings on the consolidated balance sheets. In April 2022, the swap was terminated and the FHLB advance was paid off. Termination fees were immaterial.

In May 2021 a second interest rate swap with a notional amount totaling $150 million expired and the Bank paid off $150 million of brokered certificates of deposit used in the cash flow hedge.

The following table summarizes information about the interest rate swaps designated as cash flow hedges.

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| | | |
|:---|:---|:---|
|  | December 31, 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 |

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Interest expense recorded on the swap transactions, which totaled $426,000, $2.9 million and $4.0 million for 2022, 2021 and 2020, respectively, was recorded as a component of interest expense in the consolidated statements of income. Amounts reported in accumulated OCI related to the swaps were reclassified to interest expense as interest payments were made on the Bank's variable rate liabilities. During 2022, 2021 and 2020, the Corporation had $426,000, $2.9 million and $4.0 million, respectively, of reclassifications to interest expense.

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

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| | | | |
|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
| *(in thousands)* | 2022 | 2021 | 2020 |
| Interest rate contracts: |  |  |  |
| Amount of gain (loss) recognized in OCI (effective portion) | $1324 | $668 | $(4835) |
| Amount of loss reclassified from OCI to interest expense | 426 | 2867 | 3968 |
| Amount of loss recognized in other noninterest income (ineffective portion) | **—** | **—** | **—** |

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The following table reflects the amounts relating to interest rate swaps included in the consolidated balance sheets.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Notional | Fair Value | Fair Value | Notional | Fair Value | Fair Value |
| *(in thousands)* | Amount | Asset | Liability | Amount | Asset | Liability |
| Included in other assets or other liabilities |  | $**—** | $**—** |  | $**—** | $1750 |
| Interest rate swap hedging FHLB advances | $**—** |  |  | $50000 |  |  |

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***NOTE P – PARENT COMPANY FINANCIAL INFORMATION***

Condensed financial information for the Corporation (parent company only) is as follows:

**CONDENSED BALANCE SHEETS**

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| | | |
|:---|:---|:---|
|  | December 31,  | December 31,  |
| *(in thousands)* | 2022 | 2021 |
| **Assets:** |  |  |
| &nbsp;&nbsp;Cash and due from banks | $897 | $987 |
| &nbsp;&nbsp;Investment in subsidiary bank, at equity | 363547 | 413455 |
| &nbsp;&nbsp;Prepaid income taxes | 3712 | 3120 |
| &nbsp;&nbsp;Deferred income tax benefits  | 1088 | 889 |
| &nbsp;&nbsp;Other assets  | 25 | 24 |
|  | $369269 | $418475 |
| **Liabilities:** |  |  |
| &nbsp;&nbsp;Other liabilities | $20 | $15 |
| &nbsp;&nbsp;Cash dividends payable  | 4713 | 4648 |
|  | 4733 | 4663 |
| **Stockholders' equity:** |  |  |
| &nbsp;&nbsp;Common stock | 2244 | 2324 |
| &nbsp;&nbsp;Surplus  | 78462 | 93480 |
| &nbsp;&nbsp;Retained earnings  | 348597 | 320321 |
|  | 429303 | 416125 |
| &nbsp;&nbsp;Accumulated other comprehensive income (loss), net of tax  | (64767) | (2313) |
|  | 364536 | 413812 |
|  | $369269 | $418475 |

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**CONDENSED STATEMENTS OF INCOME**

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| | | | |
|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
| *(in thousands)* | 2022 | 2021 | 2020 |
| **Income:** |  |  |  |
| &nbsp;&nbsp;Dividends from subsidiary bank | $36450 | $33200 | $25100 |
| &nbsp;&nbsp;Interest on deposits with subsidiary bank | 5 | 3 | 3 |
|  | 36455 | 33203 | 25103 |
| **Expenses:** |  |  |  |
| &nbsp;&nbsp;Salaries | 2065 | 1365 | 1241 |
| &nbsp;&nbsp;Other operating expenses | 795 | 661 | 951 |
|  | 2860 | 2026 | 2192 |
| &nbsp;&nbsp;Income before income taxes | 33595 | 31177 | 22911 |
| Income tax expense (benefit) | (791) | 89 | (570) |
| &nbsp;&nbsp;Income before undistributed earnings of subsidiary bank | 34386 | 31088 | 23481 |
| Equity in undistributed earnings | 12546 | 12001 | 17722 |
| &nbsp;&nbsp;**Net income** | $46932 | $43089 | $41203 |
| Comprehensive income (loss) | $(15522) | $37206 | $44178 |

---

 **‎** 

------

**CONDENSED STATEMENTS OF CASH FLOWS**

---

| | | | |
|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
| *(in thousands)* | 2022 | 2021 | 2020 |
| **Cash Flows From Operating Activities:** |  |  |  |
| &nbsp;&nbsp;Net income | $46932 | $43089 | $41203 |
| &nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities:<br>‎  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undistributed earnings of subsidiary bank | (12546) | (12001) | (17722) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax provision (credit) | (199) | 533 | 495 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 2466 | 1635 | 1788 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in other assets | (1) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase (decrease) in other liabilities | 5 | 1 | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other increases | (530) | (1112) | (941) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 36127 | 32145 | 24822 |
| **Cash Flows From Investing Activities:** |  |  |  |
| &nbsp;&nbsp;Capital contributions to Bank subsidiary |  |  |  |
| **Cash Flows From Financing Activities:** |  |  |  |
| &nbsp;&nbsp;Repurchase of common stock | (17889) | (14501) | (7935) |
| &nbsp;&nbsp;Proceeds from issuance of common stock, net of shares withheld  | 263 | 607 | (188) |
| &nbsp;&nbsp;Cash dividends paid | (18591) | (18261) | (17421) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities | (36217) | (32155) | (25544) |
| Net decrease in cash and cash equivalents\*  | (90) | (10) | (722) |
| Cash and cash equivalents, beginning of year | 987 | 997 | 1719 |
| Cash and cash equivalents, end of year | $897 | $987 | $997 |
| **Supplemental Schedule of Noncash Financing Activities:** |  |  |  |
| &nbsp;&nbsp;Cash dividends payable | $4713 | $4648 | $4519 |

---

\* Cash and cash equivalents is defined as cash and due from banks and includes the checking and money market accounts with the Corporation's wholly-owned bank subsidiary.

‎

------

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Shareholders and the Board of Directors of

The First of Long Island Corporation

Melville, New York

**Opinions on the Financial Statements and Internal Control over Financial Reporting**

We have audited the accompanying consolidated balance sheets of The First of Long Island Corporation (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control – Integrated Framework:(2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control – Integrated Framework:(2013)* issued by COSO.

**Basis for Opinions**

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying *Management's Report on Internal Control Over Financial Reporting*. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

**Definition and Limitations of Internal Control Over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

------

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Qualitative and Quantitative Loss Factors in the Allowance for Credit Losses

The methodology for determining the allowance for credit losses requires substantial judgment by management. As described in Note A to the consolidated financial statements, management estimates the allowance for credit losses balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

Management adjusts its historical loss experience to reflect current and forecasted conditions. In doing so, management considers a variety of general qualitative and quantitative loss factors ("Q-factors"). We consider management's application of the Q-factors in the allowance for credit losses to be a critical audit matter due to the extent of audit effort and degree of auditor judgment required to evaluate the Q-factors given the volume and nature of inputs and the significant management judgment required.

To address this matter, we tested the design and operating effectiveness of the Company's controls related to the Q-factors, including the following:

Management's application of qualitative and quantitative judgments related to the Q-factors and the resulting allocation to the allowance for credit losses;

Management's review over the completeness and accuracy of the data used as the basis for the Q-factors;

Management's testing over the mathematical accuracy of the allowance for credit losses calculation; and

Management committee review of the allowance for credit losses and provision for credit losses.

Our substantive procedures related to the Q-factors included the following:

Evaluating the reasonableness of management's application of Q-factors and the resulting allocation to the allowance for credit losses;

Testing the completeness and accuracy of certain data used in the qualitative factor calculations; and

Testing the mathematical accuracy of the allowance for credit loss calculation.

---

| |
|:---|
| <u>/s/ CROWE LLP</u> |
| Crowe LLP |

---

We have served as the Company's auditor since 2003.

New York, New York

March 9, 2023

‎

------

**ITEM 9. CHANG** **ES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE** 

None.

**ITEM 9A. CONT** **ROLS AND PROCEDURES**

**Disclosure Controls and Procedures**

The Corporation's Principal Executive Officer, Christopher Becker, and Principal Financial Officer, Jay P. McConie, 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.

**Management's Report on Internal Control Over Financial Reporting**

The management of The First of Long Island Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, based on the criteria established in *Internal Control - Integrated Framework:(2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The First of Long Island Corporation's system of internal control over financial reporting was designed by or under the supervision of the Corporation's Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of the preparation of the Corporation's financial statements for external and regulatory reporting purposes, in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The First of Long Island Corporation's management assessed the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2022, based on the criteria established in *Internal Control - Integrated Framework:(2013)* issued by COSO. Based on the assessment, management determined that, as of December 31, 2022, the Corporation's internal control over financial reporting is effective.

**Report of Independent Registered Public Accounting Firm**

Crowe LLP, an independent registered public accounting firm, has expressed an opinion on the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2022 in their report which appears on page 63.

**Changes in Internal Control Over Financial Reporting**

There were no changes in internal control over financial reporting that occurred during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

**ITEM 9B. OTH** **ER INFORMATION**

None.

**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION**

None.

**PA** **RT III**

**ITEM 10. DIREC** **TORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

The information regarding directors, executive officers and corporate governance is incorporated herein by reference to the Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held April 18, 2023 that was filed with the Securities and Exchange Commission ("SEC").

The Corporation has adopted a code of ethics that applies to its principal executive officer, principal financial officer, chief risk officer, chief accounting officer, controller and persons performing similar functions. The Corporation's Code of Ethics and amendments to and waivers from the Code of Ethics are posted on the Bank's website. To access the Code of Ethics for Senior Financial Officers go to the homepage of the Bank's Internet website at www.fnbli.com and click on "Investor Relations," place the cursor over "Corporate Governance," click on "Corporate Governance Documents" and then click on "Code of Ethics for Senior Financial Officers."

------

**ITEM 11. EXECU** **TIVE COMPENSATION**

The information regarding executive compensation is incorporated herein by reference to the Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held April 18, 2023 that was filed with the SEC.

**ITEM 12. SECU** **RITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

The information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated herein by reference to the Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held April 18, 2023 that was filed with the SEC.

**ITEM 13. CERTAI** **N RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE**

The information regarding certain relationships and related transactions and director independence is incorporated herein by reference to the Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held April 18, 2023 that was filed with the SEC.

**ITEM 14. PRINCIPAL AC** **COUNTANT FEES AND SERVICES**

The information regarding principal accountant fees and services is incorporated herein by reference to the Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held April 18, 2023 that was filed with the SEC.

**PA** **RT IV**

**ITEM 15. EXHI** **BITS AND FINANCIAL STATEMENT SCHEDULES**

(a) 1. Consolidated Financial Statements

The following consolidated financial statements of the Corporation and its subsidiary and report of independent registered public accounting firm thereon as required by this Item are included in Part II, Item 8.

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statement of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 173)

(a) 2. Financial Statement Schedules

None applicable.

(a) 3. Listing of Exhibits

See Index of Exhibits that follows.

**ITEM 16. FO** **RM 10-K SUMMARY**

Not applicable.

------

**INDEX OF EX** **HIBITS**

---

| | |
|:---|:---|
| <u>Exhibit No.</u> | <u>Description of Exhibit</u>  |
| 3(i) | [<u>Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(i) of Registrant's Form 10-Q filed May 10, 2018)</u>](http://www.sec.gov/Archives/edgar/data/740663/000074066318000024/flic-20180331xex3_i.htm) |
| 3(ii) | [<u>By-laws, as amended (incorporated by reference to Exhibit 3(ii) of Registrant's Form 8-K filed April 25, 2017)</u>](http://www.sec.gov/Archives/edgar/data/740663/000143774917007124/ex3-ii.htm) |
| 4(vi) | [<u>Description of Registrant's Common Stock</u><u>(incorporated by reference to Exhibit 4(vi) of Registrant's Form 10-K filed March 10, 2020)</u>](https://www.sec.gov/Archives/edgar/data/740663/000074066320000011/flic-20191231xex4_vi.htm) |
| 10.1 | [<u>The First of Long Island Corporation 2014 Equity Incentive</u> <u>Plan</u> <u>(incorporated by reference to Appendix A of Registrant's Proxy Statement filed March 17, 2014)</u>](http://www.sec.gov/Archives/edgar/data/740663/000114036114012901/formdef14a.htm) |
| 10.2 | [<u>The First of Long Island Corporation 2021 Equity Incentive</u> <u>Plan</u> <u>(incorporated by reference to Appendix A of Registrant's Proxy Statement filed March 12, 2021)</u>](https://www.sec.gov/Archives/edgar/data/740663/000156276221000115/flic-20210312xdef14a.htm) |
| 10.3 | [<u>The First of Long Island Corporation 2016</u> <u>Cash</u> <u>Incentive Plan (incorporated by reference to Appendix A of Registrant's Proxy Statement filed March 15, 2016)</u>](http://www.sec.gov/Archives/edgar/data/740663/000143774916027658/flic20160307_def14a.htm) |
| 10.4 | [<u>Amended and Restated Employment Agreement between Registrant and Christopher Becker, as amended (incorporated by reference to Exhibit 10.12 of Registrant's Form 8-K filed February 18, 2022)</u>](https://www.sec.gov/Archives/edgar/data/740663/000156276222000039/flic-20220215xex10_12.htm) |
| 10.5 | [<u>Employment Agreement between Registrant and Jay P. McConie (incorporated by reference to Exhibit 10.3 of Registrant's Form 8-K filed January 3, 2020</u>](https://www.sec.gov/Archives/edgar/data/740663/000094337420000006/ex_10-3.htm)[<u>and Exhibit 10.13 of Registrant's 8-K filed on February 18, 2022)</u>](https://www.sec.gov/Archives/edgar/data/740663/000156276222000039/flic-20220215xex10_13.htm) |
| 10.6 | [<u>Employment Agreement between Registrant and Christopher J. Hilton (incorporated by reference to Exhibit 10.9 of Registrant's Form 10-K filed March 15, 2019</u>](https://www.sec.gov/Archives/edgar/data/740663/000074066319000010/flic-20181231xex10_9.htm)[<u>and Exhibit 10.13 of Registrant's 8-K filed on February 18, 2022)</u>](https://www.sec.gov/Archives/edgar/data/740663/000156276222000039/flic-20220215xex10_13.htm) |
| 10.7 | [<u>Employment Agreement between Registrant and Janet T. Verneuille (incorporated by reference to Exhibit 10.2 of Registrant's Form 10-Q filed August 9, 2019</u>](https://www.sec.gov/Archives/edgar/data/740663/000074066319000026/flic-20190630xex10_2.htm)[<u>and Exhibit 10.13 of Registrant's 8-K filed on February 18, 2022)</u>](https://www.sec.gov/Archives/edgar/data/740663/000156276222000039/flic-20220215xex10_13.htm) |
| 10.8 | [<u>Employment Agreement between Registrant and Michael J. Spolarich</u>](flic-20221231xex10_8.htm) |
| 10.9 | [<u>Amendment to Employment Agreement between Registrant and Michael J. Spolarich</u>](flic-20221231xex10_9.htm) |
| 10.10 | [<u>Cooperation Agreement by and among Registrant, Driver Opportunity Partners I LP, Driver Management Company LLC and J. Abbott R. Cooper (incorporated by reference to Exhibit 10.1 of Registrant's 8-K filed on January 9, 2023)</u>](https://www.sec.gov/Archives/edgar/data/740663/000094337423000004/ex10-1_8k010923.htm) |
| 21 | [<u>Subsidiary information included in Part 1, "Business" of this Form 10-K</u>](#Business) |
| 23 | [<u>Consent of Crowe LLP, Independent Registered Public Accounting Firm</u>](flic-20221231xex23.htm) |
| 31.1 | [<u>Certification of Principal Executive Officer pursuant to Rule 13a-14(a)</u>](flic-20221231xex31_1.htm) |
| 31.2 | [<u>Certification of Principal Financial Officer pursuant to Rule 13a-14(a)</u>](flic-20221231xex31_2.htm) |
| 32 | [<u>Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) and U.S.C. Section 1350</u>](flic-20221231xex32.htm) |
| 101 | The following materials from the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Income, (3) Consolidated Statements of Comprehensive Income, (4) Consolidated Statement of Changes in Stockholders' Equity, (5) Consolidated Statements of Cash Flows and (6) Notes to Consolidated Financial Statements. |
| 104 | Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) |

---

‎

------

**SIGN** **ATURES**

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.

---

| | |
|:---|:---|
|  | <u>THE FIRST OF LONG ISLAND CORPORATION</u> |
|  | (Registrant) |
| Dated: March 9, 2023 | 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 <br>Financial Officer & Treasurer (principal financial officer) |
|  | By /s/ WILLIAM APRIGLIANO |
|  | WILLIAM APRIGLIANO, First Senior Vice President & <br>Chief Accounting Officer (principal accounting officer) |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

---

| | | |
|:---|:---|:---|
| Signatures | Titles | Date |
| /s/ WALTER C. TEAGLE III  | Non-executive Chairman of the Board | March 9, 2023 |
| Walter C. Teagle III |  |  |
| /s/ CHRISTOPHER BECKER | Director | March 9, 2023 |
| Christopher Becker |  |  |
| /s/ PAUL T. CANARICK | Director | March 9, 2023 |
| Paul T. Canarick |  |  |
| /s/ ALEXANDER L. COVER | Director | March 9, 2023 |
| Alexander L. Cover |  |  |
| /s/ JOHN J. DESMOND | Director | March 9, 2023 |
| John J. Desmond |  |  |
| /s/ EDWARD J. HAYE | Director | March 9, 2023 |
| Edward J. Haye |  |  |
| /s/ LOUISA M. IVES | Director | March 9, 2023 |
| Louisa M. Ives |  |  |
| /s/ STEPHEN V. MURPHY | Director | March 9, 2023 |
| Stephen V. Murphy |  |  |
| /s/ PETER QUICK | Director | March 9, 2023 |
| Peter Quick |  |  |
| /s/ DENISE STRAIN | Director | March 9, 2023 |
| Denise Strain |  |  |
| /s/ MILBREY RENNIE TAYLOR | Director | March 9, 2023 |
| Milbrey Rennie Taylor |  |  |
| /s/ ERIC TVETER | Director | March 9, 2023 |
| Eric Tveter |  |  |

---

## Exhibit 10.8

Exhibit 10.8

**EMPLOYMENT AGREEMENT**

This Employment Agreement (the "Agreement"), is made effective as of December 1, 2020 (the "Effective Date"), by and between The First of Long Island Corporation (the "<u>Company</u>"), The First National Bank of Long Island (the "<u>Bank</u>"; and together with the Company, "<u>FLIC</u>") and Michael J. Spolarich ("<u>Executive</u>").

**WHEREAS**, FLIC wishes to assure itself of the continued services of Executive for the period and in accordance with the terms provided in this Agreement; and

**WHEREAS**, in order to induce Executive to remain in the employ of FLIC and to provide further incentive for Executive to achieve the financial and performance objectives of FLIC, the parties desire to enter into this Agreement: and

**NOW, THEREFORE**, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;**1.** **T ERM .** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a) **<u>Term</u>**. The term of this Agreement and the period of Executive's employment hereunder shall begin as of the Effective Date and shall continue through December 31, 2021(the "Employment Period," which shall include any periods covered by renewals hereunder). Subject to Section 4(d), commencing on January 1, 2021, and continuing on January 1 of each year thereafter (the "<u>Anniversary Date</u>"), this Agreement shall renew for an additional twelve months such that the remaining term shall be twenty-four (24) months, unless written notice of non-renewal is provided to Executive at least thirty (30) days prior to any such Anniversary Date. <br>

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **EMPLOYMENT; CAPACITY ; D UTIES .** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)**<u>Employment</u>.** During the Employment Period Executive shall be employed in the capacity of Executive Vice President of the Company and the Bank and Chief Credit Officer of the Bank (the "<u>Executive Position</u>") and shall have such other senior executive title as may from time to time be determined by the Boards of Directors**.** Executive shall have such duties and responsibilities as usually appertain to the Executive Position, as well as those as shall be assigned by the Chief Executive Officer or by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)**<u>Service on Other Board</u><u>s</u>.** Executive agrees to devote his full time and attention and best efforts to the faithful and diligent performance of Executive's duties to FLIC, and Executive shall serve and further the best interests and enhance the reputation of FLIC to the best of Executive's ability. Nothing herein shall be construed as preventing Executive from serving as a member of the board of directors of any non-profit organization (of which the Board shall be notified prior to the commencement of service) or, with the consent of the Board of Directors, of any for-profit organization, in either case subject to and consistent with applicable laws. Executive's service on boards of non-profits and for-profit organizations in effect as of the date of this Agreement and as to which the Board has been previously notified, may be continued.

------

&nbsp;&nbsp;&nbsp;&nbsp;**3.** **COMPENSATION, BENEFITS AND REIMBURSEMENT.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)**<u>Base Salary</u>**. In consideration of Executive's performance of the responsibilities and duties set forth in this Agreement, Executive shall receive an annual base salary of $260,000 per year ("<u>Base Salary</u>"). Such Base Salary will be payable in accordance with the customary payroll practices of the Bank. During the term of this Agreement, the Board may increase, but not decrease, Executive's Base Salary. Any increase in Base Salary will become the "Base Salary" for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)**<u>Bonus</u>**. Executive shall be entitled to participate in any bonus plan or arrangement of FLIC (including both any short-term and long-term incentive program) in which senior management is eligible to participate. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of the other compensation to which Executive is entitled under this Agreement. The terms of FLIC's short-term and long-term incentive plans or programs shall determine the bonuses payable thereunder, if any, to Executive following Executive's termination of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)**<u>Benefit Plans</u>**. Executive will be entitled to participate in all employee benefit plans, arrangements and perquisites offered to employees and officers of FLIC, on the same terms and conditions as such plans are available to other employees and officers of FLIC. Without limiting the generality of the foregoing provisions of this Section 3(c), Executive also will be entitled to participate in any employee benefit plans including but not limited to retirement plans, pension plans, profit-sharing plans, health-and-accident plans, or any other employee benefit plan or arrangement made available by the Bank in the future to management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements as applicable to other management employees. Except as otherwise provided herein, the terms of FLIC's benefit plans or arrangements shall determine the benefits payable thereunder, if any, to Executive following Executive's termination of employment or retirement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)**<u>Vacation</u>**. Executive will be entitled to paid vacation, as well as sick leave, holidays and other paid absences, in accordance with the Bank's policies and procedures for officers. Any unused paid time off during an annual period will be treated in accordance with the Bank's personnel policies as in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (e)**<u>Expense Reimbursements</u>**. FLIC will reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing Executive's obligations under this Agreement, including, without limitation, fees for memberships in such organizations as Executive and the Board mutually agree are necessary and appropriate in connection with the performance of Executive's duties under this Agreement. Furthermore, the Bank shall pay or reimburse Executive for the full cost of the use of an automobile that is mutually agreeable to the Bank and Executive. Executive shall comply with the reasonable reporting and expense limitations on the use of such automobile as the Bank may establish from time to time. All reimbursements shall be made as soon as practicable upon substantiation of such expenses by Executive in accordance with the applicable policies and procedures of the Bank.

------

&nbsp;&nbsp;&nbsp;&nbsp;**4.** **TERMINATION AND C OMPENSATION P AYABLE FOLLOWING TERMINATION.** 

Executive's employment under this Agreement may be terminated in the following circumstances:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)**<u>Death</u>**. This Agreement shall terminate upon Executive's death, in which event Executive's estate or beneficiary shall be entitled to receive the compensation and vested benefits due Executive as of the date of Executive's death, and neither Executive, nor Executive's estate or beneficiary, shall have a right to receive any compensation or benefits under this Agreement thereafter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)**<u>Disability</u>**. FLIC may terminate Executive's employment upon his becoming "Totally Disabled," in which event Executive shall be entitled to receive the compensation and vested benefits due Executive as of the date of Executive's termination, and Executive shall have no right to receive any other compensation or benefits under this Agreement. For purposes of this Agreement, Executive shall be "<u>Totally Disabled</u>" if Executive is physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of his position under this Agreement even with reasonable accommodation. Executive's receipt of disability benefits under the Bank's long-term disability plan, if any, or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided, however, that in the absence of Executive's receipt of such long-term disability benefits or Social Security benefits, the Board may, in its reasonable discretion but based upon appropriate medical evidence, determine that Executive is Totally Disabled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)**<u>Termination for Cause</u>**. The Board may immediately terminate Executive's employment for "Cause" at any time upon written notice to Executive. Executive shall have no right to receive compensation or other benefits under this Agreement or otherwise from FLIC for any period after termination for Cause, except for compensation or benefits that have already been earned or vested as of the date of termination. For purposes of this Agreement, "Termination for Cause" shall mean termination because of, in the good faith determination of the Board: (i) Executive's conviction (including conviction on a nolo contendere plea) of a felony or of any lesser criminal offense involving moral turpitude, fraud or dishonesty; (ii) the willful commission by Executive of a criminal or other act that, in the reasonable judgment of the Board will likely cause substantial economic damage to the Company or the Bank or substantial injury to the business reputation of the Company or Bank; (iii) the commission by Executive of an act of fraud in the performance of his duties on behalf of the Company or Bank; (iv) the continuing willful failure of Executive to perform his employment duties to the Company or Bank after thirty (30) days' written notice thereof (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to Executive by the Board; (v) an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of Executive's employment by the Company or the Bank; or (vi) a material breach by Executive of any provision of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)**<u>Retirement</u>**. This Agreement and the obligations hereunder shall expire on December 31 of the calendar year in which Executive attains Normal Retirement Age ("<u>Retirement Age Termination Date</u>"). For purposes of this Agreement, "<u>Normal Retirement Age</u>" shall mean age

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65. Nothing in this Agreement shall mandate or prohibit a continuation of Executive's employment following the Retirement Age Termination Date, provided that Executive shall not be entitled to any benefits or payments under this Agreement upon termination of Executive's employment following Retirement Age Termination Date (unless the Extended Employment Period is in effect). Notwithstanding the foregoing, upon written notice to Executive, FLIC may extend the term of this Agreement for an additional two year period beyond the Retirement Age Termination Date (the "<u>Extended Employment Period</u>").

(e)**<u>Voluntary Termination by Executive</u>**. Executive may voluntarily terminate employment during the term of this Agreement upon 30 days' prior written notice to the Board. FLIC may accelerate the date of termination upon receipt of written notice of Executive's voluntary termination.

(f)**<u>Termination Without Cause or With Good Reason</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) The Board may terminate Executive's employment at any time for any reason upon no less than 30 days' written notice (a termination " <u>Without Cause</u> "), and Executive may, by written notice to the Board, terminate his employment at any time within 90 days following an event constituting "Good Reason," as defined below (a termination " <u>With Good Reason</u> "); provided, however, that FLIC shall have 30 days to cure the "Good Reason" condition, but FLIC may waive its right to cure. Executive's notice of termination With Good Reason shall notify the Company of the event that constitutes Good Reason.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B)"<u>Good Reason</u>" exists if, without Executive's express written consent, any of the following occurs:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A)the failure to appoint Executive during the Employment Period to the Executive Position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B)a reduction in Executive's Base Salary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (C)the failure of the Bank to maintain Executive's participation under the Bank's employee benefit, retirement, or material fringe benefit plans, policies, practices, or arrangements in which Executive participates. For this purpose, the Bank may eliminate and/or modify existing employee benefit, retirement, or fringe benefit plans and coverage levels on a consistent and non-discriminatory basis applicable to all such executives; or

(D)a relocation of Executive's principal place of employment by more than 50 miles from Executive's principal place of employment as of the initial Effective Date of this Agreement.

(g)**<u>Compensation</u> <u>Payable Following Termination of Employment</u>**. Upon termination of Executive's employment under this Agreement, Executive (or, if applicable, his beneficiary) shall be entitled to receive the following compensation:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)<u>Earned but Unpaid Compensation</u>. FLIC shall pay Executive any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, and any vacation accrued to the date of termination in accordance with the Bank's personnel policies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)<u>Other Compensation and Benefits</u>. Except as may be provided under this Agreement,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A)any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 3(b) and (c) above shall be determined and paid in accordance with the terms of such plans, policies and arrangements, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B)Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (h)**<u>Additional Compensation Payable Following Termination Without Cause or Termination with Good Reason</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)In addition to the compensation set forth in Section 4(g) above, Executive will receive the additional compensation and benefits set forth in this paragraph (h), if the following requirements are met:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A)Executive's employment is terminated pursuant to Section 4(f) above (Termination Without Cause or Termination for Good Reason), including a termination following a Change in Control; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B)Executive executes a release of his claims against the Bank, the Company and any affiliate, and their officers, directors, successors and assigns (the "Release"), the form of which release is attached to this Agreement. The Release must be executed and become irrevocable by the 60th day following the date of Executive's termination of employment; provided that if the 60 day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "<u>Code</u>"), the payments and benefits described in this Section 4(h) will be paid, or commence, in the second calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)If Executive meets the requirements described in clause (i) above,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A)FLIC shall pay Executive, or in the event of Executive's subsequent death, Executive's beneficiary or estate, a cash lump sum payment equal to the sum of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)two times Base Salary at the rate in effect immediately prior to his date of termination, *<u>plus</u>* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)an amount equal to the product of: (I) the reasonably estimated monthly cost of the medical, dental and vision insurance coverage maintained by the Bank for Executive

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immediately prior to Executive's date of termination; multiplied by (II) twenty-four (24).

Such amount shall be paid to Executive in a lump sum within ten (10) days following Executive's date of termination, or if later, following the seventh (7th) day after Executive's execution of the Release required under Section 4(h)(i)(C) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;**5.** **CHANGE IN CONTROL.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)**<u>Change in Control Defined</u>**. For purposes of this Agreement, the term "Change in Control" shall mean the occurrence of any of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) <u>Merger</u>: The Bank or the Company merges into or consolidates with another entity whereby the Bank or the Company is not the surviving entity, or the Bank or the Company merges another bank or corporation into the Bank or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) <u>Acquisition of Significant Share Ownership</u>: There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 50% or more of a class of the Company's or the Bank's voting securities; provided, however, this clause (B) shall not apply to beneficial ownership of the Company's or the Bank's voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) <u>Change in Board Composition</u>: During any period of two (2) consecutive years, individuals who constitute the Company's or the Bank's Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company's or the Bank's Board of Directors; provided, however, that for purposes of this clause (C), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period or who is appointed to the Board as the result of a directive, supervisory agreement or order issued by the primary federal regulator of the Company or the Bank or by the Federal Deposit Insurance Corporation (" <u>FDIC</u> ") shall be deemed to have also been a director at the beginning of such period; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) <u>Sale of Assets</u>: The Company or the Bank sells to a third party all or substantially all of its assets.

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(b)**<u>280G Net-Best Benefit</u>**. Notwithstanding the preceding Sections of this Agreement, if the payments and benefits to be afforded to Executive under Section 4(h) hereof (the "<u>Severance Benefits</u>") either alone or together with other payments and benefits which Executive has the right to receive from FLIC (or any affiliate) would constitute a "parachute payment" under Section 280G of the Code, and but for this Section 5(b), would be subject to the excise tax imposed by Section 4999 of the Code (the "<u>Excise Tax</u>"), then the Severance Benefits shall be reduced (the "<u>Benefit Reduction</u>") by the minimum amount necessary to result in no portion of the Severance Benefits being subject to the Excise Tax, provided, however, that the Benefit Reduction shall only occur if such reduction would result in Executive's "Net After-Tax Amount" attributable to the Severance Benefits being greater than it would be if no Benefit Reduction was effected. For this purpose, "<u>Net After-Tax Amount</u>" shall mean the net amount of Severance Benefits Executive is entitled to under this Agreement after giving effect to all federal, state and local taxes which would be applicable to such payments and benefits, including but not limited to, the Excise Tax. Nothing contained herein shall result in the reduction of any payments or benefits to which Executive may be entitled upon termination of employment and/or a change in control other than as specified in this Section 5(b), or a reduction in the Severance Benefits below zero.

(c)**<u>Extension of Employment Period</u>.** In the event FLIC has entered into an agreement to effect a transaction that would be considered a Change in Control during the Employment Period, the Employment Period shall be extended automatically for a period ending on, and including, the 30<sup>th</sup> day following the effective date of the Change in Control (to the extent the Employment Period would otherwise expire, without regard to the foregoing, prior to the completion of such period).

&nbsp;&nbsp;&nbsp;&nbsp;**6.** **COVENANTS OF EXECUTIVE.** 

(a)**<u>Non</u><u>-S</u><u>olicitation/Non-Compete.</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)Executive hereby covenants and agrees that, during the "Restricted Period" and except as provided in clause (ii) below, Executive shall not, without the written consent of FLIC, either directly or indirectly:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of FLIC, or any of its respective subsidiaries or affiliates, to terminate his or h is employment with FLIC and/or accept employment with another employer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) become an officer, employee, consultant, director, independent contractor, agent, joint venturer, partner or trustee of any savings bank, savings and loan association, savings and loan holding company, commercial bank, credit union, bank or bank holding company, any mortgage or loan broker or any other entity (excluding not-for-profit entities other than credit unions) that competes with the business of FLIC or any of their direct or indirect subsidiaries or affiliates, or that has a headquarters, or one or more offices, within New York City, the Counties of Nassau or Suffolk, New York, (the " <u>Restricted Territory</u> "); or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of FLIC to terminate an existing business or commercial relationship with FLIC.

(ii)The restrictions contained in Section 6(a)(i)(B) above shall not apply in the event of a Termination for Cause, or in the event of a termination of employment following a Change in Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) For purposes of this paragraph (a), the "Restricted Period" shall be a period of one (1) year following Executive's termination of employment with FLIC.

(b)**<u>Confidentiality</u>**. Executive recognizes and acknowledges that the knowledge of the business activities, plans for business activities, and all other proprietary information of FLIC, as it may exist from time to time, is valuable, special and unique assets of the business of FLIC. Executive will not, during or after the term of Executive's employment, disclose any knowledge of the past, present, planned or considered business activities or any other similar proprietary information of FLIC to any person, firm, corporation, or other entity for any reason or purpose whatsoever unless expressly authorized by the Board or required by law. Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of FLIC. Further, Executive may disclose information regarding the business activities of FLIC to any bank regulator having regulatory jurisdiction over the activities of FLIC pursuant to a formal regulatory request. In the event of a breach or threatened breach by Executive of the provisions of this Section, FLIC will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of FLIC or any other similar proprietary information, or from rendering any services to any person, firm, corporation, or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting FLIC from pursuing any other remedies available to FLIC for such breach or threatened breach, including the recovery of damages from Executive.

(c)**<u>Information/Cooperation</u>**. Executive shall, upon reasonable notice, furnish such information and assistance to FLIC as may be reasonably required by FLIC, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party, and he shall be reimbursed for any expenses incurred in providing such information and assistance; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between Executive and FLIC or any other subsidiaries or affiliates.

(d)**<u>Reliance</u>**. Except as otherwise provided, all payments and benefits to Executive under this Agreement shall be subject to Executive's compliance with this Section 6, to the extent applicable.

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&nbsp;&nbsp;&nbsp;&nbsp;**7.** **EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.** 

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between FLIC or any predecessor of FLIC and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind expressly provided elsewhere.

&nbsp;&nbsp;&nbsp;&nbsp;**8.** **NO ATTACHMENT; BINDING ON SUCCESSORS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)FLIC's obligations under this Agreement shall be binding on any and all successors or assigns, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of FLIC, in the same manner and to the same extent that FLIC would be required to perform if no such succession or assignment had taken place.

&nbsp;&nbsp;&nbsp;&nbsp;**9.** **MODIFICATION AND WAIVER.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

&nbsp;&nbsp;&nbsp;&nbsp;**10.** **MISCELLANEOUS PROVISIONS.** 

Notwithstanding anything herein contained to the contrary, the following provisions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)FLIC may terminate Executive's employment at any time, but any termination by the Board other than termination for Cause shall not prejudice Executive's right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Executive's termination for Cause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)Notwithstanding anything herein contained to the contrary, any payments to Executive pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)In the event that FLIC provides written notice of non-renewal of the Agreement to the Executive in accordance with Section 1 hereof, and Executive's employment is terminated subsequent to the expiration of the Employment Period, the provisions and obligations of the parties under this Agreement shall have expired and be of no force and effect, and therefore FLIC shall have no obligations to make payments to Executive under Section 4 of this Agreement.

(d)The parties intend that this Agreement and any payments and benefits payable hereunder shall either comply with, or be exempt from, the requirements of Code Section 409A, and this Agreement shall be maintained, administered, and interpreted consistent with that intention. Notwithstanding any provision herein to the contrary, FLIC makes no representations concerning Executive's tax consequences under this Agreement under Code Section 409A, or any other federal, state, or local tax law. Executive's tax consequences will depend, in part, upon the application of relevant tax law, including Code Section 409A, to the relevant facts and circumstances. Notwithstanding anything else in this Agreement to the contrary (with the exception of Section 4(c)), Executive's employment shall not be deemed to have been terminated unless and until Executive has a Separation from Service within the meaning of Code Section 409A. For purposes of this Agreement, a "<u>Separation from Service</u>" shall have occurred if FLIC and Executive reasonably anticipate that either no further services will be performed by Executive after the date of termination (whether as an employee or as an independent contractor) or the level of further services performed is less than 50 percent of the average level of bona fide services in the 36 months immediately preceding the termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii). Each payment under this Agreement is intended to be a "separate payment" and not of a series of payments for purposes of Code Section 409A.

(e)Notwithstanding the foregoing, if Executive is a "<u>specified employee</u>" (i.e., a "key employee" of a publicly traded company within the meaning of Section 409A of the Code and the final regulations issued thereunder) and any payment under this Agreement is triggered due to Executive's Separation from Service (other than due to disability or death), then solely to the extent necessary to avoid penalties under Section 409A of the Code, no payment shall be made during the first six (6) months following Executive's Separation from Service. Rather, any payment which would otherwise be paid to Executive during such period shall be accumulated and paid to Executive in a lump sum on the first day of the seventh month following such Separation from Service. All subsequent payments shall be paid in the manner specified in this Agreement.

(f)Notwithstanding anything in this Agreement to the contrary, Executive understands that nothing contained in this Agreement limits Executive's ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission ("<u>Government Agencies</u>") about a possible securities law violation without approval of FLIC. Executive further understands that this Agreement does not limit Executive's ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to FLIC related to the possible securities law violation. This Agreement does not limit Executive's right to receive any resulting monetary award for information provided to any Government Agency.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)In the event of Executive's death, his beneficiary shall be his surviving spouse. Alternatively, Executive may designate other beneficiaries. If Executive's spouse does not survive his, or if no beneficiary designation is in effect at the time of Executive's death, then payments due thereafter shall be made to the Executive's estate.

&nbsp;&nbsp;&nbsp;&nbsp;**11.** **SEVERABILITY.** 

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;**12.** **GOVERNING LAW.** 

This Agreement shall be governed by the laws of State of New York, but only to the extent not superseded by federal law.

&nbsp;&nbsp;&nbsp;&nbsp;**13.** **ARBITRATION**.

(a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a single arbitrator mutually acceptable to FLIC and Executive, sitting in a location selected by the Bank within 50 miles from the main office of the Bank, in accordance with the rules of the American Arbitration Association's National Rules for the Resolution of Employment Disputes then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The cost of the arbitrator shall be paid by FLIC; all other cost of arbitration shall be borne by the respective parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b) If Termination For Cause is disputed by Executive, and if it is determined in arbitration that Executive is entitled to compensation and benefits under Section 4(h) of this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that was not paid pending arbitration (at the prime rate as published in *The Wall Street Journal* from time to time).

&nbsp;&nbsp;&nbsp;&nbsp;**14.** **NOTICE.** 

For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

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| | |
|:---|:---|
| &nbsp;&nbsp; **To FLIC:** | &nbsp;&nbsp; The First of Long Island Corporation<br> 10 Glen Head Road<br> Glen Head, New York 11545<br> Attn: Chairman of the Board<br>|
| &nbsp;&nbsp; **To Executive:** | &nbsp;&nbsp; To the most recent address on file with the Bank.  |

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**[Signature Page Follows]**

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**IN WITNESS WHEREOF**, the parties have executed this Agreement as of the date first written above.

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| |
|:---|
| &nbsp;&nbsp;&nbsp; **THE FIRST OF LONG ISLAND CORPORATION** |
| &nbsp;&nbsp;&nbsp; By: /s/ Christopher Becker |
| &nbsp;&nbsp;&nbsp; Name: Christopher Becker |
| &nbsp;&nbsp;&nbsp; Title: President and Chief Executive Officer |
| &nbsp;&nbsp;&nbsp; **THE FIRST NATIONAL BANK OF** |
| &nbsp;&nbsp;&nbsp; **LONG ISLAND** |
| &nbsp;&nbsp;&nbsp; By: /s/ Christopher Becker |
| &nbsp;&nbsp;&nbsp; Name: Christopher Becker |
| &nbsp;&nbsp;&nbsp; Title: President and Chief Executive Officer |
| &nbsp;&nbsp;&nbsp; **EXECUTIVE**<br>|
| &nbsp;&nbsp;&nbsp; /s/ Michael Spolarich |
| &nbsp;&nbsp;&nbsp; Michael J. Spolarich |

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RELEASE

Pursuant to Section 4(h)(ii) of the Employment Agreement between The First of Long Island Corporation (the "Company"), The First National Bank of Long Island (the "Bank") and Michael J. Spolarich ("Executive"), effective December 1, 2020 (herein after, the "Agreement"), Executive is entitled to a cash lump sum severance payment (the "Severance Payment") in connection with his termination of employment. As a condition to receiving the Severance Payment, Executive shall have executed and not timely revoked this release (this "Release") in accordance with the terms and conditions below by no later than the 60th day following Executive's termination of employment.

Intending to be legally bound, Executive hereby, on behalf of Executive and Executive's heirs, executors, administrators, successors and assigns, fully, finally and forever releases and discharges the Company, the Bank*,* as well as their predecessors, successors and assigns, and all of their respective parent, subsidiary, related and affiliated companies, officers, owners, directors, agents, representatives, attorneys, and employees (all of whom are referred to throughout this Release as the "Parties"), of and from all claims, charges, demands, actions, causes of action, complaints, suits, controversies, proceedings, promises, agreements, liabilities, debts, obligations, judgments, rights, fees, damages, losses, and expenses, of any and every nature whatsoever, in law or in equity, known or unknown, suspected or unsuspected (collectively, "Claims"), as a result of: (i) actions or omissions occurring through the execution date of this Release; or (ii) any agreement, arrangement or promise between Executive and any Party. Specifically included in this waiver and release are, among other things, any and all Claims related to the Agreement, Claims of alleged employment discrimination, either as a result of the separation of Executive's employment or otherwise, under the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, as amended by applicable New York law and all of their respective implementing regulations and/or any other federal, state or local statute, rule, ordinance, or regulation, as well as any Claims for compensation of any type whatsoever, alleged wrongful discharge, negligent or intentional infliction of emotional distress, breach of express or implied contract, quasi- contract, promissory estoppel, detrimental reliance, fraud, defamation, or any other unlawful behavior, the existence of which is specifically denied by the Parties. The foregoing list is intended to be illustrative rather than inclusive. Executive waives the rights and Claims to the extent set forth above, and Executive also agrees not to institute, or have instituted, a lawsuit against the Parties based on any such waived Claims or rights.

Nothing in this Release, however, shall be construed to prohibit Executive from filing a charge or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission or other federal, state or local agency. Notwithstanding the foregoing, Executive waives Executive's right to recover monetary or other damages as a result of any Claim filed by Executive or by anyone else on Executive's behalf, including a class or collective action, whether or not Executive is named in such proceeding.

Further, nothing in this Release is intended to waive Executive's entitlement to: (i) any earned but unpaid compensation or benefits from the Bank or any affiliate of the Bank; (ii) the Severance Payment; (iii) vested or accrued benefits under any tax-qualified or nonqualified employee benefit plan sponsored by the Company or the Bank; (iv) equity awards under the Company's stock plans, but subject to the treatment thereof set forth in the plans and underlying award agreements; (v) Executive's right to elect health care continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") at Executive's expense (if Executive is eligible for COBRA coverage); and (vi) indemnification and directors' and officers' insurance coverage applicable to the fullest extent permitted under applicable law and as provided in the Bank's or the Company's charter, bylaws and directors' and officers' liability insurance policy. Moreover, this Release does not waive claims that Executive could make, if available, for unemployment or workers' compensation.

Finally, this Release does not limit Executive's ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission ("Government Agencies") about a possible securities law violation without approval of the Company or the Bank. Executive further understands that this Agreement does not limit Executive's ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government

------

Agency, including providing documents or other information, without notice to the Company or the Bank related to the possible securities law violation. This Agreement does not limit the Executive's right to receive any resulting monetary award for information provided to any Government Agency.

Executive affirms that, absent Executive's execution of this Release, Executive would not be entitled to the Severance Payment and is therefore receiving consideration to which Executive would not otherwise be entitled to receive. Executive also affirms that the only consideration for Executive signing this Release is that set forth in Section 4(h) of the Agreement, that no other promise or agreement of any kind has been made to or with Executive by any person or entity to cause Executive to execute this Release, and that Executive fully understands the meaning and intent of this Release, including but not limited to, its final and binding effect.

Executive also affirms that Executive shall be subject to the covenants set forth in Section 6 of the Agreement.

Executive acknowledges that Executive has carefully read and reviewed this Release and has been advised to seek the advice of an attorney, and Executive has had an opportunity to consult with and receive counsel from an attorney concerning the terms of this Release.

Executive understands and is satisfied with the terms and contents of this Release and voluntarily has signed Executive's name to the same as a free act and deed. Executive agrees that this Release shall be binding upon Executive and Executive's agents, attorneys, personal representatives, heirs, and assigns. Executive acknowledges that Executive has been given a period of at least 45 days from date of receipt within which to consider and sign this Release, which shall not be signed by Executive before Executive's last day of employment. To the extent Executive has executed this Release less than 45 days after its delivery to Executive, Executive hereby acknowledges that Executive's decision to execute this Release prior to the expiration of such 45-day period was entirely voluntary.

Executive acknowledges that Executive will be given seven (7) days from the date Executive signs this Release to change Executive's mind and revoke this Release. If Executive does not revoke this Release within seven (7) days of Executive's signing, this Release will become final and binding on the day following such seven (7) day period.

In the event that any one or more of the provisions of this Release shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of this Release shall not in any way be affected or impaired thereby. This Release shall inure to the benefit of and be binding upon the Company, the Bank, their affiliates, any successor organization which shall succeed the Company or the Bank by merger, acquisition or consolidation or operation of law and their assigns. This Release shall be binding upon the Executive and his assigns, heirs and legal representatives. This Release shall be governed by the law of the State of New York without reference to its choice of law rules.

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Any notice to revoke this Release will be deemed properly given or made if personally delivered or, if mailed, when mailed by registered or certified mail, postage prepaid to The First of Long Island Corporation at its principal business office, to the attention of____________________. The principal business office of The First of Long Island Corporation is located at 10 Glen Head Road, Glen Head, New York 11545.

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*[Remainder of page is intentionally left blank]*

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***By executing this Release, Executive acknowledges that Executive has had the opportunity to consult with an attorney of Executive's choice; that Executive has carefully reviewed and considered this Release; that Executive understands the terms of this Release; and that Executive voluntarily agrees to them.***

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EXECUTIVE

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____________________________________________

------

Date:

(On or after Executive's last day of employment)

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THE FIRST OF LONG ISLAND CORPORATION

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_____________________________________________

By:

Title:

Date:

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THE FIRST NATIONAL BANK OF LONG ISLAND

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_____________________________________________

By:

Title:

Date:

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## Exhibit 10.9

Exhibit 10.9

**FORM OF** 

**AMENDMENT TO**

**EMPLOYMENT AGREEMENT**

This Amendment, dated as of February 15, 2022 (the "Amendment"), to the Employment Agreement ("Employment Agreement"), entered into as of December 1, 2020, by and between The First of Long Island Corporation (the "<u>Company</u>"), The First National Bank of Long Island (the "<u>Bank</u>"; and together with the Company, "<u>FLIC</u>") and Michael J. Spolarich ("<u>Executive</u>").

W I T N E S S E T H:

**WHEREAS**, the Employment Agreement provides for certain benefits payable to the Executive in the event of a termination of Executive's employment by FLIC Without Cause or by Executive With Good Reason, including a termination following a Change in Control; and

**WHEREAS**, FLIC and Executive have agreed to a change in the benefits payable to Executive in the event of a termination of Executive's employment by FLIC Without Cause or by Executive For Good Reasons in connection with or following a Change in Control; and

**WHEREAS**, pursuant to Section 9 of the Employment Agreement, the parties agree to amend the Employment Agreement.

**NOW, THEREFORE,** in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Company, Bank and the Executive hereby agree as follows:

Section 1. <u>Amendment to Section 4(h) of the Employment Agreement</u>. Section 4(h) of the Employment Agreement is hereby amended and restated to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (h)**<u>Additional Compensation Payable Following Termination Without Cause or Termination with Good Reason</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)In addition to the compensation set forth in Section 4(g) above, Executive will receive the additional compensation and benefits set forth in this paragraph (h), if the following requirements are met:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Executive's employment is terminated pursuant to Section 4(f) above (Termination Without Cause or Termination for Good Reason), including a termination following a Change in Control; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) Executive executes a release of h is claims against the Bank, the Company and any affiliate, and their officers, directors, successors and assigns (the "Release"), the form of which release is attached to this Agreement. The Release must be executed and become irrevocable by the 60th day following the date of Executive's termination of employment; provided that if the 60 day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the " <u>Code</u> "), the payments and benefits described in this Section 4(h) will be paid, or commence, in the second calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)If Executive meets the requirements described in clause (i) above, (ii)(A) below shall govern, unless the termination of employment occurs in connection with or following a Change in Control, in which event (ii)(B) below shall govern:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) FLIC shall pay Executive, or in the event of Executive's subsequent death, Executive's beneficiary or estate, a cash lump sum payment equal to the sum of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)two times Base Salary at the rate in effect immediately prior to his date of termination, *<u>plus</u>* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)an amount equal to the product of: (I) the reasonably estimated monthly cost of the medical, dental and vision insurance coverage maintained by the Bank for Executive immediately prior to Executive's date of termination; multiplied by (II) twenty-four (24).

Such amount shall be paid to Executive in a lump sum within ten (10) days following Executive's date of termination, or if later, following the seventh (7th) day after Executive's execution of the Release required under Section 4(h)(i)(B) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) If the termination of employment occurs in connection with or following a Change in Control, FLIC shall pay Executive, or in the event of Executive's subsequent death, Executive's beneficiary or estate, a cash lump sum payment equal to the sum of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)two times the sum of (x) Base Salary at the rate in effect immediately prior to his date of termination, and (y) his annual cash incentive compensation, calculated based on Target levels of performance for the year in which the Change in Control occurs, *<u>plus</u>* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)an amount equal to the product of: (I) the reasonably estimated monthly cost of the medical, dental and vision insurance coverage maintained by the Bank for Executive immediately prior to Executive's date of termination; multiplied by (II) twenty-four (24).

Such amount shall be paid to Executive in a lump sum within ten (10) days following Executive's date of termination, or if later, following the seventh (7th) day after Executive's execution of the Release required under Section 4(h)(i)(B) hereof.

Section 2. <u>Amendment to Section 3(e) of the Employment Agreement.</u> Section 3(e) of the Employment Agreement is hereby amended and restated to read as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (e)**<u>Expense Reimbursements</u>**. FLIC will reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing Executive's obligations under this Agreement, including, without limitation, fees for memberships in such organizations as Executive and the Board mutually agree are necessary and appropriate in connection with the performance of Executive's duties under this Agreement. All reimbursements shall be made as soon as practicable upon substantiation of such expenses by Executive in accordance with the applicable policies and procedures of the Bank.

Section 3.<u>Continuation</u> <u>of Agreements</u>. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Employment Agreement or the New Employment Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 4.<u>Governing Law</u>. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of New York.

Section 5.<u>Counterparts</u>. This Amendment may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, and all of which together shall constitute but one and the same instrument.

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IN WITNESS WHEREOF, the Company, Bank and the Executive have duly executed this Amendment as of the day and year first written above.

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| |
|:---|
| &nbsp;&nbsp;&nbsp; **THE FIRST OF LONG ISLAND CORPORATION** |
| &nbsp;&nbsp;&nbsp; By: /s/ Christopher Becker |
| &nbsp;&nbsp;&nbsp; Name: Christopher Becker |
| &nbsp;&nbsp;&nbsp; Title: President and Chief Executive Officer |
| &nbsp;&nbsp;&nbsp; **THE FIRST NATIONAL BANK OF** |
| &nbsp;&nbsp;&nbsp; **LONG ISLAND** |
| &nbsp;&nbsp;&nbsp; By: /s/ Christopher Becker |
| &nbsp;&nbsp;&nbsp; Name: Christopher Becker |
| &nbsp;&nbsp;&nbsp; Title: President and Chief Executive Officer |
| &nbsp;&nbsp;&nbsp; **EXECUTIVE**<br>|
| &nbsp;&nbsp;&nbsp; /s/ Michael J. Spolarich |
| &nbsp;&nbsp;&nbsp; Michael J. Spolarich |

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## Ex-23

Exhibit 23

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in Registration Statement No. 333-223775 on Form S-3, and Registration Statement Nos., 333-196920 and 333-257391on Form S-8 of The First of Long Island Corporation of our report dated March 9, 2023, with respect to the consolidated financial statements of The First of Long Island Corporation and the effectiveness of internal control over financial reporting, which report appears in this Annual Report on Form 10-K of The First of Long Island Corporation for the year ended December 31, 2022.

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| |
|:---|
| /s/ Crowe LLP |
| Crowe LLP |

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New York, New York

March 9, 2023

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## Exhibit 31.1

Exhibit 31.1

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER**

**PURSUANT TO RULE 13a-14(a)**

I, Christopher Becker, certify that:

1) I have reviewed this Form 10-K of The First of Long Island Corporation ("Registrant");

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4) The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5) The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: March 9, 2023

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| |
|:---|
| TOPHE |
| By /s/ CHRISTOPHER BECKER |
| CHRISTOPHER BECKER |
| PRESIDENT & CHIEF EXECUTIVE OFFICER |
| (principal executive officer) |

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## Exhibit 31.2

Exhibit 31.2

**CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER**

**PURSUANT TO RULE 13a-14(a)**

I, Jay P. McConie, certify that:

1) I have reviewed this Form 10-K of The First of Long Island Corporation ("Registrant");

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4) The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5) The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: March 9, 2023

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| |
|:---|
| By /s/ JAY P. MCCONIE |
| JAY P. MCCONIE |
| EXECUTIVE VICE PRESIDENT,  |
| CHIEF FINANCIAL OFFICER & TREASURER |
| (principal financial officer) |

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## Ex-32

Exhibit 32

**CERTIFICATION PURSUANT TO RULE 13a-14(b)**

**AND 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of The First of Long Island Corporation ("Corporation") on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on March 9, 2023, ("Report"), we, Christopher Becker, President and Chief Executive Officer of the Corporation and Jay P. McConie, Executive Vice President, Chief Financial Officer and Treasurer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: March 9, 2023

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| |
|:---|
| By /s/ CHRISTOPHER BECKER |
| CHRISTOPHER BECKER |
| PRESIDENT & CHIEF EXECUTIVE OFFICER |
| (principal executive officer) |

---

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| |
|:---|
| By /s/ JAY P. MCCONIE |
| JAY P. MCCONIE |
| EXECUTIVE VICE PRESIDENT,  |
| CHIEF FINANCIAL OFFICER & TREASURER |
| (principal financial officer) |

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------