FIRST OF LONG ISLAND CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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

Overview


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

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

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

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

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

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

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



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

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

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

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

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



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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.

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

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


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

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



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

                                                        Six Months Ended June 30,
                                                            2022 Versus 2021
                                                 Increase (decrease) due to changes in:
                                                                                     Net
(in thousands)                                  Volume               Rate          Change
Interest Income:
Interest-earning bank balances               $       (133)       $         134   $         1
Investment securities:
Taxable                                              (122)               (152)         (274)
Nontaxable                                           (676)                  43         (633)
Loans                                                3,676               (984)         2,692
Total interest income                                2,745               (959)         1,786
Interest Expense:
Savings, NOW & money market deposits                  (89)               (607)         (696)
Time deposits                                        (496)             (1,301)       (1,797)
Short-term borrowings                                  300               (316)          (16)
Long-term debt                                       (321)               (122)         (443)
Total interest expense                               (606)            

(2,346) (2,952)
Increase (decrease) in net interest income $ 3,351 $ 1,387 $ 4,738



Net Interest Income

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

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

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

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

Noninterest Income

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


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



                                                                              22

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

Noninterest Expense

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

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

Income Taxes


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

Results of Operations – Second Quarter 2022 Versus Second Quarter 2021


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

Critical Accounting Policies and Estimates


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

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

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

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



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management currently believes will be adequate to absorb expected lifetime
losses in the Bank's loan portfolio. The process for estimating credit losses
and determining the ACL as of any balance sheet date is subjective in nature and
requires material estimates and judgements. Actual results could differ
significantly from those estimates.

The ACL is measured on a collective (pool) basis when similar risk
characteristics exist. Management segregates its loan portfolio into eleven
distinct pools: (1) commercial and industrial; (2) small business credit scored;
(3) multifamily; (4) owner-occupied; (5) other commercial real estate; (6)
construction and land development; (7) residential mortgage; (8) revolving home
equity; (9) consumer; (10) municipal loans; and (11) SBA PPP loans. The vintage
method is applied to measure the historical loss component of lifetime credit
losses inherent in most of its loan pools. For the revolving home equity and
small business credit scored pools, the PD/LGD method is used to measure
historical losses; no historical loss method was applied to the SBA PPP loan
pool. Management believes that the methods selected fairly reflect the
historical loss component of expected losses inherent in the Bank's loan
portfolio. However, since future losses could vary significantly from those
experienced in the past, on a quarterly basis management adjusts its historical
loss experience to reflect current conditions and reasonable and supportable
forecasts. In doing so, management considers a variety of Q-factors and then
subjectively determines the weight to assign to each in estimating losses. The
factors include: (1) changes in lending policies and procedures; (2) experience,
ability and depth of lending staff; (3) trends in the nature and volume of
loans; (4) changes in the quality of the loan review function; (5)
delinquencies; (6) environmental risks; (7) current and forecasted economic
conditions as judged by things such as national and local unemployment levels
and GDP; (8) changes in the value of underlying collateral as judged by things
such as median home prices and forecasted vacancy rates in the Bank's service
area; and (9) direction and magnitude of changes in the economy. The Bank's ACL
allocable to its loan pools results primarily from these Q-factor adjustments to
historical loss experience with the largest sensitivity of the ACL and provision
arising from loan growth and concentrations, credit quality and forecasts of
unemployment, GDP, vacancies and economic conditions. Because of the nature of
the Q-factors and the difficulty in assessing their impact, management's
resulting estimate of losses may not accurately reflect lifetime losses in the
portfolio.

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

Asset Quality


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

                                                           June 30,     December 31,
(in thousands)                                               2022           2021
Loans including modifications to borrowers
experiencing financial difficulty:
Modified and performing according to their modified
terms                                                    $        540   $   

554

Past due 30 through 89 days                                       193       

460

Past due 90 days or more and still accruing                         -               -
Nonaccrual                                                        260           1,235
                                                                  993           2,249
Other real estate owned                                             -               -
                                                         $        993   $       2,249

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

Allowance and Provision for Credit Losses


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

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



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

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

The amount of future chargeoffs and provisions for credit losses will be
affected by economic conditions on Long Island and in the boroughs of NYC. Such
conditions could affect the financial strength of the Bank's borrowers and will
affect the value of real estate collateral securing the Bank's mortgage loans.
Loans secured by real estate represent approximately 97% of the Bank's total
loans outstanding at June 30, 2022. The majority of these loans are
collateralized by properties located on Long Island and in the boroughs of NYC.
While business activity in the New York metropolitan area has improved,
inflation and increasing rates pose new economic challenges and may result in
higher chargeoffs and provisions.

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

Cash Flows and Liquidity


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

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

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

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

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

The Bank has both internal and external sources of liquidity that can be used to
fund loan growth and accommodate deposit outflows. The Bank's primary internal
sources of liquidity are overnight investments, maturities and monthly payments
on its investment securities and loan portfolios, operations and investment
securities designated as AFS. At June 30, 2022, the Bank had approximately
$192.2 million of unencumbered AFS securities.

The Bank is a member of the Federal Reserve Bank ("FRB") of New York and the
FHLB of New York and has a federal funds line with a commercial bank. In
addition to customer deposits, the Bank's primary external sources of liquidity
are secured borrowings from the FRB of New York and FHLB of New York. In
addition, the Bank can draw funds under its existing line and the Corporation
believes it can raise funds through its Dividend Reinvestment and Stock Purchase
Plan. However, the Bank's FRB of New York membership, FHLB of New York
membership and unsecured line do not represent legal commitments to extend
credit to the Bank. The amount that the Bank can potentially borrow is currently
dependent on the amount of unencumbered eligible securities and loans that the
Bank can use as collateral and the collateral margins required by the lenders.
Based on the Bank's unencumbered securities and loan collateral, a substantial
portion of which is in place at the FRB of New York and FHLB of New York, the
Bank had a borrowing capacity of approximately $1.8 billion at June 30, 2022.



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Capital


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

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

The Corporation and the Bank have elected to adopt the community bank leverage
ratio ("CBLR") framework, which requires a leverage ratio of greater than 9.00%.
As a qualifying community banking organization, the Corporation and the Bank may
opt out of the CBLR framework in any subsequent quarter by completing its
regulatory agency reporting using the traditional capital rules.

The Corporation's capital management policy is designed to build and maintain
capital levels that exceed regulatory standards and appropriately provide for
growth. The Leverage Ratios of the Corporation and the Bank at June 30, 2022
were 9.85% and 9.84%, respectively, and satisfy the well capitalized ratio
requirements under the Prompt Corrective Action statutes. The Corporation and
the Bank elected the optional five-year transition period provided by the
federal banking agencies for recognizing the regulatory capital impact of the
implementation of CECL.

The Corporation has a stock repurchase program under which it is authorized to
purchase shares of its common stock from time to time through open market
purchases, privately negotiated transactions, or in any other manner that is
compliant with applicable securities laws. During the first half of 2022, the
Corporation repurchased 488,897 shares of its common stock at a total cost of
$9.8 million. The Corporation can repurchase another $23.1 million under Board
approved repurchase programs. We expect to continue common stock repurchases
during the remainder of 2022.

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