The accounting and reporting policies of The First of Long Island Corporation (“Corporation”) reflect banking industry practice and conform to generally accepted accounting principles (“GAAP”) in the United States.

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The First National Bank of Long Island (“Bank”). The Bank has two wholly owned subsidiaries: FNY Service Corp. and The First of Long Island Agency, Inc. The Bank and FNY Service Corp. jointly own another subsidiary, The First of Long Island REIT, Inc., a real estate investment trust. The consolidated entity is referred to as the “Corporation” and the Bank and its subsidiaries are collectively referred to as the “Bank.” All intercompany balances and amounts have been eliminated. For further information refer to the consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019.

The consolidated financial information included herein as of and for the periods ended March 31, 2020 and 2019 is unaudited. However, such information reflects all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The December 31, 2019 consolidated balance sheet was derived from the Corporation's December 31, 2019 audited consolidated financial statements. When appropriate, items in the prior year financial statements are reclassified to conform to the current period presentation.

Use of Estimates. In preparing the consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported asset and liability balances, revenue and expense amounts, and the disclosures provided, including disclosure of contingent assets and liabilities, based on available information. Actual results could differ significantly from those estimates. Information available which could affect these judgements include, but are not limited to, changes in interest rates, changes in the performance of the economy, including the economic impact of the COVID-19 pandemic on both the allowance and provision for credit losses, and changes in the financial condition of borrowers.

The Corporation considered the impact of the COVID-19 pandemic which did have a material adverse impact on the provision for credit losses, and subsequent to March 31, 2020 resulted in certain loan modifications. The Corporation could experience a further material adverse effect on its business as a result of the impact of the COVID-19 pandemic, and the resulting governmental actions to curtail its spread. It is at least reasonably possible that information which was available at the date of the financial statements will change in the near term due to the COVID-19 pandemic and that the effect of the change would be material to the financial statements. The extent to which the COVID-19 pandemic will impact our estimates and assumptions is highly uncertain and we are unable to make an estimate at this time.

Adoption of New Accounting Standards. In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 “Measurement of Credit Losses on Financial Instruments (Topic 326)” (“CECL”). This standard changes the methodology used to determine the allowance for loan losses from an incurred loss model to a current expected credit loss model. The CECL model requires the Bank to maintain at each periodic reporting date an allowance for credit losses (“ACL” or “allowance”) in an amount that is equal to its estimate of expected lifetime credit losses on all financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities and certain off-balance sheet credit exposures. Management adopted ASU 2016-13, as amended, on January 1, 2020 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit commitments. Results for reporting periods beginning on or after January 1, 2020 are presented under Accounting Standards Codification (“ASC”) 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

On January 1, 2020, the Corporation recorded a net decrease to retained earnings of $2,325,000, net of tax effect of $993,000, for the implementation of ASC 326, with offsetting increases of $2,888,000 and $430,000 to the ACL on loans and off-balance sheet credit exposures, respectively. The following table illustrates the impact of ASC 326.



		January 1, 2020
						Impact of
		As Reported		Pre-ASC 326		ASC 326
(in thousands)		Under ASC 326		Adoption		Adoption
Assets:
Allowance for credit losses on loans:
Commercial and industrial	$	1,249	$	1,493	$	(244)
Commercial mortgages:
Multifamily		8,210		7,151		1,059
Other		3,451		3,498		(47)
Owner-occupied		1,699		921		778
Residential mortgages:
Closed end		17,054		15,698		1,356
Revolving home equity		509		515		(6)
Consumer and other		5		13		(8)
	$	32,177	$	29,289	$	2,888
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	605	$	175	$	430

The Corporation made an accounting policy election to present the accrued interest receivable balance of loans separate from the amortized cost basis and includes the receivable balance within “Other assets” on the consolidated balance sheets. Management applied the practical expedient to exclude accrued interest receivable balances from the tabular disclosures and has elected to not estimate an allowance for credit losses on accrued interest receivable. The Bank continues to reverse accrued interest receivable against current period interest income when a loan becomes nonaccrual.

For available-for-sale investment securities which are in an unrealized loss position, we evaluate whether the decline in fair value has resulted from an actual or estimated credit loss event. We consider, among other factors, 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, we assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of the amortized cost basis and determine 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 ACL 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 ACL is recognized in other comprehensive income.

We estimate 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 us. The ACL on off-balance sheet credit exposures is recorded in the line item “other liabilities” in the consolidated balance sheet and is adjusted as a provision for credit loss expense which is included in the line item “other noninterest expense” in the consolidated statements of income.

See Note 4 “Loans” for the accounting policy of ACL on loans and additional disclosures required by ASU 2016-13.

In August 2018, the FASB issued ASU 2018-13 “Changes to the Disclosure Requirements for Fair Value Measurement” to modify certain disclosure requirements pertaining to fair value measurements as part of the FASB’s disclosure framework project. Management adopted ASU 2018-13 on January 1, 2020. See Note 7 “Fair Value of Financial Instruments” for disclosures required by ASU 2018-13.

Recent Accounting Pronouncements. The pronouncements discussed in this section are not intended to be an all-inclusive list, but rather only those pronouncements that could potentially have an impact on the Corporation’s financial position, results of operations or disclosures.

In August 2018, the FASB issued ASU 2018-14 “Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 modifies certain disclosure requirements pertaining to defined benefit plans as part of the FASB’s disclosure framework project and is intended to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The adoption of this ASU will modify the Corporation’s disclosures but will not impact its financial position or results of operations.