UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) Quarterly Report Pursuant to Section 13 or 15(d) of
X the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
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 No.: 0-29826
LONG ISLAND FINANCIAL CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3453684
------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Suffolk Square, Islandia, New York 11722
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(516) 348-0888
---------------------------------------------------
(Registrant's telephone number, including area code)
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
requirements for the past 90 days; Yes ( x ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The registrant had 1,776,326 shares of Common Stock outstanding as of July 30,
1999.
<PAGE>
Form 10-Q
LONG ISLAND FINANCIAL CORP.
INDEX
Page
PART I - CONSOLIDATED FINANCIAL INFORMATION Number
- ------------------------------------------- ------
ITEM 1. Consolidated Financial Statements - Unaudited
Consolidated Balance Sheets at June 30, 1999
and December 31, 1998 2
Consolidated Statements of Earnings for the Three Months Ended
and Six Months Ended June 30, 1999 and 1998 3
Consolidated Statement of Changes in Stockholders' Equity
for the Six Months Ended June 30, 1999 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 5-6
Notes to Unaudited Consolidated Financial Statements 7-9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-21
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk 21-22
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 23
ITEM 2. Changes in Securities and Use of Proceeds 23
ITEM 3. Defaults Upon Senior Securities 23
ITEM 4. Submission of Matters to a Vote of Security Holders 23
ITEM 5. Other Information 23
ITEM 6. Exhibits and Reports on Form 8-K 23
Signatures 24
================================================================================
Statements contained in this Form 10-Q which are not historical facts are
forward- looking statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected. Such risks and uncertainties include potential changes in
interest rates, competitive factors in the financial services industry, general
economic conditions, the effect of new legislation, potential adverse effects of
Year 2000, and other risks detailed in documents filed by the Company with the
Securities and Exchange Commission from time to time.
================================================================================
1
<PAGE>
PART I - CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements - Unaudited
- ------- ---------------------------------------------
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
June 30, December 31,
1999 1998
----------- -------------
(Unaudited)
<S> <C> <C>
Assets:
Cash and due from banks ................................ $ 5,173 13,170
Interest earning deposits .............................. 123 269
Federal funds sold ..................................... -- 8,050
------- -------
Total cash and cash equivalents .......... 5,296 21,489
Securities held-to-maturity, net
(estimated fair value of $489 and $665, respectively) . 489 664
Securities available-for-sale .......................... 135,697 145,155
Loans receivable, net .................................. 105,155 94,144
Premises and equipment, net ............................ 2,198 1,975
Accrued interest receivable ............................ 1,827 1,614
Prepaid expenses and other assets ...................... 8,263 1,502
------- -------
Total assets.............................. $ 258,925 266,543
======= =======
Liabilities and Stockholders' Equity:
Deposits:
Demand deposits..................................... $ 32,851 36,605
Savings deposits.................................... 25,199 12,476
NOW and money market deposits ...................... 38,758 71,689
Time certificates issued in excess of $100,000 ..... 21,955 18,998
Other time deposits ................................ 77,677 78,099
------- -------
Total deposits............................ 196,440 217,867
Borrowed funds.......................................... 39,000 24,000
Accrued expenses and other liabilities ................. 3,022 2,808
------- -------
Total liabilities ........................ 238,462 244,675
======= =======
Stockholders' equity:
Common stock (par value $.01 per share, authorized
10,000,000 shares, issued and outstanding
1,776,326 and 1,771,306 shares, respectively) .... 18 18
Surplus ............................................ 20,185 20,126
Accumulated surplus ................................ 2,091 1,659
Accumulated other comprehensive (loss) income:
Net (depreciation) unrealized appreciation in
available-for-sale securities, net of tax .... (1,831) 65
------- -------
Total stockholders' equity ............... 20,463 21,868
------- -------
Total liabilities and stockholders' equity $ 258,925 266,543
======= =======
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
--------------------- -------------------
<S> <C> <C> <C> <C>
Interest income:
Interest earning deposits..................... $ 2 7 4 11
Federal funds sold............................ 122 125 260 224
Securities.................................... 2,334 1,809 4,682 3,719
Interest and fees on loans.................... 2,164 1,970 4,227 3,792
----- ----- ----- -----
Total interest income..................... 4,622 3,911 9,173 7,746
----- ----- ----- -----
Interest expense:
Savings deposits.............................. $ 171 34 302 56
NOW and money market deposits................. 289 274 614 502
Time certificates issued in excess of $100,000 315 381 657 835
Other time deposits........................... 1,113 1,259 2,247 2,506
Borrowed funds................................ 503 200 945 315
----- ----- ----- -----
Total interest expense.................... 2,391 2,148 4,765 4,214
----- ----- ----- -----
Net interest income....................... 2,231 1,763 4,408 3,532
Provision for loan losses......................... 150 90 300 180
----- ----- ----- -----
Net interest income after provision
for loan losses........................... 2,081 1,673 4,108 3,352
----- ----- ----- -----
Other operating income:
Service charges on deposit accounts........... $ 167 97 310 174
Net gain on sale of debt and equity securities 88 13 88 13
Mortgage banking operations................... 182 4 325 4
Other......................................... 159 69 190 104
----- ----- ----- -----
Total other operating income.............. 596 183 913 295
Other operating expenses:
Salaries and employee benefits................ 1,002 672 1,941 1,245
Occupancy expense............................. 145 111 280 194
Premises and equipment expense................ 175 94 349 170
Other......................................... 594 493 1,168 948
----- ----- ----- -----
Total other operating expenses............ 1,916 1,370 3,738 2,557
Income before provision for income taxes.. 761 486 1,283 1,090
Provision for income taxes........................ 262 190 452 432
----- ----- ----- -----
Net income................................ $ 499 296 831 658
Basic and diluted earnings per share...... $ 0.28 0.17 0.47 0.37
Weighted average shares outstanding............... 1,776,326 1,764,571 1,776,160 1,762,513
========= ========= ========= =========
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1999
(Unaudited)
(In thousands, except share data)
Accumulated
other
Common Accumulated comprehensive
stock Surplus surplus (loss) income Total
------------ ------------ -------------- ---------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998............ $ 18 20,126 1,659 65 21,868
Dividend reinvestment and stock
purchase plan, issued 5,020 shares..... - 59 - - 59
Dividends declared on common
stock ($.16 per common share).......... - - (284) - (284)
Corporate reorganization costs.......... - - (115) - (115)
Comprehensive income: (1)
Net income for the period............ - - 831 - 831
Other comprehensive income,
net of tax:
Unrealized depreciation in available-
for-sale securities, net of
reclassification adjustment (2).. - - - (1,896) (1,896)
------ ------ ------ ------- -------
Total comprehensive income (loss) (1,065)
Balance at June 30, 1999................ $ 18 20,185 2,091 (1,831) 20,463
====== ====== ====== ======= ======
<FN>
(1) The Company's comprehensive income for the six months ended June 30, 1998, was $544,000.
(2) Disclosure of reclassification amount:
June 30, 1999
Comprehensive income items, net of tax -------------
Unrealized loss in available-for-sale securities,
arising during the period.......................................... $ (1,844)
Less: Reclassification adjustment for gains included in income....... 52
-------
Net unrealized depreciation.......................................... $ (1,896)
=======
</FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
For the Six Months
Ended June 30,
1999 1998
------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 831 658
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Provision for possible loan losses...................... 300 180
Depreciation and amortization........................... 282 169
Amortization of premiums, net
of discount accretion............................... (122) (2)
Gain on sales of securities............................. (88) (13)
Proceeds and gains from sales of loans held-for-
sale, net of originations........................... 451 (129)
Net deferred loan origination fees...................... 74 60
Deferred income taxes................................... (71) 59
Changes in asset and liability accounts:
Accrued interest receivable......................... (213) 140
Accrued expenses and other liabilities.............. 260 (58)
Prepaid expenses and other assets................... (5,499) (164)
Net cash (used in) provided by ------- ------
operating activities................................ (3,795) 900
------- ------
Cash flows from investing activities:
Purchases of securities available-for-sale.............. (226,838) (198,126)
Proceeds from sales of securities available-for-sale.... 12,777 4,773
Proceeds from maturities of securities.................. 211,195 181,350
Principal repayments on securities...................... 9,576 11,099
Loan originations and principal
repayments on loans, net............................ (11,836) (11,139)
Purchase of premises and equipment...................... (505) (610)
-------- --------
Net cash used in investing activities............... (5,631) (12,653)
-------- --------
Cash flows from financing activities:
Net decrease in demand deposit
accounts, NOW accounts, money
market and savings accounts......................... (23,962) (28,530)
Net decrease in certificates of deposit................. 2,535 (2,962)
Payments for cash dividends............................. (284) (282)
Increase in borrowings.................................. 15,000 19,000
Proceeds from shares issued under the
dividend reinvestment plan.......................... 59 116
Corporate reorganization costs.......................... (115) -
-------- --------
Net cash used in financing activities................... (6,767) (12,658)
-------- --------
Net decrease in cash and cash equivalents............... (16,193) (24,411)
Cash and cash equivalents at beginning of period.............. 21,489 29,764
-------- --------
Cash and cash equivalents at end of period.................... $ 5,296 5,353
======== ========
</TABLE>
(Continued)
5
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
For the Six Months
Ended June 30,
1999 1998
---------------------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information
------------------------------------------------
Cash paid during the period for:
Interest $ 5,074 4,344
===== =====
Income taxes $ - 345
===== =====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
LONG ISLAND FINANCIAL CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Long Island Financial Corp. (the "Company") and its wholly-owned
subsidiary, Long Island Commercial Bank (the "Bank"). Significant intercompany
accounts and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements included herein reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the interim periods presented. The
results of operations for the six months ended June 30, 1999 are not necessarily
indicative of the results of operations that may be expected for the entire
fiscal year. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain reclassifications have been
made to prior year amounts to conform to the current year presentation.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto, included
in the Company's 1998 Annual Report on Form 10-K.
2. REORGANIZATION
At a special meeting on December 8, 1998, the stockholders of Long Island
Commercial Bank approved a Plan of Acquisition dated as of September 15, 1998,
which subsequently became effective January 28, 1999, and as a result of which:
(i) the Bank became a wholly-owned subsidiary of Long Island Financial Corp., a
Delaware corporation; and (ii) all of the outstanding shares of the Bank's
common stock were converted, subject to dissenter's rights, on a one-for-one
basis, into outstanding shares of the common stock of Long Island Financial
Corp. No stockholder asserted dissenter's rights. This transaction is
hereinafter referred to as the "Reorganization."
The Reorganization created a bank holding company structure which provides
greater operating flexibility by allowing the Company to conduct a broader range
of business activities and permits the Board of Directors of the Company to
determine whether to conduct such activities in the Bank or in separate
subsidiaries of the Company. Finally, the reorganization will permit expansion
into a broader range of financial services and other business activities that
are not currently permitted to the Bank as a New York state-chartered commercial
bank. Such activities include, among others, operating non-bank depository
institutions or engaging in financial and investment advisory services,
securities brokerage and management consulting activities. Costs to effect the
Reorganization amounting to $115,000 were charged against accumulated surplus.
7
<PAGE>
3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial condition and measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation. SFAS No. 133 is effective for fiscal
years beginning after June 15, 2000, and does not require restatement of prior
periods. Management of the Company believes the implementation of SFAS No. 133
will not have a material impact on the Company's financial condition or results
of operations.
4. SECURITIES
The following table sets forth certain information regarding amortized cost and
estimated fair values of the securities held-to-maturity and available-for-sale
as of the dates indicated:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
Estimated Estimated
Amortized fair Amortized fair
cost value cost value
----------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Held-to-maturity, net:
Mortgage-backed securities:
CMO.......................................... $ 489 489 664 665
======= ======= ======= =======
Available-for-sale:
U.S. Government and Agency Obligations.......... $ 83,558 81,155 78,994 78,980
Mortgage-backed securities:
GNMA......................................... 43,584 42,816 39,864 39,771
FHLMC........................................ 1,516 1,551 2,453 2,487
FNMA......................................... 4,221 4,244 6,060 6,097
Municipal obligations........................... 1,165 1,147 12,855 13,002
Other debt securities........................... 167 165 199 199
------- ------- ------- -------
Total debt securities........................... 134,211 131,078 140,425 140,536
Equity securities - FHLB stock.................. 4,619 4,619 4,619 4,619
------- ------- ------- -------
Total securities available-for-sale........... $ 138,830 135,697 145,044 145,155
======= ======= ======= =======
</TABLE>
8
<PAGE>
5. LOANS RECEIVABLE, NET
Loans receivable, net consist of the following as of the dates indicated:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
--------------- -------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial loans $ 32,461 30.3 % $ 30,853 32.1 %
Commercial real estate loans 67,800 63.4 53,990 56.2
Automobile loans 4,403 4.1 8,262 8.6
Consumer loans 1,300 1.2 1,396 1.5
Residential real estate loans held-for-sale 1,035 1.0 1,486 1.6
------- ----- ------ -----
106,999 100.0 % 95,987 100.0 %
Less:
Unearned income $ 143 362
Deferred fees, net 484 410
Allowance for loan losses 1,217 1,071
------- ------
105,155 94,144
======= ======
</TABLE>
6. RECENT DEVELOPMENTS
On May 26, 1999, the Board of Directors of the Company declared a quarterly
dividend of eight cents ($0.08) per common share. The dividend was paid on July
1, 1999, to shareholders' of record as of June 24, 1999.
On April 15, 1999, the Company announced the commencement of a program to
repurchase up to 10% of it's outstanding common stock. No time limit has been
placed on the duration of the stock repurchase program. Subject to applicable
securities laws, such purchases will be made at times and in amounts the Company
deems appropriate and may be discontinued at any time. Repurchased shares will
be held as treasury stock available for general corporate purposes. As of June
30, 1999, no shares had been repurchased by the Company.
9
<PAGE>
Management's Discussion and Analysis
Item 2. of Financial Condition and Results of Operations
- ------- ------------------------------------------------
General
Long Island Commercial Bank, the subsidiary of Long Island Financial Corp., is a
New York state-chartered commercial bank, founded in 1989, which is engaged in
commercial banking in Islandia, New York and the surrounding communities in
Suffolk and Nassau counties. The Bank offers a broad range of commercial and
consumer banking services, including loans to and deposit accounts for small and
medium-sized businesses, professionals, high net worth individuals and
consumers. The Bank is an independent local bank, emphasizing personal attention
and responsiveness to the needs of its customers. The Bank's senior management
has substantial banking experience, and senior management and the Board of
Directors of the Bank have extensive commercial and personal ties to the
communities in Nassau and Suffolk Counties, New York.
Financial Condition
The Company's total assets were $258.9 million as of June 30, 1999, compared to
$266.5 million at December 31, 1998. The decline in cash and cash equivalents of
$16.2 million, or 75.4%, was attributable to the timing of seasonal municipal
deposits which were not on deposit at June 30, 1999. Loans receivable, net
increased $11.0 million, or 11.7%, to $105.2 million at June 30, 1999, despite a
$3.9 million reduction in the automobile loan portfolio during the six month
period ended June 30, 1999. The decrease in securities available-for-sale
reflects the sale of certain municipal obligations during the six month period
ended June 30, 1999, combined with principal repayments on the Company's
mortgage- backed securities portfolio. Prepaid expenses and other assets grew by
$6.8 million primarily as a result of the purchase of bank owned life insurance,
covering the directors and executive officers of the Bank. The purchase of this
insurance provides benefits to both the Bank and the covered employees.
Total deposits decreased $21.4 million, or 9.8%, from $217.9 million at December
31, 1998 to $196.4 million at June 30, 1999, primarily reflecting a decrease in
NOW and money market deposits. The decrease in NOW and money market deposits of
$32.9 million, or 45.9%, from $71.7 million at December 31, 1998 to $38.8
million at June 30, 1999, is attributable to the timing of seasonal municipal
deposits, which were not on deposit at June 30, 1999. The decrease of $3.8
million, or 10.3%, in demand deposits was also attributable to the seasonal
reduction in municipal deposits. The effects of those declines were offset in
part by a $3.0 million increase in time deposits in excess of $100,000. Savings
deposits increased by $12.7 million, or 102.0%, from December 31, 1998 to June
30, 1999, as a result of new products offering competitive rates to higher
balance accounts while reducing the overall cost of funds.
Borrowed funds increased by $15.0 million, or 62.5%, from $24.0 million at
December 31, 1998 to $39.0 million at June 30, 1999, as the Company continued
its leveraging strategy in the first six months of 1999. Stockholders' equity
amounted to $20.5 million at June 30, 1999, compared to $21.9 million at
December 31, 1998. Excluding the unrealized loss related to securities
available-for-sale, stockholders' equity grew at a rate of 2.3% for the six
months ended June 30, 1999.
10
<PAGE>
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income depends
upon the volume of interest-earning assets and interest-bearing liabilities and
the interest rates earned or paid on them.
The following table sets forth certain information relating to the Company's
consolidated average balance sheets and its consolidated statements of earnings
for the six months ended June 30, 1999, and 1998, and reflects the average yield
on interest-earning assets and average cost of interest-bearing liabilities for
the periods indicated. Such yields and costs are derived by dividing income or
expense, annualized, by the average balance of interest-earning assets or
interest-bearing liabilities, respectively. Average balances are derived from
average daily balances. Average balances and yields include non-accrual loans,
as they are not material.
11
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
---- Average ---- Average
Average Yield / Average Yield /
Balance Interest Cost Balance Interest Cost
-------- -------- -------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C><C> <C> <C>
Interest earning assets:
Federal funds sold and
interest-earning deposits......... $ 10,417 $ 124 4.76 % $ 9,687 $ 132 5.45 %
Securities held-to-maturity and
available-for-sale, net (5)....... 150,069 2,307 6.15 % 105,705 1,719 6.50 %
Municipal obligations (4)........... 2,578 40 6.21 % 8,176 135 6.60 %
Loans receivable, net (1)........... 100,818 2,164 8.59 % 86,277 1,970 9.13 %
-------- ----- ------- -----
Total interest-earning assets..... 263,882 4,635 7.03 % 209,845 3,956 7.54 %
Non-interest-earning assets................ 21,628 ----- 10,990 -----
-------- -------
Total assets............................... $ 285,510 $ 220,835
======== =======
Interest-bearing liabilities:
Savings deposits.................... $ 21,737 $ 171 3.15 % $ 4,614 $ 34 2.95 %
NOW and money market deposits....... 60,395 289 1.91 % 42,292 274 2.59 %
Certificates of deposit............. 104,567 1,428 5.46 % 111,091 1,640 5.91 %
------- ----- ------- -----
Total interest-bearing deposits... 186,699 1,888 4.05 % 157,997 1,948 4.93 %
Borrowed funds...................... 41,195 503 4.88 % 14,456 200 5.53 %
------- ----- ------- -----
Total interest-bearing liabilities 227,894 2,391 4.20 % 172,453 2,148 4.98 %
Other non-interest bearing liabilities..... 36,507 ----- 26,722 -----
------- -------
Total liabilities.......................... 264,401 199,175
Stockholders' Equity....................... 21,109 21,660
Total liabilities and stockholders' ------- -------
equity.............................. $ 285,510 $ 220,835
======= =======
Net interest income/
interest rate spread (2) (4).......... $ 2,244 2.83 % $ 1,808 2.56 %
===== ==== ===== ====
Net interest margin (3).................... 3.40 % 3.45 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities........ 1.16 1.22
==== ====
<FN>
(1) Amount is net of residential real estate loans held-for-sale, deferred loan fees and allowance for loan losses and includes
non-performing loans.
(2) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-
bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
(4) Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate
of 34%.
(5) Securities held-to-maturity and available-for-sale, net exclude municipal obligations.
</FN>
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
------ Average ------ Average
Average Yield / Average Yield /
Balance Interest Cost Balance Interest Cost
--------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Federal funds sold and
interest-earning deposits......... $ 11,274 $ 264 4.68 % $ 8,624 $ 235 5.45 %
Securities held-to-maturity and
available-for-sale, net (5)....... 147,695 4,516 6.12 110,099 3,627 6.59
Municipal obligations (4)........... 7,688 240 6.24 4,179 138 6.60
Loans receivable, net (1)........... 98,861 4,227 8.55 83,074 3,792 9.13
------- ----- ------- -----
Total interest-earning assets..... 265,518 9,247 6.97 205,976 7,792 7.57
Non-interest-earning assets................ 19,354 ----- 10,925 -----
------- -------
Total assets............................... $ 284,872 $ 216,901
======= =======
Interest-bearing liabilities:
Savings deposits.................... $ 19,278 $ 302 3.13 $ 4,053 $ 56 2.76
NOW and money market deposits....... 64,234 614 1.91 41,112 502 2.44
Certificates of deposit............. 105,522 2,904 5.50 112,956 3,341 5.92
------- ----- ------- -----
Total interest-bearing deposits... 189,034 3,820 4.04 158,121 3,899 4.93
Borrowed funds...................... 38,840 945 4.87 11,432 315 5.51
------- ----- ------- -----
Total interest-bearing liabilities 227,874 4,765 4.18 % 169,553 4,214 4.97
Other non-interest bearing liabilities..... 35,569 ----- 25,773 -----
------- -------
Total liabilities.......................... 263,443 195,326
Stockholders' Equity....................... 21,429 21,575
Total liabilities and stockholders' ------- -------
equity.............................. $ 284,872 $ 216,901
======= =======
Net interest income/
interest rate spread (2) (4).......... $ 4,482 2.79 % $ 3,578 2.60 %
===== ==== ===== ====
Net interest margin (3).................... 3.38 % 3.47 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities........ 1.17 1.21
==== ====
<FN>
(1) Amount is net of residential real estate loans held-for-sale, deferred loan fees and allowance for loan losses and includes
non-performing loans.
(2) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-
bearing liabilities.
(3) Net interest margin represents net interest income divided by average interest-earning assets.
(4) Interest income and yields are presented on a fully-taxable equivalent basis using the Federal statutory income tax rate
of 34%.
(5) Securities held-to-maturity and available-for-sale, net exclude municipal obligations.
</FN>
</TABLE>
13
<PAGE>
Comparison of Operating Results for the Three Months Ended
June 30, 1999 and 1998
General
Net income increased by $203,000, or 68.6%, from $296,000 for the 1998 period to
$499,000 for the three months ended June 30, 1999. The increase was attributable
primarily to increases in other operating income of $413,000, or 225.7%, and net
interest income of $468,000, or 26.5%, offset in part by increases in other
operating expenses of $546,000, or 39.9%. The Bank's effective tax rate for the
three months ended June 30, 1999, was 34.4% compared to 39.1% for the 1998
period.
Interest Income
Interest income, on a fully-taxable equivalent basis, increased $679,000, or
17.2 %, from $4.0 million for the three months ended June 30, 1998, to $4.6
million for the three months ended June 30, 1999. The increase was attributable
to an increase in the average balance of total interest-earning assets of $54.0
million, or 25.8%, from $209.8 million for the three months ended June 30, 1998,
to $263.9 million for the three months ended June 30, 1999. The average balance
of securities held-to-maturity and available- for-sale, net, (exclusive of
municipal obligations) increased $44.4 million, or 42.0%, with a decrease in the
average yield from 6.50% for the three months ended June 30, 1998, to 6.15% for
the comparable period in 1999. Due to the formation and related tax benefits of
an operating subsidiary of the Bank in the second quarter 1999, the benefits of
holding municipal obligations diminished. As a result, in April of 1999, the
Bank sold approximately $11.8 million of municipal obligations. The proceeds
from the sale were reinvested in higher earning assets, primarily bank owned
life insurance and other available-for-sale securities. The average balance of
loans receivable, net increased $14.5 million, or 16.9% from $86.3 million for
the three months ended June 30, 1998, to $100.8 million for the 1999 period. The
average yield on loans receivable, net, decreased 54 basis points from 9.13% for
the three months ended June 30, 1998, to 8.59% for the comparable period in
1999. The decrease reflects the growth in the Company's commercial real estate
portfolio at lower market interest rates and as a result of increased
competitive pricing in 1999.
Interest Expense
Interest expense increased $243,000, or 11.3%, from $2.1 million for the three
months ended June 30, 1998, to $2.4 million for the three months ended June 30,
1999, resulting primarily from a $55.4 million or 32.1% increase in the average
balance of total interest-bearing liabilities for the period, from $172.5
million for the comparable period to $227.9 million for the three months ended
June 30, 1999. The growth reflected an increase in the average balance of
interest-bearing deposits of $28.7 million, or 18.2%, coupled with an increase
in the average balance of borrowed funds of $26.7 million, or 185.0%. The
average rate paid on interest-bearing deposits decreased 88 basis points for the
three month period ended June 30, 1999, to 4.05% when compared with the 4.93%
rate paid for the 1998 period. The decrease reflects the growth in lower cost
deposits as a result of increased sales efforts in late 1998 and early 1999. The
average balance of savings deposits increased by $17.1 million, or 371.1%, and
the average balance of NOW and money market deposits has increased by $18.1
million, or 42.8% from period to period. The increases reflect the introduction
of new deposit products and services, as well as an increased emphasis on sales
14
<PAGE>
throughout the Company. The average balance of certificates of deposit has
decreased by $6.5 million as the Company continues to focus on reducing its cost
of funds. The average cost of borrowed funds decreased 65 basis points to 4.88%
for the three months ended June 30, 1999, from 5.53% for the comparable period
in 1998, due to lower market interest rates.
Net Interest Income
Net interest income on a fully-taxable equivalent basis increased by $436,000,
or 24.1%, from $1.8 million for the three months ended June 30, 1998, to $2.2
million for the three months ended June 30, 1999. The average cost of total
interest-bearing liabilities for the period decreased 78 basis points to 4.20%
in 1999, from 4.98% in 1998. The average yield on interest-earning assets
decreased 51 basis points to 7.03% in 1999, from 7.54% in 1998. The net interest
rate spread increased by 27 basis points from 2.56% in 1998, to 2.83% in 1999.
Provision for Loan Losses
The Company's provision for loan losses was $150,000 for the three months ended
June 30, 1999, compared to $90,000 for the same period in 1998. This increase
generally reflects the growth within the loan portfolio, the average balance of
which increased by $14.5 million, or 16.8%, to $100.8 million for the three
months ended June 30, 1999.
Other Operating Income
Other operating income increased $413,000, or 225.7%, to $596,000 for the three
months ended June 30, 1999, compared to $183,000 for the three months ended June
30, 1998. The increase was primarily attributable to the establishment of the
Company's residential mortgage department in May 1998, and fee income associated
with the origination and sale of residential mortgages. Such fees amounted to
approximately $182,000 for the three months ended June 30, 1999. In addition,
service charges on deposits accounts increased by $70,000, or 72.2%, reflecting
the growth in the Company's depositor base and an overall increase in the
Company's fee schedule. In April 1999, the Company sold $12.8 million in
securities with a net gain on sale of securities in the amount of $88,000, an
increase of $75,000 over the prior year period.
Other Operating Expense
Other operating expenses increased $546,000, or 39.9%, from $1.4 million for the
three months ended June 30, 1998, to $1.9 million for the three months ended
June 30, 1999. Salaries and employee benefits increased by $330,000, or 49.1%,
to $1.0 million for the three months ended June 30, 1999, reflecting increase in
staff in connection with the Company's branch expansion, opening of a
residential mortgage department , continued internal growth, and the
strengthening of the Company's middle-management to support the planned growth.
The number of full-time equivalent employees increased from 59 at June 30, 1998
to 73, or 23.7% at June 30, 1999. Occupancy expense for the three months ended
June 30, 1999, was $145,000, compared to $111,000 for the 1998 period, an
increase of $34,000, or 30.6%, reflecting the branch expansion and main office
expansion to support operations growth. The branch expansion also contributed to
growth in other categories of other operating expenses.
15
<PAGE>
Income Taxes
Total income tax expense increased $72,000, or 37.9%, from $190,000 for the
three months ended June 30, 1998, to $262,000 for the three months ended June
30, 1999. The effective tax rate decreased from 39.1% for the 1998 period, to
34.4% for the 1999 period, and is attributable to the combination of the
municipal obligations portfolio and the related tax benefits of a subsidiary of
the Bank.
Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1998
General
Net income for the six months ended June 30, 1999, increased by $173,000, or
26.3%, to $831,000 from $658,000 for the corresponding period in 1998. The
increase was attributable to an increase in other operating income of $618,000,
or 209.5%, and net interest income of $876,000, or 24.8%, offset in part by
increases in other operating expenses of $1.2 million, or 46.2%. The Bank's
effective tax rate for the six months ended June 30, 1999, was 35.2% compared to
39.6% for the 1998 period.
Interest Income
Interest income, on a fully-taxable equivalent basis, increased $1.5 million, or
18.7%, from $7.8 million for the six months ended June 30, 1998, to $9.3 million
for the six months ended June 30, 1999. This increase was attributable to an
increase in the average balance of total interest-earning assets of $59.5
million, or 28.9%, from $206.0 million for the six months ended June 30, 1998,
to $265.5 million for the six months ended June 30, 1999. The average balance of
securities held-to-maturity and available-for- sale, net, (exclusive of
municipal obligations) increased $37.6 million, or 34.1%, in the six months
ended June 30, 1999, from the six months ended June 30, 1998, with a decrease in
the average yield from 6.59% for the six months ended June 30, 1998, to 6.12%
for the 1999 period. Due to the formation and related tax benefits of an
operating subsidiary of the Bank in the second quarter 1999, the benefits of
holding municipal obligations diminished. As a result, in April of 1999, the
Bank sold approximately $11.8 million of municipal obligations. The proceeds
from the sale were reinvested in higher earning assets, primarily bank owned
life insurance and other available-for-sale securities. The average balance of
loans receivable, net increased $15.8 million, or 19.0% from $83.1 million for
the six months ended June 30, 1998, compared to $98.9 million for the same
period in 1999. The average yield on loans receivable, net decreased 58 basis
points from 9.13% for the six months ended June 30, 1998, to 8.55% for the
comparable period in 1999. This decrease reflects the Company's growth in the
commercial real estate portfolio at lower market interest rates as a result of
increased competitive pricing in 1999.
16
<PAGE>
Interest Expense
Interest expense increased $551,000, or 13.1%, from $4.2 million for the six
months ended June 30, 1998, to $4.8 million for the six months ended June 30,
1999. This was attributable to an increase in the average balance of total
interest-bearing liabilities for the period of $58.3 million, or 34.4%, to
$227.9 million for the six months ended June 30, 1999, from $169.6 million for
the comparable 1998 period. The growth reflected an increase in the average
balance of interest-bearing deposits of $30.9 million, or 19.6%, coupled with an
increase in the average balance of borrowed funds of $27.4 million, or 239.7%.
The average rate paid on interest-bearing deposits decreased 89 basis points for
the six month period ended June 30, 1999, to 4.04% when compared to the 4.93%
rate paid for the 1998 period. The decrease reflects the growth in lower cost
deposits as a result of increased sales efforts in late 1998 and early 1999,
from the six months ended June 30, 1998, to the current period. The average
balance of savings deposits increased by $15.2 million, or 375.6%, and the
average balance of NOW and money market deposits increased by $23.1 million, or
56.2%. The increases reflect the introduction of new deposit products and
services, as well as an increased emphasis on sales throughout the Company. In
addition, the average balance of certificates of deposit decreased by $7.4
million as the Company continues to focus on reducing the cost of funds. In
addition, the average cost of borrowed funds also decreased 64 basis points to
4.87% for the six months ended June 30, 1999, from 5.51% for the comparable
period in 1998, due to increased borrowings throughout 1998 and 1999, at lower
market rates.
Net Interest Income
Net interest income on a fully-taxable equivalent basis increased by $904,000,
or 25.3%, from $3.6 million for the six months ended June 30, 1998, to $4.5
million for the six months ended June 30, 1999. The average cost of total
interest-bearing liabilities for the period decreased 79 basis points to 4.18%
in 1999, from 4.97% in 1998. The average yield on interest-earning assets
decreased 60 basis points to 6.97% in 1999, from 7.57% in 1998. The net interest
rate spread increased by 19 basis points from 2.60% in 1998, to 2.79% in 1999.
Provision for Loan Losses
The Company's provision for loan losses was $300,000 for the six months ended
June 30, 1999, compared to $180,000 for the 1998 period. This increase generally
reflects the growth within the loan portfolio, the average balance of which
increased by $15.8 million, or 19.0%, to $98.9 million for the six months ended
June 30, 1999. Management of the Company assesses the adequacy of the allowance
for loan losses based on evaluating known and inherent risks in the loan
portfolio and upon management's continuing analysis of the factors underlying
the quality of the loan portfolio. While management believes that, based on
information currently available, the Company's allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the Company's level of allowance for loan losses
will be sufficient to cover future loan losses incurred by the Company or that
future adjustments to the allowance for loan losses will not be necessary if
economic and other conditions differ substantially from the economic and other
conditions used by management to determine the current level of the allowance
for loan losses. Management may in the future increase its level of allowance
for loan losses as a percentage of total loans and non- performing loans in the
event it increases the level of commercial real estate, commercial, construction
or consumer lending as a percentage of its total loan portfolio. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses.
17
<PAGE>
The following table sets forth information regarding non-accrual loans, loans
delinquent 90 days or more and still accruing interest at the dates indicated.
It is the Company's general policy to discontinue accruing interest on all loans
which are past due 90 days or when, in the opinion of management, such
suspension is warranted. When a loan is placed on non-accrual status, the
Company ceases the accrual of interest owed and previously accrued interest is
charged against interest income. Loans are generally returned to accrual status
when principal and interest payments are current, there is reasonable assurance
that the loan will be fully collectible and a consistent record of performance
has been demonstrated.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
---------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Commercial and industrial loans.................. $ 273 366
Automobile loans................................. 35 37
Consumer loans................................... 80 108
--- ---
Total non-accrual loans..................... 388 511
Loans contractually past due 90 days or
more, other than non-accruing (2)............... - -
--- ---
Total non-performing loans.................. $ 388 511
=== ===
Allowance for possible loan losses as a percentage
of loans (1).................................... 1.16 % 1.12 %
Allowance for possible loan losses as a percentage
of total non-performing loans.................... 13.66 % 209.59 %
Non-performing loans as a percentage of loans (1)........ .37 % .54 %
<FN>
(1) Loans include loans receivable, net excluding the allowance for possible loan losses.
(2) Excludes $378,000 of loans, at December 31, 1998, which have matured, however, are current with respect to scheduled
periodic principal and/or interest payments. The Company is in the process of renewing these obligations and/or awaiting
anticipated repayment.
</FN>
</TABLE>
Other Operating Income
Other operating income increased $618,000, or 209.5%, to $913,000 for the six
months ended June 30, 1999, compared to $295,000 for the six months ended June
30, 1998. The increase was primarily attributable to the establishment of the
Company's residential mortgage department in May, 1998, and fee income
associated with the origination and sale of residential mortgages. Such fees
amounted to approximately $325,000 for the six months ended June 30, 1999. In
addition, service charges on deposit accounts increased by $136,000, or 78.2%,
reflecting the growth in the Company's depositor base and an overall increase in
the Company's fee schedule.
18
<PAGE>
Other Operating Expense
Other operating expenses increased $1.2 million, or 46.2%, in the current period
from $2.6 million for the six months ended June 30, 1998. Salaries and employee
benefits increased by $696,000, or 55.9%, to $1.9 million for the six months
ended June 30, 1999, reflecting a 23.7% increase in staff in connection with the
Company's branch expansion, opening of a residential mortgage department,
continued internal growth, and the strengthening of the Company's
middle-management to support the planned growth. Occupancy expense for the six
months ended June 30, 1999, was $280,000, compared to $194,000 for the 1998
period, an increase of $86,000, or 44.3%, reflecting the branch expansion and
main office expansion to support operations growth.
Income Taxes
Total income tax expense increased $20,000, or 4.6%, from $432,000 for the six
months ended June 30, 1998, to $452,000 for the six months ended June 30, 1999.
The effective tax rate decreased from 39.6% for the 1998 period, to 35.2% for
the 1999 period, and is attributable to the combination of the municipal
obligations portfolio and the related tax benefits of a subsidiary of the Bank.
Liquidity
Liquidity management for the Company requires that funds be available to pay all
deposit withdrawal and maturing financial obligations and meet credit funding
requirements promptly and fully in accordance with their terms. For most banks,
including the Bank, maturing assets provided only a limited portion of the funds
required to pay maturing liabilities over a very short time frame. The balance
of the funds required is provided by liquid assets and the acquisition of
additional liabilities, making liability management integral to liquidity
management in the short term.
The primary investing activities of the Company are the purchase of securities
available-for-sale and the origination of loans. During each of the six months
ended June 30, 1999, and 1998, the Company's purchases of securities were all
classified available-for-sale and totaled $226.8 million and $198.1 million,
respectively. Loan originations, net of principal repayments on loans, totaled
$11.8 million and $11.1 million, for the six months ended June 30, 1999, and
1998, respectively. Those activities were funded primarily by borrowings and
principal repayments and maturities on securities.
The Company maintains levels of liquidity that it considers adequate to meet its
current needs. The Company's principal sources of cash include incoming
deposits, the repayment of loans and conversion of investment securities. When
cash requirements increase faster than cash is generated, either through
increased loan demand or withdrawal of deposited funds, the Company can arrange
for the sale of loans and liquidate available-for-sale securities and access its
lines of credit, totaling $3.5 million with unaffiliated financial institutions
which enable it to borrow federal funds on an unsecured basis. In addition, the
Company has available lines of credit with the Federal Home Loan Bank of New
York (FHLB) equal to 8.3% of the Company's assets, which enable it to borrow
funds on a secured basis. The Company could also engage in other borrowings,
including reverse repurchase agreements.
19
<PAGE>
At June 30, 1999, the Company's borrowings consisted of convertible advances
from the FHLB. The convertible feature of these advances allows the FHLB, at a
specified call date and quarterly thereafter, to convert these advances into
replacement funding for the same or lesser principal amount, based on any
advance then offered by the FHLB, at then current market rates. If the FHLB
elects to convert these advances, the Bank may repay any portion of the advances
without penalty. These convertible advances are secured by various
mortgage-backed and callable agency securities. At June 30, 1999, convertible
advances outstanding were as follows:
Interest Call Contractual
Amount Rate Date Maturity
----------- -------- ---------- -----------
$14,000,000 5.49% 02/19/2003 02/19/2008
$10,000,000 4.24% 10/08/2000 10/08/2008
$15,000,000 4.59% 01/21/2002 01/21/2009
Management of the Company has set minimum liquidity level of 10% as a target.
The Company's average liquid assets (cash and due from banks, federal funds
sold, interest earning deposits with other financial institutions and investment
securities available-for-sale, less securities pledged as collateral) as a
percentage of average assets of the Company during the six months ended June 30,
1999, was 24.7%. The Company's strategic plan is to build its core business by
generating and maintaining banking relationships with small and medium-sized
privately owned businesses, professional firms and high net worth individuals
within its market area.
Capital Resources
The Bank is subject to the risk based capital guidelines administered by the
banking regulatory agencies. The guidelines currently require all banks to
maintain a minimum ratio of total risk based capital to total risk weighted
assets of 8%, including a minimum ratio of Tier 1 capital to total risk weighted
assets of 4% and a Tier 1 capital to average adjusted assets of 4%. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators, that, if undertaken, could have
a direct material effect on the Bank's financial statements. As of December 31,
1998, the most recent notification from the federal banking regulators
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action.
In accordance with the requirements of FDIC and the New York State Banking
Department, the Bank must meet certain measures of capital adequacy with respect
to leverage and risk-based capital. As of June 30, 1999, the Bank exceeded those
requirements with a leverage capital ratio, and risk-based capital ratio and
total-risk based capital ratio of 7.81%, 16.32% and 17.21%, respectively.
Year 2000
The Company has initiated a program, consistent with guidelines issued by the
Federal Financial Institutions Examination Council (FFIEC), to prepare the
Company's computer systems and software applications for the year 2000. The
Company uses purchased software for all of its internal transaction processing
applications; therefore, no significant internal programming is necessary to
prepare these systems to handle transactions in the year 2000. The majority of
the Company's efforts in preparation for year 2000 processing relate to testing
purchased and outsourced processing systems, as well as updating databases.
20
<PAGE>
The Company's primary application, which handles processing of loans, deposits,
and general ledger, has been certified as year 2000 compliant by the vendor. As
of December 31, 1998, the Company has completed extensive testing of all
critical internal applications and the test results have not indicated any year
2000 related issues. As part of our ongoing efforts to assess and minimize
potential risks associated with the year 2000, management has completed an
evaluation of its customer base and is continuing its efforts with such
customers to discuss the status of their year 2000 readiness. Through this
evaluation process, the Company is aware of no issues that would significantly
affects the Company's ability to conduct business as usual during and after the
century date change.
Despite having completed reasonable testing and certification of its internal
computer systems, as of June 30, 1999, the Company had developed its business
resumption plan considering the potential impact of disruptions in all critical
and non-critical applications from within and from third-party business partners
and infrastructure providers. Testing of the business resumption plan has been
completed to verify the proper processing of transactions on the backup system.
Monitoring and managing the year 2000 projects results in additional direct and
indirect costs to the Company. Direct costs include potential charges by
third-party software vendors for product enhancements and costs involved in
testing software products for the year 2000 compliance. Indirect costs
principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and the development
of the business resumption plan. The Company does not believe that such costs
will have a material effect on results of operations. Both direct and indirect
costs of addressing the year 2000 issue will be charged to earnings as incurred.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------- ----------------------------------------------------------
The principal objective of the Company's interest rate management is to evaluate
the interest rate risk inherent in certain balance sheet accounts, determine the
level of risk appropriate given the Company's business strategy, operating
environment, capital and liquidity requirements and performance objectives, and
manage the risk consistent with the Board of Directors approved guidelines.
Through such management, the Company seeks to reduce the vulnerability of it
operations to changes in interest rates. The Board has directed the Investment
Committee to review the Company's interest rate risk position on a quarterly
basis.
Funds management is the process by which the Company seeks to maximize the
profit potential which is derived from the spread between the rates earned on
interest-earning assets and the rates paid on interest-bearing liabilities
through the management of various balance sheet components. It involves
virtually every aspect of the Company's management and decision-making process.
Accordingly, the Company's results of operations and financial condition are
largely dependent on the movements in the market interest rates and its ability
to manage its assets and liabilities in response to such movements.
21
<PAGE>
At June 30, 1999, 78.3% of the Company's gross loans had adjustable interest
rates and its loan portfolio had an average weighted maturity of 7.2 years. At
such date, $26.0 million, or 19.1%, of the Company's securities had adjustable
interest rates, and its securities portfolio had a weighted average maturity of
6.2 years. At June 30, 1999, the Company had $56.9 million of certificates of
deposit with maturities of one year or less and $22.0 million of deposits over
$100,000, which tend to be less stable sources of funding as compared to core
deposits and represented 38.9% of the Company's interest-bearing liabilities.
Due to the Company's level of shorter term certificates of deposit, the
Company's cost of funds may increase at a greater rate in a rising rate
environment than if it had a greater amount of core deposits which, in turn, may
adversely affect net interest income and net income. Accordingly, in a rising
interest rate environment, the Company's interest-bearing liabilities may adjust
upwardly more rapidly than the yield on its adjustable-rate loans, adversely
affecting the Company's net interest rate spread, net interest income and net
income.
The Company's interest rate sensitivity is monitored by management through the
use of a quarterly interest rate risk analysis model which evaluates (i) the
potential change in the net interest income over the succeeding four quarter
period and (ii) the potential change in the fair market value of equity of the
Company ("Net Economic Value of Equity"), which would result from an
instantaneous and sustained interest rate change of zero and plus or minus 200
basis point increments.
At June 30, 1999, the effect of instantaneous and sustained interest rate
changes on the Company's net interest income and Net Economic Value of Equity
are as follows:
<TABLE>
<CAPTION>
Change in
Interest Rates Potential Change in Potential Change in
in Basis Points Net Interest Income Net Economic Value of Equity
---------------- ------------------------ -----------------------------
$ Change % Change $ Change % Change
-----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
200 $ 583 5.75 % $ (9,041) (41.30) %
100 257 2.54 (3,143) (14.36)
Static - - - -
(100) (667) (6.58) 6,891 31.48
(200) (1,862) (18.37) 10,910 49.83
</TABLE>
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ------- ------------------
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
- ------- -----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Company's Annual Meeting of Stockholders was held on April 21, 1999, and the
following individuals were elected as Directors for a term of 3 years each:
<TABLE>
<CAPTION>
Votes Votes Broker
For Withheld Abstentions Non-Votes
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Harvey Auerbach 1,363,148 119,250 - -
Perry B. Duryea, Jr. 1,363,398 119,000 - -
Frank J. Esposito 1,363,348 119,050 - -
Roy M. Kern, Sr. 1,363,598 118,800 - -
Douglas C. Manditch 1,363,598 118,800 - -
</TABLE>
The terms of the following Directors continued after the Annual Meeting:
John L. Ciarelli, Donald Del Duca, Waldemar Fernandez, Gordon Lenz, Walter J.
Mack, Werner Neuburger, Thomas Roberts III, Alfred Romito, Sally Ann Slacke and
John C. Tsunis.
Item 5. Other Information
- ------- -----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
11.0 Statement Re: Computation of Per Share Earnings
27.0 Financial Data Schedule
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.
LONG ISLAND FINANCIAL CORP.
(Registrant)
Date: August 13, 1999 By: /s/ Douglas C. Manditch
-------------------------------------
Douglas C. Manditch
President and Chief Executive Officer
Date: August 13, 1999 By: /s/ Thomas Buonaiuto
-------------------------------------
Thomas Buonaiuto
Vice President and Treasurer
24
<PAGE>
Exhibit 11.0 Computation Of Per Share Earnings
Long Island Financial Corp.
Statement Re: Computation of Per Share Earnings
(In thousands, except for share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income................................... $ 499 296 831 658
Weighted average shares outstanding.......... 1,776,326 1,764,571 1,776,160 1,762,513
Basic and diluted earnings per share......... $ 0.28 0.17 0.47 0.37
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001070517
<NAME> LONG ISLAND FINANCIAL CORP.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1.000
<CASH> 5,173
<INT-BEARING-DEPOSITS> 123
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 135,697
<INVESTMENTS-CARRYING> 489
<INVESTMENTS-MARKET> 489
<LOANS> 106,999
<ALLOWANCE> 1,217
<TOTAL-ASSETS> 258,925
<DEPOSITS> 196,440
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,022
<LONG-TERM> 39,000
0
0
<COMMON> 18
<OTHER-SE> 20,445
<TOTAL-LIABILITIES-AND-EQUITY> 258,925
<INTEREST-LOAN> 4,227
<INTEREST-INVEST> 4,682
<INTEREST-OTHER> 264
<INTEREST-TOTAL> 9,173
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</TABLE>
