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 September 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)
(631) 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 1,746,326 shares of Common Stock outstanding as of November
8, 1999.
<PAGE>
Form 10-Q
LONG ISLAND FINANCIAL CORP.
INDEX
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
ITEM 1.
Consolidated Financial Statements - Unaudited
Consolidated Balance Sheets at September 30, 1999
and December 31, 1998 2
Consolidated Statements of Earnings for the Three Months Ended
and Nine Months Ended September 30, 1999 and 1998 3
Consolidated Statement of Changes in Stockholders' Equity
for the Nine Months Ended September 30, 1999 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 7
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 21
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 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements - Unaudited
- ------- ---------------------------------------------
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Balance Sheets
(In thousands, except share data)
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
Assets:
Cash and due from banks.......................................... $ 6,287 13,170
Interest earning deposits........................................ 188 269
Federal funds sold............................................... - 8,050
----- ------
Total cash and cash equivalents.................... 6,475 21,489
Securities held-to-maturity, net
(estimated fair value of $408 and $665, respectively)........... 409 664
Securities available-for-sale.................................... 132,008 145,155
Loans receivable, net............................................ 108,158 94,144
Premises and equipment, net...................................... 2,211 1,975
Accrued interest receivable...................................... 2,201 1,614
Prepaid expenses and other assets................................ 8,487 1,502
------- -------
Total assets....................................... $ 259,949 266,543
======= =======
Liabilities and Stockholders' Equity:
Deposits:
Demand deposits.............................................. $ 34,515 36,605
Savings deposits............................................. 26,484 12,476
NOW and money market deposits................................ 34,039 71,689
Time certificates issued in excess of $100,000............... 23,499 18,998
Other time deposits.......................................... 78,900 78,099
------- -------
Total deposits..................................... 197,437 217,867
Borrowed funds................................................... 39,370 24,000
Accrued expenses and other liabilities ....................... 3,296 2,808
------- -------
Total liabilities.................................. 240,103 244,675
Stockholders' equity:
Common stock (par value $.01 per share, 10,000,000 shares
authorized; 1,776,326 shares issued; 1,746,326 and
1,771,306 outstanding, respectively)....................... 18 18
Surplus ................................................... 20,185 20,126
Accumulated surplus.......................................... 2,331 1,659
Accumulated other comprehensive (loss) income:
Net unrealized (depreciation) appreciation in available-for-
sale securities, net of tax................................ (2,318) 65
Treasury stock, at cost...................................... (370) -
-------- --------
Total stockholders' equity......................... 19,846 21,868
-------- --------
Total liabilities and stockholders' equity......... 259,949 266,543
======== ========
See accompanying notes to 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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Interest earning deposits.................... $ 4 5 8 16
Federal funds sold........................... 36 212 296 436
Securities .................................. 2,178 1,456 6,860 5,175
Interest and fees on loans................... 2,364 2,023 6,591 5,815
------ ----- ------ ------
Total interest income.................... 4,582 3,696 13,755 11,442
------ ----- ------ ------
Interest expense:
Savings deposits............................. $ 224 124 526 180
NOW and money market deposits................ 192 197 806 699
Time certificates issued in excess of $100,000 298 226 955 1,061
Other time deposits.......................... 1,087 1,214 3,334 3,720
Borrowed funds............................... 520 200 1,465 515
----- ----- ----- -----
Total interest expense................... 2,321 1,961 7,086 6,175
----- ----- ----- -----
Net interest income...................... 2,261 1,735 6,669 5,267
Provision for loan losses......................... 150 120 450 300
----- ----- ----- -----
Net interest income after provision
for loan losses ......................... 2,111 1,615 6,219 4,967
----- ----- ----- -----
Other operating income:
Service charges on deposit accounts.......... $ 166 109 476 283
Net gain on sale of securities............... - - 88 13
Mortgage banking operations.................. 114 69 439 73
Other ....................................... 135 68 325 172
--- --- ----- ---
Total other operating income............. 415 246 1,328 541
Other operating expenses:
Salaries and employee benefits............... 962 763 2,903 2,008
Occupancy expense............................ 135 128 415 330
Premises and equipment expense............... 186 136 535 362
Other........................................ 642 491 1,810 1,375
----- ----- ----- -----
Total other operating expenses........... 1,925 1,518 5,663 4,075
Income before provision for income taxes. 601 343 1,884 1,433
Provision for income taxes........................ 220 108 672 540
--- --- --- ---
Net income............................... $ 381 235 1,212 893
=== === ===== ===
Basic and diluted earnings per share..... $ 0.22 0.13 0.68 0.51
==== ==== ==== ====
Weighted average shares outstanding............... 1,758,364 1,768,166 1,770,163 1,764,418
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1999
(Unaudited)
(In thousands, except share data)
Accumulated
other
Common Accumulated comprehensive Treasury
stock Surplus surplus income (loss) stock Total
--------- --------- ------------- ---------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998............ $ 18 20,126 1,659 65 - 21,868
Comprehensive income (loss): (1)
Net income for the period............ - - 1,212 - - 1,212
Other comprehensive income,
net of tax:
Unrealized depreciation in available-
for-sale securities, net of
reclassification adjustment (2).. - - - (2,383) - (2,383)
---- ---- ---- ------- ---- -------
Total comprehensive income (loss).... (1,171)
Dividend reinvestment and stock
purchase plan, issued 5,020 shares..... - 59 - - - 59
Dividends declared on common
stock ($.24 per common share).......... - - (425) - - (425)
Corporate reorganization costs.......... - - (115) - - (115)
Treasury stock, at cost (30,000 shares). - - - - (370) (370)
---- ---- ---- ---- ----- -----
Balance at September 30, 1999........... $ 18 20,185 2,331 (2,318) (370) 19,846
== ====== ===== ======= ===== ======
<FN>
(1) The Company's comprehensive income for the Nine Months Ended September 30, 1998, was $1,103,000.
(2) Disclosure of reclassification amount:
September 30, 1999
Comprehensive income (loss) items, net of tax ------------------
Unrealized loss in available-for-sale securities,
arising during the period $ (2,331)
Less: Reclassification adjustment for gains included in income 52
-------
Net unrealized depreciation $ (2,383)
=======
</FN>
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
For the Nine Months
Ended September 30,
1999 1998
------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 1,212 893
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Provision for possible loan losses.................. 450 300
Depreciation and amortization....................... 427 279
Amortization of premiums, net
of discount accretion........................... (65) 70
Gain on sales of securities......................... (88) (13)
Proceeds and gains from sales of loans held-for-
sale, net of originations....................... 1,297 (955)
Net deferred loan origination fees.................. 102 82
Deferred income taxes............................... - 89
Changes in asset and liability accounts:
Accrued interest receivable..................... (587) 463
Accrued expenses and other liabilities.......... 534 (79)
Prepaid expenses and other assets............... (5,337) (321)
------- -----
Net cash (used in) provided by
operating activities............................ (2,055) 808
------- ---
Cash flows from investing activities:
Purchases of securities available-for-sale.............. (226,838) (204,587)
Proceeds from sales of securities available-for-sale.... 12,777 4,773
Proceeds from maturities of securities.................. 211,695 192,350
Principal repayments on securities...................... 11,844 17,237
Loan originations and principal
repayments on loans, net............................ (15,863) (8,183)
Purchase of premises and equipment...................... (663) (1,059)
--------- ---------
Net cash used in investing activities............... (7,048) 531
--------- ---------
Cash flows from financing activities:
Net decrease in demand deposit
accounts, NOW accounts, money
market and savings accounts......................... (25,732) (6,289)
Net increase (decrease) in certificates of deposit...... 5,302 (4,413)
Payments for cash dividends............................. (425) (423)
Increase in borrowings.................................. 15,370 14,000
Proceeds from shares issued under the
dividend reinvestment plan.......................... 59 170
Treasury stock purchased................................ (370) -
Corporate reorganization costs...................... (115) -
------- -------
Net cash (used in) provided by financing activities. (5,911) 3,045
------- -------
Net (decrease) increase in cash and cash equivalents.... (15,014) 4,384
Cash and cash equivalents at beginning of period.............. 21,489 29,764
------- -------
Cash and cash equivalents at end of period.................... $ 6,475 34,148
======= =======
</TABLE>
(Continued)
5
<PAGE>
(Continued)
<TABLE>
<CAPTION>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
For the Nine Months
Ended September 30,
1999 1998
------ ------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest .................................. $ 7,392 6,277
===== =====
Income taxes .............................. $ - 642
===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
LONG ISLAND FINANCIAL CORP.
NOTES TO 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 accompanying 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 nine month period ended
September 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 ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. The accounting for changes in the
fair value of a derivative depends on the intended use of the derivative and its
specific designation.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133-an amendment of FASB Statement No. 133." This statement delays
the effective date for one year of SFAS No. 133, to fiscal years beginning after
June 15, 2000. SFAS No.'s 133 and 137 apply to quarterly and annual financial
statements. The Company does not believe that there will be a material impact on
its financial condition or results of operations upon the adoption of SFAS No.
133.
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>
September 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 ........................................... $ 409 408 664 665
=== === === ===
Available-for-sale:
U.S. Government and Agency Obligations............ $ 83,032 80,135 78,994 78,980
Mortgage-backed securities:
GNMA ......................................... 41,770 40,706 39,864 39,771
FHLMC ......................................... 1,432 1,460 2,453 2,487
FNMA ......................................... 3,847 3,843 6,060 6,097
Municipal obligations ............................ 1,166 1,138 12,855 13,002
Other debt securities ............................ 108 107 199 199
------- ------- ------- -------
Total debt securities ............................ 131,355 127,389 140,425 140,536
Equity securities - FHLB stock ................... 4,619 4,619 4,619 4,619
------- ------- ------- -------
Total securities available-for-sale ............ $ 135,974 132,008 145,044 145,155
======= ======= ======= =======
</TABLE>
8
<PAGE>
5. LOANS RECEIVABLE, NET
Loans receivable, net consist of the following as of the dates indicated:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial loans............. $ 33,092 30.0 % $ 30,853 32.1 %
Commercial real estate loans................ 72,958 66.3 53,990 56.2
Automobile loans............................ 2,525 2.3 8,262 8.6
Consumer loans.............................. 1,334 1.2 1,396 1.5
Residential real estate loans held-for-sale. 189 .2 1,486 1.6
------- ----- ------ -----
110,098 100.0 % 95,987 100.0 %
Less:
Unearned income........................... 79 362
Deferred fees, net........................ 512 410
Allowance for loan losses................. 1,349 1,071
------- ------
$ 108,158 $ 94,144
======= ======
</TABLE>
6. RECENT DEVELOPMENTS
On August 24,1999 the Board of Directors of the Company declared a quarterly
dividend of eight cents ($0.08) per common share. The dividend was paid on
October 1, 1999, to shareholders' of record as of September 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. As of September 30, 1999,
30,000 shares have been repurchased by the Company at an aggregate cost of
$370,000.
7. PENDING LEGISLATION
Legislation on which the Congress has completed it's work and which the
President is expected to sign eliminates many Federal and State law barriers to
affiliations among banks and other financial services providers. The
legislation, which takes effect 120 days after the date of enactment,
establishes a statutory framework pursuant to which full affiliations can occur
between banks and securities firms, insurance companies, and other financial
companies. The legislation provides some degree of flexibility in structuring
these new affiliations, although certain activities may only be conducted
through a holding company structure. The legislation, preserves the role of the
Board of Governors of the Federal Reserve System as the umbrella supervisor for
holding companies, but incorporates a system of functional regulation pursuant
to which the various Federal and state financial supervisors will continue to
regulate the activities traditionally within their jurisdictions. The
legislation specifies that banks may not participate in the new affiliations
unless the banks are well-capitalized and well-managed or if any bank affiliate
had received a less than "satisfactory" Community Reinvestment Act of 1977
rating as of its most recent examination.
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 $259.9 million as of September 30, 1999,
compared to $266.5 million at December 31, 1998. The decline in cash and cash
equivalents of $15.0 million, or 69.9%, was attributable to the timing of
seasonal municipal deposits which were not on deposit at September 30, 1999.
Loans receivable, net increased $14.0 million, or 14.9%, to $108.2 million at
September 30, 1999, despite a $5.7 million reduction in the automobile loan
portfolio during the nine month period ended September 30, 1999. The decrease in
securities available-for-sale reflects the sale of certain municipal obligations
during the nine month period ended September 30, 1999, combined with principal
repayments on the Company's mortgage-backed securities portfolio. Prepaid
expenses and other assets grew by $7.0 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 directors and employees.
Total deposits decreased $20.5 million, or 9.4%, from $217.9 million at December
31, 1998 to $197.4 million at September 30, 1999, primarily reflecting a
decrease in NOW and money market deposits. The decrease in NOW and money market
deposits of $37.7 million, or 52.5%, from $71.7 million at December 31, 1998 to
$34.0 million at September 30, 1999, is attributable to the timing of seasonal
municipal deposits, which were not on deposit at September 30, 1999, as was the
decrease of $2.1 million, or 5.7%, in demand deposits. The effects of those
declines were offset in part by a $14.0 million, or 112.3%, increase in savings
deposits and a $4.5 million increase in time deposits in excess of $100,000 from
December 31, 1998, to September 30, 1999. The increase in savings deposits is a
result of new products offering competitive rates to higher balance accounts.
Borrowed funds increased by $15.4 million, or 64.0%, from $24.0 million at
December 31, 1998 to $39.4 million at September 30, 1999, as the Company
continued its leveraging strategy in the first nine months of 1999. Total
stockholders' equity decreased $2.1 million to $19.8 million at September 30,
1999 from $21.9 million at December 31, 1998. The decrease was primarily due to
a $2.4 million decrease in net unrealized appreciation on securities
available-for-sale, dividends declared of $425,000 for the nine months ended
September 30, 1999, and stock repurchases of $370,000, offset in part by net
income of $1.2 million.
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 nine months ended September 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 September 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> <C>
Interest earning assets:
Federal funds sold and
interest-earning deposits....... $ 3,150 $ 40 5.08 % $ 15,993 $ 217 5.43 %
Securities held-to-maturity and
available-for-sale, net (5)..... 133,342 2,166 6.50 82,567 1,347 6.53
Municipal obligations (4)......... 1,166 17 5.83 9,875 163 6.60
Loans receivable, net (1)......... 104,675 2,364 9.03 89,963 2,023 8.99
------- ----- ------- -----
Total interest-earning assets... 242,333 4,587 7.57 198,398 3,750 7.56
----- -----
Non-interest-earning assets.............. 18,888 8,566
------- -------
Total assets............................. $ 261,221 $ 206,964
======= =======
Interest-bearing liabilities:
Savings deposits..................... $ 25,960 $ 224 3.45 $ 12,724 $ 124 3.90
NOW and money market deposits........ 36,235 192 2.12 30,572 197 2.58
Certificates of deposit.............. 101,027 1,385 5.48 98,498 1,440 5.85
------- ----- ------- -----
Total interest-bearing deposits.... 163,222 1,801 4.41 141,794 1,761 4.97
Borrowed funds....................... 41,662 520 4.99 14,169 200 5.65
------- ----- ------- -----
Total interest-bearing liabilities. 204,884 2,321 4.53 155,963 1,961 5.03
----- -----
Other non-interest bearing liabilities... 36,602 29,142
------- -------
Total liabilities........................ 241,486 185,105
Stockholders' Equity..................... 19,735 21,859
------- -------
Total liabilities and stockholders'
equity............................ $ 261,221 $ 206,964
======= =======
Net interest income/
interest rate spread (2) (4)........ $ 2,266 3.04 % $ 1,789 2.53 %
===== ==== ===== ====
Net interest margin (3).................. 3.74 % 3.61 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities........ 1.18 1.27
==== ====
<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>
Nine Months Ended September 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>
Interest earning assets:
Federal funds sold and
interest-earning deposits.......... $ 8,536 $ 304 4.75 % $ 11,107 $ 452 5.43 %
Securities held-to-maturity and
available-for-sale, net (5)........ 142,858 6,682 6.24 100,821 4,974 6.58
Municipal obligations (4)............ 5,490 251 6.10 6,099 302 6.60
Loans receivable, net (1)............ 100,821 6,591 8.72 85,395 5,815 9.08
------- ----- ------- -----
Total interest-earning assets...... 257,705 13,828 7.15 203,422 11,543 7.57
------ ------
Non-interest-earning assets.............. 19,192 10,130
------- -------
Total assets............................. $ 276,897 $ 213,552
======= =======
Interest-bearing liabilities:
Savings deposits..................... $ 21,530 $ 526 3.26 $ 6,975 $ 180 3.44
NOW and money market deposits........ 54,799 806 1.96 37,560 699 2.48
Certificates of deposit.............. 104,007 4,289 5.50 108,084 4,781 5.90
------- ----- ------- -----
Total interest-bearing deposits.... 180,336 5,621 4.16 152,619 5,660 4.94
Borrowed funds....................... 39,791 1,465 4.91 12,355 515 5.56
------- ----- ------- -----
Total interest-bearing liabilities. 220,127 7,086 4.29 164,974 6,175 4.99
----- -----
Other non-interest bearing liabilities... 35,912 26,908
------- -------
Total liabilities........................ 256,039 191,882
Stockholders' Equity..................... 20,858 21,670
------- -------
Total liabilities and stockholders'
equity............................ $ 276,897 $ 213,552
======= =======
Net interest income/
interest rate spread (2) (4).......... $ 6,742 2.86 % $ 5,368 2.58 %
===== ==== ===== ====
Net interest margin (3).................. 3.49 % 3.52 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities...... 1.17 1.23
==== ====
<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
September 30, 1999 and 1998
General
The Company reported net income of $381,000, or basic and diluted earnings per
share of $.22 for the quarter ended September 30, 1999, compared to $235,000, or
basic and diluted earnings per share of $.13 for the comparable prior year
period. The increase in net income was attributable primarily to increases in
net interest income of $526,000, or 30.3%, and other operating income of
$169,000, or 68.7%, which were offset in part by increases in other operating
expenses of $407,000, or 26.8%.
Interest Income
Interest income, on a fully-taxable equivalent basis, increased $837,000, or
22.3 %, from $3.8 million for the three months ended September 30, 1998, to $4.6
million for the three months ended September 30, 1999. The increase was
attributable to an increase in the average balance of total interest-earning
assets of $43.9 million, or 22.1%, from $198.4 million for the three months
ended September 30, 1998, to $242.3 million for the three months ended September
30, 1999. The average balance of securities held-to-maturity and
available-for-sale, net, (exclusive of municipal obligations) increased $50.8
million, or 61.5%, with a decrease in the average yield to 6.50% for the three
months ended September 30, 1999, from 6.53% for the comparable period in 1998.
The decline in the average balance of municipal obligations to $1.2 million for
the three months ending September 30, 1999, from $9.9 million for the comparable
prior year period was the result of the sale of approximately $11.8 million in
municipal obligations during the second quarter of 1999. 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 $14.7 million, or 16.4% from $90.0 million for the
three months ended September 30, 1998, to $104.7 million for the 1999 period.
The average yield on loans receivable, net, increased 4 basis points to 9.03%
for the three months ended September 30, 1999, from 8.99% for the comparable
period in 1998. The increase in yield is a result of non-accrual interest
received totaling $67,000, or approximately 25 basis points. Excluding that
interest, the yield on loans receivable, net, for the three months ended
September 30, 1999 would have been 8.78%, a decrease of 21 basis points from the
comparable 1998 period. That decrease reflects the lower market interest rates
resulting from increasingly competitive pricing in 1999 in commercial real
estate lending.
Interest Expense
Interest expense increased $360,000, or 18.4%, to $2.3 million for the three
months ended September 30, 1999, from $2.0 million for the three months ended
September 30, 1998, resulting primarily from a $48.9 million or 31.4% increase
in the average balance of total interest-bearing liabilities to $204.9 million
for the three months ended September 30, 1999, from $156.0 million for the
comparable prior year period. The increased expense results from an increase in
the average balance of interest-bearing deposits of $21.4 million, or 15.1%,
coupled with an increase in the average balance of borrowed funds of $27.5
million, or 194.0%. The average rate paid on interest-bearing deposits decreased
56 basis points for the three month period ended September 30, 1999, to 4.41%
when compared with the 4.97% rate paid for the 1998 period. The decrease in
average rate reflects the increased growth in lower cost
14
<PAGE>
deposits as a result of increased sales efforts in late 1998 and early 1999. The
average balance of savings deposits increased by $13.2 million, or 104.0%, and
the average balance of NOW and money market deposits increased by $5.7 million,
or 18.5% from period to period. The average balance of certificates of deposit
increased only $2.6 million as the Company continues to focus on reducing its
cost of funds. The average cost of borrowed funds decreased 66 basis points to
4.99% for the three months ended September 30, 1999, from 5.65% 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 $477,000,
or 26.7%, to $2.3 million for the three months ended September 30, 1999, from
$1.8 million for the three months ended September 30, 1998. The average cost of
total interest-bearing liabilities for the period decreased 50 basis points to
4.53% in 1999, from 5.03% in 1998. The average yield on interest-earning assets
for the period increased 1 basis point to 7.57% in 1999, from 7.56% in 1998. The
net interest rate spread increased by 51 basis points from 2.53% in 1998, to
3.04% in 1999.
Provision for Loan Losses
The Company's provision for loan losses was $150,000 for the three months ended
September 30, 1999, compared to $120,000 for the 1998 period. This increased
provision was made primarily to reflect the growth within the loan portfolio,
the average balance of which increased by $14.7 million, or 16.4%, from $90.0
million in the 1998 period, to $104.7 million for the three months ended
September 30, 1999.
Other Operating Income
Other operating income increased $169,000, or 68.7%, to $415,000 for the three
months ended September 30, 1999, compared to $246,000 for the three months ended
September 30, 1998. The increase was attributable, in part, to fee income
associated with the origination and sale of residential mortgages. Such fees
amounted to $114,000 for the three months ended September 30, 1999. Service
charges on deposits accounts increased by $57,000, or 52.3%, reflecting the
growth in the Company's depositor base and an overall increase in the Company's
fee schedule. Other operating income increased as a result of dividends earned
on bank owned life insurance.
Other Operating Expense
Other operating expenses increased $407,000, or 26.8%, to $1.9 million for the
three months ended September 30, 1999, from $1.5 million for the three months
ended September 30, 1998. Salaries and employee benefits increased by $199,000,
or 26.1%, to $1.0 million for the three months ended September 30, 1999,
reflecting internal growth, and the strengthening of the Company's middle-
management to support the planned growth. The increase from period to period in
occupancy expense, premises and equipment expense, and other expense reflect the
branch expansion, the delivery and support of electronic banking services and
main office expansion to support operations growth.
15
<PAGE>
Income Taxes
Provision for income tax expenses increased $112,000, or 103.7%, from $108,000
recorded for the quarter ended September 30, 1998, to $220,000 for the quarter
ended September 30, 1999. The increase is primarily attributable to the increase
in income before income taxes.
Comparison of Operating Results for the Nine Months Ended
September 30, 1999 and 1998
General
The Company reported net income of $1.2 million, or basic and diluted earnings
per share of $.68 for the nine months ended September 30, 1999, compared to
$893,000, or basic and diluted earnings per share of $.51 for the comparable
prior year period. The increase was attributable to increases in net interest
income of $1.4 million, or 26.6%, and other operating income of $787,000, or
145.5%, offset in part by increases in other operating expenses of $1.6 million,
or 39.0%.
Interest Income
Interest income, on a fully-taxable equivalent basis, increased $2.3 million, or
19.8%, to $13.8 million for the nine months ended September 30, 1999, from $11.5
million for the nine months ended September 30, 1998. This increase was
attributable to an increase in the average balance of total interest-earning
assets of $54.3 million, or 26.7%, from $203.4 million for the nine months ended
September 30, 1998, to $257.7 million for the nine months ended September 30,
1999. The average balance of securities held-to-maturity and available-for-sale,
net, (exclusive of municipal obligations) increased $42.0 million, or 41.7%, in
the nine months ended September 30, 1999, from the nine months ended September
30, 1998, with a decrease in the average yield from 6.58% for the nine months
ended September 30, 1998, to 6.24% for the 1999 period. The average balance of
loans receivable, net, increased $15.4 million, or 18.1% from $85.4 million for
the nine months ended September 30, 1998, to $100.8 million for the 1999 period.
The average yield on loans receivable, net, decreased 36 basis points to 8.72%
for the three months ended September 30, 1999, from 9.08% for the comparable
period in 1998. This decrease reflects lower market interest rates resulting
from increasingly competitive pricing in 1999 in commercial real estate lending.
Interest Expense
Interest expense increased $911,000, or 14.8%, from $6.2 million for the nine
months ended September 30, 1998, to $7.1 million for the nine months ended
September 30, 1999. This was attributable to an increase in the average balance
of total interest-bearing liabilities for the period of $55.2 million, or 33.4%,
to $220.1 million for the nine months ended September 30, 1999, from $165.0
million for the comparable 1998 period. The growth reflected an increase in the
average balance of interest-bearing deposits of $27.7 million, or 18.2%, coupled
with an increase in the average balance of borrowed funds of $27.4 million, or
222.1%. The average rate paid on interest-bearing deposits decreased 78 basis
16
<PAGE>
points for the nine month period ended September 30, 1999, to 4.16% when
compared to the 4.94% rate paid for the 1998 period. The decrease in average
rate continues to reflect the growth in lower cost deposits as a result of
increased sales efforts in 1999. The average balance of savings deposits
increased by $14.6 million, or 208.7%, and the average balance of NOW and money
market deposits increased by $17.2 million, or 49.9%. The average balance of
certificates of deposit decreased by $4.1 million for the nine months ended
September 30, 1999 as the Company continued to focus on replacing higher cost
funds with lower cost core deposits. The average cost of borrowed funds
decreased 65 basis points to 4.91% for the nine months ended September 30, 1999,
from 5.56% for the comparable period in 1998, due to increased borrowings in
1998 and 1999 at lower market rates.
Net Interest Income
Net interest income on a fully-taxable equivalent basis increased by $1.3
million, or 25.6%, from $5.4 million for the nine months ended September 30,
1998, to $6.7 million for the nine months ended September 30, 1999. The average
cost of total interest-bearing liabilities for the period decreased 70 basis
points to 4.29% in 1999, from 4.99% in 1998. The average yield on
interest-earning assets decreased 42 basis points to 7.15% in 1999, from 7.57%
in 1998. The net interest rate spread increased by 28 basis points from 2.58% in
1998, to 2.86% in 1999.
Provision for Loan Losses
The Company's provision for loan losses was $450,000 for the nine months ended
September 30, 1999, compared to $300,000 for the 1998 period. This increased
provision was made to reflect the growth within the loan portfolio, the average
balance of which increased by $15.4 million, or 18.1%, to $100.8 million for the
nine months ended September 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.
The following table sets forth information regarding non-accrual loans and 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 but not
collected 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.
17
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(In thousands)
<S> <C> <C> <C>
Non-accrual loans:
Commercial and industrial loans.................. $ 45 366
Automobile loans................................. 16 37
Consumer loans................................... 71 108
---- ----
Total non-accrual loans..................... 132 511
Loans contractually past due 90 days or
more, other than non-accruing (2)............... - -
---- ----
Total non-performing loans.................. $ 132 511
---- ----
Allowance for loan losses as a percentage
of loans (1).................................... 1.23 % 1.12 %
Allowance for loan losses as a percentage
of total non-performing loans.................... 1,021.97 % 209.59 %
Non-performing loans as a percentage of loans (1)........ .12 % .54 %
<FN>
(1) Loans include loans receivable, net excluding the allowance for loan
losses.
(2) Excludes $55,638 and $378,000 of loans, at September 30, 1999 and December
31, 1998, respectively, 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 $787,000, or 145.5%, to $1.3 million for the
nine months ended September 30, 1999, compared to $541,000 for the nine months
ended September 30, 1998. The increase was attributable, in part, to fee income
associated with the origination and sale of residential mortgages. Such fees
increased by $366,000 for the nine months ended September 30, 1999. Service
charges on deposit accounts increased by $193,000, or 68.2%, reflecting the
growth in the Company's depositor base and an overall increase in the Company's
fee schedule. Other operating income increased $153,000 primarily as a result of
dividends earned on bank owned life insurance and certain loan prepayment fees.
Other Operating Expense
Other operating expenses increased $1.6 million, or 39.0%, to $5.7 million in
the nine months ended September 30, 1999, from $4.1 million in the nine months
ended September 30, 1998. Salaries and employee benefits increased by $895,000,
or 44.6%, to $2.9 million for the nine months ended September 30, 1999,
reflecting branch expansion, internal growth, and the strengthening of the
Company's middle-management to support the planned growth. Increases in
occupancy expense,
18
<PAGE>
premises and equipment expense, and other expense for the nine months ended
September 30, 1999 are a result of branch expansion and the delivery and support
of electronic banking services.
Income Taxes
Provision for income taxes increased $132,000, or 24.4%, from $540,000 for the
nine months ended September 30, 1998, to $672,000 for the nine months ended
September 30, 1999. The increase is attributable to the increase in income
before income taxes.
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 nine months
ended September 30, 1999, and 1998, the Company's purchases of securities were
all classified available-for-sale and totaled $226.8 million and $204.6 million,
respectively. Loan originations, net of principal repayments on loans, totaled
$15.9 million and $8.2 million, for the nine months ended September 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, liquidate available-for-sale securities and access its
lines of credit, totaling $4.5 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 forms of
borrowings, including reverse repurchase agreements.
At September 30, 1999, the Company's primary 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 September 30, 1999,
convertible advances outstanding were as follows:
19
<PAGE>
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 average of the Company's 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 nine months ended
September 30, 1999, was 21.2%.
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 September 30, 1999, the Bank exceeded
those requirements with a leverage capital ratio, and risk-based capital ratio
and total-risk based capital ratio of 8.66%, 16.02% and 16.97%, respectively.
Year 2000
The Company has been preparing for Year 2000 since 1998 and is pleased to report
that as of September 30, 1999, all significant systems are Year 2000 certified
and testing has been completed. 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.
Management initiated a Year 2000 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.
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 had completed extensive testing of all
critical internal applications and the test results had 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 to discuss the
status of their year 2000 readiness with new and existing customers. Through
this evaluation process, the Company has not become aware of any issues that
would significantly affect 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 September 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 guidelines approved by the Board of Directors.
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.
At September 30, 1999, 79.9% of the Company's gross loans had adjustable
interest rates and its loan portfolio had an average weighted maturity of 7.4
years. At such date, $12.2 million, or 9.2%, of the Company's securities had
adjustable interest rates, and its securities portfolio had a weighted average
maturity of 6.5 years. At September 30, 1999, the Company had $54.7 million of
certificates of deposit
21
<PAGE>
with maturities of one year or less and $23.5 million of deposits over $100,000,
which tend to be less stable sources of funding as compared to core deposits and
represented 38.7% 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 September 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 $ 381 3.81 % $ (4,432) (20.13) %
100 205 2.05 (855) (3.88)
Static - - - -
(100) (348) (3.48) 5,115 23.23
(200) (1,582) (15.84) 7,514 34.13
</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
- ------- ---------------------------------------------------
Not applicable.
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: November 12, 1999 By: /s/ Douglas C. Manditch
------------------------------------------
Douglas C. Manditch
President and Chief Executive Officer
Date: November 12, 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 Nine Months Ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net income............................. $ 381 235 1,212 893
Weighted average shares outstanding.... 1,758,364 1,768,166 1,770,163 1,764,418
Basic and diluted earnings per share... .22 .13 .68 .51
=== === === ---
</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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.000
<CASH> 6,287
<INT-BEARING-DEPOSITS> 188
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,008
<INVESTMENTS-CARRYING> 409
<INVESTMENTS-MARKET> 408
<LOANS> 110,098
<ALLOWANCE> 1,349
<TOTAL-ASSETS> 259,949
<DEPOSITS> 197,437
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,296
<LONG-TERM> 39,370
0
0
<COMMON> 18
<OTHER-SE> 19,828
<TOTAL-LIABILITIES-AND-EQUITY> 259,949
<INTEREST-LOAN> 6,591
<INTEREST-INVEST> 6,860
<INTEREST-OTHER> 304
<INTEREST-TOTAL> 13,755
<INTEREST-DEPOSIT> 5,621
<INTEREST-EXPENSE> 7,086
<INTEREST-INCOME-NET> 6,669
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 88
<EXPENSE-OTHER> 5,663
<INCOME-PRETAX> 1,884
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<YIELD-ACTUAL> 3.49
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<ALLOWANCE-DOMESTIC> 1,349
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</TABLE>
