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 March 31, 2000
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 11749
-------------------------------------- -----
(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 1,646,326 shares of Common Stock outstanding as of May 8,
2000.
<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 March 31, 2000
and December 31, 1999 2
Consolidated Statements of Earnings for the Three Months Ended
March 31, 2000 and 1999 3
Consolidated Statement of Changes in Stockholders' Equity
for the Three Months Ended March 31, 2000 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 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 17
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 19
ITEM 2. Changes in Securities and Use of Proceeds 19
ITEM 3. Defaults Upon Senior Securities 19
ITEM 4. Submission of Matters to a Vote of Security Holders 19
ITEM 5. Other Information 19
ITEM 6. Exhibits and Reports on Form 8-K 19
Signatures 20
================================================================================
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
LONG ISLAND FINANCIAL CORP.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ----------
<S> <C> <C> <C>
Assets:
Cash and due from banks................................$ 8,061 9,301
Interest earning deposits.............................. 254 204
Federal funds sold..................................... - 18,300
---- ------
Total cash and cash equivalents.......... 8,315 27,805
Securities held-to-maturity, net
(fair value of $326 and $338, respectively)........... 339 341
Securities available-for-sale, at fair value........... 123,384 169,808
Loans, net of unearned income and deferred fees........ 128,881 121,311
Less allowance for loan losses......................... 1,605 1,475
----- -----
Loans, net............................... 127,276 119,836
Premises and equipment, net............................ 2,001 2,089
Accrued interest receivable............................ 2,425 2,062
Bank owned life insurance.............................. 5,990 5,921
Prepaid expenses and other assets...................... 3,522 3,192
----- -----
Total assets.............................$ 273,252 331,054
======= =======
Liabilities and Stockholders' Equity:
Deposits:
Demand deposits....................................$ 38,979 36,191
Savings deposits.................................... 30,182 28,444
NOW and money market deposits....................... 35,389 103,126
Time certificates issued in excess of $100,000...... 25,889 18,242
Other time deposits................................. 77,572 83,737
------ ------
Total deposits............................ 208,011 269,740
Borrowed funds.......................................... 43,800 39,500
Accrued expenses and other liabilities ................ 3,180 3,471
----- -----
Total liabilities......................... 254,991 312,711
------- -------
Stockholders' equity:
Common stock (par value $.01 per share;
10,000,000 shares, authorized; 1,776,326 shares
issued; 1,646,326 and 1,776,326 outstanding,
respectively)....................................... 18 18
Surplus .......................................... 20,185 20,185
Accumulated surplus................................. 2,907 2,587
Accumulated other comprehensive income (loss)....... (3,386) (2,984)
Treasury stock at cost, (130,000 shares)............ (1,463) (1,463)
------- -------
Total stockholders' equity................ 18,261 18,343
------ ------
Total liabilities and stockholders' equity..........$ 273,252 331,054
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
---- ----
<S> <C> <C> <C>
Interest income:
Interest earning deposits $ 4 2
Federal funds sold 11 138
Securities 2,707 2,348
Interest and fees on loans 2,708 2,063
----- -----
Total interest income 5,430 4,551
----- -----
Interest expense:
Savings deposits $ 266 131
NOW and money market deposits 340 325
Time certificates issued in excess of $100,000 243 342
Other time deposits 1,227 1,134
Borrowed funds 879 442
----- -----
Total interest expense 2,955 2,374
----- -----
Net interest income 2,475 2,177
Provision for loan losses 150 150
----- -----
Net interest income after provision
for loan losses 2,325 2,027
----- -----
Other operating income:
Service charges on deposit accounts $ 200 143
Net gain on sale of securities 52 143
Other 127 31
----- -----
Total other operating income 379 317
Other operating expenses:
Salaries and employee benefits 1,030 939
Occupancy expense 134 135
Premises and equipment expense 192 174
Other 673 574
----- -----
Total other operating expenses 2,029 1,822
Income before income taxes 675 522
Income taxes 223 190
----- -----
Net income $ 452 332
===== =====
Basic and diluted earnings per share $ 0.27 0.19
===== =====
Weighted average shares outstanding 1,646,326 1,775,991
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
LONG ISLAND FINANCIAL CORP.
Consolidated Statement of Changes in Stockholders' Equity
For the Three Months Ended March 31, 2000
(Unaudited)
(In thousands, except share data)
<CAPTION>
Accumulated
other
Common Accumulated comprehensive Treasury
stock Surplus surplus loss stock Total
----------- ------- ------------------------------------------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 18 20,185 2,587 (2,984) (1,463) 18,343
Comprehensive income:
Net income - - 452 - - 452
Other comprehensive income (loss),
net of tax:
Unrealized depreciation in available-
for-sale securities, net of
reclassification adjustment (1) - - - (402) - (402)
---- ---- ---- ----- ---- -----
Total comprehensive income - - - - - 50
Dividends declared on common
stock ($.08 per common share) - - (132) - - (132)
---- ---- ----- ---- ---- -----
Balance at March 31, 2000 $ 18 20,185 2,907 (3,386) (1,463) 18,261
==== ====== ===== ======= ======= ======
</TABLE>
4
<PAGE>
<TABLE>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
For the Three Months
Ended March 31,
2000 1999
---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 452 332
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 150 150
Depreciation and amortization 187 138
Amortization of premiums, net of discount accretion (598) (46)
Loans originated for sale, net of proceeds from
sales and gains 796 1,103
Net deferred loan origination fees 42 54
Deferred income taxes (14) (35)
Changes in assets and liability account:
Accrued interest receivable (363) (569)
Prepaid expenses and other assets (101) 307
Accrued expenses and other liabilities (291) 210
----- ----
Net cash provided by operating activities 260 1,644
--- -----
Cash flows from investing activities:
Purchases of securities available-for-sale (87,325) (113,068)
Proceeds from maturities of securities 132,000 108,695
Principal repayments on securities 1,663 5,208
Loan originations net of principal repayments (8,428) (4,991)
Purchase of premises and equipment (99) (369)
Purchase of bank owned life insurance - (5,715)
------ -------
Net cash provided by (used in) investing activities 37,811 (10,240)
------ --------
Cash flows from financing activities:
Net decrease in demand deposit, savings, NOW,
and money market accounts (63,211) (21,540)
Net increase in certificates of deposit 1,482 11,117
Net increase in borrowed funds 4,300 15,000
Payments for cash dividends (132) (142)
Corporate reorganization costs - (103)
Proceeds from shares issued under the dividend reinvestment
and stock purchase plan - 59
------ -------
Net cash (used in) provided by financing activities (57,561) 4,391
------- -----
Net decrease in cash and cash equivalents (19,490) (4,205)
Cash and cash equivalents at beginning of period 27,805 21,489
------ ------
Cash and cash equivalents at end of period $ 8,315 17,284
===== ======
</TABLE>
(Continued)
5
<PAGE>
<TABLE>
LONG ISLAND FINANCIAL CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
For the Three Months
Ended March 31,
-------------------
2000 1999
---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 2,872 2,212
===== =====
Income taxes $ 361 -
===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
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 three month period ended
March 31, 2000 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 1999 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.
7
<PAGE>
3. IMPACT OF NEW 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, 1999 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>
March 31, 2000 December 31, 1999
-------------------- -------------------
Amortized Fair Amortized Fair
cost value cost value
-------------- --------------------------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Held-to-maturity, net:
Mortgage-backed securities:
CMO $ 339 326 341 338
=== === === ===
Available-for-sale:
U.S. Government and Agency Obligations $ 77,516 73,466 122,423 118,907
Mortgage-backed securities:
GNMA 40,663 38,977 41,136 39,580
FHLMC 1,232 1,257 1,350 1,369
FNMA 3,272 3,225 3,599 3,571
Municipal obligations 1,166 1,133 1,166 1,143
Other debt securities - - 92 91
------- ------- ------- -------
Total debt securities 123,849 118,058 169,766 164,661
Equity securities - FHLB stock 5,326 5,326 5,147 5,147
------- ------- ------- -------
Total securities available-for-sale $ 129,175 123,384 174,913 169,808
======= ======= ======= =======
</TABLE>
8
<PAGE>
5. LOANS RECEIVABLE, NET
Loans receivable, net consist of the following as of the dates indicated:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial loans $ 39,889 30.8 % $ 34,057 27.9 %
Commercial real estate loans 88,125 68.0 84,133 69.0
Automobile loans 67 0.1 1,463 1.2
Consumer loans 1,196 0.2 1,250 1.0
Residential real estate loans held-for-sale 223 0.9 1,019 0.9
------- ------- ------- -------
129,500 100.0 % 121,922 100.0 %
Less:
Unearned income 8 42
Deferred fees, net 611 569
Allowance for loan losses 1,605 1,475
----- -----
$ 127,276 $ 119,836
======= =======
</TABLE>
6. RECENT DEVELOPMENTS
On February 23, 2000 the Board of Directors of the Company declared a quarterly
dividend of eight cents ($0.08) per common share. The dividend was paid on April
3, 2000, to shareholders' of record as of March 24, 2000.
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 March 31, 2000,
130,000 shares had been repurchased by the Company at an aggregate cost of $1.5
million.
9
<PAGE>
Item 2. Management's Discussion and Analysis 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 of
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 $273.3 million as of March 31, 2000, compared to
$331.1 million at December 31, 1999. The decline in cash and cash equivalents of
$19.5 million, or 70.1%, was attributable to seasonal municipal deposits which
were not on deposit at March 31, 2000. Loans, net, increased $7.4 million, or
6.2%, from $119.8 million at December 31, 1999, to $127.3 million at March 31,
2000, reflecting a $9.8 million increase in commercial real estate and
commercial and industrial loans, offset in part by a $1.4 million decrease in
the automobile loan portfolio. Securities available-for- sale decreased $46.4
million or 27.3% as a portion of the proceeds of the maturing short term U.S.
Government and agency obligations purchased in December 1999 were used to pay
the maturing seasonal municipal deposits.
Total deposits decreased $61.7 million, or 22.9%, from $269.7 million at
December 31, 1999 to $208.0 million at March 31, 2000, primarily reflecting a
decrease in NOW and money market deposits. The decrease in NOW and money market
deposits of $67.7 million, or 65.7%, from $103.1 million at December 31, 1999 to
$35.4 million at March 31, 2000, is attributable to the timing of seasonal
municipal deposits, which were not on deposit at March 31, 2000. The effects of
those declines were offset in part by a $2.8 million, or 7.7% increase in demand
deposits and a $1.7 million, or 6.1%, increase in savings deposits from December
31, 1999 to March 31, 2000.
Total stockholders' equity decreased $82,000 to $18.3 million at March 31, 2000
primarily due to a $402,000 increase in accumulated other comprehensive loss on
securities available-for-sale and dividends declared of $132,000, offset in part
by net income of $452,000.
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 three months ended March 31, 2000, and 1999, 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 although they are not material.
11
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------------
2000 1999
-------------------------------------------------------
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 $ 946 $ 15 6.34 % $ 12,140 $ 140 4.61 %
Securities held-to-maturity and
available-for-sale, net (5) 170,677 2,694 6.31 145,294 2,210 6.08
Municipal obligations (4) 1,166 17 5.83 12,854 206 6.41
Loans receivable, net (1) 122,571 2,708 8.84 96,883 2,063 8.52
------- ----- ------ -----
Total interest-earning assets 295,360 5,434 7.36 267,171 4,619 6.92
----- -----
Non-interest-earning assets 23,301 17,054
------- ------
Total assets $ 318,661 $ 284,225
Interest-bearing liabilities:
Savings deposits $ 29,333 $ 266 3.63 $ 16,791 $ 131 3.12
NOW and money market deposits 61,081 340 2.23 68,116 325 1.91
Certificates of deposit 103,487 1,470 5.68 106,489 1,476 5.54
------- ----- ------- -----
Total interest-bearing deposits 193,901 2,076 4.28 191,396 1,932 4.04
Borrowed funds 66,404 879 5.29 36,458 442 4.85
-------- ----- ------ ----
Total interest-bearing liabilities 260,305 2,955 4.54 227,854 2,374 4.17
Other non-interest bearing liabilities 40,305 34,619
-------- ------
Total liabilities 300,610 262,473
Stockholders' Equity 18,051 21,752
-------- ------
Total liabilities and stockholders'
equity $ 318,661 $ 284,225
Net interest income/
interest rate spread (2) (4) $ 2,479 2.82% $ 2,245 2.75 %
===== ==== ===== ====
Net interest margin (3) 3.36% 3.36 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.13 1.17
==== ====
<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>
Comparison of Operating Results for the Three Months Ended
March 31, 2000 and 1999
General
The Company reported net income of $452,000, or basic and diluted earnings per
share of $.27 for the quarter ended March 31, 2000, compared to $332,000, or
basic and diluted earnings per share of $.19 for the prior year period. The
increase in net income was attributable primarily to increases in net interest
income of $298,000, or 13.7%, and of other operating income of $62,000, or
19.6%, which were offset in part by increases in other operating expenses of
$207,000, or 11.4%.
Interest Income
Interest income, on a fully-taxable equivalent basis, increased $815,000, or
17.6 %, from $4.6 million for the three months ended March 31, 1999, to $5.4
million for the three months ended March 31, 2000. The increase was attributable
to an increase in the average balance of total interest-earning assets of $28.2
million, or 10.6%, from $267.2 million for the three months ended March 31,
1999, to $295.4 million for the three months ended March 31, 2000. The average
balance of securities held-to-maturity and available-for-sale, net, (exclusive
of municipal obligations) decreased $25.4 million, or 17.5%, but returned a 25
basis point increase in the average yield to 6.31% for the three months ended
March 31, 2000, compared to 6.08% for the 1999 period. The $1.2 million decline
in the average balance of municipal obligations for the three months ending
March 31, 2000, from $12.9 million for the comparable prior year period,
resulted from the sale of approximately $11.8 million in municipal obligations
during the second quarter of 1999. The proceeds from that sale were reinvested
in higher earning assets, primarily bank owned life insurance and
available-for-sale securities. The average balance of loans, net, increased
$25.7 million, or 26.5% from $96.9 million for the three months ended March 31,
1999, to $122.6 million for the 2000 period. The average yield on loans
receivable, net, increased 32 basis points from 8.52% for the 1999 period, to
8.84% for the three months ended March 31, 2000. The average yield on
interest-earning assets increased from 6.92% for the three months ended March
31, 1999, to 7.36% for the three months ended March 31, 2000 as a result of
higher market interest rates.
Interest Expense
Interest expense increased $581,000, or 24.5%, from $2.4 million for the three
months ended March 31, 1999, to $3.0 million for the three months ended March
31, 2000, primarily as a result of a $32.5 million or 14.2% increase in the
average balance of total interest-bearing liabilities from $227.9 million for
the 1999 period to $260.3 million for the three months ended March 31, 2000. The
increased interest expense resulted from a increase of $2.5 million, or 1.3% in
the average balance of interest-bearing deposits, coupled with a $29.9 million,
or 82.1% increase in the average balance of borrowed funds. The average rate
paid on interest- bearing deposits increased 24 basis points from 4.04% paid for
the 1999 period to 4.28% paid for the three month period ended March 31, 2000.
The average balance of savings deposits increased by $12.5 million, or 74.7%,
and the average balance of NOW and money market deposits decreased by $7.0
million, or 10.3% from period to period. The average balance of certificates of
deposit decreased $3.0 million as the Company continued to focus on reducing its
cost of funds. The average cost of borrowed funds increased 44 basis points from
4.85% for the 1999 period, to 5.29% for the three months ended March 31, 2000,
due to higher market short term interest rates.
13
<PAGE>
Net Interest Income
Net interest income on a fully-taxable equivalent basis increased by $234,000,
or 10.4%, from $2.3 million for the three months ended March 31, 1999, to $2.5
million for the three months ended March 31, 2000. The average cost of total
interest-bearing liabilities for the period increased 37 basis points from 4.17%
in the1999 period to 4.54% in the 2000 period. The average yield on
interest-earning assets for the period increased 44 basis point from 6.92% in
the 1999 period to 7.36% in the 2000 period. The net interest rate spread
increased by 7 basis points from 2.75% in the1999 period, to 2.82% in the 2000
period.
Provision for Loan Losses
The Company's provision for loan losses was $150,000 for the three month periods
ended March 31, 1999 and 2000. The determination of the amount of the allowance
for loan losses is based on an analysis of the loan portfolio and reflects an
amount which, in management's judgement is adequate to provide for probable loan
losses in the existing portfolio. This analysis considers, among other things,
present and known inherent risks in the portfolio, adverse situations which may
affect the borrower's ability to repay, overall portfolio quality, and current
and prospective economic conditions. While management uses available information
to provide for loan losses, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various regulatory
agencies, as an integral part of the examination process, periodically review
the Company's allowance for loan losses. Such agencies may require the Company
to recognize additions to the allowance based upon their judgement of
information available to them at the time of their examination.
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 collectable and a consistent record of performance
has been demonstrated.
14
<PAGE>
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
(In thousands)
<S> <C> <C>
Non-accrual loans:
Commercial and industrial loans $ 52 42
Automobile loans 66 32
Consumer loans 91 105
---- ----
Total non-accrual loans 209 179
Loans contractually past due 90 days or
more, other than non-accruing (2) 183 -
Total non-performing loans $ 392 179
---- ----
Allowance for loan losses as a percentage
of loans (1) 1.25 % 1.22 %
Allowance for loan losses as a percentage
of total non-performing loans 409.44 % 824.02 %
Non-performing loans as a percentage of loans (1) .30 % .15 %
<FN>
(1) Loans include loans receivable, net excluding the allowance for loan losses.
(2) Excludes $231,000 of loans at December 31, 1999, 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. There were no loans
in a matured status at March 31, 2000.
</FN>
</TABLE>
Other Operating Income
Other operating income increased $62,000, or 19.6%, from $317,000 for the three
month period ended March 31, 1999 to $379,000 for the three month period ended
March 31, 2000. The increase was attributable to service charges on deposit
accounts which increased by $57,000, or 39.9%, reflecting the growth in the
Company's depositor base and an overall increase in the Company's fee schedule.
In addition, other operating income increased $96,000, or 309.7%, period over
period, primarily as a result of dividends earned on bank owned life insurance.
Net gain on sale of residential loans decreased $91,000 or 63.6% as result of
higher market interest rates resulting in an industry wide slowdown in
refinancing activity.
Other Operating Expense
Other operating expenses increased $207,000, or 11.4%, from $1.8 million for the
three month period ended March 31, 1999, to $2.0 million in the three months
ended March 31, 2000, Increases in salaries and employee benefits, premises and
equipment expense, and other expense for the three months ended March 31, 2000
are a result of the Bank's overall growth through its increased sales efforts
and introduction of new products and services.
15
<PAGE>
Income Taxes
Income taxes increased $33,000, or 17.4%, from $190,000 for the three months
ended March 31, 1999, to $223,000 for the three months ended March 31, 2000. The
increase is primarily attributable to the increase in income before income taxes
offset in part by 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 three months
ended March 31, 1999, and 2000, the Company's purchases of securities were all
classified available-for-sale and totaled $113.1 million and $87.3 million,
respectively. Loan originations, net of principal repayments on loans, totaled
$5.0 million and $8.4 million, for the three months ended March 31, 1999, and
2000, 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 $5.5 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 9.5% 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 March 31, 2000, 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 March 31, 2000, 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
16
<PAGE>
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 three months ended
March 31, 2000, was 24.0%.
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,
1999, 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 March 31, 2000, the Bank exceeded
those requirements with a leverage capital ratio, and risk-based capital ratio
and total-risk based capital ratio of 6.95%, 13.73% and 14.73%, respectively.
Year 2000
The Company successfully entered the year 2000 without any disruptions in any of
its computer systems. As of this date, the Company is not aware of any issues
that would significantly affect the Company's ability to conduct its normal
business operations.
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.
17
<PAGE>
At March 31, 2000, 81.3% of the Company's gross loans had adjustable interest
rates and its loan portfolio had an average weighted maturity of 7.6 years. At
such date, $12.3 million, or 9.9%, of the Company's securities had adjustable
interest rates, and its securities portfolio had a weighted average maturity of
6.7 years. At March 31, 2000, the Company had $64.9 million of certificates of
deposit with maturities of one year or less and $25.9 million of deposits over
$100,000, which tend to be less stable sources of funding as compared to core
deposits and represented 42.6% 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 March 31, 2000, 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 $ 325 2.91 % $ (3,272) (16.63) %
100 186 1.66 303 1.54
Static - - - -
(100) (24) (.21) 6,015 30.58
(200) (190) (1.70) 8,205 41.71
</TABLE>
18
<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
19
<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: May 15, 2000 By: /s/ Douglas C. Manditch
-------------------------
Douglas C. Manditch
President and Chief Executive Officer
Date: May 15 , 2000 By: /s/ Thomas Buonaiuto
-------------------------
Thomas Buonaiuto
Vice President and Treasurer
20
<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
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net income.................................. $ 452 332
Weighted average shares outstanding......... 1,646,326 1,775,991
Basic and diluted earnings per share........ .27 .19
=== ===
</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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 8,061
<INT-BEARING-DEPOSITS> 254
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 123,384
<INVESTMENTS-CARRYING> 339
<INVESTMENTS-MARKET> 326
<LOANS> 106,999
<ALLOWANCE> 1,605
<TOTAL-ASSETS> 273,252
<DEPOSITS> 208,011
<SHORT-TERM> 4,800
<LIABILITIES-OTHER> 3,180
<LONG-TERM> 39,000
0
0
<COMMON> 18
<OTHER-SE> 18,243
<TOTAL-LIABILITIES-AND-EQUITY> 273,252
<INTEREST-LOAN> 2,708
<INTEREST-INVEST> 2,707
<INTEREST-OTHER> 15
<INTEREST-TOTAL> 5,430
<INTEREST-DEPOSIT> 2,076
<INTEREST-EXPENSE> 4,765
<INTEREST-INCOME-NET> 2,475
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,029
<INCOME-PRETAX> 675
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 452
<EPS-BASIC> .27
<EPS-DILUTED> .27
<YIELD-ACTUAL> 3.36
<LOANS-NON> 209
<LOANS-PAST> 183
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,475
<CHARGE-OFFS> 32
<RECOVERIES> 12
<ALLOWANCE-CLOSE> 1,605
<ALLOWANCE-DOMESTIC> 1,605
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
