SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
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X
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1997
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _________________to_________________
Commission file number 0-12220
THE FIRST OF LONG ISLAND CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 11-2672906
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
10 GLEN HEAD ROAD, GLEN HEAD, NEW YORK 11545
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 671-4900
Not Applicable
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(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report.)
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.
CLASS OUTSTANDING AT AUGUST 7, 1997
- ----- -----------------------------
Common stock, par value 2,069,649
$.10 per share
EXHIBIT INDEX FOUND ON PAGE 15
Total Number of Pages, Including Cover Page - 23
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION
JUNE 30, 1997
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996 1
CONSOLIDATED STATEMENTS OF INCOME
SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5-12
PART II. OTHER INFORMATION 13
SIGNATURES 14
EXHIBIT INDEX 15
<PAGE>
<TABLE>
<S> <C> <C>
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CONSOLIDATED THE FIRST OF LONG ISLAND CORPORATION
BALANCE SHEETS AND SUBSIDIARY
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JUNE 30, December 31,
1997 1996*
------------ ------------
ASSETS:
Cash and due from banks ....................................... $ 14,974,000 $ 18,930,000
Federal funds sold ............................................ 52,500,000 38,500,000
------------ ------------
Cash and cash equivalents ..................................... 67,474,000 57,430,000
------------ ------------
Investment securities:
Held-to-maturity, at amortized cost (approximate fair
value of $173,293,000 and $142,095,000) ....................... 173,440,000 141,850,000
Available-for-sale, at fair value (amortized cost
of $53,094,000 and $79,964,000) ............................... 53,224,000 80,417,000
------------ ------------
226,664,000 222,267,000
------------ ------------
Loans:
Commercial and industrial ..................................... 25,202,000 23,345,000
Secured by real estate ........................................ 122,234,000 120,782,000
Consumer ...................................................... 7,397,000 8,999,000
Other ......................................................... 422,000 396,000
------------ ------------
155,255,000 153,522,000
Less: Unearned income ......................................... (861,000) (840,000)
------------ ------------
154,394,000 152,682,000
Allowance for loan losses ..................................... (3,596,000) (3,600,000)
------------ ------------
150,798,000 149,082,000
------------ ------------
Bank premises and equipment ................................... 4,902,000 5,044,000
Prepaid income taxes .......................................... 226,000 1,000
Deferred income tax benefits .................................. 942,000 897,000
Other assets .................................................. 6,143,000 6,182,000
------------ ------------
$457,149,000 $440,903,000
============ ============
LIABILITIES:
Deposits:
Checking ...................................................... $133,232,000 $123,160,000
Savings and money market ...................................... 225,844,000 222,892,000
Time, other ................................................... 27,853,000 26,509,000
Time, $100,000 and over ....................................... 11,721,000 11,800,000
------------ ------------
398,650,000 384,361,000
Accrued expenses and other liabilities ........................ 2,198,000 2,373,000
------------ ------------
400,848,000 386,734,000
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share:
Authorized, 20,000,000 shares;
Issued and outstanding, 2,084,366 and 2,088,784 shares ........ 208,000 209,000
Surplus ....................................................... 6,434,000 6,924,000
Retained earnings ............................................. 49,572,000 46,733,000
------------ ------------
56,214,000 53,866,000
Unrealized gains on available-for-sale securities ............. 87,000 303,000
------------ ------------
56,301,000 54,169,000
------------ ------------
$457,149,000 $440,903,000
============ ============
<FN>
*Reclassified to conform with the current period's presentation
</FN>
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
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<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
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CONSOLIDATED THE FIRST OF LONG ISLAND CORPORATION
STATEMENTS OF INCOME AND SUBSIDIARY
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Six Months Ended June 30, Three Months Ended June 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ----------- ----------- ----------
INTEREST INCOME:
Loans ............................... $ 6,755,000 $ 6,675,000 $ 3,385,000 $3,364,000
Investment securities:
Taxable ............................. 5,829,000 5,685,000 2,933,000 2,829,000
Nontaxable .......................... 993,000 960,000 500,000 487,000
Federal funds sold .................. 1,047,000 811,000 598,000 428,000
------------ ----------- ----------- ----------
14,624,000 14,131,000 7,416,000 7,108,000
------------ ----------- ----------- ----------
INTEREST EXPENSE:
Savings and money market deposits ... 3,484,000 3,369,000 1,792,000 1,701,000
Time deposits ....................... 911,000 830,000 457,000 402,000
------------ ----------- ----------- ----------
4,395,000 4,199,000 2,249,000 2,103,000
------------ ----------- ----------- ----------
Net interest income ................. 10,229,000 9,932,000 5,167,000 5,005,000
PROVISION FOR LOAN LOSSES (CREDIT) .. (100,000) -- (100,000) --
------------ ----------- ----------- ----------
Net interest income after provision
for loan losses ..................... 10,329,000 9,932,000 5,267,000 5,005,000
------------ ----------- ----------- ----------
NONINTEREST INCOME:
Trust Department income ............. 582,000 569,000 269,000 300,000
Service charges on deposit accounts . 1,260,000 1,181,000 633,000 592,000
Other ............................... 191,000 183,000 91,000 79,000
------------ ----------- ----------- ----------
2,033,000 1,933,000 993,000 971,000
------------ ----------- ----------- ----------
NONINTEREST EXPENSE:
Salaries ............................ 3,277,000 3,133,000 1,643,000 1,586,000
Employee benefits ................... 1,293,000 1,171,000 619,000 594,000
Occupancy and equipment expense ..... 926,000 981,000 456,000 480,000
Other operating expenses ............ 1,577,000 1,574,000 786,000 800,000
------------ ----------- ----------- ----------
7,073,000 6,859,000 3,504,000 3,460,000
------------ ----------- ----------- ----------
Income before income taxes .......... 5,289,000 5,006,000 2,756,000 2,516,000
INCOME TAX EXPENSE .................. 1,741,000 1,678,000 887,000 847,000
------------ ----------- ----------- ----------
NET INCOME .......................... $ 3,548,000 $ 3,328,000 $ 1,869,000 $1,669,000
============ =========== =========== ==========
Weighted average number of common and
common equivalent shares outstanding 2,130,665 2,134,767 2,130,836 2,135,930
============ =========== =========== ==========
EARNINGS PER SHARE .................. $ 1.67 $ 1.56 $ .88 $ .78
============ =========== =========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
2
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<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS THE FIRST OF LONG ISLAND CORPORATION
OF CASH FLOWS AND SUBSIDIARY
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<S> <C> <C>
Six Months Ended June 30,
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Increase (Decrease) in Cash and Cash Equivalents 1997 1996*
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................... $ 3,548,000 $ 3,328,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (credit) ................................... (100,000) --
Provision for deferred income taxes .................................. 61,000 --
Depreciation and amortization ........................................ 295,000 315,000
Premium amortization (discount accretion) on investment
securities, net ...................................................... (498,000) (684,000)
Increase in prepaid income taxes ..................................... (51,000) --
Decrease (increase) in other assets .................................. 39,000 (626,000)
Increase (decrease) in accrued expenses and other liabilities ........ (173,000) 38,000
Decrease in income taxes payable ..................................... -- (141,000)
------------ ------------
Net cash provided by operating activities ............................ 3,121,000 2,230,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and redemptions of
investment securities:
Held-to-maturity ..................................................... 26,481,000 32,229,000
Available-for-sale ................................................... 1,590,000 2,700,000
Purchase of investment securities:
Held-to-maturity ..................................................... (28,578,000) (17,694,000)
Available-for-sale ................................................... (3,715,000) (16,458,000)
Net increase in loans to customers ................................... (1,616,000) (6,838,000)
Purchases of bank premises and equipment ............................. (153,000) (267,000)
------------ ------------
Net cash used in investing activities ................................ (5,991,000) (6,328,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in total deposits ....................................... 14,289,000 6,848,000
Proceeds from exercise of stock options .............................. 330,000 143,000
Repurchase and retirement of common stock ............................ (995,000) (352,000)
Cash dividends paid .................................................. (710,000) (615,000)
------------ ------------
Net cash provided by financing activities ............................ 12,914,000 6,024,000
------------ ------------
Net increase in cash and cash equivalents ............................ 10,044,000 1,926,000
Cash and cash equivalents, beginning of period ....................... 57,430,000 54,284,000
============ ============
Cash and cash equivalents, end of period ............................. $ 67,474,000 $ 56,210,000
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH:
INVESTING ACTIVITIES
Unrealized losses on available-for-sale securities ................... $ 323,000 $ 1,915,000
Transfer of available-for-sale securities to held-to maturity category 28,886,000 --
FINANCING ACTIVITIES
Cash dividends payable ............................................... 709,000 627,000
Tax benefit from exercise of employee stock options .................. 174,000
</TABLE>
The Corporation made interest payments of $4,382,000 and $4,213,000 and
income tax payments of $1,731,000 and $1,819,000 during the six months ended
June 30, 1997 and 1996, respectively.
*Reclassified to conform with the current period's presentation
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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THE FIRST OF LONG ISLAND CORPORATION AND SUBSIDIARY
JUNE 30, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of The First
of Long Island Corporation and its wholly-owned subsidiary, The First National
Bank of Long Island (collectively referred to as the "Corporation").
The consolidated financial information included herein as of and for
the periods ended June 30, 1997 and 1996 is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The December 31, 1996 consolidated balance
sheet was derived from the Company's December 31, 1996 audited consolidated
financial statements.
2. DEPOSIT ACCOUNTS
Beginning in the first quarter of 1997, the Bank established a
noninterest-bearing sweep account for each commercial checking account. Although
the sweep accounts are savings accounts, they are included in checking deposits
in the accompanying consolidated balance sheet. The sweep accounts were
established to reduce the reserves the Bank is required to maintain against
deposits and thereby increase funds available for investment. While the Federal
Reserve Bank currently permits banks to reduce required reserves through the
maintenance of sweep accounts, there is no assurance that such activities will
be permitted in the future.
3. STOCKHOLDERS' EQUITY
At the annual meeting of stockholders held April 15, 1997, the
Corporation's stockholders approved an amendment of the certificate of
incorporation to increase the number of authorized shares of common stock from 5
million shares to 20 million shares. The primary purpose of the increase was to
insure that sufficient shares are available for the distribution to stockholders
in the event that the Corporation's Board of Directors authorizes future stock
dividends or stock splits.
4. SUBSEQUENT EVENTS
On July 15, 1997, the Corporation's Board of Directors approved an
additional stock repurchase plan which authorizes the Corporation to repurchase
up to 20,000 shares of common stock in market or private transactions. The
approval of this plan represents a continuation of similar programs that have
been approved in the past. The stock purchases will be financed through
available corporation cash. At the date of approval, there were 8,603 shares
available to be purchased under prior programs.
On July 29, 1997, the Corporation purchased 15,000 shares of its own
common stock at a price of $45.375, for total consideration of $680,625. After
this transaction, there are 13,603 shares available to be purchased under the
July 1997 program.
4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected the Corporation's financial condition and
operating results during the periods included in the accompanying consolidated
financial statements, and should be read in conjunction with such financial
statements. The Corporation's financial condition and operating results
principally reflect those of its wholly-owned subsidiary, The First National
Bank of Long Island (the "Bank"). The Corporation's primary service area is
Nassau and Suffolk Counties, Long Island.
OVERVIEW
Net income for the first six months of 1997 was $3,548,000, or $1.67 per
share, as compared to $3,328,000, or $1.56 per share, for the like period in
1996. Return on average total assets (ROA) and average stockholders' equity
(ROE) were 1.60% and 13.06%, respectively, for the first six months of 1997 as
compared to 1.56% and 13.35%, respectively, for the like period in 1996. When
comparing the first half of 1997 to the same period in 1996, net interest income
increased by $297,000, the provision for loan losses decreased by $100,000
($100,000 credit provision for the six months ended June 30, 1997 versus no
provision for the like period in 1996), noninterest income increased by
$100,000, and occupancy, equipment and other operating expenses decreased by
$52,000. The positive effect of these changes was partially offset by increases
in personnel costs and income tax expense of $266,000 and $63,000, respectively.
The increase in net interest income is largely attributable to growth
in checking balances and stockholders' equity as well as the implementation of
commercial checking and Advantage Checking (formerly NOW) sweep accounts. The
credit provision for loan losses resulted from a recovery on a charged off loan.
Total assets and deposits increased modestly during the first half of
1997 amounting to $457,149,000 and $398,650,000, respectively, at June 30, 1997
as compared to $440,903,000 and $384,361,000, respectively, at December 31,
1996. During the same time period, capital before unrealized gains on
available-for-sale securities grew by $2,348,000, or 8.8% on an annualized
basis. The Corporation's capital ratios continue to be substantially in excess
of current regulatory requirements and liquidity continues to be strong.
NET INTEREST INCOME
The following table sets forth the average daily balances for each
major category of assets, liabilities and stockholders' equity as well as the
amounts and average rates earned or paid on each major category of
interest-earning assets and interest-bearing liabilities.
5
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------------------------
1997 1996
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Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------------- ------------- --------- ------------- ------------ ---------
(DOLLARS IN THOUSANDS)
ASSETS
Federal funds sold and commercial paper $ 39,307 $ 1,047 5.37% $ 31,174 $ 811 5.23%
Investment Securities
Taxable 185,632 5,829 6.33 180,175 5,685 6.35
Nontaxable (1) 43,092 1,505 6.99 41,880 1,455 6.95
Loans (1)(2) 153,058 6,788 8.94 148,587 6,716 9.09
-------------- ------------- --------- ------------- ------------ ---------
Total interest-earning assets 421,089 15,169 7.26 401,816 14,667 7.34
------------- --------- ------------ ---------
Allowance for loan losses (3,603) (3,606)
-------------- -------------
Net interest-earning assets 417,486 398,210
Cash and due from banks 17,327 20,237
Premises and equipment, net 4,987 5,085
Other assets 6,345 6,333
-------------- -------------
$ 446,145 $ 429,865
============== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Savings and money market deposits $ 224,034 3,484 3.14 $ 221,504 3,369 3.06
Time deposits 39,058 911 4.70 35,994 830 4.64
-------------- ------------- --------- ------------- ------------ ---------
Total interest-bearing deposits 263,092 4,395 3.37 257,498 4,199 3.28
-------------- ------------- --------- ------------- ------------ ---------
Checking deposits (3) 125,869 120,033
Other liabilities 2,403 2,196
-------------- -------------
391,364 379,727
Stockholders' equity 54,781 50,138
-------------- -------------
$ 446,145 $ 429,865
============== =============
Net interest income (1) $ 10,774 $ 10,468
============= ============
Net interest spread (1) 3.89% 4.06%
========= =========
Net yield on interest-earning assets (1) 5.16% 5.24%
========= =========
</TABLE>
(1)Tax-equivalent basis. Interest income on a tax-equivalent basis includes the
additional amount of interest income that would have been earned if the
Corporation's investment in tax-exempt loans and investment securities had
been made in loans and investment securities subject to Federal income taxes
yielding the same after-tax income. The tax-equivalent amount of $1.00 of
nontaxable income was $1.52 in the first six months of 1997 and 1996 based on
a Federal income tax rate of 34%.
(2)For the purpose of these computations, nonaccruing loans are included in the
daily average loan amounts outstanding.
(3)Includes official check and treasury tax and loan balances.
Net interest income on a tax-equivalent basis increased by $306,000, or
2.9%, from $10,468,000 for the six months ended June 30, 1996 to $10,774,000 for
the comparable period in 1997. The increase is primarily attributable to an
increase in the average volume of interest-earning assets. The positive effect
of this factor was partially offset by an increase in the average volume of
interest-bearing deposit accounts, a 15 basis point decrease in the average rate
earned on the Bank's loan portfolio, and a 9 basis point increase in the average
rate paid on savings and money market deposits. The decrease in loan yield
coupled with the increase in the average rate paid on savings and money market
deposits are the primary reasons why net interest spread and yield decreased
from 4.06% and 5.24%, respectively, for the first half of 1996 to 3.89% and
5.16%, respectively, for the same period in 1997.
INCREASE IN AVERAGE VOLUME OF INTEREST-EARNING ASSETS AND
INTEREST-BEARING DEPOSITS. Total average interest-earning assets increased by
$19,273,000, or 4.8%, from $401,816,000 for the six months ended June 30, 1996
to $421,089,000 for the
6
<PAGE>
comparable period in 1997. During the same time period, total average
interest-bearing deposits increased by $5,594,000, or 2.2%, from $257,498,000 to
$263,092,000. The increase in interest-earning assets caused interest earned to
increase by approximately $593,000 while the increase in interest-bearing
liabilities caused interest paid to increase by approximately $97,000, the
combined effect of which resulted in an increase in net interest income of
$496,000.
While the increase in interest-earning assets was partially funded by
the increase in interest-bearing deposits, the remainder was primarily funded by
increases in average checking deposits and capital of $5,836,000 and $4,643,000,
respectively, and a reduction in average cash and due from banks of $2,910,000.
At June 30, 1997, checking deposits account for 33.4% of the Bank's total
deposits. Maintenance and growth of checking deposits has historically been the
Corporation's most important strategy for maintaining and increasing
profitability. The current competitive pressure in the marketplace for
businesses to earn interest on excess checking balances could adversely affect
the Corporation's future results of operations.
The increase in both interest-bearing deposits and checking deposits is
believed to be largely attributable to the Bank's attention to customer service
as well as calling programs and competitive pricing. The increase in capital is
attributable to the retention of net income and the exercise of employee stock
options, as partially offset by the purchase and retirement of common stock
under the Corporation's stock repurchase program and the payment of semi-annual
cash dividends. As more fully described in Note 2 to the consolidated financial
statements, the decrease in average cash and due from banks is partially
attributable to a reduction in reserve balances maintained with the Federal
Reserve Bank caused by the implementation of commercial checking and Advantage
Checking (formerly NOW) sweep accounts.
When comparing the first six months of 1997 to the like period in 1996,
there was no significant change in the mix of interest-earning assets or
interest-bearing liabilities.
DECREASE IN YIELD ON LOAN PORTFOLIO. The yield on the Bank's loan
portfolio decreased by 15 basis points when comparing the first six months of
1997 to the same period in 1996. This decrease is largely attributable to
somewhat lower yields on both commercial and residential mortgage loans.
INCREASE IN AVERAGE RATE PAID ON SAVINGS AND MONEY MARKET DEPOSITS. The
average rate paid on savings and money market accounts increased by 9 basis
points when comparing the first six months of 1997 to the same period in 1996.
This increase is attributable to increases in the rates paid by the Bank on its
money market products in response to market conditions.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses was $3,596,000 at June 30, 1997 as
compared to $3,600,000 at December 31, 1996, representing 2.3% and 2.4% of total
loans, respectively, and 556.7% and 546.3% of nonaccruing loans, respectively.
The change in the allowance during the first six months of 1997 is due to
recoveries of $123,000, chargeoffs of $27,000 and a $100,000 credit in the
provision for loan losses.
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The allowance for loan losses is an amount that management currently
believes will be adequate to absorb possible future losses on existing loans.
The provision charged to operations, if any, and the related balance in the
allowance for loan losses is based upon periodic evaluations of the loan
portfolio by management. These evaluations consider a variety of factors
including, but not limited to, historical losses; a borrower's ability to repay;
the value of any related collateral; levels of and trends in delinquencies and
nonaccruing loans; trends in volume and terms of loans; changes in lending
policies and procedures; experience, ability and depth of lending staff;
national and local economic conditions; concentrations of credit; and
environmental risks.
In the second quarter of 1997, the Bank sold a nonaccruing loan for
$104,000 more than its carrying value. This excess was credited to the allowance
for loan losses as a partial recovery of prior chargeoffs. The recovery
increased the level of the allowance for loan losses beyond what management
currently deems necessary to absorb possible future losses on existing loans. As
a result, management reduced the level of the allowance by $100,000 with an
offsetting credit to the provision for loan losses.
The amount of future chargeoffs and provisions for loans losses will be
affected by, among other things, economic conditions on Long Island. Such
conditions affect the financial strength of the Bank's borrowers and the value
of real estate collateral securing the Bank's mortgage loans. In addition,
future provisions and chargeoffs could be affected by environmental impairment
of properties securing the Bank's mortgage loans. Although the Bank considers
environmental impairment in processing requests for mortgage loans, impairment
may go undetected or occur in the future. Impairment of collateral properties
could affect Bank's ability to fully realize its investment in the related
loans. Loans secured by real estate represent 79.2% of total loans outstanding
at June 30, 1997.
ASSET QUALITY
The Company has identified certain assets as risk elements. These
assets include nonaccruing loans, foreclosed real estate, loans that are
contractually past due 90 days or more as to principal or interest payments and
still accruing and troubled debt restructurings. These assets present more than
the normal risk that the Company will be unable to eventually collect or realize
their full carrying value. As shown in the table that follows, the total level
of risk elements has not changed materially since December 31, 1996.
8
<PAGE>
June 30, Dec 31,
1997 1996
------ ------
(DOLLARS IN THOUSANDS)
Nonaccruing loans .......................................... $ 646 $ 659
Foreclosed real estate ..................................... -- --
------ ------
Total nonperforming assets ................................. 646 659
Troubled debt restructurings ............................... 810 876
Loans past due 90 days or more as to
principal or interest payments and still accruing .......... 11 31
------ ------
Total risk elements ........................................ $1,467 $1,566
====== ======
Nonaccruing loans as a percentage of total loans ........... .42% .43%
====== ======
Nonperforming assets as a percentage of total loans
and foreclosed real estate ................................. .42% .43%
====== ======
Risk elements as a percentage of total loans and
foreclosed real estate ..................................... .95% 1.03%
====== ======
NONINTEREST INCOME, NONINTEREST EXPENSE, AND INCOME TAXES
Noninterest income consists primarily of service charges on deposit
accounts and Trust Department income. Noninterest income increased by $100,000,
or 5.2%, from $1,933,000 for the first six months of 1996 to $2,033,000 for the
same period in 1997. The increase is primarily attributable to an increase in
the volume of overdraft checks and resulting charges.
Noninterest expense is comprised of salaries, employee benefits,
occupancy and equipment expense and other operating expenses incurred in
supporting the various business activities of the Corporation. Noninterest
expense increased by $214,000, or 3.1%, from $6,859,000 for the first six months
of 1996 to $7,073,000 for the same period in 1997. The increase is primarily
attributable to increases in salaries and employee benefits expense of $144,000
and $122,000, respectively. The negative impact of these increases was partially
offset by a decrease in occupancy and equipment expense of $55,000. The increase
in salaries is primarily attributable to normal annual salary increases.
Income tax expense as a percentage of book income was 32.9% and 33.5%
for the six months ended June 30, 1997 and 1996, respectively. These percentages
vary from the statutory Federal income tax rate of 34% primarily because of
state income taxes and tax-exempt interest on municipal securities.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1997 VERSUS
THREE MONTHS ENDED JUNE 30, 1996
Net income for the second quarter of 1997 was $1,869,000, or $.88 per
share, as compared to $1,669,000, or $.78 per share, for the same quarter in
1996. When comparing the second quarter of 1997 to the same quarter in 1996, net
interest income increased by $162,000, the provision for loan losses decreased
by $100,000 ($100,000 credit provision for the three months ended June 30, 1997
versus no provision for the like period in 1996), and
9
<PAGE>
noninterest income increased by $22,000. The positive effect
of these changes was partially offset by increases in noninterest expense and
income tax expense of $44,000 and $40,000, respectively.
NET INTEREST INCOME. The reasons for the increase in net interest income
are the same as those discussed above with respect to the six month periods.
PROVISION FOR LOAN LOSSES. The reason for the decrease in the provision for
loan losses is the same as that discussed above with regard to the six month
periods.
NONINTEREST INCOME. The reason for the increase in noninterest income is
the same as that discussed above with regard to the six month periods.
NONINTEREST EXPENSE. The reasons for the increase in employee benefits
expense are the same as those discussed above with regard to the six month
periods. However, the increase for the quarter is considerably less than half
the increase for the entire six month period because the quarter includes an
offsetting decrease in stock appreciation rights expense of $45,000.
CAPITAL
The Corporation's capital management policy is designed to build and
maintain capital levels that exceed regulatory standards. Under current
regulatory capital standards, banks are classified as well capitalized,
adequately capitalized or undercapitalized. Under such standards, a well
capitalized bank is one that has a total risk-based capital ratio equal to or
greater than 10%, a Tier 1 risk-based capital ratio equal to or greater than 6%,
and a Tier 1 leverage capital ratio equal to or greater than 5%. The
Corporation's total risk-based capital, Tier 1 risk-based capital and Tier 1
leverage capital ratios of 33.67%, 32.40% and 12.43%, respectively, at June 30,
1997 substantially exceed the requirements for a well capitalized bank.
Total stockholders' equity increased by $2,132,000, or 3.9%, from
$54,169,000 at December 31, 1996 to $56,301,000 at June 30, 1997. The increase
in stockholders' equity is attributable to the combined effect of net income of
$3,548,000, proceeds from the exercise of employee stock options of $330,000,
income tax benefits resulting from the exercise of certain employee stock
options of $174,000, repurchases of common stock amounting to $995,000, cash
dividends declared of $709,000, and unrealized losses on available-for-sale
securities of $216,000.
As more fully described in Note 3 to the Consolidated Financial
Statements, on April 15, 1997 the Corporation's stockholders approved an
increase in the number of authorized shares of common stock from 5 million to 20
million shares.
In addition, as disclosed in Note 4 to the consolidated financial
statements, on July 15, 1997 the Corporation's Board of Directors approved an
additional stock repurchase plan which authorizes the Corporation to repurchase
up to 20,000 shares of common stock in market or private transactions. On July
29, 1997, the Corporation purchased 15,000 shares of its own common stock at a
price of $45.375, for total consideration of $680,625.
10
<PAGE>
CASH FLOWS AND LIQUIDITY
CASH FLOWS. During the six months ended June 30, 1997, total deposits
increased by $14,289,000. This increase, along with $3,121,000 in cash provided
by operations and $330,000 in proceeds from the exercise of stock options were
used to fund increases in investment securities and loans of $4,222,000 and
$1,616,000, respectively, repurchases of common stock amounting to $995,000,
cash dividends paid of $710,000, capital expenditures of $153,000, and an
increase in cash and cash equivalents of $10,044,000.
As reflected in the accompanying consolidated balance sheet, the
$14,289,000 growth in deposits is comprised of increases in checking deposits
and total interest-bearing deposits of $10,072,000 and $4,217,000, respectively.
The $1,616,000 increase in total loans during the first half of 1997 is
primarily attributable to increases in commercial and industrial loans and loans
secured by real estate of $1,857,000 and $1,452,000, respectively, as offset by
a decrease in consumer loans of $1,602,000. The increase in loans secured by
real estate is primarily attributable to an increase in loans secured by
residential properties of $3,238,000, as offset by a decrease in commercial
mortgage loans of $1,691,000. Loans secured by real estate have historically
accounted for a major portion of the loan portfolio and represent 79.2% of the
total portfolio at June 30, 1997. The decrease in consumer loans is primarily
attributable to the bulk sale of student loans that had moved from in-school to
repayment status. Management currently expects to make similar sales in the
future as additional student loans enter repayment status.
Management is actively searching for favorable locations at which to
establish new branches, particularly of the commercial banking unit
configuration. As of June 30, 1997, the Office of the Comptroller of the
Currency has approved the establishment of a branch in Rockville Centre, Nassau
County, Long Island and a commercial banking unit in Holbrook, Suffolk County,
Long Island. Management does not expect the establishment of these locations to
have a material impact on the Corporation's financial position or 1997 results
of operations.
LIQUIDITY. The Corporation's primary sources of liquidity are its
overnight position in federal funds sold, its short-term investment securities
portfolio which consists of securities purchased to mature within approximately
one year, maturities and monthly payments on the balance of the investment
securities portfolio, and investment securities designated as
available-for-sale. At June 30, 1997, the Corporation had $52,500,000 in federal
funds sales, a short-term securities portfolio of $15,230,000, and
available-for-sale securities of $53,224,000. During the second quarter of 1997,
$28,886,000 of investment securities were transferred from the
available-for-sale category to the held-to-maturity category. The purpose of the
transfer was to reduce the potential negative impact on stockholders' equity of
future increases in interest rates. Management believes that this transfer did
not have a significant negative impact on the Corporation's liquidity.
The Corporation's liquidity is enhanced by its stable deposit base,
which primarily consists of checking, savings and money market accounts. The
total of such accounts comprised 90.1% of total deposits at June 30, 1997, with
checking accounting for 33.4% and savings and money market accounting for 56.7%.
The remaining 9.9% of the Bank's
11
<PAGE>
deposit base at June 30, 1997 was comprised of time deposits of $100,000
and over and other time deposits, with the $100,000 and over component
accounting for 2.9% and the other time deposit component accounting for 7.0%.
The Bank attracts all of its deposits through its banking offices
primarily from the communities in which those banking offices are located and
does not rely on brokered deposits. In addition, the Bank has not historically
relied on purchased or borrowed funds as sources of liquidity.
INTEREST RATE SENSITIVITY
The Corporation's net interest income is affected by changes in market
interest rates. The Corporation's sensitivity to interest rate fluctuations has
not changed materially since December 31, 1996.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
No. 128"). SFAS No. 128 specifies the computation, presentation, and disclosure
requirements for Earnings per Share ("EPS") by all entities with publicly held
common stock or potential stock. SFAS 128 supersedes Accounting Principles Board
Opinion No. 15 "Earnings per Share", and supersedes or amends related
pronouncements.
SFAS No. 128 is effective for financial statements for interim and annual
periods ending after December 15, 1997. Early application is not permitted and
SFAS No. 128 requires restatement of all prior-period EPS data presented. The
adoption of SFAS No. 128 will not have a material impact on the Corporation.
In March 1997, the FASB also issued Statement of Financial Accounting
Standards No. 129 "Disclosure of Information about Capital Structure" ("SFAS No.
129"). SFAS No. 129 is effective for financial statements for periods ending
after December 15, 1997. SFAS No. 129 does not change disclosure requirements
for the Corporation.
In June 1997, the FASB issued Statements of Financial Accounting Standards
No's. 130 "Reporting Comprehensive Income" and 131 "Disclosures about Segments
of an Enterprise and Related Information". These Statements are effective for
fiscal years beginning after December 15, 1997 and restatement of financial
statements or information for earlier periods provided for comparative purposes
is required. The provisions of these statements will not affect the
Corporation's results of operations or financial condition.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. NONE
ITEM 2. NONE
ITEM 3. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of The First of Long Island
Corporation (the "Corporation") held April 15, 1997 was called to approve
amendment of the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 5 million shares to 20 million shares and
to elect four directors to serve for two-year terms and until their successors
have been elected and qualified.
The total number of shares which could have been voted at the annual
meeting was 2,087,686. There were 1,632,089 votes cast for the amendment of the
Certificate of Incorporation, 111,367 votes cast against, and 19,580
abstentions.
For the election of directors, each share is entitled to as many votes as
there are directors to be elected, and such votes may be cumulated and voted for
one nominee or divided among as many different nominees as is desired. If
authority to vote for any nominee or nominees is withheld on any proxy, the
votes are spread among the remaining nominees. The following table lists the
directors elected at the annual meeting and, for each director elected, the
number of votes cast for and the number of votes withheld. No other persons were
nominated and no other persons received any votes.
- -------------------------------------------------------------------------------
Number of Votes
------------------------------------
Directors Elected At
Annual Meeting
Cast For Withheld
- -------------------------------------------------------------------------------
Howard Thomas Hogan, Jr. 1,718,945 17,274
J. Douglas Maxwell, Jr. 1,722,410 15,737
John R. Miller III 1,720,994 15,737
Walter C. Teagle III 1,826,846 15,737
- -------------------------------------------------------------------------------
The name of each other director whose term of office as a director
continued after the annual meeting is as follows:
Term as Director
NAME EXPIRES
- ---------------------- ----------------
Paul T. Canarick 1998
William J. Catacosinos 1998
Beverly Ann Gehlmeyer 1998
J. William Johnson 1998
ITEM 5. NONE
ITEM 6. (a) EXHIBITS - The following exhibits are submitted herewith:
Exhibit 3 - Amendment of Certificate of Incorporation
dated April 15, 1997
Exhibit 27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K - NONE
13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
THE FIRST OF LONG ISLAND CORPORATION
(Registrant)
DATE: AUGUST 8, 1997 BY /S/ J. WILLIAM JOHNSON
J. WILLIAM JOHNSON,
PRESIDENT
(principal executive officer)
BY /S/ MARK D. CURTIS
MARK D. CURTIS
VICE PRESIDENT AND TREASURER
(principal financial and accounting officer)
14
<PAGE>
EXHIBIT INDEX
EXHIBIT
BEGINS ON
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------ ----------
3 Amendment of Certificate of Incorporation
Dated April 15, 1997 16
27 Financial Data Schedule 20
15
EXHIBIT 3 - CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF
INCORPORATION OF THE FIRST OF LONG ISLAND CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE FIRST OF LONG ISLAND CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the President and the Secretary of The First of
Long Island Corporation, do hereby certify and set forth:
(1) The name of the corporation is The First of Long
Island Corporation.
(2) The certificate of incorporation of The First of Long Island
Corporation was filed by the Department of State on the 8th day of February,
1984.
(3) The certificate of incorporation of The First of Long Island
Corporation is amended to increase the presently authorized 5,000,000 shares of
common stock, par value $.10 per share, to 20,000,000 shares of common stock,
par value $.10 per share.
(4) To accomplish the foregoing amendment, Article "FIFTH" of the
certificate of incorporation of The First of Long Island Corporation, which sets
forth the aggregate number of shares of common stock, par value $.10 per share,
the only class which this corporation has authority to issue, is hereby amended
to read as follows:
FIFTH
CAPITAL STOCK
The aggregate number of shares which this corporation shall have authority
to issue is 20,000,000 shares, par value $.10 each, which shall be known as
"common stock."
a. The holders of the common stock shall be entitled to
receive dividends when and as legally declared by the
Board of Directors.
<PAGE>
b. The common stock may be allotted as and when the Board
of Directors shall determine, and, under and
pursuant to the laws of the State of New York, the
Board of Directors shall have the power to fix or
alter, from time to time, in respect to shares then unallotted,
any or all of the following: the dividend rate, the redemption
price, the liquidation price, the conversion rights and the
sinking or purchase fund rights of shares of any class, or of
any series of any class, or the number of shares constituting
any series of any class. The Board of Directors shall also have
the power to fix the terms, provisions and conditions of options
to purchase or subscribe for shares of any class or classes, including
the price and conversion basis thereof, and to authorize the issuance
thereof. The Board of Directors shall also have the power to issue
shares of stock of the corporation for cash, services, property, the
securities or assets of other business enterprises, as it may from time
to time deem expedient.
c. At all elections of directors of the corporation, each stockholder
entitled generally to vote for the election of directors shall
be entitled to as many votes as shall equal the number of votes
which (except for this provision as to cumulative voting) he would be
entitled to cast for the election of directors with respect to his
shares of stock multiplied by the number of directors to be elected,
and he may cast all of such votes for a single director or may
distribute them among the number to be voted for, or for any two or
more of them as he may see fit.
d. No holder of stock of the corporation shall have any preferential,
preemptive or other rights of subscription to any shares of any
class of stock of the corporation allotted or sold or to be allotted
or sold now or hereafter authorized, or to any obligations convertible
into the stock of the corporation of any class, or any right of
subscription to any part thereof.
(5) This amendment to the certificate of incorporation of The First of
Long Island Corporation was authorized by vote of the Board of Directors
followed by the affirmative vote of the holders of seventy (70%) percent of all
outstanding shares entitled to vote thereon at a meeting of the shareholders of
said corporation duly called and held on the 15th day of April, 1997, a quorum
being present.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 25th day of June, 1997.
BY /S/ J. WILLIAM JOHNSON
J. William Johnson
President
BY /S/ ARTHUR J. LUPPINACCI, JR.
Arthur J. Lupinacci, Jr.
Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<PAGE>
<LEGEND>
EXHIBIT 27 FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
consolidated financial statements and management's discussion and analysis of
financial condition and results of operations contained in the FORM 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000740663
<NAME> THE FIRST OF LONG ISLAND CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,974,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 52,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,224,000
<INVESTMENTS-CARRYING> 173,440,000
<INVESTMENTS-MARKET> 173,293,000
<LOANS> 154,394,000
<ALLOWANCE> (3,596,000)
<TOTAL-ASSETS> 457,149,000
<DEPOSITS> 398,650,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,198,000
<LONG-TERM> 0
0
0
<COMMON> 208,000
<OTHER-SE> 56,006,000
<TOTAL-LIABILITIES-AND-EQUITY> 457,149,000
<INTEREST-LOAN> 6,755,000
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<INTEREST-OTHER> 1,047,000
<INTEREST-TOTAL> 14,624,000
<INTEREST-DEPOSIT> 4,395,000
<INTEREST-EXPENSE> 4,395,000
<INTEREST-INCOME-NET> 10,229,000
<LOAN-LOSSES> (100,000)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,073,000
<INCOME-PRETAX> 5,289,000
<INCOME-PRE-EXTRAORDINARY> 5,289,000
<EXTRAORDINARY> 0
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<NET-INCOME> 3,548,000
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
<YIELD-ACTUAL> 5.16
<LOANS-NON> 646,000
<LOANS-PAST> 11,000
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<ALLOWANCE-OPEN> 3,600,000
<CHARGE-OFFS> 27,000
<RECOVERIES> 123,000
<ALLOWANCE-CLOSE> 3,596,000
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</TABLE>
