SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
Incorporation or Organization) Identification No.)
10 GLEN HEAD ROAD, GLEN HEAD, NY 11545
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 671-4900
Securities registered pursuant to Section 12(b) of the Act:
Title Of Each Class Name Of Each Exchange On Which Registered
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NONE N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value per share
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(Title of class)
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 requirement for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
[COVER PAGE 1 OF 2 PAGES]
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The aggregate market value of the Corporation's voting stock (based on the
price at which the stock was last sold on March 5, 1998) held by non-affiliates
was $125,990,182 (excludes $17,113,012 representing the market value of common
stock beneficially owned by directors and executive officers of the Registrant).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding At March 5, 1998
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Common Stock, $.10 par value 3,110,939
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's Annual Report to shareholders for the fiscal
year ended December 31, 1997 are incorporated by reference into Parts II and IV.
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held April 21, 1998 are incorporated by reference into Part
III.
[COVER PAGE 2 OF 2 PAGES]
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PART I
ITEM 1. BUSINESS
GENERAL
The First of Long Island Corporation (the "Registrant" or the "Corporation"),
a one-bank holding Company, was incorporated on February 7, 1984 for the purpose
of providing financial services through its wholly-owned subsidiary, The First
National Bank of Long Island (the "Bank").
The Bank was organized in 1927 as a national banking association under the
laws of the United States of America and was known as the First National Bank of
Glen Head through June 30, 1978. The Bank has a Trust and Investment Services
Department and conducts insurance business through The First of Long Island
Agency, Inc. (the "Agency"), a wholly-owned subsidiary.
The Bank serves the financial needs of privately owned businesses,
professionals, consumers, public bodies, and other organizations primarily in
Nassau and Suffolk Counties, Long Island. The principal business of the Bank has
historically consisted of attracting business and consumer checking, money
market and savings deposits and investing those funds in investment securities,
commercial and residential mortgage loans, commercial loans, and home equity
loans and lines. The Corporation's loan portfolio is primarily comprised of
loans to borrowers in Nassau and Suffolk Counties and real estate loans are
principally secured by properties located in these Counties.
A substantial portion of the Bank's investment securities portfolio is
comprised of U.S. Treasury securities, with lesser amounts invested in U.S.
government agency securities (modified pass-through, mortgage-backed securities
of Federal agencies), state and municipal securities, and collateralized
mortgage obligations. The Bank also regularly sells federal funds on an
overnight basis to a number of banking institutions.
The Bank offers a variety of deposit products having a wide range of interest
rates and terms. The principal products include checking accounts, money market
accounts, savings accounts, and time deposit accounts.
In addition to its loan and deposit products, the Bank offers other services
to its customers including the following:
<TABLE>
<S> <C>
ATM Banking PC Business Banking
Collection Services Safe Deposit Boxes
Counter Checks and Certified Checks Securities Transactions
Drive-Through Banking Signature Guarantee Services
Fixed Rate Annuities Telephone Banking
Foreign Drafts Travelers Checks
Gift Checks and Personal Money Orders Trust and Investment Management Services
Merchant Credit Card Depository Services U.S. Savings Bonds
Mutual Funds Wire Transfers and Foreign Cables
Night Depository Services Withholding Tax Depository Services
Payroll Services
</TABLE>
The Trust and Investment Services Department provides investment management,
pension trust, personal trust, estate, and custody services and engages in the
sale of mutual funds.
The Agency is a licensed insurance agency which was organized in 1994 under
the laws of the State of New York and is primarily engaged in the sale of fixed
rate annuity products.
In addition to its designated main office located in Huntington, New York,
the Bank has eight full service branches and six commercial banking offices, all
of which are in Nassau and Suffolk Counties. The full service branches are
located in Glen Head, Greenvale, Locust Valley, Northport, Old Brookville,
Rockville Centre, Roslyn Heights, and Woodbury. The commercial banking offices
are located in Great Neck, Hicksville, Lake Success, Mineola, New Hyde Park, and
Valley Stream.
Management is actively searching for favorable locations at which to
establish new branches, particularly of the commercial banking unit
configuration. In this regard, the Bank has received approvals from the Office
of the Comptroller of the Currency to open three additional commercial banking
offices, one in Nassau County and two in Suffolk County. The Bank has signed a
lease for one of these locations and is in the process of negotiating leases for
the other two.
The Bank's revenues are derived principally from interest on loans,
interest on investment securities, service charges and fees on deposit accounts,
and income from trust and investment management services.
The Bank did not commence, abandon, or significantly change any of its lines
of business during 1997.
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The Bank encounters substantial competition in its banking business from
numerous other banking facilities which have offices located in one or more of
the communities served by the Bank. Principal competitors are branches of large
banks such as Citibank, Chase Manhattan Bank, Bank of New York, and European
American Bank.
LENDING ACTIVITIES
GENERAL. The Bank's loan portfolio is primarily comprised of loans to small
and medium-sized privately owned businesses, professionals, and consumers in
Nassau and Suffolk Counties. The Bank offers a full range of lending services
including construction loans, commercial and residential mortgage loans, home
equity loans and lines, commercial loans, consumer loans, and commercial and
standby letters of credit. Commercial loans include, among other things,
short-term business loans, term and installment loans, revolving credit term
loans, and loans secured by marketable securities, the cash surrender value of
life insurance policies, or deposit accounts. Consumer loans include, among
other things, student loans guaranteed by the Federal government, auto loans,
unsecured home improvement loans, unsecured personal loans, overdraft checking
lines, and VISA(R) credit cards.
The Bank makes both fixed and variable rate loans. Variable rate loans are
tied to and reprice with changes in the Bank's prime interest rate, The Wall
Street Journal prime interest rate, or U.S. Treasury rates. Commercial mortgage
loans are made with terms usually not to exceed fifteen years, while the maximum
term on residential mortgage loans is thirty years. Commercial and consumer
loans generally mature within five years. The Bank's current practice is to
usually lend no more than 75% of appraised value on residential mortgage loans,
65% on home equity loans and 70% on commercial mortgage loans.
The risks inherent in the Bank's loan portfolio primarily stem from the
following factors relating to borrower size, geographic concentration, and
environmental contamination: first, loans to small and medium-sized businesses
sometimes involve a higher degree of risk than those to larger companies because
such businesses may have shorter operating histories and higher debt-to-equity
ratios than larger companies and may lack sophistication in internal record
keeping and financial and operational controls; second, the ability of many of
the Bank's borrowers to repay their loans is dependent on the strength of the
Long Island economy; and finally, if it becomes necessary to foreclose a loan
secured by real estate, the ability of the Bank to fully realize its investment
is dependent on the strength of the Long Island real estate market and the
absence of environmental contamination. The Bank does not have any significant
industry concentrations or foreign loans.
Except home equity loans and lines, loans from $300,000 to $500,000 require
the approval of the Management Loan Committee (home equity loans and lines have
more stringent approval requirements). All loans in excess of $500,000 require
the approval of the Management Loan Committee and two members of the Board Loan
Committee, one of whom must be a non-management director.
The Bank's lending is subject to written underwriting standards and loan
origination procedures, as approved by the Bank's Board of Directors and
contained in the Bank's loan policies. The Bank's loan policies allow for
exceptions and set forth the specific approvals required. Decisions on loan
applications are based on, among other things, the borrower's credit history,
the financial strength of the borrower, estimates of the borrower's ability to
repay the loan, and the value of the collateral, if any. All real estate
appraisals must meet the requirements of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989.
PORTFOLIO COMPOSITION AND SELECTED LOAN MATURITY INFORMATION. The composition
of the Bank's loan portfolio and maturity and rate information for the Bank's
commercial and industrial loans can be found in "Note C - Loans" to the
Corporation's consolidated financial statements which have been incorporated by
reference into "Item 8. Financial Statements and Supplemental Data" of this Form
10-K.
COMMERCIAL LOANS. The Bank makes commercial loans on a demand basis,
short-term discounted basis, or installment basis. Short-term business loans are
generally due and payable within one year and should be self liquidating during
the normal course of the borrower's business cycle. Term and installment loans
are usually due and payable within five years. Generally, it is the policy of
the Bank to obtain personal guarantees of principal owners on loans made to
privately-owned businesses.
REAL ESTATE MORTGAGE AND HOME EQUITY LOANS AND LINES. The Bank makes
residential and commercial mortgage loans and home equity loans and establishes
home equity lines of credit. Applicants for residential mortgage loans and home
equity loans and lines will be considered for approval provided they have
satisfactory credit history and the Bank believes that there is sufficient
monthly income to service both the loan or line applied for and existing debt.
Applicants for commercial mortgage loans will be considered for approval
provided they, as well as any guarantors, have satisfactory credit history and
can demonstrate, through financial statements and otherwise, the ability to
repay. If the source of repayment is rental income, such income must be more
than sufficient to amortize the debt.
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In processing requests for commercial mortgage loans, the Bank almost always
requires an environmental assessment to identify the possibility of
environmental contamination on or near the subject property. The extent of the
assessment procedures varies from property to property and is based on factors
such as whether or not the subject property is an industrial building, in close
proximity to a known environmentally hazardous area, or a suspected
environmental risk based on current or past use.
CONSTRUCTION LOANS. The Bank makes loans to finance the construction of both
residential and commercial properties. The maturity of such loans generally does
exceed one year and advances are made as the construction progresses. The
advances require the submission of bills by the contractor, verification by a
Bank-approved inspector that the work has been performed, and obtaining title
insurance updates to insure that no intervening liens have been placed.
CONSUMER LOANS AND LINES. The Bank makes student loans, auto loans, home
improvement loans, and other consumer loans, establishes revolving overdraft
lines of credit, and issues VISA(R) credit cards. Consumer loans and lines may
be secured or unsecured. With the exception of student loans, consumer loans are
generally made on an installment basis over terms not exceeding five years. In
reviewing loans and lines for approval, the Bank considers, among other things,
ability to repay, stability of employment and residence, and past credit
history.
PAST DUE, NONACCRUAL, AND RESTRUCTURED LOANS. Selected information about the
Bank's past due, nonaccrual, and restructured loans can be found in "Note C -
Loans" to the Corporation's consolidated financial statements which have been
incorporated by reference into "Item 8. Financial Statements and Supplemental
Data" of this Form 10-K.
The accrual of interest on loans is generally discontinued when principal or
interest payments become past due 90 days or more. As of December 31, 1997, the
Bank did not have any impaired loans or material potential problem loans except
for the loans disclosed in "Note C" to its consolidated financial statements.
Economic conditions in the Bank's market area continued to show improvement
during 1997. Future levels of past due, nonperforming, and restructured loans
will be affected by the strength of the local economy.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is an amount that
management currently believes will be adequate to absorb possible future losses
on existing loans. Changes in the Bank's allowance for loan losses and the
allocation of the Bank's total allowance for loans losses by loan type can be
found in "Note C Loans" to the Corporation's consolidated financial statements
which have been incorporated by reference into "Item 8. Financial Statements and
Supplemental Data" of this Form 10-K.
The provision charged to operations 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.
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. Loans secured by real estate
represent 78.6% of total loans outstanding at December 31, 1997. Since 1987,
environmental audits have been instituted, and the scope of these audits has
been increased over the succeeding years. Under the Bank's current policy, an
environmental audit is required on practically all commercial-type properties
that are considered for a mortgage loan. At the present time, the Bank is not
aware of any existing loans in the portfolio where there is environmental
pollution originating on the mortgaged properties that would materially affect
the value of the portfolio.
INVESTMENT ACTIVITIES
GENERAL. The investment policy of the Bank, as approved by the Board of
Directors and supervised by both the Board and the Investment Committee, is
intended to promote investment practices which are both safe and sound and in
full compliance with the Federal Reserve Board Supervisory Policy Statement on
Securities Activities and all other applicable regulations. Investment authority
will be granted and amended as is necessary by the Board of Directors.
The Bank's investment decisions seek to maximize income while keeping both
credit and market risk at acceptable levels, provide for the Bank's liquidity
needs, assist in managing interest rate sensitivity, and provide securities that
can be pledged, as needed, to secure deposits or borrowing lines.
The Bank's investment policy limits individual maturities to fifteen years
and average lives, in the case of collateralized mortgage obligations (CMO's)
and other mortgage-backed securities, to 10 years. At the time of purchase,
bonds of states and political subdivisions must generally be rated A or better,
notes of states and political subdivisions must generally be
<PAGE>
rated MIG-2 (or equivalent) or better, and commercial paper must be rated A-1 or
P-1. In addition, management periodically reviews issuer credit ratings for all
securities in the Bank's portfolio other than those issued by the U.S.
government or its agencies. Any deterioration in the creditworthiness of an
issuer will be analyzed and appropriate action taken when deemed necessary. The
Bank has not engaged in the purchase and sale of securities for the primary
purpose of producing trading profits and its current investment policy does not
allow such activity.
The Bank does not purchase or currently hold any high risk mortgage
derivative products as defined by the Federal Financial Institutions Examination
Council Supervisory Policy Statement on Securities Activities. High-risk
mortgage derivative products are generally those that possess average life or
price volatility in excess of a benchmark fixed rate, 30-year, mortgage-backed
pass-through security.
At December 31, 1997, the Bank had net unrealized gains of $1,780,000 in it
held-to-maturity portfolio, consisting of gross unrealized gains of $2,216,000
and gross unrealized losses of $436,000. The unrealized gains and losses were
principally caused by decreases and increases, respectively, in interest rates
since the securities were purchased. The Bank has the intent and ability to hold
these securities to maturity and therefore expects that neither the unrealized
gains nor the unrealized losses will ever be realized. However, the effect of
holding securities with unrealized gains or losses is that more or less interest
will be earned in future periods than could be earned on securities purchased
currently.
PORTFOLIO COMPOSITION. The composition of the Bank's investment portfolio can
be found in "Note B - Investment Securities" to the Corporation's consolidated
financial statements which have been incorporated by reference into "Item 8.
Financial Statements and Supplemental Data" of this Form 10-K.
MATURITY INFORMATION. The maturities and weighted average yields of the
Bank's investment securities at December 31, 1997 can be found in "Note B -
Investment Securities" to the Corporation's consolidated financial statements
which have been incorporated by reference into "Item 8. Financial Statements and
Supplemental Data" of this Form 10-K.
The Bank received dividends on its Federal Reserve Bank stock of $6,924 in
1997 representing a yield of 6.00%.
SOURCES OF FUNDS
GENERAL. The Bank's primary sources of funds are deposits, retained earnings,
repayment of principal and interest on loans, maturity and redemption of
investment securities, interest earned on investment securities and federal
funds sold, and other funds provided from operations.
The Bank offers checking and interest-bearing deposit products. In addition
to business checking, the Bank has a variety of personal checking products
including "First Class", regular, budget, senior citizen and special checking.
Among other things, the personal products differ in minimum balance
requirements, monthly maintenance fees, and per check charges. The
interest-bearing deposit products, which have a wide range of interest rates and
terms, include checking; three money-market-type products, including a
traditional money market savings account, "Select Savings" - a statement savings
account that earns a money market rate, and "Diamond Savings" - a passbook
savings account that earns a money market rate; traditional statement savings;
traditional passbook savings; savings certificates (3 month, 6 month and 1 to 6
year terms); large and jumbo certificates; holiday club accounts; and individual
retirement accounts (savings certificates with terms of 1 to 6 years).
Total certificates of deposits, the majority of which mature within one year,
were $37,332,000, or 8.8% of total deposits, at December 31, 1997. Certificates
of deposit in amounts of $100,000 or more were $10,606,000 at December 31, 1997,
or 2.5% of total deposits.
The Bank relies primarily on customer service, calling programs, competitive
pricing, and advertising to attract and retain deposits. Currently, the Bank
solicits deposits only from its local market area and does not have any deposits
which qualify as brokered deposits under applicable Federal regulations. The
flow of deposits is influenced by general economic conditions, changes in
interest rates and competition.
CLASSIFICATION OF AVERAGE DEPOSITS. The classification of the Bank's average
deposits can be found in "Note E - Deposits" to the Corporation's consolidated
financial statements which have been incorporated by reference into "Item 8.
Financial Statements and Supplemental Data" of this Form 10-K.
REMAINING MATURITIES OF TIME DEPOSITS. The remaining maturities of the Bank's
time deposits in amounts of $100,000 or more at December 31, 1997 can be found
in "Note E - Deposits" to the Corporation's consolidated financial statements
which have been incorporated by reference into "Item 8. Financial Statements and
Supplemental Data" of this Form 10-K.
COMPETITION
The heavy concentration of financial institutions in Nassau and Suffolk
Counties has lead to keen competition for both loans and deposits. Competition
in originating commercial loans comes primarily from commercial institutions
located in the
<PAGE>
Bank's market area. The Bank competes for commercial loans on the basis of the
quality of service it provides to borrowers, the interest rates and loan fees it
charges, and the types of loans it offers.
The Bank attracts all of its deposits through its banking offices primarily
from the communities in which those banking offices are located. Competition for
deposits is principally from other commercial banks, savings banks, brokerage
firms and credit unions located in these communities. The Bank competes for
these deposits by offering a variety of account alternatives at competitive
rates, a competitive service charge schedule, a high level of customer service
and convenient branch locations.
EMPLOYEES
As of December 31, 1997, the Bank had 159 full-time equivalent employees and
considers employee relations to be satisfactory. Employees of the Bank are not
represented by a collective bargaining unit.
REGULATION
The Corporation is subject to the regulation and supervision of the Federal
Reserve Board and the Securities and Exchange Commission. The primary banking
agency responsible for regulating the Bank is the Comptroller of the Currency.
The Bank is also subject to regulation and supervision by the Federal Reserve
Board and the Federal Deposit Insurance Corporation.
ITEM 2. PROPERTIES
The Corporation neither owns nor leases any real estate. Office facilities of
the Corporation are located at 10 Glen Head Road, Glen Head, NY in a building
owned by the Bank.
The Bank's designated main office is located at 253 New York Avenue,
Huntington, New York. Including the main office, the Bank owns a total of 10
buildings in fee and occupies seven other facilities under lease arrangements.
All of the facilities owned or leased by the Bank are in Nassau and Suffolk
Counties, New York.
The Corporation believes that the physical facilities of the Bank are
suitable and adequate at present and are being fully utilized.
ITEM 3. LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to the business, it is
believed that there are no material legal proceedings, either individually or in
the aggregate, to which the Corporation or the Bank is a party or to which any
of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None were submitted to a vote of security holders during the fourth quarter
of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Corporation's common stock trades on the Nasdaq SmallCap Market tier of
the Nasdaq Stock Market under the symbol "FLIC". The table appearing on page (i)
of the Corporation's Annual Report to Shareholders for the fiscal year ended
December 31, 1997 showing the high and low bid quotations, by quarter, for the
years ended December 31, 1997 and 1996 is incorporated herein by reference.
On March 3, 1998, there were 3,110,939 shares of the Corporation's common
stock outstanding with 815 holders of record. The holders of record include
banks and brokers who act as nominees, each of whom may represent more than one
stockholder.
During 1997 and 1996, the Corporation declared semi-annual cash dividends
aggregating $.49 and $.43 per share, respectively.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data appearing on page (i) of the Corporation's Annual
Report to Shareholders for the fiscal year ended December 31, 1997 is
incorporated herein by reference.
The Corporation's dividend payout ratio was 20.4%, 20.0% and 19.1% for 1997,
1996 and 1995, respectively.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing on pages 4 through 13 of the Corporation's Annual Report to
Shareholders for the fiscal year ended December 31, 1997 is incorporated herein
by reference.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 "Employers' Disclosures about Pensions
and Other Postretirement Benefits" ("SFAS No. 132"). SFAS No. 132 supersedes the
disclosure requirements for pension and other postretirement plans as set forth
in SFAS No. 87 "Employers' Accounting For Pensions", SFAS No. 88 "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
For Termination Benefits, and SFAS No. 106 "Employers' Accounting For
Postretirement Benefits Other Than Pensions." SFAS No. 132 does not address
measurement or recognition for pension and other postretirement benefit plans.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available, in which case the
notes to the financial statements shall include all available information and a
description of the information not available.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk information included in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and appearing on pages 10
through 12 of the Corporation's Annual Report to Shareholders for the fiscal
year ended December 31, 1997 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and report of independent public
accountants appearing on pages 16 through 37 of Corporation's Annual Report to
Shareholders for the fiscal year ended December 31, 1997 are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"ELECTION OF DIRECTORS" appearing on pages 3 and 4 and "MANAGEMENT" appearing
on pages 6 and 7 of Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held April 21, 1998 are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
"COMPENSATION OF DIRECTORS", "BOARD COMPENSATION COMMITTEE REPORT",
"COMPENSATION OF EXECUTIVE OFFICERS", "SUMMARY COMPENSATION TABLE",
"COMPENSATION PURSUANT TO PLANS", and "PERFORMANCE GRAPH" appearing on pages 5,
7 and 8 through 15 of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held April 21, 1998 are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS" appearing on Pages 1 through 3
of Registrant's Proxy Statement for its Annual Meeting of Stockholders to be
held April 21, 1998 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"TRANSACTIONS WITH MANAGEMENT AND OTHERS" appearing on pages 15 and 16 of
Registrant's Proxy Statement for its Annual Meeting of Stockholders to be held
April 21, 1998 is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) 1. Consolidated Financial Statements
The following consolidated financial statements of the Corporation and its
subsidiary, and Report of Independent Public Accountants thereon, as required by
Item 8 of this report are incorporated herein by reference.
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997, 1996 and
1995
Consolidated Statement of Changes in Stockholders' Equity - Years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
None Applicable.
(a) 3. Listing of Exhibits
The following exhibits are submitted herewith.
EXHIBIT NO. NAME EXHIBITS
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3(i) Certificate of Incorporation, as amended
3 (ii) By-laws, as amended
10.1 Incentive Compensation Plan *
10.2 1986 Stock Option and Appreciation Rights Plan **
10.3 1996 Stock Option and Appreciation Rights Plan ***
10.4 Employment Agreement Between Registrant
and J. William Johnson, dated January 31, 1996,
as amended December 18, 1996 and ****
January 2, 1998
13 Registrant's Annual Report to Shareholders
for the fiscal year ended December 31, 1997
21 Subsidiary of Registrant
23 Consent of Independent Public Accountants
27 Financial Data Schedule
99 Notice of 1998 Annual Meeting and Proxy Statement *****
* "Incentive Compensation Plan" and "Board Compensation Committee Report"
appearing on pages 12 and 7, respectively, of the Registrant's Proxy
Statement for its Annual Meeting of Stockholders to be held April 21, 1998
are incorporated herein by reference.
** Previously filed as an exhibit to Form 10-K which exhibit is incorporated
herein by reference.
*** Previously filed as part of Report on Form 10-K for 1995, filed on March
22, 1996, as exhibit 10(b).
**** Employment agreement previously filed as part of Report on Form 10-K for
1995, filed on March 22, 1996, as exhibit 10(c). The December 18, 1996
amendment increased Mr. Johnson's base annual salary from $280,000 to
$295,000 and the January 2, 1998 amendment increased Mr. Johnson's base
salary from $295,000 to $307,000.
*****The Corporation's Proxy Statement for its Annual Meeting of Stockholders to
be held April 21, 1998 was submitted in electronic format on March 10, 1998
and is incorporated herein by reference.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the three-month period ended
December 31, 1997.
(c) Exhibits
Exhibits as listed under 14(a) 3. above are submitted as a separate section
of this report.
(d) Financial Statement Schedules - None
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Signatures
Pursuant to the requirements of Section l3 or l5(d) 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)
Dated: March 20, 1998 By /S/ J. WILLIAM JOHNSON
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J. WILLIAM JOHNSON, President
(principal executive officer)
By /S/ MARK D. CURTIS
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MARK D. CURTIS,
Senior Vice President and
Treasurer (principal financial
officer and principal accounting
officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SIGNATURES TITLES DATE
/S/ J. WILLIAM JOHNSON President, Chairman MARCH 20, 1998
- ---------------------- of the Board, Chief --------------
J. William Johnson Executive Officer
/S/ PAUL T. CANARICK Director MARCH 20, 1998
- -------------------- --------------
Paul T. Canarick
/S/ BEVERLY ANN GEHLMEYER Director MARCH 20, 1998
- ------------------------- --------------
Beverly Ann Gehlmeyer
/S/ HOWARD THOMAS HOGAN, JR. Director MARCH 20, 1998
- ----------------------------- --------------
Howard Thomas Hogan, Jr.
/S/ J. DOUGLAS MAXWELL, JR. Director MARCH 20, 1998
- ----------------------------- --------------
J. Douglas Maxwell, Jr.
/S/ JOHN R. MILLER III Director MARCH 20, 1998
- ----------------------- --------------
John R. Miller III
/S/ WALTER C. TEAGLE III Director MARCH 20, 1998
- ------------------------ --------------
Walter C. Teagle III
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
EXHIBIT DESCRIPTION
- ------- -----------
3(i) Certificate of Incorporation, as amended
3(ii) By-laws, as amended
10.1 Incentive Compensation Plan *
10.2 1986 Stock Option and Appreciation Rights Plan **
10.3 1996 Stock Option and Appreciation Rights Plan ***
10.4 Employment Agreement Between Registrant and J. William Johnson,
dated January 31, 1996, as amended December 18, 1996 and ****
January 2, 1998
13 Registrant's Annual Report to Shareholders for the fiscal year ended
December 31, 1997
21 Subsidiary of Registrant
23 Consent of Independent Public Accountants
27 Financial Data Schedule
99 Notice of 1998 Annual Meeting and Proxy Statement *****
<FN>
* "Incentive Compensation Plan" and "Board Compensation Committee Report"
appearing on pages 12 and 7, respectively, of the Registrant's Proxy Statement
for its Annual Meeting of Stockholders to be held April 21, 1998 are
incorporated herein by reference.
**Previously filed as an exhibit to Form 10-K which exhibit is incorporated
herein by reference.
*** Previously filed as part of Report on Form 10-K for 1995, filed on March 22,
1996, as exhibit 10(b).
**** Previously filed as part of Report on Form 10-K for 1995, filed on March
22, 1996, as exhibit 10(c). The December 18, 1996 amendment increased Mr.
Johnson's base annual salary from $280,000 to $295,000 and the January 2, 1998
amendment increased Mr. Johnson's base salary from $295,000 to $307,000.
*****The Corporation's Proxy Statement for its Annual Meeting of Stockholders to
be held April 21, 1998 was submitted in electronic format on March 10, 1998 and
is incorporated herein by reference.
</FN>
</TABLE>
EXHIBIT 3 (i) - CERTIFICATE OF INCORPORATION, AS AMENDED
<PAGE>
CERTIFICATE OF INCORPORATION
OF
THE FIRST OF LONG ISLAND CORPORATION
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
I, the undersigned, being a person of the age of eighteen years or
older, for the purpose of forming a corporation pursuant to Section 402 of the
Business Corporation Law of New York, do hereby certify:
FIRST
NAME
The name of the corporation is The First of Long Island Corporation.
SECOND
BUSINESS PURPOSES
The purposes for which this corporation is formed are as follows:
a. General business purposes including, but not limited to, holding the
stock of The First National Bank of Long Island, New York, and
managing the affairs of said Bank.
b. To engage in any lawful act or activity for which a corporation may be
organized under the New York Business Corporation Law.
c. To do everything necessary, proper, advisable or convenient for the
accomplishment of the purposes hereinabove set forth, and to do all
other things incidental thereto or connected therewith, which are not
forbidden by the laws under which this corporation is organized, by
other laws, or by this Certificate of Incorporation.
THIRD
CORPORATE OFFICE
The office of the corporation is to be located within the Town of Oyster
Bay, County of Nassau, State of New York.
<PAGE>
FOURTH
AGENT
SECTION 1. The Secretary of State is designated as the agent of the
corporation upon whom process may be served. The post office address to which
the Secretary of State shall mail a copy of any process against the corporation
served upon him is: c/o The First National Bank of Long Island, 10 Glen Head
Road, Glen Head, New York 11545.
SECTION 2. The name and address of the registered agent which is to be the
agent of the corporation upon whom process against it may be served, are The
First National Bank of Long Island, a corporation organized under the laws of
the United States, located at 10 Glen Head Road, Glen Head, New York 11545.
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.
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.
<PAGE>
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.
SIXTH
BOARD OF DIRECTORS
SECTION 1. The management and conduct of the business of the corporation
shall be vested in a Board of Directors, which shall consist of such number of
directors, not less than the minimum permitted by law, as shall be fixed in the
Bylaws, or in the absence of such provision in the Bylaws, as shall be
determined by the shareholders at any annual or special meeting thereof.
SECTION 2. The Board of Directors shall be divided into two classes, Class
I, and Class II, which shall be as nearly equal in number as possible, and no
class shall include less than three directors. Each director shall serve for a
term ending on the date of the second annual meeting following the annual
meeting at which such director was elected; provided, however, that each initial
director in Class I shall hold office until the annual meeting of stockholders
in 1985; and each initial director in Class II shall hold office until the
annual meeting of stockholders in 1986.
<PAGE>
SECTION 3. In the event of any increase or decrease in the authorized
number of directors (i) each director then serving as such shall nevertheless
continue as a director of the class of which he is a member until the expiration
of his current term, or his prior death, retirement, resignation or removal for
cause, (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors between the
two classes of directors so as to maintain such classes as nearly equal as
possible, and (iii) when the number of directors is increased by the board and
any newly created directorships are filled by the board, there shall be no
classification of the additional directors until the next annual meeting of
shareholders.
SECTION 4. Notwithstanding any of the foregoing provisions of this Article,
each director shall serve until his successor is elected and qualified or until
his death, retirement, resignation or removal for cause. Should a vacancy occur
or be created, whether arising through death, resignation or removal for cause
of a director or through an increase in the number of directors of any class,
such vacancy shall be filled by a majority vote of the remaining directors of
the class in which such vacancy occurs, or by the sole remaining director of
that class if only one such director remains, or by the majority vote of the
remaining directors of the other class if there is no remaining member of the
class in which the vacancy occurs. A director so elected to fill a vacancy shall
serve until the next meeting of stockholders at which the election of directors
is in the regular order of business, and until his successor has been duly
elected and qualified.
SECTION 5. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the corporation, any director or the entire Board
of Directors of the corporation may be removed at any time, but only for cause.
As used herein, "cause" shall mean either (i) a felony conviction no longer
subject to appeal; (ii) a final adjudication of negligent or improper conduct in
the performance of the director's duty to the corporation; or (iii) a final
order of removal from office no longer subject to review, duly issued by the
appropriate federal banking agency.
SECTION 6. No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the New York Business Corporation Law
as the same exists or may hereafter be amended. Any repeal or
<PAGE>
modification of the foregoing provision by the stockholders of the corporation
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
SECTION 7. The affirmative vote of the holders of 70% or more of the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) shall be required to amend, alter, change or repeal this Article Sixth of
this Certificate of Incorporation.
SEVENTH
BUSINESS COMBINATIONS
PART A. For the purpose of this Article Seventh:
SECTION 1. Any shares of Voting Stock of this corporation which any Major
Stockholder has the right to vote or to acquire (i) pursuant to any agreement,
(ii) by reason of tenders of shares by stockholders of the corporation in
connection with or pursuant to a tender offer made by such Major Stockholder
(whether or not any tenders have been accepted, but excluding tenders which have
been rejected), or (iii) upon the exercise of conversion rights, warrants,
options or otherwise, shall be deemed "beneficially owned" by such Major
Stockholder.
SECTION 2. The term "Business Combination" shall mean:
a. Any merger or consolidation (whether in a single transaction or a series of
related transactions, including a series of separate transactions with a
Major Stockholder, any Affiliate or Associate thereof or any Person acting
in concert therewith) of this corporation or any Subsidiary with or into a
Major Stockholder or of a Major Stockholder into this corporation or a
Subsidiary;
b. Any sale, lease, exchange, transfer, distribution to stockholders or other
disposition, including without limitation, a mortgage, pledge or any other
security device, to or with a Major Stockholder by the corporation or any
of its Subsidiaries (in a single transaction or a series of related
transactions) of all, substantially all or any Substantial Part of the
assets of this corporation or a Subsidiary (including, without limitation,
any securities of a Subsidiary);
<PAGE>
c. The purchase, exchange, lease or other acquisition by the corporation or
any of its Subsidiaries (in a single transaction or a series of related
transactions) of all, substantially all or any Substantial Part of the
Assets or business of a Major Stockholder;
d. The issuance of any securities, or of any rights, warrants or options to
acquire any securities, of this corporation or a Subsidiary to a Major
Stockholder or the acquisition by this corporation or a Subsidiary of any
securities, or of any rights, warrants or options to acquire any
securities, of a Major Stockholder;
e. Any reclassification of Voting Stock, recapitalization or other transaction
(other than a redemption in accordance with the terms of the security
redeemed) which has the effect, directly or indirectly, of increasing the
proportionate amount of Voting Stock of the corporation or any Subsidiary
thereof which is beneficially owned by a Major Stockholder, or any partial
or complete liquidation, spin off, split off or split up of the corporation
or any Subsidiary thereof; provided, however, that this Section A(2) (e)
shall not relate to any transaction of the types specified herein that has
been approved by a majority of the Continuing Directors; and
f. Any agreement, contract or other arrangement providing for any of the
transactions described herein.
SECTION 3. The term "Continuing Director" shall mean (i) a person who was a
member of the Board of Directors of this corporation immediately prior to the
time that any then existing Major Stockholder became a Major Stockholder or (ii)
a person designated (before initially becoming a director) as a Continuing
Director by a majority of the then Continuing Directors. All references to a
vote of the Continuing Directors shall mean a vote of the total number of
Continuing Directors of the corporation.
<PAGE>
SECTION 4. The term "Major Stockholder" shall mean any person which,
together with its Affiliates and Associates and any Person acting in concert
therewith, is the beneficial owner of 10% or more of the votes held by the
holders of the outstanding shares of the Voting Stock of this corporation, and
any Affiliate or Associate of a Major Stockholder, including a Person acting in
concert therewith. The term "Major Stockholder" shall not include a Subsidiary
of this corporation.
SECTION 5. The term "Affiliate" shall mean, with respect to a specified
Person, a Person who directly or indirectly controls, or is controlled by, or is
under common control with, the Person specified.
SECTION 6. The term "Associate" means, with respect to a specified Person,
(1) any organization, other than this corporation and its subsidiaries, of which
such Person is an officer, partner, or beneficial owner of 10 per cent or more
of any class of equity securities, (2) any trust or estate in which such Person
has a substantial beneficial interest or as to which serves in a fiduciary
capacity, and (3) any relative or spouse of such Person, or relative of such
spouse, who has the same home as such Person or who is a director or officer of
this corporation or any of its subsidiaries.
SECTION 7. The term "other consideration to be received" shall include,
without limitation, Voting Stock of this corporation retained by its existing
stockholders in the event of a Business Combination which is a merger or
consolidation in which this corporation is the surviving corporation.
SECTION 8. The term "Person" shall mean any individual, corporation,
partnership or other person, group or entity (other than the corporation, any
Subsidiary of the corporation or a trustee holding stock for the benefit of
employees of the corporation or its Subsidiaries, or any one of them, pursuant
to one or more employee benefit plans or arrangements). When two or more Persons
act as a partnership, limited partnership, syndicate, association or other group
for the purpose of acquiring, holding or disposing of shares of stock, such
partnerships, syndicate, association or group will be deemed a "Person".
SECTION 9. The term "Subsidiary" shall mean any business entity 50% or more
of which is beneficially owned by the corporation.
<PAGE>
SECTION 10. The term "Substantial Part," as used in reference to the assets
of the corporation, of any Subsidiary or of any Major Stockholder means assets
having a value of more than 5% of the total consolidated assets of the
corporation and its Subsidiaries as of the end of the corporation's most recent
fiscal year ending prior to the time the determination is made.
SECTION 11. The term "Voting Stock" shall mean stock or other securities
entitled to vote upon any action to be taken in connection with any Business
Combination or entitled to vote generally in the election of directors,
including stock or other securities convertible into Voting Stock.
PART B. Notwithstanding any other provisions of this Certificate of
Incorporation and except as set forth in Part C of this Article Seventh, neither
the corporation nor any Subsidiary shall be party to a Business Combination
unless:
SECTION 1. The Business Combination was approved by the Board of Directors
of the corporation prior to the Major Stockholder involved in the Business
Combination becoming a Major Stockholder and by at least 70% of the outstanding
Voting Stock of the corporation; or
SECTION 2. The Major Stockholder involved in the Business Combination
sought and obtained the unanimous prior approval of the Board of Directors to
become a Major Stockholder and the Business Combination was approved by a
majority of the Continuing Directors and by at least 70% of the outstanding
Voting Stock of the corporation; or
SECTION 3. The Business Combination was approved by at least 70% of the
Continuing Directors of the corporation and by at least 70% of the outstanding
Voting Stock of the corporation; or
SECTION 4. The Business Combination was approved by at least 70% of the
outstanding Voting Stock of the corporation and by at least 70% of the
outstanding Voting Stock beneficially owned by stockholders other than any Major
Stockholder.
PART C. During the time a Major Stockholder exists, a resolution to
voluntarily dissolve the corporation shall be adopted only upon: (1) the vote by
at least 70% of the Continuing Directors of the corporation; or (2) the vote by
at least 70% of the outstanding Voting Stock of the corporation and by at least
70% of the outstanding Voting Stock beneficially owned by stockholders other
than any Major Stockholder.
<PAGE>
PART D. As to any particular transaction, the Continuing Directors shall
have the power and duty to determine, on the basis of information known to them:
SECTION 1. The amount of Voting Stock beneficially held by any Person;
SECTION 2. Whether a Person is an Affiliate or Associate of another;
SECTION 3. Whether a Person is acting in concert with another;
SECTION 4. Whether the assets subject to any Business Combination
constitute a "Substantial Part" as herein defined;
SECTION 5. Whether a proposed transaction is subject to the provisions of
this Article Seventh; and
SECTION 6. Such other matters with respect to which a determination is
required under this Article Seventh. Any such determination shall be conclusive
and binding for all purposes of this Article Seventh.
PART E. The affirmative vote required by this Article Seventh is in
addition to the vote of the holders of any class or series of stock of the
corporation otherwise required by law, this Certificate of Incorporation, any
resolution which has been adopted by the Board of Directors providing for the
issuance of a class or series of stock or any agreement between the corporation
and any national securities exchange.
PART F. Any amendment, change or repeal of this Article Seventh or any
other amendment of this Certificate of Incorporation which would have the effect
of modifying or permitting circumvention of the provisions of this Article
Seventh shall require approval by at least 70% of the outstanding Voting Stock
of the corporation and at least 70% of the outstanding Voting Stock beneficially
owned by stockholders other than any Major Stockholder.
EIGHTH
SHAREHOLDER MEETINGS
SECTION 1. A quorum for any meeting of shareholders to transact business of
this corporation except as otherwise specifically provided herein or by law
shall be the presence in person or by proxy of the holder of a majority of the
shares of common stock of the corporation and of record on the record date set
for the meeting.
SECTION 2. A special meeting of the shareholders may be held at any time
and for any purpose and may only be called by the President or the Board of
Directors of the corporation.
<PAGE>
NINTH
AMENDMENT
Subject to the special provisions set forth in the foregoing Articles of
this Certificate of Incorporation, the provisions contained herein may be
amended solely upon the approval of the Board of Directors and by the
affirmative vote of the holders of seventy percent (70%) of the stock entitled
to vote thereon; provided, however, that any of the following changes may be
authorized by or pursuant to authorization by the Board of Directors:
a. To specify or change the location of the corporation's office.
b. To specify or change the post office address to which the Secretary of
State shall mail a copy of any process against the corporation served
upon him.
c. To make, revoke or change the designation of a registered agent.
d. To make further changes for which the Board of Directors is authorized
pursuant to the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has set his hand this 6th day of
February, 1984.
/S/ J. WILLIAM JOHNSON
J. William Johnson
c/o The First National Bank of Long Island
10 Glen Head Road
Glen Head, New York 11545
EXHIBIT 3 (ii) - BY-LAWS, AS AMENDED
<PAGE>
BYLAWS OF
THE FIRST OF LONG ISLAND CORPORATION
ARTICLE I
OFFICES; CORPORATE SEAL
Section 1. CORPORATION OFFICE. The office of the corporation in New York
shall be that set forth in the Certificate of Incorporation or in the most
recent amendment of the Certificate of Incorporation or resolution of the Board
of Directors filed with the Secretary of State of New York changing the
corporation office.
Section 2. OTHER OFFICES. The corporation may have such other offices, within
or without the State of New York, as the Board of Directors shall, from time to
time, determine.
Section 3. CORPORATE SEAL. The corporate seal of the corporation shall
consist of the name of the corporation and the name of the State of
incorporation and shall be in such form and bear such other inscription as the
Board of Directors may determine. The failure to use such seal, however, shall
not affect the validity of any documents executed on behalf of the corporation.
ARTICLE II
SHAREHOLDER MEETINGS
Section 1. PLACE AND TIME OF MEETINGS. Meetings of the shareholders may be
held at any place, within or without the State of New York, designated by the
Board of Directors and, in the absence of such designation, shall be held at the
office of the corporation in the State of New York. The Board of Directors shall
designate the time of day for each meeting and, in the absence of such
designation, every meeting of shareholders shall be held at three-thirty o'clock
p.m.
Section 2. ANNUAL MEETINGS.
(a) Unless otherwise designated by the Board of Directors, the annual meeting
of the shareholders shall be held on the third Tuesday of April
<PAGE>
of each year; provided, however, that the interval between two consecutive
annual meetings shall not be more than thirteen (13) months nor less than ten
(10) months.
(b) At the annual meeting the shareholders, voting as provided in the
Certificate of Incorporation, shall elect directors, and shall transact such
other business as may properly come before them.
Section 3. SPECIAL MEETINGS. A special meeting of the shareholders may be
held at any time and for any purpose and may only be called by the President or
the Board of Directors.
Section 4. QUORUM; ADJOURNED MEETINGS. The presence, in person or by proxy,
of the holders of a majority of the shares entitled to vote at any annual or
special meeting shall constitute a quorum for the transaction of business. In
the absence of a quorum, any meeting may be adjourned to a subsequent date,
provided notice of such adjournment is mailed to each shareholder entitled to
vote at least five (5) days before such adjourned meeting. If a quorum is
present, a meeting may be adjourned from time to time without notice other than
announcement at such meeting. At adjourned meetings at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. If a quorum is present, the shareholders may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 5. VOTING. At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote either in person or by proxy.
Each shareholder, unless the Certificate of Incorporation provides otherwise,
shall have one vote for each share having voting power registered in his name on
the books of the corporation. Upon the demand of any shareholder, the vote upon
any question before the meeting shall be by ballot. All questions shall
<PAGE>
be decided by a majority vote of the number of shares entitled to vote and
represented at the meeting at the time of the vote except where otherwise
required by applicable law, the Certificate of Incorporation, or these Bylaws.
Section 6. CLOSING OF BOOKS. The Board of Directors may fix a time, not more
than fifty (50) nor less than ten (10) days preceding the date of any meeting of
shareholders, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, such meeting, notwithstanding any
transfer of shares on the books of the corporation after any record date so
fixed. The Board of Directors may close the books of the corporation against the
transfer of shares during the whole or any part of such period. If the Board of
Directors fails to fix a record date for determination of the shareholders
entitled to notice of, and to vote at, any meeting of shareholders, the record
date shall be the fiftieth (50th) day preceding the date of such meeting.
Section 7. NOTICE OF MEETINGS. There shall be mailed to each shareholder,
shown by the books of the corporation to be a holder of record of voting shares,
at his address as shown by the books of the corporation, a notice setting out
the time and place of each annual meeting and each special meeting, which notice
shall be mailed not less than ten (10) days nor more than fifty (50) days prior
thereto; except that notice of a meeting at which there is to be considered
either (i) an agreement of merger or consolidation, (ii) a proposal to dispose
of all or substantially all of the property and assets of the corporation, (iii)
a proposal to dissolve the corporation, or (iv) a proposal to amend the
Certificate of Incorporation, shall be mailed to all shareholders, whether
entitled to vote or not, at least thirty (30) days prior to the date of such
meeting. Every notice of any special meeting shall state the purpose or purposes
for which the meeting has been called, pursuant to Section 3 of this Article,
and the business transacted at all special meetings shall be confined to the
purpose or purposes stated in the notice.
Section 8. WAIVER OF NOTICE. Any shareholder, or the representative entitled
to vote any shares so represented, may waive notice of any shareholder meeting
by executing a written
<PAGE>
waiver of such notice either before, at or after such meeting; provided,
however, that the attendance of any stockholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
Section 9. WRITTEN ACTION. Any action which might be taken at a meeting of
the shareholders may be taken without a meeting if done in accordance with
Section 615 of the New York Business Corporation Law, as the same may be amended
from time to time, or in accordance with such other statutory provision as may
be substituted therefor.
ARTICLE III
DIRECTORS
Section 1. GENERAL. The property, affairs and business of the corporation
shall be managed by the Board of Directors, each of whom shall be at least
eighteen years of age.
Section 2. NUMBER AND QUALIFICATIONS. The Board of Directors of the
corporation shall consist of not less than five nor more than fifteen directors,
the exact number within such minimum and maximum limits to be fixed and
determined from time to time by resolution of a majority of the full Board of
Directors; provided, however, that no decrease in number shall shorten the term
of any incumbent director. Directors should own a minimum of two hundred (200)
shares.
Section 3. TERM. The Board of Directors shall be divided into two classes,
Class I and Class II, which shall be as nearly equal in number as possible. Each
director shall serve a term ending on the date of the second annual meeting
following the annual meeting at which such director was elected; provided,
however, that each initial director in Class I shall hold office until the
annual meeting of shareholders in 1985; and each initial director in Class II
shall hold office until the annual meeting of shareholders in 1986.
Section 4. NOMINATIONS.
(a) Nominations for the election of directors may be made by the Board of
Directors or by any shareholder entitled to vote for the election of directors.
Such nominations shall be
<PAGE>
made by notice in writing, delivered or mailed by first class United States
mail, postage prepaid, to the Secretary of the corporation not less than
fourteen (14) days nor more than fifty (50) days prior to any meeting of the
shareholders called for the election of directors; provided, however, that if
less than twenty-one (21) days' notice of the meeting is given to shareholders,
such written notice shall be delivered or mailed, as prescribed, to the
Secretary of the corporation not later than the close of the seventh day
following the day on which notice of the meeting was mailed to shareholders.
Notice of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(b) Each notice under subsection (a) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominee
and (iii) the number of shares of stock of the corporation which are
beneficially owned by each such nominee.
(c) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 5. ORGANIZATION MEETING. As soon as practicable after each annual
election of directors, the Board of Directors shall meet at the office of the
corporation, or at such other place within or without the State of New York as
may be designated by the Board of Directors, for the purpose of electing the
officers of the corporation and for the transaction of such other business as
shall come before the meeting.
Section 6. REGULAR MEETING. The regular meetings of the Board of Directors
shall be held, without notice, at the office of the corporation on the third
Tuesday of each January, April, July and October. When any regular meeting of
the Board falls upon a holiday, the meeting shall be held on the next banking
business day unless the Board shall designate some other day.
<PAGE>
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called at any time by the Chairman, the President or at the request of three
(3) or more of the directors and shall be held at such time and place as may be
designated in the notice of such meeting.
Section 8. NOTICE OF MEETINGS. Notice of special meetings of the Board of
Directors shall be given at least twenty-four (24) hours in advance thereof by
mail, telephone, telegram or in person.
Section 9. WAIVER OF NOTICE. Notice of any meeting of the Board of Directors
may be waived by a director either before, at, or after such meeting in a
writing signed by such director; provided, however, that a director, by his
attendance and participation in any action taken at any meeting of the Board of
Directors, shall be deemed to have waived notice of such meeting.
Section 10. DIRECTOR AND COMMITTEE ACTION BY CONFERENCE TELEPHONE. Any one or
more members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of a conference
telephone or similar equipment which allows all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
Section 11. QUORUM. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of business, except that when a vacancy
or vacancies exist, a majority of the remaining directors shall constitute a
quorum.
Section 12. VACANCIES, INCREASES IN NUMBER. Any vacancy occurring in the
Board of Directors (by death, resignation, removal for cause, increase in number
pursuant to Section 2, or otherwise) may be filled by the affirmative vote of a
majority of the remaining directors of the class in which the vacancy occurs. A
director elected to fill a vacancy shall be elected to serve until the next
annual meeting of shareholders, at which time a new director will be elected for
that position.
<PAGE>
Section 13. REMOVAL. At any meeting of shareholders called expressly for that
purpose, any director or the entire Board of Directors may be removed, with
cause, pursuant to the provisions of the Certificate of Incorporation. In the
event that the entire Board or any one or more directors be so removed, new
directors shall be elected at the same meeting.
Section 14. RETIREMENT. Each director shall retire at the annual meeting
following his attaining the age of seventy-five (75).
Section 15. CHAIRMAN OF THE BOARD. The Board of Directors shall appoint one
of its members to be Chairman of the Board to serve at the pleasure of the
Board. The Chairman so appointed may also be Chief Executive Officer of the
Bank. He shall preside at the Annual Meeting of Shareholders and at all meetings
of the Board of Directors. In addition to any specific powers conferred by these
Bylaws, he shall also have and may exercise such further powers and duties as
from time to time may be conferred upon or assigned to him by the Board of
Directors.
Section 16. SECRETARY TO THE BOARD. The Board of Directors may appoint a
Secretary to the Board who shall keep the minutes of its meetings instead of the
Secretary of the Corporation. The said person need not be a member of the Board
of Directors.
Section 17. COMMITTEES. The Board of Directors may establish such committees
from time to time, making such regulations as it deems advisable with respect to
the membership, authority and procedures of such committee of the Board of
Directors; provided, however, that in no event shall a committee have power to
amend these Bylaws.
Section 18. COMPENSATION. Directors who are not salaried officers of this
corporation may receive such fixed sum per meeting attended or such fixed annual
sum as may be determined, from time to time by resolution of the Board of
Directors. All directors may receive their expenses, if any, of attendance at
meetings of the Board of Directors or any committee thereof, if approved by
resolution of the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
Capacity and receiving proper compensation therefor.
<PAGE>
ARTICLE IV
OFFICERS
Section 1. NUMBER. The officers of this corporation shall be a Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary, and a
Treasurer, and such other officers as the Board of Directors, in its discretion,
may deem necessary. Any two offices, except those of President and Secretary,
may be held by one person.
Section 2. ELECTION, TERM OF OFFICE, QUALIFICATIONS. At each organization
meeting of the Board of Directors the Board shall elect all of the officers of
the corporation. All officers of the corporation except the President shall hold
office until the annual meeting of the Board next succeeding their election to
office, or until the election and qualification of their respective successors.
The President shall continue to hold office until the election and qualification
of his successor.
Section 3. CHIEF EXECUTIVE OFFICER. The Board of Directors shall appoint one
of its members to be Chief Executive officer of the corporation, who may also
serve as Chairman and/or President. The Chief Executive officer shall have
general executive powers, and shall have and may exercise any and all other
powers and duties pertaining by law, regulation or practice, to the office of
Chief Executive Officer, or imposed by these Bylaws. He shall also have and may
exercise such further powers and duties as from time to time may be conferred
upon, or assigned to, him by the Board of Directors.
Section 4. PRESIDENT. The Board of Directors shall appoint one of its members
to be President of the corporation. He may also be Chief Executive Officer of
the corporation, and, in the absence of the Chairman, he shall preside at
meetings of the Board of Directors and at the Annual Meeting of Shareholders. He
shall have general executive powers, and, in addition to any specific powers
conferred by these Bylaws, he shall also have and may exercise
<PAGE>
such further powers and duties as from time to time may be conferred upon or
assigned to him by the Board of Directors or the Chief Executive Officer. In the
absence of the Chief Executive Officer, he shall perform all the duties of the
Chief Executive Officer.
Section 5. VICE PRESIDENT. Each Vice President shall have such powers and
shall perform such duties as may be specified in the Bylaws or prescribed by the
Board of Directors or by the President. In the event of absence or disability of
the President, Vice Presidents shall succeed to his power and duties in the
order designated by the Board of Directors.
Section 6. SECRETARY. The Secretary shall keep accurate minutes of all
meetings of the shareholders and the Board of Directors, shall give proper
notice of meetings of shareholders and directors, and shall perform such other
duties and have such other powers as the Board of Directors or the President may
from time to time prescribe. However, the Board of Directors may, in its
discretion, appoint additionally a Secretary to the Board who shall keep the
minutes of its meetings instead of the Secretary of the Corporation.
Section 7. TREASURER. The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the money, funds, valuable papers,
and documents of the corporation (other than his own bond, if any, which shall
be in the custody of the President), and shall have and exercise, under the
supervision of the Board of Directors, all the powers and duties commonly
incident to his office, and shall give bond in such form and amount and with
such sureties as shall be required by the Board of Directors. The Treasurer
shall keep accurate accounts of all monies of the corporation received or
disbursed. He shall deposit all monies, drafts and checks in the name of, and to
the credit of, the corporation in such banks and depositaries as a majority of
the whole Board of Directors shall from time to time designate. He shall have
power to endorse for deposit all notes, checks and drafts received by the
corporation. He shall disburse the funds of the corporation in the manner
prescribed by the Board of Directors, making proper vouchers therefor. He shall
render to the President and the directors, whenever required, an account of all
his transactions as Treasurer and of the financial condition
<PAGE>
of the corporation and shall perform such other duties as may be prescribed from
time to time by the Board of Directors or by the President.
Section 8. ADDITIONAL OFFICERS AND AGENTS. The Board of Directors, at its
discretion, may appoint a general manager, one or more assistant treasurers, one
or more assistant secretaries, and such other officers or agents as it may deem
advisable, and may prescribe the duties of any such officer or agent.
ARTICLE V
SHARES
Section I. STOCK CERTIFICATES. Certificates of stock shall bear the seal of
the corporation engraved thereon, and the signature of two persons. One shall be
the signature of the President or a Vice President and it may be manual, by
facsimile process, engraved, printed or impressed. The other shall be the
signature of a Vice President, the Secretary, Assistant Secretary, or any other
officer as authorized signer appointed by the Board of Directors for that
purpose, and it may be manual or by facsimile process. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the corporation properly endorsed.
Section 2. TRANSFERS. Shares of stock shall be transferable on the books of
the corporation, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights and liabilities of the
prior holder of such shares.
Section 3. LOSS OF CERTIFICATES. Any shareholder claiming loss or destruction
of a share certificate shall make an affidavit of that fact and, unless waived
by the Chief Executive Officer or Treasurer, shall give the corporation a bond
of indemnity to indemnify the corporation against any claim which may be made
against it on account of the reissue of such
<PAGE>
certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to have been destroyed or lost.
ARTICLE VI
DIVIDENDS
Section 1. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, these Bylaws and applicable law, the Board of Directors may
declare dividends from paid-in surplus, earned surplus or from net earnings for
the current or preceding fiscal year of the corporation at such times and in
such amounts as the Board shall deem advisable.
Section 2. RECORD DATE. Subject to any provisions of the Certificate of
Incorporation, the Board of Directors may fix a date preceding the date fixed
for the payment of any dividend or allotment of other rights as the record date
for the determination of the shareholders entitled to receive payment of such
dividend or allotment of such rights; and in such case only shareholders of
record on the date so fixed shall be entitled to receive such payment or
allotment notwithstanding any transfer of shares on the books of the corporation
after such record date. The Board of Directors may close the books of the
corporation against the transfer of shares during the whole or any part of such
period.
ARTICLE VII
BOOKS AND RECORDS; FISCAL YEAR
Section 1. BOOKS AND RECORDS. The Board of Directors of the corporation shall
cause to be kept in the office of the corporation:
(a) a share register, giving the names and addresses of the shareholders, the
number and classes of shares held by each, and the dates on which the
certificates therefor were issued;
(b) records of all proceedings of shareholders and directors;
(c) such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business; and
<PAGE>
(d) Bylaws of the corporation and all amendments thereto.
Section 2. FISCAL YEAR. The fiscal year of the corporation shall be the
calendar year.
ARTICLE VIII
INSPECTION OF BOOKS
Section 1. EXAMINATION BY SHAREHOLDERS. Every shareholder of the corporation
and every holder of a voting trust certificate shall have the right to examine,
in person or by agent or attorney authorized in writing to represent the
shareholder, at any reasonable time or times, for any proper purpose, and at the
place or places where usually kept, the share register, books of account and
records of the proceedings of the shareholders and directors and to make
extracts therefrom.
Section 2. INFORMATION TO SHAREHOLDERS. Upon written request by a shareholder
of the corporation, the Board of Directors shall furnish to him a statement of
profit and loss for the last fiscal year and a balance sheet containing a
summary of the assets and liabilities as of the close of such fiscal year.
ARTICLE IX
INDEMNIFICATION, CONTRACT WITH THE CORPORATION AND
LIABILITY INSURANCE
Section 1. INDEMNIFICATION. Any person who at any time (i) shall serve or
shall have served as a director, officer, or employee of the corporation or (ii)
at the request of the corporation, shall serve or shall have served any other
corporation, association, partnership, limited liability company, joint venture,
trust, employee benefit plan or other enterprise as a director, trustee,
officer, employee, or in any other capacity, and the heirs, executors and
administrators of such person, shall be indemnified by the corporation in
accordance with and to the fullest extent permitted by New York law, including
the Business Corporation Law of the State of New York, as the same exists or may
hereafter be amended. The foregoing right of indemnification or reimbursement
shall not be exclusive of other rights to which such person may be entitled.
Section 2. CONTRACT WITH THE CORPORATION. The provisions of this Article IX
shall be deemed to be a contract between the corporation and each director and
officer of the corporation who serves in any such capacity at any time while
this Article IX and the relevant provisions of New York law, as the same exists
or may hereafter be amended, may be in existence; and any amendment of any such
law or of this Article IX shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought or threatened based
in whole or in part upon any such state of facts.
Section 3. LIABILITY INSURANCE. The corporation shall have the power, to the
fullest extent permitted by New York law, as the same exists or may hereafter be
amended, to purchase and maintain insurance on behalf of any person who is or
was a director or officer against any liability asserted against him and
incurred by him in such capacity or arising out of his status as such whether or
not the corporation would have the power to indemnify him against any such
liability under the provisions of this Article IX.
ARTICLE X
AMENDMENTS
SECTION 1. Subject to Section 2 of this Article, these Bylaws may be amended
by a vote of the majority of the whole Board of Directors at any meeting.
SECTION 2. Notwithstanding the provisions of Section 1 of this Article, the
shareholders may amend or repeal any Bylaw by affirmative vote of seventy
percent (70%) or more of the outstanding shares of capital stock of the
corporation entitled to vote generally, cast at any annual meeting or at any
special meeting of shareholders called for such purpose.
EXHIBIT 13 - REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997
<PAGE>
SELECTED FINANCIAL DATA
The following is selected consolidated financial data for the past five
years. This data should be read in conjunction with the information contained
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the accompanying consolidated financial
statements and related notes.
<TABLE>
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993(2)
INCOME STATEMENT DATA: ------------- ------------ ------------ ------------ -------------
Total Interest Income ...................... $ 30,401,000 $ 28,585,000 $ 28,017,000 $ 24,861,000 $ 23,997,000
Total Interest Expense ..................... 9,197,000 8,492,000 8,899,000 6,175,000 5,868,000
Net Interest Income ........................ 21,204,000 20,093,000 19,118,000 18,686,000 18,129,000
Provision for Loan Losses (Credit) ......... (100,000) -- -- -- 175,000
Net Income ................................. 7,626,000 6,891,000 6,208,000 6,028,000 5,548,000
PER SHARE DATA: (1)
Basic Earnings ............................. $ 2.45 $ 2.20 $ 1.97 $ 1.92 $ 1.75
Diluted Earnings ........................... 2.40 2.15 1.94 1.89 1.72
Cash Dividends Declared .................... .49 .43 .37 .34 .31
Stock Splits/Dividends Declared ............ 3-FOR-2 -- 3-for-2 -- --
Book Value ................................. $ 18.94 $ 17.29 $ 15.69 $ 13.52 $ 12.45
BALANCE SHEET DATA AT PERIOD END:
Total Assets ............................... $ 484,674,000 $440,903,000 $425,655,000 $396,055,000 $381,161,000
Total Loans ................................ 154,730,000 152,682,000 145,874,000 143,613,000 136,177,000
Allowance for Loan Losses .................. 3,579,000 3,600,000 3,600,000 3,600,000 3,590,000
Total Deposits ............................. 422,759,000 384,361,000 373,955,000 351,526,000 339,874,000
Stockholders' Equity ....................... 58,966,000 54,169,000 49,340,000 42,608,000 39,403,000
AVERAGE BALANCE SHEET DATA:
Total Assets ............................... $ 460,551,000 $436,659,000 $411,717,000 $390,543,000 $375,171,000
Total Loans ................................ 153,733,000 150,090,000 143,677,000 141,399,000 132,480,000
Allowance for Loan Losses .................. 3,597,000 3,606,000 3,607,000 3,602,000 3,554,000
Total Deposits ............................. 402,392,000 383,091,000 363,676,000 347,674,000 336,289,000
Stockholders' Equity ....................... 56,234,000 51,229,000 45,908,000 41,005,000 37,078,000
FINANCIAL RATIOS:
Return on Average Total Assets (ROA) ....... 1.66% 1.58% 1.51% 1.54% 1.48%
Return on Average Stockholders' Equity (ROE) 13.56 13.45 13.52 14.70 15.16
Average Equity to Average Assets ........... 12.21 11.73 11.15 10.50 9.88
<FN>
(1) All per share data have been adjusted to reflect the 3-for-2 stock splits
declared in 1997 and 1995.
(2) Net income, earnings per share information, ROA, and ROE for 1993 are
before the effect of an accounting change. After the accounting change, net
income, basic earnings per share, diluted earnings per share, ROA and ROE
were $6,198,000, $1.96, $1.93, 1.65%, and 16.72%, respectively.
</FN>
</TABLE>
The Corporation's Common Stock trades on The Nasdaq SmallCap Market tier
of The Nasdaq Stock Market under the symbol FLIC. The following table sets forth
high and low bid prices as quoted for the years ended December 31, 1997 and
1996.
1997 1996
------------------- ------------------
Quarter High Low High Low
- ------- -------- -------- -------- ------
First $ 27 2/3 $ 22 1/3 $ 20 1/3 $ 19
Second 28 2/3 27 1/3 22 4/7 20 1/6
Third 31 1/3 28 2/3 22 1/3 22 1/6
Fourth 40 1/6 31 1/3 22 1/3 22 1/3
At December 31, 1997, there were 805 stockholders of record of the
Corporation's Common Stock. The number of stockholders of record includes banks
and brokers who act as nominees, each of whom may represent more than one
stockholder. All prices have been adjusted to reflect a 3-for-2 stock split
declared in December 1997.
<PAGE>
CONTENTS
Selected Financial Data .............................................. (i)
Letter to Shareholders ............................................... 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................ 4
Management's Responsibility for Financial Reporting .................. 14
Consolidated Financial Statements and Notes .......................... 16
Report of Independent Public Accountants ............................. 37
Directors--The First of Long Island Corporation, The First
National Bank of Long Island.......................................... 39
Officers--The First of Long Island Corporation, The First
National Bank of Long Island.......................................... 40
BUSINESS OF THE CORPORATION
The First of Long Island Corporation ("Corporation") is a one-bank holding
company organized under the laws of the State of New York. Its primary business
is the operation of its sole subsidiary, The First National Bank of Long Island
("Bank").
The Bank was organized in 1927 under national banking laws and became the
sole subsidiary of the Corporation under a plan of reorganization effected April
30, 1984.
The Bank is a full service commercial bank which provides a broad range of
financial services to individual, professional, corporate, institutional, and
government customers through its fifteen branch system on Long Island.
The First of Long Island Agency, Inc. was organized in 1994 under the laws
of the State of New York, as a subsidiary of the Bank to conduct business as a
licensed insurance agency in the sale of insurance, primarily fixed annuity
products.
The Bank is subject to regulation and supervision of the Federal Reserve
Board, the Comptroller of the Currency, and the Federal Deposit Insurance
Corporation which also insures its deposits. The Comptroller of the Currency is
the primary banking agency responsible for regulating the subsidiary Bank. In
addition, the Corporation is subject to the regulations and supervision of the
Federal Reserve Board and the Securities and Exchange Commission.
ANNUAL MEETING NOTICE
The Annual Meeting of Stockholders will be held at the Old Brookville
office of The First National Bank of Long Island, 209 Glen Head Road, Glen Head,
New York 11545 on Tuesday, April 21, 1998 at 3:30 P.M.
---------------------------------------------------------
Executive Office Transfer Agent and Registrar
The First of Long Island The First National Bank of
Corporation Long Island
10 Glen Head Road 10 Glen Head Road
Glen Head, New York 11545 Glen Head, New York 11545
(516) 671-4900 (516) 671-4900
---------------------------------------------------------
<PAGE>
Celebrating 70 Years
Establishment - The Early Years
THE FIRST NATIONAL BANK OF GLEN HEAD OPENED FOR BUSINESS ON SATURDAY,
OCTOBER 1, 1927
THE FOLLOWING IS AN EXCERPT FROM THE GLEN COVE ECHO, SEPTEMBER 30, 1927.
One of the most important and outstanding achievements in the history
and progress of Glen Head is the completion of the new First National Bank and
its opening, which takes place this Saturday, October 1, 1927. This attractive
structure stands at the corner of Roosevelt St. and Glenwood Road, near the Glen
Head cross roads, which makes it very convenient, not only for the Glen Head
merchants and business men, but also for those people who reside in Greenvale,
Brookville, Glenwood and a portion of Sea Cliff.
This institution is capitalized at $50,000 and the surplus and undivided
profits amount to $25,000. Interest at the rate of 4% will be paid on interest
Accounts. The officers of the bank state that they will be at all times very
glad to be of service to those desiring advice as to the investment of their
surplus funds.
The officers of the bank include G. Thomas Powell, President; Harry
Tappen, Vice-President; and Robert S. Miller, Cashier. The directors
include Charles W. Bell, John L. Bogart, George Court, A. Burnside Cheshire,
Claude A. Clower, Joseph W. Harriman, Cornelius H. Luyster, G. Thomas
Powell, William E. Seaman, Harold J. Simonson, Warren H. Spurge, and Harry
Tappen. Attorney Franklin A. Coles of Glen Cove is counsel.
PERSONAL LOAN DEPARTMENT ESTABLISHED
IN THE LATE 1930'S A NEW HOME LOAN PLAN WAS INTRODUCED. ROBERT S. MILLER,
CASHIER OF THE FIRST NATIONAL BANK OF GLEN HEAD GAVE THE FOLLOWING INTERVIEW AS
PUBLISHED IN THE GLEN COVE RECORD, APRIL 2, 1936.
During the last six years many bank depositors have felt that to secure a
bank loan involved endless red tape and collateral much greater than the amount
of the loan. This attitude is entirely unjustified as the banks still consider
local loans their best form of investment and are anxious to extend their
commitments in this field.
In recent years due to the increased installment buying there has been built
up demand for small loans repayable on a monthly basis. Recognizing this demand
our bank has recently opened a Personal Loan Department designed to fill the
needs of the small borrower with loan limits of $50 to $1,000 on a reasonable
cost basis.
The Personal Loan Department is not restricted to new purchases as is the
case of Federal Housing Loans and the rules are sufficiently flexible to cover
almost any contingency such as sickness or other unforeseen emergency. When your
emergency arises, you will find at the First National Bank of Glen Head an
understanding and helpful attitude.
FORMED AUTO LOAN DEPARTMENT
AT THE END OF THE DECADE, THE BANK FORMED A NEW AUTO LOAN DEPARTMENT TO
ACCOMMODATE ITS EXPANDING LOAN SERVICES. THE FOLLOWING ARTICLE APPEARED IN THE
DECEMBER 14, 1939 EDITION OF THE GLEN COVE RECORD.
A new auto loan department in which the finance charges on new cars will be
approximately 25 percent lower than the rates now being levied by most companies
handling this type of loan was announced by Robert Miller of the Glen Head Bank
this week.
Continued on page 15
<PAGE>
TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS
I am pleased to report that The First of Long Island again experienced a
year of good growth in earnings, as earnings per share increased over 11% from
$2.15 in 1996 to $2.40 this year, on an after split and fully diluted basis. The
Corporation's consolidated net income was $7,626,000 in 1997 and total assets
grew by 10% over the prior year end, reaching $484,674,000 at December 31, 1997.
In December, the Board of Directors declared a 3-for-2 stock split in the
form of a 50% stock dividend and increased the cash dividend for the 19th
consecutive year. On an after split basis, the cash dividend declared in
December was 26.7 cents per share as compared to 22.7 cents per share that was
declared in June 1997. The increase in the cash dividend was 18 percent.
We were exceptionally gratified by the results of this past year. Our
return on assets was exceptionally strong, reaching 1.66%. Return on equity was
13.6%. Pressure on interest margins continued in 1997, especially for loan rates
as our net interest margin declined to 5.11% from 5.17% in 1996. As in prior
years the most important contribution to the growth in earnings was the increase
in checking balances. Checking accounts are our most important product and the
growth of these balances is a critical strategy in increasing our earnings per
share. We are particularly pleased by the good growth of commercial checking
balances especially as we experience increasing pressure for interest to be
earned on excess commercial balances. Other significant contributors to the
income growth were increases in retained earnings and service charge income. In
addition, operating expenses, exclusive of personnel costs, were level for the
second consecutive year.
GRAPH SHOWING EARNINGS PER SHARE
EARNINGS PER SHARE
1980 $.23
1981 $.25
1982 $.31
1983 $.39
1984 $.57
1985 $.87
1986 $1.02
1987 $1.09
1988 $1.25
1989 $1.29
1990 $1.37
1991 $1.29
1992 $1.55
1993 $1.72
1994 $1.89
1995 $1.94
1996 $2.15
1997 $2.40
On a fully diluted basis
(Adjusted for 3-for-2 stock split declared 12/97)
Overall loan growth was modest in 1997. We continued to experience
difficulty in procuring commercial mortgages during the year as new production
lagged payoffs in what is a mature portfolio. In recent years, competition for
these loans has increased markedly without a concomitant increase in the
availability of such loans. As was the case with most loans, the interest margin
on mortgages also continued to decline. Commercial loans, on the other hand,
experienced good growth on a year end to year end comparison. Residential
mortgages and outstandings in home equity lines of credit also increased at a
similarly good level. On the other hand there were declines in traditional
consumer installment loans and student loans, where in the latter case student
loans in a repayment status were sold.
In 1997 we began marketing construction financing to residential builders.
Although still in its embryonic stages, we were pleased by our beginning
success. So far our efforts in this area appear to be well received by potential
customers and we will continue to work on this new loan product in 1998. Despite
the sluggish new business results experienced in recent years, we will also
continue to strongly market commercial mortgages. In addition, we will continue
our solicitation of equity lines of credit and residential mortgages.
<PAGE>
As we approach the next millennium, we face many diverse opportunities and
challenges. As everyone is aware, the consolidation in the financial services
industry continues unabated. Banks continue to merge, get larger and close
branch offices. We believe that this opens significant windows of opportunity
for banks such as The First of Long Island. It is very difficult for the
megabanks to consistently offer the quality of service that is routinely
provided at all of our offices. This is particularly true for our principal
market: privately owned businesses, professionals and the more discerning
consumer. It is our intent to accelerate the opening of new branch offices,
especially commercial banking units, to take advantage of the opportunities
offered by these consolidations. We are moving our commercial banking office in
Rockville Centre into a new full service office, which move should be completed
by the time this report reaches you. We are actively looking to open commercial
banking offices in other areas. If we are successful in this acceleration, we
expect there will be a short term negative impact to earnings with an obviously
expectant longer term benefit.
GRAPH SHOWING CASH DIDVIDENDS DECLARED
CASH DIVIDENDS DECLARED PER SHARE
1980 $.03
1981 $.03
1982 $.05
1983 $.07
1984 $.08
1985 $.12
1986 $.15
1987 $.17
1988 $.19
1989 $.19
1990 $.23
1991 $.25
1992 $.28
1993 $.31
1994 $.34
1995 $.37
1996 $.43
1997 $.49
(Adjusted for 3-for-2 stock split declared 12/97)
A second opportunity and challenge that we will experience is more
difficult to project. Technology and the use of it is changing at a breathtaking
pace. It is important that we keep pace with these changes. The new technology
systems are more available to smaller and mid-sized banks than one might surmise
as there are a number of vendors providing them. However, all this has a price.
Over the next year or two, we expect to make significant changes to our branch
operating systems and possibly also to our back office data processing
department capabilities. Such changes are expensive and come at a time when the
systems they will replace will generally be fully depreciated. However, the
changes must be made. It is also important that we provide PC banking and
related services to our retail customers, in addition to those provided to our
commercial customers.
Coupled with the technological changes and influenced by them is a
different type of consolidation of financial services as brokerage houses,
banks, mutual funds and even insurance companies get into each other's business.
We will monitor this activity and continue to expand the breadth of services
conducted by our Trust and Investment Services Department. This department
offers superb investment services for traditional investment management, trust
and estate customers. It also sells mutual funds and annuities, which activities
will most likely be expanded and integrated more with the commercial side of the
Bank.
Although it is very difficult to predict the future, especially as it
relates to technology, we look forward to 1998 and the coming years with
excitement. We sincerely believe that The First of Long Island is a unique
company which is dedicated to excellence in all its areas of operation and has a
strong ability to provide an equally unique quality of service to privately
owned businesses, professionals and service conscious consumers.
GRAPH
RETURN ON AVERAGE ASSETS
1987 1.63%
1988 1.64%
1989 1.56%
1990 1.46%
1991 1.23%
1992 1.39%
1993 1.48%
1994 1.54%
1995 1.51%
1996 1.58%
1997 1.66%
/S/ J. WILLIAM JOHNSON
------------------------
J. William Johnson
Chairman and Chief Executive Officer
<PAGE>
MANAGEMENTS 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
1997 VERSUS 1996 SUMMARY. The Corporation earned $2.40 per share in 1997 on
an after split and fully diluted basis as compared to $2.15 in 1996, an increase
of over 11%. Based on 1997 net income of $7,626,000, the Corporation returned
1.66% on average total assets and 13.56% on average total equity, as compared to
returns of 1.58% and 13.45%, respectively, in 1996. Total assets and deposits
were $484,674,000 and $422,759,000, respectively, at December 31, 1997,
representing increases over prior year-end balances of approximately 10%.
Capital grew by $4,797,000, or nearly 9%, during 1997 and the Corporation's
capital ratios continue to substantially exceed the current regulatory criteria
for a well-capitalized bank. In addition, the Corporation's liquidity continues
to be strong.
The most significant reason for the positive results in 1997 is an increase
in average checking balances of $9,250,000. As in prior years, the Bank was
again able to use the growth of checking balances as a key strategy in
increasing earnings per share. Another factor that positively impacted 1997
results was total operating expenses, exclusive of personnel costs, remained
virtually level for the second consecutive year. Other contributing factors were
an 11% increase in service charge income and the growth of capital.
There was little overall loan growth in 1997. Commercial mortgages, which
continue to be the Bank's primary lending focus, declined slightly in 1997 as
new production lagged payoffs in what is a mature portfolio. In recent years the
demand for commercial mortgages in the Corporation's market area has not been
strong, and competition among financial institutions for such loans has
increased markedly. Intense competition has not only suppressed loan growth, but
has also contributed to the continued reduction in net interest margin on
commercial mortgages as well as the Bank's other loan products.
By contrast to commercial mortgages, other commercial loans grew again in
1997 with the year-end 1997 balance up by more than 10% when compared to 1996.
Residential mortgages and equity lines of credit also continued to grow in 1997,
while consumer loans declined. The decline in consumer loans is primarily
attributable to the bulk sale of student loans that were in repayment status.
The Bank's portfolio of tax-exempt securities grew by approximately 34% in
1997 as a result of management's efforts to take advantage of the favorable
returns afforded by longer-term, municipal securities. Savings and money market
deposits were up almost 9% when comparing year-end 1997 to 1996 primarily
because of the Bank's introduction of its "Select Savings" product, a statement
savings account that earns a higher money market rate.
1996 VERSUS 1995 SUMMARY. Net income for 1996 was $6,891,000, or $2.15 per
share on a diluted basis, as compared to $6,208,000, or $1.94 per share on a
diluted basis, for 1995. Return on average total assets and average
stockholders' equity were 1.58% and 13.45%, respectively, for 1996 as compared
to 1.51% and 13.52%, respectively, for 1995. When comparing 1996 to 1995, net
interest income increased by $975,000 ($1,029,000 on a tax-equivalent basis),
noninterest income increased by $251,000, and occupancy, equipment and other
operating expenses decreased by $126,000. The positive effect of these changes
was partially offset by increases in personnel costs and income tax expense of
$305,000 and $364,000, respectively.
The increase in net interest income is largely attributable to growth in
checking balances and stockholders' equity. The increase in noninterest income
is largely attributable to a revision of the Bank's service charge schedule
toward the end of 1995 and increased activity relative to deposit accounts. The
positive impact of these items was partially offset by securities losses of
$148,000. The increase in personnel costs is primarily attributable to normal
annual salary increases.
<PAGE>
The most significant reason for the decrease in occupancy, equipment and other
operating expenses was a reduction in FDIC insurance premiums from $401,000 in
1995 to $2,000 in 1996.
NET INTEREST INCOME
AVERAGE BALANCE SHEET; INTEREST RATES AND INTEREST DIFFERENTIAL. 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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995
------------------------------- ------------------------------ ------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------ ---------- ------ ---------- --------- ------- ---------- --------- -------
ASSETS: (DOLLARS IN THOUSANDS)
Federal funds sold
and commercial paper ............ $ 47,664 $ 2,580 5.41% $ 36,460 $ 1,923 5.27% $ 33,140 $ 1,927 5.81%
Investment securities:
Taxable ......................... 188,456 11,828 6.28 180,574 11,383 6.30 168,163 11,066 6.58
Nontaxable (1) .................. 46,897 3,264 6.96 41,763 2,917 6.98 40,238 2,868 7.13
Loans (1) (2) ..................... 153,733 13,862 9.02 150,090 13,407 8.93 143,677 13,147 9.15
------------ ---------- ------ ---------- --------- ------- ---------- --------- -------
Total interest-earning assets (1) . 436,750 31,534 7.22 408,887 29,630 7.24 385,218 29,008 7.53
---------- ------ --------- ------- --------- -------
Allowance for loan losses ......... (3,597) (3,606) (3,607)
------------ ---------- ---------
Net interest-earning assets........ 433,153 405,281 381,611
Cash and due from banks............ 16,214 19,853 19,297
Premises and equipment, net ....... 4,948 5,050 5,007
Other assets ...................... 6,236 6,475 5,802
------------ ---------- ---------
$ 460,551 $ 436,659 $ 411,717
============ ========== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Savings and money
market deposits ................. $ 229,639 7,309 3.18 $ 222,319 6,788 3.05 $ 213,250 7,171 3.36
Time deposits ..................... 39,671 1,888 4.76 36,940 1,704 4.61 35,416 1,728 4.88
------------ ---------- ------ ---------- --------- ------- --------- --------- -------
Total interest-bearing deposits ... 269,310 9,197 3.42 259,259 8,492 3.28 248,666 8,899 3.58
------------ ---------- ------ ---------- --------- ------- --------- --------- -------
Checking deposits (3) ............. 133,082 123,832 115,010
Other liabilities ................. 1,925 2,339 2,133
------------ ---------- ---------
404,317 385,430 365,809
Stockholders' equity .............. 56,234 51,229 45,908
------------ ---------- ---------
$ 460,551 $ 436,659 $411,717
============ ========== =========
Net interest income (1) ........... $ 22,337 $21,138 $ 20,109
========== ========= =========
Net interest spread (1) ........... 3.80% 3.96% 3.95%
====== ======== ======
Net interest yield (1)............. 5.11% 5.17% 5.22%
====== ======== ======
<FN>
(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
Bank'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 each year presented, 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.
</FN>
</TABLE>
<PAGE>
RATE/VOLUME ANALYSIS. The following table sets forth the effect of changes
in volume, changes in rates, and changes in rate/volume on tax-equivalent
interest income, interest expense and net interest income.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
------------------------------------------------------------------------------
1997 versus 1996 1996 versus 1995
Increase (decrease) due to changes in: Increase (decrease) due to changes in:
-------------------------------------- -------------------------------------
Rate/ Net Rate/ Net
Volume Rate Volume(2) Change Volume Rate Volume(2) Change
------- ------ -------- ------- ------ --------- -------- -------
(IN THOUSANDS)
INTEREST INCOME:
Federal funds sold .......................... $ 591 $ 51 $ 15 $ 657 $ 193 $ (179) $(18) $ (4)
Investment securities:
Taxable ..................................... 497 (50) (2) 445 817 (471) (29) 317
Nontaxable (1) .............................. 359 (10) (2) 347 109 (60) -- 49
Loans (1) ................................... 325 127 3 455 587 (316) (11) 260
------ ----- ---- ------ ------ ------- ---- -------
Total interest income ....................... 1,772 118 14 1,904 1,706 (1,026) (58) 622
------ ----- ---- ------ ------ ------- ---- -------
INTEREST EXPENSE:
Savings and money
market deposits ............................. 223 288 10 521 305 (661) (27) (383)
Time deposits ............................... 126 54 4 184 74 (96) (2) (24)
------ ----- ---- ------ ------ ------- ---- -------
Total interest expense ...................... 349 342 14 705 379 (757) (29) (407)
------ ----- ---- ------ ------ ------- ---- -------
Increase (decrease) in net
interest income ............................. $1,423 $(224) $-- $1,199 $1,327 $ (269) $(29) $ 1,029
====== ===== ==== ====== ====== ======= ==== =======
</TABLE>
(1) Tax-equivalent basis.
(2) Represents the change not solely attributable to change in rate or change
in volume but a combination of these two factors.
NET INTEREST INCOME - 1997 VERSUS 1996
Net interest income on a tax-equivalent basis increased by $1,199,000, or
5.7%, from $21,138,000 in 1996 to $22,337,000 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 and a 13 basis point
increase in the average rate paid on savings and money market deposits.
Net interest spread and yield decreased from 3.96% and 5.17%,
respectively, in 1996 to 3.80% and 5.11%, respectively, in 1997. It would appear
that the principal cause for the decreases is pressure on loan rates brought
about by competitive pricing.
INCREASE IN AVERAGE VOLUME OF INTEREST-EARNING ASSETS AND INTEREST-BEARING
DEPOSITS. Total average interest-earning assets increased by $27,863,000, or
6.8%, from $408,887,000 in 1996 to $436,750,000 in 1997. During the same time
period, total average interest-bearing deposits increased by $10,051,000, or
3.9%, from $259,259,000 to $269,310,000. The increase in interest-earning assets
caused interest earned to increase by approximately $1,772,000 while the
increase in interest-bearing liabilities caused interest paid to increase by
approximately $349,000, the combined effect of which resulted in an increase in
net interest income of $1,423,000.
The increase in interest-earning assets is comprised of increases in
federal funds sold of $11,204,000, or 30.7%, taxable investment securities of
$7,882,000, or 4.4%, nontaxable investment securities of $5,134,000, or 12.3%,
and loans of $3,643,000, or 2.4%. The significant increase in federal funds sold
is largely attributable to growth in money market type accounts and a reduction
in the Bank's short-term U.S. Treasury portfolio. Loan growth was less in 1997
than 1996 largely because of the bulk sale of student loans. In addition, there
was a slight decline in the commercial mortgage portfolio in 1997 as there had
been in 1996. Despite the decline, which management believes is primarily
attributable to reduced demand and increased competition in the local economy,
commercial mortgages continue to be the Bank's primary lending focus.
<PAGE>
The 1997 growth rate for average total investment securities of 5.9% was
similar to that experienced in 1996, but taxable investment securities grew at a
lesser rate (4.4% in 1997 versus 7.4% in 1996) and nontaxable securities grew at
an increased rate (12.3% in 1997 versus 3.8% in 1996). The changes in these
growth rates occurred because of management's efforts to increase the
longer-term, nontaxable portfolio in light of favorable returns in this sector.
While the increase of $27,863,000 in average total interest-earning assets
was partially funded by a $10,051,000 increase in average interest-bearing
deposits, the remainder was funded by increases in average checking deposits and
capital of $9,250,000 and $5,005,000, respectively, and a reduction in average
cash and due from banks of $3,639,000.
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
primarily attributable to the retention of net income, 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. The decrease
in average cash and due from banks is 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.
In 1997, commercial checking deposits accounted for approximately 25% of
total average deposits. Maintenance and growth of these deposits has
historically been the Corporation's most important strategy for maintaining and
increasing earnings per share. It should be noted that the Bank's future results
of operations could be negatively affected by competitive pressure in the
marketplace for businesses to earn interest on excess checking balances. In
addition, there is pending legislation before Congress known as The Small
Business Banking Act of 1997 which would allow banks and thrifts to pay interest
on corporate checking accounts, and proposed legislation which would allow
corporate customers to cover checks by withdrawing funds from interest-bearing
accounts each business day. The passage of the pending and/or proposed
legislation could have a material adverse effect on the Bank's future results of
operations.
INCREASE IN AVERAGE RATE PAID ON SAVINGS AND MONEY MARKET DEPOSITS. The
average rate paid on savings and money market accounts increased by 13 basis
points when comparing 1997 to the same period in 1996. This increase, which is
primarily attributable to increases in the rates paid by the Bank on its money
market products in response to market conditions, caused interest paid to
increase by approximately $288,000.
NET INTEREST INCOME - 1996 VERSUS 1995
Net interest income on a tax-equivalent basis increased by $1,029,000, or
5.1%, from $20,109,000 in 1995 to $21,138,000 in 1996. 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 and a 29 basis point
decrease in the yield on total interest-earning assets caused by a decrease in
general interest rates.
For assets funded by interest-bearing deposits, the 29 basis point
decrease in yield was accompanied by a similar but offsetting decrease of 30
basis points in the average cost of deposits. As a result, the net interest
spread in 1996 of 3.96% was virtually unchanged from the 3.95% experienced in
1995. However, for assets funded by noninterest-bearing deposits and capital,
the 29 basis point decrease in yield had no offsetting decrease in cost. As a
result, the net amount of interest earned on such assets was negatively impacted
and this is the primary cause of the decrease in net interest-yield from 5.22%
in 1995 to 5.17% in 1996.
INCREASE IN AVERAGE VOLUME OF INTEREST-EARNING ASSETS AND INTEREST-BEARING
DEPOSITS. Total average interest-earning assets increased by $23,669,000, or
6.1%, from $385,218,000 in 1995 to $408,887,000 in 1996. During the same time
period, total average interest-bearing deposits increased by $10,593,000, or
4.3%, from $248,666,000 to $259,259,000. The increase in interest-earning assets
caused interest earned to increase by approximately $1,706,000 while the
increase in interest-bearing deposits caused interest paid to increase by
approximately $379,000, the combined effect of which resulted in an increase in
net interest income of $1,327,000.
While the increase in interest-earning assets was partially funded by the
increase in interest-bearing deposits, the remainder was funded by increases in
average checking deposits and capital of $8,822,000 and $5,321,000,
respectively. 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 primarily attributable to the retention of net income, 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.
<PAGE>
When comparing 1996 to 1995, there was no significant change in the mix of
interest-earning assets or interest-bearing liabilities.
NONINTEREST INCOME, NONINTEREST EXPENSE, AND INCOME TAXES
Noninterest income consists primarily of service charges on deposit
accounts and Trust Department income. Noninterest income was $4,318,000 and
$3,906,000 in 1997 and 1996, respectively, representing increases over prior
year amounts of $412,000, or 10.5%, and $251,000, or 6.9%. The increase for 1997
is largely attributable to an increase in the volume of overdraft checks, a
revision of the Bank's service charge schedule effective July 1, 1997, and the
absence of securities losses in 1997 versus losses of $148,000 in 1996.
The increase in noninterest income for 1996 is largely attributable to a
revision of the Bank's service charge schedule toward the end of 1995 and
increased activity relative to deposit accounts. The positive impact of these
items was partially offset by the aforementioned securities losses. The
securities losses resulted from programs effectuated during 1996 whereby certain
securities were sold and others purchased in their place. The programs served to
realign maturities and will have a net positive effect on income over time, in
that the incremental interest income realized on the replacement securities will
exceed the losses realized on the securities sold.
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 was
$14,285,000 and $13,499,000 in 1997 and 1996, respectively, representing
increases over prior year amounts of $786,000, or 5.8%, and $179,000, or 1.3%.
The increase for 1997 is primarily attributable to increases in salaries and
employee benefits expense of $355,000 and $450,000, respectively. The increase
in salaries is primarily attributable to normal annual salary increases. The
largest component of the increase in employee benefits expense is an increase in
employee retirement plan expense of $196,000.
The increase in noninterest expense for 1996 is primarily attributable to
increases in salaries and occupancy and equipment expense of $256,000 and
$130,000, respectively, as partially offset by a decrease in other operating
expenses of $256,000. The increase in salaries is primarily attributable to
normal annual salary increases. The decrease in other operating expenses is
primarily attributable to a decrease in FDIC insurance premiums from $401,000 in
1995 to $2,000 in 1996. The premium decrease resulted from the fact that when
the FDIC Bank Insurance Fund reached its full-funded status in 1995, the
assessment rate for the Corporation was reduced from 23 cents per $100 of
deposits to 4 cents per $100. In addition, the Corporation's assessment was
further reduced in 1996 to the statutory minimum of $2,000 per annum.
In February 1998, the Bank established a full-service branch in Rockville
Centre, Nassau County, Long Island and simultaneously closed its Rockville
Centre commercial banking office. In addition, management is actively searching
for favorable locations at which to establish new branches, particularly of the
commercial banking unit configuration. In this regard, the Bank has received
approvals from the Office of the Comptroller of the Currency to open three
additional commercial banking offices and is currently negotiating leases for
these locations. Although the establishment of a full-service branch in
Rockville Centre and the opening of new branches is expected to positively
impact results of operations on a longer-term basis, the near-term impact will
be negative as a result of start-up expenses, increased marketing efforts, and
operating expenses incurred while a customer base is being built. Based on
available information, management does not expect the magnitude of the near-term
impact to be material to the Corporation's results of operations, financial
position, or liquidity.
The Bank plans to upgrade various equipment, particularly in its branch
system, to better service its customers and improve the efficiency of its
operations. Such upgrades are expected to be made in 1998 and 1999, and will
have a negative effect on results of operations as the new items replace ones
that are fully-depreciated. The magnitude of the impact is not expected to be
material to the Corporation's results of operations, financial position, or
liquidity.
Income tax expense as a percentage of book income was 32.7%, 34.4% and
34.3% in 1997, 1996 and 1995, respectively. The decrease in the percentage for
1997 is primarily attributable to refunds of federal and state income taxes
resulting from amending prior year tax returns.
<PAGE>
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses was $3,579,000 at December 31, 1997 as
compared to $3,600,000 at December 31, 1996, representing 2.3% and 2.4% of total
loans, respectively, and 8.3 times and 5.2 times the total of nonaccruing loans
and loans past due ninety days or more as to principal or interest payments and
still accruing, respectively. The change in the allowance during 1997 is due to
recoveries of $138,000, chargeoffs of $59,000 and a $100,000 credit in the
provision for loan losses.
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 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 deemed 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. Loans secured by real estate
represent 78.6% of total loans outstanding at December 31, 1997. Since 1987,
environmental audits have been instituted, and the scope of these audits has
been increased over the succeeding years. Under the Bank's current policy, an
environmental audit is required on practically all commercial-type properties
that are considered for a mortgage loan. In addition, the Bank continues to
monitor the possible effects of environmental contamination on the collateral
value of its commercial mortgage portfolio. At the present time, the Bank is not
aware of any existing loans in the portfolio where there is environmental
pollution originating on the mortgaged properties that would materially affect
the value of the portfolio.
ASSET QUALITY
The Company has identified certain assets as risk elements. 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 decreased from $709,000 at year-end
1996 to $437,000 at year-end 1997. The reduction is primarily due to the
resolution of several nonaccruing loans.
<TABLE>
<S> <C> <C>
1997 1996*
------- -------
(DOLLARS IN THOUSANDS)
Nonaccruing loans ............................................. $ 382 $ 659
Foreclosed real estate ........................................ -- --
------- -------
Total nonperforming assets .................................... 382 659
Troubled debt restructurings .................................. 6 19
Loans past due 90 days or more as to
principal or interest payments and still accruing ............. 49 31
------- -------
Total risk elements ........................................... $ 437 $ 709
======= =======
Nonaccruing loans as a percentage of total loans .............. .25% .43%
======= =======
Nonperforming assets as a percentage of total loans
and foreclosed real estate .................................... .25% .43%
======= =======
Risk elements as a percentage of total loans and
foreclosed real estate ........................................ .28% .46%
======= =======
<FN>
*Reclassified to conform with the current period's presentation
</FN>
</TABLE>
<PAGE>
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 33.54%, 32.28% and 12.24%, respectively, at December
31, 1997 substantially exceed the requirements for a well-capitalized bank.
Total stockholders' equity increased by $4,797,000, or 8.9%, from
$54,169,000 at December 31, 1996 to $58,966,000 at December 31, 1997. The
increase in stockholders' equity is attributable to the combined effect of net
income of $7,626,000, proceeds from the exercise of employee stock options of
$737,000, income tax benefits resulting from the exercise of certain employee
stock options of $253,000, repurchases of common stock amounting to $2,444,000,
cash dividends declared of $1,539,000, and unrealized gains on
available-for-sale securities of $164,000.
CASH FLOWS AND LIQUIDITY
CASH FLOWS. During 1997, total deposits increased by $38,398,000. This
increase, along with $7,211,000 in cash provided by operations and $737,000 in
proceeds from the exercise of stock options, were used to fund increases in
investment securities and loans of $24,001,000 and $1,969,000, respectively,
repurchases of common stock amounting to $2,444,000, cash dividends paid of
$1,419,000, capital expenditures of $521,000, and an increase in cash and cash
equivalents of $15,992,000.
As reflected in the accompanying consolidated balance sheet, the
$38,398,000 growth in deposits is comprised of increases in checking deposits
and total interest-bearing deposits of $19,688,000 and $18,710,000,
respectively.
The $1,969,000 increase in total loans during 1997 is primarily
attributable to increases in commercial and industrial loans and loans secured
by real estate of $2,341,000 and $838,000, respectively, as offset by a decrease
in consumer loans of $1,847,000. The increase in loans secured by real estate is
primarily attributable to an increase in loans secured by residential properties
of $4,430,000, as offset by a decrease in commercial mortgage loans of
$3,475,000. Loans secured by real estate have historically accounted for a major
portion of the loan portfolio and represent 78.6% of the total portfolio at
December 31, 1997. The decrease in consumer loans is primarily attributable to
the bulk sale of student loans. Management currently expects to make other sales
in the future as student loans enter repayment status.
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
December 31, 1997, the Corporation had $60,500,000 in federal funds sales, a
short-term securities portfolio of $13,528,000, and available-for-sale
securities of $56,844,000.
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 91.2% of total deposits at December 31, 1997, with
checking accounting for 33.8% and savings and money market accounting for 57.4%.
The remaining 8.8% of the Bank's deposit base at December 31, 1997 was comprised
of time deposits of $100,000 and over and other time deposits, with the $100,000
and over component accounting for 2.5% and the other time deposit component
accounting for 6.3%.
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.
MARKET RISK
The Bank originates and invests in interest-earning assets and solicits
interest-bearing deposit accounts. The operations of the Bank are subject to
risk resulting from interest rate fluctuations to the extent that there is a
difference between the amount of the Bank's interest-earning assets and the
amount of interest-bearing liabilities that are prepaid/withdrawn, mature or
reprice in specified time periods. The Bank defines interest rate risk as the
risk that the Bank's earnings and/or net portfolio value (defined below) will
change when interest rates change. The principal objective of the Bank's
asset/liability management activities is to provide maximum levels of net
interest income while maintaining acceptable levels of interest rate and
liquidity risk and facilitating the funding needs of the Bank.
<PAGE>
The Bank monitors and controls interest rate risk through a variety of
techniques including use of an interest rate sensitivity model and traditional
interest rate sensitivity gap analysis. Through use of the model, the Bank
projects future net interest income and then estimates the effect on projected
net interest income of various changes in interest rates and balance sheet
growth rates. The Bank has also begun to use the model to calculate the change
in net portfolio value ("NPV") over a range of interest rate change scenarios.
Net portfolio value is the present value of expected future cash flows from
assets less the present value of expected cash flows from liabilities.
Traditional gap analysis involves arranging the Bank's interest-earning assets
and interest-bearing liabilities by repricing periods and then computing the
difference, or interest-rate sensitivity gap, between the assets and liabilities
which are estimated to reprice during each time period and cumulatively through
the end of each time period.
Both interest rate sensitivity modeling and gap analysis involve a variety
of significant estimates and assumptions and are done at a specific point in
time. Interest rate sensitivity modeling requires, among other things, estimates
of: (1) how much and when yields and costs on individual categories of
interest-earning assets and interest-bearing liabilities will respond to general
changes in market interest rates; (2) future cash flows; and (3) discount rates.
Gap analysis requires estimates as to when individual categories of
interest sensitive assets and liabilities will reprice and assumes that assets
and liabilities assigned to the same repricing period will reprice at the same
time and in the same amount. Like sensitivity modeling, gap analysis does not
take into account the fact that the repricing of some assets and liabilities is
discretionary and subject to competitive and other pressures.
Changes in the estimates and assumptions made for interest rate sensitivity
modeling and gap analysis could have a significant impact on projected results
and conclusions. Therefore, these techniques may not accurately reflect the
impact of general interest rate movements on the Bank's net interest income or
net portfolio value.
The base case information in the following table shows an estimate of the
Corporation's NPV at December 31, 1997 using current discount rates, and an
estimate of net interest income for 1998 assuming that both interest rates and
the Bank's interest sensitive assets and liabilities remain at December 31, 1997
levels. The rate shock information in the table shows estimates of NPV at
December 31, 1997 and net interest income for 1998 assuming rate shocks of plus
100 and 200 basis points and minus 100 and 200 basis points. Rate shocks assume
that current interest rates change immediately and that a particular change in
interest rates is reflected uniformly across the yield curve regardless of the
duration to maturity or repricing of specific assets and liabilities. The
information set forth in the following table is based on significant estimates
and assumptions, and constitutes a "forward looking statement" within the
meaning of that term as set forth in Rule 175 of the Securities Act of 1933 and
Rule 3b-6 of the Securities Act of 1934.
<TABLE>
<S> <C> <C> <C> <C>
Net Portfolio Value Net Interest Income
at December 31, 1997 for 1998*
- --------------------------------------------------- --------------------- -------------------------
Percent Percent
Change Change
From From
Rate Scenario Amount Base Case Amount Base Case
- --------------------------------------------------- --------------------- -------------------------
(DOLLARS IN THOUSANDS)
+ 200 basis point rate shock $ 42,903 (30.4)% $ 20,208 (9.8)%
- --------------------------------------------------- --------------------- -------------------------
+ 100 basis point rate shock 52,015 (15.6) 21,303 (4.9)
- --------------------------------------------------- --------------------- -------------------------
Base case 61,631 - 22,398 -
- --------------------------------------------------- --------------------- -------------------------
- - 100 basis point rate shock 71,791 16.5 23,493 4.9
- --------------------------------------------------- --------------------- -------------------------
- - 200 basis point rate shock 82,532 33.9 24,476 9.3
- --------------------------------------------------- --------------------- -------------------------
</TABLE>
* Based on the foregoing assumptions and as depicted in the table above, a
shock and sustained increase in interest rates has an adverse effect on net
interest over a one year time period. This is principally because the
Bank's interest-bearing deposit accounts reprice faster than its loans and
investment securities. Over a longer period of time, and assuming that
interest rates remain stable after the initial shock, the impact should be
positive because a significant portion of the Bank's loans and investment
securities will have repriced at the higher rates and because of increased
earnings on those interest-earning assets funded by the Bank's significant
base of noninterest-bearing checking accounts and capital. The opposite
should be true of a shock and sustained decrease in interest rates.
<PAGE>
The following table summarizes the Corporation's cumulative interest rate
sensitivity gap at December 31, 1997 based upon significant estimates and
assumptions that the Corporation believes to be reasonable.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Repricing Date
- -----------------------------------------------------------------------------------------------------------------------------------
Over Over Over
Three Six One Year
Three Months Months Total Through Over Non-
Months Through Through Within Five Five interest-
or Less Six Months One Year One Year Years Years Sensitive Total
- -----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
ASSETS:
Federal funds sold .............. $ 60,500 $ -- $ -- $ 60,500 $ -- $ -- $ -- $ 60,500
Investment securities ........... 11,966 19,279 19,962 51,207 159,464 35,831 919 247,421
Loans ........................... 59,431 17,195 34,386 111,012 32,485 9,750 (2,096) 151,151
Other assets .................... -- -- -- -- -- -- 25,602 25,602
--------- -------- --------- --------- -------- -------- --------- --------
131,897 36,474 54,348 222,719 191,949 45,581 24,425 484,674
--------- -------- --------- --------- -------- -------- --------- --------
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Checking deposits ............... -- -- -- -- -- -- 142,848 142,848
Savings and money market deposits 175,969 5,641 9,531 191,141 20,013 31,425 -- 242,579
Time deposits ................... 16,620 10,502 6,631 33,753 3,259 320 -- 37,332
Other liabilities ............... -- -- -- -- -- -- 2,949 2,949
Stockholders' equity ............ -- -- -- -- -- -- 58,966 58,966
--------- -------- --------- --------- -------- -------- --------- --------
192,589 16,143 16,162 224,894 23,272 31,745 204,763 484,674
--------- -------- --------- --------- -------- -------- --------- --------
Interest-rate sensitivity gap ... $ (60,692) $ 20,331 $ 38,186 $ (2,175) $168,677 $ 13,836 $(180,338) $ --
========= ======== ========= ========= ======== ======== ========= ========
Cumulative interest-rate
sensitivity gap ................. $ (60,692) $(40,361) $ (2,175) $ (2,175) $166,502 $180,338 $ -- $ --
========= ======== ========= ========= ======== ======== ========= ========
</TABLE>
YEAR 2000
The Bank has established formal processes for identifying and assessing
the impact of the Year 2000 on its software vendors, hardware providers and bank
activities. A significant portion of the Bank's data processing activities are
performed by outside vendors, and, as such, the Bank is highly dependent on such
vendors to adequately address the Year 2000 problem on a timely basis. Although
the Bank currently believes that each of the vendors with which it will have an
ongoing relationship will properly address the Year 2000 issue on a timely
basis, failure of one or more significant vendors to do so could have a
significant adverse effect on the operations of the Bank. Based on current
information, management does not expect the cost of Year 2000 compliance to have
a significant impact on the Corporation's future results of operations,
financial condition, or liquidity.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Corporation adopted Statement of Financial Accounting
Standards No. 128 "Earnings per Share" and Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income."
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997.
Management does not currently anticipate that SFAS No. 131 will have a
significant impact on the disclosures the Corporation makes in its interim and
annual financial statements.
<PAGE>
REGULATORY MATTERS
An FDIC-insured depository institution with assets of $500 million or
more as of the end of its most recent fiscal year must meet the annual audit and
management reporting requirements of section 112 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") and related
implementing regulations. Among other things, the institution's annual report
must include a report from management that contains the following information:
(1) a statement of management's responsibilities for preparing financial
statements, establishing and maintaining an adequate internal control structure
for financial reporting, and complying with designated safety and soundness laws
in the areas of insider loans and dividend restrictions; (2) assessments by
management regarding the effectiveness of the institution's internal control
structure and fiscal year end reporting procedures and the institution's
compliance with the designated laws and regulations during the fiscal year; and,
(3) an attestation report by the institution's independent public accountants on
management's assertions regarding the effectiveness of the internal control
structure and procedures for financial reporting.
Total assets of the Bank at December 31, 1997 are $484,674,000.
Management currently estimates that the total assets of the Bank will be in
excess of $500 million by December 31, 1998 and, as a result, the Bank's 1999
annual report must comply with the requirements of Section 112 of FDICIA.
Management believes that the cost of compliance will not have a material adverse
impact on the Corporation's future results of operations, financial condition,
or liquidity.
The subsidiary Bank was examined by the Office of the Comptroller of the
Currency in the third quarter of 1997. The examination included safety and
soundness, business information systems, and consumer compliance/Community
Reinvestment Act reviews. Management is not aware, nor has it been apprised, of
any recommendations by regulatory authorities that if they were implemented
would have a material effect on the Corporation's liquidity, capital resources,
or operations.
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of The First of Long Island Corporation is responsible
for the preparation of the financial statements, related financial data and
other information in this annual report. The financial statements are prepared
in accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgment where appropriate. Financial
information appearing throughout this annual report is consistent with the
financial statements.
In meeting its responsibility both for the reliability and integrity of
these statements and information, management depends on its accounting system
and related internal control structures. These systems and controls have been
designed to provide reasonable assurances that assets are safeguarded and that
transactions are authorized and recorded in accordance with established
procedures and that reliable records are maintained. As an integral part of the
internal control structure, the Corporation maintains a professional staff of
internal auditors who monitor compliance with and assess the effectiveness of
the internal control structure and coordinate audit coverage with the
independent auditors.
The Corporation's Examining Committee of the Board of Directors,
composed solely of outside directors, meets regularly with the Corporation's
management, internal auditors, independent auditors and regulatory examiners to
review matters relating to financial reporting, internal control structure and
the nature, extent and results of the audit effort. The independent auditors,
internal auditors and banking regulators have direct access to the Examining
Committee with or without management present.
The financial statements for each of the three years in the period ended
December 31, 1997, have been audited by Arthur Andersen LLP, independent public
accountants, who render an independent professional opinion on management's
financial statements. Their appointment was approved by the Board of Directors.
The examinations provide an objective assessment of the degree to which the
Corporation's management meets its responsibility for financial reporting. Their
opinions on the financial statements are based on auditing procedures which
include reviewing internal control structures and performing selected tests of
transactions and records as deemed appropriate. These auditing procedures are
designed to provide a reasonable level of assurance that the financial
statements are fairly presented in all material respects.
<PAGE>
CELEBRATING 70 YEARS
This new plan allows terms of up to 24 months on new cars and makes a
feature of low cost insurance.
INSTALLED STATE-OF-THE-ART TELLER MACHINES TO IMPROVE SERVICE
IN JUNE OF 1948, NEW TELLER MACHINES WERE INSTALLED TO PROVIDE MORE RAPID
SERVICE FOR DEPOSITORS. THE JUNE 10TH EDITION OF THE GLEN COVE RECORD PRINTED
THE FOLLOWING STORY.
The First National Bank of Glen Head in line with its policy of offering its
depositors the most modern and convenient banking service, announces the
installation of new, rapid teller machines for their checking account deposits.
"There's nothing new for the depositor to do", according to Mr. Robert S.
Miller, Executive Vice President. Customers will continue to make their deposits
as they always have. This new machine affects only the internal operation at the
windows. Tellers will no longer need to make the time consuming pen and ink
entry in the passbook, but instead will issue a machine printed receipt which is
an exact transcript of the bank's records. Depositors will be given a small
wallet in which to keep their receipts until they have been verified against
their regular bank statement, after which the receipts may be discarded.
The machine's registry number on the receipt verifies the fact that the
deposit was actually received by the bank. Greater privacy will be enjoyed since
the depositor's name does not appear on the receipt. It can only be identified
by the bank's registry number whereas a lost passbook would reveal to the finder
a complete record of all deposits since the book was issued. The time saving
feature and the clarity of records make this new banking procedure a welcome
innovation.
4TH WAR LOAN DRIVE
The First National Bank of Glen Head
was one of the issuing agencies in the
1944 Fourth War Loan campaign.
Expansion - The Middle Years
OVER THE NEXT THREE DECADES, THE BANK EXPANDS ITS BRANCH NETWORK, BROADENS
THE ARRAY OF SERVICES IT OFFERS TO CUSTOMERS AND PURSUES ITS COMMITMENT TO
PROVIDE CUSTOMERS WITH UP-TO-DATE TECHNOLOGY.
BANK EXPANDS INTO OTHER COMMUNITIES
The second branch of The First National Bank of Glen Head opened on December
1, 1956 in Roslyn Heights, followed in later years by Greenvale, Northport, Old
Brookville and Woodbury.
IN-HOUSE COMPUTERIZED DATA PROCESSING CENTER FORMED
In April 1966, the Bank computerized its in-house data processing with the
purchase of a Burroughs 270 computer to process checks and deposits. The new
computer center was located at the Roslyn Heights branch.
FIRST CLASS BANKING - A PREMIERE PACKAGE
Long before "combo" accounts gained broad popularity, there was First Class
Banking -- The First of Long Island's premiere checking package. Since its
establishment in the 1970s, it continues to be a most attractive package
offering a great value . . . no per check fees, no monthly maintenance fee, free
standard personalized checks, free VISA(R) Classic card with no annual fee and
more.
NAME CHANGE
The First National Bank of Glen Head officially changed its name to The First
National Bank of Long Island on July 1, 1978. The new name more accurately
reflects the Bank's expansion into other Long Island communities.
Continued on page 38
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
December 31,
------------------------------
1997 1996
------------- -------------
ASSETS:
Cash and due from banks .................................................... $ 13,343,000 $ 19,351,000
Federal funds sold ......................................................... 60,500,000 38,500,000
------------- -------------
Cash and cash equivalents ................................................ 73,843,000 57,851,000
------------- -------------
Investment securities:
Held-to-maturity, at amortized cost (approximate fair
value of $192,357,000 and $142,095,000) .............................. 190,577,000 141,850,000
Available-for-sale, at fair value (amortized cost
of $56,052,000 and $79,964,000) ...................................... 56,844,000 80,417,000
------------- -------------
247,421,000 222,267,000
------------- -------------
Loans:
Commercial and industrial ............................................... 25,686,000 23,345,000
Secured by real estate .................................................. 121,620,000 120,782,000
Consumer ................................................................ 7,152,000 8,999,000
Other ................................................................... 1,101,000 396,000
------------- -------------
155,559,000 153,522,000
Unearned income ........................................................ (829,000) (840,000)
------------- -------------
154,730,000 152,682,000
Allowance for loan losses .............................................. (3,579,000) (3,600,000)
------------- -------------
151,151,000 149,082,000
------------- -------------
Bank premises and equipment ................................................ 5,037,000 5,044,000
Prepaid income taxes ....................................................... -- 1,000
Deferred income tax benefits ............................................... 785,000 897,000
Other assets ............................................................... 6,437,000 5,761,000
------------- -------------
$ 484,674,000 $ 440,903,000
============= =============
LIABILITIES:
Deposits:
Checking ................................................................ $ 142,848,000 $ 123,160,000
Savings and money market ................................................ 242,579,000 222,892,000
Time, other ............................................................. 26,726,000 26,509,000
Time, $100,000 and over ................................................. 10,606,000 11,800,000
------------- -------------
422,759,000 384,361,000
Accrued expenses and other liabilities ..................................... 2,764,000 2,373,000
Income taxes payable ....................................................... 185,000 --
------------- -------------
425,708,000 386,734,000
------------- -------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share:
Authorized, 20,000,000 shares;
Issued and outstanding, 3,113,061 and 2,088,784 shares ................. 311,000 209,000
Surplus .................................................................... 5,471,000 6,924,000
Retained earnings .......................................................... 52,717,000 46,733,000
------------- -------------
58,499,000 53,866,000
Accumulated other comprehensive income, net of tax ......................... 467,000 303,000
------------- -------------
58,966,000 54,169,000
------------- -------------
$ 484,674,000 $ 440,903,000
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
------------ ------------ -----------
INTEREST INCOME:
Loans .............................................................. $ 13,839,000 $ 13,354,000 $13,132,000
Investment securities:
Taxable ........................................................ 11,828,000 11,383,000 11,066,000
Nontaxable ..................................................... 2,154,000 1,925,000 1,892,000
Federal funds sold ................................................. 2,580,000 1,923,000 1,927,000
------------ ------------ -----------
30,401,000 28,585,000 28,017,000
------------ ------------ -----------
INTEREST EXPENSE:
Savings and money market deposits .................................. 7,309,000 6,788,000 7,171,000
Time deposits ...................................................... 1,888,000 1,704,000 1,728,000
------------ ------------ -----------
9,197,000 8,492,000 8,899,000
------------ ------------ -----------
Net interest income ............................................ 21,204,000 20,093,000 19,118,000
Provision for loan losses (credit) ..................................... (100,000) -- --
------------ ------------ -----------
Net interest income after provision for loan losses (credit) ........... 21,304,000 20,093,000 19,118,000
------------ ------------ -----------
NONINTEREST INCOME:
Trust Department income ............................................ 1,198,000 1,213,000 1,127,000
Service charges on deposit accounts ................................ 2,674,000 2,407,000 2,016,000
Realized gains (losses) on sales of available-for-sale securities... -- (148,000) 4,000
Other .............................................................. 446,000 434,000 508,000
------------ ------------ -----------
4,318,000 3,906,000 3,655,000
------------ ------------ -----------
NONINTEREST EXPENSE:
Salaries ........................................................... 6,649,000 6,294,000 6,038,000
Employee benefits .................................................. 2,732,000 2,282,000 2,233,000
Occupancy and equipment expense .................................... 1,780,000 1,863,000 1,733,000
Other operating expenses ........................................... 3,124,000 3,060,000 3,316,000
------------ ------------ -----------
14,285,000 13,499,000 13,320,000
------------ ------------ -----------
Income before income taxes ..................................... 11,337,000 10,500,000 9,453,000
Income tax expense ..................................................... 3,711,000 3,609,000 3,245,000
------------ ------------ -----------
NET INCOME ..................................................... $ 7,626,000 $ 6,891,000 $ 6,208,000
============ ============ ===========
WEIGHTED AVERAGE:
Common shares ...................................................... 3,117,530 3,139,293 3,146,063
Dilutive stock options ............................................. 64,044 60,372 50,122
------------ ------------ -----------
3,181,574 3,199,665 3,196,185
============ ============ ===========
EARNINGS PER SHARE:
Basic .............................................................. $ 2.45 $ 2.20 $ 1.97
============ ============ ===========
Diluted ............................................................ $ 2.40 $ 2.15 $ 1.94
============ ============ ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLSERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Other
Common Stock Compre- Compre-
---------------------- hensive Retained hensive
Shares Amount Surplus Income Earnings Income Total
---------- --------- ----------- ----------- ------------ ------------ ------------
Balance, January 1, 1995 1,400,384 $ 140,000 $ 7,620,000 $ 36,214,000 $ (1,366,000) $ 42,608,000
Net Income ................... $ 6,208,000 6,208,000 6,208,000
Repurchase and retirement
of common stock .............. (10,000) (1,000) (420,000) (421,000)
Exercise of stock options .... 7,261 1,000 166,000 167,000
Unrealized gains on available-
for-sale-securities, net of
tax of $962,000 .............. 1,951,000 1,951,000 1,951,000
-----------
Comprehensive income ......... $ 8,159,000
===========
3-for-2 stock split .......... 698,822 70,000 (70,000)
Cash dividends declared -
$.37 per share ............... (1,173,000) (1,173,000)
--------- --------- ----------- ----------- ------------ ------------ ------------
Balance, December 31, 1995 ... 2,096,467 210,000 7,366,000 41,179,000 585,000 49,340,000
Net Income ................... $ 6,891,000 6,891,000 6,891,000
Repurchase and retirement
of common stock .............. (22,327) (2,000) (728,000) (730,000)
Exercise of stock options .... 14,644 1,000 286,000 287,000
Unrealized losses on available
for-sale-securities, net of
tax of $139,000 .............. (282,000) (282,000) (282,000)
-----------
Comprehensive income ......... $ 6,609,000
===========
Cash dividends declared -
$.43 per share ............... (1,337,000) (1,337,000)
--------- --------- ----------- ----------- ------------ ------------ ------------
Balance, December 31, 1996 ... 2,088,784 209,000 6,924,000 46,733,000 303,000 54,169,000
Net Income ................... $ 7,626,000 7,626,000 7,626,000
Repurchase and retirement
of common stock .............. (53,059) (5,000) (2,439,000) (2,444,000)
Exercise of stock options .... 39,649 4,000 733,000 737,000
Unrealized gains on available-
for-sale-securities, net of
tax of $175,000 .............. 164,000 164,000 164,000
-----------
Comprehensive income ......... $ 7,790,000
===========
3-for-2 stock split .......... 1,037,687 103,000 (103,000)
Cash dividends declared -
$.49 per share ............... (1,539,000) (1,539,000)
Tax benefit of stock options . 253,000 253,000
--------- --------- ----------- ------------ ------------ ------------
Balance, December 31, 1997 ... 3,113,061 $ 311,000 $ 5,471,000 $ 52,717,000 $ 467,000 $ 58,966,000
========= ========= =========== ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
CONDOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
--------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------ ------------
Net income ............................................................ $ 7,626,000 $ 6,891,000 $ 6,208,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (credit) .................................... (100,000) -- --
Deferred income tax provision (credit) ................................ (63,000) 135,000 (5,000)
Depreciation and amortization ......................................... 528,000 547,000 536,000
Premium amortization (discount accretion) on investment securities, net (814,000) (1,314,000) (1,639,000)
Gain on sale of equipment ............................................. -- (1,000) --
Net realized losses (gains) on sales of available-for-sale securities . -- 148,000 (4,000)
Decrease (increase) in prepaid income taxes ........................... 1,000 (1,000) --
Decrease (increase) in other assets ................................... (676,000) 115,000 744,000
Increase in accrued expenses and other liabilities .................... 271,000 108,000 157,000
Increase (decrease) in income taxes payable ........................... 438,000 (189,000) 232,000
------------ ----------- ------------
Net cash provided by operating activities ............................. 7,211,000 6,439,000 6,229,000
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available-for-sale securities .................. -- 8,589,000 265,000
Proceeds from maturities and redemptions of investment securities:
Held-to-maturity ...................................................... 51,565,000 60,713,000 65,995,000
Available-for-sale .................................................... 6,443,000 7,965,000 8,015,000
Purchase of investment securities:
Held-to-maturity ...................................................... (70,360,000) (41,267,000) (56,671,000)
Available-for-sale .................................................... (11,649,000) (40,288,000) (19,689,000)
Net increase in loans to customers .................................... (1,969,000) (6,807,000) (2,261,000)
Purchases of bank premises and equipment .............................. (521,000) (506,000) (667,000)
Proceeds from sale of equipment ....................................... -- 9,000 --
------------ ----------- ------------
Net cash used in investing activities ................................. (26,491,000) (11,592,000) (5,013,000)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in total deposits ........................................ 38,398,000 10,406,000 22,428,000
Proceeds from exercise of stock options ............................... 737,000 287,000 167,000
Repurchase and retirement of common stock ............................. (2,444,000) (730,000) (421,000)
Cash dividends paid ................................................... (1,419,000) (1,243,000) (1,119,000)
------------ ----------- ------------
Net cash provided by financing activities ............................. 35,272,000 8,720,000 21,055,000
------------ ----------- ------------
Net increase in cash and cash equivalents ............................. 15,992,000 3,567,000 22,271,000
Cash and cash equivalents, beginning of year .......................... 57,851,000 54,284,000 32,013,000
------------ ----------- ------------
Cash and cash equivalents, end of year ................................ $ 73,843,000 $ 57,851,000 $ 54,284,000
============ =========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH:
INVESTING ACTIVITIES
Unrealized gains (losses) on available-for-sale securities ............ $ 339,000 $ (421,000) $ 2,913,000
Transfer of available-for-sale securities to held-to-maturity category 28,886,000 -- --
FINANCING ACTIVITIES
Tax benefit from exercise of employee stock options ................... 253,000 -- --
Cash dividends payable ................................................ 830,000 710,000 616,000
The Corporation made interest payments of $9,158,000, $8,476,000, and
$8,879,000 and income tax payments of $3,335,000, $3,664,000, and $3,037,000 in
1997, 1996 and 1995, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of The First of
Long Island Corporation (the "Corporation") and its wholly-owned subsidiary, The
First National Bank of Long Island (the "Bank"). The Corporation's financial
condition and operating results principally reflect those of the Bank. All
intercompany balances and amounts have been eliminated. In preparing the
consolidated financial statements, management is required to make estimates and
assumptions that affect the reported asset and liability balances and revenue
and expense amounts. Actual results could differ significantly from those
estimates.
The accounting and reporting policies of the Corporation reflect banking
industry practice and conform to generally accepted accounting principles. The
following is a summary of the significant accounting policies.
INVESTMENT SECURITIES
Current accounting standards require that investment securities be
classified as either held-to-maturity, trading, or available-for-sale. The
trading category is not applicable to any securities in the Bank's portfolio
because the Bank does not buy or hold debt or equity securities principally for
the purpose of selling in the near term. Held-to-maturity securities are those
debt securities which the Bank has the intent and ability to hold to maturity,
and are reported at amortized cost. Available-for-sale securities are those debt
and equity securities which are neither held-to-maturity securities nor trading
securities and are reported at fair value, with unrealized gains and losses, net
of the related income tax effect, included in accumulated other comprehensive
income.
Realized gains and losses on the sale of available-for-sale securities are
determined using the specific identification method.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal, net of unearned
discounts, nonrefundable loan origination fees, and an allowance for loan
losses. Interest on loans is credited to income based on the principal amount
outstanding. Unearned discounts are recognized as income over the terms of the
loans by the interest method. Nonrefundable loan origination fees are deferred
and amortized as yield adjustments over the lives of the related loans. The
incremental direct costs of originating such loans are charged to expense as
incurred, as the effect of deferral and amortization would be immaterial.
The accrual of interest income is generally discontinued when a loan
becomes 90 days past due as to principal or interest. When interest accruals are
discontinued, interest credited to income in the current year is reversed, and
interest accrued in the prior year is charged to the allowance for loan losses.
All of the Bank's nonaccruing loans are considered impaired under Statement of
Financial Accounting Standards No. 114 "Accounting by Creditors for Impairment
of a Loan" ("SFAS No. 114"). In accordance with SFAS No. 114, a valuation
allowance is established on impaired loans to reflect the difference, if any,
between the face amount of the loan and the present value of expected future
cash flows discounted at the loan's effective interest rate, or as a practical
expedient, at the loan's observable market price or the fair value of the
collateral. The valuation allowance is reported within the overall allowance for
loan losses.
The allowance for loan losses is established through provisions for loan
losses charged against income. Amounts deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance.
The allowance for loan losses represents the amount which management
believes is adequate to provide for possible future losses on existing loans.
While management uses available information to estimate possible loan losses,
the allowance may have to be increased in future years because of changed
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies can require the Bank to recognize additions to the
allowance based on their judgments of information available to them at the time
of their examination.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost, less accumulated
depreciation and amortization. Depreciation and amortization are computed by the
straight-line method for assets acquired prior to 1987 and the 150% declining
balance method for assets acquired thereafter. Buildings and furniture and
equipment are depreciated over their estimated useful lives. Building
improvements are depreciated over the remaining lives of the buildings, and
leasehold improvements are
<PAGE>
amortized over the remaining lives of the leases or their estimated useful
lives, whichever is shorter. The estimated useful lives range from five to fifty
years for buildings and building improvements and three to seven years for
furniture and equipment. The lives of the respective leases range from five to
fifteen years.
CHECKING DEPOSITS
Each of the Bank's commercial checking accounts has a related
noninterest-bearing sweep account. The sole purpose of the sweep accounts is to
reduce the noninterest-bearing reserve balances that the Bank is required to
maintain with the Federal Reserve Bank, and thereby increase funds available for
investment. Although the sweep accounts are classified as savings accounts for
regulatory purposes, they are included in checking deposits in the accompanying
consolidated balance sheets.
INCOME TAXES
A current tax liability or asset is recognized for the estimated taxes
payable or refundable on tax returns for the current year. A deferred tax
liability or asset is recognized for the estimated future tax effects
attributable to temporary differences and carryforwards. The measurement of
deferred tax assets is reduced, if necessary, by the amount of any tax benefits
that, based on available evidence, are not expected to be realized. The
measurement of current and deferred tax liabilities and assets is based on
provisions of the enacted tax law. The effects of future changes in tax laws or
rates are not anticipated.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions are used by the Corporation in
estimating fair values of financial instruments as disclosed herein:
CASH AND CASH EQUIVALENTS. The carrying amount of cash and cash equivalents
is a reasonable estimate of fair value.
INVESTMENT SECURITIES. For investment securities, fair values are based on
quoted market prices.
LOANS. Fair values are estimated for portfolios of loans with similar
financial characteristics. The total loan portfolio is first divided into
adjustable and fixed rate interest terms. Adjustable rate loans are then divided
into those that can reprice immediately with changes in interest rates and those
that are subject to repricing over time. Adjustable rate loans that reprice over
time and fixed rate loans are further segmented by type such as residential
mortgages, home equity loans, consumer installment loans, student loans,
commercial mortgages, time loans, and commercial installment loans.
For adjustable rate loans that are subject to immediate repricing, the
carrying amount less a credit risk adjustment based on internal loan
classifications is a reasonable estimate of fair value. For other adjustable
rate loans and fixed rate loans, fair value is calculated by discounting
anticipated future repricing amounts or cash flows using discount rates
equivalent to the rates at which the Bank would currently make loans which are
similar with regard to collateral, maturity, and the type of borrower. The
discounted value of the repricing amounts and cash flows is reduced by a credit
risk adjustment based on internal loan classifications.
DEPOSIT LIABILITIES. The fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits, money market accounts, and savings
accounts is equal to the amount payable on demand as of December 31 of each
year. Time deposits are segregated by type, size, and remaining maturity. The
fair value of time deposits is based on the discounted value of contractual cash
flows. The discount rate is equivalent to the rate currently offered by the Bank
for deposits of similar size, type and maturity.
ACCRUED INTEREST RECEIVABLE AND PAYABLE. For these short-term instruments,
the carrying amount is a reasonable estimate of fair value.
OFF-BALANCE-SHEET ASSETS AND LIABILITIES. The fair value of
off-balance-sheet commitments to extend credit and letters of credit is
estimated using fees currently charged to enter into similar agreements.
STOCKHOLDERS' EQUITY
EARNINGS PER SHARE. The Corporation adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128") in the fourth
quarter of 1997. All comparative earnings per share data provided for earlier
periods have been restated to conform to the provisions of this Statement.
<PAGE>
Basic earnings per share excludes dilution and is computed by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted earnings per share, which reflects the potential dilution that
could occur if outstanding stock options were exercised and resulted in the
issuance of common stock that then shared in the earnings of the Corporation, is
computed by dividing net income by the weighted average number of common shares
and dilutive stock options. Other than stock options, the Corporation has no
securities that could be converted into common stock nor does the Corporation
have any contracts that could result in the issuance of common stock.
STOCK SPLIT. On December 17, 1997, the Corporation declared a 3-for-2 stock
split to be paid on February 2, 1998 by means of a 50% stock dividend. The
effect of the split on the equity accounts of the Corporation has been estimated
and recorded in the consolidated financial statements as of and for the year
ended December 31, 1997. In addition, all share and per share amounts included
in the consolidated financial statements and notes thereto have been adjusted to
reflect the effect of the split.
STOCK REPURCHASE PROGRAMS. Since 1988, the Corporation has had stock
repurchase programs under which it can purchase shares of its own common stock
in market or private transactions. As of December 31, 1997, and in accordance
with prior approval by its Board of Directors, the Corporation could purchase
27,278 shares of stock under the latest programs.
Under the normal terms and conditions of the Corporation's stock repurchase
programs, and after approval by the Corporation's full Board of Directors, the
Corporation purchased 15,627 shares of common stock from its Chairman and Chief
Executive Officer for $656,334.
COMPREHENSIVE INCOME
The Corporation adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("SFAS No. 130") in 1997. All comparative
financial statements provided for earlier periods have been reclassified to
reflect application of the provisions of this Statement.
Comprehensive income includes net income and all other changes in equity
during a period except those resulting from investments by owners and
distributions to owners. Other comprehensive income includes revenues, expenses,
gains, and losses that under generally accepted accounting principles are
included in comprehensive income but excluded from net income.
Comprehensive income and accumulated other comprehensive income are
reported net of related income taxes. Accumulated other comprehensive income for
the Corporation consists solely of unrealized holding gains or losses on
available-for-sale securities. Such gains and losses are net of reclassification
adjustments for realized gains (losses) on sales of available-for-sale
securities of $(148,000) and $4,000 in 1996 and 1995, respectively.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Corporation has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB No. 25") and related Interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Corporation's stock at the date of grant over the amount an
employee must pay to acquire the stock. Compensation costs for stock
appreciation rights are recorded annually based on the quoted market price of
the Corporation's stock at the end of the period.
TRUST AND INVESTMENT SERVICES DIVISION
Assets held in a fiduciary capacity are not assets of the Corporation and,
accordingly, are not included in the accompanying financial statements. Trust
fees are recorded on the accrual basis.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' consolidated
financial statements and related notes to conform to the current year's
presentation.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The notes to consolidated financial statements include selected information
as of December 31, 1995, 1994 and 1993 and for the years ended December 31, 1994
and 1993. Such information is not covered by the Report of Independent Public
Accountants.
<PAGE>
NOTE B - INVESTMENT SECURITIES
The following table sets forth the amortized cost and estimated fair values
of the Bank's investment securities at December 31, 1997, 1996 and 1995.
<TABLE>
<S> <C> <C> <C> <C>
1997
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---------- ---------- --------
Held-to-Maturity Securities: (in thousands)
U.S. Treasury .............................. $ 79,679 $ 596 $ (67) $ 80,208
U.S. government agencies ................... 23,010 268 (271) 23,007
State and municipals ....................... 46,055 967 (27) 46,995
Collateralized mortgage obligations ........ 41,833 385 (71) 42,147
-------- ---------- ---------- --------
$190,577 $ 2,216 $ (436) $192,357
======== ========== ========== ========
Available-for-Sale Securities:
U.S. Treasury .............................. $ 44,859 $ 609 $ (26) $ 45,442
State and municipals ....................... 11,066 211 (2) 11,275
Equity ..................................... 127 -- -- 127
-------- ---------- ---------- --------
$ 56,052 $ 820 $ (28) $ 56,844
======== ========== ========== ========
1996
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---------- ---------- --------
Held-to-Maturity Securities: (in thousands)
U.S. Treasury .............................. $ 72,512 $ 396 $ (220) $ 72,688
U.S. government agencies ................... 29,811 296 (579) 29,528
State and municipals ....................... 32,527 465 (86) 32,906
Collateralized mortgage obligations ........ 7,000 28 (55) 6,973
-------- ---------- ---------- --------
$141,850 $ 1,185 $ (940) $142,095
======== ========== ========== ========
Available-for-Sale Securities:
U.S. Treasury .............................. $ 51,115 $ 445 $ (133) $ 51,427
State and municipals ....................... 10,297 117 (12) 10,402
Collateralized mortgage obligations ........ 18,425 120 (84) 18,461
Equity ..................................... 127 -- -- 127
-------- ---------- ---------- --------
$ 79,964 $ 682 $ (229) $ 80,417
======== ========== ========== ========
1995
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---------- ---------- --------
Held-to-Maturity Securities: (in thousands)
U.S. Treasury .............................. $ 80,861 $ 1,201 $ (49) $ 82,013
U.S. government agencies ................... 36,238 405 (396) 36,247
State and municipals ....................... 33,975 564 (91) 34,448
Collateralized mortgage obligations ........ 8,604 78 (35) 8,647
-------- ---------- ---------- --------
$159,678 $ 2,248 $ (571) $161,355
======== ========== ========== ========
Available-for-Sale Securities:
U.S. Treasury .............................. $ 38,495 $ 821 $ (23) $ 39,293
State and municipals ....................... 6,779 92 (7) 6,864
Collateralized mortgage obligations ........ 11,281 33 (42) 11,272
Equity ..................................... 127 -- -- 127
-------- ---------- ---------- --------
$ 56,682 $ 946 $ (72) $ 57,556
======== ========== ========== ========
</TABLE>
At December 31, 1997 and 1996, investment securities with a carrying value of
$51,155,000 and $47,276,000, respectively, were pledged as collateral to secure
public deposits and for other purposes.
<PAGE>
MATURITIES AND AVERAGE YIELDS. The following table sets forth the maturities
and weighted average yields of the Bank's investment securities at December 31,
1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Principal Maturing
-------------------------------------------------------------------------
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
--------------- ---------------- ----------------- -----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------- ----- ------- ---- -------- ---- -------- -----
(DOLLARS IN THOUSANDS)
HELD-TO-MATURITY SECURITIES:
U.S. Treasury ............................ $28,541 5.88% $51,138 6.11% $ -- -- % $ -- -- %
U.S. government agencies (1) ............. 634 6.37 7,212 6.48 6,639 7.78 8,525 6.55
State and municipals (2) ................. 8,086 6.42 18,383 7.03 19,247 6.94 339 7.05
Collateralized mortgage obligations (1) .. -- -- -- -- -- -- 41,833 6.90
------- ----- ------- ---- -------- ---- -------- -----
$37,261 6.01% $76,733 6.37% $25,886 7.16% $50,697 6.84%
======= ==== ======= ==== ======== ==== ======== ====
Principal Maturing
-------------------------------------------------------------------------
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
--------------- ---------------- ----------------- -----------------
Amount Yield Amount Yield Amount Yield Amount Yield
------- ----- ------- ---- -------- ---- -------- -----
(DOLLARS IN THOUSANDS)
AVAILABLE-FOR-SALE SECURITIES:
U.S. Treasury ............................ $ 3,509 5.23% $41,933 6.32% $ -- -- % $ -- -- %
State and municipals (2) ................. 820 5.71 3,146 6.85 7,040 6.58 269 6.17
------- ----- ------- ---- -------- ---- -------- -----
Total debt securities .................. 4,329 5.32 45,079 6.21 7,040 6.58 269 6.17
Equity ................................... -- -- -- -- -- -- 127 6.70
------- ----- ------- ---- -------- ---- -------- -----
$ 4,329 5.32% $45,079 6.36% $ 7,040 6.58% $ 396 6.34%
======= ==== ======= ==== ======== ==== ======== ====
</TABLE>
(1) Maturities shown are stated maturities. Securities backed by mortgages are
expected to have substantial periodic repayments resulting in weighted
average lives considerably shorter than would be surmised from the above
table.
(2) Yields on tax-exempt obligations have been computed on a tax-equivalent
basis.
NOTE C - LOANS
The following table sets forth major classifications of loans.
<TABLE>
<S> <C> <C> <C> <C> <C>
December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
Commercial and industrial .... $ 25,686 $ 23,345 $ 21,708 $ 19,482 $ 19,514
Secured by real estate ....... 121,620 120,782 115,098 115,855 108,025
Consumer ..................... 7,152 8,999 9,671 8,961 9,337
Other ........................ 1,101 396 193 174 113
--------- --------- --------- --------- ---------
155,559 153,522 146,670 144,472 136,989
Unearned income .............. (829) (840) (796) (859) (812)
--------- --------- --------- --------- ---------
154,730 152,682 145,874 143,613 136,177
Allowance for loan losses .... (3,579) (3,600) (3,600) (3,600) (3,590)
--------- --------- --------- --------- ---------
$ 151,151 $ 149,082 $ 142,274 $ 140,013 $ 132,587
========= ========= ========= ========= =========
</TABLE>
<PAGE>
ALLOWANCE FOR LOAN LOSSES. The following table sets forth changes in the
Bank's allowance for loan losses.
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended December 31,
----------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS)
Balance, beginning of year ................ $ 3,600 $ 3,600 $ 3,600 $ 3,590 $ 3,503
------ ------ ------ ------ ------
Loans charged off:
Commercial and industrial ............... -- (2) (3) (13) --
Secured by real estate .................. -- -- -- -- (121)
Consumer and other ...................... (59) (33) (21) (35) (24)
------ ------ ------ ------ ------
(59) (35) (24) (48) (145)
------ ------ ------ ------ ------
Recoveries of loans charged off:
Commercial and industrial ............... -- -- -- 6 5
Secured by real estate .................. 120 21 16 36 28
Consumer and other ...................... 18 14 8 16 24
------ ------ ------ ------ ------
138 35 24 58 57
------ ------ ------ ------ ------
Net (charge-offs) recoveries .............. 79 -- -- 10 (88)
Provision for loan losses (credit) ........ (100) -- -- -- 175
------ ------ ------ ------ ------
Balance, end of year ...................... $ 3,579 $ 3,600 $ 3,600 $ 3,600 $ 3,590
====== ====== ====== ====== ======
Ratio of net (charge-offs) recoveries to
average loans outstanding ............... .05% -% -% .01% (.07)%
====== ====== ====== ====== ======
</TABLE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES. The following table sets forth the
allocation of the Bank's total allowance for loan losses by loan type.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------- ----------------- ---------------- ------------------ ----------------
% of % of % of % of % of
Loans Loans Loans Loans Loans
To Total To Total To Total To Total To Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ -------- ------ ------- ------- ------- ------- ------- ------- ------
(DOLLARS IN THOUSANDS)
Commercial ........... $ 564 16.6% $ 530 15.3% $ 563 14.9% $ 574 13.6% $ 652 14.3%
Real-estate secured .. 2,099 78.6 2,185 79.1 2,241 78.9 2,326 80.7 2,096 79.3
Consumer and other ... 211 4.8 174 5.6 196 6.2 148 5.7 217 6.4
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total allocated ...... 2,874 100.0 2,889 100.0 3,000 100.0 3,048 100.0 2,965 100.0
Unallocated .......... 705 -- 711 -- 600 -- 552 -- 625 --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$ 3,579 100.0% $3,600 100.0% $3,600 100.0% $3,600 100.0% $3,590 100.0%
======= ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
SELECTED LOAN MATURITY INFORMATION. The following table sets forth maturity
and rate information for the Bank's commercial and industrial loans.
<TABLE>
<S> <C> <C> <C> <C>
Maturity
---------------------------------------------------------
After One
Within But Within After
One Year Five Years Five Years Total
------------ ------------ ------------ ------------
(IN THOUSANDS)
Commercial and industrial loans:
Fixed rate ............................. $ 9,060 $ 1,560 $ 40 $ 10,660
Variable rate .......................... 4,886 8,996 1,144 15,026
------------ ------------ ------------ ------------
$ 13,946 $ 10,556 $ 1,184 $ 25,686
============ ============ ============ ============
</TABLE>
<PAGE>
PAST DUE, NONACCRUAL, AND RESTRUCTURED LOANS. The following table sets
forth selected information about the Bank's nonaccrual, past due, and
restructured loans.
<TABLE>
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
At December 31: (IN THOUSANDS)
Loans past due 90 days or more as to principal or
interest payments and still accruing ....................... $ 49 $ 31 $ 4 $ 3 $ 183
Nonaccrual loans ........................................... 382 659 843 516 448
Restructured loans ......................................... 6 19 48 124 322
YEAR ENDED DECEMBER 31:
Gross interest income that would have been
recorded during the year under original terms:
Nonaccrual loans ........................................... 55 60 97 36 43
Restructured loans ......................................... 1 3 7 8 27
Gross interest income recorded during the year:
Nonaccrual loans ........................................... 32 11 36 1 1
Restructured loans ......................................... 1 2 6 6 26
Commitments for additional funds ........................... None None None None None
</TABLE>
As of December 31, 1997, the Corporation did not have any impaired loans as
defined in SFAS No. 114 except for the restructured and nonaccrual loans noted
above.
Certain directors, including their immediate families and companies in
which they are principal owners, were loan customers of the Bank during 1997 and
1996. Such loans are made in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, and do not involve more
than the normal risk of collectibility or present other unfavorable features.
The aggregate amount of these loans was approximately $1,574,000 and $1,555,000
at December 31, 1997 and 1996, respectively. During 1997, $266,000 of new loans
to such persons were made and repayments totaled $247,000. There were no loans
to directors which were nonaccruing at December 31, 1997 or 1996.
NOTE D - PREMISES AND EQUIPMENT
Bank premises and equipment consist of the following:
<TABLE>
<S> <C> <C>
December 31,
------------------
1997 1996
------ ------
(IN THOUSANDS)
Land ....................................................... $ 1,274 $ 1,274
Buildings .................................................. 4,502 4,483
Leasehold improvements ..................................... 846 752
Furniture and equipment .................................... 7,040 6,636
------ ------
13,662 13,145
Accumulated depreciation and amortization .................. (8,625) (8,101)
------ ------
$ 5,037 $ 5,044
====== ======
</TABLE>
A building occupied by one of the Bank's branch offices is leased from a
director of the Corporation and the Bank. The lease, which is dated 1992 and has
a term of approximately ten years, currently provides for annual base rentals of
$25,000, plus certain charges for real estate taxes and common area maintenance.
The Bank may cancel this lease at any time by giving the director ninety days
written notice. The Bank believes that the terms of this lease are comparable to
those that could have been obtained from other persons.
<PAGE>
NOTE E - DEPOSITS
The following table sets forth major classifications of average deposits.
<TABLE>
<S> <C> <C> <C>
Year ended December 31,
----------------------------------------------------------------------
1997 1996 1995
-------------------- --------------------- -----------------------
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
-------- --------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
Checking ............................... $133,082 - % $123,832 - % $115,010 -%
Savings and money market ............... 229,639 3.18 222,319 3.05 213,250 3.36
Time deposits .......................... 39,671 4.76 36,940 4.61 35,416 4.88
-------- ------- -------- ------- -------- ------
$402,392 2.28% $383,091 2.21% $363,676 2.45%
======== ======= ======== ======= ======== ======
</TABLE>
TIME DEPOSITS OF $100,000 AND OVER. The following table sets forth the
emaining maturities of the Bank's time deposits in amounts of $100,000 or more.
Remaining Maturity Amount
- -------------------------------------------------- ------------
(in thousands)
3 months or less ................................. $ 5,903
Over 3 through 6 months .......................... 2,658
Over 6 through 12 months ......................... 1,650
Over 12 months ................................... 395
------------
$ 10,606
============
NOTE F - INCOME TAXES
The Corporation and its subsidiary file a consolidated Federal income tax
return. Income taxes charged to earnings in 1997, 1996, and 1995 had effective
tax rates of 32.7%, 34.4%, and 34.3%, respectively. The following table sets
forth a reconciliation of the statutory Federal income tax rate to the
Corporation's effective tax rate.
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
----------------------
1997 1996 1995
---- ---- ----
Statutory federal income tax rate ............................... 34.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit ........... 5.6 5.9 6.1
Tax-exempt interest on securities and loans, net of
disallowed cost of funding ...................................... (6.4) (6.2) (6.5)
Other ........................................................... (.5) .7 .7
---- ---- ----
32.7% 34.4% 34.3%
==== ==== ====
</TABLE>
PROVISION FOR INCOME TAXES. The following table sets forth the components
of the provision for income taxes.
Year Ended December 31,
-----------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
Currently payable:
Federal .......... $ 2,841 $ 2,540 $ 2,375
State ............ 933 934 875
------- ------- -------
3,774 3,474 3,250
------- ------- -------
Deferred:
Federal .......... (96) 135 (6)
State ............ 33 -- 1
------- ------- -------
(63) 135 (5)
------- ------- -------
$ 3,711 $ 3,609 $ 3,245
======= ======= =======
<PAGE>
NET DEFERRED TAX ASSET. The following table sets forth the components of
the Bank's net deferred tax asset.
December 31,
---------------
1997 1996
------ ------
Deferred tax assets: (IN THOUSANDS)
Allowance for loan losses ............................. $1,079 $1,223
Supplemental executive retirement expense ............. 118 --
Stock appreciation rights expense ..................... -- 126
Pension expense ....................................... -- 37
Interest on nonperforming loans ....................... 100 106
Postretirement benefits expense ....................... 29 21
Accrued professional fees ............................. 12 13
------ ------
1,338 1,526
Valuation allowance ................................... -- --
------ ------
1,338 1,526
------ ------
Deferred tax liabilities:
Pension expense ....................................... 197 --
Accretion on bonds .................................... 20 371
Depreciation .......................................... 12 57
Unrealized gains on available-for-sale securities ..... 324 201
------ ------
553 629
------ ------
Net deferred tax asset ................................ $ 785 $ 897
====== ======
NOTE G - COMMITMENTS AND CONTINGENT LIABILITIES
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK. The Bank is a party to
financial instruments with off-balance-sheet risk in the normal course of
business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit, standby letters of credit, and
commercial letters of credit. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the consolidated
balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to financial instruments for commitments to extend credit, standby letters
of credit, and commercial letters of credit is represented by the contractual
notional amount of these instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-sheet
instruments. At December 31, financial instruments whose contract amounts
represent credit risk are as follows:
1997 1996
------- -------
(IN THOUSANDS)
Commitments to extend credit .......... $28,907 $22,944
Standby letters of credit ............. 1,436 1,195
Commercial letters of credit .......... 467 407
Standby letters of credit are conditional commitments issued by the Bank
to assure the performance or financial obligations of a customer to a third
party. The Bank's standby letters of credit extend through January 1999. The
credit risk involved in issuing standby letters of credit is essentially the
same as that involved in extending loans to customers. The Bank generally holds
collateral and/or obtains personal guarantees supporting these commitments. The
extent of collateral held for these commitments at December 31, 1997 varied from
0% to 100%, and averaged 39%.
Commercial letters of credit are conditional commitments issued by the
Bank to assure the payment by a customer to a supplier. All of the Bank's
commercial letters of credit extend for less than one year. The credit risk
involved in issuing commercial letters of credit is the same as that discussed
in the preceding paragraph for standby letters of credit. The Bank generally
obtains personal guarantees supporting these commitments.
Commitments to extend credit are legally binding agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained by the Bank upon extension of credit is based
<PAGE>
on management's credit evaluation of the borrower. Collateral held varies but
may include mortgages on commercial and residential real estate, deposit
accounts with the Bank or other financial institutions, and securities.
CONCENTRATIONS OF CREDIT RISK. Virtually all of the Bank's loans, personal
and commercial, are to borrowers who are domiciled on Long Island. As a result,
the income of many of the Bank's borrowers is dependent on the Long Island
economy. In addition, virtually all of the Bank's real estate loans involve
mortgages on Long Island properties. Thus, the Bank's loan portfolio is
susceptible to the economy of Long Island.
LEASE COMMITMENTS. At December 31, 1997, minimum annual rental commitments
under noncancelable operating leases are as follows:
Year Amount
- ---- ---------------
(in thousands)
1998 ..................... $ 250
1999 ..................... 235
2000 ..................... 204
2001 ..................... 165
2002 ..................... 156
Thereafter ............... 349
---------------
$ 1,359
===============
In addition, the Bank has various renewal options on the above leases. Rent
expense was $261,000, $247,000, and $220,000 in 1997, 1996, and 1995,
respectively.
NOTE H - SHAREHOLDER PROTECTION RIGHTS PLAN
On July 16, 1996, the Board of Directors of the Corporation (the "Board")
adopted a Shareholder Protection Rights Plan and declared a dividend of one
right ("Right") on each outstanding share of the Corporation's common stock (the
"Common Stock"). The dividend was paid on July 31, 1996 to shareholders of
record as of the same date.
In absence of an event of the type described below, the Rights will be
evidenced by and trade with the Common Stock and will not be exercisable.
However, the Rights will separate from the Common Stock and become exercisable
following the earlier of (1) the tenth business day, or such later date as the
Board may decide, after any person or persons (collectively referred to as
"person") commences a tender offer that would result in such person holding a
total of 20% or more of the outstanding Common Stock, or (2) ten business days
after, or such earlier or later date as the Board may decide, the announcement
by the Corporation that any person has acquired 20% or more of the outstanding
Common Stock.
When separated from the Common Stock, each Right will entitle the holder to
purchase one share of Common Stock for $83 (the "Exercise Price"). However, in
the event that the Corporation has announced that any person has acquired 20% or
more of the outstanding Common Stock, the Rights owned by that person will be
automatically void and each other Right will automatically become a right to
buy, for the Exercise Price, that number of shares of Common Stock having a
market value of twice the Exercise Price. Also, if any person acquires 20% or
more of the outstanding Common Stock, the Board can require that, in lieu of
exercise, each outstanding Right be exchanged for one share of Common Stock.
The Rights may be redeemed by action of the Board at a price of $.01 per
Right at any time prior to announcement by the Corporation that any person has
acquired 20% or more of the outstanding Common Stock. The Exercise Price and the
number of Rights outstanding are subject to adjustment to prevent dilution. The
Rights expire ten years from the date of their issuance.
NOTE I - STOCK BASED COMPENSATION
The Corporation has two stock option and appreciation rights plans (the
"Plans"). The 1996 Plan was approved by the Corporation's Board of Directors on
January 16, 1996 and subsequently approved by its stockholders. Under the 1996
Plan, options to purchase up to 360,000 shares of common stock are available to
be granted to key employees of the Corporation and its subsidiaries through
January 15, 2006. Each option, which may be granted with or without a stock
appreciation right attached, is granted at a price equal to the fair market
value of one share of the Corporation's stock on the date of grant and is
exercisable in whole or in part at certain times commencing six months from the
date of grant and ending ten years after the date of grant. The 1996 Plan also
provides for the granting of stand-alone stock appreciation rights. At December
31, 1997, options to purchase 17,287 shares of Common Stock were outstanding and
exercisable
<PAGE>
with respect to the 1996 Plan. No stock appreciation rights have been granted
under the 1996 Plan, either attached to options or on a stand-alone basis.
The 1986 Plan was approved by the Corporation's Board of Directors on January
21, 1986 and subsequently approved by its stockholders. Under the 1986 Plan, as
later amended, options to purchase up to 387,675 shares of common stock were
available to be granted to key employees of the Corporation and its subsidiaries
through January 21, 1996. The terms of the 1986 Plan are substantially the same
as those of the 1996 Plan. At December 31, 1997, options to purchase 98,509
shares of Common Stock were outstanding and exercisable under the 1986 Plan and
there were no outstanding stock appreciation rights. Compensation costs
recognized for stock appreciation rights granted under the 1986 Plan amounted to
$143,000, $72,000 and $68,000 for the years ended December 31, 1997, 1996, and
1995, respectively.
The Corporation has chosen to account for stock-based compensation using
the intrinsic value method prescribed in APB No. 25. Since each option is
granted at a price equal to the fair market value of one share of the
Corporation's stock on the date of grant, no compensation cost has been
recognized. The following table compares reported net income and earnings per
share to net income and earnings per share on a pro forma basis assuming that
the Corporation accounted for stock-based compensation under SFAS No. 123.
1997 1996
--------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
NET INCOME:
As Reported ............. $ 7,626 $ 6,891
Pro Forma ............... 7,523 6,776
EARNINGS PER SHARE:
As Reported:
Basic ................. $ 2.45 $ 2.20
Diluted ............... 2.40 2.15
Pro Forma:
Basic ................. $ 2.41 $ 2.16
Diluted ............... 2.36 2.12
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995. Future awards are anticipated under the 1996 Plan.
STOCK OPTION ACTIVITY. The following table sets forth stock option activity
and the weighted average fair value of options granted.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ---------- ------- ---------- ------- -----------
Outstanding, beginning of year ............... 155,677 $ 14.14 151,435 $ 12.99 135,936 $ 11.58
Granted ...................................... 20,057 24.34 26,325 19.89 31,837 17.87
Exercised .................................... (59,488) 12.40 (21,966) 13.07 (16,338) 10.22
Forfeited .................................... (450) 24.33 (117) 17.39 -- --
------- --------- ------- --------- ------- -----------
Outstanding and exercisable, end of year ..... 115,796 $ 16.76 155,677 $ 14.14 151,435 $ 12.99
======= ========= ======= ========= ======= ===========
Weighted average fair value of options granted $ 5.14 $ 4.36 $ 5.03
======= ======= =======
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model using the following weighted average
assumptions: risk-free interest rates of 5.56% and 5.93% for 1996 Plan options
granted in 1997 and 1996, respectively, and 5.61% and 7.40% for 1986 Plan
options granted in 1996 and 1995, respectively; volatility of 11.30% for the
1996 Plan options granted in 1997 and 1996 and volatility of 11.22% and 10.72%
for the 1986 Plan options granted in 1996 and 1995, respectively; expected
dividend yield of 2% and expected lives of 7 years for all options granted in
1997, 1996 and 1995.
<PAGE>
STOCK OPTIONS OUTSTANDING. The following table sets forth information about
stock options outstanding and exercisable at December 31, 1997.
Weighted Average
--------------------
Remaining
Contractual Exercise
Range of Exercise Prices Number Life (yrs.) Price
- ------------------------ ------- ---------- -------
$ 7.01 to $10.00 13,915 3.69 $ 9.59
$10.01 to $13.00 10,585 2.58 10.63
$13.01 to $16.00 29,507 5.60 14.83
$16.01 to $19.00 44,880 7.55 18.85
$19.01 to $25.00 16,909 9.56 24.33
------- ---------- -------
115,796 6.43 $16.76
======= ========== =======
NOTE J - RETIREMENT PLANS
The Bank has a defined benefit pension plan (the "Pension Plan") covering
eligible employees. The provisions of the Pension Plan are governed by the rules
and regulations contained in the Prototype Plan of the New York State Bankers
Retirement System (the Retirement System) and the Retirement System Adoption
Agreement executed by the Bank. For investment purposes, the Pension Plan's
contributions are pooled with the contributions of the other participants in the
Retirement System. Assets of the Pension Plan are invested in various debt and
equity securities.
Employees are eligible to participate in the Pension Plan after attaining
21 years of age and completing 12 full months of service. Pension benefits are
generally based on varying percentages of average annual compensation during
defined periods of creditable service. The Bank makes annual contributions to
the Pension Plan in an amount sufficient to fund these benefits and participants
contribute 2% of their compensation. The Bank's funding policy, the entry age
normal cost-frozen initial liability method, is consistent with the funding
requirements of federal law and regulations. Employees become fully vested after
four years of participation in the Pension Plan (no vesting occurs during the
four-year period).
NET PENSION COST. The following table sets forth the components of net
pension cost.
1997 1996 1995
------- ------- -------
(in thousands)
Service cost ...................... $ 319 $ 247 $ 213
Interest cost ..................... 345 311 250
Actual return on plan assets ...... (522) (423) (340)
Net amortization and deferral ..... (44) (44) (44)
------- ------- -------
Net pension cost .................. $ 98 $ 91 $ 79
======= ======= =======
FUNDED STATUS OF PENSION PLAN. The following table sets forth the funded
status of the Bank's Pension Plan as of the date of the latest actuarial
valuation.
<TABLE>
<S> <C> <C> <C>
October 1,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
Accumulated benefit obligation, including vested benefits
of $3,738,000, $3,113,000 and $2,715,000 ............................. $ 3,781 $ 3,158 $ 2,743
======== ======== ========
Projected benefit obligation ......................................... $ (5,021) $ (4,094) $ (3,624)
Plan assets at fair value ............................................ 6,567 5,308 4,779
-------- -------- --------
Plan assets less projected benefit obligation ........................ 1,546 1,214 1,155
Unrecognized loss (gain) from experience different from
that assumed and effects of changes in assumptions ................... (574) (364) (179)
Prior service cost not yet recognized in periodic pension cost ....... (42) (46) (49)
Unrecognized net asset ............................................... (248) (289) (329)
-------- -------- --------
Prepaid pension cost included in other assets ........................ $ 682 $ 515 $ 598
======== ======== ========
</TABLE>
<PAGE>
SIGNIFICANT ACTUARIAL ASSUMPTIONS. The following assumptions were utilized
in determining net pension cost and the funded status of the Bank's pension
plan.
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
------- ------- -------
Discount rate ........................................ 7.00% 7.75% 7.75%
Rate of increase in compensation levels .............. 5.00% 5.00% 5.00%
Expected long-term rate of return on plan assets ..... 8.00% 8.00% 8.50%
</TABLE>
The Bank has a combined profit sharing/401(k) plan (the "Profit Sharing
Plan"). Employees are eligible to participate provided they are at least 21
years of age and have completed one year of service in which they worked 1000
hours if full-time and 700 hours if part-time. Participants may elect to
contribute, on a tax-deferred basis, up to 10% of gross compensation, as
defined, subject to the limitations of Section 401(k) of the Internal Revenue
Code. The Bank may, at its sole discretion, make matching contributions to each
participant's account based on the amount of the participant's tax deferred
contributions and make profit sharing contributions to each participant's
account equal to a percentage of the participant's compensation, as defined.
Participants are fully vested in their elective contributions and, after five
years of participation in the Profit Sharing Plan, are fully vested (20% vesting
per year) in the matching and profit sharing contributions made by the Bank.
Matching contributions were $93,000, $92,000 and $84,000 for 1997, 1996, and
1995, respectively, and profit sharing contributions were $403,000, $387,000,
and $362,000, respectively.
On August 3, 1995, the Bank adopted The First National Bank of Long Island
Supplemental Executive Retirement Program ("SERP"). The SERP provides benefits
to certain employees, designated by the Compensation Committee of the Board of
Directors, whose benefits under the Pension Plan and Profit Sharing Plan are
limited by the applicable provisions of the Internal Revenue Code. The benefit
under the SERP is equal to the additional amount the employee would be entitled
to under the Pension and Profit Sharing Plans in the absence of such Internal
Revenue Code limitations. The effective date of the SERP, which superseded the
Bank's previous supplemental retirement benefit plan, was January 1, 1994. SERP
expense was $337,000, $150,000 and $101,000 in 1997, 1996 and 1995,
respectively.
NOTE K - OTHER OPERATING EXPENSES
Expenses included in other operating expenses which exceed one percent of
the aggregate of total interest income and noninterest income in 1997, 1996, and
1995 are as follows:
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
FDIC insurance (1) ...... $ -- $ -- $ 401
Computer services ....... 420 418 398
Insurance ............... 420 424 401
Marketing ............... 386 303 246
(1) Amount not separately disclosed for 1997 and 1996 since expense is one
percent or less of the aggregate of total interest income and noninterest
income in the respective year.
NOTE L - REGULATORY MATTERS
CAPITAL. The corporation is subject to various regulatory capital
requirements administered by the federal banking agencies. 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 Corporation's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Corporation must meet specific capital guidelines that involve
quantitative measures of the Corporation's assets, liabilities, and certain
off-balance-sheet items calculated under regulatory accounting practices. The
Corporation's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
<PAGE>
Under current regulations, banks are classified as well capitalized,
adequately capitalized or undercapitalized. The following table sets forth the
Corporation's capital ratios at December 31, 1997 and the minimum ratios
necessary to be classified as well capitalized and adequately capitalized. The
Corporation's capital ratios at December 31, 1997 substantially exceed the
requirements for a well-capitalized bank.
<TABLE>
<S> <C> <C> <C> <C>
Corporation's Capital Ratios
at December 31:
---------------------------- Well Adequately
1997 1996 Capitalized Capitalized
----- ----- ----------- -----------
Total Risk-Based Capital Ratio ........ 33.54% 33.43% 10.00% 8.00%
Tier 1 Risk-Based Capital Ratio ........ 32.28 32.17 6.00 4.00
Tier 1 Leverage Capital Ratio .......... 12.24 12.29 5.00 4.00
</TABLE>
OTHER MATTERS. The amount of dividends paid by the Bank to the Corporation
is subject to restrictions under Federal Reserve Board Regulation H. Under
Regulation H, the Bank is required to obtain regulatory approval for the payment
of dividends during any one calendar year that exceed the Bank's net income for
the calendar year plus the retained net income for the two preceding calendar
years. At December 31, 1997, the Bank had retained net income for the current
and two preceding calendar years of $14,296,000.
The Corporation is required to maintain average reserve balances with the
Federal Reserve Bank. The average amount of those reserve balances for the year
ended December 31, 1997 was approximately $3,188,000.
Under national banking laws and related statutes, the Bank also is limited
as to the amount it may loan to the Corporation, unless such loans are
collateralized by specified obligations. At December 31, 1997, the maximum
amount available for transfer from the Bank to the Corporation in the form of
loans approximated $8,613,000.
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at a specific point in time and are based on
existing on and off-balance-sheet financial instruments. Such estimates are
generally subjective in nature and dependent upon a number of significant
assumptions associated with each financial instrument or group of similar
financial instruments, including estimates of discount rates, risks associated
with specific financial instruments, estimates of future cash flows, and
relevant available market information. Changes in assumptions could
significantly affect the estimates. In addition, fair value estimates do not
reflect the value of anticipated future business, premiums or discounts that
could result from offering for sale at one time the Corporation's entire
holdings of a particular financial instrument, or the tax consequences of
realizing gains or losses on the sale of financial instruments.
<PAGE>
The following table sets forth the carrying/contract amounts and estimated
fair values of the Corporation's financial instruments at December 31, 1997 and
1996.
<TABLE>
<S> <C> <C> <C> <C>
1997 1996
------------------------ -----------------------
Carrying/ Carrying/
Contract Contract
Amount Fair Value Amount Fair Value
---------- ----------- ---------- ----------
(IN THOUSANDS)
FINANCIAL ASSETS:
Cash and due from banks ................ $ 13,343 $ 13,343 $ 19,351 $ 19,351
Federal funds sold ..................... 60,500 60,500 38,500 38,500
Held-to-maturity securities ............ 190,577 192,357 141,850 142,095
Available-for-sale securities .......... 56,844 56,844 80,417 80,417
Commercial and industrial loans ........ 25,003 25,003 22,668 22,666
Loans secured by real estate ........... 118,129 119,002 117,213 117,998
Consumer loans ......................... 6,968 6,968 8,805 8,805
Other loans ............................ 1,051 1,051 396 396
Accrued interest receivable ............ 3,807 3,807 3,609 3,609
FINANCIAL LIABILITIES:
Checking deposits ...................... 142,848 142,848 123,160 123,160
Savings and money market deposits ...... 242,579 242,579 222,892 222,892
Time deposits .......................... 37,332 37,322 38,309 38,350
Accrued interest payable ............... 186 186 147 147
OFF-BALANCE-SHEET LIABILITIES:
Commitments to extend credit ........... 28,907 -- 22,944 --
Standby and commercial letters of credit 1,903 8 1,602 7
</TABLE>
NOTE N - PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information for The First of Long Island Corporation
(parent company only) is as follows:
<TABLE>
<S> <C> <C>
CONDENSED BALANCE SHEETS December 31,
-----------------------
1997 1996
---------- ----------
ASSETS: (IN THOUSANDS)
Checking and money market accounts with subsidiary .... $ 2,121 $ 3,120
Investment in subsidiary bank, at equity .............. 57,422 51,932
Other assets .......................................... 253 --
---------- ----------
$ 59,796 $ 55,052
========== ==========
LIABILITIES:
Cash dividends payable ................................ $ 830 $ 710
Accrued expenses and other liabilities ................ -- 173
---------- ----------
830 883
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock .......................................... 311 209
Surplus ............................................... 5,471 6,924
Retained earnings ..................................... 52,717 46,733
---------- ----------
58,499 53,866
Accumulated other comprehensive income, net of tax .... 467 303
---------- ----------
58,966 54,169
---------- ----------
$ 59,796 $ 55,052
========== ==========
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CONDENSED STATEMENTS OF INCOME Year ended December 31,
-----------------------------------
1997 1996 1995
--------- ---------- ----------
INCOME: (IN THOUSANDS)
Dividends from subsidiary bank ....................................... $ 2,400 $ 2,200 $ 1,950
Interest on deposits with subsidiary bank ............................ 72 86 73
--------- ---------- ----------
2,472 2,286 2,023
--------- ---------- ----------
EXPENSES:
Employee benefits .................................................... 143 72 68
Other operating expenses ............................................. 29 28 27
--------- ---------- ----------
172 100 95
--------- ---------- ----------
Income before income taxes and undistributed
earnings of subsidiary bank .......................................... 2,300 2,186 1,928
Equity in undistributed earnings ..................................... 5,326 4,705 4,280
--------- ---------- ----------
NET INCOME ........................................................... $ 7,626 $ 6,891 $ 6,208
========= ========== ==========
CONDENSED STATEMENTS OF CASH FLOWS Year ended December 31,
------------------------------------
Increase (Decrease) in Cash and Cash Equivalents* 1997 1996 1995
--------- ---------- -----------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................... $ 7,626 $ 6,891 $ 6,208
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiary bank ............................ (5,326) (4,705) (4,280)
Increase (decrease) in accrued expenses and other liabilities ........ (173) (38) 69
--------- ---------- -----------
Net cash provided by operating activities ............................ 2,127 2,148 1,997
--------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and retirement of common stock ............................ (2,444) (730) (421)
Proceeds from exercise of stock options .............................. 737 287 167
Cash dividends paid .................................................. (1,419) (1,243) (1,119)
--------- ---------- -----------
Net cash used in financing activities ................................ (3,126) (1,686) (1,373)
--------- ---------- -----------
Net increase (decrease) in cash and cash equivalents ................. (999) 462 624
Cash and cash equivalents, beginning of year ......................... 3,120 2,658 2,034
--------- ---------- -----------
Cash and cash equivalents, end of year ............................... $ 2,121 $ 3,120 $ 2,658
========= ========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Tax benefit from exercise of employee stock options .................. $ 253 $ -- $ --
Cash dividends payable ............................................... 830 710 616
</TABLE>
*Cash and cash equivalents include the checking and money market accounts with
the Corporation's wholly-owned bank subsidiary.
<PAGE>
NOTE O - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1997
Interest income ........................ $ 7,208 $ 7,416 $ 7,822 $ 7,955 $ 30,401
Interest expense ....................... 2,146 2,249 2,376 2,426 9,197
Net interest income .................... 5,062 5,167 5,446 5,529 21,204
Provision for loan losses (credit) ..... -- (100) -- -- (100)
Noninterest income ..................... 1,040 993 1,103 1,182 4,318
Noninterest expense .................... 3,569 3,504 3,520 3,692 14,285
Income before income taxes ............. 2,533 2,756 3,029 3,019 11,337
Income taxes ........................... 854 887 997 973 3,711
Net income ............................. 1,679 1,869 2,032 2,046 7,626
Earnings per share:
Basic .................................. .54 .60 .65 .66 2.45
Diluted ................................ .53 .59 .64 .64 2.40
Comprehensive income ................... 771 2,561 2,256 2,202 7,790
1996
Interest income ........................ $ 7,023 $ 7,108 $ 7,241 $ 7,213 $ 28,585
Interest expense ....................... 2,096 2,103 2,165 2,128 8,492
Net interest income .................... 4,927 5,005 5,076 5,085 20,093
Provision for loan losses (credit) ..... -- -- -- -- --
Noninterest income ..................... 962 971 1,010 963 3,906
Noninterest expense .................... 3,399 3,460 3,338 3,302 13,499
Income before income taxes ............. 2,490 2,516 2,748 2,746 10,500
Income taxes ........................... 831 847 942 989 3,609
Net income ............................. 1,659 1,669 1,806 1,757 6,891
Earnings per share:
Basic .................................. .53 .53 .58 .56 2.20
Diluted ................................ .52 .52 .57 .54 2.15
Comprehensive income ................... 1,072 974 2,235 2,328 6,609
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders and Board of Directors of
The First of Long Island Corporation:
We have audited the accompanying consolidated balance sheets of The First
of Long Island Corporation and subsidiary as of December 31, 1997 and 1996 and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The First of Long Island
Corporation and subsidiary as of December 31, 1997 and 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
As explained in Note A to the consolidated financial statements, the
Corporation adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" in 1997.
New York, New York
January 20, 1998 /S/ ARTHUR ANDERSEN LLP
<PAGE>
CELEBRATING 70 YEARS
THE FIRST COMMERCIAL BANKING OFFICE OPENED ON NOVEMBER 11, 1981
The Bank introduced a revolutionary concept in business and professional
banking--the Commercial Banking Office. The first of its kind, the richly
decorated Lake Success office was designed to accommodate the special needs of
our business and professional clientele. The branch was designed to provide
significantly-reduced waiting time and give our customers the personal attention
they deserve.
ANOTHER FIRST -- 24-HOUR BANKING ATM INSTALLED
Keeping pace with the electronic banking boom of the 1980s, The First
National Bank of Long Island was one of the first banks on Long Island to
introduce 24-Hour Banking. This premier service was introduced under the name
First Class Teller with the Glen Head branch being the first to go "live".
HIGHEST RATE MONEY MARKET SAVINGS ACCOUNT
With the introduction of money market savings in 1982, The First of Long
Island was one of the first banks in its market area to offer this account. The
Bank pays one of the highest--if not the highest--rate of any bank with branch
offices on Long Island.
THE FIRST OF LONG ISLAND CORPORATION FORMED
The First of Long Island Corporation was organized in 1984 and its primary
business is the operation of its sole subsidiary, The First National Bank of
Long Island.
EXPANSION CONTINUES INTO OTHER COMMUNITIES
The Bank continued its expansion into other Long Island communities with
the opening of Huntington, Hicksville and Mineola.
CURRENT DAY -- 1990s
DEBUT OF SHORTER TERM, LOW RATE RESIDENTIAL MORTGAGE
Another first occurred at The First of Long Island with the roll out of a
shorter term, low rate fixed mortgage. This avant-garde product, introduced in
1992 with a 12 year term, provided homeowners with a vehicle to shorten the
length of their mortgage debt at a low rate after years of high rates and
monthly payments.
EXPANSION CONTINUES INTO ADDITIONAL COMMUNITIES
The Bank further expanded into other Long Island communities with the
opening of Rockville Centre, New Hyde Park, Locust Valley, Valley Stream and
Great Neck.
THE FIRST OF LONG ISLAND AGENCY, INC. ORGANIZED
The First of Long Island Agency, Inc. was organized in 1994 as a subsidiary
of the Bank to conduct business as a licensed insurance agency primarily engaged
in the sale of fixed annuity and long-term care insurance products.
LOW COST HOME EQUITY LAUNCHED
Once again The First of Long Island was on the cutting-edge with the
introduction of StarLine, which pioneered the first low cost home equity line of
credit offered on Long Island. In later years, the Bank unveiled its no closing
cost and prime rate options.
PC BANKING INTRODUCED TO BUSINESSES
In 1997 FirstLink, a personal computer based service, was introduced to
further meet the banking needs of our business customers.
WWW.FNBLI.COM OR WWW.FIRSTOFLI.COM
The First of Long Island went "live" on the worldwide web in October 1997.
<PAGE>
DIRECTORS
THE FIRST OF LONG ISLAND CORPORATION
THE FIRST NATIONAL BANK OF LONG ISLAND
PHOTOGRAPHS OF DIRECTORS
J. William Johnson,
Chairman and Chief Executive Officer
John R. Miller III,
President and Publisher,
Equal Opportunity Publications,
Inc. (publishing)
Howard Thomas Hogan, Jr.,
Partner, Hogan & Hogan
(lawyer, private practice)
Beverly Ann Gehlmeyer,
Tax Manager and Principal,
Gehlmeyer & Gehlmeyer, P.C.
(certified public accounting firm)
Paul T. Canarick,
President and Principal,
Paul Todd, Inc.
(construction company)
J. Douglas Maxwell, Jr.,
Chairman and Chief Executive Officer,
Swissray Empower, Inc.
(medical imaging distributor)
Walter C. Teagle III,
President and Chief Executive Officer,
Metro Design Systems, Inc.
(engineering design services)
<PAGE>
OFFICERS
THE FIRST OF LONG ISLAND CORPORATION
J. William Johnson,
Chairman and Chief Executive Officer
Arthur J. Lupinacci, Jr.,
Executive Vice Presient and Secretary
Mark D. Curtis,
Senior Vice President and Treasurer
Richard Kick,
Senior Vice President
Donald L. Manfredonia,
Senior Vice President
Joseph G. Perri,
Senior Vice President
John C. Sansone,
Senior Vice President
Wayne B. Drake,
Assistant Treasurer
EXECUTIVE OFFICERS
THE FIRST NATIONAL BANK OF LONG ISLAND
Chairman and Chief Executive Officer
J. William Johnson
Executive Vice President,
Arthur J. Lupinacci, Jr.
Senior Operating Officer
Senior Vice Presidents
Mark D. Curtis
Chief Financial Officer and Cashier
Richard Kick
Senior Operations and
Senior Retail Loan Officer
Donald L. Manfredonia
Senior Lending Officer
Joseph G. Perri
Senior Commercial Marketing Officer
John C. Sansone
Senior Trust Officer
<PAGE>
BUSINESS DEVELOPMENT BOARD
PHOTOGRAPHS OF BUSINESS DEVELOPMENT BOARD MEMBERS
Kenneth R. Latham,
Chairman of the Board,
Latham Brothers Lumber Company, Inc.
Herbert Haber, CPA,
Certified Public Accountant
Thomas N. Dufek, CPA,
Partner, Kilgannon,
Furey, Dufek & Company
Kevin J. Harding, Esq.,
Partner,
Harding and Harding
Herbert Kotler, Esq.,
Partner,
Sobel, Kelly and Kotler, P.C.
Susan Hirschfeld Mohr,
President, J. W. Hirschfeld Agency, Inc.
Richard Nussbaum, CPA,
Managing Partner, Nussbaum,
Yates, Wolpow, P.C.
Arthur C. Schupbach, Esq.,
Partner, Schupbach, Williams & Pavone LLP
H. Craig Treiber,
President/CEO,
The Treiber Group LLC
Emil V. Cianciulli, Esq.,
Partner, Cianciulli & Meng, P.C.
David Black, CPA,
David Black & Associates, Inc.
Lawrence F. Steiner,
President,
Universal Unlimited, Inc.
Robert A. Goodwin, Esq.,
Partner,
Goodwin, Schult & Goodwin
Alan B. Katcher,
Chief Executive Officer,
Terry Alan Adv. Co., Inc.
Zachary Levy, Esq.,
Attorney
Bernard Esquenet,
Chief Executive Officer,
The Ruhof Corp.
Quentin Sammis,
President,
Coldwell Banker Sammis
William L. Edwards,
Real Estate Investor
Howard S. Cohen,
President,
Mount Carmel Cemetery Assoc.
Arthur Ventura,
President, Badge Agency
Mark Wurzel,
President,
Calico Cottage, Inc.
John A. Burns, Jr., Esq.,
Counsel, Forchelli, Schwartz,
Mineo & Carlino, LLP
<PAGE>
OFFICIAL STAFF
VICE PRESIDENTS
Albert Arena
Commercial Banking
Archie J. Arrington
Manager, Roslyn Heights
Lester J. Bach
Manager, Great Neck
Jonathan P. Bostwick
Finance
James Clavell
Branch Administration
Kitty W. Craig
Auditing
Paul J. Daley
Commercial Banking
Joseph Dioguardi
Manager, Old Brookville
Wayne B. Drake
Controller, Finance
Stephen Durso
Commercial Banking
John G. Fitzpatrick
Loan Center
Compliance - CRA Officer
Betsy Gustafson
Deposit Operations
Charles E. Haberkorn, Jr.
Commercial Banking
Peter J. Hoey
Data Center
George P. Knott
Manager, Woodbury
Henry A. Kramer
Commercial Banking
Concepcion L. Larrea
Manager, Greenvale
Teresa P. Maloney
Trust and Investment Services
Edward V. Mirabella
Commercial Banking
John J. Mulder, Jr.
Manager, Glen Head
Patrick J. Mulligan
Trust and Investment Services
John T. Noonan
Manager, Locust Valley
William Pyszczymuka
Manager, Huntington
Debbie J. Sorace
Marketing
Henry C. Suhr
Manager, Northport
ASSISTANT VICE PRESIDENTS
Peter J. Arebalo
Manager, Valley Stream
Marion M. Bornkamp
Auditing
Linda A. Cutter
Manager, New Hyde Park
Milady B. Godwin
Human Resources
David Lippa
Glen Head
Dorothy Miller
Manager, Hicksville
Gretchen B. Nesky
Commercial Banking
Lee Nunez
Manager, Lake Success
Ronald Pimental
Manager, Rockville Centre
Frank Plesche
Huntington
Frederick G. Ruff
General Services
Carole Ann Snayd
Roslyn Heights
Michael J. Spolarich
Commercial Banking
Tina A. Sweeney
Loan Center
Ann Marie Tarantino
Compliance and Procedures
Herta Tscherne
Manager, Mineola
Trust Officers
Susan P. Contino
Trust and Investment Services
Andrew G. Drenick
Trust and Investment Services
Susan J. Hempton
Trust and Investment Services
Senior Mortgage Advisor
John F. Darcy
Loan Center
Mortgage Originator
Frederick T. Hughes
Loan Center
ASSISTANT CASHIERS
Monica T. Baker
Branch Administration
Pari Glazer
Lake Success
Arlyne H. Kramer
Hicksville
Miriam J. Klein
Old Brookville
Mary Lou Martin
Locust Valley
Caroline V. McIntyre
Greenvale
Donna P. Minervini
Rockville Centre
June E. Pipito
Woodbury
Elissa A. Toussaint
Northport
Assistant Auditor
Kevin W. Long
Auditing
ASSISTANT MANAGERS
Ann J. Cristodero
Loan Center
Urte Goldstein
Commercial Banking
Robert B. Jacobs
Loan Center
Jenny Malandruccolo
Huntington
Colleen M. Murphy
Human Resources
Diane C. Pohlmann
Compliance and Procedures
Laura Stratten
Branch Administration
Cathy A. Vanatta
Marketing
Alison A. Zabielski
Deposit Operations
ADMINISTRATIVE AND EXECUTIVE ASSISTANTS
Elaine Ballinger
Glen Head
Joanne Buckley
Trust and Investment Services
Andrea L. DePol
Roslyn Heights
Anna S. Fleming
Loan Center
Lorraine Fogarty
Branch Administration
Marguerite F. Hirschman
Trust and Investment Services
Catherine Irvin
Finance
Rosemary Kerrane
Mineola
Carmela Lalonde
Deposit Operations
Conrad A. Lissade
Data Center
Francine McDonald
Trust and Investment Services
Constance Miller
Administration
Eveline Ratte
Loan Center
Cheryl A. Romanski
Finance
Lori A. Ruggiero
Data Center
Lisa L. Samuel
Woodbury
Allison C. Brown
Northport
Anne J. Virgadamo
Huntington
Maureen P. Zebrowski
Commercial Banking
Counsel
SCHUPBACH, WILLIAMS & PAVONE LLP
Independent Auditors
ARTHUR ANDERSEN LLP
FORM 10-K REPORT
A copy of the Corporation's annual report on Form 10-K for
1997, filed with the Securities and Exchange Commission, may
be obtained without charge upon written request to Mark D.
Curtis, Senior Vice President and Treasurer, The First of
Long Island Corporation, 10 Glen Head Road, PO Box 67, Glen
Head, New York 11545-0067.
<PAGE>
FULL SERVICE OFFICES
10 Glen Head Road
Glen Head, NY 11545
(516) 671-4900
7 Glen Cove Road
Greenvale, NY 11548
(516) 621-8811
253 New York Avenue
Huntington, NY 11743
(516) 427-4143
108 Forest Avenue
Locust Valley, NY 11560
(516) 671-2299
711 Fort Salonga Road
Northport, NY 11768
(516) 261-4000
209 Glen Head Road
Old Brookville, NY 11545
(516) 759-9002
310 Merrick Road
Rockville Centre, NY 11570
(516) 763-5533
130 Mineola Avenue
Roslyn Heights, NY 11577
(516) 621-1900
800 Woodbury Road
Woodbury, NY 11797
(516) 364-3434
COMMERCIAL BANKING OFFICES
536 Northern Boulevard
Great Neck, NY 11021
(516) 482-6666
106 Old Country Road
Hicksville, NY 11801
(516) 932-7150
3000 Marcus Avenue
Lake Success, NY 11042
(516) 775-3133
194 First Street
Mineola, NY 11501
(516) 742-1144
200 Jericho Turnpike
New Hyde Park, NY 11040
(516) 328-3100
133 E. Merrick Road
Valley Stream, NY 11580
(516) 825-0202
TRUST AND INVESTMENT SERVICES
800 Woodbury Road
Woodbury, NY 11797
(516) 364-3436
<PAGE>
SUBSIDIARY OF REGISTRANT
THE FIRST NATIONAL BANK OF LONG ISLAND
10 GLEN HEAD ROAD
GLEN HEAD, NY 11545
EXHIBIT 23 - CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated January 20, 1998, incorporated by reference in this Form
10-K, into the Company's previously filed Registration Statement No.
33-44393.
/s/ ARTHUR ANDERSEN LLP
March 20, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This Schedule contains summary financial information extracted from the
consolidated financial information incorporated by reference to the 1997 Annual
Report which is filed herwith as Exhibit 13 and is qualified in its entirety by
reference to such financial information.
</LEGEND>
<CIK> 0000740663
<NAME> THE FIRST OF LONG ISLAND CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,343,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 60,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,844,000
<INVESTMENTS-CARRYING> 190,577,000
<INVESTMENTS-MARKET> 192,357,000
<LOANS> 154,730,000
<ALLOWANCE> 3,579,000
<TOTAL-ASSETS> 484,674,000
<DEPOSITS> 422,759,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,949,000
<LONG-TERM> 0
0
0
<COMMON> 311,000
<OTHER-SE> 58,655,000
<TOTAL-LIABILITIES-AND-EQUITY> 484,674,000
<INTEREST-LOAN> 13,839,000
<INTEREST-INVEST> 13,982,000
<INTEREST-OTHER> 2,580,000
<INTEREST-TOTAL> 30,401,000
<INTEREST-DEPOSIT> 9,197,000
<INTEREST-EXPENSE> 9,197,000
<INTEREST-INCOME-NET> 21,304,000
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,285,000
<INCOME-PRETAX> 11,337,000
<INCOME-PRE-EXTRAORDINARY> 11,337,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,626,000
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.40
<YIELD-ACTUAL> 5.11
<LOANS-NON> 382,000
<LOANS-PAST> 49,000
<LOANS-TROUBLED> 6,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,600,000
<CHARGE-OFFS> 59,000
<RECOVERIES> 138,000
<ALLOWANCE-CLOSE> 3,579,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
