SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
(Mark One)
- ---- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934.
- ----
For the quarterly period ended MARCH 31, 1998
OR
- ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
- ----
For the transition period from _________________to__________________
Commission file number 0-12220
THE FIRST OF LONG ISLAND CORPORATION
- ------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 11-2672906
- ------------------------------------------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
10 GLEN HEAD ROAD, GLEN HEAD, NEW YORK 11545
- ------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 671-4900
Not Applicable
- ------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 12, 1998
- ----- -----------------------------
Common stock, par value 3,111,477
.10 per share
Total Number of Pages, Including Cover Page - 16
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION
MARCH 31, 1998
INDEX
PART I. FINANCIAL INFORMATION PAGE
NO.
ITEM 1. CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997 1
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5-12
PART II. OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
MARCH 31, December 31,
1998 1997
------------- -------------
ASSETS:
Cash and due from banks .................................... $ 17,203,000 $ 13,343,000
Federal funds sold ......................................... 53,000,000 60,500,000
------------- -------------
Cash and cash equivalents .................................. 70,203,000 73,843,000
------------- -------------
Investment securities:
Held-to-maturity, at amortized cost (approximate fair
value of $189,795,000 and $192,357,000) .................... 188,039,000 190,577,000
Available-for-sale, at fair value (amortized cost
of $63,082,000 and $56,052,000) ............................ 63,791,000 56,844,000
------------- -------------
251,830,000 247,421,000
------------- -------------
Loans:
Commercial and industrial .................................. 27,652,000 25,686,000
Secured by real estate ..................................... 124,681,000 121,620,000
Consumer ................................................... 6,523,000 7,152,000
Other ...................................................... 781,000 1,101,000
------------- -------------
159,637,000 155,559,000
Unearned income ............................................ (863,000) (829,000)
------------- -------------
158,774,000 154,730,000
Allowance for loan losses .................................. (3,561,000) (3,579,000)
------------- -------------
155,213,000 151,151,000
------------- -------------
Bank premises and equipment ................................ 5,184,000 5,037,000
Deferred income tax benefits ............................... 788,000 785,000
Other assets ............................................... 6,744,000 6,437,000
------------- -------------
$ 489,962,000 $ 484,674,000
============= =============
LIABILITIES:
Deposits:
Checking ................................................... $ 148,725,000 $ 142,848,000
Savings and money market ................................... 236,477,000 242,579,000
Time, other ................................................ 26,541,000 26,726,000
Time, $100,000 and over .................................... 15,083,000 10,606,000
------------- -------------
426,826,000 422,759,000
Accrued expenses and other liabilities ..................... 1,550,000 2,764,000
Income taxes payable ....................................... 796,000 185,000
------------- -------------
429,172,000 425,708,000
------------- -------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share:
Authorized, 20,000,000 shares;
Issued and outstanding, 3,112,564 and 3,113,061 shares ..... 311,000 311,000
Surplus .................................................... 5,430,000 5,471,000
Retained earnings .......................................... 54,630,000 52,717,000
------------- -------------
60,371,000 58,499,000
Accumulated other comprehensive income, net of tax ......... 419,000 467,000
------------- -------------
60,790,000 58,966,000
------------- -------------
$ 489,962,000 $ 484,674,000
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C>
Three Months
Ended March 31,
------------------------
1998 1997
----------- ----------
INTEREST INCOME:
Loans ...................................................... $3,516,000 $3,370,000
Investment securities:
Taxable .................................................... 2,964,000 2,896,000
Nontaxable ................................................. 676,000 493,000
Federal funds sold ......................................... 633,000 449,000
---------- ----------
7,789,000 7,208,000
---------- ----------
INTEREST EXPENSE:
Savings and money market deposits .......................... 1,907,000 1,692,000
Time deposits .............................................. 467,000 454,000
---------- ----------
2,374,000 2,146,000
---------- ----------
Net interest income ........................................ 5,415,000 5,062,000
Provision for loan losses .................................. -- --
---------- ----------
Net interest income after provision for loan losses ........ 5,415,000 5,062,000
---------- ----------
NONINTEREST INCOME:
Trust Department income .................................... 294,000 313,000
Service charges on deposit accounts ........................ 736,000 627,000
Other ...................................................... 105,000 100,000
---------- ----------
1,135,000 1,040,000
---------- ----------
NONINTEREST EXPENSE:
Salaries ................................................... 1,763,000 1,634,000
Employee benefits .......................................... 667,000 674,000
Occupancy and equipment expense ............................ 481,000 470,000
Other operating expenses ................................... 804,000 791,000
---------- ----------
3,715,000 3,569,000
---------- ----------
Income before income taxes ................................. 2,835,000 2,533,000
Income tax expense ......................................... 908,000 854,000
---------- ----------
NET INCOME ................................................. $1,927,000 $1,679,000
========== ==========
WEIGHTED AVERAGE:
Common shares .............................................. 3,112,321 3,126,804
Dilutive stock options ..................................... 66,987 65,450
---------- ----------
3,179,308 3,192,254
========== ==========
EARNINGS PER SHARE:
Basic ...................................................... $ .62 $ .54
========== ==========
Diluted .................................................... $ .61 $ .53
========== ==========
COMPREHENSIVE INCOME ....................................... $1,879,000 $ 771,000
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C>
Three Months Ended March 31,
----------------------------
Increase (Decrease) in Cash and Cash Equivalents 1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 1,927,000 $ 1,679,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income tax provision ......................................... 31,000 --
Depreciation and amortization ......................................... 163,000 148,000
Premium amortization (discount accretion) on investment securities, net (108,000) (269,000)
Increase in other assets .............................................. (307,000) (296,000)
Decrease in accrued expenses and other liabilities .................... (384,000) (260,000)
Increase in income taxes payable ...................................... 632,000 807,000
------------ ------------
Net cash provided by operating activities ............................. 1,954,000 1,809,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and redemptions of investment securities:
Held-to-maturity ...................................................... 13,231,000 13,581,000
Available-for-sale .................................................... -- 387,000
Purchase of investment securities:
Held-to-maturity ...................................................... (10,531,000) (21,720,000)
Available-for-sale .................................................... (7,084,000) (1,489,000)
Net increase in loans to customers .................................... (4,061,000) (1,584,000)
Purchases of bank premises and equipment .............................. (310,000) (77,000)
------------ ------------
Net cash used in investing activities ................................. (8,755,000) (10,902,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in total deposits ........................................ 4,067,000 1,357,000
Proceeds from exercise of stock options ............................... 34,000 2,000
Repurchase and retirement of common stock ............................. (97,000) (188,000)
Cash dividends paid ................................................... (843,000) (710,000)
------------ ------------
Net cash provided by financing activities ............................. 3,161,000 461,000
------------ ------------
Net decrease in cash and cash equivalents ............................. (3,640,000) (8,632,000)
Cash and cash equivalents, beginning of year .......................... 73,843,000 57,430,000
------------ ------------
Cash and cash equivalents, end of period .............................. $ 70,203,000 $ 48,798,000
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH:
INVESTING ACTIVITIES
Unrealized gains (losses) on available-for-sale securities ............ $ (83,000) $ (1,355,000)
FINANCING ACTIVITIES
Tax benefit from exercise of employee stock options ................... 21,000 --
</TABLE>
The Corporation made interest payments of $2,344,000 and $2,102,000 and
income tax payments of $246,000 and $46,000 during the three months ended March
31, 1998 and 1997, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION AND SUBSIDIARY
MARCH 31, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of The First
of Long Island Corporation and its wholly-owned subsidiary, The First National
Bank of Long Island (collectively referred to as the "Corporation").
The consolidated financial information included herein as of and for
the periods ended March 31, 1998 and 1997 is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The December 31, 1997 consolidated
balance sheet was derived from the Company's December 31, 1997 audited
consolidated financial statements.
2. EARNINGS PER SHARE
Earnings per share data for the first quarter of 1997 have been adjusted
to reflect the 3-for-2 stock split paid February 2, 1998 and restated to conform
to the provisions of Statement of Financial Accounting Standards No. 128
"Earnings per Share."
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors that have affected the Corporation's financial condition and
operating results during the periods included in the accompanying consolidated
financial statements, and should be read in conjunction with such financial
statements. The Corporation's financial condition and operating results
principally reflect those of its wholly-owned subsidiary, The First National
Bank of Long Island (the "Bank"). The Corporation's primary service area is
Nassau and Suffolk Counties, Long Island.
OVERVIEW
The Corporation earned $.61 per share in the first quarter of 1998 as
compared to $.53 in the same quarter last year, an increase of approximately
15%. Based on first quarter 1998 net income of $1,927,000, the Corporation
returned 1.62% on average total assets and 13.09% on average total equity. This
compares to returns on assets and equity of 1.55% and 12.53%, respectively, for
the same period last year. Total assets, deposits, and capital all grew by
approximately 11% when comparing balances at March 31, 1998 to those at March
31, 1997. The Corporation's capital ratios continue to substantially exceed the
current regulatory criteria for a well capitalized bank.
The most significant factor favorably affecting earnings for the first
quarter of 1998 when compared to the same period last year was growth in average
checking balances. Average checking balances were approximately $141.4 million
for the first quarter this year as compared to $122.3 million for the same
quarter last year, an increase of 15.7%. Earnings were also favorably impacted
by a 17.4% increase in service charge income and a 9.9% increase in average
stockholders' equity.
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.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended March 31,
--------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -----------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------------- ----------- -------------- -------------- ------------ -------------
(DOLLARS IN THOUSANDS)
ASSETS
Federal funds sold ......................... $ 47,089 $ 633 5.45% $ 34,547 $ 449 5.27%
Investment Securities
Taxable................................... 192,433 2,964 6.25 185,312 2,896 6.34
Nontaxable (1)............................ 59,682 1,024 6.86 42,876 745 6.95
Loans (1)(2)................................ 157,969 3,537 9.08 152,524 3,381 8.99
-------------- ----------- -------------- -------------- ------------ -------------
Total interest-earning assets................ 457,173 8,158 7.23 415,259 7,471 7.29
----------- -------------- ------------ -------------
Allowance for loan losses.................... (3,581) (3,601)
-------------- --------------
Net interest-earning assets.................. 453,592 411,658
Cash and due from banks...................... 16,299 17,739
Premises and equipment, net.................. 5,138 5,030
Other assets................................. 6,860 6,145
-------------- --------------
$ 481,889 $ 440,572
============== ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Savings and money market deposits............ $ 238,235 1,907 3.25 $ 222,419 1,692 3.09
Time deposits................................ 39,870 467 4.75 39,309 454 4.68
-------------- ----------- -------------- -------------- ------------ -------------
Total interest-bearing deposits.............. 278,105 2,374 3.46 261,728 2,146 3.33
-------------- ----------- -------------- -------------- ------------ -------------
Checking deposits (3)........................ 141,440 122,287
Other liabilities............................ 2,622 2,212
-------------- --------------
422,167 386,227
Stockholders' equity......................... 59,722 54,345
-------------- --------------
$ 481,889 $ 440,572
============== ==============
Net interest income (1)...................... $ 5,784 $ 5,325
=========== ============
Net interest spread (1)...................... 3.77% 3.96%
============== =============
Net interest yield (1).............................. 5.13% 5.20%
============== =============
</TABLE>
(1) Tax-equivalent basis. Interest income on a tax-equivalent basis includes
the additional amount of interest income that would have been earned if the
Corporation's investment in tax-exempt loans and investment securities had
been made in loans and investment securities subject to Federal income
taxes yielding the same after-tax income. The tax-equivalent amount of
$1.00 of nontaxable income was $1.52 in the first quarters of 1998 and 1997
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.
<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>
Three Months Ended March 31,
------------------------------------------------------
1998 Versus 1997
Increase (decrease) due to changes in:
------------------------------------------------------
Rate/ Net
Volume Rate Volume (2) Change
---------- ---------- ---------- ----------
(IN THOUSANDS)
INTEREST INCOME:
Federal funds sold ............. $ 163 $ 15 $ 6 $ 184
Investment securities:
Taxable ........................ 111 (41) (2) 68
Nontaxable (1) ................. 292 (9) (4) 279
Loans (1) ...................... 121 34 1 156
---------- ---------- ---------- ----------
Total interest income .......... 687 (1) 1 687
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Savings and money
market deposits ................ 120 88 7 215
Time deposits .................. 6 7 -- 13
---------- ---------- ---------- ----------
Total interest expense ......... 126 95 7 228
---------- ---------- ---------- ----------
Increase (decrease) in net
interest income ................ $ 561 $ (96) $ (6) $ 459
========== ========== ========== ==========
</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 on a tax-equivalent basis increased by $459,000, or
8.6%, from $5,325,000 for the three months ended March 31, 1997 to $5,784,000
for the comparable period in 1998. As can be seen from the above rate/volume
analysis, the increase is comprised of a positive volume variance of $561,000
and negative rate and rate/volume variances of $96,000 and $6,000, respectively.
The positive volume variance was primarily caused by growth in average
checking deposits and stockholders' equity and the use of such funds to purchase
investment securities and originate loans. When comparing the first quarter of
1998 to the like period in 1997, average checking deposits increased by
$19,153,000, or 15.7%, and average stockholders' equity increased by $5,377,000,
or 9.9%.
Also contributing to the positive volume variance, but to a lesser
extent, was growth in savings and money market deposits. The resulting funds
were primarily used to increase the Bank's overnight position in federal funds
sold. When comparing the first quarter in 1998 to the same period in 1997,
average savings and money market deposits increased by $15,816,000, or 7.1%.
Funding interest-earning asset growth with growth in checking deposits and
capital has a greater impact on net interest income than funding such growth
with interest-bearing deposits because checking deposits and capital, unlike
interest-bearing deposits, have no associated interest cost. This is the primary
reason that the growth of checking
<PAGE>
balances has historically been one of the Corporaton's key strategies for
increasing earnings per share
The increase in both average checking and average interest-bearing
deposits noted when comparing the first quarter of 1998 to the same quarter last
year 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
average capital is attributable to the retention of net income and, to a much
lesser extent, the exercise of employee stock options. The effect of these items
on capital was partially offset by the payment of semi-annual cash dividends and
repurchase and retirement of common stock under the Corporation's stock
repurchase program.
Net interest spread and yield were 3.77% and 5.13%, respectively, for the
first quarter of 1998 as compared to 3.96% and 5.20%, respectively, for the same
quarter in 1997. It would appear that the principal causes for the decreases in
spread and yield are pressure on loan rates brought about by competitive pricing
and reduced yield on the Bank's investment securities portfolio.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses was $3,561,000 at March 31, 1998 as compared
to $3,579,000 at December 31, 1997, representing 2.2% and 2.3% of total loans,
respectively, and 9.4 times and 8.3 times the total of nonaccruing loans and
loans past due 90 days or more as to principal and interest and still accruing,
respectively. The change in the allowance during the first quarter of 1998 is
due to recoveries of $1,000 and chargeoffs of $19,000.
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.
No provision for loan losses was deemed necessary for the first quarter of
1998. 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 78.5% of total loans outstanding at March 31, 1998. Since 1987,
environmental audits have been instituted on commercial properties, and the
incidence and 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.
<PAGE>
ASSET QUALITY
The Company has identified certain assets as risk elements. These assets
include nonaccruing loans, foreclosed real estate, loans that are contractually
past due 90 days or more as to principal or interest payments and still accruing
and troubled debt restructurings. These assets present more than the normal risk
that the Company will be unable to eventually collect or realize their full
carrying value. As shown in the table that follows, the total level of risk
elements has not changed materially since December 31, 1997.
<TABLE>
<S> <C> <C>
March 31, December 31,
1998 1997
-------- ---------
(DOLLARS IN THOUSANDS)
Nonaccruing loans .......................................... $ 323 $ 382
Foreclosed real estate ..................................... -- --
-------- --------
Total nonperforming assets ................................. 323 382
Troubled debt restructurings ............................... 2 6
Loans past due 90 days or more as to
principal or interest payments and still accruing .......... 55 49
-------- --------
Total risk elements ........................................ $ 380 $ 437
======== ========
Nonaccruing loans as a percentage of total loans ........... .20% .25%
======== ========
Nonperforming assets as a percentage of total loans
and foreclosed real estate ................................. .20% .25%
======== ========
Risk elements as a percentage of total loans and
foreclosed real estate ..................................... .24% .28%
======== ========
</TABLE>
NONINTEREST INCOME, NONINTEREST EXPENSE, AND INCOME TAXES
Noninterest income consists primarily of service charges on deposit
accounts and Trust Department income. Noninterest income increased by $95,000,
or 9.1%, from $1,040,000 for the first quarter of 1997 to $1,135,000 for the
same quarter in 1998. The increase is primarily comprised of increases in
insufficient funds charges, unavailable funds charges, and maintenance/activity
charges.
Noninterest expense is comprised of salaries, employee benefits, occupancy
and equipment expense and other operating expenses incurred in supporting the
various business activities of the Corporation. Noninterest expense increased by
$146,000, or 4.1%, from $3,569,000 for the first quarter of 1997 to $3,715,000
for the same quarter in 1998. The increase is largely comprised of an increase
in salaries of $129,000, or 7.9%, which resulted primarily from normal annual
salary increases and an increase in the number of full-time-equivalent
employees. The increase in staff is partially attributable to the opening a
full-service branch in Rockville Centre, Nassau County, Long Island in February
of 1998 (the Bank simultaneously closed its Rockville Centre commercial banking
office).
In addition to opening a full-service branch in Rockville Centre, the Bank
has received approvals from the Office of the Comptroller of the Currency to
open three new commercial banking offices. Leases have been signed for two of
these locations. Although the establishment of a full-service branch in
Rockville Centre and the opening
<PAGE>
of three new commercial banking offices 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 32.0% and 33.7% for the
first quarters of 1998 and 1997, respectively. These percentages vary from the
statutory Federal income tax rate of 34% primarily because of state income taxes
and tax-exempt interest on municipal securities. The decrease in the percentage
for 1998 is primarily attributable to an increase in the amount of tax-exempt
income on municipal securities.
CAPITAL
Under current regulatory capital standards, banks are classified as well
capitalized, adequately capitalized or undercapitalized. The Corporation's
capital management policy is designed to build and maintain capital levels that
exceed the minimum requirements for a well capitalized bank. The following table
sets forth the Corporation's capital ratios at March 31, 1998 and the minimum
ratios necessary to be classified as well capitalized and adequately
capitalized. The Corporation's capital ratios at March 31, 1998 substantially
exceed the requirements for a well-capitalized bank.
<TABLE>
<S> <C> <C> <C>
Regulatory Standards
Corporation's ------------------------------
Capital Ratios at Well Adequately
March 31, 1998 Capitalized Capitalized
----------------- -------------- -------------
Total Risk-Based Capital Ratio ......... 33.48% 10.00% 8.00%
Tier 1 Risk-Based Capital Ratio ........ 32.23 6.00 4.00
Tier 1 Leverage Capital Ratio .......... 12.54 5.00 4.00
</TABLE>
Total stockholders' equity increased by $1,824,000, or from $58,966,000 at
December 31, 1997 to $60,790,000 at March 31, 1998. The increase in
stockholders' equity is primarily attributable to the combined effect of net
income of $1,927,000 and repurchases of common stock amounting to $97,000.
CASH FLOWS AND LIQUIDITY
CASH FLOWS. During the three months ended March 31, 1998, cash and cash
equivalents decreased by $3,640,000. This decrease, along with $1,954,000 in
cash provided by operations and $4,067,000 in cash provided by deposit growth
were the primary sources of funding growth in the investment securities
portfolio of $4,384,000, growth in the loan portfolio of $4,061,000, cash
dividends of $843,000, repurchases of common stock under the Corporation's stock
repurchase program of $97,000, and capital expenditures of $310,000.
As reflected in the accompanying consolidated balance sheet, the $4,067,000
growth in deposits is comprised of an increase in checking deposits of
$5,877,000 and a decrease
<PAGE>
in total interest-bearing deposits of $1,810,000. The decrease in
interest-bearing deposits is primarily comprised of a decrease in non-personal
money market accounts.
The $4,061,000 increase in total loans during the first quarter of 1998 is
primarily attributable to increases in commercial and industrial loans and
commercial mortgages of $1,966,000 and $3,447,000, respectively, as offset by
decreases in loans secured by residential real estate and consumer loans of
$931,000 and $629,000, respectively.
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 March 31, 1998, the Corporation had $53,000,000 in
federal funds sales, a short-term securities portfolio of $15,701,000, and
available-for-sale securities of $63,791,000. The Corporation's liquidity is
enhanced by its stable deposit base which primarily consists of checking,
savings and money market accounts. Such accounts comprised 90.3% of total
deposits at March 31, 1998, while time deposits of $100,000 and over and other
time deposits comprised only 3.5% and 6.2%, respectively.
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
market 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 (present value of
expected future cash flows from assets less the present value of expected cash
flows from liabilities) 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.
The Corporation's exposure to interest rate risk has not changed
substantially since December 31, 1997.
NEW ACCOUNTING PRONOUNCEMENTS
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.
<PAGE>
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.
OTHER MATTERS
The Bank has established formal processes for identifying, assessing, and
managing the Year 2000 risks posed by its third party data processing providers,
software vendors, hardware vendors, and bank activities. In addition, the Bank
is currently analyzing the Year 2000 risks posed by its customers.
The Bank utilizes Fiserv, one of the largest data processing providers for
banks and savings institutions, to perform a significant portion of its data
processing activities. Although the Bank believes that Fiserv will properly
address the Year 2000 issue on a timely basis, the failure of Fiserv 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 significantly impact the Corporation's future results of operations,
financial condition, or liquidity.
In 1997, legislation was introduced in Congress which would allow banks
and thrifts to pay interest on corporate checking deposits. Since corporate
checking deposits account for approximately 25% of the Bank's total deposits,
the passage of such legislation could have a material adverse impact on the
Bank's future results of operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. NONE
ITEM 2. NONE
ITEM 3. NONE
ITEM 4. NONE
ITEM 5. NONE
ITEM 6. (a) EXHIBITS: EXHIBIT 27 - FINANCIAL DATA SCHEDULE IS SUBMITTED HEREWITH
(b) REPORTS ON FORM 8-K - NONE
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
THE FIRST OF LONG ISLAND CORPORATION
(Registrant)
DATE: MAY 13, 1998 /S/ J. WILLIAM JOHNSON
-------------- -------------------------------------------
J. WILLIAM JOHNSON, PRESIDENT
(principal executive officer)
/S/ MARK D. CURTIS
--------------------------------------------
MARK D. CURTIS
SENIOR VICE PRESIDENT AND TREASURER
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and management's discussion and analysis of
financial condition and results of operations contained in the FORM 10-Q and is
qualified in its entirety by reference to such financial statements and
discussion.
</LEGEND>
<CIK> 0000740663
<NAME> THE FIRST OF LONG ISLAND CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,203,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 53,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 63,791,000
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<INVESTMENTS-MARKET> 189,795,000
<LOANS> 158,774,000
<ALLOWANCE> (3,561,000)
<TOTAL-ASSETS> 489,962,000
<DEPOSITS> 426,826,000
<SHORT-TERM> 0
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0
0
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<INCOME-PRETAX> 2,835,000
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<LOANS-NON> 323,000
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