SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1999
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________________________to_____________________
Commission file 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 DECEMBER 2, 1999
Common stock, par value 2,974,250
$.10 per share
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION
SEPTEMBER 30, 1999
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 1
CONSOLIDATED STATEMENTS OF INCOME
NINE AND THREE MONTHS ENDED SEPTEMBER 30,
1999 AND 1998 2
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-18
PART II. OTHER INFORMATION 19
SIGNATURES 20
EXHIBITS
EXHIBIT 27 - FINANCIAL DATA SCHEDULE 21
<PAGE>
================================================================================
C O N S O L I D A T E D B A L A N C E S H E E T S
================================================================================
<TABLE>
<CAPTION>
September 30, December 31,
1999* 1998*
------------- -------------
<S> <C> <C>
Assets:
Cash and due from banks .............................................................. $ 20,104,000 $ 16,336,000
Federal funds sold ................................................................... 66,200,000 76,000,000
------------- -------------
Cash and cash equivalents .......................................................... 86,304,000 92,336,000
------------- -------------
Investment securities:
Held-to-maturity, at amortized cost (approximate fair
value of $189,385,000 and $191,252,000) .................................... 190,979,000 187,633,000
Available-for-sale, at fair value (amortized cost
of $96,480,000 and $84,878,000) ............................................ 95,113,000 87,021,000
------------- -------------
286,092,000 274,654,000
------------- -------------
Loans:
Commercial and industrial ..................................................... 29,167,000 28,748,000
Secured by real estate ........................................................ 144,478,000 132,357,000
Consumer ...................................................................... 6,409,000 6,366,000
Other ......................................................................... 1,670,000 4,119,000
------------- -------------
181,724,000 171,590,000
Unearned income ............................................................... (911,000) (872,000)
------------- -------------
180,813,000 170,718,000
Allowance for loan losses ..................................................... (2,042,000) (3,651,000)
------------- -------------
178,771,000 167,067,000
------------- -------------
Bank premises and equipment .......................................................... 6,731,000 6,312,000
Prepaid income taxes ................................................................. 52,000 153,000
Deferred income tax benefits ......................................................... 911,000 116,000
Other assets ......................................................................... 5,671,000 5,489,000
------------- -------------
$ 564,532,000 $ 546,127,000
============= =============
Liabilities:
Deposits:
Checking ...................................................................... $ 172,789,000 $ 175,046,000
Savings and money market ...................................................... 285,276,000 265,684,000
Time, other ................................................................... 25,484,000 25,446,000
Time, $100,000 and over ....................................................... 13,879,000 13,055,000
------------- -------------
497,428,000 479,231,000
Accrued expenses and other liabilities ............................................... 2,097,000 3,152,000
------------- -------------
499,525,000 482,383,000
------------- -------------
Commitments and Contingent Liabilities
Stockholders' Equity:
Common stock, par value $.10 per share:
Authorized, 20,000,000 shares;
Issued and outstanding, 3,011,887 and 3,095,971 shares ........................... 301,000 310,000
Surplus .............................................................................. 1,842,000 4,219,000
Retained earnings .................................................................... 63,671,000 57,949,000
------------- -------------
65,814,000 62,478,000
Accumulated other comprehensive income, net of tax ................................... (807,000) 1,266,000
------------- -------------
65,007,000 63,744,000
------------- -------------
$ 564,532,000 $ 546,127,000
============= =============
</TABLE>
*Restated - See note 2 to consolidated financial statements
See notes to consolidated financial statements
1
<PAGE>
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C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -----------------------------
1999* 1998* 1999* 1998*
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Loans ..................................................... $ 11,237,000 $ 10,852,000 $ 3,770,000 $ 3,688,000
Investment securities:
Taxable ............................................... 8,569,000 9,047,000 2,994,000 3,053,000
Nontaxable ............................................ 2,748,000 2,234,000 941,000 818,000
Federal funds sold ........................................ 2,521,000 2,161,000 941,000 851,000
------------ ------------ ------------ ------------
25,075,000 24,294,000 8,646,000 8,410,000
------------ ------------ ------------ ------------
Interest expense:
Savings and money market deposits ......................... 5,709,000 5,972,000 2,055,000 2,112,000
Time deposits ............................................. 1,150,000 1,430,000 385,000 479,000
------------ ------------ ------------ ------------
6,859,000 7,402,000 2,440,000 2,591,000
------------ ------------ ------------ ------------
Net interest income ................................... 18,216,000 16,892,000 6,206,000 5,819,000
Provision for loan losses (credit) ............................ -- (100,000) -- --
------------ ------------ ------------ ------------
Net interest income after provision
for loan losses (credit) .......................... 18,216,000 16,992,000 6,206,000 5,819,000
------------ ------------ ------------ ------------
Noninterest income:
Trust Department income ................................... 924,000 868,000 289,000 310,000
Service charges on deposit accounts ....................... 2,491,000 2,226,000 787,000 722,000
Other ..................................................... 417,000 372,000 163,000 138,000
------------ ------------ ------------ ------------
3,832,000 3,466,000 1,239,000 1,170,000
------------ ------------ ------------ ------------
Noninterest expense:
Salaries .................................................. 5,789,000 5,432,000 1,964,000 1,875,000
Employee benefits ......................................... 2,062,000 2,061,000 655,000 699,000
Occupancy and equipment expense ........................... 1,719,000 1,531,000 569,000 527,000
Other operating expenses .................................. 2,776,000 2,497,000 898,000 865,000
------------ ------------ ------------ ------------
12,346,000 11,521,000 4,086,000 3,966,000
------------ ------------ ------------ ------------
Income before income taxes and transition
adjustment to allowance for loan losses .......... 9,702,000 8,937,000 3,359,000 3,023,000
Income tax expense ............................................ 3,018,000 2,845,000 1,048,000 948,000
------------ ------------ ------------ ------------
Net income before transition adjustment to
allowance for loan losses ........................ 6,684,000 6,092,000 2,311,000 2,075,000
Transition adjustment to allowance for loan
losses, net of income taxes of $655,000 ..................... 945,000 -- -- --
------------ ------------ ------------ ------------
Net Income ............................................ $ 7,629,000 $ 6,092,000 $ 2,311,000 $ 2,075,000
============ ============ ============ ============
Weighted average:
Common shares ............................................. 3,062,559 3,108,669 3,021,336 3,101,932
Dilutive stock options .................................... 53,013 67,987 47,808 67,220
------------ ------------ ------------ ------------
3,115,572 3,176,656 3,069,144 3,169,152
============ ============ ============ ============
Earnings per share before transition
adjustment to allowance for loan losses:
Basic ..................................................... $ 2.18 $ 1.96 $ .76 $ .67
============ ============ ============ ============
Diluted ................................................... $ 2.15 $ 1.92 $ .75 $ .65
============ ============ ============ ============
Earnings per share:
Basic ..................................................... $ 2.49 $ 1.96 $ .76 $ .67
============ ============ ============ ============
Diluted ................................................... $ 2.45 $ 1.92 $ .75 $ .65
============ ============ ============ ============
</TABLE>
*Restated - See Note 2 to consolidated financial statements
See notes to consolidated financial statements
2
<PAGE>
<TABLE>
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C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N S T O C K H O L D E R S ' E Q U I T Y
====================================================================================================================================
<CAPTION>
----------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1999*
----------------------------------------------------------------------------------------------
Accumulated
Other
Common Stock Compre- Compre-
---------------------- hensive Retained hensive
Shares Amount Surplus Income Earnings Income Total
--------- --------- ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 .......... 3,095,971 $ 310,000 $ 4,219,000 $ 57,949,000 $1,266,000 $ 63,744,000
Net Income ........................ $ 7,629,000 7,629,000 7,629,000
Repurchase and retirement
of common stock ................... (90,558) (9,000) (3,463,000) (3,472,000)
Exercise of stock options ......... 6,474 -- 86,000 86,000
Unrealized losses on available-
for-sale-securities, net of
tax benefit of $1,437,000 ......... (2,073,000) (2,073,000) (2,073,000)
-----------
Comprehensive income .............. $ 5,556,000
===========
Cash dividends declared -
$.30 per share .................. (907,000) (907,000)
Transfer from retained earnings
to surplus ..................... 1,000,000 (1,000,000) --
--------- --------- ----------- ------------ ---------- ------------
Balance, September 30, 1999 ....... 3,011,887 $ 301,000 $ 1,842,000 $ 63,671,000 $ (807,000) $ 65,007,000
========= ========= =========== ============ ========== ============
<CAPTION>
----------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1998*
----------------------------------------------------------------------------------------------
Accumulated
Other
Common Stock Compre- Compre-
---------------------- hensive Retained hensive
Shares Amount Surplus Income Earnings Income Total
--------- --------- ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 .......... 3,113,061 $ 311,000 $ 5,471,000 $ 52,717,000 $ 467,000 $ 58,966,000
Prior period adjustment ........... (1,223,000) (1,223,000)
Net Income ........................ $ 6,092,000 6,092,000 6,092,000
Repurchase and retirement
of common stock ................... (28,285) (3,000) (1,353,000) (1,356,000)
Exercise of stock options ......... 11,968 1,000 159,000 160,000
Unrealized gains on available-
for-sale-securities, net of
tax of $684,000 ................... 987,000 987,000 987,000
-----------
Comprehensive income .............. $ 7,079,000
===========
Cash dividends declared -
$.27 per share .................. (838,000) (838,000)
Cash in lieu of fractional shares
on 3-for-2 stock split ............ (14,000) (14,000)
Tax benefit of stock options ...... 91,000 91,000
--------- --------- ----------- ------------ ---------- ------------
Balance, September 30, 1998 ....... 3,096,744 $ 309,000 $ 4,368,000 $ 56,734,000 $1,454,000 $ 62,865,000
========= ========= =========== ============ ========== ============
</TABLE>
*Restated - See note 2 to consolidated financial statements
See notes to consolidated financial statements
3
<PAGE>
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C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
Increase (Decrease) in Cash and Cash Equivalents 1999* 1998*
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ............................................................ $ 7,629,000 $ 6,092,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (credit) .................................... -- (100,000)
Transition adjustment to allowance for loan losses .................... (1,600,000) --
Deferred income tax provision ......................................... 642,000 37,000
Depreciation and amortization ......................................... 669,000 518,000
Premium amortization (discount accretion) on investment securities, net 609,000 (132,000)
Decrease in prepaid income taxes ...................................... 101,000 108,000
Increase in other assets .............................................. (182,000) (556,000)
Increase (decrease) in accrued expenses and other liabilities ......... (126,000) 459,000
------------ ------------
Net cash provided by operating activities ............................. 7,742,000 6,426,000
------------ ------------
Cash Flows From Investing Activities:
Proceeds from maturities and redemptions of investment securities:
Held-to-maturity ...................................................... 66,316,000 48,022,000
Available-for-sale .................................................... 16,367,000 4,260,000
Purchase of investment securities:
Held-to-maturity ...................................................... (69,999,000) (45,742,000)
Available-for-sale .................................................... (28,241,000) (27,612,000)
Net increase in loans to customers .................................... (10,104,000) (15,079,000)
Purchases of bank premises and equipment .............................. (1,088,000) (1,062,000)
------------ ------------
Net cash used in investing activities ................................. (26,749,000) (37,213,000)
------------ ------------
Cash Flows From Financing Activities:
Net increase in total deposits ........................................ 18,197,000 28,678,000
Proceeds from exercise of stock options ............................... 86,000 160,000
Repurchase and retirement of common stock ............................. (3,472,000) (1,356,000)
Cash dividends paid ................................................... (1,836,000) (1,668,000)
Cash in lieu of fractional shares on 3-for-2 stock split .............. -- (14,000)
------------ ------------
Net cash provided by financing activities ............................. 12,975,000 25,800,000
------------ ------------
Net decrease in cash and cash equivalents ............................. (6,032,000) (4,987,000)
Cash and cash equivalents, beginning of year .......................... 92,336,000 73,843,000
------------ ------------
Cash and cash equivalents, end of period .............................. $ 86,304,000 $ 68,856,000
============ ============
Supplemental Schedule of Noncash:
Investing Activities
Unrealized gains (losses) on available-for-sale securities ......... $ (3,510,000) $ 1,671,000
Financing Activities
Tax benefit from exercise of employee stock options ................ -- 91,000
</TABLE>
The Corporation made interest payments of $6,836,000 and $7,386,000 and income
tax payments of $2,931,000 and $2,700,000 during the nine months ended September
30, 1999 and 1998, respectively.
*Restated - See note 2 to consolidated financial statements
See notes to consolidated financial statements
4
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION AND SUBSIDIARY
SEPTEMBER 30, 1999
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 September 30, 1999 and 1998 is unaudited; however, such
information reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods. The December
31, 1998 consolidated balance sheet was derived from the Company's December 31,
1998 audited consolidated financial statements.
2. PRIOR PERIOD ADJUSTMENT
In November 1999, The First of Long Island Corporation (the "Corporation")
learned of improprieties in its Trust Department that resulted in a misstatement
of Trust Department income and a misappropriation of funds. As a result of these
improprieties, the head of the Trust Department is no longer employed by the
Corporation. Coverages for misappropriation are provided under the Bank's
insurance policies. The Bank's management and its auditors are conducting an
ongoing investigation into this and any possible related matters.
The consolidated financial statements have been restated to correct the
misstatement referred to above. The impact of the misstatement on earnings for
years prior to 1998, net of applicable income taxes, is reflected in the
statement of changes in stockholders equity for the nine months ended September
30, 1998 as a prior period adjustment. The following tables present unaudited
quarterly data for 1999 and 1998 as originally reported and as restated to
correct for the misstatement.
5
<PAGE>
Quarterly Financial Data As Restated
<TABLE>
<CAPTION>
First Second Third Nine
Quarter Quarter Quarter Months
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
1999
Interest income .............................................. $ 8,178 $ 8,251 $ 8,646 $ 25,075
Interest expense ............................................. 2,243 2,176 2,440 6,859
Net interest income .......................................... 5,935 6,075 6,206 18,216
Provision for loan losses (credit) ........................... -- -- -- --
Noninterest income ........................................... 1,351 1,242 1,239 3,832
Noninterest expense .......................................... 4,165 4,095 4,086 12,346
Income before income taxes and transition
adjustment to allowance for loan losses .................... 3,121 3,222 3,359 9,702
Income taxes ................................................. 959 1,011 1,048 3,018
Net income before transition adjustment to
allowance for loan losses .................................. 2,162 2,211 2,311 6,684
Transition adjustment to allowance for loan losses,
net of income taxes ........................................ -- 945 -- 945
Net Income ................................................... 2,162 3,156 2,311 7,629
Earnings per share before transition adjustment
to allowance for loan losses:
Basic ........................................................ .70 .72 .76 2.18
Diluted ...................................................... .69 .71 .75 2.15
Earnings per share:
Basic......................................................... .70 1.03 .76 2.49
Diluted ...................................................... .69 1.01 .75 2.45
Comprehensive income ......................................... 1,526 1,845 2,185 5,556
1998
Interest income .............................................. $ 7,789 $ 8,095 $ 8,410 $ 24,294
Interest expense ............................................. 2,374 2,437 2,591 7,402
Net interest income .......................................... 5,415 5,658 5,819 16,892
Provision for loan losses (credit) ........................... -- (100) -- (100)
Noninterest income ........................................... 1,094 1,202 1,170 3,466
Noninterest expense .......................................... 3,715 3,840 3,966 11,521
Income before income taxes ................................... 2,794 3,120 3,023 8,937
Income taxes ................................................. 891 1,006 948 2,845
Net income ................................................... 1,903 2,114 2,075 6,092
Earnings per share:
Basic ........................................................ .61 .68 .67 1.96
Diluted ...................................................... .60 .66 .65 1.92
Comprehensive income ......................................... 1,855 2,173 3,051 7,079
</TABLE>
6
<PAGE>
Quarterly Financial Data As Originally Reported
<TABLE>
<CAPTION>
First Second Third Nine
Quarter Quarter Quarter Months
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
1999
Interest income .............................................. $ 8,178 $ 8,251 $ 8,646 $ 25,075
Interest expense ............................................. 2,243 2,176 2,440 6,859
Net interest income .......................................... 5,935 6,075 6,206 18,216
Provision for loan losses (credit) ........................... -- -- -- --
Noninterest income ........................................... 1,333 1,228 1,256 3,817
Noninterest expense .......................................... 4,165 4,095 4,086 12,346
Income before income taxes and transition
adjustment to allowance for loan losses .................... 3,103 3,208 3,376 9,687
Income taxes ................................................. 952 1,005 1,055 3,012
Net income before transition adjustment to
allowance for loan losses .................................. 2,151 2,203 2,321 6,675
Transition adjustment to allowance for loan losses,
net of income taxes ........................................ -- 945 -- 945
Net Income ................................................... 2,151 3,148 2,321 7,620
Earnings per share before transition adjustment
to allowance for loan losses:
Basic ........................................................ .69 .72 .77 2.18
Diluted ...................................................... .68 .70 .76 2.14
Earnings per share:
Basic ........................................................ .69 1.03 .77 2.49
Diluted ...................................................... .68 1.01 .76 2.45
Comprehensive income ......................................... 1,515 1,837 2,195 5,547
1998
Interest income .............................................. $ 7,789 $ 8,095 $ 8,410 $ 24,294
Interest expense ............................................. 2,374 2,437 2,591 7,402
Net interest income .......................................... 5,415 5,658 5,819 16,892
Provision for loan losses (credit) ........................... -- (100) -- (100)
Noninterest income ........................................... 1,135 1,238 1,202 3,575
Noninterest expense .......................................... 3,715 3,840 3,966 11,521
Income before income taxes ................................... 2,835 3,156 3,055 9,046
Income taxes ................................................. 908 1,021 961 2,890
Net income ................................................... 1,927 2,135 2,094 6,156
Earnings per share:
Basic ........................................................ .62 .69 .68 1.98
Diluted ...................................................... .61 .67 .66 1.94
Comprehensive income ......................................... 1,879 2,194 3,070 7,143
</TABLE>
3. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is an amount that management currently
believes will be adequate to absorb estimated inherent losses in the Bank's loan
portfolio. In estimating a range for such losses the Bank selectively reviews
individual credits in its portfolio and, for those loans deemed to be impaired,
measures impairment losses based on either the fair value of collateral or the
discounted value of expected future cash flows. Impairment losses for loans that
are not specifically reviewed are determined on a pooled basis taking into
account a variety of factors including historical losses; levels of and trends
in delinquencies and nonaccruing loans; trends in volume and terms of loans;
7
<PAGE>
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 addition to reviewing its own portfolio, management also considers
relevant loan loss statistics for the Bank's peer group. Because the process for
estimating credit losses and determining the allowance for loan losses as of any
balance sheet date is subjective in nature and requires material estimates,
there is not an exact amount but rather a range for what constitutes an
appropriate allowance.
In the second quarter of 1999 the Bank made a transition adjustment to
reduce its allowance for loan losses by $1,600,000 from $3,640,000 to
$2,040,000. This transition adjustment resulted in an allowance for loan losses
that management believes to be within an acceptable range and was made in
response to an article issued by staff members of the Financial Accounting
Standards Board in April 1999 and subsequent statements issued by staff members
of the Securities and Exchange Commission (the "SEC"). In applying the guidance
contained in the article and statements, which narrowly defines what constitutes
an inherent loan loss for purposes of inclusion in the allowance for loan
losses, management considered factors such as ability to repay and collateral
values as well as the factors discussed above.
The SEC also addressed the accounting that may result from the application
of its guidance and when such accounting should be applied. Pursuant to this,
the reduction in the Bank's allowance was recorded in the second quarter of 1999
and has been accounted for like a change in the application of an accounting
principle.
8
<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
Before a transition adjustment to the allowance for loan losses, the
Corporation earned $2.15 per share for the first nine months of 1999 as compared
to $1.92 for the same period last year, an increase of approximately 12%. Based
on net income before the transition adjustment of $6,684,000, the Corporation
returned 1.64% on average total assets and 13.89% on average total equity. This
compares to returns on assets and equity of 1.63% and 13.52%, respectively, for
the same period last year. The transition adjustment, which was recorded in the
second quarter of this year, resulted in a special nonrecurring credit to
earnings and increased final earnings per share for the nine month period to
$2.45. Total assets, deposits, and capital grew by approximately 9%, 10%, and
3%, respectively, when comparing balances at September 30, 1999 to those at
September 30, 1998. The Corporation's capital ratios continue to substantially
exceed the current regulatory criteria for a well capitalized bank.
The most important factor in the increase in earnings before the transition
adjustment was again an increase in checking account balances. Also important to
the earnings increase was growth in money market savings type balances, service
charge income, and stockholders' equity as well as a greater emphasis on
municipal bonds and mortgage-backed securities in the Bank's investment
portfolio.
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.
9
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------------------------------------
1999 1998
-------------------------------------- ---------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
--------- --------- --------- -------- --------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold ....................... $ 70,236 $ 2,521 4.80 % $ 53,367 $ 2,161 5.41%
Investment Securities:
Taxable ................................ 189,446 8,569 6.05 194,656 9,047 6.21
Nontaxable (1) ......................... 82,918 4,164 6.70 65,967 3,385 6.84
Loans (1)(2) ............................. 174,711 11,262 8.62 162,013 10,911 9.00
--------- --------- --------- -------- --------- --------
Total interest-earning assets ............ 517,311 26,516 6.85 476,003 25,504 7.16
--------- --------- --------- --------
Allowance for loan losses ................ (3,101) (3,641)
--------- --------
Net interest-earning assets .............. 514,210 472,362
Cash and due from banks .................. 19,675 17,090
Premises and equipment, net .............. 6,361 5,267
Other assets ............................. 5,812 5,645
--------- --------
$ 546,058 $500,364
========= ========
Liabilities and
Stockholders' Equity
Savings and money market deposits ........ $ 273,701 5,709 2.79 $ 246,655 5,972 3.24
Time deposits ............................ 38,004 1,150 4.05 39,202 1,430 4.88
--------- --------- --------- --------- --------- --------
Total interest-bearing deposits .......... 311,705 6,859 2.94 285,857 7,402 3.46
--------- --------- --------- --------- --------- --------
Checking deposits (3) .................... 167,723 151,769
Other liabilities ........................ 2,273 2,508
--------- ---------
481,701 440,134
Stockholders' equity ..................... 64,357 60,230
--------- ---------
$ 546,058 $ 500,364
========= =========
Net interest income (1) .................. $ 19,657 $ 18,102
========= =========
Net interest spread (1) .................. 3.91% 3.70%
========= ========
Net interest yield (1) ................... 5.08% 5.08%
========= ========
</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 nine months of 1999 and
1998 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.
10
<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.
Nine Months Ended September 30,
----------------------------------------------
1999 Versus 1998
Increase (decrease) due to changes in:
----------------------------------------------
Rate/ Net
Volume Rate Volume(2) Change
------- ------- ------- -------
(in thousands)
Interest Income:
Federal funds sold ......... $ 683 $ (245) $ (78) $ 360
Investment securities:
Taxable .................. (242) (242) 6 (478)
Nontaxable (1) ........... 870 (72) (19) 779
Loans (1) .................. 855 (468) (36) 351
------- ------- ------- -------
Total interest income ...... 2,166 (1,027) (127) 1,012
------- ------- ------- -------
Interest Expense:
Savings and money
market deposits .......... 656 (827) (92) (263)
Time deposits .............. (44) (244) 8 (280)
------- ------- ------- -------
Total interest expense ..... 612 (1,071) (84) (543)
------- ------- ------- -------
Increase (decrease) in net
interest income .......... $ 1,554 $ 44 $ (43) $ 1,555
======= ======= ======= =======
(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 $1,555,000, or
8.6%, from $18,102,000 for the nine months ended September 30, 1998 to
$19,657,000 for the comparable period in 1999. As can be seen from the above
rate/volume analysis, the increase is comprised of positive volume and rate
variances of $1,554,000 and $44,000, respectively, and a negative rate/volume
variance of $43,000.
The positive volume variance was largely 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 nine months
of 1999 to the like period in 1998, average checking deposits increased by
$15,954,000, or 10.5%, and average stockholders' equity increased by $4,127,000,
or 6.9%.
Also contributing to the positive volume variance was growth in money
market type deposits and the use of such funds to increase the Bank's overnight
position in federal funds sold and to purchase securities and originate loans.
When comparing the first nine months of 1999 to the same period in 1998, average
savings and money market deposits increased by $27,046,000, or 11.0%.
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 balances has historically been one of the
Corporation's key strategies for increasing earnings per share.
11
<PAGE>
The Bank's calling program is a significant factor that favorably impacted
the growth in average checking balances noted when comparing the first nine
months of 1999 to the same period last year, and competitive pricing is a
significant contributing factor with respect to the growth in average
interest-bearing deposits noted during the same period. In addition, the growth
in both checking and interest-bearing deposits is also believed to be
attributable to the Bank's attention to customer service and excellent
conditions in the local economy. 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 3.91% and 5.08%, respectively, for the
first nine months of 1999 as compared to 3.70% and 5.08%, respectively, for the
same period last year. It would appear that the principal cause for the increase
in spread was that in January 1999 the Bank lowered the rates paid on its
traditional savings and interest-bearing checking products to more align them
with local market conditions. However, it should be noted that that during the
third quarter of 1999 the federal funds target rate increased by 50 basis points
and the Bank increased its prime lending rate and the rates paid on its money
market products by a like amount. As more fully discussed in the Market Risk
section of this Discussion and Analysis of Financial Condition and Results of
Operations, an increase in interest rates should initially have a negative
impact on net interest income, while a sustained increase should have the
opposite effect.
Allowance and Provision For Loan Losses
The allowance for loan losses was $2,042,000 at September 30, 1999 as
compared to $3,651,000 at December 31, 1998, representing 1.13% and 2.14%,
respectively, of total loans. The reduction in the allowance during 1999 is
primarily due to the $1,600,000 transition adjustment made in the second
quarter. As further discussed below, the transition adjustment was made in
response to recent guidance issued by staff members of the Financial Accounting
Standards Board and further guidance issued by staff members of the Securities
and Exchange Commission (the "SEC").
The allowance for loan losses is an amount that management currently
believes will be adequate to absorb estimated inherent losses in the Bank's loan
portfolio. In estimating a range for such losses the Bank selectively reviews
individual credits in its portfolio and, for those loans deemed to be impaired,
measures impairment losses based on either the fair value of collateral or the
discounted value of expected future cash flows. Impairment losses for loans that
are not specifically reviewed are determined on a pooled basis taking into
account a variety of factors including historical losses; 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 addition to reviewing its own portfolio, management also considers
relevant loan loss statistics for the Bank's peer group. Because the process for
estimating credit losses and determining the allowance for loan losses as of any
balance sheet date is subjective in nature and requires material estimates,
there is not an exact amount but rather a range for what constitutes an
appropriate allowance.
In the second quarter of 1999 the Bank made a transition adjustment to
reduce its allowance for loan losses by $1,600,000. This transition adjustment
resulted in an
12
<PAGE>
allowance for loan losses that management believes to be within an acceptable
range and was made in response to an article issued by staff members of the
Financial Accounting Standards Board in April 1999 and subsequent statements
issued by staff members of the Securities and Exchange Commission (the "SEC").
In applying the guidance contained in the article and statements, which narrowly
defines what constitutes an inherent loan loss for purposes of inclusion in the
allowance for loan losses, management considered factors such as ability to
repay and collateral values as well as the factors discussed above.
The SEC also addressed the accounting that may result from the
application of its guidance and when such accounting should be applied. Pursuant
to this, the reduction in the Bank's allowance was recorded in the second
quarter of 1999 and has been accounted for like a change in the application of
an accounting principle.
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 approximately 80% of total loans outstanding at September 30, 1999.
Since 1987, environmental audits have been instituted for commercial mortgages,
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.
Asset Quality
The Corporation 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 Corporation 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, 1998.
13
<PAGE>
September 30, December 31,
1999 1998
------ ------
(dollars in thousands)
Nonaccruing loans ................................... $ -- $ 22
Foreclosed real estate .............................. -- --
------ ------
Total nonperforming assets ........................ -- 22
Troubled debt restructurings ........................ -- --
Loans past due 90 days or more as to
principal or interest payments and still accruing . 3 --
------ ------
Total risk elements ............................... $ 3 $ 22
====== ======
Nonaccruing loans as a percentage of total loans .... .00% .01%
====== ======
Nonperforming assets as a percentage of total loans
and foreclosed real estate ........................ .00% .01%
====== ======
Risk elements as a percentage of total loans and
foreclosed real estate ............................ .00% .01%
====== ======
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 $366,000,
or 10.6%, from $3,466,000 for the first nine months of 1998 to $3,832,000 for
the same period in 1999. The increase, which is primarily comprised of increases
in maintenance/activity charges and overdraft check charges, is partially
attributable to a revision of the Bank's service charge schedule in 1999.
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
$825,000, or 7.2%, from $11,521,000 for the first nine months of 1998 to
$12,346,000 for the same period in 1999. The increase is largely comprised of an
increase in salaries of $357,000, or 6.6%, an increase in occupancy and
equipment expense of $188,000, or 12.3%, and an increase in other operating
expenses of $279,000, or 11.2%. The increase in salaries is primarily
attributable to normal annual salary increases and new branch openings. The Bank
opened two commercial banking offices in Suffolk County, Long Island in the
third quarter of 1998, and an additional commercial banking office in Nassau
County, Long Island in January 1999. In addition, the Bank opened a full-service
branch in Rockville Centre, Nassau County, Long Island in February 1998 and
simultaneously closed its Rockville Centre commercial banking office.
The increase in occupancy and equipment expense is primarily attributable
to the new branch openings and significant equipment upgrades made principally
in the Bank's branch system. The increase in other operating expenses, which
includes computer service expense, is partially attributable to the new branch
openings and equipment upgrades. The equipment upgrades have and will continue
to negatively impact results of operations because the new items replaced ones
that were fully-depreciated. Management presently expects the negative impact on
1999 net income before income taxes to be approximately $375,000.
Income tax expense as a percentage of book income before the transition
adjustment was 31.1% and 31.8% for the first nine months of 1999 and 1998,
respectively. These
14
<PAGE>
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 1999 is primarily attributable to an increase
in the amount of tax-exempt income on municipal securities.
Results of Operations - Three Months Ended September 30, 1999 Versus Three
Months Ended September 30, 1998
Net income for the third quarter of 1999 was $2,311,000, or $.75 per share,
as compared to $2,075,000, or $.65 per share, for the same quarter in 1998. The
increase in earnings for the quarter was primarily due to the net effect of
increases in net interest income and noninterest expense of $387,000 and
$120,000, respectively. The significant reasons for the increases in net
interest income and noninterest expense are substantially the same as those
discussed above with regard to the nine month periods.
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 September 30, 1999 and the
minimum ratios necessary to be classified as well capitalized and adequately
capitalized. The Corporation's capital ratios at September 30, 1999
substantially exceed the requirements for a well-capitalized bank.
<TABLE>
<CAPTION>
Regulatory Standards
Corporation's --------------------------
Capital Ratios at Well Adequately
September 30, 1999 Capitalized Capitalized
------------------ ----------- -----------
<S> <C> <C> <C>
Total Risk-Based Capital Ratio ..... 29.83% 10.00% 8.00%
Tier 1 Risk-Based Capital Ratio ..... 28.92 6.00 4.00
Tier 1 Leverage Capital Ratio ....... 11.51 5.00 4.00
</TABLE>
Total stockholders' equity increased by $1,263,000, or from $63,744,000 at
December 31, 1998 to $65,007,000 at September 30, 1999. The increase in
stockholders' equity is attributable to net income of $7,629,000 and proceeds
from the exercise of stock options. The impact of these items was partially
offset by common stock repurchases amounting to $3,472,000, unrealized losses on
available-for-sale securities of $2,073,000 and cash dividends declared of
$907,000.
Stock Repurchase Program. Since 1988, the Corporation has had a stock
repurchase program under which it can purchase from time to time shares of its
own common stock in market or private transactions. Thus far in 1999, the Board
of Directors has approved four stock repurchase plans. The first two plans were
approved in April and May of this year and authorized the purchase of 25,000 and
50,000 shares, respectively. The remaining two plans were approved in October
and each authorized the purchase of 35,000 shares. Total shares purchased to
date in 1999 are 128,263, of which 107,485 were purchased under the 1999 plans
and 20,778 were purchased under a plan approved in 1998. There are 37,515 shares
that can still be purchased under the 1999 plans.
Cash Flows and Liquidity
Cash Flows. During the nine months ended September 30, 1999, cash and cash
equivalents decreased by $6,032,000. This decrease, along with $7,742,000 in
cash provided by operations and $18,197,000 in deposit growth were the primary
sources of funding increases in the securities and loan portfolios by
$15,557,000 and $10,104,000,
15
<PAGE>
respectively, stock repurchases of $3,472,000, cash dividends paid of
$1,836,000, and capital expenditures of $1,088,000.
Liquidity. The Corporation's primary sources of liquidity are its overnight
position in federal funds sold; its short-term investment securities portfolio
which generally consists of securities purchased to mature within one year and
securities with average lives of one year or less; maturities and monthly
payments on the balance of the investment securities portfolio and the loan
portfolio; and investment securities designated as available-for-sale. At
September 30, 1999, the Corporation had $66,200,000 in federal funds sales, a
short-term securities portfolio of $22,174,000, and available-for-sale
securities of $95,113,000. The Corporation's liquidity is enhanced by its stable
deposit base which primarily consists of checking, savings, and money market
accounts. Such accounts comprised 92.1% of total deposits at September 30, 1999,
while time deposits of $100,000 and over and other time deposits comprised only
2.8% and 5.1%, 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 invests in interest-earning assets which are funded by
interest-bearing deposits, noninterest-bearing deposits, and capital. The Bank's
results of operations are subject to risk resulting from interest rate
fluctuations generally and from having assets and liabilities that have
different maturity, repricing, prepayment/withdrawal characteristics or do not
have a direct interest cost. 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.
Because the Bank's interest-bearing deposit accounts generally reprice
faster than its loans and investment securities, a decrease in interest rates
should initially have a positive impact on net interest income. However, since
approximately 45% of the Bank's average interest-earning assets are funded by
noninterest-bearing checking deposits and capital, a sustained decrease in
interest rates should have a negative impact on net interest income as such
assets reprice at lower rates without an offsetting reduction in interest
expense. The opposite should be true of an increase in interest rates.
It is believed that the Corporation's exposure to interest rate risk has
not changed materially since December 31, 1998.
Year 2000
The Bank began its Year 2000 compliance efforts in 1996 and has established
formal processes for identifying, assessing, and managing the Year 2000 risks
posed by internal bank activities, vendors, and customers. All core data
processing systems have been modified to meet the Year 2000 date change.
The Bank utilizes Fiserv, Inc. ("Fiserv"), one of the largest data
processing providers for banks, savings institutions, and credit unions, to
process the transactions originating from its core banking activities, which
principally include deposits, loans, and the Bank's
16
<PAGE>
investment portfolio. Fiserv has informed the Bank that the software used to
process its applications has been upgraded to be Year 2000 compliant and tested
both internally and with clients. The client testing was performed in accordance
with guidelines issued by various bank regulatory agencies. In the second
quarter of 1999 the Bank completed its conversion to the Year 2000-compliant
versions of Fiserv's software. A Year 2000 failure by Fiserv, of course, could
have a significant adverse impact on the operations of the Bank. Business
transactions originated by the Bank's Trust Department are processed by SEI
Investments Company ("SEI"). SEI has modified its processing software to be Year
2000 compliant.
Testing of internal information and embedded technology systems, none of
which are deemed to be mission critical, is complete. With respect to a
substantial portion of these systems, the Bank has contingency/disaster recovery
plans in place and is in the process of developing others where it is reasonably
feasible. With respect to significant outside vendors, the Bank is developing
contingency plans to meet the needs of customers in the event of a Year 2000
failure. The Bank has a plan to address potential customer cash needs that may
result from Year 2000 concerns.
In the third quarter of 1998, the Bank completed an initial assessment of
the risks posed by its significant customers and counterparties and is
continuing to assess these risks on an ongoing basis. During the remainder of
this year the Bank will continue to monitor its own internal activities and the
plans of its vendors and customers to address the Year 2000 issue.
The Bank has upgraded its communication systems and the equipment used in
its branch system. The timing of the upgrades was accelerated as a result of the
Year 2000 issue. The total cost of the upgrades was approximately $1,500,000.
Approximately half of the upgrades were placed in service in the latter part of
1998, and the balance was placed in service in the first quarter of 1999. Other
than the cost of the equipment upgrades, the Bank expects to meet its Year 2000
commitment using internal resources and without incurring significant
incremental expenses. Total incremental expenses are currently expected to be
approximately $200,000. Based on current information, management does not expect
the total cost of Year 2000 compliance to materially impact the Corporation's
future results of operations, financial condition, or liquidity.
Legislation
Commercial checking deposits currently account for approximately 26% of the
Bank's total deposits. Congress is currently considering legislation that would
allow customers to cover checks by sweeping funds from interest-bearing deposit
accounts each business day and repeal the prohibition of the payment of interest
on corporate checking deposits in the future. Although management currently
believes that the Bank's earnings could be more severely impacted by permitting
the payment of interest on corporate checking deposits than the daily sweeping
of funds from interest-bearing accounts to cover checks, either could have a
material adverse impact on the Bank's future results of operations.
Forward Looking Statements
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains various forward-looking statements with respect to
financial performance and business matters. Such statements are contained in
sentences including the words "expect" or "could" or "should". The Corporation
cautions that these forward-looking statements are subject to numerous
assumptions, risks and uncertainties, and
17
<PAGE>
therefore actual results could differ materially from those contemplated by the
forward-looking statements. In addition, the Corporation assumes no duty to
update forward-looking statements.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. NONE
ITEM 2. NONE
ITEM 3. NONE
ITEM 4. NONE
ITEM 5. STOCK REPURCHASE PROGRAM
Since 1988, the Corporation has had a stock repurchase program under which
it can purchase from time to time shares of its own common stock in market or
private transactions. Thus far in 1999, the Board of Directors has approved four
stock repurchase plans. The first two plans were approved in April and May of
this year and authorized the purchase of 25,000 and 50,000 shares, respectively.
The remaining two plans were approved in October and each authorized the
purchase of 35,000 shares. Total shares purchased to date in 1999 are 128,263,
of which 107,485 were purchased under the 1999 plans and 20,778 were purchased
under a plan approved in 1998. There are 37,515 shares that can still be
purchased under the 1999 plans.
ITEM 6. (a) Exhibits: Exhibit 27 - Financial Data Schedule is submitted
herewith
(b) Reports on Form 8-K - On November 17, 1999, the Corporation filed
a current report on Form 8-K to report that on November 12, 1999
it had announced improprieties by one of its employees that
resulted in a misstatement of the Corporation's previously
reported earnings and a misappropriation of funds. The exhibits
to the Form 8-K included the text of the November 12, 1999 press
release and the text of a press release dated October 8, 1999
announcing the Corporation's earnings, before the restatement,
for the nine months ended September 30, 1999.
19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
THE FIRST OF LONG ISLAND CORPORATION
--------------------------------------------
(Registrant)
DATE: December 2, 1999 By /s/ J. WILLIAM JOHNSON
--------------------------------------------
J. WILLIAM JOHNSON, PRESIDENT
(principal executive officer)
By /s/ MARK D. CURTIS
--------------------------------------------
MARK D. CURTIS
SENIOR VICE PRESIDENT AND TREASURER
(principal financial and accounting officer)
20
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 20,099,000
<INT-BEARING-DEPOSITS> 5,000
<FED-FUNDS-SOLD> 66,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 95,113,000
<INVESTMENTS-CARRYING> 190,979,000
<INVESTMENTS-MARKET> 189,385,000
<LOANS> 180,813,000
<ALLOWANCE> 2,042,000
<TOTAL-ASSETS> 564,532,000
<DEPOSITS> 497,428,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,097,000
<LONG-TERM> 0
0
0
<COMMON> 301,000
<OTHER-SE> 64,706,000
<TOTAL-LIABILITIES-AND-EQUITY> 564,532,000
<INTEREST-LOAN> 11,237,000
<INTEREST-INVEST> 11,317,000
<INTEREST-OTHER> 2,521,000
<INTEREST-TOTAL> 25,075,000
<INTEREST-DEPOSIT> 6,859,000
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 18,216,000
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,346,000
<INCOME-PRETAX> 9,702,000
<INCOME-PRE-EXTRAORDINARY> 6,684,000
<EXTRAORDINARY> 0
<CHANGES> 945,000
<NET-INCOME> 7,629,000
<EPS-BASIC> 2.49
<EPS-DILUTED> 2.45
<YIELD-ACTUAL> 5.08
<LOANS-NON> 0
<LOANS-PAST> 3,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,651,000
<CHARGE-OFFS> 49,000
<RECOVERIES> 40,000
<ALLOWANCE-CLOSE> 2,042,000
<ALLOWANCE-DOMESTIC> 2,042,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
