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 March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ________________________to_______________________
Commission file 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 2, 2000
Common stock, par value 2,939,333
$.10 per share
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION
MARCH 31, 2000
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999 1
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31,
2000 AND 1999 2
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6-13
PART II. OTHER INFORMATION 14
SIGNATURES 15
EXHIBITS
EXHIBIT 27 - FINANCIAL DATA SCHEDULE 16
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999*
------------- -------------
<S> <C> <C>
Assets:
Cash and due from banks .................................... $ 12,982,000 $ 21,174,000
Federal funds sold ......................................... 84,800,000 64,000,000
------------- -------------
Cash and cash equivalents ................................ 97,782,000 85,174,000
------------- -------------
Investment securities:
Held-to-maturity, at amortized cost (approximate fair
value of $187,884,000 and $187,258,000) .......... 191,528,000 189,998,000
Available-for-sale, at fair value (amortized cost
of $100,897,000 and $103,125,000) ................ 98,622,000 100,865,000
------------- -------------
290,150,000 290,863,000
------------- -------------
Loans:
Commercial and industrial ........................... 29,837,000 30,296,000
Secured by real estate .............................. 146,569,000 147,598,000
Consumer ............................................ 5,578,000 5,284,000
Other ............................................... 465,000 549,000
------------- -------------
182,449,000 183,727,000
Unearned income ..................................... (932,000) (953,000)
------------- -------------
181,517,000 182,774,000
Allowance for loan losses ........................... (1,923,000) (2,033,000)
------------- -------------
179,594,000 180,741,000
------------- -------------
Bank premises and equipment ................................ 6,712,000 6,746,000
Prepaid income taxes ....................................... -- 194,000
Deferred income tax benefits ............................... 1,160,000 1,197,000
Other assets ............................................... 5,930,000 5,636,000
------------- -------------
$ 581,328,000 $ 570,551,000
============= =============
Liabilities:
Deposits:
Checking ............................................ $ 173,802,000 $ 176,869,000
Savings and money market ............................ 299,429,000 287,799,000
Time, other ......................................... 24,237,000 23,853,000
Time, $100,000 and over ............................. 16,421,000 14,668,000
------------- -------------
513,889,000 503,189,000
Accrued expenses and other liabilities ..................... 1,461,000 3,129,000
Income taxes payable ....................................... 298,000 --
------------- -------------
515,648,000 506,318,000
------------- -------------
Commitments and Contingent Liabilities
Stockholders' Equity:
Common stock, par value $.10 per share:
Authorized, 20,000,000 shares;
Issued and outstanding, 2,940,077 and 2,962,803 shares . 294,000 296,000
Surplus .................................................... 1,552,000 2,258,000
Retained earnings .......................................... 65,186,000 63,013,000
------------- -------------
67,032,000 65,567,000
Accumulated other comprehensive income (loss), net of tax .. (1,352,000) (1,334,000)
------------- -------------
65,680,000 64,233,000
------------- -------------
$ 581,328,000 $ 570,551,000
============= =============
</TABLE>
*Reclassified to conform to the current period's presentation
See notes to consolidated financial statements
1
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Three Months Ended March 31,
----------------------------
2000 1999*
------------ -----------
Interest income:
Loans ....................................... $ 3,911,000 $ 3,656,000
Investment securities:
Taxable ................................. 3,087,000 2,876,000
Nontaxable .............................. 1,056,000 917,000
Federal funds sold .......................... 910,000 729,000
----------- -----------
8,964,000 8,178,000
----------- -----------
Interest expense:
Savings and money market deposits ........... 2,383,000 1,842,000
Time deposits ............................... 447,000 401,000
----------- -----------
2,830,000 2,243,000
----------- -----------
Net interest income ..................... 6,134,000 5,935,000
Provision for loan losses (credit) .............. (75,000) --
----------- -----------
Net interest income after provision
for loan losses (credit) ............ 6,209,000 5,935,000
----------- -----------
Noninterest income:
Trust Department income ..................... 294,000 357,000
Service charges on deposit accounts ......... 697,000 887,000
Other ....................................... 119,000 107,000
----------- -----------
1,110,000 1,351,000
----------- -----------
Noninterest expense:
Salaries .................................... 1,968,000 1,927,000
Employee benefits ........................... 780,000 723,000
Occupancy and equipment expense ............. 642,000 588,000
Other operating expenses .................... 922,000 927,000
----------- -----------
4,312,000 4,165,000
----------- -----------
Income before income taxes .............. 3,007,000 3,121,000
Income tax expense .............................. 834,000 959,000
----------- -----------
Net Income .............................. 2,173,000 2,162,000
=========== ===========
Weighted average:
Common shares ............................... 2,951,440 3,095,194
Dilutive stock options ...................... 37,038 57,191
----------- -----------
2,988,478 3,152,385
=========== ===========
Earnings per share:
Basic ....................................... $ .74 $ .70
=========== ===========
Diluted ..................................... $ .73 $ .69
=========== ===========
*Reclassified to conform to the current period's presentation
See notes to consolidated financial statements
2
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Three Months Ended March 31, 2000
---------------------------------------------------------------------------------------------------
Accumulated
Other
Common Stock Compre- Compre-
-------------------------- hensive Retained hensive
Shares Amount Surplus Income Earnings Income (Loss) Total
---------- ------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 ...... 2,962,803 $ 296,000 $ 2,258,000 $ 63,013,000 $ (1,334,000) $ 64,233,000
Net Income .................... $ 2,173,000 2,173,000 2,173,000
Repurchase and retirement
of common stock ............... (23,214) (2,000) (711,000) (713,000)
Exercise of stock options ..... 488 5,000 5,000
Unrealized losses on available-
for-sale-securities, net of
income taxes .................. (18,000) (18,000) (18,000)
------------
Comprehensive income .......... $ 2,155,000
---------- ------------ ------------ ============ ------------ ------------ ------------
Balance, March 31, 2000 ....... 2,940,077 $ 294,000 $ 1,552,000 $ 65,186,000 $ (1,352,000) $ 65,680,000
========== ============ ============ ============ ============ ============
<CAPTION>
---------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1999
---------------------------------------------------------------------------------------------------
Accumulated
Other
Common Stock Compre- Compre-
-------------------------- hensive Retained hensive
Shares Amount Surplus Income Earnings Income Total
---------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <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 .................... $ 2,162,000 2,162,000 2,162,000
Repurchase and retirement
of common stock ............... (5,030) (1,000) (213,000) (214,000)
Exercise of stock options ..... 1,599 17,000 17,000
Unrealized losses on available-
for-sale-securities, net of
income taxes .................. (636,000) (636,000) (636,000)
------------
Comprehensive income .......... $ 1,526,000
---------- ------------ ---------- ============ ------------ ------------ ------------
Balance, March 31, 1999 ....... 3,092,540 $ 309,000 $4,023,000 $ 60,111,000 $ 630,000 $ 65,073,000
========== ============ ========== ============ ============ ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
Increase (Decrease) in Cash and Cash Equivalents 2000 1999
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ................................................................. $ 2,173,000 $ 2,162,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses (credit) ......................................... (75,000) --
Deferred income tax provision .............................................. 34,000 3,000
Depreciation and amortization .............................................. 272,000 307,000
Premium amortization on investment securities, net ......................... 169,000 159,000
Decrease in prepaid income taxes ........................................... 194,000 153,000
Increase in other assets ................................................... (294,000) (481,000)
Decrease in accrued expenses and other liabilities ......................... (661,000) (668,000)
Increase in income taxes payable ........................................... 298,000 459,000
------------ ------------
Net cash provided by operating activities .................................. 2,110,000 2,094,000
------------ ------------
Cash Flows From Investing Activities:
Proceeds from maturities and redemptions of investment securities:
Held-to-maturity ........................................................... 43,402,000 17,760,000
Available-for-sale ......................................................... 6,000,000 3,725,000
Purchase of investment securities:
Held-to-maturity ........................................................... (45,017,000) (9,326,000)
Available-for-sale ......................................................... (3,856,000) (3,964,000)
Net decrease in loans to customers ......................................... 1,222,000 427,000
Purchases of bank premises and equipment ................................... (238,000) (361,000)
------------ ------------
Net cash used in investing activities ...................................... 1,513,000 8,261,000
------------ ------------
Cash Flows From Financing Activities:
Net increase (decrease) in total deposits .................................. 10,700,000 (9,728,000)
Proceeds from exercise of stock options .................................... 5,000 17,000
Repurchase and retirement of common stock .................................. (713,000) (214,000)
Cash dividends paid ........................................................ (1,007,000) (929,000)
------------ ------------
Net cash provided by (used in) financing activities ........................ 8,985,000 (10,854,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents ....................... 12,608,000 (499,000)
Cash and cash equivalents, beginning of year ............................... 85,174,000 92,336,000
------------ ------------
Cash and cash equivalents, end of period ................................... $ 97,782,000 $ 91,837,000
============ ============
Supplemental Schedule of Noncash:
Investing Activities
Unrealized losses on available-for-sale securities ......................... $ (15,000) $ (1,076,000)
</TABLE>
The Corporation made interest payments of $2,806,000 and $2,252,000 and income
tax payments of $308,000 and $344,000 during the three months ended March 31,
2000 and 1999, respectively.
See notes to consolidated financial statements
4
<PAGE>
THE FIRST OF LONG ISLAND CORPORATION AND SUBSIDIARY
MARCH 31, 2000
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, 2000 and 1999 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, 1999
consolidated balance sheet was derived from the Company's December 31, 1999
audited consolidated financial statements.
5
<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 $.73 per share for the first quarter of 2000 as
compared to $.69 for the same quarter last year, an increase of approximately
6%. Based on net income of $2,173,000, the Corporation returned 1.53% on average
total assets and 13.65% on average total equity. This compares to returns on
assets and equity of 1.64% and 13.64%, respectively, for the same period last
year. Total assets, deposits, and capital grew by approximately 8%, 9%, and 1%,
respectively, when comparing balances at March 31, 2000 to those at March 31,
1999. Despite earnings, the growth in capital was minimal as a result of a
significant level of activity under the Corporation's stock repurchase program
and unrealized losses on available-for-sale securities. Management has used the
stock repurchase program to enhance both earnings per share and return on
average stockholders' equity. 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 per share was an
increase in checking account balances. Also important were growth in money
market savings type balances and the impact of the Corporation's stock
repurchase program. Negatively affecting earnings were declines in net interest
margin and service charge income, the latter resulting from the loss of several
accounts which incurred high overdraft and other service charges.
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.
6
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------------------
2000 1999
--------------------------------------- -------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------------ ---------- ------------ ----------- ---------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold ....................... $ 65,863 $ 910 5.56% $ 63,398 $ 729 4.66%
Investment Securities:
Taxable................................. 202,511 3,087 6.13 188,298 2,876 6.19
Nontaxable (1).......................... 89,923 1,600 7.12 83,187 1,389 6.68
Loans (1)(2).............................. 182,030 3,922 8.67 172,168 3,672 8.65
------------ ---------- ------------ ---------- ---------- ------------
Total interest-earning assets............. 540,327 9,519 7.08 507,051 8,666 6.91
---------- ------------ ---------- ------------
Allowance for loan losses................. (2,028) (3,660)
------------ ----------
Net interest-earning assets............... 538,299 503,391
Cash and due from banks................... 20,484 18,095
Premises and equipment, net............... 6,771 6,350
Other assets.............................. 6,681 5,507
------------ ----------
$ 572,235 $ 533,343
============ ==========
Liabilities and
Stockholders' Equity
Savings and money market deposits..... $ 288,661 2,383 3.32 $ 267,348 1,842 2.79
Time deposits............................. 41,136 447 4.37 39,394 401 4.13
------------ ---------- ------------ ---------- ---------- ------------
Total interest-bearing deposits........... 329,797 2,830 3.45 306,742 2,243 2.97
------------ ---------- ------------ ---------- ---------- ------------
Checking deposits (3)..................... 175,640 159,879
Other liabilities......................... 2,437 2,437
------------ ----------
507,874 469,058
Stockholders' equity...................... 64,361 64,285
------------ ----------
$ 572,235 $ 533,343
============ ==========
Net interest income (1)................... $ 6,689 $ 6,423
========== ==========
Net interest spread (1)................... 3.63% 3.94%
============ ============
Net interest yield (1).................... 4.98% 5.14%
============ ============
</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 2000 and 1999
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.
7
<PAGE>
Rate/Volume Analysis. The following table sets forth the effect of changes
in volumes, changes in rates, and changes in rate/volume on tax-equivalent
interest income, interest expense and net interest income.
Three Months Ended March 31,
----------------------------------------
2000 Versus 1999
Increase (decrease) due to changes in:
----------------------------------------
Rate/ Net
Volume Rate Volume(2) Change
------ ------ -------- ------
(in thousands)
Interest Income:
Federal funds sold ................ $ 29 $ 141 $ 11 $ 181
Investment securities:
Taxable ......................... 219 (30) 22 211
Nontaxable (1) .................. 112 91 8 211
Loans (1) ......................... 212 7 31 250
----- ----- ----- -----
Total interest income ............. 572 209 72 853
----- ----- ----- -----
Interest Expense:
Savings and money
market deposits ................. 148 350 43 541
Time deposits ..................... 18 24 4 46
----- ----- ----- -----
Total interest expense ............ 166 374 47 587
----- ----- ----- -----
Increase (decrease) in net
interest income ................. $ 406 $(165) $ 25 $ 266
===== ===== ===== =====
(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 $266,000, or
4.1%, from $6,423,000 for the first quarter of 1999 to $6,689,000 for the
comparable period in 2000. As can be seen from the above rate/volume analysis,
the increase is primarily comprised of a positive volume variance of $406,000
and a negative rate variance of $165,000.
The positive volume variance was largely caused by growth in average
checking deposits and the use of such funds to purchase investment securities
and originate loans. When comparing the first quarter of 2000 to the like period
in 1999, average checking deposits increased by $15,761,000, or 9.9%.
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 quarter of 2000 to the same period in 1999, average
savings and money market deposits increased by $21,313,000, or 8.0%.
Funding interest-earning asset growth with growth in checking deposits has
a greater impact on net interest income than funding such growth with
interest-bearing deposits because checking deposits, 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.
The Bank's calling program is a significant factor that favorably impacted
the growth in average checking balances noted when comparing the first quarter
of 2000 to the same period last year, and competitive pricing is a significant
contributing factor with respect
8
<PAGE>
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.
Net interest spread and yield were 3.63% and 4.98%, respectively, for the
first quarter of 2000 as compared to 3.94% and 5.14%, respectively, for the same
period last year. The principal cause for the decrease in spread and yield was
an escalation in general interest rates during the past nine months. During this
period the federal funds target rate increased by 125 basis points from 4.75% to
6.00% and the Bank raised 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 $1,923,000 at March 31, 2000 as compared
to $2,033,000 at December 31, 1999, representing 1.1% of total loans at each
date. The change in the allowance during the first quarter of 2000 is primarily
due to a $75,000 credit provision for loan losses and chargeoffs of $42,000.
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. 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.
The amount of future chargeoffs and provisions for loan 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 81% of total loans outstanding at March 31, 2000.
Environmental audits for commercial mortgages were instituted by the Bank in
1987. 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.
9
<PAGE>
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 was not significant at either December 31, 1999 or March
31, 2000.
March 31, December 31,
2000 1999
---------- -----------
(dollars in thousands)
Nonaccruing loans .................................... $ -- $ 28
Foreclosed real estate ............................... -- --
---------- -----------
Total nonperforming assets ......................... -- 28
Troubled debt restructurings ......................... -- --
Loans past due 90 days or more as to
principal or interest payments and still accruing .. -- 5
---------- -----------
Total risk elements ................................ $ -- $ 33
========== ===========
Nonaccruing loans as a percentage of total loans ..... .00% .02%
========== ===========
Nonperforming assets as a percentage of total loans
and foreclosed real estate ......................... .00% .02%
========== ===========
Risk elements as a percentage of total loans and
foreclosed real estate ............................. .00% .02%
========== ===========
Noninterest Income, Noninterest Expense, and Income Taxes
Noninterest income consists primarily of service charges on deposit
accounts and Trust Department income. Service charge income decreased by
$190,000, or 21.4%, from $887,000 for the first quarter of 1999 to $697,000 for
the same period in 2000. The decrease, which is largely comprised of decreases
in maintenance/activity charges and overdraft check charges, is partially
attributable to a the loss of several accounts that were large producers of
service charge income.
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
$147,000, or 3.5%, from $4,165,000 for the first quarter of 1999 to $4,312,000
for the same period in 2000. The increase is primarily comprised of an increase
in salaries of $41,000, or 2.1%, an increase in employee benefits expense of
$57,000, or 7.9%, and an increase in occupancy and equipment expense of $54,000,
or 9.2%. The increase in employee benefits expense is primarily attributable to
increases in executive search fees and retirement expense. The increase in
occupancy and equipment expense is largely attributable to an increase in
depreciation expense resulting primarily from significant equipment upgrades
made in 1999 and planned for 2000.
10
<PAGE>
Income tax expense as a percentage of book income was 27.7% and 30.7% for
the first three months of 2000 and 1999, 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 2000 is primarily attributable to an increase in the amount
of tax-exempt income on municipal securities and the implementation of certain
tax planning strategies.
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, 2000 and the minimum
ratios necessary to be classified as well capitalized and adequately
capitalized. The Corporation's capital ratios at March 31, 2000 substantially
exceed the requirements for a well-capitalized bank.
<TABLE>
<CAPTION>
Regulatory Standards
Corporation's ----------------------------
Capital Ratios at Well Adequately
March 31, 2000 Capitalized Capitalized
--------------------- ------------ -------------
<S> <C> <C> <C>
Total Risk-Based Capital Ratio ........ 30.91% 10.00% 8.00%
Tier 1 Risk-Based Capital Ratio ........ 30.05 6.00 4.00
Tier 1 Leverage Capital Ratio .......... 11.64 5.00 4.00
</TABLE>
Total stockholders' equity increased by $1,447,000, or from $64,233,000 at
December 31, 1999 to $65,680,000 at March 31, 2000. The increase in
stockholders' equity is primarily attributable to the combined effect of net
income of $2,173,000 and stock repurchases amounting to $713,000.
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 2000, the Board
of Directors has approved one stock repurchase plan for 35,000 shares. Total
shares purchased to date in 2000 are 23,214, all of which were purchased under a
plan approved in 1999. There are 1,262 shares that can still be purchased under
the 1999 plan and 35,000 shares that can be purchased under the 2000 plan.
Cash Flows and Liquidity
Cash Flows. During the first quarter of 2000, deposit growth provided cash
of $10,700,000 and operating and investing activities provided cash of
$2,110,000 and $1,513,000, respectively. These amounts were used to increase the
balance of cash and cash equivalents by $12,608,000, pay cash dividends of
$1,007,000, and fund stock repurchases amounting to $713,000.
The deposit growth of $10,700,000 is largely attributable to growth in
money market type balances of $9,024,000. The $3,067,000 decrease in checking
balances noted when comparing March 31, 2000 to December 31, 1999 is believed to
be cyclical in nature.
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 March
31, 2000, the Corporation had $84,800,000 in federal funds sales, a short-
11
<PAGE>
term securities portfolio of $24,743,000, and available-for-sale securities of
$98,622,000. 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 March 31, 2000, while time
deposits of $100,000 and over and other time deposits comprised only 3.2% and
4.7%, 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 maximize net interest
income while at the same time maintaining acceptable levels of interest rate and
liquidity risk and facilitating the funding needs of the Bank.
Because the Bank's loans and investment securities generally reprice slower
than its interest-bearing deposit accounts, an increase in interest rates should
initially have a negative impact on net interest income. However, since
approximately 44% of the Bank's average interest-earning assets are funded by
noninterest-bearing checking deposits and capital, a sustained increase in
interest rates should have a positive impact on net interest income as such
assets reprice at higher rates without an offsetting increase in interest
expense. The opposite should be true of a decrease in interest rates.
It is believed that the Corporation's exposure to interest rate risk has
not changed materially since December 31, 1999.
Legislation
Commercial checking deposits currently account for approximately 25% of the
Bank's total deposits. Congress is actively 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" or "would". The
Corporation cautions that these forward-looking statements are subject to
numerous assumptions, risks and uncertainties, and
12
<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.
13
<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 2000, the Board of Directors has approved one
stock repurchase plan for 35,000 shares. Total shares purchased to date in 2000
are 23,214, all of which were purchased under a plan approved in 1999. There are
1,262 shares that can still be purchased under the 1999 plan and 35,000 shares
that can be purchased under the 2000 plan.
ITEM 6. (a) Exhibits: Exhibit 27 - Financial Data Schedule is submitted herewith
(b) Reports on Form 8-K - None
14
<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)
By /s/ J. WILLIAM JOHNSON
------------------------------------
DATE: May 12, 2000 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)
15
<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> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 12,982,000
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 84,800,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 98,622,000
<INVESTMENTS-CARRYING> 191,528,000
<INVESTMENTS-MARKET> 187,884,000
<LOANS> 181,517,000
<ALLOWANCE> 1,923,000
<TOTAL-ASSETS> 581,328,000
<DEPOSITS> 513,889,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,759,000
<LONG-TERM> 0
0
0
<COMMON> 294,000
<OTHER-SE> 65,386,000
<TOTAL-LIABILITIES-AND-EQUITY> 581,328,000
<INTEREST-LOAN> 3,911,000
<INTEREST-INVEST> 4,143,000
<INTEREST-OTHER> 910,000
<INTEREST-TOTAL> 8,964,000
<INTEREST-DEPOSIT> 2,830,000
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 6,134,000
<LOAN-LOSSES> (75,000)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,312,000
<INCOME-PRETAX> 3,007,000
<INCOME-PRE-EXTRAORDINARY> 3,007,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,173,000
<EPS-BASIC> .74
<EPS-DILUTED> .73
<YIELD-ACTUAL> 4.98
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,033,000
<CHARGE-OFFS> 42,000
<RECOVERIES> 7,000
<ALLOWANCE-CLOSE> 1,923,000
<ALLOWANCE-DOMESTIC> 1,923,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
