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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) Quarterly Report Pursuant to Section 13 or 15(d) of
[X] the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002
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 No.: 0-29826
LONG ISLAND FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-3453684
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Suffolk Square, Islandia, New York 11749
-------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(631) 348-0888
--------------
(Registrant's telephone number, including area code)
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.
The registrant had 1,446,226 shares of Common Stock outstanding as of November
8, 2002.
Form 10-Q
LONG ISLAND FINANCIAL CORP.
INDEX
Page
PART I - FINANCIAL INFORMATION Number
ITEM 1. Consolidated Financial Statements - Unaudited
Consolidated Balance Sheets at September 30, 2002
and December 31, 2001 2
Consolidated Statements of Earnings for the Three Months
and Nine Months Ended September 30, 2002 and 2001 3
Consolidated Statement of Changes in Stockholders' Equity
for the Nine Months Ended September 30, 2002 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2002 and 2001 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 18
ITEM 4. Controls and Procedures 19
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 20
ITEM 2. Changes in Securities and Use of Proceeds 20
ITEM 3. Defaults Upon Senior Securities 20
ITEM 4. Submission of Matters to a Vote of Security Holders 20
ITEM 5. Other Information 20
ITEM 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Certifications 22
================================================================================
Statements contained in this Form 10-Q, which are not historical facts, are
forward-looking statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties, which could cause actual results to differ materially
from those projected. Such risks and uncertainties include potential changes in
interest rates, competitive factors in the financial services industry, general
economic conditions, the effect of new legislation, and other risks detailed in
documents filed by the Company with the Securities and Exchange Commission from
time to time.
================================================================================
1
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
LONG ISLAND FINANCIAL CORP
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
September 30, December 31,
2002 2001
Assets:
Cash and due from banks $ 22,931 $ 30,347
Interest earning deposits 64 279
Federal funds sold 5,000 --
----- -----
Total cash and cash equivalents 27,995 30,626
Securities held-to-maturity (fair value of $13,532 and $12,937, respectively) 12,458 12,457
Securities available-for-sale, at fair value 147,880 201,967
Federal Home Loan Bank stock, at cost 2,750 2,858
Loans, net of unearned income and deferred fees 199,466 178,797
Less allowance for loan losses (2,213) (2,028)
------ ------
Loans, net 197,253 176,769
Premises and equipment, net 3,338 2,929
Accrued interest receivable 2,515 2,121
Bank owned life insurance 6,738 6,495
Prepaid expenses and other assets 1,048 2,168
----- -----
Total assets $ 401,975 $ 438,390
========= =========
Liabilities and Stockholders' Equity:
Deposits:
Demand deposits $ 77,034 $ 61,502
Savings deposits 75,767 43,032
NOW and money market deposits 36,865 111,058
Time certificates issued in excess of $100,000 22,505 35,861
Other time deposits 99,155 94,464
------ ------
Total deposits 311,326 345,917
Federal funds purchased and securities sold under agreements
to repurchase -- 4,500
Other borrowings 55,000 55,000
Accrued expenses and other liabilities 3,162 4,346
----- -----
Total liabilities 369,488 409,763
------- -------
Guaranteed preferred beneficial interest in junior subordinated
debentures 7,500 7,500
----- -----
Stockholders' equity:
Common stock (par value $.01 per share; 10,000,000 shares
authorized; 1,783,126 and 1,776,826 shares issued; 1,446,226 and
1,439,926 shares outstanding, respectively) 18 18
Surplus 20,281 20,191
Accumulated surplus 7,125 5,323
Accumulated other comprehensive income (loss) 1,741 (227)
Treasury stock at cost, (336,900 shares in 2002 and 2001) (4,178) (4,178)
------ ------
Total stockholders' equity 24,987 21,127
------ ------
Total liabilities and stockholders' equity $ 401,975 $ 438,390
========= =========
See accompanying notes to consolidated financial statements
2
LONG ISLAND FINANCIAL CORP
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
Interest income:
Loans $ 3,688 $ 3,343 $ 10,710 $ 9,565
Securities 2,068 2,175 6,664 7,498
Federal funds sold 35 42 89 436
Earning deposits 2 5 6 11
- - - --
Total interest income 5,793 5,565 17,469 17,510
----- ----- ------ ------
Interest expense:
Savings deposits 341 296 742 859
NOW and money market deposits 123 111 536 823
Time certificates issued in excess of $100,000 163 372 581 1,566
Other time deposits 987 1,302 3,049 3,916
Borrowed funds 665 557 1,999 1,658
--- --- ----- -----
Total interest expense 2,279 2,638 6,907 8,822
----- ----- ----- -----
Net interest income 3,514 2,927 10,562 8,688
----- ----- ------ -----
Provision for loan losses 60 75 210 75
-- -- --- --
Net interest income after provision
for loan losses 3,454 2,852 10,352 8,613
----- ----- ------ -----
Other operating income:
Service charges on deposit accounts 445 258 1,287 789
Net gain (loss) on sale of securities -- 15 -- (38)
Net gain on sale of residential loans 189 123 525 278
Earnings on bank owned life insurance 96 89 288 268
Other 116 85 334 209
--- -- --- ---
Total other operating income 846 570 2,434 1,506
--- --- ----- -----
Other operating expenses:
Salaries and employee benefits 1,632 1,310 4,594 3,708
Occupancy expense 235 192 664 565
Premises and equipment expense 309 263 891 711
Capital securities 209 202 614 601
Other 886 794 2,682 2,279
--- --- ----- -----
Total other operating expenses 3,271 2,761 9,445 7,864
----- ----- ----- -----
Income before income taxes 1,029 661 3,341 2,255
Income taxes 353 226 1,148 773
--- --- ----- ---
Net income $ 676 $ 435 $ 2,193 $ 1,482
========== ========== ========== ===========
Basic earnings per share $ .47 $ .30 $ 1.52 $ 1.02
========== ========== ========== ===========
Diluted earnings per share $ .45 $ .29 $ 1.47 $ 1.00
========== ========== ========== ===========
Weighted average shares outstanding 1,446,226 1,439,676 1,444,307 1,457,258
========= ========= ========= =========
Diluted weighted average shares outstanding 1,503,461 1,474,878 1,492,038 1,480,125
========= ========= ========= =========
See accompanying notes to consolidated financial statements
3
LONG ISLAND FINANCIAL CORP
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 2002
(Unaudited)
(In thousands, except share data)
Accumulated
other
Common Accumulated comprehensive Treasury
stock Surplus surplus (loss)/inc stock Total
Balance at December 31, 2001 $ 18 20,191 5,323 (227) (4,178) 21,127
Comprehensive income:
Net income -- -- 2,193 -- -- 2,193
Other comprehensive income,
net of tax:
Unrealized appreciation in
available-for-sale securities,
net of reclassification adjustment -- -- -- 1,968 -- 1,968
---- ---- ---- ----- ---- -----
Total comprehensive income -- -- -- -- -- 4,161
Exercise of stock options and related
tax benefit (6,300 shares) -- 90 -- -- -- 90
Dividends declared on common stock
($.27 per common share) -- -- (391) -- -- (391)
---- ---- ---- ---- ---- ----
Balance at September 30, 2002 $ 18 20,281 7,125 1,741 (4,178) 24,987
====== ====== ===== ===== ====== ======
See accompanying notes to consolidated financial statements
4
LONG ISLAND FINANCIAL CORP
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
For the Nine Months
Ended September 30,
2002 2001
Cash flows from operating activities:
Net income $ 2,193 $ 1,482
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 210 75
Depreciation and amortization 678 528
Amortization of premiums, net of discount accretion 1,074 (460)
Net loss on sale of securities -- 38
Loans originated for sale, net of proceeds
from sales 2 (183)
Net deferred loan origination fees 49 27
Earnings on bank owned life insurance (288) (268)
Deferred income taxes (66) (65)
Changes in other assets and liabilities:
Accrued interest receivable (394) (197)
Prepaid expenses and other assets 110 139
Accrued expenses and other liabilities (1,184) (242)
------ ----
Net cash provided by operating activities 2,384 874
----- ---
Cash flows from investing activities:
Purchases of securities held-to-maturity, available-for-sale (644,846) (835,661)
Net redemption of Federal Home Loan Bank stock 108 2,468
Proceeds from the sale of securities available-for-sale -- 29,305
Proceeds from maturities of securities 667,018 817,006
Principal repayments on securities 33,929 22,791
Loan originations net of principal repayments (20,745) (31,836)
Purchase of premises and equipment (1,087) (983)
------ ----
Net cash provided by investing activities 34,377 3,090
====== =====
Cash flows from financing activities:
Net decrease in demand deposit, savings, NOW,
and money market accounts (25,926) (34,459)
Net (decrease) increase in certificates of deposit (8,665) 20,786
Net decrease in federal funds purchased and securities sold
under agreement to repurchase (4,500) --
Net increase in other borrowings -- 14,000
Exercise of stock options 90 6
Payments for cash dividends (391) (348)
Purchase of treasury stock -- (564)
---- ----
Net cash used in financing activities (39,392) (579)
------- ----
Net (decrease) increase in cash and cash equivalents (2,631) 3,385
Cash and cash equivalents at beginning of period 30,626 16,208
------ ------
Cash and cash equivalents at end of period $ 27,995 $ 19,593
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 7,906 $ 8,694
========= =========
Income taxes $ 1,679 $ 814
========= =========
See accompanying notes to consolidated financial statements
5
LONG ISLAND FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Long Island Financial Corp. (the "Company") and its wholly-owned
subsidiaries. All significant inter-company accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited consolidated financial statements included herein
reflect all normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. The results of operations for the nine month period ended
September 30, 2002 are not necessarily indicative of the results of operations
that may be expected for the entire fiscal year. Certain information and note
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain reclassifications have been made to
prior year amounts to conform to the current year presentation.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements, and notes thereto, included
in the Company's 2001 Annual Report on Form 10-K.
2. SECURITIES
The following table sets forth certain information regarding amortized cost and
estimated fair values of the securities held-to-maturity and available-for-sale
as of the dates indicated:
September 30, 2002 December 31, 2001
Amortized Fair Amortized Fair
Cost Value Cost Value
(In thousands)
Held-to-maturity:
Corporate debt $ 12,458 13,532 $ 12,457 12,937
---------- ------ ---------- ------
Total held-to-maturity $ 12,458 13,532 $ 12,457 12,937
========== ====== ========== ======
Available-for-sale:
U.S. Government and Agency obligations $ 52,653 53,408 $ 89,930 89,732
Mortgage-backed securities:
GNMA 62,765 64,224 85,171 85,021
FHLMC 11,173 11,263 4,402 4,304
FNMA 16,542 16,966 20,803 20,918
Corporate debt 2,014 2,019 2,017 1,992
----- ----- ----- -----
Total securities available-for-sale $ 145,147 147,880 $ 202,323 201,967
========== ======= ========== =======
6
3. LOANS, NET
Loans, net, are summarized as follows:
September 30, 2002 December 31, 2001
(Dollars in thousands)
Commercial and industrial loans $ 47,672 23.5 % $ 43,972 24.2 %
Commercial real estate loans 123,674 60.9 116,646 64.2
Automobile loans 27,938 13.8 18,300 10.1
Consumer loans 2,293 1.1 1,312 .7
Residential real estate loans held-for-sale 1,470 .7 1,472 .8
----- --- ----- --
203,047 100.0 181,702 100.0
Less:
Unearned income 2,885 2,258
Deferred fees, net 696 647
Allowance for loan losses 2,213 2,028
----- -----
$ 197,253 $ 176,769
============ ===========
4. RECENT DEVELOPMENTS
On August 27, 2002 the Board of Directors of the Company declared a quarterly
dividend of nine cents ($0.09) per common share. The dividend was paid on
October 1, 2002, to shareholders of record as of September 20, 2002.
5. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
At September 30, 2002, the Bank had outstanding commitments to purchase $5.0
million of mortgage-backed securities at a rate of 4.00% settling in October
2002 and $5.0 million of mortgage-backed securities at a rate of 4.00% settling
in November 2002.
6. RECENT ACCOUNTING PRONOUNCEMENTS
In October 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 147, "Acquisitions of
Certain Financial Institutions." SFAS No. 147 amends SFAS No. 72, "Accounting
for Certain Acquisitions of Banking or Thrift Institutions," SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", and FASB
Interpretation No. 9, "Applying APB Opinions Nos. 16 and 17 When a Savings and
Loan Association or a Similar Institution is Acquired in a Business Combination
Accounted for by the Purchase Method." This Statement removes acquisitions of
financial institutions, other than transactions between two or more mutual
enterprises, from the scope of SFAS No. 72 and FASB Interpretation No. 9. SFAS
No. 147 also amends SFAS No. 144 to include long-term customer-relationship
intangible assets such as depositor- and borrower-relationship intangible assets
and credit cardholder intangible assets. The provisions of SFAS No. 147 are
effective October 1, 2002. There was no impact on the Company's consolidated
statements of financial condition or consolidated statements of income upon
adoption of SFAS No. 147.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The Statement requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Previous
accounting guidance was provided by Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 replaces EITF Issue No. 94-3. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002.
7
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements Nos.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
The Statement updates, clarifies and simplifies existing accounting
pronouncements. SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt," which required all gains and losses from
extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result, the criteria
in Accounting Principles Board Opinion (APB) No. 30, "Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," will now be used to classify those gains and
losses. The provisions of SFAS No. 145 are effective for fiscal years beginning
after May 15, 2002. Early application of SFAS No. 145 is encouraged. There will
be no impact on the Company's consolidated balance sheets or consolidated
statements of earnings upon adoption of SFAS No. 145.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which replaced SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 144 established a single accounting model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by sale.
SFAS No. 144 also resolved significant implementation issues related to SFAS No.
121. The provisions of SFAS No. 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001. There was no impact
on the Company's consolidated balance sheets or consolidated statements of
earnings upon adoption of SFAS No. 144, on January 1, 2002.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment at
least annually in accordance with the provision of SFAS No. 142. SFAS No. 142
also requires that other intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their estimated
residual values. Amortizing intangible assets must also be reviewed for
impairment. SFAS No. 142 is applicable to fiscal years beginning after December
15, 2001 and is required to be applied at the beginning of the entities fiscal
year. There was no impact on the Company's consolidated balance sheets
or consolidated statements of earnings upon adoption of SFAS No. 142, on
January 1, 2002.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
The principal business of Long Island Financial Corp. consists of the operation
of a wholly-owned subsidiary, Long Island Commercial Bank. Long Island
Commercial Bank is a New York state-chartered commercial bank, founded in 1989,
which is engaged in commercial banking in Islandia, New York, and the
surrounding communities of Suffolk, Nassau, and Kings counties. The Bank offers
a broad range of commercial and consumer banking services, including loans to
and deposit accounts for small and medium-sized businesses, professionals, high
net worth individuals and consumers. The Bank is an independent local bank,
emphasizing personal attention and responsiveness to the needs of its customers.
8
Critical Accounting Policies
The Company identifies accounting policies critical to the Company's operations
and understanding of the Company's results of operations. Certain accounting
policies are considered to be important to the portrayal of the Company's
financial condition, since they require management to make complex or subjective
judgments, some of which may relate to matters that are inherently uncertain.
The inherent sensitivity of the Company's consolidated financial statements to
critical accounting policies and, the use of judgments, estimates and
assumptions could result in material differences in the Company's results of
operations or financial condition.
The Company has determined that the methodology used in determining the level of
its allowance for loan losses is critical in the presentation and understanding
of the Company's consolidated financial statements. The allowance for loan
losses represents management's estimate of probable losses inherent in the
portfolio. This evaluation process is subject to numerous estimates and
judgments. Changes in these estimates could have a direct impact on the
provision for loan losses and could result in a change in the allowance. While
management uses available information to determine losses on loans, future
additions to the allowance may be necessary based on, among other things,
unanticipated changes in economic conditions, particularly in the counties of
Nassau, and Suffolk.
In evaluating the portfolio, management takes into consideration numerous
factors such as the Company's loan growth, prior loss experience, present and
potential risks of the loan portfolio, risk ratings assigned by lending
personnel, ratings assigned by the independent loan review function, the present
financial condition of the borrowers, current economic conditions, and other
portfolio risk characteristics. The Company's formalized process for assessing
the adequacy of the allowance for loan losses and the resultant need, if any,
for periodic provisions to the allowance charged to income consists of both
individual loan analyses and loan pool analyses. The individual loan analyses
are periodically performed on individually significant loans or when otherwise
deemed necessary and primarily encompass commercial real estate and commercial
and industrial loans. Management believes that the Company's allowance for loan
losses at September 30, 2002 is adequate to provide for estimated probable
losses inherent in the portfolio.
Financial Condition
The Company's total assets were $402.0 million as of September 30, 2002,
compared to $438.4 million at December 31, 2001. The decrease in total assets
was primarily attributable to the decline in the securities available-for-sale
portfolio, which decreased $54.1 million, or 26.8%, as the proceeds of maturing
short-term U.S. Government and agency obligations purchased in December 2001
were used to pay maturing seasonal municipal deposits. Offsetting this decrease
in part, was a $20.5 million, or 11.6%, increase in loans, net, from $176.8
million at December 31, 2001, to $197.3 million at September 30, 2002,
reflecting increases primarily in the automobile loan and commercial real estate
loan portfolio.
Total deposits decreased $34.6 million, or 10.0%, from $345.9 million at
December 31, 2001 to $311.3 million at September 30, 2002, primarily reflecting
a decrease in NOW and money market deposits. The decrease in NOW and money
market deposits of $74.2 million, or 66.8%, from $111.1 million at December 31,
2001 to $36.9 million at September 30, 2002, is attributable to the withdrawal
of seasonal municipal deposits. Time deposits in excess of $100,000 decreased
$13.4 million, or 37.2%, from $35.9 million at December 31, 2001 to $22.5
million at September 30, 2002. The effects of those declines were offset in part
by a $32.7 million, or 76.1%, increase in savings deposits and a $15.5 million,
or 25.3%, increase in demand deposits. No federal funds purchased or securities
sold under agreements to repurchase were outstanding at September 30, 2002.
Other borrowings, which consist of Federal Home Loan Bank of New York advances,
remained unchanged at $55.0 million.
9
Stockholders' equity increased $3.9 million, or 18.3%, to $25.0 million at
September 30, 2002 compared to $21.1 million at December 31, 2001. The increase
to stockholders equity included $2.2 million of net income for the nine months
ending September 30, 2002, and a decrease in the accumulated other comprehensive
loss on securities available-for-sale of $2.0 million. Offsetting those
increases in part were dividends declared of $391,000.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing liabilities. Net interest income depends
upon the volume of interest-earning assets and interest-bearing liabilities and
the interest rates earned or paid on them.
The following tables set forth certain information relating to the Company's
consolidated average balance sheets and its consolidated statements of earnings
for the three months and nine months ended September 30, 2002 and 2001, and
reflect the average yield on interest-earning assets and average cost of
interest-bearing liabilities for the periods indicated. Yields and costs are
derived by dividing annualized income or expense by the average balance of
interest-earning assets or interest-bearing liabilities, respectively. Average
balances are derived from average daily balances. Average balances include
non-accrual loans although they are not material.
10
Three Months Ended September 30,
-----------2002----------- -----------2001-----------
Average Average
Average Yield / Average Yield /
Balance Interest Cost Balance Interest Cost
Interest-earning assets: (Dollars in thousands)
Federal funds sold and
interest-earning deposits $ 8,632 $ 37 1.71% $ 5,189 $ 47 3.62%
Securities, net (1) 161,492 2,068 5.12 136,537 2,163 6.34
Municipal obligations (2) -- -- -- 1,168 17 5.82
Loans, net (3) 192,106 3,688 7.68 158,061 3,343 8.46
------- ----- ---- ------- ----- ----
Total interest-earning assets 362,230 5,793 6.40 300,955 5,570 7.40
Non-interest-earning assets 34,598 23,924
------ ------
Total assets $ 396,828 $ 324,879
========= =========
Interest-bearing liabilities:
Savings deposits $ 70,118 341 1.95 $ 41,887 296 2.83
NOW and money market deposits 39,789 123 1.24 26,850 111 1.65
Certificates of deposit 124,437 1,150 3.70 127,851 1,674 5.24
------- ----- ---- ------- ----- ----
Total interest-bearing deposits 234,344 1,614 2.75 196,588 2,081 4.23
Borrowed funds 55,000 665 4.84 43,806 557 5.09
------ --- ---- ------ --- ----
Total interest-bearing liabilities 289,344 2,279 3.15 240,394 2,638 4.39
Other non-interest bearing liabilities 83,312 63,609
------ ------
Total liabilities 372,656 304,003
Stockholders' equity 24,172 20,876
------ ------
Total liabilities and
stockholders' equity $ 396,828 $ 324,879
========= =========
Net interest income/
interest rate spread (4) $ 3,514 3.25% $ 2,932 3.01%
======== ==== ======== ====
Net interest margin (5) 3.88% 3.90%
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.25x 1.25x
==== ====
(1) Securities, net, excludesmunicipal obligation. Unrealized appreciation / depreciation on
available-for-sale securities are recorded in non-interest earning assets.
(2) Interest income and yields are presented on a fully taxable equivalent basis.
(3) Amount is net of residential real estate loans held-for-sale, deferred loan fees and allowance for loan
losses but includes non-performing loans.
(4) Interest rate spread represents the difference between the yield on interest-earning assets and the cost
of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
11
Nine Months Ended September 30,
-----------2002----------- -----------2001-----------
Average Average
Average Yield / Average Yield /
Balance Interest Cost Balance Interest Cost
Interest-earning assets: (Dollars in thousands)
Federal funds sold and
interest-earning deposits $ 7,524 $ 95 1.68% $ 12,263 $ 447 4.86%
Securities, net (1) 177,267 6,664 5.01 159,185 7,462 6.25
Municipal obligations (2) -- -- -- 1,168 51 5.82
Loans, net (3) 186,394 10,710 7.66 147,867 9,565 8.62
------- ------ ---- ------- ----- ----
Total interest-earning assets 371,185 17,469 6.28 320,483 17,525 7.29
Non-interest-earning assets 33,989 23,966
------ ------
Total assets $ 405,174 $ 344,449
========= =========
Interest-bearing liabilities:
Savings deposits $ 58,921 742 1.68 $ 37,690 859 3.04
NOW and money market deposits 61,764 536 1.16 54,667 823 2.01
Certificates of deposit 126,578 3,630 3.82 128,347 5,482 5.69
------- ----- ---- ------- ----- ----
Total interest-bearing deposits 247,263 4,908 2.65 220,704 7,164 4.33
Borrowed funds 56,757 1,999 4.70 43,705 1,658 5.06
------ ----- ---- ------ ----- ----
Total interest-bearing liabilities 304,020 6,907 3.03 264,409 8,822 4.45
Other non-interest bearing liabilities 78,213 59,776
------ ------
Total liabilities 382,233 324,185
Stockholders' equity 22,941 20,264
------ ------
Total liabilities and
stockholders' equity $ 405,174 $ 344,449
========= =========
Net interest income/
interest rate spread (4) $ 10,562 3.25% $ 8,703 2.84%
======== ==== ======= ====
Net interest margin (5) 3.79% 3.62%
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.22x 1.21x
==== ====
(1) Securities, net, excludes municipal obligations. Unrealized appreciation / depreciation on
available-for-sale securities are recorded in non-interest earning assets.
(2) Interest income and yields are presented on a fully taxable equivalent basis.
(3) Amount is net of residential real estate loans held-for-sale, deferred loan fees and allowance for loan
losses but includes non-performing loans.
(4) Interest rate spread represents the difference between the yield on interest-earning assets and the cost
of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average interest-earning assets.
12
Comparison of Operating Results for the Three Months Ended September 30, 2002
and 2001
General
The Company reported net income of $676,000, or basic earnings per share of $.47
and diluted earnings per share of $.45 for the quarter ended September 30, 2002,
compared to $435,000, or basic earnings per share of $.30 and diluted earnings
per share of $.29, for the prior year period. The increase in net income was
attributable primarily to a $602,000, or 21.1% increase in net interest income
after provision for loan losses and an increase in other operating income of
$276,000, or 48.4%. Offsetting those increases was a $510,000, or 18.5% increase
in other operating expenses.
Interest Income
Interest income, on a fully taxable equivalent basis, increased $223,000, or
4.0%, for the three months ended September 30, 2002, compared to the three
months ended September 30, 2001. This increase was attributable to the increase
in the average balance of interest-earning assets of $61.2 million, or 20.4%,
from $301.0 million for the three months ended September 30, 2001, to $362.2
million for the three months ended September 30, 2002. The increase in the
average balance of interest earning assets was offset in part by a 100 basis
point decrease in the average yield on interest-earning assets from 7.40% for
the three months ended September 30, 2001, to 6.40% for the comparable 2002
period. The decrease in average yield on interest-earning assets was
attributable to a 122 basis point decrease in yield on securities, net,
(exclusive of municipal obligations) which declined from 6.34% for the three
months ended September 30, 2001, to 5.12% for the three months ended September
30, 2002. The average yield on loans receivable, net, decreased 78 basis points
from 8.46% for the three months ended September 30, 2001, to 7.68% for the
comparable 2002 period. Partially offsetting the decline in yield from period to
period was the $25.0 million, or 18.3% increase in the average balance of
securities, net, (exclusive of municipal obligations) from $136.5 million for
three months ended September 30, 2001, to $161.5 million for the three months
ended September 30, 2002. The average balance of loans, net, increased $34.0
million, or 21.5% from $158.1 million for the three months ended September 30,
2001, to $192.1 million for the comparable 2002 period.
Interest Expense
Interest expense for the three months ended September 30, 2002 was $2.3 million,
compared to $2.6 million for the three months ended September 30, 2001, a
decrease of $359,000, or 13.6%. The decrease was attributable to a 124 basis
point decrease in the average cost of interest-bearing liabilities from 4.39%
for the three months ended September 30, 2001 to 3.15% for the three months
ended September 30, 2002. The decrease in average cost was partially offset by a
$48.9 million, or 20.4%, increase in the average balance of total
interest-bearing liabilities from $240.4 million for the three months ended
September 30, 2001 to $289.3 million for the three months ended September 30,
2002. The increase in average interest-bearing liabilities reflects increases of
$37.8 million in the average balance of interest-bearing deposits and $11.2
million in the balance of borrowed funds when compared to the prior year period.
Interest expense on interest-bearing deposits for the three months ended
September 30, 2002 decreased $467,000, or 22.4%, to $1.6 million from $2.1
million for the corresponding 2001 period. This decrease was primarily due to a
148 basis point decrease in the average rate paid on interest-bearing deposits
from 4.23% for three months ended September 30, 2001 to 2.75% for the
corresponding period in 2002. Offsetting the decrease in the average rate paid
was an increase in the average balance of interest-bearing deposits of $37.8
million for the three months ended September 30, 2002 from the corresponding
period in 2001. The increase in the average balance of interest-bearing deposits
was the result of increases in the average balance of savings deposits of $28.2
million, or 67.4%, and in the balances of NOW and money market deposits of $12.9
million, or 48.2% from period to period. The increase in average balances of
interest-bearing deposits is the result of the Company's branch expansion and
the development of competitive deposit products that meet the needs of its
commercial and consumer customers.
13
Interest expense on borrowed funds increased $108,000, or 19.4%, from $557,000
for the three months ended September 30, 2001, to $665,000 for the three months
ended September 30, 2002. The increase was primarily due to an increase in the
average balance of borrowed funds of $11.2 million, or 25.6%, from $43.8 million
for the three months ended September 30, 2001 to $55.0 million for the three
months ended September 30, 2002. Offsetting the increase in the average balance
was a 25 basis point decrease in the average cost of borrowed funds from 5.09%
for the 2001 period, to 4.84% for the 2002 period.
Net Interest Income
Net interest income on a fully taxable equivalent basis
increased by $582,000, or 19.8%, from $2.9 million for the three months ended
September 30, 2001, to $3.5 million for the three months ended September 30,
2002. The average cost of total interest-bearing liabilities for the period
decreased 124 basis points from 4.39% in the 2001 period to 3.15% in the 2002
period. The average yield on total interest-earning assets for the period
decreased 100 basis points from 7.40% in the 2001 period to 6.40% in the 2002
period. The net interest rate spread increased by 24 basis points from 3.01% in
the 2001 period, to 3.25% in the 2002 period.
Provision for Loan Losses
The Company made a $60,000 provision for loan losses for the three months ended
September 30, 2002, compared to a $75,000 provision for loan losses for the
three months ended September 30, 2001. The provision for loan losses for the
three months ended September 30, 2002 reflects management's qualitative and
quantitative assessment of the loan portfolio, net charge-offs and collection of
delinquent loans. The allowance for loan losses amounted to $2.2 million and
$2.0 million at September 30, 2002 and December 31, 2001, respectively. The
allowance for loan losses as a percentage of loans was 1.11% and 1.13% at
September 30, 2002 and December 31, 2001, respectively.
The following table sets forth information regarding non-accrual loans and loans
delinquent 90 days or more and still accruing interest at the dates indicated.
It is the Company's general policy to discontinue accruing interest on all
loans, which are past-due more than 90 days or when, in the opinion of
management, such suspension is warranted. When a loan is placed on non-accrual
status, the Company ceases the accrual of interest owed and previously accrued
interest is charged against interest income. Loans are generally returned to
accrual status when principal and interest payments are current, there is
reasonable assurance that the loan will be fully collectable and a consistent
record of performance has been demonstrated.
September 30, 2002 December 31, 2001
(Dollars in thousands)
Non-accrual loans:
Commercial and industrial loans $ 126 $ 153
Consumer loans 52 25
-- --
Total non-accrual and non-performing loans 178 178
--- ---
Allowance for loan losses as a percentage
of loans (1) 1.11 % 1.13 %
Allowance for loan losses as a percentage
of total non-performing loans 1,243.26 % 1,139.33 %
Non-performing loans as a percentage of loans (1) .09 % .10 %
(1) Loans include loans, net, excluding the allowance for loan losses.
14
Other Operating Income
Other operating income increased $276,000, or 48.4%, to $846,000 for the three
months ended September 30, 2002. Service charges on deposit accounts increased
$187,000, or 72.5%, reflecting overall growth in the depositor base, and the
introduction of new and electronic banking services. Included in other operating
income was a $66,000, or 53.7%, increase in net gain on sale of residential
loans attributable to an overall increase in residential mortgage loan
production resulting from a more favorable interest rate environment.
Other Operating Expense
Other operating expense increased $510,000, or 18.5%, from $2.8 million for the
three months ended September 30, 2001, to $3.3 million for the three months
ended September 30, 2002. The increase resulted primarily from increases in
salaries and employee benefits, premises and equipment expense, and other
expense for the three months ended September 30, 2002 attributable to the Bank's
branch expansion.
Income Taxes
Income taxes increased $127,000, or 56.2%, from $226,000 for the three months
ended September 30, 2001, to $353,000 for the three months ended September 30,
2002, as a result of the increase in income before income taxes. The effective
tax rates for the three months ended September 30, 2002 and those ended
September 30, 2001 were 34.3% and 34.2%, respectively.
Comparison of Operating Results for the Nine Months Ended September 30, 2002 and
2001
General
The Company reported net income of $2.2 million, or basic earnings per share of
$1.52, and diluted earnings per share of $1.47 for the nine months ended
September 30, 2002, compared to net income of $1.5 million, or basic earnings
per share of $1.02, and diluted earnings per share of $1.00 for the prior year
period. The increase in net income was primarily attributable to an increase in
net interest income after provision for loan losses of $1.7 million, or 20.2%,
and an increase in other operating income of $928,000, or 61.6%. Offsetting
those increases was a $1.6 million, or 20.1% increase in other operating
expenses.
Interest Income
Interest income, on a fully taxable equivalent basis, decreased $56,000, or .3%,
from the nine months ended September 30, 2001, to the nine months ended
September 30, 2002. The decrease was attributable to a decrease in the average
yield on interest-earning assets of 101 basis points from 7.29% for the nine
months ended September 30, 2001, to 6.28% for the nine months ended September
30, 2002. The decrease in average yield on interest earning-assets was
attributable to a 124 basis point decrease in yield on securities, net,
(exclusive of municipal obligations) and a decrease of 96 basis points on loans,
net. From period to period, the average yield on securities declined from 6.25%
to 5.01% and the average yield on loans declined from 8.62% to 7.66%.
Substantially offsetting those declines in yield from period to period, was an
increase in the average balance of securities, net, (exclusive of municipal
obligations) of $18.1 million, or 11.4%, from $159.2 million for the nine months
ended September 30, 2001, to $177.3 million for the nine months ended September
30, 2002. Similarly, the average balance of loans, net, increased $38.5 million,
or 26.1%, from $147.9 million for the nine months ended September 30, 2002, to
$186.4 million for the nine months ended September 30, 2002.
15
Interest Expense
Interest expense for the nine months ended September 30, 2002 was $6.9 million,
compared to $8.8 million for the nine months ended September 30, 2001, a
decrease of $1.9 million, or 21.7%. The decrease in interest expense was the
result of a 142 basis point decrease in the average cost of interest-bearing
liabilities from 4.45% for the nine months ending September 30, 2001 as compared
to 3.03% for the nine months ended September 30, 2002. The decrease in average
cost was offset by a $39.6 million, or 15.0% increase in the average balance of
total interest-bearing liabilities from $264.4 million for the 2001 period to
$304.0 million for the 2002 period. The increase in average interest-bearing
liabilities reflects a $26.6 million increase in the average balance of
interest-bearing deposits and a $13.1 million increase in the average balance of
borrowed funds when compared to the prior year period.
Interest expense on interest-bearing deposits for the nine months ended
September 30, 2002 decreased $2.3 million, or 31.5%, to $4.9 million from $7.2
million for the corresponding 2001 period. This decrease was primarily due to a
168 basis point decrease in the average rate paid on interest-bearing deposits
from 4.33% for the nine months ended September 30, 2001 to 2.65% for the
corresponding period in 2002. Offsetting the decrease in the average rate paid
was a $26.6 million increase in the average balance of interest-bearing deposits
of for the nine months ended September 30, 2002 from the corresponding period in
2001. The increase in the average balance of interest-bearing deposits was the
result of increases in the average balance of savings deposits of $21.2 million,
or 56.3%, and NOW and money market deposits of $7.1 million, or 13.0% from
period to period. The increase in average balances of interest-bearing deposits
is the result of the Company's branch expansion and the development of
competitive deposit products that meet the needs of its commercial and consumer
customers.
Interest expense on borrowed funds for the nine months ended September 30, 2002
increased $341,000, or 20.6%, to $2.0 million from $1.7 million for the
corresponding 2001 period. The increase was primarily due to a $13.1 million, or
29.9%, increase in the average balance of borrowed funds from $43.7 million for
the nine months ended September 30, 2001 to $56.8 million for the nine months
ended September 30, 2002. Offsetting the increase in the average balance was a
36 basis point decrease in the average cost of borrowed funds from 5.06% for the
2001 period, to 4.70% for the 2002 period.
Net Interest Income
Net interest income on a fully taxable equivalent basis increased by $1.9
million, or 21.4%, from $8.7 million for the nine months ended September 30,
2001, to $10.6 million for the nine months ended September 30, 2002. The average
cost of total interest-bearing liabilities for the period decreased 142 basis
points from 4.45% in the 2001 period to 3.03% in the 2002 period. The average
yield on interest-earning assets for the period decreased 101 basis points from
7.29% in the 2001 period to 6.28% in the 2002 period. The net interest rate
spread increased by 41 basis points from 2.84% in the 2001 period, to 3.25% in
the 2002 period.
Provision for Loan Losses
The Company made a $210,000 provision for loan losses for the nine months ended
September 30, 2002, compared to a $75,000 provision for loan losses for the nine
months ended September 30, 2001. The provision for loan losses is based on
analysis of the loan portfolio and reflects an amount, which in management's
judgment is adequate to provide for probable loan losses in the existing
portfolio.
16
Other Operating Income
Other operating income increased $928,000, or 61.6%, to $2.4 million for the
nine months ended September 30, 2002. Service charges on deposit accounts
increased $498,000, or 63.1%, reflecting an overall increase in the Bank's
deposit fee structure, growth in the depositor base, and the introduction of new
and electronic banking services. Gain on sale of residential loans increased
$247,000, or 88.8%, as a result of an overall increase in residential mortgage
loan production made possible by lower market interest rates.
Other Operating Expense
Other operating expenses increased $1.5 million, or 20.1%, from $7.9 million for
the nine months ended September 30, 2001, to $9.4 million in the nine months
ended September 30, 2002. Increases in salaries and employee benefits, premises
and equipment expense, and other expense for the nine months ended September 30,
2002 are a result of the Bank's continuing branch expansion.
Income Taxes
Income taxes increased $375,000, or 48.5%, from $773,000 for the nine months
ended September 30, 2001, to $1.1 million for the nine months ended September
30, 2002 and was attributable to the increase in income before income taxes. The
effective tax rate for the nine months ended September 30, 2002 was 34.4%,
compared to 34.3% for the nine months ended September 30, 2001.
Liquidity
Liquidity management for the Company requires that funds be available to pay all
deposit withdrawal and maturing financial obligations and meet credit funding
requirements promptly and fully in accordance with their terms. For most banks,
including the Bank, maturing assets provide only a limited portion of the funds
required to pay maturing liabilities over a short time frame. The balance of the
funds required is provided by liquid assets and the acquisition of additional
liabilities, making liability management integral to liquidity management in the
short term.
The Company's liquid assets consist of cash and due from banks, federal funds
sold, interest-earning deposits with other financial institutions and securities
classified as available-for-sale, less securities pledged as collateral. The
Company has established a minimum liquidity level, average liquid assets to
average assets, at 10%. Average balances are derived from average daily
balances. During the three months ended September 30, 2002, the Company's
average minimum liquidity level was 26.1%.
The Company maintains levels of liquidity that it considers adequate to meet its
current needs. The Company's principal sources of cash include incoming
deposits, the repayment of loans and conversion of investment securities. When
cash requirements increase faster than cash is generated, either through
increased loan demand or withdrawal of deposited funds, the Company can arrange
for the sale of loans or liquidate available-for-sale securities. It can also
access its lines of credit, totaling $6.5 million, with unaffiliated financial
institutions, which enable it to borrow federal funds on an unsecured basis. In
addition, the Company has available lines of credit with the Federal Home Loan
Bank of New York (FHLB) equal to 8.3% of the Company's assets at September 30,
2002, which enable it to borrow funds on a secured basis. The Company could also
engage in other forms of borrowings, including reverse repurchase agreements.
At September 30, 2002, the Company's borrowings consisted of convertible and
medium term advances from the FHLB. The convertible feature of these advances
allows the FHLB, at a specified call date and quarterly thereafter, to convert
these advances into replacement funding for the same or lesser principal amount,
based on any advance then offered by the FHLB, at then current market rates. If
the FHLB elects to convert these advances, the Bank may repay any portion of the
advances without penalty. The convertible advances are secured by various
mortgage-backed and callable U.S. agency securities.
17
At September 30, 2002, convertible and medium term advances outstanding were as follows:
Call Contractual
Amount Rate Date Maturity
Convertible advance $ 14,000,000 5.49 % 02/19/2003 02/19/2008
Convertible advance 15,000,000 4.59 01/21/2003 01/21/2009
Convertible advance 14,000,000 4.97 01/19/2004 01/19/2011
Convertible advance 3,000,000 4.11 12/11/2005 12/11/2011
Medium term advance 4,000,000 3.31 12/11/2003 12/11/2003
Medium term advance 5,000,000 3.99 12/13/2004 12/13/2004
---------
Total $ 55,000,000
The primary investing activities of the Company are the purchase of securities
available-for-sale and the origination of loans. During each of the nine months
ended September 30, 2002, and 2001, the Company's purchases of securities that
were classified available-for-sale totaled $644.8 million and $829.7 million,
respectively. Loan originations, net of principal repayments on loans, totaled
$20.7 million and $31.8 million for the nine months ended September 30, 2002,
and 2001, respectively. Borrowings, principal repayments and maturities of
securities were used primarily to fund those activities.
Capital Resources
The Bank is subject to the risk based capital guidelines administered by the
banking regulatory agencies. The guidelines currently require all banks to
maintain a minimum ratio of total risk based capital to total risk weighted
assets of 8%, including a minimum ratio of Tier 1 capital to total risk weighted
assets of 4% and a Tier 1 capital to average adjusted assets of 4%. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators, that, if undertaken, could have
a direct material effect on the Bank's financial statements. As of December 31,
2001, the most recent notification from the federal banking regulators
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action.
In accordance with the requirements of the FDIC and the New York State Banking
Department, the Bank must meet certain measures of capital adequacy with respect
to leverage and risk-based capital. As of September 30, 2002, the Bank exceeded
those requirements with a leverage capital ratio, risk-based capital ratio and
total-risk based capital ratio of 6.65%, 10.74%, and 11.65%, respectively.
On May 24, 2001, the Company announced a plan for a stock repurchase program to
acquire an additional 75,000 shares of the outstanding common stock of the
Company. As of September 30, 2002, no repurchases had been made under this
program. The plan for the repurchase program was undertaken because management
believed that the repurchase of shares would enhance shareholder value and
provide additional liquidity for otherwise thinly traded shares. The repurchase
program, which remains in effect, generally will be conducted through open
market purchases, although unsolicited negotiated transactions or other types of
repurchases may be considered. Management does not believe the stock repurchase
will adversely affect the strong liquidity or capital positions of the Company,
its designation as well-capitalized or its compliance with established
regulatory capital requirements. At September 30, 2002, the Company held 336,900
shares of treasury stock at an average cost of $12.40 per share.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The principal objective of the Company's interest rate management is to evaluate
the interest rate risk inherent in certain balance sheet accounts, determine the
level of risk appropriate given the Company's business strategy, operating
environment, capital and liquidity requirements and performance objectives, and
manage the risk consistent with guidelines approved by the Board of Directors.
Through such management, the Company seeks to reduce the vulnerability of it's
operations to changes in interest rates. The Board has directed the Investment
Committee to review the Company's interest rate risk position on a quarterly
basis.
18
Funds management is the process by which the Company seeks to maximize
the profit potential which is derived from the spread between the rates earned
on interest-earning assets and the rates paid on interest-bearing liabilities
through the management of various balance sheet components. It involves
virtually every aspect of the Company's management and decision-making process.
Accordingly, the Company's results of operations and financial condition are
largely dependent on the movements in market interest rates and the Company's
ability to manage its assets and liabilities in response to such movements.
At September 30, 2002, 60.4% of the Company's gross loans had adjustable
interest rates and its loan portfolio had an average weighted maturity of 8.9
years. At that date, $39.1 million, or 24.0%, of the Company's securities had
adjustable interest rates, and its securities portfolio had a weighted average
maturity of 2.5 years. At September 30, 2002, the Company had $51.7 million of
certificates of deposit with maturities of one year or less and $22.5 million of
deposits over $100,000, which tend to be less stable sources of funding when
compared to core deposits, and which represented 25.7% of the Company's
interest-bearing liabilities. In a rising interest rate environment the
Company's interest-bearing liabilities may adjust upwardly more rapidly than the
yield on its adjustable-rate assets. Thus, due to the Company's level of shorter
term certificates of deposit, the Company's cost of funds may increase at a
greater rate in a rising rate environment than if it had a greater amount of
core deposits which, in turn, may adversely affect net interest income and net
income.
The Company's interest rate sensitivity is monitored by management through the
use of a quarterly interest rate risk analysis model which evaluates (i) the
potential change in the net interest income over the succeeding four quarter
periods and (ii) the potential change in the fair market value of equity, of the
Company ("Net Economic Value of Equity"), which would result from an
instantaneous and sustained interest rate change of zero and plus or minus 200
basis points in 100 basis point increments.
At September 30, 2002, the effect of instantaneous and sustained interest rate changes on the Company's Net
Interest Income and Net Economic Value of Equity are as follows:
Change in Potential Change in Potential Change in
Interest Rates Net Interest Income Net Economic Value of Equity
in Basis Points $ Change % Change $ Change % Change
(Dollars in thousands)
200 $ (35) (0.24) % $ (1,706) (6.14) %
100 (16) (0.11) (1,845) (6.64)
Static -- -- -- --
(100) (88) (0.61) (3,226) (11.61)
(200) (564) (3.91) (4,173) (15.02)
ITEM 4. CONTROLS AND PROCEDURES
1 Evaluation of disclosure controls and procedures. The Company maintains
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission. Based upon their evaluation of those controls and procedures
performed within 90 days of the filing date of this report, the Chief Executive
and Chief Financial officers of the Company concluded that the Company's
disclosure controls and procedures were adequate.
2 Changes in internal controls. The Company made no significant changes in its
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the Chief
Executive and Chief Financial officers.
19
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11.0 Statement Re: Computation of Per Share Earnings
99.1 Certification of Chief Executive Officer pursuant to Section
906 of Sarbanes- Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to Section
906 of Sarbanes- Oxley Act of 2002
b. Reports on Form 8K
None
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf of
the undersigned thereunto duly authorized.
LONG ISLAND FINANCIAL CORP.
(Registrant)
Date: November 13, 2002 By: /s/ Douglas C. Manditch
-----------------------
Douglas C. Manditch
President and Chief Executive Officer
Date: November 13, 2002 By: /s/ Thomas Buonaiuto
-----------------------
Thomas Buonaiuto
Vice President and Treasurer
21
CERTIFICATION
I, Douglas C. Manditch, certify, that:
1 I have reviewed this quarterly report on Form 10-Q of Long Island Financial
Corp.;
2 Based on my knowledge, the quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3 Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4 The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
1 designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
2 evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
3 presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5 The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
1 all significant deficiencies in the design or operation of the internal
controls which could adversely affect the registrant's ability to record
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
2 any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6 The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Douglas C. Manditch
-----------------------
Douglas C. Manditch
President & Chief Executive Officer
22
CERTIFICATION
I, Thomas Buonaiuto, certify, that:
1 I have reviewed this quarterly report on Form 10-Q of Long Island Financial
Corp.;
2 Based on my knowledge, the quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3 Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4 The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
1 designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
2 evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
3 presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5 The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
1 all significant deficiencies in the design or operation of the internal
controls which could adversely affect the registrant's ability to record
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
2 any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6 The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Thomas Buonaiuto
--------------------
Thomas Buonaiuto
Vice President & Treasurer
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Exhibit 11.0 Statement Regarding Computation Of Per Share Earnings
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended Nine months Ended
September 30, September 30,
2002 2001 2002 2001
Net income available to
common shareholders $ 676 435 $ 2,193 1,482
Total weighted average
common shares outstanding 1,446,226 1,439,676 1,444,307 1,457,258
Basic earnings per common share $ .47 .30 $ 1.52 1.02
========== === ========= ====
Total weighted average
common shares outstanding 1,446,226 1,439,676 1,444,307 1,457,258
Dilutive effect of stock options using
the treasury stock method 57,235 35,202 47,731 22,867
Total average common and common
equivalent shares 1,503,461 1,474,878 1,492,038 1,480,125
Diluted earnings per common share $ .45 .29 $ 1.47 1.00
========== === ========== ====
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Exhibit 99.1 Certification of Chief Executive Officer pursuant to Section 906 of
Sarbanes- Oxley Act of 2002
In connection with the Quarterly Report of Long Island Financial Corp., (the
Company) on Form 10-Q for the period ended September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Douglas
C. Manditch, President & Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15 (d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Douglas C. Manditch
-----------------------
President & Chief Executive Officer
November 13, 2002
Exhibit 99.2 Certification of Chief Financial Officer pursuant to Section 906 of
Sarbanes- Oxley Act of 2002
In connection with the Quarterly Report of Long Island Financial Corp., (the
Company) on Form 10-Q for the period ended September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Thomas
Buonaiuto, Vice President & Treasurer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15 (d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Thomas Buonaiuto
--------------------
Vice President & Treasurer
November 13, 2002
25