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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) Annual Report Pursuant to Section 13 or 15(d) of
[X] the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2001
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 0-29826
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)
None
(Securities registered pursuant to Section 12(b) of the Act)
Common Stock, $.01 par value
(Securities registered pursuant to Section 12(g) of the Act)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K of any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the last reported sales price of such stock
on the NASDAQ Stock Market was $24,190,757 on March 15, 2002.
The number of shares outstanding of the registrant's common stock was 1,439,926
as of March 15, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the 2001 Annual Report to Stockholders for fiscal year 2001 are
incorporated herein by reference - Parts II and IV.
2. Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on April 24, 2002 are incorporated herein by reference -
Part III.
LONG ISLAND FINANCIAL CORP.
2001 FORM 10-K
TABLE OF CONTENTS
Page
PART I Number
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . .15
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . .15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . .16
Item 8. Financial Statements and Supplementary Data . . . . . . . . 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . 16
PART III
Item 10. Directors and Executive Officers of the Registrant.... . . . . 17
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . .17
Item 12. Security Ownership of Certain Beneficial Owners and Management.17
Item 13. Certain Relationships and Related Transactions . . . . . . . . 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K. . . . . . . . . . . . . . . . . . . .. . . . . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . .19
2
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
Statements contained in this Form 10-K, which are not historical facts, are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Amounts herein could vary as a result of market
and other factors. Such forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ materially from those
currently anticipated due to a number of factors, which include, but are not
limited to, factors discussed in documents filed by Long Island Financial Corp.
(the "Company") with the Securities Exchange Commission from time to time. Such
forward-looking statements may be identified by the use of such words as
"believe," "expect," "anticipate," "should," "planned," "estimated" and
"potential." Examples of forward-looking statements include, but are not limited
to, estimates with respect to the financial condition, expected or anticipated
revenue, results of operations and business of the Company that are subject to
various factors which could cause actual results to differ materially from these
estimates. The Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a
material adverse effect on the operations of the Company and its subsidiaries
include, but are not limited to, changes in: interest rates; general economic
conditions; monetary and fiscal policies of the U.S. Government, including
policies of the U.S. Treasury and the Federal Reserve Board; the quality or
composition of the loan or investment portfolios; demand for loan products;
deposit flows; real estate values; the level of defaults; losses and prepayments
on loans held by the Company in portfolio or sold in the secondary markets;
demand for financial services in the Company's market area; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors affecting the Company's operations, pricing, products and
services. The forward-looking statements are made as of the date of this Form
10-K, and, except as required by applicable law, the Company assumes no
obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking
statements.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Readers
are cautioned not to place undue reliance on forward-looking statements, which
speak only as of the date of this Form 10-K
PART I
ITEM 1. BUSINESS
Long Island Financial Corp. ("the Company") is a registered bank holding
company, incorporated in Delaware in 1998 at the direction of the Directors of
Long Island Commercial Bank (the "Bank") for the purpose of becoming a holding
company to own all the outstanding common stock of the Bank. Pursuant to a Plan
of Acquisition effective January 28, 1999, the Bank became a wholly-owned
subsidiary of Long Island Financial Corp., and all of the common stock of the
Bank was converted, on a one-for-one basis, into the common stock of Long Island
Financial Corp. This transaction is hereinafter referred to as the
"Reorganization."
The Reorganization under a bank holding company structure provides greater
operating flexibility by allowing the Company to conduct a broader range of
business activities and permits the Board of Directors of the Company to
determine whether to conduct such activities at subsidiaries of the Bank or in
separate subsidiaries of the Company. The Reorganization also permits expansion
into a broader range of financial services and other business activities that
are not currently permitted to the Bank as a New York state-chartered commercial
bank. Such activities include, among others, operating non-bank depository
institutions or engaging in financial and investment advisory services,
securities brokerage and management consulting activities.
In November 2000, the Company elected to become a financial holding company as
provided for in the Financial Services Modernization Act of 1999, also known as
the Gramm-Leach-Bliley Act. That Act repealed provisions of the Glass-Steagall
Act and permits a financial holding company to engage in a statutorily provided
list of financial activities, including insurance and securities underwriting
and agency activities, merchant banking and insurance company portfolio
activities. The Act also provides for the approval for a financial holding
company to conduct other activities determined to be financial in nature or
incidental to or complementary to such financial activities.
3
General
The primary business of the Company is the operation of its wholly owned
subsidiary, the Bank. The 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 in Suffolk and Nassau 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.
The Bank's senior management has substantial banking experience, and senior
management and the Board of Directors of the Bank have extensive commercial and
personal ties to the communities in Nassau and Suffolk Counties, New York.
The Bank conducts a full service commercial and consumer banking business, which
primarily consists of attracting deposits from the areas served by its branch
network and using those deposits to originate a variety of commercial, consumer
and real estate loans. During periods in which the demand for loans which meet
the Bank's underwriting and interest rate risk standards is less than the amount
of funds available for investment, the Bank invests excess funds in federal
funds, mortgage-backed securities, corporate debt, equity securities and
securities issued by the U.S. Government and agencies thereof and municipal
obligations. The Bank's revenues are derived principally from interest income on
its loan and securities portfolios. The Bank's principal expenses are interest
paid on deposits, interest paid on borrowed funds and other operating expenses.
Funding sources, other than deposits, include: secured and unsecured borrowings,
available lines of credit, sales of securities under agreements to repurchase,
and cash flows from lending and investing activities.
The Bank's results of operations are dependent primarily on net interest income,
which is the difference between the income earned on its loan and security
portfolios and its cost of funds, consisting of interest paid on deposits and
borrowings. Results of operations are also affected by the Bank's provision for
loan losses and other operating income. Other operating expense of the Bank
principally consists of salaries and the expense of employee benefits,
occupancy, premises and equipment expense, and other expenses. Results of
operations are also significantly affected by general economic and competitive
conditions, particularly changes in interest rates, government policies and
action of regulatory authorities.
Market Area and Competition
The Bank's primary customer base is established, small-to medium-sized and
expanding businesses, professionals, and high net worth individuals and
consumers. The Company believes that emphasizing personal attention and
responsiveness to the needs of its customers, including providing state of the
art electronic banking services and expanded service hours, contributes to the
Company's competitiveness as a financial services provider.
The Bank faces extensive competition in originating loans and in attracting
deposits. Competition among financial institutions is generally based upon
interest rates offered on deposit accounts, interest rates charged on loans,
fees assessed for services performed, the quality and scope of the services
rendered, and the convenience of banking facilities.
A significant number of financial service entities operate within the Bank's
market area. In one or more aspects of its business, the Bank competes directly
with other commercial banks, savings and mortgage banking companies, mortgage
brokers, and other providers of financial services. Some of these entities are
significantly larger than the Bank and have substantially greater resources and
lending limits, and may offer certain services the Bank does not provide. In
addition, many non-bank competitors are not subject to the same extensive
Federal regulations that govern financial holding companies and Federally
insured banks.
Lending Activities
The Bank offers a variety of commercial and consumer loan products to serve the
needs of its customers. The interest rates charged by the Bank on loans are
affected principally by rates offered by its competitors, the supply of money
available for lending purposes and demand for such loans. General and economic
conditions, monetary policies of the federal government including the Federal
Reserve Board, legislative tax policies and governmental budgetary matters also
affect interest rates charged by the Bank.
Loan Approval and Underwriting - In general, the Bank utilizes a committee
process to approve its loans. The President and Chief Lending Officer are
authorized to approve loans up to $250,000. All other loans are brought before
the Loan Committee. The Loan Committee which consists of Directors Auerbach,
Duryea, Del Duca, Esposito, Kern, Manditch, Neuburger, Roberts, Romito, and
Tsunis, meet one day each month; however, additional meetings are held as the
need arises. The Board of Directors receives a monthly report summarizing the
loan portfolio activity, and actions taken by the Loan Committee.
It is the policy of the Bank that all loans satisfy basic lending criteria with
respect to the character of the applicant, including any guarantor, the ability
to repay the loan within the contemplated term, the applicant's financial
strength, the adequacy of any required security and compliance with the Bank's
lending policy.
4
Loan Portfolio
The following table sets forth the composition of the Bank's loan portfolio at
the dates indicated:
At December 31,
2001 2000 1999 1998 1997
(In thousands)
Commercial and industrial loans ...................... $ 43,972 $ 39,140 $ 34,057 $30,853 $30,909
Commercial real estate loans ......................... 116,646 93,875 84,133 53,990 31,254
Automobile loans ..................................... 18,300 2,693 1,463 8,262 17,524
Consumer loans ....................................... 1,312 1,313 1,250 1,396 1,726
Residential real estate loans held-for-sale .......... 1,472 711 1,019 1,486 --
-------- -------- -------- ------- -------
Gross loans ....................................... 181,702 137,732 121,922 95,987 81,413
------- ------- ------- ------ ------
Less:
Unearned income ................................... 2,258 395 42 362 1,322
Deferred fees, net ................................ 647 612 569 410 306
Allowance for loan losses ......................... 2,028 1,872 1,475 1,071 1,026
-------- -------- -------- ------- -------
Loans, net ........................................... $176,769 $134,853 $119,836 $94,144 $78,759
======== ======== ======== ======= =======
Commercial and Industrial Loans - The Bank offers a variety of commercial loan
services including term loans, construction loans, demand loans, revolving
credit, and loans guaranteed in part by the Small Businesses Administration. A
broad range of commercial loans, both collateralized and uncollateralized, are
made available to businesses for working capital (including inventory and
receivables), business expansion, and for the purchase of machinery and
equipment. The purpose of a particular loan generally determines its structure.
Commercial loans are typically underwritten on the basis of the borrowers'
repayment capacity from cash flow and are generally collateralized by business
assets such as, but not limited to, inventory, equipment and accounts
receivable. As a result, the availability of funds for the payment of commercial
loans may be substantially dependent on the success of the business itself.
Further, the collateral underlying the loans may depreciate over time, cannot be
appraised and may fluctuate in value based upon the success of the business.
Revolving credit lines are primarily collateralized by short-term assets, while
term loans are primarily collateralized by long-term or fixed assets. Personal
guarantees are normally required for commercial loans. At December 31, 2001,
commercial and industrial loans represented 24.2% of the loan portfolio.
Commercial Real Estate Loans - The Bank originates commercial real estate loans
to businesses to finance the acquisition and holding of commercial real estate.
The security for the Bank's commercial real estate loans is generally located in
the Bank's primary market area and is underwritten on the basis of the value of
the underlying real property. Loans secured by commercial real estate generally
involve a greater degree of risk than residential real estate loans. Primary
risks associated with commercial real estate lending include the borrower's
inability to pay the debt due to unsuccessful operation or management of the
property and adverse conditions in the real estate market or economy. At
December 31, 2001, commercial real estate loans represented 64.2% of the loan
portfolio.
Automobile Loans - The Bank maintains a program of making non-recourse loans to
a local automobile leasing company, receiving an assignment of each individual
lease and a collateral interest in each automobile. The program, which continues
to further diversify the loan portfolio, is expected to continue through 2002.
At December 31, 2001 automobile loans represented 10.1% of the loan portfolio.
Consumer Loans - Consumer loans made by the Bank include loans for new and used
automobiles, personal secured, personal unsecured, and loans secured by deposit
accounts. Consumer loans generally carry higher rates of interest than those
charged on other types of loans and pose additional risks of collectibility when
compared to other types of loans, such as residential real estate loans. In many
instances, the Bank must rely on the borrower's ability to repay, since the
collateral normally is of reduced value at the time of any liquidation.
Accordingly, the initial determination of the borrower's ability to repay is of
primary importance in the underwriting of consumer loans.
Residential Real Estate Loans - The Bank originates residential real estate
loans primarily in its market area of Nassau and Suffolk counties. Currently,
the Bank sells residential real estate loans together with the servicing rights
to these loans on a non-recourse basis to institutional investors. The Bank
limits its exposure to interest rate fluctuations and credit risk on these loans
by obtaining, at the point of origination, a commitment from an institutional
investor to purchase that loan from the Bank. By selling the servicing rights to
the loans, the Bank avoids the associated risks and expenses of managing and
servicing a loan portfolio. Income is generated from the premiums received on
the sale of loans and servicing rights, and fees charged and interest earned
during the period the Bank holds the loans for sale.
5
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the approximate contractual maturities and
sensitivities to changes in interest rates of certain loans, exclusive of
non-accrual loans as of December 31, 2001.
Commercial Residential
and Commercial Real Estate
Industrial Real Estate Automobile Consumer Loans Held- Total
Loans Loans Loans Loans For-Sale Loans
(In thousands)
Maturities:
Due within one year .................................. $27,676 $ 724 $ 214 $ 143 $1,472 $ 30,229
Due after one but within five years .................. 9,691 1,617 18,086 896 -- 30,290
Due after five but within ten years .................. 4,762 19,381 -- 227 -- 24,370
Due after ten years .................................. 1,690 94,924 -- 21 -- 96,635
------- -------- ------- ------ ------ --------
Total Due after December 31, 2001 .................... 16,143 115,922 18,086 1,144 -- 151,295
------- -------- ------- ------ ------ --------
Total amount due ..................................... $43,819 $116,646 $18,300 $1,287 $1,472 $181,524
------- -------- ------- ------ ------ --------
Rate sensitivity:
Amounts with Fixed Interest Rates .................... $ 6,461 $ 34,917 $18,086 $ 896 $ -- $ 60,360
Amounts with Adjustable Interest Rates ............... 9,682 81,005 -- 248 -- 90,935
------- -------- ------- ------ ------ --------
Total Due after December 31, 2001 .................... $16,143 $115,922 $18,086 $1,144 $ -- $151,295
======= ======== ======= ====== ====== ========
Allowance for Loan Losses
The allowance for loan losses is maintained through provisions for loan losses
based on management's on-going evaluation of the risks inherent in its loan
portfolio in consideration of the trends in its loan portfolio, the national and
regional economies and the real estate market in the Bank's primary lending
area. The allowance is maintained at an amount management considers adequate to
cover estimated losses in its loan portfolio which are deemed probable and
estimable based on information currently known to management. While, based on
information currently available, management believes that the allowance of the
Bank is sufficient to cover losses inherent in its loan portfolio at this time,
no assurance can be given that future adjustments to the allowance will not be
necessary if economic and other conditions differ substantially from the
economic and other conditions used by management to determine the current level
of the allowance. Management may in the future increase its level of loan loss
allowance as a percentage of total loans and non-performing loans as deemed
necessary. In addition, the Federal Deposit Insurance Corporation (FDIC) and New
York State Banking Department (NYSBD) as an integral part of their examination
process periodically review the Bank's allowance for loan losses. Either the
FDIC or the NYSBD may require the Bank to make additional provisions for loan
losses based upon judgments that may differ from those of management thereby
negatively impacting the Bank's financial condition and results of operations.
The following table sets forth the activity in the Bank's allowance for loan
losses for the periods indicated:
At December 31,
2001 2000 1999 1998 1997
(Dollars in thousands)
Balance at beginning of year $ 1,872 $ 1,475 $ 1,071 $ 1,026 $ 780
Provision for loan losses 150 150 600 420 240
Charge-offs:
Commercial and industrial loans - (187) (80) (203) (23)
Automobile loans - (54) (66) (58) (75)
Consumer loans (19) (99) (81) (145) (21)
---- ---- ---- --- ------
Total charge-offs (19) (340) (227) (406) (119)
Recoveries:
Commercial and industrial loans 13 547 26 1 125
Automobile loans 6 13 4 15 -
Consumer loans 6 27 1 15 -
----- ------ ------- ------ ------
Total recoveries 25 587 31 31 125
--- ----- ------ ------ ----
Net recoveries (charge-offs) 6 247 (196) (375) 6
---- --- ----- -------- ----
Balance at end of year $ 2,028 $ 1,872 $ 1,475 $ 1,071 $ 1,026
======= ======= ======= ======= ========
Ratio of net charge-offs/average
net loans -% -% .19% .43% - %
--------- -------- ------- --------- ---------
6
The following table sets forth the allocation of the Bank's allowance for loan
losses at the dates indicated:
At December 31,
2001 2000 1999 1998 1997
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Category Category Category Category Category
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
(Dollars in thousands)
Commercial and
industrial loans $ 651 24.2% $ 723 28.7% $ 610 27.9% $ 589 32.1% $ 489 38.0%
Commercial real
estate loans 1,166 64.2 939 68.2 631 69.0 330 56.2 313 38.4
Automobile loans 160 10.1 27 1.9 13 1.2 48 8.6 186 21.5
Consumer loans 18 .7 26 .7 61 1.0 104 1.5 22 2.1
Residential real
estate loans held- - .8 - .5 - .9 - 1.6 - -
for-sale
Unallocated $ 33 -- $ 157 -- $ 160 -- $ -- -- $ 16 --
------ ---- ------- ---- ------ ---- ------ ---- ------- ----
Total allowance for
loan losses $2,028 100.0% $ 1,872 100.0% $1,475 100.0% $ 1,071 100.0% $ 1,026 100.0%
====== ===== ======= ===== ====== ===== ======= ===== ======= ======
Non-Accrual Loans - 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 Bank's general policy to discontinue
accruing interest on all loans which are past due 90 days or when, in the
opinion of management, it is appropriate to discontinue accruing interest. When
a loan is placed on non-accrual status, the Bank 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
collectible and a consistent record of performance has been demonstrated.
At December 31,
2001 2000 1999 1998 1997
(Dollars in thousands)
Non-accrual loans:
Commercial and industrial loans ............................. $153 $384 $ 42 $366 $230
Automobile loans ............................................ -- -- 32 37 165
Consumer loans .............................................. 25 32 105 108 --
---- ---- ---- ---- ----
Total non-accrual loans ...................................... 178 416 179 511 395
Loans contractually past due 90 days or
more, other than non-accruing (2) ............................ -- -- -- -- 8
---- ---- ---- ---- ----
Total non-performing loans ................................... $178 $416 $179 $511 $403
==== ==== ==== ==== ====
Allowance for loan losses as a
percent of total loans (1) .............................. 1.13% 1.37% 1.22% 1.12% 1.29%
Allowance for loan losses as a
percent of total non-performing loans ................... 1139.33% 450.0% 824.02% 209.59% 254.59%
Non-performing loans as a percent
of total loans (1) ...................................... .10% .30% .15% .54% .51%
(1) Loans include loans, net of unearned income and deferred fees.
(2) Excludes $108,000 of loans at December 31, 2001, and $231,000 of loans at
December 31, 1999, which have matured, however, are current with respect to
scheduled periodic principal and/or interest payments. The Bank is in the
process of renewing these obligations and/or awaiting anticipated repayment.
7
Investment Activities
General - The Bank maintains a portfolio of securities in such instruments as
U.S. government and agency securities, mortgage-backed securities, municipal
obligations, corporate debt and equity securities. The investment policy of the
Bank, which is approved by the Board of Directors and implemented by the Bank's
Investment Committee (the "Committee") as authorized by the Board, is designed
primarily to generate acceptable yields for the Bank without compromising the
business objectives of the Bank or incurring undue interest rate or credit risk,
and to provide and maintain liquidity for the Bank. In reviewing and
establishing investment strategies the Committee considers the business and
growth plans of the Bank, the economic environment, the current interest rate
sensitivity position of the Bank, the types of securities held and other
factors.
At December 31, 2001, the Company had $217.3 million in investment securities
consisting of U.S. Government and Agency obligations, mortgage-backed
securities, municipal obligations, corporate debt and equity securities. The
accounting treatment of the securities of the Bank is addressed in Note 1 of the
Notes to the Consolidated Financial Statements in the 2001 Annual Report to
Stockholders.
U.S. Government and Agency Obligations - At December 31, 2001, the Bank's U.S.
Government and Agency obligations portfolio of the Bank totaled $89.7 million,
all of which was classified as available-for-sale. Included in this total are
$35.6 million of callable securities, which generally possess higher yields than
those securities of similar contractual terms to maturity without callable
features. The remaining balance of $54.1 million represents U.S. Treasury and
government sponsored agency discount notes, which are primarily used as
collateral for seasonal municipal deposits and other short-term borrowings.
Mortaged-Backed Securities - The Bank purchases mortgage-backed securities in
order to: (a) generate positive interest spreads with minimal administrative
expense; (b) lower its credit risk as a result of the guarantees provided by
FHLMC, FNMA, and GNMA; (c) utilize these securities as collateral for
borrowings; and (d) increase the liquidity of the Bank. At December 31, 2001,
mortgaged-backed securities totaled $110.2 million, or 25.1% of total assets,
all of which were classified as available-for-sale. At December 31, 2001, 34.2%
of the mortgage-backed securities carried adjustable rates and 65.8% were fixed
rate. The mortgage-backed securities had coupon rates ranging from 4.50% to
8.39% and had a weighted average yield of 5.40%.
Municipal Obligations - At December 31, 2001, the Banks had no municipal
obligations in its investment portfolio. The Bank generally considers investment
in municipal obligations when the taxable equivalent yields are greater than
that of other such securities with comparable maturities. All of the municipal
bonds purchased by the Bank are required to be rated "A" or better by at least
one national rating agency.
Corporate Debt - The Bank's investment policy was amended in 2000 to include the
purchase of capital notes/trust preferreds issued primarily by financial
institutions up to a limit of $15 million dollars. These securities represent
secondary capital and rank subordinate and junior in right of payment to all
indebtedness of the issuing company. To be purchased by the Bank, these higher
yielding securities must be rated investment grade by at least two of the
national rating agencies. At December 31, 2001, the Company had $14.5 million of
corporate debt at an average yield of 8.89%
Equity Securities - At December 31, 2001, the Bank held equity securities valued
at $2.9 million. Those equity securities represented the Bank's investment in
Federal Home Loan Bank of New York (FHLB) stock. In order to borrow from the
FHLB, the Bank is required to purchase shares of FHLB non-marketable equity
securities at par. For the year ended December 31, 2001, the dividend yield on
the FHLB stock was 5.71%.
8
The following table sets forth information regarding the amortized cost (book
value) and fair value of the Bank's securities portfolio at the dates indicated:
At December 31,
2001 2000 1999
Amortized Fair Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value Cost Value
Held-to-maturity:
Mortgage-backed securities:
CMO ............................................. $ -- $ -- $ 263 $ 254 $ 341 $ 338
Corporate debt ....................................... 12,457 12,937 4,491 4,482 -- --
-------- -------- -------- -------- -------- --------
Total securities
held-to-maturity ................................ $ 12,457 $ 12,937 $ 4,754 $ 4,736 $ 341 $ 338
======== ======== ======== ======== ======== ========
Available-for-sale:
U.S. Government and
Agency obligations .............................. $ 89,930 $ 89,732 $117,364 $115,945 $122,423 $118,907
Mortgage-backed securities:
GNMA ............................................ 85,171 85,021 36,559 35,963 41,136 39,580
FHLMC ........................................... 4,402 4,304 969 982 1,350 1,369
FNMA ............................................ 20,803 20,918 5,279 5,303 3,599 3,571
Corporate debt ....................................... 2,017 1,992 1,167 1,149 1,166 1,143
Other debt securities ................................ -- -- -- -- 92 91
-------- -------- -------- -------- -------- --------
Total debt securities available-for-sale ............. 202,323 201,967 161,338 159,342 169,766 164,661
------- ------- ------- ------- ------- -------
Equity securities - FHLB stock ....................... 2,858 2,858 5,326 5,326 5,147 5,147
-------- -------- -------- -------- -------- --------
Total securities
available-for-sale ............................. $205,181 $204,825 $166,664 $164,668 $174,913 $169,808
======== ======== ======== ======== ======== ========
The following table sets forth certain information regarding the amortized
cost, weighted average yields and contractual maturities of the Bank's
securities portfolio as of December 31, 2001.
More Than One More Than Five More
One Year or Less Year to Five Years Years to Ten Years Than Ten Years Total
Weighted Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield Cost Yield
(Dollars in thousands)
Available-for-sale:
Debt securities:
US Government and
Agency obligations ......... $ 54,084 1.66% $ -- --% $ 35,846 4.35% $ -- -% $ 89,930 2.73%
Mortgage-backed securities:
GNMA ....................... -- -- -- -- -- -- 85,171 5.44 85,171 5.44
FHLMC ...................... -- -- -- -- -- -- 4,402 6.66 4,402 6.66
FNMA ....................... 274 5.72 529 6.63 -- -- 20,000 4.92 20,803 4.97
Corporate debt ............... -- -- -- -- 1,000 7.50 1,017 6.78 2,017 7.14
----- ---- ----- ---- ----- ---- ----- ---- ----- ----
Total debt securities ........ 54,358 1.68 529 6.63 36,846 4.43 110,590 5.40 202,323 4.23
------- ---- ------ ---- ------- ---- -------- ---- -------- ----
Equity securities:
FHLB stock ................... 2,858 5.04 -- -- -- -- -- -- 2,858 5.04
------- ---- ------ ---- ------- ---- -------- ---- -------- ----
Total equity securities ...... 2,858 5.04 -- -- -- -- -- -- 2,858 5.04%
------- ---- ------ ---- ------- ---- -------- ---- -------- ----
Total debt and equity
securities, available-for-sale $ 57,216 1.84% $ 529 6.63% $ 36,846 4.43% $110,590 5.40% $ 205,181 4.24%
------- ---- ------ ---- ------- ---- -------- ---- -------- ----
Held-to-maturity:
Mortgage-backed securities:
CMO ........................ $ -- -% $ -- --% $ -- --% $ -- --% $ -- -%
------- ---- ------ ---- ------- ---- -------- ---- -------- ----
Corporate debt ............... $ -- -% $ -- --% $ 4,514 8.82% $ 7,943 9.37% $ 12,457 9.17%
------- ---- ------ ---- ------- ---- -------- ---- -------- ----
Total securities, held-to-
maturity ..................... $ -- -% $ -- --% $ 4,514 8.82% $ 7,943 9.37% $ 12,457 9.17%
======= ==== ====== ==== ======= ==== ======== ==== ======== ====
9
Deposits
The Bank offers a variety of deposit accounts with a range of interest rates
and terms. The deposit accounts of the Bank consist of checking, savings, NOW
accounts, money market accounts and certificates of deposit. The Bank offers
certificates of deposit with balances in excess of $100,000 at premium rates
and also offers Individual Retirement Accounts and other qualified plan
accounts. The Bank solicits deposit accounts from small businesses,
professional firms, households, and governmental institutions located
throughout its market area. The Bank does not use brokers to obtain deposits.
All deposit accounts are insured under the Bank Insurance Fund of the Federal
Deposit Insurance Corporation up to the maximum limits permitted by law.
The following table shows the distribution of the Bank's average deposit
accounts in each category of deposits presented for the periods indicated:
For the years ended December 31,
2001 2000 1999
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
(dollars in thousands)
Non-interest bearing accounts ....................... $ 51,487 -% $ 40,842 -% $ 33,791 -%
Savings accounts .................................... 39,221 2.67 31,507 3.71 22,747 3.42
NOW and money market deposits ....................... 49,431 1.88 43,865 2.31 49,413 1.99
Certificates issued in excess of $100,000 ........... 40,442 4.58 25,576 5.97 24,470 5.06
Other time deposits ................................. 88,804 5.82 80,503 6.15 79,126 5.66
------ ---- ------ ---- ------ ----
Total average deposits .............................. $269,385 $222.293 $209,547
======== ======== ========
At December 31, 2001, the Bank had outstanding approximately $35.9 million in
certificates of deposit accounts in excess of $100,000, maturing as follows:
(In thousands)
3 months or less $ 25,205
Over three through six months 3,855
Over six through 12 months 5,764
Over 12 months 1,037
-------
Total $ 35,861
======
Borrowings
The Bank utilizes borrowings to leverage the capital of the Bank and provide
liquidity when necessary. At December 31, 2001 borrowed funds primarily
consisted of $55 million of advances from the Federal Home Loan Bank of New
York (FHLB) secured by various callable U.S. agency securities and
mortgage-backed securities. At certain times, the Bank will use sales of
securities sold under agreements to repurchase as a lower cost alternative to
its FHLB advances and other sources of funds. There were no securities sold
under agreements to repurchase at December 31, 2001. At December 31, 2001 the
Bank had available a 12-month commitment for overnight and one month lines of
credit with the FHLB totaling $28.3 million dollars. Both lines of credit are
priced at the federal funds rate plus 10 basis points and reprice daily.
Outstanding at December 31, 2001, was a $4.5 million overnight line of credit
balance at a rate of 1.75%. The Company has a $500,000 secured line of credit
with another financial institution permitting the Company to borrow at that
institution's prime rate. At December 31, 2001, there was no balance
outstanding under this line of credit agreement. In addition, the Bank has
available $6.5 million in lines of credit with unaffiliated institutions,
which enable it to borrow funds on an unsecured basis, on which no balance
was outstanding at December 31, 2001. The following table sets forth certain
information regarding the Bank's borrowed funds for the years indicated:
10
For the years ended December 31,
2001 2000 1999
(Dollars in thousands)
FHLB Advances:
Maximum amount outstanding at any month-end
during the year $ 55,000 $ 39,000 $ 39,000
Average balance outstanding 43,000 36,760 38,178
Balance outstanding at end of year 55,000 29,000 39,000
Weighted average interest rate during the year 5.06% 4.94 % 4.90%
Weighted average interest rate at the end of the year 4.80% 5.02 % 4.90%
Repurchase Agreements:
Maximum amount outstanding at any month-end
during the year $ - $ 29,850 $ -
Average balance outstanding 555 4,719 530
Balance outstanding at end of year - - -
Weighted average interest rate during the year 4.93% 5.94 % 5.09%
Weighted average interest rate at the end of the year - - -
Federal Funds Purchased:
Maximum amount outstanding at any month-end
during the year $ 4,500 $ 16,650 $ 6,500
Average balance outstanding 695 5,729 1,810
Balance outstanding at end of year 4,500 - -
Weighted average interest rate during the year 4.88% 6.40 % 5.41%
Weighted average interest rate at the end of the year 1.75% - -
Line of Credit:
Maximum amount outstanding at any month-end
during the year $ - $ 500 $ 500
Average balance outstanding - 244 139
Balance outstanding at end of year - - 500
Weighted average interest rate during the year -% 9.14 % 7.91%
Weighted average interest rate at the end of the year -% - % 8.50%
Subsidiary Activities
The Company has four wholly-owned subsidiaries as follows:
LIF Statutory Trust I. On September 7, 2000, LIF Statutory Trust issued $7.5
million aggregate liquidation amount of 10.60% Capital Securities due September
7, 2030, referred to as Capital Securities. The Company has fully and
unconditionally guaranteed the Capital Securities along with all obligations of
LIF Statutory Trust I under the trust agreement. LIF Statutory Trust I was
formed for the exclusive purpose of issuing the Capital Securities and common
securities and using the proceeds to acquire an aggregate principal amount of
$7.7 million of the Company's 10.60% Junior Subordinated Debentures due
September 7, 2030, referred to as the Company's Junior Subordinated Debentures.
The Junior Subordinated Debentures are pre-payable, in whole or in part, at the
Company's option on or after September 7, 2010 at declining premiums to
maturity. Proceeds totaling approximately $7.2 million are being used for
general corporate purposes, including the repurchase of common stock.
Long Island Financial Client Services Corp. Long Island Financial Client
Services Corp. was formed for the purpose of providing Private Banking Services
to clients of the Company. Private Banking Services provided include, but are
not limited to, professional money management, investment planning, life
insurance, business insurance, charitable planning, estate planning, business
valuation services, business succession planning, and pension design and
administration. The operations of Long Island Financial Client Services Corp.
were not material to the Company's operating results for the year ended December
31, 2001.
Long Island Commercial Services Corp. Long Island Commercial Services Corp. was
formed for the purpose of providing insurance services to clients of the
Company. Insurance services provided include, but are not limited to, group
health insurance, group dental plans, business insurance, life insurance, home,
auto, boat insurance, and long term care planning. The operations of Long Island
Commercial Services Corp. were not material to the Company's operating results
for the year ended December 31, 2001.
11
Long Island Commercial Bank. The 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 in Suffolk and Nassau 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.
Long Island Commercial Bank currently has one subsidiary, Long Island Commercial
Capital Corporation. Long Island Commercial Capital Corporation was organized
for the purpose of investing in mortgage related assets as a real estate
investment trust. The Bank transferred $48.3 million in commercial real estate
loans to Long Island Commercial Capital Corporation, which included certain
associated assets and liabilities. In return, the Bank received shares of common
and preferred stock of Long Island Commercial Capital Corporation. This
subsidiary promotes greater retained earnings for the Bank through reduced taxes
and thereby serves to strengthen the Bank's capital position from an operational
standpoint.
In 1999, the Company established the Long Island Commercial Bank Foundation (the
"Foundation"). The purpose of the Foundation is to contribute funds to local
entities that are organized and operated exclusively for charitable,
educational, religious, scientific, and other specified purposes. The foundation
is primarily funded by annual contributions from Long Island Commercial Bank,
which equal 1% of the Company's prior year pretax income. The officers and
trustees of the foundation are comprised of certain officers and Board members
of the Board of the Company.
Personnel
At December 31, 2001, the Bank employed 88 employees, 4 of which are part-time.
No employees are covered by a collective bargaining agreement and the Bank
believes its relations with its employees are good.
Federal and State Taxation
General - The Company, the Bank and its subsidiary report their income using the
accrual method of accounting and are subject to federal and state income
taxation in the same manner as other corporations. The following discussion of
tax matters is intended only as a summary and does not purport to be a
comprehensive description of the tax rules applicable to the Company or its
subsidiaries. The Internal Revenue Service has not audited the Company or its
subsidiaries during the last five years.
Federal Income Taxation - In general, banks are subject to federal income tax in
the same manner as other corporations. However, gains and losses realized by
banks from the sale or exchange of portfolio debt instruments are generally
treated as ordinary, rather than capital, gains and losses, and a "small bank"
(i.e. one with assets having a tax basis of no more than $500 million), such as
the Bank, is permitted to calculate its deductions for bad debts under a reserve
method that is based upon actual charge-offs for the current and preceding five
years or a "grand-fathered" base year reserve, if larger. A bank maintaining a
bad debt reserve may be subject to additional tax if it makes distributions to
shareholders in excess of its current and accumulated earnings and profits, as
calculated for federal income tax purposes, or in redemption of its stock or in
partial or complete liquidation.
Corporate Alternative Minimum Tax - In addition to the regular income tax, the
Code imposes an alternative minimum tax (AMT) in an amount equal to 20% of
alternative minimum taxable income (AMTI) to the extent that the AMT exceeds the
regular tax. AMTI is regular taxable income as modified by certain adjustments
and tax preference items. AMTI includes an amount equal to 75% of the excess of
adjusted current earnings over AMTI (determined without regard to this
adjustment and prior to reduction for net operating losses). Only 90% of AMTI
can be offset by net operating loss carry forwards. The AMT is available as a
credit against future regular income tax. The AMT credit can be carried forward
indefinitely. The Bank does not expect to be subject to the AMT.
Dividends Received Deduction and Other Matters. The Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. A 70% dividends received deduction generally
applies with respect to dividends received from corporations that are not
members of such affiliated group, except that an 80% dividends received
deduction applies if the Company and the Bank own more than 20% of the stock of
a corporation distributing a dividend.
New York State Taxation - The Bank is subject to the New York State Franchise
Tax on Banking Corporations in an amount equal to the greater of ( i ) 8.5% of
the Bank's "entire net income" allocable to New York State during the taxable
year, or ( ii ) the applicable alternative minimum tax. The alternative minimum
tax is generally the greatest of (a) .01% of the value of the taxable assets
allocable to New York State (b) 3% of alternative entire net income allocated to
New York or (c) $250. Entire net income is similar to federal taxable income
subject to certain modifications. A bank maintaining such a bad debt reserve may
be subject to additional New York tax if it makes certain distributions to its
shareholders. In addition, net-operating losses cannot be carried back or
carried forward and alternative entire net income is equal to entire net income
without certain adjustments. The Bank is also subject to the 17% Metropolitan
Commuter Transportation District Surcharge on its New York Sate Franchise Tax.
The Company and the Bank file a combined return.
12
Delaware Taxation - The Company, as a Delaware financial holding company not
earning income in Delaware, is exempted from the corporate income tax. However,
the Company is required to file an annual report with and pay an annual
franchise tax based on issued shares and asset size to the State of Delaware.
Supervision and Regulation
General - References in this section to applicable statutes and regulations are
brief summaries only, and do not purport to be complete. The readers should
consult such statutes and regulations themselves for a full understanding of the
details of their operation.
As a consequence of the extensive regulation of commercial banking activities in
the United States, the business of Long Island Financial Corp. and its
subsidiaries are particularly susceptible to federal and state legislation that
may have the effect of increasing or decreasing the cost of doing business,
modifying permissible activities, or enhancing the competitive position of other
financial institutions.
Holding Company Regulation - As a registered financial holding company, the
Company is subject to examination, regulation, and periodic reporting under the
Bank Holding Company Act, as administered by the Board of Governors of the
Federal Reserve System (the FRB). The Company is required to obtain the prior
approval of the FRB to acquire all, or substantially all, of the assets of any
bank or bank holding company or merge with another bank holding company. Prior
FRB approval will also be required for the Company to acquire direct or indirect
ownership or control of any voting securities of any bank or bank holding
company if, after giving effect to such acquisition, the Company would, directly
or indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company. In evaluating such transactions, the FRB considers
such matters as the financial and managerial resources of and future prospects
of the companies involved, competitive factors and the convenience and needs of
the communities to be served. Bank holding companies may acquire additional
banks in any state, subject to certain restrictions such as deposit
concentration limits. In addition to the approval of the FRB, before any bank
acquisition can be completed, prior approval may also be required to be obtained
from other agencies having supervisory jurisdiction over banks to be acquired.
The FRB has adopted capital adequacy guidelines for bank holding companies (on a
consolidated basis). The Company's total and Tier 1 capital exceeds the
requirements established by the FRB.
A bank holding company is generally required to give the FRB prior written
notice of any purchase or redemption of its outstanding equity securities if the
gross consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the Company's consolidated net worth. The FRB
may disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe and unsound practice, or would violate any law,
regulation, FRB order or directive, or any condition imposed by, or written
agreement with, the FRB. There is an exception to this approval requirement for
well-capitalized bank holding companies that meet certain other conditions.
The FRB has issued a policy statement regarding the payment of dividends by bank
holding companies. In general, the FRB's policies provide that dividends should
be paid only out of current earnings and only if the prospective rate of
earnings retention by the bank holding company appears consistent with the
organization's capital needs, asset quality, and overall financial condition.
The FRB's policies also require that a bank holding company serve as a source of
financial strength to its subsidiary bank or banks by standing ready to use
available resources to provide adequate capital funds to those banks during
periods of financial stress or adversity and by maintaining the financial
flexibility and capital-raising capacity to obtain additional resources for
assisting its subsidiary bank or banks where necessary. These regulatory
policies could affect the ability of the Company to pay dividends or otherwise
engage in capital distributions.
Restrictions on Transactions with Affiliates - Section 23A of the Federal
Reserve Act imposes quantitative and qualitative limits on transactions between
a bank and any affiliate, and requires certain levels of collateral for such
transactions. It also limits the amount of advances to third parties which are
collateralized by the securities or obligations of the Company or its
subsidiaries. Section 23B requires that certain transactions between a bank and
its affiliates be on terms substantially the same, or at least as favorable, as
those prevailing at the time for comparable transactions with or involving other
nonaffiliated companies. In the absence of such comparable transactions, any
transactions between a bank and its affiliates must be on terms and under
circumstances, including credit standards, that in good faith would be offered
to or would apply to nonaffiliated companies.
Gramm-Leach-Bliley - On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act of 1999 (also known as the Financial Services
Modernization Act). The Financial Services Modernization Act repealed provisions
of the Glass-Steagall Act which restricted the affiliation of banks with firms
engaged principally in specified securities activities, and provided for
regulation of a new form of bank holding company, known as a financial holding
company under the Bank Holding Company Act. Financial holding companies, such as
the Company, can engage in a statutorily provided list of financial activities,
including insurance and securities underwriting and agency activities, merchant
banking and insurance company portfolio activities.
The general effect of the Financial Services Modernization Act is to establish a
comprehensive framework to permit affiliations among commercial banks, insurance
companies, securities firms and other financial service providers. In addition,
activities that the Federal Reserve, in consultation with the Secretary of the
Treasury, determines to be financial in nature, incidental to such financial
activities, or complementary activities that do not pose a substantial risk to
the safety and soundness of depository institutions or the financial system
generally are authorized.
13
In addition to repealing historical restrictions on, and eliminating federal and
state law barriers to affiliations among banks, securities firms, insurance
companies, and other financial service providers, the Financial Services
Modernization Act provides a uniform framework for the functional regulation of
the activities of banks, savings institutions and their holding companies;
provides an enhanced framework for protecting the privacy of consumer
information; modifies the laws governing the implementation of the Community
Reinvestment Act; and addresses a variety of other legal and regulatory issues
affecting both the day-to-day operations and the long-term activities of
financial institutions.
In order for the Company to take advantage of the ability to affiliate with
other financial services providers without obtaining prior approval, the Company
filed a declaration with the Federal Reserve Board, electing to engage in
activities permissible for financial holding companies and certifying that it is
eligible to do so because the Bank is well-capitalized and well-managed. In
addition, the Federal Reserve determined that the Bank and the Company have at
least a satisfactory CRA rating. The Company met those requirements and
qualifies as a financial holding company.
The Company does not believe that the Financial Services Modernization Act will
have a material adverse effect on its operations in the near-term. However, to
the extent that it permits banks, securities firms, and insurance companies to
affiliate, the financial services industry may experience further consolidation.
The Financial Services Modernization Act is intended to grant to community banks
certain powers as a matter of right that larger institutions have accumulated on
an ad hoc basis. Nevertheless, that Act may have the result of increasing the
amount of competition that the Company and the Bank face from larger
institutions and other types of companies offering financial products, many of
which may have substantially more financial resources than the Company or the
Bank.
From time to time, various federal and state legislation is proposed that could
result in additional regulation of, and restrictions on, the business of the
Company and the Bank. We cannot predict whether any such legislation will be
enacted or, if enacted, how the legislation would affect the business of the
Company and the Bank. As a consequence of the extensive regulation of commercial
banking activities in the United States, the Company's and the Bank's business
is particularly susceptible to being affected by federal legislation and
regulations that may increase the cost of doing business. Except as specifically
described above, management does not believe that the Financial Services
Modernization Act will have a material effect on the liquidity, capital
resources or results of operations of the Company.
Management is not aware of any other current specific recommendations by
regulatory authorities or proposed legislation, which if they were implemented,
would have a material adverse effect upon the liquidity, capital resources, or
results of operations, although the general cost of compliance with numerous and
multiple federal and state laws and regulations does have, and in the future may
have, a negative impact on the corporation's results of operations.
Further, the business of the Corporation is also affected by the state of the
financial services industry in general. As a result of legal and industry
changes, management believes that the industry will continue to experience and
increase in consolidations and mergers as the financial services industry
strives for greater cost efficiencies and market share. Management also expects
increased diversification of financial products and services offered by the Bank
and its competitors. Management believes that such consolidations and mergers,
and diversification of products and services may enhance the Bank's competitive
position.
New York State and FDIC
The Bank is organized under the New York Banking Law ("Banking Law"), and its
deposits are insured by the Bank Insurance Fund (the BIF) of the FDIC to the
extent permitted by law. As a New York bank, the Bank is subject to regular
examination and supervision by the NYSBD. As a depository institution, the
deposits of which are insured by the FDIC, the Bank also is subject to
regulation and supervision by the FDIC. While the Bank is not a member of the
Federal Reserve System, it is subject to certain regulations of the Federal
Reserve Board. In addition to banking laws, regulations and regulatory agencies,
the Bank is subject to various other laws, regulations and regulatory agencies,
all of which directly or indirectly affect the Bank's operations.
Federal Securities Laws
The status of the Company as a registered bank holding company under the BHCA
does not exempt it from certain Federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the Federal securities laws. The Company is subject to the
periodic reporting, proxy solicitation, tender offer, insider trading
restrictions and other requirements under the Securities and Exchange Act of
1934, as amended, or Exchange Act.
Delaware Corporation Law
The Company is incorporated under the laws of the State of Delaware. Thus, we
are subject to the regulation by the State of Delaware and the rights of our
shareholders are governed by the Delaware General Corporation Law.
14
ITEM 2. PROPERTIES
The Bank conducts its business from its main branch office and executive offices
located at One Suffolk Square, Islandia, New York, and eight branch offices
located in Babylon, Smithtown, Westbury, Jericho, Shirley, Ronkonkoma, Melville,
and Central Islip, New York. The Central Islip office opened January 14, 2002.
The Deer Park property was purchased in November 2001 and a banking facility
there is currently under construction. The following table sets forth
information relating to each of the offices of the Bank at December 31, 2001.
Lease Net
Date Expiration Book Value
Leased Including at
Location Leased Acquired Options Dec. 31,2001
(Dollars in thousands)
Main Office:
One Suffolk Square, Islandia, LI, New York 11749 Leased 1987 2005 $ 110
Branch Offices:
400 West Main Street, Babylon, LI, NY 11702 Leased 1995 2005 10
50 Route 111, Smithtown, LI, NY 11787 Leased 1997 2012 4
900 Merchants Concourse, Westbury, LI, NY 11590 Leased 1997 2003 17
390 North Broadway, Jericho, LI, NY 11753 Leased 1997 2008 22
861 Montauk Highway, Shirley, LI, NY 11967 Leased 1998 2002 20
3425 Veterans Memorial Hwy, Ronkonkoma, LI, NY 11779 Leased 2001 2011 163
610 Broadhollow Road, Melville, LI, NY 11747 Leased 2001 2019 140
320 Carlton Avenue, Central Islip, LI, NY 11722 Leased 2001 2019 -
720 Grand Boulevard, Deer Park, LI, NY 11729 Owned 2001 ------ -
------
$ 486
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The above captioned information regarding the market for the Company's common
equity and related stockholder matters appears in the 2001 Annual Report to
Stockholders under the caption "Capital Stock" and is incorporated herein by
this reference.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding selected financial data appears on pages 6 and 7 of the
2001 Annual Report to Stockholders under the caption "Selected Financial Data"
and is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations appears on pages 8 through 16 of the 2001 Annual Report to
Stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and is incorporated herein by
this reference.
15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in the section captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Management of
Interest Rate Risk" in the 2001 Annual Report to Stockholders is incorporated
herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Long Island Financial Corp. and the
Independent Auditors' Report appear on pages 17 through 30 of the 2001 Annual
Report to Stockholders and are incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained on pages 3 through 6 of the Proxy Statement for the
Annual Meeting of Stockholders to be held April 24, 2002 under the caption
"Election of Directors" is incorporated herein by reference.
The following table sets forth certain information regarding the executive
officers of the Company. Officers are re-elected by the Board of Directors
annually.
Name Age Position(s) Held with the Company
Perry B. Duryea 80 Chairman of the Board
Roy M. Kern, Sr. 68 Vice Chairman of the Board
Douglas C. Manditch 54 President and Chief Executive Officer
Thomas Buonaiuto 36 Vice President and Treasurer
Carmelo C. Vizzini 56 Vice President and Secretary
Biographical Information
Positions held by a director or officers have been held for at least the past
five years unless stated otherwise.
Perry B. Duryea serves as Chairman of the Board of the Company and of the Bank;
He is Chairman of Perry B. Duryea & Son, Inc., a seafood business located in
Montauk, New York. Mr. Duryea was Speaker of the New York Assembly and also
served as its Minority Leader.
Roy M. Kern, Sr. serves as Vice Chairman of the Board of the Company and of the
Bank. He was formerly President of Bragg Medical Group, Inc., a firm, which
provides billing and financial services to the medical community and is located
in Kings Park, New York.
Douglas C. Manditch is President and Chief Executive Officer of the Company and
of the Bank. He joined Long Island Commercial Bank in 1987, then in formation.
Thomas Buonaiuto serves as Vice President and Treasurer of the Company and
Executive Vice President and Chief Financial Officer of the Bank. Mr.
Buonaiuto's responsibilities include oversight of all areas of operations of the
Bank excluding lending.
Carmelo C. Vizzini serves as Vice President and Secretary of the Company and
Executive Vice President and Chief Lending Officer of the Bank. Mr. Vizzini's
responsibilities include oversight of all areas of lending within the Bank, as
well as loan operations and compliance with the Community Reinvestment Act
("CRA").
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 9 through 12 of the Proxy Statement for the
Annual Meeting of Stockholders to be held on April 24, 2002 under the captions
"Executive Compensation" and "Directors Compensation" is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on page 4 through 6 of the Proxy Statement for the
Annual Meeting of Stockholders to be held April 24, 2002 under the caption
"Information with Respect to the Nominees, Continuing Directors and Executive
Officers" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 17 of the Proxy Statement for the Annual
Meeting of Stockholders to be held April 24, 2002 under the caption
"Transactions with Certain Related Persons" is incorporated herein by reference.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
The following financial statements of the Bank are included in the Company's
Annual Report to Stockholders for the year ended December 31, 2001 and are
incorporated by this reference:
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Earnings for the Years Ended December 31, 2001, 2000
and 1999
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash
Flows for the Years Ended December 31, 2001, 2000 and 1999 Notes to
Consolidated Financial Statements Independent Auditors' Report
The remaining information appearing in the 2001 Annual Report to Stockholders is
not deemed to be filed as part of this report, except as expressly provided
herein.
(A) 2. Financial Statement Schedules
Financial Statement Schedules have been omitted because they are not applicable
or the required information is shown in the Financial Statements or Notes
thereto.
(B) Reports on Form 8-K Filed During the Last Quarter of 2001.
None
(C) Exhibits Required by Securities and Exchange Commission Regulation S-K
Exhibit Number
2.0 Plan of Acquisition between Long Island Financial Corp. and Long Island
Commercial Bank dated as of September 15, 1998.*
3.1 Certificate of Incorporation of Long Island Financial Corp., dated
September 10, 1998. *
3.2 By-Laws of Long Island Financial Corp., effective as of September 10,
1998.*
10.0 Long Island Financial Corp. 1998 Stock Option Plan. *
10.1 Change of Control Agreement between Long Island Financial Corp. and Douglas
C. Manditch
10.2 Change of Control Agreement between Long Island Financial Corp. and Thomas
Buonaiuto
10.3 Change of Control Agreement between Long Island Financial Corp. and Carmelo
C. Vizzini
11.0 Statement re: Computation of per Share Earnings (incorporated by reference
to Note 13 to Notes to Consolidated Financial Statements - Part IV, Item
14)
13.0 2001 Annual Report to Stockholders
21.0 Subsidiary information is incorporated by reference to "Part I - Subsidiary
Activities"
23.0 Consent of KPMG LLP
* Incorporated herein by reference in this document to the S-4 Registration
Statement initially filed on September 22, 1998, Registration No. 333-63971
18
SIGNATURES
Pursuant to the requirements of Section 13 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.
LONG ISLAND FINANCIAL CORP.
By: /s/ Douglas C. Manditch Date: March 28, 2002
-------------------------------
Douglas C. Manditch
President and Chief Executive Officer
By: /s/ Thomas Buonaiuto Date: March 28, 2002
-----------------------------
Thomas Buonaiuto
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 29, 2002 by the following persons on behalf of
the Registrant and in the capacities indicated.
/s/ Perry B. Duryea, Jr. /s/ Gordon A. Lenz
-------------------------------------- ------------------------------------
Perry B. Duryea, Jr. Gordon A. Lenz
Chairman of the Board Director
/s/ Roy M. Kern, Sr. /s/ Douglas C. Manditch
-------------------------------------- --------------------------------
Roy M. Kern, Sr. Douglas C. Manditch
Vice Chairman of the Board Director, President and
Chief Executive Officer
/s/ Harvey Auerbach /s/ Werner S. Neuburger
----------------------------------- -----------------------------------
Harvey Auerbach Werner S. Neuburger
Director Director
/s/ John L. Ciarelli, Esq. /s/ Thomas F. Roberts, III
------------------------------------ --------------------------------
John L. Ciarelli, Esq. Thomas F. Roberts, III
Director Director
/s/ Donald Del Duca /s/ Alfred Romito
----------------------------------- ------------------------------------
Donald Del Duca Alfred Romito
Director Director
/s/ Frank J. Esposito /s/ Sally Ann Slacke
------------------------------------- ------------------------------------
Frank J. Esposito Sally Ann Slacke
Director Director
/s/ Waldemar Fernandez /s/ John C. Tsunis, Esq.
------------------------------- -----------------------------------
Waldemar Fernandez John C. Tsunis, Esq.
Director Director
19
EXHIBIT 10.1
LONG ISLAND COMMERCIAL BANK
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT is made this 28 day of February, 2001, by and between LONG
ISLAND COMMERCIAL BANK, a New York state-chartered commercial bank located in
Islandia, New York (the "Company") and Douglas C. Manditch (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company and to protect
the Executive in the event of a Change of Control, the Company is willing to
provide a change of control benefit to the Executive. The Company will pay the
benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Base Salary" means the total annual base salary payable to the Executive at
the rate in effect on the date specified. Base Salary shall not be reduced for
any salary reduction contributions: (i) to cash or deferred arrangements under
Section 401(k) of the Code; (ii) to a cafeteria plan under Section 125 of the
Code; or (iii) to a deferred compensation plan that is not qualified under
Section 401(a) of the Code.
1.2 "Change of Control" means the transfer of shares of the Company's voting
common stock such that one entity or one person acquires (or is deemed to
acquire when applying Section 318 of the Code) more than 50.0 percent of the
Company's outstanding voting common stock followed within twelve (12) months
by the Executive's Termination of Employment for reasons other than death,
Disability or retirement.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Termination for Cause" means the termination of the Executive's employment
by the Company for any of the following reasons:
(a) Gross negligence or gross neglect of duties;
20
(b) Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
employment and resulting in an adverse effect on the Company.
1.6 "Termination of Employment" means that the Executive ceasing to be employed
by the Company for any reason whatsoever, voluntary or involuntary, other
than by reason of an approved leave of absence.
Article 2
Change of Control Benefits
2.1 Change of Control Benefit. If the Executive's employment should voluntarily
or involuntarily terminate for any reason, other than a Termination for
Cause, the Company shall pay to the Executive a Change of Control benefit
as described in this Section 2.1.
2.1.1Amount of Benefit. The Change of Control benefit shall be three times
Base Salary grossed up for excise taxes.
2.1.2Payment of Benefit. The Company shall pay the Change of Control
benefit provided herein in a lump sum to the Executive within 60 days
of the Executive's Termination of Employment.
Article 3
General Limitations
3.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not pay any benefit under this Agreement if
the Executive's employment is a Termination for Cause by the Company.
Article 4
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
Article 5
Miscellaneous
5.1 Binding Effect. This Agreement shall bind the Executive and the Company,
and their beneficiaries, survivors, executors, successors, administrators
and transferees.
21
5.2 No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge
the Executive. It also does not require the Executive to remain an employee
nor interfere with the Executive's right to terminate employment at any
time.
5.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
5.4 Tax Withholding. The Company shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.
5.5 Applicable Law. The Agreement and all rights hereunder shall be governed by
the laws of the State of New York, except to the extent preempted by the
laws of the United States of America.
5.6 Unfunded Arrangement. The Executive is a general unsecured creditor of the
Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights
to benefits are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment
by creditors.
5.7 Entire Agreement. This Agreement constitutes the entire agreement between
the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
5.8 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to establishing rules
and prescribing any forms necessary or desirable to administer this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement.
EXECUTIVE: LONG ISLAND COMMERCIAL BANK
/s/ Douglas C. Manditch By /s/ Perry B. Duryea, Jr.
-------------------------- ------------------------
Douglas C. Manditch Perry B. Duryea, Jr.
Chairman of the Board
22
EXHIBIT 10.2
LONG ISLAND COMMERCIAL BANK
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT is made this 28 day of February, 2001, by and between LONG
ISLAND COMMERCIAL BANK, a New York state-chartered commercial bank located in
Islandia, New York (the "Company") and Thomas Buonaiuto (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company and to protect
the Executive in the event of a Change of Control, the Company is willing to
provide a change of control benefit to the Executive. The Company will pay the
benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Base Salary" means the total annual base salary payable to the Executive
at the rate in effect on the date specified. Base Salary shall not be
reduced for any salary reduction contributions: (i) to cash or deferred
arrangements under Section 401(k) of the Code; (ii) to a cafeteria plan
under Section 125 of the Code; or (iii) to a deferred compensation plan
that is not qualified under Section 401(a) of the Code.
1.2 "Change of Control" means the transfer of shares of the Company's voting
common stock such that one entity or one person acquires (or is deemed to
acquire when applying Section 318 of the Code) more than 50.0 percent of
the Company's outstanding voting common stock followed within twelve (12)
months by the Executive's Termination of Employment for reasons other than
death, Disability or retirement.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Termination for Cause" means the termination of the Executive's employment
by the Company for any of the following reasons:
(a) Gross negligence or gross neglect of duties;
23
(b) Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
1.6 "Termination of Employment" means that the Executive ceasing to be employed
by the Company for any reason whatsoever, voluntary or involuntary, other
than by reason of an approved leave of absence.
Article 2
Change of Control Benefits
2.1 Change of Control Benefit. If the Executive's employment should voluntarily
or involuntarily terminate for any reason, other than a Termination for
Cause, the Company shall pay to the Executive a Change of Control benefit
as described in this Section 2.1.
2.1.1Amount of Benefit. The Change of Control benefit shall be two and one
half times Base Salary grossed up for excise taxes.
2.1.2Payment of Benefit. The Company shall pay the Change of Control
benefit provided herein in a lump sum to the Executive within 60 days
of the Executive's Termination of Employment.
Article 3
General Limitations
3.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not pay any benefit under this Agreement if
the Executive's employment is a Termination for Cause by the Company.
Article 4
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
Article 5
Miscellaneous
5.1 Binding Effect. This Agreement shall bind the Executive and the Company,
and their beneficiaries, survivors, executors, successors, administrators
and transferees.
24
5.2 No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge
the Executive. It also does not require the Executive to remain an employee
nor interfere with the Executive's right to terminate employment at any
time.
5.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
5.4 Tax Withholding. The Company shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.
5.5 Applicable Law. The Agreement and all rights hereunder shall be governed by
the laws of the State of New York, except to the extent preempted by the
laws of the United States of America.
5.6 Unfunded Arrangement. The Executive is a general unsecured creditor of the
Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights
to benefits are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment
by creditors.
5.7 Entire Agreement. This Agreement constitutes the entire agreement between
the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
5.8 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to establishing rules
and prescribing any forms necessary or desirable to administer this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement.
EXECUTIVE: LONG ISLAND COMMERCIAL BANK
/s/ Thomas Buonaiuto By /s/ Perry B. Duryea, Jr.
-------------------------- ------------------------
Thomas Buonaiuto Perry B. Duryea, Jr.
Chairman of the Board
25
EXHIBIT 10.3
LONG ISLAND COMMERCIAL BANK
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT is made this 28 day of February, 2001, by and between LONG
ISLAND COMMERCIAL BANK, a New York state-chartered commercial bank located in
Islandia, New York (the "Company") and Carmelo C. Vizzini (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company and to protect
the Executive in the event of a Change of Control, the Company is willing to
provide a change of control benefit to the Executive. The Company will pay the
benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Base Salary" means the total annual base salary payable to the Executive
at the rate in effect on the date specified. Base Salary shall not be
reduced for any salary reduction contributions: (i) to cash or deferred
arrangements under Section 401(k) of the Code; (ii) to a cafeteria plan
under Section 125 of the Code; or (iii) to a deferred compensation plan
that is not qualified under Section 401(a) of the Code.
1.2 "Change of Control" means the transfer of shares of the Company's
voting common stock such that one entity or one person acquires (or is
deemed to acquire when applying Section 318 of the Code) more than 50.0
percent of the Company's outstanding voting common stock followed within
twelve (12) months by the Executive's Termination of Employment for reasons
other than death, Disability or retirement.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Termination for Cause" means the termination of the Executive's employment
by the Company for any of the following reasons:
(a) Gross negligence or gross neglect of duties;
26
(b) Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
1.6 "Termination of Employment" means that the Executive ceasing to be employed
by the Company for any reason whatsoever, voluntary or involuntary, other
than by reason of an approved leave of absence.
Article 2
Change of Control Benefits
2.1 Change of Control Benefit. If the Executive's employment should voluntarily
or involuntarily terminate for any reason, other than a Termination for
Cause, the Company shall pay to the Executive a Change of Control benefit
as described in this Section 2.1.
2.1.1Amount of Benefit. The Change of Control benefit shall be two and one
half times Base Salary grossed up for excise taxes.
2.1.2Payment of Benefit. The Company shall pay the Change of Control
benefit provided herein in a lump sum to the Executive within 60 days
of the Executive's Termination of Employment.
Article 3
General Limitations
3.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Company shall not pay any benefit under this Agreement if
the Executive's employment is a Termination for Cause by the Company.
Article 4
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
Article 5
Miscellaneous
5.1 Binding Effect. This Agreement shall bind the Executive and the Company,
and their beneficiaries, survivors, executors, successors, administrators
and transferees.
27
5.2 No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge
the Executive. It also does not require the Executive to remain an employee
nor interfere with the Executive's right to terminate employment at any
time.
5.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
5.4 Tax Withholding. The Company shall withhold any taxes that are required to
be withheld from the benefits provided under this Agreement.
5.5 Applicable Law. The Agreement and all rights hereunder shall be governed by
the laws of the State of New York, except to the extent preempted by the
laws of the United States of America.
5.6 Unfunded Arrangement. The Executive is a general unsecured creditor of the
Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights
to benefits are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment
by creditors.
5.7 Entire Agreement. This Agreement constitutes the entire agreement between
the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
5.8 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to establishing rules
and prescribing any forms necessary or desirable to administer this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement.
EXECUTIVE: LONG ISLAND COMMERCIAL BANK
/s/ Carmelo C. Vizzini By /s/ Perry B. Duryea, Jr.
------------------------ -------------------------
Carmelo C.Vizzini Perry B. Duryea, Jr.
Chairman of the Board
28
EXHIBIT 13. 2001 ANNUAL REPORT TO STOCKHOLDERS
Selected Financial Data
The following table sets forth selected financial data for the last five years.
At or for the years ended December 31,
2001 2000 1999 1998 1997
(Dollars in thousands)
Selected Operating Data:
Interest income $ 22,945 $ 20,996 $ 18,410 $ 15,285 $ 12,726
Interest expense 11,233 11,143 9,482 8,229 7,303
Net interest income 11,712 9,853 8,928 7,056 5,423
Provision for loan losses 150 150 600 420 240
Other operating income 2,139 1,566 1,706 918 378
Other operating expenses 10,716 8,635 7,581 5,799 3,737
Income before income taxes 2,985 2,634 2,453 1,755 1,824
Income taxes 1,023 880 847 630 760
Net income $ 1,962 $ 1,754 $ 1,606 $ 1,125 $ 1,064
----- ----- ----- ----- -----
Diluted earnings per share $ 1.33 $ 1.10 $ .92 $ .64 $ 1.04
---- ---- --- --- ----
Selected Financial Condition Data:
Total assets $ 438,390 $ 332,934 $ 331,054 $ 266,543 $ 211,956
Loans, net 176,769 134,853 119,836 94,144 78,759
Allowance for loan losses 2,028 1,872 1,475 1,071 1,026
Securities 217,282 169,422 170,149 145,819 99,231
Deposits 345,917 273,189 269,740 217,867 187,626
Borrowed funds 59,500 29,000 39,500 24,000 -
Stockholders' equity 21,127 19,261 18,343 21,868 21,408
Book value per share $ 14.67 $ 13.02 $ 11.14 $ 12.35 $ 12.18
Stockholders' equity (1) 21,354 20,428 21,327 21,803 21,029
Book value per share (1) $ 14.83 $ 13.81 $ 12.95 $ 12.31 $ 11.96
Shares outstanding 1,439,926 1,479,426 1,646,326 1,771,306 1,757,709
Average Balance Sheet Data:
Loans, net $ 153,403 $ 129,393 $ 104,512 $ 86,647 $ 66,961
Securities 155,833 145,291 145,881 109,552 94,509
Assets 345,985 293,884 273,736 216,941 172,583
Demand deposits 51,487 40,842 33,791 25,811 18,657
Savings deposits 39,221 31,507 22,747 9,030 2,784
NOW and money market deposits 49,431 43,865 49,413 35,852 24,960
Certificates of deposit 129,246 106,079 103,596 105,741 99,282
Stockholders' equity $ 20,689 $ 18,138 $ 20,470 $ 21,717 $ 11,368
29
Selected Financial Data (cont'd)
At or for the years ended December 31,
2001 2000 1999 1998 1997
(Dollars in thousands, except share data)
Performance Ratios:
Return on average assets .57% .60% .59% .52% .62%
Return on average equity 9.48 9.67 7.85 5.18 9.36
Average equity to average assets 5.98 6.17 7.48 10.01 6.59
Equity to total assets at end of year 4.82 5.79 5.54 8.20 10.10
Interest rate spread (2) 2.87 2.74 2.81 2.51 2.51
Net interest margin (3) 3.66 3.58 3.50 3.48 3.29
Ratio of interest-earning assets to
average interest-bearing liabilities 1.22 1.21 1.19 1.25 1.18
Non-interest expense to average assets 3.10 2.94 2.77 2.67 2.17
Efficiency ratio (4) 77.37 75.62 71.29 72.72 64.42
Dividend payout ratio 24.81 29.09 34.78 50.00 29.81
Asset Quality Ratios and Other Data:
Total non-performing loans $ 178 $ 416 $ 179 $ 511 $ 403
Allowance for loan losses 2,028 1,872 1,475 1,071 1,026
Non-performing loans as a percent of
Total loans (5) (6) .10% .30% .15% .54% .51%
Non-performing loans as a percent of
total assets (5) .04 .12 .05 .19 .19
Allowance for loan losses as a percent of:
Non-performing loans (5) 1139.33 450.00 824.02 209.59 254.59
Total loans (6) 1.13% 1.37% 1.22% 1.12% 1.29%
Full service offices 8 6 6 6 4
(1) Excludes the unrealized appreciation (depreciation) in available-for-sale
securities.
(2) Interest rate spread represents the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities.
(3) The net interest margin represents net interest income divided by average
interest-earning assets.
(4) The efficiency ratio represents the ratio of operating expenses divided by
the sum of net interest income and other operating income.
(5) Non-performing loans consist of all non-accrual loans and all other loans
90 days or more past due. It is the Company's policy to generally cease
accruing interest on all loans 90 days or more past due.
(6) Loans include loans, net, before allowance for loan losses.
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
Statements contained in this Annual Report, which are not historical facts, are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Amounts herein could vary as a result of market
and other factors. Such forward-looking statements are subject to risks and
uncertainties which could cause actual results to differ materially from those
currently anticipated due to a number of factors, which include, but are not
limited to, factors discussed in documents filed by Long Island Financial Corp.
(the "Company") with the Securities Exchange Commission from time to time. Such
forward-looking statements may be identified by the use of such words as
"believe," "expect," "anticipate," "should," "planned," "estimated" and
"potential." Examples of forward-looking statements include, but are not limited
to, estimates with respect to the financial condition, expected or anticipated
revenue, results of operations and business of the Company that are subject to
various factors which could cause actual results to differ materially from these
estimates. The Company's ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a
material adverse effect on the operations of the Company and its subsidiaries
include, but are not limited to, changes in: interest rates; general economic
conditions; monetary and fiscal policies of the U.S. Government, including
policies of the U.S. Treasury and the Federal Reserve Board; the quality or
composition of the loan or investment portfolios; demand for loan products;
deposit flows; real estate values; the level of defaults; losses and prepayments
on loans held by the Company in portfolio or sold in the secondary markets;
demand for financial services in the Company's market area; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors affecting the Company's operations, pricing, products and
services. The forward-looking statements are made as of the date of this Annual
Report, and, except as required by applicable law, the Company assumes no
obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking
statements.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Readers
are cautioned not to place undue reliance on forward-looking statements, which
speak only as of the date of this Annual Report.
GENERAL
Long Island Financial Corp. ("the Company") is a registered Delaware
financial holding company, organized in 1999, and the parent company of Long
Island Commercial Bank ("the Bank"). The Bank, founded in 1989, is a New York
state-chartered commercial bank, which is engaged in commercial banking in
Islandia, New York and the surrounding communities in Suffolk and Nassau
Counties. The Company's results of operations are dependent primarily on net
interest income, which is the difference between the income earned on its loan
and securities portfolios and its cost of funds, consisting of interest paid on
deposits and borrowings. Results of operations are al