determining the allowance for loan losses as of any balance sheet date is subjective in nature and requires material estimates. Actual results could differ significantly from these estimates.
The amount of future chargeoffs and provisions for loan losses will be affected by, among other things, economic conditions on Long Island. Such conditions could affect the financial strength of the Bank’s borrowers and do affect the value of real estate collateral securing the Bank’s mortgage loans. Loans secured by real estate represent approximately 86% of the Bank’s total loans outstanding at September 30, 2005. Most of these loans were made to borrowers domiciled on Long Island and are secured by Long Island properties. In recent years, economic conditions on Long Island have been good and residential real estate values have grown to unprecedented highs. Such conditions and values could deteriorate in the future, and such deterioration could be substantial. If this were to occur, some of the Bank’s borrowers may be unable to make the required contractual payments on their loans, and the Bank may be unable to realize the full carrying value of such loans through foreclosure. However, management believes that the Bank’s underwriting policies are relatively conservative and, as a result, the Bank should be less affected than the overall market.
Future provisions and chargeoffs could also be affected by environmental impairment of properties securing the Bank’s mortgage loans. Environmental audits for commercial mortgages were instituted by the Bank in 1987. Under the Bank’s current policy, an environmental audit is required on practically all commercial-type properties that are considered for a mortgage loan. At the present time, the Bank is not aware of any existing loans in the portfolio where there is environmental pollution originating on the mortgaged properties that would materially affect the value of the portfolio.
Noninterest income includes service charges on deposit accounts, Investment Management Division income, gains or losses on sales of securities, and all other items of income, other than interest, resulting from the business activities of the Corporation. Excluding net gains and losses on sales of securities, noninterest income increased by $486,000, or 10.6 %, when comparing the first nine months of 2005 to the same period last year. The increase is comprised of an increase in Investment Management Division income of $213,000 and an increase in other income of $581,000, as offset by a decrease in service charge income of $308,000. The increase in Investment Management Division income is attributable to a change in the mix of business from nonmanaged to managed assets, the first quarter receipt of a final executor’s commission of $72,000 on one estate, and a revision of the Division’s fee schedule. The increase in other income is primarily due to a $333,000 recovery of real estate taxes previously paid and a $216,000 increase in the cash surrender value of bank owned life insurance. Service charge income decreased primarily as a result of a reduction in return check charges and maintenance and activity charges.
Noninterest expense is comprised of salaries, employee benefits, occupancy and equipment expense and other operating expenses incurred in supporting the various business activities of the Corporation. Noninterest expense increased by $1,076,000, or 6.0%, from $18,069,000 for the first nine months of 2004 to $19,145,000 for the current nine-month period. The increase is primarily comprised of an increase in salaries of $1,051,000, or 13.2%, an increase in occupancy and equipment expense of $118,000, or 4.4%, and an increase in other operating expenses of $130,000, or 3.4%, as offset by a
decrease in employee benefits expense of $223,000, or 6.1%. The increase in salaries is primarily attributable to normal annual salary increases, additions to staff, and $575,000 in severance paid during the second quarter to the Corporation’s former Chairman. The increase in occupancy and equipment expense is largely attributable to increases in expenses of rent and service contracts. The largest component of the increase in other operating expenses is an increase in fees paid to nonemployee directors which became effective April 1, 2005. The decrease in employee benefits expense is largely attributable to the second quarter termination of a retiree insurance benefit and the resulting reversal of a $193,000 liability.
Income tax expense as a percentage of book income (“effective tax rate”) was 20.6% for the first nine months of 2005 as compared to 25.6% for the same period last year. The benefit of tax-exempt interest on municipal securities results in an effective tax rate that is considerably lower than the statutory Federal income tax rate of 34% despite state income taxes. The reduction in the effective tax rate is primarily attributable to tax planning strategies and a reduction of taxes accrued with respect to the Bank’s investment and REIT subsidiaries.
Results of Operations – Three Months Ended September 30, 2005 Versus
Net income for the third quarter of 2005 was $3,331,000, or $.85 per share, as compared to $3,091,000, or $.74 per share, for the same quarter last year. The largest components of the increase in net income are an increase in net interest income of $348,000, a decrease in the provision for loan losses of $112,000, an increase in other noninterest income of $104,000, and a decrease in income tax expense of $93,000. The decrease in the provision for loan losses is primarily due to the resolution of one problem loan. The increase in other noninterest income is largely due to a $72,000 increase in the cash surrender value of bank owned life insurance. The reasons for the increase in noninterest income and the decrease in income tax expense are the same as those discussed with respect to the nine month period.
Negatively impacting net income for the third quarter was an increase in salaries expense of $248,000, an increase in other operating expenses of $144,000, and a decrease in service charges on deposit accounts of $127,000. Salaries are up primarily because of normal annual salary increases, filling of vacancies and additions to staff. The largest component of the increase in other operating expenses is the increase in director fees discussed with respect to the nine month period. The reason for the decrease in service charges is the same as that discussed with respect to the nine month period.
Capital
The Corporation’s capital management policy is designed to build and maintain capital levels that exceed regulatory standards. Under current regulatory capital standards, banks are classified as well capitalized, adequately capitalized or undercapitalized. Under such standards, a well capitalized bank is one that has a total risk-based capital ratio equal to or greater than 10%, a Tier 1 risk-based capital ratio equal to or greater than 6%, and a Tier 1 leverage capital ratio equal to or greater than 5%. The Corporation’s total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage capital ratios of 25.14%, 24.31% and 9.11%, respectively, at September 30, 2005 substantially exceed the requirements for a well-capitalized bank.
Total stockholders’ equity increased by $1,317,000, or from $90,240,000 at December 31, 2004 to $91,557,000 at September 30, 2005. The increase is primarily attributable to
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net income of $9,340,000 and proceeds from the exercise of stock options of $1,416,000, as largely offset by $6,032,000 spent for share repurchases, $1,631,000 in cash dividends declared, and $1,990,000 in unrealized losses on available-for-sale securities.
Stock Repurchase Program and Market Liquidity. Since 1988, the Corporation has had a stock repurchase program under which it has purchased, from time to time, shares of its own common stock in market or private transactions. The Corporation’s market transactions are generally intended to comply with the manner, timing, price and volume conditions set forth in SEC Rule 10b-18 and therefore, with respect to such transactions, provide the Corporation with safe harbor from liability for market manipulation under section 9(a)(2) and Rule 10b-5 of the Securities Exchange Act of 1934.
The stock repurchase program has historically enhanced earnings per share and return on average stockholders’ equity. Without the share repurchase program, the increase in earnings per share for the first nine months of 2005 would have been approximately eight cents lower. In estimating the impact on earnings per share, management considered the volume and timing of shares purchased in 2004 and thus far in 2005, the price paid per share, and the earnings loss resulting from using funds to purchase shares rather than investment securities.
The Corporation periodically reevaluates whether it wants to continue purchasing shares of its own common stock in open market transactions under Rule 10b-18 or otherwise. Because the trading volume in the Corporation’s common stock is limited, the Corporation believes that a reduction or discontinuance of its share repurchase program could adversely impact market liquidity for its common stock, the price of its common stock, or both. The publicly reported trading volume in the Corporation’s common stock for the year ended September 30, 2005 was 2,010,849 shares, 8.9% of which resulted from open market purchases by the Corporation under its share repurchase program.
Russell 3000®, 2000® and Microcap Indices®. Frank Russell Company (“Russell”) currently maintains 24 U.S. common stock indices. The indices are reconstituted effective the last Friday in June of each year using objective criteria, primarily market capitalization, and do not reflect subjective opinions. All Indices are subsets of the Russell 3000® Index which represents most of the investable U. S. equity market.
Effective June 24, 2005, the Corporation’s common stock was no longer included in the Russell 3000® and 2000® Indices but was selected for inclusion in the newly-created Russell Microcap Index®. The Russell Microcap Index® includes the smallest 1,000 companies in terms of market capitalization in the small-cap Russell 2000 Index plus the next 1,000 companies. The average market capitalization of companies in the Russell Microcap Index® is $217 million, the median market capitalization is $182.6 million, the capitalization of the largest company in the index is $539.5 million, and the capitalization of the smallest company in the index is $54.8 million. The Corporation’s market capitalization as of September 30, 2005 was approximately $173 million.
As with its former inclusion in the Russell 3000® and 2000® Indices, the Corporation believes that inclusion in the Russell Microcap Index® will positively impact the price, trading volume and liquidity of its common stock. Conversely, if the Corporation’s market capitalization falls below the minimum necessary to be included in the Russell Microcap Index® at any future annual reconstitution date, the Corporation believes that this could adversely affect the price, volume and liquidity of its common stock.
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Cash Flows and Liquidity
Cash Flows. The Corporation’s primary sources of cash are deposit growth, maturities and amortization of loans and investment securities, operations, and borrowing. The Corporation uses cash from these and other sources to first fund loan growth. Any remaining cash is used primarily to purchase a combination of short, intermediate, and longer-term investment securities, pay cash dividends, and repurchase common stock under the Corporation’s share repurchase program. During the first nine months of 2005, the Corporation’s cash and cash equivalent position increased by $28,829,000. The increase occurred primarily because cash provided by deposit growth, additional borrowings under repurchase agreements and operations exceeded the cash needed to grow loans and used to increase the size of the Bank’s investment securities portfolio.
Liquidity. The Bank has both internal and external sources of liquidity that can be used to fund loan growth and accommodate deposit outflows. The Bank’s primary internal sources of liquidity are its overnight position in federal funds sold; investment securities designated as available-for-sale; and maturities and monthly payments on its investment securities and loan portfolios. At September 30, 2005, the Bank had an overnight federal funds sold position of $28,000,000 and an available-for-sale securities portfolio of $320,909,000.
The Bank is a member of the Federal Home Loan Bank of New York (“FHLB”) and has repurchase agreements in place with five brokerage firms. In addition to customer deposits, the Bank’s primary external sources of liquidity are secured borrowings from the FHLB under a variety of borrowing arrangements and brokerage firms under repurchase agreements. However, neither the Bank’s FHLB membership nor repurchase agreements with brokers represent legal commitments on the part of the FHLB or the brokerage firms to extend credit to the Bank. The amount that the Bank can potentially borrow from the FHLB and brokerage firms is dependent on, among other things, the amount of unencumbered eligible securities that the Bank can use as collateral. At September 30, 2005, the Bank has unencumbered eligible securities collateral of approximately $247 million.
The Bank can also purchase overnight federal funds on an unsecured basis under lines with two other commercial banks. These lines in the aggregate amount of $30 million do not represent legal commitments to extend credit on the part of the other banks.
As a backup to borrowing from the FHLB, brokerage firms and other commercial banks, the Bank is eligible to borrow on a secured basis at the Federal Reserve Bank (“FRB”) discount window under the primary credit program. Primary credit, which is normally extended on a very short-term basis, typically overnight, at a rate 100 basis points above the federal funds target rate, is viewed by the FRB as a backup source of short-term funds for sound depository institutions like the Bank. The amount that the Bank can borrow under the primary credit program depends on, among other things, the amount of available eligible collateral.
Legislation
Commercial checking deposits currently account for approximately 30% of the Bank’s total deposits. Congress has been considering legislation that would allow corporate customers to cover checks by sweeping funds from interest-bearing deposit accounts each business day and repeal the prohibition of the payment of interest on
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corporate checking deposits in the future. Either could have a material adverse impact on the Bank’s future results of operations.
Adoption of New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued a revised Statement of Financial Accounting Standards No. 123 “Share Based Payments” (“SFAS No. 123”). SFAS No. 123 applies to awards granted or modified on or after the beginning of the first interim or annual period that begins after June 15, 2005. However, in April 2005 the Securities and Exchange Commission announced the adoption of a new rule that allows calendar year companies to implement SFAS No. 123 at the beginning of the first fiscal year rather than the first interim period beginning after June 15, 2005. Therefore the revised compliance date for calendar year companies like the Corporation is January 1, 2006 (the “Compliance Date”). The Corporation currently intends to adopt SFAS No. 123 on the Compliance Date.
SFAS No. 123 requires all public companies to record compensation cost for stock options provided to employees in return for employee service. The cost is measured at the fair value of the options when granted, and the cost is expensed over the employee service period, which is normally the vesting period of the options. Compensation cost also needs to be recorded for prior option grants that vest after the Compliance Date. The effect on results of operations for options granted after the Compliance Date will depend on the number of options granted, the calculated fair value of such options, and the applicable vesting periods, and accordingly cannot currently be predicted with any degree of certainty. Existing options that will vest after the Compliance Date are expected to result in additional compensation expense of approximately $40,000 in 2006 and $2,000 in 2007.
In March 2005, the Financial Accounting Standards Board issued FASB Interpretation No. 47 “Accounting for Conditional Asset Retirement Obligations” as an interpretation of Statement of Financial Accounting Standards No. 143 “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). This Interpretation, which serves to clarify the term conditional asset retirement obligation as used in SFAS No. 143, is not expected to materially impact the Corporation’s financial statements.
In May 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154 “Accounting Changes and Error Corrections” as a replacement of APB Opinion No. 20 and FASB Statement No. 3. This Statement applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This Statement carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This Statement also carries forward the guidance in APB Opinion No. 20 requiring justification of a change in accounting principle on the basis of preferability. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Corporation is not currently aware of any accounting changes or errors to which the provisions of this Statement will apply.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Bank invests in interest-earning assets which are funded by interest-bearing deposits and borrowings, noninterest-bearing deposits, and capital. The Bank’s results of operations are subject to risk resulting from interest rate fluctuations generally and having assets and liabilities that have different maturity, repricing, and prepayment/withdrawal characteristics. The Bank defines interest rate risk as the risk that the Bank’s earnings and/or net portfolio value (present value of expected future cash flows from assets less the present value of expected future cash flows from liabilities) will change when interest rates change. The principal objective of the Bank’s asset/liability management activities is to maximize net interest income while at the same time maintain acceptable levels of interest rate and liquidity risk and facilitate the funding needs of the Bank.
Because the Bank’s loans and investment securities generally reprice slower than its interest-bearing deposit accounts, an immediate increase in interest rates uniformly across the yield curve should initially have a negative effect on net interest income. However, if the Bank does not increase the rates paid on its deposit accounts as quickly or in the same amount as increases in market interest rates, the magnitude of the negative impact will decline. If the Bank does not increase its deposit rates at all, the impact should be positive. Over a longer period of time, and assuming that interest rates remain stable after the initial rate increase and the Bank purchases securities and originates loans at yields higher than those maturing and reprices loans at higher yields, the impact of an increase in interest rates should be positive. This occurs primarily because with the passage of time more loans and investment securities will reprice at the higher rates and there will be no offsetting increase in interest expense for those loans and investment securities funded by noninterest-bearing checking deposits and capital.
Conversely, a decrease in interest rates uniformly across the yield curve should initially have a positive impact on the Bank’s net interest income. However, if the Bank does not or cannot decrease the rates paid on its deposit accounts as quickly or in the same amount as decreases in market interest rates, the magnitude of the positive impact will decline. If the Bank does not decrease its deposit rates at all, the impact should be negative.
If interest rates decline, or have declined, and are sustained at the lower levels and, as a result, the Bank purchases securities at lower yields and loans are originated or repriced at lower yields, the impact on net interest income should be negative because 38% of the Bank’s average interest-earning assets are funded by noninterest-bearing checking deposits and capital.
The Bank monitors and controls interest rate risk through a variety of techniques including the use of interest rate sensitivity models and traditional interest rate sensitivity gap analysis. Through use of the models, the Bank projects future net interest income and then estimates the effect on projected net interest income of various changes in interest rates and balance sheet growth rates. The Bank also uses the models to calculate the change in net portfolio value over a range of interest rate change scenarios.
Traditional gap analysis involves arranging the Bank’s interest-earning assets and interest-bearing liabilities by repricing periods and then computing the difference, or interest-rate sensitivity gap, between the assets and liabilities which are estimated to reprice during each time period and cumulatively through the end of each time period.
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Both interest rate sensitivity modeling and gap analysis involve a variety of significant estimates and assumptions and are done at a specific point in time. Interest rate sensitivity modeling requires, among other things, estimates of: (1) how much and when yields and costs on individual categories of interest-earning assets and interest-bearing liabilities will adjust because of projected changes in market interest rates; (2) future cash flows; (3) discount rates; and (4) decay or runoff rates for nonmaturity deposits such as checking, savings, and money market accounts.
Gap analysis requires estimates as to when individual categories of interest-sensitive assets and liabilities will reprice and assumes that assets and liabilities assigned to the same repricing period will reprice at the same time and in the same amount. Like sensitivity modeling, gap analysis does not fully take into account the fact that the repricing of some assets and liabilities is discretionary and subject to competitive and other pressures.
Changes in the estimates and assumptions made for interest rate sensitivity modeling and gap analysis could have a significant impact on projected results and conclusions. Therefore, these techniques may not accurately reflect the actual impact of changes in the interest rate environment on the Bank’s net interest income or net portfolio value.
The table that follows is provided pursuant to the market risk disclosure rules set forth in Item 305 of Regulation S-K of the Securities and Exchange Commission. The information provided in the following table is based on significant estimates and assumptions and constitutes, like certain other statements included herein, a forward-looking statement. The base case information in the table shows (1) an estimate of the Corporation’s net portfolio value at September 30, 2005 arrived at by discounting estimated future cash flows at current market rates and (2) an estimate of net interest income on a tax-equivalent basis for the year ending September 30, 2006 assuming that maturing assets or liabilities are replaced with new balances of the same type, in the same amount, and at current rate levels and repricing balances are adjusted to current rate levels. For purposes of the base case, nonmaturity deposits are included in the calculation of net portfolio value at their carrying amount. The rate change information in the table shows estimates of net portfolio value at September 30, 2005 and net interest income on a tax-equivalent basis for the year ending September 30, 2006 assuming rate changes of plus 100 and 200 basis points and minus 100 and 200 basis points. The changes in net portfolio value from the base case have not been tax affected. In addition, cash flows for nonmaturity deposits are based on a decay or runoff rate of six years. Also, rate changes are assumed to be shock or immediate changes and occur uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. In projecting future net interest income under the indicated rate change scenarios, activity is simulated by replacing maturing balances with new balances of the same type, in the same amount, but at the assumed rate level and adjusting repricing balances to the assumed rate level.
Based on the foregoing assumptions and as depicted in the table that follows, an immediate increase in interest rates of 100 or 200 basis points would have a negative effect on net interest income over a one-year time period. This is principally because the Bank’s interest-bearing deposit accounts reprice faster than its loans and investment securities. However, if the Bank does not increase the rates paid on its deposit accounts as quickly or in the same amount as increases in market interest rates, the magnitude of the negative impact will decline. If the Bank does not increase its deposit rates at all, the impact should be positive. Over a longer period of time, and assuming that interest rates
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remain stable after the initial rate increase and the Bank purchases securities and originates loans at yields higher than those maturing and reprices loans at higher yields, the impact of an increase in interest rates should be positive. This occurs primarily because with the passage of time more loans and investment securities will reprice at the higher rates and there will be no offsetting increase in interest expense for those loans and investment securities funded by noninterest-bearing checking deposits and capital. Generally, the reverse should be true of an immediate decrease in interest rates of 100 or 200 basis points. However, deposit rates are currently very low as indicated by the Bank’s overall cost of funds of 123 basis points for the first nine months of 2005. Therefore, while rates on many of the Bank’s interest earning assets could drop by 100 or 200 basis points, rates on many of its deposit products could not. It is for this reason that in rates down 100 and 200 basis points the projected increases in net interest income as compared to the base case are less than the projected decreases in rates up 100 and 200 basis points.
| | | | | | Net Interest Income |
| | Net Portfolio Value (NPV) | | Year Ended |
| | at September 30, 2005 | | September 30, 2006 |
| | | | Percent | | | | Percent |
| | | | Change | | | | Change |
| | | | From | | | | From |
Rate Change Scenario | | Amount | | Base Case | | Amount | | Base Case |
| | (dollars in thousands) |
| | | | | | | | |
+ 200 basis point rate shock | | $80,594 | | (5.0)% | | $33,282 | | (16.1)% |
+ 100 basis point rate shock | | 82,514 | | (2.7) | | 36,473 | | (8.0) |
Base case (no rate change) | | 84,838 | | — | | 39,663 | | — |
- 100 basis point rate shock | | 87,603 | | 3.3 | | 42,065 | | 6.1 |
- 200 basis point rate shock | | 90,849 | | 7.1 | | 41,008 | | 3.4 |
Forward Looking Statements
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” contain various forward-looking statements with respect to financial performance and business matters. Such statements are generally contained in sentences including the words “expect” or “could” or “should” or “would” or “believe”. The Corporation cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, and therefore actual results could differ materially from those contemplated by the forward-looking statements. In addition, the Corporation assumes no duty to update forward-looking statements.
ITEM 4. CONTROLS AND PROCEDURES
(a) | Evaluation of Disclosure Controls and Procedures |
The Corporation’s Chief Executive Officer, Michael N. Vittorio, and Chief Financial Officer, Mark D. Curtis, have evaluated the Corporation’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”), as of the end of the period covered by this report. Based upon that evaluation, they have concluded that the Corporation’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Corporation in the reports that it files or submits under the Act, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and
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Exchange Commission’s rules and forms. Such controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to the Corporation’s management, including the principal executive and principal financial officers, to allow timely decisions regarding disclosure.
(b) | Changes in Internal Control Over Financial Reporting |
There have been no significant changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
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PART II. | OTHER INFORMATION |
Item 1. Legal Proceedings
From time to time the Corporation and the Bank may be involved in litigation that arises in the normal course of business. As of the date of this Form 10-Q, neither the Corporation nor the Bank is a party to any litigation that management believes could reasonably be expected to have a material adverse effect on the Corporation’s or the Bank’s financial position or results of operations for an annual period.
Item 2. Issuer Purchase of Equity Securities
Since 1988, the Corporation has had a stock repurchase program under which it is authorized to purchase, from time to time, shares of its own common stock in market or private transactions. The details of the Corporation’s purchases under the stock repurchase program during the third quarter of 2005 are set forth in the table that follows.
ISSUER PURCHASES OF EQUITY SECURITIES |
| | | | | | | | |
| | | | | | | | |
| | | | | | Total Number of | | |
| | Total | | | | Shares Purchased as | | Maximum Number of |
| | Number of | | Average | | Part of Publicly | | of Shares that May Yet |
| | Shares | | Price Paid | | Announced Plans | | Be Purchased Under the |
Period | | Purchased | | Per Share | | or Programs (1) | | Plans or Programs (1) |
July 1, 2005 to July 31, 2005 | | 42,806 | | $43.01 | | 42,806 | | 65,788 |
August 1, 2005 to August 31, 2005 | | 6,200 | | $44.12 | | 6,200 | | 59,588 |
September 1, 2005 to September 30, 2005 | | 3,060 | | $44.10 | | 3,060 | | 56,528 |
(1) The shares purchased by the Corporation under its stock repurchase program in the third quarter of 2005 were purchased under a 100,000 share plan approved by the Corporation’s board of directors on December 14, 2004 and publicly announced on December 15, 2004 and a 100,000 share plan approved by the Corporation’s Board of Directors on May 17, 2005 and publicly announced on May 18, 2005. The Corporation’s share repurchase plans do not have fixed expiration dates.
Item 5. Other Information
At its July 2005 meeting, the Board of Directors of the Corporation (the “Corporation”) and its wholly-owned subsidiary, The First National Bank of Long Island (the “Bank”), approved increases in the fees paid to both the Chairman of the Board (the “Chairman”) and other non-employee directors. The increased fees were approved after review and consideration of a study of comparable companies prepared for the Compensation Committee of the Board of Directors by an independent compensation consultant. Consideration was also given to the increased time commitments and responsibilities associated with being a director of a public company and a member of its various standing committees, due in large part to recent changes in laws and regulations relating to corporate governance.
Effective April 1, 2005, Board and Committee fees are as follows:
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(1) The Chairman receives an annual retainer of $80,000 plus an annual stock-based compensation award of $12,000.
(2) As approved at the Boards’ July 2005 meetings and later amended at their September 2005 meetings, each non-employee director receives an annual retainer of $14,000 from the Corporation plus $1,200 from the Bank for each directors’ meeting attended. Directors also receive $1,200 for each special meeting and $500 for each telephone meeting of the Corporation or the Bank.
(3) The Chairman of the Corporation’s Nominating Committee and the Chairperson of the Bank’s Loan Committee each receive an annual retainer of $2,500 and members of these committees receive an annual retainer of $1,000. Loan Committee members also receive $500 for each loan approval meeting attended.
(4) The Chairman of the Corporation’s Audit Committee receives an annual retainer of $10,000 and each member receives an annual retainer of $4,000. The Chairman of the Corporation’s Compensation Committee receives an annual retainer of $4,000 and each member receives an annual retainer of $2,000.
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are included herein.
Exhibit No. | Name |
31 | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules13a-14 and 15d-14 of the Exchange Act) |
| |
32 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
b) Reports on Form 8-K
During the quarter ended September 30, 2005 (and thereafter to the date hereof) the Corporation filed the following reports on Form 8-K with the Securities and Exchange Commission:
| 1) | The Corporation filed a Form 8-K dated July 25, 2005 to report that Stephen V. Murphy had been elected in accordance with the Corporation’s bylaws to serve as a Class II director of the Corporation until the 2006 annual meeting of stockholders and to serve as a director of the Corporation’s wholly-owned subsidiary, The First National Bank of Long Island. |
| 2) | The Corporation filed a Form 8-K dated August 3, 2005 to report that it had: (1) issued a press release disclosing material non-public information regarding the Corporation’s financial condition as of June 30, 2005 and results of operations for the six and three month periods then ended, and (2) mailed a quarterly report to shareholders disclosing substantially similar non-public information regarding the Corporation’s financial condition and results of operations. The press release was furnished as Exhibit 99.1 to the Form 8-K filing and the quarterly report to shareholders was furnished as Exhibit 99.2 to the Form 8-K filing. |
| 3) | The Corporation filed a Form 8-K dated November 2, 2005 to report that it had: (1) issued a press release disclosing material non-public information regarding the Corporation’s financial condition as of September 30, 2005 and results of operations for the nine and three month periods then ended, and (2) mailed a quarterly report to shareholders disclosing substantially similar non-public information regarding the Corporation’s financial condition and results of operations. The press release was furnished as Exhibit 99.1 to the Form 8-K filing and the quarterly report to shareholders was furnished as Exhibit 99.2 to the Form 8-K filing. |
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SIGNATURES
Pursuant To The Requirements Of The Securities Exchange Act Of 1934, The Registrant Has Duly Caused This Report To Be Signed On Its Behalf By The Undersigned Thereunto Duly Authorized.
| THE FIRST OF LONG ISLAND CORPORATION |
| (Registrant) |
| |
| |
Date: October 28, 2005 | By /s/ MICHAEL N. VITTORIO |
| MICHAEL N. VITTORIO |
| PRESIDENT & CHIEF EXECUTIVE OFFICER |
| (principal executive officer) |
| |
| By /s/ MARK D. CURTIS |
| MARK D. CURTIS |
| SENIOR VICE PRESIDENT & TREASURER |
| (principal financial and accounting officer) |
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EXHIBIT INDEX
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