FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 1997.
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 0-23526
Long Island Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-3198508
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
201 Old Country Road, Melville, New York 11747-2724
(Address of principal executive offices) (Zip Code)
(516) 547-2000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
24,028,550 Shares were outstanding as of December 31, 1997
LONG ISLAND BANCORP, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Consolidated Statements of Financial Condition at
December 31, 1997 and September 30, 1997 3
Consolidated Statements of Operations for the three months ended
December 31, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders' Equity for the
three months ended December 31, 1997 5
Consolidated Statements of Cash Flows for the three months ended
December 31, 1997 and 1996 6
Notes to the Consolidated Financial Statements 7 - 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 17
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 18 - 19
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 20
ITEM 2. Changes in Securities 21
ITEM 3. Defaults Upon Senior Securities 21
ITEM 4. Submission of Matters to a Vote of Security Holders 21
ITEM 5. Other Information 21
ITEM 6. Exhibits and Reports on Form 8-K 22
Signature Page 23
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Financial Condition
(In thousands, except share data)
December 31, September 30,
1997 1997
----------------- -------------------
A S S E T S
Cash and cash equivalents (including interest-earning assets
of $53,105 and $9,735, respectively) $ 121,028 $ 43,705
Investment in debt and equity securities, net:
Available-for-sale 292,064 138,578
Mortgage-backed securities, net:
Held-to-maturity (estimated fair value of
$19,959 and $20,188, respectively) 21,957 22,223
Available-for-sale 1,689,292 1,808,471
Stock in Federal Home Loan Bank of New York, at cost 48,724 48,724
Loans held for sale 188,744 157,617
Loans receivable held for investment, net:
Real estate loans, net 3,330,109 3,333,185
Commercial loans, net 9,393 6,465
Other loans, net 181,246 178,325
----------------- -------------------
Loans, net 3,520,748 3,517,975
Less allowance for possible loan losses (33,734) (33,881)
----------------- -------------------
Total loans receivable held for investment, net 3,487,014 3,484,094
Mortgage servicing rights, net 44,176 41,789
Office properties and equipment, net 87,007 88,466
Accrued interest receivable, net 33,299 35,334
Investment in real estate, net 10,366 9,103
Deferred taxes 16,529 16,547
Excess of cost over fair value of assets acquired 4,961 5,069
Prepaid expenses and other assets 27,363 31,064
----------------- -------------------
Total assets $ 6,072,524 $ 5,930,784
================= ===================
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
Liabilities:
Deposits $ 3,742,432 $ 3,730,503
Official checks outstanding 53,533 26,840
Borrowed funds,net 1,613,934 1,501,456
Mortgagors' escrow payments 48,169 69,353
Accrued expenses and other liabilities 57,203 56,257
----------------- -------------------
Total liabilities 5,515,271 5,384,409
Stockholders' equity:
Preferred stock ($0.01 par value, 5,000,000 shares authorized;
none issued)
--- ---
Common stock ($0.01 par value, 45,000,000 shares authorized;
26,816,464 shares issued, 24,028,550 and 24,022,924 outstanding,
respectively) 268 268
Additional paid-in capital 310,238 309,372
Unallocated Employee Stock Ownership Plan (17,887) (18,079)
Unearned Management Recognition & Retention Plan (3,409) (3,816)
Unrealized gain on securities available-for-sale, net of tax 12,444 12,947
Retained income-partially restricted 329,522 319,756
Treasury stock, at cost (2,787,914 and 2,793,540 shares, respectively) (73,923) (74,073)
..........
----------------- -------------------
Total stockholders' equity 557,253 546,375
----------------- -------------------
Total liabilities and stockholders' equity $ 6,072,524 $ 5,930,784
================= ===================
See accompanying notes to unaudited consolidated financial statements.
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
(In thousands, except for per share data)
FOR THE THREE MONTHS ENDED
DECEMBER 31,
-------------------------------------------
1997 1996
------------- -------------
Interest income:
Real estate loans $ 65,339 $ 59,159
Commercial loans 151 178
Other loans 4,296 3,904
Mortgage-backed securities 28,579 28,999
Debt and equity securities 6,152 3,730
------------- -------------
Total interest income 104,517 95,970
------------- -------------
Interest expense:
Deposits 41,442 39,438
Borrowed funds 24,108 16,276
------------- -------------
Total interest expense 65,550 55,714
------------- -------------
Net interest income 38,967 40,256
Provision for possible loan losses 1,500 1,500
------------- -------------
Net interest income after
provision for possible loan losses 37,467 38,756
------------- -------------
Non-interest income:
Fees and other income:
Loan fees and service charges 838 1,006
Loan servicing fees 2,584 3,382
Income from insurance and securities
commissions 690 507
Deposit service fees 1,453 1,528
------------- -------------
Total fee income 5,565 6,423
Other income 993 861
------------- -------------
Total fees and other income 6,558 7,284
------------- -------------
Net gains on sale activity:
Net gains on loans and mortgage-backed
securities 3,959 1,975
Net gain (loss) on investment in
debt and equity securities 219 99
------------- -------------
Total net gains on sale activity 4,178 2,074
Net gain (loss) on investment in real (443) (515)
estate and premises ------------- -------------
Total non-interest income 10,293 8,843
Non-interest expense:
General and administrative expense:
Compensation, payroll taxes and fringe
benefits 14,310 14,128
Advertising 607 1,255
Office occupancy and equipment 5,489 5,397
Federal insurance premiums 796 1,903
Other general and administrative expense 4,276 4,265
------------- -------------
Total general and administrative
expense 25,478 26,948
Litigation expense - goodwill lawsuit 593 359
Amortization of excess of cost over fair
value of assets acquired 108 110
Total non-interest expense 26,179 27,417
------------- -------------
Income before income taxes 21,581 20,182
Provision for income taxes 8,399 8,248
------------- -------------
Net income $ 13,182 $ 11,934
============= =============
Basic earnings per common share $ 0.59 $ 0.53
============= =============
Diluted earnings per common share $ 0.57 $ 0.51
============= =============
(a) Net income per share amounts for the period ended December 31, 1996, has
been restated to reflect the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 128 , "Earnings per Share". SFAS No. 128 replaces
primary earnings per share ("EPS") with basic EPS and fully diluted EPS
with diluted EPS.
See accompanying notes to unaudited consolidated financial statements.
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
Consolidated Statement of Changes In Stockholders' Equity
Three Months Ended December 31, 1997
(In thousands, except share data)
UNALLOCATED UNEARNED UNREALIZED
EMPLOYEE MANAGEMENT GAIN ON RETAINED
ADDITIONAL STOCK RECOGNITION SECURITIES INCOME -
COMMON PAID-IN OWNERSHIP & RETENTION AVAILABLE PARTIALLY TREASURY
STOCK CAPITAL PLAN PLAN FOR SALE RESTRICTED STOCK TOTAL
---------- ------------ ------------ ------------ ------------ ------------- ----------- ---------
Balance at September 30,
1997 $ 268 $ 309,372 $(18,079) $ (3,816) $ 12,947 $ 319,756 $ (74,073) $ 546,375
Net income 13,182 13,182
Allocation/amortization
of ESOP and MRP stock and
related tax benefits 809 192 407 1,408
Change in unrealized
gains on securities
available-for-sale, (503) (503)
net of taxes
Dividends (3,336) (3,336)
Exercise of stock
options (5,626 shares) 57 (80) 150 127
and related tax benefits
---------- ----------- ---------- ---------- ------------ ------------ ----------- -----------
Balance at December $ 268 $ 310,238 $ (17,887) $ (3,409) $ 12,444 $ 329,522 $ (73,923) $ 557,253
31, 1997
========== =========== ============ =========== ============= ============= ========== ===========
See accompanying notes to unaudited consolidated financial statements.
7
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)
For the Three Months Ended
-----------------------------
December 31,
-----------------------------
1997 1996
------------ -----------
Operating activities:
Net income $ 13,182 $ 11,934
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses 1,500 1,500
Write-off of real estate owned and investment in real estate 102 141
Gains on sale of real estate owned and investment in real estate, (81) (42)
net
Depreciation and amortization 5,219 3,550
Amortization of premiums, net of discount accretion-debt, equity
and mortgage-backed
securities (1,421) 7
Accretion of discounts, net of amortization of premiums-purchase 66 219
accounting
and goodwill amortization
Employee Stock Ownership Plan/Management Recognition & Retention 1,248 2,139
Plan expense.
Gains on sales of loans and mortgage-backed securities, net (3,959) (1,975)
Originations of loans held-for-sale, net of proceeds from sales (33,689) (31,759)
Gains on sales of debt and equity securities, net (219) (98)
Decrease (increase) in accrued interest receivable 2,035 (85)
Increase (decrease) in accrued and other liabilities 946 (49,571)
Increase in official checks outstanding 26,693 6,097
Increase in prepaid expenses, deferred taxes and other assets 3,721 7,899
Net increase (decrease) in unearned income 852 (4,546)
------------ -----------
Net cash provided (used) by operating activities 16,195 (54,590)
------------ -----------
Investing activities:
Proceeds from sales of debt and equity securities, 219 15,000
available-for-sale
Proceeds from sales of mortgage-backed securities, 311,316 173,521
available-for-sale
Proceeds from maturities of and principal payments on debt and 173,626 36,263
equity securities
Principal payments on mortgage-backed securities 118,592 70,186
Purchases of debt and equity securities, available-for-sale (325,104) (33,921)
Purchases of mortgage-backed securities, available-for-sale (190,140) (50,015)
Originations and purchases of loans held-for-investment, net of (128,656) (484,280)
principal payments
Proceeds from sale of real estate owned, office properties and 3,086 1,871
equipment
Purchases of office properties and equipment (1,535) (2,544)
Purchase of mortgage servicing rights --- (4,045)
------------ -----------
Net cash used by investing activities (38,596) (277,964)
------------ -----------
Financing activities:
Net increase in demand deposits, NOW accounts and savings accounts. 11,878 3,752
Net decrease in mortgagors' escrow accounts (21,184) (19,816)
Net increase in certificates of deposit 51 24,363
Costs to repurchase common stock --- (5,992)
Proceeds from the exercise of stock options 70 221
Cash dividends paid on common stock (3,569) (2,427)
Net increase (decrease) in short-term borrowings 4,580 (10,994)
Net increase in long-term borrowings 107,898 433,921
------------ -----------
Net cash provided by financing activities 99,724 423,028
------------ -----------
Increase in cash and cash equivalents 77,323 90,474
Cash and cash equivalents at the beginning of the quarter 43,705 76,348
------------ -----------
Cash and cash equivalents at the end of the quarter $ 121,028 $ 166,822
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the quarters for:
Interest on deposits and borrowed funds $ 59,393 $ 54,058
============ ===========
Income taxes $ 5,295 $ 3,845
============ ===========
Non-cash investing activities:
Additions to real estate owned, net $ 3,656 $ 3,013
============ ===========
Securitization of loans $ 119,932 $ 191,306
============ ===========
See accompanying notes to unaudited consolidated financial statements.
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements include
the accounts of Long Island Bancorp, Inc. ("Company") and its
wholly-owned subsidiary The Long Island Savings Bank, FSB ("Bank").
The unaudited consolidated financial statements included herein
reflect all adjustments which are, in the opinion of management,
necessary for the fair presentation of the Company's interim
financial condition as of the dates indicated and the results o
operations for the periods shown. In preparing the accompanying
consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the consolidated statements of
financial condition and of income and expenses for the periods
presented in the statement of operations. The results of operations
for the three months ended December 31, 1997 are not necessarily
indicative of the results of operations to be expected for the
remainder of the year. Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC").
These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report to Shareholders
and Form 10-K for the fiscal year ended September 30, 1997.
Certain reclassifications have been made to conform the prior period's
consolidated financial statements to the current presentation.
2. Earnings Per Share of Common Stock
Basic EPS is determined by dividing net income available to common
stockholders for the period by the weighted average number of common
shares outstanding during the same period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock which then shared in the
earnings of the entity. The weighted average number of common
shares outstanding for basic and dilutive EPS calculations for the
three months ended are presented on page 15 herein. The additional
number of shares included in the calculation of diluted EPS due to
dilutive options was 883,890 and 780,864, respectively for the quarters
ended December 31, 1997 and 1996.
3. Cash and Cash Equivalents
Effective December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share". This statement establishes standards for
computing and presenting EPS for entities with publicly held common
stock and common stock equivalents. The statement simplifies the
computations of EPS that were previously found in APB Opinion No. 15
"Earnings Per Share". This statement requires a reconciliation of the
numerator and denominator of the two EPS calculations and the
restatement of all prior period EPS data presented after adoption.
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and short-term loans to
commercial banks with original terms to maturity of less than three
months.
4. Recent Developments
On December 18, 1997, the Company announced the declaration of its
thirteenth quarterly dividend, in the amount of fifteen cents
($0.15) per common share. The dividend is payable on February 13, 1998
to shareholders of record at the close of business on January 14, 1998.
Item 2. Management's Discussion and Analysis
General
The Company was incorporated in the State of Delaware in December 1993 at the
direction of the Board of Directors of the Bank for the purpose of becoming a
holding company to own all of the outstanding capital stock of the Bank upon its
conversion from a mutual to a stock form of organization. The mutual-to-stock
conversion was completed on April
14, 1994.
Financial Condition
Total assets at December 31, 1997 were $6.1 billion, an increase of $141.7
million, or 2.4%, from September 30, 1997. The increase in assets is
principally due to an increase in investment in debt and equity securities
available for sale of $153.5 million, to $292.1 million at December 31, 1997
from $138.6 million at September 30, 1997. Further contributing to the growth
in assets was the increase in cash and cash equivalents of $77.3 million,
to $121.0 million at December 31, 1997 from $43.7 million at September 30, 1997
and an increase in total net loans held for investment and for sale of $34.0
million, to $3.7 billion at December 31, 1997. Partially offsetting these
increases was a reduction of $119.2 million, or 6.5%, in mortgage-backed
securities available for sale to $1.7 billion at December 31, 1997 from $1.8
billion at September 30, 1997.
Non-performing assets increased by $0.1 million, or 0.2%, to $53.8 million at
December 31, 1997 from $53.7 million at September 30, 1997, reflecting a $1.3
million increase in real estate owned offset by a $1.2 million decrease in
non-performing loans. Despite the marginal increase in non-performing assets,
the ratios of non-performing assets to total assets and non-performing loans
to total gross loans improved by 2 basis points to 0.89% at December 31, 1997
from 0.91% at September 30, 1997 and 4 basis points to 1.24% at December 31,
1997 from 1.28% at September 30, 1997, respectively. This improvement reflects
the growth in total assets and total gross loans.
Total liabilities at December 31, 1997 were $5.5 billion, an increase of $130.9
million since September 30, 1997. The increase in total liabilities
primarily reflects an increase in borrowed funds of $112.5 million, or 7.5%,
to $1.6 billion at December 31, 1997 from $1.5 billion at September 30, 1997
and an increase in total deposits of $11.9 million, or 0.3%, when compared with
September 30, 1997.
Stockholders' equity increased by $10.9 million, or 2.0%, to $557.3 million at
December 31, 1997 from $546.4 million at September 30, 1997. The increase
consists of earnings of $13.2 million, $1.4 million related to the Company's
stock benefit plans and $0.1 million related to the exercise of stock options
and the related tax benefits. These increases were partially offset by a
decline of $0.5 million in unrealized gains on securities classified as
available-for-sale, net of tax, and the declaration of $3.3 million in
dividends. At December 31, 1997, the Company's ratio of stockholders' equity to
total assets was 9.18% and book value per share was $23.19.
Liquidity, Regulatory Capital and Capital Resources
General. The Company's primary sources of funds are deposits and proceeds
from principal and interest payments on loans, mortgage-backed securities
("MBS`s") and other securities. While maturities and scheduled amortization of
loans and MBS`s are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Company uses borrowings as an
alternative and sometimes a less costly source of funds. The Company's primary
sources of borrowings are through the sales of securities under agreements to
repurchase ("reverse-repurchase agreements"), a funding note issued in fiscal
1996 and a medium-term note issued in fiscal 1997.
The Bank is required to maintain minimum levels of liquid assets as defined by
Office of Thrift Supervision ("OTS") regulations. During November 1997,
the OTS lowered the liquidity requirements from 5% to 4% of the Bank`s liquidity
base. Additionally, the OTS streamlined the calculations used to measure
compliance with liquidity requirements,expanded the types of assets that can be
considered liquid and reduced the liquidity base by modifying the definition
of net withdrawable account to exclude accounts with maturities exceeding
one year. At December 31, 1997, the Banks liquid asset ratio was 22.31%. The
current liquidity ratio is above the regulatory requirements in accordance
with the Banks investment objective of investing in short-term debt securities
and MBS`s. Future levels may vary.
The Company's most liquid assets are cash and short-term investments. The
levels of these assets are dependent on the Company's operating, financing,
lending and investing activities during any given period.
The primary investment activity of the Bank is the origination and purchase
of real estate loans and other loans. During the three months ended December
31, 1997, the Bank originated or purchased real estate loans in the amount of
$617.9 million, including $4.8 million which represents the bulk purchase of
loans, and other loans in the amount of $26.3 million. The Bank purchases
mortgage-backed securities to reduce liquidity not otherwise required to meet
loan demand. Purchases of mortgage-backed securities totaled $187.9 million
for the three months ended December 31, 1997. Other investing activities
may include investing in U.S. government securities, federal agency
obligations and asset-backed securities.
Liquidity management of the Company is both a daily and long-term component of
management's strategy. Excess funds are generally invested in short-term and
intermediate-term securities. In the event that the Bank should require funds
beyond its ability to generate them internally, additional sources of funds
are available through the use of Federal Home Loan Bank ("FHLB") advances,
reverse-repurchase agreements and additional borrowing of up to $700.0
million under the Bank`s medium-term note program. In addition, the Bank may
access funds, if necessary, through lines of credit totaling $150.0 million at
December 31, 1997 from an unrelated financial institution.
In accordance with the requirements of the "OTS" the Bank established a
liquidation account in the amount equal to its capital as of the date of the
latest consolidated statement of condition appearing in the final prospectus
related to the Company's initial public offering April 1994. The liquidation
account is maintained for the benefit of eligible pre-conversion depositors
who continue to maintain their account at the Bank after the conversion. The
liquidation account is reduced annually to the extent that eligible account
holders reduce their qualifying deposits. In the unlikely event of a complete
liquidation of the Bank, each eligible account holder will be entitled to
receive a distribution from the liquidation account. The Bank is not
permitted to declare or pay a dividend on or to repurchase any of its capital
stock if the effect would be to cause the Bank's regulatory capital to be
reduced below the amount required for the liquidation account. Unlike the
Bank, the Company is not subject to OTS regulatory restrictions on the
declaration or payment of dividends to its stockholders, although the source
of such dividends could depend upon dividend payments from the Bank. The
Company is subject, however, to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of its net assets
(the amount by which total assets exceed total liabilities) over its stated
capital or, if there is no such excess, to its net profits for the current
and/or immediately preceding fiscal year.
Regulatory Capital Position. Under OTS capital regulations, the Bank is
required to comply with each of three separate capital adequacy standards. At
December 31, 1997, the Bank exceeded each of the three OTS capital requirements,
as illustrated on page 15 herein.
Comparison of Operating Results for the Three Months Ended December 31, 1997
and 1996
General. The Company had net income of $13.2 million and diluted EPS of $0.57
for the quarter ended December 31, 1997 ("1997 quarter"). For the quarter
ended December 31, 1996 ("1996 quarter"), net income was $11.9 million and
diluted EPS of $0.51 per share. Basic EPS for the 1997 and 1996 quarters were
$0.59 and $0.53, respectively.
Net Interest Income. Net interest income decreased by $1.3 million, or 3.2%
to $39.0 million in the 1997 quarter from $40.3 million in the 1996 quarter.
The decrease in net interest income primarily reflects a 42 basis point
decline in the net interest margin to 2.67% for the 1997 quarter from 3.09% for
the 1996 quarter. Contributing to the lower margin were declines in the average
yield on MBS's and real estate loans of 36 and 16 basis points, respectively,
resulting from the flattening of the treasury yield curve and increased
competition for mortgage loan originations. The cost of interest-bearing
liabilities increased on the other hand, further constricting the net interest
margin. The increased cost of deposit liabilities arose from rising short
term interest rates and the migration of lower-cost core deposits into time
deposits. The rise in the cost of borrowed funds is primarily due to an
increase in the three month LIBOR rate. Further contributing to the decline
in the net interest margin was the increase in average borrowed funds and
average deposits. Average borrowed funds increased by $504.2 million, or
44.5%, to $1.6 billion for the quarter ended December 31, 1997 as compared
with $1.1 billion for the quarter ended December 31, 1996. Average deposits
increased $86.8 million to $3.8 billion at December 31, 1997 as compared with
$3.7 billion at December 31, 1996. The primary investment vehicle used by the
Company for the additional borrowed funds and deposits was real estate loans.
Average real estate loans increased by $397.7 million to $3.5 billion at
December 31, 1997 as compared with $3.1 billion at December 31, 1996.
Provision for Possible Loan Losses. The provision for possible loan losses
was $1.5 million for both the 1997 quarter and 1996 quarter. Non-performing
loans decreased by $6.7 million to $45.9 million at December 31, 1997
compared with $52.6 million at December 31, 1996. At December 31, 1997,
the ratio of the allowance for possible loan losses to non-performing loans
improved to 73.47% from 63.64% at December 31, 1996. Although management
considers the allowance for possible loan losses to be adequate at December
31, 1997, if general economic trends and real estate values were to decline,
the level of non-performing loans may increase. Such an increase could
result in greater provisions for possible loan losses thereby adversely
affecting future operating results.
Non-Interest Income. Total non-interest income increased by $1.5 million,
or 16.4%, to $10.3 million during the 1997 quarter compared with $8.8
million for the 1996 quarter. The increase in total non-interest income
primarily reflects increases in the net gains on asset sales of $2.1 million
and an increase of $0.2 million in income from insurance and securities
commissions. Net gains on asset sales increased primarily due to the Company's
mortgage banking activities and greater profits from the sale of mortgage-backed
securities available for sale. The effect of these increases was partially
offset by decreases of $0.8 million in loan servicing fee income and $0.2
million in loan fees and service charges. The decline in loan service fee
income is due to the run off of higher yielding fees from previously
securitized home equity loans and the replacement with lower yielding fees from
one-to-four family loans serviced for others.
Non-Interest Expense. Total non-interest expense decreased by $1.2
million, or 4.5%, to $26.2 million in the 1997 quarter from $27.4 million
in the 1996 quarter. Contributing to this decrease were reductions in federal
insurance premiums of $1.1 million and advertising expense of $0.6 million.
Federal insurance premiums decreased due to the 1996 enactment of the BIF/SAIF
legislation. The decrease in advertising costs reflects the timing of
certain initiatives. Prospectively, advertising costs may increase to levels
similar to last fiscal year. Partially offsetting this decrease was an
increase in compensation and benefits expense of $0.2 million. This increase
was attributable to an increase in salaries expense of $0.9 million offset
by a decrease in employee benefits of $0.7 million, resulting from the
stock-based benefit plan modifications which took effect January 1, 1997.
Provision for Income Taxes. Income tax expense increased by $0.2 million, or
1.8%, to $8.4 million in the 1997 quarter from $8.2 million in the 1996 quarter.
This increase primarily reflects higher pre-tax income partially offset by
a 200 basis point reduction in the effective tax rate to 38.92% in the 1997
quarter from 40.87% in the 1996 quarter. The decline in the effective tax rate
reflects tax planning initiatives.
Year 2000
The Company has developed preliminary plans to address the possible exposures
related to the impact on its computer systems of the year 2000. Key financial,
information and operational systems are being assessed and plans are being
developed to address system modifications required by December 31, 1999. At
this time, the Company has not yet determined the cost, which will be expensed
as incurred, of evaluating its computer software or databases, or of making
any modifications required to correct any year 2000 problems. While the
Company believes it is doing everything technologically possible to assure
year 2000 compliance, it is to some extent dependent upon vendor cooperation
and any year 2000 compliance failures could result in additional expense to the
Company.
Impact of New Accounting Standards
Effective January 1, 1997, the Company adopted SFAS 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" except for those transactions that are governed by SFAS 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement
No. 125". SFAS 127 was issued in December 1996 to extend the effective date
of the provisions of SFAS 125 as they relate to secured borrowings, collateral
and repurchase agreements, dollar rolls, securities lending and similar
transactions for one year. SFAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996 based on consistent
application of a financial-components approach that focuses on control.
Under this approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. This
statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.
This statement supersedes SFAS 76, "Extinguishment of Debt", and SFAS 77,
"Reporting by Transferors for Transfers of Receivable with Recourse", and SFAS
122, "Accounting for Mortgage Servicing Rights", and amends SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities", and SFAS
65, "Accounting for Certain Mortgage Banking Activities". The Company does not
expect SFAS 125, as amended by SFAS 127, to have a material effect on its
financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". SFAS 130 is
effective for fiscal years beginning after December 15, 1997 and requires
reclassification of financial statements for earlier periods provided for
comparative purposes. The statement establishes standards for reporting and
display of comprehensive income and its components. This statement
requires that all items that are required to be recognized as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. Comprehensive income
is defined as all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The Company has not yet
determined the impact of SFAS 130 on its financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information". SFAS 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated. The statement
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. As the requirements of
SFAS 131 are disclosure-related, its implementation will have no impact on the
Company's financial condition or results of operations. Safe Harbor Statement
Under the Private Securities Litigation Reform Act of 1995
This Form 10-Q Report includes forward looking statements based on current
management expectations. The Company's actual results could differ
materially from those management expectations and the results discussed in
these forward looking statements. Factors that could cause such a difference
include, but are not limited to, general economic conditions, legislative and
regulatory changes, monetary and fiscal policies of the federal government,
changes in real estate values, interest rates, deposit flows, the cost of funds,
demand for loan products, demand for financial services, competition, changes
in the quality or composition of the Bank's loan and investment portfolios,
changes in accounting principles, policies or guidelines, and other economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices. Additional factors are
described in the Company's other public reports filed with the SEC.
Average Balance Sheet
The following table sets forth certain information relating to the Company's
average unaudited consolidated statements of financial condition and the
consolidated statements of operations for the three months ended December
31, 1997 and 1996, and reflects the annualized average yield on assets and
average cost of liabilities for the periods indicated. Such annualized
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods shown.
Average balances are derived from the average daily balances. The yields and
costs include fees which are considered adjustments to yields.
FOR THE THREE MONTHS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1997 1996
-------------------------------------------- ----------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD\ AVERAGE YIELD\
BALANCE INTEREST COST BALANCE INTEREST COST
-------------- ------------ -------------- -------------- ------------- ----------------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
Interest-earning cash
equivalents $ 67,104 $ 920 5.44 % $ 58,388 $ 766 5.20 %
Debt and equity securities
and FHLB-NY stock, net (1) 328,775 5,232 6.37 213,001 2,964 5.57
Mortgage-backed securities, 1,762,043 28,579 6.49 1,693,945 28,999 6.85
net (1)
Real estate loans, net (2) 3,503,208 65,339 7.46 3,105,539 59,159 7.62
Commercial and other loans, 172,621 4,447 10.30 140,214 4,082 11.65
net (2)
-------------- ------------ ------------ -------------- ------------- -------------
Total interest-earning assets 5,833,751 104,517 7.17 5,211,087 95,970 7.37
Other non-interest-earning 236,483 300,439
assets
-------------- ------------ -------------- -------------
Total assets $ 6,070,234 $ 104,517 $ 5,511,526 $ 95,970
============== ============ ============== =============
INTEREST BEARING LIABILITIES
Deposits, net $ 3,795,388 $ 41,442 4.33 % $ 3,708,611 $ 39,438 4.22 %
Borrowed funds 1,637,739 24,108 5.84 1,133,506 16,276 5.70
-------------- ------------ ------------ -------------- ------------- -------------
Total interest-bearing 5,433,127 65,550 4.79 4,842,117 55,714 4.56
liabilities
Non-interest-bearing 87,198 144,903
liabilities
-------------- --------------
Total liabilities 5,520,325 4,987,020
Total stockholders' equity 549,909 524,506
-------------- ------------ ------------ -------------- ------------- -------------
Total liabilities and
stockholders'
equity $ 6,070,234 $ 65,550 $ 5,511,526 $ 55,714
============== ------------ ============== -------------
Net interest income/spread (3) $ 38,967 2.38 % $ 40,256 2.80 %
============ ============ ============= =============
Net interest margin as %
of interest-earning assets 2.67 % 3.09 %
(4)
============ =============
Ratio of interest-earning
assets to
interest-bearing 107.37 % 107.62 %
liabilities
============ =============
(1) Debt and equity and mortgage-backed securities are shown including the
average market value appreciation of $22.0 million and $15.8 million,
before tax, from SFAS 115 for the three months ended December 31, 1997 and
1996, respectively.
(2) Net of unearned discounts, premiums, deferred loan fees, purchase
accounting discounts and premiums and allowance for possible loan losses,
and including non-performing loans and loans held for sale.
(3) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.
Rate/Volume Analysis
The following table presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and expense during
the periods indicated. Information is provided in each category with respect
to (i) changes attributable to changes in volume (changes in volume multiplied
by prior rate), (ii) changes attributable to changes in rate (changes in rate
multiplied by prior volume), and (iii) the net change. The changes
attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate.
Three Months Ended December 31, 1997
Compared to
Three Months Ended December 31, 1996
Increase/(Decrease)
-----------------------------------------
Due to
-----------------------------------------
Volume Rate Net
------------ ------------- ------------
(In thousands)
Interest-earning assets:
Interest-earning cash
equivalents(1) $ 118 $ 36 $ 154
Debt and equity securities(2)(3) 1,794 474 2,268
Mortgage-backed securities(3) 1,140 (1,560) (420)
Real estate loans(4) 7,439 (1,259) 6,180
Commercial and other loans(4) 871 (506) 365
------------ ------------- ------------
Total 11,362 (2,815) 8,547
------------ ------------- ------------
Interest-bearing liabilities:
Deposits 935 1,069 2,004
Borrowed funds 7,413 419 7,832
------------ ------------- ------------
Total 8,348 1,488 9,836
------------ ------------- ------------
Net change in interest income $ 3,014 $ (4,303) $ (1,289)
============ ============= ============
(1) Cash equivalents include amounts due from banks and short-term loans to
commercial banks with original terms to maturity of less than three months.
(2) Includes FHLB-NY stock.
(3) Debt and equity and mortgage-backed securities are shown including the
average market value appreciation of $22.0 million and $15.8 million,
before tax, from SFAS 115 for the three months ended December 31, 1997 and
1996, respectively.
(4) In computing the volume and rate components of net interest income for
loans, non-performing loans and loans held for sale have been included.
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
At or for the Three Months
Ended December 31,
----------------------------------
1997 1996
-------------- ---------------
Selected Financial Ratios: (a)
Return on average assets ...................... 0.87% 0.87%
Return on average stockholders' equity ........ 9.59 9.10
Average stockholders' equity to average assets. 9.06 9.52
Stockholders' equity to total assets .......... 9.18 9.13
Interest rate spread during period............. 2.38 2.80
Net interest margin............................ 2.67 3.09
Operating expenses to average assets........... 1.68 1.96
Efficiency ratio (b)........................... 55.96 56.68
Average interest-earning assets to average
interest-bearing liabilities 107.37 107.62
Net interest income to operating expenses ..... 1.53x 1.49x
Selected Data:
Basic earnings per share....................... $0.59 $0.53
Weighted average number of shares outstanding
.for basic earnings per share computation (c).. 22,295,110 22,695,520
Diluted earnings per share..................... $0.57 $0.51
Weighted average number of shares outstanding
for diluted earnings per share computation 23,179,000 23,476,384
(c).........
Book value per share........................... $23.19 $21.49
Number of shares outstanding for book value per
share computation........................... 24,028,550 24,458,346
Cash dividends declared per share.............. $0.15 $0.15
Dividend payout ratio.......................... 26.32% 29.41%
At December 31,
----------------------------
1997 1996
------------ -----------
Asset Quality Ratios:
Non-performing loans to total gross loans.................... 1.24% 1.53%
Non-performing assets to total assets........................ 0.89 1.08
Allowance for possible loan losses to non-performing loans... 73.47 63.64
Regulatory Capital at December 31, 1997 for The Long Island Savings Bank, FSB:
Regulatory Regulatory Excess
Capital Capital Capital
Requirement Level Level
Amount Percent (d) Amount Percent (d) Amount Percent (d)
......... (Dollars in thousands)
Tangible capital (e)....................... $ 90,152 1.50% $442,895 7.37% $352,743 5.87%
Core capital (e)........................... 180,303 3.00 442,895 7.37 262,592 4.37
Risk-based capital (f)..................... 241,182 8.00 476,629 15.81 235,447 7.81
(a) Ratios for the three months ended December 31, 1997 and 1996 were
calculated on an annualized basis.
(b) Amount is determined by dividing total general and administrative expense
by net interest income (before the provision for possible loan losses) plus
total fee income.
(c) The weighted average common shares outstanding for periods prior to
December 31, 1997, have been restated to reflect the adoption of SFAS
No. 128.
(d) Tangible and core capital levels are shown as a percentage of total
adjusted assets, as computed based on regulatory guidelines. Risk-based
capital levels are shown as a percentage of risk-weighted assets.
(e) This figure represents GAAP capital excluding the effect of SFAS 115,
goodwill and a portion of mortgage servicing rights.
(f) The difference between GAAP capital and regulatory risk-based capital
represents the exclusion of the effect of SFAS 115, goodwill, a portion of
mortgage servicing rights and an addition for the allowance for possible
loan losses.
Allowance for Possible Loan Losses
The following is a summary of the Company's provisions and allowance for
possible loan losses:
Three Months Ended
December 31,
------------------------------
1997 1996
------------ -------------
(In thousands)
Opening allowance $33,881 $33,912
Provision 1,500 1,500
Net charge-offs (1,647) (1,924)
------------- ------------
Ending allowance $33,734 $33,488
============= ============
Non-Performing Assets
Loans are considered non-performing if they are in foreclosure and/or are 90 or
more days delinquent (excluding those restructured loans that have been
returned to performing status after developing a satisfactory payment history
generally six months). Loans, other than education loans, accrue interest
until considered doubtful of collection by management, but in no case beyond 90
days delinquent. Consumer loans (other than education loans) are generally
written off upon becoming 120 days delinquent in the case of installment loans
and 180 days in the case of revolving credit lines. Delinquent interest on
education loans continues to accrue, however, since these loans are backed by
a government agency guarantee and all interest and principal is ultimately
expected to be received. Once management reaches a decision to place a loan on
non-accrual status, all delinquent previously accrued interest on such loan is
reversed against previously recorded income.
The level of non-performing residential property loans is also affected by the
Company's loan restructuring activities. Where borrowers have encountered
hardship, but are able to demonstrate to the Company's satisfaction an
ability and willingness to resume regular monthly payments, the Company
seeks to provide them with an opportunity to restructure their loans. Where
successful, these restructurings avoid the cost of completing the foreclosure
process, as well as any losses on acquisition of the properties and the costs of
maintaining and disposing of real estate owned. Once restructured residential
loans comply with the terms of their restructure agreement for a satisfactory
period (generally six months), the Company returns such loans to performing
status.
The following table sets forth information regarding the components of
non-performing assets for the periods indicated. Restructured loans that
have not yet demonstrated a sufficient payment history to warrant a return to
performing status are included with non-performing loans.
December 31, September 30,
1997 1997
------------------- ---------------------
(Dollars in thousands)
Non-performing loans (1):
Residential:
One-to-four family $38,042 $37,621
Co-operative apartments 1,167 1,207
Home equity 1,408 1,478
Second mortgage --- 172
Multi-family 244 246
Total residential 40,861 40,724
Non-residential:
Commercial real estate. 2,905 2,923
Construction --- 453
Land 30 585
Total real estate loans (2) 43,796 44,685
Other loans (3) 2,122 2,389
Total non-performing loans 45,918 47,074
Real estate owned net (4) 7,906 6,643
Total non-performing assets $53,824 $53,717
Non-performing loans to total gross loans 1.24% 1.28%
Non-performing assets to total assets 0.89 0.91
Non-performing assets to total stockholders' equity and
allowance for possible loan losses 9.11 9.26
Allowance for possible loan losses to non-performing loans 73.47 71.97
Allowance for possible loan losses to total gross loans 0.90 0.92
(1) All non-performing loans are in non-accrual status. There are no loans
90 days or more past due and still accruing interest (other than
education loans which are guaranteed).
(2) Includes loans considered impaired in accordance with SFAS 114 in the
amount of $0.6 million at September 30, 1997 for which there is a related
allowance for possible loan losses.
(3) Includes commercial loans considered impaired in accordance with SFAS
114 in the amount of $0.3 million at both December 31, 1997 and September
30, 1997 for which there is a related allowance for possible loan losses.
(4) Included in Investment in real estate on the Consolidated Statements of
Financial Condition.
Item 3. Disclosures about Market risk
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 1997, which are
anticipated by the Company,based upon certain assumptions, to reprice or
mature in each of the future time periods shown. Except as stated below, the
amounts of assets and liabilities shown to reprice or mature during a particular
period were determined in accordance with the earlier of term to repricing
or the contractual terms of the asset or liability. Prepayment assumptions
ranging from 0% to 15% per year were applied, dependent upon the loan type and
coupon. Run-off rate assumptions for passbook savings, statement savings, NOW
and money market accounts, in the one year or less category, were 51%, 51%,
40% and 100% respectively, rather than the OTS assumptions which, in the one
year or less period, are 17%, 17%, 37% and 79%, respectively. These withdrawal
rates and prepayment assumptions are based on assumptions and analyses
prepared internally and are used in preparing the Regulatory Thrift
Bulletin-13 Report and the quarterly management reports. These assumptions
were used rather than the assumptions published by the OTS because management
believes they are more indicative of the actual prepayments and withdrawals
experienced by the Company. The assumptions do not reflect any increases or
decreases in interest rates paid on various categories of deposits (whether by
the Company or in general) since December 31, 1997.
INTEREST RATE SENSITIVITY GAP ANALYSIS
AT DECEMBER 31, 1997
-------------------------------------------------------------------------------------
MORE THAN MORE THAN MORE THAN MORE THAN
3 MONTHS 3 MONTHS 6 MONTHS 1 YEAR 3 YEARS MORE THAN
OR LESS TO 6 TO 1 YEAR TO 3 YEARS TO 5 YEARS 5 YEARS TOTAL
MONTHS
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
Interest-earning assets(1):
Real estate loans (2) $ 264,080 $ 263,330 $ 834,810 $ 966,929 $ 629,896 $ 515,984 $3,475,029
Commercial loans (2) 396 164 310 3,531 1,204 3,020 8,625
Other loans (2) 70,729 6,816 15,516 47,630 25,013 14,217 179,921
Mortgage-backed 296,999 287,546 531,575 192,815 307,234 72,093 1,688,262
securities (3)
Interest-earning cash 53,105 --- --- --- --- --- 53,105
equivalents
Debt and equity 11,975 856 9,332 6,821 167,213 96,930 293,127
securities (3)
Stock in FHLB-NY --- --- --- --- --- 48,724 48,724
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-earning 697,284 558,712 1,391,543 1,217,726 1,130,560 750,968 5,746,793
assets
Interest-bearing
liabilities:
Passbook accounts 111,019 88,242 104,934 96,482 92,462 101,122 594,261
Statement savings 118,564 94,438 112,302 103,248 98,946 108,236 635,734
accounts
NOW accounts 34,646 4,887 9,774 39,096 37,467 1,629 127,499
Checking & demand deposit
accounts 3,430 1,470 2,940 --- --- --- 7,840
Money market accounts 67,114 12,581 25,162 --- --- --- 104,857
Certificate accounts 477,067 380,126 498,338 607,635 145,649 7,929 2,116,744
Borrowings 142,934 50,000 93,000 553,000 775,000 --- 1,613,934
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing 954,774 631,744 846,450 1,399,461 1,149,524 218,916 5,200,869
liabilities
----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest sensitivity gap $ (257,490) $ (73,032) $ 545,093 $ (181,735) $ (18,964) $ 532,052 $ 545,924
per period
Effect of interest rate swap $ 300,000 $ --- $ --- $ --- $(300,000) $ --- $ ---
----------- ----------- ----------- ----------- ----------- ----------- -----------
Adjusted interest sensitivity $(557,490) $ (73,032) $ 545,093 $(181,735) $ 281,036 $ 532,052 $ 545,924
gap per period
=========== =========== =========== =========== =========== =========== ===========
Cumulative interest $(557,490) $(630,522) $ (85,429) $(267,164) $ 13,872 $ 545,924
sensitivity gap
=========== =========== =========== =========== =========== ===========
Cumulative interest
sensitivity gap
as a percentage of total (9.18) % (10.38) % (1.41) % (4.40) % 0.23 % 8.99 %
assets (4)
Cumulative net
interest-earning
assets as a percentage
of net
interest-bearing 73.03 79.17 108.82 100.86 100.28 110.50
liabilities
__________________
(1) Excludes non-performing loans, net of unearned discounts and premiums,
deferred loan fees, purchase accounting discounts and premiums.
(2) For purposes of gap analysis, the allowance for possible loan losses is
excluded.
(3) Mortgage-backed and debt and equity securities are shown excluding the
market value appreciation of $21.9 million, before tax, resulting from
SFAS 115.
(4) Amounts for fixed rate loans are based on scheduled payment dates and loans
for which there is no amortization schedule are included as three months or
less.
As indicated in the gap analysis, the twelve-month cumulative gap, representing
the total net assets and liabilities that are projected to reprice over the next
twelve months, was liability sensitive $85.4 million at December 31, 1997. A
liability sensitive interest rate gap would tend to decrease earnings over a
period of rising interest rate, where declining rates would increase earnings.
The cumulative one-year sensitivity gap was negative 1.41% of total assets at
December 31, 1997, compared to negative 7.38% at September 30, 1997.
Interest rate contracts such as interest rate swaps, caps, floors and collars
may be used to hedge interest rates on certain assets and liabilities. The
notional amounts of these instruments are not reflected in the Company's balance
sheet, but are included in the interest rate sensitivity table for purposes of
analyzing interest rate risk.
During fiscal 1997, the Company entered into an interest rate swap transaction,
with a notional amount of $300.0 million. The swap agreement converted the
medium-term note issued in fiscal 1997 with a fixed rate obligation of 7% into a
variable rate of LIBOR minus 3 basis points. The agreement will expire in the
third quarter of 2002. As of December 31, 1997 LIBOR minus 3 basis points was
5.64% and the interest rate swap had a fair market value of $ 2.8 million.
The Bank's interest rate sensitivity is also monitored by management through
the use of a model which internally generates estimates of the change in the
net portfolio value ("NPV") over a range of interest rate change scenarios.
NPV is the present value of expected cash flows from assets, liabilities, and
off-balance sheet contracts. The NPV ratio, under any interest rate scenario,
is defined as the NPV in that scenario divided by the market value of assets in
the same scenario. The OTS also produces a similar analysis using its own
model, based upon data submitted on the Bank's quarterly Thrift Financial
Reports, the results of which may vary from the Bank's internal model
primarily due to differences in assumptions utilized between the Bank's
internal model and the OTS model, including estimated loan prepayment rates,
reinvestment rates and deposit decay rates. For purposes of the NPV table,
prepayment speeds similar to those used in the Gap table were used,
reinvestment rates were those in effect for similar products currently being
offered, and rates on core deposits were modified to reflect recent trends.
The following table sets forth the Bank's NPV as of December 31, 1997, as
calculated by the Bank.
Portfolio
Rates in Net Portfolio Value ("NPV") Value of Assets
------------------------------------------- ----------------------------
Basis Points $ $ % NPV %
(Rate Shock) Amount Change Change Ratio Change (1)
- ----------------- -------------- ------------ ------------- ------------ --------------
(Dollars in Thousands)
+200 412,084 166,816 28.82 7.40 13.51
+100 476,766 102,134 17.64 7.92 12.62
0 578,900 9.38
-100 676,759 (97,859) (16.90) 10.71 9.34
-200 786,131 (207,231) (35.80) 12.12 8.25
(1) Based on the portfolio value of the Bank's assets assuming no change in
interest rates.
As in the case with the Gap Table, certain shortcomings are inherent in the
methodology used in the above interest rate risk measurements. Modeling
changes in NPV require the making of certain assumptions which may or may not
reflect the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the NPV model presented assumes that the
composition of the Bank's interest sensitive assets and liabilities
existing at the beginning of a period remains constant over the period being
measured and also assumes that a particular change in interest rates is
reflected uniformly across the yield curve regardless of the duration to
maturity or repricing of specific assets and liabilities. Accordingly,
although the NPV measurements and net interest income models provide an
indication of the Bank's interest rate risk exposure at a particular point in
time, such measurements are not intended to and do not provide a precise
forecast of the effect of changes in market interest rates on the Bank's net
interest income and will differ from actual results.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - The following exhibit is filed as part of this
report:
Regulation S-K Exhibit Reference Number
11. Statement re: Computation of Per Share Earnings
(In thousands, except per share data)
Three Months Ended
December 31,
-------------------------
1997 1996
---------- ---------
Basic EPS Computation
Numerator
Net Income available to common
stockholders $ 13,182 $ 11,934
============= =============
Denominator
Weighted average common shares
outstanding 22,295 22,696
------------- -------------
Basic EPS $ 0.59 $ 0.53
============= =============
Diluted EPS Computation
Numerator
Net Income available to common
stockholders $ 13,182 $ 11,934
============= =============
Denominator
Weighted average common shares
outstanding 22,295 22,696
Additional shares due to
dilutive options 884 781
------------- -------------
Total shares 23,179 23,477
============= =============
Diluted EPS $ 0.57 $ 0.51
============= =============
(b) Reports on Form 8-K
On October 21, 1997 and December 18, 1997, the Company filed with
the SEC Current Reports on Form 8-K which contained press
releases. The October press release announced the Company's
earnings for the three months ended September 30, 1997. The
December press release announced the declaration of the
Company's thirteenth consecutive quarterly dividend.
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.
Long Island Bancorp, Inc.
Dated: 2/13/98 By: /s/ John J. Conefry, Jr
-----------------------
John J. Conefry, Jr.
Chairman of the Board and Chief
Executive Officer
Dated: 2/13/98 By: /s/Mark Fuster
--------------
Mark Fuster
Chief Financial Officer