FIRST OF LONG ISLAND CORP (Form: 10-Q, Received: 08/09/2019 13:22:53)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

____________

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number 001-32964

THE FIRST OF LONG ISLAND CORPORATION

(Exact name of registrant as specified in its charter)


New York	11-2672906
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10 Glen Head Road, Glen Head, NY	11545
(Address of principal executive offices)	(Zip Code)

(516) 671-4900

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, $.10 par value per share	FLIC	Nasdaq

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨	Emerging growth company ¨
Smaller reporting company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

As of August 2, 2019, the registrant had 24,671,014 shares of common stock, $.10 par value per share, outstanding.

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited) – June 30, 2019 and December 31, 2018	1
	Consolidated Statements of Income (Unaudited) – Six and Three Months Ended June 30, 2019 and 2018	2
	Consolidated Statements of Comprehensive Income (Unaudited) – Six and Three Months Ended June 30, 2019 and 2018	3
	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Six and Three Months Ended June 30, 2019 and 2018	4
	Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2019 and 2018	6
	Notes to Unaudited Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	31
ITEM 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	33
ITEM 1A.	Risk Factors	34
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
ITEM 3.	Defaults Upon Senior Securities	34
ITEM 4.	Mine Safety Disclosures	34
ITEM 5.	Other Information	34
ITEM 6.	Exhibits	34
	Signatures	36

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)



	June 30,		December 31,
(dollars in thousands)	2019		2018

Assets:
Cash and cash equivalents	$	69,216	$	47,358

Investment securities:
Held-to-maturity, at amortized cost (fair value of $4,522 and $5,552)		4,478		5,504
Available-for-sale, at fair value		738,828		758,015
		743,306		763,519
Loans:
Commercial and industrial		108,154		98,785
Secured by real estate:
Commercial mortgages		1,311,637		1,281,295
Residential mortgages		1,732,301		1,809,651
Home equity lines		66,018		67,710
Consumer and other		3,477		5,958
		3,221,587		3,263,399
Allowance for loan losses		(29,768)		(30,838)
		3,191,819		3,232,561

Restricted stock, at cost		27,884		40,686
Bank premises and equipment, net		40,806		41,267
Right-of-use asset - operating leases		15,425		—
Bank-owned life insurance		82,012		80,925
Pension plan assets, net		15,128		15,154
Deferred income tax benefit		—		3,447
Other assets		16,545		16,143
	$	4,202,141	$	4,241,060
Liabilities:
Deposits:
Checking	$	932,443	$	935,574
Savings, NOW and money market		1,716,472		1,590,341
Time, $100,000 and over		241,794		309,165
Time, other		422,870		249,892
		3,313,579		3,084,972

Short-term borrowings		101,162		388,923
Long-term debt		360,472		362,027
Operating lease liability		16,266		—
Accrued expenses and other liabilities		19,144		16,951
Deferred income taxes payable		81		—
		3,810,704		3,852,873
Stockholders' Equity:
Common stock, par value $0.10 per share:
Authorized, 80,000,000 shares;
Issued and outstanding, 24,661,409 and 25,422,740 shares		2,466		2,542
Surplus		127,162		145,163
Retained earnings		263,067		249,922
		392,695		397,627
Accumulated other comprehensive loss, net of tax		(1,258)		(9,440)
		391,437		388,187
	$	4,202,141	$	4,241,060

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2019		2018		2019		2018

Interest and dividend income:
Loans	$	59,029	$	55,170	$	29,613	$	28,506
Investment securities:
Taxable		7,968		5,210		3,923		3,001
Nontaxable		6,046		6,870		2,954		3,439
		73,043		67,250		36,490		34,946
Interest expense:
Savings, NOW and money market deposits		8,841		5,698		4,841		3,158
Time deposits		7,331		4,577		3,933		2,869
Short-term borrowings		2,507		1,656		542		873
Long-term debt		3,675		4,278		1,895		2,161
		22,354		16,209		11,211		9,061
Net interest income		50,689		51,041		25,279		25,885
Provision (credit) for loan losses		(35)		2,315		422		803
Net interest income after provision (credit) for loan losses		50,724		48,726		24,857		25,082

Noninterest income:
Investment Management Division income		998		1,157		517		576
Service charges on deposit accounts		1,485		1,287		780		587
Other		2,678		3,527		1,420		1,516
		5,161		5,971		2,717		2,679
Noninterest expense:
Salaries and employee benefits		17,981		18,714		8,723		9,497
Occupancy and equipment		5,840		5,878		2,903		3,065
Other		6,090		5,983		3,150		3,145
		29,911		30,575		14,776		15,707
Income before income taxes		25,974		24,122		12,798		12,054

Income tax expense		4,389		2,696		2,054		1,739
Net income	$	21,585	$	21,426	$	10,744	$	10,315

Earnings per share:
Basic		$0.86		$0.85		$0.43		$0.41
Diluted		$0.86		$0.84		$0.43		$0.40

Cash dividends declared per share		$0.34		$0.30		$0.17		$0.15

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2019		2018		2019		2018
Net income	$	21,585	$	21,426	$	10,744	$	10,315
Other comprehensive income (loss):
Change in net unrealized holding gains (losses) on ‎ available-for-sale securities		15,631		(14,828)		7,214		(3,094)
Change in funded status of pension plan		176		—		88		—
Change in net unrealized loss on derivative instruments		(4,058)		(406)		(2,513)		(406)
Other comprehensive income (loss) before income taxes		11,749		(15,234)		4,789		(3,500)
Income tax expense (benefit)		3,567		(4,602)		1,469		(1,054)
Other comprehensive income (loss)		8,182		(10,632)		3,320		(2,446)
Comprehensive income	$	29,767	$	10,794	$	14,064	$	7,869

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)



	Six Months Ended June 30, 2019
								Accumulated
								Other
	Common Stock					Retained		Comprehensive
(dollars in thousands)	Shares	Amount		Surplus		Earnings		Loss		Total
Balance, January 1, 2019	25,422,740	$	2,542	$	145,163	$	249,922	$	(9,440)	$	388,187
Net income							21,585				21,585
Other comprehensive income									8,182		8,182
Repurchase of common stock	(915,100)		(91)		(20,523)						(20,614)
Shares withheld upon the vesting
and conversion of RSUs	(39,947)		(4)		(826)						(830)
Common stock issued under
stock compensation plans	123,818		12		253						265
Common stock issued under
dividend reinvestment and
stock purchase plan	69,898		7		1,427						1,434
Stock-based compensation					1,668						1,668
Cash dividends declared							(8,440)				(8,440)
Balance, June 30, 2019	24,661,409	$	2,466	$	127,162	$	263,067	$	(1,258)	$	391,437



	Six Months Ended June 30, 2018
								Accumulated
								Other
	Common Stock					Retained		Comprehensive
(dollars in thousands)	Shares	Amount		Surplus		Earnings		Income (Loss)		Total
Balance, January 1, 2018	24,668,390	$	2,467	$	127,122	$	224,315	$	546	$	354,450
Net income							21,426				21,426
Other comprehensive loss									(10,632)		(10,632)
Reclassification of stranded
tax effects upon the adoption
of ASU 2018-02							277		(277)		—
Shares withheld upon the vesting
and conversion of RSUs	(25,735)		(3)		(730)						(733)
Common stock issued under
stock compensation plans	118,900		12		172						184
Common stock issued under
dividend reinvestment and
stock purchase plan	591,781		59		15,795						15,854
Stock-based compensation					1,261						1,261
Cash dividends declared							(7,571)				(7,571)
Balance, June 30, 2018	25,353,336	$	2,535	$	143,620	$	238,447	$	(10,363)	$	374,239

‎

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

(CONTINUED)



	Three Months Ended June 30, 2019
								Accumulated
								Other
	Common Stock					Retained		Comprehensive
(dollars in thousands)	Shares	Amount		Surplus		Earnings		Loss		Total
Balance, April 1, 2019	24,900,347	$	2,490	$	132,018	$	256,512	$	(4,578)	$	386,442
Net income							10,744				10,744
Other comprehensive income									3,320		3,320
Repurchase of common stock	(240,300)		(24)		(5,259)						(5,283)
Common stock issued under
stock compensation plans	1,362		—		30						30
Stock-based compensation					373						373
Cash dividends declared							(4,189)				(4,189)
Balance, June 30, 2019	24,661,409	$	2,466	$	127,162	$	263,067	$	(1,258)	$	391,437



	Three Months Ended June 30, 2018
								Accumulated
								Other
	Common Stock					Retained		Comprehensive
(dollars in thousands)	Shares	Amount		Surplus		Earnings		Loss		Total
Balance, April 1, 2018	25,024,667	$	2,502	$	134,924	$	231,937	$	(7,917)	$	361,446
Net income							10,315				10,315
Other comprehensive loss									(2,446)		(2,446)
Shares withheld upon the vesting
and conversion of RSUs	(414)		—		(11)						(11)
Common stock issued under
stock compensation plans	6,663		1		71						72
Common stock issued under
dividend reinvestment and
stock purchase plan	322,420		32		8,503						8,535
Stock-based compensation					133						133
Cash dividends declared							(3,805)				(3,805)
Balance, June 30, 2018	25,353,336	$	2,535	$	143,620	$	238,447	$	(10,363)	$	374,239

See notes to unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Six Months Ended
	June 30,
(in thousands)	2019		2018
Cash Flows From Operating Activities:
Net income	$	21,585	$	21,426
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (credit) for loan losses		(35)		2,315
Credit for deferred income taxes		(39)		(3,502)
Depreciation and amortization of premises and equipment		2,028		2,003
Amortization of right-of-use asset - operating leases		1,058		—
Premium amortization on investment securities, net		586		965
Stock-based compensation expense		1,668		1,261
Common stock issued in lieu of cash for director fees		62		31
Accretion of cash surrender value on bank-owned life insurance		(1,087)		(1,025)
Pension expense (credit)		202		(159)
Decrease (increase) in other assets		(402)		3,204
Increase (decrease) in accrued expenses and other liabilities		(1,820)		2,444
Net cash provided by operating activities		23,806		28,963
Cash Flows From Investing Activities:
Proceeds from maturities and redemptions of investment securities:
Held-to-maturity		1,193		3,187
Available-for-sale		52,816		39,574
Purchases of investment securities:
Held-to-maturity		(155)		(1,098)
Available-for-sale		(18,596)		(137,126)
Net decrease (increase) in loans		40,777		(304,524)
Proceeds from sale of other real estate owned		—		5,125
Net decrease in restricted stock		12,802		655
Purchases of premises and equipment, net		(1,567)		(2,454)
Purchases of bank-owned life insurance		—		(20,000)
Net cash provided by (used in) investing activities		87,270		(416,661)
Cash Flows From Financing Activities:
Net increase in deposits		228,607		411,901
Net decrease in short-term borrowings		(287,761)		(25,234)
Proceeds from long-term debt		48,945		39,680
Repayment of long-term debt		(50,500)		(48,950)
Proceeds from issuance of common stock, net		1,434		15,854
Proceeds from exercise of stock options		203		153
Shares withheld upon the vesting and conversion of RSUs		(830)		(733)
Repurchase of common stock		(20,614)		—
Cash dividends paid		(8,702)		(7,459)
Net cash provided by (used in) financing activities		(89,218)		385,212
Net increase (decrease) in cash and cash equivalents		21,858		(2,486)
Cash and cash equivalents, beginning of year		47,358		69,672
Cash and cash equivalents, end of period	$	69,216	$	67,186
Supplemental Cash Flow Disclosures:
Cash paid for:
Interest	$	22,140	$	15,720
Income taxes		4,327		365
Operating cash flows from operating leases		1,257		—
Noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities		16,483		—
Cash dividends payable		4,198		3,910

See notes to unaudited consolidated financial statements

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1 - BASIS OF PRESENTATION

The accounting and reporting policies of The First of Long Island Corporation (“Corporation”) reflect banking industry practice and conform to generally accepted accounting principles (“GAAP”) in the United States. In preparing the consolidated financial statements, management is required to make estimates, such as the allowance for loan losses, and assumptions that affect the reported asset and liability balances, revenue and expense amounts, and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.

The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The First National Bank of Long Island (“Bank”). The Bank has two wholly owned subsidiaries: FNY Service Corp. and The First of Long Island Agency, Inc. The Bank and FNY Service Corp. jointly own another subsidiary, The First of Long Island REIT, Inc., a real estate investment trust. The consolidated entity is referred to as the “Corporation” and the Bank and its subsidiaries are collectively referred to as the “Bank.” All intercompany balances and amounts have been eliminated. For further information refer to the consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2018.

The consolidated financial information included herein as of and for the periods ended June 30, 2019 and 2018 is unaudited. However, such information reflects all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The December 31, 2018 consolidated balance sheet was derived from the Corporation's December 31, 2018 audited consolidated financial statements. When appropriate, items in the prior year financial statements are reclassified to conform to the current period presentation.

2 - EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted earnings per share (“EPS”) for the periods indicated.



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(dollars in thousands, except per share data)	2019		2018		2019		2018
Net income	$	21,585	$	21,426	$	10,744	$	10,315
Income allocated to participating securities (1)		—		60		—		23
Income allocated to common stockholders	$	21,585	$	21,366	$	10,744	$	10,292

Weighted average:
Common shares		25,051,412		25,149,364		24,821,026		25,334,155
Dilutive stock options and restricted stock units (1)		169,048		188,918		181,751		173,661
		25,220,460		25,338,282		25,002,777		25,507,816
Earnings per share:
Basic		$0.86		$0.85		$0.43		$0.41
Diluted		0.86		0.84		0.43		0.40

(1) Restricted stock units (“RSUs”) awarded in 2016 accrued dividends at the same rate as the dividends declared by the Board of Directors on the Corporation’s common stock. For purposes of computing EPS, these RSUs were considered to participate with common stock in the earnings of the Corporation and, therefore, the Corporation calculated basic and diluted EPS using the two-class method. Substantially all of the RSUs awarded in 2016 vested on December 31, 2018. As a result, beginning in 2019, the Corporation calculates basic and dilutive EPS using the treasury stock method.

3 - COMPREHENSIVE INCOME

Comprehensive income includes net income and other comprehensive income (loss). Other comprehensive income (loss) includes revenues, expenses, gains and losses that under GAAP are included in comprehensive income but excluded from net income. Other comprehensive income (loss) for the Corporation consists of unrealized holding gains or losses on available-for-sale securities and derivative instruments and changes in the funded status of the Bank’s defined benefit pension plan, all net of related income taxes. Accumulated other comprehensive income (loss) is recognized as a separate component of stockholders’ equity.

The components of other comprehensive income (loss) and the related tax effects are as follows:



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2019		2018		2019		2018
Change in net unrealized holding gains (losses) on
available-for-sale securities:
Change arising during the period	$	15,631	$	(14,828)	$	7,214	$	(3,094)
Tax effect		4,687		(4,480)		2,151		(932)
		10,944		(10,348)		5,063		(2,162)
Change in funded status of pension plan:
Amortization of net actuarial loss included in net income (1)		176		—		88		—
Tax effect		92		—		65		—
		84		—		23		—
Change in net unrealized loss on derivative instruments:
Change arising during the period		(4,241)		(496)		(2,627)		(496)
Reclassification adjustment for net interest expense
included in net income (2)		183		90		114		90
		(4,058)		(406)		(2,513)		(406)
Tax effect		(1,212)		(122)		(747)		(122)
		(2,846)		(284)		(1,766)		(284)

Other comprehensive income (loss)	$	8,182	$	(10,632)	$	3,320	$	(2,446)

(1) Represents the amortization of net actuarial loss relating to the Corporation’s defined benefit pension plan. This item is a component of net periodic pension cost (see “Note 7 – Defined Benefit Pension Plan”) and included in the consolidated statements of income in the line item, “Other noninterest income.”

(2) Represents the net interest expense recorded on derivative transactions and included in the consolidated statements of income under “Interest expense.”

The following table sets forth the components of accumulated other comprehensive loss, net of tax:




			Current
	Balance		Period		Balance
(in thousands)	12/31/18		Change		6/30/19
Unrealized holding gains (losses) on available-for-sale securities	$	(2,955)	$	10,944	$	7,989
Unrealized actuarial losses on pension plan		(5,696)		84		(5,612)
Unrealized loss on derivative instruments		(789)		(2,846)		(3,635)
Accumulated other comprehensive loss, net of tax	$	(9,440)	$	8,182	$	(1,258)

4 - INVESTMENT SECURITIES

The following tables set forth the amortized cost and estimated fair values of the Bank’s investment securities.



	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gains		Losses		Value
Held-to-Maturity Securities:
State and municipals	$	4,210	$	31	$	—	$	4,241
Pass-through mortgage securities		253		13		—		266
Collateralized mortgage obligations		15		—		—		15
	$	4,478	$	44	$	—	$	4,522
Available-for-Sale Securities:
State and municipals	$	397,988	$	9,021	$	(484)	$	406,525
Pass-through mortgage securities		64,719		867		(171)		65,415
Collateralized mortgage obligations		145,719		3,126		(7)		148,838
Corporate bonds		119,000		—		(950)		118,050
	$	727,426	$	13,014	$	(1,612)	$	738,828

	December 31, 2018
Held-to-Maturity Securities:
State and municipals	$	5,142	$	36	$	—	$	5,178
Pass-through mortgage securities		267		11		—		278
Collateralized mortgage obligations		95		1		—		96
	$	5,504	$	48	$	—	$	5,552
Available-for-Sale Securities:
State and municipals	$	422,235	$	3,220	$	(5,417)	$	420,038
Pass-through mortgage securities		66,631		24		(1,169)		65,486
Collateralized mortgage obligations		154,378		886		(363)		154,901
Corporate bonds		119,000		—		(1,410)		117,590
	$	762,244	$	4,130	$	(8,359)	$	758,015

At June 30, 2019 and December 31, 2018, investment securities with a carrying value of $420,902,000 and $342,712,000, respectively, were pledged as collateral to secure public deposits and borrowed funds.

There were no holdings of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity at June 30, 2019 and December 31, 2018.

Securities With Unrealized Losses. The following tables set forth securities with unrealized losses presented by the length of time the securities have been in a continuous unrealized loss position.



	June 30, 2019
	Less than				12 Months
	12 Months				or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Loss		Value		Loss		Value		Loss
State and municipals	$	1,318	$	(2)	$	23,470	$	(482)	$	24,788	$	(484)
Pass-through mortgage securities		—		—		18,600		(171)		18,600		(171)
Collateralized mortgage obligations		—		—		6,949		(7)		6,949		(7)
Corporate bonds		86,050		(950)		—		—		86,050		(950)
Total temporarily impaired	$	87,368	$	(952)	$	49,019	$	(660)	$	136,387	$	(1,612)

	December 31, 2018
State and municipals	$	102,882	$	(1,639)	$	62,995	$	(3,778)	$	165,877	$	(5,417)
Pass-through mortgage securities		38,421		(142)		23,425		(1,027)		61,846		(1,169)
Collateralized mortgage obligations		32,577		(89)		7,342		(274)		39,919		(363)
Corporate bonds		97,590		(1,410)		—		—		97,590		(1,410)
Total temporarily impaired	$	271,470	$	(3,280)	$	93,762	$	(5,079)	$	365,232	$	(8,359)

Because the unrealized losses reflected in the preceding tables are deemed by management to be attributable to changes in interest rates and not credit losses, and because management does not have the intent to sell these securities and it is not more likely than not that it will be required to sell these securities before their anticipated recovery, the Bank does not consider these securities to be other-than-temporarily impaired at June 30, 2019.

Sales of Available-for-Sale and Held-to-Maturity Securities. There were no sales of available-for-sale or held-to-maturity securities during the six months ended June 30, 2019 and 2018.

Maturities. The following table sets forth by maturity the amortized cost and fair value of the Bank’s state and municipal securities and corporate bonds at June 30, 2019 based on the earlier of their stated maturity or, if applicable, their pre-refunded date. The remaining securities in the Bank’s investment securities portfolio are mortgage-backed securities, consisting of pass-through mortgage securities and collateralized mortgage obligations. Although these securities are expected to have substantial periodic repayments they are reflected in the table below in aggregate amounts.



(in thousands)	Amortized Cost		Fair Value
Held-to-Maturity Securities:
Within one year	$	2,636	$	2,638
After 1 through 5 years		1,574		1,603
After 5 through 10 years		—		—
After 10 years		—		—
Mortgage-backed securities		268		281
	$	4,478	$	4,522
Available-for-Sale Securities:
Within one year	$	24,321	$	24,452
After 1 through 5 years		52,422		53,228
After 5 through 10 years		279,400		282,289
After 10 years		160,845		164,606
Mortgage-backed securities		210,438		214,253
	$	727,426	$	738,828

5 - LOANS

The following tables set forth by class of loans the amount of loans individually and collectively evaluated for impairment and the portion of the allowance for loan losses allocable to such loans.



	June 30, 2019
	Loans						Allowance for Loan Losses
(in thousands)	Individually ‎Evaluated for ‎Impairment		Collectively ‎Evaluated for ‎Impairment		Ending ‎Balance		Individually ‎Evaluated for ‎Impairment		Collectively ‎Evaluated for ‎Impairment		Ending ‎Balance
Commercial and industrial	$	133	$	108,021	$	108,154	$	62	$	1,139	$	1,201
Commercial mortgages:
Multifamily		—		780,563		780,563		—		6,730		6,730
Other		—		424,416		424,416		—		3,440		3,440
Owner-occupied		510		106,148		106,658		—		828		828
Residential mortgages:
Closed end		1,834		1,730,467		1,732,301		15		17,133		17,148
Revolving home equity		1,084		64,934		66,018		—		397		397
Consumer and other		287		3,190		3,477		—		24		24
	$	3,848	$	3,217,739	$	3,221,587	$	77	$	29,691	$	29,768

	December 31, 2018
Commercial and industrial	$	22	$	98,763	$	98,785	$	—	$	1,158	$	1,158
Commercial mortgages:
Multifamily		—		756,714		756,714		—		5,851		5,851
Other		—		433,330		433,330		—		3,783		3,783
Owner-occupied		520		90,731		91,251		—		743		743
Residential mortgages:
Closed end		1,814		1,807,837		1,809,651		16		18,828		18,844
Revolving home equity		743		66,967		67,710		—		410		410
Consumer and other		324		5,634		5,958		—		49		49
	$	3,423	$	3,259,976	$	3,263,399	$	16	$	30,822	$	30,838

The following tables present the activity in the allowance for loan losses for the periods indicated.



(in thousands)	Balance at ‎1/1/19		Chargeoffs		Recoveries		Provision for ‎Loan Losses ‎(Credit)		Balance at ‎6/30/19
Commercial and industrial	$	1,158	$	365	$	8	$	400	$	1,201
Commercial mortgages:
Multifamily		5,851		—		—		879		6,730
Other		3,783		—		—		(343)		3,440
Owner-occupied		743		—		—		85		828
Residential mortgages:
Closed end		18,844		433		1		(1,264)		17,148
Revolving home equity		410		249		—		236		397
Consumer and other		49		—		3		(28)		24
	$	30,838	$	1,047	$	12	$	(35)	$	29,768

	Balance at ‎4/1/19		Chargeoffs		Recoveries		Provision for ‎Loan Losses ‎(Credit)		Balance at ‎6/30/19
Commercial and industrial	$	1,047	$	311	$	4	$	461	$	1,201
Commercial mortgages:
Multifamily		6,435		—		—		295		6,730
Other		3,517		—		—		(77)		3,440
Owner-occupied		685		—		—		143		828
Residential mortgages:
Closed end		18,071		299		—		(624)		17,148
Revolving home equity		402		249		—		244		397
Consumer and other		42		—		2		(20)		24
	$	30,199	$	859	$	6	$	422	$	29,768

(in thousands)	Balance at ‎1/1/18		Chargeoffs			Recoveries	Provision for Loan Losses (Credit)		Balance at ‎6/30/18
Commercial and industrial	$	1,441	$	304	$	6	$	155	$	1,298
Commercial mortgages:
Multifamily		6,423		—		—		625		7,048
Other		4,734		—		—		34		4,768
Owner-occupied		1,076		—		—		(165)		911
Residential mortgages:
Closed end		19,347		20		100		1,526		20,953
Revolving home equity		689		49		—		135		775
Consumer and other		74		—		—		5		79
	$	33,784	$	373	$	106	$	2,315	$	35,832

	Balance at ‎4/1/18		Chargeoffs			Recoveries	Provision for Loan Losses (Credit)		Balance at ‎6/30/18
Commercial and industrial	$	1,264	$	230	$	6	$	258	$	1,298
Commercial mortgages:
Multifamily		6,769		—		—		279		7,048
Other		4,780		—		—		(12)		4,768
Owner-occupied		918		—		—		(7)		911
Residential mortgages:
Closed end		20,666		—		99		188		20,953
Revolving home equity		682		—		—		93		775
Consumer and other		75		—		—		4		79
	$	35,154	$	230	$	105	$	803	$	35,832

For individually impaired loans, the following tables set forth by class of loans at June 30, 2019 and December 31, 2018 the recorded investment, unpaid principal balance and related allowance. The tables also set forth the average recorded investment of individually impaired loans and interest income recognized while the loans were impaired during the six and three months ended June 30, 2019 and 2018. The recorded investment is the unpaid principal balance of the loans less any interest payments applied to principal and any direct chargeoffs plus or minus net deferred loan costs and fees. Any principal and interest payments received on nonaccrual impaired loans are applied to the recorded investment in the loans. The Bank recognizes interest income on other impaired loans using the accrual method of accounting.



							Six Months Ended				Three Months Ended
	June 30, 2019						June 30, 2019				June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
(in thousands)	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and industrial	$	9	$	9	$	—	$	14	$	1	$	11	$	1
Commercial mortgages - owner-occupied		510		594		—		515		15		512		7
Residential mortgages:
Closed end		1,681		1,707		—		1,705		2		1,690		1
Revolving home equity		1,084		1,113		—		1,101		—		1,089		—
Consumer and other		287		287		—		301		—		290		—
With an allowance recorded:
Commercial and industrial		124		124		62		131		—		127		—
Residential mortgages - closed end		153		153		15		154		4		153		2
Total:
Commercial and industrial		133		133		62		145		1		138		1
Commercial mortgages - owner-occupied		510		594		—		515		15		512		7
Residential mortgages:
Closed end		1,834		1,860		15		1,859		6		1,843		3
Revolving home equity		1,084		1,113		—		1,101		—		1,089		—
Consumer and other		287		287		—		301		—		290		—
	$	3,848	$	3,987	$	77	$	3,921	$	22	$	3,872	$	11



							Six Months Ended				Three Months Ended
	December 31, 2018						June 30, 2018				June 30, 2018
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
(in thousands)	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial and industrial	$	22	$	22	$	—	$	68	$	2	$	37	$	1
Commercial mortgages - owner-occupied		520		604		—		539		12		526		6
Residential mortgages:
Closed end		1,561		1,573		—		1,929		3		1,894		2
Revolving home equity		743		747		—		—		—		—		—
Consumer and other		324		324		—		231		6		344		5
With an allowance recorded:
Residential mortgages - closed end		253		253		16		276		6		264		3
Total:
Commercial and industrial		22		22		—		68		2		37		1
Commercial mortgages - owner-occupied		520		604		—		539		12		526		6
Residential mortgages:
Closed end		1,814		1,826		16		2,205		9		2,158		5
Revolving home equity		743		747		—		—		—		—		—
Consumer and other		324		324		—		231		6		344		5
	$	3,423	$	3,523	$	16	$	3,043	$	29	$	3,065	$	17

Aging of Loans. The following tables present the aging of the recorded investment in loans by class of loans.



	June 30, 2019
					Past Due				Total Past
					90 Days or				Due Loans &
	30-59 Days		60-89 Days		More and		Nonaccrual		Nonaccrual				Total
(in thousands)	Past Due		Past Due		Still Accruing		Loans		Loans		Current		Loans
Commercial and industrial	$	—	$	—	$	—	$	124	$	124	$	108,030	$	108,154
Commercial mortgages:
Multifamily		—		—		—		—		—		780,563		780,563
Other		—		—		—		—		—		424,416		424,416
Owner-occupied		—		—		—		—		—		106,658		106,658
Residential mortgages:
Closed end		—		—		—		1,521		1,521		1,730,780		1,732,301
Revolving home equity		122		—		—		1,084		1,206		64,812		66,018
Consumer and other		—		—		—		—		—		3,477		3,477
	$	122	$	—	$	—	$	2,729	$	2,851	$	3,218,736	$	3,221,587

	December 31, 2018
Commercial and industrial	$	—	$	43	$	—	$	—	$	43	$	98,742	$	98,785
Commercial mortgages:
Multifamily		—		—		—		—		—		756,714		756,714
Other		—		—		—		—		—		433,330		433,330
Owner-occupied		—		—		—		—		—		91,251		91,251
Residential mortgages:
Closed end		864		—		—		1,392		2,256		1,807,395		1,809,651
Revolving home equity		—		—		—		743		743		66,967		67,710
Consumer and other		2		—		—		—		2		5,956		5,958
	$	866	$	43	$	—	$	2,135	$	3,044	$	3,260,355	$	3,263,399

There were no loans in the process of foreclosure nor did the Bank hold any foreclosed residential real estate property at June 30, 2019 or December 31, 2018.

Troubled Debt Restructurings. A restructuring constitutes a troubled debt restructuring when it includes a concession by the Bank and the borrower is experiencing financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an

evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. The Bank performs the evaluation under its internal underwriting policy.

The Bank did not modify any loans in troubled debt restructurings during the first six months of 2019. During the six months ended June 30, 2018, the Bank modified two consumer loans to a single borrower into one loan in a troubled debt restructuring amounting to $350,000. The term of the restructured loan was extended for 12 months and the post-modification interest rate was lower than the current market rate for new debt with similar risk.

At June 30, 2019 and December 31, 2018, the Bank had an allowance for loan losses of $15,000 and $16,000, respectively, allocated to specific troubled debt restructurings. The Bank had no commitments to lend additional amounts in connection with loans that were classified as troubled debt restructurings.

There were no troubled debt restructurings for which there was a payment default during the six months ended June 30, 2019 and 2018 that were modified during the 12-month period prior to default. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Risk Characteristics. Credit risk within the Bank’s loan portfolio primarily stems from factors such as changes in the borrower’s financial condition, credit concentrations, changes in collateral values, economic conditions and environmental contamination of properties securing mortgage loans. The Bank’s commercial loans, including those secured by real estate mortgages, are primarily made to small and medium-sized businesses. Such loans sometimes involve a higher degree of risk than those to larger companies because such businesses may have shorter operating histories, higher debt-to-equity ratios and may lack sophistication in internal record keeping and financial and operational controls. In addition, most of the Bank’s loans are made to businesses and consumers on Long Island and in the boroughs of New York City (“NYC”), and a large percentage of these loans are mortgage loans secured by properties located in those areas. The primary sources of repayment for residential and commercial mortgage loans include employment and other income of the borrowers, the businesses of the borrowers and cash flows from the underlying properties. In the case of multifamily mortgage loans, a substantial portion of the underlying properties are rent stabilized or rent controlled (See “Item 1A. Risk Factors” in Part II of this Form 10-Q for information regarding recent legislation in New York State (“NYS”)). These sources of repayment are dependent on, among other things, the strength of the local economy.

Credit Quality Indicators. The Corporation categorizes loans into risk categories based on relevant information about the borrower’s ability to service their debt including, but not limited to, current financial information for the borrower and any guarantors, payment experience, credit underwriting documentation, public records, due diligence checks and current economic trends.

Commercial and industrial loans and commercial mortgage loans are risk rated utilizing a ten point rating system. The ten point risk rating system is described hereinafter.


Internally Assigned Risk Rating
1 – 2	Cash flow is of high quality and stable. Borrower has very good liquidity and ready access to traditional sources of credit. This category also includes loans to borrowers secured by cash and/or marketable securities within approved margin requirements.
3 – 4	Cash flow quality is strong, but shows some variability. Borrower has good liquidity and asset quality. Borrower has access to traditional sources of credit with minimal restrictions.
5 – 6	Cash flow quality is acceptable but shows some variability. Liquidity varies with operating cycle and assets provide an adequate margin of protection. Borrower has access to traditional sources of credit, but generally on a secured basis.
7	Watch - Cash flow has a high degree of variability and subject to economic downturns. Liquidity is strained and the ability of the borrower to access traditional sources of credit is diminished.
8	Special Mention - The borrower has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to risk sufficient to warrant adverse classification.
9	Substandard - Loans are inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
10	Doubtful - Loans have all the inherent weaknesses of those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Risk ratings on commercial and industrial loans and commercial mortgages are initially assigned during the underwriting process and affirmed as part of the approval process. The ratings are periodically reviewed and evaluated based on borrower contact, credit department review or independent loan review.

The Bank's loan risk rating and review policy establishes requirements for the annual review of commercial real estate and commercial and industrial loans. The requirements include details of the scope of coverage and selection process based on loan-type and risk rating. Among other things, at least 80% of the recorded investment of commercial real estate loans as of December 31 of the prior year must be reviewed annually. Lines of credit are also reviewed annually at each proposed reaffirmation. The frequency of the review of other loans is determined by the Bank’s ongoing assessments of the borrower’s condition.

Residential mortgage loans, revolving home equity lines and other consumer loans are risk rated utilizing a three point rating system. In most cases, the borrower’s credit score dictates the risk rating. However, regardless of credit score, loans that are on management’s watch list or have been criticized or classified by management are assigned a risk rating of 3. A credit score is a tool used in the Bank’s loan approval process, and a minimum score of 680 is generally required for new loans. Credit scores for each borrower are updated at least annually. The risk ratings along with their definitions are as follows:


Internally Assigned Risk Rating
1	Credit score is equal to or greater than 680.
2	Credit score is 635 to 679.
3	Credit score is below 635 or, regardless of credit score, the loan has been classified, criticized or placed on watch by management.

The following tables present the recorded investment in commercial and industrial loans and commercial mortgage loans by class of loans and risk rating. Loans shown as Pass are all loans other than those risk rated Watch, Special Mention, Substandard or Doubtful.



	June 30, 2019
	Internally Assigned Risk Rating
					Special
(in thousands)	Pass		Watch		Mention		Substandard		Doubtful		Total
Commercial and industrial	$	107,068	$	—	$	601	$	485	$	—	$	108,154
Commercial mortgages:
Multifamily		773,758		—		6,805		—		—		780,563
Other		424,416		—		—		—		—		424,416
Owner-occupied		101,439		1,066		3,643		510		—		106,658
	$	1,406,681	$	1,066	$	11,049	$	995	$	—	$	1,419,791

	December 31, 2018
Commercial and industrial	$	97,684	$	—	$	667	$	434	$	—	$	98,785
Commercial mortgages:
Multifamily		756,714		—		—		—		—		756,714
Other		417,838		14,194		1,298		—		—		433,330
Owner-occupied		85,710		1,090		3,911		540		—		91,251
	$	1,357,946	$	15,284	$	5,876	$	974	$	—	$	1,380,080

The following tables present the recorded investment in residential mortgage loans, home equity lines and other consumer loans by class of loans and risk rating. Loans shown as Pass are all loans other than those risk rated by management as Watch, Special Mention, Substandard or Doubtful.



	June 30, 2019
	Internally Assigned Risk Rating
					Special
(in thousands)	Pass		Watch		Mention		Substandard			Doubtful	Total
Residential mortgages:
Closed end	$	1,730,158	$	309	$	—	$	1,834	$	—	$	1,732,301
Revolving home equity		64,691		—		243		1,084		—		66,018
Consumer and other		2,799		—		—		287		—		3,086
	$	1,797,648	$	309	$	243	$	3,205	$	—	$	1,801,405

	December 31, 2018
Residential mortgages:
Closed end	$	1,807,525	$	312	$	—	$	1,814	$	—	$	1,809,651
Revolving home equity		66,718		—		249		743		—		67,710
Consumer and other		4,958		—		—		324		—		5,282
	$	1,879,201	$	312	$	249	$	2,881	$	—	$	1,882,643

Deposit account overdrafts were $391,000 and $676,000 at June 30, 2019 and December 31, 2018, respectively. Overdrafts are not assigned a risk rating and are therefore excluded from consumer loans in the tables above.

6 - STOCK-BASED COMPENSATION

On April 22, 2014, the stockholders of the Corporation approved the 2014 Equity Incentive Plan (“2014 Plan”). Upon approval of the 2014 Plan, no further awards could be made under the 2006 Stock Compensation Plan (“2006 Plan”).

2014 Plan. Under the 2014 Plan, awards may be granted to employees and non-employee directors as non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock awards, RSUs, or any combination thereof, any of which may be subject to performance-based vesting conditions. Awards may also be granted to employees as incentive stock options (“ISOs”). The exercise price of stock options and SARs granted under the 2014 Plan may not be less than the fair market value of the Corporation’s common stock on the date the stock option or SAR is granted. The 2014 Plan is administered by the Compensation Committee of the Board of Directors. Almost all of the awards granted to date under the 2014 Plan are RSUs. All awards granted under the 2014 Plan will immediately vest upon an involuntary termination following a change in control, total and permanent disability, as defined, or death, and with certain exceptions, will immediately vest in the event of retirement, as defined.

The Corporation has 2,250,000 shares of common stock reserved for awards under the 2014 Plan. Awards granted under the 2006 Plan that expire or are forfeited after April 22, 2014 will be added to the number of shares of common stock reserved for issuance of awards under the 2014 Plan. All of the 2,250,000 shares may be issued upon the exercise of stock options or SARs. A maximum of 787,500 shares may be issued as restricted stock awards or upon the conversion of RSUs. At June 30, 2019, 1,745,416 equity awards remain available to be granted under the 2014 Plan of which 293,633 may be granted as restricted stock awards or RSUs.

Details of RSUs. The following table summarizes the vesting schedule of RSUs outstanding at June 30, 2019 by the year they were originally granted.



		Granted During the Year Ended December 31,
	Total	2019	2018	2017	2016
Number of RSUs:
Granted during the year	384,435	112,144	70,688	94,329	107,274
Outstanding at June 30, 2019	225,890	112,144	44,338	66,408	3,000

Scheduled to vest during:
2019	94,126	23,535	14,359	53,232	3,000
2020	55,414	36,706	8,782	9,926	—
2021	37,632	13,185	21,197	3,250	—
2022	36,718	36,718	—	—	—
2023	1,000	1,000	—	—	—
2024	1,000	1,000	—	—	—
	225,890	112,144	44,338	66,408	3,000

The RSUs in the table above include performance-based RSUs with vesting based on the financial performance of the Corporation in 2019 and 2020 and service-based RSUs with various service-based vesting periods. The grant date fair value of RSUs awarded in 2016 is equal to the market price of the shares underlying the awards on the grant date. The grant date fair value of RSUs awarded in 2017, 2018 and 2019 is equal to the market price of the shares underlying the awards on the grant date, discounted for dividends that are not paid on these RSUs.

The following table presents a summary of RSUs outstanding at June 30, 2019 and changes during the six-month period then ended.



				Weighted-
		Weighted-		Average		Aggregate
		Average		Remaining		Intrinsic
	Number of	Grant-Date		Contractual		Value
	RSUs	Fair Value		Term (yrs.)		(in thousands)
Outstanding at January 1, 2019	215,084	$	23.79
Granted	112,144		19.48
Converted	(101,338)		20.79
Outstanding at June 30, 2019	225,890	$	22.99		1.19	$	4,536
Vested and Convertible at June 30, 2019	—	$	—		—	$	—

The performance-based RSUs granted in 2019 and 2018 have a maximum payout potential of 1.50 shares of the Corporation’s common stock for each RSU awarded. Performance-based RSU’s granted in 2017 have a maximum payout potential of 1.25 shares for each RSU awarded. All other RSUs outstanding at June 30, 2019 have a maximum payout potential of one share of the Corporation’s common stock for each RSU awarded. All of the RSUs outstanding at June 30, 2019 are currently expected to vest and become convertible in the future. The total intrinsic value of RSUs converted during the first six months of 2019 and 2018 was $2,107,000 and $2,911,000, respectively.

2006 Plan. The 2006 Plan was approved by the stockholders of the Corporation on April 18, 2006. The 2006 Plan permitted the granting of stock options, SARs, restricted stock awards and RSUs to employees and non-employee directors. Through December 31, 2011, equity grants to executive officers and directors under the 2006 Plan consisted of a combination of NQSOs and RSUs, while equity grants to other officers consisted solely of NQSOs. Beginning in 2012, equity grants under the 2006 Plan consisted solely of RSUs. Stock options granted under the 2006 Plan have a five year vesting period and a ten year term.

Fair Value of Stock Options. The grant date fair value of options was estimated on the date of grant using the Black-Scholes option pricing model. Substantially all outstanding stock options were expensed in prior years.

Stock Option Activity. The following table presents a summary of options outstanding at June 30, 2019, and changes during the six- month period then ended.



				Weighted-
		Weighted-		Average		Aggregate
		Average		Remaining		Intrinsic
	Number of	Exercise		Contractual		Value
	Options	Price		Term (yrs.)		(in thousands)
Outstanding at January 1, 2019	96,112	$	11.80
Exercised	(19,656)		10.32
Forfeited or expired	—		—
Outstanding at June 30, 2019	76,456	$	12.18		1.18	$	604
Exercisable at June 30, 2019	76,306	$	12.17		1.18	$	603

All options outstanding at June 30, 2019 are either fully vested or expected to vest. The total intrinsic value of options exercised during the first six months of 2019 and 2018 was $203,000 and $278,000, respectively. Cash received from option exercises in the first six months of 2019 and 2018 was $203,000 and $153,000, respectively. Tax benefits from stock option exercises for the six months ended June 30, 2019 and 2018 were $61,000 and $84,000, respectively.

Compensation Expense. The Corporation recorded compensation expense for share-based payments of $1,668,000 and $1,261,000 and recorded related income tax benefits of $499,000 and $380,000 for the six months ended June 30, 2019 and 2018, respectively.

Unrecognized Compensation Cost. As of June 30, 2019, there was $1,521,000 of total unrecognized compensation cost related to non-vested equity awards comprised of $1,000 for stock options and $1,520,000 for RSUs. The total cost is expected to be recognized over a weighted-average period of 1.5 years, which is based on weighted-average periods of 0.9 years and 1.5 years for stock options and RSUs, respectively.

Other. No cash was used to settle stock options during the first six months of 2019 or 2018. The Corporation uses newly issued shares to settle stock option exercises and for the conversion of RSUs. During the six months ended June 30, 2019 and 2018, 2,824 and 1,141 shares, respectively, of the Corporation’s common stock were issued to members of the Board of Directors in payment of director fees.

7 - DEFINED BENEFIT PENSION PLAN

The following table sets forth the components of net periodic pension credit.



	Six Months Ended				Three Months Ended
	June 30,				June 30,
(in thousands)	2019		2018		2019		2018
Service cost	$	634	$	685	$	317	$	343
Interest cost		893		794		447		397
Expected return on plan assets		(1,501)		(1,638)		(751)		(819)
Amortization of net actuarial loss		176		—		88		—
Net pension cost (credit)	$	202	$	(159)	$	101	$	(79)

Components of net pension cost (credit) other than the service cost component are included in the line item “Other noninterest income” in the consolidated statements of income. The service cost component is included in the line item “Salaries and employee benefits” in the consolidated statements of income.

The Bank makes cash contributions to the pension plan (“Plan”) which comply with the funding requirements of applicable federal laws and regulations. For funding purposes, the laws and regulations set forth both minimum required and maximum tax-deductible contributions. The Bank has no minimum required pension contribution for the Plan year ending September 30, 2019. Its maximum tax-deductible contribution for the tax year beginning January 1, 2019 is $7,700,000. The contribution the Bank will make in 2019, if any, has not yet been determined.

8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Recorded at Fair Value. When measuring fair value, the Corporation uses a fair value hierarchy, which is designed to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy involves three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Corporation’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Corporation deems transfers between levels of the fair value hierarchy to have occurred on the date of the event or change in circumstance that caused the transfer. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2019 or 2018.

The fair values of the Corporation’s financial assets and liabilities measured at fair value on a recurring basis are set forth in the table that follows. The fair values of available-for-sale securities are determined on a recurring basis using matrix pricing (Level 2 inputs). Matrix pricing, which is a mathematical technique widely used in the industry to value debt securities, does not rely exclusively on quoted prices for the specific securities but rather on the relationship of such securities to other benchmark quoted securities. Where no significant other observable inputs were available, Level 3 inputs were used. The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date resulting in a Level 2 classification.



	Fair Value Measurements Using:
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
(in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2019:
Financial Assets:
Available-for-Sale Securities:
State and municipals	$	406,525	$	—	$	406,255	$	270
Pass-through mortgage securities		65,415		—		65,415		—
Collateralized mortgage obligations		148,838		—		148,838		—
Corporate bonds		118,050		—		118,050		—
	$	738,828	$	—	$	738,558	$	270
Financial Liabilities:
Derivatives - interest rate swaps	$	5,188	$	—	$	5,188	$	—

December 31, 2018:
Financial Assets:
Available-for-Sale Securities:
State and municipals	$	420,038	$	—	$	420,038	$	—
Pass-through mortgage securities		65,486		—		65,486		—
Collateralized mortgage obligations		154,901		—		154,901		—
Corporate bonds		117,590		—		117,590		—
	$	758,015	$	—	$	758,015	$	—
Financial Liabilities:
Derivative - interest rate swap	$	1,130	$	—	$	1,130	$	—

The Corporation had no assets measured at fair value on a nonrecurring basis at June 30, 2019 or December 31, 2018.

Financial Instruments Not Recorded at Fair Value. Fair value estimates are made at a specific point in time. Such estimates are generally subjective in nature and dependent upon a number of significant assumptions associated with each financial instrument or group of similar financial instruments, including estimates of discount rates, liquidity, risks associated with specific financial

instruments, estimates of future cash flows, and relevant available market information. Changes in assumptions could significantly affect the estimates. In addition, fair value estimates do not reflect the value of anticipated future business, premiums or discounts that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument, or the income tax consequences of realizing gains or losses on the sale of financial instruments.

The following table sets forth the carrying amounts and estimated fair values of financial instruments that are not recorded at fair value in the Corporation’s financial statements.



	Level of	June 30, 2019				December 31, 2018
	Fair Value	Carrying				Carrying
(in thousands)	Hierarchy	Amount		Fair Value		Amount		Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	69,216	$	69,216	$	47,358	$	47,358
Held-to-maturity securities	Level 2		2,362		2,406		2,445		2,493
Held-to-maturity securities	Level 3		2,116		2,116		3,059		3,059
Loans	Level 3		3,191,819		3,131,749		3,232,561		3,079,946
Restricted stock	Level 1		27,884		27,884		40,686		40,686

Financial Liabilities:
Checking deposits	Level 1		932,443		932,443		935,574		935,574
Savings, NOW and money market deposits	Level 1		1,716,472		1,716,472		1,590,341		1,590,341
Time deposits	Level 2		664,664		667,294		559,057		553,900
Short-term borrowings	Level 1		101,162		101,162		388,923		388,923
Long-term debt	Level 2		360,472		360,467		362,027		354,651

9 – LEASES

As described in “Note 12 – Adoption of New Accounting Standards,” the Bank adopted Accounting Standards Update (“ASU”) 2016-02 “Leases” and all subsequent amendments on January 1, 2019.

The Bank leases certain branch and back-office locations under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2032 and have a weighted average remaining term of 7.89 years at June 30, 2019. Many of the Bank’s leases include renewal options of up to 10 years. The exercise of lease renewal options is at the Bank’s sole discretion.

Rental payments required by the Bank’s lease agreements may increase over time based on certain variable components such as real estate taxes and common area maintenance charges.

The Bank determines if an arrangement is a lease at inception. ASU 2016-02 requires the recognition of a right-of-use (“ROU”) asset and lease liability at the commencement date based on the present value of lease payments over the lease term. As most of the Bank’s leases do not provide an implicit interest rate, the Bank uses its incremental borrowing rate to determine the present value of the lease payments. The weighted average discount rate for leases in place at June 30, 2019 was 3.09%. For leases entered into on a going forward basis, the Bank’s ROU asset and lease liability may include options to extend the lease when it is reasonably certain that the Bank will exercise that option. Lease expense will be recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Bank has one such lease at June 30, 2019 and recognizes lease expense for this lease on a straight-line basis over the lease term.

The components of lease expense for the six and three months ended June 30, 2019 are as follows:



	Six Months Ended		Three Months Ended
(in thousands)	June 30, 2019		June 30, 2019
Operating lease cost	$	1,307	$	665
Variable lease cost		241		106
Short-term lease cost		3		1
	$	1,551	$	772

The following is a maturity analysis of the operating lease liability as of June 30, 2019.



(dollars in thousands)			June 30, 2019
12 months ended June 30,	2020	$	2,575
	2021		2,487
	2022		2,455
	2023		2,266
	2024		2,017
	Thereafter		6,566
Total lease payments			18,366
Less: interest			2,100
Present value of lease payments		$	16,266

Related Party Leases. Buildings occupied by two of the Bank’s branch offices are leased from a director of the Corporation and the Bank with a total lease liability of $138,000 at June 30, 2019. The leases expire on December 31, 2019 and October 31, 2022 with options to renew.

10 – REVENUE FROM CONTRACTS WITH CUSTOMERS

The noninterest income section of the consolidated statements of income includes the following types of revenues earned from the Bank's contracts with customers.

Investment Management Division (“IMD”) Revenues. The Bank holds customer assets in a fiduciary capacity and provides various services, including trust account services, estate settlement, custody and asset management. The services are performed for customers over time, requiring a time-based measure of progress. Fees are assessed based on market values of customer assets held or under management as of a certain point in time, and income cannot be estimated prior to the end of the measurement period. Volatility in equity and other market values will impact the amount of revenue that will be earned. Fees are generally earned and collected on a monthly or quarterly basis, accrued to income as earned and included in the consolidated statements of income in the line item "Investment Management Division income."

Deposit Account Revenues. Fees are earned and collected on a monthly basis for account maintenance and activity-based service charges on deposit accounts. The services are performed for customers over time, requiring a time-based measure of progress. Customers may be required to maintain minimum balances and average balances. Additional fees may also be earned for overdrafts, replacement of debit cards, bill payment, lockbox services and ACH services, among others, and are earned and collected as transactions take place. All deposit account fees are accrued to income as earned, either monthly or at the point of sale, and included in the consolidated statements of income in the line item "Service charges on deposit accounts."

Transaction and Branch Service Fees. The following revenue streams are components of “Other noninterest income” on the consolidated statements of income. These components totaled $1,099,000 and $985,000 for the six months ended June 30, 2019 and 2018, respectively. Other items included in “Other noninterest income,” such as bank-owned life insurance (“BOLI”) income, non-service components of net pension cost and real estate tax refunds are excluded from revenue from contracts with customers.

Debit/Credit Card Revenues. The Bank earns a fee when its customers use their debit or credit cards in point-of-sale transactions. These fees are generally known as interchange fees. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recorded daily, concurrently with the transaction processing services provided to the cardholder.

Branch Services Revenues. The Bank charges fees for safe deposit box rentals, wire transfers, money orders, checkbook printing, official checks and ATM usage. Fees are earned, collected and generally recorded as revenue when the service is provided.

Investment Advisory Services. The Bank provides branch space to a third party who sells financial products to the Bank’s customers and pays commissions to the Bank based on the products sold. Commissions are variable and based on the market values of financial assets sold. Commissions are accrued to income as earned.

11 – DERIVATIVES

As part of its asset liability management activities, the Corporation utilizes interest rate swaps to help manage its interest rate risk position. The notional amount of an interest rate swap does not represent the amount exchanged by the parties. The exchange of cash flows is determined by reference to the notional amount and the other terms of the interest rate swap agreements.

The Bank entered into an interest rate swap with a notional amount totaling $150 million on May 22, 2018 and a second interest rate swap with a notional amount of $50 million on January 17, 2019. The interest rate swaps were designated as cash flow hedges of certain Federal Home Loan Bank (“FHLB”) advances and brokered certificates of deposit (“CDs”). The swaps were determined to be fully effective during the period presented and therefore no amount of ineffectiveness has been included in net income. The aggregate fair value of the swaps is recorded in other liabilities, with changes in fair value net of related income taxes recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Corporation expects the hedges to remain fully effective during the remaining term of the swaps.

The following table summarizes information about the interest rate swaps designated as cash flow hedges.



	June 30, 2019	December 31, 2018
Notional amount	$200 million	$150 million
Weighted average fixed pay rate	2.83%	2.90%
Weighted average 3-month LIBOR receive rate	2.60%	2.38%
Weighted average maturity	2.56 Years	2.43 Years

Interest expense recorded on the swap transactions, which totaled $183,000 for the six months ended June 30, 2019, is recorded as a component of interest expense in the consolidated statements of income. Amounts reported in accumulated other comprehensive income (loss) related to swaps will be reclassified to interest expense as interest payments are made on the Bank’s variable-rate liabilities. During the six months ended June 30, 2019, the Corporation had $183,000 of reclassifications to interest expense. During the next 12 months, the Corporation estimates that $1,624,000 will be reclassified as an increase to interest expense.

The following table presents the net losses recorded in the consolidated statements of income and the consolidated statements of comprehensive income relating to interest rate swaps for the six and three months ended June 30, 2019.



					Amount of Loss
	Amount of Loss		Amount of Loss		Recognized in Other
	Recognized in OCI		Reclassified from OCI		Noninterest Income
(in thousands)	(Effective Portion)		to Interest Expense		(Ineffective Portion)
Interest rate contracts:
Six months ended June 30, 2019	$	4,241	$	183	$	—
Three months ended June 30, 2019	$	2,627	$	114	$	—

The following table reflects the amounts relating to the interest rate swap included in the consolidated balance sheet at June 30, 2019.



	June 30, 2019						December 31, 2018
	Notional		Fair Value					Notional	Fair Value
(in thousands)	Amount		Asset		Liability			Amount	Asset		Liability
Included in other liabilities			$	—	$	5,188			$	—	$	1,130
Interest rate swap hedging FHLB advances	$	—					$	150,000
Interest rate swaps hedging brokered CDs	$	200,000					$	—

Credit Risk Related Contingent Features. The Bank’s agreement with its interest rate swap counterparty sets forth minimum collateral posting thresholds. If the termination value of the swap is a net asset position, the counterparty may be required to post collateral against its obligations to the Bank under the agreement. However, if the termination value of the swap is a net liability position, the Bank may be required to post collateral to the counterparty. At June 30, 2019, the Bank is in compliance with the collateral posting provisions to its counterparty under the agreement of approximately $5.3 million. If the Bank had breached any of these provisions at June 30, 2019, it could have been required to settle its obligations under the agreement at the termination value.

12 – ADOPTION OF NEW ACCOUNTING STANDARDS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02 “Leases.” ASU 2016-02 affects any entity that enters into a lease and is intended to increase the transparency and comparability of financial statements among organizations. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset represents the right to use the underlying asset for the lease term and the lease liability represents the discounted value of the required lease payments to the lessor. The ASU also requires entities to disclose key information about leasing arrangements. The Corporation implemented ASU 2016-02 on January 1, 2019 utilizing the transition method described in ASU 2018-11 “Leases – Targeted Improvements.” Upon adoption of the ASU, the Corporation recorded a right-of-use asset and lease liability of $15.7 million and $16.5 million, respectively, for its outstanding operating leases. Implementation did not significantly

impact the Corporation’s results of operations, cash flows or regulatory capital ratios. See “Note 9 – Leases” for disclosures required by ASU 2016-02.

The Corporation elected the package of practical expedients permitted in ASU 2016-02. Accordingly, the Bank accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASU 2016-02, (b) whether classification of the operating leases would be different in accordance with ASU 2016-02, or (c) whether the unamortized initial direct costs before transition adjustments (as of December 31, 2018) would have met the definition of initial direct costs in ASU 2016-02 at lease commencement.

13 – IMPACT OF ISSUED BUT NOT YET EFFECTIVE ACCOUNTING STANDARDS

The pronouncements discussed in this section are not intended to be an all-inclusive list, but rather only those pronouncements that could potentially have an impact on the Corporation’s financial position, results of operations or disclosures.

In June 2016, the FASB issued ASU 2016-13 “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 affects entities holding financial assets that are not accounted for at fair value, including loans, debt securities and other financial assets. The ASU requires financial assets measured at amortized cost to be presented at the net amount expected to be collected by recording an allowance for credit losses. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Management has established an internal committee to manage the implementation of the ASU. The committee is led by the Bank’s Chief Accounting Officer and includes the EVP/CEO Successor, Chief Financial Officer, Chief Risk Officer, Chief Credit Officer, Controller, Manager of Accounting Controls and Chief Auditor. A broader group of Bank staff has been identified to assist in implementing the ASU, including representatives of the Bank’s loan operations, credit administration, lending, investments and technology functions. The committee has engaged a third-party software provider, developed an implementation timeline, and accumulated all necessary historical data. The committee is in the process of implementing the ASU which includes, among other things, developing accounting policy documentation and internal control processes. Parallel testing is expected to commence in the next two months.

In August 2018, the FASB issued ASU 2018-13 “Changes to the Disclosure Requirements for Fair Value Measurement” and ASU 2018-14 “Changes to the Disclosure Requirements for Defined Benefit Plans.” These ASUs modify certain disclosure requirements pertaining to fair value measurements and defined benefit plans, respectively, as part of the FASB’s disclosure framework project, and are intended to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-13 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The adoption of these ASUs will modify the Corporation’s disclosures but will not impact its financial position or results of operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of The First of Long Island Corporation’s financial condition and operating results during the periods included in the accompanying consolidated financial statements, and should be read in conjunction with such financial statements. The Corporation’s financial condition and operating results principally reflect those of its wholly-owned subsidiary, The First National Bank of Long Island, and subsidiaries wholly-owned by the Bank, either directly or indirectly, FNY Service Corp., The First of Long Island REIT, Inc. and The First of Long Island Agency, Inc. The consolidated entity is referred to as the Corporation and the Bank and its subsidiaries are collectively referred to as the Bank. The Bank’s primary service area is Nassau and Suffolk Counties, Long Island and the NYC boroughs of Queens, Brooklyn and Manhattan. Continued expansion of the Bank’s branch distribution system, particularly in the NYC boroughs of Queens and Brooklyn, is an ongoing strategic initiative.

Overview

Net income and earnings per share for the first six months of 2019 were $21.6 million and $.86, respectively, compared to $21.4 million and $.84, respectively, for the same period last year. Dividends per share increased 13.3%, from $.30 for the first six months of 2018 to $.34 for the current six-month period. Returns on average assets (“ROA”) and average equity (“ROE”) for the first six months of 2019 were 1.03% and 11.15%, respectively, versus 1.05% and 11.77%, respectively, for the same period last year. Book value per share increased from $15.27 at year-end 2018 to $15.87 at the close of the current quarter.

Analysis of Earnings – Six-Month Periods. Net income for the first six months of 2019 was $21.6 million, an increase of $159,000, or .7%, versus the same period last year. The increase is attributable to decreases in the provision for loan losses and non-interest expense of $2.4 million and $664,000, respectively. The impact of these decreases was partially offset by declines in net interest income and noninterest income of $352,000 and $810,000, respectively, and an increase in income tax expense of $1.7 million.

The decline in net interest income occurred because of yield curve flattening followed by inversion and management’s resulting decision to slow loan and overall balance sheet growth.

The modest mortgage loan pipeline at quarter end of $49 million is reflective of management’s current plans to not meaningfully change the size of the loan portfolio during the remainder of 2019.

The most significant reason for the reduction in the provision for loan losses of $2.4 million versus the same period last year was that loans declined by $42 million in the current period versus increased by $304 million in the comparable period of 2018.

The decrease in noninterest income of $810,000, or 13.6%, is primarily attributable to a BOLI death benefit in the first six months of 2018 and declines for the current six-month period in the non-service cost components of the Bank’s defined benefit pension plan and IMD income.

Noninterest expense decreased $664,000, or 2.2%, versus the same period last year primarily because of decreases in salaries and employee benefits and marketing expenses, partially offset by increases in technology and professional services fees. Management is committed to maintaining tight control over operating costs which should help to mitigate the downward pressure on earnings arising from the current interest rate environment.

Income tax expense increased $1.7 million and the effective tax rate increased from 11.2% to 16.9% when comparing the first six months of 2019 to the same period last year. These increases are primarily attributable to the recognition of state and local net operating loss carryforwards and higher excess tax benefits from stock-based compensation in the 2018 period and a decline in the current period of tax-exempt income from municipal securities and BOLI. The increase in income tax expense also reflects higher pretax earnings in the current six-month period as compared to the same period of 2018.

Asset Quality. The Bank’s allowance for loan losses to total loans (reserve coverage ratio) declined by 2 basis points from .94% at year-end 2018 to .92% at June 30, 2019. The provision (credit) for loan losses was ($35,000) and $2.3 million in the first six months of 2019 and 2018, respectively. The credit provision in the current six-month period was driven mainly by declines in outstanding loans and historical loss rates partially offset by net chargeoffs. The provision in the 2018 period was driven mainly by loan growth offset by improved economic conditions, reductions in historical loss rates and growth rate trends.

The credit quality of the Bank’s loan and securities portfolios remains strong. Nonaccrual loans, troubled debt restructurings and loans past due 30 through 89 days all remain at very low levels.

Key Strategic Initiatives and Challenges We Face. The Bank’s strategy remains focused on increasing shareholder value through loan and deposit growth when conditions warrant and the maintenance of strong credit quality, a strong efficiency ratio and an optimal amount of capital. We continue to adjust overall balance sheet and loan growth and capital levels in response to market conditions to optimize current results and best position the Bank for future increases in profitability. We currently have 52 branches in Nassau and Suffolk Counties, Long Island and the NYC boroughs of Queens, Brooklyn and Manhattan and will continue to open new branches, albeit at a slower pace than in recent years. Management is also focused on growing noninterest income from existing and potential new sources, which may include the development or acquisition of fee-based businesses.

Notwithstanding the actions taken by management to mitigate the impact on earnings of the current interest rate environment, net interest income and net interest margin remain under pressure and could be negatively impacted by further yield curve inversion, upward deposit repricings and increases in borrowing costs. The Corporation’s profitability metrics could be negatively impacted and may experience declines from current levels due to one or both of the following: (1) rising funding costs that are not accompanied by similar increases in lending and investing rates, or (2) falling funding costs that are accompanied by equal or greater declines in available yields on loans and securities. Management will continue to be measured and disciplined in its approach to deposit repricings and loan growth and will not meaningfully loosen its underwriting standards to improve net interest margin. Assuming no meaningful change in the yield curve and upward pressure on deposit and borrowing costs continue, management believes that net interest margin for 2019 should approximate 2.55%.

With respect to its lending activities, the Bank will continue to prudently manage concentration and credit risk and maintain its broker and correspondent relationships. Commercial mortgage loans will be emphasized over residential mortgage loans because of the better yield and shorter duration that such mortgages generally provide. Small business credit scored loans, along with the Bank’s traditional commercial and industrial loan products, will be originated to diversify the Bank’s loan portfolio and help mitigate the impact on net interest margin of the current interest rate environment. Management is currently exploring initiatives to grow its commercial and industrial portfolio which, if undertaken, will happen in a measured and disciplined fashion over an extended period of time.

In June 2019, New York State (“NYS”) passed The Housing Stability and Tenant Protection Act of 2019 (“TPA”). TPA represents a substantial change to the laws that have governed landlord-tenant relations in NYC for decades and significantly strengthens tenant protections. Among other changes, TPA limits the ability of landlords to increase rents to recapture the cost of individual apartment and

building-wide capital improvements and restricts the ability of landlords to deregulate rental units based on vacancy, the earnings of occupants or reaching a defined rent threshold. TPA could negatively impact landlords and the value of regulated buildings and may discourage developers from investing in new residential multifamily construction throughout NYS. This may lead to a weakening of the financial strength of some borrowers and deterioration in the value of certain collateral.

In the current environment, banking regulators are concerned about, among other things, growth, commercial real estate concentrations, underwriting of commercial real estate and commercial and industrial loans, capital levels, liquidity, cyber security and predatory sales practices. Regulatory requirements, the cost of compliance and vigilant supervisory oversight are exerting downward pressure on revenues and upward pressure on required capital levels and operating expenses.

Net Interest Income

Average Balance Sheet; Interest Rates and Interest Differential. The following table sets forth the average daily balances for each major category of assets, liabilities and stockholders’ equity as well as the amounts and average rates earned or paid on each major category of interest-earning assets and interest-bearing liabilities. The average balances of investment securities include unrealized gains and losses on available-for-sale securities, and the average balances of loans include nonaccrual loans.



	Six Months Ended June 30,
	2019						2018
	Average		Interest/		Average		Average		Interest/		Average
(dollars in thousands)	Balance		Dividends		Rate		Balance		Dividends		Rate
Assets:
Interest-earning bank balances	$	25,253	$	300	2.40	%	$	30,322	$	255	1.70	%
Investment securities:
Taxable		368,572		7,668	4.16			340,633		4,955	2.91
Nontaxable (1)		416,006		7,653	3.68			466,366		8,696	3.73
Loans (1)		3,248,214		59,032	3.63			3,127,670		55,173	3.53
Total interest-earning assets		4,058,045		74,653	3.68			3,964,991		69,079	3.48
Allowance for loan losses		(30,501)						(35,138)
Net interest-earning assets		4,027,544						3,929,853
Cash and due from banks		36,252						36,685
Premises and equipment, net		41,217						40,145
Other assets		128,493						118,561
	$	4,233,506					$	4,125,244
Liabilities and Stockholders' Equity:
Savings, NOW & money market deposits	$	1,685,467		8,841	1.06		$	1,757,700		5,698	.65
Time deposits		637,630		7,331	2.32			444,599		4,577	2.08
Total interest-bearing deposits		2,323,097		16,172	1.40			2,202,299		10,275	.94
Short-term borrowings		196,481		2,507	2.57			179,291		1,656	1.86
Long-term debt		362,461		3,675	2.04			431,985		4,278	2.00
Total interest-bearing liabilities		2,882,039		22,354	1.56			2,813,575		16,209	1.16
Checking deposits		931,942						935,753
Other liabilities		29,233						8,954
		3,843,214						3,758,282
Stockholders' equity		390,292						366,962
	$	4,233,506					$	4,125,244

Net interest income (1)			$	52,299					$	52,870
Net interest spread (1)					2.12	%					2.32	%
Net interest margin (1)					2.57	%					2.66	%

(1)Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt loans and investment securities had been made in loans and investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of $1.00 of nontaxable income was $1.27 in each period presented, using the statutory federal income tax rate of 21%.

Rate/Volume Analysis. The following table sets forth the effect of changes in volumes and rates on tax-equivalent interest income, interest expense and net interest income. The changes attributable to the combined impact of volume and rate have been allocated to the changes due to volume and the changes due to rate.



	Six Months Ended June 30,
	2019 Versus 2018
	Increase (decrease) due to changes in:
					Net
(in thousands)	Volume		Rate		Change
Interest Income:
Interest-earning bank balances	$	(47)	$	92	$	45
Investment securities:
Taxable		436		2,277		2,713
Nontaxable		(929)		(114)		(1,043)
Loans		2,219		1,640		3,859
Total interest income		1,679		3,895		5,574

Interest Expense:
Savings, NOW & money market deposits		(243)		3,386		3,143
Time deposits		2,170		584		2,754
Short-term borrowings		171		680		851
Long-term debt		(703)		100		(603)
Total interest expense		1,395		4,750		6,145
Increase (decrease) in net interest income	$	284	$	(855)	$	(571)

Net Interest Income

Net interest income on a tax-equivalent basis for the first six months of 2019 was $52.3 million, a decrease of $571,000, or 1.1%, from $52.9 million for the same period of 2018. The decline in net interest income occurred because of yield curve flattening followed by inversion and management’s resulting decision to slow loan and overall balance sheet growth. Flattening and inversion of the yield curve occurred as increases in the federal funds target rate were initially accompanied by lesser increases in intermediate and long-term U.S. treasury rates and then by declines in such rates. The federal funds target rate drives the Bank’s cost of deposits and short-term borrowings while intermediate and long-term treasury rates drive the yields available to the Bank on loan originations and repricings, securities purchases and the reinvestment of cash flows. When comparing the current six-month period to the same period last year, the cost of interest bearing deposits and short-term borrowings increased by 46 basis points and 71 basis points, respectively, while the yield on the loan portfolio only increased by 10 basis points and the yield on the securities portfolio increased by 53 basis points. Loan portfolio yield improved largely because of a positive spread between the rates on loans being originated and those paying down, loans repricing at higher yields and a shift in originations from lower yielding residential mortgages to higher yielding commercial mortgages. The improvement in yield on the securities portfolio largely resulted from restructuring of the taxable securities portfolio in 2018.

Net interest margin for the first six months of 2019 was 2.57%, down 9 basis points from 2.66% for the same period last year. The decrease is largely attributable to the flattening and inversion of the yield curve and the resulting impact on funding costs and asset yields. While net interest margin and earnings could be negatively impacted by additional increases in the federal funds target rate, a pause by the Federal Reserve or a decrease in the federal funds target rate could relieve some of the upward pressure on funding costs and may result in a decrease in funding costs and improvement in net interest income and net interest margin over time.

Management’s decision to slow loan growth resulted in modest growth of 3.9%, or $120.5 million, in the average balance of loans when comparing the current six-month period to the same period last year. Loan growth was funded by increases in the average balances of interest-bearing deposits of $120.8 million, or 5.5%, short-term borrowings of $17.2 million, or 9.6%, and stockholders’ equity of $23.3 million, or 6.4%. These increases were partially offset by a decrease in long-term borrowings of $69.5 million, or 16.1%. Substantial contributors to the growth in deposits were the Bank’s ongoing municipal deposit initiative and the issuance of brokered CDs. The average balance of brokered CDs increased $170.5 million as brokered CDs were used as a lower cost alternative to FHLB advances. Substantial contributors to the growth in stockholders’ equity were net income and the issuance of shares under the Corporation’s Dividend Reinvestment and Stock Purchase Plan (“DRIP”) during the early part of 2018, partially offset by cash dividends declared and, beginning in December 2018, common stock repurchases.

Management has been proactive in addressing the downward pressure on net interest income, net interest margin and earnings caused by the flat and now inverted yield curve and the low interest rate environment. Actions taken thus far include, among others:

Reducing overall balance sheet growth by slowing loan growth and the related need for funding

Slowing the pace of branch expansion

Changing the mix of loans being originated to higher yielding commercial mortgages from lower yielding residential mortgages

Restructuring the securities portfolio

Hedging a portion of short-term borrowings with interest rate swaps

Shifting a portion of borrowings from FHLB advances to brokered CDs to reduce funding costs

Maintaining tight control over operating expenses

Focusing on improving the level of noninterest income

Using excess capital to repurchase common stock which improves EPS and ROE

Thus far in 2019, total loans, assets and related funding, consisting of deposits and borrowings, have declined modestly and the emphasis on commercial mortgages has continued. Only one new branch was opened in 2019 and no further branch openings are expected for the remainder of the year. Management continues to evaluate additional steps that may be taken to mitigate the impact on earnings of the current interest rate environment including the hiring of additional lenders to grow the commercial and industrial loan portfolio and related core funding.

Noninterest Income

Noninterest income includes service charges on deposit accounts, IMD 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.

The decrease in noninterest income of $810,000, or 13.6%, is primarily attributable to a BOLI death benefit in the first six months of 2018 of $565,000 and declines in the non-service cost components of the Bank’s defined benefit pension plan of $412,000 and IMD income of $159,000. IMD income declined mainly because of certain trust-related fees earned in the 2018 period and lower assets under management and held in a custodial capacity in the current period. Partially offsetting these items was an increase in service charges on deposit accounts of $198,000 primarily related to higher overdraft and maintenance and activity charges. Based on information currently known, we believe that the level of noninterest income in the first half of 2019 is representative of the amount that will be recognized in the second half of the year.

Noninterest Expense

Noninterest expense is comprised of salaries and employee benefits, occupancy and equipment expense and other operating expenses incurred in supporting the various business activities of the Corporation.

Noninterest expense decreased $664,000, or 2.2%, versus the same period last year primarily because of decreases in salaries and employee benefits expense of $733,000, or 3.9%, and marketing expense of $510,000, partially offset by an increase in technology and professional services fees of $604,000. The decrease in salaries and employee benefits is largely attributable to special salary-related accruals in the 2018 period and decreases in placement and agency fees and group health insurance expense. The increase in technology and professional services fees includes an expense of $300,000 for consulting fees.

Management is committed to maintaining tight control over operating costs to mitigate the downward pressure on earnings arising from the current interest rate environment. We believe that the level of noninterest expense in the second quarter is representative of the amount of noninterest expense that will be incurred in each of the remaining quarters of 2019. Management’s expectation for noninterest expense does not take into account a future credit of $960,000 that would be applied against the Bank’s FDIC assessments over four or more quarters once the FDIC’s reserve ratio reaches 1.38% and is maintained at or above that level.

Income Taxes

Results of Operations – Second Quarter 2019 Versus Second Quarter 2018

Net income for the second quarter of 2019 was $10.7 million, representing an increase of $429,000, or 4.2%, over $10.3 million earned in the same quarter of last year. The increase is primarily attributable to declines in the provision for loan losses of $381,000, salaries and employee benefits of $774,000 and occupancy and equipment expense of $162,000. Also contributing to the increase is higher service charges on deposit accounts of $193,000. Partially offsetting these items were a decrease in net interest income of $606,000 and an increase in income tax expense of $315,000. Included in other noninterest expense for the 2019 period is a decline in marketing expense of $385,000 which was substantially offset by the aforementioned expense for consulting fees of $300,000 in the second quarter of 2019. The variances in net interest income, provision for loan losses, service charges on deposit accounts and salaries and employee benefits occurred for substantially the same reasons discussed above with respect to the six-month periods. The decline in occupancy and equipment expense is due to lower maintenance and repairs expense on the Bank’s facilities and equipment. The increase in income tax expense is due to higher pretax earnings in the current quarter and an increase in the effective tax rate from 14.4% for the second quarter of 2018 to 16.0% for the current quarter largely due to a decline in the percentage of pretax income derived from tax-exempt municipal securities and BOLI.

Net interest margin for the second quarter of 2019 was 2.58% as compared to 2.61% for the same quarter last year. The 3 basis point decline was caused by the same factors that led to the decrease in net interest margin for the six-month periods including, among others, yield curve flattening and inversion and deposit rate increases driven by competitive pressure and the Bank’s desire to retain deposits.

Application of Critical Accounting Policies

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported asset and liability balances and revenue and expense amounts. Our determination of the allowance for loan losses is a critical accounting estimate because it is based on our subjective evaluation of a variety of factors at a specific point in time and involves difficult and complex judgments about matters that are inherently uncertain. In the event that management’s estimate needs to be adjusted based on, among other things, additional information that comes to light after the estimate is made or changes in circumstances, such adjustment could result in the need for a significantly different allowance for loan losses and thereby materially impact, either positively or negatively, the Bank’s results of operations.

The Bank’s Allowance for Loan and Lease Losses Committee (“ALLL Committee”), which is a management committee chaired by the Chief Credit Officer, meets on a quarterly basis and is responsible for determining the allowance for loan losses after considering, among other things, the results of credit reviews performed by the Bank’s independent loan review consultants and the Bank’s credit department. In addition, and in consultation with the Bank’s Chief Financial Officer and Chief Risk Officer, the ALLL Committee is responsible for implementing and maintaining accounting policies and procedures surrounding the calculation of the required allowance. The Board Loan Committee reviews and approves the Bank’s Loan Policy at least once each calendar year. The Bank’s allowance for loan losses is reviewed and ratified by the Board Loan Committee on a quarterly basis and is subject to periodic examination by the Office of the Comptroller of the Currency whose safety and soundness examination includes a determination as to the adequacy of the allowance to absorb probable incurred losses.

The first step in determining the allowance for loan losses is to identify loans in the Bank’s portfolio that are individually deemed to be impaired and then measure impairment losses based on either the fair value of collateral or the discounted value of expected future cash flows. In estimating the fair value of real estate collateral, management utilizes appraisals or evaluations adjusted for costs to dispose and a distressed sale adjustment, if needed. Estimating the fair value of collateral other than real estate is also subjective in nature and sometimes requires difficult and complex judgments. Determining expected future cash flows can be more subjective than determining fair values. Expected future cash flows could differ significantly, both in timing and amount, from the cash flows actually received over the loan’s remaining life.

In addition to estimating losses for loans individually deemed to be impaired, management also estimates collective impairment losses for pools of loans that are not specifically reviewed. The Bank’s highest average annualized loss experience over periods of 24, 36, 48 or 60 months is generally the starting point in determining its allowance for loan losses for each pool of loans. Management believes that this approach appropriately reflects losses from the current economic cycle and those incurred losses in the Bank’s loan portfolio. However, since future losses could vary significantly from those experienced in the past, on a quarterly basis management adjusts its historical loss experience to reflect current conditions. In doing so, management considers a variety of general qualitative factors and then subjectively determines the weight to assign to each in estimating losses. The factors include, among others: (1) delinquencies, (2) economic conditions as judged by things such as national and local unemployment levels, (3) changes in value of underlying collateral as judged by things such as median home prices, commercial vacancy rates and forecasted vacancy and rental rates in the Bank’s service area, (4) trends in the nature and volume of loans, (5) concentrations of credit, (6) changes in lending policies and procedures, (7) experience, ability and depth of lending staff, (8) changes in the quality of the loan review function, (9) environmental risks, and (10) loan risk ratings. Substantially all of the Bank’s allowance for loan losses allocable to pools of loans that are collectively evaluated for impairment results from these qualitative adjustments to historical loss experience. Because of the nature of the qualitative factors and the difficulty in assessing their impact, management’s resulting estimate of losses may not accurately reflect actual losses in the portfolio.

Although the allowance for loan losses has two separate components, one for impairment losses on individual loans and one for collective impairment losses on pools of loans, the entire allowance for loan losses is available to absorb realized losses as they occur whether they relate to individual loans or pools of loans.

Asset Quality

The Corporation has identified certain assets as risk elements. These assets include nonaccrual loans, other real estate owned, loans that are contractually past due 90 days or more as to principal or interest payments and still accruing and troubled debt restructurings. These assets present more than the normal risk that the Corporation will be unable to eventually collect or realize their full carrying value. Information about the Corporation’s risk elements is set forth below.



	June 30,		December 31,
(dollars in thousands)	2019		2018
Nonaccrual loans:
Troubled debt restructurings	$	469	$	472
Other		2,260		1,663
Total nonaccrual loans		2,729		2,135
Loans past due 90 days or more and still accruing		—		—
Other real estate owned		—		—
Total nonperforming assets		2,729		2,135
Troubled debt restructurings - performing		1,119		1,289
Total risk elements	$	3,848	$	3,424

Nonaccrual loans as a percentage of total loans		.08%		.07%
Nonperforming assets as a percentage of total loans and other real estate owned		.08%		.07%
Risk elements as a percentage of total loans and other real estate owned		.12%		.10%

In addition to the Bank’s past due, nonaccrual and restructured loans, the disclosure of other potential problem loans can be found in “Note 5 – Loans” to the Corporation’s consolidated financial statements of this Form 10-Q.

Allowance and Provision for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. When available information confirms that specific loans, or portions thereof, are uncollectible, these amounts are charged off against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance for loan losses.

The allowance for loan losses decreased $1.1 million during the first half of 2019, amounting to $29.8 million, or .92% of total loans at June 30, 2019 compared to $30.8 million, or .94% of total loans at December 31, 2018. During the first six months of 2019, the Bank had loan chargeoffs of $1.0 million, recoveries of $12,000 and recorded a credit provision for loan losses of $35,000. During the first half of 2018, the Bank had loan chargeoffs of $373,000, recoveries of $106,000 and recorded a provision for loan losses of $2.3 million. The credit provision in the current period was driven mainly by declines in outstanding loans and historical loss rates partially offset by net chargeoffs. The provision in the 2018 period was driven mainly by loan growth offset by improved economic conditions, reductions in historical loss rates and growth rate trends.

The allowance for loan losses is an amount that management currently believes will be adequate to absorb probable incurred losses in the Bank’s loan portfolio. As more fully discussed in “Application of Critical Accounting Policies,” the process for estimating credit losses and determining the allowance for loan losses as of any balance sheet date is subjective in nature and requires material estimates. Actual results could differ significantly from those estimates. Other detailed information on the Bank’s allowance for loan losses, impaired loans and the aging of loans can be found in “Note 5 – Loans” to the Corporation’s consolidated financial statements included in this Form 10-Q.

The amount of future chargeoffs and provisions for loan losses will be affected by, among other things, economic conditions on Long Island and in NYC. Such conditions could affect the financial strength of the Bank’s borrowers and will affect the value of real estate collateral securing the Bank’s mortgage loans. Loans secured by real estate represent approximately 97% of the Bank’s total loans outstanding at June 30, 2019. The majority of these loans were collateralized by properties located on Long Island and in the boroughs of NYC.

Future provisions and chargeoffs could also be affected by environmental impairment of properties securing the Bank’s mortgage loans. At the present time, management is not aware of any environmental pollution originating on or near properties securing the Bank’s loans that would materially affect the carrying value of such loans.

Cash Flows and Liquidity

Cash Flows. The Corporation’s primary sources of cash are deposits, maturities and amortization of loans and investment securities, operations and borrowings. The Corporation uses cash from these and other sources to fund loan growth, purchase investment securities, repay borrowings, expand and improve its physical facilities, pay cash dividends, repurchase its common stock and for general corporate purposes.

The Corporation’s cash and cash equivalent position at June 30, 2019 was $69.2 million, up from $47.4 million at December 31, 2018. The increase occurred primarily because cash provided by deposit growth, paydowns or repayments of securities and loans and operations exceeded the cash used repay borrowings, repurchase common stock and pay cash dividends.

Securities decreased $20.2 million during the first half of 2019, from $763.5 million at year-end 2018 to $743.3 million at June 30, 2019. The decrease is primarily attributable to maturities and redemptions of $54.0 million, partially offset by purchases of $18.8 million and an increase in the market value of available-for-sale securities of $15.6 million.

During the first half of 2019, total deposits grew $228.6 million, or 7.4%, to $3.3 billion at June 30, 2019. The increase was attributable to growth in savings, NOW and money market deposits of $126.1 million, or 7.9%, and time deposits of $105.6 million. The growth in deposits is largely attributable to the Bank’s ongoing municipal deposit initiative, deposit promotions and the issuance of $200 million of brokered CDs during the first six months of 2019.

Substantially all of the Bank’s borrowings are from the FHLB. Total borrowings decreased $289.3 million during the first six months of 2019. The decrease is primarily due to a reduction in short-term borrowings of $287.8 million as the Bank shifted from FHLB advances to brokered CDs to lower funding costs. Long-term debt totaled $360.5 million at June 30, 2019, representing 78% of total borrowings. The Bank’s long-term fixed-rate borrowing position, time deposits and pay-fixed interest rate swaps mitigate the impact that increases in interest rates could have on the Bank’s earnings.

Liquidity. The Bank has a board committee approved liquidity policy and liquidity contingency plan, which are intended to ensure that the Bank has sufficient liquidity at all times to meet the ongoing needs of its customers in terms of credit and deposit outflows, take advantage of earnings enhancement opportunities and respond to liquidity stress conditions should they arise.

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 overnight investments, maturities and monthly payments on its investment securities and loan portfolios, operations and investment securities designated as available-for-sale. At June 30, 2019, the Bank had approximately $199.9 million of unencumbered available-for-sale securities.

The Bank is a member of the Federal Reserve Bank (“FRB”) of New York and the FHLB of New York and has a federal funds line with a commercial bank. In addition to customer deposits, the Bank’s primary external sources of liquidity are secured borrowings from the FRB of New York and FHLB of New York. The Bank can also purchase overnight federal funds under its existing line. However, the Bank’s FRB of New York membership, FHLB of New York membership and federal funds line do not represent legal commitments to extend credit to the Bank. The amount that the Bank can potentially borrow is currently dependent on, among other things, the amount of unencumbered eligible securities and loans that the Bank can use as collateral and the collateral margins required by the lenders. Based on the Bank’s unencumbered securities and loan collateral, a substantial portion of which is in place at the FRB of New York and FHLB of New York, the Bank had borrowing capacity of approximately $1.5 billion at June 30, 2019.

Capital

Stockholders’ equity totaled $391.4 million at June 30, 2019, an increase of $3.3 million from $388.2 million at December 31, 2018. The increase resulted primarily from net income of $21.6 million and an increase in the after-tax value of available-for-sale securities of $10.9 million, partially offset by the repurchase of 915,100 shares of the Corporation’s common stock at a total cost of $20.6 million and cash dividends declared of $8.4 million.

The Corporation’s capital management policy is designed to build and maintain capital levels that exceed regulatory standards and appropriately provide for growth. The regulatory capital ratios of the Corporation and the Bank at June 30, 2019 are as follows:



	Corporation	Bank
Tier 1 leverage	9.31%	9.17%
Common equity tier 1 risk-based	14.92%	14.69%
Tier 1 risk-based	14.92%	14.69%
Total risk-based	16.05%	15.83%

The Corporation and the Bank exceeded the Basel III minimum capital adequacy requirements, including the fully phased-in capital conservation buffer of 2.50%, and the Bank was well capitalized under the FDIC’s prompt corrective action provisions at June 30, 2019.

The deliberate slowing of balance sheet growth has eliminated the need to raise capital through the Corporation’s DRIP or otherwise. As a result, effective with the cash dividend paid in March 2019, the Corporation notified shareholders that the optional quarterly cash purchase feature of its DRIP is currently unavailable. This change eliminates the dilution to EPS and ROE that would otherwise result from issuing shares at a time when attracting capital is not needed to support growth. The traditional dividend reinvestment feature of the DRIP remains available to shareholders.

In October 2018, the Corporation’s Board of Directors approved a stock repurchase program for shares of its common stock in an amount up to $20 million. In April 2019, an additional $30 million was approved, for a total program size of $50 million. The Corporation may repurchase shares from time to time through open market purchases, privately negotiated transactions or in any other manner that is compliant with applicable securities laws. In the first half of 2019, the Corporation repurchased 915,100 shares through open market purchases at a total cost of $20.6 million.

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 net interest income and/or economic value of equity (“EVE”) will change when interest rates change. The principal objective of the Bank’s asset liability management activities is to optimize current and future 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.

The Bank monitors and manages interest rate risk through a variety of techniques including traditional gap analysis and the use of interest rate sensitivity models. Both gap analysis and interest rate sensitivity modeling involve a variety of significant estimates and assumptions and are done at a specific point in time. Changes in the estimates and assumptions made in gap analysis and interest rate sensitivity modeling 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 EVE.

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. 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. Among other things, 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.

Through the use of interest rate sensitivity modeling, the Bank first projects net interest income over a five-year time period assuming a static balance sheet and no changes in interest rates from current levels. Utilization of a static balance sheet ensures that interest rate risk embedded in the Bank’s current balance sheet is not masked by assumed balance sheet growth or contraction. Net interest income is then projected over a five-year time period utilizing: (1) a static balance sheet and various interest rate change scenarios, including both ramped and shock changes and changes in the shape of the yield curve; and (2) a most likely balance sheet growth scenario and these same interest rate change scenarios. The interest rate scenarios modeled are based on, among other things, the shape of the current yield curve and the relative level of rates and management’s expectations as to potential future yield curve shapes and rate levels.

The Bank also uses interest rate sensitivity modeling to calculate EVE in the current rate environment assuming shock increases and decreases in interest rates. EVE is the difference between the present value of expected future cash flows from the Bank’s assets and the present value of the expected future cash flows from the Bank’s liabilities. Present values are determined using discount rates that management believes are reflective of current market conditions. EVE can capture long-term interest rate risk that would not be captured in a five-year projection of net interest income.

In utilizing interest rate sensitivity modeling to project net interest income and calculate EVE, management makes a variety of estimates and assumptions which include, among others, the following: (1) how much and when yields and costs on individual categories of

interest-earning assets and interest-bearing liabilities will change in response to projected changes in market interest rates; (2) future cash flows, inclusive of prepayments of mortgage assets and calls of municipal securities; (3) cash flow reinvestment assumptions; (4) appropriate discount rates to be applied to loan, deposit and borrowing cash flows; and (5) decay or runoff rates for nonmaturity deposits such as checking, savings, NOW and money market accounts. The repricing of loans and borrowings and the reinvestment of loan and security cash flows are generally assumed to be impacted by the full amount of each assumed rate change, while the repricing of nonmaturity deposits is not. For nonmaturity deposits, management makes estimates of how much and when it will need to change the rates paid on the Bank’s various non-maturity deposit products in response to changes in general market interest rates. These estimates are based on, among other things, product type, management’s experience with needed deposit rate adjustments in prior interest rate change cycles, the results of a nonmaturity deposit study conducted by an independent consultant and updated on a periodic basis and management’s assessment of competitive conditions in its marketplace.

The information provided in the following table is based on a variety of estimates and assumptions that management believes to be reasonable, the more significant of which are set forth hereinafter. The base case information in the table shows (1) a calculation of the Corporation’s EVE at June 30, 2019 arrived at by discounting estimated future cash flows at rates that management believes are reflective of current market conditions and (2) an estimate of net interest income for the year ending June 30, 2020 assuming a static balance sheet, the adjustment of repricing balances to current rate levels, and the reinvestment at current rate levels of cash flows from maturing assets and liabilities in a mix of assets and liabilities that mirrors the Bank’s strategic plan. In addition, in calculating EVE, cash flows for non-maturity deposits are assumed to have an overall life of 6.4 years based on the current mix of such deposits and the most recently updated non-maturity deposit study.

The rate change information in the following table shows estimates of net interest income for the year ending June 30, 2020 and calculations of EVE at June 30, 2019 assuming rate changes of plus 100, 200 and 300 basis points and minus 100 and 200 basis points. The rate change scenarios were selected based on, among other things, the relative level of current interest rates and: (1) are assumed to be shock or immediate changes for both EVE and net interest income, (2) occur uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities, and (3) impact the repricing and reinvestment of all assets and liabilities, except non-maturity deposits, by the full amount of the rate change. In projecting future net interest income under the indicated rate change scenarios, activity is simulated by assuming that cash flows from maturing assets and liabilities are reinvested in a mix of assets and liabilities that mirrors the Bank’s strategic plan. The changes in EVE from the base case have not been tax affected.



	Economic Value of Equity			Net Interest Income for
	at June 30, 2019			Year Ending June 30, 2020
			Percent Change			Percent Change
			From			From
Rate Change Scenario (dollars in thousands)	Amount		Base Case	Amount		Base Case
+ 300 basis point rate shock	$	538,454	-13.8%	$	87,224	-14.1%
+ 200 basis point rate shock		574,339	-8.1%		92,405	-9.0%
+ 100 basis point rate shock		606,881	-2.9%		97,497	-4.0%
Base case (no rate change)		624,791	—		101,553	—
- 100 basis point rate shock		608,058	-2.7%		104,827	3.2%
- 200 basis point rate shock		518,147	-17.1%		107,619	6.0%

As shown in the preceding table, assuming a static balance sheet, an immediate increase in interest rates of 100, 200 or 300 basis points could negatively impact the Bank’s net interest income for the year ending June 30, 2020 because, among other things, the Bank would need to pay more for overnight borrowings and it is assumed the Bank would need to increase the rates paid on its non-maturity deposits in order to remain competitive. Unlike non-maturity deposits and short-term borrowings, the Bank’s securities and almost all of its loans are not subject to immediate repricing with changes in market rates. Conversely, an immediate decrease in interest rates of 100 or 200 basis points could positively impact the Bank’s net interest income for the same time period because, among other things, the Bank would immediately pay less for overnight borrowings and be able to reduce deposit rates while the downward repricing of its interest-earning assets would lag. The decline in EVE in the minus 100 and 200 basis points scenario is predominantly due to the inability to reduce interest rates on deposit accounts below zero. Changes in management’s estimates as to the rates that will need to be paid on non-maturity deposits could have a significant impact on the net interest income amounts shown for each scenario in the table.

Forward-Looking Statements

This Report on Form 10-Q and the documents incorporated into it by reference contain or may contain various forward-looking statements. These forward-looking statements include statements of goals; intentions and expectations; estimates of risks and of future costs and benefits; assessments of probable loan losses; assessments of market risk; and statements of the ability to achieve financial and other goals. Forward-looking statements are typically identified by words such as “would,” “should,” “could,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements

are subject to numerous assumptions, risks and uncertainties which may change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from historical performance.

Our forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; fluctuations in the trading price of our common stock; changes in interest rates; changes in the shape of the yield curve; changes in deposit flows, and in the demand for deposit and loan products and other financial services; changes in real estate values; changes in the quality or composition of our loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; our ability to retain key members of management; changes in legislation, regulation, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. We provide greater detail regarding some of these factors in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018, in Part I under “Item 1A. Risk Factors,” and in Part II under Item 1A. of this Form 10-Q. Our forward-looking statements may also be subject to other risks and uncertainties, including those that we may discuss elsewhere in other documents we file with the SEC from time to time.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Corporation’s Principal Executive Officer, Michael N. Vittorio, and Principal 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, 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 as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the second quarter of 2019 that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, the Corporation is party to various legal actions which are incidental to the operation of its business. Although the ultimate outcome and amount of liability, if any, with respect to these legal actions cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to us, any resulting liability is believed to be immaterial to the Corporation's consolidated financial position, results of operations and cash flows.

ITEM 1A. RISK FACTORS

The following Risk Factor is being provided hereby as an addition to those Risk Factors listed in Item 1A. of Part 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The performance of the Bank’s multi-family real estate loans could be adversely impacted by recent regulation.

Multi-family real estate loans generally involve a greater risk than residential real estate loans because of legislation and government regulations involving rent control and rent stabilization, which are outside the control of the borrower or the Bank and could impair the value of the collateral for the loans or the future cash flow of such properties. On June 14, 2019, NYS passed TPA, which represents a substantial change to the laws that have governed landlord-tenant relations in NYS for decades and significantly strengthens tenant protections. TPA increases the restrictions on rent increases in a rent-regulated apartment building, including, among other provisions, (i) repealing the vacancy bonus and longevity bonus, which allowed a property owner to raise rents as much as 20% each time a rental unit became vacant, (ii) eliminating high rent vacancy deregulation and high-income deregulation, which allowed a rental unit to be removed from rent stabilization once it crossed a statutory high-rent threshold and became vacant, or the tenant’s income exceeded the statutory amount in the preceding two years, and (iii) eliminating an exception that allowed a property owner who offered preferential rents to tenants to raise the rent to the full legal rent upon renewal. The new legislation still permits a property owner to charge up to the full legal rent once the tenant vacates. Because of this new legislation as well as previously existing laws and regulations, it is possible that rental income on multi-family properties might not rise sufficiently over time to satisfy increases in the loan rate at repricing or increases in overhead expenses (e.g., utilities, taxes, etc.). In addition, if the cash flow from a collateral property is reduced (e.g., if leases are not obtained or renewed), the borrower’s ability to repay the loan and the value of the collateral for the loan may be impaired. Therefore, impaired multi-family real estate loans may be more difficult to identify before they become problematic than residential real estate loans.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Stock Repurchases. The Corporation has a stock repurchase program under which it is authorized to purchase shares of its common stock from time to time through open market purchases, privately negotiated transactions, or in any other manner that is compliant with applicable securities laws. The details of the Corporation’s purchases under the stock repurchase program in the second quarter of 2019 are set forth in the table that follows.

ISSUER PURCHASES OF EQUITY SECURITIES



				Total Number of Shares	Maximum Dollar Value of
	Total Number	Average		Purchased as Part of	Shares that May Yet
	of Shares	Price Paid		Publicly Announced	be Purchased Under
Period	Purchased	Per Share		Plans or Programs	the Plans or Programs (1)
April 1 - April 30, 2019	—		—	—		$33,127,226
May 1 - May 31, 2019	115,200		$22.44	115,200		$30,542,564
June 1 - June 30, 2019	125,100		$21.56	125,100		$27,844,495
Total	240,300		$21.98	240,300

(1) On October 26, 2018, the Corporation’s Board of Directors approved a $20 million stock repurchase program which was announced on October 30, 2018. An additional $30 million was approved on April 16, 2019 and announced on April 18, 2019 for a total program size of $50 million. The Corporation’s stock repurchase program does not have a fixed expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS

See Index of Exhibits that follows.

INDEX OF EXHIBITS


Exhibit No.	Description of Exhibit
10.1	First Amendment to Employment Agreement between Registrant and Christopher Becker, Executive Vice President
10.2	Employment Agreement between Registrant and Janet T. Verneuille, Executive Vice President
10.3	Employment Agreement between Registrant and Anne Marie Stefanucci, Executive Vice President
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and U.S.C. Section 1350
101	The following materials from the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to the Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of Section l3 or l5(d) 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)

Dated: August 9, 2019	By /s/ MICHAEL N. VITTORIO
	MICHAEL N. VITTORIO, President & Chief Executive Officer
	(principal executive officer)

	By /s/ MARK D. CURTIS
	MARK D. CURTIS, Senior Executive Vice President, Chief
	Financial Officer & Treasurer
	(principal financial officer)

	By /s/ WILLIAM APRIGLIANO
	WILLIAM APRIGLIANO, Senior Vice President & Chief
	Accounting Officer
	(principal accounting officer)

Exhibit 10.1

FIRST AMENDMENT TO

EMPLOYMENT AGREEMENT

This First Amendment, dated as of May 31, 2019 (the “Amendment”), to the Employment Agreement (“Employment Agreement”), made effective as of January 1, 2017, by and between The First of Long Island Corporation (the “Company”), The First National Bank of Long Island (the “Bank”; and together with the Company, “FLIC”) and Christopher Becker (“Executive”).

W I T N E S S E T H:

WHEREAS, the Employment Agreement provides that Executive is to serve as Executive Vice President and Chief Risk Officer of FLIC; and

WHEREAS, FLIC and Executive have entered into an additional agreement (the “New Employment Agreement”) pursuant to which effective January 1, 2020 (the “New Employment Agreement Effective Date”), Executive shall serve as President and Chief Executive Officer of FLIC in accordance with the terms of the New Employment Agreement; and

WHEREAS, prior to the New Employment Agreement Effective Date, the terms of the Employment Agreement govern Executive’s employment with FLIC; and

WHEREAS, FLIC has determined to hire an individual who is to serve as Executive Vice President and Chief Risk Officer, effective June 3, 2019; and

WHEREAS, Executive wishes to evidence his consent to the change in his executive position effective June 3, 2019 (the “Change in Executive Position Effective Date”); and

WHEREAS, pursuant to Section 9 of the Employment Agreement, the parties agree to amend the Employment Agreement to reflect the Executive’s new executive position.

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Company, Bank and the Executive hereby agree as follows:

Section 1. Amendment to Section 2(a) of the Employment Agreement. Section 2(a) of the Employment Agreement is hereby amended to read as follows:

(a)Employment. During the Employment Period Executive shall be employed in the capacity of Executive Vice President of FLIC (the “Executive Position”) and shall have such other senior executive title as may from time to time be determined by the Boards of Directors. Executive shall have such duties and responsibilities as usually appertain to the Executive Position, as well as those as shall be assigned by the Chief Executive Officer or by the Board of Directors. The Executive shall report to the Chief Executive Officer.

Section 2. Acknowledgement. By executing and agreeing to this Amendment, Executive hereby acknowledges and agrees that the change in title reflected in Section 1 above, and the resultant change in Executive’s duties and responsibilities, which changes are effective as of the Change in Executive Position Effective Date and to which changes the Executive hereby consents, do not and will not constitute a “Good Reason” for Executive’s resignation under Sections 4(f) of the Employment Agreement, and do not and will not entitle Executive to the payments and benefits set forth in Section 4 of the Employment Agreement.

Section 3. Continuation of Agreements. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Employment Agreement or the New Employment Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 4. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of New York.

Section 5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, and all of which together shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the Company, Bank and the Executive have duly executed this Amendment as of the day and year first written above.

THE FIRST OF LONG ISLAND

CORPORATION

By: /s/ Michael N. Vittorio

Name: Michael N. Vittorio

Title: President and Chief Executive Officer

THE FIRST NATIONAL BANK OF

LONG ISLAND

By: /s/ Michael N. Vittorio

Name: Michael N. Vittorio

Title: President and Chief Executive Officer

EXECUTIVE

By: /s/ Christopher Becker

Christopher Becker

Exhibit 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made effective as of June 3, 2019 (the “Effective Date”), by and between The First of Long Island Corporation (the “Company”), The First National Bank of Long Island (the “Bank”; and together with the Company, “FLIC”) and Janet T. Verneuille (“Executive”).

WHEREAS, FLIC wishes to assure itself of the continued services of Executive for the period and in accordance with the terms provided in this Agreement; and

WHEREAS, in order to induce Executive to remain in the employ of FLIC and to provide further incentive for Executive to achieve the financial and performance objectives of FLIC, the parties desire to enter into this Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

TERM.

(a)Term. The term of this Agreement and the period of Executive’s employment hereunder shall begin as of the Effective Date and shall continue through December 31, 2020 (the “Employment Period,” which shall include any periods covered by renewals hereunder). Subject to Section 4(d), commencing on January 1, 2020, and continuing on January 1 of each year thereafter (the “Anniversary Date”), this Agreement shall renew for an additional twelve months such that the remaining term shall be twenty-four months (24) months, unless written notice of non-renewal is provided to Executive at least thirty (30) days prior to any such Anniversary Date.

EMPLOYMENT; CAPACITY; DUTIES.

(a)Employment. During the Employment Period Executive shall be employed in the capacity of Executive Vice President and Chief Risk Officer of FLIC (the “Executive Position”) and shall have such other senior executive title as may from time to time be determined by the Boards of Directors. Executive shall have such duties and responsibilities as usually appertain to the Executive Position, as well as those as shall be assigned by the Chief Executive Officer or by the Board of Directors.

(b)Service on Other Boards. Executive agrees to devote her full time and attention and best efforts to the faithful and diligent performance of Executive’s duties to FLIC, and Executive shall serve and further the best interests and enhance the reputation of FLIC to the best of Executive’s ability. Nothing herein shall be construed as preventing Executive from serving as a member of the board of directors of any non-profit organization (of which the Board shall be notified prior to the commencement of service) or, with the consent of the Board of Directors, of any for-profit organization, in either case subject to and consistent with applicable laws. Executive’s service on boards of non-profits and for-profit organizations in effect as of the date of this Agreement and as to which the Board has been previously notified, may be continued.

COMPENSATION, BENEFITS AND REIMBURSEMENT.

(a)Base Salary. In consideration of Executive’s performance of the responsibilities and duties set forth in this Agreement, Executive shall receive an annual base salary of $280,000 per year (“Base Salary”). Such Base Salary will be payable in accordance with the customary payroll practices of the Bank. During the term of this Agreement, the Board may increase, but not decrease, Executive’s Base Salary. Any increase in Base Salary will become the “Base Salary” for purposes of this Agreement.

(b)Bonus. Executive shall be entitled to participate in any bonus plan or arrangement of FLIC (including both any short-term and long-term incentive program) in which senior management is eligible to participate. Nothing paid to Executive under any such plan or arrangement will be deemed to be in lieu of the other compensation to which Executive is entitled under this Agreement. The terms of FLIC’s short-term and long-term incentive plans or programs shall determine the bonuses payable thereunder, if any, to Executive following Executive’s termination of employment.

(c)Benefit Plans. Executive will be entitled to participate in all employee benefit plans, arrangements and perquisites offered to employees and officers of FLIC, on the same terms and conditions as such plans are available to other employees and officers of FLIC. Without limiting the generality of the foregoing provisions of this Section 3(c), Executive also will be entitled to participate in any employee benefit plans including but not limited to retirement plans, pension plans, profit-sharing plans, health-and-accident plans, or any other employee benefit plan or arrangement made available by the Bank in the future to management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements as applicable to other management employees. Except as otherwise provided herein, the terms of FLIC’s benefit plans or arrangements shall determine the benefits payable thereunder, if any, to Executive following Executive’s termination of employment or retirement.

(d)Vacation. Executive will be entitled to paid vacation, as well as sick leave, holidays and other paid absences, in accordance with the Bank’s policies and procedures for officers. Any unused paid time off during an annual period will be treated in accordance with the Bank’s personnel policies as in effect from time to time.

(e)Expense Reimbursements. FLIC will reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred by Executive during the course of performing Executive’s obligations under this Agreement, including, without limitation, fees for memberships in such organizations as Executive and the Board mutually agree are necessary and appropriate in connection with the performance of Executive’s duties under this Agreement. Furthermore, the Bank shall pay or reimburse Executive for the full cost of the use of an automobile that is mutually agreeable to the Bank and Executive. Executive shall comply with the reasonable reporting and expense limitations on the use of such automobile as the Bank may establish from time to time. All reimbursements shall be made as soon as practicable upon substantiation of such expenses by Executive in accordance with the applicable policies and procedures of the Bank.

TERMINATION AND COMPENSATION PAYABLE FOLLOWING TERMINATION.

Executive’s employment under this Agreement may be terminated in the following circumstances:

(a)Death. This Agreement shall terminate upon Executive’s death, in which event Executive’s estate or beneficiary shall be entitled to receive the compensation and vested benefits due Executive as of the date of Executive’s death, and neither Executive, nor Executive’s estate or beneficiary, shall have a right to receive any compensation or benefits under this Agreement thereafter.

(b)Disability. FLIC may terminate Executive’s employment upon her becoming “Totally Disabled,” in which event Executive shall be entitled to receive the compensation and vested benefits due Executive as of the date of Executive’s termination, and Executive shall have no right to receive any other compensation or benefits under this Agreement. For purposes of this Agreement, Executive shall be “Totally Disabled” if Executive is physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of her position under this Agreement even with reasonable accommodation. Executive’s receipt of disability benefits under the Bank’s long-term disability plan, if any, or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided, however, that in the absence of Executive’s receipt of such long-term disability benefits or Social Security benefits, the Board may, in its reasonable discretion but based upon appropriate medical evidence, determine that Executive is Totally Disabled.

(c)Termination for Cause. The Board may immediately terminate Executive’s employment for “Cause” at any time upon written notice to Executive. Executive shall have no right to receive compensation or other benefits under this Agreement or otherwise from FLIC for any period after termination for Cause, except for compensation or benefits that have already been earned or vested as of the date of termination. For purposes of this Agreement, “Termination for Cause” shall mean termination because of, in the good faith determination of the Board: (i) Executive’s conviction (including conviction on a nolo contendere plea) of a felony or of any lesser criminal offense involving moral turpitude, fraud or dishonesty; (ii) the willful commission by Executive of a criminal or other act that, in the reasonable judgment of the Board will likely cause substantial economic damage to the Company or the Bank or substantial injury to the business reputation of the Company or Bank; (iii) the commission by Executive of an act of fraud in the performance of her duties on behalf of the Company or Bank; (iv) the continuing willful failure of Executive to perform her employment duties to the Company or Bank after thirty (30) days’ written notice thereof (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to Executive by the Board; (v) an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of Executive’s employment by the Company or the Bank; or (vi) a material breach by Executive of any provision of this Agreement.

(d)Retirement. This Agreement and the obligations hereunder shall expire on December 31 of the calendar year in which Executive attains Normal Retirement Age (“Retirement Age Termination Date”). For purposes of this Agreement, “Normal Retirement Age” shall mean

age 65. Nothing in this Agreement shall mandate or prohibit a continuation of Executive’s employment following the Retirement Age Termination Date, provided that Executive shall not be entitled to any benefits or payments under this Agreement upon termination of Executive’s employment following Retirement Age Termination Date (unless the Extended Employment Period is in effect ). Notwithstanding the foregoing, upon written notice to Executive, FLIC may extend the term of this Agreement for an additional two year period beyond the Retirement Age Termination Date (the “Extended Employment Period”).

(e)Voluntary Termination by Executive. Executive may voluntarily terminate employment during the term of this Agreement upon 30 days’ prior written notice to the Board. FLIC may accelerate the date of termination upon receipt of written notice of Executive’s voluntary termination.

(f)Termination Without Cause or With Good Reason.

(A)

The Board may terminate Executive’s employment at any time for any reason upon no less than 30 days’ written notice (a termination “Without Cause”), and Executive may, by written notice to the Board, terminate her employment at any time within 90 days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”); provided, however, that FLIC shall have 30 days to cure the “Good Reason” condition, but FLIC may waive its right to cure. Executive’s notice of termination With Good Reason shall notify the Company of the event that constitutes Good Reason.

(B)

“Good Reason” exists if, without Executive’s express written consent, any of the following occurs:

(A)

the failure to appoint Executive during the Employment Period to the Executive Position;

(B)

a reduction in Executive’s Base Salary;

(C)

the failure of the Bank to maintain Executive’s participation under the Bank’s employee benefit, retirement, or material fringe benefit plans, policies, practices, or arrangements in which Executive participates. For this purpose, the Bank may eliminate and/or modify existing employee benefit, retirement, or fringe benefit plans and coverage levels on a consistent and non-discriminatory basis applicable to all such executives; or

(D)

a relocation of Executive’s principal place of employment by more than 50 miles from Executive’s principal place of employment as of the initial Effective Date of this Agreement.

(g)Compensation Payable Following Termination of Employment. Upon termination of Executive’s employment under this Agreement, Executive (or, if applicable, her beneficiary) shall be entitled to receive the following compensation:

(i)Earned but Unpaid Compensation. FLIC shall pay Executive any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, and any vacation accrued to the date of termination in accordance with the Bank’s personnel policies.

(ii)Other Compensation and Benefits. Except as may be provided under this Agreement,

(A)

any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 3(b) and (c) above shall be determined and paid in accordance with the terms of such plans, policies and arrangements, and

(B)

Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation.

(h)Additional Compensation Payable Following Termination Without Cause or Termination with Good Reason.

(i)In addition to the compensation set forth in Section 4(g) above, Executive will receive the additional compensation and benefits set forth in this paragraph (h), if the following requirements are met:

(A)

Executive’s employment is terminated pursuant to Section 4(f) above (Termination Without Cause or Termination for Good Reason), including a termination following a Change in Control; and

(B)

Executive executes a release of her claims against the Bank, the Company and any affiliate, and their officers, directors, successors and assigns (the “Release”), the form of which release is attached to this Agreement. The Release must be executed and become irrevocable by the 60th day following the date of Executive’s termination of employment; provided that if the 60 day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the payments and benefits described in this Section 4(h) will be paid, or commence, in the second calendar year.

(ii)If Executive meets the requirements described in clause (i) above,

(A)

FLIC shall pay Executive, or in the event of Executive’s subsequent death, Executive’s beneficiary or estate, a cash lump sum payment equal to the sum of:

(i)two times Base Salary at the rate in effect immediately prior to her date of termination, plus

(ii)an amount equal to the product of: (I) the reasonably estimated monthly cost of the medical, dental and vision insurance coverage maintained by the Bank for Executive

immediately prior to Executive’s date of termination; multiplied by (II) twenty-four (24).

Such amount shall be paid to Executive in a lump sum within ten (10) days following Executive’s date of termination, or if later, following the seventh (7th) day after Executive’s execution of the Release required under Section 4(h)(i)(B) hereof.

CHANGE IN CONTROL.

(a)Change in Control Defined. For purposes of this Agreement, the term “Change in Control” shall mean the occurrence of any of the following events:

(A)

Merger: The Bank or the Company merges into or consolidates with another entity whereby the Bank or the Company is not the surviving entity, or the Bank or the Company merges another bank or corporation into the Bank or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;

(B)

Acquisition of Significant Share Ownership: There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 50% or more of a class of the Company’s or the Bank’s voting securities; provided, however, this clause (B) shall not apply to beneficial ownership of the Company’s or the Bank’s voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;

(C)

Change in Board Composition: During any period of two (2) consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (C), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period or who is appointed to the Board as the result of a directive, supervisory agreement or order issued by the primary federal regulator of the Company or the Bank or by the Federal Deposit Insurance Corporation (“FDIC”) shall be deemed to have also been a director at the beginning of such period; or

(D)

Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.

(b)280G Net-Best Benefit. Notwithstanding the preceding Sections of this Agreement, if the payments and benefits to be afforded to Executive under Section 4(h) hereof (the “Severance Benefits”) either alone or together with other payments and benefits which Executive has the right to receive from FLIC (or any affiliate) would constitute a “parachute payment” under Section 280G of the Code, and but for this Section 5(b), would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Severance Benefits shall be reduced (the “Benefit Reduction”) by the minimum amount necessary to result in no portion of the Severance Benefits being subject to the Excise Tax, provided, however, that the Benefit Reduction shall only occur if such reduction would result in Executive’s “Net After-Tax Amount” attributable to the Severance Benefits being greater than it would be if no Benefit Reduction was effected. For this purpose, “Net After-Tax Amount” shall mean the net amount of Severance Benefits Executive is entitled to under this Agreement after giving effect to all federal, state and local taxes which would be applicable to such payments and benefits, including but not limited to, the Excise Tax. Nothing contained herein shall result in the reduction of any payments or benefits to which Executive may be entitled upon termination of employment and/or a change in control other than as specified in this Section 5(b), or a reduction in the Severance Benefits below zero.

(c)Extension of Employment Period. In the event FLIC has entered into an agreement to effect a transaction that would be considered a Change in Control during the Employment Period, the Employment Period shall be extended automatically for a period ending on, and including, the 30th day following the effective date of the Change in Control (to the extent the Employment Period would otherwise expire, without regard to the foregoing, prior to the completion of such period).

COVENANTS OF EXECUTIVE.

(a)Non-Solicitation/Non-Compete.

(i)Executive hereby covenants and agrees that, during the “Restricted Period” and except as provided in clause (ii) below, Executive shall not, without the written consent of FLIC, either directly or indirectly:

(A)

solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of FLIC, or any of its respective subsidiaries or affiliates, to terminate his or her employment with FLIC and/or accept employment with another employer; or

(B)

become an officer, employee, consultant, director, independent contractor, agent, joint venturer, partner or trustee of any savings bank, savings and loan association, savings and loan holding company, commercial bank, credit union, bank or bank holding company, any mortgage or loan broker or any other entity (excluding not-for-profit entities other than credit unions) that competes with the business of FLIC or any of their direct or indirect subsidiaries or affiliates, or that has a headquarters, or one or more

offices, within New York City or in the Counties of Nassau or Suffolk, New York (the “Restricted Territory”); or

(C)

solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of FLIC to terminate an existing business or commercial relationship with FLIC.

(ii)The restrictions contained in Section 6(a)(i)(B) above shall not apply in the event of a Termination for Cause, or in the event of a termination of employment following a Change in Control.

(iii)For purposes of this paragraph (a), the “Restricted Period” shall be a period of one (1) year following Executive’s termination of employment with FLIC.

(b)Confidentiality. Executive recognizes and acknowledges that the knowledge of the business activities, plans for business activities, and all other proprietary information of FLIC, as it may exist from time to time, is valuable, special and unique assets of the business of FLIC. Executive will not, during or after the term of Executive’s employment, disclose any knowledge of the past, present, planned or considered business activities or any other similar proprietary information of FLIC to any person, firm, corporation, or other entity for any reason or purpose whatsoever unless expressly authorized by the Board or required by law. Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of FLIC. Further, Executive may disclose information regarding the business activities of FLIC to any bank regulator having regulatory jurisdiction over the activities of FLIC pursuant to a formal regulatory request. In the event of a breach or threatened breach by Executive of the provisions of this Section, FLIC will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of FLIC or any other similar proprietary information, or from rendering any services to any person, firm, corporation, or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting FLIC from pursuing any other remedies available to FLIC for such breach or threatened breach, including the recovery of damages from Executive.

(c)Information/Cooperation. Executive shall, upon reasonable notice, furnish such information and assistance to FLIC as may be reasonably required by FLIC, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party, and she shall be reimbursed for any expenses incurred in providing such information and assistance; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between Executive and FLIC or any other subsidiaries or affiliates.

(d)Reliance. Except as otherwise provided, all payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with this Section 6, to the extent applicable.

EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between FLIC or any predecessor of FLIC and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind expressly provided elsewhere.

NO ATTACHMENT; BINDING ON SUCCESSORS.

(a)Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

(b)FLIC’s obligations under this Agreement shall be binding on any and all successors or assigns, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of FLIC, in the same manner and to the same extent that FLIC would be required to perform if no such succession or assignment had taken place.

MODIFICATION AND WAIVER.

(a)This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

(b)No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

10.

MISCELLANEOUS PROVISIONS.

Notwithstanding anything herein contained to the contrary, the following provisions shall apply:

(a)FLIC may terminate Executive’s employment at any time, but any termination by the Board other than termination for Cause shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall have no right to receive compensation or other benefits for any period after Executive’s termination for Cause.

(b)Notwithstanding anything herein contained to the contrary, any payments to Executive pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.

(c)In the event that FLIC provides written notice of non-renewal of the Agreement to the Executive in accordance with Section 1 hereof, and Executive’s employment is terminated subsequent to the expiration of the Employment Period, the provisions and obligations of the parties under this Agreement shall have expired and be of no force and effect, and therefore FLIC shall have no obligations to make payments to Executive under Section 4 of this Agreement.

(d)The parties intend that this Agreement and any payments and benefits payable hereunder shall either comply with, or be exempt from, the requirements of Code Section 409A, and this Agreement shall be maintained, administered, and interpreted consistent with that intention. Notwithstanding any provision herein to the contrary, FLIC makes no representations concerning Executive’s tax consequences under this Agreement under Code Section 409A, or any other federal, state, or local tax law. Executive’s tax consequences will depend, in part, upon the application of relevant tax law, including Code Section 409A, to the relevant facts and circumstances. Notwithstanding anything else in this Agreement to the contrary (with the exception of Section 4(c)), Executive’s employment shall not be deemed to have been terminated unless and until Executive has a Separation from Service within the meaning of Code Section 409A. For purposes of this Agreement, a “Separation from Service” shall have occurred if FLIC and Executive reasonably anticipate that either no further services will be performed by Executive after the date of termination (whether as an employee or as an independent contractor) or the level of further services performed is less than 50 percent of the average level of bona fide services in the 36 months immediately preceding the termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii). Each payment under this Agreement is intended to be a “separate payment” and not of a series of payments for purposes of Code Section 409A.

(e)Notwithstanding the foregoing, if Executive is a “specified employee” (i.e., a “key employee” of a publicly traded company within the meaning of Section 409A of the Code and the final regulations issued thereunder) and any payment under this Agreement is triggered due to Executive’s Separation from Service (other than due to disability or death), then solely to the extent necessary to avoid penalties under Section 409A of the Code, no payment shall be made during the first six (6) months following Executive’s Separation from Service. Rather, any payment which would otherwise be paid to Executive during such period shall be accumulated and paid to Executive in a lump sum on the first day of the seventh month following such Separation from Service. All subsequent payments shall be paid in the manner specified in this Agreement.

(f)Notwithstanding anything in this Agreement to the contrary, Executive understands that nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”) about a possible securities law violation without approval of FLIC. Executive further understands that this Agreement does not limit Executive’s ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to FLIC related to the possible securities law violation. This Agreement does not limit Executive’s right to receive any resulting monetary award for information provided to any Government Agency.

(g)In the event of Executive’s death, her beneficiary shall be her surviving spouse. Alternatively, Executive may designate other beneficiaries. If Executive’s spouse does not survive her, or if no beneficiary designation is in effect at the time of Executive’s death, then payments due thereafter shall be made to the Executive’s estate.

11.

SEVERABILITY.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

12.

GOVERNING LAW.

This Agreement shall be governed by the laws of State of New York, but only to the extent not superseded by federal law.

13.

ARBITRATION.

(a)Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a single arbitrator mutually acceptable to FLIC and Executive, sitting in a location selected by the Bank within 50 miles from the main office of the Bank, in accordance with the rules of the American Arbitration Association’s National Rules for the Resolution of Employment Disputes then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The cost of the arbitrator shall be paid by FLIC; all other costs of arbitration shall be borne by the respective parties.

(b)If Termination For Cause is disputed by Executive, and if it is determined in arbitration that Executive is entitled to compensation and benefits under Section 4(h) of this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that was not paid pending arbitration (at the prime rate as published in The Wall Street Journal from time to time).

14.

NOTICE.

For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To FLIC:

The First of Long Island Corporation

10 Glen Head Road

Glen Head, New York 11545

Attn: Chairman of the Board

To Executive:

To the most recent address on file with the Bank.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


	THE FIRST OF LONG ISLAND
	CORPORATION
	By: /s/ Michael N. Vittorio
	Name: Michael N. Vittorio
	Title: President and Chief Executive Officer


	THE FIRST NATIONAL BANK OF
	LONG ISLAND
	By: /s/ Michael N. Vittorio
	Name: Michael N. Vittorio
	Title: President and Chief Executive Officer


	EXECUTIVE
	By: /s/ Janet T. Verneuille
	Janet T. Verneuille

RELEASE

Pursuant to Section 4(h)(ii) of the Employment Agreement between The First of Long Island Corporation (the “Company”), The First National Bank of Long Island (the “Bank”) and Janet T. Verneuille (“Executive”), effective June 3, 2019 (herein after, the “Agreement”), Executive is entitled to a cash lump sum severance payment (the “Severance Payment”) in connection with his termination of employment. As a condition to receiving the Severance Payment, Executive shall have executed and not timely revoked this release (this “Release”) in accordance with the terms and conditions below by no later than the 60th day following Executive’s termination of employment.

Intending to be legally bound, Executive hereby, on behalf of Executive and Executive’s heirs, executors, administrators, successors and assigns, fully, finally and forever releases and discharges the Company, the Bank, as well as their predecessors, successors and assigns, and all of their respective parent, subsidiary, related and affiliated companies, officers, owners, directors, agents, representatives, attorneys, and employees (all of whom are referred to throughout this Release as the “Parties”), of and from all claims, charges, demands, actions, causes of action, complaints, suits, controversies, proceedings, promises, agreements, liabilities, debts, obligations, judgments, rights, fees, damages, losses, and expenses, of any and every nature whatsoever, in law or in equity, known or unknown, suspected or unsuspected (collectively, “Claims”), as a result of: (i) actions or omissions occurring through the execution date of this Release; or (ii) any agreement, arrangement or promise between Executive and any Party. Specifically included in this waiver and release are, among other things, any and all Claims related to the Agreement, Claims of alleged employment discrimination, either as a result of the separation of Executive’s employment or otherwise, under the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, as amended by applicable New York law and all of their respective implementing regulations and/or any other federal, state or local statute, rule, ordinance, or regulation, as well as any Claims for compensation of any type whatsoever, alleged wrongful discharge, negligent or intentional infliction of emotional distress, breach of express or implied contract, quasi- contract, promissory estoppel, detrimental reliance, fraud, defamation, or any other unlawful behavior, the existence of which is specifically denied by the Parties. The foregoing list is intended to be illustrative rather than inclusive. Executive waives the rights and Claims to the extent set forth above, and Executive also agrees not to institute, or have instituted, a lawsuit against the Parties based on any such waived Claims or rights.

Nothing in this Release, however, shall be construed to prohibit Executive from filing a charge or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission or other federal, state or local agency. Notwithstanding the foregoing, Executive waives Executive’s right to recover monetary or other damages as a result of any Claim filed by Executive or by anyone else on Executive’s behalf, including a class or collective action, whether or not Executive is named in such proceeding.

Further, nothing in this Release is intended to waive Executive’s entitlement to: (i) any earned but unpaid compensation or benefits from the Bank or any affiliate of the Bank; (ii) the Severance Payment; (iii) vested or accrued benefits under any tax-qualified or nonqualified employee benefit plan sponsored by the Company or the Bank; (iv) equity awards under the Company’s stock plans, but subject to the treatment thereof set forth in the plans and underlying award agreements; (v) Executive’s right to elect health care continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) at Executive’s expense (if Executive is eligible for COBRA coverage); and (vi) indemnification and directors’ and officers’ insurance coverage applicable to the fullest extent

permitted under applicable law and as provided in the Bank’s or the Company’s charter, bylaws and directors’ and officers’ liability insurance policy. Moreover, this Release does not waive claims that Executive could make, if available, for unemployment or workers’ compensation.

Finally, this Release does not limit Executive’s ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”) about a possible securities law violation without approval of the Company or the Bank. Executive further understands that this Agreement does not limit Executive’s ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company or the Bank related to the possible securities law violation. This Agreement does not limit the Executive’s right to receive any resulting monetary award for information provided to any Government Agency.

Executive affirms that, absent Executive’s execution of this Release, Executive would not be entitled to the Severance Payment and is therefore receiving consideration to which Executive would not otherwise be entitled to receive. Executive also affirms that the only consideration for Executive signing this Release is that set forth in Section 4(h) of the Agreement, that no other promise or agreement of any kind has been made to or with Executive by any person or entity to cause Executive to execute this Release, and that Executive fully understands the meaning and intent of this Release, including but not limited to, its final and binding effect.

Executive also affirms that Executive shall be subject to the covenants set forth in Section 6 of the Agreement.

Executive acknowledges that Executive has carefully read and reviewed this Release and has been advised to seek the advice of an attorney, and Executive has had an opportunity to consult with and receive counsel from an attorney concerning the terms of this Release.

Executive understands and is satisfied with the terms and contents of this Release and voluntarily has signed Executive’s name to the same as a free act and deed. Executive agrees that this Release shall be binding upon Executive and Executive’s agents, attorneys, personal representatives, heirs, and assigns. Executive acknowledges that Executive has been given a period of at least 45 days from date of receipt within which to consider and sign this Release, which shall not be signed by Executive before Executive’s last day of employment. To the extent Executive has executed this Release less than 45 days after its delivery to Executive, Executive hereby acknowledges that Executive’s decision to execute this Release prior to the expiration of such 45-day period was entirely voluntary.

Executive acknowledges that Executive will be given seven (7) days from the date Executive signs this Release to change Executive’s mind and revoke this Release. If Executive does not revoke this Release within seven (7) days of Executive’s signing, this Release will become final and binding on the day following such seven (7) day period.

In the event that any one or more of the provisions of this Release shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of this Release shall not in any way be affected or impaired thereby. This Release shall inure to the benefit of and be binding upon the Company, the Bank, their affiliates, any successor organization which shall succeed the Company or the Bank by merger, acquisition or consolidation or operation of law and their assigns. This Release shall be binding upon the Executive and his assigns, heirs and legal representatives. This Release shall be governed by the law of the State of New York without reference to its choice of law rules.

Any notice to revoke this Release will be deemed properly given or made if personally delivered or, if mailed, when mailed by registered or certified mail, postage prepaid to The First of Long Island Corporation at its principal business office, to the attention of____________________. The principal business office of The First of Long Island Corporation is located at 10 Glen Head Road, Glen Head, New York 11545.

[Remainder of page is intentionally left blank]

By executing this Release, Executive acknowledges that Executive has had the opportunity to consult with an attorney of Executive’s choice; that Executive has carefully reviewed and considered this Release; that Executive understands the terms of this Release; and that Executive voluntarily agrees to them.

EXECUTIVE

____________________________________________

Date:

(On or after Executive’s last day of employment)

THE FIRST OF LONG ISLAND CORPORATION

_____________________________________________

By:

Title:

Date:

THE FIRST NATIONAL BANK OF LONG ISLAND

_____________________________________________

By:

Title:

Date:

Exhibit 10.3

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made effective as of January 1, 2019 (the “Effective Date”), by and between The First of Long Island Corporation (the “Company”), The First National Bank of Long Island (the “Bank”; and together with the Company, “FLIC”) and Anne Marie Stefanucci (“Executive”).

WHEREAS, FLIC wishes to assure itself of the continued services of Executive for the period and in accordance with the terms provided in this Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

TERM.

(a)Term. The term of this Agreement and the period of Executive’s employment hereunder shall begin as of the Effective Date and shall continue for twenty-four (24) full calendar months thereafter (the “Employment Period,” which shall include any periods covered by renewals hereunder). Subject to Section 4(d), commencing on January 1, 2020, and continuing on January 1 of each year thereafter (the “Anniversary Date”), this Agreement shall renew for an additional twelve months such that the remaining term shall be twenty-four months (24) months unless written notice of non-renewal is provided to Executive at least thirty (30) days prior to any such Anniversary Date.

EMPLOYMENT; CAPACITY; DUTIES.

(a)Employment. During the Employment Period Executive shall be employed in the capacity of Executive Vice President of the Company and the Bank and Chief Credit Officer of the Bank (the “Executive Position”) and shall have such other senior executive title as may from time to time be determined by the Boards of Directors. Executive shall have such duties and responsibilities as usually appertain to the Executive Position, as well as those as shall be assigned by the Chief Executive Officer or by the Board of Directors. The Executive shall report to the Chief Executive Officer.

Executive’s service on boards of non-profits and for-profit organizations in effect as of the date of this Agreement and as to which the Board has been previously notified, may be continued.

COMPENSATION, BENEFITS AND REIMBURSEMENT.

(a)Base Salary. In consideration of Executive’s performance of the responsibilities and duties set forth in this Agreement, Executive shall receive an annual base salary of $175,880 per year (“Base Salary”). Such Base Salary will be payable in accordance with the customary payroll practices of the Bank. During the term of this Agreement, the Board may increase, but not decrease, Executive’s Base Salary. Any increase in Base Salary will become the “Base Salary” for purposes of this Agreement.

TERMINATION AND COMPENSATION PAYABLE FOLLOWING TERMINATION.

Executive’s employment under this Agreement may be terminated in the following circumstances:

(d)Retirement. This Agreement and the obligations hereunder shall expire on December 31 of the calendar year in which Executive attains Normal Retirement Age (“Retirement

Age Termination Date”). For purposes of this Agreement, “Normal Retirement Age” shall mean age 65. Nothing in this Agreement shall mandate or prohibit a continuation of Executive’s employment following the Retirement Age Termination Date, provided that Executive shall not be entitled to any benefits or payments under this Agreement upon termination of Executive’s employment following Retirement Age Termination Date (unless the Extended Employment Period is in effect ). Notwithstanding the foregoing, upon written notice to Executive, FLIC may extend the term of this Agreement for an additional two year period beyond the Retirement Age Termination Date (the “Extended Employment Period”).

(f)Termination Without Cause or With Good Reason.

(A)

(B)

“Good Reason” exists if, without Executive’s express written consent, any of the following occurs:

(A)

the failure to appoint Executive during the Employment Period to the Executive Position;

(B)

a reduction in Executive’s Base Salary;

(C)

(D)

a relocation of Executive’s principal place of employment by more than 50 miles from Executive’s principal place of employment as of the initial Effective Date of this Agreement.

(ii)Other Compensation and Benefits. Except as may be provided under this Agreement,

(A)

(B)

Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation.

(h)Additional Compensation Payable Following Termination Without Cause or Termination with Good Reason.

(A)

Executive’s employment is terminated pursuant to Section 4(f) above (Termination Without Cause or Termination for Good Reason), including a termination following a Change in Control; and

(B)

(ii)If Executive meets the requirements described in clause (i) above,

(A)

FLIC shall pay Executive, or in the event of Executive’s subsequent death, Executive’s beneficiary or estate, a cash lump sum payment equal to the sum of:

(i)two times Base Salary at the rate in effect immediately prior to her date of termination, plus

(ii)an amount equal to the product of: (I) the reasonably estimated monthly cost of the medical, dental and vision

insurance coverage maintained by the Bank for Executive immediately prior to Executive’s date of termination; multiplied by (II) twenty-four (24).

CHANGE IN CONTROL.

(a)Change in Control Defined. For purposes of this Agreement, the term “Change in Control” shall mean the occurrence of any of the following events:

(A)

(B)

(C)

(D)

Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.

COVENANTS OF EXECUTIVE.

(a)Non-Solicitation/Non-Compete.

(A)

solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of FLIC, or any of its respective subsidiaries or affiliates, to terminate her or her employment with FLIC and/or accept employment with another employer; or

(B)

offices, within New York City or in the Counties of Nassau or Suffolk, New York (the “Restricted Territory”); or

(C)

(ii)The restrictions contained in Section 6(a)(i)(B) above shall not apply in the event of a Termination for Cause, or in the event of a termination of employment following a Change in Control.

(iii)For purposes of this paragraph (a), the “Restricted Period” shall be a period of one (1) year following Executive’s termination of employment with FLIC.

(d)Reliance. Except as otherwise provided, all payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with this Section 6, to the extent applicable.

EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

NO ATTACHMENT; BINDING ON SUCCESSORS.

MODIFICATION AND WAIVER.

(a)This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

10.

MISCELLANEOUS PROVISIONS.

Notwithstanding anything herein contained to the contrary, the following provisions shall apply:

(g)In the event of Executive’s death, any payments to be made or being made to Executive under this Agreement shall be made to her beneficiary, who shall be her surviving spouse, and if there is no surviving spouse, the beneficiary shall be her daughter, Danielle Stefanucci. Alternatively, Executive may designate other beneficiaries. If Executive’s beneficiaries do not survive her, or if no beneficiary designation is in effect at the time of Executive’s death, then payments due thereafter shall be made to the Executive’s estate.

11.

SEVERABILITY.

12.

GOVERNING LAW.

This Agreement shall be governed by the laws of State of New York, but only to the extent not superseded by federal law.

13.

ARBITRATION.

14.

NOTICE.

To FLIC:

The First of Long Island Corporation

10 Glen Head Road

Glen Head, New York 11545

Attn: Chairman of the Board

To Executive:

To the most recent address on file with the Bank.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


	THE FIRST OF LONG ISLAND
	CORPORATION
	By: /s/ Michael N. Vittorio
	Name: Michael N. Vittorio
	Title: President and Chief Executive Officer


	THE FIRST NATIONAL BANK OF
	LONG ISLAND
	By: /s/ Michael N. Vittorio
	Name: Michael N. Vittorio
	Title: President and Chief Executive Officer


	EXECUTIVE
	By: /s/ Anne Marie Stefanucci
	Anne Marie Stefanucci

RELEASE

Pursuant to Section 4(h)(ii) of the Employment Agreement between The First of Long Island Corporation (the “Company”), The First National Bank of Long Island (the “Bank”) and Anne Marie Stefanucci (“Executive”), effective January 1, 2019 (herein after, the “Agreement”), Executive is entitled to a cash lump sum severance payment (the “Severance Payment”) in connection with his termination of employment. As a condition to receiving the Severance Payment, Executive shall have executed and not timely revoked this release (this “Release”) in accordance with the terms and conditions below by no later than the 60th day following Executive’s termination of employment.

Executive also affirms that Executive shall be subject to the covenants set forth in Section 6 of the Agreement.

[Remainder of page is intentionally left blank]

EXECUTIVE

____________________________________________

Date:

(On or after Executive’s last day of employment)

THE FIRST OF LONG ISLAND CORPORATION

_____________________________________________

By:

Title:

Date:

THE FIRST NATIONAL BANK OF LONG ISLAND

_____________________________________________

By:

Title:

Date:

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a)

I, Michael N. Vittorio, certify that:

I have reviewed this Form 10-Q of The First of Long Island Corporation (“Registrant”);

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 9, 2019


By /s/ MICHAEL N. VITTORIO
MICHAEL N. VITTORIO
PRESIDENT & CHIEF EXECUTIVE OFFICER
(principal executive officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a)

I, Mark D. Curtis, certify that:

I have reviewed this Form 10-Q of The First of Long Island Corporation (“Registrant”);

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 9, 2019


By /s/ MARK D. CURTIS
MARK D. CURTIS
SENIOR EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER & TREASURER
(principal financial officer)

Exhibit 32

CERTIFICATION PURSUANT TO RULE 13a-14(b)

AND 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The First of Long Island Corporation (“Corporation”) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on August 9, 2019 (“Report”), we, Michael N. Vittorio, President and Chief Executive Officer of the Corporation and Mark D. Curtis, Senior Executive Vice President, Chief Financial Officer and Treasurer of the Corporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the accompanying Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: August 9, 2019


By /s/ MICHAEL N. VITTORIO
MICHAEL N. VITTORIO
PRESIDENT & CHIEF EXECUTIVE OFFICER
(principal executive officer)

By /s/ MARK D. CURTIS
MARK D. CURTIS
SENIOR EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER & TREASURER
(principal financial officer)