Memorandum on findings

FIRST NATIONAL BANK OF LONG ISLAND, THE

10 GLEN HEAD ROAD
GLEN HEAD, New York 11545

STAR RATING: 4
Predictive Indicator
As of September 30, 2009
Federal Reserve System Identifier 837000

HOLDING COMPANY INFORMATION

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INTRODUCTION

U.S. commercial banks are chartered under either federal or state jurisdiction for the purposes of accepting funds for deposit and extending loans to either individual or business borrowers. Banks are subject to credit, interest rate, and operational risk, and, because of both their public purpose and their importance to the nation's economy, banks are the object of intense regulatory scrutiny.

The Bankrate proprietary commercial bank rating model analyzes capitalization, asset quality, earnings, and liquidity and produces composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions.

Institution Commentary

OVERVIEW of Institution
Organized in 1927, FIRST NATIONAL BANK OF LONG ISLAND, THE is a nationally chartered commercial bank, which, as of September 30, 2009, reported $1.5074 billion in total assets. At that date, loans and deposits held by the bank amounted to $760.1590 million and $1.1803 billion, respectively. The bank's September 30, 2009 equity base of $116.3110 million produced an Equity/Assets ratio of 7.72%, as of that date.

COMPOSITE SUMMARY
Bankrate believes that, as of September 30, 2009, this bank exhibited a sound condition, characterized by very solid overall, sustainable profitability, good asset quality, strong capitalization and near normal liquidity.

EARNINGS ANALYSIS
For the nine months ended September 30, 2009, the bank recorded net income of $11.6700 million. The bank experienced a return on average assets (ROA) of 1.10% over the latest four quarters. Year earlier nine month results amounted to a net profit of $10.0740 million, or a 0.98% annualized ROA. An ROA of at least 1.0% is deemed satisfactory in accordance with banking industry standards, and the industry's ROA for the first nine months of 2009 was approximately 0.05%. We have concluded that for the first nine months of 2009, the bank achieved a very healthy return on equity. We deem net interest margin to have been mid-range. Noninterest income was substantially below normal, and management should be questioned as to the outlook for this source of revenue. We also observed overhead ratios that were approximately average. Importantly, net interest margins, noninterest income components, and overhead expense levels represent operating factors that combine to impact overall operating results. We have also noted that the bank's profitability improvement between the first nine months of 2008 and the first nine months of 2009well exceeded the banking industry peer comparison.

ASSET QUALITY ANALYSIS
The bank revealed, as previously stated, good asset quality. Our conclusion with respect to asset quality incorporates our analysis of data depicting regional economic conditions as well as our computations of a relatively low September 30, 2009 nonperforming asset ratio, much better than normal reserve coverage for nonperforming loans, and apparently acceptable quality, or no greater than average, holdings of commercial real estate and construction loans, two categories that can intensify credit risk.

Other asset categories, such as farm and consumer loans, which may carry more than usual default potential, should not have a substantial negative impact upon future results.

Loan yield can measure financial reward versus credit risk. Excessive loan yield may be an indicator of existing or future problems. Our loan review indicates that the bank has assumed a seemingly prudent position between credit risk and financial reward.

CAPITAL ANALYSIS
Balance sheet structural changes, through the one year period of time ended September 30, 2009, have possibly had a negative impact upon the bank's capital position. Our analytical methodology does take into account the quantity, quality, and durability of net worth, and, as set forth above, we have determined, based upon our series of tests, that the bank demonstrates strong capitalization. We have calculated the bank's September 30, 2009 Total Risk-Based Capital position, a computation used by industry regulators, and have concluded that this bank substantially exceeded the requirement, set by regulation, for this test.

LIQUIDITY ANALYSIS
As of September 30, 2009, the bank displayed Substantially Below Normal balance sheet liquidity and a Somewhat Greater Than Average Dependence upon wholesale, or non-core liabilities, which include all borrowings, such as Federal Home Loan Bank Advances, and CD's greater than $100,000.

Accounting principles require some securities to be categorized as "Available-for-Sale." Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the bank's present balance sheet, changes in the value of the current level of securities reported as "Available-for-Sale" are likely to have a substantial impact upon future net worth of the bank.

INSTITUTION SUMMARY
This bank has been rated sound.
Positive factors that impacted that rating follow:

• Earnings

As noted previously, early warning indicators, possibly requiring specific investigation include:

• Non-Interest Income
• Puchased Liabilities

PREDICTIVE INDICATOR
As stated, we have determined a composite Star rating for this bank of 4 , indicative of a sound financial condition. At times, financial conditions of banks change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.