<PAGE>
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant | X |
Filed by a Party other than the Registrant | |
Check the appropriate box:
| | Preliminary Proxy Statement
| X | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Paragraph 240.14a-11(c) or
240.14a-12
Sterling Financial Corporation
(Name of Registrant as Specified In Its Charter)
John E. Stefan
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
| X | $125 per Exchange Act Rules O-11(c)(1)(ii), 14-6(i)(1),
or 14a-6(j)(2).
| | $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
</PAGE>
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 1994
TO THE SHAREHOLDERS OF STERLING FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its directors, the
regular Annual Meeting of the shareholders of Sterling Financial
Corporation will be held at the Willow Valley Family Resort and
Conference Center, 2416 Willow Street Pike, Lancaster, Pennsylvania, on
Tuesday, May 3, 1994 at 9:00 a.m., prevailing time, for the purpose of
considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect two Class 3 directors to serve
for a three-year term until their successors are elected and
qualified.
2. SELECTION OF AUDITORS. To ratify the selection of Trout,
Ebersole & Groff as the corporation's independent certified
public accountants for the year ending December 31, 1994.
3. OTHER BUSINESS. To consider and vote upon such other business
as may properly be brought before the meeting and any
adjournment thereof.
Only those shareholders of record at the close of business on March
16, 1994, shall be entitled to notice of and to vote at the meeting.
It is requested that you promptly sign the enclosed Proxy and
return it in the enclosed postpaid envelope. You are cordially invited
to attend the meeting. Your Proxy is revocable and may be withdrawn at
any time by giving written notice to the Secretary of the Corporation
before it is voted at the meeting or by executing a later dated Proxy
and giving written notice to the Secretary of the Corporation.
A copy of the Annual Report of Sterling Financial Corporation is
enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN E. STEFAN
John E. Stefan
President and Chief Executive Officer
Lancaster, Pennsylvania
March 31, 1994
</PAGE>
<PAGE>
PROXY STATEMENT
Dated and to be mailed March 31, 1994
STERLING FINANCIAL CORPORATION
525 GREENFIELD ROAD
P.O. BOX 10608
LANCASTER, PENNSYLVANIA 17605-0608
(717) 295-7551
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 1994
TABLE OF CONTENTS
PAGE
GENERAL.............................................................1
Introduction........................................................1
Date, Time and Place of Meeting.....................................1
Shareholders Entitled to Vote.......................................1
Purpose of Meeting..................................................1
Solicitation of Proxies.............................................1
Revocability and Voting of Proxies..................................2
Voting of Shares and Principal Holders Thereof......................2
Shareholder Proposals...............................................3
Recommendations of the Board of Directors...........................3
INFORMATION CONCERNING ELECTION OF DIRECTORS........................4
General Information.................................................4
Information about Nominees and Continuing Directors.................5
Meetings and Committees of the Board of Directors...................8
Officers and Executive Officers.....................................9
Executive Compensation.............................................10
Compensation of Directors..........................................10
Transactions with Directors and Executive Officers.................15
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS................................................16
ADDITIONAL INFORMATION.............................................16
OTHER MATTERS......................................................16
</PAGE>
<PAGE>
GENERAL
Introduction
On June 30, 1987, The First National Bank of Lancaster County
became a wholly-owned subsidiary of Sterling Financial Corporation
(the "Corporation"), a Pennsylvania business corporation based in
Lancaster, Pennsylvania and organized for the purpose of becoming a
bank holding company. As of that date, the shareholders of The First
National Bank of Lancaster County became shareholders of Sterling
Financial Corporation. At the same time, The First National Bank of
Lancaster County changed its name to Bank of Lancaster County, N.A.
(hereinafter referred to as "Bank of Lancaster County"). The meeting
to which this Proxy Statement relates will be the seventh Annual
Meeting of the shareholders of Sterling Financial Corporation.
The principal executive office of the Corporation is located at
525 Greenfield Road, P.O. Box 10608, Lancaster, Pennsylvania 17605-
0608. The telephone number for the Corporation is (717) 295-7551.
All inquiries should be directed to Ronald L. Bowman,
Secretary/Treasurer of the Corporation.
Date, Time and Place of Meeting
The regular Annual Meeting of the shareholders of Sterling
Financial Corporation will be held on Tuesday, May 3, 1994 at 9:00
a.m. at the Willow Valley Family Resort and Conference Center, 2416
Willow Street Pike, Lancaster, Pennsylvania.
Shareholders Entitled to Vote
Shareholders of record at the close of business on March 16, 1994
shall be entitled to vote at the meeting.
Purpose of Meeting
The shareholders will be asked to consider and vote upon the
following matters at the meeting: (i) to elect two Class 3 directors
to serve for a three-year term, (ii) to vote upon a proposal to ratify
the selection of Trout, Ebersole & Groff as the Corporation's
independent certified public accountants for the year ending December
31, 1994, and (iii) to consider and vote upon such other business as
may be properly brought before the meeting and any adjournment
thereof.
</PAGE>
<PAGE>
Solicitation of Proxies
This Proxy Statement is being furnished to shareholders of the
Corporation on or about March 31, 1994 in connection with the solicitation
of proxies, in the accompanying form, by the Board of Directors of Sterling
Financial Corporation for use at the Annual Meeting of shareholders to be
held at 9:00 a.m. on Tuesday, May 3, 1994, and any adjournments or
postponements thereof.
The expense of soliciting proxies will be borne by Sterling
Financial Corporation. In addition to the use of the mails,
directors, officers and employees of Sterling Financial Corporation
and the Bank of Lancaster County may, without additional compensation,
solicit proxies personally, by telephone, by telegraph, or by
telecopier.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the meeting and to vote in person. Any
proxy given pursuant to this solicitation may be revoked by delivering
written notice of revocation to Ronald L. Bowman, Secretary/Treasurer
of Sterling Financial Corporation, or by executing a later dated Proxy
and giving written notice thereof to the Secretary of the Corporation
at any time before the proxy is voted at the meeting. Unless revoked,
any proxy given pursuant to this solicitation will be voted at the
meeting in accordance with the instructions thereon of the shareholder
giving the proxy. In the absence of instructions, all proxies will be
voted FOR the election of the two nominees identified in this Proxy
Statement and FOR the proposal to ratify the selection of independent
certified public accountants. Although the Board of Directors knows
of no other business to be presented, in the event that any other
matters are brought before the meeting, any proxy given pursuant to
this solicitation will be voted in accordance with the recommendations
of the management of Sterling Financial Corporation.
Shares held for the account of shareholders who participate in
the Dividend Reinvestment and Stock Purchase Plan will be voted by the
Plan Agent in accordance with the instructions of each shareholder as
set forth in his proxy. If a shareholder who participates in the
Dividend Reinvestment and Stock Purchase Plan does not return a proxy,
the shares held for his account by the Plan Agent will not be voted.
Shares held for the account of employees who participate in the
Employees Stock Plan will be voted by the Plan Trustee in accordance
with the instructions of each participant as set forth in the separate
proxy sent to him with respect to his Employees Stock Plan shares.
Shares with respect to which a separate Employees Stock Plan proxy is
</PAGE>
<PAGE>
not returned will be voted by the Plan Trustee in the same proportion
as shares with respect to which voting instructions have been
received.
Voting of Shares and Principal Holders Thereof
At the close of business on March 16, 1994, which is the record
date for determination of shareholders entitled to receive notice of
and to vote at the meeting and any adjournment thereof, Sterling
Financial Corporation had outstanding 2,900,768 shares of $5.00 par
value common stock. There is no other class of stock authorized or
outstanding. As of the record date, 2,072 shares of Sterling
Financial Corporation common stock were held by the Trust Department
of the Bank of Lancaster County as sole fiduciary, which shares
represent in the aggregate approximately .07 percent of the shares
outstanding and will be voted FOR the election of the two nominees
identified in this Proxy Statement and FOR the proposal to ratify the
selection of independent certified public accountants.
A majority of the outstanding common stock present in person or
by proxy constitutes a quorum for the conduct of business. Each share
is entitled to one vote on all matters submitted to a vote of the
shareholders. A majority of the votes cast at a meeting at which a
quorum is present is required in order to approve any matter submitted
to a vote of the shareholders, except in cases where the vote of a
greater number of shares is required by law or under the Articles of
Incorporation or Bylaws. In the case of the election of directors,
the candidates receiving the greatest number of votes shall be elected
to the Board of Directors. A majority of the votes cast at a meeting
at which a quorum is present is required in order to ratify the
selection of auditors.
Under Pennsylvania law and the By-laws of the Corporation, the
presence of a quorum is required for each matter to be acted upon at
the Annual Meeting. Votes withheld and abstentions will be counted in
determining the presence of a quorum for the particular matter.
Broker non-votes will not be counted in determining the presence of a
quorum for the particular matter as to which the broker withheld
authority.
Assuming the presence of a quorum, the two nominees for director
receiving the highest number of votes cast by shareholders entitled to
vote for the election of directors shall be elected. Votes withheld
from a nominee and broker non-votes will not be cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of a
majority of all votes cast by shareholders on such a matter is
required for the ratification of the selection of independent
</PAGE>
<PAGE>
auditors. Abstentions and broker non-votes are not deemed to
constitute "votes cast" and, therefore, do not count either for or
against such ratification. Abstentions and broker non-votes, however,
have the practical effect of reducing the number of affirmative votes
required to achieve a majority for each such matter by reducing the
total number of shares voted from which the required majority is calculated.
To the knowledge of Sterling Financial Corporation, no person
owned of record or beneficially on February 28, 1994 more than five
percent of the outstanding common stock of Sterling Financial
Corporation, except as follows:
<TABLE>
<CAPTION>
<S>
Name and Address Amount and
of Beneficial Nature of Beneficial Percent
Title of Class Owner Ownership of Class
<C> <C> <C> <C>
Common Stock, Howard E. Groff
$5.00 par value 111 E. State Street
per share Quarryville, PA 17566 334,316 <F1> 11.53%
Common Stock, Bank of Lancaster
$5.00 par value County Employees Stock
per share Plan c/o Trust
Department
25 N. Duke Street
Lancaster, PA 17602 235,766 <F2> 8.13%
<FN>
Footnotes
<F1> Mr. Groff holds sole voting and investment power.
<F2> Shares held for the account of Plan participants are voted by
the Plan Trustee in accordance with the instructions given by
the individual participants.
</TABLE>
Shareholder Proposals
Shareholder proposals intended to be presented at the 1995 Annual
Meeting must be received at the administrative headquarters of
Sterling Financial Corporation at 525 Greenfield Road, Lancaster,
Pennsylvania not later than Thursday, December 1, 1994 in order to be
included in the proxy statement and proxy form to be prepared by
Sterling Financial Corporation in connection with the 1995 Annual
Meeting.
</PAGE>
<PAGE>
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR
the election of the two nominees identified in this Proxy Statement
and FOR the proposal to ratify the selection of independent certified
public accountants.
INFORMATION CONCERNING ELECTION OF DIRECTORS
General Information
The Bylaws of Sterling Financial Corporation provide that the
Board of Directors shall consist of not less than one nor more than 25
persons and that the directors shall be classified with respect to the
time they shall severally hold office by dividing them into three
classes, each consisting as nearly as possible of one-third of the
number of the whole Board of Directors. The Bylaws further provide
that the directors of each class shall be elected for a term of three
years, so that the term of office of one class of directors shall
expire at the Annual Meeting each year. Finally, the Bylaws provide
that the number of directors in each class of directors shall be
determined by the Board of Directors.
A majority of the Board of Directors may increase the number of
directors between meetings of the shareholders. Any vacancy occurring
in the Board of Directors, whether due to an increase in the number of
directors, resignation, retirement, death or any other reason, may be
filled by appointment by the remaining directors. Any director who is
appointed to fill a vacancy shall hold office until the next Annual
Meeting of the shareholders and until his successor is elected and
shall have qualified. There is a mandatory retirement provision in
the Bylaws which states that the office of a director shall be
considered vacant at the Annual Meeting of shareholders next following
his attaining the age of 70 years.
The Board of Directors has presently fixed the number of
directors at nine. There are two directors whose terms of office will
expire at the 1994 Annual Meeting. There are seven continuing
directors whose terms of office will expire at the 1995 or 1996 Annual
Meeting. The Board of Directors proposes to nominate the following
two persons for election to the Board of Directors for a term of three
years:
Nominees for Class 3 Director
For a Term of Three Years
Robert H. Caldwell
J. Robert Hess
</PAGE>
<PAGE>
Each of the above nominees is presently a director of Sterling
Financial Corporation and also a director of the Bank of Lancaster
County.
In the event that any of the foregoing nominees are unable to
accept nomination or election, any proxy given pursuant to this
solicitation will be voted in favor of such other persons as the
management of Sterling Financial Corporation may recommend. However,
the Board of Directors has no reason to believe that any of its
nominees will be unable to accept nomination or to serve as a director
if elected.
Section 2.3 of the Bylaws of Sterling Financial Corporation
requires that nominations, other than those made by or on behalf of
the existing management of Sterling Financial Corporation, must be
made in writing and must be delivered or mailed to the Chairman of the
Board of Sterling Financial Corporation not less than 14 days nor more
than 50 days prior to the date of the Annual Meeting; provided,
however, that if less than 21 days' notice of the meeting is given to
the shareholders, such nominations must be mailed or delivered to the
Chairman of the Board of Sterling Financial Corporation not later than
the close of business on the seventh day following the day on which
notice of the meeting was mailed. The required notice must set forth
the name, age, residence address and principal occupation of each
nominee, as well as the name, residence address and number of shares
of Sterling Financial Corporation common stock owned by the
shareholder making the nomination and the number of shares to be voted
for that nominee. The chairman of the meeting is required to
determine whether nominations have been made in accordance with the
requirements of the Bylaws and, if he determines that a nomination is
defective, the nomination and any votes cast for the nominee shall be
disregarded.
</PAGE>
<PAGE>
Information about Nominees and Continuing Directors
Information concerning the two persons to be nominated for
election to the Board of Directors of Sterling Financial Corporation
at the 1994 Annual Meeting and concerning the seven continuing
directors is set forth in the table which appears below:
<TABLE>
<CAPTION>
<S>
Principal Occu-
pation for the Shares<F2>of
Past 5 years and Sterling Financial
Position held with Corporation Common
the Corporation Stock Beneficially Percent
Director and Bank of owned<F3>as of of
Name and Age Since<F1> Lancaster County February 28, 1994 Class
CLASS 3 - NOMINEES - THREE YEAR TERM
<C> <C> <C> <C> <C>
Robert H. 1991 Retired Senior 2,030<F4> .07%
Caldwell Executive Vice Pres-
(63) ident and Director,
Armstrong World
Industries, Inc.
(manufacturer, build-
ing materials, home
furnishings and
industrial specialties)
J. Robert Hess 1971 President, B&E Realty; 40,373<F5> 1.39%
(63) President, Hessco
Construction Co.;
Partner, Sycamore
Industrial Park; Broker
and Partner, Kingsway
Realty; Assistant
Secretary of Sterling
Financial Corporation
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S>
Principal Occu-
pation for the Shares<F2>of
Past 5 years and Sterling Financial
Position held with Corporation Common
the Corporation Stock Beneficially Percent
Director and Bank of owned<F3>as of of
Name and Age Since<F1> Lancaster County February 28, 1994 Class
CLASS 1 - CONTINUING DIRECTORS
<C> <C> <C> <C> <C>
Richard H. 1985 Dentist, 13,623<F6> .47%
Albright, Jr. Specialist,
(51) Practice limited
to Orthodontics
Howard E. 1988 Vice President, 8,812<F7> .30%
Groff, Jr. Howard E. Groff
(47) Co. (fuel oil
sales and service)
John E. Stefan 1979 President and 63,857<F8> 2.20%
(54) Chief Executive
Officer of Sterling
Financial Corpor-
ation and Bank of
Lancaster County
Glenn R. Walz 1988 President, Walz, 3,821<F9> .13%
(47) Deihm, Geisenberger,
Bucklen & Tennis, P.C.
(Certified Public
Accountants)
CLASS 2 - CONTINUING DIRECTORS
John E. 1968 Partner, Burkholder's 44,645<F10> 1.54%
Burkholder Quality Cars (auto sales);
(61) Chairman of the Board of
Sterling Financial
Corporation and Bank
of Lancaster County
Calvin G. High 1976 Senior Vice President, 6,993<F11> .24%
(61) High Industries, Inc.
(Real Estate and
Construction Group);
</PAGE>
<PAGE>
Partner, High Properties
E. Glenn Nauman Chairman of the Board, 23,026<F12> .79%
(61) Nauman Construction
(building contractor)
<FN>
As of February 28, 1994, Sterling Financial Corporation directors and
officers, as a group, owned of record and beneficially 250,199 shares
of Sterling Financial Corporation common stock, representing 8.63
percent of such shares then outstanding.
Section 16 (a) of the Securities Exchange Act of 1934 requires
Sterling Financial Corporation's directors, executive officers and
shareholders owning in excess of ten (10) percent of the Corporation's
outstanding equity stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of Sterling
Financial Corporation. To the knowledge of Sterling Financial
Corporation, its directors, executive officers and shareholders owning
in excess of ten (10) percent of the Corporation's outstanding equity
stock were in compliance with the Section 16 (a) filing requirements
applicable to such persons.
FOOTNOTES
<F1> Includes service as a director of Bank of Lancaster County.
<F2> Rounded to the nearest whole share.
<F3> Beneficial ownership of shares of the common stock of Sterling
Financial Corporation is determined in accordance with
Securities and Exchange Commission Rule 13d-3(d)(1), which
provides that a person shall be deemed to own any stock which
he, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares:
(i) voting power, which includes the power to vote or to
direct the voting of the stock, or (ii) investment power,
which includes the power to dispose or direct the disposition
of the stock, or has the right to acquire beneficial ownership
within 60 days after March 16, 1994. Unless otherwise
indicated in a footnote appearing below, all shares reported
in the table above are owned directly by the reporting person.
<F4> Includes 180 shares owned directly by spouse.
<F5> Includes 16,657 shares owned jointly with spouse, 726 shares
owned directly by spouse, 4,792 shares owned as custodian for
children and 5,813 shares owned in trust for the benefit of
</PAGE>
<PAGE>
grandchildren.
<F6> Includes 1,027 shares owned jointly with spouse, 4,123 shares
owned directly by spouse and 1,950 shares owned by spouse as
custodian for children.
<F7> Includes 1,744 shares owned directly by spouse and 4,034
shares owned as custodian for children.
<F8> Includes 19,078 shares held by Trustee under the Employees
Stock Plan, 1,103 shares owned jointly with spouse, 21,840
shares owned directly spouse, and 9,445 shares owned directly
by children. Mr. Stefan disclaims beneficial ownership of
shares owned directly by his spouse.
<F9> Includes 1,249 shares owned jointly with spouse, 805 shares
owned directly by spouse and 328 shares owned as custodian for
children.
<F10> Includes 5,087 shares owned jointly with spouse and 806 shares
owned directly by child.
<F11> Includes 5,446 shares owned jointly with spouse.
<F12> Includes 623 shares owned jointly with spouse, 17,385 owned
directly by spouse and 406 shares owned directly by mother.
</TABLE>
Meetings and Committees of the Board of Directors
The Board of Directors of Sterling Financial Corporation has a
standing Audit Committee but does not have a standing Nominating
Committee or Compensation Committee. The Bank of Lancaster County has
a standing Audit Committee and Compensation Committee. The Bank of
Lancaster County does not have a standing Nominating Committee. The
Compensation Committee of the Bank of Lancaster County has been acting
on behalf of Sterling Financial Corporation and will continue to do so
until a Sterling Financial committee is appointed.
Members of the Audit Committee of Sterling Financial Corporation
and the Bank of Lancaster County during 1993 were Richard H. Albright,
Jr., Chairman, and Messrs. High, Nauman and Walz. The principal
duties of the Audit Committee include reviewing significant audit and
accounting principles, policies and practices, reviewing performance
of internal auditing procedures, reviewing reports of examination
received from regulatory authorities, and recommending annually to the
Board of Directors the engagement of an independent certified public
</PAGE>
<PAGE>
accountant. The Audit Committee met five times during 1993.
Members of the Compensation Committee of the Bank of Lancaster
County during 1993 were Robert H. Caldwell, Chairman and Messrs. Hess,
High, Nauman and Walz. The principal duties of the Compensation
Committee include the establishment of policies dealing with various
compensation plans for the Bank of Lancaster County and the
Corporation. In addition, the Committee makes recommendations to the
Board with respect to the compensation paid to senior executives on a
quarterly basis. The Committee also oversees personnel matters. The
Compensation Committee met five times during 1993.
The Board of Directors met 12 times during 1993. All directors
attended 75% or more of the aggregate number of meetings of the Board
of Directors and of the various committees of the Board of Directors
on which they serve.
Officers and Executive Officers
The following persons are the officers and executive officers of
Sterling Financial Corporation:
<TABLE>
<CAPTION>
<S>
Office Held with the Corporation and
Bank of Lancaster County and
Name Age Term in Office
<C> <C> <C>
John E. Stefan 54 President and Chief Executive Officer
of Sterling Financial Corporation
since 1987 and President and Chief
Executive Officer of the Bank of
Lancaster County since 1979.
J. Roger Moyer, Jr. 45 Vice President of Sterling Financial
Corporation since 1987 and Senior
Vice President/Chief Administrative
Officer of the Bank of Lancaster
County since 1985.
David E. Blank 60 Vice President of Sterling Financial
Corporation since 1987 and Senior
Vice President/Lending of the Bank of
Lancaster County since 1985.
Nancy H. Draude 36 Vice President of Sterling Financial
Corporation since 1987 and Vice
President/Marketing of the Bank of
</PAGE>
<PAGE>
Lancaster County since 1984.
Beverly Wise Hill 34 Vice President of Sterling Financial
Corporation since 1993 and Vice
President/Human Resources of the Bank
of Lancaster County since 1992;
previously Senior Vice President of
Fulton Financial Corp. from January
1992 to December 1992 and Vice
President/Director of Human Resources
of Fulton Bank from January 1989 to
January 1992.
Donald L. Neff 42 Vice President of Sterling Financial
Corporation since 1988 and Senior
Vice President/Operations of the Bank
of Lancaster County since 1992.
Corporation since 1987 and Senior
Vice President/Chief Financial
Officer of the Bank of Lancaster
County since 1992.
Sharon K. Owens 33 Vice President of Sterling Financial
Corporation since 1993; Director of
Audit of Sterling Financial
Corporation from 1989 to 1993 and
Vice President/Audit of the Bank of
Lancaster County since 1992.
Ronald L. Bowman 50 Secretary/Treasurer of Sterling
Financial Corporation since 1987 and
Vice President/Comptroller of the
Bank of Lancaster County since 1971.
</TABLE>
Executive Compensation
The officers of Sterling Financial Corporation do not receive any
additional compensation for their services as such, beyond the
compensation paid to them as officers of the Bank of Lancaster County.
Shown below is information concerning annual and longterm compensation
for services in all capacities to the Corporation and to the Bank of
Lancaster County for the fiscal years ended December 31, 1993, 1992
and 1991 to those persons who were, at December 31, 1993, (i) the
Chief Executive Officer and (ii) the other most highly compensated
executive officers of the Corporation to the extent that such person's
cash compensation exceeded $100,000:
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------- -------------- -------
Name and Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary Bonus Compensation Awards SAR's Payouts
Compensation<F1>
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Stefan 1993 $206,772 $60,638 $ --- <F2> none none none $6,221
President and 1992 197,309 54,629 28,758<F2> none none none 5,243
Chief Executive 1991 174,121 39,159 none none none 4,876
Officer of
Sterling Financial
Corporation and
Bank of Lancaster
County, N.A.
J. Roger Moyer, Jr. 1993 $95,937 $27,611 none none none $3,116
Vice President of 1992 94,250 22,211 none none none 2,456
Sterling Financial 1991 82,129 12,962 none none none 2,179
Corporation and
Senior Vice President
and Chief Administrative
Officer of Bank of
Lancaster County, N.A.
David E. Blank 1993 $88,208 $18,905 none none none $2,854
Vice President of 1992 84,877 19,991 none none none 2,237
Sterling Financial 1991 73,031 12,745 none none none 1,951
Corporation and
Senior Vice President/
Lending of Bank of
Lancaster County
<FN>
<F1> Amounts shown represent distributions to Mr. Stefan, Mr. Moyer and
Mr. Blank pursuant to the Employees Stock Plan performance incentive
feature of the Plan as described elsewhere in this Proxy Statement.
<F2> Amount listed for 1992 represents $13,697 for club fees, utilized
by the Chief Executive Officer to promote the Bank of Lancaster
County's marketing activities and $8,638 for a vehicle leased by the
Bank of Lancaster County for the Chief Executive Officer's business
use. Other annual compensation for 1993 was less than 10% of annual
salary and bonus reported for the named Executive Officer.
</TABLE>
</PAGE>
<PAGE>
Board Compensation Committee Report on Executive Compensation
The Board of Directors of Sterling Financial Corporation is
responsible for the governance of the Corporation and its subsidiary,
Bank of Lancaster County, N.A. In fulfilling its fiduciary duties,
the Board of Directors acts in the best interests of the Corporation's
shareholders, customers and the communities served by the Corporation
and its subsidiary. To accomplish the strategic goals and objectives
of the Corporation, the Board of Directors engages competent persons
who undertake to accomplish these objectives with integrity and in a
cost-effective manner. The compensation of these individuals is part
of the Board of Directors' fulfillment of its duties to accomplish the
Corporation's strategic mission. The Bank of Lancaster County, N.A.,
the wholly-owned bank subsidiary of the Corporation, provides
compensation to the employees of the Corporation and the Bank.
The fundamental philosophy of the Corporation's and the Bank's
compensation program is to offer competitive compensation
opportunities for all employees based on the individual's contribution
and personal performance. The compensation program is administered by
a Compensation Committee comprised of five outside directors who are
listed below. The objectives of the Committee are to establish a fair
compensation policy to govern executive officers' base salaries and
incentive plans to attract and motivate competent, dedicated and
ambitious managers whose efforts will enhance the products and
services of the Corporation, the results of which will be improved
profitability, increased dividends to our shareholders and subsequent
appreciation in the market value of our shares.
The compensation of the Corporation's and Bank's top executives
is reviewed and approved annually by the Board of Directors. The top
executives whose compensation is determined by the committee include
the President and Chief Executive Officer and all other senior vice
presidents and vice presidents of the organization. As a guideline
for review in determining base salaries, the committee uses
information composed of executive salaries from Pennsylvania banks
with assets over $500 million, Northeast banks with assets from $500
million to $1.9 billion and National banks with assets from $500 million
to $1 billion. Many local competitors, which are represented in the
above peer groups, share similar performance results to the Bank of
Lancaster County, N.A. These peer group banks have been utilized
because of common industry issues and competition for the same executive
talent group.
CEO Compensation
The Board of Directors has determined that the CEO's 1993
compensation of $267,410 and a 6.14% increase in aggregate CEO
</PAGE>
<PAGE>
compensation is appropriate in light of the following 1993 Corporation
performance accomplishments: (1) a 14% increase in net income; (2) a
16.9% return on equity; and (3) an 8% increase in assets. There is,
however, no direct correlation between the CEO's compensation, the
CEO's increase in compensation and any of the above criteria, nor is
there any weight given by the committee to any of the above specified
individual criteria. Such increase in the CEO's compensation is based
on the committee's subjective determination after review of all
information, including the above, that it deems relevant.
Executive Officers
The Board of Directors has established that the compensation of
the Corporation's and the Bank's executive officers will increase by
5.24% over last year. Compensation increases were determined by the
committee based on its subjective analysis of the individual's
contribution to the Corporation's strategic goals and objectives. In
determining whether strategic goals have been achieved, the Board of
Directors considers among numerous factors the following: the
Corporation's performance as measured by earnings, revenues, return on
assets, return on equity, market share, total assets and non-
performing loans. Although the performance and increases in
compensation were measured in light of these factors, there is no
direct correlation between any specific criterion and the employees
compensation, nor is there any specific weight provided to any such
criteria in the committee's analysis. The determination by the
committee is subjective after review of all information, including the
above, it deems relevant.
In addition to base salary, executive officers of the Corporation
and the Bank may participate currently in the following annual and
long-term incentive plans:
Bank of Lancaster County, N.A.
Employee Stock Plan
Total compensation opportunities available to the employees of
the Bank are influenced by general labor market conditions, the
specific responsibilities of the individual and the individual's
contributions to the Corporation's success. Individuals are reviewed
annually on an anniversary year basis. The Bank strives to offer
compensation that is competitive with that offered by employers of
comparable size in our industry, as well as those within our
reasonable market area. Through these compensation policies, the
Corporation strives to meet its strategic goals and objectives to its
constituencies and provide compensation that is fair and meaningful to
its employees.
</PAGE>
<PAGE>
Robert H. Caldwell, Chairman
J. Robert Hess
Calvin G. High
E. Glenn Nauman
Glenn R. Walz
Shareholder Return Performance Graph
Set forth below is a line graph comparing the yearly dollar
change in the cumulative total shareholder return on the Corporation's
common stock against the cumulative total return of the S&P 500 Stock
Index and the Peer Group Index for the period of five fiscal years
commencing January 1, 1989 and ending December 31, 1993. The
shareholder return shown on the graph below is not necessarily
indicative of future performance.
Comparison of Five-Year Cumulative Total Return
Sterling Financial Corporation Common Stock, S&P 500 & Peer Group
Indices
"Performance Graph filed in paper under cover of Form SE
dated March 23, 1994."
(1) The Peer Group for which information appears above includes the
following companies: ACNB Corporation; CNB Financial Corporation;
Citizens and Northern Corporation; Drovers Bancshares Corporation;
First West Chester Corporation; Penn Security Bank and Trust Company;
Pennrock Financial Services; Sterling Financial Corporation; Franklin
Financial; and Penns Woods Bancorp, Inc. These companies were
selected based on four criteria: total assets between $150 million
and $600 million; market capitalization greater than $25 million;
headquarters located in Pennsylvania; and not quoted on NASDAQ. This
is the same Peer Group as 1992 except that Valley Bancorp, Inc., which
merged out of existence, has been replaced by Franklin Financial, and
Sun Bancorp, Inc. which began quotation on NASDAQ during 1993, has been
replaced by Penns Woods Bancorp, Inc.
</PAGE>
<PAGE>
Employees Stock Plan
The Bank of Lancaster County maintained during 1993 an Employees
Stock Plan (the Plan) which was approved by the shareholders in 1982.
Substantially all Plan assets are invested in Sterling Financial
Corporation common stock. All employees of the Bank of Lancaster
County who have attained the age of 18, have completed one year of
service and work at least 1,000 hours per year are eligible to
participate in the Plan. Directors, as directors, are not eligible to
participate in the Plan. Employees of Town & Country, Inc., a wholly-
owned subsidiary of the Bank of Lancaster County participate only in
the thrift incentive feature of the Plan.
The Plan has two components, a thrift incentive feature and a
performance incentive feature. Under the thrift incentive feature of
the Plan, a participant may make voluntary contributions to the Plan
each year of between two percent and six percent of compensation. The
Bank of Lancaster County will make a matching contribution equal to
25% of each participant's voluntary contributions. Under the
performance incentive feature of the Plan, the Bank of Lancaster
County contributes to the Plan each year an amount determined by the
Board of Directors on the basis of the achievement by the Bank of
Lancaster County of certain performance objectives; contributions to
the Plan may not exceed the amount which is deductible under the
Internal Revenue Code. Contributions made by the Bank of Lancaster
County to the Plan pursuant to the performance incentive feature are
allocated to participants who are employees of Bank of Lancaster
County in the same proportion that each participant's compensation
bears to the aggregate compensation of all participants.
Voluntary contributions to the Plan are fully vested at all
times. Matching contributions and contributions made by the Bank of
Lancaster County to the Plan vest at the rate of 20% per year for each
year of service. In general terms, benefits under the Plan may be
paid to participants upon retirement, termination of employment,
disability or death. A participant may under certain circumstances
make earlier withdrawals (to the extent of his interest in the Plan
attributable to voluntary contributions made by him) upon a showing of
financial hardship.
The Plan was revised in 1987 for the purpose of adopting certain
conforming amendments necessary in order to reflect the occurrence of
the holding company reorganization. The Plan was again amended on
March 8, 1988 and was approved by the shareholders at the 1988 Annual
Meeting.
</PAGE>
<PAGE>
Pension Plan
The Bank of Lancaster County Pension Plan (the Plan) is a
qualified non-contributory defined benefit pension plan which provides
retirement benefits to employees of the Bank of Lancaster County and
to employees of Town & Country, Inc., a wholly-owned subsidiary of the
Bank of Lancaster County. All employees who have completed one year
of service, work at least 1,000 hours per year and who have attained
the age of 21 are eligible to participate in the Plan. Directors, as
directors, do not participate in the Plan. Employees become 100%
vested upon the completion of five years of service. Contributions to
the Plan are made by the Bank of Lancaster County and are determined
actuarially.
Benefits under the Plan (which are not integrated with Social
Security benefits) are based upon average monthly compensation
(determined on the basis of the highest five consecutive years' base
compensation preceding retirement) and years of credited service. For
purposes of determining benefits payable under the Plan, the term
"compensation" is defined to mean base salary only and does not
include overtime pay or bonuses. Compensation paid to Messrs. Stefan,
Moyer and Blank during 1993 and covered by the Plan was $206,772,
$95,937, and $88,208, respectively. As of December 31, 1993, Messrs.
Stefan, Moyer and Blank had accrued 14, 16 and 17 years of credited
service, respectively, under the Plan for benefit accrual purposes.
The following table indicates, for purposes of illustration, the
approximate annual retirement benefit which would be payable under the
Plan, in the form of a straight life annuity with 120 months' certain
period, to a participant who retired as of September 30, 1993, at age
65, under various assumptions as to average annual compensation and
years of credited service. The benefit amounts set forth below are
not subject to further deduction for Social Security or other offset
amounts. Under the Internal Revenue Code of 1986, as amended, the
maximum annual retirement benefit that may be paid in the form of a
straight life annuity with 120 months' certain period under a
qualified defined benefit plan such as the Plan is $105,416 (subject
to adjustment based upon increases in the Consumer Price Index). In
addition, salary in excess of $235,840 (effective for the year 1993)
is disregarded in determining a participant's retirement benefit
pursuant to IRS regulations.
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
Average
Annual
Compensation Years of Credited Service
10 20 30 40
<C> <C> <C> <C> <C>
$ 50,000 $ 7,500 $15,000 $22,500 $30,000
75,000 11,250 22,500 33,750 45,000
100,000 15,000 30,000 45,000 60,000
125,000 18,750 37,500 56,250 75,000
150,000 22,500 45,000 67,500 90,000
175,000 26,250 52,500 78,750 105,000
200,000 30,000 60,000 90,000 105,416
225,000 33,750 67,500 101,250 105,416
250,000 35,376 70,752 105,416 105,416
</TABLE>
Employment Agreement
In April of 1983 the Bank of Lancaster County entered into a five
year employment agreement (the Employment Agreement) with John E.
Stefan under the terms of which it engaged Mr. Stefan as its President
and Chief Executive Officer. Unless previously terminated or unless
notice of intention not to renew is given by either party, the
Employment Agreement is subject to automatic renewal for additional
terms of five years each. The Employment Agreement may be terminated
by the Bank of Lancaster County: (i) without cause, in which case Mr.
Stefan is entitled to receive his then current salary for the
unexpired balance of the term of the Employment Agreement; or (ii)
with cause, in which case Mr. Stefan's right to receive salary and
benefits under the Employment Agreement terminates as of the effective
date of termination. In the event of any change in control of
Sterling Financial Corporation or the Bank of Lancaster County, the
right of the Bank of Lancaster County to terminate the Employment
Agreement without cause expires and the term of the Employment
Agreement is extended automatically. The obligations of the Bank of
Lancaster County under the Employment Agreement have been jointly and
severally assumed by Sterling Financial Corporation.
Compensation of Directors
The directors of Sterling Financial Corporation do not receive
any additional compensation for their services as such, beyond the
compensation paid to them as directors of the Bank of Lancaster
County. Each member of the Board of Directors of the Bank of
</PAGE>
<PAGE>
Lancaster County is paid an annual fee of $7,800 for his services as a
director. This fee is based on attendance of at least 75% of the Board
meetings held during a calendar year. If a director attends less than
75% of the Board meetings held, the director's fee would be
reduced by $650 per meeting missed. In addition to the foregoing,
each director is paid $225 for each meeting attended of a committee of
which they are a member. Additionally, each director receives $500
per meeting for attendance at four loan committee meetings, two asset
quality committee meetings, two planning committee meetings and one
asset/liability committee meeting. Directors fees are not paid to
directors who are also salaried officers of the Bank of Lancaster
County.
Transactions with Directors and Executive Officers
Some of the directors and executive officers of Sterling
Financial Corporation and the companies with which they are associated
were customers of and had banking transactions with the Bank of
Lancaster County during 1993. All loans and commitments to loan made
to such persons and to the companies with which they are associated
were made in the ordinary course of bank business, on substantially
the same terms (including interest rates, collateral and repayment
terms) as those prevailing at the time for comparable transactions
with other persons, and did not involve more than a normal risk of
collectibility or present other unfavorable features. It is
anticipated that similar transactions will be entered into by the Bank
of Lancaster County in the future.
The contracting firm of Nauman Construction was paid $434,658 in
1993 in connection with construction, renovations and leasehold
improvements at various offices of the Bank of Lancaster County.
Included in this figure was the cost to construct a building at 160
Pine Creek Drive, Christiana, Pennsylvania, to be utilized as a branch
office of the Bank of Lancaster County. E. Glenn Nauman, a director
of Sterling Financial Corporation and of the Bank of Lancaster County,
is Chairman of the Board and principal stockholder of Nauman
Construction.
The Bank of Lancaster County entered into a lease agreement (the
Lease Agreement) in 1984 with High Properties, under the terms of
which High Properties constructed and leased to the Bank of Lancaster
County a building at 525 Greenfield Road, Lancaster, Pennsylvania.
The building has been occupied since October of 1984 and serves as the
administrative headquarters of Sterling Financial Corporation and the
Bank of Lancaster County and as a branch office of the Bank of
Lancaster County. The term of the lease is 15 years and is subject to
renewal. The monthly rent for the period November 1, 1989 through
October 31, 1994 is $10,574. Total rent payments of $126,891 were
</PAGE>
<PAGE>
paid by the Bank of Lancaster County to High Properties during 1993
pursuant to the Lease Agreement. Calvin G. High, a director of
Sterling Financial Corporation and the Bank of Lancaster County, is a
partner in High Properties. Additionally, on October 29, 1992 the Bank of
Lancaster County, entered into a lease agreement with High
Properties, under the terms of which High Properties leased to Bank of
Lancaster County office space at 1858 Charter Lane, Suite 102,
Lancaster, Pennsylvania. Occupancy took place January 18, 1993. The
term of the lease is five (5) years. Base rent for the entire term is
$134,579.28. Total rent payments of $23,979 were paid by Bank of
Lancaster during 1993 pursuant to this lease agreement.
High Associates, Ltd., a division of High Industries, Inc., was
paid $19,774 in 1993 in connection with renovations at 525 Greenfield
Road. Calvin G. High, a director of Sterling Financial Corporation
and the Bank of Lancaster County is Senior Vice President of High
Industries.
The Bank of Lancaster County entered into an agreement on
August 13, 1993 with Oregon Pike Associates to purchase a parcel of
land in Manheim Township, Lancaster, Pennsylvania. The purchase price
is $1,550,000. At the time of the signing, $25,000 was paid on the
agreement. Although there are some contingencies to be resolved, it
is the intent to construct an office building to house various
functions of Bank of Lancaster County as well as branch office
facilities. Calvin G. High, a director of Sterling Financial
Corporation and Bank of Lancaster County, is a partner in Oregon Pike
Associates.
RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of Sterling Financial Corporation has
selected the firm of Trout, Ebersole & Groff as independent certified
public accountants to audit the books, records and accounts of
Sterling Financial Corporation and the Bank of Lancaster County for
the year 1994, subject to ratification by vote of a majority of the
shares of common stock represented at the 1994 Annual Meeting. Trout,
Ebersole & Groff has served as independent certified public
accountants for Sterling Financial Corporation and its predecessor,
the Bank of Lancaster County, since 1979. In the event that the
shareholders do not ratify the selection of Trout, Ebersole & Groff,
the selection of independent certified public accountants will be
reconsidered and made by the Board of Directors.
A representative of Trout, Ebersole & Groff is expected to be
present at the 1994 Annual Meeting and will be given an opportunity to
make a statement if he should so desire and to be available to respond
</PAGE>
<PAGE>
to appropriate questions.
The Board of Directors recommends that the shareholders vote FOR
the ratification of the selection of Trout, Ebersole & Groff as
independent certified public accountants for the year 1994.
A copy of the Annual Report of Sterling Financial Corporation on
Form 10-K as filed with the Securities and Exchange Commission,
including financial statements and financial statement schedules, is
available without charge to shareholders upon written request
addressed to Ronald L. Bowman, Secretary/Treasurer, Sterling Financial
Corporation, 525 Greenfield Road, P.O. Box 10608, Lancaster,
Pennsylvania 17605-0608.
OTHER MATTERS
The Board of Directors of Sterling Financial Corporation knows of
no matters other than those discussed in this Proxy Statement which
will be presented at the 1994 Annual Meeting. However, if any other
matters are properly brought before the meeting, any proxy given
pursuant to this solicitation will be voted in accordance with the
recommendations of the management of Sterling Financial Corporation.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN E. STEFAN
JOHN E. STEFAN,
President and Chief Executive Officer
Lancaster, Pennsylvania
March 31, 1994
/PAGE
<PAGE>
<PAGE>
P R O X Y
ANNUAL MEETING OF SHAREHOLDERS
May 3, 1994
STERLING FINANCIAL CORPORATION
525 Greenfield Road
P.O. Box 10608
Lancaster, Pennsylvania 17605-0608
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mary W. Wentz and Thomas Wright, or
either of them, as proxies, with full power of substitution, to represent and
vote, as directed below, all of the shares of STERLING FINANCIAL CORPORATION
common stock held of record by the undersigned on March 16, 1994, at the
Annual Meeting of the shareholders to be held at the Willow Valley Family
Resort and Conference Center, 2416 Willow Street Pike, Lancaster,
Pennsylvania, on Tuesday, May 3, 1994, at 9:00 a.m. prevailing time, and at
any adjournment or postponement thereof, with all of the powers the
undersigned would possess if personally present:
1. ELECTION OF CLASS 3 DIRECTORS TO SERVE FOR A THREE-YEAR TERM
___ ___
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below) listed below
CLASS 3
For a term of three years
Robert H. Caldwell
J. Robert Hess
INSTRUCTION:
To withhold authority to vote for any individual nominee, strike a line
through the nominee's name.
2. PROPOSAL TO RATIFY THE SELECTION OF TROUT, EBERSOLE & GROFF AS THE
CORPORATION'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1994.
___ ___ ___
___ FOR ___ AGAINST ___ ABSTAIN
</PAGE>
<PAGE>
The shares represented by this proxy will be voted as directed above.
If no directions are given, the shares represented by this proxy will be
voted FOR Proposals 1 and 2.
This proxy also confers authority as to whatever other business may be
brought before the meeting and any adjournment or postponement thereof. The
Board of Directors at present knows of no other business to be brought before
the meeting, but if any other business is other business is brought before
the meeting, the shares represented by this proxy will be voted in accordance
with the recommendations of the management of Sterling Financial Corporation.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated March 31, 1994, and hereby revoke(s)
all other proxies heretofore given by the undersigned in connection with this
meeting.
DATED:_____________________, 1994
_________________________________
(Signature)
_________________________________
(Signature)
Please sign exactly as your name
appears hereon. If stock is jointly
held, each joint owner should sign.
If signing for a corporation or a
partnership, or as attorney or
fiduciary, indicate your full title.
If more than one fiduciary is
involved, all should sign.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE
SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT
YOU PLAN TO ATTEND THIS MEETING. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE
IT IS EXERCISED AND MAY BE WITHDRAWN IF YOU ELECT TO ATTEND THE MEETING,
GIVE WRITTEN NOTIFICATION TO THE SECRETARY OF THE CORPORATION AND VOTE IN
PERSON.
</PAGE>
