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)
March 27, 1998
Dear Shareholder:
The 1998 Annual Meeting of Shareholders of Sterling Financial Corporation
(the "Corporation") will be held at 9:00 a.m. on Tuesday, April 28, 1998, at the
Willow Valley Family Resort and Conference Center, 2416 Willow Street Pike,
Lancaster, Pennsylvania. You are cordially invited to attend the Annual Meeting
as well as a continental breakfast which will be held in the Palm Court at the
Resort and Conference Center at 8:00 a.m.
In addition to the election of four Class of 2001 Directors, shareholders
are being asked to consider the proposal to ratify the selection of Trout,
Ebersole & Groff as the Corporation's certified public accountants. The formal
Notice of Annual Meeting, Proxy Statement and Proxy card are enclosed herewith.
The 1997 Annual Report of Sterling Financial Corporation is also enclosed. I
hope you will take the opportunity to review the material contained in the
Annual Report, which reflects a successful year in 1997.
It is important that your shares be represented at the Annual Meeting
whether or not you are personally able to attend. I urge you to sign and date
the enclosed Proxy and return it in the enclosed envelope as soon as possible.
If you do attend the meeting and wish to vote in person, you must give written
notice to the Secretary of the Corporation so that your Proxy will be superseded
by any ballot that you submit at the meeting.
Please indicate on the enclosed business reply card whether or not you
plan to attend the breakfast and return it to Sterling Financial Corporation.
I look forward to seeing you at the breakfast and Annual Meeting.
Sincerely,
John E. Stefan
Chairman of the Board,
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1998
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 (the
"Corporation") will be held at the Willow Valley Family Resort and Conference
Center, 2416 Willow Street Pike, Lancaster, Pennsylvania, on Tuesday, April 28,
1998 at 9:00 a.m., prevailing time, for the purpose of considering and voting
upon the following matters:
1. ELECTION OF DIRECTORS. To elect four Class of 2001 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, 1998.
3. OTHER BUSINESS. To consider and vote upon such other business as may
properly be brought before the meeting and any adjournment or post-
ponement thereof.
Only those shareholders of record at the close of business on March 13,
1998, 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 1997 Annual Report of Sterling Financial Corporation is
enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
John E. Stefan
Chairman of the Board,
President and Chief Executive Officer
Lancaster, Pennsylvania
March 27, 1998<PAGE>
PROXY STATEMENT
Dated and to be mailed March 27, 1998
STERLING FINANCIAL CORPORATION
101 NORTH POINTE BOULEVARD
LANCASTER, PENNSYLVANIA 17601-4133
(717) 581-6030
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1998
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
Quorum and Voting of Shares............................................2
Principal Holders......................................................4
Beneficial Ownership of Executive Officers, Directors and Nominees.....5
Shareholder Proposals..................................................6
Recommendations of the Board of Directors..............................7
INFORMATION CONCERNING ELECTION OF DIRECTORS.............................7
General Information....................................................7
Information about Nominees and Continuing Directors....................8
Meetings and Committees of the Board of Directors.....................10
Officers and Executive Officers.......................................11
Executive Compensation................................................13
Compensation of Directors.............................................21
Transactions with Directors and Executive Officers....................22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................22
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...23
ADDITIONAL INFORMATION..................................................23
OTHER MATTERS...........................................................23
GENERAL
Introduction
On June 30, 1987, The First National Bank of Lancaster County became a
wholly-owned subsidiary of Sterling Financial Corporation (sometimes referred to
herein as 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"
or the "Bank"). The meeting to which this Proxy Statement relates will be the
eleventh Annual Meeting of the shareholders of Sterling Financial Corporation.
The principal executive office of the Corporation is located at 101 North
Pointe Boulevard, Lancaster, Pennsylvania 17601-4133. The telephone number for
the Corporation is (717) 581-6030. All inquiries should be directed to Ronald
L. Bowman, Vice President/Secretary 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, April 28, 1998 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 13, 1998 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: (1) to elect four Class of 2001 directors to serve for
a three-year term, (2) 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, 1998, and (3) to consider and vote upon such
other business as may be properly brought before the meeting and any adjournment
or postponement thereof.
Solicitation of Proxies
This Proxy Statement and the enclosed form of proxy (the "Proxy")are being
furnished to shareholders of the Corporation on or about March 27, 1998 in
connection with the solicitation of proxies, in the accompanying form, by the
Board of Directors of the Corporation for use at the Annual Meeting of
shareholders to be held at 9:00 a.m. on Tuesday, April 28, 1998, and any
adjournments or postponements thereof.
The expense of soliciting proxies will be borne by the Corporation. In
addition to the use of the mails, directors, officers and employees of the
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 of the 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. Shares represented by proxies on the accompanying Proxy,
if properly signed and returned, will be voted in accordance with the
specifications made thereon by the shareholders. Any Proxy not
specifying to the contrary will be voted FOR the election of the four nominees
identified in this Proxy Statement and FOR the proposal to ratify the
selection of independent certified public accountants for the year ending
December 31, 1998. Although the Board of Directors knows of no
other business to be presented, in the event that 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.
Shares held for the account of shareholders who participate in the
Dividend Reinvestment and Stock Purchase Plan will be voted in accordance
with the instructions of each shareholder as set forth in his/her Proxy.
If a shareholder who participates in the Dividend Reinvestment and Stock
Purchase Plan does not return a Proxy, the shares held for his/her 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/her with
respect to his/her Employees Stock Plan shares. Shares with respect to which a
separate Employees Stock Plan Proxy is not returned will be voted by the Plan
Trustee in the same proportion as shares with respect to which voting
instructions have been received.
Quorum and Voting of Shares
At the close of business on March 13, 1998, which is the record date for
determination of shareholders entitled to receive notice of and to vote at the
meeting and any adjournment or postponement thereof, the Corporation had
outstanding 6,159,006 shares of common stock, par value $5.00 per share (the
"Common Stock"). There is no other class of stock authorized or outstanding. As
of the record date, 66,022 shares of Common Stock were held by the Trust
Department of the Bank of Lancaster County as sole fiduciary, which shares
represent in the aggregate approximately 1.07 percent of the shares outstanding
and will be voted FOR the election of the four 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 of the Corporation. 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 Bylaws 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 four 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 is required for the ratification of the selection
of independent 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.
Principal Holders
To the knowledge of the Corporation, no person owned of record or
beneficially on February 27, 1998 more than five percent of the outstanding
Common Stock, except as follows:
Name and Address Amount and
of Beneficial Nature of Beneficial Percent
Title of Class Owner Ownership(1) of Class
Common Stock, Howard E. Groff
$5.00 par value 111 E. State Street
per share Quarryville, PA 17566 716,302(2) 11.63%
Common Stock, Bank of Lancaster
$5.00 par value County Employees Stock
per share Plan c/o Trust
Department
101 North Pointe Boulevard
Lancaster, PA 17601-4133 528,490(3) 8.58%
________________________
(1) Beneficial ownership of shares of the common stock of the
Corporation is determined in accordance with Securities and Exchange
Commission Rule 13d-3, 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 13,
1998.
(2) Mr. Groff holds sole voting and investment power on 714,777 shares.
(3) Shares held for the account of Plan participants are voted by the Plan
Trustee in accordance with the instructions given by the individual
participants.
Beneficial Ownership of Executive Officers, Directors and Nominees
The following table sets forth as of February 27, 1998, the amount and
percentage of the Common Stock beneficially owned by each director, each
nominee, each named executive officer and all executive officers,
directors and nominees of the Corporation as a group.
Name of
Individual Amount and
or Identity Nature of Beneficial Percent of
of Group Ownership(1)(2) Class (3)
Richard H. Albright, Jr. 33,972(4) ---
Robert H. Caldwell 5,386(5) ---
Howard E. Groff, Jr. 24,939(6) ---
Joan R. Henderson 1,173(7) ---
J. Robert Hess 84,122(8) 1.36%
Calvin G. High 17,093(9) ---
J. Roger Moyer, Jr. 33,806(10) ---
E. Glenn Nauman 35,467(11) ---
Jere L. Obetz 17,205(12) ---
William K. Poole 3,246(13) ---
John E. Stefan 135,367(14) 2.20%
Glenn R. Walz 8,357(15) ---
All Executive Officers,
Directors and Nominees
as a Group (17 persons) 449,648 7.29%
________________________
(1) Beneficial ownership of shares of the common stock of the
Corporation is determined in accordance with Securities and
Exchange Commission Rule 13d-3, 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 13, 1998. Unless otherwise indicated in a footnote
appearing below, all shares reported in the table above are owned
directly by the reporting person.
(2) Rounded to the nearest whole share.
(3) Less than one percent (1%) unless otherwise indicated.<PAGE>
(4) Includes 1,840 shares owned jointly with spouse, 6,787 owned directly by
spouse, 4,287 shares owned by spouse as custodian for children and 10,000
shares owned by Albright Family Enterprises, L.P. of which Dr. Albright is
a general partner.
(5) Includes 705 shares owned directly by spouse.
(6) Includes 4,227 shares owned directly by spouse and 10,873 shares owned
as custodian for children.
(7) Includes 11 shares owned jointly with spouse and 280 shares owned directly
by spouse.
(8) Includes 27,693 shares owned jointly with spouse, 4,316 shares owned
directly by spouse, 13,017 shares owned as custodian for children and
14,964 shares owned in trust for the benefit of grandchildren.
(9) Includes 12,898 shares owned jointly with spouse.
(10) Includes 25,994 shares held by Trustee under the Employees Stock Plan,
1,249 shares owned jointly with spouse, 14 shares owned directly by
spouse, 1,433 shares owned directly by children and 3,575 shares owned
directly by mother for whom Mr. Moyer holds power of attorney and with
respect to which Mr. Moyer shares voting and investment power. Mr. Moyer
disclaims beneficial ownership of shares owned directly by his children.
Mr. Moyer has the right to acquire an additional 5,000 shares pursuant to
the exercise of stock options.
(11) Includes 33,072 shares owned directly by spouse and 853 shares owned
directly by mother.
(12) Includes 14,039 shares held by Trustee under the Employees Stock Plan
and 2,333 shares owned directly by spouse. Mr. Obetz disclaims
beneficial ownership of shares owned directly by his spouse.
Mr. Obetz has the right to acquire an additional 4,417 shares
pursuant to the exercise of stock options.
(13) Includes 2,413 shares held by Trustee under the Employees Stock Plan. Mr.
Poole has the right to acquire an additional 4,667 shares pursuant to the
exercise of stock options.
(14) Includes 46,498 shares held by Trustee under the Employees Stock Plan,
2,602 shares owned jointly with spouse, 48,000 shares owned directly
by spouse, and 11,000 shares owned directly by child. Mr. Stefan
disclaims beneficial ownership of shares owned directly by his spouse.
Mr. Stefan has the right to acquire an additional 10,300 shares
pursuant to the exercise of stock options.
(15) Includes 6,601 shares owned directly by spouse and 200 shares owned as
custodian for children.
Shareholder Proposals
Shareholder proposals intended to be presented at the 1999 Annual Meeting
must be received at the administrative headquarters of Sterling Financial
Corporation at 101 North Pointe Boulevard, Lancaster, Pennsylvania not later
than Monday, November 30, 1998 in order to be included in the proxy
statement and proxy form to be prepared by the Corporation in
connection with the 1999 Annual Meeting.
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
election of the four nominees identified in this Proxy Statement and FOR the
proposal to ratify the selection of independent certified public accountants for
the year ending December 31, 1998.
INFORMATION CONCERNING ELECTION OF DIRECTORS
General Information
The Bylaws of the 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/her
successor is elected and shall have qualified. There is a mandatory retirement
provision in the Bylaws that states that the office of a director shall be
considered vacant at the Annual Meeting of shareholders next following his/her
attaining the age of 70 years.
The Board of Directors has presently fixed the number of directors at ten.
There are four directors whose terms of office will expire at the 1998 Annual
Meeting. There are six continuing directors whose terms of office will expire
at the 1999 or 2000 Annual Meeting, respectively. The Board of Directors
proposes to nominate the following four persons for election to
the Board of Directors for the term specified:
Nominees for Class of 2001 Directors
For a Term of Three Years
Richard H. Albright, Jr.
Howard E. Groff, Jr.
John E. Stefan
Glenn R. Walz
Each of the above nominees is presently a director of the 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 the 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 the Corporation requires that nominations,
other than those made by or on behalf of the existing management of the
Corporation, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or received at the principal executive office of the Corporation not less than
90 days prior to the anniversary date of the immediately preceding meeting of
shareholders of the Corporation called for the election of directors. 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 was not made in accordance with the Bylaws, he shall so
declare at the Annual Meeting and the defective nomination
shall be disregarded.
Information about Nominees and Continuing Directors
Information concerning the four persons to be nominated for election to
the Board of Directors of Sterling Financial Corporation at the 1998
Annual Meeting and concerning the six continuing directors is set forth in the
table that appears below:
Principal Occupation
for the Past 5 years
and Position held with
Director the Corporation and
Name and Age Since(1) Bank of Lancaster County
Class of 2001 - Nominees - For a Term of Three Years
Richard H. Albright, Jr. 1985 Dentist, Specialist,
(55) Practice Limited to
Orthodontics
Howard E. Groff, Jr. 1988 Vice President, Howard E.
(51) Groff Co. (fuel oil sales
and service)
John E. Stefan 1979 Chairman of the Board,
(58) President and Chief
Executive Officer of
Sterling Financial
Corporation since 1994;
President and Chief
Executive Officer from 1987
to 1994; and Chairman of
the Board, President and
Chief Executive Officer of
Bank of Lancaster County
since 1994; President and
Chief Executive Officer
from 1979 to 1994
Glenn R. Walz 1988 President, Walz, Deihm,
(51) Geisenberger, Bucklen &
Tennis, P.C. (Certified
Public Accountants); Vice
Chairman of the Board,
Sterling Financial
Corporation and
Bank of Lancaster County
Class of 1999 - Continuing Directors
Joan R. Henderson 1995 President, J.R. Henderson &
(55) Associates, Inc. (Corporate
Event Planning and Fund
Raising)
Calvin G. High 1976 Senior Vice President, High
(65) Industries, Inc. (Real
Estate and Construction
Group); Partner, High
Properties
E. Glenn Nauman 1976 Retired Chairman of the Board
(65) and retired Director,
Nauman Construction
(building contractor)
Class of 2000 - Continuing Directors
Robert H. Caldwell 1991 Retired Senior Executive
(67) Vice President and
Director, Armstrong World
Industries, Inc.
(manufacturer, building
materials, home furnishings
and industrial specialties)
J. Robert Hess 1971 President, B&E Realty;
(67) President, Hessco
Construction Co.; Partner,
Sycamore Industrial Park;
Broker and Partner,
Kingsway Realty
J. Roger Moyer, Jr. 1994 Executive Vice President
(49) and Assistant Secretary of
Sterling Financial
Corporation since 1994;
Vice President from 1987 to
1994; and Executive Vice
President and Assistant
Secretary of Bank of
Lancaster County since
1994; Senior Vice
President/Chief
Administrative Officer from
1985 to 1994
________________________
(1) Includes service as a Director of Bank of Lancaster County, N.A.
Meetings and Committees of the Board of Directors
The Board of Directors of the 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 the Corporation and will continue to do so until the
Corporation appoints a committee.
Members of the Audit Committee of the Corporation and the Bank of
Lancaster County during 1997 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 accountant. The
Audit Committee met five times during 1997.
Members of the Compensation Committee of the Bank of Lancaster County
during 1997 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. The Committee also oversees
personnel matters. The Compensation Committee met six times during 1997.
The Board of Directors of the Corporation met six (6) times during 1997
and the Board of Directors of the Bank met thirteen (13) times during 1997.
All directors attended at least seventy-five percent (75%) or more
of the meetings of the Boards of Directors of the Corporation and
of the Bank and of the various committees of the Boards
on which they served, except Robert H. Caldwell, who attended 67% of the
meetings of the Corporation and 80% of the meetings of the Bank.
Officers and Executive Officers
The following persons are the officers and executive officers of the
Corporation:
Office Held with the Corporation and
Bank of Lancaster County and
Name Age Term in Office
John E. Stefan 58 Chairman of the Board, President and
Chief Executive Officer of Sterling
Financial Corporation since 1994;
President and Chief Executive Officer
of Sterling Financial Corporation from
1987 to 1994 and Chairman of the
Board, President and Chief Executive
Officer of the Bank of Lancaster
County since 1994; President and Chief
Executive Officer from 1979 to 1994.
J. Roger Moyer, Jr. 49 Executive Vice President and Assistant
Secretary of Sterling Financial
Corporation since 1994; Vice President
of Sterling Financial Corporation from
1987 to 1994 and Executive Vice
President and Assistant Secretary of
the Bank of Lancaster County since
1994; Senior Vice President/Chief
Administrative Officer from 1985 to
1994.
Jere L. Obetz 49 Senior Vice President/Treasurer and
Chief Financial Officer of Sterling
Financial Corporation since 1995;
Vice President/Treasurer and Chief
Financial Officer of Sterling
Financial Corporation from 1994 to
1995; Vice President of Sterling
Financial Corporation from 1987 to
1994 and Executive Vice President/Chief
Financial Officer of the Bank of
Lancaster County since December 1997;
Senior Vice President/Chief Financial
Officer from 1992 to 1997.
Ronald L. Bowman 54 Vice President/Secretary of Sterling
Financial Corporation since 1994;
Secretary/Treasurer of Sterling
Financial Corporation from 1987 to
1994 and Vice President/Corporate
Financial Secretary of the Bank of
Lancaster County since 1995; Vice
President/Comptroller from 1971 to 1995.
Nancy H. Draude 40 Vice President of Sterling Financial
Corporation since 1987 and Vice
President/Marketing of the Bank of
Lancaster County since 1984.
Beverly Wise Hill 38 Vice President of Sterling Financial
Corporation since 1993 and Senior Vice
President/Human Resources of the Bank
of Lancaster County since 1995; Vice
President/Human Resources from 1992 to
1995.
Donald L. Neff 46 Vice President of Sterling Financial
Corporation since 1988 and Senior
Vice President/Operations of the Bank
of Lancaster County since 1992.
Sharon K. Owens 37 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.
William K. Poole 37 Vice President of Sterling Financial
Corporation since 1994 and Executive
Vice President/Chief Lending
Officer of the Bank of Lancaster
County since December 1997;
Senior Vice President/Chief Lending
Officer from 1995 to 1997; Vice
President/Senior Commercial
Loan Officer from 1991 to 1995.
________________________
Executive Compensation
The officers of the 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
long-term compensation for services in all capacities to the Corporation and to
the Bank of Lancaster County for the fiscal years ended December 31, 1997, 1996
and 1995 to those persons who were, at December 31, 1997, (i) the Chief
Executive Officer and (ii) the other most highly compensated executive officers
of the Corporation to the extent that such person's annual salary and
bonus exceeded $100,000:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SAR's Payouts sation(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Stefan 1997 $261,747 $53,619 (1) none 6,300 none $5,021
Chairman of the 1996 254,114 64,961 (1) none 6,000 none 5,032
Board, President 1995 242,008 60,585 (1) none none none 5,285
and Chief Executive
Officer of Sterling
Financial
Corporation and
Bank of Lancaster
County, N.A.
J. Roger Moyer, Jr. 1997 $141,945 $23,601 (1) none 3,000 none $5,854
Executive Vice 1996 134,630 26,294 (1) none 3,000 none 5,890
President of 1995 123,823 25,033 (1) none none none 5,757
Sterling Financial
Corporation and
Bank of Lancaster
County, N.A.
Jere L. Obetz 1997 $99,923 $17,019 (1) none 2,750 none $2,732
Senior Vice 1996 94,432 19,079 (1) none 2,500 none 2,841
President/Chief 1995 87,100 18,358 (1) none none none 2,728
Financial Officer of
Sterling Financial
Corporation and
Executive Vice
President/Chief
Financial Officer of
Bank of Lancaster
County, N.A.
William K. Poole 1997 86,342 14,570 (1) none 3,000 none 2,354
Vice President of 1996 80,982 16,191 (1) none 2,500 none 2,400
Sterling Financial 1995 68,501 14,298 (1) none none none 2,071
Corporation and
Executive Vice
President/Chief
Lending Officer of
Bank of Lancaster
County, N.A.
________________________
</TABLE>
(1) Perquisites and other personal benefits which do not exceed the lesser of
$50,000 or 10% of total annual salary and bonus are not disclosed.
(2) Includes $3,673, $3,779 and $3,928 for Mr. Stefan, $3,673, $3,779 and
$3,776 for Mr. Moyer, $2,732, $2,841 and $2,728 for Mr. Obetz and $2,354,
$2,400 and $2,071 for Mr. Poole for 1997,1996 and 1995, respectively,
pursuant to the Employees Stock Plan performance incentive feature of the
Plan as described on pages 18 and 19 of this Proxy Statement. Also
included is the benefit of $1,348, $1,253 and $1,357 for Mr. Stefan and
$2,181, $2,111 and $1,981 for Mr. Moyer for 1997, 1996 and 1995,
respectively, in the form of employer-provided automobile usage.
Option Exercises and Fiscal Year-End Values
Shown below is information with respect to options granted in the last
fiscal year to purchase the Corporation's Common Stock under the Stock
Incentive Plan to the named officers of the Corporation and the Bank of
Lancaster County and held by them at December 31, 1997.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants For Option Term
% of Total
Options/SARs
Options/ Granted to Exercise or
SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C>
John E. Stefan 6,300(1) 17.1% $29.06(2) 12/15/07 $115,137 $291,779
J. Roger Moyer, Jr. 3,000(1) 8.2% 29.06(2) 12/15/07 54,827 138,942
Jere L. Obetz 2,750(1) 7.5% 29.06(2) 12/15/07 50,258 127,364
William K. Poole 3,000(1) 8.2% 29.06(2) 12/15/07 54,827 138,942
</TABLE>
(1) These options granted December 15, 1997, and under the terms of the Stock
Incentive Plan, are exercisable one third per year for three years
commencing on December 15, 1998.
(2) The base price of the grant is adjustable in the event of any change in the
number of issued and outstanding shares of stock which results from a stock
split, reverse stock split, payment of a stock dividend or any other
change in the capital structure of the Corporation.
Aggregated Option Exercises and Fiscal Year-End Values
Shown below is information with respect to all exercises of stock options
awarded to the named officers during the last fiscal year and the fiscal
year-end option values for each named executive officer under the Stock
Incentive Plan and held by them at December 31, 1997.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money
Options/SARs at Options/SARs at
Fiscal Year-End(#) Fiscal Year-end($)(1)
Shares Acquired Value
Name On Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
John E. Stefan --- --- 2,000/10,300 $14,566/$45,027
J. Roger Moyer, Jr. --- --- 1,000/5,000 $7,283/$22,135
Jere L. Obetz --- --- 833/4,417 $6,067/$19,079
William K. Poole --- --- 833/4,667 $6,067/$19,710
</TABLE>
(1) Market value of underlying securities based on the average of the average
of the closing bid and ask quotations for five (5) trading days immediately
preceding December 31, 1997, minus the exercise price.
Board Compensation Committee Report on Executive Compensation
Role of the Compensation Committee and Compensation Philosophy
The objectives of the Compensation Committee are to establish the
Corporation's compensation philosophy and to monitor compensation programs and
related practices for conformity with that philosophy. The Compensation
Committee believes that the Corporation should maintain a competitive
compensation structure with a strong emphasis toward paying for an employee's
contribution and performance. Therefore, the financial interests of the
shareholders are served by closely aligning, particularly for executive
management, year end financial results with an employee's reward for
performance. Accordingly, the Committee and the Corporation adhere to the
concept of pay-for-performance thus increasing the opportunity to maximize
shareholder value.
The compensation of the Corporation's and the 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, all Executive Vice Presidents, all Senior
Vice Presidents and all senior management employees. As a guideline for
review in determining competitive base salaries, the
Committee uses information from salary survey sources from Pennsylvania
banks with assets from $500 million to $1 billion, as
well as peer banks located in the surrounding geographic region. Many local
competitors, which are represented in the above peer groups, share similar
performance results to the Bank of Lancaster County. These peer group banks
have been utilized because of common industry issues and
competition for the same executive talent. The peer group
used as a guideline for review in determining executive compensation
is not the same peer group that appears in the Shareholder
Return Performance Graph.
The Compensation Committee is comprised of five non-employee directors who
are listed below. The Committee met six times during 1997.
CEO Compensation
The Board of Directors has determined that the Chief Executive Officer's
1997 compensation of $315,366, comprised of $261,747 in base annual salary and
$53,619 in bonus is appropriate in light of the following 1997 Corporation
performance accomplishments: (1) a 6.02 percent increase in net income; (2) a
14.89 percent return on equity; and (3) a 10.66 percent increase in assets.
While there is no direct correlation between the increase in Chief Executive
Officer base salary and the above criteria, the Compensation Committee did
review 1996 Corporate performance, as well as the peer bank
comparisons mentioned previously, in order to recommend a
3.0 percent increase in base salary over the previous year. The Chief
Executive Officer's annual performance incentive (bonus) is tied directly
to the organizations's performance results by rewarding
Mr. Stefan for growth in the Corporation's net income, return on shareholder
equity and efficiency ratio goals. Mr. Stefan's total bonus of $53,619
represents a decrease of 17.5 percent from the total bonus paid in 1996.
In addition, Mr. Stefan was awarded an incentive stock option. This option
to purchase 6,300 shares of Corporation Stock is listed in the table on page 14.
In addition, the Incentive Stock Option program itself is described on page 18.
Executive Officer Compensation
Base salary ranges for executive positions are determined by evaluating
the responsibilities of the positions, required skills and
experiences and the average compensation paid for similar positions
within peer banks of similar asset size and within the Corporation's
geographic market region. Annual base salary increases were
determined by the Committee based on its subjective analysis of the
individual's contribution to the Corporation's strategic goals
and objectives, and by taking into account any additional or new
responsibilities assumed by the individual in connection with
promotions or organizational changes. In determining whether
strategic goals and objectives 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 base salary were measured in light of
these factors, there is no direct correlation between any specific criterion and
the employees' base 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.
The executive officers of the Corporation and the Bank have an annual
management incentive bonus tied directly to the Corporation's performance
results. Similar to the Chief Executive Officer, the executive officers'
bonuses are directly dependent upon the organization's growth in net
income, return on shareholder equity and the Corporation's efficiency
ratio. In addition, executive officers have been awarded
incentive stock options to encourage ownership in the Corporation
and provide continued focus on enhancing shareholder
value. The Incentive Stock Option program is described on page 18.
In addition to base salary and the management incentive bonus, 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.
Employees 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 the banking industry, as well as those within the
Corporation's and the Bank's reasonable market area. Through these compensation
policies, the Corporation strives to meet its strategic goals and objectives to
its constituencies and to provide compensation that is fair and meaningful to
its employees.
Compensation Committee
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, 1993
and ending December 31, 1997. 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
1992 1993 1994 1995 1996 1997
ACNB Corp. 100.00 146.12 114.12 142.45 136.48 207.38
CNB Financial Corp. 100.00 104.40 134.52 138.04 175.37 204.58
Citizens & Northern Corp.100.00 164.90 182.82 210.59 269.68 378.30
Drovers Bancshares Corp. 100.00 128.46 134.53 165.44 183.89 321.98
First West Chester Corp. 100.00 116.07 120.24 163.59 184.18 271.50
Franklin Financial
Services Corp. 100.00 157.60 159.63 196.67 238.44 384.64
Hanover Bancorp Inc. 100.00 143.63 171.07 178.85 183.60 229.62
Penn Security Bank
& Trust Co. 100.00 133.23 172.18 178.50 192.60 256.45
Penns Woods Bancorp Inc. 100.00 172.72 206.48 241.85 299.63 479.88
PennRock Financial
Services Corp. 100.00 146.97 216.92 154.86 153.88 193.08
Peer Group Total 1,000.00 1,414.10 1,612.51 1,770.84 2,017.74 2,927.41
Peer Group Index 100.00 141.41 161.25 177.08 201.77 292.74
Sterling Financial Corp. 100.00 157.92 208.38 213.12 204.27 254.37
S & P 500 100.00 110.02 111.51 153.26 188.36 251.12
S & P 500 Index 100.00 110.02 111.51 153.26 188.36 251.12
________________________
(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; Franklin Financial Services Corporation; Hanover Bancorp,
Inc.; Penn Security Bank and Trust Company; PennRock Financial Services
Corporation; Penns Woods Bancorp, Inc.; and Sterling Financial Corporation.
These companies were selected based on four criteria: total assets between
$268 million and $845 million; market capitalization greater than $61
million; headquarters located in Pennsylvania; and not quoted on NASDAQ.
This is the same Peer Group as 1996.
1996 Stock Incentive Plan
The Corporation maintains the Sterling Financial Corporation 1996 Stock
Incentive Plan (the "Stock Incentive Plan") which was approved by the
shareholders of the Corporation at the 1997 Annual Meeting. The purpose of the
Stock Incentive Plan is to advance the development, growth and financial
condition of the Corporation and its subsidiaries by providing incentives
through participation in the appreciation of capital stock of the Corporation
in order to secure, retain and motivate personnel responsible
for the operation and management of the Corporation
and its subsidiaries.
The Stock Incentive Plan is administered by a committee consisting only of
non-employee directors (the "Committee"). Persons eligible to receive awards
under the Stock Incentive Plan are those key officers and other management
employees of the Corporation and its subsidiaries as determined by the
Committee. There were 36,750 options granted during 1997 and 31,350 options
granted during 1996. No options were exercised during 1997 or 1996.
At December 31, 1997, there were 431,900 shares reserved for
future grants under the Stock Incentive Plan.
Employees Stock Plan/401(k)
The Bank of Lancaster County maintains an Employees Stock Plan (the
"Plan") which was approved by the shareholders in 1982. All employees
of the Bank of Lancaster County who have attained the age of 18,
have completed one year of service and worked at least 1,000 hours per
year are eligible to participate in the Plan. Outside 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 salary deferral feature of the Plan.
The Plan has two components, a salary deferral feature and a performance
incentive feature. Under the salary deferral feature of the Plan, a participant
may make voluntary contributions to the Plan each year of between two percent
and ten percent of compensation. The Bank of Lancaster County will
make a matching contribution equal to 25 percent of each participant's
voluntary contributions, up to the first six percent.
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.
During 1997, the plan was amended to allow participants to defer their
contributions to five different investment alternatives. Previously, all
contributions to this Plan were invested in Sterling Financial Corporation
Stock. In addition to Corporation stock, as of July 1, 1997,
participants can elect to diversify their contributions in
increments of 5 percent to models with the
following investment objectives:
Guaranteed Principal
Fixed Income
Growth and Income
Growth (Equity)
The Corporation's matching contributions and the performance incentive feature
continue to be made in Sterling Financial Corporation Stock. In addition, as of
January 1, 1998, all participants can elect to diversify their existing holdings
in the pre-tax employee deferral account (those contributions made after January
1,1995) into the four different models. Those participants who are over age 55
and have ten years of participation in the plan can elect to diversify up to 25%
of their entire post 1987 account balance in accordance with Internal Revenue
Code Section 401(a)(28).
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 percent 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/her
interest in the Plan attributable to voluntary contributions made by him/her)
upon a showing of financial hardship.
Pension Plan
The Bank of Lancaster County Pension Plan (the "Plan") is a qualified
non-contributory defined benefit pension plan that 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.
Outside directors do not participate in the Plan. Employees become
100 percent 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,
Obetz, and Poole during 1997 and covered by the Plan was $160,000, $141,945,
$99,923, and $86,342 respectively. As of December 31, 1997, Messrs. Stefan,
Moyer, Obetz and Poole had accrued 18, 20, 26, and 13 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 that would be payable under the Plan, in
the form of a straight life annuity with 120 months' certain period, 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 $109,390 (subject to
adjustment based upon increases in the Consumer Price Index). In addition,
salary in excess of $160,000 (effective in the year 1997) is disregarded in
determining a participant's retirement benefit pursuant to regulations of the
Internal Revenue Service.
Average
Annual
Compensation Years of Credited Service
10 20 30 40
$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 24,000 48,000 72,000 96,000
200,000 24,000 48,000 72,000 96,000
225,000 24,000 48,000 72,000 96,000
250,000 24,000 48,000 72,000 96,000
275,000 24,000 48,000 72,000 96,000
300,000 24,000 48,000 72,000 96,000
________________________
Retirement Restoration Plan
Bank of Lancaster County adopted a Restoration Plan during 1996 for any
officer whose compensation exceeded $160,000. The plan is designed to "restore"
the level of benefits lost to these employees under certain qualified retirement
plans because of Internal Revenue Code restrictions.
The plan is designed to mirror the provisions set forth in the qualified
retirement plans available to all Bank of Lancaster County employees--the
defined benefit pension plan, and the employee stock or 401(k) plan.
The plan allows for the calculation of benefits on an officer's salary in
excess of $160,000. The effective date of the Plan is May 1, 1996.
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 the Bank 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 the 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 the Corporation.
Compensation of Directors
The directors of the 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. All directors of the Corporation are directors of
the Bank. Directors who are also salaried officers of the Corporation or the
Bank do not receive any fees for board or committee meetings. Each member of
the Board of Directors of the Bank was paid the sum of $2,125 for
attendance at the meetings of the Board during the first
quarter of 1997. This was based on an annual fee of $8,500.
In addition, each director was paid $275 for each meeting
attended of a committee of which he or she is a member.
In April 1997, the yearly fees for directors were changed. All directors
will receive 200 shares of Sterling Financial Corporation common stock and an
amount paid in cash equal to the value of the stock received. The stock will be
issued by July 15th of each year and will be valued at the same price as
established for the Dividend Reinvestment Plan as of July 1st of each year. In
addition, each director shall receive $100 for each meeting attended of a
committee of which he or she is a member. Committee chairs will receive $150
for each meeting attended. The cash portion of the director
fee is based on attendance at official board meetings of at
least 75% of the meetings held during a calendar year.
If a director attends less than 75% of the scheduled meetings
held, the fees will be reduced by $425. The value of the stock received in July
1997 was $5,100 based on $25.50 per share. Therefore, the yearly cash
portion of director fees was set at $5,100 for the period beginning April 1,
1997. As before, fees are not paid to directors who are also salaried
officers of the Corporation or the Bank. In the aggregate,
the value of the stock and fees paid to directors during 1997 was $102,950.
Transactions with Directors and Executive Officers
Some of the directors and executive officers of the Corporation and the
companies with which they are associated were customers of and had banking
transactions with the Bank of Lancaster County during 1997. All loans and loan
commitments 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 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 was occupied in
October of 1984 and served as the administrative headquarters of the Corporation
and the Bank of Lancaster County until August 1995. Bank of Lancaster County
has also maintained a branch office in this building since October
1984 and continues to maintain a branch office at this location.
The term of the lease is 15 years and is subject to renewal. The monthly
rent is $12,331.70. Total rent payments of $147,980.40 were paid
by the Bank of Lancaster County to High Properties
during 1997 pursuant to the Lease Agreement. On January 10, 1997, a sublease
agreement was signed under the terms of which Bank of Lancaster County will
sublease to High Employee Services, Ltd. 4,424 square feet of this building.
The term of the lease is two years and eight months to coincide with the
original lease expiration date on this building. Total rent to be received
over this period of time is $159,264. Efforts are being made to secure
tenants for the additional available space in this building.
Calvin G. High, a director of the Corporation and the Bank of
Lancaster County, is a partner in High Properties. High Associates, Ltd.,
a division of High Industries, Inc., was paid $20,146 in
1997 in connection with various services performed. Calvin G. High, a director
of the Corporation and the Bank of Lancaster County is Senior Vice President of
High Industries.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and shareholders owning in excess of
10 percent of the Corporation's outstanding equity stock to file initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Corporation with the Securities and Exchange
Commission. Based on a review of copies of such reports
received by it, and on the statements of the respective reporting
person, the Corporation believes that all Section 16(a)
filing requirements were complied with in a timely fashion, with the
exception of
Mr. E. Glenn Nauman who inadvertently did not timely file a Form 4 reporting
two transactions, during 1997.
RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Corporation has selected the firm of Trout,
Ebersole & Groff as independent certified public accountants to audit the books,
records and accounts of the Corporation and the Bank of Lancaster County for the
year 1998, subject to ratification by vote of a majority of the shares of Common
Stock represented at the 1998 Annual Meeting. Trout, Ebersole & Groff has
served as independent certified public accountants for the
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 1998 Annual Meeting and will be given an opportunity to make a statement if
he should so desire and to be available to respond 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 fiscal year ending December 31, 1998.
ADDITIONAL INFORMATION
A COPY OF THE ANNUAL REPORT OF THE CORPORATION ON FORM 10-K FOR ITS FISCAL
YEAR ENDED DECEMBER 31, 1997, 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, VICE PRESIDENT/SECRETARY, STERLING FINANCIAL
CORPORATION, 101 NORTH POINTE BOULEVARD,
LANCASTER, PENNSYLVANIA 17601-4133.
OTHER MATTERS
The Board of Directors of the Corporation knows of no matters other than
those discussed in this Proxy Statement that will be presented at the 1998
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 the Corporation.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN E. STEFAN
Chairman of the Board,
President and
Chief Executive Officer
Lancaster, Pennsylvania
March 27, 1998
P R O X Y
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 28, 1998
STERLING FINANCIAL CORPORATION
101 North Pointe Boulevard
Lancaster, Pennsylvania 17601-4133
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mary W. Wentz and Thomas Wright, and each
or any of them, as proxies, with full power of substitution, to represent and
vote, all of the shares of STERLING FINANCIAL CORPORATION common stock held of
record by the undersigned on March 13, 1998, 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,
April 28, 1998, 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 thereat, as indicated on the reverse
side of this card.
This Proxy, when properly signed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR Nominees listed in Proposal 1 and FOR Proposal 2.
This proxy also confers authority as to other business as may properly
come before the meeting and any adjournment or postponement thereof.
The Board of Directors at present knows of no other business
to be brought before this meeting, but if any 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 27, 1998, and hereby revoke(s) all
other proxies heretofore given by the undersigned in connection with this
meeting.
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.
<TABLE>
<CAPTION>
Please mark your
votes as in this
example.
Nominees:
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF CLASS OF FOR WITHHELD 2. PROPOSAL TO RATIFY THE SELECTION FOR AGAINST ABSTAIN
2001 DIRECTORS TO Richard H. Albright, Jr. OF TROUT, EBERSOLE & GROFF AS THE
SERVE FOR A THREE- Howard E. Groff, Jr. CORPORATION'S INDEPENDENT CERTIFIED
YEAR TERM John E. Stefan PUBLIC ACCOUNTANTS FOR THE YEAR
Glenn R. Walz ENDING DECEMBER 31, 1998.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below:
SIGNATURE(S) DATE ,1998
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.
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