<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994 Commission File No. 1-5273-1
----------------
STERLING BANCORP
(Exact Name of Registrant as specified in charter)
<TABLE>
<S> <C>
NEW YORK 13-2565216
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
540 MADISON AVENUE, NEW YORK, N.Y. 10022-3299
(Address of principal executive offices) (Zip Code)
</TABLE>
(212) 826-8000
(Registrant's telephone number, including area code)
----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Shares, $1 par value New York Stock Exchange
Floating Interest Rate Convertible Subordinated
Debentures, Third Series, due July 1, 1996 New York Stock Exchange
Floating Interest Rate Convertible Subordinated
Debentures, 4th Series, due November 1, 1998 New York Stock Exchange
Floating Interest Rate Convertible Subordinated
Debentures, Series V, due July 1, 2001 New York Stock Exchange
</TABLE>
----------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. / /
On February 28, 1995 the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $41,807,149.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
THE REGISTRANT HAS ONE CLASS OF COMMON STOCK OF WHICH 6,346,262 SHARES WERE
OUTSTANDING AT MARCH 16, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Specified portions of the Sterling Bancorp 1994 Annual Report are
incorporated by reference in Parts I and II.
(2) Specified portions of the Sterling Bancorp definitive Proxy Statement
dated March 16, 1995 are incorporated by reference in Part III.
================================================================================
<PAGE> 2
STERLING BANCORP
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I- 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-11
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . II-1
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . II-1
Item 9. Changes in and disagreements with accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . II-1
PART III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . III-1
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
Signatures
Exhibits Submitted in a Separate Volume.
</TABLE>
<PAGE> 3
ITEM 1. BUSINESS
GENERAL
Sterling Bancorp (the Registrant), organized in 1966, is a bank holding
company, as defined by the Bank Holding Company Act of 1956 (the BHCA), as
amended, with subsidiaries providing a full range of financial services,
including business and consumer loans, asset based financing, factoring, trade
financing, mortgage lending, leasing and trust and estate services. The
Registrant owns virtually 100% of Sterling National Bank & Trust Company of New
York (the bank), its principal subsidiary, and all of the outstanding shares of
Standard Factors Corporation/Sterling Factors, Universal Finance Corporation,
Sterling Banking Corporation and Sterling Industrial Loan Association (finance
subsidiaries). Zenith Financial Services Company operates as a division of the
Registrant. As used throughout this report, "the Company" refers to Sterling
Bancorp and its subsidiaries.
There is competition in all areas in which the Company conducts its business,
including deposits, loans, domestic and international financing and trust
services. In addition to competing with other banks, the Company also competes
in certain areas of its business with other financial institutions. The
following table presents the components of the loan portfolio for both the
Company and the bank as of December 31, 1994 and 1993. Reference is made to the
information beginning on page 36 of the Company's 1994 Annual Report (pages 11
to 41 of which are incorporated herein by reference) under the caption "CREDIT
RISK".
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------------- --------------------------
The Company The bank The Company The bank
----------- --------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C>
Domestic
Term Federal funds sold $ -- $ -- $ 40,000 $ 40,000
Commercial and industrial 260,869 232,303 218,559 198,120
Real estate - mortgage 42,079 42,079 34,808 34,808
Real estate - construction 1,486 1,486 1,665 1,665
Installment - individuals 12,920 12,920 8,403 8,403
Foreign
Governments and official
institutions 789 789 789 789
-------- -------- -------- --------
Loans, gross 318,143 289,577 304,224 283,785
Less: Unearned discounts 5,374 5,104 5,473 5,247
-------- -------- -------- --------
Loans, net of unearned
discounts $312,769 $284,473 $298,751 $278,538
======== ======== ======== ========
</TABLE>
The BHCA requires the prior approval of the Federal Reserve Board for the
acquisition by a bank holding company of more than 5% of the voting stock or
substantially all of the assets of any bank or bank holding company. Also,
under the BHCA, bank holding companies are prohibited, with certain exceptions,
from engaging in, or from acquiring more than 5% of the voting stock of any
company engaging in, activities other than banking or managing or controlling
banks or furnishing services to or performing services for their subsidiaries.
The BHCA also authorized the Federal Reserve Board to permit bank holding
companies to
I-1
<PAGE> 4
engage in, and to acquire or retain shares of companies that engage in,
activities which the Federal Reserve Board determines to be so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
The Federal Reserve Board has ruled on a number of activities and found some of
them to come within such standard while finding that other activities do not
fall within the permissible scope of such standard; other activities
have been proposed by the Federal Reserve Board for consideration. The effect
of the Federal Reserve Board's findings under the standard has been to expand
the financially related activities in which bank holding companies may engage.
Revisions of the Federal Reserve Board's principal regulation (Regulation Y)
affecting bank holding companies have expanded the scope of permissible
bank-related activities and liberalized procedures to allow the entry into such
activities. In addition, the BHCA prohibits bank holding companies from
acquiring direct or indirect control of more than a 5% interest in a bank or
bank holding company located in a state other than New York unless the laws of
such state expressly authorize such acquisition.
There are also various requirements and restrictions imposed by the laws of the
United States and the State of New York and by regulations of the Federal
Reserve System, of which the bank is a member, affecting the operations of the
Company including the requirement to maintain reserves against deposits,
restrictions relating to: (a) the nature and amount of loans that may be made
by the bank and the interest that may be charged thereon; (b) extensions of
credit by subsidiary banks of a bank holding company to the bank holding
company or certain of its subsidiaries; (c) on investments in the stock or
other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower; and (d) other investments, branching and
other activities of the Company and the bank. Regulatory limitations on the
payment of dividends to the Registrant by the bank are discussed in the
"FINANCIAL CONDITION" section beginning on page 35 of the Company's 1994 Annual
Report. The Registrant and its finance subsidiaries are subject to supervision
and regulation by the Federal Reserve Board (FRB); Sterling Industrial Loan
Association is subject to supervision and regulation by the Bureau of Financial
Institutions of the State Corporation Commission of the Commonwealth of
Virginia; Sterling Banking Corporation is subject to supervision and regulation
by the Banking Department of the State of New York; the bank is subject to
supervision and regulation by the Office of the Comptroller of the Currency
(the Comptroller) and, by reason of the insurance of its deposits to the extent
permitted by law, to the regulations of the Federal Deposit Insurance
Corporation (FDIC).
The Company and the bank are subject to risk-based capital and leverage
guidelines issued by U.S. banking industry regulators for banks and bank
holding companies in the United States. Pursuant to provisions of FDICIA,
which, among other things, requires the federal depository institution
regulatory agencies to take specific prompt actions with respect to
institutions that do not meet minimum capital standards, the agencies have
adopted regulations creating and defining five capital tiers, the highest of
which is "well capitalized". As of December 31, 1994 the bank was "well
capitalized". The capital components and ratios for the Company and the bank
are presented in the Company's 1994 Annual Report on page 40.
I-2
<PAGE> 5
There have been a number of legislative and regulatory proposals that would
have an impact on the operations of bank holding companies and their banks.
While the changing legislation and regulatory environment does not permit
forecasts to be made with any degree of certainty, the Company is unaware of
any pending legislative reforms or regulatory activities which would materially
affect its financial position or operating results in the foreseeable future.
The Federal Reserve Board has issued regulations under the BHCA that require a
bank holding company to serve as a source of financial and managerial strength
to its subsidiary banks. As a result, the Federal Reserve Board, pursuant to
such regulations, may require the Registrant to stand ready to use its
resources to provide adequate capital funds to its banking subsidiaries during
periods of financial stress or adversity. This support may be required at
times when, absent such regulations, the bank holding company might not
otherwise provide such support.
The earnings of the Registrant and its finance subsidiaries and the bank are
affected by legislative changes and by regulations and policies of various
governmental authorities, including the Federal Reserve System, the
Comptroller, and the states in which the Registrant's subsidiaries operate.
Such changes and policies significantly affect the growth of deposits as well
as the cost of purchased funds and the return on earning assets.
Changing conditions in the national economy and in the money markets make it
impossible to predict future changes in interest rates, deposit levels, loan
demand or their effects on the business and earnings of the Registrant and its
subsidiaries. Foreign activities of the Company are not considered to be
material.
I-3
<PAGE> 6
THE BANK
Sterling National Bank & Trust Company of New York was organized in 1929 under
the National Bank Act and commenced operations in New York City. The bank
maintains six offices in New York City (three branches and an International
Banking Facility in Manhattan and two branches in Queens). The executive
office is located at 540 Madison Avenue, New York, New York. There are
regional representatives located in Los Angeles, California and Richmond,
Virginia.
The bank provides a range of banking services to businesses and individuals
including checking, savings and money market accounts, certificates of deposit,
business loans, personal and installment loans, VISA/MASTERCARD, safe deposit
and night depository facilities. Business lending, depository and related
financial services are furnished to a wide range of customers in diverse
industries, including commercial, industrial and financial companies of all
sizes as well as government and non-profit agencies. Loan facilities available
to these customers include short-term revolving credit arrangements, term
loans, letters of credit, factoring, accounts receivable financing, equipment
financing, real estate and mortgage loans, leasing and lock box services.
Through its international division and International Banking Facility, the bank
offers financial services to its customers and correspondents in the world's
major financial centers. These services consist of financing import and export
transactions, issuance of letters of credit and creation of bankers
acceptances. In addition to its direct worldwide correspondent banking
relationships, active bank account relationships are maintained with leading
foreign banking institutions in major financial centers. The bank's trust
division provides a variety of fiduciary, investment management, advisory and
corporate agency services to individuals, corporations and foundations. The
bank acts as trustee for pension, profit-sharing and other employee benefit
plans and personal trusts and estates. For corporations, the bank acts as
trustee, transfer agent, registrar and in other corporate agency capacities.
Term Federal funds sold represent loans to commercial banks in the United
States. There are no industry concentrations (exceeding 10% of loans, gross)
in the commercial and industrial loan portfolio. Approximately 81% of the
bank's loans are to borrowers located in the metropolitan New York area. The
bank's legal lending limit to a single borrower was approximately $7.5 million
at December 31, 1994.
The composition of income from the bank's operations for the years ended: [1]
December 31, 1994 included interest and fees on commercial and other loans
(47%), interest and dividends on investments securities (44%) and other (9%);
[2] December 31, 1993 included interest on term Federal funds sold (2%),
interest and fees on commercial and other loans (44%), interest and dividends
on investment securities (43%), and other (11%); [3] December 31, 1992 included
interest on term Federal funds sold (6%), interest and fees on commercial and
other loans (37%), interest and dividends on investment securities (42%), and
other (15%).
At December 31, 1994, the bank had 189 employees, consisting of 73 officers and
116 supervisory and clerical employees. The bank considers its relations with
its employees to be satisfactory.
I-4
<PAGE> 7
REGISTRANT AND FINANCE SUBSIDIARIES
The Registrant and its finance subsidiaries engage in various types of secured
financing activities such as asset based financing, factoring, consumer
receivables financing and residential mortgage loans and service certain such
accounts for the bank.
Asset based financing services rendered by the Registrant and its finance
subsidiaries include new business referral, collection, supervisory,
examination and bookkeeping to the bank for fees; and the bank assumes all
credit risks.
Standard Factors Corporation/Sterling Factors ("Factors") provides factoring
services. Factors purchases client's accounts receivable, assumes credit risk
on approved orders and handles credit and collection details and bookkeeping
requirements. Income for these services is derived from commissions charged
for receivables serviced and interest charged on advances to the client. In
addition, Factors services the bank's portfolio without assuming the credit
risk for those factored receivables managed for the bank. For these services,
Standard Factors Corporation receives a portion of factoring commissions paid
by the clients plus a portion of interest charged on advances. The accounts
receivable factored are for clients primarily engaged in the apparel and
textile industries.
The Registrant and its finance subsidiaries make business and consumer loans.
The loans are usually secured by real estate, personal property, accounts
receivable or other collateral; occasionally unsecured working capital advances
are provided to its customers.
Sterling Industrial Loan Association (S.I.L.A.), located in Richmond, Virginia,
jointly originates and services mortgage loans to homeowners funded by the
bank. S.I.L.A. receives a service fee. The loans are repayable in equal
monthly installments over periods ranging from 36 to 180 months. Loans are
usually made to allow the borrower to make home repairs, to consolidate debt or
to meet educational, medical or other expenses. The loans are secured by first
or second mortgages. The amounts loaned are less than the borrower's equity in
the home, as determined by appraisals.
On June 1, 1993, the Registrant acquired the assets of Zenith Financial
Corporation, a nationwide provider of consumer receivables financing. As a
division of the Registrant, Zenith engages in asset based lending with
independent dealers who market products (i.e., housewares, appliances,
automobiles, educational material, et al) to consumers on an installment basis
with repayment terms between 12 and 48 months. Zenith administers these
installment contracts for the dealer, providing billing, payment processing and
other bookkeeping services. Zenith makes advances to each dealer of up to 80%
of the discounted aggregate value of the dealer's installment contracts.
I-5
<PAGE> 8
The composition of income (excluding equity in undistributed net income of the
banking subsidiary) of the Registrant and its finance subsidiaries for the
years ended: [1] December 31, 1994 included interest and fees on loans (46%),
interest and fees on accounts receivable factored (18%), dividends, interest
and service fees (35%) and other (1%); [2] December 31, 1993 included interest
and fees on loans (32%) interest and fees on accounts receivable factored
(14%), dividends, interest and service fees (50%), and other (4%); [3] December
31, 1992 included interest and fees on loans (11%), interest and fees on
accounts receivable factored (26%), dividends, interest and service fees (49%),
and other (14%).
At December 31, 1994, the Registrant and its finance subsidiaries employed 33
persons consisting of 10 officers with the balance of the employees performing
supervisory and clerical functions. Of these persons, 6 are represented by
District 65 Wholesale, Retail, Office and Processing Union. The Registrant and
its finance subsidiaries consider employee relations to be satisfactory.
SELECTED CONSOLIDATED STATISTICAL INFORMATION
I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest
Rates and Interest Differential.
The information appearing on pages 38, 39 and 41 of the Company's 1994 Annual
Report is incorporated herein by reference.
II. Investment Portfolio
Shown below is a summary of the Company's investment securities by type with
related book values:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1994 1993 1992
------- ------- --------
(in thousands)
<S> <C> <C> <C>
U.S. Treasury securities $ 41,022 $ 40,835 $ 28,427
Obligations of U.S. government corporations
and agencies--mortgage-backed securities 261,433 222,532 153,933
Obligations of states and political sub-
divisions................................... 30 30 178
Debt securities issued by foreign governments. 4,000 4,500 4,500
Corporate debt securities..................... -- 2,005 10,655
Other debt securities......................... 1,118 10,104 18,567
Federal Reserve Bank and other stock invest-
ments....................................... 4,179 6,810 3,311
-------- -------- --------
Total................................... $311,782 $286,816 $219,571
======== ======== ========
</TABLE>
Information regarding book values and range of maturities by type of security
and weighted average yields for totals of each category is presented in the
Company's 1994 Annual Report on pages 18, 19 and 20 and is incorporated herein
by reference. The average yield by maturity range is not available.
I-6
<PAGE> 9
III. Loan Portfolio
The following table sets forth the composition of the Company's loan portfolio
net of unearned discounts at the end of each of the most recent five fiscal
years:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Domestic
Term Federal funds
sold............... $ -- $ 40,000 $ 99,000 $ 75,000 $200,000
Commercial and
industrial......... 260,869 218,559 150,681 115,782 130,488
Real estate -
mortgage........... 42,079 34,808 36,349 36,050 42,981
Real estate -
construction 1,486 1,665 1,606 1,833 --
Installment -
individuals........ 12,920 8,403 6,258 6,051 4,342
Other................ -- -- 982 639 1,389
Foreign
Government and
official insti-
tutions........... 789 789 789 789 789
-------- -------- -------- -------- --------
Loans, gross..... 318,143 304,224 295,665 236,144 379,989
Less: unearned discounts 5,374 5,473 6,874 8,546 11,426
-------- -------- -------- -------- --------
Loans, net of
unearned
discounts..... $312,769 $298,751 $288,791 $227,598 $368,563
======== ======== ======== ======== ========
</TABLE>
The following table sets forth the maturities and sensitivity to changes in
interest rates of selected loans of the Company's loan portfolio at December
31, 1994:
<TABLE>
<CAPTION>
Due One Due One Due Over Total
Year to Five Five Gross
or Less Years Years Loans
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Commercial, industrial and
other........................ $236,290 $ 24,495 $ 84 $260,869
Real estate - mortgage.......... 4,003 18,700 19,376 42,079
Real estate - construction 1,486 -- -- 1,486
Foreign......................... 789 -- -- 789
-------- -------- -------- --------
Total................... $242,568 $ 43,195 $ 19,460 $305,223
======== ======== ======== ========
Loans due after one year,
which have:
Predetermined interest
rates..................... $ 26,548 $ 19,460 $ 46,008
Floating or adjustable
interest rates........... 16,647 -- 16,647
-------- --------- --------
Total................... $ 43,195 $ 19,460 $ 62,655
======== ======== ========
</TABLE>
I-7
<PAGE> 10
It is the policy of the Company to consider all customer requests for
extensions of original maturity dates (rollovers), whether in whole or
in part, as though each was an application for a new loan subject to
standard approval criteria, including credit evaluation. The
information appearing in the Company's 1994 Annual Report beginning on
page 36 under the caption "CREDIT RISK", beginning on page 20 in
footnote 4 and on page 17 in footnote 1 under the caption "Loans" is
incorporated herein by reference.
The following table sets forth the aggregate amount of domestic
non-accrual, past due and restructured loans of the Company at the end
of each of the most recent five fiscal years; as of December 31, 1994,
there were no foreign loans accounted for on a nonaccrual basis or which
were troubled debt restructurings:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual basis loans* $ 575[1] $2,297[1] $3,309[1] $4,499[1] $ 533
Past due 90 days or more
(other than the above)[2]. 293 146 619 3,873 254
------ ------ ------ ------ ------
Total................. $ 868 $2,443 $3,928 $8,372 $ 787
====== ====== ====== ====== ======
Note:Includes restructured
debt of............ $ -- $ -- $ -- $ -- $ 160
====== ====== ====== ====== ======
*Interest income that would
have been earned on non-
accrual and reduced rate
loans outstanding......... $ 86 $ 169 $ 313 $ 378 $ 73
====== ====== ====== ====== ======
Applicable interest income
actually realized......... $ 18 $ 98 $ 72 $ 16 $ --
====== ====== ====== ====== ======
Nonaccrual, past due and
restructured loans as a
percentage of total gross
loans.................... .27% .80% 1.33% 3.55% .20%
====== ====== ====== ====== =====
</TABLE>
[1] Includes $-0-, $1.4, $1.9 and $2.5 million at December 31, 1994,
1993, 1992 and 1991, respectively, representing the balance of a
loan to a single borrower who filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code during the third quarter
of 1991.
[2] Loans contractually past due 90 days or more as to principal or
interest and still accruing are loans which are both well secured
or guaranteed by financially responsible third parties and are in
the process of collection.
I-8
<PAGE> 11
IV. Summary of Loan Loss Experience
The information appearing in the Company's 1994 Annual Report on page 21 in
footnote 5 is incorporated herein by reference. The following table sets forth
certain information with respect to the Company's loan loss experience for each
of the most recent five fiscal years:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average loans outstanding, net
of unearned discounts, during
year............................ $255,223 $228,604 $211,917 $248,490 $351,388
======== ======== ======== ======== ========
Allowance for possible loan losses:
Balance at beginning of year...... $ 3,414 $ 3,177 $ 3,734 $ 3,373 $ 3,794
-------- -------- -------- -------- --------
Charge-offs:
Commercial and industrial..... 401 670 1,799 7,661 524
Real Estate 109 -- -- -- --
Installment................... 22 45 120 29 22
-------- -------- -------- -------- --------
Total charge-offs........... 532 715 1,919 7,690 546
-------- -------- -------- -------- --------
Recoveries:
Commercial and industrial..... 201 41 25 38 116
Installment................... -- 11 47 13 9
--------- -------- -------- -------- --------
Total recoveries............ 201 52 72 51 125
-------- -------- -------- -------- --------
Less: Net charge-offs............ 331 663 1,847 7,639 421
-------- -------- -------- -------- --------
Provision for possible loan losses 1,053 690 1,290 8,000 --
-------- -------- -------- -------- --------
Allowance - acquired portfolio -- 210 -- -- --
--------- -------- -------- -------- --------
Balance at end of year............ $ 4,136 $ 3,414 $ 3,177 $ 3,734 $ 3,373
======== ======== ======== ======== ========
Ratio of net charge-offs to
average loans outstanding, net
of unearned discounts during
year............................ .13% .29% .87% 3.07% .12%
======== ======= ======== ======== ========
</TABLE>
On June 1, 1993 the parent company purchased for cash the assets (principally
loans) of Zenith Financial Corporation, a nationwide provider of consumer
receivables financing. The purchase price included the allowance for loan
losses of $209,627.
The Company's allowance for possible loan losses is a general reserve,
maintained without any specific dedication to the components of the loan
portfolio, available to meet the credit exposure implicit in any lending
activity. The information beginning on page 36 of the Company's 1994 Annual
Report under the caption "CREDIT RISK" is incorporated herein by reference.
The Company considers its allowance for possible loan losses to be adequate
based upon the size and risk characteristics of the outstanding loan portfolio
at December 31, 1994. While net losses within the loan portfolio are not
statistically predictable, it is possible that a deterioration in economic
conditions in the next twelve months could require future provisions for loan
losses above the level taken in 1994. The Company does not anticipate any
recurrence of net credit losses of the magnitude experienced in 1991.
I-9
<PAGE> 12
V. Deposits
Average deposits and average rates paid for each of the most recent three years
is presented in the Company's 1994 Annual Report on page 38 and is incorporated
herein by reference.
Outstanding time certificates of deposit issued from domestic offices in
amounts of $100,000 or more and interest expense on domestic and foreign
deposits are presented in the Company's 1994 Annual Report on page 21 in
footnote 6 and is incorporated herein by reference.
The following table provides certain information with respect to the Company's
deposits for each of the most recent three fiscal years:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Domestic
Demand $174,897 $174,089 $159,235
NOW 34,055 32,253 28,441
Savings 29,201 33,078 34,851
Money Market 118,571 127,939 133,260
Time deposits, by remaining
periods to maturity
Within 3 months 58,527 67,128 72,219
After 3 months but within 1 year 23,172 23,249 16,066
After 1 but within 5 years 76,210 12,580 8,757
-------- -------- --------
Total domestic deposits 514,633 470,316 452,829
-------- -------- --------
Foreign
Time deposits, by remaining
periods to maturity
Within 3 months 1,670 1,670 2,330
After 3 months but within 1 year 1,000 1,000 1,000
-------- -------- --------
Total foreign deposits 2,670 2,670 3,330
-------- -------- --------
Total deposits $517,303 $472,986 $456,159
======== ======== ========
</TABLE>
Interest expense for the most recent three fiscal years is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1994 1993 1992
-------- -------- -------
(in thousands)
<S> <C> <C> <C>
NOW $ 273 $ 394 $ 603
Savings 685 907 921
Money market 2,353 2,735 3,428
Time--domestic 5,058 2,403 2,818
--foreign 104 79 158
-------- -------- -------
Total interest expense $ 8,473 $ 6,518 $ 7,928
======== ======== =======
</TABLE>
I-10
<PAGE> 13
VI. Return on Equity and Assets
The Company's returns on average total assets and average shareholders' equity,
dividend payout ratio and average shareholders' equity to average total assets
for each of the most recent three years follow:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Return on average total assets (Net income
divided by average total assets)..... .61% .57% .52%
Return on average shareholders' equity (Net
income divided by average equity).... 7.52% 6.17% 5.19%
Dividend payout ratio (Dividends declared per
share divided by net income per share).... 33.33% 40.00% 48.78%
Average shareholders' equity to average total
assets (Average equity divided by average
total assets)............................. 8.08% 9.19% 9.98%
</TABLE>
VII. Short-Term Borrowings
Balance and rate data for significant categories of the Company's Short-Term
Borrowings, for each of the most recent three years is presented in the
Company's 1994 Annual Report on page 22 in footnote 7 and is incorporated by
reference.
ITEM 2. PROPERTIES
The principal offices of the Company occupy four contiguous floors at 540
Madison Avenue at 55th Street, New York, N.Y. consisting of approximately
29,000 square feet. These are held under two leases, of which the one covering
the upper floor expires December 31, 1996. The other, covering the lower three
floors, expires December 31, 1996 with a renewal option to December 31, 2001.
Annual rental commitments approximate $882,000. Certain finance subsidiaries
maintain offices in Beverly Hills, California and Richmond, Virginia.
In addition to the principal offices, the bank maintains operating leases for
three additional branch offices, the International Banking Facility and an
Operations Center with an aggregate of approximately 43,100 square feet. The
annual office rental commitments for these premises approximates $542,000. The
leases have expiration dates ranging from 2001 through 2008 with varying
additional renewal options. The bank also maintains a branch located in Forest
Hills owned by the bank (and not subject to a mortgage).
I-11
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
Neither Registrant nor any of its subsidiaries is party to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information beginning on page 12 of the Sterling Bancorp Proxy Statement
dated March 16, 1995 under the captions "Approval of Stock Incentive Plan
Amendment" and "Shareholder Proposal" is incorporated herein by reference.
I-12
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information appearing on page 37 of the Sterling Bancorp 1994 Annual Report
under the caption "MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS" is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing on page 34 of the 1994 Annual Report under the
caption "Selected Financial Data" is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information appearing on pages 35 - 37 of the 1994 Annual Report under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" is incorporated herein by reference. Supplementary Data
appearing on page 32 of the 1994 Annual Report under the caption "Quarterly
Data (Unaudited)" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements as of December 31, 1994 and
1993 and for each of the years in the three-year period ended December 31, 1994
and the statements of condition of Sterling National Bank & Trust Company of
New York as of December 31, 1994 and 1993, notes thereto and Independent
Auditors' Report thereon appearing on pages 11 - 33 of the 1994 Annual Report,
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II-1
<PAGE> 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information beginning on page 1 of the Sterling Bancorp Proxy Statement
dated March 16, 1995 under the caption "Election of Directors" and on page 10
of the same proxy statement under the caption "Security Ownership of Directors
and Executive Officers and Certain Beneficial Owners" are incorporated herein
by reference.
Executive Officers - This information is included pursuant to Instruction 3 to
Item 401 (b) and (c) of Regulation S-K:
<TABLE>
<CAPTION>
Held
Executive
Office
Name of Executive Title Age Since
----------------- ------------------- ---- ---------
<S> <C> <C> <C>
Louis J. Cappelli..... Chairman of the Board and
Chief Executive Officer,
Director 64 1967
John C. Millman....... President, Director 52 1986
Jerrold Gilbert....... Executive Vice President, General
Counsel & Secretary 58 1974
John W. Tietjen....... Senior Vice President, Treasurer
and Chief Financial Officer 50 1989
John A. Aloisio....... Vice President 52 1992
Leonard Rudolph....... Vice President 47 1992
Frank J. Voso......... Vice President 51 1989
</TABLE>
All executive officers are elected annually by the Board of Directors and serve
at the pleasure of the Board. There are no arrangements or understandings
between any of the foregoing officers and any other person or persons pursuant
to which he was selected as an executive officer.
ITEM 11. EXECUTIVE COMPENSATION
The information beginning on page 3 of the Sterling Bancorp Proxy Statement
dated March 16, 1995 under the caption " Executive Compensation and Related
Matters" and on page 9 of the same Proxy Statement under the caption
"Transactions with the Company and Other Matters" are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information beginning on page 10 of the Sterling Bancorp Proxy Statement
dated March 16, 1995 under the caption "Security Ownership of Directors and
Executive Officers and Certain Beneficial Owners" is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing on page 9 of the Sterling Bancorp Proxy Statement
dated March 16, 1995 under the caption "Transactions with the Company and Other
Matters" is incorporated herein by reference.
III-1
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The documents filed as a part of this report are listed below:
1. Financial Statements
Annual Report to security holders, Sterling Bancorp
1994 Annual Report (This document is filed only to
the extent of pages 11 through 41 which are
incorporated by reference herein).
2. Financial Statement Schedules
None
3. Exhibits
3(i)(A) Amended and restated Certificate of
Incorporation filed with the State of New
York, Department of State, August 14, 1986
(Filed as Exhibit 3.3 to Registrant's Form
10-K for the fiscal year ended December
31, 1986 and incorporated by reference
herein).
(i)(B) Certificate of Amendment of The
Certificate of Incorporation filed with
the State of New York Department of State,
June 13, 1988 (Filed as Exhibit 3.5 to
Registrant's Form 10-K for the fiscal year
ended December 31, 1988 and incorporated
by reference herein).
(i)(C) Certificate of Amendment of the
Certificate of Incorporation filed with
the State of New York Department of
State, March 5, 1993 (Filed as Exhibit
4.1 to Registrant's Form 8-K dated March
5, 1993 and incorporated by reference
herein).
3(ii) By-Laws as in effect on March 15, 1993
(Filed as Exhibit 3.3 to the Registrant's
Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein
by reference).
4 (a) Indenture relating to floating interest
rate convertible subordinated debentures,
third series, due July 1, 1996 (Filed as
Exhibit 4(a) to Registrant's Registration
Statement 2-97263 and incorporated by
reference herein).
(b) Indenture relating to floating interest
rate convertible subordinated debentures,
4th series, due November 1, 1998 (Filed as
Exhibit 4(a) to Registrant's Registration
Statement 33-23877 and incorporated by
reference herein).
(c) Indenture dated as of August 1, 1994
relating to floating interest rate
convertible subordinated debentures,
series V, due July 1, 2001 (Filed as
Exhibit T3C to Registrant's Application
for Qualification of Indenture No.
022-22183 and incorporated herein by
reference).
10(i) Employment Agreements, dated as of
February 19, 1993 (Filed as Exhibits
3.4(a) and 3.4(b), respectively, to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1992 and incorporated
herein by reference).
(a) For Louis J. Cappelli
(b) For John C. Millman
(ii) Amendments dated February 14, 1995 to
Employment Agreements
(a) For Louis J. Cappelli
(b) For John C. Millman
11 Statement re Computation of Per Share
Earnings.
IV-1
<PAGE> 18
13 Annual Report to security holders,
Sterling Bancorp 1994 Annual Report (This
document is filed only to the extent of
pages 11 through 41 which are incorporated
by reference herein).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the last quarter
of the period covered by this report.
IV-2
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, The Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
STERLING BANCORP
/s/ Louis J. Cappelli
---------------------------
Louis J. Cappelli, Chairman
(Principal Executive Officer)
March 29, 1995
Date
/s/ John W. Tietjen
---------------------------
John W. Tietjen, Treasurer
(Principal Financial and Accounting Officer)
March 29, 1995
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
March 29, 1995 /s/ Louis J. Cappelli Director
-------------- ------------------------------ -----------------------
(Date) (Signature) (Title)
March 29, 1995 /s/ John C. Millman Director
-------------- ------------------------------ ------------------------
(Date) (Signature) (Title)
March 29, 1995 /s/ Allan F. Hershfield Director
-------------- ------------------------------ ------------------------
(Date) (Signature) (Title)
March 29, 1995 /s/ Maxwell M. Rabb Director
-------------- ------------------------------ ------------------------
(Date) (Signature) (Title)
March 29, 1995 /s/ Walter Feldesman Director
-------------- ------------------------------ ------------------------
(Date) (Signature) (Title)
March 29, 1995 /s/ Henry J. Humphreys Director
-------------- ------------------------------ ------------------------
(Date) (Signature) (Title)
March 29, 1995 /s/ Lillian Berkman Director
-------------- ------------------------------ ------------------------
(Date) (Signature) (Title)
</TABLE>
<PAGE> 20
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
DOCUMENTS FILED
AS A PART
OF THIS REPORT
ON
FORM 10-K
ANNUAL REPORT - 1994
------------
STERLING BANCORP
================================================================================
<PAGE> 21
DOCUMENT INDEX
1. Financial Statements
Annual Report to security holders, Sterling Bancorp
1994 Annual Report (This document is filed only to
the extent of pages 11 through 41 which are
incorporated by reference herein).
2. Financial Statement Schedules
None
3. Exhibits
3(i)(A) Amended and restated Certificate of
Incorporation filed with the State of New
York, Department of State, August 14, 1986
(Filed as Exhibit 3.3 to Registrant's Form
10-K for the fiscal year ended December
31, 1986 and incorporated by reference
herein).
(i)(B) Certificate of Amendment of The
Certificate of Incorporation filed with
the State of New York Department of State,
June 13, 1988 (Filed as Exhibit 3.5 to
Registrant's Form 10-K for the fiscal year
ended December 31, 1988 and incorporated
by reference herein).
(i)(C) Certificate of Amendment of the
Certificate of Incorporation filed with
the State of New York Department of
State, March 5, 1993 (Filed as Exhibit
4.1 to Registrant's Form 8-K dated March
5, 1993 and incorporated by reference
herein).
3(ii) By-Laws as in effect on March 15, 1993
(Filed as Exhibit 3.3 to the Registrant's
Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein
by reference).
4 (a) Indenture relating to floating interest
rate convertible subordinated debentures,
third series, due July 1, 1996 (Filed as
Exhibit 4(a) to Registrant's Registration
Statement 2-97263 and incorporated by
reference herein).
(b) Indenture relating to floating interest
rate convertible subordinated debentures,
4th series, due November 1, 1998 (Filed as
Exhibit 4(a) to Registrant's Registration
Statement 33-23877 and incorporated by
reference herein).
(c) Indenture dated as of August 1, 1994
relating to floating interest rate
convertible subordinated debentures,
series V, due July 1, 2001 (Filed as
Exhibit T3C to Registrant's Application
for Qualification of Indenture No.
022-22183 and incorporated herein by
reference).
10(i) Employment Agreements, dated as of
February 19, 1993 (Filed as Exhibits
3.4(a) and 3.4(b), respectively, to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1992 and incorporated
herein by reference).
(a) For Louis J. Cappelli
(b) For John C. Millman
(ii) Amendments dated February 14, 1995 to
Employment Agreements
(a) For Louis J. Cappelli
(b) For John C. Millman
11 Statement re Computation of Per Share
Earnings.
13 Annual Report to security holders,
Sterling Bancorp 1994 Annual Report (This
document is filed only to the extent of
pages 11 through 41 which are incorporated
by reference herein).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
4. Reports on Form 8-K:
There were no reports on Form 8-K filed during the last
quarter of the period covered by this report.
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
3(i)(A) Amended and restated Certificate of Incorporation filed with the State of New York,
Department of State, August 14, 1986 (Filed as Exhibit 3.3 to Registrant's Form 10-K
for the fiscal year ended December 31, 1986 and incorporated by reference herein).
(i)(B) Certificate of Amendment of The Certificate of Incorporation filed with the State of
New York Department of State, June 13, 1988 (Filed as Exhibit 3.5 to Registrant's Form 10-K
for the fiscal year ended December 31 1988 and incorporated by reference herein).
(i)(C) Certificate of Amendment of the Certificate of Incorporation filed with the State of
New York Department of State, March 5, 1993 (Filed as Exhibit 4.1 to Registrant's Form
8-K dated March 5, 1993 and incorporated by reference herein).
3(ii) By-Laws as in effect on March 15, 1993 (Filed as Exhibit 3.3 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1992 and incorporated herein by reference).
4 (a) Indenture relating to floating interest rate convertible subordinated debentures, third
series, due July 1, 1996 (Filed as Exhibit 4(a) to Registrant's Registration Statement
2-97263 and incorporated by reference herein).
(b) Indenture relating to floating interest rate convertible subordinated debentures, 4th
series, due November 1, 1998 (Filed as Exhibit 4(a) to Registrant's Registration Statement
33-23877 and incorporated by reference herein).
(c) Indenture dated as of August 1, 1994 relating to floating interest rate convertibile
subordinated debentures, series V, due July 1, 2001 (Filed as Exhibit T3C to Registrant's
Application for Qualification of Indenture No. 022-22183 and incorporated herein by
reference).
10(i) Employment Agreements, dated as of February 19, 1993 (Filed as Exhibits 3.4(a) and 3.4(b),
respectively, to the Registrant's Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
(a) For Louis J. Cappelli
(b) For John C. Millman
(ii) Amendments dated February 14, 1995 to Employment Agreements
(a) For Louis J. Cappelli
(b) For John C. Millman
11 Statement re Computation of Per Share Earnings.
13 Annual Report to security holders, Sterling Bancorp 1994 Annual Report (This document is
filed only to the extent of pages 11 through 41 which are incorporated by reference herein).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10(II)(a)
[STERLING BANCORP LETTERHEAD]
February 14, 1995
Mr. Louis J. Cappelli
Chairman
Sterling Bancorp
540 Madison Avenue
New York, NY 10022
Dear Mr. Cappelli:
This will confirm the following amendments to your employment
agreement dated February 19, 1993 with our Company:
(i) The date in the third line of Paragraph 1 (captioned "Term") is
amended to be December 31, 1999.
(ii) Subparagraph (b) of Paragraph 3 (captioned "Compensation and
Benefits") is amended so that with respect to years commencing with
calendar 1994 it reads:
"(b) You may earn bonus compensation for each calendar
year, based upon such performance measures and other
criteria as may be set by the Company's Board of Directors
(or the Compensation Committee of the Board) with respect
to such year."
The foregoing amendments were recommended by the Compensation
Committee and were approved by the Board of Directors at its February 1995 and
November 1994 meetings.
Kindly sign and return the enclosed copy to the Company in order to
confirm your understanding and acceptance of the foregoing amendments.
Sincerely,
STERLING BANCORP
By /s/ Jerrold Gilbert
-----------------------
Exec. Vice President
Agreed:
/s/ LOUIS J. CAPPELLI
--------------------------
Louis J. Cappelli
<PAGE> 1
EXHIBIT 10(II)(b)
[STERLING BANCORP LETTERHEAD]
February 14, 1995
Mr. John C. Millman
President
Sterling Bancorp
540 Madison Avenue
New York, NY 10022
Dear Mr. Millman:
This will confirm the following amendments to your employment
agreement dated February 19, 1993 with our Company:
(i) The date in the third line of Paragraph 1 (captioned "Term") is
amended to be December 31, 1997.
(ii) Subparagraph (b) of Paragraph 3 (captioned "Compensation and
Benefits") is amended so that with respect to years commencing with
calendar 1994 it reads:
"(b) You may earn bonus compensation for each calendar
year, based upon such performance measures and other
criteria as may be set by the Company's Board of Directors
(or the Compensation Committee of the Board) with respect
to such year."
The foregoing amendments were recommended by the Compensation
Committee and were approved by the Board of Directors at its February 1995 and
November 1994 meetings.
Kindly sign and return the enclosed copy to the Company in order to
confirm your understanding and acceptance of the foregoing amendments.
Sincerely,
STERLING BANCORP
By /s/ Jerrold Gilbert
-----------------------
Exec. Vice President
Agreed:
/s/ JOHN C. MILLMAN
--------------------------
John C. Millman
<PAGE> 1
EXHIBIT 11
STERLING BANCORP AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C> <C>
Income for primary earnings per share:
Net income A $ 4,005,869 $ 3,155,397 $ 2,577,214
=========== =========== ===========
Income for fully diluted earnings
per share:
Net income $ 4,005,869 $ 3,155,397 $ 2,577,214
Add expenses, net of tax effect
on assumed conversion of
convertible subordinated
debentures:
Interest 1,061,345 964,248 1,371,221
Amortization of bond discount
and expense 17,841 18,140 18,232
----------- ----------- -----------
Income for fully diluted
shares B $ 5,085,055 $ 4,137,785 $ 3,966,667
=========== =========== ===========
Common shares for primary earnings
per share:
Average shares issued (note a) 6,496,605 6,496,521 6,492,412
Add assumed conversion at the beginning
of the period of issuance date if later:
Stock options 598 1,370 --
ESOP shares allocated 15,410 3,542 --
Less average treasury shares (note b) 150,393 150,393 150,085
----------- ----------- ---------
Average common shares for compu-
tation of primary earnings
per share C 6,362,220 6,351,040 6,342,327
=========== =========== ==========
Common shares for fully diluted
earnings per share:
Average common shares 6,362,220 6,351,040 6,342,327
Add assumed conversion at the beginning
of the period or issuance date if later:
Convertible subordinated debentures 2,372,913 2,191,560 2,939,678
Series B preferred shares 2,576 2,576 2,576
ESOP shares unallocated 234,590 188,766 --
Stock options 79 481 --
----------- ----------- ------------
Average common shares for
computation of fully di-
luted earnings per share D 8,972,378 8,734,423 9,284,581
=========== =========== ===========
Net income per average
common share (A / C) $ .63 $ .50 $ .41
====== ====== =====
Net income per average common
share assuming full dilution (B / D) $ .57 $ .47 $ .43
====== ====== =====
</TABLE>
(a) Based on shares issued as at end of each month.
(b) Based on shares in treasury as at end of each month.
<PAGE> 1
Exhibit 13
FINANCIAL INFORMATION
<TABLE>
<S> <C>
Consolidated Financial Statements
of Sterling Bancorp and Subsidiaries 12
Statements of Condition
of Sterling National Bank &
Trust Company of New York 16
Notes to Consolidated Financial Statements 17
Independent Auditors' Report 33
Selected Financial Data 34
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 35
CORPORATE DIRECTORIES
Sterling Bancorp and Subsidiaries 42
</TABLE>
11
<PAGE> 2
STERLING BANCORP and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 39,224,764 $ 35,975,787
Interest-bearing deposits with other banks 2,970,000 2,970,000
Federal funds sold 8,000,000 --
Investment securities (estimated market value $294,583,889 and
$287,909,188, respectively) 311,781,877 286,815,791
Loans, net of unearned discounts 312,769,179 298,750,821
Less allowance for possible loan losses 4,135,810 3,413,947
------------ ------------
Loans, net 308,633,369 295,336,874
------------ ------------
Customers' liability under acceptances 624,083 201,669
Excess cost over equity in net assets of the banking subsidiary 21,158,440 21,158,440
Premises and equipment, net 3,423,320 2,593,890
Accrued interest receivable 3,985,290 3,501,850
Other assets 6,834,576 4,484,940
------------ ------------
$706,635,719 $653,039,241
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $174,897,143 $174,088,971
Interest-bearing deposits 342,405,372 298,896,955
------------ ------------
Total deposits 517,302,515 472,985,926
Securities sold under agreements to repurchase 44,050,836 37,225,000
Commercial paper 14,672,800 14,320,400
Other short-term borrowings 7,104,224 13,613,964
Acceptances outstanding 624,083 201,669
Due to factoring clients 11,382,321 5,784,952
Accrued expenses and other liabilities 8,755,132 3,635,678
Long-term convertible subordinated debentures 26,446,000 26,892,000
Other long-term borrowings--FHLB 22,500,000 25,500,000
------------ ------------
Total liabilities 652,837,911 600,159,589
------------ ------------
Commitments and contingent liabilities
Convertible preferred stock, Series D--market value guarantee feature 875,000 562,500
Less unearned compensation--unallocated shares 796,506 539,523
Shareholders' Equity
Preferred stock, $5 par value 1,650,760 1,963,260
Common stock, $1 par value. Shares authorized 20,000,000, issued 6,496,605 6,496,605 6,496,605
Capital surplus 28,089,137 28,089,487
Retained earnings 21,592,244 18,920,583
Net unrealized (depreciation) appreciation on securities available for sale,
net of tax (1,140,969) 734,686
------------ ------------
56,687,777 56,204,621
Less
Common stock in treasury at cost, 150,343 and 150,393 shares, respectively 1,489,239 1,489,589
Unearned compensation 1,479,224 1,858,357
------------ ------------
Total shareholders' equity 53,719,314 52,856,675
------------ ------------
$706,635,719 $653,039,241
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
12
<PAGE> 3
STERLING BANCORP and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $23,881,317 $17,454,018 $15,434,679
Deposits with other banks 123,632 97,504 178,909
Investment securities 19,314,475 14,849,795 14,432,982
Federal funds sold 322,714 138,908 525,218
----------- ----------- -----------
Total interest income 43,642,138 32,540,225 30,571,788
----------- ----------- -----------
INTEREST EXPENSE
Deposits 8,473,494 6,518,141 7,928,172
Federal funds purchased and securities sold under
agreements to repurchase 2,076,395 896,440 395,124
Commercial paper 523,648 410,552 546,310
Other short-term borrowings 553,369 210,846 130,446
Long-term convertible subordinated debentures 2,016,417 1,823,475 2,509,991
Other long-term borrowings--FHLB 1,239,073 308,483 --
----------- ----------- -----------
Total interest expense 14,882,396 10,167,937 11,510,043
----------- ----------- -----------
Net interest income 28,759,742 22,372,288 19,061,745
Provision for possible loan losses 1,053,000 690,000 1,290,000
----------- ----------- -----------
Net interest income after provision for
possible loan losses 27,706,742 21,682,288 17,771,745
----------- ----------- -----------
NONINTEREST INCOME
Commissions on letters of credit 811,372 623,019 601,095
Service charges on deposit accounts 1,419,475 1,104,469 910,939
Factoring commissions 607,318 399,588 465,771
Trust fees 564,318 817,760 675,406
Gain on sale of securities, net 41,931 -- 1,568,454
Other income 878,158 926,440 1,028,297
----------- ----------- -----------
Total noninterest income 4,322,572 3,871,276 5,249,962
----------- ----------- -----------
NONINTEREST EXPENSES
Salaries 9,604,384 8,684,823 7,729,628
Employee benefits 2,497,197 2,092,417 2,388,091
----------- ----------- -----------
Total personnel expense 12,101,581 10,777,240 10,117,719
Occupancy expense, net 2,515,084 2,594,388 2,447,353
Equipment expense 1,341,366 1,094,328 1,040,658
Other expenses 6,040,638 5,304,486 5,053,447
----------- ----------- -----------
Total noninterest expenses 21,998,669 19,770,442 18,659,177
----------- ----------- -----------
Income before income taxes 10,030,645 5,783,122 4,362,530
Provision for income taxes 6,024,776 2,627,725 1,785,316
----------- ----------- -----------
Net income $ 4,005,869 $ 3,155,397 $ 2,577,214
=========== =========== ===========
Average number of common shares outstanding
Primary 6,362,220 6,351,040 6,342,327
Fully diluted 8,972,378 8,734,423 --
Earnings per average common share
Primary $ .63 $ .50 $ .41
Fully diluted .57 .47 --
Dividends per common share .21 .20 .20
</TABLE>
See Notes to Consolidated Financial Statements.
13
<PAGE> 4
STERLING BANCORP and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK
Balance at beginning of year $ 1,963,260 $ 25,760 $ 25,760
Issuance of Series D shares -- 2,500,000 --
Market value guarantee feature (312,500) (562,500) --
----------- ----------- -----------
Balance at end of year $ 1,650,760 $ 1,963,260 $ 25,760
=========== =========== ===========
COMMON STOCK
Balance at beginning of year $ 6,496,605 $ 6,496,001 $ 6,480,449
Conversions of subordinated debentures and preferred shares -- 604 15,552
----------- ----------- -----------
Balance at end of year $ 6,496,605 $ 6,496,605 $ 6,496,001
=========== =========== ===========
CAPITAL SURPLUS
Balance at beginning of year $28,089,487 $28,083,276 $27,956,849
Common stock issued from treasury stock (350) -- --
Conversions of subordinated debentures and preferred shares -- 6,211 124,318
Forfeiture of shares issued under incentive compensation plan -- -- 1,560
Net tax benefit of unearned compensation -- -- 549
----------- ----------- -----------
Balance at end of year $28,089,137 $28,089,487 $28,083,276
=========== =========== ===========
RETAINED EARNINGS
Balance at beginning of year $18,920,583 $17,034,557 $15,726,642
Net income 4,005,869 3,155,397 2,577,214
Cash dividends paid--common shares (1,332,707) (1,269,242) (1,269,170)
--preferred shares (1,501) (129) (129)
----------- ----------- -----------
Balance at end of year $21,592,244 $18,920,583 $17,034,557
=========== =========== ===========
NET UNREALIZED (DEPRECIATION)/APPRECIATION
ON SECURITIES AVAILABLE FOR SALE, NET OF TAX
Balance at beginning of year $ 734,686 $ -- $ --
Change in valuation account for securities
available for sale, net of tax (1,875,655) 734,686 --
----------- ----------- -----------
Balance at end of year $(1,140,969) $ 734,686 $ --
=========== =========== ===========
TREASURY STOCK
Balance at beginning of year $(1,489,589) $(1,489,589) $(1,485,629)
Common stock issued from treasury stock 350 -- --
Forfeiture of shares issued under incentive compensation plan -- -- (3,960)
----------- ----------- -----------
Balance at end of year $(1,489,239) $(1,489,589) $(1,489,589)
=========== =========== ===========
UNEARNED COMPENSATION
Balance at beginning of year $(1,858,357) $ -- $ (46,800)
Forfeiture of shares issued under incentive compensation plan -- -- 2,400
Issuance of Series D preferred shares -- (2,500,000) --
Amortization of unearned compensation 122,150 102,120 44,400
Market value guarantee feature--unallocated shares 256,983 539,523 --
----------- ----------- -----------
Balance at end of year $(1,479,224) $(1,858,357) $ --
=========== =========== ===========
TOTAL SHAREHOLDERS' EQUITY
Balance at beginning of year $52,856,675 $50,150,005 $48,657,271
Net changes during the year 862,639 2,706,670 1,492,734
----------- ----------- -----------
Balance at end of year $53,719,314 $52,856,675 $50,150,005
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
14
<PAGE> 5
STERLING BANCORP and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $4,005,869 $3,155,397 $2,577,214
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 1,053,000 690,000 1,290,000
Depreciation and amortization of premises and equipment 526,351 445,297 410,930
Deferred income tax (benefit) provision (2,146,314) (22,114) 165,505
Amortization of unearned compensation 122,150 102,120 44,400
Amortization of premiums on investment securities 2,750,640 4,307,679 2,005,188
Accretion of discounts on investment securities (136,021) (33,345) (179,079)
(Increase) Decrease in accrued interest receivable (483,440) (629,131) 1,063,836
Increase (Decrease) in due to factoring clients 5,597,369 38,603 (314,574)
Increase (Decrease) in accrued expenses and other liabilities 5,119,454 (643,534) (1,027,848)
Gain on sale of securities, net (41,931) -- (1,568,454)
Other, net 1,390,453 282,987 15,069
------------ ------------ ------------
Net cash provided by operating activities 17,757,580 7,693,959 4,482,187
------------ ------------ ------------
INVESTING ACTIVITIES
Net tax benefits of unearned compensation -- -- 549
Purchase of premises and equipment (1,355,781) (439,814) (403,059)
Net decrease in interest-bearing deposits with other banks -- 660,000 1,005,000
Increase in Federal funds sold (8,000,000) -- --
Net increase in loans (14,349,495) (10,413,356) (63,039,186)
Proceeds from sale of investment securities 9,955,694 -- 107,303,906
Proceeds from prepayments, redemption or maturity of
investment securities 108,743,373 134,105,019 100,586,503
Purchase of investment securities (149,707,271) (204,263,816) (207,089,755)
------------- ------------- -------------
Net cash used in investing activities (54,713,480) (80,351,967) (61,636,042)
------------- ------------- -------------
FINANCING ACTIVITIES
Net increase in noninterest-bearing deposits 808,172 14,854,389 45,182,216
Net increase in interest-bearing deposits 43,508,417 1,972,098 32,121,071
Net increase in securities sold under repurchase agreements 6,825,836 30,582,689 1,360,061
Net (decrease) increase in commercial paper and other
short-term borrowings (6,157,340) 8,092,500 (6,768,476)
Issuance of debentures 7,020,000 -- --
Prepayments and maturities of debentures (7,466,000) (8,267,185) (5,845,130)
(Decrease) Increase in other long-term borrowings--FHLB (3,000,000) 25,500,000 --
Issuance of Series D preferred shares -- 2,500,000 --
Funding provided for purchase of Series D preferred shares -- (2,500,000) --
Cash dividends paid on preferred and common shares (1,334,208) (1,269,371) (1,269,299)
------------- ------------- -------------
Net cash provided by financing activities 40,204,877 71,465,120 64,780,443
------------- ------------- -------------
Net increase (decrease) in cash and due from banks 3,248,977 (1,192,888) 7,626,588
Cash and due from banks--beginning of year 35,975,787 37,168,675 29,542,087
------------- ------------- -------------
Cash and due from banks--end of year $ 39,224,764 $ 35,975,787 $ 37,168,675
============= ============= =============
Supplemental schedule of non-cash financing activities:
Debenture and preferred stock conversions $ -- $ 6,815 $ 139,870
Forfeiture of treasury shares under incentive compensation plan -- -- 3,960
Issuance of treasury shares 350 -- --
Supplemental disclosure of cash flow information:
Interest paid 12,505,156 10,381,307 12,722,163
Income taxes paid 4,928,459 1,178,884 1,683,080
Cash paid for assets acquired -- 7,905,912 --
</TABLE>
See Notes to Consolidated Financial Statements.
15
<PAGE> 6
STERLING NATIONAL BANK & Trust Company of New York
STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 38,626,651 $ 35,367,959
Interest-bearing deposits with other banks 2,970,000 2,970,000
Federal funds sold 8,000,000 --
Investment securities (estimated market value $294,538,338 and
$287,864,516, respectively) 311,736,326 286,771,119
Loans, net of unearned discounts 284,473,257 278,537,938
Less allowance for possible loan losses 3,435,427 3,041,737
------------ ------------
Loans, net 281,037,830 275,496,201
------------ ------------
Receivables from affiliates 1,967,549 1,967,549
Customers' liability under acceptances 624,083 201,669
Premises and equipment, net 3,369,790 2,552,003
Accrued interest receivable 3,726,434 3,329,610
Other assets 4,889,253 2,493,012
------------ ------------
$656,947,916 $611,149,122
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $175,059,538 $174,285,560
Interest-bearing deposits 353,560,049 310,964,725
------------ ------------
Total deposits 528,619,587 485,250,285
Securities sold under agreements to repurchase 44,050,836 37,225,000
Other short-term borrowings 7,104,224 13,613,964
Acceptances outstanding 624,083 201,669
Due to factoring clients 2,643,968 468,550
Accrued expenses and other liabilities 5,704,780 1,896,592
Long-term borrowings--FHLB 22,500,000 25,500,000
------------ ------------
Total liabilities 611,247,478 564,156,060
------------ ------------
Commitments and contingent liabilities
Shareholders' Equity
Common stock, $50 par value
Authorized and issued, 358,526 shares 17,926,300 17,926,300
Surplus 18,414,000 18,414,000
Undivided profits 10,501,898 9,918,272
Net unrealized (depreciation) appreciation on securities
available for sale, net of tax (1,141,760) 734,490
------------ ------------
Total shareholders' equity 45,700,438 46,993,062
------------ ------------
$656,947,916 $611,149,122
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
16
<PAGE> 7
STERLING BANCORP and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of Sterling
Bancorp ("the parent company") and its subsidiaries. Throughout the notes, the
term "the Company" refers to Sterling Bancorp and its subsidiaries.
Principles of Consolidation. The consolidated financial statements include the
accounts of the parent company and its subsidiaries, principally Sterling
National Bank & Trust Company of New York ("the bank"), after elimination of
material intercompany transactions.
General Accounting Policies. The Company follows generally accepted accounting
principles and prevailing practices within the banking industry. Certain
reclassifications have been made to the prior years' consolidated financial
statements to conform to the current presentation.
Investment Securities. The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," as of December 31, 1993. SFAS No. 115 requires, among other
things, that securities designated as available for sale be reported at
estimated market value at each period end with the unrealized gain or loss, net
of tax effect, recorded as a component of shareholders' equity.
Securities are designated as available for sale or held to
maturity at the time of acquisition. Securities which the Company will hold for
indefinite periods of time and which might be sold in the future as part of
efforts to manage interest rate risk or in response to changes in interest
rates, changes in prepayment risk, changes in market conditions or changes in
economic factors, are classified as available for sale and carried at estimated
market values. Net aggregate unrealized gains or losses are included in a
valuation allowance account and are reported, net of taxes, as a component of
shareholders' equity. Securities which the Company has the positive intent and
ability to hold to maturity are designated as held to maturity and are carried
at amortized cost, adjusted for amortization of premiums and accretion of
discounts over the period to maturity. Interest and dividends on securities are
reported in interest income. Gains and losses realized on sales of securities
are determined on the specific identification method and are reported in
noninterest income as gain on sale of securities, net.
Loans. Loans are reported at their principal amount outstanding, net of unearned
discounts and unamortized nonrefundable fees and direct costs associated with
their origination or acquisition. Interest earned on loans without discounts is
credited to income based on loan principal amounts outstanding at appropriate
interest rates. Material origination fees net of direct costs and discounts on
loans are credited to income over the terms of the loans using a method which
results in an approximate level rate of return.
Nonaccrual loans are those on which the accrual of interest has
ceased. Loans, are placed on nonaccrual status immediately if, in the opinion
of management, principal or interest is not likely to be paid in accordance
with the terms of the loan agreement, or when principal or interest is past due
90 days or more and collateral, if any, is insufficient to cover principal and
interest. Interest accrued but not collected at the date a loan is placed on
nonaccrual status is reversed against interest income. Interest income is
recognized on nonaccrual loans only to the extent received in cash. However,
where there is doubt regarding the ultimate collectibility of the loan
principal, cash receipts, whether designated as principal or interest, are
thereafter applied to reduce the carrying value of the loan. Loans are restored
to accrual status only when interest and principal payments are brought current
and future payments are reasonably assured.
Allowance for Possible Loan Losses. The allowance for possible loan losses,
which is available for losses incurred in the loan portfolio, is increased by a
provision charged to expense and decreased by charge-offs, net of recoveries.
The provision charged to expense is based on management's
evaluation of the adequacy of the allowance for possible loan losses, which
encompasses consideration of past loss experience and other factors, including
changes in the composition and volume of the loan portfolio, current economic
conditions and the relationship of the allowance to the loan portfolio.
Excess Cost Over Equity in Net Assets of the Banking Subsidiary. Since the bank
was acquired by the parent company prior to October 31, 1970 and the excess
cost over equity in net assets has a continuing value, this excess is not being
amortized.
Premises and Equipment. Premises and equipment, excluding land, are stated at
cost less accumulated depreciation and amortization. Land is reported at cost.
Depreciation is computed on a straight-line basis and is charged to noninterest
expense over the estimated useful lives of the related assets. Amortization of
leasehold improvements is charged to noninterest expense over the terms of the
respective leases or the estimated useful lives of the improvements, whichever
is shorter. Maintenance, repairs and minor improvements are charged to
noninterest expenses as incurred.
17
<PAGE> 8
Income Taxes. The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109 "Accounting for Income Taxes" as of January 1, 1993. The
adoption of SFAS No. 109 had no effect on the Company's results of operations.
SFAS No. 109 required a change to the asset and liability method of accounting
for income taxes from the deferred method of accounting for income taxes
previously followed. Deferred income tax expense (benefit) under SFAS No. 109
is determined by recognizing deferred tax assets and liabilities for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. The realization of deferred tax assets is assessed and a valuation
allowance provided for that portion of the assets for which it is more likely
than not that it will not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates and will be adjusted for the effects of future
changes in tax laws or rates, if any.
For income tax purposes, the Company files: a consolidated Federal income
tax return; combined New York State and New York City income tax returns; and
separate state income tax returns for its out-of-state subsidiaries. The parent
company either pays or collects on account of current income taxes to or from
its subsidiaries. The provision for income taxes for each subsidiary is
recorded as if separate income tax returns had been filed. Income taxes
currently payable or receivable by each subsidiary are paid to or received from
the parent company.
Statements of Cash Flows. For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks.
Earnings Per Average Common Share. Primary earnings per average common share
are computed by dividing net income by the average number of common and common
equivalent shares outstanding during the period. Common shares outstanding
exclude treasury shares. Common equivalent shares include Series D convertible
preferred shares released to participant accounts under the provisions of the
Company's Employee Stock Ownership Plan and the dilutive effect of outstanding
stock options. Series B convertible preferred shares, considered common stock
equivalents, were not significant in any period and have been excluded.
The average common shares outstanding in the computation of fully diluted
earnings per share includes the common shares outstanding adjusted for the
assumed conversion of convertible subordinated debentures and preferred shares
and the additional dilutive effect of outstanding stock options. Net income is
adjusted for interest and amortization of debt expense (after tax effect) on
the convertible subordinated debentures. Earnings per average common share on a
fully diluted basis have not been presented for 1992 because the effects would
be anti-dilutive.
NOTE 2. CASH AND DUE FROM BANKS
The bank is required to maintain average reserves, net of vault cash, on
deposit with the Federal Reserve Bank of New York against outstanding domestic
deposit liabilities. The required reserves, which are reported in cash and due
from banks, were $13,231,000 and $11,473,000 at December 31, 1994 and 1993,
respectively. Average required reserves during 1994 and 1993 were $8,998,000
and $7,976,000, respectively.
NOTE 3. INVESTMENT SECURITIES
The amortized cost and estimated market value of securities available for sale
are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1994 COST GAINS LOSSES VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $30,682,402 $ -- $ 532,402 $30,150,000
Obligations of U.S. government corporations
and agencies--mortgage-backed securities 34,585,046 -- 1,578,058 33,006,988
Federal Reserve Bank and other equity securities 4,177,806 2,421 1,326 4,178,901
----------- ---------- ---------- -----------
Total $69,445,254 $ 2,421 $2,111,786 $67,335,889
=========== ========== ========== ===========
December 31, 1993
---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities $39,529,791 $1,305,374 $ 353 $40,834,812
Obligations of U.S. government corporations
and agencies--mortgage-backed securities 43,425,382 252,671 197,524 43,480,529
Federal Reserve Bank and other equity securities 6,809,438 1,360 1,035 6,809,763
----------- ---------- ---------- -----------
Total $89,764,611 $1,559,405 $ 198,912 $91,125,104
=========== ========== ========== ===========
</TABLE>
18
<PAGE> 9
The carrying value and estimated market value of securities held to
maturity are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1994 VALUE GAINS LOSSES VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 10,871,768 $ -- $ 340,518 $ 10,531,250
Obligations of U.S. government corporations
and agencies--mortgage-backed securities 228,425,880 26,076 16,877,992 211,573,964
Obligations of states and political subdivisions 29,986 365 -- 30,351
Debt securities issued by foreign governments 4,000,000 -- -- 4,000,000
Other debt securities 1,118,354 -- 5,919 1,112,435
------------ ---------- ----------- ------------
Total $244,445,988 $ 26,441 $17,224,429 $227,248,000
============ ========== =========== ============
December 31, 1993
---------------------------------------------------------------------------------------------------------------------------------
Obligations of U.S. government corporations
and agencies--mortgage-backed securities $179,051,269 $1,747,037 $ 672,987 $180,125,319
Obligations of states and political subdivisions 29,964 2,000 -- 31,964
Debt securities issued by foreign governments 4,500,000 -- -- 4,500,000
Corporate debt securities 2,005,131 902 114 2,005,919
Other debt securities 10,104,323 59,726 43,167 10,120,882
------------ ---------- ----------- ------------
Total $195,690,687 $1,809,665 $ 716,268 $196,784,084
============ ========== =========== ============
</TABLE>
The following tables present information regarding securities available
for sale and securities held to maturity at December 31, 1994, based on
contractual maturity. Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations
with or without call or prepayment penalties. The average yield is based on the
ratio of actual income divided by the average outstanding balances during the
year. The average yield on obligations of states and political subdivisions is
not stated on a tax-equivalent basis.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET AVERAGE
SECURITIES AVAILABLE FOR SALE COST VALUE YIELD
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury securities
Due after 1 year but within 5 years $30,682,402 $30,150,000 5.63%
Obligations of U.S. government corporations and agencies--
mortgage-backed securities 34,585,046 33,006,988 5.17
Federal Reserve Bank and other equity securities 4,177,806 4,178,901 7.30
----------- -----------
Total $69,445,254 $67,335,889 5.55
=========== ===========
</TABLE>
19
<PAGE> 10
<TABLE>
<CAPTION>
ESTIMATED
CARRYING MARKET AVERAGE
SECURITIES HELD TO MATURITY VALUE VALUE YIELD
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury securities
Due after 1 year but within 5 years $ 10,871,768 $ 10,531,250 7.27%
------------ ------------
Obligations of U.S. government corporations and agencies--
mortgage-backed securities 228,425,880 211,573,964 6.17
------------ ------------
Obligations of states and political subdivisions
Due within 1 year 29,986 30,351 7.48
------------ ------------
Debt securities issued by foreign governments
Due within 1 year 1,000,000 1,000,000
Due after 1 year but within 5 years 2,000,000 2,000,000
Due after 5 years 1,000,000 1,000,000
------------ ------------
Total 4,000,000 4,000,000 6.09
------------ ------------
Other debt securities
Due after 1 year but within 5 years 1,118,354 1,112,435 5.11
------------ ------------
Total $244,445,988 $227,248,000 6.17
============ ============
</TABLE>
Information regarding securities sales is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds $9,955,694 $ -- $107,303,906
Gross gains 63,136 -- 1,568,454
Gross losses 21,205 -- --
</TABLE>
The book value of investment securities pledged to secure public funds on
deposit, securities sold under agreements to repurchase, advances from the
Federal Home Loan Bank of New York and for other purposes required by law
amounted to $110,549,000 and $138,841,000 at December 31, 1994 and 1993,
respectively.
NOTE 4. LOANS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic
Term Federal funds sold $ -- $ 40,000,000
Commercial and industrial 260,868,892 218,558,986
Real estate--mortgage 42,078,553 34,807,737
Real estate--construction 1,486,418 1,665,545
Installment 12,919,642 8,402,800
Foreign
Government and official institutions 789,424 789,424
------------ ------------
Loans, gross 318,142,929 304,224,492
Less unearned discounts 5,373,750 5,473,671
------------ ------------
Loans, net of unearned discounts $312,769,179 $298,750,821
============ ============
</TABLE>
On June 1, 1993, the Company purchased, for cash, the assets (principally
loans) of Zenith Financial Corporation, a nationwide provider of consumer
receivable financing. The purchase price was $7,906,000 and was approximately
equal to the book value of the assets acquired.
Term Federal funds sold represent loans to commercial banks in the United
States. There are no industry concentrations (exceeding 10% of loans, gross) in
the commercial and industrial loan portfolio. Approximately 81% of the bank's
loans are to borrowers located in the metropolitan New York area.
20
<PAGE> 11
Nonaccrual loans at December 31, 1994 and 1993 totalled $575,000 and
$2,297,320, respectively. There were no reduced rate loans at December 31, 1994
or 1993. The interest income that would have been earned on nonaccrual loans
outstanding at December 31, 1994, 1993 and 1992 in accordance with their
original terms is estimated to be $86,000, $169,000 and $313,000, respectively,
for the years then ended. The applicable interest income actually realized for
aforementioned years was $18,000, $98,000 and $72,000, respectively. At the end
of these years there were no commitments to lend additional funds on nonaccrual
loans.
Loans are made at normal lending limits and credit terms to officers or
directors (including their immediate families) of the Company or for the
benefit of corporations in which they have a beneficial interest. There were no
outstanding balances on such loans in excess of $60,000 to any individual or
entity at December 31, 1994 or 1993.
NOTE 5. CHANGES IN THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 3,413,947 $ 3,177,121 $ 3,733,910
Provision for possible loan losses 1,053,000 690,000 1,290,000
----------- ----------- -----------
4,466,947 3,867,121 5,023,910
----------- ----------- -----------
Less charge-offs, net of recoveries:
Charge-offs 532,345 714,976 1,918,895
Recoveries (201,208) (52,175) (72,106)
----------- ----------- -----------
Net charge-offs 331,137 662,801 1,846,789
----------- ----------- -----------
Acquired allowance -- 209,627 --
----------- ----------- -----------
Balance at end of year $ 4,135,810 $ 3,413,947 $ 3,177,121
=========== =========== ===========
</TABLE>
On June 1, 1993, the Company purchased, for cash, the assets (principally
loans) of Zenith Financial Corporation a nationwide provider of consumer
receivables financing. The purchase price included the allowance for loan
losses of $209,627.
NOTE 6. INTEREST-BEARING DEPOSITS
Foreign deposits totalled $2,670,000 at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense
Interest-bearing deposits in domestic offices $ 8,369,984 $ 6,438,900 $ 7,769,930
Interest-bearing deposits in foreign offices 103,510 79,241 158,242
----------- ----------- -----------
Total $ 8,473,494 $ 6,518,141 $ 7,928,172
=========== =========== ===========
</TABLE>
The aggregate of domestic time certificates of deposit in denominations of
$100,000 or more by remaining maturity range and related interest expense is
presented below; there were no foreign time certificates of deposits:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Remaining maturity range
Three months or less $52,758,925 $62,391,007 $63,095,562
More than three months through six months 6,878,526 15,656,912 7,393,317
More than six months through twelve months 6,742,806 1,613,158 2,662,500
More than twelve months 9,699,636 1,329,289 392,549
----------- ----------- -----------
Total $76,079,893 $80,990,366 $73,543,928
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $ 2,429,283 $ 1,700,241 $ 1,956,149
=========== =========== ===========
</TABLE>
21
<PAGE> 12
NOTE 7. SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities sold under agreements to repurchase
At December 31 --Balance $44,050,836 $37,225,000 $ 6,642,311
--Average interest rate 5.37% 2.83% 2.74%
--Average original maturity 44 days 100 days 30 days
During the year --Maximum month-end balance 62,756,854 52,481,192 14,856,000
--Daily average balance 55,813,000 31,315,000 11,593,000
--Average interest rate paid 3.72% 2.86% 3.41%
--Range of interest rates paid 2.25-5.85% 2.50-3.31% 2.70-4.55%
============ ============ ============
Commercial paper
At December 31 --Balance $14,672,800 $14,320,400 $14,081,200
--Average interest rate 4.50% 2.85% 2.98%
--Average original maturity 47 days 39 days 48 days
During the year --Maximum month-end balance 17,872,500 20,936,500 19,839,000
--Daily average balance 14,491,000 14,221,000 14,765,000
--Average interest rate paid 3.62% 2.89% 3.70%
--Range of interest rates paid 2.50-6.05% 2.50-3.30% 2.55-4.35%
============ ============ ============
</TABLE>
Other short-term borrowings include a collateralized advance from the
Federal Home Loan Bank of New York due within one year and treasury tax and
loan funds. The Federal Home Loan Bank advance of $3,000,000 is repayable in
October, 1995 at a rate of 4.33%. At December 31, 1993, the aggregate of such
advances was $6,000,000 at an average rate of 3.75%.
The parent company has agreements with its line banks to pay a fee at the
annual rate of 1/4 of 1% times the line of credit extended. At December 31,
1994, these back-up bank lines of credit totalled $15,000,000. No lines were
used at any time during 1994 and 1993.
NOTE 8. LONG-TERM CONVERTIBLE SUBORDINATED DEBENTURES
The parent company's floating interest rate convertible subordinated debentures
are traded on the New York Stock Exchange. A summary of changes in these
debentures follows (amounts in thousands):
<TABLE>
<CAPTION>
MATURITY DATES
-------------------------------------------
JULY 1, NOV. 1, JULY 1,
-------------------------------------------
1994 1996 1998 2001 TOTAL
-------------------------------------------- -------
Series Second Third 4th Fifth
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 7,756 $12,536 $14,874 $35,166
Repayments, conversions and retirements during the year (7,756) (476) (42) (8,274)
-------- ------- ------- -------
Balance at December 31, 1993 $ -- 12,060 14,832 26,892
========
New issue, August 1, 1994 -- -- $7,020 7,020
Repayments, conversions and retirements during the year (7,096) (370) -- (7,466)
------- ------- ------ -------
Balance at December 31, 1994 $ 4,964 $14,462 $7,020 $26,446
======= ======= ====== =======
Estimated market value at December 31, 1994 $ 4,865 $14,173 $6,809 $25,847
======= ======= ====== =======
</TABLE>
22
<PAGE> 13
The debentures bear interest at a floating interest rate equal to one half
of one percent (1/2%) above the daily average reference rate of interest of a
designated major New York City bank, payable semi-annually. The daily average
interest rates paid on the Second series for the six-month interest periods
ended December 31, 1993, June 30, 1993, December 31, 1992, June 30, 1992 were
6.50% and 6.50%, 6.60% and 7.05%, respectively. The daily average interest
rates paid on the Third and 4th series for the six-month interest periods ended
December 31, 1994, June 30, 1994, December 31, 1993, June 30, 1993, December
31, 1992, June 30, 1992 were 8.10% and 6.80%, 6.50% and 6.50%, 6.60% and 7.05%,
respectively. The daily average interest rate paid on the Fifth series for the
initial period August 1, to December 31, 1994 was 8.20%. The debentures are
convertible into common shares of the parent company. The conversion rate is
subject to anti-dilution provisions of the indenture. The following table
presents selected information regarding the debentures:
<TABLE>
<CAPTION>
AMOUNT
ISSUE MATURITY INITIALLY CONVERSION
DATE DATE ISSUED PRICE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6/27/85 7/1/96 $15,000,000 $12.00
10/17/88 11/1/98 15,000,000 12.50
8/ 1/94 7/1/01 7,020,000 8.75
</TABLE>
On January 19, 1993, the parent company prepaid the principal amount, plus
accrued interest, of the convertible subordinated debentures due July 1, 1994.
On June 9, 1994 the parent company offered to exchange its Third Series
Debentures due July 1, 1996 for Fifth Series Debentures due July 1, 2001.
Following the expiration of the exchange offer on July 29, 1994, $7,020,000
principal amount of Third Series Debentures were exchanged for Fifth Series
Debentures.
NOTE 9. OTHER LONG-TERM BORROWINGS
These borrowings represent advances from the Federal Home Loan Bank of New York
("FHLB"), as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
INTEREST RATES AND MATURITY DATES 1994
---------------------------------------------------------------------------------------
<S> <C>
4.50% to 4.61%, due 1996 $ 4,500,000
4.84% to 5.20%, due 1997 3,500,000
5.05% to 5.44%, due 1998 12,750,000
5.68%, due 1999 350,000
5.92%, due 2000 350,000
6.07%, due 2001 350,000
6.22%, due 2002 350,000
6.37%, due 2003 350,000
------------
Total $ 22,500,000
============
Weighted average interest rate 5.03%
====
</TABLE>
Total other long-term borrowings at December 31, 1993 amounted to
$25,500,000 with a weighted average interest rate of 4.94%.
UNDER the terms of a collateral agreement with the FHLB, advances are
secured by stock in the FHLB and by certain qualifying assets (primarily
mortgage-backed securities) having market values at least equal to 110% of the
advances outstanding.
NOTE 10. PREFERRED STOCK
The parent company is authorized to issue up to 644,389 shares of convertible
preferred stock, $5 par value, in one or more series. At December 31, 1994,
two series of preferred stock had been issued--Series B and Series D.
The following table presents information regarding the parent company's
preferred stock:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C>
Series B shares. Authorized
4,389 shares; issued and
outstanding--1,288 shares,
at liquidation value $ 25,760 $ 25,760
---------- ----------
Series D shares. Authorized
300,000 shares; issued and
outstanding--250,000
shares, at liquidation value 2,500,000 2,500,000
Less market value
guarantee feature 875,000 562,500
---------- ----------
1,625,000 1,937,500
---------- ----------
Total $1,650,760 $1,963,260
========== ==========
</TABLE>
SERIES B
Series B shares may be redeemed, in whole or in part, at the election of the
parent company at a price of $28 per share, plus accrued and unpaid dividends
to the date of redemption. In the event of involuntary liquidation of the
parent company, the holders of these shares are entitled to receive, before any
distribution to the holders of common shares, $20 per share ("liquidation
value"). At the option of holders of these shares, such shares are convertible
into common shares of the parent company at a conversion rate of two common
shares for each Series B share surrendered. There were no conversions during
1994, 1993 or 1992. Dividends on the Series B shares are paid at the rate of
$.10 per annum, payable semi-annually and are cumulative. Holders of these
shares are entitled to one vote for each share held and vote together as one
class with the holders of the common shares of the parent company.
23
<PAGE> 14
SERIES D
Series D shares may only be issued to the trustee acting on behalf of an
employee stock ownership plan ("ESOP") or other employee benefit plan of the
Company. The Series D shares are convertible into common shares of the parent
company on a share for share basis. During 1993, the parent company issued
250,000 shares to the trustee of the Company's ESOP. A transfer is made out of
shareholders' equity to the extent that the aggregate value of the outstanding
Series D shares at the specified redemption price exceeds the aggregate market
value of the same number of common shares ("market value guarantee feature").
At December 31, 1994 and 1993 such amounts were $875,000 and $562,500,
respectively. These shares are entitled to receive cash dividends in the amount
of $.6125 per annum (subject to adjustment), payable quarterly. Participants in
the Company's ESOP are entitled to vote in accordance with the terms of the
ESOP and vote together as one class with the holders of the common shares of
the parent company. The holders of these shares are entitled to receive $10 per
share and certain other preferences on liquidation, dissolution or winding up.
See note 14 for a discussion of the Company's ESOP.
NOTE 11. COMMON STOCK
Number of shares reserved for issuance:
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C>
Conversion of subordinated
debentures:
Floating rate due 7/1/96 413,667 1,005,000
Floating rate due 11/1/98 1,156,960 1,186,560
Floating rate due 7/1/01 802,286 --
Conversion of Series B
preferred shares 2,576 2,576
Conversion of Series D
preferred shares 300,000 300,000
--------- ---------
2,675,489 2,494,136
========= =========
Number of shares outstanding
at December 31, 6,346,262 6,346,212
========= =========
Number of shareholders
at December 31, 2,612 2,797
========= =========
</TABLE>
NOTE 12. RESTRICTIONS ON THE BANK
Various legal restrictions limit the extent to which the bank can supply funds
to the parent company and its non-bank subsidiaries. All national banks are
limited in the payment of dividends without the approval of the Comptroller of
the Currency ("the Comptroller") to an amount not to exceed the net profits (as
defined) for that year to date combined with its retained net profits for the
preceding two calendar years. The bank with the Comptroller's approval paid
dividends during 1994 and 1993 aggregating $3,639,038 and $2,599,314,
respectively.
NOTE 13. STOCK INCENTIVE PLANS
In April 1984, the shareholders approved a Restricted Stock Incentive Plan
which provided for the issuance of a maximum of 250,000 shares to key
employees. The plan calls for the forfeiture of non-vested shares which are
restored to the Treasury and become available for future awards. There were no
forfeitures in either 1994 or 1993, and 400 shares were forfeited in 1992. On
January 2, 1987, 20,000 shares (including some previously forfeited) were
awarded from Treasury shares. These awards vested to recipients over a five
year period at the rate of 20% per year. On December 19, 1991, 7,800 shares
(from previously forfeited) were issued from Treasury shares and vested to
recipients over a one year period. Unearned compensation was amortized as a
charge to noninterest expenses over a five year period for the 1987 awards and
over a one year period for the 1991 awards. The balance of unearned
compensation resulting from these awards was shown as a reduction of
shareholders' equity. For income tax purposes, the Company was entitled to a
deduction in an amount equal to the average market value of the shares on the
vesting date and dividends paid on shares for which restrictions had not
lapsed.
In April 1992, shareholders approved a Stock Incentive Plan covering up to
100,000 common shares of the Company under which key employees of the Company
and its subsidiaries could be granted options to purchase such common shares at
prices equal to their fair market value on the date of grant. During 1993,
options to purchase all 100,000 common shares were granted at prices between
$7.25 or $8.00. Options, expiring ten years from the date of grant, are
exercisable starting one year from the date of grant or upon the death or
disability of the grantee. The plan is administered by the Incentive
Compensation Committee of the Board of Directors. No expense is required to be
recognized in connection with options granted under the plan. Amounts received
upon exercise of options are recorded as common stock and capital surplus.
NOTE 14. EMPLOYEE STOCK OWNERSHIP PLAN
On March 5, 1993, the Company established an Employee Stock Ownership Plan
("ESOP"). This plan covers substantially all employees with one or more years of
service of at least 1,000 hours who are at least 21 years of age. During 1993,
the parent company issued 250,000 shares of Series D preferred stock at a price
of $10.00 per
24
<PAGE> 15
share to the Company's ESOP trust. The trust borrowed $2,500,000 from the bank,
to pay for the shares. Since the ESOP trust borrowed from the bank, the Company
recorded a deduction from shareholders' equity to reflect the unearned
compensation for the shares. The unearned compensation is reduced as payments
are made on the loan. In addition, because the parent company has guaranteed a
liquidation and redemption price of $10.00 per share, the difference between
$10.00 and the respective year end market price of the parent company common
stock into which the outstanding Series D shares are convertible has been
reflected outside shareholders' equity less its related share of unearned
compensation for the unallocated share. The ESOP loan is at a fixed interest
rate for a term of ten years with quarterly payments of interest only through
December 31, 1995. Quarterly principal payments at an annual rate of $250,000
and $350,000 commence on March 31, 1996 and March 31, 1999, respectively, plus
interest. The bank match-funded the ESOP loan with collateralized advances from
the Federal Home Loan Bank of New York. The ESOP shares, pledged as collateral
for the ESOP loan, are held in a suspense account and released for allocation
among the participants as principal and interest on the ESOP loan is repaid.
Under the terms of the ESOP, participants may vote both allocated and
unallocated shares.
The Company makes quarterly contributions to the ESOP equal to the debt
service on the ESOP loan less dividends paid on the ESOP shares. All dividends
paid are used for debt service. ESOP shares released from the suspense account
are allocated among the participants on the basis of salary in the year of
allocation. The Company accounts for its ESOP in accordance with Statement of
Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans."
Accordingly, the shares pledged as collateral are reported as unearned
compensation in the consolidated balance sheets. As shares are released from
the suspense account, the Company recognizes compensation expense equal to the
current market price of the common shares into which the preferred shares are
convertible, and the shares become outstanding for earnings per share
computations. Dividends on unallocated ESOP shares are recorded as a reduction
of accrued interest payable; dividends on allocated ESOP shares are recorded as
a reduction of retained earnings.
Compensation expense was $122,150 and $102,120 for 1994 and 1993,
respectively, with a corresponding reduction in unearned compensation. As of
December 31, 1994, 10,212 shares had been allocated and 12,215 shares had been
released for allocation; 227,573 shares were not released ("unallocated"). The
fair value of unallocated shares at December 31, 1994 was $2,275,730. The
following table presents interest paid on the ESOP loan, dividends paid on the
Series D preferred shares and contributions made by the Company:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $187,500 $156,771
Dividends paid 153,125 127,594
Company contributions 34,375 29,177
</TABLE>
NOTE 15. EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan that covers
substantially all employees with one or more years of service of at least 1,000
hours who are at least 21 years of age. The quarterly payments to the plan are
determined annually based upon the amount needed to satisfy the Employee
Retirement Income Security Act funding standards.
The following table sets forth the pension plan funded status:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
($5,745,268) and ($5,621,589), respectively $(6,217,822) $(6,223,391)
=========== ===========
Projected benefit obligation for service rendered to date $(8,696,965) $(8,673,674)
Plan assets at fair value (U.S. Treasury securities, insurance contract
and listed stock) 7,542,975 7,380,868
----------- -----------
Funded status (1,153,990) (1,292,806)
Unrecognized prior service cost (313,218) --
Unrecognized net loss 2,645,372 2,273,477
----------- -----------
Prepaid pension cost $ 1,178,164 $ 980,671
=========== ===========
</TABLE>
25
<PAGE> 16
Net pension expense included the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $514,083 $403,074 $410,597
Interest cost 609,807 582,544 504,358
Return on assets 250,311 (265,969) (525,289)
Deferral of asset (loss) gain (761,159) (248,273) 105,643
-------- -------- --------
Total included in employee benefits $613,042 $471,376 $495,309
======== ======== ========
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the rate of increase in future compensation levels was 5% and 4%
and the weighted average discount rate used was 8.25% and 7.25% for December
31, 1994 and 1993, respectively. The expected long-term rate of return of
Retirement Plan assets was 8%.
There were no contributions to the profit-sharing plans for the years
ended December 31, 1994, 1993 and 1992. During 1993 in connection with the
establishment of an Employee Stock Ownership Plan, the Company's Board of
Directors determined to cease contributions to the profit sharing plans; all
participants in the plans became fully vested.
NOTE 16. INCOME TAXES
The current and deferred tax provisions (benefits) for each of the last three
fiscal years are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL
Current $ 3,429,163 $1,549,307 $ 982,225
Deferred (1,365,534) (8,825) 175,773
----------- ---------- ----------
Total $ 2,063,629 $1,540,482 $1,157,998
=========== ========== ==========
STATE AND LOCAL
Current $ 4,741,927 $1,100,532 $ 637,586
Deferred (780,780) (13,289) (10,268)
----------- ---------- ----------
Total $ 3,961,147 $1,087,243 $ 627,318
=========== ========== ==========
TOTAL
Current $ 8,171,090 $2,649,839 $1,619,811
Deferred (2,146,314) (22,114) 165,505
----------- ---------- ----------
Total $ 6,024,776 $2,627,725 $1,785,316
=========== ========== ==========
</TABLE>
Reconciliations of income tax provisions with taxes or tax benefits
computed at Federal statutory rates are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34% 34% 34%
Computed tax $ 3,410,419 $1,966,261 $1,483,260
Increase in tax resulting from:
Principally state and local taxes, net of
Federal income tax benefit 2,614,357 661,464 302,056
----------- ---------- ----------
Total $ 6,024,776 $2,627,725 $1,785,316
=========== ========== ==========
</TABLE>
26
<PAGE> 17
The deferred income tax provisions (benefits) result from timing
differences in the recognition of revenue and expense for tax and financial
reporting purposes. The source of these differences and the tax effect of each
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
---------------------------------------------------------------------------------------------------------------
<S> <C>
Provision for possible loan losses $189,308
Accretion of discounts on investment securities (853)
Deferred compensation (22,950)
--------
Total $165,505
========
</TABLE>
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Difference between financial statement provision
for possible loan losses and tax bad debt deduction $1,406,175 $1,097,248
Nonaccrual interest 2,916,249 1,095,573
Deferred compensation 102,052 131,768
Other 2,421 2,434
---------- ----------
Total deferred tax assets 4,426,897 2,327,023
---------- ----------
Deferred tax liabilities
Pension and benefit plans 376,800 377,600
Other 169,120 214,760
---------- ----------
Total deferred tax liabilities 545,920 592,360
---------- ----------
Net deferred tax asset 3,880,977 1,734,663
SFAS No. 115 deferred tax asset (liability) 968,396 (625,678)
---------- ----------
Total net deferred tax asset $4,849,373 $1,108,985
========== ==========
</TABLE>
Federal income tax returns of the Company for all years through December
31, 1987 have been settled with the Internal Revenue Service.
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes" as of January 1, 1993.
The adoption of SFAS No. 109 had no material effect on the Company's results of
operations.
Taxes, other than taxes on income, are charged against noninterest
expenses and amounted to $1,170,721, $1,160,770 and $1,075,774 for the years
ended December 31, 1994, 1993 and 1992, respectively.
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107 "Disclosures about
Fair Value of Financial Instruments" requires the Company to disclose the "fair
values" of certain financial instruments for which it is practical to estimate
"fair value."
Much of the information used to arrive at fair value is highly subjective
and judgmental in nature and therefore the results may not be precise. The
subjective factors include, among other things, estimated cash flows, risk
characteristics, credit quality and interest rates all of which are subject to
change. With the exception of investment securities and long-term debt, the
Company's financial instruments are not readily marketable and market prices do
not exist. Since negotiated prices for the instruments which are not readily
marketable depend greatly on the motivation of the buyer and seller, the
amounts which will actually be realized or paid per settlement or maturity of
these instruments could be significantly different.
The following disclosures represent the Company's best estimate of the
"fair value" of both on- and off-balance sheet financial instruments. The
tables present, for each class of financial instrument: (1) the assumptions and
methods which were utilized to estimate, where practical to do so, the fair
values, (2) carrying amounts and (3) calculated estimates of fair value.
Financial Instruments with Carrying Amount Equal to Fair Value. The carrying
amount of cash and due from banks, interest-bearing deposits with other banks,
customers' liabilities under acceptances, accrued interest receivable,
agreements to repurchase, commercial paper, other short-term borrowings,
acceptances outstanding, due to factoring clients, and accrued interest
payable, as a result of their short-term nature, is considered to be equal to
fair value.
27
<PAGE> 18
Investment Securities. For investment securities, fair value has been based
upon current market quotations, where available. If quoted market prices are
not available, fair value has been estimated based upon the quoted price of
similar instruments.
Loans. The fair value of loans which reprice within 90 days reflecting changes
in the base rate is equal to their carrying amount. For other loans, the
estimated fair value is calculated based on discounted cash flow analyses,
using interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality and for similar maturities. These
calculations have been adjusted for credit risk based on the Company's
historical credit loss experience.
The estimated fair value for secured nonaccrual loans is the value of the
underlying collateral which is sufficient to repay each loan. For other
nonaccrual loans, the estimated fair value represents book value less a credit
risk adjustment based on the Company's historical credit loss experience.
Deposits. SFAS No. 107 requires that the fair value of demand, savings, NOW and
certain money market deposits be equal to their carrying amount. The Company
believes that the fair value of these deposits is clearly greater than that
prescribed by SFAS No. 107.
For other types of deposits with fixed maturities, fair value has been
estimated based upon interest rates currently being offered on deposits with
similar characteristics and maturities.
Long-Term Debt. The fair value of the Company's convertible subordinated
debentures is based on current market quotations. For other long-term
borrowings, the estimated fair value is calculated based on discounted cash
flow analyses, using interest rates currently being quoted for similar
characteristics and maturities.
Commitments to Extend Credit, Standby Letters of Credit and Financial
Guarantees. The notional amount of off-balance sheet commitments to extend
credit, standby letters of credit, and financial guarantees, is considered
equal to fair value. Resulting from the uncertainty involved in attempting to
assess the likelihood and timing of a commitment being drawn upon, coupled with
lack of an established market and the wide diversity of fee structures, the
Company does not believe it is meaningful to provide an estimate of fair value
that differs from the notional value of the commitment.
The following is a summary of the book values and estimated fair values of
the Company's financial assets and liabilities:
<TABLE>
<CAPTION>
1994 1993
------------------------------- --------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
DECEMBER 31, AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks $ 39,224,764 $ 39,224,764 $ 35,975,787 $ 35,975,787
Interest-bearing deposits with other banks 2,970,000 2,970,000 2,970,000 2,970,000
Investment securities 311,781,877 294,583,889 286,815,791 287,909,188
Loans, net 308,633,369 307,896,190 295,336,874 295,580,936
Customers' liability under acceptances 624,083 624,083 201,669 201,669
Accrued interest receivable 3,985,290 3,985,290 3,501,850 3,501,850
FINANCIAL LIABILITIES
Demand, NOW, savings and money market deposits 356,561,257 356,561,257 365,713,170 365,713,170
Time deposits 160,741,258 162,057,000 107,272,756 107,325,000
Securities sold under agreements to repurchase 44,050,836 44,050,836 37,225,000 37,225,000
Commercial paper 14,672,800 14,672,800 14,320,400 14,320,400
Other short-term borrowings 7,104,224 7,104,224 13,613,964 13,613,964
Acceptances outstanding 624,083 624,083 201,669 201,669
Due to factoring clients 11,382,321 11,382,321 5,784,952 5,784,952
Accrued interest payable 4,093,383 4,093,383 1,716,143 1,716,143
Long-term convertible subordinated debentures 26,446,000 25,847,000 26,892,000 25,349,000
Other long-term borrowings--FHLB 22,500,000 19,715,000 25,500,000 25,163,000
</TABLE>
28
<PAGE> 19
NOTE 18. PARENT COMPANY
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 331,691 $ 163,234
Interest-bearing deposits--banking subsidiary 10,765,000 11,951,815
Loans, net of unearned discounts 19,369,743 15,326,201
Less allowance for possible loan losses 509,627 259,627
------------ ------------
Loans, net 18,860,116 15,066,574
------------ ------------
Investment in subsidiaries
Bank 66,850,847 68,143,245
Others 2,804,120 2,783,154
Due from subsidiaries 1,866,929 1,170,984
Other assets 2,148,437 2,159,066
------------ ------------
$103,627,140 $101,438,072
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Commercial paper $ 14,672,800 $ 14,320,400
Due to subsidiaries 2,256,904 2,818,442
Accrued expenses and other liabilities 4,032,122 2,050,555
Long-term convertible subordinated debt 26,446,000 26,892,000
Other long-term debt 2,500,000 2,500,000
Shareholders' equity 53,719,314 52,856,675
------------ ------------
$103,627,140 $101,438,072
============ ============
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends and interest from
Banking subsidiary $3,880,700 $2,953,629 $ 37,765,742
Other subsidiaries 414,219 -- 245,000
Management and service fees from
Banking subsidiary 877,260 1,106,522 479,650
Other subsidiaries 111,600 111,600 111,600
Interest and fees on loans 2,914,933 1,396,522 171,752
Other income 60,220 191,396 405,465
---------- ---------- ------------
Total income 8,258,932 5,759,669 39,179,209
---------- ---------- ------------
EXPENSES
Interest expense 2,680,746 2,333,077 3,067,361
Provision for possible loan losses 350,000 50,000 --
Salaries and employee benefits 1,140,687 1,035,811 1,157,517
Computer service fees and rent paid to banking subsidiary 77,663 58,688 58,846
Other expenses 902,908 645,596 676,619
---------- ---------- ------------
Total expenses 5,152,004 4,123,172 4,960,343
---------- ---------- ------------
Income before income taxes and equity in undistributed
net income of subsidiaries 3,106,928 1,636,497 34,218,866
Benefit for income taxes (294,452) (487,283) (1,732,158)
---------- ---------- ------------
3,401,380 2,123,780 35,951,024
Equity in undistributed net income (loss) of subsidiaries 604,489 1,031,617 (33,373,810)
---------- ---------- ------------
Net income $4,005,869 $3,155,397 $ 2,577,214
========== ========== ============
</TABLE>
29
<PAGE> 20
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,005,869 $ 3,155,397 $ 2,577,214
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 350,000 50,000 --
Amortization of unearned compensation 122,150 102,120 44,400
Increase in accrued interest receivable (123,895) (124,554) (7,586)
Increase (Decrease) in accrued expenses and other liabilities 1,981,567 (297,459) (613,240)
Decrease in due to subsidiaries, net (561,538) (308,120) (1,680,536)
Equity in undistributed net (income) loss of subsidiaries (604,489) (1,031,617) 33,373,810
Other, net (616,672) 1,195,464 380,019
------------ ------------ ------------
Net cash provided by operating activities 4,552,992 2,741,231 34,074,081
------------ ------------ ------------
INVESTING ACTIVITIES
Net decrease (increase) in interest-bearing deposits--
banking subsidiary 1,186,815 11,219,185 (13,104,000)
Net increase in loans (4,143,542) (7,116,574) (8,000,000)
Other, net -- -- 549
------------ ------------ ------------
Net cash (used in) provided by investing activities (2,956,727) 4,102,611 (21,103,451)
------------ ------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in commercial paper 352,400 239,200 (5,849,700)
Cash dividends paid on preferred and common shares (1,334,208) (1,269,371) (1,269,299)
Issuance of debentures 7,020,000 -- --
Prepayments and maturities of debentures (7,466,000) (8,267,185) (5,845,130)
Issuance of Series D preferred shares -- 2,500,000 --
Funding provided for purchase of Series D preferred shares -- (2,500,000) --
Increase in other long-term borrowings -- 2,500,000 --
------------ ------------ ------------
Net cash used in financing activities (1,427,808) (6,797,356) (12,964,129)
------------ ------------ ------------
Net increase in cash and due from banks 168,457 46,486 6,501
Cash and due from banks--beginning of year 163,234 116,748 110,247
------------ ------------ ------------
Cash and due from banks--end of year $ 331,691 $ 163,234 $ 116,748
============ ============ ============
Supplemental schedule of non-cash financing activities:
Debenture and preferred stock conversions $ -- $ 6,815 $ 139,870
Forfeiture of treasury shares under incentive compensation plan -- -- 3,960
Issuance of Treasury shares 350 -- --
Supplemental disclosure of cash flow information:
Interest paid 2,438,821 2,811,046 3,715,993
Income taxes paid 4,928,459 1,178,884 1,667,100
Cash paid for assets acquired -- 7,905,912 --
</TABLE>
The parent company is required to maintain a deposit with the bank in an amount
equal to the unpaid principal balance on the bank's loan to the trustee of the
Employee Stock Ownership Plan. The required deposit which is reported in
interest-bearing deposits on the parent company's condensed balance sheet was
$2,500,000 at December 31, 1994.
30
<PAGE> 21
NOTE 19. COMMITMENTS AND CONTINGENT LIABILITIES
Total rental expenses under cancellable and noncancellable leases for premises
and equipment were $1,521,151, $1,644,315 and $1,525,297, respectively, for the
years ended December 31, 1994, 1993 and 1992.
The future minimum rental commitments as of December 31, 1994 under
noncancellable leases follow:
<TABLE>
<CAPTION>
RENTAL
YEAR(S) COMMITMENTS
--------------------------------------------
<S> <C>
1995 $1,608,862
1996 1,730,369
1997 825,007
1998 788,438
1999 767,739
2000 and thereafter 2,450,646
--------------
Total $8,171,061
==============
</TABLE>
Certain of the leases included above have escalation clauses and/or
provide that the Company pay maintenance, electric, taxes and other operating
expenses applicable to the leased property.
In the normal course of business, there are various commitments and
contingent liabilities outstanding which are properly not recorded on the
balance sheet. Management does not anticipate that losses, if any, as a result
of these transactions would materially affect the financial position of the
Company.
Loan commitments, substantially all of which have an original maturity of
one year or less, were approximately $35,211,000 as of December 31, 1994. These
commitments are agreements to lend to a customer as long as the conditions
established in the contract are met. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
The total commitment amounts do not necessarily represent future cash
requirements because some of the commitments are expected to expire without
being drawn upon. The bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary, by
the bank upon extension of credit is based on management's credit evaluation of
the borrower. Collateral held varies but may include cash, U.S. Treasury and
other marketable securities, accounts receivable, inventory and property, plant
and equipment.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the bank to guarantee the performance of a customer to a
third party. At December 31, 1994, these commitments totalled $24,048,552 of
which $21,026,655 expired within one year, $490,647 within two years and
$2,531,250 within three years. Approximately 25% of the commitments are
automatically renewable for periods of one year. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. The bank holds cash or cash equivalents and
marketable securities as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held for those
commitments at December 31, 1994 ranged from -0- percent to 100 percent; the
average amount collateralized is approximately 44 percent.
In the normal course of business there are various legal proceedings
pending against the Company. Management, after consulting with counsel, is of
the opinion that there should be no material liability with respect to such
proceedings, and accordingly no provision has been made in the accompanying
consolidated financial statements.
31
<PAGE> 22
NOTE 20. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1994 QUARTER MAR 31 JUN 30 SEPT 30 DEC 31
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $9,158,416 $10,701,035 $11,418,043 $12,364,644
Total interest expense 2,885,971 3,596,126 4,073,893 4,326,406
Net interest income 6,272,445 7,104,909 7,344,150 8,038,238
Provision for possible loan losses 190,000 200,000 310,000 353,000
Gain (Loss) on sale of securities, net 42,361 -- -- (430)
Noninterest income 955,025 1,029,669 1,143,705 1,152,242
Noninterest expenses 5,328,703 5,635,399 5,355,236 5,679,331
Income before income taxes 1,751,128 2,299,179 2,822,619 3,157,719
Net income 910,467 962,404 974,761 1,158,237
Earnings per average common share
Primary .14 .15 .16 .18
Fully diluted .13 .14 .13 .17
Common stock price
High 7 3/4 7 1/8 7 1/8 7
Low 7 6 3/4 6 1/2 6 1/2
Quarter--end 7 7 7 6 1/2
</TABLE>
<TABLE>
<CAPTION>
1993 QUARTER MAR 31 JUN 30 SEPT 30 DEC 31
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $7,916,257 $7,987,457 $8,120,137 $8,516,374
Total interest expense 2,496,207 2,498,824 2,504,316 2,668,590
Net interest income 5,420,050 5,488,633 5,615,821 5,847,784
Provision for possible loan losses 160,000 160,000 185,000 185,000
Noninterest income 876,966 944,409 1,046,121 1,003,780
Noninterest expenses 4,755,475 4,764,565 5,020,035 5,230,367
Income before income taxes 1,381,541 1,508,477 1,456,907 1,436,197
Net income 741,764 801,958 805,746 805,929
Earnings per average common share
Primary .12 .12 .13 .13
Fully diluted .11 .12 .12 .12
Common stock price
High 9 1/8 8 1/2 8 1/4 8 5/8
Low 8 1/8 7 1/8 6 7/8 7 5/8
Quarter--end 8 1/4 7 1/8 8 1/4 7 3/4
</TABLE>
32
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
[LOGO KPMG PEAT MARWICK LLP]
The Shareholders and Board of Directors
Sterling Bancorp:
We have audited the accompanying consolidated balance sheets of
Sterling Bancorp and Subsidiaries as of December 31, 1994 and 1993, the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1994
and the statements of condition of Sterling National Bank & Trust Company of
New York as of December 31, 1994 and 1993. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sterling
Bancorp and Subsidiaries as of December 31, 1994 and 1993, the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994 and the financial position of Sterling National Bank &
Trust Company of New York as of December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities" in
1993.
/s/ KPMG PEAT MARWICK LLP
New York, New York
February 3, 1995
33
<PAGE> 24
STERLING BANCORP and Subsidiaries
SELECTED FINANCIAL DATA
(in thousands except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total interest income $43,642 $ 32,540 $ 30,572 $ 36,445 $ 44,724
Total interest expense 14,882 10,168 11,510 20,208 26,342
Net interest income 28,760 22,372 19,062 16,237 18,382
Provision for possible loan losses 1,053 690 1,290 8,000(1) --
Gain on sale of securities, net 42 -- 1,568 12 1
Noninterest income 4,281 3,871 3,682 2,753 3,023
Noninterest expenses 21,999 19,770 18,659 17,741 17,015
Income (Loss) before taxes 10,031 5,783 4,363 (6,739) 4,391
Provision (Benefit) for income taxes 6,025 2,628 1,786 (2,047) 2,521
Net income (loss) 4,006 3,155 2,577 (4,692) 1,870
Per average common share .63 .50 .41 (.74) .30
Dividends per common share .21 .20 .20 .22 .20
AT YEAR END
Interest-bearing deposits with other banks
and Federal funds sold 10,970 2,970 3,630 4,635 15,437
Investment securities 311,782 286,816 219,571 220,629 87,969
Term Federal funds sold -- 40,000 99,000 75,000 200,000
Other loans, net of unearned discounts 312,769 258,751 189,791 152,598 168,563
Total assets 706,636 653,039 578,248 512,012 533,945
Noninterest-bearing deposits 174,897 174,089 159,234 114,052 100,585
Interest-bearing deposits 342,405 298,897 296,925 264,804 297,039
Securities sold under agreements to repurchase 44,051 37,225 6,642 5,282 3,495
Long-term convertible subordinated debentures 26,446 26,892 35,166 41,151 41,151
Other long-term borrowings--FHLB 22,500 25,500 -- -- --
Shareholders' equity 53,719 52,857 50,150 48,657 54,683
</TABLE>
(1) During the third quarter of 1991, a single large borrower of the bank
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In
light of this and based upon management's continuing evaluation of the
collectibility of the loan portfolio, an $8,000,000 addition to the
allowance was made.
34
<PAGE> 25
STERLING BANCORP and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS
Sterling Bancorp (the parent company) is a bank holding company, as defined by
the Bank Holding Company Act of 1956, as amended, with subsidiaries providing a
full range of financial services, including business and consumer loans, asset
based financing, factoring, trade financing, mortgage lending, leasing and
trust and estate services. The parent company owns virtually 100% of Sterling
National Bank & Trust Company of New York (the bank), its principal subsidiary,
and all of the outstanding shares of Standard Factors Corporation/Sterling
Factors, Universal Finance Corporation, Sterling Banking Corporation and
Sterling Industrial Loan Association (finance subsidiaries). As used throughout
this report, "the Company" refers to Sterling Bancorp and its subsidiaries.
There is competition in all areas in which the Company conducts its
business, including deposits, loans, domestic and international financing and
trust services. In addition to competing with other banks, the Company also
competes in certain areas of its business with other financial institutions. At
December 31, 1994, the bank's year to date average earning assets (of which
loans were 41% and investment securities were 57%) represented approximately
96% of the Company's year to date average earning assets. See page 38 for the
composition of the Company's average balance sheets for the three most recent
years.
FINANCIAL CONDITION
Liquidity is the ability to meet cash needs arising from changes in various
categories of assets and liabilities. Liquidity is constantly monitored and
managed at both the parent company and the bank levels. Liquid assets consist
of cash and due from banks, interest-bearing deposits in banks, Federal funds
sold and securities available for sale. Primary funding sources include core
deposits, capital market funds and other money market sources. Core deposits
include domestic noninterest-bearing and interest-bearing retail deposits,
which historically have been relatively stable. The parent company and the bank
have significant unused borrowing capacity. Contingency plans exist and could
be implemented on a timely basis to minimize the impact of any dramatic change
in market conditions.
While the parent company generates income from its own operations, it
also depends for its cash requirements on funds maintained or generated by its
subsidiaries, principally the bank. Such sources have been adequate to meet the
parent company's cash requirements throughout its history. At December 31, 1994,
the parent company had on hand approximately $11,097,000 in cash.
As presented in Footnote 12 on page 24, various legal restrictions
limit the extent to which the bank can supply funds to the parent company and
its nonbank subsidiaries. In addition, from time to time dividends are paid to
the parent company by other subsidiaries from their retained earnings without
regulatory restrictions.
At December 31, 1994, the parent company's outstanding long-term debt
aggregated $28,946,000. To the extent convertible subordinated debentures are
converted to common stock of the parent company (as has been the case with
$11,000,000 principal amount since 1982), the subordinated debt related thereto
is retired and becomes part of shareholders' equity. The parent company's
long-term indebtedness is also met through funds generated from profits and new
financing. Since becoming a public company in 1946, the parent company and its
predecessors have been able to obtain the financing required and have paid at
maturity all outstanding long-term indebtedness. The parent company expects to
continue to meet its obligations in accordance with their terms.
At December 31, 1994, the parent company's short-term debt, consisting
solely of commercial paper, was $14,673,000. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating
$33,849,000 and back-up credit lines with banks of $15,000,000. The parent
company and its predecessor have issued and repaid at maturity approximately
$12 billion of commercial paper since 1955. Since 1979, the parent company has
had no need to use available back-up lines of credit.
At December 31, 1994, the bank maintained a portfolio of investment
securities totalling $311,736,000, representing virtually 100% of the Company's
portfolio of investment securities, of which U.S. Government and U.S.
Government corporation and agency guaranteed mortgage-backed securities having
an average life of approximately 3 years amounted to $304,565,000. The bank's
asset-liability management program is designed to achieve acceptable yields
while managing interest rate risk, maturity distribution and credit risk.
As of December 31, 1993 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." As a result of the adoption of SFAS No. 115, the
Company was required to reclassify securities in its investment portfolio as
either "held to maturity" or "available for sale." The reclassification of these
securities had no effect on the Company's results of operations for the year
ended December 31, 1993. The Company has the intent and ability to hold to
maturity investment securities classified "held to maturity." These securities
are carried at cost, adjusted for amortization of premiums and accretion of
discounts. At December 31, 1994 the carrying and estimated market value of
"held to maturity" securities were $244,446,000 and $227,248,000, respectively.
The gross unrealized gains and losses on these securities were $26,000 and
$17,224,000, respectively. Investment securities classified as "available for
sale" may be sold in the future, prior to maturity. These securities are
carried at estimated market value. Net aggregate unrealized gains or losses on
these securities are included in a valuation allowance account and are
reported, net of taxes, as a component of shareholders' equity. The carrying
value of "available for sale" securities was $67,336,000 which included gross
unrealized gains of $2,000 and gross unrealized losses of $2,112,000.
Information regarding securities sales, gross gains and gross losses is
presented in Footnote 3 on page 18.
35
<PAGE> 26
The Company and the bank are subject to risk-based capital
regulations. The purpose of these regulations is to measure capital against
risk-weighted assets, including off-balance sheet items. These regulations
define the elements of total capital into Tier 1 and Tier 2 components and
establish minimum ratios of 4% for Tier 1 capital and 8% for Total Capital.
Supplementing these regulations, is a leverage requirement. This requirement
establishes a minimum leverage ratio (at least 3%) which is calculated by
dividing Tier 1 capital by adjusted quarterly average assets (after deducting
goodwill). At December 31, 1994, the risk-based capital ratios and the leverage
ratio for the Company and the bank exceeded the most stringent requirements
contemplated by these guidelines. Information regarding the Company's and the
bank's risk-based capital, at December 31, 1994 and 1993 is presented on page
40.
While the past performance is no guarantee of the future, management
believes that the Company's funding sources (including dividends from all its
subsidiaries) and the bank's funding sources will be adequate to meet their
liquidity and capital requirements in the future.
CREDIT RISK
A key management objective is to maintain the quality of the loan portfolio.
This objective is achieved by maintaining high underwriting standards coupled
with regular evaluation of the creditworthiness of and the designation of
lending limits for each borrower. The portfolio strategies seek to avoid
concentrations by industry or loan size in order to minimize credit exposure
and to originate loans in markets with which it is familiar. See Footnote 4
shown on page 20 for the composition of the loan portfolio.
The Company's commercial and industrial loan portfolio represents
approximately 82% of gross loans. Loans in this category are typically made to
small and medium sized businesses and range between $250,000 and $10 million.
The primary source of repayment is from the borrower's operating profits and
cash flows. Based on underwriting standards, loans may be secured in whole or
in part by collateral such as liquid assets, accounts receivable, equipment,
inventory or real property. The Company's real estate loan portfolio, which
represents approximately 14% of gross loans, is secured by mortgages on real
property located principally in the City of New York and the State of Virginia.
The collateral securing any loan may vary in value based on the success of the
business and economic conditions.
Intrinsic to the lending process is the possibility of loss. In times
of economic slowdown, the risk inherent in the Company's portfolio of loans is
increased. While management endeavors to minimize this risk, it recognizes that
loan losses will occur and that the amount of these losses will fluctuate
depending on the risk characteristics of the loan portfolio which in turn
depends on current and expected economic conditions, the financial condition of
borrowers, and the credit management process.
The allowance for possible loan losses is maintained through the
provision for possible loan losses, which is a charge to operating earnings.
The adequacy of the provision and the resulting allowance for possible loan
losses is determined by management's continuing review of the loan portfolio,
including identification and review of individual problem situations that may
affect the borrower's ability to repay, review of overall portfolio quality
through an analysis of current charge-offs, delinquency and nonperforming loan
data estimates of the value of any underlying collateral, review of regulatory
examinations, an assessment of current and expected economic conditions and
changes in the size and character of the loan portfolio. Thus, the allowance
level reflects identified loss potential and inherent risk in the portfolio.
While a significant change in any of the evaluation factors described above
could result in future additions in the allowance, in management's judgment,
the allowance for possible loan losses is adequate to provide for such loss
potential as is inherent in the loan portfolio.
At December 31, 1994, the ratio of the allowance to loans, net of
unearned discounts, was 1.3%. At December 31, 1994, the Company's allowance,
after giving effect to net charge-offs of $331,000, was $4,136,000 and its
nonaccrual loans amounted to $575,000. Based on the foregoing, as well as
management's judgment as to the current risks inherent in the loan portfolio,
the Company's allowance for possible loan losses was deemed adequate to absorb
all reasonably anticipated losses on specifically known and other possible
credit risks associated with the portfolio as of December 31, 1994.
RESULTS OF OPERATIONS
The Company's earnings are primarily dependent on net interest income which can
be affected by changes in interest rates. An analysis of the Company's interest
rate sensitivity is presented on page 41. Net interest income varies with the
mix of interest-earning assets and interest-bearing liabilities and their
respective yields earned and rates paid. The increases (decreases) for the
components of interest income and interest expense, expressed in terms of
fluctuation in average volume and rate are shown on page 39. Information as to
the components of interest income and interest expense and average rates is
provided in the Average Balance Sheets shown on page 38.
Comparison of years ended December 31, 1994 and December 31, 1993. Total
interest income increased $11,102,000 due to higher average funds employed at
higher rates. An increase in average investment securities outstandings coupled
with higher yields, resulted in an increase in income from investment
securities of $4,464,000. Higher average loan outstandings employed at higher
rates resulted in an increase of $6,428,000 in interest and fees on loans.
Total interest expense for the year ended December 31, 1994 increased
$4,714,000 due to higher average outstandings and higher rates. Higher rates
paid coupled with higher outstandings, resulted in an increase of $1,955,000 in
interest expense on deposits. Interest expense on borrowings was $2,759,000
higher principally due to higher average outstandings.
36
<PAGE> 27
Based on management's continuing evaluation of the collectibility of
the loan portfolio, $1,053,000 was provided for possible loan losses for the
year ended December 31, 1994.
Higher service charges on deposit accounts and higher volume for
letters of credit and factoring services, partially offset by lower income for
trust services, resulted in an increase in noninterest income of $451,000 for
the year ended December 31, 1994 compared with the same period in 1993.
Noninterest expenses increased $2,228,000 for the year ended December
31, 1994 versus the same period last year reflecting higher personnel and other
costs associated with the Company's higher levels of business activities,
increased investments in technology and higher general costs.
Due to the higher level of pre-tax profitability and additional
provisions for unresolved state tax issues, the provision for income taxes
increased $3,397,000 for the year ended December 31, 1994.
As a result of the above factors, net income increased $850,000 for
the year ended December 31, 1994 when compared with the same period in 1993.
Comparison of years ended December 31, 1993 and December 31, 1992. Total
interest income increased $1,968,000 due to higher average funds employed
partially offset by reduced yields. An increase in average investment
securities outstandings partially offset by reduced yields, resulted in an
increase in income from investment securities of $417,000. Interest income from
Federal funds sold was $386,000 lower primarily due to lower average
outstandings. Higher average loan outstandings employed at higher rates
resulted in an increase of $2,019,000 in interest and fees on loans. The
acquisition of Zenith's loan portfolio contributed to the loan growth and
accounted for the increase in average rate.
Total interest expense for the year ended December 31, 1993 decreased
$1,342,000 principally due to lower average cost of funds. Lower rates paid
partially offset by higher outstandings, resulted in a decrease of $1,411,000
in interest expense on deposits.
Based on management's continuing evaluation of the collectibility of
the loan portfolio, $690,000 was provided for possible loan losses for the year
ended December 31, 1993.
Notwithstanding higher service charges on deposit accounts and higher
volume for letters of credit and trust services, noninterest income was
$1,379,000 lower for the year ended December 31, 1993. Noninterest income for
the year ended December 31, 1992 included $1,568,000 of gains from sales of
securities in connection with the restructuring of the bank's securities
portfolio.
Noninterest expenses increased $1,111,000 for the year ended December
31, 1993 versus the same period last year reflecting higher costs associated
with the Company's business development efforts as well as higher general
costs.
The provision for income taxes increased $842,000 for the twelve
months of 1993 when compared with the same period last year based on the level
of pre-tax profitability.
As a result of the above factors, net income increased $578,000 for
the year ended December 31, 1993 when compared with the same period in 1992.
ACCOUNTING STANDARDS NOT YET ADOPTED
In 1993, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan." The Statement is effective for fiscal years beginning after December
15, 1994.
SFAS No. 114 generally requires all creditors to account for impaired
loans (except for those loans that are accounted for at fair value or at the
lower of cost or fair value) at the present value of the expected future cash
flows, discounted at the loan's effective interest rate, or at the fair value
of the loan's collateral if the loan is collateral dependent. SFAS No. 114 also
provides that in-substance foreclosed loans should not be included in Real
Estate Owned for financial reporting purposes, but, rather, in the loan
portfolio.
SFAS No. 114 was recently amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition and Disclosure." SFAS
No. 118 allows for existing income recognition practices to continue.
These Statements are not expected to have a material effect on the
Company's financial condition or results of operations when adopted in the
first quarter of 1995.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
The parent company's common stock is traded on The New York Stock Exchange
under the symbol STL. Information regarding the quarterly prices of the common
stock is presented in Footnote 20 on page 32. Information regarding the average
common shares outstanding and dividends per common share is presented in the
Consolidated Statements of Operations on page 13. Information regarding legal
restrictions on the ability of the bank to pay dividends to its shareholders is
presented in Footnote 12 on page 24. There are no such restrictions on the
ability of the parent company to pay dividends to its shareholders. Information
related to the parent company's preferred stock is presented in Footnote 10 on
page 23.
37
<PAGE> 28
STERLING BANCORP and Subsidiaries
AVERAGE BALANCE SHEETS AND ANALYSIS OF NET INTEREST EARNINGS(1)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------- --------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ---- ------- -------- ----
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits
with other banks $ 2,963 $ 123 4.17% $ 3,119 $ 97 3.13% $ 4,179 $ 179 4.28%
Investment securities
Available for sale 80,498 4,480 5.55 -- -- -- -- -- --
Held to maturity 240,364 14,825 6.17 254,815 14,835 5.83 208,173 14,416 6.92
Tax-exempt(2) 143 9 6.29 264 15 5.74 290 17 5.80
Federal funds sold 7,033 323 4.59 4,542 139 3.06 14,339 525 3.66
Loans, net of unearned
discounts
Domestic(3) 254,434 23,839 9.37 227,815 17,420 7.65 211,128 15,393 7.29
Foreign 789 43 5.44 789 34 4.29 789 42 5.37
-------- ------- -------- ------- -------- -------
TOTAL INTEREST
EARNING ASSETS 586,224 43,642 7.44% 491,344 32,540 6.62% 438,898 30,572 6.95%
------- ==== ------- ==== ------- ====
Cash and due from banks 40,564 35,160 30,588
Allowance for possible
loan losses (3,768) (3,175) (3,906)
Excess cost over equity
in net assets of the bank 21,158 21,158 21,158
Other 14,706 11,624 11,279
-------- -------- --------
TOTAL ASSETS $658,884 $556,111 $498,017
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits
Domestic
Savings $178,149 3,257 1.83% $198,772 4,254 2.14% $171,839 4,954 2.88%
Other time 126,935 5,112 4.03 82,008 2,185 2.66 82,171 2,816 3.43
Foreign
Other time 2,663 104 3.89 2,819 79 2.80 3,972 159 3.98
Borrowings
Federal funds purchased and
securities sold under agree-
ments to repurchase 55,824 2,076 3.72 31,315 896 2.86 11,593 395 3.41
Commercial paper 14,491 524 3.62 14,702 411 2.79 14,765 546 3.70
Other short-term debt 14,464 553 3.83 6,774 211 3.11 3,734 130 3.49
Long-term debt 51,581 3,256 6.31 33,204 2,132 6.42 36,160 2,510 6.94
-------- ------- -------- ------- -------- -------
TOTAL INTEREST-
BEARING LIABILITIES 444,107 14,882 3.35% 369,594 10,168 2.75% 324,234 11,510 3.55%
==== ==== ====
Noninterest-bearing
demand deposits 144,974 -- 125,804 -- 112,025 --
-------- ------- -------- ------- -------- -------
Total including noninterest
bearing demand deposits 589,081 14,882 2.53% 495,398 10,168 2.05% 436,259 11,510 2.64%
------- ==== ------- ==== ------- ====
Other liabilities 16,554 9,595 12,076
-------- -------- --------
TOTAL LIABILITIES 605,635 504,993 448,335
SHAREHOLDERS' EQUITY 53,249 51,118 49,682
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $658,884 $556,111 $498,017
======== ======== ========
Net interest income/spread $28,760 4.09% $22,372 3.87% $19,062 3.40%
======= ==== ======= ==== ======= ====
Net yield on interest
earning assets 4.91% 4.55% 4.34%
==== ==== ====
</TABLE>
(1) The average balances of assets, liabilities and shareholders' equity are
computed on the basis of daily averages for the bank and monthly averages
for the parent company and its finance subsidiaries.
(2) Interest on these securities is not presented on a tax equivalent basis.
(3) Nonaccrual loans are included in the average balance which reduces the
average yields.
38
<PAGE> 29
STERLING BANCORP and Subsidiaries
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
DECEMBER 31, 1993 TO DECEMBER 31, 1992 TO
INCREASE (DECREASE) FROM YEARS ENDED, DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------------------------------------------------------- -------------------------------------
VOLUME RATE TOTAL(1) VOLUME RATE TOTAL(1)
------ ---- -------- ------ ---- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other
banks $ (6) $ 32 $ 26 $ (40) $ (42) $ (82)
------ ------ ------- ------ ------- -------
Investment securities
Available for sale 2,240 2,240 4,480 -- -- --
Held to maturity (847) 837 (10) 2,958 (2,539) 419
Tax-exempt(2) (10) 4 (6) (2) -- (2)
------ ------ ------- ------ ------- -------
Total 1,383 3,081 4,464 2,956 (2,539) 417
------ ------ ------- ------ ------- -------
Federal funds sold 95 89 184 (330) (56) (386)
------ ------ ------- ------ ------- -------
Loans, net of unearned discount
Domestic(3) 2,268 4,151 6,419 1,241 786 2,027
Foreign -- 9 9 -- (8) (8)
------ ------ ------- ------ ------- -------
Total 2,268 4,160 6,428 1,241 778 2,019
------ ------ ------- ------ ------- -------
TOTAL INTEREST INCOME $3,740 $7,362 $11,102 $3,827 $(1,859) $ 1,968
====== ====== ======= ====== ======= =======
INTEREST EXPENSE
Savings and time deposits
Domestic
Savings $ (409) $ (588) $ (997) $ 674 $(1,374) $ (700)
Other time 1,503 1,424 2,927 (4) (627) (631)
Foreign
Other time (5) 30 25 (40) (40) (80)
------ ------ ------- ------ ------- -------
Total 1,089 866 1,955 630 (2,041) (1,411)
------ ------ ------- ------ ------- -------
Borrowings
Federal funds purchased and
securities sold
under agreements to repurchase 806 374 1,180 618 (117) 501
Commercial paper (7) 120 113 (2) (133) (135)
Other short-term debt 266 76 342 101 (20) 81
Long-term debt 1,170 (46) 1,124 (198) (180) (378)
------ ------ ------- ------ ------- -------
Total 2,235 524 2,759 519 (450) 69
------ ------ ------- ------ ------- -------
TOTAL INTEREST EXPENSE $3,324 $1,390 $ 4,714 $1,149 $(2,491) $(1,342)
====== ====== ======= ====== ======= =======
NET INTEREST INCOME $ 416 $5,972 $ 6,388 $2,678 $ 632 $3,310
====== ====== ======= ====== ======= =======
</TABLE>
(1) The rate/volume variance is allocated equally between changes in volume
and rate. The effect of the extra day in 1992 has been included in the
change in volume.
(2) Interest on these securities is not calculated on a tax equivalent basis.
(3) Nonaccrual loans have been included in the amounts outstanding and income
has been included to the extent accrued.
39
<PAGE> 30
STERLING BANCORP and Subsidiaries
CAPITAL COMPONENTS AND RATIOS
<TABLE>
<CAPTION>
THE COMPANY THE BANK
---------------------- ------------------------
12/31/94 12/31/93 12/31/94 12/31/93
-------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
COMPONENTS
Shareholders' equity $ 53,719 $ 52,857 $ 45,700 $ 46,993
Add/(Subtract):
Minority interest 8 8 -- --
Goodwill (21,158) (21,158) -- --
Net unrealized depreciation/(appreciation)
on securities available for sale, net of tax(1) 1,141 (735) 1,142 (734)
-------- -------- -------- --------
Tier 1 Capital 33,710 30,972 46,842 46,259
-------- -------- -------- --------
Allowance for possible loan losses (limited to 1.25%
of total risk-weighted assets) 4,136 3,414 3,435 3,042
Subordinated debt (limited to 50% of Tier 1 Capital) 16,690 15,486 -- --
-------- -------- -------- --------
Tier 2 Capital 20,826 18,900 3,435 3,042
-------- -------- -------- --------
Total Risk-based Capital $ 54,536 $ 49,872 $ 50,277 $ 49,301
======== ======== ======== ========
RATIOS
Tier 1 Capital 8.73% 9.37% 13.09% 14.95%
Total Capital 14.12 15.08 14.05 15.94
Leverage 5.12 5.41 7.42 8.39
Memoranda
Tier 1 Capital minimum requirement $ 15,450 $ 13,226 $ 14,318 $ 12,374
Total Capital minimum requirement 30,900 26,451 28,636 24,747
Risk-weighted assets, net of goodwill 386,241 330,641 357,946 309,343
Quarterly average assets, net of goodwill 658,976 572,680 630,932 551,157
</TABLE>
(1) As directed by regulatory agencies, this amount must be excluded from the
computation of Tier I capital.
40
<PAGE> 31
STERLING BANCORP and Subsidiaries
INTEREST RATE SENSITIVITY
To mitigate the vulnerability of earnings due to changes in interest rates,
the Company manages the repricing characteristics of assets and liabilities in
an attempt to control net interest rate sensitivity. Management attempts to
confine significant rate sensitivity gaps predominantly to repricing intervals
of a year or less so that adjustments can be made quickly. Assets and
liabilities with predetermined repricing dates are placed in a time of the
earliest repricing period. Based on the interest rate sensitivity analysis
shown below, the Company's net interest income would increase during periods of
rising interest rates and decrease during periods of falling interest rates.
Amounts are presented in thousands.
<TABLE>
<CAPTION>
REPRICING DATE
-------------------------------------------------------------------------------------
MORE THAN NON
3 MONTHS 3 MONTHS 1 YEAR TO OVER RATE
OR LESS TO 1 YEAR 5 YEARS 5 YEARS SENSITIVE TOTAL
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits
with other banks $ 1,970 $ 1 ,000 $ -- $ -- $ -- $ 2,970
Investment securities -- 1,030 58,637 247,935 4,180 311,782
Federal funds sold 8,000 -- -- -- -- 8,000
Loans, net of unearned discounts 268,191 2,245 26,996 20,354 (5,017) 312,769
Noninterest-earning assets and
allowance for possible loan losses -- -- -- -- 71,115 71,115
-------- --------- ------- -------- ---------- --------
Total Assets 278,161 4,275 85,633 268,289 70,278 706,636
-------- --------- ------- -------- ---------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits 155,875 24,172 162,358 -- -- 342,405
Securities sold under agreements
to repurchase 38,251 5,800 -- -- -- 44,051
Commercial paper 14,673 -- -- -- -- 14,673
Other short-term borrowings 4,104 3,000 -- -- 7,104
Long-term convertible subordinated
debentures 26,446 -- -- -- -- 26,446
Other long-term borrowings--FHLB -- -- 21,100 1,400 -- 22,500
Noninterest-bearing liabilities and
shareholders' equity -- -- -- -- 249,457 249,457
-------- --------- ------- -------- ---------- --------
Total Liabilities and
Shareholders' Equity 239,349 32,972 183,458 1,400 249,457 706,636
-------- --------- ------- -------- ---------- --------
Net Interest Rate Sensitivity Gap $ 38,812 $ (28,697) $ (97,825) $266,889 $ (179,179) $ --
======== ========= ========= ======== ========== ========
Cumulative Gap at December 31, 1994 $ 38,812 $ 10,115 $(87,710) $179,179 $ -- $ --
======== ========= ========= ======== ========== ========
Cumulative Gap at December 31, 1993 $ 29,476 $ 9,319 $(59,671) $170,526 $ -- $ --
======== ========= ========= ======== ========== ========
Cumulative Gap at December 31, 1992 $ 31,130 $ 31,539 $ 3,313 $156,733 $ -- $ --
======== ========= ========= ======== ========== ========
</TABLE>
41
<PAGE> 1
EXHIBIT 21
STERLING BANCORP
Subsidiaries of the Registrant
a) Sterling National Bank & Trust Company of New York
b) Standard Factors Corporation/Sterling Factors
c) Sterling Industrial Loan Association
d) Universal Finance Corporation
e) Sterling Banking Corporation
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
STERLING BANCORP AND SUBSIDIARIES
Article 9 of Regulation S-X
Financial Data Schedule
December 31, 1994
($ in 000's, except per share)
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $ 39,225
<INT-BEARING-DEPOSITS> 2,970
<FED-FUNDS-SOLD> 8,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 74,696
<INVESTMENTS-CARRYING> 311,782
<INVESTMENTS-MARKET> 294,584
<LOANS> 312,769
<ALLOWANCE> 4,136
<TOTAL-ASSETS> 706,636
<DEPOSITS> 517,303
<SHORT-TERM> 65,828
<LIABILITIES-OTHER> 20,762
<LONG-TERM> 48,946
<COMMON> 6,497
0
1,651
<OTHER-SE> 45,572
<TOTAL-LIABILITIES-AND-EQUITY> 706,636
<INTEREST-LOAN> 23,881
<INTEREST-INVEST> 19,314
<INTEREST-OTHER> 447
<INTEREST-TOTAL> 43,642
<INTEREST-DEPOSIT> 8,473
<INTEREST-EXPENSE> 14,882
<INTEREST-INCOME-NET> 28,760
<LOAN-LOSSES> 1,053
<SECURITIES-GAINS> 42
<EXPENSE-OTHER> 21,999
<INCOME-PRETAX> 10,031
<INCOME-PRE-EXTRAORDINARY> 4,006
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,006
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 4.91
<LOANS-NON> 575
<LOANS-PAST> 968
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,414
<CHARGE-OFFS> 532
<RECOVERIES> 201
<ALLOWANCE-CLOSE> 4,136
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,136
</TABLE>
