<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
June 30, 1995
For Quarter Ended...............................................................
1-5273-1
Commission file number..........................................................
Sterling Bancorp
................................................................................
(Exact name of registrant as specified in its charter)
New York 13-2565216
................................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
540 Madison Avenue, New York, N.Y. 10022-3299
................................................................................
(Address of principal executive offices) (Zip Code)
212-826-8000
................................................................................
(Registrant's telephone number, including area code)
N/A
................................................................................
(Former name, former address and former fiscal year, if
changed since last report.)
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 .
--- ---
As of June 30, 1995 there were outstanding 6,346,511 shares of common
stock, $1.00 par value, the registrant's only class of common shares
outstanding.
<PAGE> 2
STERLING BANCORP
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Financial Statements 3
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Business 8
Financial Condition 8
Asset/Liability Management 10
Securities 12
Credit Risk 12
Results of Operations 13
Average Balance Sheets 17
Rate/Volume Analysis 19
Interest Rate Sensitivity 21
Risk-Based Capital Components and Ratios 22
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 24
EXHIBIT INDEX 25
Exhibit 11 Computation of Per Share Earnings 26
Exhibit 27 Financial Data Schedule 27
</TABLE>
2
<PAGE> 3
STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Cash and due from banks $ 36,350,426 $ 39,224,764
Interest-bearing deposits with other banks 3,000,000 2,970,000
Federal funds sold 25,000,000 8,000,000
Securities
Available for sale 67,967,817 67,335,889
Held to maturity (market value
$232,852,294 and $227,248,000, respectively) 237,274,735 244,445,988
------------ ------------
Total securities 305,242,552 311,781,877
------------ ------------
Loans, net of unearned discounts 324,907,400 312,769,179
Less allowance for possible loan losses 4,626,713 4,135,810
------------ ------------
Loans, net 320,280,687 308,633,369
------------ ------------
Customers' liability under acceptances 519,163 624,083
Excess cost over equity in net assets of the
banking subsidiary 21,158,440 21,158,440
Premises and equipment, net 3,159,441 3,423,320
Other assets 10,006,610 10,819,866
------------ ------------
$724,717,319 $706,635,719
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits $164,700,176 $174,897,143
Interest-bearing deposits 317,707,822 342,405,372
------------ ------------
Total deposits 482,407,998 517,302,515
Securities sold under repurchase agreements 71,063,346 44,050,836
Commercial paper 26,627,500 14,672,800
Other short-term borrowings 11,192,975 7,104,224
Acceptances outstanding 519,163 624,083
Other liabilities 27,606,107 20,137,453
------------ ------------
619,417,089 603,891,911
------------ ------------
Long-term convertible subordinated debentures 26,159,000 26,446,000
Other long-term debt 22,250,000 22,500,000
------------ ------------
Total long-term debt 48,409,000 48,946,000
------------ ------------
Total liabilities 667,826,089 652,837,911
------------ ------------
Commitments and contingent liabilities
Convertible preferred stock, Series D
- market value guarantee feature 875,000 875,000
Less unearned compensation - unallocated shares 796,506 796,506
Shareholders' equity
Preferred shares, $5 par value. Authorized 644,389 shares
Series B 25,760 25,760
Series D 1,625,000 1,625,000
Common shares, $1 par value. Authorized 20,000,000 shares;
issued 6,496,854 and 6,496,605 shares, respectively 6,496,854 6,496,605
Capital surplus 28,091,878 28,089,137
Retained earnings 23,383,574 21,592,244
Net unrealized appreciation (depreciation) on securities
available for sale, net of tax 158,133 (1,140,969)
------------ ------------
59,781,199 56,687,777
Less
Common shares in treasury at cost, 150,343 shares 1,489,239 1,489,239
Unearned compensation 1,479,224 1,479,224
------------ ------------
Total shareholders' equity 56,812,736 53,719,314
------------ ------------
$724,717,319 $706,635,719
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 8,181,740 $ 5,636,674 $ 15,546,916 $ 10,579,696
Interest and dividends on securities
Available for sale 1,234,431 1,136,370 2,397,665 2,123,749
Held to maturity 3,854,381 3,834,873 7,776,791 7,010,570
Interest on Federal funds sold 83,992 64,661 203,149 92,135
Interest on deposits with other banks 49,199 28,457 90,917 53,301
------------ ------------ ------------ ------------
Total interest income 13,403,743 10,701,035 26,015,438 19,859,451
------------ ------------ ------------ ------------
INTEREST EXPENSE
Interest on deposits 2,928,644 1,959,711 5,732,986 3,473,308
Interest on Federal funds purchased
and securities sold under
repurchase agreements 736,306 493,600 1,385,130 868,243
Interest on commercial paper 282,505 125,176 501,779 227,056
Interest on other short-term borrowings 64,629 224,838 140,334 373,249
Interest on long-term debt 895,481 792,801 1,779,818 1,540,241
------------ ------------ ------------ ------------
Total interest expense 4,907,565 3,596,126 9,540,047 6,482,097
------------ ------------ ------------ ------------
Net interest income 8,496,178 7,104,909 16,475,391 13,377,354
Provision for possible loan losses 345,000 200,000 660,000 390,000
------------ ------------ ------------ ------------
Net interest income after provision
for possible loan losses 8,151,178 6,904,909 15,815,391 12,987,354
------------ ------------ ------------ ------------
NONINTEREST INCOME
Service charges on deposit accounts 438,076 320,978 864,470 624,295
Factoring and letters of credit
commissions 499,452 449,026 1,012,971 854,079
Trust fees 118,246 116,235 286,435 260,615
Gain on sale of securities 4,801 -- 4,801 42,361
Other 216,723 143,430 395,071 245,705
------------ ------------ ------------ ------------
Total noninterest income 1,277,298 1,029,669 2,563,748 2,027,055
------------ ------------ ------------ ------------
NONINTEREST EXPENSES
Salaries and employee benefits 3,581,146 2,899,527 6,958,477 5,751,549
Occupancy 718,560 638,082 1,441,952 1,240,656
Equipment 339,214 354,830 702,380 676,506
Legal and other professional fees 525,983 330,132 869,445 583,278
Federal deposit insurance premium 273,733 243,228 547,467 486,456
Marketing 268,001 151,380 515,464 301,554
Other 1,043,573 1,018,220 1,987,158 1,924,103
------------ ------------ ------------ ------------
Total noninterest expenses 6,750,210 5,635,399 13,022,343 10,964,102
------------ ------------ ------------ ------------
Income before income taxes 2,678,266 2,299,179 5,356,796 4,050,307
Provision for income taxes 1,381,702 1,336,775 2,803,158 2,177,436
------------ ------------ ------------ ------------
Net income $ 1,296,564 $ 962,404 $ 2,553,638 $ 1,872,871
============ ============ ============ ============
Average number of common shares outstanding 6,375,022 6,360,249 6,372,308 6,359,721
============ ============ ============ ============
Per average common share
Net income $ 0.20 $ 0.15 $ 0.40 $ 0.29
============ ============ ============ ============
Average number of common shares outstanding
assuming full dilution 8,954,674 8,775,778 8,951,937 8,777,025
============ ============ ============ ============
Per average common share assuming
full dilution
Net income $ 0.18 $ 0.13 $ 0.36 $ 0.26
============ ============ ============ ============
Dividends paid per common share $ 0.06 $ 0.05 $ 0.12 $ 0.10
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1995 1994
------------- -------------
<S> <C> <C>
Shareholders' equity at beginning of period $ 53,719,314 $ 52,856,675
------------ -------------
Net income 2,553,638 1,872,871
Dividends declared
Common stock - $.06 and $.05 per share, respectively (761,557) (634,621)
Preferred stock - at prescribed rates (751) (64)
Change in market value guarantee feature
Convertible preferred stock, Series D -- (187,500)
Unearned compensation - unallocated shares -- 179,841
Conversion of subordinated debentures
into common stock 2,990 --
Change in valuation account for securities
available for sale, net of tax 1,299,102 (1,114,089)
------------- -------------
Net change in shareholders' equity 3,093,422 116,438
------------- -------------
Shareholders' equity at end of period $ 56,812,736 $ 52,973,113
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,553,638 $ 1,872,871
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 660,000 390,000
Depreciation and amortization of premises and equipment 484,246 247,497
Deferred income tax provision (benefit) 35,017 (262,208)
Gain on sale of securities (4,801) (42,361)
Amortization of premiums on securities 707,270 1,856,925
Accretion of discounts on securities (51,414) (51,286)
Decrease (increase) in accrued interest receivable 577,616 (213,186)
Increase in other liabilities 7,468 654 6,820,216
Other, net (902,002) (344,708)
------------ ------------
Net cash provided by operating activities 11,528,224 10,273,760
------------ ------------
INVESTING ACTIVITIES
Purchase of premises and equipment (220,367) (870,889)
Net increase in interest-bearing deposits
with other banks (30,000) --
Net increase in Federal funds sold (17,000,000) (20,000,000)
Net (increase) decrease in loans (12,307,318) 16,971,509
Proceeds from prepayments, redemptions or
maturities of securities - held to maturity 12,892,304 35,251,903
Purchases of securities - held to maturity (6,122,212) (87,105,897)
Proceeds from sale of securities-available for sale 8,977,432 9,955,694
Proceeds from prepayments, redemptions or maturities
of securities - available for sale 2,581,245 23,119,147
Purchases of securities - available for sale (10,038,782) (26,844,004)
------------ ------------
Net cash used by investing activities (21,267,698) (49,522,537)
------------ ------------
FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits (10,196,967) (18,375,962)
Net (decrease) increase in interest-bearing deposits (24,697,550) 32,803,129
Net increase in securities sold under
repurchase agreements 27,012,510 28,271,226
Net increase (decrease) in commercial paper
and other short-term borrowings 16,043,451 (2,443,367)
Cash dividends paid (762,308) (634,685)
Maturities and prepayments on debentures (534,000) (179,000)
------------ ------------
Net cash provided by financing activities 6,865,136 39,441,341
------------ ------------
Net (decrease) increase in cash and due from banks (2,874,338) 192,564
Cash and due from banks - beginning of period 39,224,764 35,975,787
------------ ------------
Cash and due from banks - end of period $ 36,350,426 $ 36,168,351
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 8,077,886 $ 5,947,012
Income taxes paid 2,832,156 1,619,551
Supplemental schedule of non-cash financing activities:
Conversion of debentures $ 2,990 $ --
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. The consolidated financial statements include the accounts of Sterling
Bancorp ("the parent company") and its subsidiaries, principally
Sterling National Bank & Trust Company of New York ("the bank"), after
elimination of material intercompany transactions. The term "the
Company" refers to Sterling Bancorp and its subsidiaries. The
consolidated financial statements as of and for the interim periods
ended June 30, 1995 and 1994 are unaudited; however, in the opinion of
management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of such periods have been made.
Certain reclassifications have been made to the 1994 financial
statements to conform to current presentation. The interim financial
statements should be read in conjunction with the Company's annual
report on Form 10-K for the year ended December 31, 1994.
2. For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks.
3. The Company's outstanding Preferred Shares comprise 1,288 Series B
shares (of 4,389 authorized) and 250,000 Series D Shares (of 300,000
authorized). Each Series B share is entitled to cumulative dividends at
the rate of $0.10 per year, to one vote per share and upon liquidation
or redemption to an amount equal to accrued and unpaid dividends to the
date of redemption or liquidation plus an amount which is $20 in the
case of involuntary liquidation and $28 otherwise; each Series D share
(all of such shares are owned by the Company's Employee Stock Ownership
Trust) is entitled to dividends at the rate of $0.6125 per year, is
convertible into one Common Share, and is entitled to a liquidation
preference of $10 (together with accrued dividends). All preferred
shares are entitled to one vote per share (voting with the Common Shares
except as otherwise required by law).
4. On January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114 "Accounting by Creditors for
Impairment of a Loan," as amended by SFAS No. 118 "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures."
SFAS No. 114 required 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 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.
As of June 30, 1995, these statements did not have a material effect on
the Company's financial condition or results of operations.
7
<PAGE> 8
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,
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 intense 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
June 30, 1995, the bank's year to date average earning assets (of which loans
were 45% and securities were 54%) represented approximately 95% of the Company's
year to date average earning assets. See pages 17 and 18 for the composition of
the Company's average balance sheets for the three and six months ended June 30,
1995 and June 30, 1994.
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 and 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 June 30, 1995, the
parent company had on hand approximately $15,171,000 in cash.
Various legal restrictions limit the extent to which the bank can supply funds
to the parent company and its nonbank 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. During 1994 and 1993, with the Comptroller's
approval, the bank paid dividends aggregating $3,639,038 and $2,599,314; the
bank's net income for 1994 and 1993 was $4,222,664 and $3,463,950. In 1995, the
bank declared and paid a dividend of approximately $1,738,878. In addition, from
time to time dividends are paid to the parent company by the finance
subsidiaries from their retained earnings without regulatory restrictions.
8
<PAGE> 9
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
At June 30, 1995, the parent company's outstanding long-term debt, consisting
principally of convertible subordinated debentures (originally issued pursuant
to rights offerings to shareholders of the Company), aggregated $28,534,000. 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 June 30, 1995, the parent company's short-term debt, consisting principally
of commercial paper, was approximately $26,753,000. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating
$47,884,000 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.
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 June 30, 1995, 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 June
30, 1995 and December 31, 1994, is presented on page 22.
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.
9
<PAGE> 10
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ASSET LIABILITY MANAGEMENT
The Company's primary earnings source is its net interest income; therefore the
Company devotes significant time and has invested in resources to assist in the
management of interest rate risk and asset quality. The Company's net interest
income is affected by changes in market interest rates, and by the level and
composition of interest earning assets and interest bearing liabilities. The
Company's objectives in its asset/liability management are to utilize its
capital effectively, to provide adequate liquidity and to enhance net interest
income, without taking undue risks or subjecting the Company unduly to interest
rate fluctuations.
The Company takes a coordinated approach to the management of its liquidity,
capital and interest rate risk. This risk management process is governed by
policies and limits established by senior management which are reviewed and
approved by the Asset/Liability Committee of the Board of Directors ("ALCO").
ALCO, which is comprised of members of senior management and the Board, meets to
review among other things, economic conditions, interest rates, yield curve,
cash flow projections, expected customer actions, liquidity levels, capital
ratios and repricing characteristics of assets, liabilities and off-balance
sheet financial instruments.
The Company's balance sheet structure is primarily short-term in nature with
most assets and liabilities repricing or maturing in less than five years. The
Company monitors the interest rate sensitivity of its on-and off-balance sheet
positions by examining its near-term sensitivity and its longer term gap (as
defined below) position. The Company utilizes several tools in its management of
interest rate risk, primarily utilizing a sophisticated income simulations model
and complementing this with a traditional gap analysis.
The income simulation model measures the Company's net interest income
sensitivity or volatility to interest rate changes utilizing statistical
techniques that allow the Company to consider various factors which impact net
interest income. These factors include actual maturities, estimated cash flows,
repricing characteristics, deposits growth/retention and, most importantly, the
relative sensitivity of the Company's assets and liabilities to changes in
market interest rates. This relative sensitivity is important to consider as the
Company's core deposit base is not subject to the same degree of interest rate
sensitivity as its assets. The core deposits costs are internally managed and
tend to exhibit less sensitivity to changes in interest rates than the Company's
adjustable rate assets whose yields are based on external indices and change in
concert with market interest rates.
The Company's interest rate sensitivity is determined by identifying the
probable impact of changes in market interest rates on the yields on the
Company's assets and the rates which would be paid on it's liabilities. This
modeling technique involves a degree of estimation based on certain assumptions
that management believes to be reasonable. Utilizing this process, management
can project the impact of changes in interest rates on net interest margin. The
Company has established certain limits for the potential volatility of its net
interest margin assuming certain levels of changes in market interest rates with
the objective of maintaining a stable net interest margin under various probable
rate scenarios. The Company can also utilize this technique to stress test its
portfolio to determine the impact of various interest rate scenarios on the
Company's net interest income.
10
<PAGE> 11
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The traditional gap analysis is prepared based on the maturity and repricing
characteristics of interest earning assets and interest-bearing liabilities for
selected time bands. The mismatch between repricings or maturities within a time
band is commonly referred to as the "gap" for that period. A positive gap (asset
sensitive) where interest-rate sensitive assets exceed interest-rate sensitive
liabilities generally will result in an institution's net interest margin
increasing in a rising rate environment and decreasing in a falling rate
environment. A negative gap (liability sensitive) will generally have the
opposite results on an institution's net interest margin. However, the
traditional gap analysis does not assess the relative sensitivity of assets and
liabilities to changes in interest rates. The Company utilizes the gap analysis
to complement its income simulations modeling, primarily focusing on the longer
term structure of the balance sheet.
As part of its interest rate risk strategy, the Company uses off-balance sheet
financial instruments (derivatives) to hedge the interest rate sensitivity of
assets with the corresponding amortization reflected in the yield of the
related on-balance sheet assets being hedged. The Company has written policy
guidelines, which have been approved by the Board of Directors and the
Asset/Liability Committee, governing the use of off-balance sheet financial
instruments, including approved counterparties, risk limits and appropriate
internal control procedures. The credit risk of derivatives arises principally
from the potential for a counterparty to fail to meet its obligation to settle
a contract on a timely basis. At June 30, 1995, all counterparties have
investment grade credit ratings from the major rating agencies. Each
counterparty is specifically approved for applicable credit exposure.
At June 30, 1995, the Company's off-balance sheet financial instruments
consisted two interest rate floor contracts having a notional amount totaling
$75 million; one contract with a notional amount of $50 million has a final
maturity of February 27, 2000 and the other contract with a notional amount of
$25 million has a final maturity of March 17, 1998. These financial instruments
are being used as part of the Company's interest rate risk management and not
for trading purposes.
Interest rate floor contracts require the counterparty to pay the Company at
specified future dates the amount, if any, by which the specified interest rate
(3 month LIBOR) falls below the fixed floor rates, applied to the notional
amounts. The Company utilizes these financial instruments to adjust its interest
rate risk position without exposing itself to principal risk and funding
requirements. The interest rate floor contracts require the Company to pay a fee
for the right to receive a fixed interest payment.
The Company purchased interest rate floor contracts to reduce the impact of
falling rates on its floating rate commercial loans. The Company paid up front
premiums of $715,000 for the interest rate floor contracts that it entered into
in 1995. These premiums are amortized monthly against interest income from the
designated assets. At June 30, 1995, the unamortized premiums on these contracts
totaled $664,500 and are included in other assets. There were no payments
receivable under these contracts at June 30, 1995.
11
<PAGE> 12
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SECURITIES
The Company's securities portfolios are comprised of principally U.S. Government
and U.S. Government corporation and agency mortgage backed securities along with
other debt and equity securities. At June 30, 1995, the Company's portfolio of
securities totalled $305,243,000 of which U.S. Government and U.S. Government
corporation and agency guaranteed mortgage backed securities having an average
life of approximately 3 1/2 years amounted to $296,562,000. The Company has the
intent and ability to hold to maturity securities classified "held to maturity".
These securities are carried at cost, adjusted for amortization of premiums and
accretion of discounts. The gross unrealized gains and losses on "held to
maturity" securities were $796,000 and $5,218,000, respectively. Securities
classified as "available for sale" may be sold in the future, prior to maturity.
These securities are carried at market value. Net aggregate unrealized gains or
losses on these securities are included in a valuation allowance account and are
shown net of taxes, as a component of shareholders' equity. "Available for sale"
securities included gross unrealized gains of $765,000 and gross unrealized
losses of $472,000. Given the relatively short - term nature of the portfolio
and its generally high credit quality, management expects to realize all of its
investment upon the maturity of such instruments, and thus believes that any
market value impairment is temporary in nature.
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. The composition of the
Company's and the bank's loan portfolio at June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Company Bank
------- ----
(in thousands)
<S> <C> <C>
Domestic
Commercial and industrial $270,219 $230,940
Real estate - mortgage 45,576 45,427
Real estate - construction 1,061 1,061
Installment - individuals 13,509 13,509
Foreign
Government and official institutions 789 789
-------- --------
Loans, gross 331,154 291,726
Less unearned discounts 6,247 5,955
-------- --------
Loans, net of unearned discounts $324,907 $285,771
======== ========
</TABLE>
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.
12
<PAGE> 13
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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. The allowance reflects
management's evaluation of both loans presenting identified loss potential and
of the risk inherent in various components of the portfolio. Thus an increase
in the size of the portfolio or in any of its components could necessitate an
increase in the allowance even though there may not be a decline in credit
quality or an increase in potential problem loans. A significant change in any
of the evaluation factors described above could result in future additions to
the allowance. At June 30, 1995, the ratio of the allowance to loans, net of
unearned discounts, was 1.4%. At June 30, 1995, the Company's allowance, was
$4,627,000 and its non-accrual loans amounted to $520,000. Based on the
foregoing, as well as management's judgement 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 June
30, 1995. Potential problem loans, which are loans that are currently
performing under present loan repayment terms but where known information about
possible credit problems of borrowers cause management to have serious doubts
as to the ability of the borrowers to continue to comply with the present
repayment terms, aggregated $531,000 at June 30, 1995.
RESULTS OF OPERATIONS
Net interest income, which represents the difference between interest earned on
interest earning assets and interest incurred on interest bearing liabilities,
is the Company's primary source of earnings. Net interest income can be affected
by changes in market interest rates as well as the level and composition of
interest earning assets and interest bearing liabilities. An analysis of the
Company's interest rate sensitivity is presented on page 21. 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 pages
19 and 20. Information as to the components of interest income and interest
expense and average rates is provided in the Average Balance Sheets shown on
pages 17 and 18.
13
<PAGE> 14
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
Net interest income for the second quarter of 1995 increased $1,393,000 to
$8,498,000 from $7,105,000 for the comparable period in 1994. Total interest
income aggregated $13,404,000 up $2,703,000 for the three months ended June 30,
1995 as compared to $10,701,000 for the same period of 1994. The yield on
interest earning assets was 8.87% for the second quarter of 1995 compared with
7.23% for the comparable period in 1994. The increase in interest income was
principally due to an increase in income earned on the Company's loan portfolio
as a result of asset growth and higher market interest rates.
Interest earned on the loan portfolio amounted to $8,182,000 up $2,545,000 when
compared to the like period a year ago. Average loan balances amounted to $294
million up $48 million from an average loan volume of $246 million the prior
year three month period. The increase in the average loan volume, primarily in
the Company's commercial and industrial loan portfolio, accounted for $1,161,000
or 46% of the increase in interest earned, with the balance attributable to
higher rates.
Interest expense increased $1,310,000 to $4,906,000 for the three months ended
June 30, 1995 from $3,596,000 for the comparable period in 1994. The cost of
funds increased to 4.36% for the second quarter of 1995 up from 3.19% for the
1994 second quarter. Substantially the entire increase in interest expense was
due to the higher rate environment.
Interest expense on savings and time deposits increased by $969,000 during the
second quarter of 1995 to $2,928,000 from $1,959,000 for the comparable 1994
period primarily due to an increase in the cost of funds. The average rate paid
on interest-bearing deposits rose to 3.61% in the 1995 second quarter compared
to 2.62% in the comparable year ago period. In addition the average balances for
other time deposits increased $27 million to $149,377,000 in the second quarter
of 1995 compared with the 1994 same period primarily due to higher balances for
certificate of deposit customers.
Interest expense associated with borrowed funds was $341,000 higher when
comparing the three months ended June 30, 1995 to the same period in 1994. The
impact of the higher interest rate environment increased interest expense
associated with borrowed funds by $643,000. This increase was partially offset
by a reduction in the cost of funds of $302,000 as a result of lower average
borrowings.
Reference is made to "CREDIT RISK" above for information as to management's
continuing evaluation of the loan portfolio and the allowance for possible loan
losses appropriate thereto. Based on such evaluation, and principally as the
result of the growth in the portfolio, $345,000 was provided for possible loan
losses for the three months ended June 30, 1995.
Noninterest income increased $248,000 for the three months ended June 30, 1995
when compared with the same period in 1994 as a result of higher service charges
on deposit accounts, increased fees from factoring services and higher income
from other fee based services.
14
<PAGE> 15
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Noninterest expenses increased $1,115,000 for the three months ended June 30,
1995 versus the same period last year reflecting higher salary and employee
benefit costs as well as higher general business costs and professional fees
associated with business development.
As a result of the above factors, net income increased $334,000 for the three
months ended June 30, 1995 when compared with the same period in 1994.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
Net interest income for the six months ended June 30, 1995 increased $3,098,000
to $16,475,000 from $13,377,000 for the comparable period in 1994. Total
interest income aggregated $26,015,000 up $6,156,000 for the six months ended
June 30, 1995 as compared to $19,859,000 for the same period of 1994. The yield
on interest earning assets was 8.67% for the first half of 1995 compared with
6.96% for the comparable period in 1994. The increase in interest income was
principally due to an increase in income earned on the Company's loan portfolio
as a result of asset growth and higher market interest rates.
Interest earned on the loan portfolio for the year to date 1995 amounted to
$15,547,000 up $4,967,000 when compared to the like period a year ago. Average
loan balances amounted to $290 million up $45 million from an average loan
volume of $245 million for the prior year six month period. The increase in the
average loan volume, primarily in the Company's commercial and industrial loan
portfolio accounted for $2,027,000 or 41% of the increase in interest earned,
with the balance attributable to higher rates.
Interest expense increased $3,058,000 to $9,540,000 for the first half of 1995
from $6,482,000 for the comparable period in 1994. The cost of funds increased
to 4.26% for the first half of 1995 up from 3.00% for the same period in 1994.
The predominant portion of the increase in interest expense was due to the
higher rate environment.
Interest expense on savings and time deposits increased by $2,259,000 during the
year to date 1995 to $5,733,000 from $3,474,000 for the comparable 1994 period
primarily due to an increase in the cost of funds. The cost of interest-bearing
deposits rose to 3.52% in the 1995 year to date period compared to 2.41% in the
comparable year ago period. In addition, the average balances for other time
deposits increased $44 million to $151,210,000 in the first six months of 1995
compared with the 1994 first six months primarily due to higher balances for
certificate of deposit customers.
15
<PAGE> 16
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Interest expense associated with borrowed funds was $3,807,000 up $799,000 for
the six months ended June 30, 1995 when compared to the same period in 1994. The
impact of the higher interest rate environment increased interest expense
associated with borrowed funds by $1,299,000. This increase was partially offset
by a reduction in the cost of funds of $500,000 as a result of lower average
borrowings.
Reference is made to "CREDIT RISK" above for information as to management's
continuing evaluation of the loan portfolio and the allowance for possible loan
losses appropriate thereto. Based on such evaluation, and principally as the
result of the growth in the portfolio, $660,000 was provided for possible loan
losses for the six months ended June 30, 1995.
Noninterest income increased $537,000 for the six months ended June 30, 1995
when compared with the same period in 1994 as a result of higher service charges
on deposit accounts, increased fees from factoring services and higher income
from other fee based services.
Noninterest expenses increased $2,058,000 for the six months ended June 30, 1995
versus the same period last year reflecting higher salary and employee benefit
costs as well as higher general business costs and professional fees associated
with business development.
The provision for income taxes increased $626,000 for the first six months of
1995 when compared with the same period last year principally based on the level
of pretax profitability.
As a result of the above factors, net income increased $681,000 for the six
months ended June 30, 1995 when compared with the same period in 1994.
16
<PAGE> 17
STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Three Months Ended June 30,
<TABLE>
<CAPTION>
1995 1994
-------------------------------------- ---------------------------------------
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
-------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits
with other banks $ 2,989 $ 49 6.60% $ 2,970 $ 28 3.84%
Securities
Available for sale [2] 73,020 1,234 6.78 84,958 1,136 5.36
Held to maturity 235,312 3,855 6.55 252,889 3,835 6.08
Federal funds sold 6,176 84 6.03 6,319 65 4.15
Loans, net of unearned
discounts [3] 294,121 8,182 11.43 246,248 5,637 9.26
-------- ------- -------- --------
TOTAL EARNING ASSETS 611,618 13,404 8.87 593,384 10,701 7.23
------- ----- -------- ----
Cash and due from banks 37,069 40,948
Allowance for possible
loan losses (4,443) (3,657)
Goodwill 21,158 21,158
Other assets 13,897 13,830
-------- --------
TOTAL ASSETS $679,299 $665,663
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Savings $175,679 1,073 2.45 $177,727 771 1.74
Other time 149,377 1,855 4.98 122,667 1,188 3.89
-------- ------- -------- --------
Total interest-bearing
deposits 325,056 2,928 3.61 300,394 1,959 2.62
-------- ------- -------- --------
Borrowings
Securities sold under
agreements to repurchase 50,689 736 5.75 60,568 494 3.27
Commercial paper 20,965 283 5.40 15,158 125 3.31
Other short-term debt 5,353 64 4.84 24,027 225 3.76
Long-term debt 48,411 895 7.42 52,246 793 6.09
-------- ------- -------- --------
Total borrowings 125,418 1,978 6.30 151,999 1,637 4.32
-------- ------- -------- --------
TOTAL INTEREST-BEARING
LIABILITIES 450,474 4,906 4.36 452,393 3,596 3.19
------- ----- -------- ----
Noninterest-bearing deposits 146,943 145,740
Other liabilities 26,223 14,493
-------- --------
Total liabilities 623,640 612,626
Shareholders' equity 55,659 53,037
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $679,299 $665,663
======== ========
Net interest income/spread $ 8,498 4.51% $ 7,105 4.04%
======== ==== ======== ====
Net yield on earning assets
(margin) 5.60% 4.77%
==== ====
</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. Dollars are presented
in thousands.
[2] Based on amortized or historical cost with the FASB 115 market value
adjustment included in other assets.
[3] Non-accrual loans are included in the average balance which reduces the
average yields.
17
<PAGE> 18
STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Six Months Ended June 30,
<TABLE>
<CAPTION>
1995 1994
-------------------------------------- --------------------------------------
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits
with other banks $ 2,980 $ 91 5.95% $ 2,956 $ 53 3.64%
Securities
Available for sale [2] 72,180 2,396 6.69 84,274 2,124 5.06
Held to maturity 238,285 7,778 6.53 235,157 7,010 5.96
Federal funds sold 7,011 203 6.05 4,834 92 3.84
Loans, net of unearned
discounts [3] 290,403 15,547 11.09 244,914 10,580 8.72
-------- -------- -------- --------
TOTAL EARNING ASSETS 610,859 26,015 8.67 572,135 19,859 6.96
-------- ----- -------- ----
Cash and due from banks 38,373 41,438
Allowance for possible
loan losses (4,334) (3,584)
Goodwill 21,158 21,158
Other assets 13,182 13,624
-------- --------
TOTAL ASSETS $679,238 $644,771
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Savings $177,445 2 071 2.35 $183,057 1,674 1.84
Other time 151,210 3,662 4.88 107,370 1,800 3.38
-------- -------- -------- --------
Total interest-bearing
deposits 328,655 5,733 3.52 290,427 3,474 2.41
-------- -------- -------- --------
Borrowings
Securities sold under
agreements to repurchase 49,514 1,385 5.61 57,176 868 3.06
Commercial paper 18,984 502 5.33 14,552 227 3.15
Other short-term debt 5,835 140 4.85 20,757 373 3.63
Long-term debt 48,682 1,780 7.37 52,255 1,540 5.94
-------- -------- -------- --------
Total borrowings 123,015 3,807 6.23 144,740 3,008 4.19
-------- -------- -------- --------
TOTAL INTEREST-BEARING
LIABILITIES 451,670 9,540 4.26 435,167 6,482 3.00
-------- ----- -------- ----
Noninterest-bearing deposits 148,689 144,085
Other liabilities 23,855 12,497
-------- --------
Total liabilities 624,214 591,749
Shareholders' equity 55,024 53,022
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $679,238 $644,771
======== ========
Net interest income/spread $ 16,475 4.41% $ 13,377 3.96%
======== ===== ========
Net yield on earning assets
(margin) 5.47% 4.73%
===== ====
</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. Dollars are presented
in thousands.
[2] Based on amortized or historical cost with the FASB 115 market value
adjustment included in other assets.
[3] Non-accrual loans are included in the average balance which reduces the
average yields.
18
<PAGE> 19
STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis
Three Months Ended June 30,
(000 omitted)
<TABLE>
<CAPTION>
Increase/(Decrease)
Three Months Ended
June 30, 1995 and 1994
------------------------------------
Volume Rate Total[1]
------- ------- -------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other banks $ 0 $ 21 $ 21
------- ------- -------
Securities
Available for sale [2] (178) 276 98
Held to maturity (270) 290 20
------- ------- -------
Total (448) 566 118
------- ------- -------
Federal funds sold (6) 25 19
------- ------- -------
Loans, net of unearned discounts [3] 1,161 1,384 2,545
------- ------- -------
TOTAL INTEREST INCOME $ 707 $ 1,996 $ 2,703
======= ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Savings $ (9) $ 311 $ 302
Other time 286 381 667
------- ------- -------
Total 277 692 969
------- ------- -------
Borrowings
Securities sold under agreements to repurchase (104) 346 242
Commercial paper 64 94 158
Other short-term debt (199) 38 (161)
Long-term debt (63) 165 102
------- ------- -------
Total (302) 643 341
------- ------- -------
TOTAL INTEREST EXPENSE $ (25) $ 1,335 $ 1,310
======= ======= =======
NET INTEREST INCOME $ 732 $ 661 $ 1,393
======= ======= =======
</TABLE>
[1] The rate/volume variance is allocated equally between changes in volume
and rate.
[2] Includes Federal Reserve Bank and other stock investments.
[3] Nonaccrual loans have been included in the amounts outstanding and income
has been included to the extent accrued.
19
<PAGE> 20
STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis
Six Months Ended June 30,
(000 omitted)
<TABLE>
<CAPTION>
Increase/(Decrease)
Six Months Ended
June 30, 1995 and 1994
------------------------------------
Volume Rate Total[1]
------- ------- --------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other banks $ 2 $ 36 $ 38
------- ------- --------
Securities
Available for sale [2] (355) 627 272
Held to maturity 97 671 768
------- ------- -------
Total (258) 1,298 1,040
------- ------- -------
Federal funds sold 50 61 111
------- ------- -------
Loans, net of unearned discounts [3] 2,027 2,940 4,967
------- ------- -------
TOTAL INTEREST INCOME $ 1,821 $ 4,335 $ 6,156
======= ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Savings $ (60) $ 457 $ 397
Other time 879 983 1,862
------- ------- -------
Total 819 1,440 2,259
------- ------- -------
Borrowings
Securities sold under agreements to repurchase (161) 678 517
Commercial paper 93 182 275
Other short-term debt (314) 81 (233)
Long-term debt (118) 358 240
------- ------- -------
Total (500) 1,299 799
------- ------- -------
TOTAL INTEREST EXPENSE $ 319 $ 2,739 $ 3,058
======= ======= =======
NET INTEREST INCOME $ 1,502 $ 1,596 $ 3,098
======= ======= =======
</TABLE>
[1] The rate/volume variance is allocated equally between changes in volume
and rate.
[2] Includes Federal Reserve Bank and other stock investments.
[3] Nonaccrual loans have been included in the amounts outstanding and income
has been included to the extent accrued.
20
<PAGE> 21
STERLING BANCORP AND SUBSIDIARIES
Interest Rate Sensitivity
To mitigate the vulnerability of earnings 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 $ 1,900 $ 1,100 $ -- $ -- $ -- $ 3,000
Securities 4,030 34,104 51,043 211,980 4,086 305,243
Federal funds sold 25,000 -- -- -- -- 25,000
Loans, net of unearned
discounts 266,384 4,918 35,862 23,990 (6,247) 324,907
Noninterest-earnings assets
and allowance for possible
loan losses -- -- -- -- 66,567 66,567
--------- --------- --------- --------- --------- ---------
Total Assets 297,314 40,122 86,905 235,970 64,406 724,717
--------- --------- --------- --------- --------- ---------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits 145,815 47,540 124,353 -- -- 317,708
Securities sold under
repurchase agreements 62,541 8,522 -- -- -- 71,063
Commercial paper 23,528 3,100 -- -- -- 26,628
Other short-term borrowings 7,943 3,250 -- -- -- 11,193
Long-term debt 26,159 -- 21,200 1,050 -- 48,409
Noninterest-bearing
liabilities and share-
holders' equity -- -- -- -- 249,716 249,716
-------- --------- --------- --------- --------- ---------
Total Liabilities and
Shareholders' Equity $ 265,986 $ 62,412 $ 145,553 $ 1,050 $ 249,716 $ 724,717
========= ========= ========= ========= ========= =========
Net Interest Rate
Sensitivity Gap $ 31,328 $ (22,290) $ (58,648) $ 234,920 $(185,310) $ --
========= ========= ========= ========= ========= =========
Cumulative Gap at
June 30, 1995 $ 31,328 $ 9,038 $ (49,610) $ 185,310 $ -- $ --
========= ========= ========= ========= ========= =========
Cumulative Gap at
June 30, 1994 $ (2,285) $ (15,243) $(121,158) $ 155,327 $ -- $ --
========= ========= ========= ========= ========= =========
Cumulative Gap at
December 31, 1994 $ 38,812 $ 10,115 $ (87,710) $ 179,179 $ -- $ --
========= ========= ========= ========= ========= =========
</TABLE>
21
<PAGE> 22
STERLING BANCORP AND SUBSIDIARIES
Risk-Based Capital Components and Ratios
<TABLE>
<CAPTION>
The Company The Bank
------------------------------------------------------------
6/30/95 12/31/94 6/30/95 12/31/94
-------- -------- -------- --------
($ in thousands)
<S> <C> <C> <C> <C>
COMPONENTS
Stockholders' equity $ 56,813 $ 53,719 $ 47,703 $ 45,700
Add/(Subtract):
Minority interest 8 8 -- --
Goodwill (21,158) (21,158) -- --
Net unrealized (appreciation)depreciation
on securities available for sale,
net of tax effect (1) (158) 1,141 (157) 1,142
-------- -------- -------- --------
Tier 1 Capital 35,505 33,710 47,546 46,842
-------- -------- -------- --------
Allowance for possible loan losses
(limited to 1.25% of total risk-
weighted assets) 4,576 4,136 3,768 3,435
Subordinated debt (limited to 50%
of Tier 1 Capital) 16,578 16,690 -- --
-------- --------- -------- --------
Tier 2 Capital 21,154 20,826 3,768 3,435
-------- -------- -------- --------
Total Risk-based Capital $ 56,659 $ 54,536 $ 51,314 $ 50,277
======== ======== ======== ========
RATIOS
Tier 1 Capital 9.70% 8.73% 13.89% 13.09%
======== ======== ======== ========
Total Capital 15.48% 14.12% 14.99% 14.05%
======== ======== ======== ========
Leverage 5.39% 5.12% 7.65% 7.42%
======== ======== ======== ========
Memoranda
Tier 1 Capital minimum requirement $ 14,645 $ 15,450 $ 13,696 $ 14,318
======== ======== ======== ========
Total Capital minimum requirement $ 29,290 $ 30,900 $ 27,391 $ 28,636
======== ======== ======== ========
Risk-weighted assets, net of goodwill $366,126 $386,241 $342,390 $357,946
======== ======== ======== ========
Quarterly average assets, net of goodwill $658,141 $658,976 $621,553 $630,932
======== ======== ======== ========
</TABLE>
(1) As directed by regulatory agencies this amount must be excluded from the
computation of Tier 1 capital.
22
<PAGE> 23
STERLING BANCORP AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The Annual Meeting of Shareholders of the Company was held on April 20,
1995.
(b) The following matters were submitted to a vote of the Shareholders of
the Company:
(1) Election of Directors *
<TABLE>
<CAPTION>
Nominee Total Votes For Total Votes Withheld
------- --------------- --------------------
<S> <C> <C>
Joseph M. Adamko 5,389,767 140,989
Lillian Berkman 5,417,616 113,140
Louis J. Cappelli 5,397,074 133,682
Walter Feldesman 5,414,766 115,990
Allan F. Hershfield 5,409,867 120,889
Henry J. Humphreys 5,408,202 122,554
John C. Millman 5,397,267 133,489
Maxwell M. Rabb 5,405,491 125,265
Eugene T. Rossides 5,417,567 113,189
William C. Warren 5,414,594 116,162
</TABLE>
* all nominees were incumbents at the time of the
Annual Meeting of Shareholders and all nominees
were re-elected.
<TABLE>
<CAPTION>
(2) Amendment of Stock Incentive Plan
<S> <C>
Total Votes For 4,929,411
Total Votes Against 506,325
Total Abstentions 58,759
Broker Nonvotes 36,261
</TABLE>
<TABLE>
<CAPTION>
(3) Shareholder Proposal on Policy Against Future Agreements with Officers
and Directors
<S> <C>
Total Votes For 1,248,980
Total Votes Against 2,500,068
Total Abstentions 64,467
Total Broker Nonvotes 1,717,241
</TABLE>
23
<PAGE> 24
STERLING BANCORP AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(11) Statement Re: Computation of Per Share Earnings
(27) Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter.
SIGNATURES
Pursuant to the requirements 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
.............................
(Registrant)
Date 8/14/95 /s/ Louis J. Cappelli
---------------------- --------------------------------
Louis J. Cappelli
Chairman and
Chief Executive Officer
Date 8/14/95 /s/ John W. Tietjen
---------------------- --------------------------------
John W. Tietjen
Senior Vice President, Treasurer
and Chief Financial Officer
24
<PAGE> 25
STERLING BANCORP AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
Incorporated Sequential
Exhibit Herein By Filed Page
Number Description Reference To Herewith No.
------ ----------- ------------ -------- ---
<S> <C> <C> <C>
11 Computation of X 26
Per Share Earnings
27 Financial Data X 27
Schedule
</TABLE>
25
<PAGE> 1
Exhibit (11)
STERLING BANCORP AND SUBSIDIARIES
Statement Re: Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income for primary earnings per share:
Net income A $1,296,564 $ 962,404 $2,553,638 $1,872,871
========== ========== ========== ==========
Income for fully diluted earnings per share:
Net income $1,296,564 $ 962,404 $2,553,638 $1,872,871
Add expenses, net of tax effect
on assumed conversion of
Convertible Subordinated
Debentures:
Interest 329,885 218,950 647,141 417,292
Amortization of bond discount
and expense 3,429 2,874 7,250 5,818
---------- ---------- ---------- ----------
Income for fully diluted shares B $1,629,878 $1,184,228 $3,208,029 $2,295,981
========== ========== ========== ==========
Common shares for primary earnings per share:
Average shares issued 6,496,667 6,496,605 6,496,641 6,496,605
Add assumed conversion at the beginning
of the period or issuance date if later:
Stock options 2,448 -- 1,399 1,111
ESOP shares allocated 26,250 14,037 24,611 12,398
Less: Average Treasury shares 150,343 150,393 150,343 150,393
---------- ---------- ---------- ----------
Average common shares for compu-
tation of primary earnings
per share (See Note below) C 6,375,022 6,360,249 6,372,308 6,359,721
========== ========== ========== ==========
Common shares for fully diluted earnings per share:
Average common shares 6,375,022 6,360,249 6,372,308 6,359,721
Add assumed conversion at the beginning
of the period of issuance date if later:
Convertible Subordinated Debentures 2,349,449 2,176,990 2,349,449 2,176,990
Series B preferred shares 2,576 2,576 2,576 2,576
ESOP shares unallocated 223,750 235,963 225,389 237,602
Stock options 3,877 -- 2,215 136
---------- ---------- ---------- ----------
Average common shares for computation
of fully diluted earnings per
share (See Note below) D 8,954,674 8,775,778 8,951,937 8,777,025
========== ========== ========== ==========
Per average common share:
Net income (A + C) $ 0.20 $ 0.15 $ 0.40 $ 0.29
========== ========== ========== ==========
Net income assuming full dilution (B + D) $ 0.18 $ 0.13 $ 0.36 $ 0.26
========== ========== ========== ==========
</TABLE>
Note: Based on shares at end of each month.
26
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 36,350
<INT-BEARING-DEPOSITS> 3,000
<FED-FUNDS-SOLD> 25,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,968
<INVESTMENTS-CARRYING> 237,275
<INVESTMENTS-MARKET> 232,852
<LOANS> 324,907
<ALLOWANCE> 4,627
<TOTAL-ASSETS> 724,717
<DEPOSITS> 482,408
<SHORT-TERM> 108,884
<LIABILITIES-OTHER> 28,125
<LONG-TERM> 48,409
<COMMON> 6,497
0
1,651
<OTHER-SE> 48,665
<TOTAL-LIABILITIES-AND-EQUITY> 724,717
<INTEREST-LOAN> 15,547
<INTEREST-INVEST> 10,174
<INTEREST-OTHER> 294
<INTEREST-TOTAL> 26,015
<INTEREST-DEPOSIT> 5,733
<INTEREST-EXPENSE> 9,540
<INTEREST-INCOME-NET> 16,475
<LOAN-LOSSES> 660
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 13,022
<INCOME-PRETAX> 5,357
<INCOME-PRE-EXTRAORDINARY> 2,554
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,554
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 5.47
<LOANS-NON> 520
<LOANS-PAST> 1,125
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 531
<ALLOWANCE-OPEN> 4,136
<CHARGE-OFFS> 279
<RECOVERIES> 110
<ALLOWANCE-CLOSE> 4,627
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,627
</TABLE>
