<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
For Quarter Ended September 30, 1995
---------------------------------------------------------------
Commission file number 1-5273-1
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Sterling Bancorp
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-2565216
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
540 Madison Avenue, New York, N.Y. 10022-3299
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(Address of principal executive offices) (Zip Code)
212-826-8000
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(Registrant's telephone number, including area code)
N/A
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(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 September 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 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 23
EXHIBIT INDEX 24
Exhibit 11 Computation of Per Share Earnings 25
Exhibit 27 Financial Data Schedule 26
</TABLE>
2
<PAGE> 3
STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
Cash and due from banks $ 35,846,308 $ 39,224,764
Interest-bearing deposits with other banks 3,000,000 2,970,000
Federal funds sold 5,000,000 8,000,000
Securities
Available for sale 67,180,190 67,335,889
Held to maturity (market value
$227,385,063 and $227,248,000, respectively) 231,319,017 244,445,988
------------ ------------
Total securities 298,499,207 311,781,877
------------ ------------
Loans, net of unearned discounts 364,712,709 312,769,179
Less allowance for possible loan losses 5,233,478 4,135,810
------------ ------------
Loans, net 359,479,231 308,633,369
------------ ------------
Customers' liability under acceptances 2,367,265 624,083
Excess cost over equity in net assets of the
banking subsidiary 21,158,440 21,158,440
Premises and equipment, net 3,068,279 3,423,320
Other assets 11,483,392 10,819,866
------------ ------------
$739,902,122 $706,635,719
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits $166,122,261 $174,897,143
Interest-bearing deposits 325,031,636 342,405,372
------------ ------------
Total deposits 491,153,897 517,302,515
Securities sold under repurchase agreements 51,574,877 44,050,836
Commercial paper 25,296,400 14,672,800
Other short-term borrowings 27,724,686 7,104,224
Acceptances outstanding 2,367,265 624,083
Other liabilities 40,200,059 20,137,453
------------ ------------
638,317,184 603,891,911
------------ ------------
Long-term convertible subordinated debentures 21,346,000 26,446,000
Other long-term debt 22,250,000 22,500,000
------------ ------------
Total long-term debt 43,596,000 48,946,000
------------ ------------
Total liabilities 681,913,184 652,837,911
------------ ------------
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 24,494,809 21,592,244
Net unrealized appreciation (depreciation) on securities
available for sale, net of tax 144,606 (1,140,969)
------------ ------------
60,878,907 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 57,910,444 53,719,314
------------ ------------
$739,902,122 $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 Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 8,409,633 $ 6,172,108 $23,827,997 $16,695,053
Interest and dividends on securities
Available for sale 1,135,015 1,217,665 3,532,680 3,341,414
Held to maturity 3,864,344 3,859,253 11,641,135 10,869,823
Interest on Federal funds sold 97,708 102,405 300,857 194,540
Interest on deposits with other banks 46,404 32,541 137,321 85,842
----------- ----------- ----------- -----------
Total interest income 13,553,104 11,383,972 39,439,990 31,186,672
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits 2,841,289 2,355,381 8,574,275 5,828,689
Interest on Federal funds purchased
and securities sold under
repurchase agreements 744,376 609,629 2,129,506 1,477,872
Interest on commercial paper 353,753 137,416 855,532 364,472
Interest on other short-term borrowings 84,243 109,115 224,577 482,364
Interest on long-term debt 792,209 862,352 2,572,027 2,402,593
----------- ----------- ----------- -----------
Total interest expense 4,815,870 4,073,893 14,355,917 10,555,990
----------- ----------- ----------- -----------
Net interest income 8,737,234 7,310,079 25,084,073 20,630,682
Provision for possible loan losses 574,000 310,000 1,234,000 700,000
----------- ----------- ----------- -----------
Net interest income after provision
for possible loan losses 8,163,234 7,000,079 23,850,073 19,930,682
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts 436,582 407,784 1,301,052 1,032,079
Factoring and letters of credit
commissions 780,875 448,776 1,922,398 1,359,606
Trust fees 211,395 174,474 497,830 435,089
Gain on sale of loans 19,539 -- 19,539 --
Gain on sale of securities -- -- 4,801 42,361
Other 201,498 146,742 596,569 392,447
----------- ----------- ----------- -----------
Total noninterest income 1,649,889 1,177,776 4,342,189 3,261,582
----------- ----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits 3,310,873 2,984,513 10,269,350 8,940,408
Occupancy 835,877 637,262 2,277,829 1,877,918
Equipment 551,833 302,913 1,254,213 979,419
Legal and other professional fees 550,743 190,271 1,420,188 645,066
Federal deposit insurance premium (32,418) 247,728 515,049 734,184
Marketing 293,000 165,133 808,464 466,687
Other 1,170,426 827,416 3,157,584 2,675,656
----------- ----------- ----------- -----------
Total noninterest expenses 6,680,334 5,355,236 19,702,677 16,319,338
----------- ----------- ----------- -----------
Income before income taxes 3,132,789 2,822,619 8,489,585 6,872,926
Provision for income taxes 1,640,420 1,847,858 4,443,578 4,025,294
----------- ----------- ----------- -----------
Net income $ 1,492,369 $ 974,761 $ 4,046,007 $ 2,847,632
=========== =========== =========== ===========
Average number of common shares outstanding 6,390,444 6,363,345 6,378,428 6,360,886
=========== =========== =========== ===========
Per average common share
Net income $0.23 $0.16 $0.63 $0.45
===== ===== ===== =====
Average number of common shares outstanding
assuming full dilution 8,563,855 8,979,701 8,555,024 8,980,574
=========== =========== =========== ===========
Per average common share assuming
full dilution
Net income $0.21 $0.14 $0.57 $0.40
===== ===== ===== =====
Dividends paid per common share $0.06 $0.05 $0.18 $0.15
===== ===== ===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1995 1994
------------ ------------
<S> <C> <C>
Shareholders' equity at beginning of period $ 53,719,314 $ 52,856,675
------------ ------------
Net income 4,046,007 2,847,632
Dividends declared
Common stock- $.18 and $.15 per share,respectively (1,142,347) (951,932)
Preferred stock - at prescribed rates (1,095) (64)
Change in market value guarantee feature
Convertible preferred stock,Series D -- (7,659)
Conversion of subordinated debentures
into common stock 2,990 --
Change in valuation account for securities
available for sale, net of tax 1,285,575 (1,301,108)
------------ ------------
Net change in shareholders' equity 4,191,130 586,869
------------ ------------
Shareholders' equity at end of period $ 57,910,444 $ 53,443,544
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,046,007 $ 2,847,632
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 1,234,000 700,000
Depreciation and amortization of premises and equipment 867,397 371,997
Deferred income tax benefit (171,720) (369,638)
Gain on sale of loans (19,539) --
Gain on sale of securities (4,801) (42,361)
Amortization of premiums on securities 1,096,498 2,365,159
Accretion of discounts on securities (95,315) (115,206)
Increase in accrued interest receivable (409,837) (590,432)
Increase in other liabilities 20,062,606 8,985,893
Other, net (1,173,104) (361,543)
------------ ------------
Net cash provided by operating activities 25,432,192 13,791,501
------------ ------------
INVESTING ACTIVITIES
Purchase of premises and equipment (512,356) (1,124,465)
Net increase in interest-bearing deposits
with other banks (30,000) --
Net decrease (increase) in Federal funds sold 3,000,000 (5,000,000)
Net (increase)decrease in loans (52,060,323) 5,352,192
Proceeds from prepayments, redemptions or
maturities of securities - held to maturity 22,738,157 46,763,976
Purchases of securities - held to maturity (10,241,813) (98,225,709)
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 4,108,204 43,781,215
Purchases of securities - available for sale (10,918,982) (40,522,187)
------------ ------------
Net cash used by investing activities (34,939,681) (39,019,284)
------------ ------------
FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits (8,774,882) (20,546,710)
Net (decrease)increase in interest-bearing deposits (17,373,736) 18,842,717
Net increase in securities sold under
repurchase agreements 7,524,041 27,124,163
Net increase in commercial paper
and other short-term borrowings 31,244,062 4,068,930
Cash dividends paid (1,143,442) (951,996)
Maturities and prepayments on debentures (5,347,010) (7,366,000)
Issuance of long-term debt -- 7,020,000
------------ ------------
Net cash provided by financing activities 6,129,033 28,191,104
------------ ------------
Net (decrease)increase in cash and due from banks (3,378,456) 2,963,321
Cash and due from banks - beginning of period 39,224,764 35,975,787
------------ ------------
Cash and due from banks - end of period $ 35,846,308 $ 38,939,108
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 12,713,016 $ 9,679,021
Income taxes paid 4,863,462 3,395,097
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 September 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 September 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.
Beginning in the third quarter of 1995, the Company, through a wholly owned
subsidiary, began a program of originating mortgage loans with the intention of
reselling those loans, including the servicing rights, without recourse. To date
approximately $658,000 of such loans have been originated and sold. The gain on
that sale amounted to $19,500 and is separately reported on the income
statement. As at September 30, 1995 the Company had approximately $520,000 of
loans available for resale. These loans are carried at the lower of cost or
market and are included in loans, net of unearned discount.
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
September 30, 1995, the bank's year to date average earning assets (of which
loans were 45% and securities were 53%) represented approximately 94% 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 nine
months ended September 30, 1995 and September 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 September 30,
1995, the parent company had on hand approximately $11,633,000 in cash.
8
<PAGE> 9
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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. To date in
1995, the bank has declared and paid dividends of $3,172,982. In addition, from
time to time dividends are paid to the parent company by the finance
subsidiaries from their retained earnings without regulatory restrictions.
At September 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
$23,659,000. 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 September 30, 1995, the parent company's short-term debt, consisting
principally of commercial paper, was approximately $25,484,000. The parent
company had cash, interest-bearing deposits with banks and other current assets
aggregating $47,251,000 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 September 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
September 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 September 30, 1995, all counterparties have investment grade
credit ratings from the major rating agencies. Each counterparty is specifically
approved for applicable credit exposure.
At September 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 September 30, 1995, the unamortized premiums on these
contracts totaled $623,100 and are included in other assets. At September 30,
1995, $4,300 was receivable under these contracts.
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 September 30, 1995, the Company's portfolio
of securities totalled $298,499,000 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 $290,032,000. 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 $815,000 and $4,749,000, 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 $661,000 and gross unrealized
losses of $394,000. 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 September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Company Bank
-------- --------
(in thousands)
<S> <C> <C>
Domestic
Commercial and industrial $308,595 $262,882
Real estate - mortgage 45,790 45,269
Real estate - construction 1,361 1,361
Installment - individuals 14,979 14,979
Foreign
Government and official institutions 789 789
-------- --------
Loans, gross 371,514 325,280
Less unearned discounts 6,801 6,501
-------- --------
Loans, net of unearned discounts $364,713 $318,779
======== ========
</TABLE>
The Company's commercial and industrial loan portfolio represents approximately
83% 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 13% 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 September 30, 1995, the ratio of the allowance to loans, net
of unearned discounts, was 1.4%. At September 30, 1995, the Company's allowance,
was $5,233,000 and its non-accrual loans amounted to $503,000. 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 September 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 $515,000 at September 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 SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
Net interest income for the third quarter of 1995 increased $1,427,000 to
$8,737,000 from $7,310,000 for the comparable period in 1994. Total interest
income aggregated $13,553,000 up $2,169,000 for the three months ended September
30, 1995 as compared to $11,384,000 for the same period of 1994. The yield on
interest earning assets was 8.62% for the third quarter of 1995 compared with
7.63% 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 $8,410,000 up $2,238,000 when
compared to the like period a year ago. Average loan balances amounted to $318
million up $65 million from an average loan volume of $253 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 $1,609,000
or 72% of the increase in interest earned on loans, with the balance
attributable to higher rates.
Interest expense increased $742,000 to $4,816,000 for the three months ended
September 30, 1995 from $4,074,000 for the comparable period in 1994. The cost
of funds increased to 4.24% for the third quarter of 1995 up from 3.51% for the
1994 third quarter. The increase in interest expense was substantially due to
the higher rate environment.
Interest expense on savings and time deposits increased by $485,000 during the
third quarter of 1995 to $2,841,000 from $2,356,000 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 3.52% in the 1995 third quarter compared to
2.86% in the comparable year ago period. Average balances for interest-bearing
deposits in the third quarter of 1995 remained relatively stable when compared
to the like period a year ago.
Interest expense associated with borrowed funds was $257,000 higher when
comparing the three months ended September 30, 1995 to the same period in 1994.
The impact of the higher interest rate environment increased interest expense
associated with borrowed funds by $369,000. This increase was partially offset
by a reduction in the cost of funds of $112,000 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, $574,000 was provided for possible loan
losses for the three months ended September 30, 1995.
Noninterest income increased $472,000 for the three months ended September 30,
1995 when compared with the same period in 1994 as a result of 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 $1,325,000 for the three months ended September
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 increased business development efforts. Offsetting these
increases was a decrease in Federal deposit insurance premiums as a result of a
reduction in premiums charged.
As a result of a higher level of pretax profitability offset by lower additional
provisions for unresolved state tax issues, the provision for income taxes
declined by $207,000 in the third quarter 1995 when compared to the year ago
period.
As a result of the above factors, net income increased $518,000 for the three
months ended September 30, 1995 when compared with the same period in 1994.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
Net interest income for the nine months ended September 30, 1995 increased
$4,453,000 to $25,084,000 from $20,631,000 for the comparable period in 1994.
Total interest income aggregated $39,440,000 up $8,253,000 for the nine months
ended September 30, 1995 as compared to $31,187,000 for the same period of 1994.
The yield on interest earning assets was 8.65% for the first nine months of 1995
compared with 7.19% 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
$23,828,000 up $7,133,000 when compared to the like period a year ago. Average
loan balances amounted to $300 million up $52 million from an average loan
volume of $248 million for the prior year nine month period. The increase in the
average loan volume, primarily in the Company's commercial and industrial loan
portfolio accounted for $3,780,000 or 53% of the increase in interest earned on
loans, with the balance attributable to higher rates.
Interest expense increased $3,800,000 to $14,356,000 for the first nine months
of 1995 from $10,556,000 for the comparable period in 1994. The cost of funds
increased to 4.26% for the first nine months of 1995 up from 3.19% 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 $2,745,000 during the
year to date 1995 to $8,574,000 from $5,829,000 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 2.59% in the
comparable year ago period. In addition, the average balances for other time
deposits increased $30 million to $150 million in the first nine months of 1995
compared with the 1994 first nine 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 $5,782,000 up $1,055,000 for
the nine months ended September 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 $1,697,000. This increase was
partially offset by a reduction in the cost of funds of $642,000 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, $1,234,000 was provided for possible loan
losses for the nine months ended September 30, 1995.
Noninterest income increased $1,081,000 for the nine months ended September 30,
1995 when compared with the same period in 1994 as a result of increased fees
from factoring services and higher income from other fee based services.
Noninterest expenses increased $3,383,000 for the nine months ended September
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 expanded business development efforts. A reduction of Federal
deposit insurance premium rates offset increases in noninterest expenses.
The provision for income taxes increased $418,000 for the first nine 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 $1,198,000 for the nine
months ended September 30, 1995 when compared with the same period in 1994.
16
<PAGE> 17
STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets (1)
Three Months Ended September 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 $ 2,997 $ 46 6.14% $ 2,970 $ 33 4.41%
Securities
Available for sale (2) 66 625 1 135 6.78 82,819 1,218 5.86
Held to maturity 235,952 3,864 6.55 246,321 3,859 6.21
Federal funds sold 6,522 98 5.86 8,913 102 4.54
Loans, net of unearned
discounts (3) 317,896 8,410 10.69 253,489 6,172 9.75
-------- -------- -------- --------
TOTAL EARNING ASSETS 629,992 13,553 8.62 594,512 11,384 7.63
-------- ------ -------- ------
Cash and due from banks 35,066 38,536
Allowance for possible
loan losses (4,913) (3,934)
Goodwill 21,158 21,158
Other assets 14,746 15,192
-------- --------
TOTAL ASSETS $696,049 $665,464
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Savings $171,294 965 2.23 $173,293 779 1.78
Other time 148,867 1,876 5.00 145,686 1,577 4.15
-------- -------- -------- --------
Total interest-bearing
deposits 320,161 2,841 3.52 318,979 2,356 2.86
-------- -------- -------- --------
Borrowings
Securities sold under
agreements to repurchase 53,328 744 5.54 59,338 610 4.08
Commercial paper 25,536 354 5.50 14,516 137 3.74
Other short-term debt 6,769 85 4.94 10,601 109 4.08
Long-term debt 44,799 792 7.02 52,072 862 6.57
-------- -------- -------- --------
Total borrowings 130,432 1,975 6.01 136,527 1,718 4.99
-------- -------- -------- --------
TOTAL INTEREST-BEARING
LIABILITIES 450,593 4,816 4.24 455,506 4,074 3.51
-------- ---- -------- ----
Noninterest-bearing deposits 153,361 139,123
Other liabilities 34,926 17,188
-------- --------
Total liabilities 638,880 611,817
Shareholders' equity 57,169 53,647
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $696,049 $665,464
======== ========
Net interest income/spread $ 8,737 4.38% $ 7,310 4.12%
======== ==== ======== =====
Net yield on earning assets
(margin) 5.54% 4.87%
==== =====
</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)
Nine Months Ended September 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 $ 2,986 $ 137 6.01% $ 2,961 $ 86 3.88%
Securities
Available for sale (2) 70,252 3,533 6.74 83,783 3,341 5.32
Held to maturity 237,554 11,641 6.54 238,909 10,870 6.70
Federal funds sold 6,846 301 6.02 6,209 195 4.18
Loans, net of unearned
discounts (3) 299,629 23,828 10.94 247,798 16,695 9.24
-------- -------- -------- -------
TOTAL EARNING ASSETS 617,267 39,440 8.65 579,660 31,187 7.19
-------- ------ ------- ----
Cash and due from banks 37,257 40,459
Allowance for possible
loan losses (4,539) (3,701)
Goodwill 21,158 21,158
Other assets 13,597 14,161
-------- --------
TOTAL ASSETS $684,740 $651,737
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Savings $175,692 3,035 2.31 $179,768 2,453 1.82
Other time 150,422 5,539 4.92 120,282 3,376 3.74
-------- -------- -------- -------
Total interest-bearing
deposits 326,114 8,574 3.52 300,050 5,829 2.59
-------- -------- -------- -------
Borrowings
Securities sold under
agreements to repurchase 50,799 2,129 5.60 57,905 1,478 3.41
Commercial paper 20,840 856 5.49 14,540 364 3.35
Other short-term debt 6,121 225 4.91 17,335 482 3.72
Long-term debt 47,178 2,572 7.29 52,194 2,403 6.16
-------- -------- -------- -------
Total borrowings 124,938 5,782 6.19 141,974 4,727 4.45
-------- -------- -------- -------
TOTAL INTEREST-BEARING
LIABILITIES 451,052 14,356 4.26 442,024 10,556 3.19
-------- ---- ------- ----
Noninterest-bearing deposits 150,181 142,413
Other liabilities 27,768 14,071
-------- --------
Total liabilities 629,001 598,508
Shareholders' equity 55,739 53,229
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $684,740 $651,737
======== ========
Net interest income/spread $ 25,084 4.39% $20,631 4.00%
======== ==== ======= ====
Net yield on earning assets
(margin) 5.49% 4.79%
==== ====
</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 September 30,
(000 omitted)
<TABLE>
<CAPTION>
Increase/(Decrease)
Three Months Ended
September 30, 1995 and 1994
-------------------------------------
Volume Rate Total(1)
------- ------- -------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other banks $ -- $ 13 $ 13
------- ------- -------
Securities
Available for sale (2) (256) 173 (83)
Held to maturity (185) 190 5
------- ------- -------
Total (441) 363 (78)
------- ------- -------
Federal funds sold (31) 27 (4)
------- ------- -------
Loans, net of unearned discounts (3) 1,609 629 2,238
------- ------- -------
TOTAL INTEREST INCOME $ 1,137 $ 1,032 $ 2,169
======= ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Savings $ (11) $ 197 $ 186
Other time (1) 300 299
------- ------- -------
Total (12) 497 485
------- ------- -------
Borrowings
Securities sold under agreements to repurchase (73) 207 134
Commercial paper 128 89 217
Other short-term debt (43) 19 (24)
Long-term debt (124) 54 (70)
------- ------- -------
Total (112) 369 257
------- ------- -------
TOTAL INTEREST EXPENSE $ (124) $ 866 $ 742
======= ======= =======
NET INTEREST INCOME $ 1,261 $ 166 $ 1,427
======= ======= =======
</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
Nine Months Ended September 30,
(000 omitted)
<TABLE>
<CAPTION>
Increase/(Decrease)
Nine Months Ended
September 30, 1995 and 1994
-------------------------------------
Volume Rate Total[1]
------- ------- -------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other banks $ 2 $ 49 $ 51
------- ------- -------
Securities
Available for sale [2] (609) 801 192
Held to maturity 495 276 771
------- ------- -------
Total (114) 1,077 963
------- ------- -------
Federal funds sold 20 86 106
------- ------- -------
Loans, net of unearned discounts [3] 3,780 3,353 7,133
------- ------- -------
TOTAL INTEREST INCOME $ 3,688 $ 4,565 $ 8,253
======= ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Savings $ (66) $ 648 $ 582
Other time 939 1,224 2,163
------- ------- -------
Total 873 1,872 2,745
------- ------- -------
Borrowings
Securities sold under agreements to repurchase (239) 890 651
Commercial paper 209 283 492
Other short-term debt (361) 104 (257)
Long-term debt (251) 420 169
------- ------- -------
Total (642) 1,697 1,055
------- ------- -------
TOTAL INTEREST EXPENSE $ 231 $ 3,569 $ 3,800
======= ======= =======
NET INTEREST INCOME $ 3,457 $ 996 $ 4,453
======= ======= =======
</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 $ 200 $ 2,800 $ -- $ -- $ -- $ 3,000
Securities 11,540 18,847 63,385 199,760 4,967 298,499
Federal funds sold 5,000 -- -- -- -- 5,000
Loans, net of unearned
discounts 297,442 4,210 44,029 25,832 (6,800) 364,713
Noninterest-earnings assets
and allowance for possible
loan losses -- -- -- -- 68,690 68,690
--------- -------- --------- --------- --------- ---------
Total Assets 314,182 25,857 107,414 225,592 66,857 739,902
--------- -------- --------- --------- --------- ---------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits 148,633 59,036 117,363 -- -- 325,032
Securities sold under
repurchase agreements 41,880 9,695 -- -- -- 51,575
Commercial paper 24,522 774 -- -- -- 25,296
Other short-term borrowings 27,725 -- -- -- -- 27,725
Long-term debt 21,346 -- 21,200 1,050 -- 43,596
Noninterest-bearing
liabilities and share-
holders' equity -- -- -- -- 266,678 266,678
-------- -------- --------- --------- --------- ---------
Total Liabilities and
Shareholders' Equity $ 264,106 $ 69,505 $ 138,563 $ 1,050 $ 266,678 $ 739,902
========= ======== ========= ========= ========= =========
Net Interest Rate
Sensitivity Gap $ 50,076 $(43,648) $ (31,149) $ 224,542 $(199,821) $ --
========= ======== ========= ========= ========= =========
Cumulative Gap at
September 30, 1995 $ 50,076 $ 6,428 $ (24,721) $ 199,821 $ -- $ --
========= ======== ========= ========= ========= =========
Cumulative Gap at
September 30, 1994 $ 3,178 $(15,525) $ 123,233 $ 152,236 $ -- $ --
========= ======== ========= ========= ========= =========
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
------------------------ --------------------------
9/30/95 12/31/94 9/30/95 12/31/94
-------- -------- -------- --------
($ in thousands)
<S> <C> <C> <C> <C>
COMPONENTS
Shareholders' equity $ 57,910 $ 53,719 $ 47,668 $ 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 (1) (145) 1,141 (143) 1,142
-------- -------- -------- --------
Tier 1 Capital 36,615 33,710 47,525 46,842
-------- -------- -------- --------
Allowance for possible loan losses
(limited to 1.25% of total risk-
weighted assets) 5,021 4,136 3,960 3,435
Subordinated debt (limited to 50%
of Tier 1 Capital) 15,616 16,690 -- --
-------- -------- -------- --------
Tier 2 Capital 20,637 20,826 3,960 3,435
-------- -------- -------- --------
Total Risk-based Capital $ 57,252 $ 54,536 $ 51,485 $ 50,277
======== ======== ======== ========
RATIOS
Tier 1 Capital 9.12% 8.73% 12.90% 13.09%
======== ======== ======== ========
Total Capital 14.25% 14.12% 13.97% 14.05%
======== ======== ======== ========
Leverage 5.43% 5.12% 7.50% 7.42%
======== ======== ======== ========
Memoranda
Tier 1 Capital minimum requirement $ 16,066 $ 15,450 $ 14,742 $ 14,318
======== ======== ======== ========
Total Capital minimum requirement $ 32,132 $ 30,900 $ 29,484 $ 28,636
======== ======== ======== ========
Risk-weighted assets, net of goodwill $401,656 $386,241 $368,550 $357,946
======== ======== ======== ========
Quarterly average assets, net of goodwill $674,891 $658,976 $633,633 $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
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 11/14/95 /s/ Louis J. Cappelli
-------------------- -----------------------------------
Louis J. Cappelli
Chairman and
Chief Executive Officer
Date 11/14/95 /s/ John W. Tietjen
-------------------- -----------------------------------
John W. Tietjen
Senior Vice President, Treasurer
and Chief Financial Officer
23
<PAGE> 24
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> <C>
11 Computation of X 25
Per Share Earnings
27 Financial Data X 26
Schedule
</TABLE>
24
<PAGE> 1
Exhibit (11)
STERLING BANCORP AND SUBSIDIARIES
Statement Re: Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income for primary earnings per share:
Net income A $1,492,369 $ 974,761 $4,046,007 $2,847,632
========== ========== ========== ==========
Income for fully diluted earnings per share:
Net income $1,492,369 $ 974,761 $4,046,007 $2,847,632
Add expenses, net of tax
on assumed conversion of
Convertible Subordinated
Debentures:
Interest 268,099 279,277 799,617 757,446
Amortization of bond discount
and expense 4,501 7,407 11,751 14,149
---------- ---------- ---------- ----------
Income for fully diluted shares B $1,764,969 $1,261,445 $4,857,375 $3,619,227
========== ========== ========== ==========
Common shares for primary earnings per share:
Average shares issued 6,496,854 6,496,605 6,496,705 6,496,605
Add assumed conversion at the beginning
of the period or issuance date if later:
Stock options 14,659 -- 5,995 778
ESOP shares allocated 29,274 17,133 26,071 13,896
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 6,390,444 6,363,345 6,378,428 6,360,886
========== ========== ========== ==========
Common shares for fully diluted earnings per share:
Average common shares 6,390,444 6,363,345 6,378,428 6,360,886
Add assumed conversion at the beginning
of the period of issuance date if later:
Convertible Subordinated Debentures 1,948,366 2,380,913 1,948,366 2,380,913
Series B preferred shares 2,576 2,576 2,576 2,576
ESOP shares unallocated 220,726 232,867 223,929 236,104
Stock options 1,743 -- 1,725 95
---------- ---------- ---------- ----------
Average common shares for computation
of fully diluted earnings per
share (See Note below)
D 8,563,855 8,979,701 8,555,024 8,980,574
========== ========== ========== ==========
Per average common share:
Net income (A / C) $ 0.23 $ 0.16 $ 0.63 $ 0.45
======== ========== ========== ==========
Net income assuming full dilution (B / D) $ 0.21 $ 0.14 $ 0.57 $ 0.40
======== ========== ========== ==========
</TABLE>
Note: Based on shares at end of each month.
25
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 35,846
<INT-BEARING-DEPOSITS> 3,000
<FED-FUNDS-SOLD> 5,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,180
<INVESTMENTS-CARRYING> 231,319
<INVESTMENTS-MARKET> 227,385
<LOANS> 364,713
<ALLOWANCE> 5,233
<TOTAL-ASSETS> 739,902
<DEPOSITS> 491,154
<SHORT-TERM> 104,596
<LIABILITIES-OTHER> 42,567
<LONG-TERM> 43,596
<COMMON> 6,497
0
1,651
<OTHER-SE> 49,762
<TOTAL-LIABILITIES-AND-EQUITY> 739,902
<INTEREST-LOAN> 23,828
<INTEREST-INVEST> 15,174
<INTEREST-OTHER> 438
<INTEREST-TOTAL> 39,440
<INTEREST-DEPOSIT> 8,574
<INTEREST-EXPENSE> 14,356
<INTEREST-INCOME-NET> 25,084
<LOAN-LOSSES> 1,234
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 19,703
<INCOME-PRETAX> 8,490
<INCOME-PRE-EXTRAORDINARY> 4,046
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,046
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.57
<YIELD-ACTUAL> 5.49
<LOANS-NON> 503
<LOANS-PAST> 1,623
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 515
<ALLOWANCE-OPEN> 4,136
<CHARGE-OFFS> 319
<RECOVERIES> 182
<ALLOWANCE-CLOSE> 5,233
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,233
</TABLE>
