<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File Number: 1-5273-1
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)
430 Park Avenue, New York, N.Y. 10022-3505
(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.
[X] Yes [] No
As of June 30, 1998 there were 8,259,191 shares of common stock, $1.00 par
value, outstanding.
<PAGE> 2
STERLING BANCORP
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Financial Statements 3
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Business 10
Results for the Three Months 10
Results for the Six Months 12
Balance Sheet Analysis 14
Capital 17
Average Balance Sheets 18
Rate/Volume Analysis 20
Regulatory Capital and Ratios 22
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Asset/Liability Management 23
Interest Rate Sensitivity 26
PART II OTHER INFORMATION
Item 4. Submission of Matter to a
Vote of Security-Holders 27
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURES 28
</TABLE>
2
<PAGE> 3
STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
---- ----
<S> <C> <C>
Cash and due from banks $ 52,082,079 $ 40,065,863
Interest-bearing deposits with other banks 315,000 3,010,000
Investment securities
Available for sale (at estimated market value) 119,584,844 148,921,006
Held to maturity (estimated market value
$210,096,638 and $236,009,925, respectively) 209,916,399 236,030,004
-------------- --------------
Total investment securities 329,501,243 384,951,010
-------------- --------------
Loans, net of unearned discounts 546,330,332 558,481,845
Less allowance for credit losses 8,825,911 8,677,610
-------------- --------------
Loans, net 537,504,421 549,804,235
-------------- --------------
Customers' liability under acceptances 1,365,801 1,125,654
Excess cost over equity in net assets of the
banking subsidiary 21,158,440 21,158,440
Premises and equipment, net 6,898,592 7,330,062
Accrued interest receivable 3,737,692 4,147,008
Other assets 8,366,918 8,387,386
-------------- --------------
$ 960,930,186 $1,019,979,658
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits $ 253,472,704 $ 312,461,489
Interest-bearing deposits 402,459,838 418,946,491
-------------- --------------
Total deposits 655,932 542 731,407,980
Federal funds purchased and securities
sold under agreements to repurchase 68,384,115 106,752,546
Commercial paper 36,648,100 24,070,600
Other short-term borrowings 20,551,068 19,891,252
Acceptances outstanding 1,365,801 1,125,654
Due to factoring clients 30,027,652 30,798,610
Accrued expenses and other liabilities 8,932,886 11,560,450
-------------- --------------
821,842,164 925,607,092
Long-term debt - FHLB 41,400,000 1,750,000
-------------- --------------
Total liabilities 863,242,164 927,357,092
-------------- --------------
Commitments and contingent liabilities
Shareholders' equity
Preferred stock, $5 par value. Authorized 644,389 shares
Series B ($20 liquidation value), issued 1,230 shares 24,600 24,600
Series D ($10 liquidation value), issued 243,929 and
246,213 shares, respectively 2,439,290 2,462,130
-------------- --------------
2,463,890 2,486,730
Common stock, $1 par value. Authorized 20,000,000 shares;
issued 8,303,784 and 8,262,500 shares, respectively 8,303,784 8,262,500
Capital surplus 45,242,940 44,775,759
Retained earnings 43,961,444 39,590,806
Accumulated other comprehensive income, net of tax
Net unrealized appreciation on securities
available for sale 246,151 197,374
-------------- --------------
100,218,209 95,313,169
Less
Common shares in treasury at cost,
44,593 shares 441,257 441,257
Unearned compensation 2,088,930 2,249,346
-------------- --------------
Total shareholders' equity 97,688,022 92,622,566
-------------- --------------
$ 960,930,186 $1,019,979,658
============== ==============
</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,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $12,661,785 $11,406,455 $24,921,704 $22,489,977
Investment securities:
Available for sale 1,920,525 1,083,128 3,798,660 2,400,645
Held to maturity 3,241,675 4,000,246 7,078,801 7,783,102
Federal funds sold 217,946 15,628 356,585 89,741
Deposits with other banks 30,732 64,821 105,403 123,128
----------- ----------- ----------- -----------
Total interest income 18,072,663 16,570,278 36,261,153 32,886,593
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 4,166,160 3,501,499 8,570,887 6,820,229
Federal funds purchased
and securities sold under agreements
to repurchase 869,540 1,258,601 2,086,989 2,350,677
Commercial paper 387,785 314,769 748,816 645,462
Other short-term borrowings 252,646 159,510 497,078 305,579
Long-term debt 525,746 284,638 730,010 615,984
----------- ----------- ----------- -----------
Total interest expense 6,201,877 5,519,017 12,633,780 10,737,931
----------- ----------- ----------- -----------
Net interest income 11,870,786 11,051,261 23,627,373 22,148,662
Provision for credit losses 1,267,333 610,000 2,111,333 1,381,000
----------- ----------- ----------- -----------
Net interest income after provision
for credit losses 10,603,453 10,441,261 21,516,040 20,767,662
----------- ----------- ----------- -----------
NONINTEREST INCOME
Factoring income 1,277,325 1,005,938 2,310,977 2,096,138
Mortgage banking income 1,014,288 835,991 1,848,115 1,528,689
Service charges on deposit accounts 750,364 474,794 1,424,952 984,714
Letter of credit commissions 388,916 359,980 660,618 600,059
Trust fees 237,793 30,221 427,288 223,168
Other income 507,615 314,923 979,676 702,468
----------- ----------- ----------- -----------
Total noninterest income 4,176,301 3,021,847 7,651,626 6,135,236
----------- ----------- ----------- -----------
NONINTEREST EXPENSES
Salaries 4,607,415 4,144,517 9,015,079 8,288,115
Employee benefits 970,318 926,715 1,976,663 1,814,332
----------- ----------- ----------- -----------
Total personnel expenses 5,577,733 5,071,232 10,991,742 10,102,447
Occupancy expense, net 796,586 742,864 1,589,384 1,475,643
Equipment expense 631,267 535,702 1,221,898 1,101,093
Other expenses 2,428,667 2,327,142 4,750,896 4,903,812
----------- ----------- ----------- -----------
Total noninterest expenses 9,434,253 8,676,940 18,553,920 17,582,995
----------- ----------- ----------- -----------
Income before income taxes 5,345,501 4,786,168 10,613,746 9,319,903
Provision for income taxes 2,232,029 2,153,052 4,497,309 4,224,311
----------- ----------- ----------- -----------
Net income $ 3,113,472 $ 2,633,116 $ 6,116,437 $ 5,095,592
=========== =========== =========== ===========
Average number of common shares outstanding
Basic 8,279,458 7,791,977 8,253,079 7,758,583
Diluted 8,691,472 8,611,812 8,629,857 8,577,852
Per average common share
Basic $.37 $.33 $.74 $.65
Diluted .36 .31 .71 .61
Dividends per common share .11 .09 .21 .18
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 3,113,472 $ 2,633,116 $ 6,116,437 $ 5,095,592
Other comprehensive income, net of tax:
Unrealized holding gains/(losses)
arising during the period 124,704 170,636 48,777 (65,280)
----------- ----------- ----------- -----------
Comprehensive income $ 3,238,176 $ 2,803,752 $ 6,165,214 $ 5,030,312
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
---- ----
<S> <C> <C>
PREFERRED STOCK
Balance at January 1 $ 2,486,730 $ 2,506,600
Conversions of Series D shares (22,840) (17,300)
------------ ------------
Balance at June 30 $ 2,463,890 $ 2,489,300
============ ============
COMMON STOCK
Balance at January 1 $ 8,262,500 $ 7,725,533
Conversions of subordinated debentures -- 133,920
Conversions of preferred shares
into common shares 2,284 1,730
Options exercised 39,000 5,500
------------ ------------
Balance at June 30 $ 8,303,784 $ 7,866,683
============ ============
CAPITAL SURPLUS
Balance at January 1 $ 44,775,759 $ 38,619,434
Conversions of subordinated debentures -- 1,540,080
Conversions of preferred shares
into common shares 20,556 15,570
Options exercised 446,625 54,250
------------ ------------
Balance at June 30 $ 45,242,940 $ 40,229,334
============ ============
RETAINED EARNINGS
Balance at January 1 $ 39,590,806 $ 31,648,806
Net income 6,116,437 5,095,592
Cash dividends paid - common shares (1,718,753) (1,386,117)
- preferred shares (27,046) (21,489)
------------ ------------
Balance at June 30 $ 43,961,444 $ 35,336,792
============ ============
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at January 1 $ 197,374 $ 90,001
------------ ------------
Unrealized holding gains/(losses) arising
during the period:
Before tax 90,161 (121,886)
Tax benefit 41,384 56,606
------------ ------------
Net of tax 48,777 (65,280)
------------ ------------
Balance at June 30 $ 246,151 $ 24,721
============ ============
TREASURY STOCK
Balance at January 1 and June 30 $ (441,257) $ (418,959)
============ ============
UNEARNED COMPENSATION
Balance at January 1 $ (2,249,346) $ (2,993,980)
Amortization of unearned compensation 160,416 196,824
------------ ------------
Balance at June 30 $ (2,088,930) $ (2,797,156)
============ ============
TOTAL SHAREHOLDERS' EQUITY
Balance at January 1 $ 92,622,566 $ 77,177,435
Net changes during the period 5,065,456 5,553,280
------------ ------------
Balance at June 30 $ 97,688,022 $ 82,730,715
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,116,437 $ 5,095,592
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 2,111,333 1,381,000
Depreciation and amortization of premises and equipment 737,378 581,341
Deferred income tax (provision) (127,946) (183,706)
Net change in loans held for sale (3,862,571) (2,018,020)
Amortization of unearned compensation 160,416 196,824
Amortization of premiums on securities 1,075,253 656,936
Accretion of discounts on securities (290,324) (75,907)
Decrease in accrued interest receivable 409,316 500,814
Decrease in due to factored clients (770,958) 12,994,222
Decrease in other liabilities (2,627,564) (2,626,803)
Other, net (1,855,999) (1,912,711)
------------- -------------
Net cash provided by operating activities 1,074,771 14,589,582
------------- -------------
INVESTING ACTIVITIES
Purchase of premises and equipment (305,908) (2,294,346)
Net decrease in interest-bearing deposits
with other banks 2,695,000 --
Net decrease in Federal funds sold -- 3,000,000
Net decrease in loans 16,014,084 1,882,322
Proceeds from prepayments, redemptions or maturities
of securities - held to maturity 35,015,256 16,862,986
Purchases of securities - held to maturity (9,794,814) (31,850,173)
Purchases of securities - available for sale (214,745,892) (5,452,844)
Proceeds from prepayments, redemptions or maturities
of securities - available for sale 244,280,446 27,838,649
------------- -------------
Net cash provided by investing activities 73,158,172 9,986,594
------------- -------------
FINANCING ACTIVITIES
Net decrease in noninterest-bearing deposits (58,988,785) (11,695,472)
Net (decrease)increase in interest-bearing deposits (16,486,653) 415,431
Net (decrease)increase in Federal funds purchased and
securities sold under agreements to repurchase (38,368,431) 4,500,154
Net increase(decrease) in commercial paper
and other short-term borrowings 13,237,316 (29,990,919)
Increase(Decrease) in other long-term debt 39,650,000 (250,000)
Proceeds from exercise of stock options 485,625 59,750
Cash dividends paid on common and preferred stock (1,745,799) (1,407,395)
------------- -------------
Net cash used in financing activities (62,216,727) (38,368,451)
------------- -------------
Net increase (decrease) in cash and due from banks 12,016,216 (13,792,275)
Cash and due from banks - beginning of period 40,065,863 54,512,462
------------- -------------
Cash and due from banks - end of period $ 52,082,079 $ 40,720,187
============= =============
Supplemental schedule of non-cash financing activities:
Debenture and preferred stock conversions $ 22,840 $ 1,673,782
Supplemental disclosure of cash flow information:
Interest paid $ 12,992,642 $ 12,375,149
Income taxes paid 3,868,832 1,630,749
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE> 8
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 and its subsidiaries ("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, 1998 and 1997 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 1997 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, 1997.
2. For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks.
3. The Company's outstanding Preferred Shares as of June 30, 1998
comprise 1,230 Series B shares (of 4,389 Series B shares
authorized) and 244,691 Series D shares (of 300,000 Series D
shares 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. SFAS No. 128, "Earnings per Share," which superseded Accounting
Principles Board Opinion No. 15, "Earnings per Share," established
standards for computing, presenting and disclosing earnings per
share ("EPS"). SFAS No. 128 required the presentation of basic
earnings per share and, for entities with complex capital
structures, diluted earnings per share. Basic earnings per share
is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of
the Company.
The Company has applied the provisions of SFAS No. 128 for the
year ended December 31, 1997 and, in conformity with the
provisions of SFAS No. 128, has restated prior-period EPS data
presented in this report. Adoption of SFAS No. 128 has resulted in
modest changes in EPS data from previously reported amounts.
8
<PAGE> 9
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
5. In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 established standards
for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. It does not address issues
of recognition or measurement of comprehensive income and its
components. SFAS 130 required that all items that are required to
be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
Under the requirements of SFAS 130, an enterprise must classify
items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a balance
sheet. SFAS 130 is effective for fiscal years beginning after
December 15, 1997 and requires reclassification of financial
statements for earlier periods provided for comparative purposes.
The Company has applied the provisions of SFAS No. 130 as of
January 1, 1998, and in conformity with the provisions of SFAS No.
130, has restated prior-period amounts presented in this report.
Adoption of SFAS No. 130 had no effect on previously reported
amounts.
6. In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosure
about Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments
in annual financial statements, requires that selected information
about operating segments be reported in interim financial
statements issued to shareholders, and establishes standards for
related disclosures about an enterprise's products and services,
geographic areas and major customers. As defined in SFAS 131,
operating segments are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the enterprise's chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS 131 supersedes "Statement of Financial Accounting Standards
No. 14, "Financial Reporting for Segments of a Business," and
amends Statement of Financial Accounting Standards No. 94,
"Consolidation of All Majority-Owned Subsidiaries." SFAS 131 need
not be applied to interim financial statements in the initial year
of its application, but comparative information for interim
periods in the initial year of application is to be reported in
financial statements for interim periods in the second year of
application. SFAS 131 is effective for financial statements for
fiscal years beginning after December 15, 1997 and, accordingly,
will be adopted by the Company for its fiscal year ending December
31, 1998.
7. In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits"
("SFAS 132"). SFAS 132 standardizes the disclosure requirements
for pensions and other postretirement benefits to the extent
practicable. SFAS 132 provides information that assists users in
(a) evaluating the employer's obligations under pension and other
postretirement plans and the effects on the employer's prospects
for future cash flows, (b) analyzing the quality of currently
reported net income, and (c) estimating future reported net
income. SFAS 132 addresses disclosure only. SFAS 132 is effective
for fiscal years beginning after December 15, 1997, and, as
appropriate, will be adopted in the financial statements of the
Company for the year ended December 31, 1998.
9
<PAGE> 10
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following commentary presents management's discussion and analyses of the
consolidated results of operations and financial condition of Sterling Bancorp
(the "parent company"), a bank holding company as defined by the Bank Holding
Company Act of 1956, as amended, and its wholly-owned subsidiaries Sterling
Banking Corporation, Sterling Industrial Loan Association, and Sterling National
Bank (the "Bank"). The Bank, which is the principal subsidiary, owns all of the
outstanding shares of Sterling Factors Corporation ("Factors"), Sterling
National Mortgage Company, Inc.("SNMC-New York"), Sterling National Mortgage
Corp. ("SNMC-Virginia") and Sterling Real Estate Holding Company Inc. ("SREHC").
Throughout this discussion and analysis, the term "the Company" refers to
Sterling Bancorp and its subsidiaries. This discussion and analysis should be
read in conjunction with the Company's annual report on Form 10-K for the year
ended December 31, 1997. This report contains statements that constitute
forward-looking statements and are subject to certain risks and uncertainties
that could cause actual facts to differ materially from those presented in this
report. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date of this report.
COMPANY BUSINESS
The Company provides a full range of financial products and services, including
business and consumer loans, commercial and residential mortgage lending and
brokerage, asset-based financing, accounts receivable management services, trade
financing, equipment leasing, corporate and consumer deposits services, trust
and estate administration and, investment management services. The Company has
operations in New York and Virginia and conducts business throughout the United
States.
There is intense competition in all areas in which the Company conducts
its business. In addition to competing with other banks, the Company competes in
certain areas of its business with other financial institutions. At June
30,1998, the Bank's year-to-date average earning assets (of which loans were 55%
and investment securities were 43%) represented approximately 96% of the
Company's year-to-date average earning assets.
The Company regularly evaluates acquisition opportunities and conducts
due diligence activities in connection with possible acquisitions. As a result,
acquisition discussions and, in some cases negotiations, regularly take place
and future acquisitions could occur.
Results for the three months ended June 30, 1998 and 1997
OVERVIEW
The Company reported net income for the three months ended June 30,1998 of $3.1
million, representing $0.36 per share, calculated on a diluted basis, compared
to $2.6 million, or $0.31 per share calculated on a diluted basis, for the like
period in 1997. This increase reflects continued growth in both net interest
income and noninterest income as explained below.
Net interest income increased to $11.9 million for the second quarter
of 1998 compared with $11.1 million for the same period in 1997, principally due
to higher average earning asset outstandings. The net interest margin was 5.83%
for
10
<PAGE> 11
the three months ended June 30, 1998 compared to 6.18% for the like 1997 period.
This decrease was due to a decrease in average yield on earning assets of 44
basis points partially offset by a 6 basis point decrease in the average cost of
funds.
Noninterest income rose to $4.2 million for the three months ended June
30,1998 compared to $3.0 million for the like 1997 period principally due to
continued growth in fees from mortgage banking, factoring, trust and deposit
services.
INCOME STATEMENT ANALYSIS
Net Interest Income
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
assets, liabilities and shareholders' equity. The increases (decreases) for the
components of quarterly interest income and interest expense, expressed in terms
of fluctuation in average volume and rate are shown on page 20. Information as
to the components of interest income and interest expense and average rates for
the quarter is provided in the Average Balance Sheets shown on page 18.
Net interest income for the three months ended June 30,1998 increased
$820,000 to $11,871,000 from $11,051,000 for the comparable period in 1997.
Total interest income aggregated $18,072,000 up $1,501,000 for the
second quarter of 1998 as compared to $16,571,000 for the same period of 1997.
The yield on interest-earning assets was 8.87% for the three months ended June
30, 1998 compared with 9.31% for the comparable period in 1997. The increase in
interest income was principally due to an increase in income earned on the
Company's loan portfolio as a result of management's strategy of increasing loan
outstandings as a percentage of total assets. The decrease in yield on earning
assets was due to lower yields on loans and investment securities.
Interest earned on the loan portfolio for the three months ended June
30, 1998 amounted to $12,662,000 up $1,255,000 when compared to the like 1997
period. Average loan balances amounted to $495,613,000 up $64,860,000 from an
average of $430,753,000 in the prior year period. The increase in the average
loans, primarily in the Company's leasing, mortgage and in the short-term money
market component of commercial and industrial loan portfolio, accounted for the
increase in interest earned on loans. The decrease in the yield on the domestic
loan portfolio to 11.08% for the three months ended June 30,1998 from 11.34% for
the comparable 1997 period was attributable to a greater proportion of
short-term, lower-yielding loans within the portfolio.
Interest earned on investment securities increased $79,000 to
$5,162,000 in the second quarter of 1998 principally due to higher average
outstandings partially offset by lower yields due to a flattening of the U.S.
Treasury yield curve.
Interest expense increased $683,000 to $6,202,000 for the second
quarter of 1998 from $5,519,000 for the comparable period in 1997. The increase
in interest expense was due to higher average funds employed and higher average
rates paid for interest-bearing deposits.
11
<PAGE> 12
Interest expense on interest-bearing deposits increased $664,000 for
the three months ended June 30,1998 to $4,166,000 from $3,502,000 for the
comparable 1997 period due to increases in average outstandings and the cost of
funds. Average outstandings increased $60,590,000 to $417,257,000 in 1998 from
$356,667,000 in 1997. The average rate paid on interest-bearing deposits rose to
4.00% in 1998 compared to 3.94% in the comparable year ago period.
Provision for Credit Losses
Based on management's continuing evaluation of the loan portfolio (discussed
under "Asset Quality" below), and principally as the result of the growth in the
loan portfolios, the provision for credit losses increased to $1,267,000 up
$657,000 when compared to the same period last year.
Noninterest Income
Noninterest income increased $1,154,000 for the second quarter of 1998 when
compared with the like 1997 period primarily as a result of increased fees from
mortgage banking, factoring, trust and deposit services.
Noninterest Expense
Noninterest expenses increased $757,000 for the second quarter of 1998 when
compared with the like 1997 period primarily due to increased personnel expenses
incurred to support growing levels of business activity and continued
investments in the business franchise.
Provision for Income Taxes
The increase in the provision for income taxes was principally due to higher
pretax earnings partially offset by tax strategies implemented during 1997.
Results for the six months ended June 30, 1998 and 1997
OVERVIEW
The Company reported net income for the six months ended June 30,1998 of $6.1
million, representing $0.71 per share, calculated on a diluted basis, compared
to $5.1 million, or $0.61 per share calculated on a diluted basis, for the like
period in 1997. This increase reflects continued growth in both net interest
income and noninterest income as explained below.
Net interest income increased to $23.6 million for the first six months
of 1998 compared with $22.1 million for the same period in 1997, principally due
to higher average earning asset outstandings. The net interest margin was 5.83%
for the first six months of 1998 compared to 6.25% for the like 1997 period.
This decrease was due to a decrease in average yield on earning assets of 35
basis points and a 8 basis point increase in the average cost of funds.
Noninterest income rose to $7.7 million for the six months ended June
30,1998 compared to $6.1 million for the like 1997 period principally due to
continued growth in fees from mortgage banking, factoring, trust and deposit
services.
12
<PAGE> 13
INCOME STATEMENT ANALYSIS
Net Interest Income
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
assets, liabilities and shareholders' equity. The increases (decreases) for the
components of interest income and interest expense for the first six months,
expressed in terms of fluctuation in average volume and rate are shown on page
21. Information as to the components of interest income and interest expense and
average rates for the first six months is provided in the Average Balance Sheets
shown on page 19.
Net interest income for the six months ended June 30,1998 increased
$1,478,000 to $23,627,000 from $22,149,000 for the comparable period in 1997.
Total interest income aggregated $36,261,000 up $3,374,000 for the
first half of 1998 as compared to $32,887,000 for the same period of 1997. The
yield on interest-earning assets was 8.96% for the first six months of 1998
compared with 9.31% for the comparable period in 1997. The increase in interest
income was principally due to an increase in income earned on the Company's loan
portfolio as a result of management's strategy of increasing loan outstandings
as a percentage of total assets. The decrease in yield on earning assets was due
to lower yields on loans and investment securities.
Interest earned on the loan portfolio amounted to $24,922,000 up
$2,432,000 when compared to a year ago. Average loan balances amounted to
$490,337,000 up $61,338,000 from an average of $428,999,000 in the prior year
period. The increase in the average loans, primarily in the Company's leasing,
mortgage and in the short-term money market component of commercial and
industrial loan portfolio, accounted for the increase in interest earned on
loans. The decrease in the yield on the domestic loan portfolio to 11.15% for
the six months ended June 30,1998 from 11.37% for the comparable 1997 period was
attributable to a greater proportion of short-term, lower-yielding loans within
the portfolio.
Interest earned on investment securities increased $693,000 to
$10,877,000 in 1998 principally due to higher average outstandings partially
offset by lower yields due to a flattening of the U.S. Treasury yield curve.
Interest expense increased $1,896,000 to $12,634,000 for the first six
months of 1998 from $10,738,000 for the comparable period in 1997. The increase
in interest expense was due to higher average funds employed and higher average
rates paid for interest-bearing deposits.
Interest expense on interest-bearing deposits increased $1,751,000 for
the six months ended June 30,1998 to $8,571,000 from $6,820,000 for the
comparable 1997 period due to increases in average outstandings and the cost of
funds. Average outstandings increased $67,983,000 to $423,336,000 in 1998 from
$355,353,000 in 1997. The average rate paid on interest-bearing deposits rose to
4.08% in 1998 compared to 3.87% in the comparable year ago period.
Provision for Credit Losses
Based on management's continuing evaluation of the loan portfolio (discussed
under "Asset Quality" below), and principally as the result of the growth in the
loan portfolios, the provision for credit losses increased to $2,111,000 up
$730,000 when compared to the same period last year.
13
<PAGE> 14
Noninterest Income
Noninterest income increased $1,517,000 for the first six months of 1998 when
compared with the like 1997 period primarily as a result of increased fees from
mortgage banking, factoring, trust and deposit services.
Noninterest Expense
Noninterest expenses increased $971,000 for the second quarter of 1998 when
compared with the like 1997 period primarily due to increased personnel expenses
incurred to support growing levels of business activity and continued
investments in the business franchise.
Provision for Income Taxes
The increase in the provision for income taxes was principally due to higher
pretax earnings partially offset by tax strategies implemented during 1997.
BALANCE SHEET ANALYSIS
Securities
The Company's securities portfolios are comprised of principally U.S. Government
and U.S. Government corporation and agency guaranteed mortgage backed securities
along with other debt and equity securities. At June 30, 1998, the Company's
portfolio of securities totalled $329,501,000 of which U.S. Government and U.S.
Government corporation and agency guaranteed mortgage-backed securities having
an average life of approximately 4 years amounted to $308,633,000. The Company
has the intent and ability to hold to maturity securities classified as "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 $1,367,000 and $1,187,000, 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
$620,000 and gross unrealized losses of $182,000. Given the generally high
credit quality of the portfolio, 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.
Loan Portfolio
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.
14
<PAGE> 15
The Company's commercial and industrial loan portfolio represents
approximately 72% of gross loans. Loans in this category are typically made to
small and medium sized businesses and range between $250,000 and $10 million.
The primary source of repayment is from the borrower's operating profits and
cash flows. Based on underwriting standards, loans may be secured in whole or in
part by collateral such as liquid assets, accounts receivable, equipment,
inventory or real property. The Company's real estate loan portfolio, which
represents approximately 15% of gross loans, is secured by mortgages on real
property located principally in the City of New York and the State of Virginia.
The Company's leasing portfolio, which consists of finance leases for various
types of business equipment, represents approximately 10% of gross loans. The
collateral securing any loan may vary in value based on the success of the
business and economic conditions.
The following table sets forth the composition of the Company's loan
portfolio:
<TABLE>
<CAPTION>
June 30,
1998 1997
---- ----
($ in thousands)
% of % of
Balances Gross Balances Gross
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Domestic
Commercial and industrial $397,404 71.6% $344,939 72.6%
Equipment lease financing 54,110 9.8 42,932 9.1
Real estate 85,703 15.4 70,395 14.8
Installment - individuals 17,060 3.1 15,822 3.3
Foreign
Government and official institutions 788 0.1 789 0.2
-------- ----- -------- -----
Gross loans 555,065 100.0% 474,877 100.0%
===== =====
Unearned discounts 8,735 7,781
-------- --------
Loans, net of unearned discounts $546,330 $467,096
======== ========
</TABLE>
Asset Quality
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 credit losses is maintained through the provision for
credit losses, which is a charge to operating earnings. The adequacy of the
provision and the resulting allowance for credit 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
15
<PAGE> 16
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, including loans identified as
impaired as required by SFAS No. 114. 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 30,1998, the ratio of the allowance to loans, net of unearned
discounts, was 1.6% and the allowance was $8,826,000. At such date, the
Company's non-accrual loans amounted to $1,031,000; $617,000 of such loans were
judged to be impaired within the scope of SFAS No. 114 and required valuation
allowances of $250,000. 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 credit 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 30,1998. 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 causes
management to have serious doubts as to the ability of the borrowers to continue
to comply with the present repayment terms, aggregated $72,000 at June 30,1998.
Deposits
The Company's principal source of funds continues to be deposits, consisting of
demand (noninterest-bearing), NOW, savings, money market and time deposits
(principally certificates of deposit).
The following table provides certain information with respect to the
Company's deposits:
<TABLE>
<CAPTION>
June 30,
1998 1997
---- ----
($ in thousands)
% of % of
Balances Total Balances Total
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Domestic
Demand $253,473 38.6% $218,281 38.8%
NOW 69,085 10.5 33,412 5.9
Savings 23,480 3.6 23,534 4.2
Money Market 134,100 20.4 113,450 20.1
Time deposits 173,065 26.5 171,755 30.5
-------- ----- -------- -----
Total domestic deposits 653,203 99.6 560,432 99.5
Foreign
Time deposits 2,730 0.4 2,710 0.5
-------- ----- -------- -----
Total deposits $655,933 100.0% $563,142 100.0%
======== ===== ======== =====
</TABLE>
Fluctuations of balances in total or among categories at any date may
occur based on the Company's mix of assets and liabilities as well as on
customers' balance sheet strategies. Historically, however, average balances for
deposits have been relatively stable. Information regarding these average
balances is presented on pages 18 and 19.
16
<PAGE> 17
CAPITAL
The Company and the Bank are subject to risk-based capital regulations. The
purpose of these regulations is to quantitatively 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 for capital
adequacy purposes. Supplementing these regulations, is a leverage requirement.
This requirement establishes a minimum leverage ratio, (at least 3% to 5%) which
is calculated by dividing Tier 1 capital by adjusted quarterly average assets
(after deducting goodwill). Information regarding the Company's and the Bank's
risk- based capital is presented on page 22. In addition the Company and The
Bank are subject to the provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1981 ("FDICIA") which imposes a number of mandatory
supervisory measures. Among other matters, FDICIA established five capital
categories ranging from "well capitalized" to "critically under capitalized".
Such classifications are used by regulatory agencies to determine a bank's
deposit insurance premium, approval of applications authorizing institutions to
increase their asset size or otherwise expand business activities or acquire
other institutions. Under the provisions of FDICIA a "well capitalized"
institution must maintain minimum leverage, Tier 1 and Total Capital ratios of
5%, 6% and 10%, respectively. At June 30,1998, the Company and the Bank exceeded
the requirements for "well capitalized" institutions.
17
<PAGE> 18
STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Three Months Ended June 30,
<TABLE>
<CAPTION>
1998 1997
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
-------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits
with other banks $ 830 $ 31 5.17% $ 4,077 $ 65 5.21%
Investment securities
Available for sale [2] 122,954 1,920 6.25 65,368 1,083 6.64
Held to maturity 221,078 3,242 6.08 237,168 4,000 6.75
Federal funds sold 15,786 218 5.46 1,132 16 5.46
Loans, net of unearned discounts
Domestic [3] 494,825 12,648 11.08 429,964 11,394 11.34
Foreign 788 13 6.70 789 13 6.46
-------- -------- -------- -------
TOTAL INTEREST-EARNING
ASSETS 856,261 18,072 8.87 738,498 16,571 9.31
-------- ------- -------- ------
Cash and due from banks 43,699 47,005
Allowance for credit losses (8,754) (8,108)
Goodwill 21,158 21,158
Other assets 22,206 20,880
-------- --------
TOTAL ASSETS $934,570 $819,433
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Domestic
Savings $ 23,684 132 2.24 $ 24,548 133 2.17
NOW 65,534 472 2.89 30,932 113 1.46
Money Market 140,129 1,130 3.23 125,518 983 3.14
Time 185,180 2,395 5.19 171,947 2,223 5.18
Foreign
Time 2,730 37 5.43 3,722 50 5.41
-------- -------- -------- --------
Total interest-bearing
deposits 417,257 4,166 4.00 356,667 3,502 3.94
Borrowings
Federal funds purchased and
securities sold under
agreements to repurchase 67,597 869 5.14 92,891 1,258 5.43
Commercial paper 30,269 388 5.14 23,596 315 5.35
Other short-term debt 15,836 253 5.25 7,455 159 5.28
Long-term debt 41,512 526 5.08 20,027 285 5.70
-------- -------- -------- --------
TOTAL INTEREST-BEARING
LIABILITIES 572,471 6,202 4.31 500,636 5,519 4.37
-------- ---- -------- ----
Noninterest-bearing deposits 222,841 195,492
Other liabilities 43,785 43,395
-------- --------
Total liabilities 839,097 739,523
Shareholders' equity 95,473 79,910
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $934,570 $819,433
======== ========
Net interest income/spread $ 11,870 4.56% $ 11,052 4.94%
======== ==== ======== ====
Net yield on interest-earning
assets (margin) 5.83% 6.18%
==== ====
</TABLE>
[1] The average balances of assets, liabilities and shareholders' equity are
computed on the basis of daily averages. Dollars are presented in
thousands.
[2] Interest on tax-exempt securities included herein is immaterial and is not
presented on a tax equivalent basis.
[3] Non-accrual loans are included in the average balance, which reduces the
average yields.
18
<PAGE> 19
STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Six Months Ended June 30,
<TABLE>
<CAPTION>
1998 1997
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
-------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits
with other banks $ 1,742 $ 105 5.13% $ 3,546 $ 123 5.39%
Investment securities
Available for sale [2] 122,522 3,798 6.22 71,131 2,401 6.78
Held to maturity 227,577 7,079 6.33 231,384 7,783 6.73
Federal funds sold 12,994 357 5.46 3,326 90 5.37
Loans, net of unearned discounts
Domestic [3] 489,548 24,895 11.15 428,210 22,464 11.37
Foreign 789 27 6.78 789 26 6.55
-------- -------- -------- --------
TOTAL INTEREST-EARNING
ASSETS 855,172 36,261 8.96 738,386 32,887 9.31
-------- ------ -------- ------
Cash and due from banks 42,508 47,703
Allowance for credit losses (8,876) (8,237)
Goodwill 21,158 21,158
Other assets 21,597 19,034
-------- --------
TOTAL ASSETS $931,559 $818,044
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Domestic
Savings $ 23,617 262 2.24 $ 25,022 269 2.16
NOW 59,581 847 2.87 31,054 198 1.29
Money Market 137,642 2,152 3.15 130,392 2,005 3.10
Time 199,768 5,237 5.29 165,666 4,263 5.19
Foreign
Time 2,728 73 5.39 3,219 85 5.31
-------- -------- -------- --------
Total interest-bearing
deposits 423,336 8,571 4.08 355,353 6,820 3.87
Borrowings
Federal funds purchased and
securities sold under
agreements to repurchase 79,329 2,087 5.30 88,917 2,351 5.33
Commercial paper 29,213 749 5.17 25,051 645 5.20
Other short-term debt 15,179 497 5.22 7,626 306 4.88
Long-term debt 28,978 730 5.08 20,346 616 6.11
-------- -------- -------- --------
TOTAL INTEREST-BEARING
LIABILITIES 576,035 12,634 4.39 497,293 10,738 4.31
-------- ---- -------- ----
Noninterest-bearing deposits 218,368 198,181
Other liabilities 42,981 43,735
-------- --------
Total liabilities 837,384 739,209
Shareholders' equity 94,175 78,835
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $931,559 $818,044
======== ========
Net interest income/spread $ 23,627 4.57% $ 22,149 5.00%
======== ==== ======== ====
Net yield on interest-earning
assets (margin) 5.83% 6.25%
==== ====
</TABLE>
[1] The average balances of assets, liabilities and shareholders' equity are
computed on the basis of daily averages. Dollars are presented in
thousands.
[2] Interest on tax-exempt securities included herein is immaterial and is not
presented on a tax equivalent basis.
[3] Non-accrual loans are included in the average balance, which reduces the
average yields.
19
<PAGE> 20
STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis
Three Months Ended June 30,
(000 omitted)
<TABLE>
<CAPTION>
Increase/(Decrease)
Three Months Ended
June 30, 1998 and 1997
Volume Rate Net[1]
------ ---- ------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other banks $ (34) $ -- $ (34)
------- ------- -------
Investment securities
Available for sale [2] 904 (67) 837
Held to maturity (308) (450) (758)
------- ------- -------
Total 596 (517) 79
------- ------- -------
Federal funds sold 202 -- 202
------- ------- -------
Loans, net of unearned discounts [3] 1,573 (319) 1,254
------- ------- -------
TOTAL INTEREST INCOME $ 2,337 $ (836) $ 1,501
======= ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings $ (5) $ 4 $ (1)
NOW 192 167 359
Money Market 118 29 147
Time 168 4 172
Foreign
Time (13) -- (13)
------- ------- -------
Total 460 204 664
------- ------- -------
Borrowings
Federal funds purchased and securities
sold under agreements to repurchase (325) (64) (389)
Commercial paper 85 (12) 73
Other short-term debt 95 (1) 94
Long-term debt 275 (34) 241
------- ------- -------
Total 130 (111) 19
------- ------- -------
TOTAL INTEREST EXPENSE $ 590 $ 93 $ 683
======= ======= =======
NET INTEREST INCOME $ 1,747 $ (929) $ 818
======= ======= =======
</TABLE>
[1] The change in interest income and interest expense due to both rate and
volume has been allocated to change due to rate and the change due to
volume in proportion to the relationship of the absolute dollar amounts of
the changes in each.
[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
Rate/Volume Analysis
Six Months Ended June 30,
(000 omitted)
<TABLE>
<CAPTION>
Increase/(Decrease)
Six Months Ended
June 30, 1998 and 1997
Volume Rate Net[1]
------ ---- ------
<S> <C> <C> <C>
INTEREST INCOME
Interest-bearing deposits with other banks $ (16) $ (2) $ (18)
------- ------- -------
Investment securities
Available for sale [2] 1,562 (165) 1,397
Held to maturity (153) (551) (704)
------- ------- -------
Total 1,409 (716) 693
------- ------- -------
Federal funds sold 266 1 267
------- ------- -------
Loans, net of unearned discounts [3] 2,965 (533) 2,432
------- ------- -------
TOTAL INTEREST INCOME $ 4,624 $(1,250) $ 3,374
======= ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings $ (16) $ 9 $ (7)
NOW 278 371 649
Money Market 114 33 147
Time 891 83 974
Foreign
Time (13) 1 (12)
------- ------- -------
Total 1,254 497 1,751
------- ------- -------
Borrowings
Federal funds purchased and securities
sold under agreements to repurchase (251) (13) (264)
Commercial paper 108 (4) 104
Other short-term debt 178 13 191
Long-term debt 231 (117) 114
------- ------- -------
Total 266 (121) 145
------- ------- -------
TOTAL INTEREST EXPENSE $ 1,520 $ 376 $ 1,896
======= ======= =======
NET INTEREST INCOME $ 3,104 $(1,626) $ 1,478
======= ======= =======
</TABLE>
[1] The change in interest income and interest expense due to both rate and
volume has been allocated to change due to rate and the change due to
volume in proportion to the relationship of the absolute dollar amounts of
the changes in each.
[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.
21
<PAGE> 22
STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios
RATIOS AND MINIMUMS
(Dollars in thousands)
<TABLE>
<CAPTION>
For Capital To Be Well
Actual Adequacy Minimum Capitalized
AS OF JUNE 30, 1998 Amount Ratio Amount Ratio Amount Ratio
- ------------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets):
The Company $83,884 13.82% $48,543 8.00% $60,679 10.00%
The Bank 66,692 11.88 44,918 8.00 56,147 10.00
Tier 1 Capital (to Risk Weighted Assets):
The Company 76,284 12.57 24,272 4.00 36,408 6.00
The Bank 60,115 10.71 22,459 4.00 33,688 6.00
Tier 1 Leverage Capital (to Average Assets):
The Company 76,284 8.35 36,536 4.00 45,671 5.00
The Bank 60,115 6.87 35,010 4.00 43,763 5.00
AS OF DECEMBER 31, 1997
- -----------------------
Total Capital (to Risk Weighted Assets):
The Company $79,698 11.82% $53,935 8.00% $67,419 10.00%
The Bank 61,521 9.64 51,038 8.00 63,798 10.00
Tier 1 Capital (to Risk Weighted Assets):
The Company 71,268 10.57 26,968 4.00 40,451 6.00
The Bank 55,028 8.63 25,519 4.00 38,279 6.00
Tier 1 Leverage Capital (to Average Assets):
The Company 71,268 8.31 34,320 4.00 42,900 5.00
The Bank 55,028 6.66 33,032 4.00 41,290 5.00
</TABLE>
22
<PAGE> 23
ASSET/LIABILITY MANAGEMENT
The Company's primary earnings source is net interest income; therefore, the
Company devotes significant time and has invested in resources to assist in the
management of market risk, liquidity risk, capital 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 market
risk, liquidity and capital. This risk management process is governed by
policies and limits established by senior management which are reviewed and
approved by the Asset/Liability Committee ("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.
Market Risk
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market indices such as interest rates, foreign exchange rates and
equity prices. The Company's principal market risk exposure is interest rate
risk, with no material impact on earnings from changes in foreign exchange rates
or equity prices.
Interest rate risk is the exposure to changes in market interest rates.
Interest rate sensitivity is the relationship between market interest rates and
net interest income due to the repricing characteristics of assets and
liabilities. 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 position. In its management of interest rate risk, the Company
utilizes several tools including traditional gap analysis and sophisticated
income simulation models.
A 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 result 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.
The Company's balance sheet structure is primarily short-term in nature
with a substantial portion of assets and liabilities repricing or maturing
within one year. The Company's gap analysis at June 30,1998, presented on page
26, reveals that net interest income would increase during periods of rising
interest rates and decrease during periods of falling interest rates.
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 based on
recommendations of 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.
23
<PAGE> 24
The Company purchased interest rate floor contracts to reduce the
impact of falling rates on its floating rate commercial loans. 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.
At June 30,1998, the Company's off-balance sheet financial instruments
consisted of four interest rate floor contracts having a notional amount
totaling $125 million consisting of a contract with a notional amount of $50
million and a final maturity of February 27, 2000, another contract with a
notional amount of $25 million and a final maturity of October 10, 1999, another
contract with a notional amount of $25 million and a final maturity of February
9, 2001 and another contract with a notional amount of $25 million and a final
maturity of May 1, 2001. These financial instruments are being used as part of
the Company's interest rate risk management and not for trading purposes. At
June 30,1998, all counterparties have investment grade credit ratings from the
major rating agencies. Each counterparty is specifically approved for applicable
credit exposure.
The interest rate floor contracts require the Company to pay a fee for
the right to receive a fixed interest payment. The Company paid up front
premiums of $878,750 which are amortized monthly against interest income from
the designated assets. At June 30,1998, the unamortized premiums on these
contracts totaled $412,000 and are included in other assets. At June 30,1998,
$15,000 was receivable under these contracts.
The Company utilizes income simulation models to complement its
traditional gap analysis. While ALCO routinely monitors simulated net interest
income sensitivity over a rolling two-year horizon, it also utilizes additional
tools to monitor potential longer-term interest rate risk. The income simulation
models measure 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 its 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
estimated effects of the Company's interest rate floors are included in the
results of the sensitivity analysis. 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 following table
reflects the estimated exposure of the Company's net interest income for the
next twelve months, assuming a parallel and pro rata shift in interest rates.
<TABLE>
<CAPTION>
Rate Change Estimated Impact on
(Basis Points) Net Interest Income
-------------- -------------------
$ %
<S> <C> <C> <C>
+200 1,097,000 2.13
-200 (1,411,000) (2.74)
</TABLE>
24
<PAGE> 25
The preceding sensitivity analysis does not represent a Company
forecast and should not be relied upon as being indicative of expected operating
results. These hypothetical estimates are based upon numerous assumptions
including: the nature and timing of interest rate levels including yield curve
shape, prepayments on loans and securities, deposit decay rates, pricing
decisions on loans and deposits, reinvestment/replacement of asset and liability
cash flows, and others. While assumptions are developed based upon current
economic and local market conditions, the Company cannot make any assurances as
to the predictive nature of these assumptions including how customer preferences
or competitor influences might change.
Also, as market conditions vary from those assumed in the sensitivity
analysis, actual results will also differ due to: prepayment/refinancing levels
likely deviating from those assumed, the varying impact of interest rate change
caps or floors on adjustable rate assets, the potential effect of changing debt
service levels on customers with adjustable rate loans, depositor early
withdrawals and product preference changes, and other internal/external
variables. Furthermore, the sensitivity analysis does not reflect actions that
the Asset/Liability Committee might take in responding to or anticipating
changes in interest rates.
Liquidity Risk
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 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 markets 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 equivalents throughout its history.
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 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.
At June 30,1998, the parent company's short-term debt, consisting
principally of commercial paper used to finance ongoing current business
activities, was approximately $36,898,000. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating
$56,199,000 and back-up credit lines with banks of $19,000,000. Since 1979, the
parent company has had no need to use available back-up lines of credit.
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.
25
<PAGE> 26
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 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
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 $ 315 $ -- $ -- $ -- $ -- $ 315
Investment securities -- 24,180 14,557 283,966 6,798 329,501
Loans, net of unearned
discounts 427,959 6,332 70,188 50,586 (8,735) 546,330
Noninterest-earning assets
and allowance for
credit losses -- -- -- -- 84,784 84,784
--------- --------- --------- --------- --------- ---------
Total Assets 428,274 30,512 84,745 334,552 82,847 960,930
--------- --------- --------- --------- --------- ---------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Savings [1] -- -- 23,480 -- -- 23,480
NOW [1] -- -- 69,085 -- -- 69,085
Money market [1] 108,940 -- 25,160 -- -- 134,100
Time - domestic 93,847 65,638 13,580 -- -- 173,065
- foreign 1,730 1,000 -- -- -- 2,730
Federal funds purchased &
securities sold u/a/r 53,884 14,500 -- -- -- 68,384
Commercial paper 36,648 -- -- -- -- 36,648
Other short-term borrowings 7,701 12,850 -- -- -- 20,551
Long-term borrowings - FHLB -- 20,000 21,400 -- -- 41,400
Noninterest-bearing
liabilities and share-
holders' equity -- -- -- -- 391,487 391,487
--------- --------- --------- --------- --------- ---------
Total Liabilities and
Shareholders' Equity 302,750 113,988 152,705 -- 391,487 960,930
--------- --------- --------- --------- --------- ---------
Net Interest Rate
Sensitivity Gap $ 125,524 $ (83,476) $ (67,960) $ 334,552 $(308,640) $ --
========= ========= ========= ========= ========= =========
Cumulative Gap at
June 30, 1998 $ 125,524 $ 42,048 $ (25,912) $ 308,640 $ -- $ --
========= ========= ========= ========= ========= =========
Cumulative Gap at
June 30, 1997 $ 44,569 $ 19,930 $ (7,619) $ 277,934 $ -- $ --
========= ========= ========= ========= ========= =========
Cumulative Gap at
December 31, 1997 $ 158,116 $ 97,742 $ 60,343 $ 377,414 $ -- $ --
========= ========= ========= ========= ========= =========
</TABLE>
[1] Historically, balances in non-maturity deposit accounts have remained
relatively stable despite changes in levels of interest rates. Balances
are shown in repricing periods based on management's historical repricing
practices and runoff experience.
26
<PAGE> 27
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 17, 1998.
(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> <C>
Joseph M. Adamko 6,900,074 581,485
Lillian Berkman 6,898,132 583,427
Louis J. Cappelli 6,895,790 585,769
Walter Feldesman 6,841,094 640,465
Allan F. Hershfield 6,900,661 580,898
Henry J. Humphreys 6,900,361 581,198
John C. Millman 6,900,857 580,702
Maxwell M. Rabb 6,202,845 1,278,714
Eugene T. Rossides 6,898,542 583,017
William C. Warren 6,836,949 644,610
</TABLE>
* All nominees were incumbents at the time of the
Annual Meeting of Shareholders and all nominees
were re-elected.
(2) Amendment of Stock Incentive Plan
Total Votes For 5,341,226
Total Votes Against 2,084,996
Total Abstentions 55,336
Total Broker Nonvotes 1
27
<PAGE> 28
STERLING BANCORP AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
3 Amendments to By-Laws adopted May 21, 1998
10(i) Amendments to Employment Agreements dated May 22, 1998
(a) For Louis J. Cappelli
(b) For John C. Millman
10(ii) Form of change of Control Severance Agreement entered into
on May 22, 1998 between the Registrant and each of six
executives
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
(b) On June 5, 1998, the Company filed a Current Report on Form
8-K, dated May 21, 1998, filing: (1) certain information
relating to the extension and updating of its shareholder
protection rights plan and (2) certain exhibits including
the new rights agreement defining the rights of holders and
the press release issued in connection with the foregoing.
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 8/13/98 /s/ Louis J. Cappelli
-------------- ------------------------------------
Louis J. Cappelli
Chairman and
Chief Executive Officer
Date 8/13/98 /s/ John W. Tietjen
-------------- ------------------------------------
John W. Tietjen
Executive Vice President, Treasurer
and Chief Financial Officer
28
<PAGE> 29
STERLING BANCORP AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Filed
Number Description Herewith
------ ----------- --------
<S> <C> <C>
3 Amendments to By-Laws X
10(i) Amendments to Employment Contracts X
(a) Louis J. Cappelli
(b) John C. Millman
(ii) Form of Change of Control Severance Agreement between
The Registrant and each of six executives X
11 Computation of Per Share Earnings X
27 Financial Data Schedule X
</TABLE>
29
<PAGE> 1
Exhibit 3
BE IT RESOLVED, that, in accordance with Section 1 of Article XII of the
Corporation's By-laws, the By-laws of the Corporation be, and they hereby are,
amended as set forth in Annex I to these resolutions.
<PAGE> 2
Annex I
Exhibit 3
AMENDMENTS TO BY-LAWS
1. Section 2 of Article I of the By-laws is hereby amended to read in its
entirety as follows:
"Section 2. ANNUAL MEETINGS. The annual meeting of shareholders
shall be held on the third Thursday of April in each year, or on such
other day as may be determined by the Board of Directors, at an hour and
place to be stated in the notice, for the election of directors and the
transaction of such other business as may properly come before the
meeting."
2. Section 3 of Article I of the By-laws is hereby amended to read in its
entirety as follows:
"Section 3. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by statute, or by
the certificate of incorporation, may be called by the Chairman of the
Board or the Chairman of the Executive Committee, if there be any, or the
President, and shall be called by the Chairman or the Secretary at the
request in writing of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed meeting. The business
transacted at all special meetings shall be confined to the objects stated
in the call."
3. Article I of the By-laws is hereby amended by adding at the end thereof
the following as Section 13:
"Section 13. ADVANCE NOTICE OF SHAREHOLDER PROPOSALS.
At any annual meeting of shareholders, proposals and persons nominated for
election as directors by shareholders shall be considered only if (1)
advance written notice thereof has been timely given as provided herein
and (2) such proposals or nominations are otherwise proper for
consideration under applicable law and the certificate of incorporation
and by-laws of the Corporation. At any special meeting of shareholders
only such business may be transacted as is set forth in the notice of the
meeting referred to in Section 4 of these By-laws.
Written notice of any proposal to be presented by any shareholder or of
the name of any person to be nominated by any shareholder for election as
a director of the Corporation shall be delivered to the Secretary of the
Corporation at its principal executive office not less than 60 nor more
than 90 days prior to the date of the meeting; provided, however, that if
the date of the meeting is first publicly announced or disclosed (in a
public filing or otherwise) less than 70 days prior to the date of the
meeting, such advance notice shall be given not more than ten days after
such date is first so announced or disclosed. Public notice shall be
deemed to have been given more than 70 days in advance of the annual
meeting if the Corporation shall have previously disclosed, in these
by-laws or otherwise,
<PAGE> 3
Exhibit 3
meeting if the Corporation shall have previously disclosed, in these
by-laws or otherwise, that the annual meeting in each year is to be held
on a determinable date, unless the Board determines to hold the meeting on
a different date.
Any shareholder who gives such notice of a proposal will deliver
therewith the text of the proposal to be presented and a brief written
statement of the reasons why the shareholder favors the proposal and
setting forth the shareholder's name and address, the number and class of
all shares of each class of stock of the Corporation beneficially owned by
the shareholder and any material interest of the shareholder in the
proposal (other than as a shareholder). Any shareholder desiring to
nominate any person for election as a director of the Corporation shall
deliver with such notice a statement in writing setting forth the name of
the person to be nominated, the number and class of all shares of each
class of stock of the Corporation beneficially owned by such person, the
information regarding such person required by paragraphs (a), (e) and (f)
of Item 401 of Regulation S-K adopted by the Securities and Exchange
Commission (or the corresponding provisions of any regulation subsequently
adopted by the Securities and Exchange Commission applicable to the
Corporation), the person's signed consent to serve as a director of the
Corporation if elected, the shareholder's name and address and the number
and class of all shares of each class of stock of the Corporation
beneficially owned by the shareholder. As used herein, shares
"beneficially owned" shall mean all shares as to which such person,
together with such person's affiliates and associates (as defined in Rule
12b-2 under the Securities Exchange Act of 1934), may be deemed to
beneficially owned pursuant to Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the right to
become the beneficial owner pursuant to any agreement or understanding, or
upon the exercise of warrants, options or rights to convert or exchange
(whether such rights are exercisable immediately or only after the passage
of time or the occurrence of conditions).
The person presiding at the meeting, in addition to making any other
determinations that may be appropriate to the conduct of the meeting,
shall determine whether notice of any shareholder proposal or nomination
has been duly given and shall direct that proposals and nominees not be
considered if such notice has not been given."
4. Section 3 of Article II of the By-laws is hereby amended to read in its
entity as follows:
"Section 3. REMOVAL OF DIRECTORS. Any one or more or all of the
directors may be removed for cause by vote of the shareholders of the
Corporation and thereupon the term of office of such director or directors
who shall have been so removed shall forthwith terminate and there shall
be a vacancy or vacancies in the Board of Directors to be filled as
provided in these By-laws except as may otherwise be prescribed by law."
<PAGE> 1
Exhibit 10(i)(a)
Sterling Bancorp
430 Park Avenue
New York, New York 10022-3505
May 22, 1998
Mr. Louis J. Cappelli
Chairman
Sterling Bancorp
430 Park Avenue
New York, New York 10022
Dear Mr. Cappelli:
This will confirm the following amendments to your employment agreement, dated
February 19, 1993 (as amended, February 14, 1995, February 8, 1996, February 28,
1997 and February 19, 1998), with our Company:
(1) The first sentence of Paragraph 5 is hereby deleted and the following
sentence is inserted in lieu thereof:
In the event of a Change of Control (as defined in Schedule A
annexed) you may terminate without cause your employment within 13 months
following the event of Change in Control by reason thereof.
(2) Paragraph 7(i)(A) is hereby deleted and the following paragraph is
inserted in lieu thereof:
(i)(A) if the termination of your employment follows a Change in Control,
the Company will pay to you a lump-sum cash amount equal to (x) three (3)
times your then base annual compensation plus (y) three (3) times your
highest annual bonus earned from the Company (and its affiliates) during
the last three completed fiscal years of the Company immediately preceding
your Date of Termination, such amount to be paid within ten days following
the Date of Termination. Such payment will be made notwithstanding the
length of the then current term of this Agreement. In addition, for a
period of thirty-six (36) months, the Company shall maintain the benefits
listed in subparagraph (iv) of this Paragraph 7 below.
<PAGE> 2
Exhibit 10(i)(a)
(3) The following paragraph is hereby inserted at the end of Paragraph 7:
In addition, if you are entitled to receive a payment under
paragraph 7.(i)(A) following a Change in Control and it shall be
determined that any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which
effectuates a Change in Control (or any of its affiliated entities) to or
for your benefit (whether pursuant to the terms of this Agreement or
otherwise determined without regard to any additional payments required
under this paragraph) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by you with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to you an additional payment (a
"Gross-Up Payment") in an amount such that after payment by you of all
taxes (including any Excise Tax) imposed upon the Gross-Up Payment, you
shall retain an amount of the Gross-Up Payment equal to the sum of (x) the
Excise Tax imposed upon the Payments and (y) the product of any deductions
disallowed because of the inclusion of the Gross-up Payment in your
adjusted gross income and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-up Payment is to
be made. For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which
the Gross-up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction
of such state and local taxes and (iii) have otherwise allowable
deductions for federal income tax purposes at least equal to those which
could be disallowed because of the inclusion of the Gross-up Payment in
your adjusted gross income.
-2-
<PAGE> 3
Exhibit 10(i)(a)
Subject to the provisions of the immediately preceding paragraph,
all determinations required to be made concerning the Gross-Up Payment
including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determinations, shall be made by the public accounting firm that is
retained by the Company as of the date immediately prior to the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations both to you and to the Company within fifteen (15) business
days of the receipt of notice from you or the Company that there has been
a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, you may appoint another nationally
recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection with the
performance of the services hereunder. The Gross-up Payment with respect
to any Payments shall be made no later than thirty (30) days following
such Payment. If the Accounting Firm determines that no Excise Tax is
payable by you, it shall furnish you with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any,
on your applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon you and the Company. As a result of
the uncertainty in the application of Section 4999 of the Code at the time
of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment") or
Gross-up Payments will be made by the Company which should not have been
made ("Overpayment"), consistent with the calculations required to be made
hereunder. In the event that you thereafter are required to make payment
of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with
-3-
<PAGE> 4
Exhibit 10(i)(a)
interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall
be promptly paid by the Company to or for your benefit. In the event the
amount of the Gross-up Payment exceeds the amount necessary to reimburse
you for your Excise Tax, the Accounting Firm shall determine the amount of
the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by you (to the extent you have received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or
for the benefit of the Company. You shall cooperate, to the extent your
expenses are reimbursed by the Company, with any reasonable requests by
the Company in connection with any contests or disputes with the Internal
Revenue Service in connection with the Excise Tax.
The foregoing amendments were recommended by the Compensation Committee and were
approved by the Board of Directors at its May 21, 1998 meeting.
Kindly sign and return the enclosed copy to the Company in order to confirm your
understanding and acceptance of the foregoing amendments.
Sincerely,
STERLING BANCORP
By /s/ Jerrold Gilbert
--------------------------------
Executive Vice President
Agreed:
/s/ Louis J. Cappelli
- --------------------------------
Louis J. Cappelli
-4-
<PAGE> 1
Exhibit 10(i)(b)
Sterling Bancorp
430 Park Avenue
New York, N.Y. 10022-3505
May 22, 1998
Mr. John C. Millman
President
Sterling Bancorp
430 Park Avenue
New York, New York 10022
Dear Mr. Millman:
This will confirm the following amendments to your employment agreement, dated
February 19, 1993 (as amended, February 14, 1995, February 8, 1996, February 28,
1997 and February 19, 1998), with our Company:
(1) The first sentence of Paragraph 5 is hereby deleted and the following
sentence is inserted in lieu thereof:
In the event of a Change of Control (as defined in Schedule A
annexed) you may terminate without cause your employment within 13 months
following the event of Change in Control by reason thereof.
(2) Paragraph 7(i)(A) is hereby deleted and the following paragraph is
inserted in lieu thereof:
(i) (A) if the termination of your employment follows a Change in Control,
the Company will pay to you a lump-sum cash amount equal to (x) three (3)
times your then base annual compensation plus (y) three times your highest
annual bonus earned from the Company (and its affiliates) during the last
three completed fiscal years of the Company immediately preceding your
Date of Termination, such amount to be paid within ten days following the
Date of Termination. Such payment will be made notwithstanding the length
of the then current term of this Agreement. In addition, for
<PAGE> 2
Exhibit 10(i)(b)
a period of thirty-six (36) months, the Company shall maintain the
benefits listed in subparagraph (iv) of this Paragraph 7 below.
(3) The following paragraph is hereby inserted at the end of Paragraph 7:
In addition, if you are entitled to receive a payment under
paragraph 7.(i)(A) following a Change in Control and it shall be
determined that any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which
effectuates a Change in Control (or any of its affiliated entities) to or
for your benefit (whether pursuant to the terms of this Agreement or
otherwise determined without regard to any additional payments required
under this paragraph) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by you with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to you an additional payment (a
"Gross-Up Payment") in an amount such that after payment by you of all
taxes (including any Excise Tax) imposed upon the Gross-Up Payment, you
shall retain an amount of the Gross-Up Payment equal to the sum of (x) the
Excise Tax imposed upon the Payments and (y) the product of any deductions
disallowed because of the inclusion of the Gross-up Payment in your
adjusted gross income and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-up Payment is to
be made. For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which
the Gross-up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-up Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction
of such state and local taxes and (iii) have otherwise allowable
deductions for federal income tax purposes at
-2-
<PAGE> 3
Exhibit 10(i)(b)
least equal to those which could be disallowed because of the inclusion of
the Gross-up Payment in your adjusted gross income.
Subject to the provisions of the immediately preceding paragraph,
all determinations required to be made concerning the Gross-Up Payment
including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determinations, shall be made by the public accounting firm that is
retained by the Company as of the date immediately prior to the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations both to you and to the Company within fifteen (15) business
days of the receipt of notice from you or the Company that there has been
a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, you may appoint another nationally
recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder) All fees and expenses of the Accounting Firm
shall be borne solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection with the
performance of the services hereunder. The Gross-up Payment with respect
to any Payments shall be made no later than thirty (30) days following
such Payment. If the Accounting Firm determines that no Excise Tax is
payable by you, it shall furnish you with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any,
on your applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon you and the Company. As a result of
the uncertainty in the application of Section 4999 of the Code at the time
of the Determination, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment") or
Gross-up Payments will be made by the Company which should not have been
made ("Overpayment"), consistent with the calculations required to be made
hereunder. In the event that you thereafter
-3-
<PAGE> 4
Exhibit 10(i)(b)
are required to make payment of any Excise Tax or additional Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by
the Company to or for your benefit. In the event the amount of the
Gross-up Payment exceeds the amount necessary to reimburse you for your
Excise Tax, the Accounting Firm shall determine the amount of the
Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by you (to the extent you have received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or
for the benefit of the Company. You shall cooperate, to the extent your
expenses are reimbursed by the Company, with any reasonable requests by
the Company in connection with any contests or disputes with the Internal
Revenue Service in connection with the Excise Tax.
The foregoing amendments were recommended by the Compensation Committee
and were approved by the Board of Directors at its May 21, 1998 meeting.
Kindly sign and return the enclosed copy to the Company in order to confirm your
understanding and acceptance of the foregoing amendments.
Sincerely,
STERLING BANCORP
By /s/ Jerrold Gilbert
--------------------------------
Executive Vice President
Agreed:
/s/ John C. Millman
- --------------------------------
John C. Millman
-4-
<PAGE> 1
Exhibit 10(ii)
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (as modified, extended or
supplemented from time to time, this "Agreement") is entered into as of the ___
day of ____, 1998 by and between Sterling Bancorp, a New York corporation (the
"Company"), and ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of
a sound and vital management to be essential to protecting and enhancing the
best interests of the Company and its shareholders;
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders;
WHEREAS, the Board (as defined in Section 1 of Appendix A) has
determined that it is in the best interests of the Company and its shareholders
to secure Executive's continued services and to ensure Executive's continued
dedication to his duties in the event of any threat or occurrence of a Change in
Control (as defined in Section 4 of Appendix A) of the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement:
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions. As used in this Agreement, capitalized terms will
have the respective meanings set forth in Appendix A.
2. Obligation of Executive. In the event of a tender or exchange
offer, proxy contest, or the execution of any agreement which, if consummated,
would constitute a Change in Control, Executive agrees not to voluntarily leave
the employ of the Company, other than as a result of Disability, retirement or
an event which would constitute Good Reason if a Change in Control had occurred,
until the Change in Control occurs or, if earlier, such tender or exchange
offer, proxy contest, or agreement is terminated or abandoned.
3. Term of Agreement. (a) Subject to Section 3(b), this Agreement
shall be effective on the date hereof and shall continue in effect until the
Company shall have given three (3) years written notice of cancellation;
provided, that, notwithstanding the delivery of any such notice, this Agreement
shall continue in effect for a period of two (2) years after a Change in
Control, if such Change in Control shall have occurred during the term of this
Agreement.
<PAGE> 2
Exhibit 10(ii)
(b) Notwithstanding Section 3(a), this Agreement shall terminate if
Executive or the Company terminates Executive's employment prior to a Change in
Control; provided that, if (1) Executive's employment is terminated prior to a
Change in Control for reasons that would have constituted a Qualifying
Termination if they had occurred following a Change in Control; (2) Executive
reasonably demonstrates (or the Company agrees) that such termination (or Good
Reason event) was at the request of a third party who had indicated an intention
or taken steps reasonably calculated to effect a Change in Control; and (3) a
Change in Control involving such third party (or a party competing with such
third party to effectuate a Change in Control) does occur, then (A) for purposes
of this Agreement, the date immediately prior to the date of such termination of
employment or event constituting Good Reason shall be treated as a Change in
Control and (B) for purposes of determining the timing of payments and benefits
to Executive under Section 4, the date of the actual Change in Control shall be
treated as Executive's Date of Termination.
4. Payments Upon Termination of Employment. (a) If during the
Termination Period the employment of Executive shall terminate pursuant to a
Qualifying Termination, then the Company shall provide to Executive:
(1) Within ten (10) days following the Date of Termination a
lump-sum cash amount equal to the sum of (A) Executive's base salary
through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's annual bonus for the fiscal year in which
Executive's Date of Termination occurs in an amount at least equal to (i)
Executive's Bonus Amount, multiplied by (ii) a fraction, the numerator of
which is the number of days in the fiscal year in which the Date of
Termination occurs through the Date of Termination and the denominator of
which is three hundred sixty-five (365), and reduced by (iii) any amounts
paid from the Company's annual incentive plan for the fiscal year in which
Executive's Date of Termination occurs; plus
(2) Within ten (10) days following the Date of Termination, a
lump-sum cash amount equal to (A) two (2) times Executive's highest annual
rate of base salary during the 12-month period immediately prior to
Executive's Date of Termination, plus (B) two (2) times Executive's Bonus
Amount.
(b) If during the Termination Period the employment of Executive
shall terminate pursuant to a Qualifying Termination, the Company shall continue
to provide, for a period of two (2) years following Executive's Date of
Termination, Executive (and Executive's dependents, if applicable) with the same
level of medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer,
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<PAGE> 3
Exhibit 10(ii)
the welfare benefits described herein shall be secondary to such benefits during
the period of Executive's eligibility, but only to the extent that the Company
reimburses Executive for any increased cost and provides any additional benefits
necessary to give Executive the benefits provided hereunder.
(c) If during the Termination Period the employment of Executive
shall terminate pursuant to a Qualifying Termination, the Company shall (1) for
all purposes (including eligibility, vesting and benefit accrual) of each
pension, savings and retirement plan and program of the Company, treat Executive
as if (A) Executive had an additional two (2) years of service with the Company,
and (B) Executive's attained age were two (2) years older than Executive's
actual attained age as of his Date of Termination, and (B) pay to Executive,
within 30 days following his Date of Termination, a lump sum payment in an
amount equal to the sum of:
(i) The excess, if any, of (x) the present value of the benefits to
which Executive would be entitled under Company's pension and retirement
plans (qualified and nonqualified), if Executive had continued in the
employ of the Company for an additional two (2) years following his Date
of Termination earning during such two-year period the rate of base salary
and bonus in effect as of his Date of Termination, over (y) the present
value of the benefit to which Executive is actually entitled under such
pension and retirement plans as of his Date of Termination;
(ii) The present value of the Company contributions (including any
allocations of securities of the Company) that would have been made under
all Company savings programs (qualified and nonqualified), if Executive
had continued in the employ of the Company for an additional two (2) years
following his Date of Termination earning during such two-year period the
rate of base salary and bonus in effect as of his Date of Termination,
assuming that the Company would have made the maximum contributions
permitted under such savings programs, and assuming, for purposes of
determining the amount of any Company matching contributions, that
Executive would have contributed the amount necessary to receive the
maximum matching contributions available under such savings programs); and
(iii) If contributions to the Company's employee stock ownership
plan (the "ESOP") will continue after the Date of Termination, the value
of the allocations that would have been made to Executive under the ESOP,
if Executive had continued in the employ of the Company for an additional
two (2) years following his Date of Termination, determined by multiplying
(x) two (2) times the number of shares of stock of the Company (or, if
applicable, the Surviving Person or the Parent Corporation, as such terms
are defined below) allocated to the Executive's account under the ESOP for
the last full calendar year prior to the Date of Termination by (y) the
fair market value of one share of such stock on the Date of Termination.
For purposes of the preceding sentence, "present value" shall be determined as
of the Date of Termination and shall be calculated based upon a discount rate of
the base rate referred to in Section 7 and without reduction for mortality.
-3-
<PAGE> 4
Exhibit 10(ii)
(d) If during the Termination Period the employment of Executive
shall terminate other than by reason of a Qualifying Termination, then the
Company shall pay to Executive within thirty (30) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (1) Executive's base
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, and (2) and any accrued
vacation pay, in each case to the extent not theretofore paid. The Company may
make such additional payments, and provide such additional benefits, to
Executive as the Company and Executive may agree in writing.
5. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment, award, benefit or distribution (or any acceleration of any
payment, award, benefit or distribution) by the Company (or any of its
affiliated entities) or any entity which effectuates a Change in Control (or any
of its affiliated entities) to or for the benefit of Executive (whether pursuant
to the terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section 5) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to Executive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the sum of (1) the Excise Tax
imposed upon the Payments and (2) the product of any deductions disallowed
because of the inclusion of the Gross-up Payment in Executive's adjusted gross
income and the highest applicable marginal rate of federal income taxation for
the calendar year in which the Gross-up Payment is to be made. For purposes of
determining the amount of the Gross-up Payment, the Executive shall be deemed to
(1) pay federal income taxes at the highest marginal rates of federal income
taxation for the calendar year in which the Gross-up Payment is to be made, (2)
pay applicable state and local income taxes at the highest marginal rate of
taxation for the calendar year in which the Gross-up Payment is to be made, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes and (3) have otherwise allowable
deductions for federal income tax purposes at least equal to those which could
be disallowed because of the inclusion of the Gross-up Payment in the
Executive's adjusted gross income. Notwithstanding the foregoing provisions of
this Section 5(a), if it shall be determined that Executive is entitled to a
Gross-Up Payment, but that the Payments would not be subject to the Excise Tax
if the Payments were reduced by an amount that is less than 5% of the portion of
the Payments that would be treated as "parachute payments" under Section 280G of
the Code, then the amounts payable to Executive under this Agreement shall be
reduced (but not below zero) to the maximum amount that could be paid to
Executive without giving rise to the Excise Tax (the "Safe Harbor Cap"), and no
Gross-Up Payment shall be made to Executive. The reduction of the amounts
payable hereunder, if applicable, shall be made by reducing first the payments
under Section 4(a)(ii), unless an alternative method of reduction is elected by
Executive. For purposes of reducing the Payments to the Safe Harbor Cap, only
amounts payable under this Agreement (and no other Payments) shall be reduced.
If the reduction of the amounts payable hereunder would not result in a
reduction of the Payments
-4-
<PAGE> 5
Exhibit 10(ii)
to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced
pursuant to this provision.
(b) Subject to the provisions of Section 5(a), all determinations
required to be made under this Section 5, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment, the reduction of the
Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving
at such determinations, shall be made by the public accounting firm that is
retained by the Company as of the date immediately prior to the Change in
Control (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days
of the receipt of notice from the Company or the Executive that there has been a
Payment, or such earlier time as is requested by the Company (collectively, the
"Determination"). In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the Change in Control,
Executive may appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company and the Company shall enter
into any agreement requested by the Accounting Firm in connection with the
performance of the services hereunder. The Gross-up Payment under this Section 5
with respect to any Payments shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive's applicable federal income tax return will not result in the
imposition of a negligence or similar penalty. In the event the Accounting Firm
determines that the Payments shall be reduced to the Safe Harbor Cap, it shall
furnish Executive with a written opinion to such effect. The Determination by
the Accounting Firm shall be binding upon the Company and Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the Determination, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made ("Underpayment") or Gross-up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made hereunder.
In the event that the Executive thereafter is required to make payment of any
Excise Tax or additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall
be promptly paid by the Company to or for the benefit of Executive. In the event
the amount of the Gross-up Payment exceeds the amount necessary to reimburse the
Executive for his Excise Tax, the Accounting Firm shall determine the amount of
the Overpayment that has been made and any such Overpayment (together with
interest at the rate provided in Section 1274(b)(2) of the Code) shall be
promptly paid by Executive (to the extent he has received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or for
the benefit of the Company. Executive shall cooperate, to the extent his
expenses are reimbursed by the Company, with any reasonable requests by the
Company in connection with any contests or disputes with the Internal Revenue
Service in connection with the Excise Tax.
-5-
<PAGE> 6
Exhibit 10(ii)
6. Withholding Taxes. The Company may withhold from all payments due
to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. Reimbursement of Expenses. If any contest or dispute shall arise
under this Agreement involving termination of Executive's employment with the
Company or involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the base rate of Sterling
National Bank (or any successor) from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives Executive's statement for
such fees and expenses through the date of payment thereof by the Company,
regardless of whether or not Executive's claim is upheld by a court of competent
jurisdiction/arbitration panel; provided, however, Executive shall be required
to repay any such amounts to the Company to the extent that a court/arbitration
panel issues a final and non-appealable order setting forth the determination
that the position taken by Executive was frivolous or advanced by Executive in
bad faith.
8. Scope of Agreement. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company shall terminate prior to a Change
in Control, Executive shall have no further rights under this Agreement (except
as otherwise provided hereunder); provided, however, that any termination of
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
9. Successors; Binding Agreement. (a) This Agreement shall not be
terminated by any reorganization, merger or consolidation involving the Company
(each, a "Business Combination"). In the event of any Business Combination, the
provisions of this Agreement shall be binding upon the Person resulting from
such Business Combination (the "Surviving Person"), and the Surviving Person
shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume (and, if applicable, the ultimate parent entity that directly or
indirectly has beneficial ownership of a majority of the voting securities
eligible to elect directors of the successor entity (the "Parent Corporation")
to guarantee), by written instrument delivered to Executive (or his beneficiary
or estate), all of the obligations of the Company hereunder. Failure of the
Company to obtain such assumption and guarantee prior to the effectiveness of
any such Business Combination that constitutes a Change in Control, shall be a
breach of this Agreement and shall constitute Good Reason hereunder and shall
entitle Executive to compensation and other benefits from the Company in the
same amount and on the same terms as Executive would be entitled hereunder if
Executive's employment were terminated following a Change in Control by reason
of a Qualifying Termination. For purposes of implementing the foregoing, the
date on which any such Business Combination becomes effective shall be deemed
the date Good Reason occurs, and shall be the Date of Termination if requested
by Executive.
-6-
<PAGE> 7
Exhibit 10(ii)
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive shall die
while any amounts would be payable to Executive hereunder had Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Executive to receive such amounts or, if no person is so
appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given (1) on the date of delivery if delivered
personally or by telefacsimile upon confirmation of receipt, (2) on the first
business day following the date of dispatch if delivered by a recognized
next-day courier service or (3) five days after deposit in the United States
mail, certified and return receipt requested, postage prepaid. All such notices
and communications shall be delivered as set forth below:
If to the Executive:
If to the Company:
Sterling Bancorp
430 Park Avenue, Fourth Floor
New York, N.Y. 10022-3505
Attn: Chairman of the Board
with a copy addressed to the attention of the General
Counsel of the Company at the above address.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (1) indicate the
specific termination provision in this Agreement relied upon, (2) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (3) specify the termination date (which date shall be not less
than fifteen (15) (thirty (30), if termination is by the Company for Disability)
nor more than sixty (60) days after the giving of such notice). The failure by
Executive or the Company to set forth in such notice any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of Executive or the Company hereunder or preclude Executive or the Company from
asserting such fact or circumstance in enforcing Executive's or the Company's
rights hereunder.
-7-
<PAGE> 8
Exhibit 10(ii)
11. Full Settlement; Resolution of Disputes. In the event of a
Qualifying Termination, the Company's obligation to make any payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
be in lieu and in full settlement of all other severance payments to Executive
under any other severance or employment agreement between Executive and the
Company. The Company's obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 4(b), such amounts shall not be reduced
whether or not Executive obtains other employment.
12. Employment with Subsidiaries. Employment with the Company for
purposes of this Agreement shall include employment with any Subsidiary.
13. Survival. The respective obligations and benefits afforded to
the Company and Executive as provided in Sections 4 (to the extent that
payments or benefits are owed as a result of a termination of employment that
occurs during the term of this Agreement), 5 (to the extent that Payments are
made to Executive as a result of a Change in Control that occurs during the term
of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this
Agreement.
14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
15. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
16. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including without limitation, the right of Executive to terminate employment for
Good Reason, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits
-8-
<PAGE> 9
Exhibit 10(ii)
payable to, Executive, his estate or his beneficiaries pursuant to this
Agreement are in addition to any rights of, or benefits payable to, Executive,
his estate or his beneficiaries under any other employee benefit plan or
compensation program of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
STERLING BANCORP
By:
---------------------------------
Name
Title:
------------------------------------
-9-
<PAGE> 10
Exhibit 10(ii)
Appendix A (Certain Defined Terms)
As used in the Agreement. the following terms shall have the
respective meanings set forth below:
1. "Board" means the Board of Directors of the Company
2. "Bonus Amount" means the highest annual bonus earned by Executive
from the Company (and/or its affiliates) during the last three (3) completed
fiscal years of the Company immediately preceding Executive's Date of
Termination (annualized in the event Executive was not employed by the Company
(or its affiliates) for the whole of any such fiscal year).
3. "Cause" means (a) the willful and continued failure of Executive
to perform substantially his duties with the Company (other than any such
failure resulting from Executive's incapacity due to physical or mental illness
or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or delivering a Notice of Termination
for Good Reason to the Company) after a written demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed Executive's duties, (b) the willful engaging by Executive in illegal
conduct or gross misconduct which is demonstrably and materially injurious to
the Company or its affiliates or (c) the final, non-appealable conviction of
Executive for a criminal violation of Title 12 or 18 of the United States Code.
For purpose of this definition, no act or failure to act by Executive shall be
considered "willful" unless done or omitted to be done by Executive in bad faith
and without reasonable belief that Executive's action or omission was in the
best interests of the Company or its affiliates. Any act, or failure to act,
(1) based upon authority given pursuant to a resolution duly adopted by the
Board, (2) based upon the advice of counsel for the Company or (3) based upon
the instructions of the Company's chief executive officer or another senior
officer of the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
For purpose of clauses (a) and (b) of the first sentence of this definition,
"cause" shall not exist unless and until the Company has delivered to Executive
a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board
(excluding Executive if Executive is a Board member) at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board an event set forth in
clauses (a) or (c) has occurred and specifying the particulars thereof in
detail. The Company must notify Executive of any event constituting Cause within
sixty (60) days following the Company's knowledge of its existence or such event
shall not constitute Cause under this Agreement.
4. "Change in Control" means the occurrence of any one of the
following events:
(a) The acquisition by any individual, entity or group (within the
meaning of section 13(d)(3) or 14(d)(1) of the Securities Exchange Act of
1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting
securities which together with the beneficial ownership of voting
securities theretofore held comprises 20% or more of
<PAGE> 11
Exhibit 10(ii)
either (1) the then outstanding common shares of the Company (the "Outstanding
Company Common Shares") or (2) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions will not constitute a Change in Control: (1) any
acquisition directly from the Company (other than acquisition by virtue of the
exercise of a conversion privilege), (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (4)
any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (1), (2) and (3) of subsection (c) of this
definition are satisfied;
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least two-thirds of the
Board, provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the shareholders
of the Company, was approved by a vote of at least two-thirds of the Directors
then comprising the Incumbent Board will be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulations 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board;
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, (1) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of Directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the outstanding Company Common Shares
and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation, in substantially the same proportions
as their ownership, immediately prior to such reorganization, merger or
consolidation, in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Shares and Outstanding Company Voting Securities, as
the case may be, (2) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company or such corporation resulting from such
reorganization, merger or consolidation) beneficially owns, directly or
indirectly, 10% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation, entitled to vote generally in the election of
directors and (3) at least two-thirds of the members of the board of directors
of the corporation resulting from such reorganization, merger or consolidation
were
-2-
<PAGE> 12
Exhibit 10(ii)
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation;
(d) Approval by the shareholders of the Company of (1) a complete
liquidation or dissolution of the Company or (2) the sale or other disposition
of all or substantially all of the assets or deposits of the Company, other than
to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the company or such corporation)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (C) at least
two-thirds of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition of
assets of the Company; or
(e) Reorganization, merger or consolidation of Sterling National Bank or
sale or other disposition of all or substantially all of the assets or deposits
of Sterling National Bank, unless, in the case of a reorganization, merger or
consolidation, the resulting entity is wholly owned by a corporation meeting the
following requirements or, in the case of a sale or disposition, the sale or
disposition is a to a corporation meeting the following requirements (in each
case after giving effect to the reorganization, merger, consolidation, sale or
disposition and any related transactions): (A) more than two-thirds of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company Voting Securities
immediately prior to such reorganization, merger, consolidation, sale or
disposition, as the case may be, (B) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or such corporation)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (C) at least
two-thirds of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial
-3-
<PAGE> 13
Exhibit 10(ii)
agreement or action of the Board providing for such reorganization,
merger, consolidation, sale or disposition.
5. "Date of Termination" means (a) the effective date on which
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or Executive, as the case may be, to the other, delivered
pursuant to Section 10 or (b) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
6. "Disability" means termination of Executive's employment by the
Company due to Executive's absence from Executive's duties with the Company on a
full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness.
7. "Good Reason" means, without Executive's express written consent,
the occurrence of any of the following events after a Change in Control:
(a) (1) Any change in the duties or responsibilities (including
reporting responsibilities) of Executive that is inconsistent in any
material and adverse respect with Executive's position(s), duties,
responsibilities or status with the Company immediately prior to such
Change in Control (including any material and adverse diminution of such
duties or responsibilities) or (2) a material and adverse change in
Executive's titles or offices (including, if applicable, membership on the
Board) with the Company or its affiliates as in effect immediately prior
to such Change in Control;
(b) A reduction by the Company in Executive's rate of annual base
salary, annual bonus or annual bonus opportunity (including any material
and adverse change in the formula for such annual bonus or bonus
opportunity) as in effect immediately prior to such Change in Control or
as the same may be increased from time to time thereafter;
(c) Any requirement of the Company that Executive (1) be based
anywhere other than the Company's principal executive offices (or the
principal executive office of a subsidiary or division of the Company, if
Executive is based at such office immediately prior to such Change in
Control) or more than ten (10) miles from the office where Executive is
located at the time of the Change in Control or (2) travel on Company
business to an extent substantially greater than the travel obligations of
Executive immediately prior to such Change in Control;
(d) The failure of the Company to (1) continue in effect any
employee benefit plan, compensation plan, welfare benefit plan or material
fringe benefit plan in which Executive is participating immediately prior
to such Change in Control or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce Executive's
benefits under any such plan, unless Executive is permitted to participate
in other plans providing Executive with substantially equivalent benefits
(at substantially equivalent cost with respect to welfare benefit plans),
or (2) provide
-4-
<PAGE> 14
Exhibit 10(ii)
Executive with paid vacation in accordance with the most favorable
vacation policies of the Company and its affiliated companies as in effect
for Executive immediately prior to such Change in Control, including the
crediting of all service for which Executive had been credited under such
vacation policies prior to the Change in Control;
(e) Any refusal by the Company to continue to permit Executive to
engage in activities not directly related to the business of the Company
which Executive was permitted to engage in prior to the Change in Control;
(f) Any purported termination of Executive's employment which is not
effectuated pursuant to Section 10(b) (and which will not constitute a
termination hereunder); or
(g) The failure of the Company to obtain the assumption (and, if
applicable, guarantee) agreement from any successor (and Parent
Corporation) as contemplated in Section 9(b).
Notwithstanding anything herein to the contrary, termination of employment by
Executive for any reason during the 30-day period commencing one (1) year after
the date of a Change in Control shall constitute Good Reason.
An isolated, insubstantial and inadvertent action taken in good faith and which
is remedied by the Company within ten (10) days after receipt of notice thereof
given by Executive shall not constitute Good Reason. Executive's right to
terminate employment for Good Reason shall not be affected by Executive's
incapacities due to mental or physical illness and Executive's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any event or condition constituting Good Reason.
8. "Qualifying Termination" means a termination of Executive's
employment (a) by the Company other than for Cause or (b) by Executive for Good
Reason. Termination of Executive's employment on account of death, Disability or
Retirement shall not be treated as a Qualifying Termination, unless such death
or Disability shall occur during the 30-day period referred to in the second
paragraph of the definition of "Good Reason" (in which case it will constitute a
Qualifying Termination).
9. "Retirement" means Executive's retirement (not including any
mandatory early retirement) in accordance with the Company's retirement policy
generally applicable to its salaried employees (if any), as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with respect to Executive with Executive's written
consent.
10. "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets on liquidation or dissolution.
-5-
<PAGE> 15
Exhibit 10(ii)
11. "Termination Period" means the period of time beginning with a
Change in Control and ending two (2) years following such Change in Control.
-6-
<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,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $3,113,472 $2,633,116 $6,116,437 $5,095,592
Less: preferred dividends 12,735 9,579 25,585 19,157
---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS 3,100,737 2,623,537 6,090,852 5,076,435
Add: interest on convertible subordinated debt -- 55,639 -- 130,629
---------- ---------- ---------- ----------
NET INCOME ADJUSTED FOR DILUTED COMPUTATION $3,100,737 $2,679,176 $6,090,852 $5,207,064
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,279,458 7,791,977 8,253,079 7,758,583
Add dilutive effect of:
Stock options 167,657 117,372 131,626 100,508
Convertible preferred stock 244,357 246,963 245,152 247,493
Convertible subordinated debt -- 455,500 -- 471,268
---------- ---------- ---------- ----------
ADJUSTED FOR ASSUMED DILUTED COMPUTATION 8,691,472 8,611,812 8,629,857 8,577,852
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.37 $ 0.33 $ 0.74 $ 0.65
========== ========== ========== ==========
DILUTED EARNINGS PER SHARES $ 0.36 $ 0.31 $ 0.71 $ 0.61
========== ========== ========== ==========
</TABLE>
30
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 52,082
<INT-BEARING-DEPOSITS> 315
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 119,585
<INVESTMENTS-CARRYING> 209,916
<INVESTMENTS-MARKET> 210,097
<LOANS> 546,330
<ALLOWANCE> 8,826
<TOTAL-ASSETS> 960,930
<DEPOSITS> 655,933
<SHORT-TERM> 125,583
<LIABILITIES-OTHER> 40,326
<LONG-TERM> 41,400
0
2,464
<COMMON> 8,304
<OTHER-SE> 86,920
<TOTAL-LIABILITIES-AND-EQUITY> 960,930
<INTEREST-LOAN> 24,922
<INTEREST-INVEST> 10,877
<INTEREST-OTHER> 462
<INTEREST-TOTAL> 36,261
<INTEREST-DEPOSIT> 2,087
<INTEREST-EXPENSE> 12,634
<INTEREST-INCOME-NET> 23,627
<LOAN-LOSSES> 2,111
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 18,554
<INCOME-PRETAX> 10,614
<INCOME-PRE-EXTRAORDINARY> 6,116
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,116
<EPS-PRIMARY> 0.74<F1>
<EPS-DILUTED> 0.71<F1>
<YIELD-ACTUAL> 5.83
<LOANS-NON> 1,031
<LOANS-PAST> 358
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 72
<ALLOWANCE-OPEN> 8,678
<CHARGE-OFFS> 2,151
<RECOVERIES> 188
<ALLOWANCE-CLOSE> 8,826
<ALLOWANCE-DOMESTIC> 6,070
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,756
<FN>
<F1>Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per
Share." Accordingly, the Company has restated EPS for June 30, 1997 as follows:
Basic $.65
Diluted $.61
</FN>
</TABLE>
