-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UEjs9DDfPlOTfOnafj+KCWXkpNgkVUYwxK5kGFu8okHe3U2Wz0RkEnItRxTh+8Ez 4df5IGnSZuQbt4FXFvqufA== 0000950123-95-001423.txt : 19950516 0000950123-95-001423.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950123-95-001423 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING BANCORP CENTRAL INDEX KEY: 0000093451 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 132565216 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05273 FILM NUMBER: 95538819 BUSINESS ADDRESS: STREET 1: 540 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022-3299 BUSINESS PHONE: 2128268000 MAIL ADDRESS: STREET 1: 540 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022-3299 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD PRUDENTIAL CORP /NEW/ DATE OF NAME CHANGE: 19781210 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD PRUDENTIAL UNITED CORP DATE OF NAME CHANGE: 19681125 10-Q 1 STERLING BANCORP 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 March 31, 1995 For Quarter Ended.............................................................. 1-5273-1 Commission file number......................................................... Sterling Bancorp ............................................................................... (Exact name of registrant as specified in its charter) New York 13-2565216 ............................................................................... (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 540 Madison Avenue, New York, N.Y. 10022-3299 ............................................................................... (Address of principal executive offices) (Zip Code) 212-826-8000 ............................................................................... (Registrant's telephone number, including area code) N/A ............................................................................... (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- As of March 31, 1995 there were outstanding 6,346,262 shares of common stock, $1.00 par value, the registrant's only class of common shares outstanding. 2 STERLING BANCORP
PART I FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Consolidated Financial Statements 3 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Business 8 Financial Condition 8 Credit Risk 10 Results of Operations 11 Average Balance Sheets 13 Rate/Volume Analysis 14 Interest Rate Sensitivity 15 Risk-Based Capital Components and Ratios 16 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 17 EXHIBIT INDEX 18 Exhibit 11 Computation of Per Share Earnings 19 Exhibit 27 Financial Data Schedule 20
2 3 STERLING BANCORP AND SUBSIDIARIES Consolidated Balance Sheets
March 31, December 31, ASSETS 1995 1994 ------------ ------------ Cash and due from banks $ 33,324,173 $ 39,224,764 Interest-bearing deposits with other banks 3,000,000 2,970,000 Federal funds sold 5,000,000 8,000,000 Securities Available for sale 72,375,492 67,335,889 Held to maturity (market value $227,443,482 and $227,248,000, respectively) 237,914,322 244,445,988 ------------ ------------ Total securities 310,289,814 311,781,877 ------------ ------------ Loans, net of unearned discounts 298,928,935 312,769,179 Less allowance for possible loan losses 4,312,023 4,135,810 ------------ ------------ Loans, net 294,616,912 308,633,369 ------------ ------------ Customers' liability under acceptances 603,870 624,083 Excess cost over equity in net assets of the banking subsidiary 21,158,440 21,158,440 Premises and equipment, net 3,328,002 3,423,320 Other assets 11,207,319 10,819,866 ------------ ------------ $682,528,530 $706,635,719 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing deposits $156,463,261 $174,897,143 Interest-bearing deposits 330,884,164 342,405,372 ------------ ------------ Total deposits 487,347,425 517,302,515 Securities sold under repurchase agreements 45,330,054 44,050,836 Commercial paper 17,319,300 14,672,800 Other short-term borrowings 4,772,359 7,104,224 Acceptances outstanding 603,870 624,083 Other liabilities 23,295,850 20,137,453 ------------ ------------ 578,668,858 603,891,911 ------------ ------------ Long-term convertible subordinated debentures 26,162,000 26,446,000 Other long-term debt 22,250,000 22,500,000 ------------ ------------ Total long-term debt 48,412,000 48,946,000 ------------ ------------ Total liabilities 627,080,858 652,837,911 ------------ ------------ Commitments and contingent liabilities Convertible preferred stock, Series D - market value guarantee feature 875,000 875,000 Less unearned compensation - unallocated shares 796,506 796,506 Shareholders' equity Preferred shares, $5 par value. Authorized 644,389 shares Series B 25,760 25,760 Series D 1,625,000 1,625,000 Common shares, $1 par value. Authorized 20,000,000 shares; issued 6,496,605 shares 6,496,605 6,496,605 Capital surplus 28,089,137 28,089,137 Retained earnings 22,468,199 21,592,244 Net unrealized depreciation on securities available for sale, net of tax (367,060) (1,140,969) ------------ ------------ 58,337,641 56,687,777 Less Common shares in treasury at cost, 150,343 shares 1,489,239 1,489,239 Unearned compensation 1,479,224 1,479,224 ------------ ------------ Total shareholders' equity 55,369,178 53,719,314 ------------ ------------ $682,528,530 $706,635,719 ============ ============
See Notes to Consolidated Financial Statements. 3 4 STERLING BANCORP AND SUBSIDIARIES Consolidated Statements of Income
Three Months Ended March 31, ---------------------------------- 1995 1994 ----------- ----------- INTEREST INCOME Interest and fees on loans $ 7,365,176 $ 4,943,022 Interest and dividends on securities Available for sale 1,163,234 987,379 Held to maturity 3,922,410 3,175,697 Interest on Federal funds sold 119,157 27,474 Interest on deposits with other banks 41,718 24,844 ----------- ----------- Total interest income 12,611,695 9,158,416 ----------- ----------- INTEREST EXPENSE Interest on deposits 2,804,342 1,513,597 Interest on Federal funds purchased and securities sold under repurchase agreements 648,824 374,643 Interest on commercial paper 219,274 101,880 Interest on other short-term borrowings 75,705 148,411 Interest on long-term debt 884,337 747,440 ----------- ----------- Total interest expense 4,632,482 2,885,971 ----------- ----------- Net interest income 7,979,213 6,272,445 Provision for possible loan losses 315,000 190,000 ----------- ----------- Net interest income after provision for possible loan losses 7,664,213 6,082,445 ----------- ----------- NONINTEREST INCOME Service charges on deposit accounts 426,394 303,317 Factoring and letters of credit commissions 513,519 405,053 Trust fees 168,189 144,380 Gain on sales of securities -- 42,361 Other 178,348 102,275 ----------- ----------- Total noninterest income 1,286,450 997,386 ----------- ----------- NONINTEREST EXPENSES Salaries and employee benefits 3,377,331 2,852,022 Occupancy 723,392 602,574 Equipment 363,166 321,676 Legal and other professional fees 343,462 253,146 Federal deposit insurance premium 273,734 243,228 Marketing 247,463 150,174 Other 943,585 905,883 ----------- ----------- Total noninterest expenses 6,272,133 5,328,703 ----------- ----------- Income before income taxes 2,678,530 1,751,128 Provision for income taxes 1,421,456 840,661 ----------- ----------- Net income $ 1,257,074 $ 910,467 =========== =========== Average number of common shares outstanding 6,369,450 6,359,132 =========== ========= Per average common share Net income $0.20 $0.14 ===== ===== Average number of common shares outstanding assuming full dilution 8,951,177 8,781,981 =========== ========= Per average common share assuming full dilution Net income $0.18 $0.13 ===== ===== Dividends paid per common share $0.06 $0.05 ===== =====
See Notes to Consolidated Financial Statements. 4 5 STERLING BANCORP AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Equity
Three Months Ended --------------------------------------- March 31, March 31, 1995 1994 ------------ ------------ Shareholders' equity at beginning of period $53,719,314 $52,856,675 ----------- ----------- Net income 1,257,074 910,467 Dividends declared Common stock - $.06 and $.05 per share respectively (380,776) (317,311) Preferred stock - at prescribed rates (343) -- Change in market value guarantee feature Convertible preferred stock,Series D -- (187,500) Unearned compensation - unallocated shares -- 179,841 Change in valuation account for securities available for sale, net of tax 773,909 (665,114) ----------- ----------- Net change in shareholders' equity 1,649,864 (79,617) ----------- ----------- Shareholders' equity at end of period $55,369,178 $52,777,058 =========== ===========
See Notes to Consolidated Financial Statements. 5 6 STERLING BANCORP AND SUBSIDIARIES Statements of Cash Flows
Three Months Ended March 31, -------------------------------- 1995 1994 ------------ ------------ OPERATING ACTIVITIES Net income $ 1,257,074 $ 910,467 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan losses 315,000 190,000 Depreciation and amortization of premises and equipment 238,504 124,727 Deferred income tax provision (benefit) 123,256 (39,046) Gain on sale of securities -- (42,361) Amortization of premiums on securities 354,036 1,097,214 Accretion of discounts on securities (20,944) (946) Increase in accrued interest receivable (317,879) (388,665) Increase in other liabilities 3,158,397 1,812,747 Other, net (849,687) (528,407) ------------ ------------ Net cash provided by operating activities 4,257,757 3,135,730 ------------ ------------ INVESTING ACTIVITIES Purchase of premises and equipment (143,186) (606,062) Net increase in interest-bearing deposits with other banks (30,000) -- Net decrease in Federal funds sold 3,000,000 -- Net decrease in loans 13,701,457 71,551,764 Proceeds from sale of securities available for sale -- 9,955,693 Proceeds from prepayments, redemptions or maturities of securities 7,797,659 33,340,726 Purchase of securities (5,207,922) (104,139,291) ------------ ------------ Net cash provided by investing activities 19,118,008 10,102,830 ------------ ------------ FINANCING ACTIVITIES Net decrease in noninterest-bearing deposits (18,433,882) (38,281,319) Net decrease in interest-bearing deposits (11,521,208) (21,003,904) Net increase in securities sold under repurchase agreements 1,279,218 16,573,432 Net increase in commercial paper and other short-term borrowings 314,635 30,285,621 Cash dividends paid (381,119) (317,311) Maturities and prepayments on debentures (534,000) (129,000) ------------ ------------ Net cash used by financing activities (29,276,356) (12,872,481) ------------ ------------ Net (decrease) increase in cash and due from banks (5,900,591) 366,079 Cash and due from banks - beginning of period 39,224,764 35,975,787 ------------ ------------ Cash and due from banks - end of period $ 33,324,173 $ 36,341,866 ============ ============ Supplemental disclosure of cash flow information: Interest paid $ 4,622,324 $ 2,452,331 Income taxes paid 641,088 532,427
See Notes to Consolidated Financial Statements. 6 7 STERLING BANCORP AND SUBSIDIARIES Notes to Consolidated Financial Statements 1. The consolidated financial statements include the accounts of Sterling Bancorp ("the parent company") and its subsidiaries, principally Sterling National Bank & Trust Company of New York ("the bank"), after elimination of material intercompany transactions. The term "the Company" refers to Sterling Bancorp and its subsidiaries. The consolidated financial statements as of and for the interim periods ended March 31, 1995 and 1994 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of such periods have been made. Certain reclassifications have been made to the 1994 financial statements to conform to current presentation. The interim financial statements should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1994. 2. For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks. 3. The Company's outstanding Preferred Shares comprise 1,288 Series B shares (of 4,389 authorized) and 250,000 Series D Shares (of 300,000 authorized). Each Series B share is entitled to cumulative dividends at the rate of $0.10 per year, to one vote per share and upon liquidation or redemption to an amount equal to accrued and unpaid dividends to the date of redemption or liquidation plus an amount which is $20 in the case of involuntary liquidation and $28 otherwise; each Series D share (all of such shares are owned by the Company's Employee Stock Ownership Trust) is entitled to dividends at the rate of $0.6125 per year, is convertible into one Common Share, and is entitled to a liquidation preference of $10 (together with accrued dividends). All preferred shares are entitled to one vote per share (voting with the Common Shares except as otherwise required by law). 4. On January 1, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 114 "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114 required all creditors to account for impaired loans (except for those loans that are accounted for at fair value or at the lower of cost or fair value) at the present value of the expected future cash flows, discounted at the loan's effective interest rate, or at the fair value of the loan's collateral if the loan is collateral dependent. SFAS No. 114 also provides that in-substance foreclosed loans should not be included in Real Estate Owned for financial reporting purposes, but, rather, in the loan portfolio. SFAS No. 114 was amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure." SFAS No. 118 allows for existing income recognition practices to continue. As of March 31, 1995, these statements did not have a material effect on the Company's financial condition or results of operations. 7 8 STERLING BANCORP AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS Sterling Bancorp (the parent company) is a bank holding company, as defined by the Bank Holding Company Act of 1956, as amended, with subsidiaries providing a full range of financial services, including business and consumer loans, asset based financing, factoring, trade financing, mortgage lending, leasing, and trust and estate services. The parent company owns virtually 100% of Sterling National Bank & Trust Company of New York (the bank), its principal subsidiary, all of the outstanding shares of Standard Factors Corporation/Sterling Factors, Universal Finance Corporation, Sterling Banking Corporation and Sterling Industrial Loan Association (finance subsidiaries). As used throughout this report, "the Company" refers to Sterling Bancorp and its subsidiaries. There is intense competition in all areas in which the Company conducts its business, including deposits, loans, domestic and international financing and trust services. In addition to competing with other banks, the Company also competes in certain areas of its business with other financial institutions. At March 31, 1995, the bank's year to date average earning assets (of which loans were 44% and securities were 54%) represented approximately 95% of the Company's year to date average earning assets. See page 13 for the composition of the Company's average balance sheets for the three months ended March 31, 1995 and March 31, 1994. FINANCIAL CONDITION Liquidity is the ability to meet cash needs arising from changes in various categories of assets and liabilities. Liquidity is constantly monitored and managed at both the parent company and the bank levels. Liquid assets consist of cash and due from banks, interest-bearing deposits in banks and Federal funds sold and securities available for sale. Primary funding sources include core deposits, capital market funds and other money market sources. Core deposits include domestic noninterest-bearing and interest-bearing retail deposits, which historically have been relatively stable. The parent company and the bank have significant unused borrowing capacity. Contingency plans exist and could be implemented on a timely basis to minimize the impact of any dramatic change in market conditions. While the parent company generates income from its own operations, it also depends for its cash requirements on funds maintained or generated by its subsidiaries, principally the bank. Such sources have been adequate to meet the parent company's cash requirements throughout its history. At March 31, 1995, the parent company had on hand approximately $10,614,000 in cash. Various legal restrictions limit the extent to which the bank can supply funds to the parent company and its nonbank subsidiaries. All national banks are limited in the payment of dividends without the approval of the Comptroller of the Currency (the Comptroller) to an amount not to exceed the net profits (as defined) for that year to date combined with its retained net profits for the preceding two calendar years. During 1994 and 1993, with the Comptroller's approval, the bank paid dividends aggregating $3,639,038 and $2,599,314, the bank's net income for 1994 and 1993 was $4,222,664 and $3,463,950. In 1995, the bank declared and paid a dividend of approximately $663,300. In addition, from time to time dividends are paid to the parent company by the finance subsidiaries from their retained earnings without regulatory restrictions. 8 9 STERLING BANCORP AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS At March 31, 1995, the parent company's outstanding long-term debt, consisting principally of convertible subordinated debentures (originally issued pursuant to rights offerings to shareholders of the Company), aggregated $28,662,000. To the extent convertible subordinated debentures are converted to common stock of the parent company (as has been the case with $11,000,000 principal amount since 1982), the subordinated debt related thereto is retired and becomes part of shareholders' equity. The parent company's long-term indebtedness is also met through funds generated from profits and new financing. Since becoming a public company in 1946, the parent company and its predecessors have been able to obtain the financing required and have paid at maturity all outstanding long-term indebtedness. The parent company expects to continue to meet its obligations in accordance with their terms. At March 31, 1995, the parent company's short-term debt, consisting solely of commercial paper, was approximately $17,319,000. The parent company had cash, interest-bearing deposits with banks and other current assets aggregating $33,266,000 and back-up credit lines with banks of $15,000,000. The parent company and its predecessor have issued and repaid at maturity approximately $12 billion of commercial paper since 1955. Since 1979, the parent company has had no need to use available back-up lines of credit. The Company's asset-liability management program is designed to achieve acceptable yields while managing interest rate risk, maturity distribution and credit risk. At March 31, 1995, the Company maintained a portfolio of securities totalling $310,290,000 of which U.S. Government and U.S. Government corporation and agency guaranteed mortgage backed securities having an average life of approximately 3 1/2 years amounted to $301,359,000. The Company has the intent and ability to hold to maturity securities classified "held to maturity". These securities are carried at cost, adjusted for amortization of premiums and accretion of discounts. The gross unrealized gains and losses on "held to maturity" securities were $143,000 and $10,613,000, 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 shareholder's equity. "Available for sale" securities included gross unrealized gains of $198,000 and gross unrealized losses of $877,000. 9 10 STERLING BANCORP AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company and the bank are subject to risk-based capital regulations. The purpose of these regulations is to measure capital against risk-weighted assets, including off-balance sheet items. These regulations define the elements of total capital into Tier 1 and Tier 2 components and establish minimum ratios of 4% for Tier 1 capital and 8% for Total Capital. Supplementing these regulations, is a leverage requirement. This requirement establishes a minimum leverage ratio, (at least 3%) which is calculated by dividing Tier 1 capital by adjusted quarterly average assets (after deducting goodwill). At March 31, 1995, the risk-based capital ratios and the leverage ratio for the Company and the bank exceeded the most stringent requirements contemplated by these guidelines. Information regarding the Company's and the bank's risk-based capital, at March 31, 1995 and December 31, 1994, is presented on page 16. While the past performance is no guarantee of the future, management believes that the Company's funding sources (including dividends from all its subsidiaries) and the bank's funding sources will be adequate to meet their liquidity and capital requirements in the future. CREDIT RISK A key management objective is to maintain the quality of the loan portfolio. This objective is achieved by maintaining high underwriting standards coupled with regular evaluation of the creditworthiness of and the designation of lending limits for each borrower. The portfolio strategies seek to avoid concentrations by industry or loan size in order to minimize credit exposure and to originate loans in markets with which it is familiar. The composition of the Company's and the bank's loan portfolio at March 31, 1995 were as follows:
Company Bank ---------- ---------- (in thousands) Domestic Commercial and industrial $ 248,242 $ 215,173 Real estate - mortgage 43,059 43,059 Real estate - construction 1,355 1,355 Installment - individuals 11,396 11,396 Foreign Government and official institutions 789 789 ---------- ---------- Loans, gross 304,841 271,772 Less unearned discounts 5,912 5,637 ---------- ---------- Loans, net of unearned discounts $ 298,929 $ 266,135 ========== ==========
The Company's commercial and industrial loan portfolio represents approximately 82% of gross loans. Loans in this category are typically made to small and medium sized businesses and range between $250,000 and $10 million. The primary source of repayment is from the borrower's operating profits and cash flows. Based on underwriting standards, loans may be secured in whole or in part by collateral such as liquid assets, accounts receivable, equipment, inventory or real property. The Company's real estate loan portfolio, which represents approximately 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 collateral securing any loan may vary in value based on the success of the business and economic conditions. 10 11 STERLING BANCORP AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Intrinsic to the lending process is the possibility of loss. In times of economic slowdown, the risk inherent in the Company's portfolio of loans is increased. While management endeavors to minimize this risk, it recognizes that loan losses will occur and that the amount of these losses will fluctuate depending on the risk characteristics of the loan portfolio which in turn depends on current and expected economic conditions, the financial condition of borrowers and the credit management process. The allowance for possible loan losses is maintained through the provision for possible loan losses, which is a charge to operating earnings. The adequacy of the provision and the resulting allowance for possible loan losses is determined by management's continuing review of the loan portfolio, including identification and review of individual problem situations that may affect the borrower's ability to repay, review of overall portfolio quality through an analysis of current charge-offs, delinquency and nonperforming loan data, estimates of the value of any underlying collateral, review of regulatory examinations, an assessment of current and expected economic conditions and changes in the size and character of the loan portfolio. Thus, the allowance level reflects identified loss potential and inherent risk in the portfolio. A significant change in any of the evaluation factors described above could result in future additions in the allowance. At March 31, 1995, the ratio of the allowance to loans, net of unearned discounts, was 1.5%. At March 31, 1995, the Company's allowance, was $4,312,000 and its non-accrual loans amounted to $525,000. Based on the foregoing, as well as management's judgement as to the current risks inherent in the loan portfolio, the Company's allowance for possible loan losses was deemed adequate to absorb all reasonably anticipated losses on specifically known and other possible credit risks associated with the portfolio as of March 31, 1995. RESULTS OF OPERATIONS The Company's earnings are primarily dependent on net interest income which can be affected by changes in interest rates. An analysis of the Company's interest rate sensitivity is presented on page 15. Net interest income varies with the mix of interest- earning assets and interest-bearing liabilities and their respective yields earned and rates paid. The increases (decreases) for the components of interest income and interest expense, expressed in terms of fluctuation in average volume and rate are shown on page 14. Information as to the components of interest income and interest expense and average rates is provided in the Average Balance Sheets shown on page 13. COMPARISON OF YEARS ENDED MARCH 31, 1995 AND MARCH 31, 1994 Total interest income increased $3,453,000 for the three months ended March 31, 1995 when compared with the same period last year principally due to improved yields as well as higher average outstandings. An increase in average securities outstandings coupled with higher yields, resulted in an increase in income from securities of $922,000. Higher average outstandings employed at higher rates resulted in an increase of $2,422,000 in interest and fees on loans. 11 12 STERLING BANCORP AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Total interest expense for the three months ended March 31, 1995 increased $1,746,000 when compared with the same period in 1994 principally due to higher interest rates paid. Interest expense on interest-bearing deposits rose $1,290,000 as a result of increased rates coupled with an increase in average outstandings. Interest expense on borrowings increased $456,000 for the three months ended March 31, 1995 versus the like period a year ago. The increase is attributable to an increase in rates paid partially offset by lower average outstandings. Based on management's continuing evaluation of the collectibility of the loan portfolio, $315,000 was provided for possible loan losses for the three months ended March 31, 1995. Noninterest income increased $289,000 for the first quarter of 1995 when compared with the same period in 1994 as a result of higher service charges on deposit accounts and increased fees from letters of credit and factoring services. Noninterest expenses increased $943,000 for the three months ended March 31, 1995 versus the same period last year reflecting higher salary and employee benefit costs associated with the Company's higher levels of business activities as well as higher general business costs. The provision for income taxes increased $581,000 for the first quarter 1995 when compared with the same period last year principally based on the level of pre-tax profitability. As a result of the above factors, net income increased $347,000 for the three months ended March 31, 1995 when compared with the same period in 1994. 12 13 STERLING BANCORP AND SUBSIDIARIES Average Balance Sheets [1] Three Months Ended March 31,
1995 1994 ------------------------------------ ------------------------------------ Average Average Average Average ASSETS Balance Interest Rate Balance Interest Rate -------- -------- -------- -------- -------- -------- Interest-bearing deposits with other banks $ 2,972 $ 42 5.28% $ 2,940 $ 25 3.43% Securities Available for sale [2] 71,328 1,163 6.57 83,582 987 4.79 Held to maturity 241,296 3,922 6.51 217,229 3,176 5.93 Federal funds sold 7,856 119 6.07 3,333 27 3.34 Loans, net of unearned discounts [3] 286,502 7,365 10.79 243,588 4,943 7.61 -------- -------- -------- -------- TOTAL EARNING ASSETS 609,954 12,611 8.48 550,672 9,158 6.47 -------- ------ -------- ------ Cash and due from banks 39,692 41,934 Allowance for possible loan losses (4,229) (3,509) Goodwill 21,158 21,158 Other assets 12,447 13,418 -------- -------- TOTAL ASSETS $679,022 $623,673 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing deposits Savings $179,347 997 2.26 $188,460 903 1.94 Other time 153,063 1,807 4.78 91,901 611 2.70 -------- -------- -------- -------- Total interest-bearing deposits 332,410 2,804 3.42 280,361 1,514 2.19 -------- -------- -------- -------- Borrowings Securities sold under agreements to repurchase 48,327 649 5.46 53,745 375 2.83 Commercial paper 16,586 219 5.36 13,945 102 2.97 Other short-term debt 6,554 76 4.58 17,451 148 3.44 Long-term debt 48,705 884 7.36 52,263 747 5.80 -------- -------- -------- -------- Total borrowings 120,172 1,828 6.17 137,404 1,372 4.05 -------- -------- -------- -------- TOTAL INTEREST-BEARING LIABILITIES 452,582 4,632 4.15 417,765 2,886 2.80 -------- ---- -------- ---- Noninterest-bearing deposits 150,535 142,411 Other liabilities 21,723 10,492 -------- -------- Total liabilities 624,840 570,668 Shareholders' equity 54,182 53,005 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $679,022 $623,673 ======== ======== Net interest income/spread $ 7,979 4.33% $ 6,272 3.67% ======== ==== ======== ===== Net yield on earning assets (margin) 5.35% 4.62% ==== =====
- -------------- [1] The average balances of assets, liabilities and shareholders' equity are computed on the basis of daily averages for the bank and monthly averages for the parent company and its finance subsidiaries. Dollars are presented in thousands. [2] Based on amortized or historical cost with the FASB 115 market value adjustment included in other assets. [3] Non-accrual loans are included in the average balance which reduces the average yields. 13 14 STERLING BANCORP AND SUBSIDIARIES Rate/Volume Analysis Three Months Ended March 31, (000 omitted)
Increase/(Decrease) Three Months Ended March 31, 1995 and 1994 ------------------------------------ Volume Rate Total(1) ------- ------- -------- INTEREST INCOME Interest-bearing deposits with other banks $ 2 $ 15 $ 17 ------- ------- ------- Securities Available for sale (2) (169) 345 176 Held to maturity 396 350 746 ------- ------- ------- Total 227 695 922 ------- ------- ------- Federal funds sold 53 39 92 ------- ------- ------- Loans, net of unearned discounts (3) 602 1,820 2,422 ------- ------- ------- TOTAL INTEREST INCOME $ 884 $ 2,569 $ 3,453 ======= ======= ======= INTEREST EXPENSE Interest-bearing deposits Savings $ (48) $ 142 $ 94 Other time 563 633 1,196 ------- ------- ------- Total 515 775 1,290 ------- ------- ------- Borrowings Securities sold under agreements to repurchase (56) 330 274 Commercial paper 27 90 117 Other short-term debt (107) 35 (72) Long-term debt (58) 195 137 ------- ------- ------- Total (194) 650 456 ------- ------- ------- TOTAL INTEREST EXPENSE $ 321 $ 1,425 $ 1,746 ======= ======= ======= NET INTEREST INCOME $ 563 $ 1,144 $ 1,707 ======= ======= =======
- --------------- (1) The rate/volume variance is allocated equally between changes in volume and rate. (2) Includes Federal Reserve Bank and other stock investments. (3) Nonaccrual loans have been included in the amounts outstanding and income has been included to the extent accrued. 14 15 STERLING BANCORP AND SUBSIDIARIES Interest Rate Sensitivity To mitigate the vulnerability of earnings to changes in interest rates, the Company manages the repricing characteristics of assets and liabilities in an attempt to control net interest rate sensitivity. Management attempts to confine significant rate sensitivity gaps predominantly to repricing intervals of a year or less so that adjustments can be made quickly. Assets and liabilities with predetermined repricing dates are placed in a time of the earliest repricing period. Based on the interest rate sensitivity analysis shown below, the Company's net interest income would decrease during periods of rising interest rates and increase during periods of falling interest rates. Amounts are presented in thousands.
Repricing Date --------------------------------------------------------------------------------------- More than Non 3 months 3 months 1 year to Over Rate or less to 1 year 5 years 5 years Sensitive Total --------- --------- --------- --------- --------- --------- ASSETS Interest-bearing deposits with other banks $ 1,200 $ 1,800 $ -- $ -- $ -- $ 3,000 Securities -- 28,260 60,585 217,360 4,085 310,290 Federal funds sold 5,000 -- -- -- -- 5,000 Loans, net of unearned discounts 249,963 2,837 29,390 22,289 (5,550) 298,929 Noninterest-earnings assets and allowance for possible loan losses -- -- -- -- 65,310 65,310 --------- -------- --------- --------- --------- -------- Total Assets 256,163 32,897 89,975 239,649 63,845 682,529 --------- -------- --------- --------- --------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing deposits 145,451 37,437 147,996 -- -- 330,884 Securities sold under repurchase agreements 37,995 7,335 -- -- -- 45,330 Commercial paper 16,990 329 -- -- -- 17,319 Other short-term borrowings 1,522 3,250 -- -- -- 4,772 Long-term debt 26,162 -- 21,200 1,050 -- 48,412 Noninterest-bearing liabilities and share- holders' equity -- -- -- -- 235,812 235,812 --------- --------- --------- --------- --------- -------- Total Liabilities and Shareholders' Equity $ 228,120 $ 48,351 $ 169,196 $ 1,050 $ 235,812 $682,529 ========= ======== ========= ========= ========= ======== Net Interest Rate Sensitivity Gap $ 28,043 $(15,454) $ (79,221) $ 238,599 $(171,967) $ -- ========= ======== ========= ========= ========= ======== Cumulative Gap at March 31, 1995 $ 28,043 $ 12,589 $ (66,632) $ 171,967 $ -- $ -- ========= ======== ========= ========= ========= ======== Cumulative Gap at March 31, 1994 $ (70,411) $(88,415) $ 172,907 $ 130,512 $ -- $ -- ========= ======== ========= ========= ========= ======== Cumulative Gap at December 31, 1994 $ 38,812 $ 10,115 $ (87,710) $ 179,179 $ -- $ -- ========= ======== ========= ========= ========= ========
15 16 STERLING BANCORP AND SUBSIDIARIES Risk-Based Capital Components and Ratios
The Company The Bank ------------------------ ------------------------- 3/31/95 12/31/94 3/31/95 12/31/94 -------- -------- -------- --------- ($ in thousands) COMPONENTS Stockholders' equity $ 55,369 $ 53,719 $ 47,016 $ 45,700 Add/(Subtract): Minority interest 8 8 -- -- Goodwill (21,158) (21,158) -- -- Net unrealized depreciation on securities available for sale, net of tax effect (1) 367 1,141 368 1,142 -------- -------- -------- -------- Tier 1 Capital 34,586 33,710 47,384 46,842 -------- -------- -------- -------- Allowance for possible loan losses (limited to 1.25% of total risk- weighted assets) 4,312 4,136 3,502 3,435 Subordinated debt (limited to 50% of Tier 1 Capital) 16,579 16,690 -- -- -------- --------- --------- --------- Tier 2 Capital 20,891 20,826 3,502 3,435 -------- -------- -------- -------- Total Risk-based Capital $ 55,477 $ 54,536 $ 50,886 $ 50,277 ======== ======== ======== ======== RATIOS Tier 1 Capital 9.67% 8.73% 14.58% 13.09% ======== ======== ======== ======== Total Capital 15.51% 14.12% 15.66% 14.05% ======== ======== ======== ======== Leverage 5.26% 5.12% 7.54% 7.42% ======== ======== ======== ======== Memoranda Tier 1 Capital minimum requirement $ 14,312 $ 15,450 $ 13,000 $ 14,318 ======== ======== ======== ======== Total Capital minimum requirement $ 28,624 $ 30,900 $ 26,000 $ 28,636 ======== ======== ======== ======== Risk-weighted assets, net of goodwill $357,796 $386,241 $325,006 $357,946 ======== ======== ======== ======== Quarterly average assets, net of goodwill $657,864 $658,976 $628,528 $630,932 ======== ======== ======== ========
- --------------- (1) As directed by regulatory agencies this amount must be excluded from the computation of Tier 1 capital. 16 17 STERLING BANCORP AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of this report: (11) Statement Re: Computation of Per Share Earnings (27) Financial Data Schedule (b) No reports on Form 8-K have been filed during the quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STERLING BANCORP ............................. (Registrant) /s/ Louis J. Cappelli Date ----------------------------- ------------------------- Louis J. Cappelli Chairman and Chief Executive Officer /s/ John H. Tietjen Date ----------------------------- -------------------------- John W. Tietjen Senior Vice President, Treasurer and Chief Financial Officer 17 18 STERLING BANCORP AND SUBSIDIARIES Exhibit Index
Incorporated Sequential Exhibit Herein By Filed Page Number Description Reference To Herewith No. - ------- ----------- ------------ -------- --- 11 Computation of X 19 Per Share Earnings 27 Financial Data X 20 Schedule
18 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 Exhibit (11) STERLING BANCORP AND SUBSIDIARIES Statement Re: Computation of Per Share Earnings
Three Months Ended March 31, ------------------------- 1995 1994 ----------- ----------- Income for primary earnings per share: Net income A $1,257,074 $ 910,467 ========== =========== Income for fully diluted earnings per share: Net income $1,257,074 $ 910,467 Add expenses, net of tax effect on assumed conversion of Convertible Subordinated Debentures: Interest 310,691 223,006 Amortization of bond discount and expense 3,742 3,310 ---------- ----------- Income for fully diluted shares B $1,571,507 $ 1,136,783 ========== =========== Common shares for primary earnings per share: Average shares issued 6,496,605 6,496,605 Add assumed conversion at the beginning of the period or issuance date if later: Stock options -- 1,945 ESOP shares allocated 23,188 10,975 Less Average Treasury shares 150,343 150,393 ---------- ----------- Average common shares for compu- tation of primary earnings per share (See Note below) C 6,369,450 6,359,132 ========== =========== Common shares for fully diluted earnings per share: Average common shares 6,369,450 6,359,132 Add assumed conversion at the beginning of the period or issuance date if later: Convertible Subordinated Debentures 2,352,339 2,180,990 Series B preferred shares 2,576 2,576 ESOP shares unallocated 226,812 239,025 Stock options -- 238 ---------- ----------- Average common shares for computation of fully diluted earnings per share (See Note below) D 8,951,177 8,781,961 ========== =========== Per average common share: Net income (A divided by C) $0.20 $0.14 ===== ===== Net income assuming full dilution (B divided by D) $0.18 $0.13 ===== =====
Note: Based on shares at end of each month. 19 EX-27 3 FINANCIAL DATA SCHEDULE
9 1 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 33,324 3,000 5,000 0 72,375 237,914 227,443 298,929 4,312 682,529 487,347 67,422 23,900 48,412 6,497 0 1,651 47,222 682,529 7,365 5,086 161 12,612 2,804 4,632 7,979 315 0 6,272 2,679 1,258 0 0 1,258 0.20 0.18 5.35 525 955 0 0 4,136 194 55 4,312 0 0 4,312
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