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, 2002
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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
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Sterling Bancorp
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(Exact name of registrant as specified in its charter)
New York 13-2565216
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification)
650 Fifth Avenue, New York, N.Y. 10019-6108
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(Address of principal executive offices) (Zip Code)
212-757-3300
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of July 31, 2002 there were 9,948,155 shares of common stock,
$1.00 par value, outstanding.
STERLING BANCORP
PART I FINANCIAL INFORMATION Page
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 13
Results for Three Months 13
Results for Six Months 15
Balance Sheet Analysis 17
Capital 21
Average Balance Sheets 22
Rate/Volume Analysis 24
Regulatory Capital and Ratios 26
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Asset/Liability Management 27
Interest Rate Sensitivity 30
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 6. Exhibits and Reports on Form 8-K 31
SIGNATURES 32
EXHIBIT INDEX 33
Exhibit 10(i) Form of Change of Control Severance 34
Agreement dated April 3, 2002
Entered into Between the Registrant
and One Executive
Exhibit 11 Computation of Per Share Earnings 49
2
STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2002 2001
---- ----
ASSETS
Cash and due from banks $ 38,507,377 $ 50,362,016
Interest-bearing deposits with other banks 2,871,199 2,487,178
Federal funds sold - 10,000,000
Securities available for sale 202,613,644 177,810,042
Securities available for sale - pledged 88,465,307 91,752,370
Securities held to maturity 121,180,832 101,077,406
Securities held to maturity - pledged 198,549,621 205,387,986
-------------- --------------
Total investment securities 610,809,404 576,027,804
-------------- --------------
Loans, net of unearned discounts 796,873,439 808,686,874
Less allowance for loan losses 12,230,552 14,038,322
-------------- --------------
Loans, net 784,642,887 794,648,552
-------------- --------------
Customers' liability under acceptances 2,403,049 608,660
Excess cost over equity in net assets of the
banking subsidiary 21,158,440 21,158,440
Premises and equipment, net 8,599,745 7,852,362
Other real estate 1,167,074 809,184
Accrued interest receivable 5,814,502 5,867,121
Bank owned life insurance 20,516,181 -
Other assets 13,010,419 13,049,654
-------------- --------------
$1,509,500,277 $1,482,870,971
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits $ 333,871,976 $ 356,303,308
Interest-bearing deposits 661,233,698 628,620,646
-------------- --------------
Total deposits 995,105,674 984,923,954
Federal funds purchased and securities
sold under agreements to repurchase 111,460,881 147,095,635
Commercial paper 29,407,500 42,103,200
Other short-term borrowings 25,393,775 8,687,671
Acceptances outstanding 2,403,049 608,660
Accrued expenses and other liabilities 70,034,437 75,624,435
-------------- --------------
1,233,805,316 1,259,043,555
Long-term debt - FHLB 125,000,000 95,350,000
-------------- --------------
Total liabilities 1,358,805,316 1,354,393,555
-------------- --------------
Corporation Obligated Mandatorily Redeemable
Preferred Securities 25,000,000 -
-------------- --------------
Shareholders' equity
Preferred stock, $5 par value. Authorized 644,389 shares
Series D; issued 232,990 and 234,606 shares, respectively 2,329,900 2,346,060
Common Stock, $1 par value. Authorized 20,000,000 shares;
issued 11,124,919 and 10,834,853 shares, respectively 11,124,919 10,834,853
Capital surplus 102,392,517 98,487,765
Retained earnings 39,278,075 32,419,767
Accumulated other comprehensive income, net of tax 2,333,352 1,119,223
-------------- --------------
157,458,763 145,207,668
Less
Common shares in treasury at cost, 1,155,516 and
745,023 shares, respectively 29,265,096 15,542,454
Unearned compensation 2,498,706 1,187,798
-------------- --------------
Total shareholders' equity 125,694,961 128,477,416
-------------- --------------
$1,509,500,277 $1,482,870,971
============== ==============
See Notes to Consolidated Financial Statements.
3
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
INTEREST INCOME
Loans $14,245,642 $16,756,296 $28,412,016 $34,015,398
Investment securities
Available for sale 4,413,069 3,048,929 8,589,319 5,610,700
Held to maturity 4,857,289 4,369,768 9,799,807 9,074,459
Federal funds sold 31,806 5,069 180,989 24,561
Deposits with other banks 10,925 21,484 19,606 57,928
----------- ----------- ----------- -----------
Total interest income 23,558,731 24,201,546 47,001,737 48,783,046
----------- ----------- ----------- -----------
INTEREST EXPENSE
Deposits 3,309,349 4,891,724 6,632,553 10,239,503
Federal funds purchased and
securities sold under agreements
to repurchase 356,939 1,333,599 803,589 3,132,964
Commercial paper 152,455 453,759 359,056 868,350
Other short-term borrowings 130,059 26,066 237,748 85,416
Long-term debt 1,125,607 466,773 2,185,582 761,640
----------- ----------- ----------- -----------
Total interest expense 5,074,409 7,171,921 10,218,528 15,087,873
----------- ----------- ----------- -----------
Net interest income 18,484,322 17,029,625 36,783,209 33,695,173
Provision for loan losses 4,600,000 1,527,800 6,279,300 3,213,600
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 13,884,322 15,501,825 30,503,909 30,481,573
----------- ----------- ----------- -----------
NONINTEREST INCOME
Factoring income 1,552,012 1,314,165 2,928,903 2,715,216
Mortgage banking income 2,682,715 2,133,709 5,213,054 3,423,116
Service charges on deposit accounts 1,239,696 1,363,578 2,387,931 2,764,797
Trade finance income 626,671 616,920 1,077,928 1,297,312
Trust fees 174,542 198,815 351,660 385,619
Other service charges and fees 611,895 393,541 1,042,937 733,421
Bank owned life insurance income 293,825 - 516,181 -
Securities gains 844,343 - 844,343 -
Other income 215,398 98,986 284,301 149,356
----------- ----------- ----------- -----------
Total noninterest income 8,241,097 6,119,714 14,647,238 11,468,837
----------- ----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits 8,036,410 6,879,321 16,080,835 13,872,339
Occupancy expenses, net 1,322,235 1,071,640 2,498,584 2,198,605
Equipment expenses 793,707 580,986 1,361,696 1,152,657
Advertising and marketing 935,566 937,051 1,626,496 1,754,343
Professional fees 688,861 1,795,820 1,488,803 2,605,452
Data processing fees 370,731 328,990 727,915 673,151
Stationery and printing 329,143 186,291 542,313 398,130
Communications 387,949 333,705 792,676 703,855
Capital securities costs 512,447 - 733,665 -
Other expenses 1,858,641 1,806,131 3,615,144 3,177,343
----------- ----------- ----------- -----------
Total noninterest expenses 15,235,690 13,919,935 29,468,127 26,535,875
----------- ----------- ----------- -----------
Income before income taxes 6,889,729 7,701,604 15,683,020 15,414,535
Provision for income taxes 1,659,120 2,996,377 5,186,110 6,173,023
----------- ----------- ----------- -----------
Net income $ 5,230,609 $ 4,705,227 $10,496,910 $ 9,241,512
=========== =========== =========== ===========
Average number of common
shares outstanding
Basic 10,038,682 10,103,651 10,070,931 10,068,938
Diluted 10,745,628 10,721,342 10,762,237 10,558,288
Per average common share
Basic $0.52 $0.46 $1.04 $0.91
Diluted 0.48 0.44 0.97 0.87
Dividends per common share 0.18 0.16 0.36 0.32
See Notes To Consolidated Financial Statements.
4
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net Income $5,230,609 $4,705,227 $10,496,910 $9,241,512
Other comprehensive income,
net of tax:
Unrealized holding gains (losses)
arising during the period 2,596,974 (216,084) 1,670,919 741,257
Reclassification adjustment for
gains included in net income (456,790) - (456,790) -
---------- ---------- ----------- ----------
Comprehensive income $7,370,793 $4,489,143 $11,711,039 $9,982,769
========== ========== =========== ==========
See Notes to Consolidated Financial Statements.
5
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
Six Months Ended
June 30,
2002 2001
---- ----
Preferred Stock
Balance at January 1 $ 2,346,060 $ 2,402,760
Conversions of Series B shares - (580)
Redemption of Series B shares - (23,400)
Conversions of Series D shares (16,160) (21,000)
------------ ------------
Balance at June 30 $ 2,329,900 $ 2,357,780
============ ============
Common Stock
Balance at January 1 $ 10,834,853 $ 9,563,329
Conversions of preferred shares into common shares 2,048 2,481
Options exercised 288,018 211,792
------------ ------------
Balance at June 30 $ 11,124,919 $ 9,777,602
============ ============
Capital Surplus
Balance at January 1 $ 98,487,765 $ 67,450,110
Conversions of preferred shares into common shares 14,112 19,099
Issuance of shares under incentive compensation plan 386,400 -
Options exercised 3,504,240 2,009,662
------------ ------------
Balance at June 30 $102,392,517 $ 69,478,871
============ ============
Retained Earnings
Balance at January 1 $ 32,419,767 $ 47,466,602
Net Income 10,496,910 9,241,512
Cash dividends paid - common shares (3,582,048) (2,913,983)
- preferred shares (56,554) (49,303)
------------ ------------
Balance at June 30 $ 39,278,075 $ 53,744,828
============ ============
Accumulated Other Comprehensive Income
Balance at January 1 $ 1,119,223 $ (22,652)
------------ ------------
Unrealized holding gains/(losses)
arising during the period:
Before tax 3,088,573 1,370,157
Tax effect (1,417,654) (628,900)
------------ ------------
Net of tax 1,670,919 741,257
------------ ------------
Reclassification adjustment for gains
included in net income:
Before tax (844,343) -
Tax effect 387,553 -
------------ ------------
Net of tax (456,790) -
------------ ------------
Balance at June 30 $ 2,333,352 $ 718,605
============ ============
Treasury Stock
Balance at January 1 $(15,542,454) $ (7,986,763)
Issuance of shares under incentive compensation plan 1,267,200 -
Surrender of shares issued under incentive
compensation plan (3,034,547) (1,402,458)
Purchase of common shares (11,955,295) -
------------ ------------
Balance at June 30 $(29,265,096) $ (9,389,221)
============ ============
Unearned Compensation
Balance at January 1 $ (1,187,798) $ (1,857,292)
Issuance of shares under incentive compensation plan (1,653,600) -
Amortization of unearned compensation 342,692 199,452
------------ ------------
Balance at June 30 $ (2,498,706) $ (1,657,840)
============ ============
Total Shareholders' Equity
Balance at January 1 $128,477,416 $117,016,094
Net changes during the period (2,782,455) 8,014,531
------------ ------------
Balance at June 30 $125,694,961 $125,030,625
============ ============
See Notes to Consolidated Financial Statements.
6
STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2002 2001
---- ----
Operating Activities
Net Income $ 10,496,910 $ 9,241,512
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 6,279,300 3,213,600
Depreciation and amortization of premises and equipment 795,195 802,235
Securities gains (844,343) -
Deferred income tax provision (benefit) 592,505 (119,825)
Net change in loans held for sale 21,266,385 (11,463,278)
Amortization of unearned compensation 342,692 199,452
Amortization of premiums of securities 703,567 588,725
Accretion of discounts on securities (430,278) (332,052)
Decrease (Increase) in accrued interest receivable 52,619 (56,161)
(Decrease) Increase in other liabilities and
accrued expenses (5,589,998) 2,381,792
Increase in other assets (21,050,245) (2,098,644)
Issuance cost for preferred securities,
net of amortization (924,479) -
Other, net (2,221,894) (1,402,458)
------------- ------------
Net cash provided by operating activities 9,467,936 954,898
------------- ------------
Investing Activities
Purchase of premises and equipment (1,542,578) (1,611,672)
Increase in interest-bearing deposits (384,021) (856,010)
Decrease in federal funds sold 10,000,000 -
Increase in other real estate (357,890) (138,052)
Net (increase) decrease in loans (17,540,020) 18,882,667
Proceeds from prepayments, redemptions or maturities
of securities - held to maturity 45,445,487 36,642,988
Purchases of securities - held to maturity (58,930,888) -
Purchases of securities - available for sale (153,152,564) (67,733,749)
Proceeds from sales of securities - available for sale 39,568,514 -
Proceeds from prepayments, redemptions or maturities
of securities - available for sale 95,103,154 18,888,037
------------- ------------
Net cash (used in) provided by investing activities (41,790,806) 4,074,209
------------- ------------
Financing Activities
Decrease in noninterest-bearing deposits (22,431,332) (29,259,246)
Increase in interest-bearing deposits 32,613,052 45,133,530
Net proceeds from issuance of Corporation Obligated
Mandatorily Redeemable Preferred Securities of
subsidiary trust 24,062,500 -
Decrease in Federal funds purchased
and securities sold under agreements to repurchase (35,634,754) (52,697,517)
Increase in commercial paper and
other short-term borrowings 4,010,404 1,797,949
Purchase of treasury stock (11,955,295) -
Redemption of preferred stock - (23,400)
Increase in other long-term debt 29,650,000 29,650,000
Proceeds from exercise of stock options 3,792,258 2,221,454
Cash dividends paid on common and preferred stock (3,638,602) (2,963,286)
------------- ------------
Net cash (provided by) used in financing activities 20,468,231 (6,140,516)
------------- ------------
Net decrease in cash and due from banks (11,854,639) (1,111,409)
Cash and due from banks - beginning of period 50,362,016 50,212,689
------------- ------------
Cash and due from banks - end of period $ 38,507,377 $ 49,101,280
============= ============
Supplemental disclosures:
Interest paid $ 10,330,893 $ 15,459,001
Income taxes paid 8,655,303 6,228,875
See Notes to Consolidated Financial Statements.
7
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
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, 2002 and 2001 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 2001 consolidated
financial statements to conform to the current presentation. The
interim consolidated financial statements should be read in conjunction
with the Company's annual report on Form 10-K for the year ended
December 31, 2001. The Company paid stock dividends as follows: a 10%
stock dividend on December 10, 2001; a 10% stock dividend on December
11, 2000; and a 5% stock dividend on December 14, 1999. Fractional
shares were cashed-out and payments were made to shareholders in lieu
of fractional shares. The basic and diluted average number of shares
outstanding and earnings per share information for all prior reporting
periods have been restated to reflect the effect of the stock
dividends.
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 232,990 Series D
shares (of 300,000 Series D shares authorized). 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 1.2723 Common Shares, 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. The Financial Accounting Standards Board Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information," established standards for the
way that public business enterprises report and disclose selected
information about operating segments in interim financial statements
issued to stockholders.
8
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company provides a wide range of financial products and services,
including commercial loans, asset-based financing, accounts receivable
management services, trade financing, equipment leasing, corporate and consumer
deposit services, commercial and residential mortgage lending and brokerage,
trust and estate administration and investment management services. The
Company's primary source of earnings is net interest income, which represents
the difference between interest earned on interest-earning assets and the
interest incurred on interest- bearing liabilities. The Company's 2002
year-to-date average interest-earning assets were 53.6% loans (corporate lending
was 75.4% and real estate lending was 21.4% of total loans, respectively) and
46.4% investment securities and money market investments. There are no industry
concentrations exceeding 10% of loans, gross, in the corporate loan portfolio.
Approximately 66% of loans are to borrowers located in the metropolitan New York
area. The Company has determined that it has three reportable operating
segments: corporate lending, real estate lending and company-wide treasury.
The following tables provide certain information regarding the
Company's operating segments for the three and six month periods ended June 30,
2002 and 2001:
Corporate Real Estate Company-wide
Lending Lending Treasury Totals
------- ------- -------- ------
Three Months Ended June 30, 2002
Net interest income $ 7,242,502 $ 3,253,824 $ 7,607,181 $ 18,103,507
Noninterest income 3,172,763 2,656,382 1,159,659 6,988,804
Depreciation and amortization 48,147 47,103 -- 95,250
Segment profit 4,162,782 2,894,177 8,802,766 15,859,725
Segment assets 611,701,737 161,086,704 710,405,554 1,483,193,995
Three Months Ended June 30, 2001
Net interest income $ 7,760,864 $ 3,596,938 $ 5,190,397 $ 16,548,199
Noninterest income 3.094,816 2,246,356 30,557 5,371,729
Depreciation and amortization 45,742 52,198 86 98,026
Segment profit 4,855,752 2,957,078 6,074,439 13,887,269
Segment assets 586,115,994 152,399,842 516,524,187 1,255,040,023
Six Months Ended June 30, 2002
Net interest income $ 14,274,480 $ 6,632,193 $ 15,106,381 $ 36,013,054
Noninterest income 6,009,261 5,174,390 1,400,211 12,583,862
Depreciation and amortization 93,499 94,143 -- 187,642
Segment profit 7,813,669 5,771,340 16,744,877 30,329,886
Segment assets 611,701,737 161,086,704 710,405,554 1,483,193,995
Six Months Ended June 30, 2001
Net interest income $ 15,712,651 $ 6,947,168 $ 9,997,726 $ 32,657,545
Noninterest income 6,382 005 3 567 894 72,288 10,022,187
Depreciation and amortization 86,487 98,583 170 185,240
Segment profit 9,514,112 5,554,694 11,793,572 26,862,378
Segment assets 586,115,994 152,399,842 516,524,187 1,255,040,023
9
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The following table sets forth reconciliations of net interest income,
noninterest income, profits and assets of reportable operating segments to the
Company's consolidated totals:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net interest income:
Total for reportable operating segments $ 18,103,507 $ 16,548,199 $ 36,013,054 $ 32,657,545
Other [1] 380,815 481,426 770,155 1,037,628
-------------- -------------- -------------- --------------
Consolidated net interest income $ 18,484,322 $ 17,029,625 $ 36,783,209 $ 33,695,173
============== ============== ============== ==============
Noninterest income:
Total for reportable operating segments $ 6,988,804 $ 5,371,729 $ 12,583,862 $ 10,022,187
Other [1] 1,252,293 747,985 2,063,376 1,446,650
-------------- -------------- -------------- --------------
Consolidated noninterest income $ 8,241,097 $ 6,119,714 $ 14,647,238 $ 11,468,837
============== ============== ============== ==============
Profit:
Total for reportable operating segments $ 15,859,725 $ 13,887,269 $ 30,329,886 $ 26,862,378
Other [1] (8,969,996) (6,185,665) (14,646,866) (11,447,843)
-------------- -------------- -------------- --------------
Consolidated income before income taxes $ 6,889,729 $ 7,701,604 $ 15,683,020 $ 15,414,535
============== ============== ============== ==============
Assets:
Total for reportable operating segments $1,483,193,995 $1,255,040,023 $1,483,193,995 $1,255,040,023
Other [1] 26,306,282 21,583,493 26,306,282 21,583,493
-------------- -------------- -------------- --------------
Consolidated assets $1,509,500,277 $1,276,623,516 $1,509,500,277 $1,276,623,516
============== ============== ============== ==============
[1] Represents operations not considered to be a reportable segment
and/or general operating expenses of the Company.
5. In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." These Statements will change the accounting for
business combinations and goodwill in two ways. First, SFAS No. 141
requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Second, SFAS No.
142 changes the accounting for goodwill, including goodwill recorded in
past business combinations. The previous accounting principles
governing goodwill generated from a business combination will cease
upon adoption of SFAS No. 142. The adoption of SFAS No. 142 had no
impact on the Company's statements of financial condition and results
of operations. SFAS No. 142 became effective for the Company on January
1, 2002.
10
STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
6. The following information is provided in connection with the sales of
available for sale securities during the quarter ended June 30, 2002:
Proceeds $39,568,514
Gross gains 844,343
Gross losses -
11
STERLING BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following commentary presents management's discussion and analysis of the
consolidated results of operations and financial condition of Sterling Bancorp
(the "parent company"), a bank holding company and a financial holding company
as defined by the Bank Holding Company Act of 1956, as amended, and its wholly-
owned subsidiaries Sterling Financial Services Company, Inc., Sterling Banking
Corporation and Sterling National Bank. Sterling National Bank, which is the
principal subsidiary, owns all of the outstanding shares of Sterling Factors
Corporation, Sterling National Mortgage Company, Inc., Sterling National
Servicing, Inc., Sterling Trade Services, Inc. and Sterling Holding Company of
Virginia, Inc. Sterling Trade Services, Inc. owns all of the outstanding Common
Shares of Sterling National Asia Limited, Hong Kong. Sterling Holding Company of
Virginia, Inc. owns all of the outstanding shares of Sterling Real Estate
Holding Company, Inc. Throughout this discussion and analysis, the term "the
Company" refers to Sterling Bancorp and its subsidiaries and the term "the bank"
refers to Sterling National Bank 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, 2001.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein, including but not limited to, statements
concerning future results of operations or financial position, borrowing
capacity and future liquidity, future investment results, future credit
exposure, future loan losses and plans and objectives for future operations, and
other statements contained herein regarding matters that are not historical
facts, are "forward- looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are not historical
facts but instead are subject to numerous assumptions, risks and uncertainties,
and represent only our belief regarding future events, many of which, by their
nature, are inherently uncertain and outside our control. Any forward-looking
statements we may make speak only as of the date on which such statements are
made. It is possible that our actual results and financial position may differ,
possibly materially, from the anticipated results and financial condition
indicated in or implied by these forward-looking statements.
Factors that could cause our actual results to differ, possibly
materially, from those in the forward-looking statements include, but are not
limited to, the following: inflation, interest rates, market and monetary
fluctuations; geopolitical developments, including the impact of September 11,
2001 and any future acts or threats of war or terrorism; the effects of, and
changes in, trade, monetary and fiscal policies and laws, including interest
rate policies of the Board of Governors of the Federal Reserve System; a decline
in general economic conditions and the strength of the local economies in which
we operate; the financial condition of our borrowers; competitive pressures on
loan and deposit pricing and demand; changes in technology and their impact on
the marketing of products and services; the timely development and effective
marketing of competitive new products and services and the acceptance of these
products and services by new and existing customers; the willingness of
customers to substitute competitors' products and services for our products and
services; the impact of changes in financial services laws and regulations
(including laws concerning taxes, banking, securities and insurance); changes in
accounting principles, policies and guidelines; our success at managing the
risks involved in the foregoing as well as other risks and uncertainties
detailed from time to time in press releases and other public filings. The
foregoing list of factors is not exclusive, and we will not update any
forward-looking statements, whether written or oral, that may be made from time
to time.
12
BUSINESS
The Company provides a wide range of financial products and services, including
commercial 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 metropolitan New York area, as well as Virginia and other mid-Atlantic states
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
most areas of its business with other financial institutions. At June 30, 2002,
the bank's year-to-date average earning assets (of which loans were 52% and
investment securities were 46%) 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, 2002 and 2001
OVERVIEW
The Company reported net income for the three months ended June 30, 2002 of $5.2
million, representing $0.48 per share, calculated on a diluted basis, compared
to $4.7 million, or $0.44 per share, calculated on a diluted basis, for the like
period in 2001. This increase reflects higher net interest income and continued
growth in noninterest income, which, together with a lower provision for income
taxes, more than offset increases in noninterest expenses and the provision for
loan losses.
Net interest income, on a tax equivalent basis, increased to $18.7
million for the second quarter of 2002 compared with $17.3 million for the same
period in 2001, due to higher average earning assets outstanding coupled with
lower average cost of funding. The net interest margin, on a tax equivalent
basis, was 5.64% for the second quarter of 2002 compared to 6.12% for the like
2001 period. The net interest margin benefitted from a decrease of 160 basis
points in the average cost of funds partially offset by a decrease of 151 basis
points in the average yield on earning assets.
Noninterest income rose to $8.2 million for the three months ended June
30, 2002 compared to $6.1 million for the like 2001 period principally due to
continued growth in income from mortgage banking and factoring activities, from
gains on sales of available for sale securities and from a bank-owned life
insurance program implemented in January 2002.
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 and liabilities. The increases (decreases) in the components of interest
income and interest expense, expressed in terms of fluctuation in average volume
and rate are shown on page 24. Information as to the components of interest
income and interest expense and average rates is provided in the Average Balance
Sheets shown on page 22.
Net interest income, on a tax equivalent basis, for the three months
ended June 30, 2002 increased to $18,746,000 from $17,286,000 for the comparable
period in 2001.
Total interest income, on a tax equivalent basis, aggregated
$23,820,000 for the second quarter of 2002 down from $24,458,000 for the same
period of 2001. The tax equivalent yield on interest earning assets was 7.22%
for the three months ended June 30, 2002 compared with 8.73% for the comparable
period in 2001. The decrease in interest income was due to a decrease in income
earned on the loan portfolio partially offset by increased income on the
securities portfolio. The decrease in yield on earning assets was due to lower
yields on both the loan and securities portfolios.
Interest earned on the loan portfolio amounted to $14,246,000 which was
down $2,510,000 when compared to a year ago. Average loan balances amounted to
$730,166,000 which were up $26,144,000 from an average of $704,022,000 in the
prior year period. The increase in the average loans, the result of the
continued implementation of business plans to increase funds employed in this
asset category, was primarily in the real estate loan segment of the Company's
loan portfolio. The decrease in the yield on the domestic loan portfolio to
8.14% for the three months ended June 30, 2002 from 10.13% for the comparable
2001 period was primarily attributable to a lower rate environment on average in
the 2002 period.
Interest earned on the securities portfolio, on a tax equivalent basis,
increased to $9,531,000 for the three months ended June 30, 2002 from $7,675,000
in the prior year period. Average outstandings increased to $606,178,000 which
were up $152,991,000 from $453,187,000 in the prior year period. The increase in
average securities balances, the result of the implementation of asset/liability
management strategies designed to take advantage of the steepness of the yield
curve, was primarily in mortgage-backed securities and collateralized mortgage
obligations of U.S. government corporations and agencies.
Interest expense on deposits decreased $1,583,000 for the three months
ended June 30, 2002 to $3,309,000 from $4,892,000 for the comparable 2001 period
principally due to lower rates paid. Average rate paid on interest-bearing
deposits was 1.96% which was 158 basis points lower than the prior year period.
The decrease in average cost of deposits reflects the lower interest rate
environment during the 2002 period.
14
Interest expense associated with borrowed funds decreased to $1,766,000
for the second quarter of 2002 from $2,280,000 in the comparable 2001 period as
a result of lower rates paid partially offset by higher average long-term debt
outstandings. The average cost of borrowings was 2.21% for the three months
ended June 30, 2002 compared with 3.81% in the comparable prior year period.
Average amounts of long-term debt outstanding were up $81,243,000 to
$121,593,000 from $40,350,000 in the prior year period. These borrowings were
advances from the Federal Home Loan Bank of New York utilized in connection with
the asset/liability management strategies discussed above.
Provision for Loan Losses
Based on management's continuing evaluation of the loan portfolio (discussed
under "Asset Quality" below), and principally as the result of the charge-off of
one loan as well as the growth in the loan portfolios, the provision for loan
losses for the second quarter of 2002 increased to $4,600,000 from $1,528,000
for the comparable prior year period. During the current year quarter a $5.4
million loan to a corporate borrower which had become the subject of an
involuntary bankruptcy was charged-off.
Noninterest Income
Noninterest income increased $2,121,000 for the second quarter of 2002 when
compared with the like 2001 period primarily as a result of increased income
from mortgage banking and factoring activities, from fees for various other
services, from gains on sales of available for sale securities and from a
bank-owned life insurance program implemented in January, 2002.
Noninterest Expenses
Noninterest expenses increased $1,316,000 for the second quarter of 2002 when
compared with the like 2001 period primarily due to increased salary expenses,
pension costs, occupancy and equipment expenses, expenses related to the trust
preferred securities placement completed in February, 2002, losses on sales of
assets, and various other expenses incurred to support growing levels of
business activity and continued investment in the business franchise.
Provision for Income Taxes
During the second quarter of 2002, New York State completed an examination of
Sterling's tax returns through 1998 and issued a no change finding. As a result,
based on management's review of required tax reserves with outside
professionals, approximately $1.0 million in excess reserves was adjusted though
the provision this quarter.
Results for the Six Months Ended June 30, 2002 and 2001
OVERVIEW
The Company reported net income for the six months ended June 30,2002 of $10.5
million, representing $0.97 per share, calculated on a diluted basis, compared
to $9.2 million, or $0.87 per share calculated on a diluted basis, for the like
period in 2001. This increase reflects continued growth in both net interest
income and noninterest income, which, together with a lower provision for income
taxes, more than offset increases in noninterest expenses and the provision for
loan losses.
Net interest income, on a tax equivalent basis, increased to $37.3
million for the first six months of 2002 compared with $34.2 million for the
same period in 2001, due to higher average earning assets outstanding coupled
with lower average cost of funding. The net interest margin, on a tax equivalent
basis, was 5.70% for the first six months of 2002 compared to 6.24% for the like
2001 period. The net interest margin benefitted from a decrease of 187 basis
points in the average costs of funds partially offset by a 176 basis point
decrease in the average yield on earning assets.
Noninterest income rose to $14.6 million for the six months ended June
30,2002 compared to $11.5 million for the like 2001 period principally due to
continued growth in fees from mortgage banking and factoring activities, from
gains on sales of available for sale securities and from a bank-owned life
insurance program implemented in January 2002.
15
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 and liabilities. The increases (decreases) in the components of interest
income and interest expense, expressed in terms of fluctuation in average volume
and rate are shown on page 25. Information as to the components of interest
income and interest expense and average rates is provided in the Average Balance
Sheets shown on page 23.
Net interest income, on a tax equivalent basis, for the six months
ended June 30,2002 increased $3,106,000 to $37,308,000 from $34,202,000 for the
comparable period in 2001.
Total interest income, on a tax equivalent basis, aggregated
$47,527,000 down $5,603,000 for the first half of 2002 as compared to
$49,290,000 for the same period of 2001. The tax equivalent yield on
interest-earning assets was 7.30% for the first six months of 2002 compared with
9.06% for the comparable period in 2001. The decrease in interest income was due
to a decrease in income earned on the loan portfolio partially offset by
increased income on the securities portfolio. The decrease in yield on earning
assets was due to lower yields on both the loan and securities portfolios.
Interest earned on the loan portfolio amounted to $28,412,000 which was
down $5,603,000 when compared to a year ago. Average loan balances amounted to
$719,551,000 which were up $28,345,000 from an average of $691,206,000 in the
prior year period. The increase in the average loans, the result of the
continued implementation of business plans to increase funds employed in this
asset category, was primarily in the real estate loan segment of the Company's
loan portfolio. The decrease in the yield on the domestic loan portfolio to
8.40% for the six months ended June 30, 2002 from 10.67% for the comparable 2001
period was primarily attributable to a lower rate environment on average in the
2002 period.
Interest earned on the securities portfolio, on a tax equivalent basis,
increased to $18,914,000 for the six months ended June 30, 2002 from $15,192,000
in the prior year period. Average outstandings increased to $597,681,000 which
were up $152,718,000 from $444,963,000 in the prior year period. The increase in
average securities balances was primarily in mortgage-backed securities and
collateralized mortgage obligations of U.S. government corporations and
agencies. The decrease in yields through the securities portfolio reflects the
impact of the lower rate environment on average in the 2002 period.
Interest expense on deposits decreased $3,608,000 for the six months
ended June 30, 2002 to $6,632,000 from $10,240,000 for the comparable 2001
period principally due to lower rates paid. Average rate paid on
interest-bearing deposits was 2.01% which was 177 basis points lower than the
prior year period. The decrease in average cost of deposits reflects the lower
interest rate environment during the 2002 period.
Interest expense associated with borrowed funds decreased to $3,587,000
for the first six months of 2002 from $4,848,000 in the comparable 2001 period
as a result of lower rates paid partially offset by higher average long-term
debt outstandings. The average cost of borrowings was 2.84% for the first six
months ended June 30, 2002 compared with 4.99% in the comparable prior year
period. Average amounts of long-term debt outstanding were up $83,824,000 to
$116,784,000 from $32,960,000 in the prior year period. These borrowings were
advances from the Federal Home Loan Bank of New York utilized in connection with
the asset/liability management strategies discussed above.
16
Provision for Loan Losses
Based on management's continuing evaluation of the loan portfolio (discussed
under "Asset Quality" below), and principally as the result of the charge off of
one loan as well as the growth in the loan portfolios, the provision for loan
losses for the first six months of 2002 increased to $6,279,000 from $3,214,000
for the comparable prior year period. During the current year second quarter a
$5.4 million loan to a corporate borrower which had become the subject of an
involuntary bankruptcy was charged off.
Noninterest Income
Noninterest income increased $3,178,000 for the first six months of 2002 when
compared with the like 2001 period primarily as a result of increased income
from mortgage banking and factoring activities, from fees for various other
services, from gains on sales of available for sale securities, and from a
bank-owned life insurance program implemented in January, 2002.
Noninterest Expenses
Noninterest expenses increased $2,932,000 for the first six months of 2002 when
compared with the like 2001 period primarily due to increased salary expenses,
pension costs, occupancy and equipment expenses, expenses related to the trust
preferred securities placement completed in February, 2002, losses on sales of
assets, and various other expenses incurred to support growing levels of
business activity and continued investment in the business franchise.
Provision for Income Taxes
During the second quarter of 2002, New York State completed an examination of
Sterling's tax returns through 1998 and issued a no charge finding. As a result,
based on management's review of required tax reserves with outside
professionals, approximately $1.0 million in excess reserves was adjusted
through the provision this quarter.
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, 2002, the Company's
portfolio of securities totalled $610,809,000 of which U.S. Government and U.S.
Government corporations and agencies guaranteed mortgage-backed and
collateralized mortgage obligations securities having an average life of
approximately 4.4 years amounted to $562,709,000.
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. The following table presents information regarding
securities available for sale:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
June 30, 2002 Cost Gains Losses Value
------------- ---- ----- ------ -----
U.S. Treasury securities $ 2,485,058 $ 568 $ -- $ 2,485,626
Obligations of U.S. govern-
ment corporations and
agencies--mortgage-backed
securities 99,062,406 1,755,157 83,456 100,734,107
Obligations of U.S. govern-
ment corporations and
agencies-collateralized
mortgage obligations 140,381,938 1,006,749 130,215 141,258,472
Obligations of state and
political institutions 32,911,005 1,749,298 -- 34,660,303
Trust preferred securities 3,222,865 17,647 23,670 3,216,842
Federal Reserve Bank and
other equity securities 8,702,642 21,587 628 8,723,601
------------ ---------- -------- ------------
Total $286,765,914 $4,551,006 $237,969 $291,078,951
============ ========== ======== ============
17
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.
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 following table
presents information regarding securities held to maturity:
Gross Gross Estimated
Carrying Unrealized Unrealized Market
June 30, 2002 Value Gains Losses Value
------------- ----- ----- ------ -----
Obligations of U.S. government
corporations and agencies--
mortgage-backed securities $308,264,190 $7,292,430 $500,901 $315,055,719
Obligations of U.S. government
corporations and agencies -
collateralized mortgage
obligations 9,966,263 38,392 -- 10,004,655
Debt securities issued by
Foreign governments 1,500,000 -- -- 1,500,000
------------ ---------- -------- ------------
Total $319,730,453 $7,330,822 $500,901 $326,560,374
============ ========== ======== ============
Loan Portfolio
A key management objective is to maintain the quality of the loan portfolio. The
Company seeks to achieve this objective by maintaining rigorous underwriting
standards coupled with regular evaluation of the creditworthiness 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 Company's commercial and industrial loan portfolio represents
approximately 61% of gross loans. Loans in this category are typically made to
small and medium sized businesses and range between $250,000 and $10 million.
The primary source of repayment is from the borrower's operating profits and
cash flows. Based on underwriting standards, loans may be secured in whole or in
part by collateral such as liquid assets, accounts receivable, equipment,
inventory or real property. The Company's real estate loan portfolio, which
represents approximately 19% of gross loans, is secured by mortgages on real
property located principally in the State of New York and the Commonwealth of
Virginia.
18
The Company's leasing portfolio, which consists of finance leases for various
types of business equipment, represents approximately 15% of gross loans. The
collateral securing any loan may vary in value based on market conditions.
The following table sets forth the composition of the Company's loan
portfolio:
June 30,
--------
2002 2001
---- ----
($ in thousands)
% of % of
Balances Gross Balances Gross
-------- ----- -------- -----
Domestic
Commercial and industrial $492,937 60.8% $472,941 62.5%
Equipment lease financing 122,885 15.2 110,939 14.7
Real estate 154,657 19.1 150,871 19.9
Installment - individuals 8,217 1.0 8,764 1.2
Loans to depository institutions 32,000 3.9 12,000 1.6
Foreign
Government and official institutions - - 777 0.1
-------- ----- -------- -----
Gross loans 810,696 100.0% 756,292 100.0%
Unearned discounts 13,823 ===== 15,607 =====
-------- --------
Loans, net of unearned discounts $796,873 $740,685
======== ========
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 may be
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 loan losses is maintained through the provision for
loan losses, which is a charge to operating earnings. The adequacy of the
provision and the resulting allowance for loan losses is determined by
management's continuing review of the loan portfolio, including identification
and review of individual problem situations that may affect the borrower's
ability to repay, review of overall portfolio quality through an analysis of
current charge-offs, delinquency and nonperforming loan data, estimates of the
value of any underlying collateral, review of regulatory examinations, an
assessment of current and expected economic conditions and changes in the size
and character of the loan portfolio. The allowance reflects management's
evaluation of both loans presenting identified loss potential and of the risk
inherent in various components of the portfolio, 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, 2002, the ratio of the allowance to loans, net of
unearned discounts, was 1.53% and the allowance was $12,231,000. At such date,
the Company's non-accrual loans amounted to $1,790,000; $407,000 of such loans
were judged to be impaired within the scope of SFAS No. 114 and required
valuation allowances of $180,000. Based on the foregoing, as well as
management's judgment as to the current risks inherent in
19
the loan portfolio, the Company's allowance for loan losses was deemed adequate
to absorb all estimable losses on specifically known and other possible credit
risks associated with the portfolio as of June 30, 2002. Potential problem
loans, which are loans that are currently performing under present loan
repayment terms but where known information about possible credit problems of
borrowers cause management to have serious doubts as to the ability of the
borrowers to continue to comply with the present repayment terms, aggregated
$682,000 at June 30, 2002.
Deposits
A significant source of funds for the Company continues to be deposits,
consisting of demand (noninterest-bearing), NOW, savings, money market and time
deposits (principally certificates of deposit).
The following table provides certain information with respect to the
Company's deposits:
June 30,
------------------------------------------
2002 2001
---- ----
($ in thousands)
% of % of
Balances Total Balances Total
-------- ----- -------- -----
Domestic
Demand $333,872 33.6% $311,780 35.4%
NOW 109,559 11.0 86,826 9.8
Savings 24,486 2.5 28,556 3.2
Money market 160,488 16.1 181,535 20.6
Time deposits 363,701 36.5 270,484 30.7
-------- ----- -------- -----
Total domestic deposits 992,106 99.7 879,181 99.7
Foreign
Time deposits 3,000 0.3 2,975 0.3
-------- ----- -------- -----
Total deposits $995,106 100.0% $882,156 100.0%
======== ===== ======== =====
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 22 and 23.
20
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 26. In addition, the Company and the
bank are subject to 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 FDICIA a "well
capitalized" institution must maintain minimum leverage, Tier 1 and Total
Capital ratios of 5%, 6% and 10%, respectively. At June 30, 2002, the Company
and the bank exceeded the requirements for "well capitalized" institutions.
Under the Gramm-Leach-Bliley Act of 1999, in order for the parent company to
maintain its status as a financial holding company, the bank must remain "well
capitalized."
21
STERLING BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEETS [1]
THREE MONTHS ENDED JUNE 30,
(DOLLARS IN THOUSANDS)
2002 2001
--------------------------------- ---------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
ASSETS
Interest-bearing deposits
with other banks $ 3,650 $ 11 1.30% $ 2,880 $ 22 3.32%
Investment securities:
Available for sale 265,730 4,039 6.08 162,259 2,681 6.61
Held to maturity 306,127 4,857 6.35 257,103 4,369 6.80
Tax-exempt [2] 34,321 635 7.43 33,825 625 7.41
Federal funds sold 7,440 32 1.69 473 5 4.24
Loans, net of unearned discounts
Domestic [3] 730,166 14,246 8.14 703,245 16,744 10.13
Foreign - - - 777 12 6.17
---------- ------- ---------- -------
TOTAL INTEREST-EARNING ASSETS 1,347,434 23,820 7.22% 1,160,562 24,458 8.73%
------- ==== ------- =====
Cash and due from banks 47,542 43,211
Allowance for loan losses (14,930) (13,423)
Goodwill 21,158 21,158
Other assets 54,142 27,430
---------- ----------
TOTAL ASSETS $1,455,346 $1,238,938
========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Domestic
Savings $ 26,525 41 0.63% $ 27,217 164 2.42%
NOW 110,551 235 0.85 75,514 400 2.12
Money market 160,003 395 0.99 189,030 1,108 2.35
Time 378,106 2,625 2.78 259,260 3,185 4.93
Foreign
Time 3,000 13 1.81 2,975 35 4.77
---------- ------- ---------- -------
Total interest-bearing
deposits 678,185 3,309 1.96 553,996 4,892 3.54
---------- ------- ---------- -------
Borrowings
Federal funds purchased and
securities sold under
agreements to repurchase 71,359 357 2.01 118,299 1,334 4.52
Commercial paper 28,116 153 2.17 39,718 453 4.58
Other short-term debt 21,621 130 2.41 2,355 26 4.44
Long-term debt 121,593 1,126 3.70 40,350 467 4.63
---------- ------- ---------- -------
Total borrowings 242,689 1,766 2.91 200,722 2,280 4.55
---------- ------- ---------- -------
TOTAL INTEREST-BEARING LIABILITIES 920,874 5,075 2.21% 754,718 7,172 3.81%
------- ==== ------- ====
Noninterest-bearing deposits 309,088 290,139
Other liabilities 75,176 72,372
---------- ----------
Total liabilities 1,305,138 1,117,229
---------- ----------
Corporation Obligated Mandatorily
Redeemable Preferred Securities 25,000 -
---------- ----------
Shareholders' equity 125,208 121,709
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,455,346 $1,238,938
========== ==========
Net interest income/spread 18,745 5.01% 17,286 4.92%
==== ====
Net yield on interest-earning
assets (margin) 5.64% 6.12%
==== ====
Less: Tax equivalent adjustment 261 257
------- -------
Net interest income $18,484 $17,029
======= =======
[1] The average balances of assets, liabilities and shareholders' equity
are computed on the basis of daily averages. Average rates are
presented on a tax equivalent basis. Certain reclassifications have
been made to 2001 amounts to conform to the current presentation.
[2] Interest on tax-exempt securities is presented on a tax equivalent
basis.
[3] Nonaccrual loans are included in amounts outstanding and income has
been included to the extent collected.
22
STERLING BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEETS [1]
SIX MONTHS ENDED JUNE 30,
(DOLLARS IN THOUSANDS)
2002 2001
----------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
ASSETS
Interest-bearing deposits
with other banks $ 3,575 $ 20 1.16% $ 2,901 $ 58 4.03%
Investment securities:
Available for sale 255,553 7,838 6.13 145,299 4,885 6.72
Held to maturity 307,666 9,800 6.37 266,286 9,074 6.82
Tax-exempt [2] 34,462 1,276 7.47 33,378 1,233 7.45
Federal funds sold 21,657 181 1.66 928 25 5.26
Loans, net of unearned discounts
Domestic [3] 719,551 28,412 8.40 690,429 33,988 10.67
Foreign - - - 777 27 6.89
---------- ------ ---------- -------
TOTAL INTEREST-EARNING ASSETS 1,342,464 47,527 7.30% 1,139,998 49,290 9.06%
------ ==== ------- =====
Cash and due from banks 48,525 44,539
Allowance for loan losses (14,707) (13,317)
Goodwill 21,158 21,158
Other assets 50,911 26,571
---------- ----------
TOTAL ASSETS $1,448,351 $1,218,949
========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Domestic
Savings $ 26,932 84 0.63% $ 26,081 311 2.40%
NOW 105,505 464 0.89 73,888 835 2.28
Money market 164,986 791 0.97 185,370 2,419 2.63
Time 366,379 5,262 2.90 257,565 6,603 5.17
Foreign
Time 2,999 31 2.10 2,975 72 4.91
Total interest-bearing ---------- ------ ---------- -------
deposits 666,801 6,632 2.01 545,879 10,240 3.78
---------- ------ ---------- -------
Borrowings
Federal funds purchased and
securities sold under
agreements to repurchase 83,256 804 1.95 123,898 3,133 5.10
Commercial paper 33,346 359 2.17 35,717 868 4.90
Other short-term debt 20,310 238 2.36 3,209 85 5.37
Long-term debt 116,784 2,186 3.74 32,960 762 4.62
---------- ------ ----------- -------
Total borrowings 253,696 3,587 2.84 195,784 4,848 4.99
---------- ------ ----------- -------
TOTAL INTEREST-BEARING LIABILITIES 920,497 10,219 2.23% 741,663 15,088 4.10%
------ ==== ------- =====
Noninterest-bearing deposits 306,972 287,665
Other liabilities 77,096 70,391
---------- ----------
Total liabilities 1,304,565 1,099,719
---------- ----------
Corporation Obligated Mandatorily
Redeemable Preferred Securities 17,127 -
---------- ----------
Shareholders' equity 126,659 119,230
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,448,351 $1,218,949
========== ==========
Net interest income/spread 37,308 5.07% 34,202 4.96%
==== =====
Net yield on interest-earning
assets (margin) 5.70% 6.24%
==== =====
Less: Tax equivalent adjustment 525 507
------- -------
Net interest income $36,783 $33,695
======= =======
[1] The average balances of assets, liabilities and shareholders' equity
are computed on the basis of daily averages. Average rates are
presented on a tax equivalent basis. Certain reclassifications have
been made to 2001 amounts to conform to current presentation.
[2] Interest on tax-exempt securities is presented on a tax equivalent
basis.
[3] Nonaccrual loans are included in amounts outstanding and income has
been included to the extent collected.
23
STERLING BANCORP AND SUBSIDIARIES
RATE/VOLUME ANALYSIS [1]
(IN THOUSANDS)
Increase/(Decrease)
Three Months Ended
June 30, 2002 to June 30, 2001
-------------------------------------------
Volume Rate Net [2]
------ ---- -------
INTEREST INCOME
Interest-bearing deposits with other banks $ 15 $ (26) $ (11)
------ ------- -------
Investment securities
Available for sale 1,963 (605) 1,358
Held to maturity 1,214 (726) 488
Tax-exempt 9 1 10
------ ------- -------
Total investment securities 3,186 (1,330) 1,856
------ ------- -------
Federal funds sold 37 (10) 27
------ ------- -------
Loans, net of unearned discounts
Domestic [3] 1,856 (4,354) (2,498)
Foreign (12) - (12)
------ ------- -------
Total loans, net of unearned discount 1,844 (4,354) (2,510)
------ ------- -------
TOTAL INTEREST INCOME $5,082 $(5,720) $ (638)
====== ======= =======
INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings $ (4) $ (119) $ (123)
NOW 343 (508) (165)
Money market (149) (564) (713)
Time 2,546 (3,106) (560)
Foreign
Time 1 (23) (22)
------ ------- -------
Total interest-bearing deposits 2,737 (4,320) (1,583)
------ ------- -------
Borrowings
Federal funds purchased and securities sold
under agreements to repurchase (407) (570) (977)
Commercial paper (107) (193) (300)
Other short-term debt 144 (40) 104
Long-term debt 938 (279) 659
------ ------- -------
Total borrowings 568 (1,082) (514)
------ ------- -------
TOTAL INTEREST EXPENSE $3,305 $(5,402) $(2,097)
====== ======= =======
NET INTEREST INCOME $1,777 $ (318) $ 1,459
====== ======= =======
[1] The above table is presented on a tax equivalent basis.
[2] The change in interest income and interest expense due to both rate and
volume has been allocated to the 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.
[3] Nonaccrual loans have been included in the amounts outstanding and
income has been included to the extent collected.
24
STERLING BANCORP AND SUBSIDIARIES
Rate/Volume Analysis [1]
(IN THOUSANDS)
Increase/(Decrease)
Six Months Ended
June 30, 2002 to June 30, 2001
------------------------------
Volume Rate Net [2]
------ ---- -------
INTEREST INCOME
Interest-bearing deposits with other banks $ 31 $ (69) $ (38)
------- -------- -------
Investment securities
Available for sale 4,183 (1,230) 2,953
Held to maturity 2,192 (1,466) 726
Tax-exempt 40 3 43
------- -------- -------
Total investment securities 6,415 (2,693) 3,722
------- -------- -------
Federal funds sold 215 (59) 156
------- -------- -------
Loans, net of unearned discounts
Domestic [3] 4,263 (9,839) (5,576)
Foreign (27) - (27)
------- -------- -------
Total loans, net of unearned discount 4,236 (9,839) (5,603)
------- -------- -------
TOTAL INTEREST INCOME $10,897 $(12,660) $(1,763)
======= ======== =======
INTEREST EXPENSE
Interest-bearing deposits
Domestic
Savings $ 29 $ (256) $ (227)
NOW 694 (1,065) (371)
Money market (241) (1,387) (1,628)
Time 5,077 (6,418) (1,341)
Foreign
Time 1 (42) (41)
------- -------- -------
Total interest-bearing deposits 5,560 (9,168) (3,608)
------- -------- -------
Borrowings
Federal funds purchased and securities sold
under agreements to repurchase (808) (1,521) (2,329)
Commercial paper (54) (455) (509)
Other short-term debt 314 (161) 153
Long-term debt 1,864 (440) 1,424
------- -------- -------
Total borrowings 1,316 (2,577) (1,261)
------- -------- -------
TOTAL INTEREST EXPENSE $ 6,876 $(11,745) $(4,869)
======= ======== =======
NET INTEREST INCOME $ 4,021 $ (915) $ 3,106
======= ======== =======
[1] The above table is presented on a tax equivalent basis.
[2] The change in interest income and interest expense due to both rate and
volume has been allocated to the 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.
[3] Nonaccrual loans have been included in the amounts outstanding and
income has been included to the extent collected.
25
STERLING BANCORP AND SUBSIDIARIES
Regulatory Capital and Ratios
Ratios and Minimums
(dollars in thousands)
For Capital To Be Well
Actual Adequacy Minimum Capitalized
------ ---------------- -----------
As of June 30, 2002 Amount Ratio Amount Ratio Amount Ratio
------------------- ------ ----- ------ ----- ------ -----
Total Capital (to Risk Weighted Assets):
The Company $138,088 15.88% $69,551 8.00% $86,938 10.00%
The bank 106,198 12.94 65,665 8.00 82,082 10.00
Tier 1 Capital (to Risk Weighted Assets):
The Company 127,204 14.63 34,775 4.00 52,163 6.00
The bank 95,933 11.69 32,833 4.00 49,249 6.00
Tier 1 Leverage Capital (to Average Assets):
The Company 127,204 8.87 57,368 4.00 71,709 5.00
The bank 95,933 6.92 55,460 4.00 69,325 5.00
As of December 31, 2001
-----------------------
Total Capital (to Risk Weighted Assets):
The Company $116,912 13.70% $68,290 8.00% $85,362 10.00%
The bank 96,158 11.97 64,240 8.00 80,300 10.00
Tier 1 Capital (to Risk Weighted Assets):
The Company 106,200 12.44 34,145 4.00 51,217 6.00
The bank 86,093 10.72 32,120 4.00 48,180 6.00
Tier 1 Leverage Capital (to Average Assets):
The Company 106,200 7.79 54,553 4.00 68,191 5.00
The bank 86,093 6.54 52,681 4.00 65,852 5.00
26
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
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. This committee, 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.
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, 2002, is presented on
page 30. The results of both the income simulation analysis and the gap
analysis, reveal 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 certain
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 certain financial
instruments (derivatives), including approved counterparties, risk limits and
appropriate
27
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.
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, 2002, the Company utilized four interest rate floor contracts
having a notional amount totaling $100 million consisting of two contracts with
a notional amount of $25 million each and a final maturity of November 15, 2002
and two contracts with a notional amount of $25 million each and a final
maturity of August 14, 2003. These financial instruments are being used as part
of the Company's interest rate risk management and not for trading purposes. At
June 30, 2002, all counterparties have investment grade credit ratings from the
major rating agencies. Each counterparty is specifically approved for applicable
credit exposure.
The Company utilizes income simulation models to complement its
traditional gap analysis. While the Asset/Liability Committee 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 deposit 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 that 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. Management generally
has maintained a risk position well within the policy limits. As of June 30,
2002, the model indicated the impact of a 200 basis point parallel and pro rata
rise in rates over twelve months would approximate a 2.23% ($1,646,000) increase
in net interest income, while the impact of a 200 basis point decline in rates
over the same period would approximate a 3.70% ($2,773,000) decline from an
unchanged rate environment.
28
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 throughout the Company. 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.
The parent company generates income from its own operations. Its cash
requirements are supplemented from funds maintained or generated by its
subsidiaries, principally the bank. Such sources have been adequate to meet the
parent company's cash requirements.
The bank can supply funds to the parent company and its nonbank
subsidiaries subject to various legal restrictions. All national banks are
limited in the payment of dividends in any year 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, 2002, the parent company's short-term debt, consisting
principally of commercial paper used to finance ongoing current business
activities, was approximately $29,408,000. The parent company had cash,
interest-bearing deposits with banks and other current assets aggregating
$38,820,000 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 Company's past performance is no guarantee of the future,
management believes that the Company's funding sources (including dividends from
its subsidiaries) and the bank's funding sources will be adequate to meet their
liquidity and capital requirements in the future.
29
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. Amounts are presented in thousands.
Repricing Date
--------------
More than 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 $ 2,871 $ - $ - $ - $ - $ 2,871
Investment securities - 2,737 40,727 558,621 8,724 610,809
Loans, net of unearned
discounts
Commercial and industrial 481,461 2,612 8,823 41 (660) 492,277
Loans to depository
institutions 32,000 - - - - 32,000
Lease financing 52,399 3,373 64,750 2,363 (13,114) 109,771
Real estate 41,929 26,453 45,079 41,196 (24) 154,633
Installment 4,582 913 1,316 1,406 (24) 8,193
Foreign government and
official institutions - - - - - -
Noninterest-earning
assets and allowance
for loan losses - - - - 98,946 98,946
--------- -------- --------- ------- --------- ---------
Total Assets 615,242 36,088 160,695 603,627 93,848 1,509,500
--------- -------- --------- ------- --------- ---------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits
Savings [1] - - 24,486 - - 24,486
NOW [1] - - 109,559 - - 109,559
Money Market [1] 130,585 - 29,902 - - 160,487
Time - domestic 220,745 59,809 83,066 81 - 363,701
- foreign 1,820 1,180 - - - 3,000
Federal funds purchased &
securities sold u/a/r 111,461 - - - - 111,461
Commercial paper 29,408 - - - - 29,408
Other short-term borrowings 25,044 350 - - - 25,394
Long-term borrowings - FHLB - - 25,000 100,000 - 125,000
Noninterest-bearing liabilities
and shareholders' equity - - - - 557,004 557,004
--------- -------- --------- ------- --------- ---------
Total Liabilities and
Shareholders' Equity 519,063 61,339 272,013 100,081 557,004 1,509,500
--------- -------- --------- ------- --------- ---------
Net Interest Rate
Sensitivity Gap $ 96,179 $(25,251) $(111,318) $503,546 $(463,156) $ -
========= ======== ========= ======== ========= ==========
Cumulative Gap
June 30, 2002 $ 96,179 $ 70,928 $ (40,390) $463,156 $ - $ -
========= ======== ========= ======== ========= ==========
Cumulative Gap
June 30, 2001 $ 128,861 $ 48,498 $ (5,127) $433,853 $ - $ -
========= ======== ========= ======== ========= ==========
Cumulative Gap
December 31, 2001 $ 129,150 $ 64,668 $ (47,649) $483,188 $ - $ -
========= ======== ========= ======== ========= ==========
[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.
30
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
18, 2002.
(b) The following matters were submitted to a vote of the Shareholders
of the Company:
(1) Election of Directors
Nominee Total Votes For Total Votes Withheld
------- --------------- --------------------
Robert Abrams 8,575,496 677,588
Joseph M. Adamko 8,584,993 668,091
Louis J. Cappelli 8,018,924 1,234,160
Walter Feldesman 8,509,729 743,355
Allan F. Hershfield 8,583,592 669,492
Henry J. Humphreys 8,578,878 674,206
John C. Millman 8,019,189 1,233,895
Eugene T. Rossides 8,578,017 675,067
There were no abstentions or broker nonvotes.
(2) Amendment of Stock Incentive Plan
Total Votes For 5,677,616
Total Votes Against 3,323,580
Total Abstentions 251,886
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
10(i) Form of Change of Control Severance
Agreement dated April 3, 2002 Entered into
Between the Registrant and One Executive
11 Statement Re: Computation of Per Share
Earnings
(b) No reports on Form 8-K have been filed during the quarter.
31
STERLING BANCORP AND SUBSIDIARIES
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 08/14/02 /s/ Louis J. Cappelli
------------------ ------------------------------------
Louis J. Cappelli
Chairman and
Chief Executive Officer
Date 08/14/02 /s/ John W. Tietjen
------------------ ------------------------------------
John W. Tietjen
Executive Vice President, Treasurer
and Chief Financial Officer
32
STERLING BANCORP AND SUBSIDIARIES
EXHIBIT INDEX
Incorporated Sequential
Exhibit Herein By Filed Page
Number Description Reference To Herewith No.
------ ----------- ------------ -------- ---
10(i) Form of Change of X
Control Severance
Agreement dated
April 3, 2002 Entered
Between the Registrant
And One Executive
11 Computation of X
Per Share Earnings
33