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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997 Commission File No. 1-5273-1
STERLING BANCORP
(Exact Name of Registrant as specified in charter)
NEW YORK 13-2565216
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
430 PARK AVENUE, NEW YORK, N.Y. 10022-3505
(Address of principal executive offices) (Zip Code)
(212) 826-8000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Shares, $1 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
On March 11, 1998 the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $189,711,027.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
THE REGISTRANT HAS ONE CLASS OF COMMON STOCK OF WHICH 8,217,907 SHARES WERE
OUTSTANDING AT MARCH 11, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Specified portions of the Sterling Bancorp 1997 Annual Report are
incorporated by reference in Parts I and II.
(2) Specified portions of the Sterling Bancorp definitive Proxy Statement
dated March 11, 1998 are incorporated by reference in Part III.
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STERLING BANCORP
FORM 10-K
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. BUSINESS........................................... I- 1
Item 2. PROPERTIES......................................... I-12
Item 3. LEGAL PROCEEDINGS.................................. I-12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS........................................ I-12
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.................... II-1
Item 6. SELECTED FINANCIAL DATA............................ II-1
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............ II-1
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........ II-1
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........... II-1
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT..................................... III-1
Item 11. EXECUTIVE COMPENSATION............................. III-1
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.......................... III-1
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..... III-1
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K........................ IV-1
SIGNATURES
Exhibits Submitted in a Separate Volume.
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PART I
ITEM 1. BUSINESS
GENERAL
Sterling Bancorp ("the parent company" or "the Registrant") is a bank holding
company, as defined by the Bank Holding Company Act of 1956("the BHCA"), as
amended. Sterling provides a full range of financial products and services,
including business and consumer loans, commercial and residential mortgage
lending and brokerage, asset-based financing, accounts receivable management
services, trade financing, equipment leasing, corporate and consumer deposit
services, trust and estate administration and investment management services.
Sterling has operations in New York and Virginia and conducts business
throughout the United States. The parent company owns all of the outstanding
shares of Sterling National Bank ("the bank") - its principal subsidiary, and
all of the outstanding shares of Sterling Industrial Loan Association and
Sterling Banking Corporation ("finance subsidiaries"). Sterling National
Mortgage Company, Inc. ("SNMC-New York"), Sterling National Mortgage Corp.
("SNMC-Virginia") and Sterling Factors Corporation ("Factors") are wholly owned
subsidiaries of the bank. Until 1997, Factors was a finance subsidiary of the
Registrant. Sterling Real Estate Holding Company, Inc. a wholly owned subsidiary
of the bank, was formed as of March 1, 1997. Throughout the report, the terms
"the Company" or "Sterling" refers to Sterling Bancorp and its subsidiaries.
GOVERNMENT MONETARY POLICY
The Company is affected by the credit policies of monetary authorities,
including the Board of Governors of the Federal Reserve System. An important
element of the Federal Reserve System is to regulate the national supply of bank
credit. Among the instruments of monetary policy used by the Federal Reserve are
open market operations in U.S. Government securities, changes in the discount
rate, reserve requirements on member bank deposits, and funds availability
regulations. The monetary policies of the Federal Reserve have in the past had a
significant effect in operations of financial institutions, including the bank,
and will continue to do so in the future. Changing conditions in the national
economy and in the money markets make it impossible to predict future changes in
interest rates, deposit levels, loan demand or their effects on the business and
earnings of the Company. Foreign activities of the Company are not considered to
be material.
COMPETITION
There is intense competition in all areas in which the Company conducts its
business. The Company competes with banks and other financial institutions.
THE BANK
Sterling National Bank was organized in 1929 under the National Bank Act and
commenced operations in New York City. The bank maintains six offices in New
York City (three branches and an International Banking Facility in Manhattan and
two branches in Queens). The executive office is located at 430 Park Avenue, New
York, New York. There are regional representatives located in Richmond,
Virginia.
The bank provides a range of banking services to businesses and
individuals including checking, savings and money market accounts, certificates
of deposit, business loans, personal and installment loans, VISA/MASTERCARD,
safe deposit and night depository facilities. Business lending, depository and
related financial services are furnished to a wide range of customers in diverse
industries, including commercial, industrial and financial companies of all
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sizes as well as government and non-profit agencies. Loan facilities available
to these customers include short-term revolving credit arrangements, term loans,
letters of credit, accounts receivable management services, asset-based
financing, equipment financing, real estate and mortgage loans, leasing and lock
box services.
Through its international division and International Banking Facility, the
bank offers financial services to its customers and correspondents in the
world's major financial centers. These services consist of financing import and
export transactions, issuance of letters of credit and creation of bankers
acceptances. In addition to its direct worldwide correspondent banking
relationships, active bank account relationships are maintained with leading
foreign banking institutions in major financial centers.
The bank's trust division provides a variety of fiduciary, investment
management, advisory and corporate agency services to individuals, corporations
and foundations. The bank acts as trustee for pension, profit-sharing and other
employee benefit plans and personal trusts and estates. For corporations, the
bank acts as trustee, transfer agent, registrar and in other corporate agency
capacities.
Factors provides accounts receivable management services. Factors
purchases clients' accounts receivable, assumes credit risk on approved orders
and handles credit and collection details and bookkeeping requirements. Income
for these services is derived from commissions charged for receivables serviced
and interest charged on advances to the client. For these services, Factors
receives a portion of factoring commissions paid by the clients plus a portion
of interest charged on advances. The accounts receivable factored are for
clients primarily engaged in the apparel and textile industries.
Sterling's mortgage banking and brokerage business is conducted through
companies located in Virginia and New York. SNMC-Virginia originates and
services non-conforming mortgages, for its own portfolio and resale, on
residential properties in Virginia and several adjoining states. SNMC-New York
originates conforming, residential mortgage loans throughout the tri-state
metropolitan area, and has offices on Long Island and in Westchester.
There are no industry concentrations exceeding 10% of loans, gross in the
commercial and industrial loan portfolio. Approximately 70% of the bank's loans
are to borrowers located in the metropolitan New York area.
The composition of income from the operations of the bank and its
subsidiaries for the years ended: [1] December 31, 1997 included interest and
fees on commercial and other loans (55%), interest and dividends on investment
securities (28%) and other (17%); [2] December 31, 1996 included interest and
fees on commercial and other loans (52%), interest and dividends on investment
securities (35%), and other (13%); [3] December 31, 1995 included interest and
fees on commercial and other loans (52%), interest and dividends on investment
securities (38%), and other (10%).
At December 31, 1997, the bank had 308 employees, consisting of 116
officers and 192 supervisory and clerical employees. The bank considers its
relations with its employees to be satisfactory.
PARENT COMPANY AND FINANCE SUBSIDIARIES
The parent company and its finance subsidiaries engage in various types of
secured financing activities such as asset based financing, consumer receivables
financing and service certain such accounts for the bank.
Asset-based financing services rendered by the parent company and its
finance subsidiaries include new business referral, collection, supervisory,
and bookkeeping to the bank for a fee; and the bank assumes all credit risks.
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The parent company and its finance subsidiaries make loans that are
secured by personal property, accounts receivable or other collateral;
occasionally unsecured advances are provided to its customers.
Sterling Financial Services Company("Sterling Financial"), a nationwide
provider of consumer receivables financing, is a division of the parent company.
Sterling Financial engages in asset based lending with independent dealers who
market products, such as housewares, appliances, automobiles, and educational
material to consumers on an installment basis with repayment terms between 12
and 48 months. Sterling Financial administers these installment contracts for
the dealer, providing billing, payment processing and other bookkeeping
services. Sterling Financial makes advances to each dealer of up to 80% of the
discounted aggregate value of the dealer's installment contracts.
The composition of income (excluding equity in undistributed net income of
the bank) of the parent company and its finance subsidiaries for the years
ended: [1] December 31, 1997 included interest and fees on loans (61%),
dividends, interest and service fees (25%) and other (14%); [2] December 31,
1996 included interest and fees on loans (42%), interest and fees on accounts
receivable factored (20%), dividends, interest and service fees (31%), and other
(7%); [3] December 31, 1995 included interest and fees on loans (47%), interest
and fees on accounts receivable factored (19%), dividends, interest and service
fees (33%), and other (1%). For the years ended December 31, 1996 and 1995,
Factors and SNMC-Virginia were finance subsidiaries, and the results of their
operations were included in the foregoing and in all financial statements
relating to these years.
At December 31, 1997, the parent company and its finance subsidiaries
employed 25 persons consisting of 8 officers with the balance of the employees
performing supervisory and clerical functions. The parent company and its
finance subsidiaries consider employee relations to be satisfactory.
SUPERVISION AND REGULATION
GENERAL
Sterling Bancorp is a registered bank holding company under the BHCA and is
subject to supervision, examination and reporting requirements of the Board of
Governors of The Federal Reserve System ("FRB").
The BHCA requires the prior approval of the Federal Reserve Board for the
acquisition by a bank holding company of more than 5% of the voting stock or
substantially all of the assets of any bank or bank holding company. Also, under
the BHCA, bank holding companies are prohibited, with certain exceptions, from
engaging in, or from acquiring more than 5% of the voting stock of any company
engaging in, activities other than banking or managing or controlling banks or
furnishing services to or performing services for their subsidiaries. The BHCA
also authorized the Federal Reserve Board to permit bank holding companies to
engage in, and to acquire or retain shares of companies that engage in,
activities which the Federal Reserve Board determines to be so closely related
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to banking or managing or controlling banks as to be a proper incident thereto.
The Federal Reserve Board has ruled on a number of activities and found some of
them to come within such standard while finding that other activities do not
fall within the permissible scope of such standard; other activities have been
proposed by the Federal Reserve Board for consideration. The effect of the
Federal Reserve Board's findings under the standard has been to expand the
financially related activities in which bank holding companies may engage.
Revisions of the Federal Reserve Board's principal regulation (Regulation Y)
affecting bank holding companies have expanded the scope of permissible
bank-related activities and liberalized procedures to allow the entry into such
activities.
As a federally insured national bank, the bank is subject to supervision,
examination and reporting requirements of the Office of the Comptroller of the
Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC").
Sterling Industrial Loan Association is subject to supervision and
regulation by the Bureau of Financial Institutions of the State Corporation
Commission of the Commonwealth of Virginia. Sterling Banking Corporation is
subject to supervision and regulation by the Banking Department of the State of
New York.
PAYMENT OF DIVIDENDS
Various legal restrictions limit the extent to which the bank can supply funds
to the parent company and its nonbank subsidiaries. All national banks are
limited in the payment of dividends without the approval of the Comptroller of
the Currency to an amount not to exceed the net profits (as defined) for that
year to date combined with its retained net profits for the preceding two
calendar years. In addition, from time to time dividends are paid to the parent
company by the finance subsidiaries from their retained earnings without
regulatory restrictions.
CAPITAL ADEQUACY
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). In addition, the Company and the bank
are subject to the provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1981 ("FDICIA") which imposes a number of mandatory
supervisory measures and establishes a system of prompt corrective action to
resolve the problems of undercapitalized institutions. Among other matters,
FDICIA establishes five capital categories of "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", and
"critically undercapitalized". Such classifications are used by regulatory
agencies to determine a bank's deposit insurance premium, and to consider
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applications authorizing institutions to increase their asset size or otherwise
expand business activities or acquire other institutions. Under the provisions
of FDICIA, a "well capitalized" institution must maintain minimum leverage, Tier
1 and Total Capital ratios of 5%, 6% and 10%, respectively. At December 31,
1997, the Company and the bank exceeded all capital adequacy minimum
requirements.
The following table presents capital and ratios for the Company and the bank:
RATIOS AND MINIMUMS
(Dollars in thousands)
For Capital To Be Well
Actual Adequacy Minimum Capitalized
AS OF DECEMBER 31, 1997 Amount Ratio Amount Ratio Amount Ratio
- ----------------------- ------ ----- ------ ----- ------ -----
Total Capital (to Risk Weighted Assets):
The Company $79,698 11.82% $53,935 8.00% $67,419 10.00%
The bank 61,521 9.64 51,038 8.00 63,798 10.00
Tier l Capital (to Risk Weighted Assets):
The Company 71,268 10.57 26,968 4.00 40,451 6.00
The bank 55,028 8.63 25,519 4.00 38,279 6.00
Tier 1 Leverage Capital (to Average Assets):
The Company 71,268 8.31 34,320 4.00 42,900 5.00
The bank 55,028 6.66 33,032 4.00 41,290 5.00
AS OF DECEMBER 31, 1996
- -----------------------
Total Capital (to Risk Weighted Assets):
The Company $63,787 12.15% $41,997 8.00% $52,496 10.00%
The bank 51,428 10.67 38,566 8.00 48,208 10.00
Tier 1 Capital (to Risk Weighted Assets):
The Company 55,929 10.65 20,998 4.00 31,497 6.00
The bank 46,414 9.63 19,283 4.00 28,925 6.00
Tier 1 Leverage Capital (to Average Assets):
The Company 55,929 6.89 32,449 4.00 40,562 5.00
The bank 46,414 6.13 30,295 4.00 37,868 5.00
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TRANSACTIONS WITH AFFILIATES
There are also various requirements and restrictions imposed by the laws of the
United States and the State of New York and by regulations of the Federal
Reserve System, of which the bank is a member, affecting the operations of the
Company including the requirement to maintain reserves against deposits,
restrictions relating to: (a) the nature and amount of loans that may be made by
the bank and the interest that may be charged thereon; (b) extensions of credit
by subsidiary banks of a bank holding company to the bank holding company or
certain of its subsidiaries; (c) investments in the stock or other securities
thereof, and on the taking of such stock or securities as collateral for loans
to any borrower; and (d) other investments, branching and other activities of
the Company and the bank.
SUPPORT OF THE BANK
The Federal Reserve Board has issued regulations under the BHCA that require a
bank holding company to serve as a source of financial and managerial strength
to its subsidiary banks. As a result, the Federal Reserve Board, pursuant to
such regulations, may require the parent company to stand ready to use its
resources to provide adequate capital funds to its banking subsidiaries during
periods of financial stress or adversity. This support may be required at times
when, absent such regulations, the bank holding company might not otherwise
provide such support.
In addition, the Financial Institutions Reform, Recovery, and Enforcement
Act of 1984 provides that a depository institution insured by the FDIC can be
held liable by the FDIC for any loss incurred or reasonably expected to be
incurred in connection with the default of a commonly controlled FDIC insured
depository institution or in connection with any assistance provided by the FDIC
to a commonly controlled institution "in danger of default" (as defined).
In its resolution of the problems of an insured depository institution in
default or in danger of default, the FDIC is generally required to satisfy its
obligations to insured depositors at the least possible cost to the deposit
insurance fund. In addition, the FDIC may not take any action that would have
the effect of increasing the losses to the deposit insurance fund by protecting
depositors for more than the insured portion of deposits (generally $100,000) or
creditors other than depositors. Under the provisions of FDICIA, the FDIC is
authorized to settle all uninsured and unsecured claims in the insolvency of an
insured bank by making a final settlement payment after the declaration of
insolvency. Such a payment would constitute full payment and disposition of the
FDIC's obligations to claimants. The rate of such final settlement payment is to
be a percentage rate determined by the FDIC reflecting an average of the FDIC's
receivership recovery experience.
FDIC INSURANCE
Under the FDIC's risk related insurance assessment system, insured
depository institutions may be required to pay annual assessments to the
FDIC. An institution's risk classification is based on assignment of the
institution by the FDIC to one of three capital groups and to one of three
supervisory subgroups. The three supervisory subgroups are Group "A" --
financially solid institutions with only a few minor weaknesses, Group "B" --
institutions with weaknesses which, if uncorrected, could cause substantial
deterioration of the institution and increased risk to the insurance fund and
Group "C" -- institutions with a substantial probability of loss to the fund
absent effective corrective action. The three capital categories are well
capitalized; adequately capitalized; and undercapitalized. These three
categories are substantially the same as the prompt corrective action categories
previously described, with the undercapitalized category including institutions
that are undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes.
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Under current FDIC practices, the bank was not required to pay deposit
insurance premiums during 1997. Future assessment rates will be based on capital
levels and bank regulators' ratings as is required by FDICIA. In addition, the
bank will be required to make payments for the servicing of obligations of the
Financing Corporation (FICO) issued in connection with the resolution of savings
and loan associations, so long as such obligations remain outstanding.
Under the Federal Deposit Insurance Act, insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in unsafe
and unsound practices, is in an unsafe or unsound condition to continue
operations, or has violated any applicable law, regulation, rule, order, or
condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
Federal banking agencies promulgate safety and soundness standards relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, fees, and benefits. With respect to internal controls, information
systems and internal audit systems, the standards describe the functions that
adequate internal controls and information systems must be able to perform,
including: (i) monitoring adherence to prescribed policies; (ii) effective risk
management; (iii) timely and accurate financial, operations, and regulatory
reporting; (iv) safeguarding and managing assets; and (v) compliance with
applicable laws and regulations. The standards also include requirements that:
(i) those performing internal audits be qualified and independent; (ii) internal
controls and information systems be tested and reviewed; (iii) corrective
actions be adequately documented; and (iv) that results of an audit be made
available for review of management actions.
LEGISLATIVE PROPOSALS
Because of concerns relating to the competitiveness and the safety and soundness
of the industry, Congress continues to consider a number of wide-ranging
proposals for altering the structure, regulation, and competitive relationships
of the nation's financial institutions. Among such bills are proposals to
prohibit depository institutions and bank holding companies from conducting
certain types of activities, to subject depository institutions to increased
disclosure and reporting requirements, to alter the statutory separations of
commercial and investment banking, and to further expand the powers of
depository institutions, bank holding companies, and competitors of depository
institutions. It cannot be predicted whether or in what form any of these
proposals will be adopted or the extent to which the business of the Company may
be affected thereby.
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SELECTED CONSOLIDATED STATISTICAL INFORMATION
I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest
Rates and Interest Differential.
The information appearing on pages 59, 60, and 61 of the Company's 1997 Annual
Report is incorporated by reference herein.
II. Investment Portfolio
A summary of the Company's investment securities by type with related carrying
values at the end of each of the most recent three fiscal years appears on page
50 of the Company's 1997 Annual Report and is incorporated herein by reference.
Information regarding book values and range of maturities by type of security
and weighted average yields for totals of each category is presented in the
Company's 1997 Annual Report on pages 26 and 27 and is incorporated by reference
herein. The average yield by maturity range is not available.
III. Loan Portfolio
A table setting forth the composition of the Company's loan portfolio, net of
unearned discounts, at the end of each of the most recent five fiscal years
appears on page 51 of the Company's 1997 Annual Report and is incorporated
herein by reference.
The following table sets forth the maturities and sensitivity to changes in
interest rates of loans, excluding "installment - individuals" loans, of the
Company's loan portfolio at December 31, 1997:
Due One Due One Due After Total
Year to Five Five Gross
or Less Years Years Loans
------- ----- ----- -----
(in thousands)
Commercial and industrial $405,574 $ 5,867 $ 2,857 $414,298
Lease financing 2,193 47,968 565 50,726
Real estate - mortgage 21,480 8,772 44,083 74,335
Real estate - construction 8,353 -- -- 8,353
Foreign 789 -- -- 789
-------- -------- -------- --------
Total $438,389 $ 62,607 $ 47,505 $548,501
======== ======== ======== ========
Loans due after one year, which have:
Predetermined interest
rates $ 47,968 $ 2,857 $ 50,825
Floating or adjustable
interest rates 14,639 44,648 59,287
-------- -------- --------
Total $ 62,607 $ 47,505 $110,112
======== ======== ========
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It is the policy of the Company to consider all customer requests for
extensions of original maturity dates (rollovers), whether in whole or
in part, as though each was an application for a new loan subject to
standard approval criteria, including credit evaluation. The information
appearing in the Company's 1997 Annual Report beginning on page 50 under
the caption "Loan Portfolio", beginning on page 28 in footnote 6 and on
page 23 in footnote 1 under the caption "Loans" is incorporated by
reference herein.
The following table sets forth the aggregate amount of domestic
non-accrual, past due and restructured loans of the Company at the end
of each of the most recent five fiscal years; as of December 31, 1997,
there were no foreign loans accounted for on a nonaccrual basis or which
were troubled debt restructurings:
December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Nonaccrual basis loans* $1,388 $ 442 $ 357 $ 575 $2,297(1)
Past due 90 days or more
(other than the above)(2) 245 390 1,961 293 146
------ ------ ------ ------ ------
Total $1,633 $ 832 $2,318 $ 868 $2,443
====== ====== ====== ====== ======
Note:Includes restructured
debt of $-- $-- $-- $-- $--
====== ====== ====== ====== ======
*Interest income that would
have been earned on non-
accrual and reduced rate
loans outstanding $ 55 $ 13 $ 22 $ 86 $ 169
====== ====== ====== ====== ======
Applicable interest income
actually realized $-- $-- $-- $ 18 $ 98
====== ====== ====== ====== ======
Nonaccrual, past due and
restructured loans as a
percentage of total gross
loans .29% .18% .58% .27% .80%
====== ====== ====== ====== ======
(1) Includes $1.4 million at December 31, 1993, representing the balance of a
loan to a single borrower who filed for reorganization under Chapter 11
of the U.S. Bankruptcy Code during the third quarter of 1991.
(2) Loans contractually past due 90 days or more as to principal or interest
and still accruing are loans which are both well secured or guaranteed by
financially responsible third parties and are in the process of
collection.
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IV. Summary of Loan Loss Experience
The information appearing in the Company's 1997 Annual Report beginning on page
28 in footnote 7 and beginning on page 51 under the caption "Asset Quality" is
incorporated by reference herein. A table setting forth certain information with
respect to the Company's loan loss experience for each of the most recent five
fiscal years appears on page 52 of the Company's 1997 Annual Report and is
incorporated herein by reference.
On June 1, 1993 the parent company purchased for cash the assets (principally
loans) of Zenith Financial Corporation, a nationwide provider of consumer
receivables financing. The purchase price included the allowance for loan losses
of $209,627.
The Company considers its allowance for possible loan losses to be adequate
based upon the size and risk characteristics of the outstanding loan portfolio
at December 31, 1997. Net losses within the loan portfolio are not statistically
predictable and changes in conditions in the next twelve months could result in
future provisions for loan losses varying from the level taken in 1997.
To comply with a regulatory requirement to provide an allocation of the
allowance for possible loan losses, a table presenting the Company's allocation
of the allowance appears on page 53 of the Company's 1997 Annual Report and is
incorporated herein by reference. This allocation is based on subjective
estimates by management and may vary from year to year based on management's
evaluation of the risk characteristics of the loan portfolio. The information
appearing in the Company's 1997 Annual Report beginning on page 51 under the
caption "Asset Quality" is incorporated by reference herein. The amount
allocated to a particular loan category may not necessarily be indicative of
actual future charge-offs in a loan category. Management believes that the
allowance must be viewed in its entirety and is therefore available for future
charge-offs in any loan category.
V. Deposits
Average deposits and average rates paid for each of the most recent three years
is presented in the Company's 1997 Annual Report on page 59 and is incorporated
by reference herein.
Outstanding time certificates of deposit issued from domestic offices in amounts
of $100,000 or more and interest expense on domestic and foreign deposits are
presented in the Company's 1997 Annual Report beginning on page 29 in footnote 8
and is incorporated by reference herein.
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The following table provides certain information with respect to the Company's
deposits for each of the most recent three fiscal years:
December 31,
--------------------------------------------
1997 1996 1995
-------- ------- ------
(in thousands)
Domestic
Demand $312,462 $229,977 $224,081
NOW 54,056 32,761 30,150
Savings 24,856 25,548 26,967
Money Market 136,069 133,510 120,655
Time deposits, by remaining maturity
Within 3 months 88,658 63,092 68,689
After 3 months but within 1 year 87,580 68,725 49,715
After 1 but within 5 years 25,017 18,099 27,531
-------- -------- --------
Total domestic deposits 728,698 571,712 547,788
-------- -------- --------
Foreign
Time deposits, by remaining maturity
Within 3 months 1,580 1,710 2,240
After 3 months but within 1 year 1,130 1,000 1,000
-------- -------- --------
Total foreign deposits 2,710 2,710 3,240
-------- -------- --------
Total deposits $731,408 $574,422 $551,028
======== ======== ========
Interest expense for the most recent three fiscal years is presented in footnote
8 on page 29 of the Company's 1997 Annual Report and is incorporated herein by
reference.
VI. Return on Assets and Equity
The Company's returns on average total assets and average shareholders' equity,
dividend payout ratio and average shareholders' equity to average total assets
for each of the most recent three years follow:
Years Ended December 31,
---------------------------------------
1997 1996 1995
----- ------ -------
Return on average total assets (Net income
divided by average total assets) 1.30% 1.06% .81%
Return on average shareholders' equity (Net
income divided by average equity) 13.20% 12.55% 10.00%
Dividend payout ratio (Dividends declared per
share divided by net income per share) 27.06% 27.20% 28.41%
Average shareholders' equity to average total
assets (Average equity divided by average
total assets) 9.84% 8.46% 8.11%
I-11
14
VII. Short-Term Borrowings
Balance and rate data for significant categories of the Company's Short-Term
Borrowings, for each of the most recent three years is presented in the
Company's 1997 Annual Report on page 30 in footnote 9 and is incorporated by
reference herein.
ITEM 2. PROPERTIES
The principal offices of the Company occupy one floor at 430 Park Avenue,
New York, N.Y. consisting of approximately 15,000 square feet. The lease for
these premises expires June 29, 2001. Annual rental commitments approximate
$441,000. Certain finance subsidiaries maintain offices in Great Neck, New York
and Richmond, Virginia.
In addition to the principal offices, the bank maintains operating leases for
four branch offices, the International Banking Facility, an Operations Center,
and additional office space in New York City, Westchester, Nassau and Suffolk
counties (New York) and in Richmond and Virginia Beach (Virginia) with an
aggregate of approximately 96,400 square feet. The annual office rental
commitments for these premises approximates $1,339,000. The leases have
expiration dates ranging from 1998 through 2015 with varying additional renewal
options. The bank also maintains a branch located in Forest Hills owned by the
bank (and not subject to a mortgage).
ITEM 3. LEGAL PROCEEDINGS
Neither Registrant nor any of its subsidiaries is party to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The information beginning on page 10 of the Sterling Bancorp Proxy Statement
dated March 11, 1998 under the caption "APPROVAL OF STOCK INCENTIVE PLAN
AMENDMENT" is incorporated by reference herein.
I-12
15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information appearing on page 56 of the Sterling Bancorp 1997 Annual
Report under the caption "MARKET FOR THE COMPANY'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS" is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing on page 48 of the 1997 Annual Report under the
caption "SELECTED FINANCIAL DATA" is incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing on pages 48 - 61 of the 1997 Annual Report under
the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" is incorporated herein by reference.
Supplementary data appearing on page 46 footnote 24 of the 1997 Annual
Report is incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements as of December 31, 1997
and 1996 and for each of the years in the three-year period ended December
31, 1997 and the statements of condition of Sterling National Bank as of
December 31, 1997 and 1996, notes thereto and Independent Auditors' Report
thereon appearing on pages 18 - 47 of the 1997 Annual Report, are
incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II-1
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information beginning on page 1 of the Sterling Bancorp Proxy
Statement dated March 11, 1998 under the caption "ELECTION OF DIRECTORS"
and beginning on page 9 of the same proxy statement under the caption
"Security Ownership of Directors and Executive Officers and Certain
Beneficial Owners" are incorporated by reference herein.
Executive Officers - This information is included pursuant to Instruction
3 to Item 401 (b) and (c) of Regulation S-K:
Held
Executive
Office
Name of Executive Title Age Since
----------------- ----- --- -----
Louis J. Cappelli Chairman of the Board and
Chief Executive Officer,
Director 67 1967
John C. Millman President, Director 55 1986
Jerrold Gilbert Executive Vice President, General
Counsel & Secretary 61 1974
John W. Tietjen Executive Vice President, Treasurer
and Chief Financial Officer 53 1989
John A. Aloisio Vice President 55 1992
Leonard Rudolph Vice President 50 1992
All executive officers are elected annually by the Board of Directors and
serve at the pleasure of the Board. There are no arrangements or
understandings between any of the foregoing officers and any other person
or persons pursuant to which he was selected as an executive officer.
ITEM 11. EXECUTIVE COMPENSATION
The information beginning on page 3 of the Sterling Bancorp Proxy
Statement dated March 11, 1998 under the caption " Executive Compensation
and Related Matters" and on page 8 of the same Proxy Statement under the
caption "Transactions with the Company and Other Matters" are incorporated
by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information beginning on page 9 of the Sterling Bancorp Proxy
Statement dated March 11, 1998 under the caption "Security Ownership of
Directors and Executive Officers and Certain Beneficial Owners" is
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing on page 8 of the Sterling Bancorp Proxy
Statement dated March 11, 1998 under the caption "Transactions with the
Company and Other Matters" is incorporated by reference herein.
III-1
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The documents filed as a part of this report are listed below:
1. Financial Statements
Annual Report to security holders, Sterling Bancorp 1997
Annual Report (This document is filed only to the extent
of pages 18 through 61 which are incorporated by
reference herein).
2. Financial Statement Schedules
None
3. Exhibits
3(i)(A) Amended and restated Certificate of
Incorporation filed with the State of New
York, Department of State, August 14,
1986 (Filed as Exhibit 3.3 to
Registrant's Form 10-K for the fiscal
year ended December 31, 1986 and
incorporated by reference herein).
(i)(B) Certificate of Amendment of The
Certificate of Incorporation filed with
the State of New York Department of
State, June 13, 1988 (Filed as Exhibit
3.5 to Registrant's Form 10-K for the
fiscal year ended December 31, 1988 and
incorporated by reference herein).
(i)(C) Certificate of Amendment of The
Certificate of Incorporation filed with
the State of New York Department of
State, March 5, 1993 (Filed as Exhibit
4.1 to Registrant's Form 8-K dated March
5, 1993 and incorporated by reference
herein).
(ii) By-Laws as in effect on March 15, 1993
(Filed as Exhibit 3.3 to the Registrant's
Form 10-K for the fiscal year ended
December 31, 1992 and incorporated by
reference herein).
4 (a) Indenture relating to floating
interest rate convertible subordinated
debentures, 4th series, due November 1,
1998 (Filed as Exhibit 4(a) to
Registrant's Registration Statement
33-23877 and incorporated by reference
herein).
(b) Indenture dated as of August 1, 1995
relating to floating interest rate
convertible subordinated debentures,
series V, due July 1, 2001 (Filed as
Exhibit T3C to Registrant's Application
for Qualification of Indenture No.
022-22183 and incorporated by reference
herein).
IV-1
18
10(i) Employment Agreements, dated as of
February 19, 1993 (Filed as Exhibits
3.4(a) and 3.4(b), respectively, to the
Registrant's Form 10-K for the fiscal
year ended December 31, 1992 and
incorporated by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(ii) Amendments to Employment Agreements dated
February 14, 1995 (Filed as Exhibits
3.10(ii)(a) and 3.10(ii)(b), respectively
to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994 and
incorporated by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(iii) Amendments to Employment Agreements dated
February 8, 1996 (Filed as Exhibits
3.10(iii)(a) and 3.10(iii)(b),
respectively to the Registrant's Form
10-K for the fiscal year ended December
31, 1995 and incorporated by reference
herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(iv) Amendments to Employment Agreements dated
February 28, 1997 (Filed as Exhibits
3.10(iv)(a) and 3.10(iv)(b), respectively
to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996 and
incorporated by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(v) Amendments to Employment Agreements dated
February 19, 1998
(a) For Louis J. Cappelli
(b) For John C. Millman
11 Statement re: Computation of Per Share
Earnings.
13 Annual Report to security holders,
Sterling Bancorp 1997 Annual Report (This
document is filed only to the extent of
pages 18 through 61 which are
incorporated by reference herein).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the last quarter
of the period covered by this report.
IV-2
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/S/ Louis J. Cappelli
---------------------------
Louis J. Cappelli, Chairman
(Principal Executive Officer)
March 24, 1998
Date
/S/ John W. Tietjen
---------------------------
John W. Tietjen, Treasurer
(Principal Financial and Accounting
Officer)
March 24, 1998
Date
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
(Date) (Signature) (Title)
March 24, 1998 /s/ Louis J. Cappelli Director
--------------------------
March 24, 1998 /s/ John C. Millman Director
--------------------------
March 24, 1998 /s/ Maxwell M. Rabb Director
--------------------------
March 24, 1998 /s/ Lillian Berkman Director
--------------------------
March 24, 1998 /s/ Walter Feldesman Director
--------------------------
March 24, 1998 /s/ Henry J. Humphreys Director
--------------------------
IV-3
20
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
DOCUMENTS FILED
AS A PART
OF THIS REPORT
ON
FORM 10-K
ANNUAL REPORT - 1997
STERLING BANCORP
21
DOCUMENT INDEX
1. Financial Statements
Annual Report to security holders, Sterling Bancorp
1997 Annual Report (This document is filed only to the
extent of pages 18 through 62 which are
incorporated by reference herein).
2. Financial Statement Schedules
None
3. Exhibits
3(i)(A) Amended and restated Certificate of
Incorporation filed with the State of New
York, Department of State, August 14, 1986
(Filed as Exhibit 3.3 to Registrant's Form
10-K for the fiscal year ended December 31,
1986 and incorporated by reference herein).
(i)(B) Certificate of Amendment of The Certificate
of Incorporation filed with the State of New
York Department of State, June 13, 1988
(Filed as Exhibit 3.5 to Registrant's Form
10-K for the fiscal year ended December 31,
1988 and incorporated by reference herein).
(i)(C) Certificate of Amendment of The Certificate
of Incorporation filed with the State of New
York Department of State, March 5, 1993
(Filed as Exhibit 4.1 to Registrant's Form
8-K dated March 5, 1993 and incorporated by
reference herein).
(ii) By-Laws as in effect on March 15, 1993 (Filed
as Exhibit 3.3 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1992
and incorporated by reference herein).
4 (a) Indenture relating to floating interest
rate convertible subordinated debentures, 4th
series, due November 1, 1998 (Filed as
Exhibit 4(a) to Registrant's Registration
Statement 33-23877 and incorporated by
reference herein).
(b) Indenture dated as of August 1, 1995 relating
to floating interest rate convertible
subordinated debentures, series V, due July
1, 2001 (Filed as Exhibit T3C to Registrant's
Application for Qualification of Indenture
No. 022-22183 and incorporated by reference
herein).
10(i) Employment Agreements, dated as of February
19, 1993 (Filed as Exhibits 3.4(a) and
3.4(b), respectively, to the Registrant's
Form 10-K for the fiscal year ended December
31, 1992 and incorporated by reference
herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(ii) Amendments to Employment Agreements dated
February 14, 1995 (Filed as Exhibits
3.10(ii)(a) and 3.10(ii)(b), respectively to
the Registrant's Form 10-K for the fiscal
year ended December 31, 1994 and incorporated
by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(iii) Amendments to Employment Agreements dated
February 8, 1996 (Filed as Exhibits
3.10(iii)(a) and 3.10(iii)(b), respectively
to the Registrant's Form 10-K for the fiscal
year ended December 31, 1995 and incorporated
by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
22
(iv) Amendments to Employment Agreements dated
February 28, 1997 (Filed as Exhibits
3.10(iv)(a) and 3.10(iv)(b), respectively to
the Registrant's Form 10-K for the fiscal
year ended December 31, 1996 and incorporated
by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(v) Amendments to Employment Agreements dated
February 19, 1998
(a) For Louis J. Cappelli
(b) For John C. Millman
11 Statement re: Computation of Per Share
Earnings.
13 Annual Report to security holders, Sterling
Bancorp 1997 Annual Report (This document is
filed only to the extent of pages 18 through
61 which are incorporated by reference
herein).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
4. Reports on Form 8-K:
There were no reports on Form 8-K filed during the last
quarter of the period covered by this report.
23
EXHIBIT INDEX
Exhibit
Number
------
3(i)(A) Amended and Restated Certificate of
Incorporation filed with the State of New
York, Department of State, August 14,
1986 (Filed as Exhibit 3.3 to
Registrant's Form 10-K for the fiscal
year ended December 31, 1986 and
incorporated by reference herein).
(i)(B) Certificate of Amendment of The
Certificate of Incorporation filed with
the State of New York Department of
State, June 13, 1988 (Filed as Exhibit
3.5 to Registrant's Form 10-K for the
fiscal year ended December 31, 1988 and
incorporated by reference herein).
(i)(C) Certificate of Amendment of The
Certificate of Incorporation filed with
the State of New York Department of
State, March 5, 1993 (Filed as Exhibit
4.1 to Registrant's Form 8-K dated March
5, 1993 and incorporated by reference
herein).
(ii) By-Laws as in effect on March 15, 1993
(Filed as Exhibit 3.3 to the Registrant's
Form 10-K for the fiscal year ended
December 31, 1992 and incorporated by
reference herein).
4 (a) Indenture relating to floating interest
rate convertible subordinated debentures,
4th series, due November 1, 1998 (Filed
as Exhibit 4(a) to Registrant's
Registration Statement 33-23877 and
incorporated by reference herein).
(b) Indenture dated as of August 1, 1995
relating to floating interest rate
convertible subordinated debentures,
series V, due July 1, 2001 (Filed as
Exhibit T3C to Registrant's Application
for Qualification of Indenture No.
022-22183 and incorporated by
reference herein).
10(i) Employment Agreements, dated as of
February 19, 1993 (Filed as Exhibits
3.4(a) and 3.4(b), respectively, to the
Registrant's Form 10-K for the fiscal
year ended December 31, 1992 and
incorporated by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(ii) Amendments to Employment Agreements dated
February 14, 1995 (Filed as Exhibits
3.10(ii)(a) and 3.10(ii)(b),
respectively, to the Registrant's Form
10-K for the fiscal year ended December
31, 1994 and incorporated by reference
herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(iii) Amendments to Employment Agreements dated
February 8, 1996 (Filed as Exhibits
3.10(iii)(a) and 3.10(iii)(b),
respectively to the Registrant's Form
10-K for the fiscal year ended December
31, 1995 and incorporated by reference
herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
24
(iv) Amendments to Employment Agreements dated
February 28, 1997 (Filed as Exhibits
3.10(iv)(a) and 3.10(iv)(b), respectively
to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996 and
incorporated by reference herein).
(a) For Louis J. Cappelli
(b) For John C. Millman
(v) Amendments to Employment Agreements dated
February 19, 1998
(a) For Louis J. Cappelli
(b) For John C. Millman
11 Statement re: Computation of Per Share
Earnings.
13 Annual Report to security holders,
Sterling Bancorp 1997 Annual Report (This
document is filed only to the extent of
pages 18 through 61 which are
incorporated by reference herein).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.