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 September 30, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to ___________________________

Commission File Number: 1-5273-1

 

Sterling Bancorp


(Exact name of registrant as specified in its charter)


 

 

 

New York

 

13-2565216




(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification)

 

 

 

650 Fifth Avenue, New York, N.Y.

 

10019-6108




(Address of principal executive offices)

 

(Zip Code)


212-757-3300


(Registrant’s telephone number, including area code)

 

N/A


(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

     Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act,

x Yes o No

As of October 31, 2005 there were 18,260,089 shares of common stock,
$1.00 par value, outstanding.




STERLING BANCORP

 

 

 

 

 

 

 

 

Page

 

 

 


PART I FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

Consolidated Financial Statements (Unaudited)

3

 

 

 

Notes to Consolidated Financial Statements

8

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 

 

 

 

 

 

Overview

13

 

 

 

Income Statement Analysis

14

 

 

 

Balance Sheet Analysis

18

 

 

 

Capital

23

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

24

 

 

 

Average Balance Sheets

25

 

 

 

Rate/Volume Analysis

27

 

 

 

Regulatory Capital and Ratios

29

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

 

 

 

 

 

 

 

Asset/Liability Management

30

 

 

 

Interest Rate Sensitivity

35

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

36

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

 

 

 

 

 

 

Item 6.

Exhibits

39

 

 

 

 

 

 

SIGNATURES

40

 

 

 

 

EXHIBIT INDEX

 

 

 

 

 

 

Exhibit 11

Statement Re: Computation of Per Share Earnings

42

 

 

 

 

 

 

 

Exhibit 31.1

Certifications of the CEO pursuant to Exchange Act Rule 13a-14(a)

43

 

 

 

 

 

 

 

Exhibit 31.2

Certifications of the CFO pursuant to Exchange Act Rule 13a-14(a)

44

 

 

 

 

 

 

 

Exhibit 32

Certifications of the CEO and CFO required by Section 1350 of Chapter 63 of Title 18 of the U.S. Code

45

 

2



STERLING BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)

 

 

 

 

 

 

 

 

 

 

September 30,
2005

 

December 31,
2004

 

 

 


 


 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

83,504,142

 

$

48,842,418

 

Interest-bearing deposits with other banks

 

 

3,086,437

 

 

1,329 103

 

 

 

 

 

 

 

 

 

Securities available for sale (at estimated fair value; pledged: $133,584,919 in 2005 and $64,933,098 in 2004)

 

 

210,903,120

 

 

233,762,171

 

Securities held to maturity (pledged: $256,622,008 in 2005 and $122,309,904 in 2004) (estimated fair value: $490,103,563 in 2005 and $448,173,450 in 2004)

 

 

496,107,388

 

 

446,457,563

 

 

 



 



 

Total investment securities

 

 

707,010,508

 

 

680,219,734

 

 

 



 



 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

50,136,610

 

 

37,058,673

 

 

 



 



 

Loans held in portfolio, net of unearned discounts

 

 

1,100,749,310

 

 

1,022,286,479

 

Less allowance for loan losses

 

 

16,234,273

 

 

16,328,528

 

 

 



 



 

Loans, net

 

 

1,084,515,037

 

 

1,005,957,951

 

 

 



 



 

Customers’ liability under acceptances

 

 

1,935,369

 

 

628,965

 

Excess cost over equity in net assets of the banking subsidiary

 

 

21,158,440

 

 

21,158,440

 

Premises and equipment, net

 

 

11,190,231

 

 

10,674,708

 

Other real estate

 

 

327,400

 

 

766,620

 

Accrued interest receivable

 

 

5,774,238

 

 

5,604,781

 

Bank owned life insurance

 

 

26,705,447

 

 

26,553,145

 

Other assets

 

 

39,787,082

 

 

32,317,224

 

 

 



 



 

 

 

$

2,035,130,941

 

$

1,871,111,762

 

 

 



 



 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

540,030,392

 

$

511,307,018

 

Interest-bearing deposits

 

 

937,462,047

 

 

832,544,097

 

 

 



 



 

Total deposits

 

 

1,477,492,439

 

 

1,343,851,115

 

Securities sold under agreements to repurchase - customers

 

 

57,919,814

 

 

55,934,170

 

Securities sold under agreements to repurchase - dealers

 

 

59,894,000

 

 

33,882,000

 

Federal funds purchased

 

 

29,100,000

 

 

32,500,000

 

Commercial paper

 

 

39,402,045

 

 

25,991,038

 

Other short-term borrowings

 

 

21,169,041

 

 

2,517,375

 

Acceptances outstanding

 

 

1,935,369

 

 

628,965

 

Accrued expenses and other liabilities

 

 

88,993,126

 

 

91,329,506

 

Long-term debt

 

 

105,774,000

 

 

135,774,000

 

 

 



 



 

Total liabilities

 

 

1,881,679,834

 

 

1,722,408,169

 

 

 



 



 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

Common stock, $1 par value. Authorized 50,000,000 shares; issued 20,143,131 and 19,880,521 shares, respectively

 

 

20,143,131

 

 

19,880,521

 

Capital surplus

 

 

149,094,423

 

 

145,310,745

 

Retained earnings

 

 

36,317,106

 

 

28,664,568

 

Accumulated other comprehensive loss, net of tax

 

 

(4,146,620

)

 

(1,921,060

)

 

 



 



 

 

 

 

201,408,040

 

 

191,934,774

 

Less

 

 

 

 

 

 

 

Common shares in treasury at cost, 1,866,042 and 1,642,996 shares, respectively

 

 

47,868,914

 

 

42,939,969

 

Unearned compensation

 

 

88,019

 

 

291,212

 

 

 



 



 

Total shareholders’ equity

 

 

153,451,107

 

 

148,703,593

 

 

 



 



 

 

 

$

2,035,130,941

 

$

1,871,111, 762

 

 

 



 



 

See Notes to Consolidated Financial Statements.

3



STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 


 


 


 


 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

21,221,500

 

$

16,897,670

 

$

59,075,349

 

$

47,392,037

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale

 

 

2,309,023

 

 

3,211,403

 

 

7,277,809

 

 

10,357,118

 

Held to maturity

 

 

5,626,580

 

 

4,624,665

 

 

16,569,371

 

 

14,008,129

 

Federal funds sold

 

 

60,791

 

 

72,779

 

 

283,287

 

 

128,915

 

Deposits with other banks

 

 

16,160

 

 

5,902

 

 

38,261

 

 

13,078

 

 

 



 



 



 



 

Total interest income

 

 

29,234,054

 

 

24,812,419

 

 

83,244,077

 

 

71,899,277

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

4,953,676

 

 

3,015,262

 

 

12,491,348

 

 

7,862,397

 

Securities sold under agreements to repurchase

 

 

1,066,185

 

 

325,203

 

 

2,488,857

 

 

1,006,563

 

Federal funds purchased

 

 

209,462

 

 

9,041

 

 

387,495

 

 

72,484

 

Commercial paper

 

 

237,243

 

 

106,502

 

 

619,730

 

 

247,861

 

Other short-term borrowings

 

 

57,755

 

 

33,970

 

 

124,051

 

 

239,541

 

Long-term debt

 

 

1,356,940

 

 

1,559,688

 

 

4,212,205

 

 

4,679,063

 

 

 



 



 



 



 

Total interest expense

 

 

7,881,261

 

 

5,049,666

 

 

20,323,686

 

 

14,107,909

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

21,352,793

 

 

19,762,753

 

 

62,920,391

 

 

57,791,368

 

Provision for loan losses

 

 

2,508,000

 

 

2,338,500

 

 

7,162,000

 

 

7,235,500

 

 

 



 



 



 



 

Net interest income after provision for loan losses

 

 

18,844,793

 

 

17,424,253

 

 

55,758,391

 

 

50,555,868

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Factoring income

 

 

1,561,136

 

 

1,915,761

 

 

4,615,245

 

 

5,110,102

 

Mortgage banking income

 

 

4,601,005

 

 

3,846,269

 

 

13,034,852

 

 

11,392,079

 

Service charges on deposit accounts

 

 

1,486,342

 

 

1,258,129

 

 

3,941,596

 

 

3,480,649

 

Trade finance income

 

 

596,520

 

 

688,276

 

 

1,558,786

 

 

1,699,083

 

Trust fees

 

 

149,446

 

 

160,311

 

 

472,969

 

 

508,046

 

Other service charges and fees

 

 

322,906

 

 

394,754

 

 

1,006,220

 

 

1,349,983

 

Bank owned life insurance income

 

 

460,209

 

 

498,530

 

 

1,147,573

 

 

975,264

 

Securities gains

 

 

 

 

285,918

 

 

196,680

 

 

970,722

 

Other income

 

 

175,035

 

 

126,880

 

 

688,432

 

 

459,615

 

 

 



 



 



 



 

Total noninterest income

 

 

9,352,599

 

 

9,174,828

 

 

26,662,353

 

 

25,945,543

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

 

8,465,092

 

 

7,787,817

 

 

24,820,290

 

 

22,849,669

 

Employee benefits

 

 

2,482,452

 

 

2,464,874

 

 

6,577,315

 

 

6,720,517

 

 

 



 



 



 



 

Total personnel expense

 

 

10,947,544

 

 

10,252,691

 

 

31,397,605

 

 

29,570,186

 

Occupancy expenses, net

 

 

1,463,444

 

 

1,315,456

 

 

4,126,590

 

 

3,779,166

 

Equipment expenses

 

 

867,464

 

 

755,738

 

 

2,462,369

 

 

2,169,997

 

Advertising and marketing

 

 

937,004

 

 

974,755

 

 

3,067,397

 

 

2,992,678

 

Professional fees

 

 

737,415

 

 

952,253

 

 

3,702,823

 

 

2,939,885

 

Data processing fees

 

 

310,745

 

 

272,292

 

 

893,623

 

 

860,235

 

Stationery and printing

 

 

223,753

 

 

141,816

 

 

656,051

 

 

602,821

 

Communications

 

 

393,010

 

 

363,698

 

 

1,260,824

 

 

1,161,891

 

Other expenses

 

 

2,184,844

 

 

1,464,884

 

 

5,665,035

 

 

4,557,191

 

 

 



 



 



 



 

Total noninterest expenses

 

 

18,065,223

 

 

16,493,583

 

 

53,232,317

 

 

48,634,050

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

10,132,169

 

 

10,105,498

 

 

29,188,427

 

 

27,867,361

 

Provision for income taxes

 

 

3,858,220

 

 

3,555,324

 

 

11,091,602

 

 

9,545,652

 

 

 



 



 



 



 

Net income

 

$

6,273,949

 

$

6,550,174

 

$

18,096,825

 

$

18,321,709

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,324,683

 

 

18,207,370

 

 

18,304,920

 

 

18,248,585

 

Diluted

 

 

18,917,332

 

 

19,025,500

 

 

18,877,569

 

 

19,113,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per average common share

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.36

 

$

0.99

 

$

1.00

 

Diluted

 

 

0.33

 

 

0.35

 

 

0.96

 

 

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

 

0.19

 

 

0.16

 

 

0.57

 

 

0.48

 

See Notes to Consolidated Financial Statements.

4



STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

6,273,949

 

$

6,550,174

 

$

18,096,825

 

$

18,321,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) /gains arising during the period

 

 

(1,255,031

)

 

2,347,046

 

 

(1,608,327

)

 

(1,206,796

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gains included in net income

 

 

 

 

(154,681

)

 

(106,404

)

 

(525,160

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses) /gains supplemental pension

 

 

43,566

 

 

(29,921

)

 

(510,829

)

 

215,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 



 



 



 

Comprehensive income

 

$

5,062,484

 

$

8,712,618

 

$

15,871,265

 

$

16,805,219

 

 

 



 



 



 



 

See Notes to Consolidated Financial Statements.

5



STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2005

 

2004

 

 

 


 


 

Preferred Stock

 

 

 

 

 

 

 

Balance at January 1

 

$

 

$

2,244,320

 

Conversions of Series D shares

 

 

 

 

(2,244,320

)

 

 



 



 

Balance at September 30

 

$

 

$

 

 

 



 



 

Common Stock

 

 

 

 

 

 

 

Balance at January 1

 

$

19,880,521

 

$

19,275,964

 

Conversions of preferred shares into common shares

 

 

 

 

428,304

 

Common shares issued under stock incentive plan

 

 

262,610

 

 

123,130

 

 

 



 



 

Balance at September 30

 

$

20,143,131

 

$

19,827,398

 

 

 



 



 

Capital Surplus

 

 

 

 

 

 

 

Balance at January 1

 

$

145,310,745

 

$

141,179,832

 

Conversions of preferred shares into common shares

 

 

 

 

1,816,016

 

Common shares issued under stock incentive plan and related tax benefits

 

 

3,783,678

 

 

l,729,973

 

 

 



 



 

Balance at September 30

 

$

149,094,423

 

$

144,725,821

 

 

 



 



 

Retained Earnings

 

 

 

 

 

 

 

Balance at January 1

 

$

28,664,568

 

$

16,166,517

 

Net Income

 

 

18,096,825

 

 

18,321,709

 

Cash dividends paid - common shares

 

 

(10,444,287

)

 

(8,658,428

)

 

 



 



 

Balance at September 30

 

$

36,317,106

 

$

25,829,798

 

 

 



 



 

Accumulated Other Comprehensive Income

 

 

 

 

 

 

 

Balance at January 1

 

$

(1,921,060

)

$

(1,131,803

)

 

 



 



 

Unrealized holding (losses)/gains arising during the period:

 

 

 

 

 

 

 

Before tax

 

 

(2,990,018

)

 

(2,230,677

)

Tax effect

 

 

1,381,691

 

 

1,023,881

 

 

 



 



 

Net of tax

 

 

(1,608,327

)

 

(1,206,796

)

 

 



 



 

 

 

 

 

 

 

 

 

Reclassification adjustment for gains included in net income:

 

 

 

 

 

 

 

Before tax

 

 

(196,680

)

 

(970,722

)

Tax effect

 

 

90,276

 

 

445,562

 

 

 



 



 

Net of tax

 

 

(106,404

)

 

(525,160

)

 

 



 



 

Unrealized (losses)/gains supplemental pension:

 

 

 

 

 

 

 

Before tax

 

 

(945,876

)

 

398,273

 

Tax effect

 

 

435,047

 

 

(182,807

)

 

 



 



 

Net of tax

 

 

(510,829

)

 

215,466

 

 

 



 



 

Balance at September 30

 

$

(4,146,620

)

$

(2,648,293

)

 

 



 



 

Treasury Stock

 

 

 

 

 

 

 

Balance at January 1

 

$

(42,939,969

)

$

(33,577,847

)

Purchase of common shares

 

 

(3,322,666

)

 

(8,310,004

)

Surrender of shares issued under incentive compensation plan

 

 

(1,606,279

)

 

(409,258

)

 

 



 



 

Balance at September 30

 

$

(47,868,914

)

$

(42,297,109

)

 

 



 



 

Unearned Compensation

 

 

 

 

 

 

 

Balance at January 1

 

$

(291,212

)

$

(894,976

)

Amortization of unearned compensation

 

 

203,193

 

 

522,281

 

 

 



 



 

Balance at September 30

 

$

(88,019

)

$

(372,695

)

 

 



 



 

Total Shareholders’ Equity

 

 

 

 

 

 

 

Balance at January 1

 

$

148,703,593

 

$

143,262,007

 

Net changes during the period

 

 

4,747,514

 

 

1,802,913

 

 

 



 



 

Balance at September 30

 

$

153,451,107

 

$

145,064,920

 

 

 



 



 

See Notes to Consolidated Financial Statements.

6



STERLING BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended
September 30,

 

 

 

2005

 

2004

 

 

 


 


 

Operating Activities

 

 

 

 

 

 

 

Net Income

 

$

18,096,825

 

$

18,321,709

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Provision for loan losses

 

 

7,162,000

 

 

7,235,500

 

Depreciation and amortization of premises and equipment

 

 

1,505,815

 

 

1,318,157

 

Securities gains

 

 

(196,680

)

 

(970,722

)

Income from bank owned life insurance

 

 

(1,147,573

)

 

(975,264

)

Deferred income tax benefit

 

 

(1,034,027

)

 

(300,878

)

Net change in loans held for sale

 

 

(13,077,937

)

 

1,746,014

 

Amortization of unearned compensation

 

 

203,193

 

 

522,281

 

Amortization of premiums on securities

 

 

758,630

 

 

1,198,486

 

Accretion of discounts on securities

 

 

(473,278

)

 

(394,808

)

Increase in accrued interest receivable

 

 

(169,457

)

 

(70,917

)

Decrease in accrued expenses and other liabilities

 

 

(2,336,380

)

 

10,934,829

 

Increase in other assets

 

 

(4,910,163

)

 

(5,353,733

)

Other, net

 

 

305,985

 

 

861,992

 

 

 



 



 

Net cash provided by operating activities

 

 

4,686,953

 

 

34,072,646

 

 

 



 



 

Investing Activities

 

 

 

 

 

 

 

Purchase of premises and equipment

 

 

(2,021,338

)

 

(2,079,148

)

Net increase in interest-bearing deposits with other banks

 

 

(1,757,334

)

 

(1,013,176

)

Net increase in loans held in portfolio

 

 

(85,719,086

)

 

(73,608,868

)

Decrease (Increase) in other real estate

 

 

439,220

 

 

(189,239

)

Proceeds from prepayments, redemptions or maturities of securities - held to maturity

 

 

77,508,464

 

 

105,510,986

 

Purchases of securities - held to maturity

 

 

(127,413,506

)

 

(123,394,828

)

Proceeds from sales of securities - available for sale

 

 

2,932,250

 

 

73,254,718

 

Proceeds from prepayments, redemptions or maturities of securities - available for sale

 

 

53,354,017

 

 

84,957,982

 

Purchases of securities - available for sale

 

 

(36,447,371

)

 

(130,365,143

)

 

 



 



 

Net cash used in investing activities

 

 

(119,124,684

)

 

(66,926,716

)

 

 



 



 

Financing Activities

 

 

 

 

 

 

 

Net increase (decrease) in noninterest-bearing deposits

 

 

28,723,374

 

 

(49,557,132

)

Net increase in interest-bearing deposits

 

 

104,917,950

 

 

137,185,949

 

Decrease in Federal funds purchased

 

 

(3,400,000

)

 

(10,000,000

)

Net increase in securities sold under agreements to repurchase

 

 

27,997,644

 

 

9,777,016

 

Net increase (decrease) in commercial paper and other short-term borrowings

 

 

32,062,673

 

 

(49,608,633

)

Net decrease in long-term borrowings

 

 

(30,000,000

)

 

 

Purchase of treasury stock

 

 

(3,322,666

)

 

(8,310,004

)

Proceeds from exercise of stock options

 

 

2,564,767

 

 

1,342,069

 

Cash dividends paid on common stock

 

 

(10,444,287

)

 

(8,658,428

)

 

 



 



 

Net cash provided by financing activities

 

 

149,099,455

 

 

22,170,837

 

 

 



 



 

Net increase (decrease) in cash and due from banks

 

 

34,661,724

 

 

(10,683,233

)

Cash and due from banks - beginning of period

 

 

48,842,418

 

 

63,947,722

 

 

 



 



 

Cash and due from banks - end of period

 

$

83,504,142

 

$

53,264,489

 

 

 



 



 

Supplemental disclosures:

 

 

 

 

 

 

 

Interest paid

 

$

19,517,578

 

$

13,800,992

 

Income taxes paid

 

 

13,020,100

 

 

10,869,100

 

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 September 30, 2005 and 2004 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 2004 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, 2004. The Company effected a six-for-five stock split on December 8, 2004 and a five-for-four stock split on September 10, 2003 and paid stock dividends as follows: 20% on December 9, 2002; 10% on December 10, 2001; 10% on December 11, 2000; and 5% on December 14, 1999. Fractional shares were cashed-out and payments were made to shareholders in lieu of fractional shares. All capital and share amounts as well as basic and diluted average number of shares outstanding and earnings per average common share information for all prior reporting periods presented, reflect the effect of the stock splits and stock dividends.

 

 

2.

At September 30, 2005, the Company has a stock-based employee compensation plan, which is described more fully in Note 1 and Note 15 to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2004. The Company accounts for this plan under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 148, the following table illustrates the effect on net income and earnings per average common share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to the stock-based employee compensation plans.


 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

2005

 

2004

 

 


 


 


 

 

Net income available for common shareholders

 

$

6,273,949

 

$

6,550,174

 

 

Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects

 

 

(65,577

)

 

(59,528

)

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

Pro forma, net income

 

$

6,208,372

 

$

6,490,646

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

Earnings per average common share:

 

 

 

 

 

 

 

 

Basic- as reported

 

$

0.34

 

$

0.36

 

 

Basic- pro forma

 

 

0.34

 

 

0.36

 

 

Diluted- as reported

 

 

0.33

 

 

0.35

 

 

Diluted- pro forma

 

 

0.33

 

 

0.34

 

8



STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2005

 

2004

 

 


 


 


 

 

Net income available for common shareholders

 

$

18,096,825

 

$

18,321,709

 

 

Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects

 

 

(188,367

)

 

(174,954

)

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

Pro forma, net income

 

$

17,908,458

 

$

18,146,755

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

Earnings per average common share:

 

 

 

 

 

 

 

 

Basic- as reported

 

$

0.99

 

$

1.00

 

 

Basic- pro forma

 

 

0.98

 

 

0.99

 

 

Diluted- as reported

 

 

0.96

 

 

0.96

 

 

Diluted- pro forma

 

 

0.95

 

 

0.95

 


 

 

3.

The major components of domestic loans held for sale and loans held in portfolio are as follows:


 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 


 

 

 

 

2005

 

2004

 

 

 

 


 


 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

 

 

 

 

 

 

Real estate-mortgage

 

$

50,136,610

 

$

38,810,366

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

Loans held in portfolio

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

636,289,748

 

$

585,288,435

 

 

Lease financing

 

 

202,451,011

 

 

181,671,932

 

 

Real estate-residential mortgage

 

 

146,013,910

 

 

111,841,103

 

 

Real estate- commercial mortgage

 

 

118,573,523

 

 

94,705,763

 

 

Real estate-construction

 

 

2,309,103

 

 

2,329,491

 

 

Installment

 

 

11,766,058

 

 

15,270,005

 

 

Loans to depository institutions

 

 

10,000,000

 

 

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

Loans held in portfolio, gross

 

 

1,127,403,353

 

 

991,106,729

 

 

 

 

 

 

 

 

 

 

 

Less unearned discounts

 

 

26,654,043

 

 

23,033,619

 

 

 

 



 



 

 

Loans held in portfolio, net of unearned discounts

 

$

1,100,749,310

 

$

968,073,110

 

 

 

 



 



 


 

 

4.

In February 2004, 224,432 Series D preferred shares were converted into 428,304 common shares.

 

 

5.

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 provided to stockholders.

9



STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The Company provides a broad range of financial products and services, including commercial loans, asset-based financing, factoring and 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 2005 year-to-date average interest-earning assets were 58.5% loans (corporate lending was 66.7% and real estate lending was 29.7% of total loans, respectively) and 40.5% investment securities and money market investments. There are no industry concentrations exceeding 10% of loans, gross, in the corporate loan portfolio. Approximately 72% of loans are to borrowers located in the metropolitan New York area. In order to comply with SFAS No. 131, 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 nine month periods ended September 30, 2005 and 2004:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate
Lending

 

Real Estate
Lending

 

Company-wide
Treasury

 

Totals

 

 

 


 


 


 


 

Three Months Ended September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

10,053,884

 

$

5,928,749

 

$

5,143,317

 

$

21,125,950

 

Noninterest income

 

 

3,550,947

 

 

4,689,523

 

 

537,257

 

 

8,777,727

 

Depreciation and amortization

 

 

113,635

 

 

103,254

 

 

620

 

 

217,509

 

Segment income before taxes

 

 

5,329,839

 

 

5,636,868

 

 

5,613,007

 

 

16,579,714

 

Segment assets

 

 

801,394,089

 

 

367,284,929

 

 

839,492,676

 

 

2,008,171,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

9,486,019

 

$

4,125,387

 

$

5,958,732

 

$

19,570,138

 

Noninterest income

 

 

3,587,898

 

 

3,929,044

 

 

884,953

 

 

8,401,895

 

Depreciation and amortization

 

 

80,415

 

 

102,964

 

 

920

 

 

184,299

 

Segment income before taxes

 

 

5,224,737

 

 

4,327,299

 

 

6,536,387

 

 

16,088,423

 

Segment assets

 

 

721,671,407

 

 

286,075,699

 

 

778,890,835

 

 

1,786,637,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

29,521,527

 

$

16,141,238

 

$

16,590,184

 

$

62,252,949

 

Noninterest income

 

 

9,674,187

 

 

13,302,619

 

 

1,741,781

 

 

24,718,587

 

Depreciation and amortization

 

 

304,132

 

 

282,824

 

 

1,838

 

 

588,794

 

Segment income before taxes

 

 

14,926,978

 

 

16,018,794

 

 

18,074,853

 

 

49,020,625

 

Segment assets

 

 

801,394,089

 

 

367,284,929

 

 

839,492,676

 

 

2,008,171,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

27,049,062

 

$

11,788,083

 

$

18,408,890

 

$

57,246,035

 

Noninterest income

 

 

9,762,453

 

 

11,606,416

 

 

2,167,548

 

 

23,536,417

 

Depreciation and amortization

 

 

221,579

 

 

302,679

 

 

920

 

 

525,178

 

Segment income before taxes

 

 

13,650,937

 

 

12,534,701

 

 

20,230,073

 

 

46,415,711

 

Segment assets

 

 

721,671,407

 

 

286,075,699

 

 

778,890,835

 

 

1,786,637,941

 

10



STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

The following table sets forth reconciliations of net interest income, noninterest income, income before taxes and assets of reportable operating segments to the Company’s consolidated totals:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 


 


 

 

 

2005

 

2004

 

2005

 

2004

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

21,125,950

 

$

19,570,138

 

$

62,252,949

 

$

57,246,035

 

Other [1]

 

 

226,843

 

 

192,615

 

 

667,442

 

 

545,333

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net interest income

 

$

21,352,793

 

$

19,762,753

 

$

62,920,391

 

$

57,791,368

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

8,777,727

 

$

8,401,895

 

$

24,718,587

 

$

23,536,417

 

Other [1]

 

 

574,872

 

 

772,933

 

 

1,943,766

 

 

2,409,126

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated noninterest income

 

$

9,352,599

 

$

9,174,828

 

$

26,662,353

 

$

25,945,543

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

16,579,714

 

$

16,088,423

 

$

49,020,625

 

$

46,415,711

 

Other [1]

 

 

(6,447,545

)

 

(5,982,925

)

 

(19,832,198

)

 

(18,548,350

)

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated income before income taxes

 

$

10,132,169

 

$

10,105,498

 

$

29,188,427

 

$

27,867,361

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total for reportable operating segments

 

$

2,008,171,694

 

$

1,786,637,941

 

$

2,008,171,694

 

$

1,786,637,941

 

Other [1]

 

 

26,959,247

 

 

23,670,225

 

 

26,959,247

 

 

23,670,225

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated assets

 

$

2,035,130,941

 

$

1,810,308,166

 

$

2,035,130,941

 

$

1,810,308,166

 

 

 



 



 



 



 

[1] Represents operations not considered to be a reportable segment and/or general operating expenses of the Company.

 

 

6.

The following information is provided in connection with the sales of available for sale securities:


 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

2005

 

2004

 

 


 


 


 

 

Proceeds

 

$

 

$

26,149,573

 

 

 

 

 

 

 

 

 

 

 

Gross Gains

 

 

 

 

285,918

 

 

 

 

 

 

 

 

 

 

 

Gross Losses

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2005

 

2004

 

 


 


 


 

 

Proceeds

 

$

2,932,250

 

$

73,254,718

 

 

 

 

 

 

 

 

 

 

 

Gross Gains

 

 

196,680

 

 

970,722

 

 

 

 

 

 

 

 

 

 

 

Gross Losses

 

 

 

 

 

11



STERLING BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

 

 

7.

The following table sets forth components of net periodic benefit cost and net benefit cost for the Company’s noncontributory defined benefit pension plan and unfunded supplemental retirement plan:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

 


 


 

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPONENTS OF NET PERIODIC COST

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Cost

 

$

395,231

 

$

388,090

 

$

1,202,917

 

$

1,191,131

 

 

Interest Cost

 

 

559,634

 

 

492,931

 

 

1,578,620

 

 

1,507,418

 

 

Expected return on plan assets

 

 

(480,328

)

 

(417,379

)

 

(1,365,426

)

 

(1,292,898

)

 

Amortization of prior service cost

 

 

18,324

 

 

19,331

 

 

56,556

 

 

57,993

 

 

Recognized actuarial loss

 

 

291,769

 

 

216,556

 

 

706,477

 

 

643,647

 

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost

 

 

784,630

 

 

699,529

 

 

2,179,144

 

 

2,107,291

 

 

Settlement gain

 

 

 

 

 

 

 

 

(1,331,190

)

 

 

 



 



 



 



 

 

Net benefit cost

 

$

784,630

 

$

699,529

 

$

2,179,144

 

$

776,101

 

 

 

 



 



 



 



 


 

 

 

The Company contributed $3,000,000 to the defined benefit pension plan as of September 30, 2005.

 

 

8.

SFAS No. 123R, Share-Based Payment, will be effective for the Company beginning January 1, 2006. SFAS No. 123R provides alternative transition methods, and the Company has not yet determined which transition method it will apply upon adoption of SFAS No. 123R. The impact on the Company’s consolidated financial statements will depend on the transition method selected.

 

 

9.

In May, 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, Accounting Changes and Error Corrections. This statement replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. SFAS No. 154 establishes retrospective application as the required method for reporting a voluntary change in accounting principle and for adopting a new accounting pronouncement in the unusual instance that the pronouncement does not include specific transition guidance. SFAS No. 154 provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The reporting of a correction of an error by restating previously issued financial statements is also addressed by SFAS No. 154. SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Company expects to adopt SFAS No. 154 on January 1, 2006.

12



 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following commentary presents management’s discussion and analysis of the financial condition and results of operations of Sterling Bancorp (“the parent company”), a financial holding company under the Gramm-Leach-Bliley Act of 1999, and its subsidiaries, principally Sterling National Bank (“the bank”). Throughout this discussion and analysis, the term “the Company” refers to Sterling Bancorp and its subsidiaries. This discussion and analysis should be read in conjunction with the consolidated financial statements and supplemental data contained elsewhere in this quarterly report and the Company’s annual report on Form 10-K for the year ended December 31, 2004. Certain reclassifications have been made to prior years’ financial data to conform to current financial statement presentations as well as to reflect the effect of the six-for-five stock split effected on December 8, 2004.

OVERVIEW

The Company provides a broad range of financial products and services, including business and consumer loans, commercial and residential mortgage lending and brokerage, asset-based financing, factoring/accounts receivable management services, deposit services, trade financing, equipment leasing, trust and estate administration, and investment management services. The Company has operations in New York, New Jersey, Virginia and North Carolina and conducts business throughout the United States. The general state of the U.S. economy and, in particular, economic and market conditions in the metropolitan New York area have a significant impact on loan demand, the ability of borrowers to repay these loans and the value of any collateral securing these loans and may also affect deposit levels. Accordingly, future general economic conditions are a key uncertainty that management expects will materially affect the Company’s results of operations.

For the three months ended September 30, 2005, the bank’s average earning assets represented approximately 96.5% of the Company’s average earning assets. Loans represented 58.4% and investment securities represented 41.0% of the bank’s average earning assets for the three months ended September 30, 2005.

For the nine months ended September 30, 2005, the bank’s average earning assets represented approximately 96.5% of the Company’s average earning assets. Loans represented 57.0% and investment securities represented 42.0% of the bank’s average earning assets for the nine months ended September 30, 2005.

The Company’s primary source of earnings is net interest income, and its principal market risk exposure is interest rate risk. The Company is not able to predict market interest rate fluctuations, and its asset-liability management strategy may not prevent interest rate changes from having a material adverse effect on the Company’s results of operations and financial condition.

Although management endeavors to minimize the credit risk inherent in the Company’s loan portfolio, it must necessarily make various assumptions and judgments about the collectibility of the loan portfolio based on its experience

13



and evaluation of economic conditions. If such assumptions or judgments prove to be incorrect, the current allowance for loan losses may not be sufficient to cover loan losses and additions to the allowance may be necessary, which would have a negative impact on net income.

There is intense competition in all areas in which the Company conducts its business. The Company competes with banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions. Many of these competitors have substantially greater resources and lending limits and provide a wider array of banking services. To a limited extent, the Company also competes with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. Competition is based on a number of factors, including prices, interest rates, service, availability of products, and geographic location.

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.

INCOME STATEMENT ANALYSIS

Net interest income, which represents the difference between interest earned on interest-earning assets and interest incurred on interest-bearing liabilities, is the Company’s primary source of earnings. Net interest income can be affected by changes in market interest rates as well as the level and composition of assets, liabilities and shareholders’ equity. Net interest spread is the difference between the average rate earned, on a tax-equivalent basis, on interest-earning assets and the average rate paid on interest-bearing liabilities. The net yield on interest-earning assets (“net interest margin”) is calculated by dividing tax-equivalent net interest income by average interest-earnings assets. Generally, the net interest margin will exceed the net interest spread because a portion of interest-earning assets are funded by various noninterest-bearing sources, principally noninterest-bearing deposits and shareholders’ equity. The increases (decreases) in the components of interest income and interest expense, expressed in terms of fluctuation in average volume and rate, are provided in the Rate/Volume Analysis shown on pages 27 and 28. Information as to the components of interest income and interest expense and average rates is provided in the Average Balance Sheets shown on pages 25 and 26.

Comparisons of the Three Months Ended September 30, 2005 and 2004

The Company reported net income for the three months ended September 30, 2005 of $6.3 million, representing $0.33 per share, calculated on a diluted basis, compared to $6.6 million, or $0.35 per share calculated on a diluted basis, for the third quarter of 2004. Net income benefitted from continued growth in net interest income and higher noninterest income, but these benefits were more than offset by increases in noninterest expenses, in the provision for income taxes and in the provision for loan losses.

14



Net Interest Income

Net interest income, on a tax-equivalent basis, increased to $21.5 million for the third quarter of 2005 from $20.0 million for the 2004 period, due to higher average earning assets outstanding coupled with higher average yield on loans partially offset by higher balances for interest-bearing deposits coupled with higher rates paid on interest-bearing deposit balances and borrowed funds. The net interest margin, on a tax-equivalent basis, was 4.76% for the third quarter of 2005 compared to 4.84% for the 2004 period. The net interest margin was affected by the higher interest rate environment in 2005 and by increases in average investment securities, loan outstandings and noninterest-bearing deposits, offset by the impact of higher average interest-bearing deposits.

Total interest income, on a tax-equivalent basis, aggregated $29.4 million for the third quarter of 2005, up from $25.0 million for the 2004 period. The tax-equivalent yield on interest-earning assets was 6.54% for the third quarter of 2005 compared to 6.11% for the 2004 period.

Interest earned on the loan portfolio amounted to $21.2 million for the third quarter of 2005, up $4.3 million from a year ago. Average loan balances amounted to $1,087.3 million, an increase of $135.4 million from an average of $951.9 million in the prior year period. The increase in average loans (across virtually all segments of the Company’s loan portfolio), primarily due to the Company’s business development activities and the ongoing consolidation of banks in the Company’s marketing area, accounted for $2.6 million of the $4.3 million increase in interest earned on loans. The increase in the yield on the domestic loan portfolio to 8.02% for the third quarter of 2005 from 7.31% for the 2004 period was primarily attributable to the mix of average outstanding balances among the components of the loan portfolio and the higher interest rate environment in 2005.

Interest earned on the securities portfolio, on a tax-equivalent basis, increased to $8.1 million for the third quarter of 2005 from $8.0 million in the prior year period. Average outstandings increased to $719.8 million (39.6% of average earning assets for the third quarter of 2005) from $682.7 million (41.2% of average earning assets) in the prior year period. The average life of the securities portfolio was approximately 3.8 years at September 30, 2005 compared to 4.2 years at September 30, 2004, reflecting the impact of purchases. The decrease in yields on most of the securities portfolio reflects the impact of the continued flattening of the yield curve.

Total interest expense increased to $7.9 million for the third quarter of 2005 from $5.1 million for the 2004 period, primarily due to higher rates paid for interest-bearing deposits and for borrowed funds and higher average balances for interest-bearing deposits.

Interest expense on deposits increased to $5.0 million for the third quarter of 2005 from $3.0 million for the 2004 period primarily due to the higher interest rate environment in 2005, coupled with an increase in average balances, primarily for time deposits. Average rate paid on interest-bearing deposits was 2.06%

15



which was 65 basis points higher than the prior year period. Average interest-bearing deposit balances increased to $953.1 million for the third quarter of 2005 from $853.3 million in the 2004 period, primarily as a result of the Company’s branching initiatives and other business development activities.

Interest expense on borrowings increased to $2.9 million for the third quarter of 2005 from $2.0 million for the 2004 period, primarily due to the higher interest rate environment during 2005. The average rate paid on borrowed funds was 3.71% which was 85 basis points higher than the prior year period.

Provision for Loan Losses

Based on management’s continuing evaluation of the loan portfolio (discussed under “Asset Quality” below), the provision for loan losses for the third quarter of 2005 increased to $2.5 million from $2.3 million for the prior year period. Factors affecting the level of provision included the growth in the loan portfolios, changes in general economic conditions and the amount of nonaccrual loans.

Noninterest Income

Noninterest income increased to $9.4 million for the third quarter of 2005 from $9.2 million in the 2004 period, primarily due to higher revenues from mortgage banking activities and fees for deposit services. Partially offsetting those increases were lower gains on sales of available for sale securities and fees for factoring services.

Noninterest Expenses

Noninterest expenses increased $1.6 million for the third quarter of 2005 when compared to the 2004 period. The increase was primarily due to higher salaries and professional fees related to compliance efforts and investments in the Sterling franchise, including the new branches, with higher expenses related to salaries, equipment and occupancy costs. These increases were partially offset by a reversal of $1.0 million of litigation settlement costs originally charged to noninterest expenses in 2001. The increase in other expenses was principally due to increases in appraisal fees, credit reports, mortgage taxes, insurance and interest on potential tax liability.

Provision for Income Taxes

The provision for income taxes for the third quarter of 2005 increased to $3.9 million from $3.6 million for the prior year period, primarily due to the higher effective tax rate in 2005.

Comparisons of the Nine Months Ended September 30, 2005 and 2004

The Company reported net income for the nine months ended September 30, 2005 of $18.1 million, representing $0.96 per share, calculated on a diluted basis, compared to $18.3 million, or $0.96 per share calculated on a diluted basis, for the first nine months of 2004. Net income benefitted from continued growth in net interest income, a lower provision for loan losses and higher noninterest income, which were more than offset by increases in noninterest expenses and in the provision for income taxes.

16



Net Interest Income

Net interest income, on a tax-equivalent basis, increased to $63.4 million for the first nine months of 2005 from $58.4 million for the 2004 period, due to higher average earning assets outstanding coupled with higher average yield on loans partially offset by higher balances for interest-bearing deposits coupled with higher rates paid on interest-bearing deposit balances and borrowed funds. The net interest margin, on a tax-equivalent basis, was 4.92% for the first nine months of 2005, unchanged from the 2004 period. Net interest margin was affected by the higher interest rate environment in 2005 and by increases in average loan outstandings and noninterest-bearing deposits, substantially offset by the impact of higher average interest-bearing deposits.

Total interest income, on a tax-equivalent basis, aggregated $83.8 million for the first nine months of 2005, up from $72.5 million for the 2004 period. The tax-equivalent yield on interest-earning assets was 6.52% for the first nine months of 2005 compared to 6.13% for the 2004 period.

Interest earned on the loan portfolio amounted to $59.1 million for the first nine months of 2005, up $11.7 million from a year ago. Average loan balances amounted to $1,033.4 million, an increase of $128.0 million from an average of $905.4 million in the prior year period. The increase in average loans (across virtually all segments of the Company’s loan portfolio), primarily due to the Company’s business development activities and the ongoing consolidation of banks in the Company’s marketing area, accounted for $7.1 million of the $11.7 million increase in interest earned on loans. The increase in the yield on the domestic loan portfolio to 8.04% for the first nine months of 2005 from 7.38% for the 2004 period was primarily attributable to the mix of average outstanding balances among the components of the loan portfolio and the higher interest rate environment in 2005.

Interest earned on the securities portfolio, on a tax-equivalent basis, decreased to $24.4 million for the first nine months of 2005 from $25.0 million in the prior year period. The decrease in yields on most of the securities portfolio reflects the impact of the continued flattening of the yield curve. Average outstandings increased to $715.5 million (40.5% of average earning assets for the first nine months of 2005) from $698.3 million (43.1% of average earning assets) in the prior year period. The average life of the securities portfolio was approximately 3.8 years at September 30, 2005 compared to 4.2 years at September 30, 2004, reflecting the impact of purchases.

Total interest expense increased to $20.3 million for the first nine months of 2005 from $14.1 million for the 2004 period, primarily due to higher rates paid for interest-bearing deposits and for borrowed funds and higher average balances for interest-bearing deposits.

Interest expense on deposits increased to $12.5 million for the first nine months of 2005 from $7.9 million for the 2004 period primarily due to the higher interest rate environment in 2005, coupled with an increase in average balances, primarily for time deposits. Average rate paid on interest-bearing deposits was 1.81% which was 52 basis points higher than the prior year period. Average

17



interest-bearing deposit balances increased to $924.4 million for the first nine months of 2005 from $815.3 million in the 2004 period, primarily as a result of the Company’s branching initiatives and other business development activities.

Interest expense on borrowings increased to $7.8 million for the first nine months of 2005 from $6.2 for the 2004 period, primarily due to the higher interest rate environment during 2005. The average rate paid on borrowed funds was 3.42% which was 69 basis points higher than the prior year period.

Noninterest Income

Noninterest income increased to $26.7 million for the first nine months of 2005 from $25.9 million in the 2004 period, primarily due to higher revenues from mortgage banking activities, bank owned life insurance and fees for deposit services. Partially offsetting those increases were lower gains on sales of available for sale securities and fees for factoring services.

Noninterest Expenses

Noninterest expenses increased $4.6 million for the first nine months of 2005 when compared to the 2004 period. The increase was primarily due to higher salaries and professional fees related to compliance efforts and investments in the Sterling franchise, including the new branches, with higher expenses related to salaries, equipment and occupancy costs. These increases were partially offset by a reversal during the third quarter of 2005 of $1.0 million of litigation settlement costs originally charged to noninterest expenses in 2001. The increase in other expenses was principally due to increases in appraisal fees, credit reports, mortgage taxes, insurance and interest on potential tax liability.

Provision for Income Taxes

The provision for income taxes for the first nine months of 2005 increased by $1.5 million from the 2004 period. The lower provision for taxes in the 2004 period was due primarily to the resolution, during the second quarter of 2004, of certain state tax issues for the years 1999-2001.

BALANCE SHEET ANALYSIS

Securities

The Company’s securities portfolios are comprised principally of mortgage-backed securities of U.S. government corporations and government sponsored enterprises. At September 30, 2005, the Company’s portfolio of securities totaled $707.0 million, of which mortgage-backed securities and collateralized mortgage obligations of U.S. government corporations and government sponsored enterprises having an average life of approximately 4.1 years amounted to $592.0 million. The Company has the intent and ability to hold to maturity securities classified as “held to maturity.” These securities are carried at cost, adjusted for amortization of premiums and accretion of discounts. The gross unrealized gains and losses on “held to maturity” securities were $1.5 million and $7.5 million, respectively.

18



Securities classified as “available for sale” may be sold in the future, prior to maturity. These securities are carried at market value. Net aggregate unrealized gains or losses on these securities are included in a valuation allowance account and are shown net of taxes, as a component of shareholders’equity. “Available for sale” securities includes gross unrealized gains of $0.8 million and gross unrealized losses of $3.8 million. 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.

The following table presents information regarding securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

Gross

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Market

 

September 30, 2005

 

Cost

 

Gains

 

Losses

 

Value

 


 


 


 


 


 

 

Mortgage-Backed Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMOs (Federal Home Loan Mortgage Corporation)

 

$

35,374,264

 

$

 

$

1,348,910

 

$

34,025,354

 

Federal National Mortgage Association

 

 

58,647,440

 

 

122,940

 

 

1,056,250

 

 

57,714,130

 

Federal Home Loan Mortgage Corporation

 

 

49,535,706

 

 

46,899

 

 

787,574

 

 

48,795,031

 

Government National Mortgage Association

 

 

6,125,964

 

 

232,420

 

 

4,755

 

 

6,353,629

 

 

 



 



 



 



 

Total Mortgage-Backed Securities

 

 

149,683,374

 

 

402,259

 

 

3,197,489

 

 

146,888,144

 

Federal Home Loan Bank

 

 

14,996,818

 

 

 

 

303,068

 

 

14,693,750

 

Federal Farm Credit Bank

 

 

10,000,000

 

 

 

 

203,125

 

 

9,796,875

 

Obligations of state and political institutions

 

 

26,567,076

 

 

385,368

 

 

65,816

 

 

26,886,628

 

Other debt securities

 

 

5,000,000

 

 

 

 

 

 

5,000,000

 

Federal Reserve Bank and other equity securities

 

 

7,619,242

 

 

18,481

 

 

 

 

7,637,723

 

 

 



 



 



 



 

Total

 

$

213,866,510

 

$

806,108

 

$

3,769,498

 

$

210,903,120

 

 

 



 



 



 



 

19



The following table presents information regarding securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Carrying

 

Unrealized

 

Unrealized

 

Market

 

September 30, 2005

 

Value

 

Gains

 

Losses

 

Value

 


 


 


 


 


 

 

Mortgage-Backed Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

CMOs (Federal National Mortgage Association)

 

$

10,843,086

 

$

 

$

365,230

 

$

10,477,856

 

CMOs (Federal Home Loan Mortgage Corporation)

 

 

32,501,879

 

 

 

 

929,786

 

 

31,572,093

 

Federal National Mortgage Association

 

 

207,022,218

 

 

638,542

 

 

2,639,922

 

 

205,020,838

 

Federal Home Loan Mortgage Corporation

 

 

175,311,844

 

 

234,919

 

 

2,922,153

 

 

172,624,610

 

Government National Mortgage Association

 

 

19,447,078

 

 

663,115

 

 

464

 

 

20,109,729

 

 

 



 



 



 



 

Total Mortgage-Backed Securities

 

 

445,126,105

 

 

1,536,576

 

 

6,857,555

 

 

439,805,126

 

 

Federal Home Loan Bank

 

 

29,981,283

 

 

 

 

303,158

 

 

29,678,125

 

Federal Farm Credit Bank

 

 

20,000,000

 

 

 

 

379,688

 

 

19,620,312

 

Debt securities issued by foreign governments

 

 

1,000,000

 

 

 

 

 

 

1,000,000

 

 

 



 



 



 



 

Total

 

$

496,107,388

 

$

1,536,576

 

$

7,540,401

 

$

490,103,563

 

 

 



 



 



 



 

20



Loan Portfolio

A 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 of and the designation of lending limits for each borrower. The portfolio strategies include seeking industry and loan size diversification in order to minimize credit exposure and originating loans in markets with which the Company is familiar.

The Company’s commercial and industrial loan portfolio represents approximately 55% of all loans. Loans in this category are typically made to small and medium-sized businesses and range between $25,000 and $10 million. Sources of repayment are from the borrower’s operating profits, cash flows and liquidation of pledged collateral. Based on underwriting standards, loans may be secured in whole or in part by collateral such as liquid assets, accounts receivable, equipment, inventory, and real property. The Company’s real estate loan portfolio, which represents approximately 28% of all loans, is secured by mortgages on real property located principally in the states of New York and Virginia. The Company’s leasing portfolio, which consists of finance leases for various types of business equipment, represents approximately 15% of all 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 loans held for sale and loans held in portfolio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 


 

 

 

2005

 

2004

 

 

 


 


 

 

 

($ in thousands)

 

 

 

Balances

 

% of
Total

 

Balances

 

% of
Total

 

 

 


 


 


 


 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

635,770

 

 

55.3

%

$

584,754

 

 

58.1

%

Equipment lease financing

 

 

176,316

 

 

15.3

 

 

159,175

 

 

15.8

 

Real estate - residential mortgage

 

 

196,151

 

 

17.0

 

 

150,651

 

 

15.0

 

Real estate - commercial mortgage

 

 

118,574

 

 

10.3

 

 

94,706

 

 

9.4

 

Real estate - construction

 

 

2,309

 

 

0.2

 

 

2,329

 

 

0.2

 

Installment - individuals

 

 

11,766

 

 

1.0

 

 

15,268

 

 

1.5

 

Loans to depository institutions

 

 

10,000

 

 

0.9

 

 

 

 

 

 

 

 



 



 



 



 

 

Loans, net of unearned discounts

 

$

1,150,886

 

 

100.0

%

$

1,006,883

 

 

100.0

%

 

 



 



 



 



 

Asset Quality

Intrinsic to the lending process is the possibility of loss. In times of economic slowdown, the risk of loss 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 depend on current and expected economic conditions, the financial condition of borrowers, the realization of collateral, and the credit management process.

21



Management views the allowance for loan losses as a critical accounting policy due to its subjectivity. 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 a management evaluation process 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, an assessment of current and expected economic conditions and changes in the size and character of the loan portfolio. Other data utilized by management in determining the adequacy of the allowance for loan losses includes, but is not limited to, the results of regulatory reviews, the amount of, trend of and/or borrower characteristics on loans that are identified as requiring special attention as part of the credit review process, and peer group comparisons. The impact of this other data might result in an allowance which will be greater than that indicated by the evaluation process previously described. The allowance reflects management’s evaluation both of loans presenting identified loss potential and of the risk inherent in various components of the loan 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 September 30, 2005, the ratio of the allowance to loans held in portfolio, net of unearned discounts, was 1.47% and the allowance was $16.2 million. At such date, the Company’s nonaccrual loans amounted to $4.0 million; $0.7 million of such loans was judged to be impaired within the scope of SFAS No. 114. Loans 90 days past due and still accruing amounted to $0.8 million. Nonaccrual loans and loans 90 days past due and still accruing include leases, in the amount of $0.5 million and $0.6 million, respectively, of telecommunications equipment from a company that went into bankruptcy in July 2004. The service provider to the lessees discontinued service, resulting in the failure of certain lessees to make payments. While pursuing collection of the lease payments, past due amounts accrue. Legal action is typically commenced against lessees whose accounts are not paid within 180 days and are placed in nonaccrual status. Lessees remain unconditionally obligated to make payments. All are creditworthy and personally guaranteed; the reported delinquencies are not due to credit issues. Based on the foregoing, as well as management’s judgment as to the current risks inherent in loans held in portfolio, the Company’s allowance for loan losses was deemed adequate to absorb all reasonably anticipated losses on specifically known and other possible credit risks associated with the portfolio as of September 30, 2005. Net losses within loans held in 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 the first nine months of 2005. Potential problem loans, which are loans that are currently performing under present loan repayment terms but where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of the borrowers to continue to comply with the present repayment terms, aggregated $2.6 million at September 30, 2005.

22



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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 


 

 

 

2005

 

2004

 

 

 


 


 

 

 

($ in thousands)

 

 

 

Balances

 

% of
Total

 

Balances

 

% of
Total

 

 

 


 


 


 


 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand

 

$

540,030

 

 

36.6

%

$

424,534

 

 

32.6

%

NOW

 

 

158,660

 

 

10.7

 

 

111,868

 

 

8.6

 

Savings

 

 

26,939

 

 

1.8

 

 

29,488

 

 

2.3

 

Money market

 

 

226,202

 

 

15.3

 

 

226,655

 

 

17.4

 

Time deposits

 

 

522,643

 

 

35.4

 

 

503,824

 

 

38.8

 

 

 



 



 



 



 

 

Total domestic deposits

 

 

1,474,474

 

 

99.8

 

 

1,296,369

 

 

99.7

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

Time deposits

 

 

3,018

 

 

0.2

 

 

3,000

 

 

0.3

 

 

 



 



 



 



 

 

Total deposits

 

$

1,477,492

 

 

100.0

%

$

1,299,369

 

 

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 25 and 26.

CAPITAL

The Company and the bank are subject to risk-based capital regulations which quantitatively measure capital against risk-weighted assets, including certain off-balance sheet items. These regulations define the elements of the Tier 1 and Tier 2 components of Total Capital 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 29. In addition, the bank is subject to the Federal Deposit Insurance Corporation Improvement Act of 1981 (“FDICIA”) which imposes a number of mandatory supervisory measures. Among other matters, five capital categories, ranging from “well capitalized” to “critically under capitalized”, 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” bank must maintain minimum leverage, Tier 1 and Total Capital ratios of 5%, 6% and 10%, respectively. The Federal Reserve Board applies comparable tests for holding companies such as the Company. At September 30, 2005, the Company and the bank exceeded the requirements for “well capitalized” institutions.

 

23



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report, 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” as defined in the Securities Exchange Act of 1934. 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. Our actual results and financial position may differ 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 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 acts of war and terrorism and their impact on economic conditions; 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; changes, particularly declines, in general economic conditions and in the local economies in which the Company operates; the financial condition of the Company’s borrowers; competitive pressures on loan and deposit pricing and demand; changes in technology and their impact on the marketing of 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 the Company’s products and services; the impact of changes in the financial services laws and regulations (including laws concerning taxes, banking, securities and insurance); changes in accounting principles, policies and guidelines; the success of the Company at managing the risks involved in the foregoing as well as other risks and uncertainties indicated from time to time in press releases and other public filings. The foregoing list of important factors is not exclusive, and we will not update any forward-looking statement, whether written or oral, that may be made from time to time.

24



STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Three Months Ended September 30,
(Unaudited)
(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 


 


 

 

 

Average
Balance

 

Interest

 

Average
Rate

 

Average
Balance

 

Interest

 

Average
Rate

 

 

 


 


 


 


 


 


 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits with other banks

 

$

3,455

 

$

16

 

 

1.45

%

$

3,799

 

$

6

 

 

0.62

%

  

Securities available for sale

 

 

190,371

 

 

2,055

 

 

4.32

 

 

266,551

 

 

2,885

 

 

4.33

 

Securities held to maturity

 

 

504,688

 

 

5,626

 

 

4.46

 

 

386,851

 

 

4,624

 

 

4.78

 

Securities tax-exempt [2]

 

 

24,701

 

 

416

 

 

6.68

 

 

29,267

 

 

528

 

 

7.18

 

 

 



 



 

 

 

 



 



 

 

 

 

Total investment securities

 

 

719,760

 

 

8,097

 

 

4.50

 

 

682,669

 

 

8,037

 

 

4.71

 

Federal funds sold

 

 

6,935

 

 

61

 

 

3.43

 

 

19,620

 

 

73

 

 

1.45

 

Loans, net of unearned discounts [3]

 

 

1,087,282

 

 

21,222

 

 

8.02

 

 

951,941

 

 

16,898

 

 

7.31

 

 

 



 



 

 

 

 



 



 

 

 

 

TOTAL INTEREST-EARNING ASSETS

 

 

1,817,432

 

 

29,396

 

 

6.54

%

 

1,658,029

 

 

25,014

 

 

6.11

%

 

 

 

 

 



 



 

 

 

 



 



 

Cash and due from banks

 

 

60,457

 

 

 

 

 

 

 

 

53,476

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(17,100

)

 

 

 

 

 

 

 

(16,158

)

 

 

 

 

 

 

Goodwill

 

 

21,158

 

 

 

 

 

 

 

 

21,158

 

 

 

 

 

 

 

Other assets

 

 

82,170

 

 

 

 

 

 

 

 

70,050

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,964,117

 

 

 

 

 

 

 

$

1,786,555

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings

 

$

28,148

 

 

31

 

 

0.44

%

$

29,991

 

 

28

 

 

0.37

%

NOW

 

 

143,101

 

 

278

 

 

0.77

 

 

133,357

 

 

162

 

 

0.48

 

Money market

 

 

247,613

 

 

873

 

 

1.40

 

 

217,612

 

 

348

 

 

0.64

 

Time

 

 

531,234

 

 

3,763

 

 

2.81

 

 

469,319

 

 

2,469

 

 

2.09

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time

 

 

3,016

 

 

8

 

 

1.42

 

 

3,000

 

 

8

 

 

1.10

 

 

 



 



 

 

 

 



 



 

 

 

 

Total interest-bearing deposits

 

 

953,112

 

 

4,953

 

 

2.06

 

 

853,279

 

 

3,015

 

 

1.41

 

 

 



 



 

 

 

 



 



 

 

 

 

Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase - customers

 

 

87,049

 

 

548

 

 

2.50

 

 

90,654

 

 

272

 

 

1.19

 

Securities sold under agreements to repurchase - dealers

 

 

57,755

 

 

518

 

 

3,56

 

 

14,910

 

 

54

 

 

1.43

 

Federal funds purchased

 

 

23,438

 

 

210

 

 

3.55

 

 

2,500

 

 

9

 

 

1.44

 

Commercial paper

 

 

34,341

 

 

237

 

 

2.74

 

 

34,394

 

 

107

 

 

1.23

 

Other short-term debt

 

 

6,109

 

 

58

 

 

3.75

 

 

6,293

 

 

34

 

 

2.15

 

Long-term debt

 

 

105,774

 

 

1,357

 

 

5.13

 

 

135,774

 

 

1,559

 

 

4.59

 

 

 



 



 

 

 

 



 



 

 

 

 

Total borrowings

 

 

314,466

 

 

2,928

 

 

3.71

 

 

284,525

 

 

2,035

 

 

2.86

 

 

 



 



 

 

 

 



 



 

 

 

 

TOTAL INTEREST-BEARING LIABILITIES

 

 

1,267,578

 

 

7,881

 

 

2.47

%

 

1,137,804

 

 

5,050

 

 

1.77

%

 

 

 

 

 



 



 

 

 

 



 



 

Noninterest-bearing deposits

 

 

461,418

 

 

 

 

 

 

 

 

424,974

 

 

 

 

 

 

 

Other liabilities

 

 

82,278

 

 

 

 

 

 

 

 

83,603

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Total liabilities

 

 

1,811,274

 

 

 

 

 

 

 

 

1,646,381

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Shareholders’ equity

 

 

152,843

 

 

 

 

 

 

 

 

140,174

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,964,117

 

 

 

 

 

 

 

$

1,786,555

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

Net interest income/spread

 

 

 

 

 

21,515

 

 

4.07

%

 

 

 

 

19,964

 

 

4.34

%

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Net yield on interest-earning assets (margin)

 

 

 

 

 

 

 

 

4.76

%

 

 

 

 

 

 

 

4.84

%

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Less: Tax equivalent adjustment

 

 

 

 

 

162

 

 

 

 

 

 

 

 

202

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

Net interest income

 

 

 

 

$

21,353

 

 

 

 

 

 

 

$

19,762

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 


 

 

[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 amounts for prior periods to conform to the current presentation.

 

[2]

Interest on tax-exempt securities is presented on a tax-equivalent basis.

 

[3]

Includes loans held for sale and loans held in portfolio; all loans are domestic. Nonaccrual loans are included in amounts outstanding and income has been included to the extent earned.

25



STERLING BANCORP AND SUBSIDIARIES
Average Balance Sheets [1]
Nine Months Ended September 30,
(Unaudited)
(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 


 


 

 

 

Average
Balance

 

Interest

 

Average
Rate

 

Average
Balance

 

Interest

 

Average
Rate

 

 

 


 


 


 


 


 


 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits with other banks

 

$

3,000

 

$

38

 

 

1.71

%

$

3,151

 

$

13

 

 

0.55

%

  

Securities available for sale

 

 

197,229

 

 

6,454

 

 

4.36

 

 

282,504

 

 

9,364

 

 

4.37

 

Securities held to maturity

 

 

492,838

 

 

16,569

 

 

4.48

 

 

385,548

 

 

14,008

 

 

4.84

 

Securities tax-exempt [2]

 

 

25,415

 

 

1,350

 

 

7.10

 

 

30,217

 

 

1,619

 

 

7.16

 

 

 



 



 

 

 

 



 



 

 

 

 

Total investment securities

 

 

715,482

 

 

24,373

 

 

4.54

 

 

698,269

 

 

24,991

 

 

4.75

 

Federal funds sold

 

 

13,810

 

 

283

 

 

2.71

 

 

14,361

 

 

129

 

 

1.18

 

Loans, net of unearned discounts [3]

 

 

1,033,435

 

 

59,076

 

 

8.04

 

 

905,402

 

 

47,392

 

 

7.38

 

 

 



 



 

 

 

 



 



 

 

 

 

TOTAL INTEREST-EARNING ASSETS

 

 

1,765,727

 

 

83,770

 

 

6.52

%

 

1,621,183

 

 

72,525

 

 

6.13

%

 

 

 

 

 



 



 

 

 

 



 



 

Cash and due from banks

 

 

61,895

 

 

 

 

 

 

 

 

59,477

 

 

 

 

 

 

 

Allowance for loan losses

 

 

(17,332

)

 

 

 

 

 

 

 

(15,694

)

 

 

 

 

 

 

Goodwill

 

 

21,158

 

 

 

 

 

 

 

 

21,158

 

 

 

 

 

 

 

Other assets

 

 

80,433

 

 

 

 

 

 

 

 

70,370

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,911,881

 

 

 

 

 

 

 

$

1,756,494

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings

 

$

28,583

 

 

85

 

 

0.40

%

$

31,851

 

 

93

 

 

0.39

%

NOW

 

 

146,845

 

 

740

 

 

0.67

 

 

134,237

 

 

463

 

 

0.46

 

Money market

 

 

229,700

 

 

1,752

 

 

1.02

 

 

210,257

 

 

909

 

 

0.58

 

Time

 

 

516,273

 

 

9,889

 

 

2.56

 

 

435,991

 

 

6,373

 

 

1.95

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time

 

 

3,010

 

 

25

 

 

1.09

 

 

3,000

 

 

24

 

 

1.09

 

 

 



 



 

 

 

 



 



 

 

 

 

Total interest-bearing deposits

 

 

924,411

 

 

12,491

 

 

1.81

 

 

815,336

 

 

7,862

 

 

1.29

 

 

 



 



 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase - customers

 

 

86,540

 

 

1,302

 

 

2.01

 

 

81,625

 

 

702

 

 

1.15

 

Securities sold under agreements to repurchase - dealers

 

 

50,237

 

 

1,187

 

 

3.16

 

 

34,018

 

 

305

 

 

1.20

 

Federal funds purchased

 

 

15,739

 

 

388

 

 

3.25

 

 

8,580

 

 

72

 

 

1.11

 

Commercial paper

 

 

35,714

 

 

620

 

 

2.32

 

 

28,733

 

 

248

 

 

1.15

 

Other short- term debt

 

 

4,901

 

 

124

 

 

3.38

 

 

16,603

 

 

240

 

 

1.93

 

Long-term debt

 

 

112,074

 

 

4,212

 

 

5.01

 

 

135,774

 

 

4,679

 

 

4.59

 

 

 



 



 

 

 

 



 



 

 

 

 

Total borrowings

 

 

305,205

 

 

7,833

 

 

3.42

 

 

305,333

 

 

6,246

 

 

2.73

 

 

 



 



 

 

 

 



 



 

 

 

 

TOTAL INTEREST-BEARING LIABILITIES

 

 

1,229,616

 

 

20,324

 

 

2.21

%

 

1,120,669

 

 

14,108

 

 

1.68

%

 

 

 

 

 



 



 

 

 

 



 



 

Noninterest-bearing deposits

 

 

448,038

 

 

 

 

 

 

 

 

411,916

 

 

 

 

 

 

 

Other liabilities

 

 

83,924

 

 

 

 

 

 

 

 

81,928