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Section 1: DEF 14A (DEF 14A)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.         )

 

x Filed by the Registrant   ¨ Filed by a Party other than the Registrant
 
Check the appropriate box:
¨  Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material under §240.14a-12

 

 
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: Time: Place:
May 29, 2019 11:00 a.m. Virtual meeting; please visit www.virtualshareholdermeeting.com/STL2019

 

April 17, 2019

 

Dear Stockholders:

 

The annual meeting of stockholders (the “Annual Meeting”) of Sterling Bancorp (the “Company”) will be held on Wednesday, May 29, 2019, at 11:00 a.m. Eastern Time. This year’s Annual Meeting will be a virtual meeting of stockholders. You will be able to participate in the meeting, vote, and submit questions during the meeting via live webcast by visiting http://www.virtualshareholdermeeting.com/STL2019. A secure control number that will allow you to attend the meeting electronically can be found on the enclosed proxy card or on the Notice of Internet Availability of Proxy Materials. Whether or not you plan to participate in the meeting, the Board of Directors strongly encourages you to review the enclosed information and vote your shares. Your vote is important.

 

The Company’s performance during 2018 was highlighted by significant accomplishments that reflect our commitment to enhancing stockholder value. The Company continued making progress in its strategy of building a high performing regional bank that delivers strong growth and profitability. The Board of Directors of the Company (the “Board”) believes that the Company’s executive compensation and corporate governance policies will contribute to the Company’s ability to generate strong operating and financial performance and deliver short-term and long-term value for stockholders.

 

Recent 2019 Highlights

 

ØSterling National Bank Ranked #36 in Forbes’ 2019 List of America’s Best Banks. In January 2019, Sterling National Bank (the “Bank”) was ranked #36 by Forbes annual ranking of America’s Best Banks. It is the third year in a row that the Bank has ranked in the top 40. This list gauges the financial condition of each of America’s 100 largest banks and thrifts by assets and is based on a combination of ten key metrics related to growth, profitability, capital adequacy and asset quality.

 

Highlights for the Year Ended December 31, 2018

 

ØStrong Growth Momentum in 2018. For the year ended December 31, 2018, reported net income available to common stockholders was $439.3 million, or $1.95 per diluted common share, compared to net income available to common stockholders of $91.0 million, or $0.58 per diluted common share, for 2017. Excluding the impact of merger-related expense and other restructuring charges that were incurred in connection with the merger of Astoria Financial Corporation with and into Sterling Bancorp (the “Astoria Merger”), adjusted net income available to common stockholders was $222.0 million, or $1.40 per diluted common share, in 2017, compared to adjusted net income available to common stockholders of $449.6 million, or $2.00 per diluted common share, in 2018. This represented growth in adjusted net income available to common stockholders of 102% and growth in adjusted diluted earnings per share of 42.9% over the year ended December 31, 2017. At December 31, 2018, total assets were $31.4 billion, total portfolio loans, net, were $19.1 billion and total deposits were $21.2 billion.

 

ØSuccessful integration of Astoria Bank. During 2018, we consolidated 22 financial center locations and two back office locations, reduced personnel and completed the full conversion of Astoria Bank’s legacy deposit system and now operate on a single, fully-integrated technology platform which positions us for efficient and profitable growth.

 

ØRising Adjusted Profitability. The Company’s return on average tangible assets for the year was 1.51% and return on average tangible common equity was 17.87%. This compares to 0.52% and 6.22%, respectively, for 2017. On an adjusted basis, excluding the impact of merger-related expense and other restructuring charges, the Company’s adjusted return on average tangible assets was 1.55% and return on average tangible common equity was 18.29%. This compares to 1.27% and 15.17%, respectively, for 2017.

 

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ØSale of Residential Mortgage Loans. Consistent with our strategy to diversify our balance sheet, we announced the sale of approximately $1.6 billion in non-core, residential mortgage loans. The Company substantially completed this transaction in the first quarter of 2019 and used the proceeds from this transaction to reduce wholesale borrowings.

 

ØAcquisition of Advantage Funding on April 2, 2018. Sterling National Bank acquired Advantage Funding Management Co., Inc. (“Advantage Funding”), a leading provider of commercial vehicle and transportation financing services, with total outstanding loans and leases of $457.6 million and a diversified client base across various industry sectors and geographic markets.

 

ØStock Repurchase Program. In the fourth quarter of 2018, the Company increased the amount of shares authorized to be repurchased under the Company’s existing repurchase program to 20.0 million shares. As of December 31, 2018, the Company had repurchased a total of 9,114,771 shares under the repurchase program. In the first quarter of 2019, the Company repurchased an additional 8,002,595 shares. The Company expects to complete the full amount of the repurchase program by June 30, 2019.

 

Corporate Governance

 

The Board is committed to operating the Company in a manner aligned with our stockholders’ interests and maintaining conformity with all laws and regulations applicable to the Company’s operations. The Board believes that our proposals are consistent with best governance practices.

 

On May 22, 2018, upon approval by the stockholders at the 2018 annual meeting, the Company amended and restated its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to eliminate provisions requiring cause and a supermajority vote to remove a director. Our Board believes this aligns with recent judicial interpretations of Delaware General Corporation Law and best corporate governance practices.

 

At the annual meeting on May 22, 2018, fourteen (14) directors were elected to the Board for a one (1) year term. Director James F. Deutsch voluntarily resigned from the Board, effective December 31, 2018, for personal reasons. Another member of the Board, Robert W. Lazar, is retiring from the Board effective at the 2019 annual meeting. The remaining twelve (12) existing members of the Company’s Board will stand for re-election at the Company’s 2019 annual meeting, as well as one (1) new Board nominee.

 

Stockholder Engagement

 

The Company values its relationship with its stockholders and has expanded its engagement with investors. The Company’s executives regularly attend investor conferences and hold frequent meetings with investors. We have met with many of our institutional investors and prospective investors. We have benefited from this open dialogue and look forward to continuing this communication as we move forward.

 

Along with our Board, we wish to thank our stockholders for their continued interest and support. We also wish to thank the entire Sterling Bancorp team, as well, for their hard work and commitment in positioning the Company for even better performance going forward.

 

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Record date: You can vote if you were a common stockholder of record on April 5, 2019.

 

This notice of Annual Meeting, proxy statement, and form of proxy are being distributed and made available on or about April 17, 2019.

 

Sincerely,

 

   
Richard O’Toole Jack L. Kopnisky
Chairman of the Board of Directors President and Chief Executive Officer

 

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400 Rella Boulevard, Montebello, New York 10901

(845) 369-8040

 

NOTICE OF

ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 29, 2019

 

Notice is hereby given that the annual meeting of stockholders (the “Annual Meeting”) of Sterling Bancorp (the “Company”) will be held on Wednesday, May 29, 2019, at 11:00 a.m. Eastern Time. This year’s Annual Meeting will be a virtual meeting of stockholders. You will be able to participate in the 2019 Annual Meeting, vote, and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/STL2019. Be sure to have your 16-digit control number to enter the virtual meeting.

 

The Annual Meeting is for the purpose of considering and acting upon the:

 

1.Election of thirteen (13) directors for a one (1) year term until their successors are elected and qualified;

 

2.To approve amendments to the Sterling Bancorp 2015 Omnibus Equity and Incentive Plan (the “2015 Omnibus Plan”) to increase the number of shares reserved for issuance thereunder by 2,545,682 shares (for an aggregate 7,000,000 shares) and to effect certain tax related updates as a result of the Tax Cuts and Jobs Act of 2017 (the “TCJA”);

 

3.Approval, by advisory (non-binding) vote, of the compensation of the named executive officers;

 

4.Ratification of the appointment of Crowe LLP as the independent registered public accounting firm for the year ending December 31, 2019; and

 

5.The transaction of such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

 

IN THE CASE OF PROPOSAL 1, THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NOMINEE. FOR PROPOSALS 2, 3 AND 4, THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE PROPOSALS.

 

Any action may be taken on the foregoing proposals at the Annual Meeting on the date specified above, or on the date or dates to which the Annual Meeting may be adjourned or postponed. Stockholders of record at the close of business on April 5, 2019 are the stockholders entitled to vote at the Annual Meeting, and any adjournments or postponements thereof.

 

On or about April 17, 2019, we will mail a Notice of Internet Availability of Proxy Materials (the “Notice”) to stockholders of record at the close of business on April 5, 2019, other than those stockholders who previously requested electronic or paper delivery of communications from us. The Notice contains instructions on how to access an electronic copy of our proxy materials, including our Proxy Statement and our 2018 Annual Report, including our Annual Report on Form 10-K for the year ended December 31, 2018. The Notice also contains instructions on how to request a paper copy of the proxy materials.

 

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You have three options for submitting your vote before the 2019 Annual Meeting:

 

·         Internet through computer or mobile device such as a tablet or smart phone;

·         Phone; or

·         Mail.

 

Please vote as soon as possible to record your vote promptly, even if you plan to participate in the Annual Meeting on the Internet.

 

  By Order of the Board of Directors
   
   
   
  June Ann Byrnes
  Corporate Secretary
  Montebello, New York
  April 17, 2019

 

IMPORTANT: THE PROMPT RETURN OF PROXIES OR VOTE BY INTERNET OR

TELEPHONE WILL SAVE THE EXPENSE OF FURTHER REQUESTS FOR PROXIES.

 

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GUIDE TO VOTING MATTERS

 

Stockholders are being asked to vote on the following matters at the Sterling Bancorp (the “Company”) 2019 Annual Meeting:

 

 

PROPOSAL

OUR BOARD’S
RECOMMENDATION
VOTES REQUIRED
FOR APPROVAL

Proposal I. Election of Directors (page 4)

 

The Board of Directors of the Company (the “Board”) believes that the selected thirteen (13) director nominees possess the necessary qualifications, skills and experiences to continue to contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management.

 

FOR EACH 

DIRECTOR 

NOMINEE

Plurality of the votes entitled to be cast in the election of directors is required to ratify the election of all proposed thirteen (13) directors to the Company’s Board.

Proposal II. Approval of Amendments to the 2015 Omnibus Plan (page 14)

 

The Board has amended the 2015 Omnibus Plan to increase the number of shares reserved for issuance thereunder by 2,545,682 shares (for an aggregate 7,000,000 shares) and to effect certain tax related updates as a result of the TCJA. The Board believes the amendments are in the best interests of our stockholders as they align with the goals set out by the Company’s compensation program.

 

FOR

Affirmative vote of at least a majority of the votes represented at the Annual Meeting, either in person or by proxy, is required to approve the amendments to the 2015 Omnibus Plan.

Proposal III. Advisory Vote to Approve Executive Compensation (“Say-on-Pay”) (page 21)

 

The Company has designed its compensation program to provide a significant portion of total compensation based on performance relative to short-term and long-term financial goals and to encourage executives to maintain meaningful stock ownership in the Company. The Company seeks a non-binding advisory vote from its stockholders to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis section beginning on page 35 and the Compensation Tables section beginning on page 40. The Board and the Compensation Committee will take into account the outcome of the Say-on-Pay advisory vote when considering future executive compensation decisions.

 

FOR

Advisory (non-binding) vote; affirmative vote of at least a majority of the votes represented at the Annual Meeting, either in person or by proxy, is required to approve the compensation proposal for the Company’s named executive officers.

Proposal IV. Ratification of the Appointment of Crowe LLP as Independent Auditors (page 22)

 

The Audit Committee of the Board (the “Audit Committee”) has appointed Crowe LLP to serve as our independent auditors for the year ending December 31, 2019. The Audit Committee and the Board believe that the continued retention of Crowe LLP to serve as our independent auditors is in the best interests of the Company and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s selection of the independent auditors.

 

FOR

Affirmative vote of at least a majority of the votes represented at the Annual Meeting, either in person or by proxy, is required to approve the ratification of Crowe LLP as the Company’s independent auditors for the year ending December 31, 2019.

 

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TABLE OF CONTENTS

 

table of contents

 
PROXY STATEMENT 1
   
STOCKHOLDERS ENTITLED TO VOTE 1
INTERNET AVAILABILITY OF PROXY MATERIALS 1
PARTICIPATING IN THE ANNUAL MEETING 1
VOTING PROCEDURES 2
PARTICIPATION IN THE 401(K) PLAN 2
PRINCIPAL HOLDERS 3
   
PROPOSAL I — ELECTION OF DIRECTORS 4
 
OUR BOARD OF DIRECTORS 4
   
Director Independence 12
Depository Institution Management Interlocks 12
 
PROPOSAL II — APPROVAL OF AMENDMENTS TO THE STERLING BANCORP 2015 OMNIBUS EQUITY AND INCENTIVE PLAN 14
   
Brief Summary of the Amended Omnibus Plan 14
Equity Compensation Plan Information 20
Interests of Certain Persons 20
 
PROPOSAL III — NON-BINDING VOTE TO APPROVE EXECUTIVE COMPENSATION 21
 
PROPOSAL IV — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 22
 
Audit Fees 22
Audit Related Fees 22
Tax-Related Fees 22
All Other Fees 22
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS 23
 
CERTAIN INFORMATION ABOUT OUR EXECUTIVE OFFICERS 25
 
Qualifications and Business Experience 25
 
Executive Officers 25
Section 16(a) Beneficial Ownership Reporting Compliance 26
 
CORPORATE GOVERNANCE AND RELATED MATTERS 26
 
Code of Ethics 26
Attendance at Annual Meetings of Stockholders 26
Meetings and Committees of the Board 26
Audit Committee Report 30
Communications with the Board 30
Board Leadership Structure 30
Board’s Role in Risk Oversight 31
Board Evaluation 32
 
CORPORATE social responsibility 33
 
Community Service 33
Commitment to Safeguarding Client Data 33
Education Training 33
Environmental Sustainability 34
 
COMPENSATION DISCUSSION & ANALYSIS 35
 
Executive Summary 35
 
Introduction 35
 

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TABLE OF CONTENTS

 

Our Strategic Accomplishments 35
Highlights of 2018 Compensation Program and Actions 36
2018 Target Pay Mix 36
Governance and Compensation Highlights 37
2018 Say-on-Pay Vote 37
 
Role of the Compensation Committee 37
Role of Management 38
Role of the Compensation Consultant 38
Executive Compensation Philosophy, Benchmarking and Components 39
Executive Compensation Program and Pay Decisions 40
 
Base Salary 40
Annual Cash Incentive Compensation 41
Performance Measures 41
Target Annual Incentive Opportunities 41
2018 STI Plan Payouts - Corporate Performance Assessment 42
2018 STI Plan Payouts - Business Unit and Individual Performance Assessment 42
Final STI Plan Payouts – 2018 43
Equity Compensation/Long-Term Incentives 43
2018 Long-Term Incentive Grants 44
Vesting of Fiscal 2016-2018 Performance Share Awards 44
Benefits 45
 
Other Matters 46
 
Impact of Accounting and Tax on the Form of Compensation 46
Adjustment or Recovery of Awards 46
Consideration of Prior Amounts Realized 47
Stock Ownership Guidelines 47
Anti-Hedging and Pledging Restriction Policy 47
Employment Arrangements 48
Compensation Committee Report 48
Compensation Committee Interlocks and Insider Participation 48
Compensation Practice and Risk 48
 
Executive Compensation 49
 
Grants of Plan-Based Awards in 2018 50
Executive Officer Incentive Plan 51
2014 Stock Incentive Plan and 2015 Omnibus Plan 51
Stock Awards and Stock Option Grants Outstanding 52
Options Exercised and Stock Vested 54
Non-qualified Deferred Compensation for NEOs 54
 
Employment-Related Agreements and Potential Payments Upon Termination or Change in Control 55
 
Jack Kopnisky 55
 
Employment Agreement Terms 55
Potential Payments Upon Termination or Change in Control 56
 
Luis Massiani 57
 
Employment Agreement Terms 57
Potential Payments Upon Termination or Change in Control 58
 
Michael E. Finn, Rodney Whitwell and Thomas X. Geisel 58
 
Employment Agreement Terms 58
Potential Payments Upon Termination or Change in Control 59
 
CEO Pay Ratio 61

 

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TABLE OF CONTENTS

 

Director Compensation 62
 
Director Outstanding Equity Awards and Options 63
 
Transactions with Certain Related Persons 64
Stockholder Proposals 65
Advance Notice of Business to be Conducted at an Annual Meeting 65
 
OTHER MATTERS 66
 
HOUSEHOLDING OF PROXY STATEMENTS AND ANNUAL REPORTS 66
 
MISCELLANEOUS 66
 
ANNEX A A-1
 
STERLING BANCORP AMENDED AND RESTATED 2015 OMNIBUS EQUITY AND INCENTIVE PLAN A-1
 
ANNEX B B-1
 
GAAP Reconciliation B-1

 

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 Table of Contents

 

VOTING AND MEETING INFORMATION

 

PROXY STATEMENT
Sterling Bancorp
400 Rella Boulevard
Montebello, New York 10901
(845) 369-8040

ANNUAL MEETING OF STOCKHOLDERS

 

May 29, 2019

 

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of Sterling Bancorp (”Sterling” or the “Company”) to be used at the annual meeting of stockholders (the “Annual Meeting”), which will be held on May 29, 2019, at 11:00 a.m. Eastern Time, and all adjournments and postponements of the Annual Meeting. The accompanying Notice of Annual Meeting and this Proxy Statement are first being mailed to stockholders on or about April 17, 2019.

 

STOCKHOLDERS ENTITLED TO VOTE

 

Holders of record of Sterling’s shares of common stock, par value $0.01 per share, as of the close of business on April 5, 2019 (the “Record Date”), are entitled to one (1) vote for each share then held. As of the Record Date, there were 209,560,821 shares of common stock issued and outstanding. The presence in person or by proxy of a majority of the outstanding shares of common stock entitled to vote is necessary to constitute a quorum at the Annual Meeting. Stockholders who log on to our virtual meeting of stockholders with their 16-digit control number are considered present in person.

 

Holders of Sterling’s depositary shares, each representing a 1/40th interest in a share of Sterling’s Series A Non-Cumulative Perpetual Preferred Stock, referred to as Depositary Shares, are not entitled to vote at the Annual Meeting.

 

INTERNET AVAILABILITY OF PROXY MATERIALS

 

We are making this Proxy Statement and our 2018 Annual Report to Stockholders, including our Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019 (the “2018 Annual Report”), available to our stockholders via the Internet.

 

On or about April 17, 2019, we mailed to our stockholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including this Proxy Statement and the 2018 Annual Report. The Notice of Internet Availability also instructs you on how to access your proxy card to be able to vote through the Internet, by telephone or by mail. If you received a Notice of Internet Availability by mail, you will not receive a printed copy of the proxy materials in the mail. Other stockholders, in accordance with their prior requests, have received e-mail notification of how to access our proxy materials and vote via the Internet, or have been mailed paper copies of our proxy materials and proxy card or vote instruction form.

 

Internet distribution of proxy materials is designed to expedite receipt by stockholders, lower the cost of the Annual Meeting, and conserve natural resources. However, if you received a Notice of Internet Availability by mail and would like to receive a printed copy of our proxy materials, please follow the instructions for requesting such materials contained on the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to review these materials via e-mail unless you elect otherwise.

 

PARTICIPATING IN THE ANNUAL MEETING

 

Sterling will host its Annual Meeting live via the Internet. A summary of the information you need to participate in the Annual Meeting online is provided below:

 

ØAny stockholder can attend the Annual Meeting live via the Internet at www.virtualshareholdermeeting.com/STL2019.

 

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VOTING AND MEETING INFORMATION

 

ØWebcast starts at 11:00 a.m. Eastern Time.
ØStockholders may vote and submit questions while attending the Annual Meeting on the Internet.
ØPlease have your 16-digit control number to enter the Annual Meeting.
ØInformation on how to attend and participate via the Internet is posted at www.virtualshareholdermeeting.com/STL2019.
ØWebcast replay of the Annual Meeting will be available for one year after the meeting date on the Company’s website at www.sterlingbancorp.com.

 

VOTING PROCEDURES

 

Stockholders who execute proxies in the form solicited hereby retain the right to revoke them in the manner described below. Unless so revoked, the shares represented by such proxies will be voted at the Annual Meeting and all adjournments and postponements thereof. Proxies solicited on behalf of the Board will be voted in accordance with the directions given thereon. Where no instructions are indicated, validly executed proxies will be voted “FOR” each of the nominees in proposal I, “FOR” proposals II, III and IV set forth in this Proxy Statement and upon the transaction of such other business as may properly come before the Annual Meeting in the discretion of the persons appointed as proxies. Other than the matters listed in the attached Notice of Annual Meeting of Stockholders, the Board knows of no additional matters that will be presented for consideration at the Annual Meeting.

 

Brokers holding shares in street name for clients who are beneficial owners of such shares are prohibited from giving a proxy to vote such clients’ shares on “non-routine” matters in the absence of specific instructions from such clients. This is commonly referred to as a “broker non-vote.”  Your broker is entitled to vote your shares on the “routine” matter of ratification of the selection of Crowe LLP as the Company’s independent registered public accounting firm even if you do not provide voting instructions to your broker. Each of the other proposals is considered a “non-routine” matter.

 

As to the election of directors, the proxy card being provided by the Board enables a stockholder to vote FOR all nominees proposed by the Board, to WITHHOLD authority for all nominees or to vote FOR ALL EXCEPT one or more of the nominees being proposed. Voting for all nominees except those you list on the proxy card is the equivalent of withholding your vote for those directors you have listed. Nominees are elected by a plurality of votes cast. Proxies in which the authority to vote for the nominees being proposed is withheld and broker non-votes will not affect the outcome of the vote.

 

As to the amendment of the 2015 Omnibus Plan, a stockholder may vote FOR or AGAINST the proposal or ABSTAIN from voting on the proposal. The affirmative vote of a majority of the votes cast with respect to the proposal is required. Abstentions from voting, as well as broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on the proposal.

 

As to the advisory (non-binding) vote of the compensation of the named executive officers (the “Say-on-Pay Vote”), the proxy card being provided by the Board enables a stockholder to vote for the approval of the Company’s executive compensation, the compensation tables and narrative discussions of named executive officer compensation in this Proxy Statement. If this proposal receives a majority of the votes cast, then it will be considered approved. This vote is advisory and not binding on the Company, the Board or the Compensation Committee of the Board (the “Compensation Committee”). As a result, the Board may decide that it is in the best interests of the Company and its stockholders to maintain the Company’s executive compensation, even if it is not approved by stockholders.

 

Each stockholder, whether or not he or she plans to participate in the Annual Meeting via live webcast, is requested to vote electronically via the Internet or by telephone or by signing, dating and returning the proxy card without delay in the postage-paid envelope if provided. Any proxy given by the stockholder may be revoked at any time before it is voted. A proxy may be revoked by filing with the Corporate Secretary of Sterling a written revocation or a duly executed proxy card bearing a later date. Any stockholder present at the Annual Meeting may revoke his or her proxy and vote electronically on each matter brought before the Annual Meeting. Stockholders who log on to our virtual meeting of stockholders with their 16-digit control number are considered present in person. However, if you are a stockholder whose shares are not registered in your own name, you will need additional documentation from your record holder in order to vote at the Annual Meeting.

 

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VOTING AND MEETING INFORMATION

 

PARTICIPATION IN THE 401(K) PLAN

 

Astoria Bank had the following retirement benefit plans in place prior to the merger with Sterling: a 401(k) Plan, as amended and restated as of January 1, 2016 (the “Astoria 401(k) Plan”), Astoria Bank Employees’ Pension Plan (the “Astoria Pension Plan”), Astoria Bank Excess Benefit Plan (the “Astoria Excess Benefit Plan”) and the Astoria Bank Supplemental Benefit Plan (the “Supplemental Plan”) (collectively, the “Astoria Plans”). Pursuant to the merger agreement, the Astoria 401(k) Plan and the Astoria Pension Plan remain in effect for eligible employees as defined under their plan terms. Effective on October 2, 2017, the Astoria Plans were frozen to new participants. The Bank merged the Astoria 401(k) Plan with the Sterling National Bank 401(k) and Profit Sharing Plan (the “Sterling 401(k) Plan”) effective January 1, 2019. The Board of Directors approved the termination of the Astoria Pension Plan, effective on December 31, 2018. The Bank will take the necessary procedures to liquidate the pension obligations, with the appropriate filings made to governmental agencies.

 

Prior to the merger with the Bank, Advantage Funding had the Advantage Funding Management Co. Inc. 401(k) Plan (the “Advantage Plan”) in place for the benefit of former Advantage Funding employees. Pursuant to the merger agreement, the Advantage Plan remains in effect for eligible employees as defined under the terms of the Advantage Plan. Effective April 2, 2018, the Advantage Plan was frozen to new participants. The Bank merged the Advantage Plan with the Sterling 401(k) Plan in July 2018.

 

PRINCIPAL HOLDERS

 

In accordance with the provisions of our Certificate of Incorporation, record holders of common stock who, individually or together with their affiliates and any other person with whom they or their affiliates are acting in concert, beneficially own in excess of 10% of the issued and outstanding shares of common stock are not entitled to vote any of the shares held in excess of that limit. The Certificate of Incorporation further authorizes the Board (i) to make all determinations necessary to implement and apply that limit, including determining whether persons or entities are acting in concert, and (ii) to demand that any person who is reasonably believed to beneficially own shares of common stock in excess of the limit supply information to enable the Board to implement and apply the limit. The Company is not aware of any beneficial holder of 10% or more of the Company’s common stock as of the record date.

 

Persons and groups who beneficially own in excess of 5% of the shares of common stock are required to file certain reports with Sterling and the Securities and Exchange Commission (“SEC”) regarding such ownership. See page 23, “Security Ownership of Certain Beneficial Owners, Directors, Nominees and Executive Officers” for our 5% or more beneficial owners as of April 5, 2019.

 

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Table of Contents 

 

PROPOSAL I – ELECTION OF DIRECTORS

  

PROPOSAL I — ELECTION OF DIRECTORS

 

The Board currently consists of thirteen (13) members, each of whom serves a one-year term which will expire May 29, 2019, at our 2019 Annual Meeting.

 

Each director-nominee (“nominee”) has agreed to serve if elected. If any nominee is not able to serve, the Board may designate a substitute or reduce the number of directors serving on the Board. Proxies will be voted for the nominees shown below (or if not able to serve, such substitutes as may be designated by the Board). The Board has no reason to believe that any of the nominees will be unable to serve. The nominees will be elected by a plurality of the votes entitled to be cast at the Annual Meeting. A plurality is generally defined as the excess of the votes cast in favor of a nominee over those cast in favor of any other nominee. You may vote for up to the number of nominees named, and the nominees receiving the largest number of “FOR” votes will be elected to the director positions to be filled. Except as indicated herein, there are no arrangements or understandings between any of the nominees and any other person pursuant to which such nominees were selected. See page 27, “Nominating and Corporate Governance Committee.”

 

The Nominating and Corporate Governance Committee of the Board (the “Nominating and Corporate Governance Committee”) has nominated twelve (12) of the current thirteen (13) existing members of the Company’s Board, with Director Robert W. Lazar retiring from the Board effective at the 2019 Annual Meeting, and one new candidate, Ms. Mona Aboelnaga Kanaan, to serve as directors for a one (1) year term until the 2020 Annual Meeting:

 

Ø      John P. Cahill

Ø      Navy E. Djonovic

Ø      Fernando Ferrer

Ø      Robert Giambrone

Ø      Mona Aboelnaga Kanaan

Ø      Jack Kopnisky

Ø      James J. Landy

Ø      Maureen Mitchell

Ø      Patricia M. Nazemetz

Ø      Richard O’Toole

 

Ø      Ralph F. Palleschi

Ø      Burt Steinberg

Ø      William E. Whiston

 

 

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION
OF EACH NOMINEE AS DIRECTOR.

 

OUR BOARD OF DIRECTORS

 

Set forth below are the nominees, their ages and their positions with Sterling, and the length of their directorship. The term for directors currently serving on the Board expires as of May 29, 2019 at our 2019 Annual Meeting. If elected at the 2019 Annual Meeting, each nominee’s term will expire at the 2020 Annual Meeting. Depending on when/how each director joined the Company, his or her “length of directorship” may commence prior to any of the following: (i) the closing of the October 2013 merger (the “Provident Merger”) of Sterling Bancorp (“Legacy Sterling”) with and into Provident New York Bancorp (“Legacy Provident”), whereby Provident Bank (“Legacy Provident Bank”) converted into a national bank charter, and Legacy Provident and Legacy Provident Bank (with its name change to Sterling National Bank, the “Bank”) adopted the Sterling name; (ii) the June 2015 merger of Hudson Valley Holding Corp. (“Legacy HVB”) with and into Sterling Bancorp (the “HVB Merger”); or (iii) the October 2017 merger of Astoria Financial Corporation (“Legacy Astoria”) with and into Sterling Bancorp (the “Astoria Merger”).

 

The Company believes in servicing its stockholders through representation on the Board that ensures oversight of the Company, as well as implementation of the strategic plan and business model. The Nominating and Corporate Governance Committee, on behalf of the entire Board, reviews not only the personal qualities and characteristics in a Board member or potential candidate, but also the individual’s diverse education, business and cultural background.

 

The following discussion includes the business experience for the past five (5) years for each of our nominees, as well as the qualifications that were the basis for the Board determinations that each nominee should serve on the Board.

 

 4 

Table of Contents 

 

PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

JACK KOPNISKY

President and CEO

Not Independent

 

Age: 63

Director since: 2011

Began Board Service with Legacy Provident

 

____________________________

Committees:

Executive and Enterprise Risk

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·President and CEO of Legacy Provident and Legacy Provident Bank and continues to hold these positions at the Company and Sterling National Bank (2011 to present)
·CEO of SJB Escrow Corporation (2009 to 2011)
·Partner at Mercatus LLC (2008 to 2009)
·President and CEO of First Marblehead Corporation (2005 to 2008)
·Served in a variety of leadership positions with KeyCorp and predecessor banks (1998 to 2005), including President, Consumer Banking Group; President of KeyBank USA and President of Retail Banking and President and Chief Executive Officer of Key Investment
·B.A., Business Administration and Economics, Grove City College
·Graduate, Stonier School of Banking
·Weatherhead School of Executive Program, Case Western Reserve University

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Over 37 years of experience in the banking and financial services industry, including senior leadership positions as CEO, President, Director and Group Head of commercial banking, consumer finance, community development, private equity, brokerage and asset management businesses

Ø  Strong leadership skills

Ø  Strategic vision for future growth and continued success of the Company

 

 

 

 

RICHARD O’TOOLE

Chairman

Independent Director

 

Age: 62

Director since: 2012

Began Board Service with Legacy Provident

 

____________________________

Committees:

Compensation (Chairman), Executive (Chairman) and Nominating and Corporate Governance

 

Other current Public Company Directorships:

Ladder Capital Corp.

___________________________

 

Career and Education Highlights:

 

·The Related Companies, a real estate development and management company:
-Executive Vice President (2008 to present)
-General Counsel (2014 to present)
-Consultant (2005 to 2008)
·Partner at Paul Hastings Janofsky & Walker (2000 to 2005)
·Board Member Equinox Holding Inc. (privately held) (2016 to present) Compensation Committee
·Board Member Motivate (privately held) (2015 to present) Compensation Committee
·Board Member, Ladder Capital Corp. (NYSE: LADR) (March 2017 to present)
·B.A., St. John’s University
·J.D., St. John’s University, School of Law
·LL.M., New York University

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Over 36 years of legal and merger and acquisition experience and knowledge of real estate and tax matters

Ø  Strong leadership skills and corporate governance oversight

Ø  Familiarity with the market and communities in which Sterling National Bank does business

 

 

 

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Table of Contents 

 

PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

JOHN P. CAHILL

Independent Director

 

Age: 60

Director since: 2011

Began Board Service with Legacy HVB

 

____________________________

Committees:

Nominating & Corporate Governance (Chairman), Compensation and Executive

 

Other current Public Company Directorships:

Ecoark Holdings, Inc.

___________________________

 

Career and Education Highlights:

 

·Chief of Staff/Special Counsel of the Archdiocese of New York, serving as principal advisor to the Cardinal (April 2019 to present)
·Counsel at Norton Rose Fulbright LLP which acquired Chadbourne & Parke LLP (March 2007 to April 2019)
·Co-Founder and Principal of the Pataki-Cahill Group LLC, a strategic consulting firm focusing on the economic and policy implications of domestic energy needs (March 2007 to present)
·Served in various capacities in the administration of the Governor of New York George E. Pataki (from 1997 to 2006), including Secretary and Chief of Staff to the Governor (2002 to 2006)
·Board Member, Ecoark Holdings, Inc. (OTCQX: ZEST) (2016 to present)
·Director, TBS International (privately held) (2008 to 2012)
·B.A., Fordham University
·J.D., Pace University School of Law
·LL.M., Pace University School of Law

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Extensive experience as an attorney in government and in business

Ø  Affiliations and active involvement in various civic and non-profit organizations within the Company’s markets

Ø  Extensive knowledge of the Company and the communities Sterling National Bank serves

 

 

 

 

 

 

NAVY E. DJONOVIC

Independent Director

 

Age: 53

Director since: 2010

Began Board Service with Legacy Provident

 

____________________________

Committees:

Audit

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Partner at Maier Markey & Justic LLP, a certified public accounting firm, providing accounting, auditing and consulting services (January 2010 to present)
·Director of Operations at Mikimoto (America) (1998 to 1999)
·Senior Accountant at Arthur Anderson (1996 to 1998)
·Staff Accountant at Deloitte & Touche LLP (1994 to 1996)
·Certified Public Accountant, New York State (active member)
·Serves on the Boards of a number of non-profit and civic organizations in Westchester County including the Westchester County Association
·B.A., Accounting, Fordham University

 

 

 

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Experience as a certified public accountant working in a public accounting firm

Ø  Background in finance and operations

Ø  A member of, and Director at, several business organizations throughout Westchester County, provides insight on local communities where Sterling National Bank does business

 

 

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PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

 

FERNANDO FERRER

Independent Director

 

Age: 68

Director since: 2002

Began Board Service with Legacy Sterling

 

____________________________

Committees:

Nominating and Corporate Governance and Enterprise Risk

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Co-Chairman of Mercury Public Affairs, LLC, a part of Omnicom Group Inc., which specializes in public affairs related to business, government, politics and media (October 2006 to present)
·Appointed to the Board of the Metropolitan Transit Authority (“MTA”) by Governor Andrew Cuomo (June 2011 to present); currently serving as Vice Chairman of the Board. Served as Acting Chairman of the Board from November 2018 to March 31, 2019 and previously served in such role from February to June 2017 and from January to June 2013
·City University of New York Board of Trustees (July 2016 to present)
·President of the Drum Major Institute for Public Policy, a non-partisan, non-profit think tank (2002 to 2004)
·Bronx Borough President (1987 to 2001)
·B.A., University Heights College of Arts and Sciences, New York University
·M.P.A., Baruch College of the City University of New York

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Over 30 years of leadership experience in New York City government

Ø  Extensive experience with New York City businesses, including real estate and housing, business development and community relations

Ø  Risk management experience through service on the MTA Board

 

 

 

 

 

 

ROBERT GIAMBRONE

Independent Director

 

Age: 64

Director since: 2015

Began Board Service with Legacy Astoria

 

___________________________

Committees:

Audit and Enterprise Risk

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Director, Chief Financial and Administrative Officer and Executive Vice President of Keefe, Bruyette & Woods, Inc. (2002 to 2013)
·Executive Director and Chief Administrative Officer of Morgan Stanley Investment Management (1995 to 2002)
·Partner of KPMG LLP (1987 to 1995)
·Board member, WSP USA Buildings, Inc. and WSP Holdings, Inc. (both privately held and subsidiaries of Canadian-based company, WSP Global Inc. (TSX: WSP)) (March 2015 to present)
·B.B.A. Accounting, Iona College
·Certified Public Accountant, New York State
·Series 27, 7 and 63 Securities Licenses held

 

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Over 42 years of experience in accounting and finance with over 18 years of experience in operating a financial services business

Ø  Held Executive Management and operational positions in the financial services industry

Ø  Broad financial services, risk management and investment management expertise. Familiarity with the market and communities in which Sterling National Bank does business

 

 

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PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

 

MONA ABOELNAGA KANAAN

Independent Director

 

Age: 51

Director since: New Nominee

 

____________________________

Committees:

None

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Founder and Managing Partner of K6 Investments LLC, a private investment firm that invests globally in the financial services, technology, consumer products and entertainment industries (2011 to Present)
·President and CEO of Proctor Investment Managers LLC, a private equity firm she co-founded in 2002 which invested in traditional and alternative asset management companies (2002 to 2013)
·Board Member and Independent Director of Siguler Guff & Company Small Business Credit Opportunities Fund (2015 to present) Member of the Audit and Nominations and Governance Committees
·Member, Board of Advisors, Ibancar a FinTech specialized in collateralized consumer lending in Spain
·Trustee, The Chapin School, Co-Chair of Advancement. Member of Investment and Finance Committees
·Trustee, International House of New York
·Women’s Director Development Program, Kellogg School of Management at Northwestern University
·MBA, Finance and International Business, Columbia Business School
·B.S. Economics, University of Pennsylvania, The Wharton School of Business

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Experienced CEO, entrepreneur, private equity investor and corporate board director with nearly 30 years of experience in the financial services sector

Ø  Over 20 years in leadership roles such as Founder, CEO, President and Portfolio Manager and advisor to global banks and investment funds

Ø  Invested, divested and managed transformative strategic transaction in a broad range of asset classes, investment strategies, product areas and distribution channels

 

 

 

 

 

JAMES J. LANDY

Not Independent

 

Age: 64

Director since: 2000

Began Board Service with Legacy HVB

 

____________________________

Committees:

Enterprise Risk

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Chairman of the Board of Directors of Legacy HVB and Hudson Valley Bank N.A. (“HV Bank”) (January 2015 through June 2015) and Executive Chairman (2012 to 2014). Served in a variety of other senior positions of HV Bank from 1977 to 2012 including eleven years as President and CEO
·Serves on the Boards of several civic, municipal, charitable and ecumenical organizations throughout the New York Metropolitan area
·B.A., Manhattan College
·Graduate, Stonier School of Banking
·M.B.M., Banking, Louisiana State University

 

 

 

 

 

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Over 42 years of commercial banking experience

Ø  As the former President and CEO of HV Bank, brings to the Board invaluable knowledge and expertise regarding the financial services industry

Ø  Extensive executive management experience with a unique perspective and understanding of Sterling National Bank’s clients, products and operations

 

 

 

 

 8 

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PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

 

MAUREEN MITCHELL

Independent Director

 

Age: 67

Director since: 2018

 

 

____________________________

Committees:

Compensation and Enterprise Risk

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Senior Advisor, The Boston Consulting Group (January 2017 to present)
·President, Global Sales and Marketing, GE Asset Management, Inc. (2009 to 2016)
·Global Head of Distribution, Highland Capital Management, LP (2008 to 2009)
·Board of Trustees, Natixis/Loomis Sayles Mutual Funds (July 2017 to present)
·Board Member, Fieldpoint Private Bank and Trust (privately held) (May 2017 to May 2018)
·Board Member, Investment Company Institute (ICI Board of Governors) (2015 to 2016)
·Board Member, GE Asset Management, Inc. (2009 to 2016)
·Board Member, GE Investment Distributors, Inc. appointed President (2014 to 2016)
·GE Asset Management, Ltd. (2012 to 2016)
·GE Asset Management Funds II Plc (Dublin-based) (2012 to 2014)
·B.A., City College of New York and M.S.W., Fordham University

 

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø    Over 31 years of experience in financial service organizations with over 11 years spent in senior managing positions of sales and marketing and (10) years serving on the Boards of privately held financial institutions

Ø    Strategic vision and digital expertise launched key strategies and global opportunities exceeding growth expectations

Ø    Strong background in business transformation and mergers and acquisitions

 

 

 

 

PATRICIA M. NAZEMETZ Independent Director

 

Age: 69

Director since: 2013

Began Board Service with Legacy Astoria

 

____________________________

Committees:

Compensation

 

Other current Public Company Directorships:

YRC Worldwide Inc.

___________________________

 

Career and Education Highlights:

 

·Principal of NAZ DEC LLC (2011 to present)
·Corporate Vice President and Chief Human Resources Officer of Xerox Corporation (1999 to 2011)
·Human Resources Department of Xerox Corporation in positions of increasing responsibility (1979 to 1999)
·Board Member, YRC Worldwide, Inc. (NASDAQ:YRCW) (March 2015 to present) Compensation Committee Chair (May 2017 to present)
·Board Member, Muscular Dystrophy Association (privately held) (2014 to present) Governance Committee Chair (May 2017 to present)
·Board Member, Board of Trustees, Fordham University (1997 to 2017)
·Board Member, WMS Industries Inc. (2007 to 2013)
Compensation Committee Chair (2009 to 2013)

·Board Member, Energy East Corp. (2007 to 2009)
Compensation Committee Chair (2008 to 2009)

·B.A., Fordham University
·M.A., Fordham University

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø    Over 38 years of experience in human resources, over 11 of which were spent in an executive officer position

Ø     Knowledge of all aspects of human resources management

Ø    Familiarity with the business community in the markets where Sterling National Bank does business

 

 

 

 9 

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PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

 

RALPH F. PALLESCHI

Independent Director

 

Age: 72

Director since: 1996

Began Board Service with Legacy Astoria

 

____________________________

Committees:

Compensation and Nominating & Corporate Governance

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·President, Chief Operating Officer, and Director of First Long Island Investors, LLC and FLI Investors, LLC (successor companies of First Long Island Investors, Inc.) (1983 to present)
·Co-Founder of First Long Island Investors, Inc. in 1983
·Chief Operating Officer of New York Islanders hockey team (1993 to 1997)
·Vice President—Finance and Chief Financial Officer of Entenmann’s Inc. (1977 to 1983)
·Employee of Peat Marwick, Mitchell & Co. (predecessor of KPMG LLP) (1968 to 1977)
·Chairman of the Board of Trustees of Variety Child Learning Center
·Member of the Board of Directors of the Viscardi Center
·B.B.A., St. John’s University
·Certified public accountant

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø   Over 36 years of experience in reviewing and maintaining systems of internal controls and in financial controls, reporting and analysis

Ø    Experience and knowledge in finance, accounting wealth management and the equity markets

Ø    Former Chairman of the Board of Directors of Legacy Astoria having an in depth knowledge of financial services industry

 

 


 

 

 

 

 

BURT STEINBERG

Independent Director

 

Age: 73

Director since: 2000

Began Board Service with Legacy Provident

 

____________________________

Committees:

Audit (Chairman), Compensation and Executive

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·President and Consultant to BSRC Consulting (2001 to present)
·Director Emeritus Ascena Retail Group, Inc., formerly known as Dress Barn, Inc., a NASDAQ listed company (2009 to 2015) and Executive Director (2001 to 2009); Chief Operating Officer and President (1982 to 2001)
·Hedge fund consultant to XLCR Capital Partners LP (2011 to January 2015)
·Board Member, Deming Center, Columbia University
·Member and Director of a number of business, educational and charitable organizations throughout Rockland and the surrounding regions
·B.A., City University of New York
·M.B.A., Columbia University

 

 

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  As a member of the Board and Audit Committee of the Company for over 19 years, provides invaluable financial, accounting and regulatory experience

Ø  Experience in financial services, merchandising, finance, advertising, marketing, accounting, mergers and acquisitions

Ø  As a member of a number of business, educational and charitable organizations throughout the region, provides insight on local businesses and markets where Sterling National Bank does business

 

 10 

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PROPOSAL I – ELECTION OF DIRECTORS

 

 

 

 

WILLIAM E. WHISTON Independent Director

 

Age: 65

Director since: 2013

Began Board Service with Legacy HVB

  

____________________________

Committees:

Enterprise Risk (Chairman)

 

Other current Public Company Directorships:

None

___________________________

 

Career and Education Highlights:

 

·Chief Financial Officer of the Archdiocese of New York, a religious not-for-profit organization, based in New York City (January 2002 to present)
·Served in a number of executive positions at Allied Irish Bank, including lending, product development and operations/compliance (1972 to 2002)
·Trustee, St. Patrick’s Cathedral, St. Patrick’s Landmark Foundation and St. Joseph’s Seminary
·Member, Provident Healthcare, the member of Archcare, the healthcare arm of the Archdiocese of New York
·Board Member, Mutual of America
·B.A., Pace University
·M.B.A., Stern School of Business, New York University

 

sELECTED dIRECTOR qUALIFICATIONS:

 

Ø  Over 42 years of business experience in the areas of finance, financial services and e-commerce

Ø  Former bank executive with experience in a wide range of roles. Provides the Board with a unique perspective on business management matters

Ø  Knowledge of the communities in which Sterling National Bank serves

 

 

 11 

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PROPOSAL I – ELECTION OF DIRECTORS

 

Director Independence

 

The Board has determined that each of the current Company directors and nominees, with the exceptions of Messrs. Kopnisky and Landy, is “independent” as defined by the New York Stock Exchange (“NYSE”) listing standards and the rules of the Securities and Exchange Commission (the “SEC”). Neither Mr. Kopnisky nor Mr. Landy is independent as Mr. Kopnisky is our CEO and Mr. Landy was party to a consulting agreement with the Company that terminated on June 30, 2017. We believe we comply with all applicable requirements of the SEC and NYSE relating to director independence and the composition of the committees of our Board.

 

Depository Institution Management Interlocks

 

The Depository Institution Management Interlocks Act (the “Interlocks Act”) imposes restrictions on service as an officer or director of more than one depository institution. There are several exemptions to the Interlocks Act including the small market share exemption, which, since Sterling has total assets exceeding $2.5 billion would allow a director to serve on the Board and another unaffiliated depository organizations’ board of directors only if the other depository organization has total assets below $1.5 billion and if both Sterling and the other depository organization hold no more than 20 percent of the deposits in each relevant metropolitan statistical area or community in which both operate. Should any director meet these requirements, the Nominating and Corporate Governance Committee will monitor the relationship and any applicability of this exemption annually.

 12 

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PROPOSAL I – ELECTION OF DIRECTORS

  

The Nominating and Corporate Governance Committee maintains, and periodically updates, non-exclusive “Board membership criteria” to assist the committee in evaluating candidates for the Board. These criteria, and an indication of which of the criteria are particularly satisfied by each nominee, are summarized below:

  

Guideline Criteria John Cahill Navy Djonovic Fernando Ferrer Robert Giambrone Mona Aboelnaga Kanaan Jack Kopnisky James Landy Maureen Mitchell Patricia Nazemetz Richard O’Toole Ralph Palleschi Burt Steinberg William Whiston
Reputation for integrity, honesty and adherence to high ethical standards X X X X X X X X X X X X X
Willingness and ability to contribute positively to the collegial decision-making process of the Board X X X X X X X X X X X X X
Demonstrated business and financial acumen and experience   X X X X X X X X X X X X
Prominence within professional discipline and/or industry X X X X X X X X X X X X X
Commitment to attend and participate in Board and Board Committee meetings regularly X X X X X X X X X X X X X
No conflict of interest that would impair ability to represent the interests of all Company stockholders and fulfill responsibilities of a director X X X X X X X X X X X X X
Contribute to Board diversity (in terms of race, gender, national origin, etc.)   X X   X     X X        
Strengths and experience that contribute to ability to serve effectively on one or more Board Committees (audit, compensation, governance and nominating) X X X X X X X X X X X X X
Experience in leading mergers and acquisitions       X X X X X   X X X  
Familiarity with capital markets, financing transactions       X X X X X   X X X X
Experience in integrating acquired businesses after mergers and acquisitions strategy, and investor relations       X X X X X   X   X  
Experience identifying, evaluating and managing corporate risk X X X X X X X X X X X X X
Current or past board member of another mid-cap or large public company X         X X X X X   X  

 

*       *       *

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

PROPOSAL II — APPROVAL OF AMENDMENTS TO THE STERLING BANCORP
2015 OMNIBUS EQUITY AND INCENTIVE PLAN

 

Under the Sterling Bancorp 2015 Omnibus Equity and Incentive Plan (the “2015 Omnibus Plan”), 778,517 shares remain available for future grants as of April 5, 2019. At the Annual Meeting, stockholders will be asked to approve amendments to the 2015 Omnibus Plan in order to increase the number of shares reserved for issuance thereunder by 2,545,682 shares (7,000,000 shares in the aggregate) and to effect certain tax related updates as a result of the TCJA. As of April 5, 2019 there were options outstanding to purchase 682,646 shares of our common stock granted under the 2015 Omnibus Plan and our previous equity incentive plans, and 778,517 shares of common stock available for issuance pursuant to awards to be granted under our 2015 Omnibus Plan. We are required to obtain stockholder approval of the Amended Omnibus Plan under the rules of the NYSE.  This approval is also necessary to permit us to grant incentive stock options to employees under Section 422 of the Internal Revenue Code, as amended (the “Code”). The Amended and Restated 2015 Omnibus Plan (the “Amended Omnibus Plan”) was approved by the Board on February 27, 2019.

 

If the Amended Omnibus Plan is approved by our stockholders, the following amendments will be made to the 2015 Omnibus Plan: (1) an increase of the shares available for issuance under the Amended Omnibus Plan with the maximum number of shares available for issuance increased to 7,000,000 shares from 4,454,318 shares; (2) updates to certain tax-related provisions as a result of the TCJA, in particular removing the ability to grant new awards under Section 162(m) of the Internal Revenue Code, as amended, as a result of the repeal of such exemption pursuant to the TCJA (though keeping such exemption applicable to awards granted prior to the TCJA being effective); and (3) related administrative changes.

     

The Board believes that the amendment to the 2015 Omnibus Plan to increase the number of shares reserved thereunder is necessary for the Company to have the ability to grant shares of the Company’s common stock in the form of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), deferred stock, other stock-based awards, performance awards, substitute awards, annual cash incentive awards, and any other stock awards permitted under the 2015 Omnibus Plan in order to attract and retain qualified non-employee directors and senior management personnel. The increase in shares will help the Company achieve this goal. It is the judgment of the Board that the proposed amendments to the 2015 Omnibus Plan are in the best interests of the Company and our stockholders.

 

The Amended Omnibus Plan also includes amendments to certain provisions of the 2015 Omnibus Plan designed to meet the requirements for exemption of executive compensation under Section 162(m) of the Code. Since effectiveness of the 2015 Omnibus Plan, the TCJA was signed into law. The TCJA no longer allows for an exemption under Section 162(m) of the Code. Therefore the proposed amendments include retaining eligibility of such exemption for awards granted prior to the TCJA’s effectiveness and removing such Code Section 162(m) provisions from being applicable to awards granted after effectiveness of the TCJA.

 

This proposal, and the effectiveness of the Amended Omnibus Plan will not affect awards already granted under the 2015 Omnibus Plan or the shares currently reserved for issuance under the 2015 Omnibus Plan; however, as indicated above, only 778,517 shares of common stock remain available for grant under the 2015 Omnibus Plan as of April 5, 2019.  If the Amended Omnibus Plan is approved by our stockholders at the Annual Meeting, our stockholders may suffer further dilution upon the exercise of future awards granted under the Amended Omnibus Plan, to the extent that more shares are authorized for issuance, and are issued, under the Amended Omnibus Plan.

 

Brief Summary of the Amended Omnibus Plan

 

The following is a brief description of the Amended Omnibus Plan. The full text of the Amended Omnibus Plan is attached as Annex A to this proxy statement, and the following description is qualified in its entirety by reference to such Annex A.

 

The Amended Omnibus Plan provides for the granting of stock options, SARs, restricted stock, RSUs, deferred stock, other stock-based awards, performance awards, substitute awards, and annual cash incentive awards to certain employees and non-employee directors of the Company, the Bank, and their subsidiaries. As discussed below, the Amended Omnibus Plan does not permit the repricing of options or SARs or the granting of discounted options or SARs, and does not contain an “evergreen” or similar provision.

 

The Amended Omnibus Plan includes provisions designed to meet the requirements for deductibility of executive compensation under Section 162(m) of the Code, as modified by the TCJA with respect to “performance-based compensation” paid pursuant to written binding contracts in effect on November 2, 2017 (“Grandfathered Awards”). In addition, it is intended that all awards granted under the Amended Omnibus Plan are structured in such a way that they comply with Section 409A of the Code or an exception thereto, and the Amended Omnibus Plan is interpreted and administered in a manner that is consistent with Section 409A.

 

 14 

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

Key Provisions of the Amended Omnibus Plan

 

The Amended Omnibus Plan includes a number of provisions designed to serve stockholders’ interests and facilitate effective corporate governance, including the following:

 

 

KEY PROVISIONS

 

Minimum One Year Vesting Awards are required to have a vesting, restriction, or performance period of at least one (1) year; provided, however, that awards for up to 5% of the Amended Omnibus Plan’s authorized and available shares may be granted without such one (1) year requirement.
No Stock Option Repricing/Exchange The Amended Omnibus Plan does not permit the repricing of options or SARs or the exchange of underwater options or SARs for cash or other awards without stockholder approval.
No Tax Gross-Ups Awards do not contain tax gross-up provisions.
No Discounted Awards Options and SARs are not granted with an exercise price less than the fair market value of the common stock on the date of grant.
No “Evergreen” Provision The Amended Omnibus Plan does not contain an “evergreen” or similar provision. The Amended Omnibus Plan fixes the number of shares available for future grants and does not provide for any increase based on increases in the number of outstanding shares of common stock (other than through stock splits or similar events).
“Double-Trigger” Vesting Upon Change in Control All awards under the Amended Omnibus Plan vest under a “double-trigger” provision upon a change in control, which requires both a change-in-control and an employment termination event.
Awards Subject to Clawback All awards under the Amended Omnibus Plan are subject to forfeiture, recoupment or other penalties pursuant to the Company’s clawback policy.
Deductibility of Awards The Amended Omnibus Plan includes provisions to meet the requirements for deductibility of executive compensation under Section 162(m) of the Code for Grandfathered Awards.
Limit on Awards to Any One NON-EMPLOYEE DIRECTOR The number of shares of common stock that may be granted to any one non-employee director during any calendar year may not exceed 10,000.
Share Counting

The following factors affect the number of shares of common stock as to which equity awards may be granted under the Amended Omnibus Plan:

·     All shares granted under the Amended Omnibus Plan, including stock options and SARs, are counted as using one (1) share available under the Amended Omnibus Plan for every one (1) share delivered under the awards.

·     Any shares that are subject to equity awards that are not stock options or SARs are counted as using one (1) share available under the Amended Omnibus Plan for every one (1) share delivered under those awards.

·     Any shares related to awards under the Amended Omnibus Plan that terminate by expiration, forfeiture or that are otherwise settled in cash in lieu of shares will be available again for grant under the Amended Omnibus Plan.

·     The following shares, however, may not again be made available for grant in respect of awards under the Amended Omnibus Plan: (i) shares tendered by the participant or withheld by the Company in payment of the exercise price of a stock option, or to satisfy any tax withholding obligation with respect to an award; (ii) shares subject to a stock-settled SAR that are not issued in connection with its settlement or exercise thereof; (iii) shares reacquired by the Company on the open market or otherwise with the cash proceeds from the payment of the exercise price of a stock option; and (iv) shares that are not issued upon exercise, settlement, expiration, cancellation, forfeiture of a substitute award or for any other reason.

  

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

Administration. The Amended Omnibus Plan is administered by the Compensation Committee or other committee otherwise appointed by the Board from time to time. The Compensation Committee determines, among other items, the selection of those to be granted awards under the Amended Omnibus Plan out of those eligible for participation and the terms and conditions of any award consistent with the terms and conditions of the Amended Omnibus Plan. The Compensation Committee must consist of two (2) or more members, and each member must (1) not be a current or former officer or employee of the Company, the Bank or any of their subsidiaries, (2) be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (3) be an “outside director” within the meaning of Section 162(m) of the Code, with respect to Grandfathered Awards, and (4) be an independent director within the meaning of the rules of the NYSE. Currently, the Compensation Committee is comprised of six (6) independent directors who fit this definition. The Compensation Committee has the authority to interpret the Amended Omnibus Plan, and to make any other determinations it believes necessary or advisable for the administration of the Amended Omnibus Plan. The Compensation Committee may delegate any or all of its authority to administer the Amended Omnibus Plan as it deems appropriate, to a subcommittee of one or more of its members. By resolution, the Compensation Committee may authorize any subcommittee, the Chief Executive Officer (the “CEO”) or other executive officer of the Company to designate any senior vice president or lower level employees to be award recipients under the Amended Omnibus Plan; (ii) determine the size of any such awards; or (iii) cancel or suspend any awards, providedhowever, that (1) any resolution of the Compensation Committee must specify the total number of shares subject to the awards and the amount and form of consideration to be received for such awards, and (2) the Compensation Committee may not (i) authorize any officer to designate himself or herself as the recipient of an award, and (ii) delegate such responsibilities to any officer for awards granted to an employee who is an executive officer subject to Section 16 of the Exchange Act.

 

The Amended Omnibus Plan will automatically terminate the day before the ten (10) year anniversary of its 2015 effective date, unless terminated earlier by the Board.

 

Overall Limit on Awards under the Amended Omnibus Plan.

 

Our stockholders adopted the 2015 Omnibus Plan on May 28, 2015. The amendment to the 2015 Omnibus Plan was approved by the Board on February 27, 2019. The maximum number of shares originally authorized under the 2015 Omnibus Plan was 4,454,318 shares. The proposed amendment would increase the number of shares available by 2,545,682 shares to 7,000,000 total shares under the Amended Omnibus Plan.

 

It is intended that the additional shares to be delivered under the Amended Omnibus Plan will be made available from authorized but unissued shares of Company common stock or from treasury shares. Shares covered by an award will be removed from the share reserve as of the date of grant, and will be added back to the share reserve as described under “Share Counting” above. On each grant of a stock option or SAR, each share underlying the award will be counted as one (1) share against this limit. On each grant of any other Amended Omnibus Plan award, each share underlying the award will be counted as one (1) share against this limit.

 

Eligibility. The Compensation Committee (or its delegates) selects the people who may participate in the Amended Omnibus Plan. Any employee or non-employee director of the Company, the Bank, or any of their subsidiaries, may be selected to participate. From time to time, the Compensation Committee will determine who will be granted awards and the number of shares granted, subject to the limits described in “Limit on Awards to Any One Individual” above.

 

Types of Awards:

 

Stock Options.

 

Stock options granted under the Amended Omnibus Plan may be either nonqualified stock options or ISOs qualifying under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Under the Code, the aggregate fair market value (determined at the grant date) of the stock with respect to which ISOs are first exercisable by any individual during any calendar year shall not exceed $100,000. Stock options in excess of this limit are treated as nonqualified stock options. The stock option exercise price may not be less than the fair market value of the stock on the date the stock option is granted, with the exception that for an ISO award granted to an eligible employee who at the time of the grant holds ten percent (10%) or more of the Company’s shares, the stock option exercise price may not be less than required by the Code in order to constitute an ISO. The stock option exercise price is payable in cash or, if the grant provides, in common stock or other equity instruments. The Compensation Committee shall determine the expiration of stock options, although no stock option may be exercisable later than the tenth (10th) anniversary date of the grant or five (5) years after the date of grant if an ISO is granted to an owner of ten percent (10%) or more of the Company’s shares. The Compensation Committee determines the terms of each stock option award at the time of grant.

 

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

Stock Appreciation Rights.

 

SARs may, but need not, be granted in conjunction with options or other equity awards. The Compensation Committee determines the terms of each SAR at the time of the grant. Any freestanding SAR (that is, a SAR not granted in conjunction with another equity award) may not be granted at less than the fair market value of the stock on the date the SAR is granted and cannot have a term longer than ten (10) years. A tandem SAR may only be granted with an exercise price that is the same as the associated stock option and the expiration or other termination of a tandem SAR must be the same as that of the associated stock option. A SAR, upon exercise, may be paid in Company shares, cash, or a combination thereof as specified in the award agreement. Individuals granted a SAR will not have any dividend equivalents rights.

 

Stock Awards.

 

The Amended Omnibus Plan provides for the granting of restricted stock, RSUs, deferred stock, performance shares, performance units, and other stock-based awards. As determined by the Compensation Committee, performance awards may include any of the performance measures, or a combination thereof, set forth in the Amended Omnibus Plan attached as Annex A to this Proxy Statement. Performance goals may be based on the achievement of specified levels of Company performance (or performance of an applicable subsidiary, affiliate or unit of the Company, the Bank, or any combination thereof) pursuant to any of the performance measures set forth in the Amended Omnibus Plan’s definition of performance goals (though Grandfathered Awards were required to be subject to one or more performance measures). Performance goals may be defined in absolute terms or measured relative to the performance of companies or against a predefined index that the Compensation Committee deems appropriate, may be based on or otherwise employ comparisons based on internal targets, the past or current performance of other companies and may include or exclude certain extraordinary or non-recurring business events, and may be applied on a consolidated basis or to the Bank, individual business units, divisions or subsidiaries of the Company and the Bank. The performance goals of Grandfathered Awards were required to be set by the Compensation Committee within the first ninety (90) days of the applicable performance period.

 

Substitute Awards.

 

Substitute awards can be issued under the Amended Omnibus Plan upon the assumption of, or in substitution or exchange for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction with the Company, the Bank or any of their subsidiaries, including a merger, combination, consolidation, or acquisition of property or stock. Such substitute awards will not reduce the amount of shares available under the Amended Omnibus Plan.

 

Annual Incentive Awards.

 

Annual incentive awards are paid only upon the achievement of certain performance goals during an annual performance period and can be in the form of cash payment, stock awards or performance awards.

 

Termination of Employment or Service. In the event of a participant’s termination of employment or service prior to the relevant vesting date or expiration of restriction period or performance period, the forfeiture provisions of the participant’s awards shall be governed by the participant’s award agreement.

 

Change in Control (“CIC”). In the event of a CIC, any options and SARs outstanding which are not exercisable and vested, will become fully exercisable and vested upon termination of the employee participant’s employment with the Company, the Bank, or any of their subsidiaries, without cause or for good reason during the twenty-four (24) month period ending on the second year anniversary of a Change in Control (the Applicable Period”). The restrictions applicable to any restricted stock, RSU or other stock award which are not performance-based will lapse and such restricted stock, RSU or other stock award shall become free of all restrictions, fully vested and transferable upon the termination of the employee participant’s employment without cause or for good reason during the Applicable Period. The conditions applicable to any performance award shall be deemed satisfied at the target level and shall become free of all restrictions and become fully vested and transferable upon the termination of the employee participant’s employment without cause or for good reason during the Applicable Period.

 

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

Transferability. Unless otherwise determined by the Compensation Committee, awards granted under the Amended Omnibus Plan may not be transferred except by will or the laws of descent and distribution or, to the extent permitted by the award agreement relating to such award, to the holder’s family members, a trust, or a charitable organization designated by the holder, in each case without consideration. During an employee’s lifetime, any options or awards may be exercised only by the employee or the employee’s legal representative.

 

Certain Adjustments. In the event of an equity restructuring that causes per share value of the Company’s shares to change, the Compensation Committee, in order to prevent unintended dilution or enlargement of a participant’s rights under the Amended Omnibus Plan, may substitute or adjust, among other things:

 

·The number and class of securities available under the Amended Omnibus Plan;

 

·The number and class of securities subject to each outstanding stock option or SAR and the purchase price or base price per share;

 

·The terms of each outstanding restricted stock award and restricted stock unit award;

 

·The terms of each outstanding performance award;

 

·The maximum number of securities with respect to which stock options or SARs may be granted during any fiscal year of the Company to any one grantee; and

 

·The maximum number of shares that may be awarded during any fiscal year of the Company to any one grantee pursuant to a stock award that is subject to performance goals or a performance award.

 

A corporate event or transaction (including, but not limited to, a change in the shares or capitalization of the Company) encompasses a merger, consolidation, reorganization, recapitalization, partial or complete liquidation, stock dividend, stock split, spin-off, rights offering or recapitalization through an extraordinary dividend.

 

Amendment. The Board may further amend the Amended Omnibus Plan; however, an amendment will be contingent upon stockholder approval to the extent required by law or the rules of any stock exchange on which the Company’s stock is traded. The Amended Omnibus Plan prohibits, without stockholder approval:

 

·The amendment of outstanding awards to reduce the exercise price or base price of outstanding options or SARs;

 

·The cancellation of any previously granted stock option or SAR in exchange for another stock option or SAR with an exercise price or base price that is less than the exercise price or base price of the original option or SAR; and

 

·The cancellation of outstanding options or SARs in exchange for cash or other awards if the exercise price of the stock option or the base price of the SAR exceeds the fair market value of the Company’s common stock on the date of such cancellation.

 

Plan Benefits.

 

Further benefits under the Amended Omnibus Plan will depend on the Compensation Committee’s actions and the fair market value of the shares at various future dates; therefore, it is not possible to determine the future benefits that will be received by directors, executive officers, and others.

 

On April 5, 2019, the closing sale price of our common stock on the NYSE was $20.09 per share.

 

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

U.S. Tax Treatment of Options and Awards

 

ISOs.

 

An ISO results in no taxable income to the optionee or deduction to the Company at the time it is granted or exercised. However, the excess of the fair market value of the shares acquired over the option exercise price is an item of adjustment in computing the alternative minimum taxable income of the optionee. If the optionee holds the stock received as a result of an exercise of an ISO for at least two (2) years from the date of the grant and one (1) year from the date of exercise, then the gain realized on disposition of the stock is treated as a long-term capital gain. If the shares are disposed of prior to the end of this period, however (i.e., a “disqualifying disposition”), then the optionee will include in income, as compensation for the year of the disposition, an amount equal to the excess, if any, of the fair market value of the shares upon exercise of the option over the option exercise price (or, if less, the excess of the amount realized upon disposition over the option exercise price). In that event, the excess, if any, of the sale price over the fair market value on the date of exercise will be a short-term capital gain. In addition, the Company will be entitled to a deduction, in the year of such a disposition, for the amount includible in the optionee’s income as compensation. The optionee’s basis in the shares acquired upon exercise of an ISO is equal to the option exercise price paid, plus any amount includible in his or her income as a result of a disqualifying disposition.

 

Nonqualified Stock Options.

 

A nonqualified stock option results in no taxable income to the optionee or deduction to the Company at the time it is granted. An optionee exercising such an option will, at that time, realize compensation income taxable at ordinary income tax rates in the amount of the difference between the then market value of the shares and the option exercise price. Subject to the applicable provisions of the Code, a deduction for federal income tax purposes will be allowable to the Company in the year of exercise in an amount equal to the taxable compensation realized by the optionee.

 

The optionee’s basis in such shares is equal to the sum of the option exercise price plus the amount includible in his or her income as compensation upon exercise. Any gain (or loss) upon subsequent disposition of the shares will be a long-term or short-term gain (or loss), depending upon the holding period of the shares.

 

If a nonqualified stock option is exercised by tendering previously owned shares of the Company’s common stock in payment of the option exercise price, then, instead of the treatment described above, the following will apply: a number of new shares equal to the number of previously owned shares tendered will be considered to have been received in a tax-free exchange; the optionee’s basis and holding period for such number of new shares will be equal to the basis and holding period of the previously owned shares exchanged. The optionee will have compensation income taxable at ordinary income tax rates equal to the fair market value on the date of exercise of the number of new shares received in excess of such number of exchanged shares; the optionee’s basis in such excess shares will be equal to the amount of such compensation income; and the holding period in such shares will begin on the date of exercise.

 

SARs.

 

Generally, the recipient of a SAR will not recognize taxable income at the time the SAR is granted. Upon the exercise of a SAR, if an employee receives the appreciation inherent in the SAR in cash, the cash will be taxed as compensation income to the employee at the time it is received. If an employee receives the appreciation inherent in the SAR in stock, the value of the stock received will be taxed as compensation income to the employee at the time such stock is received.

 

In general, there will be no federal income tax deduction allowed to the Company upon the grant or termination of SARs. However, upon the exercise of a SAR, the Company will be entitled to a deduction equal to the amount of compensation income the recipient is required to recognize as a result of the exercise.

 

Restricted Stock/RSU Awards/Performance Awards.

 

In general, no income will be recognized at the time of grant by the recipient of a restricted stock, RSU, or performance award if such award is subject to a substantial risk of forfeiture. Generally, at the time the substantial risk of forfeiture terminates with respect to such an award, the then fair market value of the stock will constitute ordinary income to the employee. However, if an employee timely makes an election under Section 83(b) of the Code with respect to an award of restricted stock, the value of such stock on the date that it is received will be taxed as compensation income to the employee. Subject to the applicable provisions of the Code, a deduction for federal income tax purposes will be allowable to the Company in an amount equal to the compensation realized by the employee.

 

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PROPOSAL II – APPROVAL OF AMENDMENTS

TO THE STERLING BANCORP 2015 OMNIBUS
EQUITY AND INCENTIVE PLAN

 

Equity Compensation Plan Information

 

The following table presents equity compensation plan information that has been approved by stockholders as of December 31, 2018:

 

 

Equity compensation plans approved by stockholders

  Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a)
    Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights(1)
(b)
    Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)
 
Stock Option Plans     686,539     $ 11.20       2,318,950  

 

 

(1) Weighted average exercise price represents stock option plans only, since restricted shares have no exercise price.

 

Interests of Certain Persons

 

Our executive officers and directors have interests in matters that will be acted upon at the Annual Meeting that are different from the interests of our stockholders generally. If this proposal is adopted, each of our executive officers and directors will be eligible to receive a portion of their compensation for services in the form of stock option grants, awards of restricted stock or other equity or equity-linked awards. The Board was aware of these interests and took them into account in recommending that the stockholders vote in favor of the proposal to approve the amendment to the Amended Omnibus Plan.

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE
AMENDMENTS TO THE COMPANY’S 2015 OMNIBUS EQUITY AND INCENTIVE PLAN.

 

*       *       *

 

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PROPOSAL III – NON-BINDING VOTE TO APPROVE
EXECUTIVE COMPENSATION

  

PROPOSAL III — NON-BINDING VOTE TO APPROVE
EXECUTIVE COMPENSATION

 

In accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), stockholders are being given the opportunity to vote on an advisory (non-binding) resolution to approve the Company’s executive compensation, as described below under “Compensation Discussion and Analysis,” the compensation tables and narrative discussions of named executive officer (“NEO” or “Named Executive Officer”) compensation in this Proxy Statement. Consistent with the voting results at the 2017 Annual Meeting, the Board has determined that an advisory vote to approve executive compensation is conducted annually.

 

The Board recommends the approval of its executive compensation proposal. It believes the Company’s compensation programs are centered on a pay-for-performance culture and are strongly aligned with the long-term interests of our stockholders by rewarding performance against established corporate financial goals, strong executive leadership and superior individual performance. An important component of management’s performance requirements is strong risk management oversight to ensure that compensation plans do not encourage management to take unnecessary or excessive risks that could threaten the value of the Company. By providing a combination of annual base salary, cash incentives, long-term equity compensation (including performance awards based on the results of the Company) and competitive benefits, our goal is to attract, motivate and retain a qualified and talented team of executives who will help maximize the Company’s long-term financial performance, growth and profitability. The Company’s compensation program is designed to provide a significant portion of total compensation based on performance relative to short-term and long-term financial goals and to encourage executives to maintain significant stock ownership in the Company. The Compensation Committee regularly reviews the components of each NEO’s compensation package and generally targets 50% of the total compensation opportunity to be based on a combination of short-term and long-term performance. We accomplish these objectives through an integrated total compensation program.

 

This proposal, commonly referred to as a “Say-on-Pay” proposal, gives you, as a stockholder, the opportunity to endorse or not endorse the Company’s executive pay program through the following non-binding resolution:

 

“RESOLVED, that the compensation of Sterling Bancorp’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures, is hereby approved.”

 

At the Company’s 2018 Annual Meeting, 97.6% of the votes cast on the Say-on-Pay proposal were voted in favor of the Company’s executive compensation program. Given the significant level of support from the Company’s stockholders, the Compensation Committee and the Board believe that the Company is taking a measured, informed and responsible approach to executive compensation which incorporates all of the Company’s objectives and policies, including, but not limited to, a pay for performance culture that retains executives who perform strongly. The Board and Compensation Committee considered this substantial affirmation as one of many factors in crafting an executive compensation program that largely mirrors the stockholder approved approach and will continue to seek stockholder feedback on our compensation programs.

 

This is an advisory vote only, and neither the Company nor the Board will be bound to take action based upon the outcome. The Board and the Compensation Committee will consider the vote of the stockholders when considering future executive compensation arrangements.

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF
THE COMPANY’S EXECUTIVE COMPENSATION PROPOSAL.

  

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PROPOSAL IV – RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

PROPOSAL IV — RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of our Board (the “Audit Committee”) has approved the engagement of Crowe LLP (“Crowe”) to be Sterling’s independent registered public accounting firm for the year ending December 31, 2019. At the Annual Meeting, stockholders will consider and vote on the ratification of the engagement of Crowe for Sterling’s year ending December 31, 2019. A representative of Crowe is expected to participate in the Annual Meeting, to respond to appropriate questions and to make a statement if he or she so desires.

 

In order to ratify the selection of Crowe as the independent registered public accounting firm for 2019, the proposal must receive the affirmative vote of at least a majority of the votes represented at the Annual Meeting, either in person or by proxy, in favor of such ratification.

 

Stockholder ratification of the selection of Crowe is not required by the Bylaws or otherwise. However, the Board is submitting the selection of the independent registered public accountant to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection of Crowe, the Audit Committee will reconsider whether to retain that firm or not. Even if the selection is ratified, the Audit Committee may, at its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change is in the best interests of the Company and its stockholders.

 

The Audit Committee recommends the ratification of Crowe as the Independent Registered Public Accounting Firm for the 2019 Year. Crowe has had a long standing relationship with the Company since 2007. During this tenure, Crowe has developed a deep understanding of the Company, its operations and risk management practices and has expanded its audit scope to address the Company’s acquisitions and organic growth. Crowe has the technical experience, industry knowledge and technology to support the size of the Company and its expansion efforts. Stringent industry standards implemented by the Public Company Accounting Oversight Board promulgate procedures for review with annual inspection reports. Crowe has shown consistency in achieving high results that are relayed to the members of the Audit Committee and the members of the Board.

 

Audit Fees

 

The aggregate fees billed to us by Crowe for professional services rendered by the firm for the audit of our annual financial statements, review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by Crowe in connection with statutory and regulatory filings and engagements were $805,800 and $1,300,000 during the years ended 2017 and 2018, respectively.

 

Audit Related Fees

 

The aggregate fees billed to us by Crowe for assurance and related services rendered by the firm that are reasonably related to the performance of the audit and review of the financial statements and services provided in connection with the Astoria Merger, Advantage Funding merger (in the case of 2018), consent and review of regulatory filings and capital market offerings that are not already reported in “Audit Fees,” were $507,886 and $237,800 during the years ended 2017 and 2018, respectively.

 

Tax-Related Fees

 

The aggregate fees billed to us by Crowe for professional services rendered for tax consultations and tax compliance were $274,210 and $297,241 during the years ended 2017 and 2018, respectively.

 

All Other Fees

 

The aggregate fees billed to us by Crowe, primarily for internal audit services with respect to regulatory compliance consulting, and the filing of 2017 federal tax returns for Astoria (in the case of 2018) were $493,671 and $225,304 during the years ended 2017 and 2018, respectively.

 

The Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by an independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee pre-approved 100% of the audit related fees, tax fees and all other fees described above during 2017 and 2018 years, respectively.

 

THE AUDIT COMMITTEE OF THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF CROWE AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2019 YEAR.

 

*       *       *

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS, DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS

  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS

  

The following table sets forth certain information regarding beneficial ownership of our common stock as of April 5, 2019, by:

 

Øeach person, or group of affiliated persons, known to us to beneficially own more than 5% of the outstanding shares of our common stock;
Øeach of our directors and nominees;
Øeach person who was a NEO; and
Øall of our directors, nominees and executive officers as a group.

 

The percentages shown in the following table are based on 209,560,821 shares of common stock outstanding as of April 5, 2019. Beneficial ownership is determined in accordance with the rules of the SEC, and includes voting and investment power with respect to shares. The number of shares beneficially owned by a person includes shares subject to options held by that person that were exercisable as of April 5, 2019, or within 60 days of that date. The shares issuable under those options are treated as if they were outstanding for computing the percentage ownership of the person holding those options, but are not treated as if they were outstanding for the purposes of computing the percentage ownership of any other person. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law.

 

The following table sets forth the number of shares of our common stock beneficially owned by the indicated parties. Unless otherwise indicated, the address of each person is c/o Sterling Bancorp, 400 Rella Boulevard, Montebello, New York 10901.

 

 

Name

Amount and Nature of
Beneficial Ownership
Percent of
Class
Directors & Nominees    
John P. Cahill 23,836 (1)  *
Louis J. Cappelli – Director Emeritus 890,176 (2)  *
Navy E. Djonovic 16,619   *
Fernando Ferrer 28,545 (3) *
Robert Giambrone 13,338 (4) *
William Helmer – Director Emeritus 471,212 (5)  *
Mona Aboelnaga Kanaan – Nominee ––   *
James J. Landy 382,701 (6) *
Robert W. Lazar 33,501 (7) *
Maureen Mitchell 1,937    *
Patricia M. Nazemetz 13,738   *
Richard O’Toole 38,619   *
Ralph F. Palleschi 78,417 (8) *
Burt Steinberg 266,171 (9) *
William E. Whiston 21,163   *
Named Executive Officers    
Jack Kopnisky 614,685 (10)  *
Luis Massiani 184,580 (11) *
Rodney Whitwell 129,752 (12) *
Michael E. Finn 66,943   *
Thomas X. Geisel 39,382   *
All Directors, Nominees and Executive Officers as a Group (23 persons)(13) 3,486,670   1.67%

 

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS, DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS

 

 

Name

Amount and Nature of
Beneficial Ownership
Percent of
Class
BENEFICIAL OWNERS HOLDING MORE THAN 5%    

Wellington Management Group LLP

c/o Wellington Management Company LLP

280 Congress Street

Boston, MA 02210

21,936,363 (14) 9.77%

BlackRock Inc.

55 East 52nd Street

New York, New York 10022

20,342,074 (15) 9.10%

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

20,234,530 (16) 9.01%

_____________________

* Denotes less than 1% owned.

(1)The shares shown as owned by Mr. Cahill include 2,639 common shares owned indirectly in an Individual Retirement Account and 1,327 shares of phantom stock.
(2)The shares shown as owned by Mr. Cappelli include 1,201 common shares owned by trusts and 104,760 shares owned by the Cappelli Family Investors LLC, beneficial ownership of which he disclaims and 9,997 shares in an Individual Retirement Account.
(3)The shares shown as owned by Mr. Ferrer include 211 common shares owned indirectly in an Individual Retirement Account.
(4)The shares shown as owned by Mr. Giambrone include 1,000 common shares owned indirectly in an Individual Retirement Account and 1,575 common shares owned indirectly by his mother.
(5)The shares shown as owned by Mr. Helmer include 68,121 common shares held by his spouse, beneficial ownership of which he disclaims, 76,106 shares held in an Individual Retirement Account and 44,323 shares held in a 401(k). Mr. Helmer has pledged 282,662 of his directly-held shares as collateral.
(6)The shares shown as owned by Mr. Landy include 15,240 shares held jointly with his spouse and 150,446 common shares owned by his spouse of which he disclaims beneficial ownership of.
(7)The shares shown as owned by Mr. Lazar include 10,974 common shares owned indirectly in an Individual Retirement Account and 1,969 shares of phantom stock.
(8)The shares shown as owned by Mr. Palleschi include 78,417 common shares indirectly owned by the Ralph F. Palleschi 1998 Family Trust.
(9)The shares shown as owned by Mr. Steinberg include 115,963 common shares held by trusts and 10,734 shares owned indirectly in an Individual Retirement Account.
(10)The shares shown as owned by Mr. Kopnisky include 10,000 common shares owned by his spouse, beneficial ownership of which he disclaims, 4,461 shares owned jointly with his spouse and 129,435 common shares underlying stock options exercisable within 60 days.
(11)The shares shown as owned by Mr. Massiani include 46,169 common shares underlying stock options exercisable within 60 days.
(12)The shares shown as owned by Mr. Whitwell include 54,528 common shares underlying stock options exercisable within 60 days.
(13)Total includes all Executive Officers, including Messrs. James Blose, Brian Edwards and Javier Evans.
(14)Based upon information contained in the Schedule 13G/A filed by Wellington Management Group LLP (“Wellington”) with the SEC on February 14, 2019, Wellington and its subsidiaries beneficially owned 21,936,363 shares of common stock as of December 31, 2018, with sole voting power over 0 shares, shared voting power over 17,830,751 shares, sole dispositive power over 0 shares and shared dispositive power over 21,936,363 shares.
(15)Based upon information contained in the Schedule 13G/A filed by BlackRock Inc. (“BlackRock”) with the SEC on February 6, 2019, BlackRock beneficially owned 20,342,074 shares of common stock as of December 31, 2018, with sole voting power over 19,266,693 shares, shared voting power over 0 shares, sole dispositive power over 20,342,074 shares and shared dispositive power over 0 shares.
(16)Based upon information contained in the Schedule 13G/A filed by The Vanguard Group (“Vanguard”) with the SEC on February 11, 2019, Vanguard beneficially owned 20,234,530 shares of common stock as of December 31, 2018, with sole voting power over 107,214 shares, shared voting power over 35,197 shares, sole dispositive power over 20,114,306 shares and shared dispositive power over 120,224 shares.

 

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CERTAIN INFORMATION ABOUT OUR
EXECUTIVE OFFICERS

  

CERTAIN INFORMATION ABOUT OUR EXECUTIVE OFFICERS

 

Qualifications and Business Experience

 

 

Executive Officers

 

The following provides certain business experience for the past five (5) years with respect to individuals who serve as our executive officers. Information concerning the business experience of Mr. Kopnisky, who serves as our CEO and President, is provided in “Proposal I – Election of Directors,” above.

 

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

Name   Age  

Positions Held With

Sterling Bancorp

Luis Massiani   42   Senior Executive Vice President and Chief Financial Officer
Rodney Whitwell   60   Senior Executive Vice President and Chief Administrative Officer
Michael E. Finn   54   Senior Executive Vice President, Chief Risk Officer
Thomas X. Geisel   57   Senior Executive Vice President, Corporate Banking President

 

Luis Massiani currently serves as Senior Executive Vice President (since October 2014) and Chief Financial Officer of the Company and the Bank. Mr. Massiani was appointed as Executive Vice President and Chief Financial Officer at Legacy Provident NY Bancorp and Legacy Provident Bank effective December 2012. Prior to that Mr. Massiani was Director of the Investment Banking Department of Credit Suisse Securities (USA) LLC. Prior to joining Credit Suisse in May 2011, Mr. Massiani served first as Vice President, then later as a Director, of the investment banking department of Citadel Securities LLC, from September 2009.

 

Rodney Whitwell currently serves as Senior Executive Vice President (since October 2014) and Chief Administrative Officer (since July 2017) of the Company and the Bank. Mr. Whitwell served as Chief Operating Officer of the Company and Bank from June 2015 to July 2017, and also served as Chief Risk Officer of the Bank from November 2013 through June 2015. Mr. Whitwell was appointed as Executive Vice President and named Chief Operating Officer of Legacy Provident Bank and Legacy Provident in November of 2011. Mr. Whitwell has over thirty-one (31) years of leadership experience in financial services. Prior to joining Provident Bank, Mr. Whitwell was Principal at Mercatus LLC, a national financial services consulting and investing firm, from 2010 to 2011.

 

Michael E. Finn currently serves as Senior Executive Vice President (since July 2017) and Chief Risk Officer (since June 2015) of the Company and the Bank. Mr. Finn was appointed Executive Vice President, Chief Risk Officer of HV Bank in January 2014. From August 2011 to December 2013, Mr. Finn served as Senior Advisor to the Deputy Comptroller of the Office of the Comptroller of the Currency. From September 2004 to August 2011, Mr. Finn served as a Regional Director for the Office of Thrift Supervision.

 

Thomas X. Geisel currently serves as Senior Executive Vice President, Corporate Banking President (since March 2018) of the Company and the Bank. Mr. Geisel previously served as Executive Vice President and President of Specialty Lending since March 2015, and he served as a consultant to the Company for special projects prior to that beginning in June 2014. Mr. Geisel served as the Managing Partner of Templar Ventures LLC, a New Jersey-based merchant bank from 2013 to 2015. He served as President and Chief Executive Officer of Sun Bancorp Inc. and Sun National Bank from 2008 to 2013.

 

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CORPORATE GOVERNANCE AND
RELATED MATTERS

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Our executive officers, Directors and beneficial owners of greater than 10% of our outstanding shares of common stock are required to file reports with the SEC disclosing beneficial ownership and changes in beneficial ownership of our common stock. SEC rules require disclosure if an executive officer, Director or 10% beneficial owner fails to file these reports on a timely basis. Based on the Company’s review of ownership reports required to be filed for 2018, no executive officer, Director or 10% beneficial owner of the Company’s shares of common stock failed to file ownership reporting on a timely basis, except for the following: (i) one Form 4 by Mr. Kopnisky for the payment of tax liability for the vesting of a restricted stock award; (ii) one Form 4 by Mr. Michael Finn for the payment of tax liability for the vesting of a restricted stock award; (iii) one Form 4 for Mr. Brian Edwards for the payment of tax liability for the vesting of a restricted stock award: (iv) one Form 4 for Mr. Javier Evans for the payment of tax liability for the vesting of a restricted stock award; (v) one Form 4 each for Mr. Cahill, Ms. Djonovic, Mr. Ferrer, Mr. Giambrone, Mr. Landy, Mr. Lazar, Ms. Mitchell, Ms. Nazemetz, Mr. Palleschi, Mr. Steinberg and Mr. Whiston, for the issuance of a compensatory award for director services rendered in 2018.

 

CORPORATE GOVERNANCE AND RELATED MATTERS

 

Code of Ethics

 

Sterling has adopted a Code of Ethics that is designed to uphold the highest standards of ethics, professionalism, fairness, honesty and respect. The Code of Ethics is applicable to Sterling’s directors and employees, including the Company’s principal executive officer, principal financial and accounting officer, chief risk officer and all officers performing similar functions. The Code of Ethics addresses conflicts of interest, the treatment of confidential information and compliance with applicable laws, rules and regulations. The Code of Ethics is available on the Company’s Internet website at www.sterlingbancorp.com under the headings “Corporate Governance” and “Governance Documents.” Amendments to and waivers of the Code, as applicable, are disclosed on the Company’s website.

 

Attendance at Annual Meetings of Stockholders

 

Sterling does not have a policy regarding director attendance at Annual Meetings of stockholders. All of our directors at the time of the meeting attended, either in person or by phone, the prior year’s Annual Meeting.

 

Meetings and Committees of the Board

 

The business of the Board is conducted at regular and special meetings of the Board and its committees. In addition, the independent members of the Board meet in executive session periodically. The Chairman of the Nominating and Corporate Governance Committee presides over all executive sessions. During 2018, the Board held eight (8) regular meetings and two (2) special meetings. No member of the Board or any committee thereof attended less than 75% of the aggregate meetings of the Board and the committees of which he or she is a member.

 

BOARD AND COMMITTEE MEETINGS

Board or Committee Number of
Meetings Held
Board of Directors 10
Executive Committee 1
Nominating and Corporate Governance Committee 3
Audit Committee 8
Compensation Committee 6
Enterprise Risk Committee 5
Credit Risk Subcommittee 4

 

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CORPORATE GOVERNANCE AND
RELATED MATTERS

 

Copies of Sterling’s Corporate Governance Guidelines, Code of Ethics and the charters of each standing committee adopted by the Board are available on the Company’s Internet website (www.sterlingbancorp.com) under the heading “Governance Documents.” During 2018, our Board committees consisted of the following:

 

Executive Committee. The Executive Committee currently consists of Chairman O’Toole, who also serves as Chairman of the Executive Committee, President, CEO and Director Kopnisky, and Directors Cahill, and Steinberg. James Deutsch served on the Executive Committee until his resignation from the Board of Directors on December 31, 2018. The Executive Committee meets to review significant matters that may be brought to the full Board. The Executive Committee is empowered to act on behalf of the full Board, with certain limitations, in the event action is deemed necessary prior to a meeting of the full Board. The Executive Committee may also consider topics of importance to the organization that are not within the scope of other committees in order to provide a working forum in which to consider the matters. Matters reviewed by the Executive Committee are reported to the full Board at its next meeting. The Executive Committee met one (1) time during 2018.

 

Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee consists of Directors Cahill, who serves as Chairman, Ferrer, O’Toole and Palleschi. James Deutsch served on the Nominating and Corporate Governance Committee until his resignation from the Board of Directors on December 31, 2018. All members of the Nominating and Corporate Governance Committee are independent. The Nominating and Corporate Governance Committee met three (3) times during 2018.

 

As more fully described in the Nominating and Corporate Governance Committee Charter, the duties and responsibilities of the Nominating and Corporate Governance Committee include, among other things, the periodic review of the size, structure and composition of the Board and making recommendations for change, when appropriate, establishing procedures for evaluating the Board, reviewing Board policies, reviewing and evaluating Board compensation and recommending changes thereto, reviewing the Certificate of Incorporation and Bylaws, reviewing and approving related-party transactions, reviewing the Company’s Insider Trading Policy and establishing and recommending to the Board the stock ownership guidelines for directors and management.

 

The Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service.

 

Current members of the Board with skills and experience that are relevant to Sterling’s business and who are willing to continue Board service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective through new Board members. If there is a vacancy on the Board because any member of the Board does not wish to continue in service, if a director meets the required retirement age, or if it is decided not to re-nominate a director for re-election, the Nominating and Corporate Governance Committee determines the desired skills and experience of a new nominee, solicits suggestions for director candidates from all Board members, and may engage in other search activities (which activities may be conducted through a sub-committee). Criteria identified by the Board from time to time include factors relative to the overall composition of the Board and such other factors as the Nominating and Corporate Governance Committee deems appropriate, such as a potential candidate’s business experience, specific areas of expertise, skills, background and independence consistent with the Company’s Corporate Governance Guidelines and applicable NYSE rules. When identifying nominees to serve as a director, the Nominating and Corporate Governance Committee seeks to create a Board that is strong in its collective knowledge and has a diversity of background, skills and experience with respect to accounting and finance, information technology, management and leadership, vision and strategy, business operations, business judgment, industry knowledge, knowledge of the community served, experience in identifying and solving for risks associated with financial institutions and corporate governance.

 

Candidates should possess certain attributes, including integrity and a devotion to ethical behavior, a primary interest in the well-being of Sterling, a capacity for independent judgment, good business acumen, the capacity to protect confidential information, an ability to work as a member of a team and a willingness to evaluate other opinions or points of view. In addition to examining a candidate’s qualifications in light of the above attributes, the Nominating and Corporate Governance Committee will consider the following: the overall character of the candidate and any existing or potential conflict of interest; the candidate’s willingness to serve and ability to devote the time and effort required; the candidate’s record of leadership; and the ability to develop business for Sterling.

 

The Nominating and Corporate Governance Committee may consider qualified candidates for director suggested by our stockholders. Stockholders can suggest qualified candidates for director by writing to our Corporate Secretary at 21 Scarsdale Road, Yonkers, New York 10707. The Corporate Secretary must receive a submission not less than ninety (90) days prior to the anniversary date of the mailing of our proxy materials for the preceding year’s Annual Meeting. The submission must include the following:

 

ØA statement that the writer is a stockholder and is proposing a candidate for consideration by the Nominating and Corporate Governance Committee;

 

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ØThe name and address of the stockholder as such information appears on Sterling’s books, and the number of shares of Sterling’s common stock that are owned beneficially by such stockholder. If the stockholder is not a holder of record, appropriate evidence of the stockholder’s ownership will be required;

 

ØThe name, address and contact information for the candidate, and the number of shares of common stock of Sterling that are owned by the candidate. If the candidate is not a holder of record, appropriate evidence of the stockholder’s ownership will be required;

 

ØA statement of the candidate’s business and educational experience;

 

ØSuch other information regarding the candidate as would be required to be included in the Company’s Proxy Statement pursuant to SEC Regulation 14A;

 

ØA statement detailing any relationship between the candidate and any client, supplier or competitor of the Company or its affiliates;

 

ØDetailed information about any relationship or understanding between the proposing stockholder and the candidate; and

 

ØA statement that the candidate is willing to be considered and willing to serve as a director if nominated and elected.

 

Submissions that are received and that satisfy the above requirements are forwarded to the Chairman of the Nominating and Corporate Governance Committee for further review and consideration. A nomination submitted by a stockholder for presentation by the stockholder at an Annual Meeting must comply with the procedural and informational requirements described in “Advance Notice of Business to be conducted at an Annual Meeting,” below.

 

Audit Committee. The Audit Committee currently consists of Directors Steinberg, who serves as Chairman, Djonovic, Giambrone and Lazar. Director Lazar will step down effective upon his retirement at the Company’s 2019 annual stockholders meeting. The Company’s Chairman will appoint an additional director to serve on the Audit Committee who possesses the required financial and audit skills while remaining within the NYSE requirements. All Audit Committee members are independent. The Board has determined that each member is financially literate and has determined that Director Steinberg qualifies as an “audit committee financial expert” as defined under SEC rules and regulations by virtue of his background and experience. Director Steinberg also qualifies as a financial expert in accordance with the listing standards of the NYSE applicable to Audit Committee members. Each member of the Audit Committee is “independent” as defined by Rule 10A-3 of the Exchange Act and in accordance with the listing standards of the NYSE.

 

As more fully described in the Audit Committee Charter, the duties and responsibilities of the Audit Committee include, among other things:

 

ØAppointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged by the Company for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services;

 

ØPreapproval of all auditing services and permitted non-audit services (including the fees and terms thereof);

 

ØReview and discussion with management and the independent registered public accounting firm of the audited financial statements, quarterly financial statements and earnings press releases;

 

ØDiscussion with the independent registered public accounting firm, of the matters required to be discussed by the Public Company Accounting Oversight Board’s Auditing Standards, including Statement on Auditing Standards No. 61, as amended, relating to the conduct of the audit;

 

ØAnnual evaluation of the independent registered public accounting firm’s internal quality control procedures, qualifications, performance and independence;

 

ØOversight of the internal audit function (including reviewing and approving the audit plan, monitoring corrective actions, and reviewing and recommending modifications to policies governing the Internal Audit Department);

 

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ØReview with management of the Company’s compliance program for compliance with laws and regulations; and

 

ØConduct of an annual performance evaluation of the Audit Committee and annual review and reassessment of the adequacy of the Audit Committee charter.

 

In addition, the Audit Committee meets with our internal Chief Auditor to review the results of audits of specific areas on a quarterly basis. The Audit Committee met eight (8) times during 2018.

 

Compensation Committee. The Compensation Committee currently consists of Directors O’Toole, who serves as Chairman, Cahill, Mitchell, Nazemetz, Palleschi and Steinberg, each of whom is independent. As more fully described in the Compensation Committee’s Charter, the duties and responsibilities of the Compensation Committee include, among other things, determining the salaries of the President and CEO and all executive officers, as well as for succession planning and approving new appointments to the executive staff. The Compensation Committee also determines annual cash incentive payments to the President and CEO and other executive officers in accordance with the terms of the STI Plan (as defined herein). Determinations with respect to grants under stock benefit plans are made by members of the Compensation Committee who are considered “disinterested” for purposes of Section 162(m) of the Internal Revenue Code (prior to the Tax Cuts and Jobs Act of 2017 (“TCJA”) changes thereto). The Compensation Committee met six (6) times during 2018.

 

Enterprise Risk Committee. The Enterprise Risk Committee currently consists of Directors Whiston, who serves as Chairman, Ferrer, Giambrone, Kopnisky, Landy, Lazar and Mitchell. Director Whiston was appointed Chairman of the Enterprise Risk Committee, effective December 31, 2018, upon the resignation of James Deutsch from the Board who served as the Chairman of the Enterprise Risk Committee until that point. Director Lazar will step down effective upon his retirement at the Company’s 2019 annual stockholders meeting. The Enterprise Risk Committee’s responsibilities include overseeing all aspects of enterprise risk management including cyber security. The Enterprise Risk Committee assists the Board and oversees the efforts of Company management in formulating strategies, policies and procedures with respect to the identification, measurement, management and control of all categories of risk. The Enterprise Risk Committee met five (5) times during 2018.

 

Credit Risk Subcommittee. The Enterprise Risk Committee has a Credit Risk Subcommittee that oversees the Bank’s lending activities including, but not limited to, (i) overseeing the efforts of Bank management to maintain appropriate risk/reward metrics within the loan portfolio, (ii) reviewing with management trends in loan portfolio performance, and (iii) reviewing certain audits and regulatory examinations with respect to the Bank’s loan portfolio. The Enterprise Risk Committee resolved that the Credit Risk Subcommittee consists of Directors Landy, who serves as Chairman, Ferrer, Kopnisky, Whiston and Lazar. Mr. Deutsch served on the Credit Risk Subcommittee until his resignation in December 2018, and Director Lazar will step down effective upon his retirement at the Company’s 2019 annual stockholders meeting. The Credit Risk Subcommittee met four (4) times during 2018.

 

CURRENT COMMITTEE COMPOSITION

  Executive
Committee
Nominating & Corporate
Governance Committee
Audit
Committee
Compensation
Committee
Enterprise Risk
Committee
Credit Risk
Subcommittee
John P. Cahill C      
Navy E. Djonovic          
Fernando Ferrer      
Robert Giambrone        
Jack Kopnisky      
James J. Landy         C
Robert W. Lazar      
Patricia M. Nazemetz          
Richard O’Toole C   C    
Ralph F. Palleschi        
Burt Steinberg   C*    
William E. Whiston         C

 

Member
CChair
*Audit Committee Financial Expert

 

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RELATED MATTERS

 

Audit Committee Report

 

The Audit Committee provides oversight of the Company’s financial reporting process on behalf of the Board. Management bears primary responsibility for the financial statements and the reporting process, including the system of internal controls and disclosure controls. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with United States generally accepted accounting principles.

 

As part of its ongoing activities, the Audit Committee has:

 

ØReviewed and discussed with management the Company’s audited consolidated financial statements for 2018;

 

ØDiscussed with the independent registered public accounting firm the matters required to be discussed under Public Company Accounting Oversight Board (“PCAOB”) standards, including PCAOB Auditing Standard No. 1301, Communications with Audit Committees; and

 

ØReceived the written disclosures and the letter from the independent registered public accounting firm pursuant to applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence as currently in effect and discussed with the independent registered public accounting firm their independence.

 

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019.

 

This report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Sterling specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

 

This report has been provided by the Audit Committee:

Burt Steinberg, Chairman

Navy E. Djonovic

Robert Giambrone

Robert W. Lazar

 

Communications with the Board

 

All interested parties who wish to contact our Board or an individual director may do so by writing to: Board of Directors, Sterling Bancorp, 21 Scarsdale Road, Yonkers, New York 10707, Attention: CEO or Corporate Secretary. Interested parties who wish to communicate directly with the presiding director of Board executive sessions or with the Company’s non-management directors as a group may do so by writing to the address directly listed above, but by addressing such communication to the Chairman of the Nominating and Corporate Governance Committee. The letter should indicate if the author is a stockholder of Sterling, and, if shares are not held of record, should include appropriate evidence of stock ownership. Communications are reviewed by the Corporate Secretary and are then distributed to the Board or the individual director, as appropriate, depending on the facts and circumstances outlined in the communications received. The President and CEO, however, may directly respond at his discretion. If appropriate, the Corporate Secretary may (1) handle an inquiry directly, or (2) forward a communication for response by another employee of Sterling. A copy of any such communication and response is forwarded to the Board at the next available Board meeting. The Corporate Secretary has the authority not to forward a communication if it is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening, illegal or otherwise inappropriate.

 

Board Leadership Structure

 

The Board has reviewed the current Board leadership structure of the Company, the Bank and all affiliates, which consists of a separate Chairman of the Board and a President/CEO. The Chairman of the Board performs all duties and has all powers which are commonly incident to the office of Chairman of the Board or which are delegated to him by the Board, including presiding at all meetings of the stockholders and all meetings of the Board. The President and CEO has responsibility for the management and control of the business and affairs of the Company and has general supervision of all of the officers (other than the Chairman of the Board), employees and agents of the Company. The Board believes that separating the roles enhance both the independence of the Board and its effectiveness in discharging its responsibilities and that this procedure is currently the most appropriate Board leadership structure for the Company.

 

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RELATED MATTERS

 

Board’s Role in Risk Oversight

 

The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. In general, the following Board committees oversee the described risks:

 

ØThe Enterprise Risk Committee has primary oversight responsibility for all aspects of the enterprise-wide risk management as described in more detail below. The Enterprise Risk Committee includes a Credit Risk Subcommittee which has oversight responsibility of the Bank’s lending activities.

 

ØThe Audit Committee has primary oversight responsibility with respect to the integrity of the Company’s financial reporting process and systems of internal controls regarding finance and accounting, as well as its financial statements.

 

ØThe Compensation Committee has oversight responsibility of risks related to the Company’s compensation policies and practices, including ensuring compensation programs do not encourage unnecessary or excessive risk-taking.

 

The Enterprise Risk Committee oversees the efforts of Company management in formulating strategies, policies and procedures with respect to the identification, measurement, management and control of all categories of risk, including (a) credit risk, (b) interest rate risk, (c) liquidity, (d) price or market risk, (e) operational risk, (f) compliance/regulatory/legal risk, (g) strategic risk and (h) reputation risk. In such capacity, the Enterprise Risk Committee is responsible for, among other things, overseeing the efforts of management in: (i) fostering the establishment and maintenance of an effective risk management culture, (ii) assisting the Board in the adoption of a risk tolerance statement and an overall risk management policy, (iii) adopting a capital plan and establishing capital levels to ensure the safe and sound operation of the Company, (iv) monitoring the processes for identifying and monitoring significant risk, the aggregate risk exposures and concentrations of risk, (v) approving and monitoring acceptable levels of risk tolerance which are consistent with the Board’s agreed risk to tolerance, (vi) receiving regular reports from members of senior management on areas of material risk and (vii) facilitating the education of the full Board, as necessary, with respect to any pertinent risk topics.

 

In conjunction with the Enterprise Risk Committee, on a quarterly basis, the Chief Risk Officer presents a consolidated Risk Assessment Report to the Board covering credit risk, market and capital risk, operational and IT controls, information security, cybersecurity and strategic risks. The Board and its committees also review policies and guidelines that senior management uses to manage the Company’s exposure to risk.

 

The Company is organized to promote a strong risk awareness and management culture through the Company’s Risk Management and Oversight Program which includes three lines of defense: (1) executive management is responsible for establishing policies, procedures and controls and are accountable for monitoring and enforcing risk for each specialty line of business; (2) independent risk management is responsible for setting minimum controls and methodologies to identify and manage risks and establishing overall risk management strategies and policies and setting minimum controls and methodologies to manage risk across lines of business; and (3) the Company’s internal audit which periodically assesses the effectiveness of the internal controls. The Audit Committee reviews the effectiveness of systems for internal control, risk management and compliance with financial services legislation and regulation.

 

In particular, information security is a significant operational risk for financial institutions such as us, and includes the risk of losses resulting from cyber attacks. In light of that risk, our Board is actively engaged in the oversight of our Company’s information security risk management and cyber defense programs. The Enterprise Risk Committee oversees the Company’s cybersecurity controls and provides regular updates to the Board on cybersecurity matters. The Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues.

 

We continuously develop and enhance controls, processes and systems to identify and protect our networks, computers, systems, and data from attacks or unauthorized access, alteration or destruction of confidential information through our Cyber and Information Security Program. The Company-wide program was created based on guidance provided by federally developed programs and meets regulatory standards. This program includes comprehensive due diligence and ongoing oversight of third-party relationships, including vendors. Through this proactive program, the Company is able to respond to potential threats before developing into serious loss scenarios. The Board receives updates about the results of periodic exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and our internal response preparedness.

 

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The Compensation Committee also monitors, on an ongoing basis, our compensation policies and programs. We design such compensation practices to support a strong risk management culture while also rewarding long-term value. Each year, management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices and ensure such practices do not encourage unnecessary or excessive risk-taking. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the design features of the Company’s compensation programs, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking.

 

Board Evaluation

 

Sterling believes in the strength of each of the appointed directors. To retain the effective functionality of the Board and ensure the appropriate levels of oversight for the Company, each member performs a self-evaluation and an evaluation of peers. The formal portion of the process is overseen by the Nominating and Corporate Governance Committee and conducted through the Office of the General Counsel. Responses collected from the evaluations are reviewed by the Chairman of the Board, Chairman of the Nominating and Corporate Governance Committee and General Counsel and strategies are discussed to address the concerns raised by the Board.

 

In addition to the formal evaluation process, discussions occur throughout the year with the Board and committee members. The consistent communication can be seen through the one on one discussions held with the Chairman of the Board and/or the Chairman of the Nominating and Corporate Governance Committee as well as through executive sessions conducted at the Board and committee meetings without members of management being present.

 

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CORPORATE SOCIAL RESPONSIBILITY

 

CORPORATE SOCIAL RESPONSIBILITY

 

We understand that it is important to our stockholders that we conduct our business in a sustainable manner through our actions and interactions with our clients, colleagues and within the communities we support. We aim to integrate corporate social responsibility into all the Company does, and our Board monitors and considers corporate social responsibility in making decisions. The Company, through the Bank, is invested in the success of the communities where our clients live, work and do business.

 

Community Service

 

ØWe measure success not only in financial terms, but also in our ongoing support of the communities in the markets we serve.

 

ØThe Company’s affiliate organization, Sterling National Charitable Foundation (the “Foundation”), provides outreach to the population in the communities we serve by supporting not-for-profit organizations that share our vision to empower individuals and families through education. During 2018, the Foundation served individuals in underserved communities by granting over $1.1 million in support through the work of 80 charitable organizations with a focus on education and community development programs. Additionally, the Foundation’s support of these organizations helps adults and families in low-income areas to focus on job growth. The organizations that we support are located throughout Sterling’s financial center footprint in areas in the lower Hudson Valley, Bronx, Long Island and New Jersey.

 

ØThe vision to serve those in our local communities is spread not only through the mission of the Foundation, but also through the countless hours our Board and colleagues have contributed through volunteering their time with organizations that continue to make an impact on the lives of those communities in need. Our colleagues participate in volunteering initiatives through our partnership with organizations such as Junior Achievement and Habitat for Humanity. Hundreds of volunteer hours are spent assisting those in our local communities by teaching financial literacy in schools, providing job skills training and mentoring as well as helping build new homes for families. This year will bring new opportunities for our colleagues to continue to give back to the community through our service and support.

 

Commitment to Safeguarding Client Data

 

ØSterling maintains a highly efficient and effective operations and risk management team to provide an in-depth level of protection necessary to ensure the safety of our clients and colleagues while continuing to achieve stockholder value. Knowledge is key to maintaining the risk management and cybersecurity program and staying ahead of new threats; therefore, Sterling has invested the time and effort into continued awareness through educational programs designed for clients and colleagues. Sterling believes it is important for all colleagues to have an understanding of the risks and regulations of security and cyber activities; therefore, it requires all colleagues to participate in on-going training programs throughout the year. Along with this training, Sterling is transparent with colleagues and clients by providing opportunities for awareness shared throughout the Sterling environment and posted on the Bank’s website.

 

ØKeeping ahead of the cyber environment requires tenacity and resilience. Our colleagues are continually looking for ways to provide clients with enhanced product offerings while updating our high level of cyber and information security controls to protect the Bank’s data, applications and networks. This level of information security provides protection to our clients’ accounts from unauthorized access and a superior level of client care and support that has been the Company’s cornerstone for success over the past 130 years.

 

Education and Training

 

ØThe Company is committed to continually educating our colleagues to ensure efficient and effective operations for our clients. Participation in educational programs is required for our colleagues throughout the year, each with a focus on awareness of key banking regulations and risk prevention activities.

 

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CORPORATE SOCIAL RESPONSIBILITY

 

ØThe Company is committed to promoting its culture through programs that build on our five key principals of collaborative communication, including: Lean Six Sigma, Leadership Development, Sterling University and Creative Thinking and Career Management. Internal training programs such as Sterling University and Lean Six Sigma promote Sterling’s commitment to high achievement and accelerated growth while providing the skills necessary for colleagues to advance in their careers. The principles used in Lean Six Sigma effectuate the increase of overall productivity.

 

ØExtraordinary Women of Sterling is a program that focuses on the opportunities and challenges facing professional women while providing connections for personal and professional growth. The forum offers opportunities for career advice, mentoring and community involvement.

 

Environmental Sustainability

 

ØDigital technology has been incorporated into our product offerings like online banking which provides clients with more eco-friendly banking.

 

ØThe Company routinely evaluates and incorporates conservation initiatives, including reducing the volume of paper used, purchasing recycled paper and environmentally-friendly cleaning products and recycling paper.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

COMPENSATION DISCUSSION & ANALYSIS

 

Executive Summary

 

 

Introduction

 

This Compensation Discussion & Analysis provides detail on the compensation programs for our Chief Executive Officer, Chief Financial Officer, and our three most highly compensated other executives (our NEOs) including the overall objectives of our compensation program, each element of compensation provided, and an explanation of the reasons for the compensation decisions we have made for these individuals with respect to 2018. Our NEOs for 2018 were:

 

Name

  Age  

Positions Held With

Sterling Bancorp

Jack Kopnisky   63   President and Chief Executive Officer
Luis Massiani   42   Senior Executive Vice President and Chief Financial Officer
Rodney Whitwell   60   Senior Executive Vice President and Chief Administrative Officer
Michael E. Finn   54   Senior Executive Vice President and Chief Risk Officer
Thomas X. Geisel   57   Senior Executive Vice President and Corporate Banking President

 

Our Strategic Accomplishments

 

During 2018, we continued executing our strategy of building a high performing regional bank that focuses on serving middle market commercial clients and affluent consumers through a single point of contact, relationship-based model. Our 2018 highlights include the following:

 

ØStrong Growth Momentum in 2018. Sterling ended 2018 as a larger, more profitable and more diversified Company. As of December 31, 2018, total assets were $31.4 billion, total gross portfolio loans were $19.2 billion, and total deposits were $21.2 billion. For the year ended December 31, 2018, reported net income available to common stockholders was $439.2 million, or $1.95 per diluted share, compared to net income of $91.0 million, or $0.58 per diluted share for the same period in 2017.

 

ØSuccess of the Astoria Merger and systems integration. During 2018, we consolidated 22 financial center locations and two back office locations, reduced personnel and completed the full conversion of Astoria Bank’s legacy deposit system and now operate on a single, fully-integrated technology platform. Our successful integration of Astoria resulted in significant growth of 42.9% in adjusted earnings per share in 2018 over the prior year.

 

ØRising Adjusted Profitability. The Company’s return on average tangible assets for the year was 1.51% and return on average tangible common equity was 17.87%. This compares to 0.52% and 6.22%, respectively, for 2017. On an adjusted basis, excluding the impact of merger-related expense and other restructuring charges, the Company’s adjusted return on average tangible assets was 1.55% and return on average tangible common equity was 18.29%. This compares to 1.27% and 15.17%, respectively, for 2017.

 

ØSale of Residential Mortgage Loans. Consistent with our strategy to diversify our balance sheet, we announced the sale of approximately $1.6 billion in non-core, residential mortgage loans. The Company substantially completed this transaction in the first quarter of 2019 and used the proceeds from this transaction to reduce wholesale borrowings.

 

ØAcquisition of Advantage Funding. Sterling National Bank acquired Advantage Funding Management Co., Inc. (“Advantage Funding”), a leading provider of commercial vehicle and transportation financing services, with total outstanding loans and leases of $457.6 million and a diversified client base across various industry sectors and geographic markets.

 

ØImproving Efficiency and Positive Operating Leverage. The Company’s reported operating efficiency ratio was 42.8% for the year ended December 31, 2018, compared to 67.7% for the year ended December 31, 2017. On an adjusted basis, excluding the impact of merger-related expense and other restructuring charges, the Company’s adjusted operating efficiency ratio was 38.8% in 2018 which represented an improvement of 300 basis points over 2017.

 

ØStock Repurchase Program. In the fourth quarter of 2018, the Company increased the amount of shares authorized to be repurchased under the Company’s existing repurchase program to 20.0 million shares. As of December 31, 2018, the Company had repurchased a total of 9,114,771 shares under the repurchase program. In the first quarter of 2019, the Company repurchased an additional 8,002,595 shares. The Company expects to complete the full amount of the repurchase program by June 30, 2019.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Highlights of 2018 Compensation Program and Actions

 

The Company’s executive compensation program is designed to align total compensation with performance while enabling us to attract, motivate and retain high quality executive management. Our compensation program, and our changes implemented during 2018, continued to focus on performance-based pay that reflects our achievements on an annual basis and our ability to deliver long-term value to our stockholders. We have a balanced approach to total compensation that includes a mix of base/fixed pay and variable/performance-based pay, cash and equity, and short- and long-term incentive compensation. The Compensation Committee regularly reviews the Company’s compensation programs to ensure they are consistent with safe and sound business practices, regulatory requirements, emerging industry trends and stockholder interests.

 

As a result of a study performed by Meridian Compensation Partners, LLC (“Meridian”), the Compensation Committee approved certain changes to base salary and short-term incentive targets, as well as long-term incentive targets for the CEO and other NEOs to be effective in 2018 and designed to provide a competitive pay structure that better aligns with the Company’s peer group following the recent mergers and related integration. Specifically, since the Company doubled in size, both the Committee and management believed pay should transition in a conservative manner, and that increases to pay should reflect proven performance post integration. Salaries for 2018 and incentive targets were set with a goal to bring pay within market range over two years.

 

2018 Target Pay Mix

 

The charts below for Jack Kopnisky and our other NEOs illustrate the target compensation established for 2018, consisting of base salary, target annual incentive awards, and target 2018-2020 Long Term Incentive Plan (“LTIP”) awards consisting of performance shares and restricted stock awards. For 2018, our compensation targets and pay mix were the following:

 

 

 

 

  Performance-Based: 76% Performance-Based: 61%
  Linked to Share Value: 52% Linked to Share Value: 33%

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Governance and Compensation Highlights

 

On May 22, 2018, upon approval by the stockholders at the 2018 annual meeting, the Company amended and restated its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to eliminate provisions requiring cause and a supermajority vote to remove a director. Our Board believes this aligns with recent judicial interpretations of Delaware General Corporation Law and best corporate governance practices.

 

At the annual meeting on May 22, 2018, fourteen (14) directors were elected to the Board for a one (1) year term. Director James F. Deutsch voluntarily resigned from the Board, effective December 31, 2018, for personal reasons. One member of the Board of Directors, Robert W. Lazar, is retiring from the Board effective at the 2019 annual meeting. The remaining twelve (12) existing members of the Company’s Board will stand for re-election at the Company’s 2019 annual meeting, as well as one (1) new Board nominee, Ms. Mona Aboelnaga Kanaan.

 

The Compensation Committee continued to maintain the following best practices related to our compensation programs and practices related to the Executive Officers:

 

ØClawback policy
ØStock ownership guidelines
ØMajority (60%) of our long-term/equity incentives are based on future performance
ØAll equity awards have an additional one year holding period
ØNo gross-up provisions on excise taxes paid in connection with a change in control in all employment agreements
ØSignificant focus on performance-based pay
ØLimited perquisites
ØAnti-hedging policy
ØPledging restriction policy
ØOne year holding period post-vesting for all equity awards
ØNo payment of dividends on performance shares until vesting
ØIndependent compensation consultant

 

2018 Say-on-Pay Vote

 

At the Company’s 2018 Annual Meeting, stockholders cast an advisory vote regarding the Company’s executive compensation, or the Say-on-Pay vote; 97.6% of the votes cast on such proposal were voted in favor of the Company’s executive compensation program. Given the significant level of support from the Company’s stockholders, the Compensation Committee and the Board believe that the Company is taking a measured, informed and responsible approach to executive compensation which incorporates all of the Company’s objectives and policies set forth above including, but not limited to, a pay for performance culture that retains executives who perform strongly. The Board and the Compensation Committee considered this substantial affirmation as one of many factors in crafting an executive compensation program that largely mirrors the stockholder approved approach and will continue to seek stockholder feedback on our compensation programs.

 

Role of the Compensation Committee

 

The Compensation Committee consists of six (6) members of the Board, each of whom is independent. The Chairman of the Compensation Committee reports on material committee actions at Board meetings.

 

The Compensation Committee reviews all elements of compensation for the Company’s NEOs, namely its President and CEO, CFO and the three (3) other most highly compensated executive officers. Elements of compensation are reviewed individually and in the aggregate, including a review of base salary, annual cash incentives, total cash compensation, long-term incentives and/or equity awards, total direct compensation, benefits and perquisites. In addition, the Compensation Committee reviews the interplay between pay and performance and considers all elements in the aggregate as part of an executive’s total compensation package, taking into account the corporate goals and objectives. The Compensation Committee reviews its philosophy and executive compensation practices annually.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

The Compensation Committee’s major duties and responsibilities are the following:

 

ØReview overall compensation, benefit and perquisites programs.
ØEvaluate CEO and other executive officer performance.
ØReview all aspects of the CEO’s pay program including approval of base salary, annual incentives, equity and benefits.
ØReview all aspects of the pay programs of the executive officers who report to the CEO.
ØAssess the risks in connection with the compensation program to ensure executives are not encouraged or rewarded for taking excessive risk.
ØAward annual cash incentive payments to the NEOs in accordance with the terms of the Executive Officer Short-Term Incentive Plan.
ØReview, evaluate and, if applicable, approve incentive, equity and executive benefit plans.
ØOversee the Company’s compliance with all regulations related to executive compensation.
ØReview and approve all severance and termination arrangements for executive officers.
ØReview and approve the CD&A.
ØReview the overall compensation arrangements to confirm there are no proprietary trading activities.

 

The Compensation Committee has the authority to delegate any of its responsibilities to one or more subcommittees consisting of one or more of its members, as the Committee deems appropriate in its sole discretion.

 

Role of Management

 

Although the Compensation Committee makes independent determinations on all matters related to compensation of the NEOs, certain members of management are requested to attend meetings and/or provide input to the Compensation Committee. Input may be sought from the CEO, Chief Human Resources Officer (“CHRO”), CFO, Chief Risk Officer (“CRO”), General Counsel (“GC”), Chief Administrative Officer (“CAO”) or others to ensure the Compensation Committee has the information and perspective it requires to carry out its duties.

 

In particular, the Compensation Committee will seek input from the CEO on matters relating to strategic objectives, Company performance goals and an annual business plan. In addition, the CEO provides to the Compensation Committee a self-assessment of his annual performance, as well as summaries of executive officer performance and recommendations relating to executive officer compensation, for its review at the end of each year. The CEO is not present when the Compensation Committee discusses his performance and compensation.

 

The CHRO assists the Compensation Committee on the design, administration and operation of the Company’s compensation programs. The CHRO may be requested, on the Compensation Committee’s behalf, to work with the Compensation Committee’s independent consultant to develop proposals for the Compensation Committee’s consideration. The Compensation Committee also receives updates from the Company’s CRO and CFO throughout the year as appropriate.

 

Although executives provide insight, suggestions and recommendations, only Compensation Committee members vote on decisions regarding executive compensation. The Committee regularly meets in executive session without management.

 

Role of the Compensation Consultant

 

The Compensation Committee has the authority to retain a compensation consultant to advise on executive compensation matters. The Compensation Committee also has access to outside legal counsel and other experts as needed. The compensation consultant and other experts serve at the request of the Compensation Committee, which has the power and authority to retain such experts and approve fees and retention terms.

 

During 2018, the Compensation Committee retained Meridian to serve as independent compensation consultant and to perform the following tasks, among others: conduct a review of the competitiveness and effectiveness of the Company’s executive compensation program relative to market practice, assist in the design of equity-based performance awards, assist with year-end decisions and provide ongoing advice and counsel, as requested. In the event that the Company desires to seek Meridian’s expertise for assistance with other issues not directly related to executive compensation, the Compensation Committee would first approve such activities.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

In retaining Meridian, the Compensation Committee determined that, based on the information presented, Meridian was independent and that its engagement did not present any conflicts of interest. In making this determination, the Compensation Committee noted that (a) Meridian provided no other services to the Company other than compensation consulting; (b) no personal or business relationships exist between Meridian and members of the Board or executive officers; (c) Meridian and its consultants do not directly own any shares of the Company’s stock; and (d) Meridian maintains a written policy designed to avoid conflicts of interest that may arise. Meridian also determined that it was independent from the executive officers and confirmed this in a written statement delivered to the Chairman of the Compensation Committee. Based on the above, the Compensation Committee reviewed and concluded that Meridian’s services comply with the standards adopted by the SEC and NYSE regarding compensation advisor independence and conflicts of interest. The Compensation Committee will continue to monitor compliance with these requirements on an ongoing basis.

 

Executive Compensation Philosophy, Benchmarking and Components

 

Our executive compensation program is designed to align the interests of our executive officers with stockholders by rewarding performance against pre-established corporate financial goals, strong executive leadership and superior individual performance. By providing annual cash incentives, long-term equity compensation and conservative but competitive benefits, our goal is to attract, motivate and retain a qualified and talented team of executives who will help maximize the Company’s long-term financial performance, growth, profitability and stockholder value.

 

The Company’s compensation program provides a significant portion of total compensation based on performance relative to short-term and long-term financial goals and encourages executives to maintain significant stock ownership in the Company. The Compensation Committee reviews at least annually the components of each NEO’s compensation package and targets at least 50% of the total compensation opportunity to be based on a combination of short-term and long-term performance. We accomplish these objectives through an integrated total compensation program.

 

The Compensation Committee regularly assesses the components of the executive compensation program with advice from its independent compensation consultant. Periodically, the independent consultant will conduct a benchmarking study utilizing a peer group of banks of similar asset size, as well as a number of industry survey sources. The purpose of this assessment is to provide market perspective to the Compensation Committee as it sets base salaries and incentive opportunities for the next year. The Compensation Committee believes that periodic monitoring of the Company’s programs and pay decisions, as well as that of its industry and peers, enables it to assess the effectiveness of pay decisions and ensure the executive compensation program meets desired objectives.

 

In late 2017, Meridian updated the peer group to reflect the Company’s significant growth reflective of the Astoria Merger, resulting in our doubling in size. This peer group was used for fiscal 2018 executive compensation decisions and reflects banks of similar asset size and expanded geographic region: approximately half to 2x the asset size of Sterling in 2018, with a median asset size of $29 billion in assets, positioning the Company at the 50th percentile.

 

The same peer group was used for 2019 executive and director compensation decisions.

 

2018 AND 2019 PEER GROUP

Associated Banc-Corp BankUnited, Inc. BOK Financial Corporation
Commerce Bancshares, Inc. Cullen/Frost Bankers, Inc. F.N.B. Corporation
First Citizens BancShares, Inc. First Horizon National Corporation Hancock Holding Company
Investors Bancorp New York Community Bancorp People’s United Financial, Inc.
Prosperity Bancshares, Inc. Signature Bank Synovus Financial Corp.
Texas Capital Bancshares, Inc. Valley National Bancorp Webster Financial Corporation
Wintrust Financial Corporation    

 

Our total compensation program includes the following components:

 

Component

Objective/Purpose
Base Salary

•      Provide competitive base compensation to recognize executives’ roles, responsibilities, contributions, experience, leadership and performance. Our salaries generally are targeted to be within the range of market median.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Component Objective/Purpose
 

•      Represent fixed compensation that is the basis for other compensation elements such as incentive pay.

•      Sufficient to discourage inappropriate risk taking by executives.

•      Actual salaries and increases reflect an executive’s performance, experience and pay level relative to internal and external salary relationships.

Annual Cash Incentive Awards

•      Motivate and reward achievement of specific annual performance goals. We provide competitive compensation when performance goals are achieved and above or below median pay when performance is above or below performance.

•      Align executives with the Company’s strategic plan and critical performance goals. Provide meaningful “pay-at-risk” that is earned each year based on performance. Actual awards vary based on performance.

•      Encourage teamwork and collaboration across the Company.

Equity Compensation/ Long-term Incentives

•      Target long-term incentive opportunities that are competitive with industry practice and norms. Such opportunities reward executives for long-term growth, profitability and creating stockholder value.

•      Align executive and stockholder interests through stock awards which are tied to stock price appreciation.

•      Ensure sound risk management by providing a balanced view of performance and long-term stockholder value.

•      Grant restricted stock to help ensure executives have an ownership/equity interest.

•      Grant performance shares to incentivize executives over multi-year periods.

Benefits and Perquisites

•      Provide insurance and retirement security benefits.

•      Provide limited perquisites to be competitive with industry practice and enable the Company to attract, motivate and retain qualified talent.

Employment Agreements and Severance/Change in Control Benefits

•      Be competitive with industry practice.

•      Protect the executive and the Company in the event of termination.

•      Retain executives in the event of a change in control.

 

Executive Compensation Program and Pay Decisions

 

Consistent with past years, the Company’s total compensation program for 2018 consisted of four (4) main components: base salary, annual cash incentive compensation, long-term incentives/equity compensation and benefits. This section summarizes the programs and our pay decisions for 2018.

 

Base Salary

 

The Compensation Committee considered the competitive analysis provided by the independent consultant in 2017 and recommended the following changes to the base salary for Messrs. Kopnisky, Massiani, Whitwell and Geisel, effective January 1, 2018 and Mr. Finn, effective October 1, 2018. The 2018 salary increases were made in recognition of the growth in size of the organization following the Astoria Merger. Following the introduction of the new peer group in 2017, we took a measured approach to base salary with the intention of providing conservative salary increases over a period of time following the merger with Astoria.

 

Name / Positions

2017 Annualized

Base Salary

Increase over

2017 Base

Salary

2018 Annualized

Base Salary

Percentage

Increase

Jack Kopnisky, President and CEO $800,000 $50,000 $850,000 6.25%
Luis Massiani, SEVP & CFO    500,000 50,000 550,000 10.00%
Rodney Whitwell, SEVP & CAO, formerly COO   400,000 25,000 425,000 6.25%
Michael E. Finn, SEVP & Chief Risk Officer   425,000 75,000 500,000 17.65%
Thomas X. Geisel, SEVP & President of Corporate Banking   425,000 25,000 450,000 5.88%

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Annual Cash Incentive Compensation

 

An important element of our performance-based pay program is our Executive Officer Short-Term Incentive Plan (the “STI Plan”), which includes the participation of officers with the title of Senior Vice President and above. In February 2019, the Compensation Committee awarded annual cash incentive compensation to the NEOs pursuant to the STI Plan based on certain performance goals following the completion of the twelve (12)-month performance period ended December 31, 2018.

 

Performance Measures

 

Under the 2015 Omnibus Plan, performance measures are established by the Compensation Committee on an annual basis and are tied specifically to the Company’s strategic plan and financial performance. In setting the NEOs’ awards, the Compensation Committee considered a combination of corporate (earnings per share, available to common stockholders, as adjusted (“EPS”), return on average tangible assets, as adjusted (“ROATA”), business unit and individual performance factors. These factors included a review of the Company’s overall performance relative to its 2018 strategic plan, the individual achievement of each NEO relative to annual goals and the NEO’s overall contribution to the Company. The weights of these factors are summarized in the following table:

 

  Annual Cash Incentive Weighting of Performance Goals
NEO  Corporate   Business Unit   Individual
CEO 70%   0%   30%
Other NEOs  70%   15%   15%

 

Each executive, except for our CEO, had business unit performance objectives specific to his or her role. For example, market presidents may have specific loan and deposit target goals while operational manager performance is measured mainly through efficiency and productivity metrics. Individual performance objectives focused on the contribution of the NEO to the successful execution of the Company’s strategic plan in 2018.

 

The table below outlines the corporate metrics, targets and relative weightings established by the Compensation Committee for the NEOs for the year ended December 31, 2018:

 

Metric   Weighting   Threshold   Target   Stretch
EPS   50%   $1.78   $1.98   $2.17
ROATA   50%         1.35%         1.50%        1.65%

 

Performance was assessed after the end of the performance period against the performance objectives. Cash incentive payments based on the Company’s financial performance were made only if one or more financial metrics met or exceeded the thresholds established by the Compensation Committee.

 

Target Annual Incentive Opportunities

 

The STI Plan provides annual cash-based incentive opportunities (defined as a percentage of base salary) established by the Compensation Committee for each position based on role, responsibilities and market practice. Potential awards range from 50% of target for threshold performance to a cap of 150% of target for maximum performance. The 2018 annual incentive targets and ranges were the following:

 

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COMPENSATION DISCUSSION & ANALYSIS

 

  Annual Cash Incentive as a % of Base Salary
Name/Title Below Threshold Threshold (50%)   Target (100%)   Maximum (150%)
Jack Kopnisky, President & CEO       0.0%     50.0%     100.0%      150.0%
Luis Massiani, SEVP & CFO  0.0 37.5   75.0   112.5
Rodney Whitwell, SEVP & CAO, formerly COO 0.0 32.5   65.0     97.5
Michael E. Finn, SEVP & Chief Risk Officer 0.0 32.5   65.0     97.5
Thomas X. Geisel, SEVP & President of Corporate Banking 0.0 37.5   75.0   112.5

 

For each NEO, the target incentive value was based on base salary earnings for 2018 as follows:

 

  Annual Incentive Target 2018
Name/Title

Eligible Base

Salary Earnings

Target % of

Base

Target $

Value

Jack Kopnisky, President & CEO $850,000   100.0% $850,000
Luis Massiani, SEVP & CFO    550,000 75.0   412,500
Rodney Whitwell, SEVP & CAO, formerly COO   425,000 65.0   276,250
Michael E. Finn, SEVP & Chief Risk Officer   442,308 65.0   287,500
Thomas X. Geisel, SEVP & President of Corporate Banking   450,000 75.0   337,500

 

2018 STI Plan Payouts - Corporate Performance Assessment

 

At the end of the year, the Compensation Committee determined a payout percentage based on the Company’s financial performance, combined with an assessment of individual and business unit performance of the NEO. Based on how the Company performed against both EPS and its goals for ROATA, in addition to taking into consideration the Compensation Committee’s discretionary assessment of the execution of the 2018 strategic plan, the Compensation Committee set the corporate component at 100% of target for Messrs. Kopnisky, Massiani, Whitwell, Finn and Geisel (See attached Annex B to this proxy statement for a description of the “As Adjusted” results shown in the table below to our GAAP results for purposes of Regulation G adopted by the SEC.)

 

  Performance Goals    
Measure Threshold Target Stretch   As Adjusted
EPS $1.78 $1.98 $2.17   $2.00
ROATA      1.35%      1.50%      1.65%         1.55%

 

2018 STI Plan Payouts - Business Unit and Individual Performance Assessment

 

As outlined previously, the Company had strong performance in 2018 with substantial growth in earnings and rising profitability. In determining compensation levels, the Compensation Committee reviews each executive’s execution of the Company’s 2018 strategic plan from a corporate, business and individual perspective.

 

Mr. Kopnisky, our Chief Executive Officer, is evaluated by the Compensation Committee from a discretionary perspective based upon the overall performance of the Company, including its accomplishment of strategic plans, stockholder return and certain material financial results of the Company for 2018.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

For our executive officers other than our CEO, the Compensation Committee reviews each executive’s performance relative to corporate, business and individual considerations. Below are the primary factors considered by the Committee when determining payouts for each other NEO:

 

ØMr. Massiani, our Chief Financial Officer, exhibited strong leadership as CFO of the Company, enabling the Company to meet or exceed its growth targets and achieve strong operating results both organically and through acquisitions. Mr. Massiani effectively executed our ongoing balance sheet transition strategy, enhancing our net interest margin, improving our funding and liquidity and increasing long-term profitability. He continues to lead a high performing accounting, treasury and finance team.

 

ØMr. Whitwell, our Chief Administrative Officer, exhibited effectiveness managing human capital and developing programs to transform various revenue generation and support functions across the Company. Mr. Whitwell effectively led the integration planning and execution of the Astoria Merger.

 

ØMr. Finn, our Chief Risk Officer, has developed an effective enterprise risk management organization within the Company. Additionally, he has built a strong leadership team that has the capacity to evolve with the growth and increasing complexity of the Company.

 

ØMr. Geisel, our Corporate Banking President, has focused on growing our commercial businesses, including our diversified commercial asset classes and commercial cash management platform. Mr. Geisel oversees the lending teams that created over $1.6 billion in commercial loan growth in 2018.

 

Final STI Plan Payouts – 2018

 

Based on both the above performance measures and the Compensation Committee’s assessment of strategic business unit and individual performance, the 2018 cash incentive payments were awarded as follows relative to the 2018 target value:

 

Name/Title

2018 Target

Value

2018 Cash Incentive

Payment

Jack Kopnisky, President & CEO $850,000 $950,000
Luis Massiani, SEVP & CFO    412,500   450,000
Rodney Whitwell, SEVP & CAO, formerly COO   276,250   300,000
Michael E. Finn, SEVP & Chief Risk Officer   287,500   300,000
Thomas X. Geisel, SEVP & President of Corporate Banking   337,500   300,000

 

Equity Compensation/Long-Term Incentives

 

Another key element of executive compensation is the Company’s long-term incentive plan, which provides equity based compensation that supports our goals to provide performance-based compensation that is aligned with our stockholders’ interests and serves as a long-term retention tool for high performing executives. Shares granted as part of the long-term incentive plan are issued from the 2015 Omnibus Plan.

 

The Company’s annual long-term incentive program includes both an award in performance shares and an award of time-vested stock. Performance shares vest based on adjusted 3-year ROATA and 3-year adjusted EPS growth compared to the KBW Regional Bank Index.  In addition, in order to be eligible to earn an award, two (2) performance hurdles must be achieved (adjusted EPS must be a minimum of $1.70 per share and adjusted ROATA must be a minimum of 1.25% at the end of the performance period). Restricted stock vests ratably over a three (3) year period and is granted based on a holistic assessment of Company, individual performance and qualitative factors as determined by the Compensation Committee. Both awards have an additional one (1) year hold period upon vesting.

 

The Compensation Committee believes the long-term incentive program reinforces our strong focus on pay for performance and aligns our executives with stockholder interests.  Beginning with grants made in 2019, the Company’s annual long-term incentive program targets 75% of an award in performance shares while 25% of an award consists of time-vested stock.

 

Performance Shares (75% of target award)

 

·Rewards future performance and aligns executive’s interests with shareholders.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

·Performance shares vest based on adjusted 3-year adjusted ROATA and 3-year adjusted EPS growth compared to the KBW Regional Bank Index.

 

·Performance above and below the median will be interpolated and range from 50% of the target for achieving the 35th percentile performance relative to the index and a stretch award of 150% of target for achieving 75th percentile or greater relative to the index.

 

·In addition, in order to be eligible to earn an award, two (2) performance hurdles must be achieved (adjusted EPS must be a minimum of $1.70 per share and adjusted ROATA must be a minimum of 1.25% at the end of the performance period).

 

·One (1) year hold period upon vesting.

 

Restricted Stock (25% of target award)

 

·Granted based on the Committee’s consideration of Company and individual performance for the prior year (i.e., for the 2018 grants, considered performance for 2017); helps support retention and ownership goals.

 

·Vests ratably over a three (3)-year period and is granted based on a holistic assessment of Company, individual performance and qualitative factors as determined by the Compensation Committee.

 

·One (1)-year hold period upon vesting.

 

2018 Long-Term Incentive Grants

 

In 2018, the Company’s annual long-term incentive program targeted 60% of an award in performance shares while 40% of an award consisted of time-vested stock. The restricted stock portion vests ratably over a three (3)-year period and is granted based on a holistic assessment of Company, individual performance and qualitative factors as determined by the Compensation Committee. Both awards have an additional one (1)-year hold period upon vesting.

 

The Compensation Committee approved the 2018 equity grants summarized below. Performance shares were granted at target as vesting depends on performance for the year ending December 31, 2021. Restricted stock grants were awarded at 150% of target to reflect the Committee’s consideration of Company and individual performance for the prior year (i.e., 2017). For more information on the assumptions used in determining the fair value of these awards, refer to the “Grants of Plan-Based Awards in 2018” table included herein on page 50.

 

NEO   Restricted Stock(1)  

Performance

Shares(2)

  Total  
Jack Kopnisky   $1,121,993   $1,121,993   $2,243,986  
Luis Massiani        363,000        363,000        726,000  
Rodney Whitwell        203,990        203,990        407,980  
Michael E. Finn        203,990        203,990        407,980  
Thomas X. Geisel        188,989        188,989        377,978  

 

 

(1)Restricted Stock Awards: Fair value is based on the Company’s closing stock price on the date of the grant.
(2)Performance Awards: Fair value is based on the aggregate grant date fair value calculated in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718.

 

Vesting of Fiscal 2016-2018 Performance Share Awards

 

Our annual long-term incentive program rewards performance using both relative ROATA and relative EPS growth over a three-year cycle. Each year begins a new three-year performance cycle, and performance measures and payout range are established at the beginning of the cycle. The payout for such performance awards can range from 0% to 150% of target based 50% on the Company’s ROATA ranking relative to the KBW Regional Bank Index and based 50% on the Company’s EPS growth ranking relative to the KBW Regional Bank Index. For both the measurement of adjusted ROATA and adjusted EPS growth, the three-year average of each is measured against the three-year index averages.

 

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For each of the fiscal years ended December 31, 2016, 2017, and 2018, the Company had a ROATA of 1.31%, 1.39% and 1.70%, respectively, compared to the index peer group. The percentile rank of the three years (75th percentile) results in a payout of 150% of target.

 

For each of the fiscal years ended December 31, 2016, 2017 and 2018, the Company had EPS growth of 17.6%, 29.0%, and 39.3%, respectively, compared to the index peer group. The percentile rank of the three years (90th percentile) results in a payout of 150% of target.

 

The final payout is then calculated based equally on relative ROATA and relative EPS growth:

 

Measure Percentile Rank Payout (% of Target)
Relative EPS Growth 90% 150.0%
Relative ROATA 75% 150.0%
FINAL PAYOUT   150.0%

 

For purposes of calculating relative adjusted ROATA and adjusted EPS growth, the Compensation Committee utilizes S&P Global Market Intelligence to access the data for the KBW Regional Bank Index.

 

The final payout of 150% of target resulted in the following shares vesting under the fiscal 2016 performance awards for our NEOs:

 

Long Term Equity Plan Payout for the Fiscal 2016-2018 Performance Share Awards
 
  Shares Granted February 2016

Shares Vesting Based on Fiscal 2016-

2018 Performance (at 150.0% of Target)

Jack Kopnisky 50,669 76,003
Luis Massiani 14,251 21,376
Rodney Whitwell 10,292 15,438
Michael E. Finn   7,389 11,083
Thomas X. Geisel   8,445 12,667

 

Benefits

 

The Company sponsors a variety of benefit plans for all employees. These benefits include a tax-qualified 401(k) Plan (the “Sterling 401(k) Plan”), a tax qualified defined benefit pension plan, life insurance, and other health and welfare benefits.

 

The Company also provides certain executive benefits and perquisites that are designed to provide benefits to executives to address tax code limitations. The Company’s policy on benefits has been to provide benefits consistent with market practice.

 

Benefits and perquisites provided for executives include:

 

ØSupplemental Retirement Benefits - The Company provides the CEO with supplemental retirement benefits to make up for benefits that would otherwise be payable under our tax-qualified plans if specified tax code limitations did not apply.

 

ØInsurance - The Company provides the CEO with supplemental long-term disability insurance, long-term care insurance and life insurance.

 

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ØPerquisites - The Company does not provide significant perquisites or personal benefits to its executives. In addition, the Company has eliminated vehicles that had previously served as modest perquisites.

 

Other Matters

 

Impact of Accounting and Tax on the Form of Compensation

 

The Compensation Committee takes into account the various tax and accounting implications of compensation and benefit vehicles utilized by the Company.

 

ØThe Company expenses all restricted stock awards and stock option grants in accordance with the FASB Accounting Standards Codification Topic 718 - Compensation - Stock Compensation.

 

ØSection 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits the tax deduction for compensation paid to each of the CEO and the next three (3) most highly compensated executive officers (excluding the principal financial officer) (“Covered Employees”) to $1,000,000. Prior to the TCJA, this deduction limitation did not apply to compensation that constitutes “qualified performance-based compensation” within the meaning of Section 162(m) of the Code and regulations promulgated thereunder, including certain performance-based compensation that has been approved by the stockholders. Our stockholders have approved the 2015 Omnibus Plan, which is designed to allow the deduction as an expense on behalf of the Company for income realized by the participant upon the payment of performance-based compensation awards and income realized on the exercise of nonqualified stock options. Generally, the Compensation Committee strives to maximize the Company’s federal income tax deductions for compensation expense. Nonetheless, prior to the TCJA the Compensation Committee believed that there were circumstances in which the provision of compensation that was not fully deductible may be more consistent with its compensation philosophy and objectives and may be in the best interests of the Company and its stockholders. The Compensation Committee’s ability to retain flexibility in this regard may, in certain circumstances, have outweighed the advantages of qualifying certain compensation as deductible under Section 162(m). For taxable years beginning after December 31, 2017, the TCJA eliminated the deduction for qualified performance-based compensation, with the exception that qualified performance-based compensation paid in taxable years beginning after December 31, 2017 will continue to be deductible if paid pursuant to written binding contracts in effect on November 2, 2017, that are not materially modified on or after November 2, 2017. In addition, the TCJA expanded the definition of Covered Employees for taxable years beginning after December 31, 2017, to include employees who are the principal executive officer and principal financial officer at any time during the tax year in addition to the next three (3) most highly compensated executive officers who are required to be reported on the Company’s proxy, as well as any employee who was/is a Covered Employee for any taxable year beginning after December 31, 2016.

 

Adjustment or Recovery of Awards

 

Under Section 304 of the Sarbanes-Oxley Act of 2002, if the Company is required to restate its financial statements due to material non-compliance with any financial reporting requirements based upon a judicial determination of misconduct, the CEO and the CFO must reimburse the Company for:

 

ØAny bonus or other incentive-based or equity-based compensation received during the twelve (12) months following the first public issuance of the non-complying document; and

 

ØAny profits realized from the sale of Company securities during the twelve (12) month period.

 

The Company also maintains a clawback policy which provides that, in the event that the Company is required to prepare an accounting restatement, each executive officer shall reimburse the Company for part or the entire incentive award made to such executive officer on the basis of having met or exceeded specific targets for the performance periods subject to the restatement.  For purposes of this policy, (i) the term “incentive awards” means awards under the Company’s 2015 Omnibus Plan and equity awards, the amount of which is determined in whole or in part upon specific performance targets relating to the financial results of the Company; and (ii) the term “executive officer” means any individual who is a current or former officer of the Bank within the meaning of Section 16(a) of the Exchange Act and Rule 16a-1(f). The Company may seek to reclaim incentive awards within a three (3)-year period of the incentive payout.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Consideration of Prior Amounts Realized

 

In furtherance of the Company’s strategy of emphasizing rewards for future superior performance, prior compensation outcomes, including stock compensation gains, are generally not considered in setting future compensation levels.

 

Stock Ownership Guidelines

 

The Nominating and Corporate Governance Committee has concluded that NEOs and Board members should own a significant amount of the Company’s stock. Any person nominated, appointed or elected to the Board, in order to qualify as such, must own and thereafter continue to hold, at least 500 shares of the Company’s common stock from the time of first appointment or election to the Board. In addition, the following individuals must own the number of shares stated below:

 

STOCK OWNERSHIP GUIDELINES
 
  Lesser of
Position Multiple of Salary/Retainer # of Shares
CEO 6x Base Salary 300,000
Other NEOs 2x Base Salary   40,000
Directors 5x Board Retainer   20,000

 

The period to achieve compliance is five (5) years from the day of first appointment to the Board or NEO position, unless approved otherwise by the Nominating and Corporate Governance Committee, which monitors ownership levels and compliance on an annual basis. Below is a summary of shares that qualify for the ownership requirements described above (unexercised stock options are excluded):

 

ØBeneficially owned shares that the individual owns or over which he or she has voting power, including the power to vote (including restricted shares), or can direct the voting and/or investment power, including the power to dispose or to direct the disposition.

 

ØShares owned by an individual in the Company’s benefit plans (e.g., Sterling 401(k) Plan).

 

ØShares held by an investor in the Company for which a Board member serves as a designee.

 

NEOs and Board members are expected to hold 75% of any net shares received through compensatory equity based grants until the ownership guidelines are achieved. Once a NEO or Board member achieves the ownership requirement, he/she is no longer restricted by this holding requirement; provided his/her total stock ownership level does not fall below the ownership guidelines. As of April 5, 2019, each of our NEOs and Board members met the applicable stock ownership guidelines.

 

Anti-Hedging and Pledging Restriction Policy

 

  The Company discourages the practices of hedging and/or pledging of Company common stock by officers and directors, and has policies relating to such practices.  Pursuant to the Company’s insider trading policy and stock ownership guidelines, officers and directors of the Company are prohibited from engaging in any hedging transactions (which include short sale transactions, purchases of Company common stock on margin, and buying or selling any puts, calls or other options that have the effect of reducing the economic exposure to the shares of common stock).  In addition, officers and directors are encouraged to restrict their pledging company securities as collateral for margin purchases or a loan.  The Nominating and Corporate Governance Committee may, however, make any exception for this pledging limitation if good cause is shown.    

 

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Employment Arrangements

 

The Company and the Bank have entered into employment arrangements with all NEOs. On April 3, 2019, the Company entered into amended and restated employment agreements with all of the executive officers, effective as of January 1, 2019, including Messrs. Kopnisky, Massiani, Whitwell, Finn and Geisel. Such employment arrangements do not contain evergreen provisions nor Code Section 280G and 4999 golden parachute tax gross-up provisions. Additionally, we do not provide for the acceleration of vesting of stock options or restricted shares as a single trigger provision for potential payments upon a change in control. For a discussion of employment terms, see “Employment-Related Agreements and Potential Payments Upon Termination or Change in Control.”

 

Compensation Committee Report

 

The Compensation Committee evaluates and establishes compensation for executive officers, including the NEOs. Although management has the primary responsibility for the Company’s financial statements and reporting process, including the disclosure of the CD&A, the Compensation Committee has reviewed and discussed the CD&A with management and is satisfied it represents the philosophy, intent, and actions of the Compensation Committee with regard to executive compensation. Based on this review and discussion with management, we recommend to the Board that the CD&A be included in this Proxy Statement for filing with the SEC.

 

Richard O’Toole, Committee Chair

John Cahill

Maureen Mitchell

Patricia M. Nazemetz

Ralph F. Palleschi

Burt Steinberg

 

Compensation Committee Interlocks and Insider Participation

 

No member of the Compensation Committee is, or has been during the last completed year, an officer or employee of the Company or an officer or employee of any Company subsidiary. During 2018, none of our executive officers served on the Compensation Committee (or equivalent), or the Board of another entity whose executive officer(s) served on the Compensation Committee or Board of the Company.

 

Compensation Practice and Risk

 

The Compensation Committee considers annually, in establishing and reviewing the executive compensation program, whether the program encourages unnecessary or excessive risk taking. The goal of the Compensation Committee is to establish a compensation program designed to encourage prudent risk management and discourage inappropriate risk-taking by granting a diverse portfolio of compensation to the NEOs and other executive officers that is expected to reward the creation of stockholder value over time. To help achieve this goal, the Compensation Committee considers the risk profile of the primary compensation elements. The Compensation Committee believes that because the base salaries of the NEOs and other executive officers are fixed in amount they do not encourage inappropriate risk-taking. In addition, a significant proportion of compensation provided to the NEOs and other executive officers is in the form of equity awards that have performance and retention features that extend over a period of years. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking because the ultimate value of the awards is tied to our stock price and other stockholder friendly measures (i.e., ROATA or EPS growth) and are subject to long-term vesting schedules to help ensure that the NEOs and other executive officers have significant value tied to long-term stock price performance. In particular, all equity compensation is either based on performance over a three (3)-year period or does not fully time vest for at least a three (3)-year period, which encourages the NEOs and other executive officers to focus on long-term performance in addition to annual results, further reducing risk-taking that is likely to produce only short-term benefits and allowing sufficient time for risk outcomes to emerge.

 

In addition, awards under the STI Plan, the Company’s former 2014 Stock Incentive Plan (the “2014 SI Plan”) (which still has awards outstanding even though no new awards are made under this plan) and the 2015 Omnibus Plan are subject to clawback based on certain factors. See “Adjustment or Recovery of Awards” above. Such factors include the outcomes of our risk scorecard. The risk scorecard provides a formal structure to enable the Compensation Committee to systematically assess whether or not to adjust incentive compensation of our NEOs and executive officers in light of negative risk outcomes. Finally, and consistent with our compensation philosophy of rewarding the NEOs and other executive officers based on our long-term success, our Code of Ethics and Insider Trading Policy prohibit all employees, including the NEOs and other executive officers, from speculative trading in our stock.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Executive Compensation

 

The following table summarizes the compensation paid to our NEOs for fiscal years ended December 31, 2018, 2017 and 2016.

 

SUMMARY COMPENSATION TABLE
 

Name and

Principal

Positions

(a)

Period

(b)

Salary ($)

(c)

Bonus

($)

(d)

Stock Awards

($)

(e)

Non-Equity

Incentive Plan

Compensation

($)

(g)(1)

Change in

Pension Value

and Non-

Qualified

Deferred

Compensation

Earnings($)

(h)

All Other

Compensation

($)

(i)(2)

Total ($)

(j)

Jack Kopnisky, President and CEO 2018 $850,000 $––   $2,243,986 (3) $950,000 $––(4) $241,008 $4,284,994
2017 800,000 –– 1,320,000   1,200,000 9,921 42,354 3,372,276
2016 800,000 ¾ 1,100,010   900,000 3,443 57,107 2,860,560
Luis Massiani, Chief Financial Officer 2018 550,000 –– 726,000 (3) 450,000 –– 81,172 1,807,172
2017 493,750 –– 412,493   555,469 ––  13,292 1,475,004
2016 450,000 ¾ 375,002   450,000 ¾ 17,656 1,292,658
Rodney Whitwell, Chief Administrative Officer 2018 425,000 –– 407,980 (3) 300,000 –– 25,475 1,158,455
2017 400,000 –– 243,753   390,000 –– 12,039 1,045,792
2016 372,917 ¾ 292,499   240,000 ¾ 14,672 920,087
Michael E. Finn, Chief Risk Officer 2018 442,308 –– 407,980 (3) 300,000 –– 16,591 1,166,879
2017 381,250 –– 175,009   371,719 ––  11,968 939,946
2016 350,000 –– 174,996   180,000 ¾ 12,483 717,479
Thomas X. Geisel, President of Corporate Banking(5) 2018 450,000 –– 377,978 (3) 300,000 –– 16,738 1,144,716

 

 

(1)Annual incentive awards were based on performance for 2018 and paid in February 2019. Potential threshold, target and maximum payouts for these awards are found below in the table “Grants of Plan-Based Awards in 2018.”
(2)Details of the amounts reported in the “All Other Compensation” column for 2018 are provided in the table below.

 

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ALL OTHER COMPENSATION FOR FISCAL YEAR 2018  

Name

(a)

401(k)

Plan ($)

(b)

Contribution

on Employee

Life and LTD

Insurance

Benefits ($)

(c)

Disability

Insurance

($)

(d)

Long-

term Care

($)

(e)

Dividends on

Unvested

Restricted

Stock($)

(f)

Perquisites($)

(g)

Total ($)

(h)

Jack Kopnisky $12,375 $2,133 $9,525 $2,366 $214,630 ¾ $241,008
Luis Massiani 12,362 582 –– –– 68,228 –– 81,172
Rodney Whitwell 13,087 582 –– –– 11,807 –– 25,475
Michael E. Finn 12,375 582 –– –– 3,634 –– 16,591
Thomas X. Geisel 12,721 582 –– –– 3,435 –– 16,738

 

 

Column Notes:

(b) Represents the Company’s contributions to the Sterling 401(k) plan for the NEOs.

 

(3)Amounts shown represent the aggregate grant date fair value of both restricted stock and performance share awards calculated in accordance with FASB ASC Topic 718. The fair value of performance shares is calculated based upon the probable performance under the awards’ goals, which was target performance achievement. For more information on the assumptions used in determining the fair value of these awards, see note 13 to the audited financial statements in the Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019. Additionally, the closing price per share in year 2018 used to calculate the value of restricted stock awards, as well as the grant date fair value amounts of each individual 2018 stock award is found below in the table “Grants of Plan-Based Awards in 2018.”
(4)Mr. Kopnisky had a negative aggregate earnings for his non-qualified supplemental retirement benefits plan in the amount of $(1,092).
(5)Mr. Geisel became a named executive officer effective for 2018.

 

Grants of Plan-Based Awards in 2018

 

The following table sets forth information with respect to our NEOs concerning the grant of plan-based awards during 2018.

 

GRANTS OF PLAN-BASED AWARDS
 
   

Estimated Possible Payouts Under

Non-Equity Incentive Plan Awards(1)

 

Estimated Possible Payouts Under

Equity Incentive Plan Awards(2)

All Other

Stock

Awards:

Number of

Shares of

Grant Date

Fair Value

of Stock and

Name Grant Date

Threshold

($)

Target

($)

Maximum

($)

 

Threshold

(#)

Target

(#)

Maximum

(#)

Stock or

Units

(#)

Option

Awards

($)

(a) (b) (c) (d) (e)   (f) (g) (h) (i)(3) (l)(4)
Jack Kopnisky ¾ $425,000 $850,000 $1,275,000   ¾ ¾ ¾ ¾ $¾
2/27/18 ¾ ¾ ¾   ¾ ¾ ¾ 47,643(5) 1,121,993
2/27/18 ¾ ¾ ¾   23,822 47,643 71,465 ¾ 1,121,993
Luis Massiani ¾   206,250   412,500     618,750   ¾ ¾ ¾ ¾ ¾
2/27/18 ¾ ¾ ¾   ¾ ¾ ¾ 15,414(5)    363,000
2/27/18 ¾ ¾ ¾     7,707 15,414 23,121 ¾    363,000

 

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GRANTS OF PLAN-BASED AWARDS
 
   

Estimated Possible Payouts Under

Non-Equity Incentive Plan Awards(1)

 

Estimated Possible Payouts Under

Equity Incentive Plan Awards(2)

All Other

Stock

Awards:

Number of

Shares of

Grant Date

Fair Value

of Stock and

Name Grant Date

Threshold

($)

Target

($)

Maximum

($)

 

Threshold

(#)

Target

(#)

Maximum

(#)

Stock or

Units
(#)

Option

Awards
($)

(a) (b) (c) (d) (e)   (f) (g) (h) (i)(3) (l)(4)
Rodney Whitwell ¾ 138,125 276,250 414,375   ¾ ¾ ¾ ¾ ¾
2/27/18 ¾ ¾ ¾   –– –– ¾ 8,662(5) 203,990
2/27/18 ¾ ¾ ¾   4,331 8,662 12,993 ¾ 203,990
Michael E. Finn ¾ 143,750 287,500 431,250   ¾ ¾ ¾ ¾ ¾
2/27/18 ¾ ¾ ¾   ¾ ¾ ¾ 8,662(5) 203,990
2/27/18 ¾ ¾ ¾   4,331 8,662 12,993 ¾ 203,990
Thomas X. Geisel 2/27/18 168,750 337,500 506,250   –– –– –– 8,025(5) 188,989
2/27/18 –– –– ––   4,013 8,025 12,038 –– 188,989

 

 

(1)Represents potential annual cash incentive amounts payable pursuant to the STI Plan.
(2)Represents the number of performance shares that may vest if performance goals are achieved over a three (3)-year period.
(3)Represents the number of restricted stock awards granted.
(4)Fair value of Restricted Stock and Performance Awards is based on the Company’s closing stock price on the date of the grant. Fair value of performance awards assumes vesting at target.
(5)This restricted stock award vests annually in three (3) equal installments beginning on February 27, 2019. The closing price of the Company’s common stock on the date of grant was $23.55.

 

Executive Officer Incentive Plan

 

Please see the CD&A section titled “Annual Cash Incentive Compensation” for a description of the performance conditions and other material terms of the 2015 Omnibus Plan.

 

2014 Stock Incentive Plan and 2015 Omnibus Plan

 

The Company’s stockholders approved the 2015 Omnibus Plan on May 28, 2015. The 2015 Omnibus Plan replaced the 2014 SI Plan, and had a total of 2,800,000 shares of common stock, plus 1,654,318 shares (the number of shares remaining available for grant under the 2014 SI Plan) authorized for issuance upon adoption, for a total of 4,454,318 shares. There were 2,318,950 shares available for future grant as of December 31, 2018. We are currently seeking stockholder approval to increase the shares available for future grant under the 2015 Omnibus Plan to 7,000,000 and effect certain tax related updates to such plan. See Proposal II of this Proxy Statement for a description of the proposed Amended Omnibus Plan. The Company’s 2014 SI Plan was a stockholder-approved plan that permitted the grant of equity awards to its employees for up to 2,796,220 shares of common stock. The Company no longer makes awards under the 2014 SI Plan. Under both the 2015 Omnibus Plan and the 2014 SI Plan, options have up to a ten (10)-year term and may be either non-qualified stock options or incentive stock options. Each option entitles the holder to purchase one (1) share of common stock at an exercise price equal to the fair market value of the stock on the grant date. Employees who retire under circumstances in accordance with the terms of the 2014 SI Plan may be entitled to accelerate the vesting of individual awards, while under the 2015 Omnibus Plan, all of the terms relating to acceleration of award vesting will be set forth in the applicable award agreement. For a further description of the equity awards issued to our NEOs, please see the CD&A section titled “Equity Compensation/Long-Term Incentives.”

 

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Stock Awards and Stock Option Grants Outstanding

 

The following tables set forth information regarding stock awards and stock options outstanding as of the 2018 year end.

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2018

  Option Awards   Stock Awards
 

Number of

Securities

Underlying

Unexercised

Options

Equity Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Unearned Options

Option

Exercise

Option

Expiration

 

Number of

Shares or Units

of Stock that

have not Vested

Market Value

of Shares or

Units of Stock

that have not

Equity

Incentive

Plan

Awards:

Number of

Unearned

Shares, Units

or Other

Rights that

have not

Equity

Incentive Plan

Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights that

have not

Name

(a)

Exercisable (#)

(b)

Unexercisable (#)

(c)

(#)

(d)

Price ($)

(e)

Date

(f)(1)

 

(#)

(g)(2)

Vested ($)

(h)(3)

Vested (#)

(i)(4)

Vested ($)

(j)(5)

Jack Kopnisky 54,435 ¾ ¾ $11.36 10/24/2023   ¾ ¾ ¾ ¾
  75,000 ¾ ¾ 11.77 11/1/2023   ¾ ¾ ¾ ¾
  ¾ ¾ ¾ ¾ ¾   8,914(6) $147,170 50,669 $836,545
  ¾ ¾ ¾ ¾ ¾   16,461(7) 271,771 29,630 489,191
  ¾ ¾ ¾ ¾ ¾   47,643(8) 786,586 47,643 786,586
Luis Massiani 25,000 ¾ ¾ 9.28 12/5/2022   ¾ ¾ ¾ ¾
  21,169 ¾ ¾ 11.36 10/24/2023   ¾ ¾ ¾ ¾
  ¾ ¾ ¾ ¾ ¾   4,047(6) 66,816 14,251 235,284
  ¾ ¾ ¾ ¾ ¾   5,144(7) 84,927 9,259 152,866
  ¾ ¾ ¾ ¾ ¾   15,414(8) 254,485 15,414 254,485
Rodney Whitwell 12,000 ¾ ¾ 6.86 8/15/2021   ¾ ¾ ¾ ¾
  12,000 ¾ ¾ 8.73 3/27/2022   ¾ ¾ ¾ ¾
  14,500 ¾ ¾ 9.00 11/20/2022   ¾ ¾ ¾ ¾
  16,028 ¾ ¾ 11.36 10/24/2023   ¾ ¾ ¾ ¾
  ¾ ¾ ¾ ¾ ¾   3,431(6) 56,646 10,292 169,921
  ¾ ¾ ¾ ¾ ¾   2,675(7) 44,164 6,019 99,374
  ¾ ¾ ¾ ¾ ¾   8,662(8) 143,010 8,662 143,010
Michael Finn ¾ ¾ ¾ ¾ ¾   1,642(6) 27,109 7,389 121,992
  ¾ ¾ ¾ ¾ ¾   1,921(7) 31,716 4,321 71,340
  ¾ ¾ ¾ ¾ ¾   8,662(8) 143,010 8,662 143,010
Thomas X. Geisel ¾ ¾ ¾ ¾ ¾   1,877(6) 30,989 8,445 139,427
  ¾ ¾ ¾ ¾ ¾   2,915(7) 48,127 5,247 86,628
  ¾ ¾ ¾ ¾ ¾   8,025(8) 132,493 8,025 132,493

 

 

(1)Stock options generally expire ten (10) years after the grant date.

 

(2)Represents the number of restricted stock awards that were not vested as of December 31, 2018.

 

(3)Represents the value of the unvested restricted stock awards based on the Company’s closing stock price on December 31, 2018 of $16.51.

 

(4)Represents the number of performance shares that may vest if performance goals are achieved over a three (3)-year period. Assumes vesting at target.

 

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(5)Represents the value of the unvested performance shares based on the Company’s closing stock price on December 31, 2018 of $16.51. For each of our NEOs, the amounts listed include the following:

 

Amount Includes

Name  

Unvested Performance

Shares at Target

  Performance Period  

When Vesting Occurs if

Performance Measures

are Met

Jack Kopnisky   29,630   2017-2019   After December 31, 2019
    47,643   2018-2020   After December 31, 2020
Luis Massiani   9,259   2017-2019   After December 31, 2019
    15,414   2018-2020   After December 31, 2020
Rodney Whitwell   6,019   2017-2019   After December 31, 2019
    8,662   2018-2020   After December 31, 2020
Michael Finn   4,321   2017-2019   After December 31, 2019
    8,662   2018-2020   After December 31, 2020
Thomas X. Geisel   5,247   2017-2019   After December 31, 2019
              8,025   2018-2020   After December 31, 2020

 

 

 

(6)These unvested shares of restricted stock are pursuant to an award vesting annually in three (3) equal installments beginning on February 18, 2017.

 

(7)These unvested shares of restricted stock are pursuant to an award vesting annually in three (3) equal installments beginning on February 14, 2018.

 

(8)These unvested shares of restricted stock are pursuant to an award vesting annually in three (3) equal installments beginning on February 27, 2019.

 

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Options Exercised and Stock Vested

 

The following table represents the vesting of stock awards for each NEO, on an aggregate basis, during 2018. There were no options exercised by the NEOs during 2018.

 

  Option Awards Stock Awards

Name

(a)

Number of Shares

Acquired on Exercise

(#)

Value Realized on

Exercise

($)

Number of Shares Acquired
on Vesting (#)(1)

(b)

Value Realized on

Vesting ($)(2)

(c)

Jack Kopnisky ¾ ¾ 210,265 $5,080,497
Luis Massiani ¾ ¾ 66,786 1,608,514
Rodney Whitwell ¾ ¾ 4,768 114,374
Michael E. Finn ¾ ¾ 7,137 168,897
Thomas X. Geisel –– –– 5,834 136,142

 

(1)The vested shares reflected in this column are only time-vested restricted stock awards that vested during 2018.

 

(2)The value of restricted stock awards realized on vesting is based on the Company’s closing stock price on the vesting dates.

 

Non-qualified Deferred Compensation for NEOs

 

The Company maintains its non-qualified supplemental retirement benefits plan (the “SERP”). The purpose of the SERP is to make up for benefits that would otherwise be payable under the Sterling 401(k) Plan. Such compensation includes amounts over the qualified plan compensation limit. Rather than adding a different measure of value, the SERP restores the value executives lose under the plan due to government limitations (described above). The Compensation Committee determines employees that may participate in the SERP. Currently, the CEO is the sole participant in the SERP.

 

A participant’s supplemental retirement benefit under the SERP is adjusted for deemed earnings at a “default rate,” or, if elected by a participant, based on one or more hypothetical investments in investment options consisting of mutual funds in 2018, that are available under the Sterling 401(k) Plan. The investment in mutual funds earned an average rate of return of -2.26% in 2018.

 

Supplemental benefits under the SERP are generally paid in cash. All obligations arising under the SERP are payable from the general assets of Sterling, although Sterling has established a rabbi trust to help pay benefits under the SERP. The assets of the trust are at all times subject to the claims of Sterling’s general creditors. It is Sterling’s current policy not to fund the rabbi trust with Company common stock.

 

The following table sets forth information regarding amounts accrued by the NEOs during 2018 under each defined contribution or other plan that provides for the deferral of compensation on a non-tax qualified basis.

 

NON-QUALIFIED DEFERRED COMPENSATION

Name

(a)

   

Executive

Contributions

($)

(b)

 

Registrant

Contributions

($)

(c)

 

Aggregate

Earnings ($)

(d)

 

Aggregate

Withdrawals/

Distributions ($)

(e)

 

Aggregate Balance at

Period End ($)

(f)

Jack Kopnisky     ¾   ¾   $(1,092)   ¾   $47,181

 

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Employment-Related Agreements and Potential Payments Upon Termination or Change in Control

 

We have employment agreements with each of our NEOs. The principal terms of those agreements, each effective as of January 1, 2019 are summarized below. As defined in Messrs. Kopnisky, Massiani, Whitwell, Finn and Geisel’s employment agreements, “Cause” means the following: the executive’s failure or refusal to substantially perform his or her duties under the agreement, personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, breach of the Company’s Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers of public companies that, in the reasonable opinion of the Board, will likely cause substantial financial harm or substantial injury to the reputation of the Company or the Bank, willfully engaging in actions that, in the reasonable opinion of the Board, will likely cause substantial financial harm or substantial injury to the business reputation of the Company or the Bank, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the employment agreement.

 

As defined in Messrs. Kopnisky, Massiani, Whitwell, Finn and Geisel’s employment agreements, “Good Reason” means the following (without the executive’s consent): (i) a material reduction of any element of compensation and benefits required to be provided to the executive in accordance with any of the provisions of Section 3 of the executive’s employment agreement; (ii) a material adverse change in the executive’s functions, duties or responsibilities with the Company or Bank that would cause the executive’s position to become one of materially lesser responsibility, importance or scope; (iii) the Company requiring the executive to be based at any office or location other than as provided in Section 4 of the executive’s employment agreement resulting in an increase in the executive’s commute of thirty (30) miles or more; or (iv) a material breach of the employment agreement by the Company or the Bank; provided, however, that such breach shall not constitute Good Reason unless the executive provides the Bank with written notice within ninety (90) days after the initial occurrence thereof, the Bank fails to cure the situation within thirty (30) days following notice delivery (or such longer cure period mutually agreed upon), and the executive terminates employment within thirty (30) days after expiration of such cure period if the Bank does not cure.

 

Jack Kopnisky

 

Employment Agreement Terms

 

On April 3, 2019, Mr. Kopnisky’s employment agreement with the Company and the Bank, dated June 20, 2011 and amended as of November 26, 2012, April 3, 2013 and December 8, 2015, was amended and restated, effective as of January 1, 2019.

 

Mr. Kopnisky’s employment agreement provides for a term ending on December 31, 2021 (unless in the event of a “change in control” (as defined in the employment agreement)). In the event of a “change in control,” the employment agreement will terminate upon the second anniversary date of the change in control, if later than December 31, 2021. Mr. Kopnisky’s employment agreement provides for an annual base salary of nine hundred fifty thousand dollars ($950,000) which will be reviewed at least annually for further possible upward adjustment (his base salary shall not be reduced without Mr. Kopnisky’s consent), and a target annual bonus as determined by the Compensation Committee. In addition to an annual salary and bonus, the employment agreement provides that Mr. Kopnisky is entitled to participate in any equity and/or long-term compensation programs established by the Company for senior executive officers and all of the Company’s retirement, group life, health and disability insurance plans, supplemental life insurance and supplemental long-term disability and any other employee benefit plans.

 

Further, in the event of termination for death or disability, the terms of Mr. Kopnisky’s restricted stock awards state that they shall become fully vested; provided, however, that pursuant to the terms of his performance stock awards, any equity based awards that have vesting, in whole or in part, contingent upon achieving certain performance goals shall be deemed to be fully achieved at target as of the date of his termination of employment with such vesting calculated on a pro rata basis. The pro rata portion will be determined by calculating the total number of awarded shares that would have been received if his employment had not terminated prior to the end of the performance period, and multiplying that number by a fraction, the numerator of which is the number of full and partial months of employment he completed after the award date, and the denominator of which is the number of full and partial months between the award date and the end of the performance period.

 

If the Company terminates Mr. Kopnisky without Cause or Mr. Kopnisky voluntarily resigns for Good Reason, then Mr. Kopnisky will, subject to his execution, delivery, and non-revocation of a release of claims, be entitled to (i) a lump sum cash payment in an amount equal to the product of two (2) times the sum of his annual base salary in effect immediately prior to termination of employment, (ii) the amount of his target bonus for the year of termination, and (iii) monthly payments equal to his monthly premiums for post-employment group health plan continuation coverage under the Company’s group health plan for a period of eighteen (18) months following termination of employment (the “COBRA Payments”).

 

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However, if Mr. Kopnisky is terminated without Cause or resigns for Good Reason on or within twenty-four (24) months following a “change in control,” then he will, subject to his execution, delivery, and non-revocation of a release of claims, be entitled to (i) a lump sum cash payment in an amount equal to three (3) times the sum of his annual base salary in effect immediately prior to termination of employment and the amount of his target bonus for the year of termination, (ii) the pro-rata amount of his target bonus for the fiscal year of termination, (iii) any accrued vacation pay due under the terms of the Bank’s vacation policy and (iv) the COBRA Payments. Further, upon such termination within twenty-four (24) months after a change in control, all then-outstanding stock options, and other equity-based awards shall become fully vested; provided, however, that any stock options and other equity-based awards tied to the achievement of one or more performance goals shall be deemed to be fully achieved at target as of the date of Mr. Kopnisky’s termination of employment and such vesting calculated on a pro rata basis.

 

Under Mr. Kopnisky’s employment agreement, payments and benefits payable in connection with a “change in control” of the Company will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Code, but only if such reduction would result in Mr. Kopnisky receiving greater compensation and benefits on an after-tax basis.

 

The employment agreement also provides that, for a period of twelve (12) months following the termination of Mr. Kopnisky’s employment for any reason, he will be restricted from competing with the Company and its affiliates and from soliciting the Company’s and its affiliates’ respective clients or employees. In the event of a change in control, the non-compete provision would not apply. These provisions can be waived with the written consent of the Company. Mr. Kopnisky’s entitlement to any severance payments or benefits is subject to his compliance with these non-solicitation and non-competition requirements.

 

Potential Payments Upon Termination or Change in Control

 

The following table presents the benefits that would be received by Mr. Kopnisky, our President and CEO, pursuant to Mr. Kopnisky’s employment agreement, in the event he incurred a hypothetical termination of employment as of December 31, 2018.

 

Event Salary and Other Cash Payments ($)

Unvested and

Accelerated Awards

($)(1)

Continuance of Health

and Welfare Benefits

Total ($)
Voluntary Termination Without Good Reason or Termination With Cause ¾ ¾ ¾ ¾
Termination Without Cause or For Good Reason $3,400,000 ¾ $36,864 $3,436,864
Disability / Death ¾ $2,501,917 ¾   2,501,917
Retirement(2) ¾ ¾ ¾ ¾
Change in Control:        
Termination Without Cause or For Good Reason(3)      5,100,000(4)   3,020,471   36,864   8,157,335

  

 

(1)This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $16.51 per share, which was the closing price of Sterling’s common stock on December 31, 2018.

 

(2)Mr. Kopnisky is currently not eligible for early vesting of stock-based awards upon retirement since he has not met the eligible age and years of service requirements.

 

(3)Mr. Kopnisky would receive these benefits if termination occurs on or within twenty-four (24) months of a change in control.

 

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(4)This calculation is based on Mr. Kopnisky’s employment agreement in effect as of December 31, 2018. Under his new employment agreement described above, Mr. Kopnisky would additionally be entitled to the pro-rata amount of his target bonus for the fiscal year of termination.

 

Luis Massiani

 

Employment Agreement Terms

 

On April 3, 2019, Mr. Massiani’s employment agreement with the Company and the Bank, dated November 1, 2013 and amended as of December 8, 2015, was amended and restated, effective as of January 1, 2019.

 

Mr. Massiani’s employment agreement provides for a term ending on December 31, 2021 (unless in the event of a “change in control” (as defined in the employment agreement)). In the event of a “change in control,” the employment agreement will terminate upon the second anniversary date of the change in control, if later than December 31, 2021. Mr. Massiani’s employment agreement provides for an annual base salary of six hundred thousand dollars ($600,000), which will be reviewed at least annually for further possible upward adjustment (his base salary shall not be reduced without Mr. Massiani’s consent), and a target annual bonus as determined by the Compensation Committee of the Board. In addition to an annual salary and bonus, the employment agreement provides that Mr. Massiani is entitled to participate in any equity and/or long-term compensation programs established by the Company for senior executive officers and all of the Company’s retirement, group life, health and disability insurance plans and any other employee benefit plans.

 

To the extent the “change in control” provision of the employment agreement is inapplicable, in the event that the Company terminates Mr. Massiani for Cause, Mr. Massiani resigns from employment with or without Good Reason, or his employment ends due to his death or disability, then the Company shall only owe him for any accrued obligations Termination of employment will not be deemed to be for Cause unless and until there has been delivered to Mr. Massiani a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to Mr. Massiani and he is given an opportunity, together with his counsel, to be heard before the Board). Further, in the event of termination for death or disability, the terms of Mr. Massiani’s restricted stock awards state that they shall become fully vested.

 

If the Company terminates Mr. Massiani’s employment without Cause, then Mr. Massiani will, subject to his execution, delivery, and non-revocation of a release of claims, be entitled to (i) a lump sum cash payment in an amount equal to one (1) year of his base salary in effect immediately prior to his termination of employment and the amount of his target bonus for the year of termination, and (ii) the COBRA Payments.

 

If the Company terminates Mr. Massiani without Cause or he resigns for Good Reason on or within twenty-four (24) months following a “change in control,” then he will, subject to his execution, delivery, and non-revocation of a release of claims, be entitled to (i) a lump sum cash amount equal to three (3)  times the sum of his annual base salary in effect immediately prior to his termination of employment plus three (3) times the amount of his target bonus for the year of termination, (ii) the pro-rata amount of Mr. Massiani’s target bonus for the fiscal year of termination, (iii) any accrued vacation pay due under the terms of the Bank’s vacation policy, (iv) the COBRA Payments and (v) any unvested long-term incentive award will vest in accordance with the applicable grant or award agreement.

 

Under the employment agreement, payments and benefits payable in connection with a “change in control” of the Company will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Code, but only if such reduction would result in Mr. Massiani receiving greater compensation and benefits on an after-tax basis.

 

Mr. Massiani’s employment agreement also provides that, for a period of twelve (12) months following the termination of his employment for any reason, other than a resignation by Mr. Massiani for good reason prior to a change in control, Mr. Massiani will be restricted from competing with the Company and its affiliates and, while employed for a period of eighteen (18) months following the termination of his employment for any reason, he will be restricted from soliciting the Company’s and its affiliates’ respective clients or employees.

 

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Potential Payments Upon Termination or Change in Control

 

The following table presents the benefits that would be received by Mr. Massiani, our Senior Executive Vice President & Chief Financial Officer, pursuant to Mr. Massiani’s employment agreement, in the event he incurred a hypothetical termination of employment as of December 31, 2018.

 

Event

Salary and Other Cash

Payments ($)

Unvested and

Accelerated Awards

($)(1)

Continuance of Health

and Welfare Benefits

Total ($)
Voluntary Termination With or Without Good Reason, Termination With Cause ¾ ¾ ¾ ¾
Termination Without Cause $962,500 ¾ $42,529 $1,005,029
Disability / Death ¾  $814,676 ¾      814,676
Retirement(2) ¾ ¾ ¾ ¾
Change in Control:        
Termination Without Cause or For Good Reason(3)    1,925,000(4) 1,048,864   42,529 $3,016,393

  

 

(1)This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $16.51 per share, which was the closing price of Sterling’s common stock on December 31, 2018.

 

(2)Mr. Massiani is currently not eligible for early vesting of stock-based awards upon retirement since he has not met the eligible age and years of service requirements.

 

(3)Mr. Massiani would receive these benefits if termination occurs on or within twenty-four (24) months of a change in control.

 

(4)This calculation is based on Mr. Massiani’s employment agreement in effect as of December 31, 2018. Under his new employment agreement described above, Mr. Massiani would additionally be entitled to: (i) a lump sum cash amount equal to three (3) times (as opposed to two (2) times under his prior agreement) the sum of his annual base salary in effect immediately prior to his termination of employment and the amount of his target bonus for the year of termination and (ii) the pro-rata amount of his target bonus for the fiscal year of termination.

 

Michael E. Finn, Rodney Whitwell and Thomas X. Geisel

 

Employment Agreement Terms

 

On April 3, 2019, Messrs. Finn, Whitwell and Geisel’s employment agreements were amended and restated, effective as of January 1, 2019. Mr. Finn had a prior employment agreement, dated November 10, 2016, Mr. Whitwell had a prior employment agreement, dated November 1, 2013 and amended on October 31, 2016, Mr. Finn had a previous employment agreement dated November 10, 2016, and Mr. Geisel had a prior employment agreement dated October 31, 2016.

 

Each of Messrs. Finn, Whitwell and Geisel’s employment agreement has a term ending on December 31, 2021 (or, if a change in control occurs prior thereto, the second anniversary of the date of the change in control, if later). Messrs. Finn, Whitwell and Geisel’s employment agreements provide for an annual base salary of $500,000, $475,000 and $475,000, respectively, in all cases subject to annual review and possible upward adjustment (such base salary shall not be reduced without the executive’s consent). The executives’ agreements also provide for a target annual bonus as determined by the Compensation Committee based upon periodic reviews. Further, each executive is eligible to participate in any equity and/or other long-term compensation programs established by the Company for senior officers and all of the Company’s retirement, group life, health and disability insurance plans and any other employee benefit plans.

 

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To the extent the change in control provisions of the Employment Agreements are inapplicable, in the event that the Company terminates Messrs. Finn, Whitwell or Geisel, individually, for Cause, the executive resigns from employment without Good Reason, or his employment ends due to his death or disability, then the Company shall only owe the executive for any accrued obligations. Termination of employment will not be deemed to be for Cause unless and until there has been delivered to the executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the members of the Board at a meeting called and held for such purposes (after reasonable notice is provided to the executive and he is given an opportunity, together with his counsel, to be heard before the Board).

 

If, however, the Company terminates Messrs. Finn, Whitwell, or Geisel without Cause, then the executive will, subject to his execution, delivery and non-revocation of a release of claims, be entitled to (i) a lump sum cash payment in an amount equal to one (1) year of base salary (in the amount in effect immediately prior to termination of employment) and the amount of his target bonus for the fiscal year of termination, and (ii) the COBRA Payments.

 

If such termination of any of Messrs. Finn, Whitwell or Geisel occurs without Cause or he resigns for Good Reason upon or within twenty-four (24) months of a “change in control” (as defined in the employment agreements), then the executive will, subject to his execution, delivery, and non-revocation of a release of claims, be entitled to (i) a lump sum cash payment in an amount equal to two (2) times the sum of the executive’s annual base salary in effect immediately prior to termination of employment, plus two (2) times the amount of his target bonus for the fiscal year of termination, (ii) the pro-rata amount of the executive’s target bonus for the fiscal year of termination, (iii) any accrued vacation pay due under the terms of the Bank’s vacation policy, (iv) the COBRA Payments and (v) any unvested long-term incentive awards will vest in accordance with the applicable grant or award agreement.

 

Under the employment agreements, payments and benefits payable in connection with a “change in control” of the Company will be reduced to the extent necessary to avoid the application of any “golden parachute” excise tax pursuant to Section 4999 of the Code, but only if such reduction would result in Messrs. Finn, Whitwell or Geisel receiving greater compensation and benefits on an after-tax basis.

 

Further, pursuant to Messrs. Finn, Whitwell and Geisel’s award agreements, upon a change in control, all unvested awards of restricted stock, performance-based stock and options not forfeited will fully vest if upon or within twenty-four (24) months after a change in control he is terminated without Cause or terminates for Good Reason. If the executive resigns from employment with Good Reason, then the Company shall pay him for any accrued obligations and, if such resignation occurs upon or within twenty-four (24) months after a change in control, then he shall be entitled to the same change in control payments as described above.

 

As a part of their employment agreements, each of Messrs. Finn, Whitwell and Geisel agree to an eighteen (18) month non-solicitation period post-employment, during which he will not attempt to hire any Company or Bank employee, or solicit any Company or Bank client. Each executive also agrees to a twelve (12) month non-competition period post-employment, in which he shall not compete with the Company and the Bank.

 

All amounts and benefits under the employment agreements shall be paid in a manner or form that complies with Section 409A or an exception thereunder.

 

Potential Payments Upon Termination or Change in Control

 

The following table presents the benefits that would be received by Mr. Finn, our Senior Executive Vice President and Chief Risk Officer, pursuant to his employment agreement, in the event he incurred a hypothetical termination of employment as of December 31, 2018.

 

Event

Salary and Other Cash

Payments ($)

Unvested and

Accelerated Awards

($)(1)

Continuance of Health

and Welfare Benefits

Total ($)
Voluntary Termination With or Without Good Reason, Termination With Cause ¾ ¾ ¾ ¾
Termination Without Cause $825,000 ¾ $149 $825,149
Disability / Death ¾ $390,886 ¾   390,886
Retirement(2) ¾ ¾ ¾ ¾

 

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Event

Salary and Other Cash

Payments ($)

Unvested and

Accelerated Awards

($)(1)

Continuance of Health

and Welfare Benefits

Total ($)
Change in Control:        
Termination Without Cause or For Good Reason(3) 1,064,236(4),(5) 464,723 149 1,529,108

 

 

(1)This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $16.51 per share, which was the closing price of Sterling’s common stock on December 31, 2018.

 

(2)Mr. Finn would receive these benefits if termination occurs on or within twenty-four (24) months of a change in control.

 

(3)Mr. Finn is currently not eligible for early vesting of stock-based awards upon retirement since he has not met the eligible age and years of service requirements.

 

(4)This calculation is based on Mr. Finn’s employment agreement in effect as of December 31, 2018. Under his new employment agreement described above, Mr. Finn would additionally be entitled to the pro-rata amount of his target bonus for the fiscal year of termination.

 

(5)Reflects a reduction to avoid the application of the “golden parachute” excise tax pursuant to Section 4999 of the Code.

 

The following table presents the benefits that would be received by Mr. Whitwell, our Senior Executive Vice President and Chief Administrative Officer, pursuant to his employment agreement, in the event he incurred a hypothetical termination of employment as of December 31, 2018.

 

Event

Salary and Other Cash

Payments ($)

Unvested and

Accelerated Awards

($)(1)

Continuance of Health

and Welfare Benefits

Total ($)
Voluntary Termination With or Without Good Reason, Termination With Cause ¾ ¾ ¾ ¾
Termination Without Cause $701,250 ¾ $48,249  $749,499
Disability / Death ¾ $481,363 ¾    481,363
Retirement(2) ¾ ¾ ¾ ¾
Change in Control:        
Termination Without Cause or For Good Reason(3)         1,372,511(4), (5)   586,699   48,249 2,007,459

 

 

(1)This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $16.51.

 

(2)Mr. Whitwell is currently not eligible for early vesting of stock-based awards upon retirement since he has not met the eligible age and years of service requirements.

 

(3)Mr. Whitwell would receive these benefits if termination occurs on or within twenty-four (24) months of a change in control.

 

(4)This calculation is based on Mr. Whitwell’s employment agreement in effect as of December 31, 2018. Under his new employment agreement described above, Mr. Whitwell would additionally be entitled to the pro-rata amount of his target bonus for the fiscal year of termination.

 

(5)Reflects a reduction to avoid the application of the “golden parachute” excise tax pursuant to Section 4999 of the Code.

 

The following table presents the benefits that would be received by Mr. Geisel, our Senior Executive Vice President and President of Corporate Banking, pursuant to his employment agreement, in the event he incurred a hypothetical termination of employment as of December 31, 2018.

 

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Event Salary and Other Cash Payments ($)

Unvested and

Accelerated Awards

($)(1)

Continuance of Health

and Welfare Benefits

Total ($)
Voluntary Termination With or Without Good Reason, Termination With Cause ¾ ¾ ¾ ¾
Termination Without Cause $787,500 ¾ $49,385  $836,885
Disability / Death ¾ $445,767 ¾    445,767
Retirement ¾ ¾ ¾ ¾
Change in Control:        
Termination Without Cause or For Good Reason(2)         1,407,474(3), (4)   570,156   49,385 2,027,015

 

 

(1)This amount includes unvested and accelerated restricted stock awards, options and performance share awards. The dollar amount is calculated based on $16.51 per share, which was the closing price of Sterling’s common stock on December 31, 2018.

 

(2)Mr. Geisel would receive these benefits if termination occurs on or within twenty-four (24) months of a change in control.

 

(3)Reflects a reduction to avoid the application of the “golden parachute” excise tax pursuant to Section 4999 of the Code.

 

(4)This calculation is based on Mr. Geisel’s employment agreement in effect as of December 31, 2018. Under his new employment agreement described above, Mr. Geisel would additionally be entitled to the pro-rata amount of his target bonus for the fiscal year of termination.

 

CEO Pay Ratio

 

Our CEO to median colleague pay ratio is calculated in accordance with what the SEC requires pursuant to Item 402(u) of Regulation S-K.

 

As permitted by the SEC rules requiring disclosure of our CEO pay ratio, our calculation in 2017 excluded the employees of Astoria, which we acquired effective October 2, 2017. We estimate that there were approximately 1,098 employees as of December 31, 2017 who became our colleagues as part of the Astoria Merger. We re-calculated the median annual total compensation in 2018, including the colleagues who joined us as a result of the Astoria Merger. A total of 2,592 colleagues were included in the 2018 review.

 

88:1

CEO Pay Ratio

 

We identified the median colleague by examining the 2018 total cash (defined as base salary, cash incentives, commission) compensation for all individuals, excluding our CEO, employed by us during 2018. The median employee was chosen as of December 31, 2018. When choosing the median employee, all part-time and full-time colleagues included on payroll at any point during 2018 were included. Earnings for colleagues hired or terminated during 2018 were not annualized and no full-time equivalent adjustments were made for part-time colleagues. We have no colleagues outside the U.S., so no adjustments were made to the colleague population on that basis.

 

After our review, we determined that the median colleague in 2017 no longer represented our current population and therefore a new median colleague was selected. After identifying the new median colleague based on total cash compensation, we calculated annual total compensation for such employee using the same methodology we use for our named executive officers as set forth in the 2018 Summary Compensation Table. The total compensation of our median colleague was $48,900.

 

Please note that the SEC’s pay ratio disclosure rules provide reporting companies with a great deal of flexibility in determining the methodology used to identify the median employee and the pay ratio.  Our methodology may differ materially from the methodology used by other companies to prepare their pay ratio disclosures.  Factors such as these may contribute to a lack of comparability between our pay ratio and the pay ratio reported by other companies, including those within our sector.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

Director Compensation

 

General. The following discussion outlines the compensation that was earned by non-employee directors during 2018. Directors who are employed by us do not receive additional compensation for their service on the Board.

 

The Company uses a combination of cash and stock to attract and retain qualified candidates to serve on the Board. Equity compensation provides the opportunity for directors to earn more based on the Company’s total stockholder return and to align directors’ interests with those of the Company’s stockholders. The Nominating and Corporate Governance Committee reviews director compensation and benefits annually and makes recommendations to the Board. See the “2018 Director Compensation” table below.

 

2018 Board Compensation. Meridian performed an evaluation of the Company’s director compensation compared to peer data in October 2017. Based on such evaluation, the Company’s director compensation was found to be below market. Accordingly, the Nominating and Corporate Governance Committee recommended certain increases to the Board based on the Meridian evaluation, and the Board approved such increases effective January 2018.

 

For 2018, directors of the Company received an annual retainer fee of $48,000. Directors also received a fee of $1,500 per Board meeting attended and $1,000 per committee meeting attended. The chairman of each committee received an additional retainer fee for his oversight of the committee. The fee structure for the chairmans’ fees are as follows: the Audit Committee Chairman received $20,000; the Compensation and Nominating and Corporate Governance Committee Chairmen each received $10,000; the Executive and Enterprise Risk Committee Chairmen each received $7,500. Directors who are also employees of the Company are not eligible to receive any fees for their service as a director.

 

Stock Awards and Stock Option Grants. For service rendered during 2018, each non-employee director of the Company was granted a restricted stock award valued at $50,000, on December 10, 2018 (Mr. Deutsch opted instead to receive a $50,000 cash payment payable to Patriot, of which he is a Managing Partner).

 

Sterling National Bank Deferred Director Fee Plan. Effective January 1, 2016, the Company amended, restated and renamed the 2005 Deferred Director Fee Plan to the Sterling National Bank Deferred Director Fee Plan (the “Deferred Fee Plan”). Pursuant to the Deferred Fee Plan, non-employee directors may elect to defer all or a portion of their Board fees earned during a calendar year. Directors Cahill, Ferrer and Lazar participated in the Deferred Fee Plan in 2018. Each director may express to the committee appointed to administer the Deferred Fee Plan a preference as to how the director’s deferral account should be hypothetically invested among the investment options designated by the committee (which may include the Company’s common stock).

 

Under the terms of the Deferred Fee Plan, deferred amounts are credited to a bookkeeping account established in the name of each director. Deferral accounts are generally paid to a director in quarterly installments over five (5) years (unless the director elects, in compliance with Internal Revenue Code Section 409A, payment in a lump sum or payment in installments over a different number of years) commencing as of the earliest of (a) the date elected by the director, (b) the director’s attaining age 75, or (c) the director’s separation from service. In the event of the director’s death, the director’s deferral account is paid to the director’s designated beneficiary in the same form as it would otherwise have been paid to the director, commencing in the first calendar quarter after death. In the event of a change in control of the Company or the Bank, directors’ deferral accounts are required to be paid to directors in the form of a lump sum payment within 60 days after the change in control. A director may request an early distribution from the director’s deferral account on the account of hardship within the meaning of Internal Revenue Code Section 409A. Distributions are made in cash, except that to the extent that a director’s deferral account is hypothetically invested in shares of Company common stock, in which case the distribution is made in the form of Company common stock (subject to the director being eligible to elect distribution in cash after a change in control).

 

All obligations arising under the deferred compensation agreements are payable from the Company’s general assets; however, the Company may establish a rabbi trust to help ensure that sufficient assets will be available to pay the benefits under the deferred compensation agreements.

 

Directors Emeritus. On May 23, 2017, the Company amended and restated its Bylaws to provide the Board with the ability to appoint directors emeritus. Accordingly, Messrs. Cappelli and Helmer, two former members of the Company’s Board who served with distinction and excellence and provide unique perspective and historical guidance as former presidents of legacy companies comprising our current Company, have been appointed as directors emeritus. These directors emeritus served one-year terms that expired with the Company’s annual stockholders meeting in May 2018. During their tenure, the directors emeritus received a retainer fee of $30,000. Such directors emeritus did not have a vote in Board decisions and did not serve as committee members.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

The following table sets forth compensation information with respect to our non-employee directors during 2018.

 

2018 DIRECTOR COMPENSATION

Name

(a)

Fees Earned

or Paid in

Cash ($)

(b)

Stock Awards

($)

(c)(1)

Change in

Pension Value

and Non-

Qualified

Deferred

Compensation

Earnings ($)

(d)

All Other

Compensation

($)

(e)

Total ($)

(f)

John P. Cahill 78,000 (2) 49,983 –– –– 127,983
Louis J. Cappelli – Director Emeritus 30,000   –– –– 30,000(3) 30,000
James F. Deutsch 76,500   –– 50,000(4) 126,500
Navy E. Djonovic 67,750   49,983 –– –– 117,733
Fernando Ferrer 67,500 (2) 49,983 –– –– 117,483
Robert Giambrone 72,750   49,983 –– –– 122,733
William F. Helmer – Director Emeritus 30,000   –– –– 30,000(3) 30,000
Thomas G. Kahn 26,750 (5) 20,829 –– –– 47,579
James. J. Landy 76,250   49,983 –– –– 126,233
Robert W. Lazar 75,750 (6) 49,983 –– –– 125,733
Maureen B. Mitchell 47,250 (7) 33,316 –– –– 80,566
Patricia M. Nazemetz 65,500   49,983 –– –– 115,483
Richard O’Toole 145,500   49,983 –– –– 195,483
Ralph F. Palleschi 66,250   49,983 –– –– 116,233
Monte Redman 25,500 (5) 20,829 –– –– 46,329
Burt Steinberg 91,500   49,983 –– –– 141,483
William E. Whiston 70,500   49,983 –– –– 120,483

 

 

(1)Represents the value of restricted stock awards based on the Company’s closing stock price on December 10, 2018 of $17.20.

 

(2)Amount includes the contribution to the Deferred Fee Plan pursuant to the terms of such plan.

 

(3)Directors Cappelli and Helmer served as Directors Emeritus, pursuant to which they received an annual fee of $30,000. The term of their appointment concluded effective with the Company’s annual stockholders meeting held on May 22, 2018. Fees were paid over a twelve-month period starting in June, 2017 through to April, 2018.

 

(4)In lieu of receiving a restricted stock award valued at $50,000, Patriot (of which Mr. Deutsch is a Managing Partner) received a $50,000 cash payment.

 

(5)Directors Kahn and Redman retired from Board service effective at the Company’s annual stockholders meeting held on May 22, 2018, so their compensation reflects only a partial year of service.

 

(6)Amount includes the aggregate grant date fair value of the grant of phantom stock, exercisable upon settlement, pursuant to the terms of the Company’s Directors Deferred Compensation Plan.

 

(7)Director Mitchell joined the Company’s Board effective at the Company’s annual stockholders meeting held on May 22, 2018; therefore, her compensation and stock award reflects only a partial year of service.

 

Director Outstanding Equity Awards and Options

 

The following table sets forth information concerning phantom stock exercisable for Company common stock for each non-employee director outstanding at December 31, 2018, whether granted in 2018 or earlier. There were no unexercised options or unvested restricted stock units held by any non-employee director outstanding at December 31, 2018, whether granted in 2018 or earlier.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

  Stock Awards

Name

(a)

Number of Shares of Phantom Stock that

have not been exercised (#)

(b)

John P. Cahill 1,327(1)
Louis J. Cappelli – Director Emeritus ¾
James F. Deutsch ¾
Navy E. Djonovic ¾
Fernando Ferrer ¾
Robert Giambrone ––
William Helmer – Director Emeritus ––
James. J. Landy ¾
Robert W. Lazar 1,969(1)
Maureen B. Mitchell ––
Patricia M. Nazemetz ––
Richard O’Toole ¾
Ralph F. Palleschi ––
Burt Steinberg ¾
William E. Whiston ¾

 

 

(1)Grant of phantom stock exercisable immediately upon settlement, pursuant to the terms of the Company’s Directors Deferred Compensation Plan.

 

Transactions with Certain Related Persons

 

The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by the Bank to its executive officers and directors in compliance with federal banking regulations, including Regulation O. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is therefore generally prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit the Bank to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee.

 

Consistent with the Company’s Code of Ethics, proposed transactions with related persons must be disclosed to the Company. The Board must approve such transactions with directors or executive officers to the extent required under the Code of Ethics. The director or executive officer is required to disclose all non-privileged information the person has, and thereafter may not partake in any decision-making process. The Board evaluates the transaction, and may approve, reject, or set other conditions in its discretion. To qualify for approval, a transaction must be on the same terms, conditions, and collateral as would be reasonable if entered into with an unrelated third party. In the case of a proposed transaction with or related to a director, the Board will also consider the effect, if any, the transaction would have on the independence of the director.

 

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COMPENSATION DISCUSSION & ANALYSIS

 

A number of our directors and officers and certain business organizations associated with them have been clients of our banking and other subsidiaries. During the year ended December 31, 2018, all extensions of credit to these persons, which were made only by the Bank, have been made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the lender and did not involve more than the normal risk of collectability or present other unfavorable features. We have adopted written policies to implement the requirements of Regulation O of the Federal Reserve Board. Regulation O is made applicable to the bank by provisions of the Home Owners’ Loan Act and the regulations of the Office of Comptroller of the Currency. Under these policies, extensions of credit that exceed regulatory thresholds must be approved by the Board of the Bank.

 

There have not been any transactions during the last year to which we have been a party, in which the amount involved in the transaction exceeded $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock had or will have a direct or indirect material interest other than equity and other compensation, termination, change-in-control and other arrangements, which are described in the sections captioned “Executive Compensation —Potential Payments Upon Termination or Change in Control” and “Director Compensation.”

 

For identification of each director determined to be independent, see “Proposal I – Election of Directors – Director Independence.”

 

Stockholder Proposals

 

Under applicable SEC rules, any stockholder who intends to present a proposal at the 2020 Annual Meeting and who wishes to have the proposal included in our proxy statement for that meeting must deliver the proposal to us at our executive offices, 400 Rella Boulevard, Montebello, New York 10901, or such other address indicated in the Company’s filings, and such proposal must be received by the Company within one hundred twenty (120) calendar days before the date the Company distributed its proxy statement to stockholders for the previous year’s meeting. The Company distributed its 2019 proxy statement to stockholders on April 17, 2019, thereby requiring that any stockholder proposal be received by the Company by December 13, 2019 for next year’s proxy statement. All stockholder proposals must comply with all applicable rules and regulations adopted by the SEC.

 

Advance Notice of Business to be Conducted at an Annual Meeting

 

Our Bylaws provide an advance notice procedure for certain business, or nominations to the Board, to be brought before an Annual Meeting. In order for a stockholder to properly bring business before an Annual Meeting, or to propose a nominee to the Board, the stockholder must deliver written notice to the Corporate Secretary of Sterling not less than ninety (90) days prior to the anniversary date of our proxy materials for the preceding year’s Annual Meeting; provided, however, that if the date of the Annual Meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s Annual Meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the tenth (10th) day following the day on which public announcement of the date of such Annual Meeting is first made. The notice must include, among other information, the stockholder’s name, record address, and number of shares owned, describe briefly the proposed business, the reasons for bringing the business before the Annual Meeting, and any material interest of the stockholder and the beneficial owner, if any, in the proposed business. In the case of nominations to the Board, certain information regarding the nominee must be provided. Nothing in this paragraph shall be deemed to require us to include in our proxy statement and proxy relating to an Annual Meeting any stockholder proposal that does not meet all of the requirements for inclusion established by the SEC in effect at the time such proposal is received.

 

Advance written notice for certain business, or nominations to the Board, to be brought before the next Annual Meeting must be given to us by January 17, 2020. If notice is received after January 17, 2020 it will be considered untimely, and we will not be required to present the matter at the stockholders meeting.

 

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OTHER MATTER/HOUSEHOLDING OF
PROXY STATEMENTS AND ANNUAL
REPORTS/MISCELLANEOUS

 

OTHER MATTERS

 

This Proxy Statement and accompanying notice of meeting provide notice that the stockholders will be asked to vote on the election of the Company’s director nominees, the Say-on-Pay proposal, and the ratification of the appointment of Crowe as the Company’s independent registered public accounting firm for the year ending December 31, 2019. In accordance with the Company’s Bylaws, no persons other than the Company’s nominees may be nominated for director election or elected at the Annual Meeting and no business may be transacted at the meeting except as set forth above and such other matters as may be brought before the meeting by or at the direction of the Board or an authorized committee of the Board. If any matters should properly come before the Annual Meeting, it is intended that the Board, as holders of the proxies, will act as determined by a majority vote.

 

HOUSEHOLDING OF PROXY STATEMENTS AND ANNUAL REPORTS

 

Sterling intends to deliver only one Annual Report and Proxy Statement to multiple registered stockholders sharing the same address unless it has received contrary instructions from one or more of the stockholders. If individual stockholders wish to receive a separate copy of the Annual Report or Proxy Statement they may call or write and request separate copies currently or in the future as follows:

 

Investor Relations
Sterling Bancorp
400 Rella Boulevard
Montebello, New York 10901
Phone: 845.369.8040
Fax: 845.369.8066

 

Registered stockholders sharing the same address and receiving multiple copies of Annual Reports or Proxy Statements may request the delivery of a single copy by writing or calling the above address or phone number.

 

MISCELLANEOUS

 

The cost of solicitation of proxies will be borne by Sterling. Sterling will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of common stock. In addition to solicitations by mail, directors, officers and regular employees of Sterling may solicit proxies personally or by telephone without additional compensation.

 

A COPY OF STERLING’S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 2018 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO INVESTOR RELATIONS, 400 RELLA BOULEVARD, MONTEBELLO, NEW YORK, 10901 OR BY CALLING 845.369.8040.

 

  BY ORDER OF THE BOARD OF DIRECTORS
   
   
 

June Ann Byrnes
Corporate Secretary
Montebello, New York

April 17, 2019

 

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ANNEX A

 

ANNEX A

 

STERLING BANCORP AMENDED AND RESTATED 2015 OMNIBUS EQUITY AND INCENTIVE PLAN

 

STERLING BANCORP

AMENDED AND RESTATED 2015 OMNIBUS EQUITY AND INCENTIVE PLAN

 

ARTICLE I.
INTRODUCTION

 

1.1          Purpose. The purpose of the Sterling Bancorp Amended and Restated 2015 Omnibus Equity and Incentive Plan (the “Plan”) is to promote the growth and profitability of Sterling Bancorp by providing certain directors and employees of Sterling Bancorp, the Bank, and their Subsidiaries with an incentive to achieve corporate objectives and attracting and retaining individuals of outstanding competence through a participation interest in the performance of the common stock of Sterling Bancorp and the receipt of other incentive compensation as provided in the Plan.

 

1.2           Effective Date. The Sterling Bancorp 2015 Omnibus Equity and Incentive Plan (prior to amendment, the “Initial Plan”) was initially approved by the Board and became effective on May 28, 2015, the date of approval by the Company’s stockholders at the 2015 annual meeting of stockholders (the “Initial Effective Date”). The Plan was amended by the Board on February 27, 2019 to increase the maximum number of shares of Common Stock available for grant under the Plan and to effect certain tax related amendments. The amendments to the Initial Plan will become effective on the date on which the amendments to the Initial Plan are approved by the Company’s stockholders at the Company’s 2019 annual meeting of stockholders (the “Amendment Effective Date”). Upon the Initial Effective Date, the Prior Plan terminated and no new awards were authorized to be granted under the Prior Plan; provided, however, that the Prior Plan continues to govern awards outstanding as of such date of the Prior Plan’s termination, and such awards shall continue in full force and effect until their termination or expiration pursuant to their respective terms.

 

1.3           Eligibility. Eligible Individuals shall be selected by the Committee in its sole discretion from time to time to be Participants. The Committee’s selection of an Eligible Individual to participate in the Plan at any time shall not require the Committee to select such person to participate in the Plan at any other time.

 

1.4          Types of Awards. Awards under the Plan may be in the form of any one or more of the awards or payments permitted under the Plan including the following: (a) Options, (b) SARs, (c) Stock Awards, (d) Performance Awards, (e) Substitute Awards, and (f) Annual Incentive Awards.

 

1.5          Tax Treatment of Awards.  Grandfathered 162(m) Awards are eligible for an exception under Section 162(m) of the Code, which predates the TCJA changes to Code Section 162(m).  Any Awards that do not qualify as Grandfathered 162(m) Awards are not eligible for such exception.

 

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Table of Contents 

 

ANNEX A

 

ARTICLE II.
ADMINISTRATION

 

2.1           Committee.

 

(a)           Subject to Section 2.1(b), the Plan shall be administered by the members of the Committee.

 

(b)          The members of the Board who are “independent directors” (within the meaning of the corporate governance standards imposed by the principal national securities exchange on which securities of the Company are listed or admitted to trading) may, in their discretion, take any action and exercise any power, privilege or discretion conferred on the Committee under the Plan with the same force and effect under the Plan as if done or exercised by the Committee.

 

(c)           No member of the Committee or the Board shall participate in any action taken by such body under the Plan if he or she is personally affected thereby, unless all members of the Committee or Board, as applicable, are similarly affected.

 

(d)       To the extent not inconsistent with applicable law, including Section 162(m) of the Code with respect to Grandfathered 162(m) Awards, or the rules and regulations of the principal national securities exchange on which securities of the Company are listed or admitted to trading, the Committee may (i) delegate to a subcommittee of one or more of its members any of the authority of the Committee under the Plan, including the rights to designate Eligible Employees and grant, cancel or suspend Awards, and (ii) to the extent permitted by law, authorize the Chief Executive Officer or other executive officer of the Company to do one or more of the following with respect to employees of the Employer who are senior vice presidents or lower level employees: (A) designate certain such employees to be Eligible Employees; (B) designate such employees who are Eligible Employees to be recipients of Awards; (C) determine the number of Shares subject to such Awards to be received by such Eligible Employees; and (D) cancel or suspend Awards to such Eligible Employees as provided in Article VIII of the Plan; provided that (x) any resolution of the Committee authorizing such officer(s) or subcommittee must specify the total number of Shares subject to Awards that such officer(s) or subcommittee may so award and the amount (or minimum amount) and form of consideration to be received, (y) the Committee may not authorize any such officer to designate himself or herself as the recipient of an Award, and (z) the Committee may not delegate its power and authority to any such officer with regard to the grant of Awards to Covered Employees or to any person subject to Section 16 of the Exchange Act.

 

2.2          Committee Action. The Committee shall hold such meetings, and may make such administrative rules and regulations, as it may deem proper. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, as well as actions taken pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee. All actions of the Committee shall be final and conclusive and shall be binding upon the Company and all other interested parties. Any Person dealing with the Committee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by the secretary of the Committee and one member of the Committee, by two members of the Committee or by a representative of the Committee authorized to sign the same in its behalf.

 

2.3          Committee Responsibilities. Subject to the terms and conditions of the Plan and such limitations as may be imposed by the Board, the Committee shall be responsible for the overall management and administration of the Plan, and shall have such authority as shall be necessary or appropriate in order to carry out its responsibilities, including, without limitation, the authority:

 

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ANNEX A

 

(a)          To select Participants and establish the terms and conditions of any Award consistent with the terms and conditions of the Plan;

 

(b)          To interpret and construe the Plan, and to determine all questions that may arise under the Plan as to eligibility for participation in the Plan, the number of Shares subject to Awards, if any, to be granted, and the terms and conditions thereof;

 

(c)          To adopt, amend and rescind any rules and regulations relating to the Plan, and to prescribe forms for the operation and administration of the Plan;

 

(d)          To provide in an Award Agreement, or as a matter of policy, that Awards are (i) conditioned on compliance with certain restrictive covenants, including, but not limited to, non-competition, confidentiality, non-solicitation of employees, non-solicitation of customers and non-derogation of the Company, the Bank and the Subsidiaries, in each case, in such form and substance as determined by the Committee; and/or (ii) subject to forfeiture, including those already exercised or distributed, in the event of failure to comply with any of the covenants imposed pursuant to (i); and

 

(e)          To correct any defect or omission, or reconcile any inconsistency in any Award Agreement; and to take any other action not inconsistent with the provisions of the Plan that it may deem necessary, desirable or appropriate.

 

All decisions, determinations, interpretations and other actions of the Committee made or taken in accordance with the terms of the Plan shall be made in the Committee’s sole discretion and shall be final and conclusive and binding upon all persons having an interest therein.

 

2.4          Limitations. The following limitations shall apply to the Committee:

 

(a)          The Committee shall not, without the prior approval of the stockholders of the Company or as otherwise provided in Section 8.8, permit the repricing of Options or SARs by any method, including by exchanges for other Awards involving Shares or by cancellation and re-issuance or cash buyout.

 

(b)          The Committee may, except as otherwise provided in Sections 5.6 and 8.9 and subject to the minimum one (1) year vesting, Restriction Period, and Performance Period provisions of the Plan applicable to Awards to Eligible Employees, accelerate the vesting or exercisability of an Award upon disability, Retirement or death of a Participant, a Change in Control or for any other reason.

 

(c)          The Committee shall not provide a tax gross-up to any Participant in connection with any Award.

 

ARTICLE III.
AVAILABLE SHARES

 

3.1          Shares Available Under the Plan.

 

(a)           Subject to adjustment as provided in Section 8.8 and to all other limits set forth in this Article III, the number of Shares that shall be available for all Awards under this Plan shall be increased from 4,454,318 Shares to 7,000,000 Shares, of which no more than 7,000,000 Shares in the aggregate may be issued under the Plan in con