-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, j3wjgHbeXRi6+InR0yyvfYp+Jhq+4sRzgl0/z+u9cYULkU0pUsl9sU3j8SFhuNyk vlSU+5L0Q4xHtxdI079Wug== 0000009626-94-000004.txt : 19940331 0000009626-94-000004.hdr.sgml : 19940331 ACCESSION NUMBER: 0000009626-94-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK OF NEW YORK CO INC CENTRAL INDEX KEY: 0000009626 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 132614959 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-06152 FILM NUMBER: 94518154 BUSINESS ADDRESS: STREET 1: 48 WALL ST 15TH FL CITY: NEW YORK STATE: NY ZIP: 10296 BUSINESS PHONE: 2124951784 10-K 1 1993 FORM 10K 1. FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For The Fiscal Year Ended December 31, 1993 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission file number 1-6152 THE BANK OF NEW YORK COMPANY, INC. (Exact name of registrant as specified in its charter) NEW YORK 13-2614959 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (212) 495-1784 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ---------------------- Common Stock, $7.50 par value NEW YORK STOCK EXCHANGE 8.60% Cumulative Preferred Stock NEW YORK STOCK EXCHANGE Preferred Stock Purchase Rights NEW YORK STOCK EXCHANGE Convertible Subordinated Debentures due 2001 NEW YORK STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: Title of each class ------------------- Warrants to Purchase Common Stock Class A, 7.75% Cumulative Convertible Preferred Stock Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by nonaffiliates of the registrant at February 28, 1994 consisted of: Common Stock ($7.50 par value) $5,103,325,873 (based on closing price on New York Stock Exchange) The number of shares outstanding of the registrant's common Stock $7.50 par value was 93,862,900 shares on February 28, 1994. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1993 Annual Report to Shareholders are incorporated by reference into Parts I, II, and IV. Portions of the definitive Proxy Statement pursuant to Regulation 14A for the 1994 Annual Meeting of Shareholders are incorporated by reference into Part III. 2. PART I - ------ ITEM 1. BUSINESS - ----------------- The business of The Bank of New York Company, Inc. (the "Company") and its subsidiaries is described in the "Business Review" section of the Company's 1993 Annual Report to Shareholders which description is included in Exhibit 13 to this report and incorporated herein by reference. Also, the "Management's Discussion and Analysis" section included in Exhibit 13 contains financial and statistical information on the operations of the Company. Such information is herein incorporated by reference. COMPETITION The retail and commercial businesses in which the Company operates are strongly competitive. Competition is provided by both unregulated and regulated financial services organizations, whose products and services span the local, national, and global markets in which the Company conducts operations. Savings banks, savings and loan associations, and credit unions actively compete for deposits, and money market funds and brokerage houses offer deposit-like services. These institutions, as well as consumer and commercial finance companies, national retail chains, factors, insurance companies and pension trusts, are important competitors for various types of loans. Issuers of commercial paper compete actively for funds and reduce demand for bank loans. For personal and corporate trust services and investment counseling services, insurance companies, investment counseling firms, and other business firms and individuals offer active competition. CERTAIN REGULATORY CONSIDERATIONS General As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board under the Bank Holding Company Act ("BHC Act"). The Company is also subject to regulation by the New York State Department of Banking. Under the BHC Act, bank holding companies may not directly or indirectly acquire the ownership or control of more than 5% of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the Federal Reserve Board. In addition, bank holding companies are generally prohibited under the BHC Act from engaging in nonbanking activities, subject to certain exceptions. The Company's subsidiary banks are subject to supervision and examination by applicable federal and state banking agencies. The Bank of New York ("BNY") is a state-chartered New York banking corporation and a member of the Federal Reserve System and is subject to regulation and supervision principally by the Federal Reserve Board. The Bank of New York (Delaware) ("BNY Del.") is a Delaware chartered FDIC insured non-member bank and therefore is subject to regulation and supervision principally by the FDIC. The Bank of New York National Association ("BNYNA") is organized as a national association under the laws of the United States and therefore is subject to regulation and supervision principally by the Comptroller of the Currency ("Comptroller"). 3. Capital Adequacy Bank regulators have adopted risk-based capital guidelines for bank holding companies and banks. The minimum ratio of qualifying total capital to risk-weighted assets (including certain off-balance sheet items) is 8%. At least half of the total capital is to be comprised of common stock, retained earnings, noncumulative perpetual preferred stocks, minority interests and for bank holding companies, a limited amount of qualifying cumulative perpetual preferred stock, less certain intangibles including goodwill ("Tier I capital"). The remainder ("Tier II capital") may consist of other preferred stock, certain other instruments, and limited amounts of subordinated debt and the loan and lease loss allowance. In addition, the Federal Reserve Board has established minimum Leverage Ratio (Tier I capital to average total assets) guidelines for bank holding companies and banks. These guidelines provide for a minimum leverage ratio of 3% for bank holding companies and banks that meet certain specified criteria, including that they have the highest regulatory rating. All other banking organizations will be required to maintain a leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Furthermore, the guidelines indicate that the Federal Reserve Board will continue to consider a "Tangible Tier I Leverage Ratio" in evaluating proposals for expansion or new activities. The Tangible Tier I Leverage Ratio is the ratio of Tier I capital, less intangibles not deducted from Tier I capital, to average total assets. The Federal Reserve Board has not advised the Company of any specific minimum leverage ratio applicable to it. Federal banking agencies have proposed regulations that would modify existing rules related to risk-based and leverage capital ratios. The Company does not believe that the aggregate impact of these modifications would have a significant impact on its capital position. Bank regulators continue to indicate their desire to raise capital requirements applicable to banking organizations beyond their current levels. However, management is unable to predict whether and when higher capital requirements would be imposed and, if so, at what level and on what schedule. FDICIA The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), which was enacted in December 1991, substantially revised the depository institution regulatory and funding provisions of the Federal Deposit Insurance Act ("FDIA") and made revisions to several other federal banking statutes. Among other things, FDICIA requires the federal banking regulators to take prompt corrective action in respect of FDIC-insured depository institutions that do not meet minimum capital requirements. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." Under applicable regulations, an FDIC-insured bank is defined to be well capitalized if it maintains a Leverage Ratio of at least 5%, a risk-adjusted Tier I Capital Ratio of at least 6% and a Total Capital Ratio of at least 10% and is not otherwise in a "troubled condition" as specified by its appropriate federal regulatory agency. A bank is generally considered to be adequately capitalized if it is not defined to be well capitalized but meets all of its minimum capital requirements, i.e., if it has a total risk-based Capital Ratio of 8% or greater, a Tier I risk-based Capital Ratio of 4% or greater and a Leverage Ratio of 4% or greater. A bank will be considered undercapitalized if it fails to meet any minimum required measure, significantly undercapitalized if it is significantly below such measure and critically undercapitalized if it maintains a level of tangible equity capital equal to or less than 2% of total assets. A bank may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating. 4. FDICIA generally prohibits an FDIC-insured depository institution from making any capital distribution (including payment of dividends) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. For an undercapitalized depository institution's capital restoration plan to be acceptable, its holding company must guarantee the capital plan up to an amount equal to the lesser of 5% of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. In the event of the parent holding company's bankruptcy, such guarantee would take priority over the parent's general unsecured creditors. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator. The Company's significant banking subsidiaries are well capitalized. The table below indicates capital ratios of the Company and its significant banking subsidiaries at December 31, 1993 and 1992 and the respective guidelines for well capitalized institutions under FDICIA.
December 31, 1993 BNY Company BNY Del. BNYNA ------- --- ---- ----- Tier I 8.87% 8.21% 7.53% 13.90% Total Capital 13.65 12.82 11.00 15.17 Leverage 7.99 7.22 8.09 6.43 Tangible Common Equity 7.00 7.74 7.87 6.48
December 31, 1992 BNY Company BNY Del. BNYNA ------- --- ---- ------ Well Capitalized Guidelines ------------ Tier I 7.59% 6.92% 6.24% 10.22% 6% Total Capital 12.30 11.39 10.35 11.49 10 Leverage 7.11 6.35 6.67 6.21 5 Tangible Common Equity 5.83 6.73 7.20 6.07
At December 31, 1993, the amounts of capital by which the Company and its significant banking subsidiaries exceed the guidelines are as follows: Well Capitalized BNY Company BNY Del. BNYNA (in millions) ------- --- ---- ----- Tier I $1,215 $753 $ 79 $167 Total Capital 1,545 960 52 110 Leverage 1,404 861 149 66 5. The following table presents the components of the Company's risk-based capital at December 31, 1993 and 1992: (in millions) 1993 1992 ---- ---- Common Stock $3,778 $3,302 Preferred Stock 294 369 Less: Intangibles 317 345 ----- ------ Tier 1 Capital 3,755 3,326 Convertible Preferred Stock - 59 Qualifying Long-term Debt 1,489 1,452 Qualifying Allowance for Loan Losses 534 554 ------ ------ Tier 2 Capital 2,023 2,065 ------ ------ Total Risk-based Capital $5,778 $5,391 ====== ====== The following table presents the components of the Company's risk adjusted assets at December 31, 1993 and 1992:
1993 1992 ------------------- ------------------- Balance Balance sheet/ Risk sheet/ Risk notional adjusted notional adjusted (in millions) amount balance amount balance -------- -------- -------- -------- Assets - ------ Cash, Due From Banks and Interest- Bearing Deposits in Banks $ 4,780 $ 318 $ 5,739 $ 331 Securities 5,597 571 5,900 778 Trading Assets 1,325 270 736 292 Fed Funds Sold and Securities Purchased Under Resale Agreements 36 5 265 53 Loans 30,570 27,954 29,497 27,864 Allowance for Loan Losses (970) - (1,072) - Other Assets 4,208 3,425 4,145 3,673 ------- ------- -------- ------- Total Assets $45,546 32,543 $ 45,210 32,991 ======= ------- ======== ------- Off-Balance Sheet Exposures - --------------------------- Commitments to Extend Credit $19,463 6,167 $ 17,718 6,440 Securities Lending Indemnifications 15,005 - 13,676 - Standby Letters of Credit and Other Guarantees 4,643 3,685 5,316 4,329 Interest Rate Contracts 36,523 145 29,582 186 Foreign Exchange Contracts 39,877 225 52,987 389 -------- ------- -------- ------- Total Off-Balance Sheet Exposure $115,511 10,222 $119,279 11,344 ======== ------- ======== ------- Gross Risk Adjusted Assets 42,765 44,335 Less: Allowance for Loan Losses not Qualifying as Risk Based Capital 436 518 ------- ------- Risk Adjusted Assets $42,329 $43,817 ======= =======
6. Subsequent to December 31, 1993, the Company redeemed $173 million of preferred stock and BNY acquired the domestic factoring business of the Bank of Boston. After giving pro forma effect to these actions, the Company's and BNY's captial ratios at December 31, 1993 were as follows: Company BNY ------- ---- Tier 1 8.33% 7.82% Total Capital 13.08 12.41 Leverage 7.51 6.89 Tangible Common Equity 6.88 7.58 A discussion of the Company's capital position is incorporated by reference from the caption "Capital Resources" in the "Management's Discussion and Analysis" section of Exhibit 13. Brokered Deposits The FDIC has adopted regulations under FDICIA governing the receipt of brokered deposits. Under the regulations, a bank cannot accept, rollover or renew brokered deposits unless (i) it is well capitalized or (ii) it is adequately capitalized and receives a waiver from the FDIC. A bank that cannot receive brokered deposits also cannot offer "pass-through" insurance on certain employee benefit accounts. Whether or not it has obtained such a waiver, an adequately capitalized bank may not pay an interest rate on any deposits in excess of 75 basis points over certain prevailing market rates specified by regulation. There are no such restrictions on a bank that is well capitalized. Because BNY and BNY Del. are well capitalized, the Company believes the brokered deposits regulation will have no material effect on the funding or liquidity of BNY and BNY Del. BNYNA is well capitalized, but has no brokered deposits. FDIC Insurance Assessments BNY, BNY Del., and BNYNA are subject to FDIC deposit insurance assessments. As required by FDICIA, the FDIC has adopted a risk-based premium schedule which has increased the assessment rates for most FDIC- insured depository institutions. Under the schedule, the premiums initially range from $.23 to $.31 for every $100 of deposits. Each financial institution is assigned to one of three capital groups --- well capitalized, adequately capitalized, or undercapitalized --- and further assigned to one of three subgroups within a capital group, on the basis of supervisory evaluations by the institution's primary federal and, if applicable, state supervisors and other information relevant to the institution's financial condition and the risk posed to the applicable insurance fund. The actual assessment rate applicable to a particular institution will, therefore, depend in part upon the risk assessment classification so assigned to the institution by the FDIC. The FDIC is authorized to raise insurance premiums in certain circumstances. Any increase in premiums would have an adverse effect on the Company's earnings. Under the FDIA, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a bank's federal regulatory agency. Depositor Preference The Omnibus Budget Reconciliation Act of 1993 provides for a national depositor preference on amounts realized from the liquidation or other resolution of any depository institution insured by the FDIC. That act requires claims to be paid in the following order of priority: the receiver's administrative expenses; deposits; other general or senior liabilities of the institution; obligations subordinated to depositors or general creditors; and obligations to shareholders. Under an FDIC interim rule, which became effective August 13, 1993, "administrative expenses of the receiver" are defined as those incurred by the receiver in liquidating or resolving the affairs of a failed insured depository institution. 7. Acquisitions The BHC Act generally limits acquisitions by the Company to commercial banks and companies engaged in activities that the Federal Reserve Board has determined to be so closely related to banking as to be a proper incident thereto. The Company's direct activities are generally limited to furnishing to its subsidiaries services that qualify under the "closely related" and "proper incident" tests. Prior Federal Reserve Board approval is required under the BHC Act for new activities and acquisitions of most nonbanking companies. The BHC Act, the Federal Bank Merger Act, and the New York Banking Law regulate the acquisition of commercial banks. The BHC Act requires the prior approval of the Federal Reserve Board for the direct or indirect acquisition of more than 5% of the voting shares of a commercial bank. The BHC Act generally prohibits the acquisition of a domestic bank located outside the Company's state of principal operations, New York State, unless authorized by the law of the state of the target bank. Most states have enacted interstate banking laws that permit the Company to acquire banks located in their states, but some states (particularly in the Southeast) presently do not permit entry by New York bank holding companies. The New York Banking Law requires state regulatory approval before the Company can acquire more than 5% of the voting shares of a commercial bank in New York. The merger of BNY with another bank would require the approval of the Federal Reserve Board or other federal bank regulatory authority and, if the surviving bank is a state bank, the New York Superintendent of Banks. With respect to BNYNA, the approval of the Comptroller is required for branching of national banks, purchasing the assets of other banks and for bank mergers in which the continuing bank is a national bank. In reviewing bank acquisition and merger applications, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, and the applicant's record under the Community Reinvestment Act. Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to its banks and to commit resources to support such banks in circumstances where it might not do so absent such policy. In addition, any loans by the Company to its banks would be subordinate in right of payment to deposits and to certain other indebtedness of its banks. Regulated Banking Subsidiaries As a New York State chartered bank and a member of the Federal Reserve System, BNY is subject to the supervision of, and is regularly examined by, the New York State Banking Department and the Federal Reserve Board. As a bank insured by the FDIC, BNY is also subject to examination by that agency. BNY Del. is subject to the supervision of, and is regularly examined by, the FDIC and the Office of State Bank Commissioner of the State of Delaware. BNYNA is a national bank subject to the regulation and supervision of, and regular examination by, the Comptroller and subject to regulations of the FDIC and Federal Reserve Board. Both federal and state laws extensively regulate various aspects of the banking business, such as permissible types and amounts of loans and investments, permissible activities, and reserve requirements. These regulations are intended primarily for the protection of depositors rather than the Company's stockholders. Restrictions on Transfer of Funds Restrictions on the transfer of funds to the Company are discussed in Note 12 to the Consolidated Financial Statements included in Exhibit 13. Such discussion is incorporated herein by reference. 8. FIRREA A depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (i) the default of a commonly controlled institution or (ii) any assistance provided by the FDIC to a commonly controlled, FDIC-insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver, and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur in the absence of regulatory assistance. GOVERNMENT MONETARY POLICIES The Federal Reserve Board has the primary responsibility for monetary policy; accordingly, its actions have an important influence on the demand for credit and investments and the level of interest rates. 9. ADDITIONAL FINANCIAL INFORMATION - ------------------------------------------------------------------------------- Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
1993 1992 ====================================================== Average Average Average Average Balance Interest Rate Balance Interest Rate -------------------------------------------------------- Assets - ------ Interest-Bearing Deposits in Banks (Primarily Foreign) $ 452 $ 24 5.42% $ 753 $ 76 10.14% Federal Funds Sold and Securities Purchased Under Resale Agreements 3,149 97 3.06 2,379 85 3.54 Loans Domestic Offices Consumer 8,046 792 9.84 6,708 687 10.24 Commercial 12,211 755 6.18 11,951 772 6.46 Foreign Offices 10,170 485 4.77 11,686 651 5.57 ------- ------ ------- ------ Total Loans 30,427 2,032* 6.68 30,345 2,110* 6.95 ------- ------ ------- ------ Securities U.S. Government Obligations 3,732 215 5.78 3,611 240 6.66 Obligations of States and Political Subdivisions 1,070 110 10.29 1,224 135 11.04 Other Securities, including Trading Securities Domestic Offices 1,358 64 4.74 1,190 91 7.65 Foreign Offices 192 14 7.36 177 17 9.44 ------- ------ ------- ------ Total Other Securities 1,550 78 5.06 1,367 108 7.88 ------- ------ ------- ------ Total Securities 6,352 403 6.36 6,202 483 7.79 ------- ------ ------- ------ Total Interest-Earning Assets 40,380 $2,556 6.33% 39,679 $2,754 6.94% ====== ======= Allowance for Loan Losses (1,045) (1,057) Cash and Due from Banks 2,735 2,522 Other Assets 4,574 5,083 ------- ------- Total Assets $46,644 $46,227 ======= ======= Assets Attributable to Foreign Offices 24.37% 28.63% ====== ======
1991 ========================== Average Average Balance Interest Rate -------------------------- Assets - ------ Interest-Bearing Deposits in Banks (Primarily Foreign) $ 761 $ 87 11.45% Federal Funds Sold and Securities Purchased Under Resale Agreements 2,389 138 5.79 Loans Domestic Offices Consumer 7,453 902 12.10 Commercial 12,878 1,021 7.93 Foreign Offices 12,388 999 8.06 ------- ------ Total Loans 32,719 2,922* 8.93 ------- ------ Securities U.S. Government Obligations 1,987 156 7.85 Obligations of States and Political Subdivisions 1,497 173 11.55 Other Securities, including Trading Securities Domestic Offices 1,006 74 7.37 Foreign Offices 186 17 8.86 ------- ------ Total Other Securities 1,192 91 7.60 ------- ------ Total Securities 4,676 420 8.97 ------- ------ Total Interest-Earning Assets 40,545 $3,567 8.80% ====== Allowance for Loan Losses (1,216) Cash and Due from Banks 2,389 Other Assets 4,899 ------- Total Assets $46,617 ======= Assets Attributable to Foreign Offices 30.19% ===== *Includes fees of $103 million in 1993, $96 million in 1992, and $98 million in 1991. Nonaccrual loans are included in the average loan balance; the associated income, recognized on the cash basis, is included in interest. Taxable equivalent adjustments were $54 million in 1993, $66 million in 1992, and $77 million in 1991, and are based on the federal statutory tax rate (35% in 1993, and 34% in 1992 and 1991) and applicable state and local taxes.
Continued on page 10 10. Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
1993 1992 ========================================================== Average Average Average Average Balance Interest Rate Balance Interest Rate ---------------------------------------------------------- Liabilities and Shareholders' Equity - -------------------- Interest-Bearing Deposits Domestic Offices Money Market Rate Accounts $ 3,666 $ 91 2.48% $ 3,468 $ 108 3.11% Savings 8,379 198 2.37 7,189 216 3.01 Certificates of Deposit of $100,000 or More 1,189 36 3.00 1,709 64 3.75 Other Time Deposits 2,701 119 4.39 2,965 152 5.15 ------- ------ ------- ------ Total Domestic Offices 15,935 444 2.78 15,331 540 3.53 ------- ------ ------- ------ Foreign Offices Banks in Foreign Countries 2,829 93 3.28 4,018 204 5.07 Government and Official Institutions 1,306 57 4.34 1,270 61 4.81 Other Time and Savings 3,752 107 2.87 4,716 200 4.24 ------- ------ ------- ------ Total Foreign Offices 7,887 257 3.26 10,004 465 4.64 ------- ------ ------- ------ Total Interest- Bearing Deposits 23,822 701 2.94 25,335 1,005 3.97 ------- ------ ------- ------ Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,467 102 2.94 4,001 136 3.40 Other Borrowed Funds 2,348 86 3.66 2,045 85 4.13 Long-Term Debt 1,729 117 6.79 1,386 94 6.77 ------- ------ ------- ------ Total Interest- Bearing Liabilities 31,366 $1,006 3.21% 32,767 $1,320 4.03% ====== ====== Noninterest-Bearing Deposits Domestic Offices 8,946 7,797 Foreign Offices 69 105 ------- ------- Total Noninterest- Bearing Deposits 9,015 7,902 ------- ------- Other Liabilities 2,366 2,153 Preferred Stock 334 409 Common Shareholders' Equity 3,563 2,996 ------- ------- Total Liabilities and Shareholders' Equity $46,644 $46,227 ======= ======= Net Interest Earnings and Interest Rate Spread $1,550 3.12 $1,434 2.91 ====== ====== Net Yield on Interest- Earnings Assets 3.84% 3.61% ==== ==== Liabilities Attributable to Foreign Offices 19.74% 24.91% ===== =====
1991 =========================== Average Average Balance Interest Rate ---------------------------- Liabilities and Shareholders' Equity - -------------------- Interest-Bearing Deposits Domestic Offices Money Market Rate Accounts $ 3,594 $ 189 5.25% Savings 6,535 342 5.23 Certificates of Deposit of $100,000 or More 2,788 179 6.42 Other Time Deposits 4,057 268 6.60 ------- ------ Total Domestic Offices 16,974 978 5.76 ------- ------ Foreign Offices Banks in Foreign Countries 5,539 392 7.08 Government and Official Institutions 996 67 6.67 Other Time and Savings 5,183 357 6.89 ------- ------ Total Foreign Offices 11,718 816 6.96 ------- ------ Total Interest- Bearing Deposits 28,692 1,794 6.25 ------- ------ Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,196 177 5.55 Other Borrowed Funds 1,414 93 6.61 Long-Term Debt 991 76 7.65 ------- ------ Total Interest-Bearing Liabilities 34,293 $2,140 6.24% ====== Interest-Bearing Deposits Domestic Offices 6,862 Foreign Offices 115 ------- Total Noninterest- Bearing Deposits 6,977 ------- Other Liabilities 2,300 Preferred Stock 395 Common Shareholders' Equity 2,652 ------- Total Liabilities and Shareholders' Equity $46,617 ======= Net Interest Earnings and Interest Rate Spread $1,427 2.56 ====== Net Yield on Interest-Earnings Assets 3.52% ==== Liabilities Attributable to Foreign Offices 28.82% =====
11. Rate/Volume Analysis on a Taxable Equivalent Basis (in millions) - ----------------------------------------------------------------
1993 vs. 1992 ---------------------------------------- Increase (Decrease) due to change in: ------------------- Total Average Average Increase Balance Rate (Decrease) ------- ------- --------- Interest Income - --------------- Interest-Bearing Deposits in Banks $ (24) $ (28) $ (52) Federal Funds Sold and Securities Purchased Under Resale Agreements 27 (15) 12 Loans Domestic Offices Consumer 137 (32) 105 Commercial 17 (34) (17) Foreign Offices (79) (87) (166) ----- ----- ----- Total Loans 75 (153) (78) Securities U.S. Government Obligations 8 (33) (25) Obligations of States and Political Subdivisions (16) (9) (25) Other Securities, including Trading Assets Domestic Offices 13 (40) (27) Foreign Offices 1 (4) (3) ----- ----- ----- Total Other Securities 14 (44) (30) ----- ----- ----- Total Securities 6 (86) (80) ----- ----- ----- Total Interest Income 84 (282) (198) ----- ----- ----- Interest Expense - ---------------- Interest-Bearing Deposits Domestic Offices Money Market Rate Accounts 6 (23) (17) Savings 36 (54) (18) Certificate of Deposits of $100,000 or More (17) (11) (28) Other Time Deposits (12) (21) (33) ----- ----- ----- Total Domestic Offices 13 (109) (96) ----- ----- ----- Foreign Offices Banks in Foreign Countries (51) (60) (111) Government and Official Institutions 2 (6) (4) Other Time and Savings (36) (57) (93) ----- ----- ----- Total Foreign Offices (85) (123) (208) ----- ----- ----- Total Interest-Bearing Deposits (72) (232) (304) Federal Funds Purchased and Securities Sold Under Repurchase Agreements (17) (17) (34) Other Borrowed Funds 12 (11) 1 Long-Term Debt 23 - 23 ----- ----- ----- Total Interest Expense (54) (260) (314) ----- ----- ----- Change in Net Interest Income $ 138 $ (22) $ 116 ===== ===== =====
1992 vs. 1991 ----------------------------------- Increase (Decrease) due to change in: ------------------ Total Average Average Increase Balance Rate (Decrease) ------- ------- --------- Interest Income - --------------- Interest-Bearing Deposits in Banks $ (1) $ (10) $ (11) Federal Funds Sold and Securities Purchased Under Resale Agreements - (53) (53) Loans Domestic Offices Consumer (85) (130) (215) Commercial (70) (179) (249) Foreign Offices (54) (294) (348) ------ ------ ------ Total Loans (209) (603) (812) Securities U.S. Government Obligations 127 (43) 84 Obligations of States and Political Subdivisions (31) (7) (38) Other Securities, including Trading Assets Domestic Offices 14 3 17 Foreign Offices (1) 1 - ----- ----- ------ Total Other Securities 13 4 17 ----- ----- ------ Total Securities 109 (46) 63 ----- ----- ------ Total Interest Income (101) (712) (813) ----- ----- ------ Interest Expense - ---------------- Interest-Bearing Deposits Domestic Offices Money Market Rate Accounts (6) (75) (81) Savings 34 (160) (126) Certificate of Deposits of $100,000 or More (55) (60) (115) Other Time Deposits (64) (52) (116) ----- ----- ------ Total Domestic Offices (91) (347) (438) ----- ----- ------ Foreign Offices Banks in Foreign Countries (92) (96) (188) Government and Official Institutions 18 (24) (6) Other Time and Savings (30) (127) (157) ----- ----- ------ Total Foreign Offices (104) (247) (351) ----- ----- ------ Total Interest-Bearing Deposits (195) (594) (789) Federal Funds Purchased and Securities Sold Under Repurchase Agreements 45 (86) (41) Other Borrowed Funds 43 (51) (8) Long-Term Debt 30 (12) 18 ----- ----- ------ Total Interest Expense (77) (743) (820) ----- ----- ------ Change in Net Interest Income $ (24) $ 31 $ 7 ===== ===== ====== Changes which are not solely due to balance changes or rate changes are allocated to such categories on the basis of the respective percentage changes in average balances and average rates.
12. Interest-Rate Sensitivity - ------------------------- The Company actively manages interest-rate sensitivity (the exposure of net interest income to interest rate movements). The relationship of interest-earning assets and interest-bearing liabilities between repricing dates is monitored, and is flexible enough to capitalize on profit opportunities, while minimizing adverse effects on earnings when changes in short-term and long-term interest rates occur. The Company uses complex simulation models to adjust the structure of its assets and liabilities in response to interest rate changes. The following table reflects the year-end position of the Company's interest-earning assets and interest-bearing liabilities that either reprice or mature within the designated time periods. A positive interest sensitivity gap, for a particular time period, is one in which more interest- earning assets reprice or mature than interest-bearing liabilities. A negative interest sensitivity gap results from a greater amount of liabilities repricing or maturing. Further, within the time periods shown below, assets and liabilities reprice on different dates and at different levels. Interest sensitivity gaps change daily. A negative gap will result in an increase in net interest income in periods of declining rates and a decrease in net interest income in periods of rising rates. The opposite is true for positive gaps.
December 31, 1993 ---------------------------------------------------------- Within Within Within Within Greater 1 Mo. 2-3 Mos. 4-6 Mos. 7-12 Mos. Than 12 Mos. Total ----- -------- -------- --------- ------------ ------- (in millions) Interest-Earning Assets - ---------------- Foreign Offices $ 4,959 $ 2,829 $ 1,659 $ 654 $ 171 $10,272 Domestic Offices Loans 14,615 385 551 732 4,380 20,663 Securities 91 78 220 419 4,472 5,280 Trading Assets 1,321 - - - - 1,321 Federal Funds Sold and Securities Purchased Under Resale Agreements 36 - - - - 36 ------- ------- ------- ------ ------- ------- 21,022 3,292 2,430 1,805 9,023 $37,572 ------- ------- ------- ------ ------- ======= Interest-Bearing Liabilities - ----------------- Foreign Offices 7,321 702 278 105 2 8,408 Domestic Offices Interest-Bearing Deposits Money Market Rate Accounts 3,559 - - - - 3,559 Savings 7,003 - - 12 1,434 8,449 Certificates of Deposit of $100,000 or More 473 332 152 72 550 1,579 Other Time Deposits 406 281 347 244 290 1,568 ------- ------- ------- ------ ------- ------ Total Interest- Bearing Deposits 18,762 1,315 777 433 2,276 23,563 ------- ------- ------- ------ ------- ------ Federal Funds Purchased and Other Borrowed Funds 4,480 251 491 95 80 5,397 Long-Term Debt 25 50 71 25 1,419 1,590 ------- ------- ------- ------ ------- ------ Noninterest- Bearing Sources of Funds 1,801 24 37 76 5,084 7,022 - ---------- ------- ------- ------- ------ ------- ------ Total 25,068 1,640 1,376 629 8,859 $37,572 ======= Effect of Financial Futures and Swaps (105) (528) 712 11 (90) - ---------- ------- ------ ------- ------ ------- Interest- Sensitive Gap $(4,151) $ 1,124 $ 1,766 $1,187 $ 74 - ------------- ======= ======= ======= ====== ======= Cumulative Interest- Sensitivity Gap $(4,151) $(3,027) $(1,261) $ (74) $ - - --------- ======= ======= ======= ====== =======
13. PROVISION AND ALLOWANCE FOR LOAN LOSSES - --------------------------------------- Risk factors other than less developed country (LDC) loans and highly leveraged transaction (HLT) loans are discussed below. LDC and HLT loans are discussed under the captions "Provision and Allowance for Loan Losses" and "Highly Leveraged Transactions" in the "Management's Discussion and Analysis" section included in Exhibit 13, which discussion is incorporated herein by reference. At December 31, 1993, the domestic commercial real estate portfolio had approximately 74% of its loans in New York and New Jersey, 6% in California, 5% in Pennsylvania, 3% in New England, and 2% in Florida; no other state accounts for more than 2% of the portfolio. This portfolio consists of the following types of properties: Business loans secured by real estate 47% Offices 24 Retail 7 Hotels 5 Mixed-Used 4 Condominiums and cooperatives 3 Land 2 Industrial/Warehouse 1 Other 7 ---- 100% ==== At December 31, 1993 and 1992, the Company's nonperforming real estate loans and real estate acquired in satisfaction of loans aggregated $171 million and $411 million, respectively. Net charge-offs of real estate loans were $69 million in 1993 and $90 million in 1992. In addition, other real estate charges were $53 million and $106 million in 1993 and 1992. A discussion of other real estate charges under "Noninterest Expense and Income Taxes" in the "Management's Discussion and Analysis" section included in Exhibit 13 is incorporated herein by reference. The Company's consumer loan portfolio is comprised principally of credit card, other installment, and residential loans. Residential and auto loans are collateralized, thereby reducing the risk. Credit card net charge-offs were $121 million in 1993 compared to $118 million in 1992. The 1993 and 1992 amounts exclude $56 million and $57 million in net charge-offs related to the portion of the portfolio that is securitized. As a percentage of average credit card outstandings, net charge-offs decreased to 2.88% in 1993 from 3.74% in 1992. On a managed receivables basis, net charge-offs as a percentage of average outstandings were 3.19% in 1993 compared to 3.89% in 1992. Other consumer net charge-offs were $23 million in 1993 and $37 million in 1992. Lending to the utility industry is concentrated in investor-owned electric utilities. The Company also makes loans to gas and telephone utilities. Nonperforming loans in this industry amounted to $2 million at year-end 1993 compared to $3 million in 1992. Charge-offs of loans to the utility industry were $14 million in 1992. There were no charge-offs in 1993. 14. The Company's loans to the communications, entertainment, and publishing industries primarily consist of credits with cable television operators, broadcasters, magazine and newspaper publishers and motion picture theaters. There were no nonperforming communications loans at December 31, 1993. Nonperforming communication loans amounted to $8 million at December 31, 1992. Charge-offs of communications loans were $1 million and $23 million in 1993 and 1992. None of these amounts represent HLTs. The Company's portfolio of loans for purchasing or carrying securities is comprised largely of overnight loans which are fully collateralized, with appropriate margins, by marketable securities. Throughout its many years of experience in this area, the Company has rarely experienced a loss. The Company makes short-term, collateralized loans to mortgage bankers to fund mortgages sold to investors. Nonperforming loans and charge-offs have not been significant. Based on an evaluation of individual credits, historical loan losses, and global economic factors, the Company has allocated its allowance for loan losses as follows:
1993 1992 1991 1990 ---- ---- ---- ---- Real Estate Loans 8% 9% 10% 11% HLT Loans 6 7 11 17 Other Domestic Commercial and Industrial Loans 58 57 51 38 Consumer Loans 10 9 10 8 Foreign Loans (excluding medium-term LDC loans) 6 6 6 6 Medium-Term LDC Loans 12 12 12 20 ---- ---- ---- ---- 100% 100% 100% 100% ==== ==== ==== ====
Such an allocation is inherently judgmental, and the entire allowance for loan losses is available to absorb loan losses regardless of the nature of the loan. 15. The following table details changes in the Company's allowance for loan losses for the last five years.
(dollars in millions) 1993 1992 1991 ---- ---- ----- Loans Outstanding, December 31, $30,570 $29,497 $30,335 Average Loans Outstanding 30,427 30,345 32,719 Allowance for Loan Losses - ------------------------- Balance, January 1 Regular Domestic $ 878 $ 889 $ 831 Foreign 70 60 62 Medium-term Less Developed Countries 124 135 218 ------- ------- ------- Total, January 1 1,072 1,084 1,111 ------- ------- ------- Allowance of Acquired Companies and Other Changes 1 56 (28) Charge-Offs Domestic Commercial and Industrial (142) (311) (358) Real Estate & Construction (71) (103) (165) Consumer Loans (173) (181) (226) Foreign (54) (20) (32) Medium-term Less Developed Countries (9) (13) (39) ------- ------- ------- Total (449) (628) (820) ------- ------- ------- Recoveries Domestic Commercial and Industrial 28 66 11 Real Estate & Construction 2 13 1 Consumer Loans 29 26 21 Foreign 2 10 4 Medium-term Less Developed Countries 1 2 6 ------- ------- ------- Total 62 117 43 Net Charge-Offs (387) (511) (777) ------- ------- ------- Provision Domestic 242 423 742 Foreign 42 20 36 Medium-term Less Developed Countries - - - ------- ------- ------- Total 284 443 778 ------- ------- ------- Balance, December 31, Regular Domestic 794 878 889* Foreign 60 70 60 Medium-term Less Developed Countries 116 124 135* ------- ------- ------- Total, December 31, $ 970 $ 1,072 $ 1,084 ======= ======= ======= Ratios - ------ Net Charge-Offs to Average Loans Outstandings 1.27% 1.68% 2.37% ======= ======= ======= Net Charge-Offs to Total Allowance 39.90% 47.67% 71.68% ======= ======= ======= Total Allowance to Year-End Loans Outstanding 3.17% 3.63% 3.57% ====== ======= =======
(dollars in millions) 1990 1989 ---- ---- Loans Outstanding, December 31, $35,776 $38,583 Average Loans Outstanding 38,139 37,898 Allowance for Loan Losses - ------------------------- Balance, January 1 Regular Domestic $ 593 $ 384 Foreign 24 14 Medium-term Less Developed Countries 537* 570 ------- ------- Total, January 1 1,154 968 ------- ------- Allowance of Acquired Companies and Other Changes 1 - Charge-Offs Domestic Commercial and Industrial (111) (46) Real Estate & Construction (45) (37) Consumer Loans (157) (116) Foreign (9) (3) Medium-term Less Developed Countries (270) (433) ------- ------- Total (592) (635) ------- ------- Recoveries Domestic Commercial and Industrial 35 15 Real Estate & Construction - 1 Consumer Loans 16 12 Foreign 1 4 Medium-term Less Developed Countries 1 - ------- ------- Total 53 32 Net Charge-Offs (539) (603) ------- ------- Provision Domestic 449 380 Foreign 46 9 Medium-term Less Developed Countries - 400 ------- ------- Total 495 789 ------- ------- Balance, December 31, Regular Domestic 831* 593 Foreign 62 24 Medium-term Less Developed Countries 218* 537 ------- ------- Total, December 31, $ 1,111 $ 1,154 ======= ======= Ratios - ------ Net Charge-Offs to Average Loans Outstandings 1.41% 1.59% ======= ======= Net Charge-Offs to Total Allowance 48.51% 52.25% ======= ======= Total Allowance to Year-End Loans Outstanding 3.11% 2.99% ======= ======= *Each year includes a $50 million transfer from the LDC Allowance for Loan Losses to the Regular Allowance.
16. Nonperforming Assets - -------------------- A summary of nonperforming assets is presented in the following table.
(in millions) December 31, 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Nonaccrual - ---------- Domestic $ 408 $ 581 $1,014 $1,294 $ 864 Foreign (including Medium-term LDC) 130 198 146 86 227 ------ ------ ------ ------ ------ 538 779 1,160 1,380 1,091 Reduced Rate (Domestic) 2* 9* 13 15 3 - ------------ ------ ------ ------ ------ ------ 540 788 1,173 1,395 1,094 Real Estate Acquired in - ----------------------- Satisfaction of Loans 99 268 369 355 145 - --------------------- ----- ------ ------ ------- ------ $ 639 $1,056 $1,542 $1,750 $1,239 ===== ====== ====== ====== ====== Past Due 90 Days or More - ------------------------ and Still Accruing Interest - --------------------------- Domestic $ 156 $ 218 $ 178 $ 215 $ 188 Foreign - - 66 11 86 ------ ------ ------ ------ ------ $ 156 $ 218 $ 244 $ 226 $ 274 ====== ====== ====== ====== ====== *Excludes $117 million of reduced rate Philippine obligations secured by zero coupon U.S. Treasury bonds with comparable maturities.
17. Securities - ---------- The following table shows the maturity distribution by carrying amount and yield (not on a taxable equivalent basis) of the Company's securities portfolio at December 31, 1993.
States U.S. Government Political U.S. Government Agency Subdivisions --------------- --------------- ------------ Amount Yield Amount Yield Amount Yield ------ ----- ------ ----- ------ ----- (dollars in millions) Securities Held - --------------- for Investment -------------- One Year or Less $ 361 5.65% $ 23 5.99% $ 376 3.50% Over 1 through 5 Years 1,882 5.35 35 4.92 187 7.37 Over 5 through 10 Years 509 6.28 - - 147 7.28 Over 10 years 2 10.36 192 7.55 323 7.42 No Maturity - - - - - - ------ ----- ------ $2,754 5.57 $ 250 7.04 $1,033 5.96 ====== ===== ====== Securities Held - --------------- for Sale - ---------- One Year or Less $ - - % $ - - % $ 1 4.55% Over 1 through 5 Years 601 6.06 120 5.04 2 4.55 Over 5 through 10 Years 488 5.70 - - 2 4.55 Over 10 years 7 7.64 - - 4 4.55 No Maturity - - - - - - ----- ----- ----- $1,096 5.91 $ 120 5.04 $ 9 4.55 ====== ===== =====
Other Bonds, Notes and Stocks and Debentures Warrants ------------- ------------ Amount Yield Amount Yield Total ------ ----- ------ ----- ----- (dollars in millions) Securities Held - --------------- for Investment -------------- One Year or Less $ 55 5.63% $ - - % $ 815 Over 1 through 5 Years 33 6.02 - - 2,137 Over 5 through 10 Years 23 6.40 - - 679 Over 10 years 2 3.43 - - 519 No Maturity - - 206 2.83 206 ---- ---- ------ $113 5.87 $206 2.83 $4,356 ==== ==== ====== Securities Held - --------------- for Sale - ---------- One Year or Less $ - - % $ - - % $ 1 Over 1 through 5 Years - - - - 723 Over 5 through 10 Years - - - - 490 Over 10 years - - - - 11 No Maturity - - 16 2.99 16 ----- ---- ------ $ - - $ 16 2.99 $1,241 ===== ==== ======
Loans - ----- The following table shows the maturity structure of the Company's commercial loan portfolio at December 31, 1993.
Over 1 Year 1 Year Through Over or Less 5 Years 5 Years Total ------- ----------- ------- ----- (in millions) Domestic - -------- Real Estate, Excluding Loans Collateralized by 1-4 Family Residential Properties $ 606 $1,475 $ 705 $ 2,786 Commercial and Industrial Loans 3,352 3,887 2,542 9,781 Other, Excluding Loans to Individuals and those Collateralized by 1-4 Family Residential Properties 3,364 717 152 4,233 ------ ------- ------- ------- 7,322 6,079 3,399 16,800 Foreign 1,852 584 1,902 4,338 - ------- ------ ------- ------- ------- Total $9,174 $6,663 $5,301 $21,138 ====== ======= ======= ======= Loans with: Predetermined Interest Rates $1,173 $ 782 $1,613 $ 3,568 Floating Interest Rates 8,001 5,881 3,688 17,570 ------ ------- ------- ------- Total $9,174 $6,663 $5,301 $21,138 ====== ======= ======= =======
18. Deposits - -------- The aggregate amount of deposits by foreign customers in domestic offices was $739 million, $789 million, and $664 million at December 31, 1993, 1992, and 1991, respectively. The following table shows the maturity breakdown of domestic time deposits of $100,000 or more at December 31, 1993.
Time (in millions) Certificates Deposits- of Deposits Other Total --------------------------------------------- 3 Months or Less $ 810 $606 $1,416 Over 3 Through 6 Months 147 7 154 Over 6 Through 12 Months 72 6 78 Over 12 Months 550 16 566 ------ ---- ------ Total $1,579 $635 $2,214 ====== ===== ======
The majority of deposits in foreign offices are time deposits in denominations of $100,000 or more. Other Borrowed Funds - --------------------- Information related to other borrowed funds in 1993, 1992, and 1991 is presented in the table below.
1993 1992 ---------------- ----------------- (dollars in millions) Average Average Amount Rate Amount Rate ------ ------- ------ ------- Federal Funds Purchased and Securities Sold Under Repurchase Agreements - ------------------------ At December 31 $2,711 2.85% $1,773 2.81% Average During Year 3,467 2.94 4,001 3.40 Maximum Month-End Balance During Year 4,894 2.80 5,467 3.88 Other* - ----- At December 31 2,781 3.61% 3,029 3.82 Average During Year 2,348 3.66 2,045 4.13 Maximum Month-End Balance During Year 3,161 3.60 3,029 3.82
1991 ---------------- (dollars in millions) Average Amount Rate ------ ------- Federal Funds Purchased and Securities - ------------------------------------- Sold Under Repurchase Agreements --------------------------------- At December 31 $3,700 3.77% Average During Year 3,196 5.55 Maximum Month-End Balance During Year 5,302 8.23 Other* - ----- At December 31 1,128 4.73 Average During Year 1,414 6.61 Maximum Month-End Balance During Year 1,655 7.48 *Other borrowings consist primarily of commercial paper, bank notes, extended federal funds purchased, and amounts owed to the U.S. Treasury.
Foreign Assets - -------------- The only foreign country in which the Company's assets exceed .75% of year end total assets was the United Kingdom ($351 million in 1993 and $393 million in 1991). 19. ITEM 2. PROPERTIES - ------------------- In New York City, the Company owns the thirty story building housing its executive headquarters at 48 Wall Street, a forty-nine story office building at One Wall Street, and an operations center at 101 Barclay Street. In addition, the Company owns and/or leases administrative and operations facilities in New York City; various locations in New Jersey; Harrison, New York; Newark, Delaware; London, England; and Utica, New York. Other real properties owned or leased by the Company, when considered in the aggregate, are not material to its operations. ITEM 3. LEGAL PROCEEDINGS - -------------------------- Litigation regarding Northeast Bancorp., Inc. is described in Note 14 to the Consolidated Financial Statements included in Exhibit 13, and such description is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ There were no matters submitted to a vote of security holders of the registrant during the fourth quarter of 1993. PART II - ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND - -------------------------------------------------- RELATED STOCKHOLDER MATTERS --------------------------- Information with respect to the market for the Company's common equity and related stockholder matters is incorporated herein by reference from the "Quarterly Data" section included in Exhibit 13. The Company's securities that are listed on the New York Stock Exchange (NYSE), are indicated as such on the front cover of this report. The NYSE symbol for the Company's Common Stock is BK. The Warrants (to purchase the Company's Common Stock) are traded over the counter. All of the Company's other securities are not currently listed. The Company had 26,900 common shareholders of record at February 28, 1994. ITEM 6. SELECTED FINANCIAL DATA - -------------------------------- Selected financial data are incorporated herein by reference from the "Financial Highlights" section included in Exhibit 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Management's discussion and analysis of financial condition and results of operations is incorporated herein by reference from the corresponding section of the Company's 1993 Annual Report to Shareholders the relevant portions of which are filed as Exhibit 13 of this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- Consolidated financial statements and notes and the independent auditors' report are incorporated herein by reference from the Company's 1993 Annual Report to Shareholders the relevant portions of which are filed as Exhibit 13 to this report. Supplementary financial information is incorporated herein by reference from the "Quarterly Data" section included in Exhibit 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ----------------------------------------------------------------------------- There have been no events which require disclosure under Item 304 of Regulation S-K. 20. PART III - -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The directors of the registrant are identified on pages 25 and 26 of this report. Additional material responsive to this item is contained in the Company's definitive Proxy Statement for its 1994 Annual Meeting of Shareholders, which information is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS - ----------------------------------------------------------------------------- Company Officer Name Office and Experience Age Since ---- --------------------- --- ----- J. Carter Bacot 1989-1994 Chairman and Chief 61 1975 Executive Officer of the Company and the Bank Thomas A. Renyi 1992-1994 President of the Company and 48 1992 Vice Chairman of the Bank 1989-1993 Senior Executive Vice President and Chief Credit Officer of the Bank Alan R. Griffith 1990-1994 Senior Executive Vice 52 1990 President of the Company, and President and Chief Operating Officer of the Bank 1989-1990 Senior Executive Vice President of the Bank Samuel F. Chevalier 1989-1994 Vice Chairman of the Company 60 1989 and the Bank 1989-1990 Chief Operating Officer and President of Irving Bank Corporation 1989 Vice Chairman and Chief Operating Officer of Irving Trust Company Deno D. Papageorge 1989-1994 Senior Executive Vice 55 1980 President of the Company 1989-1994 Senior Executive Vice President and Chief Financial Officer of the Bank Richard D. Field 1989-1994 Executive Vice President 53 1987 of the Company 1989-1992 Senior Executive Vice President of the Bank Robert E. Keilman 1989-1994 Comptroller of the 48 1984 Company and the Bank, Senior Vice President of the Bank Charles E. Rappold 1989-1994 Secretary and Chief Legal 41 1986 Officer of the Company, Senior Vice President and Chief Legal Officer of the Bank Robert J. Goebert 1989-1994 Auditor of the Company, 52 1982 Senior Vice President of the Bank 21. Officers of BNY who perform major policy making functions: Bank Executive Officer Name Office and Experience Age Since ---- --------------------- --- ------ Richard A. Pace 1990-1994 Executive Vice President and Chief 48 1989 Technologist 1989-1990 Senior Vice President 1989 Senior Vice President of Irving Trust Company Robert J. Mueller 1992-1994 Senior Executive Vice President - 52 1989 Chief Credit Policy Officer 1989-1994 Executive Vice President - Mortgage & Construction Lending There are no family relationships between the executive officers of the Company. The terms of office of the executive officers of the Company extend until the annual organizational meeting of the Board of Directors. ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- The material responsive to such item in the Company's definitive Proxy Statement for its 1994 Annual Meeting of Shareholders is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The material responsive to such item in the Company's definitive Proxy Statement for its 1994 Annual Meeting of Shareholders is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The material responsive to such item in the Company's definitive Proxy Statement for its 1994 Annual Meeting of Shareholders is incorporated by reference. PART IV - ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------- (a) 1 Financial Statements: See Item 8. (a) 2 Financial Statement Schedules: Financial statement schedules are omitted since the required information is either not applicable, not deemed material, or is shown in the respective financial statements or in the notes thereto. 22. (a) 3 Listing of Exhibits: Exhibit No. Per Regulation S-K Description - -------------- ----------- 3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through October 13, 1987. (Filed as Exhibit 3(a) to the Company's 1987 Annual Report on Form 10- K and incorporated herein by reference.) (b) Certificate of Incorporation of The Bank of New York Company, Inc. as amended through July 14, 1993. (Filed as Exhibit 3 to Current Report on Form 8-K filed by the Company on July 14, 1993.) 4 (a) None of the outstanding instruments defining the rights of holders of long-term debt of the Company represent long-term debt in excess of 10% of the total assets of the Company. The Company hereby agrees to furnish to the Commission, upon request, a copy of any of such instruments. (b) Amended and Restated Rights Agreement dated March 8, 1994. (Filed as Exhibit 4(a) to Current Report on Form 8-K filed by the Company on March 23, 1994.) 10 (a) 1984 Stock Option Plan of The Bank of New York Company, Inc. as amended through February 23, 1988. (Filed as Exhibit 10(a) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference.) (b) The Bank of New York Company, Inc. Excess Contribution Plan as amended through July 10, 1990. (Filed as Exhibit 10(b) to the Company's 1990 Annual Report on Form 10-K and incorporated herein by reference.) (c) Amendments to The Bank of New York Company, Inc. Excess Contribution Plan dated February 23, 1994 and November 9, 1993. (d) The Bank of New York Company, Inc. Excess Benefit Plan as amended through December 8, 1992. (Filed as Exhibit 10(d) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (e) Amendments to The Bank of New York Company, Inc. Excess Benefit Plan dated February 23, 1994 and November 9, 1993. (f) Management Incentive Compensation Plan of The Bank of New York Company, Inc. (Filed as Exhibit 10(d) to the Company's 1986 Annual Report on Form 10-K and incorporated herein by reference.) (g) 1994 Management Incentive Compensation Plan of The Bank of New York Company, Inc. (h) 1988 Long-Term Incentive Plan as amended through December 8, 1992. (Filed as Exhibit 10(f) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (i) The Bank of New York Company, Inc. 1993 Long Term Incentive Plan. (Filed as Exhibit 10(m) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) 23. Exhibit No. Per Regulation S-K Description - --------------- ----------- 10 (j) The Bank of New York Company, Inc. Supplemental Executive Retirement Plan. (Filed as Exhibit 10(n) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (k) Amendment to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan dated March 9, 1993. (l) Trust Agreement dated April 19, 1988 related to deferred compensation plans. (Filed as Exhibit 10(h) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference.) (m) Trust Agreement dated November 16, 1993 related to deferred compensation plans. (n) Form of Remuneration Agreement between the Company and two of the five most highly compensated executive officers of the Company. (Filed as Exhibit 10 to the Company's 1982 Annual Report on Form 10-K and incorporated herein by reference.) (o) Remuneration Agreement between the Company and an executive officer of the Company. (Filed as Exhibit 10(h) to the Company's 1991 Annual Report on Form 10-K and incorporated herein by reference.) (p) Remuneration Agreement between the Company and an executive officer of the Company. (Filed as Exhibit 10(i) to the Company's 1991 Annual Report on Form 10-K and incorporated herein by reference.) (q) Remuneration Agreement between the Company and an executive officer of the Company. (Filed as Exhibit 10(j) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (r) The Bank of New York Company, Inc. Retirement Plan for Non- Employee Directors. (s) Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc. 11 Statement - Re: Computation of Per Common Share Earnings 12 Statement - Re: Computation of Earnings to Fixed Charges Ratios 13 Portions of the 1993 Annual Report to Shareholders 21 Subsidiaries of the Registrant 23.1 Consent of Deloitte & Touche 23.2 Consent of Arthur Andersen & Co. 24. (b) Reports on Form 8-K: October 18, 1993: Unaudited interim financial information and accompanying discussion for the third quarter of 1993. December 7, 1993: An Underwriting Agreement, a Form of Note, an Officers' Certificate, and a Legal Opinion filed in connection with the Company's Registration Statement on Form S-3 (File No. 33-51984 and No. 33-50333) with the Securities and Exchange Commission covering the Company's 6.50% Subordinated Notes due 2003. January 13, 1994: Unaudited interim financial information and accompanying discussion for the fourth quarter of 1993. March 23, 1994: Amended and Restated Rights Agreement dated March 8, 1994 (c) Exhibits: Submitted as a separate section of this report. (d) Financial Statements Schedules: None 25. SIGNATURES - ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in New York, New York, on the 8th day of March, 1994. THE BANK OF NEW YORK COMPANY, INC. By: \s\ J. Carter Bacot ------------------------------------- (J. Carter Bacot, Chairman) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities indicated on the 8th day of March, 1994. Signature Title --------- ----- \s\J. Carter Bacot Chairman and - ----------------------------------- Chief Executive Officer (J. Carter Bacot) (principal executive officer) \s\ Deno D. Papageorge Senior Executive Vice President - ----------------------------------- (principal financial officer) (Deno D. Papageorge) \s\ Robert E. Keilman Comptroller (principal - ------------------------------------ accounting officer) (Robert E. Keilman) \s\ Richard Barth Director - ------------------------------------ (Richard Barth) \s\ William R. Chaney Director - ------------------------------------ (William R. Chaney) \s\ Samuel F. Chevalier Vice Chairman and Director - ------------------------------------ (Samuel F. Chevalier) \s\ Anthony S. D'Amato Director - ------------------------------------ (Anthony S. D'Amato) \s\ Anthony P. Gammie Director - ------------------------------------ (Anthony P. Gammie) 26. \s\ Ralph E. Gomory Director - ------------------------------------ (Ralph E. Gomory) \s\ Alan R. Griffith Senior Executive Vice President - ----------------------------------- and Director (Alan R. Griffith) \s\ Edward L. Hennessy, Jr. Director - ------------------------------------ (Edward L. Hennessy, Jr.) \s\ John C. Malone Director - ------------------------------------ (John C. Malone) \s\ Donald L. Miller Director - ------------------------------------ (Donald L. Miller) \s\ H. Barclay Morley Director - ------------------------------------ (H. Barclay Morley) \s\ Martha T. Muse Director - ------------------------------------ (Martha T. Muse) \s\ Catherine A. Rein Director - ------------------------------------ (Catherine A. Rein) \s\ Thomas A. Renyi President and Director - ------------------------------------ (Thomas A. Renyi) \s\ Harold E. Sells Director - ------------------------------------ (Harold E. Sells) \s\ Delbert C. Staley Director - ------------------------------------ (Delbert C. Staley) \s\ W. S. White, Jr. Director - ------------------------------------ (W. S. White, Jr.) \s\ Samuel H. Woolley Director - ------------------------------------ (Samuel H. Woolley) 27. INDEX TO EXHIBITS Exhibit No. - ------------ 3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through October 13, 1987. (Filed as Exhibit 3(a) to the Company's 1987 Annual Report on Form 10-K and incorporated herein by reference. (b) Certificate of Incorporation of The Bank of New York Company, Inc. as amended through July 14, 1993. (Filed as Exhibit 3 to Current Report on Form 8-K filed by the Company on July 14, 1993.) 4 (a) None of the outstanding instruments defining the rights of holders of long-term debt of the Company represent long-term debt in excess of 10% of the total assets of the Company. The Company hereby agrees to furnish to the Commission, upon request, a copy of any of such instruments. (b) Amended and Restated Rights Agreement dated March 8, 1994. (Filed as Exhibit 4 (a) to Current Report on Form 8-K filed by the Company on March 23, 1994.) 10 (a) 1984 Stock Option Plan of The Bank of New York Company, Inc. as amended through February 23, 1988. (Filed as Exhibit 10(a) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference.) (b) The Bank of New York Company, Inc. Excess Contribution Plan as amended through July 10, 1990. (Filed as Exhibit 10(b) to the Company's 1990 Annual Report on Form 10-K and incorporated herein by reference.) (c) Amendments to The Bank of New York Company, Inc. Excess Contribution Plan dated February 23, 1994 and November 9, 1993. (d) The Bank of New York Company, Inc. Excess Benefit Plan as amended through December 8, 1992. (Filed as Exhibit 10(d) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (e) Amendments to The Bank of New York Company, Inc. Excess Benefit Plan dated February 23, 1994 and November 9, 1993. (f) Management Incentive Compensation Plan of The Bank of New York Company, Inc. (Filed as Exhibit 10(d) to the Company's 1986 Annual Report on Form 10-K and incorporated herein by reference.) (g) 1994 Management Incentive Compensation Plan of The Bank of New York Company, Inc. (h) 1988 Long-Term Incentive Plan as amended through December 8, 1992. (Filed as Exhibit 10(f) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (i) The Bank of New York Company, Inc. 1993 Long Term Incentive Plan. (Filed as Exhibit 10(m) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) 28. INDEX TO EXHIBITS Exhibit No. - ------------ 10 (j) The Bank of New York Company, Inc. Supplemental Executive Retirement Plan. (Filed as Exhibit 10(n) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (k) Amendment to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan dated March 9, 1993. (l) Trust Agreement dated April 19, 1988 related to deferred compensation plans. (Filed as Exhibit 10(h) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference.) (m) Trust Agreement dated November 16, 1993 related to deferred compensation plans. (n) Form of Remuneration Agreement between the Company and two of the five most highly compensated executive officers of the Company. (Filed as Exhibit 10 to the Company's 1982 Annual Report on Form 10-K and incorporated herein by reference.) (o) Remuneration Agreement between the Company and an executive officer of the Company. (Filed as Exhibit 10(h) to the Company's 1991 Annual Report on Form 10-K and incorporated herein by reference.) (p) Remuneration Agreement between the Company and an executive officer of the Company. (Filed as Exhibit 10(i) to the Company's 1991 Annual Report on Form 10-K and incorporated herein by reference.) (q) Remuneration Agreement between the Company and an executive officer of the Company. (Filed as Exhibit 10(j) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.) (r) The Bank of New York Company, Inc. Retirement Plan for Non-Employee Directors. (s) Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc. 11 Statement - Re: Computation of Per Common Share Earnings 12 Statement - Re: Computation of Earnings to Fixed Charges Ratios 13 Portions of the 1993 Annual Report to Shareholders 21 Subsidiaries of the Registrant 23.1 Consent of Deloitte & Touche 23.2 Consent of Arthur Andersen & Co. EX-10 2 EXHIBIT 10C Exhibit 10(c) 1. AMENDMENT TO THE BANK OF NEW YORK COMPANY, INC. EXCESS CONTRIBUTION PLAN WHEREAS, The Bank of New York Company, Inc. Excess Contribution Plan (the "Excess Contribution Plan") was amended and restated, effective as of July 10, 1990; and WHEREAS, Section 19 of the Excess Contribution Plan provides that the Compensation Committee of the Board of Directors of The Bank of New York Company, Inc. may amend the Excess Contribution Plan at any time, except in certain respects not material hereto; and WHEREAS, the Compensation Committee desires to amend the Excess Contribution Plan; NOW, THEREFORE, the Excess Contribution Plan is hereby amended in the following respects, effective as of January 1, 1994: 1. Section 10 of the Excess Contribution Plan is amended in its entirety to read as follows: 10. Purpose. The purpose of Part II of the Plan is to provide employees of the Company with payment of the amounts which would have been credited on their behalf under the Profit-Sharing Plan and the ESOP except for the limitations imposed by Section 401(a)(17) of the Code. 2. Section 11 of the Excess Contribution Plan is amended by amending the first sentence thereof to read as follows: Each employee of The Bank of New York who is a partici- pant in the Profit-Sharing Plan or the ESOP shall be a Participant in Part II of the Plan. 2. IN WITNESS WHEREOF, The Bank of New York Company, Inc. has caused this Amendment to be executed by its duly authorized officers this 23rd day of February , 1994. \s\ Alan R. Griffith ______________________________ ATTEST: \s\ Jacqueline R. McSwiggan ____________________________ Assistant Secretary 3. AMENDMENT TO THE BANK OF NEW YORK COMPANY, INC. EXCESS CONTRIBUTION PLAN WHEREAS, The Bank of New York Company, Inc. Excess Contribution Plan (the "Excess Contribution Plan") was amended and restated, effective as of July 10, 1990; and WHEREAS, Section 19 of the Excess Contribution Plan provides that the Board of Directors of The Bank of New York Company, Inc. may amend the Excess Contribution Plan at any time, except in certain respects not material hereto; and WHEREAS, the Board of Directors desires to amend the Excess Contribution Plan; NOW, THEREFORE, the Excess Contribution Plan is hereby amended in the following respects, effective as of February 1, 1993: 1. Section 2 of the Excess Contribution Plan is amended by the addition of a sentence at the end thereof to read as follows: Notwithstanding the foregoing, no employee shall be a Participant in Part I of the Plan if he is eligible for benefits under the Preservation of Benefits Plan of National Community Bank of New Jersey. 2. Section 11 of the Excess Contribution Plan is amended by the addition of a sentence at the end thereof to read as follows: Notwithstanding the foregoing, no employee shall be a Participant in Part II of the Plan if he is eligible for benefits under the Preservation of Benefits Plan of National Community Bank of New Jersey. 4. IN WITNESS WHEREOF, The Bank of New York Company, Inc. has caused this Amendment to be executed by its duly authorized officers this 9th day of November, 1993. \s\ Alan R. Griffith ______________________________ ATTEST: \s\ Jacqueline R. McSwiggan ____________________________ Assistant Secretary EX-10 3 EXHIBIT 10E Exhibit 10(e) 1. AMENDMENT TO THE BANK OF NEW YORK COMPANY, INC. EXCESS BENEFIT PLAN WHEREAS, The Bank of New York Company, Inc. Excess Benefit Plan (the "Excess Benefit Plan") was amended and restated, effective as of July 10, 1990; and WHEREAS, Section 17 of the Excess Benefit Plan provides that the Compensation Committee of the Board of Directors of The Bank of New York Company, Inc. may amend the Excess Benefit Plan at any time, except in certain respects not material hereto; and WHEREAS, the Compensation Committee desires to amend the Excess Benefit Plan; NOW, THEREFORE, the Excess Benefit Plan is hereby amended in the following respects, effective as of January 1, 1994: 1. Section 9 of the Excess Benefit Plan is amended in its entirety to read as follows: 9. Purpose. The purpose of Part II of the Plan is to provide employees of the Company with retirement benefits which would have been provided under the Retirement Plan except for the limitations imposed by Section 401(a)(17) of the Code. 2. Section 10 of the Excess Benefit Plan is amended by amending the first sentence thereof to read as follows: Each employee of The Bank of New York who is a participant in the Retirement Plan shall be a Participant in Part II of the Plan. 2. IN WITNESS WHEREOF, The Bank of New York Company, Inc. has caused this Amendment to be executed by its duly authorized officers this 23rd day of February, 1994. \s\ Alan R. Griffith ______________________________ ATTEST: \s\ Jacqueline R. McSwiggan ____________________________ Assistant Secretary 3. AMENDMENT TO THE BANK OF NEW YORK COMPANY, INC. EXCESS BENEFIT PLAN WHEREAS, The Bank of New York Company, Inc. Excess Benefit Plan (the "Excess Benefit Plan") was amended and restated, effective as of July 10, 1990; and WHEREAS, Section 17 of the Excess Benefit Plan provides that the Board of Directors of The Bank of New York Company, Inc. may amend the Excess Benefit Plan at any time, except in certain respects not material hereto; and WHEREAS, the Board of Directors desires to amend the Excess Benefit Plan; NOW, THEREFORE, the Excess Benefit Plan is hereby amended in the following respects, effective as of February 1, 1993: 1. Section 2 of the Excess Benefit Plan is amended by amending the last sentence thereof to read as follows: Notwithstanding the foregoing, no employee shall be a Participant in Part I of the Plan if he is eligible for benefits under (i) the Excess Benefit Plan of Irving Bank Corporation and Affiliated Companies, or (ii) the Preservation of Benefits Plan of National Community Bank of New Jersey. 4. 2. Section 10 of the Excess Benefit Plan is amended by amending the last sentence thereof to read as follows: Notwithstanding the foregoing, no employee shall be a Participant in Part II of the Plan if he is eligible for benefits under (i) the Excess Benefit Plan of Irving Bank Corporation and Affiliated Companies, or (ii) the Preservation of Benefits Plan of National Community Bank of New Jersey. IN WITNESS WHEREOF, The Bank of New York Company, Inc. has caused this Amendment to be executed by its duly authorized officers this 9th day of November, 1993. \s\ Alan R. Griffith ______________________________ ATTEST: \s\ Jacqueline R. McSwiggan ____________________________ Assistant Secretary EX-10 4 EXHIBIT 10G Exhibit 10(g) 1. 1994 MANAGEMENT INCENTIVE COMPENSATION PLAN OF THE BANK OF NEW YORK COMPANY, INC. 1. Purpose. The purpose of the 1994 Management Incentive Compensation Plan of The Bank of New York Company, Inc. (the "Plan") is to promote the financial interests of The Bank of New York Company, Inc. (the "Company") and its subsidiaries, including its growth, by (i) attracting and retaining officers and key personnel possessing outstanding ability; (ii) motivating officers and key personnel by means of performance-related incentives; and (iii) providing incentive compensation opportunities which are competitive with those of other major banking companies. 2. Definitions. The following definitions are applicable to the Plan: "Average Shareholders' Equity" means the average of the daily amounts of shareholders' equity during the Plan Year as shown on the Company's consolidated balance sheet. "Board of Directors" means the Board of Directors of the Company. "Compensation Committee" means the Compensation Committee of the Board of Directors. "Covered Employee" means, for any Plan Year, the Company's Chief Executive Officer (or an individual acting in such capacity) and any employee of the Company or its subsidiaries who, in the discretion of the 2 Committee for purposes of determining those employees who are "covered employees" under Section 162(m) of the Internal Revenue Code, is likely to be among the four other highest compensated officers of the Company for such Plan Year. "Incentive Fund" means the amount available for awards under the Plan with respect to each Plan Year. Such amount shall in no event, however, exceed 10% of the amount by which Income exceeds 7% of the Average Shareholders' Equity for the Plan Year. "Income" for any year means the consolidated net income of the Company for such year, as reported to shareholders. This amount shall be adjusted to exclude to the extent, if any, determined by the Compensation Committee, unusual or non-recurring items of income and expense. "Participant" means an employee of the Company or its subsidiaries who is selected to participate in the Plan. "Plan Year" means the calendar year. 3. Administration. The Plan shall be administered by the Compensation Committee, which shall in no event have as a member a person entitled to an award under the Plan. A majority of the Compensation Committee shall constitute a quorum, and the acts of a majority of the members present, or acts approved in writing by a majority of the Compensation 3 Committee without a meeting, shall be the acts of the Compensation Committee. Subject to the express provisions of the Plan, the Compensation Committee shall have authority to: (i) select the Participants; (ii) determine the size of the awards to be made under the Plan, subject to Section 5 hereof; and (iii) establish from time to time regulations for the administration of the Plan, interpret the Plan, and make all determinations deemed necessary or advisable for the administration of the Plan. 4. Participation. Participants in the Plan shall be selected for each Plan Year from those employees of the Company and its subsidiaries who have contributed, or have the capacity for contributing, in a substantial measure to the successful performance of the Company for that Plan Year. No director who is not an employee of the Company or any of its subsidiaries may be a Participant in the Plan. No employee shall at any time have a right to be selected as a Participant in the Plan for any Plan Year, to be entitled automatically to an award, nor, having been selected as a Participant for one Plan Year, to be a Participant in any other Plan Year. 5. Maximum Amount Available for Awards. The maximum amount which may be paid as awards for any Plan Year shall be limited to the amount of the Incentive Fund for that 4 year. If the accounting rules or principles to which the Company is subject are changed, or if the Company elects to change its method of accounting, after the effective date of the Plan so as to materially change, in the judgment of the Compensation Committee, the manner in which Income is determined, the Compensation Committee may make such adjustments as it deems advisable in order to arrive at substantially the same amounts as would have been derived if the accounting rules, principles or methods applicable on the effective date of the Plan were in effect. The amount of the Incentive Fund shall be computed by the Company in accordance with the Plan. 6. Determination of Awards. Subject to the provisions of Section 5 hereof, (i) the Compensation Committee, with the approval of the Board of Directors, shall determine the total amount of awards for each Plan Year, and (ii) the Compensation Committee shall determine the award for each Participant, taking into consideration, as it deems appropriate, the individual performance for the Plan Year of the Participant. 7. Awards to Covered Employees. Notwithstanding anything contained herein to the contrary, the award for any Plan Year to a Participant who is a Covered Employee may be determined on the basis of (A) the achievement by the Company of a specified target earnings per share, return on equity or net income, (B) the achievement by a business unit of the 5 Company of a specified target net income or market share, or (C) any combination of the goals set forth in (A) and (B) above. If an award is made on such basis, the Compensation Committee shall establish such goals prior to the beginning of the Plan Year (or such later date as may be prescribed by the Internal Revenue Service for purposes of Section 162(m) of the Internal Revenue Code). The Compensation Committee may, in its discretion, reduce or eliminate an award to a Covered Employee, notwithstanding the achievement of a specified target. Awards to each Covered Employee for each Plan Year will be limited to a maximum of 200% of the Covered Employee's annual salary at the rate in effect on the first day of such Plan Year. An award for a Plan Year to a Participant who is a Covered Employee may, in the discretion of the Compensation Committee, provide that in the event of the Participant's termination of employment during the Plan Year for any reason, such award will be payable only (A) if the applicable target is achieved and (B) to the extent, if any, as the Compensation Committee shall determine. Any award paid with respect to a Plan Year under this Section shall not be subject to the provisions of Section 5, 6 or 9 hereof, but shall reduce the amount of the Incentive Fund for such Plan Year. 8. Payment of Awards. Awards under the Plan shall be paid in cash within 90 days of the close of the Plan Year. 6 9. Termination of Employment. A Participant shall not be entitled to receive payment of an award, unless the Compensation Committee determines otherwise, if at any time prior to payment of the award (i) the Participant's employment terminates for any reason, including retirement, or (ii) the Participant gives or receives notice of termination for any reason, including retirement. 10. No Assignments and Transfers. A Participant shall not assign, encumber or transfer his rights and interests under the Plan and any attempt to do so shall render those rights and interests null and void. 11. No Rights to Awards or Employment. No employee of the Company or its subsidiaries or other person shall have any claim or right to be granted an award under this Plan. Neither the Plan nor any action taken thereunder shall be construed as giving any employee any right to be retained in the employ of the Company or its subsidiaries. 12. Withholding Tax. The Company shall deduct from all amounts paid any taxes required by law to be withheld with respect to such payments. 13. Amendment or Termination. The Board of Directors may amend, suspend or terminate the Plan or any portion thereof at any time. 14. Effective Date. The Plan shall be effective as of January 1, 1994. 7 15. Term. Subject to earlier termination pursuant to the provisions of Section 13, the Plan shall have a term of ten years from its effective date. EX-10 5 EXHIBIT 10K Exhibit 10(k) 1. AMENDMENT TO THE BANK OF NEW YORK COMPANY, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN WHEREAS, The Bank of New York Company, Inc. Supplemental Executive Retirement Plan (the "Plan") was adopted by the Board of Directors of The Bank of New York Company, Inc., effective as of June 9, 1992; and WHEREAS, Section 9 of the Plan provides that the Compensation Committee of the Board of Directors may amend the Plan at any time, except in certain respects not material hereto; and WHEREAS, the Compensation Committee desires to amend the Plan; NOW, THEREFORE, the Plan is hereby amended in the following respects, effective as of March 9, 1993: 1. Section 4 of the Plan is amended by deleting the second sentence thereof and substituting therefor the following: A Participant listed on Exhibit A whose employment terminates prior to attaining age 60, other than by reason of death, shall also be entitled to a Benefit under the Plan. Any other Participant whose employment terminates prior to attaining age 60, other than by reason of death, shall not be entitled to a Benefit under the Plan except as determined by the Committee in its discretion. 2. Section 5(b) of the Plan is amended by the deletion of the first sentence thereof and the substitution therefor of the following: The Benefit payable under the Plan to a Participant listed on Exhibit A whose employment terminates prior to 2. attaining age 60, other than by reason of death, shall be equal to the amount of the Benefit provided in paragraph (a) of this Section, subject to reduction (if any) in accordance with the provisions of the Retirement Plan for payment as of the first day of the month coin- ciding or following the later of the date the Partici- pant attains age 55 or the date of the Participant's termination of employment. If the Committee determines that any other Participant whose employment terminates prior to attaining age 60, other than by reason of death, is entitled to a Benefit under the Plan, the amount thereof shall be equal to the amount of the Benefit provided in paragraph (a) of this Section, subject to reduction (if any) in accordance with the provisions of the Retirement Plan for payment as of such date as determined by the Committee. 3. Section 5(c) of the Plan is amended in its entirety to read as follows: (c) Unless the Committee, in its discretion, directs payment in a different form or at a different time, payment of a Benefit to a Participant shall be made in the form of a lump sum within 30 days after: (i) the Participant's termination of employment with the Company, if his employment terminates on or after the date he attains age 60, other than by reason of death, (ii) the first day of the month coinciding with or following the later of the date the Participant attains age 55 or the date of the Participant's termination of employment, if the Participant is listed on Exhibit A and his employment terminates prior to attaining age 60, other than by reason of death, or (iii) as of such date as determined by the Committee, if the Committee determines that a Participant who is not listed on Exhibit A and whose employment terminates prior to attaining age 60, other than by reason of death, is entitled to a Benefit under the Plan. In the event of the Participant's death while an active employee of the Company, payment of a Benefit to a Participant's spouse shall, unless the Committee, in its discretion, directs payment in a different form or at a 3. different time, be made in a lump sum within 30 days after the later of: (i) the date of the Participant's death, (ii) the date on which benefits are payable to the Participant's spouse under the Retirement Plan, or (iii) the date on which benefits would have been payable to the Participant's spouse under the Retirement Plan if the service with the Company of a Participant who is or has been a member of the Irving Plan were taken into account as provided under the Retirement Plan. Lump sum payments under this paragraph shall be deter- mined based on the actuarial assumptions in effect under the Retirement Plan immediately prior to the date of payment. Notwithstanding anything contained herein to the contrary, in the event of a change of control of the Company (as defined below), the Committee may not direct payment of a Benefit to a Participant or to a Parti- cipant's spouse in a different form or at a different time. For purposes of this Section, a "change of control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on March 9, 1993, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934; provided that, without limitation, such change of control shall be deemed to have occurred at such time as (a) any "person" (within the meaning of Section 14(d) of the Securities Exchange Act of 1934), other than the Company or an employee benefit plan sponsored by the Company, acquires more than 25% of combined voting power of the outstanding securities of The Bank of New York Company, Inc. ordinarily having the right to vote at elections of directors, including shares of common stock of The Bank of New York Company, Inc.; (b) there is a sale or divestiture of all or substantially all of the assets of the Company; or (c) during any two-year period, individuals who constitute the Board of Directors of The Bank of New York Company, Inc. (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority thereof, provided that any person becoming a director during such period whose election or nomination for election by the shareholders of The Bank of New York 4. Company, Inc. was approved by a vote of at least three- quarters of the Incumbent Board (either by a specific vote or by approval of the proxy statement of The Bank of New York Company, Inc. in which such person is named as a nominee for director without objection to such nomination) shall be, for purposes of this clause (c), considered as though such person were a member of the Incumbent Board. 4. Exhibit A is added to the Plan to read as follows: Exhibit A Vested Participants The following Participants shall be entitled to a Benefit under the Plan in the event of their termination of employment prior to attaining age 60, other than by reason of death: Alan R. Griffith Samuel F. Chevalier Thomas A. Renyi Richard D. Field Richard A. Pace Robert J. Mueller IN WITNESS WHEREOF, The Bank of New York Company, Inc. has caused this Amendment to be executed by its duly authorized officers this 9th day of March, 1993. \s\ Charles E. Rappold II __________________________ ATTEST: \s\ Jacqueline R. McSwiggan ____________________________ Assistant Secretary EX-10 6 EXHIBIT 10M Exhibit 10(m) 1. GRANTOR TRUST AGREEMENT THIS AGREEMENT, made as of the 16th day of November, 1993, by and between THE BANK OF NEW YORK COMPANY, INC., a corporation organized and existing under the laws of the State of New York (hereinafter referred to as the "Com- pany"), and UNITED STATES TRUST COMPANY OF NEW YORK, a cor- poration organized and existing under the laws of the State of New York (hereinafter referred to as the "Trustee"), W I T N E S S E T H : WHEREAS, the Company is obligated under certain executive compensation plans and agreements, which are listed on Exhibit I hereto (the "Plans"), to make payment of certain amounts to current employees of the Company and its sub- sidiaries (the "Participants") under certain circumstances; and WHEREAS, the Company wishes to provide a separate source of funds to enable payment of such amounts to certain Participants who are intended to be covered by this Agreement (the "Covered Participants"); and WHEREAS, the Trustee is not a party to the Plans and makes no representations with respect thereto, and all representations and recitals with respect to the Plans shall be deemed to be those of the Company; NOW, THEREFORE, the Company and the Trustee agree as follows: 2. FIRST: Definition of Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to occur if (i) a change in control of the Company would be required to be reported in response to item 1(a) of the Current Report of Form 8-K, as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (ii) any "person" within the meaning of Section 14(d) of the Exchange Act (x) becomes the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of more than 25% of the then combined voting power of the out- standing securities of the Company ordinarily having the right to vote at the election of directors ("Voting Secu- rities"), otherwise than through a transaction or trans- actions arranged by, or consummated with the prior approval of, the Board of Directors of the Company, or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Company or for any other matter or question more than 35% of the then outstanding voting securities of the Company, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board of Directors of the Company; or (iii) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to 3. constitute at least a majority thereof, provided that any person becoming a director during such period whose election or nomination for election by the Company's stockholders was approved by a vote of at least three-quarters of the Incum- bent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomina- tion) shall be, for purposes of this clause (iii), considered as though such person were a member of the Incumbent Board. Notwithstanding the foregoing, for purposes of this Agreement, the Trustee shall not be deemed to have knowledge that a Change in Control has occurred until it has received written notice thereof from the Company or a Covered Participant. SECOND: Creation of Trust. (a) The Company hereby establishes with the Trustee and the Trustee hereby accepts a trust consisting of such cash, Letters of Credit (as defined herein) or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time (hereafter called the "Fund"). The Company may, in its discretion, deliver to the Trustee one or more irrevocable letters of credit, which shall be substantially in the form of Exhibit II hereto (referred to hereinafter as the "Letters of Credit"). Each Letter of Credit shall name the Trustee as beneficiary and shall provide that any notices 4. to the Trustee thereunder shall be sent to it at the address specified in Article TENTH. (b) The Trustee shall hold the Fund in trust and manage and administer it in accordance with the terms and provisions of this Agreement. (c) The trust created herein is intended to be a Grantor Trust under the provisions of Sections 671 through 677 of the Internal Revenue Code. (d) The Company may, prior to a Change in Control, revoke the trust by written notice to the Trustee. Upon such revocation, the Trustee shall cancel all Letters of Credit, the trust shall terminate and all assets of the Fund, after payment of any unpaid fees and expenses of the Trustee, shall be paid to the Company. (e) After a Change in Control, the trust shall become irrevocable and shall be held for the exclusive purpose of providing benefits to Covered Participants in accordance with the provisions of this Agreement. THIRD: Payments from Fund. (a) The Company shall provide the Trustee with a schedule (the "Payment Schedule") of Participants, indicating (i) the amount payable to or in respect of each Covered Participant upon such Covered Par- ticipant's termination of employment or providing formulae, or instructions, acceptable to the Trustee, utilizing readily determinable and objective information, for determining such 5. amounts, (ii) the form in which such amount is to be paid (as provided for or available under the Plans), and (iii) the time for commencement of such payment. As appropriate, based upon the terms of the Plans and the implementation of those terms by the Company, and at least annually, the Company shall adjust the amounts payable to or in respect of Participants, shall add or delete Participants at any time prior to a Change in Control and, if appropriate, shall change the formulae or instructions for determining such amounts (provided such formulae or instructions are acceptable to the Trustee) by submitting a new or amending the existing Payment Schedule. The Company shall provide promptly to each Covered Participant the information on the Payment Schedule pertaining to that Covered Participant, including all changes and adjustments. In the event of any change in the Payment Schedule after a Change in Control or if after a Change in Control the Payment Schedule is not adjusted or changed at a time when a Covered Participant believes it should, the Covered Participant affected thereby shall have the right, if he disagrees with such adjustment or change or failure to make an adjustment or change, to furnish information to the Trustee concerning the appropriate amount payable to the Covered Participant. The Trustee shall be obligated to pay from the Fund amounts based upon a Payment Schedule as adjusted, if applicable, to reflect information 6. supplied by the Covered Participant. After a Change in Control, no additions to or deletions from the list of Covered Participants shall be permitted. (b) The Trustee shall create a separate account (the "Account") in the Fund for each Covered Participant. At the time of each contribution to the Fund or establishment and delivery to the Trustee of a Letter of Credit, the Company shall designate in writing the allocation among the Accounts of such contribution and Letter of Credit. The Trustee shall hold all Accounts as a consolidated single fund. The Fund shall be revalued by the Trustee as of the last business day of each calendar quarter at current market values, as determined by the Trustee. For valuation purposes, a Letter of Credit shall be deemed to have a fair market value equal to the remaining amount available for draw under the Letter of Credit on the last business day of the applicable calendar quarter. Net investment gains and losses shall be allocated by the Trustee proportionately among the Accounts as of the end of each calendar quarter based on the value of the Accounts as of the last business day of the preceding calendar quarter. The Trustee shall maintain a record of the value of each Account based on the aggregate value of the Trust Fund, the information provided by the Company as to its contributions and its establishment and delivery of Letters of Credit with respect to each Account 7. and any payments therefrom. To the extent an amount remains credited to a Covered Participant's Account after the Company's liability to him under all Plans has been paid in full, such excess shall, as of the end of the calendar quarter in which final payment has been made, be reallocated to the Accounts of all other Covered Participants in proportion to the amounts credited to the Accounts of such Covered Participants, unless the Company directs the Trustee, prior to a Change in Control, to cancel or reduce a Letter of Credit allocated to the Covered Participant's Account in an amount equal to such excess. Notwithstanding the amount credited to a Covered Participant's Account pursuant to this paragraph, in no event shall a Covered Participant be entitled to payment hereunder of more than the Company's liability to him under the Plans. (c)(1) In the event it shall be determined prior to a Change In Control that any Covered Participant is sub- ject to any tax under the terms of the trust created here- under, then the Trustee, upon receipt of written direction from the Company, shall make payments from the Fund to such persons, in such manner and in such amounts as the Company shall direct, for purposes of paying the amount of federal, state and local tax and interest and any penalties thereon which such Covered Participant may incur arising out of such determination. In the event such a determination is made 8. after a Change In Control occurs, then the Trustee shall make payments from the Fund to such Covered Participant for the purposes set forth in the preceding sentence upon notice thereof from the Covered Participant. (2) Any payment from the Fund pursuant to Sec- tion (c)(1) of this Article shall be charged to the Accounts of those Participants to whom (or on whose behalf) such a distribution is made, under the appropriate Plan or Plans. (d) The Company may, by notice to the Trustee prior to a Change in Control, direct the Trustee to pay the Company such amount as is specified in the notice, cancel one or more Letters of Credit as specified in the notice, or reduce one or more Letters of Credit by such amount as is specified in the notice. In addition, such notice shall set forth the Account or Accounts which shall be debited with respect to such payment, cancellation or reduction. If the amount which would remain in the Fund after any such payment would be less than the unpaid fees and expenses of the Trustee, then the Trustee may deduct such fees and expenses from the payment that would otherwise be made to the Company. (e) Any direction, designation or notice by the Company required under this Article shall be in writing. Any direction by the Company with respect to a payment from the Fund shall be accompanied by a certification by the Company that the payment directed is in conformity with Article 9. THIRTEENTH hereof. The Trustee shall not be liable in any way for any payment made pursuant to any such direction of the Company. In addition, the Trustee shall not be liable in any way for any payment made based on information supplied to it by the Company. FOURTH: (a) Management of Assets of Fund. Sub- ject to paragraph (b) of this Article, the Trustee, prior to a Change In Control, shall have exclusive authority and discretion to manage and control the assets of the Fund, other than Letters of Credit, and pursuant to such authority and discretion may exercise from time to time and at any time power: (i) To invest and reinvest the Fund, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and other property, or part interest in property, real or personal, foreign or domestic, whether or not productive of income or consisting of wasting assets, and in order to reduce the rate of interest rate fluctuations, contracts, as either buyer or seller, for the future 10. delivery of United States Treasury securities and com- parable United States Government-backed securities; (ii) To sell, convey, redeem, exchange, grant options for the purchase or exchange of, or otherwise dispose of, any real or personal property, at public or private sale, for cash or upon credit, with or without security, without obligation on the part of any person dealing with the Trustee to see to the application of the proceeds of or to inquire into the validity, expediency or propriety of any such disposition; (iii) To manage, operate, repair and improve, and mortgage or lease for any length of time any real prop- erty held in the Fund; to renew or extend any mortgage, upon any terms the Trustee may deem expedient; to agree to reduction of the rate of interest or any other modi- fication in the terms of any mortgage or of any guar- antee pertaining to it; to enforce any covenant or condition of any mortgage or guarantee or to waive any default in the performance thereof; to exercise and enforce any right of foreclosure; to bid in property on foreclosure; to take a deed in lieu of foreclosure with or without paying consideration therefor and in connec- tion therewith to release the obligation on the bond secured by the mortgage; and to exercise and enforce in any action, suit or proceeding at law or in equity any 11. rights or remedies in respect of any mortgage or guarantee; (iv) To exercise, personally or by general or limited proxy, the right to vote any shares of stock, bonds or other securities held in the Fund; to delegate discretionary voting power to trustees of a voting trust for any period of time; and to exercise, personally or by power of attorney, any other right appurtenant to any securities or other property of the Fund; (v) To join in or oppose any reorganization, recapitalization, consolidation, merger or liquidation, or any plan therefor, or any lease, mortgage or sale of the property of any organization the securities of which are held in the Fund; to pay from the Fund any assess- ments, charges or compensation specified in any plan of reorganization, recapitalization, consolidation, merger or liquidation; to deposit any property with any committee or depositary; and to retain any property allotted to the Fund in any reorganization, recapital- ization, consolidation, merger or liquidation; (vi) To exercise or sell any conversion or sub- scription or other rights appurtenant to any stock, security or other property held in the Fund; (vii) To borrow from any lender (other than the Trustee in its individual capacity or the Company or any 12. of its affiliates) money, in any amount and upon any reasonable terms and conditions, for purposes of this Agreement, and to pledge or mortgage any property held in the Fund to secure the repayment of any such loan; (viii) To compromise, settle or arbitrate any claim, debt, or obligation of or against the Fund; to enforce or abstain from enforcing any right, claim, debt or obligation; and to abandon any property determined by it to be worthless; and (ix) To make loans of securities held in the Fund to registered brokers and dealers upon such terms and conditions as are permitted by applicable law and regu- lations, and in each instance to permit the securities so lent to be registered in the name of the borrower or a nominee of the borrower, provided that in each instance the loan is adequately secured and neither the borrower nor any affiliate of the borrower has discre- tionary authority or control with respect to the assets of the Fund involved in the transaction or renders investment advice with respect to those assets. (b) The Company shall deliver to the Trustee each Letter of Credit established for the Fund as executed by the bank issuing such credit. On the last business day of each month, the Trustee shall draw on the Letters of Credit to the extent the assets of the Fund are not sufficient to make 13. payments required to be made under the Payment Schedule during the next six months. Amounts received on the draw of any Letter of Credit shall reduce the allocation of the Letter of Credit to those Covered Participants for whom such Letter of Credit was previously allocated and shall be allo- cated to the Accounts of such Covered Particiipants as if such amounts were contributions to the Fund. If the Trustee receives written notice prior to the expiration or cancellation of a Letter of Credit from the bank which issued such Letter of Credit, referencing the Letter of Credit by number, signed by an officer of such bank, and stating that such Letter of Credit is due to expire and has not been extended, or is being cancelled (other than a cancellation pursuant to paragraph (d) of Article THIRD), the Trustee shall draw on such Letter of Credit to the full extent thereof prior to the expiration of such Letter of Credit (but in no event earlier than the fifth business day prior to such expiration) unless, prior to taking such action, the Trustee has received a replacement Letter of Credit or cash or other property in at least the remaining amount available to be drawn under the Letter of Credit which is due to expire or is being cancelled. The Trustee shall have no obligation to earn any income with respect to any Letters of Credit which are held by it as part of the Fund. In the event that the Trustee 14. shall resign or be removed, and a successor trustee shall be appointed hereunder, the rights and obligations of the Trustee under each Letter of Credit shall automatically become the rights and obligations of the successor trustee, and the Trustee shall have no further rights, duties, obli- gations or liabilities with respect to any Letter of Credit. (c) After a Change In Control occurs and subject to paragraph (g) of Article SIXTH hereof, the Trustee shall invest and reinvest the Fund, other than Letters of Credit, without distinction between principal and income, in direct obligations of the United States of America or agencies or instrumentalities thereof, obligations unconditionally and fully guaranteed as to principal and interest by the United States of America, and certificates of deposit and bankers' acceptances of a bank organized and existing under the laws of the United States of America or any State thereof which has a combined capital and surplus of at least $100,000,000, all having respective maturities of not more than one year when purchased. FIFTH: Administrative Powers. The Trustee shall have and in its sole and absolute discretion may exercise from time to time and at any time the following administra- tive powers and authority with respect to the Fund: (a) To continue to hold any property of the Fund whether or not productive of income; to reserve from 15. investment and keep unproductive of income, without liability for interest, cash temporarily awaiting investment and such cash as it deems advisable or as the Company from time to time may specify prior to a Change In Control in order to meet the administrative expenses of the Fund or anticipated distributions therefrom. (b) To hold property of the Fund in its own name or in the name of a nominee or nominees, without disclosure of the trust, or in bearer form so that it will pass by delivery, but no such holding shall relieve the Trustee of its responsibility for the safe custody and disposition of the Fund in accordance with the provisions of this Agreement; the Trustee's books and records shall at all times show that such property is part of the Fund; and the Trustee shall be absolutely liable for any loss occasioned by the acts of its nominee or nominees with respect to securities registered in the name of the nominee or nominees; (c) To organize and incorporate under the laws of any state it may deem advisable one or more corporations (and to acquire an interest in any such corporation that it may have organized and incorporated) for the purpose of acquiring and holding title to any property, interests or rights that the Trustee is authorized to acquire under Article FOURTH hereof; 16. (d) To employ in the management of the Fund suitable agents, without liability for any loss occasioned by any such agents selected by the Trustee with the care, skill, prudence and diligence under the circumstances then pre- vailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (e) To make, execute and deliver, as Trustee, any deeds, conveyances, leases, mortgages, contracts, waivers or other instruments in writing that the Trustee may deem necessary or desirable in the exercise of its powers under this Agreement; (f) To hold and draw upon any Letter of Credit in accordance with paragraph (b) of Article FOURTH; and (g) To do all other acts that the Trustee may deem necessary or proper to carry out any of the powers set forth in Articles FOURTH, FIFTH and SIXTH hereof or otherwise in the best interests of the Fund. SIXTH: Annuity Contracts. (a) The Trustee, upon written direction of the Company prior to a Change In Con- trol, shall pay from the Fund such sums to such insurance company or companies as the Company may direct for the pur- pose of procuring individual or group annuity contracts for any retirement allowance payable under a Plan (hereinafter in this Article referred to as "Contracts"). The Company shall 17. prepare, or cause to be prepared in such form as it shall prescribe, the application for any Contract to be applied for. The Trustee shall receive and hold in the Fund, subject to the provisions hereinafter set forth in this Article, all Contracts so obtained. (b) The Trustee shall be the complete and absolute owner of Contracts held in the Fund and, upon written direc- tion of the Company prior to a Change In Control, shall have power, without the consent of any other person, to exercise any and all of the rights, options or privileges that belong to the absolute owner of any Contract held in the Fund or that are granted by the terms of any such Contract or by the terms of this Agreement. The Trustee shall have no discre- tion with respect to the exercise of any of the foregoing powers or to take any other action permitted by any Contract held in the Fund, but shall exercise such powers or take such action only upon the written direction of the Company prior to a Change In Control; the Trustee shall have no duty to exercise any of such powers or to take any such action unless and until it shall have received such direction. The Trustee, upon the written direction of the Company prior to a Change In Control, shall deliver any Contract held in the Fund to such person or persons as may be specified in the direction. 18. (c) The Trustee shall hold in the Fund the pro- ceeds of any sale, assignment or surrender of any Contract held in the Fund and any and all dividends and other payments of any kind received in respect of any Contract held in the Fund. (d) Upon the written direction of the Company prior to a Change In Control, the Trustee shall pay from the Fund premiums, assessments, dues, charges and interest, if any, upon any Contract held in the Fund. After a Change In Control occurs, the Trustee shall pay from the Fund premiums, assessments, dues, charges and interest, if any, upon any Contract held in the Fund, without direction from the Company. (e) No insurance company that may issue any Contract or Contracts held in the Fund shall be deemed to be a party to this Agreement for any purpose, or to be respon- sible in any way for the validity of this Agreement or to have any liability under this Agreement other than as stated in each Contract that it may issue. Any insurance company may deal with the Trustee as sole owner of any Contract issued by it and held in the Fund, without inquiry as to the authority of the Trustee to act, and may accept and rely upon any written notice, instruction, direction, certificate or other communication from the Trustee believed by it to be genuine and to be signed by an officer of the Trustee and 19. shall incur no liability or responsibility for so doing. Any sums paid out by any insurance company under any of the terms of a Contract issued by it and held in the Fund either to the Trustee, or, in accordance with its direction, to any other person or persons designated as payees in such Contract shall be a full and complete discharge of the liability to pay such sums, and the insurance company shall have no obligation to look to the disposition of any sums so paid. No insurance company shall be required to look into the terms of this Agreement, to question any action of the Trustee or to see that any action of the Trustee is authorized by the terms of this Agreement. (f) Anything contained herein to the contrary notwithstanding, neither the Company nor the Trustee shall be liable for the refusal of any insurance company to issue or change any Contract or Contracts or to take any other action requested by the Trustee; nor for the form, genuineness, validity, sufficiency or effect of any Contract or Contracts held in the Fund; nor for the act of any person or persons that may render any such Contract or Contracts null and void; nor for the failure of any insurance company to pay the proceeds and avails of any such Contract or Contracts as and when the same shall become due and payable; nor for any delay in payment resulting from any provision contained in any such Contract or Contracts; nor for the fact that for any reason 20. whatsoever (other than their own negligence or willful misconduct) any Contract or Contracts shall lapse or otherwise become uncollectible. (g) After a Change In Control occurs, the Trustee may exercise any of the powers set forth in paragraphs (a) through (f) of this Article without direction from the Com- pany, including the power to purchase Contracts the rates of return and maturity dates of which may reasonably be expected to yield assets of the Fund sufficient to discharge all or a portion of the Company's obligations for retirement allow- ances under the Plans as set forth in the most recent infor- mation furnished to the Trustee by the Company prior to such Change In Control. SEVENTH: Taxes, Expenses and Compensation of Trustee. (a) The Company shall pay any federal, state, local or other taxes imposed or levied with respect to the corpus and/or income of the Fund or any part thereof under existing or future laws and, the Company in its discretion, or the Trustee, in its discretion, may contest the validity or amount of any tax, assessment, claim or demand respecting the Fund or any part thereof. (b) The Company shall pay to the Trustee from time to time such reasonable compensation for its services as trustee as shall be agreed upon by the Company and the Trustee. The Company shall also pay the reasonable and 21. necessary expenses incurred by the Trustee in the performance of its duties under the Agreement, including reasonable fees of counsel engaged by the Trustee pursuant to paragraph (b) of Article EIGHTH of this Agreement. Such compensation and expenses shall be charged against and paid from the Fund to the extent not paid by the Company. EIGHTH: General Duties of Trustee. (a) The Trustee shall discharge its duties under this Agreement solely in the interest of the beneficiaries of the Fund and (i) for the exclusive purpose of providing benefits to such beneficiaries and defraying reasonable expenses of admini- stering the Fund; (ii) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and (iii) by diversifying the investments of the Fund so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. (b) The Trustee may consult with counsel, who may be counsel for the Company or for the Trustee in its indivi- dual capacity, and shall not be deemed imprudent by reason of its taking or refraining from taking any action in accordance with the opinion of counsel. The Trustee shall not be required to give any bond or any other security for the 22. faithful performance of its duties under this Agreement, except as required by law. (c) The Trustee shall be under no duties whatso- ever, except such duties as are specifically set forth as such in this Agreement, and no implied covenant or obligation shall be read into this Agreement against the Trustee. The Trustee shall not be compelled to take any action toward the execution or performance of the trust created hereunder or to prosecute or defend any suit or claim in respect thereof, unless indemnified to its satisfaction against loss, liability, and reasonable costs and expenses. Notwithstanding anything herein to the contrary, in the event that the bank issuing a Letter of Credit shall fail or refuse to pay upon any draw thereunder, the Trustee will not be obligated to pursue any remedy against such issuing bank unless it shall have first received from the Company, the Participants or any of them security or indemnity to its satisfaction against the costs and expenses (including attorney's fees) which may be incurred therein or thereby. The Trustee shall be under no liability or obligation to anyone with respect to any failure on the part of the Company to perform any of its obligations under this Agreement. (d) The Company shall pay and shall protect, indemnify and save harmless the Trustee and its officers, directors or trustees, employees and agents from and against 23. any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, damages, reasonable costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) of any nature arising from or relating to any action or failure to act by the Trustee, its officers, directors or trustees, employees and agents or the transactions contemplated by this Agree- ment, except to the extent that any such loss, liability, action, suit, demand, damage, cost or expense is the result of the negligence or willful misconduct of the Trustee, its officers, directors or trustees, employees or agents. NINTH: Accounts of Trustee. (a)(i) The Trustee shall keep accurate and detailed accounts of all its receipts, investments and disbursements under this Agreement. Such person or persons as the Company shall designate shall be allowed to inspect the books of account relating to the Fund upon request at any reasonable time during the business hours of the Trustee. (ii) Within 120 days after the close of each calendar year, the Trustee shall transmit to the Company, and certify the accuracy of, a written statement of the assets and liabilities of the Fund at the close of that year, showing the current value of each asset at that date, and a written account of all the Trustee's transactions relating to the Fund during the period from the last previous accounting 24. to the close of that year. (For the purposes of this paragraph, the date of the Trustee's resignation or removal as provided in Article ELEVENTH hereof shall be deemed to be the close of a calendar year.) (iii) Unless the Company shall have filed with the Trustee written exceptions or objections to any such statement and account within 60 days after receipt thereof, the Company shall be deemed to have approved such statement and account; and in such case or upon the written approval by the Company of any such statement and account, the Trustee shall be forever released and discharged with respect to all matters and things embraced in such statement and account as though it had been settled by decree of a court of competent jurisdiction in an action or proceeding to which the Company and all persons having any beneficial interest in the Fund were parties. (b) Nothing contained in this Agreement or in the Plans shall deprive the Trustee of the right to have a judi- cial settlement of its accounts. In any proceeding for a judicial settlement the Trustee's accounts or for instruc- tions in connection with the Fund, the only other necessary party thereto in addition to the Trustee shall be the Company. If the Trustee so elects, it may bring in as a party or parties defendant any other person or persons. No person interested in the Fund, other than the Company, shall 25. have a right to compel an accounting, judicial or otherwise, by the Trustee, and each such person shall be bound by all accounting by the Trustee to the Company, as herein provided, as if the account had been settled by decree of a court of competent jurisdiction in an action or proceeding to which such person was a party. TENTH: Administration of the Plans; Communica- tions. (a) The Company shall administer the Plans as pro- vided therein, and subject to paragraph (b) of Article THIRD hereof or subject to any delegation by the Company and assumption by the Trustee of the duties of administering the Plans, the Trustee shall not be responsible in any respect for administering the Plans nor shall the Trustee be responsible for the adequacy of the Fund to meet and dis- charge all payments and liabilities under the Plans. The Trustee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by an officer of the Company. The Company from time to time shall furnish the Trustee with the names and specimen signatures of the officers of the Company authorized to act or give directions hereunder and shall promptly notify the Trustee of the termination of office of any such officer of the Company and the appointment of a successor thereto. Until notified to the contrary, the Trustee shall be fully 26. protected in relying upon the most recent list of the officers of the Company furnished to it by the Company. (b) Any action required by any provision of this Agreement to be taken by the Board of Directors of the Com- pany shall be evidenced by a resolution of the Board of Directors certified to the Trustee by the Secretary or an Assistant Secretary of the Company under its corporate seal, and the Trustee shall be fully protected in relying upon any resolution so certified to it. Unless other evidence with respect thereto has been specifically prescribed in this Agreement, any other action of the Company under any provi- sion of this Agreement, including any approval of or excep- tions to the Trustee's accounts, shall be evidenced by a certificate signed by an officer of the Company, and the Trustee shall be fully protected in relying upon such certificate. The Trustee may accept a certificate signed by an officer of the Company as proof of any fact or matter that it deems necessary or desirable to have established in the administration of the trust (unless other evidence of such fact or matter is expressly prescribed herein), and the Trustee shall be fully protected in relying upon the state- ments in the certificate. (c) The Trustee shall be entitled conclusively to rely upon any written notice, instruction, direction, certificate or other communication believed by it to be 28. excess of $2,000,000,000, other than the Company or any corporation that, directly or through one or more inter- mediaries, controls, is controlled by or is under common control with the Company, to act hereunder after the effec- tive date of such removal or resignation. Each successor trustee shall have the powers and duties conferred upon the Trustee in this Agreement, and the term "Trustee" as used in this Agreement shall be deemed to include any successor trustee. Upon designation or appointment of a successor trustee, the Trustee shall transfer and deliver the Fund to the successor trustee, reserving such sums as the Trustee shall deem necessary to defray its expenses in settling its accounts, to pay any of its compensation due and unpaid and to discharge any obligation of the Fund for which the Trustee may be liable. If the sums so reserved are not sufficient for these purposes, the Trustee shall be entitled to recover the amount of any deficiency from either the Company or the successor trustee, or both. When the Fund shall have been transferred and delivered to the successor trustee and the accounts of the Trustee have been settled as provided in Article NINTH hereof, the Trustee shall be released and discharged from all further accountability or liability for the Fund and shall not be responsible in any way for the further disposition of the Fund or any part thereof. 29. TWELFTH: Amendment of Agreement. (a) Subject to paragraph (b) of this Article TWELFTH, the Company expressly reserves the right at any time to amend this Agreement and the trust created thereby to any extent that it may deem advisable. No such amendment shall be made that affects the duties or responsibilities of the Trustee without its consent thereto in writing. Such amendment shall become effective upon delivery to the Trustee of a written instrument of amendment, duly executed and acknowledged by the Company and accompanied by a certified copy of a resolution of the Board of Directors of the Company authorizing such amendment. (b) Notwithstanding any other provisions of this Agreement, the provisions of this Agreement and the trust created thereby may not be amended after the date a Change In Control occurs without the written consent of two-thirds in number of the Covered Participants. The Trustee may request that the Company furnish evidence to establish that such a majority in number of such Covered Participants have granted written consent to such an amendment. THIRTEENTH: Prohibition of Diversion. (a) Except as provided in paragraph (b) below and in paragraphs (b) and (d) of Article THIRD, at no time prior to the satisfac- tion of all liabilities with respect to Covered Participants and their beneficiaries shall any part of the corpus and/or income of the Fund be used for, or diverted to, purposes 30. other than for the exclusive benefit of Covered Participants and their beneficiaries and the assets of the Fund shall never inure to the benefit of the Company and shall be held for the exclusive purposes of providing benefits to Covered Participants and their beneficiaries and defraying reasonable expenses of administering the Fund. Upon satisfaction of all liabilities with respect to Covered Participants and their beneficiaries under the Plans, this Agreement and the trust shall be terminated and the remaining assets of the Fund shall be distributed to the Company. (b) Notwithstanding any other provision of this Agreement to the contrary, the corpus and/or income of the Fund shall at all times be subject to the claims of creditors of the Company. In the event that (i) a final judicial determination is entered that the Company is unable to pay its debts as such debts mature or (ii) there shall have been filed by or against the Company in any court or other tri- bunal either of the United States or of any State or of any other authority now or hereafter exercising jurisdiction, a petition in bankruptcy or insolvency proceedings or for reorganization or for the appointment of a receiver or trustee of all or substantially all of the Company's property under the present or any future federal bankruptcy code or any other present or future applicable federal, state or other bankruptcy or insolvency statute or law, then the 31. Trustee shall not make payments from the Fund to any bene- ficiary, but under either of such circumstances, the Trustee shall deliver any property held in the Fund only as a court or other tribunal of competent jurisdiction may direct to satisfy the claims of the Company's creditors. The Board of Directors and the Chief Executive Officer of the Company shall furnish the Trustee with written notice of such final judicial determination or filing described herein. If the Trustee receives a written allegation from a person claiming to be a creditor of the Company that the Company is unable to pay its debts as they mature, the Trustee shall, within the 30-day period from the date of receipt of such allegation, determine whether the Company is in fact unable to pay its debts as they mature. During such period, the Trustee shall suspend all payments from the Fund. If the Trustee determines the Company is able to pay its debts as they mature, payments from the Fund will resume. Otherwise, the Trustee will deliver the assets of the Fund as a court or other tribunal of competent jurisdiction may direct to satisfy the claims of the Company's creditors, and, in the absence of such direction, the Trustee shall continue to suspend payments from the Fund. FOURTEENTH: Sufficiency of Fund. Notwithstanding any provision of this Agreement, the Company shall remain obligated to pay Participants the amounts due to them under 32. the Plans. If the assets of an Account are insufficient to fulfill the Company's obligations to a Covered Participant when due, then the Company shall pay to such Covered Par- ticipant (and his beneficiaries) the amount of such insufficiency. FIFTEENTH: Prohibition of Assignment of Interest. No interest, right or claim in or to any part of the Fund or any payment therefrom shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commuta- tion, anticipation, garnishment, attachment, execution or levy of any kind, and the Trustee shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypo- thecate, commute or anticipate the same, except to the extent required by law. SIXTEENTH: Affiliates. Prior to a Change in Control, any corporation that, directly or through one or more intermediaries, controls, is controlled by or is under common control with the Company may adopt and become a party to this Agreement by delivering to the Trustee an instrument in writing, duly executed and acknowledged, adopting and assuming jointly and severally the obligations of the Company under this Agreement and constituting and appointing the Company to be the agent and attorney in fact of such corporation for the purposes of giving or receiving notices, instructions, directions and other communications to or from 33. the Trustee and approving the accounts of the Trustee, accom- panied by duly certified copies of resolutions of the Board of Directors of such corporation adopting the Agreement and approving and authorizing execution, acknowledgment and delivery of such instrument and a duly certified copy of a resolution of the Board of Directors of the Company approving and consenting to the same. SEVENTEENTH: Miscellaneous. (a) This Agreement shall be interpreted, construed and enforced, and the trust hereby created shall be administered, in accordance with the laws of the United States and of the State of New York. (b) The titles to Articles of this Agreement are placed herein for convenience of reference only, and the Agreement is not to be construed by reference thereto. (c) This Agreement shall bind and inure to the benefit of the successors and assigns of the Company and the Trustee, respectively, and the Covered Participants and their beneficiaries under the Plans. (d) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute but one instrument, which may be sufficiently evidenced by any counterpart. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective names by 34. their duly authorized officers under their corporate seals as of the day and year first above written. THE BANK OF NEW YORK COMPANY, INC. By \s\ Charles E. Rappold II ---------------------- Chief Legal Officer and Secretary ATTEST: \s\ Jacqueline R. McSwiggan UNITED STATES TRUST COMPANY OF NEW YORK By \s\ Martha Dolan -------------------- Vice President ATTEST: William H. Schroeder Senior Vice President 35. STATE OF NEW YORK ) : SS.: COUNTY OF NEW YORK ) On this 16th day of November , 1993, before me personally came Charles Rappold, to me known, who, being by me duly sworn, did depose and say that he resides at 1050 Rahway Rd, Plainfield NJ., and that he is CLO and Secretary of THE BANK OF NEW YORK COMPANY, INC., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. \s\ Nicholas B. Simonetta STATE OF NEW YORK ) : SS.: COUNTY OF NEW YORK ) On this 17th day of November, 1993, before me personally came Martha Dolan, to me known, who, being by me duly sworn, did depose and say that she resides at 7 Tree Farm Road, Monmouth JCT, NJ, and that she is a Vice President of UNITED STATES TRUST COM- PANY OF NEW YORK, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Trustees of said corporation; and that he signed his name thereto by like order. \s\ Stuart Omansky 36. EXHIBIT I 1. The Bank of New York Company, Inc. Excess Benefit Plan 2. The Bank of New York Company, Inc. Supplemental Executive Retirement Plan 3. Agreements between The Bank of New York Company, Inc. and the following persons: Individual Date of Agreement Samuel F. Chevalier July 9, 1991 Richard D. Field July 9, 1991 Alan R. Griffith July 9, 1991 Richard A. Pace July 9, 1991 Thomas A. Renyi July 9, 1991 Robert J. Mueller January 10, 1993 37 EXHIBIT II [FORM OF IRREVOCABLE LETTER OF CREDIT] [Date] United States Trust Company of New York, as Trustee 770 Broadway New York, New York 10003-9548 Attention: [ ] Dear Sirs: At the request and for the account of The Bank of New York Company, Inc., we hereby establish in your favor (and in favor of your successors, the terms "you" and "yours" referring to you and any successor), as Trustee under the Trust Agreement between The Bank of New York Company, Inc. and United States Trust Company of New York, dated as of __________, 1993 (the "Trust Agreement"), this Irrevocable Letter of Credit No. _________ in the amount of U.S. $_______. This Letter of Credit is effective immediately and shall expire at the close of banking business at our office at [address] on [ ], 1994, unless terminated earlier or extended in either case in accordance with the provisions hereof. The amount of this Letter of Credit will be reduced from time to time as hereinafter provided. Funds under this Letter of Credit are available to you in immediately available funds upon presentation of your sight draft in the form of Exhibit A-1 hereto appropriately completed. 38. The amount available under this Letter of Credit shall be automatically reduced by the amount of each draft paid hereunder (effective on the date of payment of such draft). In addition, upon presentation by you of a certificate in the form of Exhibit B-1 hereto appropriately completed, the amount available under this Letter of Credit shall be automatically reduced by the amount stated in such certificate. Presentation of drafts and certificates hereunder shall be made at our office at [address], Attention: ___________________, or at any other office in the City and State of New York which may be designated by us by written notice delivered to you. Upon the earlier to occur of any one of the following events: (i) the surrender to us by you of this Letter of Credit for cancellation and (ii) the expiration date stated in the initial paragraph hereof, this Letter of Credit shall automatically expire. Communications with respect to this Letter of Credit shall be delivered to us by registered mail, return receipt requested (except that drafts and certificates shall be presented by hand delivery), addressed to us at [address], Attention: _______________, specifically referring to the number of this Letter of Credit. 39. We hereby agree that drafts drawn and presented in compliance with this Letter of Credit and accompanied by the documents required hereby will be paid in accordance with the terms hereof. It is a condition of this Letter of Credit that it will be automatically extended for periods of one year from the then relevant expiry date, unless sixty (60) days prior to that relevant expiry date we notify you by registered mail, return receipt requested, that we elect not to extend this Letter of Credit for any additional period, provided, however, that under no circumstances will this Letter of Credit be renewed or extended beyond [ ]. We hereby agree that all notices to you under this Letter of Credit will be sent to you by registered mail, return receipt requested, at 770 Broadway, New York, New York 10003-9548, Attention: Department Manager, Employee Benefits Services, or such other address as from time to time specified by you in writing. This Letter of Credit shall be governed by, and construed in accordance with, the terms of the Uniform Customs and Practices for Documentary Credits (1983 Revision), International Chamber of Commerce, Publication No. 400 (the "UCP"). This Letter of Credit shall be deemed to be issued under the laws of the State of New York (including the Uniform Commercial Code as in effect in said 40. State), and, as to matters not governed by the UCP, shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, [Name of Bank] By ___________________________ Vice President 41 EXHIBIT A-1 SIGHT DRAFT [Date] For Value Received, pay on demand (by wire transfer in same day funds) to Account No. [insert number of account to which payment is to be made and name and address of bank] ________ United States Dollars ($__________). Charge to Account of [name of account party] Irrevocable Letter of Credit No. ___________. TO: [Name of Bank] [Address] Attention: _________________, Letter of Credit Operations UNITED STATES TRUST COMPANY OF NEW YORK By ____________________________ Title: 42. EXHIBIT B-1 REQUEST FOR REDUCTION [Date] [Name of Bank] [Address] Attention: ____________________, Letter of Credit Operations Irrevocable Letter of Credit No. Gentlemen: In accordance with the above-captioned Letter of Credit, each of the undersigned hereby requests that the amount available to be drawn by the beneficiary under said Letter of Credit be reduced by $__________ upon receipt by you of this certificate. THE BANK OF NEW YORK COMPANY, INC. By ________________________________ Title: UNITED STATES TRUST COMPANY OF NEW YORK By _________________________________ Title: EX-10 7 EXHIBIT 10R 1 Exhibit 10(r) THE BANK OF NEW YORK COMPANY, INC. RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS 1. Eligibility for Benefits. (a) A member of the Board of Directors (the "Board") of The Bank of New York Company, Inc. (the "Company") shall be eligible to receive benefits under The Bank of New York Company, Inc. Retirement Plan for Non- Employee Directors (the "Plan") if the member (i) has served for at least five years on the Board, (ii) has retired from the Board (A) following attainment of age 60 or (B) by reason of disability (as defined in paragraph (c) of this Section) after completing 10 years of service as a member of the Board and (iii) is not an employee of the Company or its subsidiaries or a former employee of the Company or its subsidiaries entitled to retirement benefits under a retirement plan of the Company or a subsidiary with respect to his prior service as an employee. (b) For purposes of the Plan, service shall include all service as a member of the Board, including service prior to the effective date of the Plan. (c) A person shall be considered to have incurred a disability for purposes of the Plan if the Pension Committee of the Board (the "Committee"), in its sole discretion, has determined that the person is unable to engage in any substantial gainful activity by reason of any physical or mental impairment which can be expected to 2 result in death or be of long-continued and indefinite duration. 2. Retirement Benefits. (a) A retired member of the Board who is eligible for benefits under the Plan shall receive an annual retirement benefit equal to the following percentage of the annual cash retainer payable to non-employee Board members at the date he ceased to be a member of the Board: Length of Service % of Annual Retainer 5 years 50% 6 years 60% 7 years 70% 8 years 80% 9 years 90% 10 years 100% (b) Retirement benefits for a member of the Board who retires after age 70 shall be paid for the life of the member of the Board. Retirement benefits for a member of the Board who (i) retires between the ages of 60 and 70 or (ii) retires by reason of disability shall be paid for a number of years following retirement equal to the number of years of service as a member of the Board. (c) Retirement benefits under the Plan shall commence to be paid on a quarterly basis on the first day of the calendar quarter following the retirement of the member of the Board. 3 (d) Payment of retirement benefits under the Plan shall cease upon the death of the retired member of the Board. 3. Forfeitures. If, in its sole discretion, the Board determines that a person has been removed from the Board for cause, such person shall forfeit all existing or future entitlement to benefits under the Plan. 4. Disability. In the event that a person who is receiving benefits or is eligible to begin receiving benefits under the Plan has incurred a disability, the Committee may direct any or all of the benefits to which the person may be entitled to be paid in any one or more of the following ways: (a) to the person, or (b) to the person's legal guardian or conservator, or (c) to the person's spouse or to any other individual or entity to be expended for his or her benefit. 5. Administration. The Committee shall administer the Plan, resolve any ambiguities or incon- sistencies, and decide all questions arising in its admin- istration, interpretation or application. Any decision of the Committee shall be conclusive and binding on members of the Plan and all other persons having or claiming any right to payments under the Plan. 6. Amendment and Termination. The Board may amend or terminate the Plan in whole or in part at any time, except that no amendment or termination may reduce or 4 terminate benefits to which a current or retired member of the Board is then entitled without the written consent of the member. 7. Source of Payment of Benefits. The obligations of the Company to pay the retirement benefits provided under the Plan shall be contractual only and all payments of retirement benefits hereunder shall be made by the Company from its general assets at the time and in the manner provided herein. 8. No Assignment. No right, benefit or payment under the Plan shall be subject to assignment, sale or other transfer, nor shall it be liable or subject in any manner to attachment, garnishment or execution. 9. Governing Law. The Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. 10. Effective Date. The Plan shall be effective as of May 11, 1993. EX-10 8 EXHIBIT 10S Exhibit 10(s) 1 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF THE BANK OF NEW YORK COMPANY, INC. 1. Definitions. (a) "Board" means the Board of Directors of The Bank of New York Company, Inc. (b) "Committee" means the Pension Committee of the Board. (c) "Company" means The Bank of New York Company, Inc. (d) "Company Stock" means the common stock of the Company. (e) "Deferral Account" means the account maintained on the books of the Company for each Participant pursuant to Section 4. Separate Deferral Accounts shall be maintained for each Participant. (f) "Director" means any member of the Board who is not an employee of the Company or any of its subsidiaries. (g) "Director Compensation" means compensation to which the Director is entitled as a retainer or a fee for services as a member of the Board or the Board of Directors of The Bank of New York. (h) "Disability" means that the Committee, in its sole discretion, has determined that the Participant is unable to engage in any substantial gainful activity by reason of any physical or mental impairment which can be 2 expected to result in death or to be of long-continued and indefinite duration. (i) "Effective Date" means December 1, 1993. (j) "Investment Funds" means Funds A, B and C under the Profit-Sharing Plan. (k) "Investment Fund Accounts" means the sub- Accounts maintained under the Plan to which deferred compensation is credited pursuant to Section 4, to reflect equivalent investment performance of the Investment Funds. (l) "Participant" means a Director who elects to participate in this Plan as provided in Section 3. (m) "Plan" means the Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc. as set forth herein and as amended from time to time. (n) "Profit-Sharing Plan" means the Employees' Profit-Sharing Plan of The Bank of New York Company, Inc. (o) "Stock Account" means the sub-Account maintained under the Plan to which deferred compensation is credited pursuant to Section 4, to reflect equivalent investment performance of Fund D under the Profit-Sharing Plan. (p) "Stock Unit" means the equivalent of one share of Company Stock. 2. Administration (a) The Plan shall be administered by the Committee. The Committee shall also have the authority to 3 make, amend, interpret, and enforce all appropriate rules and regulations for the administration of the Plan and decide any and all questions as may arise in connection with the interpretation or application of the Plan. (b) The decision or action of the Committee in respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon Participants and all other persons having or claiming any interest in the Plan. 3. Participation. (a) A Director may elect to participate in the Plan by filing a written election with the Company, on such form as may be prescribed by the Committee, to defer 50%, 75% or 100% of his or her Director Compensation. (b) A deferral election shall become effective on the first day of the calendar year following the date the election is made. A deferral election for a Participant shall remain effective for each subsequent calendar year unless the Participant files another election in which the Participant elects to cease deferring Director Compensation or to change the percentage of Director Compensation which is deferred. The new deferral election shall become effective on the first day of the calendar year following the date the election is made. 4 (c) Notwithstanding anything contained herein to the contrary, in the case of each individual who is a Director as of December 1, 1993, a deferral election will be effective for Director Compensation for 1994 if it is made by February 15, 1994; provided, however, such election shall not be effective for any Director Compensation earned before the election is made. An individual who becomes a Director after the Effective Date may make a deferral election within 30 days after becoming a Director; such election, however, shall be effective only with respect to Director Compensation earned after the date such election is made. 4. Deferral Account. (a) The portion of Director Compensation that would otherwise be paid in cash except that it is deferred pursuant to a deferral election, shall be credited to the Participant's Deferral Account and shall be allocated in multiples of 25% in accordance with the Participant's deferral election, among (i) the Investment Fund Accounts maintained for the Participant, as if invested in the applicable Investment Fund as of the first business day of the month in which such Director Compensation would have been paid and (ii) the Stock Account maintained for the Participant, in Stock Units, the number of which shall be determined by dividing (A) the portion of such Director Compensation to be allocated to the Stock Account of the Participant by (B) an amount equal to 95% of the closing 5 price of the Company Stock, as reported on the New York Stock Exchange on the date such Director Compensation would have been paid. The portion of Director Compensation that would otherwise be paid in Company Stock except that it is deferred pursuant to a deferral election, shall be credited to the Participant's Deferral Account and shall be allocated to the Stock Account maintained for the Participant in Stock Units. The number of Stock Units shall be determined by (A) multiplying (x) the number of shares of Company Stock which the Participant elected to defer by (y) the closing price of the Company Stock as reported on the New York Stock Exchange on the date such Director Compensation would have been paid, and (B) dividing (z) the amount determined in clause (A) above by (xx) an amount equal to 95% of the closing price of the Company Stock as reported on the New York Stock Exchange on the date such Director Compensation would have been paid. (b) The balance credited to a Participant's Investment Fund Accounts and Stock Account shall be adjusted from time to time to reflect the equivalent investment performance of the applicable Investment Fund or of Fund D of the Profit-Sharing Plan. No transfers may be made among the Investment Fund Accounts or between the Investment Fund Accounts and the Stock Account. 6 (c) The Company shall submit to each Participant, within 120 days after the close of each calendar year, a statement, setting forth the balance to the credit of such Participant in his Deferral Account, as well as the allocation thereof among the Investment Fund Accounts and the Stock Account as of the last business day of such year. 5. Payment of Deferred Compensation. (a) Payment of a Participant's Deferral Account shall be made or commenced within 60 days after the Participant's retirement, death, or other termination of service as a Director (other than by reason of Disability). Payment shall be made in a lump sum or in substantially equal installments over a period not to exceed ten years, in accordance with the Participant's election made at the time of his deferral election. (b) In the event of a Participant's death prior to payment of the balance credited to his Deferral Account, the amount remaining in his Deferral Account shall be paid to his Beneficiary in accordance with the Participant's payment election. (c) In the event of the Disability of a Participant, the Participant's Deferral Account shall be paid in a lump sum within 60 days of such Disability. (d) A Participant may request that payment be made of all or a portion of his Deferral Account due to financial hardship occurring prior to his retirement, death, 7 or other termination as a Director by submitting a written request to the Committee. Payment of the amount determined by the Committee necessary to relieve such financial hardship shall be made in a lump sum. (e) Notwithstanding anything contained herein to the contrary, in the event of the Participant's retirement, death, or other termination as a Director after a Change of Control (as defined in paragraph (g) of this Section), his Deferral Account shall be paid in a lump sum within 60 days of such retirement, death, or other termination. (f) Payments from the Plan with respect to the Participant's Investment Fund Accounts shall be made in cash equal to the value of the Participant's Investment Fund Accounts as of the last business day of the month following the date of the Participant's retirement, death, Disability or other termination of service as a Director (and each anniversary of such date if payments are made in installments). Payments from the Plan with respect to a Participant's Stock Account shall be made in shares of Company Stock equal to the number of Stock Units in the Participant's Stock Account as of the date on which payment is made; provided, however, that cash payments shall be made in lieu of fractional shares. (g) A "Change of Control" shall be deemed to have occurred if (i) any "person" (within the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange 8 Act")), other than the Company, a subsidiary of the Company or an employee benefit plan of the Company, acquires more than 25% of the shares of the Company's common stock; (ii) there is a sale or divestiture of all or substantially all of the assets of the Company; (iii) during any two-year period, individuals who constituted the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority thereof, provided that any person becoming a director during such period whose election or nomination for election by the Company's shareholders was approved by a vote of at least three-quarters of the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for purposes of this clause (iii), considered as though such person were a member of the Incumbent Board; or (iv) a change in control of the Company would be required to be reported in response to item 1(a) of the Current Report on Form 8-K, as in effect on the Effective Date pursuant to Sections 13 or 15(d) of the Exchange Act. 6. Beneficiary Designation Each Participant shall have the right, at any time, to designate any person or persons as his beneficiary or beneficiaries to whom payment under this Plan shall be paid in the event of his death prior to complete 9 distribution to Participant of his Deferral Account. Any beneficiary designation may be made or changed by a Participant by a written instrument in such form prescribed by the Committee which is filed with the Company prior to the Participant's death. If a Participant fails to designate a beneficiary, or if all designated beneficiaries predecease the Participant, then any amounts otherwise payable to the Participant's beneficiary shall be paid to the Participant's estate. 7. Amendment and Termination of Plan (a) The Board may at any time amend the Plan in whole or in part. (b) The Board may, in its sole discretion, terminate the Plan at any time, and upon any such termination, the Company shall immediately pay to each Participant in a lump sum the then remaining balance in the Participant's Deferral Account. 8. Miscellaneous (a) The Company's obligation to make payments under the Plan shall be contractual only and all payments hereunder shall be made by the Company from its general assets at the time and in the manner provided for in the Plan. (b) Neither a Participant nor any other person shall have any right to sell, assign, transfer, pledge, anticipate, or otherwise encumber, the amounts, if any, 10 payable hereunder, to the Participant or such other person. No part of the amounts payable under the Plan shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. (c) This Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. EX-11 9 EXHIBIT 11 EXHIBIT 11 1. THE BANK OF NEW YORK COMPANY, INC. Computation of Earnings Per Common Share For the Years Ended December 31,
1993 1992 1991 ---- ---- ---- (in millions, except per share amounts) Weighted Average Number of Shares of Common Stock for Primary Computation 93 86 80 Shares Assumed to be Issued on Conversion: Debentures 6 6 2 Cumulative Preferred Stock 1 2 2 ----- ----- ----- Weighted Average Number of Shares of Common Stock Assuming Full Dilution 100 94 84 ===== ===== ===== Net Income $ 559 $ 393 $ 134 Dividend Requirements on Preferred Stock 25 33 32 ----- ----- ----- Net Income Available to Common Shareholders 534 360 102 Interest On Convertible Debentures, Net of Tax 10 11 4 Dividends on Convertible Preferred Stock 3 6 6 ----- ----- ----- Net Income Available to Common Shareholders, Assuming Full Dilution $ 547 $ 377 $ 112 ===== ===== ===== Earnings Per Share: Primary $5.74 $4.19 $1.27 Fully Diluted 5.44 4.00 1.34* *Antidilutive
EX-12 10 EXHIBIT 12 EXHIBIT 12 1. THE BANK OF NEW YORK COMPANY, INC. Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends For The Years Ended December 31
EARNINGS 1993 1992 1991 1990 1989 - -------- ---- ---- ---- ---- ---- (Dollars in millions) Income Before Income Taxes $ 886 $ 588 $ 208 $ 430 $ 137 Fixed Charges, Excluding Interest on Deposits 340 346 378 816 973 ------ ------- ------ ------ ------ Income Before Income Taxes and Fixed Charges Excluding Interest on Deposits 1,226 934 586 1,246 1,110 Interest on Deposits 701 1,005 1,794 2,489 2,575 ------ ------- ------ ------ ------ Income Before Income Taxes and Fixed Charges, Including Interest on Deposits $1,927 $ 1,939 $2,380 $3,735 $3,685 ====== ======= ====== ====== ====== FIXED CHARGES - ------------- Interest Expense, Excluding Interest on Deposits $ 305 $ 315 $ 346 $ 782 $ 936 One-Third Net Rental Expense* 35 31 32 34 37 ------ ------ ------ ------ ----- Total Fixed Charges, Excluding Interest on Deposits 340 346 378 816 973 Interest on Deposits 701 1,005 1,794 2,489 2,575 ------ ------ ------ ------ ----- Total Fixed Charges, Including Interest on Deposits $1,041 $1,351 $2,172 $3,305 $3,548 ====== ====== ====== ====== ====== PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ 40 $ 50 $ 51 $ 47 $ 51 - ------------------------------ ====== ====== ====== ====== ====== EARNINGS TO FIXED CHARGES RATIOS - -------------------------------- Excluding Interest on Deposits 3.61x 2.70x 1.55x 1.53x 1.14x Including Interest on Deposits 1.85 1.44 1.10 1.13 1.04 EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS RATIOS - ---------------------------------- Excluding Interest on Deposits 3.23 2.36 1.37 1.44 1.08 Including Interest on Deposits 1.78 1.38 1.07 1.11 1.02 *The proportion deemed representative of the interest factor.
EX-13 11 EXHIBIT 13 1 EXHIBIT 13 1993 Annual Report to Shareholders FINANCIAL HIGHLIGHTS The Bank of New York Company, Inc.
Dollars in millions, except per share amounts 1993 1992 1991 1990 1989 Net Interest Income $ 1,497 $ 1,367 $ 1,350 $ 1,476 $ 1,413 Noninterest Income 1,319 1,183 1,094 976 956 Provision for Loan Losses 284 443 778 495 789 Noninterest Expense 1,646 1,519 1,458 1,527 1,443 Net Income 559 393 134 311 96 Net Income Available to Common Shareholders 534 360 102 278 61 Return on Average Assets 1.20% 0.85% 0.29% 0.59% 0.18% Return on Average Common Shareholders' Equity 14.98 12.00 3.85 10.64 2.28 Common Dividend Payout Ratio 27.99 33.89 125.49 57.91 234.43 Per Common Share Primary Earnings $ 5.74 $ 4.19 $ 1.27 $ 3.51 $ .79 Fully Diluted Earnings 5.44 4.00 - 3.51 .81 Cash Dividends 1.71 1.52 1.67 2.12 1.97 Market Value at Year End 57.00 53.88 30.88 17.75 40.25 Average Securities $ 6,352 $ 6,202 $ 4,676 $ 4,623 $ 5,210 Average Loans 30,427 30,345 32,719 38,139 37,898 Average Total Assets 46,644 46,227 46,617 53,214 53,135 Average Deposits 32,837 33,237 35,669 37,905 37,400 Average Long-Term Debt 1,729 1,386 991 872 1,041 Average Preferred Shareholders' Equity 334 409 395 395 413 Average Common Shareholders' Equity 3,563 2,996 2,652 2,611 2,661 At Year End Allowance for Loan Losses as a Percent of Loans 3.17% 3.63% 3.57% 3.11% 2.99% Tier I Capital Ratio 8.87 7.59 5.79 5.03 4.61 Total Capital Ratio 13.65 12.30 9.40 7.96 7.53 Leverage Ratio 7.99 7.11 5.77 5.02 4.58 Common Equity to Assets Ratio 8.29 7.30 6.14 5.36 4.81 Total Equity to Assets Ratio 8.94 8.24 7.04 6.16 5.55 Common Shares Outstanding 93,613,882 91,065,452 80,372,760 79,668,862 78,282,848 Employees 15,621 16,167 15,139 15,847 17,083 The above amounts have been restated for the acquisition of National Community Banks, Inc., and the adoption of the liability method of accounting for income taxes.
2 Consolidated Balance Sheets The Bank of New York Company, Inc.
December 31, - -------------------------------------------------------------------------------- Dollars in millions, except per share amounts 1993 1992 ---- ---- Assets Cash and Due from Banks $ 4,511 $ 5,506 Interest-Bearing Deposits in Banks 269 233 Securities: Held for Investment (market value of $4,449 in 1993 and $3,412 in 1992) 4,356 3,322 Held for Sale (market value of $1,243 in 1993 and $2,597 in 1992) 1,241 2,578 ------- ------- Total Securities 5,597 5,900 Trading Assets at market value 1,325 736 Federal Funds Sold and Securities Purchased Under Resale Agreements 36 265 Loans (less allowance for loan losses of $970 in 1993 and $1,072 in 1992) 29,600 28,425 Premises and Equipment 945 974 Due from Customers on Acceptances 888 615 Accrued Interest Receivable 222 231 Other Assets 2,153 2,325 ------- ------- Total Assets $45,546 $45,210 ======= ======= Liabilities and Shareholders' Equity Deposits: Noninterest-Bearing (principally domestic offices) $ 8,690 $ 8,761 Interest-Bearing Domestic Offices 15,156 16,049 Foreign Offices 8,313 8,445 ------- ------- Total Deposits 32,159 33,255 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,711 1,773 Other Borrowed Funds 2,781 3,029 Acceptances Outstanding 901 615 Accrued Taxes and Other Expenses 763 560 Accrued Interest Payable 111 153 Other Liabilities 458 400 Long-Term Debt 1,590 1,695 ------- ------- Total Liabilities 41,474 41,480 ------- ------- Shareholders' Equity Preferred Stock-no par value, authorized 5,000,000 shares, outstanding 3,648,100 shares in 1993 and 4,400,792 shares in 1992 267 400 Class A Preferred Stock-par value $2.00 per share, authorized 5,000,000 shares, outstanding 1,085,415 shares in 1993 and 1,150,000 shares in 1992 27 28 Common Stock-par value $7.50 per share, authorized 350,000,000 shares, outstanding 93,700,481 shares in 1993 and 91,079,286 shares in 1992 703 683 Additional Capital 1,544 1,467 Retained Earnings 1,536 1,153 ------- ------- 4,077 3,731 Less: Treasury Stock (86,599 shares in 1993 and 13,834 shares in 1992), at cost 5 1 ------- ------- Total Shareholders' Equity 4,072 3,730 ------- ------- Total Liabilities and Shareholders' Equity $45,546 $45,210 ======= ======= See accompanying Notes to Consolidated Financial Statements.
3 Consolidated Statements of Income The Bank of New York Company, Inc.
In millions, except per share amounts For the years ended December 31, - -------------------------------------------------------------------------------- 1993 1992 1991 ---- ---- ---- Interest Income Loans $2,025 $2,102 $2,915 Securities Taxable 235 262 182 Exempt from Federal Income Taxes 69 86 110 ------ ------ ------ 304 348 292 Deposits in Banks 24 76 87 Federal Funds Sold and Securities Purchased Under Resale Agreements 97 85 138 Trading Assets 53 76 58 ------ ------ ------ Total Interest Income 2,503 2,687 3,490 ------ ------ ------ Interest Expense Deposits 701 1,005 1,794 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 102 136 177 Other Borrowed Funds 86 85 93 Long-Term Debt 117 94 76 ------ ------ ------ Total Interest Expense 1,006 1,320 2,140 ------ ------ ------ Net Interest Income 1,497 1,367 1,350 Provision for Loan Losses 284 443 778 ------ ------ ------ Net Interest Income After Provision for Loan Losses 1,213 924 572 ------ ------ ------ Noninterest Income Processing Fees Securities 307 273 244 Other 161 148 124 ------ ------ ------ 468 421 368 Trust and Investment Fees 131 118 110 Service Charges and Fees 460 442 385 Securities Gains 64 42 95 Other 196 160 136 ------ ------ ------ Total Noninterest Income 1,319 1,183 1,094 ------ ------ ------ Noninterest Expense Salaries and Employee Benefits 813 714 650 Net Occupancy 178 168 176 Furniture and Equipment 95 97 107 Other 560 540 525 ------ ------ ------ Total Noninterest Expense 1,646 1,519 1,458 ------ ------ ------ Income Before Income Taxes 886 588 208 Income Taxes 327 195 74 ------ ------ ------ Net Income $ 559 $ 393 $ 134 ====== ====== ====== Net Income Available to Common Shareholders $ 534 $ 360 $ 102 ====== ====== ====== Per Common Share Data: Primary Earnings $ 5.74 $ 4.19 $ 1.27 Fully Diluted Earnings 5.44 4.00 - Cash Dividends 1.71 1.52 1.67 Average Common Shares Outstanding 93.042 85.724 80.184 See accompanying Notes to Consolidated Financial Statements.
4 Consolidated Statements of Changes in Shareholders' Equity The Bank of New York Company, Inc.
Dollars in millions For the years ended December 31, 1993 1992 1991 ---- ---- ---- Preferred Stock Balance, January 1 $ 428 $ 395 $ 395 Issuance in Public Offering (shares: 1,334,000) - 139 - Redemption and Repurchase (shares: 752,120 in 1993 and 100,000 in 1992) (76) (99) - Conversion of Preferred Stock (shares: 65,157 in 1993 and 75 in 1992) (58) (7) - ------ ------ ------ Balance, December 31 294 428 395 ------ ------ ------ Common Stock Balance, January 1 683 604 603 Issuance in Public Offering (shares: 9,200,000) - 69 - Conversion of Preferred Stock (shares: 1,468,546 in 1993 and 184,790 in 1992) 11 1 - Other Issuances (shares: 1,152,649 in 1993, 1,113,551 in 1992, and 164,285 in 1991) 9 9 1 ------ ------ ------ Balance, December 31 703 683 604 ------ ------ ------ Additional Capital Balance, January 1 1,467 1,165 1,169 Issuance in Public Offering - 270 - Conversion of Preferred Stock 35 4 - Redemption and Repurchases of Preferred Stock (1) (1) - Other 43 29 (4) ------ ------ ------ Balance, December 31 1,544 1,467 1,165 ------ ------ ------ Retained Earnings Balance, January 1 1,153 913 907 Net Income 559 393 134 Cash Dividends Common Stock (150) (122) (127) Preferred Stock (27) (33) (32) Change in Accumulated Foreign Currency Translation Adjustment 1 2 (2) Unrealized Gain on Marketable Equity Securities - - 33 ------ ------ ----- Balance, December 31 1,536 1,153 913 ------ ------ ----- Less: Treasury Stock Balance, January 1 1 6 21 Issued (shares: 5,400 in 1993, 212,173 in 1992, and 625,896 in 1991) - (6) (17) Acquired (shares: 78,165 in 1993, 17,822 in 1992, and 86,283 in 1991) 4 1 2 ------ ------ ------ Balance, December 31 5 1 6 ------ ------ ------ Total Shareholders' Equity, December 31 $4,072 $3,730 $3,071 ====== ====== ====== See accompanying Notes to Consolidated Financial Statements.
5 Consolidated Statements of Cash Flows The Bank of New York Company, Inc.
In millions For the years ended December 31, - ------------------------------------------------------------------------------- 1993 1992 1991 ---- ---- ---- Operating Activities Net Income $ 559 $ 393 $ 134 Adjustments to Determine Net Cash Provided (Used) by Operating Activities: Provision for Losses on Loans and Other Real Estate 338 520 861 Depreciation and Amortization 187 176 163 Deferred Income Taxes 195 165 18 Securities Gains (64) (42) (95) Change in Trading Assets (591) (251) (266) Change in Securities Held for Sale 1,325 (1,016) (956) Change in Accruals and Other, Net 155 727 (527) ------ ------ ------ Net Cash Provided (Used) by Operating Activities 2,104 672 (668) ------ ------ ------ Investing Activities Change in Interest-Bearing Deposits in Banks 16 155 (100) Purchases of Securities Held for Investment (2,344) (1,937) (1,528) Sales of Securities Held for Investment 22 361 846 Maturities of Securities Held for Investment 1,174 1,159 1,278 Net Principal Collected (Disbursed) on Loans to Customers (2,030) 1,049 629 Sales of Loans 494 634 2,406 Sales of Other Real Estate 80 81 98 Change in Federal Funds Sold and Securities Purchased Under Resale Agreements 229 1,462 (67) Purchases of Premises and Equipment (47) (40) (42) Acquisitions, Net of Cash Acquired 58 688 78 Proceeds from the Sale of Premises and Equipment 3 3 5 Other, Net (35) 37 (17) ------ ------ ------ Net Cash Provided (Used) by Investing Activities (2,380) 3,652 3,586 ------ ------ ------ Financing Activities Change In Deposits (1,048) (1,781) (3,484) Change in Federal Funds Purchased and Securities Sold Under Repurchase agreements 938 (1,927) 94 Change in Other Borrowed Funds (248) 1,897 (704) Proceeds from the Issuance of Long-Term Debt 546 595 397 Repayments of Long-Term Debt (655) (131) (33) Redemption and Repurchases of Preferred Stock (77) (100) - Conversion of Preferred Stock (13) (2) - Issuance of Common Stock 53 380 17 Issuance of Preferred Stock - 139 - Treasury Stock Acquired (4) (1) (2) Cash Dividends Paid (179) (153) (161) Other - - (2) ------ ------ ------ Net Cash Used by Financing Activities (687) (1,084) (3,878) ------ ------ ------ Effect of Exchange Rate Changes on Cash (32) (33) (12) ------ ------ ------ Change in Cash and Due From Banks (995) 3,207 (972) Cash and Due from Banks at Beginning of Year 5,506 2,299 3,271 ------ ------ ------ Cash and Due from Banks at End of Year $4,511 $5,506 $2,299 ====== ====== ====== Supplemental Disclosure of Cash Flow Information Cash Paid During the Year for: Interest $1,047 $1,408 $2,199 Income Taxes 181 74 49 Noncash Investing Activity (Primarily Foreclosure of Real Estate) 54 179 235 See accompanying Notes to Consolidated Financial Statements.
6 Notes to Consolidated Financial Statements 1. Summary of Significant Accounting and Reporting Policies The following is a summary of the Company's more significant accounting and reporting policies. Securities - Debt securities, which the Company has the ability and intent to hold until maturity or on a long-term basis, are classified as held for investment and stated at cost, adjusted for discount accrued and premium amortized. Remaining debt securities are classified as securities held for sale and are stated at the lower of aggregate cost or market value. Debt securities held for sale include those management uses as part of its asset/liability management. Marketable equity securities are stated at the lower of aggregate cost or market value. Other equity securities are stated at cost. Gains and losses on the sale of securities are determined by the specific identification method. Investments of less than a majority but at least 20% ownership are accounted for by the equity method and classified as other assets. In 1994, the Company will change its accounting for securities held for sale from the lower of aggregate cost or market to fair value. The after-tax amount of net unrealized gains or losses will be reported as a separate component of shareholders' equity. Shareholders' equity at December 31, 1993, would have been increased by $1 million if securities held for sale at that date had been recorded at fair value. Allowance for Loan Losses - The allowance for loan losses is maintained at a level that, in management's judgment, is adequate to absorb future losses. Management's judgment is based on an evaluation of existing risks of individual credits; past loan loss experience; the volume, composition, and growth of the loan portfolio; current and projected economic conditions; and other relevant factors. In 1995, a new accounting standard will require the Company to introduce the time value of money into the determination of the portion of the allowance for loan losses which relates to impaired, non-consumer loans. The loss component of impaired, non-consumer loans will be measured by the difference between their recorded value and fair value. Fair value would be either the present value of the expected future cash flows from borrowers, market value of the loan, or the fair value of the collateral. At the present time, the impact of the new method on the Company's results of operations and financial condition is not expected to be material. Nonperforming Assets - Commercial loans are placed on nonaccrual status when collateral is insufficient and principal or interest is past due 90 days or more, or when there is reasonable doubt that interest or principal will be collected. Accrued interest is usually reversed when a loan is placed on nonaccrual status. Interest payments received on nonaccrual loans may be recognized as income or applied to principal depending upon management's judgment. Loans are not restored to accruing status until principal and interest are current or they become fully collateralized. Consumer loans are not classified as nonperforming assets, but are charged off when they are between 120 and 185 days past due, depending on the product. Interest accrual on consumer loans is suspended when the loans are 120 days past due. Real estate acquired in satisfaction of loans is carried in other assets at the lower of the recorded investment in the property or fair value. Interest Rate Contracts - Interest rate swaps and forward and futures contracts are used as part of the Company's asset/liability management. Gains and losses on hedge transactions are deferred and amortized as adjustments to net interest income over the lives of the hedged assets or liabilities. Other gains and losses are recognized currently in noninterest income. Other - Certain 1992 and 1991 information has been reclassified to conform its presentation with the 1993 financial statements. 7 2. Mergers and Acquisitions On August 11, 1993, the 10,730,668 outstanding shares of National Community Banks'(NCB) common stock were exchanged for 10,301,441 shares of the Company's common stock and the 1,149,750 outstanding shares of NCB's preferred stock were exchanged for an equal number of shares of the Company's Class A preferred stock. The merger was accounted for as a pooling of interests and prior period financial statements were restated. Previously reported revenue (total interest and noninterest income) and net income for the years ended December 31, 1992 and 1991, for the Company and NCB are as follows: - --------------------------------------------------------- In millions 1992 1991 - --------------------------------------------------------- Revenue Company $3,566 $4,230 NCB 304 354 Net Income Company 369 122 NCB 24 12 In December 1992, the Company acquired substantially all of the banking activities of Barclays Bank of New York, N.A. (Barclays). This transaction added deposits of $1.9 billion and assets of $1.8 billion. The pro forma effect of this acquisition had it occurred January 1, 1991 would not have been material. In early 1994, the Company acquired the factoring business of the Bank of Boston. 3. Cash Balance Requirements The subsidiary banks of the Company are required to maintain balances with Federal Reserve Banks under the Federal Reserve Act and Regulation D. Required balances averaged $769 million and $679 million for the years 1993 and 1992. 4. Securities A comparison of the carrying amount and market value of securities for the years 1993, 1992, and 1991; 1993 and 1992 gross unrealized gains and losses; and a maturity schedule of investments in debt securities is incorporated by reference from "Securities" in the Management's Discussion and Analysis Section of this Report. Assets, including securities sold under repurchase agreements, carried at $3 billion, $2 billion, and $3 billion at December 31, 1993, 1992, and 1991 were pledged for various purposes as required or permitted by law. 5. Loans The Company's loan distribution and industry concentrations of credit risk at December 31, 1993 and 1992 are incorporated by reference from "Loans" and "Highly Leveraged Transactions" in the Management's Discussion and Analysis Section of this Report. The Company's retail, community, and middle market banking operations in the New York metropolitan area create a significant geographic concentration. 8 Transactions in the allowance for loan losses are summarized as follows: - ------------------------------------------------------------- In millions 1993 1992 1991 - ------------------------------------------------------------- Balance, January 1 $1,072 $1,084 $1,111 Charge-Offs (449) (628) (820) Recoveries 62 117 43 ------ ------ ------ Net Charge-Offs (387) (511) (777) Provision 284 443 778 Acquisitions/(Dispositions) 1 56 (28) ------ ------ ------ Balance, December 31 $ 970 $1,072 $1,084 ====== ====== ====== Nonaccrual and reduced rate loans outstanding at December 31, 1993, 1992, and 1991 were $540 million, $788 million, and $1,173 million. Nonperforming loans at December 31, 1993 and 1992 exclude $117 million of reduced rate Philippine obligations secured by zero coupon U. S. Treasury bonds. At December 31, 1993, commitments to borrowers whose loans were classified as nonaccrual or reduced rate were not material. Interest income received on nonaccrual and reduced rate loans exceeded reversals by $4 million in 1993, $7 million in 1992, and $5 million in 1991. Interest income would have been increased by $27 million, $89 million, and $167 million if loans on nonaccrual status at December 31, 1993, 1992, and 1991 had been performing for the entire year. At year end, foreign (including LDC) loans on nonperforming status were $130 million in 1993, $198 million in 1992, and $146 million in 1991. Interest income received on foreign nonperforming loans equaled reversals in 1993, and exceed reversals by $1 million in 1992, and $3 million in 1991. Interest income would have been increased by $6 million, $10 million, and $15 million if foreign loans on nonaccrual status at December 31, 1993, 1992, and 1991 had been performing for the entire year. Other real estate was $99 million, $268 million, and $369 million, at December 31, 1993, 1992, and 1991. Writedowns of and expenses related to other real estate included in noninterest expense were $53 million, $106 million, and $103 million, in 1993, 1992, and 1991. 9 6. Long-Term Debt The following is a summary of the contractual maturity and sinking fund requirements of long-term debt at December 31, 1993 and 1992: 1993 1992 - --------------------------------------------------------------------- ----- Due 1 Year Due Under Through 5 After 5 Years In millions 1 Year Years Through 15 Total Total ------ --------- ------------- ----- ----- Fixed $ 78 $ 12 $1,409 $1,499 $ 958 Variable 31 24 36 91 737 ---- ---- ------ ------ ------ Total $109 $ 36 $1,445 $1,590 $1,695 ==== ==== ====== ====== ====== Fixed-rate debt at December 31, 1993 had interest rates ranging from 6.50% to 8.50%. The weighted average interest rates on fixed-rate debt at December 31, 1993 and 1992 were 7.29% and 7.70%. To reduce exposure to interest rate movements, the Company enters into interest rate swap agreements for some of its debt issues. As a result of these agreements, the effective interest rates differ from those stated. The weighted average interest rates on variable-rate debt at December 31, 1993 and 1992 were 5.58% and 5.14%. The Company's $250 million of 7.50% subordinated debentures due 2001 are convertible at the option of the holder into common stock of the Company at a price of $39.10 per share, subject to adjustment in certain circumstances. The debentures may be redeemed, at the option of the Company, on or after August 15, 1996 at an initial redemption price of 103.75% of the principal amount, declining by 0.75% per annum. 10 7. Shareholders' Equity The following is a summary of the Company's preferred stock outstanding: Dollars in millions, except per share amounts December 31, 1993 1992 - -------------------------------------------------------------------------------- 8.60% Cumulative, stated value $625 per share, issued 184,000 shares (4,600,000 depositary shares) $111 $111 7.75% Cumulative Convertible, par value $2 per share, issued 1,085,415 shares in 1993 and 1,150,000 shares in 1992 27 28 Other 156 289 ---- ---- Total $294 $428 ==== ==== The other preferred stocks at December 31, 1993 were redeemed in the first quarter of 1994. All holders of cumulative preferred stock have cumulative dividend rights in preference to holders of common stock. The 8.60% cumulative preferred stock has a liquidation preference of $625 per share and is redeemable at the option of the Company on and after December 1, 1997 at $625 per share, plus cumulative and unpaid dividends. The Class A 7.75% cumulative convertible preferred stock has a liquidation preference of $25 per share. It is redeemable at the option of the Company on or after July 1, 1996 at $26.16 per share and at decreasing prices thereafter to $25 per share on or after July 1, 2002, plus cumulative and unpaid dividends. Each share is convertible at the option of the holder into 0.9232 shares of common stock of the Company subject to adjustment in certain circumstances. Warrants expiring in 1998 (exercise price $62 per share) to purchase approximately 14,120,539 shares of the Company's common stock were outstanding at December 31, 1993. At December 31, 1993, the Company had reserved for issuance 27 million common shares pursuant to the terms of securities and employee benefit plans. The Company has a preferred stock purchase rights plan. The plan provides that if any person or group becomes the beneficial owner of 20% or more of the Company's common stock (an "acquiring person"), then on and after the tenth day thereafter, each right would entitle the holder to purchase $400 in market value of the Company's common stock for $200. In addition, if there is a business combination between the Company and an acquiring person, or in certain other circumstances, each right (if not previously exercised) would entitle the holder to purchase $200 in market value of the common stock of the acquiring person for $100. The rights are redeemable by the Company at $0.05 per right until they are exercisable, and will expire in 2004. The effect of common stock equivalents (stock options and warrants) on earnings per share is not dilutive. Fully diluted earnings per share give effect to the assumed conversion of the convertible debentures and convertible preferred stock. The effect of the assumed conversion of the convertible preferred stock and the 7.50% convertible debentures was antidilutive in 1991. 11 8. Stock Option Plans The Company has stock option plans (the Plans) which provide for the issuance of stock options at fair market value at the date of grant to officers and key employees of the Company and its subsidiaries. All options related to plans adopted prior to 1993 have been granted. Under the Company's 1993 Plan, options to acquire common stock may be granted in amounts that do not exceed, on a cumulative basis, 1% of the outstanding shares of common stock per year, and, subject to adjustment, options covering no more than approximately 4.2 million shares in the aggregate may be granted during the first five years. Generally, each option granted under the Plans is exercisable between one and 10 years from the date of grant. The following is a summary of activity under the Plans for the years 1993, 1992, and 1991:
1993 1992 1991 - -------------------------------------------------------------------------------- Option Option Option Price Price Price Shares per Share Shares per Share Shares per Share - -------------------------------------------------------------------------------- Outstanding, January 1 3,044,594 $11.13 to 2,970,138 $11.13 to 2,286,568 $11.13 to 44 44 44 Granted 1,027,150 54.75 902,330 16.67 to 880,000 26.75 37.75 Exercised (708,804) 11.13 to (748,634) 18.75 to (13,456) 18.75 to 44 44 31.25 Canceled (117,918) 18.75 to (79,240) 25.58 to (182,974) 18.75 to 54.75 44 44 --------- --------- -------- -------- -------- -------- Outstanding, $18.75 to $11.13 to $11.13 to December 31 3,245,022 54.75 3,044,594 44 2,970,138 44 ========= ========= ========= ========= ========= ======== Exercisable, $18.75 to $11.13 to $11.13 to December 31 1,871,775 44 1,826,496 44 1,868,094 44 ========= ======== ========= ========= ========== ======== Available for Grant, December 31 2,803,925 None 997,839 ========= ==========
9. Income Taxes In the first quarter of 1993, the Company changed retroactively from the deferred method to the liability method of accounting for income taxes and restated its financial statements. Shareholders' equity was reduced by a $46 million charge to retained earnings in prior period financial statements. Income taxes included in the consolidated statements of income consist of the following:
1993 1992* 1991* ---------------------- ---------------------- ---------------------- In million Current Deferred Total Current Deferred Total Current Deferred Total ------- -------- ----- ------- -------- ----- ------- -------- ----- Federal $ 98 $ 145 $243 $ 13 $112 $125 $ 38 $ 11 $ 49 Foreign 11 - 11 10 - 10 10 - 10 State and Local 23 50 73 7 53 60 8 7 15 ---- ----- ---- ---- ---- ---- ---- ---- ---- $132 $ 195 $327 $ 30 $165 $195 $ 56 $ 18 $ 74 ==== ===== ==== ==== ==== ==== ==== ==== ====
* Reclassified to reflect current and deferred taxes upon filing of the tax returns. 12 The components of income before taxes for the computation of taxes are as follows: - ------------------------------------- In millions 1993 1992 1991 - ------------------------------------- Domestic $821 $540 $158 Foreign 65 48 50 ---- ---- ---- $886 $588 $208 ==== ==== ==== The Company's net deferred tax liability (included in accrued taxes) at December 31 consisted of the following: - ------------------------------------------------------------ In millions 1993 1992* 1991* - ------------------------------------------------------------ Lease Financings $ 792 $ 722 $ 657 Depreciation and Amortization 287 280 257 Credit Losses on Nonperforming Loans (515) (532) (608) Other 106 70 68 ----- ------ ------ Net Deferred Tax Liability $ 670 $ 540 $ 374 ===== ====== ====== * Reclassified to reflect current and deferred taxes upon filing of the tax returns. The Company has not recorded a valuation allowance because it expects to realize all of its deferred tax assets. A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is shown in the following table: 1993 1992 1991 ---- ---- ---- % of Pre- % of Pre- % of Pre- Tax Income Tax Income Tax Income ---------- ---------- ---------- Computed Provision 35.0% 34.0% 34.0% Tax-Exempt Interest (2.7) (4.9) (17.6) Foreign Operations (0.2) (3.2) 0.8 State and Local Income Taxes, Net of Federal Income Tax Benefit 4.6 6.7 12.6 Nondeductible Expenses 2.3 3.1 8.7 Leveraged Lease Portfolio 0.3 (0.7) (2.3) Other (2.4) (1.8) (0.6) ----- ----- ----- 36.9% 33.2% 35.6% ===== ===== ===== 13 10. Employee Benefit Plans Pension Plans - ------------- The Company has defined benefit retirement plans covering substantially all full time employees. The Company has an Employee Stock Ownership Plan (ESOP), which may provide additional benefits. The Company's funding policy is to annually contribute an amount necessary to satisfy the Internal Revenue Service's funding standards. The following table presents the income (expense) components included in net pension income: In millions 1993 1992 1991 ---- ---- ---- Service Cost - Benefits Earned $ (14) $(14) $(13) Interest Cost on Projected Benefit Obligation (20) (23) (19) Actual Return on Plan Assets 52 74 80 Net Amortization and Deferral 9 (20) (29) ---- ---- ---- Net Pension Income $ 27 $ 17 $ 19 ===== ==== ==== The expected long-term rate of return on plan assets used in computing pension income was 10.5% in 1993, 1992, and 1991. The ESOP provision was $1 million in 1993, compared with $3 million in 1992 and 1991. 14 The following table sets forth the retirement plans' funded status at December 31, 1993 and 1992: In millions 1993 1992 ---- ---- Present Value of Accumulated Benefit Obligation, Including Vested Benefits of $265 in 1993 and $191 in 1992 $281 $199 ==== ==== Present Value of Projected Benefit Obligation $311 $232 Plan Assets at Fair Value, Primarily Short-Term Investments, Fixed-Income and Equity Securities 588 550 ---- ---- Excess of Plan Assets over the Projected Benefit Obligation 277 318 Unrecognized Prior Service Cost (27) (28) Unrecognized Net Loss (Gain) from Past Differences and Effects of Changes in Assumptions 41 (20) Unrecognized Net Asset Being Amortized over 16.2 Years (27) (31) ---- ---- Prepaid Pension Cost Included in Other Assets $264 $239 ==== ==== Assumptions used in computing the benefit obligation were: 1993 1992 ---- ---- Weighted Average Discount Rate 7.88% 8.75% Rate of Increase in Future Compensation Level 4.38 4.38 Other Postretirement Benefits - ----------------------------- The Company provides health care and life insurance benefits for certain retired employees. In the first quarter of 1993, the Company changed to the accrual from the cash method of accounting for these benefits. The cost of these benefits for the year ended December 31, 1993 consisted of the following components: (in millions) Service Cost - Benefits Earned $ 3 Accumulated Benefit Obligation: Interest 11 Amortization 7 --- Total $21 === The assumed health care cost trend rates to be used in determining cost of these benefits for 1994 is 9%, decreasing proportionately in each successive year to 6% in 2010 and thereafter. A change of one percentage point in this rate for each year would change the benefit obligation by 13% and the cost of the benefits by 9%. 15 The following table sets forth the funded status of the Company's other postretirement benefit obligation as of December 31: (in millions) 1993 1992 ----- ---- Accumulated Postretirement Benefit Obligation: Retirees $ 88 $ 80 Fully Eligible Active Plan Participants 23 21 Other Active Plan Participants 37 29 ----- ----- Total Obligation 148 130 Unrecognized Net Gain (Loss) from Past Differences and Effects of Changes in Assumptions (16) - Unrecognized Net Liability Being Amortized Over 20 Years (123) (130) ----- ----- Accrued Postretirement Benefit Obligation Included in Other Liabilities $ 9 $ - ===== ===== The assumed discount rates used in determining the accumulated benefit obligation were 7.75% and 8.75% in 1993 and 1992. 11. Foreign Operations Certain information with respect to foreign operations for the years ended December 31, 1993, 1992, and 1991 is incorporated by reference from "Foreign Operations" in the Management's Discussion and Analysis section of this Report. Foreign exchange activities arise from servicing customers' needs for foreign exchange, and from managing the Company's foreign currency positions. Net gains resulting from foreign exchange transactions were $54 million, $66 million, and $47 million in 1993, 1992, and 1991, and are included in other noninterest income. 16 12. Company Financial Information The condensed financial statements of the Company are as follows: Balance Sheets In millions December 31, 1993 1992 - -------------------------------------------------------------------- Assets Cash and Due from Banks $ 2 $ 6 Securities 96 188 Loans 3 16 Investment in and Advances to Subsidiaries Banks 5,713 5,561 Other 435 348 ------ ------ 6,148 5,909 ------ ------ Other Assets 129 118 ------ ------ Total Assets $6,378 $6,237 ====== ====== Liabilities and Shareholders' Equity Other Borrowed Funds $ 407 $ 375 Due to Subsidiaries Banks 42 155 Other 12 218 ------ ------ 54 373 ------ ------ Other Liabilities 256 132 Long-Term Debt 1,589 1,627 ------ ------ Total Liabilities 2,306 2,507 ------ ------ Shareholders' Equity* Preferred 294 428 Common 3,778 3,302 ------ ------ Total Liabilities and Shareholders' Equity $6,378 $6,237 ====== ====== *See Consolidated Statements of Changes in Shareholders' Equity. 17 Statements of Income In millions For the years ended December 31, 1993 1992 1991 - ----------------------------------------------------------------------------- Operating Income Dividends from Subsidiaries Banks $171 $156 $302 Other 7 32 - Interest from Subsidiaries Banks 99 70 53 Other 1 1 1 Other 21 8 23 ---- ---- ---- Total 299 267 379 ---- ---- ---- Operating Expenses Interest (including $8 in 1993, $10 in 1992, and $10 in 1991 to nonbank subsidiaries) 128 108 114 Other 18 10 9 ---- ---- ---- Total 146 118 123 ---- ---- ---- Income Before Income Taxes and Equity in Undistributed Earnings of Subsidiaries 153 149 256 Income Tax Benefit (11) (19) (6) ---- ---- ---- Income Before Equity in Undistributed Earnings of Subsidiaries 164 168 262 ---- ---- ---- Equity in Undistributed Earnings of Subsidiaries Banks 386 236 (147) Other 9 (11) 19 ---- ---- ---- 395 225 (128) ---- ---- ---- Net Income $559 $393 $134 ==== ==== ==== 18 Statements of Cash Flows In millions For the years ended December 31, 1993 1992 1991 - ------------------------------------------------------------------------------- Operating Activities Net Income $ 559 $ 393 $ 134 Adjustments to Determine Net Cash Provided by Operating Activities Amortization 4 2 1 Equity in Undistributed Earnings of Subsidiaries (393) (226) 130 Securities (Gains) Losses (14) 15 (10) Change in Interest Receivable (4) (4) (7) Change in Interest Payable (1) 13 5 Change in Taxes Payable 31 (1) 105 Other, Net 3 (18) (3) ----- ------ ----- Net Cash Provided by Operating Activities 185 174 355 ----- ------ ----- Investing Activities Purchase of Securities (57) (39) (10) Sales of Securities 117 94 37 Maturities of Securities 37 4 5 Change in Loans 8 8 15 Acquisition of, Investment in, and Advances to Subsidiaries 154 (1,265) (77) ----- ------ ----- Net Cash Provided (Used) by Investing Activities 259 (1,198) (30) ----- ------ ----- Financing Activities Change in Other Borrowed Funds 32 257 (476) Proceeds from the Issuance of Long-Term Debt 546 595 397 Repayments of Long-Term Debt (589) (129) (29) Change in Advances from Subsidiaries (217) 40 (72) Redemption and Repurchases of Preferred Stock and Warrants (77) (100) - Issuance of Common Stock 53 380 17 Issuance of Preferred Stock - 139 - Conversion of Preferred Stock (13) (2) - Treasury Stock Acquired (4) (1) (2) Cash Dividends Paid (179) (153) (161) Other, Net - - (3) ----- ------ ----- Net Cash Provided (Used) by Financing Activities (448) 1,026 (329) ----- ------ ----- Change in Cash and Due from Banks (4) 2 (4) Cash and Due from Banks at Beginning of Year 6 4 8 ----- ------ ----- Cash and Due from Banks at End of Year $ 2 $ 6 $ 4 ===== ====== ===== Supplemental Disclosure of Cash Flow Information Cash Paid During the Year for: Interest $ 129 $ 95 $ 109 Income Taxes 152 78 33 19 The Bank of New York (Bank), a significant subsidiary, is subject to dividend limitations under the Federal Reserve Act and the New York Banking Law. The Bank of New York National Association (BNYNA) is subject to dividend limitations under the National Bank Act. Under these statutes, prior regulatory approval is required for dividends in any year that would exceed either bank's net profits for such year combined with retained net profits for the prior two years. Also, both banks are prohibited from paying a dividend in an amount greater than "undivided profits then on hand" less "bad debts" (generally loans six months or more past due). Under the first of these two standards, in 1994 the Bank could declare dividends of $365 million plus net profits earned in 1994 and BNYNA could declare dividends of $56 million plus net profits earned in 1994. Neither bank is restrained from paying dividends under the second of these two standards. In addition to these statutory tests, each bank's primary federal regulator (the Federal Reserve Board, in the case of the Bank, and the Comptroller of the Currency, in the case of BNYNA) could prohibit a dividend if they determined that the payment would constitute an unsafe or unsound banking practice. Bank regulators have indicated that, generally, dividends should be paid by banks only to the extent of earnings from continuing operations. Each of the Company, the Bank, and BNYNA must comply with risk based capital and leverage ratio guidelines established by bank regulators for bank holding companies and banks. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") restricts dividend payments that would cause certain capital ratios to fall below "adequate" capital ratio standards. Each of the Company, the Bank, and BNYNA is in compliance with the capital and leverage ratio standards applicable to it. The dividend policy of The Bank of New York (Delaware) is to declare dividends that, at a minimum, allow it to meet capital guidelines established by the Federal Deposit Insurance Corporation ("FDIC"). The Bank of New York (Delaware) is also in compliance with the capitalization requirements set by FDICIA. Consistent with its policy regarding bank holding companies serving as a source of financial strength for their subsidiary banks, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common stockholders has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the bank holding company's capital needs, asset quality, and overall financial condition. The Federal Reserve Act limits amounts of, and requires collateral on, extensions of credit by the Company's insured bank subsidiaries to the Company and, with certain exceptions, its nonbank affiliates; also, there are restrictions on the amounts of investments by such banks in stock and other securities of the Company and such affiliates, and restrictions on the acceptance of their securities as collateral for loans by such banks. Extensions of credit by insured bank subsidiaries to each of the Company and such affiliates are limited to 10% of such bank subsidiary's capital and surplus, and in the aggregate for the Company and all such affiliates to 20%. 13. Fair Value of Financial Instruments The carrying amount of the Company's financial instruments (i.e., monetary assets and liabilities) is determined under different accounting methods-see Note 1. The following disclosure discusses these instruments on a uniform basis - - fair value. However, active markets do not exist for the greatest portion of these instruments. As a result, fair value determinations require significant subjective judgments regarding future cash flows. Other judgments would result 20 in different fair values. Among the assumptions used by the Company are discount rates ranging principally from 3% to 11% at December 31, 1993 and 1992. The fair value information supplements the basic financial statements and other traditional financial data presented throughout this Report. A summary of the practices used for determining fair value is as follows: Securities and Trading Activities - --------------------------------- The fair value of securities and trading assets is based on quoted market prices, dealer quotes, or pricing models. The fair value of financial instruments such as options, future and forward rate contracts, commitments to purchase and sell foreign exchange, and foreign currency swaps, are similarly determined. The fair value of interest rate swaps is the amount that would be received or paid to terminate the agreement. Loans and Commitments - --------------------- For certain categories of consumer loans, fair value includes consideration of the quoted market prices for securities backed by similar loans. The fair value of other types of loans is determined by discounting the future cash flows (including those related to off-balance-sheet activities that serve as hedges) and using secondary market values. The fair value of commitments to extend credit, standby letters of credit, and commercial letters of credit is based upon the cost to settle the commitment. Other Financial Assets - ---------------------- The fair value of these assets are assumed to equal their carrying value due to their short maturity. Deposits, Borrowings, and Long-Term Debt - ---------------------------------------- The fair value of noninterest-bearing deposits is assumed to be their carrying amount. The fair value of interest-bearing deposits, borrowings, and long-term debt is estimated based upon the current rates for instruments of the same remaining maturity or quoted market prices for the same or similar issues and the effect of hedges. 21 The carrying amount and estimated fair value of the Company's financial instruments are as follows: In millions December 31, 1993 1992 -------------------- ------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ------ Assets: Securities and Trading Assets $ 7,040 $ 7,196 $ 6,744 $ 6,940 Loans and Commitments 28,259 28,804 27,219 27,475 Other Financial Assets 5,091 5,091 6,291 6,291 ------- ------- ------- ------- Total Financial Assets 40,390 $41,091 40,254 $40,706 ======= ======= Non-Financial Assets 5,156 4,956 ------- ------- Total Assets $45,546 $45,210 ======= ======= Liabilities: Noninterest-Bearing Deposits $ 8,690 $ 8,690 $ 8,761 $ 8,761 Interest-Bearing Deposits 23,469 23,497 24,494 24,545 Borrowings 5,603 5,607 4,955 4,955 Long-Term Debt 1,590 1,805 1,695 1,836 ------- ------- ------- ------- Total Financial Liabilities 39,352 $39,599 39,905 $40,097 ======= ======= Non-Financial Liabilities 2,122 1,575 ------- ------- Total Liabilities $41,474 $41,480 ======= ======= In determining fair value, the effects of off-balance-sheet hedge items are as follows: In millions December 31, 1993 1992 ---- ---- Increase (Decrease) Securities and Trading Assets $ (7) $ 2 Loans and Commitments (35) (35) Interest-Bearing Deposits (27) (7) Borrowings - (2) Long-Term Debt (3) - Commitments and contingent items reduced the fair value of loans and commitments by $62 million in 1993 and $85 million in 1992. 14. Commitments and Contingent Liabilities In the normal course of business, various commitments and contingent liabilities are outstanding which are not reflected in the accompanying consolidated balance sheets. Management does not expect any material losses to result from these matters. 22 A summary of the notional amount of the Company's off-balance-sheet transactions, net of participations, at December 31, 1993 and 1992 follows: In millions Off-Balance-Sheet Risks 1993 1992 - ----------------------- ---- ---- Commercial Lending Commitments $19,463 $17,718 Standby Letters of Credit 3,146 3,669 Commercial Letters of Credit 1,497 1,647 Securities Lending Indemnifications 15,005 13,676 Interest Rate Contracts: Futures and Forward Contracts 14,383 6,848 Interest Rate Swaps 10,806 12,924 Options Written 6,189 5,036 Options Purchased 5,145 4,774 Foreign Exchange Contracts: Commitments to Purchase and Sell Foreign Exchange 37,276 51,236 Foreign Currency Swaps 677 697 Options Written 898 470 Options Purchased 1,027 584 The total potential loss on undrawn commitments, standby and commercial letters of credit, and securities lending indemnifications is equal to the total notional amount, which does not consider the value of any collateral. The Company's exposure to credit loss for interest rate contracts and foreign exchange contracts amounted to $264 million and $468 million in 1993 and $288 million and $1,103 million in 1992. These amounts represent net unrealized gains with counterparties. A discussion of the credit, interest rate, and foreign exchange risks inherent in off-balance-sheet financial transactions is presented under "Off- Balance-Sheet Risks" in the Management's Discussion and Analysis Section of this Report. Standby letters of credit principally support corporate obligations and include $1.0 billion that were collateralized with cash and securities at December 31, 1993 and 1992. At December 31, 1993 and 1992, securities lending indemnifications were secured by collateral of $15.0 billion and $13.7 billion. At December 31, 1993, approximately $2.5 billion of the standbys will expire within one year, $0.6 billion between one to five years, and the balance after five years. At December 31, 1993, approximately $1.9 billion of interest rate swaps will mature within one year, $6.7 billion between one to five years, and the balance after five years. Substantially all futures, forward, and option contracts mature within two years. The table below summarizes the carrying amount of items hedged and the related notional amount of interest rate swaps and futures and foreign exchange contracts that were designated as hedges at December 31, 1993: Notional Amount In millions --------------- Foreign Interest Futures Exchange Amount Rate Swaps Contracts Contracts Financial --------- ---------- --------- --------- Instruments - ----------- Loans $1,001 $649 $2,033 $ - Securities 601 100 4,452 - Deposits 579 579 - - Other Borrowed Funds 717 717 - - Long-Term Debt 275 275 - - Credit Card Securitization 450 450 - - Foreign Investments 212 - - 212 23 In 1994, a new accounting standard will require the Company to recognize unrealized gains and losses related to certain interest rate and foreign currency contracts as assets and liabilities on its balance sheet. The new standard allows the netting of unrealized gains and losses with the same counterparty when a master netting agreement is in effect. The Company's current policy is to present all unrealized gains and losses on a net basis. If the standard had been in effect on December 31, 1993, reported assets and liabilities would have increased by approximately $732 million. Net rent expense for premises and equipment was $99 million in 1993, $91 million in 1992, and $96 million in 1991. At December 31, 1993, the Company and its subsidiaries were obligated under various noncancelable lease agreements, certain of which provide for additional rents based upon real estate taxes, insurance, and maintenance and for various renewal options. The minimum rental commitments under noncancelable operating leases for premises and equipment having a term of more than one year from December 31, 1993 are as follows: - --------------------------------------------------------------------------- Year ending December 31, In millions - --------------------------------------------------------------------------- 1994 $ 66 1995 58 1996 50 1997 41 1998 31 Subsequent to 1998 125 ---- Total Minimum Lease Payments $371 ==== In April 1990, the Company notified Northeast Bancorp., Inc. (NEB) that NEB had materially breached its obligation under a merger agreement. Following denial by the Federal Reserve Board of the Company's application for approval to acquire NEB and failure by state regulators to approve the proposed merger prior to the August 15, 1990 termination date, the Company's Board of Directors notified NEB in September 1990 that it had terminated the merger agreement. In May 1990, NEB brought suit against the Company in the United States Court for the District of Connecticut seeking money damages of $350 million relating to NEB's allegations that the Company breached its obligations. In November 1990, the Company filed a motion for summary judgment to have the lawsuit dismissed; in June 1991, this motion was granted as to NEB's Connecticut Unfair Trade Practices Act and libel claims and denied as to NEB's other claims. In March 1993, the Company's motion for summary judgment on NEB's contract claims was denied. In May 1993, as part of the acquisition of NEB's Class A voting common stock by First Fidelity Bancorporation, NEB's interest in the suit was transferred to a trust funded with $2 million for the benefit of former NEB shareholders. The action will continue. In the opinion of management, NEB's claims are without merit. In the ordinary course of business, there are various claims pending against the Company and its subsidiaries. In the opinion of management, liabilities arising from such claims, if any, would not have a material effect upon the Company's consolidated financial statements. 24 Independent Auditors' Report Deloitte & Touche To the Board of Directors and Shareholders of The Bank of New York Company, Inc. New York, New York We have audited the accompanying consolidated balance sheets of The Bank of New York Company, Inc. and subsidiaries (the "Company") as of December 31, 1993 and 1992,and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of the Company and National Community Banks, Inc., which has been accounted for as a pooling of interests as described in Note 2 to the consolidated financial statements. We did not audit the consolidated balance sheets of National Community Banks, Inc. as of December 31, 1992, or the related consolidated statements of income, changes in shareholders' equity, and cash flows of National Community Banks,Inc. for the years ended December 31, 1992 and 1991, which statements reflect total assets of $4,181,508,000 as of December 31, 1992 and net income of $23,785,000, and $12,384,000 for the years ended December 31, 1992, and 1991, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for National Community Banks, Inc. for 1992 and 1991, is based solely on the report of such other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Bank of New York Company, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note 9 to the consolidated financial statements, in the first quarter of 1993 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109 and retroactively, restated the 1992 and prior financial statements for the change. \s\ Deloitte & Touche New York, New York February 25, 1994 25 Management's Discussion and Analysis of the Company's Financial Condition and Results of Operations - ------------------------------------------------------------------------------- SUMMARY OF RESULTS For the year 1993, The Bank of New York Company, Inc. (the Company) reported record net income of $559 million or a record $5.44 per fully diluted share, compared with $393 million or $4.00 per fully diluted share in 1992 and $134 million or $1.27 per share in 1991. In 1993, spreads widened reflecting a continuing shift in asset mix toward higher yielding assets and a lower level of nonperforming assets. Fee income was strong, especially from credit cards and securities and other processing. A lower provision for loan losses, continued control of operating expenses, and the acquisition of 62 branches of Barclays Bank of New York, N.A. (Barclays) on December 11, 1992, also helped to increase earnings. Earnings at the 105-branch National Community Banks (BNYNA) increased significantly in 1993. In 1993, BNYNA added $36 million to net income compared with $24 million in 1992 and $12 million in 1991. The Company's results for 1993, 1992, and 1991 have been restated to reflect the acquisition, which was accounted for as a pooling-of-interests. In 1993, nonperforming assets declined by $417 million, or 39%, to $639 million. December 31, 1993 marked the tenth consecutive quarter that nonperforming assets declined. During 1993, the Company continued to strengthen its capital position. The Company retained $383 million of earnings and issued $550 million of subordinated debt while $655 million of long-term debt matured or was redeemed and $75 million of preferred stock was redeemed. In addition, $58 million of preferred stock was converted into $46 million of common stock. The Tier I and total capital ratios for the Company at December 31, 1993 were 8.87% and 13.65% compared with 7.59% and 12.30% last year and 5.79% and 9.40% in 1991. Tangible common equity as a percent of total assets was 7.00% at December 31, 1993 compared with 5.83% one year ago and 4.49% in 1991. In 1992, noninterest income from personal trust, funds transfer, trade finance, securities lending, mutual fund custody, stock transfer, government securities clearance, and corporate trust grew significantly. Net interest income increased, reflecting increases in the net interest rate spread and the net yield on interest-earning assets. Strict control of operating expenses resulted in a modest increase in compensation expense and declines in furniture and fixture and occupancy expense. The provision for loan losses was significantly lower in 1992. In 1992, the Company sold 9.2 million shares of common stock for $339 million, $600 million of subordinated debt, and $143 million of preferred stock. It redeemed $100 million of subordinated debt and $100 million of preferred stock. The Company's 1991 results were affected by an adverse change in asset quality. As a result, the Company recorded a significant provision for loan losses. Net interest income declined, reflecting a lower volume of earning assets, including the impact of those that were nonperforming; the decline was reduced by an improvement in spreads and yields from the low interest rate environment. Noninterest income from credit cards, American depositary receipts, mutual fund custody, personal trust, securities lending, and master trust showed special strength. Operating expenses remained under tight control. The Company's capital position was improved with the issuance of $250 million of convertible subordinated debentures. Return on average assets for 1993 was 1.20% - a record for the Company - compared with .85% in 1992 and .29% in 1991, while return on average common equity was 14.98% in 1993 compared with 12.00% in 1992 and 3.85% in 1991. 26 Net Interest Income - -------------------------------------------------------------------------------- Dollars in millions 1993 1992 1991 ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 1,550 $1,434 $1,427 Net Interest Rate Spread 3.12% 2.91% 2.56% Net Yield on Interest-Earning Assets 3.84% 3.61% 3.52% Net interest income increased 8%, the spread by 7%, and the yield by 6% in 1993. Contributing to these increses were a $0.7 billion rise in the level of average interest-earning assets, the Company being liability sensitive in a declining rate environment, and the large decline in nonperforming loans. The increase in yield also reflects a higher volume of interest-free sources of funds, partially offset by lower returns on these funds in a low interest rate environment. Average earning assets increased to $40.4 billion in 1993 from $39.7 billion in 1992, primarily resulting from a $0.8 billion increase in federal funds sold and securities purchased under resale agreements. Although average loans did not grow ($30.4 billion in 1993) the mix improved, contributing to the growth in spread and yield. Special strength was noted in wholesale mortgage lending, securities industries banking, factoring, and credit card lending, which increased $1.1 billion. Credit card outstandings are expected to increase further in 1994 due to account growth and the maturities of asset securitizations ($0.6 billion). Net interest income increased slightly in 1992. A $0.9 billion decline in the level of average interest-earning assets was more than offset by the increase in the spread and yield, the result of the Company being liability sensitive in a declining rate environment. The smaller increase in yield reflects the lower returns on interest-free sources of funds in a low interest rate environment. Also the effect of the large decline in nonperforming loans had a positive impact on interest rate spreads. Loans declined to $30.3 billion in 1992 from $32.7 billion in 1991, primarily due to weak commercial loan demand and the full year effect of credit card securitizations entered into in 1991. This decline was partially offset by a $1.5 billion increase in securities. New credit card lending, which increased average outstandings by $0.5 billion, was offset by the full year effect of credit card securitizations entered into in 1991. The credit card securitizations reduced net interest income by $162 million in 1993, $164 million in 1992, and $79 million in 1991. Interest income would have been increased by $27 million, $89 million, and $167 million if loans on nonaccrual status at December 31, 1993, 1992, and 1991 had been performing for the entire year. 27 NONINTEREST INCOME Noninterest income is provided by a wide range of fiduciary and processing services, other fee-based services, and trading activities. These revenues increased 11% to $1,319 million in 1993, compared with $1,183 million in 1992 and $1,094 million in 1991. Securities processing fees were $307 million, $273 million, and $244 million in 1993, 1992, and 1991. Contributing to the increase in 1993 were American depositary receipts, government securities clearance, master trust, mutual fund custody, stock transfer, and corporate trust. Other processing fee principally funds transfer, deposit services, and trade finance, were $161 million in 1993, $148 million in 1992, and $124 million in 1991. All three performed strongly in 1993. Trust and investment fees were $131 million in 1993, $118 million in 1992, and $110 million in 1991. During 1993, increases occurred in institutional investment management, while personal trust was strong in 1992. Service charges and fees were $460 million in 1993, compared with $442 million in 1992 and $385 million in 1991. The increase in 1993 resulted primarily from growth in the Company's credit card business and the Barclays acquisition. The number of credit card accounts increased by 22% to 4.8 million and managed outstandings were up 19% from 1992 to $6.2 billion. The 1991 credit card securitizations increased noninterest income by $64 million in 1993, $70 million in 1992, and $48 million in 1991. Part of the decrease in the noninterest income from securitizations in 1993 compared with 1992 was due to maturities. The 1992 increase in service charges and fees resulted primarily from increases in syndication fees and the full year effect of credit card securitization. The Barclays acquisition made a modest contribution to the increase in service charges and fees. Securities gains in 1992 totaled $64 million, $42 million, and $95 million in 1993, 1992, and 1991, including $28 million, $1 million, and $26 million of gains on equity securities. The 1992 results include a $31 million writedown of the Company's investment in Northeast Bancorp, Inc. Other noninterest income was $196 million in 1993, $160 million in 1992, and $136 million in 1991. Foreign exchange profits were $54 million, $66 million, and $47 million in 1993, 1992, and 1991. Profits from trading interest rate contracts amounted to $18 million, $7 million, and $4 million in 1993, 1992, and 1991. Trading in debt and equity securities resulted in gains of $7 million, $21 million, and $20 million in 1993, 1992, and 1991. Other noninterest income for 1993 included a pre-tax gain of $24 million related to the sale of a portion of the Company's interest in Wing Hang Bank, Ltd. during the second quarter. NONINTEREST EXPENSE AND INCOME TAXES Noninterest expense was $1,646 million, $1,519 million, and $1,458 million in 1993, 1992, and 1991. Total noninterest expense increased 8% in 1993 compared with 1992. Furniture and equipment expense declined by 2% to $95 million for the year. Other real estate expense declined substantially by 50% to $53 million from $106 million in 1992. Salaries increased 10% in 1993 to $601 million from $546 million in 1992, and profit sharing increased to $58 million from $38 million. Other employee benefits - primarily incentive compensation and health care expenses - were up 19% to $154 million from $129 million in 1992. Occupancy expense increased by 6% to $178 million. The Barclays acquisition was a significant factor in the increase in noninterest expense. In 1992, significant cost savings were realized in occupancy and furniture and equipment expense. Salaries and employee benefits were up 9%. Other real estate expenses increased 3%. The Barclays acquisition was a modest factor in the increase in noninterest expense. Deposit insurance premiums were $57 million in 1993 compared with $50 million and $48 million in 1992 and 1991. Other real estate charges were $53 million, $106 million, and $103 million in 1993, 1992, and 1991. Operating expenses related to other real estate owned 28 were approximately $8 million in 1993, compared with $25 million in 1992 and $19 million in 1991. Writedowns and losses on sales of other real estate at NCB were $15 million, $25 million, and $20 million in 1993, 1992, and 1991. In 1993, other real estate charges include declines in the estimates of value of hospital properties in Texas ($9 million) and an office building in New Jersey ($3 million), and losses on the sale of a shopping mall in Ohio ($7 million), and two properties in New Jersey ($5 million). The 1992 other real estate charges include declines in the estimates of value of a shopping center ($7 million) and a mixed-use property ($7 million), and losses on the sale of a mixed-use property ($12 million), a hotel ($7 million), and an office building ($4 million). The 1991 other real estate charges include declines in the estimates of the values of shopping centers ($20 million), a mixed-use project ($10 million), and office buildings ($9 million), and losses on the sale of shopping centers ($12 million), and an office building ($4 million). The Company remains committed to strong cost controls. For 1994, the Company has adopted an incentive program to encourage employees to reduce controllable costs. Additional cost savings are expected in 1994 from the consolidation of 12 retail branches and the closing of the Company's Sioux Falls, South Dakota credit card operations center in November 1993. The Company's consolidated effective tax rates for 1993, 1992, and 1991 were 36.9%, 33.2%, and 35.6%. The increase in the effective tax rate for 1993 is attributable to the increase in the federal tax rate from 34% to 35%, a decline in the proportion of tax-exempt income to total income, and lower foreign tax credits. These increases were partially offset by a lower proportion of state and local income taxes and nondeductible expenses to total income. The decrease in 1992 compared with 1991 reflects a lower proportion of state and local income taxes and nondeductible expenses to total income, as well as higher foreign tax credits, partially offset by a decline in the ratio of tax-exempt income to total income. LIQUIDITY The Company maintains its liquidity through the management of its assets and liabilities, utilizing worldwide financial markets. The diversification of liabilities reflects the flexibility of the Company's funding sources under changing market conditions. Stable core deposits, including demand and retail time, are generated through the Company's diversified network and managed with the use of trend studies and deposit pricing. The use of derivative products such as interest rate swaps and financial futures enhances liquidity through the issue of long-term liabilities without exposure to interest rate risk. Liquidity also results from the maintenance of a portfolio of assets which can be easily reduced and the monitoring of unfunded loan commitments, thereby reducing unanticipated funding requirements. Reflecting plans to improve liquidity, average savings and noninterest- bearing deposits increased by $1.2 billion and $1.1 billion during 1993. Also, medium-term bank notes grew by $0.7 billion. More volatile sources of interest- bearing deposits and borrowings decreased by $2.9 billion. In 1993, the Company's average commercial paper borrowings were $93 million compared with $107 million in 1992. The Company has backup lines of credit at financial institutions supporting these borrowings. The following comments relate to the information disclosed in the Consolidated Statements of Cash Flows. Cash flows from earnings and other operating activities were $2.1 billion in 1993 and $0.7 billion in 1992, compared with an outflow of $0.7 billion in 1991. The 1993 and 1992 increases in cash flows reflect a reduction in assets held for sale. The 1993 cash flows used by investing activities were $2.4 billion, reflecting additions to loans and securities. In 1992, investing activities were the source of $3.7 billion of cash flow, reflecting a decrease in federal funds sold and securities purchased under resale agreements and a reduction of loans. In 1991, a net reduction of loans and securities held for investment contributed 29 to the generation of $3.6 billion of cash from investing activities. Cash used by financing activities was $0.7 billion, $1.1 billion, and $3.9 billion in 1993, 1992, and 1991 as the Company reduced its deposit borrowings. Restrictions on the ability of the Company to obtain funds from its subsidiaries are discussed in Note 12 to the Consolidated Financial Statements. CAPITAL RESOURCES December 31, Capital Ratios 1993 1992 - -------------- ---- ---- Common Equity 8.29% 7.30% Tangible Common Equity 7.00 5.83 Tier I Capital 8.87 7.59 Total Capital 13.65 12.30 Leverage 7.99 7.11 The significant improvement in these ratios in 1993 is the result of growth in shareholders' equity, the issuance of $550 million of subordinated debt, and modest growth in assets. The Company's common equity ratio is one of the highest among money center banks. The Company's banks' capital ratios exceed "well capitalized", the highest of five regulatory capital categories. Shareholders' equity was $4,072 million at December 31, 1993, compared with $3,730 million at December 31, 1992 and $3,071 million at December 31, 1991. The change in shareholders' equity in 1993 is primarily attributable to growth in retained earnings of $383 million offset in part by the redemption of $75 million of adjustable rate, noncumulative preferred stock. In addition, the Company issued $300 million of 6 5/8% long-term debt and $250 million of 6 1/2% long-term debt to replace $655 million of debt that was redeemed or matured in 1993. In February 1993, $58 million of preferred stock was converted into $46 million of common stock. Two issues of preferred stock were redeemed in the first quarter of 1994 reducing preferred stock by $156 million and additional capital by $17 million. The change in shareholders' equity in 1992 is primarily attributable to the issuance of 9.2 million shares of common stock in June 1992, resulting in proceeds of $339 million, and growth in retained earnings of $240 million. In addition, the Company issued $115 million of 8.6% preferred stock and $29 million of 7.75% convertible preferred stock, while redeeming $100 million of 9.45% preferred stock. During 1992, the Company also issued $600 million of subordinated notes at a weighted average rate of 7.72%, and redeemed $100 million of 12.38% subordinated debentures. The Company can issue up to $750 million of debt and preferred stock (including convertible preferred stock) pursuant to a shelf registration statement. CREDIT CARD OPERATIONS Credit card receivables sold in the form of a security is a technique for financing the Company's credit card operations. For accounting purposes, the underlying assets and liabilities are removed from the balance sheet, and amounts otherwise reported in the income statement as net interest income, fees, and provision for loan losses are reflected in noninterest income. The Company securitized $1,350 million of credit card receivables in 1991; $1,225 million were outstanding at December 31, 1993, and $1,025 million are scheduled to mature in 1994. The Company expects to return these assets to its balance sheet and to replace these financings with lower cost funds. The impact 30 of the securitizations on the Company's financial statements assuming the funds received from the securitizations were used to replace short-term borrowings, is summarized below: In millions 1993 1992 1991 ---- ---- ---- Lower Net Interest Income $162 $164 $ 79 Lower Provision for Loan Losses 56 57 15 Higher Noninterest Income 64 70 48 PROVISION AND ALLOWANCE FOR LOAN LOSSES In 1993, the Company continued to experience significant improvement in asset quality. Both charge-offs and nonperforming loans dropped sharply. The provision for loan losses was $284 million in 1993, compared with $443 million in 1992 and $778 million in 1991. Net charge-offs were $387 million in 1993, $511 million in 1992, and $777 million in 1991. In these years net charge-offs were primarily attributable to HLT, other commercial, real estate, and consumer loans. The total allowance for loan losses was $970 million and $1,072 million at year-end 1993 and 1992. This decrease of $102 million resulted from net charge-offs exceeding the provision for loan losses and reflects the sharp decline in the level of nonaccrual loans. The decrease in 1992 ($12 million) resulted from net charge-offs exceeding the provision for loan losses ($68 million), partially offset by an increase in the allowance ($56 million) resulting from the Barclays acquisition. The ratio of the total allowance for loan losses to year-end loans was 3.17% and 3.63% at December 31, 1993 and 1992. The allowance for loan losses was 152% of total nonperforming assets at December 31, 1993, compared with 102% at December 31, 1992. At December 31, 1993, the Company's LDC exposures consisted of $151 million in medium-term loans (and no material commitments), $193 million in short-term loans, $11 million in accrued interest, and $49 million in equity investments. At December 31, 1993, the allowance for loan losses associated with medium-term LDC loans was $116 million (approximately 77% of such loans). The LDC exposure excludes $266 million (face value) of bonds whose principal payments are collateralized by U.S. Treasury zero coupon obligations and interest payments are partially collateralized. These include $117 million of reduced rate Philippine bonds which were received in exchange for the same amount of Philippine loans in 1992. The Company restructured $59 million of Argentine debt and sold $27 million of medium-term LDC loans in 1991. 31 LOANS The following table shows the Company's loan distribution at the end of each of the last five years: 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- In millions Domestic Commercial and Industrial Loans* $ 9,781 $10,495 $12,398 $12,896 $13,297 Consumer Loans 6,028 5,229 4,315 6,080 5,592 Real Estate Loans Construction and Land Development 160 188 322 665 1,310 Other, Principally Commercial Mortgages 2,626 2,822 2,340 2,456 1,691 Collateralized by Residential Properties 3,203 3,423 2,820 3,633 3,835 Banks and Other Financial Institutions** 1,893 1,521 35 35 26 Loans for Purchasing or Carrying Securities 2,275 1,098 1,417 1,079 2,499 Lease Financings 1,038 1,033 1,063 1,026 1,260 Other** 65 126 1,222 1,784 2,139 ------- ------- ------- ------- ------- Total Domestic 27,069 25,935 25,932 29,654 31,649 ------- ------- ------- ------- ------- Foreign Commercial and Industrial Loans 1,775 1,928 2,773 3,130 4,316 Banks and Other Financial Institutions 810 997 1,122 1,428 1,622 Government and Official Institutions 565 535 546 584 913 Other 1,188 947 795 1,817 984 ------- ------- ------- ------- ------- Total Foreign 4,338 4,407 5,236 6,959 7,835 ------- ------- ------- ------- ------- Total Loans 31,407 30,342 31,168 36,613 39,484 Less: Unearned Income 837 845 833 837 901 Allowance for Loan Losses 970 1,072 1,084 1,111 1,154 ------- ------- ------- ------- ------- Net Loans $29,600 $28,425 $29,251 $34,665 $37,429 ======= ======= ======= ======= ======= *The commercial and industrial loan portfolio does not contain any industry concentration which exceeds 10% of loans. **Prior to 1992, certain loans to the securities and mortgage banking industries were classified as other loans. 32 HIGHLY LEVERAGED TRANSACTIONS At year-end 1993, HLT loans outstanding were $1,314 million and commitments were $349 million, compared with $1,658 million and $414 million at year-end 1992. At December 31, 1993, borrowers in the communication industry represented 57% of the HLT portfolio. Nonperforming HLT loans at December 31, 1993 were $52 million (nine customers), compared with $92 million (thirteen customers) at December 31, 1992. In 1993, net charge-offs of HLTs decreased to $22 million, versus $94 million in 1992 and $174 million in 1991. The carrying value of equity investments associated with HLTs was $22 million at December 31, 1993, compared with $44 million at December 31, 1992. There were no debt investments associated with HLT's at December 31, 1993, compared with $33 million at the end of 1992. Commitments to fund additional equity investments were $7 million at December 31, 1993. NONPERFORMING ASSETS The following table shows the distribution of nonperforming assets at December 31, 1993 and 1992: Dollars in millions 1993 1992 Change ======================================= Category of Loans: HLT $ 52 $ 92 (43)% Commercial Real Estate 72 143 (50) Other Commercial 130 139 (6) Foreign 34 89 (62) LDC(*) 96 109 (12) Community Banking 156 216 (28) ------- ------ Total Nonperforming Loans 540 788 (31) Other Real Estate 99 268 (63) ------- ------ Total Nonperforming Assets $ 639 $1,056 (39) ======= ====== Nonperforming Asset Ratio 2.1% 3.6% Allowance/Nonperforming Loans 179.6 136.0 Allowance/Nonperforming Assets 151.8 101.5 (*) Excludes $117 million of reduced rate Philippine obligations secured by U.S. Treasury bonds. Nonperforming assets declined for the tenth consecutive quarter to $639 million at December 31, 1993. The decrease in nonperforming assets during 1993 is attributable to charge- offs and writedowns of $264 million and paydowns, sales, and returns to accrual status of $456 million. The decrease was partially offset by $303 million of loans placed on nonperforming status. 33 FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Company's financial instruments are disclosed in Note 13 to the Consolidated Financial Statements. The fair values, if realized, would improve the Company's capital resources and results of operations because the excess of fair value over the carrying amount for its assets is greater than the corresponding excess for liabilities. The fair values would not affect liquidity. In both 1993 and 1992, the interest rate environment produced unrecognized fair value gains in the securities and loan portfolios. Higher values attributable to consumer loans more than offset the declines in value associated with credit-impaired commercial loans. The increase in fair value of long-term debt primarily reflects the influence of the Company's stock price on the fair value of its convertible subordinated debentures. OFF-BALANCE SHEET RISKS The Company's significant off-balance-sheet risks are commercial lending commitments, letters of credit, securities lending indemnifications, and foreign currency and interest rate risk management products. The Company assumes these risks to reduce its own interest rate and foreign currency risks and to enable its customers to meet their credit and liquidity needs and hedge their foreign currency and interest rate risks. These items involve, to varying degrees, credit, foreign exchange, and interest rate risk not recognized in the balance sheet. There are no significant industry concentrations of such risks. The Company's off-balance-sheet risks are managed and monitored in manners similar to those used for on-balance-sheet risks. The Company's exposure to credit loss for lending commitments, letters of credit, and securities lending indemnification is represented by the contractual amount of those transactions. Since many of the commitments are expected to expire without being drawn upon, the total amount does not necessarily represent future cash requirements. In securities lending transactions, the Company requires the borrower to provide collateral, thus reducing the credit risk. The notional amounts for other off-balance-sheet risks express the dollar volume of the transactions; however, the credit risk is much smaller. The Company performs credit reviews and enters into netting agreements to minimize the credit risk of foreign currency and interest rate risk management products. Exposure to foreign exchange and interest rate risk is reduced by entering into offsetting positions. The amounts associated with off-balance-sheet risks are disclosed in Note 14 to the Consolidated Financial Statements. 34 SECURITIES The following table sets forth the carrying amounts and the market values of securities at the end of the last three years: 1993 1992 1991 ---------------- ---------------- ---------------- Carrying Market Carrying Market Carrying Market In millions Amount Value Amount Value Amount Value -------- ------ -------- ------ -------- ------ Securities Held for Investment U. S. Government Obligations $2,754 $2,813 $1,372 $1,403 $1,261 $1,295 U.S. Government Agency Obligations 250 258 417 423 501 515 Obligations of States and Political Subdivisions 1,033 1,043 1,139 1,195 1,303 1,325 Equity Securities 206 220 205 205 328 338 Other Debt Securities 113 115 189 186 208 206 ------ ------ ------ ------ ------ ------ Total Securities Held for Investment 4,356 4,449 3,322 3,412 3,601 3,679 ------ ----- ------ ------ ------ ------ Securities Held for Sale U. S. Government Obligations 1,096 1,097 1,939 1,945 767 801 U.S. Government Agency Obligations 120 120 639 652 302 315 Obligations of States and Political Subdivisions 9 9 - - - - Equity Securities 16 17 - - - - ------ ------ ------ ------ ------ ------ Total Securities Held for Sale 1,241 1,243 2,578 2,597 1,069 1,116 ------ ------ ------ ------ ------ ------ Total Securities $5,597 $5,692 $5,900 $6,009 $4,670 $4,795 ====== ====== ====== ====== ====== ====== 35 Total proceeds from sales of securities were $6,626 million, $3,086 million, and $2,847 million in 1993, 1992, and 1991, of which proceeds from debt securities were $6,606 million, $2,960 million, and $2,793 million. Gains on the sale of debt securities were $38 million, $37 million, and $57 million in 1993, 1992, and 1991. The gross unrealized gains and losses in investments in securities at December 31, 1993 and 1992, are as follows: 1993 1992 ---------------------- --------------------- Gross Gross Gross Gross Unrealized Unrealized Unrealized Unrealized In millions Gains Losses Gains Losses ----------- --------- ---------- ---------- Securities Held for Investment U.S. Government Obligations $61 $ 2 $ 31 $ - U.S. Government Agency Obligations 8 - 7 1 Obligations of States and Political Subdivisions 10 - 56 - Equity Securities 16 2 1 1 Other Debt Securities 3 1 - 3 --- --- ---- --- Total Securities Held for Investment 98 5 95 5 --- --- ---- --- Securities Held for Sale U.S. Government Obligations 1 - 8 2 U.S. Government Agency Obligations - - 13 - Obligations of States and Political Subdivisions - - - - Equity Securities 1 - - - --- --- ---- --- Total Securities Held for Sale 2 - 21 2 --- --- ---- --- Total Securities $100 $ 5 $116 $ 7 === === ==== === 36 The amortized cost and estimated market values of securities at December 31, 1993, by contractual maturity, are as follows: 1993 --------------------- Estimated Amortized Market In millions Cost Value --------- --------- Securities Held for Investment Due In One Year or Less $ 815 $ 822 Due After One Year Through Five Years 2,137 2,174 Due After Five Years Through Ten Years 679 703 Due After Ten Years 327 330 Mortgage-Backed Securities 192 200 Equity Securities 206 220 ------ ------ Total Securities Held for Investment 4,356 4,449 ------ ------ Securities Held for Sale Due In One Year or Less 1 1 Due After One Year Through Five Years 723 723 Due After Five Years Through Ten Years 490 491 Due After Ten Years 11 11 Equity Securities 16 17 ------ ------ Total Securities Held for Sale 1,241 1,243 ------ ------ Total Securities $5,597 $5,692 ====== ====== 37 FOREIGN OPERATIONS The Company's foreign activities consist of banking, trust, and processing services provided to customers domiciled outside of the United States, principally in Europe and Asia. The following financial information concerning such activities reflects direct attributions and charges for funds employed, based upon average costs of interest-bearing funds: In millions Europe Asia Other Foreign Domestic Total ------ ---- ------------- -------- ----- 1993 Total Revenue $ 138 $ 201 $ 190 $ 3,293 $ 3,822 Income Before Income Taxes 18 78 9 781 886 Net Income 10 44 5 500 559 Total Assets 1,375 2,079 2,355 39,737 45,546 1992 Total Revenue $ 208 $ 187 $ 212 $ 3,263 $ 3,870 Income Before Income Taxes 48 52 42 446 588 Net Income 28 30 24 311 393 Total Assets 1,329 2,071 2,382 39,428 45,210 1991 Total Revenue $ 163 $ 222 $ 294 $ 3,905 $ 4,584 Income Before Income Taxes 19 43 14 132 208 Net Income 12 28 10 84 134 Total Assets 1,896 1,732 2,429 37,514 43,571 38 QUARTERLY DATA UNAUDITED
1993 1992 ------------------------------- ---------------------------- Dollars in millions, except per share amounts First Second Third Fourth First Second Third Fourth Interest Income $ 627 $ 628 $ 625 $ 625 $ 652 $ 660 $ 674 $ 702 Interest Expense 246 252 250 259 290 318 345 367 ----- ----- ----- ----- ----- ----- ----- ----- Net Interest Income 381 376 375 366 362 342 329 335 ----- ----- ----- ----- ----- ----- ----- ----- Provision for Loan Losses 50 55 86 93 97 95 112 139 Noninterest Income 307 335 347 330 290 311 284 297 Noninterest Expense 409 405 441 391 390 401 362 366 ----- ----- ----- ----- ----- ---- ---- ---- Income Before Income Taxes 229 251 195 212 165 157 139 127 Income Taxes 72 100 77 78 53 53 47 43 ----- ----- ----- ----- ----- ----- ----- ----- Net Income $ 157 $ 151 $ 118 $ 134 $ 112 $ 104 $ 92 $ 84 ===== ===== ===== ===== ===== ===== ===== ===== Net Income Available to Common Shareholders $ 151 $ 145 $ 111 $ 127 $ 103 $ 96 $ 84 $ 76 ===== ===== ===== ===== ===== ===== ===== ===== Per Common Share Data: Primary Earnings $1.62 $1.56 $1.19 $1.37 $1.13 $1.06 $1.04 $ .95 Fully Diluted Earnings 1.53 1.47 1.14 1.30 1.08 1.01 1.00 .91 Cash Dividends 0.50 0.45 0.38 0.38 .38 .38 .38 .38 Stock Price High 58.25 60.12 61.75 60.25 54.62 44.00 43.37 41.63 Low 52.75 52.25 51.75 52.00 43.37 39.75 37.62 31.25 Ratios: Return on Average Common Shareholders' Equity 16.16% 15.95% 12.65% 15.06% 12.52% 11.95% 12.14% 11.28% Return on Average Assets 1.32 1.28 1.03 1.17 .94 .89 .82 .74
39 Business Review Securities and Other Processing Highlights: * Revenues in Government Securities Clearance were up 36% from 1992 as a result of higher volume from existing customers and many important new relationships. We also experienced significant growth in tri-party repurchase agreements where we act as custodian. * For the fourth consecutive year The Bank of New York captured over 60% of the new public sponsored American Depositary Receipt business by establishing 75 new programs from 26 countries. * The Bank established the first two depositary receipt programs in the Peoples Republic of China and the first program in Turkey. The Bank also acted as custodian for the first Argentine company to use depositary receipts to raise capital in the U.S. private market. * Funds Transfer fees grew by 15% in 1993. An important part of this improvement resulted from increased dollar clearing activities in Russia, Korea, Indonesia, Taiwan, and Eastern Europe. Also, we developed new and expanded relationships with companies in the mortgage banking and securities industries. 40 * Growth in our Trade Finance area was due to an increase in market share and a significant increase in letters of credit and collections from Hong Kong, China, Thailand, the Philippines, India, and Brazil. * Corporate Trust fees increased 20% in 1993, due to an increase in market share and a large volume of bond refinancings because of lower interest rates. * The Bank of New York solidified its position as the leading provider of trust services for the debt derivative market with over $34 billion in securities outstanding by year end, a fourfold increase over the previous year. Debt derivatives are secondary market products created for the purpose of increasing investor yields. * The Mutual Fund Division's revenues increased by 28% in 1993 largely due to new business from companies in the insurance and securities industries. * In Stock Transfer, revenue increased 29%. The Bank of New York received over 50 new transfer agency appointments in 1993. 41 * Fees in Master Trust/Master Custody increased by 18% due in large part to new relationships in both the public and corporate sectors. Overview: The Bank of New York is the leader in securities processing, and among the top providers of other processing products, such as trade finance and funds transfer. In nearly all our businesses, the Bank is either the market leader or among the top five providers of processing services. Market Leader - ------------- American and Global Depositary Receipts Securities Lending Government Securities Clearance Number Two - ---------- Mutual Fund Custody Unit Investment Trust 42 Among Top Five - -------------- Corporate Trust Stock Transfer Master Trust/Master Custody Institutional Custody Funds Transfer Trade Finance Depositary Receipts -- Commonly referred to as ADRs, they allow foreign companies to offer their dollar denominated securities to investors in the United States. In 1993 we continued to expand our leadership position and increased our market share to over 53% of all public sponsored Depositary Receipt programs. Securities Lending -- Our global programs are designed for customers whose assets are held in custody at the Bank to increase the yield on their portfolio by lending their U.S. and non-U.S. dollar denominated securities. Average daily loan outstandings in the domestic market total approximately $25 billion. Overseas, we experienced significant growth in London and expanded our securities lending operations to Hong Kong. 43 Government Securities Clearance -- The Bank of New York is the market leader in government securities clearance and administration of tri-party repurchase agreements. Through our highly automated systems and direct links to the Federal Reserve network, we clear a daily average of $400 billion in U.S. Government and Agencies securities. This represents a 14% increase over the 1992 level of $350 billion. Mutual Fund Custody -- The Bank of New York is the second largest provider of mutual fund custody with $305 billion in assets under administration. Services include securities safekeeping, payment of dividends to customers and portfolio valuation. Unit Investment Trust -- The Bank provides trustee and custody services for over 3,800 trusts with an aggregate value of $25 billion. Lower interest rates in 1993 triggered record redemptions of municipal bonds and slowed the number of new trusts established. 44 Corporate Trust -- The Bank is the trustee for debt instruments issued by corporations and municipal, state, and federal government agencies. We offer a complete product line that can be customized to meet issuers' requirements for all types of fixed-income securities. We have expanded our services to include the fast-growing market for such products as mortgage-backed, asset-backed and debt derivative securities. Stock Transfer -- We provide complete record keeping and dividend disbursement services for 350 public companies with 7 million shareholders. This represents an increase over 1992 of 27% in the number of companies as well as a 20% increase in the number of shareholders. Master Trust/Master Custody -- We provide custody and accounting services to public and corporate pension funds, foundations, endowments, and organizations having special compliance or tax reporting requirements. The Bank is a leader in the public funds market. We have been increasing our share of business with corporate retirement funds, and in 1993 added a substantial number of new relationships. 45 Cash Management -- CA$H-Register (registered trademark) , one of the Bank's proprietary electronic banking systems, provides corporate customers with a computerized connection to the Bank to make payments and obtain information on their banking activities. In 1993, the Bank introduced an enhancement to CA$H-Register (registered trademark) that allows customers to access information on their multicurrency accounts at banks worldwide. Funds Transfer -- The Bank clears an average of over $185 billion each day for domestic and foreign financial institutions. Volume increased by 25% in 1993 to a record 10 million transactions. Trade Finance -- We provide a range of trade finance services, such as letters of credit, to many of America's leading corporations. In addition, we are emphasizing the sale of these products to middle market companies located primarily in the New York metropolitan area. Our extensive international network of correspondent banks enables us to expedite customers' imports and exports around the globe, particularly in Asia, Latin America and the Middle East. 46 Retail Banking Highlights: * The Bank of New York introduced the sale of annuities* into its branch network with specially trained Investment Product Specialists. They also sell three proprietary mutual funds: the BNY Hamilton Equity Income Fund**, the BNY Hamilton Intermediate Government Fund** and the BNY Hamilton Intermediate New York Tax-Exempt Fund**. Investment Product Specialists may be reached by calling 1-800-BNY-4IPS (1-800-269-4477). *The Bank's 24-hour bank by phone service, 1-800-CALL-BNY, was enhanced with new features such as the ability to obtain information on IRA accounts as well as to obtain information or to place stop payments on Instant Credit checks. * ARCS Mortgage, Inc., our residential mortgage banking subsidiary, closed $3.7 billion in single- and multi-family home mortgages in 1993, up 20% over 1992. ARCS' loan servicing portfolio was $10.3 billion at year end. 47 Overview: The acquisition of National Community Banks, Inc. added 105 branches to the retail network and expanded our presence to a two- state network of 383 offices serving 24 counties. We offer the same full range of sophisticated products and services that are available to large corporations to individuals, professionals, small businesses, and municipalities. The Custom Banking and International Private Banking areas, based in New York, provide high-net-worth individuals with a customized range of private banking products and services -- from deposit products to personal trust and asset management, as well as tailored loan products. The Bank's asset management services have been of particular value to our clients in the current low-rate environment, as they seek to maximize returns on their investments. *Annuities are offered through The Annuity Agency of New York, Inc. which is not affiliated with The Bank of New York. Annuities are not obligations nor guarantees of The Bank of New York and are not FDIC or federally insured. **The BNY Hamilton Funds are not a deposit or obligation of The Bank of New York, are not insured by the FDIC and are not guaranteed by The Bank of New York. Investments in mutual funds involve risk, including the possible loss of principal. BNY Hamilton Distributors Inc. is the sponsor and distributor for the BNY Hamilton Funds and is unaffiliated with The Bank of New York. For a prospectus, which contains more complete information, including charges and expenses, on the BNY Hamilton Funds, call 1-800-426-9363. Read carefully before investing or sending money. 48 Credit Cards The Bank of New York (Delaware) Highlights: * Credit card accounts increased in 1993 by 22% to a total of 4.8 million, while managed credit card outstandings rose by 19% to a year-end total of $6.2 billion. * Over the last few years, we have experienced rapid growth in our credit card business. Since 1991, compound growth rates of both accounts and outstandings have been more than twice those of the industry. * The Bank of New York (Delaware) has been a consistent leader in credit quality. The charge-off rate of the entire card portfolio decreased to 3.2% in 1993 from 3.9% in 1992, and was approximately 100 basis points below the industry average. 49 * Two new products were introduced in the highly popular Consumers Edge family of cards: Consumers Edge 25 (registered trademark) and Consumers Edge Gold (registered trademark). Like the original Consumers Edge card, both have no annual fee and offer one of the lowest rates nationally available. Both new cards also have a 25-day grace period. * Three new major unions were added to the successful Union Privilege program: the American Teachers Federation, the Carpenters Union, and the Teamsters Union. Aggressive marketing campaigns to solicit these unions' members showed excellent results in 1993 and additional campaigns are underway in 1994. Overview: The Bank of New York (Delaware) is the seventh-largest commercial bank issuer of credit cards in the United States. Its strategy is to be the nation's leading provider of low rate, no annual fee credit cards. 50 The Bank's portfolio includes two key programs: * Consumers Edge is a no annual fee card with no grace period that appeals to customers who maintain outstanding balances. It offers one of the lowest annual percentage rates in the country. Excellent growth in this portfolio during 1993 was driven by aggressive advertising and direct mail campaigns. The response rate was more than twice that of the industry average. * The Union Privilege MasterCard (registered trademark), also low rate with no annual fee, is offered on an exclusive basis to 13 million members of the AFL-CIO. With more than 75 affiliated unions participating, the Union Privilege program is the largest single affinity card program the country. Charge-offs in the Union Privilege program are lowest of all of our card portfolios. In 1993 we closed our credit card processing facility in South Dakota and consolidated its operations into our Delaware facilities. This action will reduce operating costs going forward. 51 Corporate Banking Highlights: * The Mortgage Banking Division, part of the Bank's Special Industries Sector, is a market leader in financing mortgage banking companies. In 1993, we were lead agent on credit transactions totaling $1.4 billion. Loan fee and service product income increased 50% over 1992 levels. * The Bank of New York continued to expand its role as a leader in the broadly syndicated loan market. Syndicated loan volume for 1993 increased by over 50% from the previous year for transactions in which the Bank acted as arranger, agent or co-agent. The number of administrative agencies we handle more than doubled and our fee income was up 36%. 52 * The Bank is a leading lender to the Communications, Entertainment and Publishing industries. The Bank's strong relationships with these industries and a history of successful lending resulted in the division more than doubling the number of new transactions at the agent or co-agent level during 1993. * BNY Financial Corporation, our factoring subsidiary, completed its tenth consecutive year of record earnings. Factored sales volume grew by 7% to an annual level of $7.6 billion. Over one-half of new business was due to the introduction of a new proprietary product -- Accounts Receivable Management System -- which assists clients with back-office operations and financing their receivables. * The Bank continued as a major user of The Export-Import Bank of the United States ("Eximbank") providing the only two bank-to-bank credit facilities approved for Russian banks. 53 * As a result of intensive efforts to cross-sell processing and operating services, Middle Market Banking produced more than a 20% increase in cash management and trade fees. Overview: Corporate Banking is divided into four basic areas: Special Industries Banking The Bank of New York has long been a leading provider of credit and operating services to the media, public utilities, securities, surface transportation, real estate, mortgage banking, insurance, and energy industries. Each specialized area provides a focused expertise to meet the unique requirements of these industries. U.S. Commercial Banking The Bank serves domestic corporations by focusing its calling efforts on the major metropolitan areas around the country that offer the greatest concentrations of existing and prospective customers. We seek to establish relationships with top tier companies, to obtain lead positions in corporate credits and to cross-sell processing and operating services. 54 Middle Market Banking We offer lending expertise to middle market businesses throughout the greater New York metropolitan area along with sophisticated banking services usually provided to much larger companies. These services include: asset-based finance, cash management, securities processing, leasing, and investment banking. Our acquisition of National Community Banks in New Jersey provides an excellent base for expanding these services to New Jersey middle market businesses. International Banking Our network of 23 foreign branches and representative offices is a major source of business for securities and other processing products such as Depositary Receipts, Funds Transfer and Trade Finance. We serve overseas commercial and central banks, government agencies and corporations. Our extensive international capabilities are utilized to enhance the Bank's position with corporate customers in the United States. 55 Trust and Investment Management Highlights: * Total revenues in Trust and Investment Management grew by 11% in 1993 to a record $131 million. * The Institutional Investment Sector posted 15% revenue growth led by a better than 50% increase in Short-Term Money Management. This portfolio management service for corporations and not-for-profit institutions helps to enhance investment returns while meeting customer liquidity requirements. Overview: We offer individuals a complete range of trust services through offices in New York City and in full-service regional offices in Westchester, Dutchess, and Orange counties, Long Island, and New Jersey, as well as in Florida as The Bank of New York Trust Company of Florida, N.A. Services include investment management, custody, estate and financial planning, trust and estate settlement, income tax preparation and real estate management. 56 The Tax-Exempt Bond Management Division is a unique service that assists high- net-worth individuals and corporations in maximizing returns on their municipal bond portfolios. The division actively manages bond holdings by providing investment counseling, ongoing credit review, custody and comprehensive portfolio analysis and reporting. Our large size gives us a distinct competitive advantage in buying and selling municipal bonds for customers. Institutional Investment provides portfolio management of balanced, equity and fixed-income portfolios for domestic and offshore investors. Customers include corporations, Taft-Hartley clients, endowment funds, and other tax-exempt institutions. Financial Market Services Highlights: * Foreign exchange profits and other trading activities totaled $79 million in 1993, the second highest level in the Company's history. * Securities gains of $64 million were taken as a result of favorable price movements in the bond and equity markets; securities gains were $42 million in 1992. 57 Overview: The Bank of New York is a market maker in the major trading currencies of the world and provides full-service trading capabilities around the clock through offices in New York, London, Tokyo, Frankfurt, Hong Kong, Seoul, and Taipei. The Bank is a full-service broker/dealer and underwriter of investment-grade, general obligation tax-exempt securities, which are provided to mutual funds, financial institutions, corporations, and individual investors. For more information, call 1-800-BNY-MUNI. Financial market professionals manage our worldwide assets and liabilities as well as the Company's investment portfolio. EX-21 12 EXHIBIT 21 EXHIBIT 21 1. Subsidiaries Of The Registrant Significant subsidiaries of The Bank of New York Company, Inc. are as follows: The Bank of New York, a New York State Chartered Bank BNY Holdings (Delaware) Corporation, a Delaware Corporation The Bank of New York (Delaware)*, a Delaware State Chartered Bank BNY Holdings (New Jersey) Corporation, a New Jersey Corporation The Bank of New York National Association**, a National Bank - ------------------------------- * Subsidiary of BNY Holdings (Delaware) Corporation ** Subsidiary of BNY Holdings (New Jersey) Corporation EX-23 13 EXHIBIT 23.1 EXHIBIT 23.1 1. INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements of The Bank of New York Company, Inc. listed below of our report dated February 25, 1994, appearing in the 1993 Annual Report to Shareholders which is incorporated by reference in this Annual Report on Form 10-K of The Bank of New York Company, Inc. for the year ended December 31, 1993. On Form S-3: No. 33-50333 On Form S-4: No. 33-25805 On Form S-8: No. 33-57670 Post Effective Amendment No. 2 to Registration Statement No. 2-95764 Post Effective Amendment No. 5 to Registration Statement No. 2-95765 Pre Effective Amendment No. 1 to Registration Statement No. 33-20999 Pre Effective Amendment No. 1 to Registration Statement No. 33-33460 /s/ Deloitte & Touche New York, New York March 28, 1994 EX-23 14 EXHIBIT 23.2 EXHIBIT 23.2 1. CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference into The Bank of New York Company, Inc.'s Form 10-K of our report dated January 12, 1993 (except with respect to the matter discussed in Note 18, as to which the date is January 29, 1993) with respect to the consolidated financial statements of National Community Banks, Inc. (NCB) referred to in such report. It should be noted that we have not audited any financial statements of NCB subsequent to December 31, 1992 or performed any audit procedures subsequent to the date of our report. ARTHUR ANDERSEN & CO. /S/ Arthur Andersen & Co. ARTHUR ANDERSEN & CO. Roseland, New Jersey March 24, 1994 -----END PRIVACY-ENHANCED MESSAGE-----