-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GA3DOhWHq7VeGYzW1SoQCQgifJI9Kn6+VYtlRhs0YvJb8LIJaU5fn4PAQTYtH71u 6OTiMB6sAJ7msrOXoPEdJg== 0000009626-96-000017.txt : 19960816 0000009626-96-000017.hdr.sgml : 19960816 ACCESSION NUMBER: 0000009626-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK OF NEW YORK CO INC CENTRAL INDEX KEY: 0000009626 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132614959 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06152 FILM NUMBER: 96612192 BUSINESS ADDRESS: STREET 1: 48 WALL ST 15TH FL CITY: NEW YORK STATE: NY ZIP: 10296 BUSINESS PHONE: 2124951784 10-Q 1 SECOND QTR 1996 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 number) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) (212) 495-1784 (Registrant's telephone number, including area code) 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 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 ---- ---- The number of shares outstanding of the issuer's Common Stock, $7.50 par value, was 385,658,134 shares as of July 31, 1996. 2 THE BANK OF NEW YORK COMPANY, INC. FORM 10-Q TABLE OF CONTENTS PART 1. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Consolidated Balance Sheets June 30, 1996 and December 31, 1995 3 Consolidated Statements of Income For the Three Months and Six Months Ended June 30, 1996 and 1995 4 Consolidated Statement of Changes In Shareholders' Equity For the Six Months Ended June 30, 1996 5 Consolidated Statements of Cash Flows For the Six Months Ended June 30, 1996 and 1995 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART 2. OTHER INFORMATION - -------------------------- Item 2. Changes in Securities 20 Item 4. Submissions of Matters to Vote of Security Holders 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURE 22 3 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------------------------------------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) June 30, December 31, 1996 1995 ---- ---- (Unaudited) (Note) Assets - ------ Cash and Due from Banks $ 3,845 $ 4,711 Interest-Bearing Deposits in Banks 992 982 Securities: Held-to-Maturity (fair value of $1,164 in 1996 and $1,164 in 1995) 1,231 1,252 Available-for-Sale 3,954 3,618 ------- ------- Total Securities 5,185 4,870 Trading Assets at Fair Value 586 762 Federal Funds Sold and Securities Purchased Under Resale Agreements 1,318 936 Loans (less allowance for loan losses of $982 in 1996 and $756 in 1995) 34,541 36,931 Premises and Equipment 888 902 Due from Customers on Acceptances 922 918 Accrued Interest Receivable 296 270 Other Assets 2,894 2,438 ------- ------- Total Assets $51,467 $53,720 ======= ======= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 8,969 $10,465 Interest-Bearing Domestic Offices 15,066 16,005 Foreign Offices 11,427 9,448 ------- ------- Total Deposits 35,462 35,918 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,756 3,933 Other Borrowed Funds 4,385 3,706 Acceptances Outstanding 923 928 Accrued Taxes and Other Expenses 1,443 1,378 Accrued Interest Payable 177 190 Other Liabilities 341 587 Long-Term Debt 1,913 1,848 ------- ------- Total Liabilities 46,400 48,488 ------- ------- Shareholders' Equity Preferred Stock-no par value, authorized 5,000,000 shares, outstanding 184,000 shares 111 111 Class A Preferred Stock - par value $2.00 per share, authorized 5,000,000 shares, outstanding 46,204 shares in 1996 and 49,504 shares in 1995 2 2 Common Stock-par value $7.50 per share, authorized 800,000,000 shares, issued 412,554,238 shares in 1996 and 408,324,810 shares in 1995 3,094 3,062 Additional Capital 148 125 Retained Earnings 2,478 2,120 Securities Valuation Allowance 6 58 ------- ------- 5,839 5,478 Less: Treasury Stock-32,395,786 shares in 1996 and 12,052,096 shares in 1995, at cost 754 228 Loan to ESOP-1,317,060 shares, at cost 18 18 ------- ------- Total Shareholders' Equity 5,067 5,232 ------- ------- Total Liabilities and Shareholders' Equity $51,467 $53,720 ======= ======= - ----------------------------------------------------------------------------- Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at that date. See accompanying Notes to Consolidated Financial Statements 4 - ----------------------------------------------------------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Unaudited) (In millions, except per share amounts) For the three For the six months ended months ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Interest Income - --------------- Loans $ 781 $ 812 $1,587 $1,577 Securities Taxable 66 59 128 115 Exempt from Federal Income Taxes 5 12 10 24 ----- ----- ------ ------ 71 71 138 139 Deposits in Banks 21 30 43 60 Federal Funds Sold and Securities Purchased Under Resale Agreements 32 62 61 128 Trading Assets 5 6 9 13 ----- ----- ------ ------ Total Interest Income 910 981 1,838 1,917 ----- ----- ------ ------ Interest Expense - ---------------- Deposits 286 335 578 643 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 48 36 99 68 Other Borrowed Funds 55 74 99 146 Long-Term Debt 33 32 65 65 ---- ---- ------ ------ Total Interest Expense 422 477 841 922 ---- ---- ------ ------ Net Interest Income 488 504 997 995 - ------------------- Provision for Loan Losses 425 62 515 112 ----- ----- ------ ------ Net Interest Income After Provision for Loan Losses 63 442 482 883 ----- ----- ------ ------ Noninterest Income - ------------------ Processing Fees Securities 161 102 320 200 Other 51 48 101 92 ----- ----- ------ ------ 212 150 421 292 Trust and Investment Fees 40 32 77 64 Service Charges and Fees 120 109 226 222 Securities Gains 30 13 63 20 Other 444 46 479 70 ----- ----- ------ ------ Total Noninterest Income 846 350 1,266 668 ----- ----- ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 249 223 496 444 Net Occupancy 42 43 85 87 Furniture and Equipment 23 21 46 43 Other 143 138 275 267 ----- ----- ------ ------ Total Noninterest Expense 457 425 902 841 ----- ----- ------ ------ Income Before Income Taxes 452 367 846 710 Income Taxes 174 141 325 272 ----- ----- ------ ------ Net Income $ 278 $ 226 $ 521 $ 438 - ---------- ===== ===== ====== ====== Net Income Available to Common Shareholders $ 276 $ 223 $ 516 $ 433 - ----------------------- ===== ===== ====== ===== Per Common Share Data:(1) - ------------------------- Primary Earnings $0.68 $0.57 $1.25 $1.13 Fully Diluted Earnings 0.66 0.54 1.23 1.06 Cash Dividends 0.20 0.16 0.40 0.32 Fully Diluted Shares Outstanding 418 414 423 414 - ----------------------------------------------------------------------------- (1) Per Common Share Data has been adjusted to reflect the effect of the 2-for-1 common stock split effective July 19, 1996. See accompanying Notes to Consolidated Financial Statements 5 - ------------------------------------------------------------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Statement of Changes in Shareholders' Equity (Unaudited) For the six months ended June 30, 1996 (In millions) Class A Pre- Pre- Addi- Securities Treas- Loan ferred ferred Common tional Retained Valuation ury to Stock Stock Stock Capital Earnings Allowance Stock ESOP ------ ------- ------ ------- -------- ---------- ------ ---- Balance, January 1, 1996 $111 $ 2 $3,062 $125 $2,120 $ 58 $228 $18 Changes: Net Income 521 Cash Dividends Common Stock (157) Preferred Stock (5) Conversion of Debentures 16 4 Issuance of Common Stock 16 19 (36) Treasury Stock Acquired 562 Net Unrealized Loss on Secur- ities Avail- able for Sale (52) Change in Cumulative Foreign Currency Translation Adjustment (1) ---- --- ------ ---- ------ ---- ---- --- Balance, June 30, 1996 $111 $ 2 $3,094 $148 $2,478 $ 6 $754 $18 ==== === ====== ==== ====== ==== ==== === - ------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements 6 - ------------------------------------------------------------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Cash Flows (In millions) (Unaudited) For the six months ended June 30, 1996 1995 ---- ---- Operating Activities Net Income $ 521 $ 438 Adjustments to Determine Net Cash Provided (Used) by Operating Activities Provision for Losses on Loans and Other Real Estate 524 115 Gain on Sale of Loans (400) - Depreciation and Amortization 116 98 Deferred Income Taxes 16 94 Securities Gains (63) (20) Change in Trading Assets 176 (415) Change in Accruals and Other, Net (322) 28 ------- ------- Net Cash Provided by Operating Activities 568 338 ------- ------- Investing Activities Change in Interest-Bearing Deposits in Banks (24) (86) Purchases of Securities Held-to-Maturity (146) (148) Maturities of Securities Held-to-Maturity 156 286 Purchases of Securities Available-for-Sale (796) (342) Sales of Securities Available-for-Sale 237 177 Maturities of Securities Available-for-Sale 170 22 Net Principal Disbursed on Loans to Customers (1,697) (3,661) Sales of Loans 3,884 250 Sales of Other Real Estate 46 11 Change in Federal Funds Sold and Securities Purchased Under Resale Agreements (382) 40 Purchases of Premises and Equipment (23) (23) Proceeds from the Sale of Premises and Equipment 2 1 Acquisitions, Net of Cash Acquired (321) 67 Other, Net (76) (19) ------- ------- Net Cash Provided (Used) by Investing Activities 1,030 (3,425) ------- ------- Financing Activities Change in Deposits (408) 2,589 Change in Federal Funds Purchased and Securities Sold Under Repurchase Agreements (2,177) 1,207 Change in Other Borrowed Funds 679 (303) Proceeds from the Issuance of Long-Term Debt 100 - Repayments of Long-Term Debt (17) (16) Issuance of Common Stock 71 63 Treasury Stock Acquired (562) (67) Cash Dividends Paid (162) (126) ------- ------- Net Cash Provided (Used) by Financing Activities (2,476) 3,347 ------- ------- Effect of Exchange Rate Changes on Cash 12 26 ------- ------- Change in Cash and Due From Banks (866) 286 Cash and Due from Banks at Beginning of Period 4,711 2,903 ------- ------- Cash and Due from Banks at End of Period $ 3,845 $ 3,189 ======= ======= - ----------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information Cash Paid During the Year for: Interest $ 854 $ 893 Income Taxes 231 181 Noncash Investing Activity (Primarily Foreclosure of Real Estate) 47 47 - ----------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements 7 THE BANK OF NEW YORK COMPANY, INC. Notes to Consolidated Financial Statements 1. General ------- The accounting and reporting policies of The Bank of New York Company, Inc. (the Company), a bank holding company, and its subsidiaries, conform with generally accepted accounting principles and general practice within the banking industry. Such policies, except as noted below, are consistent with those applied in the preparation of the Company's annual financial statements. The accompanying financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods have been made. Such adjustments are of a normal recurring nature. The financial statements have been restated to reflect a 2-for-1 common stock split, effective July 19, 1996. 2. Allowance for Loan Losses ------------------------- Transactions in the allowance for loan losses are summarized as follows: Six months ended June 30, (In millions) 1996 1995 ---- ----- Balance, Beginning of Period $ 756 $ 792 Charge-offs (334) (227) Recoveries 45 32 ----- ----- Net Charge-Offs (289) (195) Provision 515 112 Acquisition - 1 Credit Card Securitization - 3 ----- ----- Balance, End of Period $ 982 $ 713 ===== ===== 3. Commitments and Contingent Liabilities ------------------------------------- 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. 8 4. Dispositions ------------ On June 21, 1996, the Company sold its AFL-CIO Union Privilege affinity credit card portfolio to Household International, Inc., effective June 1, 1996, for $575 million. After settling its obligations to its marketing agent and other transactional costs, the Company recorded a pre-tax gain of $400 million, included in other noninterest income. The transaction related to approximately $3.4 billion in outstandings and included 2.2 million cards. 9 Management's Discussion and Analysis of Financial Condition - ----------------------------------------------------------- and Results of Operations - ------------------------- The Company reported record second quarter net income of $278 million, up 23% from $226 million earned in the same period last year. Second quarter fully diluted earnings per share were a record 66 cents, a 22% increase over the 54 cents earned in the second quarter of 1995. Net income for the first six months was $521 million, an increase of 19% over last year's $438 million. Earnings per share, on a fully diluted basis, were $1.23 for the first half of 1996 compared with $1.06 in 1995. The dilutive effect of stock warrants reduced earnings per share for the second quarter of 1996 by 4 cents compared with 3 cents in the first quarter of 1996 and 2 cents in last year's second quarter. This dilution was partially offset by the effect of the Company's stock buy back program which increased earnings per share 2 cents in the second quarter of 1996 and 1 cent in the first quarter of 1996. In the second quarter, the Company recorded a $400 million pre-tax gain on the sale of its AFL-CIO Union Privilege affinity credit card portfolio. The Company also recorded a $350 million provision related to its credit card portfolio in addition to its current quarterly provision for loan losses of $75 million. Excluding both the gain on the sale and the provision related to its credit card portfolio, the Company reported earnings per share of 59 cents, also a record quarterly result. Net interest income, on a taxable equivalent basis, totaled $499 million in the second quarter compared with $514 million in the second quarter of last year. Revenues from the Company's securities processing business grew 58% over the second quarter of 1995. This significant increase reflected continued strong internal growth as well as the acquisition of the corporate trust business of Nationsbank and the custody businesses of BankAmerica and J.P. Morgan. All areas of securities processing contributed to an internal growth rate increase of 12% with ADR's, corporate trust, and government securities clearance particularly strong. Fees from other processing, which includes funds transfer, cash management, and trade finance, grew 7% over last year's second quarter. The largest contributor to this increase was fees from funds transfer which were up 15%. Fees from trust and investment grew 24% in the second quarter of 1996 over the second quarter of 1995 reflecting new business and generally strong markets. Return on average assets for the second quarter was a record 2.05% versus 1.79% in the first quarter of 1996 and 1.68% in the second quarter of 1995. Return on average common equity was a record 21.97% in the second quarter of 1996, compared with 18.86% in the first quarter of 1996 and 19.85% in the second quarter of 1995. Excluding the effect of the sale of the Union credit card portfolio and the provision related to 10 the credit card portfolio, return on average assets was also a record 1.82% while return on average common equity was 19.51%. CAPITAL - ------- The Company's estimated Tier 1 capital and Total capital ratios were 7.97% and 12.92% at June 30, 1996 compared with 7.85% and 12.62% at March 31, 1996, and 8.62% and 13.20% at June 30, 1995. Tangible common equity as a percent of total assets was 7.51% at June 30, 1996 compared with 7.58% at March 31, 1996 and 7.67% one year ago. The leverage ratio was 7.75% at June 30, 1996 compared with 7.94% at March 31, 1996 and 8.17% one year ago. The decline in the capital ratios compared with June 1995 reflects the goodwill associated with the securities processing acquisitions and the repurchase of common stock. On July 9, 1996, the Company's Board of Directors declared a 2- for-1 common stock split. On August 8, 1996, holders of record as of the close of business on July 19, 1996 will receive one additional common share for every share held. The Company also increased its quarterly cash dividend on its common stock to 44 cents per share (22 cents per share post-split) from 40 cents per share previously paid. In the second quarter of 1996, the Company announced a plan to buy back through the end of 1996 up to 10 million shares (20 million shares post-split) of its common stock, in addition to the 16 million (32 million post-split) share buy back plan announced in 1995. As of July 31, 1996, 14.6 million shares (29.2 million shares post-split) had been repurchased under both plans for $728 million. The Company expects to complete its buy back plans by December 31, 1996. NET INTEREST INCOME - ------------------- 2nd 1st 2nd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 1996 1996 1995 1996 1995 --------------------------- ---------------- Net Interest Income $499 $517 $514 $1,017 $1,017 Net Interest Rate Spread 3.32% 3.43% 3.34% 3.38% 3.38% Net Yield on Interest Earning Assets 4.26 4.46 4.45 4.36 4.47 On a taxable equivalent basis, net interest income amounted to $499 million in the second quarter of 1996, compared with $514 million in the same period of 1995. The net interest rate spread was 3.32% in the second quarter of 1996, compared with 3.43% in the first quarter of 1996 and 3.34% one year ago. The net yield on interest-earning assets 11 was 4.26% compared with 4.46% in the first quarter of 1996 and 4.45% in last year's second quarter. The decrease in the net interest rate spread and the net yield from the first quarter of 1996 reflects the sale of the credit card receivables during the second quarter and promotional rates on credit cards. The decline in the net yield also reflects the financing of the stock buy back program. The Company expects the net interest rate spread to decline further in the third quarter due to the sale of the credit card receivables resulting in the loss of income on these receivables for the entire three month period. This decline is expected to be partially offset by the expiration of promotional rates on credit cards and repricing of certain accounts based on their credit scores. For the first six months of 1996, net interest income, on a taxable equivalent basis, amounted to $1,017 million the same as in the first half of 1995. The year-to-date net interest rate spread was 3.38% in 1996 compared with 3.38% in 1995, while the net yield on interest- earning assets was 4.36% in 1996 and 4.47% in 1995. Interest lost on loans on nonaccrual status at June 30, 1996 and 1995 reduced net interest income by $3 million and $5 million for the three months ended June 30, 1996 and 1995, and by $8 million and $10 million for the six months ended June 30, 1996 and 1995. NONINTEREST INCOME - ------------------ 2nd Quarter Year-to-date ----------- ------------ (In millions) 1996 1995 1996 1995 ---------------- ------------------ Processing Fees Securities $161 $102 $ 320 $200 Other 51 48 101 92 ---- ---- ------ ---- 212 150 421 292 Trust and Investment Fees 40 32 77 64 Service Charges and Fees 120 109 226 222 Securities Gains 30 13 63 20 Foreign Exchange and Other Trading Activities 21 13 31 25 Sale of Credit Card Portfolio 400 - 400 - Other 23 33 48 45 ---- ---- ------ ---- Total Noninterest Income $846 $350 $1,266 $668 ==== ==== ====== ==== Securities processing fees increased 58% to $161 million compared with $102 million in the second quarter of 1995. In the first half of 1996, securities processing fees were $320 million compared with $200 million in 1995. Strong internal growth in all areas and acquisitions contributed to the increase in revenue. Fees from other processing increased 7% over the second quarter of last year. Service charges and fees increased $11 million primarily due to higher syndication and credit card interchange fees. The Company reported $30 million of securities gains in the second quarter of 1996 compared with $33 million 12 in the first quarter and $13 million last year. The current quarter's gains reflect sales of securities held in the Company's stock portfolio as well as returns on certain limited partnership interests. Foreign exchange revenues were strong increasing $10 million over the first quarter of 1996 and $12 million over the second quarter of 1995. NONINTEREST EXPENSE AND INCOME TAXES - ------------------------------------ Total noninterest expense for the second quarter was $457 million, up 8% from $425 million in the same period last year and up from $444 million in the first quarter of this year. The rise in expenses in the second quarter was principally due to salary and other expenses related to acquisitions of securities processing businesses from J.P. Morgan, BankAmerica, and NationsBank as well as the acquisition of the Putnam Trust Company. Year-to-date noninterest expense was $902 million compared with $841 million in 1995. Occupancy expense was down 5% compared with last year's second quarter. Excluding the gain on the sale of the credit card portfolio, the efficiency ratio for the second quarter was 49.9% compared with 49.4% reported in the first quarter of 1996 and 50.4% one year ago. The effective tax rates for the second quarter and first six months of 1996 were 38.4% in both periods compared with 38.4% and 38.3% for the second quarter and first six months of 1995. 13 NONPERFORMING ASSETS - -------------------- Change 2Q 1996 vs (Dollars in millions) 6/30/96 3/31/96 1Q 1996 ----------------------------- Loans: Commercial Real Estate $ 9 $ 11 $ (2) Other Commercial 76 101 (25) Foreign 40 40 - Community Banking 76 78 (2) ---- ---- Total Loans 201 230 (29) Other Real Estate 70 58 12 ---- ---- Total $271 $288 (17) ==== ==== Nonperforming Assets Ratio 0.8% 0.7% Allowance/Nonperforming Loans 489.0 322.4 Allowance/Nonperforming Assets 362.5 258.0 Nonperforming assets totaled $271 million at June 30, 1996 compared with $288 million at March 31, 1996, a decrease of $17 million or 6%. This was the twentieth consecutive quarter of nonperforming asset decreases. At June 30, 1996, impaired loans (nonaccrual loans over $1 million) aggregated $140 million, of which $105 million exceeded their fair value by $23 million. Impaired loans at June 30, 1995 totaled $162 million, of which $95 million exceeded their fair value by $26 million. For the second quarter of 1996 and 1995, the average amount of impaired loans was $154 million and $186 million and interest income (cash received) on them was $158 thousand and $226 thousand. Credit card loans are not placed on nonperforming status, but are charged off when they become past due for certain periods. Additional information regarding the credit quality of the Company's credit card portfolio is provided below. 14 LOAN LOSS PROVISION AND NET CHARGE-OFFS - --------------------------------------- 2nd 1st 2nd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 1996 1996 1995 1996 1995 ----------------------- ------------ Provision $425* $ 90 $ 62 $515* $112 ---- ---- ---- ---- ---- Net (Charge-offs) Recovery: Commercial Real Estate - (3) (14) (3) (16) Other Commercial (7) 1 (9) (6) (13) Credit Card (187)** (96) (60) (283)** (121) Other Consumer (2) (2) (1) (4) (3) Foreign 13 (1) (12) 12 (36) Other (2) (3) (3) (5) (6) ---- ---- ---- ---- ---- Total (185) (104) (99) (289) (195) Other - - 1 - 4 ---- ---- ---- ---- ---- Change in Allowance $240 $(14) $(36) $226 $(79) ==== ==== ==== ==== ==== Other Real Estate Expenses (Recovery) $ 1 $ (2) $ 2 $ (1) $ 3 * Includes a provision of $350 million for credit card accounts. ** Includes $99 million attributed to charge-offs of past due and bankrupt Union credit card accounts not sold to Household. The allowance for loan losses was $982 million, or 2.76% of loans at June 30, 1996, compared with $742 million, or 1.91% of loans at March 31, 1996. In the second quarter of 1996, the Company recorded a provision for credit card loans of $350 million. The provision principally relates to a higher level of anticipated losses on certain Consumer's Edge accounts opened in 1994 and 1995, and on the credit card portfolio generally, following a review of information received during the second quarter of performance data and industry and economic trends. The provision also covers $99 million of charge-offs of the Union receivables not sold to Household, all of which were classified as more than 90 days past due or bankrupt. The foreign recovery in the second quarter of 1996 reflects a $13 million settlement with the Republic of Slovenia related to Yugoslavian debt. In July 1996, the Company received a $20 million settlement with the Republic of Croatia also related to Yugoslavian debt. 15 SECTOR PROFITABILITY - -------------------- The Company has an internal information system used for management purposes that produces sector performance data for Trust, and Securities and Other Processing, Retail Banking, Corporate Banking, and Other Sectors. A set of measurement principles has been developed to help ensure that reported results of the sectors track their economic performance. Net interest income is computed on a taxable equivalent basis. Support and other indirect expenses are allocated to sectors based on general guidelines. The provision for loan losses is based on net charge-offs incurred by each sector. Assets and liabilities are match funded. Based on this system, the sectors contributed to the Company's profitability for the second quarter and first six months as follows: Trust, and Securities and Other Retail Corporate (In millions) Processing Banking Banking 2nd Quarter 1996 1995 1996 1995 1996 1995 ---- ---- ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 34 $ 41 $311 $326 $124 $132 Provision for Loan Losses 0 0 191 63 (5) 36 Noninterest Income 279 206 48 43 74 69 Noninterest Expense 199 154 175 179 52 62 ---- ---- ---- ---- ---- ---- Income Before Taxes $114 $ 93 $ (7) $127 $151 $103 ==== ==== ==== ==== ==== ==== (In millions) Other Total --------- ------------ 2nd Quarter 1996 1995 1996 1995 ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 30 $ 15 $499 $514 Provision for Loan Losses 239 (37) 425 62 Noninterest Income 445 32 846 350 Noninterest Expense 31 30 457 425 ---- ---- ---- ---- Income Before Taxes $205 $ 54 $463 $377 ==== ==== ==== ==== Trust, and Securities and Other Retail Corporate (In millions) Processing Banking Banking ---------- ---------- ---------- Year-to-date 1996 1995 1996 1995 1996 1995 Net Interest Income on a Taxable Equivalent Basis $ 67 $ 77 $636 $631 $250 $265 Provision for Loan Losses 0 0 292 129 (2) 51 Noninterest Income 551 407 90 82 141 138 Noninterest Expense 392 305 339 352 108 120 ---- ---- ---- ---- ---- ---- Income Before Taxes $226 $179 $ 95 $232 $285 $232 ==== ==== ==== ==== ==== ==== (In millions) Other Total --------- ------------- Year-to-date 1996 1995 1996 1995 ---- ---- ------ ------ Net Interest Income on a Taxable Equivalent Basis $ 64 $ 44 $1,017 $1,017 Provision for Loan Losses 225 (68) 515 112 Noninterest Income 484 41 1,266 668 Noninterest Expense 63 64 902 841 ---- ---- ----- ------ Income Before Taxes $260 $ 89 $ 866 $ 732 ==== ==== ====== ====== Trust, and Securities and Other Processing - ------------------------------------------ In the Trust, and Securities and Other Processing Sector, securities processing fees increased 58% to $161 million compared to $102 million in the second quarter of 1995. In the first half of 1996, securities processing fees were $320 million compared with $200 million in 1995. Internally generated growth, which was 12% for the second 16 quarter, was led by ADRs, corporate trust, custody, and government clearance. Fee revenue from issuer services, custody and securities industry products were $54 million, $61 million, and $46 million in the second quarter of 1996 compared with $39 million, $29 million, and $34 million in 1995. Fees from other processing increased 7% over the second quarter of last year. Fees from trust and investment grew 24% in the second quarter of 1996, reflecting new business and generally strong markets. The rise in noninterest expense was principally due to salary and other expenses related to acquisitions of securities processing businesses from J.P. Morgan, BankAmerica and NationsBank. Retail - ------ On June 27, 1996 the Company sold its AFL-CIO Union Privilege affinity credit card portfolio to Household International, Inc. for $575 million, effective June 1, 1996. The transaction related to approximately $3.4 billion in outstandings and included 2.2 million cards. The Company expects to continue to service the portfolio for Household during the third quarter of 1996. The decrease in net interest income in the Retail Banking Sector principally reflects the sale of credit card receivables and promotional rates on credit cards. The table below provides information relating to the Company's credit card portfolio: 2nd 1st 2nd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 1996 1996 1995 1996 1995 Number of Accounts 4.639 6.652 6.013 4.639 6.013 Period End Balance $5,508 $8,842 $7,721 $5,508 $7,721 Loans Delinquent: 30-59 Days $ 74 $107 $ 81 $ 74 $ 81 60-89 Days 57 82 53 57 53 90 or More Days 165 193 112 165 112 ---- ---- ---- ---- ---- Total Loans Delinquent $296 $382 $246 $296 $246 Net Charge-offs $88* $96 $60 $184* $121 As a Percent of Average Loans Outstanding: Net Charge-offs 4.57%* 4.48% 3.17% 4.51%* 3.24% Accounts Delinquent More Than 30 Days 5.35 4.32 3.19 5.35 3.19 As a Percent of Period End Balances: Net Charge-offs 6.43* 4.37 3.12 6.72* 3.16 Accounts Delinquent More Than 30 Days 5.37 4.32 3.19 5.37 3.19 * Excludes $99 million attributed to charge-offs of past due and bankrupt Union credit card accounts not sold to Household. The increase in the provision for loan losses in the Retail Banking Sector is primarily attributable to increased charge-offs on Consumers Edge accounts opened in 1994 and 1995 and $99 million of 17 charge-offs of past due and bankrupt Union credit card accounts not sold to Household. Although future levels of charge-offs are difficult to predict because they depend upon numerous factors, some of which are beyond the control of the Company, rising credit card delinquencies and increased personal bankruptcies could result in future charge-offs exceeding historic levels. The decline in total delinquent loans in the second quarter of 1996 compared with the first quarter is due to the sale of the Union portfolio. Lower FDIC insurance premiums contributed to the decline in noninterest expense. Corporate - --------- Net interest income declined in the Corporate Banking Sector due to a decline in the value of noninterest bearing sources of funds. The decrease in the provision reflects a net recovery primarily due to the settlement with the Republic of Slovenia related to Yugoslavian debt and a lower level of charge-offs in the second quarter of 1996. Noninterest income benefitted from higher syndication fees recorded in the second quarter of 1996 compared to last year's second quarter. Other - ----- The Other Sector reflects the difference between the total provision for loan losses and that charged off by the sectors. The increase primarily reflects the $350 million provision for credit card loans. Securities gains and foreign exchange and other trading activities increased $25 million from the second quarter of 1995. The increase in noninterest income principally reflects the $400 million gain on the sale of the credit card receivables to Household. 18 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Dollars in millions) For the three months For the three months ended June 30, 1996 ended June 30, 1995 ------------------------ ------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------ ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 1,503 $ 21 5.52% $ 1,929 $ 30 6.32% Federal Funds Sold and Securities Purchased Under Resale Agreements 2,422 32 5.30 4,074 62 6.06 Loans Domestic Offices 25,812 588 9.17 24,239 609 10.09 Foreign Offices 11,995 196 6.58 10,990 204 7.46 ------- ------ ------- ------ Total Loans 37,807 784 8.35 35,229 813 9.27 ------- ------ ------- ------ Securities U.S. Government Obligations 2,988 43 5.78 2,911 42 5.74 U.S. Government Agency Obligations 480 7 6.24 314 5 6.32 Obligations of States and Political Subdivisions 652 15 8.92 664 18 10.89 Other Securities, including Trading Securities 1,326 19 5.62 1,260 21 6.58 ------- ------ ------- ------ Total Securities 5,446 84 6.16 5,149 86 6.64 ------- ------ ------- ------ Total Interest-Earning Assets 47,178 921 7.85% 46,381 991 8.57% ------ ------ Allowance for Loan Losses (728) (737) Cash and Due from Banks 2,527 2,782 Other Assets 5,521 5,456 ------- ------- TOTAL ASSETS $54,498 $53,882 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 3,713 39 4.23% $ 3,406 39 4.54% Savings 8,264 55 2.70 7,787 62 3.18 Certificates of Deposit $100,000 & Over 890 11 5.19 1,850 27 5.87 Other Time Deposits 2,533 29 4.68 2,588 34 5.33 Foreign Offices 12,383 152 4.90 12,056 173 5.75 ------- ------ ------- ------ Total Interest-Bearing Deposits 27,783 286 4.15 27,687 335 4.85 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,659 48 5.25 2,481 36 5.88 Other Borrowed Funds 4,081 55 5.41 4,680 74 6.29 Long-Term Debt 1,920 33 6.75 1,724 32 7.42 ------- ------ ------- ------ Total Interest-Bearing Liabilities 37,443 422 4.53% 36,572 477 5.23% ------ ------ Noninterest-Bearing Deposits 8,472 8,686 Other Liabilities 3,420 4,000 Preferred Stock 113 117 Common Shareholders' Equity 5,050 4,507 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $54,498 $53,882 ======= ======= Net Interest Earnings and Interest Rate Spread $ 499 3.32% $ 514 3.34% ====== ====== Net Yield on Interest- Earning Assets 4.26% 4.45% ==== ==== 19 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Dollars in millions) For the six months For the six months ended June 30, 1996 ended June 30, 1995 ------------------------ ------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------ ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 1,540 $ 43 5.60% $ 1,918 $ 60 6.31% Federal Funds Sold and Securities Purchased Under Resale Agreements 2,298 61 5.34 4,335 128 5.96 Loans Domestic Offices 25,966 1,200 9.29 23,673 1,185 10.09 Foreign Offices 11,816 393 6.69 10,773 396 7.41 ------- ------ ------- ------ Total Loans 37,782 1,593 8.47 34,446 1,581 9.26 ------- ------ ------- ------ Securities U.S. Government Obligations 2,931 83 5.72 2,892 83 5.78 U.S. Government Agency Obligations 466 15 6.28 316 10 6.33 Obligations of States and Political Subdivisions 644 29 9.01 688 37 10.80 Other Securities, including Trading Securities 1,263 34 5.54 1,246 40 6.41 ------- ------ ------- ------ Total Securities 5,304 161 6.13 5,142 170 6.64 ------- ------ ------- ------ Total Interest-Earning Assets 46,924 1,858 7.96% 45,841 1,939 8.53% ------ ------ Allowance for Loan Losses (726) (762) Cash and Due from Banks 2,838 2,720 Other Assets 5,489 5,288 ------- ------- TOTAL ASSETS $54,525 $53,087 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 3,858 82 4.29% $ 3,410 74 4.40% Savings 8,243 114 2.77 7,740 118 3.09 Certificates of Deposit $100,000 & Over 1,005 27 5.32 1,857 54 5.82 Other Time Deposits 2,565 61 4.78 2,539 66 5.20 Foreign Offices 11,946 294 4.95 11,736 331 5.68 ------- ------ ------- ------ Total Interest-Bearing Deposits 27,617 578 4.21 27,282 643 4.75 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,766 99 5.30 2,379 68 5.83 Other Borrowed Funds 3,613 99 5.51 4,686 146 6.27 Long-Term Debt 1,901 65 6.85 1,753 65 7.39 ------- ------ ------ ------ Total Interest-Bearing Liabilities 36,897 841 4.58% 36,100 922 5.15% ------ ------ Noninterest-Bearing Deposits 9,011 8,721 Other Liabilities 3,412 3,763 Preferred Stock 113 117 Common Shareholders' Equity 5,092 4,386 ------- ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $54,525 $53,087 ======= ======= Net Interest Earnings and Interest Rate Spread $1,017 3.38% $1,017 3.38% ====== ====== Net Yield on Interest- Earning Assets 4.36% 4.47% ==== ==== 20 PART 2. OTHER INFORMATION Item 2. Changes in Securities - ------------------------------ On July 11, 1996 a Certificate of Amendment to Article FOURTH of the Company's Certificate of Incorporation was filed by the Secretary of State of the State of New York. The amendment increased the number of shares of Common Stock, par value $7.50 per share, that the Company is authorized to issue from 350,000,000 to 800,000,000. Item 4. Submissions of Matters to Vote of Security Holders - ----------------------------------------------------------- The Company held its annual meeting on May 14, 1996 at The Bank of New York (NJ) in West Patterson, New Jersey. The following matters were submitted to a vote of the shareholders: -- Election of sixteen director nominees to new one-year terms was approved with no nominee receiving less than 167.9 million votes. -- Appointment of Ernst & Young LLP as the Company's independent public accountants for 1996 was ratified by a vote of 168.3 million affirmative to 1.6 million negative. -- Amendment to Article Fourth of Certificate of Incorporation to increase the number of authorized shares of common stock was approved by a vote of 130.9 million affirmative to 37.8 million negative. -- A proposal that cumulative voting rights be accorded to shareholders was defeated by a vote of 30.1 million affirmative to 108.9 million negative. -- A proposal to limit the number of terms that an outside director can serve on the Company's board of directors was defeated by a vote of 6.7 million affirmative to 147.6 million negative. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) The exhibits filed as part of this report are as follows: Exhibit 4 - Certificate of Amendment to Certificate of Incorporation Exhibit 11 - Statement Re: Computation of Earnings Per Common Share for the Three and Six Months Ended June 30, 1996 and 1995. Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for the Three and Six months Ended June 30, 1996 and 1995. 21 Exhibit 27 - Statement Re: Financial Data Schedule containing selected financial data at June 30, 1996 and for the Six Months ended June 30, 1996. (b) The Company filed the following reports on Form 8-K since March 31, 1996: On April 11, 1996, the Company filed a Form 8-K Current Report (Items 5 and 7), which report included unaudited interim financial information and accompanying discussion for the first quarter of 1996 contained in the Company's press release dated April 11, 1996. On June 19, 1996, the Company filed a Form 8-K Current Report (Item 5), which report included the Company's press releases dated June 17, 1996 and June 19, 1996. The Company's press release dated June 17, 1996 contained the announcement of the sale by The Bank of New York (Delaware), a subsidiary of the Company, of its AFL-CIO Union Privilege credit card portfolio to Household International, Inc., and the approval by its Board of Directors to use a portion of the proceeds of the sale to buy back up to 10 million common shares. The Company's press release dated June 19, 1996 contained the announcement of the establishment of a $350 million credit card provision. On July 17, 1996, the Company filed a Form 8-K Current Report (Items 5 and 7), which report included unaudited interim financial information and accompanying discussion for the second quarter of 1996 contained in the Company's press release dated July 17, 1996. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE BANK OF NEW YORK COMPANY, INC. ---------------------------------- (Registrant) Date: August 13, 1996 By: \s\ Deno D. Papageorge ----------------------- Name: Deno D. Papageorge Title: Senior Executive Vice President 23 EXHIBIT INDEX -------------- Exhibit Description - ------- ----------- 4 Certificate of Amendment to Certificate of Incorporation 11 Computation of Earnings Per Common Share for the Three Months Ended June 30, 1996 and 1995. 12 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for the Three and Six Months Ended June 30, 1996 and 1995. 27 Financial Data Schedule containing selected financial data at June 30, 1996 and for the Six Months Ended June 30, 1996. EX-4 2 INCORPORATION EXHIBIT 4 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE BANK OF NEW YORK COMPANY, INC. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW 1. The name of the corporation is The Bank of New York Company, Inc. The corporation was originally formed under the name The B.N.Y. Company, Inc. 2. The Certificate of Incorporation of the corporation was filed by the Department of State on July 9, 1968. A Restated Certificate of Incorporation was filed by the Department of State on August 16, 1994. 3. To increase the authorized Common Stock (par value $7.50 per share) from 350,000,000 to 800,000,000 shares the first paragraph of Article FOURTH of the Certificate of Incorporation is hereby amended to read, in its entirety: FOURTH: The aggregate number of shares which the Corporation shall have the authority to issue is eight hundred ten million (810,000,000) of which eight hundred million (800,000,000) shares (par value $7.50 per share) shall be designated as Common Stock; five million (5,000,000) shares, without par value, shall be designated as Preferred Stock; and five million (5,000,000) shares (par value $2.00 per share) shall be designated as Class A Preferred Stock. 4. The amendment of the Certificate of Incorporation was authorized pursuant to Section 803(a) of the Business Corporation Law, by a vote of the Board of Directors at a meeting duly convened and held on March 12, 1996 and by a vote of the holders of a majority of all outstanding shares entitled to vote thereon at a meeting of shareholders duly convened and held on May 14, 1996. IN WITNESS WHEREOF, the undersigned have signed this Certificate of Amendment on July 9, 1996 and affirm the statements contained herein as true under the penalties of perjury. /s/ J. Carter Bacot ------------------------------- Name: J. Carter Bacot Title: Chairman of the Board & Chief Executive Officer /s/ Jacqueline R. McSwiggan ------------------------------- Name: Jacqueline R. McSwiggan Title: Assistant Secretary EX-11 3 EPS EXHIBIT 11 THE BANK OF NEW YORK COMPANY, INC. Computation of Earnings Per Common Share (In millions, except per share amounts) For the Three For the Six Months Ended Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Weighted Average Number of Shares 387 381 391 378 Shares Assumed to be Issued on Conversion: Warrants 21 10 21 5 ----- ----- ----- ----- Weighted Average Number of Shares of Common Stock for Primary Computation 408 391 412 383 Shares Assumed to be Issued on Conversion: Debentures 10 19 10 22 Warrants - 3 1 8 Cumulative Preferred Stock - 1 - 1 ----- ----- ----- ----- Weighted Average Number of Shares of Common Stock Assuming Full Dilution 418 414 423 414 ===== ===== ===== ===== Net Income $ 278 $ 226 $ 521 $ 438 Dividend Requirements on Preferred Stock 2 3 5 5 ----- ----- ----- ----- Net Income Available to Common Shareholders 276 223 516 433 Interest on Convertible Debentures, Net of Tax 1 2 2 4 ----- ----- ----- ----- Net Income Available to Common Shareholders, Assuming Full Dilution $ 277 $ 225 $ 518 $ 437 ===== ===== ===== ===== Earnings Per Share: Primary $0.68 $0.57 $1.25 $1.13 Fully Diluted 0.66 0.54 1.23 1.06 Note: Restated to reflect the effect of the 2-for-1 common stock split effective July 19, 1996. EX-12 4 FIXED CHARGES EXHIBIT 12 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 (Dollars in millions) For the three For the six months ended months ended June 30, June 30, 1996 1995 1996 1995 EARNINGS ---- ---- ---- ---- - -------- Income Before Income Taxes $452 $367 $ 846 $ 710 Fixed Charges, Excluding Interest on Deposits 143 151 279 296 ---- ---- ------ ------ Income Before Income Taxes and Fixed Charges, Excluding Interest on Deposits 595 518 1,125 1,006 Interest on Deposits 286 335 578 643 ---- ---- ------ ------ Income Before Income Taxes and Fixed Charges, Including Interest on Deposits $881 $853 $1,703 $1,649 ==== ==== ====== ====== FIXED CHARGES - ------------- Interest Expense, Excluding Interest on Deposits $136 $142 $ 263 $ 279 One-Third Net Rental Expense* 7 9 16 17 ---- ---- ------ ------ Total Fixed Charges, Excluding Interest on Deposits 143 151 279 296 Interest on Deposits 286 335 578 643 ---- ---- ------ ------ Total Fixed Charges, Including Interest on Deposits $429 $486 $ 857 $ 939 ==== ==== ====== ====== PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ 4 $ 4 $ 8 $ 8 - ---------------------------------------- ==== ==== ====== ====== EARNINGS TO FIXED CHARGES RATIOS - -------------------------------- Excluding Interest on Deposits 4.16x 3.43x 4.03x 3.40x Including Interest on Deposits 2.05 1.76 1.99 1.76 EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS RATIOS - ---------------------------------- Excluding Interest on Deposits 4.05 3.34 3.92 3.31 Including Interest on Deposits 2.03 1.74 1.97 1.74 * The proportion deemed representative of the interest factor. EX-27 5 FDS
9 This schedule contains summary financial information which is qualified entirely by reference to The Bank of New York Company, Inc.'s Form 10-Q for the period ended June 30, 1996. 0000009626 THE BANK OF NEW YORK COMPANY, INC. 1,000,000 6-MOS DEC-31-1996 JAN-1-1996 JUN-30-1996 3,845 992 1,318 586 3,954 1,231 1,164 35,523 982 51,467 35,462 6,141 1,961 1,913 0 113 3,094 1,860 51,467 1,587 138 113 1,838 578 841 997 515 63 902 846 521 0 0 521 1.25 1.23 4.36 201 219 0 0 756 334 45 982 942 40 0 Per Common Share data has been adjusted to reflect the effect of the 2-for-1 common stock split effective July 19, 1996. Prior Financial Data Schedules have not been restated for this stock split.
-----END PRIVACY-ENHANCED MESSAGE-----