-----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, RImfZEKLq3qRucmxbk4rkhaD6sdiB16C6yizxWYsomeJnEB76+/Osb4XSubHSZ3w cvRYQELdrz1Jftj2S7FLsw== 0000009626-03-000096.txt : 20030717 0000009626-03-000096.hdr.sgml : 20030717 20030717120548 ACCESSION NUMBER: 0000009626-03-000096 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030630 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030717 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06152 FILM NUMBER: 03790684 BUSINESS ADDRESS: STREET 1: ONE WALL ST 10TH FL CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 212-495-1784 MAIL ADDRESS: STREET 1: ONE WALL STREET 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 8-K 1 r2q038k.txt 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8 - K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 17, 2003 THE BANK OF NEW YORK COMPANY, INC. ---------------------------------- (exact name of registrant as specified in its charter) NEW YORK -------- (State or other jurisdiction of incorporation) 001-06152 13-2614959 --------- ---------- (Commission file number) (I.R.S. employer identification number) One Wall Street, New York, NY 10286 ----------------------------- ----- (Address of principal executive offices) (Zip code) 212-495-1784 ------------ (Registrant's telephone number, including area code) 2 ITEM 5. Other Events ------------ Second Quarter of 2003 Financial Results ---------------------------------------- On July 17, 2003, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the second quarter of 2003. Exhibit 99 is a copy of such press release and is incorporated herein by reference. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits ------------------------------------------------------------------ (c) Exhibit Description ------- ----------- 99 Unaudited interim financial information and accompanying discussion for the second quarter of 2003 contained in the press release dated July 17, 2003, of The Bank of New York Company, Inc. ITEM 12. Results of Operations and Financial Condition --------------------------------------------- Press release filed under Item 5 3 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 hereunto duly authorized. Dated: July 17, 2003 THE BANK OF NEW YORK COMPANY, INC. (Registrant) By: /s/ Thomas J. Mastro ------------------------- Name: Thomas J. Mastro Title: Comptroller 4 EXHIBIT INDEX ------------- Exhibit No. Description - ----------- ----------- 99 Unaudited interim financial information and accompanying discussion for the second quarter of 2003 contained in the press release dated July 17, 2003, of The Bank of New York Company, Inc. EX-99 3 r2q03ex99.txt EX-99 1 EXHIBIT 99 The Bank of New York Company, Inc. NEWS - ------------------------------------------------------------------------------ One Wall Street, New York, NY 10286 ----------------------------------- Contact: PUBLIC AND INVESTOR RELATIONS IMMEDIATELY - ----------- Media: Investors: - ----- ---------- R. Jeep Bryant, MD John M. Roy, MD (212) 635-1569 (212) 635-8005 Gregg A. Scheuing, VP (212) 635-1578 THE BANK OF NEW YORK COMPANY, INC. REPORTS SOLID SECOND QUARTER EARNINGS REFLECTING IMPROVING EQUITY MARKET CONDITIONS CORE SECURITIES SERVICING FEES UP 13% ANNUALIZED FROM PRIOR QUARTER NEW YORK, N.Y., July 17, 2003 -- The Bank of New York Company, Inc. (NYSE: BK) reports second quarter earnings per diluted share on a reported basis of 39 cents and excluding the impact of the Pershing acquisition, 42 cents per share. The Company reported earnings of 41 cents in the first quarter of 2003. The reported results include previously announced dilution from Pershing, which closed May 1, 2003, of 1 cent on operating earnings and an additional 2 cents from merger and integration costs associated with the acquisition. With Pershing, the Company earned 41 cents on an operating basis in the second quarter. Net income for the second quarter was $295 million compared with $361 million, or 50 cents per share a year ago. Year-to-date net income was $590 million, or 80 cents per share, compared to $723 million, or 99 cents per share in 2002. The second quarter results showed sequential quarter improvement in the Company's key businesses, including securities servicing and associated foreign exchange, global payment services, private client services and asset 2 management. These businesses responded positively to better market conditions in May and June, characterized by higher equity trading volumes, improved equity price levels, and increased foreign exchange volume and volatility. Including Pershing, noninterest income was up $152 million, or 18%, over the first quarter of 2003 and increased to a record 71% of total revenue. Excluding Pershing, securities servicing fees increased 3% over the first quarter, or 13% annualized, as the Company's equity-linked businesses rebounded from first quarter levels. This rebound also positively impacted foreign exchange and other trading, which increased 22% excluding Pershing. The Company's other major fee categories also showed growth on a sequential quarter basis, including private client services and asset management, which was up 5%, and global payment services, which was up 3%. Chairman and Chief Executive Officer Thomas A. Renyi stated, "Our diversified business model responded well to the recent improved conditions in the equity markets, and we are well positioned to benefit from further strengthening in the capital markets. At the same time, credit costs remain stable and we continue to make significant progress in our credit exposure reduction program. "This quarter also marked the successful closing of Pershing, where we continue to be on target with all of our major integration milestones, particularly client retention. We are confident of our ability to realize the projected synergies and expect this acquisition to be accretive in early 2004." 3 SUPPLEMENTAL FINANCIAL INFORMATION For the quarter and six months ended June 30, 2003, the Company has prepared information in four categories: - Reported results which are in accordance with Generally Accepted Accounting Principles (GAAP). - Core operating results which exclude the Pershing acquisition. - Pershing results which reflect the revenues and expenses since the May 1 acquisition of Pershing but excluding the merger and integration costs. - Merger and integration costs. The Company believes that providing supplemental non-GAAP financial information is useful to investors in understanding the underlying operational performance of the Company, its businesses and performance trends and, therefore, facilitates comparisons with the performance of other financial service companies. Specifically, the Company believes that the exclusion of the transaction-related and restructuring expenses permits evaluation and a comparison of results for ongoing business operations, and it is on this basis that the Company's management internally assesses performance. The following is a reconciliation of the Company's financial results for the three months ended June 30, 2003: 4 THE BANK OF NEW YORK COMPANY, INC. Supplemental Information (In millions, except per share amounts) (Unaudited)
Income Statement Quarter ended June 30 SUPPLEMENTAL GAAP ----------------------------------- ----------------------- Operating Merger 2003 2002 ------------ and Reported Reported Core Pershing (a) Integration Results Results ---- -------- ----------- -------- -------- Net Interest Income $ 387 $ 11 $ - $ 398 $ 423 - ------------------- Provision for Credit Losses 40 - - 40 35 ----- ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 347 11 - 358 388 ----- ----- ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 489 109 - 598 478 Global Payment Services 79 - - 79 71 ----- ----- ----- ----- ----- 568 109 - 677 549 Private Client Services and Asset Management Fees 94 - - 94 88 Service Charges and Fees 93 - - 93 93 Foreign Exchange and Other Trading Activities 79 9 - 88 72 Securities Gains 9 - - 9 25 Other 32 3 - 35 28 ----- ----- ----- ----- ----- Total Noninterest Income 875 121 - 996 855 ----- ----- ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 439 60 - 499 418 Net Occupancy 57 16 - 73 49 Furniture and Equipment 38 11 - 49 35 Clearing 31 9 - 40 33 Sub-custodian Expenses 19 - - 19 15 Software 36 7 - 43 29 Amortization of Intangibles 4 3 - 7 2 Merger and Integration Cost - - 25 25 - Other 142 6 - 148 115 ----- ----- ----- ----- ----- Total Noninterest Expense 766 112 25 903 696 ----- ----- ----- ----- ----- Income Before Income Taxes 456 20 (25) 451 547 Income Taxes 156 9 (9) 156 186 ----- ----- ----- ----- ----- Net Income $ 300 $ 11 $ (16) $ 295 $ 361 - ---------- ===== ===== ===== ===== ===== Diluted Earnings Per Share $0.42 ($0.01)(b) ($0.02) $0.39 $0.50 Notes: Reported results agree with the Company's Consolidated Statement of Income (a) Includes $5 million of net interest costs attributable to the Pershing acquisition financing. (b) The ($0.01) dilution is due to changes in shares outstanding attributable to the acquisition.
5 The following is a supplemental balance sheet showing the impact of the Pershing acquisition. THE BANK OF NEW YORK COMPANY, INC. Supplemental Information (In millions) (Unaudited)
Balance Sheet June 30, 2003 GAAP SUPPLEMENTAL REPORTED ----------------------------------------- ------------------ Core Pershing Elimination June 30, June 30, Entries June 30, December 31, 2003 2003 2003 2002 ---- ---- ---------- ---- ---- Assets - --- --- Cash and Due from Banks $ 4,067 $ 256 $ 4,323 $ 4,748 Interest-Bearing Deposits in Banks 6,706 38 6,744 5,104 Securities 20,377 15 20,392 18,300 Trading Assets at Fair Value 6,059 172 6,231 7,309 Federal Funds Sold and Securities Purchased Under Resale Agreements 8,095 3,981 12,076 1,385 Margin Loans 406 5,505 5,911 352 Loans (less allowance for credit losses of $824 in 2003 and $831 in 2002) 31,206 31,206 30,156 Premises and Equipment 975 133 1,108 975 Due from Customers on Acceptances 191 191 351 Accrued Interest Receivable 237 7 244 204 Investment in/Advances to Pershing 2,891 $(2,891) Goodwill & Intangible Assets 2,653 1,320 3,973 2,575 Other Assets 6,650 704 7,354 6,105 ------- ------- ------- ------- ------- Total Assets $90,513 $12,131 $(2,891) $99,753 $77,564 ======= ======= ======= ======= ======= Liabilities and Shareholders' Equity - ------------------------------------ Deposits $64,800 $64,800 $55,387 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 699 $ 336 1,035 636 Trading Liabilities 2,548 52 2,600 2,800 Payables to Customers and Broker-Dealers 1,684 7,723 9,407 870 Other Borrowed Funds 706 1,081 $ (871) 916 475 Acceptances Outstanding 194 194 352 Accrued Taxes and Other Expenses 4,014 19 4,033 4,066 Accrued Interest Payable 139 3 142 101 Other Liabilities 1,101 897 1,998 753 Long-Term Debt 6,515 6,515 5,440 ------ ------ ------ ------- ------- Total Liabilities 82,400 10,111 (871) 91,640 70,880 ------ ------ ------ ------- ------- Shareholders' Equity 8,113 2,020 (2,020) 8,113 6,684 ------- ------- ------- ------- ------- Total Liabilities and Shareholders' Equity $90,513 $12,131 $(2,891) $99,753 $77,564 ======= ======= ======= ======= ======= - -------------------------------------------------------------------------------------------------- Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date.
Although the Company believes that the non-GAAP financial measures presented in this release enhance investors' understanding of our business and performance, these non-GAAP measures should not be considered an alternative to GAAP. 6 SECURITIES SERVICING FEES Securities servicing fees were $598 million in the second quarter, an increase of $124 million or 26% over the first quarter, and $120 million or 25% over the second quarter of 2002, primarily due to the Pershing acquisition. For the first six months of 2003, securities servicing fees were $1,071 million, an increase of $139 million from $932 million for the first six months of 2002, principally due to Pershing and other acquisitions. Pershing securities servicing fees in May and June included in the quarter and six months ended June 30, 2003 were $109 million. Excluding Pershing, core securities servicing fees were up 3% from the first quarter, or 13% annualized, as a result of improved performance in the Company's equity-linked businesses. Fees from investor services increased both on a sequential quarter basis and over last year's second quarter. Strong performers on a sequential quarter basis included global custody and securities lending. Wholesale distribution services and securities lending were up over last year's second quarter. Global custody benefited from the phase-in of new client wins, higher equity prices, and increased transaction volumes. As of June 30, 2003, assets under custody were $7.8 trillion, up from $6.8 trillion at March 31, 2003, and up from $6.6 trillion at June 30, 2002. The acquisition of Pershing added approximately $500 billion to custody assets at June 30, 2003. Securities lending benefited from seasonal factors compared to the first quarter and higher loan volume compared to last year. Global issuer services declined on a sequential quarter basis and in comparison to the second quarter of 2002. Corporate trust fees declined from the record level attained in the first quarter of 2003. Depositary receipts showed improved performance on a sequential quarter basis as a result of the improved equity markets as well as seasonal corporate actions, but remain below year ago levels. Fees from broker-dealer services increased for the quarter in terms of both sequential quarter and year-over-year comparisons. Strong performers included government securities clearance and domestic and global collateral 7 management services, which benefited from new business wins and higher fixed income transaction volumes driven by refinancing activity. Execution and clearing services increased on both a sequential quarter and on a year-over-year basis, reflecting the acquisition of Pershing as well as an increase in market trading volumes in the second quarter of 2003. Total combined second quarter NYSE and NASDAQ trading volume was up 17% from the first quarter of 2003. Excluding Pershing, sequential quarter fee growth for these services was strong across all the business units, in particular BNY Brokerage, B-Trade, and G-Trade. NONINTEREST INCOME Noninterest income for the second quarter of 2003 was $996 million, an increase of 18% sequentially and 16% from a year ago. Noninterest income was 71% of total revenues. Noninterest income for the six months ended June 30, 2003 was $1,841 million, an increase of 10% over the comparable 2002 period. The increases are principally due to the Pershing acquisition and improved performance in the core business. Pershing's contribution to the Company's noninterest income was $121 million for the quarter and six months ended June 30, 2003.
2nd 1st 2nd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ------------ (In millions) 2003 2003 2002 2003 2002 ----- ---- ---- ---- ---- Servicing Fees Securities $598 $474 $478 $1,071 $ 932 Global Payment Services 79 77 71 156 144 ---- ---- ---- ------ ------ 677 551 549 1,227 1,076 Private Client Services and Asset Management Fees 94 90 88 184 171 Service Charges and Fees 93 98 93 191 176 Foreign Exchange and Other Trading Activities 88 65 72 154 134 Securities Gains 9 7 25 16 56 Other 35 33 28 69 60 ---- ---- ---- ------ ------ Total Noninterest Income $996 $844 $855 $1,841 $1,673 ==== ==== ==== ====== ======
Global payment services fees increased by 3% from the prior quarter and 11% from the second quarter of 2002. The increased revenues over both periods reflect greater funds transfer activity, particularly multi-currency payments, and new business wins in key client segments, such as U.S. and international 8 banks and mortgage banks. Global payment services fees increased by 8% on a year-to-date basis over 2002. Private client services and asset management fees for the second quarter were up 5% from the prior quarter, and 7% from the second quarter of 2002. The sequential quarter increase reflects the continued strong demand for alternative investments from Ivy Asset Management as well as higher fees from the private client services business. The increase from the second quarter of 2002 and on a year-to-date basis was due to strong performance from Ivy Asset Management and acquisitions. Total assets under management were $83 billion at June 30, 2003, up from $76 billion at March 31, 2003 and up from $75 billion a year ago. Service charges and fees were down $5 million from the prior quarter, and flat with one year ago. The decrease from the prior quarter reflects lower fees from structured products. Service charges and fees were up 9% on a year- to-date basis over 2002, reflecting higher fees from capital markets and structured products. Foreign exchange and other trading revenues were up $23 million, or 35%, compared with the prior quarter, and $16 million, or 22%, from one year ago. The main reasons for the increase were higher foreign exchange revenue and the addition of Pershing, which contributed $9 million to other trading revenues for the quarter and six months ended June 30, 2003. The strong foreign exchange performance in the second quarter reflects greater client activity resulting from increased cross-border investing, increased currency volatility, and wider intraday trading ranges. Excluding Pershing, other trading revenues comprised primarily of fixed income execution and interest rate risk management products were down from the strong first quarter results but up from the quarter and six month period ending June 30, 2002. In the second quarter of 2003, the flatter yield curve and lower interest rates caused clients to delay their hedging activities. For the six months ended June 30, 2003, foreign exchange and other trading revenues were up 15% over the six months ended June 30, 2002. Securities gains in the second quarter were $9 million, up modestly from $7 million in the prior quarter and down significantly from $25 million a year 9 ago. Gains were principally derived from the Company's fixed income securities portfolio. Year-to-date securities gains are down $40 million from the first six months of 2002. Comparisons with the prior year periods reflect the Company's reduction in its equity investing activities in 2002. Other noninterest income increased $2 million from the first quarter of 2003 and $7 million from the second quarter of 2002. Pershing contributed $3 million to other income for the quarter and six months ended June 30, 2003. NET INTEREST INCOME
2nd 1st 2nd Quarter Quarter Quarter Year-to-Date (Dollars in millions) ------- ------- ------- ------------ 2003 2003 2002 2003 2002 ---- ---- ---- ---- ---- Net Interest Income $398 $386 $423 $784 $835 Tax Equivalent Adjustment 9 9 13 19 26 ---- ---- ---- ---- ---- Net Interest Income on a Tax Equivalent Basis $407 $395 $436 $803 $861 ==== ==== ==== ==== ==== Net Interest Rate Spread 1.95% 2.18% 2.31% 2.05% 2.31% Net Yield on Interest Earning Assets 2.22 2.44 2.65 2.32 2.64
Net interest income on a taxable equivalent basis was $407 million in the second quarter of 2003, compared with $395 million in the first quarter of 2003, and $436 million in the second quarter of 2002. Pershing contributed $11 million of net interest income for the quarter. The net interest rate spread was 1.95% in the second quarter of 2003, compared with 2.18% in the first quarter of 2003, and 2.31% in the second quarter of 2002. The net yield on interest earning assets was 2.22% in the second quarter of 2003, compared with 2.44% in the first quarter of 2003, and 2.65% in the second quarter of 2002. The increase in net interest income from the first quarter of 2003 is primarily due to the Pershing acquisition and higher earning assets arising from higher levels of client deposits. This was partially offset by lower reinvestment yields in the fixed income securities portfolio. The decrease in net interest income from the second quarter of 2002 reflects lower reinvestment yields on fixed income securities, planned decreases in loan balances, and the impact of Federal Reserve interest rate reductions in 2002 and 2003, partially offset by the Pershing acquisition. 10 For the first six months of 2003, net interest income on a taxable equivalent basis amounted to $803 million compared with $861 million in the first half of 2002, reflecting the same factors that affected the comparison with last year's quarter. The year-to-date net interest spread was 2.05% in 2003 compared with 2.31% in 2002, while the net yield on interest earning assets was 2.32% in 2003 and 2.64% in 2002. In this release a number of amounts related to net interest income are presented on a "taxable equivalent basis". The Company believes that this presentation provides comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry standards. NONINTEREST EXPENSE AND INCOME TAXES
2nd 1st 2nd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 2003 2003 2002 2003 2002 ---- ---- ---- ---- ---- Salaries and Employee Benefits $499 $423 $418 $ 922 $ 805 Net Occupancy 73 58 49 131 98 Furniture and Equipment 49 36 35 85 70 Clearing 40 29 33 69 60 Sub-custodian Expenses 19 16 15 35 30 Software 43 35 29 78 55 Amortization of Intangibles 7 3 2 10 4 Merger and Integration Costs 25 - - 25 - Other 148 139 115 287 223 ---- ---- ---- ------ ------ Total Noninterest Expense $903 $739 $696 $1,642 $1,345 ==== ==== ==== ====== ======
Noninterest expense for the second quarter of 2003 was $903 million, compared with $739 million in the prior quarter. The increase principally reflects noninterest expense from Pershing of $112 million, as well as $25 million of merger and integration costs related to the Pershing acquisition. Core noninterest expense was $766 million, up $27 million from the first quarter of 2003, reflecting higher variable compensation and other revenue- related costs as well as the full quarter impact of stock option expense. Salaries and employee benefits increased by $76 million on a sequential quarter basis primarily due to the Pershing acquisition, increased incentive compensation tied to revenues, and increased stock option expensing of $6 million in the second quarter of 2003. Pershing salaries and employee benefits were $60 million for the quarter ended June 30, 2003. The increase from the second quarter of 2002 primarily reflects the impact of the Pershing 11 acquisition, the inception of stock option expensing in 2003, a lower pension credit, increased technology investments, and higher business continuity spending. Noninterest expense for the first six months of 2003 was $1,642 million compared with $1,345 million last year, mainly reflecting the same factors that explain the second quarter to second quarter increase. The efficiency ratio for the second quarter was 64.8%, compared to 60.0% in the previous quarter and 55.0% in 2002. For the first half of 2003, the efficiency ratio was 62.5% compared with 54.3% last year. The increase in the efficiency ratio is largely attributable to the Pershing acquisition. The effective tax rate for the second quarter of 2003 was 34.6%, unchanged from the first quarter of 2003, and up from 34.0% in the second quarter 2002. The effective tax rate for the six month period ended June 30, 2003 was 34.6%, compared with 33.8% for the six month period ended June 30, 2002. The increase in the effective tax rate reflects fewer tax credits. BALANCE SHEET RETURN AND CAPITAL RATIOS Total assets were $99.8 billion at June 30, 2003, compared with $79.5 billion at March 31, 2003, and $80.8 billion at June 30, 2002. The increase in total assets reflects $12.1 billion in assets related to Pershing as well as an increase of $8 billion in liquid assets primarily related to the Company's securities servicing business. Customers have left higher cash balances with the Company in the low interest rate environment due to a lack of favorable overnight investment alternatives. In addition, high securities settlement volumes at quarter end resulted in a higher than normal level of uncompleted trades across the industry, which added to the cash levels in customer accounts. Total shareholders' equity was $8.1 billion at June 30, 2003, compared with $6.9 billion at March 31, 2003, and $6.6 billion at June 30, 2002. The increase in shareholders' equity is primarily attributable to the issuance of approximately $1 billion of common stock related to the Pershing acquisition. Return on average common equity on a reported basis for the second quarter of 2003 was 15.56%, compared with 17.80% in the first quarter of 2003, 12 and 22.59% in the second quarter of 2002. On a reported basis, return on average assets for the second quarter of 2003 was 1.30%, compared with 1.49% in the first quarter of 2003, and 1.82% in the second quarter of 2002. Excluding the merger-related costs of $25 million, return on average common equity for the second quarter of 2003 was 16.41%, while return on average assets was 1.37%. For the first six months of 2003, return on average common equity was 16.61% compared with 23.16% in 2002. On a reported basis, return on average assets was 1.39% for the first six months of 2003 compared with 1.83% in 2002 on a reported basis. Excluding the merger-related costs of $25 million, return on average common equity for the first six months of 2003 was 17.08%, while return on average assets was 1.43%. The Company's estimated regulatory Tier 1 capital and Total capital ratios were 6.85% and 11.11% at June 30, 2003, compared with 7.92% and 12.72% at March 31, 2003, and 7.70% and 11.48% at June 30, 2002. The regulatory leverage ratio was 5.85% at June 30, 2003, compared with 6.68% at March 31, 2003, and 6.82% at June 30, 2002. The Company's tangible common equity as a percentage of total assets was 4.32% at June 30, 2003, compared with 5.53% at March 31, 2003, and 5.41% at June 30, 2002. The Company's capital ratios at June 30, 2003 reflect the increased size of the balance sheet as well as an additional $1.3 billion of intangible assets (which are deducted from regulatory capital) related to Pershing. The Company remains well capitalized. 13 NONPERFORMING ASSETS
Change 06/30/03 vs. (Dollars in millions) 06/30/03 3/31/03 3/31/03 -------- -------- ------------ Loans: Commercial $312 $327 $(15) Foreign 84 75 9 Other 41 34 7 ---- ---- ---- Total Nonperforming Loans 437 436 1 Other Real Estate - - - ---- ---- ---- Total Nonperforming Assets $437 $436 $ 1 ==== ==== ==== Nonperforming Assets Ratio 1.4% 1.4% Allowance/Nonperforming Loans 188.6 190.4 Allowance/Nonperforming Assets 188.6 190.4
Nonperforming assets totaled $437 million at June 30, 2003, essentially unchanged from $436 million at March 31, 2003. The level of nonperforming assets prospectively will depend upon the strength and pace of the U.S. economic recovery. CREDIT LOSS PROVISION AND NET CHARGE-OFFS
2nd 1st 2nd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ------------ (In millions) 2003 2003 2002 2003 2002 ---- ---- ---- ---- ---- Provision $ 40 $ 40 $ 35 $ 80 $ 70 ==== ==== ==== ==== ==== Net Charge-offs: Commercial $ (34) $ (25) $(17) $(59) $(47) Foreign (7) - - (7) 1 Other - (10) (14) (10) (14) Consumer (5) (5) (4) (10) (10) ------ ------ ----- ----- ---- Total $ (46) $ (40) $(35) $(86) $(70) ====== ====== ===== ===== ==== Other Real Estate Expenses $ - $ - $ - $ - $ -
The allowance for credit losses was $824 million at June 30, 2003, $830 million at March 31, 2003, and $616 million at June 30, 2002. The allowance for credit losses as a percent of non-margin loans was 2.57% at June 30, 2003, compared with 2.65% at March 31, 2003, and 1.73% at June 30, 2002. The ratio of the allowance to nonperforming assets was 188.6% at June 30, 2003, compared with 190.4% at March 31, 2003, and 194.9% at June 30, 2002. 14
June 30 March 31 June 30 (Dollars in millions) 2003 2003 2002 ------- -------- ------- Loans $37,941 $31,735 $35,998 Margin Loans 5,911 467 487 Non-Margin Loans 32,030 31,268 35,511 Allowance 824 830 616 Allowance for Loan Losses As a Percent of Loans 2.17% 2.62% 1.71% Allowance for Loan Losses As a Percent of Non-Margin Loans 2.57 2.65 1.73
OTHER DEVELOPMENTS In addition to Pershing, the Company closed two additional acquisitions in the second quarter of 2003. The Company acquired the corporate trust business of INTRUST Bank, N.A., which included more than 300 bond trust and agency appointments for corporations and municipalities in Kansas and the surrounding states. The Company also acquired Capital Resource Financial Services, LLC, a Chicago-based provider of commission recapture, transition management, and third-party services to plan sponsors and investment managers. The two acquisitions did not have a material impact on the second quarter results. The Company remains on track to complete its current $9 billion corporate exposure reduction program by the end of 2004. During the quarter, corporate exposures were reduced in excess of $600 million, with telecom exposures reduced from $1.4 billion to $1.1 billion. On May 1, 2003, the Company issued 40 million common shares in connection with the Pershing acquisition. In addition, the Company issued $350 million of 5.95% series F trust preferred securities. On June 1, 2003, the Company redeemed the $300 million of outstanding 7.05% series D Trust preferred securities. ADDITIONAL INFORMATION Thomas A. Renyi, chairman and chief executive officer, and Bruce W. Van Saun, senior executive vice president and chief financial officer, will review the quarterly results in a live conference call and audio webcast today at 9:00 a.m. ET. The presentation will be accessible from the Company's website at www.bankofny.com/earnings and also by telephone at (888)790-0319 within the 15 United States or (610)769-3531 internationally. The replay will be available through the Company's website and also by telephone at (888)568-0513 within the United States or (402)530-8002 internationally through 5:00 p.m. ET on Thursday, July 31, 2003. The call may include forward looking statements. See "Forward Looking Statements" below. The Bank of New York Company, Inc. (NYSE: BK) is a global leader in securities servicing for issuers, investors and financial intermediaries. The Company plays an integral role in the infrastructure of the capital markets, servicing securities in more than 100 markets worldwide. The Company provides quality solutions through leading technology for global corporations, financial institutions, asset managers, governments, non-profit organizations, and individuals. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has a distinguished history of serving clients around the world through its five primary businesses: Securities Servicing and Global Payment Services, Private Client Services and Asset Management, Corporate Banking, Global Market Services, and Retail Banking. Additional information on the Company is available at www.bankofny.com. *************************** FORWARD LOOKING STATEMENTS All statements in this press release other than statements of historical fact are forward looking statements including, among other things, projections with respect to revenue and earnings and the Company's plans and objectives and as such are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. These include lower than expected performance or higher than expected costs in connection with acquisitions and integration of acquired businesses, the level of capital market activity, changes in customer credit quality, the effects of capital reallocation, portfolio performance, ultimate differences from management projections or market forecasts, the actions that management could take in response to these changes and other factors described under the heading "Forward Looking Statements" in the Company's 2002 Form 10-K and First Quarter 2003 Form 10-Q which have been filed with the SEC and are available at the SEC's website (www.sec.gov). Forward looking statements speak only as of the date they are made. The Company will not update forward looking statements to reflect factual assumptions, circumstances or events which have changed after a forward looking statement was made. (Financial highlights and detailed financial statements are attached.) 16 THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited)
June 30, March 31, June 30, 2003 2003 2002 -------- --------- -------- Quarter ------- Net Income $ 295 $ 295 $ 361 Basic EPS 0.39 0.41 0.50 Diluted EPS 0.39 0.41 0.50 Cash Dividends Per Share 0.19 0.19 0.19 Year-To-Date ------------ Net Income $ 590 $ 295 $ 723 Basic EPS 0.80 0.41 1.00 Diluted EPS 0.80 0.41 0.99 Cash Dividends Per Share 0.38 0.19 0.38 Assets $99,753 $79,548 $80,805 Loans 37,941 31,735 35,998 Securities 20,392 19,599 16,377 Deposits - Domestic 37,347 33,280 29,423 - Foreign 27,453 23,664 25,868 Long-Term Debt 6,515 5,685 5,668 Common Shareholders' Equity 8,113 6,874 6,610 Common Shareholders' Equity Per Share 10.50 9.41 9.09 Market Value Per Share of Common Stock 28.75 20.50 33.75 Allowance for Credit Losses as a Percent of Loans 2.17% 2.62% 1.71% Allowance for Credit Losses as a Percent of Non-Margin Loans 2.57 2.65 1.73 Tier 1 Capital Ratio 6.85 7.92 7.70 Total Capital Ratio 11.11 12.72 11.48 Leverage Ratio 5.85 6.68 6.82 Tangible Common Equity Ratio 4.32 5.53 5.41 Employees 23,106 19,491 19,010 Efficiency Ratio 64.8% 60.0% 55.0% Assets Under Custody (In trillions) Total Assets Under Custody $7.8 $6.8 $6.6 Equity Securities 32% 25% 29% Fixed Income Securities 68 75 71 Cross-Border Assets $2.2 $1.9 $1.8 Assets Under Management (In billions) Total Assets Under Management $83 $76 $75 Equity Securities 32% 29% 34% Fixed Income Securities 23 24 23 Alternative Investments 9 9 8 Liquid Assets 36 38 35 Assets Under Administration (In billions) $27 $27 $30
17 THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited)
For the three For the six months ended months ended June 30, June 30, 2003 2002 2003 2002 ---- ---- ---- ---- Interest Income - --------------- Loans $ 330 $ 375 $642 $756 Securities Taxable 155 158 315 299 Exempt from Federal Income Taxes 13 16 26 32 ----- ----- ----- ----- 168 174 341 331 Deposits in Banks 41 44 71 79 Federal Funds Sold and Securities Purchased Under Resale Agreements 24 12 39 26 Trading Assets 32 68 76 141 ----- ----- ----- ----- Total Interest Income 595 673 1,169 1,333 ----- ----- ----- ----- Interest Expense - ---------------- Deposits 138 158 284 318 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 4 8 7 16 Other Borrowed Funds 13 28 14 55 Long-Term Debt 42 56 80 109 ----- ----- ----- ----- Total Interest Expense 197 250 385 498 ----- ----- ----- ----- Net Interest Income 398 423 784 835 - ------------------- Provision for Credit Losses 40 35 80 70 ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 358 388 704 765 ----- ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 598 478 1,071 932 Global Payment Services 79 71 156 144 ----- ----- ----- ----- 677 549 1,227 1,076 Private Client Services and Asset Management Fees 94 88 184 171 Service Charges and Fees 93 93 191 176 Foreign Exchange and Other Trading Activities 88 72 154 134 Securities Gains 9 25 16 56 Other 35 28 69 60 ----- ----- ----- ----- Total Noninterest Income 996 855 1,841 1,673 ----- ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 499 418 922 805 Net Occupancy 73 49 131 98 Furniture and Equipment 49 35 85 70 Other 257 194 479 372 Merger and Integration Costs 25 - 25 - ----- ----- ----- ----- Total Noninterest Expense 903 696 1,642 1,345 ----- ----- ----- ----- Income Before Income Taxes 451 547 903 1,093 Income Taxes 156 186 313 370 ----- ----- ----- ----- Net Income $ 295 $ 361 $ 590 $ 723 - ---------- ===== ===== ===== ===== Per Common Share Data: - ---------------------- Basic Earnings $0.39 $0.50 $0.80 $1.00 Diluted Earnings 0.39 0.50 0.80 0.99 Cash Dividends Paid 0.19 0.19 0.38 0.38 Diluted Shares Outstanding 757 729 742 729 - -------------------------------------------------------------------------------------------------
18 THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited)
June 30, December 31, 2003 2002 ---- ---- Assets - ------ Cash and Due from Banks $ 4,323 $ 4,748 Interest-Bearing Deposits in Banks 6,744 5,104 Securities Held-to-Maturity 374 954 Available-for-Sale 20,018 17,346 ------- ------- Total Securities 20,392 18,300 Trading Assets at Fair Value 6,231 7,309 Federal Funds Sold and Securities Purchased Under Resale Agreements 12,076 1,385 Margin Loans 5,911 352 Loans (less allowance for credit losses of $824 in 2003 and $831 in 2002) 31,206 30,156 Premises and Equipment 1,108 975 Due from Customers on Acceptances 191 351 Accrued Interest Receivable 244 204 Goodwill 3,149 2,497 Intangible Assets 824 78 Other Assets 7,354 6,105 ------- ------- Total Assets $99,753 $77,564 ======= ======= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $16,433 $13,301 Interest-Bearing Domestic Offices 21,940 19,997 Foreign Offices 26,427 22,089 ------- ------- Total Deposits 64,800 55,387 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,035 636 Trading Liabilities 2,600 2,800 Payables to Customers and Broker-Dealers 9,407 870 Other Borrowed Funds 916 475 Acceptances Outstanding 194 352 Accrued Taxes and Other Expenses 4,033 4,066 Accrued Interest Payable 142 101 Other Liabilities 1,998 753 Long-Term Debt 6,515 5,440 ------- ------- Total Liabilities 91,640 70,880 ------- ------- Shareholders' Equity Class A Preferred Stock - par value $2.00 per share, authorized 5,000,000 shares, outstanding 3,000 shares in 2003 and in 2002 - - Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,038,852,034 shares in 2003 and 993,697,297 shares in 2002 7,791 7,453 Additional Capital 1,564 847 Retained Earnings 5,053 4,736 Accumulated Other Comprehensive Income 158 134 ------- ------- 14,566 13,170 Less: Treasury Stock (265,946,234 shares in 2003 and 267,240,854 shares in 2002), at cost 6,450 6,483 Loan to ESOP (485,533 shares in 2003 and in 2002), at cost 3 3 ------- ------- Total Shareholders' Equity 8,113 6,684 ------- ------- Total Liabilities and Shareholders' Equity $99,753 $77,564 ======= ======= - ---------------------------------------------------------------------------------------- Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date.
19 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions)
For the three months For the three months ended June 30, 2003 ended June 30, 2002 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 7,049 $ 41 2.37% $ 5,737 $ 44 3.03% Federal Funds Sold and Securities Purchased Under Resale Agreements 7,931 24 1.20 2,834 12 1.69 Margin Loans 3,492 21 2.42 449 3 3.01 Loans Domestic Offices 20,281 219 4.34 18,619 240 5.17 Foreign Offices 11,964 90 3.01 15,566 132 3.40 ------- ----- ------- ----- Total Loans 32,245 309 3.84 34,185 372 4.37 ------- ----- ------- ----- Securities U.S. Government Obligations 209 2 4.16 669 9 5.40 U.S. Government Agency Obligations 3,019 29 3.84 3,253 45 5.54 Obligations of States and Political Subdivisions 352 6 7.30 580 9 6.54 Other Securities 15,140 140 3.67 10,112 124 4.89 Trading Securities 4,346 32 2.95 8,124 68 3.36 ------- ----- ------- ----- Total Securities 23,066 209 3.62 22,738 255 4.49 ------- ----- ------- ----- Total Interest-Earning Assets 73,783 604 3.28% 65,943 686 4.18% ----- ----- Allowance for Credit Losses (826) (616) Cash and Due from Banks 2,748 2,726 Other Assets 15,219 11,634 ------- ------- TOTAL ASSETS $90,924 $79,687 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,239 $ 17 0.94% $ 6,405 $ 21 1.33% Savings 9,039 18 0.81 8,171 22 1.10 Certificates of Deposit $100,000 & Over 4,649 19 1.63 1,252 8 2.50 Other Time Deposits 1,350 5 1.55 1,567 9 2.27 Foreign Offices 23,827 79 1.32 24,459 98 1.60 ------- ----- ------- ----- Total Interest-Bearing Deposits 46,104 138 1.20 41,854 158 1.51 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,428 4 1.10 2,299 8 1.47 Payables to Customers and Broker-Dealers 4,289 8 0.80 195 1 0.53 Other Borrowed Funds 983 5 1.90 4,199 27 2.66 Long-Term Debt 6,469 42 2.53 5,450 56 4.06 ------- ----- ------- ----- Total Interest-Bearing Liabilities 59,273 197 1.33% 53,997 250 1.87% ----- ----- Noninterest-Bearing Deposits 12,383 10,257 Other Liabilities 11,661 9,017 Common Shareholders' Equity 7,607 6,416 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $90,924 $79,687 ======= ======= Net Interest Earnings and Interest Rate Spread $ 407 1.95% $ 436 2.31% ===== ==== ===== ==== Net Yield on Interest-Earning Assets 2.22% 2.65% ==== ====
20 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions)
For the six months For the six months ended June 30, 2003 ended June 30, 2002 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 6,024 $ 71 2.38% $ 5,481 $ 79 2.88% Federal Funds Sold and Securities Purchased Under Resale Agreements 6,475 39 1.21 3,069 26 1.72 Margin Loans 1,970 24 2.43 452 6 2.57 Loans Domestic Offices 19,471 433 4.48 18,759 480 5.16 Foreign Offices 12,424 186 3.03 15,869 270 3.43 ------- ----- ------- ----- Total Loans 31,895 619 3.91 34,628 750 4.37 ------- ----- ------- ----- Securities U.S. Government Obligations 267 5 3.88 736 20 5.37 U.S. Government Agency Obligations 3,135 63 4.02 3,075 87 5.66 Obligations of States and Political Subdivisions 367 13 7.07 574 19 6.57 Other Securities 14,582 278 3.80 9,322 231 4.96 Trading Securities 5,025 76 3.06 8,435 141 3.38 ------- ----- ------- ----- Total Securities 23,376 435 3.73 22,142 498 4.51 ------- ----- ------- ----- Total Interest-Earning Assets 69,740 1,188 3.43% 65,772 1,359 4.18% ----- ----- Allowance for Credit Losses (828) (616) Cash and Due from Banks 2,780 2,683 Other Assets 14,036 11,809 ------- ------- TOTAL ASSETS $85,728 $79,648 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,457 $ 35 0.96% $ 6,661 $ 44 1.34% Savings 8,766 38 0.87 8,114 48 1.18 Certificates of Deposit $100,000 & Over 4,687 39 1.69 877 12 2.74 Other Time Deposits 1,311 11 1.68 1,585 19 2.38 Foreign Offices 23,847 161 1.36 24,816 195 1.59 ------- ----- ------- ----- Total Interest-Bearing Deposits 46,068 284 1.24 42,053 318 1.53 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,360 7 1.04 2,203 16 1.47 Payables to Customers and Broker-Dealers 2,403 8 0.71 392 1 0.47 Other Borrowed Funds 639 6 1.77 4,174 54 2.57 Long-Term Debt 5,958 80 2.68 5,239 109 4.15 ------- ----- ------- ----- Total Interest-Bearing Liabilities 56,428 385 1.38% 54,061 498 1.87% ----- ----- Noninterest-Bearing Deposits 11,871 10,192 Other Liabilities 10,261 9,097 Common Shareholders' Equity 7,168 6,298 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $85,728 $79,648 ======= ======= Net Interest Earnings and Interest Rate Spread $ 803 2.05% $ 861 2.31% ===== ==== ===== ==== Net Yield on Interest-Earning Assets 2.32% 2.64% ==== ====
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