EX-99 3 r3q03ex99.txt EX-99 1 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 RECORD SECURITIES SERVICING FEES; NON-PERFORMING ASSETS DOWN 11%; THIRD QUARTER EARNINGS IN LINE WITH PREVIOUS GUIDANCE NEW YORK, N.Y., October 22, 2003 -- The Bank of New York Company, Inc. (NYSE: BK) reports third quarter diluted earnings per share of 34 cents and operating earnings of 42 cents per share, compared with operating earnings of 41 cents per share in the second quarter. Third quarter reported results include previously announced merger and integration costs associated with the acquisition of Pershing of 2 cents per share and the cost of the settlement of claims related to the Company's 1999 sale of BNY Financial Corporation to General Motors Acceptance Corporation ("GMAC") of 6 cents per share. Net income for the third quarter was $260 million, compared with $79 million or 11 cents per share a year ago, when the Company incurred credit charges and a valuation adjustment on its bank stock portfolio. Year-to-date 2 net income was $850 million, or $1.13 per share, compared to $802 million, or $1.10 per share in 2002. The third quarter results showed continued improvement in the Company's primary businesses, including securities servicing and related foreign exchange, and private client services and asset management. The quarter also included a full quarter of results from Pershing, which closed on May 1, 2003. This contributed to record securities servicing fees of $657 million in the third quarter. Noninterest income grew to a new high of 72% of total revenues. Excluding Pershing, securities servicing fees increased 1.2% over the second quarter, or 5% annualized, led by global custody, broker-dealer services and mutual fund services. Core noninterest expenses were essentially flat, as reductions in discretionary expenditures offset continued investments in strategic initiatives. Nonperforming assets declined by $49 million, or 11% in the third quarter, while the ratio of the allowance to non-performing assets improved from 188.6% to 210.5%. Chairman and Chief Executive Officer Thomas A. Renyi stated, "New business wins and the general improvement in market tone assisted us in achieving a second consecutive quarter of improving operating earnings, in spite of the normal seasonal slowdown in equity transaction volume. Combining top line growth with solid day-to-day expense control resulted in a restoration of positive operating leverage. "Our program to enhance our credit risk profile advanced well as reflected by the decline in nonperforming assets as well as further reductions in corporate exposures. This quarter also marked the first full reporting period with Pershing, where we remain on track to achieve our stated goals for integration costs and synergy benefits. "Overall, the continued firming of the global capital markets bodes well for our business model. Pershing in particular is well positioned to benefit from the increased level of confidence shown by the retail investor." 3 SUPPLEMENTAL FINANCIAL INFORMATION For the quarter and nine months ended September 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 exclude the merger and integration costs. - Other non-operating expenses including merger and integration costs related to the Pershing acquisition and the settlement with GMAC. 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 merger and integration costs, and the settlement with GMAC, 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 and nine months ended September 30, 2003: 4 THE BANK OF NEW YORK COMPANY, INC. Supplemental Information (In millions, except per share amounts) (Unaudited)
Income Statement Quarter ended September 30 SUPPLEMENTAL GAAP ----------------------------------- ----------------------- Operating 2003 2002 ------------ Reported Reported Core Pershing (a) Other(c) Results Results ---- -------- ----------- -------- -------- Net Interest Income $ 387 $ 20 $ - $ 407 $ 418 ------------------- Provision for Credit Losses 40 - - 40 225 ----- ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 347 20 - 367 193 ----- ----- ----- ----- ----- Noninterest Income ------------------ Servicing Fees Securities 495 162 - 657 480 Global Payment Services 80 - - 80 74 ----- ----- ----- ----- ----- 575 162 - 737 554 Private Client Services and Asset Management Fees 97 - - 97 85 Service Charges and Fees 88 1 - 89 90 Foreign Exchange and Other Trading Activities 80 12 - 92 49 Securities Gains 9 - - 9 (188) Other 35 4 - 39 46 ----- ----- ----- ----- ----- Total Noninterest Income 884 179 - 1,063 636 ----- ----- ----- ----- ----- Noninterest Expense ------------------- Salaries and Employee Benefits 443 90 - 533 397 Net Occupancy 57 12 - 69 76 Furniture and Equipment 35 15 - 50 32 Clearing 28 14 - 42 32 Sub-custodian Expenses 18 - - 18 18 Software 36 9 - 45 29 Amortization of Intangibles 4 4 - 8 - Merger and Integration Costs - - 23 23 - Other 145 28 78 251 122 ----- ----- ----- ----- ----- Total Noninterest Expense 766 172 101 1,039 706 ----- ----- ----- ----- ----- Income Before Income Taxes 465 27 (101) 391 123 Income Taxes 159 11 (39) 131 44 ----- ----- ----- ----- ----- Net Income $ 306 $ 16 $ (62) $ 260 $ 79 ---------- ===== ===== ===== ===== ===== Diluted Earnings Per Share $0.43 ($0.01)(b) ($0.08) $0.34 $0.11 Notes: Reported results agree with the Company's Consolidated Statement of Income (a) Includes $8 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. (c) Consists of merger and integration costs related to the Pershing acquisition and the settlement with GMAC of $78 million, net of reserves.
5 THE BANK OF NEW YORK COMPANY, INC. Supplemental Information (In millions, except per share amounts) (Unaudited)
Income Statement Nine Months ended September 30 SUPPLEMENTAL GAAP ----------------------------------- ----------------------- Operating 2003 2002 ------------ Reported Reported Core Pershing (a) Other(c) Results Results ---- -------- ----------- -------- -------- Net Interest Income $1,159 $ 31 $ - $1,190 $1,253 ------------------- Provision for Credit Losses 120 - - 120 295 ----- ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 1,039 31 - 1,070 958 ----- ----- ----- ----- ----- Noninterest Income ------------------ Servicing Fees Securities 1,457 271 - 1,728 1,411 Global Payment Services 238 - - 238 220 ----- ----- ----- ----- ----- 1,695 271 - 1,966 1,631 Private Client Services and Asset Management Fees 281 - - 281 256 Service Charges and Fees 277 1 - 278 264 Foreign Exchange and Other Trading Activities 224 22 - 246 183 Securities Gains 26 - - 26 (131) Other 100 7 - 107 106 ----- ----- ----- ----- ----- Total Noninterest Income 2,603 301 - 2,904 2,309 ----- ----- ----- ----- ----- Noninterest Expense ------------------- Salaries and Employee Benefits 1,305 149 - 1,454 1,202 Net Occupancy 172 20 - 192 175 Furniture and Equipment 108 26 - 134 101 Clearing 89 22 - 111 91 Sub-custodian Expenses 53 - - 53 48 Software 107 16 - 123 84 Amortization of Intangibles 11 7 - 18 5 Merger and Integration Costs - - 48 48 - Other 423 47 78 548 345 ----- ----- ----- ----- ----- Total Noninterest Expense 2,268 287 126 2,681 2,051 ----- ----- ----- ----- ----- Income Before Income Taxes 1,374 45 (126) 1,293 1,216 Income Taxes 473 18 (48) 443 414 ----- ----- ----- ----- ----- Net Income $ 901 $ 27 $ (78) $ 850 $ 802 ---------- ===== ===== ===== ===== ===== Diluted Earnings Per Share $1.25 ($0.02)(b) ($0.10) $1.13 $1.10 Notes: Reported results agree with the Company's Consolidated Statement of Income (a) Includes $14 million of net interest costs attributable to the Pershing acquisition financing. (b) The ($0.02) dilution is due to changes in shares outstanding attributable to the acquisition. (c) Consists of merger and integration costs related to the Pershing acquisition and the settlement with GMAC of $78 million, net of reserves.
6 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 September 30, 2003 GAAP SUPPLEMENTAL REPORTED ----------------------------------------- ------------------ Core Pershing Elimination September 30, September 30, Entries September 30, December 31, 2003 2003 2003 2002 ---- ---- ------- ---- ---- Assets ------ Cash and Due from Banks $ 3,668 $ 62 $ - $ 3,730 $ 4,748 Interest-Bearing Deposits in Banks 4,873 448 - 5,321 5,104 Securities 22,845 17 - 22,862 18,300 Trading Assets at Fair Value 6,709 180 - 6,889 7,309 Federal Funds Sold and Securities Purchased Under Resale Agreements 2,832 3,851 - 6,683 1,385 Margin Loans 73 5,399 - 5,472 352 Loans (less allowance for credit losses of $817 in 2003 and $831 in 2002) 29,358 1,893 - 31,251 30,156 Premises and Equipment 963 125 - 1,088 975 Due from Customers on Acceptances 233 - - 233 351 Accrued Interest Receivable 271 8 - 279 204 Investment in/Advances to Pershing 3,542 - (3,542) Goodwill & Intangible Assets 2,645 1,327 - 3,972 2,575 Other Assets 6,247 1,157 - 7,404 6,105 ------- ------- ------- ------- ------- Total Assets $84,259 $14,467 $(3,542) $95,184 $77,564 ======= ======= ======= ======= ======= Liabilities and Shareholders' Equity ------------------------------------ Deposits $58,937 $ - $ - $58,937 $55,387 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 622 337 - 959 636 Trading Liabilities 2,779 70 - 2,849 2,800 Payables to Customers and Broker-Dealers 1,419 8,751 - 10,170 870 Other Borrowed Funds 739 1,755 (1,507) 987 475 Acceptances Outstanding 235 - - 235 352 Accrued Taxes and Other Expenses 3,987 112 - 4,099 4,066 Accrued Interest Payable 122 3 - 125 101 Other Liabilities 898 1,404 - 2,302 753 Long-Term Debt 6,298 - - 6,298 5,440 ------ ------ ------ ------- ------- Total Liabilities 76,036 12,432 (1,507) 86,961 70,880 ------ ------ ------ ------- ------- Shareholders' Equity 8,223 2,035 (2,035) 8,223 6,684 ------- ------- ------- ------- ------- Total Liabilities and Shareholders' Equity $84,259 $14,467 $(3,542) $95,184 $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 the Company's business and performance, these non-GAAP measures should not be considered an alternative to GAAP. 7 SECURITIES SERVICING FEES Securities servicing fees were a record $657 million in the third quarter, an increase of $59 million or 10% over the second quarter, and $177 million or 37% over the third quarter of 2002, primarily due to the full quarter impact of the Pershing acquisition. For the first nine months of 2003, securities servicing fees were $1,728 million, an increase of $317 million from $1,411 million for the first nine months of 2002, principally due to Pershing and other acquisitions. Pershing's securities servicing fees included in the quarter and nine months ended September 30, 2003 were $162 million and $271 million, respectively. Strong new business momentum in global custody and higher equity prices drove investor services fees higher on both a sequential quarter and year- over-year basis. The higher fees compared to last year were also due to strong performance in securities lending. As of September 30, 2003, assets under custody rose to $7.9 trillion, from $7.8 trillion at June 30, 2003 and $6.6 trillion at September 30, 2002. Broker-dealer services fees also increased significantly both sequentially and year-over-year driven by strong performance in government securities clearance and collateral management services. These businesses continue to benefit from new business wins and higher fixed income transaction volumes. Mutual fund servicing also increased in the third quarter due to higher equity price levels. Global issuer services fees were essentially flat on a sequential quarter basis and down from a year ago. Corporate trust fees were up modestly from the second quarter, while depositary receipts (DRs) decreased on a sequential quarter basis due to a lack of equity market activity in August and fewer corporate actions during the quarter. The decline versus a year ago was also related to DRs. 8 Execution and clearing services fees increased both sequentially and in comparison with last year due to the full quarter impact of Pershing. Execution services decreased sequentially and in comparison with last year due to lower equity market trading volumes. Average daily combined third quarter NYSE and NASDAQ trading volume was down 5% from the second quarter of 2003 and 4% from the third quarter of 2002. Average monthly fees from Pershing remained flat with last quarter despite the lower trading volumes due to relative strength in retail investor activity. NONINTEREST INCOME Noninterest income for the third quarter of 2003 was $1,063 million, an increase of 7% sequentially and 67% from a year ago. Noninterest income for the nine months ended September 30, 2003 was $2,904 million, an increase of 26% over the comparable 2002 period. The increases are principally due to the acquisition of Pershing, improved performance in the core businesses, and the absence of the negative valuation adjustment in the third quarter of 2002. Pershing's contribution to the Company's noninterest income was $179 million for the quarter and $301 million for the nine months ended September 30, 2003. 3rd 2nd 3rd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ------------ (In millions) 2003 2003 2002 2003 2002 ----- ---- ---- ---- ---- Servicing Fees Securities $ 657 $598 $480 $1,728 $1,411 Global Payment Services 80 80 74 238 220 ------ ---- ---- ------ ------ 737 678 554 1,966 1,631 Private Client Services and Asset Management Fees 97 94 85 281 256 Service Charges and Fees 89 92 90 278 264 Foreign Exchange and Other Trading Activities 92 88 49 246 183 Securities Gains 9 9 (188) 26 (131) Other 39 35 46 107 106 ------ ---- ---- ------ ------ Total Noninterest Income $1,063 $996 $636 $2,904 $2,309 ====== ==== ==== ====== ====== Global payment services fees were flat compared with the prior quarter and increased 8% from the third quarter of 2002. Year-over-year growth is 9 attributable to the build-out of multi-currency product capabilities and further penetration of the financial institutions market segment. Private client services and asset management fees for the third quarter were up 3% from the prior quarter, and 14% from the third quarter of 2002. The sequential quarter and year-over-year increases reflect higher equity price levels as well as the continued strong demand for alternative investments from Ivy Asset Management and higher short-term money management fees, partially offset by higher seasonal tax-oriented fees in the second quarter. In addition, the year-over-year comparison also benefited from acquisitions. Total assets under management were $85 billion at September 30, 2003, up from $83 billion at June 30, 2003 and $71 billion a year ago. Service charges and fees have remained stable. The increase of 5% on a year-to-date basis over 2002 primarily reflects higher fees from loan syndication and underwriting fees. Foreign exchange and other trading revenues were up 5% compared with the prior quarter and up $43 million, or 88% from one year ago. The increase from the second quarter was primarily due to Pershing contributing for the full third quarter compared to only two months in the second quarter. Excluding Pershing, foreign exchange remained strong, increasing slightly from the second quarter as higher client activity levels and volatility in September offset the seasonal slowdown in August. Compared to a year ago, the significant increase resulted from increased client-driven foreign exchange and interest rate hedging activity and the Pershing acquisition. For the nine months ended September 30, 2003, foreign exchange and other trading revenues were up 34% over the nine months ended September 30, 2002. Securities gains in the third quarter were $9 million, flat with the prior quarter and up significantly from a loss of $188 million a year ago. Year-to-date securities gains were $157 million higher than the prior year period, reflecting a $210 million equity write-down in the third quarter of 2002. Other noninterest income increased $4 million from the second quarter of 2003 and decreased $7 million from the third quarter of 2002. Third quarter 10 2002 results included a $32 million Empire State Development Corporation ("ESDC") grant covering relocation and other costs. NET INTEREST INCOME
3rd 2nd 3rd Quarter Quarter Quarter Year-to-Date (Dollars in millions) ------- ------- ------- ------------ 2003 2003 2002 2003 2002 ---- ---- ---- ---- ---- Net Interest Income $407 $398 $418 $1,190 $1,253 Tax Equivalent Adjustment 9 9 11 27 36 ---- ---- ---- ------ ------ Net Interest Income on a Tax Equivalent Basis $416 $407 $429 $1,217 $1,289 ==== ==== ==== ====== ====== Net Interest Rate Spread 1.87% 1.95% 2.32% 1.99% 2.31% Net Yield on Interest Earning Assets 2.10 2.22 2.66 2.24 2.65
Net interest income on a taxable equivalent basis was $416 million in the third quarter of 2003, compared with $407 million in the second quarter of 2003, and $429 million in the third quarter of 2002. The net interest rate spread was 1.87% in the third quarter of 2003, compared with 1.95% in the second quarter of 2003, and 2.32% in the third quarter of 2002. The net yield on interest earning assets was 2.10% in the third quarter of 2003, compared with 2.22% in the second quarter of 2003, and 2.66% in the third quarter of 2002. The increase in net interest income from the second quarter of 2003 is primarily due to the full quarter impact of Pershing and modest growth in the Company's investment securities portfolio. This was partially offset by the impact of the Federal Reserve rate reduction in June. The decline in net interest income from the third 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, which were partially offset by the Pershing acquisition and higher average balances of investment securities. For the first nine months of 2003, net interest income on a taxable equivalent basis amounted to $1,217 million compared with $1,289 million in the first nine months of 2002, reflecting the same factors that affected the comparison with last year's quarter. The year-to-date net interest spread was 11 1.99% in 2003 compared with 2.31% in 2002, while the net yield on interest earning assets was 2.24% in 2003 and 2.65% 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 3rd 2nd 3rd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 2003 2003 2002 2003 2002 ---- ---- ---- ---- ---- Salaries and Employee Benefits $ 443 $439 $397 $1,305 $1,202 Net Occupancy 57 57 76 172 175 Furniture and Equipment 35 38 32 108 101 Clearing 28 31 32 89 91 Sub-custodian Expenses 18 19 18 53 48 Software 36 36 29 107 84 Amortization of Intangibles 4 4 - 11 5 Other 145 139 122 423 345 ------ ---- ---- ------ ------ Total Core 766 763 706 2,268 2,051 Merger and Integration Costs 23 25 - 48 - Pershing 172 115 - 287 - GMAC Settlement 78 - - 78 - ------ ---- ---- ------ ------ Total Noninterest Expense $1,039 $903 $706 $2,681 $2,051 ====== ==== ==== ====== ====== Noninterest expense for the third quarter of 2003 was $1,039 million, compared with $903 million in the prior quarter. The increase principally reflects the full quarter impact of Pershing and non-operating merger and integration expenses as well as net costs related to the GMAC settlement. Core noninterest expense was $766 million, essentially flat with the second quarter of 2003. On a core basis salaries and employee benefits were up only 1% from the second quarter and other expense categories also reflected the Company's focus on reducing discretionary spending. The increase in core expenses compared with the third quarter and first nine months of 2002 primarily reflects the impact of acquisitions, the inception of stock option expensing in 2003, a lower pension credit, increased technology investments and higher business continuity spending. Reflecting the shift in the Company's business mix including the Pershing acquisition, the efficiency ratio, excluding non-operating expenses related to 12 the GMAC settlement and the Pershing's merger and integration costs, increased to 63.8% for the third quarter of 2003, compared with 63.0% in the previous quarter and 56.1% in the third quarter of 2002, excluding the impact of the ESDC grant and the associated sublease expense. The effective tax rate for the third quarter of 2003 was 33.4%, compared to 34.6% in the second quarter of 2003, and 35.9% in the third quarter 2002. The effective tax rate for the nine months ended September 30, 2003 was 34.3%, compared with 34.0% for the nine months ended September 30, 2002. The decrease in the effective tax rate reflects the tax benefit on the GMAC settlement and lower state and local taxes. BALANCE SHEET RETURN AND CAPITAL RATIOS Total assets were $95.2 billion at September 30, 2003, compared with $99.6 billion at June 30, 2003, and $81.0 billion at September 30, 2002. The decrease in total assets on a sequential quarter basis reflects lower client deposit levels given a more orderly securities settlement process across the industry relative to the June quarter end. The increase versus a year ago mainly reflects the Pershing acquisition. Total shareholders' equity was $8.2 billion at September 30, 2003, compared with $8.1 billion at June 30, 2003, and $6.6 billion at September 30, 2002. The major reasons for the increase in shareholders' equity from a year ago are the issuance of approximately $1 billion of common stock to fund the Pershing acquisition and the retention of earnings. Return on average common equity on a reported basis for the third quarter of 2003 was 12.82%, compared with 15.56% in the second quarter of 2003, and 4.73% in the third quarter of 2002. On an operating basis, return on average common equity for the third quarter of 2003 was 15.85%, compared with 16.41% in the second quarter of 2003, and 20.31% in the third quarter of 2002. For the first nine months of 2003, the reported return on average common equity was 15.23% compared with 16.74% in 2002 and the return on average assets was 1.27% for the first nine months of 2003 compared with 1.35% in 2002. On an operating basis, return on average common equity was 16.63% 13 compared with 22.17% in 2002 and the return on average assets was 1.39% for the first nine months of 2003 compared with 1.79% in 2002. On a reported basis, return on average assets for the third quarter of 2003 was 1.06%, compared with 1.30% in the second quarter of 2003, and 0.40% in the third quarter of 2002. On an operating basis, return on average assets for the third quarter of 2003 was 1.31%, compared with 1.37% in the second quarter of 2003, and 1.71% in the third quarter of 2002. The Company's estimated regulatory Tier 1 capital and Total capital ratios were 7.08% and 11.18% at September 30, 2003, compared with 6.83% and 11.07% at June 30, 2003, and 7.70% and 11.73% at September 30, 2002. The regulatory leverage ratio was 5.64% at September 30, 2003, compared with 5.85% at June 30, 2003, and 6.77% at September 30, 2002. The Company's tangible common equity as a percentage of total assets was 4.66% at September 30, 2003, compared with 4.33% at June 30, 2003, and 5.38% at September 30, 2002. The improvement in the Company's capital ratios versus June 30, 2003 reflects the retention of equity during the quarter as well as the decrease in balance sheet assets. 14 NONPERFORMING ASSETS Change 09/30/03 vs. (Dollars in millions) 09/30/03 6/30/03 6/30/03 -------- -------- ------------ Loans: Commercial $265 $312 $(47) Foreign 79 84 (5) Other 44 41 3 ---- ---- ---- Total Nonperforming Loans 388 437 (49) Other Real Estate - - - ---- ---- ---- Total Nonperforming Assets $388 $437 $(49) ==== ==== ==== Nonperforming Assets Ratio 1.2% 1.4% Allowance/Nonperforming Loans 210.5 188.6 Allowance/Nonperforming Assets 210.5 188.6 Nonperforming assets declined $49 million during the third quarter to $388 million from $437 million at June 30, 2003. The decrease primarily reflects sales and charge-offs of commercial loans. CREDIT LOSS PROVISION AND NET CHARGE-OFFS
3rd 2nd 3rd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ------------ (In millions) 2003 2003 2002 2003 2002 ---- ---- ---- ---- ---- Provision $ 40 $ 40 $225 $120 $295 ==== ==== ==== ==== ==== Net Charge-offs: Commercial $ (25) $ (34) $(150) $ (85) $(197) Foreign (12) (7) (5) (18) (5) Other (4) - - (15) (14) Consumer (6) (5) (5) (16) (14) ------ ------ ------ ----- ------ Total $ (47) $ (46) $(160) $(134) $(230) ====== ====== ====== ===== ====== Other Real Estate Expenses $ - $ - $ - $ - $ -
The allowance for credit losses was $817 million at September 30, 2003, $824 million at June 30, 2003, and $681 million at September 30, 2002. The allowance for credit losses as a percent of non-margin loans was 2.55% at September 30, 2003, compared with 2.50% at June 30, 2003, and 2.01% at September 30, 2002. The ratio of the allowance to nonperforming assets was 210.5% at September 30, 2003, compared with 188.6% at June 30, 2003, and 123.5% at September 30, 2002. 15 September 30 June 30 September 30 (Dollars in millions) 2003 2003 2002 ------- -------- ------- Total Loans $37,540 $37,796 $34,242 Margin Loans 5,472 4,877 407 Non-Margin Loans 32,068 32,919 33,835 Allowance 817 824 681 Allowance for Loan Losses As a Percent of Total Loans 2.18% 2.18% 1.99% Allowance for Loan Losses As a Percent of Non-Margin Loans 2.55 2.50 2.01 OTHER DEVELOPMENTS On September 29, 2003, the Company announced that it had agreed to a settlement regarding GMAC's claims relating to the Company's 1999 sale to GMAC of BNY Financial Corporation, the Company's factoring and asset-based finance business. The settlement resolved claims between the parties with a payment of $110 million by the Company to GMAC. After accounting for a previously established reserve for this matter, the net impact of the settlement was approximately 6 cents per fully diluted share, recorded by the Company as a non-operating charge in the third quarter of 2003. The Bank of New York sold BNY Financial Corporation to GMAC for $1.8 billion in cash in 1999. The Company has achieved more than 75% of its current $9 billion corporate exposure reduction program through September 30th. During the third quarter, corporate exposures were reduced by approximately $1.5 billion, bringing the total reductions to date to $6.8 billion. Telecom industry exposures were reduced to approximately $1.0 billion at September 30, 2003, down from $1.5 billion at December 31, 2002. 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 am 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 United States or (610) 769-3531 internationally. A replay of the call will be available through the Company's website and also by telephone at (888) 568-0348 within the United States or (402) 530-7891 internationally. 16 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 Second 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.) 17
THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) September 30, June 30, September 30, 2003 2003 2002 --------------------- ------------------- ------------ Reported Operating Reported Operating Reported --------- --------- -------- --------- ------------ Quarter ------- Net Income $ 260 $ 322 $ 295 $ 311 $ 79 Basic EPS 0.34 0.42 0.39 0.41 0.11 Diluted EPS 0.34 0.42 0.39 0.41 0.11 Cash Dividends Per Share 0.19 0.19 0.19 0.19 0.19 Return on Average Common Shareholders' Equity 12.82% 15.85% 15.56% 16.41% 4.73% Return on Average Assets 1.06 1.31 1.30 1.37 0.40 Efficiency Ratio 70.7 63.8 64.8 63.0 56.4 Year-To-Date ------------ Net Income $ 850 $ 929 $ 590 $ 607 $ 802 Basic EPS 1.14 1.24 0.80 0.82 1.11 Diluted EPS 1.13 1.23 0.80 0.82 1.10 Cash Dividends Per Share 0.57 0.57 0.38 0.38 0.57 Return on Average Common Shareholders' Equity 15.23% 16.63% 16.61% 17.08% 16.74% Return on Average Assets 1.27 1.39 1.39 1.43 1.35 Efficiency Ratio 65.5 62.4 62.5 61.6 55.0 Assets $95,184 $99,604 $80,987 Loans 37,540 37,796 34,242 Securities 22,862 20,392 18,023 Deposits - Domestic 35,922 37,319 32,964 - Foreign 23,015 27,336 24,005 Long-Term Debt 6,298 6,515 5,528 Common Shareholders' Equity 8,223 8,113 6,633 Common Shareholders' Equity Per Share $10.63 $10.50 $ 9.15 Market Value Per Share of Common Stock 29.11 28.75 28.74 Allowance for Credit Losses as a Percent of Total Loans 2.18% 2.18% 1.99% Allowance for Credit Losses as a Percent of Non-Margin Loans 2.55 2.50 2.01 Tier 1 Capital Ratio 7.08 6.83 7.70 Total Capital Ratio 11.18 11.07 11.73 Leverage Ratio 5.64 5.85 6.77 Tangible Common Equity Ratio 4.66 4.33 5.38 Employees 22,926 23,106 18,905 Assets Under Custody (In trillions) Total Assets Under Custody $7.9 $7.8 $6.6 Equity Securities 32% 32% 26% Fixed Income Securities 68 68 74 Cross-Border Assets $2.2 $2.2 $1.8 Assets Under Management (In billions) Total Assets Under Management $85 $83 $71 Equity Securities 31% 32% 29% Fixed Income Securities 22 23 26 Alternative Investments 10 9 9 Liquid Assets 37 36 36 Assets Under Administration (In billions) $32 $27 $27
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) For the three For the nine months ended months ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Interest Income --------------- Loans $ 284 $ 359 $ 904 $1,108 Margin loans 31 3 54 9 Securities Taxable 162 175 477 474 Exempt from Federal Income Taxes 11 15 37 47 ----- ----- ----- ----- 173 190 514 521 Deposits in Banks 38 28 109 106 Federal Funds Sold and Securities Purchased Under Resale Agreements 22 11 61 38 Trading Assets 27 58 103 199 ----- ----- ----- ----- Total Interest Income 575 649 1,745 1,981 ----- ----- ----- ----- Interest Expense ---------------- Deposits 113 165 397 484 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3 8 10 24 Other Borrowed Funds 6 7 13 60 Customer Payables 10 1 19 1 Long-Term Debt 36 50 116 159 ----- ----- ----- ----- Total Interest Expense 168 231 555 728 ----- ----- ----- ----- Net Interest Income 407 418 1,190 1,253 ------------------- Provision for Credit Losses 40 225 120 295 ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 367 193 1,070 958 ----- ----- ----- ----- Noninterest Income ------------------ Servicing Fees Securities 657 480 1,728 1,411 Global Payment Services 80 74 238 220 ----- ----- ----- ----- 737 554 1,966 1,631 Private Client Services and Asset Management Fees 97 85 281 256 Service Charges and Fees 89 90 278 264 Foreign Exchange and Other Trading Activities 92 49 246 183 Securities Gains 9 (188) 26 (131) Other 39 46 107 106 ----- ----- ----- ----- Total Noninterest Income 1,063 636 2,904 2,309 ----- ----- ----- ----- Noninterest Expense ------------------- Salaries and Employee Benefits 533 397 1,454 1,202 Net Occupancy 69 76 192 175 Furniture and Equipment 50 32 134 101 Other 364 201 853 573 Merger and Integration Costs 23 - 48 - ----- ----- ----- ----- Total Noninterest Expense 1,039 706 2,681 2,051 ----- ----- ----- ----- Income Before Income Taxes 391 123 1,293 1,216 Income Taxes 131 44 443 414 ----- ----- ----- ----- Net Income $ 260 $ 79 $ 850 $ 802 ---------- ===== ===== ===== ===== Per Common Share Data: ---------------------- Basic Earnings $0.34 $0.11 $1.14 $1.11 Diluted Earnings 0.34 0.11 1.13 1.10 Cash Dividends Paid 0.19 0.19 0.57 0.57 Diluted Shares Outstanding 774 727 753 729 -------------------------------------------------------------------------------------------------
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) September 30, December 31, 2003 2002 ---- ---- Assets ------ Cash and Due from Banks $ 3,730 $ 4,748 Interest-Bearing Deposits in Banks 5,321 5,104 Securities Held-to-Maturity 270 954 Available-for-Sale 22,592 17,346 ------- ------- Total Securities 22,862 18,300 Trading Assets at Fair Value 6,889 7,309 Federal Funds Sold and Securities Purchased Under Resale Agreements 6,683 1,385 Loans (less allowance for credit losses of $817 in 2003 and $831 in 2002) 36,723 30,508 Premises and Equipment 1,088 975 Due from Customers on Acceptances 233 351 Accrued Interest Receivable 279 204 Goodwill 3,156 2,497 Intangible Assets 816 78 Other Assets 7,404 6,105 ------- ------- Total Assets $95,184 $77,564 ======= ======= Liabilities and Shareholders' Equity ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $16,379 $13,301 Interest-Bearing Domestic Offices 19,874 19,997 Foreign Offices 22,684 22,089 ------- ------- Total Deposits 58,937 55,387 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 959 636 Trading Liabilities 2,849 2,800 Payables to Customers and Broker-Dealers 10,170 870 Other Borrowed Funds 987 475 Acceptances Outstanding 235 352 Accrued Taxes and Other Expenses 4,099 4,066 Accrued Interest Payable 125 101 Other Liabilities 2,302 753 Long-Term Debt 6,298 5,440 ------- ------- Total Liabilities 86,961 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 1,039,086,738 shares in 2003 and 993,697,297 shares in 2002 7,793 7,453 Additional Capital 1,594 847 Retained Earnings 5,168 4,736 Accumulated Other Comprehensive Income 105 134 ------- ------- 14,660 13,170 Less: Treasury Stock (265,248,941 shares in 2003 and 267,240,854 shares in 2002), at cost 6,434 6,483 Loan to ESOP (485,533 shares in 2003 and in 2002), at cost 3 3 ------- ------- Total Shareholders' Equity 8,223 6,684 ------- ------- Total Liabilities and Shareholders' Equity $95,184 $77,564 ======= ======= ---------------------------------------------------------------------------------------- Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date.
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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 September 30, 2003 ended September 30, 2002 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 7,085 $ 38 2.12% $ 4,029 $ 28 2.76% Federal Funds Sold and Securities Purchased Under Resale Agreements 9,200 22 0.96 2,736 11 1.64 Margin Loans 5,419 31 2.25 434 3 2.84 Loans Domestic Offices 21,409 208 3.86 18,954 237 4.92 Foreign Offices 10,571 76 2.85 14,360 122 3.40 ------- ----- ------- ----- Total Loans 31,980 284 3.52 33,314 359 4.26 ------- ----- ------- ----- Securities U.S. Government Obligations 313 2 3.00 521 7 5.14 U.S. Government Agency Obligations 3,464 30 3.44 3,741 47 5.07 Obligations of States and Political Subdivisions 311 6 7.17 504 8 6.55 Other Securities 16,516 144 3.49 12,032 139 4.63 Trading Securities 4,357 27 2.47 6,792 58 3.38 ------- ----- ------- ----- Total Securities 24,961 209 3.35 23,590 259 4.39 ------- ----- ------- ----- Total Interest-Earning Assets 78,645 584 2.94% 64,103 660 4.09% ----- ----- Allowance for Credit Losses (822) (616) Cash and Due from Banks 2,914 2,601 Other Assets 16,416 12,722 ------- ------- TOTAL ASSETS $97,153 $78,810 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,657 $ 13 0.67% $ 6,661 $ 22 1.32% Savings 9,281 17 0.72 8,144 22 1.07 Certificates of Deposit $100,000 & Over 3,840 14 1.47 3,322 18 2.14 Other Time Deposits 1,183 4 1.49 1,475 8 2.17 Foreign Offices 24,452 65 1.06 23,234 95 1.63 ------- ----- ------- ----- Total Interest-Bearing Deposits 46,413 113 0.97 42,836 165 1.53 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,687 3 0.68 2,040 8 1.51 Other Borrowed Funds 2,464 6 1.00 1,155 7 2.25 Payables to Customers and Broker-Dealers 5,407 10 0.72 145 1 1.47 Long-Term Debt 6,310 36 2.27 5,467 50 3.59 ------- ----- ------- ----- Total Interest-Bearing Liabilities 62,281 168 1.07% 51,643 231 1.77% ----- ----- Noninterest-Bearing Deposits 13,266 10,792 Other Liabilities 13,555 9,760 Common Shareholders' Equity 8,051 6,615 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $97,153 $78,810 ======= ======= Net Interest Earnings and Interest Rate Spread $ 416 1.87% $ 429 2.32% ===== ==== ===== ==== Net Yield on Interest-Earning Assets 2.10% 2.66% ==== ====
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THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions) For the nine months For the nine months ended September 30, 2003 ended September 30, 2002 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 6,381 $ 109 2.28% $ 4,992 $ 106 2.85% Federal Funds Sold and Securities Purchased Under Resale Agreements 7,394 61 1.11 2,957 38 1.70 Margin Loans 3,133 54 2.33 446 9 2.66 Loans Domestic Offices 20,124 642 4.27 18,824 716 5.09 Foreign Offices 11,799 262 2.97 15,361 392 3.41 ------- ----- ------- ----- Total Loans 31,923 904 3.79 34,185 1,108 4.34 ------- ----- ------- ----- Securities U.S. Government Obligations 282 8 3.55 663 26 5.31 U.S. Government Agency Obligations 3,246 93 3.82 3,299 134 5.43 Obligations of States and Political Subdivisions 348 19 7.10 550 27 6.57 Other Securities 15,234 421 3.69 10,235 370 4.82 Trading Securities 4,802 103 2.88 7,882 199 3.38 ------- ----- ------- ----- Total Securities 23,912 644 3.59 22,629 756 4.46 ------- ----- ------- ----- Total Interest-Earning Assets 72,743 1,772 3.26% 65,209 2,017 4.14% ----- ----- Allowance for Credit Losses (826) (616) Cash and Due from Banks 2,825 2,656 Other Assets 14,837 12,117 ------- ------- TOTAL ASSETS $89,579 $79,366 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,493 $ 48 0.86% $ 6,661 $ 66 1.33% Savings 8,971 54 0.81 8,124 70 1.15 Certificates of Deposit $100,000 & Over 4,402 54 1.62 1,701 30 2.35 Other Time Deposits 1,268 16 1.62 1,548 27 2.32 Foreign Offices 24,051 225 1.25 24,283 291 1.60 ------- ----- ------- ----- Total Interest-Bearing Deposits 46,185 397 1.15 42,317 484 1.53 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,470 10 0.90 2,148 24 1.48 Other Borrowed Funds 1,510 13 1.17 3,286 60 2.43 Payables to Customers and Broker-Dealers 3,160 19 0.79 179 1 1.07 Long-Term Debt 6,077 116 2.54 5,316 159 3.96 ------- ----- ------- ----- Total Interest-Bearing Liabilities 58,402 555 1.27% 53,246 728 1.83% ----- ----- Noninterest-Bearing Deposits 12,341 10,394 Other Liabilities 11,370 9,321 Common Shareholders' Equity 7,466 6,405 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $89,579 $79,366 ======= ======= Net Interest Earnings and Interest Rate Spread $1,217 1.99% $1,289 2.31% ====== ==== ====== ==== Net Yield on Interest-Earning Assets 2.24% 2.65% ==== ====