-----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, HNZnHXxakqAqxfzTzQTcf0v9aFHwwUpcXRMaJlqwfkG/6ozR2tb0+WcROnUtp3T+ YayF/B60ATaWqSK0FULoCQ== 0000009626-05-000118.txt : 20050420 0000009626-05-000118.hdr.sgml : 20050420 20050420072405 ACCESSION NUMBER: 0000009626-05-000118 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050331 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050420 DATE AS OF CHANGE: 20050420 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: 05760562 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 r8k1q05a.txt 8-K 1 UNITED STATES 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): April 20, 2005 THE BANK OF NEW YORK COMPANY, INC. ---------------------------------- (exact name of registrant as specified in its charter) NEW YORK 001-06152 13-2614959 -------- --------- ---------- (State or other jurisdiction (Commission (I.R.S. employer of incorporation) file number) 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) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 2 ITEM 2.02 Results of Operations and Financial Condition --------------------------------------------- On April 20, 2005, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the first quarter of 2005. Exhibit 99.1 is a copy of such press release and is incorporated herein by reference. The information furnished under Item 2.02 of this Current Report on Form 8- K, including Exhibit 99.1 shall be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, as amended. ITEM 9.01 Financial Statements and Exhibits --------------------------------- Index to and Description of Exhibits (c) Exhibit Description ------- ----------- 99.1 Unaudited interim financial information and accompanying discussion for the first quarter of 2005 contained in the press release dated April 20, 2005, of The Bank of New York Company, Inc. 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: April 20, 2005 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 - ----------- ----------- 99.1 Unaudited interim financial information and accompanying discussion for the first quarter of 2005 contained in the press release dated April 20, 2005, of The Bank of New York Company, Inc. EX-99 2 r1q05ex99.txt EX-99 1 IMMEDIATELY - ----------- Media: Investors: - ------ ---------- R. Jeep Bryant, MD Joseph F. Murphy, MD (212) 635-1569 (212) 635-7740 Gregg A. Scheuing, VP (212) 635-1578 THE BANK OF NEW YORK COMPANY, INC. REPORTS FIRST QUARTER EPS OF 49 CENTS; SUSTAINED STRENGTH IN SECURITIES SERVICING FEES; NET INTEREST INCOME GROWTH CONTINUES NEW YORK, N.Y., April 20, 2005 -- The Bank of New York Company, Inc. (NYSE: BK) reports first quarter net income of $379 million and diluted earnings per share of 49 cents, compared with net income of $351 million and diluted earnings per share of 45 cents in the fourth quarter of 2004, and net income of $364 million and diluted earnings per share of 47 cents in the first quarter of 2004. In the fourth quarter of 2004, the Company recorded several gains and charges (note 1) that in aggregate reduced reported earnings by 3 cents per share. First quarter 2005 highlights include solid performance in securities servicing, asset management, and foreign exchange and other trading, continued excellent credit performance, and good expense control. Securities servicing fees increased 1% sequentially from the seasonally robust fourth quarter to $751 million, reflecting strong growth in investor services and broker-dealer 2 services. Private client services and asset management increased 5% sequentially, reflecting continued growth in Ivy Asset Management's international business. Foreign exchange and other trading revenues increased 7% sequentially, reflecting continued strong customer flows in foreign exchange and improved results in interest rate derivatives. Partially offsetting this revenue growth were lower capital markets related income, fewer securities gains, and lower other income. Additional highlights for the quarter include continued growth in net interest income of 2% sequentially and 10% year-over-year, reflecting widening spreads as interest rates continue to rise. Asset quality remains strong, as the provision improved to a credit of $10 million and NPA's declined by 10%. Total expenses declined by 2% from the fourth quarter. After adjusting for legal reserves taken in the fourth quarter, expense growth was 1%, reflecting the Company's expense control efforts. Chairman and Chief Executive Officer Thomas A. Renyi stated, "Our securities servicing businesses maintained good revenue momentum following the very strong results in the fourth quarter of 2004. The balance sheet remained well positioned for growth in net interest income, and our credit risk improvement efforts continue to deliver results. Our intensified focus on expense management was also effective, as total expenses were essentially unchanged sequentially. "The key factors impacting growth going forward remain the sustainability of a favorable investment environment and consistent focus on expense control." 3 SECURITIES SERVICING FEES 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (In millions) 2005 2004 2004 ------- ------- ------- Execution and Clearing Services $ 293 $ 302 $ 303 Investor Services 263 239 226 Issuer Services 139 149 137 Broker-Dealer Services 56 52 50 ------- ------- ------- Securities Servicing Fees $ 751 $ 742 $ 716 ======= ======= ======= Securities servicing fees were $751 million in the first quarter, an increase of $9 million, or 1%, from the fourth quarter of 2004 and $35 million, or 5%, from a year ago. Execution and clearing services fees for the first quarter of 2005 decreased $9 million, or 3%, from the fourth quarter of 2004, and $10 million, or 3%, from the first quarter of 2004. The sequential quarter decrease primarily reflects a slowdown in customer re-balancing and transition activity in execution services from strong fourth quarter levels and three fewer trading days. Pershing's correspondent clearing business was slightly down sequentially as modestly better retail investor market activity was offset by fewer trading days. Investor services fees were up $24 million, or 10%, over the fourth quarter of 2004, and $37 million, or 16%, from the first quarter of 2004. Sequential and year-over-year results reflect strong performance across all business lines. New business wins drove performance in global fund services and securities lending, while global fund services was also favorably impacted by higher international transaction volumes. Spreads improved in securities lending both sequentially and versus a year ago as demand for treasury securities increased. Assets under custody rose to $9.9 trillion as of March 31, 2005, from $9.7 trillion at December 31, 2004 and $8.6 trillion at March 31, 2004. Issuer services fees were down 7% sequentially and up 1% versus the first quarter of 2004. The sequential quarter decrease reflects reduced depositary receipts fees due to seasonally lower dividends and a decline in corporate 4 trust fees due to lower municipal bond activity. The increase versus the first quarter of 2004 primarily reflects higher corporate trust fees due to continued strength in international issuance and corporate specialty products. Broker-dealer services fees increased to $56 million from $52 million in the fourth quarter of 2004 and $50 million in the first quarter of 2004, as a result of increased collateral management activity and higher volumes both sequentially and year-over-year in securities clearance. NONINTEREST INCOME 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (In millions) 2005 2004 2004 ------- ------- ------- Servicing Fees Securities $ 751 $ 742 $ 716 Global Payment Services 75 71 79 ------- ------- ------- 826 813 795 Private Client Services and Asset Management Fees 121 115 108 Service Charges and Fees 92 98 96 Foreign Exchange and Other Trading Activities 96 90 106 Securities Gains 12 18 33 Other* 31 42 82 ------- ------- ------- Total Noninterest Income $ 1,178 $ 1,176 $ 1,220 ======= ======= ======= *See Note 3. Total noninterest income for the first quarter of 2005 was $1,178 million, essentially flat on a sequential quarter basis and a decrease of 3% from a year ago. The first quarter of 2005 reflects stronger performance in securities servicing and asset management versus both prior periods offset by decreases in service charges and fees, securities gains and other noninterest income. The first quarter of 2004 included a $48 million gain on the sale of a portion of the Company's investment in Wing Hang Bank Limited, recorded in other noninterest income, as well as securities gains of $19 million related to four sponsor fund investments. Global payment services fees increased $4 million, or 6%, compared with the fourth quarter of 2004 and decreased $4 million, or 5%, from the first quarter of 2004. The sequential increase reflects strength in cash management due to new business wins which offset lower revenue from trade finance. The decline versus the first quarter of 2004 reflects lower fees due to customers choosing to pay with higher compensating balances partially offset by new business. 5 Private client services and asset management fees for the first quarter were up 5% from the prior quarter and 12% from the first quarter of 2004. The sequential quarter increase reflects continued growth at Ivy Asset Management and higher fees in institutional equity and retail investment products. The increase from the first quarter of 2004 is primarily due to growth at Ivy as well as higher fees from BNY Hamilton Funds. Total assets under management were $104 billion at March 31, 2005, up from $102 billion at December 31, 2004 and $92 billion a year ago. Service charges and fees were down 6% from the fourth quarter of 2004 and 4% from the first quarter of 2004. The sequential and year-over-year decreases reflect lower capital markets fees due to reduced activity in loan syndications and bond underwriting. Foreign exchange and other trading revenues increased $6 million, or 7%, sequentially and decreased $10 million, or 9%, from the first quarter of 2004. The strong sequential quarter performance reflects improved results in interest rate derivatives, while the decrease from the record first quarter of 2004 performance resulted from lower foreign exchange revenues. Securities gains in the first quarter were $12 million, compared with $18 million in the fourth quarter of 2004 and $33 million in the first quarter of 2004. In the first quarter of 2004, securities gains included $19 million of realized gains on four sponsor fund investments. Other noninterest income was $31 million, compared with $42 million in the prior quarter and $82 million in the first quarter of 2004. The sequential quarter decline reflects a lower event-driven revenue such as gains on asset dispositions. Other noninterest income in the first quarter of 2004 included a pre-tax gain of $48 million on the sale of a portion of the Company's investment in Wing Hang Bank Limited. 6 NET INTEREST INCOME
1st 4th 4th 1st 1st Quarter Quarter Quarter Quarter Quarter (Dollars in millions) -------- -------- -------- -------- -------- Reported Reported Core** Reported Core** -------- -------- ------- -------- -------- 2005 2004 2004 2004 2004 -------- -------- ------- -------- -------- Net Interest Income $ 455 $ 527 $ 448 $ 268 $ 413 Tax Equivalent Adjustment* 7 9 9 6 6 -------- -------- -------- -------- -------- Net Interest Income on a Tax Equivalent Basis $ 462 $ 536 $ 457 $ 274 $ 419 ======== ======== ======== ======== ======== Net Interest Rate Spread 1.93% 2.26% 1.87% 1.13% 1.85% Net Yield on Interest Earning Assets 2.36 2.64 2.25 1.36 2.08 * See Note (2) ** Excludes SFAS 13 adjustments, see Note (1).
Net interest income on a taxable equivalent basis was $462 million in the first quarter of 2005. The net interest rate spread was 1.93% in the first quarter of 2005, compared with 2.26% in the fourth quarter of 2004, and 1.13% in the first quarter of 2004 while the net yield on interest earning assets was 2.36% in the first quarter of 2005, compared with 2.64% in the fourth quarter of 2004 and 1.36% for the first quarter of 2004. Excluding the leasing adjustments of $79 million in the fourth quarter and ($145) million in the first quarter of 2004, the net interest rate spread and net yield on interest earning assets were 1.87% and 2.25%, and 1.85% and 2.08%, respectively. Excluding the impact of the SFAS 13 leasing adjustments on the leveraged lease portfolio in 2004, net interest income on a taxable equivalent basis was up on a sequential quarter basis to $462 million, compared with $457 million in the fourth quarter of 2004 and $419 million in the first quarter of 2004. On the same basis, the net interest rate spread was 1.93% in the first quarter of 2005, compared with 1.87% in the fourth quarter of 2004, and 1.85% in the first quarter of 2004 while the net yield on interest earning assets was 2.36% in the first quarter of 2005, compared with 2.25% in the fourth quarter of 2004 and 2.08% in the first quarter of 2004. The increase in net interest income from the fourth and first quarters of 2004 core results is primarily due to the repricing of the Company's assets at 7 a faster rate than its liabilities and higher volume and values of interest free deposits given the rise in short term rates, partly offset by a slight decline in average assets and fewer days in the quarter. NONINTEREST EXPENSE AND INCOME TAXES 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (In millions) 2005 2004 2004 ------- ------- ------- Salaries and Employee Benefits $ 618 $ 617 $ 574 Net Occupancy 78 75 81 Furniture and Equipment 52 51 51 Clearing 46 45 48 Sub-custodian Expenses 23 22 22 Software 53 43 49 Communications 23 23 24 Amortization of Intangibles 8 9 8 Other 176 212 156 ------- ------- ------- Total Noninterest Expense $ 1,077 $ 1,097 $ 1,013 ======= ======= ======= Noninterest expense for the first quarter of 2005 was $1,077 million, compared with $1,097 million in the prior quarter and $1,013 million in the first quarter of 2004. The fourth quarter of 2004 included $30 million legal reserves in other noninterest expense while the first quarter of 2004 results included $18 million related to cost reduction initiatives, including lease terminations, severance and relocation expenses. Salaries and employee benefits expense for the first quarter was essentially unchanged on a sequential quarter basis, reflecting higher pension and seasonal social security expenses tied to bonuses, offset by lower new business conversion costs and lower restricted stock expense. Relative to the first quarter of 2004, salaries and employee benefits expense increased by $44 million, or 8%, reflecting higher pension and stock option expense as well as higher staffing levels associated with growth in investor services and expansion of certain staff functions. Occupancy expenses were up $3 million sequentially, reflecting higher energy costs and higher depreciation associated with a back up data center. First quarter 2004 occupancy expense included lease termination expenses of $8 million. Other expenses in the fourth quarter of 2004 included $30 million of expenses associated with legal reserves. Excluding the legal reserves, other expenses declined by $6 million sequentially, reflecting lower travel expenses and professional fees. 8 The effective tax rate for the first quarter of 2005 was 33.1%, compared to 42.8% in the fourth quarter of 2004 and 21.5% in the first quarter of 2004. The effective tax rate in the fourth quarter of 2004 reflects the net of the increase in the tax reserve related to LILO exposures and the impact of the SFAS 13 leasing adjustments related to cross-border rail equipment leases and aircraft leases. The effective tax rate in the first quarter of 2004 reflects the SFAS 13 leasing adjustment related to the Company's leasing portfolio. The effective tax rates in all periods reflect a reclassification related to Section 42 tax credits. See Note 3. BALANCE SHEET RETURN AND CAPITAL RATIOS Total assets were $96.4 billion at March 31, 2005, compared with $94.5 billion at December 31, 2004, and $92.7 billion at March 31, 2004. The increase in assets from December 31, 2004 reflects increased loans to securities industry customers. Total shareholders' equity was $9.3 billion at March 31, 2005, compared with $9.3 billion at December 31, 2004, and $8.8 billion at March 31, 2004. The sequential change in shareholders' equity reflects the retention of earnings offset by a decline in the securities valuation allowance and the repurchase of common stock. The major reason for the increase in shareholders' equity from a year ago is the retention of earnings. Return on average common equity for the first quarter of 2005 was 16.52%, compared with 15.34% in the fourth quarter of 2004, and 17.17% in the first quarter of 2004. Return on average assets for the first quarter of 2005 was 1.55%, compared with 1.40% in the fourth quarter of 2004, and 1.47% in the first quarter of 2004. The Company's estimated regulatory Tier 1 capital and Total capital ratios were 8.12% and 12.53% at March 31, 2005, compared with 8.31% and 12.21% at December 31, 2004, and 7.60% and 11.70% at March 31, 2004. The regulatory leverage ratio was 6.56% at March 31, 2005, compared with 6.41% at December 31, 2004, and 5.83% at March 31, 2004. The Company's tangible common equity as a percentage of total assets was 5.49% at March 31, 2005, down from 5.56% at December 31, 2004 reflecting retained earnings offset by a decrease in the mark-to-market on the investment portfolio and the buyback of stock. 9 CREDIT LOSS PROVISION AND NET CHARGE-OFFS 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (In millions) 2005 2004 2004 ------- ------- ------- Provision $ (10) $ (7) $ 12 ======= ======= ======= Net Charge-offs: Commercial $ (3) $ (1) $ (5) Foreign - 2 (10) Regional Commercial (2) (8) - Consumer (5) (5) (11) ------- ------- ------- Total $ (10) $ (12) $ (26) ======= ======= ======= The Company recorded a $10 million credit to the provision in the first quarter of 2005, compared to $7 million credit to the provision in the fourth quarter of 2004 and $12 million provision in the first quarter of 2004. The lower provision in 2005 reflects the Company's improved asset quality and a continued strong credit environment. The total allowance for credit losses was $716 million at March 31, 2005, $736 million at December 31, 2004, and $790 million at March 31, 2004. The total allowance for credit losses as a percent of non-margin loans were 2.19% at March 31, 2005, compared with 2.48% at December 31, 2004, and 2.64% at March 31, 2004. March 31, December 31, March 31, (Dollars in millions) 2005 2004 2004 ------------ ------------ ------------ Margin Loans $ 6,038 $ 6,059 $ 6,130 Non-Margin Loans 32,726 29,722 29,940 Total Loans 38,764 35,781 36,070 Allowance for Loan Losses 583 591 632 Allowance for Lending-Related Commitments 133 145 158 Total Allowance for Credit Losses 716 736 790 Allowance for Loan Losses As a Percent of Total Loans 1.50% 1.65% 1.75% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.78 1.99 2.11 Total Allowance for Credit Losses As a Percent of Total Loans 1.85 2.06 2.19 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 2.19 2.48 2.64 10 NONPERFORMING ASSETS Change 3/31/05 vs. (Dollars in millions) 3/31/05 12/31/04 12/31/04 ------------ ------------ ----------- Loans: Commercial $ 124 $ 132 $ (8) Foreign 19 28 (9) Other 49 53 (4) ------------ ------------ ----------- Total Nonperforming Loans 192 213 (21) Other Real Estate - 1 (1) ------------ ------------ ----------- Total Nonperforming Assets $ 192 $ 214 $ (22) ============ ============ =========== Nonperforming Assets Ratio 0.6% 0.7% Allowance for Loan Losses/Nonperforming Loans 304.0 277.5 Allowance for Loan Losses/Nonperforming Assets 304.0 276.5 Total Allowance for Credit Losses/Nonperforming Loans 373.4 345.6 Total Allowance for Credit Losses/Nonperforming Assets 373.4 344.3 Nonperforming assets declined by $22 million, or 10%, during the first quarter of 2005 to $192 million and are down 44% from a year ago. The sequential quarter decrease in nonperforming loans primarily reflects paydowns and sales of $19 million and charge-offs of $6 million. The ratio of the total allowance for credit losses to nonperforming assets increased to 373.4% at March 31, 2005, compared with 344.3% at December 31, 2004, and 230.5% at March 31, 2004. OTHER DEVELOPMENTS In January 2005, the Company acquired certain of the assets and liabilities of Standards & Poor's Securities, Inc. (SPSI), the institutional brokerage subsidiary of Standard & Poor's. The Company will assume SPSI's client relationships and Standard & Poor's research clients will have access to BNY Securities Group's diverse set of execution management platforms and commission management services. The acquisition demonstrates the Company's strategy to align with leading independent providers of research and other financial services. In March 2005, the Company agreed to acquire the execution and commission management services of Boston Institutional Services ("BIS"). Under the term of the agreement, the Company will assume BIS's client relationships for its execution and commission management business. 11 On March 1, 2005, the Board of Governors of the Federal Reserve System (the "FRB") adopted a final rule that allows the continued limited inclusion of trust preferred securities in the Tier 1 capital of bank holding companies (BHCs). Under the final rule, the Company will be subject to a 15 percent limit in the amount of trust preferred securities that can be included in Tier 1 capital, net of goodwill, less any related deferred tax liability. Amounts in excess of these limits will continue to be included in Tier 2 capital. The final rule provides a five-year transition period, ending March 31, 2009, for application of quantitative limits. Both the Company and the Bank are expected to remain "well capitalized" under the final rule. At the end of the transition period, the Company expects all its current trust preferred securities will continue to qualify as Tier 1 capital. In the first quarter of 2005, ownership of Pershing was transferred from The Bank of New York to the parent company, The Bank of New York Company, Inc. In connection with the transfer, the Company issued $1.1 billion of debt of which $500 million qualified as Tier 2 capital. 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 8:00 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. The passcode is "The Bank of New York." A replay of the call will be available through the Company's website and also by telephone at (866)481-6891 within the United States or (203)369-1570 internationally. The Bank of New York Company, Inc. (NYSE: BK) is a global leader in providing a comprehensive array of services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. The Company has a long tradition of collaborating with clients to deliver innovative solutions through its core competencies: securities servicing, treasury management, investment management, and individual & regional banking services. The Company's extensive global client base includes a broad range of leading financial institutions, corporations, 12 government entities, endowments and foundations. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has consistently played a prominent role in the evolution of financial markets worldwide. *************************** Notes: (1) Other First & Fourth Quarter Developments in 2004 are summarized in the following tables: (In millions) Applicable Income Statement Pre-Tax After-Tax Item Quarter Caption Income Tax Income - -------------------- ---------- ---------------- ------- ----- --------- Net Interest Income(a) - --------------------- SFAS 13 cumulative lease adjustment- First Net Interest (leasing portfolio) Income $ (145) $ 113 $ (32) Noninterest Income(b) - -------------------- Gain on sale of Wing Hang First Other Income 48 (21) 27 Gain on sponsor First Securities fund investments Gains 19 (7) 12 Subtotal - Noninterest ------- ----- -------- Income 67 (28) 39 Noninterest Expense(c) - --------------------- Severance tied to First Salaries and relocations Employee Benefits (10) 4 (6) Lease terminations First Net Occupancy (8) 3 (5) Subtotal - Noninterest ------- ----- -------- Expense (18) 7 (11) ------- ----- -------- Total $ (96) $ 92 $ (4) ======= ===== ======== (a) An after-tax charge of $32 million resulting from a cumulative adjustment to the leasing portfolio, which was triggered under Statement of Financial Accounting Standards No. 13 "Accounting for Leases" ("SFAS 13") by the combination of a reduction in state and local taxes and a restructuring of the lease portfolio completed in the first quarter. The SFAS 13 adjustment impacts the timing of lease income reported by the Company, and resulted in a reduction in net interest income of $145 million, offset by tax benefits of $113 million. (b) A $27 million after-tax gain on the sale of a portion of the Company's interest in Wing Hang Bank Limited ("Wing Hang"), a Hong Kong based bank, which was recorded in other income, and $19 million ($12 million after-tax) of higher than anticipated securities gains in the first quarter resulting from realized gains on sponsor fund investments in Kinkos, Inc., Bristol West Holdings, Inc., Willis Group Holdings, Ltd., and True Temper Sports, Inc. (c) The Company also took several actions associated with its long-term cost reduction initiatives. These actions included an after-tax severance charge of $6 million related to staff reductions tied to job relocations and a $5 million after-tax charge for terminating high cost leases associated with the staff redeployments. 13 (In millions) Applicable Income Statement Pre-Tax After-Tax Item Quarter Caption Income Tax Income - -------------------- ---------- ---------------- ------- ----- --------- Net Interest Income(d) - --------------------- SFAS 13 cumulative lease adjustment - (cross-border Fourth Net Interest rail equipment leases) Income $ 89 $ (37) $ 52 lease adjustment - Fourth Net Interest (aircraft leases) Income (10) 4 (6) ------- ----- -------- Subtotal - Net Interest Income 79 (33) 46 Aircraft leases/other Fourth Provision for Credit Losses 7 (3) 4 Subtotal-Net Interest Income After Provision ------- ----- -------- for Credit Losses 86 (36) 50 Noninterest Income(e) - -------------------- Aircraft leases Fourth Other Income 3 (1) 2 Subtotal - Noninterest ------- ----- -------- Income 3 (1) 2 Noninterest Expense(f) - --------------------- Charge for the RW Matter Fourth Other Expense (30) 8 (22) Subtotal - Noninterest ------- ----- -------- Expense (30) 8 (22) Federal tax reserve adjustment related to LILO exposure(g) Fourth Income Tax - (50) (50) ------- ----- -------- Total $ 59 $ (79) $ (20) ======= ===== ======== (d) An after-tax benefit of $52 million resulting from a SFAS 13 cumulative adjustment to the leasing portfolio for customers exercising their early buy- out ("EBO") options. The Company's leasing portfolio contains a number of large cross-border leveraged leases where the lessee has an EBO option to purchase the leased assets, generally railcars and related assets. Given a confluence of economic factors, the value of the leased equipment currently exceeds the exercise price of the EBO option. The Company offered financial incentives to these lessees to accelerate the exercise of their EBO options. As a result, several lessees agreed to this proposal, triggering the after-tax $52 million gain. The gain results from the recognition of lease income over a shorter time frame, since the term of the lease has been shortened to the EBO date. In addition, the Company's net investment in aircraft leases was impacted by a $6 million after-tax adjustment related to aircraft leased to two airlines. The Company recorded a $7 million reduction in the provision for credit losses which largely reflects release of reserves on the aircraft leases. (e) An after-tax gain of $2 million on the sale of a leased aircraft. (f) An after-tax expense of $22 million in connection with the anticipated settlement of the RW Professional Leasing Services Corp. matter ("RW Matter"). (g) In December of 2004 and January 2005, the Company had several appellate conferences with the IRS related to the Company's cross-border leveraged lease 14 transactions. Based on these conferences, the Company believes it may be possible to settle the proposed IRS tax adjustments related to the portfolio. However, negotiations are continuing and the matter may still be litigated. Based on a revision to the probabilities and costs assigned to litigation and settlement outcomes, the Company recorded a $50 million expense associated with increasing the tax reserve on these transactions. (2) 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. (3) The Company participates in unconsolidated investments that own real estate qualifying for low income housing tax credits based on Section 42 of the Internal Revenue Code. The Company's share of operating losses generated by these investments is recorded as other income. The Company has historically netted the tax credits generated by these investments against the related operating losses. The Company has reviewed this accounting method and has decided to record these tax credits as a reduction of income tax expense. Prior period results for other income and income tax expense have been reclassified and did not have an impact on net income. See pages 19 and 20. 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 and trading activity, changes in customer credit quality, market performance, the effects of capital reallocation, portfolio performance, changes in regulatory expectations and standards, 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 and Factors That Could Affect Future Results" in the Company's 2004 Form 10-K which has been filed with the SEC and is 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.) 15
THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) March 31, December 31, March 31, 2005 2004 2004 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 1,917 $ 1,967 $ 1,667 Net Income 379 351 364 Basic EPS 0.49 0.45 0.47 Diluted EPS 0.49 0.45 0.47 Cash Dividends Per Share 0.20 0.20 0.19 Return on Average Common Shareholders' Equity 16.52% 15.34% 17.17% Return on Average Assets 1.55 1.40 1.47 Efficiency Ratio 66.2 64.8 69.3 Assets $ 96,422 $ 94,529 $ 92,652 Loans 38,764 35,781 36,070 Securities 23,907 23,802 24,083 Deposits - Domestic 33,634 35,558 33,639 - Foreign 25,246 23,163 22,443 Long-Term Debt 7,389 6,121 6,276 Common Shareholders' Equity 9,335 9,290 8,760 Common Shareholders' Equity Per Share $ 12.02 $ 11.94 $ 11.27 Market Value Per Share of Common Stock 29.05 33.42 31.50 Allowance for Loan Losses as a Percent of Total Loans 1.50% 1.65% 1.75% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.78 1.99 2.11 Total Allowance for Credit Losses as a Percent of Total Loans 1.85 2.06 2.19 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 2.19 2.48 2.64 Tier 1 Capital Ratio 8.12 8.31 7.60 Total Capital Ratio 12.53 12.21 11.70 Leverage Ratio 6.56 6.41 5.83 Tangible Common Equity Ratio 5.49 5.56 5.22 Employees 23,160 23,363 22,820 Assets Under Custody (In trillions) Total Assets Under Custody $ 9.9 $ 9.7 $ 8.6 Equity Securities 34% 35% 33% Fixed Income Securities 66 65 67 Cross-Border Assets Under Custody $ 2.8 $ 2.7 $ 2.4 Assets Under Administration (In billions) $ 33 $ 33 $ 33 Assets Under Management (In billions) Total Assets Under Management 104 102 92 Equity Securities 34% 36% 36% Fixed Income Securities 21 21 22 Alternative Investments 15 15 13 Liquid Assets 30 28 29
16
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) For the three months ended March 31, -------------------- 2005 2004 --------- -------- Interest Income - --------------- Loans $ 341 $ 118 Margin loans 55 34 Securities Taxable 207 181 Exempt from Federal Income Taxes 9 10 --------- -------- 216 191 Deposits in Banks 71 68 Federal Funds Sold and Securities Purchased Under Resale Agreements 27 16 Trading Assets 22 14 --------- -------- Total Interest Income 732 441 --------- -------- Interest Expense - ---------------- Deposits 184 118 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 6 3 Other Borrowed Funds 13 9 Customer Payables 25 13 Long-Term Debt 49 30 --------- -------- Total Interest Expense 277 173 --------- -------- Net Interest Income 455 268 - ------------------- Provision for Credit Losses (10) 12 --------- -------- Net Interest Income After Provision for Credit Losses 465 256 --------- -------- Noninterest Income - ------------------ Servicing Fees Securities 751 716 Global Payment Services 75 79 --------- -------- 826 795 Private Client Services and Asset Management Fees 121 108 Service Charges and Fees 92 96 Foreign Exchange and Other Trading Activities 96 106 Securities Gains 12 33 Other 31 82 --------- -------- Total Noninterest Income 1,178 1,220 --------- -------- Noninterest Expense - ------------------- Salaries and Employee Benefits 618 574 Net Occupancy 78 81 Furniture and Equipment 52 51 Clearing 46 48 Sub-custodian Expenses 23 22 Software 53 49 Communications 23 24 Amortization of Intangibles 8 8 Other 176 156 --------- -------- Total Noninterest Expense 1,077 1,013 --------- -------- Income Before Income Taxes 566 463 Income Taxes 187 99 --------- -------- Net Income $ 379 $ 364 - ---------- ========= ======== Per Common Share Data: - ---------------------- Basic Earnings $ 0.49 $ 0.47 Diluted Earnings 0.49 0.47 Cash Dividends Paid 0.20 0.19 Diluted Shares Outstanding 779 778
17
THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) March 31, 2005 December 31, 2004 ------------------ ----------------- Assets - ------ Cash and Due from Banks $ 2,597 $ 3,886 Interest-Bearing Deposits in Banks 8,802 8,192 Securities Held-to-Maturity 1,831 1,886 Available-for-Sale 22,076 21,916 ------------------ ----------------- Total Securities 23,907 23,802 Trading Assets at Fair Value 5,091 4,627 Federal Funds Sold and Securities Purchased Under Resale Agreements 4,085 5,708 Loans (less allowance for loan losses of $583 in 2005 and $591 in 2004) 38,181 35,190 Premises and Equipment 1,070 1,097 Due from Customers on Acceptances 138 137 Accrued Interest Receivable 313 285 Goodwill 3,487 3,477 Intangible Assets 793 793 Other Assets 7,958 7,335 ------------------ ----------------- Total Assets $ 96,422 $ 94,529 ================== ================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 15,574 $ 17,442 Interest-Bearing Domestic Offices 18,608 18,692 Foreign Offices 24,698 22,587 ------------------ ----------------- Total Deposits 58,880 58,721 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 879 1,205 Trading Liabilities 2,870 2,873 Payables to Customers and Broker-Dealers 8,684 8,664 Other Borrowed Funds 906 533 Acceptances Outstanding 140 139 Accrued Taxes and Other Expenses 4,192 4,452 Accrued Interest Payable 114 113 Other Liabilities (including allowance for lending-related commitments of $133 in 2005 and $145 in 2004) 3,033 2,418 Long-Term Debt 7,389 6,121 ------------------ ----------------- Total Liabilities 87,087 85,239 ------------------ ----------------- Shareholders' Equity Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,046,300,569 shares in 2005 and 1,044,841,603 shares in 2004 7,847 7,836 Additional Capital 1,790 1,790 Retained Earnings 6,374 6,162 Accumulated Other Comprehensive Income (87) (6) ------------------ ----------------- 15,924 15,782 Less: Treasury Stock (269,413,566 shares in 2005 and 266,720,629 shares in 2004), at cost 6,579 6,492 Loan to ESOP (305,261 shares in 2005), at cost 10 - ------------------ ----------------- Total Shareholders' Equity 9,335 9,290 ------------------ ----------------- Total Liabilities and Shareholders' Equity $ 96,422 $ 94,529 ================== ================= - ------------------------------------------------------------------------------------------------ Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.
18
THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions) For the three months ended For the three months ended March 31, 2005 March 31, 2004 -------------------------- -------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 9,824 $ 71 2.95% $11,692 $ 68 2.35% Federal Funds Sold and Securities Purchased Under Resale Agreements 4,816 27 2.31 7,115 16 0.93 Margin Loans 6,407 55 3.46 6,179 34 2.18 Loans Domestic Offices 22,135 245 4.49 21,074 55 1.05 Foreign Offices 10,302 96 3.76 9,201 63 2.74 ------- -------- ------- -------- Non-Margin Loans 32,437 341 4.26 30,275 118 1.56 ------- -------- ------- -------- Securities U.S. Government Obligations 358 3 3.04 440 3 2.31 U.S. Government Agency Obligations 3,302 31 3.74 4,300 35 3.23 Obligations of States and Political Subdivisions 199 4 7.34 247 3 5.56 Other Securities 19,681 185 3.77 17,914 155 3.46 Trading Securities 2,464 22 3.60 2,753 15 2.15 ------- -------- ------- -------- Total Securities 26,004 245 3.77 25,654 211 3.28 ------- -------- ------- -------- Total Interest-Earning Assets 79,488 739 3.77% 80,915 447 2.22% ------- -------- ------- -------- Allowance for Credit Losses (589) (679) Cash and Due from Banks 4,166 2,971 Other Assets 16,177 16,471 ------- ------- TOTAL ASSETS $99,242 $99,678 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,915 $ 21 1.25% $ 6,607 $ 11 0.68% Savings 8,901 21 0.94 9,149 15 0.67 Certificates of Deposit $100,000 & Over 2,880 18 2.57 3,987 12 1.24 Other Time Deposits 899 4 1.76 1,016 4 1.46 Foreign Offices 25,464 120 1.92 25,834 76 1.18 ------- -------- ------- ------- Total Interest-Bearing Deposits 45,059 184 1.66 46,593 118 1.02 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,390 6 1.84 1,612 3 0.66 Other Borrowed Funds 1,825 13 2.87 2,398 9 1.49 Payables to Customers and Broker-Dealers 6,385 25 1.57 6,973 13 0.73 Long-Term Debt 6,605 49 2.98 6,209 30 1.95 ------- -------- ------- -------- Total Interest-Bearing Liabilities 61,264 277 1.84% 63,785 173 1.09% ------- -------- ------- -------- Noninterest-Bearing Deposits 15,520 14,016 Other Liabilities 13,158 13,355 Common Shareholders' Equity 9,300 8,522 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $99,242 $99,678 ======= ======= Net Interest Earnings and Interest Rate Spread $ 462 1.93% $ 274 1.13% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 2.36% 1.36% ======= =======
19
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) For the three months ended -------------------------------------------- March 31, June 30, September 30, December 31, Year 2004 2004 2004 2004 2004 --------- -------- ------------- ----------- ------ Interest Income - --------------- Loans $ 118 $ 272 $ 290 $ 401 $1,080 Margin loans 34 35 40 48 156 Securities Taxable 181 180 181 197 741 Exempt from Federal Income Taxes 10 10 10 11 40 --------- -------- ------------- ----------- ------ 191 190 191 208 781 Deposits in Banks 68 78 77 81 305 Federal Funds Sold and Securities Purchased Under Resale Agreements 16 17 20 27 80 Trading Assets 14 9 11 17 51 --------- -------- ------------- ----------- ------ Total Interest Income 441 601 629 782 2,453 --------- -------- ------------- ----------- ------ Interest Expense - ---------------- Deposits 118 126 139 164 548 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3 3 4 6 15 Other Borrowed Funds 9 9 9 25 52 Customer Payables 13 12 14 19 57 Long-Term Debt 30 30 35 41 136 --------- -------- ------------- ----------- ------ Total Interest Expense 173 180 201 255 808 --------- -------- ------------- ----------- ------ Net Interest Income 268 421 428 527 1,645 - ------------------- Provision for Credit Losses 12 10 - (7) 15 --------- -------- ------------- ----------- ------ Net Interest Income After Provision for Credit Losses 256 411 428 534 1,630 --------- -------- ------------- ----------- ------ Noninterest Income - ------------------ Servicing Fees Securities 716 717 685 742 2,858 Global Payment Services 79 81 84 71 317 --------- -------- ------------- ----------- ------ 795 798 769 813 3,175 Private Client Services and Asset Management Fees 108 113 113 115 448 Service Charges and Fees 96 94 98 98 385 Foreign Exchange and Other Trading Activities 106 100 67 90 364 Securities Gains 33 12 14 18 78 Other 82 39 38 42 200 --------- -------- ------------- ----------- ------ Total Noninterest Income 1,220 1,156 1,099 1,176 4,650 --------- -------- ------------- ----------- ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 574 570 564 617 2,324 Net Occupancy 81 72 77 75 305 Furniture and Equipment 51 51 51 51 204 Clearing 48 44 39 45 176 Sub-custodian Expenses 22 22 21 22 87 Software 49 50 52 43 193 Communications 24 23 22 23 93 Amortization of Intangibles 8 8 9 9 34 Other 156 172 164 212 706 --------- -------- ------------- ----------- ------ Total Noninterest Expense 1,013 1,012 999 1,097 4,122 --------- -------- ------------- ----------- ------ Income Before Income Taxes 463 555 528 613 2,158 Income Taxes 99 184 174 262 718 --------- -------- ------------- ----------- ------ Net Income $ 364 $ 371 $ 354 $ 351 $1,440 - ---------- ========= ======== ============= =========== ====== Per Common Share Data: - ---------------------- Basic Earnings $ 0.47 $ 0.48 $ 0.46 $ 0.45 $ 1.87 Diluted Earnings 0.47 0.48 0.46 0.45 1.85 Cash Dividends Paid 0.19 0.20 0.20 0.20 0.79 Diluted Shares Outstanding 778 779 778 780 778 - ------------------------------------------------------------------------------------------------ See Note 3.
20
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) For the year Ended December 31, ------------------------------------------------- 2004 2003 2002 2001 2000 --------- --------- --------- --------- --------- Interest Income - --------------- Loans $ 1,080 $ 1,187 $ 1,452 $ 2,239 $ 2,889 Margin loans 156 86 12 32 21 Securities Taxable 741 651 639 463 323 Exempt from Federal Income Taxes 40 48 61 74 63 --------- --------- --------- --------- --------- 781 699 700 537 386 Deposits in Banks 305 150 133 252 273 Federal Funds Sold and Securities Purchased Under Resale Agreements 80 79 51 159 277 Trading Assets 51 129 259 401 531 --------- --------- --------- --------- --------- Total Interest Income 2,453 2,330 2,607 3,620 4,377 --------- --------- --------- --------- --------- Interest Expense - ---------------- Deposits 548 507 644 1,392 2,011 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 15 13 29 103 153 Other Borrowed Funds 52 21 65 163 139 Customer Payables 57 30 2 4 - Long-Term Debt 136 150 202 277 317 --------- --------- --------- --------- --------- Total Interest Expense 808 721 942 1,939 2,620 --------- --------- --------- --------- --------- Net Interest Income 1,645 1,609 1,665 1,681 1,757 - ------------------- Provision for Credit Losses 15 155 685 375 105 --------- --------- --------- --------- --------- Net Interest Income After Provision for Credit Losses 1,630 1,454 980 1,306 1,652 --------- --------- --------- --------- --------- Noninterest Income - ------------------ Servicing Fees Securities 2,858 2,412 1,896 1,775 1,650 Global Payment Services 317 314 296 291 265 --------- --------- --------- --------- --------- 3,175 2,726 2,192 2,066 1,915 Private Client Services and Asset Management Fees 448 384 344 314 296 Service Charges and Fees 385 375 357 352 360 Foreign Exchange and Other Trading Activities 364 327 234 338 261 Securities Gains 78 35 (118) 154 150 Other 200 149 124 337 120 --------- --------- --------- --------- --------- Total Noninterest Income 4,650 3,996 3,133 3,561 3,102 --------- --------- --------- --------- --------- Noninterest Expense - ------------------- Salaries and Employee Benefits 2,324 2,002 1,581 1,593 1,493 Net Occupancy 305 261 230 233 184 Furniture and Equipment 204 185 138 178 108 Clearing 176 154 124 61 36 Sub-custodian Expenses 87 74 70 62 68 Software 193 170 115 90 66 Communications 93 92 65 86 56 Amortization of Goodwill and Intangibles 34 25 8 112 115 Merger and Integration Costs - 96 - - - Other 706 639 420 404 384 --------- --------- --------- --------- --------- Total Noninterest Expense 4,122 3,698 2,751 2,819 2,510 --------- --------- --------- --------- --------- Income Before Income Taxes 2,158 1,752 1,362 2,048 2,244 Income Taxes 718 595 460 705 815 --------- --------- --------- --------- --------- Net Income $ 1,440 $ 1,157 $ 902 $ 1,343 $ 1,429 - ---------- ========= ========= ========= ========= ========= Per Common Share Data: - ---------------------- Basic Earnings $ 1.87 $ 1.54 $ 1.25 $ 1.84 $ 1.95 Diluted Earnings 1.85 1.52 1.24 1.81 1.92 Cash Dividends Paid 0.79 0.76 0.76 0.72 0.66 Diluted Shares Outstanding 778 759 728 741 745 - ------------------------------------------------------------------------------------------------ See Note 3.
-----END PRIVACY-ENHANCED MESSAGE-----