-----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, StIeZM3vqV9z/Xj0CWTqMATYU8Ki4CpoMVPN235s+5CbJ4Rzer2HGT7Ao07OIShx 9h3m7+Z1nchAr1bjPNoYdw== 0000009626-05-000173.txt : 20050720 0000009626-05-000173.hdr.sgml : 20050720 20050720090350 ACCESSION NUMBER: 0000009626-05-000173 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050630 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050720 DATE AS OF CHANGE: 20050720 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: 05962814 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 r2q058kcover.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): July 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 July 20, 2005, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the second 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 second quarter of 2005 contained in the press release dated July 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: July 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 second quarter of 2005 contained in the press release dated July 20, 2005, of The Bank of New York Company, Inc. EX-99 2 r8k2q05.txt EX-99 1 IMMEDIATELY - --------------------- THE BANK OF NEW YORK COMPANY, INC. REPORTS SECOND QUARTER EPS OF 52 CENTS; SECURITIES SERVICING REVENUE UP 8% OVER SECOND QUARTER 2004 STRONG NET INTEREST INCOME GROWTH POSITIVE OPERATING LEVERAGE NEW YORK, N.Y., July 20, 2005 -- The Bank of New York Company, Inc. (NYSE: BK) reported today second quarter net income of $398 million and diluted earnings per share of 52 cents, compared with net income of $371 million and diluted earnings per share of 48 cents in the second quarter of 2004, and net income of $379 million and diluted earnings per share of 49 cents in the first quarter of 2005. Year-to-date net income was $777 million, or $1.00 of diluted earnings per share, compared to $735 million, or 94 cents of diluted earnings per share in 2004. Second Quarter 2005 Highlights * Securities servicing fees increased by 8% compared to the second quarter of 2004 and 3% sequentially to $776 million, driven by strong growth in investor services on a year-over-year basis while issuer services was strong sequentially. * Net interest income grew by 12% versus the second quarter of last year and 3% on a sequential quarter basis reflecting the Company's sound interest rate positioning and strong liquidity generated by its core servicing businesses. * Positive operating leverage, reflecting top-line growth and tight operating expense control. * Foreign exchange and other trading revenues grew by 3% compared to the second quarter 2004 and 7% on a sequential quarter basis reflecting continued strong customer flows and a trending market in foreign exchange. * Private client services and asset management revenue increased by 8% versus the second quarter of 2004 reflecting growth in assets at Ivy Asset Management. On a sequential quarter basis revenues were up 1%. * Continued excellent credit performance. * Acquired on July 1, 2005 Lynch, Jones & Ryan, Inc., a leader in providing commission recapture services to institutional clients. * Active capital management as the Company repurchased 7.7 million shares during the quarter. Chairman and Chief Executive Officer Thomas A. Renyi stated, "Our results for the quarter reflect a strong, balanced performance - broad-based revenue growth coupled with focused expense control. This produced solid positive operating leverage, which has been a primary 2 objective and is satisfying to see. We do recognize that this performance only begins to reflect the progress of our growth and efficiency initiatives and the full potential of our franchise. "We see significant opportunity to further expand our market share in our core businesses. Our success in capturing new business over the last six months shows we have the competitive strength and aggressive posture needed to capitalize on every opportunity. We will continue to work to do just that, while also carefully managing our costs." SECURITIES SERVICING FEES
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q05 vs. 2Q05 vs. -------------- Inc/ (In millions) 2Q05 1Q05 2Q04 1Q05 2Q04 2005 2004 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Execution and Clearing Services $ 294 $ 293 $ 279 -% 5% $ 587 $ 582 1% Investor Services 265 263 229 1 16 528 455 16 Issuer Services 159 139 155 14 3 298 292 2 Broker-Dealer Services 58 56 53 4 9 114 103 11 ------ ------ ------ ------ ------ Securities Servicing Fees $ 776 $ 751 $ 716 3 8 $1,527 $1,432 7 ====== ====== ====== ====== ======
Securities servicing fees in the second quarter of 2005 were up from the second quarter of 2004 and from the first quarter of 2005, reflecting strong growth in issuer services sequentially and in investor services and broker- dealer services versus the prior year. Execution and clearing includes institutional agency brokerage, electronic trading, transition management services, independent research and through Pershing, correspondent clearing services such as clearing, execution, financing, and custody for introducing broker-dealers. The second quarter of 2005 was up from 2004 as modest growth at Pershing was offset by weakness in the execution business. Fees for execution and clearing were essentially unchanged from the first quarter of 2005. In execution services, higher transition management revenue and additional trading days helped to offset the decline in daily trading volumes. Pershing's continuing strategic shift to more value-added, fee-based services helped offset weaker transaction- based revenue. Investor services, which includes global fund services, global custody, securities lending, global liquidity services and outsourcing, was up significantly from the second quarter of 2004 and up slightly from the first quarter of 2005. Year-over-year results reflect strong performance across all business lines. Global fund services was favorably impacted by new business and higher international transaction volumes. Securities lending improved year-over-year and sequentially due to continued growth in new business and robust demand for Treasury collateral. Sequential performance reflects strong results in securities lending offset by the negative impact on global custody of lower transaction volumes in Europe. Assets under custody rose to $10.3 trillion as of June 30, 2005, from $8.7 trillion at June 30, 2004 and $9.9 trillion at March 31, 2005. Issuer services, which includes corporate trust, depositary receipts and stock transfer, increased versus the second quarter of 2004 and showed strong growth sequentially. The increase versus the second quarter of 2004 primarily reflects higher corporate trust fees due to continued strength in international issuance and structured products. The new business wins in corporate trust are driven by the Company's introduction of new products, analytic tools, and 3 expanded capacity. The sequential quarter increase reflects higher depositary receipts fees due to seasonally higher dividend activity and an increase in corporate trust fees due to new business wins in municipal and structured products. Broker-dealer services, which includes government securities clearance and collateral management, increased over both the second quarter of 2004 and the first quarter of 2005, as a result of increased collateral management activity and higher volumes in securities clearance. NONINTEREST INCOME
Percent Inc/(Dec) ----------------- Year-to-Date Percent 2Q05 vs. 2Q05 vs. -------------- Inc/ (In millions) 2Q05 1Q05 2Q04 1Q05 2Q04 2005 2004 (Dec) ------ ------ ------ -------- ------- ------ ------ ------- Servicing Fees Securities $ 776 $ 751 $ 716 3% 8% $1,527 $1,432 7% Global Payment Services 76 75 83 1 (8) 151 162 (7) ------ ------ ------ ------ ------ 852 826 799 3 7 1,678 1,594 5 Private Client Services and Asset Management Fees 122 121 113 1 8 243 221 10 Service Charges and Fees 103 92 93 12 11 195 189 3 Foreign Exchange and Other Trading Activities 103 96 100 7 3 199 206 (3) Securities Gains 23 12 12 92 92 35 45 (22) Other* 53 31 39 71 36 84 121 (31) ------ ------ ------ ------ ------ Total Noninterest Income $1,256 $1,178 $1,156 7 9 $2,434 $2,376 2 ====== ====== ====== ====== ====== *See Note (3).
The second quarter of 2005 increase in noninterest income versus both the year ago quarter and the sequential quarter reflects broadly stronger performance in securities servicing, service charges and fees, securities gains, and other income. Global payment services fees were lower than the second quarter and year-to-date periods of 2004 and essentially unchanged on a sequential quarter basis. The decline reflects customers choosing to pay with higher compensating balances, which benefits net interest income, partially offset by new business. On an invoiced services basis, total revenue was up 5% over the second quarter of 2004 and 4% sequentially as new business wins were driven by new capabilities in processing cross-border transactions as well as remote check deposit. Private client services and asset management fees for the second quarter were up significantly from the second quarter of 2004 reflecting growth in fees at Ivy Asset Management. The small sequential quarter increase reflects seasonally higher private client fees partially offset by a slight decline in fees at Ivy Asset Management. Total assets under management were $106 billion, up from $93 billion a year ago and $104 billion at March 31, 2005. Service charges and fees were up from the second quarter of 2004 and from the first quarter of 2005. For the second quarter and first six months of 2005, service charges and fees were up from 2004, reflecting higher capital markets fees. The sequential quarter increase reflects higher capital markets fees due to increased loan syndication and advisory fees. 4 Foreign exchange and other trading revenues were up slightly from the second quarter of 2004 and increased significantly on a sequential quarter basis. In comparison to the second quarter of 2004 the improved results reflect new business wins as well as improved results in interest rate derivatives. Sequential quarter results were paced by new business wins in foreign exchange, seasonal activity tied to dividends and a trending currency market. Securities gains in the second quarter were up compared with the second quarter of 2004 and the first quarter of 2005. The increase reflects higher gains in the Company's sponsor fund portfolio. Securities gains declined in the first six months of 2005 versus a year ago reflecting $19 million of realized gains on four sponsor fund investments recorded in the first quarter of 2004. Other noninterest income increased versus the second quarter of 2004 and the sequential quarter. The second quarter and year-to-date periods of 2005 include a $17 million gain on the sale of the Company's interest in Financial Models Company, Inc. In the six months ended June 30, 2005, other noninterest income was down from the six months ended June 30, 2004 primarily reflecting a 2004 pre-tax gain of $48 million on the sale of a portion of the Company's investment in Wing Hang Bank Limited. See Note 1. NET INTEREST INCOME
Percent Inc/(Dec) Year-to-Date Percent ----------------- -------------------- Inc/(Dec) (Dollars in millions) 2Q05 vs. 2Q05 vs. 2005 2004 2004 --------------- 2Q05 1Q05 2Q04 1Q05 2Q04 Reported Core** Reported Core** ---- ---- ---- -------- -------- ---- -------- ------ -------- ------ Net Interest Income $470 $455 $421 3% 12% $925 $ 689 $ 834 34% 11% Tax Equivalent Adjustment* 7 7 8 14 14 14 ---- ---- ---- ---- -------- ------ Net Interest Income on a Tax Equivalent Basis $477 $462 $429 3 11 $939 $ 703 $ 848 34 11 ==== ==== ==== ==== ======== ====== Net Interest Rate Spread 1.84% 1.93% 1.84% 1.89% 1.49% 1.84% Net Yield on Interest Earning Assets 2.34 2.36 2.09 2.35 1.73 2.08 * See Note (2) ** Excludes SFAS 13 adjustment. See Note (1).
The increases in net interest income over 2004 reflect the Company's positioning to benefit from the rise in short-term rates, as well as customers' increasing use of compensating balances to pay for services. The increase from the first quarter of 2005 is due to sound interest rate positioning, driven in part by the expansion of deposit spreads and increased liquidity generated by servicing activities including custody, clearing and corporate trust. The increase in liquidity reflects a solid level of activity through these businesses. 5 NONINTEREST EXPENSE AND INCOME TAXES
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q05 vs. 2Q05 vs. -------------- Inc/ (In million) 2Q05 1Q05 2Q04 1Q05 2Q04 2005 2004 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Salaries and Employee Benefits $ 640 $ 618 $ 570 4% 12% $1,258 $1,144 10% Net Occupancy 82 78 72 5 14 160 153 5 Furniture and Equipment 51 52 51 (2) - 103 102 1 Clearing 42 46 44 (9) (5) 88 92 (4) Sub-custodian Expenses 24 23 22 4 9 47 44 7 Software 55 53 50 4 10 108 99 9 Communications 22 23 23 (4) (4) 45 47 (4) Amortization of Intangibles 10 8 8 25 25 18 16 13 Other 197 176 172 12 15 373 328 14 ------ ------ ------ ------ ------ Total Noninterest Expense $1,123 $1,077 $1,012 4 11 $2,200 $2,025 9 ====== ====== ====== ====== ======
Noninterest expense for the second quarter of 2005 was up compared with the second quarter of 2004 and the first quarter of 2005. The increase versus the year ago quarter reflects staffing costs associated with new business, as well as higher pension and option expenses, expanded occupancy costs associated with business continuity, and higher consulting expenses in other expense. The sequential increase reflects higher salaries and employee benefits tied to new business and revenue growth, higher severance of $5 million, and incremental option expense of $4 million. The year 2005 is the third and final year the adoption of expensing stock options will impact year-over-year expense comparisons. Other expenses were impacted by legal costs which increased by $12 million, including the accrual of $10 million for the potential settlement of certain regulatory matters previously disclosed, and higher seasonal travel expenses. Relative to the second quarter of 2004, salaries and employee benefits expense increased 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. Salaries and employee benefits expense for the second quarter increased on a sequential quarter basis, reflecting higher incentives tied to improved revenues and a $5 million increase in severance as the Company accelerated the migration of staff to lower cost locations, as well as an additional $4 million of stock option expense related to grants awarded in March 2005. For the first six months of 2005, salaries and employee benefit expense also was higher, reflecting many of these same factors. Occupancy expenses were up sequentially partly reflecting a write-off associated with Ivy's move to a new location. On a year-to-date basis, occupancy expenses were up from 2004 primarily reflecting higher energy costs and business continuity initiatives. Occupancy expense in 2004 included lease termination expenses of $8 million recorded in the first quarter of 2004. The increase in software expense versus a year ago reflects spending and development to support business growth, with the sequential quarter comparison largely reflecting a $3 million software write-off. The effective tax rate for the second quarter of 2005 was 33.4%, compared to 33.1% in the second quarter of 2004 and 33.1% in the first quarter of 2005. The effective tax rate for the six months period ended June 30, 2005 was 33.3%, compared with 27.8% for the six months period 6 ended June 30, 2004. The increase in the year-to-date period reflects the benefit associated with the SFAS 13 leasing adjustment related to the Company's leasing portfolio in the first quarter of 2004. The effective tax rates in all periods reflect a reclassification related to Section 42 tax credits. See Note 3. CREDIT LOSS PROVISION AND NET CHARGE-OFFS
Year-to-Date ----------------- (In millions) 2Q05 1Q05 2Q04 2005 2004 ------- ------- ------- ------- ------- Provision $ 5 $ (10) $ 10 $ (5) $ 22 ======= ======= ======= ======= ======= Net Charge-offs: Commercial $ (2) $ (3) $ (11) $ (5) $ (16) Foreign (4) - (8) (4) (18) Regional Commercial 2 (2) - - - Consumer (7) (5) (6) (12) (17) ------- ------- ------- ------- ------- Total $ (11) $ (10) $ (25) $ (21) $ (51) ======= ======= ======= ======= =======
LOANS
June 30, March 31, June 30, (Dollars in millions) 2005 2005 2004 ------------ ------------ ------------ Margin Loans $ 6,055 $ 6,038 $ 6,114 Non-Margin Loans 34,626 32,726 32,091 ------------ ------------ ------------ Total Loans $ 40,681 $ 38,764 $ 38,205 ============ ============ ============ Allowance for Loan Losses $ 562 $ 583 $ 598 Allowance for Lending-Related Commitments 148 133 177 ------------ ------------ ------------ Total Allowance for Credit Losses $ 710 $ 716 $ 775 ============ ============ ============ Allowance for Loan Losses As a Percent of Total Loans 1.38% 1.50% 1.57% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.62 1.78 1.86 Total Allowance for Credit Losses As a Percent of Total Loans 1.75 1.85 2.03 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 2.05 2.19 2.42
7 NONPERFORMING ASSETS
Change Percent June 30, March 31, 6/30/05 vs. Inc/ (Dollars in millions) 2005 2005 3/31/05 (Dec) --------- --------- ----------- -------- Loans: Commercial $ 78 $ 124 $ (46) (37)% Foreign 15 19 (4) (21) Other 47 49 (2) (4) --------- --------- ----------- Total Nonperforming Loans 140 192 (52) (27) Other Real Estate - - - - --------- --------- ----------- Total Nonperforming Assets $ 140 $ 192 $ (52) (27) ========= ========= =========== Nonperforming Assets Ratio 0.4% 0.6% Allowance for Loan Losses/Nonperforming Loans 400.5 304.0 Allowance for Loan Losses/Nonperforming Assets 400.5 304.0 Total Allowance for Credit Losses/Nonperforming Loans 506.1 373.4 Total Allowance for Credit Losses/Nonperforming Assets 506.1 373.4
The sequential quarter decrease in nonperforming loans primarily reflects the disposition of a $36 million loan to a retailer, as well as charge-offs. OTHER DEVELOPMENTS On July 1, 2005, the Company acquired Lynch, Jones & Ryan, Inc. ("LJR"), a subsidiary of Instinet Group. LJR is the pioneer and premier provider of commission recapture programs, with over 30 years experience in providing value-added trading services to institutional investors who comprise 1,400 plan sponsor funds, with more than $2.2 trillion in assets. LJR's headquarters are in New York, with regional offices in Chicago, Dallas, and San Francisco and a presence in London, Tokyo and Sydney. The acquisition of LJR bolsters the Company's position as the leading provider of agency brokerage and commission management services, and reinforces its long-standing commitment to the plan sponsor and institutional fund community around the world. In June 2005, the Company and Trust Company of Australia Ltd. (Trust) formed a joint venture that will provide securitization trustee and other agency-related services to Australian-based issuers of debt. The new company will combine Trust's strong local infrastructure and market presence with the Company's global experience and expertise to provide a wide range of trustee and agency services. The joint venture, based in Sydney, begin operating in early June 2005. The joint venture presents the Company with a significant opportunity to expand its footprint in Australia and to capitalize on the sizeable growth potential in the securitization market across a variety of asset classes. In July 2005, the Bank of New York and BHF-BANK established BHF BNY Securities Services GmbH as a jointly held subsidiary. Based in Frankfurt am Main, the new company will market Global Custody (Depotbank) services for German investment companies, and securities custody and settlement services for the national and international direct investments of institutional investors. 8 In the second quarter of 2005, the Company sold its 28% equity investment in BNY Inter Maritime Bank, a Swiss private bank. The Company did not record a gain or loss on the sale. In July 2005, the Company signed a definitive agreement to acquire the bond administration business of Marshall & Ilsley Trust Company N.A., and M&I Marshall & Ilsley Bank (together, "M&I"), where they act as bond trustee, paying/fiscal agent, master trustee, transfer agent and/or registrar. The transaction involves the acquisition of approximately 560 bond trusteeships and agency appointments, representing $4.8 billion of principal debt outstanding for an estimated 225 clients. The transaction is expected to close in the third quarter of 2005. In July 2005, the Company raised its quarterly dividend by 5% to 21 cents per share payable August 4, 2005 to shareholders of record on July 26, 2005. In July 2005, the Company announced that its board of directors has approved a new share buyback program, which authorizes the Company to purchase 20 million shares on the open market. CONFERENCE CALL 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 a.m. ET. The presentation will be accessible from the Company's website at * www.bankofny.com/earnings and * By telephone at (888)677-2456 within the United States or (517)623-4161 internationally. * Passcode is "The Bank of New York." * Replay of the call will be available through the Company's website and also by telephone at (866)513-9973 within the United States or (203)369-1999 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, 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. 9 *************************** Notes: (1) Other First Quarter Developments in 2004 is 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. (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. 10 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 38 to 40 of the Company's March 31, 2005 Form 10-Q. 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 and First Quarter 2005 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 that have changed after a forward looking statement was made. (Financial highlights and detailed financial statements are attached.) Contact Information Media: Investors: - --------- ------------- R. Jeep Bryant, MD Joseph F. Murphy, MD (212) 635-1569 (212) 635-7740 Gregg A. Scheuing, VP (212) 635-1578 11
THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) June 30, March 31, June 30, 2005 2005 2004 ------------ ------------- ------------ Quarter ------- Revenue (tax equivalent basis) $ 2,077 $ 1,917 $ 1,775 Net Income 398 379 371 Basic EPS 0.52 0.49 0.48 Diluted EPS 0.52 0.49 0.48 Cash Dividends Per Share 0.20 0.20 0.20 Return on Average Common Shareholders' Equity 17.12% 16.52% 17.14% Return on Average Assets 1.59 1.55 1.49 Efficiency Ratio 65.7 66.2 63.9 Year-to-date ------------ Revenue (tax equivalent basis) $ 3,995 $ 1,917 $ 3,450 Net Income 777 379 735 Basic EPS 1.01 0.49 0.95 Diluted EPS 1.00 0.49 0.94 Cash Dividends Per Share 0.40 0.20 0.39 Return on Average Common Shareholders' Equity 16.82% 16.52% 17.15% Return on Average Assets 1.57 1.55 1.48 Efficiency Ratio 65.9 66.2 66.3 Assets $ 103,063 $ 96,537 $ 97,536 Loans 40,681 38,764 38,205 Securities 25,779 23,907 22,986 Deposits - Domestic 37,921 33,634 36,279 - Foreign 26,076 25,328 24,781 Long-Term Debt 7,586 7,389 6,025 Common Shareholders' Equity 9,471 9,335 8,785 Common Shareholders' Equity Per Share $ 12.29 $ 12.02 $ 11.29 Market Value Per Share of Common Stock 28.78 29.05 29.48 Allowance for Loan Losses as a Percent of Total Loans 1.38% 1.50% 1.57% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.62 1.78 1.86 Total Allowance for Credit Losses as a Percent of Total Loans 1.75 1.85 2.03 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 2.05 2.19 2.42 Tier 1 Capital Ratio 8.06 8.13 7.70 Total Capital Ratio 12.48 12.54 11.63 Leverage Ratio 6.55 6.56 6.00 Tangible Common Equity Ratio 5.26 5.48 4.95 Employees 22,993 23,160 23,001 Assets Under Custody (In trillions) Total Assets Under Custody $ 10.3 $ 9.9 $ 8.7 Equity Securities 35% 34% 34% Fixed Income Securities 65 66 66 Cross-Border Assets Under Custody $ 2.9 $ 2.8 $ 2.4 Assets Under Administration (In billions) $ 33 $ 33 $ 32 Assets Under Management (In billions) Total Assets Under Management 106 104 93 Equity Securities 34% 34% 36% Fixed Income Securities 21 21 22 Alternative Investments 15 15 14 Liquid Assets 30 30 28
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) For the three For the six months ended months ended June 30, June 30, 2005 2004 2005 2004 ------ ------- ------- ------- Interest Income - --------------- Loans $ 367 $ 272 $ 708 $ 389 Margin loans 62 35 117 69 Securities Taxable 233 180 440 360 Exempt from Federal Income Taxes 10 10 19 19 ------ ------- ------- ------- 243 190 459 379 Deposits in Banks 67 78 138 147 Federal Funds Sold and Securities Purchased Under Resale Agreements 36 17 64 33 Trading Assets 39 9 61 23 ------ ------- ------- ------- Total Interest Income 814 601 1,547 1,040 ------ ------- ------- ------- Interest Expense - ---------------- Deposits 220 126 404 244 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 7 3 14 5 Other Borrowed Funds 25 9 38 18 Customer Payables 28 12 53 24 Long-Term Debt 64 30 113 60 ------ ------- ------- ------- Total Interest Expense 344 180 622 351 ------ ------- ------- ------- Net Interest Income 470 421 925 689 - ------------------- Provision for Credit Losses 5 10 (5) 22 ------ ------- ------- ------- Net Interest Income After Provision for Credit Losses 465 411 930 667 ------ ------- ------- ------- Noninterest Income - ------------------ Servicing Fees Securities 776 716 1,527 1,432 Global Payment Services 76 83 151 162 ------ ------- ------- ------- 852 799 1,678 1,594 Private Client Services and Asset Management Fees 122 113 243 221 Service Charges and Fees 103 93 195 189 Foreign Exchange and Other Trading Activities 103 100 199 206 Securities Gains 23 12 35 45 Other 53 39 84 121 ------ ------- ------- ------- Total Noninterest Income 1,256 1,156 2,434 2,376 ------ ------- ------- ------- Noninterest Expense - ------------------- Salaries and Employee Benefits 640 570 1,258 1,144 Net Occupancy 82 72 160 153 Furniture and Equipment 51 51 103 102 Clearing 42 44 88 92 Sub-custodian Expenses 24 22 47 44 Software 55 50 108 99 Communications 22 23 45 47 Amortization of Intangibles 10 8 18 16 Other 197 172 373 328 ------ ------- ------- ------- Total Noninterest Expense 1,123 1,012 2,200 2,025 ------ ------- ------- ------- Income Before Income Taxes 598 555 1,164 1,018 Income Taxes 200 184 387 283 ------ ------- ------- ------- Net Income $ 398 $ 371 $ 777 $ 735 - ---------- ====== ====== ====== ====== Per Common Share Data: - ---------------------- Basic Earnings $ 0.52 $ 0.48 $ 1.01 $ 0.95 Diluted Earnings 0.52 0.48 1.00 0.94 Cash Dividends Paid 0.20 0.20 0.40 0.39 Diluted Shares Outstanding 772 779 775 778
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) June 30, 2005 December 31, 2004 ------------------ ----------------- Assets - ------ Cash and Due from Banks $ 2,957 $ 3,886 Interest-Bearing Deposits in Banks 7,061 8,192 Securities Held-to-Maturity 2,183 1,886 Available-for-Sale 23,596 21,916 ------------------ ----------------- Total Securities 25,779 23,802 Trading Assets at Fair Value 6,632 4,627 Federal Funds Sold and Securities Purchased Under Resale Agreements 7,194 5,708 Loans (less allowance for loan losses of $562 in 2005 and $591 in 2004) 40,119 35,190 Premises and Equipment 1,050 1,097 Due from Customers on Acceptances 120 137 Accrued Interest Receivable 331 285 Goodwill 3,492 3,477 Intangible Assets 785 793 Other Assets 7,543 7,335 ------------------ ----------------- Total Assets $ 103,063 $ 94,529 ================== ================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 18,485 $ 17,442 Interest-Bearing Domestic Offices 19,898 18,692 Foreign Offices 25,614 22,587 ------------------ ----------------- Total Deposits 63,997 58,721 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,415 1,205 Trading Liabilities 3,088 2,873 Payables to Customers and Broker-Dealers 8,647 8,664 Other Borrowed Funds 1,058 533 Acceptances Outstanding 121 139 Accrued Taxes and Other Expenses 4,442 4,452 Accrued Interest Payable 123 113 Other Liabilities (including allowance for lending-related commitments of $148 in 2005 and $145 in 2004) 3,115 2,418 Long-Term Debt 7,586 6,121 ------------------ ----------------- Total Liabilities 93,592 85,239 ------------------ ----------------- Shareholders' Equity Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,047,761,908 shares in 2005 and 1,044,841,603 shares in 2004 7,858 7,836 Additional Capital 1,820 1,790 Retained Earnings 6,618 6,162 Accumulated Other Comprehensive Income (24) (6) ------------------ ----------------- 16,272 15,782 Less: Treasury Stock (276,660,662 shares in 2005 and 266,720,629 shares in 2004), at cost 6,791 6,492 Loan to ESOP (305,261 shares in 2005), at cost 10 - ------------------ ----------------- Total Shareholders' Equity 9,471 9,290 ------------------ ----------------- Total Liabilities and Shareholders' Equity $ 103,063 $ 94,529 ================== ================= - ------------------------------------------------------------------------------------------------ Note: The balance sheet at December 31, 2004 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 June 30, 2005 ended June 30, 2004 ---------------------------- ---------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate --------- -------- ------- --------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 9,182 $ 67 2.91% $ 12,779 $ 78 2.47% Federal Funds Sold and Securities Purchased Under Resale Agreements 5,160 36 2.81 7,340 17 0.92 Margin Loans 6,341 62 3.93 6,495 35 2.18 Loans Domestic Offices 22,719 261 4.62 22,236 209 3.79 Foreign Offices 10,141 106 4.19 8,947 62 2.80 --------- -------- --------- -------- Non-Margin Loans 32,860 367 4.49 31,183 271 3.50 --------- -------- --------- -------- Securities U.S. Government Obligations 282 2 3.21 479 3 2.46 U.S. Government Agency Obligations 3,804 38 3.95 4,008 33 3.27 Obligations of States and Political Subdivisions 211 4 7.24 235 5 7.96 Other Securities 20,422 206 4.04 18,163 158 3.45 Trading Securities 3,416 39 4.62 2,082 9 1.69 --------- -------- --------- -------- Total Securities 28,135 289 4.12 24,967 208 3.30 --------- -------- --------- -------- Total Interest-Earning Assets 81,678 821 4.04% 82,764 609 2.95% -------- -------- Allowance for Credit Losses (584) (629) Cash and Due from Banks 2,898 2,842 Other Assets 16,469 15,396 --------- --------- TOTAL ASSETS $ 100,461 $ 100,373 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,075 $ 26 1.48% $ 6,864 $ 12 0.68% Savings 8,939 24 1.10 9,357 15 0.66 Certificates of Deposit $100,000 & Over 3,065 24 3.10 3,917 12 1.21 Other Time Deposits 868 5 2.18 953 4 1.60 Foreign Offices 26,332 141 2.14 26,568 83 1.26 --------- -------- --------- -------- Total Interest-Bearing Deposits 46,279 220 1.91 47,659 126 1.06 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,152 7 2.58 1,612 3 0.68 Payables to Customers and Broker-Dealers 5,984 28 1.90 6,813 12 0.69 Other Borrowed Funds 1,954 25 5.11 2,387 9 1.51 Long-Term Debt 7,485 64 3.41 6,139 30 1.92 --------- -------- --------- -------- Total Interest-Bearing Liabilities 62,854 344 2.20% 64,610 180 1.11% -------- -------- Noninterest-Bearing Deposits 15,260 14,803 Other Liabilities 13,022 12,256 Common Shareholders' Equity 9,325 8,704 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 100,461 $ 100,373 ========= ========= Net Interest Earnings and Interest Rate Spread $ 477 1.84% $ 429 1.84% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 2.34% 2.09% ======= =======
15 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions)
For the six months For the six months ended June 30, 2005 ended June 30, 2004 -------------------------- ---------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate -------- --------- ------- -------- --------- --------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 9,502 $ 138 2.93% $12,235 $ 147 2.41% Federal Funds Sold and Securities Purchased Under Resale Agreements 4,989 64 2.57 7,228 33 0.93 Margin Loans 6,374 117 3.70 6,337 69 2.18 Loans Domestic Offices 22,429 507 4.56 21,655 264 2.46 Foreign Offices 10,221 201 3.97 9,074 125 2.77 -------- -------- ------- -------- Non-Margin Loans 32,650 708 4.37 30,729 389 2.55 -------- -------- ------- -------- Securities U.S. Government Obligations 320 5 3.12 459 5 2.39 U.S. Government Agency Obligations 3,554 69 3.85 4,154 68 3.25 Obligations of States and Political Subdivisions 205 7 7.29 241 8 6.73 Other Securities 20,054 392 3.91 18,039 311 3.46 Trading Securities 2,943 61 4.20 2,417 24 1.95 -------- -------- ------- -------- Total Securities 27,076 534 3.95 25,310 416 3.29 -------- -------- ------- -------- Total Interest-Earning Assets 80,591 1,561 3.91% 81,839 1,054 2.59% -------- -------- Allowance for Credit Losses (586) (654) Cash and Due from Banks 3,528 2,907 Other Assets 16,322 15,934 -------- ------- TOTAL ASSETS $ 99,855 $100,026 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,996 $ 47 1.37% $ 6,736 $ 23 0.68% Savings 8,920 45 1.02 9,253 31 0.66 Certificates of Deposit $100,000 & Over 2,973 42 2.85 3,952 24 1.23 Other Time Deposits 883 9 1.97 984 7 1.53 Foreign Offices 25,900 261 2.03 26,201 159 1.22 -------- -------- ------- -------- Total Interest-Bearing Deposits 45,672 404 1.78 47,126 244 1.04 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,270 14 2.18 1,612 5 0.67 Other Borrowed Funds 1,890 38 4.03 2,393 18 1.50 Payables to Customers and Broker-Dealers 6,184 53 1.73 6,893 24 0.71 Long-Term Debt 7,047 113 3.21 6,174 60 1.94 -------- -------- ------- -------- Total Interest-Bearing Liabilities 62,063 622 2.02% 64,198 351 1.10% Noninterest-Bearing Deposits 15,389 14,410 Other Liabilities 13,090 12,805 Common Shareholders' Equity 9,313 8,613 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 99,855 $100,026 ======== ======== Net Interest Earnings and Interest Rate Spread $ 939 1.89% $ 703 1.49% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 2.35% 1.73% ======= =======
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