-----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, ISGN7M5/GHtqO2BQvDYP6VTNtjugR00Y40V1Zx+UigwsG09BH4uCceicrBlbkY9Z 0eTNmPqAqY8+VogbQ6uyZw== 0000009626-06-000006.txt : 20060118 0000009626-06-000006.hdr.sgml : 20060118 20060118093725 ACCESSION NUMBER: 0000009626-06-000006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051231 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060118 DATE AS OF CHANGE: 20060118 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: 06534488 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 r4q058k.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): January 18, 2006 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 January 18, 2006, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the fourth 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 fourth quarter of 2005 contained in the press release dated January 18, 2006, 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: January 18, 2006 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 fourth quarter of 2005 contained in the press release dated January 18, 2006, of The Bank of New York Company, Inc. EX-99 2 r8k4q05exhibit99.txt EXHIBIT 99 Exhibit 99 1 News Release For Immediate Release THE BANK OF NEW YORK COMPANY, INC. REPORTS 18% INCREASE IN FOURTH QUARTER EARNINGS PER SHARE; POSITIVE CORE OPERATING LEVERAGE AND STRONG GROWTH IN SECURITIES SERVICING REVENUE AND NET INTEREST INCOME NEW YORK, N.Y., January, 18, 2006 -- The Bank of New York Company, Inc. (NYSE: BK) reported today fourth quarter net income of $405 million compared with $351 million in the year-ago quarter and diluted earnings per share of 53 cents, up 18% over the 45 cents earned in the fourth quarter of 2004. Third quarter 2005 earnings were $389 million and 51 cents. Full-year 2005 net income was $1,571 million compared to $1,440 million in 2004 while diluted earnings per share was up 10% to $2.03 from $1.85 in 2004. Reported EPS reflects a reduction of 3 cents for the fourth quarter 2004 and full-year 2004 due to items detailed in Note 1. Performance Highlights *Positive core operating leverage over year-ago and sequential quarters. See Note 4. *Securities servicing fees up 10% versus the year-ago quarter and on a full-year basis. The growth was led by strong performance in investor, issuer and broker-dealer services. *Strong net interest income, driven by the Company's sound interest rate positioning and strong liquidity generated by its core servicing businesses. *Foreign exchange and other trading revenues up 10% from the year-ago quarter. *Private client services and asset management revenues were up 10% from the year-ago quarter. Chairman and Chief Executive Officer Thomas A. Renyi stated, "Our fourth quarter and full-year results reflect the accelerating earnings power of our franchise. We are achieving double-digit revenue growth in many of our key business lines and are positioned to generate positive operating leverage on a consistent basis - a primary goal for us. We have good momentum entering 2006 and continue to position our Company for long-term growth and success. During 2005 we formed strategic alliances to penetrate faster-growing markets in France, Germany, the Nordic and Baltic region, Japan, Australia, and India. We also continued to expand our market presence in high-growth areas such as hedge fund servicing and collateral management, while extending our capabilities in the rapidly growing area of alternative investments. Through these initiatives, our strengthened marketing programs, and the gains we are making in service quality and client-focused technology, we will create new growth opportunities in the year ahead." 2 SECURITIES SERVICING FEES
Percent Inc/(Dec) ----------------- Year-to-date Percent 4Q05 vs. 4Q05 vs. -------------- Inc/ (In millions) 4Q05 3Q05 4Q04 3Q05 4Q04 2005 2004 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Execution and Clearing Services $ 321 $ 314 $ 301 2% 7% $ 1,222 $ 1,145 7% Investor Services 265 265 240 - 10 1,060 924 15 Issuer Services 171 170 150 1 14 639 583 10 Broker-Dealer Services 58 57 50 2 16 227 205 11 ------ ------ ------ ------ ------- Securities Servicing Fees $ 815 $ 806 $ 741 1 10 $ 3,148 $ 2,857 10 ====== ====== ====== ======= =======
Double-digit securities servicing fee growth over the fourth quarter and full-year 2004 periods reflects solid growth across all businesses. On a sequential-quarter basis, fees were marginally higher, reflecting modest growth in execution & clearing, issuer services, and broker-dealer services. Execution and clearing fees increased from both the fourth quarter and full-year 2004, reflecting organic growth at Pershing and in the execution businesses as well as the additional revenues from the LJR acquisition. Pershing's revenues were up on a sequential basis, while the execution business also improved reflecting higher activity levels and continued strength in transition management. The execution and clearing businesses include 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. Investor services fees rose significantly from the year-ago quarter due to strong performance in key business lines. Global and domestic fund services and custody were favorably impacted by new customer wins and strong organic growth, while securities lending improved year-over-year due to higher loan volumes driven by new business wins as well as a favorable spread environment. Sequential performance reflects solid results across most businesses offset by the impact of business lost through client consolidation. Investor services includes global fund services, global custody, securities lending, global liquidity services and outsourcing. Issuer services fees increased versus the year-ago periods due to higher levels of trading activity and greater corporate actions in depositary receipts, as well as continued strength in international issuance and structured products in corporate trust. The sequential quarter increase from the strong third quarter reflects higher depositary receipt revenue resulting from a greater number of corporate actions and strong investment flows into the international markets, which drove increased depositary receipt issuance. In corporate trust, growth was led by fees from international issuance. Broker-dealer services fees improved versus the year-ago periods as a result of increased collateral management activity and greater volumes in government securities clearance. Sequential performance improved due to higher fees in collateral management. 3 NONINTEREST INCOME
Percent Inc/(Dec) ----------------- Year-to-date Percent 4Q05 vs. 4Q05 vs. -------------- Inc/ (In millions) 4Q05 3Q05 4Q04 3Q05 4Q04 2005 2004 (Dec) ------ ------ ------ -------- ------- ------ ------ ------- Servicing Fees Securities $ 815 $ 806 $ 741 1% 10% $3,148 $2,857 10% Global Payment Services 68 75 72 (9) (6) 294 319 (8) ------ ------ ------ ------- ------ 883 881 813 - 9 3,442 3,176 8 Private Client Services and Asset Management Fees 127 120 115 6 10 490 448 9 Service Charges and Fees 94 93 98 1 (4) 382 384 (1) Foreign Exchange and Other Trading Activities 99 93 90 6 10 391 364 7 Securities Gains 18 15 18 20 - 68 78 (13) Other* 53 46 42 15 26 183 200 (9) ------ ------ ------ ------ ------ Total Noninterest Income $1,274 $1,248 $1,176 2 8 $4,956 $4,650 7 ====== ====== ====== ====== ====== *See Note (3).
The increase in noninterest income versus the fourth quarter and year-to-date periods of 2004 reflects broadly stronger performance in securities servicing, foreign exchange and other trading, and private client services and asset management. The sequential increase in noninterest income primarily reflects increases in foreign exchange and other trading, private client services and asset management, and other income. Global payment services fees decreased from the fourth quarter and full-year of 2004 and on a sequential-quarter basis. The declines reflect customers choosing to pay with higher compensating balances, which benefits net interest income. On an invoiced services basis, total revenue was up 3% over the fourth quarter of 2004 and 5% for the full year. Private client services and asset management fees for the fourth quarter were up from the fourth quarter of 2004 reflecting higher fees at the Company's asset management subsidiaries including Gannett, Welsh and Kotler, Estabrook, and Ivy Asset Management. The sequential quarter increase reflects growth in private banking fees and in revenue at Ivy Asset Management. Total assets under management were $105 billion, up from $102 billion a year ago and marginally lower from $106 billion at September 30, 2005. Service charges and fees were down from the fourth quarter of 2004 and were up slightly from the third quarter of 2005. Full year service charges and fees decreased slightly from 2004 due to lower retail transaction fees. The sequential quarter increase reflects higher loan syndication fees. Foreign exchange and other trading revenues were up significantly from the fourth quarter of 2004 and on a sequential-quarter basis. The positive variances result from higher client activity in foreign exchange as well as improved results in interest rate derivatives. The increase in the year 2005 compared with 2004 was due to higher customer-driven foreign exchange and increased interest rate derivative trading, partially offset by weaker trading results at Pershing. Securities gains in the fourth quarter were flat from the fourth quarter of 2004 and were up compared with the third quarter of 2005. The sequential quarter increase reflects higher gains in the Company's sponsor fund portfolio. For the year ended December 31, 2005, securities gains declined versus a year ago, reflecting $19 million of realized gains on four sponsor fund investments recorded in the first quarter of 2004. See Note 1. 4 Other noninterest income increased versus the fourth quarter of 2004 and the third quarter of 2005. The fourth quarter of 2005 included the sale of a building for a $10 million pre-tax gain and four New York Stock Exchange seats for a $6 million pre-tax gain. On a year-to-date basis, other noninterest income included a $17 million gain on the second quarter 2005 sale of the Company's interest in Financial Models Company, Inc., a $12 million gain on the sale of certain Community Reinvestment Act investments in the third quarter, a $12 million gain on the sale of eight New York Stock Exchange seats in the third and fourth quarters and the above gain on the sale of a building. For the year ended December 31, 2005, other noninterest income was down from the year ended December 31, 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) ------------------ -------------------- ----------------- 4Q05 4Q05 4Q05 vs vs vs 4Q05 3Q05 4Q04 4Q04 3Q05 4Q04 4Q04 2004 2004 Reported Core** Reported Core** 2005 Reported Core** Reported Core** ---- ---- ------- ---- ---- -------- ---- ---- -------- ----- -------- ------ Net Interest Income $492 $492 $527 $448 -% (7)% 10% $1,909 $1,645 $1,711 16% 12% Tax Equivalent Adjustment* 7 8 9 9 29 30 30 ---- ---- ---- ---- ------ ------ ------ Net Interest Income on a Tax Equivalent Basis $499 $500 $536 $457 - (7) 9 $1,938 $1,675 $1,741 16 11 ==== ==== ==== ==== ====== ====== ====== Net Interest Rate Spread 1.71% 1.84% 2.26% 1.87% 1.83% 1.78% 1.86% Net Yield on Interest Earning Assets 2.35 2.42 2.64 2.25 2.36 2.07 2.15 * See Note (2) ** Excludes SFAS 13 adjustment. See Note (1).
Net interest income on a reported basis decreased on a year-over-year quarterly basis reflecting the leasing adjustment recorded in the fourth quarter of 2004. See Note 1. On a core basis, net interest income increased over the fourth quarter and year 2004 reflecting strong liquidity generated by the Company's securities servicing businesses and sound interest rate positioning. Net interest income was flat on a sequential quarter basis, reflecting higher earning assets offset by the aggregate $14 million impact of a cumulative adjustment in the Company's reserve position with the Federal Reserve and the interest impact of depositing funds with the IRS related to the anticipated LILO settlement. The fourth quarter 2005 compared to the third quarter had lower interest income related to nonperforming assets. 5 NONINTEREST EXPENSE AND INCOME TAXES
Percent Inc/(Dec) ----------------- Year-to-date Percent 4Q05 vs. 4Q05 vs. -------------- Inc/ (In millions) 4Q05 3Q05 4Q04 3Q05 4Q04 2005 2004 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Salaries and Employee Benefits $ 647 $ 644 $ 617 -% 5% $2,549 $2,324 10% Net Occupancy 84 79 75 6 12 323 305 6 Furniture and Equipment 53 52 51 2 4 208 204 2 Clearing 50 49 45 2 11 187 176 6 Sub-custodian Expenses 24 25 22 (4) 9 96 87 10 Software 53 54 43 (2) 23 215 193 11 Communications 26 24 23 8 13 95 93 2 Amortization of Intangibles 12 10 9 20 33 40 34 18 Other 199 198 212 1 (6) 770 706 9 ------ ------ ------ ----- ------ Total Noninterest Expense $1,148 $1,135 $1,097 1 5 $4,483 $4,122 9 ====== ====== ====== ====== ======
Noninterest expense was up compared with the fourth quarter of 2004 and the third quarter of 2005. The increase versus the year-ago quarter reflects increased staffing and clearing costs associated with new business and acquisitions, as well as higher pension and option expenses, expanded occupancy costs associated with business continuity, and higher legal costs. Other expenses in the 2004 fourth quarter included the $30 million reserve associated with the RW Leasing matter. Relative to the year-ago quarter, salaries rose 2% as tight headcount control and reengineering and relocation projects offset the impact of business wins, acquisitions and additional legal and compliance personnel. Benefit expense increased due to higher stock options, pension, medical, and incentive payments. Salaries and employee benefits expense for the fourth quarter increased slightly on a sequential quarter basis, reflecting higher incentive compensation as well as increased medical costs. For the full-year 2005, salaries and employee benefit expense also was higher compared to the full-year 2004, reflecting many of these same factors affecting the year-over-year quarterly comparison. Occupancy expenses were up sequentially reflecting the costs associated with the Company's new out-of-region data center in the mid-south region of the U.S. and the growth center in Manchester, England. On an annual basis, occupancy expenses were up from 2004, primarily reflecting the same factors affecting the sequential quarter comparison as well as higher energy costs. Occupancy expense in 2004 included lease termination expenses of $8 million recorded in the first quarter of 2004. The increase in clearing expenses in the year-over-year periods reflects higher expenses associated with acquisitions within the execution business. On a sequential-quarter basis, other expenses in the fourth quarter of 2005 increased due to higher costs for legal, seasonal travel, and employment agencies tied to hiring. On a year-to-date basis, other expenses included $14 million (both pre- and after-tax) of expenses set aside for the 6 settlement of the previously disclosed Russian funds transfer matter in the third quarter of 2005, while the second quarter included $10 million ($7 million after-tax) for the potential settlement of certain regulatory matters. In the fourth quarter of 2004, other expenses included $30 million ($22 million after-tax) of expenses accrued for the settlement of the RW Leasing matter. The effective tax rate for the fourth quarter of 2005 was 33.3%, compared to 42.8% in the fourth quarter of 2004 and 34.7% in the third quarter of 2005. The effective tax rate for the year ended December 31, 2005, was 33.6%, compared with 33.3% for the year ended December 31, 2004. The decrease from the fourth quarter of 2004 primarily reflects the expensing in 2004 of the potential LILO settlement. The sequential quarter decrease principally reflects the impact on the third quarter of 2005 of the non-deductibility of the amount associated with the settlement referenced above and the tax impact on the sale of the CRA investments. The increase in the year 2005 compared with 2004 is due to higher state and local income taxes. 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
4th 3rd 4th Quarter Quarter Quarter Year-to-date (In millions) 2005 2005 2004 2005 2004 ------- ------- ------- -------------- Provision $ 10 $ 10 $ (7) $ 15 $ 15 ======= ======= ======= ======= ======= Net Charge-offs: Commercial $ (139) $ (2) $ (1) $ (143) $ (22) Foreign (1) (2) 2 (7) (24) Regional Commercial (3) (3) (8) (9) (9) Consumer (8) (6) (5) (27) (28) -------- -------- -------- -------- -------- Total $ (151) $ (13) $ (12) $ (186) $ (83) ======= ======= ======= ======= =======
During the fourth quarter of 2005 the Company charged-off $139 million of leases with two bankrupt airline customers. 7 LOANS
December 31, September 30, December 31, (Dollars in millions) 2005 2005 2004 ------------ ------------ ------------ Margin Loans $ 6,089 $ 6,320 $ 6,059 Non-Margin Loans 34,637 35,823 29,722 ------------ ------------ ------------ Total Loans $ 40,726 $ 42,143 $ 35,781 ============ ============ ============ Allowance for Loan Losses $ 411 $ 561 $ 591 Allowance for Lending-Related Commitments 154 146 145 ------------ ------------ ------------ Total Allowance for Credit Losses $ 565 $ 707 $ 736 ============ ============ ============ Allowance for Loan Losses As a Percent of Total Loans 1.01% 1.33% 1.65% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.19 1.57 1.99 Total Allowance for Credit Losses As a Percent of Total Loans 1.39 1.68 2.06 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 1.63 1.97 2.48
NONPERFORMING ASSETS
Change 12/31/2005 Percent vs. Inc/ (Dollars in millions) 12/31/2005 9/30/2005 9/30/2005 (Dec) --------- --------- ----------- ------ Loans: Commercial $ 17 $ 35 $ (18) (51)% Foreign 14 15 (1) (7) Other 35 57 (22) (39) --------- --------- ----------- Total Nonperforming Loans 66 107 (41) (38) Other Assets Owned 13 - 13 - --------- --------- ----------- Total Nonperforming Assets $ 79 $ 107 $ (28) (26) ========= ========= =========== Nonperforming Assets Ratio 0.2% 0.3% Allowance for Loan Losses/Nonperforming Loans 629.7% 524.9% Allowance for Loan Losses/Nonperforming Assets 524.0 524.9 Total Allowance for Credit Losses/Nonperforming Loans 865.4 661.2 Total Allowance for Credit Losses/Nonperforming Assets 720.2 661.2
The sequential quarter decrease in nonperforming loans primarily reflects completion of the sale of the Company's exposure to a cable operator that was categorized as nonperforming. 8 OTHER DEVELOPMENTS On January 3, 2006, the Company acquired Alcentra Group Limited, an international asset management group focused on funds that invest in non-investment grade debt. Alcentra's management team will retain a 20 percent interest. Alcentra has operations in London and Los Angeles and currently manages 15 different investment funds with over $6.2 billion of assets. On January 17, 2006, the Company announced a definitive agreement to acquire Urdang Capital Management, Inc., a real estate investment management firm that manages more than $2.7 billion in direct investments and portfolios of REIT securities. The transaction is expected to close by the end of the first quarter, pending regulatory approval and other customary conditions of closing. If these acquisitions had closed prior to December 31, 2005, the tangible common equity ratio would have been reduced by approximately 33 basis points from 5.57% to 5.24%. In the fourth quarter of 2005, the Company's new data center in the mid-south region of the U.S. became operational. The new data center will improve the geographic diversification and resilience of the Company's operations and will support the processing needs of the Company's institutional and retail customers. 9 CONFERENCE CALL INFORMATION Thomas A. Renyi, chairman and chief executive officer, and Bruce W. Van Saun, vice chairman and chief financial officer, will review the quarterly results in a live conference call and audio webcast today at 10:30 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)515-1614 within the United States or (203)369-2024 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. *************************** 10 THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited)
December 31, September 30, December 31, 2005 2005 2004 ------------- ------------- ------------ Quarter ------- Revenue (tax equivalent basis) $ 2,237 $ 2,126 $ 1,967 Net Income 405 389 351 Basic EPS 0.53 0.51 0.45 Diluted EPS 0.53 0.51 0.45 Cash Dividends Per Share 0.21 0.21 0.20 Return on Average Common Shareholders' Equity 16.57% 16.15% 15.34% Return on Average Assets 1.53 1.53 1.40 Efficiency Ratio 65.4 65.5 64.8 Year-to-date ------------ Revenue (tax equivalent basis) $ 8,341 $ 6,103 $ 7,133 Net Income 1,571 1,166 1,440 Basic EPS 2.05 1.52 1.87 Diluted EPS 2.03 1.51 1.85 Cash Dividends Per Share 0.82 0.61 0.79 Return on Average Common Shareholders' Equity 16.59% 16.59% 16.37% Return on Average Assets 1.55 1.56 1.45 Efficiency Ratio 65.7 65.8 66.0 Assets $ 102,074 $ 101,766 $ 94,529 Loans 40,726 42,143 35,781 Securities 27,326 26,230 23,802 Deposits - Domestic 37,374 34,807 35,558 - Foreign 27,050 26,270 23,163 Long-Term Debt 7,819 7,529 6,121 Common Shareholders' Equity 9,864 9,608 9,290 Common Shareholders' Equity Per Share $ 12.79 $ 12.48 $ 11.94 Market Value Per Share of Common Stock 31.85 29.41 33.42 Allowance for Loan Losses as a Percent of Total Loans 1.01% 1.33% 1.65% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.19 1.57 1.99 Total Allowance for Credit Losses as a Percent of Total Loans 1.39 1.68 2.06 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 1.63 1.97 2.48 Tier 1 Capital Ratio 8.35 7.93 8.31 Total Capital Ratio 12.44 12.20 12.21 Leverage Ratio 6.59 6.59 6.41 Tangible Common Equity Ratio 5.57 5.32 5.56 Employees 23,451 23,081 23,363
11 THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Estimated)
December 31, September 30, December 31, 2005 2005 2004 ------------ ------------- ------------ Assets Under Custody (In trillions) ----------------------------------- Assets Under Custody $ 10.9 $ 10.3 $ 9.7 Equity Securities 32% 31% 35% Fixed Income Securities 68 69 65 Cross-Border Assets Under Custody $ 3.4 $ 3.1 $ 2.7 Assets Under Management (In billions) ------------------------------------- Total Assets Under Management 105 106 102 Equity Securities 35% 34% 36% Fixed Income Securities 20 21 21 Alternative Investments 14 14 15 Liquid Assets 31 31 28
12 Notes: (1) In 2004, the Company recorded several gains and charges that in the aggregate reduced reported earnings by 3 cents per share. These items were recorded in the first and fourth quarters of 2004 and are summarized in the table below. (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) 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 (66) 80 14 Aircraft leases/other Fourth Provision for Credit Losses 7 (3) 4 Subtotal-Net Interest Income After Provision ------- ----- -------- for Credit Losses (59) 77 18 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 Aircraft leases Fourth Other Income 3 (1) 2 Subtotal-Noninterest ------- ----- -------- Income 70 (29) 41 Noninterest Expense (c) - ----------------------- Severance tied to First Salaries and relocations Employee Benefits (10) 4 (6) Lease terminations First Net Occupancy (8) 3 (5) Charge for the RW Matter Fourth Other Expense (30) 8 (22) Subtotal-Noninterest ------- ----- -------- Expense (48) 15 (33) Federal tax reserve adjustment related to LILO exposure Fourth Income Tax - (50) (50) ------- ----- -------- Total $ (37) $ 13 $ (24) ======= ===== ======== (a) An after-tax charge of $32 million resulting from a cumulative adjustment to the leasing portfolio 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. 13 An after-tax benefit of $52 million resulted 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 early buy-out 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 early buy-out option. The Company offered financial incentives to these lessees to accelerate the exercise of their early buy-out 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 early buy-out date. 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. (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, was recorded in other income, and $19 million ($12 million after-tax) of higher than anticipated securities gains in the first quarter resulted from realized gains on sponsor fund investments in Kinkos, Inc., Bristol West Holdings, Inc., Willis Group Holdings, Ltd., and True Temper Sports, Inc. The Company also had an after-tax gain of $2 million on the sale of a leased aircraft. (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. The Company recorded an after-tax expense of $22 million in connection with the settlement of the RW Professional Leasing Services Corp. matter ("RW Matter"). This expense is only partially tax deductible. The Company had several appellate conferences with the IRS related to the Company's cross-border leveraged lease transactions in December of 2004 and January 2005. 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 "tax 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 43 to 45 of the Company's September 30, 2005 Form 10-Q. 14 (4) Operating leverage is measured by comparing the rate of increase in revenue to the rate of increase in expenses. The chart below shows the computation of operating leverage. The core numbers reflect adjustment for the items detailed in Note 1. Operating Leverage (Dollars in million)
4Q 2005 4Q 2004 --------------------- --------------------- % Change % Change Reported Adj Core Reported Adj Core Reported Core -------- --- ---- -------- --- ---- --------- -------- Noninterest Income $1,274 $ - $1,274 $1,176 $ (3) $1,173 8.3% 8.6% Net Interest Income 492 - 492 527 (79) 448 (6.6) 9.8 Total Revenue 1,766 - 1,766 1,703 (82) 1,621 3.7 8.9 Total Expense 1,148 - 1,148 1,097 (30) 1,067 4.6 7.6 Operating Leverage (0.9)% 1.3% ===== ====
4Q 2005 3Q 2005 --------------------- --------------------- % Change % Change Reported Adj Core Reported Adj Core Reported Core -------- --- ---- -------- --- ---- --------- -------- Noninterest Income $1,274 $ - $1,274 $1,248 $ - $1,248 2.1% 2.1% Net Interest Income 492 - 492 492 - 492 - - Total Revenue 1,766 - 1,766 1,740 - 1,740 1.5 1.5 Total Expense 1,148 - 1,148 1,135 - 1,135 1.1 1.1 Operating Leverage 0.4% 0.4% ===== =====
2005 2004 --------------------- --------------------- % Change % Change Reported Adj Core Reported Adj Core Reported Core -------- --- ---- -------- --- ---- --------- -------- Noninterest Income $4,956 $ - $4,956 $4,650 $(70) $4,580 6.6% 8.2% Net Interest Income 1,909 - 1,909 1,645 66 1,711 16.0 11.6 Total Revenue 6,865 - 6,865 6,295 (4) 6,291 9.1 9.1 Total Expense 4,483 - 4,483 4,122 (48) 4,074 8.8 10.0 Operating Leverage 0.3% (0.9)% ===== =====
15 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 Third 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 16
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) For the three For the year months ended Percent ended Percent December 31, Inc/ December 31, Inc/ 2005 2004 (Dec) 2005 2004 (Dec) ---- ---- ------- ---- ---- ------- Interest Income - --------------- Loans $ 423 $ 401 5% $1,505 $1,080 39% Margin loans 79 48 65 267 156 71 Securities Taxable 282 197 43 976 741 32 Exempt from Federal Income Taxes 10 11 (9) 40 40 - ------ ------ ------ ------ 292 208 40 1,016 781 30 Deposits in Banks 68 81 (16) 274 305 (10) Federal Funds Sold and Securities Purchased Under Resale Agreements 40 27 48 142 80 78 Trading Assets 54 17 218 152 51 198 ------ ------ ------ ------ Total Interest Income 956 782 22 3,356 2,453 37 ------ ------ ------ ------ Interest Expense - ---------------- Deposits 303 164 85 955 548 74 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 12 6 100 35 15 133 Other Borrowed Funds 25 25 - 58 52 12 Customer Payables 40 19 111 128 57 125 Long-Term Debt 84 41 105 271 136 99 ------ ------ ------ ------ Total Interest Expense 464 255 82 1,447 808 79 ------ ------ ------ ------ Net Interest Income 492 527 (7) 1,909 1,645 16 Provision for Credit Losses 10 (7) (243) 15 15 - ------ ------ ------ ------ Net Interest Income After Provision for Credit Losses 482 534 (10) 1,894 1,630 16 ------ ------ ------ ------ Noninterest Income - ------------------ Servicing Fees Securities 815 741 10 3,148 2,857 10 Global Payment Services 68 72 (6) 294 319 (8) ------ ------ ------ ------ 883 813 9 3,442 3,176 8 Private Client Services and Asset Management Fees 127 115 10 490 448 9 Service Charges and Fees 94 98 (4) 382 384 (1) Foreign Exchange and Other Trading Activities 99 90 10 391 364 7 Securities Gains 18 18 - 68 78 (13) Other 53 42 26 183 200 (9) ------ ------ ------ ------ Total Noninterest Income 1,274 1,176 8 4,956 4,650 7 ------ ------ ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 647 617 5 2,549 2,324 10 Net Occupancy 84 75 12 323 305 6 Furniture and Equipment 53 51 4 208 204 2 Clearing 50 45 11 187 176 6 Sub-custodian Expenses 24 22 9 96 87 10 Software 53 43 23 215 193 11 Communications 26 23 13 95 93 2 Amortization of Intangibles 12 9 33 40 34 18 Other 199 212 (6) 770 706 9 ------ ------ ------ ------ Total Noninterest Expense 1,148 1,097 5 4,483 4,122 9 ------ ------ ------ ------ Income Before Income Taxes 608 613 (1) 2,367 2,158 10 Income Taxes 203 262 (23) 796 718 11 ------ ------ ------ ------ Net Income $ 405 $ 351 15 $1,571 $1,440 9 ====== ====== ====== ====== Per Common Share Data: - --------------------- Basic Earnings $ 0.53 $ 0.45 18 $ 2.05 $ 1.87 10 Diluted Earnings 0.53 0.45 18 2.03 1.85 10 Cash Dividends Paid 0.21 0.20 5 0.82 0.79 4 Diluted Shares Outstanding 771 780 (1) 773 778 (1)
17
THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) December 31, 2005 December 31, 2004 ------------------ ----------------- Assets - ------ Cash and Due from Banks $ 3,515 $ 3,886 Interest-Bearing Deposits in Banks 8,644 8,192 Securities Held-to-Maturity 1,977 1,886 Available-for-Sale 25,349 21,916 ------------------ ----------------- Total Securities 27,326 23,802 Trading Assets at Fair Value 5,930 4,627 Federal Funds Sold and Securities Purchased Under Resale Agreements 2,425 5,708 Loans (less allowance for loan losses of $411 in 2005 and $591 in 2004) 40,315 35,190 Premises and Equipment 1,060 1,097 Due from Customers on Acceptances 233 137 Accrued Interest Receivable 391 285 Goodwill 3,619 3,477 Intangible Assets 811 793 Other Assets 7,805 7,335 ------------------ ----------------- Total Assets $ 102,074 $ 94,529 ================== ================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 18,236 $ 17,442 Interest-Bearing Domestic Offices 19,522 18,692 Foreign Offices 26,666 22,587 ------------------ ----------------- Total Deposits 64,424 58,721 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 834 1,205 Trading Liabilities 2,401 2,873 Payables to Customers and Broker-Dealers 8,623 8,664 Other Borrowed Funds 860 533 Acceptances Outstanding 235 139 Accrued Taxes and Other Expenses 4,135 4,452 Accrued Interest Payable 170 113 Other Liabilities (including allowance for lending-related commitments of $154 in 2005 and $145 in 2004) 2,709 2,418 Long-Term Debt 7,819 6,121 ------------------ ----------------- Total Liabilities 92,210 85,239 ------------------ ----------------- Shareholders' Equity Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,049,865,076 shares in 2005 and 1,044,841,603 shares in 2004 7,874 7,836 Additional Capital 1,909 1,790 Retained Earnings 7,089 6,162 Accumulated Other Comprehensive Income (146) (6) ------------------ ----------------- 16,726 15,782 Less: Treasury Stock (278,532,777 shares in 2005 and 266,720,629 shares in 2004), at cost 6,855 6,492 Loan to ESOP (203,507 shares in 2005), at cost 7 - ------------------ ----------------- Total Shareholders' Equity 9,864 9,290 ------------------ ----------------- Total Liabilities and Shareholders' Equity $ 102,074 $ 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 For the three months ended December 31, 2005 ended December 31, 2004 ----------------------------- --------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate -------- -------- -------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 8,369 $ 68 3.20% $ 10,825 $ 81 2.99% Federal Funds Sold and Securities Purchased Under Resale Agreements 4,305 40 3.72 5,364 27 2.03 Margin Loans 6,470 79 4.87 6,378 48 2.98 Loans Domestic Offices 23,396 291 4.94 22,766 316 5.52 Foreign Offices 10,885 132 4.81 10,234 86 3.33 --------- -------- --------- -------- Non-Margin Loans 34,281 423 4.90 33,000 402 4.84 --------- -------- --------- -------- Securities U.S. Government Obligations 226 2 4.17 291 2 3.08 U.S. Government Agency Obligations 3,992 43 4.27 3,550 31 3.47 Obligations of States and Political Subdivisions 219 4 6.71 209 4 8.01 Other Securities 22,428 249 4.46 19,308 178 3.69 Trading Securities 4,929 55 4.40 1,962 18 3.56 --------- -------- --------- -------- Total Securities 31,794 353 4.44 25,320 233 3.68 --------- -------- --------- -------- Total Interest-Earning Assets 85,219 963 4.50% 80,887 791 3.89% -------- --------- -------- Allowance for Credit Losses (562) (595) Cash and Due from Banks 3,401 3,759 Other Assets 17,009 15,916 --------- --------- TOTAL ASSETS $ 105,067 $ 99,967 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,260 $ 32 2.03% $ 6,648 $ 17 1.04% Savings 8,310 29 1.39 9,095 18 0.80 Certificates of Deposit $100,000 & Over 3,579 38 4.16 3,285 17 2.02 Other Time Deposits 2,199 16 2.86 919 4 1.62 Foreign Offices 28,536 188 2.62 25,410 108 1.70 --------- -------- --------- -------- Total Interest-Bearing Deposits 48,884 303 2.46 45,357 164 1.44 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,348 12 3.55 1,407 6 1.58 Other Borrowed Funds 1,966 25 4.95 3,494 25 2.81 Payables to Customers and Broker-Dealers 5,979 40 2.65 5,886 19 1.26 Long-Term Debt 7,577 84 4.36 6,176 41 2.64 --------- -------- --------- -------- Total Interest-Bearing Liabilities 65,754 464 2.79% 62,320 255 1.63% -------- --------- -------- Noninterest-Bearing Deposits 15,986 15,659 Other Liabilities 13,628 12,892 Common Shareholders' Equity 9,699 9,096 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 105,067 $ 99,967 ========= ========= Net Interest Earnings and Interest Rate Spread $ 499 1.71% $ 536 2.26% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 2.35% 2.64% ======= =======
19 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions)
For the year ended For the year ended December 31, 2005 December 31, 2004 -------------------------- -------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 8,996 $ 274 3.04% $11,675 $ 305 2.62% Federal Funds Sold and Securities Purchased Under Resale Agreements 4,685 142 3.03 6,562 80 1.22 Margin Loans 6,403 267 4.17 6,342 156 2.46 Loans Domestic Offices 22,805 1,051 4.61 21,853 799 3.65 Foreign Offices 10,474 454 4.33 9,583 283 2.95 --------- -------- ------- -------- Non-Margin Loans 33,279 1,505 4.52 31,436 1,082 3.44 --------- -------- ------- -------- Securities U.S. Government Obligations 273 9 3.43 415 11 2.58 U.S. Government Agency Obligations 3,766 153 4.05 3,853 128 3.33 Obligations of States and Political Subdivisions 215 15 6.95 229 17 7.41 Other Securities 20,948 867 4.14 18,455 652 3.53 Trading Securities 3,549 153 4.34 2,094 52 2.50 --------- -------- -------- -------- Total Securities 28,751 1,197 4.16 25,046 860 3.43 --------- -------- -------- -------- Total Interest-Earning Assets 82,114 3,385 4.12% 81,061 2,483 3.06% -------- -------- Allowance for Credit Losses (574) (623) Cash and Due from Banks 3,357 3,151 Other Assets 16,538 15,751 -------- -------- TOTAL ASSETS $101,435 $ 99,340 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,767 $ 109 1.62% $ 6,648 $ 54 0.81% Savings 8,695 101 1.16 9,224 65 0.71 Certificates of Deposit $100,000 & Over 3,167 108 3.40 3,706 55 1.49 Other Time Deposits 1,378 35 2.57 955 15 1.57 Foreign Offices 26,561 602 2.26 25,757 359 1.39 -------- -------- ------- -------- Total Interest-Bearing Deposits 46,568 955 2.05 46,290 548 1.18 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,284 35 2.73 1,551 15 0.99 Other Borrowed Funds 1,865 58 3.10 2,675 52 1.93 Payables to Customers and Broker-Dealers 6,014 128 2.12 6,361 57 0.89 Long-Term Debt 7,312 271 3.67 6,152 136 2.19 -------- -------- ------- -------- Total Interest-Bearing Liabilities 63,043 1,447 2.29% 63,029 808 1.28% -------- ------- -------- Noninterest-Bearing Deposits 15,647 14,766 Other Liabilities 13,272 12,748 Common Shareholders' Equity 9,473 8,797 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $101,435 $ 99,340 ======== ======== Net Interest Earnings and Interest Rate Spread $ 1,938 1.83% $ 1,675 1.78% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 2.36% 2.07% ======= =======
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