-----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, AcMVg9mxqdwf1+Ixg+1xIdMga/iJqEowD+zElnk5jS2i+6J3z9r3BlrJoRogojC5 LmKzWTcbjq6AtHHdtsFVCw== 0000009626-95-000018.txt : 19951119 0000009626-95-000018.hdr.sgml : 19951119 ACCESSION NUMBER: 0000009626-95-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06152 FILM NUMBER: 95590388 BUSINESS ADDRESS: STREET 1: 48 WALL ST 15TH FL CITY: NEW YORK STATE: NY ZIP: 10296 BUSINESS PHONE: 2124951784 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-6152 THE BANK OF NEW YORK COMPANY, INC. (Exact name of registrant as specified in its charter) New York 13-2614959 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) (212) 495-1784 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- The number of shares outstanding of the issuer's Common Stock, $7.50 par value, was 200,029,577 shares as of October 31, 1995. 2 THE BANK OF NEW YORK COMPANY, INC. FORM 10-Q TABLE OF CONTENTS PART 1. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Consolidated Balance Sheets September 30, 1995 and December 31, 1994 3 Consolidated Statements of Income For the Three Months and Nine Months Ended September 30, 1995 and 1994 4 Consolidated Statement of Changes In Shareholders' Equity For the Nine Months Ended September 30, 1995 5 Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 1995 and 1994 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART 2. OTHER INFORMATION - -------------------------- Item 1. Legal Proceedings 19 Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURE 20 3 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements - ------------------------------------------------------------------------------ THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) September 30, December 31, 1995 1994 ---- ---- Assets - ------ Cash and Due from Banks $ 1,909 $ 2,903 Interest-Bearing Deposits in Banks 1,092 992 Securities: Held-to-Maturity (fair value of $2,951 in 1995 and $2,707 in 1994) 3,090 2,930 Available-for-Sale 2,085 1,721 ------- ------- Total Securities 5,175 4,651 Trading Assets at Fair Value 938 940 Federal Funds Sold and Securities Purchased Under Resale Agreements 844 3,019 Loans (less allowance for loan losses of $747 in 1995 and $792 in 1994) 36,817 32,291 Premises and Equipment 906 914 Due From Customers on Acceptances 912 810 Accrued Interest Receivable 245 290 Other Assets 2,249 2,069 ------- ------- Total Assets $51,087 $48,879 ======= ======= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 7,750 $ 8,579 Interest-Bearing Domestic Offices 15,628 14,871 Foreign Offices 10,364 10,641 ------- ------- Total Deposits 33,742 34,091 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,849 1,502 Other Borrowed Funds 3,709 4,738 Acceptances Outstanding 917 812 Accrued Taxes and Other Expenses 1,312 1,049 Accrued Interest Payable 228 213 Other Liabilities 394 404 Long-Term Debt 1,836 1,774 ------- ------- Total Liabilities 45,987 44,583 ------- ------- Shareholders' Equity Preferred Stock-no par value, authorized 5,000,000 shares, outstanding 184,000 shares 111 111 Class A Preferred Stock - par value $2.00 per share, authorized 5,000,000 shares, outstanding 50,304 shares in 1995 and 322,104 shares in 1994 2 8 Common Stock - par value $7.50 per share, authorized 350,000,000 shares, issued 201,086,278 shares in 1995 and 190,213,322 shares in 1994 1,508 1,427 Additional Capital 1,046 858 Retained Earnings 2,523 2,048 Securities Valuation Allowance 51 (58) ------- ------- 5,241 4,394 Less: Treasury Stock - 3,727,354 shares in 1995 and 2,566,071 shares in 1994, at cost 121 78 Loan to ESOP - 712,695 shares, at cost 20 20 ------- ------- Total Shareholders' Equity 5,100 4,296 ------- ------- Total Liabilities and Shareholders' Equity $51,087 $48,879 ======= ======= - ------------------------------------------------------------------------------ See accompanying Notes to Consolidated Financial Statements 4 - ------------------------------------------------------------------------------ THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Unaudited) (In millions, except per share amounts) For the three For the nine months ended months ended September 30, September 30, 1995 1994 1995 1994 ---- ---- ---- ---- Interest Income - --------------- Loans $ 815 $ 632 $2,392 $1,705 Securities Taxable 59 54 175 169 Exempt from Federal Income Taxes 10 13 33 43 ----- ----- ------ ------ 69 67 208 212 Deposits in Banks 22 22 83 45 Federal Funds Sold and Securities Purchased Under Resale Agreements 31 53 159 107 Trading Assets 10 9 23 38 ----- ----- ------ ------ Total Interest Income 947 783 2,865 2,107 ----- ----- ------ ------ Interest Expense - ---------------- Deposits 309 225 952 583 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 41 25 110 79 Other Borrowed Funds 52 59 198 127 Long-Term Debt 33 26 97 78 ---- ---- ------ ------ Total Interest Expense 435 335 1,357 867 ---- ---- ------ ------ Net Interest Income 512 448 1,508 1,240 - ------------------- Provision for Loan Losses 113 39 225 123 ----- ----- ------ ------ Net Interest Income After Provision for Loan Losses 399 409 1,283 1,117 ----- ----- ------ ------ Noninterest Income - ------------------ Processing Fees Securities 103 90 303 268 Other 48 43 140 129 ----- ----- ------ ------ 151 133 443 397 Trust and Investment Fees 33 34 97 101 Service Charges and Fees 103 121 325 354 Securities Gains (Losses) 17 (1) 37 15 Other 101 34 171 124 ----- ----- ------ ------ Total Noninterest Income 405 321 1,073 991 ----- ----- ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 232 219 676 642 Net Occupancy 45 44 132 135 Furniture and Equipment 21 22 64 65 Other 126 135 393 390 ----- ----- ------ ------ Total Noninterest Expense 424 420 1,265 1,232 ----- ----- ------ ------ Income Before Income Taxes 380 310 1,091 876 Income Taxes 146 116 418 328 ----- ----- ------ ------ Net Income $ 234 $ 194 $ 673 $ 548 - ---------- ===== ===== ====== ====== Net Income Available to Common Shareholders $ 232 $ 191 $ 665 $ 538 - ----------------------- ===== ===== ====== ====== Per Common Share Data: - ---------------------- Primary Earnings $1.16 $1.01 $3.42 $2.86 Fully Diluted Earnings 1.11 0.96 3.19 2.70 Cash Dividends 0.36 0.275 1.00 0.775 Average Common Shares Outstanding 193 188 191 188 - ------------------------------------------------------------------------------ See accompanying Notes to Consolidated Financial Statements 5 - ------------------------------------------------------------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Statement of Changes in Shareholders' Equity (Unaudited) For the nine months ended September 30, 1995 (In millions) Class A Pre- Pre- Addi- Securities Treas- Loan ferred ferred Common tional Retained Valuation ury to Stock Stock Stock Capital Earnings Allowance Stock ESOP ------ ------- ------ ------- -------- ---------- ------ ---- Balance, January 1, 1995 $111 $ 8 $1,427 $ 858 $2,048 $(58) $ 78 $20 Changes: Net Income 673 Cash Dividends Common Stock (190) Preferred Stock (8) Conversion of Debentures 33 53 Conversion of Preferred Stock (6) 4 3 Issuance of Common Stock, Primarily Acquisition of Putnam Trust Company 44 132 (37) Treasury Stock Acquired 80 Net Unrealized Gain on Secur- ities Avail- able for Sale 109 ---- --- ------ ------ ------ ---- ---- --- Balance, September 30, 1995 $111 $ 2 $1,508 $1,046 $2,523 $ 51 $121 $20 ==== === ====== ====== ====== ==== ==== === - ------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements 6 - ------------------------------------------------------------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Cash Flows (In millions) (Unaudited) For the nine months ended September 30, 1995 1994 ---- ---- Operating Activities Net Income $ 673 $ 548 Adjustments to Determine Net Cash Provided (Used) by Operating Activities Provision for Losses on Loans and Other Real Estate 228 127 Depreciation and Amortization 145 146 Deferred Income Taxes 136 180 Securities Gains (37) (15) Change in Trading Assets 2 830 Change in Accruals and Other, Net 22 (451) ------- ------- Net Cash Provided by Operating Activities 1,169 1,365 ------- ------- Investing Activities Change in Interest-Bearing Deposits in Banks (85) (451) Purchases of Securities Held-to-Maturity (389) (255) Maturities of Securities Held-to-Maturity 421 557 Purchases of Securities Available-for-Sale (527) (1,008) Sales of Securities Available-for-Sale 420 1,729 Maturities of Securities Available-for-Sale 22 8 Net Principal Disbursed on Loans to Customers (4,859) (2,453) Sales of Loans 326 272 Sales of Other Real Estate 18 25 Change in Federal Funds Sold and Securities Purchased Under Resale Agreements 2,211 (3,921) Purchases of Premises and Equipment (34) (33) Acquisitions, Net of Cash Acquired (Disbursed) 100 (161) Proceeds from the Sale of Premises and Equipment 2 11 Partial Sale of Unconsolidated Subsidiary - 37 Other, Net 8 (118) ------- ------- Net Cash Used by Investing Activities (2,366) (5,761) ------- ------- Financing Activities Change in Deposits (1,050) 1,974 Change in Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,347 (1,238) Change in Other Borrowed Funds (1,008) 2,587 Proceeds from the Issuance of Long-Term Debt 142 - Repayments of Long-Term Debt (16) (115) Redemption, Conversion and Repurchases of Preferred Stock & Warrants - (173) Issuance of Common Stock 72 30 Treasury Stock Acquired (80) (64) Cash Dividends Paid (198) (156) ------- ------- Net Cash Provided by Financing Activities 209 2,845 ------- ------- Effect of Exchange Rate Changes on Cash (6) 61 ------- ------- Change in Cash and Due From Banks (994) (1,490) Cash and Due from Banks at Beginning of Period 2,903 4,511 ------- ------- Cash and Due from Banks at End of Period $ 1,909 $ 3,021 ======= ======= - ----------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information Cash Paid During the Year for: Interest $ 1,342 $ 799 Income Taxes 287 108 Noncash Investing Activity (Primarily Foreclosure of Real Estate) 51 38 - ----------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements 7 THE BANK OF NEW YORK COMPANY, INC. Notes to Consolidated Financial Statements 1. General ------- The accounting and reporting policies of The Bank of New York Company, Inc. (the Company), a bank holding company, and its subsidiaries, conform with generally accepted accounting principles and general practice within the banking industry. Such policies, except as noted below, are consistent with those applied in the preparation of the Company's annual financial statements. The accompanying financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods have been made. Such adjustments are of a normal recurring nature. 2. Allowance for Loan Losses ------------------------- Transactions in the allowance for loan losses are summarized as follows: Nine months ended September 30, (In millions) 1995 1994 ---- ----- Balance, Beginning of Period $ 792 $ 970 Charge-offs (323) (314) Recoveries 42 44 ----- ----- Net Charge-Offs (281) (270) Acquisition 8 - Credit Card Securitization 3 11 Provision 225 123 ----- ----- Balance, End of Period $ 747 $ 834 ===== ===== Effective January 1, 1995, the Company adopted a new accounting standard which introduces the time value of money into the determination of the allowance for loan losses. The portion of the allowance allocated to nonaccrual commercial loans over $1 million is now measured by the difference between their recorded value and fair value. Fair value is either the present value of the expected future cash flows from borrowers, market value of the loan, or the fair value of the collateral. At September 30, 1995, such loans aggregated $163 million, of which $98 million exceeded their fair value by $24 million. For the third quarter of 1995, the average amount of impaired loans was $163 million and interest income (cash received) 8 recognized on them was $237 thousand. Commercial loans are placed on nonaccrual status when collateral is insufficient and principal or interest is past due 90 days or more, or when there is reasonable doubt that interest or principal will be collected. Accrued interest is usually reversed when a loan is placed on nonaccrual status. Interest payments received on nonaccrual loans may be recognized as income or applied to principal depending upon management's judgment. Loans are not restored to accruing status until principal and interest are current or they become fully collateralized. Consumer installment loans are not classified as nonperforming assets, but are charged off based upon an established delinquency schedule determined by product. Real estate acquired in satisfaction of loans is carried in other assets at the lower of recorded investment in the property or fair value minus estimated costs to sell. 3. Commitments and Contingent Liabilities -------------------------------------- In April 1990, the Company notified Northeast Bancorp., Inc. (NEB) that NEB had materially breached its obligation under a merger agreement. Following denial by the Federal Reserve Board of the Company's application for approval to acquire NEB and failure by state regulators to approve the proposed merger prior to the August 15, 1990 termination date, the Company's Board of Directors notified NEB in September 1990 that it had terminated the merger agreement. In May 1990, NEB brought suit against the Company in the United States Court for the District of Connecticut seeking money damages of $350 million relating to NEB's allegations that the Company breached its obligations. The suit was settled in November 1995 for $13 million. In the ordinary course of business, there are various claims pending against the Company and its subsidiaries. In the opinion of management, liabilities arising from such claims, if any, would not have a material effect upon the Company's consolidated financial statements. 9 4. Acquisitions ------------ In September, 1995, the Company acquired certain portions of the securities processing business of BankAmerica Corporation. The Company has also agreed to purchase certain portions of the securities processing business of J.P. Morgan & Co. Incorporated. The J.P. Morgan global custody business includes securities lending and domestic custody business in the United States and the United Kingdom. The BankAmerica acquisition includes U.S. and global custody, as well as securities lending, securities clearance and master trust. J.P. Morgan has approximately $800 billion in custody assets and BankAmerica had approximately $462 billion in custody assets while those of the Company total $1.65 trillion. The Company has also agreed to acquire the corporate trust business of NationsBank Corporation. This acquisition involves the transfer to the Company of approximately 11,500 bond trustee and agency accounts representing over $167 billion in outstanding securities. The J.P. Morgan and NationsBank transactions are expected to close by year end and are subject to regulatory approval. On September 1, 1995, the Company acquired The Putnam Trust Company of Greenwich, headquartered in Greenwich, Connecticut. Putnam Trust Company has 8 branches in Fairfield County with $643 million in assets. The pro forma effect of these acquisitions on the Company's 1994 income is not material. 5. Capital Resources ----------------- The Company issued $140 million of subordinated debt during the third quarter of 1995. Also, in October 1995, the Company increased the amount of an outstanding shelf registration for debt and preferred stock to $1,360 million. 10 Management's Discussion and Analysis of Financial Condition - ----------------------------------------------------------- and Results of Operations - ------------------------- The Company reported record third quarter fully diluted earnings per share of $1.11, a 16% increase over the 96 cents earned in the third quarter of 1994. Net income rose by 21% to $234 million from $194 million earned in the same period last year. Earnings per share, on a fully diluted basis, was $3.19 for the first nine months of 1995 compared with $2.70 in 1994. Net income for the first nine months was $673 million, an increase of 23% over last year's $548 million. Earnings per share for the third quarter and first nine months of 1995 were reduced by $.05 and $.15, respectively for the dilutive effect of stock warrants. Net interest income, on a taxable equivalent basis, was a record $521 million in the third quarter, a $62 million or 14% increase over the third quarter of last year. Loan demand continued to strengthen, particularly in corporate lending across the United States, in the middle market, and in most of the special industry lending areas. The net interest rate spread and yield set records in the third quarter. Also in the third quarter, the Company took in a $47 million gain from the balance of the sale of the ARCS Mortgage portfolio. Revenues from the Company's securities processing business grew 14% over the third quarter of 1994 and were once again led by strong performances from ADRs, corporate trust, mutual funds custody, and master trust. Other processing fees grew 12% over the same period lead by increases in trade finance and funds transfer revenues. Expenses remained under tight control, up only 1%. The Putnam Trust Company acquisition was effective for only one month. Return on average assets for the third quarter was a record 1.78% versus 1.68% in the second quarter of 1995 and 1.49% in the third quarter of 1994. Return on average common equity was 19.28% in the third quarter of 1995, compared with 19.85% in the second quarter of 1995 and 18.68% in the third quarter of last year. CAPITAL AND LIQUIDITY - --------------------- The Company's estimated Tier 1 capital and Total capital ratios were 8.86% and 13.59% at September 30, 1995 compared with 8.62% and 13.20% at June 30, 1995, and 8.43% and 12.86% at September 30, 1994. Tangible common equity as a percent of total assets was 8.55% at September 30, 1995 compared with 7.67% at June 30, 1995 and 6.99% one year ago. 11 NET INTEREST INCOME - ------------------- 3rd 2nd 3rd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 1995 1995 1994 1995 1994 --------------------------- ----------------- Net Interest Income $521 $514 $459 $1,538 $1,277 Net Interest Rate Spread 3.47% 3.34% 3.35% 3.41% 3.26% Net Yield on Interest- Earning Assets 4.61 4.45 4.16 4.52 4.01 On a taxable equivalent basis, net interest income amounted to a record $521 million in the third quarter of 1995, compared with $459 million in the same period of 1994, an increase of 14%. The net interest rate spread was a record 3.47% in the third quarter of 1995 compared with 3.34% in the second quarter of 1995 and 3.35% one year ago. The net yield on interest-earning assets was also a record at 4.61% compared with 4.45% in the second quarter of 1995 and 4.16% in last year's third quarter. For the first nine months of 1995, net interest income, on a taxable equivalent basis, amounted to $1,538 million compared with $1,277 million in the same period of 1994, an increase of 20%. The year-to-date net interest rate spread was 3.41% in 1995 compared with 3.26% in 1994, while the net yield on interest-earning assets was 4.52% in 1995 and 4.01% in 1994. Growth in the Company's credit card business continued. Compared with last year's third quarter, managed outstandings were up 11% to $8.0 billion from $7.2 billion. Results were not impacted by the introduction, on September 14, 1995, of the Company's first co-branded credit card, which was issued in conjunction with Toys"R"Us (registered trademark). Interest lost on loans on nonaccrual status at September 30, 1995 and 1994 reduced net interest income by $5 million for the three months ended September 30, 1995 and 1994, and by $15 million for the nine months ended September 30, 1995 and 1994. 12 NONINTEREST INCOME - ------------------ 3rd Quarter Year-to-date ----------- ------------ (In millions) 1995 1994 1995 1994 ---------------- ------------------ Processing Fees Securities $103 $ 90 $ 303 $268 Other 48 43 140 129 ---- ---- ------ ---- 151 133 443 397 Trust and Investment Fees 33 34 97 101 Income from Credit Card Securitization - 9 3 33 Other Service Charges and Fees 103 112 322 321 Securities Gains (Losses) 17 (1) 37 15 Foreign Exchange and Other Trading Activities 18 10 43 39 Other 83 24 128 85 ---- ---- ------ ---- Total Noninterest Income $405 $321 $1,073 $991 ==== ==== ====== ==== Securities processing fees increased 14% to $103 million compared to $90 million in the third quarter of 1994. In the first nine months of 1995 securities processing fees were $303 million compared to $268 million in 1994. The strongest performers in securities processing continue to be ADRs, corporate trust, mutual funds custody and master trust. In other processing, trade finance revenue increased by 12% over the third quarter of last year and in funds transfer, total revenues including balance equivalents were up 17%. Credit card interchange income also showed substantial strength. Foreign exchange and other trading activity increased $8 million, or 80%, over the third quarter of 1994. The pre-tax gain of $47 million from the sale of the ARCS Mortgage Inc. servicing portfolio was included in other noninterest income in the third quarter. This brings the total gain from the sale of ARCS to $58 million. As a result of the sale of ARCS, other service charges and fees declined by $7 million in the third quarter of 1995. Other noninterest income in the first nine months of 1994 included a $22 million pre-tax gain on the sale of a portion of the Company's interest in Wing Hang Bank, Ltd. The return of the securitized credit card receivables to the balance sheet reduced noninterest income by $9 million and $30 million compared to the third quarter and first nine months of last year. 13 NONINTEREST EXPENSE AND INCOME TAXES - ------------------------------------ The Company continued to control expenses in the third quarter of 1995. Total noninterest expense was up only 1% to $424 million from $420 million in the same period last year. Year-to-date noninterest expense was $1,265 million compared with $1,232 million in 1994. Salaries and employee benefits increased 6% in the third quarter to $232 million from $219 million in the same period last year due in part to acquisitions in the Company's securities processing businesses and to the purchase of Putnam Trust Company on September 1, 1995. Excluding the ARCS gain, the efficiency ratio for the third quarter improved to 49.1%. This ratio was 49.7% in the second quarter of 1995 and 53.4% in the third quarter of 1994. The effective tax rates for the third quarter and first nine months of 1995 were 38.4% and 38.3% compared with 37.4% for the third quarter and first nine months of 1994. NONPERFORMING ASSETS - -------------------- Change 3Q 1995 vs (Dollars in millions) 9/30/95 6/30/95 2Q 1995 ----------------------------- Loans: HLT $ 15 $ 16 $ (1) Commercial Real Estate 49 54 (5) Other Commercial 48 49 (1) Foreign 18 19 (1) LDC 21 21 - Community Banking 82 73 9 ---- ---- Total Loans 233 232 1 Other Real Estate 81 88 (7) ---- ---- Total $314 $320 (6) ==== ==== Nonperforming Assets Ratio 0.8% 0.9% Allowance/Nonperforming Loans 320.6 307.3 Allowance/Nonperforming Assets 237.9 222.8 This was the seventeenth consecutive quarter of net declines in nonperforming assets. NPAs totaled $314 million at September 30, 1995, compared with $320 million at June 30, 1995. 14 LOAN LOSS PROVISION AND NET CHARGE-OFFS - --------------------------------------- 3rd 2nd 3rd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------ (In millions) 1995 1995 1994 1995 1994 ----------------------- ------------- Provision $113 $ 62 $ 39 $225 $ 123 ---- ---- ---- ---- ----- Net Charge-offs: HLT (1) (5) (24) (6) (32) Commercial Real Estate - (14) - (16) (5) Other Commercial (4) (4) (21) (12) (51) Consumer (66) (61) (38) (190) (108) Foreign (9) - (6) (22) (14) Other (6) (3) (2) (12) (42) ---- ---- ---- ---- ----- Total (86) (87) (91) (258) (252) Acquisition 7 - - 8 - Credit Card Securitization - 1 5 3 11 ---- ---- ---- ---- ----- Increase (Decrease) in Regular Allowance $ 34 $(24) $(47) $(22) $(118) ==== ==== ==== ==== ===== Other Real Estate Expenses $ 1 $ 2 $ 3 $ 4 $ 7 The allowance for loan losses was $747 million, or 1.99% of loans at September 30, 1995, compared with $713 million, or 1.97% of loans at June 30, 1995. CREDIT CARD SECURITIZATION - -------------------------- Credit card receivables sold in the form of a security is a technique for financing the Company's credit card operations. It replaces at competitive rates other sources of deposits and borrowed money, and improves liquidity and capital. For accounting purposes, the technique removes the underlying assets and liabilities from the balance sheet, and amounts otherwise reported in the income statement are classified as noninterest income. The Company securitized $1,350 million of credit card receivables in 1991; zero was outstanding at September 30, 1995. The impact of the securitization, assuming the funds received from the securitization were used 15 to replace short-term borrowings, is summarized below: 3rd Quarter Year-to-date ----------- ------------ (In millions) 1995 1994 1995 1994 ---- ---- ---- ---- Lower Net Interest Income $- $18 $5 $78 Lower Provision for Loan Losses - 6 2 29 Higher Noninterest Income - 9 3 33 HIGHLY LEVERAGED TRANSACTIONS - ----------------------------- At September 30, 1995, HLT loans outstanding were $1,460 million and commitments were $661 million compared with $1,323 million and $501 million at June 30, 1995. At September 30, 1995, borrowers in the communication industry represented 45% of the HLT portfolio. SECTOR PROFITABILITY - -------------------- The Company has an internal information system used for management purposes that produces sector performance data for Trust, and Securities and Other Processing, Retail Banking, Corporate Banking, and Other Sectors. A set of measurement principles has been developed to help ensure that reported results of the sectors track their economic performance. Sector results are subject to restatement whenever improvements are made in the measurement principles or organizational changes are made. The data below has been restated to reflect the transfer from Corporate Banking to Other of certain gains and losses associated with foreign investments and subsidiaries. The sectors contributed to the Company's profitability for the third quarter and first nine months as follows: Trust, and Securities and Other Retail Corporate (In millions) Processing Banking Banking ---------- ---------- ---------- 3rd Quarter 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 41 $ 35 $328 $272 $132 $114 Provision for Loan Losses 0 0 72 39 5 50 Noninterest Income 209 193 39 52 78 68 Noninterest Expense 154 149 167 177 63 62 ---- ---- ---- ---- ---- ---- Income Before Taxes $ 96 $ 79 $128 $108 $142 $ 70 ==== ==== ==== ==== ==== ==== Other Total ---------- ---------- 3rd Quarter 1995 1994 1995 1994 ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 20 $ 38 $521 $459 Provision for Loan Losses 36 (50) 113 39 Noninterest Income 79 8 405 321 Noninterest Expense 40 32 424 420 ---- ---- ---- ---- Income Before Taxes $ 23 $ 64 $389 $321 ==== ==== ==== ==== 16 Trust, and Securities and Other Retail Corporate (In millions) Processing Banking Banking ---------- ---------- ---------- Year-to-date 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $118 $ 93 $959 $724 $397 $337 Provision for Loan Losses 0 0 201 150 56 110 Noninterest Income 616 575 121 168 216 187 Noninterest Expense 459 433 519 528 183 175 ---- ---- ---- ---- ---- ---- Income Before Taxes $275 $235 $360 $214 $374 $239 ==== ==== ==== ==== ==== ==== Other Total ---------- -------------- Year-to-date 1995 1994 1995 1994 ---- ---- ------ ---- Net Interest Income on a Taxable Equivalent Basis $ 64 $123 $1,538 $1,277 Provision for Loan Losses (32) (137) 225 123 Noninterest Income 120 61 1,073 991 Noninterest Expense 104 96 1,265 1,232 ---- ---- ------ ------ Income Before Taxes $112 $225 $1,121 $ 913 ==== ==== ====== ====== In the Trust, and Securities and Other Processing Sector, securities processing fees increased 14% to $103 million compared to $90 million in the third quarter of 1994. In the first nine months of 1995 securities processing fees were $303 million compared to $268 million in 1994. The strongest performers in securities processing continue to be ADRs, corporate trust, mutual funds custody and master trust. In other processing, trade finance revenue increased by 12% over the third quarter of last year and in funds transfer, total revenues including balance equivalents were up 17%. The increase in net interest income in the Retail Sector principally reflects growth in the Company's credit card business and the higher value of noninterest-bearing balances. Charge-offs increased in both the quarter and year-to-date periods compared to last year. Credit card accounts past due over 30 days were 4.00% of outstandings at the end of the third quarter of 1995 compared with 3.19% in the second quarter of 1995 and 2.73% in the third quarter of 1994. In the third quarter of 1995, net credit card charge-offs as a percentage of average outstandings were 3.31%, compared with 3.17% in the second quarter of 1995 and 2.30% in the third quarter of 1994. Maturities in the sector's credit card securitization program shifted revenue from noninterest income to net interest income. Credit card interchange income also showed strength. The increase in net interest income in the Corporate Banking Sector is attributable to increased loan demand, higher yields, and a decline in nonperforming assets. Loan demand continued to strengthen, particularly in corporate lending across the United States, in the middle market, and in most of the special industry lending areas. The Other Sector reflects the difference between the recorded provision for loan losses and that allocated to the sectors. Noninterest income includes $47 million for the third quarter of 1995 and $58 million for the first nine months of 1995 of the pre-tax gain on the sale of the ARCS Mortgage portfolio. Also included in noninterest income for the first nine months of 1994 is a $22 million pre-tax gain on the sale of a portion of the Company's interest in Wing Hang Bank, Ltd. Securities gains and foreign exchange and other trading activity increased $26 million from the third quarter of 1994. 17 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Dollars in millions) For the three months For the three months ended September 30, 1995 ended September 30, 1994 ------------------------ ------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------ ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 1,451 $ 23 6.18% $ 1,739 $ 22 5.09% Federal Funds Sold and Securities Purchased Under Resale Agreements 2,127 31 5.77 4,617 53 4.55 Loans Domestic Offices 24,480 610 9.90 21,991 487 8.78 Foreign Offices 11,237 206 7.26 10,011 147 5.83 ------- ------ ------- ------ Total Loans 35,717 816 9.07 32,002 634 7.86 ------- ------ ------- ------ Securities U.S. Government Obligations 2,998 43 5.65 2,867 40 5.59 U.S. Government Agency Obligations 398 6 6.35 327 5 6.53 Obligations of States and Political Subdivisions 618 16 10.15 804 21 10.49 Other Securities, including Trading Securities 1,550 21 5.68 1,430 19 5.17 ------- ------ ------- ------ Total Securities 5,564 86 6.21 5,428 85 6.26 ------- ------ ------- ------ Total Interest-Earning Assets 44,859 956 8.46% 43,786 794 7.20% ------ ------ Allowance for Loan Losses (705) (886) Cash and Due from Banks 2,902 2,743 Other Assets 5,051 5,909 ------- ------- TOTAL ASSETS $52,107 $51,552 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 3,370 38 4.46% $ 3,521 28 3.16% Savings 7,982 62 3.10 8,145 47 2.30 Certificates of Deposit $100,000 & Over 1,592 22 5.56 1,121 12 4.17 Other Time Deposits 2,453 32 5.24 2,271 24 4.15 Foreign Offices 11,234 155 5.46 10,645 114 4.27 ------- ------ ------- ------ Total Interest-Bearing Deposits 26,631 309 4.61 25,703 225 3.48 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,846 41 5.67 2,385 25 4.10 Other Borrowed Funds 3,357 52 6.20 5,009 59 4.70 Long-Term Debt 1,768 33 7.32 1,493 26 6.88 ------- ------ ------- ------ Total Interest-Bearing Liabilities 34,602 435 4.99% 34,590 335 3.85% ------ ------ Noninterest-Bearing Deposits 8,974 8,740 Other Liabilities 3,646 4,039 Preferred Stock 113 128 Common Shareholders' Equity 4,772 4,055 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $52,107 $51,552 ======= ======= Net Interest Earnings and Interest Rate Spread $ 521 3.47% $ 459 3.35% ====== ====== Net Yield on Interest- Earning Assets 4.61% 4.16% ==== ==== 18 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Dollars in millions) For the nine months For the nine months ended September 30, 1995 ended September 30, 1994 ------------------------ ------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------ ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 1,761 $ 83 6.28% $ 1,188 $ 45 5.09% Federal Funds Sold and Securities Purchased Under Resale Agreements 3,591 159 5.92 3,531 107 4.06 Loans Domestic Offices 23,945 1,796 10.03 21,514 1,315 8.17 Foreign Offices 10,930 601 7.36 10,093 395 5.23 ------- ------ ------- ------ Total Loans 34,875 2,397 9.19 31,607 1,710 7.23 ------- ------ ------- ------ Securities U.S. Government Obligations 2,927 126 5.73 3,251 132 5.44 U.S. Government Agency Obligations 343 16 6.33 343 17 6.49 Obligations of States and Political Subdivisions 664 53 10.60 931 69 9.83 Other Securities, including Trading Securities 1,349 61 6.13 1,653 64 5.15 ------- ------ ------- ------ Total Securities 5,283 256 6.48 6,178 282 6.08 ------- ------ ------- ------ Total Interest-Earning Assets 45,510 2,895 8.51% 42,504 2,144 6.74% ------ ------ Allowance for Loan Losses (743) (930) Cash and Due from Banks 2,782 2,831 Other Assets 5,208 5,552 ------- ------- TOTAL ASSETS $52,757 $49,957 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 3,397 112 4.42% $ 3,582 75 2.79% Savings 7,821 181 3.09 8,276 138 2.24 Certificates of Deposit $100,000 & Over 1,767 76 5.74 936 25 3.60 Other Time Deposits 2,510 98 5.22 2,269 71 4.18 Foreign Offices 11,567 485 5.61 9,744 274 3.77 ------- ------ ------- ------ Total Interest-Bearing Deposits 27,062 952 4.70 24,807 583 3.15 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,537 110 5.77 3,036 79 3.45 Other Borrowed Funds 4,238 198 6.25 3,944 127 4.30 Long-Term Debt 1,758 97 7.37 1,527 78 6.83 ------- ------ ------ ------ Total Interest-Bearing Liabilities 35,595 1,357 5.10% 33,314 867 3.48% ------ ------ Noninterest-Bearing Deposits 8,806 8,950 Other Liabilities 3,724 3,594 Preferred Stock 116 169 Common Shareholders' Equity 4,516 3,930 ------- ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $52,757 $49,957 ======= ======= Net Interest Earnings and Interest Rate Spread $1,538 3.41% $1,277 3.26% ====== ====== Net Yield on Interest- Earning Assets 4.52% 4.01% ==== ==== 19 PART 2. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- Discussion of litigation regarding Northeast Bancorp, Inc. is included in Note 3 to the Consolidated Financial Statements included in Part 1, Item 1 of this Report. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) The exhibits filed as part of this report are as follows: Exhibit 11 - Statement Re: Computation of Earnings Per Common Share for the Three and Nine Months Ended September 30, 1995 and 1994. Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for the Three and Nine Months Ended September 30, 1995 and 1994. Exhibit 27 - Statement Re: Financial Data Schedule containing selected financial data at September 30, 1995 and for the Nine Months ended September 30, 1995. (b) The Company filed the following reports on Form 8-K since June 30, 1995: On July 13, 1995, the Company filed a Form 8-K Current Report (Items 5 and 7), which report included unaudited interim financial information and accompanying discussion for the second quarter of 1995 contained in the Company's press release dated July 13, 1995. On August 8, 1995, the Company filed a Form 8-K Current Report (Items 5 and 7), which report included a Distribution Agreement dated August 1, 1995, the Forms of Notes, An Officers' Certificate, and the Opinion of Counsel in connection with the Company's Registration Statements on Form S-3 (File Nos. 33-51984 and 33-50333) covering the Company's Subordinated Retail Medium-Term Notes issuable under an Indenture dated October 1, 1993. On October 16, 1995, the Company filed a Form 8-K Current Report (Items 5 and 7), which report included unaudited interim financial information and accompanying discussion for the third quarter of 1995 contained in the Company's press release dated October 16, 1995. 20 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 thereunto duly authorized. THE BANK OF NEW YORK COMPANY, INC. ---------------------------------- (Registrant) Date: November 13, 1995 \s\ Deno D. Papageorge ----------------------- Deno D. Papageorge, Chief Financial Officer 21 EXHIBIT INDEX -------------- Exhibit Description - ------- ----------- 11 Computation of Earnings Per Common Share for the Three and Nine Months Ended September 30, 1995 and 1994. 12 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for the Three and Nine Months Ended September 30, 1995 and 1994. 27 Financial Data Schedule containing selected financial data at September 30, 1995 and for the Nine Months ended September 30, 1995. EX-11 2 EXHIBIT 11 THE BANK OF NEW YORK COMPANY, INC. Computation of Earnings Per Common Share (in millions, except per share amounts) For the Three For the Nine Months Ended Months Ended September 30, September 30, 1995 1994 1995 1994 ---- ---- ---- ---- Weighted Average Number of Shares 193 188 191 188 Shares Assumed to be Issued on Conversion: Warrants 7 - 4 - ----- ----- ----- ----- Weighted Average Number of Shares of Common Stock for Primary Computation 200 188 195 188 Shares Assumed to be Issued on Conversion: Debentures 9 12 10 12 Warrants 2 - 5 - Cumulative Preferred Stock - 2 - 2 ----- ----- ----- ----- Weighted Average Number of Shares of Common Stock Assuming Full Dilution 211 202 210 202 ===== ===== ===== ===== Net Income $ 234 $ 194 $ 673 $ 548 Dividend Requirements on Preferred Stock 2 3 8 10 ----- ----- ----- ----- Net Income Available to Common Shareholders 232 191 665 538 Interest on Convertible Debentures, Net of Tax 2 3 6 8 Dividends on Convertible Preferred Stock - - - 1 ----- ----- ----- ----- Net Income Available to Common Shareholders, Assuming Full Dilution $ 234 $ 194 $ 671 $ 547 ===== ===== ===== ===== Earnings Per Share: Primary $1.16 $1.01 $3.42 $2.86 Fully Diluted 1.11 0.96 3.19 2.70 EX-12 3 EXHIBIT 12 THE BANK OF NEW YORK COMPANY, INC. Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Dollars in Millions) For the three For the nine months ended months ended September 30, September 30, 1995 1994 1995 1994 EARNINGS ---- ---- ---- ---- - -------- Income Before Income Taxes $380 $310 $1,091 $ 876 Fixed Charges, Excluding Interest on Deposits 134 118 430 309 ---- ---- ------ ------ Income Before Income Taxes and Fixed Charges, Excluding Interest on Deposits 514 428 1,521 1,185 Interest on Deposits 309 225 952 583 ---- ---- ------ ------ Income Before Income Taxes and Fixed Charges, Including Interest on Deposits $823 $653 $2,473 $1,768 ==== ==== ====== ====== FIXED CHARGES - ------------- Interest Expense, Excluding Interest on Deposits $126 $110 $ 405 $ 284 One-Third Net Rental Expense* 8 8 25 25 ---- ---- ------ ------ Total Fixed Charges, Excluding Interest on Deposits 134 118 430 309 Interest on Deposits 309 225 952 583 ---- ---- ------ ------ Total Fixed Charges, Including Interest on Deposits $443 $343 $1,382 $ 892 ==== ==== ====== ====== PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ 4 $ 4 $ 12 $ 17 - ---------------------------------------- ==== ==== ====== ====== EARNINGS TO FIXED CHARGES RATIOS - -------------------------------- Excluding Interest on Deposits 3.84x 3.63x 3.54x 3.83x Including Interest on Deposits 1.86 1.90 1.79 1.98 EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS RATIOS - ---------------------------------- Excluding Interest on Deposits 3.72 3.51 3.44 3.63 Including Interest on Deposits 1.84 1.88 1.77 1.94 * The proportion deemed representative of the interest factor. EX-27 4
9 This schedule contains summary financial information extracted from The Bank of New York Company, Inc.'s Form 10-Q for the period ended Septemeber 30, 1995 and is qualified entirely by reference to such Form 10-Q. 0000009626 THE BANK OF NEW YORK COMPANY, INC. 1,000,000 9-MOS DEC-31-1995 JAN-1-1995 SEP-30-1995 1,909 1,092 844 938 2,085 3,090 2,951 37,564 747 51,087 33,742 7,558 1,934 1,836 1,508 0 113 3,479 51,087 2,392 208 265 2,865 952 1,357 1,508 225 37 1,265 1,091 673 0 0 673 3.42 3.19 4.52 233 224 0 0 792 323 42 747 661 86 0
-----END PRIVACY-ENHANCED MESSAGE-----