-----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, RhCcSaqYfD2OLSRa/CGjK3UsPN9ulINgcIgzG9Hl2gpZpa3qBREADRRyFiQ7BnfZ mqYGWjMSvuLu0RRBAt0aQA== 0000009626-97-000006.txt : 19970515 0000009626-97-000006.hdr.sgml : 19970515 ACCESSION NUMBER: 0000009626-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97603484 BUSINESS ADDRESS: STREET 1: 48 WALL ST 15TH FL CITY: NEW YORK STATE: NY ZIP: 10296 BUSINESS PHONE: 2124951784 10-Q 1 FIRST QTR 1997 10-Q 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 March 31, 1997 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 384,765,722 shares as of April 30, 1997. 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 March 31, 1997 and December 31, 1996 3 Consolidated Statements of Income For the Three Months Ended March 31, 1997 and 1996 4 Consolidated Statement of Changes In Shareholders' Equity For the Three Months Ended March 31, 1997 5 Consolidated Statements of Cash Flows For the Three Months Ended March 31, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART 2. OTHER INFORMATION - -------------------------- 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) March 31, December 31, 1997 1996 ---- ---- (Unaudited) (Note) Assets - ------ Cash and Due from Banks $ 8,301 $ 6,032 Interest-Bearing Deposits in Banks 1,648 1,387 Securities: Held-to-Maturity (fair value of $1,084 in 1997 and $1,127 in 1996) 1,129 1,170 Available-for-Sale 3,862 3,883 ------- ------- Total Securities 4,991 5,053 Trading Assets at Fair Value 1,736 1,547 Federal Funds Sold and Securities Purchased Under Resale Agreements 482 562 Loans (less allowance for loan losses of $869 in 1997 and $901 in 1996) 35,902 36,105 Premises and Equipment 865 875 Due From Customers on Acceptances 1,153 985 Accrued Interest Receivable 272 315 Other Assets 3,034 2,904 ------- ------- Total Assets $58,384 $55,765 ======= ======= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $11,173 $11,812 Interest-Bearing Domestic Offices 15,598 15,268 Foreign Offices 14,491 12,263 ------- ------- Total Deposits 41,262 39,343 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,083 1,737 Other Borrowed Funds 4,342 4,144 Acceptances Outstanding 1,160 1,015 Accrued Taxes and Other Expenses 1,404 1,417 Accrued Interest Payable 154 167 Other Liabilities 542 399 Long-Term Debt 1,817 1,816 ------- ------- Total Liabilities 52,764 50,038 ------- ------- Guaranteed Preferred Beneficial Interests in the Company's Junior Subordinated Deferrable Interest Debentures 600 600 ------- ------- 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 27,279 shares in 1997 and 40,429 shares in 1996 1 1 Common Stock - par value $7.50 per share, authorized 800,000,000 shares, issued 451,398,969 shares in 1997 and 444,317,786 shares in 1996 3,385 3,332 Additional Capital 399 344 Retained Earnings 2,964 2,798 Securities Valuation Allowance 57 82 ------- ------- 6,917 6,668 Less: Treasury Stock - 66,670,816 shares in 1997 and 57,849,845 shares in 1996, at cost 1,880 1,524 Loan to ESOP - 1,195,719 shares, at cost 17 17 ------- ------- Total Shareholders' Equity 5,020 5,127 ------- ------- Total Liabilities and Shareholders' Equity $58,384 $55,765 ======= ======= - ------------------------------------------------------------------------------ Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date. 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 months ended March 31, 1997 1996 ---- ---- Interest Income - --------------- Loans $ 746 $ 810 Securities Taxable 61 58 Exempt from Federal Income Taxes 9 9 ----- ----- 70 67 Deposits in Banks 34 22 Federal Funds Sold and Securities Purchased Under Resale Agreements 33 29 Trading Assets 4 4 ----- ----- Total Interest Income 887 932 ----- ----- Interest Expense - ---------------- Deposits 301 291 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 28 51 Other Borrowed Funds 39 44 Long-Term Debt 31 33 ---- ---- Total Interest Expense 399 419 ---- ---- Net Interest Income 488 513 - ------------------- Provision for Loan Losses 60 90 ----- ----- Net Interest Income After Provision for Loan Losses 428 423 ----- ----- Noninterest Income - ------------------ Processing Fees Securities 185 159 Other 55 50 ----- ----- 240 209 Trust and Investment Fees 43 37 Service Charges and Fees 94 101 Securities Gains 7 33 Other 71 35 ----- ----- Total Noninterest Income 455 415 ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 257 247 Net Occupancy 41 44 Furniture and Equipment 24 23 Other 124 129 ----- ----- Total Noninterest Expense 446 443 ----- ----- Income Before Income Taxes 437 395 Income Taxes 160 152 Distribution on Trust Preferred Securities 12 - ----- ----- Net Income $ 265 $ 243 - ---------- ===== ===== Net Income Available to Common Shareholders $ 263 $ 241 - ----------------------- ===== ===== Per Common Share Data: - ---------------------- Primary Earnings $0.65 $0.58 Fully Diluted Earnings 0.65 0.57 Cash Dividends 0.24 0.20 Fully Diluted Shares Outstanding 405 428 - ------------------------------------------------------------------------------ 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 three months ended March 31, 1997 (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, 1997 $111 $ 1 $3,332 $ 344 $2,798 $ 82 $1,524 $17 Changes: Net Income 265 Cash Dividends Common Stock (94) Preferred Stock (2) Exercise of Warrants 38 40 Issuance of Common Stock 15 15 (34) Treasury Stock Acquired 390 Net Unrealized Loss on Secur- ities Avail- able for Sale (25) Change in Cumulative Foreign Currency Translation Adjustment (3) ---- --- ------ ------ ------ ---- ------ --- Balance, March 31, 1997 $111 $ 1 $3,385 $ 399 $2,964 $ 57 $1,880 $17 ==== === ====== ====== ====== ==== ====== === - ------------------------------------------------------------------------------- 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 three months ended March 31, 1997 1996 ---- ---- Operating Activities Net Income $ 265 $ 243 Adjustments to Determine Net Cash Provided (Used) by Operating Activities Provision for Losses on Loans and Other Real Estate 60 97 Depreciation and Amortization 52 57 Deferred Income Taxes 50 54 Securities Gains (7) (33) Change in Trading Activities (216) (30) Change in Accruals and Other, Net 234 (341) ------- ------- Net Cash Provided by Operating Activities 438 47 ------- ------- Investing Activities Change in Interest-Bearing Deposits in Banks (304) (174) Purchases of Securities Held-to-Maturity (77) (80) Maturities of Securities Held-to-Maturity 112 64 Purchases of Securities Available-for-Sale (309) (593) Sales of Securities Available-for-Sale 100 197 Maturities of Securities Available-for-Sale 192 70 Net Principal Disbursed on Loans to Customers (960) (1,097) Sales of Loans 961 55 Sales of Other Real Estate 4 44 Change in Federal Funds Sold and Securities Purchased Under Resale Agreements 80 (49) Purchases of Premises and Equipment (9) (14) Acquisitions, Net of Cash Acquired (85) (296) Other, Net (110) (30) ------- ------- Net Cash Used by Investing Activities (405) (1,903) ------- ------- Financing Activities Change in Deposits 2,021 - Change in Federal Funds Purchased and Securities Sold Under Repurchase Agreements 346 (844) Change in Other Borrowed Funds 228 745 Proceeds from the Issuance of Long-Term Debt - 100 Issuance of Common Stock 141 58 Treasury Stock Acquired (390) (198) Cash Dividends Paid (96) (81) ------- ------- Net Cash Provided (Used) by Financing Activities 2,250 (220) ------- ------- Effect of Exchange Rate Changes on Cash (14) (1) ------- ------- Change in Cash and Due From Banks 2,269 (2,077) Cash and Due from Banks at Beginning of Period 6,032 4,711 ------- ------- Cash and Due from Banks at End of Period $ 8,301 $ 2,634 ======= ======= - ----------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information Cash Paid During the Year for: Interest $ 425 $ 429 Income Taxes 28 24 Noncash Investing Activity (Primarily Foreclosure of Real Estate) 4 30 - ----------------------------------------------------------------------------- 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 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. The financial statements reflect a 2-for-1 common stock split effective July 19, 1996. 2. Allowance for Loan Losses ------------------------- Transactions in the allowance for loan losses are summarized as follows: Three months ended March 31, (In millions) 1997 1996 ----- ----- Balance, Beginning of Period $ 901 $ 756 Charge-offs (109) (124) Recoveries 17 20 ----- ----- Net Charge-Offs (92) (104) Provision 60 90 ----- ----- Balance, End of Period $ 869 $ 742 ===== ===== 3. Capital Transactions -------------------- In 1996, the Company announced a plan to buy back through the end of 1997 up to 30 million shares of its common stock. As of April 30, 1997, 11.6 million shares had been repurchased at a cost of $443 million During the first quarter of 1997, warrant holders converted 1.2 million warrants into 5.0 million common shares, providing the Company with $77 million in capital. In April 1997, warrant holders converted 8 an additional 0.3 million warrants into 1.1 million common shares, providing the Company with $18 million in capital. 4. New Accounting Pronouncement ---------------------------- In the fourth quarter of 1997, the Company will calculate earnings per share (EPS) based on a new accounting pronouncement. The presentation of "primary" and "fully diluted" EPS will be replaced with "basic" and "diluted" EPS. Basic and diluted EPS for the three months ended March 31, 1997, for each previously reported period in 1996, and for the years 1993 to 1996 are presented in Exhibit 11.1. 5. Commitments and Contingent Liabilities -------------------------------------- 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 Management's Discussion and Analysis of Financial Condition - ----------------------------------------------------------- and Results of Operations - ------------------------- The Company reported first quarter fully diluted earnings per share were 65 cents, a 14% increase over the 57 cents earned in the first quarter of 1996. First quarter net income was $265 million, up 9% from $243 million earned in the same period last year. Return on average common equity totaled 20.90% in the first quarter of 1997 compared with 19.48% in the fourth quarter of 1996 and 18.86% in the first quarter of 1996. First quarter net income, E.P.S., and return on average common equity were records, excluding the non-recurring gain on the sale of the Union card portfolio in the second quarter of 1996. Return on average assets for the first quarter was 1.86% compared with 1.84% in the fourth quarter and 1.79% in the first quarter of 1996. Revenues from the Company's securities processing businesses continued their substantial growth and were up 16% over the first quarter of 1996 to $185 million. ADR's, mutual funds, government securities clearance, corporate trust, and stock transfer were particularly strong. Overall, fees from other processing were up 11% over last year's first quarter to $55 million. Cash management fees were ahead a strong 13% and trade finance fees were up by 11%, while fees from the funds transfer business were up 10%. Trust and investment continued to benefit from new business and strong markets which combined to push fees 16% higher to $43 million in the first quarter of 1997. Net interest income, on a taxable equivalent basis, declined to $496 million in the first quarter from $521 million in the first quarter of last year, reflecting the sale of approximately $900 million in credit card receivables to Associates National Bank effective January 1, 1997 and the sale of the Union credit card receivables in the second quarter of 1996. Tangible fully diluted earnings per share (earnings before the amortization of goodwill and intangibles) were $0.70 per share in the first quarter of 1997 compared with $0.61 per share in the first quarter of 1996. On the same basis, tangible return on average assets was 2.05% in the first quarter of 1997 compared with 1.98% in the first quarter of 1996; and tangible return on average common equity was 29.69% in the first quarter of 1997 compared with 25.62% in the first quarter of 1996. Average fully diluted shares outstanding were 405 million for the quarter, down slightly from the 407 million in the fourth quarter and down significantly from the 428 million in the prior year period. The decline from the fourth quarter was the result of the Company's stock buyback program, largely offset by the conversion of warrants and the issuance of stock to benefit plans. The reduction from the prior year 10 period was the result of the cumulative favorable impact of the Company's stock buyback programs. CAPITAL - ------- The Company's Tier 1 capital and Total capital ratios remained strong at 7.92% and 12.28% at March 31, 1997 compared with 8.34% and 12.78% at December 31, 1996, and 7.85% and 12.62% at March 31, 1996. Tangible common equity as a percent of total assets was 6.39% at March 31, 1997 compared with 7.00% at December 31, 1996 and 7.58% one year ago. The leverage ratio was 7.83% at March 31, 1997 compared with 8.70% at December 31, 1996 and 7.93% one year ago. NET INTEREST INCOME - ------------------- 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (In millions) 1997 1996 1996 --------------------------- Net Interest Income $496 $500 $521 Net Interest Rate Spread 3.30% 3.35% 3.47% Net Yield on Interest Earning Assets 4.24 4.33 4.49 The net interest rate spread was 3.30% in the first quarter of 1997, compared with 3.35% in the fourth quarter of 1996 and 3.47% one year ago. The net yield on interest-earning assets was 4.24% compared with 4.33% in the fourth quarter of 1996 and 4.49% in last year's first quarter. The decline in the spread and yield was primarily attributable to the sale of approximately $900 million in credit card receivables to Associates in the first quarter of 1997 and the sale of the Union portfolio in the second quarter of 1996. The decline in net interest income on a taxable equivalent basis to $496 million in the first quarter of 1997 from $521 million in the first quarter of 1996 was primarily the result of the credit card sales partially offset by continued growth in the Company's corporate loan portfolio. Interest lost on loans on nonaccrual status at March 31, 1997 and 1996 reduced net interest income by $4 million and $5 million for the three months ended March 31, 1997 and 1996. 11 NONINTEREST INCOME - ------------------ 1st Quarter ----------- (In millions) 1997 1996 ---------------- Processing Fees Securities $185 $159 Other 55 50 ---- ---- 240 209 Trust and Investment Fees 43 37 Service Charges and Fees 94 101 Securities Gains 7 33 Foreign Exchange and Other Trading Activities 27 10 Other 44 25 ---- ---- Total Noninterest Income $455 $415 ==== ==== Securities processing fees increased 16% to $185 million compared with $159 million in the first quarter of 1996. Strong internal growth in all areas drove the increase in revenue. The Company reported $7 million of securities gains in the first quarter of 1997 compared with $33 million last year. Revenues from foreign exchange and other trading activities were $27 million compared with $10 million last year. Included in other noninterest income in the first quarter of 1997 was a $27 million pre-tax gain on the sale of a portion of the Company's interest in Wing Hang Bank, Ltd. 12 TRADING ACTIVITIES - ------------------ The fair value and notional amounts of the Company's financial instruments held for trading purposes at March 31, 1997 are as follows: 1st Quarter March 31, 1997 1997 - Average --------------------------- ------------------ Trading Account Trading Account Notional ------------------ ------------------ (In millions) Amount Assets Liabilities Assets Liabilities -------- ------ ----------- ------ ----------- Interest Rate Contracts: Futures and Forward Contracts $ 5,524 $ - $ 3 $ 1 $ - Swaps 8,978 68 71 88 103 Written Options 12,553 - 16 - 8 Purchased Options 13,096 19 - 7 - Foreign Exchange Contracts: Swaps 39 1 1 2 1 Written Options 40,102 - 548 - 645 Purchased Options 42,477 498 - 634 - Commitments to Purchase and Sell Foreign Exchange 51,362 740 734 991 964 Securities 410 26 220 - ------ ------ ------ ------ Total Trading Account $1,736 $1,399 $1,943 $1,721 ====== ====== ====== ====== The Company expanded its offering of foreign exchange risk management products in 1996 as a result of an agreement it entered into with Susquehanna Trading, a firm with significant expertise in foreign exchange options. In 1997, the Company expanded its activities with Susquehanna Trading to include interest rate management products. Activity related to Susquehanna Trading is the primary reason for the increase in the notional amounts and trading account balances for foreign exchange option contracts and commitments to purchase and sell foreign exchange in 1997. The Company manages trading risk through a system of position limits, an earnings at risk methodology, stop loss advisory limits, and other market sensitivity measures. Earnings at risk is designed to measure with 95% certainty the Company's exposure to changes in earnings resulting from price fluctuations in the trading portfolio over a 24 hour period. The total trading portfolio's pre-tax earnings at risk averaged approximately $2.0 million for the first quarter of 1997, and ranged from approximately $1.4 million to $3.0 million. During the first quarter of 1997 daily trading revenue averaged approximately $0.7 million, and ranged from approximately a gain of $3.8 million to a loss of $1.1 million. During this period,total trading revenues did not exceed the Company's total earnings at risk estimates on any given trading day. 13 NONINTEREST EXPENSE AND INCOME TAXES - --------------------------------------- Total noninterest expense for the quarter was $446 million, down 7.2% from the $480 million reported in the fourth quarter and up only slightly, .7%, from the $443 million reported a year ago. Strong cost controls in all areas combined with reductions in credit card servicing expenses drove this performance. Employee related expense increased $10 million compared to the first quarter of 1996, while all other expenses were flat to down. During the quarter the Company continued to service the credit card receivables sold to Associates under an interim servicing agreement. When the servicing agreement expires, employees associated with the servicing of these receivables will be transferred to Associates. The efficiency ratio for the first quarter was a record 47.3% compared with 51.7% reported in the fourth quarter of 1996 and 49.4% one year ago. The effective tax rate for the first quarter of 1997 was 36.7% compared with 38.4% for the first quarter of 1996. NONPERFORMING ASSETS - -------------------- Change 1Q 1997 vs (Dollars in millions) 3/31/97 12/31/96 4Q 1996 -------------------------------- Loans: Commercial Real Estate $ 20 $ 20 $ - Other Commercial 79 90 (11) Foreign 37 38 (1) Community Banking 72 65 7 ---- ---- Total Loans 208 213 (5) Other Real Estate 40 41 (1) ---- ---- Total $248 $254 (6) ==== ==== Nonperforming Assets Ratio 0.7% 0.7% Allowance/Nonperforming Loans 418.3 423.7 Allowance/Nonperforming Assets 350.2 355.3 Nonperforming assets totaled $248 million at March 31, 1997, compared with $254 million at December 31, 1996, a decrease of $6 million. At March 31, 1997, impaired loans (nonaccrual loans over $1 million) aggregated $150 million, of which $108 million exceeded their 14 fair value by $22 million. Impaired loans at March 31, 1996 totaled $167 million, of which $132 million exceeded their fair value by $27 million. For the first quarters of 1997 and 1996, the average amount of impaired loans was $152 million and $164 million and interest income (cash received) on them was $378 thousand and $92 thousand. Credit card loans are not placed on nonperforming status, but are charged off when they become past due for certain periods. Additional information regarding the credit quality of the Company's credit card portfolio is provided in the sections "Loan Loss Provision and Net Charge-Offs" and "Sector Profitability". LOAN LOSS PROVISION AND NET CHARGE-OFFS - --------------------------------------- 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (in millions) 1997 1996 1996 ----------------------- Provision $ 60 $ 45 $ 90 ---- ---- ---- Net (Charge-offs) Recoveries: Commercial Real Estate 1 (1) (3) Other Commercial (3) (2) 1 Credit Card (93) (93) (96) Other Consumer (2) (2) (2) Foreign 4 (1) (1) Other 1 (2) (3) ---- ---- ---- Total (92) (101) (104) ---- ---- ---- Change in Allowance $(32) $(56) $(14) ==== ==== ==== Other Real Estate Expenses (Recoveries) $ - $ 3 $ (2) Net charge-offs of credit card loans were $93 million for the first quarter. Credit card loans outstanding were $4.251 billion at March 31, 1997 compared with $5.414 billion at December 31, 1996. The allowance for loan losses was $869 million, or 2.36% of loans at March 31, 1997, compared with $901 million, or 2.44% of loans at December 31, 1996. The ratio of the allowance to nonperforming assets was 350% at March 31, 1997. 15 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 insure 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. Prior year results have been restated to reflect the transfer of custom banking from the Retail Sector to the Trust, and Securities and Other Processing Sector and middle market and certain real estate lending from the Retail Sector to the Corporate Sector. Changes were also made in the allocation of long-term debt and certain foreign branch costs. Net interest income is computed on a taxable equivalent basis. Support and other indirect expenses are allocated to sectors based on general guidelines. The provision for loan losses is based on net charge-offs incurred by each sector. Assets and liabilities are match funded. The Trust, and Securities and Other Processing Sector provides a broad array of fee based services. Trust includes personal trust and investment management. Securities processing includes services to both institutional issuers and investors. The Retail Banking Sector includes credit card financing, consumer lending, and residential mortgage lending. The Corporate Banking Sector is divided into special industries banking, U.S. commercial banking, middle market banking, international banking, and factoring. The Other Sector includes trading and investing activities, treasury services to other sectors, general administration, and the difference between the recorded provision for loan losses and that allocated to the other sectors. Based on this system, the sectors contributed to the Company's profitability for the first quarters of 1997 and 1996 as follows: Trust, and Securities and Other Retail Corporate Processing Banking Banking ---------- ---------- ---------- (In millions) 1997 1996 1997 1996 1997 1996 ---- ---- ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 60 $ 54 $239 $302 $163 $138 Provision for Loan Losses - 1 92 98 1 5 Noninterest Income 317 273 34 41 59 62 Noninterest Expense 220 196 129 155 53 55 ---- ---- ---- ---- ---- ---- Income Before Taxes $157 $130 $ 52 $ 90 $168 $140 ==== ==== ==== ==== ==== ==== Other Total ---------- ------------- (In millions) 1997 1996 1997 1996 ---- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $ 34 $ 27 $496 $521 Provision for Loan Losses (33) (14) 60 90 Noninterest Income 45 39 455 415 Noninterest Expense 44 37 446 443 ---- ---- ---- ---- Income Before Taxes $ 68 $ 43 $445 $403 ==== ==== ==== ==== 16 Trust, and Securities and Other Processing - ------------------------------------------ In the Trust, and Securities and Other Processing Sector, securities processing fees increased 16% to $185 million compared with $159 million in the first quarter of 1996. The increase in revenue reflects strong internal growth. ADR's, mutual funds, government securities clearance, corporate trust, and stock transfer were particularly strong. Fee revenue from issuer services, custody, and securities industry products was $69 million, $64 million, and $52 million in the first quarter of 1997 compared with $53 million, $60 million, and $46 million in 1996. Fees from other processing increased 11% over the first quarter of last year. Fees from trust and investment grew 16% in the first quarter of 1997, reflecting new business and generally strong markets. The rise in noninterest expense is primarily related to the abovementioned growth. Retail - ------ The decrease in net interest income, noninterest income, and noninterest expense in the Retail Banking Sector principally reflects the sale of approximately $900 million in credit card receivables to Associates in the first quarter of 1997 and the sale of the Union card portfolio in the second quarter of 1996. The provision for loan losses in the Retail Banking Sector principally reflects increased charge-offs on Consumers Edge(registered trademark) accounts opened in 1994 and 1995. The table and discussion below provide information relating to the Company's credit card portfolio excluding the Union portfolio: 1st 4th 1st Quarter Quarter Quarter ------- ------- ------- (In millions) 1997 1996 1996 --------------------------- Number of Accounts 3.667 4.537 4.534 New Account Originations .020 .080 .357 Period End Balance $4,251 $5,414 $5,324 Loans Delinquent: 30-59 Days $ 72 $ 93 $ 77 60-89 Days 65 71 58 90 or More Days 146 214 137 ---- ---- ---- Total Loans Delinquent $283 $378 $272 Net Charge-offs $93 $93 $62 As a Percent of Average Loans Outstanding: Net Charge-offs 7.56% 7.03% 4.87 Accounts Delinquent More Than 30 Days 5.70 7.20 5.32 As a Percent of Period End Balances: Net Charge-offs 8.87 6.83 4.68 Accounts Delinquent More Than 30 Days 6.66 6.99 5.12 17 Loans delinquent more than 30 days decreased from $378 million at December 31, 1996 to $283 million at March 31, 1997. Loans past due more than 90 days decreased from $214 million at December 31, 1996 to $146 million at March 31, 1997. The decline in delinquent loans is primarily attributable to the Associates sale. Delinquencies and charge-offs for the first quarter of 1997 were up compared with the first quarter of last year. Loans delinquent more than 30 days increased to $283 million from $272 million at March 31, 1996 while loans past due more than 90 days increased to $146 million from $137 million at March 31, 1996. Credit card loans delinquent more than 90 days have a significant risk of loss. This adverse trend in credit quality reflects an industry-wide deterioration in consumer credit performance as well as increased losses attributable to bankruptcies resulting from a 1994 change in the bankruptcy laws. Bankrupt accounts at March 31, 1997 were 25% higher than at March 31, 1996. At March 31, 1997 bankrupt accounts included $7 million that were not yet 30 days past due, up more than 28% from the first quarter of 1996. The deterioration in credit quality also reflects increased losses on Consumers Edge(registered trademark)accounts opened in 1994 and 1995. As a result of rising delinquencies related to its Consumers Edge(registered accounts) accounts, the Company reduced Consumers Edge(registered trademark) new account originations to 330 thousand in 1996 down from 851 thousand accounts in 1995 and 1.029 million accounts in 1994. For the first quarter of 1997 the Company originated 2 thousand Consumers Edge(registered trademark) accounts. Future levels of charge-offs are difficult to predict because they depend upon future economic trends, consumer behavior, growth in the portfolio, competition, and other factors. Some of these factors are beyond the control of the Company. The rising trend in credit card delinquencies and personal bankruptcies may result in future charge-offs exceeding historic levels. Corporate - --------- Net interest income increased in the Corporate Banking Sector due to strong loan growth in the U.S. Commercial Banking and Special Industries sectors. Income from the Company's offshore banking subsidiaries was lower in the first quarter of 1997 compared to last year. Other - ----- The Other Sector includes the difference between the total provision for loan losses and that charged off by the sectors. Noninterest income includes a gain of $27 million on the sale of a portion of the Company's interest in Wing Hang Bank, Ltd. in the first quarter of 1997. Foreign exchange revenues increased to $25 million in the first quarter of 1997 from $8 million in the same period last year. Securities gains decreased $26 million from the first quarter of 1996. 18 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 March 31, 1997 ended March 31, 1996 ------------------------ ------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 2,439 $ 34 5.64% $ 1,577 $ 22 5.68% Federal Funds Sold and Securities Purchased Under Resale Agreements 2,550 33 5.32 2,175 29 5.39 Loans Domestic Offices 22,752 524 9.30 26,119 615 9.43 Foreign Offices 14,296 223 6.33 11,636 197 6.81 ------- ------ ------- ------ Total Loans 37,048 747 8.15 37,755 812 8.62 ------- ------ ------- ------ Securities U.S. Government Obligations 2,754 39 5.79 2,874 40 5.65 U.S. Government Agency Obligations 424 7 6.35 452 7 6.32 Obligations of States and Political Subdivisions 643 14 8.64 635 14 9.09 Other Securities, including Trading Securities 1,522 21 5.56 1,201 16 5.46 ------- ------ ------- ------ Total Securities 5,343 81 6.11 5,162 77 6.09 ------- ------ ------- ------ Total Interest-Earning Assets 47,380 895 7.66% 46,669 940 8.11% ------ ------ Allowance for Loan Losses (870) (725) Cash and Due from Banks 4,047 3,148 Other Assets 7,294 5,458 ------- ------- TOTAL ASSETS $57,851 $54,550 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 3,886 41 4.23% $ 4,003 43 4.34% Savings 8,120 51 2.56 8,221 58 2.84 Certificates of Deposit $100,000 & Over 697 9 5.29 1,120 15 5.42 Other Time Deposits 2,495 30 4.74 2,598 31 4.86 Foreign Offices 14,602 170 4.73 11,510 144 5.01 ------- ------ ------- ------ Total Interest-Bearing Deposits 29,800 301 4.09 27,452 291 4.27 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,266 28 5.10 3,874 51 5.34 Other Borrowed Funds 3,252 39 4.91 3,146 44 5.64 Long-Term Debt 1,817 31 6.84 1,881 33 6.94 ------- ------ ------- ------ Total Interest-Bearing Liabilities 37,135 399 4.36% 36,353 419 4.64% ------ ------ Noninterest-Bearing Deposits 9,269 9,550 Other Liabilities 5,641 3,401 Minority Interest - Preferred Securities 600 - Preferred Stock 112 113 Common Shareholders' Equity 5,094 5,133 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $57,851 $54,550 ======= ======= Net Interest Earnings and Interest Rate Spread $ 496 3.30% $ 521 3.47% ====== ====== Net Yield on Interest- Earning Assets 4.24% 4.49% ==== ==== 19 PART 2. OTHER INFORMATION 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 Months Ended March 31, 1997 and 1996. Exhibit 11.1 - Statement Re: Restated Computation of Earnings Per Common Share under Statement of Financial Accounting Standards No. 128, "Earnings per Share". Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges, Distribution on Trust Preferred Securities, and Preferred Stock Dividends for the Three Months Ended March 31, 1997 and 1996. Exhibit 27 - Statement Re: Financial Data Schedule containing selected financial data at March 31, 1997 and for the Three Months Ended March 31, 1997. (For SEC Purposes) (b) The Company filed the following reports on Form 8-K since December 31, 1996: On January 16, 1997, 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 fourth quarter of 1996 contained in the Company's press release dated January 16, 1997. On April 14, 1997, 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 first quarter of 1997 contained in the Company's press release dated April 14, 1997. 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: May 12, 1997 By: \s\ Robert E. Keilman ----------------------- Name: Robert E. Keilman Title: Comptroller 21 EXHIBIT INDEX -------------- Exhibit Description - ------- ----------- 11 Computation of Earnings Per Common Share for the Three Months Ended March 31, 1997 and 1996. 11.1 Restated Computation of Earnings Per Common Share under Statement of Financial Accounting Standards No. 128, "Earnings per Share". 12 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges, Distribution on Trust Preferred Securities, and Preferred Stock Dividends for the Three Months Ended March 31, 1997 and 1996. 27 Financial Data Schedule containing selected financial data at March 31, 1997 and for the Three Months Ended March 31, 1997. (For SEC Purposes) EX-11 2 EPS EXHIBIT 11 THE BANK OF NEW YORK COMPANY, INC. Computation of Earnings Per Common Share (In millions, except per share amounts) For the Three Months Ended March 31, 1997 1996 ---- ---- Weighted Average Number of Shares 387 395 Shares Assumed to be Issued on Conversion: Warrants 18 21 ----- ----- Weighted Average Number of Shares of Common Stock for Primary Computation 405 416 Shares Assumed to be Issued on Conversion: Debentures - 11 Warrants - 1 ----- ----- Weighted Average Number of Shares of Common Stock Assuming Full Dilution 405 428 ===== ===== Net Income $ 265 $ 243 Dividend Requirements on Preferred Stock 2 2 ----- ----- Net Income Available to Common Shareholders 263 241 Interest on Convertible Debentures, Net of Tax - 1 ----- ----- Net Income Available to Common Shareholders, Assuming Full Dilution $ 263 $ 242 ===== ===== Earnings Per Share: Primary $0.65 $0.58 Fully Diluted 0.65 0.57 EX-11 3 RESTATED EPS EXHIBIT 11.1 The Bank of New York Company, Inc. Calculation of Earnings Per Share under New Rules $ In Thousands, except EPS 1997 1996 --------- ------------------------------------------ 1st Qtr 1st Qtr 2nd Qtr Six Mos. 3rd Qtr --------- ------------------------------------------ OLD RULES EPS (As Reported-APB 15) Primary $ 0.65 $ 0.58 $ 0.68 $ 1.25 $ 0.60 Fully Diluted $ 0.65 $ 0.57 $ 0.66 $ 1.23 $ 0.60 NEW RULES EPS (Restated-FAS 128) Basic $ 0.68 $ 0.61 $ 0.71 $ 1.32 $ 0.64 Diluted $ 0.65 $ 0.57 $ 0.66 $ 1.23 $ 0.60 Computation Under FAS 128: - ------------------------- Weighted Average Common Shares Outstanding-Basic 387,130 394,836 386,788 390,812 385,740 Shares Issued on Conversion: Debentures - 10,740 9,700 10,220 4,719 Warrants 17,691 21,156 21,096 21,126 21,310 Convertible Preferred Stock 118 178 170 174 171 --------- ------------------------------------------ Weighted Average Shares 404,939 426,910 417,754 422,332 411,940 ========= ========================================== Net Income $ 264,973 $ 243,151 $ 278,321 $ 521,472 $ 248,509 Preferred Dividends (2,492) (2,496) (2,494) (4,990) (2,494) --------- ------------------------------------------- Net Income Available to Common Shareholders 262,481 240,655 275,827 516,482 246,015 --------- ------------------------------------------ Interest on Convertible Debentures, Net of Tax - 1,058 841 1,899 478 Dividends on Conv. Preferred 20 23 21 44 21 --------- ------------------------------------------ Diluted Net Income $ 262,501 $ 241,736 $ 276,689 $ 518,425 $246,514 ========= ========================================== 1996 -------------------- Nine Mos. 4th Qtr -------------------- OLD RULES EPS (As Reported-APB 15) Primary $ 1.86 $ 0.61 Fully Diluted $ 1.81 $ 0.61 NEW RULES EPS (Restated-FAS 128) Basic $ 1.96 $ 0.64 Diluted $ 1.83 $ 0.61 Computation Under FAS 128: - ------------------------- Weighted Average Common Shares Outstanding-Basic 389,109 387,970 Shares Issued on Conversion: Debentures 8,373 - Warrants 21,188 18,769 Convertible Preferred Stock 173 165 -------------------- Weighted Average Shares 418,843 406,904 ==================== Net Income $ 769,981 $ 249,720 Preferred Dividends (7,484) (2,493) -------------------- Net Income Available to Common Shareholders 762,497 247,227 -------------------- Interest on Convertible Debentures, Net of Tax 2,377 - Dividends on Conv. Preferred 65 21 -------------------- Diluted Net Income $ 764,939 $ 247,248 ==================== YEAR ---------------------------------------------- 1996 1995 1994 1993 ---------------------------------------------- OLD RULES EPS (As Reported-APB 15) Primary $ 2.47 $ 2.29 $ 1.96 $ 1.43 Fully Diluted $ 2.41 $ 2.15 $ 1.85 $ 1.36 NEW RULES EPS (Restated-FAS 128) Basic $ 2.60 $ 2.35 $ 1.96 $ 1.43 Diluted $ 2.44 $ 2.20 $ 1.85 $ 1.36 Computation Under FAS 128: - ------------------------- Weighted Average Common Shares Outstanding-Basic 388,354 385,130 375,778 372,168 Shares Issued on Conversion: Debentures 6,270 18,392 25,564 25,576 Warrants 20,583 10,370 - - Convertible Preferred Stock 171 544 2,960 4,956 ---------------------------------------------- Weighted Average Shares 415,378 414,436 404,302 402,700 ============================================== Net Income $1,019,701 $ 913,891 $ 749,200 $ 559,312 Preferred Dividends (9,977) (10,149) (13,107) (25,566) ---------------------------------------------- Net Income Available to Common Shareholders 1,009,724 903,742 736,093 533,746 ---------------------------------------------- Interest on Convertible Debentures, Net of Tax 2,377 6,845 10,454 10,463 Dividends on Conv. Preferred 86 258 1,463 3,074 ---------------------------------------------- Diluted Net Income $1,012,187 $ 910,845 $ 748,010 $ 547,283 ============================================== EX-12 4 FIXED CHARGES EXHIBIT 12 THE BANK OF NEW YORK COMPANY, INC. Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges, Distribution on Trust Preferred Securities and Preferred Stock Dividends (Dollars in millions) For the three months ended March 31, 1997 1996 EARNINGS ---- ---- - -------- Income Before Income Taxes $437 $395 Fixed Charges, Excluding Interest on Deposits 107 136 ---- ---- Income Before Income Taxes and Fixed Charges, Excluding Interest on Deposits 544 531 Interest on Deposits 301 291 ---- ---- Income Before Income Taxes and Fixed Charges, Including Interest on Deposits $845 $822 ==== ==== FIXED CHARGES - ------------- Interest Expense, Excluding Interest on Deposits $ 98 $128 One-Third Net Rental Expense* 9 8 ---- ---- Total Fixed Charges, Excluding Interest on Deposits 107 136 Interest on Deposits 300 291 ---- ---- Total Fixed Charges, Including Interest on Deposits $407 $427 ==== ==== DISTRIBUTION ON TRUST PREFERRED SECURITIES, - ------------------------------------------- PRE TAX BASIS $ 12 $ - - ------------- ==== ==== PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ 4 $ 4 - ---------------------------------------- ==== ==== EARNINGS TO FIXED CHARGES RATIOS - -------------------------------- Excluding Interest on Deposits 5.08x 3.90x Including Interest on Deposits 2.07 1.93 EARNINGS TO COMBINED FIXED CHARGES & PREFERRED STOCK DIVIDENDS RATIOS - ---------------------------------- Excluding Interest on Deposits 4.42 3.79 Including Interest on Deposits 2.00 1.91 * The proportion deemed representative of the interest factor. EX-27 5
9 This schedule contains summary financial information which is qualified entirely by reference to The Bank of New York Company, Inc.'s Form 10-Q for the period ended March 31, 1997. 0000009626 THE BANK OF NEW YORK COMPANY, INC. 1,000,000 3-MOS DEC-31-1997 JAN-1-1997 MAR-31-1997 8,301 1,648 482 1,736 3,862 1,129 1,084 36,771 869 58,384 41,262 6,425 2,100 1,817 0 112 3,385 1,523 58,384 746 70 71 887 301 399 488 60 7 446 437 265 0 0 265 0.65 0.65 4.24 208 222 0 0 901 109 17 869 649 38 182
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