-----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, E6tP0ei4yZgPcngSsjxxy/CKDQac6oyf8CX6mGqRdG3cvnxhc69V4sM4iliTGbwO 5oo2JSHomYxp4k5jY4eO2g== 0000009626-99-000027.txt : 19990816 0000009626-99-000027.hdr.sgml : 19990816 ACCESSION NUMBER: 0000009626-99-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: SEC FILE NUMBER: 001-06152 FILM NUMBER: 99688066 BUSINESS ADDRESS: STREET 1: ONE WALL STREET 10TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 2124951784 MAIL ADDRESS: STREET 1: 100 CHURCH STREET 9TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 10-Q 1 SECOND QUARTER 1999 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 June 30, 1999 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) One 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 735,290,016 shares as of July 31, 1999 2 THE BANK OF NEW YORK COMPANY, INC. FORM 10-Q TABLE OF CONTENTS PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Consolidated Balance Sheets June 30, 1999 and December 31, 1998 3 Consolidated Statements of Income For the Three Months and Six Months Ended June 30, 1999 and 1998 4 Consolidated Statement of Changes In Shareholders' Equity For the Six Months Ended June 30, 1999 5 Consolidated Statements of Cash Flows For the Six Months Ended June 30, 1999 and 1998 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures about Market Risk. (See "Trading Activities") 12 PART II. OTHER INFORMATION - -------------------------- Item 2. Sales of Unregistered Common Stock 23 Item 4. Submission of Matters to Vote of Security Holders 23 Item 6. Exhibits and Reports on Form 8-K 23 SIGNATURE 25 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements - ----------------------------- THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited)
June 30, December 31, 1999 1998 ---- ---- Assets - ------ Cash and Due from Banks $ 5,619 $ 3,999 Interest-Bearing Deposits in Banks 4,499 4,504 Securities: Held-to-Maturity (fair value of $774 in 1999 and $923 in 1998) 817 964 Available-for-Sale 5,205 5,451 ------- ------- Total Securities 6,022 6,415 Trading Assets at Fair Value 1,699 1,637 Federal Funds Sold and Securities Purchased Under Resale Agreements 2,583 3,281 Loans (less allowance for credit losses of $595 in 1999 and $636 in 1998) 37,792 37,750 Premises and Equipment 854 856 Due from Customers on Acceptances 853 946 Accrued Interest Receivable 295 355 Other Assets 7,555 3,760 ------- ------- Total Assets $67,771 $63,503 ======= ======= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $10,895 $11,480 Interest-Bearing Domestic 16,120 16,091 Foreign Offices 20,462 17,061 ------- ------- Total Deposits 47,477 44,632 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,639 1,571 Other Borrowed Funds 3,703 4,536 Acceptances Outstanding 864 951 Accrued Taxes and Other Expenses 2,165 2,183 Accrued Interest Payable 126 188 Other Liabilities 740 608 Long-Term Debt 2,277 2,086 ------- ------- Total Liabilities 60,991 56,755 ------- ------- Guaranteed Preferred Beneficial Interests in the Company's Junior Subordinated Deferrable Interest Debentures 1,500 1,300 ------- ------- Shareholders' Equity Class A Preferred Stock - par value $2.00 per share, authorized 5,000,000 shares, outstanding 16,887 shares in 1999 and 22,820 shares in 1998 1 1 Common Stock-par value $7.50 per share, authorized 1,600,000,000 shares, issued 974,810,001 shares in 1999 and 970,767,767 shares in 1998 7,311 7,281 Additional Capital 242 142 Retained Earnings 1,744 1,318 Accumulated Other Comprehensive Income 217 312 ------- ------- 9,515 9,054 Less: Treasury Stock (212,980,823 shares in 1999 and 197,648,459 shares in 1998), at cost 4,222 3,593 Loan to ESOP (1,801,003 shares in 1999 and 1998), at cost 13 13 ------- ------- Total Shareholders' Equity 5,280 5,448 ------- ------- Total Liabilities and Shareholders' Equity $67,771 $63,503 ======= ======= - ---------------------------------------------------------------------------------------- Note: The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date. See accompanying Notes to Financial Statements.
4 THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited)
For the three For the six months ended months ended June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- Interest Income - --------------- Loans $ 659 $ 695 $1,319 $1,364 Securities Taxable 63 72 128 146 Exempt from Federal Income Taxes 12 16 22 30 ----- ----- ------ ------ 75 88 150 176 Deposits in Banks 54 40 118 83 Federal Funds Sold and Securities Purchased Under Resale Agreements 46 42 99 72 Trading Assets 5 5 10 9 ---- ----- ----- ------ Total Interest Income 839 870 1,696 1,704 ----- ----- ----- ------ Interest Expense - ---------------- Deposits 324 343 641 667 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 36 31 67 65 Other Borrowed Funds 28 54 75 103 Long-Term Debt 35 34 70 66 ----- ----- ----- ------ Total Interest Expense 423 462 853 901 ----- ----- ----- ------ Net Interest Income 416 408 843 803 - ------------------- Provision for Credit Losses 15 5 30 10 ----- ----- ----- ------ Net Interest Income After Provision for Credit Losses 401 403 813 793 ----- ----- ----- ------ Noninterest Income - ------------------ Processing Fees Securities 302 239 593 469 Cash 70 64 139 127 ----- ----- ----- ------ 372 303 732 596 Trust and Investment Fees 60 51 118 101 Service Charges and Fees 91 85 176 166 Securities Gains 50 46 100 74 Other 78 76 150 176 ----- ----- ----- ------ Total Noninterest Income 651 561 1,276 1,113 ----- ----- ----- ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 311 287 622 570 Net Occupancy 40 43 81 84 Furniture and Equipment 21 21 45 41 Other 141 121 274 244 ----- ----- ----- ------ Total Noninterest Expense 513 472 1,022 939 ----- ----- ----- ------ Income Before Income Taxes 539 492 1,067 967 Income Taxes 188 172 372 344 Distribution on Trust Preferred Securities 28 25 56 45 ----- ----- ----- ------ Net Income $ 323 $ 295 $ 639 $ 578 - ---------- ===== ===== ===== ====== Net Income Available to Common Shareholders $ 323 $ 295 $ 639 $ 578 - ------------------------------------------- ===== ===== ===== ====== Per Common Share Data: - ---------------------- Basic Earnings $0.42 $0.39 $0.84 $ 0.78 Diluted Earnings 0.42 0.38 0.82 0.74 Cash Dividends Paid 0.14 0.13 0.28 0.26 Diluted Shares Outstanding 773 783 776 782 - ------------------------------------------------------------------------------------------------ See accompanying Notes to Financial Statements
5
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statement of Changes in Shareholders' Equity For the six months ended June 30, 1999 (In millions) (Unaudited) Preferred Stock Balance, January 1 $ 1 ------- Balance, June 30 1 ------- Common Stock Balance, January 1 7,281 Issuances in Connection with Employee Benefit Plans 30 ------- Balance, June 30 7,311 ------- Additional Capital Balance, January 1 142 Common Stock Issuances in Connection with Employee Benefit Plans 100 ------- Balance, June 30 242 ------- Retained Earnings Balance, January 1 1,318 Net Income 639 Cash Dividends (213) ------- Balance, June 30 1,744 ------- Accumulated Other Comprehensive Income Securities Valuation Allowance Balance, January 1 340 Change in Fair Value of Securities Available-for-Sale, Net of $29 Million in Taxes (29) Reclassification Adjustment, Net of $36 Million in Taxes (65) ------- Balance, June 30 246 ------- Foreign Currency Items Balance, January 1 (28) Foreign Currency Translation Adjustment, Net of $1 Million in Tax Benefits (1) ------- Balance, June 30 (29) ------- Less Treasury Stock Balance, January 1 3,593 Issued (46) Acquired 675 ------- Balance, June 30 4,222 ------- Less Loan to ESOP Balance, January 1 13 ------- Balance, June 30 13 ------- Total Shareholders' Equity, June 30 $ 5,280 ======= - ------------------------------------------------------------------------------------ Comprehensive Income for the three months ended June 30, 1999 and 1998 was $286 million and $316 million. Comprehensive income for the six months ended June 30, 1999 and 1998 was $544 million and $647 million. 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 six months Ended June 30, 1999 1998 ---- ---- Operating Activities Net Income $ 639 $ 578 Adjustments to Determine Net Cash Provided (Used) by Operating Activities: Provision for Losses on Loans and Other Real Estate 30 11 Depreciation and Amortization 106 90 Deferred Income Taxes 221 102 Securities Gains (100) (74) Change in Trading Activities (227) 702 Change in Accruals and Other, Net (182) (1,085) ------ ------ Net Cash Provided by Operating Activities 487 324 ------ ------ Investing Activities Change in Interest-Bearing Deposits in Banks (118) 200 Purchases of Securities Held-to-Maturity (189) (259) Maturities of Securities Held-to-Maturity 289 375 Purchases of Securities Available-for-Sale (1,178) (1,477) Sales of Securities Available-for-Sale 450 745 Maturities of Securities Available-for-Sale 236 517 Net Principal Disbursed on Loans to Customers (3,560) (3,190) Sales of Loans and Other Real Estate 107 159 Change in Federal Funds Sold and Securities Purchased Under Resale Agreements 698 1,653 Purchases of Premises and Equipment (33) (38) Acquisitions, Net of Cash Acquired (56) (419) Proceeds from the Sale of Premises and Equipment 2 41 Other, Net 12 (51) ------ ------ Net Cash Provided (Used) by Investing Activities (3,340) (1,744) ------ ------ Financing Activities Change in Deposits 3,171 2,092 Change in Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,068 (333) Change in Other Borrowed Funds (381) 1,441 Proceeds from the Issuance of Trust Preferred Securities 200 300 Proceeds from the Issuance of Long-Term Debt 206 210 Repayments of Long-Term Debt (21) (16) Issuance of Common Stock 177 251 Treasury Stock Acquired (675) (759) Cash Dividends Paid (213) (194) ------ ------ Net Cash Provided (Used) by Financing Activities 4,532 2,992 ------ ------ Effect of Exchange Rate Changes on Cash (59) (12) ------ ------ Change in Cash and Due From Banks 1,620 1,560 Cash and Due from Banks at Beginning of Period 3,999 5,769 ------ ------ Cash and Due from Banks at End of Period $5,619 $7,329 ====== ====== - ---------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Information Cash Paid During the Period for: Interest $ 915 $ 931 Income Taxes 148 194 Noncash Investing Activity (Primarily Foreclosure of Real Estate) 2 4 - ---------------------------------------------------------------------------- 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. 2. Acquisitions and Dispositions ----------------------------- On July 22, 1999 the Company completed the sale of BNY Factoring LLC (Factor) to General Motors Acceptance Corporation for $1.8 billion in cash. The sale included related Canadian and UK factoring and asset-based lending operations. The Company recorded a gain in excess of $1 billion on the sale. The June 30, 1999 balance sheet includes related assets of $3.8 billion (net of a $37 million allowance for credit losses) as part of other assets that were classified as held for sale. The decision to sell the Factor was based on the Company's desire to focus on expanding its higher growth, less asset- sensitive core activities in securities servicing, cash processing, and trust and investment services. On March 23, 1999, the Company announced its agreement to purchase RBS Trust Bank Ltd. from the Royal Bank of Scotland plc. In addition, the Company will acquire a 30% equity ownership in RBSI Security Services (Holdings) Ltd., headquartered on the island of Jersey. The proposed transaction is subject to final regulatory approvals, which are expected in September 1999. RBS Trust Bank Ltd. has over $640 billion of assets under administration and over $11 billion in total assets as of June 30, 1999. 3. Allowance for Credit Losses --------------------------- Transactions in the allowance for credit losses are summarized as follows: Six months ended June 30, (In millions) 1999 1998 ---- ---- Balance, Beginning of Period $ 636 $ 641 Charge-Offs (42) (19) Recoveries 8 10 ----- ----- Net Charge-Offs (34) (9) Acquisition/(Disposition) (37) 4 Provision 30 10 ----- ----- Balance, End of Period $ 595 $ 646 ===== ===== 8 4. Capital Transactions -------------------- The Company has completed its previously authorized 18 million share buy back. The Company has approved a new plan to buy back an additional 30 million of its common shares. As of July 31, 1999, approximately 5 million shares remain to be purchased under this new plan. 5. New Accounting Pronouncements ----------------------------- Effective January 1, 2001, a new accounting standard will require the Company to record all derivatives on the balance sheet at fair value and apply new accounting practices for hedging activities. The Company has not yet determined the impact of the new accounting standard. 6. Earnings Per Share ------------------ The following table illustrates the computations of basic and diluted earnings per share for the three and six months ended June 30, 1999 and 1998: Three Months Ended Six Months Ended June 30, June 30, (In millions, except per share amounts) 1999 1998 1999 1998 ---- ---- ---- ---- Net Income $323 $295 $639 $578 ==== ==== ==== ==== Diluted Net Income $323 $295 $639 $578 ==== ==== ==== ==== Basic Weighted Average Shares Outstanding 761 749 763 744 Shares Issued on Conversion: Warrants - 22 - 25 Employee Stock Options 12 12 13 13 ---- ---- ---- ---- Diluted Weighted Average Shares Outstanding 773 783 776 782 ==== ==== ==== ==== Basic Earnings Per Share: $ 0.42 $ 0.39 $ 0.84 $ 0.78 Diluted Earnings Per Share: 0.42 0.38 0.82 0.74 7. 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 Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations - --------------------- The Company's actual results of future operations may differ from those set forth in certain forward-looking statements contained herein. Refer to further discussion under the heading "Forward Looking Statements". The Company's reported second quarter diluted earnings per share were 42 cents, up 11% from the 38 cents earned in the second quarter of 1998. Net income for the second quarter was a record $323 million, up 10% from the $295 million earned in the same period last year. Diluted earnings per share were 82 cents for the first half of 1999, up 11% from the 74 cents earned last year. Net income for the first six months was a record $639 million, an increase of 11% over last year's $578 million. Continued strong revenue growth in the Company's fee based businesses combined with the benefits of the ongoing emphasis on cost control and capital management produced another record performance. Substantial new business wins coupled with strong and active securities markets worldwide drove securities servicing revenues up 27% from the second quarter of 1998, matching the first quarter's superior performance. Trust and investment fees once again grew 16% led by strong investment performance, new customers, and record levels in U.S. equity markets. Overall, noninterest income contributed 61% of revenues for the quarter, demonstrating continued momentum in fee generating businesses. In securities servicing, all areas did well with global custody, mutual funds, securities lending, ADRs and execution services particularly strong. Domestic and global custody continued to gain market share from new business wins as assets under custody grew by 20% from a year ago reaching $5.3 trillion at quarter end. Trust and investment's results were due to strong investment performance which continues to attract new customers. Focus on cost control was evident, as noninterest expense for the quarter was flat compared with the first quarter of 1999 and the efficiency ratio improved to 49.9%. As part of its capital management program, the Company has repurchased all of the 18 million shares authorized under its buyback program. The Company has approved a new plan to buy back an additional 30 million of its common shares. Return on average common equity for the second quarter of 1999 was 24.82% compared with 24.03% in the second quarter of 1998. Return on average assets for the second quarter of 1999 was 1.95% compared with 1.90% in the second quarter of 1998. For the first six months of 1999, return on average common equity totaled 24.65% compared with 24.49% in 1998. Return on average assets was 1.94% for the first six months of 1999 compared with 1.91% in 1998. Net interest income on a taxable equivalent basis for the second quarter decreased to $427 million from $436 million in the first quarter of 1999. For the first six months of 1999, net interest income on a taxable equivalent basis was $863 million compared with $828 million in the first half of 1998. Fees from the Company's securities servicing businesses reached $302 million for the second quarter compared with $239 million last year. For the first six months of 1999 fees from the Company's securities servicing businesses totaled $593 million, growing by 27% compared with the corresponding period of the prior year. All areas contributed to strong internal growth of 16%. In cash processing, revenues from cash management were up 11% driven by continued cross selling to the Company's securities servicing customers. Fees from funds transfer grew by 10% from the previous year, the result of continued market share gains and the firming global economy. Also benefiting from the recovery in world markets were trade finance revenues which were up 10 8% from a year ago. Overall, cash processing fees grew by 10% reaching $70 million for the quarter. Trust and investment fees were $60 million for the quarter, an increase of 16% over last year driven by strong results from personal trust, personal asset management and retail investment products. Foreign exchange and other trading revenues were $46 million this quarter compared with $42 million in the second quarter last year. Tangible diluted earnings per share (earnings before the amortization of goodwill and intangibles) were 44 cents per share in the second quarter of 1999, up from 40 cents per share in the second quarter of 1998. On the same basis, tangible return on average common equity was 37.79% in 1999 compared with 37.13% in 1998; and tangible return on average assets was 2.11% in 1999 compared with 2.07% in 1998. Tangible diluted earnings per share were 87 cents per share for the first six months of 1999, compared with 79 cents per share in 1998. Tangible return on average common equity was 37.53% in the first six months of 1999 compared with 37.41% in 1998; and tangible return on average assets was 2.11% in the first six months of 1999 compared with 2.09% last year. Amortization of intangibles for the second quarter and the first six months of 1999 was $27 million and $53 million compared with $25 million and $49 million last year. Average diluted shares outstanding were 773 million for the quarter, down from the 779 million in the first quarter of 1999 and 783 million in the prior year period as a result of the Company's stock buyback programs. CAPITAL The Company's estimated Tier 1 capital and Total capital ratios remained strong at 7.61% and 11.49% at June 30, 1999 compared with 7.84% and 11.86% at March 31, 1999, and 7.25% and 11.24% at June 30, 1998. Tangible common equity as a percent of total assets was 5.59% at June 30, 1999 compared with 5.88% at March 31, 1999 and 5.55% one year ago. The leverage ratio was 7.65% at June 30, 1999 compared with 7.69% at March 31, 1999 and 7.17% one year ago. NET INTEREST INCOME
2nd 1st 2nd Quarter Quarter Quarter Year to Date ------- ------- ------- -------------- (In millions) 1999 1999 1998 1999 1998 ---- ---- ---- ---- ---- Net Interest Income $427 $436 $424 $863 $828 Net Interest Rate Spread 2.18% 2.29% 2.27% 2.24% 2.25% Net Yield on Interest- Earning Assets 3.07 3.18 3.28 3.13 3.30
Net interest income on a taxable equivalent basis was $427 million in the second quarter of 1999 compared with $436 million in the first quarter of 1999 and $424 million in the second quarter of 1998. The net interest rate spread was 2.18% in the second quarter of 1999, compared with 2.29% in the first quarter of 1999 and 2.27% one year ago. The net yield on interest-earning assets was 3.07% compared with 3.18% in the first quarter of 1999 and 3.28% in last year's second quarter. For the first six months of 1999, net interest income on a taxable equivalent basis, amounted to $863 million compared with $828 million in the first half of 1998. The year-to-date net interest rate spread was 2.24% in 1999 compared with 2.25% in 1998, while the net yield on interest-earning assets was 3.13% in 1999 and 3.30% in 1998. 11 The declines in net interest income, interest rate spread and yield from the first quarter were primarily the result of continued growth in loans that support our securities servicing activities. These loans are lower yielding and short term in nature. Interest income would have been increased by $4 million and $3 million for the second quarters of 1999 and 1998 and $6 million for the first six months of 1999 and 1998 if loans on nonaccrual status at June 30, 1999 and 1998 had been performing for the entire quarter. NONINTEREST INCOME
2nd 1st 2nd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ------------ (In millions) 1999 1999 1998 1999 1998 ---- ---- ---- ---- ---- Processing Fees Securities $302 $291 $239 $ 593 $ 469 Cash 70 69 64 139 127 ---- ---- ---- ------ ------ 372 360 303 732 596 Trust and Investment Fees 60 58 51 118 101 Service Charges and Fees 91 85 85 176 166 Foreign Exchange and Other Trading Activities 46 42 42 88 88 Securities Gains 50 50 46 100 74 Other 32 30 34 62 88 ---- ---- ---- ------ ------ Total Noninterest Income $651 $625 $561 $1,276 $1,113 ==== ==== ==== ====== ======
Total noninterest income reached $651 million increasing 4% from the first quarter of 1999 and 16% from the prior year period. Securities servicing fees grew 4% on a linked quarter basis reaching $302 million and 27% from a year ago. Fees from trust and investment were up $2 million from the first quarter reaching $60 million, and $9 million or 16% from the second quarter of 1998. Service charges and fees benefited from improved capital markets activity and rose 7% from the first quarter and the prior year period reaching $91 million. Securities gains of $50 million were level with the first quarter of 1999 and up slightly from the $46 million in the second quarter of 1998. 12 TRADING ACTIVITIES The fair value and notional amounts of the Company's financial instruments held for trading purposes at June 30, 1999 are as follows: 2nd Quarter 1999 June 30, 1999 Average ---------------------------- ------------------- (In millions) Fair Value Fair Value ------------------ ------------------- Notional Trading Account Amount Assets Liabilities Assets Liabilities - --------------- -------- ------ ----------- ------ ----------- Interest Rate Contracts: Futures and Forward Contracts $28,968 $ 8 $ - $ 9 $ - Swaps 62,382 633 495 679 606 Written Options 67,854 - 601 - 524 Purchased Options 32,032 66 - 73 - Foreign Exchange Contracts: Written Options 41,101 - 224 - 201 Purchased Options 44,305 242 - 209 - Commitments to Purchase and Sell Foreign Exchange 53,971 453 417 494 460 Securities 297 274 881 169 ------ ------ ------ ------ Total Trading Account $1,699 $2,011 $2,345 $1,960 ====== ====== ====== ====== The Company manages trading risk through a system of position limits, a value at risk (VAR) methodology, stop loss advisory triggers, and other market sensitivity measures. Risk is monitored and reported to senior management by an independent unit on a daily basis. The VAR methodology captures, based on certain assumptions, the potential overnight pre-tax dollar loss from adverse changes in fair values of all trading positions. The calculation assumes a one day holding period for most instruments, utilizes a 99% confidence level, and incorporates the non-linear characteristics of options. This methodology does not attempt to evaluate risk created from extraordinary financial, economic or other occurrences, and any risk evaluation system has judgmental aspects. The following table indicates the calculated VAR amounts for the trading portfolio for the periods indicated. During these periods, the daily trading loss did not exceed the calculated VAR amounts on any given day.
(In millions) 2nd Quarter 1999 Year-to-date 1999 ------------------------- ------------------------- Market Risk Average Minimum Maximum Average Minimum Maximum 06/30/99 - ----------- ------- ------- ------- ------- ------- ------- -------- Interest Rate $ 4.7 $ 3.3 $ 7.1 $ 4.8 $ 2.1 $10.9 $ 4.5 Foreign Exchange 1.4 0.7 3.5 1.5 0.7 4.0 1.1 Overall Portfolio 6.1 4.5 8.7 6.3 3.7 12.1 5.6
(In millions) 2nd Quarter 1998 Year-to-date 1998 ------------------------- ------------------------- Market Risk Average Minimum Maximum Average Minimum Maximum 06/30/98 - ----------- ------- ------- ------- ------- ------- ------- -------- Interest Rate $ 4.5 $ 2.1 $ 7.0 $ 4.8 $ 2.1 $ 7.0 $ 3.9 Foreign Exchange 2.1 0.8 3.5 2.2 0.8 4.0 1.4 Overall Portfolio 6.6 4.0 9.0 7.0 4.0 9.7 5.3
NONINTEREST EXPENSE AND INCOME TAXES Continued adherence to expense control resulted in total noninterest expense for the quarter of $513 million, compared with $509 million in the first quarter of 1999. The increase of 9% from $472 million in the same period last year was principally due to acquisitions. Noninterest expense for the 13 second quarter included $5 million related to making computer systems Year 2000 compliant compared with $8 million in the prior year. For the first six months of 1999, Year 2000 expenses were $11 million compared with $16 million for the first six months of 1998. The efficiency ratio for the second quarter of 1999 was 49.9% compared with 50.3% in both the first quarter of 1999 and the second quarter of 1998. For the first half of 1999, the efficiency ratio was 50.1% compared with 50.2% last year. The effective tax rate for the second quarter and the first six months of 1999 was 34.9% in both periods compared with 35.0% and 35.6% last year. NONPERFORMING ASSETS
Change 6/30/99 vs. (Dollars in millions) 6/30/99 3/31/99 3/31/99 -------- -------- -------- Loans: Commercial Real Estate $ 1 $ 4 $ (3) Other Commercial 103 103 - Foreign 68 66 2 Regional Commercial 33 35 (2) ----- ----- ----- Total Loans 205 208 (3) Other Real Estate 15 14 1 ----- ----- ----- Total $ 220 $ 222 $ (2) ===== ===== ===== Nonperforming Assets Ratio 0.6% 0.5% Allowance/Nonperforming Loans 290.2 303.6 Allowance/Nonperforming Assets 271.0 284.3
The June 30, 1999 nonperforming assets exclude $21 million classified as assets held for sale related to the BNY Financial Corporation transaction. At June 30, 1999, impaired loans (nonaccrual loans over $1 million) aggregated $173 million, of which $148 million exceeded their fair value by $72 million. Impaired loans at June 30, 1998, totaled $141 million, of which $105 million exceeded their fair value by $38 million. For the second quarters of 1999 and 1998, the average amounts of impaired loans were $174 million and $146 million. Interest income (cash received) of $60 thousand was received on the impaired loans in the second quarter of 1999, while $436 thousand was received during the second quarter of 1998. 14 CREDIT LOSS PROVISION AND NET CHARGE-OFFS
2nd 1st 2nd Quarter Quarter Quarter Year-to-date ------- ------- ------- ------------- (In millions) 1999 1999 1998 1999 1998 ---- ---- ---- ---- ---- Provision $ 15 $ 15 $ 5 $ 30 $ 10 ==== ==== ==== ==== ==== Net(Charge-offs)Recoveries: Commercial Real Estate 1 (2) 1 (1) 2 Other Commercial (13) (7) (3) (20) (6) Consumer (1) (1) (1) (2) (2) Foreign (2) (9) - (11) (1) Other - - (1) - (2) ---- ---- ---- ---- ---- Total $(15) $(19) $ (4) (34) (9) ==== ==== ==== ==== ==== Other Real Estate Expenses $ - $ - $ - $ - $ 1
The allowance for credit losses was $595 million, or 1.55% of loans at June 30, 1999 compared with $632 million, or 1.59% of loans at March 31, 1999 and $646 million, or 1.65% of loans at June 30, 1998. The ratio of the allowance to nonperforming assets was 271.0% at June 30, 1999 compared with 284.3% at March 31, 1999 and 324.9% at June 30, 1998. Based on an evaluation of individual credits, historical credit losses, and global economic factors, the Company has allocated its allowance for credit losses as follows: 6/30/99 3/31/99 12/31/98 ------- -------- -------- Real Estate 4% 2% 3% Domestic Commercial and Industrial 80 82 74 Consumer - - 1 Foreign 13 13 11 Unallocated 3 3 11 --- --- --- 100% 100% 100% Such an allocation is inherently judgmental, and the entire allowance for credit losses is available to absorb credit losses regardless of the nature of the loss. The increase in the allowance allocated to domestic commercial and industrial loans in 1999 reflects the increase in nonperforming loans in 1999 and other economic factors. The discussion below contains certain forward looking statements. These statements are qualified by the discussion of "Forward Looking Statements" on page 20. The Company continues to emphasize growth in its fee based businesses and regularly reviews its credit portfolio, to reduce its exposure to potential credit losses and to ensure that its relationships justify the risks associated with credit extension. During the third quarter, the Company has been reviewing its portfolio to determine the need to accelerate the disposition of some of its loans. Depending on the results of this review the Company may record a liquidity charge to noninterest income, an increase in its provision and charge-offs and a related decrease in nonperforming loans in the third quarter of 1999. The ultimate size of the accelerated disposition program is dependent on economic, credit, and business events in the third quarter. 15 SEGMENT PROFITABILITY Segment Data Effective January 1, 1999, the Company adopted a new accounting pronouncement requiring disclosure about the Company's segments based on a management approach. The Company has an internal information system that produces performance data for its four segments along product and service lines. The Trust, and Securities and Cash Processing segment provides a broad array of fee based services. Trust includes personal trust and investment management. Securities servicing includes services to both institutional issuers and investors. Cash processing products primarily relate to funds transfer, deposit services and trade finance. The Corporate Banking segment provides lending services, including asset based financing, to domestic and international commercial enterprises. The Retail Banking segment includes consumer lending, residential mortgage lending, and retail deposit services. The Financial Markets segment includes trading, investing and leasing activities, and treasury services to other segments. The Company's segment data has been determined on an internal management basis of accounting, other than the generally accepted accounting principles used for consolidated financial reporting. These measurement principles are designed to ensure that reported results of the segments track their economic performance. Segment results are subject to restatement when improvements are made in the measurement principles or organizational changes are made. In 1999, net interest income for the Corporate Banking and Financial Markets segments has been restated to reflect adjustments to deposit balances allocated to these sectors. The measure of revenues and profit or loss by operating segment has been adjusted to present segment data on a taxable equivalent basis. The provision for credit losses allocated to each reportable segment is based on management's judgment as to average credit losses that will be incurred in the operations of the segment over a credit cycle of a period of years. Management's judgment includes the following factors among others: historical charge-off experience and the volume, composition and growth of the loan portfolio. This method is different from that required under generally accepted accounting principles as it anticipates future losses which are not yet probable and therefore not recognizable under generally accepted accounting principles. Assets and liabilities are match funded. Support and other indirect expenses are allocated to segments based on general guidelines. The segments contributed to the Company's profitability as follows:
In Millions Trust, and Securities For the Quarter Ended and Cash Corporate Retail Financial Reconciling Consolidated June 30, 1999 Processing Banking Banking Markets Items* Total - --------------------- ---------- --------- ------- --------- ----------- ------------ Net Interest Income $ 100 $ 167 $ 120 $ 23 $ 6 $ 416 Provision for Credit Losses - 32 - (2) (15) 15 Noninterest Income 465 92 23 60 11 651 Noninterest Expense 278 79 72 18 66 513 ------ ------- ------ ------- ------ ------- Income Before Taxes $ 287 $ 148 $ 71 $ 67 $ (34) $ 539 ====== ======= ====== ======= ====== ======= Average Assets $5,315 $34,847 $3,962 $20,822 $1,591 $66,537 ====== ======= ====== ======= ====== =======
16
In Millions Trust, and Securities For the Quarter Ended and Cash Corporate Retail Financial Reconciling Consolidated June 30, 1998 Processing Banking Banking Markets Items* Total - --------------------- ---------- --------- ------- --------- ----------- ------------ Net Interest Income $ 110 $ 150 $ 129 $ 20 $ (1) $ 408 Provision for Credit Losses - 28 6 - (29) 5 Noninterest Income 377 87 20 63 14 561 Noninterest Expense 249 67 73 14 69 472 ------ ------- ------ ------- ------ ------- Income Before Taxes $ 238 $ 142 $ 70 $ 69 $ (27) $ 492 ====== ======= ====== ======= ====== ======= Average Assets $5,723 $33,774 $4,727 $16,490 $1,520 $62,234 ====== ======= ====== ======= ====== =======
In Millions Trust, and Securities For the Half Ended and Cash Corporate Retail Financial Reconciling Consolidated June 30, 1999 Processing Banking Banking Markets Items* Total - --------------------- ---------- --------- ------- --------- ----------- ------------ Net Interest Income $ 206 $ 336 $ 234 $ 52 $ 15 $ 843 Provision for Credit Losses - 61 2 (2) (31) 30 Noninterest Income 912 178 44 109 33 1,276 Noninterest Expense 566 144 147 35 130 1,022 ------ ------- ------ ------- ------ ------- Income Before Taxes $ 552 $ 309 $ 129 $ 128 $ (51) $ 1,067 ====== ======= ====== ======= ====== ======= Average Assets $6,355 $33,090 $4,246 $21,004 $1,580 $66,275 ====== ======= ====== ======= ====== =======
In Millions Trust, and Securities For the Half Ended and Cash Corporate Retail Financial Reconciling Consolidated June 30, 1998 Processing Banking Banking Markets Items* Total - --------------------- ---------- --------- ------- --------- ----------- ------------ Net Interest Income $ 197 $ 314 $ 255 $ 40 $ (3) $ 803 Provision for Credit Losses - 56 7 - (53) 10 Noninterest Income 751 161 39 120 42 1,113 Noninterest Expense 489 130 152 32 136 939 ------ ------- ------ ------- ------ ------- Income Before Taxes $ 459 $ 289 $ 135 $ 128 $ (44) $ 967 ====== ======= ====== ======= ====== ======= Average Assets $5,676 $32,697 $4,727 $16,322 $1,504 $60,926 ====== ======= ====== ======= ====== ======= * - Reconciling items for net interest income primarily relate to the recording of interest income on a taxable equivalent basis, reallocation of capital and the funding of goodwill. Reconciling items for noninterest income primarily relate to the sale of a building in 1998. Reconciling items for noninterest expense include $27 million and $53 million of goodwill amortization for the second quarter and year-to-date for 1999 and $25 million and $49 million of goodwill amortization for the second quarter and year-to- date for 1998, Year 2000 expenses, and corporate overhead. The adjustment to the provision for credit losses reflects the difference between the aggregate of the credit provision over a credit cycle for the reportable segments and the Company's recorded provision. The reconciling items for average assets consist of goodwill and other intangible assets.
17 Segment Highlights Trust, and Securities and Cash Processing - ----------------------------------------- In the Trust, and Securities and Cash Processing segment, noninterest income in the second quarter of 1999 increased to $465 million from $377 million in the second quarter of 1998. All of the Company's businesses have shown strong internal growth with global custody, mutual funds, securities lending, ADRs, and execution services performing particularly well. Strong internal growth across all areas reached 16%, with remaining growth coming from acquisitions. Domestic and global custody continued to gain market share from new business wins as assets under custody grew by 20% from a year ago reaching $5.3 trillion at quarter end. Securities servicing fees increased to $302 million as compared with $239 million in the second quarter of 1998. Fee revenues from issuer services grew to $116 million in the second quarter of 1999, up from $98 million in the prior year's period. Investment company services increased to $99 million in the second quarter of 1999, as compared to $80 million in the second quarter of 1998. Broker/dealer services in the second quarter of 1999 were $87 million, up from $60 million last year. Fees from cash processing in the second quarter of 1999 increased to $70 million from $64 million in last year's second quarter. Revenues from cash management were up 11% driven by continued cross selling to the Company's securities servicing customers. Trade finance revenues were up 8% from a year ago as recovery in world markets continues. Fees from funds transfer grew by 10% from the previous year, the result of continued markets share gains and the firming global economy. Fees from trust and investment management grew to $60 million in the second quarter of 1999, as compared to $51 million in the second quarter of 1998, driven by strong results from personal trust, personal asset management and retail investment products. Net charge-offs in the Trust, and Securities and Cash Processing segment were zero in the second quarters of 1999 and 1998. The rise in noninterest expense is consistent with the increase in growth as well as the added salary and other expenses from acquisitions. Corporate Banking - ----------------- The Corporate Banking segment's net interest income was $167 million in the second quarter of 1999, an 11% increase from last year's $150 million. In the second quarter of 1999, average loans outstanding in the Corporate Banking segment increased 4% from the second quarter of last year. The second quarter of 1999 provision for credit losses was $32 million compared with $28 million last year. Net charge-offs in the Corporate Banking segment were $16 million and $3 million in the second quarters of 1999 and 1998. The 6% increase in noninterest income to $92 million in the current quarter reflects higher revenues associated with capital markets activities, offset by lower asset based lending revenue and lower income from the Company's offshore banking subsidiaries. Noninterest expense increased to $79 million from $67 million. Retail Banking - -------------- In the Retail Banking segment, net interest income in the second quarter of 1999 was $120 million as compared with $129 million in the second quarter of 1998. Net interest income in the branch banking network has been negatively impacted by the decline in the value of noninterest bearing sources of funds in a declining rate environment. Noninterest income increased in this same period to $23 million from $20 million. Noninterest expense in the second quarter of 1999 was $72 million as compared with $73 in the previous year's period. Net charge-offs were $1 million in both the second quarter of 1999 and 1998. 18 Financial Markets - ----------------- In the Financial Markets segment, net interest income for the quarter increased to $23 million from 1998's $20 million primarily due to increased leasing activities. Noninterest income decreased to $60 million in the second quarter of 1999 from $63 million in the second quarter of 1998, a 5% decrease reflecting decreases in foreign exchange and other trading revenue. Net recoveries were $2 million in the second quarters of 1999 and zero in the second quarter of 1998. YEAR 2000 READINESS DISCLOSURE The Year 2000 information in this document is provided without warranty or guarantee of any kind, and is not intended to supplement or amend any agreements between the Company and its customers or suppliers. The Company does not warrant or represent that its computer systems or those of its suppliers or business partners are or will be Year 2000 compliant. The Year 2000 information in this letter is subject to the Year 2000 Information and Readiness Disclosure Act, and supersedes any previous information provided by the Company concerning its Year 2000 efforts. The Company's Year 2000 compliance program consists of updating major Company-owned application systems, business-area supported systems, and the Company's proprietary customer software and evaluating the Year 2000 compliance efforts of vendors of major vendor-supplied systems. The Company's compliance efforts have also considered the Year 2000 readiness of its global sub-custodians, major service providers, correspondents, business partners, and borrowers. The current focus is to monitor continued preparedness and contingency planning. While contingency planning has been defined as part of the Year 2000 compliance program, all new measures have been incorporated into the Bank's existing Business Continuity Plans. The Company divided its major proprietary applications systems into three business line groups. The applications in each group were subjected to a phased process of assessment, renovation, certification testing, and implementation. All critical systems have completed all phases. A program is in place to continue to monitor critical systems to prevent Y2K problems from being reintroduced. Major business-line products have been made available in isolated future-dated environments for selected customers to test their interfaces and to assure themselves of the Company's compliance. The Company is satisfied with the results of testing with customers and agencies. Continued participation at the request of the agencies and customers will continue as required. Remediation of the Company's proprietary customer software has been completed. Installation on client desktop computers is substantially complete. Customers have been advised of their obligation to assure that their environments are compliant in order for the Company's software to function correctly during and after the century date change. The Company has substantially completed an evaluation of its significant business partners, including other financial service providers, correspondents, counterparties, sub-custodians, vendors and settlement agencies, for the purpose of assessing their Year 2000 compliance. The Company is currently satisfied with the information it has received concerning the progress and Year 2000 readiness programs of each significant third party. The Company will continue to monitor the readiness and progress of these parties throughout 1999. The Company intends to replace service providers that are seen as not managing the Year 2000 issue adequately. The Company considers Year 2000 readiness in its credit decisions and factors this into borrower ratings. Based on a review of significant obligors, 19 the Company believes that exposure to obligor Year 2000 problems does not present a material risk to the Company. The Company's personal computers considered to be critical to the Company's operations have been upgraded. Upgrading of physical facilities that is considered critical to the Company's operations to Year 2000 readiness are expected to be completed by the end of September 1999. The Company's contingency plans relating to Year 2000 issues include the identification and assessment of the impact of various worst case scenarios on the critical operational components for each of the Company's business units. The Company has reviewed the applicability of its current contingency plans, which include creation of an information center, establishment of special rapid response technology teams, scheduling availability of key personnel, testing and simulation activities, offsite data center facilities, and emergency backup power. These plans, with minor modification have been determined to be adequate to mitigate Year 2000 related risks. The information center, which has been established as a repository and focus for analysis of information, will publish the status of the organization internally and externally during critical periods. It is also authorized to requisition and deploy resources as needed to address unanticipated situations. Overall the Company's Year 2000 compliance program is on or ahead of schedule to meet the needs of its customers and compliance deadlines defined by its regulators. The estimated cost of the Year 2000 project is approximately $82 million. In the first half of 1999 the Company spent $11 million on making computer systems Year 2000 compliant. Total expenses since 1997 have been $62 million. A material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such problems could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of suppliers, customers and other business partners, as well as entities with which the Company does not have direct business relations, the Company is unable to determine at this time whether the consequences of the Year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. The Year 2000 compliance program is intended to significantly reduce the Company's level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of its material business partners. The Company believes that, with completion of its Year 2000-compliance program as scheduled, the possibility of significant interruptions of normal operations should be reduced. However, because of the unprecedented nature of this issue, there can be no certainty as to its impact. INTRODUCTION OF THE EURO In January 1999, eleven European countries adopted the euro as their common legal currency. In the transition period from adoption through December 31, 2001, commerce may be conducted in either the euro or the former national currencies. The Company has adapted its information technology systems and business practices to accommodate euro-denominated transactions. The introduction of the euro currency may result in increased price transparency in the euro-area countries as well as a loss of cross-currency trading in the former national currencies, and may ultimately have profound political and financial implications. Based on its knowledge at this time, the Company does not, anticipate that the introduction of the euro will have a material effect on the Company's financial condition or results of operations. 20 FORWARD LOOKING STATEMENTS The Company or its executive officers and directors on behalf of the Company, may from time to time make forward looking statements. Any such forward looking statements could be affected by a number of factors that the Company is necessarily unable to predict with accuracy, including future changes in interest rates, general credit quality, economic activity, consumer behavior, government monetary policy, legislation and regulation, competition, credit, market and operating risk, and loan demand. In addition, the Company's future results of operations and other forward looking statements contained in Management's Discussion and Analysis and elsewhere in this Form 10-Q involve a number of risks and uncertainties, including risks relating to Year 2000 and the introduction of the Euro (in particular, the Year 2000 readiness of third parties with which the Company does business). As a result of variations in such factors, actual results may differ materially from any forward looking statements. Some of these factors are described below. The Company disclaims any obligation to update forward looking statements. Government Monetary Policies The Federal Reserve Board has the primary responsibility for monetary policy; accordingly, its actions have an important influence on the demand for credit and investments and the level of interest rates and thus on the earnings of the Company. Legislation and Regulation Proposals to change the laws and regulations governing the banking industry are frequently introduced in Congress, in the state legislatures and before the various bank regulatory agencies. Such changes could, among other things, increase the Company's overhead and capital costs or reduce fees charged by the Company, increase competition for banks, or provide for further integration of the financial services industry. The likelihood and timing of any such changes and the impact such changes might have on the Company and its subsidiaries, however, cannot be determined at this time. Competition The businesses in which the Company operates are very competitive. Competition is provided by both unregulated and regulated financial services organizations, whose products and services span the local, national, and global markets in which the Company conducts operations. In addition to other commercial banks, savings banks, savings and loan associations, and credit unions actively compete for deposits, and money market funds and brokerage houses offer deposit-like services. These institutions, as well as consumer and commercial finance companies, national retail chains, factors, insurance companies and pension trusts, are important competitors for various types of loans. Issuers of commercial paper compete actively for funds and reduce demand for bank loans. For personal and corporate trust services and investment counseling services, insurance companies, investment counseling firms, and other business firms and individuals offer active competition. A wide variety of domestic and foreign companies compete for processing services. 21 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 June 30, 1999 ended June 30, 1998 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 5,024 $ 54 4.31% $ 3,150 $ 40 5.12% Federal Funds Sold and Securities Purchased Under Resale Agreements 3,949 46 4.66 3,165 42 5.33 Loans Domestic Offices 20,704 362 7.02 19,753 384 7.80 Foreign Offices 19,310 297 6.16 18,219 312 6.86 ------- ----- ------- ----- Total Loans 40,014 659 6.60 37,972 696 7.35 ------- ----- ------- ----- Securities U.S. Government Obligations 2,512 36 5.82 3,307 48 5.81 U.S. Government Agency Obligations 875 14 6.40 557 9 6.50 Obligations of States and Political Subdivisions 580 11 7.90 656 14 8.23 Other Securities, including Trading Securities 2,740 30 4.31 3,085 37 4.86 ------- ----- ------- ----- Total Securities 6,707 91 5.46 7,605 108 5.68 ------- ----- ------- ----- Total Interest-Earning Assets 55,694 850 6.12% 51,892 886 6.85% ----- ----- Allowance for Credit Losses (630) (598) Cash and Due from Banks 3,075 3,529 Other Assets 8,398 7,411 ------- ------- TOTAL ASSETS $66,537 $62,234 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,195 54 4.13% $ 4,991 59 4.77% Savings 7,821 43 2.22 7,751 48 2.50 Certificates of Deposit $100,000 & Over 591 7 4.75 734 10 5.48 Other Time Deposits 2,123 22 4.25 2,293 28 4.86 Foreign Offices 19,652 198 4.04 15,864 198 4.98 ------- ----- ------- ----- Total Interest-Bearing Deposits 35,382 324 3.67 31,633 343 4.34 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,370 36 4.26 2,760 31 4.56 Other Borrowed Funds 2,153 28 5.25 4,053 54 5.36 Long-Term Debt 2,233 35 6.30 1,964 34 6.83 ------- ----- ------- ----- Total Interest-Bearing Liabilities 43,138 423 3.94% 40,410 462 4.58% ----- ----- Noninterest-Bearing Deposits 10,640 10,227 Other Liabilities 6,044 5,379 Minority Interest-Preferred Securities 1,500 1,300 Preferred Stock - 1 Common Shareholders' Equity 5,215 4,917 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $66,537 $62,234 ======= ======= Net Interest Earnings and Interest Rate Spread $ 427 2.18% $ 424 2.27% ===== ==== ===== ==== Net Yield on Interest-Earning Assets 3.07% 3.28% ==== ====
22 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Dollars in millions)
For the six months For the six months ended June 30, 1999 ended June 30, 1998 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 5,158 $ 118 4.61% $ 3,002 $ 83 5.56% Federal Funds Sold and Securities Purchased Under Resale Agreements 4,229 99 4.71 2,743 72 5.29 Loans Domestic Offices 20,263 724 7.21 19,389 755 7.86 Foreign Offices 19,407 596 6.19 17,923 611 6.87 ------- ----- ------- ----- Total Loans 39,670 1,320 6.71 37,312 1,366 7.38 ------- ----- ------- ----- Securities U.S. Government Obligations 2,552 73 5.77 3,365 97 5.78 U.S. Government Agency Obligations 866 28 6.36 584 19 6.47 Obligations of States and Political Subdivisions 603 23 7.80 660 27 8.23 Other Securities, including Trading Securities 2,538 55 4.37 2,907 65 4.53 ------- ----- ------- ----- Total Securities 6,559 179 5.51 7,516 208 5.58 ------- ----- ------- ----- Total Interest-Earning Assets 55,616 1,716 6.22% 50,573 1,729 6.89% ----- ----- Allowance for Credit Losses (633) (621) Cash and Due from Banks 3,075 3,535 Other Assets 8,217 7,439 ------- ------- TOTAL ASSETS $66,275 $60,926 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,186 106 4.12% $ 4,857 114 4.73% Savings 7,808 86 2.21 7,712 97 2.54 Certificates of Deposit $100,000 & Over 624 15 4.84 701 19 5.50 Other Time Deposits 2,188 47 4.34 2,301 55 4.86 Foreign Offices 19,127 387 4.08 15,112 382 5.10 ------- ----- ------- ----- Total Interest-Bearing Deposits 34,933 641 3.70 30,683 667 4.39 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3,181 67 4.24 2,856 65 4.60 Other Borrowed Funds 2,886 75 5.29 3,717 103 5.56 Long-Term Debt 2,180 70 6.41 1,902 66 6.88 ------- ----- ------- ----- Total Interest-Bearing Liabilities 43,180 853 3.98% 39,158 901 4.64% ----- ----- Noninterest-Bearing Deposits 10,532 10,124 Other Liabilities 5,863 5,718 Minority Interest-Preferred Securities 1,473 1,164 Preferred Stock - 1 Common Shareholders' Equity 5,227 4,761 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $66,275 $60,926 ======= ======= Net Interest Earnings and Interest Rate Spread $ 863 2.24% $ 828 2.25% ===== ==== ===== ==== Net Yield on Interest-Earning Assets 3.13% 3.30% ==== ====
23 PART II. OTHER INFORMATION Item 2. Sales of Unregistered Common Stock - ------------------------------------------- During the second quarter of 1999, shares of the Company's common stock were issued in transactions exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof. 14,400 shares of common stock were issued to serving non-employee directors as part of their annual retainer on June 15, 1999. Item 4. Submission of Matters to Vote of Security Holders - ---------------------------------------------------------- The Company held its annual meeting on May 11, 1999 at The Bank of New York at 101 Barclay St. in New York, New York. The following matters were submitted to a vote of the shareholders: -- election of fifteen director nominees to new one-year terms was approved with no nominee receiving less than 585.1 million votes; -- appointment of Ernst & Young LLP as the Company's independent public accountants for 1999 was ratified by a vote of 662.2 affirmative to 1.1 million negative; -- proposal to re-approve current performance goal standards under, and approve amendment to, the 1994 Management Incentive Compensation Plan was approved by a vote of 639.6 million affirmative to 21.1 million negative; -- proposal that cumulative voting rights be accorded to shareholders was defeated by a vote of 150.6 million affirmative to 348.9 negative; and -- proposal that the Company affirm its political non-partisanship was defeated by a vote of 25.1 million affirmative to 500.1 million votes negative. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) The exhibits filed as part of this report are as follows: Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Distributions on Trust Preferred Securities and for the Three and Six Months Ended June 30, 1999 and 1998. Exhibit 27 - Statement Re: Financial Data Schedule containing selected financial data at June 30, 1999 and for the Six Months Ended June 30, 1999 (b) The Company filed the following reports on Form 8-K since March 31, 1999: On June 8, 1999, the Company filed a Form 8-K Current Report (Items 5 and 7), which report included the press release announcing the sale of the Company's Factoring and Asset-Based Lending Business to GMAC for $1.8 billion and a new stock buyback program. On July 19, 1999, 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 1999 contained in the Company's press release dated July 19, 1999. 24 On July 30, 1999, the Company filed a Form 8-K Current Report (Items 5 and 7) related to the issuance by the Company of $895,000,00 of its Senior Subordinated Medium-Term Notes, Series D and Senior Medium-Term Notes, Series C (collectively, the "Notes"), issuable under an Indenture, dated as of October 1, 1993 between the Company and Chase Manhattan Trust Company National Association (the "Senior Subordinated Indenture") and an Indenture, dated as of July 18, 1991 between the Company and Bankers Trust Company, respectively (the "Senior Indenture" and together with the Senior Subordinated Indenture, the "Indentures"). The exhibits filed in connection with the Registration Statements on Form S-3 (File Nos. 33-61957, 333-70187, and 333-70187-01 through 04) consist of the Distribution Agreement, the Forms of Notes, Officers' Certificates pursuant to Section 301 of the Indentures, and the opinion of counsel as to the legality of the Notes. 25 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: August 13, 1999 By: \s\ Thomas J. Mastro --------------------------------- Name: Thomas J. Mastro Title: Comptroller 26 EXHIBIT INDEX -------------- Exhibit Description - ------- ----------- 12 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Distributions on Trust Preferred Securities for the Three and Six Months Ended June 30, 1999 and 1998. 27 Financial Data Schedule containing selected financial data at June 30, 1999 and for the Six Months Ended June 30, 1998 EX-12 2 EXHIBIT 12 EXHIBIT 12 THE BANK OF NEW YORK COMPANY, INC. Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges, and Distributions on Trust Preferred Securities (Dollars in millions)
Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- EARNINGS - -------- Income Before Income Taxes $ 539 $ 492 $1,067 $ 967 Fixed Charges, Excluding Interest on Deposits 107 128 228 250 ------ ------ ------ ------ Income Before Income Taxes and Fixed Charges Excluding Interest on Deposits 646 620 1,295 1,217 Interest on Deposits 324 343 641 667 ------ ------ ------ ------ Income Before Income Taxes and Fixed Charges, Including Interest on Deposits $ 970 $ 963 $1,936 $1,884 ====== ====== ====== ====== FIXED CHARGES - ------------- Interest Expense, Excluding Interest on Deposits $ 99 $ 119 $ 212 $ 234 One-Third Net Rental Expense* 8 9 16 16 ------ ------ ------ ------ Total Fixed Charges, Excluding Interest on Deposits 107 128 228 250 Interest on Deposits 324 343 641 667 ------ ------ ------ ------ Total Fixed Charges, Including Interest on Deposits $ 431 $ 471 $ 869 $ 917 ====== ====== ====== ====== DISTRIBUTION ON TRUST PREFERRED SECURITIES, PRE-TAX BASIS $ 28 $ 25 $ 56 $ 45 - ------------------------------- ====== ====== ====== ====== EARNINGS TO FIXED CHARGES RATIOS - -------------------------------- Excluding Interest on Deposits 6.04x 4.84x 5.68x 4.87x Including Interest on Deposits 2.25 2.04 2.23 2.05 EARNINGS TO COMBINED FIXED CHARGES, DISTRIBUTION ON TRUST PREFERRED SECURITIES, & PREFERRED STOCK DIVIDENDS RATIOS - ------------------------------------------- Excluding Interest on Deposits 4.79 4.05 4.56 4.13 Including Interest on Deposits 2.11 1.94 2.09 1.96 *The proportion deemed representative of the interest factor.
EX-27 3 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the Bank of New York Company, Inc.'s Form 10-Q for the period ended June 30, 1999 and is qualified entirely by reference to such Form 10-Q. 0000009626 THE BANK OF NEW YORK COMPANY, INC. 1,000,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 5,619 4,499 2,583 1,699 5,205 817 774 38,387 595 67,771 47,477 7,342 3,031 2,277 0 1 7,311 (2,032) 67,771 659 75 105 839 324 423 416 15 50 513 539 323 0 0 323 0.42 0.42 3.07 205 21 0 0 636 (42) 8 595 500 79 16
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