<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended JUNE 30, 1994
---------------------------------------------
Commission file number 0-8709
-------------------------------------------------
U. S. TRUST CORPORATION
- -----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-2927955
- -----------------------------------------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 852-1000
- -----------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- -----------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
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 for 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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
9,379,687 shares, Common Stock $1 par value, as of July 29, 1994
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
--------------------
An index of the financial statements included in this Form 10-Q
filing follows. All page numbers refer to pages within this Form 10-Q.
Title of Financial Statement Page #
- ---------------------------- ------
Consolidated Statement of Income for the Three Month
Periods Ended June 30, 1994 and 1993 3
Consolidated Statement of Income for the Six Month
Periods Ended June 30, 1994 and 1993 4
Consolidated Statement of Condition as of June 30,
1994 and December 31, 1993 5
Consolidated Statement of Changes in Stockholders' Equity
for the Six Month Periods Ended June 30, 1994 and 1993 6
Consolidated Statement of Cash Flows for the Six
Month Periods Ended June 30, 1994 and 1993 7
Notes to the Consolidated Financial Statements 8
Consolidated Net Interest Income and Average Balances for
the Three Month Periods Ended June 30, 1994 and 1993 11
Consolidated Net Interest Income and Average Balances for
the Six Month Periods Ended June 30, 1994 and 1993 12
In the opinion of management, all adjustments necessary for a
fair presentation of financial position and results of operations for
the interim periods have been made. Such adjustments, except for the
items mentioned in the Notes to the Consolidated Financial Statements
and/or Management's Discussion and Analysis of Financial Condition and
Results of Operations, are of a normal recurring nature.
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<CAPTION>
For the Three Month Periods Ended June 30,
--------------------------------------------
Better (Worse)
-------------------
1994 1993 $ %
-------- ------- ------- -------
<C> <S> <S> <S> <S>
INTEREST INCOME
Loans $ 22,556 $18,829 $ 3,727 19.8 %
Securities:
Taxable 19,980 17,610 2,370 13.5
Exempt from Federal Income Taxes 1,291 1,963 (672) (34.2)
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 518 1,468 (950) (64.7)
Deposits with Banks 711 602 109 18.1
-------- ------- -------
Total Interest Income 45,056 40,472 4,584 11.3
-------- ------- -------
INTEREST EXPENSE
Deposits 10,232 8,920 (1,312) (14.7)
Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and
Other Borrowings 7,203 2,911 (4,292) (147.4)
Long Term Debt 1,273 1,357 84 6.2
-------- ------- -------
Total Interest Expense 18,708 13,188 (5,520) (41.9)
-------- ------- -------
NET INTEREST INCOME 26,348 27,284 (936) (3.4)
Provision for Credit Losses 500 1,250 750 60.0
-------- ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 25,848 26,034 (186) (0.7)
-------- ------- -------
FEES AND OTHER INCOME
Fiduciary and Other Fees 73,231 64,968 8,263 12.7
Securities Gains, Net 3 18 (15) (83.3)
Other 2,199 2,367 (168) (7.1)
-------- ------- -------
Total Fees and Other Income 75,433 67,353 8,080 12.0
-------- ------- -------
Total Operating Income Net of Interest
Expense and Provision for Credit Losses 101,281 93,387 7,894 8.5
-------- ------- -------
OPERATING EXPENSES
Salaries 33,542 29,449 (4,093) (13.9)
Employee Benefits and Incentive
Compensation 17,196 17,432 236 1.4
-------- ------- -------
Total Salaries and Benefits 50,738 46,881 (3,857) (8.2)
Net Occupancy 9,355 9,741 386 4.0
Equipment 4,500 4,366 (134) (3.1)
Other 17,736 15,546 (2,190) (14.1)
-------- ------- -------
Total Operating Expenses 82,329 76,534 (5,795) (7.6)
-------- ------- -------
Income Before Income Tax Expense 18,952 16,853 2,099 12.5
Income Tax Expense 8,054 7,078 (976) (13.8)
-------- ------- -------
Net Income $ 10,898 $ 9,775 $ 1,123 11.5
======== ======= ======= ======
Net Income Per Share $ 1.10 $ 0.99 $ 0.11 11.1 %
======== ======= ======= ======
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<CAPTION>
For the Six Month Periods Ended June 30,
-------------------------------------------
Better (Worse)
-------------------
1994 1993 $ %
-------- -------- -------- -------
<C> <S> <S> <S> <S>
INTEREST INCOME
Loans $ 42,716 $ 37,055 $ 5,661 15.3 %
Securities:
Taxable 34,230 34,071 159 0.5
Exempt from Federal Income Taxes 2,619 4,088 (1,469) (35.9)
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 5,526 5,567 (41) (0.7)
Deposits with Banks 1,293 2,396 (1,103) (46.0)
-------- -------- --------
Total Interest Income 86,384 83,177 3,207 3.9
-------- -------- --------
INTEREST EXPENSE
Deposits 19,633 18,172 (1,461) (8.0)
Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and
Other Borrowings 9,810 5,362 (4,448) (83.0)
Long Term Debt 2,563 2,672 109 4.1
-------- -------- --------
Total Interest Expense 32,006 26,206 (5,800) (22.1)
-------- -------- --------
NET INTEREST INCOME 54,378 56,971 (2,593) (4.6)
Provision for Credit Losses 1,000 2,500 1,500 60.0
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 53,378 54,471 (1,093) (2.0)
-------- -------- --------
FEES AND OTHER INCOME
Fiduciary and Other Fees 146,152 127,178 18,974 14.9
Securities Gains, Net 2,034 25 2,009 -
Other 4,523 4,363 160 3.7
-------- -------- --------
Total Fees and Other Income 152,709 131,566 21,143 16.1
-------- -------- --------
Total Operating Income Net of Interest
Expense and Provision for Credit Losses 206,087 186,037 20,050 10.8
-------- -------- --------
OPERATING EXPENSES
Salaries 66,277 57,416 (8,861) (15.4)
Employee Benefits and Incentive
Compensation 36,763 34,007 (2,756) (8.1)
-------- -------- --------
Total Salaries and Benefits 103,040 91,423 (11,617) (12.7)
Net Occupancy 19,133 19,495 362 1.9
Equipment 8,747 8,624 (123) (1.4)
Other 34,180 29,939 (4,241) (14.2)
-------- -------- --------
Total Operating Expenses 165,100 149,481 (15,619) (10.4)
-------- -------- --------
Income Before Income Tax Expense 40,987 36,556 4,431 12.1
Income Tax Expense 17,419 15,353 (2,066) (13.5)
-------- -------- --------
Net Income $ 23,568 $ 21,203 $ 2,365 11.2
======== ======== ======== =======
Net Income Per Share $ 2.38 $ 2.14 $ 0.24 11.2 %
======== ======== ======== =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars In Thousands)
(UNAUDITED)
<CAPTION>
June 30, December 31,
1994 1993
---------- ------------
<C> <S> <S>
ASSETS
Cash and Due from Banks $ 294,124 $ 179,117
Interest Bearing Deposits with Banks 61,990 61,476
Securities:
Available for Sale 1,217,710 836,532
Held to Maturity (Estimated Fair Value
$428,456 in 1994 and $87,069 in 1993) 449,773 86,748
Federal Funds Sold and Securities Purchased
Under Agreements to Resell 5,000 237,000
Loans 1,615,699 1,398,723
Less: Allowance for Credit Losses 14,017 13,393
---------- ----------
Net Loans 1,601,682 1,385,330
Premises and Equipment 108,648 109,767
Other Assets 174,188 290,382
---------- ----------
Total Assets $3,913,115 $3,186,352
========== ==========
LIABILITIES
Deposits:
Non-Interest Bearing $1,257,593 $1,241,085
Interest Bearing 1,216,448 1,245,529
---------- ----------
Total Deposits 2,474,041 2,486,614
Federal Funds Purchased, Securities Sold Under
Agreements to Repurchase and Other Borro 1,007,481 258,072
Accounts Payable and Accrued Liabilities 138,601 147,979
Long Term Debt 62,574 65,100
---------- ----------
Total Liabilities 3,682,697 2,957,765
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value; 40,000,000 Shares
Authorized; 11,491,597 Shares Issued in 1994
and 11,436,293 Shares Issued in 1993 11,492 11,436
Capital Surplus 69,176 67,898
Retained Earnings 256,466 242,112
Treasury Stock at Cost (2,123,590 Shares in 1994
and 2,076,868 Shares in 1993) (85,795) (82,857)
Loan to ESOP (16,171) (18,697)
Unrealized Gain (Loss), Net of Taxes, on
Securities Available for Sale (4,750) 8,695
---------- ----------
Total Stockholders' Equity 230,418 228,587
---------- ----------
Total Liabilities and Stockholders' Equity $3,913,115 $3,186,352
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<CAPTION>
For the Six Month Periods
Ended June 30,
-------------------------
1994 1993
-------- --------
<C> <S> <S>
COMMON STOCK
Balance, January 1 $ 11,436 $ 56,506
Issuance of Shares Under Employee Benefit Plans 56 427
Change in Par Value of Common Stock - (45,537)
-------- --------
Balance, June 30 $ 11,492 $ 11,396
======== ========
CAPITAL SURPLUS
Balance, January 1 $ 67,898 $ 23,280
Employee Benefit Plans 1,278 2,181
Change in Par Value of Common Stock - 45,537
-------- --------
Balance, June 30 $ 69,176 $ 70,998
======== ========
RETAINED EARNINGS
Balance, January 1 $242,112 $216,839
Net Income 23,568 21,203
Cash Dividends Declared ($1.00 and $0.94 Per Share) (9,369) (8,834)
Tax Benefit on Dividends Paid to ESOP 155 506
-------- --------
Balance, June 30 $256,466 $229,714
======== ========
TREASURY STOCK
Balance, January 1 $(82,857) $(78,443)
Purchases (4,729) (5,967)
Issuance (Tender) of Shares Under Employee
Benefit Plans, Net 1,791 1,199
-------- --------
Balance, June 30 $(85,795) $(83,211)
======== ========
LOAN TO ESOP
Balance, January 1 $(18,697) $(21,029)
Principal Payment by ESOP 2,526 2,332
-------- --------
Balance, June 30 $(16,171) $(18,697)
======== ========
UNREALIZED GAIN (LOSS), NET OF TAXES, ON
SECURITIES AVAILABLE FOR SALE
Balance, January 1 $ 8,695 $ -
Net Change in Fair Value, After Taxes (13,445) -
-------- --------
Balance, June 30 $ (4,750) $ -
======== ========
TOTAL STOCKHOLDERS' EQUITY $230,418 $210,200
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(UNAUDITED)
<CAPTION>
For Six Month Periods
Ended June 30,
----------------------
1994 1993
--------- ---------
<C> <S> <S>
Cash Flows From Operating Activities:
Net Income $ 23,568 $ 21,203
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Credit Losses 1,000 2,500
Depreciation and Amortization of Premises and
Equipment and Other Assets 7,171 5,577
Net Amortization of Premium on Securities:
Available for Sale 1,925 -
Held to Maturity 950 -
Investment - 4,174
Net Change in Accrued Interest, Commissions and
Other Receivables 141,113 (21,074)
Net Change in Accounts Payable and Other Liabilities (8,868) 24,133
Other, Net (1,656) 2,072
--------- ---------
Net Cash Provided by Operating Activities 165,203 38,585
--------- ---------
Cash Flows From Investing Activities:
Net Change in Interest Bearing Deposits with Banks (514) 1,040
Purchases of Securities:
Available for Sale (784,488) -
Held to Maturity (392,545) -
Investment - (594,887)
Proceeds From Sales of Securities:
Available for Sale 43,957 -
Held to Maturity - -
Investment - -
Proceeds From Maturities, Calls and Mandatory
Redemptions of Securities:
Available for Sale 334,098 -
Held to Maturity 28,569 -
Investment - 248,421
Net Change in Federal Funds Sold and Securities
Purchased Under Agreements to Resell 232,000 -
Net Change in Loans (216,976) (371,355)
Expenditures for Premises and Equipment, Net of Retirements (5,167) (5,709)
Principal Payment by ESOP 2,526 2,332
Other, Net (14,058) 135
--------- ---------
Net Cash (Used) by Investing Activities (772,598) (720,023)
--------- ---------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits 16,508 (11,282)
Net Change in Money Market and Other Savings Deposits (43,624) 13,191
Net Change in Time Deposits 14,543 (1,767)
Net Change in Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and Other Borrowings 749,409 729,746
Issuance of Long Term Debt - 4,000
Repayments of Long Term Debt (2,526) (2,332)
Issuance of Common Stock 1,910 2,949
Purchases of Treasury Stock (4,729) (5,967)
Dividends Paid (9,089) (8,391)
--------- ---------
Net Cash Provided by Financing Activities 722,402 720,147
--------- ---------
Net Change in Cash and Cash Equivalents 115,007 38,709
Cash and Cash Equivalents at January 1 179,117 219,709
--------- ---------
Cash and Cash Equivalents at June 30 $ 294,124 $ 258,418
========= =========
Income Taxes Paid $ 17,020 $ 16,227
Interest Expense Paid 32,618 27,159
The accompanying notes are an integral part of these financial statements.
</TABLE>
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U. S. TRUST CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. PLEDGED ASSETS
--------------
Assets carried at $260,539,000 on June 30, 1994 and
$285,543,000 on December 31, 1993 were pledged to secure
public deposits, as collateral for borrowings, to qualify
for fiduciary powers and for other purposes.
2. CONTINGENCIES
-------------
There are various pending and threatened actions and claims
against the Corporation and its subsidiaries in which the
Corporation has denied liability and which it will vigorously
contest. Management, after consultation with counsel, is of
the opinion that the ultimate resolution of such matters is
unlikely to have any future material effect on the
Corporation's financial position or results of operations.
3. CHANGE IN ACCOUNTING PRINCIPLES
-------------------------------
In the fourth quarter of 1993, the Corporation adopted
Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits,"
("FAS 112"). FAS 112 requires employers to accrue, in
certain circumstances, the cost of benefits provided to former
or inactive employees after employment but before retirement.
The adoption of FAS 112 did not have a significant impact on
the results of operations or financial condition of the
Corporation.
In addition, the Corporation also adopted as of December 31,
1993, Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," ("FAS 115"). FAS 115 requires investments in
debt securities to be classified in one of three categories,
each having a different financial accounting method. The three
categories, with their related accounting methods, are:
securities held to maturity (carrying amount equals amortized
cost; unrealized gains and losses are not recorded); trading
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<PAGE>
U. S. TRUST CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. CHANGE IN ACCOUNTING PRINCIPLES (Cont'd.)
-------------------------------
securities (carrying amount equals estimated fair value;
unrealized gains and losses included in the determination of
net income) or securities available for sale (carrying amount
equals estimated fair value; unrealized gains and losses
recorded in a separate component of stockholders' equity). In
prior years, the Corporation accounted for all of its
investment securities portfolio using the then accepted
industry practice of amortized cost.
As of June 30, 1994, $1,218 million of investment securities
were classified as available for sale. The unrealized loss
related to securities classified as available for sale amounted
to $8,855,000. Stockholders' equity has been decreased by
$4,750,000 (net of $4,105,000 of deferred income taxes). The
carrying amount of investment securities classifies as held to
maturity was $450 million. The market value of these
securities was $428 million.
4. ACQUISITION
-----------
On July 7, 1993, U.S. Trust Corporation acquired Capital Trust
Company, a Portland, Oregon-based trust and investment
management firm, for 75,831 shares of its common stock, valued
at approximately $4 million, in a transaction that was
accounted for as a pooling-of-interests. Since the effect of
this acquisition was not significant, the results of operations
for Capital Trust Company have been included in the
Corporation's consolidated financial statements from the date
of acquisition and, accordingly, prior period financial
statements have not been restated. As of January 1, 1994,
Capital Trust changed its name to U.S. Trust Company of the
Pacific Northwest and its consulting practice was contributed
to a separate subsidiary, CTC Consulting, Inc.
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U. S. TRUST CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. OTHER MATTERS
-------------
At the Annual Meeting of Shareholders on April 27, 1993, the
shareholders approved an amendment to the Certificate of
Incorporation which had the effect of reducing the par value
of the Corporation's Common Stock from $5 per share to $1 per
share. Effective as of that date $45,537,000 was transferred
from the Common Stock account to the Capital Surplus account.
In addition, the shareholders approved an increase in the
Corporation's authorized Common Shares to 40 million from
20 million. Neither of these actions had any effect on the
total amount of Stockholders' Equity.
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED NET INTEREST INCOME AND AVERAGE BALANCES
(Dollars in Thousands; Interest and Average Rates on a Taxable Equivalent Basis)
(UNAUDITED)
<CAPTION>
For the Three Month Periods Ended June 30,
-------------------------------------------------------------
1994 1993
----------------------------- -----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- -------- ------- ---------- -------- -------
<C> <S> <S> <S> <S> <S> <S>
ASSETS
Interest Bearing
Deposits with Banks $ 71,958 $ 711 3.96% $ 75,020 $ 602 3.22%
---------- ------- ----- ---------- -------
Securities (1):
U.S. Government
Obligations 796,933 8,800 4.42 382,583 5,738 6.00
Federal Agency
Obligations 693,389 10,261 5.92 715,359 10,011 5.60
State and Municipal
Obligations 82,486 2,063 10.00 116,151 3,109 10.71
Collateralized
Mortgage
Obligations (2) 84,714 860 4.06 232,904 1,815 3.12
Other Securities 48,071 502 4.18 38,902 371 3.81
---------- ------- ----- ---------- ------- -----
Total Securities 1,705,593 22,486 5.27 1,485,899 21,044 5.67
---------- ------- ----- ---------- ------- -----
Loans (3) 1,290,805 22,564 7.01 1,077,453 18,845 7.02
---------- ------- ----- ---------- ------- -----
Federal Funds Sold and
Securities Purchased
Under Agreements to
Resell 53,819 518 3.86 199,808 1,468 2.95
---------- ------- ----- ---------- ------- -----
Total Interest Earning
Assets 3,122,175 46,279 5.94 2,838,180 41,959 5.92
---------- ------- ----- ---------- ------- -----
Allowance for Credit
Losses (13,901) (13,152)
Cash and Due from Banks 300,309 304,192
Other Assets 469,417 450,581
---------- ----------
Total Assets $3,878,000 $3,579,801
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing
Deposits $1,313,401 10,232 3.12 $1,220,078 8,920 2.93
Federal Funds Purchased,
Securities Sold Under
Agreements to Re-
purchase and Other
Borrowings 723,721 7,203 3.99 396,444 2,911 2.95
Long Term Debt 62,574 1,273 8.14 66,432 1,357 8.17
---------- ------- ----- ---------- ------- -----
Total Sources on Which
Interest is Paid 2,099,696 18,708 3.57 1,682,954 13,188 3.14
---------- ------- ----- ---------- ------- -----
Total Non-Interest
Bearing Deposits 1,392,144 1,536,639
Other Liabilities 145,946 136,213
Stockholders' Equity (3) 240,214 223,995
---------- ----------
Total Liabilities and
Stockholders' Equity $3,878,000 $3,579,801
========== ==========
Net Interest Income $27,571 $28,771
======= =======
Net Yield on Interest
Earning Assets 3.53 4.06
===== =====
Interest Spread 2.37 2.78
===== =====
<FN>
(1) Includes securities classified at June 30, 1994 as available for sale and
held to maturity at amortized cost and securities classified as investment
securities in 1993. The average balance and average rate for securities
available for sale have been calculated using their amortized cost.
(2) Primarily comprised of variable rate collateralized mortgage obligations.
(3) Loans include the Loan to ESOP, which had an average balance of
$16,171,000 in 1994 and $18,697,000 in 1993.
(4) Yields on obligations of states and political subdivisions are stated on a
fully taxable basis, employing the statutory federal tax rate adjusted for
the effect of state and local taxes, resulting in an effective tax rate of
47%. The amounts of the tax equivalent adjustments to net interest income
are as follows:
Total Securities $ 1,215 $ 1,471
Total Loans $ 8 $ 16
</TABLE>
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<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED NET INTEREST INCOME AND AVERAGE BALANCES
(Dollars in Thousands; Interest and Average Rates on a Taxable Equivalent Basis)
(UNAUDITED)
<CAPTION>
For the Six Month Periods Ended June 30,
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- -------- ------- ---------- -------- -------
<C> <S> <S> <S> <S> <S> <S>
ASSETS
Interest Bearing
Deposits with Banks $ 71,696 $ 1,293 3.64% $ 145,053 $ 2,396 3.33%
---------- ------- ----- ---------- ------- -----
Securities (1):
U.S. Government
Obligations 684,688 14,751 4.31 356,825 11,074 6.21
Federal Agency
Obligations 614,124 17,262 5.62 629,957 18,539 5.89
State and Municipal
Obligations 82,443 4,191 10.17 121,544 6,482 10.67
Collateralized
Mortgage
Obligations (2) 94,169 1,812 3.85 248,897 4,324 3.48
Other Securities 65,891 1,188 3.61 41,554 763 3.67
---------- ------- ----- ---------- ------- -----
Total Securities 1,541,315 39,204 5.09 1,398,777 41,182 5.89
---------- ------- ----- ---------- ------- -----
Loans (3) 1,256,757 42,732 6.86 1,057,697 37,088 7.07
---------- ------- ----- ---------- ------- -----
Federal Funds Sold and
Securities Purchased
Under Agreements to
Resell 353,354 5,526 3.15 371,502 5,567 3.02
---------- ------- ----- ---------- ------- -----
Total Interest Earning
Assets 3,223,122 88,755 5.53 2,973,029 86,233 5.83
---------- ------- ----- ---------- ------- -----
Allowance for Credit
Losses (13,765) (12,614)
Cash and Due from Banks 327,238 311,878
Other Assets 461,136 409,665
---------- ----------
Total Assets $3,997,731 $3,681,958
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing
Deposits $1,327,917 19,633 2.98 $1,218,954 18,172 3.01
Federal Funds Purchased,
Securities Sold Under
Agreements to Re-
purchase and Other
Borrowings 532,442 9,810 3.72 364,620 5,362 2.97
Long Term Debt 63,007 2,563 8.14 65,017 2,672 8.22
---------- ------- ----- ---------- ------- -----
Total Sources on Which
Interest is Paid 1,923,366 32,006 3.35 1,648,591 26,206 3.20
---------- ------- ----- ---------- ------- -----
Total Non-Interest
Bearing Deposits 1,654,677 1,681,257
Other Liabilities 177,571 130,687
Stockholders' Equity (3) 242,117 221,423
---------- ----------
Total Liabilities and
Stockholders' Equity $3,997,731 $3,681,958
========== ==========
Net Interest Income $56,749 $60,027
======= =======
Net Yield on Interest
Earning Assets 3.53 4.05
===== =====
Interest Spread 2.18 2.63
===== =====
<FN>
(1) Includes securities classified at June 30, 1994 as available for sale and
held to maturity at amortized cost and securities classified as investment
securities in 1993. The average balance and average rate for securities
available for sale have been calculated using their amortized cost.
(2) Primarily comprised of variable rate collateralized mortgage obligatio
(3) Loans include the Loan to ESOP, which had an average balance of
$16,603,000 in 1994 and $19,109,000 in 1993.
(4) Yields on obligations of states and political subdivisions are stated on a
fully taxable basis, employing the statutory federal tax rate adjusted for
the effect of state and local taxes, resulting in an effective tax rate of
47%. The amounts of the tax equivalent adjustments to net interest income
are as follows:
Total Securities $ 2,355 $3,023
Total Loans $ 16 $ 33
</TABLE>
-12-
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
Results of Operations:
- ---------------------
Net income for the second quarter ended June 30, 1994
amounted to $10.9 million, an increase of 11.5% over the $9.8 million
earned in the second quarter of 1993. Fully diluted net income per
share for the quarter totaled $1.10, an 11.1% increase over the $0.99
earned in the second quarter of 1993. For the six month period ended
June 30, 1994, net income amounted to $23.6 million, an 11.2%
improvement over the $21.2 million achieved in the 1993 period.
Fully diluted net income per share was $2.38 for the 1994 six months,
compared to $2.14 in the 1993 period, an increase of 11.2%.
The Corporation's return on average stockholders' equity for
the first six months of 1994 was 21.07%, compared to 21.13% for the
first six months of 1993. Its return on average total assets was
1.19% in the six months ended June 30, 1994, versus 1.17% in the
six months ended June 30, 1993.
Net Interest Income (Taxable Equivalent Basis)
- ----------------------------------------------
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, % Ended June 30, %
------------------- Better ------------------- Better
(In Thousands) 1994 1993 (Worse) 1994 1993 (Worse)
------- ------- ------ ------- ------- ------
<C> <S> <S> <S> <S> <S> <S>
Interest Income $45,056 $40,472 11.3 % $86,384 $83,177 3.9 %
Taxable Equivalent
Adjustment 1,223 1,487 (17.8) 2,371 3,056 (22.4)
------- ------- ------- -------
Total Interest Income 46,279 41,959 10.3 88,755 86,233 2.9
Interest Expense 18,708 13,188 (41.9) 32,006 26,206 (22.1)
------- ------- ------- -------
Net Interest Income $27,571 $28,771 (4.2) $56,749 $60,027 (5.5)
======= ======= ==== ======= ======= ====
</TABLE>
Net interest income, on a taxable equivalent basis, was
$1.2 million lower in the second quarter of 1994, compared to the second
quarter of 1993. For the six months, net interest income, on a taxable
equivalent basis, was $3.3 million lower in 1994 than the comparable
1993 period.
-13-
<PAGE>
<PAGE>
Net Interest Income (Taxable Equivalent Basis) (Cont'd.)
- ----------------------------------------------
The Corporation's net interest income is sensitive to its
average volume of non-interest bearing deposits and to the level of
interest rates on interest earning assets. The Corporation's average
volume of non-interest-bearing sources of funds (primarily non-interest
bearing deposits) in the second quarter of 1994 decreased 11.5%
($133 million) from the comparable 1993 period. For the first six
months of 1994, the Corporation's average volume of non-interest-bearing
sources of funds declined 1.9% ($25 million) from the same period of
1993. These declines were principally a result of a reduction in the
amount of the Funds Services Division's non-interest-bearing deposit
balances.
The Funds Services Division generates a substantial flow of
non-interest-bearing deposits. The total volume of the Division's non-
interest-bearing deposits is generally inversely sensitive to the level
of interest rates. In periods of falling interest rates, the average
balance of non-interest-bearing deposits tends to increase, whereas in
periods of rising interest rates, the average balance typically
declines. Interest rates were historically very low in 1993 and the
Funds Services Division experienced higher than normal deposit balances.
The Corporation's consolidated average volume of non-interest-bearing
sources of funds in the second quarter 1993 was $1,155 million, compared
to the 1992 and 1994 quarterly averages of $834 million and
$1,022 million, respectively.
The net yield on average interest-earning assets was 3.53% for
both the quarter and six months ended June 30, 1994, compared to 4.06%
and 4.05% in the respective 1993 periods. The average interest rates
earned on the Corporation's securities portfolio in both the 1994
quarter and six month periods were lower than the comparable 1993
periods reflecting the reinvestment of the funds obtained from
maturities and sales of securities at lower interest rates and with
shorter maturities.
-14-
<PAGE>
<PAGE>
Fees and Other Income
- ---------------------
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, % Ended June 30, %
------------------- Better --------------------- Better
(In Thousands) 1994 1993 (Worse) 1994 1993 (Worse)
------- ------- ------ -------- -------- ------
<C> <S> <S> <S> <S> <S> <S>
Fiduciary and Other Fees $73,231 $64,968 12.7 % $146,152 $127,178 14.9%
Securities Gains, Net 3 18 (83.3) 2,034 25 -
Other 2,199 2,367 (7.1) 4,523 4,363 3.7
------- ------- -------- --------
Total $75,433 $67,353 12.0 $152,709 $131,566 16.1
======= ======= ==== ======== ======== ====
</TABLE>
Fiduciary and other fees increased $8.3 million in the second
quarter of 1994. For the first six months of 1994, fiduciary and other
fees increased $19.0 million. The growth in fee income for both the
quarter and six months is attributable to all lines of business. Total
assets under management increased 10.5% to $31.4 billion at June 30,
1994, from $28.4 billion at June 30, 1993. The growth in fiduciary and
other fees for both the quarter and six months was affected by the
volatility experienced in 1994 in the equity and bond markets, as a
considerable percentage of the Corporation's fiduciary and other fees
are based upon the market values of investments under management. In
addition, second quarter and six month 1994 fiduciary and other fees
include $1.9 million and $3.8 million, respectively, resulting from the
acquisition of U.S. Trust Company of the Pacific Northwest, previously
known as Capital Trust Company on July 7, 1993.
Net securities gains in the second quarter of 1994 and both the
second quarter and first six months of 1993 were negligible. In the
first six months of 1994, net securities gains totaled $2.0 million.
-15-
<PAGE>
<PAGE>
Operating Expenses
- ------------------
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, % Ended June 30, %
------------------- Better --------------------- Better
(In Thousands) 1994 1993 (Worse) 1994 1993 (Worse)
------- ------- ------ -------- -------- ------
<C> <S> <S> <S> <S> <S> <S>
Salaries $33,542 $29,449 (13.9)% $ 66,277 $ 57,416 (15.4)%
Employee Benefits and
Incentive Compensation 17,196 17,432 1.4 36,763 34,007 (8.1)
------- ------- -------- --------
Total Salaries and Benefits 50,738 46,881 (8.2) 103,040 91,423 (12.7)
Net Occupancy 9,355 9,741 4.0 19,133 19,495 1.9
Equipment 4,500 4,366 (3.1) 8,747 8,624 (1.4)
Other 17,736 15,546 (14.1) 34,180 29,939 (14.2)
------- ------- -------- --------
Total Operating Expenses $82,329 $76,534 (7.6) $165,100 $149,481 (10.4)
======= ======= ==== ======== ======== ====
</TABLE>
Non-interest operating expenses in the second quarter of 1994
increased $5.8 million to $82.3 million from the $76.5 million reported
in the second quarter of 1993. For the six months ended June 30, 1994,
non-interest operating expenses amounted to $165.1 million,
$15.6 million higher than the $149.5 million incurred in the 1993
period. Excluding U.S. Trust Company of the Pacific Northwest, non-
interest operating expenses increased 4.7% in the second quarter of 1994
and 7.6% for the six months, compared to the 1993 periods. Salaries and
employee benefit expenses, including sales incentives and commissions,
increased $3.9 million in the second quarter and $11.6 million for the
first six months, reflecting increases in the asset management and
mutual funds services businesses' professional staffs and related
employee benefit expense. For the second quarter of 1994, the ratio of
total operating expenses to taxable equivalent total operating income,
net of interest expense and provision for credit losses, was 80.3%,
compared to 80.7% for the second quarter of 1993. For the six months
ended June 30, 1994, the ratio of total operating expenses to taxable
equivalent total operating income, net of interest expense and provision
for credit losses, was 79.2%, versus 79.1% for the first half of 1993.
Income Taxes
- ------------
The Corporation's effective tax rate for both the second
quarter and first six months of 1994 was 42.5%, compared with an
effective tax rate of 42.0% for the respective 1993 periods.
-16-
<PAGE>
<PAGE>
Financial Condition:
- -------------------
Capital
- -------
The Corporation has maintained its strong capital position
throughout the first six months of 1994. The ratio of Tier 1 capital
at June 30, 1994 to period end risk-adjusted assets (as defined by the
Federal Reserve Board) was 13.82%, compared to 11.19% at June 30, 1993.
The ratio of Total Capital at June 30, 1994 to period end risk-adjusted
assets (as defined by the Federal Reserve Board) was 15.13%. At
June 30, 1993 this ratio was 12.48%.
The leverage ratio (defined by the Federal Reserve Board as
Tier 1 capital as of the period end divided by quarterly (3 month) total
average assets reduced by goodwill and nonqualifying intangibles)
amounted to 5.89% and 5.68% at June 30, 1994 and 1993, respectively.
United States Trust Company of New York ("Trust Company") has
also maintained its strong capital position. At June 30, 1994, the
Trust Company's Tier 1 capital ratio was 13.08% compared to 10.86% at
June 30, 1993. The Trust Company's leverage ratio (as defined by the
Federal Reserve Board) was 5.50% and 5.49% at June 30, 1994 and 1993,
respectively.
For the six month period ended June 30, 1994, 90,000 shares of
common stock were acquired under the Corporation's share repurchase
program at an average price of $50.81 per share. For the comparable
1993 period, 110,500 shares were repurchased at an average cost of
$54.00 per share. The Corporation's Board of Directors has authorized
the repurchase of an aggregate of 3.7 million of its common shares under
plans initiated in 1987, 1988 and 1992. Under its common stock
repurchase program, the Corporation has authority to repurchase up to an
additional 668,213 shares of common stock.
One of the principal purposes of the Corporation's common stock
repurchase program is to provide a supply of common shares for issuance
under the Corporation's various common stock incentive and compensation
plans. Such common shares are obtained through systematic purchases in
the open market in amounts deemed sufficient to satisfy the
Corporation's immediate and near-term (i.e., less than two years)
obligations to issue common shares under its benefit plans. During the
first six months of 1994, the Corporation issued 98,582 common shares
under its various stock-based plans.
-17-
<PAGE>
<PAGE>
Asset/Liability Management
- --------------------------
The principal functions of asset and liability management are
to provide for adequate liquidity, to manage interest rate exposure by
maintaining a prudent relationship between interest rate sensitive
assets and liabilities and to manage the size and composition of the
balance sheet so as to maximize net interest income, while complying
with bank regulatory agency capital standards.
Liquidity
- ---------
The Corporation's balance sheet is highly liquid. At June 30,
1994, 51.84% of total assets consisted of cash and securities readily
convertible to cash. The comparable percentages for December 31, 1993
and June 30, 1993 are 43.96% and 49.94%, respectively.
During the first six months of 1994, the Corporation purchased
$784.5 million of securities available for sale and $392.5 million of
securities held to maturity. The total securities purchased during the
first six months of 1994 included $768.1 million of U.S. Government
Treasury securities with an approximate weighted average maturity of
1.7 years and $374.0 million of U.S. Government Agency securities with
an approximate weighted average life of 5.5 years. In January 1994,
the Corporation sold $41.9 million of securities available for sale.
There were no sales of securities for the six month period ended
June 30, 1993.
The Corporation's portfolio of securities available for sale is
mainly comprised of U.S. Treasury fixed rate obligations with original
terms of two years or less (63%), Government National Mortgage
Association ("GNMA") 15-year fixed rate mortgage-backed securities and
GNMA adjustable rate mortgage-backed securities (20%), obligations of
states and municipalities (6%) and variable rate collateralized mortgage
obligations ("CMOs") (6%). The GNMAs are backed by the full faith and
credit of the United States Government, while the CMOs are
collateralized by GNMAs.
The market value of securities available for sale has declined
$25.4 million during the period from December 31, 1993 to June 30, 1994.
The decrease in market value reflected several factors. First, the
funds obtained from the sale, maturity and call of securities during
this period were reinvested by the Corporation in securities yielding
current market rates, which were lower than the rates previously earned.
Second, interest rates (evidenced by actions by the Federal
Reserve Board that caused the Federal funds interest rate to increase
125 basis points) increased, reducing the market value of fixed rate
securities.
-18-
<PAGE>
<PAGE>
Liquidity (Cont'd.)
- ---------
In excess of 95% of the Corporation's securities classified as
held to maturity consist of GNMA 15-year fixed rate mortgage-backed
securities ("Fixed rate GNMAs") and GNMA adjustable rate mortgage-backed
securities ("GNMA ARMs"). These securities are backed by the full faith
and credit of the United States Government. All of the fixed rate GNMAs
were acquired in 1994, with approximately 75% of them being purchased in
the first three months of the year. The portfolio of fixed rate GNMAs
had an approximate average duration of 4.5 years. Approximately 50% of
the GNMA ARMs were acquired in 1992 and 50% in the first three months of
1994. The portfolio of GNMA ARMs had an approximate average duration of
1.3 years.
The market value of securities held to maturity at June 30,
1994 was $428.5 million, which was $21.3 million less than the carrying
amount. At December 31, 1993, the fair value of securities held to
maturity was $87.1 million, which exceeded the carrying amount by
$300,000. The decline in market value reflects the increase in interest
rates during the period beginning December 31, 1993 and ending June 30,
1994.
At June 30, 1994, the Corporation held approximately
$750 million (carrying amount) of GNMA and CMO securities ("mortgage
securities"). While these mortgage securities, as well as the
Corporation's residential real estate mortgage loans ("mortgage loans"),
are subject to prepayment risk, management believes that these are
appropriate investments for the Corporation. The underlying nature of
the Corporation's business and its balance sheet structure serve as
a counterbalance to the prepayment risk. The Corporation's business
generates a substantial amount of non-interest bearing deposits that, on
average, remain available to fund long-term investments. Consequently,
if the Corporation's prepayment experience is adverse, the funding of
these investments through long-term non-interest bearing deposits
mitigates the Corporation's net interest exposure. The Corporation
also has invested in a large portfolio of U.S. Treasury obligations
("Treasuries") with an approximate weighted average maturity of
1.7 years. These Treasuries enable the Corporation to take advantage of
rising interest rates while holding its mortgage securities and loans
(See "Interest Rate Sensitivity").
-19-
<PAGE>
<PAGE>
Interest Rate Sensitivity
- -------------------------
Interest rate risk arises from differences in the timing of
repricing assets and liabilities. One measure of interest rate risk is
the difference in asset and liability repricing on a cumulative basis
within a specified time frame. The following table provides the
components of the Corporation's interest rate sensitivity gaps at
June 30, 1994. Gap analysis has inherent limitations as an analytical
tool because it only measures the Corporation's exposure at a single
point in time. This exposure to interest rates is constantly changing
as a result of the Corporation's ongoing business and its management
initiatives.
As set forth in the following table, the Corporation had more
liabilities repricing than assets (liability sensitive) through one
year. In general, when an enterprise is liability sensitive, it's net
interest income will improve in a declining interest rate environment
and will decline in a rising interest rate environment. Conversely, an
asset sensitive enterprise, which the Corporation is in the 1 - 5 year
time period, will realize a benefit in net interest income if rates are
rising and will have lower net interest income in a falling rate
environment.
-20-
<PAGE>
<PAGE>
Interest Sensitivity (Cont'd.)
- --------------------
<TABLE>
<CAPTION>
0 - 3 4 - 6 7 - 12 1 - 5 Over
(In Thousands) Months Months Months Years 5 Years Total
---------- ---------- -------- ---------- -------- ----------
<C> <S> <S> <S> <S> <S> <S>
Assets
- ------
Interest Bearing Deposits
with Banks $ 61,990 $ - $ - $ - $ - $ 61,990
Securities Available for
Sale and Held to Maturity 382,745 117,569 188,639 787,872 190,658 1,667,483
Federal Funds Sold and
Securities Purchased
Under Agreements to Resell 5,000 - - - - 5,000
Loans, Net of Allowance
for Credit Losses 1,055,498 38,038 63,044 268,356 176,746 1,601,682
Other Assets 317,237 - - 146,093 113,630 576,960
---------- ---------- -------- ---------- -------- ----------
Total Assets 1,822,470 155,607 251,683 1,202,321 481,034 3,913,115
---------- ---------- -------- ---------- -------- ----------
Liabilities and Stockholders' Equity
- ------------------------------------
Non-Interest Bearing Deposits 286,143 22,635 87,240 477,300 384,275 1,257,593
Interest Bearing Deposits 1,186,039 7,721 14,245 8,443 - 1,216,448
Federal Funds Purchased,
Securities Sold Under
Agreements to Repurchase
and Other Borrowings 1,007,481 - - - - 1,007,481
Accounts Payable and
Accrued Liabilities - - 17,325 69,300 51,976 138,601
Long Term Debt - 1,650 3,021 47,634 10,269 62,574
Stockholders' Equity - - - 129,600 100,818 230,418
---------- --------- --------- ---------- -------- ----------
Total Liabilities and
Stockholders' Equity 2,479,663 32,006 121,831 732,277 547,338 3,913,115
---------- --------- --------- ---------- -------- ----------
Asset/(Liability)
Sensitivity Gap (657,193) 123,601 129,852 470,044 (66,304) -
---------- --------- --------- ---------- -------- ----------
Interest Rate Swaps 67,500 (6,125) (13,750) (47,625) - -
---------- --------- --------- ---------- -------- ----------
Interest Rate Sensitivity Gap (589,693) 117,476 116,102 422,419 (66,304) -
---------- --------- --------- ---------- -------- ----------
Cumulative Interest Rate
Sensitivity Gap $ (589,693) $(472,217) $(356,115) $ 66,304 $ - $ -
========== ========= ========= ========== ======== ==========
% of Total Assets 15.1% 12.1% 9.1% 1.7% - -
========== ========= ========= ========== ======== ==========
</TABLE>
-21-
<PAGE>
<PAGE>
Interest Sensitivity (Cont'd.)
- --------------------
In managing its interest sensitivity gaps, the Corporation
takes into account the nature of its business operations. The
Corporation invests in fixed rate U.S. Treasury securities, fixed rate
GNMA mortgage-backed securities and fixed rate residential real estate
mortgage loans. These investments are funded by a portion of the non-
interest bearing deposits obtained through its trust business that are
considered to be a stable source of long term funds and, to a lesser
degree, by interest rate swaps, fixed rate long term debt and
stockholders' equity. Investments in short-term and variable rate
instruments, which are largely indexed to LIBOR, and investments in
variable rate loans that are indexed to the prime rate are funded by
money market deposits mainly derived from private banking clients and
other short-term interest bearing liabilities.
It is difficult to predict the impact of a change in the term
structure of interest rates on the Corporation because of the nature of
the Corporation's business. The Corporation's trust business exhibits
seasonal fluctuations in the flow of non-interest bearing deposits over
fairly regular semi-annual periods. Non-interest bearing deposit
balances tend to be at their highest levels in the first and third
quarters of the year and at their lowest levels in the second and fourth
quarters. During periods of high non-interest bearing deposit levels,
the Corporation will sell excess funds in the Federal funds and
Eurodollar markets. During periods of seasonal deposit outflows, the
Corporation will raise funds in the Federal funds, repurchase agreement
and Eurodollar markets. From time to time, the Corporation will use
forward rate agreements and other derivative products to either hedge
its seasonal non-interest bearing deposit variations or to hedge
anticipated short-term future investments.
Asset Quality
- -------------
The Corporation's loan portfolio is comprised primarily of
loans to private banking customers. Average loans increased
$216 million, or 20.4%, to $1.3 billion in the second quarter of 1994,
from $1.1 billion in the second quarter of 1993. Residential real
estate mortgages accounted for approximately 57% of the increase in the
portfolio.
-22-
<PAGE>
<PAGE>
Asset Quality (Cont'd.)
- -------------
An analysis of the allowance for credit losses follows.
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
----------------------- -----------------------
(In Thousands) 1994 1993 1994 1993
------- ------- ------- -------
<C> <S> <S> <S> <S>
Balance, Beginning of Period $13,648 $12,218 $13,393 $11,676
------- ------- ------- -------
Provision Charged to Income 500 1,250 1,000 2,500
------- ------- ------- -------
Recoveries:
Private Banking 123 269 293 453
Other 88 1,026 141 1,044
------- ------- ------- -------
211 1,295 434 1,497
------- ------- ------- -------
Charge-offs:
Private Banking (192) (703) (660) (1,533)
Other (150) (8) (150) (88)
------- ------- ------- -------
(342) (711) (810) (1,621)
------- ------- ------- -------
Net (Charge Offs) Recoveries (131) 584 (376) (124)
------- ------- ------- -------
Balance, End of Period $14,017 $14,052 $14,017 $14,052
======= ======= ======= =======
</TABLE>
The provision for credit losses in the second quarter of 1994
was $500,000, compared to $1.25 million in the second quarter of 1993.
As a percentage of average loans for the quarter, net charge-offs, on an
annualized basis, were 4 basis points for the second quarter of 1994,
compared to net recoveries of 22 basis points for the second quarter of
1993.
The allowance for credit losses at June 30, 1994, was
$14.0 million, or 1.10% of average loans outstanding for the quarter.
This compares with $13.4 million, or 1.13% of average loans outstanding
for the quarter ended December 31, 1993, and $14.1 million, or 1.33% of
average loans outstanding for the quarter ended June 30, 1993.
-23-
<PAGE>
<PAGE>
Asset Quality (Cont'd.)
- -------------
The allowance for credit losses as a percentage of
nonperforming loans was 239.48% at June 30, 1994, compared to
223.03% at December 31, 1993, and 203.21% at June 30, 1993. The ratio
of nonperforming assets to average loans and real estate owned for the
quarter was 1.34% at June 30, 1994, compared to 1.47% at December 31,
1993 and 1.79% at June 30, 1993. The improvement in these ratios when
comparing June 30, 1994 with December 31, 1993, reflects a net addition
to the allowance for credit losses since December 31, 1993 as the
provision has exceeded net loan charge-offs and a modest reduction in
nonperforming loans and nonperforming assets.
Nonperforming assets, which include non-accrual and
restructured loans and real estate acquired in debt restructurings, are
as follows:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
(In Millions) 1994 1993 1993
-------- ------------ --------
<C> <S> <S> <S>
Non-accrual and
restructured loans $ 5.8 $ 6.0 $ 6.9
Real estate acquired in
debt restructurings 11.4 11.5 12.2
----- ----- -----
Total Nonperforming Assets $17.2 $17.5 $19.1
===== ===== =====
</TABLE>
Accounting Standards Not Yet Adopted
- ------------------------------------
Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," ("FAS 114")," issued
in May 1993, addresses the accounting by creditors for impairment of
certain loans. FAS 114 requires that impaired loans be measured based
on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. FAS 114 is effective for fiscal
years beginning after December 15, 1994, with earlier adoption
encouraged. Based upon a preliminary review, the Corporation does not
believe that the adoption of FAS 114 will have a significant impact on
the financial condition or results of operations of the Corporation.
-24-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of Shareholders of the registrant was
held April 26, 1994.
(b) Not applicable
(c) (i) Election of nine directors of the Corporation, seven
to hold office for a term of three years, one to hold
office for a term of two years, one to hold office for a
term of one year, and, in each case, until their
successors have been elected and qualified.
Term Expires in 1997:
Peter O. Crisp Daniel P. Davison
Affirmative Votes 8,409,658 Affirmative Votes 8,412,431
Negative Votes 34,220 Negative Votes 31,447
Abstentions/No Vote - Abstentions/No Vote -
Antonia M. Grumbach Frederic C. Hamilton
Affirmative Votes 8,413,939 Affirmative Votes 8,379,944
Negative Votes 29,939 Negative Votes 63,934
Abstentions/No Vote - Abstentions/No Vote -
Peter L. Malkin Jeffrey S. Maurer
Affirmative Votes 8,414,256 Affirmative Votes 8,411,861
Negative Votes 29,622 Negative Votes 32,017
Abstentions/No Vote - Abstentions/No Vote -
Richard F. Tucker
Affirmative Votes 8,414,873
Negative Votes 29,005
Abstentions/No Vote -
Term Expires in 1996:
Eleanor Baum
Affirmative Votes 8,407,111
Negative Votes 36,767
Abstentions/No Vote -
-25-
<PAGE>
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders (Cont'd.)
---------------------------------------------------
(c) (i) Election of nine directors of the Corporation, seven
to hold office for a term of three years, one to hold
office for a term of two years, one to hold office for a
term of one year, and, in each case, until their
successors have been elected and qualified.
Term Expires in 1995:
Ruth A. Wooden
Affirmative Votes 8,410,328
Negative Votes 33,550
Abstentions/No Vote -
(c) (ii) Appointment of Coopers & Lybrand as independent
auditors for the Corporation and its consolidated subsidiaries
for the year 1994.
Affirmative Votes 8,330,661
Negative Votes 66,374
Abstentions/No Vote 46,843
(c) (iii) Assumption by the Corporation of certain employee
benefit plans of United States Trust Company of New York.
Affirmative Votes 8,142,187
Negative Votes 109,108
Abstentions/No Vote 192,583
(c) (iv) Amendments to the 1989 Stock Compensation Plan.
Affirmative Votes 7,438,501
Negative Votes 421,950
Abstentions/No Vote 583,427
(c) (v) Amendments to the 1988 Long-Term Plan and Long-Term
Plan
Affirmative Votes 7,435,037
Negative Votes 415,348
Abstentions/No Vote 593,493
-26-
<PAGE>
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders (Cont'd.)
---------------------------------------------------
(c) (vi) Approval of the amended Board Members' Deferred
Compensation Plan
Affirmative Votes 7,498,609
Negative Votes 344,343
Abstentions/No Vote 600,926
(d) Not applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) EXHIBITS:
11 - Statement re Computation of Net Income Per Share.
(b) REPORTS ON FORM 8-K:
None
-27-
<PAGE>
<PAGE>
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.
U. S. Trust Corporation
------------------------------
(Registrant)
Date: August 15, 1994 Richard E. Brinkmann
---------------- ------------------------------
Richard E. Brinkmann
Senior Vice President
and Comptroller
(Principal Accounting Officer)
-28-
<PAGE>
<TABLE>
U.S. TRUST CORPORATION
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
----------------------- -----------------------
1994 1993 1994 1993
----------- ---------- ----------- -----------
<C> <S> <S> <S> <S>
PRIMARY NET INCOME PER SHARE:
Net Income $10,898,000 $9,775,000 $23,568,000 $21,203,000
Plus Dividend Equivalent on
Deferred Long-Term Performance
Plan Awards (After-Tax) 70,609 57,117 139,365 107,401
----------- ---------- ----------- -----------
Adjusted Net Income $10,968,609 $9,832,117 $23,707,365 $21,310,401
=========== ========== =========== ===========
Weighted average number of
common shares outstanding 9,369,922 9,317,035 9,372,290 9,315,253
Add average shares issuable
under stock option and
variable stock award plans 583,957 595,116 587,171 612,074
----------- ---------- ----------- -----------
Total Common and Common
Equivalent Shares 9,953,879 9,912,151 9,959,461 9,927,327
=========== ========== =========== ===========
Primary Net Income Per Share $ 1.10 $ 0.99 $ 2.38 $ 2.15
FULLY DILUTED NET INCOME PER SHARE:
Net Income $10,898,000 $9,775,000 $23,568,000 $21,203,000
Plus Dividend Equivalent on
Deferred Long-Term Performance
Plan Awards (After-Tax) 70,609 57,117 139,365 107,401
----------- ---------- ----------- -----------
Adjusted Net Income $10,968,609 $9,832,117 $23,707,365 $21,310,401
=========== ========== =========== ===========
Weighted average number of
common shares outstanding 9,369,922 9,317,035 9,372,290 9,315,253
Add maximum dilutive impact
of average shares issuable
under stock option and
variable stock award plans* 600,717 613,174 602,535 629,149
----------- ---------- ----------- -----------
Total Dilutive Shares 9,970,639 9,930,209 9,974,825 9,944,402
=========== ========== =========== ===========
Fully Diluted Net Income Per Share $ 1.10 $ 0.99 $ 2.38 $ 2.14
* Assumes issuance of the maximum number of shares calculated as follows:
Stock option plans - computed using the higher of the average market price
or period-end market price of the Corporation's common stock.
Variable stock award plans - computed assuming the issuance of performance
stock awards that have been awarded but not yet vested.
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