<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended MARCH 31, 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.
9,382,150 shares, Common Stock $1 par value, as of April 29, 1994
Page 1 of 17 Pages
<PAGE>
<PAGE>
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 March 31, 1994 and 1993 3
Consolidated Statement of Condition as of March 31,
1994 and December 31, 1993 4
Consolidated Statement of Changes in Stockholders' Equity
for the Three Month Periods Ended March 31, 1994 and 1993 5
Consolidated Statement of Cash Flows for the Three
Month Periods Ended March 31, 1994 and 1993 6
Notes to the Consolidated Financial Statements 7
Consolidated Net Interest Income and Average Balances for
the Three Month Periods Ended March 31, 1994 and 1993 9
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.
-2-
<PAGE>
<PAGE>
<TABLE>
UNAUDITED
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
<CAPTION>
For the Three Month Periods Ended March 31,
--------------------------------------------
Better (Worse)
-------------------
1994 1993 $ %
--------- -------- -------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 20,160 $ 18,226 $ 1,934 10.6 %
Securities:
Taxable 14,250 16,461 (2,211) (13.4)
Exempt from Federal Income Taxes 1,328 2,125 (797) (37.5)
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 5,008 4,099 909 22.2
Deposits with Banks 582 1,794 (1,212) (67.6)
-------- -------- --------
Total Interest Income 41,328 42,705 (1,377) (3.2)
-------- -------- --------
INTEREST EXPENSE
Deposits 9,401 9,252 (149) (1.6)
Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and
Other Borrowings 2,607 2,451 (156) (6.4)
Long Term Debt 1,290 1,315 25 1.9
-------- -------- --------
Total Interest Expense 13,298 13,018 (280) (2.2)
-------- -------- --------
NET INTEREST INCOME 28,030 29,687 (1,657) (5.6)
Provision for Credit Losses 500 1,250 750 60.0
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES 27,530 28,437 (907) (3.2)
-------- -------- --------
FEES AND OTHER INCOME
Fiduciary and Other Fees 72,921 62,210 10,711 17.2
Securities Gains, Net 2,031 7 2,024 N/M
Other 2,324 1,996 328 16.4
-------- -------- --------
Total Fees and Other Income 77,276 64,213 13,063 20.3
-------- -------- --------
Total Operating Income Net of Interest
Expense and Provision for Credit Losses 104,806 92,650 12,156 13.1
-------- -------- --------
OPERATING EXPENSES
Salaries 32,735 27,967 (4,768) (17.0)
Employee Benefits and Incentive
Compensation 19,567 16,575 (2,992) (18.1)
-------- -------- --------
Total Salaries and Benefits 52,302 44,542 (7,760) (17.4)
Net Occupancy 9,778 9,754 (24) (0.2)
Equipment 4,247 4,258 11 0.3
Other 16,444 14,393 (2,051) (14.2)
-------- -------- --------
Total Operating Expenses 82,771 72,947 (9,824) (13.5)
-------- -------- --------
Income Before Income Tax Expense 22,035 19,703 2,332 11.8
Income Tax Expense 9,365 8,275 (1,090) (13.2)
-------- -------- --------
Net Income $ 12,670 $ 11,428 $ 1,242 10.9
======== ======== ======== ======
Net Income Per Share $ 1.28 $ 1.15 $ 0.13 11.3 %
The accompanying notes are an integral part of these financial statements.
N/M - Not Meaningful.
</TABLE>
-3-
<PAGE>
<PAGE>
<TABLE>
UNAUDITED
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars In Thousands)
<CAPTION>
March 31, December 31,
ASSETS 1994 1993
---------- ------------
<S> <C> <C>
Cash and Due from Banks $ 214,607 $ 179,117
Interest Bearing Deposits with Banks 71,230 61,476
Securities:
Available for Sale 1,268,516 836,532
Held to Maturity 396,648 86,748
Federal Funds Sold and Securities Purchased
Under Agreements to Resell - 237,000
Loans 1,420,739 1,398,723
Less: Allowance for Credit Losses 13,648 13,393
---------- ----------
Net Loans 1,407,091 1,385,330
Premises and Equipment 109,033 109,767
Other Assets 161,838 290,382
---------- ----------
Total Assets $3,628,963 $3,186,352
========== ==========
LIABILITIES
Deposits:
Non-Interest Bearing $1,183,553 $1,241,085
Interest Bearing 1,260,773 1,245,529
---------- ----------
Total Deposits 2,444,326 2,486,614
Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and Other
Borrowings 755,221 258,072
Accounts Payable and Accrued Liabilities 137,402 147,979
Long Term Debt 62,574 65,100
---------- ----------
Total Liabilities 3,399,523 2,957,765
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value, 40,000,000 Shares
Authorized, 11,467,548 Shares Issued in 1994
and 11,436,293 Shares Issued in 1993 11,468 11,436
Capital Surplus 67,989 67,898
Retained Earnings 250,179 242,112
Treasury Stock, at Cost (2,093,590 Shares in
1994 and 2,076,868 Shares in 1993) (84,266) (82,857)
Loan to ESOP (16,171) (18,697)
Unrealized Gain, Net of Taxes, on
Securities Available for Sale 241 8,695
---------- ----------
Total Stockholders' Equity 229,440 228,587
---------- ----------
Total Liabilities and Stockholders' Equity $3,628,963 $3,186,352
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
-4-
<PAGE>
<PAGE>
<TABLE>
UNAUDITED
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
For the Three Month
Periods Ended March 31,
---------------------------
1994 1993
--------- ---------
<S> <C> <C>
COMMON STOCK
Balance, January 1 $ 11,436 $ 56,506
Issuance of Shares Under Employee Benefit Plans 32 334
--------- ---------
Balance, March 31 $ 11,468 $ 56,840
========= =========
CAPITAL SURPLUS
Balance, January 1 $ 67,898 $ 23,280
Employee Benefit Plans 91 1,224
--------- ---------
Balance, March 31 $ 67,989 $ 24,504
========= =========
RETAINED EARNINGS
Balance, January 1 $ 242,112 $ 216,839
Net Income 12,670 11,428
Cash Dividends Declared ($0.50 and $0.47 Per Share) (4,676) (4,415)
Tax Benefit on Dividends Paid to ESOP 73 415
--------- ---------
Balance, March 31 $ 250,179 $ 224,267
========= =========
TREASURY STOCK
Balance, January 1 $ (82,857) $ (78,443)
Purchases (3,200) (1,275)
Issuance (Tender) of Shares Under Employee
Benefit Plans, Net 1,791 1,298
--------- ---------
Balance, March 31 $ (84,266) $ (78,420)
========= =========
LOAN TO ESOP
Balance, January 1 $ (18,697) $ (21,029)
Principal Payment by ESOP 2,526 2,332
--------- ---------
Balance, March 31 $ (16,171) $ (18,697)
========= =========
UNREALIZED GAIN, NET OF TAXES, ON SECURITIES
AVAILABLE FOR SALE
Balance, January 1 $ 8,695 $ -
Adjustment, Net of Taxes (8,454) -
--------- ---------
Balance, March 31 $ 241 $ -
========= =========
TOTAL STOCKHOLDERS' EQUITY $ 229,440 $ 208,494
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
-5-
<PAGE>
<PAGE>
<TABLE>
U.S. TRUST CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<CAPTION>
For Three Month Periods
Ended March 31,
------------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 12,670 $ 11,428
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Credit Losses 500 1,250
Depreciation and Amortization of Premises and
Equipment and Other Assets 3,869 3,310
Net Amortization of Premium on Securities:
Available for Sale 1,134 -
Held to Maturity 318 -
Investment - 1,576
Net Change in Accrued Interest, Commissions and
Other Receivables 141,989 (23,806)
Net Change in Accounts Payable and Other Liabilities (14,280) 12,585
Other, Net (3,073) 63
--------- ---------
Net Cash Provided by Operating Activities 143,127 6,406
--------- ---------
Cash Flows From Investing Activities:
Net Change in Interest Bearing Deposits with Banks (9,754) (149,592)
Purchases of Securities:
Available for Sale (687,853) -
Held to Maturity (324,261) -
Investment - (390,063)
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 198,542 -
Held to Maturity 16,133 -
Investment - 147,934
Net Change in Federal Funds Sold and Securities
Purchased Under Agreements to Resell 237,000 -
Net Change in Loans (22,016) 28,609
Expenditures for Premises and Equipment, Net of Retirements (2,381) (2,096)
Principal Payment by ESOP 2,526 2,332
Other, Net (5,341) 3,405
--------- ---------
Net Cash (Used) by Investing Activities (553,448) (359,471)
--------- ---------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits (57,532) (124,391)
Net Change in Money Market and Other Savings Deposits 14,284 84,137
Net Change in Time Deposits 960 (1,512)
Net Change in Federal Funds Purchased, Securities Sold
Under Agreements to Repurchase and Other Borrowings 497,149 328,883
Issuance of Long Term Debt - 3,000
Repayments of Long Term Debt (2,526) (2,332)
Issuance of Common Stock 1,076 2,102
Purchases of Treasury Stock (3,200) (1,275)
Dividends Paid (4,400) (3,990)
--------- ---------
Net Cash Provided by Financing Activities 445,811 284,622
--------- ---------
Net Change in Cash and Cash Equivalents 35,490 (68,443)
Cash and Cash Equivalents at January 1 179,117 219,709
--------- ---------
Cash and Cash Equivalents at March 31 $ 214,607 $ 151,266
========= =========
- - ------------------------------------------------------------------------------------
Income Taxes Paid $ 1,949 $ 3,831
Interest Expense Paid 13,567 13,396
The accompanying notes are an integral part of these financial statements.
</TABLE>
-6-
<PAGE>
<PAGE>
U. S. TRUST CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. PLEDGED ASSETS
--------------
Assets carried at $448,707,000 on March 31, 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 any 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.
3. CHANGE IN ACCOUNTING PRINCIPLES
-------------------------------
The Corporation adopted, as of December 31, 1993,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
method, are: securities held to maturity (carrying amount
equals amortized cost; unrealized gains and losses are not
recorded); trading securities (carrying amount equals
estimated fair value; unrealized gains and losses included
in the determination of net income) or securities available
-7-
<PAGE>
<PAGE>
U. S. TRUST CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. CHANGE IN ACCOUNTING PRINCIPLES (Cont'd.)
-------------------------------
for sale (carrying amount equals estimated fair value;
unrealized gains and losses recorded in a separate component
of stockholders' equity). Prior to adopting FAS 115, all of
the Corporation's investments in debt and equity securities
had been classified as investment securities that were
recorded at their amortized cost.
As of March 31, 1994 $1,269 million of investment securities
were classified as available for sale and $397 million as held
to maturity. The unrealized gains related to securities
classified as available for sale amounted to $508,000.
Stockholders' equity has been increased by $241,000 (net of
$267,000 of deferred income taxes).
4. ACQUISITION
-----------
On July 7, 1993, the 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 subsidiary, CTC Consulting, Inc.
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.
-8-
<PAGE>
<PAGE>
<TABLE>
UNAUDITED
U.S. TRUST CORPORATION
CONSOLIDATED NET INTEREST INCOME AND AVERAGE BALANCES
(Dollars in Thousands; Interest and Average Rates on a Taxable Equivalent Basis)
<CAPTION>
For the Three Month Periods Ended March 31,
-------------------------------------------------------------
1994 1993
-------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Bearing Deposits
with Banks $ 71,431 $ 582 3.31% $ 215,864 $ 1,794 3.37%
---------- ------- ---------- -------
Securities (1):
U.S. Government Obligations 571,196 5,951 4.17 330,781 5,336 6.45
Federal Agency Obligations 533,979 7,001 5.24 543,606 8,528 6.28
State and Municipal
Obligations 82,399 2,128 10.33 126,996 3,373 10.62
Collateralized Mortgage
Obligations (2) 103,729 952 3.67 265,068 2,509 3.79
Other Securities 83,908 686 3.27 44,235 392 3.55
---------- ------- ---------- -------
Total Securities 1,375,211 16,718 4.86 1,310,686 20,138 6.15
---------- ------- ---------- -------
Loans (3) 1,222,331 20,168 6.69 1,037,721 18,243 7.13
---------- ------- ---------- -------
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 656,217 5,008 3.10 545,104 4,099 3.05
---------- ------- ---------- -------
Total Interest Earning Assets 3,325,190 42,476 5.15 3,109,375 44,274 5.74
---------- ------- ---------- -------
Allowance for Credit Losses (13,627) (12,070)
Cash and Due from Banks 354,466 319,649
Other Assets 452,763 368,295
---------- ----------
Total Assets $4,118,792 $3,785,249
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits $1,342,594 9,401 2.84 $1,217,817 9,252 3.08
Federal Funds Purchased,
Securities Sold Under
Agreements to Repurchase and
Other Borrowings 339,038 2,607 3.12 332,443 2,451 2.99
Long Term Debt 63,444 1,290 8.13 63,587 1,315 8.27
---------- ------- ---------- -------
Total Sources on Which
Interest is Paid 1,745,076 13,298 3.09 1,613,847 13,018 3.27
---------- ------- ---------- -------
Total Non-Interest Bearing
Deposits 1,920,126 1,827,480
Other Liabilities 209,549 125,100
Stockholders' Equity (3) 244,041 218,822
---------- ----------
Total Liabilities and
Stockholders' Equity $4,118,792 $3,785,249
========== ==========
Net Interest Income $29,178 $31,256
======= =======
Net Yield on Interest
Earning Assets 3.53 4.04
===== =====
Interest Spread 2.06 2.47
===== =====
<FN>
(1) Includes securities classified at March 31, 1994 as available for sale and held to maturity at
amortize 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 $17,041,000 in 1994 and
$19,526,000 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 $ 1,140 $ 1,552
Total Loans $ 8 $ 17
</TABLE>
-9-
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
Results of Operations:
- - ---------------------
Net income for the first quarter ended March 31, 1994
amounted to $12.7 million, an increase of 10.9% over the $11.4 million
earned in the first quarter of 1993. Fully diluted net income per
share for the quarter totaled $1.28, an 11.3% increase over the $1.15
earned in the first quarter of 1993.
The Corporation's return on average stockholders' equity for
the first three months of 1994 was 22.64%, compared to 23.26% for the
first three months of 1993. Its return on average total assets was
1.25% in the three months ended March 31, 1994, versus 1.23% in the
three months ended March 31, 1993.
Net Interest Income (Taxable Equivalent Basis)
- - ----------------------------------------------
<TABLE>
<CAPTION>
Three Month Periods Ended March 31,
-------------------------------------
% Better
(In Thousands) 1994 1993 (Worse)
------- ------- ---------
<S> <C> <C> <C>
Interest Income $41,328 $42,705 (3.2)%
Taxable Equivalent Adjustment 1,148 1,569 (26.8)
------- -------
Total Interest Income 42,476 44,274 (4.1)
Interest Expense 13,298 13,018 (2.2)
------- -------
Net Interest Income $29,178 $31,256 (6.6)%
======= ======= ====
</TABLE>
Net interest income, on a taxable equivalent basis, was
$2.1 million lower in the 1994 first quarter, compared to the 1993
period.
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 increased 5.7%
($85 million) in the first quarter of 1994, compared with the first
quarter of 1993. The positive effect of the higher level of non-
interest bearing sources of funds was more than offset by the lower
average interest rate earned on the Corporation's securities portfolio
in 1994. The average yield on the securities portfolio was 4.86% in
1994, compared to 6.15% in 1993, a decline of 129 basis points from the
prior period, as the funds obtained from maturities and sales of
securities were reinvested at lower interest rates and shorter
maturities. For the first quarter of 1994, the net yield on average
interest earning assets was 3.53%, compared to 4.04% in the 1993
period.
-10-
<PAGE>
<PAGE>
Fees and Other Income
- - ---------------------
<TABLE>
<CAPTION>
Three Month Periods Ended March 31,
------------------------------------
% Better
(In Thousands) 1994 1993 (Worse)
------- ------- --------
<S> <C> <C> <C>
Fiduciary and Other Fees $72,921 $62,210 17.2%
Securities Gains, Net 2,031 7 -
Other 2,324 1,996 16.4
------- -------
Total Fees and Other Income $77,276 $64,213 20.3%
======= ======= ====
</TABLE>
Fiduciary and other fees increased $10.7 million in the first
quarter of 1994. The growth in fee income is attributable to all areas
of business. The increase in fiduciary and other fees for the first
quarter 1994 includes $1.8 million attributable to the operating
results of U.S. Trust Company of the Pacific Northwest. Assets under
management increased 10.7% to $31.3 billion at March 31, 1994,
including $1.4 billion managed by U.S. Trust Company of the Pacific
Northwest, from $28.3 billion at March 31, 1993.
Securities gains in the first quarter of 1994 are attributable
mainly to the sale of U.S. Government Treasury obligations classified
as available for sale.
Operating Expenses
- - ------------------
<TABLE>
<CAPTION>
Three Month Periods Ended March 31,
-------------------------------------
% Better
(In Thousands) 1994 1993 (Worse)
------- ------- ---------
<S> <C> <C> <C>
Salaries $32,735 $27,967 (17.0)%
Employee Benefits and
Incentive Compensation 19,567 16,575 (18.1)
------- -------
Total Salaries and Benefits 52,302 44,542 (17.4)
Net Occupancy 9,778 9,754 (0.2)
Equipment 4,247 4,258 0.3
Other 16,444 14,393 (14.2)
------- -------
Total Operating Expenses $82,771 $72,947 (13.5)%
======= ======= ====
</TABLE>
-11-
<PAGE>
<PAGE>
Operating Expenses (Cont'd.)
- - ------------------
For the first quarter of 1994, non-interest operating expenses
increased $9.8 million or 13.5% over the first quarter of 1993.
Excluding U.S. Trust Company of the Pacific Northwest, non-interest
operating expenses increased 10.6% for the quarter, compared to 1993.
Salaries and employee benefit expenses, including sales incentives and
commissions, increased $7.8 million or 17.4%, for the first quarter,
reflecting increases in the asset management, private banking and
mutual funds services businesses professional staffs and related
employee benefit expense. Excluding U.S. Trust Company of the Pacific
Northwest, salaries and employee benefit expenses increased 15.3% for
the first quarter, compared to 1993. For the first 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 78.1%, compared to 77.4% for the first quarter of 1993.
Income Taxes
- - ------------
The Corporation's effective tax rate for the first quarter of
1994 was 42.5%, compared with an effective tax rate of 42.0% for the
first quarter of 1993. The increase in the effective tax rate is the
result of a decline in tax-exempt income due to maturities and
redemptions of investments in state and municipal obligations and the
impact of the increase in the federal corporate income tax rate in
August 1993.
Financial Condition:
- - -------------------
Capital
- - -------
The Corporation has maintained its strong capital position
in the first quarter of 1994. The ratio of Tier 1 capital
at March 31, 1994 to period end risk-adjusted assets (as defined by
the Federal Reserve Board) was 14.18%. At March 31, 1993 this
ratio was 13.47%.
The Leverage ratio (defined by the Federal Reserve Board as
Tier 1 capital as of the period end divided by total quarterly average
assets reduced by goodwill and nonqualifying intangibles) amounted to
5.41% and 5.32% at March 31, 1994 and 1993, respectively.
-12-
<PAGE>
<PAGE>
Capital (Cont'd.)
- - -------
United States Trust Company of New York (the "Trust Company")
has also maintained its strong capital position. At March 31, 1994,
the Trust Company's Tier 1 capital ratio was 13.42% compared to 12.99%
at March 31, 1993. The Trust Company's Leverage ratio (as defined
by the Federal Reserve Board) was 5.04% and 5.07% at March 31, 1994
and 1993, respectively.
All Tier 1 and Total Capital ratios exclude the effects of
the Corporation's adoption of FAS 115 pending the regulatory
authorities determination of the appropriateness of including such FAS
115 adjustments in the calculations.
For the three month period ended March 31, 1994, 60,000
shares of common stock were acquired under the Corporation's share
repurchase program at an average price of $50.74 per share. For the
comparable 1993 period, 23,500 shares were repurchased at an average
cost of $54.23 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. Since the
inception of the common stock repurchase program, 3.0 million common
shares have been repurchased at an average cost of $39.76 per share.
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 three months of 1994, the Corporation issued 74,533 common
shares under its stock option, restricted stock, long-term performance,
and stock plan for non-officer directors plans.
Liquidity
- - ---------
The Corporation's balance sheet is highly liquid. At
March 31, 1994, 53.76% of total assets consisted of cash and
securities readily convertible to cash. The comparable percentages for
December 31, 1993 and March 31, 1993 are 43.96% and 55.14%,
respectively.
During the first three months of 1994, the Corporation
purchased $689.3 million of securities available for sale and $315.4
million of securities held to maturity. Of all securities purchased
($1,004.7 million) in the first quarter of 1994, $683.8 million were
U.S. Government Treasury securities with an approximate weighted
average maturity of 1.8 years and $312.6 million were U.S. Government
Agency securities with an approximate weighted average life of 5.7
years. During the first three months of 1994, the Corporation sold
$41.9 million of securities available for sale. There were no sales of
securities for the three month period ended March 31, 1993.
-13-
<PAGE>
<PAGE>
Liquidity (Cont'd.)
- - ---------
The fair value of securities held to maturity at March 31,
1994 was $382.5 million, which was $14.1 million less than the book
value. At December 31, 1993, the fair value of securities held to
maturity was $87.1 million, which exceeded the book value by $300,000.
Asset Quality
- - -------------
The Corporation's loan portfolio is comprised primarily of
loans to private banking customers. Average loans increased
$187 million, or 18.4%, to $1,205 million in the first quarter of 1994,
from $1,018 million in the first quarter of 1993. Residential real
estate mortgages accounted for more than 56% of the increase in the
portfolio.
An analysis of the allowance for credit losses follows.
<TABLE>
<CAPTION>
Three Month Periods Ended March 31,
-----------------------------------
(In Thousands) 1994 1993
------- -------
<S> <C> <C>
Balance, Beginning of Period $13,393 $11,676
------- -------
Provision Charged to Income 500 1,250
------- -------
Recoveries:
Private Banking 170 147
Other 53 55
------- -------
223 202
------- -------
Charge-offs:
Private Banking (468) (830)
Other - (80)
------- -------
(468) (910)
------- -------
Net (Charge Offs) (245) (708)
------- -------
Balance, End of Period $13,648 $12,218
======= =======
</TABLE>
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<PAGE>
<PAGE>
Asset Quality (Cont'd.)
- - -------------
The provision for credit losses in the first quarter of 1994
was $500,000, compared to $1.25 million in the first quarter of
1993. As a percentage of average loans for the quarter, net
charge-offs, on an annualized basis, were 8 basis points for the first
quarter of 1994, compared to 28 basis points for the first quarter of
1993.
The allowance for credit losses at March 31, 1994, was
$13.6 million, or 1.13% of total average loans outstanding for the
quarter. This compares with $13.4 million, or 1.13% of total average
loans outstanding for the quarter ended December 31, 1993, and
$12.2 million, or 1.20% of total average loans outstanding for the
quarter ended March 31, 1993.
The allowance for credit losses as a percentage of
nonperforming loans was 217.78% at March 31, 1994, compared to 223.03%
at December 31, 1993, and 188.96% at March 31, 1993. The ratio of
nonperforming assets to total average loans and real estate owned for
the quarter was 1.46% at March 31, 1994, compared to 1.47% at
December 31, 1993 and 2.01% at March 31, 1993.
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 results of operations or financial condition of the Corporation.
-15-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
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
-16-
<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: May 10, 1994 Richard E. Brinkmann
------------------ ------------------------------
Richard E. Brinkmann
Senior Vice President
and Comptroller
(Principal Accounting Officer)
-17-
<PAGE>
<TABLE>
U.S. TRUST CORPORATION
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
Three Month Periods Ended March,
---------------------------------
1994 1993
----------- ------------
<S> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net Income $12,670,000 $11,428,000
Plus Dividend Equivalent on Deferred Long-
Term Performance Plan Awards (After-Tax) 68,756 50,284
----------- ------------
Adjusted Net Income $12,738,756 $11,478,284
=========== ============
Weighted average number of common
shares outstanding 9,374,684 9,313,451
Add average shares issuable under stock
option and variable stock award plans 569,752 617,826
----------- ------------
Total Common and Common Equivalent Shares 9,944,436 9,931,277
=========== ============
Primary Net Income Per Share $ 1.28 $ 1.16
FULLY DILUTED NET INCOME PER SHARE:
Net Income $12,670,000 $11,428,000
Plus Dividend Equivalent on Deferred Long-
Term Performance Plan Awards (After-Tax) 68,756 50,284
----------- ------------
Adjusted Net Income $12,738,756 $11,478,284
=========== ============
Weighted average number of common
shares outstanding 9,374,684 9,313,451
Add maximum dilutive impact of average shares
issuable under stock option and variable
stock award plans* 598,599 686,638
----------- ------------
Total Dilutive Shares 9,973,283 10,000,089
=========== ============
Fully Diluted Net Income Per Share $ 1.28 $ 1.15
* 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.
</TABLE>
-1-
