CONFORMED 1.
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 Quarter Ended September 30, 1996 Commission file number 1-2940
HSBC Americas, Inc.
(Exact name of registrant as specified in its charter)
Delaware Corporation 22-1093160
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Marine Midland Center, Buffalo, N.Y. 14203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 841-2424
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
All voting stock (1,001 shares of Common Stock, $5 par value) is owned by HSBC
Holdings B.V., an indirect wholly-owned subsidiary of HSBC Holdings plc.
This report includes a total of 16 pages.
2.
Part I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements
Consolidated Balance Sheet
September 30, 1996 and December 31, 1995 3
Consolidated Statement of Income
For The Quarter and Nine Months
Ended September 30, 1996 and 1995 4
Consolidated Statement of Changes in
Shareholders' Equity For The Nine Months
Ended September 30, 1996 and 1995 5
Consolidated Statement of Cash Flows
For The Nine Months Ended
September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
3.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET HSBC AMERICAS, INC.
September 30, December 31,
dollars in thousands 1996 1995*
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 924,163 $ 1,242,335
Interest bearing deposits with banks 1,334,850 1,488,101
Federal funds sold and securities purchased
under resale agreements 1,092,569 518,256
Trading assets 791,225 616,531
Securities available for sale 3,125,670 2,613,830
Loans 14,426,357 13,772,339
Less - allowance for loan losses 441,494 477,502
- ------------------------------------------------------------------------------
Loans, net 13,984,863 13,294,837
Premises and equipment 180,997 180,552
Customers' acceptance liability 19,791 21,671
Accrued interest receivable 175,850 150,335
Other real estate and other owned assets 66,911 109,758
Other assets 461,229 317,137
- ------------------------------------------------------------------------------
TOTAL ASSETS $ 22,158,118 $ 20,553,343
==============================================================================
LIABILITIES
Deposits in domestic offices:
Noninterest bearing $ 3,280,342 $ 3,433,016
Interest bearing 11,537,886 10,454,352
Interest bearing deposits in foreign offices 2,416,442 1,442,484
- ------------------------------------------------------------------------------
Total deposits 17,234,670 15,329,852
Federal funds purchased and securities sold
under repurchase agreements 597,607 1,136,476
Other short-term borrowings 1,508,988 1,401,634
Interest, taxes and other liabilities 271,256 257,094
Acceptances outstanding 19,791 21,671
Long-term debt 583,149 709,750
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 20,215,461 18,856,477
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock 98,063 98,063
Common shareholder's equity:
Common stock 5 5
Capital surplus 1,803,274 1,803,094
Retained earnings (accumulated deficit) 37,926 (233,686)
Net unrealized gain on securities
available for sale, net of taxes 3,389 29,390
- ------------------------------------------------------------------------------
Total common shareholder's equity 1,844,594 1,598,803
- ------------------------------------------------------------------------------
Total shareholders' equity 1,942,657 1,696,866
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,158,118 $ 20,553,343
==============================================================================
The accompanying notes are an integral part of these financial statements.
* Restated to include the accounts and results of Oleifera Investments, Ltd.
combined with the Company on January 1, 1996.
</TABLE>
4.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME HSBC AMERICAS, INC.
Quarter ended Nine months ended
dollars in thousands September 30 September 30
- ------------------------------------------------------------------------------
1996 1995 * 1996 1995 *
<S> <C> <C> <C> <C>
Interest income:
Loans $ 331,812 $ 310,877 $ 942,379 $ 900,926
Securities 49,109 37,318 140,668 104,461
Trading assets 12,574 9,030 38,409 23,702
Deposits with banks 15,647 13,463 51,468 40,752
Federal funds sold and
securities purchased under
resale agreements 7,463 6,660 20,564 31,070
- ------------------------------------------------------------------------------
Total interest income 416,605 377,348 1,193,488 1,100,911
- ------------------------------------------------------------------------------
Interest expense:
Deposits:
In domestic offices 107,582 102,804 304,308 288,909
In foreign offices 17,036 19,257 53,198 50,738
Federal funds purchased and
securities sold under
repurchase agreements 15,772 9,737 46,260 21,386
Other short-term borrowings 15,256 8,532 49,131 38,813
Long-term debt 11,413 12,518 34,274 38,321
- ------------------------------------------------------------------------------
Total interest expense 167,059 152,848 487,171 438,167
- ------------------------------------------------------------------------------
Net interest income 249,546 224,500 706,317 662,744
Provision for loan losses 15,000 16,939 49,750 158,061
- ------------------------------------------------------------------------------
Net interest income, after
provision for loan losses 234,546 207,561 656,567 504,683
- ------------------------------------------------------------------------------
Other operating income:
Trust income 9,748 11,162 30,332 34,065
Service charges 22,709 21,274 65,453 62,702
Mortgage servicing income 3,495 3,769 11,929 12,654
Other fees and commissions 29,078 30,805 85,810 90,561
Trading revenues 1,250 1,420 2,604 4,251
Other income 11,395 12,764 35,600 34,675
- ------------------------------------------------------------------------------
Total other operating income 77,675 81,194 231,728 238,908
- ------------------------------------------------------------------------------
312,221 288,755 888,295 743,591
- ------------------------------------------------------------------------------
Other operating expenses:
Salaries 73,633 72,339 211,395 211,741
Pension and other employee
benefits 18,061 15,823 53,246 54,829
- ------------------------------------------------------------------------------
Total personnel expense 91,694 88,162 264,641 266,570
Net occupancy expense 20,436 20,056 58,845 55,238
Other expenses 61,701 61,208 162,059 184,475
- ------------------------------------------------------------------------------
Total other operating expenses 173,831 169,426 485,545 506,283
Provision for ORE and
other owned asset losses 811 3,466 2,634 5,101
- ------------------------------------------------------------------------------
Total operating expenses after
provision for ORE and other
owned assets 174,642 172,892 488,179 511,384
- ------------------------------------------------------------------------------
Income before taxes 137,579 115,863 400,116 232,207
Applicable income tax expense 36,600 34,835 124,100 13,245
- ------------------------------------------------------------------------------
Net income $ 100,979 $ 81,028 $ 276,016 $ 218,962
==============================================================================
The accompanying notes are an integral part of these financial statements.
* Restated to include the accounts and results of Oleifera Investments,
Ltd. combined with the Company on January 1, 1996.
</TABLE>
5.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY HSBC AMERICAS,INC.
- ---------------------------------------------------------------------------
Nine months ended September 30
dollars in thousands 1996 1995*
- ---------------------------------------------------------------------------
<S> <C> <C>
At beginning of period $1,696,866 $1,657,448
Net income 276,016 218,962
Net change in unrealized gain on
securities available for sale, net of taxes (26,001) -
Cash dividends declared on preferred stock (4,404) (4,404)
Return of capital to parent - (40,000)
Capital contributions from parent 180 -
- ---------------------------------------------------------------------------
At end of period $1,942,657 $1,832,006
===========================================================================
- ---------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended September 30
dollars in thousands 1996 1995*
- ---------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 276,016 $ 218,962
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation, amortization and deferred taxes 62,366 (70,174)
Provision for loan losses 49,750 158,061
Net change in other accrual accounts (15,211) (268,283)
Net change in loans originated for sale 296,011 (63,112)
Net change in trading assets (186,329) 12,400
Other, net (45,385) (80,214)
- ---------------------------------------------------------------------------
Net cash used by operating activities 437,218 (92,360)
- ---------------------------------------------------------------------------
Cash flows from investing activities:
Net change in interest bearing deposits with banks 379,310 230,379
Net change in short-term investments (574,313) (169,707)
Purchases of securities (956,079) (1,192,004)
Sales of securities 84,123 48,042
Maturities of securities 364,156 527,604
Net change in credit card receivables (110,082) (140,916)
Net change in other short-term loans 3,501 12,312
Net originations and maturities of long-term loans 118,265 (290,577)
Expenditures for premises and equipment (15,943) (12,306)
Net cash provided by (used in) acquisitions, net
of cash acquired (7,094) -
Other, net 70,885 148,766
- ---------------------------------------------------------------------------
Net cash used by investing activities (643,271) (838,407)
- ---------------------------------------------------------------------------
Cash flows from financing activities:
Net change in deposits 448,800 1,022,683
Net change in short-term borrowings (431,515) (19,110)
Repayment of long-term debt (125,000) -
Return of capital to parent - (40,000)
Dividends paid (4,404) (4,404)
- ---------------------------------------------------------------------------
Net cash provided by financing activities (112,119) 959,169
- ---------------------------------------------------------------------------
Net change in cash and due from banks (318,172) 28,402
Cash and due from banks at beginning of period 1,242,335 1,051,003
- ---------------------------------------------------------------------------
Cash and due from banks at end of period $ 924,163 $1,079,405
===========================================================================
The accompanying notes are an integral part of these financial statements.
*Restated to include the accounts and results of Oleifera Investments, Ltd.
combined with the Company on January 1,1996.
</TABLE>
6.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accounting and reporting policies of HSBC Americas, Inc. (the Company) and
its subsidiaries including its principal subsidiary, Marine Midland Bank,
conform to generally accepted accounting principles and to predominant
practice within the banking industry. Such policies, except as noted below,
are consistent with those applied in the presentation of the Company's annual
financial statements.
The interim financial information in this report has not been audited. In the
opinion of the Company's management, all adjustments necessary for a fair
presentation of financial position, results of operations and cash flows for
the interim periods have been made. The interim financial information should
be read in conjunction with the 1995 Annual Report on Form 10-K.
2. Pledged Financial Instruments
At September 30, 1996, securities, loans and other assets carried at
$1,578,215,000 were pledged as collateral for borrowings, to secure public and
trust deposits and for other purposes.
3. Acquisitions
The Company's results have been consolidated with Oleifera Investments, Ltd.
(OIL) which was combined with the Company on January 1, 1996. The net assets
of OIL, an indirect wholly-owned subsidiary of HSBC Holdings plc, were
transferred to the Company through a contribution of stock. Assets of OIL
totaling $183 million at December 31, 1995, consisted primarily of commercial
loans and other real estate.
The merger transaction was accounted for as a transfer of assets between
companies under common control, with the assets and liabilities of OIL
combined with those of the Company at their historical carrying values. The
Company's consolidated financial statements reflect a restatement of prior
periods to include the accounts and results of operations of OIL as though
they had been combined as of the beginning of the earliest period presented.
On June 28, 1996, the Company acquired $1.1 billion in selected assets and
assumed $1.2 billion in deposits of East River Savings Bank for $93 million.
The acquisition was accounted for as a purchase and the results of its
operations are included in the financial statements since the date of
acquisition. The excess fair value of net assets acquired is estimated to be
approximately $102 million and will be amortized against income over periods
not exceeding fifteen years. Additionally prior to June 30, 1996, the Company
acquired two New York City branches of the Hang Seng Bank, an affiliate of the
Company.
On August 21, 1996, the Company and CT Financial Services Inc., a federal
corporation organized under the laws of Canada (the "Seller"), entered into a
Stock Purchase Agreement pursuant to which the Company agreed to purchase from
the Seller all of the issued and outstanding common shares of CTUS Inc.
("CTUS"), a unitary thrift holding company. CTUS owns approximately 99% of
the issued and outstanding shares of First Federal Savings and Loan
Association of Rochester ("First Federal"), a thrift institution which, at
June 30, 1996 had approximately $7.2 billion in assets and operated 80
branches across New York State, including 31 branches in Monroe and Erie
counties. The purchase price to be paid by the Company to the Seller is $620
million in cash, subject to upwards or downwards adjustment to the extent that
at the time of closing of the acquisition the book value of First Federal is
greater than or less than an amount equal to $400 million plus or minus
certain adjustments. It is contemplated that simultaneously with the purchase
7.
of the common shares of CTUS by the Company, First Federal will be merged with
and into Marine Midland Bank ("Marine"), the Company's principal subsidiary.
The Stock Purchase Agreement provides that prior to the closing of the
purchase of the CTUS common shares by the Company, CTUS will issue to the
Seller and the Seller will continue to hold following the purchase, a class of
preferred shares of CTUS which will provide for a contingent dividend or
redemption equal to the amount of the recovery, net of taxes and costs, if
any, by First Federal (or Marine as its successor) resulting from the pending
action in the United States Court of Claims by First Federal against the
United States government alleging breaches by the government of contractual
obligations to First Federal following passage of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989. The Company will sell a portion
of its portfolio of investment securities to fund the purchase price of the
CTUS common shares under the Stock Purchase Agreement.
Completion of the acquisition is subject to certain conditions, including
receipt of necessary regulatory approvals including approval of the Board of
Governors of the Federal Reserve System and the New York State Banking
Department as well as notification of the Office of Thrift Supervision. The
transaction when completed will be accounted for as a purchase and the results
of CTUS's operations will be included in the Company's financial statements
from the date of acquisition.
Also in August 1996 the Company reached an agreement to acquire the
institutional United States dollar clearing activity of Morgan Guaranty Trust
Company of New York. This transaction is expected to occur by December 31,
1996.
4. New Accounting Standards
Effective January 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 122, Accounting for Mortgage Servicing
Rights (FAS 122) prospectively. FAS 122 requires that a mortgage banking
enterprise recognize as separate assets the right to service mortgage loans
for others, whether acquired directly or in conjunction with the acquisition
of mortgage loan assets.
As originated or purchased mortgage loans are sold, securitized or where a
definitive plan exists to sell or securitize such loans, their total cost is
allocated between servicing rights and the loans, based on relative fair
values.
FAS 122 specifies that servicing rights be evaluated for impairment based on
the difference between the carrying value of such rights and their current
fair value. For purposes of measuring impairment, which is to be recorded
through use of a valuation reserve, servicing rights will be stratified based
upon interest rates and whether or not such rates are fixed or variable.
The adoption of FAS 122 did not have a material effect on the financial
position or results of operations of the Company.
The Company is required to adopt Statement of Financial Accounting Standards
No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (FAS 125), effective January 1, 1997. The
Company does not expect that the adoption of FAS 125 will have a material
effect on its financial position or results of operation.
8.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
HSBC Americas, Inc. (the Company), reported third quarter net income of $101.0
million, compared with $81.0 million in the 1995 third quarter. For the first
nine months of 1996, net income was $276.0 million, compared with $219.0
million for the first nine months of last year. Net income in 1996 reflected
improved net interest income.
Net Interest Income
Net interest income for the third quarter of 1996 increased to $249.5 million
compared with $224.5 million for the third quarter of 1995. For the first
nine months of 1996, net interest income was $706.3 million compared with
$662.7 million for the first nine months of 1995.
Interest income of $416.6 million in the third quarter of 1996 was 10.4%
higher than the third quarter of 1995. Average earning assets of $20.0
billion for the third quarter of 1996 were 14.0% higher than a year ago.
Outstanding average earning assets include the impact of the $1.1 billion in
assets acquired from the East River Savings Bank in June 1996. The average
rate earned on earning assets was 8.28% for the third quarter of 1996 compared
with 8.54% a year ago. Interest income of $1,193.5 million for the first nine
months of 1996 was 8.4% higher than the first nine months of 1995. Average
earning assets of $19.4 billion for the first nine months of 1996 were 11.4%
higher than the first nine months of 1995. The average rate earned on earning
assets was 8.23% for the first nine months of 1996 compared with 8.47% a year
ago. The improvement in interest income is due to a number of factors
including increases in consumer and commercial loan volume, an increased
investment portfolio, and a reduction in commercial nonaccrual loans.
Interest expense for the third quarter of 1996 was $167.1 million,
representing a 9.3% increase over the third quarter of 1995. Average interest
bearing liabilities for the third quarter of 1996 were $16.1 billion, compared
with $13.6 billion a year ago. Average outstanding interest bearing
liabilities include the impact of the $1.2 billion of deposit liabilities
acquired from the East River Savings Bank in June 1996. The average rate paid
on interest bearing liabilities was 4.12% compared with 4.47% a year ago.
Interest expense for the first nine months of 1996 was $487.2 million or 11.2%
above the first nine months of 1995. Average interest bearing liabilities for
the first nine months of 1996 were $15.6 billion, compared with $13.4 billion
a year ago. The average rate paid on interest bearing liabilities was 4.18%
for the first nine months of 1996 compared with 4.38% a year ago.
The taxable equivalent net yield on average total assets for the third quarter
of 1996 was 4.67%, compared with 4.74% a year ago. The taxable equivalent net
yield on average total assets for the first nine months of 1996 was 4.58%,
compared with 4.75% a year ago.
9.
Other Operating Income
For the third quarter of 1996, total other operating income was $77.7 million,
compared with $81.2 million in the 1995 third quarter. For the first nine
months of 1996, total other operating income was $231.7 million, compared with
$238.9 million for the first nine months of 1995.
Other Operating Expenses
Other operating expenses were $174.6 million in the 1996 third quarter
compared with $172.9 million for the 1995 third quarter. Expenses for the
third quarter of 1996 include those associated with the operation of the 11
branches acquired from East River Savings Bank in June 1996. The Company
accrued less than $.5 million in the third quarter of 1996 for its estimate of
the one-time assessment to recapitalize the SAIF Insurance Fund. The Company
had $71 million in deposits subject to this assessment. Expenses for the third
quarter of 1995 were reduced by $7.9 million as a result of a refund received
from the Federal Deposit Insurance Corp. (FDIC) relating to its premium rate
reduction for the period June 1995 to September 1995. Other operating
expenses were $488.2 million for the first nine months of 1996 compared with
$511.4 million a year ago. The FDIC insurance premium decreased principally
from the industry-wide reduction in deposit insurance premium rates. This
event resulted in a $13.1 million decrease in other expense in the first nine
months of 1996 compared with the same period of 1995, including the effect of
the refund.
Income Taxes
Contemplated in the merger of Concord Leasing Corp. (Concord) and the Company
was the availability of net operating loss carryforwards and other temporary
deductible differences of Concord that could be used to offset future taxable
income of the Company. At January 1, 1995, Concord had net deferred tax
assets of approximately $206 million resulting from loss carryforwards and
deductible differences, which were offset in full by a valuation allowance due
to the uncertainty of Concord realizing the tax benefits on a stand-alone
basis. As a result of the merger, Concord's net deferred tax asset of $73.5
million was recognized in the first quarter of 1995 reflecting management's
judgement that such asset was now more likely than not to be realized.
The recognition of deferred tax carryforward losses associated with Concord
has continued to result in the reduction of taxes from a statutory effective
rate of 43% to 31% for the first nine months of 1996 and 27% for the third
quarter.
The deferred tax asset at September 30, 1996 was $83 million, net of valuation
reserve of $281 million, compared with $88 million, net of valuation reserve
of $304 million at December 31, 1995.
10.
<TABLE>
<CAPTION>
Asset Quality
The following tables provides a summary of the loan loss allowance and
nonperforming assets.
3rd 3rd 9 Months Year 9 Months
Quarter Quarter Ended Ended Ended
1996 1995 9/30/96 12/31/95 9/30/95
(in millions)
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses
Balance at beginning
of period $458.0 $521.9 $477.5 $531.5 $531.5
Allowance related to
acquired companies - - 3.4 .4 -
Provision for loan losses 15.0 16.9 49.8 175.3 158.1
Net charge offs 31.5 8.7 89.2 229.7 159.5
Balance at end of period $441.5 $530.1 $441.5 $477.5 $530.1
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
(in millions)
<S> <C> <C> <C>
Nonaccruing Loans
Balance at end of period $382.2 $468.3 $585.1
As a percent of loans
outstanding 2.65% 3.40% 4.39%
Nonperforming Loans and Assets*
Balance at end of period $449.1 $578.1 $779.2
As a percent of total assets 2.03% 2.81% 3.91%
Allowance Ratios
Allowance for loan losses as a
percent of:
Loans 3.06% 3.47% 3.97%
Nonaccruing loans 115.52 101.95 90.61
*Includes nonaccruing loans, other real estate and other owned assets.
</TABLE>
Provisions for loan losses were $15.0 million in the third quarter of 1996
compared with $16.9 million in the third quarter of 1995. Provisions for loan
losses for the first nine months of 1996 were $49.8 million compared with
$158.1 million during the first nine months of 1995. Provision expense during
the first nine months of 1996 reflected the higher level of net charge offs in
the credit card portfolio, $61.0 million in 1996 compared with $34.2 million
in 1995. The provision for loan losses in the first nine months of 1995
primarily related to the assets acquired through the merger of Concord on
January 1, 1995 as a result of management's decision to accelerate the timing
of control and disposal of Concord's exit portfolios.
The Company identified impaired loans as defined by FAS 114 totaling $251
million at September 30, 1996, of which $62 million had a specific loan loss
allowance of $37 million. At December 31, 1995, the Company had identified
impaired loans of $348 million, of which $117 million had a specific loan loss
allowance of $61 million.
11.
Derivative Financial Instruments
As principally an end-user of off-balance sheet financial instruments, the
Company uses various derivative financial instruments to manage its overall
interest rate risk and to reduce the risk associated with changes in the
income stream of certain on-balance sheet assets. At September 30, 1996,
$26.0 billion notional value of such positions, with an estimated negative
fair value of approximately $24.1 million were outstanding. At December 31,
1995, $16.8 billion notional value of such positions, with an estimated
negative fair value of $10.7 million were outstanding.
The Company also maintains various derivatives in its trading portfolio to
offset risk associated with changes in market value of certain trading assets,
and to satisfy the foreign currency requirements of retail customers. These
derivatives are carried at fair value. At September 30, 1996, $.7 billion
notional value of such positions with an estimated negative fair value of $.2
million were outstanding. At December 31, 1995, $1.0 billion of notional
value of such positions with an estimated negative fair value of $.9 million
were outstanding.
The Company's credit risk associated with off-balance sheet positions is not
considered material, since almost all derivative contracts are executed with
counterparties affiliated through common ownership. Collateral is maintained
on these positions, the amount of which is consistent with the measurement of
exposure used in the risk based capital ratio calculations under the banking
regulators' guidelines.
Liquidity
The Company maintains a strong liquidity position. Short-term investments and
trading assets were $3.2 billion at September 30, 1996 compared with $2.6
billion at December 31, 1995. Loans at September 30, 1996 were 65.1% of total
assets compared with 67.0% at December 31, 1995.
Deposits at September 30, 1996 were $17.2 billion, compared with $15.3 billion
at December 31, 1995. Deposits continue to exceed loans and were 119.5% of
loans at September 30, 1996. The Company acquired the East River Savings Bank
branch network and deposits and selected commercial, residential and consumer
loans in June 1996 which increased deposits by $1.2 billion and loans by $.9
billion.
Short-term borrowings, including repurchase agreements, were $2.1 billion at
September 30, 1996 compared with $2.5 billion at December 31, 1995. Long-term
borrowings of $.6 billion at September 30, 1996 compared with $.7 billion at
December 31, 1995.
12.
Capital
Shareholders' equity was $1.9 billion at September 30, 1996 compared with $1.7
billion at December 31, 1995. The capital contribution from the parent
primarily relates to a parent company stock ownership plan in which almost all
employees are eligible to participate.
Under risk-based capital guidelines, the Company's capital ratios were 11.19%
at the Tier 1 level and 15.61% at the total capital level at September 30,
1996. These ratios compare with 10.89% at the Tier 1 level and 16.39% at the
total capital level at December 31, 1995.
Under guidelines for leverage ratios, the Company's ratio of Tier 1 capital to
quarterly average total assets was 8.54% at September 30, 1996 compared with
8.36% at December 31, 1995.
Pending Acquisitions
In August 1996, the Company announced that it had reached an agreement to
acquire CTUS Inc., a unitary thrift holding company and parent of First
Federal Savings and Loan Association of Rochester, from Toronto-based CT
Financial Services Inc. for $620 million. The pending acquisition is more
fully described in the Notes to Consolidated Financial Statements.
The Company also announced in August 1996 an agreement to acquire the
institutional United States dollar clearing activity of Morgan Guaranty Trust
Company of New York. This transaction is expected to occur by December 31,
1996.
Subsequent Event
On November 4, 1996 the Company issued $300 million of 7% subordinated debt
maturing in November 2006. The proceeds to be received will be used as an
extension of credit to its principal subsidiary, Marine Midland Bank.
13.
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES* HSBC AMERICAS, INC.
Third Quarter 1996 Third Quarter 1995 **
dollars in millions Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits
with banks $ 1,107 $ 15.7 5.63 % $ 900 $ 13.5 5.94%
Federal funds sold and securities
purchased under resale agreements 550 7.5 5.40 439 6.7 6.02
Trading assets 821 12.6 6.12 534 9.1 6.79
Securities:
U.S. Government and
federal agency obligations 2,979 43.5 5.81 2,187 33.5 6.09
Other securities 237 5.7 9.58 265 3.9 5.80
- ------------------------------------------------------------------------------
Total securities 3,216 49.2 6.09 2,452 37.4 6.04
Loans:
Domestic:
Commercial 6,919 152.3 8.76 6,607 148.6 8.93
Consumer 6,937 171.5 9.85 6,119 154.1 10.02
- -----------------------------------------------------------------------------
Total domestic 13,856 323.8 9.30 12,726 302.7 9.44
International 499 8.7 6.95 532 9.1 6.76
- ------------------------------------------------------------------------------
Total loans 14,355 332.5 9.22 13,258 311.8 9.33
- ------------------------------------------------------------------------------
Total earning assets 20,049 $ 417.5 8.28 % 17,583 $378.5 8.54%
- ------------------------------------------------------------------------------
Less - allowance for loan losses (447) (535)
Cash and due from banks 901 910
Other assets 833 935
- ------------------------------------------------------------------------------
Total assets $ 21,336 $ 18,893
==============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand
deposits $ 1,685 $ 5.7 1.33 % $ 1,588 $ 7.7 1.92%
Consumer savings deposits 4,369 33.5 3.05 3,727 31.3 3.33
Other consumer time deposits 3,920 51.8 5.26 3,152 45.0 5.66
Commercial and public savings
and other time deposits 1,719 16.6 3.85 1,750 18.8 4.27
Deposits in foreign offices 1,321 17.0 5.13 1,480 19.3 5.16
- ------------------------------------------------------------------------------
Total time deposits 13,014 124.6 3.81 11,697 122.1 4.14
- ------------------------------------------------------------------------------
Short-term borrowings 2,416 31.1 5.11 1,147 18.3 6.32
Long-term debt 702 11.4 6.47 711 12.5 6.99
- ------------------------------------------------------------------------------
Total funds borrowed 3,118 42.5 5.42 1,858 30.8 6.58
- ------------------------------------------------------------------------------
Total interest bearing
liabilities 16,132 $ 167.1 4.12 % 13,555 $152.9 4.47%
- ------------------------------------------------------------------------------
Interest rate spread 4.16 % 4.07%
- ------------------------------------------------------------------------------
Demand deposits 3,049 3,030
Other liabilities 265 517
Total shareholders' equity 1,890 1,791
- ------------------------------------------------------------------------------
Total liabilities and
shareholdes' equity $ 21,336 $ 18,893
==============================================================================
Net interest income $ 250.4 $225.6
Net yield on average earning assets 4.97 % 5.09%
Net yield on average total assets 4.67 4.74
- ------------------------------------------------------------------------------
Net interest income/net yield on
average earning assets:
Domestic $ 240.4 5.06 % $214.8 5.26%
International 10.0 3.49 10.8 3.08
==============================================================================
* Interest and rates are presented on a taxable equivalent basis.
** Restated to include the accounts and results of Oleifera Investments, Ltd.
combined with the Company on January 1, 1996.
</TABLE>
14.
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES* HSBC AMERICAS, INC.
Nine Months 1996 Nine Months 1995**
dollars in millions Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits
with banks $1,241 $ 51.5 5.54 % $ 898 $ 40.8 6.07%
Federal funds sold and securities
purchased under resale agreements 516 20.6 5.33 686 31.1 6.06
Trading assets 844 38.5 6.08 452 23.8 7.01
Securities:
U.S. Government and
federal agency obligations 2,861 123.6 5.77 2,053 94.2 6.13
Other securities 252 17.3 9.15 241 10.4 5.77
- -----------------------------------------------------------------------------
Total securities 3,113 140.9 6.05 2,294 104.6 6.10
Loans:
Domestic:
Commercial 6,532 422.3 8.64 6,571 428.9 8.73
Consumer 6,661 496.2 9.95 5,992 446.9 9.97
- -----------------------------------------------------------------------------
Total domestic 13,193 918.5 9.30 12,563 875.8 9.32
International 511 26.3 6.87 542 28.3 6.98
- -----------------------------------------------------------------------------
Total loans 13,704 944.8 9.21 13,105 904.1 9.22
- -----------------------------------------------------------------------------
Total earning assets 19,418 $1,196.3 8.23 % 17,435 $1,104.4 8.47%
- -----------------------------------------------------------------------------
Less - allowance for loan losses (463) (548)
Cash and due from banks 964 897
Other assets 765 959
- -----------------------------------------------------------------------------
Total assets $20,684 $ 18,743
=============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand
deposits $ 1,648 $ 16.4 1.33 % $ 1,578 $ 22.8 1.93%
Consumer savings deposits 4,002 92.3 3.08 3,759 91.0 3.24
Other consumer time deposits 3,478 139.7 5.37 3,028 123.6 5.46
Commercial and public savings
and other time deposits 1,861 55.9 4.01 1,643 51.5 4.19
Deposits in foreign offices 1,368 53.2 5.19 1,387 50.8 4.89
- -----------------------------------------------------------------------------
Total time deposits 12,357 357.5 3.86 11,395 339.7 3.99
- -----------------------------------------------------------------------------
Short-term borrowings 2,514 95.4 5.07 1,271 60.2 6.33
Long-term debt 707 34.3 6.48 712 38.3 7.20
- -----------------------------------------------------------------------------
Total funds borrowed 3,221 129.7 5.38 1,983 98.5 6.64
- -----------------------------------------------------------------------------
Total interest bearing
liabilities 15,578 $ 487.2 4.18 % 13,378 $ 438.2 4.38%
- -----------------------------------------------------------------------------
Interest rate spread 4.05 % 4.09%
- -----------------------------------------------------------------------------
Demand deposits 3,016 3,011
Other liabilities 281 604
Total shareholders' equity 1,809 1,750
- -----------------------------------------------------------------------------
Total liabilities and
shareholders' equity $20,684 $ 18,743
=============================================================================
Net interest income $ 709.1 $ 666.2
Net yield on average earning assets 4.88 % 5.11%
Net yield on average total assets 4.58 4.75
- -----------------------------------------------------------------------------
Net interest income/net yield on average earning assets:
Domestic $ 681.0 5.03 % $ 632.2 5.30%
International 28.1 2.84 34.0 3.06
=============================================================================
* Interest and rates are presented on a taxable equivalent basis.
** Restated to include the accounts and results of Oleifera Investments, Ltd.
combined with the Company on January 1, 1996.
</TABLE>
15.
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Report on Form 8-K
A current report on Form 8-K dated August 29, 1996 was filed with
the Securities and Exchange Commission on August 30, 1996,
reporting that the Company had reached an agreement to acquire
CTUS Inc., a unitary thrift holding company and parent of First
Federal Savings and Loan Association of Rochester.
A current report on Form 8-K dated August 30, 1996 was filed with
the Securities and Exchange Commission on August 30, 1996
reporting that the Company had reached an agreement to acquire the
institutional United States dollar clearing business of Morgan
Guaranty Trust Company of New York.
A current report on Form 8-K dated October 22, 1996 was filed with
the Securities and Exchange Commission on October 23, 1996
providing historical and proforma financial statements for the
pending acquisition of CTUS Inc.
16.
SIGNATURES
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.
HSBC Americas, Inc.
(Registrant)
Date: November 5, 1996 /s/ Gerald A. Ronning
Executive Vice President & Controller
(On behalf of Registrant and
as Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 924
<INT-BEARING-DEPOSITS> 1,335
<FED-FUNDS-SOLD> 1,093
<TRADING-ASSETS> 791
<INVESTMENTS-HELD-FOR-SALE> 3,126
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 14,426
<ALLOWANCE> 441
<TOTAL-ASSETS> 22,158
<DEPOSITS> 17,235
<SHORT-TERM> 2,106
<LIABILITIES-OTHER> 291
<LONG-TERM> 583
0
98
<COMMON> 0
<OTHER-SE> 1,845
<TOTAL-LIABILITIES-AND-EQUITY> 22,158
<INTEREST-LOAN> 942
<INTEREST-INVEST> 141
<INTEREST-OTHER> 110
<INTEREST-TOTAL> 1,193
<INTEREST-DEPOSIT> 358
<INTEREST-EXPENSE> 487
<INTEREST-INCOME-NET> 706
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 7
<EXPENSE-OTHER> 488
<INCOME-PRETAX> 400
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.88
<LOANS-NON> 382
<LOANS-PAST> 86
<LOANS-TROUBLED> 25
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 477
<CHARGE-OFFS> 129
<RECOVERIES> 40
<ALLOWANCE-CLOSE> 441
<ALLOWANCE-DOMESTIC> 180
<ALLOWANCE-FOREIGN> 26
<ALLOWANCE-UNALLOCATED> 235
</TABLE>
