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 June 30, 1997 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 17 pages.
2.
Part I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements
Consolidated Balance Sheet
June 30, 1997 and December 31, 1996 3
Consolidated Statement of Income
For The Quarter and Six Months
Ended June 30, 1997 and 1996 4
Consolidated Statement of Changes in
Shareholders' Equity For The Six Months
Ended June 30, 1997 and 1996 5
Consolidated Statement of Cash Flows
For The Six Months Ended
June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
<TABLE>
<CAPTION>
3.
CONSOLIDATED BALANCE SHEET HSBC AMERICAS, INC.
June 30, December 31,
dollars in thousands 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,046,152 $ 967,249
Interest bearing deposits with banks 2,130,534 1,933,036
Federal funds sold and securities purchased
under resale agreements 3,311,653 1,841,863
Trading assets 982,806 891,546
Securities available for sale 3,608,183 2,870,075
Loans 20,908,128 14,691,916
Less - allowance for loan losses 431,567 418,159
- ------------------------------------------------------------------------------
Loans, net 20,476,561 14,273,757
Premises and equipment 222,056 189,795
Accrued interest receivable 223,767 175,326
Intangible assets 498,702 192,355
Other assets 372,292 294,753
- ------------------------------------------------------------------------------
TOTAL ASSETS $ 32,872,706 $ 23,629,755
==============================================================================
LIABILITIES
Deposits in domestic offices
Noninterest bearing $ 4,467,789 $ 4,315,447
Interest bearing 16,322,745 11,621,213
Interest bearing deposits in foreign offices 2,495,110 1,773,159
- ------------------------------------------------------------------------------
Total deposits 23,285,644 17,709,819
Short-term borrowings 5,170,538 2,481,342
Interest, taxes and other liabilities 368,940 385,434
Long-term debt 1,946,184 1,080,183
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 30,771,306 21,656,778
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock - 98,063
Common shareholder's equity
Common stock 5 5
Capital surplus 1,803,731 1,803,427
Retained earnings 289,771 60,630
Net unrealized gain (loss) on securities
available for sale, net of taxes 7,893 10,852
- ------------------------------------------------------------------------------
Total common shareholder's equity 2,101,400 1,874,914
- ------------------------------------------------------------------------------
Total shareholders' equity 2,101,400 1,972,977
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 32,872,706 $ 23,629,755
==============================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
4.
CONSOLIDATED STATEMENT OF INCOME HSBC AMERICAS, INC.
dollars in thousands Quarter ended June 30 Six months ended June 30
- ------------------------------------------------------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans $ 444,332 $ 300,853 $ 828,600 $ 610,567
Securities 59,985 49,649 108,034 91,558
Trading assets 15,048 13,740 29,143 25,835
Deposits with banks 21,351 15,790 38,477 35,821
Federal funds sold and
securities purchased under
resale agreements 15,617 8,275 30,372 13,102
- ------------------------------------------------------------------------------
Total interest income 556,333 388,307 1,034,626 776,883
- ------------------------------------------------------------------------------
Interest expense
Deposits
In domestic offices 151,117 97,947 272,312 196,727
In foreign offices 20,908 18,200 39,236 36,162
Short-term borrowings 54,044 34,137 86,287 64,363
Long-term debt 30,568 11,306 52,141 22,861
- ------------------------------------------------------------------------------
Total interest expense 256,637 161,590 449,976 320,113
- ------------------------------------------------------------------------------
Net interest income 299,696 226,717 584,650 456,770
Provision for loan losses 21,000 15,000 39,400 34,750
- ------------------------------------------------------------------------------
Net interest income, after
provision for loan losses 278,696 211,717 545,250 422,020
- ------------------------------------------------------------------------------
Other operating income
Trust income 10,613 10,654 21,137 20,585
Service charges 26,847 21,895 49,392 42,745
Mortgage servicing income 5,521 3,963 10,497 8,434
Other fees and commissions 33,588 28,764 64,021 56,732
Trading revenues 1,746 939 3,151 1,354
Other income 10,622 8,201 20,764 24,204
- ------------------------------------------------------------------------------
Total other operating income 88,937 74,416 168,962 154,054
- ------------------------------------------------------------------------------
367,633 286,133 714,212 576,074
- ------------------------------------------------------------------------------
Other operating expenses
Salaries 88,518 69,604 162,542 137,761
Pension and other employee
benefits 15,418 15,931 33,460 35,185
- ------------------------------------------------------------------------------
Total personnel expense 103,936 85,535 196,002 172,946
Net occupancy expense 21,723 18,692 44,344 38,409
Other expenses 70,179 53,421 137,754 100,358
- ------------------------------------------------------------------------------
Total other operating expenses 195,838 157,648 378,100 311,713
Provision for ORE and
other owned asset losses 527 1,293 1,003 1,824
- ------------------------------------------------------------------------------
Total operating expenses after
provision for ORE and other
owned assets 196,365 158,941 379,103 313,537
- ------------------------------------------------------------------------------
Income before taxes 171,268 127,192 335,109 262,537
Applicable income tax expense 55,200 38,100 104,500 87,500
- ------------------------------------------------------------------------------
Net income $ 116,068 $ 89,092 $ 230,609 $ 175,037
==============================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
5.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'EQUITY HSBC AMERICAS, INC.
- ---------------------------------------------------------------------------
Six months ended June 30
dollars in thousands 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
At beginning of period $1,972,977 $1,696,866
Net income 230,609 175,037
Net change in unrealized gain on
securities available for sale, net of taxes (2,959) (29,959)
Cash dividends declared on preferred stock (1,468) (2,936)
Redemption of preferred stock (98,063) -
Capital contributions from parent 304 -
- ---------------------------------------------------------------------------
At end of period $2,101,400 $1,839,008
===========================================================================
- ---------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended June 30
dollars in thousands 1997 1996
- ---------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 230,609 $ 175,037
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation, amortization and deferred taxes 91,574 46,603
Provision for loan losses 39,400 34,750
Net change in other accrual accounts (106,866) (25,511)
Net change in loans originated for sale (49,379) (42,428)
Net change in trading assets (113,365) (252,965)
Other, net (19,834) (42,202)
- ---------------------------------------------------------------------------
Net cash provided (used) by operating activities 72,139 (106,716)
- ---------------------------------------------------------------------------
Cash flows from investing activities
Net change in interest bearing deposits with banks (197,498) 531,793
Net change in short-term investments (1,441,790) (458,515)
Purchases of securities (640,813) (891,367)
Sales of securities 509,843 15,396
Maturities of securities 268,235 183,367
Net change in credit card receivables 141,536 (118,758)
Net change in other short-term loans (28,583) 99,077
Net originations and maturities of long-term loans (421,781) 61,456
Expenditures for premises and equipment (17,979) (9,460)
Net cash used in acquisitions, net
of cash acquired (607,388) (7,094)
Other, net (38,655) 59,334
- ---------------------------------------------------------------------------
Net cash used by investing activities (2,474,873) (534,771)
- ---------------------------------------------------------------------------
Cash flows from financing activities
Net change in deposits 1,148,632 477,888
Net change in short-term borrowings 1,525,374 57,777
Repayment of long-term debt (291,370) -
Guaranteed mandatorily redeemable preferred
securities of subsidiary 200,000 -
Redemption of preferred stock (98,063) -
Dividends paid (2,936) (2,936)
- ---------------------------------------------------------------------------
Net cash provided by financing activities 2,481,637 532,729
- ---------------------------------------------------------------------------
Net change in cash and due from banks 78,903 (108,758)
Cash and due from banks at beginning of period 967,249 1,242,335
- ---------------------------------------------------------------------------
Cash and due from banks at end of period $1,046,152 $1,133,577
===========================================================================
The accompanying notes are an integral part of these financial statements.
</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 1996 Annual Report on Form 10-K.
2. Derivative Financial Instruments
Exposure to market rate movements outside of the Company's trading activities
is managed by modifying its asset and liability mix, either directly or
through the use of derivative financial instruments, principally interest rate
swaps, forward rate agreements, futures and options. These end-user
derivative contracts include qualifying hedges and positions that modify the
interest rate characteristics of specified financial instruments. Derivative
financial instruments not qualifying as end-user positions are treated as
trading positions and marked to market.
To qualify as a hedge, the derivative financial instrument must be designated
as a hedge and effective in reducing the market risk of an existing asset or
liability. Effectiveness of the hedge is evaluated on an initial and ongoing
basis. To qualify as a position modifying the interest rate characteristics
of an instrument, there must be an approved objective to synthetically alter
the market risk characteristics of specified items and the derivative
financial instrument must be designated as such a position and effective in
accomplishing the underlying objective. These criteria are subject to various
limits and controls.
To the extent that derivative financial instruments are linked to assets and
liabilities that are valued on an historical cost basis, accrual or deferral
based accounting is applied. As such, they are not marked to current market
value, rather cash flows and/or gains and losses realized are accrued and/or
amortized as an adjustment to net interest income, or to the income or expense
generated by the corresponding specific asset-liability position.
Derivative financial instruments specifically linked to and used to offset the
risk associated with securities classified as available for sale, are
accounted for on the same basis as the underlying securities. The mark to
market value of the derivatives are included with the fair value of the
related instruments and as such become a component of the unrealized gains
(losses) recorded in the shareholders' equity adjustment account.
Derivative financial instruments used to offset risk associated with cash
trading instruments and foreign exchange trading activity are accounted for on
a mark to market (fair value) basis consistent with the accounting applied to
the related activity. The mark to market adjustment, which is recorded
through the use of a valuation reserve and may include an interest
receivable/payable component, along with any related gains or losses realized
upon liquidation of a derivative trading position, is recorded as a component
of trading revenues (loss).
7.
Derivative financial instruments entered into to facilitate the needs of
customers are immediately matched off by taking corresponding and offsetting
positions with other counterparties. The Company considers this activity to
be a fee generating service offered to certain select customers and does not
maintain unmatched positions within this portfolio. With the exception of a
small spread between the pay and receive rates, representing compensation for
facilitating the transaction, the periodic accrual amounts effectively offset
each other. If a position becomes unmatched for any reason, it is immediately
accounted for on a mark to market basis.
3. Pledged Financial Instruments
At June 30, 1997, securities, loans and other assets carried at $4.9 billion
were pledged as collateral for borrowings, to secure public and trust deposits
and for other purposes.
4. Acquisition
Effective March 1, 1997 the Company completed its acquisition of CTUS Inc.
(CTUS), a unitary thrift holding company. CTUS owned First Federal Savings
and Loan Association of Rochester (First Federal), a thrift institution which
had $7.0 billion in assets and deposits of $4.3 billion. First Federal
operated 79 branches in New York State.
The Company liquidated a portion of its short-term investments to fund the
acquisition price of $676 million. The transaction was accounted for as a
purchase and the results of CTUS operations are included in the Company's
financial statements from the date of acquisition. The excess fair value of
net assets acquired was $238 million and is being amortized against income
over fifteen years.
The following unaudited pro forma financial information presents the combined
results of the Company and CTUS as if the acquisition had occurred as of the
beginning of 1997 and 1996, after giving effect to certain adjustments,
including accounting adjustments relating to fair value adjustments,
amortization of goodwill and related income tax effect. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and CTUS constituted a single entity
during such periods.
<TABLE>
<CAPTION>
Six months ended June 30
1997 1996
(unaudited)
(in millions)
<S> <C> <C>
Net interest income after
provision for loan losses $571 $489
Net income 228 220
</TABLE>
The agreement provided that the Company issue preferred shares to CT Financial
Services Inc. (the Seller) and the Seller will continue to hold following the
purchase the preferred shares which provide for a contingent dividend or
redemption equal to the amount of recovery, net of taxes and costs, if any, by
First Federal resulting from the pending action 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 preferred shares issued have a par value of
$100.
8.
5. New Accounting Standards
Effective January 1, 1997, the Company generally adopted the provisions of
Statement of Financial Accounting Standards No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities
prospectively. The Financial Accounting Standards Board delayed the effective
date of certain of the provisions until January 1, 1998. FAS 125 primarily
establishes criteria based on legal control to determine whether a transfer of
a financial asset is a sale or a secured borrowing.
The adoption of the required provisions of FAS 125 did not have a material
effect on the financial position or results of operations of the Company.
Further, the Company does not expect that adoption of the delayed provisions
will have a material effect on its financial position or results of operation.
9.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
HSBC Americas, Inc. (the Company) reported second quarter net income of $116.1
million, compared with a $89.1 million in the 1996 second quarter. For the
first six months of 1997, net income was $230.6 million, compared with
$175.0 million for the first six months of last year.
The Company's results include the effect of recent acquisitions. Major
acquisitions were as follows. The Company acquired $1.1 billion in selected
assets and assumed $1.2 billion in deposits of East River Savings Bank in June
1996. On December 31, 1996, the Company acquired the institutional U.S.
dollar clearing activity of Morgan Guaranty Trust Company of New York. The
Company assumed $.9 billion in deposit liabilities and acquired a like amount
of Federal funds sold. Effective March 1, 1997, the Company acquired CTUS
Inc. which owned First Federal Savings and Loan Association of Rochester
(First Federal). This acquisition had $7.0 billion in assets and deposits of
$4.3 billion.
Net Interest Income
Net interest income for the second quarter of 1997 increased to $299.7 million
compared with $226.7 million for the second quarter of 1996. For the first
six months of 1997, net interest income was $584.7 million compared with
$456.8 million for the first six months of 1996. The acquisitions were the
principal factor behind the increase. Additionally, there was growth in
nonacquisition business as loans and deposits increased modestly.
Interest income of $556.3 million in the second quarter of 1997 was 43.3%
higher than the second quarter of 1996. Average earning assets of $28.1
billion for the second quarter of 1997 were 44.5% higher than a year ago. The
average rate earned on earning assets was 7.96% for the second quarter of 1997
compared with 8.06% a year ago. Interest income of $1,034.6 million for the
first six months of 1997 was 33.2% higher than the first six months of 1996.
Average earning assets of $25.7 billion for the first six months of 1997 were
34.7% higher than the first six months of 1996. The average rate earned on
earning assets was 8.12% for the first six months of 1997 compared with 8.20%
a year ago.
Interest expense for the second quarter of 1997 was $256.6 million,
representing a 58.8% increase over the second quarter of 1996. Average
interest bearing liabilities for the second quarter of 1997 were $23.6
billion, 51.5% higher than a year ago. The average rate paid on interest
bearing liabilities was 4.37% compared with 4.18% a year ago. Interest
expense for the first six months of 1997 was $450.0 million or 40.6% above the
first six months of 1996. Average interest bearing liabilities for the first
six months of 1997 were $21.1 billion, 38.1% higher than a year ago. The
average rate paid on interest bearing liabilities was 4.29% for the first six
months of 1997 compared with 4.21% a year ago.
The taxable equivalent net yield on average total assets for the second
quarter of 1997 was 4.02%, compared with 4.43% a year ago. The taxable
equivalent net yield on average total assets for the first six months of 1997
was 4.30%, compared with 4.53% a year ago. The net yields on earning assets
has declined as a result of the First Federal acquisition. Savings and loan
institutions, including First Federal, generally have much narrower interest
margins than commercial banking institutions and the full impact of the
acquisition on the interest margin was experienced in the second quarter of
1997.
10.
Other Operating Income
For the second quarter of 1997, total other operating income was $88.9
million, compared with $74.4 million in the 1996 second quarter. Fee income
categories, (service charges, mortgages, other fees and commissions) were up
from the second quarter of 1996 primarily as a result of the recent
acquisitions. For the first six months of 1997, total other operating income
was $169.0 million, compared with $154.1 million for the first six months of
1996.
Other Operating Expenses
Other operating expenses were $196.4 million in the 1997 second quarter
compared with $158.9 million for the 1996 second quarter. Other operating
expenses were $379.1 million for the first six months of 1997 compared with
$313.5 million a year ago. The expense increases relate directly to
acquisitions.
Income Taxes
The effective rate was 31% in the first half of 1997 compared with 33% in the
first half of 1996 as a result of reduction in state statutory tax rates. The
effective rate is below the expected statutory rate due to the recognition of
deferred losses associated with prior acquisitions of related entities,
Concord Leasing, Inc. and Oleifera Investments, Ltd. The deferred tax asset
at June 30, 1997 was $13 million, net of valuation reserve of $176 million,
compared with $55 million, net of valuation reserve of $250 million at
December 31, 1996.
11.
<TABLE>
<CAPTION>
Asset Quality
The following tables provides a summary of the loan loss allowance and
nonperforming assets.
2nd 2nd 6 Months Year 6 Months
Quarter Quarter Ended Ended Ended
1997 1996 6/30/97 12/31/96 6/30/96
(in millions)
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses
Balance at beginning of period $443.5 $471.8 $418.2 $477.5 $477.5
Allowance related to acquired
companies - 3.4 40.3 3.4 3.4
Provision charged to income 21.0 15.0 39.4 64.7 34.8
Net charge offs 32.9 32.2 66.3 127.4 57.7
Balance at end of period $431.6 $458.0 $431.6 $418.2 $458.0
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
(in millions)
<S> <C> <C> <C>
Nonaccruing Loans
Balance at end of period $309.6 $357.5 $387.2
As a percent of loans outstanding 1.48% 2.43% 2.62%
Nonperforming Loans and Assets*
Balance at end of period $318.1 $371.0 $454.3
As a percent of total assets .97% 1.57% 2.00%
Allowance Ratios
Allowance for loan losses as a
percent of:
Loans 2.06% 2.85% 3.10%
Nonaccruing loans 139.40 116.98 118.27
* Includes nonaccruing loans, other real estate and other owned assets.
</TABLE>
The allowance acquired in 1997 results from the First Federal acquisition
which had a loan portfolio of $6 billion, primarily consisting of residential
mortgages.
Provisions for loan losses were $21.0 million in the second quarter of 1997
compared with $15.0 million in the second quarter of 1996. Provisions for
loan losses for the first half of 1997 were $39.4 million compared with $34.8
million during the first half of 1996. Higher credit card delinquencies,
4.83% of credit card outstandings at June 30, 1997 compared with 3.23% at
June 30, 1996, have led to increased charge offs. Net charge offs in the
credit card portfolio were $63.6 million and $39.0 million in the first half
of 1997 and 1996, respectively. This increased level has partially been
offset by continued improvement in commercial credit quality. Commercial loan
credit quality resulted in net recoveries of $5.8 million in the first half of
1997 compared with net charge offs of $14.4 million in the first half of 1996.
The Company identified impaired loans as defined by FAS 114 totaling $185
million at June 30, 1997, of which $77 million had a specific loan loss
allowance of $30 million. At December 31, 1996, impaired loans totaled $258
million, of which $61 million had a specific loan loss allowance of $24
million.
12.
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 and expense stream of certain on-balance sheet assets and liabilities.
At June 30, 1997, $23.6 billion notional value of such positions, with an
estimated negative fair value of approximately $17.8 million were outstanding.
At December 31, 1996, $27.1 billion notional value of such positions, with an
estimated negative fair value of $17.4 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 June 30, 1997, $1.2 billion
notional value of such positions with an estimated negative fair value of $1.1
million were outstanding. At December 31, 1996 $1 billion of notional value
of such positions with an estimated negative fair value of $.5 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 $6.4 billion at June 30, 1997 compared with $4.7 billion
at December 31, 1996. Loans at June 30, 1997 were 63.6% of total assets
compared with 62.2% at December 31, 1996.
Deposits at June 30, 1997 were $23.3 billion, compared with $17.7 billion at
December 31, 1996. Deposits continue to exceed loans and were 111.4% of loans
at June 30, 1997. Short-term borrowings, including repurchase agreements,
were $5.2 billion at June 30, 1997 compared with $2.5 billion at December 31,
1996. Long-term borrowings of $1.9 billion at June 30, 1997 compared with
$1.1 billion at December 31, 1996.
13.
Capital
Shareholders' equity was $2.1 billion at June 30, 1997 compared with $2.0
billion at December 31, 1996. The Company redeemed all of its outstanding
shares of preferred stock of $98 million on March 31, 1997.
Under risk-based capital guidelines, the Company's capital ratios were 10.15%
at the Tier 1 level and 14.50% at the total capital level at June 30, 1997.
These ratios compare with 11.92% at the Tier 1 level and 17.00% at the total
capital level at December 31, 1996. Tier 1 and total capital include
guaranteed mandatorily redeemable preferred securities issued by a subsidiary
of the Company of $200 million in December 1996 and $200 million in May 1997.
These securities are classified as long-term debt on the consolidated balance
sheet.
Under guidelines for leverage ratios, the Company's ratio of Tier 1 capital to
quarterly average total assets was 7.12% at June 30, 1997 compared with 9.54%
at December 31, 1996.
The acquisition of CTUS Inc. was a major factor reducing the capital ratios at
June 30, 1997 from those at December 31, 1996 as the acquisition was a cash
purchase. Although the ratios have declined, they remain well above U.S.
regulatory requirements.
<TABLE>
<CAPTION>
14.
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES* HSBC AMERICAS, INC.
Second Quarter 1997 Second Quarter 1996
dollars in millions Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits
with banks $ 1,465 $ 21.4 5.84 % $ 1,186 $ 15.8 5.36 %
Federal funds sold and securities
purchased under resale agreements 1,096 15.6 5.72 635 8.3 5.24
Trading assets 985 15.1 6.12 910 13.8 6.07
Securities:
U.S. Government and
federal agency obligations 3,504 52.9 6.05 3,060 44.0 5.78
Other securities 317 7.1 9.01 248 5.7 9.20
- ------------------------------------------------------------------------------
Total securities 3,821 60.0 6.30 3,308 49.7 6.05
Loans:
Domestic:
Commercial 7,449 165.2 8.90 6,256 129.8 8.34
Consumer 12,581 268.7 8.55 6,606 163.3 9.93
- ------------------------------------------------------------------------------
Total domestic 20,030 433.9 8.69 12,862 293.1 9.16
International 670 11.1 6.68 518 8.6 6.70
- ------------------------------------------------------------------------------
Total loans 20,700 445.0 8.62 13,380 301.7 9.07
- ------------------------------------------------------------------------------
Total earning assets 28,067 $ 557.1 7.96 % 19,419 $ 389.3 8.06 %
- ------------------------------------------------------------------------------
Allowance for loan losses (434) (466)
Cash and due from banks 974 987
Other assets 1,387 726
- ------------------------------------------------------------------------------
Total assets $ 29,994 $ 20,666
==============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand
deposits $ 2,033 $ 5.8 1.15 % $ 1,631 $ 5.2 1.29 %
Consumer savings deposits 5,681 42.6 3.01 3,883 29.7 3.08
Other consumer time deposits 6,381 82.3 5.17 3,277 43.5 5.34
Commercial and public savings
and other time deposits 1,977 20.4 4.13 1,937 19.5 4.05
Deposits in foreign offices,
primarily banks 1,613 20.9 5.20 1,420 18.3 5.16
- ------------------------------------------------------------------------------
Total interest bearing deposits 17,685 172.0 3.90 12,148 116.2 3.85
- ------------------------------------------------------------------------------
Federal funds purchased and securities
sold under repurchase agreements 2,618 35.8 5.49 1,368 16.9 4.97
Other short-term borrowings 1,298 18.2 5.63 1,339 17.2 5.18
Long-term debt 1,975 30.6 6.21 709 11.3 6.41
- ------------------------------------------------------------------------------
Total funds borrowed 5,891 84.6 5.76 3,416 45.4 5.35
- ------------------------------------------------------------------------------
Total interest bearing
liabilities 23,576 $ 256.6 4.37 % 15,564 $ 161.6 4.18 %
- ------------------------------------------------------------------------------
Interest rate spread 3.59 % 3.88 %
- ------------------------------------------------------------------------------
Noninterest bearing deposits 3,868 3,020
Other liabilities 517 285
Total shareholders' equity 2,033 1,797
- ------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 29,994 $ 20,666
==============================================================================
Net interest income $ 300.5 $ 227.7
Net yield on average earning assets 4.29 % 4.72 %
Net yield on average total assets 4.02 4.43
- ------------------------------------------------------------------------------
Net interest income/net yield on
average earning assets:
Domestic $ 284.0 4.42 % $ 219.6 4.81 %
International 16.5 2.89 8.1 3.12
==============================================================================
* Interest and rates are presented on a taxable equivalent basis.
</TABLE>
<TABLE>
<CAPTION>
15.
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES* HSBC AMERICAS, INC.
Six Months 1997 Six Months 1996
dollars in millions Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits
with banks $ 1,344 $ 38.5 5.77 % $ 1,310 $ 35.8 5.50 %
Federal funds sold and securities
purchased under resale agreements1,123 30.4 5.45 498 13.1 5.29
Trading assets 977 29.2 5.98 856 25.9 6.06
Securities:
U.S. Government and
federal agency obligations 3,229 96.0 5.98 2,801 80.1 5.75
Other securities 264 12.2 9.34 260 11.6 8.95
- -----------------------------------------------------------------------------
Total securities 3,493 108.2 6.25 3,061 91.7 6.02
Loans:
Domestic:
Commercial 7,361 334.2 9.15 6,336 270.0 8.57
Consumer 10,727 472.6 8.85 6,521 324.7 10.00
- -----------------------------------------------------------------------------
Total domestic 18,088 806.8 8.99 12,857 594.7 9.30
International 710 23.2 6.60 517 17.6 6.84
- -----------------------------------------------------------------------------
Total loans 18,798 830.0 8.90 13,374 612.3 9.21
- -----------------------------------------------------------------------------
Total earning assets 25,735 $1,036.3 8.12 % 19,099 $778.8 8.20 %
- -----------------------------------------------------------------------------
Allowance for loan losses (426) (471)
Cash and due from banks 965 995
Other assets 1,191 731
- -----------------------------------------------------------------------------
Total assets $27,465 $ 20,354
=============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand
deposits $ 1,937 $ 11.2 1.16 % $ 1,629 $ 10.7 1.32 %
Consumer savings deposits 5,187 78.4 3.05 3,817 58.8 3.10
Other consumer time deposits 5,625 143.7 5.15 3,254 87.9 5.43
Commercial and public savings
and other time deposits 1,939 39.1 4.06 1,933 39.3 4.09
Deposits in foreign offices,
primarily banks 1,557 39.2 5.08 1,392 36.2 5.22
- -----------------------------------------------------------------------------
Total interest bearing deposits 16,245 311.6 3.87 12,025 232.9 3.89
- -----------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchased agreements 1,966 52.8 5.42 1,210 30.5 5.07
Other short-term borrowings 1,248 33.5 5.41 1,354 33.8 5.03
Long-term debt 1,670 52.1 6.29 709 22.9 6.48
- -----------------------------------------------------------------------------
Total funds borrowed 4,884 138.4 5.72 3,273 87.2 5.36
- -----------------------------------------------------------------------------
Total interest bearing
liabilities 21,129 $ 450.0 4.29 % 15,298 $320.1 4.21 %
- -----------------------------------------------------------------------------
Interest rate spread 3.83 % 3.99 %
- -----------------------------------------------------------------------------
Noninterest bearing deposits 3,836 3,000
Other liabilities 470 288
Total shareholders' equity 2,030 1,768
- -----------------------------------------------------------------------------
Total liabilities and
shareholders' equity $27,465 $ 20,354
=============================================================================
Net interest income $ 586.3 $458.7
Net yield on average earning assets 4.59 % 4.83 %
Net yield on average total assets 4.30 4.53
- -----------------------------------------------------------------------------
Net interest income/net yield on average earning assets:
Domestic $ 552.7 4.74 % $440.6 5.01 %
International 33.6 3.07 18.1 2.57
=============================================================================
* Interest and rates are presented on a taxable equivalent basis.
</TABLE>
16.
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Report on Form 8-K
None
17.
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 August 8, 1997 /s/ Gerald A. Ronning
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,046
<INT-BEARING-DEPOSITS> 2,131
<FED-FUNDS-SOLD> 3,312
<TRADING-ASSETS> 983
<INVESTMENTS-HELD-FOR-SALE> 3,608
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 20,908
<ALLOWANCE> 432
<TOTAL-ASSETS> 32,873
<DEPOSITS> 23,286
<SHORT-TERM> 5,171
<LIABILITIES-OTHER> 369
<LONG-TERM> 1,546
400
0
<COMMON> 0
<OTHER-SE> 2,101
<TOTAL-LIABILITIES-AND-EQUITY> 32,873
<INTEREST-LOAN> 829
<INTEREST-INVEST> 108
<INTEREST-OTHER> 98
<INTEREST-TOTAL> 1,035
<INTEREST-DEPOSIT> 312
<INTEREST-EXPENSE> 450
<INTEREST-INCOME-NET> 585
<LOAN-LOSSES> 39
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 379
<INCOME-PRETAX> 335
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.59
<LOANS-NON> 310
<LOANS-PAST> 62
<LOANS-TROUBLED> 7
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 418
<CHARGE-OFFS> 94
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 432
<ALLOWANCE-DOMESTIC> 200
<ALLOWANCE-FOREIGN> 26
<ALLOWANCE-UNALLOCATED> 206
</TABLE>
