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, 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 16 pages.
2.
Part I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements
Consolidated Balance Sheet
September 30, 1997 and December 31, 1996 3
Consolidated Statement of Income
For The Quarter and Nine Months
Ended September 30, 1997 and 1996 4
Consolidated Statement of Changes in
Shareholders' Equity For The Nine Months
Ended September 30, 1997 and 1996 5
Consolidated Statement of Cash Flows
For The Nine Months Ended
September 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 8
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
<TABLE>
<CAPTION>
3.
CONSOLIDATED BALANCE SHEET HSBC AMERICAS, INC.
September 30, December 31,
dollars in thousands 1997 1996
- - ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,110,822 $ 967,249
Interest bearing deposits with banks 2,114,020 1,933,036
Federal funds sold and securities purchased
under resale agreements 1,342,831 1,841,863
Trading assets 968,456 891,546
Securities available for sale 3,422,338 2,870,075
Loans 21,569,498 14,691,916
Less - allowance for loan losses 427,376 418,159
- - ------------------------------------------------------------------------------
Loans, net 21,142,122 14,273,757
Premises and equipment 221,622 189,795
Accrued interest receivable 202,246 175,326
Intangible assets 485,654 192,355
Other assets 396,131 294,753
- - ------------------------------------------------------------------------------
TOTAL ASSETS $ 31,406,242 $ 23,629,755
==============================================================================
LIABILITIES
Deposits in domestic offices
Noninterest bearing $ 4,086,353 $ 4,315,447
Interest bearing 15,969,717 11,621,213
Interest bearing deposits in foreign offices 2,134,683 1,773,159
- - ------------------------------------------------------------------------------
Total deposits 22,190,753 17,709,819
Short-term borrowings 4,687,156 2,481,342
Interest, taxes and other liabilities 678,170 385,434
Long-term debt 1,814,252 1,080,183
- - ------------------------------------------------------------------------------
TOTAL LIABILITIES 29,370,331 21,656,778
- - ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock - 98,063
Common shareholder's equity
Common stock 5 5
Capital surplus 1,804,125 1,803,427
Retained earnings 209,766 60,630
Net unrealized gain on securities
available for sale, net of taxes 22,015 10,852
- - ------------------------------------------------------------------------------
Total common shareholder's equity 2,035,911 1,874,914
- - ------------------------------------------------------------------------------
Total shareholders' equity 2,035,911 1,972,977
- - ------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 31,406,242 $ 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.
Quarter ended Nine months ended
dollars in thousands September 30 September 30
- - ------------------------------------------------------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Loans $ 452,153 $ 331,812 $ 1,280,753 $ 942,379
Securities 55,912 49,109 163,946 140,668
Trading assets 14,731 12,574 43,874 38,409
Deposits with banks 26,299 15,647 64,777 51,468
Federal funds sold and
securities purchased under
resale agreements 12,391 7,463 42,763 20,564
- - ------------------------------------------------------------------------------
Total interest income 561,486 416,605 1,596,113 1,193,488
- - ------------------------------------------------------------------------------
Interest expense
Deposits
In domestic offices 155,982 107,582 428,295 304,308
In foreign offices 27,429 17,036 66,665 53,198
Short-term borrowings 49,088 31,028 135,376 95,391
Long-term debt 30,350 11,413 82,490 34,274
- - ------------------------------------------------------------------------------
Total interest expense 262,849 167,059 712,826 487,171
- - ------------------------------------------------------------------------------
Net interest income 298,637 249,546 883,287 706,317
Provision for loan losses 24,000 15,000 63,400 49,750
- - ------------------------------------------------------------------------------
Net interest income, after
provision for loan losses 274,637 234,546 819,887 656,567
- - ------------------------------------------------------------------------------
Other operating income
Trust income 10,469 9,748 31,605 30,332
Service charges 26,837 22,709 76,228 65,453
Mortgage servicing income 5,195 3,495 15,693 11,929
Other fees and commissions 34,765 29,078 98,786 85,810
Trading revenues 1,619 1,250 4,771 2,604
Other income 14,242 11,395 35,006 35,600
- - ------------------------------------------------------------------------------
Total other operating income 93,127 77,675 262,089 231,728
- - ------------------------------------------------------------------------------
367,764 312,221 1,081,976 888,295
- - ------------------------------------------------------------------------------
Other operating expenses
Salaries 88,826 73,633 251,369 211,395
Pension and other employee
benefits 15,437 18,061 48,897 53,246
- - ------------------------------------------------------------------------------
Total personnel expense 104,263 91,694 300,266 264,641
Net occupancy expense 23,369 20,436 67,713 58,845
Other expenses 73,351 61,701 211,105 162,059
- - ------------------------------------------------------------------------------
Total other operating expenses 200,983 173,831 579,084 485,545
Provision for ORE and
other owned asset losses 986 811 1,988 2,634
- - ------------------------------------------------------------------------------
Total operating expenses after
provision for ORE and other
owned assets 201,969 174,642 581,072 488,179
- - ------------------------------------------------------------------------------
Income before taxes 165,795 137,579 500,904 400,116
Applicable income tax expense 45,800 36,600 150,300 124,100
- - ------------------------------------------------------------------------------
Net income $ 119,995 $ 100,979 $ 350,604 $ 276,016
==============================================================================
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.
- - ----------------------------------------------------------------------------
Nine months ended September 30
dollars in thousands 1997 1996
- - ----------------------------------------------------------------------------
<S> <C> <C>
At beginning of period $ 1,972,977 $1,696,866
Net income 350,604 276,016
Net change in unrealized gain on
securities available for sale, net of taxes 11,163 (26,001)
Cash dividends declared on preferred stock (1,468) (4,404)
Cash dividends declared on common stock (200,000) -
Redemption of preferred stock (98,063) -
Capital contributions from parent 698 180
- - ----------------------------------------------------------------------------
At end of period $ 2,035,911 $1,942,657
============================================================================
- - ----------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended September 30
dollars in thousands 1997 1996
- - ----------------------------------------------------------------------------
Cash flows from operating activities
Net income $ 350,604 $ 276,016
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation, amortization and deferred taxes 102,726 62,366
Provision for loan losses 63,400 49,750
Net change in other accrual accounts 21,241 (15,211)
Net change in loans originated for sale (320,781) 296,011
Net change in trading assets (133,164) (186,329)
Other, net (32,616) (45,385)
- - ----------------------------------------------------------------------------
Net cash provided (used) by operating activities 51,410 437,218
- - ----------------------------------------------------------------------------
Cash flows from investing activities
Net change in interest bearing deposits with banks (180,984) 379,310
Net change in short-term investments 527,032 (574,313)
Purchases of securities (1,309,331) (956,079)
Sales of securities 1,104,044 84,123
Maturities of securities 517,293 364,156
Net change in credit card receivables (45,939) (110,082)
Net change in other short-term loans (3,600) 3,501
Net originations and maturities of long-term loans (670,323) 118,265
Expenditures for premises and equipment (26,334) (15,943)
Net cash used in acquisitions, net
of cash acquired (607,388) (7,094)
Other, net 14,643 70,885
- - ----------------------------------------------------------------------------
Net cash used by investing activities (680,887) (643,271)
- - ----------------------------------------------------------------------------
Cash flows from financing activities
Net change in deposits 53,741 448,800
Net change in short-term borrowings 1,041,991 (431,515)
Repayment of long-term debt (421,683) (125,000)
Guaranteed mandatorily redeemable preferred
securities of subsidiary 200,000 -
Redemption of preferred stock (98,063) -
Dividends paid (2,936) (4,404)
- - ----------------------------------------------------------------------------
Net cash provided by financing activities 773,050 (112,119)
- - ----------------------------------------------------------------------------
Net change in cash and due from banks 143,573 (318,172)
Cash and due from banks at beginning of period 967,249 1,242,335
- - ----------------------------------------------------------------------------
Cash and due from banks at end of period $ 1,110,822 $ 924,163
============================================================================
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
The Company uses a variety a derivative instruments including interest rate
swaps, forward rate agreements, futures and option contracts to manage
interest rate risk exposure and to generate trading revenues. Primarily
employing an interest rate risk management strategy known as synthetic
alteration, the repricing characteristics of various on-balance sheet
positions are altered by use of associated derivative contracts. Interest rate
risk is managed by creating a mix of balance sheet assets and liabilities
deemed consistent and desirable given expectations of balance sheet changes
and risk management strategies.
A synthetic alteration strategy requires that the related derivative contract
be linked to specific individual or pools of balance sheet assets or
liabilities by the notional, durational and interest rate risk characteristics
of the associated instruments and must achieve a result that is consistent
with overall risk management objectives.
To the extent the aforementioned criteria are satisfied, the derivative
contract is accounted for on a basis consistent with that of the underlying
hedged item. For a derivative financial instrument synthetically altering an
asset or liability accounted for on an historical cost basis, accrual based
accounting is applied. Specifically, income or expense is recognized and
accrued to the next settlement date in accordance the contractual terms of the
agreement as an adjustment to the income or expense associated with the
underlying hedged position. The derivative position would not be marked to
market.
Similarly, derivative instruments that correlate to balance sheet positions
carried at market value or that are entered into for the purpose of generating
trading revenues, are accounted for on a mark to market basis. Associated
income and expense is recognized as trading revenue. For derivatives linked to
securities classified as available for sale, the derivative mark to market is
recorded through shareholder's equity consistent with the valuation of the
assets.
Derivatives that do not qualify as synthetic alterations at inception are
marked to market through earnings. Derivatives that cease to qualify as
synthetic alterations are marked to market prospectively with any deferred
gains or losses at that time amortized to earnings over the remaining life of
the derivative or hedged item provided the hedged balance sheet position has
not been liquidated. When the hedged position is liquidated the gain or loss,
including any deferred amount is recognized in earnings.
7.
3. Pledged Financial Instruments
At September 30, 1997, securities, loans and other assets carried at $2.8
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>
Nine months ended September 30
1997 1996
(unaudited)
(in millions)
<S> <C> <C>
Net interest income after
provision for loan losses $846 $763
Net income 348 314
</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.
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.
8.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
HSBC Americas, Inc. (the Company) reported third quarter net income of $120.0
million, compared with a $101.0 million in the 1996 third quarter. For the
first nine months of 1997, net income was $350.6 million, compared with
$276.0 million for the first nine months of last year.
The Company's results include the effect of recent acquisitions. Major
acquisitions were as follows. 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. 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. The Company acquired $1.1 billion in selected
assets and assumed $1.2 billion in deposits of East River Savings Bank in June
1996.
Net Interest Income
Net interest income for the third quarter of 1997 increased to $298.6 million
compared with $249.5 million for the third quarter of 1996. For the first
nine months of 1997, net interest income was $883.3 million compared with
$706.3 million for the first nine 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 $561.5 million in the third quarter of 1997 was 34.8%
higher than the third quarter of 1996. Average earning assets of $28.5
billion for the third quarter of 1997 were 42.2% higher than a year ago. The
average rate earned on earning assets was 7.83% for the third quarter of 1997
compared with 8.28% a year ago. Interest income of $1,596.1 million for the
first nine months of 1997 was 33.7% higher than the first nine months of 1996.
Average earning assets of $26.7 billion for the first nine months of 1997 were
37.3% higher than the first nine months of 1996. The average rate earned on
earning assets was 8.01% for the first nine months of 1997 compared with 8.23%
a year ago.
Interest expense for the third quarter of 1997 was $262.8 million,
representing a 57.3% increase over the third quarter of 1996. Average
interest bearing liabilities for the third quarter of 1997 were $23.7 billion,
47.1% higher than a year ago. The average rate paid on interest bearing
liabilities was 4.39% compared with 4.12% a year ago. Interest expense for
the first nine months of 1997 was $712.8 million or 46.3% above the first nine
months of 1996. Average interest bearing liabilities for the first nine
months of 1997 were $22.0 billion, 41.3% higher than a year ago. The average
rate paid on interest bearing liabilities was 4.33% for the first nine months
of 1997 compared with 4.18% a year ago.
The taxable equivalent net yield on average total assets for the third quarter
of 1997 was 3.93%, compared with 4.67% a year ago. The taxable equivalent net
yield on average total assets for the first nine months of 1997 was 4.17%,
compared with 4.58% 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 and third quarters of 1997.
9.
Other Operating Income
For the third quarter of 1997, total other operating income was $93.1 million,
compared with $77.7 million in the 1996 third quarter. Fee income categories,
(service charges, mortgages, other fees and commissions) were up from the
third quarter of 1996 primarily as a result of the recent acquisitions. For
the first nine months of 1997, total other operating income was $262.1
million, compared with $231.7 million for the first nine months of 1996.
Other Operating Expenses
Other operating expenses were $202.0 million in the 1997 third quarter
compared with $174.6 million for the 1996 third quarter. Other operating
expenses were $581.1 million for the first nine months of 1997 compared with
$488.2 million a year ago. The expense increases relate directly to
acquisitions.
Income Taxes
The effective rate was 30% in the first nine months of 1997 compared with 31%
in the first nine months 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 the benefits of deferred losses associated with prior
acquisitions of related entities, Concord Leasing, Inc. and Oleifera
Investments, Ltd. The deferred tax asset at September 30, 1997 was $34
million, net of valuation reserve of $157 million, compared with $55 million,
net of valuation reserve of $250 million at December 31, 1996.
10.
Asset Quality
The following tables provides a summary of the loan loss allowance and
nonperforming assets.
<TABLE>
3rd 3rd 9 Months Year 9 Months
Quarter Quarter Ended Ended Ended
1997 1996 9/30/97 12/31/96 9/30/96
(in millions)
<S> <C> <C> <C> <C> <C>
Allowance for Loan Losses
Balance at beginning of period $431.6 $458.0 $418.2 $477.5 $477.5
Allowance related to acquired
companies - - 40.3 3.4 3.4
Provision charged to income 24.0 15.0 63.4 64.7 49.8
Net charge offs 28.2 31.5 94.5 127.4 89.2
Balance at end of period $427.4 $441.5 $427.4 $418.2 $441.5
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
(in millions)
<S> <C> <C> <C>
Nonaccruing Loans
Balance at end of period $321.4 $357.5 $382.2
As a percent of loans outstanding 1.49% 2.43% 2.65%
Nonperforming Loans and Assets*
Balance at end of period $327.0 $371.0 $449.1
As a percent of total assets 1.04% 1.57% 2.03%
Allowance Ratios
Allowance for loan losses as a
percent of:
Loans 1.98% 2.85% 3.06%
Nonaccruing loans 132.95 116.98 115.52
* 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 $24.0 million in the third quarter of 1997
compared with $15.0 million in the third quarter of 1996. Provisions for loan
losses for the first nine months of 1997 were $63.4 million compared with
$49.8 million during the first nine months of 1996. Higher credit card
delinquencies, 4.64% of credit card outstandings at September 30, 1997
compared with 3.75% at September 30, 1996, have led to increased charge offs.
Net charge offs in the credit card portfolio were $94.9 million and $61.0
million in the first nine months of 1997 and 1996, respectively. This
increased level was offset by continued improvement in commercial credit
quality. Commercial loan credit quality resulted in net recoveries of $11.6
million in the first nine months of 1997 compared with net charge offs of
$21.7 million in the first nine months of 1996.
The Company identified impaired loans as defined by FAS 114 totaling $171
million at September 30, 1997, of which $72 million had a specific loan loss
allowance of $27 million. At December 31, 1996, impaired loans totaled $258
million, of which $61 million had a specific loan loss allowance of $24
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 and expense stream of certain on-balance sheet assets and liabilities.
At September 30, 1997, $22.6 billion notional value of such positions, with an
estimated positive fair value of approximately $21.4 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 September 30, 1997, $.8 billion
notional value of such positions with an estimated negative fair value of $.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 $4.4 billion at September 30, 1997 compared with $4.7
billion at December 31, 1996. Loans at September 30, 1997 were 68.7% of total
assets compared with 62.2% at December 31, 1996.
Deposits at September 30, 1997 were $22.2 billion, compared with $17.7 billion
at December 31, 1996. Deposits continue to exceed loans and were 102.9% of
loans at September 30, 1997. Short-term borrowings, including repurchase
agreements, were $4.7 billion at September 30, 1997 compared with $2.5 billion
at December 31, 1996. Long-term borrowings of $1.8 billion at September 30,
1997 compared with $1.1 billion at December 31, 1996.
12.
Capital
Shareholders' equity was $2.0 billion at September 30, 1997 and December 31,
1996. The Company redeemed its outstanding shares of preferred stock of $98
million on March 31, 1997 and declared a dividend of $200 million during
September 1997 payable to its common shareholder.
Under risk-based capital guidelines, the Company's capital ratios were 9.60%
at the Tier 1 level and 13.88% at the total capital level at September 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 another $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 6.83% at September 30, 1997 compared with
9.54% at December 31, 1996.
The acquisition of CTUS Inc. was a major factor reducing the capital ratios at
September 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 for well-capitalized institutions.
<TABLE>
<CAPTION>
13.
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES* HSBC AMERICAS,INC.
Third Quarter 1997 Third Quarter 1996
dollars in millions Balance Interest Rate Balance Interest Rate
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits
with banks $ 1,804 $ 26.3 5.78 % $ 1,107 $ 15.7 5.63%
Federal funds sold and securities
purchased under resale agreements 972 12.4 5.06 550 7.5 5.40
Trading assets 990 14.8 5.97 821 12.6 6.12
Securities:
U.S. Government and
federal agency obligations 3,286 48.2 5.84 2,979 43.5 5.81
Other securities 364 7.7 8.41 237 5.7 9.58
- - ------------------------------------------------------------------------------
Total securities 3,650 55.9 6.08 3,216 49.2 6.09
Loans:
Domestic:
Commercial 7,432 168.6 9.00 6,919 152.3 8.76
Consumer 13,015 272.9 8.36 6,937 171.5 9.85
- - ------------------------------------------------------------------------------
Total domestic 20,447 441.5 8.57 13,856 323.8 9.30
International 639 11.3 7.00 499 8.7 6.95
- - ------------------------------------------------------------------------------
Total loans 21,086 452.8 8.52 14,355 332.5 9.22
- - ------------------------------------------------------------------------------
Total earning assets 28,502 $ 562.2 7.83 % 20,049 $ 417.5 8.28%
- - ------------------------------------------------------------------------------
Allowance for loan losses (429) (447)
Cash and due from banks 980 901
Other assets 1,169 833
- - ------------------------------------------------------------------------------
Total assets $ 30,222 $ 21,336
==============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand
deposits $ 2,016 $ 5.8 1.14 % $ 1,685 $ 5.7 1.33%
Consumer savings deposits 5,629 39.1 2.76 4,369 33.5 3.05
Other consumer time deposits 6,336 87.8 5.50 3,920 51.8 5.26
Commercial and public savings
and other time deposits 2,231 23.2 4.14 1,719 16.6 3.85
Deposits in foreign offices,
primarily banks 2,072 27.5 5.25 1,321 17.0 5.13
- - ------------------------------------------------------------------------------
Total interest bearing deposits 18,284 183.4 3.98 13,014 124.6 3.81
- - ------------------------------------------------------------------------------
Federal funds purchased and securities
sold under repurchase agreements 1,815 25.1 5.49 1,199 15.8 5.24
Other short-term borrowings 1,738 23.9 5.47 1,217 15.3 4.99
Long-term debt 1,895 30.4 6.35 702 11.4 6.47
- - ------------------------------------------------------------------------------
Total funds borrowed 5,448 79.4 5.78 3,118 42.5 5.42
- - ------------------------------------------------------------------------------
Total interest bearing
liabilities 23,732 $ 262.8 4.39 % 16,132 $ 167.1 4.12%
- - ------------------------------------------------------------------------------
Interest rate spread 3.44 % 4.16%
- - ------------------------------------------------------------------------------
Noninterest bearing deposits 3,926 3,049
Other liabilities 420 265
Total shareholders' equity 2,144 1,890
- - ------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 30,222 $ 21,336
==============================================================================
Net interest income $ 299.4 $ 250.4
Net yield on average earning assets 4.17 % 4.97%
Net yield on average total assets 3.93 4.67
- - ------------------------------------------------------------------------------
Net interest income/net yield on
average earning assets:
Domestic $ 282.8 4.29 % $ 240.4 5.06%
International 16.6 2.83 10.0 3.49
==============================================================================
* Interest and rates are presented on a taxable equivalent basis.
</TABLE>
<TABLE>
<CAPTION>
14.
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES* HSBC AMERICAS,INC.
Nine Months 1997 Nine Months 1996
dollars in millions Balance Interest Rate Balance Interest Rate
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest bearing deposits
with banks $ 1,499 $ 64.8 5.78 % $ 1,241 $ 51.5 5.54%
Federal funds sold and securities
purchased under resale agreement 1,072 42.8 5.33 516 20.6 5.33
Trading assets 981 44.0 5.98 844 38.5 6.08
Securities:
U.S. Government and
federal agency obligations 3,248 144.2 5.93 2,861 123.6 5.77
Other securities 298 19.9 8.96 252 17.3 9.15
- - ------------------------------------------------------------------------------
Total securities 3,546 164.1 6.19 3,113 140.9 6.05
Loans:
Domestic:
Commercial 7,385 502.8 9.10 6,532 422.3 8.64
Consumer 11,498 745.5 8.66 6,661 496.2 9.95
- - ------------------------------------------------------------------------------
Total domestic 18,883 1,248.3 8.84 13,193 918.5 9.30
International 686 34.5 6.72 511 26.3 6.87
- - ------------------------------------------------------------------------------
Total loans 19,569 1.282.8 8.76 13,704 944.8 9.21
- - ------------------------------------------------------------------------------
Total earning assets 26,667 $1.598.5 8.01 % 19,418 $1,196.3 8.23%
- - ------------------------------------------------------------------------------
Allowance for loan losses (427) (463)
Cash and due from banks 970 964
Other assets 1,184 765
- - ------------------------------------------------------------------------------
Total assets $28,394 $20,684
==============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand
deposits $ 1,964 $ 17.0 1.16 % $ 1,648 $ 16.4 1.33%
Consumer savings deposits 5,336 117.5 2.94 4,002 92.3 3.08
Other consumer time deposits 5,865 231.5 5.28 3,478 139.7 5.37
Commercial and public savings
and other time deposits 2,037 62.3 4.09 1,861 55.9 4.01
Deposits in foreign offices,
primarily banks 1,731 66.7 5.15 1,368 53.2 5.19
- - ------------------------------------------------------------------------------
Total interest bearing deposits 16,933 495.0 3.91 12,357 357.5 3.86
- - ------------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchased agreements 1,915 77.9 5.44 1,206 46.3 5.12
Other short-term borrowings 1,413 57.4 5.44 1,308 49.1 5.02
Long-term debt 1,746 82.5 6.32 707 34.3 6.48
- - ------------------------------------------------------------------------------
Total funds borrowed 5,074 217.8 5.74 3,221 129.7 5.38
- - ------------------------------------------------------------------------------
Total interest bearing
liabilities 22,007 $ 712.8 4.33 % 15,578 $ 487.2 4.18%
- - ------------------------------------------------------------------------------
Interest rate spread 3.68 % 4.05%
- - ------------------------------------------------------------------------------
Noninterest bearing deposits 3,866 3,016
Other liabilities 453 281
Total shareholders' equity 2,068 1,809
- - ------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $28,394 $20,684
==============================================================================
Net interest income $ 885.7 $ 709.1
Net yield on average earning assets 4.44 % 4.88%
Net yield on average total assets 4.17 4.58
- - ------------------------------------------------------------------------------
Net interest income/net yield on average earning assets:
Domestic $ 835.5 4.58 % $ 681.0 5.03%
International 50.2 2.98 28.1 2.84
==============================================================================
* Interest and rates are presented on a taxable equivalent basis.
</TABLE>
15.
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Report on Form 8-K
None
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 6, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,111
<INT-BEARING-DEPOSITS> 2,114
<FED-FUNDS-SOLD> 1,343
<TRADING-ASSETS> 968
<INVESTMENTS-HELD-FOR-SALE> 3,422
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 21,569
<ALLOWANCE> 427
<TOTAL-ASSETS> 31,406
<DEPOSITS> 22,191
<SHORT-TERM> 4,687
<LIABILITIES-OTHER> 678
<LONG-TERM> 1,414
400
0
<COMMON> 0
<OTHER-SE> 2,036
<TOTAL-LIABILITIES-AND-EQUITY> 31,406
<INTEREST-LOAN> 1,281
<INTEREST-INVEST> 164
<INTEREST-OTHER> 151
<INTEREST-TOTAL> 1,596
<INTEREST-DEPOSIT> 495
<INTEREST-EXPENSE> 713
<INTEREST-INCOME-NET> 883
<LOAN-LOSSES> 63
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 581
<INCOME-PRETAX> 501
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 351
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.44
<LOANS-NON> 321
<LOANS-PAST> 60
<LOANS-TROUBLED> 7
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 418
<CHARGE-OFFS> 136
<RECOVERIES> 42
<ALLOWANCE-CLOSE> 427
<ALLOWANCE-DOMESTIC> 197
<ALLOWANCE-FOREIGN> 26
<ALLOWANCE-UNALLOCATED> 204
</TABLE>
