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 the Quarter Ended September 30, 1994 Commission File No. 1-7436
REPUBLIC NEW YORK CORPORATION
(Exact name of registrant specified in its charter)
Maryland 13-2764867
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
452 Fifth Avenue, New York, New York 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 525-6100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes.X.. No....
Number of shares outstanding of the issuer's common stock, as of October 31,
1994: 52,795,752 shares.
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Statements of Condition - Unaudited
September 30, 1994 and December 31, 1993 2
Consolidated Statements of Income - Unaudited
Nine-Months and Three-Months Ended
September 30, 1994 and 1993 3
Consolidated Statements of Cash Flows - Unaudited
Nine-Months Ended September 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 6-13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
The information contained in the financial statements furnished in
this report is unaudited. However, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of operations for the interim periods
presented, have been included.
-1-
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
UNAUDITED
<CAPTION>
(Dollars in thousands)
September 30, December 31,
1994 1993
<S> <C> <C>
Assets
Cash and due from banks $ 638,380 $ 636,633
Interest-bearing deposits with banks 9,530,875 5,346,647
Precious metals 1,577,081 1,117,610
Securities held to maturity (approximate market
value of $5,586,369 in 1994 and $2,088,805 in 1993) 5,742,154 1,992,847
Securities available for sale (at approximate market
value) 6,034,928 12,956,946
Total investment securities 11,777,082 14,949,793
Trading account assets 3,062,180 1,194,629
Federal funds sold and securities purchased
under resale agreements 838,621 2,322,465
Loans (net of unearned income of $49,972 in 1994
and $94,825 in 1993) 9,383,733 9,508,558
Allowance for possible loan losses (319,578) (311,855)
Loans (net) 9,064,155 9,196,703
Customers' liability on acceptances 1,411,214 1,134,294
Accounts receivable and accrued interest 1,778,659 2,117,879
Investment in affiliate 599,127 625,333
Premises and equipment 407,403 399,626
Other assets 524,956 451,860
Total assets $ 41,209,733 $ 39,493,472
Liabilities and Stockholders' Equity
Noninterest-bearing deposits:
In domestic offices $ 1,408,884 $ 1,427,518
In foreign offices 94,607 135,251
Interest-bearing deposits:
In domestic offices 8,434,725 8,724,797
In foreign offices 12,287,929 12,513,684
Total deposits 22,226,145 22,801,250
Trading account liabilities 2,763,022 177,475
Short-term borrowings (note 1) 4,486,868 4,164,419
Acceptances outstanding 1,411,219 1,137,636
Accounts payable and accrued expenses 1,847,836 2,873,903
Due to factored clients 666,652 614,549
Other liabilities 143,807 122,203
Long-term debt 2,588,991 2,582,875
Subordinated long-term debt and perpetual
capital notes (note 2) 2,405,843 2,271,940
Stockholders' equity: (note 3)
Cumulative preferred stock, no par value
8,952,500 shares outstanding in 1994 and
8,131,000 in 1993 672,500 556,425
Common stock, $5 par value
150,000,000 shares authorized; 52,835,627
shares outstanding in 1994 and 52,703,271 in 1993 264,178 263,516
Surplus 440,699 459,713
Retained earnings 1,401,255 1,204,818
Net unrealized appreciation (depreciation) on
securities available for sale, net of taxes (109,282) 262,750
Total stockholders' equity 2,669,350 2,747,222
Total liabilities and stockholders' equity $ 41,209,733 $ 39,493,472
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<CAPTION>
(In thousands except per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 514,551 $ 463,468 $ 177,459 $ 163,334
Interest on deposits with banks 249,615 237,083 122,205 68,665
Interest and dividends on investment securities:
Taxable 648,986 637,200 208,610 206,721
Exempt from federal income taxes 55,384 48,255 19,304 17,133
Interest on trading account assets 46,372 34,528 13,816 16,639
Interest on federal funds sold and securities
purchased under resale agreements 41,297 24,471 14,166 9,080
Total interest income 1,556,205 1,445,005 555,560 481,572
INTEREST EXPENSE:
Interest on deposits 563,414 515,036 213,053 174,780
Interest on short-term borrowings 159,369 145,792 51,450 47,428
Interest on long-term debt 205,003 201,393 72,860 66,341
Total interest expense 927,786 862,221 337,363 288,549
NET INTEREST INCOME 628,419 582,784 218,197 193,023
Provision for loan losses 16,000 70,000 3,000 20,000
Net interest income after provision for
loan losses 612,419 512,784 215,197 173,023
OTHER OPERATING INCOME:
Income from precious metals 39,831 26,896 15,438 11,014
Foreign exchange trading income 68,159 88,264 24,228 30,486
Trading account profits and commissions 20,220 40,400 9,638 20,436
Investment securities gains (losses), net 12,290 6,258 (767) 3,802
Net gain (loss) on loans sold or held for sale 1,982 (1,186) 1,419 (268)
Commission income 44,864 36,165 12,595 15,555
Equity in earnings of affiliate 58,465 41,583 18,809 14,743
Other income 49,413 45,754 15,912 12,432
Total other operating income 295,224 284,134 97,272 108,200
OTHER OPERATING EXPENSES:
Salaries 189,291 150,268 58,887 51,672
Employee benefits 110,560 103,083 36,787 34,885
Occupancy, net 40,872 35,708 13,935 12,542
Other expenses 199,154 171,497 63,180 57,870
Total other operating expenses 539,877 460,556 172,789 156,969
INCOME BEFORE INCOME TAXES 367,766 336,362 139,680 124,254
Income taxes 117,142 115,084 48,263 46,649
NET INCOME $ 250,624 $ 221,278 $ 91,417 $ 77,605
NET INCOME APPLICABLE TO COMMON STOCK $ 225,933 $ 199,998 $ 82,143 $ 70,545
Net income per common share:
Primary $ 4.28 $ 3.82 $ 1.55 $ 1.34
Fully diluted $ 4.15 $ 3.71 $ 1.50 $ 1.30
Average common shares outstanding:
Primary 52,738 52,390 53,018 52,634
Fully diluted 56,542 56,253 56,797 56,506
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
(In thousands)
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 250,624 $ 221,278
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization, net 49,661 34,083
Provision for loan losses 16,000 70,000
Gains on sales of investment securities, net (12,290) (6,258)
Net (gains) losses on loans sold or held for sale (1,982) 1,186
Equity in earnings of affiliate (58,465) (41,583)
Net (increase) decrease in trading accounts 717,996 (514,913)
Net (increase) decrease in accounts receivable and
accrued interest 332,634 (1,993,228)
Net increase (decrease) in accounts payable and
accrued expenses (623,421) 2,510,097
Other, net (57,907) (185,502)
Net cash provided by operating activities 612,850 95,160
Cash Flows From Investing Activities:
Net (increase) decrease in interest-bearing deposits
with banks (4,184,228) 4,432,321
Net increase in precious metals (459,471) (276,296)
Net (increase) decrease in federal funds sold and
securities purchased under resale agreements 1,483,844 (120,420)
Net increase in short-term investments (39,360) (213,750)
Purchases of securities available for sale (3,232,955) (565,347)
Proceeds from sales of securities available for sale 3,384,360 -
Proceeds from maturities of securities available for sale 2,479,251 242,336
Purchases of securities held to maturity (90,276) (2,874,968)
Proceeds from sales of securities held to maturity - 39,541
Proceeds from maturities of securities held to maturity 184,139 1,959,736
Net increase in loans (131,348) (1,369,596)
Investment in affiliate 23,805 19,477
Net cash provided (used) by investing activities (582,239) 1,273,034
Cash Flows From Financing Activities:
Net increase (decrease) in deposits (574,764) 1,278,313
Net increase (decrease) in short-term borrowings 322,449 (2,677,261)
Net increase in due to factored clients 52,103 16,207
Proceeds from issuance of long-term debt 297,802 605,590
Repayment of long-term debt (290,979) (471,071)
Proceeds from issuance of subordinated long-term debt 200,000 -
Repayment of subordinated long-term debt (66,000) -
Net proceeds from issuance of cumulative preferred stock 146,062 -
Repurchase of cumulative preferred stock (33,925) -
Repurchase of common stock (29,757) -
Cash dividends paid (72,085) (62,575)
Other, net 33,241 7,312
Net cash used by financing activities (15,853) (1,303,485)
Effect of exchange rate changes on cash
and due from banks (13,011) 1,583
Net increase in cash and due from banks 1,747 66,292
Cash and due from banks at beginning of period 636,633 490,711
Cash and due from banks at end of period $ 638,380 $ 557,003
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 769,801 $ 879,205
Income taxes $ 97,540 $ 124,075
Transfers from securities available for sale
to securities held to maturity $ 3,862,350 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COVERING THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
1. On March 8, 1994, Republic National Bank of New York (the "Bank"),
the principal banking subsidiary of the Corporation, received the net
proceeds from the public sale, on March 1, 1994, of $1.0 billion
principal amount of 4.30% Notes due March 8, 1995. The Notes are not
redeemable prior to maturity and are unsecured and, except with
respect to domestic deposits, are unsubordinated debt obligations of
the Bank. The net proceeds of this short-term borrowing have been
used for the general banking business of the Bank.
2. On May 5, 1994, the Corporation sold, in a public offering, $200
million principal amount of 7 3/4% Subordinated Notes due 2009. The
Notes are direct unsecured general obligations of the Corporation and
are subordinated to all present and future senior indebtedness of the
Corporation. The Notes are not redeemable prior to maturity. The
net proceeds received have been used for general corporate purposes.
3. On May 16, 1994, the Corporation sold, in a public offering,
6,000,000 depositary shares, each representing a one-fourth interest
in a share of Adjustable Rate Cumulative Preferred Stock, Series D
($100 Stated Value) (the "Preferred Stock"). The dividend rate on
the Preferred Stock is determined quarterly by reference to a formula
based on certain benchmark market rates, but will not be less than
4 1/2% or more than 10 1/2% per annum for any applicable dividend
period. The dividend rate in effect for the period ended
September 30, 1994, was 5.92%. The Preferred Stock will be
redeemable, in whole or in part, at the option of the Corporation on
or after July 1, 1999 at $100 per share (which is equivalent to $25
per depositary share) plus accrued and unpaid dividends to the
redemption date.
On July 1, 1994, the Corporation redeemed all 678,500 outstanding
shares of its Cumulative Floating Rate Series B Preferred Stock at
the stated value of $50.00 per share.
For the nine months ended September 30, 1994, the Corporation
purchased a total of 629,964 shares of its Common Stock. Such
purchases were made under authorizations by the Board of Directors.
The shares were purchased at an aggregate cost of $29,757,000. On
October 19, 1994, the Board of Directors authorized the purchase of
up to 500,000 additional shares of the Corporation's Common Stock.
Such purchases would lessen the dilutive impact on earnings per share
resulting from the anticipated issuance of common stock under
employee benefit plans. These purchases will be made periodically in
the open market or through privately negotiated transactions.
4. Certain amounts from the prior year have been reclassified to conform
with 1994 classifications.
-5-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Management's discussion and analysis of the summary of operations
should be read in conjunction with the consolidated financial
statements (unaudited) and notes shown elsewhere in this Report. In
the following discussion, the interest income earned on tax exempt
obligations has been adjusted (increased) to a fully-taxable equivalent
basis. The rate used for this adjustment was approximately 44% in 1994
and 1993. This tax equivalent adjustment permits all interest income
and net interest income to be analyzed on a comparable basis. The
following table presents a comparative summary of the increases
(decreases) in income and expense for the third quarter and nine months
ended September 30, 1994 compared to the corresponding periods of 1993.
<TABLE>
<CAPTION>
Increase (Decrease)
3rd Qtr. 1994 vs. 9 Mos. 1994 vs.
3rd Qtr. 1993 9 Mos. 1993
(Dollars in thousands) Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Interest income $ 74,216 15.1 $113,580 7.7
Interest expense 48,814 16.9 65,565 7.6
Net interest income 25,402 12.6 48,015 7.9
Provision for loan losses (17,000) (85.0) (54,000) (77.1)
Net interest income after
provision for loan losses 42,402 23.3 102,015 19.0
Other operating income (10,929) (10.1) 11,089 3.9
Other operating expenses 15,820 10.1 79,321 17.2
Income before income taxes 15,653 11.8 33,783 9.4
Applicable income taxes 1,613 3.5 2,057 1.8
Tax equivalent adjustment 228 2.6 2,380 10.2
Total applicable income taxes 1,841 3.3 4,437 3.2
Net income $ 13,812 17.8 $ 29,346 13.3
Net income applicable
to common stock $ 11,598 16.4 $ 25,935 13.0
</TABLE>
Net Interest Income - on a fully-taxable equivalent basis amounted to
$227.1 million in the third quarter of 1994, an increase of $25.4
million, or 12.6%, compared to the similar quarter in 1993 and totaled
$654.2 million for the first nine months of 1994, an increase of $48.0
million, or 7.9%, compared to the same period in 1993.
As shown in the tables on pages 7 and 8, average
interest-earning assets were $33.3 billion in the third quarter and
$33.1 billion in the first nine months of 1994 compared to $32.1
billion and $32.5 billion in the corresponding periods of 1993. The
net interest rate differential was 2.71% in the third quarter and 2.64%
for the first nine months of 1994, compared to 2.49% in both of the
corresponding periods of last year.
-6-
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL,
AVERAGE RATES EARNED AND PAID
UNAUDITED
<CAPTION>
(Fully taxable equivalent basis)
(Dollars in thousands)
Quarter Ended September 30,
1994 1993
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits with banks $ 9,451,271 $ 122,205 5.13% $ 6,976,191 $ 68,665 3.91%
Investment securities(1):
Taxable 10,619,414 208,610 7.79 12,892,468 206,721 6.36
Exempt from federal income taxes 1,159,692 28,184 9.64 1,006,878 25,690 10.12
Total investment securities 11,779,106 236,794 7.98 13,899,346 232,411 6.63
Trading account assets(2) 1,069,013 13,816 5.13 1,055,724 16,639 6.25
Federal funds sold and securities
purchased under resale agreements 1,325,529 14,166 4.24 1,044,278 9,080 3.45
Loans, net of unearned income:
Domestic offices 6,501,221 130,207 7.95 6,625,028 121,809 7.29
Foreign offices 3,125,180 47,252 6.00 2,479,174 41,620 6.66
Total loans, net of unearned
income 9,626,401 177,459 7.31 9,104,202 163,429 7.12
Total interest-earning assets 33,251,320 $ 564,440 6.73% 32,079,741 $ 490,224 6.06%
Cash and due from banks 624,840 599,161
Other assets 7,703,432 4,341,943
Total assets $41,579,592 $37,020,845
Interest-bearing funds:
Consumer and other time deposits $ 7,857,452 $ 61,439 3.10% $ 8,255,896 $ 62,035 2.98%
Certificates of deposit 580,383 6,548 4.48 656,697 5,298 3.20
Deposits in foreign offices 12,598,134 145,066 4.57 11,265,569 107,447 3.78
Total interest-bearing
deposits 21,035,969 213,053 4.02 20,178,162 174,780 3.44
Trading account liabilities (2) 156,547 2,228 5.65 169,065 2,315 5.43
Short-term borrowings 4,921,491 49,222 3.97 4,365,072 45,113 4.10
Total long-term debt 5,011,125 72,860 5.77 4,625,148 66,341 5.69
Total interest-bearing funds 31,125,132 $ 337,363 4.30% 29,337,447 $ 288,549 3.90%
Noninterest-bearing deposits:
In domestic offices 1,385,960 1,212,888
In foreign offices 105,041 98,118
Other liabilities 6,355,866 3,982,224
Stockholders' equity:
Preferred stock 672,500 556,425
Common stockholders' equity 1,935,093 1,833,743
Total stockholders' equity 2,607,593 2,390,168
Total liabilities and
stockholders' equity $41,579,592 $37,020,845
Interest income/earning assets $ 564,440 6.73% $ 490,224 6.06%
Interest expense/earning assets 337,363 4.02 288,549 3.57
Net interest differential $ 227,077 2.71% $ 201,675 2.49%
<FN>
<F1>
(1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale
included in other assets.
<F2>
(2) Excludes noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
</TABLE>
-7-
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL,
AVERAGE RATES EARNED AND PAID
UNAUDITED
<CAPTION>
(Fully taxable equivalent basis)
(Dollars in thousands)
Nine Months Ended September 30,
1994 1993
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits with banks $ 6,999,888 $ 249,615 4.77% $ 8,088,078 $ 237,083 3.92%
Investment securities(1):
Taxable 12,494,473 648,986 6.94 13,016,992 637,200 6.54
Exempt from federal income taxes 1,151,599 81,156 9.42 933,751 71,382 10.22
Total investment securities 13,646,072 730,142 7.15 13,950,743 708,582 6.79
Trading account assets(2) 1,070,854 46,372 5.79 884,431 34,528 5.22
Federal funds sold and securities
purchased under resale agreements 1,452,167 41,297 3.80 1,008,208 24,471 3.25
Loans, net of unearned income:
Domestic offices 6,558,425 363,944 7.42 6,298,196 361,212 7.67
Foreign offices 3,406,384 150,607 5.91 2,253,925 102,521 6.08
Total loans, net of unearned
income 9,964,809 514,551 6.90 8,552,121 463,733 7.25
Total interest-earning assets 33,133,790 $ 1,581,977 6.38% 32,483,581 $ 1,468,397 6.04%
Cash and due from banks 683,341 529,434
Other assets 7,229,977 3,835,431
Total assets $41,047,108 $36,848,446
Interest-bearing funds:
Consumer and other time deposits $ 7,975,089 $ 176,456 2.96% $ 8,301,984 $ 193,647 3.12%
Certificates of deposit 599,528 17,701 3.95 735,843 17,716 3.22
Deposits in foreign offices 11,801,053 369,257 4.18 10,555,169 303,673 3.85
Total interest-bearing
deposits 20,375,670 563,414 3.70 19,592,996 515,036 3.51
Trading account liabilities (2) 162,555 7,468 6.14 94,580 3,751 5.30
Short-term borrowings 5,604,230 151,901 3.62 5,432,019 142,041 3.50
Total long-term debt 4,956,826 205,003 5.53 4,526,599 201,393 5.95
Total interest-bearing funds 31,099,281 $ 927,786 3.99% 29,646,194 $ 862,221 3.89%
Noninterest-bearing deposits:
In domestic offices 1,335,299 1,143,785
In foreign offices 114,054 102,671
Other liabilities 5,863,789 3,618,178
Stockholders' equity:
Preferred stock 616,622 556,425
Common stockholders' equity 2,018,063 1,781,193
Total stockholders' equity 2,634,685 2,337,618
Total liabilities and
stockholders' equity $41,047,108 $36,848,446
Interest income/earning assets $ 1,581,977 6.38% $ 1,468,397 6.04%
Interest expense/earning assets 927,786 3.74 862,221 3.55
Net interest differential $ 654,191 2.64% $ 606,176 2.49%
<FN>
<F1>
(1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale
included in other assets.
<F2>
(2) Excludes noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
</TABLE>
-8-
The Corporation is positioning itself to benefit from the improving
economic trends principally in the Latin American countries of Mexico and
Brazil and has increased the level of its activities in the financial
markets of both of those countries. During the third quarter of 1994, net
interest income benefited from a higher volume of investments in wholesale
money market assets in Brazil as well as continued investments in Mexico.
See "Statement of Condition" below for additional information related to
Brazil and Mexico.
Net interest income in the third quarter of 1994 also included
prepayment penalties of approximately $5.0 million resulting from the
refinancing of certain commercial loans.
Provision for loan losses - was $3.0 million and $16.0 million in the third
quarter and first nine months of 1994, respectively, compared to $20.0
million and $70.0 million for the corresponding periods of last year. It
is the Corporation's view that because of improvement in the credit quality
of the loan portfolio and the declining level of non-performing loans, it
is not necessary to continue to increase the allowance for loan losses at
this time.
Net loan recoveries, excluding restructuring country debt, were $1.7
million in the third quarter of 1994, compared to net loan charge-offs of
$2.5 million in the third quarter of last year. Net recoveries of
restructuring country debt amounted to $0.1 million in the third quarter of
1994, compared to $6.9 million related to such obligatons in the third
quarter of 1993.
For the first nine months of 1994, net loan charge-offs, excluding
restructuring country debt, were $15.5 million compared to $30.3 million in
the corresponding period of last year. Net recoveries of restructuring
country debt were $6.7 million for the first nine months of 1994, compared
to $1.0 million in the year-ago period.
The allowance for possible loan losses at September 30, 1994 was
$319.6 million, compared to $311.9 million at December 31, 1993 as loans
declined modestly to $9.4 billion at September 30, 1994 from $9.5 billion
at year end 1993. The allowance for possible loan losses as a percentage
of loans outstanding, net of unearned income was 3.41% at September 30,
1994, compared to 3.28% at December 31, 1993.
At September 30, 1994, non-accrual loans were $58.7 million,
compared to $63.2 million at June 30, 1994 and $94.9 million at
December 31, 1993. The decline in non-accrual loans since December 31,
1993 is primarily attributable to the Brazilian debt restructuring
settlement which reduced non-accrual loans by $33.4 million in the second
quarter of 1994. Under this settlement, the Corporation received bonds in
exchange for substantially all of its non-performing outstandings to
Brazil. See "Other Operating Income" below for additional discussion of
the Brazilian debt restructuring and "Statement of Condition" below for a
discussion of total non-performing assets.
-9-
The following is a summary of total non-accrual loans at periods
ending:
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31,
(In thousands) 1994 1994 1993
<S> <C> <C> <C>
Non-accrual loans:
Domestic $ 45,037 $ 45,210 $ 48,084
Foreign-restructuring
country - 1,875 33,853
Foreign-other 13,679 16,111 12,956
Total non-accrual loans $ 58,716 $ 63,196 $ 94,893
</TABLE>
Other operating income - totaled $97.3 million in the third quarter of
1994, compared to $108.2 million in the year-earlier quarter. This
decline was primarily attributable to lower levels of customer trading
activities. For the first nine months of 1994, such income was $295.2
million compared to $284.1 million in the corresponding period of last
year.
Income from trading activities in the third quarter of 1994
declined to $49.3 million from $61.9 million in the third quarter of last
year. Income from precious metals increased $4.4 million from the
corresponding period a year ago, due to higher levels of activity in the
precious metals markets, including the contribution from the businesses
acquired in the Republic Mase Bank transaction. This increase was more
than offset by lower activity and revenues in foreign exchange and trading
account profits and commissions. The level of trading income in the third
quarter of 1994 improved $19.2 million over the second quarter, as the
generally reduced activity in the global markets resulting from the high
level of market uncertainty in the second quarter became less pronounced.
For the first nine months of 1994, income from trading activities
was $128.2 million, compared to $155.6 million in the same period a year
ago and reflects the factors mentioned above.
Investment securities losses were $0.8 million in the third quarter
of 1994, compared to gains of $3.8 million in the third quarter of last
year which primarily resulted from early redemptions of securities prior
to scheduled maturity. For the first nine months of 1994, investment
security gains were $12.3 million, compared to gains of $6.3 million last
year. Net gains on security transactions for the nine-month period of
1994 included gains in the second quarter of $52.0 million realized on the
sale of Argentine equities acquired in a 1990 debt-for-equity swap, gains
of $26.9 million realized on the sale of all of the securities received in
connection with Brazil's debt restructuring and net losses of $68.9
million primarily on the disposition of securities sold as part of the
Corporation's asset/liability management program.
The Corporation recorded net gains on loans sold or held for sale
of $1.4 million in the third quarter of 1994, compared to net losses of
$0.3 million in the corresponding quarter last year. For the nine months
ended September 30, 1994, net gains of $2.0 million compare to net losses
of $1.2 million in the same period of last year.
-10-
Commission income amounted to $12.6 million in the third quarter of
1994, compared to $15.6 million in the corresponding period of 1993
reflecting a lower level of fees earned from global asset management
activities. For the first nine months of 1994, commission income amounted
to $44.9 million, compared to $36.2 million last year.
Equity in the earnings of Safra Republic Holdings S.A. (Safra
Republic), a European international private banking group of which the
Corporation owns 49% of the outstanding shares, increased 27.6% to $18.8
million in the third quarter of 1994, compared to $14.7 million in the
third quarter of 1993. For the nine-month period of 1994 these earnings
increased 40.6% to $58.5 million, compared to $41.6 million for the
corresponding period of 1993.
Other income was $15.9 million in the third quarter of 1994,
compared to $12.4 million in the corresponding quarter last year. For the
nine months ended September 30, 1994, other income was $49.4 million,
compared to $45.8 million in the year-ago period. The nine-month periods
include a $2.4 million gain on the early extinguishment of $79.9 million
principal amount of Libor Accrual Notes due 1996 in the second quarter of
1994 and a $5.1 million gain on the sale of certain data processing rights
in the first quarter of 1993.
Other Operating Expenses - totaled $172.8 million in the third quarter and
$539.9 million for the first nine months of 1994. This compares to $157.0
million and $460.6 million in the corresponding periods of 1993. These
increases are attributable primarily to the Corporation's expansion into
new business areas. The previously announced acquisitions of Republic
Mase Bank, SafraCorp California and Bank Leumi Le Israel (Canada) and the
addition of staff in trading, domestic private banking and various support
areas contributed to the increase. The nine months of 1994 includes a
second quarter $17.0 million restructuring charge to de-emphasize certain
business activities, including activities of Republic New York Securities
Corporation. Total operating expenses declined $1.4 million in the third
quarter of 1994, when compared to the second quarter of 1994, after
adjusting for the restructuring charge.
Salaries and employee benefits were $95.7 million in the third
quarter of 1994, compared to $86.6 million in the third quarter of last
year. For the nine months ended September 30, 1994, such expenses were
$299.9 million, including $14.8 million related to the restructuring
expenses mentioned above compared to $253.4 million in the year-earlier
period.
Occupancy expense was $13.9 million in the third quarter of 1994,
compared to $12.5 million in the third quarter of 1993. For the nine
months ended September 30, 1994, occupancy expense was $40.9 million,
compared to $35.7 million last year. The respective period to period
increases are primarily due to the new business areas mentioned above and
additional costs for home office expansion.
All other expenses were $63.2 million in the third quarter of 1994,
compared to $57.9 million in the third quarter last year. For the nine
months ended September 30, 1994, other expenses were $199.2 million
including the balance of the restructuring charge, compared to $171.5
million last year. These increases reflect higher levels of expense for
equipment, communications and computer services.
-11-
Total Applicable Income Taxes - have been adjusted (increased) to reflect
the inclusion of interest income on tax exempt obligations as if they were
subject to federal, state and local income taxes, after giving effect to
the deductiblity of state and local taxes for federal income tax purposes.
Total applicable income taxes increased $1.8 million, or 3.3%, in the
third quarter of 1994 and $4.4 million, or 3.2%, during the first nine
months of 1994 when compared to the corresponding periods of 1993.
Changes in income taxes in the third quarter are a result of fluctuations
in the level of New York state and city income taxes. Income taxes in the
third quarter of 1993 reflect the effect, retroactive to January 1, 1993,
of applying a higher U.S. statutory tax rate in accordance with the
Omnibus Budget Reconciliation Act of 1993. The effective tax rates, total
applicable income taxes as a percentage of income before income taxes, for
the third quarter and nine-month periods of 1994 were 38.5% and 36.3%,
respectively, compared to 41.6% and 38.5% in the corresponding periods of
last year.
STATEMENT OF CONDITION
Stockholders' Equity and Capital Ratios
At September 30, 1994, stockholders' equity included a deduction
of $109.3 million, which represents the after-tax unrealized depreciation
in the securities available for sale portfolio and approximately 49% of
Safra Republic's unrealized depreciation in its securities available for
sale portfolio. This compares to a $262.8 million unrealized appreciation
in the securities available for sale portfolio and approximately 49% of
Safra Republic's unrealized appreciation in its securities available for
sale portfolio at December 31, 1993.
The Corporation's leverage ratio, Tier 1 capital to quarterly
average assets, and its risk-based capital ratios, Tier 1 and total
qualifying capital to risk-weighted assets, include the assets and capital
of Safra Republic on a consolidated basis in accordance with the
requirements of the Federal Reserve Board specifically applied to the
Corporation. The component of stockholders' equity representing the net
unrealized appreciation or depreciation on securities available for sale
is not included in this calculation.
In accordance with regulatory guidelines, the Corporation excludes
Republic New York Securities Corporation's assets and off-balance-sheet
contracts from the Corporation's capital calculations. The guidelines
require the Corporation to deduct one-half of its investment in this
subsidiary from each of Tier 1 and Tier 2 capital.
At September 30, 1994, the Corporation's leverage ratio was 6.00%
compared to 5.61% at year end 1993. At September 30, 1994, risk-based
capital ratios were 15.80% for Tier 1, or "core", capital and 26.91% for
total qualifying capital, compared to 15.16% and 26.20%, respectively, at
December 31, 1993. These ratios substantially exceed the minimums in
effect for bank holding companies.
At September 30, 1994, the ratio of the Corporation's total common
stockholders' equity to total assets was 4.85%, compared to 5.55% at
December 31, 1993. The decline in this ratio was primarily attributable
to the reduction in common equity related to the unrealized depreciation
in the market value of the Corporation's portfolio of securities available
for sale.
-12-
During the third quarter of 1994, the Corporation increased its
investment in Brazilian overnight wholesale capital and money market
activities. These investments grew to approximately $244 million at
September 30, 1994 and together with the Corporation's other longer term
Brazilian investments, the Corporation increased its exposure to Brazil to
approximately $548 million, or 1.33% of total assets.
The Ministry of Finance and Public Credit of Mexico has granted the
Bank a license to establish a Mexican banking subsidiary. The new
subsidiary will be headquartered in Mexico City, where the Bank has had a
representative office since 1972. The subsidiary will operate as Republic
National Bank of New York (Mexico), S.A. with an initial capitalization of
$100 million. It will engage in activities consistent with those of
Mexican "multiple banks", including deposit gathering from the public and
the granting of commercial and individual loans.
Non-performing Assets
At September 30, 1994, total non-performing assets of $85.5 million
included $58.7 million of non-accrual loans and $26.8 million of other
real estate owned. Total non-performing assets at June 30, 1994 and
December 31, 1993 were $87.5 million and $118.2 million respectively. The
decline in total non-performing assets at September 30, from December 31
was primarily due to the Brazilian debt restructuring settlement during
the second quarter of 1994, which reduced non-accrual loans by $33.4
milllion.
The following is a summary of total non-accrual loans and other
non-performing assets at periods ending:
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31,
(In thousands) 1994 1994 1993
<S> <C> <C> <C>
Total non-accrual loans $ 58,716 $ 63,196 $ 94,893
Other non-performing assets:
Other real estate owned 26,822 24,331 23,338
Total non-accrual loans and
Other non-performing assets $ 85,538 $ 87,527 $ 118,231
</TABLE>
Financial Instruments
At September 30, 1994, the net fair value depreciation of the
Corporation's on-balance sheet financial instruments, including related
off-balance sheet interest rate hedges, was approximately $11 million.
This amount represents a decline in the fair value of such instruments
of approximately $60 million since June 30, 1994 and $325 million since
December 31, 1993. The change in value reflects the effect of rising
interest rates during the first nine months of 1994.
Not included in the information above is the fair value of deposit
liabilities with no stated maturity that are required to be reported at
their carrying value. These deposits have an increased value to the
Corporation during periods of rising interest rates since they can be
invested at more favorable spreads.
In the third quarter of 1994, the Corporation designated as held to
maturity approximately $0.5 billion carrying value of U.S. Government
Agency securities which had been previously designated as available for
sale. These securities are in addition to approximately $3.4 billion
carrying value of such securities which had been so designated in the
first six months of 1994.
-13-
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings Per Common Share
27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended September 30, 1994.
-14-
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.
REPUBLIC NEW YORK CORPORATION
Dated: November 14, 1994 By /s/Walter H. Weiner
Walter H. Weiner
Chairman of the Board
Dated: November 14, 1994 By /s/John D. Kaberle, Jr.
John D. Kaberle, Jr.
Executive Vice President and
Comptroller
(Principal Accounting Officer)
-15-
FORM 10-Q
QUARTERLY REPORT
For the fiscal quarter ended September 30, 1994
REPUBLIC NEW YORK CORPORATION
EXHIBIT INDEX
No. Exhibit Description
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
EXHIBIT 11
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
UNAUDITED
<CAPTION>
(In thousands except per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Primary:
Earnings:
Net income $ 250,624 $ 221,278 $ 91,417 $ 77,605
Less preferred stock dividends 24,691 21,280 9,274 7,060
Net income applicable to common
stock $ 225,933 $ 199,998 $ 82,143 $ 70,545
Shares:
Average number of common shares
outstanding 52,738 52,390 53,018 52,634
Net income per common share $ 4.28 $ 3.82 $ 1.55 $ 1.34
Fully Diluted:
Earnings:
Net income applicable to common
stock $ 225,933 $ 199,998 $ 82,143 $ 70,545
Add dividends applicable
to convertible preferred stock 8,733 8,733 2,911 2,911
Net income applicable to common
stock as adjusted $ 234,666 $ 208,731 $ 85,054 $ 73,456
Shares:
Average number of common shares
outstanding 52,738 52,390 53,018 52,634
Add shares assumed issued upon
exercise of stock options 235 294 210 303
Add shares assumed issued upon
conversion of preferred stock 3,569 3,569 3,569 3,569
Average number of common shares
outstanding as adjusted 56,542 56,253 56,797 56,506
Net income per common share $ 4.15 $ 3.71 $ 1.50 $ 1.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 638,380
<INT-BEARING-DEPOSITS> 9,530,875
<FED-FUNDS-SOLD> 838,621
<TRADING-ASSETS> 3,062,180
<INVESTMENTS-HELD-FOR-SALE> 6,034,928
<INVESTMENTS-CARRYING> 5,742,154
<INVESTMENTS-MARKET> 5,516,409
<LOANS> 9,383,733
<ALLOWANCE> 319,578
<TOTAL-ASSETS> 41,209,733
<DEPOSITS> 22,226,145
<SHORT-TERM> 4,486,868
<LIABILITIES-OTHER> 143,807
<LONG-TERM> 4,994,834
<COMMON> 264,178
0
672,500
<OTHER-SE> 1,732,672
<TOTAL-LIABILITIES-AND-EQUITY> 41,209,733
<INTEREST-LOAN> 514,551
<INTEREST-INVEST> 704,370
<INTEREST-OTHER> 337,284
<INTEREST-TOTAL> 1,556,205
<INTEREST-DEPOSIT> 563,414
<INTEREST-EXPENSE> 927,786
<INTEREST-INCOME-NET> 628,419
<LOAN-LOSSES> 16,000
<SECURITIES-GAINS> 12,290
<EXPENSE-OTHER> 539,877
<INCOME-PRETAX> 367,766
<INCOME-PRE-EXTRAORDINARY> 250,624
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 250,624
<EPS-PRIMARY> 4.28
<EPS-DILUTED> 4.15
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
