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 June 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 July 31,
1994: 53,068,737 shares.
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Statements of Condition - Unaudited
June 30, 1994 and December 31, 1993 2
Consolidated Statements of Income - Unaudited
Six-Months and Three-Months Ended
June 30, 1994 and 1993 3
Consolidated Statements of Cash Flows - Unaudited
Six-Months Ended June 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 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
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-
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
UNAUDITED
<CAPTION>
(Dollars in thousands)
June 30, December 31,
1994 1993
<S> <C> <C>
Assets
Cash and due from banks $ 620,597 $ 636,633
Interest-bearing deposits with banks 7,896,011 5,346,647
Precious metals 1,417,216 1,117,610
Securities held to maturity (approximate market
value of $5,146,093 in 1994 and $2,088,805 in 1993) 5,257,195 1,992,847
Securities available for sale (at approximate market
value) 6,675,918 12,956,946
Total investment securities 11,933,113 14,949,793
Trading account assets (note 1) 3,862,408 1,194,629
Federal funds sold and securities purchased
under resale agreements 1,667,189 2,322,465
Loans (net of unearned income of $54,650 in 1994
and $94,825 in 1993) 9,572,683 9,508,558
Allowance for possible loan losses (314,591) (311,855)
Loans (net) 9,258,092 9,196,703
Customers' liability on acceptances 1,033,084 1,134,294
Accounts receivable and accrued interest 2,255,195 2,117,879
Investment in affiliate 570,668 625,333
Premises and equipment 405,820 399,626
Other assets 490,370 451,860
Total assets $ 41,409,764 $ 39,493,472
Liabilities and Stockholders' Equity
Noninterest-bearing deposits:
In domestic offices $ 1,469,431 $ 1,427,518
In foreign offices 111,248 135,251
Interest-bearing deposits:
In domestic offices 8,454,501 8,724,797
In foreign offices 12,422,264 12,513,684
Total deposits 22,457,444 22,801,250
Trading account liabilities (note 1) 3,025,818 177,475
Short-term borrowings (note 2) 4,965,224 4,164,419
Acceptances outstanding 1,033,641 1,137,636
Accounts payable and accrued expenses 1,562,083 2,873,903
Due to factored clients 600,724 614,549
Other liabilities 160,197 122,203
Long-term debt 2,600,290 2,582,875
Subordinated long-term debt and perpetual
capital notes (note 3) 2,405,677 2,271,940
Stockholders' equity:
Cumulative preferred stock, no par value
9,631,000 shares outstanding in 1994 and
8,131,000 in 1993 (note 4) 706,425 556,425
Common stock, $5 par value
150,000,000 shares authorized; 53,016,457
shares outstanding in 1994 and 52,703,271 in 1993 265,082 263,516
Surplus 445,052 459,713
Retained earnings 1,328,997 1,204,818
Net unrealized appreciation (depreciation) on
securities available for sale, net of taxes (146,890) 262,750
Total stockholders' equity 2,598,666 2,747,222
Total liabilities and stockholders' equity $ 41,409,764 $ 39,493,472
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-2-
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<CAPTION>
(In thousands except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 337,092 $ 300,134 $ 171,786 $ 150,979
Interest on deposits with banks 127,410 168,418 74,088 74,383
Interest and dividends on investment securities:
Taxable 440,376 430,479 221,933 213,794
Exempt from federal income taxes 36,080 31,122 18,581 15,285
Interest on trading account assets 32,556 17,889 14,109 9,171
Interest on federal funds sold and securities
purchased under resale agreements 27,131 15,391 15,819 8,342
Total interest income 1,000,645 963,433 516,316 471,954
INTEREST EXPENSE:
Interest on deposits 350,361 340,256 182,334 164,609
Interest on short-term borrowings 107,919 98,364 54,705 42,881
Interest on long-term debt 132,143 135,052 67,241 66,188
Total interest expense 590,423 573,672 304,280 273,678
NET INTEREST INCOME 410,222 389,761 212,036 198,276
Provision for loan losses 13,000 50,000 3,000 25,000
Net interest income after provision for
loan losses 397,222 339,761 209,036 173,276
OTHER OPERATING INCOME:
Income from precious metals 24,393 15,882 11,212 10,398
Foreign exchange trading income 43,931 57,778 21,599 32,799
Trading account profits (losses) and commissions 10,582 19,964 (2,661) 11,200
Investment securities gains, net 13,057 2,456 9,969 2,542
Net gains (losses) on loans sold or held for sale 563 (918) 1,063 (243)
Commission income 32,269 20,610 14,769 11,181
Equity in earnings of affiliate 39,656 26,840 18,546 13,538
Other income 33,501 33,322 18,910 13,543
Total other operating income 197,952 175,934 93,407 94,958
OTHER OPERATING EXPENSES:
Salaries 130,404 98,596 73,613 50,359
Employee benefits 73,773 68,198 34,961 36,461
Occupancy, net 26,937 23,166 12,951 11,399
Other expenses 135,974 113,627 69,635 58,503
Total other operating expenses 367,088 303,587 191,160 156,722
INCOME BEFORE INCOME TAXES 228,086 212,108 111,283 111,512
Income taxes 68,879 68,435 31,855 36,584
NET INCOME $ 159,207 $ 143,673 $ 79,428 $ 74,928
NET INCOME APPLICABLE TO COMMON STOCK $ 143,790 $ 129,453 $ 71,095 $ 67,873
Net income per common share:
Primary $ 2.73 $ 2.48 $ 1.35 $ 1.30
Fully diluted $ 2.65 $ 2.41 $ 1.31 $ 1.26
Average common shares outstanding:
Primary 52,595 52,267 52,633 52,336
Fully diluted 56,415 56,127 56,432 56,201
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
(In thousands)
Six Months Ended
June 30,
1994 1993
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 159,207 $ 143,673
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization, net 31,350 20,016
Provision for loan losses 13,000 50,000
Gains on sales of investment securities, net (13,057) (2,456)
Net (gains) losses on loans sold or held for sale (563) 918
Equity in earnings of affiliate (39,656) (26,840)
Net (increase) decrease in trading accounts 180,564 (30,479)
Net decrease in accounts receivable and
accrued interest 307,440 36,998
Net decrease in accounts payable and accrued expenses (903,957) (54,390)
Other, net 25,218 (118,671)
Net cash provided (used) by operating activities (240,454) 18,769
Cash Flows From Investing Activities:
Net (increase) decrease in interest-bearing deposits
with banks (2,548,987) 3,576,951
Net increase in precious metals (299,606) (247,869)
Net (increase) decrease in federal funds sold and
securities purchased under resale agreements 655,276 (623,096)
Net (increase) decrease in short-term investments 41,413 (90,538)
Purchases of securities available for sale (2,800,204) -
Proceeds from sales of securities available for sale 2,954,234 -
Proceeds from maturities of securities available for sale 1,748,152 151,819
Purchases of securities held to maturity (22,870) (1,852,927)
Proceeds from sales of securities held to maturity - 34,362
Proceeds from maturities of securities held to maturity 115,683 1,164,218
Net increase in loans (325,550) (482,188)
Investment in affiliate 23,805 19,477
Net cash provided (used) by investing activities (458,654) 1,650,209
Cash Flows From Financing Activities:
Net increase (decrease) in deposits (343,556) 790,063
Net increase (decrease) in short-term borrowings 800,805 (2,215,940)
Net decrease in due to factored clients (13,825) (12,979)
Proceeds from issuance of long-term debt 297,802 277,075
Repayment of long-term debt (279,900) (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 -
Cash dividends paid (45,989) (41,256)
Other, net 1,804 (84)
Net cash provided (used) by financing activities 697,203 (1,674,192)
Effect of exchange rate changes on cash
and due from banks (14,131) (2,941)
Net decrease in cash and due from banks (16,036) (8,155)
Cash and due from banks at beginning of period 636,633 490,711
Cash and due from banks at end of period $ 620,597 $ 482,556
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 527,986 $ 628,062
Income taxes $ 71,419 $ 77,163
Transfers from securities available for sale
to securities held to maturity $ 3,357,161 $ -
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-4-
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COVERING THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
1. On January 1, 1994, the Corporation adopted Financial Accounting
Standards Board Interpretation No. 39, "Offsetting of Amounts Related
to Certain Contracts". This interpretation requires, among other
things, that unrealized gains and losses on certain off-balance sheet
financial instruments be reported on a gross basis except when a
legally enforceable netting agreement with a counterparty exists. At
June 30, 1994, the adoption of this interpretation resulted in an
increase in the Corporation's trading account assets and liabilities of
approximately $2.1 billion. The Corporation has elected not to restate
prior periods under this interpretation.
2. 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.
3. 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.
4. 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 that 10 1/2% per annum for any applicable dividend period. The
dividend rate in effect for the period ended June 30, 1994, was 6.05%.
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.
5. On January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS No. 112"). SFAS No. 112 requires the recognition of
an obligation for the estimated cost of postemployment benefits.
Postemployment is defined as the period after employment but before
retirement if certain conditions are met. Postemployment benefits
include, but are not limited to, salary continuation, severance
benefits, job training and counseling, health care and life insurance
coverage. The effect of initially adopting this SFAS and the impact of
the ongoing costs are not material to the results of operations.
6. 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 42% in 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 second quarter and six months
ended June 30, 1994 compared to the corresponding periods of 1993.
<TABLE>
<CAPTION>
Increase (Decrease)
2nd Qtr. 1994 vs. 6 Mos. 1994 vs.
2nd Qtr. 1993 6 Mos. 1993
(Dollars in thousands) Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Interest income $ 45,804 9.6 $ 39,363 4.0
Interest expense 30,602 11.2 16,751 2.9
Net interest income 15,202 7.4 22,612 5.6
Provision for loan losses (22,000) (88.0) (37,000) (74.0)
Net interest income after
provision for loan losses 37,202 20.6 59,612 16.8
Other operating income (1,551) ( 1.6) 22,018 12.5
Other operating expenses 34,438 22.0 63,501 20.9
Income before income taxes 1,213 1.0 18,129 8.0
Applicable income taxes (4,729) (12.9) 444 0.6
Tax equivalent adjustment 1,442 20.1 2,151 14.6
Total applicable income taxes (3,287) ( 7.5) 2,595 3.1
Net income $ 4,500 6.0 $ 15,534 10.8
Net income applicable
to common stock $ 3,222 4.7 $ 14,337 11.1
</TABLE>
Net Interest Income - on a fully-taxable equivalent basis amounted to
$220.7 million in the second quarter of 1994, an increase of $15.2
million, or 7.4%, compared to the similar quarter in 1993. For the
first six months of 1994, net interest income totaled $427.1 million
an increase of $22.6 million, or 5.6%, compared to the six month period
of 1993.
As shown in the tables on pages 7 and 8, average
interest-earning assets were $33.1 billion in both the second quarter
and six-month periods of 1994, compared to $31.9 billion and $32.7
billion in the corresponding periods of 1993. The net interest rate
differential was 2.68% in the second quarter and 2.60% for the first
six months of 1994, compared to 2.58% and 2.50% in 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 June 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 $ 6,670,388 $ 74,088 4.46% $ 7,641,724 $ 74,383 3.90%
Investment securities(1):
Taxable 12,619,588 221,933 7.05 13,138,350 213,794 6.53
Exempt from federal income taxes 1,178,579 27,208 9.26 871,953 22,385 10.30
Total investment securities 13,798,167 249,141 7.24 14,010,303 236,179 6.76
Trading account assets(2) 1,054,558 14,109 5.37 803,943 9,171 4.58
Federal funds sold and securities
purchased under resale agreements 1,672,492 15,819 3.79 1,087,145 8,342 3.08
Loans, net of unearned income:
Domestic offices 6,449,452 119,220 7.41 6,236,848 119,456 7.68
Foreign offices 3,423,360 52,566 6.16 2,110,929 31,608 6.01
Total loans, net of unearned
income 9,872,812 171,786 6.98 8,347,777 151,064 7.26
Total interest-earning assets 33,068,417 $ 524,943 6.37% 31,890,892 $ 479,139 6.03%
Cash and due from banks 671,153 489,410
Other assets 6,927,819 3,768,637
Total assets $40,667,389 $36,148,939
Interest-bearing funds:
Consumer and other time deposits $ 7,996,732 $ 57,531 2.89% $ 8,361,606 $ 64,135 3.08%
Certificates of deposit 610,927 6,020 3.95 746,596 5,907 3.17
Deposits in foreign offices 11,716,659 118,783 4.07 9,917,206 94,567 3.82
Total interest-bearing
deposits 20,324,318 182,334 3.60 19,025,408 164,609 3.47
Trading account liabilities (2) 166,247 2,962 7.15 84,611 1,093 5.18
Short-term borrowings 5,933,361 51,743 3.50 5,307,063 41,788 3.16
Total long-term debt 4,942,609 67,241 5.46 4,482,060 66,188 5.92
Total interest-bearing funds 31,366,535 $ 304,280 3.89% 28,899,142 $ 273,678 3.80%
Noninterest-bearing deposits:
In domestic offices 1,325,748 1,145,727
In foreign offices 96,219 114,798
Other liabilities 5,333,510 3,650,078
Stockholders' equity:
Preferred stock 620,941 556,425
Common stockholders' equity 1,924,436 1,782,769
Total stockholders' equity 2,545,377 2,339,194
Total liabilities and
stockholders' equity $40,667,389 $36,148,939
Interest income/earning assets $ 524,943 6.37% $ 479,139 6.03%
Interest expense/earning assets 304,280 3.69 273,678 3.45
Net interest differential $ 220,663 2.68% $ 205,461 2.58%
<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)
Six Months Ended June 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 $ 5,774,196 $ 127,410 4.45% $ 8,644,021 $ 168,418 3.93%
Investment securities(1):
Taxable 13,432,002 440,376 6.61 13,079,255 430,479 6.64
Exempt from federal income taxes 1,147,552 52,971 9.31 897,188 45,692 10.27
Total investment securities 14,579,554 493,347 6.82 13,976,443 476,171 6.87
Trading account assets(2) 1,071,774 32,556 6.13 798,784 17,889 4.52
Federal funds sold and securities
purchased under resale agreements 1,515,486 27,131 3.61 990,173 15,391 3.13
Loans, net of unearned income:
Domestic offices 6,587,027 233,737 7.16 6,134,780 239,403 7.87
Foreign offices 3,546,986 103,355 5.88 2,141,301 60,901 5.74
Total loans, net of unearned
income 10,134,013 337,092 6.71 8,276,081 300,304 7.32
Total interest-earning assets 33,075,023 $1,017,536 6.20% 32,685,502 $ 978,173 6.03%
Cash and due from banks 712,592 494,571
Other assets 6,993,250 3,582,173
Total assets $40,780,865 $36,762,246
Interest-bearing funds:
Consumer and other time deposits $ 8,033,908 $ 115,017 2.89% $ 8,325,028 $ 131,612 3.19%
Certificates of deposit 609,101 11,153 3.69 775,416 12,418 3.23
Deposits in foreign offices 11,402,513 224,191 3.96 10,199,969 196,226 3.88
Total interest-bearing
deposits 20,045,522 350,361 3.52 19,300,413 340,256 3.56
Trading account liabilities (2) 165,559 5,233 6.37 57,337 1,436 5.05
Short-term borrowings 5,945,599 102,686 3.48 5,965,493 96,928 3.28
Total long-term debt 4,929,676 132,143 5.41 4,477,324 135,052 6.08
Total interest-bearing funds 31,086,356 $ 590,423 3.83% 29,800,567 $ 573,672 3.88%
Noninterest-bearing deposits:
In domestic offices 1,309,968 1,109,234
In foreign offices 118,561 104,947
Other liabilities 5,617,749 3,436,154
Stockholders' equity:
Preferred stock 588,683 556,425
Common stockholders' equity 2,059,548 1,754,919
Total stockholders' equity 2,648,231 2,311,344
Total liabilities and
stockholders' equity $40,780,865 $36,762,246
Interest income/earning assets $1,017,536 6.20% $ 978,173 6.03%
Interest expense/earning assets 590,423 3.60 573,672 3.53
Net interest differential $ 427,113 2.60% $ 404,501 2.50%
<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-
In the second quarter of 1994, the Corporation continued its
ongoing program to reduce its interest rate sensitivity. It continued
to extend the maturity of its liabilities by entering into
approximately $1.9 billion notional amount of interest rate swaps and
caps with final maturities ranging from 1996 to 1999. The Corporation
also reduced its investment in longer term assets by selling
approximately $2.9 billion face value of U.S. government agency
securities and reinvesting the proceeds in short-term assets. The
reduction in net interest margin resulting from these actions will be
partially offset by earnings attributable to the increased margin from
sources of retail funds which have not increased in cost as rapidly as
market rates have risen.
During the second quarter of 1994, the Corporation designated as
held to maturity approximately $3.4 billion carrying value of GNMA
securities which had been previously designated as available for sale.
Provision for Loan Losses -was $3.0 million in the second quarter of
1994, compared to $25.0 million in the second quarter of 1993. It is
the Corporation's view that because of improvement in the loan
portfolio's credit quality and the declining level of non-performing
loans, it is not necessary to continue to increase the allowance for
loan losses at this time. The provision for loan losses for the first
six months of 1994 was $13.0 million compared to $50.0 million for the
corresponding period last year.
Net loan charge-offs, excluding restructuring country debt, were
$3.1 million in the second quarter of 1994, compared to $12.9 million
in the second quarter of last year. Net recoveries of restructuring
country debt amounted to $0.9 million in the current quarter of 1994,
compared to net charge-offs of $7.1 million related to such obligations
in the second quarter of 1993.
For the first six months of 1994, net loan charge-offs,
excluding restructuring country debt, were $17.2 million compared to
$27.9 million in the corresponding period last year. Net recoveries of
restructuring country debt were $6.7 million for the first six months
of 1994, compared to net charge-offs of $5.9 million in the year-ago
period.
The allowance for possible loan losses at June 30, 1994
was $314.6 million, compared to $311.9 million at December 31, 1993, as
loans rose modestly to $9.6 billion at June 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 3.29% at
June 30, 1994, compared to 3.28% at December 31, 1993.
At June 30, 1994, non-accrual loans were $63.2 million,
compared to $90.3 million at March 31, 1994 and $94.9 million at
December 31, 1993. The decline in non-accrual loans during the current
quarter is primarily attributable to the Brazilian debt restructuring
settlement which reduced non-accrual loans by $33.4 million. 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-
<TABLE>
The following is a summary of total non-accrual loans at periods
ending:
<CAPTION>
June 30, March 31, Dec. 31,
(In thousands) 1994 1994 1993
<S> <C> <C> <C>
Non-accrual loans:
Domestic $ 45,210 $ 46,510 $ 48,084
Foreign-restructuring
country 1,875 33,989 33,853
Foreign-other 16,111 9,776 12,956
Total non-accrual loans $ 63,196 $ 90,275 $ 94,893
</TABLE>
Other Operating Income - totaled $93.4 million in the second quarter of
1994, compared to $95.0 million in the year-earlier quarter. For the
first six months of 1994, such income was $198.0 million compared to
$175.9 million in the corresponding period of last year.
Income from trading activities in the second quarter of 1994
declined from the $54.4 million of the corresponding quarter a year ago
to $30.2 million. This decline was attributable primarily to lower
levels of customer activity in foreign exchange and derivative products
reflecting generally reduced activity in the global markets due to the
high level of market uncertainty during the period.
For the first six months of 1994, income from trading activities
was $78.9 million, compared to $93.6 million in the same period a year
ago. This change reflects the factors mentioned above which were
partially offset by increased income from precious metals.
Investment securities gains were $10.0 million in the second
quarter of 1994, compared to gains of $2.5 million in the second
quarter of last year. Included in net securities gains from sales of
securities classified as available for sale in the second quarter of
1994, were gains 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 on the disposition of securities, primarily those sold as part
of the Corporation's asset/liability management program. For the first
six months of 1994, investment securities gains were $13.1 million,
compared to gains of $2.5 million last year.
The Corporation recorded net gains on loans sold or held for
sale of $1.1 million in the second quarter of 1994, compared to net
losses of $0.2 million in the corresponding quarter last year. For the
six months ended June 30, 1994, net gains of $0.6 million compare to
net losses of $0.9 million in the same period of last year.
Commission income amounted to $14.8 million in the second
quarter of 1994, compared to $11.2 million in the corresponding period
of 1993. For the first six months of 1994, commission income amounted
to $32.3 million, compared to $20.6 million last year. These increases
are attributable to the higher levels of fees earned from securities
brokerage and other institutional fee-based services.
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 37.0% to
$18.5 million in the second quarter of 1994, compared to $13.5 million
in the second quarter of 1993. For the six-month period of 1994 these
earnings were $39.7 million, compared to $26.8 million for the
corresponding period of 1993.
-10-
Other income in the second quarter of 1994 was $18.9 million,
including a $2.4 million gain on the early extinguishment of $79.9
million principal amount of LIBOR Accrual Notes due 1996. Other income
in the second quarter of 1993 was $13.5 million. For the six months
ended June 30, 1994, other income was $33.5 million, compared to $33.3
million in the year-ago period, which included a $5.1 million gain on
the sale of certain data processing rights.
Other Operating Expenses - totaled $191.2 million in the second quarter
and $367.1 million for the first six months of 1994. This compares
with $156.7 million and $303.6 million in the corresponding periods of
1993. These increases are primarily attributable to the Corporation's
expansion into new business areas, including its acquisitions of
Republic Mase Bank, SafraCorp California and Bank Leumi Le Israel
(Canada) and the addition of staff in trading, private banking and
various support areas, and to a one-time $17.0 million restructuring
charge.
The Corporation's securities subsidiary has refocused on serving
the needs of the Corporation's clients and has de-emphasized certain
business activities. In addition, the Corporation's management has
examined operating expenses on a corporation-wide basis and has
implemented a selective restructuring program. As a result of these
actions, the Corporation recorded the one-time $17.0 million
restructuring expense mentioned above. The Corporation expects that
the level of ongoing expense will be reduced sufficiently to offset
this cost within the next 12 months.
Salaries and employee benefits were $108.6 million in the second
quarter of 1994, including $14.8 million related to the restructuring
expense mentioned above, compared to salaries and employee benefits of
$86.8 million in the second quarter of 1993. For the six months ended
June 30, 1994, such expenses were $204.2 million, compared to $166.8
million in the year-earlier period.
Occupancy expense was $13.0 million in the second quarter of
1994, compared to $11.4 million in the second quarter of last year.
For the six months ended June 30, 1994, occupancy expense was $26.9
million, compared to $23.2 million last year.
All other operating expenses were $69.6 million in the second
quarter of 1994, including the balance of the restructuring charge,
compared to $58.5 million in the second quarter of last year. For the
six months ended June 30, 1994, other expenses were $136.0 million
compared to $113.6 million last year.
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 deductibility of state and local taxes for federal
income tax purposes. Total applicable income taxes declined $3.3
million, or 7.5%, in the second quarter of 1994 and increased $2.6
million, or 3.1%, during the first six months of 1994 when compared to
the corresponding periods of 1993. The effective tax rates, total
applicable income taxes as a percentage of income before income taxes,
for the second quarter and six-month periods of 1994 were 33.8% and
35.0%, respectively, compared to 36.9% and 36.7% in the corresponding
periods of last year.
-11-
STATEMENT OF CONDITION
Stockholders' Equity and Capital Ratios
At June 30, 1994, stockholders' equity included a deduction of
$146.9 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 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 also require the Corporation to deduct
one-half of its investment in this subsidiary from each of Tier 1 and
Tier 2 capital.
At June 30, 1994, the Corporation's leverage ratio was 6.03%
compared to 5.61% at year end 1993. At June 30, 1994, risk-based
capital ratios were 16.15% for Tier 1, or "core", capital and
27.52% 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 June 30, 1994, the ratio of the Corporation's total common
stockholders' equity to total assets was 4.57%, 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.
Non-performing Assets
At June 30, 1994, total non-performing assets of $87.5 million
included $63.2 million of non-accrual loans and $24.3 million of other
real estate owned. Total non-performing assets at March 31, 1994 and
December 31, 1993 were $118.2 million. The decline in total
non-performing assets at June 30, from March 31, was primarily due to
the Brazilian debt restructuring settlement during the quarter, which
reduced non-accrual loans by $33.4 million.
The following is a summary of total non-accrual loans and other
non-performing assets at periods ending:
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31,
(In thousands) 1994 1994 1993
<S> <C> <C> <C>
Total non-accrual loans $ 63,196 $ 90,275 $ 94,893
Other non-performing assets:
Other real estate owned 24,331 27,882 23,338
Total non-accrual loans and
other non-performing assets $ 87,527 $ 118,157 $ 118,231
</TABLE>
-12-
Financial Instruments
At June 30, 1994, the net fair value appreciation of the
Corporation's on balance sheet financial instruments, including related
off-balance sheet interest rate hedges, was approximately $49 million.
This amount represents a decline in fair value appreciation of such
instruments of approximately $265 million from the $314 million net
appreciation at December 31, 1993. The change in value reflects the
effect of rising interest rates during the first six 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.
-13-
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Corporation's Annual Meeting of Stockholders was
held on April 20, 1994.
(c) The following matters were voted upon at such meeting:
(i) Election of the following twenty-four persons as
directors of the Corporation, with shares voted for and
withheld indicated:
<TABLE>
<CAPTION>
Shares
Nominee Shares For Withheld
<S> <C> <C>
Kurt Andersen 41,824,715 217,105
Peter A. Cohen 41,969,944 71,876
Albert S. Corwen 41,976,613 65,207
Cyril S. Dwek 41,824,965 216,855
Ernest Ginsberg 41,965,513 76,307
Nathan Hasson 41,971,278 70,542
Morris Hirsch 41,969,779 72,041
Jeffrey C. Keil 41,831,045 210,775
Peter Kimmelman 41,976,279 65,541
Leonard Lieberman 41,975,663 66,157
William C. MacMillen, Jr. 41,972,688 69,132
Martin F. Mertz 41,971,443 70,377
James L. Morice 41,976,293 65,527
E. Daniel Morris 41,976,528 65,292
Janet L. Norwood 41,971,193 70,627
John A. Pancetti 41,971,683 70,137
Javier Perez de Cuellar 41,809,723 232,097
Vito S. Portera 41,973,428 68,392
Wilbur M. Rabinowitz 41,973,294 68,526
William P. Rogers 41,970,268 71,552
Dov C. Schlein 41,973,428 68,392
Jacques Tawil 41,826,390 215,430
Walter H. Weiner 41,973,428 68,392
Peter White 41,970,314 71,506
(ii) Approval of the 1994 Performance Based Incentive Compensation
Plan. The number of votes cast for, against or withheld, as
well as the number of abstentions and broker non-votes as to
such matter, were as follows:
For Against Abstain Broker No Vote
39,904,926 1,941,148 195,746 -0-
-14-
(iii) Approval of selection of KPMG Peat Marwick as the
Corporation's auditors for 1994. The number of votes cast
for, against or withheld, as well as the number of abstentions
and broker non-votes as to such matter, were as follows:
For Against Abstain Broker No Vote
41,946,595 19,070 24,820 51,335
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Computation of Earnings Per Common Share
(b) Reports on Form 8-K
(i) On May 9, 1994, a report on Form 8-K was filed submitting the
Corporation's press releases announcing the declaration of
dividends payable July 1, 1994 and results for the quarter and
three-month period ended March 31, 1994, in connection with
the filing of a Prospectus Supplement dated May 5, 1994
relating to the offering of $200 million principal amount of
the Corporation's 7 3/4% Subordinated Notes due 2009.
(ii) On May 23, 1994, a report on Form 8-K was filed submitting
the calculation of ratios of earnings to combined fixed
charges and preferred stock dividends and amended Articles
Supplementary, classifying shares of the Corporation's
Adjustable Rate Cumulative Preferred Stock, Series D ($100
Stated Value), in connection with the filing of a Prospectus
Supplement dated May 16, 1994, relating to the offering of
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).
-15-
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: August 12, 1994 By /s/Walter H. Weiner
Walter H. Weiner
Chairman of the Board
Dated: August 12, 1994 By /s/John D. Kaberle, Jr.
John D. Kaberle, Jr.
Executive Vice President and
Comptroller
(Principal Accounting Officer)
-16-
FORM 10-Q
QUARTERLY REPORT
For the fiscal quarter ended June 30, 1994
REPUBLIC NEW YORK CORPORATION
EXHIBIT INDEX
No. Exhibit Description
11 Computation of Earnings Per Common Share
</TABLE>
EXHIBIT 11
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
UNAUDITED
<CAPTION>
(In thousands except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Primary:
Earnings:
Net income $ 159,207 $ 143,673 $ 79,428 $ 74,928
Less preferred stock dividends 15,417 14,220 8,333 7,055
Net income applicable to common
stock $ 143,790 $ 129,453 $ 71,095 $ 67,873
Shares:
Average number of common shares
outstanding 52,595 52,267 52,633 52,336
Net income per common share $ 2.73 $ 2.48 $ 1.35 $ 1.30
Fully Diluted:
Earnings:
Net income applicable to common
stock $ 143,790 $ 129,453 $ 71,095 $ 67,873
Add dividends applicable
to convertible preferred stock 5,822 5,822 2,911 2,911
Net income applicable to common
stock as adjusted $ 149,612 $ 135,275 $ 74,006 $ 70,784
Shares:
Average number of common shares
outstanding 52,595 52,267 52,633 52,336
Add shares assumed issued upon
exercise of stock options 251 291 230 296
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 56,415 56,127 56,432 56,201
Net income per common share $ 2.65 $ 2.41 $ 1.31 $ 1.26
</TABLE>
