UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT 1934
For the quarterly period ended March 31, 1995
Commission File No. 001-07436
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) had 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 April 30, 1995: 52,261,367 shares.
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Statements of Condition - Unaudited
March 31, 1995 and December 31, 1994 2
Consolidated Statements of Income - Unaudited
Three-Months Ended March 31, 1995 and 1994 3
Consolidated Statements of Cash Flows - Unaudited
Three-Months Ended March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 6-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
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>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
UNAUDITED
(Dollars in thousands)
March 31, December 31,
Assets 1995 1994
- ------ --------------- ---------------
<S> <C> <C>
Cash and due from banks $ 808,158 $ 867,242
Interest-bearing deposits with banks 8,489,948 10,242,061
Precious metals 1,493,440 1,456,269
Securities held to maturity (approximate market
value of $5,826,125 in 1995 and
$5,614,248 in 1994) 5,938,954 5,887,672
Securities available for sale (at approximate
market value) 5,487,471 5,552,056
--------------- ---------------
Total investment securities 11,426,425 11,439,728
Trading account assets 4,310,232 2,543,637
Federal funds sold and securities purchased
under resale agreements 2,399,383 1,123,925
Loans (net of unearned income of $43,051
in 1995 and $47,109 in 1994) 9,057,636 8,913,490
Allowance for possible loan losses (318,138) (319,220)
--------------- ---------------
Loans, net (note 1)<F1> 8,739,498 8,594,270
Customers' liability on acceptances 1,317,360 1,514,461
Accounts receivable and accrued interest 1,746,135 1,797,491
Investment in affiliate 641,213 607,818
Premises and equipment 431,377 428,017
Other assets 545,046 452,986
--------------- ---------------
Total assets $ 42,348,215 $ 41,067,905
=============== ===============
Liabilities and Stockholders' Equity
- ------------------------------------
Noninterest-bearing deposits:
In domestic offices $ 1,521,833 $ 1,701,667
In foreign offices 105,125 114,503
Interest-bearing deposits:
In domestic offices 8,667,208 8,534,562
In foreign offices 13,007,782 12,375,270
--------------- ---------------
Total deposits 23,301,948 22,726,002
Trading account liabilities 4,135,576 2,087,594
Short-term borrowings 4,458,989 4,969,394
Acceptances outstanding 1,318,111 1,517,675
Accounts payable and accrued expenses 1,548,735 1,325,953
Due to factored clients 621,636 680,010
Other liabilities 132,845 134,792
Long-term debt 1,767,119 2,580,831
Subordinated long-term debt and perpetual
capital notes 2,406,279 2,406,266
Stockholders' equity:
Cumulative preferred stock, no par value
8,952,500 shares outstanding in 1995 and 1994 672,500 672,500
Common stock, $5 par value
150,000,000 shares authorized; 52,266,388
shares outstanding in 1995 and 52,621,155 in 1994 261,332 263,106
Surplus 431,892 437,653
Retained earnings 1,533,943 1,457,609
Net unrealized depreciation on securities available
for sale, net of taxes (242,690) (191,480)
--------------- ---------------
Total stockholders' equity 2,656,977 2,639,388
--------------- ---------------
Total liabilities and stockholders' equity $ 42,348,215 $ 41,067,905
=============== ===============
<FN>
<F1> See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-2-
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(In thousands except per share data)
Three Months Ended
March 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 176,913 $ 165,306
Interest on deposits with banks 149,749 53,322
Interest and dividends on investment securities:
Taxable 227,609 218,443
Exempt from federal income taxes 24,181 17,499
Interest on trading account assets 12,884 18,447
Interest on federal funds sold and securities
purchased under resale agreements 20,492 11,312
------------ ------------
Total interest income 611,828 484,329
------------ ------------
Interest expense:
Interest on deposits 272,301 168,027
Interest on short-term borrowings 51,762 53,214
Interest on long-term debt 71,802 64,902
------------ ------------
Total interest expense 395,865 286,143
------------ ------------
Net interest income 215,963 198,186
Provision for loan losses 3,000 10,000
------------ ------------
Net interest income after provision for
loan losses 212,963 188,186
------------ ------------
Other operating income:
Income from precious metals 15,416 13,181
Foreign exchange trading income 21,927 22,332
Trading account profits and commissions 9,189 13,243
Investment securities gains, net 1,679 3,088
Net gain (loss) on loans sold or held for sale 767 (500)
Commission income 15,245 17,500
Equity in earnings of affiliate 19,188 21,110
Other income 15,732 14,591
------------ ------------
Total other operating income 99,143 104,545
------------ ------------
Other operating expenses:
Salaries 61,508 56,791
Employee benefits 40,216 38,812
Occupancy, net 14,505 13,986
Other expenses (note 2)<F2> 76,372 66,339
------------ ------------
Total other operating expenses 192,601 175,928
------------ ------------
Income before income taxe 119,505 116,803
Income taxes 31,992 37,024
------------ ------------
Net income $ 87,513 $ 79,779
============ ============
Net income applicable to common stock $ 77,343 $ 72,695
============ ============
Net income per common share:
Primary $1.48 $1.38
Fully diluted $1.43 $1.34
Average common shares outstanding:
Primary 52,302 52,557
Fully diluted 56,073 56,396
<FN>
<F1> See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)
Three Months Ended
March 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 87,513 $ 79,779
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization, net 13,322 16,361
Provision for loan losses 3,000 10,000
Investment securities gains, net (1,679) (3,088)
Net (gain) loss on loans sold or held for sale (767) 500
Equity in earnings of affiliate (19,188) (21,110)
Net decrease in trading accounts 281,387 547,275
Net decrease in accounts receivable and
accrued interest 15,476 30,060
Net increase (decrease) in accounts payable and
accrued expenses 273,599 (480,812)
Other, net (128,534) 66,028
---------- ----------
Net cash provided by operating activities 524,129 244,993
---------- ----------
Cash Flows From Investing Activities:
Net (increase) decrease in interest-bearing deposits
with banks 1,752,113 (158,441)
Net increase in precious metals (37,171) (404,327)
Net (increase) decrease in federal funds sold and
securities purchased under resale agreements (1,275,458) 162,869
Net decrease in short-term investments 35,313 57,259
Purchases of securities held to maturity (13,848) (22,870)
Proceeds from maturities of securities held to maturity 123,725 15,592
Purchases of securities available for sale (442,367) (1,535,092)
Proceeds from sales of securities available for sale 141,884 184,906
Proceeds from maturities of securities available for sale 271,223 1,099,173
Net increase in loans (307,609) (624,814)
---------- ----------
Net cash provided (used) by investing activities 247,805 (1,225,745)
---------- ----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits 576,032 (661,815)
Net increase (decrease) in short-term borrowings (510,405) 1,715,278
Net decrease in due to factored clients (58,374) (55,991)
Proceeds from issuance of long-term debt 36,508 145,586
Repayment of long-term debt (850,000) (100,000)
Repayment of subordinated long-term debt - (66,000)
Cash dividends paid (27,124) (21,294)
Other, net 8,410 (6,637)
---------- ----------
Net cash provided (used) by financing activities (824,953) 949,127
Effect of exchange rate changes on cash
and due from banks (6,065) (2,745)
---------- ----------
Net decrease in cash and due from banks (59,084) (34,370)
Cash and due from banks at beginning of period 867,242 636,633
---------- ----------
Cash and due from banks at end of period $ 808,158 $ 602,263
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 407,877 $ 259,525
Income taxes 2,672 16,297
<FN>
<F1> See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-4-
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COVERING THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1. On January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures." SFAS No. 114 applies to all loans except large
groups of smaller-balance homogeneous loans that are collectively
evaluated for impairment and certain other loans. The
Corporation's impaired loans under SFAS No. 114 includes the
separate evaluation of loans with principal balances of $500,000
or more. A loan is considered impaired if it is probable that the
creditor will be unable to collect all contractual amounts due
(principal and interest) as scheduled in the loan agreement. Such
loans have been placed on non-accrual status either because
interest or principal are past due or based on management's
judgment, the Corporation does not expect to receive all principal
and interest in accordance with the terms of the loan agreement.
Impaired loans are measured based on either an estimate of the
present value of expected future cash flows at a loan's effective
interest rate, at the loan's market value, or the fair value of
collateral if the loan is collateral dependent. As of March 31,
1995, the Corporation's recorded investment in impaired loans was
$35.8 million, including $23.6 million of impaired loans with a
related allowance for loan losses of $7.3 million and $12.2 million
of impaired loans with no related allowance for loan losses. The
average recorded investment in impaired loans, net of charge-offs,
for the quarter ended March 31, 1995 was $41.5 million. Interest
income on an impaired loan is recorded on a cash basis when the
outstanding principal is brought current and no longer considered
impaired. During the first quarter of 1995, no interest income was
recognized on impaired loans, as defined by SFAS No. 114.
Total non-accrual loans, which includes impaired loans that
are separately evaluated under SFAS No. 114, were $58.9 million at
March 31, 1995.
The following table presents data related to the Corporation's
allowance for possible loan losses for the respective quarters ended:
<TABLE>
<CAPTION>
March 31, March 31,
(In thousands) 1995 1994
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 319,220 $ 311,855
Charge-offs (10,273) (18,115)
Recoveries 6,536 9,703
----------- -----------
Net charge-offs (3,737) (8,412)
Provision charged to operating
expense 3,000 10,000
Translation adjustment (345) (27)
----------- -----------
Balance at end of period $ 318,138 $ 313,416
=========== ===========
</TABLE>
2. On January 1, 1995, the Corporation adopted SFAS No. 116,
"Accounting for Contributions Received and Contributions Made."
This SFAS requires that pledges to make charitable
contributions be recognized in the period that the funds
are unconditionally pledged. This change in the method of
accounting for charitable contributions resulted in a one-time
expense in the first quarter of 1995 of $7.5 million,included
in other operating expenses.
-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 1995 and 1994. 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
first quarter of 1995 compared to the first quarter of 1994.
<TABLE>
<CAPTION>
Increase (Decrease)
1st Qtr. 1995 vs.
1st Qtr. 1994
----------------------
Amount Percent
--------- -------
<S> <C> <C>
(Dollars in thousands)
Interest income $ 129,058 26.2
Interest expense 109,722 38.3
---------
Net interest income 19,336 9.4
Provision for loan losses (7,000) (70.0)
---------
Net interest income after
provision for loan losses 26,336 13.4
Other operating income (5,402) (5.2)
Other operating expenses 16,673 9.5
---------
Income before income taxes 4,261 3.4
---------
Applicable income taxes (5,032) (13.6)
Tax equivalent adjustment 1,559 18.9
---------
Total applicable income taxes (3,473) (7.7)
---------
Net income $ 7,734 9.7
=========
Net income applicable to
common stock $ 4,648 6.4
=========
</TABLE>
Net Interest Income - on a fully-taxable equivalent basis amounted
to $225.8 million in the first quarter of 1995, compared to net
interest income of $206.5 million in the first quarter of 1994.
This increase is primarily due to income generated by the
Corporation's local currency investments in Brazil. The return on
these investments contributed to a rise in the net interest rate
differential to 2.84% in the first quarter of 1995 from 2.53% in
the first quarter of last year, which more than offset the effect
of a reduction in average interest-earning assets.
-6-
<TABLE>
<CAPTION>
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL,
AVERAGE RATES EARNED AND PAID
UNAUDITED
(Fully taxable equivalent basis)
(Dollars in thousands)
Quarter Ended March 31,
-------------------------------------------------------------------------
1995 1994
----------------------------------- -----------------------------------
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 $ 9,505,137 $ 149,749 6.39 % $ 4,878,003 $ 53,322 4.43 %
Investment securities:(1)<F1>
Taxable 10,264,507 227,609 8.99 14,244,415 218,443 6.22
Exempt from federal income taxes 1,342,735 34,004 10.27 1,116,525 25,763 9.36
------------ ---------- ------------ ----------
Total investment securities 11,607,242 261,613 9.14 15,360,940 244,206 6.45
Trading account assets(2)<F2> 958,226 12,884 5.45 1,088,990 18,447 6.87
Federal funds sold and securities
purchased under resale agreements 1,399,343 20,492 5.94 1,358,480 11,312 3.38
Loans, net of unearned income:
Domestic offices 6,056,861 128,964 8.64 6,724,601 114,517 6.91
Foreign offices 2,701,014 47,949 7.20 3,670,611 50,789 5.61
------------ ---------- ------------ ----------
Total loans, net of unearned income 8,757,875 176,913 8.19 10,395,212 165,306 6.45
------------ ---------- ------------ ----------
Total interest-earning assets 32,227,823 $ 621,651 7.82 % 33,081,625 $ 492,593 6.04 %
========== ===== ========== =====
Cash and due from banks 558,297 754,030
Other assets 7,271,285 7,058,686
------------ -----------
Total assets $ 40,057,405 $ 40,894,341
============ ============
Interest-bearing funds:
Consumer and other time deposits $ 7,738,589 $ 75,962 3.98 % $ 8,071,084 $ 57,486 2.89 %
Certificates of deposit 820,459 11,403 5.64 607,275 5,133 3.43
Deposits in foreign offices 12,650,266 184,936 5.93 11,088,367 105,408 3.86
------------ ---------- ------------ ----------
Total interest-bearing deposits 21,209,314 272,301 5.21 19,766,726 168,027 3.45
Trading account liabilities(2)<F2> 36,729 671 7.41 164,870 2,271 5.59
Short-term borrowings 4,508,138 51,091 4.60 5,957,837 50,943 3.47
Total long-term debt 4,385,152 71,802 6.64 4,916,743 64,902 5.35
------------ ---------- ----------- ----------
Total interest-bearing funds 30,139,333 $ 395,865 5.33 % 30,806,176 $ 286,143 3.77 %
========== ===== ========== =====
Noninterest-bearing deposits:
In domestic offices 1,478,170 1,294,187
In foreign offices 108,989 140,903
Other liabilities 5,679,985 5,901,990
Stockholders' equity:
Preferred stock 672,500 556,425
Common stockholders' equity 1,978,428 2,194,660
------------ ------------
Total stockholders' equity 2,650,928 2,751,085
------------ ------------
Total liabilities and stockholders'
equity $ 40,057,405 $ 40,894,341
============ ============
Interest income/earning assets $ 621,651 7.82 % $ 492,593 6.04 %
Interest expense/earning assets 395,865 4.98 286,143 3.51
---------- ----- ---------- -----
Net interest differential $ 225,786 2.84 % $ 206,450 2.53 %
========== ===== ========== =====
<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 non-interest bearing balances, which are included in other assets or other liabilities, respectively.
</FN>
</TABLE>
-7-
As shown in the table on page 7, average interest-earning assets
were $32.2 billion in the first quarter of 1995, compared to $33.1
billion in the first quarter of 1994. The Corporation has reduced
its holdings of longer term investment securities since the first
quarter of 1994, as part of a program to insulate net interest
income against changes in the level of interest rates. It also
reduced the loan portfolio during the first quarter of 1995, with
the primary reduction being in loans used for purchasing and
carrying securities. These assets were partially replaced by
increases in interest-bearing deposits with banks.
At March 31, 1995, the Corporation's total exposure to Brazil,
consisting primarily of Brady bonds, medium-term government bonds
and short-term government bonds, was approximately 0.86% of total
assets, down from 1.39% at year end 1994. In the first quarter of
1995, temporary investments in short-term assets in Brazil
contributed approximately 6.0% of interest income. The Corporation
did not have any investments in temporary short-term assets in
Brazil during the first quarter of 1994.
As previously announced, the Corporation has received the necessary
approvals to open a banking subsidiary in Mexico. It is anticipated
that this subsidiary will begin operations in the third quarter of
1995.
Provision for loan losses - was $3.0 million in the first quarter
of 1995, compared to $10.0 million in the first quarter of last
year. The credit quality of the loan portfolio remained at a high
level, as non-performing loans were virtually unchanged from year
end 1994.
Net loan charge-offs were $3.7 million in the first quarter of
1995, compared to net loan charge-offs of $8.4 million in the first
quarter of 1994. Included in the first quarter of 1994 were net
recoveries of restructuring country debt of $5.7 million. See Note
1 of notes to consolidated financial statements for additional
information related to the allowance for possible loan losses and
net charge-offs.
The allowance for possible loan losses at March 31, 1995 was $318.1
million, compared to $319.2 million at December 31, 1994. Included
in the allowance for loan losses at March 31, 1995, is $7.3 million
that has been specifically identified with loans that have been
classified as impaired in accordance with SFAS No. 114 and 118.
The allowance for possible loan losses as a percentage of loans
outstanding, net of unearned income, was 3.51% at March 31, 1995
compared to 3.58% at December 31, 1994.
The following table presents summary data related to non-accrual
loans for the periods ending:
<TABLE>
<CAPTION>
March 31, March 31, Dec. 31,
(in thousands) 1995*<F1> 1994 1994
----------- ---------- ----------
<S> <C> <C> <C>
Non-accrual loans:
Domestic $ 44,233 $ 46,510 $ 43,392
Foreign-restructuring countries - 33,989 -
Foreign-other 14,698 9,776 14,734
--------- --------- ---------
Total non-accrual loans $ 58,931 $ 90,275 $ 58,126
========= ========= =========
Non-accrual loans as a percentage of
loans outstanding at period end 0.65% 0.90% 0.65%
========= ========= =========
<FN>
<F1> *Includes impaired loans.
</FN>
</TABLE>
-8-
At March 31, 1995, non-accrual loans were $58.9 million, relatively
unchanged from $58.1 million at December 31, 1994 and down
significantly from $90.3 million at March 31, 1994. The decline in
non-accrual loans from March 31, 1994 is primarily attributable to the
Brazilian debt restructuring settlement that reduced non-accrual loans
by $33.4 in the second quarter of 1994. See "Statement of Condition"
below for information on total non-performing assets.
Other Operating Income - declined to $99.1 million in the first
quarter of 1995, compared to $104.5 million in the first quarter last
year.
Income from trading activities declined to $46.5 million in the first
quarter of 1995, from $48.8 million in the first quarter of last year.
This change was primarily attributable to a combination of a decline
in trading account profits and commissions that was partially offset
by an increase in income from precious metals.
Investment securities gains were $1.7 million in the first quarter of
1995, compared to $3.1 million in the first quarter of 1994. In both
periods, the respective gains include sales of securities available
for sale and redemptions prior to maturity of securities held to
maturity. A net gain on loans sold or held for sale of $0.8 million
was recorded in the first quarter of 1995 compared to a net loss of
$0.5 million in the first quarter of last year.
Equity in the earnings of affiliate was $19.2 million in the first
quarter of 1995, compared to $21.1 million in the first quarter of
last year. This income represents the Corporation's share of the
earnings of Safra Republic Holdings S.A. ("Safra Republic"), a
European international private banking group of which the Corporation
owns approximately 49%. The decline is due primarily to a reduction
in client activity in investment funds, partially offset by an
increase in revenues from foreign exchange and other trading
activities and a decline in the provision for loan losses. Client
portfolio assets increased from $11.9 billion at March 31, 1994 to
$14.8 billion at March 31, 1995. All of this increase came in the
form of client deposits.
Commission income of $15.2 million in the first quarter of 1995,
compares with $17.5 million in the corresponding period of 1994. This
decline is attributable primarily to lower commissions earned from
investment management activities and a de-emphasis of certain
businesses in the securities subsidiary.
Other Operating Expenses - were $192.6 million in the first quarter
of 1995, compared to $175.9 million in the corresponding quarter of
1994. Included in the first quarter of 1995 is an accrual for
charitable contributions of $7.5 million, reflecting the Corporation's
January 1, 1995 adoption of SFAS No. 116, "Accounting for
Contributions Received and Contributions Made". This SFAS requires
that pledges to make charitable contributions be recognized in the
period that the funds are unconditionally pledged. Total charitable
contributions for the first quarter of 1995, including the effect
of the adoption of this SFAS, were $9.3 million.
Salaries and employee benefits rose $6.1 million, or 6.4%, in the
first quarter of 1995, compared to the first quarter of last year.
This increase reflects general increases in staff compensation, higher
salaries in administration and support activities, growth in Far East
operations and increased costs of employee benefits.
-9-
All other expenses increased $2.5 million, or 3.8% after excluding the
one-time expense of $7.5 million for charitable contributions
reflecting the adoption of SFAS No. 116. This increase was primarily
attributable to higher costs for professional fees and computer
services.
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 taxes, after giving
effect to the deductibility of state and local taxes for federal
income tax purposes. Total applicable income taxes declined $3.5
million, or 7.7% between the first quarters of 1995 and 1994. The
effective tax rates, total applicable income taxes as a percentage of
income before income taxes, for the first quarters of 1995 and 1994
were 32% and 36%, respectively. This decline is attributable to
proportionately higher levels of income being earned in jurisdictions
with lower tax rates.
STATEMENT OF CONDITION
- ----------------------
Stockholders' Equity and Capital Ratios
- ---------------------------------------
At March 31, 1995, stockholders' equity included a deduction of $242.7
million, which represents the after-tax unrealized depreciation in the
valuation of the Corporation's securities available for sale
portfolio and approximately 49% of Safra Republic's unrealized
depreciation in its securities available for sale portfolio, compared
to an unrealized depreciation of $191.5 million at December 31, 1994.
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.
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.
On April 1, 1995, bank regulators imposed a new rule that alters the
treatment of deferred tax assets for capital adequacy purposes. Under
the new rule, the amount of deferred tax assets that depend on future
taxable income that may be included in regulatory capital is subject
to certain limitations. The Corporation believes that the new rule
will not have a material effect on its capital adequacy ratios.
Bank regulators recently issued proposals to amend risk-based capital
guidelines related to derivative contracts. The proposals would
expand the type of contracts included and the factors used to
calculate potential future exposure of derivative contracts. The
Corporation has determined that the proposals, if issued in final
form, would not have a material effect on its capital ratios.
-10-
At March 31, 1995, the Corporation's leverage ratio was 6.32% compared
to 5.87% at year end 1994. At March 31, 1995, risk-based capital
ratios were 17.00% for Tier 1, or "core", capital and 28.75% for total
qualifying capital, compared to 16.17% and 27.49%, respectively, at
December 31, 1994. These ratios substantially exceed the minimums in
effect for bank holding companies.
At March 31, 1995, the ratio of the Corporation's total common
stockholders' equity to total assets was 4.69%, compared to 4.79% at
December 31, 1994. The decline in this ratio was primarily
attributable to the reduction in common equity related to the increase
in unrealized depreciation in market value of the Corporation's
portfolio of securities available for sale.
Non-performing Assets
- ---------------------
The following is a summary of total non-accrual loans and other
non-performing assets at periods ending:
<TABLE>
<CAPTION>
March 31, March 31, Dec. 31,
(in thousands) 1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
Total non-accrual loans $ 58,931 $ 90,275 $ 58,126
Other real estate owned 23,678 27,882 23,479
--------- --------- ---------
Total non-accrual loans and other
real estate owned $ 82,609 $ 118,157 $ 81,605
========= ========= =========
Total non-performing assets as a percentage
of period end total assets 0.20% 0.28% 0.20%
========= ========= =========
</TABLE>
The decline in total non-performing assets at March 31, 1995 from
the same date in the prior year is primarily due to the Brazilian
debt restructuring settlement during the second quarter of 1994,
which reduced non-accrual loans by $33.4 million.
Financial Instruments
- ---------------------
At March 31, 1995, the net fair value appreciation of
the Corporation's on-balance sheet financial instruments, including
related off-balance sheet interest rate hedges, was approximately
$100 million. This represents an increase in the fair value of
such instruments of approximately $120 million since December 31,
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.
Recent Development
- ------------------
On May 5, 1995, the Corporation announced that it has begun the
implementation phase of Project Excellence-Plus, its previously
announced company-wide project to improve operating efficiencies
and reduce costs.
-11-
The Corporation, which has consistently ranked as one of the most
efficient bank holding companies in the United States, expects to
improve its "efficiency ratio" (total operating expenses to fully
taxable equivalent net interest income and other income). In the
first quarter of 1995, the Corporation had an efficiency ratio of
57.0%, which excluded the one-time charge of $7.5 million related
to the change in method of accounting for charitable contributions
described above. If, during the first quarter, the Corporation had
benefited from the cost savings identified by this project, the
efficiency ratio would have been 51.2%, without giving effect to
any revenue enhancements resulting from the project.
The Corporation expects pre-tax cost savings in operating expenses
to reach a rate of not less than $75 million per year once the
project's ideas are fully implemented over the next 14 months.
In the fourth quarter of 1995, the Corporation expects to have
reached at least 60% of the full rate of total projected savings.
Cost savings will be achieved in both personnel and non-personnel
areas, and will result from general efficiencies, process redesign,
vendor management, restructuring and consolidation of operations
and automation.
The Corporation will take one-time restructuring and related
charges of approximately $120 million on a pre-tax basis in the
second quarter of 1995. Approximately 80% of this charge is
related to the cost of severance for approximately 850 personnel
out of a worldwide staff of 5,550. The distribution of personnel
affected is approximately 75% domestic and 25% international.
Tandon Capital Associates advised the Corporation on Project
Excellence-Plus.
-12-
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 March 31, 1995.
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchanges
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: May 15, 1995 By Walter H. Weiner
Chairman of the Board
Dated: May 15, 1995 By John D. Kaberle, Jr.
Executive Vice President and
Comptroller
(Principal Accounting Officer)
-14-
FORM 10-Q
QUARTERLY REPORT
For the fiscal quarter ended March 31, 1995
REPUBLIC NEW YORK CORPORATION
EXHIBIT INDEX
No. Exhibit Description
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
EXHIBIT 11
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
UNAUDITED
(In thousands except per share data)
Three Months Ended
March 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Primary:
Earnings:
Net income $ 87,513 $ 79,779
Less preferred stock dividends (10,170) (7,084)
------------ -----------
Net income applicable to common
stock $ 77,343 $ 72,695
=========== ===========
Shares:
Average number of common
shares outstanding 52,302 52,557
=========== ===========
Net income per common share $ 1.48 $ 1.38
=========== ===========
Fully Diluted:
Earnings:
Net income applicable to common
stock $ 77,343 $ 72,695
Add dividends applicable to
convertible preferred stock 2,911 2,911
----------- -----------
Net income applicable to common
stock as adjusted $ 80,254 $ 75,606
=========== ===========
Shares:
Average number of common
shares outstanding 52,302 52,557
Add shares assumed issued upon
exercise of stock options 202 270
Add shares assumed issued upon
conversion of preferred stock 3,569 3,569
------------ -----------
Average number of common shares
outstanding as adjusted 56,073 56,396
============ ===========
Net income per common share $ 1.43 $ 1.34
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 808,158
<INT-BEARING-DEPOSITS> 8,489,948
<FED-FUNDS-SOLD> 2,399,383
<TRADING-ASSETS> 4,,310,232
<INVESTMENTS-HELD-FOR-SALE> 5,487,471
<INVESTMENTS-CARRYING> 5,938,954
<INVESTMENTS-MARKET> 5,827,125
<LOANS> 9,057,636
<ALLOWANCE> 318,138
<TOTAL-ASSETS> 42,348,215
<DEPOSITS> 23,301,948
<SHORT-TERM> 4,458,989
<LIABILITIES-OTHER> 132,845
<LONG-TERM> 4,173,398
<COMMON> 261,332
0
672,500
<OTHER-SE> 1,723,145
<TOTAL-LIABILITIES-AND-EQUITY> 42,348,215
<INTEREST-LOAN> 176,913
<INTEREST-INVEST> 251,790
<INTEREST-OTHER> 183,125
<INTEREST-TOTAL> 611,828
<INTEREST-DEPOSIT> 272,301
<INTEREST-EXPENSE> 395,865
<INTEREST-INCOME-NET> 215,963
<LOAN-LOSSES> 3,000
<SECURITIES-GAINS> 1,679
<EXPENSE-OTHER> 192,601
<INCOME-PRETAX> 119,505
<INCOME-PRE-EXTRAORDINARY> 87,513
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,513
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.43
<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>
