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 OF 1934
For the quarterly Period Ended June 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
Not Applicable
Former name, former address and former fiscal year, if changed since last report
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.__.
- -------------------------------------------------------------------------
The number of shares outstanding of the registrant's common stock,
was 55,358,720 at July 31, 1996.
<PAGE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Statements of Condition - Unaudited
June 30, 1996 and December 31, 1995 2
Consolidated Statements of Income - Unaudited
Six-Months and Three-Months Ended June 30,
1996 and 1995 3
Consolidated Statements of Cash Flows - Unaudited 4
Consolidated Statement of Changes in Stockholders' Equity-
Unaudited-Six Months Ended June 30, 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8-15
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
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-
<PAGE>
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
UNAUDITED
(Dollars in thousands)
June 30, December 31,
Assets 1996 1995
------------ ------------
<S> <C> <C>
Cash and due from banks $ 890,861 $ 675,683
Interest-bearing deposits with banks 5,573,134 6,094,495
Precious metals 1,043,985 1,250,038
Securities held to maturity (approximate market
value of $7,886,020 in 1996 and $4,595,454 in 1995) 7,969,445 4,487,022
Securities available for sale (at approximate market value) 11,753,967 11,751,523
------------ ------------
Total investment securities 19,723,412 16,238,545
Trading account assets 3,508,884 4,035,606
Federal funds sold and securities purchased
under resale agreements 2,136,323 1,749,268
Loans (net of unearned income of $ 28,177
in 1996 and $34,988 in 1995) 11,303,917 9,843,960
Allowance for possible credit losses (339,214) (300,593)
Customers' liability on acceptances 789,819 818,007
Accounts receivable and accrued interest 2,069,480 1,946,077
Investment in affiliate 731,861 722,466
Premises and equipment 465,116 436,771
Other assets 682,077 371,231
------------ ------------
Total assets $ 48,579,655 $ 43,881,554
============ ============
Liabilities and Stockholders' Equity
Noninterest-bearing deposits:
In domestic offices $ 2,144,753 $ 1,740,035
In foreign offices 198,187 160,133
Interest-bearing deposits:
In domestic offices 12,082,652 8,471,452
In foreign offices 15,654,152 14,548,013
------------ ------------
Total deposits 30,079,744 24,919,633
Trading account liabilities 3,190,666 3,719,651
Short-term borrowings 4,958,942 3,890,768
Acceptances outstanding 790,568 819,766
Accounts payable and accrued expenses 1,622,091 2,840,048
Due to factored clients 591,545 528,684
Other liabilities 156,955 193,645
Long-term debt 1,696,108 1,555,111
Subordinated long-term debt and perpetual
capital notes (note 3) 2,406,441 2,406,440
Stockholders' equity:
Cumulative preferred stock, no par value
8,502,500 shares outstanding in 1996 and 1995 575,000 575,000
Common stock, $5 par value
150,000,000 shares authorized; 55,428,109
shares outstanding in 1996 and 56,259,563 in 1995 277,141 281,298
Surplus 520,149 590,008
Retained earnings 1,771,982 1,636,264
Net unrealized depreciation on securities available
for sale, net of taxes (57,677) (74,762)
------------ ------------
Total stockholders' equity 3,086,595 3,007,808
------------ ------------
Total liabilities and stockholders' equity $ 48,579,655 $ 43,881,554
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(In thousands except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 438,318 $ 362,233 $ 222,785 $ 185,320
Interest on deposits with banks 202,808 281,312 99,790 131,563
Interest and dividends on investment securities:
Taxable 608,864 442,447 318,086 214,838
Exempt from federal income taxes 47,757 46,396 23,879 22,215
Interest on trading account assets 32,250 23,925 17,591 11,041
Interest on federal funds sold and securities
purchased under resale agreements 41,618 39,022 23,837 18,530
---------- ---------- ---------- ----------
Total interest income 1,371,615 1,195,335 705,968 583,507
---------- ---------- ---------- ----------
Interest Expense:
Interest on deposits 630,408 555,347 326,906 283,046
Interest on short-term borrowings 150,774 96,496 75,440 44,734
Interest on long-term debt 125,432 138,303 61,707 66,501
---------- ---------- ---------- ----------
Total interest expense 906,614 790,146 464,053 394,281
---------- ---------- ---------- ----------
Net Interest Income 465,001 405,189 241,915 189,226
Provision for credit losses 8,000 6,000 4,000 3,000
---------- ---------- ---------- ----------
Net interest income after provision for
credit losses 457,001 399,189 237,915 186,226
---------- ---------- ---------- ----------
Other Operating Income:
Income from precious metals 11,611 27,763 3,223 12,347
Foreign exchange trading income 50,601 60,239 23,039 38,312
Trading account profits and commissions 25,557 24,706 15,832 15,517
Investment securities gains, net 9,888 4,967 4,559 3,288
Net gain on loans sold or held for sale 1,743 767 241 --
Commission income 34,646 28,287 19,010 13,042
Equity in earnings of affiliate 44,494 38,482 22,854 19,294
Other income (note 3) 37,909 33,871 20,419 18,139
---------- ---------- ---------- ----------
Total other operating income 216,449 219,082 109,177 119,939
---------- ---------- ---------- ----------
Other Operating Expenses:
Salaries 125,205 119,660 64,044 58,152
Employee benefits 80,129 78,041 40,187 37,825
Occupancy, net 34,490 29,098 18,114 14,593
Restructuring and related charges (note 5) -- 120,000 -- 120,000
Other expenses 140,412 143,463 73,542 67,091
---------- ---------- ---------- ----------
Total other operating expenses 380,236 490,262 195,887 297,661
---------- ---------- ---------- ----------
Income Before Income Taxes 293,214 128,009 151,205 8,504
Income tax expense (benefit) 90,572 29,405 48,155 (2,587)
---------- ---------- ---------- ----------
Net Income $ 202,642 $ 98,604 $ 103,050 $ 11,091
========== ========== ========== ==========
Net Income Applicable to Common Stock $ 187,050 $ 78,379 $ 95,235 $ 1,036
========== ========== ========== ==========
Net income per common share:
Primary $3.35 $1.50 $1.71 $0.02
Fully diluted $3.35 $1.50 $1.71 $0.02
Average common shares outstanding:
Primary 55,870 52,327 55,718 52,352
Fully diluted 55,870 56,094 55,718 56,114
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)
Six Months Ended
June 30,
---------------------------
1996 1995
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 202,642 $ 98,604
Adjustments to reconcile net income to net cash
provided by (used) in operating activities:
Depreciation and amortization, net 38,738 32,049
Provision for credit losses 8,000 6,000
Investment securities gains, net (9,888) (4,967)
Net gain on loans sold or held for sale (1,743) (767)
Restructuring and related charges -- 107,298
Equity in earnings of affiliate (44,494) (38,482)
Net change in trading accounts (2,263) (266,452)
Net change in accounts receivable and accrued interest (488,474) 30,850
Net change in accounts payable and accrued expenses (21,232) 312,059
Other, net (160,130) (55,781)
----------- -----------
Net cash provided by (used) in operating activities (478,844) 220,411
----------- -----------
Cash Flows From Investing Activities:
Interest-bearing deposits with banks 699,861 2,954,089
Precious metals 206,053 (85,856)
Federal funds sold and securities purchased under resale agreements 262,945 (701,017)
Short-term investments (60,596) (11,187)
Purchases of securities held to maturity (2,596,034) (43,030)
Proceeds from maturities of securities held to maturity 279,931 238,833
Purchases of securities available for sale (3,881,417) (2,178,453)
Proceeds from sales of securities available for sale 1,504,235 572,726
Proceeds from maturities of securities available for sale 2,343,934 471,054
Loans (251,853) (908,600)
Payment for purchase of Brooklyn Bancorp, Inc., net of cash received (486,002) --
Investment in affiliate 30,296 28,133
----------- -----------
Net cash provided by (used) in investing activities (1,948,647) 336,692
----------- -----------
Cash Flows From Financing Activities:
Deposits 1,542,757 1,208,715
Short-term borrowings 1,045,215 (893,980)
Due to factored clients 62,861 (51,826)
Proceeds from issuance of long-term debt 407,569 --
Repayment of long-term debt (266,085) (1,032,750)
Proceeds from issuance of subordinated long-term debt 100,000 --
Repayment of subordinated long-term debt (100,000) --
Net proceeds from issuance of cumulative preferred stock -- 72,563
Repurchase of common stock (82,174) (16,699)
Cash dividends paid (57,340) (56,281)
Other, net (1,426) 19,909
----------- -----------
Net cash provided by (used) in financing activities 2,651,377 (750,349)
Effect of exchange rate changes on cash and due from banks (8,708) (2,037)
----------- -----------
Net decrease in cash and due from banks 215,178 (195,283)
Cash and due from banks at beginning of period 675,683 867,242
----------- -----------
Cash and due from banks at end of period $ 890,861 $ 671,959
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 914,801 $ 790,146
Income taxes 78,811 61,185
Transfers from securities available for sale
to securities held to maturity 1,008,547 --
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
UNAUDITED
(Dollars in thousands)
Six Months
Ended
June 30,
1996
-----------
<S> <C>
Cumulative Preferred Stock:
Balance at beginning and end of period $ 575,000
===========
Common Stock:
Balance at beginning of period $ 281,298
Net issuance under stock option, restricted stock and
restricted stock election plans of 512,032 shares 2,560
Retirement of 1,343,486 shares (6,717)
-----------
Balance at end of period $ 277,141
===========
Surplus:
Balance at beginning of period $ 590,008
Net issuance of common stock under stock option,
restricted stock and restricted stock election plans of
512,032 shares 6,089
Treasury stock transactions of affiliate (491)
Retirement of 1,343,486 common shares (75,457)
-----------
Balance at end of period $ 520,149
===========
Retained Earnings:
Balance at beginning of period $ 1,636,264
Net income 202,642
Foreign currency translation, net of taxes (8,991)
Dividends declared on common stock (42,341)
Dividends declared on issues of preferred stock (15,592)
-----------
Balance at end of period $ 1,771,982
===========
Net Unrealized Depreciation on Securities
Available for Sale, Net of Taxes:
Balance at beginning of period $ (74,762)
Unrealized appreciation 33,626
Income tax benefit (16,541)
-----------
Balance at end of period $ (57,677)
===========
Total Stockholders' Equity:
Balance at beginning of period $ 3,007,808
Net changes during the period 78,787
-----------
Balance at end of period $ 3,086,595
===========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-5-
<PAGE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COVERING THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. On January 1, 1996, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This SFAS
establishes the recognition and measurement criteria for impairment losses
on long-lived assets, certain identifiable intangibles and goodwill related
to those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. This SFAS requires that an
impairment loss be recognized when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this SFAS has had no effect on the Corporation's results of
operations or its financial condition.
On January 1, 1996, the Corporation adopted SFAS No. 123,
"Accounting for Stock-Based Compensation." This SFAS encourages the
adoption of a new accounting method for employee stock-based compensation
plans and applies to all arrangements whereby an employee receives stock or
other equity instruments of an employer based on the price of an employer's
stock. These arrangements include restricted stock, stock options and stock
appreciation rights. The SFAS also permits the retention of the
Corporation's current method of accounting for these plans under Accounting
Principles Board Opinion No.25. The Corporation will continue its current
method of accounting for stock based compensation and, therefore, pro forma
footnote disclosures of net income and earnings per share will be provided
on an annual basis. The adoption of this SFAS will have no effect on the
Corporation's results of operations or its financial condition.
2. On February 29, 1996, the Corporation completed the acquisition
of Brooklyn Bancorp, Inc.("BBI") and its wholly-owned subsidiary CrossLand
FSB ("CrossLand"). The Corporation purchased all of the common stock and
common stock equivalents of BBI at $41.50 per share for a total
consideration of approximately $529.5 million. The acquisition was
accounted for as a purchase and CrossLand's operations were merged into
Republic National Bank of New York. The excess of cost over the market
value of net assets acquired, goodwill, amounted to $186 million and is
being amortized to expense on a straight-line basis over a life of fifteen
years. Approximately $680 million of assets acquired from BBI are currently
subject to a loss-sharing agreement with the Federal Deposit Insurance
Corporation (FDIC). Under this agreement, the Corporation will be
reimbursed by the FDIC for 80 percent of any losses it incurs through the
expiration of the agreement on June 30, 1998. BBI had total assets of $4.1
billion, total deposits of approximately $3.6 billion and 30 branches in
the New York metropolitan area. Also see "Management's Discussion and
Analysis-Results of Operations".
3. On March 22, 1996, the Corporation sold, in a public offering,
$100 million principal amount of 7% Subordinated Notes due 2011. 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 by the Corporation have been used for general corporate
purposes, which included the repurchase of $100 million principal amount
outstanding of the Corporation's issue of Subordinated Floating Rate Yield
Curve Notes due 2002. Other income in the first quarter of 1996 included a
gain of $1.1 million in connection with the repurchase and early
extinguishment of this debt issue.
-6-
<PAGE>
4. The following table summarizes the activity in the allowance for
possible credit losses for the six-month periods ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
(In thousands)
Balance at beginning of period $ 300,593 $ 319,220
Charge-offs (20,528) (20,140)
Recoveries 8,276 8,598
--------- ---------
Net charge-offs (12,252) (11,542)
Provision charged to operating expense 8,000 6,000
Allowance acquired from BBI 42,579 --
Translation adjustment 294 652
--------- ---------
Balance at end of period $ 339,214 $ 314,330
========= =========
</TABLE>
5. In the second quarter of 1995, the Corporation recorded
a $120 million provision for restructuring and related charges in
connection with the implementation of Project Excellence Plus, the
Corporation's company-wide re-engineering program to improve operating
efficiencies and reduce costs. The components of this provision were as
follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Salaries and employee benefits $ 71,000
Occupancy, net 10,000
Other expenses 39,000
--------
Total restructuring and related charges provision $120,000
========
</TABLE>
The following table summarizes the activity in accrued
restructuring and related charges for the six-month periods ended June 30,
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(In thousands)
<S> <C> <C>
Balance at beginning of period $ 63,963 $ --
Provision during the period -- 120,000
Payments (22,121) (12,702)
Non-cash writedowns (5,521) (7,733)
--------- ---------
Ending accrual at June 30, $ 36,321 $ 99,565
========= =========
</TABLE>
6. Certain amounts from 1995 have been reclassified to conform
with 1996 classifications.
-7-
<PAGE>
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%. 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, 1996 compared to the corresponding periods of 1995.
<TABLE>
<CAPTION>
Increase (Decrease)
-------------------------------------------------------------
2nd Qtr. 1996 vs. Six Months 1996 vs.
2nd Qtr. 1995 Six Months 1995
-------------------------- --------------------------
Amount Percent Amount Percent
-------------------------- --------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income $ 121,788 20.6 $ 174,161 14.3
Interest expense 69,772 17.7 116,468 14.7
--------- ---------
Net interest income 52,016 26.3 57,693 13.6
Provision for credit losses 1,000 33.3 2,000 33.3
--------- ---------
Net interest income after
provision for credit losses 51,016 26.1 55,693 13.3
Other operating income (10,762) (9.0) (2,633) (1.2)
Other operating expenses (101,774) (34.2) (110,026) (22.4)
--------- ---------
Income before income taxes 142,028 *<F1> 163,086 111.2
--------- ---------
Applicable income taxes 50,742 *<F1> 61,167 *<F1>
Tax equivalent adjustment (673) (7.6) (2,119) (11.3)
--------- ---------
Total applicable income taxes 50,069 *<F1> 59,048 122.8
--------- ---------
Net income $ 91,959 *<F1> $ 104,038 105.5
========= ====== ========= ======
Net income applicable to
common stock $ 94,199 *<F1> $ 108,671 138.6
========= ====== ========= ======
<FN>
<F1>*Exceeds 200%
</FN>
</TABLE>
Net Interest Income - on a fully-taxable equivalent basis was $250.1
million in the second quarter of 1996, compared to $198.1 million in the
second quarter of 1995. As shown in the table on page 9, average
interest-earning assets rose to $39.9 billion for the second quarter of
1996, compared to $31.0 billion for the second quarter of 1995. The
respective increases reflected the additional interest-earning assets
recently acquired from BBI, the investment of deposit liabilities acquired
from First Nationwide Savings Bank and Bank Leumi Trust Company, and an
increase in investment securities funded by deposits in foreign offices and
short-term borrowings. The net interest rate differential was 2.52% in the
second quarter of 1996, compared to 2.56% in the second quarter last year.
-8-
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL,
AVERAGE RATES EARNED AND PAID
UNAUDITED
(Fully taxable equivalent basis)
(Dollars in thousands)
Quarter Ended June 30,
--------------------------------------------------------------------------------------
1996 1995
----------------------------------------- ------------------------------------------
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 $ 5,754,785 $ 99,790 6.97% $ 7,256,147 $ 131,563 7.27%
Investment securities:(1)<F1>
Taxable 17,818,852 318,086 7.18 11,037,959 214,838 7.81
Exempt from federal income taxes 1,545,833 32,079 8.35 1,249,754 31,088 9.98
----------- ----------- ----------- -----------
Total investment securities 19,364,685 350,165 7.27 12,287,713 245,926 8.03
Trading account assets(2)<F2> 1,223,718 17,591 5.78 795,843 11,041 5.56
Federal funds sold and securities
purchased under resale agreements 1,790,545 23,837 5.35 1,171,244 18,530 6.35
Loans, net of unearned income:
Domestic offices 8,240,550 164,664 8.04 6,656,862 138,223 8.33
Foreign offices 3,538,986 58,121 6.61 2,825,047 47,097 6.69
----------- ----------- ----------- -----------
Total loans, net of unearned income 11,779,536 222,785 7.61 9,481,909 185,320 7.84
----------- ----------- ----------- -----------
Total interest-earning assets 39,913,269 $ 714,168 7.20% 30,992,856 $ 592,380 7.67%
=========== ======= =========== ======
Cash and due from banks 731,293 636,519
Other assets 7,672,774 9,000,848
----------- -----------
Total assets $48,317,336 $40,630,223
=========== ===========
Interest-bearing funds:
Consumer and other time deposits $11,141,148 $ 109,012 3.94% $ 7,685,701 $ 80,920 4.22%
Certificates of deposit 821,597 10,282 5.03 907,151 12,849 5.68
Deposits in foreign offices 14,781,369 207,612 5.65 12,066,055 189,277 6.29
----------- ----------- ----------- -----------
Total interest-bearing deposits 26,744,114 326,906 4.92 20,658,907 283,046 5.50
Trading account liabilities(2)<F2> 91,496 1,952 8.58 49,314 801 6.51
Short-term borrowings 6,094,595 73,488 4.85 3,882,621 43,933 4.54
Total long-term debt 3,946,672 61,707 6.29 4,001,201 66,501 6.67
----------- ----------- ----------- -----------
Total interest-bearing funds 36,876,877 $ 464,053 5.06% 28,592,043 $ 394,281 5.53%
=========== ======= =========== ======
Noninterest-bearing deposits:
In domestic offices 1,957,276 1,472,368
In foreign offices 153,574 100,665
Other liabilities 6,268,737 7,762,452
Stockholders' equity:
Preferred stock 575,000 676,667
Common stockholders' equity 2,485,872 2,026,028
----------- -----------
Total stockholders' equity 3,060,872 2,702,695
----------- -----------
Total liabilities and
stockholders' equity $48,317,336 $40,630,223
=========== ===========
Interest income/earning assets $ 714,168 7.20% $ 592,380 7.67%
Interest expense/earning assets 464,053 4.68 394,281 5.11
----------- ------- ----------- ------
Net interest differential $ 250,115 2.52% $ 198,099 2.56%
=========== ======= =========== ======
<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>
-9-
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL,
AVERAGE RATES EARNED AND PAID
UNAUDITED
(Fully taxable equivalent basis)
(Dollars in thousands)
Six Months Ended June 30,
----------------------------------------------------------------------------
1996 1995
----------------------------------- ---------------------------------------
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 $ 5,847,749 $ 202,808 6.97% $ 8,380,642 $ 281,312 6.77%
Investment securities:(1)<F1>
Taxable 17,059,829 608,864 7.18 10,651,234 442,447 8.38
Exempt from federal income taxes 1,546,863 64,334 8.36 1,296,245 65,092 10.13
----------- ----------- ------------ -----------
Total investment securities 18,606,692 673,198 7.28 11,947,479 507,539 8.57
Trading account assets(2)<F2> 1,117,746 32,250 5.80 877,035 23,925 5.50
Federal funds sold and securities
purchased under resale agreements 1,508,447 41,618 5.55 1,285,294 39,022 6.12
Loans, net of unearned income:
Domestic offices 8,107,662 327,237 8.12 6,356,862 267,187 8.48
Foreign offices 3,368,099 111,081 6.63 2,763,031 95,046 6.94
----------- ----------- ------------ -----------
Total loans, net of unearned income 11,475,761 438,318 7.68 9,119,893 362,233 8.01
----------- ----------- ------------ -----------
Total interest-earning assets 38,556,395 $ 1,388,192 7.24% 31,610,343 $ 1,214,031 7.74%
=========== ====== =========== ======
Cash and due from banks 729,225 597,408
Other assets 7,887,788 8,136,067
----------- -----------
Total assets $47,173,408 $40,343,818
=========== ===========
Interest-bearing funds:
Consumer and other time deposits $10,471,608 $ 209,805 4.03% $ 7,712,145 $ 156,882 4.10%
Certificates of deposit 784,353 19,630 5.03 863,805 24,252 5.66
Deposits in foreign offices 14,034,304 400,973 5.75 12,358,161 374,213 6.11
----------- ----------- ----------- -----------
Total interest-bearing deposits 25,290,265 630,408 5.01 20,934,111 555,347 5.35
Trading account liabilities(2)<F2> 75,664 2,924 7.77 43,022 1,472 6.90
Short-term borrowings 6,069,287 147,850 4.90 4,195,380 95,024 4.57
Total long-term debt 3,935,059 125,432 6.41 4,193,177 138,303 6.65
----------- ----------- ----------- -----------
Total interest-bearing funds 35,370,275 $ 906,614 5.15% 29,365,690 $ 790,146 5.43%
=========== ====== =========== ======
Noninterest-bearing deposits:
In domestic offices 1,883,842 1,475,269
In foreign offices 144,007 104,827
Other liabilities 6,734,710 6,721,219
Stockholders' equity:
Preferred stock 575,000 674,584
Common stockholders' equity 2,465,574 2,002,229
----------- -----------
Total stockholders' equity 3,040,574 2,676,813
----------- -----------
Total liabilities and stockholders' equity $47,173,408 $40,343,818
=========== ===========
Interest income/earning assets $ 1,388,192 7.24% $ 1,214,031 7.74%
Interest expense/earning assets 906,614 4.73 790,146 5.04
----------- ------ ----------- ------
Net interest differential $ 481,578 2.51% $ 423,885 2.70%
=========== ====== =========== ======
<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>
-10-
<PAGE>
As shown in the table on page 10, net interest income was $481.6 million
for the first six months of 1996, compared to $423.9 million, in the
comparable period of 1995. Average interest-earning assets rose to $38.6
billion for the first six months of 1996, compared to $31.6 billion for the
corresponding period of 1995. The increases reflected the acquisition
during the period of additional interest-earning assets described above.
The net interest rate differential was 2.51% for the first six months of
1996, compared to 2.70% in the respective period of 1995.
As previously announced, the Corporation has received regulatory approvals
to operate commercial banking subsidiaries in Russia and Brazil. Both
subsidiaries are scheduled to commence operations late in 1996 and will
focus on activities in the local capital markets and servicing the local
market needs of multinational corporate clients.
Provision for credit losses - was $4.0 million and $8.0 million in the
second quarter and first six months of 1996, respectively, compared to $3.0
million and $6.0 million for the corresponding periods of last year.
Net charge-offs were $4.3 million in the second quarter of 1996, compared
to net charge-offs of $7.8 million in the second quarter of 1995. For the
first six months of 1996, net charge-offs were $12.3 million, compared to
$11.5 million in the six-month period of 1995. See Note 4 of notes to
consolidated financial statements for additional information related to the
allowance for possible credit losses and net charge-offs.
The allowance for possible credit losses at June 30, 1996 was $339.2
million, or 3.00% of loans outstanding net of unearned income, compared to
$300.6 million, or 3.05%, at December 31, 1995. The total allowance for
possible credit losses is available to absorb any credit losses in the
Corporation's portfolio. The increase in the allowance for credit losses at
June, 30, 1996, from year end 1995, was primarily attributable to the
addition of the allowance acquired from BBI of $42.6 million. The increase
in loans from $9.8 billion at December 31, 1995 to $11.3 billion at June
30, 1996 was also primarily a result of the loan portfolio, consisting
primarily of conventional residential and commercial mortgage loans,
acquired in the BBI transaction.
Approximately $680 million of assets acquired from BBI are currently
subject to a loss-sharing agreement with the FDIC. Under this agreement,
the Corporation will be reimbursed by the FDIC for 80-percent of any losses
it incurs through the expiration of the agreement on June 30, 1998.
In the second quarter of 1996, $15.1 million of assets that had been
on non-accrual status were repaid. Also, during the second quarter of 1996
the Corporation sold approximately $57 million of loans acquired from BBI
in a bulk sale. Included in this sale were $10.1 million of loans on
non-accrual status.
-11-
<PAGE>
The following table presents summary data related to non-accrual loans for
the periods ending:
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31,
(in thousands) 1996 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Non-accrual loans:
Domestic $ 105,352(1)<F1> $ 137,438 (1)<F1> $ 49,311
Foreign 13,308 13,222 18,561
------------ ------------ -----------
Total non-accrual loans $ 118,660 $ 150,660 $ 67,872
============ ============ ===========
Non-accrual loans as a percentage of
loans outstanding at period end 1.05% 1.36% 0.69%
============ ============ ===========
<FN>
<F1> (1) Included at June 30, 1996 and March 31, 1996, are $53.9 million and
$81.4 million, respectively, of exposure acquired from BBI that is covered
by the FDIC 80-percent loss-sharing agreement referred to above. See
"Statement of Condition" below for information on total non-performing
assets.
</FN>
</TABLE>
Other Operating Income - was $109.2 million in the second quarter of
1996, compared to $119.9 million in the second quarter a year-earlier and
$107.3 million in the first quarter of 1996. For the first six months of
1996, such income was $216.4 million, compared to $219.1 million in the
corresponding period of 1995.
Income from trading activities was $42.1 million in the second quarter of
1996, compared to $66.2 million in the second quarter of 1995 and $45.7
million in the first quarter of 1996. The second quarter-to-quarter change
primarily reflects a reduction in foreign exchange trading income from the
level recorded in the second quarter of last year. Also contributing to
this change was a shift in precious metals revenues out of income from
precious metals and into interest income as the metals markets became net
providers of funds to the Corporation instead of net users of funds as in
the second quarter of 1995. For the first six months of 1996, income from
trading activities declined to $87.8 million, from $112.7 million in the
same period a year ago, primarily due to the reasons mentioned above.
Investment securities gains were $4.6 million in the second quarter of
1996, compared to $3.3 million in the second quarter of 1995. For the first
six months of 1996, investment securities gains were $9.9 million, compared
to $5.0 million last year. In both periods, the respective gains were from
sales of securities available for sale and, to a lesser degree, redemptions
prior to maturity of securities held to maturity.
Commission income, which consists primarily of fees for the issuance of
letters of credit, the creation of acceptances and the collection and
transfer of funds, amounted to $19.0 million in the second quarter of 1995,
compared to $13.0 million in the second quarter of 1995. The rise in
commission income primarily reflects higher volumes for the shipment of
U.S. dollar denominated banknotes. For the first six months of 1996,
commission income amounted to $34.6 million, compared to $28.3 for the
six-month period of 1995.
-12-
<PAGE>
Equity in the earnings of affiliate rose to $22.9 million in the second
quarter of 1996, compared to $19.3 million in the second quarter of last
year. For the six-month period of 1996, these earnings were $44.5 million,
compared to $38.5 million for the corresponding period of 1995. 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%. These increases were
due to higher levels of net interest income, partially offset by increases
in the provision for credit losses and income taxes at Safra Republic.
Safra Republic's total client portfolio accounts, increased to $18.4
billion at June 30, 1996 from $15.6 billion at June 30, 1995. This change
consisted of increases of $1.8 billion, or 30%, in client portfolio assets
and $1.0 billion, or 10%, in client deposits.
The Corporation's other income, which consists primarily of service charges
on deposit accounts, trust income and other income from factoring and
overseas locations, was $20.4 million in the second quarter of 1996
compared to $18.1 million in the second quarter of last year. These amounts
included gains of $2.7 million and $1.3 million in the second quarters of
1996 and 1995, respectively, from the sale of New York retail branches.
Other income for the six-month periods ended June 30, was $37.9 million and
$33.9 million in 1996 and 1995, respectively. Included in 1996 was a gain
of $1.1 million from the repurchase and early extinguishment of long-term
debt.
Other Operating Expenses - totaled $195.9 million in the second quarter and
$380.2 million for the first six-months of 1996, compared to $297.7 million
and $490.3 million in the corresponding periods of 1995. The 1995 amounts
included the Corporation's second quarter provision for restructuring and
related charges of $120.0 million in connection with a company-wide project
to improve operating efficiencies and reduce costs. The second quarter of
1996 reflected a full quarter of expenses attributable to the BBI and First
Nationwide transactions of approximately $21.0 million, including $4.6
million for amortization of intangible assets and $1.5 million of one-time
charges. The second quarter of 1996 also included higher incentive
compensation awards and expenditures for technology.
Salaries and employee benefits were $104.2 million in the second quarter of
1996, compared to $96.0 million in the second quarter of last year. The
increase in the 1996 second quarter reflects staff increases attributable
to the above-mentioned acquisitions and higher incentive compensation. For
the six months ended June 30, 1996, such expenses rose to $205.3 million
from $197.7 million in the year-earlier period, primarily due to the
additions to staff from BBI.
Occupancy expense was $18.1 million in the second quarter and $34.5
million for the six-month period of 1996, compared to $14.6 million and
$29.1 million in the comparable periods of 1995. These increases were
primarily due to the acquisition of 37 branches during the first six months
of 1996.
All other expenses were $73.5 million in the second quarter of 1996,
compared to $67.1 million in the second quarter of last year. The $6.4
million increase in the second quarter of 1996, when compared to the second
quarter of 1995, reflects a full quarter of expenses attributable to the
BBI and First Nationwide acquisitions, including increased costs for
amortization of intangible assets and increased expenditures on technology.
Included in the current quarter's expenses was a $1.5 million one-time
charge for computer upgrades and the conversion of newly acquired BBI
retail accounts. For the six-month period of 1996, all other expenses were
$140.4 million, compared to $143.5 million in the same period last year
that included a one-time charge for charitable contributions of $7.5
million.
-13-
<PAGE>
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 increased $50.1 million in the second quarter
of 1996 and $59.0 million during the first six months of 1996 when compared
to the corresponding periods of 1995. As a result of the restructuring
charge and normal permanent differences between book and tax income,
taxable income was negative in the second quarter of 1995. The effective
tax rates, total applicable income taxes as a percentage of income before
income taxes, was 35% for both the second quarter and six-month periods of
1996, compared to 36% and 33%, respectively, in the corresponding periods
of last year.
STATEMENT OF CONDITION
Stockholders' Equity and Capital Ratios
At June 30, 1996, stockholders' equity included a deduction of $57.7
million, which represents the after-tax unrealized depreciation in the
valuation of the Corporation's portfolio of securities available for sale
and approximately 49% of Safra Republic's unrealized depreciation in its
portfolio of securities available for sale, compared to an unrealized
depreciation in both such portfolios of $74.8 million at December 31, 1995.
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 capital guidelines, the Corporation excludes
Republic New York Securities Corporation's assets and off-balance-sheet
contracts from the Corporation's capital calculations. Such guidelines
require the Corporation to deduct one-half of its investment in this
subsidiary from each of Tier 1 and Tier 2 capital.
The following table presents the Corporation's risk-based capital ratios:
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
--------- -------
<S> <C> <C>
Risk-based capital ratios:
Tier 1 risk-based capital ratio 12.67% 14.72%
Total risk-based capital ratio 21.73% 24.96%
Leverage ratio 5.37% 6.24%
</TABLE>
At June 30, 1996, the ratio of the Corporation's total common stockholders'
equity to total assets was 5.17%, compared to 5.54% at December 31, 1995.
The decline in this ratio was attributable to total assets increasing to
$48.6 billion at June 30, 1996 from $43.9 billion at December 31, 1995,
primarily as a result of the BBI acquisition while common stockholders'
equity increased by $78.8 million during the period.
-14-
<PAGE>
Non-performing Assets
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) 1996 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Total non-accrual loans $ 118,660 $ 150,660 $ 67,872
Other real estate owned 40,466 42,395 31,329
--------- --------- ---------
Total non-performing assets (1)<F1> 159,126 193,055 $ 99,201
=========
Less: FDIC loss-sharing (61,325) (88,644)
--------- ---------
Total $ 97,801 $ 104,411
========= =========
Total non-performing assets as a
percentage of period end total assets 0.33% 0.41% 0.23%
========= ========= =========
<FN>
<F1>(1) Included at June 30, 1996 and March 31, 1996, is $60.2 million and
$88.9 million, respectively, of exposure acquired from BBI that is covered
by an FDIC 80-percent loss-sharing agreement, which expires on June 30,
1998.
</FN>
</TABLE>
-15-
<PAGE>
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 May 29, 1996.
(c) The following matters were voted upon at such meeting:
(i) Election of the following twenty-one persons as directors of the
Corporation, with shares voted for and withheld indicated:
<TABLE>
<CAPTION>
Nominee Shares For Shares Withheld
<S> <C> <C>
Kurt Andersen 46,279,342 1,610,064
Cyril S. Dwek 46,793,704 1,095,702
Ernest Ginsberg 46,793,704 1,095,702
Nathan Hasson 46,793,704 1,095,702
Jeffrey C Keil 46,793,704 1,095,702
Peter Kimmelman 46,793,704 1,095,702
Richard Kraemer 46,691,818 1,197,585
Leonard Lieberman 46,762,844 1,126,562
William C. MacMillen Jr 46,791,622 1,097,784
Peter J. Mansbach 46,793,704 1,095,702
Martin F. Mertz 46,793,629 1,095,777
James L. Morice 46,793,704 1,095,702
E. Daniel Morris 46,793,704 1,095,702
Janet L. Norwood 46,793,029 1,096,377
John A. Pancetti 46,793,704 1,095,702
Vito S. Portera 46,762,728 1,126,678
William P. Rogers 46,302,954 1,586,452
Elias Saal 46,793,612 1,095,794
Dov C. Schlein 46,793,704 1,095,702
Walter H. Weiner 46,790,351 1,099,055
Peter White 46,793,704 1,095,702
</TABLE>
(ii) Approval of selection of KPMG Peat Marwick LLP, as the
Corporation's auditors for 1996. The number of votes cast for or against,
as well as the number of abstentions as to such matter, were as follows:
For Against Abstain
47,805,965 32,360 51,081
-16-
<PAGE>
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
(i) On April 23, 1996, a report on Form 8-K/A was filed in connection
with the Corporation's Current Report on Form 8-K, dated March 15, 1996,
which reported the completion, on February 29, 1996, of the acquisition of
Brooklyn Bancorp, Inc. by the Corporation. The amended Current Report on
Form 8-K/A includes Pro Forma Combined Condensed financial information at
December 31, 1995 and for the one-year period then ended.
-17-
<PAGE>
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: August 14, 1996 By Walter H. Weiner
Chairman of the Board
Dated: August 14, 1996 By Kenneth F. Cooper
Executive Vice President and
Chief Financial Officer
-18-
<PAGE>
FORM 10-Q
QUARTERLY REPORT
For the fiscal quarter ended June 30, 1996
REPUBLIC NEW YORK CORPORATION
EXHIBIT INDEX
No. Exhibit Description
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
<TABLE>
<CAPTION>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
UNAUDITED
(In thousands except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- ----------------------
1996 1995 1996 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Primary:
Earnings:
Net income $ 202,642 $ 98,604 $ 103,050 $ 11,091
Less preferred stock dividends (15,592) (20,225) (7,815) (10,055)
--------- -------- --------- --------
Net income applicable to
common stock $ 187,050 $ 78,379 $ 95,235 $ 1,036
========= ======== ========= ========
Shares:
Average number of common and common
equivalent shares outstanding 55,870 52,327 55,718 52,352
========= ======== ========= ========
Net income per common share $ 3.35 $ 1.50 $ 1.71 $ 0.02
========= ======== ========= ========
Fully Diluted:
Earnings:
Net income applicable to
common stock $ 187,050 $ 78,379 $ 95,235 $ 1,036
Add dividends applicable to
convertible preferred stock -- 5,822 -- 2,911
--------- -------- --------- --------
Net income applicable to
common stock as adjusted $ 187,050 $ 84,201 $ 95,235 $ 3,947
========= ======== ========= ========
Shares:
Average number of common and common
equivalent shares outstanding 55,870 52,327 55,718 52,352
Add shares assumed issued upon
exercise of stock options -- 198 -- 193
Add shares assumed issued upon
conversion of preferred stock -- 3,569 -- 3,569
--------- -------- --------- --------
Average number of common shares
outstanding as adjusted 55,870 56,094 55,718 56,114
========= ======== ========= ========
Net income per common share $ 3.35 $ 1.50 $ 1.71 $ 0.02 (1)<F1>
========= ======== ========= ========
<FN>
<F1>(1) Fully diluted earnings per share as calculated are $0.07 for the three-month period ended
June 30, 1995. Since fully diluted earnings per share can not be anti-dilutive, primary and fully
diluted earnings per share are the same for such three-month period.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 890,861
<INT-BEARING-DEPOSITS> 5,573,134
<FED-FUNDS-SOLD> 2,136,323
<TRADING-ASSETS> 3,508,884
<INVESTMENTS-HELD-FOR-SALE> 11,753,967
<INVESTMENTS-CARRYING> 7,969,445
<INVESTMENTS-MARKET> 7,886,020
<LOANS> 11,303,917
<ALLOWANCE> 339,214
<TOTAL-ASSETS> 48,579,655
<DEPOSITS> 30,079,744
<SHORT-TERM> 4,958,942
<LIABILITIES-OTHER> 156,955
<LONG-TERM> 4,102,549
<COMMON> 277,141
575,000
0
<OTHER-SE> 2,234,454
<TOTAL-LIABILITIES-AND-EQUITY> 48,579,655
<INTEREST-LOAN> 438,318
<INTEREST-INVEST> 656,621
<INTEREST-OTHER> 276,676
<INTEREST-TOTAL> 1,371,615
<INTEREST-DEPOSIT> 630,408
<INTEREST-EXPENSE> 906,614
<INTEREST-INCOME-NET> 465,001
<LOAN-LOSSES> 8,000
<SECURITIES-GAINS> 9,888
<EXPENSE-OTHER> 380,236
<INCOME-PRETAX> 293,214
<INCOME-PRE-EXTRAORDINARY> 202,642
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,642
<EPS-PRIMARY> 3.35
<EPS-DILUTED> 3.35
<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>
