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 March 31, 1998.
[ ] 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
54,006,320 at April 30, 1998.
<PAGE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Statements of Condition - Unaudited
March 31, 1998 and December 31, 1997 2
Consolidated Statements of Income - Unaudited
Three Months Ended March 31, 1998 and 1997 3
Consolidated Statements of Cash Flows - Unaudited
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Changes in Stockholders' Equity-
Unaudited-Three Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7-13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
The information contained in the financial statements furnished in
this report is unaudited. However, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of operations for the interim periods
presented, have been included.
-1-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
UNAUDITED
(Dollars in thousands)
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Cash and due from banks $ 809,452 $ 901,783
Interest-bearing deposits with banks 4,310,782 4,756,804
Precious metals 1,080,833 1,241,956
Securities held to maturity (approximate market
value of $8,837,267 in 1998 and $9,392,289 in 1997) 8,694,993 9,237,151
Securities available for sale (at approximate market value) 16,121,021 16,276,667
------------ ------------
Total investment securities 24,816,014 25,513,818
Trading account assets (note 1) 4,368,211 4,510,955
Federal funds sold and securities purchased
under resale agreements 1,385,419 2,169,291
Loans (net of unearned income of $15,159
in 1998 and $16,563 in 1997) 13,204,150 12,359,741
Allowance for possible credit losses (note 1) (326,811) (326,481)
Customers' liability on acceptances 83,223 121,022
Accounts receivable and accrued interest 2,886,613 2,452,721
Investment in affiliate 903,636 864,178
Premises and equipment 465,294 469,103
Other assets 785,118 603,464
------------ ------------
Total assets $ 54,771,934 $ 55,638,355
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits:
In domestic offices $ 2,508,552 $ 2,699,819
In foreign offices 408,375 222,957
Interest-bearing deposits:
In domestic offices 12,036,499 12,214,760
In foreign offices 18,542,941 18,251,998
------------ ------------
Total deposits 33,496,367 33,389,534
Trading account liabilities 4,325,679 5,320,864
Short-term borrowings 5,555,349 5,613,834
Acceptances outstanding 83,465 121,371
Accounts payable and accrued expenses 2,120,283 2,191,840
Due to factored clients 781,631 593,815
Other liabilities (note 1) 187,503 154,682
Long-term debt 1,688,158 1,814,435
Subordinated long-term debt and perpetual
capital notes 2,650,000 2,650,000
Company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely junior subordinated debt securities 350,000 350,000
Stockholders' equity:
Cumulative preferred stock, no par value
7,501,250 shares outstanding in 1998 and 1997 500,000 500,000
Common stock, $5 par value
150,000,000 shares authorized; 54,028,352
shares outstanding in 1998 and 54,354,292 in 1997 270,142 271,771
Surplus 393,809 421,535
Retained earnings 2,342,992 2,259,172
Accumulated other comprehensive
income (loss), net of taxes 26,556 (14,498)
------------ ------------
Total stockholders' equity 3,533,499 3,437,980
------------ ------------
Total liabilities and stockholders' equity $ 54,771,934 $ 55,638,355
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(In thousands except per share data)
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 259,540 $ 255,245
Interest on deposits with banks 68,525 75,391
Interest and dividends on investment securities:
Taxable 399,112 344,651
Exempt from federal income taxes 22,786 21,765
Interest on trading account assets 18,767 29,294
Interest on federal funds sold and securities
purchased under resale agreements 39,317 21,112
--------- ---------
Total interest income 808,047 747,458
--------- ---------
INTEREST EXPENSE:
Interest on deposits 380,799 334,861
Interest on short-term borrowings 91,122 93,633
Interest on long-term debt 75,844 65,409
--------- ---------
Total interest expense 547,765 493,903
--------- ---------
NET INTEREST INCOME 260,282 253,555
Provision for credit losses 4,000 4,000
--------- ---------
Net interest income after provision for
credit losses 256,282 249,555
--------- ---------
OTHER OPERATING INCOME:
Income from precious metals 3,366 10,798
Foreign exchange trading income 30,243 27,125
Trading account profits and commissions 6,529 8,226
Investment securities losses, net (8,481) (5,304)
Net gain on loans sold or held for sale 3,665 7,477
Commission income 23,958 20,595
Equity in earnings of affiliate 35,946 28,065
Other income 27,370 29,423
--------- ---------
Total other operating income 122,596 126,405
--------- ---------
OTHER OPERATING EXPENSES:
Salaries 74,453 66,349
Employee benefits 58,378 49,627
Occupancy, net 18,892 18,279
Other expenses 100,019 79,932
--------- ---------
Total other operating expenses 251,742 214,187
--------- ---------
INCOME BEFORE INCOME TAXES 127,136 161,773
Income taxes 9,662 51,529
--------- ---------
NET INCOME $ 117,474 $ 110,244
========= =========
NET INCOME APPLICABLE TO COMMON STOCK - DILUTED $ 110,420 $ 103,422
========= =========
Net income per common share:
Basic $2.10 $1.94
Diluted 2.07 1.91
Average common shares outstanding:
Basic 52,450 53,098
Diluted 53,368 54,050
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 117,474 $ 110,244
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization, net 27,781 20,809
Provision for credit losses 4,000 4,000
Investment securities losses, net 8,481 5,304
Net gain on loans sold or held for sale (3,665) (7,477)
Equity in earnings of affiliate (35,946) (28,065)
Net change in precious metals 161,123 (37,482)
Net change in trading accounts (629,551) (191,671)
Net change in accounts receivable and accrued interest (397,625) (1,064,595)
Net change in accounts payable and accrued expenses 250,179 983,322
Other, net (179,141) 3,994
----------- -----------
Net cash used in operating activities (676,890) (201,617)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Interest-bearing deposits with banks 446,022 991,705
Federal funds sold and securities purchased under resale agreements 783,872 688,893
Short-term investments 49,731 (180,085)
Purchases of securities held to maturity (5,035) (897,717)
Proceeds from maturities of securities held to maturity 547,193 159,755
Purchases of securities available for sale (2,580,021) (1,475,474)
Proceeds from sales of securities available for sale 726,424 444,613
Proceeds from maturities of securities available for sale 1,722,269 562,202
Loans (1,135,396) (591,841)
----------- -----------
Net cash provided by (used in) investing activities 555,059 (297,949)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deposits 107,421 194,689
Short-term borrowings (58,485) 449,292
Due to factored clients 187,816 131,927
Proceeds from issuance of long-term debt 85,275 84,685
Repayment of long-term debt (211,398) (145,267)
Repurchase of cumulative preferred stock - (155,800)
Repurchase of common stock (37,469) (48,305)
Cash dividends paid (32,104) (29,576)
Other, net (1,922) (3,425)
----------- -----------
Net cash provided by financing activities 39,134 478,220
Effect of exchange rate changes on cash and due from banks (9,634) (1,454)
----------- -----------
Net decrease in cash and due from banks (92,331) (22,800)
Cash and due from banks at beginning of period 901,783 710,183
----------- -----------
Cash and due from banks at end of period $ 809,452 $ 687,383
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 513,205 $ 536,816
Income taxes 3,646 1,889
Transfers from securities available for sale to trading account assets 222,890 -
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
UNAUDITED
(Dollars in thousands)
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---------- ------------
<S> <C> <C>
CUMULATIVE PREFERRED STOCK:
Balance at beginning of period $ 500,000 $ 555,800
Redemption of 4,000,000 shares of $1.9375 cumulative
preferred stock - (100,000)
Redemption of 558 shares of remarketed preferred stock - (55,800)
----------- -----------
Balance at end of period $ 500,000 $ 400,000
=========== ===========
COMMON STOCK:
Balance at beginning of period $ 271,771 $ 275,048
Net issuance (cancellation) under stock option, restricted stock
and restricted stock election plans of 17,811 shares
in 1998 and (1,512) shares in 1997 89 (8)
Retirement of 343,751 shares in 1998 and 543,290 shares in 1997 (1,718) (2,716)
----------- -----------
Balance at end of period $ 270,142 $ 272,324
=========== ===========
SURPLUS:
Balance at beginning of period $ 421,535 $ 502,425
Net issuance (cancellation) of common stock under stock option,
restricted stock and restricted stock election plans of
17,811 shares in 1998 and (1,512) shares in 1997 8,064 5,412
Treasury stock transactions of affiliate (39) 122
Retirement of 343,751 common shares in 1998 and 543,290
common shares in 1997 (35,751) (45,589)
----------- -----------
Balance at end of period $ 393,809 $ 462,370
=========== ===========
RETAINED EARNINGS:
Balance at beginning of period $ 2,259,172 $ 1,934,824
Net income 117,474 110,244
Dividends declared on common stock (27,052) (25,129)
Dividends declared on issues of preferred stock (6,602) (6,438)
----------- -----------
Balance at end of period $ 2,342,992 $ 2,013,501
=========== ===========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAXES :
Balance at beginning of period $ (14,498) $ 38,523
Net appreciation on securities available for sale 43,990 11,468
Reclassification adjustment for losses included in net income 5,550 3,671
----------- -----------
Net unrealized appreciation on securities available for sale 49,540 15,139
Foreign currency translation (8,486) (6,960)
----------- -----------
Other comprehensive income 41,054 8,179
----------- -----------
Balance at end of period $ 26,556 $ 46,702
=========== ===========
TOTAL STOCKHOLDERS' EQUITY:
Balance at beginning of period $ 3,437,980 $ 3,306,620
Net changes during the period 95,519 (111,723)
----------- -----------
Balance at end of period $ 3,533,499 $ 3,194,897
=========== ===========
Total Comprehensive Income, Net of Taxes:
Net income $ 117,474 $ 110,244
Other comprehensive income 41,054 8,179
----------- -----------
Total comprehensive income, net of taxes: $ 158,528 $ 118,423
=========== ===========
<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 THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1. The Corporation's aggregate allowance for possible credit losses at
March 31, 1998 was $351.7 million, which consisted of: $14.9 million
applicable to trading account assets, which is a reduction of "trading
account assets," $10.0 million included in "other liabilities" for
off-balance-sheet extensions of credit, such as standby letters of credit,
guarantees and commitments, and $326.8 million, which is available to
absorb all other possible credit losses. The allowance for possible credit
losses at March 31, 1997 was available to absorb all credit losses.
The following table presents data related to the Corporation's
aggregate allowance for possible credit losses for the three-month periods
ended March 31, 1998 and 1997.
(In thousands) 1998 1997
--------- ---------
Aggregate balance at beginning of period $ 353,481 $ 350,358
Charge-offs (7,737) (6,728)
Recoveries 2,311 5,987
--------- ---------
Net charge-offs (5,426) (741)
Provision charged to operating expense 4,000 4,000
Translation adjustment (387) (950)
--------- ---------
Balance at end of period $ 351,668 $ 352,667
========= =========
2. The Corporation's board of directors approved a two-for-one common stock
split, in the form of a 100% stock dividend, payable on June 1, 1998, to
stockholders of record on May 1, 1998. Earnings per common share amounts
have not been adjusted to reflect the split.
3. Certain amounts from the prior year have been reclassified to conform
with 1998 classifications.
-6-
<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 43% in 1998 and 1997. 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 1998 compared to the first quarter of 1997.
Increase (Decrease)
--------------------------
1st Qtr. 1998 vs.
1st Qtr. 1997
--------------------------
Amount Percent
-------- --------
(Dollars in thousands)
Interest income $ 60,468 8.0
Interest expense 53,862 10.9
--------
Net interest income 6,606 2.5
Provision for credit losses - -
--------
Net interest income after
provision for credit losses 6,606 2.6
Other operating income (3,809) (3.0)
Other operating expenses 37,555 17.5
--------
Income before income taxes (34,758) (20.5)
--------
Applicable income taxes (41,867) (81.2)
Tax equivalent adjustment (121) (1.5)
--------
Total applicable income taxes (41,988) (70.5)
--------
Net income $ 7,230 6.6
======== ========
Net income applicable to
common stock - diluted $ 6,998 6.8
======== ========
Net Interest Income - on a fully-taxable equivalent basis, amounted to
$268.2 million in the first quarter of 1998, compared to $261.6 million in
the first quarter of 1997. As shown in the table on page 8, average
interest-earning assets were $45.9 billion in the first quarter of 1998, up
from $43.0 billion in the first quarter of 1997. The increase in net
interest income in the first quarter of 1998 compared to the first quarter
of last year reflects the higher level of interest-earning assets. The net
interest rate differential narrowed to 2.37% in the first quarter of 1998
from 2.47% in the first quarter of last year, as increased premium
amortization resulted from a higher rate of prepayments on mortgage-backed
securities.
-7-
<PAGE>
<TABLE>
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL,
AVERAGE RATES EARNED AND PAID
UNAUDITED
(Fully taxable equivalent basis)
(Dollars in thousands)
<CAPTION>
Quarter Ended March 31,
---------------------------------------------------------------------------------
1998 1997
---------------------------------------- --------------------------------------
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 $ 4,200,687 $ 68,525 6.62 $ 4,765,059 $ 75,391 6.42
Investment securities:(1)<F1>
Taxable 23,375,774 399,112 6.92 20,087,077 344,651 6.96
Exempt from federal income taxes 1,556,875 30,731 8.01 1,488,306 29,831 8.13
----------- -------- ----------- --------
Total investment securities 24,932,649 429,843 6.99 21,575,383 374,482 7.04
Trading account assets(2)<F2> 1,008,555 18,767 7.55 1,676,907 29,294 7.08
Federal funds sold and securities
purchased under resale agreements 2,861,972 39,317 5.57 1,597,686 21,112 5.36
Loans, net of unearned income:
Domestic offices 8,885,831 183,390 8.37 8,575,204 175,634 8.31
Foreign offices 3,961,220 76,150 7.80 4,761,047 79,611 6.78
----------- -------- ----------- --------
Total loans, net of unearned income 12,847,051 259,540 8.19 13,336,251 255,245 7.76
----------- -------- ----------- --------
Total interest-earning assets 45,850,914 $815,992 7.22 42,951,286 $755,524 7.13
======== ==== ======== ====
Cash and due from banks 798,668 748,948
Other assets 8,278,668 9,321,772
----------- -----------
Total assets $54,928,250 $53,022,006
=========== ===========
Interest-bearing funds:
Consumer and other time deposits $10,557,424 $103,696 3.98 $10,965,892 $107,202 3.96
Certificates of deposit 1,541,360 19,633 5.17 1,582,525 19,489 4.99
Deposits in foreign offices 17,885,145 257,470 5.84 16,152,960 208,170 5.23
----------- -------- ----------- --------
Total interest-bearing deposits 29,983,929 380,799 5.15 28,701,377 334,861 4.73
Trading account liabilities(2)<F2> 380,897 2,932 3.12 264,185 4,052 6.22
Short-term borrowings 6,807,115 88,190 5.25 7,294,690 89,581 4.98
Total long-term debt 4,742,391 75,844 6.49 4,194,480 65,409 6.32
----------- -------- ----------- --------
Total interest-bearing funds 41,914,332 $547,765 5.30 40,454,732 $493,903 4.95
======== ===== ======== ====
Noninterest-bearing deposits:
In domestic offices 2,591,733 2,197,543
In foreign offices 269,375 213,173
Other liabilities 6,699,783 6,888,910
Stockholders' equity:
Preferred stock 500,000 480,064
Common stockholders' equity 2,953,027 2,787,584
----------- -----------
Total stockholders' equity 3,453,027 3,267,648
----------- -----------
Total liabilities and stockholders' equity $54,928,250 $53,022,006
=========== ===========
Interest income/earning assets $815,992 7.22 $755,524 7.13
Interest expense/earning assets 547,765 4.85 493,903 4.66
-------- ----- -------- ----
Net interest differential $268,227 2.37 $261,621 2.47
======== ===== ======== ====
<FN>
<F1> (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale
included in other assets.
<F2> (2) Excludes noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
</FN>
</TABLE>
-8-
<PAGE>
PROVISION FOR CREDIT LOSSES - was $4.0 million in the first quarter of
1998, the same as in the first quarter of last year. Net charge-offs were
$5.4 million in the first quarter of 1998, compared to net charge-offs of
$0.7 million in the first quarter of 1997.
The aggregate allowance for possible credit losses at March 31, 1998 was
$351.7 million, consisting of $14.9 million applicable to trading account
assets which is a reduction of "trading account assets", $10.0 million
included in "other liabilities" for off-balance-sheet extensions of credit,
such as standby letters of credit, guarantees and commitments, and $326.8
million (allowance for possible credit losses), which is available to
absorb all other credit losses. See Note 1 of notes to consolidated
financial statements for additional information related to the aggregate
allowance for possible credit losses and net charge-offs.
Approximately $164 million of assets acquired from Brooklyn Bancorp, Inc.
("BBI") are currently subject to a loss-sharing agreement with the Federal
Deposit Insurance Corporation (the "FDIC"). Under this agreement, the
Corporation will be reimbursed by the FDIC for 80-percent of any losses it
incurs through June 30, 1998, when the loss-sharing provisions of the
agreement terminates.
The following table presents summary data related to non-accrual loans at
periods ended:
March 31, Dec. 31, March 31,
(in thousands) 1998 1997 1997
--------- --------- ---------
Non-accrual loans:
Domestic (1) $ 76,397 $ 84,094 $ 87,457
Foreign 8,140 9,727 13,788
--------- --------- ---------
Total non-accrual loans $ 84,537 $ 93,821 $101,245
========= ========= =========
Non-accrual loans as a percentage of
loans outstanding at period end 0.64% 0.76% 0.82%
========= ========= =========
- -----
(1) Includes loans with carrying values of $11.1 million, $29.7
million and $33.1 million at March 31, 1998, December 31, 1997 and
March 31, 1997, respectively, which were acquired in the acquisition
of BBI. Such loans are covered by a loss-sharing agreement with the
FDIC, the loss-sharing provisions of which expire on June 30, 1998.
The covered amounts of such loans were $11.5 million, $29.9 million
and $31.6 million at March 31, 1998, December 31, 1997 and March 31,
1997, respectively. See "Statement of Condition" below for information
on total non-performing assets.
The decline in domestic non-accrual loans at March 31, 1998 from December
31, 1997 was primarily attributable to sales and satisfactions of loans
that had been acquired in the BBI transaction.
OTHER OPERATING INCOME - was $122.6 million in the first quarter of 1998,
compared to $126.4 million in the first quarter last year, which included a
gain of $7.4 million on the unwinding of a real estate financing
transaction.
-9-
<PAGE>
Total trading revenue, including associated net interest income which is
reported as net interest income, was $66.0 million in the first quarter of
1998, compared to $53.3 million in the first quarter of 1997. Net interest
income associated with trading activities rose to $25.8 million in the
first quarter of 1998 from $7.1 million in the first quarter of 1997 due
primarily to precious metals transactions. The items of net interest
income/(expense) in the following table represent the net interest earned
or paid on instruments held for trading, as well as an allocation by
management to reflect the funding benefit or cost associated with the
trading positions.
Three Months Ended
March 31,
---------------------------
1998 1997
-------- --------
(In thousands)
Income from precious metals:
Trading revenue $ 3,366 $ 10,798
Net interest income 18,922 4,818
-------- --------
Total 22,288 15,616
-------- --------
Foreign exchange trading income:
Trading revenue 30,243 27,125
Net interest (expense) (618) (2,815)
-------- --------
Total 29,625 24,310
-------- --------
Trading account profits and
commissions:
Trading revenue 6,529 8,226
Net interest income 7,519 5,135
-------- --------
Total 14,048 13,361
-------- --------
Total:
Trading revenue 40,138 46,149
Net interest income 25,823 7,138
-------- --------
Total $ 65,961 $ 53,287
======== ========
Investment securities losses were $8.5 million in the first quarter of
1998, compared to losses of $5.3 million in the first quarter of 1997. In
the first quarters of both 1998 and 1997, investment securities losses were
primarily from sales of mortgage-backed securities.
The Corporation recorded net gains on loans sold or held for sale of $3.7
million in the first quarter of 1998, compared to net gains of $7.5 million
in the first quarter of last year. The gains in both periods were primarily
from dispositions of commercial real estate loans.
Commission income, which consists primarily of securities brokerage
commissions, fees for the issuance of bankers acceptances and letters of
credit and retail services, was $24.0 million in the first quarter of 1998,
compared to $20.6 million in the first quarter of 1997.
-10-
<PAGE>
Equity in the earnings of affiliate was $35.9 million in the first quarter
of 1998, compared to $28.1 million in the first quarter of 1997, an
increase of 28%. 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 increase in earnings of affiliate was primarily due
to higher levels of commission income. Also contributing to the increase
were higher levels of net interest income and a decrease in the provision
for credit losses, partially offset by an increase in operating expenses at
Safra Republic. The growth in client assets, combined with higher levels of
client activities in portfolio securities, contributed to the increase in
income in the first quarter of 1998 over the first quarter of 1997. Safra
Republic's total client accounts both on-and off-balance sheet were $30.6
billion at March 31, 1998, compared to $25.8 billion at March 31, 1997.
This change consisted of increases of $3.8 billion, or 27%, in client
portfolio assets and $1.0 billion, or 9%, in client deposits
Other income was $27.4 million in the first quarter of 1998, compared to
$29.4 million in the first quarter of 1997. The domestic consumer bank and
the domestic and international private banking divisions generate fee
income through service charges to clients for deposit accounts and trust
and securities activities. Other income includes revenues from these
activities of $15.6 million in the first quarter of 1998, compared to $14.0
million in the first quarter of 1997. Also included in other income are
investment management performance fees, net of expenses, of $7.8 million in
the first quarter of 1998, compared to $4.6 million in the first quarter of
last year. Included in the first quarter of 1997 was a one-time gain of
$7.4 million on the unwinding of a real estate financing transaction.
OTHER OPERATING EXPENSES - were $251.7 million in the first quarter of
1998, compared to $214.2 million in the first quarter of 1997. Included in
the first quarter of 1998 were $18.9 million of Year 2000 expenses. The
Corporation did not incur any Year 2000 expenses in the first quarter of
1997.
Salaries and employee benefits were $132.8 million in the first quarter of
1998, compared to $116.0 million in the first quarter of 1997. The increase
between the first quarters of 1998 and 1997 reflected increased incentive
compensation and higher levels of staff.
Occupancy expense was $18.9 million in the first quarter of 1998, compared
to $18.3 million in the first quarter of 1997.
All other expenses were $100.0 million in the first quarter of 1998,
compared to $79.9 million in the first quarter of 1997. After excluding the
impact of Year 2000 expenses, other expenses in the first quarter of 1998
increased by $2.2 million from the first quarter of 1997. Amortization of
goodwill and other intangible assets was $6.8 million in the first quarter
of 1998, compared to $7.1 million in the first quarter of 1997.
As previously reported, the Corporation estimates that total incremental
expenses for the Year 2000 project will be approximately $60.0 million. To
date, $34.4 million of these costs have been recorded, with the expense of
$18.9 million for the first quarter of 1998 expected to represent the
quarterly peak for incurring these expenses.
-11-
<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 decreased $42.0 million, or 71%, between the
first quarters of 1998 and 1997. The effective tax rates, total applicable
income taxes as a percentage of income before income taxes, for the first
quarters of 1998 and 1997 were 13% and 35%, respectively. The effective
income tax rate for the first quarter of 1998 is lower than the statutory
rates for federal and state income taxes because, based on current tax
guidance, certain tax liabilities accrued in prior years were reversed in
the first quarter of 1998.
STATEMENT OF CONDITION
CAPITAL RATIOS
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 (the "FRB") specifically applied to the Corporation.
These ratios do not reflect the effect on stockholders' equity related to
the FASB 115 valuation of the Corporation's portfolio of securities
available for sale which is included in accumulated other comprehensive
income (loss), net of taxes.
Effective with the calculations for March 31, 1998, the total risk-based
capital ratio has been calculated under the FRB's new market risk capital
guidelines. The guidelines incorporate a measure of specific issuer risk
for debt and equity trading positions as well as the market risk of all
trading and nontrading foreign exchange and commodity positions. The total
risk-based capital ratio for December 31, 1997 has not been restated to
reflect these new guidelines.
The following table presents the Corporation's capital ratios at periods
ending:
March 31, Dec. 31,
1998 1997
--------- ---------
Risk-based capital ratios:
Tier 1 risk-based capital ratio 12.32% 12.97%
Total risk-based capital ratio 20.54% 21.58%
Leverage ratio 5.72% 5.60%
Common stockholders'
equity/total assets 5.54% 5.28%
-12-
<PAGE>
NON-PERFORMING ASSETS
The following is a summary of the Corporation's non-performing assets at
periods ended:
March 31, Dec. 31, March 31,
(in thousands) 1998 1997 1997
-------- -------- --------
Total non-accrual loans $ 84,537 $ 93,821 $101,245
Other assets and real estate owned 14,432 18,847 32,691
-------- -------- --------
Total non-performing assets (1) $ 98,969 $112,668 $133,936
======== ======== ========
Total non-performing assets as a
percentage of period end total assets 0.18% 0.20% 0.24%
======== ======== ========
------
(1) Includes non-performing assets at March 31, 1998, December 31,
1997 and March 31, 1997, with carrying values of $15.0 million, $35.2
million and $39.1 million, respectively, which were acquired in the
purchase of BBI. Such non-performing assets are covered by a
loss-sharing agreement with the FDIC, the loss-sharing provisions of
which expire on June 30, 1998. The covered amounts of such
non-performing assets were $15.5 million, $35.4 million and $37.7
million at March 31, 1998, December 31, 1997 and March 31, 1997,
respectively.
FORWARD-LOOKING INFORMATION
In connection with the information relating to the Year 2000, this Report
contains statements that constitute forward-looking statements and are
subject to certain risks and uncertainties that could cause the actual
facts to differ materially from those contained in this Report. Such
uncertainties could include unanticipated events relating to work on the
developments or modifications to computer systems and to software,
including work performed by suppliers or vendors to the Corporation, and
the satisfactory resolution of such events may be beyond the Corporation's
control in responding to such events. Readers are cautioned not to place
undue reliance on these forward looking statements which speak only to the
date of this Report.
-13-
<PAGE>
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, 1998.
-14-
<PAGE>
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: May 15, 1998 By /s/Walter H. Weiner
-------------------------
Walter H. Weiner
Chairman of the Board
Dated: May 15, 1998 By /s/John D. Kaberle, Jr.
----------------------------
John D. Kaberle, Jr.
Executive Vice President and
Comptroller
-15-
<PAGE>
FORM 10-Q
QUARTERLY REPORT
For the fiscal quarter ended March 31, 1998
REPUBLIC NEW YORK CORPORATION
EXHIBIT INDEX
No. Exhibit Description
11 Computation of Earnings Per Common Share
27 Financial Data Schedule
<TABLE>
EXHIBIT 11
REPUBLIC NEW YORK CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
UNAUDITED
(In thousands except per share data)
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Basic earnings:
Net income $ 117,474 $ 110,244
Less preferred stock dividends (6,602) (6,438)
Less dividends on restricted stock plan shares (865) (735)
--------- ---------
Net income applicable to common stock- basic $ 110,007 $ 103,071
========= =========
Average common shares outstanding - excluding restricted
stock plan shares 52,450 53,098
========= =========
Basic earnings per common share $ 2.10 $ 1.94
========= =========
Diluted earnings:
Net income applicable to common stock - basic $ 110,007 $ 103,071
Dividend adjustment on restricted stock plan
shares to reflect shares assumed issued 413 351
--------- ---------
Net income applicable to common stock - diluted $ 110,420 $ 103,422
========= =========
Shares:
Average common shares outstanding - excluding restricted
stock plan shares 52,450 53,098
Net shares assumed issued under restricted stock plan 874 897
Shares assumed issued on exercise of stock options 44 55
--------- ---------
Average common shares outstanding 53,368 54,050
========= =========
Diluted earnings per common share $ 2.07 $ 1.91
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 809,452
<INT-BEARING-DEPOSITS> 4,310,782
<FED-FUNDS-SOLD> 1,385,419
<TRADING-ASSETS> 4,368,211
<INVESTMENTS-HELD-FOR-SALE> 16,121,021
<INVESTMENTS-CARRYING> 8,694,993
<INVESTMENTS-MARKET> 8,837,267
<LOANS> 13,204,150
<ALLOWANCE> 326,811
<TOTAL-ASSETS> 54,771,934
<DEPOSITS> 33,496,367
<SHORT-TERM> 5,555,349
<LIABILITIES-OTHER> 187,503
<LONG-TERM> 4,338,158
<COMMON> 270,142
0
500,000
<OTHER-SE> 2,763,357
<TOTAL-LIABILITIES-AND-EQUITY> 54,771,934
<INTEREST-LOAN> 259,540
<INTEREST-INVEST> 421,898
<INTEREST-OTHER> 126,609
<INTEREST-TOTAL> 808,047
<INTEREST-DEPOSIT> 380,799
<INTEREST-EXPENSE> 547,765
<INTEREST-INCOME-NET> 260,282
<LOAN-LOSSES> 4,000
<SECURITIES-GAINS> (8,481)
<EXPENSE-OTHER> 251,742
<INCOME-PRETAX> 127,136
<INCOME-PRE-EXTRAORDINARY> 117,474
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117,474
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 2.07
<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>
