<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended: JUNE 30, 1996
Commission file number: 0-20469
U.S. TRUST CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
New York 13-3818952
--------------------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212) 852-1000
--------------
(Registrant's telephone number, including area code)
-----------------------------------------
(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
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
9,778,128 shares, Common Stock, $1 par value, as of July 31, 1996
Page 1 of 23 Pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
An index of the financial statements included in this Form 10-Q filing
follows. All page numbers refer to pages within this Form 10-Q.
Title of Financial Statement Page #
- ---------------------------- ------
Condensed Consolidated Statement of Income:
For the Three Month Periods Ended June 30, 1996 and 1995 3
For the Six Month Periods Ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of Condition as of June 30, 1996
and December 31, 1995 5
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the Six Month Periods Ended June 30, 1996 and 1995 6
Condensed Consolidated Statement of Cash Flows for the Six Month
Periods Ended June 30, 1996 and 1995 7
Notes to the Condensed Consolidated Financial Statements 8
Condensed Consolidated Net Interest Revenue and Average Balances:
For the Three Month Periods Ended June 30, 1996 and 1995 20
For the Six Month Periods Ended June 30, 1996 and 1995 21
In the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position and results of operations
for the interim periods have been made. Such adjustments, except for certain
items mentioned in the Notes to the Condensed Consolidated Financial Statements
and/or Management's Discussion and Analysis of Financial Condition and Results
of Operations, are of a normal recurring nature.
-2-
<PAGE> 3
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Month Periods Ended June 30,
------------------------------------------------------
Better (Worse)
----------------------
1996 1995 $ %
-------- -------- --------- -----
<S> <C> <C> <C> <C>
Fee Revenue
Core $ 60,382 $ 53,562 $ 6,820 12.7 %
Processing -- 24,467 (24,467) --
-------- -------- --------- -----
60,382 78,029 (17,647) (22.6)
Net Interest Revenue 19,063 24,752 (5,689) (23.0)
Other Income -- 1,020 (1,020) --
Securities Gains (Losses), Net (2) -- (2) --
-------- -------- --------- -----
Total Revenue 79,443 103,801 (24,358) (23.5)
-------- -------- --------- -----
OPERATING EXPENSES
Salaries 23,017 35,186 12,169 34.6
Employee Benefits and Performance Compensation 13,322 17,050 3,728 21.9
-------- -------- --------- -----
Total Salaries and Benefits 36,339 52,236 15,897 30.4
Net Occupancy 8,142 10,285 2,143 20.8
Other 17,973 24,889 6,916 27.8
Restructuring -- 7,446 7,446 --
-------- -------- --------- -----
Total Operating Expense 62,454 94,856 32,402 34.2
-------- -------- --------- -----
Income Before Income Tax Expense 16,989 8,945 8,044 89.9
Income Tax Expense 7,135 3,578 (3,557) (99.4)
-------- -------- --------- -----
Net Income $ 9,854 $ 5,367 $ 4,487 83.6
======== ======== ========= =====
Net Income Per Share $ 0.94 $ 0.52 $ 0.42 80.8 %
======== ======== ========= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Month Periods Ended June 30,
----------------------------------------------------
Better (Worse)
----------------------
1996 1995 $ %
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Fee Revenue
Core $118,381 $103,385 $ 14,996 14.5 %
Processing -- 49,526 (49,526) --
-------- -------- -------- -------
118,381 152,911 (34,530) (22.6)
Net Interest Revenue 38,279 53,020 (14,741) (27.8)
Other Income -- 1,683 (1,683) --
Securities Gains, Net 206 186 20 10.8
-------- -------- -------- -------
Total Revenue 156,866 207,800 (50,934) (24.5)
-------- -------- -------- -------
OPERATING EXPENSES
Salaries 44,920 69,472 24,552 35.3
Employee Benefits and Performance
Compensation 25,607 37,409 11,802 31.5
-------- -------- -------- -------
Total Salaries and Benefits 70,527 106,881 36,354 34.0
Net Occupancy 16,381 20,790 4,409 21.2
Other 36,422 47,910 11,488 24.0
Restructuring -- 8,894 8,894 --
-------- -------- -------- -------
Total Operating Expenses 123,330 184,475 61,145 33.1
-------- -------- -------- -------
Income Before Income Tax Expense 33,536 23,325 10,211 43.8
Income Tax Expense 14,085 9,330 (4,755) (51.0)
-------- -------- -------- -------
Net Income $ 19,451 $ 13,995 $ 5,456 39.0
======== ======== ======== =======
Net Income Per Share $ 1.86 $ 1.37 $ 0.49 35.8 %
======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CONDITION
(Dollars In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
----------- ------------
<S> <C> <C>
Cash and Due from Banks $ 81,908 $ 96,785
Interest Earning Securities 917,930 764,900
Loans 1,575,438 1,459,695
Less: Allowance for Credit Losses 16,202 16,086
----------- -----------
Net Loans 1,559,236 1,443,609
Other Assets 276,554 267,925
----------- -----------
Total Assets $ 2,835,628 $ 2,573,219
=========== ===========
LIABILITIES
Deposits:
Non-Interest Bearing $ 503,964 $ 489,827
Interest Bearing 1,708,364 1,503,430
----------- -----------
Total Deposits 2,212,328 1,993,257
Short-Term Credit Facilities 178,759 134,815
Accounts Payable and Accrued Liabilities 221,255 233,870
Long-Term Debt 26,468 29,434
----------- -----------
Total Liabilities 2,638,810 2,391,376
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value; 40,000,000
Shares Authorized; 9,778,128 Shares
Issued in 1996 and 9,739,144 Shares
Issued in 1995 9,778 9,739
Capital Surplus 1,109 125
Retained Earnings 198,410 183,804
Loan to ESOP (10,468) (13,434)
Unrealized Gain (Loss), Net of Taxes, on
Securities Available for Sale (2,011) 1,609
----------- -----------
Total Stockholders' Equity 196,818 181,843
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,835,628 $ 2,573,219
=========== ===========
</TABLE>
The accompanying notes are in integral part of these financial statements.
-5-
<PAGE> 6
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Month Periods
Ended June 30,
-------------------------
1996 1995
--------- -----------
<S> <C> <C>
COMMON STOCK
Balance, January 1 $ 9,739 $ 11,581
Issuance of Shares Under Employee Benefit Plans 39 183
-------- --------
Balance, June 30 $ 9,778 $ 11,764
======== ========
CAPITAL SURPLUS
Balance, January 1 $ 125 $ 72,605
Employee Benefit Plans 984 6,817
-------- --------
Balance, June 30 $ 1,109 $ 79,422
======== ========
RETAINED EARNINGS
Balance, January 1 $183,804 $244,639
Net Income 19,451 13,995
Cash Dividends Declared ($0.50 Per Share in 1996 and 1995) (4,889) (4,850)
Tax Benefit on Stock Based Awards 44 1,566
-------- --------
Balance, June 30 $198,410 $255,350
======== ========
TREASURY STOCK
Balance, January 1 $ -- $(86,139)
Issuance (Tender) of Shares Under Employee Benefit Plans -- (162)
-------- --------
Balance, June 30 $ -- $(86,301)
======== ========
LOAN TO ESOP
Balance, January 1 $(13,434) $(16,171)
Principal Payment by ESOP 2,966 2,737
-------- --------
Balance, June 30 $(10,468) $(13,434)
======== ========
UNREALIZED GAIN (LOSS), NET OF TAXES, ON
SECURITIES AVAILABLE FOR SALE
Balance, January 1 $ 1,609 $ (3,192)
Net Change in Fair Value, After Taxes (3,620) 6,088
-------- --------
Balance, June 30 $ (2,011) $ 2,896
======== ========
TOTAL STOCKHOLDERS' EQUITY $196,818 $249,697
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 7
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(UNAUDITED)
For the Six Month
Periods Ended June 30,
--------------------------
1996 1995
--------- -----------
<TABLE>
<CAPTION>
<S> <C> <C>
Net Cash Provided by Operating Activities $ 17,200 $ 33,008
--------- -----------
Cash Flows From Investing Activities:
Interest Earning Securities:
Purchases (764,481) (1,370,602)
Sales 119,497 641,862
Maturities, Calls and Mandatory Redemptions 485,548 685,116
Net Change in Loans (115,777) (41,826)
Other, Net (13,057) (18,454)
--------- -----------
Net Cash (Used in) Investing Activities (288,270) (103,904)
--------- -----------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits 14,137 165,125
Net Change in Interest Bearing Deposits 204,934 117,344
Net Change in Short-Term Credit Facilities 43,944 (139,991)
Repayments of Long-Term Debt (2,966) (3,737)
Other, Net (3,856) (3,320)
--------- -----------
Net Cash Provided by Financing Activities 256,193 135,421
--------- -----------
Net Change in Cash and Cash Equivalents (14,877) 64,525
Cash and Cash Equivalents at January 1 96,785 164,610
--------- -----------
Cash and Cash Equivalents at June 30 $ 81,908 $ 229,135
========= ===========
- --------------------------------------------------------------------------------
Income Taxes Paid $ 7,450 $ 2,825
Interest Expense Paid 42,415 44,908
</TABLE>
These accompanying notes are an integral part of these
financial statements.
-7-
<PAGE> 8
U. S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DISPOSITION AND MERGER TRANSACTION
On November 18, 1994, the former U.S. Trust Corporation ("UST") and The
Chase Manhattan Corporation ("Chase") entered into an agreement under which
Chase acquired UST's institutional custody, mutual funds servicing and unit
trust businesses (the "Processing Business") and certain back office operations
(collectively, the "Chase Acquired Business") for $363.5 million in Chase common
stock. The transaction with Chase was consummated through two almost
simultaneous steps. On September 1, 1995, UST spun-off to its shareholders
shares of common stock of a newly-formed entity which assumed the name U.S.
Trust Corporation (the "Corporation" or "Parent") on a share-for-share basis
(the "Disposition"). The Corporation and its subsidiaries acquired the assets
and operations of UST's asset management, private banking, special fiduciary and
corporate trust businesses (the "Core Businesses"). On September 2, 1995, UST,
which then included only the assets and liabilities of the Chase Acquired
Business, merged into Chase (the "Merger") and UST shareholders received 0.68
shares of Chase common stock for each share of UST. The number of shares of
Chase common stock received by UST shareholders was based upon an exchange ratio
calculated by dividing the purchase price of $363.5 million by the average of
the daily average of the high and low prices of Chase common stock for the ten
trading days immediately before the closing date. Based on the exchange formula,
Chase issued 6,619,758 of its shares to UST's shareholders on a pro rata basis.
In connection with the Disposition and Merger, Chase agreed to provide
securities processing, custodial, data processing and other services to the
Corporation for a five-year term (the "Services Agreement") at an annual base
fee of $10 million. The Services Agreement may be extended an additional two to
five years beyond its initial term.
2. ACQUISITION
On April 28, 1995, UST purchased the individual account business of J.
& W. Seligman & Co. Inc., (approximately $800 million in assets under
management) and acquired J. & W. Seligman Trust Company ("Seligman") for an
initial payment of approximately $9 million in cash, in a transaction that was
accounted for as a purchase. J. & W. Seligman & Co. Inc. is a privately held
investment manager and advisor located in New York City. Under the terms of the
agreement, the Corporation was required to make a second payment based upon
certain business retention and other conditions one year after the acquisition
date. On April 28, 1996, the Corporation made a second payment of approximately
$7 million.
-8-
<PAGE> 9
U. S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
3. NET INTEREST REVENUE
Net Interest Revenue for financial reporting purposes consists of
interest income less interest expense and the provision for credit losses. The
following is a detailed analysis of the composition of net interest revenue:
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
---------------------------- -------------------------
(In Thousands) 1996 1995 1996 1995
------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 28,539 $ 27,277 $ 55,987 $ 54,575
Securities:
Taxable 10,713 10,449 18,689 26,824
Tax Exempt 750 1,085 1,466 2,212
Short-Term Investments 339 8,877 3,602 13,974
Deposits with Banks 456 284 1,146 1,252
------------- ----------- ------------ ----------
Total Interest Income 40,797 47,972 80,890 98,837
------------- ----------- ------------ ----------
Interest Expense:
Deposits 18,859 18,755 38,160 36,117
Short-Term Credit Facilities 2,147 2,897 2,976 6,532
Long-Term Debt 478 1,168 975 2,368
------------- ----------- ------------ ----------
Total Interest Expense 21,484 22,820 42,111 45,017
------------- ----------- ------------ ----------
Net Interest Income 19,313 25,152 38,779 53,820
Provision for Credit Losses 250 400 500 800
------------- ----------- ------------ ----------
Net Interest Revenue $ 19,063 $ 24,752 $ 38,279 $ 53,020
============= =========== ============ ==========
</TABLE>
4. PLEDGED ASSETS
Financial instruments carried at $183,351,000 on June 30, 1996 and
$66,258,000 on December 31, 1995 were pledged to secure public deposits, as
collateral for borrowings, to qualify for fiduciary powers and for other
purposes.
5. CONTINGENCIES
There are various pending and threatened actions and claims against the
Corporation and its subsidiaries in which the Corporation has denied liability
and which it will vigorously contest. Management, after consultation with
counsel, is of the opinion that the ultimate resolution of such matters is
unlikely to have any future material effect on the Corporation's financial
position or results of operations.
-9-
<PAGE> 10
U. S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
6. SUBSEQUENT EVENT
On July 23, 1996, the Board of Directors authorized the repurchase of
up to 500,000 shares of its common stock to be used solely to meet the
Corporation's obligations under its stock-based benefit plans.
7. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the
current presentation.
-10-
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
On November 18, 1994, UST entered into an agreement under which Chase
was to acquire UST's Processing Business. This transaction was consummated on
September 2, 1995. See "Notes to the Condensed Consolidated Financial Statements
No. 1" for details.
Generally Accepted Accounting Principles and the financial reporting
guidance promulgated by the Securities and Exchange Commission consider the
Corporation as the continuing reporting entity. That is, the financial
statements of the Corporation presented herein include the Processing Business
results for the first half of 1995. As a result, the comparability of the
Corporation's financial results for the first half of 1995 to the current
financial and operating structure of the Corporation is limited. Accordingly,
the following discussion and analysis where relevant compares the second quarter
and year-to-date results with the first quarter of 1996 and the six month period
from October 1, 1995 through March 31, 1996, the first full six month period
subsequent to the sale of the Processing Business. In addition, where
appropriate, relevant information pertaining to the Processing Business is
provided for the second quarter and first half of 1995.
RESULTS OF OPERATIONS
Net income for the second quarter ended June 30, 1996 amounted to $9.9
million, or $0.94 per share. In the second quarter of 1995, net income was $5.4
million, or $0.52 per share. For the first quarter of 1996, the Corporation
earned $9.6 million, or $0.92 per share.
For the first half of 1996, the Corporation earned $19.5 million, or
$1.86 per share, compared to the $14.0 million, or $1.37 per share in the first
half of 1995. The Corporation's return on average stockholders' equity was 20.9%
for the first half of 1996 versus 12.1% for the first half of 1995.
FEE REVENUE
<TABLE>
<CAPTION>
June vs. June vs.
Three Month Periods Ended March June
----------------------------------------------- % %
June 30, March 31, June 30, Better Better
(In Thousands) 1996 1996 1995 (Worse) (Worse)
---------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Investment Management $ 54,135 $ 52,717 $ 47,616 2.7 13.7
Corporate Trust 6,247 5,282 5,946 18.3 5.1
---------------- -------------- ------------- ----------- -------------
Total Core Businesses 60,382 57,999 53,562 4.1 12.7
Processing Business - - 24,467 - -
---------------- -------------- ------------- ----------- -------------
Total Fee Revenue $ 60,382 $ 57,999 $ 78,029 4.1 (22.6)
================ ============== ============= =========== =============
Market Related Fees $ 46,475 $ 44,607 $ 39,351 4.2 18.1
Transaction Related Fees 13,907 13,392 14,211 3.8 (2.1)
---------------- -------------- ------------- ----------- -------------
Total Core Businesses $ 60,382 $ 57,999 $ 53,562 4.1 12.7
================ ============== ============= =========== =============
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
June vs. June vs.
Six Month Periods Ended March (*) June
----------------------------------------------- % %
June 30, March 31, June 30, Better Better
(In Thousands) 1996 1996 (*) 1995 (Worse) (Worse)
---------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Investment Management $ 106,852 $ 102,482 $ 91,836 4.3 16.4
Corporate Trust 11,529 12,104 11,549 (4.8) (0.2)
---------------- -------------- ------------- ----------- -------------
Total Core Businesses 118,381 114,586 103,385 3.3 14.5
Processing Business - - 49,526 - -
---------------- -------------- ------------- ----------- -------------
Total Fee Revenue $ 118,381 $ 114,586 $ 152,911 3.3 (22.6)
================ ============== ============= =========== =============
Market Related Fees $ 90,963 $ 87,770 $ 75,314 3.6 20.8
Transaction Related Fees 27,418 26,816 28,071 2.2 (2.3)
---------------- -------------- ------------- ----------- -------------
Total Core Businesses $ 118,381 $ 114,586 $ 103,385 3.3 14.5
================ ============== ============= =========== =============
</TABLE>
(*) Includes activity from October 1, 1995 to March 31, 1996.
For the second quarter of 1996, fee revenue increased approximately
$6.8 million to $60.4 million from $53.6 million in the second quarter of 1995,
and $2.4 million from $58.0 million in the first quarter of 1996. Market-related
fee revenue increased by $7.1 million to $46.5 million from $39.4 million in the
second quarter of 1995, and $1.9 million from $44.6 million in the first quarter
of 1996.
In the first half of 1996, fee revenue increased approximately $15.0
million to $118.4 million from $103.4 million in the first half of 1995.
Market-related fee revenue increased $15.6 million from $75.3 million in the
first half of 1995 to $91.0 million in the first half of 1996.
Market-related fee revenue is based primarily on the market value of
the assets in clients' investment management accounts. Most market-related fee
revenue is determined on a declining incremental scale so that as the value of a
client's portfolio grows in size, the Corporation earns a smaller percentage on
the increasing value. Therefore, market value or other incremental changes in a
portfolio's size do not necessarily have a proportionate impact on the level of
market-related fee revenue. The decline in Corporate Trust fee revenue for the
six month period ended June 30, 1996, versus March 31, 1996 and June 30, 1995,
is principally due to a slowing of new business related to bond immobilization
services.
<TABLE>
<CAPTION>
Assets Under Management and Administration June 30, March 31, June 30,
(In Billions) 1996 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Assets Under Management:
Investment Management $ 35.5 $ 34.4 $ 29.2
Special Fiduciary 14.8 14.8 12.0
----------- ------------ ------------
Total 50.3 49.2 41.2
Processing Business - - 2.2
----------- ------------ ------------
Total Assets Under Management 50.3 49.2 43.4
----------- ------------ ------------
Assets Under Administration:
Personal Custody and Other 14.6 14.1 11.4
Corporate and Municipal Trusteeships
and Agency Relationships at Par Value 199.7 197.2 175.9
----------- ------------ ------------
Total 214.3 211.3 187.3
Processing Business - - 221.3
----------- ------------ ------------
Total Assets Under Administration 214.3 211.3 408.6
----------- ------------ ------------
Total Assets Under Management and Administration $ 264.6 $ 260.5 $ 452.0
=========== ============ ============
</TABLE>
-12-
<PAGE> 13
Investment management assets, increased 3.3% to $35.5 billion at June
30, 1996, from $34.4 billion at March 31, 1996, and 21.7% from $29.2 billion at
June 30, 1995. The following is the composition of assets under management:
<TABLE>
<CAPTION>
June 30, March 31, December 31,
1996 1996 1995
------------- -------------- ----------------
<S> <C> <C> <C>
Equity 49 % 49 % 47 %
Fixed Income 37 37 40
Short-Term and Other 14 14 13
------------- -------------- ----------------
100 % 100 % 100 %
============= ============== ================
</TABLE>
Approximately $4.3 billion of assets under management were invested in
the Corporation's Excelsior Funds at June 30, 1996. At December 31, 1995 and
March 31, 1996, total assets under management invested in the Excelsior Funds
were $3.7 billion and $4.0 billion, respectively.
NET INTEREST REVENUE
<TABLE>
<CAPTION>
June June
vs. vs.
Three Month Periods Ended March June
-------------------------------------------- % %
(In Thousands) June 30, March 31, June 30, Better Better
1996 1996 1995 (Worse) (Worse)
------------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest Income $ 40,797 $ 40,093 $ 47,972 1.8 (15.0)
Interest Expense 21,484 20,627 22,820 (4.2) 5.9
------------- ------------ ------------- ----------- ----------
Net Interest Income 19,313 19,466 25,152 (0.8) (23.2)
Provision for Credit Losses 250 250 400 - 37.5
------------- ------------ ------------- ----------- ----------
Net Interest Revenue $ 19,063 $ 19,216 $ 24,752 (0.8) (23.0)
============= ============ ============= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
June June
vs. vs.
Six Month Periods Ended March (*) June
-------------------------------------------- % %
(In Thousands) June 30, March 31, June 30, Better Better
1996 1996 (*) 1995 (Worse) (Worse)
------------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest Income $ 80,890 $ 78,601 $ 98,837 2.9 (18.2)
Interest Expense 42,111 41,428 45,017 (1.6) 6.5
------------- ------------ ------------- ----------- ----------
Net Interest Income 38,779 37,173 53,820 4.3 (27.9)
Provision for Credit Losses 500 650 800 23.1 37.5
------------- ------------ ------------- ----------- ----------
Net Interest Revenue $ 38,279 $ 36,523 $ 53,020 4.8 (27.8)
============= ============ ============= =========== ==========
</TABLE>
(*) Includes activity from October 1, 1995 to March 31, 1996.
-13-
<PAGE> 14
Net interest revenue for the three and six month periods ended June 30,
1996 has been significantly impacted by the following events. In anticipation of
the Disposition and Merger, the Corporation reduced the overall size of the
balance sheet, (the average volume of interest earning assets for the six month
period ended June 30, 1996 was $513 million lower than the corresponding 1995
period) and shortened the maturity structure of the securities portfolio. In
addition, the six month period ended June 30, 1995 included approximately $710
million of average investable balances generated by the Processing Business.
Investable balances are defined as total average non-interest bearing deposits
less average cash items in the process of collection and average overdrafts.
OPERATING EXPENSES
<TABLE>
<CAPTION>
June June
vs. vs.
Three Month Periods Ended March June
------------------------------------------ % %
(In Thousands) June 30, March, 31, June 30, Better Better
1996 1996 1995 (Worse) (Worse)
------------ ------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Salaries $ 23,017 $ 21,903 $ 35,186 (5.1) 34.6
Employee Benefits and
Performance Compensation 13,322 12,285 17,050 (8.4) 21.9
------------ ------------- ----------- ---------- ---------
Total Salaries and Benefits 36,339 34,188 52,236 (6.3) 30.4
Net Occupancy 8,142 8,239 10,285 1.2 20.8
Other 17,973 18,449 24,889 2.6 27.8
Restructuring - - 7,446 - -
------------ ------------- ----------- ---------- ---------
Total Operating Expense $ 62,454 $ 60,876 $ 94,856 (2.6) 34.2
============ ============= =========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
June June
vs. vs.
Six Month Periods Ended March(*) June
-------------------------------------------- % %
(In Thousands) June 30, March, 31, June 30, Better Better
1996 1996 (*) 1995 (Worse) (Worse)
------------ -------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Salaries $ 44,920 $ 43,985 $ 69,472 (2.1) 35.3
Employee Benefits and
Performance Compensation 25,607 24,927 37,409 (2.7) 31.5
------------ -------------- ------------ ---------- ----------
Total Salaries and Benefits 70,527 68,912 106,881 (2.3) 34.0
Net Occupancy 16,381 15,684 20,790 (4.4) 21.2
Other 36,422 34,162 47,910 (6.6) 24.0
Restructuring - - 8,894 - -
------------ -------------- ------------ ---------- ----------
Total Operating Expense $ 123,330 $ 118,758 $ 184,475 (3.8) 33.1
============ ============== ============ ========== ==========
</TABLE>
(*) Includes activity from October 1, 1995 to March 31, 1996.
-14-
<PAGE> 15
Operating expenses amounted to $62.5 million in the second quarter of
1996, compared to $60.9 million in the first quarter of 1996 and $87.4 million
(excluding $7.4 million of restructuring charges) in the second quarter of 1995.
For the first half of 1996, operating expenses were $123.3 million,
compared to $118.8 million in the six month period ended March 31, 1996 and
$175.6 million (excluding $8.9 million of restructuring charges) in the first
half of 1995. The Corporation's pre-tax margin was 21.4% for both the first and
second quarters of 1996.
The decrease in operating expenses from the second quarter and first
half of 1995 to the second quarter and first half of 1996 reflects the impact of
the Disposition and Merger.
INCOME TAXES
The Corporation's effective tax rate for the second quarter and first
half of 1996 was 42.0%, compared to an effective tax rate of 40.0% for the
comparable periods of 1995. The lower 1995 effective tax rate is primarily due
to the annualized impact of the restructuring charges incurred in connection
with the Disposition and Merger.
CAPITAL AND LIQUIDITY
The Corporation's ratio of Tier 1 Capital to period end risk-adjusted
assets (as defined by the Federal Reserve Board) was 11.0% at June 30, 1996 and
13.1% at June 30, 1995. The ratio of Total Capital to period end risk-adjusted
assets was 12.2% at June 30, 1996 and 14.3% at June 30, 1995. The Tier 1
Leverage (Tier 1 Capital as of the period end divided by quarterly (3 month)
total average assets) was 5.7% at June 30, 1996 and 6.8% at June 30, 1995.
The Corporation's capital ratios have been negatively impacted in 1996
as a result of the change, effective April 1, 1995, in the Federal Reserve
Board's (the "Federal Reserve") method of determining Tier 1 Capital.
Specifically, the Federal Reserve Board regulations limit the amount of deferred
tax assets that qualify for Tier 1 Capital to the lower of 10% of Tier 1 Capital
or the Corporation's projected earnings for the next year. However, if the
Corporation has the ability to recover deferred tax assets from income taxes
paid in prior years, the amount of the "carry back" capability, as defined,
qualifies as Tier 1 Capital. Because the Corporation is a new tax payer, as of
September 1, 1995, its tax carry back capability is limited to earnings that
have been generated since the Disposition and Merger. Accordingly, a substantial
amount of its deferred tax assets are subject to the aforementioned limitations.
As the Corporation generates taxable income, the impact of the Federal Reserve's
regulation on deferred tax assets will be mitigated.
The Corporation requires access to funds sufficient to pay dividends to
common shareholders, interest and principal to debt holders and for other
corporate purposes. The Corporation paid two quarterly dividends of $0.25 per
share in the first half of 1996 and currently expects, subject to approval of
the Board of Directors, to declare quarterly dividends of $0.25 per share for
the remainder of 1996.
At June 30, 1996, the Corporation's banking subsidiaries can declare,
in the aggregate, dividends of approximately $21.1 million without prior
regulatory approval. The Corporation has a $25.0 million unsecured revolving
credit facility with a major financial institution maturing in 1998. At June 30,
1996, the outstanding balance under this facility was $17.0 million.
-15-
<PAGE> 16
ASSET/LIABILITY MANAGEMENT
The principal functions of asset and liability management are: to
provide for adequate liquidity; to manage interest rate exposure by maintaining
a prudent relationship between interest rate sensitive assets and liabilities;
and, to structure the size and composition of the balance sheet in order to
maximize net interest revenue, while complying with bank regulatory agency
capital standards.
Although the balance sheet is significantly smaller subsequent to the
Disposition and Merger, the Corporation's asset mix is still principally liquid
and low-risk. Approximately 35% of average total assets consist of cash and due
from banks, short-term financial instruments and readily marketable securities.
The securities portfolio is concentrated in investments in U.S. Government
Treasury securities.
The loan portfolio is the largest component of average total assets.
Average loans for the second quarter and first half of 1996 were $1.48 billion
and $1.43 billion, respectively compared to $1.34 billion and $1.35 billion for
the second quarter and first half of 1995, respectively. See the "Asset Quality"
section of Management's Discussion and Analysis for a further discussion of the
Corporation's loan portfolio.
Interest Rate Sensitivity
Interest rate risk arises from differences in the timing of repricing
assets and liabilities. One measure of interest rate risk is the difference in
asset and liability repricing on a cumulative basis within a specified time
frame. Gap analysis has inherent limitations as an analytical tool because it
only measures the Corporation's exposure at a single point in time. Exposure to
interest rates is constantly changing as a result of the Corporation's ongoing
business and its management initiatives.
The following table provides the components of the Corporation's
interest rate sensitivity gaps at June 30, 1996. To reflect anticipated
payments, certain asset and liability categories are included in the table based
on estimated rather than contractual maturity or repricing dates. As of June 30,
1996, the Corporation had more liabilities repricing or maturing than assets
(liability sensitive). In general, when an enterprise is liability sensitive,
its net interest revenue will improve in a declining interest rate environment
and will decline in a rising interest rate environment.
<TABLE>
<CAPTION>
0 - 3 4 - 6 7 - 12 1 - 5 Over
(In Thousands) Months Months Months Years 5 Years Total
------------- ----------- ---------- ----------- ----------- -------------
INTEREST EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Securities $ 360,488 $ 97,003 $ 104,127 $ 272,466 $ 83,846 $ 917,930
Loans, Net of Allowance
for Credit Losses 635,328 39,451 76,366 462,474 345,617 1,559,236
------------- ----------- ---------- ----------- ----------- -------------
Total Interest Earning Assets 995,816 136,454 180,493 734,940 429,463 2,477,166
------------- ----------- ---------- ----------- ----------- -------------
INTEREST BEARING LIABILITIES:
Interest Bearing Deposits (1,571,247) (24,196) (47,537) (65,384) - (1,708,364)
Short-Term Credit Facilities (178,759) - - - - (178,759)
Long-Term Debt - - - (24,468) (2,000) (26,468)
------------- ----------- ---------- ----------- ----------- -------------
Total Interest Bearing Liabilities (1,750,006) (24,196) (47,537) (89,852) (2,000) (1,913,591)
------------- ----------- ---------- ----------- ----------- -------------
Asset/(Liability) Sensitivity Gap (754,190) 112,258 132,956 645,088 427,463 563,575
Interest Rate Swaps 585,250 * (750) (31,500) (353,000) (200,000) -
------------- ----------- ---------- ----------- ----------- -------------
Interest Rate Sensitivity Gap (168,940) 111,508 101,456 292,088 227,463 563,575
Net Non-Interest Earning Assets/(Non-
Interest Bearing Liabilities) and Equity (138,789) - - (217,125) (207,661) (563,575)
------------- ----------- ---------- ----------- ----------- -------------
Maturity/Repricing Gap (307,729) 111,508 101,456 74,963 19,802 -
------------- ----------- ---------- ----------- ----------- -------------
Cumulative Gap $ (307,729) $ (196,221) $ (94,765) $ (19,802) $ - $ -
============= =========== ========== =========== =========== =============
</TABLE>
* Includes $586.0 million of total outstanding notional principal net of
maturing and amortizing Swaps.
-16-
<PAGE> 17
In managing its interest rate sensitivity gaps, the Corporation takes
into account the nature of its business operations. The Corporation invests in
fixed rate U.S. Treasury securities, fixed or variable rate residential real
estate mortgage loans and fixed or variable rate mortgage backed securities.
As part of its overall asset and liability management process, the
Corporation uses interest rate swaps ("Swaps") as hedges. Swaps are used
primarily to hedge the long-term fixed interest rate exposure from residential
real estate mortgage loans. The following table provides details, as of June 30,
1996, of the notional amounts of Swaps by maturity and the related average
interest rates paid and received. The Corporation is a fixed rate payor on all
of its Swaps. The Corporation's use of Swaps as an asset/liability management
tool has increased since a greater proportion of the Corporation's fixed rate
interest earning assets will be funded with short-term interest bearing
liabilities. Prior to the Disposition and Merger, the Processing Business'
non-interest bearing deposits had provided a long-term funding source.
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------------
Within 1 1 to 5 Over 5
(Dollars In Thousands) Year Years Years Total
--------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Fixed Pay Swaps $ 33,000 $ 353,000 $ 200,000 $ 586,000
Average Rate Paid 6.9340 % 6.7258 % 6.3581 % 6.6120 %
Average Rate Received (1) 5.5313 % 5.5279 % 5.5216 % 5.5259 %
</TABLE>
(1) Represents the average variable rate that will be received by the
Corporation based upon the rate in effect at the latest variable rate reset date
of each Swap.
The impact of the Corporation's hedging activities upon net interest
revenue for the quarters and six month periods ended June 30, 1996 and 1995, are
detailed in the following table.
<TABLE>
<CAPTION>
Three Month Periods Ended Six Month Periods Ended
--------------------------------------- -------------------------------------
(Dollars In Thousands) June 30, March 31, June 30, June 30, March 31, June 30,
1996 1996 1995 1996 1996 (*) 1995
------------ ------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Revenue:
As Reported $ 19,063 $ 19,216 $ 24,752 $ 38,279 $ 36,523 $ 53,020
Excluding Hedging Activities $ 20,505 $ 20,243 $ 25,306 $ 40,748 $ 38,422 $ 53,869
Net Yield on Interest Earning Assets:
As Reported 3.39% 3.48% 3.82% 3.44% 3.27% 3.91%
Excluding Hedging Activities 3.65% 3.67% 3.91% 3.66% 3.44% 3.99%
</TABLE>
(*) Includes activity from October 1, 1995 to March 31, 1996.
The difference between results "As Reported" and "Excluding Hedging
Activities" in each year reflects the cost of utilizing swaps to hedge interest
rate risk.
-17-
<PAGE> 18
Interest Earning Securities
Included in interest earning securities are $6,840,000 and $4,868,000
of interest bearing deposits with banks and $911,090,000 and $760,032,000 of
securities available for sale at June 30, 1996 and December 31, 1995,
respectively.
During the first half of 1996, the Corporation purchased approximately
$764.5 million (principally U.S. Government agency and Treasury securities) and
sold approximately $119.3 million of U.S. Treasury securities) of securities
classified as available for sale.
Approximately 76% of the Corporation's portfolio of securities
available for sale is comprised of U.S. Treasury fixed rate obligations,
obligations of the Government National Mortgage Association ("GNMAs") and other
securities backed by the full faith and credit of the U.S. Government. The
remaining portfolio is primarily comprised of securities of government sponsored
enterprises, variable rate collateralized mortgage obligations ("CMOs") and
obligations of states and municipalities. CMOs are primarily collateralized by
GNMAs.
The amortized cost of interest earning securities exceeded their market
value by $3.6 million at June 30, 1996, and by $8.9 million at June 30, 1995.
ASSET QUALITY
The Corporation's loan portfolio is primarily comprised of credit
extensions to private banking customers. Average loans remained relatively
stable with a moderate increase from $1.35 billion in the first half of 1995 to
$1.43 billion in the first half of 1996. Residential real estate mortgages
comprised approximately 70% of total loans at June 30, 1996.
An analysis of the allowance for credit losses follows:
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
--------------------------- --------------------------
(In Thousands) 1996 1995 1996 1995
----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Balance, Beginning of Period $ 16,160 $ 15,491 $ 16,086 $ 14,699
Provision for Credit Losses 250 400 500 800
Recoveries 67 1,461 275 2,128
Charge-offs (275) (1,481) (659) (1,756)
----------- ------------ --------- -----------
Net (Charge-Offs) Recoveries (208) (20) (384) 372
----------- ------------ --------- -----------
Balance, End of Period $ 16,202 $ 15,871 $ 16,202 $ 15,871
=========== ============ ========= ===========
</TABLE>
The provision for credit losses is based upon management's judgment of
the appropriate level of the allowance for credit losses when related to the
risk of loss inherent in the loan portfolio. In assessing adequacy of the
allowance for credit losses, management relies on its ongoing review of specific
loans, past experience, the present loan portfolio composition and general
economic and financial considerations.
-18-
<PAGE> 19
As a percentage of average loans, annualized net loan charge-offs were
six basis points for the second quarter of 1996, compared to annualized net loan
charge-offs of one basis point for the second quarter of 1995. For the first
half of 1996, annualized net loan charge-offs as a percentage of average loans
were five basis points, versus annualized net loan recoveries as a percentage of
average loans of six basis points for the first half of 1995. The allowance for
credit losses at June 30, 1996, was 1.09% of average loans for the quarter. This
compares with 1.19% of average loans for the quarter ended June 30, 1995. The
allowance for credit losses as a percentage of nonperforming loans was 133.10%
at June 30, 1996, compared to 183.04% at June 30, 1995. The ratio of
nonperforming assets to average loans and real estate owned for the quarter was
1.29% at June 30, 1996, compared to 1.37% at June 30, 1995.
Nonperforming assets, which include non-accrual loans and real estate
acquired through foreclosure or restructurings, for the most recent five
quarters are as follows:
<TABLE>
<CAPTION>
June 30, March 31, December 31, September 30, June 30,
(In Millions) 1996 1996 1995 1995 1995
----------- ------------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $ 12.2 $ 12.5 $ 13.3 $ 9.5 $ 8.7
Other real estate owned 7.0 9.2 9.6 9.5 9.8
----------- ------------- ---------------- ----------------- ------------
Total Nonperforming Assets $ 19.2 $ 21.7 $ 22.9 $ 19.0 $ 18.5
=========== ============= ================ ================= ============
</TABLE>
The increase in non-accrual loans from June 30, 1995 to June 30, 1996
is due primarily to the reclassification of one credit facility to non-accrual
status. The decline in other real estate owned is due to periodic write-downs to
net realizable value. Other real estate owned is net of a reserve for selling
and disposition costs of $978,000 for the quarters September 30, 1995 through
June 30, 1996. The reserve for selling and disposition costs was $478,000 at
June 30, 1995.
ACCOUNTING STANDARDS NOT YET ADOPTED
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", ("FAS 123"), issued in October 1995, establishes
financial accounting and reporting standards for stock-based compensation plans.
FAS 123 allows companies either to continue to account for stock-based employee
compensation plans under existing accounting standards or to adopt a fair value
based method of accounting as defined in FAS 123. The Corporation intends to
continue accounting for its employee stock compensation plans under its current
method and will adopt the disclosure requirement of FAS 123 in its 1996 Form
10-K.
-19-
<PAGE> 20
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED NET INTEREST REVENUE AND AVERAGE BALANCES
(Dollars in Thousands; Interest and Average Rates on a Taxable Equivalent Basis)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Month Periods Ended June 30,
-------------------------------------------------------------
1996 1995
----------------------------- -----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- ------- ---- ---------- ------- ----
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Securities (1) (2) $ 876,459 $12,975 5.95% $1,369,743 $21,510 6.30%
Loans (3) 1,492,522 28,539 7.69 1,351,856 27,277 8.09
---------- ------- ---- ---------- ------- ----
Total Interest Earning Assets 2,368,981 41,514 7.04 2,721,599 48,787 7.19
---------- ------- ---- ---------- ------- ----
Allowance for Credit Losses (16,278) (15,904)
Cash and Due from Banks 74,266 242,316
Other Assets 299,393 471,533
---------- ----------
Total Assets $2,726,362 $3,419,544
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits $1,638,152 18,859 4.63 $1,454,421 18,755 5.17
Short-Term Credit Facilities 160,924 2,147 5.37 198,444 2,897 5.86
Long-Term Debt 26,468 478 7.24 57,483 1,168 8.13
---------- ------- ---- ---------- ------- ----
Total Sources on Which
Interest is Paid 1,825,544 21,484 4.73 1,710,348 22,820 5.35
---------- ------- ---- ---------- ------- ----
Total Non-Interest Bearing
Deposits 477,534 1,307,251
Other Liabilities 223,528 149,041
Stockholders' Equity (3) 199,756 252,904
---------- ----------
Total Liabilities and
Stockholders' Equity $2,726,362 $3,419,544
========== ==========
Net Interest Revenue -
Tax Equivalent Basis 20,030 25,967
Credit Loss Provision (250) (400)
Tax Equivalent Adjustment (717) (815)
------- -------
Net Interest Revenue $19,063 $24,752
======= =======
Net Yield on Interest
Earning Assets 3.39% 3.82%
==== ====
Interest Spread 2.31% 1.84%
==== ====
</TABLE>
(1) The average balance and average rate for securities available for sale
have been calculated using their amortized cost.
(2) Yields on obligations of states and political subdivisions are stated
on a fully taxable basis, employing the statutory federal tax rate
adjusted for the effect of state and local taxes, resulting in an
effective tax rate of 47%. The amounts of the tax equivalent
adjustments to net interest revenue are related to securities.
(3) Loans and Stockholders' equity include the Loan to ESOP, which had an
average balance of $10.5 million in 1996 and $13.4 million in 1995.
-20-
<PAGE> 21
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED NET INTEREST REVENUE AND AVERAGE BALANCES
(Dollars in Thousands; Interest and Average Rates on a Taxable Equivalent Basis)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Month Periods Ended June 30,
------------------------------------------------------------------
1996 1995
------------------------------- --------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
---------- ------- ---- ---------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Securities (1) (2) $ 898,029 $26,238 5.88% $1,493,772 $ 46,076 6.22%
Loans (3) 1,442,853 55,987 7.80 1,363,368 54,575 8.07
---------- ------- ---- ---------- -------- ----
Total Interest Earning Assets 2,340,882 82,225 7.05 2,857,140 100,651 7.09
---------- ------- ---- ---------- -------- ----
Allowance for Credit Losses (16,270) (15,566)
Cash and Due from Banks 85,973 259,802
Other Assets 298,418 458,462
---------- ----------
Total Assets $2,709,003 $3,559,838
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits $1,643,599 38,160 4.67 $1,447,379 36,117 5.03
Short-Term Credit Facilities 116,035 2,976 5.16 228,936 6,532 5.75
Long-Term Debt 26,973 975 7.25 58,302 2,368 8.12
---------- ------- ---- ---------- -------- ----
Total Sources on Which
Interest is Paid 1,786,607 42,111 4.74 1,734,617 45,017 5.23
---------- ------- ---- ---------- -------- ----
Total Non-Interest Bearing
Deposits 492,162 1,430,673
Other Liabilities 231,962 148,000
Stockholders' Equity (3) 198,272 246,548
---------- ----------
Total Liabilities and
Stockholders' Equity $2,709,003 $3,559,838
========== ==========
Net Interest Revenue -
Tax Equivalent Basis 40,114 55,634
Credit Loss Provision (500) (800)
Tax Equivalent Adjustment (1,335) (1,814)
------- --------
Net Interest Revenue $38,279 $ 53,020
======= ========
Net Yield on Interest
Earning Assets 3.44% 3.91%
==== ====
Interest Spread 2.31% 1.86%
==== ====
</TABLE>
(1) The average balance and average rate for securities available for sale
have been calculated using their amortized cost.
(2) Yields on obligations of states and political subdivisions are stated
on a fully taxable basis, employing the statutory federal tax rate
adjusted for the effect of state and local taxes, resulting in an
effective tax rate of 47%. The amounts of the tax equivalent
adjustments to net interest revenue are related to securities.
(3) Loans and Stockholders' equity include the Loan to ESOP, which had an
average balance of $11.0 million in 1996 and $13.9 million in 1995.
-21-
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) EXHIBITS:
2.1 - Agreement and Plan of Merger dated as of November 18, 1994 (as
amended, supplemented or otherwise modified from time to time) between
The Chase Manhattan Corporation ("Chase") and the former U.S. Trust
Corporation ("UST"), filed as Appendix A to Exhibit 99.1 ("Exhibit
99.1") to UST's Annual Report on Form 10-K (File No. 0-8709) for the
fiscal year ended December 31, 1994. (1)(2)
2.2 - Form of Agreement and Plan of Distribution among UST, the former
United States Trust Company of New York ("USTNY"), the Corporation and
New U.S. Trust Company of New York (the "Trust Company"), filed as
Appendix B to Exhibit 99.1. (1)(2)
2.3 - Form of Contribution and Assumption Agreement between USTNY and the
Trust Company, filed as Appendix C to Exhibit 99.1. (1)(2)
2.4 - Form of Post Closing Covenants Agreement among Chase, UST, USTNY, the
Corporation and the Trust Company, filed as Appendix D to Exhibit 99.1.
(1)
2.5 - Tax Allocation Agreement dated as of September 1, 1995 among UST, the
Corporation and Chase, filed as Exhibit 2.5 to the Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.
(1)
2.6 - Services Agreement between USTNY and the Trust Company, dated
September 1, 1995, filed as Exhibit 2.6 to Amendment No. 1, dated
December 27, 1995 to the Corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995. (1)
3.1 - Restated Certificate of Incorporation of the Corporation, filed as
Exhibit 4(b) to the Corporation's Registration Statement on Form S-8
(Registration No. 33-62371). (1)
3.2 - By-Laws of the Corporation, filed as Appendix II to the Corporation's
Registration Statement on Form 10 dated February 9, 1995. (1)
4 - Note: The exhibits filed herewith do not include the instruments with
respect to long-term debt of the Corporation and its subsidiaries,
inasmuch as the total amount of debt authorized under any such
instrument does not exceed 10% of the total assets of the Corporation
and its subsidiaries on a consolidated basis. The Corporation agrees,
pursuant to Item 601 (b)(4)(iii) of Regulation S-K, that it will
furnish a copy of any such instrument to the Securities and Exchange
Commission upon request.
11- - Statement re Computation of Net Income Per Share.
27 - Financial Data Schedule.
(1) Incorporated herein by reference.
(2) The copy of this document being incorporated by reference herein does not
include the exhibits and schedules thereto which are identified as being
omitted in the table of contents of this document. The Corporation
undertakes to furnish any such omitted exhibits and schedules to the
Commission upon its request.
(b) REPORTS ON FORM 8-K:
None.
-22-
<PAGE> 23
SIGNATURE
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.
U. S. Trust Corporation
-----------------------
(Registrant)
Date: August 8, 1996 By: Richard E. Brinkmann
-------------------------------------
Richard E. Brinkmann
Senior Vice President
and Comptroller
(Principal Accounting Officer)
-23-
<PAGE> 24
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION
11 STATEMENT RE COMPUTATION
OF NET INCOME PER SHARE
27 FINANCIAL DATA SCHEDULE
<PAGE> 1
U.S. TRUST CORPORATION
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three-Month Periods Six-Month Periods
Ended June 30, Ended June 30,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net Income $ 9,854,000 $ 5,367,000 $19,451,000 $13,995,000
Plus Dividend Equivalent on Deferred
Long-Term Performance Plan Awards
(After-Tax) 104,226 90,821 205,476 181,643
----------- ----------- ----------- -----------
Adjusted Net Income $ 9,958,226 $ 5,457,821 $19,656,476 $14,176,643
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 9,778,128 9,614,706 9,765,959 9,559,831
Add average shares issuable under stock
based benefit plans 833,440 765,187 797,162 775,309
----------- ----------- ----------- -----------
Total Common and Common
Equivalent Shares 10,611,568 10,379,893 10,563,121 10,335,140
=========== =========== =========== ===========
Primary Net Income Per Share $ 0.94 $ 0.53 $ 1.86 $ 1.37
FULLY DILUTED NET INCOME PER SHARE:
Net Income $ 9,854,000 $ 5,367,000 $19,451,000 $13,995,000
Plus Dividend Equivalent on Deferred
Long-Term Performance Plan Awards
(After-Tax) 104,226 90,821 205,476 181,643
----------- ----------- ----------- -----------
Adjusted Net Income $ 9,958,226 $ 5,457,821 $19,656,476 $14,176,643
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 9,778,128 9,614,706 9,765,959 9,559,831
Add maximum dilutive impact of average
shares issuable under stock based
benefit plans 833,440 791,775 797,162 819,608
----------- ----------- ----------- -----------
Total Dilutive Shares 10,611,568 10,406,481 10,563,121 10,379,439
=========== =========== =========== ===========
Fully Diluted Net Income Per Share $ 0.94 $ 0.52 $ 1.86 $ 1.37
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 81908
<INT-BEARING-DEPOSITS> 6840
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 911090
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1575438
<ALLOWANCE> 16202
<TOTAL-ASSETS> 2835628
<DEPOSITS> 2212328
<SHORT-TERM> 178759
<LIABILITIES-OTHER> 221255
<LONG-TERM> 26468
0
0
<COMMON> 9778
<OTHER-SE> 187040
<TOTAL-LIABILITIES-AND-EQUITY> 2835628
<INTEREST-LOAN> 28539
<INTEREST-INVEST> 11463
<INTEREST-OTHER> 795
<INTEREST-TOTAL> 40797
<INTEREST-DEPOSIT> 18859
<INTEREST-EXPENSE> 21484
<INTEREST-INCOME-NET> 19313
<LOAN-LOSSES> 250
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 62454
<INCOME-PRETAX> 16989
<INCOME-PRE-EXTRAORDINARY> 9854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9854
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
<YIELD-ACTUAL> 3.39
<LOANS-NON> 12173
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 16160
<CHARGE-OFFS> 275
<RECOVERIES> 67
<ALLOWANCE-CLOSE> 16202
<ALLOWANCE-DOMESTIC> 16202
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16202
</TABLE>