<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: JUNE 30, 1997
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.
19,281,927 shares, Common Stock, $1 par value, as of July 31, 1997
Page 1 of 26
<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.
<TABLE>
<CAPTION>
Title of Financial Statement Page #
- ---------------------------- ------
<S> <C>
Condensed Consolidated Statement of Income:
For the Three Months Ended June 30, 1997 and 1996 3
For the Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statement of Condition as of June 30, 1997
and December 31, 1996 5
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the Six Months Ended June 30, 1997 and 1996 6
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1997 and 1996 7
Notes to the Condensed Consolidated Financial Statements 8
Condensed Consolidated Net Interest Revenue and Average Balances:
For the Three Months Ended June 30, 1997 and 1996 22
For the Six Months Ended June 30, 1997 and 1996 23
</TABLE>
2
<PAGE> 3
U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
------------------------------------------------------
BETTER (WORSE)
----------------------
1997 1996 $ %
------- -------- -------- -----
<S> <C> <C> <C> <C>
Fee Revenue $67,913 $ 60,382 $ 7,531 12.5%
Net Interest Revenue 22,167 19,063 3,104 16.3
Securities (Losses), Net -- (2) 2 --
------- -------- -------- ----
TOTAL REVENUE 90,080 79,443 10,637 13.4
------- -------- -------- ----
OPERATING EXPENSES
Salaries 25,220 23,017 (2,203) (9.6)
Employee Benefits and Performance
Compensation 16,443 13,322 (3,121) (23.4)
------- -------- -------- ----
Total Salaries and Benefits 41,663 36,339 (5,324) (14.7)
Net Occupancy 9,192 8,142 (1,050) (12.9)
Other 18,834 17,973 (861) (4.8)
------- -------- -------- ----
TOTAL OPERATING EXPENSES 69,689 62,454 (7,235) (11.6)
------- -------- -------- ----
Income Before Income Tax Expense 20,391 16,989 3,402 20.0
Income Tax Expense 7,952 7,135 (817) (11.5)
------- -------- -------- ----
NET INCOME $12,439 $ 9,854 $ 2,585 26.2%
======= ======== ======== ====
NET INCOME PER SHARE $ 0.58 $ 0.47 $ 0.11 23.4%
======= ======== ======== ====
</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 Months Ended June 30,
-------------------------------------------------------
Better (Worse)
-----------------------
1997 1996 $ %
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Fee Revenue $134,609 $118,381 $ 16,228 13.7%
Net Interest Revenue 43,915 38,279 5,636 14.7
Securities Gains, Net 9 206 (197) (95.6)
-------- -------- -------- ----
Total Revenue 178,533 156,866 21,667 13.8
-------- -------- -------- ----
OPERATING EXPENSES
Salaries 48,806 44,920 (3,886) (8.7)
Employee Benefits and Performance
Compensation 33,363 25,607 (7,756) (30.3)
-------- -------- -------- ----
Total Salaries and Benefits 82,169 70,527 (11,642) (16.5)
Net Occupancy 18,396 16,381 (2,015) (12.3)
Other 38,034 36,422 (1,612) (4.4)
-------- -------- -------- ----
Total Operating Expenses 138,599 123,330 (15,269) (12.4)
-------- -------- -------- ----
Income Before Income Tax Expense 39,934 33,536 6,398 19.1
Income Tax Expense 15,574 14,085 (1,489) (10.6)
-------- -------- -------- ----
Net Income $ 24,360 $ 19,451 $ 4,909 25.2%
======== ======== ======== ====
Net Income Per Share $ 1.13 $ 0.93 $ 0.20 21.5%
======== ======== ======== ====
</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 1997 1996
------------------ -----------------------
<S> <C> <C>
Cash and Due from Banks $ 89,677 $ 78,566
Interest Earning Securities 1,459,005 1,451,869
Loans, Net of Allowance for Credit Losses
($17,629 in 1997 and $16,693 in 1996) 1,741,881 1,671,448
Other Assets 294,341 275,435
------------------ -------------------
Total Assets $ 3,584,904 $ 3,477,318
================== ===================
LIABILITIES
Deposits:
Non-Interest Bearing $ 801,477 $ 687,942
Interest Bearing 1,906,623 2,075,847
------------------ -------------------
Total Deposits 2,708,100 2,763,789
Short-Term Credit Facilities 348,801 240,283
Accounts Payable and Accrued Liabilities 231,840 232,680
Long-Term Debt 23,254 26,468
------------------ -------------------
3,311,995 3,263,220
Trust Preferred Capital Securities 50,000 -
------------------ -------------------
Total Liabilities 3,361,995 3,263,220
------------------ -------------------
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value; 40,000,000 Shares
Authorized; 19,873,584 Shares Issued in 1997
and 19,629,562 Shares Issued in 1996 19,874 19,630
Capital Surplus 9,967 3,575
Retained Earnings 225,200 205,384
Treasury Stock, at Cost (581,157 Shares in 1997
and 124,000 Shares in 1996) (25,917) (4,728)
Loan to ESOP (7,254) (10,468)
Unrealized Gain, Net of Taxes, on
Securities Available for Sale 1,039 705
------------------ -------------------
Total Stockholders' Equity 222,909 214,098
------------------ -------------------
Total Liabilities and Stockholders' Equity $ 3,584,904 $ 3,477,318
================== ===================
</TABLE>
The accompanying notes are an 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 Months
Ended June 30,
-------------------------------
1997 1996
--------- ---------
<S> <C> <C>
COMMON STOCK
Balance, January 1 $ 19,630 $ 9,739
Effect of Two-For-One Stock Split -- 9,739
Acquisition 204 --
Issuance of Shares Under Employee Benefit Plans 40 78
--------- ---------
Balance, June 30 $ 19,874 $ 19,556
--------- ---------
CAPITAL SURPLUS
Balance, January 1 $ 3,575 $ 125
Effect of Two-For-One Stock Split -- (125)
Acquisition 6,943 --
Employee Benefit Plans (551) 984
--------- ---------
Balance, June 30 $ 9,967 $ 984
--------- ---------
RETAINED EARNINGS
Balance, January 1 $ 205,384 $ 183,804
Effect of Two-For-One Stock Split -- (9,653)
Net Income 24,360 19,451
Cash Dividends Declared ($0.30 Per Share in 1997
and $0.25 Per Share in 1996) (5,872) (4,889)
Tax Benefit on Stock Based Awards 1,328 44
--------- ---------
Balance, June 30 $ 225,200 $ 188,757
--------- ---------
TREASURY STOCK
Balance, January 1 $ (4,728) $ --
Purchases (23,844) --
Issuance of Shares Under Employee Benefit Plans, Net 2,655 --
--------- ---------
Balance, June 30 $ (25,917) $ --
--------- ---------
LOAN TO ESOP
Balance, January 1 $ (10,468) $ (13,434)
Principal Payment by ESOP 3,214 2,966
--------- ---------
Balance, June 30 $ (7,254) $ (10,468)
--------- ---------
UNREALIZED GAIN (LOSS), NET OF TAXES, ON
SECURITIES AVAILABLE FOR SALE
Balance, January 1 $ 705 $ 1,609
Net Change in Fair Value, After Taxes 334 (3,620)
--------- ---------
Balance, June 30 $ 1,039 $ (2,011)
--------- ---------
Total Stockholders' Equity $ 222,909 $ 196,818
========= =========
</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)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------------------------------
1997 1996
--------------------- --------------------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 33,707 $ 18,223
--------------------- --------------------
Cash Flows From Investing Activities:
Interest Earning Securities:
Purchases (472,158) (764,481)
Sales 34,394 119,497
Maturities, Calls and Mandatory Redemptions 429,467 485,548
Net Change in Loans (71,404) (115,777)
Other, Net (13,652) (13,057)
--------------------- --------------------
Net Cash (Used in) Investing Activities (93,353) (288,270)
--------------------- --------------------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits 113,535 14,137
Net Change in Interest Bearing Deposits (169,224) 204,934
Net Change in Short-Term Credit Facilities 108,518 43,944
Repayments of Long-Term Debt (3,214) (2,966)
Issuance of Trust Preferred Capital Securities 50,000 -
Purchases of Treasury Stock (23,844) -
Other, Net (5,014) (4,879)
--------------------- --------------------
Net Cash Provided by Financing Activities 70,757 255,170
--------------------- --------------------
Net Change in Cash and Cash Equivalents 11,111 (14,877)
Cash and Cash Equivalents at January 1 78,566 96,785
--------------------- --------------------
Cash and Cash Equivalents at June 30 $ 89,677 $ 81,908
===================== ====================
- ---------------------------------------------------------------------------------------------------------
Income Taxes Paid $ 14,996 $ 7,450
Interest Expense Paid 63,693 42,415
</TABLE>
The Corporation issued 66,768 treasury shares and 20,580 common shares for
employee benefit plans during the first half of 1997 and 38,984 common shares
during the comparable 1996 period.
The 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. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
U.S. Trust Corporation (the "Corporation" or "Parent") and its majority owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation.
The accounting and reporting policies of the Corporation and its
subsidiaries conform with generally accepted accounting principles and general
practice within the investment management and banking industries. The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the financial statement
dates and the reported amounts of revenues and expenses during the reported
periods. Since management's judgment involves making estimates concerning the
likelihood of future events, the actual results could differ from those
estimates which will have a positive or negative effect on future period
results.
The financial statements have been prepared in accordance with the
rules of the Securities and Exchange Commission. Pursuant to such rules certain
disclosures have not been included. The financial statements should be read in
connection with the Corporation's audited financial statements for the year
ended December 31, 1996. Interim results are not necessarily indicative of the
full year results.
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 these 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. TRUST PREFERRED CAPITAL SECURITIES
On January 28, 1997, U.S. Trust Capital A (the "Trust"), a statutory
business trust, which for financial reporting purposes is reflected as a
subsidiary and included in the consolidated financial statements of the
Corporation, issued $50.0 million of 8.414% Capital Securities ("Trust Preferred
Capital Securities") with a stated value and liquidation preference of $1,000
per share. The Corporation has unconditionally guaranteed performance of all
of the Trust's obligations under the Trust Preferred Capital Securities. The
proceeds from the sale of the Trust Preferred Capital Securities were utilized
by the Trust to purchase $51.5 million of 8.414% Junior Subordinated Debt
Securities from the Corporation. The Junior Subordinated Debt Securities are
unsecured and subordinated to all senior debt of the Corporation and are the
sole assets of the Trust. The Trust Preferred Capital Securities qualify as
Tier 1 Capital under Federal Reserve Board guidelines, and have no voting
rights. Holders of the Trust Preferred Capital Securities will be entitled to
receive cumulative cash distributions semi-annually. The Corporation's proceeds
from the issuance of the Junior Subordinated Debt Securities were used for
general corporate purposes, including the acquisition of common stock of the
Corporation.
The Trust Preferred Capital Securities are subject to mandatory
redemption, in whole or in part, upon repayment of the Junior Subordinated Debt
Securities. The Corporation has the right to redeem the Junior Subordinated Debt
Securities prior to their stated maturity of February 1, 2027, on or after
February 1, 2007, upon approval (if then required) of the Federal Reserve Board.
8
<PAGE> 9
U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS
On January 16, 1997, the Corporation acquired the assets and
liabilities of Florence Fearrington, Inc., a New York investment advisory firm
that managed approximately $400 million in assets, for approximately $7.2
million of the Corporation's common stock. The transaction was accounted for as
a purchase.
On December 31, 1996, the Corporation acquired Lilienthal Associates, a
California based investment advisory firm that managed approximately $270
million in assets, for approximately $2.4 million of the Corporation's common
stock. The transaction was accounted for as a purchase.
4. ACCOUNTING CHANGES AND DEVELOPMENTS
As of January 1, 1997, the Corporation adopted the required provisions
of Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
("FAS 125"). FAS 125 establishes rules distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. The adoption
of FAS 125 had no impact on the financial condition or results of operations of
the Corporation.
In February 1997, the Securities and Exchange Commission issued Release
No. 34-38223 which requires (i) quantitative and qualitative disclosures outside
the financial statements about market risk inherent in derivatives and other
financial instruments and (ii) enhanced descriptions of accounting policies for
derivatives in the footnotes to the financial statements (see Notes to the
Condensed Consolidated Financial Statements No. 5). The market risk disclosure
requirements of this release will be applicable commencing with the
Corporation's 1997 Annual Report on Form 10-K. Since this release relates to
disclosure requirements only, adoption will not affect either the Corporation's
financial condition or results of operations.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share," ("FAS 128") was issued, effective for interim and annual
periods ending after December 15, 1997 and requires the restatement of prior
period data. FAS 128 supersedes Accounting Principles Board Opinion No. 15,
"Earnings Per Share," ("APB 15") and replaces Primary and Fully Diluted earnings
per share with Basic Earnings Per Share ("BEPS") and Diluted Earnings Per Share
("DEPS"). The determinants of BEPS may be expressed in equation form as
follows:
- The equation for computing BEPS is:
Income Available to Common Stockholders
----------------------------------------------------------------------
Weighted Average Shares Outstanding During the Reported Period
Income available to common stockholders is net income less dividends on
preferred stock. The denominator used in the calculation of BEPS does
not include the dilutive effect of stock options or other common stock
equivalents that were included in the calculation of primary earnings
per share under APB 15. Accordingly, BEPS will typically be higher than
primary earnings per share required by APB 15.
9
<PAGE> 10
U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. ACCOUNTING CHANGES AND DEVELOPMENTS (CONTINUED)
- DEPS reflects the total amount of potential dilution that would occur
if securities or other commitments to issue common stock that have a
dilutive effect on earnings per share were exercised or converted
into common stock. DEPS is computed similarly to Fully Diluted
earnings per share pursuant to APB 15. The equation for computing
DEPS is:
Income Available to Common Stockholders + Effect of Assumed Conversions
-----------------------------------------------------------------------
Weighted Average Shares Outstanding During the Reported Period +
Dilutive Potential Common Shares
The following table includes the quarterly and annual earnings per
share data for the Corporation under both APB 15 and FAS 128:
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
------------- ------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
1996:
APB 15
Primary $0.46 $0.47 $0.49 $0.53 $1.94
Fully Diluted $0.46 $0.47 $0.49 $0.53 $1.92
FAS 128
Basic $0.49 $0.50 $0.52 $0.58 $2.09
Assuming Dilution $0.46 $0.47 $0.49 $0.53 $1.95
1997:
APB 15
Primary $0.55 $0.58 - - -
Fully Diluted $0.55 $0.58 - - -
FAS 128
Basic $0.61 $0.64 - - -
Assuming Dilution $0.55 $0.58 - - -
</TABLE>
Details of the Corporation's current computation of earnings per share
are presented in Exhibit 11.
The following Statements of Financial Accounting Standards were issued
in June 1997. Both of these statements relate to disclosure requirements only,
thus adoption will not affect either the Corporations financial condition or
results of operations.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("FAS 130") was issued, effective for periods beginning
after December 15, 1997. FAS 130 requires that changes in comprehensive income
(changes in equity from transactions, events and circumstances from "non-owner
sources", as defined) items be shown in a primary financial statement.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," ("FAS 131") was issued,
effective for periods beginning after December 15, 1997. FAS 131 requires
disclosure of financial and descriptive information about its reportable
operating segments.
The Corporation is currently reviewing the requirements of FAS 130 and
FAS 131, which will be adopted as of January 1, 1998.
10
<PAGE> 11
U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. DERIVATIVE FINANCIAL INSTRUMENTS
As part of asset and liability management activities, the Corporation
employs interest rate swaps ("Swaps") to modify the interest rate
characteristics of nontrading-related balance sheet instruments. Specifically,
Swaps are used to mitigate interest rate exposure created by financing fixed
rate residential real estate mortgage loans with short-term interest bearing
deposits. The Corporation utilizes Swaps solely as hedging instruments. The
specific criteria required for Swaps used for such purposes are described
below.
Swaps used as hedges must be effective at reducing the risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the derivative contract. Swaps must be linked to the related asset
or liability, whereby the terms of the Swap generally equal the terms of the
related asset or liability, at the inception and throughout the term of the
derivative contract.
Swaps that qualify as hedges are accounted for under the accrual
method; the interest component associated with Swaps is recognized over the life
of the contract in net interest revenue and there is no recognition of
unrealized gains and losses on the Swap in the statement of financial condition.
It has been the Corporation's practice not to terminate its Swaps or sell the
underlying financial instruments that are being hedged by the Swaps. However, if
the Corporation terminates a Swap, any amounts received from (a gain) or paid to
(a loss) the counterparty would be deferred and amortized over the shorter of
the remaining original life of the hedged item or the terminated Swap in other
income or expense. In instances when the hedged item is sold, the cumulative
change in the value of the associated Swap is recognized immediately as an
adjustment to the gain or loss of the hedged item.
6. 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:
11
<PAGE> 12
U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended June 30, Ended June 30,
---------------------------- ----------------------------
(In Thousands) 1997 1996 1997 1996
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Interest Income:
Loans $32,642 $28,539 $ 64,098 $ 55,987
Securities:
Taxable 17,329 10,713 35,074 18,689
Tax Exempt 1,004 750 2,002 1,466
Short-Term Investments 1,688 339 2,761 3,602
Deposits with Banks 363 456 693 1,146
------------- ------------ ------------- ------------
Total Interest Income 53,026 40,797 104,628 80,890
------------- ------------ ------------- ------------
Interest Expense:
Deposits 25,206 18,859 49,793 38,160
Short-Term Credit Facilities 4,033 2,147 7,877 2,976
Long-Term Debt 411 478 842 975
Trust Preferred Capital Securities 1,059 - 1,751 -
------------- ------------ ------------- ------------
Total Interest Expense 30,709 21,484 60,263 42,111
------------- ------------ ------------- ------------
Net Interest Income 22,317 19,313 44,365 38,779
Provision for Credit Losses 150 250 450 500
------------- ------------ ------------- ------------
Net Interest Revenue $22,167 $19,063 $ 43,915 $ 38,279
============= ============ ============= ============
</TABLE>
7. PLEDGED ASSETS
Financial instruments carried at $154.4 million on June 30, 1997 and
$154.2 million on December 31, 1996 were pledged to secure public deposits, as
collateral for borrowings, to qualify for fiduciary powers and for other
purposes.
8. 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. RECLASSIFICATIONS
Certain amounts presented in prior periods have been reclassified to
conform with the current period's presentation.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL REPORTING MATTERS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies. Except for the historical
information contained herein, matters discussed in this report may be
forward-looking statements which involve risks and uncertainties and actual
results may differ materially from those set forth in any such forward-looking
statements. Further, such forward-looking statements speak only as of the date
on which such statements are made, and the Corporation undertakes no obligation
to update forward-looking statements to reflect events or circumstances after
the date on which such statements are made or to reflect the occurrence of
unanticipated events. Please refer to the Corporation's 1996 Annual Report on
Form 10-K for a detailed description of the Corporation's Financial Performance
Objectives.
RESULTS OF OPERATIONS
Net income for the second quarter of 1997 was $12.4 million, compared
to $9.9 million earned in the second quarter of 1996. On a fully diluted per
share basis, net income was $0.58 in the second quarter of 1997, versus $0.47 in
the second quarter of 1996. The Corporation's return on average stockholders'
equity was 22.6% for the second quarter of 1997, compared to 20.9% for the
second quarter of 1996.
FEE REVENUE
<TABLE>
<CAPTION>
Three Month Periods Ended
------------------------------- %
June 30, June 30, Better
(In Thousands) 1997 1996 (Worse)
-------------- -------------- ------------- ------------
<S> <C> <C> <C>
Investment Management
and Related Services $61,451 $54,135 13.5
Corporate Trust 6,462 6,247 3.4
-------------- ------------- ------------
Total Fee Revenue $67,913 $60,382 12.5
============== ============= ============
Market Related Fees $54,049 $46,475 16.3
Transaction Related Fees 13,864 13,907 (0.3)
-------------- ------------- -------------
Total Fee Revenue $67,913 $60,382 12.5
============== ============= ============
</TABLE>
<TABLE>
<CAPTION>
Six Month Periods Ended
------------------------------ %
June 30, June 30, Better
(In Thousands) 1997 1996 (Worse)
-------------- -------------- -------------- ------------
<S> <C> <C> <C>
Investment Management
and Related Services $122,670 $106,852 14.8
Corporate Trust 11,939 11,529 3.6
-------------- -------------- ------------
Total Fee Revenue $134,609 $118,381 13.7
============== ============== ============
Market Related Fees $107,421 $ 90,963 18.1
Transaction Related Fees 27,188 27,418 (0.8)
-------------- -------------- -------------
Total Fee Revenue $134,609 $118,381 13.7
============== ============== ============
</TABLE>
13
<PAGE> 14
Total fee revenue for the second quarter of 1997 increased
approximately $7.5 million to $67.9 million from $60.4 million in the second
quarter of 1996. Market related fee revenue increased by $7.6 million to $54.0
million from $46.5 million in the second quarter of 1996.
Market related fee revenue is based primarily on the market value of
the assets in clients' investment management accounts. In general, market
related fee revenue is influenced by a variety of factors, including growth or
decline of stock and bond market levels, new business, acquisitions, fee
increases and revenue from new services, but offset by the outflow of investment
management assets due to terminating trusts, disbursements and lost business.
Most market related fee revenue is determined on a sliding scale so
that as the value of a client's portfolio grows in size, the Corporation
receives a smaller percentage of the increasing value. Therefore, market value
or other incremental changes in a portfolio's size do not typically have a
proportionate impact on the level of market related fee revenue. Another
important factor in the determination of the level of market related fee revenue
is the composition of assets under management. Depending on how assets under
management are invested, fluctuations in any one market will not necessarily
have a proportionate, if any, impact on the level of fee revenue. The following
is a comparative analysis of the composition of assets under management.
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1997 1997 1996
-------------- -------------- ---------------
<S> <C> <C> <C>
Equity 55% 52% 49%
Fixed Income 33% 35% 37%
Short-Term and Other 12% 13% 14%
-------------- -------------- ---------------
100% 100% 100%
============== ============== ===============
</TABLE>
The carrying amount of assets under management was $57.7 billion at
June 30, 1997, increasing $7.4 billion from June 30, 1996 and $4.4 billion from
March 31, 1997. Investment management assets at June 30, 1997, increased
approximately $6.8 billion from June 30, 1996 and $3.7 billion from March 31,
1997. Investment management assets at June 30, 1997 include approximately $670
million (approximate value at initial acquisition) of assets related to the
acquisitions of Florence Fearrington, Inc. in the first quarter of 1997 and
Lilienthal Associates in the fourth quarter of 1996.
<TABLE>
<CAPTION>
June vs. June vs.
March June
% %
Assets Under Management and Administration June 30, March 31, June 30, Better Better
(In Billions) 1997 1997 1996 (Worse) (Worse)
- ----------------------------------------------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets Under Management:
Investment Management $ 42.3 $ 38.6 $ 35.5 9.6 18.9
Special Fiduciary 15.4 14.7 14.8 4.9 4.7
------------ ------------- ------------- ------------ ------------
Total Assets Under Management 57.7 53.3 50.3 8.3 14.7
------------ ------------- ------------- ------------ ------------
Assets Under Administration:
Personal Custody and Other 19.2 15.9 14.6 21.2 32.1
Corporate and Municipal Trusteeships
and Agency Relationships at Par Value 234.8 226.0 199.7 3.8 17.6
------------ ------------- ------------- ------------ ------------
Total Assets Under Administration 254.0 241.9 214.3 5.0 18.6
------------ ------------- ------------- ------------ ------------
Total Assets Under Management and
Administration $311.7 $295.2 $264.6 5.6 17.8
============ ============= ============= ============ ============
</TABLE>
14
<PAGE> 15
Approximately $5.3 billion of assets under management were invested in
the Corporation's Excelsior Funds at June 30, 1997. At March 31, 1997 and June
30, 1996, total assets under management invested in the Excelsior Funds were
$5.1 billion and $4.3 billion, respectively.
NET INTEREST REVENUE
<TABLE>
<CAPTION>
Three Month Periods Ended
-------------------------------- %
June 30, June 30, Better
(In Thousands) 1997 1996 (Worse)
---------------------------------- ------------- ------------ -----------
<S> <C> <C> <C>
Interest Income $53,026 $40,797 30.0
Interest Expense 30,709 21,484 (42.9)
------------- ------------ -----------
Net Interest Income 22,317 19,313 15.6
Provision for Credit Losses 150 250 40.0
------------- ------------ -----------
Net Interest Revenue $22,167 $19,063 16.3
============= ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Six Month Periods Ended
-------------------------------- %
June 30, June 30, Better
(In Thousands) 1997 1996 (Worse)
---------------------------------- ------------- ------------ -----------
<S> <C> <C> <C>
Interest Income $104,628 $80,890 29.3
Interest Expense 60,263 42,111 (43.1)
------------- ------------ -----------
Net Interest Income 44,365 38,779 14.4
Provision for Credit Losses 450 500 10.0
------------- ------------ -----------
Net Interest Revenue $43,915 $38,279 14.7
============= ============ ===========
</TABLE>
Net interest revenue is affected by changes in interest rates, funding
strategies, and the relative proportion and composition of interest bearing and
non-interest bearing financial instruments. Although the net yield on interest
earning assets has declined from 3.39% for the quarter ended June 30, 1996 to
3.06% for the quarter ended June 30, 1997, this has been offset by a higher
volume of interest earning assets.
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Month Periods Ended
----------------------------- %
June 30, June 30, Better
(In Thousands) 1997 1996 (Worse)
----------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Salaries $25,220 $23,017 (9.6)
Employee Benefits and
Performance Compensation 16,443 13,322 (23.4)
----------- ----------- -----------
Total Salaries and Benefits 41,663 36,339 (14.7)
Net Occupancy 9,192 8,142 (12.9)
Other 18,834 17,973 (4.8)
----------- ----------- -----------
Total Operating Expenses $69,689 $62,454 (11.6)
=========== =========== ===========
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION> Six Month Periods Ended
----------------------------- %
June 30, June 30, Better
(In Thousands) 1997 1996 (Worse)
----------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Salaries $ 48,806 $ 44,920 (8.7)
Employee Benefits and
Performance Compensation 33,363 25,607 (30.3)
----------- ----------- ------------
Total Salaries and Benefits 82,169 70,527 (16.5)
Net Occupancy 18,396 16,381 (12.3)
Other 38,034 36,422 (4.4)
----------- ----------- ------------
Total Operating Expenses $138,599 $123,330 (12.4)
=========== =========== ============
</TABLE>
Operating expenses increased by $7.2 million in the second quarter of
1997, compared to the second quarter of 1996. The Corporation's pre-tax margin
was 22.6% for the second quarter of 1997 and 21.4% for the second quarter of
1996.
For the first half of 1997, operating expenses increased by $15.3
million, compared to the first half of 1996. The Corporation's pre-tax margin
was 22.4% for the first half of 1997 and 21.4% for the first half of 1996.
Employee benefits and performance compensation expense was the
principal reason for the rise in operating expenses in both periods. Performance
compensation is determined based upon the Corporation's financial performance as
measured by the Corporation's earnings per share, adjusted to offset the impact
of extraordinary or nonrecurring events, or other changes, conditions or
circumstances that warrant adjustment. Employee benefit expense is typically a
function of staffing levels. The number of full-time equivalent employees
increased 4.9% to 1,496 at June 30, 1997, compared to 1,426 at June 30, 1996.
The Corporation makes a substantial commitment to sales, marketing and
advertising. As of June 30, 1997, approximately 107 employees were devoted to
these functions compared to 93 employees as of June 30, 1996. Direct expenses
associated with these functions, including salary, employee benefits and
performance compensation (principally sales commissions) were $6.3 million for
the second quarter of 1997, and $6.2 million during the corresponding 1996
period. Direct expenses increased minimally during the second quarter of 1997
compared to the second quarter of 1996 due to a change in timing of payments of
sales incentives from the second quarter in 1996 to the first quarter in 1997.
For the first half of the 1997 direct expenses amounted to $13.5 million an
increase of 15.3% from the $11.7 million incurred during the first half of 1996.
In addition to the aforementioned expenses, occupancy expense directly allocable
to these functions amounted to approximately $501,000 and $451,000 for the
second quarters of 1997 and 1996, respectively and $1.0 million and $904,000 for
the first six months of 1997 and 1996, respectively.
The Corporation has established a task force to evaluate, coordinate
and execute any systems changes that may be required by the year 2000 date
change. The Corporation is working with The Chase Manahattan Corporation
(provider of certain of the Corporation's data processing systems) as well as
other vendors to ensure compliance with required systems changes.
INCOME TAXES
The effective tax rate for the 1997 second quarter and first half was
39.0%, compared to 42.0% for the 1996 second quarter and first half. The decline
in the effective tax rate is due to a decrease in state and local income taxes,
resulting from the increasing contribution to income from the national expansion
of the Corporation's businesses.
16
<PAGE> 17
FINANCIAL CONDITION
CAPITAL
The Corporation's ratio of Tier 1 Capital to period end risk-adjusted
assets (as defined by the Federal Reserve Board) was 14.6% at June 30, 1997 and
11.0% at June 30, 1996. The ratio of Total Capital to period end risk-adjusted
assets was 15.7% at June 30, 1997 and 12.2% at June 30, 1996. The Tier 1
Leverage (Tier 1 Capital as of the period end divided by quarterly (3 month)
total average assets) was 7.1% at June 30, 1997 and 5.7% at June 30, 1996. The
Corporation's capital ratios were positively impacted as a result of the
issuance of $50.0 million of Trust Preferred Capital Securities on January 28,
1997 (see Notes to the Condensed Consolidated Financial Statements No. 2).
On January 28, 1997, the Corporation announced a two-for-one stock
split of its common shares effected in the form of a stock dividend distributed
on February 21, 1997, to shareholders of record on February 7, 1997. The impact
of the stock split has been reflected in the 1996 Condensed Consolidated
Statement of Condition and in all earnings per share calculations.
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure that the Corporation
can meet its cash flow requirements and to capitalize on opportunities for the
Corporation's business expansion. Management monitors the liquidity position of
the Corporation's subsidiaries on an ongoing basis to ensure that funds are
available to meet loan and deposit cash flow requirements. The liquidity profile
is also structured to ensure that the capital needs of the Parent and its
subsidiaries are met on a day to day basis.
The Corporation's liquidity requirements consist mainly of dividend
payments to common stockholders, interest and principal payments to debt holders
and purchases of its common stock. On January 28, 1997, the Corporation
announced a 20% increase in the Corporation's regular quarterly dividend,
indicating an annual dividend rate of $0.60 per share. During the first six
months of 1997, the Board of Directors declared two quarterly dividends of $0.15
per share.
The Board of Directors authorized the repurchase of up to a total of
two million shares of common stock. During the first six months of 1997, the
Corporation had repurchased 522,590 shares at a weighted average purchase price
of $45.63 per share. The repurchased shares will be used to meet the Parent's
obligations under its stock-based benefit plans and for general capital
management purposes.
The Parent's sources of liquidity are primarily derived from dividends
from its subsidiaries, issuances of common stock and issuances of long and
short-term debt instruments. At June 30, 1997, the subsidiaries have the ability
to pay dividends of approximately $43.9 million without prior approval of the
regulatory authorities. The proceeds from the issuance of Trust Preferred
Capital Securities (see Notes to the Condensed Consolidated Financial Statements
No. 2) have been used for general corporate purposes, including the acquisition
of the Corporation's common stock.
The Corporation has a $40.0 million unsecured revolving credit facility
maturing in 1999. As of June 30, 1997, the Corporation had no borrowings
outstanding under this facility. Additionally, the Parent may borrow, subject to
certain regulatory restrictions, on a fully collateralized basis from its
subsidiaries.
Subsidiaries of the Corporation have established credit facilities with
the Federal Home Loan Bank ("FHLB") totaling approximately $107.6 million. As of
June 30, 1997, the subsidiaries have borrowed $21.0 million on these facilities
from the FHLB.
17
<PAGE> 18
Liquidity is also generated from the types of financial instruments
that the subsidiaries carry as investments. Approximately $1.03 billion or 86%
of the securities portfolio is invested in U.S. Treasury obligations or
securities backed by the full faith and credit of the U.S. Government. These
securities are readily marketable and may be sold or financed through repurchase
agreements, as appropriate. At June 30, 1997, securities sold under agreements
to repurchase aggregated $54.9 million.
ASSET/LIABILITY MANAGEMENT
The objective of asset and liability management is to maximize net
interest revenue while maintaining a high level of asset quality, acceptable
levels of interest rate sensitivity and adequate liquidity.
The Corporation's asset mix is principally liquid and low-risk.
Approximately 40% of average total assets for the first six months of 1997,
consist of short-term financial instruments and readily marketable securities.
The securities portfolio is concentrated in investments in U.S. Government
securities and investment securities backed by the full faith and credit of the
U.S. Government.
The loan portfolio is the largest component of average total assets.
For the 1997 first half, average loans comprise approximately 49% of average
assets. Average loans increased $239.9 million, or 16.8%, to $1.7 billion during
the first half of 1997, from $1.4 billion for the first half of 1996. See the
"Asset Quality" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations for a further discussion of the
Corporation's loan portfolio.
Interest Rate Sensitivity
The Corporation is exposed to interest rate risk primarily through its
mortgage lending activities and through its investments in mortgage backed
securities. Net interest revenue may be generated from prudent asset/liability
management activities that may result in timing differences in the maturity
and/or repricing of assets, liabilities and off balance sheet positions. The
results of these timing differences is presented below in the interest
sensitivity gap analysis. Gap analysis has inherent limitations as an analytical
tool because it measures the Corporation's exposure to interest rate risk at a
single point in time. The Corporation also uses simulation analysis to monitor
and control net interest revenue at risk and the economic value of equity at
risk under multiple interest rate scenarios.
To reflect anticipated payments, certain asset and liability categories
(including items with no stated maturity) are included in the table based on
estimated rather than contractual maturity or repricing dates.
18
<PAGE> 19
<TABLE>
<CAPTION>
0 - 3 4 - 6 7 - 12 1 - 5 Over
(In Thousands) Months Months Months Years 5 Years Total
- ------------------------------------------ ----------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Securities $ 513,434 $ 141,461 $ 156,148 $ 473,988 $ 173,974 $ 1,459,005
Loans, Net of Allowance
for Credit Losses 673,846 45,312 90,665 649,026 283,032 1,741,881
----------- --------- --------- ----------- --------- -----------
Total Interest Earning Assets 1,187,280 186,773 246,813 1,123,014 457,006 3,200,886
----------- --------- --------- ----------- --------- -----------
INTEREST BEARING LIABILITIES:
Interest Bearing Deposits (1,801,426) (19,139) (33,074) (52,984) -- (1,906,623)
Short-Term Credit Facilities (348,801) -- -- -- -- (348,801)
Trust Preferred Capital Securities -- -- -- -- (50,000) (50,000)
Long-Term Debt -- (1,000) (1,000) (20,254) (1,000) (23,254)
----------- --------- --------- ----------- --------- -----------
Total Interest Bearing Liabilities (2,150,227) (20,139) (34,074) (73,238) (51,000) (2,328,678)
----------- --------- --------- ----------- --------- -----------
Asset/(Liability) Sensitivity Gap (962,947) 166,634 212,739 1,049,776 406,006 872,208
Interest Rate Swaps 617,250* (750) (81,500) (410,000) (125,000) --
----------- --------- --------- ----------- --------- -----------
Interest Rate Sensitivity Gap (345,697) 165,884 131,239 639,776 281,006 872,208
Net Non-Interest Earning Assets,
Non-Interest Bearing Liabilities and
Stockholders' Equity (367,699) -- (21,600) (255,784) (227,125) (872,208)
----------- --------- --------- ----------- --------- -----------
Maturity/Repricing Gap (713,396) 165,884 109,639 383,992 53,881 --
----------- --------- --------- ----------- --------- -----------
Cumulative Gap $ (713,396) $(547,512) $(437,873) $ (53,881) $ -- $ --
=========== ========= ========= =========== ========= ===========
</TABLE>
* Includes $618.0 million of total outstanding notional principal net of
maturing and amortizing Swaps.
As part of its overall asset and liability management process, the
Corporation uses Swaps as hedges. Swaps mitigate the interest rate exposure
created by financing the residential real estate mortgage loans with short-term
deposits. The following table provides details, as of June 30, 1997, 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.
<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 $ 83,000 $450,000 $ 85,000 $618,000
Average Rate Paid 6.4464 % 6.7007 % 6.1703 % 6.5936 %
Average Rate Received (1) 5.8069 % 5.8208 % 5.8088 % 5.8172 %
</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, 1997 and 1996, are
detailed in the following table.
19
<PAGE> 20
<TABLE>
<CAPTION>
Three Month Periods Ended Six Month Periods Ended
-------------------------------------- ------------------------------------
(Dollars In Thousands) June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
- ---------------------- ----------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net Interest Revenue:
As Reported $22,167 $19,063 $43,915 $38,279
Excluding Hedging Activities $23,571 $20,505 $46,998 $40,748
Net Yield on Interest Earning Assets:
As Reported 3.06% 3.39% 3.04% 3.44%
Excluding Hedging Activities 3.26% 3.66% 3.28% 3.66%
</TABLE>
The difference between results "As Reported" and "Excluding Hedging
Activities" in each period reflects the cost of utilizing swaps to hedge
interest rate risk.
Interest Earning Securities
Interest earning securities are comprised of $90.8 million and $202.0
million of interest bearing deposits with banks, $1.20 billion and $1.17 billion
of securities available for sale and $166.0 million and $84.0 million of federal
funds sold at June 30, 1997 and December 31, 1996, respectively.
During the first six months of 1997, the Corporation purchased
approximately $472.2 million (principally U.S. Government Treasury and Federal
agency) of securities classified as available for sale. Approximately 86% 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
variable rate collateralized mortgage obligations ("CMOs") and obligations of
states and municipalities. CMOs principally are collateralized by GNMAs.
At June 30, 1997, the market value of interest earning securities
exceeded their amortized cost by $1.9 million. The amortized cost of interest
earning securities exceeded their market value by $3.6 million at June 30, 1996.
The Corporation classified all of its securities portfolio as "available for
sale". While the Corporation does not trade its securities portfolio, it needs
to have the ability to sell securities as required to meet its asset/liability
objectives.
ASSET QUALITY
The Corporation's loan portfolio is predominantly comprised of loans to
private banking customers. At June 30, 1997, the loan portfolio totaled $1.8
billion of which over 72% were collateralized by residential real estate
mortgages.
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) 1997 1996 1997 1996
- -------------------------------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Balance, Beginning of Period $17,268 $16,160 $16,693 $16,086
Provision for Credit Losses 150 250 450 500
Recoveries 211 67 486 275
Charge-offs - (275) - (659)
------------- ------------- ------------ ------------
Net (Charge-Offs) Recoveries 211 (208) 486 (384)
------------ ------------- ------------- ------------
Balance, End of Period $17,629 $16,202 $17,629 $16,202
============ ============ ============= ============
</TABLE>
20
<PAGE> 21
The level of the allowance for credit losses is based upon management's
judgment as to the current condition of the credit portfolio, which includes
loans, commitments to extend credit and standby letters or credit, determined by
a continuous surveillance process. In assessing the 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.
As a percentage of average loans, annualized net loan recoveries were
five basis points for the second quarter of 1997, compared to annualized net
loan charge-offs of six basis points for the second quarter of 1996. For the
first half of 1997, annualized net loan recoveries as a percentage of average
loans were six basis points, versus annualized net loan charge-offs of five
basis points for the first half of 1996. The allowance for credit losses at June
30, 1997, was 1.04% of average loans for the quarter. This compares with 1.09%
of average loans for the quarter ended June 30, 1996. Given the current market
environment, it is anticipated that the allowance for credit losses as a
percentage of loans will continue to decrease.
Nonperforming assets, which include non-accrual ("impaired") loans and
real estate acquired through foreclosure or restructurings, for the most recent
five quarters are as follows:
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, Sept. 30, June 30,
(In Millions) 1997 1997 1996 1996 1996
- --------------------------------- -------------- ------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $8.8 $8.8 $8.9 $10.8 $12.2
Real estate owned, net 0.7 0.7 0.7 7.0 7.0
-------------- ------------ --------------- -------------- ---------------
Total Nonperforming Assets $9.5 $9.5 $9.6 $17.8 $19.2
============== ============ =============== ============== ===============
</TABLE>
Other real estate owned is net of a reserve for selling and disposition
costs of $477,000 at June 30, 1997, March 31, 1997 and December 31, 1996 and
$978,000 for the second and third quarters of 1996.
The allowance for credit losses as a percentage of non-accrual loans
was 200.2% at June 30, 1997, compared to 133.1% at June 30, 1996. The ratio of
nonperforming assets to average loans and real estate owned for the quarter was
0.6% at June 30, 1997, compared to 1.3% at June 30, 1996.
21
<PAGE> 22
<TABLE>
<CAPTION>
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)
FOR THE THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------------------------------
1997 1996
-------------------------------------------- -----------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ----
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Securities (1) (2) $ 1,332,254 $ 21,267 6.40% $ 876,459 $12,975 5.95%
Loans (3) 1,699,592 32,642 7.70 1,492,522 28,539 7.69
----------- ----------- ---- ---------- ------- ----
Total Interest Earning Assets 3,031,846 53,909 7.12 2,368,981 41,514 7.04
----------- ----------- ---- ---------- ------- ----
Allowance for Credit Losses (17,445) (16,278)
Cash and Due from Banks 70,220 74,266
Other Assets 333,602 299,393
----------- -----------
Total Assets $ 3,418,223 $ 2,726,362
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits $ 2,087,345 25,206 4.84 $1,638,152 18,859 4.63
Short-Term Credit Facilities 292,065 4,033 5.54 160,924 2,147 5.37
Trust Preferred Capital Securities 50,000 1,059 8.47 -- -- --
Long-Term Debt 23,254 411 7.09 26,468 478 7.22
----------- ----------- ---- ---------- ------- ----
Total Sources on Which
Interest is Paid 2,452,664 30,709 5.02 1,825,544 21,484 4.73
----------- ----------- ---- ---------- ------- ----
Total Non-Interest Bearing
Deposits 507,466 477,534
Other Liabilities 230,229 223,528
Stockholders' Equity (3) 227,864 199,756
----------- -----------
Total Liabilities and
Stockholders' Equity $ 3,418,223 $ 2,726,362
=========== ===========
Net Interest Revenue -
Tax Equivalent Basis 23,200 20,030
Credit Loss Provision (150) (250)
Tax Equivalent Adjustment (2) (883) (717)
----------- -------
Net Interest Revenue $ 22,167 $19,063
=========== =======
Net Yield on Interest
Earning Assets 3.06% 3.39%
===== =====
Interest Spread 2.10% 2.31%
===== =====
(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 a marginal tax rate of 47%.
(3) Loans and Stockholders' Equity have been increased to include the Loan to ESOP, which had an average balance
of $7.3 million in 1997 and $10.5 million in 1996.
22
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
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)
FOR THE SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------------------
1997 1996
------------------------------------------- ----------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Securities (1) (2) $ 1,357,109 $ 42,332 6.29% $ 898,029 $26,238 5.88%
Loans (3) 1,679,548 64,098 7.70 1,442,853 55,987 7.80
----------- ----------- ---- ---------- ------- ----
Total Interest Earning Assets 3,036,657 106,430 7.05 2,340,882 82,225 7.05
----------- ----------- ---- ---------- ------- ----
Allowance for Credit Losses (17,171) (16,270)
Cash and Due from Banks 69,284 85,973
Other Assets 331,511 298,418
----------- -----------
Total Assets $ 3,420,281 $ 2,709,003
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Deposits $ 2,091,013 49,793 4.80 $1,643,599 38,160 4.67
Short-Term Credit Facilities 290,570 7,877 5.47 116,035 2,976 5.16
Trust Preferred Capital Securities 42,541 1,751 8.23 -- -- --
Long-Term Debt 23,787 842 7.12 26,973 975 7.23
----------- ----------- ---- ---------- ------- ----
Total Sources on Which
Interest is Paid 2,447,911 60,263 4.96 1,786,607 42,111 4.74
----------- ----------- ---- ---------- ------- ----
Total Non-Interest Bearing
Deposits 495,976 492,162
Other Liabilities 246,225 231,962
Stockholders' Equity (3) 230,169 198,272
----------- -----------
Total Liabilities and
Stockholders' Equity $ 3,420,281 $ 2,709,003
=========== ===========
Net Interest Revenue -
Tax Equivalent Basis 46,167 40,114
Credit Loss Provision (450) (500)
Tax Equivalent Adjustment (2) (1,802) (1,335)
----------- --------
Net Interest Revenue $ 43,915 $ 38,279
=========== ========
Net Yield on Interest
Earning Assets 3.04% 3.44%
===== =====
Interest Spread 2.09% 2.31%
===== =====
(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 a marginal tax rate of 47%.
(3) Loans and Stockholders' Equity have been increased to include the Loan to ESOP, which had an average balance of $7.8 million in
1997 and $11.0 million in 1996.
23
</TABLE>
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the Corporation was held
April 22, 1997.
(b) Not required.
(c) (i) Election of six directors to hold office for a term expiring in
2000, and, in each case, until their successors have been elected and qualified.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Peter O. Crisp Jeffrey S. Maurer
For 17,005,197 For 16,971,296
Withhold Authority 255,363 Withhold Authority 289,264
Antonia M. Grumbach David A. Olsen
For 16,736,073 For 17,006,173
Withhold Authority 524,487 Withhold Authority 254,387
Frederic C. Hamilton Richard F. Tucker
For 16,991,253 For 17,005,601
Withhold Authority 269,307 Withhold Authority 524,959
</TABLE>
(ii) Ratification of appointment of Coopers & Lybrand L.L.P. as
independent auditors for the Corporation and its consolidated subsidiaries for
the year 1997.
For 16,930,304
Against 154,428
Abstain 182,847
(iii) Approval of amendments to the 1995 Stock Option Plan.
For 13,957,569
Against 2,627,668
Abstain 182,314
(iv) Approval of amendments to the Executive Incentive Plan.
For 14,952,069
Against 1,697,290
Abstain 249,068
(d) Not applicable.
24
<PAGE> 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
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.
10.23 Form of Benefits Protection Agreement for H. Marshall Schwarz, Jeffrey
S. Maurer and Frederick B. Taylor.
10.24 Form of Benefits Protection Agreement.
10.25 Benefits Protection Agreement for Maribeth S. Rahe.
11 Statement re Computation of Net Income Per Share.
27 Financial Data Schedule.
(1) Incorporated herein by reference.
(b) REPORTS ON FORM 8-K:
None.
25
<PAGE> 26
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 13, 1997 By: Richard E. Brinkmann
--------------- ------------------------------
Richard E. Brinkmann
Comptroller and
Chief Planning Officer
(Principal Accounting Officer)
26
<PAGE> 27
EXHIBIT INDEX
Item No. Description
- -------- -----------
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.
10.23 Form of Benefits Protection Agreement for H. Marshall Schwarz, Jeffrey
S. Maurer and Frederick B. Taylor.
10.24 Form of Benefits Protection Agreement.
10.25 Benefits Protection Agreement for Maribeth S. Rahe.
11 Statement re Computation of Net Income Per Share.
27 Financial Data Schedule.
(1) Incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.23
BENEFITS PROTECTION AGREEMENT
The Benefits Protection Agreement dated October 22, 1996, by and
between U.S. Trust Corporation (the "Corporation"), United States Trust Company
of New York (the "Company") and (the "Executive") is hereby amended
and restated effective as of June 24, 1997 to read in its entirety as follows:
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Corporation (the "Boards") recognize that the possibility of a
Change in Control (as hereinafter defined) exists and that the threat or the
occurrence of a Change in Control can result in significant distraction of the
key management personnel of the Company and its affiliates because of the
uncertainties inherent in such a situation;
WHEREAS, the Boards have determined that it is essential and in the
best interests of the Company, and the Corporation and its stockholders, for the
Company and its affiliates to retain the services of the Executive in the event
of a threat or occurrence of a Change in Control and to ensure the Executive's
continued dedication and efforts in such event without undue concern for the
Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company or its affiliates, particularly in the event of a threat or the
occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide assurances to the Executive as to the
payment of certain benefits to the Executive if a Change in Control should
occur, and as to the payment of certain other benefits if the Executive's
employment is terminated following a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of October 22,
1996, and shall continue in effect until October 31, 1998 (the "Term");
provided, however, that on November 1, 1997, and on each November 1 thereafter,
the Term shall automatically be extended for one (1) year unless the Company
shall have given written notice to the Executive at least ninety (90) days prior
thereto that the Term shall not be so extended; provided, further, however, that
following the occurrence of a Change in Control, the Term shall not expire prior
to the expiration of four (4) years after such occurrence.
2. BENEFITS PAYABLE ON CHANGE IN CONTROL. If (i) a Change in Control
(as defined in Section 11(a) hereof) occurs during the Term, (ii) the
Executive's employment with the Company and all of its affiliates has not
terminated prior to the date on which such Change in Control occurs, and (iii)
such Change in Control is not treated as a "Change in Control" for purposes of
any Change
<PAGE> 2
in Control Plan (as defined in Section 11(b) hereof) maintained by the
Corporation or the Company, the Corporation or the Company, as applicable, shall
pay to the Executive pursuant to this Agreement each benefit that would have
been payable to the Executive under each such Change in Control Plan if the
Change in Control (as defined in Section 11(a) hereof) had been treated as a
"Change in Control" for purposes of such plan.
3. BENEFITS PAYABLE ON TERMINATION AFTER CHANGE IN CONTROL. If (i) a
Change in Control (as defined in Section 11(a) hereof) occurs during the Term,
(ii) the Executive's employment with the Company and all of its affiliates
terminates as a result of either (A) an Involuntary Termination (as defined in
Section 11(c) hereof) within two (2) years following such Change in Control, or
(B) the Executive's voluntarily leaving such employment during the six (6)-
month period following such Change in Control, and (iii) for purposes of any
Change in Control Plan (as defined in Section 11(b) hereof) maintained by the
Corporation or the Company, the Boards have directed by resolution that no
payments or benefits shall be made or provided under such plan as a result of
the occurrence of such Change in Control, then the Corporation or the Company,
as applicable, shall pay or provide to the Executive pursuant to this Agreement
each benefit that would have been payable or provided to the Executive upon such
termination of the Executive's employment under each such Change in Control Plan
if the Boards did not so direct.
4. BENEFITS PAYABLE ON TERMINATION OF RETIREMENT PLAN AFTER CHANGE IN
CONTROL. If (i) a Change in Control (as defined in Section 11(a) hereof) occurs
during the Term, (ii) the Employees' Retirement Plan of United States Trust
Company of New York and Affiliated Companies (the "Retirement Plan") is
terminated within four (4) years following such Change in Control, (iii) the
Executive's employment with the Company and all of its affiliates had not
terminated prior to such Change in Control, and (iv) such Change in Control is
not treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan, the Company shall pay to the Executive pursuant to this
Agreement the increased benefit that would have been payable to the Executive
under Section 13.2 of the Retirement Plan as a result of such termination of the
Retirement Plan if the Change in Control (as defined in Section 11(a) hereof)
had been treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan.
5. TERMINATION BEFORE CHANGE IN CONTROL. If the Executive's employment
with the Company and all of its affiliates is terminated by the Company or any
affiliate at any time prior to a Change in Control (as defined in Section 11(a)
hereof ) and the Executive reasonably demonstrates that such termination was at
the request of a third party who had indicated an intention or had taken steps
reasonably calculated to effect such Change in Control and who effectuated such
Change in Control, such termination of the Executive's employment shall be
treated, for purposes of this Agreement, as an Involuntary Termination (as
defined in Section 11(c) hereof) of the Executive's employment occurring
immediately after the Change in Control, and as an "Involuntary Termination" of
the Executive's employment occurring immediately after a "Change in Control" as
those terms are defined in the applicable Change in Control Plans.
-2-
<PAGE> 3
6. TIME AND MANNER OF PAYMENT. Each benefit payable to the Executive
hereunder shall be paid or provided in the same amount, in the same form, and at
the same time or for the same period, as such benefit would have been paid or
provided to the Executive under the terms of the applicable Change in Control
Plan if the Change in Control (as defined in Section 11(a) hereof) had been
treated as a "Change in Control" for purposes of such plan.
If any payment to be made to the Executive under this Agreement is or
will be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such payment. The amount of the Gross-Up Payment shall be
determined in the same manner, and shall be paid in the same form and at the
same time, as provided in the 1990 Change in Control and Severance Policy for
Top Tier Officers of United States Trust Company of New York and Affiliated
Companies.
The Corporation or the Company shall deduct from any payment otherwise
required to be made to the Executive hereunder all federal, state, local and
other taxes required by law to be withheld with respect to such payment.
7. CORPORATION'S OBLIGATION. The Corporation agrees that it will take
such steps as may be necessary to cause the Company to meet each of its
obligations to the Executive under this Agreement.
8. NON-DUPLICATION OF BENEFITS. If the Executive receives a payment
under Section 2 hereof with respect to any option held by the Executive under
the 1995 Stock Option Plan of U.S. Trust Corporation, the option so held by the
Executive shall be treated as cancelled, for purposes of such plan, effective
immediately after the Change in Control resulting in such payment. The
obligations of the Corporation or the Company to make any other payment under
any other Change in Control Plan shall be offset to the extent such payment is
made under this Agreement.
9. SUCCESSORS. This Agreement shall be binding upon the Corporation,
the Company, and any assignee or successor corporation or organization resulting
from the merger, consolidation or other reorganization thereof or succeeding to
substantially all of the assets and business of the Corporation or the Company.
The Corporation and the Company agree that they will make appropriate provision
for the preservation of the Executive's rights under this Agreement in any
agreement or plan that they may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
10. NON-ASSIGNABILITY. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, [his] [her]
beneficiaries or legal representatives,
-3-
<PAGE> 4
except by will or by the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's legal personal
representative.
11. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the common shares of the Corporation has
been acquired by any person (as defined by Section 3(a)(9) of the
Securities Exchange Act of 1934) other than directly from the
Corporation,
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation, or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not
nominated by the Corporation's Board of Directors or by the Executive
Committee of the Corporation's Board of Directors in the most recent
proxy statement of the Corporation.
(b) "CHANGE IN CONTROL PLAN" shall mean (i) in the case of the Company,
the 1990 Change in Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies; and (ii) in the case
of the Corporation, the following: the Benefit Equalization Plan of U.S. Trust
Corporation, the 1989 Stock Compensation Plan and Predecessor Plans of U.S.
Trust Corporation, the 1995 Stock Option Plan of U.S. Trust Corporation, the
Executive Incentive Plan of U.S. Trust Corporation, the Executive Deferred
Compensation Plan of U.S. Trust Corporation, the Deferred Restricted Unit Plan
of U.S. Trust Corporation, and the Supplemental Pension Agreement between the
Corporation and the Executive dated August 29, 1995. Each plan referred to in
(i) and (ii) of the preceding sentence shall mean the plan as in effect on the
date of this Agreement, and as amended from time to time thereafter; provided,
however, that no such amendment shall be taken into account for purposes of this
Agreement to the extent it would result in any reduction of the benefits payable
hereunder to the Executive with respect to such plan as in effect prior to such
amendment, unless the Executive has consented in writing to such plan amendment.
(c) "INVOLUNTARY TERMINATION" shall mean the termination of an
Executive's employment with the Company and all of its affiliates
(i) by the Company or an affiliate, or
(ii) by the Executive following
-4-
<PAGE> 5
(A) any reduction in the Executive's base salary,
or in the Executive's opportunity to earn an annual bonus
in an amount at least equal to the percentage of the
Executive's annual base salary that was used to determine
the Executive's target bonus award for the year
immediately preceding the year in which a Change in
Control occurs,
(B) any change, without the Executive's consent, in
the location of the Executive's place of employment to a
borough other than Manhattan or, if such place of
employment is not in Manhattan, to a city other than the
city in which the Executive's place of employment is
located,
(C) any material diminishment of the Executive's
responsibilities with respect to the business of the
Company or an affiliate, or
(D) any other material adverse change in the
conditions of the Executive's employment with the Company
or an affiliate.
An Involuntary Termination pursuant to clause (ii) above shall be
deemed to occur within two (2) years following a Change in Control if the event
described in subclause (A), (B), (C) or (D) that gives rise to such termination
occurs within two (2) years following a Change in Control and such termination
occurs within six (6) months after such event.
IN WITNESS WHEREOF, the Corporation and the Company have caused this
amended and restated Agreement to be executed by the duly authorized Chairman of
the Compensation and Benefits Committee of their respective Boards of Directors,
and the Executive has executed this amended and restated Agreement, as of June
24, 1997.
U.S. TRUST CORPORATION
ATTEST: By:
-----------------------------------
Philip L. Smith, Chairman
- ------------------------------ Compensation and Benefits Committee
Secretary
UNITES STATES TRUST COMPANY
OF NEW YORK
ATTEST: By:
-----------------------------------
Philip L. Smith, Chairman
- ------------------------------ Compensation and Benefits Committee
Secretary
----------------------------------
[Name of Executive]
-5-
<PAGE> 1
EXHIBIT 10.24
BENEFITS PROTECTION AGREEMENT
The Benefits Protection Agreement dated October 22, 1996, by and
between U.S. Trust Corporation (the "Corporation"), United States Trust Company
of New York (the "Company") and (the "Executive") is hereby amended
and restated effective as of June 24, 1997 to read in its entirety as follows:
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Corporation (the "Boards") recognize that the possibility of a
Change in Control (as hereinafter defined) exists and that the threat or the
occurrence of a Change in Control can result in significant distraction of the
key management personnel of the Company and its affiliates because of the
uncertainties inherent in such a situation;
WHEREAS, the Boards have determined that it is essential and in the
best interests of the Company, and the Corporation and its stockholders, for the
Company and its affiliates to retain the services of the Executive in the event
of a threat or occurrence of a Change in Control and to ensure the Executive's
continued dedication and efforts in such event without undue concern for the
Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company or its affiliates, particularly in the event of a threat or the
occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide assurances to the Executive as to the
payment of certain benefits to the Executive if a Change in Control should
occur, and as to the payment of certain other benefits if the Executive's
employment is terminated following a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of October 22,
1996, and shall continue in effect until October 31, 1998 (the "Term");
provided, however, that on November 1, 1997, and on each November 1 thereafter,
the Term shall automatically be extended for one (1) year unless the Company
shall have given written notice to the Executive at least ninety (90) days prior
thereto that the Term shall not be so extended; provided, further, however, that
following the occurrence of a Change in Control, the Term shall not expire prior
to the expiration of four (4) years after such occurrence.
2. BENEFITS PAYABLE ON CHANGE IN CONTROL. If (i) a Change in Control
(as defined in Section 11(a) hereof) occurs during the Term, (ii) the
Executive's employment with the Company and all of its affiliates has not
terminated prior to the date on which such Change in Control occurs, and (iii)
such Change in Control is not treated as a "Change in Control" for purposes of
any Change
<PAGE> 2
in Control Plan (as defined in Section 11(b) hereof) maintained by the
Corporation or the Company, the Corporation or the Company, as applicable, shall
pay to the Executive pursuant to this Agreement each benefit that would have
been payable to the Executive under each such Change in Control Plan if the
Change in Control (as defined in Section 11(a) hereof) had been treated as a
"Change in Control" for purposes of such plan.
3. BENEFITS PAYABLE ON INVOLUNTARY TERMINATION AFTER CHANGE IN CONTROL.
If (i) a Change in Control (as defined in Section 11(a) hereof) occurs during
the Term, (ii) the Executive's employment with the Company and all of its
affiliates terminates as a result of an Involuntary Termination (as defined in
Section 11(c) hereof) within two (2) years following such Change in Control, and
(iii) for purposes of any Change in Control Plan (as defined in Section 11(b)
hereof) maintained by the Corporation or the Company, the Boards have directed
by resolution that no payments or benefits shall be made or provided under such
plan as a result of the occurrence of such Change in Control, then the
Corporation or the Company, as applicable, shall pay or provide to the Executive
pursuant to this Agreement each benefit that would have been payable or provided
to the Executive upon such termination of the Executive's employment under each
such Change in Control Plan if the Boards did not so direct.
4. BENEFITS PAYABLE ON TERMINATION OF RETIREMENT PLAN AFTER CHANGE IN
CONTROL. If (i) a Change in Control (as defined in Section 11(a) hereof) occurs
during the Term, (ii) the Employees' Retirement Plan of United States Trust
Company of New York and Affiliated Companies (the "Retirement Plan") is
terminated within four (4) years following such Change in Control, (iii) the
Executive's employment with the Company and all of its affiliates had not
terminated prior to such Change in Control, and (iv) such Change in Control is
not treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan, the Company shall pay to the Executive pursuant to this
Agreement the increased benefit that would have been payable to the Executive
under Section 13.2 of the Retirement Plan as a result of such termination of the
Retirement Plan if the Change in Control (as defined in Section 11(a) hereof)
had been treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan.
5. TERMINATION BEFORE CHANGE IN CONTROL. If the Executive's employment
with the Company and all of its affiliates is terminated by the Company or any
affiliate at any time prior to a Change in Control (as defined in Section 11(a)
hereof) and the Executive reasonably demonstrates that such termination was at
the request of a third party who had indicated an intention or had taken steps
reasonably calculated to effect such Change in Control and who effectuated such
Change in Control, such termination of the Executive's employment shall be
treated, for purposes of this Agreement, as an Involuntary Termination (as
defined in Section 11(c) hereof) of the Executive's employment occurring
immediately after the Change in Control, and as an "Involuntary Termination" of
the Executive's employment occurring immediately after a "Change in Control" as
those terms are defined in the applicable Change in Control Plans.
6. TIME AND MANNER OF PAYMENT. Each benefit payable to the Executive
hereunder shall be paid or provided in the same amount, in the same form, and at
the same time or for the same
-2-
<PAGE> 3
period, as such benefit would have been paid or provided to the Executive under
the terms of the applicable Change in Control Plan if the Change in Control (as
defined in Section 11(a) hereof) had been treated as a "Change in Control" for
purposes of such plan.
If any payment to be made to the Executive under this Agreement is or
will be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such payment. The amount of the Gross-Up Payment shall be
determined in the same manner, and shall be paid in the same form and at the
same time, as provided in the 1990 Change in Control and Severance Policy for
Top Tier Officers of United States Trust Company of New York and Affiliated
Companies.
The Corporation or the Company shall deduct from any payment otherwise
required to be made to the Executive hereunder all federal, state, local and
other taxes required by law to be withheld with respect to such payment.
7. CORPORATION'S OBLIGATION. The Corporation agrees that it will take
such steps as may be necessary to cause the Company to meet each of its
obligations to the Executive under this Agreement.
8. NON-DUPLICATION OF BENEFITS. If the Executive receives a payment
under Section 2 hereof with respect to any option held by the Executive under
the 1995 Stock Option Plan of U.S. Trust Corporation, the option so held by the
Executive shall be treated as cancelled, for purposes of such plan, effective
immediately after the Change in Control resulting in such payment. The
obligations of the Corporation or the Company to make any other payment under
any other Change in Control Plan shall be offset to the extent such payment is
made under this Agreement.
9. SUCCESSORS. This Agreement shall be binding upon the Corporation,
the Company, and any assignee or successor corporation or organization resulting
from the merger, consolidation or other reorganization thereof or succeeding to
substantially all of the assets and business of the Corporation or the Company.
The Corporation and the Company agree that they will make appropriate provision
for the preservation of the Executive's rights under this Agreement in any
agreement or plan that they may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
10. NON-ASSIGNABILITY. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, [his] [her]
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
-3-
<PAGE> 4
11. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the common shares of the Corporation has
been acquired by any person (as defined by Section 3(a)(9) of the
Securities Exchange Act of 1934) other than directly from the
Corporation,
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation, or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not
nominated by the Corporation's Board of Directors or by the Executive
Committee of the Corporation's Board of Directors in the most recent
proxy statement of the Corporation.
(b) "CHANGE IN CONTROL PLAN" shall mean (i) in the case of the Company,
the 1990 Change in Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies; and (ii) in the case
of the Corporation, the following: the Benefit Equalization Plan of U.S. Trust
Corporation, the 1989 Stock Compensation Plan and Predecessor Plans of U.S.
Trust Corporation, the 1995 Stock Option Plan of U.S. Trust Corporation, the
Executive Incentive Plan of U.S. Trust Corporation, the Executive Deferred
Compensation Plan of U.S. Trust Corporation, and the Deferred Restricted Unit
Plan of U.S. Trust Corporation. Each plan referred to in (i) and (ii) of the
preceding sentence shall mean the plan as in effect on the date of this
Agreement, and as amended from time to time thereafter; provided, however, that
no such amendment shall be taken into account for purposes of this Agreement to
the extent it would result in any reduction of the benefits payable hereunder to
the Executive with respect to such plan as in effect prior to such amendment,
unless the Executive has consented in writing to such plan amendment.
(c) "INVOLUNTARY TERMINATION" shall mean the termination of an
Executive's employment with the Company and all of its affiliates
(i) by the Company or an affiliate, or
(ii) by the Executive following
(A) any reduction in the Executive's base salary,
or in the Executive's opportunity to earn an annual bonus
in an amount at least equal to the percentage of the
Executive's annual base salary that was used to determine
the
-4-
<PAGE> 5
Executive's target bonus award for the year immediately
preceding the year in which a Change in Control occurs,
(B) any change, without the Executive's consent, in
the location of the Executive's place of employment to a
borough other than Manhattan or, if such place of
employment is not in Manhattan, to a city other than the
city in which the Executive's place of employment is
located,
(C) any material diminishment of the Executive's
responsibilities with respect to the business of the
Company or an affiliate, or
(D) any other material adverse change in the
conditions of the Executive's employment with the Company
or an affiliate.
An Involuntary Termination pursuant to clause (ii) above shall be
deemed to occur within two (2) years following a Change in Control if the event
described in subclause (A), (B), (C) or (D) that gives rise to such termination
occurs within two (2) years following a Change in Control and such termination
occurs within six (6) months after such event.
IN WITNESS WHEREOF, the Corporation and the Company have caused this
amended and restated Agreement to be executed by their duly authorized officers
and the Executive has executed this amended and restated Agreement as of the day
and year first above written.
U.S. TRUST CORPORATION
ATTEST: By: ------------------------------------
H. Marshall Schwarz
- ------------------------------ Chairman and Chief Executive Officer
Secretary
UNITES STATES TRUST COMPANY
OF NEW YORK
ATTEST: By: -------------------------------------
H. Marshall Schwarz
- ------------------------------ Chairman and Chief Executive Officer
Secretary
------------------------------------------
[Name of Executive]
-5-
<PAGE> 1
EXHIBIT 10.25
BENEFITS PROTECTION AGREEMENT
THIS AGREEMENT made as of the 30th day of June, 1997, by and between
U.S. Trust Corporation (the "Corporation"), United States Trust Company of New
York (the "Company") and Maribeth S. Rahe (the "Executive").
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Corporation (the "Boards") recognize that the possibility of a
Change in Control (as hereinafter defined) exists and that the threat or the
occurrence of a Change in Control can result in significant distraction of the
key management personnel of the Company and its affiliates because of the
uncertainties inherent in such a situation;
WHEREAS, the Boards have determined that it is essential and in the
best interests of the Company, and the Corporation and its stockholders, for the
Company and its affiliates to retain the services of the Executive in the event
of a threat or occurrence of a Change in Control and to ensure the Executive's
continued dedication and efforts in such event without undue concern for the
Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company or its affiliates, particularly in the event of a threat or the
occurrence of a Change in Control, the Company desires to enter into this
Agreement with the Executive to provide assurances to the Executive as to the
payment of certain benefits to the Executive if a Change in Control should
occur, and as to the payment of certain other benefits if the Executive's
employment is terminated following a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of June 30,
1997, and shall continue in effect until June 30, 1999 (the "Term"); provided,
however, that on July 1, 1998, and on each July 1 thereafter, the Term shall
automatically be extended for one (1) year unless the Company shall have given
written notice to the Executive at least ninety (90) days prior thereto that the
Term shall not be so extended; provided, further, however, that following the
occurrence of a Change in Control, the Term shall not expire prior to the
expiration of four (4) years after such occurrence.
2. BENEFITS PAYABLE ON CHANGE IN CONTROL. If (i) a Change in Control
(as defined in Section 11(a) hereof) occurs during the Term, (ii) the
Executive's employment with the Company and all of its affiliates has not
terminated prior to the date on which such Change in Control occurs, and (iii)
such Change in Control is not treated as a "Change in Control" for purposes of
any Change in Control Plan (as defined in Section 11(b) hereof) maintained by
the Corporation or the Company, the Corporation or the Company, as applicable,
shall pay to the Executive pursuant to this
<PAGE> 2
Agreement each benefit that would have been payable to the Executive under each
such Change in Control Plan if the Change in Control (as defined in Section
11(a) hereof) had been treated as a "Change in Control" for purposes of such
plan.
3. BENEFITS PAYABLE ON TERMINATION AFTER CHANGE IN CONTROL. If (i) a
Change in Control (as defined in Section 11(a) hereof) occurs during the Term,
(ii) the Executive's employment with the Company and all of its affiliates
terminates as a result of either (A) an Involuntary Termination (as defined in
Section 11(c) hereof) within two (2) years following such Change in Control, or
(B) the Executive's voluntarily leaving such employment during the six (6)-
month period following such Change in Control, and (iii) for purposes of any
Change in Control Plan (as defined in Section 11(b) hereof) maintained by the
Corporation or the Company, the Boards have directed by resolution that no
payments or benefits shall be made or provided under such plan as a result of
the occurrence of such Change in Control, then the Corporation or the Company,
as applicable, shall pay or provide to the Executive pursuant to this Agreement
each benefit that would have been payable or provided to the Executive upon such
termination of the Executive's employment under each such Change in Control Plan
if the Boards did not so direct.
4. BENEFITS PAYABLE ON TERMINATION OF RETIREMENT PLAN AFTER CHANGE IN
CONTROL. If (i) a Change in Control (as defined in Section 11(a) hereof) occurs
during the Term, (ii) the Employees' Retirement Plan of United States Trust
Company of New York and Affiliated Companies (the "Retirement Plan") is
terminated within four (4) years following such Change in Control, (iii) the
Executive's employment with the Company and all of its affiliates had not
terminated prior to such Change in Control, and (iv) such Change in Control is
not treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan, the Company shall pay to the Executive pursuant to this
Agreement the increased benefit that would have been payable to the Executive
under Section 13.2 of the Retirement Plan as a result of such termination of the
Retirement Plan if the Change in Control (as defined in Section 11(a) hereof)
had been treated as a "Change in Control" for purposes of Section 13.2 of the
Retirement Plan.
5. TERMINATION BEFORE CHANGE IN CONTROL. If the Executive's employment
with the Company and all of its affiliates is terminated by the Company or any
affiliate at any time prior to a Change in Control (as defined in Section 11(a)
hereof ) and the Executive reasonably demonstrates that such termination was at
the request of a third party who had indicated an intention or had taken steps
reasonably calculated to effect such Change in Control and who effectuated such
Change in Control, such termination of the Executive's employment shall be
treated, for purposes of this Agreement, as an Involuntary Termination (as
defined in Section 11(c) hereof) of the Executive's employment occurring
immediately after the Change in Control, and as an "Involuntary Termination" of
the Executive's employment occurring immediately after a "Change in Control" as
those terms are defined in the applicable Change in Control Plans.
6. TIME AND MANNER OF PAYMENT. Each benefit payable to the Executive
hereunder shall be paid or provided in the same amount, in the same form, and at
the same time or for the same period, as such benefit would have been paid or
provided to the Executive under the terms of the
-2-
<PAGE> 3
applicable Change in Control Plan if the Change in Control (as defined in
Section 11(a) hereof) had been treated as a "Change in Control" for purposes of
such plan.
If any payment to be made to the Executive under this Agreement is or
will be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon such payment. The amount of the Gross-Up Payment shall be
determined in the same manner, and shall be paid in the same form and at the
same time, as provided in the 1990 Change in Control and Severance Policy for
Top Tier Officers of United States Trust Company of New York and Affiliated
Companies.
The Corporation or the Company shall deduct from any payment otherwise
required to be made to the Executive hereunder all federal, state, local and
other taxes required by law to be withheld with respect to such payment.
7. CORPORATION'S OBLIGATION. The Corporation agrees that it will take
such steps as may be necessary to cause the Company to meet each of its
obligations to the Executive under this Agreement.
8. NON-DUPLICATION OF BENEFITS. If the Executive receives a payment
under Section 2 hereof with respect to any option held by the Executive under
the 1995 Stock Option Plan of U.S. Trust Corporation, the option so held by the
Executive shall be treated as cancelled, for purposes of such plan, effective
immediately after the Change in Control resulting in such payment. The
obligations of the Corporation or the Company to make any other payment under
any other Change in Control Plan shall be offset to the extent such payment is
made under this Agreement.
9. SUCCESSORS. This Agreement shall be binding upon the Corporation,
the Company, and any assignee or successor corporation or organization resulting
from the merger, consolidation or other reorganization thereof or succeeding to
substantially all of the assets and business of the Corporation or the Company.
The Corporation and the Company agree that they will make appropriate provision
for the preservation of the Executive's rights under this Agreement in any
agreement or plan that they may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
10. NON-ASSIGNABILITY. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive, or by her
beneficiaries or legal representatives, except by will or by the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
-3-
<PAGE> 4
11. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "CHANGE IN CONTROL" shall mean that any of the following events has
occurred:
(i) 20% or more of the common shares of the Corporation has
been acquired by any person (as defined by Section 3(a)(9) of the
Securities Exchange Act of 1934) other than directly from the
Corporation,
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of the surviving corporation is
held by persons other than former shareholders of the Corporation, or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors of the Corporation are persons who were not
nominated by the Corporation's Board of Directors or by the Executive
Committee of the Corporation's Board of Directors in the most recent
proxy statement of the Corporation.
(b) "CHANGE IN CONTROL PLAN" shall mean (i) in the case of the Company,
the 1990 Change in Control and Severance Policy for Top Tier Officers of United
States Trust Company of New York and Affiliated Companies; and (ii) in the case
of the Corporation, the following: the Benefit Equalization Plan of U.S. Trust
Corporation, the 1995 Stock Option Plan of U.S. Trust Corporation, the Executive
Incentive Plan of U.S. Trust Corporation, the Executive Deferred Compensation
Plan of U.S. Trust Corporation, and the Deferred Restricted Unit Plan of U.S.
Trust Corporation. Each plan referred to in (i) and (ii) of the preceding
sentence shall mean the plan as in effect on the date of this Agreement, and as
amended from time to time thereafter; provided, however, that no such amendment
shall be taken into account for purposes of this Agreement to the extent it
would result in any reduction of the benefits payable hereunder to the Executive
with respect to such plan as in effect prior to such amendment, unless the
Executive has consented in writing to such plan amendment.
(c) "INVOLUNTARY TERMINATION" shall mean the termination of an
Executive's employment with the Company and all of its affiliates
(i) by the Company or an affiliate, or
(ii) by the Executive following
(A) any reduction in the Executive's base salary,
or in the Executive's opportunity to earn an annual bonus
in an amount at least equal to the percentage of the
Executive's annual base salary that was used to determine
the Executive's target bonus award for the year
immediately preceding the year in which a Change in
Control occurs,
-4-
<PAGE> 5
(B) any change, without the Executive's consent, in
the location of the Executive's place of employment to a
borough other than Manhattan or, if such place of
employment is not in Manhattan, to a city other than the
city in which the Executive's place of employment is
located,
(C) any material diminishment of the Executive's
responsibilities with respect to the business of the
Company or an affiliate, or
(D) any other material adverse change in the
conditions of the Executive's employment with the Company
or an affiliate.
An Involuntary Termination pursuant to clause (ii) above shall be
deemed to occur within two (2) years following a Change in Control if the event
described in subclause (A), (B), (C) or (D) that gives rise to such termination
occurs within two (2) years following a Change in Control and such termination
occurs within six (6) months after such event.
IN WITNESS WHEREOF, the Corporation and the Company have caused this
Agreement to be executed by the duly authorized Chairman of the Compensation and
Benefits Committee of their respective Boards of Directors, and the Executive
has executed this Agreement, as of the day and year first above written.
U.S. TRUST CORPORATION
ATTEST: By:
-----------------------------------
Philip L. Smith, Chairman
- ------------------------------ Compensation and Benefits Committee
Secretary
UNITES STATES TRUST COMPANY
OF NEW YORK
ATTEST: By:
-----------------------------------
Philip L. Smith, Chairman
- ------------------------------ Compensation and Benefits Committee
Secretary
----------------------------------------
Maribeth S. Rahe
-5-
<PAGE> 1
<TABLE>
<CAPTION>
U.S. TRUST CORPORATION
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
Three-Month Periods Six-Month Periods
Ended June 30, Ended June 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME PER SHARE:
Net Income $12,439,000 $ 9,854,000 $24,360,000 $19,451,000
Plus Dividend Equivalent on Deferred
Long-Term Performance Plan Awards
(After-Tax) 142,473 104,226 259,196 205,476
----------- ----------- ----------- -----------
Adjusted Net Income $12,581,473 $ 9,958,226 $24,619,196 $19,656,476
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 19,424,307 19,556,256 19,543,262 19,531,918
Add average shares issuable under stock
based benefit plans 2,279,174 1,666,880 2,259,901 1,594,324
----------- ----------- ----------- -----------
Total Common and Common
Equivalent Shares 21,703,481 21,223,136 21,803,163 21,126,242
=========== =========== =========== ===========
Primary Net Income Per Share $ 0.58 $ 0.47 $ 1.13 $ 0.93
=========== =========== =========== ===========
FULLY DILUTED NET INCOME PER SHARE:
Net Income $12,439,000 $ 9,854,000 $24,360,000 $19,451,000
Plus Dividend Equivalent on Deferred
Long-Term Performance Plan Awards
(After-Tax) 142,473 104,226 259,196 205,476
----------- ----------- ----------- -----------
Adjusted Net Income $12,581,473 $ 9,958,226 $24,619,196 $19,656,476
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 19,424,307 19,556,256 19,543,262 19,531,918
Add maximum dilutive impact of average
shares issuable under stock based
benefit plans 2,294,624 1,666,880 2,291,592 1,594,324
----------- ----------- ----------- -----------
Total Dilutive Shares 21,718,931 21,223,136 21,834,854 21,126,242
=========== =========== =========== ===========
Fully Diluted Net Income Per Share $ 0.58 $ 0.47 $ 1.13 $ 0.93
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 89,677
<INT-BEARING-DEPOSITS> 90,771
<FED-FUNDS-SOLD> 166,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,202,234
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,759,510
<ALLOWANCE> 17,629
<TOTAL-ASSETS> 3,584,904
<DEPOSITS> 2,708,100
<SHORT-TERM> 348,801
<LIABILITIES-OTHER> 231,840
<LONG-TERM> 73,254
0
0
<COMMON> 19,874
<OTHER-SE> 203,035
<TOTAL-LIABILITIES-AND-EQUITY> 3,584,904
<INTEREST-LOAN> 32,642
<INTEREST-INVEST> 18,333
<INTEREST-OTHER> 2,051
<INTEREST-TOTAL> 53,026
<INTEREST-DEPOSIT> 25,026
<INTEREST-EXPENSE> 30,709
<INTEREST-INCOME-NET> 22,317
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 69,689
<INCOME-PRETAX> 20,391
<INCOME-PRE-EXTRAORDINARY> 12,439
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,439
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 3.06
<LOANS-NON> 8,806
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,268
<CHARGE-OFFS> 0
<RECOVERIES> 211
<ALLOWANCE-CLOSE> 17,629
<ALLOWANCE-DOMESTIC> 17,629
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,629
</TABLE>
