UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6152
THE BANK OF NEW YORK COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 13-2614959
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
(212) 495-1784
(Registrant's telephone number, including area code)
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 such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
The number of shares outstanding of the issuer's Common
Stock, $7.50 par value, was 187,901,790 shares as of April 30,
1994.
<PAGE> 2.
THE BANK OF NEW YORK COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1994 and December 31, 1993 3
Consolidated Statements of Income
For the Three Months Ended March 31,
1994 and 1993 4
Consolidated Statement of Changes In
Shareholders' Equity
For the Three Months Ended March 31, 1994 5
Consolidated Statements of Cash Flows
For the Three Months Ended March 31,
1994 and 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART 2. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 19
Item 4. Submissions of Matters to Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 21
<PAGE> 3.
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Condition
(Unaudited)
(Dollars in millions, except per share amounts)
<CAPTION>
March 31, Dec. 31,
1994 1993
---- ----
<S> <C> <C>
Assets
Cash and Due from Banks $ 3,165 $ 4,511
Interest-Bearing Deposits in Banks 298 269
Securities:
Held-to-Maturity(market value of $3,085 in 1994
and $4,449 in 1993) 3,199 4,356
Available-for-Sale(market value of $2,420 in 1994
and $1,243 in 1993) 2,420 1,241
------- -------
Total Securities 5,619 5,597
Trading Assets at Market Value 2,479 1,325
Federal Funds Sold and Securities Purchased
Under Resale Agreements 300 36
Loans (less allowance for loan losses of $934 in
1994 and $970 in 1993) 31,626 29,600
Premises and Equipment 934 945
Due from Customers on Acceptances 1,074 888
Accrued Interest Receivable 221 222
Other Assets 2,292 2,153
------- -------
Total Assets $48,008 $45,546
======= =======
Liabilities and Shareholders' Equity
Deposits
Noninterest-Bearing (principally domestic offices) $ 8,792 $ 8,690
Interest-Bearing
Domestic Offices 14,904 15,156
Foreign Offices 9,061 8,313
------- -------
Total Deposits 32,757 32,159
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 2,726 2,711
Other Borrowed Funds 4,382 2,781
Acceptances Outstanding 1,075 901
Accrued Taxes and Other Expenses 819 763
Accrued Interest Payable 130 111
Other Liabilities 550 458
Long-Term Debt 1,540 1,590
------- -------
Total Liabilities 43,979 41,474
------- -------
Shareholders' Equity
Preferred Stock-no par value, authorized 5,000,000
shares, outstanding 184,000 shares in 1994 and
3,648,100 shares in 1993 111 267
Class A Preferred Stock - par value $2.00 per share,
authorized 5,000,000 shares, outstanding 1,077,015
shares in 1994 and 1,085,415 shares in 1993 27 27
Common Stock-par value $7.50 per share, authorized
350,000,000 shares, issued 187,989,104 shares in
1994 and 187,400,962 shares in 1993 1,410 1,406
Additional Capital 839 841
Retained Earnings 1,650 1,536
Securities Valuation Allowance (3) -
------- -------
4,034 4,077
Less: Treasury Stock-184,800 shares in
1994 and 173,198 in 1993, at cost 5 5
------- -------
Total Shareholders' Equity 4,029 4,072
------- -------
Total Liabilities and Shareholders' Equity $48,008 $45,546
======= =======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 4.
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(Unaudited)
(In millions, except per share amounts)
<CAPTION>
For the three
months ended
March 31,
1994 1993
----- -----
<S> <C> <C>
Interest Income
- ---------------
Loans $ 512 $ 507
Securities
Taxable 57 56
Exempt from Federal Income Taxes 15 19
----- -----
72 75
Deposits in Banks 8 8
Federal Funds Sold and Securities
Purchased Under Resale Agreements 19 27
Trading Assets 15 8
----- -----
Total Interest Income 626 625
----- -----
Interest Expense
- ----------------
Deposits 166 187
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 27 22
Other Borrowed Funds 23 22
Long-Term Debt 27 28
----- -----
Total Interest Expense 243 259
----- -----
Net Interest Income 383 366
- -------------------
Provision for Loan Losses 45 93
----- -----
Net Interest Income After Provision
for Loan Losses 338 273
----- -----
Noninterest Income
- ------------------
Processing Fees
Securities 88 76
Other 42 38
----- -----
130 114
Trust and Investment Fees 33 32
Service Charges and Fees 119 114
Securities Gains 12 26
Other 56 44
----- -----
Total Noninterest Income 350 330
----- -----
Noninterest Expense
- -------------------
Salaries and Employee Benefits 211 199
Net Occupancy 47 43
Furniture and Equipment 22 22
Other 123 127
----- -----
Total Noninterest Expense 403 391
----- -----
Income Before Income Taxes 285 212
Income Taxes 107 78
----- -----
Net Income $ 178 $ 134
- ---------- ===== =====
Net Income Available to Common Shareholders $ 174 $ 127
- ------------------------------------------- ===== =====
Per Common Share Data (1):
- --------------------------
Primary Earnings $0.93 $0.69
Fully Diluted Earnings 0.87 0.65
Cash Dividends 0.225 0.19
Average Common Shares Outstanding 188 184
(1) Per Common Share Data has been adjusted to reflect the effect of the 2-for-1
common stock split effective April 22, 1994.
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 5.
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
For the three months ended March 31, 1994
(In millions)
<CAPTION> Secur-
ities
Class A Valu-
Pre- Pre- Addi- Retain- ation Treas-
ferred ferred Common tional ed Earn- Allow- ury
Stock Stock Stock Capital ings ance Stock
----- ----- ----- ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1994 $ 267 $ 27 $1,406 $ 841 $1,536 $ - 5
Changes:
Net Income 178
Cash Dividends
Common Stock (41)
Preferred Stock (5)
Redemption of
Preferred Stock (156) (17)
Redemption of Common
Stock Warrants and
Issuance of
Common Stock 4 (2)
Net Unrealized
Loss on Securities
Available-for-Sale (3)
Change in
Cumulative Foreign
Currency
Translation
Adjustment (1)
------ ------ ------ ----- ------ ----- ------
Balance,
March 31, 1994 $ 111 $ 27 $1,410 $ 839 $1,650 $ (3) $ 5
====== ====== ====== ===== ====== ===== ======
</TABLE>
<PAGE> 6.
<TABLE>
- --------------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
<CAPTION>
For the three months ended
March 31,
1994 1993
---- ----
<S> <C> <C>
Operating Activities
Net Income $ 178 $ 134
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities
Provision for Losses on Loans and Other Real Estate 45 100
Depreciation and Amortization 48 44
Deferred Income Taxes 53 41
Securities Gains (12) (26)
Change in Trading Assets (230) (235)
Change in Securities Held for Sale - 1,068
Change in Accruals and Other, Net (237) 37
------ ------
Net Cash Provided (Used) By Operating Activities (155) 1,163
------ ------
Investing Activities
Change in Interest-Bearing Deposits in Banks (21) 18
Purchases of Securities Held-to-Maturity (107) (438)
Sales of Securities Held-to-Maturity - 6
Maturities of Securities Held-to-Maturity 141 223
Purchases of Securities Available-for-Sale (486) -
Sales of Securities Available-for-Sale 693 -
Maturities of Securities Available-for-Sale 5 -
Net Principal Disbursed on Loans to Customers (2,085) (124)
Sales of Loans 122 158
Sales of Other Real Estate 6 26
Change in Federal Funds Sold and Securities Purchased
Under Resale Agreements (264) 163
Purchases of Premises and Equipment (6) (8)
Acquisitions, Net of Cash Acquired (160) 58
Proceeds from the Sale of Premises and Equipment 4 -
Partial Sale of Unconsolidated Subsidiary 37 -
Other, Net (108) (111)
------- -------
Net Cash Used by Investing Activities (2,229) (29)
------- -------
Financing Activities
Change in Deposits 560 (2,427)
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 15 923
Change in Other Borrowed Funds 717 (228)
Repayment of Long-Term Debt (50) -
Redemption and Repurchases of Preferred Stock
and Warrants (173) (13)
Issuance of Common Stock 2 29
Treasury Stock Acquired - (1)
Cash Dividends Paid (46) (42)
------ ------
Net Cash Provided (Used) by Financing Activities 1,025 (1,759)
------ ------
Effect of Exchange Rate Changes on Cash 13 2
------ ------
Decrease In Cash and Due From Banks (1,346) (623)
Cash and Due from Banks at Beginning of Period 4,511 5,506
------ ------
Cash and Due from Banks at End of Period $3,165 $4,883
====== ======
- --------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 224 $ 287
Income Taxes 11 7
Noncash Investing Activity (Primarily Foreclosure
of Real Estate) 29 35
- --------------------------------------------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 7.
THE BANK OF NEW YORK COMPANY, INC.
Notes to Consolidated Financial Statements
1. General
-------
The accounting and reporting policies of The Bank of New York Company,
Inc. (the Company), a bank holding company, and its subsidiaries, conform
with generally accepted accounting principles and general practice within the
banking industry. Such policies, except as noted below, are consistent with
those applied in the preparation of the Company's annual financial
statements.
The accompanying financial statements are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of financial
position, results of operations and cash flows for the interim periods have
been made. Such adjustments are of a normal recurring nature.
2. Securities
----------
Effective January 1, 1994, the Company accounts for debt and equity
securities classified as available-for-sale at market value, with net
unrealized gains and losses reported as a separate component of shareholders'
equity. Previously such securities were stated at the lower of aggregate
cost or market value. In connection with this change, the Company
reclassified $1,384 million of securities from held-to-maturity to available-
for-sale. In addition, $267 million of loans ("Brady Bonds") were
reclassified from loans to securities held-to-maturity.
Realized gains on the sale of securities available-for-sale were $7
million in both the first quarter of 1994 and 1993.
<PAGE> 8.
The following table sets forth the carrying amount and the fair value of
securities at March 31, 1994:
Gross Gross
Amortized Unrealized Unrealized Fair
(In millions) Cost Gains Losses Value
-------- ----------- ---------- ------
Securities Held-to-Maturity
- ---------------------------
U.S. Government Obligations $1,437 $ 2 $ 45 $1,394
U.S. Government Agency
Obligations 344 1 8 337
Obligations of States and
Political Subdivisions 995 5 - 1,000
Other Debt Securities 423 1 70 354
------ ------ ------ ------
Total Securities
Held-to-Maturity 3,199 9 123 3,085
------ ------ ------ ------
Securities Available-for-Sale
- -----------------------------
U.S. Government Obligations 2,204 8 24 2,188
Equity Securities 220 12 - 232
------ ------ ------ ------
Total Securities
Available-for-Sale 2,424 20 24 2,420
------ ------ ------ ------
Total Securities $5,623 $ 29 $ 147 $5,505
====== ====== ====== ======
<PAGE> 9.
The amortized cost and fair value of securities at March 31, 1994, by
contractual maturity, are as follows:
-------------------
Amortized Fair
(In millions) Cost Value
--------- --------
Securities Held-to-Maturity
- ---------------------------
Due In One Year or Less $ 562 $ 565
Due After One Year Through
Five Years 1,262 1,242
Due After Five Years Through
Ten Years 619 593
Due After Ten Years 756 685
------ ------
Total Securities Held-to-Maturity 3,199 3,085
------ ------
Securities Available-for-Sale
- -----------------------------
Due In One Year or Less 265 267
Due After One Year Through
Five Years 1,026 1,030
Due After Five Years Through
Ten Years 908 884
Due After Ten Years 5 7
Equity Securities 220 232
------ ------
Total Securities Available-for-Sale 2,424 2,420
------ ------
Total Securities $5,623 $5,505
====== ======
<PAGE> 10.
The following table shows the maturity distribution by carrying amount
and yield (not on a taxable equivalent basis) of the Company's securities
portfolio at March 31, 1994.
<TABLE>
<CAPTION>
States and
U.S. Government Political
U.S. Government Agency Subdivisions
(Dollars in millions) --------------- --------------- -------------
Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C>
------ ----- ------ ----- ------ -----
Securities Held
- ----------------
to Maturity
- -----------
One Year or Less $ 80 5.55% $ 21 5.87% $ 406 4.04%
Over 1 through 5 Years 920 4.71 145 5.05 147 6.84
Over 5 through 10 Years 437 5.63 3 8.00 130 7.43
Over 10 Years - - 175 7.51 312 7.44
----- ----- -----
$1,437 5.04 $ 344 6.38 $ 995 5.96
====== ===== =====
Securities Available
- --------------------
for Sale
- --------
One Year or Less $ 267 5.30% $ - - % $ - - %
Over 1 through 5 Years 1,030 5.89 - - - -
Over 5 through 10 Years 884 6.07 - - - -
Over 10 Years 7 11.19 - - - -
No Maturity - - - - - -
------ ----- ----
$2,188 5.91 $ - - $ - -
====== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Other Bonds,
Notes and Stocks and
Debentures Warrants
(Dollars in millions) --------------- ---------------
Amount Yield Amount Yield Total
------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Securities Held
- ----------------
to Maturity
- -----------
One Year or Less $ 55 4.52% $ - - % $ 562
Over 1 through 5 Years 50 6.22 - - 1,262
Over 5 through 10 Years 49 5.91 - - 619
Over 10 Years 269 5.22 - - 756
----- ----- ------
$ 423 5.32 $ - - $3,199
====== ===== ======
Securities Available
- --------------------
for Sale
- --------
One Year or Less $ - - % $ - - % $ 267
Over 1 through 5 Years - - - - 1,030
Over 5 through 10 Years - - - - 884
Over 10 Years - - - - 7
No Maturity - - 232 3.59 232
------ ------ ------
$ - - $ 232 3.59 $2,420
====== ====== ======
</TABLE>
3. Allowance for Loan Losses
-------------------------
Transactions in the allowance for loan losses are summarized as
follows:
(In millions) Three months ended
March 31,
1994 1993
---- ----
Balance, Beginning of Period $ 970 $1,072
Charge-offs (100) (115)
Recoveries 17 14
----- -----
Net Charge-Offs (83) (101)
Credit Card Securitization 2 -
Provision 45 93
----- -----
Balance, End of Period $ 934 $1,064
===== =====
<PAGE> 11.
In 1995, a new accounting standard will require the Company to introduce
the time value of money into the determination of the portion of the
allowance for loan losses which relates to impaired, non-consumer loans. The
loss component of impaired, non-consumer loans will be measured by the
difference between their recorded value and fair value. Fair value would be
either the present value of the expected future cash flows from borrowers,
market value of the loan, or the fair value of the collateral. At the
present time, the impact of the new method on the Company's results of
operations and financial condition is not expected to be material.
4. Capital Resources
- --------------------
The financial statements reflect a 2-for-1 common stock split, effective
April 22, 1994.
Also, the Company increased its quarterly common stock cash dividend to
55 cents per share (27.5 cents per share post split) from 45 cents per share,
and announced a plan to buy back, throughout the remainder of 1994, up to 5
million of its post-split common shares. All shares purchased will be used
in connection with certain employee benefit plans or will be held as treasury
shares.
5. Commitments and Contingent Liabilities
--------------------------------------
In April 1990, the Company notified Northeast Bancorp., Inc. (NEB) that
NEB had materially breached its obligation under a merger agreement.
Following denial by the Federal Reserve Board of the Company's application
for approval to acquire NEB and failure by state regulators to approve the
proposed merger prior to the August 15, 1990 termination date, the Company's
Board of Directors notified NEB in September 1990 that it had terminated the
merger agreement.
In May 1990, NEB brought suit against the Company in the United States
Court for the District of Connecticut seeking money damages of $350 million
relating to NEB's allegations that the Company breached its obligations. In
November 1990, the Company filed a motion for summary judgment to have the
lawsuit dismissed; in June 1991, this motion was granted as to NEB's
Connecticut Unfair Trade Practices Act and libel claims and denied as to
NEB's other claims. In March 1993, the Company's motion for summary judgment
on NEB's contract claims was denied. In May 1993, as part of the acquisition
of NEB's Class A voting common stock by First Fidelity Bancorporation, NEB's
interest in the suit was transferred to a trust funded with $2 million for
the benefit of former NEB shareholders. The action will continue. In the
opinion of management, NEB's claims are without merit.
In the ordinary course of business, there are various claims pending
against the Company and its subsidiaries. In the opinion of management,
liabilities arising from such claims, if any, would not have a material
effect upon the Company's consolidated financial statements.
<PAGE> 12.
On January 1, 1994, a new accounting standard required the Company to
recognize unrealized gains and losses related to certain interest rate and
foreign currency contracts as assets and liabilities on its balance sheet.
The new standard allows the netting of unrealized gains and losses with the
same counterparty when a master netting agreement is in effect. The Company
previously presented all unrealized gains and losses on a net basis.
Reported assets and liabilities increased by approximately $815 million at
March 31, 1994 as a result of the new accounting standard.
<PAGE> 13.
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
The Company reported record first quarter net income of $178 million,
which compares with net income of $134 million in the first quarter of
1993. Fully diluted earnings per share in the first quarter of 1994 were
a record $0.87 compared with $0.65 per share in the same period last year,
an increase of 34%. The gain on the sale of a portion of the Company's
interest in Wing Hang Bank, Ltd. in Hong Kong, which was partially offset
by a restructuring charge related to National Community Division, added
a net 6 cents to earnings per share this quarter.
Net interest income, on a taxable equivalent basis, increased $16
million or 4% to $396 million from the first quarter of 1993. The Company
noted widened spreads and increasing loan demand during the first quarter.
Credit card growth remained especially strong. There was also growth in
other consumer loans, as well as in middle market and large corporate
lending.
Fee income was strong, especially from securities and other
processing, syndications and factoring. A lower provision for loan losses
and continued control of operating expenses contributed to higher
earnings.
Return on average assets in the first quarter of 1994 was 1.50%
compared with 1.32% in the fourth quarter of 1993 and 1.17% in the first
quarter of 1993. Return on average common equity was 18.55% in the first
quarter of 1994 compared with 16.16% in the fourth quarter of 1993 and
15.06% in the first quarter of 1993. Both return on assets and return on
equity for this quarter were records for the Company.
CAPITAL AND LIQUIDITY
- ---------------------
The Company's estimated Tier I capital and total capital ratios were
8.25% and 12.85% at March 31, 1994 compared with 8.87% and 13.65% at
December 31, 1993 and 8.26% and 12.90% at March 31, 1993. The decline in
these ratios from December 31, 1993 is primarily attributable to the
redemption of $156 million of preferred stock in the first quarter of
1994. The absence of this preferred stock will add approximately 4 cents
to annual per share earnings. Tangible common equity as a percent of
total assets was 6.84% at March 31, 1994 compared with 7.00% at December
31, and 6.41% one year ago.
On April 12, 1994, the Company's Board of Director's declared a 2-
for-1 common stock split. On May 13, 1994, holders of record as of the
close of business on April 22, 1994 will receive one additional share for
every share held.
Also, the Company's Board of Directors declared a quarterly common
stock cash dividend of 55 cents per share (27.5 cents per share post
split), a 22% increase over the 45 cents previously paid. This increase
<PAGE> 14.
will result in an annual rate of $2.20 per share ($1.10 per share post
split), the highest in the Company's history, surpassing the previous high
of $2.12 per share ($1.06 per share post split) paid in 1990. The new
dividend is payable on May 6, 1994 to holders of record as of the close
of business on April 22, 1994.
In addition, the Company announced a plan to buy back, throughout the
remainder of this year, up to 5 million of its post-split common shares.
All shares purchased will be used in connection with certain employee
benefit plans or will be held as treasury shares.
NONPERFORMING ASSETS
- --------------------
(Dollars in millions)
Change
1Q 1994 vs.
3/31/94 12/31/93 4Q 1993
--------------------------------------
Loans:
HLT $ 51 $ 52 (2)%
Commercial Real Estate 55 72 (24)
Other Commercial 105 130 (19)
Foreign 24 34 (29)
LDC 95 96 (1)
Community Banking 118 156 (24)
----- -----
Total Loans 448 540 (17)
Other Real Estate 84 99 (15)
----- -----
Total $ 532 $ 639 (17)
===== =====
Nonperforming Asset Ratio 1.6% 2.1%
Allowance/Nonperforming
Loans 208.5 179.6
Allowance/Nonperforming
Assets 175.6 151.8
Nonperforming assets declined for the eleventh consecutive quarter.
They totaled $532 million at March 31, compared with $639 million at
December 31, 1993, a decrease of $107 million or 17%. A total of $51
million of small nonperforming loans were sold this quarter. This was the
Company's first bulk sale of nonperforming loans.
Nonperforming commercial real estate assets, which include other real
estate owned, declined to $139 million at March 31, 1994, a $32 million,
or 19% decrease from $171 million at December 31, 1993.
<PAGE> 15.
LOAN LOSS PROVISION AND NET CHARGE-OFFS
- ---------------------------------------
(In millions) 1st 4th 1st
Quarter Quarter Quarter
1994 1993 1993
------- ------- -------
Provision $ 45 $ 50 $ 93
---- ---- ----
Net Charge-offs:
HLT - 2 (7)
Commercial Real Estate (5) (30) (18)
Other Commercial (20) (6) (32)
Consumer (39) (40) (36)
Foreign - (6) (2)
Other (19) (5) (6)
---- ---- ----
Total (83) (85) (101)
Credit Card Securitization 2 1 -
---- ---- ----
Decrease in
Allowance $ (36) $ (34) $ (8)
==== ==== ====
Other Real Estate
Expense $ 2 $ 4 $ 9
The allowance for loan losses was $934 million, or 2.87% of loans at March
31, 1994 compared with $970 million, or 3.17% of loans at December 31,
1993.
NET INTEREST INCOME
- -------------------
On a taxable equivalent basis, net interest income amounted to $396
million in the first quarter of 1994, compared with $380 million in the
same period of 1993, an increase of 4%. The net interest rate spread was
3.18% in the first quarter of 1994 compared with 3.12% in the fourth
quarter of 1993 and 3.11% one year ago. The net yield on interest earning
assets was 3.89% in the first quarter of 1994 compared with 3.83% in the
fourth quarter of 1993 and 3.82% in the same period last year. The spread
and yield benefitted modestly from the return of a portion of the
Company's credit card securitization to its balance sheet.
There was continued strong performance in credit cards, as the number
of card accounts increased by 23% to 4.9 million and managed outstandings
were up by 21% to $6.3 billion from one year ago. Response rates to the
Company's aggressive national direct-mail campaign have significantly
exceeded expectations so far this year. The Company will continue this
program throughout the remainder of 1994. The credit quality of our card
portfolio continues to be excellent. Delinquencies continue to decline.
Net charge-offs as a percentage of average outstandings were 3.13% in the
first quarter of 1994, down significantly from 3.48% one year ago.
<PAGE> 16.
Interest lost on loans on nonaccrual status at March 31, 1994 and
1993, reduced net interest income by $6 million and $15 million for the
three months ended March 31, 1994 and 1993.
NONINTEREST INCOME
- ------------------
Noninterest income increased 6% to $350 million in the first quarter,
compared with $330 million in the same period last year.
Securities processing fees were $88 million for the first quarter of
1994 and $76 million for the first quarter of 1993, an increase of 16%.
Most areas contributed to the increase. Among the strongest were
corporate trust, government securities clearance, master trust and mutual
fund custody. Other processing fees, principally funds transfer, deposit
services, and trade finance, were $42 million for the first quarter of
1994, compared with $38 million in the same period last year, an increase
of 11%.
Service charges and fees were $119 million in the first quarter of
1994, compared with $114 million in the first quarter of last year. In
the first quarter, noninterest income attributable to the Company's credit
card securitization was $4 million less than the comparable period of last
year due to a portion of these assets returning to the balance sheet.
Securities gains were $12 million in the first quarter of 1994
compared with $26 million in the same period last year.
Other noninterest income was $56 million and $44 million for the
first quarters of 1994 and 1993. Foreign exchange profits and trading
activities were $16 million and $23 million in the first quarters of 1994
and 1993. Also included in other noninterest income for 1994 is a pre-tax
gain of $22 million ($14 million after-tax) related to the sale of a
portion of the Company's interest in Wing Hang Bank, Ltd., which was
partially offset by a $3 million restructuring charge related to National
Community Division (NCD).
NONINTEREST EXPENSE AND INCOME TAXES
- ------------------------------------
Total noninterest expense increased 3% to $403 million in the first
quarter from $391 million in 1993. Other real estate expense decreased
to $2 million from $9 million in the first quarter of 1993.
Salaries increased 5% in the first quarter to $153 million from $146
million in the same period last year. Excluding the $3 million
restructuring charge related to NCD, salaries increased 3%. Profit-
sharing increased to $16 million from $13 million in last year's first
quarter. Other employee benefits -- primarily incentive compensation and
health care expenses -- were up 4% from the first quarter of last year.
The effective tax rate for the first quarter of 1994 was 37.5%
compared with 36.8% for the first quarter of 1993.
<PAGE> 17.
CREDIT CARD OPERATIONS
- ----------------------
Credit card receivables sold in the form of a security is a technique
for financing the Company's credit card operations. It replaces at
competitive rates other sources of deposits and borrowed money, and
improves liquidity and capital. For accounting purposes, the technique
removes the underlying assets and liabilities from the balance sheet, and
amounts otherwise reported in the income statement are classified as
noninterest income.
The Company securitized $1,350 million of credit card receivables in
1991; $1,038 million were outstanding at March 31, 1994, and $838 million
are scheduled to mature during the rest of 1994. The impact of the
securitization, assuming the funds received from the securitization were
used to replace short-term borrowings, is summarized below:
(In millions) Three months ended
March 31,
1994 1993
---- ----
Lower Net Interest Income $34 $42
Lower Provision for Loan Losses 13 15
Higher Noninterest Income 12 16
HIGHLY LEVERAGED TRANSACTIONS
- -----------------------------
At March 31, 1994, HLT loans outstanding were $1,291 million and
commitments were $284 million compared with $1,314 million and $349
million at December 31, 1993. At March 31, 1994, borrowers in the
communication industry represented 54% of the HLT portfolio.
LESS DEVELOPED COUNTRY (LDC) DEBT
- ---------------------------------
The Company's medium-term LDC loans were $150 million at March 31,
1994 compared with $151 million at December 31, 1993. The medium-term LDC
loan loss allowance was $116 million, or 77% of such loans, which
adequately reflects their current market value.
In the second quarter, the Company expects to charge-off approximately
$15 million of Yugoslavian loans in response to the Interagency Country
Exposure Review Committee's statements that certain Yugoslavian loans were
value-impaired.
<PAGE> 18.
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
<CAPTION>
For the three For the three
months ended months ended
March 31, 1994 March 31, 1993
------------------------- --------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
Interest-Bearing Deposits in
Banks (primarily foreign) $ 563 $ 8 5.39% $ 576 $ 8 5.49%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 2,444 19 3.23 3,520 27 3.09
Loans
Domestic Offices 21,309 398 7.58 19,845 379 7.75
Foreign Offices 10,005 116 4.69 10,575 129 4.96
------ ------ ------ ------
Total Loans 31,314 514 6.66 30,420 508 6.78
------ ------ ------ ------
Securities
U.S. Government Obligations 3,688 48 5.30 2,322 33 5.84
U.S. Government Agency
Obligations 366 6 6.41 1,118 18 6.47
Obligations of States and
Political Subdivisions 1,024 24 9.55 1,133 30 10.48
Other Securities,including
Trading Securities 1,822 20 4.35 1,167 15 5.13
------ ------ ------ ------
Total Securities 6,900 98 5.74 5,740 96 6.74
------ ------ ------ ------
Total Interest-Earning
Assets 41,221 639 6.29% 40,256 639 6.44%
------ ------
Allowance for Loan Losses (971) (1,073)
Cash and Due from Banks 3,000 2,705
Other Assets 5,116 4,645
------ ------
TOTAL ASSETS $48,366 $46,533
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts$ 3,626 22 2.47% $ 3,699 24 2.59%
Savings 8,383 45 2.19 8,276 51 2.51
Certificates of Deposit
$100,000 & Over 885 7 3.06 1,413 11 3.18
Other Time Deposits 2,268 24 4.37 2,952 32 4.46
Foreign Offices 8,739 68 3.17 8,022 69 3.46
------ ------ ------ ------
Total Interest-Bearing
Deposits 23,901 166 2.83 24,362 187 3.11
Federal Funds Purchased and
Securities Sold Under
Repurchase Agreements 3,713 27 2.90 2,956 22 3.00
Other Borrowed Funds 2,610 23 3.63 2,576 22 3.45
Long-Term Debt 1,557 27 6.86 1,695 28 6.73
------ ------ ------ ------
Total Interest-Bearing
Liabilities 31,781 243 3.11% 31,589 259 3.33%
------ ------
Noninterest-Bearing Deposits 9,440 8,864
Other Liabilities 3,106 2,277
Preferred Stock 243 400
Common Shareholders' Equity 3,796 3,403
------ ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $48,366 $46,533
======= =======
Net Interest Earnings
and Interest Rate Spread $396 3.18% $380 3.11%
====== ======
Net Yield on Interest-Earning
Assets 3.89% 3.82%
====== ======
</TABLE>
<PAGE> 19.
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Discussion of litigation regarding Northeast Bancorp, Inc. is included
in Note 5 to the Consolidated Financial Statements included in Part 1, Item
1 of this Report.
Item 4. Submission of Matters to Vote of Security Holders
- ---------------------------------------------------------
The Company held its annual meeting on May 10, 1994 at its 48 Wall
Street headquarters in New York City. The following matters were submitted
to a vote of the shareholders:
-- Election of eighteen director nominees to new one-year terms was
approved with no nominee receiving less than 79.1 million votes.
-- Appointment of Deloitte & Touche as the Company's independent public
accountants for 1994 was ratified by a vote of 80.7 million affirmative to 311
thousand negative.
-- The adoption of the 1994 Management Incentive Compensation Plan of
the Bank of New York Company, Inc. was approved by a vote of 75.5 million
affirmative to 5.0 million negative.
-- A proposal that cumulative voting rights be accorded to shareholders
was defeated by a vote of 21.5 million affirmative to 48.1 million negative.
-- A proposal concerning disclosure of compensation of executive
officers was defeated by a vote of 5.2 million affirmative to 63.8 million
negative.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The exhibits filed as part of this report are as follows:
Exhibit 11 - Statement Re: Computation of Earnings Per Common Share
for the Three Months Ended March 31, 1994 and 1993.
Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends for the Three Months Ended March 31, 1994 and 1993.
(b) The Company filed the following reports on Form 8-K since December 31,
1993:
On January 14, 1994, the Company filed a Form 8-K Current Report
(Item 5), which report included unaudited interim financial information
and accompanying discussion for the fourth quarter of 1993 contained in
the Company's press release dated January 14, 1994.
<PAGE> 20.
On April 12, 1994, the Company filed a Form 8-K Current Report (Item 5),
which report included unaudited interim financial information and
accompanying discussion for the first quarter of 1994 and the
announcement of a quarterly dividend increase to 55 cents per share, a
2-for-1 stock split, and a plan to buy back up to 2.5 million of its
pre-split common shares contained in the Company's press release dated
April 12, 1994.
<PAGE> 21.
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.
THE BANK OF NEW YORK COMPANY, INC.
----------------------------------
(Registrant)
Date: May 13, 1994 /s/ Deno D. Papageorge
----------------------
Deno D. Papageorge,
Chief Financial Officer
<PAGE> 22.
EXHIBIT INDEX
--------------
Exhibit Description
- ------- -----------
11 Computation of Earnings Per Common Share
for the Three Months Ended March 31, 1994
and 1993.
12 Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
for the Three Months Ended March 31, 1994
and 1993.
<TABLE>
EXHIBIT 11
THE BANK OF NEW YORK COMPANY, INC.
Computation of Earnings Per Common Share
(in millions, except per share amounts)
<CAPTION>
For the Three Months Ended
March 31,
1994 1993
---- ----
<S> <C> <C>
Weighted Average Number of Shares of
Common Stock for Primary Computation 188 184
Shares Assumed to be Issued on Conversion:
Debentures 12 12
Cumulative Preferred Stock 2 2
----- -----
Weighted Average Number of Shares
of Common Stock Assuming Full Dilution 202 198
===== =====
Net Income $ 178 $ 134
Dividend Requirements on Preferred Stock 4 7
----- -----
Net Income Available to Common Shareholders 174 127
Interest on Convertible Debentures,
Net of Tax 2 2
Dividends on Convertible Preferred Stock 1 1
----- -----
Net Income Available to Common
Shareholders', Assuming Full Dilution $ 177 $ 130
===== =====
Earnings Per Share:
Primary $0.93 $0.69
Fully Diluted 0.87 0.65
<FN>
Restated to reflect the effect of the 2-for-1 common stock split effective
April 22, 1994.
</TABLE>
<TABLE>
EXHIBIT 12
THE BANK OF NEW YORK COMPANY, INC.
Ratios of Earnings to Fixed Charges and Ratios
of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
(Dollars in millions)
<CAPTION>
For the three months ended
March 31,
1994 1993
---- ----
<S> <C> <C>
EARNINGS
- --------
Income Before Income Taxes $285 $212
Fixed Charges, Excluding Interest on Deposits 85 80
---- ----
Income Before Income Taxes and Fixed Charges,
Excluding Interest on Deposits 370 292
Interest on Deposits 166 187
---- ----
Income Before Income Taxes and Fixed Charges,
Including Interest on Deposits $536 $479
==== ====
FIXED CHARGES
- -------------
Interest Expense, Excluding Interest on Deposits $77 $72
One-Third Net Rental Expense* 8 8
---- ----
Total Fixed Charges, Excluding Interest on Deposits 85 80
Interest on Deposits 166 187
---- ----
Total Fixed Charges, Including Interest on Deposits $251 $267
==== ====
PREFERRED STOCK DIVIDENDS,PRE-TAX BASIS $ 8 $ 12
- --------------------------------------- ==== ====
EARNINGS TO FIXED CHARGES RATIOS
- --------------------------------
Excluding Interest on Deposits 4.35x 3.65x
Including Interest on Deposits 2.14 1.79
EARNINGS TO COMBINED FIXED CHARGES
& PREFERRED STOCK DIVIDENDS RATIOS
- ----------------------------------
Excluding Interest on Deposits 3.98 3.17
Including Interest on Deposits 2.07 1.72
* The proportion deemed representative of the interest factor.
</TABLE>
