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 June 30, 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 188,753,358 shares as of July 29,
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
June 30, 1994 and December 31, 1993 3
Consolidated Statements of Income
For the Three Months and Six Months
Ended June 30, 1994 and 1993 4
Consolidated Statement of Changes In
Shareholders' Equity
For the Six Months Ended June 30, 1994 5
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
1994 and 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART 2. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 19
<PAGE> 3.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Condition
(Unaudited)
(Dollars in millions, except per share amounts)
<CAPTION>
June 30, Dec. 31,
1994 1993
---- ----
<S> <C> <C>
Assets
Cash and Due from Banks $ 7,268 $ 4,511
Interest-Bearing Deposits in Banks 818 269
Securities:
Held to Maturity (fair value of $2,934 in 1994
and $4,449 in 1993) 3,012 4,356
Available for Sale (fair value of $1,598 in
1994 and $1,243 in 1993) 1,598 1,241
------- -------
Total Securities 4,610 5,597
Trading Assets at Fair Value 2,497 1,325
Federal Funds Sold and Securities Purchased
Under Resale Agreements 253 36
Loans (Less allowance for loan losses of $885 in
1994 and $970 in 1993) 32,166 29,600
Premises and Equipment 926 945
Due from Customers on Acceptances 1,223 888
Accrued Interest Receivable 234 222
Other Assets 2,352 2,153
------- -------
Total Assets $52,347 $45,546
======= =======
Liabilities and Shareholders' Equity
Deposits
Noninterest-Bearing (principally domestic offices) $ 8,756 $ 8,690
Interest-Bearing
Domestic Offices 14,981 15,156
Foreign Offices 10,706 8,313
------- -------
Total Deposits 34,443 32,159
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 2,231 2,711
Other Borrowed Funds 7,323 2,781
Acceptances Outstanding 1,223 901
Accrued Taxes and Other Expenses 863 763
Accrued Interest Payable 180 111
Other Liabilities 436 458
Long-Term Debt 1,526 1,590
------- -------
Total Liabilities 48,225 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 954,127
shares in 1994 and 1,085,415 shares in 1993 24 27
Common Stock-par value $7.50 per share, authorized
350,000,000 shares, issued 188,533,102 shares in
1994 and 187,400,962 shares in 1993 1,414 1,406
Additional Capital 846 841
Retained Earnings 1,770 1,536
Securities Valuation Allowance (23) -
------- -------
4,142 4,077
Less: Treasury Stock-699,196 shares in
1994 and 173,198 shares in 1993, at cost 20 5
------- -------
Total Shareholders' Equity 4,122 4,072
------- -------
Total Liabilities and Shareholders' Equity $52,347 $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 For the six
months ended months ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income
Loans $ 561 $ 502 $1,073 $1,009
Securities
Taxable 58 60 115 116
Exempt from Federal Income Taxes 15 18 30 37
----- ----- ----- -----
73 78 145 153
Deposits in Banks 15 6 23 14
Federal Funds Sold and Securities
Purchased Under Resale Agreements 35 25 54 52
Trading Assets 14 14 29 22
----- ----- ----- -----
Total Interest Income 698 625 1,324 1,250
----- ----- ----- -----
Interest Expense
Deposits 192 175 358 362
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 27 27 54 49
Other Borrowed Funds 44 19 68 41
Long-Term Debt 26 29 52 57
---- ---- ---- ----
Total Interest Expense 289 250 532 509
---- ---- ---- ----
Net Interest Income 409 375 792 741
Provision for Loan Losses 39 86 84 179
----- ----- ----- -----
Net Interest Income After
Provision for Loan Losses 370 289 708 562
----- ----- ----- -----
Noninterest Income
Processing Fees
Securities 88 76 175 152
Other 43 39 85 77
----- ----- ----- -----
131 115 260 229
Trust and Investment Fees 33 32 66 65
Service Charges and Fees 119 116 238 229
Securities Gains 4 23 16 49
Other 34 61 91 105
----- ----- ----- -----
Total Noninterest Income 321 347 671 677
----- ----- ----- -----
Noninterest Expense
Salaries and Employee Benefits 212 211 423 410
Net Occupancy 44 45 91 88
Furniture and Equipment 21 26 43 48
Other 133 159 255 286
----- ----- ----- -----
Total Noninterest Expense 410 441 812 832
----- ----- ----- -----
Income Before Income Taxes 281 195 567 407
Income Taxes 105 77 212 155
----- ----- ----- -----
Net Income $ 176 $ 118 $ 355 $ 252
===== ===== ===== =====
Net Income Available to
Common Shareholders $ 173 $ 111 $ 347 $ 238
===== ===== ===== =====
Per Common Share Data:
Primary Earnings $0.92 $0.59 $1.85 $1.28
Fully Diluted Earnings 0.87 0.57 1.74 1.22
Cash Dividends 0.275 0.19 0.50 0.38
Average Common Shares Outstanding 188 186 188 185
- -----------------------------------------------------------------------------
<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 six months ended June 30, 1994
(In millions)
Secur-
ities
<CAPTION> 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 355
Cash Dividends
Common Stock (94)
Preferred Stock (8)
Conversion of
Preferred Stock (3) 2 1
Redemption of
Preferred Stock (156) (17)
Redemption of Common
Stock Warrants and
Issuance of
Common Stock 6 4 (6)
Net Unrealized
Loss on Securities
Available-for-Sale (23)
Change in
Cumulative Foreign
Currency
Translation
Adjustment (2)
Treasury Stock
Acquired 21
------ ------ ------ ----- ------ ----- ------
Balance,
June 30, 1994 $ 111 $ 24 $1,414 $ 846 $1,770 $ (23) $ 20
====== ====== ====== ===== ====== ===== ======
- ----------------------------------------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 6.
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
<CAPTION>
For the six months ended
June 30,
1994 1993
---- ----
<S> <C> <C>
Operating Activities
Net Income $ 355 $ 252
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities
Provision for Losses on Loans and Other Real Estate 87 215
Depreciation and Amortization 98 89
Deferred Income Taxes 141 60
Securities Gains (15) (49)
Change in Trading Assets (248) (590)
Change in Securities Held for Sale - 1,458
Change in Accruals and Other, Net (526) 147
------ ------
Net Cash Provided (Used) By Operating Activities (108) 1,582
------ ------
Investing Activities
Change in Interest-Bearing Deposits in Banks (536) 63
Purchases of Securities Held-to-Maturity (176) (1,211)
Sales of Securities Held-to-Maturity - 7
Maturities of Securities Held-to-Maturity 414 586
Purchases of Securities Available-for-Sale (498) -
Sales of Securities Available-for-Sale 1,501 -
Maturities of Securities Available-for-Sale 8 -
Net Principal Disbursed on Loans to Customers (2,659) (1,402)
Sales of Loans 169 358
Sales of Other Real Estate 20 49
Change in Federal Funds Sold and Securities Purchased
Under Resale Agreements (217) (120)
Purchases of Premises and Equipment (23) (16)
Acquisitions, Net of Cash Acquired (161) 81
Proceeds from the Sale of Premises and Equipment 11 1
Partial Sale of Unconsolidated Subsidiary 37 -
Other, Net (92) (21)
------- -------
Net Cash Used by Investing Activities (2,202) (1,625)
------- -------
Financing Activities
Change in Deposits 2,190 (1,675)
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements (480) 440
Change in Other Borrowed Funds 3,657 133
Proceeds from the Issuance of Long-Term Debt - 297
Repayment of Long-Term Debt (65) (14)
Redemption, Conversion and Repurchases of
Preferred Stock and Warrants (175) (90)
Issuance of Common Stock 16 41
Treasury Stock Acquired (21) (2)
Cash Dividends Paid (102) (82)
------ ------
Net Cash Provided (Used) by Financing Activities 5,020 (952)
------ ------
Effect of Exchange Rate Changes on Cash 47 (18)
------ ------
Increase (Decrease) In Cash and Due From Banks 2,757 (1,013)
Cash and Due from Banks at Beginning of Period 4,511 5,506
------ ------
Cash and Due from Banks at End of Period $7,268 $4,493
====== ======
- ------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 463 $ 534
Income Taxes 83 37
Noncash Investing Activity (Primarily Foreclosure
of Real Estate) 33 45
- ------------------------------------------------------------------------------
<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, $286 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 and $21 million in the second quarter of 1994 and 1993 and $14 million
and $28 million for the first half of 1994 and 1993.
<PAGE> 8.
3. Allowance for Loan Losses
-------------------------
Transactions in the allowance for loan losses are
summarized as follows:
(In millions) Six months ended
June 30,
1994 1993
---- ----
Balance, Beginning of Period $ 970 $1,072
Charge-offs (208) (246)
Recoveries 33 33
----- -----
Net Charge-Offs (175) (213)
Credit Card Securitization 6 -
Provision 84 179
----- -----
Balance, End of Period $ 885 $1,038
===== =====
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.
In the second quarter of 1994, the Company increased its
quarterly common stock cash dividend to 27.5 cents per share from
22.5 cents per share, and announced a plan to buy back,
throughout the remainder of 1994, up to 5 million of its common
shares. Shares purchased will be used in connection with certain
employee benefit plans or will be held in treasury. Through
June 30, 1994 the Company had repurchased approximately 735,000
common shares at a cost of approximately $21 million.
<PAGE> 9.
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.
A new accounting standard, that became effective on January
1, 1994, requires 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 $1,683 million at June 30, 1994 as a
result of the new accounting standard.
<PAGE> 10.
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
The Company reported second quarter net income of $176
million, which compares with net income of $118 million in the
second quarter of 1993, a 49% increase. Fully diluted earnings
per share in the second quarter of 1994 were 87 cents compared
with 57 cents per share in the same period last year, an increase
of 53%. The second quarter E.P.S. compares with 87 cents in the
first quarter, which included a net gain of 6 cents per share
related to the sale of a portion of the Company's interest in
Wing Hang Bank, Ltd. and a restructuring charge at the Company's
National Community Division.
All per share figures are adjusted for the 2-for-1 common
stock split that was paid on May 13, 1994.
Net income in the first half of 1994 was $355 million, a 41%
increase over the $252 million earned in the first six months of
1993. Net income was $1.74 per fully diluted share, a 43%
increase over the $1.22 earned last year.
Net interest income, on a taxable equivalent basis, totaled
$421 million in the second quarter, an all-time high and a $33
million or 9% increase over the second quarter of last year. The
net interest rate spread of 3.26%, also a quarterly record, was 8
basis points higher than in the first quarter and 6 basis points
higher than the second quarter of 1993. The Company also noted
increased loan demand and a continued shift in asset mix toward
higher yielding assets. Credit card outstandings continued to
show strong growth. A lower provision for loan losses,
substantially lower other real estate expenses, as well as good
performance in the Company's securities and other processing
business also contributed to earnings. Operating expenses
remained under tight control.
Return on average assets in the second quarter of 1994 was
1.42%, slightly lower than the all-time high of 1.50% recorded in
the first quarter of 1994. Return on average assets was 1.03% in
the second quarter of 1993. Return on average common equity was
17.67% in the second quarter of 1994, slightly lower than the
record 18.55% achieved in the first quarter of 1994. Return on
average common equity was 12.65% in the second quarter of 1993.
CAPITAL AND LIQUIDITY
- ---------------------
The Company's Tier I capital and total capital ratios were
8.29% and 12.76% at June 30, 1994 compared with 8.28% and 12.89%
at March 31, 1994, and 8.24% and 13.34% one year ago. Tangible
common equity as a percent of total assets was 6.49% at June 30,
1994 compared with 6.84% at March 31, 1994 and 6.49% at June 30,
1993.
<PAGE> 11.
NONPERFORMING ASSETS
- --------------------
(dollars in millions)
% Change
2Q 1994 vs
6/30/94 3/31/94 1Q 1994
-------------------------------------
Loans:
HLT $ 51 $ 51 -
Commercial Real Estate 56 55 2%
Other Commercial 119 105 13
Foreign 31 24 29
LDC 74 95 (22)
Community Banking 82 118 (31)
----- -----
Total Loans 413 448 (8)
Other Real Estate 67 84 (20)
----- -----
Total $ 480 $ 532 (10)
===== =====
Nonperforming Asset Ratio 1.4% 1.6%
Allowance/Nonperforming
Loans 214.3 208.5
Allowance/Nonperforming
Assets 184.4 175.6
Nonperforming assets declined for the twelfth consecutive
quarter. They totaled $480 million at June 30, 1994 compared with
$532 million at March 31, 1994, a decrease of $52 million or 10%.
During the second quarter the Company recorded a $43 million bulk
sale of small nonperforming loans.
Nonperforming commercial real estate assets, which include
other real estate owned, declined to $123 million at June 30,
1994, a $16 million, or 12% decrease from $139 million at March
31, 1994.
<PAGE> 12.
LOAN LOSS PROVISION AND NET CHARGE-OFFS
- ---------------------------------------
(in millions)
2nd 1st 2nd
Quarter Quarter Quarter Year-to-date
------- ------- ------- ------------
1994 1994 1993 1994 1993
---- ---- ---- ---- ----
Regular Provision $ 39 $ 45 $ 86 $ 84 $ 179
---- ---- ---- ---- ----
Net Charge-offs:
HLT (8) - (6) (8) (13)
Commercial Real Estate (1) (5) (15) (6) (33)
Other Commercial (10) (20) (2) (30) (34)
Consumer (31) (39) (36) (70) (72)
Foreign (7) - (35) (7) (37)
Other (20) (19) (18) (39) (24)
---- ---- ---- ---- ----
Total (77) (83) (112) (160) (213)
Credit Card Securitization 4 2 - 6 -
---- ---- ---- ---- ----
Decrease in Regular
Allowance $(34) $(36) $(26) $(70) $(34)
==== ==== ==== ==== ====
Other Real Estate
Expense $ 2 $ 2 $ 31 $ 4 $ 40
The allowance for loan losses was $885 million, or 2.68% of
loans at June 30, 1994 compared with $934 million, or 2.87% of
loans at March 31, 1994. In the second quarter of 1994, the
Company charged-off $15 million of LDC loans to Yugoslavia.
NET INTEREST INCOME
- -------------------
On a taxable equivalent basis, net interest income amounted
to a record $421 million in the second quarter of 1994, compared
with $388 million in the same period of 1993, an increase of 9%.
The net interest rate spread was 3.26% in the second quarter of
1994 compared with 3.18% in the first quarter of 1994 and 3.20%
one year ago. The net yield on interest earning assets was 3.98%
in the second quarter of 1994 compared with 3.89% in the first
quarter of 1994 and 3.90% in the same period last year. The
spread and yield benefitted modestly from the return of a
previously securitized portion of the Company's credit card
portfolio to its balance sheet.
For the first six months of 1994, net interest income, on a
taxable equivalent basis, amounted to $817 million compared with
$768 million in the same period of 1993, an increase of 6%. The
year-to-date net interest rate spread was 3.21% in 1994 compared
with 3.15% in 1993, while the net yield on interest-earning
assets was 3.94% in 1994 and 3.86% in 1993.
<PAGE> 13.
The Company's credit card business continued its strong
growth. Managed outstandings were up by 22% to $6.7 billion and
the number of card accounts increased by 28% to 5.5 million from
one year ago. The credit quality of the card portfolio continues
to be excellent. Net charge-offs as a percentage of managed
average outstandings were 2.86% in the second quarter of 1994,
down significantly from 3.13% in the first quarter and
3.28% one year ago.
Interest lost on loans on nonaccrual status at June 30, 1994
and 1993, reduced net interest income by $6 million and $12
million for the three months ended June 30, 1994 and 1993, and by
$12 million and $27 million for the six months ended June 30,
1994 and 1993.
NONINTEREST INCOME
- ------------------
Noninterest income was $321 million and $671 million in the
second quarter and first six months of 1994, compared with $347
million and $677 million in the same periods last year.
Securities gains and foreign exchange and other trading
activities were lower in the second quarter and six month periods
of 1994 compared with 1993. The first quarter of 1994
and the second quarter of 1993 included pre-tax gains of $22
million and $24 million, respectively, from the sale of a portion
of the Company's interest in Wing Hang Bank, Ltd.
Securities processing fees increased 16% to $88 million for
the second quarter of 1994 from $76 million in the second quarter
of 1993. Most areas contributed to the increase. Among the
strongest were corporate trust, government securities clearance,
American depositary receipts and mutual fund custody. Other
processing fees, principally funds transfer, deposit services,
and trade finance, were $43 million for the second quarter of
1994, compared with $39 million in the same period last year, an
increase of 10%.
For the first six months of 1994, securities processing fees
increased 15% to $175 million and other processing fees increased
10% to $85 million, compared with $152 million and $77 million in
the same period of 1993.
Service charges and fees were $119 million in the second
quarter of 1994, compared with $116 million in the second quarter
of last year, an increase of 3%. Areas of particular strength
included syndications, trade finance and factoring commissions.
In the second quarter, noninterest income attributable to the
Company's credit card securitization was $6 million less than the
comparable period of last year due to the return of a portion of
these assets to the balance sheet. For the first half of 1994,
service charges and fees were $238 million compared with $229
million in 1993.
<PAGE> 14.
Securities gains were $4 million and $23 million in the
second quarters of 1994 and 1993; year-to-date securities gains
totaled $16 million and $49 million in 1994 and 1993. Second
quarter and year-to-date foreign exchange profits and trading
activities totaled $13 million and $29 million in 1994, compared
with $19 million and $42 million in 1993.
NONINTEREST EXPENSE AND INCOME TAXES
- ------------------------------------
Total noninterest expense decreased 7% to $410 million in
the second quarter from $441 million in 1993. Year-to-date total
noninterest expense was $812 million in 1994 compared with $832
million in 1993.
Other real estate expense declined $29 million to $2 million
in the second quarter.
The Company recorded restructuring charges related to its
National Community Division of $3 million in the first quarter of
1994 and $35 million in the second quarter of 1993.
Most noninterest expense categories were down from the
second quarter of 1993. Excluding restructuring charges and the
effect of factoring and corporate trust acquisitions, salaries
increased 4% in the second quarter from the same period of last
year. Profit-sharing increased to $16 million from $13 million
in last year's second quarter. Other employee benefits --
primarily incentive compensation and health care expenses --
were equal to the $42 million recorded in the second quarter of
last year.
The effective tax rates for the second quarter and first six
months of 1994 was 37.4% in both periods compared with 39.5% and
38.1% for the same periods last year.
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.
<PAGE> 15.
The Company securitized $1,350 million of credit card
receivables in 1991; $750 million were outstanding at June 30,
1994, and $550 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 Six months ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
Lower Net Interest Income $27 $42 $60 $84
Lower Provision for Loan Losses 10 14 23 29
Higher Noninterest Income 11 18 24 34
HIGHLY LEVERAGED TRANSACTIONS
- -----------------------------
At June 30, 1994, HLT loans outstanding were $1,275 million
and commitments were $340 million compared with $1,291 million
and $284 million at March 31, 1994. At June 30, 1994, borrowers
in the communication industry represented 56% of the HLT
portfolio.
<PAGE> 16.
<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
June 30, 1994 June 30, 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) $ 1,248 $ 15 4.96% $ 406 $ 6 5.77%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 3,508 35 3.98 3,358 25 3.03
Loans
Domestic Offices 21,236 430 8.12 19,806 383 7.76
Foreign Offices 10,264 132 5.17 10,025 121 4.84
------ ------ ------ -----
Total Loans 31,500 562 7.16 29,831 504 6.78
------ ------ ------ -----
Securities
U.S. Government Obligations 3,207 44 5.46 2,386 34 5.76
U.S. Government Agency
Obligations 336 5 6.52 1,239 20 6.30
Obligations of States and
Political Subdivisions 969 23 9.55 1,080 28 10.27
Other Securities,including
Trading Securities 1,712 26 5.96 1,611 21 5.28
------ ------ ------ -----
Total Securities 6,224 98 6.29 6,316 103 6.52
------ ------ ------ -----
Total Interest-Earning
Assets 42,480 710 6.71% 39,911 638 6.41%
------ -----
Allowance for Loan Losses (934) (1,062)
Cash and Due from Banks 2,754 2,580
Other Assets 5,620 4,606
------ ------
TOTAL ASSETS $49,920 $46,035
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts$ 3,599 25 2.74% $ 3,703 23 2.52%
Savings 8,303 46 2.22 8,383 50 2.39
Certificates of Deposit
$100,000 & Over 798 7 3.36 1,268 9 2.89
Other Time Deposits 2,268 22 4.02 2,833 31 4.35
Foreign Offices 9,826 92 3.74 7,551 62 3.28
------ ------ ------ -----
Total Interest-Bearing
Deposits 24,794 192 3.10 23,738 175 2.95
Federal Funds Purchased and
Securities Sold Under
Repurchase Agreements 3,025 27 3.60 3,664 27 2.92
Other Borrowed Funds 4,188 44 4.23 2,070 19 3.77
Long-Term Debt 1,533 26 6.74 1,712 29 6.70
------ ------ ------ -----
Total Interest-Bearing
Liabilities 33,540 289 3.45% 31,184 250 3.21%
------ -----
Noninterest-Bearing Deposits 8,679 8,631
Other Liabilities 3,629 2,347
Preferred Stock 137 345
Common Shareholders' Equity 3,935 3,528
------ ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $49,920 $46,035
======= =======
Net Interest Earnings
and Interest Rate Spread $421 3.26% $388 3.20%
====== ======
Net Yield on Interest-Earning
Assets 3.98% 3.90%
====== =====
</TABLE>
<PAGE> 17.
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
<CAPTION>
For the six For the six
months ended months ended
June 30, 1994 June 30, 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) $ 907 $ 23 5.09% $ 490 $ 14 5.60%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 2,979 54 3.67 3,438 52 3.06
Loans
Domestic Offices 21,272 828 7.85 19,826 762 7.75
Foreign Offices 10,135 248 4.93 10,298 250 4.90
------ ------ ------ ------
Total Loans 31,407 1,076 6.91 30,124 1,012 6.78
------ ------ ------ ------
Securities
U.S. Government Obligations 3,446 92 5.38 2,354 68 5.80
U.S. Government Agency
Obligations 351 11 6.47 1,179 38 6.38
Obligations of States and
Political Subdivisions 996 48 9.55 1,107 57 10.38
Other Securities,including
Trading Securities 1,767 45 5.13 1,390 36 5.22
------ ------ ------ ------
Total Securities 6,560 196 6.00 6,030 199 6.62
------ ------ ------ ------
Total Interest-Earning
Assets 41,853 1,349 6.50% 40,082 1,277 6.42%
------ ------
Allowance for Loan Losses (952) (1,068)
Cash and Due from Banks 2,876 2,642
Other Assets 5,369 4,627
------ ------
TOTAL ASSETS $49,146 $46,283
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts$ 3,612 47 2.60% $ 3,701 47 2.55%
Savings 8,343 91 2.20 8,330 101 2.45
Certificates of Deposit
$100,000 & Over 841 13 3.21 1,340 20 3.04
Other Time Deposits 2,268 47 4.20 2,892 64 4.41
Foreign Offices 9,286 160 3.48 7,785 130 3.37
------ ------ ------ ------
Total Interest-Bearing
Deposits 24,350 358 2.97 24,048 362 3.03
Federal Funds Purchased and
Securities Sold Under
Repurchase Agreements 3,367 54 3.22 3,312 49 2.95
Other Borrowed Funds 3,403 68 4.00 2,322 41 3.60
Long-Term Debt 1,545 52 6.80 1,704 57 6.72
------ ------ ------ ------
Total Interest-Bearing
Liabilities 32,665 532 3.29% 31,386 509 3.27%
------ ------
Noninterest-Bearing Deposits 9,057 8,747
Other Liabilities 3,369 2,311
Preferred Stock 189 373
Common Shareholders' Equity 3,866 3,466
------ ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $49,146 $46,283
======= =======
Net Interest Earnings
and Interest Rate Spread $817 3.21% $768 3.15%
====== ======
Net Yield on Interest-Earning
Assets 3.94% 3.86%
====== ======
</TABLE>
<PAGE> 18.
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 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 and Six Months Ended June 30,
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 and Six Months Ended
June 30, 1994 and 1993.
(b) The Company filed the following reports on Form 8-K since
March 31, 1994:
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 27.5 cents per share, a 2-for-1 stock
split, and a plan to buy back up to 5 million of its common
shares contained in the Company's press release dated
April 12, 1994.
On July 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
second quarter of 1994 contained in the Company's press
release dated July 14, 1994.
<PAGE> 19.
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: August 11, 1994 \s\ Deno D. Papageorge
---------------------
Deno D. Papageorge,
Chief Financial Officer
<PAGE> 20.
EXHIBIT INDEX
--------------
Exhibit Description
- ------- -----------
11 Computation of Earnings Per Common Share
for the Three and Six Months Ended June 30,
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 and Six Months Ended June 30,
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 For the Six Months Ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted Average Number
of Shares of Common
Stock for
Primary Computation 188 186 188 185
Shares Assumed to be
Issued on Conversion:
Debentures 12 12 12 12
Cumulative Preferred
Stock 2 2 2 3
----- ----- ----- -----
Weighted Average
Number of Shares
of Common Stock
Assuming Full Dilution 202 200 202 200
===== ===== ===== =====
Net Income $ 176 $ 118 $ 355 $ 252
Dividend Requirements
on Preferred Stock 3 7 8 14
----- ----- ----- -----
Net Income Available
to Common Shareholders 173 111 347 238
Interest on Convertible
Debentures, Net of Tax 3 2 5 5
Dividends on Convertible
Preferred Stock - 1 1 2
----- ----- ----- -----
Net Income
Available to Common
Shareholders, Assuming
Full Dilution $ 176 $ 114 $ 353 $ 245
===== ===== ===== =====
Earnings Per Share:
Primary $0.92 $0.59 $1.85 $1.28
Fully Diluted 0.87 0.57 1.74 1.22
</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 For the six months ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
EARNINGS
- --------
Income Before
Income Taxes $281 $195 $ 567 $ 407
Fixed Charges, Excluding
Interest on Deposits 105 84 190 164
---- ---- ------ ------
Income Before Income
Taxes and Fixed
Charges,Excluding
Interest on Deposits 386 279 757 571
Interest on Deposits 192 175 358 362
---- ---- ------ ------
Income Before Income
Taxes and Fixed
Charges,Including
Interest on Deposits $578 $454 $1,115 $ 933
==== ==== ====== ======
FIXED CHARGES
- -------------
Interest Expense,
Excluding Interest
on Deposits $97 $75 $174 $147
One-Third Net
Rental Expense* 8 9 16 17
---- ---- ------ ------
Total Fixed
Charges, Excluding
Interest on Deposits 105 84 190 164
Interest on Deposits 192 175 358 362
---- ---- ------ ------
Total Fixed
Charges, Including
Interest on Deposits $297 $259 $548 $ 526
==== ==== ====== ======
PREFERRED STOCK
DIVIDENDS,PRE-TAX BASIS $ 5 $11 $12 $23
==== ==== ====== ======
EARNINGS TO FIXED CHARGES RATIOS
- --------------------------------
Excluding Interest
on Deposits 3.68x 3.32x 3.98x 3.48x
Including Interest
on Deposits 1.95 1.75 2.03 1.77
EARNINGS TO COMBINED FIXED CHARGES
& PREFERRED STOCK DIVIDENDS RATIOS
- ----------------------------------
Excluding Interest
on Deposits 3.51 2.94 3.75 3.05
Including Interest
on Deposits 1.91 1.68 1.99 1.70
<FN>
* The proportion deemed representative of the interest factor.
</TABLE>
