<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For The Fiscal Year Ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 no.)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 495-1784
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, $7.50 par value NEW YORK STOCK EXCHANGE
8.60% Cumulative Preferred Stock NEW YORK STOCK EXCHANGE
Preferred Stock Purchase Rights NEW YORK STOCK EXCHANGE
Convertible Subordinated Debentures due 2001 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Warrants to Purchase Common Stock
Class A, 7.75% Cumulative Convertible Preferred Stock
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
registrant at February 28, 1995 consisted of:
Common Stock ($7.50 par value) $6,301,003,576
(based on closing price
on New York Stock Exchange)
The number of shares outstanding of the registrant's common Stock $7.50 par
value was 188,089,659 shares on February 28, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report to Shareholders are incorporated by
reference into Parts I, II, and IV. Portions of the definitive Proxy
Statement pursuant to Regulation 14A for the 1995 Annual Meeting of
Shareholders are incorporated by reference into Part III.
<PAGE> 2
PART I
------
ITEM 1. BUSINESS
-----------------
The business of The Bank of New York Company, Inc. (the "Company") and
its subsidiaries is described in the "Business Review" section of the
Company's 1994 Annual Report to Shareholders which description is included in
Exhibit 13 to this report and incorporated herein by reference. Also, the
"Management's Discussion and Analysis" section included in Exhibit 13 contains
financial and statistical information on the operations of the Company. Such
information is herein incorporated by reference.
COMPETITION
The retail and commercial businesses in which the Company operates are
very competitive. Competition is provided by both unregulated and regulated
financial services organizations, whose products and services span the local,
national, and global markets in which the Company conducts operations.
Savings banks, savings and loan associations, and credit unions actively
compete for deposits, and money market funds and brokerage houses offer
deposit-like services. These institutions, as well as consumer and commercial
finance companies, national retail chains, factors, insurance companies and
pension trusts, are important competitors for various types of loans. Issuers
of commercial paper compete actively for funds and reduce demand for bank
loans. For personal and corporate trust services and investment counseling
services, insurance companies, investment counseling firms, and other business
firms and individuals offer active competition.
CERTAIN REGULATORY CONSIDERATIONS
General
As a bank holding company, the Company is subject to the regulation and
supervision of the Federal Reserve Board under the Bank Holding Company Act
("BHC Act"). The Company is also subject to regulation by the New York State
Department of Banking. Under the BHC Act, bank holding companies may not
directly or indirectly acquire the ownership or control of more than 5% of the
voting shares or substantially all of the assets of any company, including a
bank, without the prior approval of the Federal Reserve Board. In addition,
bank holding companies are generally prohibited under the BHC Act from
engaging in nonbanking activities, subject to certain exceptions.
The Company's subsidiary banks are subject to supervision and examination
by applicable federal and state banking agencies. The Bank of New York
("BNY") is a state-chartered New York banking corporation and a member of the
Federal Reserve System and is subject to regulation and supervision
principally by the Federal Reserve Board. The Bank of New York (Delaware)
("BNY Del.") is a Delaware chartered FDIC insured non-member bank and
therefore is subject to regulation and supervision principally by the FDIC.
The Bank of New York National Association ("BNYNA") is organized as a national
association under the laws of the United States and therefore is subject to
regulation and supervision principally by the Comptroller of the Currency
("Comptroller").
<PAGE> 3
Capital Adequacy
Bank regulators have adopted risk-based capital guidelines for bank
holding companies and banks. The minimum ratio of qualifying total capital to
risk-weighted assets (including certain off-balance sheet items) is 8%. At
least half of the total capital is to be comprised of common stock, retained
earnings, noncumulative perpetual preferred stocks, minority interests and for
bank holding companies, a limited amount of qualifying cumulative perpetual
preferred stock, less certain intangibles including goodwill ("Tier I
capital"). The remainder ("Tier II capital") may consist of other preferred
stock, certain other instruments, and limited amounts of subordinated debt and
the loan and lease loss allowance.
In addition, the Federal Reserve Board has established minimum Leverage
Ratio (Tier I capital to average total assets) guidelines for bank holding
companies and banks. These guidelines provide for a minimum leverage ratio of
3% for bank holding companies and banks that meet certain specified criteria,
including that they have the highest regulatory rating. All other banking
organizations will be required to maintain a leverage ratio of 3% plus an
additional cushion of at least 100 to 200 basis points. The guidelines also
provide that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels, without significant
reliance on intangible assets. Furthermore, the guidelines indicate that the
Federal Reserve Board will continue to consider a "Tangible Tier I Leverage
Ratio" in evaluating proposals for expansion or new activities. The Tangible
Tier I Leverage Ratio is the ratio of Tier I capital, less intangibles not
deducted from Tier I capital, to average total assets. The Federal Reserve
Board has not advised the Company of any specific minimum leverage ratio
applicable to it.
Federal banking agencies have proposed regulations that would modify
existing rules related to risk-based and leverage capital ratios. The Company
does not believe that the aggregate impact of these modifications would have a
significant impact on its capital position.
Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels.
However, management is unable to predict whether and when higher capital
requirements would be imposed and, if so, at what level and on what schedule.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), substantially revised the depository institution regulatory and
funding provisions of the Federal Deposit Insurance Act ("FDIA") and made
revisions to several other federal banking statutes. Among other things,
FDICIA requires the federal banking regulators to take prompt corrective
action in respect of FDIC-insured depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." Under applicable
regulations, an FDIC-insured bank is defined to be well capitalized if it
maintains a Leverage Ratio of at least 5%, a Tier I Capital Ratio of at least
6% and a Total Capital Ratio of at least 10% and is not otherwise in a
"troubled condition" as specified by its appropriate federal regulatory
agency. A bank is generally considered to be adequately capitalized if it is
not defined to be well capitalized but meets all of its minimum capital
requirements, i.e., if it has a Total Capital Ratio of 8% or greater, a Tier I
Capital Ratio of 4% or greater and a Leverage Ratio of 4% or greater. A bank
will be considered undercapitalized if it fails to meet any minimum required
measure, significantly undercapitalized if it is significantly below such
measure and critically undercapitalized if it maintains a level of tangible
equity capital equal to or less than 2% of total assets. A bank may be deemed
to be in a capitalization category that is lower than is indicated by its
actual capital position if it receives an unsatisfactory examination rating.
<PAGE> 4
FDICIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to restrictions on borrowing from the Federal Reserve System. In
addition, undercapitalized depository institutions are subject to growth
limitations and are required to submit capital restoration plans. For an
undercapitalized depository institution's capital restoration plan to be
acceptable, its holding company must guarantee the capital plan up to an
amount equal to the lesser of 5% of the depository institution's assets at the
time it becomes undercapitalized or the amount of the capital deficiency when
the institution fails to comply with the plan. In the event of the parent
holding company's bankruptcy, such guarantee would take priority over the
parent's general unsecured creditors. The federal banking agencies may not
accept a capital plan without determining, among other things, that the plan
is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
The Company's significant banking subsidiaries are well capitalized.
The table below indicates capital ratios of the Company and its
significant banking subsidiaries at December 31, 1994 and 1993 and the
respective guidelines for well capitalized institutions under FDICIA.
December 31, 1994 December 31, 1993
BNY BNY
Company BNY Del. BNYNA Company BNY Del. BNYNA
------- --- ---- ----- ------- --- ---- ----- Well
Capitalized
Guidelines
-----------
Tier I 8.45% 8.26% 7.27% 18.04% 8.87% 8.21% 7.53% 13.90% 6%
Total
Capital 13.43 12.36 11.34 19.30 13.65 12.82 11.00 15.17 10
Leverage 7.89 7.28 7.72 8.58 7.99 7.22 8.09 6.43 5
Tangible
Common
Equity 7.39 7.66 7.28 8.76 7.00 7.74 7.87 6.48
At December 31, 1994, the amounts of capital by which the Company and its
significant banking subsidiaries exceed the guidelines are as follows:
Well Capitalized
BNY
Company BNY Del. BNYNA
(in millions) ------- --- ---- -----
Tier I $1,167 $839 $ 97 $247
Total Capital 1,634 877 103 191
Leverage 1,475 961 196 155
<PAGE> 5
The following table presents the components of the Company's risk-based
capital at December 31, 1994 and 1993:
(in millions)
1994 1993
---- ----
Common Stock $4,234 $3,778
Preferred Stock 119 294
Less: Intangibles 329 317
----- ------
Tier 1 Capital 4,024 3,755
Qualifying Long-term Debt 1,774 1,489
Qualifying Allowance for Loan Losses 597 534
------ ------
Tier 2 Capital 2,371 2,023
------ ------
Total Risk-based Capital $6,395 $5,778
====== ======
The following table presents the components of the Company's risk
adjusted assets at December 31, 1994 and 1993:
1994 1993
------------------ ------------------
Balance Balance
sheet/ Risk sheet/ Risk
notional adjusted notional adjusted
(in millions) amount balance amount balance
-------- -------- -------- --------
Assets
------
Cash, Due From Banks and Interest-
Bearing Deposits in Banks $ 3,895 $ 567 $ 4,780 $ 318
Securities 4,651 671 5,597 571
Trading Assets 940 124 1,325 270
Fed Funds Sold and Securities
Purchased Under Resale Agreements 3,019 3 36 5
Loans 33,083 30,814 30,570 27,954
Allowance for Loan Losses (792) - (970) -
Other Assets 4,083 3,273 4,208 3,425
------- ------- ------- -------
Total Assets $48,879 35,452 $45,546 32,543
======= ------- ======= -------
Off-Balance Sheet Exposures
---------------------------
Commitments to Extend Credit $ 37,771 7,520 $ 30,877 6,167
Securities Lending Indemnifications 15,326 - 15,005 -
Standby Letters of Credit and
Other Guarantees 7,240 4,515 5,699 3,685
Interest Rate Contracts 28,632 81 36,834 145
Foreign Exchange Contracts 51,021 236 39,878 225
-------- ------- -------- -------
Total Off-Balance Sheet Exposures $139,990 12,352 $128,293 10,222
======== ------- ======== -------
Gross Risk Adjusted Assets 47,804 42,765
Less: Allowance for Loan Losses not
Qualifying as Risk Based Capital 195 436
------- -------
Risk Adjusted Assets $47,609 $42,329
======= =======
<PAGE> 6
A discussion of the Company's capital position is incorporated by
reference from the caption "Capital Resources" in the "Management's Discussion
and Analysis" section of Exhibit 13.
Brokered Deposits
The FDIC has adopted regulations under FDICIA governing the receipt of
brokered deposits. Under the regulations, a bank cannot accept, rollover or
renew brokered deposits unless (i) it is well capitalized or (ii) it is
adequately capitalized and receives a waiver from the FDIC. A bank that
cannot receive brokered deposits also cannot offer "pass-through" insurance on
certain employee benefit accounts. Whether or not it has obtained such a
waiver, an adequately capitalized bank may not pay an interest rate on any
deposits in excess of 75 basis points over certain prevailing market rates
specified by regulation. There are no such restrictions on a bank that is
well capitalized. Because BNY and BNY Del. are well capitalized, the Company
believes the brokered deposits regulation will have no material effect on the
funding or liquidity of BNY and BNY Del. BNYNA is well capitalized, but has
no brokered deposits.
FDIC Insurance Assessments
BNY, BNY Del., and BNYNA are subject to FDIC deposit insurance
assessments. As required by FDICIA, the FDIC adopted a risk-based premium
schedule to determine the assessment rates for most FDIC-insured depository
institutions. Under the schedule, the premiums initially range from $.23 to
$.31 for every $100 of deposits. Each financial institution is assigned to
one of three capital groups --- well capitalized, adequately capitalized, or
undercapitalized --- and further assigned to one of three subgroups within a
capital group, on the basis of supervisory evaluations by the institution's
primary federal and, if applicable, state supervisors and other information
relevant to the institution's financial condition and the risk posed to the
applicable insurance fund. The actual assessment rate applicable to a
particular institution will, therefore, depend in part upon the risk
assessment classification so assigned to the institution by the FDIC. In
February 1995, the FDIC issued a proposal to change the premium range from
$.04 to $0.31 for every $100 of deposits. If implemented, this proposal would
result in a significant reduction in FDIC insurance assessments of BNY, BNY
Delaware and BNYNA.
The FDIC is authorized to raise insurance premiums in certain
circumstances. Any increase in premiums would have an adverse effect on the
Company's earnings.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe and unsound practices, is
in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order, or condition imposed by a bank's
federal regulatory agency.
Depositor Preference
The Omnibus Budget Reconciliation Act of 1993 provides for a national
depositor preference on amounts realized from the liquidation or other
resolution of any depository institution insured by the FDIC. That act
requires claims to be paid in the following order of priority: the receiver's
administrative expenses; deposits; other general or senior liabilities of the
institution; obligations subordinated to depositors or general creditors; and
obligations to shareholders. Under an FDIC interim rule, which became
effective August 13, 1993, "administrative expenses of the receiver" are
defined as those incurred by the receiver in liquidating or resolving the
affairs of a failed insured depository institution.
<PAGE> 7
Acquisitions
The BHC Act generally limits acquisitions by the Company to commercial
banks and companies engaged in activities that the Federal Reserve Board has
determined to be so closely related to banking as to be a proper incident
thereto. The Company's direct activities are generally limited to furnishing
to its subsidiaries services that qualify under the "closely related" and
"proper incident" tests. Prior Federal Reserve Board approval is required
under the BHC Act for new activities and acquisitions of most nonbanking
companies.
The BHC Act, the Federal Bank Merger Act, and the New York Banking Law
regulate the acquisition of commercial banks. The BHC Act requires the prior
approval of the Federal Reserve Board for the direct or indirect acquisition
of more than 5% of the voting shares of a commercial bank. The BHC Act
generally prohibits the acquisition of a domestic bank located outside the
Company's state of principal operations, New York State, unless authorized by
the law of the state of the target bank. Most states have enacted interstate
banking laws that permit the Company to acquire banks located in their states,
but some states (particularly in the Southeast) presently do not permit entry
by New York bank holding companies. The New York Banking Law requires state
regulatory approval before the Company can acquire more than 5% of the voting
shares of a commercial bank in New York.
The Riegle-Neal Interstate banking and Branching Efficiency Act of 1994
which was enacted in September, 1994, authorizes (i) bank holding companies to
engage in interstate acquisitions of banks beginning one year after the date
of its enactment, (ii) interstate branching through interstate bank mergers
beginning June 1, 1997 (subject to the ability of states to "opt-in" and
thereby permit such mergers earlier or to "opt-out" and thereby prohibit
them), (iii) de novo interstate branching provided that such action is
specifically authorized by the law of the state in which the branch is to be
located and (iv) banks to receive deposits, close and service loans, and
receive payments on loans and other obligations as agent for a bank affiliate
in the same or a different state beginning September 29, 1995. One effect of
this legislation, subject to the state authority described above, will be to
permit the Company to merge two or more of its banking subsidiaries which, as
a result, may create greater efficiency in its operations.
The merger of BNY with another bank would require the approval of the
Federal Reserve Board or other federal bank regulatory authority and, if the
surviving bank is a state bank, the New York Superintendent of Banks. With
respect to BNYNA, the approval of the Comptroller is required for branching of
national banks, purchasing the assets of other banks and for bank mergers in
which the continuing bank is a national bank.
In reviewing bank acquisition and merger applications, the bank
regulatory authorities will consider, among other things, the competitive
effect and public benefits of the transactions, the capital position of the
combined organization, and the applicant's record under the Community
Reinvestment Act.
Under Federal Reserve Board policy, the Company is expected to act as a
source of financial strength to its banks and to commit resources to support
such banks in circumstances where it might not do so absent such policy. In
addition, any loans by the Company to its banks would be subordinate in right
of payment to deposits and to certain other indebtedness of its banks.
Regulated Banking Subsidiaries
As a New York State chartered bank and a member of the Federal Reserve
System, BNY is subject to the supervision of, and is regularly examined by,
the New York State Banking Department and the Federal Reserve Board. As a
bank insured by the FDIC, BNY is also subject to examination by that agency.
BNY Del. is subject to the supervision of, and is regularly examined by, the
FDIC and the Office of State Bank Commissioner of the State of Delaware.
BNYNA is a national bank subject to the regulation and supervision of, and
regular examination by, the Comptroller and subject to regulations of the FDIC
and Federal Reserve Board.
<PAGE> 8
Both federal and state laws extensively regulate various aspects of the
banking business, such as permissible types and amounts of loans and
investments, permissible activities, and reserve requirements. These
regulations are intended primarily for the protection of depositors rather
than the Company's stockholders.
Restrictions on Transfer of Funds
Restrictions on the transfer of funds to the Company are discussed in
Note 9 to the Consolidated Financial Statements included in Exhibit 13. Such
discussion is incorporated herein by reference.
FIRREA
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled institution or (ii)
any assistance provided by the FDIC to a commonly controlled, FDIC-insured
depository institution in danger of default. "Default" is defined generally
as the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
"default" is likely to occur in the absence of regulatory assistance.
GOVERNMENT MONETARY POLICIES
The Federal Reserve Board has the primary responsibility for monetary
policy; accordingly, its actions have an important influence on the demand for
credit and investments and the level of interest rates.
<PAGE> 9
ADDITIONAL FINANCIAL INFORMATION
------------------------------------------------------------------------------
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
1994 1993 1992
==============================================================================
Aver- Aver- Aver-
Average Inter- age Average Inter- age Average Inter- age
Balance est Rate Balance est Rate Balance est Rate
-----------------------------------------------------------------
Assets
------
Interest
-Bearing
Deposits in
Banks
(Primarily
Foreign) $ 1,266 $ 68 5.33% $ 452 $ 24 5.42% $ 753 $ 76 10.14%
Federal Funds
Sold and
Securities
Purchased
Under Resale
Agreements 3,653 161 4.39 3,149 97 3.06 2,379 85 3.54
Loans
Domestic
Offices
Consumer 9,549 1,015 10.62 8,259 806 9.76 7,016 704 10.04
Commercial 12,340 833 6.76 11,998 741 6.18 11,643 755 6.48
Foreign
Offices 10,140 564 5.56 10,170 485 4.77 11,686 651 5.57
------- ------ ------- ------ ------- ------
Total Loans 32,029 2,412* 7.53 30,427 2,032* 6.68 30,345 2,110* 6.95
------- ------ ------- ------ ------- ------
Securities
U.S.
Government
Obligations 3,516 197 5.61 3,732 215 5.78 3,611 240 6.66
Obligations
of States
and
Political
Subdivisions 893 89 10.02 1,070 110 10.29 1,224 135 11.04
Other
Securities,
including
Trading
Securities
Domestic
Offices 1,341 70 5.25 1,358 64 4.74 1,190 91 7.65
Foreign
Offices 191 11 5.64 192 14 7.36 177 17 9.44
------- ------ ------- ------ ------- ------
Total Other
Securities 1,532 81 5.30 1,550 78 5.06 1,367 108 7.88
------- ------ ------- ------ ------- ------
Total
Securities 5,941 367 6.19 6,352 403 6.36 6,202 483 7.79
------- ------ ------- ------ ------- ------
Total
Interest-
Earning
Assets 42,889 $3,008 7.01% 40,380 $2,556 6.33% 39,679 $2,754 6.94%
====== ====== ======
Allowance
for Loan
Losses (906) (1,045) (1,057)
Cash and Due
from Banks 2,827 2,735 2,522
Other Assets 5,470 4,574 5,083
------- ------- -------
Total Assets $50,280 $46,644 $46,227
======= ======= =======
Assets
Attributable
to Foreign
Offices 24.30% 24.37% 28.63%
===== ===== =====
*Includes fees of $118 million in 1994, $103 million in 1993, and $96 million
in 1992.
Nonaccrual loans are included in the average loan balance; the associated
income, recognized on the cash basis, is included in interest.
Taxable equivalent adjustments were $46 million in 1994, $54 million in 1993,
and $66 million in 1992, and are based on the federal statutory tax rate (35%
in 1994 and 1993, and 34% in 1992) and applicable state and local taxes.
Continued on page 10
<PAGE> 10
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
1994 1993 1992
===============================================================================
Aver- Aver- Aver-
Average Inter- age Average Inter- age Average Inter- age
Balance est Rate Balance est Rate Balance est Rate
-------------------------------------------------------------
Liabilities and
Shareholders'
Equity
---------------
Interest-Bearing
Deposits
Domestic Offices
Money Market
Rate Accounts $ 3,593 $ 108 3.01% $ 3,666 $ 91 2.48% $ 3,468 $ 108 3.11%
Savings 8,166 190 2.32 8,379 198 2.37 7,189 216 3.01
Certificates of
Deposit of
$100,000
or More 1,041 42 4.03 1,189 36 3.00 1,709 64 3.75
Other Time
Deposits 2,296 97 4.24 2,701 119 4.39 2,965 152 5.15
------- ------ ------- ------ ------- ------
Total Domestic
Offices 15,096 437 2.90 15,935 444 2.78 15,331 540 3.53
------- ------ ------- ------ ------- ------
Foreign Offices
Banks in
Foreign
Countries 2,917 125 4.30 2,829 93 3.28 4,018 204 5.07
Government and
Official
Institutions 1,384 60 4.37 1,306 57 4.34 1,270 61 4.81
Other Time and
Savings 5,689 220 3.84 3,752 107 2.87 4,716 200 4.24
------- ------ ------- ------ ------- ------
Total Foreign
Offices 9,990 405 4.05 7,887 257 3.26 10,004 465 4.64
------- ------ ------- ------ ------- ------
Total Interest-
Bearing
Deposits 25,086 842 3.35 23,822 701 2.94 25,335 1,005 3.97
------- ------ ------- ------ ------- ------
Federal Funds
Purchased and
Securities Sold
Under Repurchase
Agreements 2,843 106 3.73 3,467 102 2.94 4,001 136 3.40
Other Borrowed
Funds 4,135 191 4.63 2,348 86 3.66 2,045 85 4.13
Long-Term Debt 1,530 106 6.93 1,729 117 6.79 1,386 94 6.77
------- ------ ------- ------ ------- ------
Total Interest-
Bearing
Liabilities 33,594 $1,245 3.71% 31,366 $1,006 3.21% 32,767 $1,320 4.03%
======= ======= =======
Noninterest-
Bearing Deposits
Domestic Offices 8,897 8,946 7,797
Foreign Offices 58 69 105
------- ------- -------
Total
Noninterest-
Bearing
Deposits 8,955 9,015 7,902
------- ------- -------
Other Liabilities 3,594 2,366 2,153
Preferred Stock 157 334 409
Common
Shareholders'
Equity 3,980 3,563 2,996
------- ------- -------
Total Liabilities
and
Shareholders'
Equity $50,280 $46,644 $46,227
======= ======= =======
Net Interest
Earnings and
Interest Rate
Spread $1,763 3.30 $1,550 3.12 $1,434 2.91
====== ====== ======
Net Yield on
Interest-Earning
Assets 4.11% 3.84% 3.61%
==== ==== ====
Liabilities
Attributable
to Foreign
Offices 22.79% 19.74% 24.91%
===== ===== =====
<PAGE> 11
Rate/Volume Analysis on a Taxable Equivalent Basis (in millions)
----------------------------------------------------------------
1994 vs. 1993 1993 vs. 1992
----------------------------------------------------------------------------
Increase (Decrease) Increase (Decrease)
due to change in: due to change in:
---------------- Total ----------------- Total
Average Average Increase Average Average Increase
Balance Rate (Decrease) Balance Rate (Decrease)
------- ------- ---------- ------- ------- ---------
Interest Income
---------------
Interest-Bearing
Deposits in Banks $ 44 $ - $ 44 $ (24) $ (28) $ (52)
Federal Funds Sold
and Securities
Purchased Under
Resale Agreements 17 47 64 25 (13) 12
Loans
Domestic Offices
Consumer 134 75 209 122 (20) 102
Commercial 22 70 92 23 (37) (14)
Foreign Offices (1) 80 79 (79) (87) (166)
----- ----- ----- ------ ------ ------
Total Loans 155 225 380 66 (144) (78)
Securities
U.S. Government
Obligations (12) (6) (18) 8 (33) (25)
Obligations of
States and
Political
Subdivisions (18) (3) (21) (16) (9) (25)
Other Securities,
including
Trading Assets
Domestic Offices (1) 7 6 12 (39) (27)
Foreign Offices - (3) (3) 1 (4) (3)
----- ----- ----- ----- ----- ------
Total Other
Securities (1) 4 3 13 (43) (30)
----- ----- ----- ----- ----- ------
Total Securities (31) (5) (36) 5 (85) (80)
----- ----- ----- ----- ----- ------
Total Interest
Income 185 267 452 72 (270) (198)
----- ----- ----- ----- ----- ------
Interest Expense
----------------
Interest-Bearing
Deposits
Domestic Offices
Money Market Rate
Accounts (2) 19 17 6 (23) (17)
Savings (5) (3) (8) 32 (50) (18)
Certificate of
Deposits of
$100,000 or More (5) 11 6 (17) (11) (28)
Other Time Deposits (18) (4) (22) (12) (21) (33)
----- ----- ----- ----- ----- ------
Total Domestic
Offices (30) 23 (7) 9 (105) (96)
----- ----- ----- ----- ----- ------
Foreign Offices
Banks in Foreign
Countries 3 29 32 (51) (60) (111)
Government and
Official
Institutions 3 - 3 2 (6) (4)
Other Time and
Savings 67 46 113 (37) (56) (93)
----- ----- ----- ----- ----- ------
Total Foreign
Offices 73 75 148 (86) (122) (208)
----- ----- ----- ----- ----- ------
Total Interest-
Bearing
Deposits 43 98 141 (77) (227) (304)
Federal Funds
Purchased and
Securities Sold
Under Repurchase
Agreements (20) 24 4 (17) (17) (34)
Other Borrowed Funds 77 28 105 11 (10) 1
Long-Term Debt (13) 2 (11) 23 - 23
----- ----- ----- ----- ----- ------
Total Interest
Expense 87 152 239 (60) (254) (314)
----- ----- ----- ----- ----- ------
Change in Net
Interest Income $ 98 $ 115 $ 213 $ 132 $ (16) $ 116
===== ===== ===== ===== ===== ======
Changes which are not solely due to balance changes or rate changes are
allocated to such categories on the basis of the respective percentage changes
in average balances and average rates.
<PAGE> 12
Interest-Rate Sensitivity
-------------------------
The Company actively manages interest-rate sensitivity (the exposure of
net interest income to interest rate movements). The relationship of
interest-earning assets and interest-bearing liabilities between repricing
dates is closely monitored, yet the Company's policies are flexible enough to
capitalize on profit opportunities, while minimizing adverse effects on
earnings when changes in short-term and long-term interest rates occur. The
Company uses complex simulation models to adjust the structure of its assets
and liabilities in response to interest rate exposures.
The Company uses three basic scenarios to model interest rate
sensitivity, these include base line, high rate, and low rate. The base
line scenario is the Company's estimated most likely path for future
short-term interest rates. The base line scenario forecast in January 1995
assumes rising rates. The "high rate" scenario assumes a 79 basis point
increase from the base line scenario (already a rising rate scenario).
The "low rate" scenario assumes the average rate declines 121 basis points
under the base line scenario. Additionally, other scenarios are reviewed to
examine the impact of other interest rate changes.
The Company quantifies interest rate sensitivity by calculating the change
in net interest income between the three scenarios over a 12 month policy
measurement period. Net interest income as calculated by the earnings
simulation model under the base line scenario becomes the standard. The
measurement of interest rate sensitivity is the percentage change in net
interest income calculated by the model under high rate versus base-line
scenario and under low rate versus base-line scenario. The scenarios do not
include the adjustments that management would make as rate expectations change.
The Company's policy limit for fluctuations in net interest income
resulting from either the high rate or low rate scenario is 6 percent. Based
upon the January 1995 outlook, if interest rates were to rise to follow the
high rate scenario, then net interest income during the policy measurement
period would be positively affected by 1.82% percent (assuming management took
no actions.) If interest rates were to follow the low rate scenario, then net
interest income would be negatively affected by 1.94%
In addition to the policy limit discussed above, the Company also has a
global mismatch limit to control the impact of interest rate fluctuations on
the Company's earnings. The Company's global mismatch is defined as the
absolute value of the Company's asset repricings less liability repricings in
24 maturity bands ranging from one day to over 10 years. Off balance sheet
instruments, such as swaps and futures used to hedge balance sheet items are
included in the calculation of the global mismatch. Each year the Company's
Board of Directors approves specific mismatch limits. The global mismatch is
reviewed weekly by senior management.
The following table reflects the year-end position of the Company's
interest-earning assets and interest-bearing liabilities that either reprice
or mature within the designated time periods. Further, within each time period
assets and liabilities reprice on different dates and at different levels.
Interest sensitivity gaps change daily. A positive interest sensitivity gap,
for a particular time period, is one in which more assets reprice or mature
than liabilities. A negative interest sensitivity gap results from a greater
amount of liabilities repricing or maturing. A positive gap implies that there
are more rate sensitive assets than liabilities which suggests that as interest
rates rise, the return on assets will rise faster than the funding costs.
Conversely, a negative gap indicates a higher ratio of rate sensitive
liabilities than assets. In such cases, if interest rates rise, then funding
costs will rise at a faster rate than the return on assets. Finally, the
cumulative gap is the sum of the dollar gap for sequential time periods.
<PAGE> 13
December 31, 1994
-----------------------------------------------
Within Greater
Within Within Within 7-12 Than
1 Mo. 2-3 Mos. 4-6 Mos. Mos. 12 Mos. Total
------ -------- -------- ------ ------- -------
(in millions)
Interest-Earning Assets
-----------------------
Foreign Offices $ 5,840 $ 4,025 $1,677 $ 196 $ 217 $11,955
Domestic Offices
Loans 16,976 471 392 564 4,387 22,790
Securities 131 60 93 309 3,380 3,973
Trading Assets 686 - - - - 686
Federal Funds Sold and
Securities Purchased
Under Resale Agreement 3,019 - - - - 3,019
------- ------- ------ ------ ------ -------
26,652 4,556 2,162 1,069 7,984 $42,423
------- ------- ------ ------ ------ =======
Interest-Bearing Liabilities
----------------------------
Foreign Offices 8,323 1,614 625 488 32 11,082
Domestic Offices
Interest-Bearing Deposits
Money Market Rate
Accounts 3,330 - - - - 3,330
Savings 6,444 - - 13 1,296 7,753
Certificates of Deposit
of $100,000 or More 493 399 224 304 901 2,321
Other Time Deposits 335 235 322 219 355 1,466
------- ------- ------ ------ ------ -------
Total Interest-Bearing
Deposits 18,925 2,248 1,171 1,024 2,584 25,952
------- ------- ------ ------ ------ -------
Federal Funds Purchased
and Other Borrowed Funds 4,344 737 147 555 17 5,800
Long-Term Debt - - 64 - 1,710 1,774
------- ------- ------ ------ ------ -------
Noninterest-Bearing Sources
of Funds 3,581 25 38 76 5,177 8,897
--------------------------- ------- ------- ------ ------ ------ -------
Total 26,850 3,010 1,420 1,655 9,488 $42,423
=======
Effect of Financial Futures
and Swaps 933 (2,401) (396) 1,055 809
--------------------------- ------- ------- ------ ------ ------
Interest-Sensitive Gap $ 735 $ (855) $ 346 $ 469 $ (695)
---------------------- ======= ======= ====== ====== ======
Cumulative Interest-
Sensitivity Gap $ 735 $ (120) $ 226 $ 695 $ -
-------------------- ======= ======= ====== ====== ======
<PAGE> 14
PROVISION AND ALLOWANCE FOR LOAN LOSSES
---------------------------------------
At December 31, 1994, the domestic commercial real estate portfolio had
approximately 76% of its loans in New York and New Jersey, 5% in California,
5% in Pennsylvania, 3% in New England, and 1% in Florida; no other state
accounts for more than 1% of the portfolio. This portfolio consists of the
following types of properties:
Business loans secured by real estate 45%
Offices 28
Retail 8
Hotels 5
Mixed-Used 4
Land 2
Condominiums and cooperatives 1
Industrial/Warehouse 1
Other 6
----
100%
====
At December 31, 1994 and 1993, the Company's nonperforming real estate
loans and real estate acquired in satisfaction of loans aggregated $119
million and $171 million, respectively. Net charge-offs of real estate loans
were $6 million in 1994 and $69 million in 1993. In addition, other real
estate charges were $11 million and $53 million in 1994 and 1993. A
discussion of other real estate charges under "Noninterest Expense and Income
Taxes" in the "Management's Discussion and Analysis" section included in
Exhibit 13 is incorporated herein by reference.
At December 31, 1994, the Company's LDC exposures consisted of $78
million in medium-term loans (and no material commitments), $334 million in
short-term loans, $14 million in accrued interest, and $48 million in equity
investments. At December 31, 1994, the allowance for loan losses associated
with LDC loans was $98 million. In addition, the Company has $318 million of
debt securities to emerging market countries, including $270 million (book
value) of bonds whose principal payments are collateralized by U.S. Treasury
zero coupon obligations and whose interest payments are partially
collateralized.
The Company's consumer loan portfolio is comprised principally of credit
card, other installment, and residential loans. Residential and auto loans
are collateralized, thereby reducing the risk. Credit card net charge-offs
were $149 million in 1994 compared to $121 million in 1993. The 1994 and 1993
amounts exclude $32 million and $56 million in net charge-offs related to the
portion of the portfolio that is securitized. As a percentage of average
credit card outstandings, net charge-offs were to 2.47% in 1994 compared to
2.88% in 1993. On a managed receivables basis, net charge-offs as a
percentage of average outstandings were 2.68% in 1994 compared to 3.19% in
1993. Other consumer net charge-offs were $7 million in 1994 and $23 million
in 1993.
Lending to the utility industry is concentrated in investor-owned
electric utilities. The Company also makes loans to gas and telephone
utilities. Nonperforming loans in this industry amounted to $2 million at
year-end 1994 and 1993. There were no charge-offs in 1994 and 1993.
<PAGE> 15
The Company's loans to the communications, entertainment, and publishing
industries primarily consist of credits with cable television operators,
broadcasters, magazine and newspaper publishers and motion picture theaters.
There were no nonperforming communications loans at December 31, 1994 and
1993. Charge-offs of communications loans were $1 million in 1993. There
were no charge-off in 1994.
The Company's portfolio of loans for purchasing or carrying securities is
comprised largely of overnight loans which are fully collateralized, with
appropriate margins, by marketable securities. Throughout its many years of
experience in this area, the Company has rarely experienced a loss.
The Company makes short-term, collateralized loans to mortgage bankers
to fund mortgages sold to investors. Nonperforming loans and charge-offs have
not been significant.
Based on an evaluation of individual credits, historical loan losses, and
global economic factors, the Company has allocated its allowance for loan
losses as follows:
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Real Estate Loans 9% 8% 9% 10% 11%
HLT Loans 5 6 7 11 17
Other Domestic Commercial
and Industrial Loans 51 58 57 51 38
Consumer Loans 16 10 9 10 8
Foreign Loans (excluding
medium-term LDC loans) 7 6 6 6 6
LDC Loans 12 12 12 12 20
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
Such an allocation is inherently judgmental, and the entire allowance for
loan losses is available to absorb loan losses regardless of the nature of the
loan.
<PAGE> 16
The following table details changes in the Company's allowance for loan losses
for the last five years.
(dollars in millions) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Loans Outstanding, December 31, $33,083 $30,570 $29,497 $30,335 $35,776
Average Loans Outstanding 32,029 30,427 30,345 32,719 38,139
Allowance for Loan Losses
-------------------------
Balance, January 1
Regular
Domestic $ 794 $ 878 $ 889 $ 831 $ 593
Foreign 60 70 60 62 24
Less Developed Countries 116 124 135 218 537*
------- ------- ------- ------- -------
Total, January 1 970 1,072 1,084 1,111 1,154
------- ------- ------- ------- -------
Allowance of Acquired Companies
and Other Changes - - 56 (10) 1
Credit Card Securitizations 14 1 - (18) -
Charge-Offs
Domestic
Commercial and Industrial (158) (142) (311) (358) (111)
Real Estate & Construction (6) (71) (103) (165) (45)
Consumer Loans (191) (173) (181) (226) (157)
Foreign (38) (54) (20) (32) (9)
Less Developed Countries (18) (9) (13) (39) (270)
------- ------- ------- ------- -------
Total (411) (449) (628) (820) (592)
------- ------- ------- ------- -------
Recoveries
Domestic
Commercial and Industrial 14 28 66 11 35
Real Estate & Construction - 2 13 1 -
Consumer Loans 35 29 26 21 16
Foreign 8 2 10 4 1
Less Developed Countries - 1 2 6 1
------- ------- ------- ------- -------
Total 57 62 117 43 53
Net Charge-Offs (354) (387) (511) (777) (539)
------- ------- ------- ------- -------
Provision
Domestic 135 242 423 742 449
Foreign 27 42 20 36 46
------- ------- ------- ------- -------
Total 162 284 443 778 495
------- ------- ------- ------- -------
Balance, December 31,
Regular
Domestic 637 794 878 889* 831*
Foreign 57 60 70 60 62
Less Developed Countries 98 116 124 135* 218*
------- ------- ------- ------- -------
Total, December 31, $ 792 $ 970 $ 1,072 $ 1,084 $ 1,111
======= ======= ======= ======= =======
Ratios
------
Net Charge-Offs to Average Loans
Outstandings 1.11% 1.27% 1.68% 2.37% 1.41%
======= ======= ======= ======= =======
Net Charge-Offs to Total Allowance 44.70% 39.90% 47.67% 71.68% 48.51%
======= ======= ======= ======= =======
Total Allowance to Year-End Loans
Outstanding 2.40% 3.17% 3.63% 3.57% 3.11%
====== ====== ===== ====== ======
*Each year includes a $50 million transfer from the LDC Allowance for Loan
Losses to the Regular Allowance.
<PAGE> 17
Nonperforming Assets
--------------------
A summary of nonperforming assets is presented in the following table.
(in millions) December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Nonaccrual
----------
Domestic $ 220 $ 408 $ 581 $1,014 $1,294
Foreign (including
Medium-term LDC) 77 130 198 146 86
----- ------ ------ ------ ------
297 538 779 1,160 1,380
Reduced Rate (Domestic) - 2 9 13 15
------------ ----- ------ ------ ------ ------
297 540 788 1,173 1,395
Real Estate Acquired in
-----------------------
Satisfaction of Loans 56 99 268 369 355
--------------------- ----- ------ ------ ------ ------
$ 353 $ 639 $1,056 $1,542 $1,750
===== ====== ====== ====== ======
Past Due 90 Days or More
------------------------
and Still Accruing Interest
---------------------------
Domestic $ 163 $ 156 $ 218 $ 178 $ 215
Foreign - - - 66 11
----- ------ ------ ------ ------
$ 163 $ 156 $ 218 $ 244 $ 226
===== ====== ====== ====== ======
<PAGE> 18
Securities
----------
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 December 31, 1994.
States and
U.S. Government Political
U.S. Government Agency Subdivisions
--------------- ---------------- -------------
Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
(dollars in millions)
Securities Held-
----------------
to-Maturity
-----------
One Year or Less $ 256 5.47% $ 1 6.04% $ 264 5.44%
Over 1 through 5 Years 736 4.99 153 5.08 119 6.94
Over 5 through 10 Years 436 5.63 - - 111 7.78
Over 10 years - - - - 275 7.53
Mortgage-Backed Securities - - - - - -
------ ----- ------
$1,428 5.27 $ 154 5.08 $ 769 6.76
====== ===== ======
Securities Available-
--------------------
for-Sale
----------
One Year or Less $ 25 5.50% $ - -% $ - -%
Over 1 through 5 Years 958 5.87 - - 2 5.23
Over 5 through 10 Years 436 6.10 - - 2 5.34
Over 10 years 7 11.19 - - 3 5.74
Equity Securities - - - - - -
------ ----- -----
$1,426 5.96 $ - - $ 7 5.45
====== ===== =====
Other Bonds, Mortgage-Backed
Notes and and Equity
Debentures Securities
------------- ------------
Amount Yield Amount Yield Total
------ ----- ------ ----- -----
(dollars in millions)
Securities Held-
----------------
to-Maturity
-----------
One Year or Less $ 28 5.13% $ - - % $ 549
Over 1 through 5 Years 39 6.19 - - 1,047
Over 5 through 10 Years 53 5.90 - - 600
Over 10 years 294 7.07 - - 569
Mortgage-Backed Securities - - 165 7.49 165
---- ---- ------
$414 6.70 $165 7.49 $2,930
==== ==== ======
Securities Available-
--------------------
for-Sale
----------
One Year or Less $ 2 -% $ - -% $ 27
Over 1 through 5 Years 7 - - - 967
Over 5 through 10 Years 3 - - - 441
Over 10 years 10 5.22 - - 20
Equity Securities - - 266 4.77 266
----- ---- ------
$ 22 2.48 $266 4.77 $1,721
===== ==== ======
Loans
-----
The following table shows the maturity structure of the Company's commercial
loan portfolio at December 31, 1994.
Over 1 Year
1 Year Through Over
or Less 5 Years 5 Years Total
------ ----------- ------- -----
(in millions)
Domestic
--------
Real Estate, Excluding Loans
Collateralized by 1-4 Family
Residential Properties $ 599 $1,392 $ 876 $ 2,867
Commercial and Industrial Loans 3,755 4,131 3,263 11,149
Other, Excluding Loans to
Individuals and those
Collateralized by 1-4 Family
Residential Properties 3,154 340 184 3,678
------ ------ ------ -------
7,508 5,863 4,323 17,694
Foreign 1,425 695 1,531 3,651
------- ------ ------ ------ -------
Total $8,933 $6,558 $5,854 $21,345
====== ====== ====== =======
Loans with:
Predetermined Interest Rates $ 437 $ 193 $1,109 $ 1,739
Floating Interest Rates 8,496 6,365 4,745 19,606
------ ------ ------ -------
Total $8,933 $6,558 $5,854 $21,345
====== ====== ====== =======
<PAGE> 19
Deposits
--------
The aggregate amount of deposits by foreign customers in domestic offices
was $875 million, $739 million, and $789 million at December 31, 1994, 1993,
and 1992.
The following table shows the maturity breakdown of domestic time
deposits of $100,000 or more at December 31, 1994.
Time
(in millions) Certificates Deposits-
of Deposits Other Total
------------------------------------------------
3 Months or Less $ 842 $654 $1,496
Over 3 Through 6 Months 224 5 229
Over 6 Through 12 Months 374 5 379
Over 12 Months 881 19 900
------ ---- ------
Total $2,321 $683 $3,004
====== ==== ======
The majority of deposits in foreign offices are time deposits in
denominations of $100,000 or more.
Other Borrowed Funds
---------------------
Information related to other borrowed funds in 1994, 1993, and 1992 is
presented in the table below.
1994 1993 1992
--------------- --------------- --------------
(dollars in millions)
Average Average Average
Amount Rate Amount Rate Amount Rate
------ ------- ------ ------- ------ -------
Federal Funds Purchased and
---------------------------
Securities Sold Under
---------------------
Repurchase Agreements
---------------------
At December 31 $1,502 4.91% $2,711 2.85% $1,773 2.81%
Average During Year 2,843 3.73 3,467 2.94 4,001 3.40
Maximum Month-End Balance
During Year 6,415 3.36 4,894 2.80 5,467 3.88
Other*
-----
At December 31 4,176 5.79% 2,781 3.61 3,029 3.82
Average During Year 4,135 4.63 2,348 3.66 2,045 4.13
Maximum Month-End Balance
During Year 5,639 4.57 3,161 3.60 3,029 3.82
*Other borrowings consist primarily of commercial paper, bank notes, extended
federal funds purchased, and amounts owed to the U.S. Treasury.
Foreign Assets
--------------
The only foreign country in which the Company's assets exceed .75% of
year end total assets was the United Kingdom in 1993 ($351 million). There
were no foreign countries in which the Company's assets exceeded .75% of year
end total assets in 1994. However, at December 31, 1994 the Company had
outstanding commitments to extend credit to customers in the United Kingdom
amounting to $651 million.
<PAGE> 20
ITEM 2. PROPERTIES
-------------------
In New York City, the Company owns the thirty story building housing its
executive headquarters at 48 Wall Street, a forty-nine story office building
at One Wall Street, and an operations center at 101 Barclay Street. In
addition, the Company owns and/or leases administrative and operations
facilities in New York City; various locations in New Jersey; Harrison, New
York; Newark, Delaware; London, England; and Utica, New York. Other real
properties owned or leased by the Company, when considered in the aggregate,
are not material to its operations.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
Litigation regarding Northeast Bancorp., Inc. is described in Note 12
to the Consolidated Financial Statements included in Exhibit 13, and such
description is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
There were no matters submitted to a vote of security holders of the
registrant during the fourth quarter of 1994.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
--------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
Information with respect to the market for the Company's common equity
and related stockholder matters is incorporated herein by reference from the
"Quarterly Data" section included in Exhibit 13. The Company's securities
that are listed on the New York Stock Exchange (NYSE), are indicated as such
on the front cover of this report. The NYSE symbol for the Company's Common
Stock is BK. The Warrants (to purchase the Company's Common Stock) are traded
over the counter. All of the Company's other securities are not currently
listed. The Company had 26,473 common shareholders of record at February 28,
1995.
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
Selected financial data are incorporated herein by reference from the
"Financial Highlights" section included in Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Management's discussion and analysis of financial condition and results
of operations is incorporated herein by reference from the corresponding
section of Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
Consolidated financial statements and notes and the independent auditors'
report are incorporated herein by reference from Exhibit 13 to this report.
The report of Independent Public Accountants for National Community
Banks, Inc. is incorporated herein by reference from Exhibit 99 to this
report.
Supplementary financial information is incorporated herein by reference
from the "Quarterly Data" section included in Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
There have been no events which require disclosure under Item 304 of
Regulation S-K.
<PAGE> 21
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The directors of the registrant are identified on pages 27 and 28 of this
report. Additional material responsive to this item is contained in the
Company's definitive Proxy Statement for its 1995 Annual Meeting of
Shareholders, which information is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT AND BUSINESS EXPERIENCE DURING THE PAST
----------------------------------------------------------------------------
FIVE YEARS
----------
Company
Officer
Name Office and Experience Age Since
---- --------------------- --- -----
J. Carter Bacot 1990-1995 Chairman and Chief Executive 62 1975
Officer of the Company and the Bank
Thomas A. Renyi 1994-1995 President of the Company and 49 1992
President and Chief Operating
Officer of the Bank
1992-1994 President of the Company and
Vice Chairman of the Bank
1990-1992 Senior Executive Vice President and
Chief Credit Officer of the Bank
Alan R. Griffith 1994-1995 Vice Chairman of the Company and 53 1990
the Bank
1990-1994 Senior Executive Vice President of
the Company, and President and Chief
Operating Officer of the Bank
Samuel F. Chevalier 1990-1995 Vice Chairman of the Company and 61 1989
the Bank
1990 Chief Operating Officer and
President of Irving Bank Corporation
Deno D. Papageorge 1990-1995 Senior Executive Vice President of 56 1980
the Company, Senior Executive Vice
President and Chief Financial
Officer of the Bank
Richard D. Field 1990-1995 Executive Vice President of the 54 1987
Company, Senior Executive Vice
President of the Bank
Robert E. Keilman 1990-1995 Comptroller of the Company and the 49 1984
Bank, Senior Vice President of the
Bank
Phebe C. Miller 1995 Secretary and Chief Legal Officer 45 1995
of the Company, Senior Vice
President and Chief Legal Officer
of the Bank
1994-1995 Senior Vice President of the Bank
1991-1994 Managing Director, General Counsel
and Secretary, Discount Corporation
of New York
1990-1991 Vice President and Counsel,
Discount Corporation of New York
Robert J. Goebert 1990-1995 Auditor of the Company, Senior Vice 53 1982
President of the Bank
<PAGE> 22
Officers of BNY who perform major policy making functions:
Bank
Executive
Officer
Name Office and Experience Age Since
---- --------------------- --- ------
Gerald L. Hassell 1994-1995 Senior Executive Vice President 43 1990
and Chief Commercial Banking
Officer
1992-1994 Executive Vice President -
Special Industries Banking
1990-1991 Executive Vice President -
Communications, Entertainment,
and Publishing Division
Robert J. Mueller 1992-1995 Senior Executive Vice President - 53 1989
Chief Credit Policy Officer
1990-1992 Executive Vice President - Mortgage
& Construction Lending
Richard A. Pace 1990-1995 Executive Vice President and Chief 49 1989
Technologist
There are no family relationships between the executive officers of the
Company. The terms of office of the executive officers of the Company extend
until the annual organizational meeting of the Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The material responsive to such item in the Company's definitive Proxy
Statement for its 1995 Annual Meeting of Shareholders is incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
The material responsive to such item in the Company's definitive Proxy
Statement for its 1995 Annual Meeting of Shareholders is incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The material responsive to such item in the Company's definitive Proxy
Statement for its 1995 Annual Meeting of Shareholders is incorporated by
reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------
(a) 1 Financial Statements:
See Item 8.
(a) 2 Financial Statement Schedules:
Financial statement schedules are omitted since the required information
is either not applicable, not deemed material, or is shown in the respective
financial statements or in the notes thereto.
<PAGE> 23
(a) 3 Listing of Exhibits:
Exhibit No. Per
Regulation S-K Description
-------------- -----------
3 (a) The By-Laws of The Bank of New York Company, Inc. as amended
through October 13, 1987.
(Filed as Exhibit 3(a) to the Company's 1987 Annual Report on Form
10-K Form 10-K and incorporated herein by reference.)
(b) Restated Certificate of Incorporation of The Bank of New York
Company, Inc. dated July 20, 1994.
(Filed as Exhibit 4 to Form 10-Q filed by the Company
on November 10, 1994 and incorporated herein by reference.)
4 (a) None of the outstanding instruments defining the rights of holders
of long-term debt of the Company represent long-term debt in
excess of 10% of the total assets of the Company. The Company
hereby agrees to furnish to the Commission, upon request, a copy
of any of such instruments.
(b) Rights Agreement, including form of Preferred Stock Purchase
Rights, incorporated herein by reference to the Company's
Registration Statement on Form 8-A dated December 18, 1985.
(c) First Amendment, dated as of June 13, 1989, to the Rights
Agreement, including form of Preferred Stock Purchase Right, dated
as of December 10, 1985, between The Bank of New York Company,
Inc. and The Bank of New York, as Rights Agent, incorporated by
reference to the amendment on Form 8, dated June 14, 1989, to the
registrant's Registration Statement on Form 8-A, dated
December 18, 1985.
(d) Second Amendment, dated as of April 30, 1993, to the Rights
Agreement, including form of Preferred Stock Purchase Right, dated
as of December 10, 1985, between The Bank of New York Company,
Inc. and The Bank of New York, as Rights Agent, incorporated by
reference to the amendment on Form 8-A/A, dated April 30, 1993, to
the registrant's Registration Statement on Form 8-A dated
December 18, 1985.
(e) Third Amendment, dated as of March 8, 1994, to the Rights
Agreement, dated as of December 10, 1985, between The Bank of New
York Company, Inc. and The Bank of New York, as Rights Agent,
Incorporated by reference to Exhibit 4(a) to the Company's Current
Report on Form 8-K for the Report Date March 8, 1994.
10 (a) 1984 Stock Option Plan of The Bank of New York Company, Inc. as
amended through February 23, 1988. (Filed as Exhibit 10(a) to the
Company's 1988 Annual Report on Form 10-K and incorporated herein
by reference.)*
(b) Amendment dated October 11, 1994 to 1984 Stock Option Plan of The
Bank of New York Company, Inc.*
(c) The Bank of New York Company, Inc. Excess Contribution Plan as
amended through July 10, 1990. (Filed as Exhibit 10(b) to the
Company's 1990 Annual Report on Form 10-K and incorporated herein
by reference.)*
(d) Amendments to The Bank of New York Company, Inc. Excess
Contribution Plan dated February 23, 1994 and November 9, 1993.
(Filed as Exhibit 10(c) to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.)*
<PAGE> 24
Exhibit No. Per
Regulation S-K Description
-------------- -----------
10 (e) The Bank of New York Company, Inc. Excess Benefit Plan as amended
through December 8, 1992.
(Filed as Exhibit 10(d) to the Company's 1992 Annual Report on
Form 10-K and incorporated herein by reference.)*
(f) Amendments to The Bank of New York Company, Inc. Excess Benefit
Plan dated February 23, 1994 and November 9, 1993.
(Filed as Exhibit 10(e) to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.)*
(g) Amendment dated May 10, 1994 to The Bank of New York Company, Inc.
Excess Benefit Plan.*
(h) 1994 Management Incentive Compensation Plan of The Bank of New
York Company, Inc.
(Filed as Exhibit 10(g) to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.)*
(i) 1988 Long-Term Incentive Plan as amended through December 8, 1992.
(Filed as Exhibit 10(f) to the Company's 1992 Annual Report on
Form 10-K and incorporated herein by reference.)*
(j) Amendment dated October 11, 1994 to the 1988 Long-Term Incentive
Plan of The Bank of New York Company, Inc.*
(k) The Bank of New York Company, Inc. 1993 Long-Term Incentive Plan.
(Filed as Exhibit 10(m) to the Company's 1992 Annual Report on
Form 10-K and incorporated herein by reference.)*
(l) Amendment dated October 11, 1994 to the 1993 Long-Term Incentive
Plan of The Bank of New York Company, Inc.*
(m) The Bank of New York Company, Inc. Supplemental Executive
Retirement Plan.
(Filed as Exhibit 10(n) to the Company's 1992 Annual Report on
Form 10-K and incorporated herein by reference.)*
(n) Amendment to The Bank of New York Company, Inc. Supplemental
Executive Retirement Plan dated March 9, 1993.
(Filed as Exhibit 10(k) to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.)*
(o) Amendment dated October 11, 1994 to The Bank of New York Company,
Inc. Supplemental Executive Retirement Plan.*
(p) Trust Agreement dated April 19, 1988 related to certain executive
compensation plans and agreements.
(Filed as Exhibit 10(h) to the Company's 1988 Annual Report on
Form 10-K and incorporated herein by reference.)*
(q) Trust Agreement dated November 16, 1993 related to certain
executive compensation plans and agreements.
(Filed as Exhibit 10(m) to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.)*
(r) Amendment dated October 11, 1994 to Trust Agreement dated November
16, 1993, related to certain executive compensation plans and
agreements.*
<PAGE> 25
Exhibit No. Per
Regulation S-K Description
-------------- -----------
10 (s) Trust Agreement dated December 15, 1994 related to certain
executive compensation plans and agreements.*
(t) Form of Remuneration Agreement between the Company and two of the
five most highly compensated executive officers of the Company.
(Filed as Exhibit 10 to the Company's 1982 Annual Report on Form
10-K and incorporated herein by reference.)*
(u) Form of Tax Reimbursement Agreement dated as of July 13, 1994
between the Company and two of the five most highly compensated
executive officers of the Company.*
(v) Form of Remuneration Agreement dated October 11, 1994 between the
Company and three of the five most highly compensated officers of
the Company.*
(w) The Bank of New York Company, Inc. Retirement Plan for Non-
Employee Directors.
(Filed as Exhibit 10(r) to the Company's 1993 Annual Report on Form
10-K and incorporated herein by reference.)*
(x) Amendment dated November 8, 1994 to The Bank of New York Company,
Inc. Retirement Plan for Non-Employee Directors.*
(y) Deferred Compensation Plan for Non-Employee Directors of The Bank
of New York Company, Inc.
(Filed as Exhibit 10(s) to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.)*
(z) Amendment dated November 8, 1994 to the Deferred Compensation Plan
for Non-Employee Directors of The Bank of New York Company, Inc.*
11 Statement - Re: Computation of Per Common Share Earnings
12 Statement - Re: Computation of Earnings to Fixed Charges Ratios
13 Portions of the 1994 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
99 Report of Independent Public Accountants for National Community
Banks, Inc.
--------------------
* Indicates a management contract or compensatory plan or arrangement.
<PAGE> 26
(b) Reports on Form 8-K:
October 13, 1994: Unaudited interim financial information and
accompanying discussion for the third quarter of 1994.
December 6, 1994: An Underwriting Agreement dated December 6,
1994, a Form of Note, an Officers' Certificate, an Opinion of
Counsel, and a Consent of Counsel in connection with a Registration
Statement on Form S-3 (File Nos. 33-51984 and 33-50333) covering
the Company's 8.50% Subordinated Notes Due 2004 issuable under an
Indenture dated October 1, 1993.
January 17, 1995: Unaudited interim financial information and
accompanying discussion for the fourth quarter of 1994.
(c) Exhibits:
Submitted as a separate section of this report.
(d) Financial Statements Schedules:
None
<PAGE> 27
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 in New York, New York, on
the 27th day of March, 1995.
THE BANK OF NEW YORK COMPANY, INC.
By: \s\ Deno D. Papageorge
-------------------------------------
(Deno D. Papageorge
Senior Executive Vice President)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 27th day of March, 1995.
Signature Title
--------- -----
\s\J. Carter Bacot Chairman and
----------------------------------- Chief Executive Officer
(J. Carter Bacot) (principal executive officer)
\s\ Deno D. Papageorge Senior Executive Vice President
----------------------------------- (principal financial officer)
(Deno D. Papageorge)
\s\ Robert E. Keilman Comptroller
------------------------------------ (principal accounting officer)
(Robert E. Keilman)
Director
------------------------------------
(Richard Barth)
\s\ William R. Chaney Director
------------------------------------
(William R. Chaney)
\s\ Samuel F. Chevalier Vice Chairman and Director
------------------------------------
(Samuel F. Chevalier)
Director
------------------------------------
(Anthony P. Gammie)
\s\ Ralph E. Gomory Director
------------------------------------
(Ralph E. Gomory)
<PAGE> 28
\s\ Alan R. Griffith Vice Chairman
------------------------------------ and Director
(Alan R. Griffith)
\s\ Edward L. Hennessy, Jr. Director
------------------------------------
(Edward L. Hennessy, Jr.)
\s\ John C. Malone Director
------------------------------------
(John C. Malone)
\s\ Donald L. Miller Director
------------------------------------
(Donald L. Miller)
\s\ H. Barclay Morley Director
------------------------------------
(H. Barclay Morley)
\s\ Martha T. Muse Director
------------------------------------
(Martha T. Muse)
\s\ Catherine A. Rein Director
------------------------------------
(Catherine A. Rein)
\s\ Thomas A. Renyi President and
------------------------------------ Director
(Thomas A. Renyi)
\s\ Harold E. Sells Director
------------------------------------
(Harold E. Sells)
\s\ Delbert C. Staley Director
------------------------------------
(Delbert C. Staley)
\s\ W. S. White, Jr. Director
------------------------------------
(W. S. White, Jr.)
\s\ Samuel H. Woolley Director
------------------------------------
(Samuel H. Woolley)
<PAGE> 29
INDEX TO EXHIBITS
Exhibit No.
------------
3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through
October 13, 1987.*
(b) Restated Certificate of Incorporation of The Bank of New York
Company, Inc. dated July 20, 1994.*
4 (a) None of the outstanding instruments defining the rights of holders
of long-term debt of the Company represent long-term debt in excess
of 10% of the total assets of the Company. The Company hereby
agrees to furnish to the Commission, upon request, a copy of any of
such instruments.
(b) Rights Agreement, including form of Preferred Stock Purchase
Rights.*
(c) First Amendment, dated as of June 13, 1989, to the Rights Agreement,
including form of Preferred Stock Purchase Right, dated as of
December 10, 1985, between The Bank of New York Company, Inc. and
The Bank of New York, as Rights Agent.*
(d) Second Amendment, dated as of April 30, 1993, to the Rights
Agreement, including form of Preferred Stock Purchase Right, dated
as of December 10, 1985, between The Bank of New York Company, Inc.
and The Bank of New York, as Rights Agent.*
(e) Third Amendment, dated as of March 8, 1994, to the Rights Agreement,
dated as of December 10, 1985, between The Bank of New York Company,
Inc. and The Bank of New York, as Rights Agent.*
10 (a) 1984 Stock Option Plan of The Bank of New York Company, Inc. as
amended through February 23, 1988.*
(b) Amendment dated October 11, 1994 to 1984 Stock Option Plan of The
Bank of New York Company, Inc.
(c) The Bank of New York Company, Inc. Excess Contribution Plan as
amended through July 10, 1990.*
(d) Amendments to The Bank of New York Company, Inc. Excess Contribution
Plan dated February 23, 1994 and November 9, 1993.*
(e) The Bank of New York Company, Inc. Excess Benefit Plan as amended
through December 8, 1992.*
(f) Amendments to The Bank of New York Company, Inc. Excess Benefit Plan
dated February 23, 1994 and November 9, 1993.*
(g) Amendment dated May 10, 1994 to The Bank of New York Co., Inc.
Excess Benefit Plan.
(h) 1994 Management Incentive Compensation Plan of The Bank of New York
Company, Inc.*
(i) 1988 Long-Term Incentive Plan as amended through December 8, 1992.*
(j) Amendment dated October 11, 1994 to the 1988 Long-Term Incentive
Plan of The Bank of New York Company, Inc.
(k) The Bank of New York Company, Inc. 1993 Long-Term Incentive Plan.*
(l) Amendment dated October 11, 1994 to the 1993 Long-Term Incentive
Plan of The Bank of New York Company, Inc.
(m) The Bank of New York Company, Inc. Supplemental Executive Retirement
Plan.*
<PAGE> 30
INDEX TO EXHIBITS
Exhibit No.
------------
10 (n) Amendment to The Bank of New York Company, Inc. Supplemental
Executive Retirement Plan dated March 9, 1993.*
(o) Amendment dated October 11, 1994 to The Bank of New York Company,
Inc. Supplemental Executive Retirement Plan.
(p) Trust Agreement dated April 19, 1988 related to deferred
compensation plans.*
(q) Trust Agreement dated November 16, 1993 related to deferred
compensation plans.*
(r) Amendment dated October 11, 1994 to Trust Agreement dated
Novemeber 16, 1993, related to deferred compensation plans.
(s) Trust Agreement dated December 15, 1994 related to certain
executive compensation plans and agreements.
(t) Form of Remuneration Agreement between the Company and two of the
five most highly compensated executive officers of the Company.*
(u) Form of Tax Reimbursement Agreement dated as of July 13, 1994
between the Company and two of the five most highly compensated
executive officers of the Company.
(v) Form of Remuneration Agreement dated October 11, 1994 between the
Company and three of the five most highly compensated officers of
the Company.
(w) The Bank of New York Company, Inc. Retirement Plan for Non-
Employee Directors.*
(x) Amendment dated November 8, 1994 to The Bank of New York Company,
Inc. Retirement Plan for Non-Employee Directors.
(y) Deferred Compensation Plan for Non-Employee Directors of The Bank
of New York Company, Inc.*
(z) Amendment dated November 8, 1994 to the Deferred Compensation
Plan for Non-Employee Directors of The Bank of New York
Company, Inc.
11 Statement - Re: Computation of Per Common Share Earnings
12 Statement - Re: Computation of Earnings to Fixed Charges Ratios
13 Portions of the 1994 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
99 Report of Independent Public Accountants for National Community
Banks, Inc.
-------------------
* Incorporated by reference
<PAGE> 1 EXHIBIT 10(b)
AMENDMENT
TO
1984 STOCK OPTION PLAN
OF THE BANK OF NEW YORK COMPANY, INC.
AND CONSOLIDATED SUBSIDIARIES
WHEREAS, the 1984 Stock Option Plan of The Bank of
New York Company, Inc. and Consolidated Subsidiaries (the
"Plan") was adopted by the Board of Directors of The Bank of
New York Company, Inc. (the "Company") on January 12, 1984,
effective as of April 12, 1984; and
WHEREAS, Section 10 of the Plan provides that the
Board of Directors of the Company may amend the Plan at any
time; and
WHEREAS, the Board of Directors of the Company
desires to adopt an amendment to the Plan;
NOW, THEREFORE, the Plan is hereby amended,
effective as of October 11, 1994, by amending the second
paragraph of Section 9 of the Plan to read as follows:
A "Change of Control" shall be deemed to occur if
(A) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company
or any of its subsidiaries, an underwriter temporarily
holding securities pursuant to an offering of such
securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substan-
tially the same proportion as their ownership of the
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Com-
pany's then outstanding securities ("Voting
Securities"); or (B) during any period of not more than
two years, individuals who constitute the Board of
Directors of the Company as of the beginning of the
<PAGE> 2
period and any new director (other than a director designated
by a person who has entered into an agreement with the
Company to effect a transaction described in clause (A) or
(C) of this sentence) whose election by the Board of
Directors of the Company or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at such time or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company or all or
substantially all of the Company's assets.
Exhibit 10 (g)
<PAGE> 1. AMENDMENT TO
THE BANK OF NEW YORK COMPANY, INC.
EXCESS BENEFIT PLAN
WHEREAS, The Bank of New York Company, Inc. Excess
Benefit Plan (the "Excess Benefit Plan") was amended and
restated, effective as of July 10, 1990; and
WHEREAS, Section 17 of the Excess Benefit Plan
provides that the Board of Directors of The Bank of New York
Company, Inc. may amend the Excess Benefit Plan at any time,
except in certain respects not material hereto; and
WHEREAS, the Board of Directors desires to amend
the Excess Benefit Plan;
NOW, THEREFORE, the Excess Benefit Plan is hereby
amended in the following respects, effective as of August 11,
1994:
1. Section 2 of the Plan is amended by amending
the last sentence thereof to read as follows:
Notwithstanding the foregoing, no employee shall be a
Participant in Part I of the Plan if he is eligible for
benefits under (i) the Excess Benefit Plan of Irving
Bank Corporation and Affiliated Companies,
(ii) Appendix A to the Plan or (iii) the Preservation of
Benefits Plan of National Community Bank of New Jersey.
2. Section 10 of the Plan is amended by amending
the last sentence thereof to read as follows:
Notwithstanding the foregoing, no employee shall be a
Participant in Part II of the Plan if he is eligible for
benefits under (i) the Excess Benefit Plan of Irving
Bank Corporation and Affiliated Companies,
(ii) Appendix A to the Plan or (iii) the Preservation of
Benefits Plan of National Community Bank of New Jersey.
<PAGE> 2
3. The following Appendix is added to the Plan:
APPENDIX A
Special Retirement Benefits for Former
Participants in the Preservation of Benefits
Plan of National Community Bank of New Jersey
Notwithstanding any other provision of the Plan to
the contrary, effective as of August 11, 1994, the
provisions of this Appendix A shall be applicable to
persons who were participants in the Preservation of
Benefits Plan of National Community Bank of New Jersey
(the "POB") on August 10, 1994. Each such participant
is referred to hereinafter as a "POB Participant".
Effective as of August 11, 1994, the Company shall
pay to each POB Participant, or to his beneficiary after
his death, the benefit to which the Participant (or
beneficiary) is entitled pursuant to the terms of the
POB as in effect on August 10, 1994. Such benefit shall
be paid in accordance with the provisions of the POB.
IN WITNESS WHEREOF, The Bank of New York Company,
Inc. has caused this Amendment to be executed by its duly
authorized officers this 10th day of May, 1994.
\s\ Alan Griffith
ATTEST:
\s\ Jacqueline McSwiggan
Assistant Secretary
<PAGE> 1 EXHIBIT 10(j)
AMENDMENT
TO
1988 LONG-TERM INCENTIVE PLAN
OF THE BANK OF NEW YORK COMPANY, INC.
WHEREAS, the 1988 Long-Term Incentive Plan of The
Bank of New York Company, Inc. (the "1988 LTIP") was adopted
by the Board of Directors of The Bank of New York Company,
Inc. (the "Company"), effective as of January 1, 1988; and
WHEREAS, Section 17 of the 1988 LTIP provides that
the Board of Directors of the Company may amend the 1988 LTIP
at any time; and
WHEREAS, the Board of Directors of the Company
desires to adopt an amendment to the 1988 LTIP;
NOW, THEREFORE, the 1988 LTIP is hereby amended,
effective as of October 11, 1994, by amending the second
paragraph of Section 12 of the 1988 LTIP to read as follows:
A "Change of Control" shall be deemed to occur if
(A) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company
or any of its subsidiaries, an underwriter temporarily
holding securities pursuant to an offering of such
securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substan-
tially the same proportion as their ownership of the
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Com-
pany's then outstanding securities ("Voting
Securities"); or (B) during any period of not more than
two years, individuals who constitute the Board of
Directors of the Company as of the beginning of the
period and any new director (other than a director
designated by a person who has entered into an agreement
<PAGE> 2
with the Company to effect a transaction described in clause
(A) or (C) of this sentence) whose election by the Board of
Directors of the Company or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at such time or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company or all or
substantially all of the Company's assets.
<PAGE> 1 EXHIBIT 10(l)
AMENDMENT
TO
1993 LONG-TERM INCENTIVE PLAN
OF THE BANK OF NEW YORK COMPANY, INC.
WHEREAS, the 1993 Long-Term Incentive Plan of The
Bank of New York Company, Inc. (the "1993 LTIP") was adopted
by the Board of Directors of The Bank of New York Company,
Inc. (the "Company"), effective as of January 1, 1993; and
WHEREAS, Section 17 of the 1993 LTIP provides that
the Board of Directors of the Company may amend the 1993 LTIP
at any time; and
WHEREAS, the Board of Directors of the Company
desires to adopt an amendment to the 1993 LTIP;
NOW, THEREFORE, the 1993 LTIP is hereby amended,
effective as of October 11, 1994, by amending the second
paragraph of Section 12 of the 1993 LTIP to read as follows:
A "Change of Control" shall be deemed to occur if
(A) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company
or any of its subsidiaries, an underwriter temporarily
holding securities pursuant to an offering of such
securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substan-
tially the same proportion as their ownership of the
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Com-
pany's then outstanding securities ("Voting
Securities"); or (B) during any period of not more than
two years, individuals who constitute the Board of
Directors of the Company as of the beginning of the
period and any new director (other than a director
designated by a person who has entered into an agreement
<PAGE> 2
with the Company to effect a transaction described in clause
(A) or (C) of this sentence) whose election by the Board of
Directors of the Company or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at such time or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company or all or
substantially all of the Company's assets.
<PAGE> 1 EXHIBIT 10(o)
AMENDMENT TO
THE BANK OF NEW YORK COMPANY, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, The Bank of New York Company, Inc.
Supplemental Executive Retirement Plan (the "SERP") was
adopted by the Board of Directors of The Bank of New York
Company, Inc., effective as of June 9, 1992; and
WHEREAS, Section 9 of the SERP provides that the
Board of Directors may amend the SERP at any time, except in
certain respects not material hereto; and
WHEREAS, the Board of Directors desires to amend
the SERP;
NOW, THEREFORE, the SERP is hereby amended,
effective as of October 11, 1994, by amending the last
sentence of Section 5(c) of the SERP to read as follows:
For purposes of this Section, a "change of control" of
the Company shall be deemed to occur if (A) any "person"
(as such term is defined in Section 3(a)(9) and as used
in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), excluding
The Bank of New York Company, Inc. or any of its
subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of The Bank of
New York Company, Inc. or any of its subsidiaries, an
underwriter temporarily holding securities pursuant to
an offering of such securities or a corporation owned,
directly or indirectly, by stockholders of The Bank of
New York Company, Inc. in substantially the same
proportion as their ownership of The Bank of New York
Company, Inc., is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of The Bank of New York
Company, Inc. representing 25% or more of the combined
voting power of the then outstanding securities of The
Bank of New York Company, Inc. ("Voting Securities"); or
(B) during any period of not more than two years,
individuals who constitute the Board of Directors of The
<PAGE> 2
Bank of New York Company, Inc. as of the beginning of
the period and any new director (other than a director
designated by a person who has entered into an agreement with
The Bank of New York Company, Inc. to effect a transaction
described in clause (A) or (C) of this sentence) whose
election by the Board of Directors of The Bank of New York
Company, Inc. or nomination for election by the shareholders
of The Bank of New York Company, Inc. was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at such time or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a majority
thereof; or (C) the shareholders of The Bank of New York
Company, Inc. approve a merger or consolidation of The Bank
of New York Company, Inc. with any other corporation, other
than a merger or consolidation which would result in the
Voting Securities of The Bank of New York Company, Inc.
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 60% of
the combined voting power of the Voting Securities of The
Bank of New York Company, Inc. or such surviving entity
outstanding immediately after such merger or consolidation,
or the shareholders of The Bank of New York Company, Inc.
approve a plan of complete liquidation of The Bank of New
York Company, Inc. or any agreement for the sale or
disposition by The Bank of New York Company, Inc. or all or
substantially all of the assets of The Bank of New York
Company, Inc.
IN WITNESS WHEREOF, The Bank of New York Company, Inc.
has caused this Amendment to be executed by its duly
authorized officers this 14 day of March, 1995.
\s\ Alan Griffith
ATTEST:
\s\ Jacqueline McSwiggan
Assistant Secretary
<PAGE> 1 EXHIBIT 10 (r)
AMENDMENT TO
GRANTOR TRUST AGREEMENT
THIS AGREEMENT, made as of October 11, 1994, by and
between THE BANK OF NEW YORK COMPANY, INC., a corporation
organized and existing under the laws of the State of New
York (hereinafter referred to as the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a corporation organized and
existing under the laws of the State of New York (hereinafter
referred to as the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Company and the Trustee entered into a
Grantor Trust Agreement dated as of November 16, 1993 (the
"Agreement"); and
WHEREAS, Article TWELFTH of the Agreement provides
that the Company may amend the Agreement; and
WHEREAS, the Company desires to amend the Agreement
in a certain respect;
NOW, THEREFORE, the Company and the Trustee agree
that the Agreement is amended, effective as of October 11,
1994, by amending Article FIRST in its entirety to read as
follows:
FIRST: Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall
be deemed to occur if (A) any "person" (as such term is
defined in Section 3(a)(9) and as used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), excluding the Company or
any of its subsidiaries, a trustee or any fiduciary
holding securities under an employee benefit plan of the
Company or any of its subsidiaries, an underwriter
<PAGE> 2
temporarily holding securities pursuant to an offering
of such securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substantially
the same proportion as their ownership of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding
securities ("Voting Securities"); or (B) during any period of
not more than two years, individuals who constitute the Board
of Directors of the Company as of the beginning of the period
and any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in clause (A) or (C) of this
sentence) whose election by the Board of Directors of the
Company or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at such time or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or (C) the shareholders of the
Company approve a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 60% of
the combined voting power of the Voting Securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation, or the shareholders of
the Company approve a plan of complete liquidation of the
Company or any agreement for the sale or disposition by the
Company or all or substantially all of the Company's assets.
Notwithstanding the foregoing, for purposes of this
Agreement, the Trustee shall not be deemed to have
knowledge that a Change in Control has occurred until it
<PAGE> 3
has received written notice thereof from the Company or a
Covered Participant.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed in their respective names by
their duly authorized officers under their corporate seals as
of the day and year first above written.
THE BANK OF NEW YORK COMPANY, INC.
By \s\ Deno D. Papageorge
Senior Executive Vice President
ATTEST:
\s\ Jacqueline McSwiggan
UNITED STATES TRUST COMPANY
OF NEW YORK
By \s\ Martha C. Dyer
Vice President
ATTEST:
\s\ William H. Schroder
Senior Vice President
<PAGE> 1 Exhibit 10(s)
GRANTOR TRUST AGREEMENT
THIS AGREEMENT, made as of the 15th day of
December, 1994, by and between THE BANK OF NEW YORK COMPANY,
INC., a corporation organized and existing under the laws of
the State of New York (hereinafter referred to as the "Com-
pany"), and UNITED STATES TRUST COMPANY OF NEW YORK, a cor-
poration organized and existing under the laws of the State
of New York (hereinafter referred to as the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Company is obligated under certain
executive compensation plans and agreements, which are listed
on Exhibit I hereto (the "Plans"), to make payment of certain
amounts to current employees of the Company and its sub-
sidiaries (the "Participants") under certain circumstances;
and
WHEREAS, the Company wishes to provide a separate
source of funds to enable payment of such amounts to certain
Participants who are intended to be covered by this Agreement
(the "Covered Participants"); and
WHEREAS, the Trustee is not a party to the Plans
and makes no representations with respect thereto, and all
representations and recitals with respect to the Plans shall
be deemed to be those of the Company;
NOW, THEREFORE, the Company and the Trustee agree
as follows:
<PAGE> 2
FIRST: Definition of Change in Control. For
purposes of this Agreement, a "Change in Control" shall be
deemed to occur if (A) any "person" (as such term is defined
in Section 3(a)(9) and as used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly, by stockholders of the Company
in substantially the same proportion as their ownership of
the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then out-
standing securities ("Voting Securities"); or (B) during any
period of not more than two years, individuals who constitute
the Board of Directors of the Company as of the beginning of
the period and any new director (other than a director
designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (A)
or (C) of this sentence) whose election by the Board of
Directors of the Company or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
<PAGE> 3
either were directors at such time or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company or all or
substantially all of the Company's assets.
Notwithstanding the foregoing, for purposes of this
Agreement, the Trustee shall not be deemed to have knowledge
that a Change in Control has occurred until it has received
written notice thereof from the Company or a Covered
Participant.
SECOND: Creation of Trust. (a) The Company
hereby establishes with the Trustee and the Trustee hereby
accepts a trust consisting of such cash, Letters of Credit
(as defined herein) or other property acceptable to the
Trustee as shall be paid or delivered to the Trustee from
<PAGE> 4
time to time (hereafter called the "Fund"). The Company may,
in its discretion, deliver to the Trustee one or more
irrevocable letters of credit, which shall be substantially
in the form of Exhibit II hereto (referred to hereinafter as
the "Letters of Credit"). Each Letter of Credit shall name
the Trustee as beneficiary and shall provide that any notices
to the Trustee thereunder shall be sent to it at the address
specified in Article TENTH.
(b) The Trustee shall hold the Fund in trust and
manage and administer it in accordance with the terms and
provisions of this Agreement.
(c) The trust created herein is intended to be a
Grantor Trust under the provisions of Sections 671 through
677 of the Internal Revenue Code.
(d) The Company may, prior to a Change in Control,
revoke the trust by written notice to the Trustee. Upon such
revocation, the Trustee shall cancel all Letters of Credit,
the trust shall terminate and all assets of the Fund, after
payment of any unpaid fees and expenses of the Trustee, shall
be paid to the Company.
(e) After a Change in Control, the trust shall
become irrevocable and shall be held for the exclusive
purpose of providing benefits to Covered Participants in
accordance with the provisions of this Agreement.
THIRD: Payments from Fund. (a) The Company shall
provide the Trustee with a schedule (the "Payment Schedule")
<PAGE> 5
of Participants, indicating (i) the amount payable to or in
respect of each Covered Participant upon such Covered Par-
ticipant's termination of employment or providing formulae,
or instructions, acceptable to the Trustee, utilizing readily
determinable and objective information, for determining such
amounts, (ii) the form in which such amount is to be paid (as
provided for or available under the Plans), and (iii) the
time for commencement of such payment. As appropriate, based
upon the terms of the Plans and the implementation of those
terms by the Company, and at least annually, the Company
shall adjust the amounts payable to or in respect of
Participants, shall add or delete Participants at any time
prior to a Change in Control and, if appropriate, shall
change the formulae or instructions for determining such
amounts (provided such formulae or instructions are
acceptable to the Trustee) by submitting a new or amending
the existing Payment Schedule. The Company shall provide
promptly to each Covered Participant the information on the
Payment Schedule pertaining to that Covered Participant,
including all changes and adjustments. In the event of any
change in the Payment Schedule after a Change in Control or
if after a Change in Control the Payment Schedule is not
adjusted or changed at a time when a Covered Participant
believes it should, the Covered Participant affected thereby
shall have the right, if he disagrees with such adjustment or
change or failure to make an adjustment or change, to furnish
<PAGE> 6
information to the Trustee concerning the appropriate amount
payable to the Covered Participant. The Trustee shall be
obligated to pay from the Fund amounts based upon a Payment
Schedule as adjusted, if applicable, to reflect information
supplied by the Covered Participant. After a Change in
Control, no additions to or deletions from the list of
Covered Participants shall be permitted.
(b) The Trustee shall create a separate account
(the "Account") in the Fund for each Covered Participant. At
the time of each contribution to the Fund or establishment
and delivery to the Trustee of a Letter of Credit, the
Company shall designate in writing the allocation among the
Accounts of such contribution and Letter of Credit. The
Trustee shall hold all Accounts as a consolidated single
fund. The Fund shall be revalued by the Trustee as of the
last business day of each calendar quarter at current market
values, as determined by the Trustee. For valuation
purposes, a Letter of Credit shall be deemed to have a fair
market value equal to the remaining amount available for draw
under the Letter of Credit on the last business day of the
applicable calendar quarter. Net investment gains and losses
shall be allocated by the Trustee proportionately among the
Accounts as of the end of each calendar quarter based on the
value of the Accounts as of the last business day of the
preceding calendar quarter. The Trustee shall maintain a
record of the value of each Account based on the aggregate
<PAGE> 7
value of the Trust Fund, the information provided by the
Company as to its contributions and its establishment and
delivery of Letters of Credit with respect to each Account
and any payments therefrom. To the extent an amount remains
credited to a Covered Participant's Account after the
Company's liability to him under all Plans has been paid in
full, such excess shall, as of the end of the calendar
quarter in which final payment has been made, be reallocated
to the Accounts of all other Covered Participants in
proportion to the amounts credited to the Accounts of such
Covered Participants, unless the Company directs the Trustee,
prior to a Change in Control, to cancel or reduce a Letter of
Credit allocated to the Covered Participant's Account in an
amount equal to such excess. Notwithstanding the amount
credited to a Covered Participant's Account pursuant to this
paragraph, in no event shall a Covered Participant be
entitled to payment hereunder of more than the Company's
liability to him under the Plans.
(c)(1) In the event it shall be determined prior
to a Change In Control that any Covered Participant is sub-
ject to any tax under the terms of the trust created here-
under, then the Trustee, upon receipt of written direction
from the Company, shall make payments from the Fund to such
persons, in such manner and in such amounts as the Company
shall direct, for purposes of paying the amount of federal,
state and local tax and interest and any penalties thereon
<PAGE> 8
which such Covered Participant may incur arising out of such
determination. In the event such a determination is made
after a Change In Control occurs, then the Trustee shall make
payments from the Fund to such Covered Participant for the
purposes set forth in the preceding sentence upon notice
thereof from the Covered Participant.
(2) Any payment from the Fund pursuant to Sec-
tion (c)(1) of this Article shall be charged to the Accounts
of those Participants to whom (or on whose behalf) such a
distribution is made, under the appropriate Plan or Plans.
(d) The Company may, by notice to the Trustee
prior to a Change in Control, direct the Trustee to pay the
Company such amount as is specified in the notice, cancel one
or more Letters of Credit as specified in the notice, or
reduce one or more Letters of Credit by such amount as is
specified in the notice. In addition, such notice shall set
forth the Account or Accounts which shall be debited with
respect to such payment, cancellation or reduction. If the
amount which would remain in the Fund after any such payment
would be less than the unpaid fees and expenses of the
Trustee, then the Trustee may deduct such fees and expenses
from the payment that would otherwise be made to the Company.
(e) Any direction, designation or notice by the
Company required under this Article shall be in writing. Any
direction by the Company with respect to a payment from the
Fund shall be accompanied by a certification by the Company
<PAGE> 9
that the payment directed is in conformity with Article
THIRTEENTH hereof. The Trustee shall not be liable in any
way for any payment made pursuant to any such direction of
the Company. In addition, the Trustee shall not be liable in
any way for any payment made based on information supplied to
it by the Company.
FOURTH: (a) Management of Assets of Fund. Sub-
ject to paragraph (b) of this Article, the Trustee, prior to
a Change In Control, shall have exclusive authority and
discretion to manage and control the assets of the Fund,
other than Letters of Credit, and pursuant to such authority
and discretion may exercise from time to time and at any time
power:
(i) To invest and reinvest the Fund, without
distinction between principal and income, in shares of
stock (whether common or preferred) or other evidences
of ownership, bonds, debentures, notes or other
evidences of indebtedness, unsecured or secured by
mortgages on real or personal property wherever situated
(including any part interest in a bond and mortgage or
note and mortgage whether insured or uninsured) and
other property, or part interest in property, real or
personal, foreign or domestic, whether or not productive
of income or consisting of wasting assets, and in order
to reduce the rate of interest rate fluctuations,
contracts, as either buyer or seller, for the future
<PAGE> 10
delivery of United States Treasury securities and com-
parable United States Government-backed securities;
(ii) To sell, convey, redeem, exchange, grant
options for the purchase or exchange of, or otherwise
dispose of, any real or personal property, at public or
private sale, for cash or upon credit, with or without
security, without obligation on the part of any person
dealing with the Trustee to see to the application of
the proceeds of or to inquire into the validity,
expediency or propriety of any such disposition;
(iii) To manage, operate, repair and improve, and
mortgage or lease for any length of time any real prop-
erty held in the Fund; to renew or extend any mortgage,
upon any terms the Trustee may deem expedient; to agree
to reduction of the rate of interest or any other modi-
fication in the terms of any mortgage or of any guar-
antee pertaining to it; to enforce any covenant or
condition of any mortgage or guarantee or to waive any
default in the performance thereof; to exercise and
enforce any right of foreclosure; to bid in property on
foreclosure; to take a deed in lieu of foreclosure with
or without paying consideration therefor and in connec-
tion therewith to release the obligation on the bond
secured by the mortgage; and to exercise and enforce in
any action, suit or proceeding at law or in equity any
<PAGE> 11
rights or remedies in respect of any mortgage or
guarantee;
(iv) To exercise, personally or by general or
limited proxy, the right to vote any shares of stock,
bonds or other securities held in the Fund; to delegate
discretionary voting power to trustees of a voting trust
for any period of time; and to exercise, personally or
by power of attorney, any other right appurtenant to any
securities or other property of the Fund;
(v) To join in or oppose any reorganization,
recapitalization, consolidation, merger or liquidation,
or any plan therefor, or any lease, mortgage or sale of
the property of any organization the securities of which
are held in the Fund; to pay from the Fund any assess-
ments, charges or compensation specified in any plan of
reorganization, recapitalization, consolidation, merger
or liquidation; to deposit any property with any
committee or depositary; and to retain any property
allotted to the Fund in any reorganization, recapital-
ization, consolidation, merger or liquidation;
(vi) To exercise or sell any conversion or sub-
scription or other rights appurtenant to any stock,
security or other property held in the Fund;
(vii) To borrow from any lender (other than the
Trustee in its individual capacity or the Company or any
of its affiliates) money, in any amount and upon any
<PAGE> 12
reasonable terms and conditions, for purposes of this
Agreement, and to pledge or mortgage any property held
in the Fund to secure the repayment of any such loan;
(viii) To compromise, settle or arbitrate any claim,
debt, or obligation of or against the Fund; to enforce
or abstain from enforcing any right, claim, debt or
obligation; and to abandon any property determined by it
to be worthless; and
(ix) To make loans of securities held in the Fund
to registered brokers and dealers upon such terms and
conditions as are permitted by applicable law and regu-
lations, and in each instance to permit the securities
so lent to be registered in the name of the borrower or
a nominee of the borrower, provided that in each
instance the loan is adequately secured and neither the
borrower nor any affiliate of the borrower has discre-
tionary authority or control with respect to the assets
of the Fund involved in the transaction or renders
investment advice with respect to those assets.
(b) The Company shall deliver to the Trustee each
Letter of Credit established for the Fund as executed by the
bank issuing such credit. On the last business day of each
month, the Trustee shall draw on the Letters of Credit to the
extent the assets of the Fund are not sufficient to make
payments required to be made under the Payment Schedule
during the next six months. Amounts received on the draw of
<PAGE> 13
any Letter of Credit shall reduce the allocation of the
Letter of Credit to those Covered Participants for whom such
Letter of Credit was previously allocated and shall be allo-
cated to the Accounts of such Covered Participants as if such
amounts were contributions to the Fund.
If the Trustee receives written notice prior to the
expiration or cancellation of a Letter of Credit from the
bank which issued such Letter of Credit, referencing the
Letter of Credit by number, signed by an officer of such
bank, and stating that such Letter of Credit is due to expire
and has not been extended, or is being cancelled (other than
a cancellation pursuant to paragraph (d) of Article THIRD),
the Trustee shall draw on such Letter of Credit to the full
extent thereof prior to the expiration of such Letter of
Credit (but in no event earlier than the fifth business day
prior to such expiration) unless, prior to taking such
action, the Trustee has received a replacement Letter of
Credit or cash or other property in at least the remaining
amount available to be drawn under the Letter of Credit which
is due to expire or is being cancelled.
The Trustee shall have no obligation to earn any
income with respect to any Letters of Credit which are held
by it as part of the Fund. In the event that the Trustee
shall resign or be removed, and a successor trustee shall be
appointed hereunder, the rights and obligations of the
Trustee under each Letter of Credit shall automatically
<PAGE> 14
become the rights and obligations of the successor trustee,
and the Trustee shall have no further rights, duties, obli-
gations or liabilities with respect to any Letter of Credit.
(c) After a Change In Control occurs and subject
to paragraph (g) of Article SIXTH hereof, the Trustee shall
invest and reinvest the Fund, other than Letters of Credit,
without distinction between principal and income, in direct
obligations of the United States of America or agencies or
instrumentalities thereof, obligations unconditionally and
fully guaranteed as to principal and interest by the United
States of America, and certificates of deposit and bankers'
acceptances of a bank organized and existing under the laws
of the United States of America or any State thereof which
has a combined capital and surplus of at least $100,000,000,
all having respective maturities of not more than one year
when purchased.
FIFTH: Administrative Powers. The Trustee shall
have and in its sole and absolute discretion may exercise
from time to time and at any time the following administra-
tive powers and authority with respect to the Fund:
(a) To continue to hold any property of the Fund
whether or not productive of income; to reserve from
investment and keep unproductive of income, without liability
for interest, cash temporarily awaiting investment and such
cash as it deems advisable or as the Company from time to
time may specify prior to a Change In Control in order to
<PAGE> 15
meet the administrative expenses of the Fund or anticipated
distributions therefrom.
(b) To hold property of the Fund in its own name
or in the name of a nominee or nominees, without disclosure
of the trust, or in bearer form so that it will pass by
delivery, but no such holding shall relieve the Trustee of
its responsibility for the safe custody and disposition of
the Fund in accordance with the provisions of this Agreement;
the Trustee's books and records shall at all times show that
such property is part of the Fund; and the Trustee shall be
absolutely liable for any loss occasioned by the acts of its
nominee or nominees with respect to securities registered in
the name of the nominee or nominees;
(c) To organize and incorporate under the laws of
any state it may deem advisable one or more corporations (and
to acquire an interest in any such corporation that it may
have organized and incorporated) for the purpose of acquiring
and holding title to any property, interests or rights that
the Trustee is authorized to acquire under Article FOURTH
hereof;
(d) To employ in the management of the Fund
suitable agents, without liability for any loss occasioned by
any such agents selected by the Trustee with the care, skill,
prudence and diligence under the circumstances then pre-
vailing that a prudent man acting in a like capacity and
<PAGE> 16
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims;
(e) To make, execute and deliver, as Trustee, any
deeds, conveyances, leases, mortgages, contracts, waivers or
other instruments in writing that the Trustee may deem
necessary or desirable in the exercise of its powers under
this Agreement;
(f) To hold and draw upon any Letter of Credit in
accordance with paragraph (b) of Article FOURTH; and
(g) To do all other acts that the Trustee may deem
necessary or proper to carry out any of the powers set forth
in Articles FOURTH, FIFTH and SIXTH hereof or otherwise in
the best interests of the Fund.
SIXTH: Annuity Contracts. (a) The Trustee, upon
written direction of the Company prior to a Change In Con-
trol, shall pay from the Fund such sums to such insurance
company or companies as the Company may direct for the pur-
pose of procuring individual or group annuity contracts for
any retirement allowance payable under a Plan (hereinafter in
this Article referred to as "Contracts"). The Company shall
prepare, or cause to be prepared in such form as it shall
prescribe, the application for any Contract to be applied
for. The Trustee shall receive and hold in the Fund, subject
to the provisions hereinafter set forth in this Article, all
Contracts so obtained.
<PAGE> 17
(b) The Trustee shall be the complete and absolute
owner of Contracts held in the Fund and, upon written direc-
tion of the Company prior to a Change In Control, shall have
power, without the consent of any other person, to exercise
any and all of the rights, options or privileges that belong
to the absolute owner of any Contract held in the Fund or
that are granted by the terms of any such Contract or by the
terms of this Agreement. The Trustee shall have no discre-
tion with respect to the exercise of any of the foregoing
powers or to take any other action permitted by any Contract
held in the Fund, but shall exercise such powers or take such
action only upon the written direction of the Company prior
to a Change In Control; the Trustee shall have no duty to
exercise any of such powers or to take any such action unless
and until it shall have received such direction. The
Trustee, upon the written direction of the Company prior to a
Change In Control, shall deliver any Contract held in the
Fund to such person or persons as may be specified in the
direction.
(c) The Trustee shall hold in the Fund the pro-
ceeds of any sale, assignment or surrender of any Contract
held in the Fund and any and all dividends and other payments
of any kind received in respect of any Contract held in the
Fund.
(d) Upon the written direction of the Company
prior to a Change In Control, the Trustee shall pay from the
<PAGE> 18
Fund premiums, assessments, dues, charges and interest, if
any, upon any Contract held in the Fund. After a Change In
Control occurs, the Trustee shall pay from the Fund premiums,
assessments, dues, charges and interest, if any, upon any
Contract held in the Fund, without direction from the
Company.
(e) No insurance company that may issue any
Contract or Contracts held in the Fund shall be deemed to be
a party to this Agreement for any purpose, or to be respon-
sible in any way for the validity of this Agreement or to
have any liability under this Agreement other than as stated
in each Contract that it may issue. Any insurance company
may deal with the Trustee as sole owner of any Contract
issued by it and held in the Fund, without inquiry as to the
authority of the Trustee to act, and may accept and rely upon
any written notice, instruction, direction, certificate or
other communication from the Trustee believed by it to be
genuine and to be signed by an officer of the Trustee and
shall incur no liability or responsibility for so doing. Any
sums paid out by any insurance company under any of the terms
of a Contract issued by it and held in the Fund either to the
Trustee, or, in accordance with its direction, to any other
person or persons designated as payees in such Contract shall
be a full and complete discharge of the liability to pay such
sums, and the insurance company shall have no obligation to
look to the disposition of any sums so paid. No insurance
<PAGE> 19
company shall be required to look into the terms of this
Agreement, to question any action of the Trustee or to see
that any action of the Trustee is authorized by the terms of
this Agreement.
(f) Anything contained herein to the contrary
notwithstanding, neither the Company nor the Trustee shall be
liable for the refusal of any insurance company to issue or
change any Contract or Contracts or to take any other action
requested by the Trustee; nor for the form, genuineness,
validity, sufficiency or effect of any Contract or Contracts
held in the Fund; nor for the act of any person or persons
that may render any such Contract or Contracts null and void;
nor for the failure of any insurance company to pay the
proceeds and avails of any such Contract or Contracts as and
when the same shall become due and payable; nor for any delay
in payment resulting from any provision contained in any such
Contract or Contracts; nor for the fact that for any reason
whatsoever (other than their own negligence or willful
misconduct) any Contract or Contracts shall lapse or
otherwise become uncollectible.
(g) After a Change In Control occurs, the Trustee
may exercise any of the powers set forth in paragraphs (a)
through (f) of this Article without direction from the Com-
pany, including the power to purchase Contracts the rates of
return and maturity dates of which may reasonably be expected
to yield assets of the Fund sufficient to discharge all or a
<PAGE> 20
portion of the Company's obligations for retirement allow-
ances under the Plans as set forth in the most recent infor-
mation furnished to the Trustee by the Company prior to such
Change In Control.
SEVENTH: Taxes, Expenses and Compensation of
Trustee. (a) The Company shall pay any federal, state,
local or other taxes imposed or levied with respect to the
corpus and/or income of the Fund or any part thereof under
existing or future laws and, the Company in its discretion,
or the Trustee, in its discretion, may contest the validity
or amount of any tax, assessment, claim or demand respecting
the Fund or any part thereof.
(b) The Company shall pay to the Trustee from time
to time such reasonable compensation for its services as
trustee as shall be agreed upon by the Company and the
Trustee. The Company shall also pay the reasonable and
necessary expenses incurred by the Trustee in the performance
of its duties under the Agreement, including reasonable fees
of counsel engaged by the Trustee pursuant to paragraph (b)
of Article EIGHTH of this Agreement. Such compensation and
expenses shall be charged against and paid from the Fund to
the extent not paid by the Company.
EIGHTH: General Duties of Trustee. (a) The
Trustee shall discharge its duties under this Agreement
solely in the interest of the beneficiaries of the Fund and
(i) for the exclusive purpose of providing benefits to such
<PAGE> 21
beneficiaries and defraying reasonable expenses of admini-
stering the Fund; (ii) with the care, skill, prudence and
diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims; and (iii) by diversifying the
investments of the Fund so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent
not to do so.
(b) The Trustee may consult with counsel, who may
be counsel for the Company or for the Trustee in its indivi-
dual capacity, and shall not be deemed imprudent by reason of
its taking or refraining from taking any action in accordance
with the opinion of counsel. The Trustee shall not be
required to give any bond or any other security for the
faithful performance of its duties under this Agreement,
except as required by law.
(c) The Trustee shall be under no duties whatso-
ever, except such duties as are specifically set forth as
such in this Agreement, and no implied covenant or obligation
shall be read into this Agreement against the Trustee. The
Trustee shall not be compelled to take any action toward the
execution or performance of the trust created hereunder or to
prosecute or defend any suit or claim in respect thereof,
unless indemnified to its satisfaction against loss,
liability, and reasonable costs and expenses.
<PAGE> 22
Notwithstanding anything herein to the contrary, in the event
that the bank issuing a Letter of Credit shall fail or refuse
to pay upon any draw thereunder, the Trustee will not be
obligated to pursue any remedy against such issuing bank
unless it shall have first received from the Company, the
Participants or any of them security or indemnity to its
satisfaction against the costs and expenses (including
attorney's fees) which may be incurred therein or thereby.
The Trustee shall be under no liability or obligation to
anyone with respect to any failure on the part of the Company
to perform any of its obligations under this Agreement.
(d) The Company shall pay and shall protect,
indemnify and save harmless the Trustee and its officers,
directors or trustees, employees and agents from and against
any and all losses, liabilities (including liabilities for
penalties), actions, suits, judgments, demands, damages,
reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) of any nature
arising from or relating to any action or failure to act by
the Trustee, its officers, directors or trustees, employees
and agents or the transactions contemplated by this Agree-
ment, except to the extent that any such loss, liability,
action, suit, demand, damage, cost or expense is the result
of the negligence or willful misconduct of the Trustee, its
officers, directors or trustees, employees or agents.
<PAGE> 23
NINTH: Accounts of Trustee. (a)(i) The Trustee
shall keep accurate and detailed accounts of all its
receipts, investments and disbursements under this Agreement.
Such person or persons as the Company shall designate shall
be allowed to inspect the books of account relating to the
Fund upon request at any reasonable time during the business
hours of the Trustee.
(ii) Within 120 days after the close of each
calendar year, the Trustee shall transmit to the Company, and
certify the accuracy of, a written statement of the assets
and liabilities of the Fund at the close of that year,
showing the current value of each asset at that date, and a
written account of all the Trustee's transactions relating to
the Fund during the period from the last previous accounting
to the close of that year. (For the purposes of this
paragraph, the date of the Trustee's resignation or removal
as provided in Article ELEVENTH hereof shall be deemed to be
the close of a calendar year.)
(iii) Unless the Company shall have filed with the
Trustee written exceptions or objections to any such
statement and account within 60 days after receipt thereof,
the Company shall be deemed to have approved such statement
and account; and in such case or upon the written approval by
the Company of any such statement and account, the Trustee
shall be forever released and discharged with respect to all
matters and things embraced in such statement and account as
<PAGE> 24
though it had been settled by decree of a court of competent
jurisdiction in an action or proceeding to which the Company
and all persons having any beneficial interest in the Fund
were parties.
(b) Nothing contained in this Agreement or in the
Plans shall deprive the Trustee of the right to have a judi-
cial settlement of its accounts. In any proceeding for a
judicial settlement the Trustee's accounts or for instruc-
tions in connection with the Fund, the only other necessary
party thereto in addition to the Trustee shall be the
Company. If the Trustee so elects, it may bring in as a
party or parties defendant any other person or persons. No
person interested in the Fund, other than the Company, shall
have a right to compel an accounting, judicial or otherwise,
by the Trustee, and each such person shall be bound by all
accounting by the Trustee to the Company, as herein provided,
as if the account had been settled by decree of a court of
competent jurisdiction in an action or proceeding to which
such person was a party.
TENTH: Administration of the Plans; Communica-
tions. (a) The Company shall administer the Plans as pro-
vided therein, and subject to paragraph (b) of Article THIRD
hereof or subject to any delegation by the Company and
assumption by the Trustee of the duties of administering the
Plans, the Trustee shall not be responsible in any respect
for administering the Plans nor shall the Trustee be
<PAGE> 25
responsible for the adequacy of the Fund to meet and dis-
charge all payments and liabilities under the Plans. The
Trustee shall be fully protected in relying upon any written
notice, instruction, direction or other communication signed
by an officer of the Company. The Company from time to time
shall furnish the Trustee with the names and specimen
signatures of the officers of the Company authorized to act
or give directions hereunder and shall promptly notify the
Trustee of the termination of office of any such officer of
the Company and the appointment of a successor thereto.
Until notified to the contrary, the Trustee shall be fully
protected in relying upon the most recent list of the
officers of the Company furnished to it by the Company.
(b) Any action required by any provision of this
Agreement to be taken by the Board of Directors of the Com-
pany shall be evidenced by a resolution of the Board of
Directors certified to the Trustee by the Secretary or an
Assistant Secretary of the Company under its corporate seal,
and the Trustee shall be fully protected in relying upon any
resolution so certified to it. Unless other evidence with
respect thereto has been specifically prescribed in this
Agreement, any other action of the Company under any provi-
sion of this Agreement, including any approval of or excep-
tions to the Trustee's accounts, shall be evidenced by a
certificate signed by an officer of the Company, and the
Trustee shall be fully protected in relying upon such
<PAGE> 26
certificate. The Trustee may accept a certificate signed by
an officer of the Company as proof of any fact or matter that
it deems necessary or desirable to have established in the
administration of the trust (unless other evidence of such
fact or matter is expressly prescribed herein), and the
Trustee shall be fully protected in relying upon the state-
ments in the certificate.
(c) The Trustee shall be entitled conclusively to
rely upon any written notice, instruction, direction,
certificate or other communication believed by it to be
genuine and to be signed by the proper person or persons, and
the Trustee shall be under no duty to make investigation or
inquiry as to the truth or accuracy of any statement con-
tained therein.
(d) Until notice be given to the contrary, com-
munications to the Trustee shall be sent to it at its office
at 770 Broadway, New York, New York 10003-9548, Attention:
Department Manager, Employee Benefits Services; communica-
tions to the Company shall be sent to it at its office at
48 Wall Street, New York, New York 10005, Attention: General
Counsel.
ELEVENTH: Resignation or Removal of Trustee.
(a) The Trustee may resign at any time upon 60 days' written
notice to the Company, or upon shorter notice if acceptable
to the Company. The Company, by action of its Board of
Directors, may remove the Trustee at any time upon 60 days'
<PAGE> 27
written notice to the Trustee, or upon shorter notice if
acceptable to the Trustee. In the event it resigns or is
removed, the Trustee shall have a right to have its accounts
settled as provided in Article NINTH hereof.
(b) Upon the resignation or removal of the
Trustee, the Company, by action of its Board of Directors,
shall appoint a successor trustee which shall be a bank as
defined under the Investment Advisers Act of 1940, having a
net worth in excess of $100,000,000 or having assets in
excess of $2,000,000,000, other than the Company or any
corporation that, directly or through one or more inter-
mediaries, controls, is controlled by or is under common
control with the Company, to act hereunder after the effec-
tive date of such removal or resignation. Each successor
trustee shall have the powers and duties conferred upon the
Trustee in this Agreement, and the term "Trustee" as used in
this Agreement shall be deemed to include any successor
trustee. Upon designation or appointment of a successor
trustee, the Trustee shall transfer and deliver the Fund to
the successor trustee, reserving such sums as the Trustee
shall deem necessary to defray its expenses in settling its
accounts, to pay any of its compensation due and unpaid and
to discharge any obligation of the Fund for which the Trustee
may be liable. If the sums so reserved are not sufficient
for these purposes, the Trustee shall be entitled to recover
the amount of any deficiency from either the Company or the
<PAGE> 28
successor trustee, or both. When the Fund shall have been
transferred and delivered to the successor trustee and the
accounts of the Trustee have been settled as provided in
Article NINTH hereof, the Trustee shall be released and
discharged from all further accountability or liability for
the Fund and shall not be responsible in any way for the
further disposition of the Fund or any part thereof.
TWELFTH: Amendment of Agreement. (a) Subject to
paragraph (b) of this Article TWELFTH, the Company expressly
reserves the right at any time to amend this Agreement and
the trust created thereby to any extent that it may deem
advisable. No such amendment shall be made that affects the
duties or responsibilities of the Trustee without its consent
thereto in writing. Such amendment shall become effective
upon delivery to the Trustee of a written instrument of
amendment, duly executed and acknowledged by the Company and
accompanied by a certified copy of a resolution of the Board
of Directors of the Company authorizing such amendment.
(b) Notwithstanding any other provisions of this
Agreement, the provisions of this Agreement and the trust
created thereby may not be amended after the date a Change In
Control occurs without the written consent of two-thirds in
number of the Covered Participants. The Trustee may request
that the Company furnish evidence to establish that such a
majority in number of such Covered Participants have granted
written consent to such an amendment.
<PAGE> 29
THIRTEENTH: Prohibition of Diversion. (a) Except
as provided in paragraph (b) below and in paragraphs (b)
and (d) of Article THIRD, at no time prior to the satisfac-
tion of all liabilities with respect to Covered Participants
and their beneficiaries shall any part of the corpus and/or
income of the Fund be used for, or diverted to, purposes
other than for the exclusive benefit of Covered Participants
and their beneficiaries and the assets of the Fund shall
never inure to the benefit of the Company and shall be held
for the exclusive purposes of providing benefits to Covered
Participants and their beneficiaries and defraying reasonable
expenses of administering the Fund. Upon satisfaction of all
liabilities with respect to Covered Participants and their
beneficiaries under the Plans, this Agreement and the trust
shall be terminated and the remaining assets of the Fund
shall be distributed to the Company.
(b) Notwithstanding any other provision of this
Agreement to the contrary, the corpus and/or income of the
Fund shall at all times be subject to the claims of creditors
of the Company. In the event that (i) a final judicial
determination is entered that the Company is unable to pay
its debts as such debts mature or (ii) there shall have been
filed by or against the Company in any court or other tri-
bunal either of the United States or of any State or of any
other authority now or hereafter exercising jurisdiction, a
petition in bankruptcy or insolvency proceedings or for
<PAGE> 30
reorganization or for the appointment of a receiver or
trustee of all or substantially all of the Company's property
under the present or any future federal bankruptcy code or
any other present or future applicable federal, state or
other bankruptcy or insolvency statute or law, then the
Trustee shall not make payments from the Fund to any bene-
ficiary, but under either of such circumstances, the Trustee
shall deliver any property held in the Fund only as a court
or other tribunal of competent jurisdiction may direct to
satisfy the claims of the Company's creditors. The Board of
Directors and the Chief Executive Officer of the Company
shall furnish the Trustee with written notice of such final
judicial determination or filing described herein.
If the Trustee receives a written allegation from a
person claiming to be a creditor of the Company that the
Company is unable to pay its debts as they mature, the
Trustee shall, within the 30-day period from the date of
receipt of such allegation, determine whether the Company is
in fact unable to pay its debts as they mature. During such
period, the Trustee shall suspend all payments from the Fund.
If the Trustee determines the Company is able to pay its
debts as they mature, payments from the Fund will resume.
Otherwise, the Trustee will deliver the assets of the Fund as
a court or other tribunal of competent jurisdiction may
direct to satisfy the claims of the Company's creditors, and,
<PAGE> 31
in the absence of such direction, the Trustee shall continue
to suspend payments from the Fund.
FOURTEENTH: Sufficiency of Fund. Notwithstanding
any provision of this Agreement, the Company shall remain
obligated to pay Participants the amounts due to them under
the Plans. If the assets of an Account are insufficient to
fulfill the Company's obligations to a Covered Participant
when due, then the Company shall pay to such Covered Par-
ticipant (and his beneficiaries) the amount of such
insufficiency.
FIFTEENTH: Prohibition of Assignment of Interest.
No interest, right or claim in or to any part of the Fund or
any payment therefrom shall be assignable, transferable or
subject to sale, mortgage, pledge, hypothecation, commuta-
tion, anticipation, garnishment, attachment, execution or
levy of any kind, and the Trustee shall not recognize any
attempt to assign, transfer, sell, mortgage, pledge, hypo-
thecate, commute or anticipate the same, except to the extent
required by law.
SIXTEENTH: Affiliates. Prior to a Change in
Control, any corporation that, directly or through one or
more intermediaries, controls, is controlled by or is under
common control with the Company may adopt and become a party
to this Agreement by delivering to the Trustee an instrument
in writing, duly executed and acknowledged, adopting and
assuming jointly and severally the obligations of the Company
<PAGE> 32
under this Agreement and constituting and appointing the
Company to be the agent and attorney in fact of such
corporation for the purposes of giving or receiving notices,
instructions, directions and other communications to or from
the Trustee and approving the accounts of the Trustee, accom-
panied by duly certified copies of resolutions of the Board
of Directors of such corporation adopting the Agreement and
approving and authorizing execution, acknowledgment and
delivery of such instrument and a duly certified copy of a
resolution of the Board of Directors of the Company approving
and consenting to the same.
SEVENTEENTH: Miscellaneous. (a) This Agreement
shall be interpreted, construed and enforced, and the trust
hereby created shall be administered, in accordance with the
laws of the United States and of the State of New York.
(b) The titles to Articles of this Agreement are
placed herein for convenience of reference only, and the
Agreement is not to be construed by reference thereto.
(c) This Agreement shall bind and inure to the
benefit of the successors and assigns of the Company and the
Trustee, respectively, and the Covered Participants and their
beneficiaries under the Plans.
(d) This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an
original but all of which together shall constitute but one
<PAGE> 33
instrument, which may be sufficiently evidenced by any
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed in their respective names by
their duly authorized officers under their corporate seals as
of the day and year first above written.
THE BANK OF NEW YORK COMPANY, INC.
By \s\ Charles Rappold
Chief Legal officer & Secretary
ATTEST:
\s\ Robert Keilman
UNITED STATES TRUST COMPANY
OF NEW YORK
By \s\ William H. Schroder
Senior Vice President
ATTEST:
\s\Ann E. Clark
<PAGE> 34
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this 15 day of December, 1994, before
me personally came Charles Rappold , to me known, who, being
by me duly sworn, did depose and say that he resides at 1050
Rahway Rd. Plainfield, NJ, and that he is CLO & Secretary of
THE BANK OF NEW YORK COMPANY, INC., one of the corporations
described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it
was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like
order.
\s\ Patricia D. Steube
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
On this 16 day of December, 1994, before me
personally came William H. Schroeder, to me known, who, being
by me duly sworn, did depose and say that he resides at 70 E.
10 St New York, New York , and that he is a Senior Vice President of
UNITED STATES TRUST COMPANY OF NEW YORK, one of the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Trustees of
said corporation; and that he signed his name thereto by like
order.
\s\ Stuart Omansky
<PAGE> 1
EXHIBIT I
Tax Reimbursement Agreements between The Bank of New York
Company, Inc. and the following persons:
Individual Date of Agreement
J. Carter Bacot July 13, 1994
Deno D. Papageorge July 13, 1994
<PAGE> 1
EXHIBIT II
[FORM OF IRREVOCABLE LETTER OF CREDIT]
[Date]
United States Trust Company of New York,
as Trustee
770 Broadway
New York, New York 10003-9548
Attention: [ ]
Dear Sirs:
At the request and for the account of The Bank of
New York Company, Inc., we hereby establish in your favor
(and in favor of your successors, the terms "you" and "yours"
referring to you and any successor), as Trustee under the
Trust Agreement between The Bank of New York Company, Inc.
and United States Trust Company of New York, dated as of
__________, 1994 (the "Trust Agreement"), this Irrevocable
Letter of Credit No. _________ in the amount of U.S.
$_______. This Letter of Credit is effective immediately and
shall expire at the close of banking business at our office
at [address] on [ ], 1995, unless terminated earlier
or extended in either case in accordance with the provisions
hereof. The amount of this Letter of Credit will be reduced
from time to time as hereinafter provided.
Funds under this Letter of Credit are available to
you in immediately available funds upon presentation of your
sight draft in the form of Exhibit A-1 hereto appropriately
completed.
<PAGE> 2
The amount available under this Letter of Credit
shall be automatically reduced by the amount of each draft
paid hereunder (effective on the date of payment of such
draft). In addition, upon presentation by you of a
certificate in the form of Exhibit B-1 hereto appropriately
completed, the amount available under this Letter of Credit
shall be automatically reduced by the amount stated in such
certificate.
Presentation of drafts and certificates hereunder
shall be made at our office at [address], Attention:
___________________, or at any other office in the City and
State of New York which may be designated by us by written
notice delivered to you.
Upon the earlier to occur of any one of the
following events: (i) the surrender to us by you of this
Letter of Credit for cancellation and (ii) the expiration
date stated in the initial paragraph hereof, this Letter of
Credit shall automatically expire.
Communications with respect to this Letter of
Credit shall be delivered to us by registered mail, return
receipt requested (except that drafts and certificates shall
be presented by hand delivery), addressed to us at [address],
Attention: _______________, specifically referring to the
number of this Letter of Credit.
<PAGE> 3
We hereby agree that drafts drawn and presented in
compliance with this Letter of Credit and accompanied by the
documents required hereby will be paid in accordance with the
terms hereof.
It is a condition of this Letter of Credit that it
will be automatically extended for periods of one year from
the then relevant expiry date, unless sixty (60) days prior
to that relevant expiry date we notify you by registered
mail, return receipt requested, that we elect not to extend
this Letter of Credit for any additional period, provided,
however, that under no circumstances will this Letter of
Credit be renewed or extended beyond [ ].
We hereby agree that all notices to you under this
Letter of Credit will be sent to you by registered mail,
return receipt requested, at 770 Broadway, New York, New York
10003-9548, Attention: Department Manager, Employee Benefits
Services, or such other address as from time to time
specified by you in writing.
This Letter of Credit shall be governed by, and
construed in accordance with, the terms of the Uniform
Customs and Practices for Documentary Credits (1983
Revision), International Chamber of Commerce, Publication
No. 400 (the "UCP"). This Letter of Credit shall be deemed
to be issued under the laws of the State of New York
(including the Uniform Commercial Code as in effect in said
<PAGE> 4
State), and, as to matters not governed by the UCP, shall be
governed by, and construed in accordance with, the laws of
the State of New York.
Very truly yours,
[Name of Bank]
By ___________________________
Vice President
<PAGE> 1
EXHIBIT A-1
SIGHT DRAFT
[Date]
For Value Received, pay on demand (by wire transfer
in same day funds) to Account No. [insert number of account
to which payment is to be made and name and address of bank]
________ United States Dollars ($__________).
Charge to Account of [name of account party]
Irrevocable Letter of Credit No. ___________.
TO: [Name of Bank]
[Address]
Attention: _________________,
Letter of Credit Operations
UNITED STATES TRUST COMPANY
OF NEW YORK
By ____________________________
Title:
<PAGE> 1
EXHIBIT B-1
REQUEST FOR REDUCTION
[Date]
[Name of Bank]
[Address]
Attention: ____________________,
Letter of Credit Operations
Irrevocable Letter of Credit No.
Gentlemen:
In accordance with the above-captioned Letter of
Credit, each of the undersigned hereby requests that the
amount available to be drawn by the beneficiary under said
Letter of Credit be reduced by $__________ upon receipt by
you of this certificate.
THE BANK OF NEW YORK COMPANY, INC.
By ________________________________
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By _________________________________
Title:
EXHIBIT 10(u)
<PAGE> 1.
Tax Reimbursement Agreement
AGREEMENT, dated as of July 13, 1994, by and
between THE BANK OF NEW YORK COMPANY, INC. ("Employer") and
("Employee").
WHEREAS, Employer and Employee have entered into a
severance benefit agreement dated May 17, 1982 (the "1982
Agreement"); and
WHEREAS, Employer desires to reimburse Employee
with respect to any excise taxes owed by Employee under
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") in connection with compensation or
benefits received pursuant to the 1982 Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, and other good and valuable
consideration, the parties hereto agree as follows:
1. Tax Reimbursement Payment. (a) If any
of the payments provided under the 1982 Agreement (the
"Contract Payments") or any other portion of the Total
Payments (as defined below) will at any time be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended or the applicable
provisions of any successor statute (the "Code"), the
Employer shall pay to the Employee, by the fifth day
following the Employee's date of termination of employment
from the Employer, an additional amount (the "Tax
Reimbursement Payment") such that the net amount retained by
the Employee, after deduction of any Excise Tax on the
Contract Payments and such other Total Payments and any
<PAGE> 2
federal and state and local income tax, employment tax and
Excise Tax upon the payment provided for by this Section 1,
shall be equal to the Total Payments. For purposes of
determining whether any of the payments will be subject to
the Excise Tax and the amount of such Excise Tax:
(i) any other payments or benefits received or to
be received by the Employee in connection with the
termination of his employment as contemplated by the 1982
Agreement or a change in control of the Employer (whether
payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with (a) the Employer, (b)
the Employer's successors, (c) any person whose action
results in a change in control of the Employer or (d) any
corporation affiliated (or which, as a result of the
completion of a transaction causing a change in control of
the Employer, will become affiliated) with the Employer
within the meaning of Section 1504 of the Code) (together
with the Contract Payment, the "Total Payments") shall be
treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Employer's independent
auditors and acceptable to the Employee the Total Payments
(in whole or in part) do not constitute parachute payments,
or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the
Code either in their entirety or in excess of the base
<PAGE> 3
amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax; and
(ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Employer's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
(b) For purposes of determining the amount of the
Tax Reimbursement Payment, the Employee shall be deemed to
pay federal income taxes at the highest marginal rate of
federal, state and local income taxation in the calendar
year in which the Tax Reimbursement Payment is to be made,
net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account
hereunder at the time of termination of the Employee's
employment, the Employee shall repay to the Employer at the
time that the amount of such reduction in Excise Tax is
finally determined the portion of the Tax Reimbursement
Payment attributable to such reduction (plus the portion of
the Tax Reimbursement Payment attributable to the Excise Tax
and federal, state and local income tax and employment tax
imposed on the Tax Reimbursement Payment being repaid by the
Employee if such repayment results in a reduction in Excise
Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at
the rate provided in Section 1274(d) of the Code. In the
event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination
<PAGE> 4
of the Employee's employment (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment),
the Employer shall make an additional tax reimbursement
payment in respect of such excess (plus any interest payable
with respect to such excess) at the time that the amount of
such excess is finally determined.
(c) In the event of any proceeding before the
Internal Revenue Service, United State Tax Court, the United
States Claims Court or any other federal court involving the
question of whether any payment made or benefit provided by
the Employer to the Employee is an excess parachute payment
(including any proceeding initiated by a claim for refund or
tax return examination with respect to either the Employer
or the Employee), the Employer shall have the right to
participate in such proceeding with counsel of its
selection, which counsel shall be experienced in federal
income tax matters and shall be reasonably satisfactory to
the Employee. The direct costs of any such proceeding
(including, but not limited to, all fees and disbursements
of the Employee's counsel and the Employer's counsel) shall
be borne by the Employer.
2. Governing Law. This Agreement is
governed by and is to be construed and enforced in
accordance with the laws of the State of New York, without
regard to its conflicts of law principles. If under such
law, any portion of this Agreement is at any time deemed to
be in conflict with any applicable statute, rule, regulation
or ordinance, such portion shall be deemed to be modified or
<PAGE> 5
altered to conform thereto or, if that is not possible, to
be omitted from this Agreement; the invalidity of any such
portion shall not affect the force, effect and validity of
the remaining portion hereof.
3. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be
amended but only by a subsequent written agreement of the
parties. Any waiver or discharge must be in writing and
signed by Employee or such officer of Employer as may be
designated by the Board of Directors of Employer (the
"Board"). No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or
dissimilar provisions at the same or any prior or subsequent
time.
(b) Successors in Interest. This Agreement shall
be binding upon and shall inure to the benefit of Employee,
Employee's heirs, executors, administrators and
beneficiaries, and shall be binding upon and inure to the
benefit of Employer and its successors. No rights or
obligations of Employer under this Agreement may be assigned
or transferred by Employer, except Employer shall require
any successor to or acquiror of (whether direct or indirect,
by purchase, merger, consolidation or otherwise) all or
substantially all of the business and/or assets of Employer
to expressly assume and agree in writing to perform this
Agreement in the same manner and to the same extent that
<PAGE> 6
Employer would be required and to perform it as if no such
succession had taken place.
(c) Withholding Taxes. Any amount payable to
Employee under this Agreement shall be subject to applicable
withholding of income, wage and other taxes.
(d) Claims and Denials. All claims by Employee
for benefits under this Agreement shall be directed to and
determined by the Board and shall be in writing. Any denial
by the Board of a claim for benefits under this Agreement
shall be delivered to Employee in writing and shall set
forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall
afford a reasonable opportunity to Employee for a review of
the decisions denying a claim and shall further allow
Employee to appeal to the Board a decision of the Board
within sixty (60) days after notification by the Board that
Employee's claim has been denied.
(e) Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel
of three (3) arbitrators in the State of New York, in
accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The
expenses of such arbitration shall be borne by Employer.
(f) Designated Beneficiary. In the event of
Employee's death, all amounts due to Employee hereunder
shall be paid to Employee's spouse or, if Employee's spouse
predeceases him, to his estate, unless Employee provides to
<PAGE> 7
the Employer in writing the names of the beneficiary or
beneficiaries who shall be paid any such amounts (Employee's
spouse, estate or specified beneficiary, as the case may be,
shall be Employee's "Designated Beneficiary" for purposes of
this Agreement).
(g) Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed
to be an original but all of which together will constitute
one and the same instrument.
(h) Applicability. This Agreement shall be
applicable and payments shall be made hereunder solely to
the extent the Tax Reimbursement Payment is not provided to
Employee by means of another agreement with the Employer or
any successor entity or affiliate of the Employer.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the year and day first above
written.
EMPLOYER
By:
Title:
EMPLOYEE
<PAGE> 1 EXHIBIT 10(v)
October 11, 1994
Dear Mr. :
The Bank of New York Company, Inc., a New York cor-
poration (the "Company"), considers the establishment and
maintenance of a sound and vital management to be essential
to protecting and enhancing the best interests of the Company
and its shareholders. In this connection, the Company
recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may
arise and that such possibility, and the uncertainty and
questions which it may raise among management of the Company
and its principal subsidiary, The Bank of New York (the
"Bank"), may result in the departure or distraction of
management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board of Directors of the
Company (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of management of the
Company and the Bank to their assigned duties without
distraction in circumstances arising from the possibility of
a change in control of the Company. In particular, the Board
believes it important, should the Company or its shareholders
receive a proposal for transfer of control of the Company,
that you be able to assess and advise the Board whether such
proposal would be in the best interests of the Company and
its shareholders and to take such other action regarding such
proposal as the Board might determine to be appropriate,
without being influenced by the uncertainties of your own
situation.
In order to induce you to remain in the employ of
the Company, this letter agreement sets forth the severance
benefits which the Company agrees will be provided to you in
the event your employment with the Company or the Bank is
terminated subsequent to a "change in control" of the Company
under the circumstances described below.
1. Agreement to Provide Services; Right to
Terminate.
(i) Except as otherwise provided in paragraph (ii)
below, the Company, the Bank or you may terminate your
employment at any time, subject to the Company's providing
<PAGE>2
the benefits hereinafter specified in accordance with the
terms hereof.
(ii) In the event a tender offer or exchange offer
is made by a Person (as hereinafter defined) for more than
25% of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections
of directors ("Voting Securities"), including shares of the
common stock of the Company, you agree that you will not
leave the employ of the Company or the Bank (other than as a
result of Disability or upon Retirement, as such terms are
hereinafter defined) and will render the services contem-
plated in the recitals to this Agreement until such tender
offer or exchange offer has been abandoned or terminated or a
change in control of the Company, as defined in Section 3
hereof, has occurred. For purposes of this Agreement, the
term "Person" shall mean and include any individual, cor-
poration, partnership, group, association or other "person",
as such term is used in Section 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), other than the
Company, the Bank, any other subsidiary of the Company or any
employee benefit plan(s) sponsored by the Company, the Bank
or any other subsidiary of the Company.
2. Term of Agreement. This Agreement shall
commence on the date hereof and shall continue in effect
until December 31, 1995; provided, however, that commencing
on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one addi-
tional year unless at least 90 days prior to such January lst
date, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, further, that,
notwithstanding the delivery of any such notice, this Agree-
ment shall continue in effect for a period of twenty-four
(24) months after a change in control of the Company, as
defined in Section 3 hereof, if such change in control shall
have occurred during the term of this Agreement, as it may be
extended by the first proviso set forth above. Notwith-
standing anything in this Section 2 to the contrary, this
Agreement shall terminate if you or the Company or the Bank
terminate your employment prior to a change in control of the
Company.
3. Change in Control. For purposes of this
Agreement, a "change in control" of the Company shall be
deemed to occur if (A) any "person" (as such term is defined
in Section 3(a)(9) and as used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation
<PAGE> 3
owned, directly or indirectly, by stockholders of the Company
in substantially the same proportion as their ownership of
the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then out-
standing securities ("Voting Securities"); or (B) during any
period of not more than two years, individuals who constitute
the Board as of the beginning of the period and any new
director (other than a director designated by a person who
has entered into an agreement with the Company to effect a
transaction described in clause (A) or (C) of this sentence)
whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at such time or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company or all or
substantially all of the Company's assets.
4. Termination Following Change in Control. If
any of the events described in Section 3 hereof constituting
a change in control of the Company shall have occurred, you
shall be entitled to the benefits provided in Section 5
hereof upon the termination of your employment with the
Company or the Bank within twenty-four (24) months after such
event, unless such termination is (a) because of your death
or Retirement, (b) by the Company for Cause or Disability or
(c) by you other than for Good Reason (as all such capital-
ized terms are hereinafter defined).
(i) Disability. Termination by the Company of
your employment based on "Disability" shall mean termination
because of your absence from your duties with the Company on
a full time basis for one hundred eighty (180) consecutive
days as a result of your incapacity due to physical or mental
illness, unless within thirty (30) days after Notice of
Termination (as hereinafter defined) is given to you
following such absence you shall have returned to the full
time performance of your duties.
<PAGE> 4
(ii) Retirement. Termination by you or by the
Company of your employment based on "Retirement" shall mean
termination on or after your attainment of age sixty-five (65).
(iii) Cause. Termination by the Company or the Bank
of your employment for "Cause" shall mean termination upon
(a) the willful and continued failure by you to perform sub-
stantially your duties with the Company or the Bank (other
than any such failure resulting from your incapacity due to
physical or mental illness) after a demand for substantial
performance is delivered to you by the Chairman of the Board
or President of the Company or the Chief Executive Officer of
the Bank, as appropriate, which specifically identifies the
manner in which such executive believes that you have not
substantially performed your duties, or (b) the willful
engaging by you in illegal conduct which is materially and
demonstrably injurious to the Company or the Bank. For
purposes of this paragraph (iii), no act, or failure to act,
on your part shall be considered "willful" unless done, or
omitted to be done, by you in bad faith and without reason-
able belief that your action or omission was in, or not
opposed to, the best interests of the Company or the Bank.
Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Company or the Bank shall
be conclusively presumed to be done, or omitted to be done,
by you in good faith and in the best interests of the Company
and the Bank. It is also expressly understood that your
attention to matters not directly related to the business of
the Company or the Bank shall not provide a basis for termi-
nation for Cause so long as the Board has approved your
engagement in such activities. Notwithstanding the fore-
going, you shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to you
a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters of the entire membership of
the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board
you were guilty of the conduct set forth above in (a) or (b)
of this paragraph (iii) and specifying the particulars
thereof in detail.
(iv) Good Reason. Termination by you of your
employment for "Good Reason" shall mean termination based on:
(A) a determination by you, in your reasonable
judgment, that there has been an adverse change in your
status or position(s) as an executive officer of the
Company or the Bank as in effect immediately prior to
<PAGE> 5
the change in control, including, without limitation, any
adverse change in your status or position as a result of a
diminution in your duties or responsibilities (other than, if
applicable, any such change directly attributable to the fact
that the Company is no longer publicly owned) or the
assignment to you of any duties or responsibilities which are
inconsistent with such status or position(s), or any removal
of you from or any failure to reappoint or reelect you to
such position(s) (except in connection with the termination
of your employment for Cause, Disability or Retirement or as
a result of your death or by you other than for Good Reason);
(B) a reduction by the Company or the Bank in your
base salary as in effect immediately prior to the change
in control;
(C) the failure by the Company or the Bank to
continue in effect any Plan (as hereinafter defined) in
which you are participating at the time of the change in
control of the Company (or Plans providing you with at
least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of
the change in control, or the taking of any action, or
the failure to act, by the Company or the Bank which
would adversely affect your continued participation in
any of such Plans on at least as favorable a basis to
you as is the case on the date of the change in control
or which would materially reduce your benefits in the
future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the
change in control;
(D) the failure by the Company or the Bank to
provide and credit you with the number of paid vacation
days to which you are then entitled in accordance with
its normal vacation policy as in effect immediately
prior to the change in control;
(E) the requirement by the Company or the Bank
that you be based at an office that is greater than
35 miles from where your office is located immediately
prior to the change in control except for required
travel on the business of the Company or the Bank to an
extent substantially consistent with the business travel
obligations which you undertook on behalf of the Company
or the Bank prior to the change in control;
(F) the failure by the Company to obtain from any
Successor (as hereinafter defined) the assent to this
Agreement contemplated by Section 6 hereof;
<PAGE> 6
(G) any purported termination by the Company or
the Bank of your employment which is not effected
pursuant to a Notice of Termination satisfying the
requirements of paragraph (v) below (and, if applicable,
paragraph (iii) above); and for purposes of this
Agreement, no such purported termination shall be
effective; or
(H) any refusal by the Company or the Bank to
continue to allow you to attend to matters or engage in
activities not directly related to the business of the
Company or the Bank which, prior to the change in
control, you were permitted by the Board to attend to or
engage in.
For purposes of this Agreement, "Plan" shall mean any compen-
sation plan such as an incentive, stock option or restricted
stock plan or any employee benefit plan such as a thrift,
pension, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other
plan, program or policy of the Company or the Bank intended
to benefit employees.
(v) Notice of Termination. Any purported termi-
nation by the Company or the Bank or by you following a
change in control shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in
this Agreement relied upon.
(vi) Date of Termination. "Date of Termination"
following a change in control shall mean (a) if your
employment is to be terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you
shall not have returned to the performance of your duties on
a full-time basis during such thirty (30) day period), (b) if
your employment is to be terminated by the Company or the
Bank for Cause or by you pursuant to Sections 4(iv)(F) and 6
hereof or for any other Good Reason, the date specified in
the Notice of Termination, or (c) if your employment is to be
terminated by the Company or the Bank for any reason other
than Cause, the date specified in the Notice of Termination,
which in no event shall be a date earlier than ninety (90)
days after the date on which a Notice of Termination is
given, unless an earlier date has been expressly agreed to by
you in writing either in advance of, or after, receiving such
Notice of Termination. In the case of termination by the
Company or the Bank of your employment for Cause, if you have
not previously expressly agreed in writing to the
termination, then within thirty (30) days after receipt by
you of the Notice of Termination with respect thereto, you
may notify the Company that a dispute exists concerning the
<PAGE> 7
termination, in which event the Date of Termination shall be
the date set either by mutual written agreement of the
parties or by the arbitrators in a proceeding as provided in
Section 13 hereof. During the pendency of any such dispute,
the Company or the Bank will continue to pay you your full
compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved in
accordance with Section 13.
5. Compensation Upon Termination or During
Disability; Other Agreements.
(i) During any period following a change in
control of the Company that you fail to perform your duties
as a result of incapacity due to physical or mental illness,
you shall continue to receive your salary at the rate then in
effect and any benefits or awards under any Plans shall
continue to accrue during such period, to the extent not
inconsistent with such Plans, until your employment is
terminated pursuant to and in accordance with paragraphs 4(i)
and 4(vi) hereof. Thereafter, your benefits shall be
determined in accordance with the Plans then in effect.
(ii) If your employment shall be terminated for
Cause following a change in control of the Company, the
Company or the Bank shall pay you your salary through the
Date of Termination at the rate in effect just prior to the
time a Notice of Termination is given plus any benefits or
awards (including both the cash and stock components) which
pursuant to the terms of any Plans have been earned and are
otherwise payable, but which have not yet been paid to you.
Thereupon the Company and the Bank shall have no further
obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within
twenty-four (24) months after a change in control of the
Company, as defined in Section 3 above, shall have occurred,
your employment by the Company or the Bank shall be termi-
nated (a) by the Company or the Bank other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then
the Company shall pay or cause the Bank to pay to you, no
later than the fifth business day following the Date of
Termination, without regard to any contrary provisions of any
Plan, the following:
(A) your salary through the Date of Termination at
the rate in effect just prior to the time a Notice of
Termination is given plus any benefits or awards (inclu-
ding both the cash and stock components) which pursuant
to the terms of any Plans have been earned and otherwise
payable, but which have not yet been paid to you; and
<PAGE> 8
(B) as severance pay and in lieu of any further
salary for periods subsequent to the Date of Termi-
nation, an amount in cash equal to 2.99 times your
"annualized includible compensation for the base period"
(as defined in Section 280G(d)(1) of the Internal
Revenue Code of 1986 (the "Code")).
(iv) If, within twenty-four (24) months after a
change in control of the Company, as defined in Section 3
above, shall have occurred, your employment by the Company or
the Bank shall be terminated (a) by the Company or the Bank
other than for Cause, Disability or Retirement or (b) by you
for Good Reason, then the Company shall maintain or cause the
Bank to maintain in full force and effect, for the continued
benefit of you and your dependents for a period terminating
on the earliest of (a) three years after the Date of Ter-
mination, (b) the commencement date of equivalent benefits
from a new employer or (c) your attainment of age sixty-five (65),
all insured and self-insured employee welfare
benefit Plans in which you were entitled to participate
immediately prior to the Date of Termination, provided that
your continued participation is possible under the general
terms and provisions of such Plans (and any applicable
funding media) and you continue to pay an amount equal to
your regular contribution under such plans for such par-
ticipation. If, at the end of three years after the
Termination Date, you have not reached your sixty-fifth
birthday and you have not previously received or are not then
receiving equivalent benefits from a new employer, the Com-
pany shall or cause the Bank to arrange, at its sole cost and
expense, to enable you to convert your and your dependents'
coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company and the Bank
may apply for such conversions. In the event that your
participation in any such Plan is barred, the Company shall
or cause the Bank, at its sole cost and expense, to arrange
to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substan-
tially similar (on an after-tax basis) to those which you
otherwise would have been entitled to receive under such
Plans pursuant to this paragraph (iv) or, if such insurance
is not available at a reasonable cost to the Company or the
Bank, the Company shall or cause the Bank to otherwise
provide you and your dependents with equivalent benefits (on
an after-tax basis). You shall not be required to pay any
premiums or other charges in an amount greater than that
which you would have paid in order to participate in such
Plans.
(v) Except as specifically provided in para-
graph (iv) above, the amount of any payment provided for in
this Section 5 shall not be reduced, offset or subject to
<PAGE> 9
recovery by the Company or the Bank by reason of any compen-
sation earned by you as the result of employment by another
employer after the Date of Termination, or otherwise.
6. Successors; Binding Agreement.
(i) The Company will seek, by written request at
least five business days prior to the time a Person becomes a
Successor (as hereinafter defined), to have such Person by
agreement in form and substance satisfactory to you, assent
to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent by
the later of (A) three business days prior to the time such
Person becomes a Successor or (B) two business days after
such Person receives a written request to so assent shall
constitute Good Reason for termination by you of your
employment if a change in control of the Company occurs or
has occurred. For purposes of this Agreement, "Successor"
shall mean any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of
time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's
Voting Securities or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there be no
such designee, to your estate.
(iii) For purposes of this Agreement, the "Company"
shall include any corporation or other entity which is the
surviving or continuing entity in respect of any merger,
consolidation or form of business combination in which the
Company ceases to exist.
7. Fees, Expenses and Interest; Mitigation.
(i) The Company shall, or cause the Bank to,
reimburse you, on a current basis, for all reasonable legal
fees and related expenses incurred by you in connection with
the Agreement following a change in control of the Company,
including, without limitation, (a) all such fees and
expenses, if any, incurred in contesting or disputing any
termination of your employment or incurred by you in seeking
advice with respect to the matters set forth in Section 8
hereof or (b) your seeking to obtain or enforce any right or
benefit provided by this Agreement, in each case, regardless
of whether or not your claim is upheld by a court of com-
<PAGE> 10
petent jurisdiction; provided, however, you shall be required
to repay any such amounts to the Company to the extent that a
court issues a final and non-appealable order setting forth
the determination that the position taken by you was
frivolous or advanced by you in bad faith. In addition to
the fees and expenses provided herein, you shall also be paid
interest on any disputed amount ultimately paid to you at the
prime rate announced by the Bank from time to time from the
date payment should have been made until paid in full.
(ii) You shall not be required to mitigate the
amount of any payment the Company or the Bank becomes
obligated to make to you in connection with this Agreement,
by seeking other employment or otherwise.
8. Taxes.
(i) All payments to be made to you under this
Agreement will be subject to required withholding of federal,
state and local income and employment taxes.
(ii) Notwithstanding anything in the foregoing to
the contrary, if any of the payments provided for in this
Agreement, together with any other payments which you have
the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in
Section 1504(a) of the Code without regard to Section 1504(b)
of the Code) of which the Company is a member, would consti-
tute a "parachute payment" (as defined in Section 280G(b)(2)
of the Code), the payments pursuant to this Agreement shall
be reduced (reducing first the payments under Section
5(iii)(B)) to the largest amount as will result in no portion
of such payments being subject to the excise tax imposed by
Section 4999 of the Code; provided, however, that the deter-
mination as to whether any reduction in the payments under
this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be
conclusive and binding on the Company with respect to its
treatment of the payment for tax reporting purposes.
9. Survival. The respective obligations of, and
benefits afforded to, the Company and you as provided in
Sections 5, 6(ii), 7, 8, 13 and 14 of this Agreement shall
survive termination of this Agreement.
10. Notice. For the purposes of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid
and addressed, in the case of the Company, to the address set
forth on the first page of this Agreement or, in the case of
the undersigned employee, to the address set forth below his
<PAGE> 11
signature, provided that all notices to the Company shall be
directed to the attention of the Chairman of the Board or
President of the Company, with a copy to the Secretary of the
Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective
only upon receipt.
11. Miscellaneous. No provision of this Agreement
may be modified, waived or discharged unless such modifi-
cation, waiver or discharge is agreed to in a writing signed
by you and the Chairman of the Board or President of the
Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of compliance with,
any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agree-
ment shall be governed by the laws of the State of New York
applied without regard to conflict of laws principles.
12. Validity. The invalidity or unenforceability
of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration in New York City by three
arbitrators in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be
entered on the arbitrators' award in any court having
jurisdiction; provided, however, that you shall be entitled
to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this
Agreement. The Company shall bear all costs and expenses
arising in connection with any arbitration proceeding pur-
suant to this Section 13.
14. Employee's Commitment. You agree that subse-
quent to your period of employment with the Company and the
Bank, you will not at any time communicate or disclose to any
unauthorized person, without the written consent of the
Company, any proprietary processes of the Company or any
subsidiary or other confidential information concerning their
business, affairs, products, suppliers or customers which, if
disclosed, would have a material adverse effect upon the
business or operations of the Company and its subsidiaries,
<PAGE> 12
taken as a whole; it being understood, however, that the
obligations of this Section 14 shall not apply to the extent
that the aforesaid matters (a) are disclosed in circumstances
where you are legally required to do so or (b) become
generally known to and available for use by the public
otherwise than by your wrongful act or omission.
15. Related Agreements. To the extent that any
provision of any other agreement between the Company, the
Bank or any of the Company's other subsidiaries and you shall
limit, qualify or be inconsistent with any provision of this
Agreement, then for purposes of this Agreement, while the
same shall remain in force, the provision of this Agreement
shall control and such provision of such other agreement
shall be deemed to have been superseded, and to be of no
force or effect, as if such other agreement had been formally
amended to the extent necessary to accomplish such purpose.
16. Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and
the same instrument.
If this letter correctly sets forth our agreement
on the subject matter hereof, kindly sign and return to the
Company the enclosed copy of this letter which will then
constitute our agreement on this subject and will supersede
our previous letter agreement, dated January 12, 1993.
Sincerely,
THE BANK OF NEW YORK COMPANY, INC.
By _______________________________
Name:
Title:
Agreed to this day
of , 1994.
_________________________
Employee
Address:
<PAGE> 1 EXHIBIT 10(x)
AMENDMENT
TO
THE BANK OF NEW YORK COMPANY, INC.
RETIREMENT PLAN FOR
NON-EMPLOYEE DIRECTORS
WHEREAS, The Bank of New York Company, Inc.
Retirement Plan for Non-Employee Directors (the "Directors'
Retirement Plan") was adopted by the Board of Directors of
The Bank of New York Company, Inc. (the "Company"), effective
as of May 11, 1993; and
WHEREAS, Section 6 of the Directors' Retirement
Plan provides that the Board of Directors of the Company may
amend the Plan at any time, except in certain respects not
material hereto; and
WHEREAS, the Board of Directors of the Company
desires to adopt an amendment to the Directors' Retirement
Plan;
NOW, THEREFORE, the Directors' Retirement Plan is
hereby amended, effective as of November 8, 1994, by the
addition of a new paragraph (e) at the end of Section 2 of
the Plan to read as follows:
(e) Notwithstanding anything contained herein to
the contrary, in the event of a Change of Control (as
defined below), (i) each retired member of the Board who
is then receiving (or entitled to receive) retirement
benefits under the Plan shall be paid within 60 days
thereafter, a lump sum payment of the actuarial
equivalent of the retired member's retirement benefit as
of the Change of Control and (ii) each member of the
Board who ceases to be a member of the Board within two
years after the Change of Control for any reason other
than his death and (A) is entitled to a retirement
benefit under the Plan or (B) would be entitled to a
retirement benefit under the Plan if he satisfied the
age and service requirements of paragraph (a) of
<PAGE> 2
Section 1 of the Plan, shall receive a lump sum payment of
the actuarial equivalent of the member's retirement benefit
as determined in accordance with the next sentence, within
60 days after he ceases to be a member of the Board. The
retirement benefit of a member of the Board referred to in
clause (ii) of the preceding sentence shall be equal to 100%
of his annual retainer payable for (i) the life of the member
of the Board, if he has attained age 70 when he ceased to be
a member of the Board, or (ii) the number of years of service
as a member of the Board, if he had not attained age 70 when
he ceased to be a member of the Board. The actuarial
equivalent of retirement benefits hereunder shall be
determined on the basis of the actuarial assumptions in
effect under the Retirement Plan of The Bank of New York
Company, Inc. immediately prior to the date of payment.
A "Change of Control" shall be deemed to occur if
(A) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company
or any of its subsidiaries, an underwriter temporarily
holding securities pursuant to an offering of such
securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substan-
tially the same proportion as their ownership of the
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Com-
pany's then outstanding securities ("Voting
Securities"); or (B) during any period of not more than
two years, individuals who constitute the Board of
Directors of the Company as of the beginning of the
period and any new director (other than a director
designated by a person who has entered into an agreement
with the Company to effect a transaction described in
clause (A) or (C) of this sentence) whose election by
the Board of Directors of the Company or nomination for
election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at such time
or whose election or nomination for election was
previously so approved, cease for any reason to con-
stitute a majority thereof; or (C) the shareholders of
the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the Voting
Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
<Page 3>
outstanding or by being converted into Voting Securities of
the surviving entity) at least 50% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a
plan of complete liquidation of the Company or any agreement
for the sale or disposition by the Company or all or
substantially all of the Company's assets.
<PAGE> 1 EXHIBIT 10(z)
AMENDMENT
TO
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
OF THE BANK OF NEW YORK COMPANY, INC.
WHEREAS, the Deferred Compensation Plan for Non-Employee
Directors of The Bank of New York Company, Inc. (the
"Directors' Deferred Compensation Plan") was adopted by the
Board of Directors of The Bank of New York Company, Inc. (the
"Company"), effective as of December 1, 1993; and
WHEREAS, Section 7(a) of the Directors' Deferred
Compensation Plan provides that the Board of Directors of the
Company may amend the Plan at any time; and
WHEREAS, the Board of Directors of the Company
desires to adopt an amendment to the Directors' Deferred
Compensation Plan;
NOW, THEREFORE, the Directors' Deferred
Compensation Plan is hereby amended, effective as of
November 8, 1994, by amending Section 5(g) of the Plan to
read as follows:
(g) A "Change of Control" shall be deemed to occur
if (A) any "person" (as such term is defined in Section
3(a)(9) and as used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company
or any of its subsidiaries, an underwriter temporarily
holding securities pursuant to an offering of such
securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substan-
tially the same proportion as their ownership of the
Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Com-
pany's then outstanding securities ("Voting
Securities"); or (B) during any period of not more than
two years, individuals who constitute the Board of
<PAGE> 2
Directors of the Company as of the beginning of the period
and any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in clause (A) or (C) of this
sentence) whose election by the Board of Directors of the
Company or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at such time or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or (C) the shareholders of the
Company approve a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 60% of
the combined voting power of the Voting Securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation, or the shareholders of
the Company approve a plan of complete liquidation of the
Company or any agreement for the sale or disposition by the
Company or all or substantially all of the Company's assets.
EXHIBIT 11
<PAGE> 1
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Computation of Earnings Per Common Share
For the Years Ended December 31,
<CAPTION>
1994 1993 1992
---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C>
Weighted Average Number of Shares of
Common Stock for Primary Computation 188 186 172
Shares Assumed to be Issued on Conversion:
Debentures 12 12 12
Cumulative Preferred Stock 2 2 4
----- ----- -----
Weighted Average Number of Shares of
Common Stock Assuming Full Dilution 202 200 188
===== ===== =====
Net Income $ 749 $ 559 $ 393
Dividend Requirements on Preferred Stock 13 25 33
----- ----- -----
Net Income Available to Common Shareholders 736 534 360
Interest On Convertible Debentures, Net of Tax 10 10 11
Dividends on Convertible Preferred Stock 2 3 6
----- ----- -----
Net Income Available to Common Shareholders,
Assuming Full Dilution $ 748 $ 547 $ 377
===== ===== =====
Earnings Per Share:
Primary $3.92 $2.87 $2.10
Fully Diluted 3.70 2.72 2.00
</TABLE>
EXHIBIT 12
<TABLE>
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
For The Years Ended December 31,
<CAPTION>
EARNINGS 1994 1993 1992 1991 1990
-------- ---- ---- ---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Income Before Income Taxes $1,198 $ 886 $ 588 $ 208 $ 430
Fixed Charges, Excluding Interest on
Deposits 436 340 346 378 816
------ ------ ------ ------ ------
Income Before Income Taxes and Fixed
Charges Excluding Interest on
Deposits 1,634 1,226 934 586 1,246
Interest on Deposits 842 701 1,005 1,794 2,489
------ ------ ------ ------ ------
Income Before Income Taxes and Fixed
Charges, Including Interest on
Deposits $2,476 $1,927 $1,939 $2,380 $3,735
====== ====== ====== ====== ======
FIXED CHARGES
-------------
Interest Expense, Excluding Interest
on Deposits $ 403 $ 305 $ 315 $ 346 $ 782
One-Third Net Rental Expense* 33 35 31 32 34
------ ------ ------ ------ ------
Total Fixed Charges, Excluding
Interest on Deposits 436 340 346 378 816
Interest on Deposits 842 701 1,005 1,794 2,489
------ ------ ------ ------ ------
Total Fixed Charges, Including
Interest on Deposits $1,278 $1,041 $1,351 $2,172 $3,305
====== ====== ====== ====== ======
PREFERRED STOCK DIVIDENDS, PRE-TAX
BASIS $ 21 $ 40 $ 50 $ 51 $ 47
---------------------------------- ====== ====== ====== ====== ======
EARNINGS TO FIXED CHARGES RATIOS
--------------------------------
Excluding Interest on Deposits 3.75x 3.61x 2.70x 1.55x 1.53x
Including Interest on Deposits 1.94 1.85 1.44 1.10 1.13
EARNINGS TO COMBINED FIXED CHARGES
& PREFERRED STOCK DIVIDENDS RATIOS
----------------------------------
Excluding Interest on Deposits 3.58 3.23 2.36 1.37 1.44
Including Interest on Deposits 1.91 1.78 1.38 1.07 1.11
<FN>
*The proportion deemed representative of the interest factor.
</TABLE>
<PAGE> 1
EXHIBIT 13
1994 Annual Report to Shareholders
<TABLE>
FINANCIAL HIGHLIGHTS
The Bank of New York Company, Inc.
<CAPTION>
Dollars in millions,
except per share amounts 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net Interest Income $ 1,717 $ 1,497 $ 1,367 $ 1,350 $ 1,476
Noninterest Income 1,289 1,319 1,183 1,094 976
Provision for Loan Losses 162 284 443 778 495
Noninterest Expense 1,646 1,646 1,519 1,458 1,527
Net Income 749 559 393 134 311
Net Income Available to
Common Shareholders 736 534 360 102 278
Return on Average Assets 1.49% 1.20% 0.85% 0.29% 0.59%
Return on Average Common
Shareholders' Equity 18.49 14.98 12.00 3.85 10.64
Common Dividend Payout Ratio 27.88 27.99 33.89 125.49 57.91
Per Common Share
Primary Earnings $ 3.92 $ 2.87 $ 2.10 $ 0.64 $ 1.75
Fully Diluted Earnings 3.70 2.72 2.00 - 1.75
Cash Dividends 1.10 0.86 0.76 0.84 1.06
Market Value at Year End 29.00 28.50 26.94 15.44 8.88
Average Securities $ 5,941 $ 6,352 $ 6,202 $ 4,676 $ 4,623
Average Loans 32,029 30,427 30,345 32,719 38,139
Average Total Assets 50,280 46,644 46,227 46,617 53,214
Average Deposits 34,041 32,837 33,237 35,669 37,905
Average Long-Term Debt 1,530 1,729 1,386 991 872
Average Preferred
Shareholders' Equity 157 334 409 395 395
Average Common
Shareholders' Equity 3,980 3,563 2,996 2,652 2,611
At Year End
Allowance for Loan Losses
as a Percent of Loans 2.40% 3.17% 3.63% 3.57% 3.11%
Tier I Capital Ratio 8.45 8.87 7.59 5.79 5.03
Total Capital Ratio 13.43 13.65 12.30 9.40 7.96
Leverage Ratio 7.89 7.99 7.11 5.77 5.02
Common Equity to Assets Ratio 8.55 8.29 7.30 6.14 5.36
Total Equity to Assets Ratio 8.79 8.94 8.24 7.04 6.16
Common Shares Outstanding
(in millions) 186.935 187.228 182.131 160.746 159.338
Employees 15,477 15,621 16,167 15,139 15,847
<FN>
The per common share amounts and common shares outstanding have been restated
to reflect the 2-for-1 common stock split effective April 22, 1994.
</TABLE>
<PAGE> 2
<TABLE>
Consolidated Balance Sheets
The Bank of New York Company, Inc.
<CAPTION>
December 31,
-------------------------------------------------------------------------------
Dollars in millions, except per share amounts 1994 1993
---- ----
<S> <C> <C>
Assets
Cash and Due from Banks $ 2,903 $ 4,511
Interest-Bearing Deposits in Banks 992 269
Securities:
Held-to-Maturity (fair value of $2,707
in 1994 and $4,449 in 1993) 2,930 4,356
Available-for-Sale (fair value of
$1,721 in 1994 and $1,243 in 1993) 1,721 1,241
------- -------
Total Securities 4,651 5,597
Trading Assets at Fair Value 940 1,325
Federal Funds Sold and Securities Purchased
Under Resale Agreements 3,019 36
Loans (less allowance for loan losses of $792 in
1994 and $970 in 1993) 32,291 29,600
Premises and Equipment 914 945
Due from Customers on Acceptances 810 888
Accrued Interest Receivable 290 222
Other Assets 2,069 2,153
------- -------
Total Assets $48,879 $45,546
======= =======
Liabilities and Shareholders' Equity
Deposits:
Noninterest-Bearing (principally domestic offices) $ 8,579 $ 8,690
Interest-Bearing
Domestic Offices 14,871 15,156
Foreign Offices 10,641 8,313
------- -------
Total Deposits 34,091 32,159
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,502 2,711
Other Borrowed Funds 4,738 2,781
Acceptances Outstanding 812 901
Accrued Taxes and Other Expenses 1,049 763
Accrued Interest Payable 213 111
Other Liabilities 404 458
Long-Term Debt 1,774 1,590
------- -------
Total Liabilities 44,583 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 322,104
shares in 1994 and 1,085,415 shares in 1993 8 27
Common Stock-par value $7.50 per share, authorized
350,000,000 shares, issued 190,213,322 shares in 1994
and 187,400,962 shares in 1993 1,427 1,406
Additional Capital 858 841
Retained Earnings 2,048 1,536
Securities Valuation Allowance (58) -
------- -------
4,394 4,077
Less: Treasury Stock (2,566,071 shares in 1994
and 173,198 shares in 1993), at cost 78 5
Loan to ESOP (712,695 shares in 1994), at cost 20 -
------- -------
Total Shareholders' Equity 4,296 4,072
------- -------
Total Liabilities and Shareholders' Equity $48,879 $45,546
======= =======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 3
<TABLE>
Consolidated Statements of Income
The Bank of New York Company, Inc.
<CAPTION>
In millions, except per share amounts For the years ended December 31,
-------------------------------------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest Income
Loans $2,405 $2,025 $2,102
Securities
Taxable 227 235 262
Exempt from Federal Income Taxes 56 69 86
------ ------ ------
283 304 348
Deposits in Banks 68 24 76
Federal Funds Sold and Securities
Purchased Under Resale Agreements 161 97 85
Trading Assets 45 53 76
------ ------ ------
Total Interest Income 2,962 2,503 2,687
------ ------ ------
Interest Expense
Deposits 842 701 1,005
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 106 102 136
Other Borrowed Funds 191 86 85
Long-Term Debt 106 117 94
------ ------ ------
Total Interest Expense 1,245 1,006 1,320
------ ------ ------
Net Interest Income 1,717 1,497 1,367
Provision for Loan Losses 162 284 443
------ ------ ------
Net Interest Income After Provision
for Loan Losses 1,555 1,213 924
------ ------ ------
Noninterest Income
Processing Fees
Securities 359 309 275
Other 171 162 148
------ ------ ------
530 471 423
Trust and Investment Fees 126 134 121
Service Charges and Fees 465 454 437
Securities Gains 15 64 42
Other 153 196 160
------ ------ ------
Total Noninterest Income 1,289 1,319 1,183
------ ------ ------
Noninterest Expense
Salaries and Employee Benefits 852 813 714
Net Occupancy 178 178 168
Furniture and Equipment 88 95 97
Other 528 560 540
------ ------ ------
Total Noninterest Expense 1,646 1,646 1,519
------ ------ ------
Income Before Income Taxes 1,198 886 588
Income Taxes 449 327 195
------ ------ ------
Net Income $ 749 $ 559 $ 393
====== ====== ======
Net Income Available to Common
Shareholders $ 736 $ 534 $ 360
====== ====== ======
Per Common Share:
Primary Earnings $ 3.92 $ 2.87 $ 2.10
Fully Diluted Earnings 3.70 2.72 2.00
Cash Dividends 1.10 0.86 0.76
Average Common Shares Outstanding 187.889 186.084 171.448
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 4
<TABLE>
Consolidated Statements of Changes in Shareholders' Equity
The Bank of New York Company, Inc.
<CAPTION>
Dollars in millions
For the years ended December 31, 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Preferred Stock
Balance, January 1 $ 294 $ 428 $ 395
Issuance in Public Offering (shares: 1,334,000) - - 139
Redemption and Repurchase (shares: 3,464,100 in
1994, 752,120 in 1993, and 100,000 in 1992) (156) (76) (99)
Conversion of Preferred Stock (shares: 763,311 in
1994, 65,157 in 1993, and 75 in 1992) (19) (58) (7)
------ ------ ------
Balance, December 31 119 294 428
------ ------ ------
Common Stock
Balance, January 1 1,406 1,366 1,208
Issuance in Public Offering (shares: 18,400,000) - - 138
Conversion of Preferred Stock (shares: 1,412,076
in 1994, 2,937,092 in 1993, and 369,580 in 1992) 11 22 2
Other Issuances (shares: 1,400,284 in 1994,
2,305,298 in 1993, and 2,227,102 in 1992) 10 18 18
------ ------ ------
Balance, December 31 1,427 1,406 1,366
------ ------ ------
Additional Capital
Balance, January 1 841 784 561
Issuance in Public Offering - - 201
Conversion of Preferred Stock 8 24 3
Redemption and Repurchases of Preferred Stock (4) (1) (1)
Other 13 34 20
------ ------ ------
Balance, December 31 858 841 784
------ ------ ------
Retained Earnings
Balance, January 1 1,536 1,153 913
Net Income 749 559 393
Cash Dividends
Common Stock (205) (150) (122)
Preferred Stock (14) (27) (33)
Redemption of Preferred Stock (17) - -
Change in Accumulated Foreign
Currency Translation Adjustment (1) 1 2
------ ------ ------
Balance, December 31 2,048 1,536 1,153
------ ------ ------
Securities Valuation Allowance
Balance, January 1 1 - -
Net Unrealized Loss on Securities
Available-for-Sale (59) - -
------ ------ ------
Balance, December 31 (58) - -
------ ------ ------
Less Treasury Stock
Balance, January 1 5 1 6
Issued (shares: 1,331,734 in 1994, 10,800 in
1993, and 424,346 in 1992) (39) - (6)
Acquired (shares: 3,724,607 in 1994, 156,330 in
1993, and 35,644 in 1992) 112 4 1
------ ------ ------
Balance, December 31 78 5 1
------ ------ ------
Less Loan to ESOP (712,695 shares in 1994) 20 - -
------ ------ ------
Balance, December 31 20 - -
------ ------ ------
Total Shareholders' Equity, December 31 $4,296 $4,072 $3,730
====== ====== ======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 5
<TABLE>
Consolidated Statements of Cash Flows
The Bank of New York Company, Inc.
<CAPTION>
In millions For the years ended December 31,
-------------------------------------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net Income $ 749 $ 559 $ 393
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities:
Provision for Losses on Loans and Other Real Estate 169 338 520
Depreciation and Amortization 200 187 176
Deferred Income Taxes 271 193 165
Securities Gains (15) (64) (42)
Change in Trading Assets 1,309 (591) (251)
Change in Accruals and Other, Net (232) 88 (263)
------ ------ ------
Net Cash Provided by Operating Activities 2,451 710 698
------ ------ ------
Investing Activities
Change in Interest-Bearing Deposits in Banks (711) 16 155
Purchases of Securities Held-to-Maturity (367) (2,344) (1,436)
Sales of Securities Held-to-Maturity - 22 361
Maturities of Securities Held-to-Maturity 684 1,174 1,159
Purchase of Securities Available-for-Sale (1,177) (2,104) (3,356)
Sales of Securities Available-for-Sale 1,985 3,467 2,792
Maturities of Securities Available-for-Sale 8 31 37
Net Principal Collected (Disbursed) on Loans to
Customers (3,039) (2,030) 1,049
Sales of Loans 323 494 634
Sales of Other Real Estate 33 80 81
Change in Federal Funds Sold and Securities
Purchased Under Resale Agreements (2,983) 229 1,462
Purchases of Premises and Equipment (43) (47) (40)
Acquisitions, Net of Cash Acquired (161) 58 688
Other, Net 18 (32) 40
------ ------ ------
Net Cash Provided (Used) by Investing Activities (5,430) (986) 3,626
------ ------ ------
Financing Activities
Change In Deposits 1,814 (1,048) (1,781)
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements (1,209) 938 (1,927)
Change in Other Borrowed Funds 990 (248) 1,897
Proceeds from the Issuance of Long-Term Debt 297 546 595
Repayments of Long-Term Debt (115) (655) (131)
Redemption, Conversion, and Repurchases of Preferred
Stock and Warrants (177) (90) (102)
Issuance of Common Stock 42 53 380
Issuance of Preferred Stock - - 139
Treasury Stock Acquired (112) (4) (1)
Cash Dividends Paid (219) (179) (153)
------ ------ ------
Net Cash Provided (Used) by Financing Activities 1,311 (687) (1,084)
------ ------ ------
Effect of Exchange Rate Changes on Cash 60 (32) (33)
------ ------ ------
Change in Cash and Due From Banks (1,608) (995) 3,207
Cash and Due from Banks at Beginning of Year 4,511 5,506 2,299
------ ------ ------
Cash and Due from Banks at End of Year $2,903 $4,511 $5,506
====== ====== ======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $1,143 $1,047 $1,408
Income Taxes 155 181 74
Noncash Investing Activity (Primarily
Foreclosure of Real Estate) 43 54 179
Reclassification of Assets to Securities
Held for Sale 1,390 - -
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 6
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting and Reporting Policies
The following is a summary of the Company's more significant accounting
and reporting policies.
Securities - Effective January 1, 1994, the Company accounts for debt
and equity securities classified as available-for-sale at fair value,
except for those equity securities whose fair value cannot be readily
determined. These securities are carried at cost. Equity investments
of less than a majority but at least 20% ownership are accounted for by
the equity method and classified as other assets. For securities
carried at fair value the after tax effect of net unrealized gains and
losses is reported as a separate component of shareholders' equity.
Previously such securities were stated at the lower of aggregate cost or
market value.
Securities classified as trading assets are carried at fair value,
with net unrealized holding gains and losses recognized currently in
income. Debt securities, which the Company has the ability and intent
to hold until maturity, are classified as held-to-maturity and stated at
cost, adjusted for discount accrued and premium amortized. Gains and
losses on the sale of securities are determined by the specific
identification method.
Allowance for Loan Losses - The allowance for loan losses is maintained
at a level that, in management's judgment, is adequate to absorb future
losses. Management's judgment is based on an evaluation of existing
risks of individual credits; past loan loss experience; the volume,
composition, and growth of the loan portfolio; current and projected
economic conditions; and other relevant factors.
Effective January 1, 1995, a new accounting standard requires 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. The impact of the new method on the Company's
results of operations and financial condition is not expected to be
material.
Nonperforming Assets - Commercial loans are placed on nonaccrual status
when collateral is insufficient and principal or interest is past due 90
days or more, or when there is reasonable doubt that interest or
principal will be collected. Accrued interest is usually reversed when
a loan is placed on nonaccrual status. Interest payments received on
nonaccrual loans may be recognized as income or applied to principal
depending upon management's judgment. Loans are not restored to
accruing status until principal and interest are current or they become
fully collateralized. Consumer loans are not classified as
nonperforming assets, but are charged off when they are between 120 and
185 days past due, depending on the product. Interest accrual on
consumer loans is suspended when the loans are 120 days past due. Real
estate acquired in satisfaction of loans is carried in other assets at
the lower of the recorded investment in the property or fair value minus
estimated costs to sell.
Derivative Financial Instruments - Derivative contracts, such as
futures, forwards, swaps, options, and similar products, used in trading
activities are recorded at market value; gains and losses are included
in other noninterest income. Revenues and expenses related to
derivative contracts used to hedge the Company's assets and liabilities
are recorded in net interest income. Realized gains and losses on
hedge transactions are deferred and amortized as adjustments to net
interest income over the lives (currently 5 years) of the assets or
liabilities.
Other - Certain 1993 and 1992 information has been reclassified to
conform its presentation with the 1994 financial statements and to
reflect the effects of the 2-for-1 common stock split effective April
22, 1994.
<PAGE> 7
2. Mergers and Acquisitions
During 1994, the Company made acquisitions related to its corporate
trust and factoring businesses. In December 1992, the Company acquired
substantially all of the banking activities of Barclays Bank of
New York, N.A. (Barclays). This transaction added deposits of $1.9
billion and assets of $1.8 billion. The pro forma effect of these
acquisitions would not have been material.
On August 11, 1993, the 10,730,668 outstanding shares of National
Community Banks'(NCB) common stock were exchanged for 20,602,882 shares
of the Company's common stock and the 1,149,750 outstanding shares of
NCB's preferred stock were exchanged for an equal number of shares of
the Company's Class A preferred stock. The merger was accounted for as
a pooling of interests and prior period financial statements were
restated.
In the first quarter of 1995, the Company made acquisitions related
to its corporate trust, American depositary receipts and unit investment
trust businesses.
3. Securities
The following table sets forth the amortized cost and the fair values of
securities at the end of the last two years:
1994
--------------------------------------------
Gross Unrealized
In millions Amortized ---------------- Fair
Cost Gains Losses Value
--------- ------ ------ -----
Securities Held-to-
Maturity
U. S. Government
Obligations $1,428 $ 1 $ 92 $1,337
U.S. Government Agency
Obligations 319 - 23 296
Obligations of States and
Political Subdivisions 769 5 7 767
Emerging Markets 294 - 104 190
Other Debt Securities 120 - 3 117
------ --- ----- ------
Total Securities
Held-to-Maturity 2,930 6 229 2,707
------ --- ----- ------
Securities
Available-for-Sale
U. S. Government
Obligations 1,520 2 96 1,426
Obligations of States and
Political Subdivisions 7 - - 7
Emerging Markets 24 3 5 22
Equity Securities 268 11 13 266
------ --- ----- ------
Total Securities
Available-for-Sale 1,819 16 114 1,721
------ --- ----- ------
Total Securities $4,749 $22 $ 343 $4,428
====== === ===== ======
<PAGE> 8
1993
-------------------------------------------
Gross Unrealized
In millions Amortized ---------------- Fair
Cost Gains Losses Value
--------- ----- ------ ------
Securities Held-to-
Maturity
U. S. Government
Obligations $2,754 $ 61 $2 $2,813
U.S. Government Agency
Obligations 250 8 - 258
Obligations of States and
Political Subdivisions 1,033 10 - 1,043
Equity Securities 206 16 2 220
Other Debt Securities 113 3 1 115
------ ---- -- ------
Total Securities
Held-to-Maturity 4,356 98 5 4,449
------ ---- -- ------
Securities
Available-for-Sale
U. S. Government
Obligations 1,096 1 - 1,097
U.S. Government Agency
Obligations 120 - - 120
Obligations of States and
Political Subdivisions 9 - - 9
Equity Securities 16 1 - 17
------ ---- -- ------
Total Securities
Available-for-Sale 1,241 2 - 1,243
------ ---- -- ------
Total Securities $5,597 $100 $5 $5,692
====== ==== == ======
The amortized cost and fair values of securities at December 31,
1994, by contractual maturity, are as follows:
Held-to-Maturity Available-for-Sale
-------------------- -------------------
Amortized Fair Amortized Fair
In millions Cost Value Cost Value
--------- ------- --------- -------
Due in One Year or Less $ 549 $ 544 $ 25 $ 27
Due After One Year Through
Five Years 1,047 999 1,003 967
Due After Five Years Through
Ten Years 600 549 507 441
Due After Ten Years 569 462 16 20
Mortgage-Backed Securities 165 153 - -
Equity Securities - - 268 266
------ ------ ------ ------
$2,930 $2,707 $1,819 $1,721
====== ====== ====== ======
Realized gross gains and (losses) on the sale of securities
available-for-sale were $17 million and $(1) million in 1994 and $38
million and $(3) million in 1993.
Assets, including securities sold under repurchase agreements,
carried at $2 billion, $3 billion, and $2 billion at December 31, 1994,
1993, and 1992 were pledged for various purposes as required or
permitted by law.
<PAGE> 9
4. Loans
The Company's loan distribution and industry concentrations of credit
risk at December 31, 1994 and 1993 are incorporated by reference from
"Loans" in the Management's Discussion and Analysis Section of this
Report. The Company's retail, community, and middle market banking
operations in the New York metropolitan area create a significant
geographic concentration.
In the ordinary course of business the Company and its banking
subsidiaries have made loans at prevailing interest rates and terms to
directors and executive officers of the Company and to certain entities
to which these individuals are related. The aggregate dollar amount of
these loans was $663 million and $237 million at December 31, 1994 and
1993, respectively. The change in the amount of loans outstanding is
primarily attributable to the inclusion of previously existing loans to
entities which became related parties upon increased ownership interests
acquired during 1994 by entities related to a director of the Company.
All loans were fully performing during this period.
Transactions in the allowance for loan losses are summarized as follows:
-------------------------------------------------------------
In millions 1994 1993 1992
-------------------------------------------------------------
Balance, January 1 $ 970 $1,072 $1,084
Charge-Offs (411) (449) (628)
Recoveries 57 62 117
----- ------ ------
Net Charge-Offs (354) (387) (511)
Provision 162 284 443
Credit Card Securitization 14 1 -
Acquisitions - - 56
----- ------ ------
Balance, December 31 $ 792 $ 970 $1,072
===== ====== ======
Nonaccrual and reduced rate loans outstanding at December 31, 1994,
1993, and 1992 were $297 million, $540 million, and $788 million. At
December 31, 1994, commitments to borrowers whose loans were classified
as nonaccrual or reduced rate were not material. At December 31, 1994
there were no derivative financial instruments on nonperforming status.
Interest income received on nonaccrual and reduced rate loans
exceeded reversals by $3 million in 1994, $4 million in 1993, and $7
million in 1992. Interest income would have been increased by $17
million, $27 million, and $89 million if loans on nonaccrual status at
December 31, 1994, 1993, and 1992 had been performing for the entire
year. At year end, foreign (including LDC) loans on nonperforming
status were $77 million in 1994, $130 million in 1993, and $198 million
in 1992. Interest income received on foreign nonperforming loans
equaled reversals in 1994 and 1993, and exceeded reversals by $1 million
in 1992. Interest income would have been increased by $2 million, $6
million, and $10 million if foreign loans on nonaccrual status at
December 31, 1994, 1993, and 1992 had been performing for the entire
year.
Other real estate was $56 million, $99 million, and $268 million,
at December 31, 1994, 1993, and 1992. Writedowns of and expenses
related to other real estate included in noninterest expense were $11
million, $53 million, and $106 million (including operating expenses of
$4 million, $8 million, and $25 million) in 1994, 1993, and 1992.
<PAGE> 10
5. Long-Term Debt
The following is a summary of the contractual maturity and sinking fund
requirements of long-term debt at December 31, 1994 and 1993:
1994 1993
--------------------------------------------- -----
1 Year After 5 Years
Under Through Through
In millions 1 Year 5 Years 10 Years Total Total
------ --------- ------------- ------ ------
Fixed $3 $12 $1,700 $1,715 $1,499
Variable 5 24 30 59 91
-- --- ------ ------ ------
Total $8 $36 $1,730 $1,774 $1,590
== === ====== ====== ======
Fixed-rate debt at December 31, 1994 had interest rates ranging
from 6.50% to 8.50%. The weighted average interest rates on fixed-rate
debt at December 31, 1994 and 1993 were 7.50% and 7.29%. Exposure to
interest rate movements is reduced by interest rate swap agreements. As
a result of these agreements, the effective interest rates differ from
those stated. The weighted average interest rates on variable-rate debt
at December 31, 1994 and 1993 were 6.25% and 5.58%.
The Company's $250 million of 7.50% subordinated debentures due
2001 are convertible at the option of the holder into common stock of
the Company at a price of $19.55 per share, subject to adjustment in
certain circumstances. The debentures may be redeemed, at the option of
the Company, on or after August 15, 1996 at an initial redemption price
of 103.75% of the principal amount, declining by 0.75% per annum.
<PAGE> 11
6. Shareholders' Equity
The following is a summary of the Company's preferred stock outstanding:
Dollars in millions, except per share amounts December 31, 1994 1993
-------------------------------------------------------------------------------
8.60% Cumulative, stated value $625 per share, issued
184,000 shares (4,600,000 depositary shares) $111 $111
Other 8 183
---- ----
Total $119 $294
==== ====
All holders of cumulative preferred stock have cumulative dividend
rights in preference to holders of common stock.
The 8.60% cumulative preferred stock has a liquidation preference
of $625 per share and is redeemable at the option of the Company on and
after December 1, 1997 at $625 per share, plus cumulative and unpaid
dividends.
At December 31, 1994, 13,771,936 warrants expiring in 1998
(exercise price $31 per share) to purchase approximately 27,543,872
shares of the Company's common stock were outstanding.
The treasury shares were acquired pursuant to a plan to buy back up
to 5 million common shares.
At December 31, 1994, the Company had reserved for issuance 59
million common shares pursuant to the terms of securities and employee
benefit plans.
The Company has a preferred stock purchase rights plan. The plan
provides that if any person or group becomes the beneficial owner of 20%
or more of the Company's common stock (an "acquiring person"), then on
and after the tenth day thereafter, each right would entitle the holder
to purchase $400 in market value of the Company's common stock for $200.
In addition, if there is a business combination between the Company and
an acquiring person, or in certain other circumstances, each right (if
not previously exercised) would entitle the holder to purchase $200 in
market value of the common stock of the acquiring person for $100. The
rights are redeemable by the Company at $0.05 per right until they are
exercisable, and will expire in 2004.
The effect of common stock equivalents (stock options and warrants)
on earnings per share is not dilutive. Fully diluted earnings per share
give effect to the assumed conversion of convertible debentures and
convertible preferred stock.
<PAGE> 12
7. Income Taxes
Income taxes included in the consolidated statements of income consist
of the following:
<TABLE>
<CAPTION>
1994 1993 1992
In ---------------------- ---------------------- ----------------------
millions Current Deferred Total Current Deferred Total Current Deferred Total
------- -------- ----- ------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal $134 $ 189 $323 $ 90 $153 $243 $13 $112 $125
Foreign 13 - 13 11 - 11 10 - 10
State and
Local 31 82 113 33 40 73 7 53 60
---- ----- ---- ---- ---- ---- --- ---- ----
$178 $ 271 $449 $134 $193 $327 $30 $165 $195
==== ===== ==== ==== ==== ==== === ==== ====
</TABLE>
The components of income before taxes for the computation of taxes
are as follows:
------------------------------------------
In millions 1994 1993 1992
------------------------------------------
Domestic $1,149 $821 $540
Foreign 49 65 48
------ ---- ----
$1,198 $886 $588
====== ==== ====
The Company's net deferred tax liability (included in accrued
taxes) at December 31 consisted of the following:
------------------------------------------------------------
In millions 1994 1993 1992
------------------------------------------------------------
Lease Financings $ 883 $ 784 $ 722
Depreciation and Amortization 308 285 280
Credit Losses on
Nonperforming Loans (386) (508) (532)
Other 105 106 70
----- ------ ------
Net Deferred Tax Liability $ 910 $ 667 $ 540
===== ====== ======
The Company has not recorded a valuation allowance because it
expects to realize all of its deferred tax assets.
A reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate is shown in the following table:
1994 1993 1992
---- ---- ----
Federal Rate 35.0% 35.0% 34.0%
Tax-Exempt Interest (1.6) (2.7) (4.9)
Foreign Operations (1.3) (0.2) (3.2)
State and Local Income
Taxes, Net of Federal
Income Tax Benefit 5.8 4.6 6.7
Nondeductible Expenses 1.3 2.3 3.1
Leveraged Lease Portfolio (0.5) 0.3 (0.7)
Other (1.2) (2.4) (1.8)
----- ----- -----
Effective Rate 37.5% 36.9% 33.2%
===== ===== =====
<PAGE> 13
8. Employee Benefit Plans
Pension Plans
-------------
The Company has defined benefit retirement plans covering substantially
all full-time employees. The Company has an Employee Stock Ownership
Plan (ESOP), which may provide additional benefits. The Company's
funding policy is to annually contribute an amount necessary to satisfy
the Internal Revenue Service's funding standards.
The following table presents the income (expense) components
included in net pension income:
In millions 1994 1993 1992
---- ---- ----
Service Cost - Benefits Earned $(17) $(14) $(14)
Interest Cost on Projected Benefit Obligation (23) (20) (23)
Actual Return on Plan Assets (16) 52 74
Net Amortization and Deferral 82 9 (20)
---- ---- ----
Net Pension Income $ 26 $ 27 $ 17
==== ==== ====
The expected long-term rate of return on plan assets used in
computing pension income was 10.5% in 1994, 1993, and 1992. The ESOP
provision was $1 million in 1994 and 1993 and $3 million in 1992.
The following table sets forth the retirement plans' funded status
at December 31, 1994 and 1993:
In millions 1994 1993
---- ----
Present Value of Accumulated Benefit Obligation, Including
Vested Benefits of $220 in 1994 and $265 in 1993 $232 $281
==== ====
Present Value of Projected Benefit Obligation $257 $311
Plan Assets at Fair Value, Primarily Short-Term
Investments, Fixed-Income and Equity Securities 561 588
---- ----
Excess of Plan Assets over the
Projected Benefit Obligation 304 277
Unrecognized Prior Service Cost (24) (27)
Unrecognized Net Loss from Past Differences and
Effects of Changes in Assumptions 43 41
Unrecognized Net Asset Being Amortized over 16.2 Years (24) (27)
---- ----
Prepaid Pension Cost Included in Other Assets $299 $264
==== ====
Assumptions used in computing the benefit obligation
were:
Weighted Average Discount Rate 9.38% 7.88%
Rate of Increase in Future Compensation Level 4.38 4.38
<PAGE> 14
Other Postretirement Benefits
-----------------------------
The Company provides health care and life insurance benefits for
certain retired employees. In the first quarter of 1993, the Company
changed to the accrual from the cash method of accounting for these
benefits.
The cost of these benefits consisted of the following components:
In millions 1994 1993
---- ----
Service Cost - Benefits Earned $ 2 $ 3
Accumulated Benefit Obligation:
Interest 10 11
Amortization 7 7
---- ----
Total $ 19 $ 21
==== ====
The assumed health care cost trend rates to be used in determining
the cost of these benefits for 1995 is 9%, decreasing proportionately in
each successive year to 6% in 2010 and thereafter. A change of one
percentage point in this rate for each year would change the benefit
obligation by 10% and the cost of the benefits by 7%.
The following table sets forth the funded status of the Company's
other postretirement benefit obligation as of December 31:
In millions 1994 1993
----- ----
Accumulated Postretirement Benefit Obligation:
Retirees $ 69 $ 88
Fully Eligible Active Plan Participants 21 23
Other Active Plan Participants 29 37
----- -----
Total Obligation 119 148
Unrecognized Net Gain (Loss) from Past Differences
and Effects of Changes in Assumptions 20 (16)
Unrecognized Net Liability Being Amortized
Over 20 Years (116) (123)
----- -----
Accrued Postretirement Benefit
Obligation Included in Other Liabilities $ 23 $ 9
===== =====
The assumed discount rates used in determining the accumulated
benefit obligation were 9.38% and 7.75% in 1994 and 1993.
<PAGE> 15
9. Company Financial Information
The condensed financial statements of the Company are as follows:
Balance Sheets
In millions December 31, 1994 1993
--------------------------------------------------------------------
Assets
Cash and Due from Banks $ - $ 2
Securities 138 96
Loans 199 3
Investment in and Advances to Subsidiaries
Banks 6,112 5,713
Other 140 435
------ ------
6,252 6,148
------ ------
Other Assets 138 129
------ ------
Total Assets $6,727 $6,378
====== ======
Liabilities and Shareholders' Equity
Other Borrowed Funds $ 427 $ 407
Due to Subsidiaries
Banks 32 42
Other 16 12
------ ------
48 54
------ ------
Other Liabilities 183 256
Long-Term Debt 1,773 1,589
------ ------
Total Liabilities 2,431 2,306
------ ------
Shareholders' Equity*
Preferred 119 294
Common 4,177 3,778
------ ------
Total Liabilities and Shareholders' Equity $6,727 $6,378
====== ======
*See Consolidated Statements of Changes in Shareholders' Equity.
<PAGE> 16
Statements of Income
In millions For the years ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------
Operating Income
Dividends from Subsidiaries
Banks $240 $171 $156
Other - 7 32
Interest from Subsidiaries
Banks 98 99 70
Other - 1 1
Other 24 21 8
---- ---- ----
Total 362 299 267
---- ---- ----
Operating Expenses
Interest (including $1 in 1994, $8 in 1993,
and $10 in 1992 to nonbank subsidiaries) 122 128 108
Other 15 18 10
---- ---- ----
Total 137 146 118
---- ---- ----
Income Before Income Taxes and Equity in
Undistributed Earnings of Subsidiaries 225 153 149
Income Tax Benefit (8) (11) (19)
---- ---- ----
Income Before Equity in Undistributed
Earnings of Subsidiaries 233 164 168
---- ---- ----
Equity in Undistributed Earnings of Subsidiaries
Banks 506 386 236
Other 10 9 (11)
---- ---- ----
Total 516 395 225
---- ---- ----
Net Income $749 $559 $393
==== ==== ====
<PAGE> 17
Statements of Cash Flows
In millions For the years ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------
Operating Activities
Net Income $ 749 $ 559 $ 393
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities
Amortization 3 4 2
Equity in Undistributed Earnings
of Subsidiaries (517) (393) (226)
Securities (Gains) Losses (13) (14) 15
Change in Interest Receivable (4) (4) (4)
Change in Interest Payable 1 (1) 13
Change in Taxes Payable (78) 31 (1)
Other, Net 9 3 (18)
----- ----- ------
Net Cash Provided by Operating Activities 150 185 174
----- ----- ------
Investing Activities
Purchase of Securities (142) (57) (39)
Sales of Securities 89 117 94
Maturities of Securities 1 37 4
Change in Loans (196) 8 8
Acquisition of, Investment in, and Advances to
Subsidiaries 367 154 (1,265)
----- ----- ------
Net Cash Provided (Used) by Investing Activities 119 259 (1,198)
----- ----- ------
Financing Activities
Change in Other Borrowed Funds 20 32 257
Proceeds from the Issuance of Long-Term Debt 297 546 595
Repayments of Long-Term Debt (115) (589) (129)
Change in Advances from Subsidiaries (7) (217) 40
Redemption, Conversion, and Repurchases of
Preferred Stock and Warrants (177) (90) (102)
Issuance of Common Stock 42 53 380
Issuance of Preferred Stock - - 139
Treasury Stock Acquired (112) (4) (1)
Cash Dividends Paid (219) (179) (153)
----- ----- ------
Net Cash Provided (Used) by Financing
Activities (271) (448) 1,026
----- ----- ------
Change in Cash and Due from Banks (2) (4) 2
Cash and Due from Banks at Beginning of Year 2 6 4
----- ----- ------
Cash and Due from Banks at End of Year $ - $ 2 $ 6
===== ===== ======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 122 $ 129 $ 95
Income Taxes 118 152 78
<PAGE> 18
The Bank of New York ("Bank"), a significant subsidiary, is subject
to dividend limitations under the Federal Reserve Act and the New York
Banking Law. The Bank of New York National Association ("BNYNA") is
subject to dividend limitations under the National Bank Act. Under
these statutes, prior regulatory approval is required for dividends in
any year that would exceed either bank's net profits for such year
combined with retained net profits for the prior two years. Also, both
banks are prohibited from paying a dividend in an amount greater than
"undivided profits then on hand" less "bad debts" (generally loans six
months or more past due).
Under the first of these two standards, in 1995 the Bank could
declare dividends of $513 million plus net profits earned in 1995 and
BNYNA could declare dividends of $117 million plus net profits earned in
1995. Neither bank is restrained from paying dividends under the second
of these two standards.
In addition to these statutory tests, each bank's primary federal
regulator (the Federal Reserve Board, in the case of the Bank, and the
Comptroller of the Currency, in the case of BNYNA) could prohibit a
dividend if they determined that the payment would constitute an unsafe
or unsound banking practice. Bank regulators have indicated that,
generally, dividends should be paid by banks only to the extent of
earnings from continuing operations.
The Company, the Bank, BNYNA, and The Bank of New York (Delaware)
each must comply with risk based capital and leverage ratio guidelines
established by bank regulators for bank holding companies and banks. In
addition, the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") restricts dividend payments that would cause certain
capital ratios to fall below "adequate" capital ratio standards. Each
of the Company, the Bank, BNYNA, and The Bank of New York (Delaware) is
in compliance with the capital and leverage ratio standards applicable
to it.
The dividend policy of The Bank of New York (Delaware) is to
declare dividends that, at a minimum, allow it to meet capital
guidelines established by the Federal Deposit Insurance Corporation
("FDIC").
Consistent with its policy regarding bank holding companies serving
as a source of financial strength for their subsidiary banks, the
Federal Reserve Board has stated that, as a matter of prudent banking, a
bank holding company generally should not maintain a rate of cash
dividends unless its net income available to common stockholders has
been sufficient to fully fund the dividends, and the prospective rate of
earnings retention appears consistent with the bank holding company's
capital needs, asset quality, and overall financial condition.
The Federal Reserve Act limits amounts of, and requires collateral
on, extensions of credit by the Company's insured bank subsidiaries to
the Company and, with certain exceptions, its nonbank affiliates; also,
there are restrictions on the amounts of investments by such banks in
stock and other securities of the Company and such affiliates, and
restrictions on the acceptance of their securities as collateral for
loans by such banks. Extensions of credit by insured bank subsidiaries
to each of the Company and such affiliates are limited to 10% of such
bank subsidiary's capital and surplus, and in the aggregate for the
Company and all such affiliates to 20%.
The subsidiary banks of the Company are required to maintain
reserve balances with Federal Reserve Banks under the Federal Reserve
Act and Regulation D. Required balances averaged $789 million and $769
million for the years 1994 and 1993.
<PAGE> 19
10. Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments (i.e.,
monetary assets and liabilities) are determined under different
accounting methods-see Note 1. The following disclosure discusses these
instruments on a uniform basis - fair value. However, active markets do
not exist for a significant portion of these instruments, principally loans
and commitments. As a result, fair value determinations require significant
subjective judgments regarding future cash flows. Other judgments would
result in different fair values. Among the assumptions used by the Company
are discount rates ranging principally from 7% to 11% at December 31, 1994
and 4% to 11% at December 31, 1993. The fair value information supplements
the basic financial statements and other traditional financial data
presented throughout this Report.
A summary of the practices used for determining fair value is as
follows:
Securities, Trading Activities, and Derivatives Designated as Hedges
--------------------------------------------------------------------
The fair value of securities and trading assets and liabilities is based
on quoted market prices, dealer quotes, or pricing models. The fair
value of derivative instruments such as options, future and forward rate
contracts, commitments to purchase and sell foreign exchange, and
foreign currency swaps, are similarly determined. The fair value of
interest rate swaps is the amount that would be received or paid to
terminate the agreement.
Loans and Commitments
---------------------
For certain categories of consumer loans, fair value includes
consideration of the quoted market prices for securities backed by
similar loans. The fair value of other types of loans is determined by
discounting the future cash flows and using secondary market values.
The fair value of commitments to extend credit, standby letters of
credit, and commercial letters of credit is based upon the cost to
settle the commitment.
Other Financial Assets
----------------------
The fair value of these assets is assumed to equal their carrying value
due to their short maturity.
Deposits, Borrowings, and Long-Term Debt
----------------------------------------
The fair value of noninterest-bearing deposits is assumed to be their
carrying amount. The fair value of interest-bearing deposits,
borrowings, and long-term debt is estimated based upon the current rates
for instruments of the same remaining maturity or quoted market prices
for the same or similar issues.
<PAGE> 20
The carrying amount and estimated fair value of the Company's financial
instruments are as follows:
In millions December 31, 1994 1993
-------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -------
Assets:
Securities $ 4,780 $ 4,623 $ 5,715 $ 5,878
Trading Assets* 940 940 1,325 1,325
Loans and Commitments 30,739 30,944 28,259 28,839
Derivatives Designated as Hedges 19 15 28 (42)
Other Financial Assets 7,211 7,211 5,065 5,065
------- ------- ------- -------
Total Financial Assets 43,689 $43,733 40,392 $41,065
======= =======
Non-Financial Assets 5,190 5,154
------- -------
Total Assets $48,879 $45,546
======= =======
Liabilities:
Noninterest-Bearing Deposits $ 8,579 $ 8,579 $ 8,690 $ 8,690
Interest-Bearing Deposits 25,512 25,477 23,469 23,524
Borrowings 5,888 5,886 5,586 5,607
Long-Term Debt 1,774 1,812 1,590 1,808
Trading Liabilities* 562 562 - -
Derivatives Designated as Hedges 14 45 26 (30)
------- ------- ------- -------
Total Financial Liabilities 42,329 $42,361 39,361 $39,599
======= =======
Non-Financial Liabilities 2,254 2,113
------- -------
Total Liabilities $44,583 $41,474
======= =======
* 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 would have been
increased by approximately $688 million at December 31, 1993 as a result
of the new standard.
Commitments and contingent items reduced the fair value of loans
and commitments by $79 million in 1994 and $62 million in 1993.
<PAGE> 21
The table below summarizes the carrying amount of items hedged and
the related notional amount and fair value (unrealized gain/loss) of
interest rate swaps and futures contracts that were designated as
hedges:
In millions
Interest Futures
Rate Swaps* Contracts**
Financial ------------ -----------
Instruments
----------- Carrying Notional Unrealized Notional Unrealized
Amount Amount Gain (Loss) Amount Gain (Loss)
-------- -------- ---- ---- ------ ---- ----
At December 31, 1994
--------------------
Loans $1,383 $ 705 $22 $( 8) $1,319 $1 $ -
Deposits 2,779 1,030 14 (15) 2,325 - (7)
Borrowings 1,907 1,777 7 (3) 1,040 - (2)
Long-Term Debt 400 400 - (39) - - -
Credit Card
Securitization 200 200 - - - - -
At December 31, 1993
--------------------
Loans $1,001 $ 649 $ - $(35) $2,033 $- $ -
Securities 601 100 1 - 4,452 - (8)
Deposits 579 579 27 - - - -
Borrowings 717 717 - - - - -
Long-Term Debt 275 275 3 - - - -
Credit Card
Securitization 450 450 9 - - - -
* Gross unrealized gains (losses) for interest rate swaps
are shown net at December 31, 1993.
** Including forward rate agreements
A discussion of the credit, interest rate, and foreign exchange
risks inherent in off-balance-sheet financial transactions is presented
under "Trading and Off-Balance-Sheet Risks" in the Management's Discussion
and Analysis Section of this report.
The Company's financial assets and liabilities are primarily
variable rate instruments. Fixed rate loans and deposits are issued to
satisfy customer and investor needs. Derivative financial instruments
are utilized to manage exposure to the effect of interest rate changes
on fixed rate assets and liabilities, and to enhance liquidity. The
Company matches the duration of derivatives to that of the assets and
liabilities being hedged, so that changes in fair value resulting from
changes in interest rates will be offset.
The Company used receive fixed and pay fixed interest rate swaps,
futures contracts, and forward rate agreements to convert fixed rate
loans, deposits, borrowings, long term debt, and securitized credit card
receivables to floating rates. The aggregate notional amount of the
futures contracts is greater than the amount of assets hedged because
the three-month duration of the futures contract is shorter than the
duration of the assets hedged. The basis swaps convert various variable
rate borrowings to LIBOR which better matches the assets funded by the
borrowings.
<PAGE> 22
The Company uses forward foreign exchange contracts to protect the
value of its investments in foreign subsidiaries. The after-tax effects
are shown in the cumulative translation adjustment included in
shareholders' equity. At December 31, 1994 and 1993, $202 million and
$212 million in notional amount of foreign exchange contracts, with fair
values of zero and $2 million, hedged corresponding amounts of
foreign investments. These foreign exchange contracts had a maturity of
approximately one month at December 31, 1994.
Deferred net gains on derivative financial instruments designated
as hedges amounted to $4 million and $7 million at December 31, 1994 and
1993.
Net interest income increased by $24 million, $39 million, and zero
in 1994, 1993, and 1992 as a result of derivative financial instruments
designated as hedges.
The following table illustrates the notional amount, maturities,
and weighted average rates for interest rate contracts that were
designated as hedges:
Maturities
In millions Total -----------------------------
12/31/94 1995 1996 Thereafter
-----------------------------------------------------------------------------
Receive Fixed Interest Rate Swaps:
Notional Amount $1,525 $ 522 $ 228 $ 775
Weighted Average:
Receive Rate 6.94% 6.95% 8.01% 6.62%
Pay Rate (1) 6.97 5.55 6.95 7.94
Pay Fixed Interest Rate Swaps:
Notional Amount $ 705 $ 152 $ 36 $ 517
Weighted Average:
Receive Rate (1) 7.21% 5.51% 7.08% 7.72%
Pay Rate 7.03 5.38 7.74 7.46
Basis Interest Rate Swaps:
Notional Amount $1,882 $1,721 - $ 161
Weighted Average:
Receive Rate 5.86% 5.87% - 5.76%
Pay Rate 5.87 5.81 - 6.52
Long Eurodollar Futures:
Notional Amount $2,381 $ 954 $ 537 $ 890
Weighted Average Rate 7.44% 6.90% 7.51% 7.98%
Short Eurodollar Futures:
Notional Amount $1,319 $1,283 $ 36 -
Weighted Average Rate 6.37% 6.37% 6.18% -
Forward Rate Agreements:
Notional Amount $ 984 $ 984 - -
Weighted Average:
Receive Rate 7.13% 7.13% - -
Pay Rate 7.62 7.62 - -
(1) The variable replacement rates shown above are calculated from the
implied forward LIBOR yield curve as of December 31, 1994. However,
actual repricings are generally based on 3 month LIBOR.
<PAGE> 23
11. Trading Activities
The fair value and the notional amount of the Company's financial
instruments that are held for trading purposes are:
In millions 1994 Fair Values
Notional Amount Assets Liabilities
------------------ --------------- --------------
Trading Account 12/31/94 12/31/93 12/31 Average 12/31 Average
-----------------------------------------------------------------------------
Interest Rate Contracts:
Futures and Forward
Contracts $ 3,890 $ 9,998 $ 7 $ 18 $ 2 $ 14
Swaps 6,527 8,053 58 144 41 117
Written Options 5,497 6,225 - - 26 14
Purchased Options 5,685 5,159 26 14 - -
Foreign Exchange Contracts:
Swaps 549 677 31 45 38 52
Written Options 2,161 898 14 14 7 12
Purchased Options 2,451 1,027 3 9 13 16
Commitments to Purchase
and Sell Foreign Exchange 45,860 37,265 383 721 435 712
Debt Securities 162 582 - -
Other Securities 256 336 - -
---- ----- ---- ----
Total Trading Account $940 $1,883 $562 $937
==== ====== ==== ====
The credit exposure for these assets represents unrealized gains
with counterparties (Assets in the table above). These credit exposures
have been reduced by $284 million as a result of master netting
agreements related to trading account and hedging derivatives.
At December 31, 1994, approximately $14.3 billion of interest rate
contracts will mature within one year, $6.2 billion between one to five
years, and the balance after five years. Substantially all foreign
exchange contracts mature within one year.
Other noninterest income included the following income related to
trading activities:
In millions
------------------------------------------------------------------------
1994 1993 1992
---- ---- ----
Foreign Exchange $27 $54 $66
Interest Rate Contracts 13 18 7
Debt and Other Securities 4 7 21
--- --- ---
$44 $79 $94
=== === ===
Foreign exchange includes income from trading commitments to
purchase and sell foreign exchange, futures, and options. Interest rate
contracts reflect the results of trading futures and forward contracts,
interest rate swaps, foreign currency swaps, and options. Debt and
other securities reflect income from trading debt and equity securities
and mortgage loan origination activities.
<PAGE> 24
12. Commitments and Contingent Liabilities
In the normal course of business, various commitments and contingent
liabilities are outstanding which are not reflected in the accompanying
consolidated balance sheets. Management does not expect any material
losses to result from these matters.
A summary of the notional amount of the Company's off-balance-sheet
credit transactions, net of participations, at December 31, 1994 and
1993 follows:
In millions
Off-Balance-Sheet Credit Risks 1994 1993
------------------------------ ---- ----
Commercial Lending Commitments $21,931 $19,463
Credit Card Commitments 15,512 11,118
Standby Letters of Credit 4,085 3,146
Commercial Letters of Credit 2,070 1,497
Securities Lending Indemnifications 15,326 15,005
The total potential loss on undrawn commitments, standby and
commercial letters of credit, and securities lending indemnifications is
equal to the total notional amount if drawn upon, which does not
consider the value of any collateral. The Company does not anticipate
the use of all of its unused credit lines available to credit card
holders by individual customers at one time. These credit lines are
contingent upon customers maintaining specific credit standards, and the
Company has the right to reduce or cancel them at any time.
Standby letters of credit principally support corporate obligations
and include $1.6 billion and $1.0 billion that were collateralized with
cash and securities at December 31, 1994 and 1993. At December 31, 1994
and 1993, securities lending indemnifications were secured by collateral
of $15.3 billion and $15.0 billion.
At December 31, 1994, approximately $3.4 billion of the standbys
will expire within one year, $0.7 billion between one to five years, and
the balance after five years.
At December 31, 1994 and 1993, the Company has recourse obligations
related to the sale of $1,251 million and $2,118 million of mortgages
and credit card receivables. The Company has recorded liabilities for
these obligations of $7 million and $20 million at December 31, 1994 and
1993.
Net rent expense for premises and equipment was $96 million in
1994, $99 million in 1993, and $91 million in 1992.
At December 31, 1994, the Company and its subsidiaries were
obligated under various noncancelable lease agreements, certain of which
provide for additional rents based upon real estate taxes, insurance,
and maintenance and for various renewal options. The minimum rental
commitments under noncancelable operating leases for premises and
equipment having a term of more than one year from December 31, 1994 are
as follows:
---------------------------------------------------------------------------
Year ending December 31, In millions
---------------------------------------------------------------------------
1995 $ 68
1996 60
1997 49
1998 35
1999 25
Subsequent to 1999 95
----
Total Minimum Lease Payments $332
====
<PAGE> 25
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. In the opinion of management, the claims
made 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.
13. Other Noninterest Income and Expense
Other noninterest income includes equity in earnings of
unconsolidated subsidiaries of $34 million, $46 million, and $26 million
in 1994, 1993, and 1992. Other noninterest expense includes deposit
insurance premiums of $52 million, $57 million, and $50 million in
1994, 1993, and 1992 and amortization of intangibles of $86 million, $81
million, and $78 million in 1994, 1993, and 1992.
<PAGE> 26
14. Stock Option Plans
The Company has stock option plans (the Plans) which provide for the
issuance of stock options at fair market value at the date of grant to
officers and key employees of the Company and its subsidiaries. Under
the Company's 1993 Plan, options to acquire common stock may be granted
in amounts that do not exceed, on a cumulative basis, 1% of the
outstanding shares of common stock per year, and, subject to adjustment,
options covering no more than approximately 9.2 million shares in the
aggregate may be granted during the first five years. Generally, each
option granted under the Plans is exercisable between one and 10 years
from the date of grant. The following is a summary of activity under
the Plans for the years 1994, 1993, and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------
Option Option Option
Price Price Price
Shares Per Share Shares Per Share Shares Per Share
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
January 1 6,609,852 $9.38 to 6,089,188 $5.56 to 5,940,276 $5.56 to
27.38 22 22
Granted 1,012,800 26 to 2,054,300 27.38 1,804,660 8.34 to
31.88 18.88
Exercised (847,386) 9.38 to (1,417,608) 5.56 to (1,497,268) 9.38 to
27.38 22 22
Canceled (58,520) 9.38 to (116,028) 9.38 to (158,480) 12.79 to
27.38 27.38 22
--------- --------- --------- -------- --------- --------
Outstanding, $10.71 to $9.38 to $5.66 to
December 31 6,716,746 31.88 6,609,852 27.38 6,089,188 22
========= ========= ========= ======== ========= ========
Exercisable, $10.71 to $9.38 to $5.56 to
December 31 4,959,134 27.38 3,863,358 22 3,652,992 22
========= ========= ========= ======== ========= ========
Available for
Grant,
December 31 4,346,130 5,607,850 None
========= =========
</TABLE>
<PAGE> 27
15. Foreign Operations
The Company's foreign activities consist of banking, trust, and
processing services provided to customers domiciled outside of the
United States, principally in Europe and Asia. The following financial
information concerning such activities reflects direct attributions and
charges for funds employed, based upon average costs of interest-bearing
funds:
1994
--------------------------------------
Income
Before
Total Income Net Total
Revenue Taxes Income Assets
------- ------ ------ -------
Europe $ 124 $ 6 $ 3 $ 1,939
Asia 211 94 53 2,179
Other Foreign 181 9 5 2,785
Domestic 3,735 1,089 688 41,976
------ ------ ---- -------
Total $4,251 $1,198 $749 $48,879
====== ====== ==== =======
1993
--------------------------------------
Income
Before
Total Income Net Total
Revenue Taxes Income Assets
------- ------ ------ -------
Europe $ 138 $ 18 $ 10 $ 1,375
Asia 201 78 44 2,079
Other Foreign 190 9 5 2,355
Domestic 3,293 781 500 39,737
------ ---- ---- -------
Total $3,822 $886 $559 $45,546
====== ==== ==== =======
1992
--------------------------------------
Income
Before
Total Income Net Total
Revenue Taxes Income Assets
------- ------ ------ -------
Europe $ 208 $ 48 $ 28 $ 1,329
Asia 187 52 30 2,071
Other Foreign 212 42 24 2,382
Domestic 3,263 446 311 39,428
------ ---- ---- -------
Total $3,870 $588 $393 $45,210
====== ==== ==== =======
Foreign exchange activities arise from servicing customers' needs
for foreign exchange, and from managing the Company's foreign currency
positions. Net gains resulting from foreign exchange transactions were
$27 million, $54 million, and $66 million in 1994, 1993, and 1992, and
are included in other noninterest income.
<PAGE> 28
Independent Auditors' Report Deloitte & Touche LLP
To the Board of Directors and Shareholders of
The Bank of New York Company, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of The Bank
of New York Company, Inc. and subsidiaries (the "Company") as of
December 31, 1994 and 1993, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits. The 1992 consolidated financial statements give
retroactive effect to the merger of the Company and National Community
Banks, Inc., which has been accounted for as a pooling of interests as
described in Note 2 to the consolidated financial statements. We did
not audit the consolidated statements of income, changes in
shareholders' equity, and cash flows of National Community Banks, Inc.
for the year ended December 31, 1992, which statements reflect net
income of $23,785,000 for the year ended December 31, 1992. Those
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for National Community Banks, Inc. for 1992, is based solely on
the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Bank of New York Company, Inc. and subsidiaries as of December 31, 1994
and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, on
January 1, 1994 the Company changed its method of accounting for certain
investments in debt and equity securities to conform with Statement of
Financial Accounting Standards No. 115.
\s\ Deloitte & Touche LLP
New York, New York
February 24, 1995
<PAGE> 29
Management's Discussion and Analysis of the Company's Financial
Condition and Results of Operations
------------------------------------------------------------------------
SUMMARY OF RESULTS
For the year 1994, The Bank of New York Company, Inc. (the Company)
reported record net income of $749 million or a record $3.70 per fully
diluted share, compared with $559 million or $2.72 per fully diluted
share in 1993 and $393 million or $2.00 per fully diluted share in 1992.
Net interest income reached record levels as the net interest
spread increased to 3.30% and the net yield on interest earning assets
was 4.11%. These increases reflect a continued shift in the asset mix
toward higher yielding assets, including strong growth in credit cards.
A reduction in nonperforming assets also contributed to the increase in
net interest income. Revenues from the Company's securities and other
processing businesses remained strong. A lower provision for loan
losses and continued control of operating expenses contributed to higher
earnings.
The Company increased its quarterly stock dividend to 32 cents per
share, a 42% increase. The Company also declared a 2-for-1 common stock
split. In addition, the Company repurchased 3.7 million shares of
common stock. The Company retained $512 million of earnings and issued
$300 million of subordinated debt. Two issues of preferred stock were
redeemed in 1994, reducing preferred stock by $156 million and retained
earnings by $17 million.
In 1994, returns on average common equity and on average assets
established all-time highs. Return on average common equity was 18.49%
in 1994 compared with 14.98% in 1993 and 12.00% in 1992, while return on
average assets for 1994 was 1.49% compared with 1.20% in 1993 and .85%
in 1992.
Nonperforming assets declined by $286 million, or 45%, to $353
million in 1994. December 31, 1994 marked the fourteenth consecutive
quarter that nonperforming assets declined.
The Tier I and total capital ratios for the Company at December 31,
1994 were 8.45% and 13.43% compared with 8.87% and 13.65% last year and
7.59% and 12.30% in 1992. Tangible common equity as a percent of total
assets was 7.39% at December 31, 1994 compared with 7.00% one year ago
and 5.83% in 1992.
In 1993, spreads widened reflecting a continuing shift in asset mix
toward higher yielding assets and a lower level of nonperforming assets.
Fee income was strong, especially from credit cards and securities and
other processing. A lower provision for loan losses, continued control
of operating expenses, and the acquisition of 62 branches of Barclays
Bank of New York, N.A. (Barclays) on December 11, 1992, also helped to
increase earnings. Earnings at the National Community Division (BNYNA)
increased significantly in 1993.
During 1993, the Company strengthened its capital position. The
Company retained $383 million of earnings and issued $550 million of
subordinated debt while $655 million of long-term debt matured or was
redeemed and $75 million of preferred stock was redeemed. In addition,
$58 million of preferred stock was converted into $46 million of common
stock.
In 1992, noninterest income from personal trust, funds transfer,
trade finance, securities lending, mutual fund custody, stock transfer,
government securities clearance, and corporate trust grew significantly.
Net interest income increased, reflecting increases in the net interest
rate spread and the net yield on interest-earning assets. Strict
control of operating expenses resulted in a modest increase in
compensation expense and declines in furniture and fixture and occupancy
expense. The provision for loan losses was significantly lower in 1992
compared with 1991.
In 1992, the Company sold 18.4 million shares of common stock for
$339 million, $600 million of subordinated debt, and $143 million of
preferred stock. It redeemed $100 million of subordinated debt and $100
million of preferred stock.
<PAGE> 30
NET INTEREST INCOME
Dollars in millions 1994 1993 1992
---- ---- ----
Net Interest Income on a Taxable
Equivalent Basis $1,763 $1,550 $1,434
Net Interest Rate Spread 3.30% 3.12% 2.91%
Net Yield on Interest-Earning Assets 4.11% 3.84% 3.61%
On a taxable equivalent basis, net interest income increased 14% in
1994. Credit card growth, the large decline in nonperforming loans, and
wider interest rate spreads contributed to this growth during 1994.
Average loans grew to $32.0 billion in 1994 from $30.4 billion in 1993.
Managed credit card outstandings were up by 24% to $7.7 billion at
December 31, 1994 and the number of card accounts increased by 25% from
one year ago to 6.0 million. Large corporate lending in the U.S. also
showed strong growth. The net interest rate spread and net yield on
interest-earning assets increased by 6% and 7% in 1994. The spread and
yield benefitted from the return of most of the Company's credit card
securitization to its balance sheet. The increase in the yield also
reflects an increase in the volume of interest-free sources of funds by
$281 million (a portion attributable to compensating balances in lieu of
servicing fees), and higher returns on these funds in a rising interest
rate environment.
Net interest income increased 8%, the spread by 7%, and the yield
by 6% in 1993. Contributing to these increases were a $0.7 billion rise
in the level of average interest-earning assets, the Company being
liability sensitive in a declining rate environment, and the large
decline in nonperforming loans. The increase in yield also reflects a
higher volume of interest-free sources of funds, partially offset by
lower returns on these funds in a low interest rate environment.
Average earning assets increased to $40.4 billion in 1993 from
$39.7 billion in 1992, primarily resulting from a $0.8 billion increase
in federal funds sold and securities purchased under resale agreements.
Although average loans did not grow ($30.4 billion in 1993) the mix
improved, contributing to the growth in spread and yield. Special
strength was noted in wholesale mortgage lending, securities industries
banking, factoring, and credit card lending, which increased $1.1
billion.
The credit card securitizations reduced net interest income by $87
million in 1994, $162 million in 1993, and $164 million in 1992.
Interest income would have been increased by $17 million, $27
million, and $89 million if loans on nonaccrual status at December 31,
1994, 1993, and 1992 had been performing for the entire year.
<PAGE> 31
NONINTEREST INCOME
Noninterest income is provided by a wide range of fiduciary and
processing services, other fee-based services, and trading activities.
These revenues were $1,289 million in 1994, compared with $1,319 million
in 1993 and $1,183 million in 1992.
Securities processing fees were $359 million, $309 million, and
$275 million in 1994, 1993, and 1992. Other processing fees,
principally funds transfer, deposit services, and trade finance, were
$171 million in 1994, $162 million in 1993, and $148 million in 1992.
Trust and investment fees were $126 million in 1994, $134 million in
1993, and $121 million in 1992. Service charges and fees, excluding
those associated with the credit card securitization, were $427 million
in 1994, compared with $390 million in 1993 and $367 million in 1992.
For further discussion of fee revenue see Sector Profitability.
The credit card securitizations increased noninterest income by $38
million in 1994, $64 million in 1993, and $70 million in 1992. Most of
the decrease in the noninterest income from securitizations in 1994
compared with 1993 was due to maturities.
Securities gains totaled $15 million, $64 million, and $42 million
in 1994, 1993, and 1992, including gains on equity securities of $28
million in 1993 and $1 million in 1992. There were no net equity
securities gains recorded in 1994. The 1992 results include a $31
million writedown of the Company's investment in Northeast Bancorp, Inc.
Other noninterest income was $153 million in 1994, $196 million in
1993, and $160 million in 1992. Profits from foreign exchange and other
trading activities were $44 million, $79 million, and $94 million in
1994, 1993, and 1992. Other noninterest income for 1994 and 1993
included pre-tax gains of $22 million and $24 million related to the
sale of portions of the Company's interest in Wing Hang Bank, Ltd.
NONINTEREST EXPENSE AND INCOME TAXES
Expenses remained under good control in 1994. Total noninterest
expense was $1,646 million in 1994, unchanged from 1993. Noninterest
expense was $1,519 million in 1992.
Net occupancy and furniture and fixture expenses fell by a combined
$7 million, or 3%, to $266 million. Salary expense increased by 4% in
1994, and profit sharing and incentive compensation also increased.
Medical insurance expense was $59 million in 1994, a decline of 5% from
$62 million in 1993.
Total noninterest expense increased 8% in 1993 compared with 1992.
Furniture and equipment expense declined by 2% to $95 million for the
year. Other real estate expense declined substantially. Salaries
increased 10% in 1993 to $601 million from $546 million in 1992, and
profit sharing increased to $58 million from $38 million. Other
employee benefits - primarily incentive compensation and health care
expenses - were up 19% to $154 million from $129 million in 1992.
Occupancy expense increased by 6% to $178 million.
Deposit insurance premiums were $52 million in 1994 compared with
$57 million and $50 million in 1993 and 1992. The FDIC has proposed a
substantial reduction in the assessment rate for deposit insurance
premiums.
Other real estate charges were $11 million, $53 million, and $106
million in 1994, 1993, and 1992. Operating expenses related to other
real estate owned were approximately $4 million in 1994, compared with
$8 million in 1993 and $25 million in 1992.
The Company's consolidated effective tax rates for 1994, 1993, and
1992 were 37.5%, 36.9%, and 33.2%. The 1994 rate reflects the reduced
impact of tax-exempt income and state and local income taxes, offset by
lower taxes on foreign operations and the effect of nondeductible
expenses to total income. In 1993, the federal tax rate increased from
34% to 35%, tax-exempt income had less of an effect, and foreign tax
credits were lower. These increases were partially offset by the impact
of state and local income taxes and nondeductible expenses.
<PAGE> 32
LIQUIDITY
The Company maintains its liquidity through the management of its assets
and liabilities, utilizing worldwide financial markets. The
diversification of liabilities reflects the flexibility of the Company's
funding sources under changing market conditions. Stable core deposits,
including demand and retail time, are generated through the Company's
diversified network and managed with the use of trend studies and
deposit pricing. The use of derivative products such as interest rate
swaps and financial futures enhances liquidity through the issue of
long-term liabilities without exposure to interest rate risk. Liquidity
also results from the maintenance of a portfolio of assets which can be
easily reduced and the monitoring of unfunded loan commitments, thereby
reducing unanticipated funding requirements.
Average savings and noninterest-bearing deposits decreased by $0.3
billion during 1994. Medium-term notes grew by $1.4 billion and
foreign deposits increased by $2.1 billion. More volatile sources of
interest-bearing deposits and borrowings decreased by $0.5 billion.
In 1994, the Company's average commercial paper borrowings were
$361 million compared with $93 million in 1993. The Company has backup
lines of credit at financial institutions supporting these borrowings.
The following comments relate to the information disclosed in the
Consolidated Statements of Cash Flows.
Cash flows from earnings and other operating activities were 2.5
billion in 1994, compared with $0.7 billion in 1993 and 1992. The 1994
increase reflects a decline in trading assets.
The 1994 and 1993 cash flows used by investing activities were $5.4
billion and $1.0 billion, reflecting additions to loans and securities.
In 1992, investing activities were the source of $3.6 billion of cash
flow, reflecting a decrease in federal funds sold and securities
purchased under resale agreements and a reduction of loans. Cash
provided by financing activities was $1.3 billion in 1994 as the Company
used deposits and other borrowings to finance its investing activities.
Cash used by financing activities was $0.7 billion and $1.1 billion in
1993 and 1992 as the Company reduced its deposit borrowings.
Restrictions on the ability of the Company to obtain funds from its
subsidiaries are discussed in Note 9 to the Consolidated Financial
Statements.
CAPITAL RESOURCES
December 31,
Capital Ratios 1994 1993
-------------- ---- ----
Common Equity 8.55% 8.29%
Tangible Common Equity 7.39 7.00
Tier I Capital 8.45 8.87
Total Capital 13.43 13.65
Leverage 7.89 7.99
The Company's common equity ratio is one of the highest among money
center banks. The Company's banks' capital ratios exceed "well
capitalized," the highest of five regulatory capital categories.
Shareholders' equity was $4,296 million at December 31, 1994,
compared with $4,072 million at December 31, 1993 and $3,730 million at
December 31, 1992. The increase in common shareholders equity in 1994
is primarily attributable to growth in retained earnings of $512 million
offset by the repurchase of $112 million of common stock.
The change in shareholders' equity in 1993 is primarily
attributable to growth in retained earnings of $383 million offset in
part by the redemption of $75 million of stock.
The Company can issue up to $450 million of debt and preferred
stock (including convertible preferred stock) pursuant to a shelf
registration statement.
<PAGE> 33
CREDIT CARD SECURITIZATION
Credit card receivables sold in the form of a security is a technique
for financing the Company's credit card operations. For accounting
purposes, the underlying assets and liabilities are removed from the
balance sheet, and amounts otherwise reported in the income statement as
net interest income, fees, and provision for loan losses are reflected
in noninterest income.
The Company securitized $1,350 million of credit card receivables
in 1991; $200 million were outstanding at December 31, 1994 and are
scheduled to mature in 1995. The impact of the securitizations on the
Company's financial statements, assuming the funds received from the
securitizations were used to replace short-term borrowings, is
summarized below:
In millions 1994 1993 1992
---- ---- ----
Lower Net Interest Income $87 $162 $164
Lower Provision for Loan Losses 32 56 57
Higher Noninterest Income 38 64 70
PROVISION AND ALLOWANCE FOR LOAN LOSSES
In 1994, the Company continued to experience significant improvement in
asset quality as nonperforming loans dropped sharply. As a result the
provision for loan losses was $162 million in 1994, compared with $284
million in 1993 and $443 million in 1992. Net charge-offs were $354
million in 1994, $387 million in 1993, and $511 million in 1992. In
these years net charge-offs were primarily attributable to real estate,
other commercial, and consumer loans. The total allowance for loan
losses was $792 million and $970 million at year-end 1994 and 1993. The
decrease in the allowance for loan losses ($178 million in 1994 and $102
million in 1993) resulted primarily from net charge-offs exceeding the
provision for loan losses and the sharp decline in the level of
nonaccrual loans. Maturities in the Company's credit card
securitization program enabled it to transfer $14 million in 1994 and $1
million in 1993 of its recourse obligation from other liabilities to the
allowance. The ratio of the total allowance for loan losses to year-end
loans was 2.40% and 3.17% at December 31, 1994 and 1993. The allowance
for loan losses was 224% of total nonperforming assets at December 31,
1994, compared with 152% at December 31, 1993.
<PAGE> 34
LOANS
The following table shows the Company's loan distribution at the end of
each of the last five years:
1994 1993 1992 1991 1990
In millions ---- ---- ---- ---- ----
Domestic
Commercial and Industrial Loans* $11,149 $ 9,781 $10,495 $12,398 $12,896
Consumer Loans 8,265 6,028 5,229 4,315 6,080
Real Estate Loans
Construction and Land
Development 125 160 188 322 665
Other, Principally Commercial
Mortgages 2,743 2,626 2,822 2,340 2,456
Collateralized by Residential
Properties 3,036 3,203 3,423 2,820 3,633
Banks and Other Financial
Institutions** 1,289 1,893 1,521 35 35
Loans for Purchasing or Carrying
Securities 2,339 2,275 1,098 1,417 1,079
Lease Financings 1,308 1,038 1,033 1,063 1,026
Other** 49 65 126 1,222 1,784
------- ------- ------- ------- -------
Total Domestic 30,303 27,069 25,935 25,932 29,654
------- ------- ------- ------- -------
Foreign
Commercial and Industrial Loans 1,605 1,775 1,928 2,773 3,130
Banks and Other Financial
Institutions 672 810 997 1,122 1,428
Government and Official
Institutions*** 212 565 535 546 584
Other 1,161 1,188 947 795 1,817
------- ------- ------- ------- -------
Total Foreign 3,650 4,338 4,407 5,236 6,959
------- ------- ------- ------- -------
Total Loans 33,953 31,407 30,342 31,168 36,613
Less: Unearned Income 870 837 845 833 837
Allowance for Loan Losses 792 970 1,072 1,084 1,111
------- ------- ------- ------- -------
Net Loans $32,291 $29,600 $28,425 $29,251 $34,665
======= ======= ======= ======= =======
* The commercial and industrial loan portfolio does not contain any
industry concentration which exceeds 10% of loans.
** Prior to 1992, certain loans to the securities and mortgage banking
industries were classified as other loans.
*** During 1994, $292 million of loans were reclassified to securities.
At year-end 1994, highly leveraged transaction (HLT) loans
outstanding were $1,250 million and commitments were $480 million
compared with $1,314 million and $349 million at year-end 1993. At
December 31, 1994, borrowers in the communication industry represented
50% of the HLT portfolio. In 1994, net charge-offs of HLTs were $33
million compared with $22 million in 1993 and $94 million in 1992.
<PAGE> 35
NONPERFORMING ASSETS
The following table shows the distribution of nonperforming assets at
December 31, 1994 and 1993:
Dollars in millions 1994 1993 Change
----------------------------------
Category of Loans:
HLT $ 24 $ 52 (54)%
Commercial Real Estate 63 72 (13)
Other Commercial 50 130 (62)
Foreign 32 34 (6)
LDC 45 96 (53)
Community Banking 83 156 (47)
---- ----
Total Nonperforming Loans 297 540 (45)
Other Real Estate 56 99 (43)
---- ----
Total Nonperforming Assets $353 $639 (45)
==== ====
Nonperforming Asset Ratio 1.1% 2.1%
Allowance/Nonperforming Loans 266.7 179.6
Allowance/Nonperforming Assets 224.4 151.8
Nonperforming assets declined for the fourteenth consecutive
quarter to $353 million at December 31, 1994.
The decrease in nonperforming assets during 1994 is attributable to
charge-offs and writedowns of $149 million and paydowns, sales, and
returns to accrual status of $299 million. The decrease was partially
offset by $162 million of loans placed on nonperforming status.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments are disclosed in
Note 10 to the Consolidated Financial Statements. The fair values, if
realized, would improve the Company's capital resources and results of
operations because the excess of fair value over the carrying amount for
its assets is greater than the corresponding excess for liabilities.
The fair values would not affect liquidity.
In 1994, rising interest rates reduced unrecognized fair value
gains in the securities portfolios compared to 1993. Higher values
attributable to consumer loans more than offset the declines in value
associated with credit-impaired commercial loans in both 1994 and 1993.
The increase in fair value of long-term debt primarily reflects the
influence of the Company's stock price on the fair value of its
convertible subordinated debentures.
<PAGE> 36
TRADING AND OFF-BALANCE SHEET RISKS
The Company's significant trading and off-balance-sheet risks are
securities, foreign currency and interest rate risk management products,
commercial lending commitments, letters of credit, and securities
lending indemnifications. The Company assumes these risks to trade for
its own account, to reduce its own interest rate and foreign currency
risks, and to enable its customers to meet their credit and liquidity
needs and hedge their foreign currency and interest rate risks. These
items involve, to varying degrees, credit, foreign exchange, and
interest rate risk not recognized in the balance sheet. The Company's
off-balance-sheet risks are managed and monitored in manners similar to
those used for on-balance-sheet risks. There are no significant
industry concentrations of such risks. The Company manages trading risk
through a system of position limits and an earnings at risk methodology.
Position limits restrict by instrument and currency the size of
positions the Company can take. Earnings at risk is designed to measure
with 95% certainty the Company's exposure to change in earnings
resulting from price fluctuations in the Company's trading portfolio
over a 24-hour period. At December 31, 1994 the trading portfolio's
earnings at risk were $2 million.
The Company's exposure to credit loss for lending commitments,
letters of credit, and securities lending indemnification is represented
by the contractual amount of those transactions. Since many of the
commitments are expected to expire without being drawn upon, the total
amount does not necessarily represent future cash requirements. In
securities lending transactions, the Company requires the borrower to
provide collateral, thus reducing the credit risk.
The notional amounts for other off-balance-sheet risks express the
dollar volume of the transactions; however, the credit risk is much
smaller. The Company performs credit reviews and enters into netting
agreements to minimize the credit risk of foreign currency and interest
rate risk management products. Exposure to foreign exchange and
interest rate risk is reduced by entering into offsetting positions.
The amounts associated with off-balance-sheet risks are disclosed
in Notes 10 and 12 to the Consolidated Financial Statements.
SECTOR PROFITABILITY
The Company has an internal information system used for management
purposes that produces sector performance data for Trust, and Securities
and Other Processing, Retail Banking, Corporate Banking, and Other
sectors. A set of measurement principles has been developed to help
ensure that reported results of the sectors track their economic
performance. Sector results are subject to restatement whenever
improvements are made in the measurement principles or organizational
changes are made.
Net interest income is computed on a taxable equivalent basis.
Support and other indirect expenses are allocated to sectors based on
general guidelines. The provision for loan losses is based on net
charge-offs incurred by each sector. Assets and liabilities are match
funded.
The Trust, and Securities and Other Processing Sector provides a
broad array of fee based services. Trust includes personal trust,
personal asset management and institutional investment. Securities
processing includes American depositary receipts, corporate trust,
securities lending, government securities clearance, mutual fund
custody, unit investment trust, stock transfer, and institutional
custody. Trade finance, funds transfer, and deposit services are
included in other processing.
Retail banking includes credit card financing, consumer lending,
custom banking, and residential mortgage lending.
The Corporate Banking Sector is divided into special industries
banking, U.S. commercial banking, middle market banking, international
banking, and factoring.
Other includes trading and investing activities, treasury services
to other sectors, general administration, and the difference between the
recorded provision for loan losses and that allocated to sectors.
<PAGE> 37
The sectors contributed to the Company's profitability as follows:
Trust, and
Securities
And Other Retail Corporate
Processing Banking Banking Other Total
-------------------------------------------------------------
In millions 1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
---- ---- ----- ---- ---- ---- ---- ---- ------ ------
Net Interest
Income on a
Taxable
Equivalent
Basis $129 $108 $1,034 $831 $482 $466 $118 $145 $1,763 $1,550
Provision
for Loan
Losses - - 203 184 151 203 (192) (103) 162 284
Noninterest
Income 754 703 220 242 250 248 65 126 1,289 1,319
Noninterest
Expense 582 539 702 709 223 250 139 148 1,646 1,646
-------------------------------------------------------------
Income
before
Taxes $301 $272 $ 349 $180 $358 $261 $236 $226 $1,244 $ 939
=============================================================
In the Trust, and Securities and Other Processing Sector, American
depositary receipts and corporate trust showed exceptional growth. Other
areas of strength included mutual fund custody and government securities
clearance. In other processing, trade finance increased by 15% over 1993.
Overall volume and total revenue in funds transfer were up 20% and 18% from
1993. However, service fees in the funds transfer and deposit services
area were lower due to customers' increasing use of compensating balances
in a rising interest rate environment. Trust and investment management
reported lower revenue due primarily to lower market valuations of assets
under management.
The increase in the Retail Sector principally reflects strong growth
in the Company's credit card business. This growth was reflected both in
net interest income, which increased due to increased outstandings, and in
noninterest income, which increased due to greater interchange revenue.
Maturities in the sector's credit card securitization program shifted
revenue from noninterest income to net interest income.
The increase in net interest income in the Corporate Banking Sector is
attributable to higher yields as well as a decline in nonperforming assets.
The sector also benefitted from a reduction in the provision for loan
losses. In addition, increased earnings in the Company's factoring
business contributed to the sector's results. The decrease in noninterest
expense is partially attributable to a reduction in other real estate
expense.
The increase in the other sector reflects a credit for the difference
between the recorded provision for loan losses and that allocated to the
sectors. The other sector had a decline in revenue from trading and
investing activities.
<PAGE> 38
<TABLE>
QUARTERLY DATA UNAUDITED
<CAPTION>
1994 1993
--------------------------- ---------------------------
Dollars in millions, Fourth Third Second First Fourth Third Second First
except per share
amounts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 853 $ 783 $ 698 $ 626 $ 627 $ 628 $ 625 $ 625
Interest Expense 378 335 289 243 246 252 250 259
----- ----- ----- ----- ----- ----- ----- -----
Net Interest Income 475 448 409 383 381 376 375 366
----- ----- ----- ----- ----- ----- ----- -----
Provision for Loan
Losses 39 39 39 45 50 55 86 93
Noninterest Income 298 321 321 350 307 335 347 330
Noninterest Expense 413 420 410 403 409 405 441 391
----- ----- ----- ----- ----- ----- ----- -----
Income Before
Income Taxes 321 310 281 285 229 251 195 212
Income Taxes 120 116 105 107 72 100 77 78
----- ----- ----- ----- ----- ----- ----- -----
Net Income $ 201 $ 194 $ 176 $ 178 $ 157 $ 151 $ 118 $ 134
===== ===== ===== ===== ===== ===== ===== =====
Net Income
Available to
Common Shareholders $ 198 $ 191 $ 173 $ 174 $ 151 $ 145 $ 111 $ 127
===== ===== ===== ===== ===== ===== ===== =====
Per Common Share Data:
Primary Earnings $1.06 $1.01 $0.92 $0.93 $0.81 $0.78 $0.60 $0.69
Fully Diluted
Earnings 1.00 0.96 0.87 0.87 0.77 0.74 0.57 0.65
Cash Dividends 0.32 0.275 0.275 0.225 0.25 0.225 0.19 0.19
Stock Price
High 31.87 32.62 32.00 29.69 29.12 30.06 30.87 30.12
Low 26.75 28.62 25.06 25.50 26.37 26.12 25.87 26.00
Ratios:
Return on Average
Common
Shareholders'
Equity 19.03% 18.68% 17.67% 18.55% 16.16% 15.95% 12.65% 15.06%
Return on Average
Assets 1.55 1.49 1.42 1.50 1.32 1.28 1.03 1.17
</TABLE>
<PAGE> 39
Business Review
The Bank of New York Company, Inc. - Core Businesses
Securities and Other Processing
Services and Products
* American Depositary Receipts
* Corporate Trust
* Stock Transfer
* Master Trust/Master Custody
* Mutual Funds Custody
* Institutional Custody
* Securities Lending
* Unit Investment Trust
* Government Securities Clearance
* Funds Transfer
* Trade Finance
* Cash Management
Significant Accomplishments
* Corporate trust acquisitions added 2,200 new trust appointments
* Established first Korean depositary receipt program
* Workstation custody product software received 1994 Microsoft
(registered trademark) award for financial innovation
Statistical Information
* Leader in ADR business with 54% of the public sponsored market
* Second-largest provider of Mutual Funds Custody
* Over $1.6 trillion in assets under custody
* Over $200 billion daily funds transfer volume
* Among top five domestic issuers of letters of credit
<PAGE> 40
Credit Cards
Services and Products
* Consumers Edge (registered trademark)
* Union Privilege MasterCard (registered trademark)
* Affinity Cards
* MasterCard (registered trademark)
* VISA (registered trademark)
Significant Accomplishments
* Added 1.2 million new cardholders
* Outstandings grew 24%
* Introduced The Bank of New York MasterCard (registered trademark)
Business Card for small businesses
Statistical Information
* Among top ten bank issuers of credit cards
* Leader in the low rate/no annual fee market segment
* Largest single affinity card program in the country
* Over $7.7 billion in managed outstandings
Corporate Banking
Services and Products
* Special Industries Banking
* U.S. Commercial Banking
* International Banking
* Syndications and loan sales
<PAGE> 41
* Factoring
* Commercial Finance
* Leasing
Significant Accomplishments
* Acted as agent or co-agent in 187 broadly syndicated loan transactions
* Reduced nonperforming loans by over $200 million or 44%
* Opened representative offices in Moscow and Shanghai
Statistical Information
* Largest lender and arranger of bank loans to the Media and
Communications industries
* Domestic factored volume reached $12 billion
* Ranked fourth among the top 20 arrangers of bank loans to the Utility
industry
Retail Banking
Services and Products
* Deposit, lending and cash management services for individuals,
professionals, small businesses, municipalities and middle market
companies
* Trade finance for small and mid-size companies
* Residential and multifamily mortgages
* Individual investment products
Significant Accomplishments
* Opened 55 Personal Investment Centers throughout the branch network
<PAGE> 42
* Introduced Group Banking product with special banking services for
employees of small businesses and middle market companies
Statistical Information
* Largest suburban New York City branch network
* Total number of branches: 379
New York - 274 branches in 11 counties
New Jersey - 105 branches in 13 counties
* Over 1 million individual, small business, municipal and middle market
customers
Trust, Investment Management and Private Banking
Services and Products
* Financial planning
* Investment management
* Tax-exempt bond management
* BNY Hamilton Funds
* Trusts and estate settlement
* Income tax preparation
* Real estate management
* Domestic and international private banking
Significant Accomplishments
* Launched integrated customer information management system
* Introduced PortfolioLink, a new line of credit linked to custody and
investment management accounts
* Introduced Small Cap Index Fund
<PAGE> 43
Statistical Information
* Institutional assets under management of $14 billion
* Personal assets under management of $12 billion
* Over $11 billion in custodized assets under administration
Financial Market Services
Services and Products
* Foreign exchange trading
* Interest rate and currency risk management products
* Municipal Securities broker/dealer and underwriter
Significant Accomplishments
* Conservative interest rate hedging strategy reduced the impact of rising
interest rates on net margins
* Volume of foreign exchange transactions executed on behalf of Securities
and Other Processing customers increased 40%
Statistical Information
* Market maker in world's major trading currencies
* Full-service broker/dealer and underwriter of general obligation
tax-exempt securities, principally in the New York tri-state area
* 24-hour trading capability through our offices in New York, London,
Tokyo, Frankfurt, Hong Kong, Seoul and Taipei
<PAGE> 44
Securities and Other Processing
The Bank of New York offers a more complete range of processing and operating
services than any other bank. Our long-standing commitment to this business,
coupled with superior technological resources, enables us to fulfill virtually
any client's needs.
Securities-related products serve both the institutional issuer and investor.
We are a market leader in American and global depositary receipts, securities
lending and government securities clearance. We hold the number two market
position in mutual funds custody and in servicing unit investment trusts. We
rank among the top five providers in corporate trust, stock transfer, master
trust/master custody and institutional custody.
In other processing, we are a leader in funds transfer, processing over 50,000
transactions each day, and rank among the top providers of cash management,
letters of credit and trade finance services to corporate and institutional
customers worldwide.
We have consistently invested in the technology necessary to improve our
processing efficiency and accommodate incremental volume. As an example, we
designed a personal computer-based information delivery system called
Workstation, which allows our processing customers to access a range of
securities related data captured by us from their own office. Software we
have developed has allowed us to adapt this technology for use in virtually
all of our securities processing businesses.
Our Securities and Other Processing businesses are comprised of the following:
<PAGE> 45
American Depositary Receipts - Allow foreign companies to offer their dollar
denominated securities to investors in the United States. During 1994, The
Bank of New York continued its leadership role in this market, acting as
depositary for over 56% of all new public sponsored programs, including the
establishment of 105 new public sponsored depositary receipt programs from 34
countries. In total, The Bank of New York acts as depositary for more public
sponsored depositary receipt programs than all of our competitors combined.
Securities Lending - Our global programs are designed for customers whose
assets are held in custody or are otherwise available for lending. This
process provides for increasing the yield on customer portfolios by lending
their U.S. and non-U.S. dollar denominated securities. Overseas we saw
significant growth in London and expanded our operations to include a presence
in Hong Kong.
Government Securities Clearance - We are the market leader in government
securities clearance and the administration of tri-party repurchase
agreements. Revenues from this business were up 25% from 1993 principally
from the addition of 17 new relationships and the significant growth in
domestic and global tri-party business. Our focus on marketing to bank
securities affiliates (Section 20s) has resulted in our being the leading
provider to this important growth market.
Mutual Funds Custody - The Bank of New York is the second-largest provider of
mutual funds custody with approximately $300 billion in assets under
administration, and we continue to expand our presence as a leading provider
of worldwide custody and accounting services. We provide securities
safekeeping, payment of dividends and portfolio valuation. During 1994 our
product offerings
<PAGE> 46
were expanded to include full fund administration and trustee/custody
services for non-U.S. portfolios. These services are being offered from a
new Bank subsidiary located in Dublin, Ireland.
Unit Investment Trust - We provide trustee and custody services for over 3,900
trusts with an approximate aggregate market value of $22 billion. The rising
interest rate environment in 1994 benefited this business due to reduced calls
of municipal bonds in existing portfolios.
Corporate Trust - The Bank of New York is one of the top three providers of
corporate trust services in the United States, with more than 20,000 issues
representing over $300 billion in outstanding securities under administration.
We offer a complete product line that can be customized to meet issuers'
requirements for all types of fixed-income securities. Our commitment to this
business was underscored by the acquisition of four new corporate trust books
of business during 1994.
Stock Transfer - We provide comprehensive record keeping and dividend
disbursement services for 380 public companies with over 7.5 million
shareholders. During 1994, we introduced our Workstation product to our stock
transfer customers. Designed specifically for the Corporate Secretary's
office, Workstation provides on-line access to vital shareholder data.
Master Trust/Master Custody - The Bank provides custody and accounting services
to corporate pension funds, foundations, endowments and organizations having
special compliance or tax reporting requirements. We are the leader in the
fast growing public funds market segment, and have also expanded our share of
corporate retirement funds. Fees generated by this business were up
<PAGE> 47
significantly in 1994, principally from the establishment of new relationships
in both segments of the market.
Cash Management - The Bank offers a full range of cash management services to
corporate and institutional customers worldwide. Our strategy is to focus on
meeting the individual needs of our corporate banking clients. These markets
include the communications and securities industries, mortgage banking, mutual
funds and middle market companies.
Funds Transfer - We clear an average of over $200 billion each day for
domestic and foreign financial institutions. We have established a network of
2,200 correspondent banking relationships in 132 countries. This global
partnership enhances the accuracy and efficiency of the daily U.S. dollar
denominated funds transfer activities throughout this network. Our continued
investment in technology has allowed us to increase processing proficiency and
support significant incremental transaction volume. The result has been
improved profitability and a 30% gain in market share over the last two years.
Trade Finance - The Bank provides a broad range of trade finance services,
such as letters of credit, to domestic and multinational companies of all
sizes. Our global network of correspondent banks enables us to expedite
customers' imports and exports around the world, particularly in Asia, Latin
America and the Middle East. A significant element of our trade strategy is
to focus on U.S. retailers, where we have a strong domestic corporate
presence. These customers represent a major share of our domestic import
letter of credit activity.
<PAGE> 48
Highlights
* The Bank of New York was appointed depositary for the largest
privatization in 1994: Denmark's Tele-Danmark, $1.2 billion offering.
* We established the first New York Stock Exchange listed depositary
receipt programs from Colombia, Korea, Indonesia, Russia and the first
144A depositary receipt program from Peru.
* Our Asian branches advised and issued nearly 100,000 letters of credit
with a combined face amount of over $9 billion. This exceeded our 1993
volume by over 40%.
* Revenues from our Mutual Funds Custody Division grew 20% in 1994,
principally from the addition of 123 new portfolios during the year.
* Through our highly automated systems and direct links to the Federal
Reserve network, we clear a daily average of $400 billion in U.S.
Government and Agencies securities.
* We have been selected by the Russian Commission on Securities and Stock
Markets to lead the development of the first western-style independent
share registration service in Russia. This service will be available in
the second quarter of 1995.
<PAGE> 49
Credit Cards
The Bank of New York (Delaware) is the ninth-largest commercial bank issuer of
credit cards in the United States. It continues to be a leading provider of
low rate, no annual fee credit cards.
Consumers Edge is a no annual fee card with no grace period that appeals to
customers who maintain outstanding balances. It offers one of the lowest
annual interest rates in the country.
The Union Privilege MasterCard offered on an exclusive basis to over 14
million members of the AFL-CIO, is the largest single affinity card program in
the country.
<PAGE> 50
Highlights
* Credit card accounts increased in 1994 by 25%, from 4.8 million to 6.0
million, while managed credit card outstandings rose by 24% to a year-end
total of $7.7 billion.
* Added over one million new accounts to the Consumers Edge program.
* Introduced The Bank of New York (Delaware) MasterCard Business Card,
which affords small businesses a tailored cash management tool. The
Business Card offers all the conveniences of a traditional corporate
charge card with additional expense control options developed
specifically for small businesses.
* Cardholders have access to customer representatives seven days a week
from 8AM to 11PM Eastern time.
* Cardholders may access general account information 24 hours a day and
seven days a week through our automated voice response system.
<PAGE> 51
Corporate Banking
The Bank of New York serves the global banking needs of selected domestic and
multinational corporations and institutions. Our goal is to establish broader
and more durable relationships with these companies by leading their corporate
credits, and by obtaining their securities processing and other operating
business through effective cross-selling.
The primary function of the Bank's 26 international branches and
representative offices is to sell and to assist in the delivery of securities
and other processing products with special emphasis on trade services and
funds transfer.
Corporate banking is divided into the following areas:
Special Industries Banking - The Bank of New York has long been a leading
provider of credit and operating services to the media, securities, energy and
public utilities, surface transportation, real estate, mortgage banking and
insurance industries. Each specialized area provides a focused expertise to
meet the unique requirements of these industries.
U.S. Commercial Banking - The Bank serves domestic corporations by focusing
its calling efforts on the major metropolitan areas around the country that
offer the greatest concentrations of existing and prospective customers.
Middle Market Banking - We offer lending expertise to growing mid-size
businesses throughout the greater New York metropolitan area along with the
same sophisticated banking services usually provided to much larger companies.
These
<PAGE> 52
services include: asset-based finance, cash management, securities
processing, trade finance, leasing and investment banking.
International Banking - We support the global requirements of overseas
correspondent banks, government agencies and corporations, both in the U.S.
and abroad. Our network of foreign branches and representative offices is a
major source of business for securities and other processing products such as
American Depositary Receipts, funds transfer and trade finance. Our extensive
international capabilities are utilized to enhance the Bank's position with
corporate customers in the United States.
Factoring - BNY Financial Corporation, our factoring subsidiary, is the
second-largest factoring operation in the U.S. and the largest in Canada. We
have accomplished major customer and geographic diversification in this
business over the last five years. Historically, our customer concentration
in the apparel industry ranged between 65-70%. Today, 42% of our business is
to this industry, with the remainder coming from such diverse sources as the
utility, industrial security, shipping, freight, food processing and beverage
industries. BNY Financial Corporation now operates in seven offices located
in New York, Boston, Los Angeles, Atlanta, Charlotte, as well as Toronto and
Montreal.
Highlights
* BNY Financial Corporation completed its 13th consecutive year of record
earnings.
* The Bank of New York was appointed Administrative Agent on over 150
broadly syndicated loans.
<PAGE> 53
Retail Banking
The Bank of New York is the leading retail bank in the suburban New York area.
Our extensive branch network totals 379 offices serving 24 counties in New
York and New Jersey.
We offer individuals, professionals, small businesses and municipalities a
complete range of products and services that are designed to provide the best
banking value.
In 1994, much of our efforts focused on integrating and growing the franchises
that we had acquired during the previous two years. We accomplished this by
introducing new products and improved service to all of our markets.
For consumers, we introduced an enhanced Priority Value Banking relationship
product, offering higher savings rates and lower loan rates to our best
customers.
Recognizing the consumer's need to move beyond traditional products and
services, we introduced the Personal Investment Centers, conveniently located
in Bank of New York branches, and staffed by licensed representatives who
are equipped to offer alternative investment products such as annuities and
mutual funds.
<PAGE> 54
Highlights
* We introduced Group Banking, a new product that provides small business
customers the ability to add direct payroll deposit, free checking and
other banking services to their employee benefits packages. Before
year-end we added the Pay Plus card, which allows employees without bank
accounts to participate in direct deposit of payroll as well.
* The Bank's 24-hour bank by phone service line, 1-800-CALL-BNY was
enhanced with new features such as automated check reorders, ATM and
direct deposit information.
* We became the only bank in our market to accept applications by
telephone, with approval in 60 minutes, for all types of consumer loans.
<PAGE> 55
Trust, Investment Management and Private Banking
The Trust, Investment Management and Private Banking sector provides a wide
range of custom financial services to high income, high net worth individuals
and business owners. The sector also provides domestic and offshore
institutions with a fully array of investment management services.
The Bank's personal services encompass financial planning, investment
management, banking, trusts, estate administration, custody, income tax
planning and preparation, and real estate management. These services are
provided to individuals in the United States and abroad and delivered by
professionals located throughout the New York City metropolitan area and New
Jersey, and in Florida. The goal of our private banking teams, which are
staffed by representatives from our Trust, Investment and Banking areas, is to
expand our major high net worth client relationships by providing focused,
responsive and more fully integrated levels of customer service.
The sector's Institutional Investment Management Division manages assets for
corporations, public funds, unions, foundations and endowments. Our
investment options include balanced, fixed-income, active equity, index fund
products and short-term money management as well as ADRs and other
international instruments.
Highlights
* The Tax-Exempt Bond Management Division, which offers a unique service
that enables investors to maximize returns on their municipal bond
portfolios, posted a 39% increase in revenue over the previous year.
* Short-Term Money Management service for institutions seeking safety and
high returns on liquid funds posted revenue growth of 26%.
<PAGE> 56
Financial Market Services
The Bank of New York is a market maker in the world's major trading
currencies. We provide 24-hour, full-service trading capabilities through our
offices in New York, London, Tokyo, Frankfurt, Hong Kong, Seoul and Taipei.
The Bank is a full-service broker/dealer and underwriter of high-grade,
general obligation tax-exempt securities issued principally in the New York
tri-state area. These securities are provided to mutual funds, financial
institutions, corporations and individual investors.
The Bank of New York offers a full range of interest rate hedging products to
help corporate treasurers and investment managers control and reduce their
exposure to interest rate risk. These products can be transacted in U.S.
dollars as well as selected foreign currencies. Additionally, the Bank sells
cross-currency hedging products, which are designed to manage both interest
rate and currency risk.
Our financial market professionals also manage our worldwide assets and
liabilities and the Company's own investment portfolio. In a year where losses
on derivatives portfolios dominated the financial press, The Bank of New York
stood out for not employing these instruments to reach for yield through
interest rate speculation.
<PAGE> 57
Highlights
* Our focus on marketing interest rate risk management products to
financial institutions resulted in a $260 million increase in
transaction volume to this important business sector. The majority of
this growth came from transactions with large regional banks and
companies in the insurance and credit card industries.
* Our "match funding" approach to asset and liability management insulated
our balance sheet from the effects of rising interest rates.
EXHIBIT 21
<PAGE> 1
Subsidiaries Of The Registrant
Significant subsidiaries of The Bank of New York Company, Inc. are as follows:
The Bank of New York, a New York State Chartered Bank
BNY Holdings (Delaware) Corporation, a Delaware Corporation
The Bank of New York (Delaware)*, a Delaware State Chartered Bank
BNY Holdings (New Jersey) Corporation, a New Jersey Corporation
The Bank of New York National Association**, a National Bank
-------------------------------
* Subsidiary of BNY Holdings (Delaware) Corporation
** Subsidiary of BNY Holdings (New Jersey) Corporation
EXHIBIT 23.1
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements of
The Bank of New York Company, Inc. listed below of our report dated February
24, 1995, appearing in the 1994 Annual Report to Shareholders which is
incorporated by reference in this Annual Report on Form 10-K of The Bank of
New York Company, Inc. for the year ended December 31, 1994.
On Form S-3:
No. 33-50333
No. 33-51984
On Form S-4:
No. 33-25805
On Form S-8:
No. 33-57670
Post Effective Amendment No. 2 to Registration Statement
No. 2-95764
Post Effective Amendment No. 5 to Registration Statement
No. 2-95765
Pre Effective Amendment No. 1 to Registration Statement
No. 33-20999
Pre Effective Amendment No. 1 to Registration Statement
No. 33-33460
\s\ Deloitte & Touche LLP
New York, New York
March 27, 1995
Exhibit 23.2
<PAGE> 1
Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference into The Bank of New York Company Inc.'s Form 10-K of our report
dated January 12, 1993 (except with respect to the matter discussed in Note
18, as to which the date is January 29, 1993) with respect to the consolidated
financial statements of National Community Banks, Inc. (NCB) referred to in
such report. It should be noted that we have not audited any financial
statements of NCB subsequent to December 31, 1992 or performed any audit
procedures subsequent to the date of our report.
\s\ Arthur Andersen LLP
Roseland, New Jersey Arthur Andersen LLP
March 21, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from The Bank of
New York Company, Inc.'s Form 10-K for the period ended December 31, 1994 and
is qualified entirely by reference to such Form 10-K.
</LEGEND>
<CIK> 0000009626
<NAME> THE BANK OF NEW YORK COMPANY, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,903
<INT-BEARING-DEPOSITS> 992
<FED-FUNDS-SOLD> 3,019
<TRADING-ASSETS> 940
<INVESTMENTS-HELD-FOR-SALE> 1,721
<INVESTMENTS-CARRYING> 2,930
<INVESTMENTS-MARKET> 2,707
<LOANS> 33,083
<ALLOWANCE> 792
<TOTAL-ASSETS> 48,879
<DEPOSITS> 34,091
<SHORT-TERM> 6,240
<LIABILITIES-OTHER> 1,666
<LONG-TERM> 1,774
<COMMON> 1,427
0
119
<OTHER-SE> 2,750
<TOTAL-LIABILITIES-AND-EQUITY> 48,879
<INTEREST-LOAN> 2,405
<INTEREST-INVEST> 283
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<INTEREST-TOTAL> 2,962
<INTEREST-DEPOSIT> 842
<INTEREST-EXPENSE> 1,245
<INTEREST-INCOME-NET> 1,717
<LOAN-LOSSES> 162
<SECURITIES-GAINS> 15
<EXPENSE-OTHER> 1,646
<INCOME-PRETAX> 1,198
<INCOME-PRE-EXTRAORDINARY> 749
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 749
<EPS-PRIMARY> 3.92
<EPS-DILUTED> 3.70
<YIELD-ACTUAL> 4.11
<LOANS-NON> 297
<LOANS-PAST> 163
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 970
<CHARGE-OFFS> 411
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<ALLOWANCE-UNALLOCATED> 0
</TABLE>
Exhibit 99
<PAGE> 1
Arthur Andersen LLP
Report of Independent Public Accountants
To the Board of Directors
of National Community Banks, Inc.
We have audited the accompanying consolidated statement of income, changes in
shareholders' equity and cash flows for the year ended December 31, 1992 of
National Community Banks, Inc. (a New Jersey Corporation) and its subsidiary.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of National
Community Banks, Inc. and subsidiary for the year ended December 31, 1992, in
conformity with generally accepted accounting principles.
As described in Note 13 to the consolidated financial statements, National
Community Banks, Inc. (the Company), its subsidiary, National Community Bank
of New Jersey, and certain directors and officers of the Company have been
named defendants in a complaint seeking relief on behalf of a class of
shareholders. This litigation continues to be in a preliminary stage and its
ultimate outcome cannot be determined.
\s\ Arthur Andersen LLP
Arthur Andersen LLP
Roseland, New Jersey
January 12, 1993 (except with
respect to the matter discussed
in Note 18, as to which the date
is January 29, 1993)
