<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6152
THE BANK OF NEW YORK COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 13-2614959
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
(212) 495-1784
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
The number of shares outstanding of the issuer's Common
Stock, $7.50 par value, was 192,080,153 shares as of July 31,
1995.
<PAGE> 2
THE BANK OF NEW YORK COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 3
Consolidated Statements of Income
For the Three Months and Six Months
Ended June 30, 1995 and 1994 4
Consolidated Statement of Changes In
Shareholders' Equity
For the Six Months Ended June 30, 1995 5
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART 2. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
(Unaudited)
June 30, December 31,
1995 1994
---- ----
Assets
- ------
Cash and Due from Banks $ 3,189 $ 2,903
Interest-Bearing Deposits in Banks 1,109 992
Securities:
Held-to-Maturity (fair value of $2,668 in
1995 and $2,707 in 1994) 2,801 2,930
Available-for-Sale 2,037 1,721
------- -------
Total Securities 4,838 4,651
Trading Assets at Fair Value 1,355 940
Federal Funds Sold and Securities Purchased
Under Resale Agreements 2,979 3,019
Loans (less allowance for loan losses
of $713 in 1995 and $792 in 1994) 35,474 32,291
Premises and Equipment 900 914
Due from Customers on Acceptances 1,126 810
Accrued Interest Receivable 280 290
Other Assets 2,214 2,069
------- -------
Total Assets $53,464 $48,879
======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits
Noninterest-Bearing (principally
domestic offices) $ 8,905 $ 8,579
Interest-Bearing
Domestic Offices 15,319 14,871
Foreign Offices 12,654 10,641
------- -------
Total Deposits 36,878 34,091
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 2,709 1,502
Other Borrowed Funds 4,414 4,738
Acceptances Outstanding 1,128 812
Accrued Taxes and Other Expenses 1,167 1,049
Accrued Interest Payable 241 213
Other Liabilities 452 404
Long-Term Debt 1,710 1,774
------- -------
Total Liabilities 48,699 44,583
------- -------
Shareholders' Equity
Preferred Stock-no par value, authorized
5,000,000 shares, outstanding 184,000 shares 111 111
Class A Preferred Stock - par value $2.00
per share, authorized 5,000,000 shares,
outstanding 215,604 shares in 1995 and
322,104 shares in 1994 6 8
Common Stock-par value $7.50 per share,
authorized 350,000,000 shares, issued
195,176,810 shares in 1995 and
190,213,322 shares in 1994 1,464 1,427
Additional Capital 919 858
Retained Earnings 2,361 2,048
Securities Valuation Allowance 32 (58)
------- -------
4,893 4,394
Less: Treasury Stock-3,406,145 shares in
1995 and 2,566,071 shares in 1994, at cost 108 78
Loan to ESOP-712,695 shares, at cost 20 20
------- -------
Total Shareholders' Equity 4,765 4,296
------- -------
Total Liabilities and Shareholders' Equity $53,464 $48,879
======= =======
- -----------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
<PAGE> 4
- -----------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(Unaudited)
(In millions, except per share amounts)
For the three For the six
months ended months ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
Interest Income
- ---------------
Loans $ 812 $ 561 $1,577 $1,073
Securities
Taxable 59 58 115 115
Exempt from Federal Income Taxes 12 15 24 30
----- ----- ------ ------
71 73 139 145
Deposits in Banks 30 15 60 23
Federal Funds Sold and Securities
Purchased Under Resale Agreements 62 35 128 54
Trading Assets 6 14 13 29
----- ----- ------ ------
Total Interest Income 981 698 1,917 1,324
----- ----- ------ ------
Interest Expense
- ----------------
Deposits 335 192 643 358
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 36 27 68 54
Other Borrowed Funds 74 44 146 68
Long-Term Debt 32 26 65 52
---- ---- ------ ------
Total Interest Expense 477 289 922 532
---- ---- ------ ------
Net Interest Income 504 409 995 792
- -------------------
Provision for Loan Losses 62 39 112 84
----- ----- ------ ------
Net Interest Income After
Provision for Loan Losses 442 370 883 708
----- ----- ------ ------
Noninterest Income
- ------------------
Processing Fees
Securities 102 89 200 178
Other 48 43 92 85
----- ----- ------ ------
150 132 292 263
Trust and Investment Fees 32 34 64 67
Service Charges and Fees 109 116 222 234
Securities Gains 13 4 20 15
Other 46 35 70 92
----- ----- ------ ------
Total Noninterest Income 350 321 668 671
----- ----- ------ ------
Noninterest Expense
- -------------------
Salaries and Employee Benefits 223 212 444 423
Net Occupancy 43 44 87 91
Furniture and Equipment 21 21 43 43
Other 138 133 267 255
----- ----- ------ ------
Total Noninterest Expense 425 410 841 812
----- ----- ------ ------
Income Before Income Taxes 367 281 710 567
Income Taxes 141 105 272 212
----- ----- ------ ------
Net Income $ 226 $ 176 $ 438 $ 355
- ---------- ===== ===== ====== ======
Net Income Available to
Common Shareholders $ 223 $ 173 $ 433 $ 347
- ----------------------- ===== ===== ====== =====
Per Common Share Data:
- ----------------------
Primary Earnings $1.14 $0.92 $2.26 $1.85
Fully Diluted Earnings 1.09 0.87 2.11 1.74
Cash Dividends 0.32 0.275 0.64 0.50
Average Common Shares Outstanding 190 188 189 188
- -----------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
<PAGE> 5
- -------------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
For the six months ended June 30, 1995
(In millions)
Class A
Pre- Pre- Addi- Securities Treas- Loan
ferred ferred Common tional Retained Valuation ury to
Stock Stock Stock Capital Earnings Allowance Stock ESOP
------ ------- ------ ------- -------- ---------- ------ ----
Balance,
January 1, 1995 $111 $ 8 $1,427 $858 $2,048 $(58) $ 78 $20
Changes:
Net Income 438
Cash Dividends
Common Stock (121)
Preferred Stock (5)
Conversion of
Debentures 27 43
Conversion of
Preferred Stock (2) 1 1
Acquisition of
Common Stock
Warrants and
Issuance of
Common Stock 9 17 (37)
Treasury Stock
Acquired 67
Net Unrealized
Gain on Secur-
ities Avail-
able for Sale 90
Change in
Cumulative
Foreign
Currency
Translation
Adjustment 1
---- --- ------ ---- ------ ---- ---- ---
Balance,
June 30, 1995 $111 $ 6 $1,464 $919 $2,361 $ 32 $108 $20
==== === ====== ==== ====== ==== ==== ===
- -------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
<PAGE> 6
- -------------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
For the six months ended
June 30,
1995 1994
---- ----
Operating Activities
Net Income $ 438 $ 355
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities
Provision for Losses on Loans and Other Real Estate 115 87
Depreciation and Amortization 98 98
Deferred Income Taxes 94 141
Securities Gains (20) (15)
Change in Trading Assets (415) (248)
Change in Accruals and Other, Net 28 (526)
------- -------
Net Cash Provided (Used) by Operating Activities 338 (108)
------- -------
Investing Activities
Change in Interest-Bearing Deposits in Banks (86) (536)
Purchases of Securities Held-to-Maturity (148) (176)
Maturities of Securities Held-to-Maturity 286 414
Purchases of Securities Available-for-Sale (342) (498)
Sales of Securities Available-for-Sale 177 1,501
Maturities of Securities Available-for-Sale 22 8
Net Principal Disbursed on Loans to Customers (3,661) (2,659)
Sales of Loans 250 169
Sales of Other Real Estate 11 20
Change in Federal Funds Sold and Securities
Purchased Under Resale Agreements 40 (217)
Purchases of Premises and Equipment (23) (23)
Acquisitions, Net of Cash Acquired 67 (161)
Proceeds from the Sale of Premises and Equipment 1 11
Partial Sale of Unconsolidated Subsidiary - 37
Other, Net (19) (92)
------- -------
Net Cash Used by Investing Activities (3,425) (2,202)
------- -------
Financing Activities
Change in Deposits 2,589 2,190
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,207 (480)
Change in Other Borrowed Funds (303) 3,657
Repayments of Long-Term Debt (16) (65)
Redemption, Conversion and Repurchases of
Preferred Stock & Warrants - (175)
Issuance of Common Stock 63 16
Treasury Stock Acquired (67) (21)
Cash Dividends Paid (126) (102)
------- -------
Net Cash Provided by Financing Activities 3,347 5,020
------- -------
Effect of Exchange Rate Changes on Cash 26 47
------- -------
Change in Cash and Due From Banks 286 2,757
Cash and Due from Banks at Beginning of Period 2,903 4,511
------- -------
Cash and Due from Banks at End of Period $ 3,189 $ 7,268
======= =======
- -----------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 893 $ 463
Income Taxes 181 83
Noncash Investing Activity (Primarily Foreclosure
of Real Estate) 47 33
- -----------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
<PAGE> 7
THE BANK OF NEW YORK COMPANY, INC.
Notes to Consolidated Financial Statements
1. General
-------
The accounting and reporting policies of The Bank of New York Company,
Inc. (the Company), a bank holding company, and its subsidiaries, conform
with generally accepted accounting principles and general practice within the
banking industry. Such policies, except as noted below, are consistent with
those applied in the preparation of the Company's annual financial
statements.
The accompanying financial statements are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of financial
position, results of operations and cash flows for the interim periods have
been made. Such adjustments are of a normal recurring nature.
2. Allowance for Loan Losses
-------------------------
Transactions in the allowance for loan losses are summarized as
follows:
Six months ended
June 30,
(In millions) 1995 1994
---- -----
Balance, Beginning of Period $ 792 $ 970
Charge-offs (227) (208)
Recoveries 32 33
----- -----
Net Charge-Offs (195) (175)
Acquisition 1 -
Credit Card Securitization 3 6
Provision 112 84
----- -----
Balance, End of Period $ 713 $ 885
===== =====
Effective January 1, 1995, the Company adopted a new accounting standard
which introduces the time value of money into the determination of the
allowance for loan losses. The portion of the allowance allocated to
nonaccrual commercial loans over $1 million is now measured by the difference
between their recorded value and fair value. Fair value is either the
present value of the expected future cash flows from borrowers, market value
of the loan, or the fair value of the collateral. At June 30, 1995, such
loans aggregated $162 million, of which $95 million exceeded their fair value
by $26 million. For the second quarter of 1995, the average amount of
impaired loans was $186 million and interest income (cash received)
<PAGE> 8
recognized on them was $226 thousand.
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. Real estate acquired in satisfaction of loans is carried in
other assets at the lower of recorded investment in the property or fair
value minus estimated costs to sell.
3. Common Stock
------------
In the second quarter of 1995, the Company increased its quarterly
common stock cash dividend to 36 cents per share from 32 cents per share.
4. Commitments and Contingent Liabilities
--------------------------------------
In April 1990, the Company notified Northeast Bancorp., Inc. (NEB) that
NEB had materially breached its obligation under a merger agreement.
Following denial by the Federal Reserve Board of the Company's application
for approval to acquire NEB and failure by state regulators to approve the
proposed merger prior to the August 15, 1990 termination date, the Company's
Board of Directors notified NEB in September 1990 that it had terminated the
merger agreement.
In May 1990, NEB brought suit against the Company in the United States
Court for the District of Connecticut seeking money damages of $350 million
relating to NEB's allegations that the Company breached its obligations. In
November 1990, the Company filed a motion for summary judgment to have the
lawsuit dismissed; in June 1991, this motion was granted as to NEB's
Connecticut Unfair Trade Practices Act and libel claims and denied as to
NEB's other claims. In March 1993, the Company's motion for summary judgment
on NEB's contract claims was denied. In May 1993, as part of the acquisition
of NEB's Class A voting common stock by First Fidelity Bancorporation, NEB's
interest in the suit was transferred to a trust funded with $2 million for
the benefit of former NEB shareholders. 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.
<PAGE> 9
5. Acquisitions
------------
The Company has agreed to purchase certain portions of the securities
processing business of J.P. Morgan & Co. Incorporated and BankAmerica
Corporation. The J.P. Morgan global custody business includes securities
lending and domestic custody business in the United States and the United
Kingdom. The BankAmerica acquisition includes U.S. and global custody, as
well as securities lending, securities clearance and master trust. J.P.
Morgan has approximately $800 billion in custody assets being sold to the
Company and BankAmerica Corporation has approximately $462 billion in custody
assets being sold to the Company while those of the Company total $1.65
trillion. The Company has also agreed to acquire the corporate trust
business of NationsBank Corporation. This acquisition involves the transfer
to the Company of approximately 11,500 bond trustee and agency accounts
representing over $167 billion in outstanding securities.
On March 25, 1995, the Company agreed to acquire The Putnam Trust
Company of Greenwich, headquartered in Greenwich, Connecticut. Putnam Trust
Company has 8 branches in Fairfield County with $661 million in assets at
June 30, 1995.
These transactions are expected to close by year end and are subject to
regulatory approval. The pro forma effect of these acquisitions on the
Company's 1994 income is not material.
<PAGE> 10
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
The Company reported record second quarter fully diluted earnings per
share of $1.09, a 25% increase over the 87 cents earned in the second quarter
of 1994. Net income rose by 28% to $226 million from $176 million earned in
the same period last year. Earnings per share, on a fully diluted basis,
were $2.11 for the first half of 1995 compared with $1.74 in 1994. Net
income for the first six months was $438 million, an increase of 23% over
last year's $355 million. Earnings per share for the second quarter and
first six months of 1995 were reduced by 3 and 7 cents for the dilutive
effect of stock warrants issued in 1988. During the second quarter of 1995,
the Company recorded an initial $11 million pre-tax gain ($6 million after-
tax) on the sale of its ARCS Mortgage Inc. servicing portfolio.
Net interest income, on a taxable equivalent basis, totaled $514 million
in the second quarter, a $93 million or 22% increase over the second quarter
of last year. Loan demand, in general, continued to strengthen along with an
ongoing shift toward higher yielding assets. Revenues from the Company's
securities processing business grew 15% over the second quarter of 1994 and
were led by strong performances from ADRs, corporate trust, mutual funds
custody, and master trust. Other processing fees grew 12% over the same
period. Operating expenses remained under tight control.
The Company increased its quarterly cash stock dividend to 36 cents per
share, a 13% increase over the 32 cents previously paid. This increase will
result in an annual rate of $1.44 per share, the highest in the Company's
history, surpassing the previous high of $1.28 per share.
Return on average common equity was 19.85% in the second quarter of
1995, compared with 19.98% in the first quarter of 1995 and 17.67% in the
second quarter of last year. Return on average assets for the second quarter
was a record 1.68% versus 1.65% in the first quarter of 1995 and 1.42% in the
second quarter of 1994.
CAPITAL AND LIQUIDITY
- ---------------------
The Company's Tier 1 capital and Total capital ratios were 8.56% and
13.12% at June 30, 1995 compared with 8.56% and 13.31% at March 31, 1995, and
8.29% and 12.76% at June 30, 1994. Tangible common equity as a percent of
total assets was 7.67% at June 30, 1995 compared with 7.36% at March 31, 1995
and 6.49% one year ago.
<PAGE> 11
NET INTEREST INCOME
- -------------------
2nd 1st 2nd
Quarter Quarter Quarter Year-to-date
------- ------- ------- ------------
(In millions) 1995 1995 1994 1995 1994
--------------------------- -----------------
Net Interest Income $514 $502 $421 $1,017 $817
Net Interest Rate
Spread 3.34% 3.41% 3.26% 3.38% 3.21%
Net Yield on Interest
Earning Assets 4.45 4.49 3.98 4.47 3.94
On a taxable equivalent basis, net interest income amounted to a record
$514 million in the second quarter of 1995, compared with $421 million in the
same period of 1994, an increase of 22%. The net interest rate spread was
3.34% in the second quarter of 1995 compared with 3.41% in the first quarter
of 1995 and 3.26% one year ago. The net yield on interest earning assets was
4.45% in the second quarter of 1995 down slightly from the record 4.49% in
the first quarter of 1995 but up compared with 3.98% in last year's second
quarter.
For the first six months of 1995, net interest income, on a taxable
equivalent basis, amounted to $1,017 million compared with $817 million in
the same period of 1994, an increase of 24%. The year-to-date net interest
rate spread was 3.38% in 1995 compared with 3.21% in 1994, while the net
yield on interest-earning assets was 4.47% in 1995 and 3.94% in 1994.
The Company's credit card business continued its strong performance.
Compared with last year's second quarter, managed outstandings were up 15% to
$7.7 billion from $6.7 billion and the number of card accounts increased by
9% to 6.0 million from 5.5 million.
Interest lost on loans on nonaccrual status at June 30, 1995 and 1994
reduced net interest income by $5 million and $6 million for the three months
ended June 30, 1995 and 1994, and by $10 million and $12 million for the six
months ended June 30, 1995 and 1994.
<PAGE> 12
NONINTEREST INCOME
- ------------------
2nd Quarter Year-to-date
----------- ------------
(In millions) 1995 1994 1995 1994
---------------- ----------------
Processing Fees
Securities $102 $ 89 $200 $178
Other 48 43 92 85
---- ---- ---- ----
150 132 292 263
Trust and Investment Fees 32 34 64 67
Income from Credit Card
Securitization - 11 3 24
Other Service Charges and Fees 109 105 219 210
Securities Gains 13 4 20 15
Foreign Exchange and
Other Trading Activities 13 13 25 29
Other 33 22 45 63
---- ---- ---- ----
Total Noninterest Income $350 $321 $668 $671
==== ==== ==== ====
Securities processing fees increased 15% to $102 million compared to
$89 million in the second quarter of 1994. In the first half of 1995,
securities processing fees were $200 million compared to $178 million in
1994. The strongest performers in securities processing were ADRs, corporate
trust, mutual funds custody and master trust. In other processing, trade
finance revenue increased by 21% over the second quarter of last year and in
funds transfer, total revenues including balance equivalents were up 20%. In
other charges and fees, credit card interchange income and syndication fees
showed substantial strength.
An initial pre-tax gain of $11 million from the sale of ARCS Mortgage
Inc. servicing portfolio was included in other noninterest income in the
second quarter of 1995. The balance will be recognized in the third quarter.
Other noninterest income in the first six months of 1994 included a $22
million pre-tax gain on the sale of a portion of the Company's interest in
Wing Hang Bank, Ltd.
The return of the securitized credit card receivables to the balance
sheet reduced noninterest income by $11 million compared to last year's
second quarter and by $21 million compared to last year's first half.
NONINTEREST EXPENSE AND INCOME TAXES
- ------------------------------------
The Company continued to control expenses in the second quarter of 1995.
Total noninterest expense was up only 4% to $425 million from $410 million in
the same period last year. Year-to-date noninterest expenses were $841
million compared with $812 million in 1994. Salaries and employee benefits
<PAGE> 13
increased 5% in the second quarter to $223 million from $212 million in the
same period last year due in part to acquisitions in the Company's securities
processing and factoring businesses. Occupancy expense was down 2% compared
with last year's second quarter. The effective tax rates for the second
quarter and first six months of 1995 were 38.4% and 38.3% compared with 37.4%
for the second quarter and first six months of 1994.
NONPERFORMING ASSETS
- --------------------
Change
2Q 1995 vs
(Dollars in millions) 6/30/95 3/31/95 1Q 1995
-----------------------------
Loans:
HLT $ 16 $ 23 $ (7)
Commercial Real Estate 54 67 (13)
Other Commercial 49 47 2
Foreign 19 31 (12)
LDC 21 34 (13)
Community Banking 73 79 (6)
---- ----
Total Loans 232 281 (49)
Other Real Estate 88 57 31
---- ----
Total $320 $338 (18)
==== ====
Nonperforming Assets
Ratio 0.9% 1.0%
Allowance/Nonperforming
Loans 307.3 266.5
Allowance/Nonperforming
Assets 222.8 221.6
This was the sixteenth consecutive quarter of nonperforming assets
decreases. NPAs totaled $320 million at June 30, 1995, compared with $338
million at March 31, 1995. The increase in other real estate is attributable
to a $39 million California office complex that was foreclosed on in the
second quarter of 1995.
<PAGE> 14
LOAN LOSS PROVISION AND NET CHARGE-OFFS
- ---------------------------------------
2nd 1st 2nd
Quarter Quarter Quarter Year-to-date
------- ------- ------- ------------
(In millions) 1995 1995 1994 1995 1994
----------------------- ------------
Provision $ 62 $ 50 $ 39 $112 $ 84
---- ---- ---- ---- ----
Net Charge-offs:
HLT (5) - (8) (5) (8)
Commercial Real Estate (14) (2) (1) (16) (6)
Other Commercial (4) (4) (10) (8) (30)
Consumer (61) (63) (31) (124) (70)
Foreign - (13) (7) (13) (7)
Other (3) (3) (20) (6) (39)
---- ---- ---- ---- ----
Total (87) (85) (77) (172) (160)
Acquisition - 1 - 1 -
Credit Card Securitization 1 2 4 3 6
---- ---- ---- ---- ----
Decrease in Regular Allowance $(24) $(32) $(34) $(56) $(70)
==== ==== ==== ==== ====
Other Real Estate Expenses $ 2 $ 1 $ 2 $ 3 $ 3
The increase in the provision compared with 1994 was principally related
to growth in the credit card portfolio, particularly in the Consumers Edge
product line. The allowance for loan losses was $713 million, or 1.97% of
loans at June 30, 1995, compared with $749 million, or 2.19% of loans at
March 31, 1995. The Company eliminated its exposure to Yugoslavia in the
second quarter with a $12 million charge-off.
CREDIT CARD SECURITIZATION
- --------------------------
Credit card receivables sold in the form of a security is a technique
for financing the Company's credit card operations. It replaces at
competitive rates other sources of deposits and borrowed money, and improves
liquidity and capital. For accounting purposes, the technique removes the
underlying assets and liabilities from the balance sheet, and amounts
otherwise reported in the income statement are classified as noninterest
income.
The Company securitized $1,350 million of credit card receivables in
1991; zero was outstanding at June 30, 1995. The impact of the
securitization, assuming the funds received from the securitization were used
<PAGE> 15
to replace short-term borrowings, is summarized below:
2nd Quarter Year-to-date
----------- ------------
(In millions) 1995 1994 1995 1994
---- ---- ---- ----
Lower Net Interest Income $1 $27 $5 $60
Lower Provision for Loan Losses - 10 2 23
Higher Noninterest Income - 11 3 24
HIGHLY LEVERAGED TRANSACTIONS
- -----------------------------
At June 30, 1995, HLT loans outstanding were $1,323 million and
commitments were $501 million compared with $1,397 million and $476 million
at March 31, 1995. At June 30, 1995, borrowers in the communication industry
represented 46% of the HLT portfolio.
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. The data below has been
restated to reflect the transfer from Corporate Banking to Other of certain
gains and losses associated with foreign investments and subsidiaries.
The sectors contributed to the Company's profitability for the second
quarter and first six months as follows:
Trust, and
Securities
and Other Retail Corporate
(In millions) Processing Banking Banking
---------- ---------- ----------
2nd Quarter 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Net Interest Income on a
Taxable Equivalent Basis $ 41 $ 31 $326 $231 $132 $121
Provision for Loan Losses 0 0 63 51 36 36
Noninterest Income 206 193 43 64 69 53
Noninterest Expense 154 144 179 176 62 61
---- ---- ---- ---- ---- ----
Income Before Taxes $ 93 $ 80 $127 $ 68 $103 $ 77
==== ==== ==== ==== ==== ====
(In millions) Other Total
---------- ----------
2nd Quarter 1995 1994 1995 1994
---- ---- ---- ----
Net Interest Income on a
Taxable Equivalent Basis $ 15 $ 38 $514 $421
Provision for Loan Losses (37) (48) 62 39
Noninterest Income 32 11 350 321
Noninterest Expense 30 29 425 410
---- ---- ---- ----
Income Before Taxes $ 54 $ 68 $377 $293
==== ==== ==== ====
<PAGE> 16
Trust, and
Securities
and Other Retail Corporate
(In millions) Processing Banking Banking
---------- ---------- ----------
Year-to-date 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Net Interest Income on a
Taxable Equivalent Basis $ 77 $ 58 $631 $452 $265 $223
Provision for Loan Losses 0 0 129 111 51 60
Noninterest Income 407 382 82 116 138 119
Noninterest Expense 305 284 352 351 120 113
---- ---- ---- ---- ---- ----
Income Before Taxes $179 $156 $232 $106 $232 $169
==== ==== ==== ==== ==== ====
(In millions) Other Total
---------- ------------
Year-to-date 1995 1994 1995 1994
---- ---- ------ ----
Net Interest Income on a
Taxable Equivalent Basis $ 44 $ 84 $1,017 $817
Provision for Loan Losses (68) (87) 112 84
Noninterest Income 41 54 668 671
Noninterest Expense 64 64 841 812
---- ---- ------ ----
Income Before Taxes $ 89 $161 $ 732 $592
==== ==== ====== ====
Securities processing fees increased 15% to $102 million compared to
$89 million in the second quarter of 1994. In the first half of 1995
securities processing fees were $200 million compared to $178 million in
1994. The strongest performers in securities processing were ADRs, corporate
trust, mutual funds custody and master trust. In other processing, trade
finance revenue increased by 21% over the second quarter of last year and in
funds transfer, total revenues including balance equivalents were up 20%.
The increase in the Retail Sector principally reflects strong growth in
the Company's credit card business and the higher value of noninterest-
bearing balances. Charge-offs increased in both the quarter and year-to-date
periods compared to last year. Credit card accounts past due 30-179 days
were 3.19% of outstandings at the end of the second quarter of 1995 compared
with 3.23% in the first quarter of 1995 and 2.34% in the second quarter of
1994. In the second quarter of 1995, net credit card charge-offs as a
percentage of average outstandings were 3.17%, compared with 3.34% in the
first quarter of 1995 and 2.86% in the second quarter of 1994. 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 increased loan demand, higher yields, and a decline in
nonperforming assets. In addition, higher syndication fees and increased
earnings in the Company's factoring business contributed to the sector's
results.
The Other Sector reflects a credit for the difference between the
recorded provision for loan losses and that allocated to the sectors.
Noninterest income in the first quarter of 1994 includes a $22 million pre-
tax gain on the sale of a portion of the Company's interest in Wing Hang
Bank, Ltd.
<PAGE> 17
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
For the three months For the three months
ended June 30, 1995 ended June 30, 1994
------------------------ -------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------
ASSETS
- ------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 1,929 $ 30 6.32% $ 1,248 $ 15 4.96%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 4,074 62 6.06 3,508 35 3.98
Loans
Domestic Offices 24,239 609 10.09 21,236 430 8.12
Foreign Offices 10,990 204 7.46 10,264 132 5.17
------- ------ ------- ------
Total Loans 35,229 813 9.27 31,500 562 7.16
------- ------ ------- ------
Securities
U.S. Government
Obligations 2,911 42 5.74 3,207 44 5.46
U.S. Government Agency
Obligations 314 5 6.32 336 5 6.52
Obligations of States and
Political Subdivisions 664 18 10.89 969 23 9.55
Other Securities,
including Trading
Securities 1,260 21 6.58 1,712 26 5.96
------- ------ ------- ------
Total Securities 5,149 86 6.64 6,224 98 6.29
------- ------ ------- ------
Total Interest-Earning
Assets 46,381 991 8.57% 42,480 710 6.71%
------ ------
Allowance for Loan Losses (737) (934)
Cash and Due from Banks 2,782 2,754
Other Assets 5,456 5,620
------- -------
TOTAL ASSETS $53,882 $49,920
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate
Accounts $ 3,406 39 4.54% $ 3,599 25 2.74%
Savings 7,787 62 3.18 8,303 46 2.22
Certificates of Deposit
$100,000 & Over 1,850 27 5.87 798 7 3.36
Other Time Deposits 2,588 34 5.33 2,268 22 4.02
Foreign Offices 12,056 173 5.75 9,826 92 3.74
------- ------ ------- ------
Total Interest-Bearing
Deposits 27,687 335 4.85 24,794 192 3.10
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,481 36 5.88 3,025 27 3.60
Other Borrowed Funds 4,680 74 6.29 4,188 44 4.23
Long-Term Debt 1,724 32 7.42 1,533 26 6.74
------- ------ ------- ------
Total Interest-Bearing
Liabilities 36,572 477 5.23% 33,540 289 3.45%
------ ------
Noninterest-Bearing
Deposits 8,686 8,679
Other Liabilities 4,000 3,629
Preferred Stock 117 137
Common Shareholders'
Equity 4,507 3,935
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $53,882 $49,920
======= =======
Net Interest Earnings
and Interest Rate Spread $ 514 3.34% $ 421 3.26%
====== ======
Net Yield on Interest-
Earning Assets 4.45% 3.98%
==== ====
<PAGE> 18
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
For the six months For the six months
ended June 30, 1995 ended June 30, 1994
------------------------ -------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------
ASSETS
- ------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 1,918 $ 60 6.31% $ 907 $ 23 5.09%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 4,335 128 5.96 2,979 54 3.67
Loans
Domestic Offices 23,673 1,185 10.09 21,272 828 7.85
Foreign Offices 10,773 396 7.41 10,135 248 4.93
------- ------ ------- ------
Total Loans 34,446 1,581 9.26 31,407 1,076 6.91
------- ------ ------- ------
Securities
U.S. Government
Obligations 2,892 83 5.78 3,446 92 5.38
U.S. Government Agency
Obligations 316 10 6.33 351 11 6.47
Obligations of States and
Political Subdivisions 688 37 10.80 996 48 9.55
Other Securities,
including Trading
Securities 1,246 40 6.41 1,767 45 5.13
------- ------ ------- ------
Total Securities 5,142 170 6.64 6,560 196 6.00
------- ------ ------- ------
Total Interest-Earning
Assets 45,841 1,939 8.53% 41,853 1,349 6.50%
------ ------
Allowance for Loan Losses (762) (952)
Cash and Due from Banks 2,720 2,876
Other Assets 5,288 5,369
------- -------
TOTAL ASSETS $53,087 $49,146
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate
Accounts $ 3,410 74 4.40% $ 3,612 47 2.60%
Savings 7,740 118 3.09 8,343 91 2.20
Certificates of Deposit
$100,000 & Over 1,857 54 5.82 841 13 3.21
Other Time Deposits 2,539 66 5.20 2,268 47 4.20
Foreign Offices 11,736 331 5.68 9,286 160 3.48
------- ------ ------- ------
Total Interest-Bearing
Deposits 27,282 643 4.75 24,350 358 2.97
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,379 68 5.83 3,367 54 3.22
Other Borrowed Funds 4,686 146 6.27 3,403 68 4.00
Long-Term Debt 1,753 65 7.39 1,545 52 6.80
------- ------ ------ ------
Total Interest-Bearing
Liabilities 36,100 922 5.15% 32,665 532 3.29%
------ ------
Noninterest-Bearing
Deposits 8,721 9,057
Other Liabilities 3,763 3,369
Preferred Stock 117 189
Common Shareholders'
Equity 4,386 3,866
------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $53,087 $49,146
======= =======
Net Interest Earnings
and Interest Rate Spread $1,017 3.38% $ 817 3.21%
====== ======
Net Yield on Interest-
Earning Assets 4.47% 3.94%
==== ====
<PAGE> 19
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Discussion of litigation regarding Northeast Bancorp, Inc. is included
in Note 4 to the Consolidated Financial Statements included in Part 1, Item
1 of this Report.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The exhibits filed as part of this report are as follows:
Exhibit 11 - Statement Re: Computation of Earnings Per Common Share for
the Three and Six Months Ended June 30, 1995 and 1994.
Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and Preferred Stock Dividends for
the Three and Six months Ended June 30, 1995 and 1994.
Exhibit 27 - Statement Re: Financial Data Schedule containing selected
financial data at June 30, 1995 and for the Six Months ended June 30,
1995.
(b) The Company filed the following reports on Form 8-K since March 31,
1995:
On April 17, 1995, the Company filed a Form 8-K Current Report (Items 5
and 7), which report included unaudited interim financial information
and accompanying discussion for the first quarter of 1995 contained in
the Company's press release dated April 17, 1995.
On July 13, 1995, the Company filed a Form 8-K Current Report (Items 5
and 7), which report included unaudited interim financial information
and accompanying discussion for the second quarter of 1995 contained in
the Company's press release dated July 13, 1995.
On August 8, 1995, the Company filed a Form 8-K Current Report (Items 5 and
7), which report included a Distribution Agreement dated August 1, 1995, the
Forms of Notes, An Officers' Certificate, and the Opinion of Counsel in
connection with the Company's Registration Statements on Form S-3 (File Nos.
33-51984 and 33-50333) covering the Company's Subordinated Retail Medium-Term
Notes issuable under an Indenture dated October 1, 1993.
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BANK OF NEW YORK COMPANY, INC.
----------------------------------
(Registrant)
Date: August 11, 1995 \s\ Robert E. Keilman
-----------------------
Robert E. Keilman
Comptroller
(principal accounting officer)
<PAGE> 21
EXHIBIT INDEX
--------------
Exhibit Description
- ------- -----------
11 Computation of Earnings Per Common Share
for the Three and Six Months Ended June 30,
1995 and 1994.
12 Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
for the Three and Six Months Ended June 30,
1995 and 1994.
27 Financial Data Schedule containing selected
financial data at June 30, 1995 and for the
Six Months ended June 30, 1995.
EXHIBIT 11
THE BANK OF NEW YORK COMPANY, INC.
Computation of Earnings Per Common Share
(In millions, except per share amounts)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
Weighted Average Number of Shares 190 188 189 188
Shares Assumed to be Issued on Conversion:
Warrants 5 - 3 -
----- ----- ----- -----
Weighted Average Number of Shares
of Common Stock for Primary Computation 195 188 192 188
Shares Assumed to be Issued on Conversion:
Debentures 10 12 11 12
Warrants 1 - 3 -
Cumulative Preferred Stock 1 2 1 2
----- ----- ----- -----
Weighted Average Number of Shares of
Common Stock Assuming Full Dilution 207 202 207 202
===== ===== ===== =====
Net Income $ 226 $ 176 $ 438 $ 355
Dividend Requirements on Preferred Stock 3 3 5 8
----- ----- ----- -----
Net Income Available
to Common Shareholders 223 173 433 347
Interest on Convertible
Debentures, Net of Tax 2 3 4 5
Dividends on Convertible Preferred Stock - - - 1
----- ----- ----- -----
Net Income Available to Common
Shareholders, Assuming Full Dilution $ 225 $ 176 $ 437 $ 353
===== ===== ===== =====
Earnings Per Share:
Primary $1.14 $0.92 $2.26 $1.85
Fully Diluted 1.09 0.87 2.11 1.74
EXHIBIT 12
THE BANK OF NEW YORK COMPANY, INC.
Ratios of Earnings to Fixed Charges and Ratios
of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
(Dollars in millions)
For the three For the six
months ended months ended
June 30, June 30,
1995 1994 1995 1994
EARNINGS ---- ---- ---- ----
- --------
Income Before Income Taxes $367 $281 $ 710 $ 567
Fixed Charges, Excluding Interest
on Deposits 151 105 296 190
---- ---- ------ ------
Income Before Income Taxes and Fixed
Charges, Excluding Interest on Deposits 518 386 1,006 757
Interest on Deposits 335 192 643 358
---- ---- ------ ------
Income Before Income Taxes and Fixed
Charges, Including Interest on Deposits $853 $578 $1,649 $1,115
==== ==== ====== ======
FIXED CHARGES
- -------------
Interest Expense, Excluding Interest
on Deposits $142 $ 97 $ 279 $ 174
One-Third Net Rental Expense* 9 8 17 16
---- ---- ------ ------
Total Fixed Charges, Excluding Interest
on Deposits 151 105 296 190
Interest on Deposits 335 192 643 358
---- ---- ------ ------
Total Fixed Charges, Including Interest
on Deposits $486 $297 $ 939 $ 548
==== ==== ====== ======
PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ 4 $ 5 $ 8 $ 12
- ---------------------------------------- ==== ==== ====== ======
EARNINGS TO FIXED CHARGES RATIOS
- --------------------------------
Excluding Interest on Deposits 3.43x 3.68x 3.40x 3.98x
Including Interest on Deposits 1.76 1.95 1.76 2.03
EARNINGS TO COMBINED FIXED CHARGES
& PREFERRED STOCK DIVIDENDS RATIOS
- ----------------------------------
Excluding Interest on Deposits 3.34 3.51 3.31 3.75
Including Interest on Deposits 1.74 1.91 1.74 1.99
* The proportion deemed representative of the interest factor.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from The Bank of
New York Company, Inc.'s Form 10-Q for the period ended June 30, 1995 and is
qualified entirely by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000009626
<NAME> THE BANK OF NEW YORK COMPANY, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,189
<INT-BEARING-DEPOSITS> 1,109
<FED-FUNDS-SOLD> 2,979
<TRADING-ASSETS> 1,355
<INVESTMENTS-HELD-FOR-SALE> 2,037
<INVESTMENTS-CARRYING> 2,801
<INVESTMENTS-MARKET> 2,668
<LOANS> 36,187
<ALLOWANCE> 713
<TOTAL-ASSETS> 53,464
<DEPOSITS> 36,878
<SHORT-TERM> 7,123
<LIABILITIES-OTHER> 1,860
<LONG-TERM> 1,710
<COMMON> 1,464
0
117
<OTHER-SE> 3,184
<TOTAL-LIABILITIES-AND-EQUITY> 53,464
<INTEREST-LOAN> 1,577
<INTEREST-INVEST> 139
<INTEREST-OTHER> 201
<INTEREST-TOTAL> 1,917
<INTEREST-DEPOSIT> 643
<INTEREST-EXPENSE> 922
<INTEREST-INCOME-NET> 995
<LOAN-LOSSES> 112
<SECURITIES-GAINS> 20
<EXPENSE-OTHER> 841
<INCOME-PRETAX> 710
<INCOME-PRE-EXTRAORDINARY> 438
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 438
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.11
<YIELD-ACTUAL> 4.47
<LOANS-NON> 232
<LOANS-PAST> 174
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 792
<CHARGE-OFFS> 227
<RECOVERIES> 32
<ALLOWANCE-CLOSE> 713
<ALLOWANCE-DOMESTIC> 623
<ALLOWANCE-FOREIGN> 90
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
