<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 September 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 200,029,577 shares as of October 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
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Income
For the Three Months and Nine Months
Ended September 30, 1995 and 1994 4
Consolidated Statement of Changes In
Shareholders' Equity
For the Nine Months Ended September 30, 1995 5
Consolidated Statements of Cash Flows
For the Nine Months Ended September 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)
September 30, December 31,
1995 1994
---- ----
Assets
- ------
Cash and Due from Banks $ 1,909 $ 2,903
Interest-Bearing Deposits in Banks 1,092 992
Securities:
Held-to-Maturity (fair value of $2,951 in
1995 and $2,707 in 1994) 3,090 2,930
Available-for-Sale 2,085 1,721
------- -------
Total Securities 5,175 4,651
Trading Assets at Fair Value 938 940
Federal Funds Sold and Securities Purchased
Under Resale Agreements 844 3,019
Loans (less allowance for loan losses
of $747 in 1995 and $792 in 1994) 36,817 32,291
Premises and Equipment 906 914
Due From Customers on Acceptances 912 810
Accrued Interest Receivable 245 290
Other Assets 2,249 2,069
------- -------
Total Assets $51,087 $48,879
======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits
Noninterest-Bearing (principally
domestic offices) $ 7,750 $ 8,579
Interest-Bearing
Domestic Offices 15,628 14,871
Foreign Offices 10,364 10,641
------- -------
Total Deposits 33,742 34,091
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 3,849 1,502
Other Borrowed Funds 3,709 4,738
Acceptances Outstanding 917 812
Accrued Taxes and Other Expenses 1,312 1,049
Accrued Interest Payable 228 213
Other Liabilities 394 404
Long-Term Debt 1,836 1,774
------- -------
Total Liabilities 45,987 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 50,304 shares in 1995 and
322,104 shares in 1994 2 8
Common Stock - par value $7.50 per share,
authorized 350,000,000 shares, issued
201,086,278 shares in 1995 and
190,213,322 shares in 1994 1,508 1,427
Additional Capital 1,046 858
Retained Earnings 2,523 2,048
Securities Valuation Allowance 51 (58)
------- -------
5,241 4,394
Less: Treasury Stock - 3,727,354 shares in
1995 and 2,566,071 shares in 1994, at cost 121 78
Loan to ESOP - 712,695 shares, at cost 20 20
------- -------
Total Shareholders' Equity 5,100 4,296
------- -------
Total Liabilities and Shareholders' Equity $51,087 $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 nine
months ended months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Interest Income
- ---------------
Loans $ 815 $ 632 $2,392 $1,705
Securities
Taxable 59 54 175 169
Exempt from Federal Income Taxes 10 13 33 43
----- ----- ------ ------
69 67 208 212
Deposits in Banks 22 22 83 45
Federal Funds Sold and Securities
Purchased Under Resale Agreements 31 53 159 107
Trading Assets 10 9 23 38
----- ----- ------ ------
Total Interest Income 947 783 2,865 2,107
----- ----- ------ ------
Interest Expense
- ----------------
Deposits 309 225 952 583
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 41 25 110 79
Other Borrowed Funds 52 59 198 127
Long-Term Debt 33 26 97 78
---- ---- ------ ------
Total Interest Expense 435 335 1,357 867
---- ---- ------ ------
Net Interest Income 512 448 1,508 1,240
- -------------------
Provision for Loan Losses 113 39 225 123
----- ----- ------ ------
Net Interest Income After
Provision for Loan Losses 399 409 1,283 1,117
----- ----- ------ ------
Noninterest Income
- ------------------
Processing Fees
Securities 103 90 303 268
Other 48 43 140 129
----- ----- ------ ------
151 133 443 397
Trust and Investment Fees 33 34 97 101
Service Charges and Fees 103 121 325 354
Securities Gains (Losses) 17 (1) 37 15
Other 101 34 171 124
----- ----- ------ ------
Total Noninterest Income 405 321 1,073 991
----- ----- ------ ------
Noninterest Expense
- -------------------
Salaries and Employee Benefits 232 219 676 642
Net Occupancy 45 44 132 135
Furniture and Equipment 21 22 64 65
Other 126 135 393 390
----- ----- ------ ------
Total Noninterest Expense 424 420 1,265 1,232
----- ----- ------ ------
Income Before Income Taxes 380 310 1,091 876
Income Taxes 146 116 418 328
----- ----- ------ ------
Net Income $ 234 $ 194 $ 673 $ 548
- ---------- ===== ===== ====== ======
Net Income Available to
Common Shareholders $ 232 $ 191 $ 665 $ 538
- ----------------------- ===== ===== ====== ======
Per Common Share Data:
- ----------------------
Primary Earnings $1.16 $1.01 $3.42 $2.86
Fully Diluted Earnings 1.11 0.96 3.19 2.70
Cash Dividends 0.36 0.275 1.00 0.775
Average Common Shares Outstanding 193 188 191 188
- ------------------------------------------------------------------------------
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 nine months ended September 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 673
Cash Dividends
Common Stock (190)
Preferred Stock (8)
Conversion of
Debentures 33 53
Conversion of
Preferred Stock (6) 4 3
Issuance of
Common Stock,
Primarily
Acquisition of
Putnam Trust
Company 44 132 (37)
Treasury Stock
Acquired 80
Net Unrealized
Gain on Secur-
ities Avail-
able for Sale 109
---- --- ------ ------ ------ ---- ---- ---
Balance, September
30, 1995 $111 $ 2 $1,508 $1,046 $2,523 $ 51 $121 $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 nine months ended
September 30,
1995 1994
---- ----
Operating Activities
Net Income $ 673 $ 548
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities
Provision for Losses on Loans and Other Real Estate 228 127
Depreciation and Amortization 145 146
Deferred Income Taxes 136 180
Securities Gains (37) (15)
Change in Trading Assets 2 830
Change in Accruals and Other, Net 22 (451)
------- -------
Net Cash Provided by Operating Activities 1,169 1,365
------- -------
Investing Activities
Change in Interest-Bearing Deposits in Banks (85) (451)
Purchases of Securities Held-to-Maturity (389) (255)
Maturities of Securities Held-to-Maturity 421 557
Purchases of Securities Available-for-Sale (527) (1,008)
Sales of Securities Available-for-Sale 420 1,729
Maturities of Securities Available-for-Sale 22 8
Net Principal Disbursed on Loans to Customers (4,859) (2,453)
Sales of Loans 326 272
Sales of Other Real Estate 18 25
Change in Federal Funds Sold and Securities
Purchased Under Resale Agreements 2,211 (3,921)
Purchases of Premises and Equipment (34) (33)
Acquisitions, Net of Cash Acquired (Disbursed) 100 (161)
Proceeds from the Sale of Premises and Equipment 2 11
Partial Sale of Unconsolidated Subsidiary - 37
Other, Net 8 (118)
------- -------
Net Cash Used by Investing Activities (2,366) (5,761)
------- -------
Financing Activities
Change in Deposits (1,050) 1,974
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 2,347 (1,238)
Change in Other Borrowed Funds (1,008) 2,587
Proceeds from the Issuance of Long-Term Debt 142 -
Repayments of Long-Term Debt (16) (115)
Redemption, Conversion and Repurchases of
Preferred Stock & Warrants - (173)
Issuance of Common Stock 72 30
Treasury Stock Acquired (80) (64)
Cash Dividends Paid (198) (156)
------- -------
Net Cash Provided by Financing Activities 209 2,845
------- -------
Effect of Exchange Rate Changes on Cash (6) 61
------- -------
Change in Cash and Due From Banks (994) (1,490)
Cash and Due from Banks at Beginning of Period 2,903 4,511
------- -------
Cash and Due from Banks at End of Period $ 1,909 $ 3,021
======= =======
- -----------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 1,342 $ 799
Income Taxes 287 108
Noncash Investing Activity (Primarily Foreclosure
of Real Estate) 51 38
- -----------------------------------------------------------------------------
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:
Nine months ended
September 30,
(In millions) 1995 1994
---- -----
Balance, Beginning of Period $ 792 $ 970
Charge-offs (323) (314)
Recoveries 42 44
----- -----
Net Charge-Offs (281) (270)
Acquisition 8 -
Credit Card Securitization 3 11
Provision 225 123
----- -----
Balance, End of Period $ 747 $ 834
===== =====
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 September 30, 1995,
such loans aggregated $163 million, of which $98 million exceeded their fair
value by $24 million. For the third quarter of 1995, the average amount of
impaired loans was $163 million and interest income (cash received)
<PAGE> 8
recognized on them was $237 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 installment loans are not
classified as nonperforming assets, but are charged off based upon an
established delinquency schedule determined by product. 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. 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. The
suit was settled in November 1995 for $13 million.
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
4. Acquisitions
------------
In September, 1995, the Company acquired certain portions of the
securities processing business of BankAmerica Corporation. The Company has
also agreed to purchase certain portions of the securities processing
business of J.P. Morgan & Co. Incorporated. 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 and BankAmerica had approximately $462 billion in custody assets 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. The J.P. Morgan and NationsBank transactions are expected to
close by year end and are subject to regulatory approval.
On September 1, 1995, the Company acquired The Putnam Trust Company of
Greenwich, headquartered in Greenwich, Connecticut. Putnam Trust Company has
8 branches in Fairfield County with $643 million in assets.
The pro forma effect of these acquisitions on the Company's 1994 income
is not material.
5. Capital Resources
-----------------
The Company issued $140 million of subordinated debt during the third
quarter of 1995. Also, in October 1995, the Company increased the amount of
an outstanding shelf registration for debt and preferred stock to $1,360
million.
<PAGE> 10
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
The Company reported record third quarter fully diluted earnings per
share of $1.11, a 16% increase over the 96 cents earned in the third quarter
of 1994. Net income rose by 21% to $234 million from $194 million earned in
the same period last year. Earnings per share, on a fully diluted basis, was
$3.19 for the first nine months of 1995 compared with $2.70 in 1994. Net
income for the first nine months was $673 million, an increase of 23% over
last year's $548 million. Earnings per share for the third quarter and first
nine months of 1995 were reduced by $.05 and $.15, respectively for the
dilutive effect of stock warrants.
Net interest income, on a taxable equivalent basis, was a record $521
million in the third quarter, a $62 million or 14% increase over the third
quarter of last year. Loan demand continued to strengthen, particularly in
corporate lending across the United States, in the middle market, and in most
of the special industry lending areas. The net interest rate spread and
yield set records in the third quarter. Also in the third quarter, the
Company took in a $47 million gain from the balance of the sale of the ARCS
Mortgage portfolio. Revenues from the Company's securities processing
business grew 14% over the third quarter of 1994 and were once again led by
strong performances from ADRs, corporate trust, mutual funds custody, and
master trust. Other processing fees grew 12% over the same period lead by
increases in trade finance and funds transfer revenues. Expenses remained
under tight control, up only 1%. The Putnam Trust Company acquisition was
effective for only one month.
Return on average assets for the third quarter was a record 1.78% versus
1.68% in the second quarter of 1995 and 1.49% in the third quarter of 1994.
Return on average common equity was 19.28% in the third quarter of 1995,
compared with 19.85% in the second quarter of 1995 and 18.68% in the third
quarter of last year.
CAPITAL AND LIQUIDITY
- ---------------------
The Company's estimated Tier 1 capital and Total capital ratios were
8.86% and 13.59% at September 30, 1995 compared with 8.62% and 13.20% at June
30, 1995, and 8.43% and 12.86% at September 30, 1994. Tangible common equity
as a percent of total assets was 8.55% at September 30, 1995 compared with
7.67% at June 30, 1995 and 6.99% one year ago.
<PAGE> 11
NET INTEREST INCOME
- -------------------
3rd 2nd 3rd
Quarter Quarter Quarter Year-to-date
------- ------- ------- ------------
(In millions) 1995 1995 1994 1995 1994
--------------------------- -----------------
Net Interest Income $521 $514 $459 $1,538 $1,277
Net Interest Rate
Spread 3.47% 3.34% 3.35% 3.41% 3.26%
Net Yield on Interest-
Earning Assets 4.61 4.45 4.16 4.52 4.01
On a taxable equivalent basis, net interest income amounted to a record
$521 million in the third quarter of 1995, compared with $459 million in the
same period of 1994, an increase of 14%. The net interest rate spread was a
record 3.47% in the third quarter of 1995 compared with 3.34% in the second
quarter of 1995 and 3.35% one year ago. The net yield on interest-earning
assets was also a record at 4.61% compared with 4.45% in the second quarter
of 1995 and 4.16% in last year's third quarter.
For the first nine months of 1995, net interest income, on a taxable
equivalent basis, amounted to $1,538 million compared with $1,277 million in
the same period of 1994, an increase of 20%. The year-to-date net interest
rate spread was 3.41% in 1995 compared with 3.26% in 1994, while the net
yield on interest-earning assets was 4.52% in 1995 and 4.01% in 1994.
Growth in the Company's credit card business continued. Compared with
last year's third quarter, managed outstandings were up 11% to $8.0 billion
from $7.2 billion. Results were not impacted by the introduction, on
September 14, 1995, of the Company's first co-branded credit card, which was
issued in conjunction with Toys"R"Us (registered trademark).
Interest lost on loans on nonaccrual status at September 30, 1995 and
1994 reduced net interest income by $5 million for the three months ended
September 30, 1995 and 1994, and by $15 million for the nine months ended
September 30, 1995 and 1994.
<PAGE> 12
NONINTEREST INCOME
- ------------------
3rd Quarter Year-to-date
----------- ------------
(In millions) 1995 1994 1995 1994
---------------- ------------------
Processing Fees
Securities $103 $ 90 $ 303 $268
Other 48 43 140 129
---- ---- ------ ----
151 133 443 397
Trust and Investment Fees 33 34 97 101
Income from Credit Card
Securitization - 9 3 33
Other Service Charges and Fees 103 112 322 321
Securities Gains (Losses) 17 (1) 37 15
Foreign Exchange and
Other Trading Activities 18 10 43 39
Other 83 24 128 85
---- ---- ------ ----
Total Noninterest Income $405 $321 $1,073 $991
==== ==== ====== ====
Securities processing fees increased 14% to $103 million compared to
$90 million in the third quarter of 1994. In the first nine months of 1995
securities processing fees were $303 million compared to $268 million in
1994. The strongest performers in securities processing continue to be ADRs,
corporate trust, mutual funds custody and master trust. In other processing,
trade finance revenue increased by 12% over the third quarter of last year
and in funds transfer, total revenues including balance equivalents were up
17%. Credit card interchange income also showed substantial strength.
Foreign exchange and other trading activity increased $8 million, or 80%,
over the third quarter of 1994.
The pre-tax gain of $47 million from the sale of the ARCS Mortgage Inc.
servicing portfolio was included in other noninterest income in the third
quarter. This brings the total gain from the sale of ARCS to $58 million.
As a result of the sale of ARCS, other service charges and fees declined by
$7 million in the third quarter of 1995. Other noninterest income in the
first nine 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 $9 million and $30 million compared to
the third quarter and first nine months of last year.
<PAGE> 13
NONINTEREST EXPENSE AND INCOME TAXES
- ------------------------------------
The Company continued to control expenses in the third quarter of 1995.
Total noninterest expense was up only 1% to $424 million from $420 million in
the same period last year. Year-to-date noninterest expense was $1,265
million compared with $1,232 million in 1994. Salaries and employee benefits
increased 6% in the third quarter to $232 million from $219 million in the
same period last year due in part to acquisitions in the Company's securities
processing businesses and to the purchase of Putnam Trust Company on
September 1, 1995.
Excluding the ARCS gain, the efficiency ratio for the third quarter
improved to 49.1%. This ratio was 49.7% in the second quarter of 1995 and
53.4% in the third quarter of 1994.
The effective tax rates for the third quarter and first nine months of
1995 were 38.4% and 38.3% compared with 37.4% for the third quarter and first
nine months of 1994.
NONPERFORMING ASSETS
- --------------------
Change
3Q 1995 vs
(Dollars in millions) 9/30/95 6/30/95 2Q 1995
-----------------------------
Loans:
HLT $ 15 $ 16 $ (1)
Commercial Real Estate 49 54 (5)
Other Commercial 48 49 (1)
Foreign 18 19 (1)
LDC 21 21 -
Community Banking 82 73 9
---- ----
Total Loans 233 232 1
Other Real Estate 81 88 (7)
---- ----
Total $314 $320 (6)
==== ====
Nonperforming Assets
Ratio 0.8% 0.9%
Allowance/Nonperforming
Loans 320.6 307.3
Allowance/Nonperforming
Assets 237.9 222.8
This was the seventeenth consecutive quarter of net declines in
nonperforming assets. NPAs totaled $314 million at September 30, 1995,
compared with $320 million at June 30, 1995.
<PAGE> 14
LOAN LOSS PROVISION AND NET CHARGE-OFFS
- ---------------------------------------
3rd 2nd 3rd
Quarter Quarter Quarter Year-to-date
------- ------- ------- ------------
(In millions) 1995 1995 1994 1995 1994
----------------------- -------------
Provision $113 $ 62 $ 39 $225 $ 123
---- ---- ---- ---- -----
Net Charge-offs:
HLT (1) (5) (24) (6) (32)
Commercial Real Estate - (14) - (16) (5)
Other Commercial (4) (4) (21) (12) (51)
Consumer (66) (61) (38) (190) (108)
Foreign (9) - (6) (22) (14)
Other (6) (3) (2) (12) (42)
---- ---- ---- ---- -----
Total (86) (87) (91) (258) (252)
Acquisition 7 - - 8 -
Credit Card Securitization - 1 5 3 11
---- ---- ---- ---- -----
Increase (Decrease) in
Regular Allowance $ 34 $(24) $(47) $(22) $(118)
==== ==== ==== ==== =====
Other Real Estate Expenses $ 1 $ 2 $ 3 $ 4 $ 7
The allowance for loan losses was $747 million, or 1.99% of loans at
September 30, 1995, compared with $713 million, or 1.97% of loans at June 30,
1995.
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 September 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:
3rd Quarter Year-to-date
----------- ------------
(In millions) 1995 1994 1995 1994
---- ---- ---- ----
Lower Net Interest Income $- $18 $5 $78
Lower Provision for Loan Losses - 6 2 29
Higher Noninterest Income - 9 3 33
HIGHLY LEVERAGED TRANSACTIONS
- -----------------------------
At September 30, 1995, HLT loans outstanding were $1,460 million and
commitments were $661 million compared with $1,323 million and $501 million
at June 30, 1995. At September 30, 1995, borrowers in the communication
industry represented 45% 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 third
quarter and first nine months as follows:
Trust, and
Securities
and Other Retail Corporate
(In millions) Processing Banking Banking
---------- ---------- ----------
3rd Quarter 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Net Interest Income on a
Taxable Equivalent Basis $ 41 $ 35 $328 $272 $132 $114
Provision for Loan Losses 0 0 72 39 5 50
Noninterest Income 209 193 39 52 78 68
Noninterest Expense 154 149 167 177 63 62
---- ---- ---- ---- ---- ----
Income Before Taxes $ 96 $ 79 $128 $108 $142 $ 70
==== ==== ==== ==== ==== ====
Other Total
---------- ----------
3rd Quarter 1995 1994 1995 1994
---- ---- ---- ----
Net Interest Income on a
Taxable Equivalent Basis $ 20 $ 38 $521 $459
Provision for Loan Losses 36 (50) 113 39
Noninterest Income 79 8 405 321
Noninterest Expense 40 32 424 420
---- ---- ---- ----
Income Before Taxes $ 23 $ 64 $389 $321
==== ==== ==== ====
<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 $118 $ 93 $959 $724 $397 $337
Provision for Loan Losses 0 0 201 150 56 110
Noninterest Income 616 575 121 168 216 187
Noninterest Expense 459 433 519 528 183 175
---- ---- ---- ---- ---- ----
Income Before Taxes $275 $235 $360 $214 $374 $239
==== ==== ==== ==== ==== ====
Other Total
---------- --------------
Year-to-date 1995 1994 1995 1994
---- ---- ------ ----
Net Interest Income on a
Taxable Equivalent Basis $ 64 $123 $1,538 $1,277
Provision for Loan Losses (32) (137) 225 123
Noninterest Income 120 61 1,073 991
Noninterest Expense 104 96 1,265 1,232
---- ---- ------ ------
Income Before Taxes $112 $225 $1,121 $ 913
==== ==== ====== ======
In the Trust, and Securities and Other Processing Sector, securities
processing fees increased 14% to $103 million compared to $90 million in the
third quarter of 1994. In the first nine months of 1995 securities
processing fees were $303 million compared to $268 million in 1994. The
strongest performers in securities processing continue to be ADRs, corporate
trust, mutual funds custody and master trust. In other processing, trade
finance revenue increased by 12% over the third quarter of last year and in
funds transfer, total revenues including balance equivalents were up 17%.
The increase in net interest income in the Retail Sector principally
reflects 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
over 30 days were 4.00% of outstandings at the end of the third quarter of
1995 compared with 3.19% in the second quarter of 1995 and 2.73% in the third
quarter of 1994. In the third quarter of 1995, net credit card charge-offs
as a percentage of average outstandings were 3.31%, compared with 3.17% in
the second quarter of 1995 and 2.30% in the third quarter of 1994.
Maturities in the sector's credit card securitization program shifted revenue
from noninterest income to net interest income. Credit card interchange
income also showed strength.
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. Loan demand continued to strengthen, particularly in
corporate lending across the United States, in the middle market, and in most
of the special industry lending areas.
The Other Sector reflects the difference between the recorded provision
for loan losses and that allocated to the sectors. Noninterest income
includes $47 million for the third quarter of 1995 and $58 million for the
first nine months of 1995 of the pre-tax gain on the sale of the ARCS
Mortgage portfolio. Also included in noninterest income for the first nine
months of 1994 is a $22 million pre-tax gain on the sale of a portion of the
Company's interest in Wing Hang Bank, Ltd. Securities gains and foreign
exchange and other trading activity increased $26 million from the third
quarter of 1994.
<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 September 30, 1995 ended September 30, 1994
------------------------ -------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------
ASSETS
- ------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 1,451 $ 23 6.18% $ 1,739 $ 22 5.09%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 2,127 31 5.77 4,617 53 4.55
Loans
Domestic Offices 24,480 610 9.90 21,991 487 8.78
Foreign Offices 11,237 206 7.26 10,011 147 5.83
------- ------ ------- ------
Total Loans 35,717 816 9.07 32,002 634 7.86
------- ------ ------- ------
Securities
U.S. Government
Obligations 2,998 43 5.65 2,867 40 5.59
U.S. Government Agency
Obligations 398 6 6.35 327 5 6.53
Obligations of States and
Political Subdivisions 618 16 10.15 804 21 10.49
Other Securities,
including Trading
Securities 1,550 21 5.68 1,430 19 5.17
------- ------ ------- ------
Total Securities 5,564 86 6.21 5,428 85 6.26
------- ------ ------- ------
Total Interest-Earning
Assets 44,859 956 8.46% 43,786 794 7.20%
------ ------
Allowance for Loan Losses (705) (886)
Cash and Due from Banks 2,902 2,743
Other Assets 5,051 5,909
------- -------
TOTAL ASSETS $52,107 $51,552
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate
Accounts $ 3,370 38 4.46% $ 3,521 28 3.16%
Savings 7,982 62 3.10 8,145 47 2.30
Certificates of Deposit
$100,000 & Over 1,592 22 5.56 1,121 12 4.17
Other Time Deposits 2,453 32 5.24 2,271 24 4.15
Foreign Offices 11,234 155 5.46 10,645 114 4.27
------- ------ ------- ------
Total Interest-Bearing
Deposits 26,631 309 4.61 25,703 225 3.48
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,846 41 5.67 2,385 25 4.10
Other Borrowed Funds 3,357 52 6.20 5,009 59 4.70
Long-Term Debt 1,768 33 7.32 1,493 26 6.88
------- ------ ------- ------
Total Interest-Bearing
Liabilities 34,602 435 4.99% 34,590 335 3.85%
------ ------
Noninterest-Bearing
Deposits 8,974 8,740
Other Liabilities 3,646 4,039
Preferred Stock 113 128
Common Shareholders'
Equity 4,772 4,055
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $52,107 $51,552
======= =======
Net Interest Earnings
and Interest Rate Spread $ 521 3.47% $ 459 3.35%
====== ======
Net Yield on Interest-
Earning Assets 4.61% 4.16%
==== ====
<PAGE> 18
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
For the nine months For the nine months
ended September 30, 1995 ended September 30, 1994
------------------------ -------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------
ASSETS
- ------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 1,761 $ 83 6.28% $ 1,188 $ 45 5.09%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 3,591 159 5.92 3,531 107 4.06
Loans
Domestic Offices 23,945 1,796 10.03 21,514 1,315 8.17
Foreign Offices 10,930 601 7.36 10,093 395 5.23
------- ------ ------- ------
Total Loans 34,875 2,397 9.19 31,607 1,710 7.23
------- ------ ------- ------
Securities
U.S. Government
Obligations 2,927 126 5.73 3,251 132 5.44
U.S. Government Agency
Obligations 343 16 6.33 343 17 6.49
Obligations of States and
Political Subdivisions 664 53 10.60 931 69 9.83
Other Securities,
including Trading
Securities 1,349 61 6.13 1,653 64 5.15
------- ------ ------- ------
Total Securities 5,283 256 6.48 6,178 282 6.08
------- ------ ------- ------
Total Interest-Earning
Assets 45,510 2,895 8.51% 42,504 2,144 6.74%
------ ------
Allowance for Loan Losses (743) (930)
Cash and Due from Banks 2,782 2,831
Other Assets 5,208 5,552
------- -------
TOTAL ASSETS $52,757 $49,957
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Interest-Bearing Deposits
Money Market Rate
Accounts $ 3,397 112 4.42% $ 3,582 75 2.79%
Savings 7,821 181 3.09 8,276 138 2.24
Certificates of Deposit
$100,000 & Over 1,767 76 5.74 936 25 3.60
Other Time Deposits 2,510 98 5.22 2,269 71 4.18
Foreign Offices 11,567 485 5.61 9,744 274 3.77
------- ------ ------- ------
Total Interest-Bearing
Deposits 27,062 952 4.70 24,807 583 3.15
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,537 110 5.77 3,036 79 3.45
Other Borrowed Funds 4,238 198 6.25 3,944 127 4.30
Long-Term Debt 1,758 97 7.37 1,527 78 6.83
------- ------ ------ ------
Total Interest-Bearing
Liabilities 35,595 1,357 5.10% 33,314 867 3.48%
------ ------
Noninterest-Bearing
Deposits 8,806 8,950
Other Liabilities 3,724 3,594
Preferred Stock 116 169
Common Shareholders'
Equity 4,516 3,930
------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $52,757 $49,957
======= =======
Net Interest Earnings
and Interest Rate Spread $1,538 3.41% $1,277 3.26%
====== ======
Net Yield on Interest-
Earning Assets 4.52% 4.01%
==== ====
<PAGE> 19
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Discussion of litigation regarding Northeast Bancorp, Inc. is included
in Note 3 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 Nine Months Ended September 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 Nine Months Ended September 30, 1995 and 1994.
Exhibit 27 - Statement Re: Financial Data Schedule containing selected
financial data at September 30, 1995 and for the Nine Months ended
September 30, 1995.
(b) The Company filed the following reports on Form 8-K since June 30, 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.
On October 16, 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 third quarter of 1995 contained in
the Company's press release dated October 16, 1995.
<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: November 13, 1995 \s\ Deno D. Papageorge
-----------------------
Deno D. Papageorge,
Chief Financial Officer
<PAGE> 21
EXHIBIT INDEX
--------------
Exhibit Description
- ------- -----------
11 Computation of Earnings Per Common Share
for the Three and Nine Months Ended
September 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 Nine Months Ended
September 30, 1995 and 1994.
27 Financial Data Schedule containing selected
financial data at September 30, 1995 and for
the Nine Months ended September 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 Nine
Months Ended Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Weighted Average Number of Shares 193 188 191 188
Shares Assumed to be Issued on Conversion:
Warrants 7 - 4 -
----- ----- ----- -----
Weighted Average Number of Shares
of Common Stock for Primary Computation 200 188 195 188
Shares Assumed to be Issued on Conversion:
Debentures 9 12 10 12
Warrants 2 - 5 -
Cumulative Preferred Stock - 2 - 2
----- ----- ----- -----
Weighted Average Number of Shares of
Common Stock Assuming Full Dilution 211 202 210 202
===== ===== ===== =====
Net Income $ 234 $ 194 $ 673 $ 548
Dividend Requirements on Preferred Stock 2 3 8 10
----- ----- ----- -----
Net Income Available
to Common Shareholders 232 191 665 538
Interest on Convertible
Debentures, Net of Tax 2 3 6 8
Dividends on Convertible Preferred Stock - - - 1
----- ----- ----- -----
Net Income Available to Common
Shareholders, Assuming Full Dilution $ 234 $ 194 $ 671 $ 547
===== ===== ===== =====
Earnings Per Share:
Primary $1.16 $1.01 $3.42 $2.86
Fully Diluted 1.11 0.96 3.19 2.70
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 nine
months ended months ended
September 30, September 30,
1995 1994 1995 1994
EARNINGS ---- ---- ---- ----
- --------
Income Before Income Taxes $380 $310 $1,091 $ 876
Fixed Charges, Excluding Interest
on Deposits 134 118 430 309
---- ---- ------ ------
Income Before Income Taxes and Fixed
Charges, Excluding Interest on Deposits 514 428 1,521 1,185
Interest on Deposits 309 225 952 583
---- ---- ------ ------
Income Before Income Taxes and Fixed
Charges, Including Interest on Deposits $823 $653 $2,473 $1,768
==== ==== ====== ======
FIXED CHARGES
- -------------
Interest Expense, Excluding Interest
on Deposits $126 $110 $ 405 $ 284
One-Third Net Rental Expense* 8 8 25 25
---- ---- ------ ------
Total Fixed Charges, Excluding Interest
on Deposits 134 118 430 309
Interest on Deposits 309 225 952 583
---- ---- ------ ------
Total Fixed Charges, Including Interest
on Deposits $443 $343 $1,382 $ 892
==== ==== ====== ======
PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ 4 $ 4 $ 12 $ 17
- ---------------------------------------- ==== ==== ====== ======
EARNINGS TO FIXED CHARGES RATIOS
- --------------------------------
Excluding Interest on Deposits 3.84x 3.63x 3.54x 3.83x
Including Interest on Deposits 1.86 1.90 1.79 1.98
EARNINGS TO COMBINED FIXED CHARGES
& PREFERRED STOCK DIVIDENDS RATIOS
- ----------------------------------
Excluding Interest on Deposits 3.72 3.51 3.44 3.63
Including Interest on Deposits 1.84 1.88 1.77 1.94
* 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 Septemeber 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,909
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<INVESTMENTS-CARRYING> 3,090
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<SHORT-TERM> 7,558
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0
113
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<NET-INCOME> 673
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</TABLE>
