<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, 1998
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)
One 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 760,662,982 shares as of October 30, 1998.
<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, 1998 and December 31, 1997 3
Consolidated Statements of Income
For the Three Months and Nine Months
Ended September 30, 1998 and 1997 4
Consolidated Statement of Changes In
Shareholders' Equity For the Nine
Months Ended September 30, 1998 5
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
1998 and 1997 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 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURE 28
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------------------------------------------------------
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(Unaudited) (Note)
<S> <C> <C>
Assets
- ------
Cash and Due from Banks $ 7,693 $ 5,769
Interest-Bearing Deposits in Banks 2,667 2,126
Securities:
Held-to-Maturity (fair value of $966 in
1998 and $1,106 in 1997) 996 1,127
Available-for-Sale 4,915 5,501
------- -------
Total Securities 5,911 6,628
Trading Assets at Fair Value 2,460 2,616
Federal Funds Sold and Securities Purchased
Under Resale Agreements 1,143 2,820
Loans (less allowance for loan losses
of $638 in 1998 and $641 in 1997) 37,868 34,486
Premises and Equipment 850 835
Due From Customers on Acceptances 1,121 1,187
Accrued Interest Receivable 340 356
Other Assets 3,759 3,138
------- -------
Total Assets $63,812 $59,961
======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits
Noninterest-Bearing (principally
domestic offices) $11,209 $12,561
Interest-Bearing
Domestic Offices 15,769 15,607
Foreign Offices 17,514 13,189
------- -------
Total Deposits 44,492 41,357
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,807 2,329
Other Borrowed Funds 5,230 4,673
Acceptances Outstanding 1,132 1,196
Accrued Taxes and Other Expenses 2,163 1,910
Accrued Interest Payable 173 182
Other Liabilities 479 503
Long-Term Debt 2,022 1,809
------- -------
Total Liabilities 57,498 53,959
------- -------
Guaranteed Preferred Beneficial Interests in
the Company's Junior Subordinated Deferrable
Interest Debentures 1,300 1,000
------- -------
Class A Preferred Stock - par value $2.00
per share, authorized 5,000,000 shares,
outstanding 22,800 shares in 1998 and
23,844 shares in 1997 1 1
Common Stock - par value $7.50 per share,
authorized 1,600,000,000 shares, issued
953,810,729 shares in 1998 and
920,425,238 shares in 1997 7,154 6,904
Additional Capital 72 12
Retained Earnings 1,110 529
Accumulated Other Comprehensive Income 221 285
------- -------
8,558 7,731
Less: Treasury Stock - 195,994,250 shares in
1998 and 170,641,008 shares in 1997, at cost 3,529 2,714
Loan to ESOP - 2,113,658 shares, at cost 15 15
------- -------
Total Shareholders' Equity 5,014 5,002
------- -------
Total Liabilities and Shareholders' Equity $63,812 $59,961
======= =======
- ------------------------------------------------------------------------------
<FN>
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date.
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE> 4
<TABLE>
- --------------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income
- ---------------
Loans $ 708 $ 766 $ 2,073 $ 2,278
Securities
Taxable 64 59 209 178
Exempt from Federal
Income Taxes 16 9 46 26
----- ----- ----- -----
80 68 255 204
Deposits in Banks 44 45 127 118
Federal Funds Sold and Securities
Purchased Under Resale
Agreements 68 37 140 105
Trading Assets 6 5 15 16
----- ----- ----- -----
Total Interest Income 906 921 2,610 2,721
----- ----- ----- -----
Interest Expense
- ----------------
Deposits 367 331 1,034 960
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 38 30 104 88
Other Borrowed Funds 52 42 154 124
Long-Term Debt 34 32 100 94
----- ----- ----- -----
Total Interest Expense 491 435 1,392 1,266
----- ----- ----- -----
Net Interest Income 415 486 1,218 1,455
- -------------------
Provision for Loan Losses 5 60 15 180
----- ----- ----- -----
Net Interest Income After
Provision for Loan Losses 410 426 1,203 1,275
----- ----- ----- -----
Noninterest Income
- ------------------
Processing Fees
Securities 258 202 726 577
Cash 66 63 193 177
----- ----- ----- -----
324 265 919 754
Trust and Investment Fees 53 46 154 134
Service Charges and Fees 81 92 248 280
Securities Gains 51 51 125 91
Other 63 50 239 189
----- ----- ----- -----
Total Noninterest Income 572 504 1,685 1,448
----- ----- ----- -----
Noninterest Expense
- -------------------
Salaries and Employee Benefits 294 269 863 789
Net Occupancy 41 42 126 126
Furniture and Equipment 22 23 63 70
Other 124 139 368 399
----- ----- ----- -----
Total Noninterest Expense 481 473 1,420 1,384
----- ----- ----- -----
Income Before Income Taxes 501 457 1,468 1,339
Income Taxes 175 165 519 488
Distribution on Trust Preferred
Securities 25 19 70 45
----- ----- ----- -----
Net Income $ 301 $ 273 $ 879 $ 806
- ---------- ===== ===== ===== =====
Net Income Available to
- -----------------------
Common Shareholders $ 301 $ 270 $ 879 $ 799
------------------- ===== ===== ===== =====
Per Common Share Data:
- ----------------------
Basic Earnings $0.40 $0.36 $1.18 $1.05
Diluted Earnings 0.39 0.34 1.13 0.98
Cash Dividends Paid 0.14 0.12 0.40 0.36
Diluted Shares Outstanding 779 801 781 812
- --------------------------------------------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE>
- -------------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statement of Changes in Shareholders' Equity
For the nine months ended September 30, 1998
(In millions)
(Unaudited)
<CAPTION>
<S> <C>
Preferred Stock
Balance, January 1 $ 1
-------
1
Balance, September 30 -------
Common Stock
Balance, January 1 6,904
Exercise of Warrants 200
Other Issuances 50
-------
Balance, September 30 7,154
-------
Additional Capital
Balance, January 1 12
Exercise of Warrants 7
Other 53
-------
Balance, September 30 72
-------
Retained Earnings
Balance, January 1 529
Net Income 879
Cash Dividends
Common Stock (298)
-------
Balance, September 30 1,110
-------
Accumulated Other Comprehensive Income
Securities Valuation Allowance
Balance, January 1 320
Change in Fair Value of Securities
Available-for-Sale, Net of $27 Million
in Taxes 26
Reclassification Adjustment,
Net of $45 Million in Taxes (90)
-------
Balance, September 30 256
-------
Foreign Currency Items
Balance, January 1 (35)
Foreign Currency Translation Adjustment, (-)
-------
Balance, September 30 (35)
-------
Less: Treasury Stock
Balance, Janaury 1 2,714
Issued (89)
Acquired 904
-------
Balance, September 30 3,529
-------
Less Loan to ESOP
Balance, January 1 15
-------
Balance, September 30 15
-------
Total Shareholders' Equity, September 30 $ 5,014
=======
- -------------------------------------------------------------------------------
<FN>
Comprehensive Income for the three months ended September 30, 1998 and
1997 was $167 million and $381 million.
Comprehensive Income for the nine months ended September 30, 1998 and
1997 was $814 million and $980 million.
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE> 6
<TABLE>
- -------------------------------------------------------------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
<CAPTION>
For the nine months ended
September 30,
1998 1997
---- ----
<S> <C> <C>
Operating Activities
Net Income $ 879 $ 806
Adjustments to Determine Net Cash Provided (Used)
by Operating Activities
Provision for Losses on Loans and Other Real Estate 16 181
Depreciation and Amortization 138 154
Deferred Income Taxes 209 190
Securities Gains (125) (91)
Change in Trading Activities 103 (325)
Change in Accruals and Other, Net (995) 184
------- -------
Net Cash Provided by Operating Activities 225 1,099
------- -------
Investing Activities
Change in Interest-Bearing Deposits in Banks (456) (662)
Purchases of Securities Held-to-Maturity (505) (234)
Maturities of Securities Held-to-Maturity 637 278
Purchases of Securities Available-for-Sale (1,885) (1,034)
Sales of Securities Available-for-Sale 1,704 394
Maturities of Securities Available-for-Sale 731 614
Net Principal Disbursed on Loans to Customers (2,645) (3,173)
Sales of Loans and Other Real Estate 204 1,263
Change in Federal Funds Sold and Securities
Purchased Under Resale Agreements 1,677 (2,596)
Purchases of Premises and Equipment (66) (30)
Acquisitions, Net of Cash Acquired (445) (178)
Proceeds from the Sale of Premises and Equipment 48 -
Other, Net (80) (75)
------- -------
Net Cash Used by Investing Activities (1,081) (5,433)
------- -------
Financing Activities
Change in Deposits 3,035 3,302
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements (522) 199
Change in Other Borrowed Funds 544 561
Proceeds from the Issuance of Trust
Preferred Securities 300 400
Proceeds from the Issuance of Long-Term Debt 270 25
Repayments of Long-Term Debt (34) (16)
Issuance of Common Stock 399 226
Treasury Stock Acquired (904) (1,058)
Cash Dividends Paid (298) (284)
------- -------
Net Cash Provided by Financing Activities 2,800 3,355
------- -------
Effect of Exchange Rate Changes on Cash (20) (4)
------- -------
Change in Cash and Due From Banks 1,924 (983)
Cash and Due from Banks at Beginning of Period 5,769 6,032
------- -------
Cash and Due from Banks at End of Period $ 7,693 $ 5,049
======= =======
- -----------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 1,401 $ 1,267
Income Taxes 229 263
Noncash Investing Activity (Primarily Foreclosure
of Real Estate) 7 7
- -----------------------------------------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE> 7
THE BANK OF NEW YORK COMPANY, INC.
Notes to Consolidated Financial Statements
1. General
-------
The accounting and reporting policies of The Bank of New York
Company, Inc. (the Company), a bank holding company, and its
subsidiaries, conform with generally accepted accounting principles
and general practice within the banking industry. Such policies 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) 1998 1997
----- -----
Balance, Beginning of Period $ 641 $ 901
Charge-offs (42) (355)
Recoveries 20 45
----- -----
Net Charge-Offs (22) (310)
Acquisition 4 -
Provision 15 180
----- -----
Balance, End of Period $ 638 $ 771
===== =====
<PAGE> 8
3. Capital Transactions
--------------------
As of October 31, 1998, the Company has approximately 1.0 million
shares remaining to repurchase under its share buyback program.
During the third quarter of 1998, warrant holders converted 1.0
million warrants into 8.2 million common shares, providing the Company
with $64 million in capital. In October 1998, warrant holders
converted an additional 0.7 million warrants into 5.5 million common
shares, providing the Company with $43 million in capital.
On May 12, 1998 the Company's shareholders authorized an increase
in the Company's capital stock from 800 million common shares to 1.6
billion common shares. The stock was split two-for-one on August 13,
1998 to shareholders of record on July 24, 1998. Prior period
financial statements have been restated to reflect the stock split.
4. New Accounting Pronouncements
-----------------------------
On January 1, 1998, a new accounting pronouncement related to
comprehensive income was adopted. Unrealized gains or losses on
available-for-sale securities and foreign currency translation
adjustments, which were reported separately in shareholders' equity,
are now included in other comprehensive income. Prior periods have
been restated for these changes.
Effective January 1, 2000, a new accounting standard will require
the Company to record all derivatives on the balance sheet at fair
value and apply new accounting practices for hedging activities. The
Company has not yet determined the impact of the new accounting
standard on the Company's financial position and results of
operations.
<PAGE> 9
5. Earnings Per Share
------------------
The following table illustrates the computations of basic and
diluted earnings per share for the three and nine months ended
September 30, 1998 and 1997:
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
Net Income $301 $273 $879 $806
Preferred Stock Dividends - (3) - (7)
---- ---- ---- ----
Net Income Available to
Common Shareholders $301 $270 $879 $799
==== ==== ==== ====
Basic Weighted Average
Shares Outstanding 751 754 746 764
Shares Issued on Conversion:
Warrants 16 34 22 34
Employee Stock Options 12 13 13 14
---- ---- ---- ----
Diluted Weighted Average
Shares Outstanding 779 801 781 812
==== ==== ==== ====
Earnings Per Share:
Basic $ 0.40 $ 0.36 $ 1.18 $ 1.05
Diluted 0.39 0.34 1.13 0.98
6. Commitments and Contingent Liabilities
--------------------------------------
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> 10
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
The Company's actual results of future operations may differ from
those set forth in certain forward-looking statements contained
herein. Refer to further discussion under the heading "Forward Looking
Statements".
The Company's reported third quarter diluted earnings per share
were 39 cents, up 15% from the 34 cents earned in the third quarter of
1997. Third quarter net income was $301 million, up 10% from $273
million earned in the same period last year. Diluted earnings per
share were $1.13 for the first nine months of 1998, up 15% from the
$0.98 earned last year. Net income for the first nine months was a
record $879 million, an increase of 9% over last year's $806 million.
Third quarter results were driven by strong growth across
diversified fee based businesses. Record securities trading volumes,
new business wins, and market share gains pushed securities servicing
fees up 27% and trust and investment fees up 15%. As a result, fee
based revenue and noninterest income contributed 58% of revenues.
Additional highlights for the quarter were consistent and favorable
foreign exchange results, reductions in nonperforming assets, and
continued control of operating expenses.
In securities servicing, revenue growth was led by ADRs, domestic
and global custody, stock transfer, and UIT. The ADR business
continues its strong performance with trading volumes on U.S.
exchanges in the third quarter up 38% from a year ago. In addition,
the Company was named as agent on 34 new programs during the quarter.
Domestic and global custody continued to gain momentum from new
business wins. Trust and investment's performance, in the face of
generally declining equity markets, was the result of strong relative
investment performance creating continued new business flow. Financial
discipline remained a hallmark for the Company, as the efficiency
ratio was 50.6%.
These favorable results contributed to a return on average common
equity for the third quarter of 1998 of 24.19% compared 24.03% in the
second quarter of 1998 and 22.06% in the third quarter of 1997. Return
on average assets for the third quarter of 1998 was 1.86% compared
with 1.90% in the second quarter of 1998 and 1.81% in the third
quarter of 1997. For the first nine months of 1998, return on average
common equity totaled 24.39% compared with 21.59% in 1997. Return on
average assets was 1.90% for the first nine months of 1998 compared
with 1.83% in 1997.
<PAGE> 11
Tangible diluted earnings per share (earnings before the
amortization of goodwill and intangibles) were 41 cents per share in
the third quarter of 1998, up 14% from 36 cents per share in the third
quarter of 1997. On the same basis, tangible return on average common
equity was 37.56% in the third quarter of 1998 compared with 32.29% in
the third quarter of 1997; and tangible return on average assets was
2.03% in the third quarter of 1998 compared with 2.00% in the third
quarter of 1997. Tangible diluted earnings per share were $1.20 per
share for the first nine months of 1998, compared with $1.06 per share
in 1997. Tangible return on average common equity was 37.47% in the
first nine months of 1998 compared with 31.18% in 1997; and tangible
return on average assets was 2.07% in the first nine months 1998
compared with 2.02% last year.
Net interest income on a taxable equivalent basis for the third
quarter rose to $430 million from $424 million in the second quarter
due to growth in liquid investments related to substantial increases
in customer driven deposits from the Company's global securities
servicing clients. Revenues from the Company's securities servicing
businesses reached $258 million for the third quarter and $726 million
for the first nine months of 1998, up 27% and 26% compared with the
corresponding periods of the prior year. Strong internal growth of 16%
was spread over all of the Company's securities servicing businesses.
In cash processing, fees from funds transfer grew by 8% from the
previous year, the result of continued market share gains partially
offset by reduced levels of global trade activity. Trade finance
revenues were flat with a year ago as the decline in letter of credit
volume was mitigated by improving margins. For the quarter, overall
cash processing fees grew by 5% from a year ago reaching $66 million.
Trust and investment fees were $53 million for the quarter, an
increase of 15% over last year, the result of focused and aggressive
new business efforts. Notwithstanding the turmoil in the global
financial markets, foreign exchange and other trading revenues were
$30 million compared with $35 million last year and $42 million in the
second quarter of 1998 reflecting the customer driven nature of this
business.
Average diluted shares outstanding were 779 million for the
quarter, down from the 783 million in the second quarter of 1998 and
801 million in the third quarter a year ago as a result of the
Company's stock buyback programs.
<PAGE> 12
CAPITAL
- -------
The Company's estimated Tier 1 capital and Total capital ratios
remained strong at 7.48% and 11.59% at September 30, 1998 compared
with 7.25% and 11.24% at June 30, 1998 and 7.61% and 11.62% at
September 30, 1997. Tangible common equity as a percent of total
assets was 5.59% at September 30, 1998 compared with 5.55% at June 30,
1998 and 5.99% one year ago. The leverage ratio was 7.24% at September
30, 1998 compared with 7.17% at June 30, 1998 and 7.82% one year ago.
NET INTEREST INCOME
- -------------------
3rd 2nd 3rd Year-to-date
Quarter Quarter Quarter ------------
(Dollars in millions) 1998 1998 1997 1998 1997
---- ---- ---- ---- ----
Net Interest Income $430 $424 $495 $1,258 $1,480
Net Interest Rate
Spread 2.14% 2.27% 2.98% 2.21% 3.13%
Net Yield on Interest-
Earning Assets 3.15 3.28 4.02 3.25 4.11
Net interest income on a taxable equivalent basis was $430
million in the third quarter of 1998 compared with $424 million in the
second quarter of 1998 and $495 million in the third quarter of 1997.
The net interest rate spread was 2.14% in the third quarter of 1998,
compared with 2.27% in the second quarter of 1998 and 2.98% one year
ago. The net yield on interest-earning assets was 3.15% compared with
3.28% in the second quarter of 1998 and 4.02% in last year's third
quarter.
For the first nine months of 1998, net interest income on a
taxable equivalent basis, amounted to $1,258 million compared with
$1,480 million in the first nine months of 1997. The year-to-date net
interest rate spread was 2.21% in 1998 compared with 3.13% in 1997,
while the net yield on interest-earning assets was 3.25% in 1998 and
4.11% in 1997.
The increase in net interest income and the decline in the net
interest rate spread from the second quarter were the result of growth
in highly liquid but lower yielding assets, related to substantial
increases in short-term deposits from our securities servicing client
base. The declines from the third quarter of 1997 were primarily the
result of the sale of the credit card business.
Interest lost on loans on nonaccrual status at September 30, 1998
and 1997 reduced net interest income by $2 million and $4 million for
<PAGE> 13
the three months ended September 30, 1998 and 1997, and by $8 million
and $10 million for the nine months ended September 30, 1998 and 1997.
NONINTEREST INCOME
- ------------------
3rd Quarter Year-to-date
----------- --------------
(In millions) 1998 1997 1998 1997
---- ---- ------ ----
Processing Fees
Securities $258 $202 $ 726 $ 577
Cash 66 63 193 177
---- ---- ------ ------
324 265 919 754
Trust and Investment Fees 53 46 154 134
Service Charges and Fees 81 92 248 280
Foreign Exchange and
Other Trading Activities 30 35 118 87
Securities Gains 51 51 125 91
Other 33 15 121 102
---- ---- ------ ------
Total Noninterest Income $572 $504 $1,685 $1,448
==== ==== ====== ======
Securities servicing fees increased 27% to $258 million compared
with $202 million in the third quarter of 1997. Strong internal growth
across all areas reached 16%, with remaining growth coming from
acquisitions made during 1997. In the first nine months of 1998,
securities servicing fees were $726 million compared with $577 million
in 1997. Third quarter service charges and fees of $81 million were
down from $85 million in the second quarter. This was due to a decline
in syndication activity which, while still strong, was below second
quarter levels. Service charges and fees were down from $92 million in
the third quarter of 1997 reflecting the loss of revenue associated
with the sale of the credit card business, partially offset by growth
in factoring commissions related to U.K. asset based lending
acquisitions. Revenues from foreign exchange and other trading
activities were $30 million in the third quarter of 1998 compared with
$42 million in the second quarter of 1998 and $35 million in the third
quarter of 1997. The Company reported $51 million of securities gains
in the third quarter of 1998, the same level as a year ago.
<PAGE> 14
TRADING ACTIVITIES
- ------------------
The fair value and notional amounts of the Company's financial
instruments held for trading purposes at September 30, 1998 are as
follows:
3rd Quarter 1998
September 30, 1998 Average
---------------------------- -------------------
(In millions) Fair Value Fair Value
Notional ------------------ -------------------
Trading Account Amount Assets Liabilities Assets Liabilities
- --------------- -------- ------ ----------- ------ -----------
Interest Rate Contracts:
Futures and Forward
Contracts $19,379 $ 7 $ - $ 9 $ -
Swaps 36,602 445 293 262 201
Written Options 49,190 - 353 - 205
Purchased Options 26,168 110 - 34 -
Foreign Exchange Contracts:
Swaps 34 - - - -
Written Options 56,725 - 463 - 545
Purchased Options 60,163 459 - 510 -
Commitments to Purchase
and Sell Foreign Exchange 58,588 554 532 487 473
Securities 885 125 843 82
------ ------ ------ ------
Total Trading Account $2,460 $1,766 $2,145 $1,506
====== ====== ====== ======
Typically, the Company does not take directional risk, but on
occasion residual risk is created in the process of acting as a market
maker for the Company's customers. This residual risk is managed by
the Company's traders and is limited in total exposure as described
below.
The Company manages trading risk through a system of position
limits, a value at risk (VAR) methodology, stop loss advisory
triggers, and other market sensitivity measures. Risk is monitored and
reported to senior management by an independent unit on a daily basis.
The VAR methodology captures, based on certain assumptions, the
potential overnight pre-tax dollar loss from adverse changes in fair
values of all trading positions. The calculation assumes a one day
holding period for most instruments, utilizes a 99% confidence level,
and incorporates the non-linear characteristics of options. This
methodology does not attempt to evaluate risk created from
extraordinary financial, economic or other occurrences, some of which
have recently occurred, and any risk evaluation system has judgmental
aspects.
<PAGE> 15
The following table indicates the calculated VAR amounts for the
trading portfolio for the periods indicated. During these periods, the
daily trading loss did not exceed the calculated VAR amounts on any
given day.
(In millions) 3rd Quarter 1998 Year-to-date
-------------------------- ------------------------- As of
Market Risk Average Minimum Maximum Average Minimum Maximum 9/30/98
- ----------- ------- ------- ------- ------- ------- ------- -------
Interest Rate $3.3 $1.5 $6.4 $4.3 $1.5 $7.0 $4.3
Foreign Exchange 2.6 1.1 4.8 2.3 0.8 4.8 2.9
Overall Portfolio 5.9 2.8 9.7 6.6 2.8 9.7 7.2
NONINTEREST EXPENSE AND INCOME TAXES
- ------------------------------------
Total noninterest expense for the quarter was $481 million, up
only 2% from $473 million in the same period last year. Year-to-date
noninterest expense was $1,420 million compared with $1,384 million in
1997, a 3% increase. Noninterest expense for the third quarter
included $8 million, approximately 1 cent per share, related to making
computer systems Year 2000 compliant. For the first nine months of
1998, Year 2000 expenses were $25 million or approximately 2 cents per
share.
The efficiency ratio for the third quarter of 1998 was 50.6%
compared with 50.3% in the second quarter of 1998 and 50.1% for the
third quarter of 1997. For the first nine months of 1998, the
efficiency ratio was 50.3% compared with 48.8% last year. The upward
move from a year ago in the efficiency ratio is primarily attributable
to the sale of the Company's credit card operations and higher Year
2000 systems expenses.
The effective tax rate for the third quarter and first nine
months of 1998 was 35.1% and 35.4% compared with 36.1% and 36.4% last
year.
<PAGE> 16
NONPERFORMING ASSETS
- --------------------
Change
9/30/98 vs.
(Dollars in millions) 9/30/98 6/30/98 6/30/98
------- ------- -----------
Loans:
Commercial Real Estate $ 36 $ 35 $ 1
Other Commercial 56 61 (5)
Foreign 40 37 3
Community Banking 45 49 (4)
---- ---- ---
Total Loans 177 182 (5)
Other Real Estate 18 17 1
---- ---- ---
Total $195 $199 $(4)
==== ==== ===
Nonperforming Assets Ratio 0.5% 0.5%
Allowance/Nonperforming Loans 360.4 356.1
Allowance/Nonperforming Assets 327.8 324.9
Nonperforming assets totaled $195 million at September 30, 1998,
compared with $199 million at June 30, 1998, a decrease of $4 million.
This was the twenty-ninth consecutive quarter of nonperforming asset
decreases.
At September 30, 1998, impaired loans (nonaccrual loans over $1
million) aggregated $138 million, of which $106 million exceeded their
fair value by $36 million. Impaired loans at September 30, 1997,
totaled $155 million, of which $120 million exceeded their fair value
by $56 million. For the third quarters of 1998 and 1997, the average
amount of impaired loans was $139 million and $152 million. No
interest income (cash received) was received on the impaired loans in
the third quarter of 1998, while $140 thousand was received during the
third quarter of 1997.
<PAGE> 17
LOAN LOSS PROVISION AND NET CHARGE-OFFS
- ---------------------------------------
3rd 2nd 3rd Year-to-date
Quarter Quarter Quarter ------------
In millions) 1998 1998 1997 1998 1997
------- ------- ------- ---- ----
Provision $ 5 $ 5 $ 60 $ 15 $180
==== ==== ==== ==== ====
Net(Charge-offs)
Recoveries:
Commercial Real Estate 5 1 1 7 2
Other Commercial (16) (3) (26) (22) (35)
Other Consumer (1) (1) (1) (3) (3)
Foreign (1) - 1 (2) 4
Other - (1) (1) (2) (2)
Credit Card - - (95) - (276)
---- ---- ----- ---- -----
Total $(13) $ (4) $(121) $(22) $(310)
==== ==== ===== ==== =====
Other Real Estate Expense $ - $ - $ (2) $ 1 $ (1)
(Recoveries)
The allowance for loan losses was $638 million, or 1.66% of loans
at September 30, 1998 compared with $646 million, or 1.65% of loans at
June 30, 1998 and $771 million, or 2.01% of loans at September 30,
1997. The ratio of the allowance to nonperforming assets was 327.8% at
September 30, 1998 compared with 324.9% at June 30, 1998 and 326.5% at
September 30, 1997.
SECTOR PROFITABILITY
- --------------------
The Company has an internal information system used for
management purposes that produces sector performance data for Trust,
Securities Servicing and Cash Processing; Corporate Banking; Retail
Banking; and Other Sectors. A set of measurement principles has been
developed to help insure 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. Prior year results have been restated
to reflect the transfer of leasing operations from the Other Sector to
the Corporate Banking Sector. Changes were also made in the allocation
of equity to sectors.
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
<PAGE> 18
charge-offs incurred by each sector. Assets and liabilities are match
funded.
The Trust, Securities Servicing, and Cash Processing Sector
provides a broad array of fee based services. Trust includes personal
trust and investment management. Securities Servicing includes
services to both institutional issuers and investors. Cash Processing
products relate primarily to funds transfer, deposit services and
trade finance. The Retail Banking Sector includes consumer lending,
residential mortgage lending, and retail deposit services. The Retail
Banking Sector ceased credit card lending during 1997. The Corporate
Banking Sector is divided into specialty industries banking, U.S.
commercial banking, regional commercial banking, international
banking, leasing, and asset based lending. The Other Sector 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 the other sectors.
Based on this system, the sectors contributed to the Company's
profitability for the third quarter and first nine months of 1998 and
1997 as follows:
Trust,
Securities
Servicing
and Cash Corporate Retail
(In millions) Processing Banking Banking Other Total
---------- ---------- ---------- ---------- -----------
3rd Quarter 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net Interest Income
on a Taxable
Equivalent Basis $ 90 $ 73 $205 $176 $132 $244 $ 4 $ 2 $431 $495
Provision for
Loan Losses - - 12 25 1 96 (8) (61) 5 60
Noninterest Income 396 332 74 66 24 48 78 58 572 504
Noninterest Expense 262 221 67 64 103 141 50 47 482 473
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Income Before Taxes $224 $184 $200 $153 $ 52 $ 55 $40 $74 $516 $466
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Trust,
Securities
Servicing
and Cash Corporate Retail
(In millions) Processing Banking Banking Other Total
---------- ---------- ---------- ---------- -----------
Year-to-date 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net Interest Income
on a Taxable
Equivalent Basis $ 268 $222 $590 $532 $391 $720 $10 $ 6 $1,259 $1,480
Provision for
Loan Losses - - 18 32 4 279 (7) (131) 15 180
Noninterest Income 1,142 951 243 199 64 139 235 159 1,685 1,448
Noninterest Expense 779 654 210 177 274 413 157 140 1,420 1,384
----- ---- ---- ---- ---- ---- ---- ---- ------ ------
Income Before Taxes $ 631 $519 $605 $522 $177 $167 $95 $156 $1,509 $1,364
===== ==== ==== ==== ==== ==== ==== ==== ====== ======
<PAGE> 19
Trust, Securities Servicing, and Cash Processing
- ------------------------------------------------
The 23% increase in net interest income for the third quarter is
attributable to substantial increases in customer driven deposits from
the Company's global securities servicing clients. Securities
servicing fees increased 27% to $258 million compared with $202
million in the third quarter of 1997. In the first nine months of
1998, securities servicing fees were $726 million compared with $577
million in 1997. Strong internal growth of 16% was spread over all
the Company's businesses with ADRs, global custody, domestic custody,
UIT, and stock transfer performing particularly well. Fee revenues
from issuer services, investment company services, and broker/dealer
services were $105 million, $76 million, and $77 million in the third
quarter of 1998 compared with $80 million, $68 million, and $54
million in 1997.
In cash processing, fees from funds transfer for the third
quarter grew by 8% over the previous year, the result of continued
market share gains partially offset by reduced levels of global trade
activity. Trade finance revenues were flat with a year ago as the
decline in letter of credit volume was mitigated by improving margins.
For the quarter, overall cash processing fees grew by 5% from a year
ago reaching $66 million.
Trust and investment's performance, in the face of generally
declining equity markets, was the result of strong relative investment
performance creating continued new business flows.
The rise in noninterest expense is primarily related to the
above-mentioned growth.
Retail Banking
- --------------
The decrease in net interest income, provision for loan losses,
noninterest income, and noninterest expense in the Retail Banking
Sector principally reflects the sale of the Company's credit card
business in 1997. Net interest income in the Retail Banking Sector's
branch network benefited from more favorable interest rate spreads in
the third quarter of 1998 compared to the third quarter last year.
Operating expenses and net interest income relating to branch banking
decreased in part due to the sale of eleven retail branches in
November 1997.
<PAGE> 20
Corporate Banking
- -----------------
Net interest income increased in the Corporate Banking Sector due
to strong loan growth and acquisitions related to the asset based
lending business for both the quarter and year to date. In the third
quarter of 1998, average loans outstanding in the Corporate Banking
Sector increased 16% from the third quarter of last year. Both the
quarter and year to date increases in noninterest income reflect
higher asset based lending revenue and syndication fees, offset by
lower income from the Company's offshore banking subsidiaries. The
increase in noninterest expense is partially due to acquisitions
related to the asset based lending business.
Other
- -----
The Other Sector reflects the difference between the total
provision for loan losses and that charged off by the sectors. The
Company reported $51 million of securities gains in the third quarter
of both 1997 and 1998. Noninterest income for the first nine months of
1998 includes a pre-tax gain of $29 million on the sale of the
Company's property at 48 Wall Street. Noninterest income for the first
nine months of last year includes a $27 million pre-tax gain on the
sale of a portion of the Company's interest in Wing Hang Bank, Ltd.
YEAR 2000 READINESS
- -------------------
The Company's Year 2000 compliance program consists of updating
major Company-owned application systems, business-area supported
systems, and the Company's proprietary customer software and
evaluating the Year 2000 compliance efforts of vendors of major
vendor-supplied systems. The Company's compliance efforts have also
focused on assessing the Year 2000 readiness of its service providers,
business partners, and borrowers and contingency planning.
The Company has divided its major proprietary applications
systems into three business line groups. The applications in each
group are subjected to a four-phase process of assessment, renovation,
certification testing, and implementation. The critical systems in two
of the groups have completed all four phases. In the third group,
critical applications appear to be Year 2000 compliant except for
final certification testing which is expected to be completed by
December 31, 1998. Compliant versions of substantially all
applications are currently in use. Major business-line products are
being made available in isolated future-dated environments for
customers to test their interfaces and to assure themselves of the
Company's compliance.
<PAGE> 21
The Company has identified its critical vendor-supplied systems.
The Company expects all but one of these systems to be Year 2000
compliant by December 31, 1998. The Company expects to receive a Year
2000 compliant version of the remaining system in May 1999.
One third of the Company's business-area supported systems has
been designated as exempt from the Year 2000 compliance effort as
those systems are scheduled to be retired or replaced. An additional
third has been successfully tested or is undergoing certification
testing. The remaining third is scheduled to complete testing by March
31, 1999.
Remediation of the Company's proprietary customer software has
been completed. Although some products await final data center
acceptance testing, installation on client desktop computers is
expected to be complete by July 1999. Customers have been advised of
their obligation to assure that their environments are compliant in
order for the Company's software to function correctly during and
after the century date change.
The Company has developed an inventory of its business partners,
including other financial service providers, correspondents,
counterparties, sub-custodians, vendors and settlement agencies, for
the purpose of assessing their Year 2000 compliance. The Company is
conducting a review of the Year 2000 readiness of each significant
third party. The Company is prepared to replace service providers that
are seen as not managing the Year 2000 issue adequately. All third
party assessments are scheduled to be completed by the end of 1998. If
necessary, alternative service providers will be retained during the
first half of 1999.
The Company considers Year 2000 readiness in its credit decisions
and factors this into borrower ratings. Based on a review of
significant obligors, the Company believes that exposure to obligor
Year 2000 problems does not present a material risk to the Company.
Upgrade of the Company's personal computers and physical
facilities to be Year 2000 ready is not considered critical to the
Company's operations.
The Company's contingency plans relating to Year 2000 issues
include the identification and assessment of the impact of various
worst case scenarios on the critical operational components for each
of the Company's business units. The Company is in the process of
reviewing the applicability of its current contingency plan and
expects to complete modifications to the Plan by June 30, 1999.
The Company's Year 2000 compliance program is currently on
schedule to meet the needs of its customers and compliance deadlines
defined by its regulators. The estimated cost of the Year 2000 project
<PAGE> 22
is approximately $82 million, of which $43 million has been spent at
September 30, 1998.
A material Year 2000 problem could result in an interruption in,
or a failure of, certain normal business activities or operations.
Such problems could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of suppliers,
customers and other business partners, the Company is unable to
determine at this time whether the consequences of the Year 2000
failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 compliance
program is intended to significantly reduce the Company's level of
uncertainty about the Year 2000 problem and, in particular, about the
Year 2000 compliance and readiness of its material business partners.
The Company believes that, with completion of its Year 2000-compliance
program as scheduled, the possibility of significant interruptions of
normal operations should be reduced. However, because of the
unprecedented nature of this issue, there can be no certainty as to
its impact.
Readers are cautioned that forward-looking statements contained
in the Year 2000 section should be read in conjunction with the
Company's disclosure under the heading "Forward Looking Statements",
below.
INTRODUCTION OF THE EURO
- ------------------------
In January 1999, eleven European countries will adopt the euro as
their common legal currency. In the transition period from adoption
through December 31, 2001, commerce may be conducted in either the
euro or the former national currencies.
The Company has adapted its information technology systems and
business practices to attempt to accommodate euro-denominated
transactions. Affected systems have been identified, modifications
specified and necessary programming changes have already been
completed. Testing of those systems has begun and will conclude in the
fourth quarter of 1998. Customers have been notified of the changes in
the Company's business practices, Company-developed software
applications residing on customer computers will be revised or
replaced before year end.
The costs of the technology conversion and customer-related
efforts incurred through September 30, 1998 have approximated $8
million. The introduction of the euro currency may result in increased
price transparency in the euro-area countries as well as a loss of
cross-currency trading in the former national currencies, and may
<PAGE> 23
ultimately have profound political and financial implications. In
addition, there may be disruption of international payment and
settlement operations. Based on its knowledge at this time, however,
the Company does not, anticipate that the introduction of the euro
will have a material effect on its financial condition or results of
operations.
FORWARD LOOKING STATEMENTS
- --------------------------
The Company or its executive officers and directors on behalf of
the Company, may from time to time make forward looking statements. To
the extent that any forward looking statements are made, the Company
is necessarily unable to predict future changes in interests rates,
economic activity, consumer behavior, government monetary policy,
legislation and regulation, competition, and loan demand. In addition,
the Company's future results of operations and other forward looking
statements contained in Management's Discussion and Analysis and
elsewhere in this Form 10-Q involve a number of risks and
uncertainties, including risks relating to Year 2000 and the
introduction of the Euro (in particular, the Year 2000 and Euro-
readiness of third parties with which the Company does business). As a
result of variations in such factors, actual results may differ
materially from any forward looking statements. Some of these factors
are described below. The Company disclaims any obligation to update
forward looking statements.
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 and thus on the earnings of the Company.
Legislation and Regulation
- -----------------------------
Proposals to change the laws and regulations governing the
banking industry are frequently introduced in Congress, in the state
legislatures and before the various bank regulatory agencies. Such
changes could, among other things, increase the Company's overhead and
capital costs or reduce fees charged by the Company or increase
competition for banks. The likelihood and timing of any such changes
and the impact such changes might have on the Company and its
subsidiaries, however, cannot be determined at this time.
<PAGE> 24
Competition
- -----------
The 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. A wide
variety of domestic and foreign companies compete for processing
services
<PAGE> 25
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
<CAPTION>
For the three months For the three months
ended September 30, 1998 ended September 30, 1997
------------------------ ------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 3,247 $ 44 5.43% $ 3,207 $ 45 5.55%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 4,889 68 5.50 2,677 37 5.43
Loans
Domestic Offices 20,074 383 7.56 22,346 515 9.15
Foreign Offices 18,846 327 6.88 15,041 252 6.65
------- ----- ------- -----
Total Loans 38,920 710 7.23 37,387 767 8.14
------- ----- ------- -----
Securities
U.S. Government
Obligations 2,907 42 5.73 2,788 40 5.74
U.S. Government Agency
Obligations 465 8 6.67 360 6 6.47
Obligations of States and
Political Subdivisions 687 13 7.80 659 14 8.56
Other Securities,
including Trading
Securities 2,984 36 4.76 1,721 21 4.89
------- ----- ------- -----
Total Securities 7,043 99 5.58 5,528 81 5.86
------- ----- ------- -----
Total Interest-Earning
Assets 54,099 921 6.75% 48,799 930 7.56%
----- -----
Allowance for Loan Losses (646) (821)
Cash and Due from Banks 3,133 3,661
Other Assets 7,446 7,959
------- -------
TOTAL ASSETS $64,032 $59,598
======= =======
LIABILITIES AND
- ---------------
SHAREHOLDERS' EQUITY
- --------------------
Interest-Bearing Deposits
Money Market Rate
Accounts $ 5,078 62 4.87% $ 4,399 51 4.62%
Savings 7,645 50 2.60 7,874 50 2.53
Certificates of Deposit
$100,000 & Over 666 9 5.46 751 11 5.55
Other Time Deposits 2,228 27 4.78 2,421 31 5.07
Foreign Offices 17,542 219 4.94 15,044 188 4.96
------- ----- ------- -----
Total Interest-Bearing
Deposits 33,159 367 4.39 30,489 331 4.31
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 3,205 38 4.75 2,277 30 5.18
Other Borrowed Funds 3,827 52 5.31 3,053 42 5.54
Long-Term Debt 1,998 34 6.81 1,807 32 6.96
------- ----- ------- -----
Total Interest-Bearing
Liabilities 42,189 491 4.61% 37,626 435 4.59%
----- -----
Noninterest-Bearing
Deposits 10,220 9,795
Other Liabilities 5,391 6,205
Minority Interest-
Preferred Securities 1,300 1,000
Preferred Stock 1 112
Common Shareholders'
Equity 4,931 4,860
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $64,032 $59,598
======= =======
Net Interest Earnings
and Interest Rate Spread $ 430 2.14% $ 495 2.97%
===== ==== ===== ====
Net Yield on Interest-
Earning Assets 3.15% 4.02%
==== ====
</TABLE>
<PAGE> 26
<TABLE>
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Dollars in millions)
<CAPTION>
For the nine months For the nine months
ended September 30, 1998 ended September 30, 1997
------------------------ ------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 3,084 $ 127 5.51% $ 2,866 $ 118 5.49%
Federal Funds Sold and
Securities Purchased
Under Resale Agreements 3,466 140 5.39 2,587 105 5.42
Loans
Domestic Offices 19,620 1,137 7.76 22,529 1,563 9.28
Foreign Offices 18,234 938 6.88 14,704 718 6.53
------- ------ ------- ------
Total Loans 37,854 2,075 7.33 37,233 2,281 8.19
------- ------ ------- ------
Securities
U.S. Government
Obligations 3,211 139 5.77 2,742 119 5.79
U.S. Government Agency
Obligations 544 27 6.53 390 19 6.43
Obligations of States and
Political Subdivisions 669 41 8.08 645 42 8.63
Other Securities,
including Trading
Securities 2,933 101 4.61 1,652 62 5.10
------- ------ ------- ------
Total Securities 7,357 308 5.58 5,429 242 5.97
------- ------ ------- ------
Total Interest-Earning
Assets 51,761 2,650 6.84% 48,115 2,746 7.63%
------ ------
Allowance for Loan Losses (644) (843)
Cash and Due from Banks 3,400 3,820
Other Assets 7,456 7,703
------- -------
TOTAL ASSETS $61,973 $58,795
======= =======
LIABILITIES AND
- ---------------
SHAREHOLDERS' EQUITY
- --------------------
Interest-Bearing Deposits
Money Market Rate
Accounts $ 4,931 176 4.78% $ 4,183 141 4.49%
Savings 7,689 147 2.56 8,005 152 2.54
Certificates of Deposit
$100,000 & Over 689 28 5.49 721 29 5.44
Other Time Deposits 2,276 82 4.83 2,494 93 4.94
Foreign Offices 15,931 601 5.04 14,951 545 4.88
------- ------ ------- ------
Total Interest-Bearing
Deposits 31,516 1,034 4.39 30,354 960 4.23
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,974 104 4.65 2,256 88 5.20
Other Borrowed Funds 3,754 154 5.48 3,168 124 5.23
Long-Term Debt 1,935 100 6.85 1,810 94 6.91
------- ------ ------- ------
Total Interest-Bearing
Liabilities 40,179 1,392 4.63% 37,588 1,266 4.50%
------ ------
Noninterest-Bearing
Deposits 10,156 9,418
Other Liabilities 5,609 5,958
Minority Interest-
Preferred Securities 1,210 773
Preferred Stock 1 112
Common Shareholders'
Equity 4,818 4,946
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $61,973 $58,795
======= =======
Net Interest Earnings
and Interest Rate Spread $1,258 2.21% $1,480 3.13%
====== ===== ====== =====
Net Yield on Interest-
Earning Assets 3.25% 4.11%
==== ====
</TABLE>
<PAGE> 27
PART 2. OTHER INFORMATION
Item 5. Other Information
- -------------------------
A shareholder proposal submitted outside the process of Rule
14a-8 is considered untimely if it is not received by February 14,
1999.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The exhibits filed as part of this report are as follows:
Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Combined Fixed Charges, Distribution on
Trust Preferred Securities, and Preferred Stock Dividends for the
Three and Nine Months Ended September 30, 1998 and 1997.
Exhibit 27 - Statement Re: Financial Data Schedule containing
selected financial data at September 30, 1998 and for the Nine
Months Ended September 30, 1998.
(b) The Company filed the following reports on Form 8-K since
June 30, 1998:
On July 20, 1998, 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 1998 contained in the Company's press release dated
July 20, 1998.
On October 19, 1998, 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 1998 contained in the Company's press release dated
October 19, 1998
<PAGE> 28
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, 1998 By: \s\ Robert E. Keilman
-----------------------
Name: Robert E. Keilman
Title: Comptroller
<PAGE> 29
EXHIBIT INDEX
--------------
Exhibit Description
- ------- -----------
12 Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges, Distribution
on Trust Preferred Securities, and Preferred
Stock Dividends for the Three and Nine Months Ended
September 30, 1998 and 1997.
27 Financial Data Schedule containing selected
financial data at September 30, 1998 and for the
Nine Months Ended September 30, 1998.
<TABLE>
EXHIBIT 12
THE BANK OF NEW YORK COMPANY, INC.
Ratios of Earnings to Fixed Charges and Ratios
of Earnings to Combined Fixed Charges,
Distribution on Trust Preferred Securities
and Preferred Stock Dividends
(Dollars in millions)
<CAPTION>
Three Nine
Months Ended Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
EARNINGS
- --------
Income Before Income Taxes $ 501 $457 $1,468 $1,339
Fixed Charges, Excluding Interest
on Deposits 132 112 383 329
------ ---- ------ ------
Income Before Income Taxes and Fixed
Charges, Excluding Interest on Deposits 633 569 1,850 1,668
Interest on Deposits 367 331 1,034 960
------ ---- ------ ------
Income Before Income Taxes and Fixed
Charges, Including Interest on Deposits $1,000 $900 $2,884 $2,628
====== ==== ====== ======
FIXED CHARGES
- -------------
Interest Expense, Excluding Interest
on Deposits $ 124 $104 $ 358 $ 306
One-Third Net Rental Expense* 8 8 25 23
------ ---- ------ ------
Total Fixed Charges, Excluding Interest
on Deposits 132 112 383 329
Interest on Deposits 367 331 1,034 960
------ ---- ------ ------
Total Fixed Charges, Including Interest
on Deposits $499 $443 $1,417 $1,289
====== ==== ====== ======
DISTRIBUTION ON TRUST PREFERRED SECURITIES,
- -------------------------------------------
PRE-TAX BASIS
- ------------- $ 25 $ 19 $ 70 $ 45
====== ==== ====== ======
PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ - $ 4 $ - $ 12
- ---------------------------------------- ====== ==== ====== ======
EARNINGS TO FIXED CHARGES RATIOS
- --------------------------------
Excluding Interest on Deposits 4.80x 5.08x 4.83x 5.07x
Including Interest on Deposits 2.00 2.03 2.04 2.04
EARNINGS TO COMBINED FIXED CHARGES
& PREFERRED STOCK DIVIDENDS RATIOS
- ----------------------------------
Excluding Interest on Deposits 4.03 4.21 4.08 4.32
Including Interest on Deposits 1.91 1.93 1.94 1.95
* The proportion deemed representative of the interest factor.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information which is qualified entirely
by reference to The Bank of New York Company, Inc.'s Form 10-Q for the period
ended September 30, 1998.
</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-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 7,693
<INT-BEARING-DEPOSITS> 2,667
<FED-FUNDS-SOLD> 1,143
<TRADING-ASSETS> 2,460
<INVESTMENTS-HELD-FOR-SALE> 4,915
<INVESTMENTS-CARRYING> 996
<INVESTMENTS-MARKET> 966
<LOANS> 38,506
<ALLOWANCE> 638
<TOTAL-ASSETS> 63,812
<DEPOSITS> 44,492
<SHORT-TERM> 7,037
<LIABILITIES-OTHER> 2,815
<LONG-TERM> 2,022
0
1
<COMMON> 7,154
<OTHER-SE> (2,141)
<TOTAL-LIABILITIES-AND-EQUITY> 63,812
<INTEREST-LOAN> 708
<INTEREST-INVEST> 80
<INTEREST-OTHER> 118
<INTEREST-TOTAL> 906
<INTEREST-DEPOSIT> 367
<INTEREST-EXPENSE> 491
<INTEREST-INCOME-NET> 415
<LOAN-LOSSES> 5
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 481
<INCOME-PRETAX> 501
<INCOME-PRE-EXTRAORDINARY> 301
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301
<EPS-PRIMARY> $0.40<F1>
<EPS-DILUTED> $0.39<F1>
<YIELD-ACTUAL> 3.15
<LOANS-NON> 177
<LOANS-PAST> 26
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 641
<CHARGE-OFFS> 42
<RECOVERIES> 20
<ALLOWANCE-CLOSE> 638
<ALLOWANCE-DOMESTIC> 497
<ALLOWANCE-FOREIGN> 51
<ALLOWANCE-UNALLOCATED> 90
<FN>
<F1>Per common share data has been adjusted to reflect the effect of the
2-for-1 common stock split effective on August 13, 1998. Prior Financial Data
Schedules have not been restated for this split.
</FN>
</TABLE>
