<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 738,239,307 shares as of July 31, 2000
<PAGE> 2
THE BANK OF NEW YORK COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Income
For the Three Months and Six Months
Ended June 30, 2000 and 1999 4
Consolidated Statement of Changes In
Shareholders' Equity For the Six
Months Ended June 30, 2000 5
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk. (See "Trading Activities") 12
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 23
Item 4. Submission of Matters to Vote of Security Holders 23
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 25
<PAGE 3>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Assets
------
Cash and Due from Banks $ 4,167 $ 3,276
Interest-Bearing Deposits in Banks 4,729 6,850
Securities
Held-to-Maturity (fair value of $897 in 2000
and $839 in 1999) 921 871
Available-for-Sale 5,767 6,028
------- -------
Total Securities 6,688 6,899
Trading Assets at Fair Value 11,168 8,715
Federal Funds Sold and Securities Purchased Under Resale
Agreements 4,554 5,383
Loans (less allowance for credit losses of $610 in 2000
and $595 in 1999) 37,508 36,952
Premises and Equipment 885 893
Due from Customers on Acceptances 1,194 739
Accrued Interest Receivable 331 319
Other Assets 5,437 4,730
------- -------
Total Assets $76,661 $74,756
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Deposits
Noninterest-Bearing (principally domestic offices) $13,671 $12,162
Interest-Bearing
Domestic Offices 15,851 16,319
Foreign Offices 25,815 27,270
------- -------
Total Deposits 55,337 55,751
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,455 1,318
Other Borrowed Funds 4,626 3,825
Acceptances Outstanding 1,196 740
Accrued Taxes and Other Expenses 2,887 2,644
Accrued Interest Payable 111 131
Other Liabilities 1,213 893
Long-Term Debt 2,829 2,811
------- -------
Total Liabilities 69,654 68,113
------- -------
Company-Obligated Mandatory Redeemable Preferred
Trust Securities of Subsidiary Trust Holding Solely
Junior Subordinated Debentures 1,500 1,500
------- -------
Shareholders' Equity
Class A Preferred Stock - par value $2.00 per share,
authorized 5,000,000 shares, outstanding 16,320 shares
in 2000 and 16,787 shares in 1999 1 1
Common Stock-par value $7.50 per share,
authorized 1,600,000,000 shares, issued
982,085,224 shares in 2000 and
977,961,165 shares in 1999 7,366 7,335
Additional Capital 395 315
Retained Earnings 3,079 2,620
Accumulated Other Comprehensive Income 57 30
------- -------
10,898 10,301
Less: Treasury Stock (242,441,759 shares in 2000
and 237,747,242 shares in 1999), at cost 5,381 5,148
Loan to ESOP (1,444,005 shares
in 2000 and 1999), at cost 10 10
------- -------
Total Shareholders' Equity 5,507 5,143
------- -------
Total Liabilities and Shareholders' Equity $76,661 $74,756
======= =======
<FN>
----------------------------------------------------------------------------------------
Note: The balance sheet at December 31, 1999 has been derived from the audited financial
statements at that date.
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE> 4
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income
---------------
Loans $ 735 $ 659 $1,451 $1,319
Securities
Taxable 78 63 157 128
Exempt from Federal Income Taxes 15 12 31 22
------ ----- ----- -----
93 75 188 150
Deposits in Banks 66 54 137 118
Federal Funds Sold and Securities Purchased
Under Resale Agreements 69 46 118 99
Trading Assets 144 5 246 10
------ ----- ----- -----
Total Interest Income 1,107 839 2,140 1,696
------ ----- ----- -----
Interest Expense
----------------
Deposits 521 324 992 641
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 32 36 69 67
Other Borrowed Funds 42 28 70 75
Long-Term Debt 49 35 98 70
------ ----- ----- -----
Total Interest Expense 644 423 1,229 853
------ ----- ----- -----
Net Interest Income 463 416 911 843
-------------------
Provision for Credit Losses 25 15 45 30
------ ----- ----- -----
Net Interest Income After Provision for
Credit Losses 438 401 866 813
------ ----- ----- -----
Noninterest Income
------------------
Servicing Fees
Securities 403 302 775 593
Cash 65 70 131 139
------ ----- ----- -----
468 372 906 732
Private Client Services and
Asset Management Fees 72 60 142 118
Service Charges and Fees 104 91 194 176
Securities Gains 45 50 85 100
Other 91 78 190 150
------ ----- ----- -----
Total Noninterest Income 780 651 1,517 1,276
------ ----- ----- -----
Noninterest Expense
-------------------
Salaries and Employee Benefits 366 311 725 622
Net Occupancy 45 40 89 81
Furniture and Equipment 27 21 53 45
Other 190 141 364 274
------ ----- ----- -----
Total Noninterest Expense 628 513 1,231 1,022
------ ----- ----- -----
Income Before Income Taxes 590 539 1,152 1,067
Income Taxes 206 188 401 372
Distribution on Preferred Trust Securities 28 28 57 56
------ ----- ----- -----
Net Income $ 356 $ 323 $ 694 $ 639
---------- ====== ===== ===== =====
Net Income Available to Common Shareholders $ 356 $ 323 $ 694 $ 639
------------------------------------------- ====== ===== ===== =====
Per Common Share
----------------
Basic Earnings $ 0.49 $0.42 $0.95 $0.84
Diluted Earnings 0.48 0.42 0.93 0.82
Cash Dividends Paid 0.16 0.14 0.32 0.28
Diluted Shares Outstanding 745 773 743 776
<FN>
------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statement of Changes in Shareholders' Equity
For the six months ended June 30, 2000
(In millions)
(Unaudited)
<S> <C>
Preferred Stock
Balance, January 1 $ 1
-------
Balance, June 30 1
-------
Common Stock
Balance, January 1 7,335
Issuances in Connection with Employee Benefit Plans 31
-------
Balance, June 30 7,366
-------
Additional Capital
Balance, January 1 315
Common Stock Issued in Connection with Employee Benefit Plans 80
-------
Balance, June 30 395
-------
Retained Earnings
Balance, January 1 2,620
Net Income 694
Cash Dividends on Common Stock (235)
-------
Balance, June 30 3,079
-------
Accumulated Other Comprehensive Income
Securities Valuation Allowance
Balance, January 1 58
Change in Fair Value of Securities Available-for-Sale,
Net of $28 Million in Taxes 50
Reclassification Adjustment, Net of ($12) Million in Taxes (23)
-------
Balance, June 30 85
-------
Foreign Currency Items
Balance, January 1 (28)
Foreign Currency Translation Adjustment -
-------
Balance, June 30 (28)
-------
Less Treasury Stock
Balance, January 1 5,148
Issued (59)
Acquired 292
-------
Balance, June 30 5,381
-------
Less Loan to ESOP
Balance, January 1 10
-------
Balance, June 30 10
-------
Total Shareholders' Equity, June 30 $ 5,507
=======
<FN>
------------------------------------------------------------------------------------
Comprehensive Income for the three months ended June 30, 2000 and 1999 was $382
million and $286 million.
Comprehensive income for the six months ended June 30, 2000 and 1999 was $721
million and $544 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 six months
Ended June 30,
2000 1999
---- ----
<S> <C> <C>
Operating Activities
Net Income $ 694 $ 639
Adjustments to Determine Net Cash Attributable to
Operating Activities
Provision for Losses on Loans and Other Real Estate 46 30
Depreciation and Amortization 122 106
Deferred Income Taxes 256 221
Securities Gains (85) (100)
Change in Trading Activities (3,042) (227)
Change in Accruals and Other, Net (207) (182)
------ ------
Net Cash (Used) Provided by Operating Activities (2,216) 487
------ ------
Investing Activities
Change in Interest-Bearing Deposits in Banks 2,057 (118)
Purchases of Securities Held-to-Maturity (207) (189)
Maturities of Securities Held-to-Maturity 145 289
Purchases of Securities Available-for-Sale (1,766) (1,178)
Sales of Securities Available-for-Sale 1,312 450
Maturities of Securities Available-for-Sale 778 236
Net Principal Disbursed on Loans to Customers (1,031) (3,560)
Sales of Loans and Other Real Estate 232 107
Change in Federal Funds Sold and Securities
Purchased Under Resale Agreements 829 698
Purchases of Premises and Equipment (28) (33)
Acquisitions, Net of Cash Acquired (104) (56)
Proceeds from the Sale of Premises and Equipment 1 2
Other, Net (132) 12
------ ------
Net Cash Provided (Used) by Investing Activities 2,086 (3,340)
------ ------
Financing Activities
Change in Deposits 372 3,171
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 137 2,068
Change in Other Borrowed Funds 873 (381)
Proceeds from the Issuance of Preferred Trust Securities - 200
Proceeds from the Issuance of Long-Term Debt 40 206
Repayments of Long-Term Debt (28) (21)
Issuance of Common Stock 170 177
Treasury Stock Acquired (292) (675)
Cash Dividends Paid (235) (213)
------ ------
Net Cash Provided by Financing Activities 1,037 4,532
------ ------
Effect of Exchange Rate Changes on Cash (16) (59)
------ ------
Change in Cash and Due From Banks 891 1,620
Cash and Due from Banks at Beginning of Period 3,276 3,999
------ ------
Cash and Due from Banks at End of Period $4,167 $5,619
====== ======
----------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $1,249 $ 915
Income Taxes 89 148
Noncash Investing Activity
(Primarily Foreclosure of Real Estate) 1 2
<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 consolidated 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. Acquisitions and Dispositions
-----------------------------
In January 2000, the Company completed the acquisition of certain assets
of Institutional Securities Trading LLC ("IST"). IST is a commission recapture
and third-party services firm primarily serving Taft-Hartley organizations and
other plan sponsors. In May 2000, the Company completed the acquisition of
certain assets of Global Execution Network Associates, Inc. ("GENA"). GENA is
a U.S. based broker-dealer, specializing in quantitative and program equity
trading in 52 markets globally. GENA's clients are both U.S. and U.K.
institutional investors. The acquisition will enhance the Company's non-dollar
trading capabilities for the Company's institutional clients worldwide and
furthers the Company's strategy to be a recognized leader in global
institutional agency brokerage.
In March 2000, the Company completed the acquisition of the correspondent
clearing business of SG Cowen Securities Corporation. This transaction
supports the Company's ongoing strategy of growth in the correspondent
clearing business. In July 2000, the Company completed the acquisition of BHF
Securities Corporation, a leading provider of domestic and international
correspondent clearing services.
In March 2000, the Company acquired the corporate trust business of
Harris Trust and Savings Bank located in Chicago, Illinois. The transaction
involves the transfer of approximately 1,700 trustee and agency appointments
for corporate and municipal issues of debt securities. In May 2000, the
Company completed its purchase of the issuer, agency and depository services
business of Barclays Bank PLC. This transaction involves the transfer of
several hundred fiscal, principal paying agent and sub-agent appointments as
well as depository holdings on behalf of Euroclear and Clearstream Banking SA.
In June 2000, the Company signed a definitive agreement to acquire the
corporate trust business of Dai-Ichi Kangyo Bank of California, a wholly-owned
subsidiary of the Dai-Ichi Kangyo Bank Ltd., headquartered in Tokyo, Japan.
In July 2000, the Company acquired the corporate trust business of Sakura
Trust Company.
In August 2000, the Company signed a definitive agreement to acquire
Ivy Asset Management Corp., a privately-held asset management firm, based in
Garden City, New York.
In April 2000, the Company completed the sale of its interest in Banco
Credibanco S.A. to Unibanco-Uniao de Bancos Brasileiros S.A.
<PAGE> 8
3. Allowance for Credit Losses
---------------------------
Transactions in the allowance for credit losses are summarized as
follows:
Six months ended
June 30,
(In millions) 2000 1999
---- ----
Balance, Beginning of Period $ 595 $ 636
Charge-Offs (42) (42)
Recoveries 12 8
----- -----
Net Charge-Offs (30) (34)
Acquisition/(Disposition) - (37)
Provision 45 30
----- -----
Balance, End of Period $ 610 $ 595
===== =====
4. Capital Transactions
--------------------
As of July 31, 2000, the Company has approximately 7 million common
shares remaining to repurchase under its share buyback programs.
5. New Accounting Pronouncements
-----------------------------
Effective January 1, 2001, 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 Financial Accounting
Standards Board ("FASB") continues to issue interpretative guidance related to
this standard. Based upon current interpretations of the standard and market
conditions as of June 30, 2000, the adoption of the standard is not expected
to have a material effect on the Company's financial position or results of
operations.
6. Earnings Per Share
------------------
The following table illustrates the computations of basic and diluted
earnings per share for the three and six months ended June 30, 2000 and 1999:
Three Months Ended Six Months Ended
June 30, June 30,
(In millions, except per share amounts)
2000 1999 2000 1999
---- ---- ---- ----
Diluted Net Income $356 $323 $694 $639
==== ==== ==== ====
Basic Weighted Average
Shares Outstanding 733 761 732 763
Shares Issuable on Exercise of
Employee Stock Options 12 12 11 13
---- ---- ---- ----
Diluted Weighted Average Shares Outstanding 745 773 743 776
==== ==== ==== ====
Basic Earnings Per Share: $ 0.49 $ 0.42 $ 0.95 $ 0.84
Diluted Earnings Per Share: 0.48 0.42 0.93 0.82
7. 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> 9
Item 2. 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 second quarter diluted earnings per share were
48 cents, up 14% from the 42 cents earned in the second quarter of 1999. Net
income for the second quarter was a record $356 million, up 10% from the
$323 million earned in the same period last year. Diluted earnings per share
were 93 cents for the first half of 2000, up 13% from the 82 cents earned last
year. Net income for the first six months was a record $694 million, an
increase of 9% over last year's $639 million. Last year's results included BNY
Financial Corporation ("BNYFC") which was divested in the third quarter of
1999.
The second quarter results offer further evidence of the strength of
the Company's long-term strategy to deliver sustainable, high quality revenue
and earnings growth. In securities servicing, fee revenues increased to a
record $403 million, or 33% for the quarter. Foreign exchange and other
trading revenue increased to $71 million or 54% over last year, benefiting
from a surge in global trading volumes and market share gains. Private client
services and asset management fees grew 21% in the quarter, led by strong
performance in all product areas. The Company's continued focus on fee-based
businesses resulted in noninterest income growing to 63% of total revenue in
the second quarter, up from 61% last year.
Return on average common equity for the second quarter of 2000 was 26.93%
compared with 24.82% in the second quarter of 1999. Return on average assets
for the second quarter of 2000 was 1.81% compared with 1.95% in the second
quarter of 1999. For the first six months of 2000, return on average common
equity was 27.00% compared with 24.65% in 1999. Return on average assets was
1.79% for the first six months of 2000 compared with 1.94% in 1999.
Fees from the Company's securities servicing businesses reached a record
$403 million for the second quarter compared with $302 million last year. For
the first six months of 2000, fees from the Company's securities servicing
businesses totaled a record $775 million, growing 31% compared with
$593 million in 1999. Fee revenue was strong across all product lines with
particular strength in global custody, depositary receipts ("DRs"), and global
execution and clearing services. Fee revenue also benefited from the
acquisition of the Royal Bank of Scotland Trust Bank ("RBSTB") in the fourth
quarter of 1999. The Company continues to be the world's leading custodian
with assets of $6.8 trillion. Cross-border custody assets now total
$2 trillion, reflecting the rapid expansion of worldwide capital markets.
DR trading activity reached an all time high, evidence of U.S. investor
interest in global telecommunication, media, and technology industries as well
as significant cross-border merger and acquisition activity.
Private client services and asset management fees were $72 million for
the quarter, up 21% over last year, led by continued superior investment
performance by BNY Asset Management resulting in further new business, as well
as by the acquisition of Estabrook Capital Management, Inc.
Total revenues from global payment services, excluding trade finance,
were up 10% from last year's second quarter, primarily due to strength in cash
management. The introduction of CA$H-Register PlusSM, the Company's new
browser-based delivery system for cash management services, has fueled revenue
growth in the middle market and small business client segments. Trade finance
revenues were down from a year ago primarily due to the sale of BNYFC and
reduced pricing, driven by the improved risk profiles of select Asian and
Latin American markets.
Foreign exchange and other trading revenues for the quarter increased 54%
over the second quarter of last year to $71 million. In the first six months
<PAGE> 10
of 2000, foreign exchange and other trading revenues were $147 million
compared with $88 million last year. Foreign exchange revenues from the
Company's global securities servicing customer base were particularly strong,
due to increased transaction flows and customer penetration.
Net interest income on a taxable equivalent basis for the second quarter
increased to $477 million from $460 million in the first quarter of 2000. For
the first six months of 2000, net interest income on a taxable equivalent
basis was $937 million compared with $863 million in the first half of 1999.
Tangible diluted earnings per share (earnings before the amortization of
goodwill and intangibles) were 51 cents per share in the second quarter of
2000, up 16% from 44 cents per share in the second quarter of 1999. On the
same basis, tangible return on average common equity was 41.77% in the second
quarter of 2000 compared with 37.79% in 1999; and tangible return on average
assets was 1.96% in the second quarter of 2000 compared with 2.11% in 1999.
Tangible diluted earnings per share were 99 cents per share for the first six
months of 2000, up 14%, compared with 87 cents per share in 1999. Tangible
return on average common equity was 42.37% in the first six months of 2000
compared with 37.53% in 1999; and tangible return on average assets was 1.94%
in the first six months of 2000 compared with 2.11% last year. Amortization of
intangibles for the second quarter and the first six months of 2000 were
$28 million and $56 million, respectively, compared with $27 million and
$53 million last year.
CAPITAL
The Company's estimated Tier 1 capital and Total capital ratios were
8.03% and 12.24% at June 30, 2000, compared with 7.39% and 11.49% at
March 31, 2000, and 7.63% and 11.52% at June 30, 1999. The leverage ratio was
6.80% at June 30, 2000, compared with 6.66% at March 31, 2000, and 7.65% one
year ago. Tangible common equity as a percent of total assets was 5.11% at
June 30, 2000, compared with 4.74% at March 31, 2000, and 5.59% one year ago.
The decline in the leverage and tangible common equity ratios from 1999
primarily reflects the acquisition of RBSTB, which brought approximately
$10 billion in highly liquid, short-term assets and liabilities. In the second
quarter of 2000, the Company repurchased approximately one million shares
under its common stock repurchase programs.
LIQUIDITY
The Company maintains its liquidity through the management of its assets
and liabilities, utilizing worldwide financial markets. The diversification of
liabilities reflects the flexibility of the Company's funding sources under
changing market conditions. Stable core deposits, including demand, retail
time, and trust deposits from processing businesses, are generated through the
Company's diversified network and managed with the use of trend studies and
deposit pricing. The use of derivative products such as interest rate swaps
and financial futures is designed to enhance liquidity through the issue of
long-term liabilities with limited exposure to interest rate risk. Liquidity
also results from the maintenance of a portfolio of assets, which can be
easily reduced, and the monitoring of unfunded loan commitments, thereby
reducing unanticipated funding requirements.
<PAGE> 11
NONINTEREST INCOME
<TABLE>
<CAPTION>
2nd 1st 2nd
Quarter Quarter Quarter Year-to-Date
------- ------- ------- ------------
(In millions) 2000 2000 1999 2000 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Servicing Fees
Securities $403 $372 $302 $ 775 $ 593
Cash 65 66 70 131 139
---- ---- ---- ------ ------
468 438 372 906 732
Private Client Services and
Asset Management fees 72 70 60 142 118
Service Charges and Fees 104 90 91 194 176
Foreign Exchange and
Other Trading Activities 71 76 46 147 88
Securities Gains 45 40 50 85 100
Other 20 23 32 43 62
---- ---- ---- ------ ------
Total Noninterest Income $780 $737 $651 $1,517 $1,276
==== ==== ==== ====== ======
</TABLE>
Total noninterest income reached $780 million, up 20%, from $651 million
in the prior year period. The decline in cash servicing fees reflects both
lower trade finance fees as well as lower cash management and funds transfer
fees due to customers' expanded use of compensating balances in lieu of fees
in a rising interest rate environment. Service charges and fees increased to
$104 million due to higher capital markets activity. Securities gains were
$45 million compared with $40 million in the first quarter of 2000 and
$50 million one year ago.
NET INTEREST INCOME
<TABLE>
<CAPTION>
2nd 1st 2nd
Quarter Quarter Quarter Year to Date
------- ------- ------- --------------
(In millions) 2000 2000 1999 2000 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Interest Income $477 $460 $427 $937 $863
Net Interest Rate
Spread 1.93% 1.96% 2.18% 1.94% 2.24%
Net Yield on Interest-
Earning Assets 2.91 2.89 3.07 2.90 3.13
</TABLE>
Net interest income on a taxable equivalent basis was $477 million in the
second quarter of 2000 compared with $460 million in the first quarter of 2000
and $427 million in the second quarter of 1999. The net interest rate spread
was 1.93% in the second quarter of 2000, compared with 1.96% in the first
quarter of 2000 and 2.18% one year ago. The net yield on interest-earning
assets was 2.91% compared with 2.89% in the first quarter of 2000 and 3.07% in
last year's second quarter.
For the first six months of 2000, net interest income on a taxable
equivalent basis, amounted to $937 million compared with $863 million in the
first half of 1999. The year-to-date net interest rate spread was 1.94% in
2000 compared with 2.24% in 1999, while the net yield on interest-earning
assets was 2.90% in 2000 and 3.13% in 1999.
The expansion of the Company's securities servicing, global payment
services, and asset management businesses continues to generate increased
levels of deposits. These additional deposits were invested in high quality
liquid assets which increased net interest income, although lowering the net
interest-rate spread. The improvement in the yield from the first quarter of
2000 reflects the growing value of interest-free deposits generated by the
Company's securities and fiduciary businesses.
<PAGE> 12
Interest income would have been increased by $1 million and $4 million
for the second quarters of 2000 and 1999 and $4 million and $6 million for the
first six months of 2000 and 1999 if loans on nonaccrual status at June 30,
2000 and 1999 had been performing for the entire quarter.
TRADING ACTIVITIES
The fair value and notional amounts of the Company's financial
instruments held for trading purposes at June 30, 2000 are as follows:
2nd Quarter 2000
June 30, 2000 Average
---------------------------- -------------------
(In millions) Fair Value Fair Value
------------------ -------------------
Notional
Trading Account Amount Assets Liabilities Assets Liabilities
--------------- -------- ------ ----------- ------ -----------
Interest Rate Contracts:
Futures and Forward
Contracts $22,334 $ 1 $ - $ 3 $ -
Swaps 104,466 1,159 984 1,360 1,083
Written Options 79,720 - 638 - 741
Purchased Options 46,541 60 - 52 -
Foreign Exchange Contracts:
Swaps 346 - - - -
Written Options 21,500 - 88 - 8
Purchased Options 23,735 148 - 7 -
Commitments to Purchase
and Sell Foreign Exchange 60,262 629 511 905 702
Securities 9,171 135 9,671 166
------- ------ -------- ------
Total Trading Account $11,168 $2,356 $11,998 $2,700
======= ====== ======= ======
The Company manages trading risk through a system of position limits,
a value at risk (VAR) methodology, based on a Monte Carlo simulation, 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. As the VAR
methodology does not evaluate risk attributable to extraordinary financial,
economic or other occurrences, the risk assessment process includes a
number of stress scenarios based upon the risk factors in the portfolio and
management's assessment of market conditions. Additional stress scenarios
based upon historic market events are also tested.
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.
<TABLE>
<CAPTION>
(In millions) 2nd Quarter 2000 Year-to-date 2000
------------------------- -----------------------------------
Market Risk Average Minimum Maximum Average Minimum Maximum 06/30/00
----------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate $ 5.0 $ 4.1 $ 6.6 $ 4.7 $ 2.7 $ 6.6 $ 4.2
Foreign Exchange 1.6 1.0 2.6 1.8 1.0 3.8 2.0
Overall Portfolio 6.6 5.3 8.2 6.5 4.4 8.8 6.2
</TABLE>
<TABLE>
<CAPTION>
(In millions) 2nd Quarter 1999 Year-to-date 1999
------------------------- -----------------------------------
Market Risk Average Minimum Maximum Average Minimum Maximum 06/30/99
----------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate $ 4.7 $ 3.3 $ 7.1 $ 4.8 $ 2.1 $10.9 $ 4.5
Foreign Exchange 1.4 0.7 3.5 1.5 0.7 4.0 1.1
Overall Portfolio 6.1 4.5 8.7 6.3 3.7 12.1 5.6
</TABLE>
<PAGE> 13
NONINTEREST EXPENSE AND INCOME TAXES
Noninterest expense for the second quarter of 2000 was $628 million,
compared with $513 million in 1999. The increase was principally due to
acquisitions and technology investment.
The efficiency ratio for the second quarter of 2000 was 51.9% compared
with 52.1% in the first quarter of 2000 and 49.9% in the second quarter of
1999. For the first half of 2000, the efficiency ratio was 52.0% compared with
50.1% last year.
The effective tax rate remained unchanged at 34.9% for the second quarter
and the first six months of 2000 and 1999.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
Change
6/30/00 vs.
(Dollars in millions) 6/30/00 3/31/00 3/31/00
-------- -------- --------
<S> <C> <C> <C>
Loans:
Other Commercial $ 45 $ 27 $ 18
Foreign 54 63 (9)
Regional Commercial 33 29 4
Loans Available for Sale 23 32 (9)
----- ----- -----
Total Loans 155 151 4
Other Real Estate 7 8 (1)
----- ----- -----
Total $ 162 $ 159 $ 3
===== ===== =====
Nonperforming Assets Ratio 0.4% 0.4%
Allowance/Nonperforming Loans 393.4 398.2
Allowance/Nonperforming Assets 376.4 378.1
</TABLE>
Nonperforming assets totaled $162 million at June 30, 2000, compared with
$159 million at March 31, 2000. At June 30, 2000, remaining credit exposures
of loans available for sale totaled $246 million with outstandings of
$144 million compared with $389 million and $275 million at March 31, 2000,
respectively.
At June 30, 2000, impaired loans (nonaccrual loans over $1 million)
aggregated $110 million, of which $83 million exceeded their fair value by
$25 million. Impaired loans at June 30, 1999, totaled $173 million, of which
$148 million exceeded their fair value by $72 million. For the second quarters
of 2000 and 1999, the average amounts of impaired loans were $103 million and
$174 million. Interest income (cash received) of $589 thousand was received on
the impaired loans in the second quarter of 2000, while $60 thousand was
received during the second quarter of 1999.
<PAGE> 14
CREDIT LOSS PROVISION AND NET CHARGE-OFFS
<TABLE>
<CAPTION>
2nd 1st 2nd
Quarter Quarter Quarter Year-to-date
------- ------- ------- -------------
(In millions) 2000 2000 1999 2000 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Provision $ 25 $ 20 $ 15 $ 45 $ 30
==== ==== ==== ==== ====
Net(Charge-offs)Recoveries:
Commercial Real Estate - - 1 - (1)
Other Commercial (12) (13) (13) (25) (20)
Consumer (1) (1) (1) (2) (2)
Foreign - - (2) - (11)
Other (2) (1) - (3) -
---- ---- ---- ---- ----
Total $(15) $(15) $(15) $(30) $(34)
===== ===== ===== ===== =====
Other Real Estate Expenses $ 1 $ 1 $ - $ 2 $ -
</TABLE>
The allowance for credit losses increased to $610 million, or 1.60% of
loans at June 30, 2000, compared with $600 million, or 1.48% of loans at
March 31, 2000, and $595 million, or 1.55% of loans at June 30, 1999. The
ratio of the allowance to nonperforming assets was 376.4% at June 30, 2000,
compared with 378.1% at March 31, 2000, and 271.0% at June 30, 1999.
Based on an evaluation of individual credits, historical credit losses,
and global economic factors, the Company has allocated its allowance for
credit losses as follows:
6/30/00 3/31/00 12/31/99
------- -------- --------
Real Estate 3% 3% 4%
Domestic 77 79 78
Foreign 11 12 12
Unallocated 9 6 6
--- --- ---
100% 100% 100%
Such an allocation is inherently judgmental, and the entire allowance for
credit losses is available to absorb credit losses regardless of the nature of
the loss.
<PAGE> 15
SEGMENT PROFITABILITY
Segment Data
The Servicing and Fiduciary businesses segment provides a broad array of
fee based services. This segment includes the Company's securities servicing,
global payment services, and private client services and asset management
businesses. Securities servicing includes global custody, securities
clearance, mutual funds, unit investment trust, securities lending, American
Depositary Receipts, corporate trust, stock transfer and execution services.
Global payment services products primarily relate to funds transfer, cash
management and trade finance. Private client services and asset management
provide traditional banking and trust services to affluent clients and asset
management to institutional and private clients.
The Corporate Banking segment focuses on providing lending services, such
as term loans, lines of credit, asset based financings, and commercial
mortgages, to the largest public and private corporations nationwide, as well
as public and private mid-size businesses in the New York metropolitan area.
Special industry groups focus on financial institutions, securities,
insurance, media and telecommunications, energy, real estate, retailing,
automotive, and government banking institutions. Through BNY Capital Markets,
the Company provides syndicated loans, bond underwriting, private placements
of corporate debt and equity securities, and merger, acquisition, and advisory
services.
The Retail Banking segment includes consumer lending, residential
mortgage lending, and retail deposit services. The Company operates 351
branches in 22 counties in three states.
The Financial Markets segment includes trading of foreign exchange and
interest rate products, investing and leasing activities, and treasury
services to other segments. This segment offers a comprehensive array of
multi-currency hedging and yield enhancement strategies. Offices in New York,
London, Brussels, Tokyo, Frankfurt, Hong Kong, Seoul and Taipei provide
clients a 24-hour trading capability.
The Company has an internal information system that produces performance
data for its four business segments along product and service lines.
The segments contributed to the Company's profitability as follows:
<TABLE>
<CAPTION>
In Millions Servicing
and
For the Quarter Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
June 30, 2000 Businesses Banking Banking Markets Items Total
--------------------- ---------- --------- ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 160 $ 160 $ 132 $ 22 $ (11) $ 463
Provision for
Credit Losses - 38 1 - (14) 25
Noninterest Income 610 87 24 59 - 780
Noninterest Expense 400 52 79 16 81 628
------ ------- ------ ------- ------- -------
Income Before Taxes $ 370 $ 157 $ 76 $ 65 $ (78) $ 590
====== ======= ====== ======= ======= =======
Average Assets $18,131 $31,529 $4,199 $23,396 $1,691 $78,946
======= ======= ====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
In Millions Servicing
and
For the Quarter Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
June 30, 1999 Businesses Banking Banking Markets Items Total
--------------------- ---------- --------- ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 100 $ 167 $ 120 $ 23 $ 6 $ 416
Provision for
Credit Losses - 32 - (2) (15) 15
Noninterest Income 465 92 23 60 11 651
Noninterest Expense 278 79 72 18 66 513
------ ------- ------ ------- ------- -------
Income Before Taxes $ 287 $ 148 $ 71 $ 67 $ (34) $ 539
====== ======= ====== ======= ======= =======
Average Assets $5,315 $34,847 $3,962 $20,822 $1,591 $66,537
====== ======= ====== ======= ====== =======
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
In Millions Servicing
and
For the Half Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
June 30, 2000 Businesses Banking Banking Markets Items Total
--------------------- ---------- --------- ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 324 $ 292 $ 260 $ 36 $ (1) $ 911
Provision for
Credit Losses - 66 2 - (23) 45
Noninterest Income 1,183 162 48 122 2 1,517
Noninterest Expense 785 105 152 34 155 1,231
------ ------- ------ ------- ------- -------
Income Before Taxes $ 722 $ 283 $ 154 $ 124 $ (131) $ 1,152
====== ======= ====== ======= ======= =======
Average Assets $17,082 $31,376 $4,368 $23,246 $1,670 $77,742
======= ======= ====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
In Millions Servicing
and
For the Half Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
June 30, 1999 Businesses Banking Banking Markets Items Total
--------------------- ---------- --------- ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 206 $ 336 $ 234 $ 52 $ 15 $ 843
Provision for
Credit Losses - 61 2 (2) (31) 30
Noninterest Income 912 178 44 109 33 1,276
Noninterest Expense 566 144 147 35 130 1,022
------ ------- ------ ------- ------- -------
Income Before Taxes $ 552 $ 309 $ 129 $ 128 $ (51) $ 1,067
====== ======= ====== ======= ======= =======
Average Assets $6,355 $33,090 $4,246 $21,004 $1,580 $66,275
====== ======= ====== ======= ====== =======
</TABLE>
Segment Highlights
Servicing and Fiduciary Businesses
----------------------------------
In the second quarter of 2000, noninterest income was $610 million up
from $465 million in 1999.
Fees from the Company's securities servicing businesses reached a record
$403 million for the second quarter compared with $302 million last year. For
the first six months of 2000, fees from the Company's securities servicing
businesses totaled a record $775 million, growing 31% compared with
$593 million in 1999. Fee revenue was strong across all product lines with
particular strength in global custody, depositary receipts, and global
execution and clearing services. Fee revenue also benefited from the
acquisition of the RBSTB in the fourth quarter of 1999. The Company continues
to be the world's leading custodian with assets of $6.8 trillion. Cross-border
custody assets now total $2 trillion, reflecting the rapid expansion of
worldwide capital markets. DR trading activity reached an all time high,
evidence of U.S. investor interest in global telecommunication, media, and
technology industries as well as significant cross-border merger and
acquisition activity. Execution and clearing services continue to benefit from
increased activity and a steady flow of new business. In addition, the
acquisition of GENA and SG Cowen have contributed to the success of these
businesses.
Private client services and asset management fees were $72 million for
the quarter, up 21% over last year, led by continued superior investment
performance by BNY Asset Management resulting in further new business, as well
as by the acquisition of Estabrook Capital Management, Inc. Assets under
management were $62.9 billion while assets under administration were $32.2
billion at June 30, 2000.
Total revenues from global payment services, excluding trade finance,
were up 10% from last year's second quarter, primarily due to strength in cash
management. The introduction of CA$H-Register PlusSM, the Company's new
browser-based delivery system for cash management services, has fueled revenue
growth in the middle market and small business client segments. Trade finance
<PAGE> 17
revenues were down from a year ago primarily due to the sale of BNYFC and
reduced pricing, driven by the improved risk profiles of select Asian and
Latin American markets.
Net interest income in the Servicing and Fiduciary businesses segment
was $160 million for the second quarter of 2000 compared with $100 million in
1999. The increase in net interest income is partially attributable to the
acquisition of RBSTB.
Net charge-offs in the Servicing and Fiduciary Businesses segment were
zero in the second quarters of 2000 and 1999. Noninterest expense for the
second quarter of 2000 was $400 million compared with $278 million in 1999.
The increase was principally due to acquisitions and technology investment.
Corporate Banking
-----------------
The Corporate Banking segment's net interest income was $160 million in
the second quarter of 2000, down from last year's $167 million. The decline
reflects the sale of BNYFC.
The second quarter of 2000 provision for credit losses was $38 million
compared with $32 million last year. Net charge-offs in the Corporate Banking
segment were $14 million and $16 million in the second quarters of 2000 and
1999. Noninterest income was $87 million in the current year compared with
$92 million last year. The decline is attributable to the sale of BNYFC
partially offset by the receipt of a few large loan syndication fees.
Noninterest expense declined to $52 million from $79 million reflecting the
sale of BNYFC.
Retail Banking
--------------
In the Retail Banking segment, net interest income in the second quarter
of 2000 was $132 million compared with $120 million in 1999. The increase
reflects the higher value of demand deposits in an increasing interest rate
environment. Noninterest income increased in this same period to $24 million
from $23 million. Noninterest expense in the second quarter of 2000 was
$79 million compared with $72 million in the previous year's period. Net
charge-offs were $1 million in the second quarters of 2000 and 1999.
Financial Markets
-----------------
In the Financial Markets segment, net interest income for the quarter was
$22 million compared with 1999's $23 million. Noninterest income was $59
million in the second quarter of 2000 down slightly from the $60 million
recorded in the second quarter of 1999. The second quarter's results reflect
continued success in foreign exchange trading. Net charge-offs were zero and
net recoveries were $2 million in the second quarters of 2000 and 1999.
Segment Accounting Principles
-----------------------------
The Company's segment data has been determined on an internal management
basis of accounting, other than the generally accepted accounting principles
used for consolidated financial reporting. These measurement principles ensure
that reported results of the segments track their economic performance.
Segment results are subject to restatement whenever improvements are made in
the measurement principles or organizational changes are made.
The measure of revenues and profit or loss by operating segment has been
adjusted to present segment data on a taxable equivalent basis. The provision
for credit losses allocated to each reportable segment is based on
management's judgment as to average credit losses that will be incurred in the
operations of the segment over a credit cycle of a period of years.
Management's judgment includes the following factors among others: historical
charge-off experience and the volume, composition and growth of the loan
portfolio. This method is different from that required under generally
accepted accounting principles as it anticipates future losses which are not
yet probable and therefore not recognizable under generally accepted
<PAGE> 18
accounting principles. Assets and liabilities are match funded. Support and
other indirect expenses are allocated to segments based on general guidelines.
Reconciling Items
-----------------
Reconciling items for net interest income primarily relate to the
recording of interest income on a taxable equivalent basis, reallocation of
capital and the funding of goodwill. Reconciling items for noninterest expense
include $28 million and $27 million of amortization of intangibles in the
second quarters of 2000 and 1999, Year 2000 expenses, and corporate overhead.
The adjustment to the provision for credit losses reflects the difference
between the aggregate of the credit provision over a credit cycle for the
reportable segments and the Company's recorded provision. The reconciling
items for average assets consist of goodwill and other intangible assets.
FORWARD LOOKING STATEMENTS
The information presented with respect to, among other things, earnings
growth, legal proceedings, the Company's plans and objectives in moving into
fee based business, and future loan losses, is forward looking information.
Forward looking statements are the Company's current estimates or expectations
of future events or future results. As such, forward looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from projected results discussed in this Report. These include
lower than expected performance or higher than expected costs in connection
with acquisitions and integration of acquired businesses, variations in
management projections or market forecasts and the actions that management
could take in response to these changes.
The Company or its executive officers and directors on behalf of the
Company, may from time to time make forward looking statements. When used in
this report, any press release or oral statements, the words "estimate",
"project", "anticipate", "expect", "intend", "believe", "plan", "goal", and
words of like import are intended to identify forward looking statements in
addition to statements specifically identified as forward looking statements.
These statements, projections or future plans, could be affected by a number
of factors that the Company is necessarily unable to predict with accuracy,
including future changes in interest rates, general credit quality, the level
of capital market activity, economic activity, consumer behavior, government
monetary policy, legislation and regulation, competition, credit, market and
operating risk, and loan demand. In addition, the Company's future results of
operations, discussions of future plans 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
the uncertainties created by the enactment of the Gramm-Leach-Bliley Act of
1999 (Financial Services Modernization). As a result of variations in such
factors, actual results may differ materially from any forward looking
statements.
Forward looking statements speak only as of the date they are made. The
Company will not update forward looking statements to reflect factual
assumptions, circumstances or events which have changed after a forward
looking statement was made.
<PAGE> 19
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.
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.
A wide variety of domestic and foreign companies compete for processing
services. 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.
<PAGE> 20
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Preliminary)
(Dollars in millions)
<TABLE>
<CAPTION>
For the three months For the three months
ended June 30, 2000 ended June 30, 1999
------------------------------ ------------------------------
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) $ 5,167 $ 66 5.11% $ 5,024 $ 54 4.31%
Federal Funds Sold and Securities
Purchased Under Resale Agreements 4,413 69 6.32 3,949 46 4.66
Loans
Domestic Offices 19,424 358 7.42 20,704 362 7.02
Foreign Offices 20,328 377 7.45 19,310 297 6.16
------- ----- ------- -----
Total Loans 39,752 735 7.44 40,014 659 6.60
------- ----- ------- -----
Securities
U.S. Government Obligations 2,123 32 6.00 2,512 36 5.82
U.S. Government Agency Obligations 1,132 19 6.85 875 14 6.40
Obligations of States and
Political Subdivisions 615 12 8.00 580 11 7.90
Other Securities, including
Trading Securities 12,749 188 5.91 2,740 30 4.31
------- ----- ------- -----
Total Securities 16,619 251 6.06 6,707 91 5.46
------- ----- ------- -----
Total Interest-Earning Assets 65,951 1,121 6.84% 55,694 850 6.12%
----- -----
Allowance for Credit Losses (600) (630)
Cash and Due from Banks 3,435 3,075
Other Assets 10,160 8,398
------- -------
TOTAL ASSETS $78,946 $66,537
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts $ 5,797 71 4.95% $ 5,195 54 4.13%
Savings 7,678 48 2.50 7,821 43 2.22
Certificates of Deposit
$100,000 & Over 423 6 5.30 591 7 4.75
Other Time Deposits 1,991 25 5.09 2,123 22 4.25
Foreign Offices 29,176 371 5.12 19,652 198 4.04
------- ----- ------- -----
Total Interest-Bearing Deposits 45,065 521 4.65 35,382 324 3.67
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 2,400 32 5.43 3,370 36 4.26
Other Borrowed Funds 2,442 42 6.81 2,153 28 5.25
Long-Term Debt 2,823 49 6.94 2,233 35 6.30
------- ----- ------- -----
Total Interest-Bearing Liabilities 52,730 644 4.91% 43,138 423 3.94%
----- -----
Noninterest-Bearing Deposits 11,224 10,640
Other Liabilities 8,175 6,044
Minority Interest-Preferred Securities 1,500 1,500
Common Shareholders' Equity 5,317 5,215
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $78,946 $66,537
======= =======
Net Interest Earnings
and Interest Rate Spread $ 477 1.93% $ 427 2.18%
===== ==== ===== ====
Net Yield on Interest-Earning Assets 2.91% 3.07%
==== ====
</TABLE>
<PAGE> 21
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Preliminary)
(Dollars in millions)
<TABLE>
<CAPTION>
For the six months For the six months
ended June 30, 2000 ended June 30, 1999
------------------------------ ------------------------------
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) $ 5,781 $ 137 4.76% $ 5,158 $ 118 4.61%
Federal Funds Sold and Securities
Purchased Under Resale Agreements 4,030 118 5.90 4,229 99 4.71
Loans
Domestic Offices 19,768 720 7.32 20,263 724 7.21
Foreign Offices 20,242 731 7.27 19,407 596 6.19
------- ----- ------- -----
Total Loans 40,010 1,451 7.30 39,670 1,320 6.71
------- ----- ------- -----
Securities
U.S. Government Obligations 2,449 74 6.05 2,552 73 5.77
U.S. Government Agency Obligations 979 33 6.75 866 28 6.36
Obligations of States and
Political Subdivisions 603 24 8.01 603 23 7.80
Other Securities, including
Trading Securities 11,181 329 5.92 2,538 55 4.37
------- ----- ------- -----
Total Securities 15,212 460 6.08 6,559 179 5.51
------- ----- ------- -----
Total Interest-Earning Assets 65,033 2,166 6.70% 55,616 1,716 6.22%
----- -----
Allowance for Credit Losses (604) (633)
Cash and Due from Banks 3,359 3,075
Other Assets 9,954 8,217
------- -------
TOTAL ASSETS $77,742 $66,275
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts $ 5,660 137 4.85% $ 5,186 106 4.12%
Savings 7,663 94 2.48 7,808 86 2.21
Certificates of Deposit
$100,000 & Over 444 12 5.38 624 15 4.84
Other Time Deposits 2,097 51 4.90 2,188 47 4.34
Foreign Offices 28,434 698 4.94 19,127 387 4.08
------- ----- ------- -----
Total Interest-Bearing Deposits 44,298 992 4.51 34,933 641 3.70
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 2,596 69 5.33 3,181 67 4.24
Other Borrowed Funds 2,219 70 6.36 2,886 75 5.29
Long-Term Debt 2,823 98 6.89 2,180 70 6.41
------- ----- ------- -----
Total Interest-Bearing Liabilities 51,936 1,229 4.76% 43,180 853 3.98%
----- -----
Noninterest-Bearing Deposits 11,258 10,532
Other Liabilities 7,881 5,863
Minority Interest-Preferred Securities 1,500 1,473
Common Shareholders' Equity 5,167 5,227
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $77,742 $66,275
======= =======
Net Interest Earnings
and Interest Rate Spread $ 937 1.94% $ 863 2.24%
===== ==== ===== ====
Net Yield on Interest-Earning Assets 2.90% 3.13%
==== ====
</TABLE>
<PAGE> 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
The Company continues to cooperate with investigations, which have been
ongoing for almost two years, by federal and state law enforcement and bank
regulatory authorities. The investigations focus on funds transfer activities
in certain accounts at The Bank of New York ("BNY"), principally involving
wire transfers from Russian and other sources in Eastern Europe, as well as
certain other matters involving BNY and its affiliates. The funds transfer
investigations center around accounts controlled by Peter Berlin, his wife,
Lucy Edwards (until discharged in September 1999, an officer of BNY), and
companies and persons associated with them. Berlin and Edwards plead guilty to
various federal criminal charges. The Company cannot predict when or on what
basis the investigations will conclude or their effect, if any, on the
Company.
On February 8, 2000, BNY entered into a written agreement with both the
Federal Reserve Bank of New York and the New York State Banking Department,
which imposed a number of reporting requirements and controls. Substantial
portions of these were in place on the date the agreement was signed.
Four purported shareholder derivative actions have been filed in
connection with these Russian related matters - - two in the United States
District Court for the Southern District of New York and two in the New York
Supreme Court, New York County - - against certain directors and officers of
the Company and BNY alleging that the defendants have breached their fiduciary
duties of due care and loyalty by aggressively pursuing business with Russian
banks and entities without implementing sufficient safeguards and failing to
supervise properly those responsible for that business. The actions seek, on
behalf of the Company and BNY, monetary damages from the defendants,
corrective action and attorneys' fees. The defendants have moved to dismiss
both actions in New York State Supreme Court on the ground that plaintiffs
have failed properly to make a demand on the boards of directors of the
Company or BNY, and that the boards must reject a proper demand before a
complaint can proceed. These motions are currently pending.
Additionally, on October 7, 1999, six alleged depositors of Joint Stock
Bank Inkombank ("Inkombank"), a Russian Bank, filed a purported class action
in the United States District Court for the Southern District of New York on
behalf of all depositors of Inkombank who lost their deposits when that bank
collapsed in 1998. The complaint, as subsequently amended, alleges that the
Company and BNY and their senior officers knew about, and aided and abetted
the looting of Inkombank by its principals. The amended complaint asserts
causes of action for conversion and aiding and abetting conversion under New
York law. In addition, the amended complaint states a claim under the
Racketeer Influenced and Corrupt Organizations Act ("RICO"). It seeks an
unspecified amount of damages believed to exceed $500 million, along with
punitive damages of $500 million, interest, costs, attorneys' fees, expert
fees, and other expenses. The amended compliant seeks a trebling of any RICO
damages. The Company and BNY moved to dismiss the amended complaint, and the
Court granted that motion with leave to replead. The Company and BNY believe
that the allegations of the amended complaint are without merit and intend to
defend the actions vigorously.
The Company does not expect that any of the foregoing civil actions will
have a material impact on the Company's consolidated financial statements.
In the ordinary course of business, there are various legal 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 on the Company's consolidated financial statements.
<PAGE> 23
Item 2. Changes in Securities and Use of Proceeds
--------------------------------------------------
During the second quarter of 2000, shares of the Company's common stock
were issued in transactions exempt from registration under the Securities Act
of 1933 pursuant to Section 4(2) thereof. 14,400 shares of common stock were
issued to serving non-employee directors as part of their annual retainer on
June 15, 2000.
Item 4. Submission of Matters to Vote of Security Holders
----------------------------------------------------------
The Company held its annual meeting on May 9, 2000 at The Bank of New
York at 101 Barclay St. in New York, New York. The shareholders:
(1) elected fifteen persons to serve as directors of the Company;
(2) ratified the appointment of Ernst & Young LLP as the Company's
independent public accountants for 2000;
(3) defeated a shareholder proposal regarding term limits for
directors; and
(4) defeated a shareholder proposal regarding the Company's Rights Plan.
The number of votes cast for, against or withheld, and the number of
abstentions with respect to each such matter is set forth below, as are the
number of broker non-votes, where applicable. Pursuant to New York law,
abstentions and broker non-votes are not counted toward the election of
directors.
<TABLE>
<CAPTION>
FOR AGAINST/WITHHELD ABSTAINED BROKER NON-VOTES
<S> <C> <C> <C> <C>
(1) Election of Directors:
J. Carter Bacot 639,610,979 8,808,865
Richard Barth 644,381,178 4,038,666
Frank J. Biondi, Jr. 644,443,553 3,976,291
William R. Chaney 632,868,013 15,551,831
Nicholas M. Donofrio 644,449,241 3,970,603
Alan R. Griffith 644,409,398 4,010,446
Gerald L. Hassell 644,443,303 3,976,541
Richard J. Kogan 644,480,713 3,939,131
John A. Luke, Jr. 644,295,672 4,124,172
John C. Malone 556,257,984 92,161,860
Donald L. Miller 644,293,647 4,126,197
Catherine A. Rein 644,438,929 3,980,915
Thomas A. Renyi 644,296,176 4,123,668
William C. Richardson 644,423,653 3,987,191
Brian L. Roberts 644,422,619 3,997,225
(2) Ratification of Auditors 643,710,216 2,493,714 2,215,914
(3) Approval of Shareholder
Proposal Regarding Term
Limits for Directors 25,303,271 522,779,851 9,847,497 90,489,225
(4) Approval of Shareholder
Proposal Regarding the
Company's Rights Plan 255,750,367 291,537,734 10,642,518 90,489,225
</TABLE>
<PAGE> 24
Item 5. Other Information
--------------------------
In March 2000, the Federal Reserve Board published for public comment a
proposal to amend its regulatory capital guidelines to increase the amount of
consolidated regulatory capital required to be held by bank holding companies
with respect to certain equity and debt investments made by bank holding
companies, or their subsidiaries, in nonfinancial companies. The financial
impact of the proposal upon the Company cannot be determined until a final
rule is published. However, based upon its estimate of the impact of applying
the proposed rule to the Company's current investments covered by the proposed
rule, management anticipates that the Company's regulatory capital ratios will
remain in excess of the ratios required in order to be considered "well
capitalized".
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) The exhibits filed as part of this report are as follows:
Exhibit 3(i) - Restated Certificate of Incorporation.
Exhibit 12 - Statement Re: Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and Distributions on
Preferred Trust Securities for the Three Months and Six Months Ended
June 30, 2000 and 1999.
Exhibit 27 - Statement Re: Financial Data Schedule containing selected
financial data at June 30, 2000.
(b) The Company filed the following reports on Form 8-K since
March 31, 2000:
On April 17, 2000, the Company filed a Form 8-K Current Report (Items 5
and 7), which report included unaudited interim financial information and
accompanying discussion for the first quarter of 2000 contained in the
Company's press release dated April 17, 2000.
On July 17, 2000, 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 2000 contained in the
Company's press release dated July 17, 2000.
<PAGE> 25
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 hereunto duly authorized.
THE BANK OF NEW YORK COMPANY, INC.
----------------------------------
(Registrant)
Date: August 11, 2000 By: \s\ Thomas J. Mastro
---------------------------------
Name: Thomas J. Mastro
Title: Comptroller
EXHIBIT INDEX
-------------
Exhibit Description
------- -----------
3(i) Restated Certificate of Incorporation
12 Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges and Distributions on Trust
Preferred Securities for the Three and Six Months Ended
June 30, 2000 and 1999.
27 Financial Data Schedule containing selected financial
data at June 30, 2000 and for the Six Months Ended
June 30, 2000
