<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-5920
BANKERS TRUST NEW YORK CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-6180473
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
280 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
(212) 250-2500
(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 for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No _______
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of April 30, 1996: Common Stock, $1 par value,
79,496,062 shares.
<PAGE> 1
BANKERS TRUST NEW YORK CORPORATION
March 31, 1996 FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended March 31, 1996 and 1995 2
Consolidated Balance Sheet
At March 31, 1996 and December 31, 1995 3
Consolidated Statement of Changes in Stockholders'
Equity
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1996 and 1995 5
Consolidated Schedule of Net Interest Revenue
Three Months Ended March 31, 1996 and 1995 6
In the opinion of management, all material adjustments
necessary for a fair presentation of the financial position
and results of operations for the interim periods presented
have been made. All such adjustments were of a normal
recurring nature. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative
of the results of operations for the full year or any other
interim period.
The financial statements included in this Form 10-Q should
be read with reference to the Corporation's 1995 Annual Report.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 36
Item 6. Exhibits and Reports on Form 8-K 37
SIGNATURE 38
<PAGE> 2
PART I. FINANCIAL INFORMATION
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Increase
THREE MONTHS ENDED MARCH 31, 1996 1995 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,590 $1,353 $ 237
Interest expense 1,377 1,171 206
Net interest revenue 213 182 31
Provision for credit losses 5 14 (9)
Net interest revenue after provision
for credit losses 208 168 40
NONINTEREST REVENUE
Trading 247 (78) 325
Fiduciary & funds management 183 171 12
Corporate finance fees 86 72 14
Other fees & commissions 87 73 14
Net revenue from equity investment transactions 21 26 (5)
Securities available for sale gains 15 2 13
Insurance premiums 62 49 13
Other 49 27 22
Total noninterest revenue 750 342 408
NONINTEREST EXPENSES
Salaries 201 208 (7)
Incentive compensation & employee benefits 227 133 94
Agency & other professional service fees 60 76 (16)
Communication & data services 46 47 (1)
Occupancy, net 37 41 (4)
Furniture & equipment 41 42 (1)
Travel & entertainment 18 23 (5)
Provision for policyholder benefits 72 56 16
Other 59 58 1
Provision for severance-related costs - 50 (50)
Total noninterest expenses 761 734 27
Income (loss) before income taxes 197 (224) 421
Income taxes (benefit) 59 (67) 126
NET INCOME (LOSS) $ 138 $ (157) $ 295
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 123 $ (165) $ 288
Cash dividends declared per common share $1.00 $1.00 $-
EARNINGS (LOSS) PER COMMON SHARE:
PRIMARY $1.52 $(2.11) $3.63
FULLY DILUTED $1.51 $(2.11) $3.62
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 3
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions, except par value)
<TABLE>
<CAPTION>
March 31, December 31,
1996* 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,181 $ 2,337
Interest-bearing deposits with banks 1,377 2,023
Federal funds sold 1,038 854
Securities purchased under resale
agreements 15,670 13,206
Securities borrowed 15,390 10,951
Trading assets:
Government securities 18,345 20,704
Corporate debt securities 5,670 5,648
Equity securities 6,024 5,098
Swaps, options and other derivative contracts 10,330 10,555
Other trading assets 5,136 5,888
Total trading assets 45,505 47,893
Securities available for sale 6,880 6,283
Loans 13,088 12,633
Allowance for credit losses (987) (992)
Accounts receivable and accrued interest 4,072 4,220
Other assets 4,930 4,594
Total $108,144 $104,002
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 1,997 $ 2,687
Foreign offices 545 605
Interest-bearing deposits
Domestic offices 5,824 5,402
Foreign offices 14,190 17,014
Total deposits 22,556 25,708
Trading liabilities:
Securities sold, not yet purchased
Government securities 11,897 11,092
Equity securities 3,918 3,262
Other trading liabilities 331 473
Swaps, options and other derivative contracts 10,903 11,264
Total trading liabilities 27,049 26,091
Securities sold under repurchase agreements 23,209 15,247
Other short-term borrowings 12,493 15,761
Accounts payable and accrued expenses 4,665 3,931
Other liabilities 2,742 2,736
Long-term debt 10,125 9,294
Total liabilities 102,839 98,768
PREFERRED STOCK OF SUBSIDIARY 250 250
STOCKHOLDERS' EQUITY
Preferred stock 866 865
Common stock, $1 par value
Authorized, 300,000,000 shares
Issued, 83,678,973 shares 84 84
Capital surplus 1,304 1,302
Retained earnings 3,351 3,316
Common stock in treasury, at cost:
1995, 4,602,855 shares;
1996, 4,277,569 shares (311) (336)
Other stockholders' equity (239) (247)
Total stockholders' equity 5,055 4,984
Total $108,144 $104,002
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
* Unaudited
</TABLE>
<PAGE> 4
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED March 31, 1996 1995
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 $ 865 $ 395
Preferred stock issued 1 244
Balance, March 31 866 639
COMMON STOCK
Balance, January 1 and March 31 84 84
CAPITAL SURPLUS
Balance, January 1 1,302 1,317
Preferred stock issuance and conversion costs - (10)
Common stock distributed under employee
benefit plans 2 (1)
Balance, March 31 1,304 1,306
RETAINED EARNINGS
Balance, January 1 3,316 3,494
Net income (loss) 138 (157)
Cash dividends declared
Preferred stock (15) (7)
Common stock (79) (78)
Treasury stock distributed under employee benefit plans (9) (9)
Balance, March 31 3,351 3,243
COMMON STOCK IN TREASURY, AT COST
Balance, January 1 (336) (416)
Purchases of stock (20) (11)
Restricted stock granted, net 23 7
Treasury stock distributed under employee benefit plans 22 27
Balance, March 31 (311) (393)
COMMON STOCK ISSUABLE - STOCK AWARDS
Balance, January 1 233 160
Deferred stock awards granted, net 66 10
Deferred stock distributed (1) (15)
Balance, March 31 298 155
DEFERRED COMPENSATION - STOCK AWARDS
Balance, January 1 (151) (63)
Deferred stock awards granted, net (66) (9)
Restricted stock granted, net (22) (6)
Amortization of deferred compensation, net 41 11
Balance, March 31 (198) (67)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1 (348) (336)
Translation adjustments (17) 3
Income taxes applicable to translation adjustments 16 (12)
Balance, March 31 (349) (345)
SECURITIES VALUATION ALLOWANCE
Balance, January 1 19 69
Change in unrealized net gains, after applicable
income taxes and minority interest (9) (23)
Balance, March 31 10 46
TOTAL STOCKHOLDERS' EQUITY, MARCH 31 $5,055 $4,668
</TABLE>
<PAGE> 5
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 138 $ (157)
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 5 14
Provision for severance-related costs - 50
Provision for policyholder benefits 72 56
Deferred income taxes 26 53
Depreciation and amortization of premises
and equipment 35 34
Other, net (15) (34)
Earnings adjusted for noncash charges and credits 261 16
Net change in:
Trading assets 2,308 (4,980)
Trading liabilities 700 8,896
Receivables and payables from securities
transactions 29 1,289
Other operating assets and liabilities, net 666 (363)
Securities available for sale gains (15) (2)
Net cash provided by operating activities 3,949 4,856
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits with banks 624 332
Federal funds sold (184) 429
Securities purchased under resale agreements (2,337) (8,225)
Securities borrowed (4,439) (1,510)
Loans (348) 679
Securities available for sale:
Purchases (1,568) (439)
Maturities and other redemptions 892 1,049
Sales 135 914
Acquisitions of premises and equipment (54) (50)
Other, net 11 37
Net cash used in investing activities (7,268) (6,784)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in:
Deposits (3,250) (61)
Securities sold under repurchase agreements 8,025 3,028
Other short-term borrowings (3,393) (1,654)
Issuances of long-term debt 1,050 1,007
Repayments of long-term debt (187) (781)
Issuances of preferred stock - 100
Purchases of treasury stock (20) (11)
Cash dividends paid (94) (85)
Other, net 15 7
Net cash provided by financing activities 2,146 1,550
Net effect of exchange rate changes on cash 17 (4)
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (1,156) (382)
Cash and due from banks, beginning of year 2,337 1,985
Cash and due from banks, end of period $ 1,181 $ 1,603
Interest paid $1,433 $808
Income taxes paid, net $81 $29
Noncash investing activities $30 $25
Noncash financing activities:
Conversion of debt to preferred stock $1 $144
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 6
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
INTEREST REVENUE
Interest-bearing deposits with banks $ 43 $ 49 $ (6)
Federal funds sold 28 35 (7)
Securities purchased under resale agreements 194 147 47
Securities borrowed 225 172 53
Trading assets 772 616 156
Securities available for sale
Taxable 90 89 1
Exempt from federal income taxes 7 16 (9)
Loans 231 229 2
Total interest revenue 1,590 1,353 237
INTEREST EXPENSE
Deposits
In domestic offices 88 93 (5)
In foreign offices 247 241 6
Trading liabilities 326 213 113
Securities sold under repurchase agreements 308 236 72
Other short-term borrowings 271 298 (27)
Long-term debt 137 90 47
Total interest expense 1,377 1,171 206
NET INTEREST REVENUE $ 213 $ 182 $ 31
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Bankers Trust New York Corporation (the "Parent Company") and
subsidiaries (collectively, the "Corporation", or the "Firm") earned $138
million for the quarter ended March 31, 1996, or $1.52 primary earnings per
share. In the first quarter of 1995, the Corporation recorded a loss of
$157 million, or $2.11 primary loss per share.
ORGANIZATIONAL UNIT ANALYSIS
Change in Functional Analysis
In recent years a Business Function approach was used to analyze the
principal components of the financial performance of the Corporation's
businesses. As reported in the Corporation's 1995 Annual Report on Form 10-
K, the Corporation has changed this financial analysis to reflect more
closely its organizational structure. Presented on page 34 of this report,
is net income by Business Functions compiled by utilizing the methods and
assumptions that were relevant prior to the first quarter of 1996.
Organizational Units Results
The following table analyzes net income (loss) by Organizational
Units:
<TABLE>
<CAPTION>
Net Income (Loss) by Organizational Unit
First First
Quarter Quarter Increase
(in millions) 1996 1995 (Decrease)
<S> <C> <C> <C>
Investment Banking $ 77 $ 24 $ 53
Risk Management Products & Services 1 (30) 31
Trading & Sales 24 11 13
Investment Management 1 (4) 5
Client Processing Services 21 20 1
Australia/New Zealand 24 22 2
Asia 6 (3) 9
Latin America 19 (108) 127
Corporate (including unallocated overhead) (35) (89) 54
Net Income (Loss) $138 $(157) $295
<FN>
Note: See page 32 for Organizational Unit definitions and assumptions
</TABLE>
<PAGE> 8
ORGANIZATIONAL UNIT ANALYSIS (continued)
The Investment Banking business produced net income of $77 million in
the first quarter of 1996, compared with $24 million in the first quarter
of the previous year. Higher revenue from corporate finance and private
equity investments accounted for most of this increase.
Risk Management Products & Services produced net income of $1 million
in the first quarter of 1996, a significant improvement from the loss seen
in the first quarter of 1995. This improvement was due to an increase in
new business revenue as the Corporation continues its client-focused effort
to restructure its Risk Management Products & Services business.
Net income from the Trading & Sales business was up $13 million from
the first quarter of 1995. Increased net income from arbitrage trading was
partially offset by lower income from client-related foreign exchange
activities.
The Corporation's Investment Management business, which for reporting
purposes does not include investment management activities in Australia/New
Zealand, reported a small net income in the first quarter of 1996, a modest
improvement from the first quarter of 1995. The Corporation has
restructured this business and is implementing a development plan to
improve results in the future.
Client Processing Services produced $21 million of net income in the
first quarter of 1996, consistent with the first quarter of 1995.
Australia/New Zealand business net income was $24 million in the first
quarter of 1996, up $2 million from the first quarter of 1995.
Asia net income was $6 million in the first quarter of 1996, as
compared with a $3 million loss in the first quarter of 1995. The
increased income was primarily due to improved revenue in Thailand and
Japan.
Latin America net income was $19 million in the first quarter of 1996,
due to strong trading results and improved revenue from the Corporation's
Chilean insurance subsidiaries. The first quarter 1995 net loss was the
result of certain client risk management and trading positions that were
affected by extreme volatility and illiquidity in Latin American securities
markets after the Mexican peso devaluation. These positions were resolved
during the first half of 1995.
<PAGE> 9
REVENUE
The table below shows net interest revenue, average balances and
average rates. The tax equivalent adjustment is made to present the
revenue and yields on certain assets, primarily tax-exempt securities and
loans, as if such revenue were taxable.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE (in millions)
Book basis $213 $182 $ 31
Tax equivalent adjustment 4 15 (11)
Fully taxable basis $217 $197 $ 20
AVERAGE BALANCES (in millions)
Interest-earning assets $85,576 $78,228 $7,348
Interest-bearing liabilities 82,912 75,642 7,270
Earning assets financed by
noninterest-bearing funds $ 2,664 $ 2,586 $ 78
AVERAGE RATES (fully taxable basis)
Yield on interest-earning assets 7.49% 7.09% .40%
Cost of interest-bearing liabilities 6.68 6.28 .40
Interest rate spread .81 .81 -
Contribution of noninterest-bearing
funds .21 .21 -
Net interest margin 1.02% 1.02% -
</TABLE>
Net interest revenue for the first quarter of 1996 totaled $213
million, up $31 million, or 17 percent, from the first quarter of 1995.
The $31 million increase in net interest revenue was primarily due to a $29
million increase in trading-related net interest revenue, which totaled $30
million for the first quarter of 1996.
The Firm's non-trading-related net interest revenue, considered to be
historically a more stable component of overall net interest revenue, was
$183 million in the first quarter of 1996, compared to $181 million for the
comparable 1995 quarter.
<PAGE> 10
REVENUE (continued)
A significant portion of the Firm's trading and risk management
activities involve positions in interest rate instruments and related
derivatives. The revenue from these activities can periodically shift
between trading and net interest, depending on a variety of factors,
including risk management strategies. Therefore, the Corporation views
trading revenue and trading-related net interest revenue together.
Combined trading revenue and trading-related net interest revenue for
the first quarter of 1996 was $277 million, up $354 million from the $77
million loss reported in the first quarter of 1995.
The table below quantifies the Corporation's trading revenue and
trading-related net interest revenue by major category of market risk.
These categories are based on management's view of the predominant
underlying risk exposure of each of the Firm's trading positions.
<TABLE>
<CAPTION>
Trading-
Related
Net
Trading Interest
(in millions) Revenue Revenue Total
<S> <C> <C> <C>
Quarter ended March 31, 1996
Interest rate risk $158 $ 52 $210
Foreign exchange risk 17 - 17
Equity and commodity risk 72 (22) 50
Total $247 $ 30 $277
Quarter ended March 31, 1995
Interest rate risk $(57) $ 18 $(39)
Foreign exchange risk (43) - (43)
Equity and commodity risk 22 (17) 5
Total $(78) $ 1 $(77)
</TABLE>
<PAGE> 11
REVENUE (continued)
Interest Rate Risk - The increase in revenue was principally due to a
rebound in the Firm's activities in Latin America as 1995 was characterized
by heightened volatility in interest rates coupled with liquidity problems
in the emerging markets of Latin America.
Foreign Exchange Risk - Trading revenue improved compared to the same
period last year due to increased stability in the foreign exchange
markets. The first quarter of 1995 was affected by global volatility in
foreign exchange markets during which the dollar fell to record lows
against the yen and the mark.
Equity and Commodity Risk - The improvement in revenue was principally
due to a rebound in the Firm's equity related products in the Risk
Management Products & Services, Trading & Sales and Investment Banking
Organizational Units.
Shown below is a comparison of the components of noninterest revenue
(excluding trading).
<TABLE>
<CAPTION>
Quarter Ended
March 31, Increase
(in millions) 1996 1995 (Decrease)
<S> <C> <C> <C>
Fiduciary & funds management revenue $183 $171 $12
Corporate finance fees 86 72 14
Other fees and commissions:
Service charges on deposit accounts 15 19 (4)
Transaction processing fees 37 33 4
Other 35 21 14
Total other fees & commissions 87 73 14
Net revenue from equity investment
transactions 21 26 (5)
Securities available for sale gains 15 2 13
Insurance premiums 62 49 13
Other 49 27 22
Total noninterest revenue (excluding trading) $503 $420 $83
</TABLE>
<PAGE> 12
REVENUE (continued)
Fiduciary and funds management revenue totaled $183 million for the
first quarter of 1996, up $12 million, or 7 percent, from the comparable
period last year. The increase in revenue was due primarily to an increase
in global private banking commissions and investment management revenue.
These increases were attributable to a higher level of assets under
management in the United States and Australian markets.
Corporate finance fees of $86 million increased by $14 million, or 19
percent, from the same period last year. Higher revenue from securities
underwriting fees and loan syndication fees was partially offset by lower
revenue from merger and acquisition fees. Other fees and commissions
totaled $87 million, an increase of $14 million, or 19 percent, compared
with last year's first quarter.
All other noninterest revenue totaled $147 million, up $43 million
from the prior year's first quarter. Contributing to this increase were
higher insurance premium revenue from operations in Chile and higher
securities available for sale gains.
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The provision for credit losses is dependent upon management's
evaluation as to the amount needed to maintain the allowance for credit
losses at a level considered appropriate in relation to the risk of losses
inherent in the portfolio.
The provision for credit losses was $5 million for the first quarter of
1996, compared with $14 million in the prior year's first quarter. Net
charge-offs for the first quarter were $10 million, compared with $21
million a year ago. The current quarter's net charge-offs included a
leveraged derivative contract recovery of $9 million against the allowance
for credit losses. For the first quarter of 1995, nonrefinancing country
net charge-offs were $28 million and included net charge-offs of $8 million
of real estate loans.
<PAGE> 13
PROVISION AND ALLOWANCE FOR CREDIT LOSSES (continued)
The provision for credit losses and the other changes in the allowance
for credit losses are shown below (in millions).
<TABLE>
<CAPTION>
Quarter Ended
March 31,
Allowance for credit losses 1996 1995
<S> <C> <C>
Balance, beginning of period $992 $1,252
Net charge-offs
Charge-offs 28 34
Recoveries 18 13
Total net charge-offs* 10 21
Provision for credit losses 5 14
Balance, end of period $987 $1,245
*Components:
Secured by real estate $ 1 $ 6
Real estate related 4 2
Highly leveraged 20 20
Other (12) -
Refinancing country (3) (7)
Total $ 10 $21
</TABLE>
The allowance for credit losses, at $987 million at March 31, 1996,
was down $5 million from its level at December 31, 1995. The allowance was
equal to 138 percent, and 133 percent of total cash basis loans at March
31, 1996, and December 31, 1995, respectively. The Corporation believes
that its allowance must be viewed in its entirety and therefore is
available for potential credit losses in its entire portfolio, including
loans, credit-related commitments, derivatives and other financial
instruments.
In the opinion of management, the allowance, when taken as a whole, is
adequate to absorb reasonably estimated credit losses inherent in the
Corporation's entire portfolio.
The recorded investment in loans that was considered to be impaired
under SFAS 114 was $804 million and $844 million which consisted of total
cash basis loans and renegotiated loans at March 31, 1996 and December 31,
1995, respectively. Included in these amounts were $423 million and $458
million of loans for which the related valuation allowance was $80 million
and $90 million at these dates, respectively.
<PAGE> 14
EXPENSES
Total noninterest expenses of $761 million increased by $27 million,
or 4 percent, from the first quarter of 1995. Incentive compensation and
employee benefits expense increased $94 million, or 71 percent due to
higher earnings. Salaries expense decreased $7 million, or 3 percent, from
the first quarter of 1995, mostly due to a 2 percent decrease in the
average number of employees. All other expenses totaled $333 million for
the quarter, down $60 million, or 15 percent, from last year's first
quarter. The first quarter of 1995 included a $50 million pre-tax
provision for severance-related costs.
INCOME TAXES
Income tax expense for the first quarter of 1996 amounted to $59
million, compared with an income tax benefit of $67 million for the first
quarter of 1995. The effective tax rate was 30 percent for the current and
prior year quarters.
<PAGE> 15
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share amounts were
computed by subtracting from earnings the dividend requirements on
preferred stock to arrive at earnings applicable to common stock and
dividing this amount by the average number of common and common equivalent
shares outstanding during the period.
For both primary and fully diluted earnings per share, the average
number of common and common equivalent shares outstanding was the sum of
the average number of shares of common stock outstanding and the
incremental number of shares issuable under outstanding stock options and
deferred stock awards that had a dilutive effect as computed under the
treasury stock method. Under this method, the number of incremental shares
is determined by assuming the issuance of the outstanding stock options and
deferred stock awards reduced by the number of shares assumed to be
repurchased from the issuance proceeds, using the market price of the
Parent Company's common stock. For primary earnings per share, this market
price is the average market price for the period, while for fully diluted
earnings per share, it is the period-end market price if it is higher than
the average market price. At no time during the three month period ended
March 31, 1996 and 1995 did the Corporation have outstanding any securities
which were convertible to the Parent Company's common stock.
The earnings applicable to common stock and the number of shares used
for primary and fully diluted earnings per share were as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net income (loss) applicable to common stock $123 $(165)
Average number of common shares outstanding 77.495 78.346
Average common and common equivalent shares
outstanding - primary (1) 80.896 78.346
Average common and common equivalent shares
outstanding assuming full dilution (1) 81.560 78.346
<FN>
(1) Common stock equivalents are excluded from the first quarter 1995 as the
effect would be anti-dilutive in calculating earnings per share.
</TABLE>
<PAGE> 16
BALANCE SHEET ANALYSIS
The following table highlights the changes in the balance sheet.
Since quarter-end balances can be distorted by one-day fluctuations, an
analysis of changes in the quarterly averages is provided to give a better
indication of balance sheet trends.
<TABLE>
<CAPTION>
CONDENSED AVERAGE BALANCE SHEETS
(in millions)
1st Qtr 4th Qtr Increase
1996 1995 (Decrease)
<S> <C> <C> <C>
ASSETS
Interest-earning
Interest-bearing deposits with banks $ 2,167 $ 3,624 $(1,457)
Federal funds sold 1,992 2,387 (395)
Securities purchased under resale
agreements 15,798 15,167 631
Securities borrowed 16,194 13,817 2,377
Trading assets 30,393 31,926 (1,533)
Securities available for sale
Taxable 5,303 5,206 97
Exempt from federal income taxes 1,335 1,365 (30)
Total securities available for sale 6,638 6,571 67
Loans
In domestic offices 7,000 7,199 (199)
In foreign offices 5,394 5,624 (230)
Total loans 12,394 12,823 (429)
Total interest-earning assets 85,576 86,315 (739)
Noninterest-earning
Cash and due from banks 1,478 1,972 (494)
Noninterest-earning trading assets 16,948 17,858 (910)
All other assets 10,667 9,736 931
Allowance for credit losses (998) (1,028) 30
Total $113,671 $114,853 $(1,182)
LIABILITIES
Interest-bearing
Interest-bearing deposits
In domestic offices $ 5,928 $ 5,788 $ 140
In foreign offices 15,996 18,404 (2,408)
Total interest-bearing deposits 21,924 24,192 (2,268)
Trading liabilities 11,939 12,599 (660)
Securities sold under repurchase agreements 23,922 22,680 1,242
Other short-term borrowings 15,449 15,960 (511)
Long-term debt 9,678 8,904 774
Total interest-bearing liabilities 82,912 84,335 (1,423)
Noninterest-bearing
Noninterest-bearing deposits 3,347 3,606 (259)
Noninterest-bearing trading liabilities 15,355 15,392 (37)
All other liabilities 6,779 6,240 539
Total liabilities 108,393 109,573 (1,180)
PREFERRED STOCK OF SUBSIDIARY 250 250 -
STOCKHOLDERS' EQUITY
Preferred stock 866 865 1
Common stockholders' equity 4,162 4,165 (3)
Total stockholders' equity 5,028 5,030 (2)
Total $113,671 $114,853 $(1,182)
<FN>
The condensed average balance sheets are presented on a slightly different
basis than the balance sheets presented in the financial statements section
of this report, in that the various categories of interest-earning assets
and interest-bearing liabilities exclude certain noninterest-
earning/bearing components included in the balance sheet captions. These
components, excluding noninterest-earning/bearing trading
assets/liabilities, are included in "all other assets" and "all other
liabilities" in the condensed average balance sheets.
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 17
BALANCE SHEET ANALYSIS (continued)
The Corporation's average total assets amounted to $113.7 billion for
the first quarter of 1996, a decrease of $1.2 billion from the fourth
quarter of 1995. Average interest-earning assets decreased $739 million,
or 1 percent, and the proportion of interest-earning assets to total assets
remained constant at 75 percent. The decrease in interest-earning assets
was primarily due to decreases in trading assets (down $1.5 billion, or 5
percent) and interest-bearing deposits with banks (down $1.5 billion, or 40
percent) offset in part by an increase in securities borrowed (up $2.4
billion, or 17 percent). Interest-earning trading assets, as a percentage
of average total assets decreased from 28 percent to 27 percent.
Noninterest-earning trading assets decreased $910 million, or 5 percent
from the fourth quarter of 1995.
Average total liabilities decreased $1.2 billion, or 1 percent, from
the fourth quarter of 1995. Within interest-earning liabilities a decrease
in total interest-bearing deposits ($2.3 billion, or 9 percent) was offset
in part by an increase in securities sold under repurchase agreements ($1.2
billion, or 5 percent). Total short term borrowings (securities sold under
repurchase agreements and other short-term borrowings) as a percentage of
total interest-bearing liabilities increased slightly from 46 to 47
percent.
<PAGE> 18
BALANCE SHEET ANALYSIS (continued)
Securities Available for Sale
The fair value, amortized cost and gross unrealized holding gains and
losses for the Corporation's securities available for sale follow (in
millions):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Fair value $6,880 $6,283
Amortized cost 6,821 6,204
Excess of fair value over
amortized cost (1) $ 59 $ 79
(1) Components:
Unrealized gains $154 $ 182
Unrealized losses (95) (103)
$ 59 $ 79
</TABLE>
Long-term Debt
During the first quarter of 1996, the Corporation obtained $1.050
billion of cash proceeds from the issuances of long-term debt and repaid
$187 million of long-term debt. The larger of these debt issuances were as
follows (in millions):
<TABLE>
<CAPTION>
Face Amount
<S> <C>
Parent Company
Floating Rate Notes due 2001 $300
7 1/8% Subordinated Notes due 2006 $150
Bankers Trust Company
Bank Notes due February 1998 to January 2006 $160
Equity Linked Notes due April 1996 to November 2003 $238
BT Securities Corporation
Floating Rate Notes due 1999 $150
</TABLE>
<PAGE> 19
TRADING DERIVATIVES
The Corporation actively manages trading positions in a variety of
derivative contracts. Many of the Corporation's trading positions are
established as a result of providing derivative products to meet customers'
demands. To anticipate customer demand for such transactions, the
Corporation also carries an inventory of capital market instruments and
maintains its access to market liquidity by quoting bid and offer prices
to, and trading with, other market makers. These two activities are
essential to provide customers with capital market products at competitive
prices. All positions are reported at fair value and changes in fair
values are reflected in trading revenue as they occur.
The following tables reflect the gross fair values and balance sheet
amounts of trading derivative financial instruments:
<TABLE>
<CAPTION>
At March 31, Average During
1996 1st Qtr. 1996
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 15,148 $(14,113) $15,321 $(15,074)
Interest Rate Contracts
Forwards 63 (61) 84 (87)
Options purchased 940 1,269
Options written (1,176) (1,419)
Foreign Exchange Rate Contracts
Spot and Forwards 6,617 (7,876) 8,394 (9,882)
Options purchased 1,069 1,014
Options written (985) (973)
Equity-related contracts 1,990 (2,346) 2,058 (2,490)
Commodity-related and other contracts 563 (541) 525 (527)
Exchange-Traded Options
Interest Rate 27 (2) 37 (13)
Equity 174 (64) 150 (69)
Total Gross Fair Values 26,591 (27,164) 28,852 (30,534)
Impact of Netting Agreements (16,261) 16,261 (18,257) 18,257
$ 10,330(1) 10,595
$(10,903)(1) $(12,277)
<FN>
(1) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
</TABLE>
<PAGE> 20
TRADING DERIVATIVES (continued)
<TABLE>
<CAPTION>
At December 31, Average During
1995 4th Qtr.1995
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 15,858 $(15,471) $ 16,260 $(14,960)
Interest Rate Contracts
Forwards 83 (81) 127 (104)
Options purchased 1,426 1,299
Options written (1,312) (1,729)
Foreign Exchange Rate Contracts
Spot and Forwards 7,931 (8,937) 9,473 (10,236)
Options purchased 999 1,213
Options written (941) (1,148)
Equity-related contracts 2,011 (2,359) 1,838 (2,093)
Commodity-related and other contracts 541 (531) 542 (468)
Exchange-Traded Options
Interest Rate 33 (16) 32 (39)
Equity 137 (80) 158 (105)
Total Gross Fair Values 29,019 (29,728) 30,942 (30,882)
Impact of Netting Agreements (18,464) 18,464 (19,152) 19,152
$ 10,555(1) $ 11,790
$(11,264)(1) $(11,730)
<FN>
(1) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
</TABLE>
END-USER DERIVATIVES
The Corporation, as an end user, utilizes various types of derivative
products (principally interest rate swaps) to manage the interest rate,
currency and other market risks associated with certain liabilities and
assets such as interest-bearing deposits, short-term borrowings and long-
term debt as well as investments in non-marketable equity instruments and
net investments in foreign entities. Revenue or expense pertaining to
management of interest rate exposure is predominantly recognized over the
life of the contract as an adjustment to interest revenue or expense.
Total net end-user derivative unrealized gains were $53 million, and
$212 million at March 31, 1996 and December 31, 1995, respectively. The
$159 million decrease during the first quarter of 1996 was primarily due to
increases in foreign interest rates.
<PAGE> 21
END-USER DERIVATIVES (continued)
The following tables provide the gross unrealized gains and losses for
end-user derivatives. Gross unrealized gains and losses for hedges of
securities available for sale are recognized in the financial statements
with the offset as an adjustment to securities valuation allowance in
stockholders' equity. Gross unrealized gains and losses for hedges of
other assets, interest-bearing deposits, other short-term borrowings, long-
term debt and net investments in foreign subsidiaries are not yet
recognized in the financial statements.
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions) available Other bearing borrow- term subsi-
March 31, 1996 for sale assets deposits ings debt diaries Total
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain $ - $- $ 61 $ 1 $167 $- $ 229
Unrealized (Loss) - - (27) (7) (57) - (91)
Pay Variable Net - - 34 (6) 110 - 138
Pay Fixed
Unrealized Gain 4 - 16 - 36 - 56
Unrealized (Loss) (59) - (55) (1) (26) - (141)
Pay Fixed Net (55) - (39) (1) 10 - (85)
Total Unrealized
Gain 4 - 77 1 203 - 285
Total Unrealized
(Loss) (59) - (82) (8) (83) - (232)
Total Net $(55) $- $ (5) $(7) $120 $- $ 53
Forward Rate Agreements
Unrealized Gain $- $- $- $- $- $- $-
Unrealized (Loss) - - - - - - -
Net $- $- $- $- $- $- $-
Currency Swaps and Forwards
Unrealized Gain $- $- $18 $1 $ 44 $ 24 $ 87
Unrealized (Loss) - - (2) - (41) (33) (76)
Net $- $- $16 $1 $ 3 $ (9) $ 11
Other Contracts (1)
Unrealized Gain $ - $ - $- $- $- $- $ -
Unrealized (Loss) (5) (6) - - - - (11)
Net $(5) $(6) $- $- $- $- $(11)
Total Unrealized
Gain $ 4 $ - $ 95 $ 2 $ 247 $ 24 $ 372
Total Unrealized
(Loss) (64) (6) (84) (8) (124) (33) (319)
Total Net $(60) $(6) $ 11 $(6) $ 123 $ (9) $ 53
<FN>
(1) Other contracts are principally equity swaps and collars.
</TABLE>
<PAGE> 22
END-USER DERIVATIVES (continued)
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions) available Other bearing borrow- term subsi-
December 31, 1995 for sale assets deposits ings debt diaries Total
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain $ - $- $132 $ 4 $339 $- $ 475
Unrealized (Loss) - - (12) (1) (24) - (37)
Pay Variable Net - - 120 3 315 - 438
Pay Fixed
Unrealized Gain - - 11 - 14 - 25
Unrealized (Loss) (88) - (82) (1) (21) - (192)
Pay Fixed Net (88) - (71) (1) (7) - (167)
Total Unrealized
Gain - - 143 4 353 - 500
Total Unrealized
(Loss) (88) - (94) (2) (45) - (229)
Total Net $(88) $- $ 49 $ 2 $308 $- $ 271
Forward Rate Agreements
Unrealized Gain $- $- $ 1 $- $- $- $ 1
Unrealized (Loss) - - (1) - - - (1)
Net $- $- $ - $- $- $- $ -
Currency Swaps and Forwards
Unrealized Gain $- $1 $ 17 $ - $ 20 $ 14 $ 52
Unrealized (Loss) - - (12) (1) (48) (30) (91)
Net $- $1 $ 5 $(1) $(28) $(16) $(39)
Other Contracts (1)
Unrealized Gain $ - $ 1 $- $- $- $- $ 1
Unrealized (Loss) (5) (16) - - - - (21)
Net $(5) $(15) $- $- $- $- $(20)
Total Unrealized
Gain $ - $ 2 $ 161 $ 4 $373 $ 14 $ 554
Total Unrealized
(Loss) (93) (16) (107) (3) (93) (30) (342)
Total Net $(93) $(14) $ 54 $ 1 $280 $(16) $ 212
<FN>
(1) Other contracts are principally equity swaps and collars.
</TABLE>
<PAGE> 23
END-USER DERIVATIVES (continued)
For pay variable and pay fixed interest rate swaps entered into as an
end user, the weighted average receive rate and weighted average pay rate
(interest rates were based on the weighted averages of both U.S. and non-
U.S. currencies) by maturity and corresponding notional amounts were as
follows ($ in millions):
<TABLE>
<CAPTION>
At March 31, 1996
Notional
Amount Paying Variable Paying Fixed
Maturing Notional Receive Pay Notional Receive Pay Total
In: Amount Rate Rate Amount Rate Rate Notional
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $23,456 5.70% 5.33% $ 6,768 5.80% 6.13% $30,224
1997-1998 10,183 5.70 5.48 3,845 5.05 5.77 14,028
1999-2000 3,479 6.43 6.02 1,240 3.46 4.77 4,719
2001 and
thereafter 4,347 6.48 5.50 668 5.51 7.27 5,015
Total $41,465 $12,521 $53,986
<FN>
All rates were those in effect at March 31, 1996. Variable rates are
primarily based on LIBOR and may change significantly, affecting future
cash flows.
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995
Notional
Amount Paying Variable Paying Fixed
Maturing Notional Receive Pay Notional Receive Pay Total
In: Amount Rate Rate Amount Rate Rate Notional
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $30,770 5.97% 5.87% $ 8,742 6.00% 6.21% $39,512
1997-1998 6,558 5.99 5.84 3,657 5.33 5.76 10,215
1999-2000 3,448 6.57 6.34 1,373 3.86 4.99 4,821
2001 and
thereafter 3,927 6.64 5.93 629 5.91 7.34 4,556
Total $44,703 $14,401 $59,104
<FN>
All rates were those in effect at December 31, 1995. Variable rates are
primarily based on LIBOR and may change significantly, affecting future
cash flows.
</TABLE>
<PAGE> 24
REGULATORY CAPITAL
The Federal Reserve Board's ("FRB") capital adequacy guidelines
mandate that minimum capital ratios be maintained by bank holding companies
and their bank subsidiaries. In addition, the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") mandated the establishment
of capital tiers for banks based on these ratios. The Corporation's 1995
Annual Report on Form 10-K, on page 42, provides a detailed discussion of
these guidelines and regulations.
Based on their respective regulatory capital ratios as of March 31,
1996, both Bankers Trust Company ("BTCo") and Bankers Trust (Delaware) are
well capitalized, as defined in the regulations issued by the FRB and the
other federal bank regulatory agencies setting forth the general capital
requirements mandated by FDICIA.
The table below presents the regulatory capital ratios of Bankers
Trust New York Corporation ("Corporation") and BTCo at March 31, 1996 and
December 31, 1995, along with the FRB's minimum regulatory guidelines. All
of these regulatory capital ratios excluded any impact from the adoption of
SFAS 115.
<TABLE>
<CAPTION>
FRB
Minimum
March 31, December 31, Regulatory
1996 1995 Guidelines
<S> <C> <C> <C>
CORPORATION
Risk-Based Ratios
Tier 1 Capital 8.20% 8.51% 4.0%
Total Capital 13.41% 13.90% 8.0%
Leverage Ratio 5.28% 5.12% 3.0%
BTCo
Risk-Based Ratios
Tier 1 Capital 9.39% 9.47% 4.0%
Total Capital 12.58% 12.78% 8.0%
Leverage Ratio 5.49% 5.14% 3.0%
</TABLE>
The following were the essential components of the Corporation's and
BTCo's risk-based capital ratios (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Corporation
Tier 1 Capital $4,518 $4,512
Tier 2 Capital 2,867 2,858
Total Capital $7,385 $7,370
Total risk-weighted assets $55,073 $53,021
</TABLE>
<PAGE> 25
REGULATORY CAPITAL (continued)
<TABLE>
<CAPTION>
March 31,December 31,
1996 1995
<S> <C> <C>
BTCo
Tier 1 Capital $4,585 $4,394
Tier 2 Capital 1,554 1,532
Total Capital $6,139 $5,926
Total risk-weighted assets $48,811 $46,389
</TABLE>
Comparing March 31, 1996 to December 31, 1995, the Corporation's Tier
1 Capital and Total Capital ratios declined by 31 basis points and 49 basis
points, respectively, as a result of the increase in total risk-weighted
assets. The Corporation's total risk-weighted assets at March 31, 1996
were $2.052 billion higher than at year-end 1995. The Leverage Ratio
increased by 16 basis points at March 31, 1996 primarily as a result of a
decrease in average total assets during the first quarter. These factors
were also the causes for the variances in BTCo's Capital and Leverage
ratios.
LIQUIDITY
Liquidity is the ability to have the funds available at all times to
meet the commitments of the Corporation. The Corporation has a formal
process for managing liquidity on a global basis for the Firm as a whole as
well as for each of its significant subsidiaries. Management's guiding
policy is to maintain conservative levels of liquidity designed to ensure
that the Firm has the ability to meet its obligations under all conceivable
circumstances. Management maintains a dual focus to ensure a conservative
liquidity position by promoting asset liquidity and actively managing
liability/capital levels, maturities and diversification. The fundamental
objective in this regard is to ensure that, even in the event of a complete
loss of access to the liability markets, the Corporation will be able to
continue to fund those assets that cannot be liquidated in a timely manner.
Most of the Corporation's assets are highly liquid and of high credit
quality. The Corporation maintains excess liquidity through its base of
liquid assets. Liquid assets consist of cash and due from banks, interest-
bearing deposits with banks, federal funds sold, securities purchased under
resale agreements, securities borrowed, trading assets, and securities
available for sale. Securities purchased under resale agreements and
securities borrowed are virtually all short-term in nature and are
collateralized with U.S. government or other marketable securities, or cash
equivalents. Trading assets are marked to market daily and primarily
consist of U.S. government and agency securities, state and municipal
securities, foreign government obligations, and money market instruments.
The Corporation's liquid assets amounted to $87.0 billion as of March 31,
1996, and $83.5 billion as of December 31, 1995, both of which equaled 80
percent of gross total assets.
<PAGE> 26
LIQUIDITY (continued)
Cash Flows
The following comments apply to the consolidated statement of cash
flows, which appears on page 5.
Cash and due from banks decreased by $1.2 billion during the first
quarter of 1996, as the net cash used in investing activities exceeded the
sum of the net cash provided by operating and financing activities. The
$7.3 billion of net cash used in investing activities was primarily the
result of cash outflows from the net change in securities borrowed($4.4
billion), securities purchased under resale agreements ($2.3 billion) and
purchases of securities available for sale ($1.6 billion). This was
partially offset by cash inflows from maturities and other redemptions of
securities available for sale ($892 million). The $3.9 billion of net cash
provided by operating activities primarily resulted from a $3.0 billion net
change in trading assets and trading liabilities. The $2.1 billion of net
cash provided by financing activities was primarily the result of an
increase in the net change in securities sold under repurchase agreements
($8.0 billion) and the proceeds from the issuance of long term debt ($1.1
billion), offset in part by cash outflows from a $3.4 billion net change in
other short term borrowing and a $3.3 billion net change in deposits.
Cash and due from banks decreased $382 million during the first
quarter of 1995, as the net cash used in investing activities exceeded the
sum of net cash provided by operating and financing activities. The $6.8
billion of net cash used in investing activities was largely the result of
cash outflows from net changes in securities purchased under resale
agreements ($8.2 billion) and securities borrowed ($1.5 billion). These
factors were partially offset by cash inflows from sales, maturities and
other redemptions of securities available for sale ($2.0 billion). The
$4.9 billion of net cash provided by operating activities primarily
resulted from a $3.9 billion net change in trading assets and liabilities
as well as a $1.3 billion net change in receivables and payables from
securities transactions. Within the financing activities category, cash
inflows from the net changes in securities sold under repurchase agreements
($3.0 billion), as well as from the issuance of long-term debt ($1.0
billion) were offset in part by cash outflows from the net changes in other
short-term borrowings ($1.7 billion) and repayments of long-term debt ($781
million).
Interest Rate Sensitivity
Condensed interest rate sensitivity data for the Corporation at March
31, 1996 is presented in the table below. For purposes of this
presentation, the interest-earning/bearing components of trading assets and
trading liabilities are assumed to reprice within three months.
The interest rate gaps reported in the table arise when assets are
funded with liabilities having different repricing intervals, after
considering the effect of off-balance sheet hedging instruments. Since
these gaps are actively managed and change daily as adjustments are made in
<PAGE> 27
LIQUIDITY (continued)
interest rate views and market outlook, positions at the end of any period
may not be reflective of the Corporation's interest rate view in subsequent
periods. Active management dictates that longer-term economic views are
balanced against prospects of short-term interest rate changes in all
repricing intervals.
<TABLE>
<CAPTION>
By Repricing Interval Non-
interest-
Within 1 - 5 After bearing
(in billions) March 31, 1996 1 year years 5 years funds Total
<S> <C> <C> <C> <C> <C>
Assets $ 76.0 $ 2.4 $ 3.8 $ 25.9 $ 108.1
Liabilities, preferred stock
of subsidiary and preferred
stock (72.0) (4.1) (3.0) (24.8) (103.9)
Common stockholders' equity - - - (4.2) (4.2)
Effect of off-balance sheet
hedging instruments (5.6) 3.2 2.4 - -
Interest rate sensitivity gap $ (1.6) $ 1.5 $ 3.2 $ (3.1) $ -
</TABLE>
<PAGE> 28
NONPERFORMING ASSETS
The components of cash basis loans, renegotiated loans, other real
estate and other nonperforming assets are shown below ($ in millions).
<TABLE>
<CAPTION>
March 31,December 31,
1996 1995
<S> <C> <C>
CASH BASIS LOANS
Domestic
Commercial and industrial $253 $263
Secured by real estate 286 297
Financial institutions 10 10
Total domestic 549 570
International
Commercial and industrial 96 106
Secured by real estate 65 65
Financial institutions 5 3
Total international 166 174
Total cash basis loans $715 $744
Ratio of cash basis loans to total loans 5.5% 5.9%
Ratio of allowance for credit losses to cash
basis loans 138% 133%
RENEGOTIATED LOANS
Secured by real estate $89 $ 88
Other - 12
Total renegotiated loans $89 $100
OTHER REAL ESTATE $257 $259
OTHER NONPERFORMING ASSETS
Assets acquired in credit workouts $66 $66
Other 1 1
Total other nonperforming assets $67 $67
Loans 90 days or more past due and still
accruing interest $- $26
</TABLE>
<PAGE> 29
NONPERFORMING ASSETS (continued)
An analysis of the changes in the Corporation's total cash basis loans
during the first quarter of 1996 follows (in millions).
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1995 $ 744
Net transfers to cash basis loans 25
Net paydowns (21)
Charge-offs (28)
Transfers to other real estate (4)
Other (1)
Balance, March 31, 1996 $ 715
</TABLE>
The Corporation's total cash basis loans amounted to $715 million at
March 31, 1996, down $29 million, or 4 percent, from December 31, 1995.
This reduction was primarily the result of decreases in highly
leveraged loans ($21 million), loans secured by real estate ($11 million)
and other cash basis loans ($5 million) partially offset by an increase in
real estate related loans ($8 million). Also within cash basis loans,
loans secured by real estate were $351 million and $362 million at March
31, 1996 and December 31, 1995, respectively. Commercial and industrial
loans to highly leveraged borrowers were $132 million and $153 million at
March 31, 1996 and December 31, 1995, respectively. Within cash basis
loans, leveraged derivative contracts were $107 million and $104 million at
March 31, 1996 and December 31, 1995, respectively. Based on an analysis
of the potential outcome of outstanding issues relating to leveraged
derivative transactions, management continues to believe that the expected
financial impact should be covered by existing reserves.
The following table sets forth the approximate effect on interest
revenue of cash basis loans and renegotiated loans. This disclosure
reflects the interest on loans which were carried on the balance sheet and
classified as either cash basis or renegotiated at March 31 of each year.
The rates used in determining the gross amount of interest that would have
been recorded at the original rate were not necessarily representative of
current market rates.
<PAGE> 30
NONPERFORMING ASSETS (continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in millions) 1996 1995
<S> <C> <C>
Domestic Loans
Gross amount of interest that would have
been recorded at original rate $14 $14
Less, interest, net of reversals, recognized
in interest revenue 1 1
Reduction of interest revenue 13 13
International Loans
Gross amount of interest that would have
been recorded at original rate 3 6
Less, interest, net of reversals, recognized
in interest revenue - -
Reduction of interest revenue 3 6
Total reduction of interest revenue $16 $19
</TABLE>
HIGHLY LEVERAGED TRANSACTIONS
Amounts included in the table and discussion which follow are
generally based on the definition that the Corporation uses in order to
monitor the extent of its exposure to highly leveraged transactions
("HLTs"). The Corporation's 1995 Annual Report on Form 10-K, on page 57,
provides a detailed discussion of the definition.
<TABLE>
<CAPTION>
Highly Leveraged Transactions
March 31, December 31,
(in millions) 1996 1995
<S> <C> <C>
Loans
Senior debt $1,053 $1,105
Subordinated debt 76 68
Total loans $1,129 $1,173
Unfunded commitments
Commitments to lend $367 $539
Letters of credit 220 263
Total unfunded commitments $587 $802
Equity investments $666 $648
Commitments to invest $493 $289
</TABLE>
<PAGE> 31
HIGHLY LEVERAGED TRANSACTIONS (continued)
The Corporation's outstanding loans were to 93 separate borrowers in
36 separate industry groups at March 31, 1996, compared to 97 separate
borrowers in 38 separate industry groups at December 31, 1995. The
industrial machinery group at 16 percent and the wholesale and retail food
group at 11 percent were the only industry concentrations which exceeded 10
percent of total HLT loans outstanding at March 31, 1996.
In addition to the amounts shown in the table above, at March 31,
1996, the Corporation had issued commitment letters which had been
accepted, subject to documentation and certain other conditions, of $1.715
billion (which were in various stages of syndication) and had additional
HLTs in various stages of discussion and negotiation.
During the first quarter of 1996, the Corporation originated $1.4
billion of HLT commitments. It should be noted that the Corporation's
loans and commitments in connection with HLTs fluctuate as new loans and
commitments are made and as loans and commitments are syndicated,
participated or paid.
All loans and commitments to finance HLTs are reviewed and approved by
senior credit officers of the Corporation. In addition to a strict
transactional and credit approval process, the portfolio of leveraged loans
and commitments is actively monitored and managed to minimize risk through
diversification among borrowers and industries. As part of this strategy,
sell and hold targets are regularly updated in connection with market
opportunities and the addition of new HLTs. Retention by the Corporation
after syndication and sales of loan participations has typically been less
than $50 million, and the average outstanding for the portfolio at March
31, 1996 was less than $13 million. However, at March 31, 1996, the
Corporation had total exposure (loans outstanding plus unfunded
commitments) in excess of $50 million to 7 separate highly leveraged
borrowers.
At March 31, 1996, $132 million of the HLT loan portfolio was on a
cash basis. In addition, $6 million of the equity investments in HLT
companies represented assets acquired in credit workouts, which are
reported as other nonperforming assets. Net charge-offs of $20 million of
HLT loans were recorded in the first quarter of 1996. In addition, the
Corporation recorded a net gain of $20 million in connection with the sales
and/or write-offs of its equity investments in highly leveraged companies
during the first quarter of 1996.
Generally, fees (typically 2 to 4 percent of the principal amount
committed) and interest charged (typically LIBOR plus 1.5 to 3 percent) on
HLT loans are higher than on other credits. The Corporation does not
account for revenue or expenses from HLTs separately from its other
corporate lending activities. However, it is estimated that transaction
fees recognized for lending activities relating to HLTs were approximately
$25 million during the first quarter of 1996 and that as of March 31, 1996,
approximately $17 million of fees were deferred and will be recognized as
future revenue.
<PAGE> 32
Organizational Unit Definitions and Assumptions
The Corporation delivers a wide range of financial products and
services worldwide principally through eight broad Organizational Units.
Five units are organized around specific products and services: Investment
Banking, Risk Management Products & Services, Trading & Sales, Investment
Management, and Client Processing Services. Three additional units are
organized to deliver these same types of financial products and services
with the unique local expertise necessary to operate successfully in
Australia/New Zealand, Asia and Latin America. The Units are described
below:
Investment Banking: Delivers the Firm's full range of financing,
advisory and research products and services to corporate, financial
institution and investor clients. Services include the underwriting,
distribution and trading of public equity and debt (both investment grade
and high-yield), private placements and structured finance, as well as
merger and acquisition advisory services. The unit is responsible for the
Firm's private equity investments. The Corporation's Asset-Based Lending
activities, although managed separately, are included in Investment Banking
for reporting purposes.
Risk Management Products & Services: Assists clients in the
management of their financial and economic risk. Products and services
include interest rate, currency, equity, commodity and credit derivatives,
as well as risk management advisory services. This business also manages
the Corporation's risk associated with client derivative transactions.
Trading & Sales: Provides financial products and services to the
Corporation's clients and enters into securities, currency, commodity,
derivatives and funding transactions on a proprietary basis. The unit is
responsible for funding the Corporation worldwide, including capital and
liquidity management.
Investment Management: Manages investments for pension funds,
corporations and other institutional investors worldwide (the Australian
funds management business is reported in the results of Australia/New
Zealand). Services provided include management of equities, fixed income
securities and other financial instruments in many of the world's major
financial markets. The Corporation's Private Banking activities, although
managed separately, are included in Investment Management for reporting
purposes.
Client Processing Services: Gathers, moves and manages assets for
institutional clients throughout the world. This unit delivers the
Corporation's processing, fiduciary and trust services, such as cash
management, custody and clearance, and deposit and credit services, to
corporations, financial institutions and governments and their agencies
around the world. It also provides retirement services, including
recordkeeping and administrative services and portfolio measurement to
sponsors of U.S. defined benefit and defined contribution plans.
<PAGE> 33
Organizational Unit Definitions and Assumptions (continued)
Geographically-Based Businesses:
Australia/New Zealand - Provides funds management and corporate
finance, and financial markets services to local and international clients,
and trades for its own account in related markets.
Asia - Provides advisory and corporate finance services to financial
institutions, governments and both state-owned and privatized businesses.
In addition, it engages in arbitrage trading and equity investments.
Latin America - Engages in trading and distribution, organization and
underwriting of corporate finance securities, mergers and acquisitions
services and private equity investments. In addition, this organizational
unit, through its Chilean insurance subsidiaries, underwrites pension-
related life and disability insurance and sells pension-related life
annuities.
Corporate Unit include the unallocated costs of corporate staff
together with the notional interest income on the Corporation's capital
accounts. The Corporate unit also includes a residual portion of the
Firm's loans to clients not booked in the business units. In addition to
the provision for credit losses there are also various special charges and
reserves reflected within Corporate such as the previously disclosed
severance charge taken in the first quarter of 1995.
Organizational Unit business results are determined based on the
Corporation's internal management accounting process which allocates
revenue and expenses among the Organizational Units. Because the
Corporation's business is complex in nature and its operations are
integrated, it is impractical to segregate respective contributions of the
Organizational Units with precision. As a result, estimates and subjective
judgments have been made to apportion revenue and expense items. The
internal management accounting process, unlike financial accounting in
accordance with generally accepted accounting principles, is based on the
way the management views its business and is not necessarily comparable
with similar information disclosed by other financial institutions. In
order to provide comparability from one period to the next, the Corporation
will restate this analysis to conform with material changes in the
allocation process and/or significant changes in organizational structure.
<PAGE> 34
Business Functions Profitability
<TABLE>
<CAPTION>
First First
Quarter Quarter Increase
(in millions) 1996 1995 (Decrease)
<S> <C> <C> <C>
Client Finance $ 34 $ 14 $ 20
Client Advisory 22 20 2
Client Financial Risk Management 9 (122) 131
Client Transaction Processing 14 8 6
Trading and Positioning 76 (36) 112
Unallocated (17) (41) 24
Income (Loss) $138 $(157) $295
</TABLE>
<PAGE> 35
ADOPTION OF EMPLOYEE BENEFIT PLAN
In the first quarter of 1996, the Corporation implemented a new key
employee benefit plan called the Partnership for One-hundred Plan (the
"Plan"), a copy of which is filed as Exhibit 10(iii)(A)(2) to this Report.
Holders of plan units will be entitled to cash payments based on
increases on the Corporation's common stock above $75 per share, with a
maximum payout of $100 per unit at a share price of $100. The units vest
in the last three years of a five year period unless the Corporation's
common stock price reaches $100, in which case the units vest and become
payable immediately. To date, 1,800,000 units of the 2,000,000 authorized
under the Plan have been issued.
RECENT DEVELOPMENTS
On May 9, 1996, the Corporation and Procter & Gamble reached an
agreement settling the two year old dispute between the two companies
involving two derivatives transactions. The financial impact of the
settlement will be covered by existing reserves, and the settlement will
have no impact on the Corporation's results of operations.
<PAGE> 36
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on April 16, 1996.
(b) Each of the persons named in the Proxy Statement as a nominee for
Directors was elected.
(c) The following are the voting results on each of the matters which
were submitted to the stockholders:
<TABLE>
<CAPTION>
Withheld
or Broker
For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Election of Directors
George B. Beitzel 70,107,922 1,448,050
Phillip A. Griffiths 70,115,223 1,440,749
William R. Howell 70,113,334 1,442,638
Jon M. Huntsman 70,129,201 1,426,771
Vernon E. Jordan, Jr. 69,984,166 1,571,806
Hamish Maxwell 70,096,146 1,459,826
Frank N. Newman 70,119,789 1,436,183
N. J. Nicholas Jr. 70,125,065 1,430,907
Russell E. Palmer 70,100,878 1,455,094
Patricia C. Stewart 70,086,285 1,469,687
George J. Vojta 70,085,557 1,470,415
Resolutions
. To ratify the appointment of
Ernst & Young LLP as indepen-
dent auditor for 1996. 71,266,585 177,316 112,071
. To prescribe certain methods
for conducting the activities
of the Corporation's political
action committee. 1,801,131 54,856,277 3,181,662 11,716,902
. To provide for cumulative
voting in the election of
directors. 16,812,958 42,035,855 990,258 11,716,901
. To report the Corporation's
structural adjustment programs
being undertaken in less
developed countries and analyze
the programs' impact on the
Corporation's loans to those
countries. 963,359 56,424,059 2,451,661 11,716,893
</TABLE>
The text of the matters referred to under this Item 4 is set forth
in the Proxy Statement dated March 20, 1996 previously filed with
the Commission and incorporated herein by reference.
<PAGE> 37
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(4) Instruments Defining the Rights of Security Holders,
Including Indentures
(v) - The Corporation hereby agrees to furnish to the
Commission, upon request, a copy of any instru-
ments defining the rights of holders of long-term
debt issued by Bankers Trust New York Corporation
or its subsidiaries.
(10) Material Contracts
iii(A) Management Contracts and Compensation Plans
(12) Statement re Computation of Ratios
(27) Financial Data Schedule
(b) Reports on Form 8-K - Bankers Trust New York Corporation filed
three reports on Form 8-K during the quarter ended March 31, 1996.
- The report dated January 11, 1996 filed the Corporation's Press
Release dated January 11, 1996 which announced that Richard H.
Daniel joined Bankers Trust New York Corporation and Bankers
Trust Company as Chief Financial Officer.
- The report dated January 18, 1996 filed the Corporation's Press
Release dated January 18, 1996, which announced earnings for the
quarter and year ended December 31, 1995.
- The report dated March 19, 1996 filed an underwriting agreement
covering the issuance and sale by Bankers Trust New York
Corporation of 7 1/8% Subordinated Notes due 2006 and various
other exhibits related to the issuance.
<PAGE> 38
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, on May 15, 1996.
BANKERS TRUST NEW YORK CORPORATION
BY: GEOFFREY M. FLETCHER
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
BANKERS TRUST NEW YORK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
EXHIBIT INDEX
(4) Instruments Defining the Rights of Security
Holders, Including Indentures
(v) - Long-Term Debt Indentures (a)
(10) Material Contracts
iii (a) Management Contracts and Compensation Plans
(1) Employment Contract for Richard H. Daniel
(2) Partnership for One-hundred Plan
Plan Document
(12) Statement re Computation of Ratios
(a) - Computation of Consolidated Ratios of
Earnings to Fixed Charges
(b) - Computation of Consolidated Ratios of
Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements
(27) Financial Data Schedule
[FN]
(a) The Corporation hereby agrees to furnish to the Commission, upon
request, a copy of any instruments defining the rights of holders of long-
term debt issued by Bankers Trust New York Corporation or its
subsidiaries.
<PAGE>
<PAGE>
EXHIBIT 10(iii)(A)(1)
January 10, 1996
Mr. Richard H. Daniel
957 Bellview Road
McLean, VA 22102
Dear Dick:
It gives me great pleasure to extend to you the following offer
of employment.
Your title will be Chief Financial Officer/ Managing Director
of Bankers Trust Company (the "Company") and Chief Financial
Officer of the Company's parent, Bankers Trust New York
Corporation (the "Parent"). In addition, subject to approval
of the Parent's Board of Directors, you will have the title of
Executive Vice President of the Parent. You will be a member
of the Operating Committee and Vice Chairman of the Asset
Liability Committee. You will be responsible for the firm's
financial functions (excluding Audit) and for Market Risk
Management. You will report to me, as Chief Executive Officer
of the Company and Parent, or any successor Chief Executive
Officer of the Company and Parent, and will chair the Asset
Liability Committee in my absence. Your services shall be
principally performed, and your office shall be located, in New
York City.
Your annual base salary will be $350,000 paid monthly in equal
installments. Your annual base salary will be subject to
annual review by the Parent's compensation committee in
accordance with Parent practice and may be increased from time
to time at the sole discretion of the compensation committee.
On your start date (which shall be determined by you but shall
be no later than February 20, 1996, hereinafter the
"Commencement Date"), you will receive a special one-time
payment of $350,000 (less mandatory deductions), a $60,000
credit to your ADCAP retirement account, and 60,000 units from
the Partnership for One Hundred Plan (POP). In addition, on
the Commencement Date, you are to receive under the terms and
conditions of the Parent's Stock Option and Stock Award Plan, a
20,000-share stock option award and 10,000 shares of three-year
restricted stock. The price of your options will be based on
<PAGE>
the average of the high and low trading prices of the Parent's
common stock on the Commencement Date as shown on the New York
Stock Exchange transactions tape. Such options, as well as the
options granted to you in respect of services for 1996 and 1997
as described below, will have a term of 10 years from the date
of grant; will be subject to accelerated vesting under the Plan
and as described below; will vest on the first anniversary of
the date of grant; and will remain exercisable for 3 years
following your termination of employment with the Parent and
any of its subsidiaries for any reason, other than (i) your
termination of employment by the Parent and any of its
subsidiaries for "Cause" (as defined below) or (ii) your
voluntary termination of employment without "Good Reason" (as
defined below) which does not occur during the one year period
following a "Change of Control" (as defined below). Should you
forgo in whole or in part your 1995 bonus at your current
employer as a result of joining the Parent, you will be made
whole, up to $150,000 (less mandatory deductions).
For your services in 1996, you will receive the following in
addition to your base salary:
A guaranteed minimum cash performance bonus of $1,000,000
(less mandatory deductions). $500,000 will be paid to you on
May 15, 1996; the remaining $500,000 (less mandatory
deductions) will be paid on the day that 1996 performance
bonuses are normally paid to staff (usually December or the
following January).
50,000 units in the 1996 Partnership Equity Plan (PEP).
A 40,000-share stock option award to be granted on the
normal award date in 1996 (usually in June).
A $70,000 credit to your ADCAP retirement account.
For your services in 1997, you will receive the following in
addition to your base salary:
A guaranteed minimum cash performance bonus of $1,000,000
(less mandatory deductions) on the day that 1997 performances
bonuses are normally paid to staff (usually December or the
following January).
A 40,000-share stock option award to be granted on the
normal award date in 1997 (usually in June).
50,000 units in the 1997 Partnership Equity Plan (PEP).
A $70,000 credit to your ADCAP retirement account.
<PAGE>
Any 1996 and 1997 bonuses beyond the guaranteed minimums will
be paid in accordance with the terms of the Equity
Participation Plan, which means approximately 70% in cash and
30% in equity. Any amounts over the guaranteed cash will be
paid in such a way as to approach the 70:30 cash to equity
ratio for the total.
The Parent or one of its subsidiaries will reimburse you or pay
directly all reasonable relocation expenses for you and your
family. These will include, without limitation:
House-hunting expenses to include all travel, hotel,
ground transportation and childcare expenses for you and your
spouse.
Temporary living expenses for you and your family for up
to nine months from the Commencement Date, including, without
limitation, rental cost of a temporary residence, rental cost
of temporary furniture and any real estate commissions paid by
you in procuring such residence.
Home buy-out of your existing residence based on the
average of two independent appraisals.
Usual and customary closing costs on the sale of your
existing home (including brokerage commissions) and on the
acquisition of a primary residence in the New York City
metropolitan area, including two points on the purchase and any
brokerage commissions paid by you in connection with such
purchase.
Travel expenses and the cost of moving your household
goods, including reimbursement for travel expenses incurred by
you in connection with commuting weekly from your current
residence in McLean, Virginia to New York City for up to nine
months from the Commencement Date.
A settling-in allowance of $100,000.
All relocation-related expenses will be grossed up for tax
purposes.
During the term of your employment with either the Company or
Parent you will be entitled to participate in all employee
benefit plans, programs and arrangements of the Parent or any
of its affiliates now or hereinafter made available to any
senior executives of the Company or Parent on a basis no less
favorable than is made available to any other such senior
executives (including, without limitation, each plan, program
<PAGE>
or arrangement providing for retirement benefits, supplemental
and excess retirement benefits, annual and long-term incentive
compensation, stock options, group life insurance, accident and
death insurance, medical and dental insurance, sick leave,
disability benefits and fringe benefits and perquisites).
In addition, you will be entitled to at least five (5) weeks
paid vacation per calendar year and you shall receive prompt
reimbursement from the Company or Parent for all reasonable out-
of-pocket expenses incurred by you in performing your duties
for the Company or Parent.
You will be afforded the same indemnification protection
regarding directors and officers liability that the Company and
Parent provide to their senior executive officers and
directors. In addition, you will be covered by any directors
and officers liability policy generally in force for the
Company's and Parent's senior executive officers and directors.
Our offer is contingent upon your completing our standard
employment package. The package includes an employment
application, a security data sheet, a personal information
form, and confirmation of employment authorization (which
includes completing the Immigration and Naturalization Services
Form I-9). You will also have to read and sign a Substance
Abuse Policy Employee Acknowledgment Form which is enclosed in
the envelope marked "Medical Evaluation." In addition, it will
be necessary for you to successfully complete a medical
evaluation, background investigation, including but not limited
to a credit investigation, and all other components of the
Company's and Parent's pre-employment screening process to the
Company's and Parent's satisfaction.
You may schedule an appointment for your medical evaluation
either at our office at BT Plaza or if you wish in Washington,
D.C. by calling Peter Gurney of Human Resources at
(212) 250-2219. Please complete and bring the forms in the
envelope marked "Medical Evaluation" to your appointment. You
will be eligible to start employment once you have received
notification of the successful completion of your medical
evaluation and credit investigation which we estimate will take
48 hours.
The Parent recently reviewed its policies and procedures as
they relate to the handling of information of a proprietary or
confidential nature. Included in this policy is a requirement
that all employee and related accounts be maintained in
designated accounts from brokerage firms approved by the
Parent, currently, BT Brokerage, NatWest Investor Corporation
and Smith Barney, Inc. Additional information pertaining to
<PAGE>
this policy can be found in the enclosed booklet entitled,
"Confidential Information, Insider Trading and Related
Matters."
In the event your employment with the Parent or its
subsidiaries is terminated (i) at any time by the Company or
Parent without Cause, (ii) at any time by you with Good Reason,
(iii) by you for any reason within one year following a "Change
of Control" (as defined below), or (iv) as a result of your
death or permanent disability, you will receive, as soon as
practicable thereafter:
(A) a lump sum cash payment equal to any portion of your
annual base salary which shall have accrued but remain unpaid
through your date of termination;
(B) a lump sum cash payment equal to any cash performance
bonus with respect to the immediately preceding calendar year
which shall have accrued but remain unpaid as of the date of
your termination;
(C) if such termination of employment occurs on or prior to
the fifth anniversary of the Commencement Date, a lump sum cash
payment equal to the product of (x) the sum of (I) your annual
base salary as in effect immediately prior to such termination
plus (II) the average of cash performance bonuses paid or
payable to you in respect of prior years during the term of
your employment, or if such termination shall occur during the
first year of your employment, $1,000,000, times (y) two (2)
(the "Multiplier"); provided, however, that if such termination
of employment occurs after the third anniversary of the
Commencement Date, the Multiplier shall be proportionately
reduced, in a manner consistent with that set forth by examples
in Exhibit I hereto, to reflect the portion of the two year
period between the third anniversary and fifth anniversary of
the Commencement Date that shall have elapsed through the date
of such termination of your employment;
(D) also if such termination of employment occurs prior to the
fifth anniversary of the Commencement Date, immediate full
vesting of all restricted stock, PEP units, stock options,
ADCAP credits, POP units and other incentive awards, without
loss of floor protection with respect to PEP units (the
"incentive plan awards") together with a lump sum cash payment
equal to the equivalent value of any incentive plan awards
described above which the Parent has agreed to grant to you for
your services in 1996 and 1997 and which shall not have been
granted as of the date of such termination of employment; and
(E) continued coverage under the Parent's (or its affiliates')
medical, dental, disability and life insurance plans, policies
<PAGE>
and programs on the same basis enjoyed by you while employed by
the Company or Parent until the earlier of (A) two years
following your date of termination or (B) the date on which you
become eligible for medical, dental and life insurance coverage
without a preexisting condition exclusion by a subsequent
employer;
provided that the aggregate amount of cash payments to be made
to you in connection with your termination of employment due to
your death or permanent disability shall be reduced by the
aggregate present value of any cash death or disability
payments payable to you in connection with such termination
under the Parent's (or its affiliates') death and disability
benefit plans, programs and arrangements.
Your entitlement to the foregoing shall be
without prejudice to any other severance or termination
benefits for which you may be eligible under any other plan,
policy or arrangement of the Parent or its affiliates, provided
that the Company or Parent shall be entitled to reduce the
amount of cash compensation otherwise payable to you under any
other severance arrangement maintained by the Parent or its
affiliates by the aggregate amount of cash compensation payable
to you pursuant to clause (C) above. Any other compensation
and benefits following your termination of employment under any
of the circumstances described in clauses (i) through (iv)
above by will be determined under the applicable plans,
programs and arrangements of the Parent or its affiliates.
In the event your employment with the Company and Parent is
terminated at any time by the Company or Parent for Cause (as
defined below) or is terminated by you without Good Reason,
other than during the one year period following a Change of
Control (a "Voluntary Resignation"), you will receive, as soon
as practicable thereafter, a lump sum cash payment equal to the
sum of:
(i) any portion of your annual base salary which shall have
accrued but remain unpaid through your date of termination;
plus
(ii) any cash performance bonus with respect to the
immediately preceding calendar year which shall have accrued
but remain unpaid as of the date of your termination.
Your entitlement to the foregoing shall be without prejudice to
any other severance or termination benefits for which you may
be eligible under any other plan, policy or arrangement of the
Parent or its affiliates. Your entitlement to any other
compensation and benefits following your termination of
employment by the Company or Parent for Cause or by you by
<PAGE>
Voluntary Resignation will be determined under the applicable
plans, programs and arrangements of the Parent or its
affiliates.
For purposes of this agreement, the following definitions will
apply:
"Cause" will mean (i) conviction of a felony or commission of
an act rising to the level of a felony, including, but not
limited to, fraud, or (ii) your willful and continuing refusal
or failure to substantially perform your duties for the Company
following the Company's written notification to you of such
alleged refusal or failure and your subsequent refusal or
failure within 30 days of your receipt of such notice to
perform or in good faith to commence the performance of your
duties for the Company; provided that in no event shall your
ineffectiveness or incompetence in the performance of your
duties for the Company or a bona fide disagreement over
corporate policy be deemed grounds for a termination for Cause.
"Good Reason" will mean any material breach by the Company of
its obligations to you hereunder including, without limitation,
any material reduction in your duties, authority, status or
responsibilities (whether or not accompanied by a change in
title) as described in this agreement or any requirement that
you report to any person or entity other than the Company's
Chief Executive Officer, which breach is not cured by the
Company within 30 days following written notice thereof from
you.
"Change of Control" will mean:
(i) The acquisition, other than from the Parent, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within
the meaning of rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either the then outstanding shares of common
stock of the Parent (the "Outstanding Parent Common Stock") or
the combined voting power of the then outstanding voting
securities of the Parent entitled to vote generally in the
election of directors (the "Parent Voting Securities");
provided, however, that any acquisition by the Parent or any of
its subsidiaries, or any employee benefit plan (or related
trust) of the Parent or its subsidiaries, or any corporation
with respect to which, following such acquisition, more than
80% of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
<PAGE>
beneficially owned, directly or indirectly, by the individuals
and entities who were the beneficial owners, respectively, or
the Outstanding Parent Common Stock and Parent Voting
Securities immediately prior to such acquisition in
substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding
Parent Common Stock and Parent Voting Securities, as the case
may be, shall not constitute a Change of Control; or
(ii) Individuals who, as of January 1, 1994, constitute
the Board (as of the date hereof the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board
provided that any individual becoming a director subsequent to
such date whose election, or nomination for election by the
Parent's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the directors of the Parent (as such terms are used
in Rule 14A-11 of Regulation 14A promulgated under the Exchange
Act); or
(iii) Approval by the stockholders of the Parent of a
reorganization, merger or consolidation, in each case, with
respect to which the individuals and entities who were the
respective beneficial owners of the common stock and voting
securities of the Parent immediately prior to such
reorganization, merger, or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 80% of respectively, the then
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the Parent resulting from such reorganization, merger or
consolidation, or a complete liquidation or dissolution of the
Parent or of the sale or disposition of all or substantially
all of the assets of the Parent.
Anything herein to the contrary notwithstanding, a Change in
Control shall not be deemed to have occurred if such Change in
Control results from or arises out of a purchase or other
acquisition of the Parent or the Company, directly or
indirectly, by a corporation or other entity in which you have
a direct or indirect equity interest representing more that 2%
in value or voting power of the outstanding equity securities
of such corporation or other entity; provided, however, that
the limitation contained in this sentence shall not apply in
respect of any awards entitling you to any direct or indirect
<PAGE>
equity interest in a corporation or other entity (a) which
equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market
system, or (b) received by you without your concurrence or
consent, as a result of or in connection with a purchase of
other acquisition of the Parent or the Company by such
corporation or other entity.
Upon a Change of Control, all restricted shares, PEP units,
stock options, ADCAP credits, POP units and other incentive
awards then held by you shall immediately vest, without loss of
floor protection with respect to PEP units.
To date, neither the Company nor the Parent has provided
protection to any of its executives with respect to any
potential excise taxes that might be imposed upon the
executives in connection with a Change of Control under section
4999 of the Internal Revenue Code, or otherwise. In the event
it shall be determined that any payments or benefits provided
to you by the Company or the Parent (including any accelerated
vesting of compensation and benefits) would be subject to the
excise tax imposed by section 4999 of the Internal Revenue Code
or any similar tax payable under any federal, state, local or
other law (collectively, the "Excise Tax"), then you shall be
entitled to gross-up or other protection with respect to such
Excise Tax which is at least as favorable as such gross-up or
other protection, if any, as may be provided by the Company or
the Parent to any other senior executive of the Company or
Parent.
You will not be required to mitigate any payments or benefits
due to you under this agreement by seeking alternative
employment, nor will any payments from the Company or Parent be
reduced by any amounts or benefits received in connection with
such alternative employment.
The Company or Parent will reimburse you for (i) all reasonable
legal fees and disbursements incurred by you in connection with
the negotiation and preparation of this agreement and (ii) all
reasonable fees and disbursements incurred by you in connection
with any dispute over the enforcement of your rights under this
agreement, but only if you substantially prevail in such
dispute.
<PAGE>
Needless to say, we are all very enthusiastic at the prospect
of your joining Bankers Trust. Please sign and return one copy
of this letter upon your acceptance of our offer. Call me if
you have any questions regarding our offer.
Sincerely,
/S/FRANK N. NEWMAN
Frank N. Newman
President
Agreed To:
/S/RICHARD H. DANIEL
Richard H. Daniel
Date: January 19, 1996
<PAGE>
Exhibit I to Daniel Offer Letter
Examples
Illustrating the Clause (C) Payment Amount (1)
For each of the following examples, assume that the sum of your
annual base salary plus the average of cash performance bonuses
previously paid to you is $2,000,000.
Example 1
In the event of a termination of your employment prior to the
third anniversary of your Commencement, Clause (C) would
entitle you to a payment of $4,000,000 ($2,000,000 times 2 (the
Multiplier)).
Example 2
In the event of a termination of your employment exactly 3 1/2
years after the Commencement Date, Clause (C) would entitle you
to a payment of $3,000,000 ($2,000,000 times 1.5 (the
Multiplier of 2, proportionately adjusted down to 1.5 to
reflect that 6 months of the 24 month period between the third
and fifth anniversaries of the Commencement Date had elapsed as
of the date of your termination).
Example 3
In the event of a termination of your employment exactly 4
years after the Commencement Date, Clause (C) would entitle you
to a payment of $2,000,000 ($2,000,000 times 1 (the Multiplier
of 2, proportionately adjusted down to 1 to reflect that 12
months of the 24 month period between the third and fifth
anniversaries of the Commencement Date had elapsed as of the
date of your termination).
(1) Each example assumes your termination of employment
under circumstances that would entitle you to the
severance payments described in Clause (C) (i.e., a
termination by the company or Parent without Cause,
by you with Good Reason, by you without Good Reason
within one year following a Change of Control or as a
result of your death or permanent disability).
<PAGE>
<PAGE>
EXHIBIT 10(iii)(A)(2)
BANKERS TRUST NEW YORK CORPORATION
Partnership for One-hundred Plan
Plan Document
I. Purpose of the Plan
The purpose of the Partnership for One hundred Plan (the
"Plan") is to provide key employees of Bankers Trust New
York Corporation and its subsidiaries (the "Corporation")
with an incentive to exert their efforts to increase Bankers
Trust New York Corporation share price.
II. Administration of the Plan
The Plan is to be administered by the Human Resources
Committee of the Corporation's Board of Directors (the
"Committee"). The Committee may amend, suspend or terminate
the Plan at any time. The Committee also shall interpret
the provisions of the Plan and may selectively accelerate
the payout of the value of any employee's award.
III. Eligible Employees
Participants in the Plan will include approximately 35
senior executives selected by the Committee.
IV. Plan Provisions
Upon receiving an award under the Plan, participants will
receive a number of units whose value will be based on the
price of the Corporation's common stock (the "Stock"). The
units awarded will vest one-third per year on the third,
fourth and fifth anniversaries of the date of grant. The
maximum number of units to be granted under the Plan is
2,000,000.
V. Unit Values
Unit values will be set according to a formula which will be
based on the Stock price as shown on the New York Stock
Exchange Transactions Tape (the "Tape"). When the Stock
price increases to $76 per share each unit will be valued at
$4 and will increase by increments of $4 per $1.00 of stock
price increase to reach the maximum value of $100 at a $100
Stock price.
<PAGE>
VI. Plan Limitations
Awards will immediately vest and be paid out when the Stock
price reaches $100.
VII. Transferability Restrictions
Benefits under this agreement are not assignable, pledgeable
or otherwise transferable.
VIII. Distributions from the Plan
All distributions from the plan are to be made in cash only.
Payouts on the awards will occur at the earlier of the end
of the five year performance period, or when the Stock price
reaches $100 as shown on the Tape. Payouts that are made at
the end of five years will be based on a thirty day moving
average price of the Stock as of the last trading date of
the performance period.
IX. Change of Control
In the event of a change in control (as defined in the 1994
Stock Option and Stock Award Plan, "Change of Control") the
value of all awards under the Plan will vest and be
immediately paid to the respective participants. Payouts
that are made due to a Change in Control will be based on
the average of the high and the low price of the Stock on
the date that the Change of Control triggering event occurs
as shown on the Tape.
X. Termination Provisions
a) Retirement (as defined in the Corporation's qualified
pension plan, Death and Total Disability (as defined in
the Corporation's Long-Term Disability Plan) - Units
awarded will be valued and paid out at the end of the
five year term or upon the Stock price reaching $100.
b) Resignation - The value of the vested units paid will
correspond to the lower of the Stock price on the
resignation date or the end of the five year period.
Unvested units are forfeited.
c) Termination for Cause (as defined under the
Corporation's Separation Allowance Plan) - All units,
vested and unvested, are forfeited.
d) Other Terminations - Units will be valued and paid out
on the off-payroll date.
<PAGE>
XI. Employee Taxes
Participating employees are responsible for all taxes due as
required.
XII. Choice of Law
The Plan will be governed by and construed in accordance
with the laws of the State of New York.
XIII. Effective Date
The effective date of the Plan is January 1, 1996.
<PAGE>
<TABLE>
EXHIBIT 12(a)
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<CAPTION>
Three
Months
Ended
Year Ended December 31, March 31,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effects
of accounting
changes $ 834 $ 906 $1,550 $ 869 $ 215 $ 197
2. Add: Fixed charges
excluding
capitalized
interest
(Line 10) 3,614 3,099 3,148 3,884 5,356 1,384
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 31 40 30 45 28 10
4. Earnings including
interest on deposits 4,417 3,965 4,668 4,708 5,543 1,571
5. Less: Interest on
deposits 1,589 1,119 1,013 965 1,359 335
6. Earnings excluding
interest on deposits$2,828 $2,846 $3,655 $3,743 $4,184 $1,236
Fixed Charges:
7. Interest Expense $3,585 $3,072 $3,122 $3,858 $5,330 $1,377
8. Estimated interest
component of net
rental expense 29 27 26 26 26 7
9. Amortization of debt
issuance expense - - - - - -
10. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,614 3,099 3,148 3,884 5,356 1,384
11. Add: Capitalized
interest - - - - - -
12. Total fixed charges 3,614 3,099 3,148 3,884 5,356 1,384
13. Less: Interest on
deposits
(Line 5) 1,589 1,119 1,013 965 1,359 335
14. Fixed charges excluding
interest on deposits $2,025 $1,980 $2,135 $2,919 $3,997 $1,049
Consolidated Ratios of Earnings
to Fixed Charges:
Including interest on
deposits
(Line 4/Line 12) 1.22 1.28 1.48 1.21 1.03 1.14
Excluding interest on
deposits
(Line 6/Line 14) 1.40 1.44 1.71 1.28 1.05 1.18
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 12(b)
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(dollars in millions)
<CAPTION>
Three
Months
Ended
Year Ended December 31, March 31,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effect
of accounting
changes $ 834 $ 906 $1,550 $ 869 $ 215 $ 197
2. Add: Fixed charges
excluding
capitalized
interest
(Line 13) 3,614 3,099 3,148 3,884 5,356 1,384
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 31 40 30 45 28 10
4. Earnings including
interest on deposits 4,417 3,965 4,668 4,708 5,543 1,571
5. Less: Interest on
deposits 1,589 1,119 1,013 965 1,359 335
6. Earnings excluding
interest on deposits$2,828 $2,846 $3,655 $3,743 $4,184 $1,236
Preferred Stock Dividend Requirements:
7. Preferred stock dividend
requirements $ 34 $ 30 $ 23 $ 28 $ 51 $ 15
8. Ratio of income from
continuing operations
before income taxes to
income from continuing
operations after income
taxes 125% 142% 145% 141% 145% 143%
9. Preferred stock dividend
requirements on a pretax
basis $ 43 $ 43 $ 33 $ 39 $ 74 $ 21
Fixed Charges:
10. Interest Expense $3,585 $3,072 $3,122 $3,858 $5,330 $1,377
11. Estimated interest
component of net
rental expense 29 27 26 26 26 7
12. Amortization of debt
issuance expense - - - - - -
13. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,614 3,099 3,148 3,884 5,356 1,384
14. Add: Capitalized
interest - - - - - -
15. Total fixed charges 3,614 3,099 3,148 3,884 5,356 1,384
16. Add: Preferred stock
dividend require-
ments - pretax
(Line 9) 43 43 33 39 74 21
<PAGE>
17. Total combined fixed
charges and preferred
stock dividend require-
ments on a pretax
basis 3,657 3,142 3,181 3,923 5,430 1,405
18. Less: Interest on
deposits
(Line 5) 1,589 1,119 1,013 965 1,359 335
19. Combined fixed charges
and preferred stock
dividend requirements
on a pretax basis
excluding interest on
deposits $2,068 $2,023 $2,168 $2,958 $4,071 $1,070
Consolidated Ratios of Earnings
to Combined Fixed Charges
and Preferred Stock
Dividend Requirements:
Including interest on
deposits
(Line 4/Line 17) 1.21 1.26 1.47 1.20 1.02 1.12
Excluding interest on
deposits
(Line 6/Line 19) 1.37 1.41 1.69 1.27 1.03 1.16
</TABLE>
<PAGE>
BANKERS TRUST NEW YORK CORPORATION
280 PARK AVENUE
NEW YORK, NEW YORK 10017
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
March 15, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
Accompanying this letter is Bankers Trust New York Corporation's
quarterly report on Form 10-Q for the quarter ended March 31, 1996 (the
"Form 10-Q"). The Form 10-Q is being filed electronically through the
EDGAR System.
If there are any question or comments in connection with the enclosed
filing, please contact the undersigned at 212-250-7098.
Very truly yours,
BANKERS TRUST NEW YORK CORPORATION
By: GEOFFREY M. FLETCHER
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
Attachment
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BANKERS TRUST NEW
YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION AT MARCH
31, 1996 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,181
<INT-BEARING-DEPOSITS> 1,377
<FED-FUNDS-SOLD> 1,038
<TRADING-ASSETS> 45,505
<INVESTMENTS-HELD-FOR-SALE> 6,880
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 13,088
<ALLOWANCE> 987
<TOTAL-ASSETS> 108,144
<DEPOSITS> 22,556
<SHORT-TERM> 35,702<F1>
<LIABILITIES-OTHER> 7,407<F2>
<LONG-TERM> 10,125
0
866
<COMMON> 84
<OTHER-SE> 4,105
<TOTAL-LIABILITIES-AND-EQUITY> 108,144
<INTEREST-LOAN> 231
<INTEREST-INVEST> 97
<INTEREST-OTHER> 490<F3>
<INTEREST-TOTAL> 1,590
<INTEREST-DEPOSIT> 335
<INTEREST-EXPENSE> 1,377
<INTEREST-INCOME-NET> 213
<LOAN-LOSSES> 5
<SECURITIES-GAINS> 15
<EXPENSE-OTHER> 761
<INCOME-PRETAX> 197
<INCOME-PRE-EXTRAORDINARY> 197
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.51
<YIELD-ACTUAL> 1.02
<LOANS-NON> 715
<LOANS-PAST> 0
<LOANS-TROUBLED> 89
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 992
<CHARGE-OFFS> 28
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 987
<ALLOWANCE-DOMESTIC> 272
<ALLOWANCE-FOREIGN> 219
<ALLOWANCE-UNALLOCATED> 496
<FN>
<F1>Short-term borrowings include the following:
Securities sold under repurchase agreements 23,209
Other short-term borrowings 14,493
Total 35,702
<F2>Other liabilities include the following:
Accounts payable and accrued expenses 4,665
Other liabilities 2,742
Total 7,407
<F3>Other interest income includes the following:
Interest-bearing deposits with banks 43
Federal funds sold 28
Securities sold under resale agreements 194
Securities borrowed 225
Total 490
</FN>
</TABLE>
