<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 June 30, 1997
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.)
130 Liberty Street
New York, New York 10006
(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 July 31, 1997: Common Stock, $1 par value,
78,395,130 shares.
<PAGE> 1
BANKERS TRUST NEW YORK CORPORATION
June 30, 1997 FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended June 30, 1997 and 1996 2
Six Months Ended June 30, 1997 and 1996 3
Consolidated Balance Sheet
At June 30, 1997 and December 31, 1996 4
Consolidated Statement of Changes in Stockholders'
Equity
Six Months Ended June 30, 1997 and 1996 5
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1997 and 1996 6
Consolidated Schedule of Net Interest Revenue
Three Months and Six Months Ended
June 30, 1997 and 1996 7
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 and six months ended June 30, 1997 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 1996 Annual Report
as supplemented by the first quarter 1997 Form 10-Q.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 38
SIGNATURE 40
<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 JUNE 30, 1997 1996 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,694 $1,459 $ 235
Interest expense 1,379 1,216 163
Net interest revenue 315 243 72
Provision for credit losses - - -
Net interest revenue after provision
for credit losses 315 243 72
NONINTEREST REVENUE
Trading 282 146 136
Fiduciary and funds management 234 198 36
Corporate finance fees 174 136 38
Other fees and commissions 91 82 9
Net revenue from equity investment transactions 3 72 (69)
Securities available for sale gains 68 25 43
Insurance premiums 64 63 1
Other 54 76 (22)
Total noninterest revenue 970 798 172
NONINTEREST EXPENSES
Salaries 232 202 30
Incentive compensation and employee benefits 377 235 142
Agency and other professional service fees 99 98 1
Communication and data services 45 47 (2)
Occupancy, net 38 36 2
Furniture and equipment 49 41 8
Travel and entertainment 31 24 7
Provision for policyholder benefits 72 78 (6)
Other 85 64 21
Total noninterest expenses 1,028 825 203
Income before income taxes 257 216 41
Income taxes 76 65 11
NET INCOME $ 181 $ 151 $ 30
NET INCOME APPLICABLE TO COMMON STOCK $ 169 $ 137 $ 32
Cash dividends declared per common share $1.00 $1.00 $-
EARNINGS PER COMMON SHARE:
PRIMARY $2.07 $1.67 $.40
FULLY DILUTED $2.05 $1.66 $.39
</TABLE>
<PAGE> 3
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Increase
SIX MONTHS ENDED JUNE 30, 1997 1996 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $3,339 $3,049 $290
Interest expense 2,716 2,593 123
Net interest revenue 623 456 167
Provision for credit losses - 5 (5)
Net interest revenue after provision
for credit losses 623 451 172
NONINTEREST REVENUE
Trading 561 393 168
Fiduciary and funds management 442 381 61
Corporate finance fees 314 222 92
Other fees and commissions 170 169 1
Net revenue from equity investment transactions 47 93 (46)
Securities available for sale gains 82 40 42
Insurance premiums 127 125 2
Other 95 125 (30)
Total noninterest revenue 1,838 1,548 290
NONINTEREST EXPENSES
Salaries 469 403 66
Incentive compensation and employee benefits 699 462 237
Agency and other professional service fees 186 158 28
Communication and data services 90 93 (3)
Occupancy, net 75 73 2
Furniture and equipment 99 82 17
Travel and entertainment 56 42 14
Provision for policyholder benefits 140 150 (10)
Other 149 123 26
Total noninterest expenses 1,963 1,586 377
Income before income taxes 498 413 85
Income taxes 148 124 24
NET INCOME $350 $ 289 $61
NET INCOME APPLICABLE TO COMMON STOCK $325 $ 260 $65
Cash dividends declared per common share $2.00 $2.00 $-
EARNINGS PER COMMON SHARE:
PRIMARY $3.95 $3.19 $.76
FULLY DILUTED $3.93 $3.17 $.76
</TABLE>
<PAGE> 4
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions, except par value)
<TABLE>
<CAPTION>
June 30,December 31,
1997* 1996
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,730 $ 1,543
Interest-bearing deposits with banks 2,334 2,210
Federal funds sold 1,305 1,599
Securities purchased under resale
agreements 25,754 17,986
Securities borrowed 12,794 16,676
Trading assets:
Government securities 12,270 16,745
Corporate debt securities 9,642 8,005
Equity securities 8,018 6,048
Swaps, options and other derivatives 10,824 11,410
Other trading assets 8,328 6,711
Total trading assets 49,082 48,919
Securities available for sale 7,478 7,920
Loans, net of allowance for credit losses
of $767 at June 30, 1997 and $773 at
December 31, 1996 18,939 15,053
Accounts receivable and accrued interest 3,431 3,003
Other assets 6,101 5,326
Total $128,948 $120,235
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 3,046 $ 2,600
Foreign offices 1,439 1,013
Interest-bearing deposits
Domestic offices 15,618 9,928
Foreign offices 18,327 16,774
Total deposits 38,430 30,315
Trading liabilities:
Securities sold, not yet purchased
Government securities 4,949 7,652
Equity securities 4,973 4,151
Other trading liabilities 401 325
Swaps, options and other derivatives 11,064 11,585
Total trading liabilities 21,387 23,713
Securities sold under repurchase agreements 22,550 23,000
Other short-term borrowings 19,398 19,395
Accounts payable and accrued expenses 5,088 3,656
Other liabilities, including allowance for
credit losses of $206 at June 30, 1997
and $200 at December 31, 1996 4,192 2,833
Long-term debt not included in risk-based capital 8,268 8,533
Long-term debt included in risk-based capital 2,939 2,576
Mandatorily redeemable capital securities of
subsidiary trusts holding solely junior
subordinated deferrable interest debentures
included in risk-based capital 1,470 730
Total liabilities 123,722 114,751
PREFERRED STOCK OF SUBSIDIARY - 250
STOCKHOLDERS' EQUITY
Preferred stock 703 810
Common stock, $1 par value
Authorized, 300,000,000 shares
Issued, 83,678,973 shares 84 84
Capital surplus 1,352 1,339
Retained earnings 3,588 3,462
Common stock in treasury, at cost: 1997, 6,011,773 shares;
1996, 4,435,226 shares (513) (372)
Other stockholders' equity 12 (89)
Total stockholders' equity 5,226 5,234
Total $128,948 $120,235
<FN>
* Unaudited
</TABLE>
<PAGE> 5
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997 1996
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 $ 810 $ 865
Preferred stock issued - 1
Preferred stock redeemed (100) -
Preferred stock repurchased (7) -
Balance, June 30 703 866
COMMON STOCK
Balance, January 1 and June 30 84 84
CAPITAL SURPLUS
Balance, January 1 1,339 1,302
Common stock distributed under employee
benefit plans 13 6
Balance, June 30 1,352 1,308
RETAINED EARNINGS
Balance, January 1 3,462 3,316
Net income 350 289
Cash dividends declared
Preferred stock (26) (29)
Common stock (156) (159)
Treasury stock distributed under employee benefit plans (42) (24)
Balance, June 30 3,588 3,393
COMMON STOCK IN TREASURY, AT COST
Balance, January 1 (372) (336)
Purchases of stock (274) (38)
Restricted stock granted (cancelled), net (17) 19
Treasury stock distributed under employee benefit plans 150 82
Balance, June 30 (513) (273)
COMMON STOCK ISSUABLE - STOCK AWARDS
Balance, January 1 526 233
Deferred stock awards granted (cancelled), net 61 63
Deferred stock distributed (18) (1)
Balance, June 30 569 295
DEFERRED COMPENSATION - STOCK AWARDS
Balance, January 1 (308) (151)
Deferred stock awards (granted) cancelled, net (61) (62)
Restricted stock (granted) cancelled, net 16 (19)
Amortization of deferred compensation, net 125 82
Balance, June 30 (228) (150)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1 (364) (348)
Translation adjustments 26 (27)
Income taxes applicable to translation adjustments (23) 18
Balance, June 30 (361) (357)
SECURITIES VALUATION ALLOWANCE
Balance, January 1 57 19
Change in unrealized net gains, after applicable
income taxes and minority interest (25) (18)
Balance, June 30 32 1
TOTAL STOCKHOLDERS' EQUITY, JUNE 30 $5,226 $5,167
</TABLE>
<PAGE> 6
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 350 $ 289
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses - 5
Provision for policyholder benefits 140 150
Deferred income taxes (58) 100
Depreciation and other amortization
and accretion 177 125
Other, net 77 (56)
Earnings adjusted for noncash charges and credits 686 613
Net change in:
Trading assets 439 3,776
Trading liabilities (2,117) (248)
Receivables and payables from securities
transactions 741 1,287
Other operating assets and liabilities, net 995 356
Securities available for sale gains (82) (40)
Net cash provided by operating activities 662 5,744
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits with banks (136) (79)
Federal funds sold 294 489
Securities purchased under resale agreements (7,768) (11,972)
Securities borrowed 3,882 (2,422)
Loans (3,982) (1,504)
Securities available for sale:
Purchases (2,836) (2,918)
Maturities and other redemptions 1,897 1,823
Sales 237 260
Acquisitions of premises and equipment (116) (86)
Other, net 140 106
Net cash used in investing activities (8,388) (16,303)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in:
Deposits 7,916 (517)
Securities sold under repurchase agreements (423) 9,024
Other short-term borrowings 254 (126)
Issuances of long-term debt* 3,221 2,018
Repayments of long-term debt (2,311) (363)
Redemptions of preferred stock of subsidiary (250) -
Redemptions and repurchases of preferred stock (107) -
Purchases of treasury stock (274) (38)
Cash dividends paid (183) (188)
Other, net 89 63
Net cash provided by financing activities 7,932 9,873
Net effect of exchange rate changes on cash (19) 12
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 187 (674)
Cash and due from banks, beginning of period 1,543 2,337
Cash and due from banks, end of period $ 1,730 $ 1,663
Interest paid $2,515 $2,624
Income taxes paid, net $47 $133
Noncash investing activities $86 $50
Noncash financing activities:
Conversion of debt to preferred stock $- $1
<FN>
* Includes $740 million at June 30, 1997, related to mandatorily redeemable
capital securities of subsidiary trusts holding solely junior subordinated
deferrable interest debentures included in risk-based capital.
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 7
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST REVENUE
Interest-bearing deposits with banks $ 82 $ 40 $ 147 $ 83
Federal funds sold 61 31 110 59
Securities purchased under
resale agreements 314 275 644 469
Securities borrowed 175 241 357 466
Trading assets 647 517 1,245 1,289
Securities available for sale
Taxable 96 110 206 200
Exempt from federal income taxes 6 5 16 12
Loans 313 240 614 471
Total interest revenue 1,694 1,459 3,339 3,049
INTEREST EXPENSE
Interest-bearing deposits
Domestic offices 200 84 346 172
Foreign offices 259 216 509 463
Trading liabilities 125 135 276 461
Securities sold under repurchase agreements 328 400 661 708
Other short-term borrowings 275 237 563 508
Long-term debt 162 144 307 281
Mandatorily redeemable capital securities of
subsidiary trusts holding solely junior
subordinated deferrable interest debentures
included in risk-based capital 30 - 54 -
Total interest expense 1,379 1,216 2,716 2,593
NET INTEREST REVENUE $ 315 $ 243 $ 623 $ 456
</TABLE>
<PAGE> 8
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 $181
million for the three months ended June 30, 1997, or $2.05 fully diluted
earnings per share. In the second quarter of 1996, the Corporation earned
$151 million, or $1.66 fully diluted earnings per share.
For the first six months of 1997, the Corporation earned $350 million,
or $3.93 fully diluted earnings per share. For the first six months of
1996, the Corporation earned $289 million, or $3.17 fully diluted earnings
per share.
ORGANIZATIONAL UNIT RESULTS
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 diverse 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 judgments
have been made to apportion revenue and expense items. In addition,
certain revenue and expenses have been segregated and reported in
Corporate/Other because, in the opinion of management, they could not be
reasonably allocated or because their contributions to a particular
organizational unit would be distortive. The internal management
accounting process, unlike financial accounting in accordance with
generally accepted accounting principles, is based on the way 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 generally
restate this analysis to conform with material changes in the allocation
process and/or significant changes in organizational structure.
<PAGE> 9
ORGANIZATIONAL UNIT RESULTS (continued)
The following tables present the results by Organizational Units:
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended June 30, 1997 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 353 $ 193 $160 $113
Risk Management Services 107 97 10 7
Trading & Sales 168 84 84 59
Investment Management 87 75 12 8
Client Processing Services 208 182 26 18
Australia/New Zealand 132 99 33 23
Asia 11 31 (20) (14)
Latin America 172 117 55 39
Corporate/Other 47 150 (103) (72)
Total $1,285 $1,028 $257 $181
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended June 30, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $281 $132 $149 $104
Risk Management Services 38 64 (26) (18)
Trading & Sales 84 59 25 17
Investment Management 75 70 5 4
Client Processing Services 197 169 28 20
Australia/New Zealand 114 67 47 33
Asia 36 26 10 7
Latin America 166 118 48 33
Corporate/Other 50 120 (70) (49)
Total $1,041 $825 $216 $151
</TABLE>
<TABLE>
Total Non- Pretax Net
Six Months Ended June 30, 1997 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 656 $ 358 $298 $209
Risk Management Services 212 186 26 18
Trading & Sales 302 157 145 102
Investment Management 172 147 25 17
Client Processing Services 404 360 44 31
Australia/New Zealand 261 180 81 57
Asia 51 60 (9) (6)
Latin America 315 227 88 62
Corporate/Other 88 288 (200) (140)
Total $2,461 $1,963 $498 $350
</TABLE>
<PAGE> 10
ORGANIZATIONAL UNIT RESULTS (continued)
<TABLE>
Total Non- Pretax Net
Six Months Ended June 30, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 508 $ 241 $ 267 $186
Risk Management Services 101 133 (32) (22)
Trading & Sales 174 115 59 41
Investment Management 148 139 9 7
Client Processing Services 379 325 54 38
Australia/New Zealand 212 131 81 57
Asia 69 52 17 12
Latin America 302 226 76 53
Corporate/Other 106 224 (118) (83)
Total $1,999 $1,586 $ 413 $289
</TABLE>
The Investment Banking business contributed net income of $113 million
in the second quarter, up from $104 million a year ago. The increase from
the prior year period reflected higher corporate finance income offset
partly by higher personnel-related costs. Revenue from private equity
investments declined from the high level of the second quarter of 1996.
For the first six months of 1997, net income was $209 million versus $186
million for the first six months of 1996. The year-over-year increase
resulted primarily from higher corporate finance income.
Risk Management Services recorded net income of $7 million in the
second quarter of 1997, up $25 million from the second quarter of 1996.
Net income was $18 million in the first half of 1997 compared to a net loss
of $22 million in the first half of 1996. The prior year periods reflected
losses incurred in the commodity derivatives books when copper prices
dropped sharply. Beginning in 1997, the responsibility for managing the
metals and mining commodities book was transferred to Australia/NZ.
Net income from the Trading & Sales business, at $59 million, was up
$42 million from the second quarter of 1996. Net income was $102 million
for the first six months of 1997 compared to $41 million for the prior year
period. The current quarter and year-to-date improvement was largely due
to strong arbitrage activities as compared to the prior year periods.
The Corporation's Investment Management business, which for reporting
purposes does not include funds management activities in Australia/NZ,
reported net income of $8 million for the current quarter, up $4 million
from the 1996 comparable period. Net income was $17 million in the first
half of 1997, up $10 million from the first half of 1996. Improved
performance fees contributed to the increase from the prior year quarter
and the first six months of 1996. At June 30, 1997, assets under
management in this organizational unit were approximately $242 billion,
compared to $191 billion at June 30, 1996.
<PAGE> 11
ORGANIZATIONAL UNIT RESULTS (continued)
Client Processing Services contributed $18 million of net income in
the second quarter of 1997, down $2 million from the 1996 second quarter.
Revenues of $208 million were up $11 million from the second quarter of
1996. The decline in net income from the year ago quarter reflected higher
personnel-related costs and technology costs. Net income was $31 million
in the first half of 1997 compared with $38 million in the first half of
1996.
Net income of the Australia/NZ business was $23 million in the second
quarter of 1997, down $10 million from the second quarter of 1996. The
decrease from the prior year quarter was primarily due to higher personnel-
related costs as a result of increased staff levels offset in part by
improved revenues from trading activities and fiduciary and funds
management. At June 30, 1997, assets under management in Australia/NZ's
investment management business were approximately $28 billion, compared to
$24 billion at June 30, 1996. Net income for the first six months of 1997
was $57 million, even with the first six months of 1996.
Asia net loss was $14 million in the second quarter of 1997 compared
to net income of $7 million in the second quarter of 1996. Thailand is
currently experiencing a significant reduction in its economic growth and
the Thai stock market has experienced a steep decline. As a result, the
Corporation recognized a decline in value of its unconsolidated investment
in a Thai finance company. Partially offsetting this decline, the
Corporation recognized trading gains from favorable Thai baht currency
positions. The combined effect of these factors in Thailand resulted in a
pre-tax net loss of $22 million. For the first six months of 1997, the
Asia organizational unit incurred a net loss of $6 million compared to net
income of $12 million in the prior year period. The decrease from the
prior year period resulted from the losses incurred in Thailand as
previously mentioned.
Latin America net income was $39 million in the second quarter of
1997, up $6 million from the second quarter of 1996. A pre-tax gain of $22
million ($15 million after-tax) was recorded during the current quarter
resulting from the completion of the first stage of the sale of 50% of the
Corporation's stake in Consorcio, the largest life insurance and annuity
firm in Chile. The prior year's quarter included a $31 million pre-tax
gain on the sale of Compensa, which was the smaller of the Corporation's
Chilean insurance subsidiaries. Net income for the first half of 1997 was
$62 million compared to $53 million in the first half of 1996.
Corporate/Other net loss was $72 million in the second quarter of
1997, compared with a net loss of $49 million in the second quarter of
1996. For the first six months of 1997, this unit incurred a net loss of
$140 million versus a net loss of $83 million in the prior year period.
The first half of 1997 included the effects of increased incentive
compensation and employee benefits and consulting expenses associated with
several strategic and infrastructure improvement projects. The prior year
period included higher levels of legal and professional fees.
<PAGE> 12
REVENUE
Net Interest Revenue
The table below presents 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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET INTEREST REVENUE (in millions)
Book basis $315 $243 $623 $456
Tax equivalent adjustment 6 4 13 8
Fully taxable basis $321 $247 $636 $464
AVERAGE BALANCES (in millions)
Interest-earning assets $99,985 $91,002 $97,870 $88,289
Interest-bearing liabilities 97,883 86,702 94,662 84,807
Earning assets financed by
noninterest-bearing funds $ 2,102 $ 4,300 $ 3,208 $ 3,482
AVERAGE RATES (fully taxable basis)
Yield on interest-earning assets 6.82% 6.47% 6.91% 6.96%
Cost of interest-bearing liabilities 5.65 5.64 5.79 6.15
Interest rate spread 1.17 .83 1.12 .81
Contribution of noninterest-bearing
funds .12 .26 .19 .25
Net interest margin 1.29% 1.09% 1.31% 1.06%
</TABLE>
Net interest revenue for the second quarter of 1997 totaled $315
million, up $72 million, or 30 percent, from the second quarter of 1996.
The $72 million increase in net interest revenue was primarily due to an
$84 million increase in trading-related net interest revenue, which totaled
$148 million for the second quarter of 1997. Nontrading-related net
interest revenue totaled $167 million for the second quarter of 1997 versus
$179 million for the comparable period in 1996.
Net interest revenue was $623 million for the first six months of
1997, up $167 million, or 37 percent from the first half of 1996.
Nontrading-related net interest revenue totaled $341 million for the first
six months of 1997 versus $362 million for the comparable period in 1996.
<PAGE> 13
REVENUE (continued)
In the second quarter of 1997, the interest rate spread was 1.17
percent compared to .83 percent in the prior year period. Net interest
margin increased to 1.29 percent from 1.09 percent. The yield on interest
earning assets rose by 35 basis points and the cost of interest-bearing
liabilities was essentially flat. Average interest-earning assets totaled
$100.0 billion for the second quarter of 1997, up $9.0 billion from the
same period in 1996. The increase was primarily attributable to growth in
the loan portfolio.
Trading Revenue
The Firm's trading and risk management businesses include significant
activities in interest rate instruments and related derivatives. These
activities can periodically shift revenue 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 second quarter of 1997 totaled $430 million, up $220 million from the
second quarter of 1996. Combined trading revenue and trading-related net
interest revenue for the first six months of 1997 was $843 million, up $356
million from the $487 million reported in the first half of 1996.
<PAGE> 14
REVENUE (continued)
The table below presents 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 June 30, 1997
Interest rate risk $168 $154 $322
Foreign exchange risk 48 - 48
Equity and commodity risk 66 (6) 60
Total $282 $148 $430
Quarter ended June 30, 1996
Interest rate risk $ 75 $59 $134
Foreign exchange risk 63 - 63
Equity and commodity risk 8 5 13
Total $146 $64 $210
Six Months ended June 30, 1997
Interest rate risk $339 $302 $641
Foreign exchange risk 86 - 86
Equity and commodity risk 136 (20) 116
Total $561 $282 $843
Six Months ended June 30, 1996
Interest rate risk $233 $111 $344
Foreign exchange risk 80 - 80
Equity and commodity risk 80 (17) 63
Total $393 $ 94 $487
</TABLE>
Second Quarter 1997 vs. Second Quarter 1996
Interest Rate Risk - The increase in revenue was primarily due to
strong results in the bond market and increased activity in foreign markets
including Europe, Australia and New Zealand.
Foreign Exchange Risk - Foreign exchange revenue decreased from the
same period last year principally due to a decline in revenue from
activities in Australia.
Equity and Commodity Risk - Total trading and trading-related net
interest revenue increased from the same period last year. The prior year
period reflected losses incurred in the commodity derivatives books when
copper prices dropped sharply.
<PAGE> 15
REVENUE (continued)
Six Months 1997 vs. Six Months 1996
Interest Rate Risk - The increase in revenue was principally due to
strong results in the bond market, increased flow of client trading
services and increased revenue from proprietary trading activities.
Improved performance in Asia, Australia and New Zealand also contributed to
the increase.
Foreign Exchange Risk - Foreign exchange risk revenue increased
compared to the same period last year principally due to improved revenues
from proprietary and customer activities.
Equity and Commodity Risk - The increase in total trading and trading
related revenue as compared to the same period last year is principally due
to strong revenue from precious metals in the first half of 1997 and
nonrecurring losses in commodity derivatives in first half of 1996.
Noninterest Revenue (Excluding Trading)
Second Quarter 1997 vs. Second Quarter 1996
Fiduciary and funds management revenue was $234 million in the second
quarter of 1997 up $36 million from the prior year period. Client
processing services, funds management and global private banking
commissions contributed to this increase.
Corporate finance fees increased 28 percent from the $136 million
earned in the second quarter of 1996 primarily due to higher fees for
arranging financings, merger and acquisition fees and loan syndication
fees.
The Corporation's private equity investment activities largely
contributed to the changes in securities available for sale gains (up $43
million) and net revenue from equity investment transactions (down $69
million).
<PAGE> 16
REVENUE (continued)
Six Months 1997 vs. Six Months 1996
Fiduciary and funds management fees of $442 million increased $61
million from the first six months of 1996. Higher revenue from funds
management, client processing services and global private banking
commissions were the primary contributors to this increase.
Corporate finance fees totaled $314 million for the first half of
1997, up $92 million from the prior year period, primarily due to higher
fees for arranging financings, merger and acquisition fees and loan
syndication fees.
The Corporation's private equity investment activities largely
contributed to the changes in securities available for sale gains (up $42
million) and net revenue from equity investment transactions (down $46
million).
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The provision for credit losses is determined based 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.
No provision for credit losses was required for the current or prior
year's second quarter. Net charge-offs for the second quarter were $2
million, compared with $15 million a year ago.
In accordance with the American Institute of Certified Public
Accountant's Banks and Savings Institutions Audit and Accounting Guide, the
Corporation has allocated its total allowance for credit losses as follows:
$767 million as a reduction of loans, and $206 million as other liabilities
related to other credit-related items. The Corporation continues to
believe that the total allowance for credit losses is available for credit
losses in its entire portfolio, which is comprised of loans, credit-related
commitments, derivatives and other financial instruments. Due to a
multitude of complex and changing factors that are collectively weighed in
determining the adequacy of the allowance for credit losses, management
expects that the allocation of the total allowance for credit losses may be
adjusted as risk factors change. Prior period amounts have not been
restated.
<PAGE> 17
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 Six Months Ended
June 30, June 30,
Allowance for credit losses 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Balance, beginning of period $958 $987 $973 $992
Net charge-offs
Charge-offs 3 21 36 49
Recoveries 1 6 19 24
Total net charge-offs(1) 2 15 17 25
Provision for credit losses - - - 5
Allowance related to acquisition
of an affiliate 17 - 17 -
Balance, end of period(2) $973 $972 $973 $972
(1) Components of Net Charge-offs:
Secured by real estate $ 2 $ - $ 1 $ 1
Real estate related - - - 4
Highly leveraged - 3 16 23
Other 1 13 1 1
Refinancing country (1) (1) (1) (4)
Total $ 2 $15 $ 17 $25
(2) Allocation:
Loans $767
Other Liabilities 206
Balance, end of period $973
</TABLE>
The allowance for credit losses that has been allocated to loans, was
$767 million at June 30, 1997 compared to $773 million at December 31,
1996. The allowance was equal to 251 percent and 171 percent of total cash
basis loans at June 30, 1997 and December 31, 1996, respectively. These
ratios were computed using the amounts that were allocated to loans.
Impaired loans under SFAS 114, which consisted of total cash basis
loans and renegotiated loans, were $342 million and $489 million at June
30, 1997 and December 31, 1996, respectively. Included in these amounts
were $128 million and $227 million of loans which required a valuation
allowance of $31 million and $57 million at those same dates, respectively.
<PAGE> 18
EXPENSES
Second Quarter 1997 vs. Second Quarter 1996
Total noninterest expenses of $1.028 billion increased by $203
million, or 25 percent, from the second quarter of 1996. Salaries expense
increased $30 million, or 15 percent, principally due to a 7 percent
increase in the average number of employees and to annual pay increases.
Incentive compensation and employee benefits, the largest component of
noninterest expenses, increased $142 million due to higher profitability
and the increase in the average number of employees.
Six Months 1997 vs. Six Months 1996
Total noninterest expenses of $1.963 billion increased by $377 million
for the first six months of 1997. Salaries expense increased $66 million,
or 16 percent, due to an increase in the average number of employees and to
annual pay increases. Incentive compensation and employee benefits
increased $237 million due to higher profitability and an increase in the
average number of employees.
INCOME TAXES
Income tax expense for the second quarter of 1997 amounted to $76
million, compared with $65 million for the second quarter of 1996. For the
first six months of 1997, income tax expense was $148 million compared with
$124 million in the first half of 1996. The effective tax rate was 30
percent for both the current quarter and six months ended June 30, 1997 as
well as the prior year quarter and six months ended June 30, 1996.
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
<PAGE> 19
EARNINGS PER COMMON SHARE (continued)
the average market price. At no time during the three month and six month
periods ended June 30, 1997 and 1996 did the Corporation have outstanding
any securities which were convertible into 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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net income applicable to common stock $169 $137 $325 $260
Average number of common shares
outstanding 76.136 77.832 76.574 77.664
Average common and common equivalent shares
outstanding - primary 81.585 81.900 82.181 81.398
Average common and common equivalent shares
outstanding assuming full dilution 82.403 82.351 82.647 81.956
</TABLE>
<PAGE> 20
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)
2nd Qtr 1st Qtr 4th Qtr
1997 1997 1996
<S> <C> <C> <C>
ASSETS
Interest-earning
Interest-bearing deposits with banks $ 4,330 $ 3,396 $ 3,545
Federal funds sold 4,313 3,702 1,990
Securities purchased under resale
agreements 23,395 22,120 22,380
Securities borrowed 14,092 14,712 15,447
Trading assets 27,955 28,022 31,427
Securities available for sale
Taxable 6,571 6,988 6,777
Exempt from federal income taxes 1,136 1,148 1,077
Total securities available for sale 7,707 8,136 7,854
Loans
Domestic offices 8,891 8,207 8,172
Foreign offices 9,302 7,437 7,032
Total loans 18,193 15,644 15,204
Total interest-earning assets 99,985 95,732 97,847
Noninterest-earning
Cash and due from banks 1,573 1,302 1,378
Noninterest-earning trading assets 20,151 18,960 17,700
All other assets 8,940 8,386 8,409
Allowance for credit losses (770) (802) (988)
Total $129,879 $123,578 $124,346
LIABILITIES
Interest-bearing
Interest-bearing deposits
Domestic offices $ 14,690 $ 11,748 $ 8,738
Foreign offices 20,218 19,661 18,812
Total interest-bearing deposits 34,908 31,409 27,550
Trading liabilities 4,616 6,103 9,687
Securities sold under repurchase agreements 25,035 22,341 25,750
Other short-term borrowings 20,790 19,188 18,852
Long-term debt 11,064 11,169 11,173
Mandatorily redeemable capital securities
of subsidiary trusts holding solely junior
subordinated deferrable interest debentures 1,470 1,195 165
Total interest-bearing liabilities 97,883 91,405 93,177
Noninterest-bearing
Noninterest-bearing deposits 3,003 3,152 3,518
Noninterest-bearing trading liabilities 16,230 16,920 15,725
All other liabilities 7,604 6,715 6,352
Total liabilities 124,720 118,192 118,772
PREFERRED STOCK OF SUBSIDIARY - 182 250
STOCKHOLDERS' EQUITY
Preferred stock 704 773 815
Common stockholders' equity 4,455 4,431 4,509
Total stockholders' equity 5,159 5,204 5,324
Total $129,879 $123,578 $124,346
</TABLE>
<PAGE> 21
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 are as follows.
<TABLE>
<CAPTION>
June 30, March 31, December 31,
(in millions) 1997 1997 1996
<S> <C> <C> <C>
Fair value $7,478 $7,986 $7,920
Amortized cost 7,334 7,854 7,755
Excess of fair value over
amortized cost * $ 144 $ 132 $ 165
* Components:
Unrealized gains $195 $210 $245
Unrealized losses (51) (78) (80)
$144 $132 $165
</TABLE>
Long-term Debt
The larger of long-term debt issuances and maturities/redemptions
which occurred during the second quarter of 1997 are as follows (in
millions):
<TABLE>
<CAPTION>
Face Amount
Maturities/
Issuances Redemptions
<S> <C> <C>
Parent Company
Floating Rate Notes due March 2000 $250
Bankers Trust Company
Redeemable Preference Securities due
April 1997 and April 2000 $333
Floating Rate Notes due May 2002 $239
Floating Rate Notes due June 2007 $118
</TABLE>
<PAGE> 22
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 markets 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 June 30, Average During
1997 2nd Qtr.1997
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 15,039 $(14,075)$ 15,215 $(13,923)
Interest Rate Contracts
Forwards 54 (64) 43 (47)
Options purchased 1,098 1,056
Options written (1,201) (1,183)
Foreign Exchange Rate Contracts
Spot and Forwards 10,850 (11,061) 12,863 (14,021)
Options purchased 977 921
Options written (965) (950)
Equity-related contracts 3,108 (4,092) 2,925 (3,311)
Commodity-related and other contracts 570 (606) 588 (648)
Exchange-Traded Options
Interest Rate 6 (3) 18 (13)
Equity 276 (151) 246 (133)
Total Gross Fair Values 31,978 (32,218) 33,875 (34,229)
Impact of Netting Agreements (21,154) 21,154 (22,246) 22,246
$ 10,824(1) $11,629
$(11,064)(1) $(11,983)
<FN>
(1) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
</TABLE>
<PAGE> 23
TRADING DERIVATIVES (continued)
<TABLE>
<CAPTION>
At December 31, AverageDuring
1996 4th Qtr. 1996
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 16,582 $(15,394) $ 16,258 $(15,498)
Interest Rate Contracts
Forwards 84 (86) 53 (50)
Options purchased 1,149 1,183
Options written (1,252) (1,313)
Foreign Exchange Rate Contracts
Spot and Forwards 9,855 (10,935) 8,642 (9,893)
Options purchased 917 1,143
Options written (953) (1,104)
Equity-related contracts 2,696 (2,941) 2,389 (2,426)
Commodity-related and other contracts 679 (690) 747 (712)
Exchange-Traded Options
Interest Rate 10 (12) 11 (15)
Foreign exchange - - - (6)
Equity 251 (135) 244 (115)
Total Gross Fair Values 32,223 (32,398) 30,670 (31,132)
Impact of Netting Agreements (20,813) 20,813 (19,580) 19,580
$ 11,410(1) $ 11,090
$(11,585)(1) $(11,552)
<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 securities available for sale, loans, 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 losses were $108 million at
June 30, 1997 compared with an unrealized gain of $54 million at December
31, 1996. The $162 million decrease during the first half of 1997 was
primarily due to increases in long-term interest rates.
<PAGE> 24
END-USER DERIVATIVES (continued)
The following tables provide the gross unrealized gains and losses for
end-user derivatives. Gross unrealized gains and losses for hedges of
securities available for sale are recognized in the financial statements
with the offset as an adjustment to securities valuation allowance in
stockholders' equity. Gross unrealized gains and losses for hedges of
loans, other assets, interest-bearing deposits, other short-term
borrowings, long-term debt, and net investments in foreign subsidiaries are
not yet recognized in the financial statements.
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions)available Other bearing borrow- term subsi-
June 30, 1997 for sale Loans assets deposits ings debt(1)diaries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain$ 1 $ - $- $ 44 $ 11 $ 193 $- $ 249
Unrealized (Loss) - (26) - (41) (16) (96) - (179)
Pay Variable Net 1 (26) - 3 (5) 97 - 70
Pay Fixed
Unrealized Gain 4 - - 17 - 8 - 29
Unrealized
(Loss) (28) - - (42) (1) (56) - (127)
Pay Fixed Net (24) - - (25) (1) (48) - (98)
Total Unrealized
Gain 5 - - 61 11 201 - 278
Total Unrealized
(Loss) (28) (26) - (83) (17) (152) - (306)
Total Net $(23) $(26) $- $(22) $ (6)$ 49 $- $ (28)
Forward Rate Agreements
Unrealized Gain $- $- $- $ 1 $- $- $- $ 1
Unrealized (Loss) - - - (1) - - - (1)
Net $- $- $- $ - $- $- $- $ -
Currency Swaps and Forwards
Unrealized Gain $ - $- $1 $ - $ 4 $ 54 $ 40 $ 99
Unrealized (Loss)(5) - - (1) (6) (109) (46) (167)
Net $(5) $- $1 $(1) $(2)$ (55) $ (6)_$ (68)
Other Contracts (2)
Unrealized Gain$ 4 $- $ - $- $- $- $- $ 4
Unrealized
(Loss) (10) - (6) - - - - (16)
Net $ (6) $- $(6) $- $- $- $- $(12)
Total Unrealized
Gain $ 9 $ - $ 1 $ 62 $15 $ 255 $ 40 $ 382
Total Unrealized
(Loss) (43) (26) (6) (85) (23) (261) (46) (490)
Total Net $(34) $(26) $(5) $(23) $ (8)$ (6) $ (6)$(108)
<FN>
(1) Includes trust preferred capital securities.
(2) Other contracts are principally equity swaps and collars.
</TABLE>
<PAGE> 25
END-USER DERIVATIVES (continued)
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions)available Other bearing borrow- term subsi-
Dec 31, 1996for sale Loans assets deposits ings debt(1) diaries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain$ 1 $ - $- $ 62 $ 7 $198 $- $ 268
Unrealized (Loss)- (14) - (23) (6) (93) - (136)
Pay Variable Net 1 (14) - 39 1 105 - 132
Pay Fixed
Unrealized Gain 3 - - 13 - 1 - 17
Unrealized
(Loss) (50) (9) - (45) (1) (28) - (133)
Pay Fixed Net (47) (9) - (32) (1) (27) - (116)
Total Unrealized
Gain 4 - - 75 7 199 - 285
Total Unrealized
(Loss) (50) (23) - (68) (7) (121) - (269)
Total Net $(46) $(23) $- $ 7 $ - $ 78 $- $ 16
Forward Rate Agreements
Unrealized Gain $- $- $- $ 1 $- $- $- $ 1
Unrealized (Loss) - - - (1) - - - (1)
Net $- $- $- $ - $- $- $- $ -
Currency Swaps and Forwards
Unrealized Gain $- $- $1 $27 $- $ 53 $ 42 $123
Unrealized (Loss) - - - (3) - (18) (41) (62)
Net $- $- $1 $24 $- $ 35 $ 1 $ 61
Other Contracts (2)
Unrealized Gain$ - $- $ - $- $- $- $- $ -
Unrealized
(Loss) (19) - (4) - - - - (23)
Net $(19) $- $(4) $- $- $- $- $(23)
Total Unrealized
Gain $ 4 $- $ 1 $103 $ 7 $252 $ 42 $ 409
Total Unrealized
(Loss) (69) (23) (4) (72) (7) (139) (41) (355)
Total Net $(65) $(23) $(3) $ 31 $ - $113 $ 1 $ 54
<FN>
(1) Includes trust preferred capital securities.
(2) Other contracts are principally equity swaps and collars.
</TABLE>
<PAGE> 26
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 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 June 30, 1997
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>
1997 $22,963 5.68% 5.67% $1,552 5.46% 5.82% $24,515
1998-1999 17,026 5.98 5.75 4,199 4.95 5.82 21,225
2000-2001 5,350 6.76 5.93 1,176 3.61 4.94 6,526
2002 and thereafter 8,506 6.85 5.78 1,253 6.10 7.09 9,759
Total $53,845 $8,180 $62,025
<FN>
All rates were those in effect at June 30, 1997. Variable rates are
primarily based on LIBOR and may change significantly, affecting future
cash flows.
</TABLE>
<TABLE>
<CAPTION>
At December 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>
1997 $33,275 5.59% 5.52% $4,056 5.23% 5.71% $37,331
1998-1999 7,957 5.96 5.52 2,095 4.82 5.82 10,052
2000-2001 3,614 6.84 5.63 867 4.11 5.67 4,481
2002 and thereafter 5,579 6.79 5.65 932 5.61 7.14 6,511
Total $50,425 $7,950 $58,375
<FN>
All rates were those in effect at December 31, 1996. Variable rates are
primarily based on LIBOR and may change significantly, affecting future
cash flows.
</TABLE>
<PAGE> 27
REGULATORY CAPITAL
The Corporation and its banking subsidiaries are subject to various
regulatory capital requirements administered by the federal banking
agencies. The Federal Reserve Board's ("FRB") risk-based capital
guidelines addressing the capital adequacy of bank holding companies and
banks (collectively, "banking organizations") include a definition of
capital and a framework for calculating risk-weighted assets. In addition,
these guidelines specify minimum risk-based capital ratios to be maintained
by banking organizations. The FRB also has a minimum Leverage ratio which
is used as a supplement to the risk-based capital ratios in evaluating the
capital adequacy of banking organizations. The Corporation's 1996 Annual
Report on Form 10-K, on pages 45 and 82, provides a detailed discussion of
these guidelines and regulations.
In 1996, the FRB and the other U.S. federal banking agencies jointly
issued an amendment to the capital adequacy guidelines to incorporate a
measure for market risk ("the market risk amendment"). Essentially, this
amendment changes the calculation of risk-weighted assets in the trading
accounts, and includes the positions and capital of the "Section 20"
securities subsidiary (BT Securities Corporation) in the combined credit
risk and market risk capital calculation of the Corporation. In all other
respects (including the exclusion of the positions and capital of the
international insurance entities), the current capital adequacy guidelines
remain unchanged.
Compliance with the market risk amendment is mandatory by January 1,
1998 for those banking organizations that meet certain thresholds with
regard to their trading activity. Banking organizations may choose to
adopt early during 1997, with prior approval from their primary federal
regulator. The Corporation's 1996 Annual Report on Form 10-K, on page 47,
provides further detailed discussion on the market risk amendment.
The Corporation adopted the market risk amendment as of March 31, 1997
and was the first banking organization to adopt such amendment.
Based on their respective regulatory capital ratios as of June 30,
1997, both the Corporation and Bankers Trust Company ("BTCo") 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, as applicable.
<PAGE> 28
REGULATORY CAPITAL (continued)
The Corporation's and BTCo's ratios are presented in the table below.
The ratios for December 31, 1996 have not been restated for the adoption of
the market risk amendment.
<TABLE>
<CAPTION>
FRB
Minimum To Be Well
Actual Actual for Capitalized
as of as of Capital Under
June 30, December 31,Adequacy Regulatory
1997 1996 Purposes Guidelines
<S> <C> <C> <C> <C>
Tier 1 Capital
Corporation 8.2% 8.7% 4.0% 6.0%
BTCo 9.0% 9.3% 4.0% 6.0%
Total Capital
Corporation 14.4% 13.7% 8.0% 10.0%
BTCo 12.4% 12.9% 8.0% 10.0%
Leverage
Corporation 4.4% 5.5% 3.0%(1) 3.0%(1)
BTCo 5.3% 5.3% 3.0%(1) 5.0%
<FN>
(1) These minimum levels for the Leverage ratio may be set 100 to 200 basis
points higher depending upon other regulatory criteria.
</TABLE>
<PAGE> 29
REGULATORY CAPITAL (continued)
The following are the essential components of the Corporation's and
BTCo's risk-based capital ratios. The December 31, 1996 balances have not
been restated for the adoption of the market risk amendment.
<TABLE>
<CAPTION>
Actual as of Actual as of
June 30, December 31,
(in millions) 1997 1996
<S> <C> <C>
Corporation
Tier 1 Capital $5,618 $5,326
Tier 2 Capital 3,730 3,004
Tier 3 Capital 517 -
Total Capital $9,865 $8,330
Total risk-weighted assets $68,730 $60,990
BTCo
Tier 1 Capital $5,247 $4,869
Tier 2 Capital 2,031 1,900
Total Capital $7,278 $6,769
Total risk-weighted assets $58,591 $52,484
</TABLE>
Comparing June 30, 1997 to December 31, 1996, the Corporation's Tier 1
Capital ratio declined 50 basis points due to an increase in risk-weighted
assets partially offset by an increase in Tier 1 Capital. The
Corporation's risk-weighted assets at June 30, 1997 were $7.7 billion
higher than at year-end 1996 while its Tier 1 Capital was $292 million
higher. The Total Capital ratio of the Corporation increased 70 basis
points due to the issuance of trust preferred capital securities and the
addition of BT Securities Corporation's subordinated debt as a component of
Total Capital (as Tier 3 Capital in accordance with the market risk
amendment), offset by the $7.7 billion increase in risk-weighted assets.
With the adoption of the market risk amendment as of March 31, 1997,
the Corporation's Leverage ratio decreased 110 basis points as BT
Securities Corporation's average assets and capital were included in this
calculation for the first time.
BTCo's Tier 1 Capital and Total Capital ratios decreased by 30 basis
points and 50 basis points, respectively, as a result of a $6.1 billion
increase in risk-weighted assets, partially offset by an increase to Tier 1
and Total Capital of $378 million and $509 million, respectively.
BTCo's Leverage ratio was unchanged as the increase in the quarterly
average assets was offset by the increase in Tier 1 Capital.
<PAGE> 30
LIQUIDITY
Liquidity is the ability to have funds available at all times to meet
the commitments of the Corporation. The Corporation has a formal process
for managing global liquidity for the Firm as a whole and 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 reasonably foreseeable
circumstances. Management maintains appropriate asset liquidity and
actively manages liability/capital levels, maturities and diversification.
The fundamental objective 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 swaps, options and other derivative contracts, foreign
government securities, corporate debt securities, U.S. government and
agency securities, and equity securities. The Corporation's liquid assets
amounted to $100.5 billion as of June 30, 1997, $97.1 billion as of March
31, 1997 and $96.9 billion as of December 31, 1996, which equaled 77
percent, 78 percent, and 80 percent of gross total assets at those dates
respectively.
<PAGE> 31
LIQUIDITY (continued)
Cash Flows
The following comments apply to the consolidated statement of cash
flows, which appears on page 6.
Cash and due from banks increased by $187 million during the first six
months of 1997 as the sum of the net cash provided by financing activities
and operating activities exceeded the net cash used in investing
activities. The increase in cash provided by financing activities was
primarily due to the net changes in deposits ($7.9 billion) and the
issuance of long-term debt ($3.2 billion), partially offset by repayments
of long-term debt ($2.3 billion). Within net cash provided by operating
activities, cash inflows from other operating assets and liabilities, net
($1.0 billion), net changes in receivables and payables from securities
transactions ($741 million) and net changes in trading assets ($439
million), was mostly offset by cash outflows from net changes in trading
liabilities ($2.1 billion). The $8.4 billion of net cash used in investing
activities was primarily the result of cash outflows from the net changes
in securities purchased under resale agreements ($7.8 billion) and loans
($4.0 billion) and from purchases of securities available for sale ($2.8
billion), partially offset by cash inflows from the net change in
securities borrowed ($3.9 billion) and maturities and other redemptions of
securities available for sale ($1.9 billion).
Cash and due from banks decreased $674 million during the first six
months of 1996, as the net cash used in investing activities exceeded the
sum of the net cash provided by financing and operating activities. The
$16.3 billion of net cash used in investing activities was largely the
result of cash outflows from net changes in securities purchased under
resale agreements ($12.0 billion), purchases of securities available for
sale ($2.9 billion) and net changes in securities borrowed ($2.4 billion)
partially offset by cash inflows from maturities and other redemptions of
securities available for sale ($1.8 billion). The $9.9 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 ($9.0
billion) and from issuances of long-term debt ($2.0 billion), offset in
part by a decrease in the net change in deposits ($517 million) and
repayments of long-term debt ($363 million). The increase in net cash
provided by operating activities was mostly due to an increase in net
changes in trading assets ($3.8 billion) and net changes in receivables and
payables from securities transactions ($1.3 billion).
<PAGE> 32
LIQUIDITY (continued)
Interest Rate Sensitivity
Condensed interest rate sensitivity data for the Corporation at June
30, 1997 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
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) June 30, 1997 1 year years 5 years funds Total
<S> <C> <C> <C> <C> <C>
Assets $ 92.0 $ 4.0 $ 3.1 $ 29.8 $ 128.9
Liabilities and preferred
stock (82.2) (7.6) (4.8) (29.8) (124.4)
Common stockholders' equity - - - (4.5) (4.5)
Effect of off-balance sheet
hedging instruments (15.5) 10.7 4.8 - -
Interest rate sensitivity gap $ (5.7) $ 7.1 $ 3.1 $ (4.5) $ -
</TABLE>
<PAGE> 33
NONPERFORMING ASSETS
The components of cash basis loans, renegotiated loans, other real
estate and other nonperforming assets are shown below ($ in millions).
<TABLE>
<CAPTION>
June 30,December 31,
1997 1996
<S> <C> <C>
CASH BASIS LOANS
Domestic
Commercial and industrial $105 $117
Secured by real estate 124 233
Total domestic 229 350
International
Commercial and industrial 37 57
Secured by real estate 32 39
Financial institutions 2 4
Other 5 2
Total international 76 102
Total cash basis loans $305 $452
Ratio of cash basis loans to total gross loans 1.5% 2.9%
Ratio of allowance for credit losses to cash
basis loans (1) 251% 171%
RENEGOTIATED LOANS
Secured by real estate $37 $37
Total renegotiated loans $37 $37
OTHER REAL ESTATE $196 $213
OTHER NONPERFORMING ASSETS
Assets acquired in credit workouts $8 $10
Total other nonperforming assets $8 $10
Loans 90 days or more past due and still
accruing interest $- $-
<FN>
(1) Ratio was computed using the allowance for credit losses that has been
allocated to loans of $767 million and $773 million at June 30, 1997 and
December 31, 1996, respectively.
</TABLE>
<PAGE> 34
NONPERFORMING ASSETS (continued)
An analysis of the changes in the Corporation's total cash basis loans
during the first six months of 1997 follows (in millions).
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1996 $452
Net transfers to cash basis loans 18
Net paydowns (87)
Charge-offs (36)
Transfers to other real estate (10)
Other (32)
Balance, June 30, 1997 $305
</TABLE>
The Corporation's total cash basis loans amounted to $305 million at
June 30, 1997, down $147 million, or 33 percent, from December 31, 1996.
This decline is primarily attributable to decreases in loans secured
by real estate ($116 million) and highly leveraged loans ($41 million).
Within cash basis loans, loans secured by real estate were $156 million and
$272 million at June 30, 1997 and December 31, 1996, respectively.
Commercial and industrial loans to highly leveraged borrowers were $76
million and $117 million at June 30, 1997 and December 31, 1996,
respectively.
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 June 30 of each year.
The rates used in determining the gross amount of interest which would have
been recorded at the original rate were not necessarily representative of
current market rates.
<PAGE> 35
NONPERFORMING ASSETS (continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(in millions) 1997 1996
<S> <C> <C>
Domestic Loans
Gross amount of interest that would have
been recorded at original rate $12 $24
Less, interest, net of reversals, recognized
in interest revenue 2 4
Reduction of interest revenue 10 20
International Loans
Gross amount of interest that would have
been recorded at original rate 4 6
Less, interest, net of reversals, recognized
in interest revenue - -
Reduction of interest revenue 4 6
Total reduction of interest revenue $14 $26
</TABLE>
HIGHLY LEVERAGED TRANSACTIONS
Amounts included in the table and discussion which follow generally
reflect the definition that the Corporation uses in order to monitor the
extent of its exposure to highly leveraged transactions ("HLTs"). The
Corporation's 1996 Annual Report on Form 10-K, on page 59, provides a
detailed discussion of the definition.
<TABLE>
<CAPTION>
Highly Leveraged Transactions
June 30, December 31,
(in millions) 1997 1996
<S> <C> <C>
Loans
Senior debt $1,894 $1,587
Subordinated debt 59 76
Total loans $1,953 $1,663
Unfunded commitments
Commitments to lend $ 900 $ 875
Letters of credit 239 128
Total unfunded commitments $1,139 $1,003
Equity investments $801 $665
Commitments to invest $604 $425
</TABLE>
<PAGE> 36
HIGHLY LEVERAGED TRANSACTIONS (continued)
The Corporation's outstanding loans were to 156 separate borrowers in
44 separate industry groups at June 30, 1997, compared to 127 separate
borrowers in 43 separate industry groups at December 31, 1996. There were
no industry concentrations which exceeded 10 percent of total HLT loans
outstanding at June 30, 1997.
In addition to the amounts shown in the table above, at June 30, 1997,
the Corporation had issued commitment letters which had been accepted,
subject to documentation and certain other conditions, of $1.77 billion
(which were in various stages of syndication) and had additional HLTs in
various stages of discussion and negotiation.
During the first half of 1997, the Corporation originated $2.2 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 per borrower for the
portfolio at June 30, 1997 was less than $13 million. However, at June 30,
1997, the Corporation had total exposure (loans outstanding plus unfunded
commitments) in excess of $50 million to 11 separate highly leveraged
borrowers.
At June 30, 1997, $76 million of the HLT loan portfolio was on a cash
basis. In addition, $4 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 $16 million of HLT loans were
recorded in the first half of 1997. In addition, the Corporation recorded
a net gain of $26.5 million in connection with the sales and/or write-offs
of certain equity investments in highly leveraged companies during the
first six months of 1997.
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
$77 million during the first half of 1997 and that as of June 30, 1997,
approximately $19 million of fees were deferred and will be recognized as
future revenue.
<PAGE> 37
ACCOUNTING DEVELOPMENTS
In February, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128
establishes standards for computing and presenting earnings per share
("EPS"). SFAS No. 128 replaces the presentation of primary EPS with basic
EPS and fully diluted EPS with diluted EPS. Basic EPS excludes dilution
and is calculated by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period.
Diluted EPS is computed similarly to fully diluted EPS.
SFAS No. 128 is effective for financial statement periods ending after
December 15, 1997, and requires restatement of all prior period EPS data.
The adoption of SFAS No. 128 is not expected to have a material impact on
the Corporation's fully diluted EPS computations.
MERGER
On April 6, 1997, the Corporation, its wholly-owned subsidiary Voyager
Merger Corporation and Alex. Brown Incorporated ("Alex. Brown") entered
into a definitive agreement to merge (the "Merger"). The merger agreement
provides that each Alex. Brown common share will be exchanged for 0.83
shares of the Corporation's common stock on a tax free basis. In
connection with the Merger, it is estimated that a nonrecurring merger and
related restructuring charge up to $80 million (pre-tax) will be recognized
upon consummation of the Merger. These charges are expected to result from
severance expenses to be incurred in connection with anticipated staff
reductions, other merger-related expenses, such as costs to eliminate
redundant operations of the Corporation and Alex.
Brown, and direct costs of the Merger.
On August 13, 1997, the shareholders of the common stock of the
Corporation approved the issuance of the shares of common stock of the
Corporation called for by the Merger and the shareholders
of the common stock of Alex. Brown approved the Merger
at their respective special shareholder meetings.
The Board of Governors of the Federal Reserve System has approved the
applications for the Merger. The Merger is expected to close on September
1, 1997 and will be accounted for as a pooling-of-interests. The effects
of the Merger have not been reflected in the financial statements herein.
Unaudited Pro Forma Combined Financial Statements as of June 30, 1997
and for the six months ended June 30, 1997 and 1996 are contained in
Exhibit 99 to this document.
<PAGE> 38
PART II. OTHER INFORMATION
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 security holders
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
(99) Additional Exhibits
(b) Reports on Form 8-K - Bankers Trust New York Corporation filed
five reports on Form 8-K during the quarter ended June 30, 1997.
- The report dated April 7, 1997, filed the Corporation's Press
Release dated April 6, 1997, which announced that Bankers Trust
New York Corporation and Alex. Brown Incorporated have signed a
definitive agreement to merge. The report also filed additional
financial information relating to the merger.
- The report dated April 17, 1997, filed the Corporation's Press
Release dated April 17, 1997, which announced earnings for the
quarter ended March 30, 1997.
- The report dated May 1, 1997, filed the Corporation's opinion
of counsel delivered in connection with the issuance of the
Corporation's 7.75% Subordinated Notes due May 1, 2012.
- The report dated June 13, 1997, filed the Corporation's Press
Release dated June 12, 1997, which announced that it had entered
into a strategic alliance with two firms who will each purchase
a 25% stake in a Bankers Trust holding company whose principal
asset is Consorcio Nacional de Seguros S.A. In addition, the
report also indicated that due to a steep decline in the Thai
stock market, it would recognize a decline in the value of its
unconsolidated investment in a Thai affiliate.
<PAGE> 39
PART II. OTHER INFORMATION (continued)
- The Current Report on Form 8-K/A dated March 6 and filed June
18, 1997, provided an update of information previously reported
on Form 8-K dated March 6, 1997, and filed March 14, 1997 which
announced that the Corporation had appointed KPMG Peat Marwick
LLP as its independent auditors for the fiscal year ending
December 31, 1997, and chose not to renew the engagement of
Ernst & Young LLP, who served as the Corporation's auditors for
the fiscal year ended December 31, 1996
<PAGE> 40
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 August 14, 1997.
BANKERS TRUST NEW YORK CORPORATION
BY: RICHARD H. DANIEL
Richard H. Daniel
Vice Chairman and Controller
(Principal Financial Officer)
BANKERS TRUST NEW YORK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
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 agreement with Mary Cirillo
(2) Partnership for One-hundred Plan II
(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
(99) (i) Additional Exhibits
(1) Pro Forma Combined Financial Statements
as of June 30, 1997, for the six months
ended June 30, 1997 and 1996.
[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> 41
<PAGE>
Exhibit 10iii(a) 2
Bankers Trust New York Corporation
Partnership for One-hundred Plan II
Plan Document
I. Purpose of the Plan
The purpose of the Partnership for One hundred Plan II (the
"Plan") is to provide key employees of Bankers Trust New
York Corporation and its subsidiaries (the "Corporation") an
incentive to exert their efforts to increase the price of
Bankers Trust New York Corporation common stock (the
"Stock").
II. Administration of the Plan
The Plan is to be administered by the Human Resources
Committee of the Corporatio's Board of Directors (the
"Committee"). The Committee also shall interpret the
provisions of the Plan.
III. Eligible Employees
Participants in the Plan will include approximately 35
senior executives of the Corporation as selected by the
Committee.
IV. Unit Awards of the Plan
Under the Plan, participants are to receive Unit Awards
whose values, subject to Section VI, will be based on the
value of the Stock at the end of the performance period.
For the purpose of this Section, the value of the Stock is
the average of the mean high and low trading prices of the
Stock, as reported on the New York Stock Exchange Composite
tape for each business day during the three month period
ending December 31, 2000 ("Stock Value").
Each Unit is first valued at $6.53 when Stock Value is $92
and increases by $6.53 for each $1 increase in Stock Value
over $92 until units reach their maximum value of $58.75
each, at a Stock Value of $100. Fractional share prices
will be valued proportionately.
V. Vesting and Distribution Provisions
Subject to Sections VIII and IX, Units vest one-third per
year each on December 31st of 1998, 1999 and 2000. Subject
to Sections VI, VIII and X, the cash value of Unit Awards
will be distributed on or about December 31, 2000.
<PAGE>
VI. Special Incentive
In the event the Stock trades at $100 on three consecutive
days or five days in total, as reported on the New York
Stock Exchange Composite tape during the period January 1,
1998 and December 31, 2000, inclusive, the value of each
unit will be fixed ("Lock-In") at $58.75. In addition,
within five days following Lock-In, participants will
receive the value of their Unit Awards in cash to the extent
vested. The balance of each participants Unit Award will
be distributed proportionately as it subsequently vests.
VII. Transferability Restrictions
Unit Awards may not be assigned, pledged or otherwise
transferred.
VIII. Change of Control
In the event of a Change of Control (as defined in the
Corporation's 1997 Stock Option and Stock Award Plan), the
value of all Unit Awards, will be immediately paid to the
respective participants. For the purpose of this Section,
the value of Unit Awards will be based on the average of the
reported New York Stock Exchange Composite tape's high and
low trading prices of the Stock on the date the Change of
Control occurs.
IX. Termination Provisions
a) Retirement, Death and Total Disability - Units vest in
full on the off-payroll date. Unless otherwise
determined by the Committee, with respect to Executive
Officers of the Corporation or otherwise determined by
the CEO, with respect to non-Executive Officers, Unit
Awards will be valued and distributed according to
Sections IV and VI.
b) Resignation - Unvested Units are forfeited upon the
off-payroll date. The value of the vested Units will
correspond to the lower of the Stock Value on the
resignation date or the end of the five year period and
will be distributed on or about December 31, 2000. For
the purpose of determining the Stock Value under this
Subsection, the off-payroll date is substituted for
December 31, 2000.
c) Termination for Disciplinary Reasons ("Cause") as
defined in the Corporation's Policies section of the
Employee Handbook - All Units, vested and unvested, are
forfeited.
<PAGE>
d) Other Terminations - Units will be valued based on Stock
Value and paid out on the off-payroll date. For the
purpose of determining the Stock Value under this
Subsection, the off-payroll date is substituted for
December 31, 2000.
X. Employee Taxes
All distributions from the Plan are subject to all tax
withholding as required.
XI. Plan Amendments, Termination
The Committee reserves the right to rescind the Plan and
replace it with a different plan that is determined by the
Committee to be of equal value (not necessarily based on
stock price) if deemed by the Committee to be in the best
interests of the Corporation.
XII. Effective Date
The plan is to be effective upon approval by the Committee.
<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>
Six MonthsEnded
Year Ended December 31, June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effects
of accounting
changes $ 906 $1,550 $ 869 $ 311 $ 872 $ 498
2. Add: Fixed charges
excluding
capitalized
interest
(Line 10) 3,099 3,148 3,884 5,095 5,426 2,732
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 40 30 45 28 30_____(54)
4. Earnings including
interest on deposits 3,965 4,668 4,708 5,378 6,268 3,284
5. Less: Interest on
deposits 1,119 1,013 965 1,360 1,355 ___855
6. Earnings excluding
interest on deposits $2,846 $3,655 $3,743 $4,018 $4,913 $2,429
Fixed Charges:
7. Interest Expense $3,072 $3,122 $3,858 $5,069 $5,400 $2,716
8. Estimated interest
component of net
rental expense 27 26 26 26 26 14
9. Amortization of debt
issuance expense - - - - - ____2
10. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,099 3,148 3,884 5,095 5,426 2,732
11. Add: Capitalized
interest - - - - - _____-
12. Total fixed charges 3,099 3,148 3,884 5,095 5,426 2,732
13. Less: Interest on
deposits
(Line 5) 1,119 1,013 965 1,360 1,355 ___855
14. Fixed charges excluding
interest on deposits $1,980 $2,135 $2,919 $3,735 $4,071 $ 1,877
Consolidated Ratios of Earnings
to Fixed Charges:
Including interest on
deposits
(Line 4/Line 12) 1.28 1.48 1.21 1.06 1.16 1.20
Excluding interest on
deposits
(Line 6/Line 14) 1.44 1.71 1.28 1.08 1.21 1.29
</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>
Six Months
Ended
Year Ended December 31, June 30,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effect
of accounting
changes $ 906 $1,550 $ 869 $ 311 $ 872 $ 498
2. Add: Fixed charges
excluding
capitalized
interest
(Line 13) 3,099 3,148 3,884 5,095 5,426 2,732
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 40 30 45 28 30 ___(54)
4. Earnings including
interest on deposits 3,965 4,668 4,708 5,378 6,268 3,284
5. Less: Interest on
deposits 1,119 1,013 965 1,360 1,355 ___855
6. Earnings excluding
interest on deposits$2,846 $3,655 $3,743 $4,018 $4,913 $2,429
Preferred Stock Dividend Requirements:
7. Preferred stock dividend
requirements $ 30 $ 23 $ 28 $ 51 $ 51 $25
8. Ratio of income from
continuing operations
before income taxes to
income from continuing
operations after income
taxes 142% 145% 141% 145% 142% 142%
9. Preferred stock dividend
requirements on a pretax
basis $ 43 $ 33 $ 39 $ 74 $ 72 $ 36
Fixed Charges:
10. Interest Expense $3,072 $3,122 $3,858 $5,069 $5,400 $2,716
11. Estimated interest
component of net
rental expense 27 26 26 26 26 14
12. Amortization of debt
issuance expense - - - - - 2
13. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,099 3,148 3,884 5,095 5,426 2,732
14. Add: Capitalized
interest - - - - - -
15. Total fixed charges 3,099 3,148 3,884 5,095 5,426 2,732
16. Add: Preferred stock
dividend require-
ments - pretax
(Line 9) 43 33 39 74 72 36
<PAGE>
17. Total combined fixed
charges and preferred
stock dividend require-
ments on a pretax
basis 3,142 3,181 3,923 5,169 5,498 2,768
18. Less: Interest on
deposits
(Line 5) 1,119 1,013 965 1,360 1,355 855
19. Combined fixed charges
and preferred stock
dividend requirements
on a pretax basis
excluding interest on
deposits $2,023 $2,168 $2,958 $3,809 $4,143 $1,913
Consolidated Ratios of Earnings
to Combined Fixed Charges
and Preferred Stock
Dividend Requirements:
Including interest on
deposits
(Line 4/Line 17) 1.26 1.47 1.20 1.04 1.14 1.19
Excluding interest on
deposits
(Line 6/Line 19) 1.41 1.69 1.27 1.05 1.19 1.27
</TABLE>
<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 JUNE
30, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,730
<INT-BEARING-DEPOSITS> 2,334
<FED-FUNDS-SOLD> 1,305
<TRADING-ASSETS> 49,082
<INVESTMENTS-HELD-FOR-SALE> 7,478
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 19,706
<ALLOWANCE> 767
<TOTAL-ASSETS> 128,948
<DEPOSITS> 38,430
<SHORT-TERM> 41,948<F1>
<LIABILITIES-OTHER> 8,589<F2>
<LONG-TERM> 12,677
0
703
<COMMON> 84
<OTHER-SE> 4,439
<TOTAL-LIABILITIES-AND-EQUITY> 128,948
<INTEREST-LOAN> 614
<INTEREST-INVEST> 222
<INTEREST-OTHER> 1,258<F3>
<INTEREST-TOTAL> 3,339
<INTEREST-DEPOSIT> 855
<INTEREST-EXPENSE> 2,716
<INTEREST-INCOME-NET> 623
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 82
<EXPENSE-OTHER> 1,963
<INCOME-PRETAX> 498
<INCOME-PRE-EXTRAORDINARY> 498
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 350
<EPS-PRIMARY> 3.95
<EPS-DILUTED> 3.93
<YIELD-ACTUAL> 1.31
<LOANS-NON> 305
<LOANS-PAST> 0
<LOANS-TROUBLED> 37
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 973
<CHARGE-OFFS> 36
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 973<F4>
<ALLOWANCE-DOMESTIC> 134
<ALLOWANCE-FOREIGN> 208
<ALLOWANCE-UNALLOCATED> 425
<FN>
<F1>Short-term borrowings include the following:
Securities sold under repurchase agreements 22,550
Other short-term borrowings 19,398
Total 41,948
<F2>Other liabilities inclue the following:
Accounts payable and accrued expenses 5,088
Other liabilities 3,501
Total 8,589
<F3>Other interest income includes the following:
Interest-bearing deposits with banks 147
Federal funds sold 110
Securities purchased under resale agreement 644
Securities borrowed 357
Total 1,258
<F4>The Corporation has allocated its total allowance for credit losses as
follows: 767 as a reduction of loans and 206 as other liabilities related to
all other credit-related items.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
BANKERS TRUST NEW YORK CORPORATION AND ALEX. BROWN INCORPORATED
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following Unaudited Pro Forma Combined Statements of Income for
the six months ended June 30, 1997 and 1996 and the Unaudited Pro Forma
Combined Balance Sheet as of June 30, 1997 give effect to the pending
merger (the "Merger") of Alex. Brown Incorporated ("Alex. Brown") into
Bankers Trust New York Corporation ("BTNY") accounted for as a pooling of
interests as if the Merger had occurred on the dates indicated. The pro
forma information is based on the historical consolidated financial
statements of BTNY and Alex. Brown and their subsidiaries after giving
effect to the pro forma adjustments described in the Notes to the Pro Forma
Combined Financial Statements.
This information should be read in conjunction with the historical
consolidated financial statements of Alex. Brown and the historical
consolidated financial statements of BTNY. The effect of up to $80 million
(pre-tax) of merger and related restructuring charges and other associated
costs expected to be taken in connection with the Merger has not been
reflected in the pro forma combined financial statements as efforts by BTNY
and Alex. Brown to refine the actual amount of such charges are ongoing
(see Notes to Unaudited Pro Forma Combined Financial Statements). The pro
forma financial data do not give effect to the anticipated cost savings and
revenue enhancement opportunities that could result from the Merger. The
pro forma financial data are not necessarily indicative of the results that
actually would have occurred had the Merger been consummated on the dates
indicated or that may be obtained in the future.
<PAGE>
BANKERS TRUST NEW YORK CORPORATION AND ALEX. BROWN INCORPORATED
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,1997
BTNY Alex. Brown Pro Forma Pro Forma
Historical Historical Adjustments Combined
(a) (a, d)
<S> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $3,339 $ 72 $- $3,411
Interest expense 2,716 24 2,740
NET INTEREST REVENUE 623 48 671
Provision for credit losses - - -
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 623 48 671
NONINTEREST REVENUE
Trading 561 65 626
Fiduciary and funds management 442 53 495
Corporate finance fees 314 170 484
Other fees and commissions 170 113 283
Net revenue from equity investment
transactions 47 9 56
Securities available for sale gains 82 - 82
Insurance premiums 127 - 127
Other 95 12 107
Total noninterest revenue 1,838 422 2,260
NONINTEREST EXPENSES
Salaries and commissions 469 139 608
Incentive compensation and employee
benefits 699 120 819
Agency and other professional
service fees 186 6 192
Communication and data services 90 13 103
Occupancy, net 75 12 87
Furniture and equipment 99 9 108
Travel and entertainment 56 10 66
Provision for policyholder benefits 140 - 140
Other 149 57 206
Total noninterest expenses 1,963 366 2,329
Income before income taxes 498 104 602
Income taxes 148 41 189
NET INCOME $ 350 $ 63 $- $ 413
NET INCOME APPLICABLE TO
COMMON STOCK $ 325 $ 63 $- $ 388
EARNINGS PER COMMON SHARE:
PRIMARY $3.95 $2.46 $3.75(c)
FULLY DILUTED $3.93 $2.19 $3.64(c)
Cash dividends declared per
common share $2.00 $.340 $2.00(c)
Average common and common equivalent
shares outstanding - primary 82.181 25.523 103.365(c)
Average common and common equivalent shares
outstanding assuming full dilution 82.647 29.396 107.046(c)
<FN>
See Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
BANKERS TRUST NEW YORK CORPORATION AND ALEX. BROWN INCORPORATED
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,1996
BTNY Alex. Brown Pro Forma Pro Forma
Historical Historical Adjustments Combined
(a) (a, d)
<S> <C> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $3,049 $ 69 $- $3,118
Interest expense 2,593 25 2,618
NET INTEREST REVENUE 456 44 500
Provision for credit losses 5 - 5
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 451 44 495
NONINTEREST REVENUE
Trading 393 102 495
Fiduciary and funds management 381 39 420
Corporate finance fees 222 236 458
Other fees and commissions 169 105 274
Net revenue from equity investment
transactions 93 10 103
Securities available for sale gains 40 - 40
Insurance premiums 125 - 125
Other 125 20 145
Total noninterest revenue 1,548 512 2,060
NONINTEREST EXPENSES
Salaries and commissions 403 144 547
Incentive compensation and employee
benefits 462 163 625
Agency and other professional
service fees 158 9 167
Communication and data services 93 10 103
Occupancy, net 73 10 83
Furniture and equipment 82 8 90
Travel and entertainment 42 8 50
Provision for policyholder benefits 150 - 150
Other 123 53 176
Total noninterest expenses 1,586 405 1,991
Income before income taxes 413 151 564
Income taxes 124 60 184
NET INCOME $ 289 $ 91 $- $ 380
NET INCOME APPLICABLE TO
COMMON STOCK $ 260 $ 91 $- $ 351
EARNINGS PER COMMON SHARE:
PRIMARY $3.19 $3.69 $3.44(c)
FULLY DILUTED $3.17 $3.25 $3.33(c)
Cash dividends declared
per common share $2.00 $.300 $2.00(c)
Average common and common equivalent
shares outstanding - primary 81.398 24.549 101.774(c)
Average common and common equivalent shares
outstanding assuming
full dilution 81.956 28.285 105.433(c)
<FN>
See Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
BANKERS TRUST NEW YORK CORPORATION AND ALEX. BROWN INCORPORATED
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
At June 30, 1997
BTNY Alex. Brown Pro Forma Pro Forma
Historical Historical Adjustments Combined
(a) (a, d)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,730 $ 26 $ - $ 1,756
Interest-bearing deposits in banks 2,334 - 2,334
Federal funds sold 1,305 - 1,305
Sec. purch. under resale agreements25,754 4 25,758
Securities borrowed 12,794 491 13,285
Trading assets:
Government securities 12,270 68 12,338
Corporate debt securities 9,642 2 9,644
Equity securities 8,018 48 8,066
Swaps, options & other derivatives10,824 - 10,824
Other trading assets 8,328 1 8,329
Total trading assets 49,082 119 49,201
Securities available for sale 7,478 - 7,478
Loans, net of allowance for credit
losses of $767 18,939 61 19,000
Customer receivables 127 1,503 1,630
Accounts receivable &
accrued interest 3,304 144 3,448
Other assets 6,101 267 6,368
Total $128,948 $2,615 $ - $131,563
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 3,046 $ - $ - $ 3,046
Foreign offices 1,439 - 1,439
Interest-bearing deposits
Domestic offices 15,618 - 15,618
Foreign offices 18,327 - 18,327
Total deposits 38,430 - 38,430
Trading liabilities:
Securities sold, not yet purchased
Government securities 4,949 9 4,958
Equity securities 4,973 29 5,002
Other trading liabilities 401 - 401
Swaps, options & other derivatives11,064 - 11,064
Total trading liabilities 21,387 38 21,425
Securities loaned and securities sold
under repurchase agreements 22,550 423 22,973
Other short-term borrowings 19,398 129 19,527
Accounts payable and
accrued expenses 5,085 351 5,436
Other liabilities, including allowance
for credit losses of $206 4,195 734 4,929
Long-term debt not included in
risk-based capital 8,268 200 8,468
Long-term debt included in
risk-based capital 2,939 - 2,939
Mandatorily redeemable
capital securities
of subsidiary trusts holding
solely junior
subordinated deferrable
interest debentures
included in risk-based capital 1,470 - 1,470
Total liabilities 123,722 1,875 125,597
<PAGE>
STOCKHOLDERS' EQUITY
Preferred stock 703 - 703
Common stock 84 3 18(c) 105
Capital surplus 1,352 157 (18)(c) 1,491
Retained earnings 3,588 580 4,168
Common stock in treasury, at cost (513) - (513)
Other stockholders' equity 12 - 12
Total stockholders' equity 5,226 740 - 5,966
Total $128,948 $2,615 $ - $131,563
<FN>
See Notes to Unaudited Pro Forma Combined Financial Statements.
</TABLE>
<PAGE>
BANKERS TRUST NEW YORK CORPORATION AND ALEX. BROWN INCORPORATED
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Alex. Brown's and BTNY's historical financial statements have been
reclassified to conform to the current presentation.
(b) In connection with the Merger, it is estimated that nonrecurring
merger and restructuring charges will be recognized upon consummation
of the Merger. These charges are expected to result from severance
expenses to be incurred in connection with anticipated staff reductions,
other merger-related expenses, such as costs to eliminate redundant back
office and other operations of BTNY and Alex. Brown, and direct costs of
the Merger.
The effect of these proposed nonrecurring charges, as well as other
associated costs expected to be taken in connection with the Merger, has
not been reflected in the pro forma combined financial statements, as
efforts by BTNY and Alex. Brown to refine the actual amount of such
charges are ongoing. The effect of these nonrecurring charges and other
associated costs is not expected to be material in relation to the
combined stockholders' equity of BTNY and Alex. Brown.
The pro forma combined financial statements do not reflect expected
cost savings, nor do they reflect any estimates of revenue enhancements
that could be realized as a result of the Merger.
(c) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis and the related pro forma adjustments to
the common stock and capital surplus accounts at June 30, 1997 reflect
an exchange of approximately 21 million shares of BTNY Common
Stock,(using the Exchange Ratio of .83) for approximately 25 million
outstanding shares of Alex. Brown Common Stock, at June 30, 1997.
Pro forma combined cash dividends declared per common share represents
BTNY's historical amounts.
For the earnings per common share calculations, the pro forma combined
average common and common equivalent shares outstanding (primary and
assuming full dilution) reflects the exchange of BTNY Common Stock (using
the Exchange Ratio of .83) for the outstanding shares of Alex. Brown
Common Stock.
(d) Transactions between BTNY and Alex. Brown are not material in relation
to the pro forma combined financial statements and, therefore,
intercompany balances have not been eliminated from the pro forma
combined amounts.
<PAGE>
Exhibit 10iii(a) 1
May 30, 1997
By Messenger
Ms. Mary Cirillo
The Dakota
One West 72nd Street
New York, NY 10023
Dear Mary:
It gives me great pleasure to extend to you the following
offer of employment.
You will be responsible for the firm's Client Processing
Services and will be a member of the Management Committee. For
the term of this agreement, you will directly report to the Chief
Executive Officer of Bankers Trust New York Corporation ("the
Parent") and Bankers Trust Company (the "Company"). Your
services shall be principally performed, and your office shall be
located, in New York City.
Subject to approval by the Board, your corporate title for
the Parent will be Executive Vice President, and Senior Managing
Director for the Company. Your functional title for both the
Parent and Company will be Head of Client Processing Services.
Your annual base salary will be US$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 the Parent's practice and may be increased from
time to time at the sole discretion of the compensation
committee.
On your start date, on or about June 15, 1997, but not later
than July 1, 1997, hereinafter the "Commencement Date", you will
receive:
<PAGE>
- 50,000 units from the Partnership Equity Plan for 1997,
- 50,000-share stock option award, and,
- 10,000 shares of three-year restricted stock.
- A US$700,000 contribution to your ADCAP (retirement)
account.
The above restricted stock and stock options, as well as the
options granted to you in respect of services for 1998 as
described below, are to be awarded under the terms and conditions
of the Parent"s Stock Option and Stock Award Plan. The exercise
price of stock options will be based on the average of the high
and low trading prices of the Parent"s common stock on the
respective grant dates. In addition, stock options have a term
of 10 years from the date of grant and vest on the first
anniversary of the date of each such grant. Your ADCAP account
is subject to the terms and conditions of the ADCAP Plan.
For your services in 1997, you will also receive a
guaranteed minimum bonus of $550,000 (less mandatory deductions).
Payment of the net after-tax cash amount will be paid on the date
that the firm normally pays bonus awards to senior management
(usually, in the following January). In addition, your ADCAP
account will be credited with $65,000 at year end.
For your services in 1998, you will receive the following in
addition to your base salary:
- A guaranteed minimum bonus of US$550,000 (less mandatory
deductions) on the day that performances bonuses are normally
paid to senior management.
- A 50,000-share stock option award to be granted on the
normal award date.
- 50,000 units in the Partnership Equity Plan for 1998.
- A US$65,000 contribution to your ADCAP account.
Bonus awards to officials of the firm are payable in cash
and equity of the firm, under the Equity Participation Plan.
Actual proportions will be determined at the end of the year and
will be consistent with other officers at Bankers Trust at your
level.
<PAGE>
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 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 will include
completing the Immigration and Naturalization Service's Form I-
9). You will also have to read and sign the 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,
a 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
by calling Peter Gurney of Human Resources at (212) 250-2219.
Please complete and bring the forms in the envelope marked
"Medical Evaluation" to you appointment. You will be eligible to
start employment once you have received notification of the
<PAGE>
successful completion of you 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 Bankers Trust, Fleet Corporation or
Smith Barney, Inc. Additional information pertaining to this
policy can be found in the Bankers Trust employee booklet
entitled, "Confidential Information, Insider Trading and Related
Matters."
Pursuant to new SEC rules pertaining to equity-based
compensation plans, all equity awards included in this letter are
subject to approval of the Human Resources Committee of the
Parent.
In the event that before the second anniversary of the
Commencement date, the term of this agreement, or, in the case of
restricted stock, before the third anniversary of the
Commencement date, your employment is terminated by the Parent
and Company other than for Cause (as defined in the Parent"s
Separation Policy), the following will occur:
- All sums due you from your annual base salary and guaranteed
bonuses as provided in this agreement, to the extent not
previously paid will be immediately paid out to you as a lump-
sum, net of applicable withholding taxes;
- Your restricted stock grant will be immediately vested and
distributed to you;
- All PEP units provided by this agreement, to the extent not
yet converted into book-entry shares of stock under the terms of
the plan, will have a guaranteed cash-value of $21.00 per unit
and be immediately distributed to you; and,
- All stock options as provided in this agreement which had
been granted to you prior to the off-payroll date, which have not
vested on the off-payroll date, will vest and become immediately
exercisable.
<PAGE>
Following the term of this agreement, you will be subject to
the provisions of the Parent's standard separation policy.
Upon a Change of Control, all guaranteed bonuses, restricted
shares, PEP shares/units, stock options, and POP units will vest
and be distributed in accordance with the provisions of the
Parent's Change of Control Policy.
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/ Mark Bieler
Mark Bieler
Agreed to:
/s/ Mary Cirillo
Mary Cirillo
____June 3, 1997
Date
