<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 April 30, 1997: Common Stock, $1 par value,
77,607,691 shares.
<PAGE> 1
BANKERS TRUST NEW YORK CORPORATION
March 31, 1997 FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended March 31, 1997 and 1996 2
Consolidated Balance Sheet
At March 31, 1997 and December 31, 1996 3
Consolidated Statement of Changes in Stockholders'
Equity
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1997 and 1996 5
Consolidated Schedule of Net Interest Revenue
Three Months Ended March 31, 1997 and 1996 6
In the opinion of management, all material adjustments
necessary for a fair presentation of the financial position
and results of operations for the interim periods presented
have been made. All such adjustments were of a normal
recurring nature. The results of operations for the three
months ended March 31, 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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 36
Item 6. Exhibits and Reports on Form 8-K 37
SIGNATURE 38
<PAGE> 2
PART I. FINANCIAL INFORMATION
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Increase
THREE MONTHS ENDED MARCH 31, 1997 1996 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,645 $1,590 $ 55
Interest expense 1,337 1,377 (40)
Net interest revenue 308 213 95
Provision for credit losses - 5 (5)
Net interest revenue after provision
for credit losses 308 208 100
NONINTEREST REVENUE
Trading 279 247 32
Fiduciary and funds management 208 183 25
Corporate finance fees 140 86 54
Other fees and commissions 79 87 (8)
Net revenue from equity investment transactions 44 21 23
Securities available for sale gains 14 15 (1)
Insurance premiums 63 62 1
Other 41 49 (8)
Total noninterest revenue 868 750 118
NONINTEREST EXPENSES
Salaries 237 201 36
Incentive compensation and employee benefits 322 227 95
Agency and other professional service fees 87 60 27
Communication and data services 45 46 (1)
Occupancy, net 37 37 -
Furniture and equipment 50 41 9
Travel and entertainment 25 18 7
Provision for policyholder benefits 68 72 (4)
Other 64 59 5
Total noninterest expenses 935 761 174
Income before income taxes 241 197 44
Income taxes 72 59 13
NET INCOME $ 169 $ 138 $ 31
NET INCOME APPLICABLE TO COMMON STOCK $ 156 $ 123 $ 33
Cash dividends declared per common share $1.00 $1.00 $-
EARNINGS PER COMMON SHARE:
PRIMARY $1.89 $1.52 $.37
FULLY DILUTED $1.89 $1.51 $.38
</TABLE>
<PAGE> 3
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions, except par value)
<TABLE>
<CAPTION>
March 31,December 31,
1997* 1996
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,607 $ 1,543
Interest-bearing deposits with banks 2,581 2,210
Federal funds sold 1,195 1,599
Securities purchased under resale
agreements 22,273 17,986
Securities borrowed 13,963 16,676
Trading assets:
Government securities 11,686 16,745
Corporate debt securities 8,460 8,005
Equity securities 7,021 6,048
Swaps, options and other derivatives 11,222 11,410
Other trading assets 9,072 6,711
Total trading assets 47,461 48,919
Securities available for sale 7,986 7,920
Loans, net of allowance for credit losses
of $758 at March 31, 1997 and $773 at
December 31, 1996 17,221 15,053
Accounts receivable and accrued interest 3,227 3,003
Other assets 5,464 5,326
Total $122,978 $120,235
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 2,803 $ 2,600
Foreign offices 1,052 1,013
Interest-bearing deposits
Domestic offices 12,365 9,928
Foreign offices 19,369 16,774
Total deposits 35,589 30,315
Trading liabilities:
Securities sold, not yet purchased
Government securities 3,943 7,652
Equity securities 4,935 4,151
Other trading liabilities 431 325
Swaps, options and other derivatives 11,177 11,585
Total trading liabilities 20,486 23,713
Securities sold under repurchase agreements 21,995 23,000
Other short-term borrowings 20,224 19,395
Accounts payable and accrued expenses 3,836 3,656
Other liabilities, including allowance for
credit losses of $200 at both March 31, 1997
and December 31, 1996 3,179 2,833
Long-term debt not included in risk-based capital 7,955 8,533
Long-term debt included in risk-based capital 3,164 2,576
Mandatorily redeemable capital securities of
subsidiary trusts holding solely junior
subordinated deferrable interest debentures
included in risk-based capital 1,469 730
Total liabilities 117,897 114,751
PREFERRED STOCK OF SUBSIDIARY - 250
STOCKHOLDERS' EQUITY
Preferred stock 704 810
Common stock, $1 par value
Authorized, 300,000,000 shares
Issued, 83,678,973 shares 84 84
Capital surplus 1,349 1,339
Retained earnings 3,512 3,462
Common stock in treasury, at cost:
1997, 5,965,427 shares;
1996, 4,435,226 shares (527) (372)
Other stockholders' equity (41) (89)
Total stockholders' equity 5,081 5,234
Total $122,978 $120,235
<FN>
* Unaudited
</TABLE>
<PAGE> 4
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997 1996
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 $ 810 $ 865
Preferred stock issued - 1
Preferred stock redeemed (100) -
Preferred stock repurchased (6) -
Balance, March 31 704 866
COMMON STOCK
Balance, January 1 and March 31 84 84
CAPITAL SURPLUS
Balance, January 1 1,339 1,302
Common stock distributed under employee
benefit plans 10 2
Balance, March 31 1,349 1,304
RETAINED EARNINGS
Balance, January 1 3,462 3,316
Net income 169 138
Cash dividends declared
Preferred stock (14) (15)
Common stock (78) (79)
Treasury stock distributed under employee
benefit plans (27) (9)
Balance, March 31 3,512 3,351
COMMON STOCK IN TREASURY, AT COST
Balance, January 1 (372) (336)
Purchases of stock (244) (20)
Restricted stock granted, net (14) 23
Treasury stock distributed under employee
benefit plans 103 22
Balance, March 31 (527) (311)
COMMON STOCK ISSUABLE - STOCK AWARDS
Balance, January 1 526 233
Deferred stock awards granted, net 66 66
Deferred stock distributed (14) (1)
Balance, March 31 578 298
DEFERRED COMPENSATION - STOCK AWARDS
Balance, January 1 (308) (151)
Deferred stock awards granted, net (66) (66)
Restricted stock granted, net 14 (22)
Amortization of deferred compensation, net 63 41
Balance, March 31 (297) (198)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1 (364) (348)
Translation adjustments 11 (17)
Income taxes applicable to translation adjustments (8) 16
Balance, March 31 (361) (349)
SECURITIES VALUATION ALLOWANCE
Balance, January 1 57 19
Change in unrealized net gains, after applicable
income taxes and minority interest (18) (9)
Balance, March 31 39 10
TOTAL STOCKHOLDERS' EQUITY, MARCH 31 $5,081 $5,055
</TABLE>
<PAGE> 5
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 169 $ 138
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses - 5
Provision for policyholder benefits 68 72
Deferred income taxes (39) 26
Depreciation and other amortization
and accretion 61 61
Other, net 7 (14)
Earnings adjusted for noncash charges and credits 266 288
Net change in:
Trading assets 2,051 2,308
Trading liabilities (3,053) 700
Receivables and payables from securities
transactions 297 29
Other operating assets and liabilities, net 337 639
Securities available for sale gains (14) (15)
Net cash (used in) provided by operating activities (116) 3,949
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits with banks (360) 624
Federal funds sold 404 (184)
Securities purchased under resale agreements (4,287) (2,337)
Securities borrowed 2,713 (4,439)
Loans (2,359) (348)
Securities available for sale:
Purchases (1,786) (1,568)
Maturities and other redemptions 593 892
Sales 73 135
Acquisitions of premises and equipment (60) (54)
Other, net (2) 11
Net cash used in investing activities (5,071) (7,268)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in:
Deposits 5,070 (3,250)
Securities sold under repurchase agreements (997) 8,025
Other short-term borrowings 918 (3,393)
Issuances of long-term debt* 2,500 1,050
Repayments of long-term debt (1,600) (187)
Redemptions and repurchases of preferred stock (106) -
Redemptions of preferred stock of subsidiary (250) -
Purchases of treasury stock (244) (20)
Cash dividends paid (93) (94)
Other, net 61 15
Net cash provided by financing activities 5,259 2,146
Net effect of exchange rate changes on cash (8) 17
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 64 (1,156)
Cash and due from banks, beginning of period 1,543 2,337
Cash and due from banks, end of period $ 1,607 $ 1,181
Interest paid $1,159 $1,433
Income taxes (refunded) paid, net $(3) $81
Noncash investing activities $46 $30
Noncash financing activities:
Conversion of debt to preferred stock $- $1
<FN>
* Includes $739 million 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> 6
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Increase
1997 1996 (Decrease)
<S> <C> <C> <C>
INTEREST REVENUE
Interest-bearing deposits with banks $ 65 $ 43 $ 22
Federal funds sold 49 28 21
Securities purchased under resale agreements 330 194 136
Securities borrowed 182 225 (43)
Trading assets 598 772 (174)
Securities available for sale
Taxable 106 90 16
Exempt from federal income taxes 14 7 7
Loans 301 231 70
Total interest revenue 1,645 1,590 55
INTEREST EXPENSE
Interest-bearing deposits
Domestic offices 146 88 58
Foreign offices 250 247 3
Trading liabilities 151 326 (175)
Securities sold under repurchase agreements 333 308 25
Other short-term borrowings 288 271 17
Long-term debt 145 137 8
Mandatorily redeemable capital securities of
subsidiary trusts holding solely junior
subordinated deferrable interest debentures
included in risk-based capital 24 - 24
Total interest expense 1,337 1,377 (40)
NET INTEREST REVENUE $ 308 $ 213 $ 95
</TABLE>
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Bankers Trust New York Corporation (the "Parent Company") and
subsidiaries (collectively, the "Corporation", or the "Firm") earned $169
million for the quarter ended March 31, 1997, or $1.89 primary earnings per
share. In the first quarter of 1996, the Corporation earned $138 million,
or $1.52 primary 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 restate
this analysis to conform with material changes in the allocation process
and/or significant changes in organizational structure.
<PAGE> 8
ORGANIZATIONAL UNIT RESULTS (continued)
The following tables present the results by Organizational Units:
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended March 31, 1997 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 303 $165 $138 $ 96
Risk Management Services 105 89 16 11
Trading & Sales 134 73 61 43
Investment Management 85 72 13 9
Client Processing Services 196 178 18 13
Australia/New Zealand 129 81 48 34
Asia 40 29 11 8
Latin America 143 110 33 23
Corporate/Other 41 138 (97) (68)
Total $1,176 $935 $241 $169
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended March 31, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $227 $109 $118 $ 82
Risk Management Services 63 69 (6) (4)
Trading & Sales 90 56 34 24
Investment Management 73 69 4 3
Client Processing Services 182 156 26 18
Australia/New Zealand 98 64 34 24
Asia 33 26 7 5
Latin America 136 108 28 20
Corporate/Other 56 104 (48) (34)
Total $958 $761 $197 $138
</TABLE>
Changes in Organizational Structure
To move risk management capabilities closer to clients, responsibility
for the convertible debt business and for management of the metals and
mining commodities book has been transferred from Risk Management Services
to Investment Banking and Australia/New Zealand, respectively.
In addition, the Emerging Europe, Middle East and Africa unit has been
formed, combining people with risk management, trading, and investment
banking expertise. For external reporting purposes this new unit is
included in Risk Management Services. Prior period results have been
restated for the changes in organizational structure except for the
transfer of responsibility for managing the metals and mining commodities
book in Australia/New Zealand which is reflected in 1997 results only.
<PAGE> 9
ORGANIZATIONAL UNIT RESULTS (continued)
The Investment Banking business contributed net income of $96 million
in the first quarter of 1997, up from $82 million a year ago. The increase
from the prior year period reflected higher corporate finance fees and net
revenue from equity transactions.
Risk Management Services recorded net income of $11 million in the
first quarter of 1997, up $15 million from the first quarter of 1996.
Revenues of $105 million were up $42 million from the first quarter of
1996. Compared to the prior year period, revenues from new derivatives
transactions and from the Emerging Europe, Middle East and Africa unit
improved.
Net income from the Trading & Sales business, at $43 million, was up
$19 million from the first quarter of 1996. The current quarter's
improvement was largely due to higher revenues from trading and client-
related business as compared to the prior year period.
The Corporation's Investment Management business, which for reporting
purposes does not include funds management activities in Australia/NZ,
reported net income of $9 million for the current quarter, up $6 million
from the 1996 comparable period due to an increase in assets under
management. At March 31, 1997, assets under management in this
organizational unit were approximately $206 billion, compared to $183
billion at March 31, 1996.
Client Processing Services contributed $13 million of net income in
the first quarter of 1997, down $5 million from the 1996 first quarter.
Revenues of $196 million were up $14 million from the first quarter of
1996. The decline in net income from a year ago reflected higher
operations costs and growth in staff expense.
Net income of the Australia/NZ business was $34 million in the first
quarter of 1997, up $10 million from the first quarter of 1996. The
increase from the prior year period was primarily due to improved revenues
from trading activities and fiduciary and funds management offset in part
by increased salaries and incentive compensation and employee benefits as a
result of higher staff levels. At March 31, 1997, assets under management
in Australia/NZ's investment management business were approximately $27
billion, compared to $23 billion at March 31, 1996.
Asia net income was $8 million in the first quarter of 1997, up $3
million from the first quarter of 1996. The current quarter's increase was
primarily due to very strong results in North Asia. Offsetting the
improved results in North Asia were losses incurred during the first
quarter from the Corporation's investment in Thai Investment and Securities
Co. in Thailand. Thailand is currently experiencing a significant
reduction in its economic growth and the Thai stock market has experienced
a steep decline.
Latin America net income was $23 million in the first quarter of 1997,
up $3 million from the first quarter of 1996. An increase in trading-
related activities contributed to the current quarter's results.
<PAGE> 10
ORGANIZATIONAL UNIT RESULTS (continued)
Corporate/Other net loss was $68 million in the first quarter of 1997,
compared with a net loss of $34 million in the first quarter of 1996. The
current quarter included the effects of increased incentive compensation
and employee benefits, a contribution to the BT Foundation, and consulting
expenses associated with several strategic and infrastructure improvement
projects.
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
March 31,
Increase
1997 1996 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE (in millions)
Book basis $308 $213 $95
Tax equivalent adjustment 7 4 3
Fully taxable basis $315 $217 $98
AVERAGE BALANCES (in millions)
Interest-earning assets $95,732 $85,576 $10,156
Interest-bearing liabilities 91,405 82,912 8,493
Earning assets financed by
noninterest-bearing funds $ 4,327 $ 2,664 $ 1,663
AVERAGE RATES (fully taxable basis)
Yield on interest-earning assets 7.00% 7.49% (.49)%
Cost of interest-bearing liabilities 5.93 6.68 .75
Interest rate spread 1.07 .81 .26
Contribution of noninterest-bearing
funds .26 .21 .05
Net interest margin 1.33% 1.02% .31%
</TABLE>
Net interest revenue for the first quarter of 1997 totaled $308
million, up $95 million, or 45 percent, from the first quarter of 1996.
The $95 million increase in net interest revenue was primarily due to a
$104 million increase in trading-related net interest revenue, which
totaled $134 million for the first quarter of 1997. Nontrading-related net
interest revenue which is considered to be historically a more stable
component of overall net interest revenue, totaled $174 million for the
first quarter of 1997 versus $183 million for the comparable period in
1996.
<PAGE> 11
REVENUE (continued)
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 first quarter of 1997 totaled $413 million, up $136 million from the
first quarter of 1996.
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 March 31, 1997
Interest rate risk $171 $148 $319
Foreign exchange risk 38 - 38
Equity and commodity risk 70 (14) 56
Total $279 $134 $413
Quarter ended March 31, 1996
Interest rate risk $158 $ 52 $210
Foreign exchange risk 17 - 17
Equity and commodity risk 72 (22) 50
Total $247 $ 30 $277
</TABLE>
<PAGE> 12
REVENUE (continued)
Interest Rate Risk - The increase in revenue was due to increased flow
of client trading services, strong results from proprietary trading
activities, and increased revenue from bond trading activities attributable
to increased capital inflows to the market. Also, contributing to the
increase was improved performance from the Firm's trading activities in
Asia and Latin America.
Foreign Exchange Risk - Foreign exchange risk revenue increased from
the first quarter of 1996 principally due to strong performance in the
Firm's activities in Australia including both proprietary and customer
related revenues.
Equity and Commodity Risk - Total trading and trading-related net
interest revenue increased compared to the same period last year primarily
due to strong revenues from precious metals.
Noninterest Revenue (Excluding Trading)
Fiduciary and funds management revenue was $208 million in the first
quarter of 1997, up $25 million, or 14 percent, from the comparable period
last year. All activities within this category contributed to the year-
over-year increase, especially global private banking commissions, funds
management revenue and custodian fees.
Corporate finance fees of $140 million increased $54 million, or 63
percent, from the same period last year, primarily due to higher private
placement fees, merger and acquisition fees and loan syndication fees.
<PAGE> 13
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 first quarter of
1997 compared with $5 million for the prior year's first quarter. Net
charge-offs for the first quarter were $15 million, compared with $10
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:
$758 million as a reduction of loans, and $200 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.
The provision for credit losses and the other changes in the allowance
for credit losses are shown below (in millions).
<TABLE>
<CAPTION>
Quarter Ended
March 31,
Allowance for credit losses 1997 1996
<S> <C> <C>
Balance, beginning of period $973 $992
Net charge-offs
Charge-offs 33 28
Recoveries 18 18
Total net charge-offs(1) 15 10
Provision for credit losses - 5
Balance, end of period(2) $958 $987
(1) Components of Net Charge-offs:
Secured by real estate $(1) $ 1
Real estate related - 4
Highly leveraged 16 20
Other - (12)
Refinancing country - (3)
Total $15 $ 10
(2) Allocation:
Loans $758
Other Liabilities 200
Balance, end of period $958
</TABLE>
<PAGE> 14
PROVISION AND ALLOWANCE FOR CREDIT LOSSES (continued)
The allowance for credit losses that has been allocated to loans, was
$758 million at March 31, 1997 compared to $773 million at December 31,
1996. The allowance was equal to 228 percent and 171 percent of total cash
basis loans at March 31, 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 $369 million and $489 million at March
31, 1997 and December 31, 1996, respectively. Included in these amounts
were $152 million and $227 million of loans which required a valuation
allowance of $30 million and $57 million at those same dates, respectively.
EXPENSES
Total noninterest expenses of $935 million increased by $174 million,
or 23 percent, from the first quarter of 1996. Salaries expense increased
$36 million, or 18 percent, principally due to an 8 percent increase in the
average number of employees and to merit increases. Incentive compensation
and employee benefits, the largest component of noninterest expenses,
increased $95 million due to higher earnings, greater emphasis on
performance-based compensation and the increase in the average number of
employees.
INCOME TAXES
Income tax expense for the first quarter of 1997 amounted to $72
million, compared with $59 million for the first quarter of 1996. The
effective tax rate was 30 percent for both the current and prior year
quarter.
<PAGE> 15
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share amounts were
computed by subtracting from earnings the dividend requirements on
preferred stock to arrive at earnings applicable to common stock and
dividing this amount by the average number of common and common equivalent
shares outstanding during the period.
For both primary and fully diluted earnings per share, the average
number of common and common equivalent shares outstanding was the sum of
the average number of shares of common stock outstanding and the
incremental number of shares issuable under outstanding stock options and
deferred stock awards that had a dilutive effect as computed under the
treasury stock method. Under this method, the number of incremental shares
is determined by assuming the issuance of the outstanding stock options and
deferred stock awards reduced by the number of shares assumed to be
repurchased from the issuance proceeds, using the market price of the
Parent Company's common stock. For primary earnings per share, this market
price is the average market price for the period, while for fully diluted
earnings per share, it is the period-end market price, if it is higher than
the average market price. At no time during the three month period ended
March 31, 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
March 31,
1997 1996
<S> <C> <C>
Net income applicable to common stock $156 $123
Average number of common shares outstanding 77.018 77.495
Average common and common equivalent shares
outstanding - primary 82.784 80.896
Average common and common equivalent shares
outstanding assuming full dilution 82.898 81.560
</TABLE>
<PAGE> 16
BALANCE SHEET ANALYSIS
The following table highlights the changes in the balance sheet.
Since quarter-end balances can be distorted by one-day fluctuations, an
analysis of changes in the quarterly averages is provided to give a better
indication of balance sheet trends.
<TABLE>
<CAPTION>
CONDENSED AVERAGE BALANCE SHEETS
(in millions)
1st Qtr 4th Qtr Increase
1997 1996 (Decrease)
<S> <C> <C> <C>
ASSETS
Interest-earning
Interest-bearing deposits with banks $ 3,396 $ 3,545 $ (149)
Federal funds sold 3,702 1,990 1,712
Securities purchased under resale
agreements 22,120 22,380 (260)
Securities borrowed 14,712 15,447 (735)
Trading assets 28,022 31,427 (3,405)
Securities available for sale
Taxable 6,988 6,777 211
Exempt from federal income taxes 1,148 1,077 71
Total securities available for sale 8,136 7,854 282
Loans
Domestic offices 8,207 8,172 35
Foreign offices 7,437 7,032 405
Total loans 15,644 15,204 440
Total interest-earning assets 95,732 97,847 (2,115)
Noninterest-earning
Cash and due from banks 1,302 1,378 (76)
Noninterest-earning trading assets 18,960 17,700 1,260
All other assets 8,386 8,409 (23)
Allowance for credit losses (802) (988) 186
Total $123,578 $124,346 $ (768)
LIABILITIES
Interest-bearing
Interest-bearing deposits
Domestic offices $ 11,748 $ 8,738 $ 3,010
Foreign offices 19,661 18,812 849
Total interest-bearing deposits 31,409 27,550 3,859
Trading liabilities 6,103 9,687 (3,584)
Securities sold under repurchase agreements 22,341 25,750 (3,409)
Other short-term borrowings 19,188 18,852 336
Long-term debt 11,169 11,173 (4)
Mandatorily redeemable capital securities
of subsidiary trusts holding solely junior
subordinated deferrable interest debentures 1,195 165 1,030
Total interest-bearing liabilities 91,405 93,177 (1,772)
Noninterest-bearing
Noninterest-bearing deposits 3,152 3,518 (366)
Noninterest-bearing trading liabilities 16,920 15,725 1,195
All other liabilities 6,715 6,352 363
Total liabilities 118,192 118,772 (580)
PREFERRED STOCK OF SUBSIDIARY 182 250 (68)
STOCKHOLDERS' EQUITY
Preferred stock 773 815 (42)
Common stockholders' equity 4,431 4,509 (78)
Total stockholders' equity 5,204 5,324 (120)
Total $123,578 $124,346 $ (768)
</TABLE>
<PAGE> 17
BALANCE SHEET ANALYSIS (continued)
The Corporation's average total assets amounted to $123.6 billion for
the first quarter of 1997, a decrease of $768 million, or 1 percent, from
the fourth quarter of 1996. Average interest-earning assets decreased $2.1
billion, or 2 percent, and the proportion of interest-earning assets to
total assets decreased from 79 percent to 77 percent. The decrease in
interest-earning assets was primarily due to decreases in trading assets
(down $3.4 billion or 11 percent) and securities borrowed (down $735
million, or 5 percent), offset in part by an increase in federal funds sold
(up $1.7 billion, or 86 percent). Interest-earning trading assets, as a
percentage of total assets declined from 25 percent to 23 percent.
Noninterest-earning trading assets increased $1.3 billion, or 7 percent,
from the fourth quarter of 1996.
Average total liabilities decreased $580 million from the fourth
quarter of 1996. Within interest-bearing liabilities, decreases in trading
liabilities (down $3.6 billion, or 37 percent) and securities sold under
repurchase agreements (down $3.4 billion, or 13 percent) were offset in
part by increases in total interest-bearing deposits (up $3.9 billion or 14
percent) and mandatorily redeemable capital securities (up $1.0 billion, or
624 percent). Total short-term borrowings (securities sold under
repurchase agreements and other short-term borrowings) as a percentage of
total interest-bearing liabilities declined from 48 percent to 45 percent.
Securities Available for Sale
The fair value, amortized cost and gross unrealized holding gains and
losses for the Corporation's securities available for sale follow (in
millions). During the first quarter of 1997, the Corporation transferred
approximately $1.1 billion of asset-backed securities from securities-
available-for-sale to trading account assets. This transfer, which had no
impact on the current quarter's income, was the result of a change in risk
management strategies.
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Fair value $7,986 $7,920
Amortized cost 7,854 7,755
Excess of fair value over
amortized cost * $ 132 $ 165
* Components:
Unrealized gains $210 $245
Unrealized losses (78) (80)
$132 $165
</TABLE>
<PAGE> 18
BALANCE SHEET ANALYSIS (continued)
Long-term Debt
The larger of long-term debt issuances and maturities/redemptions
which occurred during the first quarter of 1997 are as follows (in
millions):
<TABLE>
<CAPTION>
Face Amount
Maturities/
Issuances Redemptions
<S> <C> <C>
Parent Company
8% Subordinated Debentures - $200
Floating Rate Notes due May 1998 $300
Floating Rate Notes due January 2002 $250 -
Bankers Trust Company
Floating Rate Notes due February 2002 $324 -
Redeemable Preference Securities - $510
Redeemable Preference Securities
due March 2004 (1) $651 -
<FN>
(1) At March 31, 1997, certain subsidiaries of Bankers Trust Company had
outstanding ($3.0 billion) of mandatorily redeemable preference securities
with maturities ranging from April 1997 to March 2004.
</TABLE>
Trust Preferred Capital Securities
During the first quarter of 1997, BT Capital Trust A ("Trust A"), BT
Preferred Capital Trust I ("Trust I") and BT Preferred Capital Trust II
("Trust II"), wholly-owned subsidiaries of the Corporation issued $250
million 7.90% Capital Securities, Series A1, ("Series A1 Securities"), $250
million 8 1/8% Preferred Securities, Series I ("Series I Securities") and
$250 million 7.875% Preferred Securities, Series II ("Series II
Securities"), respectively. The Series A1 Securities and the Series II
Securities have a liquidation value of $1,000 per Series A1 Security and
Series II Security, respectively. The Series I Securities have a
liquidation value of $25 per Series I Security. Series A1 Securities,
Series I Securities and Series II Securities represent preferred undivided
beneficial interests in the assets of Trust A, Trust I and Trust II,
respectively. The Corporation is the holder of all of the beneficial
interests represented by common securities of Trust A, Trust I and Trust II
("Common Securities" and, collectively with the Series A1 Securities,
Series I Securities and Series II Securities, the "Trust Securities").
Trust A, Trust I and Trust II exist for the sole purpose of issuing
the Trust Securities and investing the proceeds thereof in 7.90% Junior
Subordinated Deferrable Interest Debentures, Series A1, 8 1/8% Junior
Subordinated Deferrable Interest Debentures, Series I and 7.875% Junior
Subordinated Deferrable Interest Debentures, Series II (the "Series A1
<PAGE> 19
BALANCE SHEET ANALYSIS (continued)
Debentures," the "Series I Debentures" and the "Series II Debentures" and
collectively, the "Junior Subordinated Debentures") issued by the
Corporation. The Junior Subordinated Debentures are unsecured and
subordinated to all senior indebtedness of the Corporation and will be the
sole assets of Trust A, Trust I and Trust II. Payments under the Junior
Subordinated Debentures by the Corporation are the same as those for the
Series A1 Securities, Series I Securities and Series II Securities
described below, respectively. The obligations of the Corporation under
the Junior Subordinated Debentures, the relevant indenture and trust
agreement, the relevant guarantee by the Corporation of the obligations of
Trust A, Trust I and Trust II and certain other related agreements, in the
aggregate, constitute a full and unconditional guarantee of the relevant
trust's obligations under the Series A1 Securities, Series I Securities and
Series II Securities.
Holders of the Series A1 Securities will be entitled to receive
preferential cumulative cash distributions accumulating from January 16,
1997 and payable semi-annually in arrears on the fifteenth day of January
and July of each year, commencing July 15, 1997, at the annual rate of
7.90% of the liquidation amount of $1,000 per Series A1 Security. The
Series A1 Securities are subject to mandatory redemption upon repayment of
the Series A1 Debentures at maturity on January 15, 2027. The maturity date
may be shortened under certain circumstances to a date not earlier than
January 15, 2017. In addition, the Series A1 Debentures may be redeemed at
the option of the Corporation on or after January 15, 2007. On March 18,
1997, BT Capital Trust B, a wholly-owned subsidiary of the Corporation,
offered to exchange $250 million of its 7.90% Capital Securities, Series B1
(the "Series B1 Securities"), which had been registered under the
Securities Act of 1933, for any and all of the outstanding 7.90% Capital
Securities, Series A1 of BT Capital Trust A. BT Capital Trust B exists for
the sole purpose of issuing the Series B1 Securities and investing the
proceeds thereof in 7.90% Junior Subordinated Deferrable Interest
Debentures, Series B1 issued by the Corporation. The Series B1 Securities
are identical in all material respects to the Series A1 Securities. On
April 21, 1997, $250 million of the Series B1 Securities were exchanged for
all of the Series A1 Securities.
Holders of the Series I Securities will be entitled to receive
preferential cumulative cash distributions accumulating from February 5,
1997 and payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing March 31, 1997, at the
annual rate of 8 1/8% of the liquidation amount of $25 per Series I
Security. The Series I Securities are subject to mandatory redemption upon
repayment of the Series I Debentures at maturity on February 1, 2037. The
maturity date may be shortened under certain circumstances to a date not
earlier than February 1, 2002. In addition, the Series I Debentures may be
redeemed at the option of the Corporation on or after February 1, 2002.
Holders of the Series II Securities will be entitled to receive
preferential cumulative cash distributions accumulating from February 25,
1997, and payable semi-annually in arrears on the twenty fifth day of
February and August of each year, commencing August 25, 1997, at the annual
rate of 7.875% of the liquidation amount of $1,000 per Series II Security.
<PAGE> 20
BALANCE SHEET ANALYSIS (continued)
The Series II Securities are subject to mandatory redemption upon repayment
of the Series II Debentures at maturity on February 25, 2027. The maturity
date may be shortened under certain circumstances to a date not earlier
than February 25, 2012. In addition, the Series II Debentures may be
redeemed at the option of the Corporation on or after February 25, 2007.
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 March 31, Average During
1997 1st Qtr.1997
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 15,502 $(13,981)$ 16,805 $(15,203)
Interest Rate Contracts
Forwards 40 (42) 73 (75)
Options purchased 1,010 1,138
Options written (1,142) (1,211)
Foreign Exchange Rate Contracts
Spot and Forwards 12,889 (14,231) 13,663 (14,629)
Options purchased 893 1,094
Options written (940) (1,100)
Equity-related contracts 2,882 (2,877) 3,141 (3,328)
Commodity-related and other contracts 594 (640) 614 (635)
Exchange-Traded Options
Interest Rate 12 (12) 18 (8)
Equity 207 (119) 237 (130)
Total Gross Fair Values 34,029 (33,984) 36,783 (36,319)
Impact of Netting Agreements (22,807) 22,807 (24,071) 24,071
$ 11,222(1) $12,712
$(11,177)(1) $(12,248)
<FN>
(1) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
</TABLE>
<PAGE> 21
TRADING DERIVATIVES (continued)
<TABLE>
<CAPTION>
At December 31, Average During
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 $149 million at
March 31, 1997 compared with an unrealized gain of $54 million at December
31, 1996. The $203 million decrease during the first quarter of 1997 was
primarily due to increases in long-term interest rates.
<PAGE> 22
END-USER DERIVATIVES (continued)
The following tables provide the gross unrealized gains and losses for
end-user derivatives. Gross unrealized gains and losses for hedges of
securities available for sale are recognized in the financial statements
with the offset as an adjustment to securities valuation allowance in
stockholders' equity. Gross unrealized gains and losses for hedges of
loans, other assets, interest-bearing deposits, other short-term
borrowings, long-term debt, and net investments in foreign subsidiaries are
not yet recognized in the financial statements.
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions)available Other bearing borrow- term subsi-
March 31, 1997for sale Loans assets deposits ings debt(1)diaries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain$ - $ - $- $ 22 $ 8 $ 148 $- $ 178
Unrealized (Loss) - (10) - (80) (13) (184) - (287)
Pay Variable Net - (10) - (58) (5) (36) - (109)
Pay Fixed
Unrealized Gain 12 - - 20 1 22 - 55
Unrealized (Loss)(21) - - (34) (3) (30) - (88)
Pay Fixed Net (9) - - (14) (2) (8) - (33)
Total Unrealized
Gain 12 - - 42 9 170 - 233
Total Unrealized
(Loss) (21) (10) - (114) (16) (214) - (375)
Total Net $ (9) $(10) $- $ (72) $ (7)$ (44) $- $(142)
Forward Rate Agreements
Unrealized Gain $- $- $- $ 3 $- $- $- $ 3
Unrealized (Loss) - - - (1) - - - (1)
Net $- $- $- $ 2 $- $- $- $ 2
Currency Swaps and Forwards
Unrealized Gain $ 3 $ - $1 $- $ 3 $ 63 $ 37 $107
Unrealized (Loss)(3) (1) - (1) (4) (22) (44) (75)
Net $ - $(1) $1 $(1) $(1) $ 41 $ (7) $ 32
Other Contracts (2)
Unrealized Gain $ 1 $- $ - $- $- $- $- $ 1
Unrealized (Loss)(37) - (5) - - - - (42)
Net $(36) $- $(5) $- $- $- $- $(41)
Total Unrealized
Gain $ 16 $ - $ 1 $ 45 $ 12 $233 $ 37 $ 344
Total Unrealized
(Loss) (61) (11) (5) (116) (20) (236) (44) (493)
Total Net $(45) $(11) $(4) $ (71) $ (8)$ (3) $ (7)$(149)
<FN>
(1) Includes trust preferred capital securities.
(2) Other contracts are principally equity swaps and collars.
</TABLE>
<PAGE> 23
END-USER DERIVATIVES (continued)
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions)available Other bearing borrow- term subsi-
Dec 31, 1996 for sale Loans assets deposits ings debt(1) diaries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain$ 1 $ - $- $ 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> 24
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 March 31, 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 $31,262 5.56% 5.68% $1,627 4.70% 5.46% $32,889
1998-1999 11,571 5.91 5.55 2,716 4.68 5.59 14,287
2000-2001 3,886 6.72 5.69 1,901 5.45 5.92 5,787
2002 and thereafter 7,877 6.98 5.67 1,181 5.81 7.25 9,058
Total $54,596 $7,425 $62,021
<FN>
All rates were those in effect at March 31, 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> 25
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 March 31,
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> 26
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
March 31, 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 8.6% 9.3% 4.0% 6.0%
Total Capital
Corporation 14.8% 13.7% 8.0% 10.0%
BTCo 12.1% 12.9% 8.0% 10.0%
Leverage
Corporation 4.5% 5.5% 3.0%(1) 3.0%(1)
BTCo 5.4% 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> 27
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
March 31, December 31,
(in millions) 1997 1996
<S> <C> <C>
Corporation
Tier 1 Capital $5,438 $5,326
Tier 2 Capital 3,727 3,004
Tier 3 Capital 655 -
Total Capital $9,820 $8,330
Total risk-weighted assets $66,489 $60,990
BTCo
Tier 1 Capital $4,896 $4,869
Tier 2 Capital 1,949 1,900
Total Capital $6,845 $6,769
Total risk-weighted assets $56,815 $52,484
</TABLE>
Comparing March 31, 1997 to December 31, 1996, the Corporation's Tier
1 Capital ratio declined 50 basis points due to an increase in risk-
weighted assets. The Corporation's risk-weighted assets at March 31, 1997
were $5.5 billion higher than at year-end 1996. The Total Capital ratio of
the Corporation increased 110 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.
With the adoption of the market risk amendment, the Corporation's
Leverage ratio decreased 100 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 70 basis
points and 80 basis points, respectively, as a result of a $4.3 billion
increase in risk-weighted assets. BTCo's Leverage ratio increased by 10
basis points.
<PAGE> 28
PREFERRED STOCK
During the first quarter of 1997, the Corporation redeemed all
1 million outstanding shares of its 8.55% Cumulative Preferred Stock,
Series I at a price of $100 million. In addition, the Corporation
repurchased approximately $6 million of its Adjustable Rate Cumulative
Preferred Stock, Series Q and Series R.
PREFERRED STOCK OF SUBSIDIARY
During the first quarter of 1997, BT Overseas Finance N.V. ("BTOF"),
an indirect wholly-owned subsidiary of the Corporation, redeemed all 2,500
shares of its BTOF Auction Rate cumulative Preferred Stock Series A-D at a
price of $250 million.
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 $97.1 billion as of March 31, 1997 and $96.9 billion as of
December 31, 1996, which equaled 78 percent, and 80 percent of gross total
assets at those dates respectively.
<PAGE> 29
LIQUIDITY (continued)
Cash Flows
The following comments apply to the consolidated statement of cash
flows, which appears on page 5.
Cash and due from banks remained constant during the first quarter of
1997, as the net cash provided by financing activities was offset by the
sum of the net cash used in investing activities and the net cash used in
operating activities. The $5.3 billion of net cash provided by financing
activities was primarily the result of a positive net change in deposits
($5.1 billion) and issuances of long-term debt ($2.5 billion), offset in
part by repayments of long-term debt ($1.6 billion). The $5.1 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 ($4.3 billion) and loans ($2.4 billion), and purchases of
securities available for sale ($1.8 billion), partially offset by cash
inflows from the net change in securities borrowed ($2.7 billion), and
maturities and other redemptions of securities available for sale ($593
million). The $116 million of net cash used in operating activities was
primarily the result of a negative net change in trading liabilities ($3.1
billion) partially offset by a positive net changes in trading assets ($2.1
billion and other operating assets and liabilities ($337 million).
Cash and due from banks decreased by $1.2 billion during the first
quarter of 1996, as the net cash used in investing activities exceeded the
sum of the net cash provided by operating and financing activities. The
$7.3 billion of net cash used in investing activities was primarily the
result of cash outflows from the net change in securities borrowed ($4.4
billion), securities purchased under resale agreements ($2.3 billion) and
purchases of securities available for sale ($1.6 billion). This was
partially offset by cash inflows from maturities and other redemptions of
securities available for sale ($892 million). The $3.9 billion of net cash
provided by operating activities primarily resulted from a $3.0 billion net
change in trading assets and trading liabilities. The $2.1 billion of net
cash provided by financing activities was primarily the result of an
increase in the net change in securities sold under repurchase agreements
($8.0 billion) and the proceeds from the issuances of long-term debt ($1.1
billion), offset in part by cash outflows from a $3.4 billion net change in
other short-term borrowings and a $3.3 billion net change in deposits.
<PAGE> 30
LIQUIDITY (continued)
Interest Rate Sensitivity
Condensed interest rate sensitivity data for the Corporation at March
31, 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) March 31, 1997 1 year years 5 years funds Total
<S> <C> <C> <C> <C> <C>
Assets $ 87.1 $ 4.2 $ 3.4 $ 28.3 $ 123.0
Liabilities and preferred
stock (80.6) (6.6) (4.4) (27.0) (118.6)
Common stockholders' equity - - - (4.4) (4.4)
Effect of off-balance sheet
hedging instruments (13.1) 8.7 4.4 - -
Interest rate sensitivity gap $ (6.6) $ 6.3 $ 3.4 $ (3.1) $ -
</TABLE>
<PAGE> 31
NONPERFORMING ASSETS
The components of cash basis loans, renegotiated loans, other real
estate and other nonperforming assets are shown below ($ in millions).
<TABLE>
<CAPTION>
March 31,December 31,
1997 1996
<S> <C> <C>
CASH BASIS LOANS
Domestic
Commercial and industrial $106 $117
Secured by real estate 153 233
Total domestic 259 350
International
Commercial and industrial 38 57
Secured by real estate 32 39
Financial institutions 1 4
Other 2 2
Total international 73 102
Total cash basis loans $332 $452
Ratio of cash basis loans to total gross loans 1.8% 2.9%
Ratio of allowance for credit losses to cash
basis loans (1) 228% 171%
RENEGOTIATED LOANS
Secured by real estate $37 $37
Total renegotiated loans $37 $37
OTHER REAL ESTATE $188 $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 $758 million and $773 million at March 31, 1997 and
December 31, 1996, respectively.
</TABLE>
<PAGE> 32
NONPERFORMING ASSETS (continued)
An analysis of the changes in the Corporation's total cash basis loans
during the first quarter of 1997 follows (in millions).
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1996 $452
Net transfers to cash basis loans 16
Net paydowns (69)
Charge-offs (33)
Transfers to other real estate (2)
Other (32)
Balance, March 31, 1997 $332
</TABLE>
The Corporation's total cash basis loans amounted to $332 million at
March 31, 1997, down $120 million, or 27 percent, from December 31, 1996.
This decline is primarily attributable to decreases in loans secured
by real estate ($87 million) and highly leveraged loans ($29 million).
Within cash basis loans, loans secured by real estate were $185 million and
$272 million at March 31, 1997 and December 31, 1996, respectively.
Commercial and industrial loans to highly leveraged borrowers were $88
million and $117 million at March 31, 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 March 31 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> 33
NONPERFORMING ASSETS (continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in millions) 1997 1996
<S> <C> <C>
Domestic Loans
Gross amount of interest that would have
been recorded at original rate $6 $14
Less, interest, net of reversals, recognized
in interest revenue 1 1
Reduction of interest revenue 5 13
International Loans
Gross amount of interest that would have
been recorded at original rate 2 3
Less, interest, net of reversals, recognized
in interest revenue - -
Reduction of interest revenue 2 3
Total reduction of interest revenue $7 $16
</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
March 31, December 31,
(in millions) 1997 1996
<S> <C> <C>
Loans
Senior debt $1,580 $1,587
Subordinated debt 70 76
Total loans $1,650 $1,663
Unfunded commitments
Commitments to lend $ 904 $ 875
Letters of credit 148 128
Total unfunded commitments $1,052 $1,003
Equity investments $744 $665
Commitments to invest $443 $425
</TABLE>
<PAGE> 34
HIGHLY LEVERAGED TRANSACTIONS (continued)
The Corporation's outstanding loans were to 130 separate borrowers in
43 separate industry groups at March 31, 1997, compared to 127 separate
borrowers in 43 separate industry groups at December 31, 1996. The
miscellaneous manufacturing and services group at 11 percent was the only
industry concentration which exceeded 10 percent of total HLT loans
outstanding at March 31, 1997.
In addition to the amounts shown in the table above, at March 31,
1997, the Corporation had issued commitment letters which had been
accepted, subject to documentation and certain other conditions, of $41
million (which were in various stages of syndication) and had additional
HLTs in various stages of discussion and negotiation.
During the first quarter of 1997, the Corporation originated $755
million 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 March 31, 1997 was less than $13 million. However, at March
31, 1997, the Corporation had total exposure (loans outstanding plus
unfunded commitments) in excess of $50 million to 10 separate highly
leveraged borrowers.
At March 31, 1997, $88 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 quarter of 1997. In addition, the Corporation
recorded a net gain of $27.2 million in connection with the sales and/or
write-offs of certain equity investments in highly leveraged companies
during the first quarter 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
$31 million during the first quarter of 1997 and that as of March 31, 1997,
approximately $29 million of fees were deferred and will be recognized as
future revenue.
<PAGE> 35
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 and Alex. Brown Incorporated ("AB")
entered into a definitive agreement to merge (the "Merger"). The merger
agreement provides that each AB common share will be exchanged for 0.83
shares of the Corporation's common stock. The transaction is expected to
be tax-free to shareholders and accounted for on a pooling-of-interests
basis. In connection with the Merger, it is estimated that nonrecurring
merger and related 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 the Corporation and AB, and
direct costs of the Merger.
The Merger, which is expected to be completed by the fourth quarter of
1997, is subject to customary closing conditions, including certain
regulatory approvals and shareholder approvals. Unaudited Pro forma
Combined Financial Statements as of March 31, 1997, for the three months
ended March 31, 1997 and 1996, and for the three years ended December 31,
1996 are contained in Exhibit 99 to this document.
<PAGE> 36
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on April 15, 1997.
(b) Each of the persons named in the Proxy Statement as a nominee for
Directors was elected.
(c) The following are the voting results on each of the matters which
were submitted to the stockholders:
<TABLE>
<CAPTION>
Withheld
or Broker
For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Election of Directors
George B. Beitzel 70,927,063 365,476
Phillip A. Griffiths 70,932,695 359,844
William R. Howell 70,924,258 368,280
Vernon E. Jordan, Jr. 69,931,155 1,361,384
Hamish Maxwell 70,909,268 383,271
Frank N. Newman 70,934,349 358,189
N. J. Nicholas Jr. 70,923,638 368,900
Russell E. Palmer 70,927,606 364,933
Donald L. Staheli 70,918,072 374,467
Patricia C. Stewart 70,889,767 402,772
George J. Vojta 70,930,860 361,679
Paul A. Volcker 70,926,127 366,412
Resolutions
. To ratify the appointment of
KPMG Peat Marwick LLP as
independent auditor for 1997. 70,974,638 119,731 198,169
. To approve the 1997 Stock
Option and Stock Award Plan. 39,181,738 20,004,029 1,975,269 10,131,503
. To limit the term of service
of outside directors to no more
than six years. 3,262,580 56,816,791 850,693 10,362,474
. To provide for cumulative
voting in the election of
directors. 21,117,455 38,862,214 920,395 10,392,475
. To submit a plan of merger by
BTNY or any of its subsidiaries
to shareholders for approval
prior to approval by the Board
of Directors. 3,494,994 56,298,937 1,136,230 10,362,377
</TABLE>
The text of the matters referred to under this Item 4 is set forth
in the Proxy Statement dated March 10, 1997 previously filed with
the Commission and incorporated herein by reference.
<PAGE> 37
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(4) Instruments Defining the Rights of Security Holders,
Including Indentures
(v) - The Corporation hereby agrees to furnish to the
Commission, upon request, a copy of any instru-
ments defining the rights of 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
two reports on Form 8-K during the quarter ended March 31, 1997.
- The report dated January 23, 1997, filed the Corporation's Press
Release dated January 23, 1997, which announced earnings for the
quarter and year ended December 31, 1996.
- The report dated March 6, 1997, provided an update of
information previously reported on Form 8-K dated November 20,
1996, 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
independent auditors for the fiscal year ended December 31, 1996.
<PAGE> 38
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on May 15, 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 MARCH 31, 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) Severance agreement with B.J. Kingdon
(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 March 31, 1997, for the three months
ended March 31, 1997 and 1996 and for the
three years ended December 31, 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>
EXHIBIT 12(a)
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
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 $ 241
2. Add: Fixed charges
excluding
capitalized
interest
(Line 10) 3,099 3,148 3,884 5,095 5,426 1,345
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 40 30 45 28 30 (5)
4. Earnings including
interest on deposits 3,965 4,668 4,708 5,378 6,268 1,591
5. Less: Interest on
deposits 1,119 1,013 965 1,360 1,355 396
6. Earnings excluding
interest on deposits $2,846 $3,655 $3,743 $4,018 $4,913 $1,195
Fixed Charges:
7. Interest Expense $3,072 $3,122 $3,858 $5,069 $5,400 $1,337
8. Estimated interest
component of net
rental expense 27 26 26 26 26 7
9. Amortization of debt
issuance expense - - - - - 1
10. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,099 3,148 3,884 5,095 5,426 1,345
11. Add: Capitalized
interest - - - - - -
12. Total fixed charges 3,099 3,148 3,884 5,095 5,426 1,345
13. Less: Interest on
deposits
(Line 5) 1,119 1,013 965 1,360 1,355 396
14. Fixed charges excluding
interest on deposits $1,980 $2,135 $2,919 $3,735 $4,071 $ 949
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 1.18
Excluding interest on
deposits
(Line 6/Line 14) 1.44 1.71 1.28 1.08 1.21 1.26
</TABLE>
<PAGE>
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)
<TABLE>
<CAPTION>
Three
Months
Ended
Year Ended December 31, March 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effect
of accounting
changes $ 906 $1,550 $ 869 $ 311 $ 872 $ 241
2. Add: Fixed charges
excluding
capitalized
interest
(Line 13) 3,099 3,148 3,884 5,095 5,426 1,345
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 40 30 45 28 30 (5)
4. Earnings including
interest on deposits 3,965 4,668 4,708 5,378 6,268 1,591
5. Less: Interest on
deposits 1,119 1,013 965 1,360 1,355 396
6. Earnings excluding
interest on deposits$2,846 $3,655 $3,743 $4,018 $4,913 $ 1,195
Preferred Stock Dividend Requirements:
7. Preferred stock dividend
requirements $ 30 $ 23 $ 28 $ 51 $ 51 $13
8. Ratio of income from
continuing operations
before income taxes to
income from continuing
operations after income
taxes 142% 145% 141% 145% 142% 143%
9. Preferred stock dividend
requirements on a pretax
basis $ 43 $ 33 $ 39 $ 74 $ 72 $ 19
Fixed Charges:
10. Interest Expense $3,072 $3,122 $3,858 $5,069 $5,400 $1,337
11. Estimated interest
component of net
rental expense 27 26 26 26 26 7
12. Amortization of debt
issuance expense - - - - - 1
13. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,099 3,148 3,884 5,095 5,426 1,345
14. Add: Capitalized
interest - - - - - -
15. Total fixed charges 3,099 3,148 3,884 5,095 5,426 1,345
16. Add: Preferred stock
dividend require-
ments - pretax
(Line 9) 43 33 39 74 72 19
<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 1,364
18. Less: Interest on
deposits
(Line 5) 1,119 1,013 965 1,360 1,355 396
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 $968
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 1.17
Excluding interest on
deposits
(Line 6/Line 19) 1.41 1.69 1.27 1.05 1.19 1.23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF
CONDITION AT MARCH 31, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,607
<INT-BEARING-DEPOSITS> 2,581
<FED-FUNDS-SOLD> 1,195
<TRADING-ASSETS> 47,461
<INVESTMENTS-HELD-FOR-SALE> 7,986
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 17,979
<ALLOWANCE> 758
<TOTAL-ASSETS> 122,978
<DEPOSITS> 35,589
<SHORT-TERM> 42,219<F1>
<LIABILITIES-OTHER> 6,397<F2>
<LONG-TERM> 12,588
0
704
<COMMON> 84
<OTHER-SE> 4,293
<TOTAL-LIABILITIES-AND-EQUITY> 122,978
<INTEREST-LOAN> 301
<INTEREST-INVEST> 120
<INTEREST-OTHER> 626<F3>
<INTEREST-TOTAL> 1,645
<INTEREST-DEPOSIT> 396
<INTEREST-EXPENSE> 1,337
<INTEREST-INCOME-NET> 308
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 935
<INCOME-PRETAX> 241
<INCOME-PRE-EXTRAORDINARY> 241
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
<YIELD-ACTUAL> 1.33
<LOANS-NON> 332
<LOANS-PAST> 0
<LOANS-TROUBLED> 37
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 973
<CHARGE-OFFS> 33
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 958<F4>
<ALLOWANCE-DOMESTIC> 136
<ALLOWANCE-FOREIGN> 143
<ALLOWANCE-UNALLOCATED> 479
<FN>
<F1>Short-term borrowings include the following:
Securities sold under repurchase agreements 21,995
Other short-term borrowings 20,224
Total 42,219
<F2>Other liabilities include the following:
Accounts payable and accrued expenses 3,836
Other liabilities 2,561
Total 6,397
<F3>Other interest income includes the following:
Interest-bearing deposits with banks 65
Federal funds sold 49
Securities repurchased under resale agreements 330
Securities borrowed 182
Total 626
<F4>The Corporation has allocated its total allowance for credit losses as
follows: 758 as a reduction of loans and 200 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 three months ended March 31, 1997 and 1996, and for each of the three
years ended December 31, 1996 and the Unaudited Pro Forma Combined Balance
Sheet as of March 31, 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 merger and
related restructuring charges expected to be taken in connection with the
Merger have not been reflected in the pro forma combined financial
statements as efforts by BTNY and Alex. Brown continue to refine the actual
amount of such charges (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 Three Months Ended March 31,1997
BTNY AB Pro Forma Pro Forma
Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
(a) (a, d)
NET INTEREST REVENUE
Interest revenue $1,645 $ 36 $- $1,681
Interest expense 1,337 12 1,349
NET INTEREST REVENUE 308 24 332
Provision for credit losses - - -
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 308 24 332
NONINTEREST REVENUE
Trading 279 32 311
Fiduciary and funds management 208 23 231
Corporate finance fees 140 75 215
Other fees and commissions 79 60 139
Net revenue from equity investment
transactions 44 3 47
Securities available for sale gains 14 - 14
Insurance premiums 63 - 63
Other 41 5 46
Total noninterest revenue 868 198 1,066
NONINTEREST EXPENSES
Salaries and commissions 237 68 305
Incentive compensation and employee
benefits 322 54 376
Agency and other professional
service fees 87 3 90
Communication and data services 45 6 51
Occupancy, net 37 6 43
Furniture and equipment 50 4 54
Travel and entertainment 25 5 30
Provision for policyholder benefits 68 - 68
Other 64 25 89
Total noninterest expenses 935 171 1,106
Income before income taxes 241 51 292
Income taxes 72 20 92
NET INCOME $ 169 $ 31 $- $ 200
NET INCOME APPLICABLE TO
COMMON STOCK $ 156 $ 31 $- $ 187
EARNINGS PER COMMON SHARE:
PRIMARY $1.89 $1.23 $1.81(c)
FULLY DILUTED $1.89 $1.10 $1.76(c)
Cash dividends declared
per common share $1.00 $.170 $1.00(c)
Average common and common equivalent
shares outstanding - primary 82.784 25.294 103.778(c)
Average common and common
equivalent shares
outstanding assuming full dilution 82.898 29.079 107.034(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 Three Months Ended March 31, 1996
BTNY AB Pro Forma Pro Forma
Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
(a) (a, d)
NET INTEREST REVENUE
Interest revenue $1,590 $ 33 $- $1,623
Interest expense 1,377 12 1,389
NET INTEREST REVENUE 213 21 234
Provision for credit losses 5 - 5
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 208 21 229
NONINTEREST REVENUE
Trading 247 53 300
Fiduciary and funds management 183 17 200
Corporate finance fees 86 102 188
Other fees and commissions 87 53 140
Net revenue from equity investment
transactions 21 6 27
Securities available for sale gains 15 - 15
Insurance premiums 62 - 62
Other 49 7 56
Total noninterest revenue 750 238 988
NONINTEREST EXPENSES
Salaries and commissions 201 66 267
Incentive compensation and employee
benefits 227 80 307
Agency and other professional
service fees 60 3 63
Communication and data services 46 5 51
Occupancy, net 37 5 42
Furniture and equipment 41 4 45
Travel and entertainment 18 4 22
Provision for policyholder benefits 72 - 72
Other 59 25 84
Total noninterest expenses 761 192 953
Income before income taxes 197 67 264
Income taxes 59 26 85
NET INCOME $ 138 $ 41 $- $ 179
NET INCOME APPLICABLE TO
COMMON STOCK $ 123 $ 41 $- $ 164
EARNINGS PER COMMON SHARE:
PRIMARY $1.52 $1.67 $1.62(c)
FULLY DILUTED $1.51 $1.48 $1.57(c)
Cash dividends declared
per common share $1.00 $.133 $1.00(c)
Average common and common equivalent
shares outstanding - primary 80.896 24.316 101.078(c)
Average common and common
equivalent shares outstanding
assuming full dilution 81.560 28.009 104.808(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 Year Ended December 31,1996
BTNY AB Pro Forma Pro Forma
Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
(a) (a, d)
NET INTEREST REVENUE
Interest revenue $6,366 $142 $- $6,508
Interest expense 5,400 51 5,451
NET INTEREST REVENUE 966 91 1,057
Provision for credit losses 5 - 5
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 961 91 1,052
NONINTEREST REVENUE
Trading 846 168 1,014
Fiduciary and funds management 783 78 861
Corporate finance fees 507 415 922
Other fees and commissions 343 206 549
Net revenue from equity investment
transactions 211 19 230
Securities available for sale gains 75 - 75
Insurance premiums 230 - 230
Other 204 32 236
Total noninterest revenue 3,199 918 4,117
NONINTEREST EXPENSES
Salaries and commissions 867 288 1,155
Incentive compensation and employee
benefits 951 264 1,215
Agency and other professional
service fees 311 19 330
Communication and data services 193 21 214
Occupancy, net 150 22 172
Furniture and equipment 171 16 187
Travel and entertainment 97 19 116
Provision for policyholder benefits 280 - 280
Other 268 101 369
Total noninterest expenses 3,288 750 4,038
Income before income taxes 872 259 1,131
Income taxes 260 105 365
NET INCOME $ 612 $154 $- $ 766
NET INCOME APPLICABLE TO
COMMON STOCK $ 561 $154 $- $ 715
EARNINGS PER COMMON SHARE:
PRIMARY $6.78 $6.28 $6.93(c)
FULLY DILUTED $6.74 $5.51 $6.71(c)
Cash dividends declared per
common share $4.00 $.637 $4.00(c)
Average common and common equivalent
shares outstanding - primary 82.766 24.563 103.153(c)
Average common and common
equivalent shares outstanding
assuming full dilution 83.259 28.470 106.889(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 Year Ended December 31,1995
BTNY AB Pro Forma Pro Forma
Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
(a) (a, d)
NET INTEREST REVENUE
Interest revenue $5,886 $103 $- $5,989
Interest expense 5,069 36 5,105
NET INTEREST REVENUE 817 67 884
Provision for credit losses 31 - 31
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 786 67 853
NONINTEREST REVENUE
Trading 341 140 481
Fiduciary and funds management 697 55 752
Corporate finance fees 398 293 691
Other fees and commissions 314 177 491
Net revenue from equity investment
transactions 146 7 153
Securities available for
sale gains 180 - 180
Insurance premiums 234 - 234
Other 113 34 147
Total noninterest revenue 2,423 706 3,129
NONINTEREST EXPENSES
Salaries and commissions 804 241 1,045
Incentive compensation and employee
benefits 640 192 832
Agency and other professional
service fees 318 17 335
Communication and data services 184 20 204
Occupancy, net 152 25 177
Furniture and equipment 162 15 177
Travel and entertainment 88 16 104
Provision for policyholder
benefits 271 - 271
Other 229 89 318
Provision for severance
-related costs 50 - 50
Total noninterest expenses 2,898 615 3,513
Income before income taxes 311 158 469
Income taxes 96 62 158
NET INCOME $ 215 $ 96 $- $ 311
NET INCOME APPLICABLE TO
COMMON STOCK $ 164 $ 96 $- $ 260
EARNINGS PER COMMON SHARE:
PRIMARY $2.03 $4.11 $2.59(c)
FULLY DILUTED $2.02 $3.60 $2.53(c)
Cash dividends declared
per common share $4.00 $.516 $4.00(c)
Average common and common equivalent
shares outstanding - primary 80.923 23.267 100.135(c)
Average common and common
equivalent shares outstanding
assuming full dilution 81.095 27.192 103.664(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 Year Ended December 31,1994
BTNY AB Pro Forma Pro Forma
Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
(a) (a, d)
NET INTEREST REVENUE
Interest revenue $5,030 $ 66 $- $5,096
Interest expense 3,858 22 3,880
NET INTEREST REVENUE 1,172 44 1,216
Provision for credit losses 25 - 25
NET INTEREST REVENUE AFTER
PROVISION FOR CREDIT LOSSES 1,147 44 1,191
NONINTEREST REVENUE
Trading 465 121 586
Fiduciary and funds management 740 43 783
Corporate finance fees 431 197 628
Other fees and commissions 325 143 468
Net revenue from equity investment
transactions 109 19 128
Securities available for sale gains 72 - 72
Insurance premiums 183 - 183
Other 148 17 165
Total noninterest revenue 2,473 540 3,013
NONINTEREST EXPENSES
Salaries and commissions 774 196 970
Incentive compensation and employee
benefits 724 132 856
Agency and other professional
service fees 268 8 276
Communication and data services 176 18 194
Occupancy, net 146 20 166
Furniture and equipment 163 12 175
Travel and entertainment 109 14 123
Provision for policyholder benefits 205 - 205
Other 186 66 252
Total noninterest expenses 2,751 466 3,217
Income before income taxes 869 118 987
Income taxes 254 47 301
NET INCOME $ 615 $ 71 $- $ 686
NET INCOME APPLICABLE TO
COMMON STOCK $ 587 $ 71 $- $ 658
EARNINGS PER COMMON SHARE:
PRIMARY $7.17 $3.06 $6.51(c)
FULLY DILUTED $7.17 $2.70 $6.33(c)
Cash dividends declared per
common share $3.70 $.450 $3.70(c)
Average common and common equivalent
shares outstanding - primary 81.825 23.124 101.018(c)
Average common and common
equivalent shares outstanding
assuming full dilution 81.865 26.982 104.260(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 March 31, 1997
BTNY AB Pro Forma Pro Forma
Historical Historical Adjustments Combined
<S> <C> <C> <C> <C>
(a) (a, d)
ASSETS
Cash and due from banks $ 1,607 $ 72 $ - $ 1,679
Interest-bearing deposits in banks 2,581 - 2,581
Federal funds sold 1,195 - 1,195
Sec. purch. under resale
agreements 22,273 43 22,316
Securities borrowed 13,963 282 14,245
Trading assets:
Government securities 11,686 135 11,821
Corporate debt securities 8,460 48 8,508
Equity securities 7,021 40 7,061
Swaps, options & other
derivatives 11,222 - 11,222
Other trading assets 9,072 8 9,080
Total trading assets 47,461 231 47,692
Securities available for sale 7,986 - 7,986
Loans, net of allowance for credit
losses of $758 17,221 61 17,282
Customer receivables 80 1,502 1,582
Accounts receivable &
accrued interest 3,147 115 3,262
Other assets 5,464 247 5,711
Total $122,978 $2,553 $ - $125,531
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 2,803 $ - $ - $ 2,803
Foreign offices 1,052 - 1,052
Interest-bearing deposits
Domestic offices 12,365 - 12,365
Foreign offices 19,369 - 19,369
Total deposits 35,589 - 35,589
Trading liabilities:
Securities sold, not yet purchased
Government securities 3,943 43 3,986
Equity securities 4,935 15 4,950
Other trading liabilities 431 12 443
Swaps, options & other
derivatives 11,177 - 11,177
Total trading liabilities 20,486 70 20,556
Securities loaned and securities sold
under repurchase agreements 21,995 581 22,576
Other short-term borrowings 20,224 96 20,320
Accounts payable and
accrued expenses 3,836 259 4,095
Other liabilities, including allowance
for credit losses of $200 3,179 636 3,815
Long-term debt not included in
risk-based capital 7,955 209 8,164
Long-term debt included in
risk-based capital 3,164 - 3,164
Mandatorily redeemable capital
securities of subsidiary trusts
holding solely junior subordinated
deferrable interest debentures
included in risk-based capital 1,469 - 1,469
Total liabilities 117,897 1,851 119,748
STOCKHOLDERS' EQUITY
Preferred stock 704 - 704
Common stock 84 2 19(c) 105
Capital surplus 1,349 147 (19)(c) 1,477
Retained earnings 3,512 553 4,065
Common stock in treasury, at cost (527) - (527)
Other stockholders' equity (41) - (41)
Total stockholders' equity 5,081 702 - 5,783
Total $122,978 $2,553 $ - $125,531
<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 related 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 the proposed nonrecurring charges have 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 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 March 31, 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 March 31, 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 10(iii)(A)(1)
Bankers Trust New York Corporation
130 Liberty Street, New York, New York 10006
CORPORATE HUMAN RESOURCES
SETTLEMENT AND NON-DISCLOSURE AGREEMENT
B.J. KINGDON, on his own behalf and on behalf of his
heirs, executors, administrators, attorneys, successors and
assigns (hereinafter collectively referred to as "Kingdon"), and
BANKERS TRUST NEW YORK CORPORATION, on its own behalf and on
behalf of its subsidiaries, divisions, affiliates, successors and
assigns, and its and their respective officers, directors,
agents, representatives and employees (hereinafter collectively
referred to as "Bankers Trust" or the "Company"), have reached
the within agreement ("Agreement") in settlement of any and all
issues related to Kingdon's employment with, and separation from
the employ of, Bankers Trust, such Agreement being reached on
the following terms and conditions:
1. Kingdon will resign his position as Senior
Managing Director of Bankers Trust effective February 14, 1997.
2. In full and complete satisfaction of all known
and unknown claims against Bankers Trust, and in consideration
for executing this Agreement, Kingdon will be entitled to the
following:
a. Bankers Trust shall provide Kingdon with base
salary continuation, payable monthly through Kingdon's off-
payroll date of July 25, 1997.
<PAGE>
b. On or about July 25, 1997, Bankers Trust will
make a lump-sum payment to Kingdon of $544,656.
c. Bankers Trust shall pay Kingdon a bonus for
the 1996 performance year of $300,000, on or about the eighth
day after Kingdon executes this Agreement.
d. Kingdon's 50,000 outstanding Employee Stock
options must be exercised by his off-payroll date of July 25, 1997,
Kingdon's 1996 options granted at $76.4375 strike price will not
vest until June 18, 1997. Any options remaining unexercised
after Kingdon's July 25, 1997 off-payroll date will be forfeited.
e. Bankers Trust acknowledges that Kingdon has a
Restricted Stock award outstanding of 2,500 shares. Kingdon's
shares award will vest and be distributed to him on July 25,
1997, his off-payroll date.
f. Kingdon's shares awarded under the
Partnership Equity Plan ("PEP") will continue to be deferred
until the fifth anniversary following the end of each related
performance year. That is, Kingdon's 1993, 1994, 1995 and 1996
Awards will be distributable to him in or about December of 1998,
1999, 2000 and 2001, respectively. Shares acquired by net EPS
reinvestments through Kingdon's off-payroll date will immediately
vest. For the remainder of their respective deferral periods,
earnings on shares in Kingdon's PEP account will be limited to
<PAGE>
the related common stock dividend rate and will continue to pay
out quarterly. The 75% floor protection on the original shares
awarded to Kingdon (not shares acquired through reinvested net
EPS credits) remains intact until distribution.
g. Bankers Trust acknowledges that Kingdon's
PartnerShare Account is fully vested effective February 14, 1997.
h. Kingdon's ADCAP account will vest in full
as of his July 25, 1997 off-payroll date, and will be
distributed in cash at such time.
i. Kingdon's 7,612.8725 shares in the Equity
Participation Plan ("EPP"), to the extent unvested, will vest in
full as of his July 25, 1997 off-payroll date. All shares will
continue to be deferred as scheduled. In the event the Human
Resources Committee approves the early distribution of EPP Share
Awards, and an election is not made to receive early
distributions of shares, shares would nonetheless be mandatorily
distributed one-third per year starting February 1997. Floor
protection remains intact for the remainder of the deferred
period, however, EPS yield in excess of dividend, if any, is
eliminated following the off-payroll date.
j. All salary paid to Kingdon through his off-
payroll date (subject to tax limits) will qualify under the
formula to compute Kingdon's benefit under the terms of the
Company's qualified Pension Plan.
<PAGE>
k. Kingdon's 70,000 POP units valued at $41.25
each ($2,887,500) will vest in full and be distributed in cash on or
about July 25,1997, the off-payroll date, and further, Kingdon waives
any further rights in this plan.
l. Kingdon's coverage in the Company's group
medical and dental plans shall continue through his off-payroll date.
Thereafter, Kingdon may voluntarily continue coverage
for himself and his eligible dependents at his own expense for a
period of up to eighteen (18) months consistent with applicable federal law.
m. On or about July 25, 1997, Kingdon's
off-payroll date, he will receive the cash equivalent of 4.58
unused vacation days for the 1997 calendar year.
Kingdon acknowledges that the payments and
benefits set forth above shall be subject to applicable federal,
state and local taxes, and all other deductions as required by
law and Bankers Trust policy. Kingdon shall have no duty to seek
other employment or to become self-employed to mitigate any
payments or benefits to which he is entitled pursuant to this
Agreement nor shall there be any offset against such payments or
benefits in the event of such employment or self-employment. If
Kingdon dies prior to the payment of any of the amounts set forth
in this paragraph, Kingdon's estate or his designated beneficiary
shall be paid such amounts.
<PAGE>
3. Kingdon agrees that he will not publicly or
privately disparage Bankers Trust or any of the Company's
products, services, divisions, affiliates, related companies or
current or former officers, directors, trustees, employees,
agents, administrators, representatives or fiduciaries. The
Company agrees that it will not publicly or privately disparage
Kingdon. Notwithstanding the foregoing, neither Kingdon nor the
Company will be restricted from providing information about the
other as required by a court or governmental agency or by
applicable law. Further, the Company shall not be restricted
from reporting information regarding Kingdon's performance while
employed by the Company to internal or external auditors, special
counsel or investigators, any applicable enforcement agencies,
regulatory agencies, insurance carriers or in litigation
involving Kingdon or the Company. Kingdon hereby acknowledges
and further agrees that the payments and benefits described
herein will be forfeited (including the right to exercise any
outstanding stock options), if he materially violates any
material provisions of this Agreement. In any such instances,
Kingdon also agrees to tender back all amounts he received from
Bankers Trust pursuant to paragraph 2 of this Agreement which is
over and above that to which he is normally entitled under
standard Bankers Trust policy, within thirty days of his being
advised by Bankers Trust of the conduct or behavior which the
<PAGE>
Company believes to be a material violation of a material
provision of this Agreement. Should Kingdon not tender back such
consideration as set forth above and, as a result, should Bankers
Trust be forced to take legal action to recover such amounts and
should Bankers Trust be the prevailing party in such litigation,
Kingdon shall be responsible to Bankers Trust for all costs
incurred in bringing such action, including but not limited to,
its reasonable attorneys' fees. Nothing set forth herein should
be construed as preventing Bankers Trust from seeking any
additional rights or remedies it may have at law or in equity in
the event of a material violation of a material provision of this
Agreement.
4. In exchange for the consideration described in
Paragraph 2, Kingdon hereby releases Bankers Trust from any and
all liability arising from any and all acts or omissions
including, but not limited to, those arising out of his
employment relationship with the Company or under any contract,
tort, federal, state, or local fair employment practices or civil
rights law including, but not limited to, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, the Older Worker
Benefits Protection Act of 1990, the Civil Rights Act of 1866,
the Americans With Disabilities Act of 1990, the Employee
Retirement Income Security Act of 1974, the New York State and
<PAGE>
New York City Civil Rights Laws, or any claim for physical or
emotional distress or injuries, or any other duty or obligation
of any kind or description. This release shall apply to all
known, unknown, unsuspected and unanticipated claims, liens,
injuries and damages including, but not limited to, claims of
employment discrimination, indemnity for discharge, or claims
sounding in tort or in contract, express or implied, as of the
date of the execution of this Agreement. Notwithstanding the
foregoing, Kingdon does not release his right to have the Company
perform its obligations under this Agreement, including without
limitation, his right to (i) indemnification pursuant to this
paragraph 4, or any other right to indemnification by the
Company, (ii) any compensation or benefits pursuant to any plan
or program that is part of the subject matter of this Agreement,
(iii) pension, health or similar benefits under the Company's
retirement programs.
Kingdon also agrees not to initiate any legal
action, charges or complaints against Bankers Trust in any forum
whatsoever, in connection with the claims released by him
pursuant to this paragraph 4. In the event any such actions,
charges or complaints are asserted in the future by or on behalf
of Kingdon, a material violation of a material provision of this
Agreement shall be deemed to have occurred, entitling Bankers
Trust to the return of the consideration set forth in this
Agreement which is over and above that to which Kingdon is
normally entitled under standard Company policy, as well as the
attorneys' fees incurred by Bankers Trust in defending such
action, charge or complaint.
Bankers Trust expressly denies that it has
violated any law, statute, ordinance, contract, duty or
obligation whatsoever, or that it committed any tort or engaged
in any wrongful conduct with respect to Kingdon. Kingdon acknowledges that the
consideration described in this Agreement is in excess of that to
which he was otherwise entitled upon his termination under either
applicable law, Company policy, or pursuant to any contractual
agreement he may have with Bankers Trust.
Bankers Trust agrees that Kingdon is entitled to
indemnification to the fullest extent provided by the Company for
Officers as set forth in the Company's bylaws as may exist from
time to time, but in no event less favorable than available to
other officers. Kingdon shall also be entitled to officers'
liability insurance in accordance with the terms of the policy
provided by the Company for its Officers as amended from time to
time.
5. The terms of this Agreement, the claims that have
been or could have been raised against Bankers Trust as of the
date of this Agreement, and the facts and circumstances
<PAGE>
underlying any such claim shall not be admissible by Kingdon in
any litigation or proceeding in any forum, except as required by
law, for any purpose other than to secure enforcement of the
terms and conditions of this Agreement.
6. Neither Kingdon nor the Company will publish, publicize, or
disseminate or cause to be published, publicized or disseminated
or permit to be published, publicized or disseminated, directly
or indirectly, and will keep entirely confidential any
information, data or documents (1) relating to Kingdon's
employment with and separation from Bankers Trust, except that
either party may discuss the fact that he was employed by
Bankers Trust, his title, salary, compensation, responsibilities
and that he resigned his position; or (2) relating to the terms
of this Agreement or the fact that this Agreement exists, except
for (a) the purpose of enforcing this Agreement should that ever
become necessary; or (b) disclosures required by a court or
governmental agency or by applicable law, or to any
investigatory or regulatory agency with authority over the
Company. Kingdon may disclose the terms of this Agreement to
his spouse, accountants, attorneys or tax preparers, or
prospective employers, provided that disclosures to prospective
employers shall be limited to the provisions of paragraphs 6 and
7, and, the Company may disclose the terms of this Agreement to
<PAGE>
its accountants, attorneys, tax preparers, its employees who
have a need to know such terms, and as otherwise set forth
above.
Kingdon further agrees that he will not publish,
publicize or disseminate, or cause to be published, publicized
or disseminated or permit to be published, publicized or
disseminated, directly or indirectly, and will keep entirely
confidential any confidential information, data or documents
relating to the operations of the Company, including any trade
secrets or other proprietary information, except as may be
required by a court or governmental agency. Confidential
information shall mean all information that is not known or
available to the public concerning the business of the Company
relating to its financial products, product development, trade
secrets, customers, suppliers, finances, and business plans and
strategies, including know-how, financial information concerning
the Company and its customers and specifications, programs,
documentation and manuals relating to all financial models,
telecommunications and computer systems, software, hardware and
applications developed or used by Bankers Trust. Confidential
information shall include information that is, or becomes, known
to the public as a result of a breach by Kingdon of the
provisions of this paragraph 6. Bankers Trust reserves the
right to seek appropriate damages, including attorneys' fees and
<PAGE>
injunctive relief, should Kingdon violate this Agreement.
7. Kingdon agrees that during the one-year period
following the execution of this Agreement, he will not, directly
or indirectly, personally solicit or induce or cause any third
party to solicit or induce any Bankers Trust employees to work
for him or any competitor of the Company, it being understood
that if any such employee contacts Kingdon on his or her own
initiative, Kingdon may thereafter discuss with such employee
his or her working for him or a competitor, provided that in
such situations, Kingdon agrees to notify the Chief Legal or
Human Resources Officer of Bankers Trust and advise either
executive of such contact and of the employee(s) making such
contact, before extending any offer of employment to such
individual(s).
8. The failure of either party to insist upon strict
adherence to any term of this Agreement on any occasion shall not
be considered a waiver thereof or deprive such party of the right
thereafter to insist upon strict adherence to that term or any
other term of the Agreement. Any waiver must be in writing and
signed by Kingdon or any authorized officer of the Company, as
the case may be.
<PAGE>
9. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without
giving effect to its conflicts of laws provisions.
10. If any of the provisions, terms, clauses, or
waivers or releases of claims or rights contained in this
Agreement are declared illegal, unenforceable, or ineffective in
a legal forum, such provisions, terms, clauses, waivers, releases
or claims or rights shall be deemed severable, such that all
other provisions, terms, clauses, waivers, releases of claims and
rights contained in this Agreement shall remain valid and binding
upon both parties.
11. Kingdon agrees to voluntarily cooperate with the
Company in connection with any threatened, actual or future
litigation or investigations by federal, state, or local agencies
involving the Company, whether administrative, civil or criminal
in nature, in which and to the extent his cooperation is deemed
necessary by the Company in its discretion.
12. Kingdon acknowledges that he has had up to twenty-
one (21) days from the date he received this Agreement to
consider the terms of this Agreement and further, acknowledges
that he is fully aware of its contents and of its legal effects.
Kingdon is also hereby advised in writing by Bankers Trust to
consult with an attorney regarding this Agreement.
<PAGE>
13. This Agreement has been executed freely,
knowingly and voluntarily by Kingdon without duress, coercion, or
undue influence, with a full and free understanding of its terms.
This Agreement is revocable by either party for seven (7) days
following its execution, after which time it shall become
effective and enforceable. Notice of revocation must be sent in
writing to the other party prior to the eighth day after this
Agreement is signed by the party seeking revocation. If Kingdon
wishes to revoke his agreement, his written notice of revocation
must be received within the seven (7) day revocation period by
Peter Gurney, Managing Director, at the following address:
Bankers Trust New York Corporation, 130 Liberty Street, New York,
New York.
14. This Agreement supersedes all prior oral and
written agreements, if any, with respect to the subject matter
hereof between the parties. This Agreement may not be changed
except by a writing signed by Kingdon and an authorized management
representative of Bankers Trust.
<PAGE>
AGREED:
/S/B.J. KINGDON
B.J. KINGDON
February 11, 1997
Date
On this 11TH day of FEBRUARY 1997, before me personally
came B.J. KINGDON to me known to be the individual
described in and who executed the foregoing Settlement
and Non-disclosure Agreement, and duly acknowledged
to me that he executed the same.
/S/ PERRY V. CAPITANI
Notary Public
AGREED:
BANKERS TRUST NEW YORK
CORPORATION on behalf of
Bankers Trust
By: /S/ PERTER GURNEY
PETER GURNEY
FEBRUARY 11, 1997
Date
On this 11TH day of FEBRUARY 1997, before me personally
came PETER GURNEY, authorized representative for Bankers
Trust New York Corporation, to me known to be the individual
described in and who executed the foregoing Settlement and
Non-disclosure Agreement, and duly acknowledged to me that
he executed the same.
/S/PERRY V. CAPITANI
Notary Public
PERRY V. CAPITANI
NOTARY PUBLIC, STATE OF NEW YORK
NO.4863442
QUALIFIED IN NASSAU COUNTY
CERTIFICATE FILED IN NEW YORK COUNTY
COMMISSION EXPIRES OCTOBER 27,1998
