-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G518pKMbbLYjbvqPk7WU/qPm/bukEjcGDoGcJnlvbhxszzTDpWGFvIRqaGxhO5gq /NFmiouNFyxXFLLuRr3DBA== 0000927016-99-002621.txt : 19990719 0000927016-99-002621.hdr.sgml : 19990719 ACCESSION NUMBER: 0000927016-99-002621 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990715 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990716 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKBOSTON CORP CENTRAL INDEX KEY: 0000036672 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 042471221 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-06522 FILM NUMBER: 99665929 BUSINESS ADDRESS: STREET 1: 100 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174342200 FORMER COMPANY: FORMER CONFORMED NAME: BANK OF BOSTON CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIRST NATIONAL BOSTON CORP DATE OF NAME CHANGE: 19830414 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): JULY 15, 1999 BANKBOSTON CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 1-6522 04-2471221 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 100 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 434-2200 ================================================================================ -2- ITEM 5. OTHER EVENTS. - ---------------------- On July 15, 1999, BankBoston Corporation (the Corporation) issued a press release announcing its earnings for the quarter ended June 30, 1999. The financial information that is included herewith as Exhibit 99(a) was included in the Corporation's press release and is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. - ------------------------------------------- (c) Exhibits. 99(a) Financial information included in the Corporation's Press Release dated July 15, 1999. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BANKBOSTON CORPORATION Dated: July 16, 1999 /s/ Robert T. Jefferson ------------------------- Robert T. Jefferson Comptroller EX-99.A 2 BANKBOSTON REPORTS SECOND QUARTER NET INCOME EXHIBIT 99 (A) BANKBOSTON REPORTS SECOND QUARTER NET INCOME OF $250 MILLION OR $.83 PER SHARE 11% GROWTH IN EARNINGS PER SHARE FROM FIRST QUARTER BOSTON, July 15, 1999 -- BankBoston Corporation (NYSE: BKB) reported today second quarter net income of $250 million, or $.83 per common share on a diluted basis. This compares with $223 million, or $.75 per share, in the first quarter of 1999 and $242 million, or $.80 per share, in the second quarter of 1998. Net income for the first half of 1999 was $473 million, or $1.58 per share, compared with net income for the first half of 1998 of $480 million, or $1.58 per share. Highlights were as follows (current quarter amounts shown for total revenues and operating income exclude business sale gains and valuation writedowns related to the transfer of commercial loans into an accelerated disposition portfolio): . Revenues, on a fully taxable equivalent basis, were $1,371 million, compared with $1,234 million in the prior quarter and $1,102 million in the second quarter of 1998. The growth from prior periods reflected increases from several businesses, including a record quarter from Robertson Stephens; . Operating income (pre-tax income before provision for credit losses), on a fully taxable equivalent basis, was $472 million in the second quarter, compared with $428 million in the prior quarter and $455 million in the second quarter of 1998; . The Corporation's Brazilian and Argentine operations continued their strong performance despite a difficult economic environment and together they reported an increase of approximately 50% in net income this year compared with the first half of 1998; . Return on average common equity was 19.92% in the second quarter, compared with 18.54% in the prior quarter and 20.70% in the second quarter of 1998; . Return on average assets was 1.25% in the second quarter, compared with 1.19% in the prior quarter and 1.36% in the second quarter of 1998; . Nonaccrual loans and OREO totaled $386 million at June 30, 1999, compared with $382 million at March 31, 1999 and June 30, 1998; . The provision for credit losses was $95 million in the second quarter, compared with $70 million in the prior quarter and $60 million in the second quarter of 1998. Net credit losses were $61 million in the current quarter, which represented a $5 million decline from the first quarter. This decline included: (a) higher recoveries of $45 million, which mainly resulted from a partial insurance recovery related to international private banking loans that had been charged off in the first quarter of 1998, and (b) higher chargeoffs of $40 million, which included the transfer of commercial loans into an accelerated disposition portfolio. Net credit losses in the second quarter of 1998 were $51 million. The reserve for credit losses grew to 1.89% of outstanding loans and leases at June 30, 1999, compared with 1.77% at March 31, 1999 and 1.70% at June 30, 1998; . The second quarter included a gain of $50 million from the sale of the Corporation's minority interest in Partners First (a credit card company) and valuation writedowns to noninterest income of $25 million resulting from the aforementioned transfer of commercial loans into an accelerated disposition portfolio. 1 NONINTEREST INCOME The components of noninterest income are as follows:
First Second Quarter Six Months Quarter ---------------- ----------------- 1999 (in millions) 1999 1998 Change 1999 1998 Change - --------- ------ ------ ------- ------- ------ ------- $ 334 Financial service fees and commissions $ 456 $ 195 $261 $ 789 $ 360 $ 429 34 Net equity and mezzanine profits 26 84 (58) 59 136 (77) 33 Mutual fund fees 35 32 3 67 62 5 39 Personal trust fees 41 41 0 81 82 ( 1) 7 Other trust and agency fees 6 9 ( 3) 13 17 ( 4) 39 Trading profits and commissions 41 (4) 45 80 30 50 45 Net foreign exchange profits 37 32 5 82 61 21 (2) Securities gains/(losses), net (3) 11 (14) (5) 36 (41) 66 Other income 48 57 ( 9) 116 97 19 ----- ----- ----- ---- ------ ------ ----- 595 Subtotal 687 457 230 1,282 881 401 0 Gain on sale of businesses 50 0 50 50 165 (115) 0 Valuation writedowns: commercial loans transferred (25) 0 (25) (25) 0 (25) into an accelerated disposition portfolio ----- ----- ----- ---- ------ ------ ----- $ 595 Total $ 712 $ 457 $255 $1,307 $1,046 $ 261 ===== ===== ===== ==== ====== ====== =====
. The significant growth in financial service fees and commissions is detailed below. . Equity and mezzanine profits declined in all comparisons mainly due to a lower level of sales activity. At June 30, 1999, the Private Equity portfolio had a carrying value of $1.5 billion compared with $1.2 billion at June 30, 1998. . Mutual fund fees improved in all comparisons due to a higher level of fees from Brazil, Argentina and international private banking. The Corporation remains among the top mutual fund providers in Brazil and Argentina at June 30, 1999, ranking fifth in Brazil with assets under management of $4.6 billion and first in Argentina with assets under management of $1.7 billion. . The improvement in trading profits and commissions from all prior periods was due, in part, to an increase in profits from Robertson Stephens, which was acquired by the Corporation during the third quarter of 1998. Also contributing to the improvement in the prior year comparisons were profits earned during 1999 by the Boston-based emerging markets trading unit compared with losses incurred during 1998. . Foreign exchange profits were up in both prior year comparisons as the Corporation's Boston-based business benefited from a greater volume of customer transactions due, in part, to volatile market conditions in 1999. Higher profits from the foreign exchange businesses in Chile and Mexico also contributed to the increases. Lower market volatility during the second quarter of 1999 resulted in a decline in profits from the high levels posted in the first quarter by the Boston-based business and Argentina. . Net securities losses were recorded in the current year periods while net gains, which were due to stronger domestic and international markets, were recorded in 1998. . The change in other income in the first quarter and six month comparisons was affected by gains that arose in the first quarter of 1999 from currency positions maintained in Brazil, as the Brazilian government devalued its currency by allowing it to float freely against the U.S. dollar. All comparisons of other income were affected by higher levels of earnings from minority owned subsidiaries; increased revenue from investments in bank owned life insurance policies (largely offset by the funding cost for the investment that was included in net interest revenue); and the recognition of translation losses in the second quarter of 1999, which had previously been included in the translation component of equity. In addition, the prior year comparisons reflected the impact of a gain from the second quarter of 1998 sale of the Corporation's minority interest in a Mexican pension company. . During the second quarter of 1999, the Corporation recorded a $50 million gain in connection with the sale of its minority interest in Partners First (a credit card company) and also recorded valuation writedowns of $25 million from the transfer of commercial loans into an accelerated disposition portfolio. During the first quarter of 1998, the Corporation recorded a gain of $165 million related to the sale of its 26% ownership interest in HomeSide Inc., a mortgage banking company. The components of financial service fees and commissions are as follows:
First Quarter Second Quarter Six Months - --------- -------------- -------------- 1999 (in millions) 1999 1998 Change 1999 1998 Change - --------- ----- ----- ------ ----- ----- ------ $ 80 Deposit and electronic banking fees $ 94 $ 76 $ 18 $ 174 $ 146 $ 28 20 Letters of credit and acceptance fees 19 19 0 39 38 1 18 Other loan-related fees 19 17 2 37 31 6 21 Credit card fees 23 12 11 44 22 22 28 Syndication and agent fees 26 20 6 54 35 19 60 Underwriting fees 89 10 79 149 16 133 55 Brokerage fees and commissions 74 3 71 129 6 123 20 Advisory fees 72 11 61 91 16 75 32 Other 40 27 13 72 50 22 ----- ----- ----- ---- ----- ----- ---- $ 334 Total $ 456 $ 195 $261 $ 789 $ 360 $429 ===== ===== ===== ==== ===== ===== ====
. Deposit and electronic banking fees improved in all comparisons due mainly to an increase in domestic electronic banking fees, as well as higher fees from Argentina and Brazil. . The increase in credit card fees from the first quarter is mainly due to higher fees from Argentina and Brazil. Compared with prior year periods, the growth was mainly due to higher fees from Brazil and Uruguay. The latter was affected by the acquisition of OCA (a credit card and consumer finance company in Uruguay) during 1998. . Syndication and agent fees increased in the prior year comparisons due to a higher level of activity. . The significant increase in underwriting, brokerage and advisory fees in all comparisons relates to growth from Robertson Stephens, an investment banking company acquired by the Corporation during the third quarter of 1998. Business volumes have been very strong during the first half of 1999, particularly in the second quarter. . Other financial service fees improved in all comparisons due, in part, to a higher level of fees from Argentina and Brazil. NET INTEREST REVENUE Net interest revenue, on a fully taxable equivalent basis, was $684 million for the second quarter of 1999, compared with $639 million in the prior quarter and $645 million in the second quarter of 1998. Net interest margin was 4.03% for the second and first quarters of 1999, compared with 4.17% in the second quarter of last year. For the first half of 1999, net interest revenue on a fully taxable equivalent basis was $1,324 million, compared with $1,252 million in the first half of 1998. Net interest margin was 4.03% for the first half of 1999, compared with 4.12% for the first half of 1998. The $45 million increase in net interest revenue from the prior quarter was due to (a) an increase from the Private Equity business due to a higher level of dividends, (b) an increase from Brazil due, in part, to wider spreads and the absence of a first quarter charge related to fiscal reforms that were passed by the Brazilian government, including certain tax measures and (c) wider spreads from Argentina. All of these factors also had a positive impact on net interest margin. In addition, one more day in the second quarter accrual period contributed to the improvement in net interest revenue. Overall, net interest margin was flat with the first quarter as the improvements discussed above were offset by the impact of a $2.5 billion increase in the average balance of liquid, lower-yielding assets in the Corporation's Section 20 subsidiary, needed to support a much higher level of activity in Robertson Stephens. Compared with prior year periods, net interest revenue improved while net interest margin declined. The increase in net interest revenue was mainly driven by Argentina, which benefited from wider spreads and an increase in average earning assets of approximately $1 billion. The latter reflected expansion activities, including the acquisition of Deutsche Bank Argentina and the opening of new branches. In addition, the net interest revenue comparisons also benefited from last year's acquisition of OCA and higher domestic loan fees. Partially offsetting the improvement in the six month comparison and contributing to the decline in net interest margin was the absence of net interest revenue from the national credit card business, which was contributed into a joint venture during the first quarter of 1998, and the impact of funding costs associated with an investment in bank owned life insurance policies. The major factor behind the decline in net interest margin in both comparisons was a higher level of liquid, lower-yielding assets in the Corporation's Section 20 subsidiary to support the investment banking activities of Robertson Stephens, which was acquired by the Corporation during the third quarter of 1998. Average earning assets from the Section 20 subsidiary grew approximately $6.5 billion in the quarterly comparison and $5.5 billion in the six month comparison. This more than offset net interest margin improvements posted by Argentina and Brazil, as well as increases attributable to the OCA acquisition and higher domestic loan fees. NONINTEREST EXPENSE The components of noninterest expense are as follows:
First Quarter Second Quarter Six Months - --------- -------------- ---------------- 1999 (in millions) 1999 1998 Change 1999 1998 Change - --------- ----- ----- ------ ------ ------ ------ $ 473 Employee costs $ 547 $ 368 $179 $1,021 $ 722 $299 109 Occupancy & equipment 113 96 17 221 190 31 27 Professional fees 25 22 3 52 46 6 25 Advertising and public relations 32 32 0 56 54 2 35 Communications 37 31 6 72 61 11 13 Goodwill amortization 13 8 5 25 16 9 124 Other 132 90 42 258 219 39 ----- ----- ----- ---- ------ ------ ---- $ 806 Total $ 899 $ 647 $252 $1,705 $1,308 $397 ===== ===== ===== ==== ====== ====== ====
Below is an analysis of the changes in noninterest expense from the first quarter (dollars in millions): - ------------------------------------------------------------------------------------------------------ Noninterest expense: first quarter 1999 $806 - ------------------------------------------------------------------------------------------------------ . Increase in direct expenses from wholesale banking, mainly Robertson Stephens 88 - ------------------------------------------------------------------------------------------------------ . Other factors, net (mainly advertising) 5 ---- - ------------------------------------------------------------------------------------------------------ Noninterest expense: second quarter 1999 $899 ==== - ------------------------------------------------------------------------------------------------------
Noninterest expense increased $93 million from the first quarter of 1999 due mainly to higher expenses in the Wholesale Bank. This reflects an increase in incentive compensation which corresponds to a significantly higher level of revenue, principally from investment banking activities in Robertson Stephens. Below is an analysis of the changes in noninterest expense from prior year periods (dollars in millions):
- ------------------------------------------------------------------------------------------------------------------------- Q2 6 MOS. --------- ----------- - -------------------------------------------------------------------------------------------------------------------------- Noninterest expense: 1998 period $647 $1,308 - ------------------------------------------------------------------------------------------------------------------------- . Increase in direct expenses from wholesale banking, mainly Robertson Stephens 206 338 - ------------------------------------------------------------------------------------------------------------------------- . Increase in direct expenses from Brazil and Southern Cone (Argentina, Uruguay, Chile) 32 80 - ------------------------------------------------------------------------------------------------------------------------- . Absence of Q1'98 charges related to the Regional Bank, as well as the realignments of the European and the private banking businesses 0 (48) - ------------------------------------------------------------------------------------------------------------------------- . Other factors, net 14 27 ---- ------ - ------------------------------------------------------------------------------------------------------------------------- Noninterest expense: 1999 period $899 $1,705 ==== ====== - -------------------------------------------------------------------------------------------------------------------------
As noted above, the vast majority of the increase in noninterest expense from the 1998 periods mainly reflects expansion activities by the Corporation including the acquisition of Robertson Stephens in the third quarter of 1998, branch expansion in Argentina and Brazil, and the acquisition of OCA. In addition, higher levels of incentive compensation associated with the growth in revenue also contributed to the increase. CREDIT PROFILE Loan and Lease Portfolio The segments of the lending portfolio are as follows:
(in millions) 6-30-99 3-31-99 12-31-98 9-30-98 6-30-98 -------- -------- --------- -------- -------- United States Operations: Commercial, industrial and financial $ 16,603 $ 17,028 $ 16,294 $ 18,218 $ 16,275 Commercial real estate: Construction 353 228 215 209 219 Other commercial real estate 3,323 3,531 3,871 4,089 3,876 Consumer-related loans: Residential mortgages 1,729 1,840 2,035 2,111 2,229 Home equity 2,051 2,325 2,294 2,672 2,871 Credit card 375 379 404 393 412 Other 2,357 2,433 2,532 2,693 2,753 Lease financing 1,810 1,768 1,801 1,607 1,609 Unearned income (282) (291) (275) (231) (232) -------- -------- --------- -------- -------- 28,319 29,241 29,171 31,761 30,012 -------- -------- --------- -------- -------- International Operations: Commercial 10,170 10,308 10,356 10,636 10,218 Consumer-related loans: Residential mortgages 1,281 1,249 1,251 1,383 1,318 Credit card 351 327 362 339 248 Other 1,166 1,162 1,192 1,164 1,087 Lease financing 677 705 725 652 519 Unearned income (175) (217) (251) (188) (148) -------- -------- --------- -------- -------- 13,470 13,534 13,635 13,986 13,242 -------- -------- --------- -------- -------- Total loans and lease financing $ 41,789 $ 42,775 $ 42,806 $ 45,747 $ 43,254 ======== ======== ========= ======== ========
Loans and leases were $41.8 billion at June 30, 1999 compared with $42.8 billion at March 31, 1999. The domestic portfolio declined approximately $900 million from March 31 mainly due to lower levels of commercial and home equity loans due, in part, to syndication and securitization activity, respectively. The international portfolio decreased slightly from March 31 as an increase in trade-related Brazilian loans was offset by declines related to syndication activities. Nonaccrual Loans and OREO Nonaccrual loans and OREO amounted to $386 million at June 30, 1999, compared with $382 million at March 31, 1999, and June 30, 1998. The growth in the international commercial portfolio from March 31 reflects the recessionary environment in Latin America and includes the placement of one large loan on nonaccrual. Nonaccrual loans and OREO represented .9% of related assets at June 30, 1999, March 31, 1999 and June 30, 1998. The components of consolidated nonaccrual loans and OREO are as follows:
(in millions) 6-30-99 3-31-99 12-31-98 9-30-98 6-30-98 -------- -------- --------- -------- -------- Domestic nonaccrual loans: Commercial, industrial and financial $ 54 $ 81 $ 86 $ 71 $ 63 Commercial real estate: Construction 0 2 2 2 2 Other commercial real estate 9 17 19 30 33 Consumer-related loans: Residential mortgages 29 30 36 36 42 Home equity 15 16 17 18 15 Credit card 5 6 6 6 6 Other 14 16 20 21 18 -------- -------- --------- -------- -------- 126 168 186 184 179 -------- -------- --------- -------- -------- International nonaccrual loans: Commercial 126 77 86 103 107 Consumer-related loans: Residential mortgages 58 56 50 39 36 Credit card 6 8 6 7 6 Other 48 49 47 33 26 -------- -------- --------- -------- -------- 238 190 189 182 175 -------- -------- --------- -------- -------- Total nonaccrual loans 364 358 375 366 354 OREO 22 24 27 29 28 -------- -------- --------- -------- -------- Total $ 386 $ 382 $ 402 $ 395 $ 382 ======== ======== ========= ======== ========
Provision and Reserve for Credit Losses The reserve for credit losses at June 30, 1999 was $792 million, or 1.89% of outstanding loans and leases, compared with $758 million, or 1.77% at March 31, 1999 and $734 million, or 1.70% at June 30, 1998. The reserve for credit losses was 218% of nonaccrual loans at June 30, 1999, compared with 212% at March 31, 1999 and 207% at June 30, 1998. The provision for credit losses was $95 million in the second quarter of 1999, compared with $70 million in the first quarter of 1999 and $60 million in the second quarter of 1998. Net credit losses were $61 million in the second quarter of 1999, compared with $66 million in the first quarter of 1999 and $51 million in the second quarter of 1998. The $5 million decline in net credit losses from the first quarter was due to higher recoveries of $45 million, which mainly resulted from a partial insurance recovery related to international private banking loans that had been charged off in the first quarter of 1998, and higher chargeoffs of $40 million, which included the transfer of commercial loans into an accelerated disposition portfolio. The carrying value of this portfolio was approximately $100 million at June 30, 1999. Net credit losses as a percent of average loans and leases on an annualized basis were .57% in the second quarter of 1999, compared with .63% for the first quarter of 1999 and .46% in the second quarter of 1998. Net credit losses were as follows:
First Second Quarter Six Months Quarter ----------------- ---------------- 1999 (in millions) 1999 1998 1999 1998 - ----------- ------ ------ ------ ------ Domestic $ 21 Commercial, industrial and financial $ 49 $ 5 $ 70 $ 18 (3) Commercial real estate 0 (1) (3) (2) Consumer-related loans: 0 Residential mortgages 0 1 0 3 4 Credit card 4 6 8 26 1 Home equity 1 1 2 3 13 Other 9 11 22 30 ----- ----- ----- ----- ----- 36 63 23 99 78 International 8 Commercial (25) 13 (17) 89 Consumer-related loans: 4 Credit card 5 2 9 4 18 Other 18 13 36 21 ----- ----- ----- ----- ----- 30 (2) 28 28 114 ----- ----- ----- ----- ----- $ 66 Total $ 61 $ 51 $ 127 $ 192 ===== ===== ===== ===== =====
THE CORPORATION BankBoston, with assets of $77.6 billion and some 25,000 employees, is the nation's oldest commercial bank and New England's only global bank. BankBoston is engaged in consumer, small business and corporate banking in New England; delivering sophisticated financial solutions to corporations and governments nationally and internationally; and full service banking in leading Latin American markets. The Corporation's common stock is listed on the New York and Boston stock exchanges. On March 14, 1999, the Corporation entered into an agreement and plan of merger with Fleet Financial Group, Inc. The merger, which will be accounted for as a pooling of interests, is subject to shareholder and regulatory approvals, and is expected to be completed late in the third quarter or early in the fourth quarter of 1999. A special meeting of the Corporation's stockholders to consider and vote on the planned merger with Fleet Financial Group, Inc. has been scheduled for August 11, 1999. ************ This press release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from estimates. These risks and uncertainties include, among other things, (1) significant changes in world financial markets, particularly in Latin America and Asia; (2) the ability of various countries in Asia and Latin America, particularly in Brazil, to institute timely and effective economic policies; (3) developments in general economic conditions, both domestic and international, including interest rate and currency fluctuations, market fluctuations and perceptions, and inflation; (4) legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; (5) changes in the competitive environment for financial services organizations and the Corporation's ability to manage those changes; and (6) the Corporation's ability and resources, in both its domestic and international operations, to effectively execute its articulated business strategies and manage risks associated with the Year 2000 issue. In addition to these factors, the forward-looking statements in this press release relating to the Corporation's pending merger with Fleet Financial Group, Inc. are subject to a number of risks and uncertainties including, among other things, (1) the ability of the combined entity to fully realize expected cost savings from the merger or to realize those savings within the expected timeframe; (2) the level of revenues following the merger; (3) the level of costs related to the integration of the businesses of the Corporation and Fleet. CONSOLIDATED BALANCE SHEET (dollars in millions)
March 31 June 30 -------- ------------------- 1999 1999 1998 -------- ------- ------- Assets Securities: $13,516 Available for sale $13,427 $11,218 410 Held to maturity 397 528 42,775 Loans and lease financing 41,789 43,254 (758) Reserve for credit losses (792) (734) ------- ------- ------- 42,017 Net loans and lease financing 40,997 42,520 6,939 Other earning assets 10,128 5,704 12,826 Cash and other assets 12,615 10,529 ------- ------- ------- $75,708 Total Assets $77,564 $70,499 ======= ======= ======= Liabilities and Stockholders' Equity $48,468 Deposits $49,036 $45,196 13,878 Funds borrowed 14,989 13,654 4,616 Notes payable 4,599 3,682 2,788 Other liabilities 2,871 1,992 Guaranteed preferred beneficial interests in 995 Corporation's junior subordinated debentures 995 995 ------- ------- ------- 70,745 Total Liabilities 72,490 65,519 ------- ------- ------- Stockholders' Equity 0 Preferred equity 0 278 4,963 Common equity 5,074 4,702 ------- ------- ------- 4,963 Total Stockholders' Equity 5,074 4,980 ------- ------- ------- $75,708 Total Liabilities and Stockholders' Equity $77,564 $70,499 ======= ======= =======
SELECTED AVERAGE BALANCES
Quarter Ended Quarters Ended Six Months Ended ------------- -------------- ---------------- March 31 June 30 June 30 -------- -------------- ---------------- 1999 1999 1998 1999 1998 ---- ------- -------------- ------- ---------------- Assets $42,536 Loans and lease financing $42,538 $44,196 $42,537 $43,952 13,247 Securities 13,898 11,188 13,574 10,898 64,280 Total earning assets 68,146 61,961 66,223 61,228 76,110 Total assets 80,544 71,236 78,338 70,476 Liabilities and Stockholders' Equity 40,378 Interest bearing deposits 40,676 37,195 40,528 37,176 7,038 Noninterest bearing deposits 7,424 8,209 7,232 8,411 ------- ------- ------- ------- ------- 47,416 Total deposits 48,100 45,404 47,760 45,587 5,526 Notes payable (1) 5,586 4,392 5,556 4,073 59,280 Total interest bearing liabilities 63,212 54,641 61,257 53,932 4,877 Common stockholders' equity 5,039 4,600 4,957 4,525 4,877 Total stockholders' equity 5,039 4,878 4,957 4,803
(1) Amounts include guaranteed preferred beneficial interests in the Corporation's junior subordinated debentures. CONSOLIDATED STATEMENT OF INCOME (dollars in millions, except per share amounts)
Quarter Ended Quarters Ended Six Months Ended March 31 June 30 June 30 - ----------------- ---------------------- --------------------- 1999 1999 1998 1999 1998 - ----------------- --------- --------- --------- -------- $1,371.7 Interest income $1,447.7 $1,390.2 $2,819.4 $2,727.6 736.9 Interest expense 769.5 750.7 1,506.4 1,484.8 -------- -------- -------- -------- -------- 634.8 Net interest revenue 678.2 639.5 1,313.0 1,242.8 70.0 Provision for credit losses 95.0 60.0 165.0 200.0 -------- -------- -------- -------- -------- Net interest revenue after provision 564.8 for credit losses 583.2 579.5 1,148.0 1,042.8 -------- -------- -------- -------- -------- Noninterest income: 333.5 Financial service fees and commissions 455.7 194.6 789.2 359.7 79.1 Trust and investment management fees 81.6 82.1 160.8 161.4 39.0 Trading profits and commissions 40.9 (3.7) 79.9 30.4 (2.0) Securities gains/(losses), net (2.7) 11.4 (4.6) 36.2 145.1 Other income 136.2 173.0 281.2 458.8 -------- -------- -------- -------- -------- 594.7 Total noninterest income 711.7 457.4 1,306.5 1,046.5 -------- -------- -------- -------- -------- Noninterest expense: 401.9 Salaries 482.5 305.1 884.5 597.8 71.5 Employee benefits 65.1 63.3 136.6 124.2 64.0 Occupancy expense 67.9 55.8 131.9 110.1 44.6 Equipment expense 44.8 39.6 89.4 79.8 223.5 Other expense 239.1 183.6 462.6 396.6 -------- -------- -------- -------- -------- 805.5 Total noninterest expense 899.4 647.4 1,705.0 1,308.5 -------- -------- -------- -------- -------- 354.0 Income before income taxes 395.5 389.5 749.5 780.8 131.0 Provision for income taxes 145.3 147.6 276.3 300.7 -------- -------- -------- -------- -------- $ 223.0 NET INCOME $ 250.2 $ 241.9 $ 473.2 $ 480.1 ======== ======== ======== ======== ======== NET INCOME PER COMMON SHARE: $ .75 Basic $ .84 $ .81 $ 1.60 $ 1.61 $ .75 Diluted $ .83 $ .80 $ 1.58 $ 1.58 $ .32 DIVIDENDS PAID PER COMMON SHARE $ .32 $ .29 $ .64 $ .58 Average number of common shares, in thousands: 295,935 Basic 296,832 293,769 296,386 293,159 298,477 Diluted 301,662 298,275 300,095 297,579 $ 0 Preferred dividends $ 0 $ 4.4 $ 0 $ 8.8
NUMBER OF EMPLOYEES
June 30 Mar. 31 June 30 1999 1999 1998 ----------- --------- ----------- Full time equivalent employees 24,800 24,700 22,900
OTHER DATA (dollars in millions, except per share amounts)
Quarter Ended Quarters Ended Six Months Ended - ----------------- --------------- ----------------- March 31 June 30 June 30 - ----------------- --------------- ----------------- 1999 1999 1998 1999 1998 - ----------------- ------- --------------- --------- ----------------- 1.19% Return on average total assets (annualized) 1.25% 1.36% 1.22% 1.37% 18.54% Return on average common equity (annualized) 19.92% 20.70% 19.25% 21.01% $639.0 Net interest revenue, fully taxable equivalent basis $684.6 $644.9 $1,323.7 $1,251.9 4.03% Consolidated net interest margin 4.03% 4.17% 4.03% 4.12% 3.55% Domestic net interest margin (estimated) 3.52% 4.12% 3.53% 4.13% 5.23% International net interest margin (estimated) 5.29% 4.29% 5.26% 4.11%
March 31 June 30 - ----------------- ---------------------- 1999 1999 1998 - ----------------- --------- --------- COMMON STOCKHOLDERS' EQUITY: $ 4,963 Common stockholders' equity $ 5,074 $ 4,702 296,626 Common shares outstanding, in thousands 297,041 294,126 Per common share: $ 16.73 Book value $ 17.08 $ 15.99 43.31 Market value 51.13 55.63 CAPITAL RATIOS/REGULATORY CAPITAL: 5.57% Tangible Common Equity ratio 5.59% 6.09% Risk-based capital ratios: Estimate 7.2% Tier 1 capital ratio (minimum required 4.00%) 7.5% 8.4% 11.5% Total capital ratio (minimum required 8.00%) 11.9% 13.0% 6.9% Leverage ratio 6.8% 7.8% $ 5,186 Tier 1 capital $ 5,383 $ 5,491 8,335 Total capital 8,566 8,524 72,200 Total risk-adjusted assets 72,086 65,351
RESERVE FOR CREDIT LOSSES (dollars in millions)
Quarter Ended Quarters Ended Six Months Ended March 31 June 30 June 30 - ---------------- -------------------- --------------------- 1999 1999 1998 1999 1998 - ---------------- -------- ------- -------- -------- $753.5 Beginning balance $ 757.4 $725.1 $ 753.5 $ 711.6 70.0 Provision for credit losses 95.0 60.0 165.0 200.0 0.0 Reserve of acquired companies 0.0 0.0 0.0 14.0 (83.6) Credit losses (122.7) (73.4) (206.2) (229.6) 17.5 Recoveries 62.1 22.2 79.5 37.9 ------- ------- ------ ------- ------- (66.1) Net credit losses (60.6) (51.2) (126.7) (191.7) ------- ------- ------ ------- ------- $757.4 Ending balance $ 791.8 $733.9 $ 791.8 $ 733.9 ======= ======= ====== ======= ======= 1.77% Reserve as a % of loans and leases 1.89% 1.70% 1.89% 1.70% ======= ======= ====== ======= ======= 212% Reserve as a % of nonaccrual loans 218% 207% 218% 207% ======= ======= ====== ======= =======
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