-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o9dRnAyUIHOac9U20g9gEeaiNZjOCMs1tzUzb0jlfDTWMQbUcGlBtNvUdep2dSia juP48sGPdlqghmW8X8MjlQ== 0000083246-94-000026.txt : 19940815 0000083246-94-000026.hdr.sgml : 19940815 ACCESSION NUMBER: 0000083246-94-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REPUBLIC NEW YORK CORP CENTRAL INDEX KEY: 0000083246 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 132764867 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07436 FILM NUMBER: 94543429 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125256100 10-Q 1 FOR THE QUARTER ENDED JUNE 30, 1994 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1994 Commission File No. 1-7436 REPUBLIC NEW YORK CORPORATION (Exact name of registrant specified in its charter) Maryland 13-2764867 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 452 Fifth Avenue, New York, New York 10018 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 525-6100 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.... Number of shares outstanding of the issuer's common stock, as of July 31, 1994: 53,068,737 shares. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited June 30, 1994 and December 31, 1993 2 Consolidated Statements of Income - Unaudited Six-Months and Three-Months Ended June 30, 1994 and 1993 3 Consolidated Statements of Cash Flows - Unaudited Six-Months Ended June 30, 1994 and 1993 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis 6-13 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 15 The information contained in the financial statements furnished in this report is unaudited. However, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented, have been included. -1- ITEM 1. FINANCIAL STATEMENTS REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION UNAUDITED
(Dollars in thousands) June 30, December 31, 1994 1993 Assets Cash and due from banks $ 620,597 $ 636,633 Interest-bearing deposits with banks 7,896,011 5,346,647 Precious metals 1,417,216 1,117,610 Securities held to maturity (approximate market value of $5,146,093 in 1994 and $2,088,805 in 1993) 5,257,195 1,992,847 Securities available for sale (at approximate market value) 6,675,918 12,956,946 Total investment securities 11,933,113 14,949,793 Trading account assets (note 1) 3,862,408 1,194,629 Federal funds sold and securities purchased under resale agreements 1,667,189 2,322,465 Loans (net of unearned income of $54,650 in 1994 and $94,825 in 1993) 9,572,683 9,508,558 Allowance for possible loan losses (314,591) (311,855) Loans (net) 9,258,092 9,196,703 Customers' liability on acceptances 1,033,084 1,134,294 Accounts receivable and accrued interest 2,255,195 2,117,879 Investment in affiliate 570,668 625,333 Premises and equipment 405,820 399,626 Other assets 490,370 451,860 Total assets $ 41,409,764 $ 39,493,472 Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 1,469,431 $ 1,427,518 In foreign offices 111,248 135,251 Interest-bearing deposits: In domestic offices 8,454,501 8,724,797 In foreign offices 12,422,264 12,513,684 Total deposits 22,457,444 22,801,250 Trading account liabilities (note 1) 3,025,818 177,475 Short-term borrowings (note 2) 4,965,224 4,164,419 Acceptances outstanding 1,033,641 1,137,636 Accounts payable and accrued expenses 1,562,083 2,873,903 Due to factored clients 600,724 614,549 Other liabilities 160,197 122,203 Long-term debt 2,600,290 2,582,875 Subordinated long-term debt and perpetual capital notes (note 3) 2,405,677 2,271,940 Stockholders' equity: Cumulative preferred stock, no par value 9,631,000 shares outstanding in 1994 and 8,131,000 in 1993 (note 4) 706,425 556,425 Common stock, $5 par value 150,000,000 shares authorized; 53,016,457 shares outstanding in 1994 and 52,703,271 in 1993 265,082 263,516 Surplus 445,052 459,713 Retained earnings 1,328,997 1,204,818 Net unrealized appreciation (depreciation) on securities available for sale, net of taxes (146,890) 262,750 Total stockholders' equity 2,598,666 2,747,222 Total liabilities and stockholders' equity $ 41,409,764 $ 39,493,472 See accompanying notes to consolidated financial statements.
-2- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME UNAUDITED
(In thousands except per share data) Six Months Ended Three Months Ended June 30, June 30, 1994 1993 1994 1993 INTEREST INCOME: Interest and fees on loans $ 337,092 $ 300,134 $ 171,786 $ 150,979 Interest on deposits with banks 127,410 168,418 74,088 74,383 Interest and dividends on investment securities: Taxable 440,376 430,479 221,933 213,794 Exempt from federal income taxes 36,080 31,122 18,581 15,285 Interest on trading account assets 32,556 17,889 14,109 9,171 Interest on federal funds sold and securities purchased under resale agreements 27,131 15,391 15,819 8,342 Total interest income 1,000,645 963,433 516,316 471,954 INTEREST EXPENSE: Interest on deposits 350,361 340,256 182,334 164,609 Interest on short-term borrowings 107,919 98,364 54,705 42,881 Interest on long-term debt 132,143 135,052 67,241 66,188 Total interest expense 590,423 573,672 304,280 273,678 NET INTEREST INCOME 410,222 389,761 212,036 198,276 Provision for loan losses 13,000 50,000 3,000 25,000 Net interest income after provision for loan losses 397,222 339,761 209,036 173,276 OTHER OPERATING INCOME: Income from precious metals 24,393 15,882 11,212 10,398 Foreign exchange trading income 43,931 57,778 21,599 32,799 Trading account profits (losses) and commissions 10,582 19,964 (2,661) 11,200 Investment securities gains, net 13,057 2,456 9,969 2,542 Net gains (losses) on loans sold or held for sale 563 (918) 1,063 (243) Commission income 32,269 20,610 14,769 11,181 Equity in earnings of affiliate 39,656 26,840 18,546 13,538 Other income 33,501 33,322 18,910 13,543 Total other operating income 197,952 175,934 93,407 94,958 OTHER OPERATING EXPENSES: Salaries 130,404 98,596 73,613 50,359 Employee benefits 73,773 68,198 34,961 36,461 Occupancy, net 26,937 23,166 12,951 11,399 Other expenses 135,974 113,627 69,635 58,503 Total other operating expenses 367,088 303,587 191,160 156,722 INCOME BEFORE INCOME TAXES 228,086 212,108 111,283 111,512 Income taxes 68,879 68,435 31,855 36,584 NET INCOME $ 159,207 $ 143,673 $ 79,428 $ 74,928 NET INCOME APPLICABLE TO COMMON STOCK $ 143,790 $ 129,453 $ 71,095 $ 67,873 Net income per common share: Primary $ 2.73 $ 2.48 $ 1.35 $ 1.30 Fully diluted $ 2.65 $ 2.41 $ 1.31 $ 1.26 Average common shares outstanding: Primary 52,595 52,267 52,633 52,336 Fully diluted 56,415 56,127 56,432 56,201 See accompanying notes to consolidated financial statements.
-3- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(In thousands) Six Months Ended June 30, 1994 1993 Cash Flows From Operating Activities: Net income $ 159,207 $ 143,673 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization, net 31,350 20,016 Provision for loan losses 13,000 50,000 Gains on sales of investment securities, net (13,057) (2,456) Net (gains) losses on loans sold or held for sale (563) 918 Equity in earnings of affiliate (39,656) (26,840) Net (increase) decrease in trading accounts 180,564 (30,479) Net decrease in accounts receivable and accrued interest 307,440 36,998 Net decrease in accounts payable and accrued expenses (903,957) (54,390) Other, net 25,218 (118,671) Net cash provided (used) by operating activities (240,454) 18,769 Cash Flows From Investing Activities: Net (increase) decrease in interest-bearing deposits with banks (2,548,987) 3,576,951 Net increase in precious metals (299,606) (247,869) Net (increase) decrease in federal funds sold and securities purchased under resale agreements 655,276 (623,096) Net (increase) decrease in short-term investments 41,413 (90,538) Purchases of securities available for sale (2,800,204) - Proceeds from sales of securities available for sale 2,954,234 - Proceeds from maturities of securities available for sale 1,748,152 151,819 Purchases of securities held to maturity (22,870) (1,852,927) Proceeds from sales of securities held to maturity - 34,362 Proceeds from maturities of securities held to maturity 115,683 1,164,218 Net increase in loans (325,550) (482,188) Investment in affiliate 23,805 19,477 Net cash provided (used) by investing activities (458,654) 1,650,209 Cash Flows From Financing Activities: Net increase (decrease) in deposits (343,556) 790,063 Net increase (decrease) in short-term borrowings 800,805 (2,215,940) Net decrease in due to factored clients (13,825) (12,979) Proceeds from issuance of long-term debt 297,802 277,075 Repayment of long-term debt (279,900) (471,071) Proceeds from issuance of subordinated long-term debt 200,000 - Repayment of subordinated long-term debt (66,000) - Net proceeds from issuance of cumulative preferred stock 146,062 - Cash dividends paid (45,989) (41,256) Other, net 1,804 (84) Net cash provided (used) by financing activities 697,203 (1,674,192) Effect of exchange rate changes on cash and due from banks (14,131) (2,941) Net decrease in cash and due from banks (16,036) (8,155) Cash and due from banks at beginning of period 636,633 490,711 Cash and due from banks at end of period $ 620,597 $ 482,556 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 527,986 $ 628,062 Income taxes $ 71,419 $ 77,163 Transfers from securities available for sale to securities held to maturity $ 3,357,161 $ - See accompanying notes to consolidated financial statements.
-4- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993 1. On January 1, 1994, the Corporation adopted Financial Accounting Standards Board Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts". This interpretation requires, among other things, that unrealized gains and losses on certain off-balance sheet financial instruments be reported on a gross basis except when a legally enforceable netting agreement with a counterparty exists. At June 30, 1994, the adoption of this interpretation resulted in an increase in the Corporation's trading account assets and liabilities of approximately $2.1 billion. The Corporation has elected not to restate prior periods under this interpretation. 2. On March 8, 1994, Republic National Bank of New York (the "Bank"), the principal banking subsidiary of the Corporation, received the net proceeds from the public sale, on March 1, 1994, of $1.0 billion principal amount of 4.30% Notes due March 8, 1995. The Notes are not redeemable prior to maturity and are unsecured and, except with respect to domestic deposits, are unsubordinated debt obligations of the Bank. The net proceeds of this short-term borrowing have been used for the general banking business of the Bank. 3. On May 5, 1994, the Corporation sold, in a public offering, $200 million principal amount of 7 3/4% Subordinated Notes due 2009. The Notes are direct unsecured general obligations of the Corporation and are subordinated to all present and future senior indebtedness of the Corporation. The Notes are not redeemable prior to maturity. The net proceeds received have been used for general corporate purposes. 4. On May 16, 1994, the Corporation sold, in a public offering, 6,000,000 depositary shares, each representing a one-fourth interest in a share of Adjustable Rate Cumulative Preferred Stock, Series D ($100 Stated Value) (the "Preferred Stock"). The dividend rate on the Preferred Stock is determined quarterly by reference to a formula based on certain benchmark market rates, but will not be less than 4 1/2% or more that 10 1/2% per annum for any applicable dividend period. The dividend rate in effect for the period ended June 30, 1994, was 6.05%. The Preferred Stock will be redeemable, in whole or in part, at the option of the Corporation on or after July 1, 1999 at $100 per share (which is equivalent to $25 per depositary share) plus accrued and unpaid dividends to the redemption date. 5. On January 1, 1994, the Corporation adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). SFAS No. 112 requires the recognition of an obligation for the estimated cost of postemployment benefits. Postemployment is defined as the period after employment but before retirement if certain conditions are met. Postemployment benefits include, but are not limited to, salary continuation, severance benefits, job training and counseling, health care and life insurance coverage. The effect of initially adopting this SFAS and the impact of the ongoing costs are not material to the results of operations. 6. Certain amounts from the prior year have been reclassified to conform with 1994 classifications. -5- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Management's discussion and analysis of the summary of operations should be read in conjunction with the consolidated financial statements (unaudited) and notes shown elsewhere in this Report. In the following discussion, the interest income earned on tax exempt obligations has been adjusted (increased) to a fully-taxable equivalent basis. The rate used for this adjustment was approximately 44% in 1994 and 42% in 1993. This tax equivalent adjustment permits all interest income and net interest income to be analyzed on a comparable basis. The following table presents a comparative summary of the increases (decreases) in income and expense for the second quarter and six months ended June 30, 1994 compared to the corresponding periods of 1993.
Increase (Decrease) 2nd Qtr. 1994 vs. 6 Mos. 1994 vs. 2nd Qtr. 1993 6 Mos. 1993 (Dollars in thousands) Amount Percent Amount Percent Interest income $ 45,804 9.6 $ 39,363 4.0 Interest expense 30,602 11.2 16,751 2.9 Net interest income 15,202 7.4 22,612 5.6 Provision for loan losses (22,000) (88.0) (37,000) (74.0) Net interest income after provision for loan losses 37,202 20.6 59,612 16.8 Other operating income (1,551) ( 1.6) 22,018 12.5 Other operating expenses 34,438 22.0 63,501 20.9 Income before income taxes 1,213 1.0 18,129 8.0 Applicable income taxes (4,729) (12.9) 444 0.6 Tax equivalent adjustment 1,442 20.1 2,151 14.6 Total applicable income taxes (3,287) ( 7.5) 2,595 3.1 Net income $ 4,500 6.0 $ 15,534 10.8 Net income applicable to common stock $ 3,222 4.7 $ 14,337 11.1
Net Interest Income - on a fully-taxable equivalent basis amounted to $220.7 million in the second quarter of 1994, an increase of $15.2 million, or 7.4%, compared to the similar quarter in 1993. For the first six months of 1994, net interest income totaled $427.1 million an increase of $22.6 million, or 5.6%, compared to the six month period of 1993. As shown in the tables on pages 7 and 8, average interest-earning assets were $33.1 billion in both the second quarter and six-month periods of 1994, compared to $31.9 billion and $32.7 billion in the corresponding periods of 1993. The net interest rate differential was 2.68% in the second quarter and 2.60% for the first six months of 1994, compared to 2.58% and 2.50% in the corresponding periods of last year. -6- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED
(Fully taxable equivalent basis) (Dollars in thousands) Quarter Ended June 30, 1994 1993 Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Interest-earning assets: Interest-bearing deposits with banks $ 6,670,388 $ 74,088 4.46% $ 7,641,724 $ 74,383 3.90% Investment securities(1): Taxable 12,619,588 221,933 7.05 13,138,350 213,794 6.53 Exempt from federal income taxes 1,178,579 27,208 9.26 871,953 22,385 10.30 Total investment securities 13,798,167 249,141 7.24 14,010,303 236,179 6.76 Trading account assets(2) 1,054,558 14,109 5.37 803,943 9,171 4.58 Federal funds sold and securities purchased under resale agreements 1,672,492 15,819 3.79 1,087,145 8,342 3.08 Loans, net of unearned income: Domestic offices 6,449,452 119,220 7.41 6,236,848 119,456 7.68 Foreign offices 3,423,360 52,566 6.16 2,110,929 31,608 6.01 Total loans, net of unearned income 9,872,812 171,786 6.98 8,347,777 151,064 7.26 Total interest-earning assets 33,068,417 $ 524,943 6.37% 31,890,892 $ 479,139 6.03% Cash and due from banks 671,153 489,410 Other assets 6,927,819 3,768,637 Total assets $40,667,389 $36,148,939 Interest-bearing funds: Consumer and other time deposits $ 7,996,732 $ 57,531 2.89% $ 8,361,606 $ 64,135 3.08% Certificates of deposit 610,927 6,020 3.95 746,596 5,907 3.17 Deposits in foreign offices 11,716,659 118,783 4.07 9,917,206 94,567 3.82 Total interest-bearing deposits 20,324,318 182,334 3.60 19,025,408 164,609 3.47 Trading account liabilities (2) 166,247 2,962 7.15 84,611 1,093 5.18 Short-term borrowings 5,933,361 51,743 3.50 5,307,063 41,788 3.16 Total long-term debt 4,942,609 67,241 5.46 4,482,060 66,188 5.92 Total interest-bearing funds 31,366,535 $ 304,280 3.89% 28,899,142 $ 273,678 3.80% Noninterest-bearing deposits: In domestic offices 1,325,748 1,145,727 In foreign offices 96,219 114,798 Other liabilities 5,333,510 3,650,078 Stockholders' equity: Preferred stock 620,941 556,425 Common stockholders' equity 1,924,436 1,782,769 Total stockholders' equity 2,545,377 2,339,194 Total liabilities and stockholders' equity $40,667,389 $36,148,939 Interest income/earning assets $ 524,943 6.37% $ 479,139 6.03% Interest expense/earning assets 304,280 3.69 273,678 3.45 Net interest differential $ 220,663 2.68% $ 205,461 2.58% (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale included in other assets. (2) Excludes noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
-7- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED
(Fully taxable equivalent basis) (Dollars in thousands) Six Months Ended June 30, 1994 1993 Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Interest-earning assets: Interest-bearing deposits with banks $ 5,774,196 $ 127,410 4.45% $ 8,644,021 $ 168,418 3.93% Investment securities(1): Taxable 13,432,002 440,376 6.61 13,079,255 430,479 6.64 Exempt from federal income taxes 1,147,552 52,971 9.31 897,188 45,692 10.27 Total investment securities 14,579,554 493,347 6.82 13,976,443 476,171 6.87 Trading account assets(2) 1,071,774 32,556 6.13 798,784 17,889 4.52 Federal funds sold and securities purchased under resale agreements 1,515,486 27,131 3.61 990,173 15,391 3.13 Loans, net of unearned income: Domestic offices 6,587,027 233,737 7.16 6,134,780 239,403 7.87 Foreign offices 3,546,986 103,355 5.88 2,141,301 60,901 5.74 Total loans, net of unearned income 10,134,013 337,092 6.71 8,276,081 300,304 7.32 Total interest-earning assets 33,075,023 $1,017,536 6.20% 32,685,502 $ 978,173 6.03% Cash and due from banks 712,592 494,571 Other assets 6,993,250 3,582,173 Total assets $40,780,865 $36,762,246 Interest-bearing funds: Consumer and other time deposits $ 8,033,908 $ 115,017 2.89% $ 8,325,028 $ 131,612 3.19% Certificates of deposit 609,101 11,153 3.69 775,416 12,418 3.23 Deposits in foreign offices 11,402,513 224,191 3.96 10,199,969 196,226 3.88 Total interest-bearing deposits 20,045,522 350,361 3.52 19,300,413 340,256 3.56 Trading account liabilities (2) 165,559 5,233 6.37 57,337 1,436 5.05 Short-term borrowings 5,945,599 102,686 3.48 5,965,493 96,928 3.28 Total long-term debt 4,929,676 132,143 5.41 4,477,324 135,052 6.08 Total interest-bearing funds 31,086,356 $ 590,423 3.83% 29,800,567 $ 573,672 3.88% Noninterest-bearing deposits: In domestic offices 1,309,968 1,109,234 In foreign offices 118,561 104,947 Other liabilities 5,617,749 3,436,154 Stockholders' equity: Preferred stock 588,683 556,425 Common stockholders' equity 2,059,548 1,754,919 Total stockholders' equity 2,648,231 2,311,344 Total liabilities and stockholders' equity $40,780,865 $36,762,246 Interest income/earning assets $1,017,536 6.20% $ 978,173 6.03% Interest expense/earning assets 590,423 3.60 573,672 3.53 Net interest differential $ 427,113 2.60% $ 404,501 2.50% (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale included in other assets. (2) Excludes noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
-8- In the second quarter of 1994, the Corporation continued its ongoing program to reduce its interest rate sensitivity. It continued to extend the maturity of its liabilities by entering into approximately $1.9 billion notional amount of interest rate swaps and caps with final maturities ranging from 1996 to 1999. The Corporation also reduced its investment in longer term assets by selling approximately $2.9 billion face value of U.S. government agency securities and reinvesting the proceeds in short-term assets. The reduction in net interest margin resulting from these actions will be partially offset by earnings attributable to the increased margin from sources of retail funds which have not increased in cost as rapidly as market rates have risen. During the second quarter of 1994, the Corporation designated as held to maturity approximately $3.4 billion carrying value of GNMA securities which had been previously designated as available for sale. Provision for Loan Losses -was $3.0 million in the second quarter of 1994, compared to $25.0 million in the second quarter of 1993. It is the Corporation's view that because of improvement in the loan portfolio's credit quality and the declining level of non-performing loans, it is not necessary to continue to increase the allowance for loan losses at this time. The provision for loan losses for the first six months of 1994 was $13.0 million compared to $50.0 million for the corresponding period last year. Net loan charge-offs, excluding restructuring country debt, were $3.1 million in the second quarter of 1994, compared to $12.9 million in the second quarter of last year. Net recoveries of restructuring country debt amounted to $0.9 million in the current quarter of 1994, compared to net charge-offs of $7.1 million related to such obligations in the second quarter of 1993. For the first six months of 1994, net loan charge-offs, excluding restructuring country debt, were $17.2 million compared to $27.9 million in the corresponding period last year. Net recoveries of restructuring country debt were $6.7 million for the first six months of 1994, compared to net charge-offs of $5.9 million in the year-ago period. The allowance for possible loan losses at June 30, 1994 was $314.6 million, compared to $311.9 million at December 31, 1993, as loans rose modestly to $9.6 billion at June 30, 1994 from $9.5 billion at year end 1993. The allowance for possible loan losses as a percentage of loans outstanding, net of unearned income, was 3.29% at June 30, 1994, compared to 3.28% at December 31, 1993. At June 30, 1994, non-accrual loans were $63.2 million, compared to $90.3 million at March 31, 1994 and $94.9 million at December 31, 1993. The decline in non-accrual loans during the current quarter is primarily attributable to the Brazilian debt restructuring settlement which reduced non-accrual loans by $33.4 million. Under this settlement, the Corporation received bonds in exchange for substantially all of its non-performing outstandings to Brazil. See "Other Operating Income" below for additional discussion of the Brazilian debt restructuring and "Statement of Condition" below for a discussion of total non-performing assets. -9- The following is a summary of total non-accrual loans at periods ending:
June 30, March 31, Dec. 31, (In thousands) 1994 1994 1993 Non-accrual loans: Domestic $ 45,210 $ 46,510 $ 48,084 Foreign-restructuring country 1,875 33,989 33,853 Foreign-other 16,111 9,776 12,956 Total non-accrual loans $ 63,196 $ 90,275 $ 94,893
Other Operating Income - totaled $93.4 million in the second quarter of 1994, compared to $95.0 million in the year-earlier quarter. For the first six months of 1994, such income was $198.0 million compared to $175.9 million in the corresponding period of last year. Income from trading activities in the second quarter of 1994 declined from the $54.4 million of the corresponding quarter a year ago to $30.2 million. This decline was attributable primarily to lower levels of customer activity in foreign exchange and derivative products reflecting generally reduced activity in the global markets due to the high level of market uncertainty during the period. For the first six months of 1994, income from trading activities was $78.9 million, compared to $93.6 million in the same period a year ago. This change reflects the factors mentioned above which were partially offset by increased income from precious metals. Investment securities gains were $10.0 million in the second quarter of 1994, compared to gains of $2.5 million in the second quarter of last year. Included in net securities gains from sales of securities classified as available for sale in the second quarter of 1994, were gains of $52.0 million realized on the sale of Argentine equities acquired in a 1990 debt-for-equity swap, gains of $26.9 million realized on the sale of all of the securities received in connection with Brazil's debt restructuring and net losses of $68.9 million on the disposition of securities, primarily those sold as part of the Corporation's asset/liability management program. For the first six months of 1994, investment securities gains were $13.1 million, compared to gains of $2.5 million last year. The Corporation recorded net gains on loans sold or held for sale of $1.1 million in the second quarter of 1994, compared to net losses of $0.2 million in the corresponding quarter last year. For the six months ended June 30, 1994, net gains of $0.6 million compare to net losses of $0.9 million in the same period of last year. Commission income amounted to $14.8 million in the second quarter of 1994, compared to $11.2 million in the corresponding period of 1993. For the first six months of 1994, commission income amounted to $32.3 million, compared to $20.6 million last year. These increases are attributable to the higher levels of fees earned from securities brokerage and other institutional fee-based services. Equity in the earnings of Safra Republic Holdings S.A. ("Safra Republic"), a European international private banking group of which the Corporation owns 49% of the outstanding shares, increased 37.0% to $18.5 million in the second quarter of 1994, compared to $13.5 million in the second quarter of 1993. For the six-month period of 1994 these earnings were $39.7 million, compared to $26.8 million for the corresponding period of 1993. -10- Other income in the second quarter of 1994 was $18.9 million, including a $2.4 million gain on the early extinguishment of $79.9 million principal amount of LIBOR Accrual Notes due 1996. Other income in the second quarter of 1993 was $13.5 million. For the six months ended June 30, 1994, other income was $33.5 million, compared to $33.3 million in the year-ago period, which included a $5.1 million gain on the sale of certain data processing rights. Other Operating Expenses - totaled $191.2 million in the second quarter and $367.1 million for the first six months of 1994. This compares with $156.7 million and $303.6 million in the corresponding periods of 1993. These increases are primarily attributable to the Corporation's expansion into new business areas, including its acquisitions of Republic Mase Bank, SafraCorp California and Bank Leumi Le Israel (Canada) and the addition of staff in trading, private banking and various support areas, and to a one-time $17.0 million restructuring charge. The Corporation's securities subsidiary has refocused on serving the needs of the Corporation's clients and has de-emphasized certain business activities. In addition, the Corporation's management has examined operating expenses on a corporation-wide basis and has implemented a selective restructuring program. As a result of these actions, the Corporation recorded the one-time $17.0 million restructuring expense mentioned above. The Corporation expects that the level of ongoing expense will be reduced sufficiently to offset this cost within the next 12 months. Salaries and employee benefits were $108.6 million in the second quarter of 1994, including $14.8 million related to the restructuring expense mentioned above, compared to salaries and employee benefits of $86.8 million in the second quarter of 1993. For the six months ended June 30, 1994, such expenses were $204.2 million, compared to $166.8 million in the year-earlier period. Occupancy expense was $13.0 million in the second quarter of 1994, compared to $11.4 million in the second quarter of last year. For the six months ended June 30, 1994, occupancy expense was $26.9 million, compared to $23.2 million last year. All other operating expenses were $69.6 million in the second quarter of 1994, including the balance of the restructuring charge, compared to $58.5 million in the second quarter of last year. For the six months ended June 30, 1994, other expenses were $136.0 million compared to $113.6 million last year. Total Applicable Income Taxes - have been adjusted (increased) to reflect the inclusion of interest income on tax exempt obligations as if they were subject to federal, state and local income taxes, after giving effect to the deductibility of state and local taxes for federal income tax purposes. Total applicable income taxes declined $3.3 million, or 7.5%, in the second quarter of 1994 and increased $2.6 million, or 3.1%, during the first six months of 1994 when compared to the corresponding periods of 1993. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, for the second quarter and six-month periods of 1994 were 33.8% and 35.0%, respectively, compared to 36.9% and 36.7% in the corresponding periods of last year. -11- STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At June 30, 1994, stockholders' equity included a deduction of $146.9 million, which represents the after-tax unrealized depreciation in the securities available for sale portfolio and approximately 49% of Safra Republic's unrealized depreciation in its securities available for sale portfolio. This compares to a $262.8 million unrealized appreciation in the securities available for sale portfolio at December 31, 1993. The Corporation's leverage ratio, Tier 1 capital to quarterly average assets, and its risk-based capital ratios, Tier 1 and total qualifying capital to risk-weighted assets, include the assets and capital of Safra Republic on a consolidated basis in accordance with the requirements of the Federal Reserve Board specifically applied to the Corporation. The component of stockholders' equity representing the net unrealized appreciation or depreciation on securities available for sale is not included in this calculation. In accordance with regulatory guidelines, the Corporation excludes Republic New York Securities Corporation's assets and off-balance-sheet contracts from the Corporation's capital calculations. The guidelines also require the Corporation to deduct one-half of its investment in this subsidiary from each of Tier 1 and Tier 2 capital. At June 30, 1994, the Corporation's leverage ratio was 6.03% compared to 5.61% at year end 1993. At June 30, 1994, risk-based capital ratios were 16.15% for Tier 1, or "core", capital and 27.52% for total qualifying capital, compared to 15.16% and 26.20%, respectively, at December 31, 1993. These ratios substantially exceed the minimums in effect for bank holding companies. At June 30, 1994, the ratio of the Corporation's total common stockholders' equity to total assets was 4.57%, compared to 5.55% at December 31, 1993. The decline in this ratio was primarily attributable to the reduction in common equity related to the unrealized depreciation in the market value of the Corporation's portfolio of securities available for sale. Non-performing Assets At June 30, 1994, total non-performing assets of $87.5 million included $63.2 million of non-accrual loans and $24.3 million of other real estate owned. Total non-performing assets at March 31, 1994 and December 31, 1993 were $118.2 million. The decline in total non-performing assets at June 30, from March 31, was primarily due to the Brazilian debt restructuring settlement during the quarter, which reduced non-accrual loans by $33.4 million. The following is a summary of total non-accrual loans and other non-performing assets at periods ending:
June 30, March 31, Dec. 31, (In thousands) 1994 1994 1993 Total non-accrual loans $ 63,196 $ 90,275 $ 94,893 Other non-performing assets: Other real estate owned 24,331 27,882 23,338 Total non-accrual loans and other non-performing assets $ 87,527 $ 118,157 $ 118,231
-12- Financial Instruments At June 30, 1994, the net fair value appreciation of the Corporation's on balance sheet financial instruments, including related off-balance sheet interest rate hedges, was approximately $49 million. This amount represents a decline in fair value appreciation of such instruments of approximately $265 million from the $314 million net appreciation at December 31, 1993. The change in value reflects the effect of rising interest rates during the first six months of 1994. Not included in the information above is the fair value of deposit liabilities with no stated maturity that are required to be reported at their carrying value. These deposits have an increased value to the Corporation during periods of rising interest rates. -13- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. (a) The Corporation's Annual Meeting of Stockholders was held on April 20, 1994. (c) The following matters were voted upon at such meeting: (i) Election of the following twenty-four persons as directors of the Corporation, with shares voted for and withheld indicated:
Shares Nominee Shares For Withheld Kurt Andersen 41,824,715 217,105 Peter A. Cohen 41,969,944 71,876 Albert S. Corwen 41,976,613 65,207 Cyril S. Dwek 41,824,965 216,855 Ernest Ginsberg 41,965,513 76,307 Nathan Hasson 41,971,278 70,542 Morris Hirsch 41,969,779 72,041 Jeffrey C. Keil 41,831,045 210,775 Peter Kimmelman 41,976,279 65,541 Leonard Lieberman 41,975,663 66,157 William C. MacMillen, Jr. 41,972,688 69,132 Martin F. Mertz 41,971,443 70,377 James L. Morice 41,976,293 65,527 E. Daniel Morris 41,976,528 65,292 Janet L. Norwood 41,971,193 70,627 John A. Pancetti 41,971,683 70,137 Javier Perez de Cuellar 41,809,723 232,097 Vito S. Portera 41,973,428 68,392 Wilbur M. Rabinowitz 41,973,294 68,526 William P. Rogers 41,970,268 71,552 Dov C. Schlein 41,973,428 68,392 Jacques Tawil 41,826,390 215,430 Walter H. Weiner 41,973,428 68,392 Peter White 41,970,314 71,506 (ii) Approval of the 1994 Performance Based Incentive Compensation Plan. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to such matter, were as follows: For Against Abstain Broker No Vote 39,904,926 1,941,148 195,746 -0- -14- (iii) Approval of selection of KPMG Peat Marwick as the Corporation's auditors for 1994. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to such matter, were as follows: For Against Abstain Broker No Vote 41,946,595 19,070 24,820 51,335 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11. Computation of Earnings Per Common Share (b) Reports on Form 8-K (i) On May 9, 1994, a report on Form 8-K was filed submitting the Corporation's press releases announcing the declaration of dividends payable July 1, 1994 and results for the quarter and three-month period ended March 31, 1994, in connection with the filing of a Prospectus Supplement dated May 5, 1994 relating to the offering of $200 million principal amount of the Corporation's 7 3/4% Subordinated Notes due 2009. (ii) On May 23, 1994, a report on Form 8-K was filed submitting the calculation of ratios of earnings to combined fixed charges and preferred stock dividends and amended Articles Supplementary, classifying shares of the Corporation's Adjustable Rate Cumulative Preferred Stock, Series D ($100 Stated Value), in connection with the filing of a Prospectus Supplement dated May 16, 1994, relating to the offering of 6,000,000 Depositary Shares, each representing a one-fourth interest in a share of Adjustable Rate Cumulative Preferred Stock, Series D ($100 Stated Value). -15- 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 thereunto duly authorized. REPUBLIC NEW YORK CORPORATION Dated: August 12, 1994 By /s/Walter H. Weiner Walter H. Weiner Chairman of the Board Dated: August 12, 1994 By /s/John D. Kaberle, Jr. John D. Kaberle, Jr. Executive Vice President and Comptroller (Principal Accounting Officer) -16- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended June 30, 1994 REPUBLIC NEW YORK CORPORATION EXHIBIT INDEX No. Exhibit Description 11 Computation of Earnings Per Common Share
EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11 REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE UNAUDITED
(In thousands except per share data) Six Months Ended Three Months Ended June 30, June 30, 1994 1993 1994 1993 Primary: Earnings: Net income $ 159,207 $ 143,673 $ 79,428 $ 74,928 Less preferred stock dividends 15,417 14,220 8,333 7,055 Net income applicable to common stock $ 143,790 $ 129,453 $ 71,095 $ 67,873 Shares: Average number of common shares outstanding 52,595 52,267 52,633 52,336 Net income per common share $ 2.73 $ 2.48 $ 1.35 $ 1.30 Fully Diluted: Earnings: Net income applicable to common stock $ 143,790 $ 129,453 $ 71,095 $ 67,873 Add dividends applicable to convertible preferred stock 5,822 5,822 2,911 2,911 Net income applicable to common stock as adjusted $ 149,612 $ 135,275 $ 74,006 $ 70,784 Shares: Average number of common shares outstanding 52,595 52,267 52,633 52,336 Add shares assumed issued upon exercise of stock options 251 291 230 296 Add shares assumed issued upon conversion of preferred stock 3,569 3,569 3,569 3,569 Average number of common shares outstanding as adjusted 56,415 56,127 56,432 56,201 Net income per common share $ 2.65 $ 2.41 $ 1.31 $ 1.26
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