-----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, BGDYQ7z1wDM9w+v1yorHO53LOo1o3nWsDTLXMS8Zupo9t+XjkQRv2uBcI357B9zN DF4BkBMBE5TLIWgLdNattg== 0000083246-95-000026.txt : 19951120 0000083246-95-000026.hdr.sgml : 19951120 ACCESSION NUMBER: 0000083246-95-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REPUBLIC NEW YORK CORP CENTRAL INDEX KEY: 0000083246 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [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: 95593260 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125256100 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED 9/30/95 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 September 30, 1995. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 Not Applicable Former name, former address and former fiscal year, if changed since last report 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 __ The number of shares outstanding of the registrant's common stock was 56,208,840 October 31, 1995. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited September 30, 1995 and December 31, 1994 2 Consolidated Statements of Income - Unaudited Nine-Months and Three-Months Ended September 30, 1995 and 1994 3 Consolidated Statements of Cash Flows - Unaudited Nine-Months Ended September 30, 1995 and 1994 4 Consolidated Statement of Changes in Stockholders' Equity- Unaudited-Nine Months Ended September 30, 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 8-15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 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) September 30, December 31, 1995 1994 ----------- ----------- Assets Cash and due from banks 592,945 867,242 Interest-bearing deposits with banks 5,539,997 10,242,061 Precious metals 1,061,483 1,456,269 Securities held to maturity (approximate market value of $5,773,089 in 1995 and $5,614,248 in 1994) 5,731,222 5,887,672 Securities available for sale (at approximate market value) 7,845,891 5,552,056 ---------- ---------- Total investment securities 13,577,113 11,439,728 Trading account assets 3,764,618 2,543,637 Federal funds sold and securities purchased under resale agreements 2,818,355 1,123,925 Loans (net of unearned income of $38,306 in 1995 and $47,109 in 1994) 9,810,081 8,913,490 Allowance for possible loan losses (note 3) (313,418) (319,220) ---------- --------- Loans, net 9,496,663 8,594,270 Customers' liability on acceptances 1,398,624 1,514,461 Accounts receivable and accrued interest 1,762,936 1,797,491 Investment in affiliate 673,553 607,818 Premises and equipment 438,508 428,017 Other assets 511,935 452,986 --------- --------- Total assets $ 41,636,730 $ 41,067,905 Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 1,462,836 $ 1,701,667 In foreign offices 101,146 114,503 Interest-bearing deposits: In domestic offices 8,470,159 8,534,562 In foreign offices 13,098,689 12,375,270 ------------- ----------- Total deposits 23,132,830 22,726,002 Trading account liabilities 3,566,633 2,087,594 Short-term borrowings 3,830,305 4,969,394 Acceptances outstanding 1,400,228 1,517,675 Accounts payable and accrued expenses 1,858,994 1,325,953 Due to factored clients 651,515 680,010 Other liabilities 145,887 134,792 Long-term debt 1,752,410 2,580,831 Subordinated long-term debt and perpetual capital notes 2,406,547 2,406,266 Stockholders' equity (notes 1 and 2): Cumulative preferred stock, no par value 8,502,500 shares outstanding in 1995 and 8,952,500 in 1994 575,000 672,500 Common stock, $5 par value 150,000,000 shares authorized; 56,146,799 shares outstanding in 1995 and 52,621,155 in 1994 280,734 263,106 Surplus 583,679 437,653 Retained earnings 1,577,870 1,457,609 Net unrealized depreciation on securities available for sale, net of taxes (125,902) (191,480) ------------ ---------- Total stockholders' equity 2,891,381 2,639,388 Total liabilities and stockholders' equity $ 41,636,730 $ 41,067,905 ============ =========== 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) Nine Months Ended Three Months Ended September 30, September 30, 1995 1994 1995 1994 Interest income: Interest and fees on loans $ $ $ $ 547,453 514,551 185,220 177,459 Interest on deposits with banks 413,902 249,615 132,590 122,205 Interest and dividends on investment securities: Taxable 676,020 648,986 233,573 208,610 Exempt from federal income taxes 67,814 55,384 21,418 19,304 Interest on trading account assets 39,974 46,372 16,049 13,816 Interest on federal funds sold and securities purchased under resale agreements 63,209 41,297 24,187 14,166 ---------- --------- --------- -------- Total interest income 1,808,372 1,556,205 613,037 555,560 ----------- --------- --------- -------- Interest expense: Interest on deposits 844,152 563,414 288,805 213,053 Interest on short-term borrowings 150,215 159,369 53,719 51,450 Interest on long-term debt 205,200 205,003 66,897 72,860 ------------ ---------- ---------- -------- Total interest expense 1,199,567 927,786 409,421 337,363 ------------ ---------- ---------- -------- Net interest income 608,805 628,419 203,616 218,197 Provision for loan losses 9,000 16,000 3,000 3,000 Net interest income after provision for loan losses 599,805 612,419 200,616 215,197 ----------- ---------- ---------- -------- Other operating income: Income from precious metals 34,340 39,831 6,577 15,438 Foreign exchange trading income 90,282 68,159 30,043 24,228 Trading account profits and commissions 25,701 20,220 995 9,638 Investment securities gains (losses), net 9,292 12,290 4,325 (767) Net gain on loans sold or held for sale 3,912 1,982 3,145 1,419 Commission income 43,068 44,864 14,781 12,595 Equity in earnings of affiliate 58,698 58,465 20,216 18,809 Other income 50,587 49,413 16,716 15,912 ----------- ---------- --------- -------- Total other operating income 315,880 295,224 96,798 97,272 =========== ========== ========= ======== Other operating expenses: Salaries 177,104 174,503 57,444 58,887 Employee benefits 113,867 110,560 35,826 36,787 Occupancy, net 43,542 40,872 14,444 13,935 Restructuring and related charges (note 4) 120,000 17,000 - - Other expenses (note 5) 197,924 196,942 54,461 63,180 ---------- ---------- --------- -------- Total other operating expenses 652,437 539,877 162,175 172,789 ---------- ---------- --------- -------- Income before income taxes 263,248 367,766 135,239 139,680 Income tax expense 69,456 117,142 40,051 48,263 ---------- ---------- --------- -------- Net income $ 193,792 $ 250,624 $ 95,188 $ 91,417 ========== ========== --------- -------- Net income applicable to common stock $ 165,390 $ 225,933 $ 87,011 $ 82,143 =========== ========== ========= ======== Net income per common share: Primary $3.10 $4.28 $1.57 $1.55 Fully diluted $3.05 $4.15 $1.55 $1.50 Average common shares outstanding: Primary 53,334 52,738 55,316 53,018 Fully diluted 56,160 56,542 56,292 56,797 See accompanying notes to consolidated financial statements.
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REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands) Nine Months Ended September 30, 1995 1994 ------------ ---------- Cash Flows From Operating Activities: Net income $ 193,792 $ 250,624 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net 48,458 49,661 Provision for loan losses 9,000 16,000 Investment securities gains, net (9,292) (12,290) Net gain on loans sold or held for sale (3,912) (1,982) Restructuring and related charges 82,436 16,395 Equity in earnings of affiliate (58,698) (58,465) Net increase in trading accounts 258,058 717,996 Net (increase) decrease in accounts receivable and accrued interest (1,325) 332,634 Net increase (decrease) in accounts payable and accrued expenses 532,433 (623,421) Other, net (229,652) (74,302) Net cash provided by operating activities 821,298 612,850 Cash Flows From Investing Activities: Net decrease (increase) in interest-bearing deposits with banks 4,702,064 (4,184,228) Net increase (decrease) in precious metals 394,786 (459,471) Net (increase) decrease in federal funds sold and securities purchased under resale agreements (1,694,430) 1,483,844 Net decrease (increase) in short-term investments 100,601 (39,360) Purchases of securities held to maturity (68,880) (90,276) Proceeds from maturities of securities held to maturity 331,986 184,139 Purchases of securities available for sale (3,866,989) (3,232,955) Proceeds from sales of securities available for sale 626,049 3,384,360 Proceeds from maturities of securities available for sale 1,032,472 2,479,251 Net increase in loans (1,079,437) (131,348) Investment in affiliate 28,133 23,805 ------------ ---------- Net cash provided (used) by investing activities 506,355 (582,239) ------------ ----------- Cash Flows From Financing Activities: Net increase (decrease) in deposits 407,073 (574,764) Net (decrease) increase in short-term borrowings (1,139,089) 322,449 Net (decrease) increase in due to factored clients (28,495) 52,103 Proceeds from issuance of long-term debt 276,886 297,802 Repayment of long-term debt (1,104,600) (290,979) 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 72,563 146,062 Repurchase of cumulative preferred stock - (33,925) Retirement of common stock (17,651) (29,757) Cash dividends paid (84,947) (72,085) Other, net 22,658 33,241 ----------- --------- Net cash used by financing activities (1,595,602) (15,853) Effect of exchange rate changes on cash and due from banks (6,348) (13,011) Net (decrease) increase in cash and due from banks (274,297) 1,747 Cash and due from banks at beginning of period 867,242 636,633 ----------- --------- Cash and due from banks at end of period $ 592,945 $ 638,380 =========== ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,085,707 $ 769,801 Income taxes 87,387 97,540 Transfers from securities available for sale to securities held to maturity - 3,862,350 See accompanying notes to consolidated financial statements.
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REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY UNAUDITED (Dollars in thousands) Nine Months Ended September 30, 1995 Cumulative Preferred Stock: Balance at beginning of period $ 672,500 Issuance of 3,000,000 shares of $1.8125 Cumulative Preferred Stock 75,000 Redemption of 3,450,000 shares of $3.375 Cumulative Convertible Preferred Stock (172,500) ---------- Balance at end of period $ 575,000 ========== Common Stock: Balance at beginning of period $ 263,106 Net issuance under stock option, restricted stock and restricted stock election plans of 372,600 shares 1,863 Retirement of 370,325 shares (1,852) Issuance of 3,523,369 shares upon conversion of $3.375 Cumulative Convertible Preferred Stock 17,617 --------- Balance at end of period $ 280,734 ========== Surplus: Balance at beginning of period $ 437,653 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 372,600 shares 12,728 Cost of issuing preferred stock (2,437) Treasury stock transactions of affiliate (1,056) Retirement of 370,325 common shares (15,799) Issuance of 3,523,369 shares upon conversion of $3.375 Cumulative Convertible Preferred Stock 152,590 --------- Balance at end of period $ 583,679 ========== Retained Earnings: Balance at beginning of period $1,457,609 Net income 193,792 Foreign currency translation, net of taxes 12,727 Dividends declared on common stock (57,945) Dividends declared on issues of preferred stock (28,313) ----------- Balance at end of period $ 1,577,870 ========== Net Unrealized Depreciation on Securities Available for Sale, Net of Taxes: Balance at beginning of period $ (191,480) Unrealized appreciation 97,492 Income tax expense (31,914) ----------- Balance at end of period (125,902) Total Stockholders' Equity: Balance at beginning of period $ 2,639,388 Net changes during the period 251,993 ----------- Balance at end of period $ 2,891,381 =========== See accompanying notes to consolidated financial statements.
-5- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 1. On June 26, 1995, the Corporation sold, in a public offering, 3,000,000 shares of $1.8125 Cumulative Preferred Stock ($25 Stated Value) (the "Preferred Stock") with an aggregate stated value of $75 million. The Preferred Stock may be redeemed, at the option of the Corporation, in whole or in part, at any time or from time to time, on or after July 1, 2000 at $25 per share, plus, in each case, dividends accrued and unpaid to the redemption date. The net proceeds received have been used for general corporate purposes, including payment to holders of the $3.375 Cumulative Convertible Preferred Stock who, in connection with the Corporation's call for redemption described in footnote 2, elected to redeem. 2. On July 24, 1995, the Corporation redeemed all of the outstanding shares of its $3.375 Cumulative Convertible Preferred Stock. Holders of the preferred stock tendered an aggregate of 42,596 shares at the redemption price of $52.025 plus accrued and unpaid dividends of $0.21563 per share. Holders of 3,406,093 shares of preferred stock elected to convert, at the conversion ratio of 1.03448, into an aggregate of 3,523,369 shares of common stock. Fractional shares of common stock and shares not tendered received cash. 3. The table below summarizes the activity in the allowance for possible loan losses for the nine months ended September 30, 1995 and 1994.
1995 1994 (In thousands) Balance at beginning of period $ 319,220 $ 311,855 Provision for loan losses 9,000 16,000 ---------- --------- 328,220 327,855 Charge-offs (25,326) (39,260) Recoveries 9,817 30,427 ---------- --------- Net charge-offs (15,509) (8,833) Translation adjustment 707 556 ---------- --------- Balance at end of period $ 313,418 $ 319,578 ========== =========
4. In the second quarter of 1995, the Corporation recorded a $120 million provision for restructuring and related charges in connection with the implementation of Project Excellence Plus, the Corporation's company-wide project to improve operating efficiencies and reduce costs. The components of this provision were as follows: (In thousands) Salaries and employee benefits $ 75,000 Occupancy, net 10,000 Other expenses 35,000 --------- Total restructuring and related charges provision $ 120,000 -6- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 4. (continued) The following table summarizes the activity in the accrual of restructuring and related charges for the nine months ended September 30, 1995: (In thousands) Provision for restructuring and related charges $ 120,000 Payments (37,564) Non-cash writedowns (7,921) ----------- Ending accrual at September 30, 1995 $ 74,515 =========== 5. On January 1, 1995, the Corporation adopted SFAS No. 116, "Accounting for Contributions Received and Contributions Made." This SFAS requires that pledges to make charitable contributions be recognized in the period that funds are unconditionally pledged. This change in the method of accounting for charitable contributions resulted in a one-time expense in the first quarter of 1995 of $7.5 million, included in other operating expenses. 6. On July 1, 1995, the Corporation adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights an amendment of FASB Statement No. 65." SFAS No. 122 eliminates the distinction made in SFAS No. 65 in accounting for mortgage servicing rights which depended on whether the loans were originated by the servicer or purchased. Under SFAS No. 122, mortgage servicers are required to recognize, as separate assets, rights to service loans regardless of how the rights were acquired. The statement also requires, among other things, mortgage servicers who sell or securitize loans on which the servicing rights are retained to allocate the total cost of the loans to the servicing rights and loans if it is practicable to estimate those fair values. Mortgage servicing rights must be assessed periodically for impairment and written down to fair value through a valuation allowance. The Corporation has retained the servicing rights on the mortgage loans it has sold. The effects of initially adopting this SFAS were not material to the Corporation's results of operations. 7. On September 23, 1995, the Corporation announced that it had reached an agreement to acquire Brooklyn Bancorp, Inc. ("BRKB"), parent of CrossLand Federal Savings Bank, for approximately $530 million in an all cash transaction at $41.50 per share. At September 30, 1995, BRKB had total assets of $4.1 billion, total deposits of $3.7 billion and total stockholders' equity of $375 million. BRKB has approximately 385,000 accounts in 33 branches in the New York metropolitan area. It is anticipated that this transaction will close in the first quarter of 1996, subject to regulatory and shareholder approval and certain other conditions. Also see "Management's Discussion and Analysis- Other Operating Expenses". 8. Certain amounts from the prior year have been reclassified to conform with 1995 classifications. -7- 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 1995 and 1994. 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 third quarter and nine months ended September 30, 1995 compared to the corresponding periods of 1994.
Increase (Decrease) 3rd Qtr. 1995 vs. Nine Months 1995 vs. 3rd Qtr. 1994 Nine Months 1994 Amount Percent Amount Percent (Dollars in thousands) Interest income $ 56,908 10.1 $ 253,402 16.0 Interest expense 72,058 21.4 271,781 29.3 Net interest income (15,150) (6.7) (18,379) (2.8) Provision for loan losses - - (7,000) (43.8) Net interest income after provision for loan losses (15,150) (6.8) (11,379) (1.8) Other operating income (474) (0.5) 20,656 7.0 Other operating expenses (10,614) (6.1) 112,560 20.8 Income before income taxes (5,010) (3.4) (103,283) (26.2) Applicable income taxes (8,212) (17.0) (47,686) (40.7) Tax equivalent adjustment (569) (6.4) 1,235 4.8 Total applicable income taxes (8,781) (15.4) (46,451) (32.5) Net income $ 3,771 4.1 $ (56,832) (22.7) Net income applicable to common stock $ 4,868 5.9 $ (60,543) (26.8)
Net Interest Income - on a fully-taxable equivalent basis amounted to $211.9 million in the third quarter of 1995, compared to $227.1 million in the third quarter of 1994. The lower level of net interest income in the third quarter of 1995, compared to the corresponding quarter of 1994 resulted from a narrower net interest rate differential as the cost of interest-bearing funds rose more than the yields on interest-earning assets. Also, as is shown in the table on page 9, average interest-earning assets declined to $32.9 billion in the third quarter of 1995 from $33.3 billion in the third quarter of 1994. Net interest income in the third quarter of 1994 included approximately $5.0 million of prepayment penalties from the refinancing of certain commercial loans. -8-
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands) Quarter Ended September 30, 1995 1994 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 $ 7,711,239 $ 132,590 6.82% $ 9,451,271 $ 122,205 5.13% Investment securities:(1) Taxable 11,718,931 233,573 7.91 10,619,414 208,610 7.79 Exempt from federal income taxes 1,311,941 29,729 8.99 1,159,692 28,184 9.64 Total investment securities 13,030,872 263,302 8.02 11,779,106 236,794 7.98 Trading account assets(2) 962,728 16,049 6.61 1,069,013 13,816 5.13 Federal funds sold and securities purchased under resale agreements 1,591,228 24,187 6.03 1,325,529 14,166 4.24 Loans, net of unearned income: Domestic offices 6,757,208 137,753 8.09 6,501,221 130,207 7.95 Foreign offices 2,835,459 47,467 6.64 3,125,180 47,252 6.00 Total loans, net of unearned income 9,592,667 185,220 7.66 9,626,401 177,459 7.31 Total interest-earning assets 32,888,734 621,348 7.50% 33,251,320 564,440 6.73% Cash and due from banks 600,743 624,840 Other assets 8,336,268 7,703,432 Total assets $41,825,745 $41,579,592 Interest-bearing funds: Consumer and other time deposits $ 7,594,458 $ 81,208 4.24% $ 7,857,452 $ 61,439 3.10% Certificates of deposit 899,013 12,567 5.55 580,383 6,548 4.48 Deposits in foreign offices 12,747,934 195,030 6.07 12,598,134 145,066 4.57 Total interest-bearing deposits 21,241,405 288,805 5.39 21,035,969 213,053 4.02 Trading account liabilities(2) 33,895 579 6.78 156,547 2,228 5.65 Short-term borrowings 4,788,295 53,140 4.40 4,921,491 49,222 3.97 Total long-term debt 4,082,222 66,897 6.50 5,011,125 72,860 5.77 Total interest-bearing funds 30,145,817 $ 409,421 5.39% 31,125,132 $ 337,363 4.30% Noninterest-bearing deposits: In domestic offices 1,497,680 1,385,960 In foreign offices 133,488 105,041 Other liabilities 7,200,243 6,355,866 Stockholders' equity: Preferred stock 617,661 672,500 Common stockholders' equity 2,230,856 1,935,093 Total stockholders' equity 2,848,517 2,607,593 Total liabilities and stockholders' equity $41,825,745 $41,579,592 Interest income/earning assets $ 621,348 7.50% $ 564,440 6.73% Interest expense/earning assets 409,421 4.94 337,363 4.02 Net interest differential $ 211,927 2.56% $ 227,077 2.71% (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale included in other assets. (2) Excludes non-interest bearing balances, which are included in other assets or other liabilities, respectively. (2) Excludes non-interest bearing belanaces, which are included in other assets or other liabilities, respectively.
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AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands) Nine Months Ended September 30, 1995 1994 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 $ 8,157,508 $ 413,902 6.78% $ 6,999,888 $ 249,615 4.77% Investment securities:(1) Taxable 11,007,133 676,020 8.21 12,494,473 648,986 6.94 Exempt from federal income taxes 1,301,477 94,821 9.74 1,151,599 81,156 9.42 Total investment securities 12,308,610 770,841 8.37 13,646,072 730,142 7.15 Trading account assets(2) 905,599 39,974 5.90 1,070,854 46,372 5.79 Federal funds sold and securities purchased under resale agreements 1,387,272 63,209 6.09 1,452,167 41,297 3.80 Loans, net of unearned income: Domestic offices 6,490,311 404,940 8.34 6,558,425 363,944 7.42 Foreign offices 2,787,174 142,513 6.84 3,406,384 150,607 5.91 Total loans, net of unearned income 9,277,485 547,453 7.89 9,964,809 514,551 6.90 Total interest-earning assets 32,036,474 $1,835,379 7.66% 33,133,790 $1,581,977 6.38% Cash and due from banks 598,520 683,341 Other assets 8,202,801 7,229,977 Total assets $40,837,795 $41,047,108 Interest-bearing funds: Consumer and other time deposits $ 7,672,916 $ 238,090 4.15% $ 7,975,089 $ 176,456 2.96% Certificates of deposit 875,541 36,819 5.62 599,528 17,701 3.95 Deposits in foreign offices 12,488,085 569,243 6.09 11,801,053 369,257 4.18 Total interest-bearing deposits 21,036,542 844,152 5.37 20,375,670 563,414 3.70 Trading account liabilities(2) 39,980 2,051 6.86 162,555 7,468 6.14 Short-term borrowings 4,393,018 148,164 4.51 5,604,230 151,901 3.62 Total long-term debt 4,156,192 205,200 6.60 4,956,826 205,003 5.53 Total interest-bearing funds 29,625,732 $1,199,567 5.41% 31,099,281 $ 927,786 3.99% Noninterest-bearing deposits: In domestic offices 1,482,739 1,335,299 In foreign offices 114,381 114,054 Other liabilities 6,880,896 5,863,789 Stockholders' equity: Preferred stock 655,609 616,622 Common stockholders' equity 2,078,438 2,018,063 Total stockholders' equity 2,734,047 2,634,685 Total liabilities and stockholders' equity $40,837,795 $41,047,108 Interest income/earning assets $1,835,379 7.66% $1,581,977 6.38% Interest expense/earning assets 1,199,567 5.01 927,786 3.74 Net interest differential $ 635,812 2.65% $ 654,191 2.64% (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale included in other assets. (2) Excludes non-interest bearing balances, which are included in other assets or other liabilities, respectively.
-10- For the first nine months of 1995, net interest income declined to $635.8 million, from $654.2 million for the nine-month period in the prior year. As shown in the table on page 10, this change is due to average interest-earning assets declining to $32.0 billion for the nine-month period of 1995 from $33.1 billion in the nine-month period last year, while the net interest rate differential rose slightly to 2.65% from 2.64% for the respective periods. Net interest income in the third quarter of 1995 increased by $13.8 million when compared to the second quarter of 1995 due to increased volumes of interest-earning assets, primarily investment securities, federal funds sold and trading account assets, funded by increases in deposits and short-term borrowings. The net interest rate differential was 2.56% for both quarters. At September 30, 1995, the Corporation's total exposure to Brazil, consisting primarily of Brady bonds, medium-term government bonds and short-term government bonds was approximately 1.44% of total assets, compared to 1.39% at year end 1994. Provision for loan losses - was $3.0 million and $9.0 million in the third quarter and first nine months of 1995, respectively, compared to $3.0 million and $16.0 million for the corresponding periods of last year. Net loan charge-offs were $4.0 million in the third quarter of 1995, compared to net loan recoveries of $1.7 million in the third quarter of 1994. For the first nine months of 1995, net loan charge-offs were $15.5 million, compared to $8.8 million in the corresponding period of last year. Reflected in the results for the nine-month period of 1994 were net recoveries of restructuring country debt of $6.7 million. The allowance for possible loan losses at September 30, 1995 was $313.4 million, or 3.19% of loans outstanding net of unearned income, compared to $319.2 million, or 3.58%, at December 31, 1994. The following table presents summary data related to non-accrual loans for the periods ended:
Sept. 30, June 30, Dec. 31, 1995* 1995* 1994* (in thousands) Non-accrual loans: Domestic $37,073 $35,724 $43,392 Foreign 16,482 17,311 14,734 Total non-accrual loans $53,555 $53,035 $58,126 Non-accrual loans as a percentage of loans outstanding at period end 0.55% 0.55% 0.65% *Includes impaired loans with book values of $31,001 at September 30, 1995 and $31,858 at June 30, 1995.
At September 30, 1995, non-accrual loans were $53.6 million, compared to $53.0 million at June 30, 1995 and $58.1 million at December 31, 1994. The decline in non-accrual loans from December 31, 1994 is primarily attributable to a domestic non-accrual loan which became "Other Real Estate Owned" during 1995 that was offset by newly classified domestic and foreign non-accrual loans. See "Statement of Condition" below for information on total non-performing assets. -11- Other Operating Income - totaled $96.8 million in the third quarter of 1995, compared to $97.3 million in the third quarter of last year. For the first nine months of 1995, such income was $315.9 million, compared to $295.2 million in the nine-month period last year. Income from trading activities was $37.6 million in the third quarter of 1995, compared to $49.3 million in the third quarter of 1994. The quarter-to-quarter change resulted from significantly reduced levels of customer business in certain trading activities, including declines of $8.9 million in precious metals trading and $8.6 million in trading account profits and commissions, primarily in derivative products, that were partially offset by an increase in foreign exchange trading income of $5.8 million. In addition, certain arbitrage opportunities normally available in the precious metals markets were significantly reduced during the current quarter. For the first nine months of 1995, income from trading activities was $150.3 million, compared to $128.2 million in the same period a year ago. This increase is primarily due to higher levels of foreign exchange trading income and, to a lesser degree, of trading account profits and commissions, that were partially reduced by lower levels of income from precious metals. Investment securities gains of $4.3 million in the third quarter of 1995 included gains of $3.6 million on certain investment securities which were redeemed by the issuer prior to their scheduled maturities. In the third quarter of 1994, investment securities losses of $0.8 million were recorded. For the first nine months of 1995, investment securities gains were $9.3 million, compared to $12.3 million of gains in the nine-month period last year. Included in net securities gains in the nine-month period of 1994, from sales of securities classified as available for sale, were gains in the second quarter 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 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. The Corporation recorded a net gain of $3.1 million in the third quarter of 1995 on loans sold or held for sale primarily due to the sale of approximately $108 million principal amount of originated mortgage loans. The Corporation has retained the servicing rights on the loans sold. For the nine months ended September 30, 1995, net gains of $3.9 million compared to net gains of $2.0 million a year ago. Commission income amounted to $14.8 million in the third quarter of 1995, compared to $12.6 million in the corresponding period of 1994. Commission income consists primarily of fees for the issuance of letters of credit, the creation of acceptances and the collection and transfer of funds, and included $1.2 million in the third quarter of 1995 resulting from the acquisition of a 50% interest in an asset management company which was previously a wholly-owned subsidiary of Safra Republic Holdings S.A. ("Safra Republic"), a European international private banking group of which the Corporation owns approximately 49%. For the first nine months of 1995, commission income amounted to $43.1 million, compared to $44.9 million last year. -12- Equity in the earnings of affiliate was $20.2 million in the third quarter of 1995, compared to $18.8 million in the third quarter of last year. This income represents the Corporation's share of the earnings of Safra Republic for the period. For the first nine months of 1995, these earnings were $58.7 million, compared to $58.5 million for the corresponding period of 1994. Safra Repulic's client portfolio assets, both on- and off-balance-sheet, increased to $16.0 billion at September 30, 1995 from $13.1 billion on the same date last year. Most of this increase came in the form of on-balance-sheet client deposits. Other income amounted to $16.7 million in the third quarter of 1995, compared to $15.9 million in the third quarter of 1994. Other income consists primarily of service charges on deposit accounts, trust income, and other income from factoring and overseas locations. For the nine-month period ended September 30, 1995, such income was $50.6 million, compared to $49.4 million in the year-ago period. Included in the respective nine-month periods were gains of $1.3 million on the sale of a New York retail branch and $2.4 million on the early extinguishment of long-term debt in the second quarters of 1995 and 1994. Other Operating Expenses - totaled $162.2 million in the third quarter and $652.4 million for the first nine months of 1995, compared to $172.8 million and $539.9 million for the corresponding periods of 1994. Included in the current year were pre-tax restructuring and related charges of $120.0 million recorded in the second quarter in connection with the implementation of Project Excellence Plus, the corporation-wide re-engineering program to improve operating efficiencies and reduce costs. In the second quarter of 1994, the Corporation implemented a limited restructuring program related to the de-emphasis of certain business activities in its securities subsidiary and incurred certain other operating expenses which resulted in a $17.0 million pre-tax restructuring charge in that period. Salaries and employee benefits were $93.3 million in the third quarter of 1995, a slight decline from $95.7 million in the third quarter of 1994 and $96.0 million in the second quarter of 1995. These declines were attributable to staff reductions in connection with the implementation of Project Excellence Plus as described above, as well as lower provisions for bonuses. The Corporation continues to be on target with its expense reduction objectives developed in Project Excellence Plus. For the nine months ended September 30, 1995, salaries and benefits were $291.0 million, compared to $285.1 million for the nine-month period a year ago. All other expenses were $54.5 million in the third quarter of 1995, compared to $63.2 million in the third quarter of last year. Other operating expenses in the third quarter of 1995 included an FDIC insurance premium rebate related to the Bank Insurance Fund recapitalization refund of $6.3 million, $1.6 million of which was applicable to the second quarter of 1995. The balance of the rebate, $4.7 million, was applicable to the third quarter of 1995. A reduction in the premium rate which will apply in future quarters will result in a similar reduction in future insurance premiums. For the nine months ended September 30, 1995, other expenses were $197.9 million, including a one-time expense of $7.5 million for charitable contributions reflecting the adoption of SFAS No. 116 in the first quarter of 1995. The acquisition of Brooklyn Bancorp, Inc., described in Footnote 7 of the Notes to Consolidated Financial Statements- Item 1 of this Quarterly Report, continues the Corporation's strategy of extending its retail franchise by expanding the base of core deposits and increasing the number of customers served. Management believes that the transaction will have a positive effect on earnings based upon anticipated cost savings to be derived from the consolidation of certain branches where the branch networks of the constituent banks overlap. -13- In August, the Corporation's banking subsidiary headquartered in Mexico City began operations. This subsidiary will operate as Republic National Bank of New York (Mexico) S.A. and will engage in activities consistent with those of Mexican "multiple banks", including deposit gathering from the public and granting commercial and individual loans. 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 taxes, after giving effect to the deductibility of state and local taxes for federal income tax purposes. Total applicable income taxes declined $8.8 million, or 15.4%, in the third quarter of 1995 and $46.5 million, or 32.5%, during the first nine months of 1995 when compared to the corresponding periods of 1994. These changes were a result of the decline in income before income taxes due to the effect of the restructuring charges and a reduction in the level of income subject to state and local income taxes. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, for the third quarter and the first nine months of 1995 were 34% and 33%, respectively, compared to 38% and 36% for the corresponding periods of last year. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At September 30, 1995, stockholders' equity included a deduction of $125.9 million, which represents the after-tax unrealized depreciation in the valuation of the Corporation's portfolio of securities available for sale and approximately 49% of Safra Republic's unrealized depreciation in its portfolio of securities available for sale, compared to an unrealized depreciation of $191.5 million at December 31, 1994. 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. These ratios do not reflect the effect on stockholders' equity related to the valuation of the Corporation's portfolio of securities available for sale. 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 require the Corporation to deduct one-half of its investment in this subsidiary from each of Tier 1 and Tier 2 capital. Effective October 1, 1995, bank regulators approved amendments to the risk-based capital guidelines regarding the treatment of derivative contracts. The amendments revise the conversion factors used to estimate the potential future exposure of derivative contracts and permit banking organizations to recognize the effects of bilateral netting arrangements in the determination of those estimates. The Corporation believes that the amendments will not have a material effect on its capital ratios. At September 30, 1995, the Corporation's leverage ratio was 6.35% compared to 5.87% at year end 1994. At September 30, 1995, risk-based capital ratios were 15.69% for Tier 1, or "core", capital and 26.56% for total qualifying capital, compared to 16.17% and 27.49%, respectively, at December 31, 1994. These ratios substantially exceeded the minimums in effect for bank holding companies. -14- At September 30, 1995, the ratio of the Corporation's total common stockholders' equity to total assets was 5.56%, compared to 4.79% at December 31, 1994. The improvement in this ratio during the period was attributable to total common stockholders' equity increasing by $349 million, resulting from the conversion of preferred stock into common shares, earnings retention and a reduction in the net unrealized depreciation of the Corporation's portfolio of securities available for sale. Non-performing Assets The following is a summary of total non-accrual loans and other non-performing assets at periods ended:
Sept. 30, June 30, Dec. 31, 1995* 1995* 1994* (in thousands) Total non-accrual loans $53,555 $53,035 $58,126 Other real estate owned 30,612 28,222 23,479 Total non-accrual loans and other real estate owned $84,167 $81,257 $81,605 Total non-performing assets as a percentage of period end total assets 0.20% 0.19% 0.20%
Financial Instruments At September 30, 1995, the net fair value appreciation of the Corporation's on-and off-balance-sheet financial instruments, including related off-balance-sheet hedges, was approximately $175 million. This represents an increase in the fair value of such instruments of approximately $195 million since December 31, 1994. The information above does not include 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 since they can be invested at more favorable spreads. -15- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11. Computation of Earnings Per Common Share 27. Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended September 30, 1995. -16- 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: November 14, 1995 By Walter H. Weiner Walter H. Weiner Chairman of the Board Dated: November 14, 1995 By Kenneth F. Cooper Kenneth F. Cooper Executive Vice President and Chief Financial Officer -17- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended September 30, 1995 REPUBLIC NEW YORK CORPORATION EXHIBIT INDEX No. Exhibit Description 11 Computation of Earnings Per Common Share 27 Financial Data Schedule 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) Nine Months Ended Three Months Ended September 30, September 30, 1995 1994 1995 1994 Primary: Earnings: Net income $ 193,792 $ 250,624 $ 95,188 $ 91,417 Less preferred stock dividends (28,402) (24,691) (8,177) (9,274) Net income applicable to common stock $ 165,390 $ 225,933 $ 87,011 $ 82,143 Shares: Average number of common shares outstanding 53,334 52,738 55,316 53,018 Net income per common share $ 3.10 $ 4.28 $ 1.57 $ 1.55 Fully Diluted: Earnings: Net income applicable to common stock $ 165,390 $ 225,933 $ 87,011 $ 82,143 Add dividends applicable to convertible preferred stock 5,920 8,733 98 2,911 Net income applicable to common stock as adjusted $ 171,310 $ 234,666 $ 87,109 $ 85,054 Shares: Average number of common shares outstanding 53,334 52,738 55,316 53,018 Add shares assumed issued upon exercise of stock options 181 235 170 210 Add shares assumed issued upon conversion of preferred stock 2,645 3,569 806 3,569 Average number of common shares outstanding as adjusted 56,160 56,542 56,292 56,797 Net income per common share $ 3.05 $ 4.15 $ 1.55 $ 1.50
EX-27 3 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
9 1,000 9-MOS DEC-31-1995 SEPT-30-1995 592,945 5,539,997 2,818,355 3,764,618 7,845,891 5,731,222 5,773,089 9,810,081 313,418 41,636,730 23,132,830 3,830,305 145,887 4,158,957 280,734 0 575,000 2,035,647 41,636,730 547,453 743,834 517,085 1,808,372 844,152 1,199,567 608,805 9,000 9,292 652,437 263,248 193,792 0 0 193,792 $3.10 $3.05 0 0 0 0 0 0 0 0 0 0 0 0
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