-----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, OYkQsMec5i6AwQMjjxoYF+TX9hqeJhaOrfqyCDt73iSbQaL2PSO41JdHmiMudyNE 1LVYoqi2riRT7LU5lSVqHg== 0000083246-98-000010.txt : 19980817 0000083246-98-000010.hdr.sgml : 19980817 ACCESSION NUMBER: 0000083246-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: SEC FILE NUMBER: 001-07436 FILM NUMBER: 98689997 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125256100 10-Q 1 QUARTERLY REPORT ON FORM 10-Q: 6-30-98 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly Period Ended June 30, 1998. [ ] 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 107,901,141 at July 31, 1998. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited June 30, 1998 and December 31, 1997 2 Consolidated Statements of Income - Unaudited Six Months and Three Months Ended June 30, 1998 and 1997 3 Consolidated Statements of Cash Flows - Unaudited Six Months Ended June 30, 1998 and 1997 4 Consolidated Statements of Changes in Stockholders' Equity - Unaudited Six Months Ended June 30, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 7-14 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 15 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)
June 30, December 31, 1998 1997 ------------ ------------ ASSETS Cash and due from banks $ 1,066,843 $ 901,783 Interest-bearing deposits with banks 8,626,903 4,756,804 Precious metals 782,266 1,241,956 Securities held to maturity (approximate market value of $8,121,668 in 1998 and $9,392,289 in 1997) 7,979,192 9,237,151 Securities available for sale (at approximate market value) 16,788,744 16,276,667 ------------ ------------ Total investment securities 24,767,936 25,513,818 Trading account assets (note 1) 4,242,167 4,510,955 Federal funds sold and securities purchased under resale agreements 2,218,397 2,169,291 Loans (net of unearned income of $14,968 in 1998 and $16,563 in 1997) 13,816,426 12,359,741 Allowance for credit losses (note 1) (326,776) (326,481) Customers' liability on acceptances 72,187 121,022 Accounts receivable and accrued interest 2,538,509 2,452,721 Investment in affiliate 838,274 864,178 Premises and equipment 467,964 469,103 Other assets 807,986 603,464 ------------ ------------ Total assets $59,919,082 $55,638,355 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Noninterest-bearing deposits: In domestic offices $ 2,668,278 $ 2,699,819 In foreign offices 231,632 222,957 Interest-bearing deposits: In domestic offices 11,573,799 12,214,760 In foreign offices 19,746,916 18,251,998 ------------ ------------ Total deposits 34,220,625 33,389,534 Trading account liabilities 3,982,668 5,320,864 Short-term borrowings 10,214,634 5,613,834 Acceptances outstanding 72,794 121,371 Accounts payable and accrued expenses 2,206,174 2,191,840 Due to factored clients 639,165 593,815 Other liabilities (note 1) 213,307 154,682 Long-term debt 1,883,884 1,814,435 Subordinated long-term debt and perpetual capital notes 2,650,000 2,650,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debt securities 350,000 350,000 Stockholders' equity (notes 2 and 3): Cumulative preferred stock, no par value 7,501,250 shares outstanding in 1998 and 1997 500,000 500,000 Common stock, $5 par value 150,000,000 shares authorized; 108,087,878 shares issued in 1998 and 108,708,584 in 1997 540,439 543,543 Surplus 122,083 149,763 Retained earnings 2,428,203 2,259,172 Accumulated other comprehensive loss, net of taxes (101,318) (14,498) Common stock in treasury, at cost 54,970 shares in 1998 (3,576) - ------------ ------------ Total stockholders' equity 3,485,831 3,437,980 ------------ ------------ Total liabilities and stockholders' equity $59,919,082 $55,638,355 ============ ============ 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, ----------------------- ------------------------ 1998 1997 1998 1997 ---------- ---------- ---------- ---------- INTEREST INCOME: Interest and fees on loans $ 548,894 $ 522,544 $ 289,354 $ 267,299 Interest on deposits with banks 146,310 153,557 77,785 78,166 Interest and dividends on investment securities: Taxable 785,322 718,331 386,210 373,680 Exempt from federal income taxes 42,816 45,449 20,030 23,684 Interest on trading account assets 44,147 60,831 25,380 31,537 Interest on federal funds sold and securities purchased under resale agreements 91,697 46,672 52,380 25,560 ---------- ---------- ---------- ---------- Total interest income 1,659,186 1,547,384 851,139 799,926 ---------- ---------- ---------- ---------- INTEREST EXPENSE: Interest on deposits 749,258 699,450 368,459 364,589 Interest on short-term borrowings 228,740 210,506 137,618 116,873 Interest on long-term debt 152,552 132,653 76,708 67,244 ---------- ---------- ---------- ---------- Total interest expense 1,130,550 1,042,609 582,785 548,706 ---------- ---------- ---------- ---------- NET INTEREST INCOME 528,636 504,775 268,354 251,220 Provision for credit losses 8,000 8,000 4,000 4,000 ---------- ---------- ---------- ---------- Net interest income after provision for credit losses 520,636 496,775 264,354 247,220 ---------- ---------- ---------- ---------- OTHER OPERATING INCOME: Income from precious metals 3,620 11,843 254 1,045 Foreign exchange trading income 72,222 59,737 41,979 32,612 Trading account profits and commissions 7,759 21,046 1,230 12,820 Investment securities gains, net 3,949 1,363 12,430 6,667 Net gain (loss) on loans sold or held for sale 3,504 9,895 (161) 2,418 Commission income 48,168 41,257 24,210 20,662 Equity in earnings of affiliate 72,726 58,674 36,780 30,609 Other income 54,964 47,659 27,594 18,236 ---------- ---------- ---------- ---------- Total other operating income 266,912 251,474 144,316 125,069 ---------- ---------- ---------- ---------- OTHER OPERATING EXPENSES: Salaries 149,393 135,044 74,940 68,695 Employee benefits 117,256 98,229 58,878 48,602 Occupancy, net 37,007 35,123 18,115 16,844 Other expenses 191,472 160,286 91,453 80,354 ---------- ---------- ---------- ---------- Total other operating expenses 495,128 428,682 243,386 214,495 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 292,420 319,567 165,284 157,794 Income taxes 56,109 98,818 46,447 47,289 ---------- ---------- ---------- ---------- NET INCOME $ 236,311 $ 220,749 $ 118,837 $ 110,505 ========== ========== ========== ========== NET INCOME APPLICABLE TO COMMON STOCK - DILUTED $ 222,272 $ 208,342 $ 111,852 $ 104,920 ========== ========== ========== ========== Net income per common share:(note 3) Basic $2.11 $1.96 $1.06 $0.99 Diluted 2.08 1.94 1.05 0.98 Average common shares outstanding:(note 3) Basic 104,795 105,912 104,691 105,632 Diluted 106,694 107,412 106,652 106,724 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, -------------------------- 1998 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 236,311 $ 220,749 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization, net 54,220 39,355 Provision for credit losses 8,000 8,000 Investment securities gains, net (3,949) (1,363) Net gain on loans sold or held for sale (3,504) (9,895) Equity in earnings of affiliate (72,726) (58,674) Net change in precious metals 459,690 248,811 Net change in trading accounts (846,518) (216,580) Net change in accounts receivable and accrued interest (5,945) (1,234,483) Net change in accounts payable and accrued expenses 123,613 1,159,171 Other, net (162,841) (83,999) ----------- ----------- Net cash provided by (used in) operating activities (213,649) 71,092 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Interest-bearing deposits with banks (3,870,099) 495,895 Federal funds sold and securities purchased under resale agreements (49,106) 15,080 Short-term investments 137,098 (211,032) Purchases of securities held to maturity (11,780) (995,790) Proceeds from maturities of securities held to maturity 1,269,739 432,505 Purchases of securities available for sale (5,193,725) (3,644,211) Proceeds from sales of securities available for sale 1,498,454 650,933 Proceeds from maturities of securities available for sale 3,238,318 1,482,025 Loans (2,117,366) (1,140,033) Investment in affiliate 56,439 38,953 ----------- ----------- Net cash used in investing activities (5,042,028) (2,875,675) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Deposits 832,031 1,511,639 Short-term borrowings 4,600,800 1,525,844 Due to factored clients 45,350 23,739 Proceeds from issuance of long-term debt 508,683 310,311 Repayment of long-term debt (439,986) (309,482) Repurchase of cumulative preferred stock - (155,800) Repurchase of common stock (51,810) (57,543) Purchase of treasury stock at cost (3,576) - Cash dividends paid (65,827) (59,983) Other, net 6,446 (1,291) ----------- ----------- Net cash provided by financing activities 5,432,111 2,787,434 Effect of exchange rate changes on cash and due from banks (11,374) (5,825) ----------- ----------- Net increase (decrease) in cash and due from banks 165,060 (22,974) Cash and due from banks at beginning of period 901,783 710,183 ----------- ----------- Cash and due from banks at end of period $ 1,066,843 $ 687,209 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,097,700 $ 1,023,335 Income taxes 56,374 76,229 Transfers from securities available for sale to trading account assets 222,890 - Transfers from securities available for sale to securities held to maturity - 949,079 See accompanying notes to consolidated financial statements.
-4- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY UNAUDITED (Dollars in thousands)
Six Months Ended June 30, ---------------------------- 1998 1997 ----------- ----------- CUMULATIVE PREFERRED STOCK: Balance at beginning of period $ 500,000 $ 555,800 Redemption of 4,000,000 shares of $1.9375 cumulative preferred stock - (100,000) Redemption of 558 shares of remarketed preferred stock - (55,800) ----------- ----------- Balance at end of period $ 500,000 $ 400,000 =========== =========== COMMON STOCK: Balance at beginning of period $ 543,543 $ 550,095 Net issuance under stock option, restricted stock and restricted stock election plans of 292,996 shares in 1998 and 902,828 shares in 1997 1,465 4,514 Retirement of 913,702 shares in 1998 and 1,289,094 shares in 1997 (4,569) (6,445) ----------- ----------- Balance at end of period $ 540,439 $ 548,164 =========== =========== SURPLUS: Balance at beginning of period $ 149,763 $ 227,378 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 292,996 shares in 1998 and 902,828 shares in 1997 15,048 7,382 Treasury stock transactions of affiliate 937 (248) Deferred compensation 3,576 - Retirement of 913,702 common shares in 1998 and 1,289,094 common shares in 1997 (47,241) (51,098) ----------- ----------- Balance at end of period $ 122,083 $ 183,414 =========== =========== RETAINED EARNINGS: Balance at beginning of period $ 2,259,172 $ 1,934,824 Net income 236,311 220,749 Dividends declared on common stock (54,105) (50,346) Dividends declared on issues of preferred stock (13,175) (11,712) ----------- ----------- Balance at end of period $ 2,428,203 $ 2,093,515 =========== =========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES: Balance at beginning of period $ (14,498) $ 38,523 Net (depreciation) appreciation on securities available for sale (71,232) 65,148 Reclassification adjustment for gains included in net income (2,461) (507) ----------- ----------- Net unrealized (depreciation) appreciation on securities available for sale (73,693) 64,641 Foreign currency translation (13,127) (10,864) ----------- ----------- Other comprehensive income (loss) (86,820) 53,777 ----------- ----------- Balance at end of period $ (101,318) $ 92,300 =========== =========== COMMON STOCK IN TREASURY, AT COST: Balance at beginning of period $ - $ - Purchases of treasury stock at cost, 54,970 shares (3,576) - ----------- ----------- Balance at end of period $ (3,576) $ - =========== =========== TOTAL STOCKHOLDERS' EQUITY: Balance at beginning of period $ 3,437,980 $ 3,306,620 Net changes during the period 47,851 10,773 ----------- ----------- Balance at end of period $ 3,485,831 $ 3,317,393 =========== =========== TOTAL COMPREHENSIVE INCOME, NET OF TAXES: Net income $ 236,311 $ 220,749 Other comprehensive income (loss) (86,820) 53,777 ----------- ----------- Total comprehensive income, net of taxes $ 149,491 $ 274,526 =========== =========== See accompanying notes to consolidated financial statements.
-5- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 1. The Corporation's aggregate allowance for credit losses at June 30, 1998 was $351.6 million, which consisted of: $14.8 million applicable to trading account assets which is a reduction of "trading account assets," $10.0 million included in "other liabilities" for off-balance-sheet extensions of credit, such as standby letters of credit, guarantees and commitments, and $326.8 million, which is available to absorb all other credit losses. The following table presents data related to the Corporation's aggregate allowance for credit losses for the six-month periods ended June 30, 1998 and 1997. 1998 1997 ----------- ----------- (In thousands) Aggregate balance at beginning of period $ 353,481 $ 350,358 Charge-offs (13,841) (12,455) Recoveries 4,475 7,592 ----------- ----------- Net charge-offs (9,366) (4,863) Provision charged to operating expense 8,000 8,000 Translation adjustment (482) (969) ----------- ----------- Aggregate balance at end of period $ 351,633 $ 352,526 =========== =========== 2. Common stock in treasury consists of common shares of the Corporation, at cost, which are held by a trust established in connection with the Corporation's 1998 Long Term Incentive Compensation Plan, for the benefit of certain employees who have elected to invest a portion of their deferred restricted cash compensation in common stock of the Corporation. At the end of the deferral period, the common stock will be delivered by the trust to the employee. 3. On June 1, 1998, a 100% stock dividend in the form of a two-for-one common stock split was distributed to stockholders of record on May 1, 1998. All share and per share data have been adjusted to reflect the split. 4. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, and for hedging activities. This statement is effective for periods commencing January 1, 2000. The Corporation is currently evaluating the impact this statement will have on its results of operations and its financial position. 5. Certain amounts from the prior year have been reclassified to conform with 1998 classifications. -6- 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 43% in 1998 and 1997. 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, 1998 compared to the corresponding periods of 1997. Increase (Decrease) -------------------------------------------- 2nd Qtr. 1998 vs. Six Months 1998 vs. 2nd Qtr. 1997 Six Months 1997 -------------------- -------------------- Amount Percent Amount Percent ---------- ------- ---------- ------- (Dollars in thousands) Interest income $ 49,466 6.1 $ 109,934 7.0 Interest expense 34,079 6.2 87,941 8.4 ---------- ---------- Net interest income 15,387 5.9 21,993 4.2 Provision for credit losses - - - - ---------- ---------- Net interest income after provision for credit losses 15,387 6.0 21,993 4.3 Other operating income 19,247 15.4 15,438 6.1 Other operating expenses 28,891 13.5 66,446 15.5 ---------- ---------- Income before income taxes 5,743 3.5 (29,015) (8.6) ---------- ---------- Applicable income taxes (842) (1.8) (42,709) (43.2) Tax equivalent adjustment (1,747) (20.5) (1,868) (11.3) ---------- ---------- Total applicable income taxes (2,589) (4.6) (44,577) (38.6) ---------- ---------- Net income $ 8,332 7.5 $ 15,562 7.0 ========== ======= ========== ======= Net income applicable to common stock - diluted $ 6,932 6.6 $ 13,930 6.7 ========== ======= ========== ======= NET INTEREST INCOME - on a fully-taxable equivalent basis was $275.1 million in the second quarter of 1998, compared to $259.7 million in the second quarter of 1997. The second quarter of 1998 net interest income reflects $8.9 million of additional earnings on the repayment of an international loan. This item reduced the adverse affect of increased premium amortization attributable to the higher rate of prepayments experienced in the second quarter of 1998 on mortgage-backed securities. As shown in the table on page 8, average interest-earning assets were $48.0 billion in the second quarter of 1998, compared to $45.1 billion in the second quarter of 1997. During the second quarter of 1998, the Corporation increased the level of taxable investment securities, federal funds sold and short-term borrowings. The net interest rate differential was 2.30% in the second quarter of 1998, compared to 2.31% in the second quarter last year. The net interest rate differential in the second quarter of 1998 was affected favorably by 7 basis points due to the repayment of the international loan discussed above. -7- AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands)
Quarter Ended June 30, ------------------------------------------------------------------------------ 1998 1997 ----------------------------------- ------------------------------------ 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 $ 4,900,070 $ 77,785 6.37 $ 4,953,775 $ 78,166 6.33 Investment securities (1): Taxable 23,061,629 386,210 6.72 21,037,573 373,680 7.12 Exempt from federal income taxes 1,359,317 26,791 7.91 1,588,120 32,192 8.13 ----------- --------- ----------- --------- Total investment securities 24,420,946 413,001 6.78 22,625,693 405,872 7.20 Trading account assets (2) 1,256,439 25,380 8.10 1,638,352 31,537 7.72 Federal funds sold and securities purchased under resale agreements 3,789,488 52,380 5.54 1,909,235 25,560 5.37 Loans, net of unearned income: Domestic offices 9,683,560 200,490 8.30 9,288,054 188,245 8.13 Foreign offices 3,989,617 88,864 8.93 4,710,118 79,054 6.73 ----------- --------- ----------- --------- Total loans, net of unearned income 13,673,177 289,354 8.49 13,998,172 267,299 7.66 ----------- --------- ----------- --------- Total interest-earning assets 48,040,120 $ 857,900 7.16 45,125,227 $ 808,434 7.19 ========= ======= ========= ======= Cash and due from banks 896,245 813,100 Other assets 7,493,606 9,698,863 ----------- ----------- Total assets $56,429,971 $55,637,190 =========== ============ Interest-bearing funds: Consumer and other time deposits $10,507,775 $ 99,927 3.81 $10,826,151 $ 108,401 4.02 Certificates of deposit 1,281,931 16,293 5.10 1,619,298 20,796 5.15 Deposits in foreign offices 17,211,301 252,239 5.88 17,447,434 235,392 5.41 ----------- --------- ----------- --------- Total interest-bearing deposits 29,001,007 368,459 5.10 29,892,883 364,589 4.89 Trading account liabilities (2) 408,373 5,918 5.81 164,146 3,090 7.55 Short-term borrowings 10,114,149 131,700 5.22 8,906,736 113,783 5.12 Total long-term debt 4,764,732 76,708 6.46 4,197,233 67,244 6.43 ----------- --------- ----------- --------- Total interest-bearing funds 44,288,261 $ 582,785 5.28 43,160,998 $ 548,706 5.10 ========= ======= ========= ======= Noninterest-bearing deposits: In domestic offices 2,613,450 2,284,431 In foreign offices 246,061 161,047 Other liabilities 5,745,263 6,793,141 Stockholders' equity: Preferred stock 500,000 400,000 Common stockholders' equity 3,036,936 2,837,573 ----------- ----------- Total stockholders' equity 3,536,936 3,237,573 ----------- ----------- Total liabilities and stockholders' equity $56,429,971 $55,637,190 =========== ============ Interest income/earning assets $ 857,900 7.16 $ 808,434 7.19 Interest expense/earning assets 582,785 4.86 548,706 4.88 --------- ------- --------- ------- Net interest differential $ 275,115 2.30 $ 259,728 2.31 ========= ======= ========= ======= (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- AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands)
Six Months Ended June 30, ------------------------------------------------------------------------------ 1998 1997 ------------------------------------ ------------------------------------ Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid % Balance Expense Paid % ----------- ---------- ------- ----------- ---------- ------- Interest-earning assets: $ 4,552,310 $ 146,310 6.48 $ 4,859,939 $ 153,557 6.37 Interest-bearing deposits with banks Investment securities (1): 23,217,833 785,322 6.82 20,564,951 718,331 7.04 Taxable 1,457,550 57,522 7.96 1,538,489 62,023 8.13 Exempt from federal income taxes ----------- ---------- ----------- ----------- 24,675,383 842,844 6.89 22,103,440 780,354 7.12 Total investment securities 1,133,182 44,147 7.86 1,657,523 60,831 7.40 Trading account assets (2) Federal funds sold and securities 3,328,292 91,697 5.56 1,754,321 46,672 5.36 purchased under resale agreements Loans, net of unearned income: 9,286,899 383,880 8.34 8,933,598 363,879 8.21 Domestic offices 3,975,497 165,014 8.37 4,735,442 158,665 6.76 Foreign offices ----------- ---------- ----------- ---------- 13,262,396 548,894 8.35 13,669,040 522,544 7.71 Total loans, net of unearned income ----------- ---------- ----------- ---------- 46,951,563 $1,673,892 7.19 44,044,263 $1,563,958 7.16 Total interest-earning assets ========== ======= ========== ======= Cash and due from banks 847,726 781,201 Other assets 7,883,968 9,511,358 ----------- ----------- Total assets $55,683,257 $54,336,822 =========== =========== Interest-bearing funds: Consumer and other time deposits $10,532,463 $ 203,623 3.90 $10,895,636 $ 215,603 3.99 Certificates of deposit 1,410,929 35,926 5.13 1,601,013 40,285 5.07 Deposits in foreign offices 17,546,361 509,709 5.86 16,803,773 443,562 5.32 ----------- ---------- ----------- ---------- Total interest-bearing deposits 29,489,753 749,258 5.12 29,300,422 699,450 4.81 Trading account liabilities (2) 394,711 8,850 4.52 213,889 7,142 6.73 Short-term borrowings 8,469,768 219,890 5.24 8,105,166 203,364 5.06 Total long-term debt 4,753,623 152,552 6.47 4,195,864 132,653 6.38 ----------- ---------- ----------- ---------- Total interest-bearing funds 43,107,855 $1,130,550 5.29 41,815,341 $1,042,609 5.03 ========== ======= ========== ======= Noninterest-bearing deposits: In domestic offices 2,602,652 2,241,227 In foreign offices 257,654 186,966 Other liabilities 6,219,883 6,840,762 Stockholders' equity: Preferred stock 500,000 439,810 Common stockholders' equity 2,995,213 2,812,716 ----------- ------------ Total stockholders' equity 3,495,213 3,252,526 ----------- ------------ Total liabilities and stockholders' equity $55,683,257 $54,336,822 =========== ============ Interest income/earning assets $1,673,892 7.19 $1,563,958 7.16 Interest expense/earning assets 1,130,550 4.86 1,042,609 4.77 ---------- ------- ---------- ------- Net interest differential $ 543,342 2.33 $ 521,349 2.39 ========== ======= ========== ======= (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.
-9- As shown in the table on page 9, net interest income on a fully-taxable equivalent basis was $543.3 million for the first six months of 1998, compared to $521.3 million in the comparable period of 1997. Average interest-earning assets rose to $47.0 billion for the first six months of 1998, compared to $44.0 billion for the corresponding period of 1997. The increase in average interest-earning assets was primarily attributable to taxable investment securities and federal funds sold. The net interest rate differential was 2.33% for the first six months of 1998, compared to 2.39% in the respective period of 1997. PROVISION FOR CREDIT LOSSES - was $4.0 million and $8.0 million in the second quarter and first six months of 1998, respectively, unchanged from the corresponding periods of last year. Aggregate net charge-offs were $3.9 million in the second quarter of 1998, compared to net charge-offs of $4.1 million in the second quarter of 1997. For the first six months of 1998, aggregate net charge-offs were $9.4 million, compared to $4.9 million for the six-month period of 1997. See Note 1 of notes to consolidated financial statements for additional information related to the allowance for credit losses and net charge-offs. The following table presents summary data related to non-accrual loans and other non-performing assets for the periods ended: June 30, March 31, Dec. 31, 1998 1998 1997 -------- -------- -------- (in thousands) Non-accrual loans: Domestic $ 74,473 $ 76,397 $ 84,094 Foreign 6,232 8,140 9,727 -------- -------- -------- Total non-accrual loans 80,705 84,537 93,821 Other assets and real estate owned 9,000 14,432 18,847 -------- -------- -------- Total non-performing assets $ 89,705 $ 98,969 $112,668 ======== ======== ======== Non-accrual loans as a percentage of loans outstanding at period end 0.58% 0.64% 0.76% ======== ======== ======== Total non-performing assets as a percentage of period end total assets 0.15% 0.18% 0.20% ======== ======== ======== OTHER OPERATING INCOME - was $144.3 million in the second quarter of 1998, compared to $125.1 million in the second quarter a year earlier and $122.6 million in the first quarter of 1998. For the first six months of 1998, such income was $266.9 million, compared to $251.5 million in the corresponding period of 1997. Total trading revenue, including associated net interest income which is reported as net interest income, rose 12.7% to $63.7 million in the second quarter of 1998, up from $56.5 million in the second quarter of 1997. For the six-month period ended June 30, 1998, such revenue amounted to $129.6 million, an increase of 18.1% from $109.8 million in 1997. Trading net interest income, which was primarily attributable to precious metals activities, rose to $20.2 million and $46.0 million, respectively, in the second quarter and first six months of 1998 from $10.0 million and $17.2 million in the corresponding periods of 1997. The items of net interest income/(expense) in the following table represent the net interest earned or paid on instruments held for trading, as well as an allocation by management to reflect the funding benefit or cost associated with the trading positions. -10- Three Months Six Months Ended Ended June 30, June 30, ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- (In thousands) Income from precious metals: Trading revenue $ 254 $ 1,045 $ 3,620 $ 11,843 Net interest income 16,516 7,371 35,438 12,189 -------- -------- -------- -------- Total 16,770 8,416 39,058 24,032 -------- -------- -------- -------- Foreign exchange trading income: Trading revenue 41,979 32,612 72,222 59,737 Net interest (expense) (2,213) (2,764) (2,831) (5,579) -------- -------- -------- -------- Total 39,766 29,848 69,391 54,158 -------- -------- -------- -------- Trading account profits and commissions: Trading revenue 1,230 12,820 7,759 21,046 Net interest income 5,903 5,419 13,422 10,554 -------- -------- -------- -------- Total 7,133 18,239 21,181 31,600 -------- -------- -------- -------- Total: Trading revenue 43,463 46,477 83,601 92,626 Net interest income 20,206 10,026 46,029 17,164 -------- -------- -------- -------- Total $ 63,669 $ 56,503 $129,630 $109,790 ======== ======== ======== ======== Investment securities gains were $12.4 million in the second quarter of 1998, compared to $6.7 million in the second quarter of 1997. In the second quarters of both 1998 and 1997, investment securities gains were primarily from sales of other securities available for sale and, to a lesser degree, U.S. Government agency securities available for sale. For the first six months of 1998, investment securities gains were $3.9 million, compared to $1.4 million last year. The Corporation recorded a net loss on loans sold or held for sale of $0.2 million in the second quarter of 1998, compared to a net gain of $2.4 million in the second quarter of 1997. For the six month period of 1998 such gain amounted to $3.5 million compared to a net gain of $9.9 million in the corresponding period of 1997, which was primarily attributable to the sale of non-accrual commercial real estate loans. Commission income, which consists primarily of securities brokerage commissions, fees for the issuance of banker acceptances and letters of credit and retail services was $24.2 million in the second quarter of 1998, compared to $20.7 million in the second quarter of 1997. For the first six months of 1998, commission income amounted to $48.2 million compared to $41.3 million for the six-month period of 1997. -11- Equity in the earnings of affiliate increased to $36.8 million in the second quarter of 1998, an increase of 20% from $30.6 million in the second quarter of 1997. This income represents the Corporation's share of the earnings of Safra Republic Holdings S.A. ("Safra Republic"), a European international private banking group of which the Corporation owns approximately 49%. The growth in client account assets at Safra Republic, combined with higher levels of client activities in portfolio securities, contributed to the increase. Safra Republic's total client account assets, both on-and off-balance sheet, increased to $32.1 billion at June 30, 1998 from $27.3 billion at June 30, 1997. This change consisted of increases of $3.6 billion, or 24%, in client portfolio assets and $1.2 billion, or 10%, in client deposits. For the six-month period of 1998, equity in the earnings of Safra Republic was $72.7 million, compared to $58.7 million for the six-month period of last year, an increase of 24%. Other income was $27.6 million in the second quarter of 1998, compared to $18.2 million in the second quarter of 1997. The domestic consumer bank and the domestic and international private banking divisions generate fee income through service charges to clients for deposit accounts and trust and securities activities. Other income includes revenues from these activities of $16.4 million in the second quarter of 1998, compared to $14.6 million in the second quarter of 1997. Other income in the second quarter of 1998 included a gain of $4.4 million related to sales of real estate. Other income for the six-month periods ended June 30, 1998 and 1997 was $55.0 million and $47.7 million, respectively. Included in the 1997 six-month amount was a gain of $7.4 million on the unwinding of a real estate financing transaction and approximately $3.6 million of annual investment management performance fees. OTHER OPERATING EXPENSES - were $243.4 million in the second quarter and $495.1 million for the first six months of 1998, compared to $214.5 million and $428.7 million in the corresponding periods of 1997. Included in the second quarter and first six months of 1998 were $8.6 million and $27.5 million of Year 2000 expenses, respectively. The Corporation did not incur any Year 2000 expenses in the corresponding periods of 1997. Salaries and employee benefits were $133.8 million in the second quarter of 1998, compared to $117.3 million in the second quarter of last year. The increases in the second quarter of 1998 compared to the second quarter of 1997, were attributable largely to increased staff in information technology and additions to staff to support a greater volume of activity in mortgage origination, trading and foreign offices. For the six months ended June 30, 1998, such expenses rose to $266.6 million from $233.3 million in the year-earlier period, due to higher levels of staff discussed above and increased incentive compensation. Occupancy expense was $18.1 million in the second quarter of 1998 and $37.0 million for the six-month period of 1998, compared to $16.8 million and $35.1 million in the comparable periods of 1997. -12- All other expenses were $91.5 million in the second quarter and $191.5 million in the first six months of 1998, compared to $80.4 million and $160.3 million in the corresponding periods of 1997. After excluding the impact of Year 2000 expenses of $7.6 million and $25.5 million, in the second quarter and first six months of 1998, respectively, all other expenses increased by $3.5 million and $5.7 million, respectively, from the same periods in 1997. Amortization of goodwill and other intangible assets was $6.7 million in the second quarter of 1998, compared to $7.1 million in the second quarter of last year. As previously reported, the Corporation estimates that total incremental expenses for the Year 2000 project will be approximately $60 million. Commencing in the second half of 1997 and through June 30 1998, $43.0 million of these costs have been recorded. The first quarter 1998 expenses of $18.9 million have represented the peak for costs incurred during any one quarter, with $8.6 million of these costs recorded in the second quarter of 1998. The Corporation is on target to meet its plan to complete substantially all systems conversions by the end of 1998. 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 $2.6 million in the second quarter of 1998 and declined $44.6 million during the first six months of 1998 when compared to the corresponding periods of 1997. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, were 31% for the second quarter and 23% for the six-month period of 1998, compared to 34%, respectively, in the corresponding periods of last year. The six-month period of 1998 effective tax rate reflected the reversal in the first quarter of certain tax liabilities accrued in prior years. STATEMENT OF CONDITION CAPITAL RATIOS 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 (the "FRB") specifically applied to the Corporation. These ratios do not reflect the effect on stockholders' equity related to the FASB 115 valuation of the Corporation's portfolio of securities available for sale which is included in accumulated other comprehensive loss, net of taxes. The total risk-based capital ratio has been calculated under the FRB's new market risk capital guidelines. The guidelines incorporate a measure of specific issuer risk for debt and equity trading positions as well as the market risk of all trading and nontrading foreign exchange and commodity positions. The total risk-based capital ratio for December 31, 1997 has not been restated to reflect these new guidelines -13- The following table presents the Corporation's risk-based capital ratios: June 30, Dec. 31, 1998 1997 ---------- ---------- Risk-based capital ratios: Tier 1 risk-based capital ratio 12.83% 12.97% Total risk-based capital ratio 21.28% 21.58% Leverage ratio 5.97% 5.60% Common stockholders' equity/total assets 4.98% 5.28% FORWARD-LOOKING INFORMATION IN CONNECTION WITH THE INFORMATION RELATING TO THE YEAR 2000, THIS REPORT CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING STATEMENTS AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE THE ACTUAL FACTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THIS REPORT. SUCH UNCERTAINTIES RELATED TO THE YEAR 2000 INFORMATION COULD INCLUDE UNANTICIPATED EVENTS RELATING TO WORK ON THE DEVELOPMENTS OR MODIFICATIONS TO COMPUTER SYSTEMS AND TO SOFTWARE, INCLUDING WORK PERFORMED BY SUPPLIERS OR VENDORS TO THE CORPORATION, AND THE SATISFACTORY RESOLUTION OF SUCH EVENTS MAY BE BEYOND THE CORPORATION'S CONTROL IN RESPONDING TO SUCH EVENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS WHICH SPEAK ONLY TO THE DATE OF THIS REPORT. -14- 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 May 27, 1998. (c) The following matters were voted upon at such meeting: (i) Election of the following twenty-two persons as directors of the Corporation, with shares voted for and withheld indicated: Nominee Shares For Shares Withheld ------- ---------- --------------- Kurt Andersen 43,961,992 590,016 Robert A. Cohen 43,964,114 587,893 Cyril S. Dwek 43,964,114 587,893 Ernest Ginsberg 43,964,314 587,693 Nathan Hasson 43,964,314 587,693 Peter Kimmelman 43,964,202 587,805 Richard A. Kraemer 43,964,314 587,693 Leonard Lieberman 43,935,491 616,515 William C. MacMillen, Jr. 43,962,655 589,352 Peter J. Mansbach 43,963,202 588,805 Martin F. Mertz 43,964,314 587,693 James L. Morice 43,964,314 587,693 E. Daniel Morris 43,964,057 587,949 Janet L. Norwood 43,964,057 587,949 John A. Pancetti 43,963,935 588,072 Vito S. Portera 43,962,889 589,118 Thomas F. Robards 43,964,314 587,693 William P. Rogers 43,318,116 1,233,891 Elias Saal 43,964,314 587,693 Dov C. Schlein 43,963,935 588,072 Walter H. Weiner 43,961,277 590,730 George T. Wendler 43,964,314 587,693 (ii) Approval of selection of KPMG Peat Marwick LLP, as the Corporation's auditors for 1998. The number of votes cast for or against, as well as the number of abstentions as to such matter, were as follows: For Against Abstain --- ------- ------- 44,518,568 12,494 20,946 -15- 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 June 30, 1998. -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: August 14, 1998 By /s/Walter H. Weiner ------------------------- Walter H. Weiner Chairman of the Board Dated: August 14, 1998 By /s/Stan Martin ------------------------------- Stan Martin Executive Vice President and Chief Financial Officer - Financial Reporting and Control -17- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended June 30, 1998 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 PER SHARE EARNINGS REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE UNAUDITED (In thousands except per share data)
Six Months Ended Three Months Ended June 30, June 30, ---------------------- ---------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Basic earnings: Net income $ 236,311 $ 220,749 $ 118,837 $ 110,505 Less preferred stock dividends (13,175) (11,712) (6,573) (5,274) Less dividends on restricted stock plan shares (1,747) (1,529) (882) (794) --------- --------- --------- --------- Net income applicable to common stock- basic $ 221,389 $ 207,508 $ 111,382 $ 104,437 ========= ========= ========= ========= Average common shares outstanding - excluding restricted stock plan shares 104,795 105,912 104,691 105,632 ========= ========= ========= ========= Basic earnings per common share $ 2.11 $ 1.96 $ 1.06 $ 0.99 ========= ========= ========= ========= Diluted earnings: Net income applicable to common stock - basic $ 221,389 $ 207,508 $ 111,382 $ 104,437 Dividend adjustment on restricted stock plan shares to reflect shares assumed issued 883 834 470 483 --------- --------- --------- --------- Net income applicable to common stock - diluted $ 222,272 $ 208,342 $ 111,852 $ 104,920 ========= ========= ========= ========= Shares: Average common shares outstanding - excluding restricted stock plan shares 104,795 105,912 104,691 105,632 Net shares assumed issued under restricted stock plan 1,816 1,393 1,883 988 Shares assumed issued on exercise of stock options 83 107 78 104 --------- --------- --------- --------- Average common shares outstanding 106,694 107,412 106,652 106,724 ========= ========= ========= ========= Diluted earnings per common share $ 2.08 $ 1.94 $ 1.05 $ 0.98 ========= ========= ========= =========
EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-1998 JUN-30-1998 1,066,843 8,626,903 2,218,397 4,242,167 16,788,744 7,979,192 8,121,668 13,816,426 326,776 59,919,082 34,220,625 10,214,634 213,307 4,533,884 540,439 0 500,000 2,445,392 59,919,082 548,894 828,138 282,154 1,659,186 749,258 1,130,550 528,636 8,000 3,949 495,128 292,420 236,311 0 0 236,311 2.11 2.08 0 0 0 0 0 0 0 0 0 0 0 0
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