-----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, LsLloZHHeIHWZOtQHhLp7nBmYuqZJuHlLvATHqXvXzasdDt4VJd/b05x8tYqD4LA p7aNmsn2Vy10bzZBw7s9bQ== 0000083246-94-000030.txt : 19941116 0000083246-94-000030.hdr.sgml : 19941116 ACCESSION NUMBER: 0000083246-94-000030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE 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: 94559847 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 9/30/94 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 September 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 October 31, 1994: 52,795,752 shares. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited September 30, 1994 and December 31, 1993 2 Consolidated Statements of Income - Unaudited Nine-Months and Three-Months Ended September 30, 1994 and 1993 3 Consolidated Statements of Cash Flows - Unaudited Nine-Months Ended September 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 6. Exhibits and Reports on Form 8-K 14 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, 1994 1993 Assets Cash and due from banks $ 638,380 $ 636,633 Interest-bearing deposits with banks 9,530,875 5,346,647 Precious metals 1,577,081 1,117,610 Securities held to maturity (approximate market value of $5,586,369 in 1994 and $2,088,805 in 1993) 5,742,154 1,992,847 Securities available for sale (at approximate market value) 6,034,928 12,956,946 Total investment securities 11,777,082 14,949,793 Trading account assets 3,062,180 1,194,629 Federal funds sold and securities purchased under resale agreements 838,621 2,322,465 Loans (net of unearned income of $49,972 in 1994 and $94,825 in 1993) 9,383,733 9,508,558 Allowance for possible loan losses (319,578) (311,855) Loans (net) 9,064,155 9,196,703 Customers' liability on acceptances 1,411,214 1,134,294 Accounts receivable and accrued interest 1,778,659 2,117,879 Investment in affiliate 599,127 625,333 Premises and equipment 407,403 399,626 Other assets 524,956 451,860 Total assets $ 41,209,733 $ 39,493,472 Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 1,408,884 $ 1,427,518 In foreign offices 94,607 135,251 Interest-bearing deposits: In domestic offices 8,434,725 8,724,797 In foreign offices 12,287,929 12,513,684 Total deposits 22,226,145 22,801,250 Trading account liabilities 2,763,022 177,475 Short-term borrowings (note 1) 4,486,868 4,164,419 Acceptances outstanding 1,411,219 1,137,636 Accounts payable and accrued expenses 1,847,836 2,873,903 Due to factored clients 666,652 614,549 Other liabilities 143,807 122,203 Long-term debt 2,588,991 2,582,875 Subordinated long-term debt and perpetual capital notes (note 2) 2,405,843 2,271,940 Stockholders' equity: (note 3) Cumulative preferred stock, no par value 8,952,500 shares outstanding in 1994 and 8,131,000 in 1993 672,500 556,425 Common stock, $5 par value 150,000,000 shares authorized; 52,835,627 shares outstanding in 1994 and 52,703,271 in 1993 264,178 263,516 Surplus 440,699 459,713 Retained earnings 1,401,255 1,204,818 Net unrealized appreciation (depreciation) on securities available for sale, net of taxes (109,282) 262,750 Total stockholders' equity 2,669,350 2,747,222 Total liabilities and stockholders' equity $ 41,209,733 $ 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) Nine Months Ended Three Months Ended September 30, September 30, 1994 1993 1994 1993 INTEREST INCOME: Interest and fees on loans $ 514,551 $ 463,468 $ 177,459 $ 163,334 Interest on deposits with banks 249,615 237,083 122,205 68,665 Interest and dividends on investment securities: Taxable 648,986 637,200 208,610 206,721 Exempt from federal income taxes 55,384 48,255 19,304 17,133 Interest on trading account assets 46,372 34,528 13,816 16,639 Interest on federal funds sold and securities purchased under resale agreements 41,297 24,471 14,166 9,080 Total interest income 1,556,205 1,445,005 555,560 481,572 INTEREST EXPENSE: Interest on deposits 563,414 515,036 213,053 174,780 Interest on short-term borrowings 159,369 145,792 51,450 47,428 Interest on long-term debt 205,003 201,393 72,860 66,341 Total interest expense 927,786 862,221 337,363 288,549 NET INTEREST INCOME 628,419 582,784 218,197 193,023 Provision for loan losses 16,000 70,000 3,000 20,000 Net interest income after provision for loan losses 612,419 512,784 215,197 173,023 OTHER OPERATING INCOME: Income from precious metals 39,831 26,896 15,438 11,014 Foreign exchange trading income 68,159 88,264 24,228 30,486 Trading account profits and commissions 20,220 40,400 9,638 20,436 Investment securities gains (losses), net 12,290 6,258 (767) 3,802 Net gain (loss) on loans sold or held for sale 1,982 (1,186) 1,419 (268) Commission income 44,864 36,165 12,595 15,555 Equity in earnings of affiliate 58,465 41,583 18,809 14,743 Other income 49,413 45,754 15,912 12,432 Total other operating income 295,224 284,134 97,272 108,200 OTHER OPERATING EXPENSES: Salaries 189,291 150,268 58,887 51,672 Employee benefits 110,560 103,083 36,787 34,885 Occupancy, net 40,872 35,708 13,935 12,542 Other expenses 199,154 171,497 63,180 57,870 Total other operating expenses 539,877 460,556 172,789 156,969 INCOME BEFORE INCOME TAXES 367,766 336,362 139,680 124,254 Income taxes 117,142 115,084 48,263 46,649 NET INCOME $ 250,624 $ 221,278 $ 91,417 $ 77,605 NET INCOME APPLICABLE TO COMMON STOCK $ 225,933 $ 199,998 $ 82,143 $ 70,545 Net income per common share: Primary $ 4.28 $ 3.82 $ 1.55 $ 1.34 Fully diluted $ 4.15 $ 3.71 $ 1.50 $ 1.30 Average common shares outstanding: Primary 52,738 52,390 53,018 52,634 Fully diluted 56,542 56,253 56,797 56,506
See accompanying notes to consolidated financial statements. -3- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(In thousands) Nine Months Ended September 30, 1994 1993 Cash Flows From Operating Activities: Net income $ 250,624 $ 221,278 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net 49,661 34,083 Provision for loan losses 16,000 70,000 Gains on sales of investment securities, net (12,290) (6,258) Net (gains) losses on loans sold or held for sale (1,982) 1,186 Equity in earnings of affiliate (58,465) (41,583) Net (increase) decrease in trading accounts 717,996 (514,913) Net (increase) decrease in accounts receivable and accrued interest 332,634 (1,993,228) Net increase (decrease) in accounts payable and accrued expenses (623,421) 2,510,097 Other, net (57,907) (185,502) Net cash provided by operating activities 612,850 95,160 Cash Flows From Investing Activities: Net (increase) decrease in interest-bearing deposits with banks (4,184,228) 4,432,321 Net increase in precious metals (459,471) (276,296) Net (increase) decrease in federal funds sold and securities purchased under resale agreements 1,483,844 (120,420) Net increase in short-term investments (39,360) (213,750) Purchases of securities available for sale (3,232,955) (565,347) Proceeds from sales of securities available for sale 3,384,360 - Proceeds from maturities of securities available for sale 2,479,251 242,336 Purchases of securities held to maturity (90,276) (2,874,968) Proceeds from sales of securities held to maturity - 39,541 Proceeds from maturities of securities held to maturity 184,139 1,959,736 Net increase in loans (131,348) (1,369,596) Investment in affiliate 23,805 19,477 Net cash provided (used) by investing activities (582,239) 1,273,034 Cash Flows From Financing Activities: Net increase (decrease) in deposits (574,764) 1,278,313 Net increase (decrease) in short-term borrowings 322,449 (2,677,261) Net increase in due to factored clients 52,103 16,207 Proceeds from issuance of long-term debt 297,802 605,590 Repayment of long-term debt (290,979) (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 - Repurchase of cumulative preferred stock (33,925) - Repurchase of common stock (29,757) - Cash dividends paid (72,085) (62,575) Other, net 33,241 7,312 Net cash used by financing activities (15,853) (1,303,485) Effect of exchange rate changes on cash and due from banks (13,011) 1,583 Net increase in cash and due from banks 1,747 66,292 Cash and due from banks at beginning of period 636,633 490,711 Cash and due from banks at end of period $ 638,380 $ 557,003 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 769,801 $ 879,205 Income taxes $ 97,540 $ 124,075 Transfers from securities available for sale to securities held to maturity $ 3,862,350 $ -
See accompanying notes to consolidated financial statements. -4- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 1. 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. 2. 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. 3. 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 than 10 1/2% per annum for any applicable dividend period. The dividend rate in effect for the period ended September 30, 1994, was 5.92%. 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. On July 1, 1994, the Corporation redeemed all 678,500 outstanding shares of its Cumulative Floating Rate Series B Preferred Stock at the stated value of $50.00 per share. For the nine months ended September 30, 1994, the Corporation purchased a total of 629,964 shares of its Common Stock. Such purchases were made under authorizations by the Board of Directors. The shares were purchased at an aggregate cost of $29,757,000. On October 19, 1994, the Board of Directors authorized the purchase of up to 500,000 additional shares of the Corporation's Common Stock. Such purchases would lessen the dilutive impact on earnings per share resulting from the anticipated issuance of common stock under employee benefit plans. These purchases will be made periodically in the open market or through privately negotiated transactions. 4. 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 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 third quarter and nine months ended September 30, 1994 compared to the corresponding periods of 1993.
Increase (Decrease) 3rd Qtr. 1994 vs. 9 Mos. 1994 vs. 3rd Qtr. 1993 9 Mos. 1993 (Dollars in thousands) Amount Percent Amount Percent Interest income $ 74,216 15.1 $113,580 7.7 Interest expense 48,814 16.9 65,565 7.6 Net interest income 25,402 12.6 48,015 7.9 Provision for loan losses (17,000) (85.0) (54,000) (77.1) Net interest income after provision for loan losses 42,402 23.3 102,015 19.0 Other operating income (10,929) (10.1) 11,089 3.9 Other operating expenses 15,820 10.1 79,321 17.2 Income before income taxes 15,653 11.8 33,783 9.4 Applicable income taxes 1,613 3.5 2,057 1.8 Tax equivalent adjustment 228 2.6 2,380 10.2 Total applicable income taxes 1,841 3.3 4,437 3.2 Net income $ 13,812 17.8 $ 29,346 13.3 Net income applicable to common stock $ 11,598 16.4 $ 25,935 13.0
Net Interest Income - on a fully-taxable equivalent basis amounted to $227.1 million in the third quarter of 1994, an increase of $25.4 million, or 12.6%, compared to the similar quarter in 1993 and totaled $654.2 million for the first nine months of 1994, an increase of $48.0 million, or 7.9%, compared to the same period in 1993. As shown in the tables on pages 7 and 8, average interest-earning assets were $33.3 billion in the third quarter and $33.1 billion in the first nine months of 1994 compared to $32.1 billion and $32.5 billion in the corresponding periods of 1993. The net interest rate differential was 2.71% in the third quarter and 2.64% for the first nine months of 1994, compared to 2.49% in both of 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 September 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 $ 9,451,271 $ 122,205 5.13% $ 6,976,191 $ 68,665 3.91% Investment securities(1): Taxable 10,619,414 208,610 7.79 12,892,468 206,721 6.36 Exempt from federal income taxes 1,159,692 28,184 9.64 1,006,878 25,690 10.12 Total investment securities 11,779,106 236,794 7.98 13,899,346 232,411 6.63 Trading account assets(2) 1,069,013 13,816 5.13 1,055,724 16,639 6.25 Federal funds sold and securities purchased under resale agreements 1,325,529 14,166 4.24 1,044,278 9,080 3.45 Loans, net of unearned income: Domestic offices 6,501,221 130,207 7.95 6,625,028 121,809 7.29 Foreign offices 3,125,180 47,252 6.00 2,479,174 41,620 6.66 Total loans, net of unearned income 9,626,401 177,459 7.31 9,104,202 163,429 7.12 Total interest-earning assets 33,251,320 $ 564,440 6.73% 32,079,741 $ 490,224 6.06% Cash and due from banks 624,840 599,161 Other assets 7,703,432 4,341,943 Total assets $41,579,592 $37,020,845 Interest-bearing funds: Consumer and other time deposits $ 7,857,452 $ 61,439 3.10% $ 8,255,896 $ 62,035 2.98% Certificates of deposit 580,383 6,548 4.48 656,697 5,298 3.20 Deposits in foreign offices 12,598,134 145,066 4.57 11,265,569 107,447 3.78 Total interest-bearing deposits 21,035,969 213,053 4.02 20,178,162 174,780 3.44 Trading account liabilities (2) 156,547 2,228 5.65 169,065 2,315 5.43 Short-term borrowings 4,921,491 49,222 3.97 4,365,072 45,113 4.10 Total long-term debt 5,011,125 72,860 5.77 4,625,148 66,341 5.69 Total interest-bearing funds 31,125,132 $ 337,363 4.30% 29,337,447 $ 288,549 3.90% Noninterest-bearing deposits: In domestic offices 1,385,960 1,212,888 In foreign offices 105,041 98,118 Other liabilities 6,355,866 3,982,224 Stockholders' equity: Preferred stock 672,500 556,425 Common stockholders' equity 1,935,093 1,833,743 Total stockholders' equity 2,607,593 2,390,168 Total liabilities and stockholders' equity $41,579,592 $37,020,845 Interest income/earning assets $ 564,440 6.73% $ 490,224 6.06% Interest expense/earning assets 337,363 4.02 288,549 3.57 Net interest differential $ 227,077 2.71% $ 201,675 2.49% (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) Nine Months Ended September 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 $ 6,999,888 $ 249,615 4.77% $ 8,088,078 $ 237,083 3.92% Investment securities(1): Taxable 12,494,473 648,986 6.94 13,016,992 637,200 6.54 Exempt from federal income taxes 1,151,599 81,156 9.42 933,751 71,382 10.22 Total investment securities 13,646,072 730,142 7.15 13,950,743 708,582 6.79 Trading account assets(2) 1,070,854 46,372 5.79 884,431 34,528 5.22 Federal funds sold and securities purchased under resale agreements 1,452,167 41,297 3.80 1,008,208 24,471 3.25 Loans, net of unearned income: Domestic offices 6,558,425 363,944 7.42 6,298,196 361,212 7.67 Foreign offices 3,406,384 150,607 5.91 2,253,925 102,521 6.08 Total loans, net of unearned income 9,964,809 514,551 6.90 8,552,121 463,733 7.25 Total interest-earning assets 33,133,790 $ 1,581,977 6.38% 32,483,581 $ 1,468,397 6.04% Cash and due from banks 683,341 529,434 Other assets 7,229,977 3,835,431 Total assets $41,047,108 $36,848,446 Interest-bearing funds: Consumer and other time deposits $ 7,975,089 $ 176,456 2.96% $ 8,301,984 $ 193,647 3.12% Certificates of deposit 599,528 17,701 3.95 735,843 17,716 3.22 Deposits in foreign offices 11,801,053 369,257 4.18 10,555,169 303,673 3.85 Total interest-bearing deposits 20,375,670 563,414 3.70 19,592,996 515,036 3.51 Trading account liabilities (2) 162,555 7,468 6.14 94,580 3,751 5.30 Short-term borrowings 5,604,230 151,901 3.62 5,432,019 142,041 3.50 Total long-term debt 4,956,826 205,003 5.53 4,526,599 201,393 5.95 Total interest-bearing funds 31,099,281 $ 927,786 3.99% 29,646,194 $ 862,221 3.89% Noninterest-bearing deposits: In domestic offices 1,335,299 1,143,785 In foreign offices 114,054 102,671 Other liabilities 5,863,789 3,618,178 Stockholders' equity: Preferred stock 616,622 556,425 Common stockholders' equity 2,018,063 1,781,193 Total stockholders' equity 2,634,685 2,337,618 Total liabilities and stockholders' equity $41,047,108 $36,848,446 Interest income/earning assets $ 1,581,977 6.38% $ 1,468,397 6.04% Interest expense/earning assets 927,786 3.74 862,221 3.55 Net interest differential $ 654,191 2.64% $ 606,176 2.49% (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- The Corporation is positioning itself to benefit from the improving economic trends principally in the Latin American countries of Mexico and Brazil and has increased the level of its activities in the financial markets of both of those countries. During the third quarter of 1994, net interest income benefited from a higher volume of investments in wholesale money market assets in Brazil as well as continued investments in Mexico. See "Statement of Condition" below for additional information related to Brazil and Mexico. Net interest income in the third quarter of 1994 also included prepayment penalties of approximately $5.0 million resulting from the refinancing of certain commercial loans. Provision for loan losses - was $3.0 million and $16.0 million in the third quarter and first nine months of 1994, respectively, compared to $20.0 million and $70.0 million for the corresponding periods of last year. It is the Corporation's view that because of improvement in the credit quality of the loan portfolio and the declining level of non-performing loans, it is not necessary to continue to increase the allowance for loan losses at this time. Net loan recoveries, excluding restructuring country debt, were $1.7 million in the third quarter of 1994, compared to net loan charge-offs of $2.5 million in the third quarter of last year. Net recoveries of restructuring country debt amounted to $0.1 million in the third quarter of 1994, compared to $6.9 million related to such obligatons in the third quarter of 1993. For the first nine months of 1994, net loan charge-offs, excluding restructuring country debt, were $15.5 million compared to $30.3 million in the corresponding period of last year. Net recoveries of restructuring country debt were $6.7 million for the first nine months of 1994, compared to $1.0 million in the year-ago period. The allowance for possible loan losses at September 30, 1994 was $319.6 million, compared to $311.9 million at December 31, 1993 as loans declined modestly to $9.4 billion at September 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 3.41% at September 30, 1994, compared to 3.28% at December 31, 1993. At September 30, 1994, non-accrual loans were $58.7 million, compared to $63.2 million at June 30, 1994 and $94.9 million at December 31, 1993. The decline in non-accrual loans since December 31, 1993 is primarily attributable to the Brazilian debt restructuring settlement which reduced non-accrual loans by $33.4 million in the second quarter of 1994. 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:
Sept. 30, June 30, Dec. 31, (In thousands) 1994 1994 1993 Non-accrual loans: Domestic $ 45,037 $ 45,210 $ 48,084 Foreign-restructuring country - 1,875 33,853 Foreign-other 13,679 16,111 12,956 Total non-accrual loans $ 58,716 $ 63,196 $ 94,893
Other operating income - totaled $97.3 million in the third quarter of 1994, compared to $108.2 million in the year-earlier quarter. This decline was primarily attributable to lower levels of customer trading activities. For the first nine months of 1994, such income was $295.2 million compared to $284.1 million in the corresponding period of last year. Income from trading activities in the third quarter of 1994 declined to $49.3 million from $61.9 million in the third quarter of last year. Income from precious metals increased $4.4 million from the corresponding period a year ago, due to higher levels of activity in the precious metals markets, including the contribution from the businesses acquired in the Republic Mase Bank transaction. This increase was more than offset by lower activity and revenues in foreign exchange and trading account profits and commissions. The level of trading income in the third quarter of 1994 improved $19.2 million over the second quarter, as the generally reduced activity in the global markets resulting from the high level of market uncertainty in the second quarter became less pronounced. For the first nine months of 1994, income from trading activities was $128.2 million, compared to $155.6 million in the same period a year ago and reflects the factors mentioned above. Investment securities losses were $0.8 million in the third quarter of 1994, compared to gains of $3.8 million in the third quarter of last year which primarily resulted from early redemptions of securities prior to scheduled maturity. For the first nine months of 1994, investment security gains were $12.3 million, compared to gains of $6.3 million last year. Net gains on security transactions for the nine-month period of 1994 included 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 of the securities received in connection with Brazil's debt restructuring and net losses of $68.9 million primarily on the disposition of securities sold as part of the Corporation's asset/liability management program. The Corporation recorded net gains on loans sold or held for sale of $1.4 million in the third quarter of 1994, compared to net losses of $0.3 million in the corresponding quarter last year. For the nine months ended September 30, 1994, net gains of $2.0 million compare to net losses of $1.2 million in the same period of last year. -10- Commission income amounted to $12.6 million in the third quarter of 1994, compared to $15.6 million in the corresponding period of 1993 reflecting a lower level of fees earned from global asset management activities. For the first nine months of 1994, commission income amounted to $44.9 million, compared to $36.2 million last year. 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 27.6% to $18.8 million in the third quarter of 1994, compared to $14.7 million in the third quarter of 1993. For the nine-month period of 1994 these earnings increased 40.6% to $58.5 million, compared to $41.6 million for the corresponding period of 1993. Other income was $15.9 million in the third quarter of 1994, compared to $12.4 million in the corresponding quarter last year. For the nine months ended September 30, 1994, other income was $49.4 million, compared to $45.8 million in the year-ago period. The nine-month periods include a $2.4 million gain on the early extinguishment of $79.9 million principal amount of Libor Accrual Notes due 1996 in the second quarter of 1994 and a $5.1 million gain on the sale of certain data processing rights in the first quarter of 1993. Other Operating Expenses - totaled $172.8 million in the third quarter and $539.9 million for the first nine months of 1994. This compares to $157.0 million and $460.6 million in the corresponding periods of 1993. These increases are attributable primarily to the Corporation's expansion into new business areas. The previously announced acquisitions of Republic Mase Bank, SafraCorp California and Bank Leumi Le Israel (Canada) and the addition of staff in trading, domestic private banking and various support areas contributed to the increase. The nine months of 1994 includes a second quarter $17.0 million restructuring charge to de-emphasize certain business activities, including activities of Republic New York Securities Corporation. Total operating expenses declined $1.4 million in the third quarter of 1994, when compared to the second quarter of 1994, after adjusting for the restructuring charge. Salaries and employee benefits were $95.7 million in the third quarter of 1994, compared to $86.6 million in the third quarter of last year. For the nine months ended September 30, 1994, such expenses were $299.9 million, including $14.8 million related to the restructuring expenses mentioned above compared to $253.4 million in the year-earlier period. Occupancy expense was $13.9 million in the third quarter of 1994, compared to $12.5 million in the third quarter of 1993. For the nine months ended September 30, 1994, occupancy expense was $40.9 million, compared to $35.7 million last year. The respective period to period increases are primarily due to the new business areas mentioned above and additional costs for home office expansion. All other expenses were $63.2 million in the third quarter of 1994, compared to $57.9 million in the third quarter last year. For the nine months ended September 30, 1994, other expenses were $199.2 million including the balance of the restructuring charge, compared to $171.5 million last year. These increases reflect higher levels of expense for equipment, communications and computer services. -11- 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 deductiblity of state and local taxes for federal income tax purposes. Total applicable income taxes increased $1.8 million, or 3.3%, in the third quarter of 1994 and $4.4 million, or 3.2%, during the first nine months of 1994 when compared to the corresponding periods of 1993. Changes in income taxes in the third quarter are a result of fluctuations in the level of New York state and city income taxes. Income taxes in the third quarter of 1993 reflect the effect, retroactive to January 1, 1993, of applying a higher U.S. statutory tax rate in accordance with the Omnibus Budget Reconciliation Act of 1993. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, for the third quarter and nine-month periods of 1994 were 38.5% and 36.3%, respectively, compared to 41.6% and 38.5% in the corresponding periods of last year. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At September 30, 1994, stockholders' equity included a deduction of $109.3 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 and approximately 49% of Safra Republic's unrealized appreciation in its 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 require the Corporation to deduct one-half of its investment in this subsidiary from each of Tier 1 and Tier 2 capital. At September 30, 1994, the Corporation's leverage ratio was 6.00% compared to 5.61% at year end 1993. At September 30, 1994, risk-based capital ratios were 15.80% for Tier 1, or "core", capital and 26.91% 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 September 30, 1994, the ratio of the Corporation's total common stockholders' equity to total assets was 4.85%, 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. -12- During the third quarter of 1994, the Corporation increased its investment in Brazilian overnight wholesale capital and money market activities. These investments grew to approximately $244 million at September 30, 1994 and together with the Corporation's other longer term Brazilian investments, the Corporation increased its exposure to Brazil to approximately $548 million, or 1.33% of total assets. The Ministry of Finance and Public Credit of Mexico has granted the Bank a license to establish a Mexican banking subsidiary. The new subsidiary will be headquartered in Mexico City, where the Bank has had a representative office since 1972. The subsidiary will operate as Republic National Bank of New York (Mexico), S.A. with an initial capitalization of $100 million. It will engage in activities consistent with those of Mexican "multiple banks", including deposit gathering from the public and the granting of commercial and individual loans. Non-performing Assets At September 30, 1994, total non-performing assets of $85.5 million included $58.7 million of non-accrual loans and $26.8 million of other real estate owned. Total non-performing assets at June 30, 1994 and December 31, 1993 were $87.5 million and $118.2 million respectively. The decline in total non-performing assets at September 30, from December 31 was primarily due to the Brazilian debt restructuring settlement during the second quarter of 1994, which reduced non-accrual loans by $33.4 milllion. The following is a summary of total non-accrual loans and other non-performing assets at periods ending:
Sept. 30, June 30, Dec. 31, (In thousands) 1994 1994 1993 Total non-accrual loans $ 58,716 $ 63,196 $ 94,893 Other non-performing assets: Other real estate owned 26,822 24,331 23,338 Total non-accrual loans and Other non-performing assets $ 85,538 $ 87,527 $ 118,231
Financial Instruments At September 30, 1994, the net fair value depreciation of the Corporation's on-balance sheet financial instruments, including related off-balance sheet interest rate hedges, was approximately $11 million. This amount represents a decline in the fair value of such instruments of approximately $60 million since June 30, 1994 and $325 million since December 31, 1993. The change in value reflects the effect of rising interest rates during the first nine 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 since they can be invested at more favorable spreads. In the third quarter of 1994, the Corporation designated as held to maturity approximately $0.5 billion carrying value of U.S. Government Agency securities which had been previously designated as available for sale. These securities are in addition to approximately $3.4 billion carrying value of such securities which had been so designated in the first six months of 1994. -13- 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, 1994. -14- 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, 1994 By /s/Walter H. Weiner Walter H. Weiner Chairman of the Board Dated: November 14, 1994 By /s/John D. Kaberle, Jr. John D. Kaberle, Jr. Executive Vice President and Comptroller (Principal Accounting Officer) -15- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended September 30, 1994 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, 1994 1993 1994 1993 Primary: Earnings: Net income $ 250,624 $ 221,278 $ 91,417 $ 77,605 Less preferred stock dividends 24,691 21,280 9,274 7,060 Net income applicable to common stock $ 225,933 $ 199,998 $ 82,143 $ 70,545 Shares: Average number of common shares outstanding 52,738 52,390 53,018 52,634 Net income per common share $ 4.28 $ 3.82 $ 1.55 $ 1.34 Fully Diluted: Earnings: Net income applicable to common stock $ 225,933 $ 199,998 $ 82,143 $ 70,545 Add dividends applicable to convertible preferred stock 8,733 8,733 2,911 2,911 Net income applicable to common stock as adjusted $ 234,666 $ 208,731 $ 85,054 $ 73,456 Shares: Average number of common shares outstanding 52,738 52,390 53,018 52,634 Add shares assumed issued upon exercise of stock options 235 294 210 303 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 56,542 56,253 56,797 56,506 Net income per common share $ 4.15 $ 3.71 $ 1.50 $ 1.30
EX-27 3 ART. 9 FDS FOR 3RD QUARTER 10-Q
9 1,000 9-MOS DEC-31-1994 SEP-30-1994 638,380 9,530,875 838,621 3,062,180 6,034,928 5,742,154 5,516,409 9,383,733 319,578 41,209,733 22,226,145 4,486,868 143,807 4,994,834 264,178 0 672,500 1,732,672 41,209,733 514,551 704,370 337,284 1,556,205 563,414 927,786 628,419 16,000 12,290 539,877 367,766 250,624 0 0 250,624 4.28 4.15 0 0 0 0 0 0 0 0 0 0 0 0
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