-----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, C9TsMfSY168WTg4FUs2MlCO6dWkE+Zkh6i+YtZu+M3VIFQv8bJwYOI49wdsm/G+y 1+un0MzOCiw8GXsfxNkBcg== 0000083246-96-000014.txt : 19960515 0000083246-96-000014.hdr.sgml : 19960515 ACCESSION NUMBER: 0000083246-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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: 96564045 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: 3-31-96 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 March 31, 1996. [ ] 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 55,734,747 at April 30, 1996. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited March 31, 1996 and December 31, 1995 2 Consolidated Statements of Income - Unaudited Three-Months Ended March 31, 1996 and 1995 3 Consolidated Statements of Cash Flows - Unaudited Three-Months Ended March 31, 1996 and 1995 4 Consolidated Statement of Changes in Stockholders' Equity- Unaudited-Three Months Ended March 31, 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 8-13 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. ITEM 1. FINANCIAL STATEMENTS
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION UNAUDITED (Dollars in thousands) March 31, December 31, Assets 1996 1995 ------------ ------------ Cash and due from banks $ 747,767 $ 675,683 Interest-bearing deposits with banks 6,003,656 6,094,495 Precious metals 1,145,745 1,250,038 Securities held to maturity (approximate market value of $7,779,324 in 1996 and $4,595,454 in 1995) 7,817,052 4,487,022 Securities available for sale (at approximate market value) 11,484,377 11,751,523 ------------ ------------ Total investment securities 19,301,429 16,238,545 Trading account assets 3,580,673 4,035,606 Federal funds sold and securities purchased under resale agreements 890,924 1,749,268 Loans (net of unearned income of $31,004 in 1996 and $34,988 in 1995) 11,062,712 9,843,960 Allowance for possible loan losses (339,209) (300,593) ------------ ------------ Loans, net 10,723,503 9,543,367 Customers' liability on acceptances 1,070,062 818,007 Accounts receivable and accrued interest 1,832,947 1,946,077 Investment in affiliate 732,742 722,466 Premises and equipment 457,405 436,771 Other assets 657,406 371,231 ------------ ------------ Total assets $ 47,144,259 $ 43,881,554 ============ ============ Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 1,827,206 $ 1,740,035 In foreign offices 181,488 160,133 Interest-bearing deposits: In domestic offices 12,030,898 8,471,452 In foreign offices 15,066,917 14,548,013 ------------ ------------ Total deposits 29,106,509 24,919,633 Trading account liabilities 3,157,109 3,719,651 Short-term borrowings 4,053,311 3,890,768 Acceptances outstanding 1,070,487 819,766 Accounts payable and accrued expenses 1,979,135 2,840,048 Due to factored clients 653,315 528,684 Other liabilities 189,541 193,645 Long-term debt 1,499,037 1,555,111 Subordinated long-term debt and perpetual capital notes (note 3) 2,406,463 2,406,440 Stockholders' equity: Cumulative preferred stock, no par value 8,502,500 shares outstanding in 1996 and 1995 575,000 575,000 Common stock, $5 par value 150,000,000 shares authorized; 55,737,670 shares outstanding in 1996 and 56,259,563 in 1995 278,688 281,298 Surplus 565,203 590,008 Retained earnings 1,702,801 1,636,264 Net unrealized depreciation on securities available for sale, net of taxes (92,340) (74,762) ------------ ------------ Total stockholders' equity 3,029,352 3,007,808 ------------ ------------ Total liabilities and stockholders' equity $ 47,144,259 $ 43,881,554 ============ ============ See accompanying notes to consolidated financial statements.
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REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (In thousands except per share data) Three Months Ended March 31, --------------------- 1996 1995 ---------- --------- Interest Income: Interest and fees on loans $ 215,533 $ 176,913 Interest on deposits with banks 103,018 149,749 Interest and dividends on investment securities: Taxable 290,778 227,609 Exempt from federal income taxes 23,878 24,181 Interest on trading account assets 14,659 12,884 Interest on federal funds sold and securities purchased under resale agreements 17,781 20,492 -------- -------- Total interest income 665,647 611,828 -------- -------- Interest Expense: Interest on deposits 303,502 272,301 Interest on short-term borrowings 75,334 51,762 Interest on long-term debt 63,725 71,802 -------- -------- Total interest expense 442,561 395,865 -------- -------- Net Interest Income 223,086 215,963 Provision for loan losses 4,000 3,000 -------- -------- Net interest income after provision for loan losses 219,086 212,963 -------- -------- Other Operating Income: Income from precious metals 8,388 15,416 Foreign exchange trading income 27,562 21,927 Trading account profits and commissions 9,725 9,189 Investment securities gains, net 5,329 1,679 Net gain on loans sold or held for sale 1,502 767 Commission income 15,636 15,245 Equity in earnings of affiliate 21,640 19,188 Other income (note 3) 17,490 15,732 -------- -------- Total other operating income 107,272 99,143 -------- -------- Other Operating Expenses: Salaries 61,161 61,508 Employee benefits 39,942 40,216 Occupancy, net 16,376 14,505 Other expenses 66,870 76,372 -------- -------- Total other operating expenses 184,349 192,601 -------- -------- Income Before Income Taxes 142,009 119,505 Income taxes 42,417 31,992 -------- -------- Net Income $ 99,592 $ 87,513 ======== ======== Net Income Applicable to Common Stock $ 91,815 $ 77,343 ======== ======== Net income per common share: Primary $ 1.64 $ 1.48 Fully diluted $ 1.64 $ 1.43 Average common shares outstanding: Primary 56,021 52,302 Fully diluted 56,021 56,073 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) Three Months Ended March 31, ----------------------------- 1996 1995 ------------- ------------ Cash Flows From Operating Activities: Net income $ 99,592 $ 87,513 Adjustments to reconcile net income to net cash provided by (used) in operating activities: Depreciation and amortization, net 17,854 13,322 Provision for loan losses 4,000 3,000 Investment securities gains, net (5,329) (1,679) Net gain on loans sold or held for sale (1,502) (767) Equity in earnings of affiliate (21,640) (19,188) Net change in trading accounts (107,609) 281,387 Net change in accounts receivable and accrued interest (227,259) 15,476 Net change in accounts payable and accrued expenses 113,047 273,599 Other, net (66,847) (128,534) ------------- ------------ Net cash provided by (used) in operating activities (195,693) 524,129 ------------- ------------ Cash Flows From Investing Activities: Interest-bearing deposits with banks 269,339 1,752,113 Precious metals 104,293 (37,171) Federal funds sold and securities purchased under resale agreements 1,508,344 (1,275,458) Short-term investments (180,028) 35,313 Purchases of securities held to maturity (2,290,772) (13,848) Proceeds from maturities of securities held to maturity 126,968 123,725 Purchases of securities available for sale (2,175,208) (442,367) Proceeds from sales of securities available for sale 1,182,146 141,884 Proceeds from maturities of securities available for sale 1,489,668 271,223 Loans 2,437 (307,609) Payment for purchase of Brooklyn Bancorp, Inc., net of cash received (486,002) - ------------- ------------ Net cash provided by (used) in investing activities (448,815) 247,805 ------------- ------------ Cash Flows From Financing Activities: Deposits 570,116 576,032 Short-term borrowings 139,584 (510,405) Due to factored clients 124,631 (58,374) Proceeds from issuance of long-term debt 110,165 36,508 Repayment of long-term debt (166,085) (850,000) Proceeds from issuance of subordinated long-term debt 100,000 - Repayment of subordinated long-term debt (100,000) - Repurchase of common stock (31,917) (10,021) Cash dividends paid (27,944) (27,124) Other, net (609) 18,431 ------------- ------------ Net cash provided by (used) in financing activities 717,941 (824,953) Effect of exchange rate changes on cash and due from banks (1,349) (6,065) ------------- ------------ Net increase (decrease) in cash and due from banks 72,084 (59,084) Cash and due from banks at beginning of period 675,683 867,242 ------------- ------------ Cash and due from banks at end of period $ 747,767 $ 808,158 ============= ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 427,561 $ 407,877 Income taxes 23,461 2,672 Transfers from securities available for sale to securities held to maturity 1,008,547 - 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) Three Months Ended March 31, 1996 ------------ Cumulative Preferred Stock: Balance at beginning and end of period $ 575,000 =========== Common Stock: Balance at beginning of period $ 281,298 Net issuance under stock option, restricted stock and restricted stock election plans of 32,204 shares 161 Retirement of 554,097 shares (2,771) ----------- Balance at end of period $ 278,688 =========== Surplus: Balance at beginning of period $ 590,008 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 32,204 shares 4,779 Treasury stock transactions of affiliate (438) Retirement of 554,097 common shares (29,146) ----------- Balance at end of period $ 565,203 =========== Retained Earnings: Balance at beginning of period $ 1,636,264 Net income 99,592 Foreign currency translation, net of taxes (4,096) Dividends declared on common stock (21,182) Dividends declared on issues of preferred stock (7,777) ----------- Balance at end of period $ 1,702,801 =========== Net Unrealized Depreciation on Securities Available for Sale, Net of Taxes: Balance at beginning of period $ (74,762) Unrealized depreciation (24,101) Income tax benefit 6,523 ----------- Balance at end of period $ (92,340) =========== Total Stockholders' Equity: Balance at beginning of period $ 3,007,808 Net changes during the period 21,544 ----------- Balance at end of period $ 3,029,352 =========== See accompanying notes to consolidated financial statements
-5- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 1. On January 1, 1996, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This SFAS establishes the recognition and measurement criteria for impairment losses on long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This SFAS requires that an impairment loss be recognized when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The adoption of this SFAS has had no effect on the Corporation's results of operations or its financial condition. On January 1, 1996, the Corporation adopted SFAS No. 123, "Accounting for Stock-Based Compensation." This SFAS encourages the adoption of a new accounting method for employee stock-based compensation plans and applies to all arrangements whereby an employee receives stock or other equity instruments of an employer based on the price of an employer's stock. These arrangements include restricted stock, stock options and stock appreciation rights. The SFAS also permits the retention of the Corporation's current method of accounting for these plans under Accounting Principles Board Opinion No.25. The Corporation will continue its current method of accounting for stock based compensation and, therefore, pro forma footnote disclosures of net income and earnings per share will be provided on an annual basis. The adoption of this SFAS will have no effect on the Corporation's results of operations or its financial condition. 2. On February 29, 1996, the Corporation completed the acquisition of Brooklyn Bancorp, Inc.("BBI") and its wholly-owned subsidiary CrossLand FSB ("CrossLand"). The Corporation purchased all of the common stock and common stock equivalents of BBI at $41.50 per share for a total consideration of approximately $529.5 million. The acquisition was accounted for as a purchase and CrossLand's operations were merged into Republic National Bank of New York. The excess of cost over the market value of net assets acquired, goodwill, amounted to $186 million and is being amortized to expense on a straight-line basis over a life of fifteen years. Approximately $796 million of assets acquired from BBI are subject to a loss-sharing agreement with the Federal Deposit Insurance Corporation (FDIC). Under this agreement, the Corporation will be reimbursed by the FDIC for 80 percent of any losses it incurs through the expiration of the agreement on June 30, 1998. BBI had total assets of $4.1 billion, total deposits of approximately $3.6 billion and 30 branches in the New York metropolitan area. Also see "Management's Discussion and Analysis-Results of Operations". 3. On March 22, 1996, the Corporation sold, in a public offering, $100 million principal amount of 7% Subordinated Notes due 2011. 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 by the Corporation have been used for general corporate purposes, which included the repurchase of $100 million principal amount outstanding of the Corporation's issue of Subordinated Floating Rate Yield Curve Notes due 2002. Other income in the first quarter of 1996, included a gain of $1.1 million in connection with the repurchase and early extinguishment of this debt issue. -6- 4. The following table presents data related to the Corporation's allowance for possible loan losses for the three-month periods ended March 31, 1996 and 1995.
(In thousands) 1996 1995 -------------- ------------- Balance at beginning of period $ 300,593 $ 319,220 Charge-offs (11,374) (10,273) Recoveries 3,433 6,536 -------------- ------------- Net charge-offs (7,941) (3,737) Provision charged to operating expense 4,000 3,000 Allowance acquired from BBI 42,579 - Translation adjustment (22) (345) -------------- ------------- Balance at end of period $ 339,209 $ 318,138 ============== =============
5. 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 re-engineering program to improve operating efficiencies and reduce costs. The following table summarizes the activity in accrued restructuring and related charges for the three months ended March 31, 1996.
(In thousands) Balance at December 31, 1995 $ 63,963 Payments (9,717) Non-cash writedowns (112) --------------- Balance at March 31, 1996 $ 54,134 ===============
-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%. 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 first quarter of 1996 compared to the first quarter of 1995.
Increase (Decrease) -------------------------- 1st Qtr. 1996 vs. 1st Qtr. 1995 -------------------------- Amount Percent -------------------------- (Dollars in thousands) Interest income $ 52,373 8.4 Interest expense 46,696 11.8 ------------- Net interest income 5,677 2.5 Provision for loan losses 1,000 33.3 ------------- Net interest income after provision for loan losses 4,677 2.1 Other operating income 8,129 8.2 Other operating expenses (8,252) (4.3) ------------- Income before income taxes 21,058 16.3 ------------- Applicable income taxes 10,425 32.6 Tax equivalent adjustment (1,446) (14.7) ------------- Total applicable income taxes 8,979 21.5 ------------- Net income $ 12,079 13.8 ============= ========== Net income applicable to common stock $ 14,472 18.7 ============= ==========
Net Interest Income - on a fully-taxable equivalent basis amounted to $231.5 million in the first quarter of 1996, compared to net interest income of $225.8 million in the first quarter of 1995. The acquisition of Brooklyn Bancorp, Inc. ("BBI") increased net interest income in the first quarter of 1996 by approximately $17 million, after imputing the cost of acquisition funding. As shown in the table on page 9, average interest-earning assets rose to $37.2 billion in the first quarter of 1996, from $32.2 billion in the first quarter of 1995, or 15.4%. This increase reflected the additional interest-earning assets acquired in the BBI transaction. -8-
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands) Quarter Ended March 31, ----------------------------------------------------------------------------------- 1996 1995 ----------------------------------------- ------------------------------------ Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid -------------- ------------- ---------- -------------- ------------- --------- Interest-earning assets: Interest-bearing deposits with banks $ 5,940,713 $ 103,018 6.97% $ 9,505,137 $ 149,749 6.39% Investment securities:(1) Taxable 16,300,804 290,778 7.17 10,264,507 227,609 8.99 Exempt from federal income taxes 1,547,892 32,255 8.38 1,342,735 34,004 10.27 -------------- ------------- -------------- ------------- Total investment securities 17,848,696 323,033 7.28 11,607,242 261,613 9.14 Trading account assets(2) 1,011,774 14,659 5.83 958,226 12,884 5.45 Federal funds sold and securities purchased under resale agreements 1,226,349 17,781 5.83 1,399,343 20,492 5.94 Loans, net of unearned income: Domestic offices 7,974,773 162,573 8.20 6,056,861 128,964 8.64 Foreign offices 3,197,212 52,960 6.66 2,701,014 47,949 7.20 -------------- ------------- -------------- ------------- Total loans, net of unearned income 11,171,985 215,533 7.76 8,757,875 176,913 8.19 -------------- ------------- -------------- ------------- Total interest-earning assets 37,199,517 $ 674,024 7.29% 32,227,823 $ 621,651 7.82% ============= ========== ============= ========= Cash and due from banks 727,158 558,297 Other assets 8,102,801 7,271,285 -------------- -------------- Total assets $ 46,029,476 $ 40,057,405 ============== ============== Interest-bearing funds: Consumer and other time deposits $ 9,802,068 $ 100,793 4.14% $ 7,738,589 $ 75,962 3.98% Certificates of deposit 747,108 9,348 5.03 820,459 11,403 5.64 Deposits in foreign offices 13,287,239 193,361 5.85 12,650,266 184,936 5.93 -------------- ------------- -------------- ------------- Total interest-bearing deposits 23,836,415 303,502 5.12 21,209,314 272,301 5.21 Trading account liabilities(2) 59,831 972 6.53 36,729 671 7.41 Short-term borrowings 6,043,980 74,362 4.95 4,508,138 51,091 4.60 Total long-term debt 3,923,446 63,725 6.53 4,385,152 71,802 6.64 -------------- ------------- -------------- ------------- Total interest-bearing funds 33,863,672 $ 442,561 5.26% 30,139,333 $ 395,865 5.33% ============= ========== ============= ========= Noninterest-bearing deposits: In domestic offices 1,810,408 1,478,170 In foreign offices 134,439 108,989 Other liabilities 7,200,682 5,679,985 Stockholders' equity: Preferred stock 575,000 672,500 Common stockholders' equity 2,445,275 1,978,428 -------------- -------------- Total stockholders' equity 3,020,275 2,650,928 -------------- -------------- Total liabilities and stockholders' equity $ 46,029,476 $ 40,057,405 ============== ============== Interest income/earning assets $ 674,024 7.29% $ 621,651 7.82% Interest expense/earning assets 442,561 4.79 395,865 4.98 ------------- ---------- ------------- --------- Net interest differential $ 231,463 2.50% $ 225,786 2.84% ============= ========== ============= ========= (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.
-9- Net interest rate differential declined to 2.50% in the first quarter of 1996 from 2.84% in the first quarter of 1995. The decline in rate differential in the first quarter of 1996 from the first quarter last year was attributable primarily to the lower level of interest income from high-yield short-term assets in Brazil. In the first quarter of 1996, these investments contributed approximately 1.9% of interest income, compared to a contribution of approximately 6.0% in the first quarter of 1995. At March 31, 1996, the Corporation's total exposure to Brazil, consisting primarily of Brady Bonds, medium-term government bonds and short-term government bonds, was approximately 1.65% of total assets, up from 1.55% at year end 1995. Provision for loan losses - was $4.0 million in the first quarter of 1996, compared to $3.0 million in the first quarter of last year. Net loan charge-offs were $7.9 million in the first quarter of 1996, compared to net loan charge-offs of $3.7 million in the first quarter of 1995. See Note 4 of notes to consolidated financial statements for additional information related to the allowance for possible loan losses and net charge-offs. The allowance for possible loan losses at March 31, 1996 was $339.2 million, or 3.07% of loans outstanding net of unearned income, compared to $300.6 million, or 3.05% at December 31, 1995. The total allowance for possible loan losses is available to absorb credit losses in the Corporation's entire portfolio. The increase in the allowance for loan losses in the first quarter of 1996 from year end 1995, was primarily attributable to the addition of the allowance acquired from BBI of $42.6 million. The increase in loans from $9.8 billion at December 31, 1995 to $11.1 billion at March 31, 1996 was also primarily a result of the loan portfolio, consisting primarily of conventional residential and commercial mortgage loans, acquired in the BBI transaction. Approximately $796 million of assets acquired from BBI are subject to a loss-sharing agreement with the FDIC. Under this agreement, the Corporation will be reimbursed by the FDIC for 80 percent of any losses it incurs through the expiration of the agreement on June 30, 1998. The following table presents summary data related to non-accrual loans at periods ended:
March 31, March 31, Dec. 31, (in thousands) 1996 1995 1995 ------------- ------------- ------------ Non-accrual loans: Domestic $ 137,438 (1) $ 44,233 $ 49,311 Foreign 13,222 14,698 18,561 ------------- ------------- ------------ Total non-accrual loans $ 150,660 $ 58,931 $ 67,872 ============= ============= ============ Non-accrual loans as a percentage of loans outstanding at period end 1.36% 0.65% 0.69% ============= ============= ============ (1) Includes $91.6 million of loans acquired from BBI, of which $81.4 million (pre-acquisition book value of $101.8 million) are covered by the FDIC 80-percent loss-sharing agreement as described above. See "Statement of Condition" below for information on total non-performing assets.
-10- Other Operating Income - rose to $107.3 million in the first quarter of 1996, compared to $99.1 million in the first quarter last year. Included in the first quarter of 1996 was approximately $1.2 million of other income attributable to BBI. Income from trading activities declined to $45.7 million in the first quarter of 1996, from $46.5 million in the first quarter of last year, but increased from $25.5 million in the fourth quarter of 1995. The first quarter-to-quarter change was attributable to a decline in income from precious metals that was partially offset by increased income from foreign exchange and trading account profits and commissions. The increase in trading income in the first quarter of 1996, compared to the fourth quarter of 1995, resulted from expanded marketing efforts and increased client activity. Investment securities gains were $5.3 million in the first quarter of 1996, compared to $1.7 million in the first quarter of 1995. In both periods, the respective gains were primarily from sales of securities available for sale and, to a lesser degree, redemptions prior to maturity of securities held to maturity. A net gain on loans sold or held for sale of $1.5 million was recorded in the first quarter of 1996, compared to a net gain of $0.8 million in the first quarter of last year. Commission income, which consists primarily of fees for the issuance of letters of credit, the creation of acceptances and the collection and transfer of funds, was $15.6 million in the first quarter of 1996, compared to $15.2 million in the corresponding period of 1995. Equity in the earnings of affiliate rose to $21.6 million in the first quarter of 1995, up from $19.2 million in the first quarter of last year. 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%. This increase was due to higher levels of net interest income and other income, primarily investment securities gains, partially offset by increases in the provision for loan losses, operating expenses and income taxes. Safra Republic's total client portfolio accounts were $17.5 billion at March 31, 1996, compared to $14.8 billion at March 31, 1995. This change consisted of increases of $1.6 billion, or 28%, in client portfolio assets and $1.1 billion, or 12%, in client deposits. The Corporation's other income, which consists primarily of service charges on deposit accounts, trust income and other income from factoring and overseas locations, was $17.5 million in the first quarter of 1996, compared to $15.7 million in the first quarter of l995. Included in the first quarter of 1996 was a gain of $1.1 million from the repurchase and early extinguishment of an issue of $100 million principal amount of floating rate subordinated long-term debt. Other Operating Expenses - were $184.3 million in the first quarter of 1996, of which approximately $14 million was attributable to BBI, including $2.9 million for amortization of intangible assets. This compared to operating expenses of $192.6 million in the first quarter of 1995, which included a one-time expense of $7.5 million related to a change in the method of accounting for charitable contributions. The Corporation expects to realize expense savings in the next two quarters as redundancies resulting from the BBI acquisition are eliminated. -11- Salaries and employee benefits were $101.1 million in the first quarter of 1996, compared to $101.7 million in the first quarter of 1995. The 1996 amount reflects both staff reductions attributable to the Corporation's 1995 re-engineering program and additions to staff related to recent acquisitions and new business expansion. Occupancy expense was $16.4 million in the first quarter of 1996, compared to $14.5 million in the first quarter of 1995. This increase was primarily due to the acquisition of 30 additional BBI branches. All other expenses were $66.9 million in the first quarter of 1996 and $76.4 million in the first quarter of last year, which included the $7.5 million one-time charge for charitable contributions as described above. Excluding the effect of this one-time charge in the first quarter of 1995, all other expenses in the first quarter of 1996 declined $2.0 million, or 2.9%, compared to 1995. This change reflected a reduction in the rate of FDIC insurance premiums, which was partially offset by the increased costs for amortization of goodwill and other intangible assets related to recent acquisitions. 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 increased $9.0 million, or 21.5%, between the first quarters of 1996 and 1995. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, for the first quarters of 1996 and 1995 were 34% and 32%, respectively. This increase was attributable to proportionately higher levels of income being earned in jurisdictions with higher tax rates. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At March 31, 1996, stockholders' equity included a deduction of $92.3 million, which represented 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 appreciation in its securities available for sale portfolio, this compares with a deduction of $74.8 million at December 31, 1995. 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. 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. -12- The following table presents the Corporation's risk-based capital ratios:
March 31, Dec. 31, 1996 1995 ---------- ---------- Risk-based capital ratios: Tier 1 risk-based capital ratio 13.25% 14.72% Total risk-based capital ratio 22.68% 24.96% Leverage ratio 5.57% 6.24%
These ratios substantially exceeded the minimums in effect for bank holding companies. At March 31, 1996, the ratio of the Corporation's total common stockholders' equity to total assets was 5.21%, compared to 5.54% at December 31, 1995. The decline in this ratio at March 31, 1996 was attributable to total assets increasing to $47.1 billion from $43.9 billion at December 31, 1995, primarily as a result of the BBI acquisition while common stockholders' equity increased by $21.5 million. Non-performing Assets The following is a summary of the Corporation's non-performing assets at periods ending:
March 31, Dec. 31, March 31, (in thousands) 1996 1995 1995 ------------- ------------- ------------ Total non-accrual loans $ 150,660 $ 67,872 $ 58,931 Other real estate owned 42,395 31,329 23,678 ------------- ------------- ------------ Total non-performing assets 193,055 (1) $ 99,201 $ 82,609 ============= ============ Less: FDIC loss-sharing (88,644) ------------- Total $ 104,411 ============= Total non-performing assets as a percentage of period end total assets 0.41% 0.23% 0.20% ============= ============= ============ (1) Includes $101.2 million of assets acquired in the BBI transaction, of which $88.9 million are covered by the FDIC 80-percent loss-sharing agreement (pre-acquisition book value of $110.8 million at 80 percent or $88.6 million).
-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 (i) On March 15, 1996, a report on Form 8-K was filed reporting the completion of the Corporation's previously announced acquisition of Brooklyn Bancorp, Inc. and its wholly-owned subsidiary CrossLand Federal Savings Bank. -14- SIGNATURES Pursuant to the requirements of the Securities Exchanges 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: May 14, 1996 By Walter H. Weiner Chairman of the Board Dated: May 14, 1996 By Kenneth F. Cooper Executive Vice President and Chief Financial Officer -15- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended March 31, 1996 REPUBLIC NEW YORK CORPORATION EXHIBIT INDEX No. Exhibit Description 11 Computation of Earnings Per Common Share 27 Financial Data Schedule EX-11 2 EXHIBIT 11
REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE UNAUDITED (In thousands except per share data) Three Months Ended March 31, ------------------------------ 1996 1995 ------------- ------------ Primary: Earnings: Net income $ 99,592 $ 87,513 Less preferred stock dividends (7,777) (10,170) ------- ------- Net income applicable to common stock $ 91,815 $ 77,343 ======= ======= Shares: Average number of common and common equivalent shares outstanding 56,021 52,302 ======= ======= Net income per common share $ 1.64 $ 1.48 ======= ======= Fully Diluted: Earnings: Net income applicable to common stock $ 91,815 $ 77,343 Add dividends applicable to convertible preferred stock -- 2,911 ------- ------- Net income applicable to common stock as adjusted $ 91,815 $ 80,254 ======= ======= Shares: Average number of common and common equivalent shares outstanding 56,021 52,302 Add shares assumed issued upon exercise of stock options -- 202 Add shares assumed issued upon conversion of preferred stock -- 3,569 ------- ------- Average number of common and common equivalent shares outstanding 56,021 56,073 ======= ======= Net income per common share $ 1.64 $ 1.43 ======= =======
EX-27 3
9 1,000 3-MOS DEC-31-1996 MAR-31-1996 747,767 6,003,656 890,924 3,580,673 11,484,377 7,817,052 7,779,324 11,062,712 339,209 47,144,259 29,106,509 4,053,311 189,541 3,905,500 278,688 0 575,000 2,175,664 47,144,259 215,533 314,656 135,458 665,647 303,502 442,561 223,086 4,000 5,329 184,349 142,009 99,592 0 0 99,592 1.64 1.64 0 0 0 0 0 0 0 0 0 0 0 0
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