-----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, Up27bTg92CUQy87Eir+ztVwi/SuwyF2ZBZ0jrmiQ6W774TrxYt+iJRacwao7pT6C I5gJ3ovMEh1L7gBHAKEf8A== 0000083246-96-000019.txt : 19960816 0000083246-96-000019.hdr.sgml : 19960816 ACCESSION NUMBER: 0000083246-96-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96614599 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: 6-30-96 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 June 30, 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 55,358,720 at July 31, 1996. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited June 30, 1996 and December 31, 1995 2 Consolidated Statements of Income - Unaudited Six-Months and Three-Months Ended June 30, 1996 and 1995 3 Consolidated Statements of Cash Flows - Unaudited 4 Consolidated Statement of Changes in Stockholders' Equity- Unaudited-Six Months Ended June 30, 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 8-15 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 17 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, Assets 1996 1995 ------------ ------------ Cash and due from banks $ 890,861 $ 675,683 Interest-bearing deposits with banks 5,573,134 6,094,495 Precious metals 1,043,985 1,250,038 Securities held to maturity (approximate market value of $7,886,020 in 1996 and $4,595,454 in 1995) 7,969,445 4,487,022 Securities available for sale (at approximate market value) 11,753,967 11,751,523 ------------ ------------ Total investment securities 19,723,412 16,238,545 Trading account assets 3,508,884 4,035,606 Federal funds sold and securities purchased under resale agreements 2,136,323 1,749,268 Loans (net of unearned income of $ 28,177 in 1996 and $34,988 in 1995) 11,303,917 9,843,960 Allowance for possible credit losses (339,214) (300,593) Customers' liability on acceptances 789,819 818,007 Accounts receivable and accrued interest 2,069,480 1,946,077 Investment in affiliate 731,861 722,466 Premises and equipment 465,116 436,771 Other assets 682,077 371,231 ------------ ------------ Total assets $ 48,579,655 $ 43,881,554 ============ ============ Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 2,144,753 $ 1,740,035 In foreign offices 198,187 160,133 Interest-bearing deposits: In domestic offices 12,082,652 8,471,452 In foreign offices 15,654,152 14,548,013 ------------ ------------ Total deposits 30,079,744 24,919,633 Trading account liabilities 3,190,666 3,719,651 Short-term borrowings 4,958,942 3,890,768 Acceptances outstanding 790,568 819,766 Accounts payable and accrued expenses 1,622,091 2,840,048 Due to factored clients 591,545 528,684 Other liabilities 156,955 193,645 Long-term debt 1,696,108 1,555,111 Subordinated long-term debt and perpetual capital notes (note 3) 2,406,441 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; 55,428,109 shares outstanding in 1996 and 56,259,563 in 1995 277,141 281,298 Surplus 520,149 590,008 Retained earnings 1,771,982 1,636,264 Net unrealized depreciation on securities available for sale, net of taxes (57,677) (74,762) ------------ ------------ Total stockholders' equity 3,086,595 3,007,808 ------------ ------------ Total liabilities and stockholders' equity $ 48,579,655 $ 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) Six Months Ended Three Months Ended June 30, June 30, ------------------------------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Interest Income: Interest and fees on loans $ 438,318 $ 362,233 $ 222,785 $ 185,320 Interest on deposits with banks 202,808 281,312 99,790 131,563 Interest and dividends on investment securities: Taxable 608,864 442,447 318,086 214,838 Exempt from federal income taxes 47,757 46,396 23,879 22,215 Interest on trading account assets 32,250 23,925 17,591 11,041 Interest on federal funds sold and securities purchased under resale agreements 41,618 39,022 23,837 18,530 ---------- ---------- ---------- ---------- Total interest income 1,371,615 1,195,335 705,968 583,507 ---------- ---------- ---------- ---------- Interest Expense: Interest on deposits 630,408 555,347 326,906 283,046 Interest on short-term borrowings 150,774 96,496 75,440 44,734 Interest on long-term debt 125,432 138,303 61,707 66,501 ---------- ---------- ---------- ---------- Total interest expense 906,614 790,146 464,053 394,281 ---------- ---------- ---------- ---------- Net Interest Income 465,001 405,189 241,915 189,226 Provision for credit losses 8,000 6,000 4,000 3,000 ---------- ---------- ---------- ---------- Net interest income after provision for credit losses 457,001 399,189 237,915 186,226 ---------- ---------- ---------- ---------- Other Operating Income: Income from precious metals 11,611 27,763 3,223 12,347 Foreign exchange trading income 50,601 60,239 23,039 38,312 Trading account profits and commissions 25,557 24,706 15,832 15,517 Investment securities gains, net 9,888 4,967 4,559 3,288 Net gain on loans sold or held for sale 1,743 767 241 -- Commission income 34,646 28,287 19,010 13,042 Equity in earnings of affiliate 44,494 38,482 22,854 19,294 Other income (note 3) 37,909 33,871 20,419 18,139 ---------- ---------- ---------- ---------- Total other operating income 216,449 219,082 109,177 119,939 ---------- ---------- ---------- ---------- Other Operating Expenses: Salaries 125,205 119,660 64,044 58,152 Employee benefits 80,129 78,041 40,187 37,825 Occupancy, net 34,490 29,098 18,114 14,593 Restructuring and related charges (note 5) -- 120,000 -- 120,000 Other expenses 140,412 143,463 73,542 67,091 ---------- ---------- ---------- ---------- Total other operating expenses 380,236 490,262 195,887 297,661 ---------- ---------- ---------- ---------- Income Before Income Taxes 293,214 128,009 151,205 8,504 Income tax expense (benefit) 90,572 29,405 48,155 (2,587) ---------- ---------- ---------- ---------- Net Income $ 202,642 $ 98,604 $ 103,050 $ 11,091 ========== ========== ========== ========== Net Income Applicable to Common Stock $ 187,050 $ 78,379 $ 95,235 $ 1,036 ========== ========== ========== ========== Net income per common share: Primary $3.35 $1.50 $1.71 $0.02 Fully diluted $3.35 $1.50 $1.71 $0.02 Average common shares outstanding: Primary 55,870 52,327 55,718 52,352 Fully diluted 55,870 56,094 55,718 56,114 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) Six Months Ended June 30, --------------------------- 1996 1995 ----------- ------------ Cash Flows From Operating Activities: Net income $ 202,642 $ 98,604 Adjustments to reconcile net income to net cash provided by (used) in operating activities: Depreciation and amortization, net 38,738 32,049 Provision for credit losses 8,000 6,000 Investment securities gains, net (9,888) (4,967) Net gain on loans sold or held for sale (1,743) (767) Restructuring and related charges -- 107,298 Equity in earnings of affiliate (44,494) (38,482) Net change in trading accounts (2,263) (266,452) Net change in accounts receivable and accrued interest (488,474) 30,850 Net change in accounts payable and accrued expenses (21,232) 312,059 Other, net (160,130) (55,781) ----------- ----------- Net cash provided by (used) in operating activities (478,844) 220,411 ----------- ----------- Cash Flows From Investing Activities: Interest-bearing deposits with banks 699,861 2,954,089 Precious metals 206,053 (85,856) Federal funds sold and securities purchased under resale agreements 262,945 (701,017) Short-term investments (60,596) (11,187) Purchases of securities held to maturity (2,596,034) (43,030) Proceeds from maturities of securities held to maturity 279,931 238,833 Purchases of securities available for sale (3,881,417) (2,178,453) Proceeds from sales of securities available for sale 1,504,235 572,726 Proceeds from maturities of securities available for sale 2,343,934 471,054 Loans (251,853) (908,600) Payment for purchase of Brooklyn Bancorp, Inc., net of cash received (486,002) -- Investment in affiliate 30,296 28,133 ----------- ----------- Net cash provided by (used) in investing activities (1,948,647) 336,692 ----------- ----------- Cash Flows From Financing Activities: Deposits 1,542,757 1,208,715 Short-term borrowings 1,045,215 (893,980) Due to factored clients 62,861 (51,826) Proceeds from issuance of long-term debt 407,569 -- Repayment of long-term debt (266,085) (1,032,750) Proceeds from issuance of subordinated long-term debt 100,000 -- Repayment of subordinated long-term debt (100,000) -- Net proceeds from issuance of cumulative preferred stock -- 72,563 Repurchase of common stock (82,174) (16,699) Cash dividends paid (57,340) (56,281) Other, net (1,426) 19,909 ----------- ----------- Net cash provided by (used) in financing activities 2,651,377 (750,349) Effect of exchange rate changes on cash and due from banks (8,708) (2,037) ----------- ----------- Net decrease in cash and due from banks 215,178 (195,283) Cash and due from banks at beginning of period 675,683 867,242 ----------- ----------- Cash and due from banks at end of period $ 890,861 $ 671,959 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 914,801 $ 790,146 Income taxes 78,811 61,185 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) Six Months Ended June 30, 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 512,032 shares 2,560 Retirement of 1,343,486 shares (6,717) ----------- Balance at end of period $ 277,141 =========== Surplus: Balance at beginning of period $ 590,008 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 512,032 shares 6,089 Treasury stock transactions of affiliate (491) Retirement of 1,343,486 common shares (75,457) ----------- Balance at end of period $ 520,149 =========== Retained Earnings: Balance at beginning of period $ 1,636,264 Net income 202,642 Foreign currency translation, net of taxes (8,991) Dividends declared on common stock (42,341) Dividends declared on issues of preferred stock (15,592) ----------- Balance at end of period $ 1,771,982 =========== Net Unrealized Depreciation on Securities Available for Sale, Net of Taxes: Balance at beginning of period $ (74,762) Unrealized appreciation 33,626 Income tax benefit (16,541) ----------- Balance at end of period $ (57,677) =========== Total Stockholders' Equity: Balance at beginning of period $ 3,007,808 Net changes during the period 78,787 ----------- Balance at end of period $ 3,086,595 =========== 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, 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 $680 million of assets acquired from BBI are currently 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 summarizes the activity in the allowance for possible credit losses for the six-month periods ended June 30, 1996 and 1995.
1996 1995 ---------- --------- (In thousands) Balance at beginning of period $ 300,593 $ 319,220 Charge-offs (20,528) (20,140) Recoveries 8,276 8,598 --------- --------- Net charge-offs (12,252) (11,542) Provision charged to operating expense 8,000 6,000 Allowance acquired from BBI 42,579 -- Translation adjustment 294 652 --------- --------- Balance at end of period $ 339,214 $ 314,330 ========= =========
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 components of this provision were as follows:
(In thousands) Salaries and employee benefits $ 71,000 Occupancy, net 10,000 Other expenses 39,000 -------- Total restructuring and related charges provision $120,000 ========
The following table summarizes the activity in accrued restructuring and related charges for the six-month periods ended June 30, 1996 and 1995.
1996 1995 --------- --------- (In thousands) Balance at beginning of period $ 63,963 $ -- Provision during the period -- 120,000 Payments (22,121) (12,702) Non-cash writedowns (5,521) (7,733) --------- --------- Ending accrual at June 30, $ 36,321 $ 99,565 ========= =========
6. Certain amounts from 1995 have been reclassified to conform with 1996 classifications. -7- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Management's discussion and analysis of the summary of operations should be read in conjunction with the consolidated financial statements (unaudited) and notes shown elsewhere in this Report. In the following discussion, the interest income earned on tax exempt obligations has been adjusted (increased) to a fully-taxable equivalent basis. The rate used for this adjustment was approximately 44%. 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, 1996 compared to the corresponding periods of 1995.
Increase (Decrease) ------------------------------------------------------------- 2nd Qtr. 1996 vs. Six Months 1996 vs. 2nd Qtr. 1995 Six Months 1995 -------------------------- -------------------------- Amount Percent Amount Percent -------------------------- -------------------------- (Dollars in thousands) Interest income $ 121,788 20.6 $ 174,161 14.3 Interest expense 69,772 17.7 116,468 14.7 --------- --------- Net interest income 52,016 26.3 57,693 13.6 Provision for credit losses 1,000 33.3 2,000 33.3 --------- --------- Net interest income after provision for credit losses 51,016 26.1 55,693 13.3 Other operating income (10,762) (9.0) (2,633) (1.2) Other operating expenses (101,774) (34.2) (110,026) (22.4) --------- --------- Income before income taxes 142,028 * 163,086 111.2 --------- --------- Applicable income taxes 50,742 * 61,167 * Tax equivalent adjustment (673) (7.6) (2,119) (11.3) --------- --------- Total applicable income taxes 50,069 * 59,048 122.8 --------- --------- Net income $ 91,959 * $ 104,038 105.5 ========= ====== ========= ====== Net income applicable to common stock $ 94,199 * $ 108,671 138.6 ========= ====== ========= ====== *Exceeds 200%
Net Interest Income - on a fully-taxable equivalent basis was $250.1 million in the second quarter of 1996, compared to $198.1 million in the second quarter of 1995. As shown in the table on page 9, average interest-earning assets rose to $39.9 billion for the second quarter of 1996, compared to $31.0 billion for the second quarter of 1995. The respective increases reflected the additional interest-earning assets recently acquired from BBI, the investment of deposit liabilities acquired from First Nationwide Savings Bank and Bank Leumi Trust Company, and an increase in investment securities funded by deposits in foreign offices and short-term borrowings. The net interest rate differential was 2.52% in the second quarter of 1996, compared to 2.56% in the second quarter last year. -8-
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands) Quarter Ended June 30, -------------------------------------------------------------------------------------- 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 $ 5,754,785 $ 99,790 6.97% $ 7,256,147 $ 131,563 7.27% Investment securities:(1) Taxable 17,818,852 318,086 7.18 11,037,959 214,838 7.81 Exempt from federal income taxes 1,545,833 32,079 8.35 1,249,754 31,088 9.98 ----------- ----------- ----------- ----------- Total investment securities 19,364,685 350,165 7.27 12,287,713 245,926 8.03 Trading account assets(2) 1,223,718 17,591 5.78 795,843 11,041 5.56 Federal funds sold and securities purchased under resale agreements 1,790,545 23,837 5.35 1,171,244 18,530 6.35 Loans, net of unearned income: Domestic offices 8,240,550 164,664 8.04 6,656,862 138,223 8.33 Foreign offices 3,538,986 58,121 6.61 2,825,047 47,097 6.69 ----------- ----------- ----------- ----------- Total loans, net of unearned income 11,779,536 222,785 7.61 9,481,909 185,320 7.84 ----------- ----------- ----------- ----------- Total interest-earning assets 39,913,269 $ 714,168 7.20% 30,992,856 $ 592,380 7.67% =========== ======= =========== ====== Cash and due from banks 731,293 636,519 Other assets 7,672,774 9,000,848 ----------- ----------- Total assets $48,317,336 $40,630,223 =========== =========== Interest-bearing funds: Consumer and other time deposits $11,141,148 $ 109,012 3.94% $ 7,685,701 $ 80,920 4.22% Certificates of deposit 821,597 10,282 5.03 907,151 12,849 5.68 Deposits in foreign offices 14,781,369 207,612 5.65 12,066,055 189,277 6.29 ----------- ----------- ----------- ----------- Total interest-bearing deposits 26,744,114 326,906 4.92 20,658,907 283,046 5.50 Trading account liabilities(2) 91,496 1,952 8.58 49,314 801 6.51 Short-term borrowings 6,094,595 73,488 4.85 3,882,621 43,933 4.54 Total long-term debt 3,946,672 61,707 6.29 4,001,201 66,501 6.67 ----------- ----------- ----------- ----------- Total interest-bearing funds 36,876,877 $ 464,053 5.06% 28,592,043 $ 394,281 5.53% =========== ======= =========== ====== Noninterest-bearing deposits: In domestic offices 1,957,276 1,472,368 In foreign offices 153,574 100,665 Other liabilities 6,268,737 7,762,452 Stockholders' equity: Preferred stock 575,000 676,667 Common stockholders' equity 2,485,872 2,026,028 ----------- ----------- Total stockholders' equity 3,060,872 2,702,695 ----------- ----------- Total liabilities and stockholders' equity $48,317,336 $40,630,223 =========== =========== Interest income/earning assets $ 714,168 7.20% $ 592,380 7.67% Interest expense/earning assets 464,053 4.68 394,281 5.11 ----------- ------- ----------- ------ Net interest differential $ 250,115 2.52% $ 198,099 2.56% =========== ======= =========== ====== (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.
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AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands) Six Months Ended June 30, ---------------------------------------------------------------------------- 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 $ 5,847,749 $ 202,808 6.97% $ 8,380,642 $ 281,312 6.77% Investment securities:(1) Taxable 17,059,829 608,864 7.18 10,651,234 442,447 8.38 Exempt from federal income taxes 1,546,863 64,334 8.36 1,296,245 65,092 10.13 ----------- ----------- ------------ ----------- Total investment securities 18,606,692 673,198 7.28 11,947,479 507,539 8.57 Trading account assets(2) 1,117,746 32,250 5.80 877,035 23,925 5.50 Federal funds sold and securities purchased under resale agreements 1,508,447 41,618 5.55 1,285,294 39,022 6.12 Loans, net of unearned income: Domestic offices 8,107,662 327,237 8.12 6,356,862 267,187 8.48 Foreign offices 3,368,099 111,081 6.63 2,763,031 95,046 6.94 ----------- ----------- ------------ ----------- Total loans, net of unearned income 11,475,761 438,318 7.68 9,119,893 362,233 8.01 ----------- ----------- ------------ ----------- Total interest-earning assets 38,556,395 $ 1,388,192 7.24% 31,610,343 $ 1,214,031 7.74% =========== ====== =========== ====== Cash and due from banks 729,225 597,408 Other assets 7,887,788 8,136,067 ----------- ----------- Total assets $47,173,408 $40,343,818 =========== =========== Interest-bearing funds: Consumer and other time deposits $10,471,608 $ 209,805 4.03% $ 7,712,145 $ 156,882 4.10% Certificates of deposit 784,353 19,630 5.03 863,805 24,252 5.66 Deposits in foreign offices 14,034,304 400,973 5.75 12,358,161 374,213 6.11 ----------- ----------- ----------- ----------- Total interest-bearing deposits 25,290,265 630,408 5.01 20,934,111 555,347 5.35 Trading account liabilities(2) 75,664 2,924 7.77 43,022 1,472 6.90 Short-term borrowings 6,069,287 147,850 4.90 4,195,380 95,024 4.57 Total long-term debt 3,935,059 125,432 6.41 4,193,177 138,303 6.65 ----------- ----------- ----------- ----------- Total interest-bearing funds 35,370,275 $ 906,614 5.15% 29,365,690 $ 790,146 5.43% =========== ====== =========== ====== Noninterest-bearing deposits: In domestic offices 1,883,842 1,475,269 In foreign offices 144,007 104,827 Other liabilities 6,734,710 6,721,219 Stockholders' equity: Preferred stock 575,000 674,584 Common stockholders' equity 2,465,574 2,002,229 ----------- ----------- Total stockholders' equity 3,040,574 2,676,813 ----------- ----------- Total liabilities and stockholders' equity $47,173,408 $40,343,818 =========== =========== Interest income/earning assets $ 1,388,192 7.24% $ 1,214,031 7.74% Interest expense/earning assets 906,614 4.73 790,146 5.04 ----------- ------ ----------- ------ Net interest differential $ 481,578 2.51% $ 423,885 2.70% =========== ====== =========== ====== (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale included in other assets. (2) Excludes non-interest bearing balances, which are included in other assets or other liabilities, respectively.
-10- As shown in the table on page 10, net interest income was $481.6 million for the first six months of 1996, compared to $423.9 million, in the comparable period of 1995. Average interest-earning assets rose to $38.6 billion for the first six months of 1996, compared to $31.6 billion for the corresponding period of 1995. The increases reflected the acquisition during the period of additional interest-earning assets described above. The net interest rate differential was 2.51% for the first six months of 1996, compared to 2.70% in the respective period of 1995. As previously announced, the Corporation has received regulatory approvals to operate commercial banking subsidiaries in Russia and Brazil. Both subsidiaries are scheduled to commence operations late in 1996 and will focus on activities in the local capital markets and servicing the local market needs of multinational corporate clients. Provision for credit losses - was $4.0 million and $8.0 million in the second quarter and first six months of 1996, respectively, compared to $3.0 million and $6.0 million for the corresponding periods of last year. Net charge-offs were $4.3 million in the second quarter of 1996, compared to net charge-offs of $7.8 million in the second quarter of 1995. For the first six months of 1996, net charge-offs were $12.3 million, compared to $11.5 million in the six-month period of 1995. See Note 4 of notes to consolidated financial statements for additional information related to the allowance for possible credit losses and net charge-offs. The allowance for possible credit losses at June 30, 1996 was $339.2 million, or 3.00% of loans outstanding net of unearned income, compared to $300.6 million, or 3.05%, at December 31, 1995. The total allowance for possible credit losses is available to absorb any credit losses in the Corporation's portfolio. The increase in the allowance for credit losses at June, 30, 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 $11.3 billion at June 30, 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 $680 million of assets acquired from BBI are currently 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. In the second quarter of 1996, $15.1 million of assets that had been on non-accrual status were repaid. Also, during the second quarter of 1996 the Corporation sold approximately $57 million of loans acquired from BBI in a bulk sale. Included in this sale were $10.1 million of loans on non-accrual status. -11- The following table presents summary data related to non-accrual loans for the periods ending:
June 30, March 31, Dec. 31, (in thousands) 1996 1996 1995 ------------ ------------ ----------- Non-accrual loans: Domestic $ 105,352(1) $ 137,438 (1) $ 49,311 Foreign 13,308 13,222 18,561 ------------ ------------ ----------- Total non-accrual loans $ 118,660 $ 150,660 $ 67,872 ============ ============ =========== Non-accrual loans as a percentage of loans outstanding at period end 1.05% 1.36% 0.69% ============ ============ =========== (1) Included at June 30, 1996 and March 31, 1996, are $53.9 million and $81.4 million, respectively, of exposure acquired from BBI that is covered by the FDIC 80-percent loss-sharing agreement referred to above. See "Statement of Condition" below for information on total non-performing assets.
Other Operating Income - was $109.2 million in the second quarter of 1996, compared to $119.9 million in the second quarter a year-earlier and $107.3 million in the first quarter of 1996. For the first six months of 1996, such income was $216.4 million, compared to $219.1 million in the corresponding period of 1995. Income from trading activities was $42.1 million in the second quarter of 1996, compared to $66.2 million in the second quarter of 1995 and $45.7 million in the first quarter of 1996. The second quarter-to-quarter change primarily reflects a reduction in foreign exchange trading income from the level recorded in the second quarter of last year. Also contributing to this change was a shift in precious metals revenues out of income from precious metals and into interest income as the metals markets became net providers of funds to the Corporation instead of net users of funds as in the second quarter of 1995. For the first six months of 1996, income from trading activities declined to $87.8 million, from $112.7 million in the same period a year ago, primarily due to the reasons mentioned above. Investment securities gains were $4.6 million in the second quarter of 1996, compared to $3.3 million in the second quarter of 1995. For the first six months of 1996, investment securities gains were $9.9 million, compared to $5.0 million last year. In both periods, the respective gains were from sales of securities available for sale and, to a lesser degree, redemptions prior to maturity of securities held to maturity. 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, amounted to $19.0 million in the second quarter of 1995, compared to $13.0 million in the second quarter of 1995. The rise in commission income primarily reflects higher volumes for the shipment of U.S. dollar denominated banknotes. For the first six months of 1996, commission income amounted to $34.6 million, compared to $28.3 for the six-month period of 1995. -12- Equity in the earnings of affiliate rose to $22.9 million in the second quarter of 1996, compared to $19.3 million in the second quarter of last year. For the six-month period of 1996, these earnings were $44.5 million, compared to $38.5 million for the corresponding period of 1995. 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%. These increases were due to higher levels of net interest income, partially offset by increases in the provision for credit losses and income taxes at Safra Republic. Safra Republic's total client portfolio accounts, increased to $18.4 billion at June 30, 1996 from $15.6 billion at June 30, 1995. This change consisted of increases of $1.8 billion, or 30%, in client portfolio assets and $1.0 billion, or 10%, 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 $20.4 million in the second quarter of 1996 compared to $18.1 million in the second quarter of last year. These amounts included gains of $2.7 million and $1.3 million in the second quarters of 1996 and 1995, respectively, from the sale of New York retail branches. Other income for the six-month periods ended June 30, was $37.9 million and $33.9 million in 1996 and 1995, respectively. Included in 1996 was a gain of $1.1 million from the repurchase and early extinguishment of long-term debt. Other Operating Expenses - totaled $195.9 million in the second quarter and $380.2 million for the first six-months of 1996, compared to $297.7 million and $490.3 million in the corresponding periods of 1995. The 1995 amounts included the Corporation's second quarter provision for restructuring and related charges of $120.0 million in connection with a company-wide project to improve operating efficiencies and reduce costs. The second quarter of 1996 reflected a full quarter of expenses attributable to the BBI and First Nationwide transactions of approximately $21.0 million, including $4.6 million for amortization of intangible assets and $1.5 million of one-time charges. The second quarter of 1996 also included higher incentive compensation awards and expenditures for technology. Salaries and employee benefits were $104.2 million in the second quarter of 1996, compared to $96.0 million in the second quarter of last year. The increase in the 1996 second quarter reflects staff increases attributable to the above-mentioned acquisitions and higher incentive compensation. For the six months ended June 30, 1996, such expenses rose to $205.3 million from $197.7 million in the year-earlier period, primarily due to the additions to staff from BBI. Occupancy expense was $18.1 million in the second quarter and $34.5 million for the six-month period of 1996, compared to $14.6 million and $29.1 million in the comparable periods of 1995. These increases were primarily due to the acquisition of 37 branches during the first six months of 1996. All other expenses were $73.5 million in the second quarter of 1996, compared to $67.1 million in the second quarter of last year. The $6.4 million increase in the second quarter of 1996, when compared to the second quarter of 1995, reflects a full quarter of expenses attributable to the BBI and First Nationwide acquisitions, including increased costs for amortization of intangible assets and increased expenditures on technology. Included in the current quarter's expenses was a $1.5 million one-time charge for computer upgrades and the conversion of newly acquired BBI retail accounts. For the six-month period of 1996, all other expenses were $140.4 million, compared to $143.5 million in the same period last year that included a one-time charge for charitable contributions of $7.5 million. -13- 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 $50.1 million in the second quarter of 1996 and $59.0 million during the first six months of 1996 when compared to the corresponding periods of 1995. As a result of the restructuring charge and normal permanent differences between book and tax income, taxable income was negative in the second quarter of 1995. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, was 35% for both the second quarter and six-month periods of 1996, compared to 36% and 33%, respectively, in the corresponding periods of last year. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At June 30, 1996, stockholders' equity included a deduction of $57.7 million, which represents the after-tax unrealized depreciation in the valuation of the Corporation's portfolio of securities available for sale and approximately 49% of Safra Republic's unrealized depreciation in its portfolio of securities available for sale, compared to an unrealized depreciation in both such portfolios 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 capital guidelines, the Corporation excludes Republic New York Securities Corporation's assets and off-balance-sheet contracts from the Corporation's capital calculations. Such guidelines require the Corporation to deduct one-half of its investment in this subsidiary from each of Tier 1 and Tier 2 capital. The following table presents the Corporation's risk-based capital ratios:
June 30, Dec. 31, 1996 1995 --------- ------- Risk-based capital ratios: Tier 1 risk-based capital ratio 12.67% 14.72% Total risk-based capital ratio 21.73% 24.96% Leverage ratio 5.37% 6.24%
At June 30, 1996, the ratio of the Corporation's total common stockholders' equity to total assets was 5.17%, compared to 5.54% at December 31, 1995. The decline in this ratio was attributable to total assets increasing to $48.6 billion at June 30, 1996 from $43.9 billion at December 31, 1995, primarily as a result of the BBI acquisition while common stockholders' equity increased by $78.8 million during the period. -14- Non-performing Assets The following is a summary of total non-accrual loans and other non-performing assets at periods ending:
June 30, March 31, Dec. 31, (In thousands) 1996 1996 1995 --------- --------- --------- Total non-accrual loans $ 118,660 $ 150,660 $ 67,872 Other real estate owned 40,466 42,395 31,329 --------- --------- --------- Total non-performing assets (1) 159,126 193,055 $ 99,201 ========= Less: FDIC loss-sharing (61,325) (88,644) --------- --------- Total $ 97,801 $ 104,411 ========= ========= Total non-performing assets as a percentage of period end total assets 0.33% 0.41% 0.23% ========= ========= ========= (1) Included at June 30, 1996 and March 31, 1996, is $60.2 million and $88.9 million, respectively, of exposure acquired from BBI that is covered by an FDIC 80-percent loss-sharing agreement, which expires on June 30, 1998.
-15- 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 29, 1996. (c) The following matters were voted upon at such meeting: (i) Election of the following twenty-one persons as directors of the Corporation, with shares voted for and withheld indicated:
Nominee Shares For Shares Withheld Kurt Andersen 46,279,342 1,610,064 Cyril S. Dwek 46,793,704 1,095,702 Ernest Ginsberg 46,793,704 1,095,702 Nathan Hasson 46,793,704 1,095,702 Jeffrey C Keil 46,793,704 1,095,702 Peter Kimmelman 46,793,704 1,095,702 Richard Kraemer 46,691,818 1,197,585 Leonard Lieberman 46,762,844 1,126,562 William C. MacMillen Jr 46,791,622 1,097,784 Peter J. Mansbach 46,793,704 1,095,702 Martin F. Mertz 46,793,629 1,095,777 James L. Morice 46,793,704 1,095,702 E. Daniel Morris 46,793,704 1,095,702 Janet L. Norwood 46,793,029 1,096,377 John A. Pancetti 46,793,704 1,095,702 Vito S. Portera 46,762,728 1,126,678 William P. Rogers 46,302,954 1,586,452 Elias Saal 46,793,612 1,095,794 Dov C. Schlein 46,793,704 1,095,702 Walter H. Weiner 46,790,351 1,099,055 Peter White 46,793,704 1,095,702
(ii) Approval of selection of KPMG Peat Marwick LLP, as the Corporation's auditors for 1996. 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 47,805,965 32,360 51,081 -16- 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 April 23, 1996, a report on Form 8-K/A was filed in connection with the Corporation's Current Report on Form 8-K, dated March 15, 1996, which reported the completion, on February 29, 1996, of the acquisition of Brooklyn Bancorp, Inc. by the Corporation. The amended Current Report on Form 8-K/A includes Pro Forma Combined Condensed financial information at December 31, 1995 and for the one-year period then ended. -17- 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: August 14, 1996 By Walter H. Weiner Chairman of the Board Dated: August 14, 1996 By Kenneth F. Cooper Executive Vice President and Chief Financial Officer -18- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended June 30, 1996 REPUBLIC NEW YORK CORPORATION EXHIBIT INDEX No. Exhibit Description 11 Computation of Earnings Per Common Share 27 Financial Data Schedule EX-11 2
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, --------------------- ---------------------- 1996 1995 1996 1995 --------- -------- --------- -------- Primary: Earnings: Net income $ 202,642 $ 98,604 $ 103,050 $ 11,091 Less preferred stock dividends (15,592) (20,225) (7,815) (10,055) --------- -------- --------- -------- Net income applicable to common stock $ 187,050 $ 78,379 $ 95,235 $ 1,036 ========= ======== ========= ======== Shares: Average number of common and common equivalent shares outstanding 55,870 52,327 55,718 52,352 ========= ======== ========= ======== Net income per common share $ 3.35 $ 1.50 $ 1.71 $ 0.02 ========= ======== ========= ======== Fully Diluted: Earnings: Net income applicable to common stock $ 187,050 $ 78,379 $ 95,235 $ 1,036 Add dividends applicable to convertible preferred stock -- 5,822 -- 2,911 --------- -------- --------- -------- Net income applicable to common stock as adjusted $ 187,050 $ 84,201 $ 95,235 $ 3,947 ========= ======== ========= ======== Shares: Average number of common and common equivalent shares outstanding 55,870 52,327 55,718 52,352 Add shares assumed issued upon exercise of stock options -- 198 -- 193 Add shares assumed issued upon conversion of preferred stock -- 3,569 -- 3,569 --------- -------- --------- -------- Average number of common shares outstanding as adjusted 55,870 56,094 55,718 56,114 ========= ======== ========= ======== Net income per common share $ 3.35 $ 1.50 $ 1.71 $ 0.02 (1) ========= ======== ========= ======== (1) Fully diluted earnings per share as calculated are $0.07 for the three-month period ended June 30, 1995. Since fully diluted earnings per share can not be anti-dilutive, primary and fully diluted earnings per share are the same for such three-month period.
EX-27 3
9 1,000 6-MOS DEC-31-1996 JUN-30-1996 890,861 5,573,134 2,136,323 3,508,884 11,753,967 7,969,445 7,886,020 11,303,917 339,214 48,579,655 30,079,744 4,958,942 156,955 4,102,549 277,141 575,000 0 2,234,454 48,579,655 438,318 656,621 276,676 1,371,615 630,408 906,614 465,001 8,000 9,888 380,236 293,214 202,642 0 0 202,642 3.35 3.35 0 0 0 0 0 0 0 0 0 0 0 0
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