-----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, T4EK9leixowURMGOsj4Kxcpd44Yss62Iz7uMgD18L1/pyZcX96345BsD6b15VCgm W++mP3dPJ0GRJzKDGwkiHQ== 0000083246-96-000023.txt : 19961118 0000083246-96-000023.hdr.sgml : 19961118 ACCESSION NUMBER: 0000083246-96-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96664944 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: 9-30-96 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 September 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 55,222,860 at October 31, 1996. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited September 30, 1996 and December 31, 1995 2 Consolidated Statements of Income - Unaudited Nine Months and Three Months Ended September 30, 1996 and 1995 3 Consolidated Statements of Cash Flows - Unaudited Nine Months Ended September 30, 1996 and 1995 4 Consolidated Statement of Changes in Stockholders' Equity- Unaudited Nine Months Ended September 30, 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 8-15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 The information contained in the financial statements furnished in this report is unaudited. However, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented have been included. -1- ITEM 1. FINANCIAL STATEMENTS REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION UNAUDITED (Dollars in thousands)
September 30, December 31, 1996 1995 ------------ ------------ Cash and due from banks $ 717,345 $ 675,683 Interest-bearing deposits with banks 5,599,832 6,094,495 Precious metals 1,329,789 1,250,038 Securities held to maturity (approximate market value of $8,038,486 in 1996 and $4,595,454 in 1995) 8,110,006 4,487,022 Securities available for sale (at approximate market value) 12,149,115 11,751,523 ------------ ------------ Total investment securities 20,259,121 16,238,545 Trading account assets 4,046,367 4,035,606 Federal funds sold and securities purchased under resale agreements 1,992,344 1,749,268 Loans (net of unearned income of $27,758 in 1996 and $34,988 in 1995) 11,789,344 9,843,960 Allowance for possible credit losses (350,327) (300,593) Customers' liability on acceptances 824,592 818,007 Accounts receivable and accrued interest 2,500,080 1,946,077 Investment in affiliate 779,363 722,466 Premises and equipment 461,858 436,771 Other assets 652,062 371,231 ------------ ------------ Total assets $ 50,601,770 $ 43,881,554 ============ ============ Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 2,077,935 $ 1,740,035 In foreign offices 120,993 160,133 Interest-bearing deposits: In domestic offices 12,454,013 8,471,452 In foreign offices 16,327,873 14,548,013 ------------ ------------ Total deposits 30,980,814 24,919,633 Trading account liabilities 3,391,908 3,719,651 Short-term borrowings 5,179,753 3,890,768 Acceptances outstanding 825,317 819,766 Accounts payable and accrued expenses 1,990,340 2,840,048 Due to factored clients 671,362 528,684 Other liabilities 260,114 193,645 Long-term debt 1,674,867 1,555,111 Subordinated long-term debt and perpetual capital notes (note 3) 2,400,000 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; 55,227,901 shares outstanding in 1996 and 56,259,563 in 1995 276,140 281,298 Surplus 515,834 590,008 Retained earnings 1,848,322 1,636,264 Net unrealized appreciation (depreciation) on securities available for sale, net of taxes 11,999 (74,762) ------------ ------------ Total stockholders' equity 3,227,295 3,007,808 ------------ ------------ Total liabilities and stockholders' equity $ 50,601,770 $ 43,881,554 ============ ============ 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, ----------------------- ------------------------ 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Interest Income: Interest and fees on loans $ 674,312 $ 547,453 $ 235,994 $ 185,220 Interest on deposits with banks 294,734 413,902 91,926 132,590 Interest and dividends on investment securities: Taxable 933,764 676,020 324,900 233,573 Exempt from federal income taxes 71,473 67,814 23,716 21,418 Interest on trading account assets 49,676 39,974 17,426 16,049 Interest on federal funds sold and securities purchased under resale agreements 69,483 63,209 27,865 24,187 ---------- ---------- ---------- ---------- Total interest income 2,093,442 1,808,372 721,827 613,037 ---------- ---------- ---------- ---------- Interest Expense: Interest on deposits 952,444 844,152 322,036 288,805 Interest on short-term borrowings 238,821 150,215 88,047 53,719 Interest on long-term debt 190,692 205,200 65,260 66,897 ---------- ---------- ---------- ---------- Total interest expense 1,381,957 1,199,567 475,343 409,421 ---------- ---------- ---------- ---------- Net Interest Income 711,485 608,805 246,484 203,616 Provision for credit losses 28,000 9,000 20,000 3,000 ---------- ---------- ---------- ---------- Net interest income after provision for credit losses 683,485 599,805 226,484 200,616 ---------- ---------- ---------- ---------- Other Operating Income: Income from precious metals 18,233 34,340 6,622 6,577 Foreign exchange trading income 73,896 90,282 23,295 30,043 Trading account profits and commissions 39,189 25,701 13,632 995 Investment securities gains, net 15,444 9,292 5,556 4,325 Net gain (loss) on loans sold or held for sale 350 3,912 (1,393) 3,145 Commission income 52,834 43,068 18,188 14,781 Equity in earnings of affiliate 68,271 58,698 23,777 20,216 Other income (note 3) 58,015 50,587 20,106 16,716 ---------- ---------- ---------- ---------- Total other operating income 326,232 315,880 109,783 96,798 ---------- ---------- ---------- ---------- Other Operating Expenses: Salaries 189,792 177,104 64,587 57,444 Employee benefits 121,106 113,867 40,977 35,826 Occupancy, net 55,086 43,542 20,596 14,444 Restructuring and related charges (note 5) - 120,000 - - Other expenses 212,546 197,924 72,134 54,461 ---------- ---------- ---------- ---------- Total other operating expenses 578,530 652,437 198,294 162,175 ---------- ---------- ---------- ---------- Income Before Income Taxes 431,187 263,248 137,973 135,239 Income taxes 120,893 69,456 30,321 40,051 ---------- ---------- ---------- ---------- Net Income $ 310,294 $ 193,792 $ 107,652 $ 95,188 ========== ========== ========== ========== Net Income Applicable to Common Stock $ 286,727 $ 165,390 $ 99,677 $ 87,011 ========== ========== ========== ========== Net income per common share: Primary $5.15 $3.10 $1.80 $1.57 Fully diluted $5.15 $3.05 $1.80 $1.55 Average common shares outstanding: Primary 55,711 53,334 55,396 55,316 Fully diluted 55,711 56,160 55,396 56,292 See accompanying notes to consolidated financial statements.
-3- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands)
September 30, ------------------------------- 1996 1995 ----------- ----------- Cash Flows From Operating Activities: Net income $ 310,294 $ 193,792 Adjustments to reconcile net income to net cash provided by (used) in operating activities: Depreciation and amortization, net 65,979 48,458 Provision for credit losses 28,000 9,000 Investment securities gains, net (15,444) (9,292) Net gain on loans sold or held for sale (1,743) (3,912) Restructuring and related charges - 82,436 Equity in earnings of affiliate (68,271) (58,698) Net change in precious metals (79,751) 394,786 Net change in trading accounts (338,504) 258,058 Net change in loans held for sale (118,558) - Net change in accounts receivable and accrued interest (895,200) (1,325) Net change in accounts payable and accrued expenses 176,016 532,433 Other, net (76,371) (229,652) ----------- ----------- Net cash provided by (used) in operating activities (1,013,553) 1,216,084 ----------- ----------- Cash Flows From Investing Activities: Interest-bearing deposits with banks 673,163 4,702,064 Federal funds sold and securities purchased under resale agreements 406,924 (1,694,430) Short-term investments 155,157 100,601 Purchases of securities held to maturity (2,840,101) (68,880) Proceeds from maturities of securities held to maturity 383,275 331,986 Purchases of securities available for sale (5,166,717) (3,866,989) Proceeds from sales of securities available for sale 1,699,769 626,049 Proceeds from maturities of securities available for sale 3,053,610 1,032,472 Loans (640,943) (1,079,437) 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 (2,731,569) 111,569 ----------- ----------- Cash Flows From Financing Activities: Deposits 2,443,681 407,073 Short-term borrowings 1,266,180 (1,139,089) Due to factored clients 142,678 (28,495) Proceeds from issuance of long-term debt 427,136 276,886 Repayment of long-term debt (313,334) (1,104,600) 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 Retirement of common stock (113,033) (17,651) Cash dividends paid (86,114) (84,947) Other, net 21,579 22,658 ----------- ----------- Net cash provided by (used) in financing activities 3,788,773 (1,595,602) Effect of exchange rate changes on cash and due from banks (1,989) (6,348) ----------- ----------- Net increase (decrease) in cash and due from banks 41,662 (274,297) Cash and due from banks at beginning of period 675,683 867,242 ----------- ----------- Cash and due from banks at end of period $ 717,345 $ 592,945 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,157,226 $ 1,085,707 Income taxes 95,233 87,387 Transfers from securities available for sale to securities held to maturity 1,008,547 - See accompanying notes to consolidated financial statements.
-4- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY UNAUDITED (Dollars in thousands)
Nine Months Ended September 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 781,624 shares 3,908 Retirement of 1,813,286 shares (9,066) ------------- Balance at end of period $ 276,140 ============= Surplus: Balance at beginning of period $ 590,008 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 781,624 shares 30,052 Treasury stock transactions of affiliate (259) Retirement of 1,813,286 common shares (103,967) ------------- Balance at end of period $ 515,834 ============= Retained Earnings: Balance at beginning of period $ 1,636,264 Net income 310,294 Foreign currency translation, net of taxes (11,325) Dividends declared on common stock (63,344) Dividends declared on issues of preferred stock (23,567) ------------- Balance at end of period $ 1,848,322 ============= Net Unrealized Appreciation (Depreciation) on Securities Available for Sale, Net of Taxes: Balance at beginning of period $ (74,762) Unrealized appreciation 143,798 Income tax expense (57,037) ------------- Balance at end of period $ 11,999 ============= Total Stockholders' Equity: Balance at beginning of period $ 3,007,808 Net changes during the period 219,487 ------------- Balance at end of period $ 3,227,295 ============= See accompanying notes to consolidated financial statements.
-5- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE NINE MONTHS ENDED SEPTEMBER 30, 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. In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" was issued. This SFAS as written, establishes the criteria for determining whether a transfer of financial assets should be accounted for as a sale or as a pledge of collateral in a secured borrowing. This SFAS will be adopted by the Corporation on January 1, 1997. Subsequent to the issuance of SFAS No. 125, the effective date of certain requirements as originally issued have been proposed to be deferred for one year. The adoption of this SFAS is not expected to have a material 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 Federal Savings Bank ("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 $650 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." -6- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 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. 4. The following table summarizes the activity in the allowance for possible credit losses for the nine-month periods ended September 30, 1996 and 1995.
1996 1995 --------- --------- (In thousands) Balance at beginning of period $ 300,593 $ 319,220 Charge-offs (36,023) (25,326) Recoveries 14,804 9,817 --------- --------- Net charge-offs (21,219) (15,509) Provision charged to operating expense 28,000 9,000 Allowance acquired from BBI 42,579 - Translation adjustment 374 707 --------- --------- Balance at end of period $ 350,327 $ 313,418 ========= =========
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 nine-month periods ended September 30, 1996 and 1995.
1996 1995 --------- --------- (In thousands) Balance at beginning of period $ 63,963 $ - Provision during the period - 120,000 Payments (26,792) (37,564) Non-cash writedowns (5,585) (7,921) --------- --------- Ending accrual at September 30, $ 31,586 $ 74,515 ========= =========
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 third quarter and nine months ended September 30, 1996 compared to the corresponding periods of 1995.
Increase (Decrease) --------------------------------------------- 3rd Qtr. 1996 vs. Nine Months 1996 vs. 3rd Qtr. 1995 Nine Months 1995 -------------------- -------------------- Amount Percent Amount Percent --------- ------- --------- ------- (Dollars in thousands) Interest income $ 108,444 17.5 $ 282,605 15.4 Interest expense 65,922 16.1 182,390 15.2 --------- --------- Net interest income 42,522 20.1 100,215 15.8 Provision for credit losses 17,000 * 19,000 * --------- --------- Net interest income after provision for credit losses 25,522 12.2 81,215 13.0 Other operating income 12,985 13.4 10,352 3.3 Other operating expenses 36,119 22.3 (73,907) (11.3) --------- --------- Income before income taxes 2,388 1.7 165,474 57.0 --------- --------- Applicable income taxes (9,730) (24.3) 51,437 74.1 Tax equivalent adjustment (346) (4.2) (2,465) (9.1) --------- --------- Total applicable income taxes (10,076) (20.8) 48,972 50.8 --------- --------- Net income $ 12,464 13.1 $ 116,502 60.1 ========= ======= ========= ======= Net income applicable to common stock $ 12,666 14.6 $ 121,337 73.4 ========= ======= ========= ======= *Exceeds 200%
Net Interest Income - on a fully-taxable equivalent basis amounted to $254.4 million in the third quarter of 1996, compared to $211.9 million in the third quarter of 1995. As shown in the table on page 9, average interest-earning assets rose to $41.0 billion in the third quarter of 1996 from $32.9 billion in the third quarter of 1995. The respective increases reflected the additional interest-earning assets recently acquired from BBI, the investment of deposit liabilities of branches acquired from First Nationwide Bank, Bank Leumi Trust Company of New York and Independence Savings Bank, and an increase in investment securities funded by deposits in foreign offices and short-term borrowings. The net interest rate differential was 2.47% in the third quarter of 1996, compared to 2.56% in the third quarter last year. -8- AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands)
Quarter Ended September 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 $ 5,906,911 $ 91,926 6.19 $ 7,711,239 $ 132,590 6.82 Investment securities:(1) Taxable 18,300,015 324,900 7.06 11,718,931 233,573 7.91 Exempt from federal income taxes 1,490,059 31,681 8.46 1,311,941 29,729 8.99 ------------ -------- ------------ -------- Total investment securities 19,790,074 356,581 7.17 13,030,872 263,302 8.02 Trading account assets(2) 1,168,008 17,426 5.94 962,728 16,049 6.61 Federal funds sold and securities purchased under resale agreements 2,012,720 27,865 5.51 1,591,228 24,187 6.03 Loans, net of unearned income: Domestic offices 8,384,193 171,023 8.11 6,757,208 137,753 8.09 Foreign offices 3,775,928 64,971 6.85 2,835,459 47,467 6.64 ------------ -------- ------------ -------- Total loans, net of unearned income 12,160,121 235,994 7.72 9,592,667 185,220 7.66 ------------ -------- ------------ -------- Total interest-earning assets 41,037,834 $ 729,792 7.07 32,888,734 $ 621,348 7.50 ========= ====== ========= ===== Cash and due from banks 705,730 600,743 Other assets 7,667,665 8,336,268 ------------ ------------ Total assets $ 49,411,229 $ 41,825,745 ============ ============ Interest-bearing funds: Consumer and other time deposits $ 11,148,550 $ 110,114 3.93 $ 7,594,458 $ 81,208 4.24 Certificates of deposit 1,087,844 13,577 4.97 899,013 12,567 5.55 Deposits in foreign offices 15,078,686 198,345 5.23 12,747,934 195,030 6.07 ------------ -------- ------------ -------- Total interest-bearing deposits 27,315,080 322,036 4.69 21,241,405 288,805 5.39 Trading account liabilities(2) 259,863 4,546 6.96 33,895 579 6.78 Short-term borrowings 6,784,006 83,501 4.90 4,788,295 53,140 4.40 Total long-term debt 4,101,227 65,260 6.33 4,082,222 66,897 6.50 ------------ -------- ------------ -------- Total interest-bearing funds 38,460,176 $ 475,343 4.92 30,145,817 $ 409,421 5.39 ========= ====== ========= ===== Noninterest-bearing deposits: In domestic offices 2,099,582 1,497,680 In foreign offices 120,752 133,488 Other liabilities 5,612,465 7,200,243 Stockholders' equity: Preferred stock 575,000 617,661 Common stockholders' equity 2,543,254 2,230,856 ------------ ------------ Total stockholders' equity 3,118,254 2,848,517 ------------ ------------ Total liabilities and stockholders' equity $ 49,411,229 $ 41,825,745 ============ ============ Interest income/earning assets $ 729,792 7.07 $ 621,348 7.50 Interest expense/earning assets 475,343 4.60 409,421 4.94 --------- ------ --------- ----- Net interest differential $ 254,449 2.47 $ 211,927 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 noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
-9- AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands)
Nine Months Ended September 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 $ 5,867,614 $ 294,734 6.71 $ 8,157,508 $ 413,902 6.78 Investment securities:(1) Taxable 17,476,242 933,764 7.14 11,007,133 676,020 8.21 Exempt from federal income taxes 1,527,790 96,015 8.39 1,301,477 94,821 9.74 ------------ ---------- ------------ ---------- Total investment securities 19,004,032 1,029,779 7.24 12,308,610 770,841 8.37 Trading account assets(2) 1,134,622 49,676 5.85 905,599 39,974 5.90 Federal funds sold and securities purchased under resale agreements 1,677,765 69,483 5.53 1,387,272 63,209 6.09 Loans, net of unearned income: Domestic offices 8,200,512 498,260 8.12 6,490,311 404,940 8.34 Foreign offices 3,505,034 176,052 6.71 2,787,174 142,513 6.84 ------------ ---------- ------------ ---------- Total loans, net of unearned income 11,705,546 674,312 7.69 9,277,485 547,453 7.89 ------------ ---------- ------------ ---------- Total interest-earning assets 39,389,579 $2,117,984 7.18 32,036,474 $1,835,379 7.66 ========== ======= ========== ======= Cash and due from banks 721,336 598,520 Other assets 7,813,877 8,202,801 ------------ ------------ Total assets $ 47,924,792 $ 40,837,795 ============ ============ Interest-bearing funds: Consumer and other time deposits $ 10,698,902 $ 319,919 3.99 $ 7,672,916 $ 238,090 4.15 Certificates of deposit 886,255 33,207 5.00 875,541 36,819 5.62 Deposits in foreign offices 14,384,972 599,318 5.57 12,488,085 569,243 6.09 ------------ ---------- ------------ ---------- Total interest-bearing deposits 25,970,129 952,444 4.90 21,036,542 844,152 5.37 Trading account liabilities(2) 137,512 7,470 7.26 39,980 2,051 6.86 Short-term borrowings 6,309,266 231,351 4.90 4,393,018 148,164 4.51 Total long-term debt 3,990,853 190,692 6.38 4,156,192 205,200 6.60 ------------ ---------- ------------ ---------- Total interest-bearing funds 36,407,760 $1,381,957 5.07 29,625,732 $1,199,567 5.41 ========== ======= ========== ======= Noninterest-bearing deposits: In domestic offices 1,956,280 1,482,739 In foreign offices 136,199 114,381 Other liabilities 6,357,895 6,880,896 Stockholders' equity: Preferred stock 575,000 655,609 Common stockholders' equity 2,491,658 2,078,438 ------------ ------------- Total stockholders' equity 3,066,658 2,734,047 ------------ ------------- Total liabilities and stockholders' equity $ 47,924,792 $ 40,837,795 ============ ============= Interest income/earning assets $2,117,984 7.18 $1,835,379 7.66 Interest expense/earning assets 1,381,957 4.68 1,199,567 5.01 ---------- ------- ---------- ------- Net interest differential $ 736,027 2.50 $ 635,812 2.65 ========== ======= ========== ======= (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.
-10- As shown in the table on page 10, net interest income was $736.0 million for the first nine months of 1996, compared to $635.8 million, for the nine-month period in the prior year. Average interest-earning assets rose to $39.4 billion for the nine-month period of 1996 from $32.0 billion in 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 2.50% for the nine-month period of 1996, compared to 2.65% in 1995. As previously announced, the Corporation has received regulatory approvals to operate commercial banking subsidiaries in Russia and Brazil. These subsidiaries will commence operations in the fourth quarter of 1996. Both subsidiaries will focus on activities in the local capital markets and servicing the local market needs of multinational corporate clients. Provision for credit losses - was $20.0 million and $28.0 million in the third quarter and first nine months of 1996, respectively, compared to $3.0 million and $9.0 million for the corresponding periods of last year. Net charge-offs were $9.0 million in the third quarter of 1996, compared to net charge-offs of $4.0 million in the third quarter of 1995. A commercial real estate charge-off of $6.0 million was the primary factor that contributed to this increase. While no specific credit concerns exist, management considers the increased provision for credit losses in the third quarter of 1996 to be prudent in the context of increased domestic and international exposures. For the first nine months of 1996, net charge-offs were $21.2 million, compared to $15.5 million in the corresponding period of last year. See Note 4 of notes to consolidated financial statements for additional information related to the allowance for credit losses. The allowance for possible credit losses at September 30, 1996 was $350.3 million, or 2.97% 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 September 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 $11.8 billion at September 30, 1996 was also primarily a result of the acquisition of the BBI loan portfolio, consisting primarily of conventional residential and commercial mortgage loans. Approximately $650 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. The following table presents summary data related to non-accrual loans for the periods ended:
Sept. 30, June 30, Dec. 31, (in thousands) 1996 1996 1995 -------- -------- -------- Non-accrual loans: Domestic $ 99,138 $105,352 $49,311 Foreign 12,816 13,308 18,561 -------- -------- -------- Total non-accrual loans (1) $111,954 $118,660 $67,872 ======== ======== ======== Non-accrual loans as a percentage of loans outstanding at period end 0.95% 1.05% 0.69% ======== ======== ========
-11- (1) Included at September 30, 1996 and June 30, 1996 are $46.9 million and $53.9 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 $109.8 million in the third quarter of 1996, compared to $96.8 million in the third quarter of last year and $109.2 million in the second quarter of 1996. For the first nine months of 1996, such income was $326.2 million, compared to $315.9 million in the nine-month period last year. Income from trading activities was $43.5 million in the third quarter of 1996, compared to $37.6 million in the third quarter of last year and $42.1 million in the second quarter of 1996. The third quarter-to-quarter change primarily resulted from an increase in trading account profits and commissions partially offset by a reduction in foreign exchange trading income from the level recorded in the third quarter of last year. For the first nine months of 1996, income from trading activities was $131.3 million, compared to $150.3 million in the same period a year ago. This reduction of income resulted from lower levels of foreign exchange trading income and income from precious metals that was partially offset by increased trading account profits and commissions. Investment securities gains were $5.6 million in the third quarter of 1996 compared to $4.3 million in the third quarter of last year. For the first nine months of 1996, investment securities gains were $15.4 million compared to $9.3 million last year. In the nine-month periods, the gains were primarily from sales of securities available for sale and to a lesser degree redemptions prior to scheduled maturity in 1996. In 1995, the gains were from sales and redemptions of securities prior to scheduled maturity. The Corporation recorded a net loss on loans sold or held for sale of $1.4 million in the third quarter of 1996 compared to a $3.1 million gain in the third quarter of last year. Originated mortgage loans were sold in both periods with the Corporation retaining the servicing rights. For the nine months ended September 30, 1996, net gains on loans sold or held for sale were $0.4 million compared to $3.9 million in the nine-month period a year ago. 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 $18.2 million in the third quarter of 1996 compared to $14.8 million in the third quarter of 1995. For the first nine months of 1996, commission income amounted to $52.8 million compared to $43.1 million for the nine-month period of 1995. The rise in commission income in both periods, primarily reflects an increase in the level of fees for the shipment of U.S. dollar denominated banknotes. Equity in the earnings of affiliate rose to $23.8 million in the third quarter of 1996, compared to $20.2 million in the third quarter of last year. For the nine-month period of 1996, these earnings were $68.3 million compared to $58.7 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, both on- and off-balance-sheet, increased to $20.8 billion at September 30, 1996 from $16.0 billion at September 30, 1995. This change consisted of increases of $3.1 billion, or 49%, in client portfolio assets and $1.7 billion or 18%, in client deposits. This increase includes the client assets from the recent acquisition of Banque Unigestion S.A., a Geneva-based private bank. -12- 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 $20.1 million in the third quarter of 1996 compared to $16.7 million in the third quarter of last year. The third quarter of 1996 included $2.3 million of income related to net gains on the sale of other real estate owned. Other income for the nine-month periods ended September 30, was $58.0 million and $50.6 million in 1996 and 1995, respectively. The nine-month periods included gains of $1.1 million from the repurchase and early extinguishment of long-term debt and $2.7 million from the sale of a New York retail branch in 1996 and $1.3 million from the sale of a New York retail branch in 1995. Other Operating Expenses - totaled $198.3 million in the third quarter and $578.5 million for the first nine months of 1996, compared to $162.2 million and $652.4 million for the corresponding periods of 1995. The third quarter of 1996 included expenses of approximately $18.0 million attributable to the operations of BBI and branches acquired from First Nationwide and Bank Leumi and $2.0 million of one-time occupancy expenses resulting from consolidation of branches. The nine-month period of 1995 included the Corporation's second quarter pre-tax provision for restructuring and related charges of $120.0 million in connection with a company-wide project to improve operating efficiencies and reduce costs. Salaries and employee benefits were $105.6 million in the third quarter of 1996, compared to $93.3 million in the third quarter of last year. For the nine months ended September 30, 1996, such expenses rose to $310.9 million from $291.0 million in the year-earlier period. These increases primarily reflect staff additions attributable to the above-mentioned acquisitions and higher incentive compensation. Occupancy expense was $20.6 million in the third quarter of 1996 and $55.1 million for the nine-month period of 1996, compared to $14.4 million and $43.5 million in the comparable periods of 1995. These increases were primarily due to the acquisition of 38 branches during the first nine months of 1996 that included a one-time charge in the third quarter of 1996 of $2.0 million related to branch consolidations. All other expenses were $72.1 million in the third quarter of 1996, compared to $54.5 million in the third quarter of last year. All other expenses in the third quarter of 1996 rose $17.7 million, when compared to the third quarter of 1995 which included an FDIC insurance premium rebate of $6.3 million. The third quarter-to-quarter increase reflects a full quarter of expenses attributable to the BBI, First Nationwide and Bank Leumi acquisitions, including increased costs for amortization of goodwill and other intangible assets related to recent acquisitions. Amortization of goodwill and other intangible assets amounted to $7.6 million in the third quarter of 1996 compared to $2.5 million in the third quarter last year. For the nine-month period of 1996, all other expenses were $212.5 million, compared to $197.9 million in the same period last year that included a one-time charge for charitable contributions of $7.5 million. The nine-month period of 1996 includes amortization of goodwill and other intangibles of $21.0 million, compared to $7.3 million in the nine-month period of 1995. This change was primarily due to the recent acquisitions mentioned above. -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 decreased $10.1 million in the third quarter of 1996 and increased $49.0 million during the first nine months of 1996 when compared to the corresponding periods of 1995. As a result of a tax law change enacted in August 1996, the Corporation is no longer liable for deferred taxes which had been provided in prior years for credit provisions of Republic Bank for Savings, which was merged into Republic National Bank on January 2, 1996. In the third quarter of 1996, the Corporation recorded a one-time $12.0 million income tax benefit related to this tax law change. The increase in total applicable income taxes for the nine-month period of 1996 resulted from the lower level of income before income taxes recorded in 1995 due to the effect of the restructuring charge taken. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, for the third quarter and first nine months of 1996 were 26% and 32%, respectively, compared to 34% and 33% in the corresponding periods of last year. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At September 30, 1996, stockholders' equity included $12.0 million, which represents the after-tax unrealized appreciation in the valuation of the Corporation's portfolio of securities available for sale and approximately 49% of Safra Republic's unrealized appreciation 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:
September 30, Dec. 31, 1996 1995 --------------- -------------- Risk-based capital ratios: Tier 1 risk-based capital ratio 12.86% 14.72% Total risk-based capital ratio 22.03% 24.96% Leverage ratio 5.26% 6.24%
-14- At September 30, 1996, the ratio of the Corporation's total common stockholders' equity to total assets was 5.24%, compared to 5.54% at December 31, 1995. The decline in this ratio was attributable to total assets increasing 15.3%, to $50.6 billion, at September 30, 1996 from $43.9 billion at December 31, 1995 primarily as a result of the BBI acquisition while common stockholders' equity increased 7.3%, or $219.5 million, during the period. Non-performing Assets 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) 1996 1996 1995 ----------- ----------- ----------- Total non-accrual loans $ 111,954 $ 118,660 $ 67,872 Other real estate owned 39,443 40,466 31,329 ----------- ----------- ----------- Total non-performing assets (1) 151,397 159,126 $ 99,201 =========== Less: FDIC loss-sharing (56,172) (61,325) ----------- ----------- Total $ 95,225 $ 97,801 =========== =========== Total non-performing assets as a percentage of period end total assets 0.30% 0.33% 0.23% =========== =========== =========== (1) Included at September 30, 1996 and June 30, 1996, is $53.2 million and $60.2 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 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, 1996. -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REPUBLIC NEW YORK CORPORATION Dated: November 14, 1996 By /s/Walter H. Weiner Walter H. Weiner Chairman of the Board Dated: November 14, 1996 By /s/Kenneth F. Cooper Kenneth F. Cooper Executive Vice President and Chief Financial Officer -17- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended September 30, 1996 REPUBLIC NEW YORK CORPORATION EXHIBIT INDEX No. Exhibit Description 11 Computation of Earnings Per Common Share 27 Financial Data Schedule -17- 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, ---------------------- ---------------------- 1996 1995 1996 1995 --------- --------- --------- --------- Primary: Earnings: Net income $ 310,294 $ 193,792 $ 107,652 $ 95,188 Less preferred stock dividends (23,567) (28,402) (7,975) (8,177) --------- --------- --------- --------- Net income applicable to common stock $ 286,727 $ 165,390 $ 99,677 $ 87,011 ========= ========= ========= ========= Shares: Average number of common and common equivalent shares outstanding 55,711 53,334 55,396 55,316 ========= ========= ========= ========= Net income per common share $ 5.15 $ 3.10 $ 1.80 $ 1.57 ========= ========= ========= ========= Fully Diluted: Earnings: Net income applicable to common stock $ 286,727 $ 165,390 $ 99,677 $ 87,011 Add dividends applicable to convertible preferred stock - 5,920 - 98 --------- --------- --------- --------- Net income applicable to common stock as adjusted $ 286,727 $ 171,310 $ 99,677 $ 87,109 ========= ========= ========= ========= Shares: Average number of common and common equivalent shares outstanding 55,711 53,334 55,396 55,316 Add shares assumed issued upon exercise of stock options - 181 - 170 Add shares assumed issued upon conversion of preferred stock - 2,645 - 806 --------- --------- --------- --------- Average number of common shares outstanding as adjusted 55,711 56,160 55,396 56,292 ========= ========= ========= ========= Net income per common share $ 5.15 $ 3.05 $ 1.80 $ 1.55 ========= ========= ========= =========
EX-27 3 ART. 9 FDS FOR 3RD QUARTER 10-Q
9 1,000 9-MOS DEC-31-1996 SEP-30-1996 717,345 5,599,832 1,992,344 4,046,367 12,149,115 8,110,006 8,038,486 11,789,344 350,327 50,601,770 30,980,814 5,179,753 260,114 4,074,867 276,140 575,000 0 2,376,155 50,601,770 674,312 1,005,237 413,893 2,093,442 952,444 1,381,957 711,485 28,000 15,444 578,530 431,187 310,294 0 0 310,294 $5.15 $5.15 0 0 0 0 0 0 0 0 0 0 0 0
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