-----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, FiYzXIZhAGA3Zi67vElBQpBvxW574Eugv+S31WCbqTaKJNNBrDl4YaHfoIfXzZeu OCYCnFo9NvhY0taphX4Bnw== 0000083246-97-000013.txt : 19970520 0000083246-97-000013.hdr.sgml : 19970520 ACCESSION NUMBER: 0000083246-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97607590 BUSINESS ADDRESS: STREET 1: 452 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125256100 10-Q 1 QUARTERLY REPORT ON FORM 10-Q: 3-31-97 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly Period Ended March 31, 1997. [ ] 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 54,394,958 at April 30, 1997. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited March 31, 1997 and December 31, 1996 2 Consolidated Statements of Income - Unaudited Three Months Ended March 31, 1997 and 1996 3 Consolidated Statements of Cash Flows - Unaudited Three Months Ended March 31, 1997 and 1996 4 Consolidated Statement of Changes in Stockholders' Equity- Unaudited-Three Months Ended March 31, 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 7-12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13 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) March 31, December 31, 1997 1996 ------------ ------------ Assets - ------ Cash and due from banks $ 687,383 $ 710,183 Interest-bearing deposits with banks 4,917,490 5,909,195 Precious metals 1,268,801 1,231,319 Securities held to maturity (approximate market value of $8,775,562 in 1997 and $8,144,518 in 1996) 8,880,723 8,135,068 Securities available for sale (at approximate market value) 13,919,249 13,040,445 ------------ ------------ Total investment securities 22,799,972 21,175,513 Trading account assets 5,572,868 4,807,788 Federal funds sold and securities purchased under resale agreements 1,420,216 2,109,109 Loans (net of unearned income of $23,273 in 1997 and $25,306 in 1996) 12,286,082 11,721,936 Allowance for possible credit losses (352,667) (350,358) Customers' liability on acceptances 888,473 938,615 Accounts receivable and accrued interest 3,468,269 2,108,318 Investment in affiliate 836,947 806,274 Premises and equipment 464,073 469,231 Other assets 710,966 661,728 ------------ ------------ Total assets $ 54,968,873 $ 52,298,851 ============ ============ Liabilities and Stockholders' Equity Noninterest-bearing deposits: In domestic offices $ 2,065,520 $ 2,296,267 In foreign offices 225,477 177,675 Interest-bearing deposits: In domestic offices 12,541,286 12,559,554 In foreign offices 17,086,512 16,692,083 ------------ ------------ Total deposits 31,918,795 31,725,579 Trading account liabilities 4,975,494 4,402,085 Short-term borrowings 5,896,133 5,446,841 Acceptances outstanding 888,669 939,598 Accounts payable and accrued expenses 2,873,938 1,405,822 Due to factored clients 736,613 604,686 Other liabilities 296,361 218,910 Long-term debt 1,437,973 1,498,710 Subordinated long-term debt and perpetual capital notes 2,400,000 2,400,000 Company-obligated manditorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debt securities 350,000 350,000 Stockholders' equity: Cumulative preferred stock, no par value 4,501,750 shares outstanding in 1997 and 8,502,308 shares in 1996 400,000 555,800 Common stock, $5 par value 150,000,000 shares authorized; 54,464,747 shares outstanding in 1997 and 55,009,549 in 1996 272,324 275,048 Surplus 462,370 502,425 Retained earnings 1,990,597 1,918,880 Net unrealized appreciation on securities available for sale, net of taxes 69,606 54,467 ------------ ------------ Total stockholders' equity 3,194,897 3,306,620 ------------ ------------ Total liabilities and stockholders' equity $ 54,968,873 $ 52,298,851 ============ ============ See accompanying notes to consolidated financial statements.
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REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (In thousands except per share data) Three Months Ended March 31, ------------------------- 1997 1996 --------- --------- Interest Income: Interest and fees on loans $ 255,245 $ 215,533 Interest on deposits with banks 75,391 103,018 Interest and dividends on investment securities: Taxable 344,651 290,778 Exempt from federal income taxes 21,765 23,878 Interest on trading account assets 29,294 14,659 Interest on federal funds sold and securities purchased under resale agreements 21,112 17,781 --------- --------- Total interest income 747,458 665,647 --------- --------- Interest Expense: Interest on deposits 334,861 303,502 Interest on short-term borrowings 93,633 75,334 Interest on long-term debt 65,409 63,725 --------- --------- Total interest expense 493,903 442,561 --------- --------- Net Interest Income 253,555 223,086 Provision for credit losses 4,000 4,000 --------- --------- Net interest income after provision for credit losses 249,555 219,086 --------- --------- Other Operating Income: Income from precious metals 10,798 8,388 Foreign exchange trading income 27,125 27,562 Trading account profits and commissions 8,226 9,725 Investment securities gains (losses), net (5,304) 5,329 Net gain on loans sold or held for sale 7,477 1,502 Commission income 20,595 15,636 Equity in earnings of affiliate 28,065 21,640 Other income 29,423 17,490 --------- --------- Total other operating income 126,405 107,272 --------- --------- Other Operating Expenses: Salaries 66,349 61,161 Employee benefits 49,627 39,942 Occupancy, net 18,279 16,376 Other expenses 79,932 66,870 --------- --------- Total other operating expenses 214,187 184,349 --------- --------- Income Before Income Taxes 161,773 142,009 Income taxes 51,529 42,417 --------- --------- Net Income $ 110,244 $ 99,592 ========= ========= Net Income Applicable to Common Stock $ 103,806 $ 91,815 ========= ========= Net income per common share $ 1.89 $ 1.64 Average common shares outstanding 54,809 56,021 See accompanying notes to consolidated financial statements.
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REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands) Three Months Ended March 31, ------------------------------ 1997 1996 ----------- ---------- Cash Flows From Operating Activities: Net income $ 110,244 $ 99,592 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization, net 20,809 17,854 Provision for credit losses 4,000 4,000 Investment securities (gains) losses, net 5,304 (5,329) Net gain on loans sold or held for sale (7,477) (1,502) Equity in earnings of affiliate (28,065) (21,640) Net change in precious metals (37,482) 104,293 Net change in trading accounts (191,671) (107,609) Net change in accounts receivable and accrued interest (1,064,595) (227,259) Net change in accounts payable and accrued expenses 983,322 113,047 Other, net 3,994 (66,847) ---------- ---------- Net cash used in operating activities (201,617) (91,400) ---------- ---------- Cash Flows From Investing Activities: Interest-bearing deposits with banks 991,705 269,339 Federal funds sold and securities purchased under resale agreements 688,893 1,508,344 Short-term investments (180,085) (180,028) Purchases of securities held to maturity (897,717) (2,290,772) Proceeds from maturities of securities held to maturity 159,755 126,968 Purchases of securities available for sale (1,475,474) (2,175,208) Proceeds from sales of securities available for sale 444,613 1,182,146 Proceeds from maturities of securities available for sale 562,202 1,489,668 Loans (591,841) 2,437 Payment for purchase of Brooklyn Bancorp, Inc., net of cash received - (486,002) ---------- ---------- Net cash used in investing activities (297,949) (553,108) ---------- ---------- Cash Flows From Financing Activities: Deposits 194,689 570,116 Short-term borrowings 449,292 139,584 Due to factored clients 131,927 124,631 Proceeds from issuance of long-term debt - 110,165 Repayment of long-term debt (60,582) (166,085) Proceeds from issuance of subordinated long-term debt - 100,000 Repayment of subordinated long-term debt - (100,000) Repurchase of preferred stock (155,800) - Repurchase of common stock (48,305) (31,917) Cash dividends paid (29,576) (27,944) Other, net (3,425) (609) ---------- ---------- Net cash provided by financing activities 478,220 717,941 Effect of exchange rate changes on cash and due from banks (1,454) (1,349) ---------- ---------- Net increase (decrease) in cash and due from banks (22,800) 72,084 Cash and due from banks at beginning of period 710,183 675,683 ---------- ---------- Cash and due from banks at end of period $ 687,383 $ 747,767 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 536,816 $ 427,561 Income taxes 1,889 23,461 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) Three Months Ended March 31, 1997 ------------ Cumulative Preferred Stock: Balance at beginning of period $555,800 Retirement of 4,000,000 shares of $1.9375 cumulative preferred stock and 558 shares of remarketed preferred stock (155,800) ----------- Balance at end of period $400,000 =========== Common Stock: Balance at beginning of period $275,048 Net cancellation under stock option, restricted stock and restricted stock election plans of 1,512 shares (8) Retirement of 543,290 shares (2,716) ----------- Balance at end of period $272,324 =========== Surplus: Balance at beginning of period $502,425 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 1,512 shares 5,412 Treasury stock transactions of affiliate 122 Retirement of 543,290 common shares (45,589) ----------- Balance at end of period $462,370 =========== Retained Earnings: Balance at beginning of period $1,918,880 Net income 110,244 Foreign currency translation, net of taxes (6,960) Dividends declared on common stock (25,129) Dividends declared on issues of preferred stock (6,438) ----------- Balance at end of period $1,990,597 =========== Net Unrealized Appreciation on Securities Available for Sale, Net of Taxes: Balance at beginning of period $54,467 Unrealized appreciation 23,291 Income tax expense (8,152) ----------- Balance at end of period $69,606 =========== Total Stockholders' Equity: Balance at beginning of period $3,306,620 Net changes during the period (111,723) ----------- Balance at end of period $3,194,897 =========== See accompanying notes to consolidated financial statements. -5- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COVERING THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 1. In February 1997, SFAS No.128, "Earnings per Share", was issued. This statement establishes standards for computing and presenting earnings per share ("EPS") and changes the method of calculating EPS whereby primary EPS will become "Basic" EPS and fully diluted EPS will become "Diluted" EPS. This statement simplifies the standards for computing earnings per share previously found in Accounting Principles Board Opinion No. 15, and makes them comparable to international EPS standards. Basic EPS, unlike primary EPS, excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Corporation. This SFAS will be adopted by the Corporation on December 31, 1997. The adoption of this SFAS will have no material effect on the Corporation's results of operations or its financial position. 2. The following table presents data related to the Corporation's allowance for possible credit losses for the three-month periods ended March 31, 1997 and 1996. (In thousands) 1997 1996 ----------- ----------- Balance at beginning of period $ 350,358 $ 300,593 Charge-offs (6,728) (11,374) Recoveries 5,987 3,433 ----------- ----------- Net charge-offs (741) (7,941) Provision charged to operating expense 4,000 4,000 Allowance acquired from Brooklyn Bancorp, Inc. - 42,579 Translation adjustment (950) (22) ----------- ----------- Balance at end of period $ 352,667 $ 339,209 =========== =========== -6- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Management's discussion and analysis of the summary of operations should be read in conjunction with the consolidated financial statements (unaudited) and notes shown elsewhere in this Report. In the following discussion, the interest income earned on tax exempt obligations has been adjusted (increased) to a fully-taxable equivalent basis. The rate used for this adjustment was approximately 43% in 1997 and 44% in 1996. This tax equivalent adjustment permits all interest income and net interest income to be analyzed on a comparable basis. The following table presents a comparative summary of the increases (decreases) in income and expense for the first quarter of 1997 compared to the first quarter of 1996. Increase (Decrease) -------------------------- 1st Qtr. 1997 vs. 1st Qtr. 1996 -------------------------- Amount Percent -------------------------- (Dollars in thousands) Interest income $ 81,500 12.1 Interest expense 51,342 11.6 ------------- Net interest income 30,158 13.0 Provision for credit losses - - ------------- Net interest income after provision for credit losses 30,158 13.3 Other operating income 19,133 17.8 Other operating expenses 29,838 16.2 ------------- Income before income taxes 19,453 12.9 ------------- Applicable income taxes 9,112 21.5 Tax equivalent adjustment (311) (3.7) ------------- Total applicable income taxes 8,801 17.3 ------------- Net income $ 10,652 10.7 ============= ======= Net income applicable to common stock $ 11,991 13.1 ============= ======= Net Interest Income - on a fully-taxable equivalent basis, amounted to $261.6 million in the first quarter of 1997, compared to $231.5 million in the first quarter of 1996. The increase in net interest income is due primarily to an increase in the volume of average interest-earning assets which more than offset the three basis point decline in net interest rate differential. Towards the end of the first quarter of 1997, the corporation extended the maturity of some of its funding to further reduce its exposure to rising interest-rates. As shown in the table on page 8, average interest-earning assets rose to $43.0 billion in the first quarter of 1997, or 15.6%, from $37.2 billion in the first quarter of 1996. This increase reflected the additional interest-earning assets acquired from Brooklyn Bancorp, Inc., ("BBI"), in the first quarter of 1996, the investment of deposit liabilities of branches acquired from First Nationwide Bank, Bank Leumi Trust Company and Independence Savings Bank during the remainder of 1996 and an increase in investment securities funded by deposits in foreign and domestic offices and short-term borrowings. -7-
AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands) Quarter Ended March 31, ---------------------------------------------------------------------------------- 1997 1996 ---------------------------------------- ---------------------------------------- Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid % Balance Expense Paid % -------------- ------------- --------- -------------- ------------ -------- Interest-earning assets: Interest-bearing deposits with banks $ 4,765,059 $ 75,391 6.42 $ 5,940,713 $ 103,018 6.97 Investment securities:(1) Taxable 20,087,077 344,651 6.96 16,300,804 290,778 7.17 Exempt from federal income taxes 1,488,306 29,831 8.13 1,547,892 32,255 8.38 -------------- ------------- -------------- ------------ Total investment securities 21,575,383 374,482 7.04 17,848,696 323,033 7.28 Trading account assets(2) 1,676,907 29,294 7.08 1,011,774 14,659 5.83 Federal funds sold and securities purchased under resale agreements 1,597,686 21,112 5.36 1,226,349 17,781 5.83 Loans, net of unearned income: Domestic offices 8,575,204 175,634 8.31 7,974,773 162,573 8.20 Foreign offices 4,761,047 79,611 6.78 3,197,212 52,960 6.66 -------------- ------------- -------------- ------------ Total loans, net of unearned income 13,336,251 255,245 7.76 11,171,985 215,533 7.76 -------------- ------------- -------------- ------------ Total interest-earning assets 42,951,286 $ 755,524 7.13 37,199,517 $ 674,024 7.29 ============= ======== ============ ======== Cash and due from banks 748,948 727,158 Other assets 9,321,772 8,102,801 -------------- -------------- Total assets $ 53,022,006 $ 46,029,476 ============== ============== Interest-bearing funds: Consumer and other time deposits $ 10,965,892 $ 107,202 3.96 $ 9,802,068 $ 100,793 4.14 Certificates of deposit 1,582,525 19,489 4.99 747,108 9,348 5.03 Deposits in foreign offices 16,152,960 208,170 5.23 13,287,239 193,361 5.85 -------------- ------------- -------------- ------------ Total interest-bearing deposits 28,701,377 334,861 4.73 23,836,415 303,502 5.12 Trading account liabilities(2) 264,185 4,052 6.22 59,831 972 6.53 Short-term borrowings 7,294,690 89,581 4.98 6,043,980 74,362 4.95 Total long-term debt 4,194,480 65,409 6.32 3,923,446 63,725 6.53 -------------- ------------- -------------- ------------ Total interest-bearing funds 40,454,732 $ 493,903 4.95 33,863,672 $ 442,561 5.26 ============= ======== ============ ======== Noninterest-bearing deposits: In domestic offices 2,197,543 1,810,408 In foreign offices 213,173 134,439 Other liabilities 6,888,910 7,200,682 Stockholders' equity: Preferred stock 480,064 575,000 Common stockholders' equity 2,787,584 2,445,275 -------------- -------------- Total stockholders' equity 3,267,648 3,020,275 -------------- -------------- Total liabilities and stockholders' equity $ 53,022,006 $ 46,029,476 ============== ============== Interest income/earning assets $ 755,524 7.13 $ 674,024 7.29 Interest expense/earning assets 493,903 4.66 442,561 4.79 ------------- -------- ------------ -------- Net interest differential $ 261,621 2.47 $ 231,463 2.50 ============= ======== ============ ======== (1) Based on amortized or historic cost with the mark-to-market adjustment on securities available for sale included in other assets. (2) Excludes noninterest-bearing balances, which are included in other assets or other liabilities, respectively.
-8- The net interest rate differential was 2.47% in the first quarter of 1997, compared to 2.50% in the first quarter of 1996 Provision for credit losses - was $4.0 million in the first quarter of 1997, the same as in the first quarter of last year. Net loan charge-offs were $0.7 million in the first quarter of 1997, compared to net loan charge-offs of $7.9 million in the first quarter of 1996. See Note 2 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 March 31, 1997 was $352.7 million, or 2.87% of loans outstanding, net of unearned income, compared to $350.4 million, or 2.99%, at December 31, 1996. The total allowance for possible credit losses is available to absorb credit losses in the Corporation's entire portfolio. Approximately $387 million of assets acquired from BBI are subject to a loss-sharing agreement with the FDIC. Under this agreement, the Corporation will be reimbursed by the FDIC for 80 percent of any losses it incurs through the expiration of the agreement on June 30, 1998. The following table presents summary data related to non-accrual loans at periods ended: March 31, Dec. 31, March 31, (in thousands) 1997 1996 1996 --------- --------- -------- Non-accrual loans: Domestic $87,457 $94,137 $137,438 Foreign 13,788 10,956 13,222 -------- -------- -------- Total non-accrual loans (1) $101,245 $105,093 $150,660 ======== ======== ======== Non-accrual loans as a percentage of loans outstanding at period end 0.82% 0.90% 1.36% ======== ======== ======== (1) Includes non-performing loans acquired in the purchase of BBI with a carrying value at March 31, 1997, December 31, 1996 and March 31, 1996 of $33.1 million, $46.3 million and $81.4 million respectively, which are covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation. The covered amounts were $31.6 million, $49.6 million and $81.5 million at March 31, 1997, December 31, 1996 and March 31, 1996, respectively. See "Statement of Condition" below for information on total non-performing assets. Other Operating Income - rose to $126.4 million in the first quarter of 1997, compared to $107.3 million in the first quarter last year. Total other operating income was $119.9 million in the fourth quarter of 1996. Income from trading activities was $46.1 million in the first quarter of 1997, compared to $45.7 million in the first quarter of last year, and $44.5 million in the fourth quarter of 1996. The first quarter-to-quarter change was attributable to an increase in income from precious metals that was partially offset by a decline in income from foreign exchange and trading account profits and commissions. -9- The increase in trading income in the first quarter of 1997, compared to the fourth quarter of 1996, resulted from an increase in income from precious metals and foreign exchange trading income partially offset by a decline in trading account profits and commissions. Investment securities losses were $5.3 million in the first quarter of 1997, compared to gains of $5.3 million in the first quarter of 1996. In the first quarter of 1997, losses were primarily from the sale of mortgage-backed securities. In the first quarter of 1996, gains were primarily from sales of emerging market and other securities, partially reduced by losses on mortgage-backed securities. The Corporation recorded a net gain on loans sold or held for sale of $7.5 million in the first quarter of 1997 compared to a $1.5 million gain in the first quarter of last year. The gain in the first quarter of 1997 was attributable to the sale of non-accrual commercial real estate loans. Commission income, which consists primarily of fees for the issuance of letters of credit, the creation of acceptances and the collection and transfer of funds, was $20.6 million in the first quarter of 1997, compared to $15.6 million in the corresponding period of 1996. The increase in commission income resulted from higher levels of fees for funds transfer, the shipment of U.S.-dollar-denominated banknotes and commissions earned from brokerage services. Equity in the earnings of affiliate increased to $28.1 million in the first quarter of 1997, compared to $21.6 million in the first quarter of 1996. This income represents the Corporation's share of the earnings of Safra Republic Holdings S.A., ("Safra Republic"), a European international private banking group of which the Corporation owns approximately 49%. This increase was due to higher levels of net interest income and other income, primarily commission income and foreign exchange and precious metals trading income, partially offset by increases in the provision for credit losses, operating expenses and income taxes. Safra Republic's total client portfolio accounts were $25.8 billion at March 31, 1997, compared to $17.5 billion at March 31, 1996. This change consisted of increases of $6.7 billion, or 92%, in client portfolio assets and $1.6 billion, or 16%, in client deposits, and includes client assets and deposits from the acquisition by Safra Republic of Banque Unigestion S.A. in 1996 and Mercury Bank A.G. which was completed in February, 1997. 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 $29.4 million in the first quarter of 1996, compared to $17.5 million in the first quarter of last year. The first quarter of 1997 included a gain of $7.4 million on the unwinding of a real estate financing transaction and approximately $3.6 million of annual investment management performance fees earned at Safra Republic Investments Limited, a subsidiary whose ownership is shared equally with Safra Republic. The first quarter of 1996 included a gain of $1.1 million from the repurchase and early extinguishment of an issue of $100 million principal amount of floating rate subordinated long-term debt. Other Operating Expenses - were $214.2 million in the first quarter of 1997, compared to $184.3 million in the first quarter of 1996. The increase reflects the impact of retail banking acquisitions in the first half of 1996, and the opening of new foreign offices late in 1996 and early in 1997. Total operating expenses also includes ongoing investments in trading, risk management, profitability reporting systems and other technology and electronic banking initiatives which began in the second half of 1996. -10- Salaries and employee benefits were $116.0 million in the first quarter of 1997, compared to $101.1 million in the first quarter of 1996. The increase between the first quarter of 1997 and the first quarter of 1996 was attributable to the above mentioned initiatives as well as higher levels of incentive based compensation. Occupancy expense was $18.3 million in the first quarter of 1997, compared to $16.4 million in the first quarter of 1996. All other expenses were $79.9 million in the first quarter of 1997 compared to $66.9 million in the first quarter of last year. Included in the first quarter of 1997 is $1.1 million of expense related to the Corporation's non-accrual assets included in other real estate owned. The first quarter of 1996 did not include any costs for other real estate owned. Equipment expenses increased $2.3 million over the first quarter of last year. Amortization of goodwill and other intangible assets was $7.1 million in the first quarter of 1997, compared to $5.9 million in the first quarter of 1996. 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 $8.8 million, or 17.3%, between the first quarters of 1997 and 1996. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, for the first quarters of 1997 and 1996 were 35% and 34%, respectively. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At March 31, 1997, stockholders' equity included $69.6 million, which represented 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 securities available for sale portfolio, compared to an unrealized appreciation of $54.5 million in both such portfolios at December 31, 1996. The Corporation's leverage ratio, Tier 1 capital to quarterly average assets, and its risk-based capital ratios, Tier 1 and total qualifying capital to risk-weighted assets, include the assets and capital of Safra Republic on a consolidated basis in accordance with the requirements of the Federal Reserve Board specifically applied to the Corporation. In accordance with regulatory guidelines, the Corporation excludes Republic New York Securities Corporation's assets and off-balance-sheet contracts from the Corporation's capital calculations. The guidelines require the Corporation to deduct one-half of its investment in this subsidiary from each of Tier 1 and Tier 2 capital. -11- The following table presents the Corporation's risk-based capital ratios: March 31, Dec. 31, 1997 1996 ------------ ----------- Risk-based capital ratios: Tier 1 risk-based capital ratio 13.04% 13.80% Total risk-based capital ratio 21.91% 23.28% Leverage ratio 5.49% 5.87% The declines in the risk-based capital and leverage ratios at March 31, 1997, from year end 1996, were attributable to reductions in Tier 1 and total risk-based capital that resulted from the redemption of $155.8 million of preferred stock and increased amounts of goodwill. Higher levels of risk-based assets and average assets also contributed to the decline in these ratios. These ratios substantially exceeded the minimums in effect for bank holding companies. At March 31, 1997, the ratio of the Corporation's total common stockholders' equity to total assets was 5.08%, compared to 5.26% at December 31, 1996. The decline in this ratio at March 31, 1997 was attributable to total assets increasing 5.1% to $55.0 billion at March 31, 1997 from $52.3 billion at December 31, 1996, while common stockholders' equity increased 1.6% or $44.1 million during the period. Non-performing Assets The following is a summary of the Corporation's non-performing assets at periods ended: March 31, Dec. 31, March 31, (in thousands) 1997 1996 1996 --------- --------- --------- Total non-accrual loans $101,245 $105,093 $150,660 Other real estate owned 32,691 36,278 42,395 --------- --------- --------- Total non-performing assets 133,936 141,371 193,055 Less: FDIC loss-sharing (1) (39,110) (52,359) (88,879) --------- --------- --------- Total $ 94,826 $ 89,012 $104,176 ========= ========= ========= Total non-performing assets as a percentage of period end total assets 0.24% 0.27% 0.41% ========= ========= ========= (1) Represents the carrying value of non-performing assets, acquired in the purchase of BBI which are covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation. The agreement expires on June 30, 1998. The covered amounts were $37.7 million, $55.6 million and $88.6 million at March 31, 1997, December 31, 1996 and March 31, 1996, respectively. -12- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11. Computation of Earnings Per Common Share 27. Financial Data Schedule (b) Reports on Form 8-K (i) On January 27, 1997, a report on Form 8-K was filed submitting the Corporation's press release dated January 15, 1997, with financial statements, announcing results for the fourth quarter and twelve month period ending December 31, 1996. -13- SIGNATURES Pursuant to the requirements of the Securities Exchanges Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REPUBLIC NEW YORK CORPORATION Dated: May 15, 1997 By /s/Walter H. Weiner ---------------------------- Walter H. Weiner Chairman of the Board Dated: May 15, 1997 By /s/Kenneth F. Cooper ----------------------------- Kenneth F. Cooper Executive Vice President and Chief Financial Officer -14- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended March 31, 1997 REPUBLIC NEW YORK CORPORATION EXHIBIT INDEX No. Exhibit Description 11 Computation of Earnings Per Common Share 27 Financial Data Schedule EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11 REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE UNAUDITED (In thousands except per share data) Three Months Ended March 31, --------------------------- 1997 1996 ------------ ----------- Net income per common share: Earnings: Net income $ 110,244 $ 99,592 Less preferred stock dividends (6,438) (7,777) ----------- ----------- Net income applicable to common stock $ 103,806 $ 91,815 =========== =========== Shares: Average number of common and common equivalent shares outstanding 54,809 56,021 =========== =========== Net income per common share $ 1.89 $ 1.64 =========== =========== EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 3-MOS DEC-31-1997 MAR-31-1997 687,383 4,917,490 1,420,216 5,572,868 13,919,249 8,880,723 8,775,562 12,286,082 352,667 54,968,873 31,918,795 5,896,133 296,361 3,837,973 272,324 0 400,000 2,522,573 54,968,873 255,245 366,416 125,797 747,458 334,861 493,903 253,555 4,000 (5,304) 214,187 161,773 110,244 0 0 110,244 1.89 1.89 0 0 0 0 0 0 0 0 0 0 0 0
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