-----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, UQ2koisRloL7LotwKKpQsRPnldKMT8474IYZjM9dtkGrEowQxFIacLtyfRlUfb7z uT3STJQKYghS/oiwG6caeg== 0000083246-97-000021.txt : 19970815 0000083246-97-000021.hdr.sgml : 19970815 ACCESSION NUMBER: 0000083246-97-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660805 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: 6-30-97 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 June 30, 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 54,815,460 at July 31, 1997. REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Statements of Condition - Unaudited June 30, 1997 and December 31, 1996 2 Consolidated Statements of Income - Unaudited Six Months and Three Months Ended June 30, 1997 and 1996 3 Consolidated Statements of Cash Flows - Unaudited Six Months Ended June 30, 1997 and 1996 4 Consolidated Statement of Changes in Stockholders' Equity- Unaudited Six Months Ended June 30, 1997 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, 1997 1996 ------------ ------------ Assets - ------ Cash and due from banks $ 687,209 $ 710,183 Interest-bearing deposits with banks 5,413,300 5,909,195 Precious metals 982,508 1,231,319 Securities held to maturity (approximate market value of $9,694,278 in 1997 and $8,144,518 in 1996) 9,655,125 8,135,068 Securities available for sale (at approximate market value) 13,952,404 13,040,445 ------------ ------------ Total investment securities 23,607,529 21,175,513 Trading account assets (note 2) 4,826,330 4,807,788 Federal funds sold and securities purchased under resale agreements 2,094,029 2,109,109 Loans (net of unearned income of $21,838 in 1997 and $25,306 in 1996) 12,801,173 11,721,936 Allowance for possible credit losses (note 2) (325,526) (350,358) Customers' liability on acceptances 675,230 938,615 Accounts receivable and accrued interest 3,340,367 2,108,318 Investment in affiliate 832,882 806,274 Premises and equipment 477,827 469,231 Other assets 638,874 661,728 ------------ ------------ Total assets $ 56,051,732 $ 52,298,851 ============ ============ Liabilities and Stockholders' Equity - ------------------------------------ Noninterest-bearing deposits: In domestic offices $ 2,224,145 $ 2,296,267 In foreign offices 211,985 177,675 Interest-bearing deposits: In domestic offices 12,376,608 12,559,554 In foreign offices 18,422,180 16,692,083 ------------ ------------ Total deposits 33,234,918 31,725,579 Trading account liabilities 4,204,047 4,402,085 Short-term borrowings 6,972,685 5,446,841 Acceptances outstanding 675,421 939,598 Accounts payable and accrued expenses 2,590,048 1,405,822 Due to factored clients 628,425 604,686 Other liabilities (note 2) 179,744 218,910 Long-term debt 1,499,051 1,498,710 Subordinated long-term debt and perpetual capital notes 2,400,000 2,400,000 Company-obligated mandatorily 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 in 1996 400,000 555,800 Common stock, $5 par value 150,000,000 shares authorized; 54,816,416 shares outstanding in 1997 and 55,009,549 in 1996 274,082 275,048 Surplus 457,496 502,425 Retained earnings 2,066,707 1,918,880 Net unrealized appreciation on securities available for sale, net of taxes 119,108 54,467 ------------ ------------ Total stockholders' equity 3,317,393 3,306,620 ------------ ------------ Total liabilities and stockholders' equity $ 56,051,732 $ 52,298,851 ============ ============ 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)
Six Months Ended Three Months Ended June 30, June 30, ----------------------- ----------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Interest Income: Interest and fees on loans $ 522,544 $ 438,318 $ 267,299 $ 222,785 Interest on deposits with banks 153,557 202,808 78,166 99,790 Interest and dividends on investment securities: Taxable 718,331 608,864 373,680 318,086 Exempt from federal income taxes 45,449 47,757 23,684 23,879 Interest on trading account assets 60,831 32,250 31,537 17,591 Interest on federal funds sold and securities purchased under resale agreements 46,672 41,618 25,560 23,837 ---------- ---------- ---------- ---------- Total interest income 1,547,384 1,371,615 799,926 705,968 ---------- ---------- ---------- ---------- Interest Expense: Interest on deposits 699,450 630,408 364,589 326,906 Interest on short-term borrowings 210,506 150,774 116,873 75,440 Interest on long-term debt 132,653 125,432 67,244 61,707 ---------- ---------- ---------- ---------- Total interest expense 1,042,609 906,614 548,706 464,053 ---------- ---------- ---------- ---------- Net Interest Income 504,775 465,001 251,220 241,915 Provision for credit losses 8,000 8,000 4,000 4,000 ---------- ---------- ---------- ---------- Net interest income after provision for credit losses 496,775 457,001 247,220 237,915 ---------- ---------- ---------- ---------- Other Operating Income: Income from precious metals 11,843 11,611 1,045 3,223 Foreign exchange trading income 59,737 50,601 32,612 23,039 Trading account profits and commissions 21,046 25,557 12,820 15,832 Investment securities gains, net 1,363 9,888 6,667 4,559 Net gain on loans sold or held for sale 9,895 1,743 2,418 241 Commission income 41,257 34,646 20,662 19,010 Equity in earnings of affiliate 58,674 44,494 30,609 22,854 Other income 47,659 37,909 18,236 20,419 ---------- ---------- ---------- ---------- Total other operating income 251,474 216,449 125,069 109,177 ---------- ---------- ---------- ---------- Other Operating Expenses: Salaries 135,044 125,205 68,695 64,044 Employee benefits 98,229 80,129 48,602 40,187 Occupancy, net 35,123 34,490 16,844 18,114 Other expenses 160,286 140,412 80,354 73,542 ---------- ---------- ---------- ---------- Total other operating expenses 428,682 380,236 214,495 195,887 ---------- ---------- ---------- ---------- Income Before Income Taxes 319,567 293,214 157,794 151,205 Income taxes 98,818 90,572 47,289 48,155 ---------- ---------- ---------- ---------- Net Income $ 220,749 $ 202,642 $ 110,505 $ 103,050 ========== ========== ========== ========== Net Income Applicable to Common Stock $ 209,037 $ 187,050 $ 105,231 $ 95,235 ========== ========== ========== ========== Net income per common share $3.82 $3.35 $1.93 $1.71 Average common shares outstanding 54,699 55,870 54,588 55,718 See accompanying notes to consolidated financial statements.
-3- REPUBLIC NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands)
Six Months Ended June 30, -------------------------- 1997 1996 ----------- ----------- Cash Flows From Operating Activities: - ------------------------------------ Net income $ 220,749 $ 202,642 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization, net 39,355 38,738 Provision for credit losses 8,000 8,000 Investment securities gains, net (1,363) (9,888) Net gain on loans sold or held for sale (9,895) (1,743) Equity in earnings of affiliate (58,674) (44,494) Net change in precious metals 248,811 206,053 Net change in trading accounts (216,580) (2,263) Net change in accounts receivable and accrued interest (1,234,483) (488,474) Net change in accounts payable and accrued expenses 1,159,171 (21,232) Other, net (83,999) (160,130) ----------- ----------- Net cash provided by (used in) operating activities 71,092 (272,791) ----------- ----------- Cash Flows From Investing Activities: - ------------------------------------ Interest-bearing deposits with banks 495,895 699,861 Federal funds sold and securities purchased under resale agreements 15,080 262,945 Short-term investments (211,032) (60,596) Purchases of securities held to maturity (995,790) (2,596,034) Proceeds from maturities of securities held to maturity 432,505 279,931 Purchases of securities available for sale (3,644,211) (3,881,417) Proceeds from sales of securities available for sale 650,933 1,504,235 Proceeds from maturities of securities available for sale 1,482,025 2,343,934 Loans (1,140,033) (251,853) Payment for purchase of Brooklyn Bancorp, Inc., net of cash received -- (486,002) Investment in affiliate 38,953 30,296 ----------- ----------- Net cash used in investing activities (2,875,675) (2,154,700) ----------- ----------- Cash Flows From Financing Activities: - ------------------------------------ Deposits 1,511,639 1,542,757 Short-term borrowings 1,525,844 1,045,215 Due to factored clients 23,739 62,861 Proceeds from issuance of long-term debt 310,311 407,569 Repayment of long-term debt (309,482) (266,085) 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 (57,543) (82,174) Cash dividends paid (59,983) (57,340) Other, net (1,291) (1,426) ----------- ----------- Net cash provided by financing activities 2,787,434 2,651,377 ----------- ----------- Effect of exchange rate changes on cash and due from banks (5,825) (8,708) ----------- ----------- Net increase (decrease) in cash and due from banks (22,974) 215,178 Cash and due from banks at beginning of period 710,183 675,683 ----------- ----------- Cash and due from banks at end of period $ 687,209 $ 890,861 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,023,335 $ 914,801 Income taxes 76,229 78,811 Transfers from securities available for sale to securities held to maturity 949,079 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) Six Months Ended June 30, 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 issuance under stock option, restricted stock and restricted stock election plans of 451,414 shares 2,257 Retirement of 644,547 shares (3,223) ----------- Balance at end of period $ 274,082 =========== Surplus: Balance at beginning of period $ 502,425 Net issuance of common stock under stock option, restricted stock and restricted stock election plans of 451,414 shares 9,639 Treasury stock transactions of affiliate (248) Retirement of 644,547 common shares (54,320) ----------- Balance at end of period $ 457,496 =========== Retained Earnings: Balance at beginning of period $ 1,918,880 Net income 220,749 Foreign currency translation, net of taxes (10,864) Dividends declared on common stock (50,346) Dividends declared on issues of preferred stock (11,712) ----------- Balance at end of period $ 2,066,707 =========== Net Unrealized Appreciation on Securities Available for Sale, Net of Taxes: Balance at beginning of period $ 54,467 Unrealized appreciation 99,448 Income tax expense (34,807) ----------- Balance at end of period $ 119,108 =========== Total Stockholders' Equity: Balance at beginning of period $ 3,306,620 Net changes during the period 10,773 ----------- Balance at end of period $ 3,317,393 =========== 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, 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. In June 1997, SFAS No. 130, "Reporting Comprehensive Income", was issued. This statement establishes standards for reporting and displaying comprehensive income and its components when a full set of financial statements that report financial position, results of operations and cash flows are provided. Items such as foreign currency translation adjustments and unrealized gains and losses on available for sale securities are currently included as a component of stockholders' equity until realized. Such items will be included in determining comprehensive income. Under the SFAS, any items that qualify for comprehensive income disclosure may be presented separately in a dual step income statement, that displays net income and comprehensive income components, or alternatively, in a separate statement of comprehensive income that begins with net income and displays other comprehensive income components to arrive at total comprehensive income. This SFAS will be adopted by the Corporation on January 1, 1998. The adoption of this SFAS will have no material effect on the Corporation's results of operations or its financial position. In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", was issued and supersedes SFAS No. 14 "Financial Reporting for Segments of a Business Enterprise". This statement establishes standards for reporting information about segments of a business in annual financial statements and will require selected segment information in interim reports to shareholders. The statement requires among other things, disclosure on a business segment basis, as defined by the Corporation, to include a description of products and services, major customers, interest income and expense, profit or loss as measured by the Corporation's management in assessing segment performance and geographic information on assets and revenue. This SFAS is effective, as it relates to the Corporation, on January 1, 1998 and need not be applied to interim periods during 1998. The adoption of this SFAS will have no material effect on the Corporation's results of operations or its financial position. -6- 2. During the second quarter of 1997, the Corporation changed its method of reporting the aggregate allowance for possible credit losses in order to be consistent with industry practice. The Corporation's aggregate allowance for possible credit losses at June 30, 1997 was $352.5 million, consisting of $17.0 million applicable to trading account assets which is a reduction of "trading account assets," $10.0 million included in "other liabilities" for off-balance-sheet extensions of credit, such as standby letters of credit, guarantees and commitments, and $325.5 million, which is available to absorb all other possible credit losses. Prior period amounts have not been restated to reflect the change in reporting the allowance for possible credit losses. The following table presents data related to the Corporation's aggregate allowance for possible credit losses for the six-month periods ended June 30, 1997 and 1996. Amounts from 1996 have not been reclassified. 1997 1996 --------- --------- (In thousands) Aggregate balance at beginning of period $ 350,358 $ 300,593 Charge-offs (12,455) (20,528) Recoveries 7,592 8,276 --------- --------- Net charge-offs (4,863) (12,252) Provision charged to operating expense 8,000 8,000 Allowance acquired from Brooklyn Bancorp, Inc. - 42,579 Translation adjustment (969) 294 --------- --------- Aggregate balance at end of period $ 352,526 $ 339,214 ========= ========= -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 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 second quarter and six months ended June 30, 1997 compared to the corresponding periods of 1996. Increase (Decrease) ------------------------------------------- 2nd Qtr. 1997 vs. Six Months 1997 vs. 2nd Qtr. 1996 Six Months 1996 ------------------- -------------------- Amount Percent Amount Percent ------------------- -------------------- (Dollars in thousands) Interest income $ 94,266 13.2 $ 175,766 12.7 Interest expense 84,653 18.2 135,995 15.0 --------- --------- Net interest income 9,613 3.8 39,771 8.3 Provision for credit losses - - - - --------- --------- Net interest income after provision for credit losses 9,613 3.9 39,771 8.4 Other operating income 15,892 14.6 35,025 16.2 Other operating expenses 18,608 9.5 48,446 12.7 --------- --------- Income before income taxes 6,897 4.3 26,350 8.5 --------- --------- Applicable income taxes (866) (1.8) 8,246 9.1 Tax equivalent adjustment 308 3.8 (3) - --------- --------- Total applicable income taxes (558) (1.0) 8,243 7.7 --------- --------- Net income $ 7,455 7.2 $ 18,107 8.9 ========= ==== ========= ==== Net income applicable to common stock $ 9,996 10.5 $ 21,987 11.8 ========= ==== ========= ==== Net Interest Income - on a fully-taxable equivalent basis was $259.7 million in the second quarter of 1997, compared to $250.1 million in the second quarter of 1996. As shown in the table on page 9, average interest-earning assets rose to $45.1 billion in the second quarter of 1997, compared to $39.9 billion in the second quarter of 1996. The net interest rate differential was 2.31% in the second quarter of 1997, compared to 2.52% in the second quarter last year. The decline in the net interest rate margin in the second quarter of 1997, from the second quarter of last year, reflects the previously reported extension of some of the Corporation's short-term funding to further reduce its exposure to a rising interest rate scenario. In addition, the growth in the size of the balance sheet was a result of increased client deposits, particularly in foreign offices, which were invested in high quality assets at narrow spreads. -8- AVERAGE BALANCES, NET INTEREST DIFFERENTIAL, AVERAGE RATES EARNED AND PAID UNAUDITED (Fully taxable equivalent basis) (Dollars in thousands)
Quarter Ended June 30, -------------------------------------------------------------------------------- 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 $ 4,953,775 $ 78,166 6.33 $ 5,754,785 $ 99,790 6.97 Investment securities:(1) Taxable 21,037,573 373,680 7.12 17,818,852 318,086 7.18 Exempt from federal income taxes 1,588,120 32,192 8.13 1,545,833 32,079 8.35 ----------- --------- ----------- --------- Total investment securities 22,625,693 405,872 7.20 19,364,685 350,165 7.27 Trading account assets(2) 1,638,352 31,537 7.72 1,223,718 17,591 5.78 Federal funds sold and securities purchased under resale agreements 1,909,235 25,560 5.37 1,790,545 23,837 5.35 Loans, net of unearned income: Domestic offices 9,288,054 188,245 8.13 8,240,550 164,664 8.04 Foreign offices 4,710,118 79,054 6.73 3,538,986 58,121 6.61 ----------- --------- ------------ --------- Total loans, net of unearned income 13,998,172 267,299 7.66 11,779,536 222,785 7.61 ----------- --------- ------------ --------- Total interest-earning assets 45,125,227 $ 808,434 7.19 39,913,269 $ 714,168 7.20 ========= ======= ========= ======= Cash and due from banks 813,100 731,293 Other assets 9,698,863 7,672,774 ----------- ----------- Total assets $55,637,190 $48,317,336 =========== =========== Interest-bearing funds: Consumer and other time deposits $10,826,151 $ 108,401 4.02 $11,141,148 $ 109,012 3.94 Certificates of deposit 1,619,298 20,796 5.15 821,597 10,282 5.03 Deposits in foreign offices 17,447,434 235,392 5.41 14,781,369 207,612 5.65 ----------- --------- ----------- --------- Total interest-bearing deposits 29,892,883 364,589 4.89 26,744,114 326,906 4.92 Trading account liabilities(2) 164,146 3,090 7.55 91,496 1,952 8.58 Short-term borrowings 8,906,736 113,783 5.12 6,094,595 73,488 4.85 Total long-term debt 4,197,233 67,244 6.43 3,946,672 61,707 6.29 ----------- --------- ----------- ---------- Total interest-bearing funds 43,160,998 $ 548,706 5.10 36,876,877 $ 464,053 5.06 ========= ======= ========= ======= Noninterest-bearing deposits: In domestic offices 2,284,431 1,957,276 In foreign offices 161,047 153,574 Other liabilities 6,793,141 6,268,737 Stockholders' equity: Preferred stock 400,000 575,000 Common stockholders' equity 2,837,573 2,485,872 ----------- ----------- Total stockholders' equity 3,237,573 3,060,872 ----------- ----------- Total liabilities and stockholders' equity $55,637,190 $48,317,336 =========== =========== Interest income/earning assets $ 808,434 7.19 $ 714,168 7.20 Interest expense/earning assets 548,706 4.88 464,053 4.68 --------- ------- --------- ------- Net interest differential $ 259,728 2.31 $ 250,115 2.52 ========= ======= ========= ======= (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)
Six Months Ended June 30, -------------------------------------------------------------------------------- 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 $ 4,859,939 $ 153,557 6.37 $ 5,847,749 $ 202,808 6.97 Investment securities:(1) Taxable 20,564,951 718,331 7.04 17,059,829 608,864 7.18 Exempt from federal income taxes 1,538,489 62,023 8.13 1,546,863 64,334 8.36 ----------- ----------- ----------- ---------- Total investment securities 22,103,440 780,354 7.12 18,606,692 673,198 7.28 Trading account assets(2) 1,657,523 60,831 7.40 1,117,746 32,250 5.80 Federal funds sold and securities purchased under resale agreements 1,754,321 46,672 5.36 1,508,447 41,618 5.55 Loans, net of unearned income: Domestic offices 8,933,598 363,879 8.21 8,107,662 327,237 8.12 Foreign offices 4,735,442 158,665 6.76 3,368,099 111,081 6.63 ----------- ---------- ----------- ---------- Total loans, net of unearned income 13,669,040 522,544 7.71 11,475,761 438,318 7.68 ----------- ---------- ----------- ---------- Total interest-earning assets 44,044,263 $1,563,958 7.16 38,556,395 $1,388,192 7.24 ========== ====== ========== ====== Cash and due from banks 781,201 729,225 Other assets 9,511,358 7,887,788 ------------ ----------- Total assets $54,336,822 $47,173,408 ============ =========== Interest-bearing funds: Consumer and other time deposits $10,895,636 $ 215,603 3.99 $10,471,608 $ 209,805 4.03 Certificates of deposit 1,601,013 40,285 5.07 784,353 19,630 5.03 Deposits in foreign offices 16,803,773 443,562 5.32 14,034,304 400,973 5.75 ------------ ---------- ----------- ---------- Total interest-bearing deposits 29,300,422 699,450 4.81 25,290,265 630,408 5.01 Trading account liabilities(2) 213,889 7,142 6.73 75,664 2,924 7.77 Short-term borrowings 8,105,166 203,364 5.06 6,069,287 147,850 4.90 Total long-term debt 4,195,864 132,653 6.38 3,935,059 125,432 6.41 ------------ ---------- ----------- ---------- Total interest-bearing funds 41,815,341 $1,042,609 5.03 35,370,275 $ 906,614 5.15 ========== ====== ========== ====== Noninterest-bearing deposits: In domestic offices 2,241,227 1,883,842 In foreign offices 186,966 144,007 Other liabilities 6,840,762 6,734,710 Stockholders' equity: Preferred stock 439,810 575,000 Common stockholders' equity 2,812,716 2,465,574 ------------ ----------- Total stockholders' equity 3,252,526 3,040,574 ------------ ----------- Total liabilities and stockholders' equity $54,336,822 $47,173,408 ============ =========== Interest income/earning assets $1,563,958 7.16 $1,388,192 7.24 Interest expense/earning assets 1,042,609 4.77 906,614 4.73 ---------- ------ ---------- ------ Net interest differential $ 521,349 2.39 $ 481,578 2.51 ========== ====== ========== ====== (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 on a fully-taxable equivalent basis was $521.3 million for the first six months of 1997, compared to $481.6 million in the comparable period of 1996. Average interest-earning assets rose to $44.0 billion for the first six months of 1997, compared to $38.6 billion for the corresponding period of 1996. The net interest rate differential was 2.39% for the first six months of 1997, compared to 2.51% in the respective period of 1996. The decline in the net interest rate differential for the six months of 1997, was attributable to the same factors that contributed to the decline in the second quarter of 1997. Provision for credit losses - was $4.0 million and $8.0 million in the second quarter and first six months of 1997, respectively, unchanged from the corresponding periods of last year. Net charge-offs were $4.1 million in the second quarter of 1997, compared to net charge-offs of $4.3 million in the second quarter of 1996. For the first six months of 1997, net charge-offs were $4.9 million, compared to $12.3 million for the six-month period 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. During the second quarter of 1997, the Corporation changed its method of reporting the aggregate allowance for possible credit losses in order to be consistent with industry practice. The Corporation's aggregate allowance for possible credit losses at June 30, 1997 was $352.5 million, consisting of $17.0 million applicable to trading account assets which is a reduction of "trading account assets", $10.0 million included in "other liabilities" for off-balance-sheet extensions of credit, such as standby letters of credit, guarantees and commitments, and $325.5 million, which is available to absorb all other possible credit losses. Approximately $338 million of assets acquired from Brooklyn Bancorp, Inc. ("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 term of the agreement which ends on June 30, 1998. The following table presents summary data related to non-accrual loans for the periods ended: June 30, March 31, Dec. 31, (in thousands) 1997 1997 1996 --------- --------- --------- Non-accrual loans: Domestic $ 86,773 $ 87,457 $ 94,137 Foreign 8,795 13,788 10,956 --------- --------- --------- Total non-accrual loans (1) $ 95,568 $ 101,245 $ 105,093 ========= ========= ========= Non-accrual loans as a percentage of loans outstanding at period end 0.75% 0.82% 0.90% ========= ========= ========= (1) Includes non-performing loans acquired in the purchase of BBI with a carrying value at June 30, 1997, March 31, 1997 and December 31, 1996 of $23.6 million, $33.1 million and $46.3 million, respectively, which are covered by a loss-sharing agreement with the FDIC. The covered amounts were $23.2 million, $31.6 million and $49.6 million, respectively. See "Statement of Condition" below for information on total non-performing assets. -11- Other Operating Income - was $125.1 million in the second quarter of 1997, compared to $109.2 million in the second quarter a year-earlier and $126.4 million in the first quarter of 1997. For the first six months of 1997, such income was $251.5 million, compared to $216.4 million in the corresponding period of 1996. Reported trading revenue (excluding associated net interest income) was $46.5 million in the second quarter of 1997, compared to $42.1 million in the second quarter of 1996 and $46.1 million in the first quarter of 1997. Net interest income associated with trading activities totaled an estimated $10.0 million in the second quarter of 1997 and $7.1 million in the first quarter of 1997. Trading revenue from precious metals activities in the second quarter of 1997 declined from the first quarter of 1997 as a result of lower levels of trading activities. This decrease was partially offset by an increase in metals arbitrage activities which generated net interest income. The items of net interest income/(expense) in the table below represent the net interest earned or paid on instruments held for trading, as well as an allocation by management to reflect the funding benefit or cost associated with the trading positions. 2nd Qtr 1st Qtr Six Months 1997 1997 1997 --------- --------- --------- (In thousands) Income from precious metals: Trading revenue $ 1,045 $ 10,798 $ 11,843 Net interest income 7,371 4,818 12,189 --------- --------- --------- Total 8,416 15,616 24,032 --------- --------- --------- Foreign exchange trading income: Trading revenue 32,612 27,125 59,737 Net interest (expense) (2,764) (2,815) (5,579) --------- --------- --------- Total 29,848 24,310 54,158 --------- --------- --------- Trading account profits and commissions: Trading revenue 12,820 8,226 21,046 Net interest income 5,419 5,135 10,554 --------- --------- --------- Total 18,239 13,361 31,600 --------- --------- --------- Total: Trading revenue 46,477 46,149 92,626 Net interest income 10,026 7,138 17,164 --------- --------- --------- Total $ 56,503 $ 53,287 $ 109,790 ========= ========= ========= Investment securities gains were $6.7 million in the second quarter of 1997, compared to $4.6 million in the second quarter of 1996. For the first six months of 1997, investment securities gains were $1.4 million, compared to $9.9 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. -12- Net gain on sales of loans were $2.4 million in the second quarter of 1997, compared to $0.2 million in the second quarter of 1996. For the six month period of 1997 such gain amounted to $9.9 million, which was primarily attributable to the sale of non-accrual commercial real estate loans, compared to a gain of $1.7 million in comparable period of 1996. Commission income, which consists primarily of fees for the issuance of banker acceptances and letters of credit, retail services and securities commissions was $20.7 million in the second quarter of 1997, compared to $19.0 million in the second quarter of 1996. The increase in commission income in the second quarter of 1997 over the second quarter of last year reflects increased revenue from domestic private banking, retail banking and international correspondent banking. For the first six months of 1997, commission income amounted to $41.3 million, compared to $34.6 million for the six-month period of 1996. Equity in the earnings of affiliate rose to $30.6 million in the second quarter of 1997, an increase of 34% from $22.9 million in the second quarter of last year. This income represents the Corporation's share of the earnings of Safra Republic Holdings S.A. ("Safra Republic"), a European international private banking group of which the Corporation owns approximately 49%. The increase in earnings of affiliate was due to higher levels of net interest income and commission income partially offset by increased other operating expenses and income taxes at Safra Republic. The growth in client assets at Safra Republic, combined with higher levels of client activities in portfolio securities, contributed to the increase. Safra Republic's total client accounts, both on- and off-balance-sheet, increased to $27.3 billion at June 30, 1997 from $18.4 billion at June 30, 1996. This change consisted of increases of $7.4 billion, or 95%, in client portfolio assets and $1.5 billion, or 14%, in client deposits, and includes assets and deposits from the acquisition by Safra Republic of Banque Unigestion S.A. in July 1996 and Mercury Bank A.G. in February 1997. For the six-month period of 1997, equity in the earnings of Safra Republic was $58.7 million, compared to $44.5 million for the corresponding period of 1996. 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 $18.2 million in the second quarter of 1997 compared to $20.4 million in the second quarter of last year. Included in the second quarter of 1996 was a gain of $2.7 million from the sale of New York retail branches. Other income for the six-month periods ended June 30, 1997 and 1996, was $47.7 million and $37.9 million, respectively. Included in the 1997 six-month amount was 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. Other Operating Expenses - totaled $214.5 million in the second quarter and $428.7 million for the first six-months of 1997, compared to $195.9 million and $380.2 million in the corresponding periods of 1996. The fluctuations in the period-to-period expense levels reflect the impact of retail banking acquisitions made during 1996 and the opening of new foreign offices late in 1996 and early 1997. Total operating expenses also includes ongoing investments in trading, risk management and profitability reporting systems and other technology and electronic banking initiatives which were begun in the second half of 1996. Salaries and employee benefits were $117.3 million in the second quarter of 1997, compared to $104.2 million in the second quarter of last year. The increase in the second quarter of 1997 from the same quarter of 1996 reflects the opening of new foreign offices as well as higher levels of incentive-based compensation. For the six months ended June 30, 1997, such expenses rose to $233.3 million from $205.3 million in the year-earlier period, due to the initiatives discussed above. -13- Occupancy expense was $16.8 million in the second quarter and $35.1 million for the six-month period of 1997, compared to $18.1 million and $34.5 million in the comparable periods of 1996. The decrease in expense in the second quarter of 1997 from the second quarter of 1996 resulted from increased operating efficiency, while the six-month increase in 1997 was primarily due to the acquisition of 37 branches during the first six months of 1996. All other expenses were $80.4 million in the second quarter of 1997, compared to $73.5 million in the second quarter of last year. The second quarter-to-quarter increase reflects the impact of the initiatives discussed above. Included in the second quarter 1996 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 1997, all other expenses were $160.3 million, compared to $140.4 million in the same period last year. The six month 1997 expenses include $1.5 million related to the Corporation's non-accrual assets included in other real estate owned compared to none in the six month period in the prior year. 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 declined $0.6 million in the second quarter of 1997 and increased $8.2 million during the first six months of 1997 when compared to the corresponding periods of 1996. The effective tax rates, total applicable income taxes as a percentage of income before income taxes, were 34% for both the second quarter and six-month periods of 1997, compared to 35%, respectively, in the corresponding periods of last year. STATEMENT OF CONDITION Stockholders' Equity and Capital Ratios At June 30, 1997, stockholders' equity included $119.1 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 portfolio of securities available for sale, compared to an unrealized appreciation in both such portfolios of $54.5 million 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. These ratios do not reflect the effect on stockholders' equity related to the FASB 115 valuation of securities available for sale. 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. -14- The following table presents the Corporation's risk-based capital ratios: June 30, Dec. 31, 1997 1996 --------- ---------- Risk-based capital ratios: Tier 1 risk-based capital ratio 12.59% 13.80% Total risk-based capital ratio 21.17% 23.28% Leverage ratio 5.38% 5.87% The declines in the risk-based capital and leverage ratios at June 30, 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. 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 June 30, 1997, the ratio of the Corporation's total common stockholders' equity to total assets was 5.20%, compared to 5.26% at December 31, 1996. The decline in this ratio was attributable to total assets increasing 7.2%, to $56.1 billion at June 30, 1997 from $52.3 billion at December 31, 1996, while common stockholders' equity increased $167 million, or 6.0%, during the period. Non-performing Assets The following is a summary of the Corporation's non-performing assets for periods ended: June 30, March 31, Dec. 31, (In thousands) 1997 1997 1996 --------- --------- --------- Total non-accrual loans $ 95,568 $ 101,245 $ 105,093 Other real estate owned 33,215 32,691 36,278 --------- --------- --------- Total non-performing assets 128,783 133,936 141,371 Less: FDIC loss-sharing (1) (29,677) (39,110) (52,359) --------- --------- --------- Total $ 99,106 $ 94,826 $ 89,012 ========= ========= ========= Total non-performing assets as a percentage of period end total assets 0.23% 0.24% 0.27% ========= ========= ========= (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 $29.2 million, $37.7 million and $55.6 million, at June 30, 1997, March 31, 1997 and December 31, 1996, respectively. -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 28, 1997. (c) The following matters were voted upon at such meeting: (i) Election of the following twenty-three persons as directors of the Corporation, with shares voted for and withheld indicated: Nominee Shares For Shares Withheld ------- ---------- --------------- Kurt Andersen 47,720,927 540,116 Robert A. Cohen 47,719,416 541,627 Cyril S. Dwek 47,740,675 520,368 Ernest Ginsberg 47,739,775 521,268 Nathan Hasson 47,740,775 520,268 Peter Kimmelman 47,767,303 493,740 Richard A. Kraemer 47,667,623 493,420 Leonard Lieberman 47,734,760 526,283 William C. MacMillen Jr. 47,762,157 498,886 Peter J. Mansbach 47,766,848 494,195 Martin F. Mertz 47,765,234 495,809 James L. Morice 47,766,753 494,290 E. Daniel Morris 47,740,563 520,480 Janet L. Norwood 47,762,900 498,143 John A. Pancetti 47,740,325 520,718 Vito S. Portera 47,722,575 538,468 Thomas F. Robards 47,739,991 521,052 William P. Rogers 47,737,080 523,963 Elias Saal 47,740,675 520,368 Dov C. Schlein 47,740,175 520,868 Walter H. Weiner 47,878,227 391,836 George T. Wendler 47,880,927 389,136 Peter White 44,862,537 3,407,526 (ii) Approval of selection of KPMG Peat Marwick LLP, as the Corporation's auditors for 1997. 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 --- ------- ------- 48,200,374 18,750 50,935 -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 There were no reports on Form 8-K filed during the quarter ended June 30, 1997. -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. Dated: August 14, 1997 By /s/Walter H. Weiner ---------------------------- Walter H. Weiner Chairman of the Board Dated: August 14, 1997 By /s/Kenneth F. Cooper ----------------------------- Kenneth F. Cooper Executive Vice President and Chief Financial Officer -18- FORM 10-Q QUARTERLY REPORT For the fiscal quarter ended June 30, 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 PER SHARE EARNINGS 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, ---------------------- ---------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Net income per common share: Earnings: Net income $ 220,749 $ 202,642 $ 110,505 $ 103,050 Less preferred stock dividends (11,712) (15,592) (5,274) (7,815) --------- --------- --------- --------- Net income applicable to common stock $ 209,037 $ 187,050 $ 105,231 $ 95,235 ========= ========= ========= ========= Shares: Average number of common and common equivalent shares outstanding 54,699 55,870 54,588 55,718 ========= ========= ========= ========= Net income per common share $ 3.82 $ 3.35 $ 1.93 $ 1.71 ========= ========= ========= =========
EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-1997 JUN-30-1997 687,209 5,413,300 2,094,029 4,826,330 13,952,404 9,655,125 9,694,278 12,801,173 325,526 56,051,732 33,234,918 6,972,685 179,744 3,899,051 274,082 400,000 0 2,643,311 56,051,732 522,544 763,780 261,060 1,547,384 699,450 1,042,609 504,775 8,000 1,363 428,682 319,567 220,749 0 0 220,749 3.82 3.82 0 0 0 0 0 0 0 0 0 0 0 0
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