-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mtYyMtUWmKaTmrrOKEMiUdOZVHjZ85HRYvY0I9ySSUgLdWoE/hYL2CGwyWdnE0G7 kQpGXjynTrOMkqtfVhmG1g== 0000009749-94-000064.txt : 19940526 0000009749-94-000064.hdr.sgml : 19940526 ACCESSION NUMBER: 0000009749-94-000064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940516 DATE AS OF CHANGE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKERS TRUST NEW YORK CORP CENTRAL INDEX KEY: 0000009749 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 136180473 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05920 FILM NUMBER: 94529011 BUSINESS ADDRESS: STREET 1: 280 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2122502500 MAIL ADDRESS: STREET 1: 280 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: BT NEW YORK CORP DATE OF NAME CHANGE: 19671107 10-Q 1 10-Q UNITED STATES 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, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5920 BANKERS TRUST NEW YORK CORPORATION (Exact name of registrant as specified in its charter) New York 13-6180473 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 280 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip code) (212) 250-2500 (Registrant's telephone number, including area code) 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 Indicate the number of shares outstanding of each of the registrant's classes of common stock as of April 30, 1994: Common Stock, $1 par value, 79,671,148 shares. 1 BANKERS TRUST NEW YORK CORPORATION MARCH 31, 1994 FORM 10-Q TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statement of Income Three Months Ended March 31, 1994 and 1993 2 Consolidated Balance Sheet At March 31, 1994 and December 31, 1993 3 Consolidated Statement of Changes in Stockholders' Equity Three Months Ended March 31, 1994 and 1993 4 Consolidated Statement of Cash Flows Three Months Ended March 31, 1994 and 1993 5 Consolidated Schedule of Net Interest Revenue Three Months Ended March 31, 1994 and 1993 6 Notes to Financial Statements 7 In the opinion of management, all material adjustments necessary for a fair presentation of the financial position and results of operations for the interim periods presented have been made. All such adjustments were of a normal recurring nature, except for the cumulative effects of accounting changes for postretirement and postemployment benefits (recorded in the first quarter of 1993). The results of operations for the three months ended March 31, 1994 are not necessarily indicative of the results of operations for the full year or any other interim period. The financial statements included in this Form 10-Q should be read with reference to the Corporation's 1993 Annual Report. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 30 Item 6. Exhibits and Reports on Form 8-K 31 SIGNATURE 32 2 PART 1. FINANCIAL INFORMATION BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in millions, except per share data) (unaudited)
Increase THREE MONTHS ENDED MARCH 31, 1994 1993 (Decrease) NET INTEREST REVENUE Interest revenue $1,211 $1,021 $ 190 Interest expense 841 721 120 Net interest revenue 370 300 70 Provision for credit losses - 30 (30) Net interest revenue after provision for credit losses 370 270 100 NONINTEREST REVENUE Trading 14 346 (332) Fiduciary and funds management 188 159 29 Fees and commissions 182 147 35 Securities available for sale gains 4 - 4 Investment securities gains - 4 (4) Other 117 78 39 Total noninterest revenue 505 734 (229) NONINTEREST EXPENSES Salaries 177 165 12 Incentive compensation and employee benefits 162 271 (109) Occupancy, net 37 35 2 Furniture and equipment 39 34 5 Other 226 176 50 Total noninterest expenses 641 681 (40) Income before income taxes and cumulative effects of accounting changes 234 323 (89) Income taxes 70 93 (23) INCOME BEFORE CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 164 230 (66) Cumulative effects of accounting changes - (75) 75 NET INCOME $ 164 $ 155 $ 9 NET INCOME APPLICABLE TO COMMON STOCK $ 159 $ 148 $ 11 PRIMARY EARNINGS PER COMMON SHARE: Income before cumulative effects of accounting changes $1.90 $2.64 $(.74) Cumulative effects of accounting changes - (.89) .89 Net income $1.90 $1.75 $ .15 FULLY DILUTED EARNINGS PER COMMON SHARE: Income before cumulative effects of accounting changes $1.90 $2.63 $(.73) Cumulative effects of accounting changes - (.88) .88 Net income $1.90 $1.75 $ .15 Cash dividends declared per common share $.90 $.78 $.12 The accompanying notes are an integral part of the financial statements. /TABLE 3 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ($ in millions, except par value) (unaudited)
March 31, December 31, 1994 1993 ASSETS Cash and due from banks $ 1,775 $ 1,750 Interest-bearing deposits with banks 1,096 1,638 Federal funds sold 438 361 Securities purchased under resale agreements 14,198 9,567 Securities borrowed 3,852 2,937 Trading assets 56,173 48,276 Securities available for sale 5,791 7,073 Loans 13,659 15,200 Allowance for credit losses (1,345) (1,324) Premises and equipment, net 737 719 Due from customers on acceptances 436 455 Accounts receivable and accrued interest 4,061 2,561 Other assets 2,850 2,869 Total $103,721 $92,082 LIABILITIES Deposits Noninterest-bearing In domestic offices $ 3,495 $ 3,185 In foreign offices 562 707 Interest-bearing In domestic offices 6,137 7,120 In foreign offices 9,855 11,764 Total deposits 20,049 22,776 Trading liabilities 23,005 9,349 Securities sold under repurchase agreements 25,842 23,834 Other short-term borrowings 17,480 18,992 Acceptances outstanding 436 455 Accounts payable and accrued expenses 3,621 3,771 Other liabilities 2,600 2,524 Long-term debt 5,693 5,597 Total liabilities 98,726 87,298 PREFERRED STOCK OF SUBSIDIARY 250 250 STOCKHOLDERS' EQUITY Preferred stock 450 250 Common stock, $1 par value Authorized, 300,000,000 shares Issued, 83,678,973 shares 84 84 Capital surplus 1,319 1,321 Retained earnings 3,305 3,226 Common stock in treasury, at cost: 1994, 4,088,682 shares; 1993, 3,076,439 shares (316) (233) Other (97) (114) Total stockholders' equity 4,745 4,534 Total $103,721 $92,082 The accompanying notes are an integral part of the financial statements.
4 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (in millions) (unaudited)
THREE MONTHS ENDED MARCH 31, 1994 1993 PREFERRED STOCK Balance, January 1 $ 250 $ 500 Issuance of Adjustable Rate Cumulative Preferred Stock, Series Q 200 - Redemption of Money Market Cumulative Preferred Stock, Series F, G and H - (187) Balance, March 31 450 313 COMMON STOCK Balance, January 1 and March 31 84 84 CAPITAL SURPLUS Balance, January 1 1,321 1,306 Preferred stock issuance costs (4) - Common stock distributed under employee benefit plans 2 3 Balance, March 31 1,319 1,309 RETAINED EARNINGS Balance, January 1 3,226 2,552 Net income 164 155 Cash dividends declared Preferred stock (5) (6) Common stock (72) (65) Treasury stock distributed under employee benefit plans (8) (9) Balance, March 31 3,305 2,627 COMMON STOCK IN TREASURY, AT COST Balance, January 1 (233) (52) Purchases of stock (99) (35) Restricted stock granted, net 1 1 Treasury stock distributed under employee benefit plans 15 31 Balance, March 31 (316) (55) COMMON STOCK ISSUABLE - STOCK AWARDS Balance, January 1 143 53 Deferred stock awards granted, net 33 35 Deferred stock distributed - (1) Balance, March 31 176 87 DEFERRED COMPENSATION - STOCK AWARDS Balance, January 1 (47) (54) Deferred stock awards granted, net (34) (34) Restricted stock granted, net - (1) Amortization of deferred compensation, net 16 15 Balance, March 31 (65) (74) CUMULATIVE TRANSLATION ADJUSTMENTS Balance, January 1 (319) (288) Translation adjustments (23) (24) Income taxes applicable to translation adjustments 21 11 Balance, March 31 (321) (301) SECURITIES VALUATION ALLOWANCE Balance, January 1 109 20 Change in unrealized net gains, after applicable income taxes and minority interest 4 (3) Balance, March 31 113 17 TOTAL STOCKHOLDERS' EQUITY, MARCH 31 $4,745 $4,007 The accompanying notes are an integral part of the financial statements. /TABLE 5 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) (unaudited)
THREE MONTHS ENDED MARCH 31, 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 164 $ 155 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Cumulative effects of accounting changes - 75 Provision for credit losses - 30 Provision for policyholder benefits 60 44 Deferred income taxes (98) (11) Depreciation and amortization of premises and equipment 30 25 Other, net (28) 3 Earnings adjusted for noncash charges and credits 128 321 Net change in: Trading assets (7,191) (4,732) Trading liabilities 13,630 951 Receivables and payables from securities transactions (1,656) 1,027 Other operating assets and liabilities, net 193 (140) Securities available for sale gains (4) - Investment securities gains - (4) Net cash provided by (used in) operating activities 5,100 (2,577) CASH FLOWS FROM INVESTING ACTIVITIES Net change in: Interest-bearing deposits with banks 486 409 Federal funds sold (77) (1,670) Securities purchased under resale agreements (4,639) (829) Securities borrowed (915) (1,605) Loans 1,472 1,435 Securities available for sale: Purchases (1,116) - Maturities and other redemptions 726 - Sales 1,176 - Investment securities: Purchases - (2,317) Maturities and other redemptions - 2,199 Sales - 136 Acquisitions of premises and equipment (41) (34) Other, net 16 24 Net cash used in investing activities (2,912) (2,252) CASH FLOWS FROM FINANCING ACTIVITIES Net change in: Deposits (2,920) (2,245) Securities sold under repurchase agreements 1,979 3,902 Other short-term borrowings (1,372) 2,913 Issuances of long-term debt 512 460 Repayments of long-term debt (429) (57) Issuance of preferred stock of subsidiary - 247 Issuance of preferred stock 196 - Redemption of preferred stock - (187) Purchases of treasury stock (99) (35) Cash dividends paid (78) (71) Other, net 10 3 Net cash provided by (used in) financing activities (2,201) 4,930 Net effect of exchange rate changes on cash 38 21 NET INCREASE IN CASH AND DUE FROM BANKS 25 122 Cash and due from banks, beginning of year 1,750 1,384 Cash and due from banks, end of period $ 1,775 $ 1,506 Interest paid $913 $754 Income taxes paid, net $70 $19 Noncash investing activities $57 $17 The accompanying notes are an integral part of the financial statements.
6 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE (in millions) (unaudited)
Three Months Ended March 31, Increase 1994 1993(Decrease) INTEREST REVENUE Interest-bearing deposits with banks $ 34 $ 55 $(21) Federal funds sold 2 5 (3) Securities purchased under resale agreements 96 97 (1) Securities borrowed 30 36 (6) Trading assets 760 505 255 Securities available for sale Taxable 61 - 61 Exempt from federal income taxes 21 - 21 Investment securities Taxable - 84 (84) Exempt from federal income taxes - 14 (14) Loans 207 225 (18) Total interest revenue 1,211 1,021 190 INTEREST EXPENSE Deposits In domestic offices 45 54 (9) In foreign offices 153 196 (43) Trading liabilities 196 84 112 Securities sold under repurchase agreements 214 188 26 Other short-term borrowings 174 142 32 Long-term debt 59 57 2 Total interest expense 841 721 120 NET INTEREST REVENUE $ 370 $ 300 $ 70
7 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (unaudited) Note 1 - Significant Accounting Policies The following change in the significant accounting policies of Bankers Trust New York Corporation (the "Parent Company") and its subsidiaries (collectively, the "Corporation" or the "Firm") was adopted effective January 1, 1994. Offsetting of Amounts Related to Certain Contracts The Corporation adopted FASB Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts," effective January 1, 1994. The Interpretation requires that unrealized gains and losses on swaps, forwards, options and similar contracts be recognized as assets and liabilities, except where such gains and losses arise from contracts covered by qualifying master netting agreements. It was the Corporation's former policy to record such unrealized gains and losses on a net basis on the balance sheet, which was in accordance with industry practice at that time. As the result of this adoption, at March 31, 1994 the Corporation's consolidated total assets and total liabilities each increased by $14 billion. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Corporation earned $164 million for the first quarter of 1994, or $1.90 primary earnings per share. In the first quarter of 1993, the Corporation earned $230 million before cumulative effects of accounting changes, or $2.64 primary earnings per share. Net income for the first quarter of 1993 was $155 million, or $1.75 primary earnings per share. Effective January 1, 1993, the Corporation adopted the new Statements of Financial Accounting Standards ("SFAS") for postretirement benefits other than pensions (SFAS 106) and postemployment benefits (SFAS 112). In adopting SFAS 106 and SFAS 112 the Corporation recorded charges to earnings of $100 million and $7 million, respectively, (or $70 million and $5 million, respectively, net of income taxes) in the first quarter of 1993 for the cumulative effects of these changes in accounting principles. BUSINESS FUNCTIONS ANALYSIS Because the Corporation's business is complex in nature and its operations are highly integrated, it is impractical to segregate the respective contributions of the business functions with precision. For example, the Client Advisory function is difficult to split from the Client Finance function, since most complex financings include both an element of advice and the arrangement of credit for the client. Further, transactions undertaken for purposes of Client Financial Risk Management may contain an element of Client Finance or Trading and Positioning. Finally, the Trading and Positioning function serves as an element of support for client-based activities. As a result, estimates and subjective judgments have been made to apportion revenue and expenses among the business functions. In addition, certain revenue and expenses have been excluded from the business functions because, in the opinion of management, they could not be reasonably allocated or because their attribution to a particular function would be distortive. The following table breaks down first quarter earnings on the basis of the Corporation's five business functions, which represent its core business activities and are an important tool for analyzing the results of operations. Detailed definitions of these categories, as well as a discussion of the methodology used to calculate their results, appear in the 1993 Annual Report on Form 10-K.
Business Functions Profitability (Income Before Cumulative Effects of Accounting Changes - in millions) First Quarter 1994 Client Finance $ 43 Client Advisory 30 Client Financial Risk Management 114 Client Transaction Processing 32 Trading and Positioning (49) Unallocated (6) Total $164 /TABLE 9 BUSINESS FUNCTIONS ANALYSIS (continued) Client Finance - Client Finance income in the first quarter of 1994 was $43 million. This result was principally attributable to loan syndications and high yield bond underwritings, accompanied by a decrease in the credit cost related to the loan portfolio. Client Advisory - Client Advisory income was $30 million in the first quarter of 1994. The majority of products - particularly funds management products in Australia - contributed to this performance, as did the Corporation's Chilean insurance subsidiary, Consorcio Nacional de Seguros S.A. Performance-based funds management fees were somewhat down from 1993 levels. Client Financial Risk Management - Client Financial Risk Management was $114 million reflecting the continued demand from clients on a global basis for sophisticated risk management products. Client Transaction Processing - Client Transaction Processing income was $32 million in the first quarter of 1994. Processing volumes increased during the first quarter, continuing the 1993 trend. Profit margins in core cash management and securities custody and clearance activities improved as expenses were held relatively flat. The quarter also benefited from slightly higher earnings on balances generated in the business. Trading and Positioning - As previously stated in the Corporation's Annual Report on Form 10-K, difficult market conditions due to, among other things, the Federal Reserve Board's decision to raise short-term interest rates and the breakdown of U.S.-Japan trade talks, adversely affected certain of the Corporation's trading positions during the first quarter of 1994. The Corporation incurred a loss of $49 million, after all expenses, in Trading and Positioning. 10 REVENUE The table below shows net interest revenue, average balances and average rates. The tax equivalent adjustment is made to present the revenue and yields on certain assets, primarily tax-exempt securities and loans, as if such revenue were taxable.
Three Months Ended March 31, Increase 1994 1993 (Decrease) NET INTEREST REVENUE (in millions) Book basis $370 $300 $70 Tax equivalent adjustment 21 15 6 Fully taxable basis $391 $315 $76 AVERAGE BALANCES (in millions) Interest-earning assets $81,037 $71,322 $ 9,715 Interest-bearing liabilities 77,935 64,802 13,133 Earning assets financed by noninterest-bearing funds $ 3,102 $ 6,520 $(3,418) AVERAGE RATES (fully taxable basis) Yield on interest-earning assets 6.17% 5.89% .28% Cost of interest-bearing liabilities 4.38 4.51 (.13) Interest rate spread 1.79 1.38 .41 Contribution of noninterest-bearing funds .17 .41 (.24) Net interest margin 1.96% 1.79% .17%
Net interest revenue for the first quarter of 1994 totaled $370 million, up $70 million, or 23 percent, from the first quarter of 1993. This increase was due primarily to higher trading-related net interest, reflecting a 14 percent increase in average interest-earning assets, most of which related to trading strategies. 11 REVENUE (continued) The Corporation views trading revenue and trading-related net interest revenue in combination, as quantified below (in millions):
Trading- Related Net Trading Interest Revenue Revenue Total First Quarter 1994 $ 14 $177 $191 First Quarter 1993 $346 $117 $463
The $272 million decrease in this combined total from the first quarter of 1993 was primarily attributable to sharply lower revenue from proprietary trading and positioning activities. The main areas of reduced revenue were sovereign bond trading, foreign exchange trading and the trading of emerging markets debt and equity issues. Partially offsetting this decline was higher revenue from the Firm's client risk management activities. 12 REVENUE (continued) Shown below is a comparison of the components of noninterest revenue (in millions).
Three Months Ended March 31, Increase 1994 1993(Decrease) Trading $ 14 $346 $(332) Fiduciary and funds management 188 159 29 Fees and commissions Corporate finance fees 108 78 30 Service charges on deposit accounts 22 23 (1) Acceptances and letters of credit commissions11 12 (1) Other 41 34 7 Total fees and commissions 182 147 35 Securities available for sale gains 4 - 4 Investment securities gains - 4 (4) Other noninterest revenue Insurance premiums 55 38 17 Net revenue from equity investment transactions, including write-offs 29 30 (1) Other 33 10 23 Total other noninterest revenue 117 78 39 Total noninterest revenue $505 $734 $(229)
Fiduciary and funds management revenue totaled a record $188 million for the first quarter, up $29 million, or 18 percent, from the same period last year. Continued growth in private banking assets under management contributed significantly to this increase. Increases were also recorded by most other business activities within this revenue category. Fees and commissions of $182 million increased by $35 million, or 24 percent, from the equivalent period in 1993. Of this increase, $30 million related to corporate finance fees, which rose 38 percent, to $108 million, led by increased loan syndication and debt underwriting activities. Other noninterest revenue totaled $117 million, up $39 million from the prior year's quarter. This increase was due to higher insurance premium revenue as well as increases in both equity in income of unconsolidated subsidiaries and gains on sales of other assets. PROVISION AND ALLOWANCE FOR CREDIT LOSSES The Corporation recorded $21 million of net recoveries and no provision for credit losses in the first quarter of 1994. In the prior year's quarter, net charge-offs of $121 million and a provision for credit losses of $30 million were recognized. Refinancing country recoveries of $19 million were recorded in the first quarter of 1994, compared with $1 million of net recoveries in last year's first quarter. Nonrefinancing country net recoveries for the current quarter were $2 million, compared 13 PROVISION AND ALLOWANCE FOR CREDIT LOSSES (continued) with net charge-offs of $122 million for the first quarter of 1993, which included a charge-off of $66 million which resulted from the sale of Mexican government Par Bonds, as well as $17 million of loans to highly leveraged borrowers and $7 million of real estate loans. The provision for credit losses and the other changes in the allowance for credit losses are shown below (in millions).
Three Months Ended March 31, 1994 1993 Allowance for credit losses, January 1 $1,324 $1,620 Net charge-offs Charge-offs 21 130 Recoveries 42 9 Total net charge-offs (recoveries) (1) (21) 121 Provision for credit losses - 30 Allowance for credit losses, March 31 $1,345 $1,529 (1) Components: Secured by real estate $ (2) $ 6 Real estate related - 1 Highly leveraged (9) 17 Other 9 98 Refinancing country (19) (1) Total $(21) $121
The allowance for credit losses, at $1.345 billion at March 31, 1994, was up $21 million from its level at December 31, 1993, due to net recoveries. The allowance was equal to 156 percent and 136 percent of total cash basis loans at March 31, 1994 and December 31, 1993, respectively. The Corporation believes that its allowance must be viewed in its entirety and therefore is available for potential credit losses in its entire portfolio, including loans, credit-related commitments, derivatives and other financial instruments. In the opinion of management, the allowance, when taken as a whole, is adequate to absorb reasonably estimated credit losses inherent in the Corporation's portfolio. EXPENSES Total noninterest expenses of $641 million decreased by $40 million from the first quarter of 1993. Incentive compensation and employee benefits expense decreased $109 million, or 40 percent, mostly due to lower bonus expense reflecting the reduced earnings. Salaries expense increased $12 million, or 7 percent, from the first quarter of 1993. The average number of employees increased by 5 percent versus the same period, to 13,649. 14 EXPENSES (continued) All other expenses totaled $302 million for the quarter, up $57 million, or 23 percent, from last year's first quarter. Increases in the provision for policyholder benefits, minority interest, agency personnel fees and other real estate expense accounted for most of this increase. INCOME TAXES Income tax expense for the first quarter of 1994 amounted to $70 million, compared with $93 million for the first quarter of 1993. The effective tax rate was 30 percent for the current quarter, compared with 29 percent in the first quarter of last year. The first quarter figure for 1993 excludes the income taxes included in the reported cumulative effects of accounting changes for SFAS 106 and SFAS 112. EARNINGS PER COMMON SHARE Primary and fully diluted earnings per common share amounts were computed by subtracting from the applicable earnings the dividend requirements on preferred stock to arrive at earnings applicable to common stock and dividing those amounts by the average number of common and common equivalent shares outstanding during the period. For both primary and fully diluted earnings per share, the average number of common and common equivalent shares outstanding was the sum of the average number of shares of common stock outstanding and the incremental number of shares issuable under outstanding stock options and deferred stock awards that had a dilutive effect as computed under the treasury stock method. Under this method, the number of incremental shares is determined by assuming the issuance of the outstanding stock options and deferred stock awards reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the market price of the Parent Company's common stock. For primary earnings per share, this market price is the average market price for the period, while for fully diluted earnings per share, it is the period-end market price if it is higher than the average market price. At no time during the three month period ended March 31, 1994 and 1993 did the Corporation have outstanding any securities which were convertible to the Parent Company's common stock. 15 EARNINGS PER COMMON SHARE (continued) The earnings applicable to common stock and the number of shares used for primary and fully diluted earnings per share were as follows (in millions):
Three Months Ended March 31, 1994 1993 Earnings applicable to common stock: Income before cumulative effects of accounting changes $159 $223 Cumulative effects of accounting changes - (75) Net income $159 $148 Average number of common shares outstanding 80.313 82.940 Primary earnings per share Average number of common and common equivalent shares outstanding 83.665 84.581 Fully diluted earnings per share Average number of common and common equivalent shares outstanding - assuming full dilution 83.665 84.789
16 BALANCE SHEET ANALYSIS The following table highlights the changes in the balance sheet. Since quarter-end balances can be distorted by one-day fluctuations, an analysis of changes in the quarterly averages is provided to give a better indication of balance sheet trends.
CONDENSED AVERAGE BALANCE SHEETS (in millions) 1st Qtr 4th Qtr Increase 1994 1993 (Decrease) ASSETS Interest-bearing deposits with banks $ 1,512 $ 2,042 $ (530) Federal funds sold 279 488 (209) Securities purchased under resale agreements 12,866 8,791 4,075 Securities borrowed 3,788 2,343 1,445 Trading assets 43,007 41,942 1,065 Securities available for sale Taxable 5,294 - 5,294 Exempt from federal income taxes 1,288 - 1,288 Total securities available for sale 6,582 - 6,582 Investment securities Taxable - 5,541 (5,541) Exempt from federal income taxes - 1,030 (1,030) Total investment securities - 6,571 (6,571) Loans 13,003 14,211 (1,208) Total interest-earning assets 81,037 76,388 4,649 Cash and due from banks 2,020 1,971 49 Noninterest-earning trading assets 19,359 3,772 15,587 All other assets 8,046 6,528 1,518 Allowance for credit losses (1,349) (1,494) 145 Total $109,113 $87,165 $21,948 LIABILITIES Interest-bearing deposits In domestic offices $ 7,065 $ 8,511 $(1,446) In foreign offices 11,472 12,410 (938) Total interest-bearing deposits 18,537 20,921 (2,384) Trading liabilities 12,223 7,430 4,793 Securities sold under repurchase agreements 24,120 21,671 2,449 Other short-term borrowings 17,361 14,504 2,857 Long-term debt 5,694 5,450 244 Total interest-bearing liabilities 77,935 69,976 7,959 Noninterest-bearing deposits 4,154 3,932 222 Noninterest-bearing trading liabilities 15,358 1,694 13,664 All other liabilities 6,814 6,883 (69) Total liabilities 104,261 82,485 21,776 PREFERRED STOCK OF SUBSIDIARY 250 250 - STOCKHOLDERS' EQUITY Preferred stock 259 250 9 Common stockholders' equity 4,343 4,180 163 Total stockholders' equity 4,602 4,430 172 Total $109,113 $87,165 $21,948 The condensed average balance sheets are presented on a different basis than the spot balance sheets, in that the various categories of interest-earning assets and interest- bearing liabilities exclude certain noninterest-earning/bearing components included in the spot balance sheet captions. These components are included in "all other assets" and "all other liabilities" in the condensed average balance sheets.
17 BALANCE SHEET ANALYSIS (continued) The Corporation's average total assets amounted to $109.1 billion for the first quarter of 1994, representing an increase of $21.9 billion, or 25 percent, from the fourth quarter of 1993. Noninterest-earning trading assets increased $15.6 billion due primarily to the adoption of FASB Interpretation No. 39, effective January 1, 1994. Average interest-earning assets increased $4.6 billion, however, due to the adoption of FASB Interpretation No. 39, the proportion of interest-earning assets to total assets decreased, from 88 percent to 74 percent. The increase in interest- earning assets was primarily due to increases in securities purchased under resale agreements (up $4.1 billion, or 46 percent) and securities borrowed (up $1.4 billion, or 62 percent). As a percentage of average total assets, interest-earning trading assets decreased from 48 percent to 39 percent in the first quarter of 1994, while loans decreased from 16 percent to 12 percent. Average total liabilities increased $21.8 billion, or 26 percent, from the fourth quarter of 1993. Noninterest-bearing trading liabilities increased $13.7 billion due primarily to the adoption of FASB Interpretation No. 39. Interest-bearing liabilities increased $8.0 billion, or 11 percent, from last year's fourth quarter. This increase was primarily attributable to higher levels of trading liabilities (up $4.8 billion, or 65 percent), other short-term borrowings (up $2.9 billion, or 20 percent) and securities sold under repurchase agreements (up $2.4 billion, or 11 percent) offset in part by a decrease in total interest- bearing deposits (down $2.4 billion, or 11 percent). Total short-term borrowings (securities sold under repurchase agreements and other short- term borrowings) as a percentage of total interest-bearing liabilities increased slightly to 53 percent, from 52 percent in the fourth quarter of 1993. Trading Assets and Trading Liabilities The components of these accounts, which are carried at market value, were as follows (in millions):
March 31, December 31, 1994 1993 TRADING ASSETS U.S. government and agency securities $17,423 $19,648 Obligations of U.S. states and political subdivisions553 494 Foreign government securities 8,600 13,229 Corporate debt securities 5,365 5,565 Equity securities 3,843 3,804 Bankers acceptances and certificates of deposit 1,294 2,178 Swaps, options and other derivative contracts (1)15,575 732 Other 3,520 2,626 Total trading assets $56,173 $48,276 TRADING LIABILITIES Securities sold, not yet purchased U.S. government and agency securities $ 6,020 $4,023 Foreign government securities 1,570 3,099 Corporate debt securities 1,026 - Equity securities 1,892 1,644 Other 157 583 Swaps, options and other derivative contracts (1)12,340 - Total trading liabilities $23,005 $9,349 (1) Comprised of fair values of interest rate instruments, foreign exchange rate instruments, and equity and commodity instruments, reduced by the effects of master netting agreements, in accordance with FASB Interpretation No. 39, at March 31, 1994. At December 31, 1993, prior to the adoption of FASB Interpretation No. 39, the Corporation's policy was to record the unrealized gains and losses on these contracts on a net basis.
18 BALANCE SHEET ANALYSIS (continued) Securities Available for Sale The fair value, amortized cost and gross unrealized holding gains and losses for the Corporation's securities available for sale follow (in millions):
March 31, December 31, 1994 1993 Fair value $5,791 $7,073 Amortized cost 5,585 6,898 Excess of fair value over amortized cost (1) $ 206 $ 175 (1) Components: Unrealized gains $279 $ 308 Unrealized losses (73) (133) $206 $ 175
19 BALANCE SHEET ANALYSIS (continued) Long-term Debt During the first quarter of 1994, the Corporation obtained $512 million of cash proceeds from the issuances of long-term debt and repaid $429 million of long-term debt. The larger of these debt issuances and redemptions were as follows (in millions):
Face Amount Issuances Redemptions Parent Company 10.20% Subordinated Debentures due March 1999 $145 Bankers Trust Company 5-3/8% Notes due February 1994 $200 BT Securities Corporation Senior Subordinated Floating Rate Notes due 1997$200
Preferred Stock Issuance On March 28, 1994, the Parent Company issued $200 million, or 8 million depositary shares at $25 per share, each representing a one- hundredth interest in a share of Adjustable Rate Cumulative Preferred Stock, Series Q (Liquidation Preference - $2,500 per share) ("Series Q"). At the option of the Parent Company, the Series Q may be redeemed, in whole or in part, on or after March 1, 1999, at $2,500 per share (or $25 per depositary share), plus, in each case, accrued and unpaid dividends to the redemption date. Any optional redemption shall be with the approval of the Federal Reserve Board unless at that time that body should determine that its approval is not required. Dividends on the Series Q are cumulative and payable quarterly on March 1, June 1, September 1 and December 1 of each year. The dividend rate is determined by a formula that considers the interest rates of selected short- and long-term U.S. Treasury securities at the time the rate is set. In no event will the dividend rate be less than 4 1/2 percent per annum. A more detailed description of the terms of the Series Q is contained in the Prospectus, as supplemented, which was filed with the Securities and Exchange Commission. 20 END-USER DERIVATIVES The Corporation, as an end user, utilizes various types of derivative products (principally interest rate swaps) to manage the interest rate, currency and other market risks associated with liabilities and assets such as interest-bearing deposits, short-term borrowings and long-term debt as well as investments in non-marketable equity instruments and net investments in foreign entities. End-user derivative products are accounted for on an accrual basis, that is, revenue or expense pertaining to management of interest rate exposure is recognized over the life of the contract as an adjustment to interest revenue or expense. At December 31, 1993, the Corporation had reported net unrealized gains applicable to end-user derivatives of $215 million. At March 31, 1994, due to significant increases in interest rates, the fair value of end-user derivatives had decreased by approximately $466 million. This decline in fair value was more than offset by a reduction in the fair value of the Corporation's related liabilities (interest-bearing deposits, other short-term borrowings and long-term debt). The change in the fair value of the applicable assets and liabilities favorably offset the decline in the value of the related end-user derivatives by approximately $33 million. The following table provides the gross gains and gross losses not yet recognized in the financial statements for end-user derivatives applicable to certain hedged assets and liabilities (in millions):
Other short- Interest- term Long- Other bearing borrow- term Quarter Ended March 31, 1994 assets deposits ings debt Total Interest Rate Swap Pay Variable Unrealized Gain $- $ 97 $ 16 $ 119 $ 232 Pay Variable Unrealized (Loss) - (49) (185) (129) (363) Pay Variable Net - 48 (169) (10) (131) Pay Fixed Unrealized Gain - 28 - 16 44 Pay Fixed Unrealized (Loss) - (95) (1) (61) (157) Pay Fixed Net - (67) (1) (45) (113) Total Unrealized Gain - 125 16 135 276 Total Unrealized (Loss) - (144) (186) (190) (520) Total Net $- $ (19) $(170)$ (55) $(244) Currency Swap Unrealized Gain $2 $ 3 $ 3 $34 $42 Unrealized (Loss) - (1) (1) (2) (4) Net $2 $ 2 $ 2 $32 $38 Equity Swap/Collar Unrealized Gain $ 12 $- $- $- $ 12 Unrealized (Loss) (57) - - - (57) Net $(45) $- $- $- $(45) Total Unrealized Gain $ 14 $ 128 $ 19 $ 169 $ 330 Total Unrealized (Loss) (57) (145) (187) (192) (581) Total Net $(43) $ (17) $(168)$ (23) $(251) /TABLE 21 END-USER DERIVATIVES (continued) Derivatives which are used to manage the risks associated with securities available for sale are carried at fair value. The unrealized gains and unrealized losses on derivatives included in securities available for sale amounted to $9 million and $52 million, respectively, at March 31, 1994, with the corresponding offset to securities valuation allowance in stockholders' equity. For pay variable and pay fixed interest rate swaps entered into as end user, the weighted average receive rate and weighted average pay rate by maturity and corresponding notional amounts at March 31, 1994 were as follows ($ in millions):
Notional Amount Paying Variable(1) Paying Fixed Maturing Notional Receive Pay Notional Receive Pay Total In: Amount Rate Rate Amount Rate Rate Notional 1994 $ 8,319 3.45% 3.66% $2,200 3.56%5.17% $10,519 1995-1996 9,530 4.63 3.59 2,893 3.61 5.98 12,423 1997-1998 3,123 5.08 3.38 890 3.02 5.93 4,013 1999 and thereafter 4,295 6.08 3.59 1,360 3.76 8.09 5,655 Total $25,267 $7,343 $32,610 (1) Variable rates were those in effect at March 31, 1994.
22 REGULATORY CAPITAL The Federal Reserve Board's capital adequacy guidelines mandate that minimum ratios ("FRB Minimum Regulatory Guidelines") be maintained by bank holding companies and banks. The Corporation's 1993 Annual Report on Form 10-K, on page 39, provides a detailed discussion of both these regulatory capital guidelines and the federal bank regulations regarding capital tiers under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") for the Corporation's bank subsidiaries. Based on their respective regulatory capital ratios at March 31, 1994, both Bankers Trust Company ("BTCo.") and Bankers Trust (Delaware) are well capitalized, based on the definitions in the regulations issued by the Federal Reserve Board and the other federal bank regulatory agencies setting forth the general capital requirements mandated by FDICIA. The table below indicates the regulatory capital ratios of the Corporation and BTCo. and the minimum regulatory guidelines.
FRB Minimum March 31, December 31, Regulatory 1994 1993 Guidelines CORPORATION Risk-Based Ratios Tier 1 Capital 8.89% 8.50% 4.0% Total Capital 14.66% 14.46% 8.0% Leverage Ratio 5.39% 6.28% 3.0% BTCo. Risk-Based Ratios Tier 1 Capital 9.98% 9.38% 4.0% Total Capital 13.48% 12.96% 8.0% Leverage Ratio 5.68% 6.01% 3.0%
The following were the essential components of the Corporation's risk- based capital ratios (in millions):
March 31, December 31, 1994 1993 Tier 1 Capital $4,441 $4,072 Tier 2 Capital 2,884 2,859 Total Capital $7,325 $6,931 Total risk-weighted assets $49,963 $47,916
23 REGULATORY CAPITAL (continued) During the first quarter of 1994, the Corporation's Tier 1 Capital ratio increased by 39 basis points and the Total Capital ratio improved by 20 basis points. The Leverage Ratio decreased by 89 basis points as a result of a 27 percent increase in quarterly average total assets, primarily due to the adoption of FASB Interpretation No. 39. The $369 million increase in Tier 1 Capital was primarily attributable to the issuance of Series Q Preferred Stock, the inclusion of net deferred tax assets which are permissible for regulatory capital, as well as the retention of earnings. The Corporation's total risk-weighted assets at March 31, 1994 were $2.047 billion higher than at year-end 1993. LIQUIDITY Liquidity management at the Corporation focuses on both asset liquidity and liability management. Enhancing asset liquidity remains a particularly important element of its liquidity management philosophy. At the same time, management is continually seeking opportunities to further diversify the Corporation's funding sources. Liquid assets consist of cash and due from banks, interest-bearing deposits with banks, federal funds sold, securities purchased under resale agreements, securities borrowed, trading assets and securities available for sale. At March 31, 1994, the Corporation's liquid assets amounted to $83.3 billion, or 79 percent of gross total assets, compared with 77 percent at December 31, 1993. Cash Flows The following comments apply to the consolidated statement of cash flows, which appears on page 5. Cash and due from banks increased $25 million during the first quarter of 1994, as the sum of net cash used in investing and financing activities exceeded the net cash provided by operating activities. Within the investing activities category, cash outflows from a net increase in securities purchased under resale agreements ($4.6 billion) and purchases of securities available for sale ($1.1 billion) were offset in part by cash inflows from sales, maturities and other redemptions of securities available for sale ($1.9 billion) and a net decrease in loans ($1.5 billion). The $2.2 billion of net cash used in financing activities resulted from net decreases of $2.9 billion in deposits and $1.4 billion in other short-term borrowings, partially offset by a $2.0 billion net increase in securities sold under repurchase agreements. The $5.1 billion of net cash provided by operating activities primarily resulted from a $13.6 billion net increase in trading liabilities offset in part by cash outflows from a $7.1 billion net increase in trading assets and a $1.7 billion net change in receivables and payables from securities transactions. For the quarter ended March 31, 1993, cash and due from banks increased $122 million, as net cash provided by financing activities exceeded the sum of net cash used in operating and investing activities. The $4.9 billion of net cash provided by financing activities primarily 24 LIQUIDITY (continued) resulted from net increases in securities sold under repurchase agreements ($3.9 billion) and other short-term borrowings ($2.9 billion), offset in part by a net decrease in deposits ($2.2 billion). The $2.6 billion of net cash used in operating activities primarily resulted from $2.9 billion of net cash outflows from changes in operating assets and liabilities and by $321 million of earnings adjusted for noncash charges and credits. Within the investing activities category, cash outflows from purchases of investment securities ($2.3 billion), net changes in federal funds sold ($1.7 billion), securities borrowed ($1.6 billion) and securities purchased under resale agreements ($829 million) were offset in part by cash inflows from sales, maturities and other redemptions of investment securities ($2.3 billion) and the net change in loans ($1.4 billion). Interest Rate Sensitivity Condensed interest rate sensitivity data for the Corporation at March 31, 1994 is presented in the table below. For purposes of this presentation, the interest-earning/bearing components of trading account assets and securities sold, not yet purchased are assumed to reprice within three months. Since the interest rate gaps are actively managed and change daily as adjustments are made in interest rate views and market outlook, positions at the end of any period may not be reflective of the Corporation's interest rate view in subsequent periods. Active management dictates that longer term economic views are balanced against prospects of short-term interest rate changes in all repricing intervals.
By Repricing Interval Non- interest- Within 1 - 5 After bearing (in billions) March 31, 1994 1 year years 5 years funds Total Assets $ 70.8 $ 2.0 $ 2.4 $ 28.5 $103.7 Liabilities, preferred stock of subsidiary and preferred stock (69.2) (3.2) (1.9) (25.1) (99.4) Common stockholders' equity - - - (4.3) (4.3) Effect of off-balance sheet hedging instruments (1.3) .8 .5 - - Interest rate sensitivity gap $ .3 $ (.4) $ 1.0 $ (.9) $ -
25 NONPERFORMING ASSETS The components of cash basis loans, renegotiated loans, other real estate and other nonperforming assets are shown below ($ in millions).
March 31, December 31, 1994 1993 CASH BASIS LOANS (NONREFINANCING COUNTRY) Domestic Commercial and industrial $219 $285 Secured by real estate 321 306 Financial institutions 24 30 Total domestic 564 621 International Commercial and industrial 93 84 Secured by real estate 141 149 Other 2 2 Total international 236 235 Total cash basis loans (nonrefinancing country) 800 856 CASH BASIS LOANS (REFINANCING COUNTRY) International 62 118 Total cash basis loans $862 $974 Ratio of cash basis loans to total loans 6.3% 6.4% Ratio of allowance for credit losses to cash basis loans 156% 136% RENEGOTIATED LOANS Highly leveraged $ 5 $ 6 Secured by real estate 14 14 Other nonrefinancing country 1 1 Total renegotiated loans $20 $21 Other real estate $283 $287 OTHER NONPERFORMING ASSETS Assets acquired in credit workouts $ 85 $ 85 Nonperforming derivative contracts 16 16 Total other nonperforming assets $101 $101 Loans 90 days or more past due and still accruing interest $23 $40
26 NONPERFORMING ASSETS (continued) An analysis of the changes in the Corporation's total cash basis loans during the first quarter of 1994 follows (in millions).
Balance, December 31, 1993 $974 Net transfers from accrual status 53 Net paydowns (43) Charge-offs (19) Transfers to other real estate (9) Loan sales (39) Other (55) Balance, March 31, 1994 $862
The Corporation's total cash basis loans amounted to $862 million at March 31, 1994, down $112 million, or 11 percent, from December 31, 1993. Nonrefinancing and refinancing country cash basis loans each decreased by $56 million during the first quarter of 1994. Within total nonrefinancing country cash basis loans were loans secured by real estate of $462 million and $455 million at March 31, 1994 and December 31, 1993, respectively. Also within nonrefinancing country cash basis loans, loans to highly leveraged borrowers (mainly included within the domestic commercial and industrial category in the table on page 25) decreased by $31 million, to $162 million, during the first quarter of 1994. Other real estate decreased by $4 million during the same period. Although total nonperforming assets have decreased for nine consecutive quarters, in view of current economic conditions, no assurance can be given that the level of cash basis real estate loans and other real estate will not increase during the remainder of 1994. 27 NONPERFORMING ASSETS (continued) The following table sets forth the approximate effect on interest revenue of cash basis loans and renegotiated loans. This disclosure reflects the interest on loans which were carried on the balance sheet and classified as either cash basis or renegotiated at March 31 of each year. The rates used in determining the gross amount of interest that would have been recorded at the original rate were not necessarily representative of current market rates.
Three Months Ended March 31, (in millions) 1994 1993 Domestic Loans Gross amount of interest that would have been recorded at original rate $11 $18 Less, interest, net of reversals, recognized in interest revenue 1 2 Reduction of interest revenue 10 16 International Loans Gross amount of interest that would have been recorded at original rate 5 15 Less, interest, net of reversals, recognized in interest revenue 3 20 Reduction of (Increase in) interest revenue 2 (5) Total reduction of interest revenue $12 $11
28 HIGHLY LEVERAGED TRANSACTIONS Amounts included in the table and discussion which follow are generally based on the definition that the Corporation uses in order to monitor the extent of its exposure to highly leveraged transactions ("HLTs"). The Corporation's 1993 Annual Report on Form 10-K, on page 45, provides a detailed discussion of the definition.
Highly Leveraged Transactions March 31,December 31, (in millions) 1994 1993 Loans Senior debt $825 $1,314 Subordinated debt 134 126 Total loans $959 $1,440 Unfunded commitments Commitments to lend $348 $603 Letters of credit 194 201 Total unfunded commitments $542 $804 Equity investments $508 $477 Commitments to invest $140 $127
The Corporation's outstanding loans were to 85 separate borrowers in 34 separate industry groups at March 31, 1994, compared to 105 separate borrowers in 35 separate industry groups at December 31, 1993. Broadcasting, at 10.85 percent, was the only industry concentration which exceeded 10 percent of total HLT loans outstanding at March 31, 1994. In addition to the amounts shown in the table above, at March 31, 1994, the Corporation had issued commitment letters which had been accepted, subject to documentation and certain other conditions, of $1.1 billion (which were in various stages of syndication) and had additional HLTs in various stages of discussion and negotiation. During the first quarter of 1994, the Corporation originated $329 million of HLT commitments, of which $197 million were sold, syndicated or participated, on a non-recourse basis. All loans and commitments to finance HLTs are reviewed and approved by senior credit officers of the Corporation. In addition to a strict transactional and credit approval process, the portfolio of leveraged loans and commitments is actively monitored and managed to minimize risk through diversification among borrowers and industries. As part of this strategy, sell and hold targets are regularly updated in connection with market 29 HIGHLY LEVERAGED TRANSACTIONS (continued) opportunities and the addition of new HLTs. Retention by the Corporation after syndication and sales of loan participations has typically been less than $50 million, and the average outstanding for the portfolio at March 31, 1994 was less than $12 million. However, at March 31, 1994, the Corporation had total exposure (loans outstanding plus unfunded commitments) in excess of $50 million to 7 separate highly leveraged borrowers. At March 31, 1994, $162 million of the HLT loan portfolio was on a cash basis and $5 million was classified as renegotiated. In addition, $38 million of the equity investments in HLT companies represented assets acquired in settlement of indebtedness, which are reported as other nonperforming assets. Net recoveries of $9 million of HLT loans were recorded in the first quarter of 1994. In addition, the Corporation recorded a net gain of $9 million in connection with its equity investments in highly leveraged companies during the first quarter of 1994. Generally, fees (typically 2 to 4 percent of the principal amount committed) and interest charged (typically LIBOR plus 1.5 to 3 percent) on HLT loans are higher than on other credits. The Corporation does not account for revenue or expenses from HLTs separately from its other corporate lending activities. However, it is estimated that transaction fees recognized for lending activities relating to HLTs were approximately $39 million during the first quarter of 1994 and that as of March 31, 1994, approximately $16 million of fees were deferred and will be recognized as future revenue. During the first quarter of 1994, the Corporation transferred approximately $238 million of outstanding loans to highly leveraged borrowers from its loan portfolio to trading. The transferred loans were carried at market value upon transfer to trading. None of the loans was classified as a nonperforming asset at the time of transfer. Accordingly, subsequent to transfer these loans have been excluded from the Corporation's HLT outstandings at March 31, 1994 as reported above. No significant impact on earnings was recorded as a result of this transfer. 30 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Annual Meeting of Stockholders was held on April 19, 1994. (b) Each of the persons named in the Proxy Statement as a nominee for Director was elected. (c) The following are the voting results on each of the matters which were submitted to the stockholders: Against or Broker For Withheld Abstain Non-Votes Election of Directors George B. Beitzel 72,405,762 762,639 William R. Howell 72,407,289 761,112 Jon M. Huntsman 72,410,245 758,156 Vernon E. Jordan, Jr. 72,358,906 809,495 Hamish Maxwell 72,402,608 765,793 Donald F. McCullough 72,367,362 801,039 N. J. Nicholas Jr. 72,404,740 763,661 Russell E. Palmer 72,408,015 760,386 Didier Pineau-Valencienne 72,366,465 801,936 Charles S. Sanford, Jr. 72,405,392 763,009 Eugene B. Shanks, Jr. 72,409,356 759,045 Patricia C. Stewart 72,402,033 766,368 George J. Vojta 72,407,809 760,592 Resolutions . To ratify the appointment of Ernst & Young as independent auditor for 1994. 72,782,642 176,956 208,803 . To approve the 1994 Stock Option and Stock Award Plan.51,040,92316,857,729 444,496 4,825,253 . To approve the Incentive Bonus Plan for Corporate Officers.67,633,9813,039,133 493,087 2,002,200 . To provide for cumulative voting in the election of directors. 14,843,303 53,259,653 307,856 4,757,589 . To not make any new loans or renew any old loans to corporations which have changed their Annual Meeting dates to conflict with those of other major corporations.1,092,34866,179,702 1,133,962 4,762,389 The text of the matters referred to under this Item 4 is set forth in the Proxy Statement dated March 15, 1994 previously filed with the Commission and incorporated herein by reference. 31 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (4) Instruments Defining the Rights of Security Holders, Including Indentures (v) - The Corporation hereby agrees to furnish to the Commission, upon request, a copy of any instru- ments defining the rights of holders of long-term debt issued by Bankers Trust New York Corporation or its subsidiaries. (12) Statement re Computation of Ratios (99) Additional Exhibits Proxy Statement dated March 15, 1994 - Notice of Annual Meeting of Bankers Trust New York Corporation on April 19, 1994 - Previously filed with the Commission. (b) Reports on Form 8-K - Bankers Trust New York Corporation filed two reports on Form 8-K during the quarter ended March 31, 1994. - The report dated January 20, 1994 filed the Corporation's Press Release dated January 20, 1994, which announced earnings for the quarter and year ended December 31, 1993. - The report dated March 21, 1994 filed an underwriting agreement covering the issuance and sale by Bankers Trust New York Corporation of 8,000,000 Depositary Shares, each representing a one-hundredth interest in a share of Adjustable Rate Cumulative Preferred Stock, Series Q and various other exhibits related to the issuance. 32 SIGNATURE 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, on May 16, 1994. BANKERS TRUST NEW YORK CORPORATION By: GEOFFREY M. FLETCHER Geoffrey M. Fletcher Senior Vice President and Principal Accounting Officer 33 BANKERS TRUST NEW YORK CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1994 EXHIBIT INDEX (4) Instruments Defining the Rights of Security Holders, Including Indentures (v) - Long-Term Debt Indentures (a) (12) Statement re Computation of Ratios (a) - Computation of Consolidated Ratios of Earnings to Fixed Charges (b) - Computation of Consolidated Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements [FN] (a) The Corporation hereby agrees to furnish to the Commission, upon request, a copy of any instruments defining the rights of holders of long-term debt issued by Bankers Trust New York Corporation or its subsidiaries. EX-12 2 EXHIBIT EXHIBIT 12(a) BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES (dollars in millions)
Three Months Ended Year Ended December 31, March 31, 1989 1990 1991 1992 1993 1994 Earnings: 1. Income (loss) before income taxes and cumulative effects of accounting changes $ (815) $ 815 $ 834 $ 906 $1,550 $ 234 2. Add: Fixed charges excluding capitalized interest (Line 10) 4,803 4,826 3,614 3,099 3,148 848 3. Less: Equity in undistri- buted income of unconsolidated subsidiaries and affiliates 14 47 31 40 30 14 4. Earnings including interest on deposits 3,974 5,594 4,417 3,965 4,668 1,068 5. Less: Interest on deposits 2,253 2,226 1,589 1,119 1,013 198 6. Earnings excluding interest on deposits $1,721 $3,368 $2,828 $2,846 $3,655 $ 870 Fixed Charges: 7. Interest Expense $4,775 $4,799 $3,585 $3,072 $3,122 $ 841 8. Estimated interest component of net rental expense 26 27 29 27 26 7 9. Amortization of debt issuance expense 2 - - - - - 10. Total fixed charges including interest on deposits and excluding capitalized interest 4,803 4,826 3,614 3,099 3,148 848 11. Add: Capitalized interest 5 - - - - - 12. Total fixed charges 4,808 4,826 3,614 3,099 3,148 848 13. Less: Interest on deposits (Line 5) 2,253 2,226 1,589 1,119 1,013 198 14. Fixed charges excluding interest on deposits $2,555 $2,600 $2,025 $1,980 $2,135 $ 650 Consolidated Ratios of Earnings to Fixed Charges: Including interest on deposits (Line 4/Line 12) 0.83 1.16 1.22 1.28 1.48 1.26 Excluding interest on deposits (Line 6/Line 14) 0.67 1.30 1.40 1.44 1.71 1.34 For the year ended December 31, 1989, earnings, as defined above, did not cover fixed charges, including and excluding interest on deposits, by $834 million as a result of the 1989 special provision for refinancing country credit losses of $1.6 billion.
EX-12 3 EXHIBIT EXHIBIT 12(b) BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS (dollars in millions)
Three Months Ended Year Ended December 31, March 31, 1989 1990 1991 1992 1993 1994 Earnings: 1. Income (loss) before income taxes and cumulative effects of accounting changes $ (815) $ 815 $ 834 $ 906 $1,550 $ 234 2. Add: Fixed charges excluding capitalized interest (Line 13) 4,803 4,826 3,614 3,099 3,148 848 3. Less: Equity in undistri- buted income of unconsolidated subsidiaries and affiliates 14 47 31 40 30 14 4. Earnings including interest on deposits 3,974 5,594 4,417 3,965 4,668 1,068 5. Less: Interest on deposits 2,253 2,226 1,589 1,119 1,013 198 6. Earnings excluding interest on deposits $1,721 $3,368 $2,828 $2,846 $3,655 $ 870 Preferred Stock Dividend Requirements: 7. Preferred stock dividend requirements $ 7 $ 31 $ 34 $ 30 $ 23 $ 5 8. Ratio of income from continuing operations before income taxes to income from continuing operations after income taxes * 127% 123% 125% 142% 145% 143% 9. Preferred stock dividend requirements on a pretax basis $ 9 $ 38 $ 43 $ 43 $ 33 $ 7 Fixed Charges: 10. Interest Expense $4,775 $4,799 $3,585 $3,072 $3,122 841 11. Estimated interest component of net rental expense 26 27 29 27 26 7 12. Amortization of debt issuance expense 2 - - - - - 13. Total fixed charges including interest on deposits and excluding capitalized interest 4,803 4,826 3,614 3,099 3,148 848 14. Add: Capitalized interest 5 - - - - - 15. Total fixed charges 4,808 4,826 3,614 3,099 3,148 848 16. Add: Preferred stock dividend require- ments - pretax (Line 9) 9 38 43 43 33 7 17. Total combined fixed charges and preferred stock dividend require- ments on a pretax basis 4,817 4,864 3,657 3,142 3,181 855 18. Less: Interest on deposits (Line 5) 2,253 2,226 1,589 1,119 1,013 198 19. Combined fixed charges and preferred stock dividend requirements on a pretax basis excluding interest on deposits $2,564 $2,638 $2,068 $2,023 $2,168 $ 657 Consolidated Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements: Including interest on deposits (Line 4/Line 17) 0.82 1.15 1.21 1.26 1.47 1.25 Excluding interest on deposits (Line 6/Line 19) 0.67 1.28 1.37 1.41 1.69 1.32 * Represents income from continuing operations before income taxes, excluding the 1989 special provision for refinancing country credit losses of $1.6 billion, divided by income from continuing operations after income taxes, excluding the 1989 special provision for refinancing country credit losses of $1.6 billion, which adjusts preferred stock dividend requirements to a pretax basis. For the year ended December 31, 1989, earnings, as defined above, did not cover combined fixed charges and preferred stock dividend requirements, including and excluding interest on deposits, by $843 million as a result of the 1989 special provision for refinancing country credit losses of $1.6 billion.
BANKERS TRUST NEW YORK CORPORATION 280 PARK AVENUE NEW YORK, NEW YORK 10017 Geoffrey M. Fletcher Senior Vice President and Principal Accounting Officer May 16, 1994 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: Accompanying this letter is Bankers Trust New York Corporation's quarterly report on Form 10-Q for the quarter ended March 31, 1994 (the "Form 10-Q"). The Form 10-Q is being filed electronically through the EDGAR System. One hard copy of the Form 10-Q will be sent to the Securities and Exchange Commission's Filer Support Unit, Alexandria, Virginia. If there are any questions or comments in connection with the enclosed filing, please contact the undersigned at 212-250-7098. Very truly yours, BANKERS TRUST NEW YORK CORPORATION By: GEOFFREY M. FLETCHER Geoffrey M. Fletcher Senior Vice President and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----