-----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, AcCFeKev+CVOpSiPxFi2tXuBUBhNqdfi02r0lBVSx57vpuFXRSkHDtmyoTrHKM2T 4F8WOWofDQCW4fnSqnsWsQ== 0000009749-96-000138.txt : 20030213 0000009749-96-000138.hdr.sgml : 20030213 19960814173458 ACCESSION NUMBER: 0000009749-96-000138 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 DATE AS OF CHANGE: 19960821 SROS: AMEX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKERS TRUST NEW YORK CORP CENTRAL INDEX KEY: 0000009749 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [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: 96615528 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 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 June 30, 1996 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 July 31, 1996: Common Stock, $1 par value, 80,268,808 shares. 1 BANKERS TRUST NEW YORK CORPORATION June 30, 1996 FORM 10-Q TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statement of Income Three Months Ended June 30, 1996 and 1995 2 Six Months Ended June 30, 1996 and 1995 3 Consolidated Balance Sheet At June 30, 1996 and December 31, 1995 4 Consolidated Statement of Changes in Stockholders' Equity Six Months Ended June 30, 1996 and 1995 5 Consolidated Statement of Cash Flows Six Months Ended June 30, 1996 and 1995 6 Consolidated Schedule of Net Interest Revenue Three Months and Six Months Ended June 30, 1996 and 1995 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. The results of operations for the three months and six months ended June 30, 1996 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 1995 Annual Report as supplemented by the first quarter 1996 Form 10-Q. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 34 SIGNATURE 35 2 PART I. FINANCIAL INFORMATION BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in millions, except per share data) (unaudited)
Increase THREE MONTHS ENDED JUNE 30, 1996 1995 (Decrease) NET INTEREST REVENUE Interest revenue $1,459 $1,520 $(61) Interest expense 1,216 1,298 (82) Net interest revenue 243 222 21 Provision for credit losses - - - Net interest revenue after provision for credit losses 243 222 21 NONINTEREST REVENUE Trading 146 79 67 Fiduciary & funds management 198 166 32 Corporate finance fees 136 127 9 Other fees & commissions 82 84 (2) Net revenue from equity investment transactions 72 13 59 Securities available for sale gains 25 17 8 Insurance premiums 63 63 - Other 76 38 38 Total noninterest revenue 798 587 211 NONINTEREST EXPENSES Salaries 202 194 8 Incentive compensation & employee benefits 235 135 100 Agency & other professional service fees 98 68 30 Communication & data services 47 48 (1) Occupancy, net 36 38 (2) Furniture & equipment 41 40 1 Travel & entertainment 24 24 - Provision for policyholder benefits 78 71 7 Other 64 60 4 Total noninterest expenses 825 678 147 Income before income taxes 216 131 85 Income taxes 65 40 25 NET INCOME $ 151 $ 91 $ 60 NET INCOME APPLICABLE TO COMMON STOCK $ 137 $ 79 $ 58 Cash dividends declared per common share $1.00 $1.00 $- EARNINGS PER COMMON SHARE: PRIMARY $1.67 $.98 $.69 FULLY DILUTED $1.66 $.98 $.68 Certain prior period amounts have been reclassified to conform to the current presentation.
3 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in millions, except per share data) (unaudited)
Increase SIX MONTHS ENDED JUNE 30, 1996 1995 (Decrease) NET INTEREST REVENUE Interest revenue $3,049 $2,873 $176 Interest expense 2,593 2,469 124 Net interest revenue 456 404 52 Provision for credit losses 5 14 (9) Net interest revenue after provision for credit losses 451 390 61 NONINTEREST REVENUE Trading 393 1 392 Fiduciary & funds management 381 337 44 Corporate finance fees 222 199 23 Other fees & commissions 169 157 12 Net revenue from equity investment transactions 93 39 54 Securities available for sale gains 40 19 21 Insurance premiums 125 112 13 Other 125 65 60 Total noninterest revenue 1,548 929 619 NONINTEREST EXPENSES Salaries 403 402 1 Incentive compensation & employee benefits 462 268 194 Agency & other professional service fees 158 144 14 Communication & data services 93 95 (2) Occupancy, net 73 79 (6) Furniture & equipment 82 82 - Travel & entertainment 42 47 (5) Provision for policyholder benefits 150 127 23 Other 123 118 5 Provision for severance-related costs - 50 (50) Total noninterest expenses 1,586 1,412 174 Income (loss) before income taxes 413 (93) 506 Income taxes (benefit) 124 (27) 151 NET INCOME (LOSS) $ 289 $ (66) $355 NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 260 $ (86) $346 Cash dividends declared per common share $2.00 $2.00 $- EARNINGS (LOSS) PER COMMON SHARE: PRIMARY $3.19 $(1.10) $4.29 FULLY DILUTED $3.17 $(1.10) $4.27 Certain prior period amounts have been reclassified to conform to the current presentation.
4 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ($ in millions, except par value)
June 30, December 31, 1996* 1995 ASSETS Cash and due from banks $ 1,663 $ 2,337 Interest-bearing deposits with banks 2,065 2,023 Federal funds sold 365 854 Securities purchased under resale agreements 25,420 13,206 Securities borrowed 13,373 10,951 Trading assets: Government securities 14,565 20,704 Corporate debt securities 7,637 5,648 Equity securities 6,869 5,098 Swaps, options and other derivatives 9,486 10,555 Other trading assets 5,218 5,888 Total trading assets 43,775 47,893 Securities available for sale 6,851 6,283 Loans 14,249 12,633 Allowance for credit losses (972) (992) Accounts receivable and accrued interest 2,841 4,220 Other assets 4,971 4,594 Total $114,601 $104,002 LIABILITIES Noninterest-bearing deposits Domestic offices $ 3,327 $ 2,687 Foreign offices 488 605 Interest-bearing deposits Domestic offices 6,091 5,402 Foreign offices 15,387 17,014 Total deposits 25,293 25,708 Trading liabilities: Securities sold, not yet purchased Government securities 10,918 11,092 Equity securities 4,655 3,262 Other trading liabilities 377 473 Swaps, options and other derivatives 10,333 11,264 Total trading liabilities 26,283 26,091 Securities sold under repurchase agreements 24,050 15,247 Other short-term borrowings 15,755 15,761 Accounts payable and accrued expenses 4,531 3,931 Other liabilities 2,563 2,736 Long-term debt 10,709 9,294 Total liabilities 109,184 98,768 PREFERRED STOCK OF SUBSIDIARY 250 250 STOCKHOLDERS' EQUITY Preferred stock 866 865 Common stock, $1 par value Authorized, 300,000,000 shares Issued, 83,678,973 shares 84 84 Capital surplus 1,308 1,302 Retained earnings 3,393 3,316 Common stock in treasury, at cost: 1996, 3,758,059 shares; 1995, 4,602,855 shares (273) (336) Other stockholders' equity (211) (247) Total stockholders' equity 5,167 4,984 Total $114,601 $104,002 Certain prior period amounts have been reclassified to conform to the current presentation. * Unaudited
5 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (in millions) (unaudited)
SIX MONTHS ENDED JUNE 30, 1996 1995 PREFERRED STOCK Balance, January 1 $ 865 $ 395 Preferred stock issued 1 468 Balance, June 30 866 863 COMMON STOCK Balance, January 1 and June 30 84 84 CAPITAL SURPLUS Balance, January 1 1,302 1,317 Preferred stock issuance and conversion costs - (16) Common stock distributed under employee benefit plans 6 (1) Balance, June 30 1,308 1,300 RETAINED EARNINGS Balance, January 1 3,316 3,494 Net income (loss) 289 (66) Cash dividends declared Preferred stock (29) (18) Common stock (159) (157) Treasury stock distributed under employee benefit plans (24) (13) Balance, June 30 3,393 3,240 COMMON STOCK IN TREASURY, AT COST Balance, January 1 (336) (416) Purchases of stock (38) (13) Restricted stock granted, net 19 4 Treasury stock distributed under employee benefit plans 82 34 Balance, June 30 (273) (391) COMMON STOCK ISSUABLE - STOCK AWARDS Balance, January 1 233 160 Deferred stock awards granted, net 63 31 Deferred stock distributed (1) (16) Balance, June 30 295 175 DEFERRED COMPENSATION - STOCK AWARDS Balance, January 1 (151) (63) Deferred stock awards granted, net (62) (22) Restricted stock granted, net (19) (2) Amortization of deferred compensation, net 82 19 Balance, June 30 (150) (68) CUMULATIVE TRANSLATION ADJUSTMENTS Balance, January 1 (348) (336) Translation adjustments (27) 13 Income taxes applicable to translation adjustments 18 (24) Balance, June 30 (357) (347) SECURITIES VALUATION ALLOWANCE Balance, January 1 19 69 Change in unrealized net gains, after applicable income taxes and minority interest (18) (36) Balance, June 30 1 33 TOTAL STOCKHOLDERS' EQUITY, JUNE 30 $5,167 $4,889
6 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) (unaudited)
SIX MONTHS ENDED JUNE 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 289 $ (66) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for credit losses 5 14 Provision for severance-related costs - 50 Provision for policyholder benefits 150 127 Deferred income taxes 100 (33) Depreciation and amortization of premises and equipment 71 67 Other, net (56) (45) Earnings adjusted for noncash charges and credits 559 114 Net change in: Trading assets 3,776 (3,874) Trading liabilities (248) 7,914 Receivables and payables from securities transactions 1,287 126 Other operating assets and liabilities, net 410 (759) Securities available for sale gains (40) (19) Net cash provided by operating activities 5,744 3,502 CASH FLOWS FROM INVESTING ACTIVITIES Net change in: Interest-bearing deposits with banks (79) 1,903 Federal funds sold 489 2,306 Securities purchased under resale agreements (11,972) (8,637) Securities borrowed (2,422) 289 Loans (1,504) 960 Securities available for sale: Purchases (2,918) (1,621) Maturities and other redemptions 1,823 1,687 Sales 260 1,163 Acquisitions of premises and equipment (86) (73) Other, net 106 (64) Net cash used in investing activities (16,303) (2,087) CASH FLOWS FROM FINANCING ACTIVITIES Net change in: Deposits (517) (2,135) Securities sold under repurchase agreements 9,024 3,240 Other short-term borrowings (126) (3,990) Issuances of long-term debt 2,018 2,196 Repayments of long-term debt (363) (1,000) Issuances of preferred stock - 221 Purchases of treasury stock (38) (13) Cash dividends paid (188) (174) Other, net 63 11 Net cash provided by (used in) financing activities 9,873 (1,644) Net effect of exchange rate changes on cash 12 (17) NET DECREASE IN CASH AND DUE FROM BANKS (674) (246) Cash and due from banks, beginning of year 2,337 1,985 Cash and due from banks, end of period $ 1,663 $ 1,739 Interest paid $2,624 $2,310 Income taxes paid, net $133 $182 Noncash investing activities $50 $41 Noncash financing activities: Conversion of debt to preferred stock $1 $243 Certain prior period amounts have been reclassified to conform to the current presentation.
7 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE (in millions) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 INTEREST REVENUE Interest-bearing deposits with banks $ 40 $ 60 $ 83 $ 109 Federal funds sold 31 21 59 56 Securities purchased under resale agreements 275 211 469 358 Securities borrowed 241 198 466 370 Trading assets 517 714 1,289 1,330 Securities available for sale Taxable 110 81 200 170 Exempt from federal income taxes 5 15 12 31 Loans 240 220 471 449 Total interest revenue 1,459 1,520 3,049 2,873 INTEREST EXPENSE Deposits In domestic offices 84 98 172 191 In foreign offices 216 237 463 478 Trading liabilities 135 237 461 450 Securities sold under repurchase agreements 400 310 708 546 Other short-term borrowings 237 307 508 605 Long-term debt 144 109 281 199 Total interest expense 1,216 1,298 2,593 2,469 NET INTEREST REVENUE $ 243 $ 222 $ 456 $ 404 Certain prior period amounts have been reclassified to conform to the current presentation.
8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Bankers Trust New York Corporation (the "Parent Company") and subsidiaries (collectively, the "Corporation", or the "Firm") earned $151 million for the quarter ended June 30, 1996, or $1.67 primary earnings per share. In the second quarter of 1995, the Corporation earned $91 million, or $.98 primary earnings per share. For the first six months of 1996, the Corporation earned $289 million, or $3.19 primary earnings per share. The Corporation recorded a loss of $66 million, or $1.10 primary loss per share in the comparable period of 1995. ORGANIZATIONAL UNITS RESULTS Organizational Unit business results are determined based on the Corporation's internal management accounting process, which allocates revenue and expenses among the Organizational Units. Because the Corporation's business is complex in nature and its operations are integrated, it is impractical to segregate respective contributions of the Organizational Units with precision. As a result, estimates and subjective judgments have been made to apportion revenue and expense items. The internal management accounting process, unlike financial accounting in accordance with generally accepted accounting principles, is based on the way the management views Bankers Trust's business and is not necessarily comparable with similar information disclosed by other financial institutions. In order to provide comparability from one period to the next, the Corporation will restate this analysis to conform with material changes in the allocation process and/or significant changes in organizational structure. The following table analyzes net income (loss) by Organizational Units:
Quarter Ended Six Months Ended June 30, Increase June 30, Increase (in millions) 1996 1995 (Decrease) 1996 1995 (Decrease) Investment Banking $109 $ 74 $ 35 $186 $ 98 $ 88 Risk Management Services (22) (9) (13) (21) (39) 18 Trading & Sales 17 8 9 41 19 22 Investment Management 4 2 2 5 (2) 7 Client Processing Services 26 27 (1) 47 47 - Australia/New Zealand 31 25 6 55 47 8 Asia 7 8 (1) 13 5 8 Latin America 36 (4) 40 55 (112) 167 Corporate/Other (57) (40) (17) (92) (129) 37 Net Income (Loss) $151 $ 91 $ 60 $289 $ (66) $355
9 ORGANIZATIONAL UNITS RESULTS (continued) The Investment Banking business produced net income of $109 million in the second quarter of 1996, compared with $74 million in the second quarter of the previous year. The current quarter's results were attributable primarily to strong revenues from corporate finance activities. In addition, within the Private Equity Investment unit, one transaction increased total pre-tax revenues to $30 million above the quarterly average of the past two years. Net income for the first six months of 1996 was $186 million compared with $98 million for the comparable period of 1995. Risk Management Services produced a net loss of $22 million in the second quarter of 1996, down $13 million from the second quarter of 1995. The current quarter's results were due to losses incurred in the commodity derivatives books when copper prices dropped sharply. For the first six months of 1996 this unit incurred a net loss of $21 million versus a net loss of $39 million for the same period in 1995. Net income from the Trading & Sales business, at $17 million, was up $9 million from the second quarter of 1995. Net income for the first half of 1996 was $41 million versus $19 million for the comparable period in 1995. The Corporation's Investment Management business, which for reporting purposes does not include investment management activities in Australia/NZ, reported net income of $4 million for the current quarter. The improved results from the second quarter of 1995 were due primarily to increased revenue from private banking activities. At June 30, 1996, assets under management in this organizational unit were approximately $191 billion, compared to $172 billion at June 30, 1995. Net income for the first six months of 1996 was $5 million compared to a net loss of $2 million in the first six months of 1995. Client Processing Services recorded $26 million of net income in the second quarter of 1996, down slightly from the second quarter of 1995, which had been boosted by a $6 million after-tax gain from the sale of the unit-investment-trust product line. Net income for the first six months of 1996 was $47 million, even with the first six months of 1995. Net income of the Australia/NZ business was $31 million in the second quarter of 1996, up $6 million from the second quarter of 1995. The improvement was due to strong performances in funds management and corporate finance. At June 30, 1996, assets under management in Australia/NZ's investment management business were approximately $24 billion, compared to $20 billion at June 30, 1995. Net income for the first six months of 1996 was $55 million compared to $47 million for the same period in 1995. Asia net income was $7 million in the second quarter of 1996, down slightly from the second quarter of 1995. Net income was $13 million for the first six months of 1996 compared to $5 million for the first six months of 1995. Latin America net income was $36 million in the second quarter of 1996, up $40 million from the second quarter of 1995. Included in the second quarter's results was $31 million in pre-tax revenue from the sale 10 ORGANIZATIONAL UNITS RESULTS (continued) of Compensa, the smaller of the Corporation's two Chilean insurance subsidiaries. Consorcio, which is now a wholly-owned subsidiary, is the largest life insurance company in Chile. Net income for the first six months of 1996 was $55 million compared to a net loss of $112 million in the comparable period of 1995. The loss incurred in the first-half of 1995 was the result of certain client risk management and trading positions that were affected by extreme volatility and illiquidity in Latin American securities markets after the Mexican peso devaluation. Corporate/Other net loss was $57 million in the second quarter of 1996 compared with a net loss of $40 million in the second quarter of 1995. The 1996 net loss was principally due to $28 million pre-tax of unusual legal and professional fees related to the completion of the Independent Counsel's report and the settlement of old leveraged derivative disputes. For the first six months of 1996 the net loss was $92 million compared with $129 million for the first six months of 1995. 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.
Quarter Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 NET INTEREST REVENUE (in millions) Book basis $243 $222 $456 $404 Tax equivalent adjustment 4 9 8 24 Fully taxable basis $247 $231 $464 $428 AVERAGE BALANCES (in millions) Interest-earning assets $91,002 $81,393 $88,289 $79,819 Interest-bearing liabilities 86,702 77,674 84,807 76,664 Earning assets financed by noninterest-bearing funds $ 4,300 $ 3,719 $ 3,482 $ 3,155 AVERAGE RATES (fully taxable basis) Yield on interest-earning assets 6.47% 7.53% 6.96% 7.32% Cost of interest-bearing liabilities 5.64 6.70 6.15 6.49 Interest rate spread .83 .83 .81 .83 Contribution of noninterest-bearing funds .26 .31 .25 .25 Net interest margin 1.09% 1.14% 1.06% 1.08%
Net interest revenue for the second quarter of 1996 totaled $243 million, up $21 million, or 9 percent, from the second quarter of 1995. The $21 million increase in net interest revenue was primarily due to a $14 million increase in nontrading-related net interest revenue, which totaled $179 million for the second quarter of 1996, compared to $165 million for the comparable 1995 quarter. Nontrading-related net interest revenue is 11 REVENUE (continued) considered to be historically a more stable component of overall net interest revenue. Net interest revenue was $456 for the first six months of 1996, up $52 million, or 13 percent from the first half of 1995. Non-trading related net interest revenue totaled $362 million for the first six months of 1996 versus $346 for the comparable period in 1995. A significant portion of the Firm's trading and risk management activities involve positions in interest rate instruments and related derivatives. The revenue from these activities can periodically shift between trading and net interest, depending on a variety of factors, including risk management strategies. Therefore, the Corporation views trading revenue and trading-related net interest revenue together. Combined trading revenue and trading-related net interest revenue for the second quarter of 1996 totaled $210 million, up $74 million from the second quarter of 1995. Combined trading revenue and trading-related net interest revenue for the first six months of 1996 was $487 million, up $428 million from the $59 million reported in the first half of 1995. The table below quantifies the Corporation's trading revenue and trading-related net interest revenue by major category of market risk. These categories are based on management's view of the predominant underlying risk exposure of each of the Firm's trading positions.
Trading- Related Net Trading Interest (in millions) Revenue Revenue Total Quarter ended June 30, 1996 Interest rate risk $ 75 $ 59 $134 Foreign exchange risk 63 - 63 Equity and commodity risk 8 5 13 Total $146 $ 64 $210 Quarter ended June 30, 1995 Interest rate risk $ 10 $ 72 $ 82 Foreign exchange risk 5 - 5 Equity and commodity risk 64 (15) 49 Total $ 79 $ 57 $136 Six Months ended June 30, 1996 Interest rate risk $233 $111 $344 Foreign exchange risk 80 - 80 Equity and commodity risk 80 (17) 63 Total $393 $ 94 $487 Six Months ended June 30, 1995 Interest rate risk $(47) $ 90 $ 43 Foreign exchange risk (38) - (38) Equity and commodity risk 86 (32) 54 Total $ 1 $ 58 $ 59
12 REVENUE (continued) Second Quarter 1996 vs. Second Quarter 1995 Interest Rate Risk - The increase in revenue was principally due to a rebound in the Firm's activities in Latin America as 1995 was characterized by heightened volatility in interest rates coupled with liquidity problems in the emerging markets of Latin America. Foreign Exchange Risk - Foreign exchange revenue improved compared to the same period last year principally due to strong performance in the Firm's activities in Australia. Equity and Commodity Risk - Total trading and trading-related net interest revenue declined compared to the same period last year due to losses incurred in the commodity derivatives books when copper prices dropped sharply. Six Months 1996 vs. Six Months 1995 Interest Rate Risk - The increase in revenue was principally due to a rebound in the Firm's activities in Latin America as 1995 was characterized by heightened volatility in interest rates coupled with liquidity problems in the emerging markets of Latin America. Foreign Exchange Risk - Trading revenue improved compared to the same period last year due to increased stability in the foreign exchange markets and strong performance in the Firm's activities in Australia. The first half of 1995 was affected by global volatility in foreign exchange markets during which the dollar fell to record lows against the Japanese yen and the German mark. Equity and Commodity Risk - Total trading and trading-related net interest revenue increased as a result of a rebound in the Firm's equity related products in the Risk Management Services, Trading & Sales, and Investment Banking Organizational Units. These results were partially offset by losses incurred in the commodity derivatives books when copper prices dropped sharply. 13 Shown below is a comparison of the components of noninterest revenue (excluding trading).
Quarter Ended Six Months Ended June 30, Increase June 30, Increase (in millions) 1996 1995 (Decrease) 1996 1995 (Decrease) Fiduciary & funds management revenue $198 $166 $ 32 $ 381 $337 $ 44 Corporate finance fees 136 127 9 222 199 23 Other fees and commissions: Service charges on deposit accounts 18 17 1 33 36 (3) Transaction processing fees 37 36 1 74 69 5 Other 27 31 (4) 62 52 10 Total other fees & commissions 82 84 (2) 169 157 12 Net revenue from equity investment transactions 72 13 59 93 39 54 Securities available for sale gains 25 17 8 40 19 21 Insurance premiums 63 63 - 125 112 13 Other 76 38 38 125 65 60 Total noninterest revenue (excluding trading) $652 $508 $144 $1,155 $928 $227
14 REVENUE (continued) Second Quarter 1996 vs. Second Quarter 1995 Fiduciary and funds management revenue totaled $198 million for the second quarter of 1996, up $32 million, or 19 percent, from the comparable period last year. Increased revenues were recognized from global fiduciary services, global private banking activities and corporate trust services. These increases were due to greater transaction volumes and to a higher level of assets under management in the United States and Australian markets. Corporate finance fees of $136 million increased by $9 million, or 7 percent, from the same period last year, due to higher revenue from securities underwriting and management fees. Other fees and commissions totaled $82 million, a decrease of $2 million, or 2 percent, compared with last year's second quarter. Net revenue from equity investment transactions was $72 million, up $59 million from the prior year's second quarter. This increase was attributable primarily to sales within the Private Equity Investment unit of Investment Banking. All other noninterest revenue totaled $164 million, up $46 million from the prior year's second quarter. Contributing to this increase was $31 million in pre-tax revenue on the sale of Compensa, the smaller of the Corporation's two Chilean insurance subsidiaries. Six Months 1996 vs. Six Months 1995 Fiduciary and funds management fees of $381 million, increased $44 million, or 13 percent, from the first six months of 1995. Increased revenues were recorded in virtually all activities within this category. Corporate finance fees totaled $222 million, an increase of $23 million, or 12 percent from the first half of 1995. Higher revenue from securities underwriting and commercial banking fees were partially offset by lower revenue from merger and acquisition fees. Other fees and commissions totaled $169 million, up $12 million, or 8 percent compared to last year's first six months. Net revenue from equity investment transactions was $93 million, up $54 million from the first half of 1995. This increase was attributable primarily to sales within the Private Equity Investment unit of Investment Banking. All other noninterest revenue totaled $290 million, up $94 million from the first six months of 1995. Contributing to this increase was $31 million in pre-tax revenue on the sale of Compensa, the smaller of the Corporation's two Chilean insurance subsidiaries, and higher insurance premium revenue from operations in Chile. 15 PROVISION AND ALLOWANCE FOR CREDIT LOSSES The provision for credit losses is dependent upon management's evaluation as to the amount needed to maintain the allowance for credit losses at a level considered appropriate in relation to the risk of losses inherent in the portfolio. No provision for credit losses was required for the current or prior year's second quarter. Net charge-offs for the second quarter were $15 million, compared with $2 million a year ago. The current quarter's net charge-offs included $7 million in charge-offs taken in connection with settlements of old leveraged derivative transactions. The provision for credit losses and the other changes in the allowance for credit losses are shown below (in millions).
Quarter Ended Six Months Ended June 30, June 30, Allowance for credit losses 1996 1995 1996 1995 Balance, beginning of period $987 $1,245 $992 $1,252 Net charge-offs Charge-offs 21 13 49 47 Recoveries 6 11 24 24 Total net charge-offs* 15 2 25 23 Provision for credit losses - - 5 14 Balance, end of period $972 $1,243 $972 $1,243 *Components: Secured by real estate $ - $(3) $ 1 $ 3 Real estate related - - 4 2 Highly leveraged 3 2 23 22 Other 13 4 1 4 Refinancing country (1) (1) (4) (8) Total $15 $ 2 $25 $23
The allowance for credit losses, at $972 million at June 30, 1996, was down $15 million from its level at March 31, 1996. The allowance was equal to 170 percent, 138 percent, and 133 percent of total cash basis loans at June 30, 1996, March 31, 1996, and December 31, 1995, 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 entire portfolio. 16 PROVISION AND ALLOWANCE FOR CREDIT LOSSES (continued) The recorded investment in loans that was considered to be impaired under SFAS 114 was $662 million and $844 million which consisted of total cash basis loans and renegotiated loans at June 30, 1996 and December 31, 1995, respectively. Included in these amounts were $293 million and $458 million of loans for which the related valuation allowance was $62 million and $90 million at these dates, respectively. EXPENSES Second Quarter 1996 vs. Second Quarter 1995 Total noninterest expenses of $825 million increased by $147 million, or 22 percent, from the second quarter of 1995. Incentive compensation and employee benefits expense increased $100 million, primarily due to higher bonus expense reflecting improved earnings. Salaries expense increased $8 million, or 4 percent, from the second quarter of 1995, mostly due to a 2 percent increase in the average number of employees. All other expenses totaled $388 million for the quarter, up $39 million, or 11 percent, from last year's second quarter. The current quarter included $28 million pre- tax of legal and professional fees related to the completion of the Independent Counsel's report and the settlement of old leveraged derivatives transactions. Six Months 1996 vs. Six Months 1995 Total noninterest expenses of $1.586 billion for the first six months of 1996 increased by $174 million, or 12 percent from the first half of 1995. Incentive compensation and employee benefits expense increased $194 million, mostly due to higher bonus expense reflecting improved earnings. Salaries expense increased slightly in the first half of 1996. All other expenses totaled $721 million for the first six months of 1996, down $21 million, or 3 percent from last year's comparable period. The first half of 1995 included a $50 million pre-tax provision for severance-related costs. INCOME TAXES Income tax expense for the second quarter of 1996 amounted to $65 million, compared with $40 million for the second quarter of 1995. For the first six months of 1996, the income tax expense was $124 million compared with an income tax benefit of $27 million in the first half of 1995. The effective tax rate was 30 percent for both the quarter and six months ended June 30, 1996 compared with 31 percent and 29 percent for the quarter and six months ended June 30, 1995. 17 EARNINGS PER COMMON SHARE Primary and fully diluted earnings per common share amounts were computed by subtracting from earnings the dividend requirements on preferred stock to arrive at earnings applicable to common stock and dividing this amount 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 and six month periods ended June 30, 1996 and 1995 did the Corporation have outstanding any securities which were convertible into the Parent Company's common stock. 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):
Quarter Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Net income (loss) applicable to common stock $137 $79 $260 $(86) Average number of common shares outstanding 77.832 78.318 77.664 78.332 Average common and common equivalent shares outstanding - primary (1) 81.900 80.564 81.398 78.332 Average common and common equivalent shares outstanding assuming full dilution (1) 82.351 80.796 81.956 78.332 (1) Common stock equivalents are excluded from the six months ended June 30, 1995 as the effect would be anti-dilutive in calculating earnings per share.
18 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) 2nd Qtr 1st Qtr 4th Qtr 1996 1996 1995 ASSETS Interest-earning Interest-bearing deposits with banks $ 2,114 $ 2,167 $ 3,624 Federal funds sold 2,318 1,992 2,387 Securities purchased under resale agreements 21,636 15,798 15,167 Securities borrowed 15,820 16,194 13,817 Trading assets 29,376 30,393 31,926 Securities available for sale Taxable 5,480 5,303 5,206 Exempt from federal income taxes 1,201 1,335 1,365 Total securities available for sale 6,681 6,638 6,571 Loans In domestic offices 7,106 7,000 7,199 In foreign offices 5,951 5,394 5,624 Total loans 13,057 12,394 12,823 Total interest-earning assets 91,002 85,576 86,315 Noninterest-earning Cash and due from banks 1,210 1,478 1,972 Noninterest-earning trading assets 17,425 16,948 17,858 All other assets 9,104 10,667 9,736 Allowance for credit losses (989) (998) (1,028) Total $117,752 $113,671 $114,853 LIABILITIES Interest-bearing Interest-bearing deposits In domestic offices $ 6,039 $ 5,928 $ 5,788 In foreign offices 15,861 15,996 18,404 Total interest-bearing deposits 21,900 21,924 24,192 Trading liabilities 12,178 11,939 12,599 Securities sold under repurchase agreements 28,554 23,922 22,680 Other short-term borrowings 13,677 15,449 15,960 Long-term debt 10,393 9,678 8,904 Total interest-bearing liabilities 86,702 82,912 84,335 Noninterest-bearing Noninterest-bearing deposits 3,034 3,347 3,606 Noninterest-bearing trading liabilities 15,118 15,355 15,392 All other liabilities 7,526 6,779 6,240 Total liabilities 112,380 108,393 109,573 PREFERRED STOCK OF SUBSIDIARY 250 250 250 STOCKHOLDERS' EQUITY Preferred stock 866 866 865 Common stockholders' equity 4,256 4,162 4,165 Total stockholders' equity 5,122 5,028 5,030 Total $117,752 $113,671 $114,853 The condensed average balance sheets are presented on a slightly different basis than the balance sheets presented in the financial statements section of this report, in that the various categories of interest-earning assets and interest-bearing liabilities exclude certain noninterest- earning/bearing components included in the balance sheet captions. These components, excluding noninterest-earning/bearing trading assets/liabilities, are included in "all other assets" and "all other liabilities" in the condensed average balance sheets. Certain prior period amounts have been reclassified to conform to the current presentation.
19 BALANCE SHEET ANALYSIS (continued) Second Quarter 1996 vs. First Quarter 1996 The Corporation's average total assets amounted to $117.8 billion for the second quarter of 1996, an increase of $4.1 billion, or 4 percent, from the first quarter of 1996. Average interest-earning assets increased $5.4 billion, or 6 percent, and the proportion of interest-earning assets to total assets increased from 75 percent to 77 percent. The increase in interest-earning assets was primarily due to an increase in securities purchased under resale agreements (up $5.8 billion, or 37 percent), offset in part by a decrease in trading assets (down $1.0 billion, or 3 percent). Interest-earning trading assets, as a percentage of total assets, decreased from 27 percent to 25 percent. Noninterest-earning trading assets increased $477 million or 3 percent from the first quarter of 1996. Average total liabilities increased $4.0 billion, or 4 percent from the first quarter of 1996. Within interest-bearing liabilities an increase in securities sold under repurchase agreements (up $4.6 billion, or 19 percent) was offset in part by a decrease in other short-term borrowings (down $1.8 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 from 47 percent to 49 percent. Second Quarter 1996 vs. Fourth Quarter 1995 The Corporation's average total assets for the second quarter of 1996 increased $2.9 billion, or 3 percent, from the fourth quarter of 1995. Average interest-earning assets increased $4.7 billion, or 5 percent, and the proportion of interest-earning assets to total assets increased from 75 percent to 77 percent. The increase in interest-earning assets was primarily due to increases in securities purchased under resale agreements (up $6.5 billion, or 43 percent) and securities borrowed (up $2.0 billion, or 14 percent) offset in part by decreases in trading assets (down $2.6 billion, or 8 percent) and interest-bearing deposits with banks (down $1.5 billion, or 42 percent). Interest-earning trading assets, as a percentage of total assets decreased from 28 percent to 25 percent. Noninterest- earning trading assets decreased $433 million or 2 percent from the fourth quarter of 1995. Average total liabilities increased $2.8 billion, or 3 percent from the fourth quarter of 1995. Within interest-bearing liabilities, increases in securities sold under repurchase agreements (up $5.9 billion, or 26 percent) and long-term debt (up $1.5 billion, or 17 percent) were offset in part by decreases in total interest-bearing deposits (down $2.3 billion, or 9 percent) and other short-term borrowings (down $2.3 billion, or 14 percent). Total short-term borrowings (securities sold under repurchase agreements and other short-term borrowings) as a percentage of total interest-bearing liabilities increased from 46 percent to 49 percent. 20 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):
June 30, March 31, December 31, 1996 1996 1995 Fair value $6,851 $6,880 $6,283 Amortized cost 6,818 6,821 6,204 Excess of fair value over amortized cost * $ 33 $ 59 $ 79 * Components: Unrealized gains $113 $154 $ 182 Unrealized losses (80) (95) (103) $ 33 $ 59 $ 79
Long-term Debt During the second quarter of 1996, the Corporation obtained $968 million of cash proceeds from the issuances of long-term debt and repaid $176 million of long-term debt. The larger of these debt issuances were as follows (in millions):
Face Amount Parent Company 7 3/8% Subordinated Notes due 2008 $150 Bankers Trust Company 5.94% Senior Notes due 2001 $310 Redeemable Preference Securities due August 2002 (1) $233 BT Securities Corporation Floating Rate Notes due 1999 $150 (1) At June 30, 1996 certain subsidiaries of Bankers Trust Company had outstanding ($3.0 billion) of mandatorily redeemable preference securities with maturities ranging from September 1996 to October 2002.
21 TRADING DERIVATIVES The Corporation actively manages, in accordance with the Corporation's risk management policies, trading positions in a variety of derivative books. Many of the Corporation's trading positions are established as a result of providing derivative products to meet customers' demands. To anticipate customer demand for such transactions, the Corporation also carries an inventory of capital market instruments and maintains its access to market liquidity by quoting bid and offer prices to, and trading with, other market makers. These two activities are essential to provide customers with capital market products at competitive prices. All trading positions are reported at fair value and changes in fair values are reflected in trading revenue as they occur. The following tables reflect the gross fair values and balance sheet amounts of trading derivative financial instruments:
At June 30, Average During 1996 2nd Qtr. 1996 (Liabi- (Liabi- (in millions) Assets lities) Assets lities) OTC Financial Instruments Interest Rate and Currency Swap Contracts $ 13,052 $(11,937) $14,254 $(13,607) Interest Rate Contracts Forwards 44 (43) 66 (61) Options purchased 1,015 1,020 Options written (1,261) (1,277) Foreign Exchange Rate Contracts Spot and Forwards 7,295 (8,814) 7,315 (8,674) Options purchased 850 931 Options written (908) (910) Equity-related contracts 1,907 (2,112) 2,064 (2,330) Commodity-related and other contracts 720 (750) 550 (540) Exchange-Traded Options Interest Rate 12 (8) 26 (5) Equity 157 (66) 165 (71) Total Gross Fair Values 25,052 (25,899) 26,391 (27,475) Impact of Netting Agreements (15,566) 15,566 (16,258) 16,258 $ 9,486(1) $10,133 $(10,333)(1) $(11,217) (1) As reflected on the balance sheet in "Trading Assets" and "Trading Liabilities."
22 TRADING DERIVATIVES (continued)
At December 31, Average During 1995 4th Qtr. 1995 (Liabi- (Liabi- (in millions) Assets lities) Assets lities) OTC Financial Instruments Interest Rate and Currency Swap Contracts $ 15,858 $(15,471) $ 16,260 $(14,960) Interest Rate Contracts Forwards 83 (81) 127 (104) Options purchased 1,426 1,299 Options written (1,312) (1,729) Foreign Exchange Rate Contracts Spot and Forwards 7,931 (8,937) 9,473 (10,236) Options purchased 999 1,213 Options written (941) (1,148) Equity-related contracts 2,011 (2,359) 1,838 (2,093) Commodity-related and other contracts 541 (531) 542 (468) Exchange-Traded Options Interest Rate 33 (16) 32 (39) Equity 137 (80) 158 (105) Total Gross Fair Values 29,019 (29,728) 30,942 (30,882) Impact of Netting Agreements (18,464) 18,464 (19,152) 19,152 $ 10,555(1) $ 11,790 $(11,264)(1) $(11,730) (1) As reflected on the balance sheet in "Trading Assets" and "Trading Liabilities."
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 certain 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. Revenue or expense pertaining to management of interest rate exposure is predominantly recognized over the life of the contract as an adjustment to interest revenue or expense. Total net end-user derivative unrealized gains were $71 million, and $212 million at June 30, 1996 and December 31, 1995, respectively. The $141 million decrease during the second half of 1996 was primarily due to increases in long-term interest rates. 23 END-USER DERIVATIVES (continued) The following tables provide the gross unrealized gains and losses for end-user derivatives. Gross unrealized gains and losses for hedges of securities available for sale are recognized in the financial statements with the offset as an adjustment to securities valuation allowance in stockholders' equity. Gross unrealized gains and losses for hedges of loans, other assets, interest-bearing deposits, other short-term borrowings, long-term debt, and net investments in foreign subsidiaries are not yet recognized in the financial statements.
Other Net invest- short- ments in Securities Interest- term Long- foreign (in millions) available Other bearing borrow- term subsi- June 30, 1996 for sale Loans assets deposits ings debt diaries Total Interest Rate Swaps Pay Variable Unrealized Gain $ - $16 $- $ 39 $ 1 $177 $- $ 233 Unrealized (Loss) - - - (41) (10) (86) - (137) Pay Variable Net - 16 - (2) (9) 91 - 96 Pay Fixed Unrealized Gain 7 - - 16 - 48 - 71 Unrealized (Loss) (46) (2) - (52) - (2) - (102) Pay Fixed Net (39) (2) - (36) - 46 - (31) Total Unrealized Gain 7 16 - 55 1 225 - 304 Total Unrealized (Loss) (46) (2) - (93) (10) (88) - (239) Total Net $(39) $14 $- $(38) $ (9) $137 $- $ 65 Forward Rate Agreements Unrealized Gain $- $- $- $- $- $- $- $- Unrealized (Loss) - - - - - - - - Net $- $- $- $- $- $- $- $- Currency Swaps and Forwards Unrealized Gain $ - $- $ 1 $ 18 $ - $ 48 $ 28 $ 95 Unrealized (Loss) (1) - - (2) (3) (44) (32) (82) Net $(1) $- $ 1 $ 16 $(3) $ 4 $ (4) $ 13 Other Contracts (1) Unrealized Gain $ - $- $ - $- $- $- $- $ - Unrealized (Loss) (4) - (3) - - - - (7) Net $(4) $- $(3) $- $- $- $- $(7) Total Unrealized Gain $ 7 $16 $ 1 $ 73 $ 1 $ 273 $ 28 $ 399 Total Unrealized (Loss) (51) (2) (3) (95) (13) (132) (32) (328) Total Net $(44) $14 $(2) $(22) $(12)$ 141 $ (4)$ 71 (1) Other contracts are principally equity swaps and collars.
24 END-USER DERIVATIVES (continued)
Other Net invest- short- ments in Securities Interest- term Long- foreign (in millions) available Other bearing borrow- term subsi- December 31, 1995 for sale Loans assets deposits ings debt iaries Total Interest Rate Swaps Pay Variable Unrealized Gain $ - $ - $- $132 $ 4 $339 $- $ 475 Unrealized (Loss) - (5) - (7) (1) (24) - (37) Pay Variable Net - (5) - 125 3 315 - 438 Pay Fixed Unrealized Gain - - - 11 - 14 - 25 Unrealized (Loss (88) - - (82) (1) (21) - (192) Pay Fixed Net (88) - - (71) (1) (7) - (167) Total Unrealized Gain - - - 143 4 353 - 500 Total Unrealized (Loss) (88) (5) - (89) (2) (45) - (229) Total Net $(88) $(5) $- $ 54 $ 2 $308 $- $ 271 Forward Rate Agreements Unrealized Gain $- $- $- $ 1 $- $- $- $ 1 Unrealized (Loss) - - - (1) - - - (1) Net $- $- $- $ - $- $- $- $ - Currency Swaps and Forwards Unrealized Gain $- $- $1 $ 17 $ - $ 20 $ 14 $ 52 Unrealized (Loss) - - - (12) (1) (48) (30) (91) Net $- $- $1 $ 5 $(1) $(28) $(16) $(39) Other Contracts (1) Unrealized Gain $ - $- $ 1 $- $- $- $- $ 1 Unrealized (Loss) (5) - (16) - - - - (21) Net $(5) $- $(15) $- $- $- $- $(20) Total Unrealized Gain $ - $- $ 2 $ 161 $ 4 $373 $ 14 $ 554 Total Unrealized (Loss) (93) (5) (16) (102) (3) (93) (30) (342) Total Net $(93) $(5) $(14) $ 59 $ 1 $280 $(16)$ 212 (1) Other contracts are principally equity swaps and collars.
25 END-USER DERIVATIVES (continued) For paying variable and paying fixed interest rate swaps entered into as an end user, the weighted average receive rate and weighted average pay rate (interest rates were based on the weighted averages of both U.S. and non- U.S. currencies) by maturity and corresponding notional amounts were as follows ($ in millions):
At June 30, 1996 Notional Amount Paying Variable Paying Fixed Maturing Notional Receive Pay Notional Receive Pay Total In: Amount Rate Rate Amount Rate Rate Notional 1996 $19,489 5.62% 5.49% $ 5,865 5.95% 5.92% $25,354 1997-1998 15,970 5.73 5.58 4,350 5.22 5.92 20,320 1999-2000 3,812 6.45 6.04 1,313 3.62 4.94 5,125 2001 and thereafter 5,012 6.63 5.58 820 5.56 7.31 5,832 Total $44,283 $12,348 $56,631 All rates were those in effect at June 30, 1996. Variable rates are primarily based on LIBOR and may change significantly, affecting future cash flows.
At December 31, 1995 Notional Amount Paying Variable Paying Fixed Maturing Notional Receive Pay Notional Receive Pay Total In: Amount Rate Rate Amount Rate Rate Notional 1996 $30,770 5.97% 5.87% $ 8,742 6.00% 6.21% $39,512 1997-1998 6,558 5.99 5.84 3,657 5.33 5.76 10,215 1999-2000 3,448 6.57 6.34 1,373 3.86 4.99 4,821 2001 and thereafter 3,927 6.64 5.93 629 5.91 7.34 4,556 Total $44,703 $14,401 $59,104 All rates were those in effect at December 31, 1995. Variable rates are primarily based on LIBOR and may change significantly, affecting future cash flows.
26 REGULATORY CAPITAL The Federal Reserve Board's ("FRB") capital adequacy guidelines mandate that minimum capital ratios be maintained by bank holding companies and their bank subsidiaries. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") mandated the establishment of capital tiers for banks based on these ratios. The Corporation's 1995 Annual Report on Form 10-K, on page 42, provides a detailed discussion of these guidelines and regulations. Based on their respective regulatory capital ratios as of June 30, 1996, both Bankers Trust Company ("BTCo") and Bankers Trust (Delaware) are well capitalized, as defined in the regulations issued by the FRB and the other federal bank regulatory agencies setting forth the general capital requirements mandated by FDICIA. The table below presents the regulatory capital ratios of Bankers Trust New York Corporation and BTCo at June 30, 1996 and December 31, 1995, along with the FRB's minimum regulatory guidelines. All of these regulatory capital ratios exclude any impact of the securities valuation allowance which is determined in accordance with SFAS 115.
FRB Minimum June 30, December 31, Regulatory 1996 1995 Guidelines CORPORATION Risk-Based Ratios Tier 1 Capital 8.3% 8.5% 4.0% Total Capital 13.5% 13.9% 8.0% Leverage Ratio 5.5% 5.1% 3.0% BTCo Risk-Based Ratios Tier 1 Capital 9.3% 9.5% 4.0% Total Capital 12.4% 12.8% 8.0% Leverage Ratio 5.5% 5.1% 3.0%
The following were the essential components of the Corporation's and BTCo's risk-based capital ratios (in millions):
June 30, December 31, 1996 1995 Corporation Tier 1 Capital $4,614 $4,512 Tier 2 Capital 2,948 2,858 Total Capital $7,562 $7,370 Total risk-weighted assets $55,900 $53,021
27 REGULATORY CAPITAL (continued)
June 30, December 31, 1996 1995 BTCo Tier 1 Capital $4,617 $4,394 Tier 2 Capital 1,552 1,532 Total Capital $6,169 $5,926 Total risk-weighted assets $49,619 $46,389
Comparing June 30, 1996 to December 31, 1995, the Corporation's Tier 1 Capital and Total Capital ratios declined by 20 basis points and 40 basis points, respectively, as a result of the increase in total risk-weighted assets. The Corporation's total risk-weighted assets at June 30, 1996 were $2.879 billion higher than at year-end 1995. The Leverage Ratio increased by 40 basis points at June 30, 1996 primarily as a result of a decrease in average total assets during the second quarter of 1996 compared to the fourth quarter of 1995. These factors were also the causes for the variances in BTCo's Capital and Leverage ratios. LIQUIDITY Liquidity is the ability to have the funds available at all times to meet the commitments of the Corporation. The Corporation has a formal process for managing liquidity on a global basis for the Firm as a whole as well as for each of its significant subsidiaries. Management's guiding policy is to maintain conservative levels of liquidity designed to ensure that the Firm has the ability to meet its obligations under all conceivable circumstances. Management maintains a dual focus to ensure a conservative liquidity position by promoting asset liquidity and actively managing liability/capital levels, maturities and diversification. The fundamental objective in this regard is to ensure that, even in the event of a complete loss of access to the liability markets, the Corporation will be able to continue to fund those assets that cannot be liquidated in a timely manner. Most of the Corporation's assets are highly liquid and of high credit quality. The Corporation maintains excess liquidity through its base of liquid assets. 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. Securities purchased under resale agreements and securities borrowed are virtually all short-term in nature and are collateralized with U.S. government or other marketable securities, or cash equivalents. Trading assets are marked to market daily and primarily consist of U.S. government and agency securities, state and municipal securities, foreign government obligations, and money market instruments. The Corporation's liquid assets amounted to $93.5 billion and $87.0 billion as of June 30, and March 31, 1996, and $83.5 billion as of December 31, 1995, which equaled 81 percent, 80 percent, and 80 percent of gross total assets at those dates respectively. 28 LIQUIDITY (continued) Cash Flows The following comments apply to the consolidated statement of cash flows, which appears on page 6. Cash and due from banks decreased $674 million during the first six months of 1996, as the net cash used in investing activities exceeded the sum of the net cash provided by financing and operating activities. The $16.3 billion of net cash used in investing activities was largely the result of cash outflows from net changes in securities purchased under resale agreements ($12.0 billion), purchases of securities available for sale ($2.9 billion) and net changes in securities borrowed ($2.4 billion) partially offset by cash inflows from maturities and other redemptions of securities available for sale ($1.8 billion). The $9.9 billion of net cash provided by financing activities was primarily the result of an increase in the net change in securities sold under repurchase agreements ($9.0 billion) and from issuances of long-term debt ($2.0 billion), offset in part by a decrease in the net change in deposits ($517 million) and repayments of long-term debt ($363 million). The increase in net cash provided by operating activities was mostly due to an increase in net changes in trading assets ($3.8 billion) and net changes in receivables and payables from securities transactions ($1.3 billion). Cash and due from banks decreased $246 million during the first six months of 1995, 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 net changes in securities purchased under resale agreements ($8.6 billion) was offset in part by cash inflows from sales, maturities and other redemptions of securities available for sale ($2.9 billion) as well as net changes in federal funds sold ($2.3 billion). The $1.6 billion of net cash used in financing activities was largely the result of cash outflows from the net changes in other short-term borrowings ($4.0 billion) and deposits ($2.1 billion) as well as from repayments of long-term debt ($1.0 billion) offset in part by the cash inflows from the net change in securities sold under repurchase agreements ($3.2 billion) and issuances of long-term debt ($2.2 billion). The $3.5 billion of net cash provided by operating activities primarily resulted from a $4.0 billion net change in trading assets and liabilities. Interest Rate Sensitivity Condensed interest rate sensitivity data for the Corporation at June 30, 1996 is presented in the table below. For purposes of this presentation, the interest-earning/bearing components of trading assets and trading liabilities are assumed to reprice within three months. The interest rate gaps reported in the table arise when assets are funded with liabilities having different repricing intervals, after considering the effect of off-balance sheet hedging instruments. Since these gaps are actively managed and change daily as adjustments are made in 29 LIQUIDITY (continued) 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) June 30, 1996 1 year years 5 years funds Total Assets $ 83.8 $ 2.2 $ 3.6 $ 25.0 $ 114.6 Liabilities, preferred stock of subsidiary and preferred stock (76.4) (4.4) (3.6) (25.9) (110.3) Common stockholders' equity - - - (4.3) (4.3) Effect of off-balance sheet hedging instruments (6.5) 3.7 2.8 - - Interest rate sensitivity gap $ 0.9 $ 1.5 $ 2.8 $ (5.2) $ -
30 NONPERFORMING ASSETS The components of cash basis loans, renegotiated loans, other real estate and other nonperforming assets are shown below ($ in millions).
June 30, December 31, 1996 1995 CASH BASIS LOANS Domestic Commercial and industrial $169 $263 Secured by real estate 250 297 Financial institutions 10 10 Total domestic 429 570 International Commercial and industrial 80 106 Secured by real estate 58 65 Financial institutions 4 3 Lease financing 2 - Total international 144 174 Total cash basis loans $573 $744 Ratio of cash basis loans to total loans 4.0% 5.9% Ratio of allowance for credit losses to cash basis loans 170% 133% RENEGOTIATED LOANS Secured by real estate $89 $ 88 Other - 12 Total renegotiated loans $89 $100 OTHER REAL ESTATE $219 $259 OTHER NONPERFORMING ASSETS Assets acquired in credit workouts $67 $66 Other 1 1 Total other nonperforming assets $68 $67 Loans 90 days or more past due and still accruing interest $2 $26
31 NONPERFORMING ASSETS (continued) An analysis of the changes in the Corporation's total cash basis loans during the first six months of 1996 follows (in millions).
Balance, December 31, 1995 $ 744 Net transfers to cash basis loans 8 Net paydowns (123) Charge-offs (49) Transfers to other real estate (5) Other (2) Balance, June 30, 1996 $573
The Corporation's total cash basis loans amounted to $573 million at June 30, 1996, down $171 million, or 23 percent, from December 31, 1995. This decline is attributable to collections and charge-offs in connection with the settlement of old derivative transactions ($60 million) as well as decreases in loans secured by real estate ($54 million) and various commercial and industrial loans ($61 million). Also within cash basis loans, loans secured by real estate were $308 million and $362 million at June 30, 1996 and December 31, 1995, respectively. Commercial and industrial loans to highly leveraged borrowers were $128 million and $153 million at June 30, 1996 and December 31, 1995, respectively. Within cash basis loans, leveraged derivative contracts were $61 million and $104 million at June 30, 1996 and December 31, 1995, respectively. Based on an analysis of the potential outcome of the remaining outstanding issues relating to leveraged derivative transactions, management continues to believe that the expected financial impact should be covered by existing reserves. 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 June 30 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. 32 NONPERFORMING ASSETS (continued)
Six Months Ended June 30, (in millions) 1996 1995 Domestic Loans Gross amount of interest that would have been recorded at original rate $24 $32 Less, interest, net of reversals, recognized in interest revenue 4 4 Reduction of interest revenue 20 28 International Loans Gross amount of interest that would have been recorded at original rate 6 10 Less, interest, net of reversals, recognized in interest revenue - - Reduction of interest revenue 6 10 Total reduction of interest revenue $26 $38
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 1995 Annual Report on Form 10-K, on page 57, provides a detailed discussion of the definition.
Highly Leveraged Transactions June 30, December 31, (in millions) 1996 1995 Loans Senior debt $1,169 $1,105 Subordinated debt 72 68 Total loans $1,241 $1,173 Unfunded commitments Commitments to lend $574 $539 Letters of credit 229 263 Total unfunded commitments $803 $802 Equity investments $613 $648 Commitments to invest $280 $289
33 HIGHLY LEVERAGED TRANSACTIONS (continued) The Corporation's outstanding loans were to 110 separate borrowers in 39 separate industry groups at June 30, 1996, compared to 97 separate borrowers in 38 separate industry groups at December 31, 1995. The retail food group at 12 percent was the only industry concentration which exceeded 10 percent of total HLT loans outstanding at June 30, 1996. In addition to the amounts shown in the table above, at June 30, 1996, the Corporation had issued commitment letters which had been accepted, subject to documentation and certain other conditions, of $1.68 billion (which were in various stages of syndication) and had additional HLTs in various stages of discussion and negotiation. During the first half of 1996, the Corporation originated $2.3 billion of HLT commitments. It should be noted that the Corporation's loans and commitments in connection with HLTs fluctuate as new loans and commitments are made and as loans and commitments are syndicated, participated or paid. 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 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 June 30, 1996 was less than $12 million. However, at June 30, 1996, the Corporation had total exposure (loans outstanding plus unfunded commitments) in excess of $50 million to 7 separate highly leveraged borrowers. At June 30, 1996, $128 million of the HLT loan portfolio was on a cash basis. In addition, $6 million of the equity investments in HLT companies represented assets acquired in credit workouts, which are reported as other nonperforming assets. Net charge-offs of $23 million of HLT loans were recorded in the first half of 1996. In addition, the Corporation recorded a net gain of $75 million in connection with the sales and/or write-offs of its equity investments in highly leveraged companies during the first half of 1996. 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 $61 million during the first half of 1996 and that as of June 30, 1996, approximately $19 million of fees were deferred and will be recognized as future revenue. 34 PART II. OTHER INFORMATION 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. (10) Material Contracts iii(A) Management Contracts and Compensation Plans (12) Statement re Computation of Ratios (27) Financial Data Schedule (b) Reports on Form 8-K - Bankers Trust New York Corporation filed five reports on Form 8-K during the quarter ended June 30, 1996. - The report dated April 15, 1996 filed the Corporation's Press Release dated April 15, 1996, which announced the expected election of Frank N. Newman to the position of Chairman of the Board of Bankers Trust New York Corporation and Bankers Trust Company, and filed the Corporation's Press Release dated April 16, 1996, which announced earnings for the quarter ended March 31, 1996. The report also filed certain additional financial information relating to an historical analysis of net income by Organizational Unit for the years ending December 31, 1992 through 1995. - The report dated April 25, 1996 filed an underwriting agreement covering the issuance and sale by Bankers Trust New York Corporation of 7 3/8% Subordinated Notes due 2008 and various other exhibits related to the issuance. - The report dated May 3, 1996 filed the announcement dated May 3, 1996 that Equitable of Iowa Companies would acquire Golden American Life Insurance Company, an indirect wholly-owned subsidiary of Bankers Trust New York Corporation. - The report dated May 22, 1996 filed the Corporation's Press Release dated May 22, 1996 which announced that Wolfensohn & Co., Inc. will merge with Bankers Trust. - The report dated June 18, 1996 filed the Corporation's Press Release dated June 18, 1996 which announced that Donald L. Staheli, chairman of the board and chief executive officer of Continental Grain Company, had been elected a director of both Bankers Trust New York Corporation and Bankers Trust Company. 35 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 August 14, 1996. BANKERS TRUST NEW YORK CORPORATION BY: GEOFFREY M. FLETCHER Geoffrey M. Fletcher Senior Vice President and Principal Accounting Officer 36 37 38 BANKERS TRUST NEW YORK CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 EXHIBIT INDEX (4) Instruments Defining the Rights of Security Holders, Including Indentures (v) - Long-Term Debt Indentures (a) (10) Material Contracts iii (a) Management Contracts and Compensation Plans (1) Severance Agreement with Timothy T. Yates (2) Severance Agreement with Charles S. Sanford, Jr. (3) BT Investments (Australia) Limited Group Notional Equity Participation Plan (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 (27) Financial Data Schedule [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-10.III.A1 2 EXHIBIT 10(iii)(A)(1) SETTLEMENT AND NON-DISCLOSURE AGREEMENT TIMOTHY T. YATES, on his own behalf and on behalf of his heirs, executors, administrators, attorneys, successors and assigns (hereinafter collectively referred to as "Yates"), and BANKERS TRUST NEW YORK CORPORATION, on its own behalf and on behalf of its subsidiaries, divisions, affiliates, successors and assigns, and its and their respective officers, directors, agents, representatives and employees (hereinafter collectively referred to as "Bankers Trust" or the "Company"), have reached the within agreement ("Agreement") in settlement of any and all issues related to Yates' employment with, and separation from the employ of, Bankers Trust, such Agreement being reached on the following terms and conditions: i. Yates shall resign his employment with Bankers Trust effective April 16, 1996. ii. In full and complete satisfaction of all known and unknown claims against Bankers Trust, and in consideration for executing this Agreement, Yates will be entitled to the following: (1) On or about the eighth (8th) day following his execution of this Agreement, which Yates acknowledges may not be executed prior to April 16, 1996, his last day of employment, Bankers Trust shall continue Yates' base salary as a separation allowance for the period April 16, 1996 through March 11, 1997. Yates' group health insurance benefits will also be continued during this period, unless he obtains other employment, in which event he shall be paid the balance of his separation allowance in a lump sum, his group health insurance benefits will cease, and he shall be entitled to continue such benefits at his own expense, in accordance with applicable federal law. (2) On or about March 11, 1997, provided he has not materially violated any of the provisions of this Agreement, Yates will be provided with a $330,303.00 lump sum payment, less applicable taxes. The acceptance of said lump sum payment by Yates, shall constitute a reaffirmation of the waiver and release provisions set forth in paragraph iv of this Agreement, releasing all claims by Yates against Bankers Trust, whether known or unknown, as of the date of his acceptance of such payment. (3) Bankers Trust acknowledges that Yates has a Restricted Stock award outstanding of 23,900 shares. On or about April 16, 1996, provided he has executed this Agreement, such shares will vest and be distributed to Yates. Yates acknowledges that the payments and benefits set forth above shall be subject to applicable federal, state and local taxes, and all other deductions as required by law and Bankers Trust policy. Yates shall have no duty to seek other employment or to become self-employed to mitigate any payments or benefits to which he is entitled pursuant to this Agreement nor shall there be any offset against such payments or benefits in the event of such employment or self-employment. If Yates dies prior to the payment of any of the amounts set forth in this paragraph, Yates' estate or his designated beneficiary shall be paid such amounts. Bankers Trust reserves the right to accelerate any of the severance payments due Yates during the period April 17, 1996 through March 11, 1997. In such event, Yates' group health insurance benefits shall be handled as if he had obtained other employment, in accordance with paragraph ii(1) above. iii Yates agrees that he will not publicly or privately disparage Bankers Trust or any of the Company's products, services, divisions, affiliates, related companies or current or former officers, directors, trustees, employees, agents, administrators, representatives or fiduciaries. The Company agrees that it will not publicly or privately disparage Yates. Notwithstanding the foregoing, neither Yates nor the Company will be restricted from providing information about the other as required by a court or governmental agency or by applicable law. Further, the Company shall not be restricted from reporting information regarding Yates' performance while employed by the Company to internal or external auditors, special counsel or investigators, any applicable enforcement agencies, regulatory agencies, insurance carriers or in litigation involving Yates or the Company. iv. In exchange for the consideration described in paragraphs ii(1), (2) and (3), Yates hereby releases Bankers Trust from any and all liability arising from any and all acts including, but not limited to, those arising out of his employment relationship with the Company or his separation therefrom, or under any contract, tort, federal, state, or local fair employment practices or civil rights law including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Older Workers' Benefits Protection Act of 1990, the Civil Rights Act of 1866, the Americans With Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the New York State and New York City Civil Rights Laws, or any claim for physical or emotional distress or injuries, or any other duty or obligation of any kind or description. This release shall apply to all known, unknown, unsuspected and unanticipated claims, liens, injuries and damages including, but not limited to, claims of employment discrimination, indemnity for discharge, or claims sounding in tort or in contract, express or implied, as of the date of the execution of this Agreement. Notwithstanding the foregoing, Yates does not release his right to have the Company perform its obligations under this Agreement, including without limitation, his right to (i) indemnification pursuant to the by-laws of the Company and applicable Directors' and Officers' liability insurance as hereinafter described, (ii) any compensation or benefits pursuant to any plan or program that is part of the subject matter of this Agreement, (iii) pension, health or similar benefits under the Company's retirement programs. Yates also agrees not to initiate any legal action, charges or complaints against Bankers Trust in any forum whatsoever, in connection with the claims released by him pursuant to this paragraph. Bankers Trust expressly denies that it has violated any such law, statute, ordinance, contract, duty or obligation whatsoever, or that it committed any tort or engaged in any wrongful conduct with respect to Yates. Yates acknowledges that the consideration described in this Agreement is in excess of that to which he was otherwise entitled upon his termination under either applicable law, Company policy, or pursuant to any contractual agreement he may have with Bankers Trust. Bankers Trust agrees that Yates is entitled to indemnification to the fullest extent provided by the Company for Directors and Officers as set forth in the Company's bylaws as may exist from time to time, but in no event less favorable than available to other Directors and Officers. Yates shall also be entitled to Directors' and Officers' liability insurance in accordance with the terms of the policy provided by the Company for its Directors and Officers as amended from time to time. Subject to the terms of such bylaws, Yates shall have the right to choose his own counsel in connection with any investigatory or legal proceedings, in which Yates may be or become involved, and shall be reimbursed for reasonable attorneys' fees in connection with any such investigation or litigation. Additionally, Yates shall be given reasonable access to Company books and records relevant to such investigatory or legal proceedings to the extent permitted by the Company's bylaws or applicable rules, regulations or law. v. The terms of this Agreement, the claims that have been or could have been raised against Bankers Trust as of the date of this Agreement, and the facts and circumstances underlying any such claim shall not be admissible by Yates in any litigation or proceeding in any forum, except as required by law, for any purpose other than to secure enforcement of the terms and conditions of this Agreement. vi. Neither Yates nor the Company will publish, publicize, or disseminate or cause to be published, publicized or disseminated or permit to be published, publicized or disseminated, directly or indirectly, and will keep entirely confidential any information, data or documents (1) relating to Yates' employment with and separation from Bankers Trust, except that either party may discuss the fact that he was employed by Bankers Trust, his title, salary, compensation, responsibilities and that he resigned his position; or (2) relating to the terms of this Agreement or the fact that this Agreement exists, except for (a) the purpose of enforcing this Agreement should that ever become necessary; or (b) disclosures required by a court or governmental agency or by applicable law, or to any investigatory or regulatory agency with authority over the Company. Yates may disclose the terms of this Agreement to his spouse, accountants, attorneys or tax preparers, and, the Company may disclose the terms of this Agreement to its accountants, attorneys, tax preparers, its employees who have a need to know such terms, and as otherwise set forth above. Should this document or any terms hereof be disclosed publicly pursuant to applicable law, the terms of this Agreement with respect to non-disclosure shall no longer be applicable with respect to any items otherwise made public. Yates further agrees that he will not publish, publicize or disseminate, or cause to be published, publicized or disseminated or permit to be published, publicized or disseminated, directly or indirectly, and will keep entirely confidential any confidential information, data or documents relating to the operations of the Company, including, but not limited to, any trade secrets or other proprietary information, except as may be required by a court or governmental agency. Confidential information shall mean all information that is not known or available to the public concerning the business of the Company relating to its financial products, product development, trade secrets, customers, suppliers, finances, and business plans and strategies, including know-how, financial information concerning the Company and its customers and specifications, programs, documentation and manuals relating to all financial models, telecommunications and computer systems, software, hardware and applications developed or used by Bankers Trust. Confidential information shall include information that is, or becomes, known to the public as a result of a breach by Yates of the provisions of this Agreement. Bankers Trust reserves the right to seek appropriate damages, including attorneys' fees and injunctive relief, should Yates violate this Agreement. vii. Yates agrees that during the one-year period following the execution of this Agreement, he will not, directly or indirectly, personally solicit or induce or cause any third party to solicit or induce any Bankers Trust employees to work for him or any competitor of the Company, it being understood that if any such employee contacts Yates on his or her own initiative, Yates may thereafter discuss with such employee his or her working for him or a competitor, provided that in such situations, Yates agrees to notify the Chief Legal or Human Resources Officer of Bankers Trust and advise either executive of such contact and of the employee(s) making such contact in writing, before extending any offer of employment to such individual(s). viii. The failure of either party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of the Agreement. Any waiver must be in writing and signed by Yates or any authorized officer of the Company, as the case may be. ix. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its conflicts of laws provisions. x. If any of the provisions, terms, clauses, or waivers or releases of claims or rights contained in this Agreement are declared illegal, unenforceable, or ineffective in a legal forum, such provisions, terms, clauses, waivers, releases or claims or rights shall be deemed severable, such that all other provisions, terms, clauses, waivers, releases of claims and rights contained in this Agreement shall remain valid and binding upon both parties. xi. Yates agrees to voluntarily cooperate with the independent counsel's investigation of Bankers Trust's derivatives business, and with the Company in connection with any threatened, actual or future litigation or investigations by federal, state, or local agencies involving the Company, whether administrative, civil or criminal in nature, in which and to the extent his cooperation is deemed necessary by the Company in its sole discretion. The Company shall reimburse Yates for all reasonable out-of-pocket travel expenses incurred by him in connection with his voluntary cooperation under this paragraph. Such expenses shall be reimbursed after his submission to the Company of statements in such reasonable detail as the Company may require. Yates shall be entitled to a fee of $500 per hour for furnishing such voluntary cooperation, such fee to be paid promptly following his submission of a statement therefor. xii. Yates acknowledges that he has had up to twenty-one (21) days from the date he received this Agreement to consider the terms of this Agreement and further, acknowledges that he is fully aware of its contents and of its legal effects. Yates is also hereby advised by Bankers Trust to consult with an attorney regarding this Agreement. xiii. This Agreement has been executed freely, knowingly and voluntarily by Yates without duress, coercion, or undue influence, with a full and free understanding of its terms. This Agreement is revocable by either party for seven (7) days following its execution, after which time it shall become effective and enforceable. Notice of revocation must be sent in writing to the other party within the seven (7) day revocation period after this Agreement is signed by the party seeking revocation. If Yates wishes to revoke his agreement, his written notice of revocation must be received within the seven (7) day revocation period by Peter Gurney, Managing Director, at the following address: Bankers Trust New York Corporation, 130 Liberty Street, New York, New York. xiv. This Agreement supersedes all prior oral and written agreements, if any, with respect to the subject matter hereof between the parties. This Agreement may not be changed except by a writing signed by Yates and an authorized management representa tive of Bankers Trust. AGREED: AGREED: BANKERS TRUST NEW YORK CORPORATION on behalf of Bankers Trust /S/TIMOTHY T YATES By: /S/MARK BIELER TIMOTHY T. YATES Mark Bieler Executive Vice President April 17, 1996 April 10, 1996 Date Date the foregoing Settlement and Non-disclosure Agreement, and duly acknowledged to me that he executed the same. On this 17th day of April 1996, before me personally came TIMOTHY T. YATES to me known to be the individual On this 10th day of April described in and who executed 1996, before me personally came Mark Bieler, authorized representative for Bankers Trust New York Corporation, to me known to be the individual described in and who executed the foregoing Settlement and Non-disclosure Agreement, and duly acknowledged to me that he executed the same. /S/JOSEPHINE A. MONTI Notary Public /S/PERRY V.CAPITANI Notary Public EX-10.III.A2 3 EXHIBIT 10(iii)(A)(2) SETTLEMENT AND NON-DISCLOSURE AGREEMENT CHARLES S. SANFORD, JR., on his own behalf and on behalf of his heirs, executors, administrators, attorneys, successors and assigns (hereinafter collectively referred to as "Sanford"), and BANKERS TRUST NEW YORK CORPORATION, on its own behalf and on behalf of its subsidiaries, divisions, affiliates, successors and assigns, and its and their respective officers, directors, agents, representatives and employees (hereinafter collectively referred to as "Bankers Trust" or the "Company"), have reached the within agreement ("Agreement") in settlement of any and all issues related to Sanford's employment with, and retirement from the employ of, Bankers Trust, such Agreement being reached on the following terms and conditions: i. Sanford shall resign his position as Chairman of Bankers Trust effective April 16, 1996 and his employment on April 30, 1996. ii. In recognition of his many years of dedicated service to Bankers Trust and of his retirement from the Company and for executing this Agreement, Sanford will be provided with the following: (1) On or about the eighth (8th) day following his execution of this Agreement, which Sanford acknowledges may not be executed prior to April 30, 1996, his last day of employment, Bankers Trust shall contribute $2,000,000 to Sanford's ADCAP account. Sanford's entire ADCAP account will be distributed to him on or about May 31, 1996. Sanford hereby acknowledges and further agrees that the $2,000,000 contribution to his ADCAP account made pursuant to this paragraph, will be forfeited and he will be required to tender back such contribution to Bankers Trust within thirty (30) days of a request therefor, if he materially violates any provisions of this Agreement, within the one-year period following its execution. Sanford also acknowledges that should any request be made by Bankers Trust for the tender back of this contribution in the event of his material violation of this Agreement, and should he fail to tender back such contribution within the requisite thirty (30) day period, he shall be responsible for Bankers Trust's attorneys' fees and costs incurred in any action to recover such contribution. (2) On April 16, 1996, Bankers Trust shall provide Sanford with 75,000 stock options under the terms of the BTNY Corporation Stock Option Stock Award Plan. These options shall vest on the eighth (8th) day following the execution of this Agreement. Such options shall become first exercisable on April 16, 1997. These options together with all other previously awarded options that are currently outstanding shall continue to become exercisable in accordance with their terms and, notwithstanding any provisions of such options to the contrary, shall remain exercisable for the original terms under which they have been granted. That is, options which have previously been granted to Sanford and are currently outstanding may be exercised for the remainder of the original ten year exercise period. Any options remaining unexercised at the end of the respective periods will be forfeited. Sanford understands that upon execution of this Agreement by the Company, any Incentive Stock Options outstanding will be deemed "Modified" and thereby lose their tax qualified status. (3) Bankers Trust acknowledges that Sanford has a Restricted Stock award outstanding of 63,500 shares. On or about the eighth (8th) day after he executes this Agreement, such shares will vest and be distributed to Sanford. Sanford acknowledges that the payments and benefits set forth above shall be subject to applicable federal, state and local taxes, and all other deductions as required by law and Bankers Trust policy. Sanford shall have no duty to seek other employment or to become self-employed to mitigate any payments or benefits to which he is entitled pursuant to this Agreement nor shall there be any offset against such payments or benefits in the event of such employment or self-employment. If Sanford dies prior to the payment of any of the amounts set forth in this paragraph, Sanford's estate or his designated beneficiary shall be paid such amounts. iii. In exchange for the consideration described in paragraphs ii(1), (2) and (3), Sanford hereby releases Bankers Trust from any and all liability arising from any and all acts including, but not limited to, those arising out of his employment relationship with the Company or his separation therefrom, or under any contract, tort, federal, state, or local fair employment practices or civil rights law including, but not limited to, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers' Benefits Protection Act of 1990, or any claim for physical or emotional distress or injuries, or any other duty or obligation of any kind or description. This release shall apply to all known, unknown, unsuspected and unanticipated claims, liens, injuries and damages including, but not limited to, claims of employment discrimination, indemnity for discharge, or claims sounding in tort or in contract, express or implied, as of the date of the execution of this Agreement. Notwithstanding the foregoing, Sanford does not release his right to have the Company perform its obligations under this Agreement, including without limitation, his right to (i) indemnification pursuant to the by-laws of the Company, and applicable Directors' and Officers' Liability insurance as hereafter described (ii) any compensation or benefits pursuant to any plan or program that is part of the subject matter of this Agreement, (iii) pension, health or similar benefits under the Company's retirement programs. Sanford also agrees not to initiate any legal action, charges or complaints against Bankers Trust in any forum whatsoever, in connection with the claims released by him pursuant to this paragraph. Bankers Trust expressly denies that it has violated any such law, statute, ordinance, contract, duty or obligation whatsoever, or that it committed any tort or engaged in any wrongful conduct with respect to Sanford. Sanford acknowledges that the consideration described in this Agreement is in excess of that to which he was otherwise entitled upon his termination under either applicable law, Company policy, or pursuant to any contractual agreement he may have with Bankers Trust. Bankers Trust agrees that Sanford is entitled to indemnification to the fullest extent provided by the Company for Directors and Officers as set forth in the Company's bylaws as may exist from time to time, but in no event less favorable than available to other Directors and Officers. Sanford shall also be entitled to Directors' and Officers' liability insurance in accordance with the terms of the policy provided by the Company for its Directors and Officers as amended from time to time. Subject to the terms of such bylaws, Sanford shall have the right to choose his own counsel in connection with any investigatory or legal proceedings, in which Sanford may be or become involved, and shall be reimbursed for reasonable attorneys' fees in connection with any such investigation or litigation. Additionally, Sanford shall be given reasonable access to Company books and records relevant to such investigatory or legal proceedings to the extent permitted by the Company's bylaws or applicable rules, regulations or law. iv. The terms of this Agreement, the claims that have been or could have been raised against Bankers Trust as of the date of this Agreement, and the facts and circumstances underlying any such claim shall not be admissible by Sanford in any litigation or proceeding in any forum, except as required by law, for any purpose other than to secure enforcement of the terms and conditions of this Agreement. v. Neither Sanford nor the Company will publish, publicize, or disseminate or cause to be published, publicized or disseminated or permit to be published, publicized or disseminated, directly or indirectly, and will keep entirely confidential any information, data or documents (1) relating to Sanford's employment with and separation from Bankers Trust, except that either party may discuss the fact that he was employed by Bankers Trust, his title, salary, compensation, responsibilities and that he resigned his position; or (2) relating to the terms of this Agreement or the fact that this Agreement exists, except for (a) the purpose of enforcing this Agreement should that ever become necessary; or (b) disclosures required by a court or governmental agency or by applicable law, or to any investigatory or regulatory agency with authority over the Company. Sanford may disclose the terms of this Agreement to his spouse, accountants, attorneys or tax preparers, and, the Company may disclose the terms of this Agreement to its accountants, attorneys, tax preparers, its employees who have a need to know such terms, and as otherwise set forth above. Should this document or any terms hereof be disclosed publicly pursuant to applicable law, the terms of this agreement with respect to non-disclosure shall no longer be applicable with respect to any items otherwise made public. Sanford further agrees that he will not publish, publicize or disseminate, or cause to be published, publicized or disseminated or permit to be published, publicized or disseminated, directly or indirectly, and will keep entirely confidential any confidential information, data or documents relating to the operations of the Company, including, but not limited to, any trade secrets or other proprietary information, except as may be required by a court or governmental agency. Confidential information shall mean all information that is not known or available to the public concerning the business of the Company relating to its financial products, product development, trade secrets, customers, suppliers, finances, and business plans and strategies, including know-how, financial information concerning the Company and its customers and specifications, programs, documentation and manuals relating to all financial models, telecommunications and computer systems, software, hardware and applications developed or used by Bankers Trust. Confidential information shall include information that is, or becomes, known to the public as a result of a breach by Sanford of the provisions of this Agreement. Bankers Trust reserves the right to seek appropriate damages, including attorneys' fees and injunctive relief, should Sanford violate this Agreement. vi. The failure of either party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of the Agreement. Any waiver must be in writing and signed by Sanford or any authorized officer of the Company, as the case may be. vii. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its conflicts of laws provisions. viii. If any of the provisions, terms, clauses, or waivers or releases of claims or rights contained in this Agreement are declared illegal, unenforceable, or ineffective in a legal forum, such provisions, terms, clauses, waivers, releases or claims or rights shall be deemed severable, such that all other provisions, terms, clauses, waivers, releases of claims and rights contained in this Agreement shall remain valid and binding upon both parties. ix. Sanford agrees to voluntarily cooperate with the independent counsel's investigation of Bankers Trust's derivatives business, and with the Company in connection with any threatened, actual or future litigation or investigations by federal, state, or local agencies involving the Company, whether administrative, civil or criminal in nature, in which and to the extent his cooperation is deemed necessary by the Company in its sole discretion. The Company shall reimburse Sanford for all reasonable out-of-pocket travel expenses incurred by him in connection with his voluntary cooperation under this paragraph. Such expenses shall be reimbursed after his submission to the Company of statements in such reasonable detail as the Company may require. Sanford shall be entitled to a fee of $2,500 per day (pro-rated for a portion of a day) for furnishing such voluntary cooperation, such fee to be paid promptly following his submission of a statement therefor. x. Sanford acknowledges that he has had up to twenty- one (21) days from the date he received this Agreement to consider the terms of this Agreement and further, acknowledges that he is fully aware of its contents and of its legal effects. Sanford is also hereby advised by Bankers Trust to consult with an attorney regarding this Agreement. xi. This Agreement has been executed freely, knowingly and voluntarily by Sanford without duress, coercion, or undue influence, with a full and free understanding of its terms. This Agreement is revocable by either party for seven (7) days following its execution, after which time it shall become effective and enforceable. Notice of revocation must be sent in writing to the other party within the seven (7) day revocation period after this Agreement is signed by the party seeking revocation. If Sanford wishes to revoke his agreement, his written notice of revocation must be received within the seven (7) day revocation period by Peter Gurney, Managing Director, at the following address: Bankers Trust New York Corporation, 130 Liberty Street, New York, New York. xii. This Agreement supersedes all prior oral and written agreements, if any, with respect to the subject matter hereof between the parties. This Agreement may not be changed except by a writing signed by Sanford and an authorized management representative of Bankers Trust. AGREED: AGREED: BANKERS TRUST NEW YORK CORPORATION on behalf of Bankers Trust /S/CHARLES S. SANFORD, JR. By: /S/MARK BIELER CHARLES S. SANFORD, JR. Mark Bieler Executive Vice President April 30, 1996 April 10, 1996 Date Date On this 30th day of April 1996, On this 10th day of April before me personally came CHARLES 1996, before me personally S. SANFORD, JR. to me known to be came Mark Bieler, authorized the individual described in and representative for Bankers who executed the foregoing Trust New York Corporation, to Settlement and Non-disclosure me known to be the individual Agreement, and duly acknowledged described in and who executed to me that he executed the same. the foregoing Settlement and Non-disclosure Agreement, and duly acknowledged to me that he executed the same. /S/PERRY V. CAPITANI /S/PERRY V. CAPITANI Notary Public Notary Public EX-10.III.A3 4 10(iii) A (3) BT Investments (Australia) Limited Group Notional Equity Participation Plan Plan Document 1. Purpose The purpose of The Notional Equity Participation Plan is to attract, retain and motivate key employees of BT Investments (Australia) Limited Group ("BTIA") ("Eligible Employee(s)") to exert their best efforts on behalf of Bankers Trust New York Corporation ("BTNY") and its subsidiaries by providing a direct link between the creation of shareholder value and the rewards realized by such employees. 2. Definitions As used in this Plan, the following terms shall have the meanings set forth below: a) "Award Agreement" means an agreement between a Participant and the Company evidencing a notional award of Equity Participation ("EP") Units pursuant to the Plan. The EP Unit Agreement shall remain in effect until all EP Units and Plan Shares issued pursuant thereto have been forfeited, converted, terminated or distributed (Exhibit I). b) "BTIA Management" shall be the Management Committee of BTIA or its designate. c) "BTNY Board" shall mean the Board of Directors of BTNY. d) "Company" means BTIA or any of its subsidiaries. e) Deferral Period - shall mean a five-year period following the Performance Period in which Plan Shares are held in participants' accounts. f) "EP Unit" shall mean an Equity Participation Unit notionally awarded to a Participant, which shall be valued at the end of the Performance Period and converted into Plan Shares. The specific number of EP Units notionally awarded to each Participant will be specified in the individual's Award Agreement. g) "HR Committee" shall mean the Human Resources Committee of the Board of Directors of BTNY. h) "Management Committee" shall mean the Management Committee of BTNY or its designated successor. i) "Participant" shall mean any Eligible Employee that is a party to an Award Agreement. j) "Performance Curve" means the established relationship between performance and EP Unit value. k) "Performance Period" means the one-year period that will serve as the basis for the valuation of EP Units, based on actual performance as measured by the Performance Curve. 1) "Plan Shares" means notional shares of BTNY common stock converted from the value of EP Units at the end of the Performance Year. The methodology for converting the value of EP units into Plan shares shall be determined by the Management Committee subject to approval by the HR Committee. The dollar value of Plan Shares will be paid as a bonus at the end of the Deferral Period. Dividend equivalents will be paid on Plan shares in cash as taxable salary. m) "Vesting Date" means the second anniversary following the end of the Performance Year and is the date on which all related awards under the Plan are to become nonforfeitable. 3. Eligibility Upon recommendation by BTIA Management and approval by the Management Committee for recommendation to the HR Committee and approval by the HR Committee, participation in this Plan will be limited to those employees with the title of Vice President and above who in the opinion of the BTIA Management have the ability to impact the future direction and success of the Company. The determination of the size of an individual's award will be dependent on his or her ability to contribute to the overall achievement of the Company's long- term strategic goals and objectives in the opinion of the BTIA Management and subject to approval by both the Management Committee and the HR Committee. Specifically, this includes individual criteria such as: Role in setting goals for and managing the Company, Functional responsibility within the Company, and the potential impact on the Company's long-term success, Demonstrated success and track record in carrying out responsibilities, Critical skills and difficulty to replace. Award recommendations will be made on an annual basis by BTIA Management to and for approval by the Management Committee for further recommendation and approval by the HR Committee. 4. EP Unit Awards Participants will be notionally awarded EP Units based on a frequency selected by the HR Committee. The number of EP Units awarded to an individual will be specified in the Award Agreement. EP Units are subject to a valuation process which is based on performance criteria approved by the Management Committee for recommendation to and approval by the HR Committee (e.g., annual profit performance of BTNY). Higher or lower achievements will have a direct relationship to the assigned value for each unit as determined in the Performance Curve. Such criteria will be subject to annual review by BTIA management and subject to final approval by both the Management Committee and the HR Committee. An individual's year-end EP Unit value (total EP Units times year-end unit valuation) will be converted into Plan Shares. Plan Shares are to earn dividend equivalents equal to the regular quarterly dividends actually paid to shareholdings on BTNY common stock. 5. Vesting of Awards Subject to Sections 6, 9, 10 and 11, all awards granted under this Plan are to become nonforfeitable on the second anniversary following the end of the Performance Year 6. Payment of Awards Subject to section 9, at the end of the Deferral Period, Plan Shares will be valued and an amount equal to the market value of the Plan Shares will be paid to the participant as taxable salary. The participant's net after tax salary paid under the Plan will be used to purchase BTNY common stock shares in the participant's name. 7. Administration This Plan will be administered by BTIA Management, subject to approval by the Management Committee and the HR Committee. The HR Committee, based on recommendation by BTIA Management, as approved by the Management Committee, shall determine: The employees who will participate The number of EP Units to be awarded to each Participant The time or times when EP Units will be awarded The HR Committee shall determine: The Performance Curve schedules at the beginning of each Performance Period Any other conditions relating to the award of any EP Unit or Plan Shares. The HR Committee will interpret this Plan and make any determinations necessary in administering this Plan, including the ability to terminate the Plan at any time. 8. Rights of Participants EP Units and Plan Shares are solely devices for the measurement and determination of awards made to Participants under this Plan and as such: Do not constitute ownership or any rights of share ownership in BTIA, BTNY or any of its subsidiaries, Shall not constitute or be treated as an entitlement to any specific property of, or to participation in any trust fund maintained by BTIA, BTNY or any other affiliate or any of their subsidiaries, Shall not give the Participants any rights other than those of an employee of BTIA with respect to unpaid salary owing where already vested but not yet due. Shall represent unfunded and unsecured obligations of BTIA with respect to salary to be paid at the end of the Deferral Period, Shall not give Participants any rights to continued employment with BTIA or continued participation in this Plan. 9. Termination of Employment If the employment of a Participant terminates prior to the last day of the Deferral Period, vesting of awards will be subject to section 5 and payment, if due, will be made in accordance with this section. a. Retirement. When a Participant's employment terminates as a result of retirement in accordance with the terms of BTIA's retirement plan, EP Units not yet converted into Plan Shares will be converted at the end of the Performance Year. All Plan Shares are to remain outstanding and payment of awards as taxable salary will be made at the end of the Deferral Period. b. Death. In the event of a Participant's death, the Participant's estate or beneficiaries will receive payment of awards (as taxable salary) as held by the deceased as Plan Shares within 60 days. Any EP Units not yet converted into Plan shares will be converted at the end of the Performance Period into Plan Shares and payment of awards as taxable salary will take place at that time. Rights to any such payment shall pass by will or law of descent and payment in the following order: (a) to beneficiaries so designated by the Participant; if none, then (b) to a legal representative of the Participant, if none, then (c) to the persons entitled thereto as determined by a court of competent jurisdiction. c. Disability. In the event a Participant is deemed by the Company to be disabled, payment of the value of all outstanding Plan Shares will be made as taxable salary within 60 days following such determination. Any EP Units not yet converted into Plan Shares will be converted at the end of the Performance Year and paid as taxable salary at that time. Payment will be made to the Participant, if legally competent, or a committee or other legally designated guardian or representative if the Participant is legally incompetent by virtue of such disability. d. Other termination. If a Participant's employment is terminated for any other reason other than for fraud or gross negligence, except as otherwise provided for in Section 10 and subject to compliance with the terms of Section 11, EP Units not yet converted into Plan Shares will be converted at the end of the Performance Year. All Plan shares are to remain outstanding and payment of awards (as taxable salary) will be made at the end of the Deferral Period. Irrespective of any other provisions under the Plan, any Participant whose employment is terminated due to fraud or gross negligence will forfeit any unvested awards made to such participant under this Plan. 10. Cancellation of EP Units or EP Accounts Unless the Award Agreement specifies otherwise, BTIA Management, subject to approval of the Management Committee may cancel any unpaid or deferred awards at any time if the Participant is not in compliance with all applicable provisions of the EP Unit Agreement, the Plan or any other. contract between the Participant and the Company. 11. Covenant Not to Compete or Solicit a) Participants who resign and move to competitive employment prior to the Vesting Date forfeit all rights, other than any dividend equivalents paid prior to such termination, on unvested awards made under this Plan. Payment of vested awards will be made at the end of the Deferral Period. b) Payment of Awards made to Participants who resign and move to competitive employment after the Vesting Date of awards will be made as taxable salary at the end of the Deferral Period. c) Participants requested to resign by BTIA and who comply with the noncompetitive employment condition will receive payment of awards in accordance with section 9(d). d) BTIA Management will have absolute discretion to determine what constitutes competitive employment. 12. Nonassignability Except pursuant to paragraphs (b) and (c) of Section 9, payment of the value of Plan Shares as taxable salary shall not be assignable or transferable or payable to anyone other than the Participant to whom it was granted. 13. Adjustments Upon recommendation BTIA Management and approval of the Management Committee for recommendation to the HR Committee, the HR Committee shall have the right to make non adverse adjustments to the Performance Curve if it is deemed that a significant change in the capital structure or dividend policy of BTIA or other event has occurred that impacts the value of the Plan. 14. Corporation's Right to Conduct its Business/Affect Value This Plan and the existence of outstanding Plan Shares shall in no way restrict BTNY's ability to make business decisions affecting BTIA (including, but not limited to, such decisions as: transactions with affiliates, mergers and dissolutions) 15. Binding Effect This Plan shall be binding upon and enforceable against all successors and assigns of BTIA and BTNY. 16. Amendment, Modification Suspension or Discontinuance of This Plan The HR Committee may amend, modify, suspend or terminate the Plan at any time. However, no such action shall adversely affect any award rights previously created under the Plan to with respect to any then outstanding award, without the Participant's written consent. No other explanatory materials, statements, representations, or examples, oral or written, amend the Plan in any manner. In the event of a conflict between this Plan and the Stock Option Plan, the latter plan prevails, except to the extent that any award payable can only be paid as taxable salary in accordance with Section 6 of this Plan. 17. Effective Date of the Plan The Plan shall be effective on January 1, 1995. 18. Term of Plan No awards shall be granted pursuant to the Plan after December 31, 1996, but Awards theretofore granted may extend beyond that date. 19. Governing Law This Plan shall be construed and its provisions enforced and administered in accordance with the laws of Australia. Exhibit I BT Investments (Australia) Limited Group NOTIONAL EQUITY PARTICIPATION PLAN AWARD AGREEMENT BT Investments (Australia) Limited Group Notional Equity Participation Plan Award Agreement dated ___________________ between BT Investments (Australia) Limited Group ("BTIA"), a wholly owned subsidiary group of Bankers Trust New York Corporation (the "Corporation"), the Corporation and ___________________ (the "Participant"). WHEREAS, the purpose of BTIA Notional Equity Participation Plan Awards is to aid BTIA in securing and retaining key employees of outstanding ability and to motivate such employees to exert their best efforts on behalf of the BTIA, and have a favorable impact on the management growth and protection of the business of the Corporation and its subsidiaries; NOW THEREFORE in consideration of the Participant's services in the employment of the BTIA, the Human Resources Committee of the Corporation (the "Committee") notionally grants to the Participant, XXX Equity Participation Units ("EP Units") for the 19XX calendar year (the "performance Year") and in connection with such award, BTIA, the Corporation and the Participant agree as follows: 1. EP Units will be notionally cash valued on the last business day of the Performance Period according to a formula approved by the Committee. For 19XX, the formula is to be based on the net income before bonuses and taxes of BTIA. 2. The notional cash value of EP Units will be used to compute the number of notional shares (the "Plan Shares") of common stock of the Corporation to be credited to the Participant's 19XX BTIA Notional Equity Participation Plan account. For these purposes, the number of Plan Shares to be converted from the value of EP Units is based on the average of the mean high and low trading prices of the Corporation's common stock as traded on the last day of each month during the Performance Period. Plan Shares vest on the second anniversary following the end of the Performance Year. Three years following vesting, Plan Shares will be valued and an amount equal to the market value of the Plan Shares will be paid to the Participant as taxable salary. 3. The Participant shall not have either voting or dividend rights with respect to Plan Shares; however, the Participant shall be entitled to receive from BTIA dividend equivalent payments with respect to the Plan Shares that will coincide with the dividends actually paid by the Corporation on its common stock in terms of both payment amounts and periods. Dividend equivalent payments with respect to Plan Shares shall be paid as taxable salary. 4. EP Units and Plan Shares may not be sold, assigned, transferred, pledged or otherwise encumbered. 5. Neither this Agreement nor any action taken under this Agreement shall be construed as giving any employee any right to be retained in the employ of BTIA. 6. The Participant acknowledges that the Committee may in its sole discretion amend the terms and conditions of this Agreement including retroactive amendments; provided, however, no such amendment shall impair the Participant's rights (see Section 12 of the Plan) hereunder without his or her consent. 7. Except as otherwise provided for in this paragraph, the Participant agrees that if his or her employment terminates prior to the payment date of this ward, the award will be paid following the fifth anniversary of the end of the Performance Year. In cases where the termination is due to disability, Plan Shares will immediately vest and be valued. To the extent that EP Units have not yet been converted into Plan Shares, the value of the EP Units at the end of the Performance Year will be converted into Plan Shares and valued. The value of the Plan Shares will be paid as taxable salary within 60 days of the determination of such disability by BTIA. In the case of death, the Participant's estate or beneficiaries will receive within 60 days of the date of death, distribution of the value of Plan Shares held by the Participant as taxable salary. All EP Units not yet converted into Plan Shares as of the date of death will be converted into Plan Shares, valued and paid as taxable salary. In the event of a Change of Control as defined in Section 5 of the Bankers Trust New York Corporation 1994 Stock Option and Stock Award Plan, (a) EP Units will be valued immediately as set forth in the next sentence and such amount will be paid to the Participant in cash as taxable salary (b) all Plan Shares held by the Participant will vest and be immediately distributed in cash as taxable salary. The value of EP Units at a Change of Control shall equal the value such EP Units would have had if BTIA had achieved the Net Income before Bonus and Tax for the Performance Year equal to the Net Income before Bonus and Tax achieved by BTIA on an annualized basis as of the date on which the Change of Control Event occurred. In the event the Participant moves to competitive employment as described in Section 11 of the Plan following termination of employment with BTIA for any reason payment of vested awards as taxable salary will be made at the end of the Deferral Period and all unvested awards forfeited. Where the Participant's employment with BTIA terminates for fraud or gross negligence, all rights granted under this agreement are void and forfeited to the extent not previously paid as taxable salary. This Agreement shall be governed by the laws of Australia. IN WITNESS THEREOF, the BTIA and the Corporation have duly executed this BT Investment (Australia) Limited Group Notional Equity Participation Plan Award Agreement on the Date set forth above. BANKERS TRUST NEW YORK CORPORATION BY ___________________________________________ BANKERS TRUST INVESTMENTS (AUSTRALIA) LIMITED GROUP BY ___________________________________________ Agreed to this _____ date of _______________ 19 _____ _______________________________________________ Participant EX-12.A 5 EXHIBIT 12(a) BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES (dollars in millions)
Six Months Ended Year Ended December 31, June 30, 1991 1992 1993 1994 1995 1996 Earnings: 1. Income before income taxes and cumulative effects of accounting changes $ 834 $ 906 $1,550 $ 869 $ 215 $ 413 2. Add: Fixed charges excluding capitalized interest (Line 10) 3,614 3,099 3,148 3,884 5,356 2,606 3. Less: Equity in undistri- buted income of unconsolidated subsidiaries and affiliates 31 40 30 45 28 18 4. Earnings including interest on deposits 4,417 3,965 4,668 4,708 5,543 3,001 5. Less: Interest on deposits 1,589 1,119 1,013 965 1,359 635 6. Earnings excluding interest on deposits$2,828 $2,846 $3,655 $3,743 $4,184 $2,366 Fixed Charges: 7. Interest Expense $3,585 $3,072 $3,122 $3,858 $5,330 $2,593 8. Estimated interest component of net rental expense 29 27 26 26 26 13 9. Amortization of debt issuance expense - - - - - - 10. Total fixed charges including interest on deposits and excluding capitalized interest 3,614 3,099 3,148 3,884 5,356 2,606 11. Add: Capitalized interest - - - - - - 12. Total fixed charges 3,614 3,099 3,148 3,884 5,356 2,606 13. Less: Interest on deposits (Line 5) 1,589 1,119 1,013 965 1,359 635 14. Fixed charges excluding interest on deposits $2,025 $1,980 $2,135 $2,919 $3,997 $1,971 Consolidated Ratios of Earnings to Fixed Charges: Including interest on deposits (Line 4/Line 12) 1.22 1.28 1.48 1.21 1.03 1.15 Excluding interest on deposits (Line 6/Line 14) 1.40 1.44 1.71 1.28 1.05 1.20
EX-12.B 6 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)
Six Months Ended Year Ended December 31, June 30, 1991 1992 1993 1994 1995 1996 Earnings: 1. Income before income taxes and cumulative effect of accounting changes $ 834 $ 906 $1,550 $ 869 $ 215 $ 413 2. Add: Fixed charges excluding capitalized interest (Line 13) 3,614 3,099 3,148 3,884 5,356 2,606 3. Less: Equity in undistri- buted income of unconsolidated subsidiaries and affiliates 31 40 30 45 28 18 4. Earnings including interest on deposits 4,417 3,965 4,668 4,708 5,543 3,001 5. Less: Interest on deposits 1,589 1,119 1,013 965 1,359 635 6. Earnings excluding interest on deposits$2,828 $2,846 $3,655 $3,743 $4,184 $2,366 Preferred Stock Dividend Requirements: 7. Preferred stock dividend requirements $ 34 $ 30 $ 23 $ 28 $ 51 $ 29 8. Ratio of income from continuing operations before income taxes to income from continuing operations after income taxes 125% 142% 145% 141% 145% 143% 9. Preferred stock dividend requirements on a pretax basis $ 43 $ 43 $ 33 $ 39 $ 74 $ 41 Fixed Charges: 10. Interest Expense $3,585 $3,072 $3,122 $3,858 $5,330 $2,593 11. Estimated interest component of net rental expense 29 27 26 26 26 13 12. Amortization of debt issuance expense - - - - - - 13. Total fixed charges including interest on deposits and excluding capitalized interest 3,614 3,099 3,148 3,884 5,356 2,606 14. Add: Capitalized interest - - - - - - 15. Total fixed charges 3,614 3,099 3,148 3,884 5,356 2,606 16. Add: Preferred stock dividend require- ments - pretax (Line 9) 43 43 33 39 74 41 17. Total combined fixed charges and preferred stock dividend require- ments on a pretax basis 3,657 3,142 3,181 3,923 5,430 2,647 18. Less: Interest on deposits (Line 5) 1,589 1,119 1,013 965 1,359 635 19. Combined fixed charges and preferred stock dividend requirements on a pretax basis excluding interest on deposits $2,068 $2,023 $2,168 $2,958 $4,071 $2,012 Consolidated Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements: Including interest on deposits (Line 4/Line 17) 1.21 1.26 1.47 1.20 1.02 1.13 Excluding interest on deposits (Line 6/Line 19) 1.37 1.41 1.69 1.27 1.03 1.18
BANKERS TRUST NEW YORK CORPORATION 280 PARK AVENUE NEW YORK, NEW YORK 10017 Geoffrey M. Fletcher Senior Vice President and Principal Accounting Officer August 14, 1996 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 June 30, 1996 (the "Form 10-Q"). The Form 10-Q is being filed electronically through the EDGAR System. If there are any question 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 Attachment EX-27 7
9 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION AT JUNE 30, 1996 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-1996 JUN-30-1996 1,663 2,065 365 43,775 6,851 0 0 14,249 972 114,601 25,293 39,805 7,094 10,709 0 866 84 4,217 114,601 471 212 1,077 3,049 635 2,593 456 5 40 1,586 413 413 0 0 289 3.19 3.17 1.06 573 2 89 0 992 49 24 972 233 209 530 Short-term borrowings include the following: Securities sold under repurchase agreements 24,050 Other short-term borrowings 15,755 Total 39,805 Other liabilities include the following: Accounts payable and accrued expenses 4,531 Other liabilities 2,563 Total 7,094 Other interest income includes the following: Interest-bearing deposits with banks 83 Federal funds sold 59 Securities purchased under resale agreements 469 Securities borrowed 466 Total 1,077
-----END PRIVACY-ENHANCED MESSAGE-----