ITEM 1. BUSINESS - -----------------
CAUTIONARY STATEMENT
To the extent that any forward looking statements are made, the Company is necessarily unable to predict future changes in interest rates, economic activity and loan demand. As a result of variations in such factors, actual results may differ materially from any forward looking statements.
INTRODUCTION
The business of The Bank of New York Company, Inc. (the "Company") and its subsidiaries is described in the "Business Review" section of the Company's 1995 Annual Report to Shareholders which description is included in Exhibit 13 to this report and incorporated herein by reference. Also, the "Management's Discussion and Analysis" section included in Exhibit 13 contains financial and statistical information on the operations of the Company. Such information is herein incorporated by reference.
COMPETITION
The businesses in which the Company operates are very competitive. Competition is provided by both unregulated and regulated financial services organizations, whose products and services span the local, national, and global markets in which the Company conducts operations.
Savings banks, savings and loan associations, and credit unions actively compete for deposits, and money market funds and brokerage houses offer deposit-like services. These institutions, as well as consumer and commercial finance companies, national retail chains, factors, insurance companies and pension trusts, are important competitors for various types of loans. Issuers of commercial paper compete actively for funds and reduce demand for bank loans. For personal and corporate trust services and investment counseling services, insurance companies, investment counseling firms, and other business firms and individuals offer active competition. A wide variety of domestic and foreign companies compete for processing services.
CERTAIN REGULATORY CONSIDERATIONS
General
As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board under the Bank Holding Company Act ("BHC Act"). The Company is also subject to regulation by the New York State Department of Banking. Under the BHC Act, bank holding companies may not directly or indirectly acquire the ownership or control of more than 5% of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the Federal Reserve Board. In addition, bank holding companies are generally prohibited under the BHC Act from engaging in nonbanking activities, subject to certain exceptions.
The Company's subsidiary banks are subject to supervision and examination by applicable federal and state banking agencies. The Bank of New York ("BNY"), a New York chartered banking corporation and The Bank of New York (NJ) ("BNYNJ"), a New Jersey chartered banking corporation are members of the Federal Reserve System and are subject to regulation and supervision principally by the Federal Reserve Board. As banks insured by the FDIC, BNY and BNYNJ are also subject to examination by that agency. The Bank of New York (Delaware) ("BNY Del."), chartered in Delaware, and The Putnam Trust Company ("PTC"), chartered in Connecticut, are FDIC-insured non-member banks and therefore subject to regulation and supervision principally by the FDIC. BNY, BNYNJ, BNY (Del.), and PTC are also subject to supervision and examination by their respective state regulators,
the New York Banking Department, the New Jersey Banking Department, the Office of State Bank Commissioner of the State of Delaware, and the Connecticut Banking Department.
Both federal and state laws extensively regulate various aspects of the banking business, such as permissible types and amounts of loans and investments, permissible activities, and reserve requirements. These regulations are intended primarily for the protection of depositors rather than the Company's stockholders.
Capital Adequacy
Bank regulators have adopted risk-based capital guidelines for bank holding companies and banks. The minimum ratio of qualifying total capital to risk-weighted assets (including certain off-balance sheet items) is 8%. At least half of the total capital is to be comprised of common stock, retained earnings, noncumulative perpetual preferred stock, minority interests and for bank holding companies, a limited amount of qualifying cumulative perpetual preferred stock, less certain intangibles including goodwill ("Tier 1 capital"). The remainder ("Tier 2 capital") may consist of other preferred stock, certain other instruments, and limited amounts of subordinated debt and allowance for loan losses.
In addition, the Federal Reserve Board has established minimum Leverage Ratio (Tier 1 capital to average total assets) guidelines for bank holding companies and banks, and the FDIC has established substantially identical minimum leverage requirements for state chartered FDIC-insured, nonmember banks. The Federal Reserve Board's guidelines provide for a minimum Leverage Ratio of 3% for bank holding companies and banks that meet certain specified criteria, including those having the highest regulatory rating. All other banking organizations will be required to maintain a Leverage Ratio of at least 3% plus an additional cushion of 100 to 200 basis points. The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Furthermore, the guidelines indicate that the Federal Reserve Board will continue to consider a "Tangible Tier 1 Leverage Ratio" in evaluating proposals for expansion or new activities. The Tangible Tier 1 Leverage Ratio is the ratio of Tier 1 capital, less intangibles not deducted from Tier 1 capital, to average total assets. The Federal Reserve Board has not advised the Company of any specific minimum Leverage Ratio applicable to it. See "FDICIA" below.
Federal banking agencies have proposed or are considering regulations that would modify existing rules related to capital ratios with respect to various areas of risk including interest rate exposure and other market risk. The Company does not believe that the aggregate impact of these modifications would have a significant impact on its capital position.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), substantially revised the depository institution regulatory and funding provisions of the Federal Deposit Insurance Act ("FDIA") and made revisions to several other federal banking statutes. Among other things, FDICIA requires the federal banking regulators to take prompt corrective action in respect of FDIC-insured depository institutions that do not meet minimum capital requirements. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." Under applicable regulations, an FDIC-insured bank is defined to be well capitalized if it maintains a Leverage Ratio of at least 5%, a Tier 1 Capital Ratio of at least 6% and a Total Capital Ratio of at least 10% and is not otherwise in a "troubled condition" as specified by its appropriate federal regulatory agency. A bank is generally considered to be adequately capitalized if it is not defined to be well capitalized but meets all of its minimum capital requirements, i.e., if it has a Total Capital Ratio of 8% or greater, a Tier 1 Capital Ratio of 4% or greater and a Leverage Ratio of 4% or greater. A bank will be considered undercapitalized if it fails to meet any minimum required measure, significantly undercapitalized if it is significantly below any such measure and critically undercapitalized if it maintains a
level of tangible equity capital equal to or less than 2% of total assets. A bank may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating.
FDICIA generally prohibits an FDIC-insured depository institution from making any capital distribution (including payment of dividends) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. For an undercapitalized depository institution's capital restoration plan to be acceptable, its holding company must guarantee the capital plan up to an amount equal to the lesser of 5% of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. In the event of the parent holding company's bankruptcy, such guarantee would take priority over the parent's general unsecured creditors. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.
The Company's major banking subsidiaries are well capitalized.
The table below indicates capital ratios of the Company and its major banking subsidiaries at December 31, 1995 and 1994 and the respective guidelines for well capitalized institutions under FDICIA.
December 31, 1995 December 31, 1994
BNY BNY Company BNY Del. BNYNJ Company BNY Del. BNYNJ ------- --- ---- ----- ------- --- ---- ----- Well Capitalized Guidelines -----------
Tier 1 8.42% 7.84% 7.87% 15.27% 8.45% 8.26% 7.27% 18.04% 6% Total Capital 13.08 11.61 11.55 16.54 13.43 12.36 11.34 19.30 10 Leverage 8.46 7.63 8.48 7.85 7.89 7.28 7.72 8.58 5 Tangible Common Equity 8.00 7.71 7.78 7.89 7.39 7.66 7.28 8.76
At December 31, 1995, the amounts of capital by which the Company and its major banking subsidiaries exceed the well capitalized guidelines are as follows:
BNY Company BNY Del. BNYNJ (in millions) ------- --- ---- -----
Tier 1 $1,293 $767 $167 $200 Total Capital 1,650 669 138 141 Leverage 1,841 1,125 288 120
The following table presents the components of the Company's risk-based capital at December 31, 1995 and 1994:
(in millions) 1995 1994 ---- ---- Common Stock $5,119 $4,177 Preferred Stock 113 119 Adjustments: Intangibles (672) (330) Securities Valuation Allowance (58) 58 ------ ------ Tier 1 Capital 4,502 4,024
Qualifying Long-term Debt 1,827 1,774 Qualifying Allowance for Loan Losses 670 597 ------ ------ Tier 2 Capital 2,497 2,371 ------ ------ Total Risk-based Capital $6,999 $6,395 ====== ======
The following table presents the components of the Company's risk adjusted assets at December 31, 1995 and 1994: 1995 1994 -------------------- -------------------- Balance Balance sheet/ Risk sheet/ Risk notional adjusted notional adjusted (in millions) amount balance amount balance -------- -------- -------- -------- Assets - ------ Cash, Due From Banks and Interest- Bearing Deposits in Banks $ 5,693 $ 731 $ 3,895 $ 567 Securities 4,870 819 4,651 671 Trading Assets 762 60 940 124 Fed Funds Sold and Securities Purchased Under Resale Agreements 936 17 3,019 3 Loans 37,687 34,826 33,083 30,814 Allowance for Loan Losses (756) - (792) - Other Assets 4,528 3,441 4,083 3,273 ------- ------- -------- ------- Total Assets $53,720 39,894 $ 48,879 35,452 ======= ------- ======== ------- Off-Balance Sheet Exposures - --------------------------- Commitments to Extend Credit $ 54,274 9,220 $ 37,771 7,520 Securities Lending Indemnifications 15,068 - 15,326 - Standby Letters of Credit and Other Guarantees 6,081 4,228 7,240 4,515 Interest Rate Contracts 27,800 96 28,632 81 Foreign Exchange Contracts 28,005 140 51,021 236 -------- ------- -------- ------- Total Off-Balance Sheet Exposures $131,228 13,684 $139,990 12,352 ======== ------- ======== ------- Gross Risk Adjusted Assets 53,578 47,804
Less: Allowance for Loan Losses not Qualifying as Risk Based Capital 86 195 ------- ------- Risk Adjusted Assets $53,492 $47,609 ======= =======
A discussion of the Company's capital position is incorporated by reference from the caption "Capital Resources" in the "Management's Discussion and Analysis" section of Exhibit 13.
Brokered Deposits
The FDIC has adopted regulations under FDICIA governing the receipt of brokered deposits. Under the regulations, a bank cannot accept, rollover or renew brokered deposits unless (i) it is well capitalized or (ii) it is adequately capitalized and receives a waiver from the FDIC. A bank that cannot receive brokered deposits also cannot offer "pass-through" insurance on certain employee benefit accounts. Whether or not it has obtained such a waiver, an adequately capitalized bank may not pay an interest rate on any deposits in excess of 75 basis points over certain prevailing market rates specified by regulation. There are no such restrictions on a bank that is well capitalized. Because BNY and BNY Del. are well capitalized, the Company believes the brokered deposits regulation will have no material effect on the funding or liquidity of BNY and BNY Del. BNYNJ and PTC are well capitalized, but have no brokered deposits.
FDIC Insurance Assessments
BNY, BNY Del., BNYNJ, and PTC are subject to FDIC deposit insurance assessments. As required by FDICIA, the FDIC adopted a risk-based premium schedule to determine the assessment rates for most FDIC-insured depository institutions. Effective January 1, 1996, under the schedule, the premiums range from zero to $.27 for every $100 of deposits compared to a range of $.04 to $.31 for every $100 of deposits from June 1, 1995 to December 31, 1995 and a previous range of $.23 to $.31 for every $100 of deposits. Each financial institution is assigned to one of nine categories based on the institutions capital ratios and supervisory evaluations, and the premium paid by the institution is based on the category. Under the present schedule institutions in the highest of the three capital categories and the highest of three supervisory categories pay no premium and institutions in the lowest of these categories pay $.27 per $100 of deposits.
The FDIC is authorized to raise insurance premiums in certain circumstances. Any increase in premiums would have an adverse effect on the Company's earnings.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by a bank's federal regulatory agency.
Depositor Preference
The Omnibus Budget Reconciliation Act of 1993 provides for a national depositor preference on amounts realized from the liquidation or other resolution of any depository institution insured by the FDIC. That act requires claims against insured depositary institutions to be paid in the following order of priority: the receiver's administrative expenses; deposits; other general or senior liabilities of the institution; obligations subordinated to depositors or general creditors; and obligations to shareholders. Under an FDIC interim rule, which became effective August 13, 1993, "administrative expenses of the receiver" are defined as those incurred by the receiver in liquidating or resolving the affairs of a failed insured depository institution.
Acquisitions
The BHC Act generally limits acquisitions by the Company to commercial banks and companies engaged in activities that the Federal Reserve Board has determined to be so closely related to banking as to be a proper incident thereto. The Company's direct activities are generally limited to furnishing services to its subsidiaries and activities that qualify under the "closely related" and "proper incident" tests. Prior Federal Reserve Board approval is required under the BHC Act for new activities and acquisitions of most nonbanking companies.
The BHC Act, the Federal Bank Merger Act, and the New York Banking Law regulate the acquisition of commercial banks. The BHC Act requires the prior approval of the Federal Reserve Board for the direct or indirect acquisition of more than 5% of the voting shares of a commercial bank.
Effective September 29, 1995, The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA") permits bank holding companies, with Federal Reserve Board approval, to acquire banks located in states other than the bank holding company's home state without regard to whether the transaction is permitted under state law. In addition, IBBEA provides that, commencing June 1, 1997, national banks and state banks with different home states will be permitted to merge across state lines, with the approval of the appropriate federal banking agency, unless the home state of a participating bank passes legislation between the date of enactment of IBBEA and May 31, 1997 expressly prohibiting interstate mergers. IBBEA further provides that states may enact laws permitting interstate bank merger transactions prior to June 1, 1997 (opt-in statutes). A bank may also establish and operate a de novo branch in a state in which the bank does not maintain a branch if that state expressly permits de novo branching. Once a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. A bank that has established a branch in a state through de novo branching may establish and acquire additional branches in such state in the same manner and to the same extent as a bank having a branch in such state as a result of an interstate merger. One effect of this legislation, will be to permit the Company to merge two or more of its banking subsidiaries which, as a result, may create greater efficiency in its operations. New York and Connecticut have enacted opt-in statutes.
The merger of BNY with another bank would require the approval of the Federal Reserve Board or other federal bank regulatory authority and, if the surviving bank is a New York state bank, the New York Superintendent of Banks.
In reviewing bank acquisition and merger applications, the bank regulatory authorities will consider, among other things, the competitive effect of the transaction, financial and managerial issues including the capital position of the combined organization, and convenience and needs factors, including the applicant's record under the Community Reinvestment Act.
Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to its banks and to commit resources to support such banks in circumstances where it might not do so absent such policy. In addition, any loans by the Company to its banks would be subordinate in right of payment to deposits and to certain other indebtedness of its banks.
Restrictions on Transfer of Funds
Restrictions on the transfer of funds to the Company and subsidiary bank dividend limitations are discussed in Note 9 to the Consolidated Financial Statements included in Exhibit 13. Such discussion is incorporated herein by reference.
FDIA
Under the FDIA, a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989 in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled, FDIC-insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver, and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur in the absence of regulatory assistance.
Government Monetary Policies
The Federal Reserve Board has the primary responsibility for monetary policy; accordingly, its actions have an important influence on the demand for credit and investments and the level of interest rates and thus on the earnings of the Company.
Proposed Legislation
Proposals to change the laws and regulations governing the banking industry are frequently introduced in Congress, in the state legislatures and before the various bank regulatory agencies. The likelihood and timing of any such changes and the impact such changes might have on the Company and its subsidiaries, however, cannot be determined at this time.
ADDITIONAL FINANCIAL INFORMATION - -------------------------------------------------------------------------------- Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions) 1995 1994 1993 ================================================================= Aver- Aver- Aver- Average Inter- age Average Inter- age Average Inter- age Balance est Rate Balance est Rate Balance est Rate ----------------------------------------------------------------- Assets - ------ Interest -Bearing Deposits in Banks (Primarily Foreign) $ 1,682 $ 106 6.28% $ 1,266 $ 68 5.33% $ 452 $ 24 5.42% Federal Funds Sold and Securities Purchased Under Resale Agreements 3,280 193 5.89 3,653 161 4.39 3,149 97 3.06 Loans Domestic Offices Consumer 11,151 1,381 12.39 9,549 1,015 10.62 8,259 806 9.76 Commercial 13,215 1,047 7.92 12,340 833 6.76 11,998 741 6.18 Foreign Offices 11,055 805 7.28 10,140 564 5.56 10,170 485 4.77 ------- ------ ------- ------ ------- ------ Total Loans 35,421 3,233* 9.13 32,029 2,412* 7.53 30,427 2,032* 6.68 ------- ------ ------- ------ ------- ------ Securities U.S. Government Obligations 3,301 191 5.78 3,516 197 5.61 3,732 215 5.78 Obligations of States and Political Subdivisions 650 68 10.50 893 89 10.02 1,070 110 10.29 Other Securities, including Trading Securities Domestic Offices 1,076 65 6.10 1,341 70 5.25 1,358 64 4.74 Foreign Offices 233 14 6.31 191 11 5.64 192 14 7.36 ------- ------ ------- ------ ------- ------ Total Other Securities 1,309 79 6.13 1,532 81 5.30 1,550 78 5.06 ------- ------ ------- ------ ------- ------ Total Securities 5,260 338 6.45 5,941 367 6.19 6,352 403 6.36 ------- ------ ------- ------ ------- ------ Total Interest- Earning Assets 45,643 $3,870 8.48% 42,889 $3,008 7.01% 40,380 $2,556 6.33% ====== ====== ====== Allowance for Loan Losses (739) (906) (1,045) Cash and Due from Banks 2,971 2,827 2,735 Other Assets 5,178 5,470 4,574 ------- ------- ------- Total Assets $53,053 $50,280 $46,644 ======= ======= ======= Assets Attributable to Foreign Offices 25.73% 24.30% 24.37% ===== ===== =====
*Includes fees of $134 million in 1995, $118 million in 1994, and $103 million in 1993. Nonaccrual loans are included in the average loan balance; the associated income, recognized on the cash basis, is included in interest. Taxable equivalent adjustments were $40 million in 1995, $46 million in 1994, and $54 million in 1993, and are based on the federal statutory tax rate (35%) and applicable state and local taxes.
Continued on page 10
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
1995 1994 1993 ============================================================== Aver- Aver- Aver- Average Inter- age Average Inter- age Average Inter- age Balance est Rate Balance est Rate Balance est Rate -------------------------------------------------------------- Liabilities and Shareholders' Equity - --------------- Interest-Bearing Deposits Domestic Offices Money Market Rate Accounts $ 3,451 $ 153 4.44% $ 3,593 $ 108 3.01% $ 3,666 $ 91 2.48% Savings 7,909 243 3.07 8,166 190 2.32 8,379 198 2.37 Certificates of Deposit of $100,000 or More 1,673 95 5.68 1,041 42 4.03 1,189 36 3.00 Other Time Deposits 2,560 143 5.60 2,296 97 4.24 2,701 119 4.39 ------- ------ ------- ------ ------- ------ Total Domestic Offices 15,593 634 4.07 15,096 437 2.90 15,935 444 2.78 ------- ------ ------- ------ ------- ------ Foreign Offices Banks in Foreign Countries 3,968 218 5.48 2,917 125 4.30 2,829 93 3.28 Government and Official Institutions 1,394 81 5.78 1,384 60 4.37 1,306 57 4.34 Other Time and Savings 6,041 332 5.52 5,689 220 3.84 3,752 107 2.87 ------- ------ ------- ------ ------- ------ Total Foreign Offices 11,403 631 5.54 9,990 405 4.05 7,887 257 3.26 ------- ------ ------- ------ ------- ------ Total Interest- Bearing Deposits 26,996 1,265 4.69 25,086 842 3.35 23,822 701 2.94 ------- ------ ------- ------ ------- ------ Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,804 161 5.75 2,843 106 3.73 3,467 102 2.94 Other Borrowed Funds 3,962 246 6.22 4,135 191 4.63 2,348 86 3.66 Long-Term Debt 1,773 130 7.30 1,530 106 6.93 1,729 117 6.79 ------- ------ ------- ------ ------- ------ Total Interest- Bearing Liabilities 35,535 $1,802 5.07% 33,594 $1,245 3.71% 31,366 $1,006 3.21% ====== ====== ====== Noninterest- Bearing Deposits Domestic Offices 9,012 8,897 8,946 Foreign Offices 53 58 69 ------- ------- ------- Total Noninterest- Bearing Deposits 9,065 8,955 9,015 ------- ------- ------- Other Liabilities 3,685 3,594 2,366 Preferred Stock 115 157 334 Common Shareholders' Equity 4,653 3,980 3,563 ------- ------- ------- Total Liabilities and Shareholders' Equity $53,053 $50,280 $46,644 ======= ======= ======= Net Interest Earnings and Interest Rate Spread $2,068 3.41% $1,763 3.30% $1,550 3.12% ====== ====== ====== Net Yield on Interest-Earnings Assets 4.53% 4.11% 3.84% ==== ==== ===== Liabilities Attributable to Foreign Offices 24.94% 22.79% 19.74% ===== ===== =====
Rate/Volume Analysis on a Taxable Equivalent Basis (in millions) - ---------------------------------------------------------------- 1995 vs. 1994 1994 vs. 1993 -------------------------------------------------------- Increase (Decrease) Increase (Decrease) due to change in: due to change in: ---------------- Total ----------------- Total Average Average Increase Average Average Increase Balance Rate (Decrease) Balance Rate (Decrease) ------- ------- ---------- ------- ------- --------- Interest Income - --------------- Interest-Bearing Deposits in Banks $ 25 $ 13 $ 38 $ 44 $ - $ 44 Federal Funds Sold and Securities Purchased Under Resale Agreements (18) 50 32 17 47 64 Loans Domestic Offices Consumer 184 182 366 134 75 209 Commercial 62 152 214 22 70 92 Foreign Offices 54 187 241 (1) 80 79 ----- ----- ----- ----- ----- ----- Total Loans 300 521 821 155 225 380 Securities U.S. Government Obligations (12) 6 (6) (12) (6) (18) Obligations of States and Political Subdivisions (25) 4 (21) (18) (3) (21) Other Securities, including Trading Assets Domestic Offices (15) 10 (5) (1) 7 6 Foreign Offices 2 1 3 - (3) (3) ----- ----- ----- ----- ----- ----- Total Other Securities (13) 11 (2) (1) 4 3 ----- ----- ----- ----- ----- ----- Total Securities (50) 21 (29) (31) (5) (36) ----- ----- ----- ----- ----- ----- Total Interest Income 257 605 862 185 267 452 ----- ----- ----- ----- ----- ----- Interest Expense - ---------------- Interest-Bearing Deposits Domestic Offices Money Market Rate Accounts (4) 49 45 (2) 19 17 Savings (6) 59 53 (5) (3) (8) Certificate of Deposits of $100,000 or More 32 21 53 (5) 11 6 Other Time Deposits 12 34 46 (18) (4) (22) ----- ----- ----- ----- ----- ----- Total Domestic Offices 34 163 197 (30) 23 (7) ----- ----- ----- ----- ----- ----- Foreign Offices Banks in Foreign Countries 52 41 93 3 29 32 Government and Official Institutions - 21 21 3 - 3 Other Time and Savings 14 98 112 67 46 113 ----- ----- ----- ----- ----- ----- Total Foreign Offices 66 160 226 73 75 148 ----- ----- ----- ----- ----- ----- Total Interest- Bearing Deposits 100 323 423 43 98 141 Federal Funds Purchased and Securities Sold Under Repurchase Agreements (1) 56 55 (20) 24 4 Other Borrowed Funds (8) 63 55 77 28 105 Long-Term Debt 18 6 24 (13) 2 (11) ----- ----- ----- ----- ----- ----- Total Interest Expense 109 448 557 87 152 239 ----- ----- ----- ----- ----- ----- Change in Net Interest Income $ 148 $ 157 $ 305 $ 98 $ 115 $ 213 ===== ===== ===== ===== ===== =====
Changes which are not solely due to balance changes or rate changes are allocated to such categories on the basis of the respective percentage changes in average balances and average rates.
Interest-Rate Sensitivity - -------------------------
The Company actively manages interest-rate sensitivity (the exposure of net interest income to interest rate movements). The relationship between interest-earning assets and interest-bearing liabilities is closely monitored. The Company attempts to develop and follow policies which are flexible enough to capitalize on opportunities, while minimizing adverse effects on earnings when changes in short-term and long-term interest rates occur. The Company uses complex simulation models to adjust the structure of its assets and liabilities in response to interest rate exposures. The Company considers three basic scenarios to model interest rate sensitivity; these are base line, high rate, and low rate. The base line scenario is the Company's estimated most likely path for future short-term interest rates. The base line scenario forecast in January 1996 assumes rates will decline slightly during the first quarter of 1996 and then rise back to year end 1995 levels during the fourth quarter of 1996. The "high rate" scenario assumes a 153 basis point increase from the base line scenario. The "low rate" scenario assumes the average rate declines 50 basis points under the base line scenario. Additionally, other scenarios are reviewed to examine the impact of other interest rate changes. The Company quantifies interest rate sensitivity by calculating the change in net interest income between the three scenarios over a 12 month measurement period. Net interest income as calculated by the earnings simulation model under the base line scenario becomes the standard. The measurement of interest rate sensitivity is the percentage change in net interest income calculated by the model under high rate versus base-line scenario and under low rate versus base-line scenario. The scenarios do not include the adjustments that management would make as rate expectations change. The Company's policy limit for fluctuations in net interest income resulting from either the high rate or low rate scenario is 6.00 percent. Based upon the January 1996 outlook, if interest rates were to rise to follow the high rate scenario, then net interest income during the policy measurement period would be positively affected by 2.26 percent. If interest rates were to follow the low rate scenario, then net interest income would be negatively affected by 0.22 percent (assuming management took no actions). In addition to the policy limit discussed above, the Company also has a global mismatch limit to control the impact of interest rate fluctuations on the Company's earnings. The Company's global mismatch is defined as the absolute value of the Company's asset repricings less liability repricings in 24 maturity bands ranging from one day to over 10 years. Off balance sheet instruments, such as swaps and futures used to hedge balance sheet items are included in the calculation of the global mismatch. Each year the Company's Board of Directors approves both mismatch limits and earnings at risk limits. The global mismatch is reviewed weekly by senior management. Estimated market value changes under various interest rate scenarios are also monitored. The following table reflects the year-end position of the Company's interest-earning assets and interest-bearing liabilities that either reprice or mature within the designated time periods. The interest sensitivity indicated by this table is not necessarily indicative of the Company's interest sensitivity models discussed above because within each time period, assets and liabilities reprice on different dates and at different levels, and interest sensitivity gaps change daily. A positive interest sensitivity gap, for a particular time period, is one in which more assets reprice or mature than liabilities. A negative interest sensitivity gap results from a greater amount of liabilities repricing or maturing. A positive gap implies that there are more rate sensitive assets than liabilities which suggests that as interest rates rise, the return on assets will rise faster than the funding costs. Conversely, a negative gap indicates a higher ratio of rate sensitive liabilities than assets. In such case, if interest rates rise, then funding costs will rise at a faster rate than the return on assets. The cumulative gap is the sum of the dollar gap for sequential time periods.
December 31, 1995 -------------------------------------------------- Within Within Within Greater Within 2-3 4-6 7-12 Than 1 Mo. Mos. Mos. Mos. 12 Mos. Total ------ ------ ------ ------ ------- ------- (in millions) Interest-Earning Assets - ----------------------- Foreign Offices $ 6,512 $ 3,995 $ 2,021 $ 384 $ 172 $13,084 Domestic Offices Loans 18,999 599 933 693 4,910 26,134 Securities 107 110 113 487 3,161 3,978 Trading Assets 629 - - - - 629 Federal Funds Sold and Securities Purchased Under Resale Agreement 933 - - - - 933 ------- ------- ------- ------ ------- ------- Total 27,180 4,704 3,067 1,564 8,243 $44,758 ------- ------- ------- ------ ------- =======
Interest-Bearing Liabilities - ---------------------------- Foreign Offices 8,390 610 620 111 - 9,731 Domestic Offices Interest-Bearing Deposits Money Market Rate Accounts 4,057 - - - - 4,057 Savings 6,962 - - 13 1,243 8,218 Certificates of Deposit of $100,000 or More 617 552 213 164 568 2,114 Other Time Deposits 365 270 352 256 373 1,616 ------- ------- ------- ------ ------- ------- 20,391 1,432 1,185 544 2,184 25,736 ------- ------- ------- ------ ------- ------- Federal Funds Purchased and Other Borrowed Funds 5,716 291 896 451 3 7,357 Long-Term Debt - - 57 - 1,791 1,848 ------- ------- ------- ------ ------- -------
Noninterest-Bearing Sources of Funds 4,065 158 237 474 4,883 9,817 - ------------------- ------- ------- ------- ------ ------- ------- Total 30,172 1,881 2,375 1,469 8,861 $44,758 ======= Effect of Financial Futures and Swaps 827 (1,354) 112 173 242 - ------------------- ------- ------- ------- ------ ------- Interest-Sensitive Gap $(2,165) $ 1,469 $ 804 $ 268 $ (376) - ---------------------- ======= ======= ======= ====== ======= Cumulative Interest- Sensitivity Gap $(2,165) $ (696) $ 108 $ 376 $ - - -------------------- ======= ======= ======= ====== =======
LOANS AND PROVISION AND ALLOWANCE FOR LOAN LOSSES - -------------------------------------------------
The provision for loan losses was $330 million in 1995, compared with $162 million in 1994 and $284 million in 1993. The increase in the provision compared with 1994 was principally related to charge-offs in the credit card portfolio. In 1995, the Company continued to experience improvement in the asset quality of business loans as nonperforming loans dropped.
At December 31, 1995, the domestic commercial real estate portfolio had approximately 81% of its loans in New York and New Jersey, 4% in California, 3% in New England, and 2% in Pennsylvania; no other state accounts for more than 1% of the portfolio. This portfolio consists of the following types of properties:
Business loans secured by real estate 44% Offices 26 Retail 9 Mixed-Used 5 Hotels 4 Condominiums and cooperatives 4 Industrial/Warehouse 2 Land 1 Other 5 ---- 100% ====
At December 31, 1995 and 1994, the Company's nonperforming real estate loans and real estate acquired in satisfaction of loans aggregated $114 million and $119 million, respectively. Net charge-offs of real estate loans were $16 million in 1995 and $6 million in 1994. In addition, other real estate charges were $5 million and $11 million in 1995 and 1994.
At December 31, 1995 the Company's LDC exposures consisted of $49 million in medium-term loans (and no material commitments), $447 million in short-term loans, $9 million in accrued interest, and $148 million in equity investments. At December 31, 1995, the allowance for loan losses associated with LDC loans was $74 million. In addition, the Company has $316 million of debt securities to emerging market countries, including $280 million (book value) of bonds whose principal payments are collateralized by U.S. Treasury zero coupon obligations and whose interest payments are partially collateralized.
The Company's consumer loan portfolio is comprised principally of credit card, other installment, and residential loans. Residential and auto loans are collateralized, thereby reducing the risk. Credit card delinquencies and charge-offs increased compared to last year. Credit card accounts past due over 30 days were 4.50% of managed outstandings at the end of 1995 compared with 3.34% at the end of 1994. Credit card net charge-offs were $267 million in 1995 compared to $149 million in 1994. The 1995 and 1994 amounts exclude $2 million and $32 million in net charge-offs related to the portion of the portfolio that was securitized. As a percentage of average credit card outstandings, net charge-offs were 3.44% in 1995 compared to 2.47% in 1994. On a managed receivables basis, net charge-offs as a percentage of average outstandings were 3.44% in 1995 compared to 2.68% in 1994. Other consumer net charge-offs were $5 million in 1995 and $7 million in 1994.
The Company's loans to the energy industry primarily consist of credits with investor-owned electric and gas utilities, and oil, gas and mining companies. Nonperforming loans in this industry amounted to $11 million at year-end 1995 and 1994. There were no charge-offs in 1995 and 1994.
The Company's loans to the communications, entertainment, and publishing industries primarily consist of credits with cable television operators, broadcasters, magazine and newspaper publishers, motion picture theaters and regional telephone companies. There were no nonperforming communications loans at December 31, 1995 and 1994, and there were no charge-offs in 1995 and 1994.
The Company's portfolio of loans for purchasing or carrying securities is comprised largely of overnight loans which are fully collateralized, with appropriate margins, by marketable securities. Throughout its many years of experience in this area, the Company has rarely experienced a loss.
The Company makes short-term, collateralized loans to mortgage bankers to fund mortgages sold to investors. There were no nonperforming loans at December 31, 1995 and 1994, and there were no charge-offs in 1995 and 1994.
Based on an evaluation of individual credits, historical loan losses, and global economic factors, the Company has allocated its allowance for loan losses as follows:
1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Real Estate Loans 7% 9% 8% 9% 10% Other Domestic Commercial and Industrial Loans 57 56 64 64 62 Consumer Loans 25 16 10 9 10 Foreign Loans (excluding medium-term LDC loans) 1 7 6 6 6 LDC Loans 10 12 12 12 12 ---- ---- ---- ---- ---- 100% 100% 100% 100% 100% ==== ==== ==== ==== ====
Such an allocation is inherently judgmental, and the entire allowance for loan losses is available to absorb loan losses regardless of the nature of the loan.
The following table details changes in the Company's allowance for loan losses for the last five years.
(dollars in millions) 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Loans Outstanding, December 31, $37,687 $33,083 $30,570 $29,497 $30,335 Average Loans Outstanding 35,421 32,029 30,427 30,345 32,719
Allowance for Loan Losses - ------------------------- Balance, January 1 Regular Domestic $ 637 $ 794 $ 878 $ 889 $ 831 Foreign 57 60 70 60 62 Less Developed Countries 98 116 124 135 218* ------- ------- ------- ------- ------- Total, January 1 792 970 1,072 1,084 1,111 ------- ------- ------- ------- ------- Allowance of Acquired Companies and Other Changes 8 - - 56 (10) Credit Card Securitizations 3 14 1 - (18) Charge-Offs Domestic Commercial and Industrial (56) (158) (142) (311) (358) Real Estate & Construction (19) (6) (71) (103) (165) Consumer Loans (309) (191) (173) (181) (226) Foreign (24) (38) (54) (20) (32) Less Developed Countries (24) (18) (9) (13) (39) ------- ------- ------- ------- ------- Total (432) (411) (449) (628) (820) ------- ------- ------- ------- ------- Recoveries Domestic Commercial and Industrial 14 14 28 66 11 Real Estate & Construction 3 - 2 13 1 Consumer Loans 37 35 29 26 21 Foreign 1 8 2 10 4 Less Developed Countries - - 1 2 6 ------- ------- ------- ------- ------- Total 55 57 62 117 43 Net Charge-Offs (377) (354) (387) (511) (777) ------- ------- ------- ------- ------- Provision Domestic 356 135 242 423 742 Foreign (26) 27 42 20 36 ------- ------- ------- ------- ------- Total 330 162 284 443 778 ------- ------- ------- ------- ------- Balance, December 31, Regular Domestic 674 637 794 878 889* Foreign 8 57 60 70 60 Less Developed Countries 74 98 116 124 135* ------- ------- ------- ------- ------- Total, December 31, $ 756 $ 792 $ 970 $ 1,072 $ 1,084 ======= ======= ======= ======= ======= Ratios - ------ Net Charge-Offs to Average Loans Outstandings 1.06% 1.11% 1.27% 1.68% 2.37% ======= ======= ======= ======= ======= Net Charge-Offs to Total Allowance 49.87% 44.70% 39.90% 47.67% 71.68% ======= ======= ======= ======= ======= Total Allowance to Year-End Loans Outstanding 2.01% 2.40% 3.17% 3.63% 3.57% ====== ======= ======= ======= =======
*Includes a $50 million transfer from the LDC Allowance for Loan Losses to the Regular Allowance.
Nonperforming Assets - -------------------- A summary of nonperforming assets is presented in the following table.
(in millions) December 31,
1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Nonaccrual - ---------- Domestic $ 184 $ 220 $ 408 $ 581 $1,014 Foreign (including Medium-term LDC) 41 77 130 198 146 ------ ------ ------ ------ ------ 225 297 538 779 1,160
Reduced Rate (Domestic) - - 2 9 13 - ------------ ------ ------ ------ ------ ------ 225 297 540 788 1,173
Real Estate Acquired in - ----------------------- Satisfaction of Loans 72 56 99 268 369 - --------------------- ----- ------ ------ ------- ------
$ 297 $ 353 $ 639 $1,056 $1,542 ===== ====== ====== ====== ====== Past Due 90 Days or More - ------------------------ and Still Accruing Interest - --------------------------- Domestic $ 270 $ 163 $ 156 $ 218 $ 178 Foreign - - - - 66 ------ ------ ------ ------ ------ $ 270 $ 163 $ 156 $ 218 $ 244 ====== ====== ====== ====== ======
Securities - ---------- The following table shows the maturity distribution by carrying amount and yield (not on a taxable equivalent basis) of the Company's securities portfolio at December 31, 1995.
States and U.S. Government Political U.S. Government Agency Subdivisions --------------- --------------- ------------ Amount Yield Amount Yield Amount Yield ------ ----- ------ ----- ------ ----- (dollars in millions)
Securities Held- - ---------------- to-Maturity ----------- One Year or Less $ 14 5.35% $ 40 4.60% $ 143 4.41% Over 1 through 5 Years 2 5.21 179 5.55 62 5.69 Over 5 through 10 Years - - 2 7.00 65 6.44 Over 10 years - - - - 97 7.07 Mortgage-Backed Securities - - - - - - ------ ----- ------ $ 16 5.33% $ 221 5.39% $ 367 5.69% ====== ===== ====== Securities Available- - -------------------- for-Sale - ---------- One Year or Less $ 481 5.62% $ - -% $ 31 8.93% Over 1 through 5 Years 1,512 5.33 - - 35 6.78 Over 5 through 10 Years 836 5.75 - - 42 6.32 Over 10 years 8 7.65 - - 153 6.40 Equity Securities - - - - - - ----- ----- ----- $2,837 5.51% $ - - $ 261 6.74% ====== ===== =====
Other Bonds, Mortgage-Backed Notes and and Equity Debentures Securities ------------- ------------ Amount Yield Amount Yield Total ------ ----- ------ ----- ----- (dollars in millions)
Securities Held- - ---------------- to-Maturity ----------- One Year or Less $ 24 3.43% $ - -% $ 221 Over 1 through 5 Years 67 6.40 - - 310 Over 5 through 10 Years 60 4.31 - - 127 Over 10 years 273 5.81 - - 370 Mortgage-Backed Securities - - 224 7.34 224 ---- ---- ------ $424 5.56% $224 7.34% $1,252 ==== ==== ====== Securities Available- - -------------------- for-Sale - ---------- One Year or Less $ 12 5.66% $ - -% $ 524 Over 1 through 5 Years 15 3.73 - - 1,562 Over 5 through 10 Years 12 0.08 - - 890 Over 10 years 11 6.07 - - 172 Equity Securities - - 470 3.39 470 ----- ---- ------ $ 50 3.87% $470 3.39% $3,618 ===== ==== ======
Loans - -----
The following table shows the maturity structure of the Company's commercial loan portfolio at December 31, 1995. Over 1 Year 1 Year Through Over or Less 5 Years 5 Years Total ------- ----------- ------- ----- (in millions) Domestic - -------- Real Estate, Excluding Loans Collateralized by 1-4 Family Residential Properties $ 454 $1,443 $ 962 $ 2,859 Commercial and Industrial Loans 3,803 5,139 3,083 12,025 Other, Excluding Loans to Individuals and those Collateralized by 1-4 Family Residential Properties 4,268 750 202 5,220 ------- ------ ------ ------- 8,525 7,332 4,247 20,104 Foreign 1,731 902 1,711 4,344 - ------- ------- ------ ------ ------- Total $10,256 $8,234 $5,958 $24,448 ======= ====== ====== =======
Loans with: Predetermined Interest Rates $ 638 $ 384 $1,244 $ 2,266 Floating Interest Rates 9,618 7,850 4,714 22,182 ------- ------ ------ ------- Total $10,256 $8,234 $5,958 $24,448 ======= ====== ====== =======
Deposits - -------- The aggregate amount of deposits by foreign customers in domestic offices was $4.0 billion, $3.2 billion, and $2.1 billion at December 31, 1995, 1994, and 1993. The following table shows the maturity breakdown of domestic time deposits of $100,000 or more at December 31, 1995.
Time (in millions) Certificates Deposits- of Deposits Other Total -----------------------------------------------
3 Months or Less $1,092 $2,104 $3,196 Over 3 Through 6 Months 219 6 225 Over 6 Through 12 Months 169 12 181 Over 12 Months 616 34 650 ------ ------ ------ Total $2,096 $2,156 $4,252 ====== ====== ======
The majority of deposits in foreign offices are time deposits in denominations of $100,000 or more.
Other Borrowed Funds - --------------------- Information related to other borrowed funds in 1995, 1994, and 1993 is presented in the table below. 1995 1994 1993 ---------------- --------------- --------------- (dollars in millions) Average Average Average Amount Rate Amount Rate Amount Rate ------ ------- ------ ------- ------ -------
Federal Funds Purchased - ----------------------- and Securities Sold Under ------------------------- Repurchase Agreements --------------------- At December 31 $3,933 4.61% $1,502 4.91% $2,711 2.85% Average During Year 2,804 5.75 2,843 3.73 3,467 2.94 Maximum Month-End Balance During Year 3,991 5.96 6,415 3.36 4,894 2.80
Other* - ----- At December 31 3,106 5.73% 4,176 5.79 2,781 3.61 Average During Year 3,962 6.22 4,135 4.63 2,348 3.66 Maximum Month-End Balance During Year 5,025 5.74 5,639 4.57 3,161 3.60
*Other borrowings consist primarily of commercial paper, bank notes, extended federal funds purchased, and amounts owed to the U.S. Treasury.
Foreign Assets - -------------- At December 31, 1995, the Company had assets in excess of .75% of year end total assets in Greece, totaling $527 million, and in South Korea, totaling $480 million. There were no foreign countries in which the Company's assets exceeded .75% of year end total assets in 1994.
ITEM 2.

ITEM 2. PROPERTIES - ------------------- In New York City, the Company owns the thirty story building housing its executive headquarters at 48 Wall Street, a forty-nine story office building at One Wall Street, and an operations center at 101 Barclay Street. In addition, the Company owns and/or leases administrative and operations facilities in New York City; various locations in New Jersey and Connecticut; Harrison, New York; Newark, Delaware; Brussels, Belgium; London, England;
and Utica, New York. Other real properties owned or leased by the Company, when considered in the aggregate, are not material to its operations.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS - -------------------------- Litigation regarding Northeast Bancorp., Inc. is described in Note 12 to the Consolidated Financial Statements included in Exhibit 13, and such description is incorporated herein by reference.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ There were no matters submitted to a vote of security holders of the registrant during the fourth quarter of 1995.
PART II - ------- ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------ Information with respect to the market for the Company's common equity and related stockholder matters is incorporated herein by reference from the "Quarterly Data" section included in Exhibit 13. The Company's securities that are listed on the New York Stock Exchange (NYSE), are indicated as such on the front cover of this report. The NYSE symbol for the Company's Common Stock is BK. The Warrants (to purchase the Company's Common Stock) are traded over the counter. All of the Company's other securities are not currently listed. The Company had 26,366 common shareholders of record at February 29, 1996.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA - -------------------------------- Selected financial data are incorporated herein by reference from the "Financial Highlights" section included in Exhibit 13.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Management's discussion and analysis of financial condition and results of operations is incorporated herein by reference from the corresponding section of Exhibit 13.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- Consolidated financial statements and notes and the independent auditors' report are incorporated herein by reference from Exhibit 13 to this report. Supplementary financial information is incorporated herein by reference from the "Quarterly Data" section included in Exhibit 13.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ------------------------------------------------------------------------ On March 12, 1996, the Company's Board of Directors, acting upon the recommendation of the Audit Committee of the Company's Board of Directors dismissed Deloitte & Touche LLP as the Company's independent public accountants and appointed Ernst & Young LLP to serve as the Company's independent public accountants for the year 1996. Deloitte & Touche LLP's reports on the Company's financial statements for the last two years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the two fiscal years ended December 31, 1995 and during the period from December 31, 1995 through March 12, 1996, there were no disagreements between the Company and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements would have caused Deloitte & Touche LLP to make reference to the subject matter of such disagreements in connection with its reports.
PART III - --------
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------
The directors of the registrant are identified on pages 28 and 29 of this report. Additional material responsive to this item is contained in the Company's definitive Proxy Statement for its 1996 Annual Meeting of Shareholders, which information is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS - ----------------------------------------------------------------------------- Company Officer Name Office and Experience Age Since ---- --------------------- --- -----
J. Carter Bacot 1995-1996 Chairman and Chief Executive Officer of the Company, Chairman of the Bank 63 1975 1991-1995 Chairman and Chief Executive Officer of the Company and the Bank
Thomas A. Renyi 1995-1996 President of the Company and 50 1992 President and Chief Executive Officer of the Bank 1994-1995 President of the Company and President and Chief Operating Officer of the Bank 1992-1994 President of the Company and Vice Chairman of the Bank 1991-1992 Senior Executive Vice President and Chief Credit Officer of the Bank
Alan R. Griffith 1994-1996 Vice Chairman of the Company 54 1990 and the Bank 1991-1994 Senior Executive Vice President of the Company, and President and Chief Operating Officer of the Bank
Samuel F. Chevalier 1991-1996 Vice Chairman of the Company 62 1989 and the Bank
Deno D. Papageorge 1991-1996 Senior Executive Vice President of 57 1980 the Company, Senior Executive Vice President and Chief Financial Officer of the Bank
Richard D. Field 1991-1996 Executive Vice President of the 55 1987 Company, Senior Executive Vice President of the Bank
Robert E. Keilman 1991-1996 Comptroller of the Company and 50 1984 the Bank, Senior Vice President of the Bank
Phebe C. Miller 1995-1996 Secretary and Chief Legal Officer 46 1995 of the Company, Senior Vice President and Chief Legal Officer of the Bank 1994-1995 Senior Vice President of the Bank 1991-1994 Managing Director, General Counsel and Secretary, Discount Corporation of New York 1991 Vice President and Counsel, Discount Corporation of New York
Robert J. Goebert 1991-1996 Auditor of the Company, Senior Vice 54 1982 President of the Bank
Officers of BNY who perform major policy making functions: Bank Executive Officer Name Office and Experience Age Since ---- --------------------- --- ------
Gerald L. Hassell 1994-1996 Senior Executive Vice President and 44 1990 Chief Commercial Banking Officer 1992-1994 Executive Vice President - Special Industries Banking 1991 Executive Vice President - Communications, Entertainment, and Publishing Division
Robert J. Mueller 1992-1996 Senior Executive Vice President - 54 1989 Chief Credit Policy Officer 1991-1992 Executive Vice President - Mortgage & Construction Lending
Newton P.S. Merrill 1994-1996 Senior Executive Vice President - 56 1994 Trust, Investment Management and Private Banking 1991-1993 Senior Executive Vice President- The Bank of Boston
Richard A. Pace 1991-1996 Executive Vice President and Chief 50 1989 Technologist
There are no family relationships between the executive officers of the Company. The terms of office of the executive officers of the Company extend until the annual organizational meeting of the Board of Directors.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- The material responsive to such item in the Company's definitive Proxy Statement for its 1996 Annual Meeting of Shareholders is incorporated by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The material responsive to such item in the Company's definitive Proxy Statement for its 1996 Annual Meeting of Shareholders is incorporated by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The material responsive to such item in the Company's definitive Proxy Statement for its 1996 Annual Meeting of Shareholders is incorporated by reference.
PART IV - -------
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------- (a) 1 Financial Statements:
See Item 8.
(a) 2 Financial Statement Schedules:
Financial statement schedules are omitted since the required information is either not applicable, not deemed material, or is shown in the respective financial statements or in the notes thereto.
(a) 3 Listing of Exhibits:
Exhibit No. Per Regulation S-K Description - -------------- -----------
3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through October 13, 1987. (Filed as Exhibit 3(a) to the Company's 1987 Annual Report on Form 10-K and incorporated herein by reference.)
(b) Restated Certificate of Incorporation of The Bank of New York Company, Inc. dated July 20, 1994. (Filed as Exhibit 4 to Form 10-Q filed by the Company on November 10, 1994 and incorporated herein by reference.)
4 (a) None of the outstanding instruments defining the rights of holders of long-term debt of the Company represent long-term debt in excess of 10% of the total assets of the Company. The Company hereby agrees to furnish to the Commission, upon request, a copy of any of such instruments.
(b) Rights Agreement, including form of Preferred Stock Purchase Rights, incorporated herein by reference to the Company's Registration Statement on Form 8-A dated December 18, 1985.
(c) First Amendment, dated as of June 13, 1989, to the Rights Agreement,including form of Preferred Stock Purchase Right, dated as of December 10, 1985, between The Bank of New York Company, Inc. and The Bank of New York, as Rights Agent, incorporated by reference to the amendment on Form 8, dated June 14, 1989, to the registrant's Registration Statement on Form 8-A, dated December 18, 1985.
(d) Second Amendment, dated as of April 30, 1993, to the Rights Agreement, including form of Preferred Stock Purchase Right, dated as of December 10, 1985, between The Bank of New York Company, Inc. and The Bank of New York, as Rights Agent, incorporated by reference to the amendment on Form 8-A/A, dated April 30, 1993, to the registrant's Registration Statement on Form 8-A dated December 18, 1985.
(e) Third Amendment, dated as of March 8, 1994, to the Rights Agreement, dated as of December 10, 1985, between The Bank of New York Company, Inc. and The Bank of New York, as Rights Agent, incorporated by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K for the Report Date March 8, 1994.
10 (a) 1984 Stock Option Plan of The Bank of New York Company, Inc. as amended through February 23, 1988. (Filed as Exhibit 10(a) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference.)*
(b) Amendment dated October 11, 1994 to 1984 Stock Option Plan of The Bank of New York Company, Inc. (Filed as Exhibit 10(b) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(c) The Bank of New York Company, Inc. Excess Contribution Plan as amended through July 10, 1990. (Filed as Exhibit 10(b) to the Company's 1990 Annual Report on Form 10-K and incorporated herein by reference.)*
Exhibit No. Per Regulation S-K Description - -------------- -----------
10 (d) Amendments to The Bank of New York Company, Inc. Excess Contribution Plan dated February 23, 1994 and November 9, 1993. (Filed as Exhibit 10(c) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
(e) Amendment to The Bank of New York Company, Inc. Excess Contribution Plan dated November 14, 1995.*
(f) The Bank of New York Company, Inc. Excess Benefit Plan as amended through December 8, 1992. (Filed as Exhibit 10(d) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.)*
(g) Amendments to The Bank of New York Company, Inc. Excess Benefit Plan dated February 23, 1994 and November 9, 1993. (Filed as Exhibit 10(e) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
(h) Amendment dated May 10, 1994 to The Bank of New York Company, Inc. Excess Benefit Plan. (Filed as Exhibit 10(g) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(i) Amendment to The Bank of New Company, Inc. Excess Benefit Plan dated November 14, 1995.*
(j) 1994 Management Incentive Compensation Plan of The Bank of New York Company, Inc. (Filed as Exhibit 10(g) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
(k) 1988 Long-Term Incentive Plan as amended through December 8, 1992. (Filed as Exhibit 10(f) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.)*
(l) Amendment dated October 11, 1994 to the 1988 Long-Term Incentive Plan of The Bank of New York Company, Inc. (Filed as Exhibit 10(j) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(m) The Bank of New York Company, Inc. 1993 Long-Term Incentive Plan. (Filed as Exhibit 10(m) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.)*
(n) Amendment dated October 11, 1994 to the 1993 Long-Term Incentive Plan of The Bank of New York Company, Inc. (Filed as Exhibit 10(l) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(o) The Bank of New York Company, Inc. Supplemental Executive Retirement Plan. (Filed as Exhibit 10(n) to the Company's 1992 Annual Report on Form 10-K and incorporated herein by reference.)*
(p) Amendment to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan dated March 9, 1993. (Filed as Exhibit 10(k) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
Exhibit No. Per Regulation S-K Description - --------------- ------------ 10 (q) Amendment effective October 11, 1994 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan. (Filed as Exhibit 10(o) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(r) Trust Agreement dated April 19, 1988 related to certain executive compensation plans and agreements. (Filed as Exhibit 10(h) to the Company's 1988 Annual Report on Form 10-K and incorporated herein by reference.)*
(s) Trust Agreement dated November 16, 1993 related to certain executive compensation plans and agreements. (Filed as Exhibit 10(m) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
(t) Amendment dated October 11, 1994 to Trust Agreement dated November 16, 1993, related to certain executive compensation plans and agreements.* (Filed as Exhibit 10(r) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(u) Trust Agreement dated December 15, 1994 related to certain executive compensation plans and agreements.* (Filed as Exhibit 10(s) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(v) Form of Remuneration Agreement between the Company and two of the five most highly compensated executive officers of the Company. (Filed as Exhibit 10 to the Company's 1982 Annual Report on Form 10-K and incorporated herein by reference.)*
(w) Form of Tax Reimbursement Agreement dated as of July 13, 1994 between the Company and two of the five most highly compensated executive officers of the Company.* (Filed as Exhibit 10(u) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(x) Form of Remuneration Agreement dated October 11, 1994 between the Company and three of the five most highly compensated officers of the Company.* (Filed as Exhibit 10(v) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(y) The Bank of New York Company, Inc. Retirement Plan for Non-Employee Directors. (Filed as Exhibit 10(r) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
(z) Amendment dated November 8, 1994 to The Bank of New York Company, Inc. Retirement Plan for Non-Employee Directors.* (Filed as Exhibit 10(x) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
(aa) Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc. (Filed as Exhibit 10(s) to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference.)*
Exhibit No. Per Regulation S-K Description - -------------- -----------
(bb) Amendment dated November 8, 1994 to the Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.* (Filed as Exhibit 10(z) to the Company's 1994 Annual Report on Form 10-K and incorporated herein by reference.)*
11 Statement - Re: Computation of Per Common Share Earnings
12 Statement - Re: Computation of Earnings to Fixed Charges Ratios
13 Portions of the 1995 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
- ------------------- * Indicates a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
October 16, 1995: Unaudited interim financial information and accompanying discussion for the third quarter of 1995.
November 14, 1995: A press release announcing the Company's plan to buy back up to 16 million of its outstanding common shares.
January 16, 1996: Unaudited interim financial information and accompanying discussion for the fourth quarter of 1995.
March 12, 1996: The Company's disclosure statement with respect to dismissing Deloitte & Touche LLP and appointing Ernst & Young LLP as the Company's independent accountants, and a letter to the Securities and Exchange Commission from Deloitte & Touche LLP agreeing with the Company's disclosure statement; as subsequently amended on From 8-K/A.
(c) Exhibits:
Submitted as a separate section of this report.
(d) Financial Statements Schedules:
None
SIGNATURES - ----------
Pursuant to the requirements of Section 13 or 15(d) 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 in New York, New York, on the 12th day of March, 1996.
THE BANK OF NEW YORK COMPANY, INC.
By: \s\ Deno D. Papageorge ------------------------------------- (Deno D. Papageorge, Senior Executive Vice President)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities indicated on the 12th day of March, 1996.
Signature Title --------- -----
\s\J. Carter Bacot Chairman and - ----------------------------------- Chief Executive Officer (J. Carter Bacot) (principal executive officer)
\s\ Deno D. Papageorge Senior Executive Vice President - ----------------------------------- (principal financial officer) (Deno D. Papageorge)
\s\ Robert E. Keilman Comptroller - ------------------------------------ (principal accounting officer) (Robert E. Keilman)
\s\ Richard Barth Director - ------------------------------------ (Richard Barth)
\s\ Frank J. Biondi, Jr. Director - ------------------------------------ (Frank J. Biondi, Jr.)
\s\ William R. Chaney Director - ------------------------------------ (William R. Chaney)
\s\ Samuel F. Chevalier Vice Chairman and Director - ------------------------------------ (Samuel F. Chevalier)
\s\ Anthony P. Gammie Director - ------------------------------------ (Anthony P. Gammie)
\s\ Ralph E. Gomory Director - ------------------------------------ (Ralph E. Gomory)
\s\ Alan R. Griffith Vice Chairman - ------------------------------------ and Director (Alan R. Griffith)
\s\ Edward L. Hennessy, Jr. Director - ------------------------------------ (Edward L. Hennessy, Jr.)
\s\ John C. Malone Director - ------------------------------------ (John C. Malone)
\s\ Donald L. Miller Director - ------------------------------------ (Donald L. Miller)
\s\ H. Barclay Morley Director - ------------------------------------ (H. Barclay Morley)
\s\ Martha T. Muse Director - ------------------------------------ (Martha T. Muse)
\s\ Catherine A. Rein Director - ------------------------------------ (Catherine A. Rein)
\s\ Thomas A. Renyi President and - ------------------------------------ Director (Thomas A. Renyi)
\s\ Harold E. Sells Director - ------------------------------------ (Harold E. Sells)
\s\ W. S. White, Jr. Director - ------------------------------------ (W. S. White, Jr.)
INDEX TO EXHIBITS Exhibit No. - ------------ 3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through October 13, 1987.*
(b) Restated Certificate of Incorporation of The Bank of New York Company, Inc. dated July 20, 1994.*
4 (a) None of the outstanding instruments defining the rights of holders of long-term debt of the Company represent long-term debt in excess of 10% of the total assets of the Company. The Company hereby agrees to furnish to the Commission, upon request, a copy of any of such instruments.
(b) Rights Agreement, including form of Preferred Stock Purchase Rights.*
(c) First Amendment, dated as of June 13, 1989, to the Rights Agreement, including form of Preferred Stock Purchase Right, dated as of December 10, 1985, between The Bank of New York Company, Inc. and The Bank of New York, as Rights Agent.*
(d) Second Amendment, dated as of April 30, 1993, to the Rights Agreement, including form of Preferred Stock Purchase Right, dated as of December 10, 1985, between The Bank of New York Company, Inc. and The Bank of New York, as Rights Agent.*
(e) Third Amendment, dated as of March 8, 1994, to the Rights Agreement, dated as of December 10, 1985, between The Bank of New York Company, Inc. and The Bank of New York, as Rights Agent.*
10 (a) 1984 Stock Option Plan of The Bank of New York Company, Inc. as amended through February 23, 1988.*
(b) Amendment dated October 11, 1994 to 1984 Stock Option Plan of The Bank of New York Company, Inc.*
(c) The Bank of New York Company, Inc. Excess Contribution Plan as amended through July 10, 1990.*
(d) Amendments to The Bank of New York Company, Inc. Excess Contribution Plan dated February 23, 1994 and November 9, 1993.*
(e) Amendment to The Bank of New York Company, Inc. Excess Contribution Plan dated November 14, 1995.
(f) The Bank of New York Company, Inc. Excess Benefit Plan as amended through December 8, 1992.*
(g) Amendments to The Bank of New York Company, Inc. Excess Benefit Plan dated February 23, 1994 and November 9, 1993.*
(h) Amendment dated May 10, 1994 to The Bank of New York Co., Inc. Excess Benefit Plan.*
(i) Amendment to The Bank of New York Company, Inc. Excess Benefit Plan dated November 14,1995.
(j) 1994 Management Incentive Compensation Plan of The Bank of New York Company, Inc.*
(k) 1988 Long-Term Incentive Plan as amended through December 8, 1992.*
(l) Amendment dated October 11, 1994 to the 1988 Long-Term Incentive Plan of The Bank of New York Company, Inc.*
INDEX TO EXHIBITS Exhibit No. - ----------- 10 (m) The Bank of New York Company, Inc. 1993 Long-Term Incentive Plan.*
(n) Amendment dated October 11, 1994 to the 1993 Long-Term Incentive Plan of The Bank of New York Company, Inc.*
(o) The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.*
(p) Amendment to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan dated March 9, 1993.*
(q) Amendment effective October 11, 1994 to The Bank of New York Company, Inc. Supplemental Executive Retirement Plan.*
(r) Trust Agreement dated April 19, 1988 related to executive compensation agreements.*
(s) Trust Agreement dated November 16, 1993 related to deferred executive compensation agreements.*
(t) Amendment dated October 11, 1994 to Trust Agreement dated November 16, 1993, related to executive compensation agreements.*
(u) Trust Agreement dated December 15, 1994 related to certain executive compensation plans and agreements.*
(v) Form of Remuneration Agreement between the Company and two of the five most highly compensated executive officers of the Company.*
(w) Form of Tax Reimbursement Agreement dated as of July 13, 1994 between the Company and two of the five most highly compensated executive officers of the Company.*
(x) Form of Remuneration Agreement dated October 11, 1994 between the Company and three of the five most highly compensated officers of the Company.
(y) The Bank of New York Company, Inc. Retirement Plan for Non-Employee Directors.*
(z) Amendment dated November 8, 1994 to The Bank of New York Company, Inc. Retirement Plan for Non-Employee Directors.*
(aa) Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.*
(bb) Amendment dated November 8, 1994 to the Deferred Compensation Plan for Non-Employee Directors of The Bank of New York Company, Inc.*
11 Statement - Re: Computation of Per Common Share Earnings
12 Statement - Re: Computation of Earnings to Fixed Charges Ratios
13 Portions of the 1995 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule - ------------------- * Incorporated by reference