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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6152
THE BANK OF NEW YORK COMPANY, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-2614959
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 495-1784
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $7.50 par value NEW YORK STOCK EXCHANGE
Preferred Stock Purchase Rights NEW YORK STOCK EXCHANGE
7.80% Trust Preferred Securities, Series C NEW YORK STOCK EXCHANGE
7.05% Preferred Securities, Series D NEW YORK STOCK EXCHANGE
6.88% Trust Preferred Securities, Series E NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Class A, 7.75% Cumulative Convertible Preferred Stock
7.97% Capital Securities, Series B
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant at February 29, 2000 consisted of:
Common Stock ($7.50 par value) $24,506,591,106
(based on closing price
on New York Stock Exchange)
The number of shares outstanding of the registrant's Common Stock $7.50 par
value was 737,040,334 shares on February 29, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Shareholders are incorporated by
reference into Parts I, II, and IV.
Proxy Statement for the annual meeting of shareholders to be held May 9, 2000
(other than information included in the proxy statement pursuant to Item 402
(i), (k) and (l) of Regulation S-K is incorporated by reference into Part III.
PART I
- ------
ITEM 1. BUSINESS
- -----------------
INTRODUCTION
The business of The Bank of New York Company, Inc. (the "Company") and
its subsidiaries is described in the Company's 1999 Annual Report to
Shareholders beginning under the heading "Securities Servicing and Cash
Processing" and continuing through " Global Markets" 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.
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 of
1956 ("BHC Act"). The Company is also subject to regulation by the New York
State Banking Department. 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. Bank
Holding Companies qualified and electing to be treated as Financial Holding
Companies are entitled to engage in a broader range of activities. See the
discussion under the heading "Legislation and Regulation".
The Company's subsidiary banks are subject to supervision and examination
by applicable federal and state banking agencies. The Bank of New York
("BNY"), the Company's principal banking subsidiary, is a New York chartered
banking corporation, a member of the Federal Reserve System and is subject to
regulation, supervision and examination by the Federal Reserve Board. BNY is
also subject to regulation, supervision and examination by the New York State
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
The Federal bank regulators have adopted risk-based capital guidelines
for bank holding companies and banks. The minimum ratio of qualifying total
capital ("Total Capital") to risk-weighted assets (including certain off-
balance sheet items) is 8%. At least half of the total capital is to consist
of common stock, retained earnings, noncumulative perpetual preferred stock,
minority interests (including preferred trust securities) and, for bank
holding companies, a limited amount of qualifying cumulative perpetual
preferred stock, less most 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 the loan and
lease allowance. Not more than 25% of qualifying Tier 1 Capital may consist
of preferred trust securities.
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. 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. At December 31, 1999, the Federal
Reserve Board has not advised the Company of any specific minimum Leverage
Ratio applicable to it. See "FDICIA" below.
The Federal Reserve recently proposed regulations which would require
Bank Holding Companies to deduct from Tier 1 capital 50% of the total carrying
value of certain investments in non-financial companies, including merchant
banking investments. The Company is considering the possible impact of this
proposal but does not believe that such changes would have a material effect
on its capital position.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") among other things, requires federal banking regulators to take
prompt corrective action in respect of FDIC-insured depository institutions
(such as BNY) that do not meet minimum capital requirements. FDICIA
establishes five capital tiers: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized", and "critically
undercapitalized". A depository institution's capital tier will depend upon
how its capital levels compare to various relevant capital measures and
certain other factors, as established by regulation. Under applicable
regulations, an FDIC-insured bank is deemed to be: (i) well capitalized if it
maintains a Leverage Ratio of at least 5%, a Tier 1 Capital Ratio (Tier 1
Capital to risk-weighted assets and certain off-balance sheet items) of at
least 6% and a Total Capital Ratio of at least 10% and is not subject to an
order, written agreement, capital directive, or prompt corrective action
directive to meet and maintain a specific level for any capital measure; (ii)
adequately capitalized if it maintains a Leverage Ratio of at least 4% (or a
Leverage Ratio of at least 3% if it is rated Composite 1 in its most recent
report of examination, subject to appropriate federal banking agency
guidelines), a Tier 1 Capital Ratio of 4% and a Total Capital Ratio of at
least 8% and is not defined to be well capitalized but meets all of its
minimum capital requirements; (iii) undercapitalized if it has a Leverage
Ratio of less than 4% (or a Leverage Ratio that is less than 3% if it is rated
Composite 1 in its most recent report of examination, subject to appropriate
federal banking agency guidelines), a Tier 1 Capital Ratio less than 4% and a
Total Capital Ratio of less than 10% and it does not meet the definition of a
significantly undercapitalized or critically undercapitalized institution;
(iv) significantly undercapitalized if it has a Leverage Ratio of less than
3%, a Tier 1 Capital Ratio less than 3% and a Total Capital Ratio of less than
10% and it does not meet the definition of critically undercapitalized; and
(v) 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
imposes progressively more restrictive constraints on operations, management
and capital distributions, depending on the capital category in which an
institution is classified.
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. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit a capital restoration plan. 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. In addition, 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 became 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. 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. A depository institution that is not well
capitalized is subject to certain limitations on brokered deposits.
A discussion of the Company's capital position and capital adequacy is
incorporated by reference from "Capital Resources" in the "Management's
Discussion and Analysis" Section and Note 10 to the Consolidated Financial
Statements of Exhibit 13.
A discussion of the Gramm-Leach-Bliley Financial Modernization Act of
1999 appears herein under the heading "Legislation and Regulation".
As of December 31, 1999 and 1998, capital ratios for the Company and BNY
were categorized as well capitalized as set forth in the table below.
December 31, 1999 December 31, 1998
----------------- -----------------
Well
Capitalized
Company BNY Company BNY Guidelines
------- --- ------- --- -----------
Tier I 7.51% 7.14% 7.89% 7.39% 6%
Total Capital 11.67 10.50 11.90 10.72 10
Leverage 7.20 6.85 7.46 6.95 5
Tangible Common
Equity 4.79 6.36 6.25 7.43
At December 31, 1999, the amounts of capital by which the Company and BNY
exceed the well capitalized guidelines are as follows:
(in millions) Company BNY
------- ---
Tier 1 $ 999 $ 726
Total Capital 1,102 316
Leverage 1,518 1,223
The following table presents the components of the Company's risk-based
capital at December 31, 1999 and 1998:
(in millions) 1999 1998
---- ----
Common Stock $ 5,142 $ 5,447
Preferred Stock 1 1
Minority Interest - Preferred Securities 1,500 1,300
Adjustments: Intangibles (1,624) (1,558)
Securities Valuation Allowance (58) (340)
-------- --------
Tier 1 Capital 4,961 4,850
Qualifying Unrealized Equity Security Gains 74 181
Qualifying Long-term Debt 2,089 1,655
Qualifying Allowance for Loan Losses 581 633
-------- --------
Tier 2 Capital 2,744 2,469
-------- -------
Total Risk-based Capital $ 7,705 $ 7,319
======== =======
The following table presents the components of the Company's risk
adjusted assets at December 31, 1999 and 1998:
1999 1998
---------------------------------------------
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 $ 10,126 $ 1,727 $ 8,503 $ 1,347
Securities 6,899 2,481 6,415 1,832
Trading Assets 8,715 - 1,637 -
Fed Funds Sold and Securities
Purchased Under Resale Agreements 5,383 957 3,281 345
Loans 37,547 32,901 38,386 33,246
Allowance for Credit Losses (595) - (636) -
Other Assets 6,681 4,612 5,917 3,732
--------- ------- --------- -------
Total Assets $ 74,756 42,678 $ 63,503 40,502
========= ------- ========= -------
Off-Balance Sheet Exposures
- ---------------------------
Commitments to Extend Credit $ 51,574 13,484 $ 44,767 13,497
Securities Lending Indemnifications 61,378 - 47,839 -
Standby Letters of Credit and
Other Guarantees 10,399 8,397 8,738 6,404
Interest Rate Contracts 213,653 535 142,454 235
Foreign Exchange Contracts 102,950 - 132,129 1
--------- ------- --------- -------
Total Off-Balance Sheet Exposures $439,954 22,416 $375,927 20,137
========= ------- ========= -------
Market Risk Equivalent Assets 887 683
Unrealized Equity Security Gains
Qualifying as Risk Based Capital 74 181
------- -------
Risk Adjusted Assets $66,055 $61,503
======= =======
FDIC Insurance Assessments
BNY is 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, 1997, under the schedule, the premiums range from zero to $.27 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.
BNY paid no FDIC insurance premiums in 1999. In addition, the Deposit
Insurance Funds Act provides for assessments at all insured depository
institutions to pay for the cost of the Financing Corporation (a governmental
agency) funding. The assessment will be based on deposit levels and will be
approximately 1.19 basis points.
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 FDICIA, 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 domestic
depositor preference on amounts realized from the liquidation or other
resolution of any depository institution insured by the FDIC.
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.
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 national banks and state banks with different
home states are permitted to merge across state lines, with the approval of
the appropriate federal banking agency, unless the home state of a
participating bank passed legislation between the date of enactment of IBBEA
and May 31, 1997 expressly prohibiting interstate mergers. Most states,
including New York, New Jersey and Connecticut have not passed legislation
prohibiting interstate mergers. 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.
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 depositors 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 10 to the Consolidated Financial
Statements included in Exhibit 13. Such discussion is incorporated herein by
reference.
Cross Guarantees
Under FDICIA, a financial institution insured by the FDIC that is under
common control with a failed or failing FDIC-insured institution can be
required to indemnify the FDIC for losses resulting from the insolvency of the
failed institution, even if this causes the affiliated institution also to
become insolvent. Any obligation or liability owed by a subsidiary depository
institution to its parent company is subordinate to the subsidiary's cross-
guarantee liability with respect to commonly controlled insured depository
institutions and to the rights of depositors.
ADDITIONAL FINANCIAL INFORMATION
- --------------------------------
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
- ------------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- ------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------------------- ------------------------- ------------------------
Assets
- ------
Interest-Bearing
Deposits in Banks
(Primarily Foreign) $ 5,500 $ 247 4.49% $ 3,437 $ 184 5.35% $ 3,277 $ 188 5.75%
Federal Funds Sold
and Securities
Purchased Under
Resale Agreements 4,236 205 4.83 3,880 203 5.24 2,964 162 5.46
Loans
Domestic Offices
Credit Card - - - - - - 3,329 496 14.90
Other Consumer 3,292 270 8.21 3,366 282 8.36 3,503 291 8.31
Commercial 16,415 1,148 6.99 16,407 1,229 7.49 14,744 1,143 7.75
Foreign Offices 19,174 1,219 6.36 18,567 1,264 6.81 15,001 984 6.56
-------- ------ -------- ------ -------- ------
Total Loans 38,881 2,637* 6.78 38,340 2,775* 7.24 36,577 2,914* 7.97
-------- ------ -------- ------ -------- ------
Securities
U.S. Government
Obligations 3,373 202 5.98 3,638 213 5.85 3,225 189 5.86
Obligations of
States and
Political
Subdivisions 588 46 7.86 672 54 7.98 652 56 8.57
Other Securities,
including Trading
Securities
Domestic Offices 1,882 85 4.51 2,051 108 5.23 1,360 52 3.81
Foreign Offices 1,702 95 5.56 793 31 3.93 485 34 6.92
-------- ------ -------- ------ -------- ------
Total Other
Securities 3,584 180 5.01 2,844 139 4.87 1,845 86 4.63
-------- ------ -------- ------ -------- ------
Total Securities 7,545 428 5.67 7,154 406 5.66 5,722 331 5.77
-------- ------ -------- ------ -------- ------
Total Interest-Earning
Assets 56,162 $3,517 6.26% 52,811 $3,568 6.76% 48,540 $3,595 7.40%
====== ====== ======
Allowance for Credit
Losses (613) (643) (784)
Cash and Due from
Banks 3,174 3,237 3,798
Other Assets 8,054 7,736 7,688
-------- -------- --------
Total Assets $66,777 $63,141 $59,242
======== ======== ========
Assets Attributable
to Foreign Offices ** 41.39% 38.79% 33.35%
===== ===== =====
*Includes fees of $130 million in 1999, $120 million in 1998, and $154 million in 1997.
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 $44 million in 1999, $58 million in 1998, and $34 million in
1997 and are based on the federal statutory tax rate (35%) and applicable state and local taxes.
**Includes Cayman Islands branch office.
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
- ------------------------------------------------------------------------------
1999 1998 1997
--------------------------- -------------------------- -------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
--------------------------- -------------------------- -------------------------
Liabilities and
Shareholders' Equity
- --------------------
Interest-Bearing Deposits
Domestic Offices
Money Market Rate
Accounts $ 5,142 $ 221 4.30% $ 4,998 $ 232 4.65% $ 4,326 $ 196 4.54%
Savings 7,757 177 2.28 7,682 193 2.51 7,921 202 2.55
Certificates of
Deposit of $100,000
or More 526 26 5.03 687 37 5.41 675 37 5.48
Other Time Deposits 2,238 99 4.42 2,299 110 4.80 2,514 124 4.92
------- ------ ------- ------ ------- ------
Total Domestic Offices 15,663 523 3.34 15,666 572 3.65 15,436 559 3.62
------- ------ ------- ------ ------- ------
Foreign Offices
Banks in Foreign Countries 6,402 264 4.12 5,422 246 4.53 5,304 225 4.25
Government and
Official Institutions 1,178 55 4.67 1,205 65 5.39 1,290 69 5.33
Other Time and Saving 12,613 521 4.13 9,784 491 5.02 8,308 437 5.27
------- ------ ------- ------ ------- ------
Total Foreign Offices 20,193 840 4.16 16,411 802 4.88 14,902 731 4.91
------- ------ ------- ------ ------- ------
Total Interest-
Bearing Deposits 35,856 1,363 3.80 32,077 1,374 4.28 30,338 1,290 4.25
------- ------ ------- ------ ------- ------
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,940 131 4.45 3,147 145 4.60 2,410 121 5.00
Other Borrowed Funds 2,362 126 5.36 3,761 204 5.42 3,177 168 5.27
Long-Term Debt 2,306 152 6.57 1,972 136 6.90 1,815 126 6.92
------- ------ ------- ------ ------- ------
Total Interest-Bearing
Liabilities 43,464 $1,772 4.07% 40,957 $1,859 4.54% 37,740 $1,705 4.52%
====== ====== ======
Noninterest-Bearing Deposits
Domestic Offices 10,613 10,109 9,423
Foreign Offices 95 76 149
------- ------- -------
Total Noninterest-
Bearing Deposits 10,708 10,185 9,572
------- ------- -------
Other Liabilities 6,004 5,850 6,050
Minority Interest - Preferred
Securities 1,487 1,233 830
Preferred Stock 1 1 103
Common Shareholders' Equity 5,113 4,915 4,947
------- ------- -------
Total Liabilities
and Shareholders' Equity $66,777 $63,141 $59,242
======= ======= =======
Net Interest Earnings and
Interest Rate Spread $1,745 2.19% $1,709 2.22% $1,890 2.88%
====== ====== ======
Net Yield on
Interest-Earning Assets 3.11% 3.24% 3.89%
===== ===== =====
Liabilities Attributable
to Foreign Offices 35.77% 31.53% 30.00%
====== ====== ======
Rate/Volume Analysis on a Taxable Equivalent Basis (in millions)
- ----------------------------------------------------------------
1999 vs. 1998 1998 vs. 1997
------------------------------------- ----------------------------------
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 $ 96 $ (33) $ 63 $ 9 $(13) $ (4)
Federal Funds Sold and Securities
Purchased Under Resale Agreements 18 (16) 2 48 (7) 41
Loans
Domestic Offices
Credit Card - - - (496) - (496)
Other Consumer (7) (5) (12) (11) 2 (9)
Commercial 1 (82) (81) 125 (39) 86
Foreign Offices 40 (85) (45) 238 42 280
----- ------ ------ ------ ----- ------
Total Loans 34 (172) (138) (144) 5 (139)
Securities
U.S. Government Obligations (15) 4 (11) 24 - 24
Obligations of States and
Political Subdivisions (7) (1) (8) 2 (4) (2)
Other Securities, including
Trading Assets
Domestic Offices (8) (15) (23) 32 24 56
Foreign Offices 43 21 64 16 (19) (3)
----- ------ ------ ------ ----- ------
Total Other Securities 35 6 41 48 5 53
----- ------ ------ ------ ----- ------
Total Securities 13 9 22 74 1 75
----- ------ ------ ------ ----- ------
Total Interest Income 161 (212) (51) (13) (14) (27)
----- ------ ------ ------ ----- ------
Interest Expense
- ----------------
Interest-Bearing Deposits
Domestic Offices
Money Market Rate Accounts 7 (18) (11) 31 5 36
Savings 2 (18) (16) (6) (3) (9)
Certificate of Deposits of
$100,000 or More (9) (2) (11) 1 (1) -
Other Time Deposits (3) (8) (11) (10) (4) (14)
----- ------ ------ ------ ----- ------
Total Domestic Offices (3) (46) (49) 16 (3) 13
----- ------ ------ ------ ----- ------
Foreign Offices
Banks in Foreign Countries 42 (24) 18 6 15 21
Government and Official
Institutions (1) (9) (10) (5) 1 (4)
Other Time and Savings 126 (96) 30 75 (21) 54
----- ------ ------ ------ ----- ------
Total Foreign Offices 167 (129) 38 76 (5) 71
----- ------ ------ ------ ----- ------
Total Interest-Bearing
Deposits 164 (175) (11) 92 (8) 84
Federal Funds Purchased and
Securities Sold Under
Repurchase Agreements (9) (5) (14) 34 (10) 24
Other Borrowed Funds (76) (2) (78) 31 5 36
Long-Term Debt 22 (6) 16 11 (1) 10
----- ------ ------ ------ ----- ------
Total Interest Expense 101 (188) (87) 168 (14) 154
----- ------ ------ ------ ----- ------
Change in Net Interest Income $ 60 $ (24) $ 36 $(181) $ - $(181)
===== ====== ====== ====== ===== ======
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.
Market Risk Management
- ----------------------
Market risk is the risk of loss due to adverse changes in the financial
markets. Market risk arises from derivative financial instruments, such as
futures, forwards, swaps and options, and other financial instruments, such as
loans, securities, deposits and other borrowings. The Company's market risks
are primarily interest rate and foreign exchange risk, as well as credit risk.
Market risk associated with the Company's trading activities and
asset/liability management activities is managed and controlled as discussed
under "Market Risk Management", "Trading Activities and Risk Management" and,
"Asset/Liability Management" in the "Management's Discussion and Analysis"
section of Exhibit 13. Such discussion is incorporated herein by reference.
The information presented with respect to market risk is forward looking
information. As such it is subject to risks and uncertainties that could
cause actual results to differ materially from projected results discussed in
this Report. These include adverse changes in market conditions and the
actions that management could take in response to these changes.
Credit Risk Management
- ----------------------
Credit risk represents the possibility that the Company would suffer a
loss if a borrower or other counterparty were to default on its obligations to
the Company. Credit risk exposure arises primarily from lending activities,
as well as from interest rate, foreign exchange, and securities processing
products. For derivative financial instruments, total credit exposure
consists of current and potential exposure. Current credit exposure
represents the replacement cost of the transaction. Potential credit exposure
is a statistically based estimate of the future replacement cost of the
transaction. The Company has established policies and procedures to manage
the level and composition of its credit risk on both a transaction and a
portfolio basis. In managing the aggregate credit extension to individual
customers, the Company measures the amount at risk on derivative financial
instruments as the total of current and potential credit exposure.
The Risk Management Sector is responsible for developing and maintaining
credit risk policies, as well as for overseeing and reviewing credit
guidelines. After development, credit risk policies are reviewed and approved
by the Board of Directors. Through the use of a credit approval process and
established credit limits, the Company evaluates the credit quality of
counterparties, industries, products, and countries. The Company seeks to
reduce both on and off-balance-sheet credit risk through portfolio
diversification, loan participations, syndications, asset sales, credit
enhancements, risk reduction arrangements, and netting agreements.
Although the Company attempts to minimize its exposure to credit risk,
this risk is inherent in the banking industry and can increase as a result of
general economic developments.
Provision and Allowance for Credit Losses
- -----------------------------------------
The provision for credit losses was $135 million in 1999, compared with $20
million in 1998 and $280 million in 1997. The increase in the provision
compared with 1998 was primarily due to the decision to accelerate the
disposition of certain loans, some of which were nonperforming, as well as
higher charge-offs in the Company's asset based lending businesses.
Nonperforming assets declined by 18% to $158 million at December 31,
1999. The decrease in nonperforming assets during 1999 is attributable to
charge-offs and writedowns of $126 million and paydowns, sales, and returns to
accrual status of $163 million. The decrease was partially offset by $254
million of loans placed on nonperforming status.
A summary of nonperforming assets is presented in the following table.
(in millions) December 31,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Nonaccrual
- ----------
Domestic $ 83 $126 $159 $175 $184
Foreign 63 53 34 38 41
---- ---- ---- ---- ----
146 179 193 213 225
---- ---- ---- ---- ----
146 179 193 213 225
Real Estate Acquired
in Satisfaction of Loans 12 14 15 41 72
- ------------------------ ---- ---- ---- ---- ----
$158 $193 $208 $254 $297
==== ==== ==== ==== ====
Past Due 90 Days or More
and Still Accruing Interest
- ---------------------------
Domestic:
Credit Card $ - $ - $ 1 $215 $214
Other Consumer 3 3 2 2 5
Commercial 13 26 75 30 51
---- ---- ---- ---- ----
16 29 78 247 270
Foreign:
Banks 3 - - - -
---- ---- ---- ---- ----
$ 19 $ 29 $ 78 $247 $270
==== ==== ==== ==== ====
1999 1998
---- ----
Nonperforming Asset Ratio 0.4% 0.5%
Allowance/Nonperforming Loans 407.7 355.5
Allowance/Nonperforming Assets 376.9 328.9
Net charge-offs were $137 million in 1999, $29 million in 1998, and $354
million in 1997. In 1999, net charge-offs were primarily related to the
decision to accelerate the disposition of certain loans, as well as higher
charge-offs in the Company's asset based lending businesses. Net charge-offs
in 1998 were mainly related to commercial loans, while net charge-offs were
primarily attributable to credit card loans in 1997. The total allowance for
credit losses was $595 million and $636 million at year-end 1999 and 1998. The
ratio of the total allowance for credit losses to year-end loans was 1.58% and
1.66% at December 31, 1999 and 1998.
In 1999 as part of its continuing strategy to align credit products with
fiduciary and servicing businesses, the Company reviewed its credit portfolio
and decided to accelerate the disposition of certain loans based on, in part,
cross sell potential and overall profitability. As a result, in 1999 the
Company categorized over $1 billion of loans as available for sale and
recorded a liquidity charge of $124 million. At December 31, 1999, the
remaining credit exposures available for sale totaled $538 million with
outstandings of $318 million.
The following table details changes in the Company's allowance for credit losses
for the last five years.
(dollars in millions) 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Loans Outstanding, December 31, $37,547 $38,386 $35,127 $37,006 $37,687
Average Loans Outstanding 38,881 38,340 36,577 36,698 35,421
Allowance for Loan Losses
- -------------------------
Balance, January 1
Domestic $ 498 $ 441 $ 670 $ 515 $ 509
Foreign 69 44 38 82 155
Unallocated 69 156 193 159 128
------ ------ ------ ------ ------
Total, January 1 636 641 901 756 792
------ ------ ------ ------ ------
Allocations and Acquisitions (1) (39) 4 (186) - 11
Charge-Offs
Domestic
Commercial and Industrial (104) (34) (89) (46) (56)
Real Estate & Construction (5) - - (11) (19)
Consumer (8) (10) (13) (16) (15)
Credit Card - - (298) (503) (294)
Foreign (37) (7) (3) (4) (48)
------ ------ ------ ------ ------
Total (154) (51) (403) (580) (432)
------ ------ ------ ------ ------
Recoveries
Domestic
Commercial and Industrial 10 7 9 15 14
Real Estate & Construction 2 7 3 - 3
Consumer 4 5 8 7 10
Credit Card - - 23 62 27
Foreign 1 3 6 41 1
------ ------ ------ ------ ------
Total 17 22 49 125 55
Net Charge-Offs (137) (29) (354) (455) (377)
------ ------ ------ ------ ------
Provision 135 20 280 600 330
Balance, December 31,
Domestic 485 498 441 670 515
Foreign 71 69 44 38 82
Unallocated 39 69 156 193 159
------ ------ ------ ------ ------
Total, December 31, $ 595 $ 636 $ 641 $ 901 $ 756
====== ====== ====== ====== ======
Ratios
- ------
Net Charge-Offs to Average Loans
Outstandings 0.35% 0.08% 0.97% 1.24% 1.06%
====== ====== ====== ====== ======
Net Charge-Offs to Total Allowance 23.03% 4.56% 55.23% 50.50% 49.87%
====== ====== ====== ====== ======
Total Allowance to Year-End Loans
Outstanding 1.58% 1.66% 1.82% 2.44% 2.01%
===== ===== ===== ===== =====
(1) In 1999, $39 million was allocated to BNYFC loans sold. In 1997, $186 million of the
allowance was allocated to credit card loans sold in 1997.
At December 31, 1999 and 1998, the Company's nonperforming real estate
loans and real estate acquired in satisfaction of loans aggregated $12 million
and $40 million, respectively. Real estate loan net charge-offs were $3
million in 1999 with net recoveries of $7 million in 1998. In addition, other
real estate expenses were $1 million and $2 million in 1999 and 1998.
At December 31, 1999, the Company's emerging markets exposures consisted
of $111 million in medium-term loans (and no material commitments), $1,393
million in short-term loans, primarily trade related, and $254 million in
investments. The Company expects to complete the sale of an investment in
Brazil ($44 million carrying value) in the second quarter of 2000 with a small
gain. In addition, the Company has $308 million of debt securities of
emerging market countries, including $256 million (book value) of bonds whose
principal payments are collateralized by U.S. Treasury zero coupon obligations
and whose interest payments are partially collateralized. Emerging market
countries where the Company has exposure include Argentina, Brazil, Bulgaria,
China, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Honduras,
Indonesia, Iraq, Jamaica, Malaysia, Mexico, Morocco, Panama, Peru,
Philippines, Russia, Thailand, Uruguay, Venezuela, and Vietnam.
The Company's consumer loan portfolio is comprised principally of other
installment and residential loans. Residential and auto loans are
collateralized, thereby reducing the risk.
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. There were no nonperforming loans to borrowers in this industry at
December 31, 1999 and 1998. There were no charge-offs in this industry in 1999
and 1998.
The Company's loans to the media and telecommunications industries
primarily consist of credits with cable television operators, broadcasters,
magazine and newspaper publishers, motion picture theaters and regional
telephone companies. Nonperforming loans to borrowers in these industries
were $7 million and zero at December 31, 1999 and 1998. Charge-offs were $15
million and zero in 1999 and 1998.
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 loans to mortgage bankers to fund their operations and
mortgages to be sold to investors. Frequently these loans are collateralized
by the mortgages sold to investors. Nonperforming loans were $10 million and
zero at December 31, 1999 and 1998. Charge-offs were $44 million and zero in
1999 and 1998.
Based on an evaluation of individual credits, historical credit losses and
global economic factors, the Company has allocated its allowance for credit
losses as follows:
[CAPTION]
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
[S] [C] [C] [C] [C] [C]
Real Estate 4% 3% 4% 5% 7%
Domestic Commercial
And Industrial 78 74 64 40 36
Consumer - 1 1 1 2
Credit Card - - - 29 23
Foreign 12 11 7 4 11
Unallocated 6 11 24 21 21
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
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, 1999.
U.S. States and Other Bonds, Asset-Backed
U.S. Government Political Notes and and Equity
Government Agency Subdivisions Debentures Securities
------------- ------------- ------------- ------------- -------------
(dollars in millions) Amount Yield* Amount Yield* Amount Yield* Amount Yield* Amount Yield* Total
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- -----
Securities Held-
- ----------------
to-Maturity
- ------------
One Year or Less $ 9 4.82% $ 3 6.89% $ 191 5.72% $ 80 6.59% $ - -% $ 283
Over 1 through 5 Years 3 6.18 1 8.00 32 5.61 111 4.01 - - 147
Over 5 through 10 Years - - - - 29 6.61 206 6.60 - - 235
Over 10 years - - - - 23 6.73 69 6.06 - - 92
Asset-Backed Securities - - 114 7.25 - - - - - - 114
------ ----- ------ ---- ------ ------
$ 12 5.19% $ 118 7.04% $ 275 5.88% $466 5.90% $ - - $ 871
====== ===== ====== ==== ====== ======
Securities Available-
- ---------------------
for-Sale
- ---------
One Year or Less $ 679 5.74% $ 50 5.56% $ 4 5.66% $604 4.78% $ - -% $1,337
Over 1 through 5 Years 1,754 5.85 65 5.94 44 5.08 184 5.31 - - 2,047
Over 5 through 10 Years 185 5.97 401 6.72 61 5.24 20 6.54 - - 667
Over 10 years 99 6.33 216 6.51 208 5.54 36 5.86 - - 559
Asset-Backed Securities - - - - - - - - 354 6.04 354
Equity Securities - - - - - - - - 1,064 2.07 1,064
----- ----- ------ ---- ------ ------
$2,717 5.85% $ 732 6.51% $ 317 5.42% $844 4.98% $1,418 3.07% $6,028
====== ===== ====== ==== ====== ======
*Yields are based upon the amortized cost of securities.
Loans
- -----
The following table shows the maturity structure of the Company's commercial
loan portfolio at December 31, 1999.
Over 1 Year
1 Year Through Over
(in millions) or Less 5 Years 5 Years Total
------- ----------- ------- ------
Domestic
- --------
Real Estate, Excluding Loans Collateralized
by 1-4 Family Residential Properties $ 368 $ 1,140 $1,538 $ 3,046
Commercial and Industrial Loans 3,317 8,313 2,770 14,400
Other, Excluding Loans to Individuals and those
Collateralized by 1-4 Family Residential Properties 4,917 1,254 88 6,259
------- ------- ------ -------
8,602 10,707 4,396 23,705
Foreign 2,890 1,499 958 5,347
- -------
------- ------- ------ -------
Total $11,492 $12,206 $5,354 $29,052
======= ======= ====== =======
Loans with:
Predetermined Interest Rates $ 2,647 $ 1,004 $1,466 $ 5,117
Floating Interest Rates 8,845 11,202 3,888 23,935
------- ------- ------ -------
Total $11,492 $12,206 $5,354 $29,052
======= ======= ====== =======
Deposits
- --------
The aggregate amount of deposits by foreign customers in domestic offices
was $7.1 billion, $5.4 billion, and $4.5 billion at December 31, 1999, 1998,
and 1997.
The following table shows the maturity breakdown of domestic time
deposits of $100,000 or more at December 31, 1999.
Other
Certificates Time
(in millions) of Deposits Deposits Total
--------------------------------------------
3 Months or Less $1,044 $2,632 $3,676
Over 3 Through 6 Months 134 - 134
Over 6 Through 12 Months 113 3 116
Over 12 Months 289 15 304
------ ------ ------
Total $1,580 $2,650 $4,230
====== ====== ======
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 1999, 1998, and 1997 is
presented in the table below.
1999 1998 1997
--------------------------------------------------------------
(dollars in millions) Average Average Average
Amount Rate Amount Rate Amount Rate
------ ------- ------ ------- ------ --------
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements
At December 31 $1,318 2.46% $1,571 3.78% $2,329 4.32%
Average During Year 2,940 4.45 3,147 4.60 2,410 5.00
Maximum Month-End Balance During Year 3,639 2.58 4,684 4.65 3,805 5.45
Other*
At December 31 $1,595 3.97% $2,963 4.86% $2,960 5.69%
Average During Year 2,362 5.36 3,761 5.42 3,177 5.27
Maximum Month-End Balance During Year 3,476 4.70 3,467 5.07 3,439 5.12
*Other borrowings consist primarily of commercial paper, bank notes, extended
federal funds purchased, and amounts owed to the U.S. Treasury.
Foreign Assets
- --------------
Foreign assets are subject to general risks attendant to the conduct of
business in each foreign country, including economic uncertainties and each
foreign government's regulations. In addition, the Company's foreign assets
may be affected by changes in demand or pricing resulting from fluctuations in
currency exchange rates or other factors. At December 31, 1999, the Company
had cross border exposure of more than 1% of its total assets in Germany,
totaling $1.2 billion, in the United Kingdom, totaling $1.1 billion and in
France, totaling $1.1 billion. Germany's assets consisted of $935 million
attributable to banks and other financial institutions, $173 million
attributable to public sector entities, and $120 million attributable to
commercial, industrial and other companies. The United Kingdom's assets
consisted of $607 million attributable to banks and other financial
institutions and $500 million attributable to commercial, industrial and other
companies. France's assets consisted of $830 million attributable to banks
and other financial institutions, $182 million attributable to public sector
entities, and $39 million attributable to commercial, industrial and other
companies. At December 31, 1999, the Company had cross border exposure of
more than .75% of its total assets in Belgium and Italy, aggregating $1.3
billion. At December 31, 1998, the Company had cross border exposure of more
than .75% of its total assets in France and Hong Kong, aggregating $1.1
billion.
Introduction of the Euro
- ------------------------
In January 1999, eleven European countries adopted the euro as their
common legal currency. In the transition period from adoption through
December 31, 2001, commerce may be conducted in either the euro or the former
national currencies.
The Company has adapted its information technology systems and business
practices to accommodate euro-denominated transactions. The introduction of
the euro currency may result in increased price transparency in the euro-area
countries as well as a loss of cross-currency trading in the former national
currencies, and may ultimately have profound political and financial
implications. Based on its knowledge at this time, the Company does not
anticipate that the introduction of the euro will have a material effect on
the Company's financial condition or results of operations.
EXECUTIVE OFFICERS OF THE REGISTRANT AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------------------------
Company
Officer
Name Office and Experience Age Since
- ---- --------------------- --- -------
Thomas A. Renyi 1998-2000 Chairman and Chief Executive Officer 54 1992
of the Company and the Bank
1997-1998 President and Chief Executive Officer of
the Company and the Bank
1996-1997 President of the Company and President and
Chief Executive Officer of the Bank
1995 President of the Company and President and
Chief Operating Officer of the Bank
Alan R. Griffith 1995-2000 Vice Chairman of the Company and the Bank 58 1990
Gerald L. Hassell 1998-2000 President of the Company and the Bank and 48 1998
Senior Executive Vice President of the Company
1995-1998 Chief Commercial Banking Officer and
Senior Executive Vice President of the Bank
Bruce W. Van Saun 1998-2000 Senior Executive Vice President of the 42 1998
Company and Chief Financial Officer of the
Company and the Bank
1997-1998 Executive Vice President and Chief Financial
Officer of the Bank
1995-1997 Chief Financial Officer Deutsche Bank
North America
Thomas J. Mastro 1999-2000 Comptroller of the Company and the Bank 50 1999
1998-1999 Senior Vice President of the Bank
1995-1998 Vice President of the Bank
Robert J. Goebert 1995-2000 Auditor of the Company, Senior Vice 58 1982
President of the Bank
OFFICERS OF BNY WHO PERFORM MAJOR PLOICY MAKING FUNCTIONS:
- ------------------------------------------------------------------------------------------
Bank
Executive
Officer
Name Office and Experience Age Since
- ---- --------------------- --- -------
Robert J. Mueller 1998-2000 Senior Executive Vice President - 58 1989
Asset Based Lending Sector
1995-1998 Senior Executive Vice President and
Chief Credit Policy Officer
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 2. PROPERTIES
- -------------------
At December 31, 1999 in New York City, the Company owned the forty-nine
story building housing its executive headquarters at One Wall Street and an
operations center at 101 Barclay Street. The Company leases the land at the
101 Barclay Street location under a lease expiring in 2080. 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. LEGAL PROCEEDINGS
- --------------------------
The Company is cooperating with investigations being conducted by law
enforcement and bank regulatory authorities focusing on funds transfer
activities in certain accounts at BNY, principally involving wire transfers
from Russian and other sources in Eastern Europe. The investigations center
around accounts controlled by Peter Berlin, his wife, Lucy Edwards (until
discharged in September 1999, an officer of BNY), and companies and persons
associated with them. Berlin and Edwards have pleaded guilty to various
federal criminal charges.
On February 8, 2000, BNY entered into a written agreement with both the
Federal Reserve Bank of New York and the New York State Banking Department,
which imposed a number of reporting requirements and controls. A substantial
portion of these were in place on the date the agreement was signed.
Three purported shareholder derivative actions have been filed in
connection with these Russian related matters - - two in the United States
District Court for the Southern District of New York and one in the New York
Supreme Court, New York County - - against certain directors and officers of
the Company and BNY alleging that the defendants have breached their fiduciary
duties of due care and loyalty by aggressively pursuing business with Russian
banks and entities without implementing sufficient safeguards and failing to
supervise properly those responsible for that business. The actions seek, on
behalf of the Company and BNY, monetary damages from the defendants,
corrective action and attorneys' fees.
Additionally, on October 7, 1999 six alleged depositors of Joint Stock
Bank Inkombank ("Inkombank"), a Russian Bank, filed a purported class action
in the United States District Court for the Southern District of New York on
behalf of all depositors of Inkombank who lost their deposits when that bank
collapsed in 1998. The complaint, as subsequently amended, alleges that the
Company and BNY and their senior officers knew about, and aided and abetted
the looting of Inkombank by its principals. The amended complaint asserts
causes of action for conversion and aiding and abetting conversion under New
York law. In addition, the amended complaint states a claim under the
Racketeer Influenced and Corrupt Organizations Act ("RICO"). It seeks an
unspecified amount of damages believed to exceed $500 million, along with
punitive damages of $500 million, interest, costs, attorneys' fees, expert
fees, and other expenses. The amended compliant seeks a trebling of any RICO
damages. The Company and BNY have filed a motion to dismiss the amended
complaint in its entirety. The Company and BNY believe that the allegations
of the amended complaint are without merit and intend to defend the actions
vigorously.
The Company does not expect that any of the foregoing civil actions will
have a material impact on the Company's consolidated financial condition.
In the ordinary course of business, there are various legal claims
pending against the Company and its subsidiaries. In the opinion of
management, liabilities arising from such claims, if any, would not have a
material effect on the Company's consolidated financial statements.
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 1999.
PART II
- -------
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. All of the Company's other securities are not currently listed.
The Company had 29,176 common shareholders of record at February 29, 2000.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Selected financial data are incorporated herein by reference from the
"Financial Highlights" section included in Exhibit 13.
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.
FORWARD LOOKING STATEMENTS
The information presented with respect to earnings growth, the Company's
plans and objectives in moving toward fee based business and otherwise is
forward looking information. Forward looking statements are the Company's
current estimates or expectations of future events or future results. As such
forward looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from projected results discussed in
this Report. These include variations in management projections or market
forecasts and the actions that management could take in response to these
changes.
The Company or its executive officers and directors on behalf of the
Company, may from time to time make forward looking statements. When used in
this report, any press release or oral statements, the words "estimate",
"project", "anticipate", "expect", "intend", "believe", "plan", "goal", and
words of like import are intended to identify forward looking statements in
addition to statements specifically identified as forward looking statements.
These statements, projections or future plans, could be affected by a number
of factors that the Company is necessarily unable to predict with accuracy,
including future changes in interest rates, general credit quality, economic
activity, consumer behavior, government monetary policy, legislation and
regulation, competition, credit, market and operating risk, and loan demand.
In addition, the Company's future results of operations, discussions of future
plans and other forward looking statements contained in Management's
Discussion and Analysis and elsewhere in this Form 10-K involve a number of
risks and uncertainties, including risks relating to the uncertainties created
by the enactment of the Gramm-Leach-Bliley Financial Modernization Act of
1999. As a result of variations in such factors, actual results may differ
materially from any forward looking statements.
Forward looking statements speak only as of the date they are made. The
Company will not update forward looking statements to reflect factual
assumptions, circumstances or events which have changed after a forward
looking statement was made.
Government Monetary Policies
The Federal Reserve Board has the primary responsibility for United
States monetary policy. 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.
Legislation and Regulation
The Gramm-Leach-Bliley Financial Modernization Act of 1999:
a) Allows bank holding companies meeting management, capital and Community
Reinvestment Act standards to engage in a substantially broader range of
nonbanking activities than currently is permissible, including insurance
underwriting and making merchant banking investments in commercial and
financial companies;
b) Allows insurers and other financial services companies to acquire banks;
c) Removes various restrictions that currently apply to bank holding company
ownership of securities firms and mutual fund advisory companies; and
d) Establishes the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations.
The Modernization Act also modifies current law related to financial privacy
and community reinvestment. The new financial privacy provisions would
generally prohibit financial institutions, including the Company, from
disclosing nonpublic personal financial information to third parties unless
customers have the opportunity to "opt out" of the disclosure.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
See page 11 "Market Risk Management".
Quantitative and qualitative disclosure about market risk are
incorporated herein by reference from the "Market Risk Management", "Trading
Activities and Risk Management", and "Asset/Liability Management" sections
included in Exhibit 13.
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. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- -------------------------------------------------------------------------
There have been no events which require disclosure under Item 304 of
Regulation S-K.
PART III
- --------
The material responsive to Items 10, 11, 12 and 13 is incorporated by
reference to the Company's definitive proxy statement for its 2000 Annual
Meeting, except for information as to Executive Officers set forth in Part I,
Item 1.
PART IV
- -------
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:
A list of the exhibits filed or incorporated by reference appears
following page 23 of this Report, which information is incorporated by
reference.
(b) Reports on Form 8-K:
October 18, 1999: Unaudited interim financial information and
accompanying discussion for the third quarter of 1999.
December 6, 1999: 7.30% Senior Subordinated Notes due 2009 with four
exhibits: underwriting agreement, dated November 30, 1999; the Form of Note;
an Officers' Certificate pursuant to Section 301 of the Indenture; and the
opinion as to the legality of the Notes.
December 16, 1999: Projections and earnings estimates presented
to the financial analysts on December 16, 1999.
January 18, 2000: Unaudited interim financial information and
accompanying discussion for the fourth quarter of 1999.
(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 14th day of March, 2000.
THE BANK OF NEW YORK COMPANY, INC.
By: \s\ Thomas J. Mastro
-------------------------------------
(Thomas J. Mastro,
Comptroller)
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 14th day of March, 2000.
Signature Title
--------- -----
\s\ Thomas A. Renyi Chairman of the Board, Chief
- ------------------------------------ Executive Officer (Principal
(Thomas A. Renyi) Executive Officer), and Director
\s\ Gerald L. Hassell President and Director
- ------------------------------------
(Gerald L. Hassell)
\s\ Alan R. Griffith Vice Chairman and Director
- ------------------------------------
(Alan R. Griffith)
\s\ Bruce W. Van Saun Senior Executive Vice President
- ------------------------------------ and Chief Financial Officer
(Bruce W. Van Saun) (Principal Financial Officer)
\s\ Thomas J. Mastro Comptroller
- ------------------------------------ (Principal Accounting Officer)
(Thomas J. Mastro)
\s\ J. Carter Bacot Director
- ------------------------------------
(J. Carter Bacot)
\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\ Nicholas M. Donofrio Director
- ------------------------------------
(Nicholas M. Donofrio)
\s\ Richard J. Kogan Director
- ------------------------------------
(Richard J. Kogan)
\s\ John A. Luke, Jr. Director
- ------------------------------------
(John A. Luke, Jr.)
\s\ John C. Malone Director
- ------------------------------------
(John C. Malone)
\s\ Donald L. Miller Director
- ------------------------------------
(Donald L. Miller)
\s\ Catherine A. Rein Director
- ------------------------------------
(Catherine A. Rein)
\s\ William C. Richardson Director
- ------------------------------------
(William C. Richardson)
\s\ Brian L. Roberts Director
- ------------------------------------
(Brian L. Roberts)
INDEX TO EXHIBITS
Exhibit No.
- ----------
3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through
October 13, 1987- incorporated by reference to Exhibit 3(a) to the
Company's 1987 Annual Report on Form 10-K.
(b) Restated Certificate of Incorporation of The Bank of New York Company,
Inc. dated July 20, 1994, incorporated by reference to Exhibit 4 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.
(c) Amendment to Certificate of Incorporation of The Bank of New York
Company, Inc. dated July 9, 1996, incorporated by reference to
Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
(d) Amendment to Certificate of Incorporation of The Bank of New York
Company, Inc. dated July 16, 1998 incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-3 (Registration
Statement No. 333-70187.
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
instrument.
(b) 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 Company's registration statement on Form 8-A dated
December 18,1995.
(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 Company's Registration
Statement on Form 8-A, dated December 18, 1985. (File No. 1-6152)
(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 , filed May 3, 1993, to the Company's Registration
Statement on Form 8-A, dated December 18, 1985. (File No. 1-6152)
(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 the amendment on Form 8-A/A, filed March 24, 1994, to the
Company's Registration Statement on Form 8-A, dated December 18, 1985.
(File No. 1-6152)
*10(a) Amendment dated October 1, 1997 to the Trust Agreement dated
November 16, 1993 related to executive compensation agreements,
incorporated by reference to Exhibit 10(a) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
*(b) Enhanced Severance Agreement dated July 8, 1997, incorporated by
reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
*(c) Enhanced Severance Agreement dated July 8, 1997, incorporated by
reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
*(d) Enhanced Severance Agreement dated July 8, 1997, incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
*(e) Enhanced Severance Agreement dated July 8, 1997, incorporated by
reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
*(f) Consulting Agreement dated November 5, 1997, incorporated by reference
to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
*(g) Compensation Agreement dated April 17, 1997, incorporated by reference
to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
*(h) 1984 Stock Option Plan of The Bank of New York Company, Inc. as
amended through February 23, 1988, incorporated by reference to
Exhibit 10(a) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1988.
*(i) Amendment dated October 11, 1994 to 1984 Stock Option Plan of The Bank
of New York Company, Inc., incorporated by reference to Exhibit 10(b)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
*(j) The Bank of New York Company, Inc. Excess Contribution Plan as amended
through July 10, 1990- incorporated by reference to Exhibit 10(b) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1990.
*(k) Amendments dated February 23, 1994 and November 9, 1993 to The Bank of
New York Company, Inc. Excess Contribution Plan, incorporated by
reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
*(l) Amendment to The Bank of New York Company, Inc. Excess Contribution
Plan dated November 14, 1995, incorporated by reference to Exhibit
10(l) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
*(m) The Bank of New York Company, Inc. Excess Benefit Plan as amended
through December 8, 1992, incorporated by reference to Exhibit 10(d)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
*(n) Amendments dated February 23, 1994 and November 9, 1993 to The Bank
of New York Company, Inc. Excess Benefit Plan, incorporated by
reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
*(o) Amendment dated May 10, 1994 to The Bank of New York Company, Inc.
Excess Benefit Plan, incorporated by reference to Exhibit 10(g) to the
Company's Annual report on Form 10-K for the year ended
December 31, 1994.
*(p) Amendment dated November 14, 1995 to The Bank of New Company, Inc.
Excess Benefit Plan, incorporated by reference to Exhibit 10(i) to the
Company's Annual report on Form 10-K for the year ended
December 31, 1995.
*(q) 1994 Management Incentive Compensation Plan of The Bank of New York
Company, Inc., incorporated by reference to Exhibit 10(g) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
*(r) Amendment dated January 12, 1999 to the 1994 Management Incentive
Compensation Plan of The Bank of New York Company, Inc, incorporated
by reference to exhibit 10 (r) to the Company's annual report on
Form 10-K for the year ended December 31, 1998.
*(s) 1988 Long-Term Incentive Plan as amended through December 8, 1992,
incorporated by reference to Exhibit 10(f) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
*(t) Amendment dated October 11, 1994 to the 1988 Long-Term Incentive Plan
of The Bank of New York Company, Inc., incorporated by reference to
Exhibit 10(j) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
*(u) The Bank of New York Company, Inc. 1993 Long-Term Incentive Plan,
incorporated by reference to Exhibit 10(m) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
*(v) Amendment dated October 11, 1994 to the 1993 Long-Term Incentive Plan
of The Bank of New York Company, Inc., incorporated by reference to
Exhibit 10(l) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
*(w) Amendment dated December 10, 1996 to the 1993 Long-Term Incentive Plan
of The Bank of New York Company, Inc., incorporated by reference to
Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
*(x) Amendment dated January 14, 1997 to the 1993 Long-Term Incentive Plan
of The Bank of New York Company, Inc., incorporated by reference to
Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
*(y) Amendment dated March 11, 1997 to the 1993 Long-Term Incentive Plan of
The Bank of New York Company, Inc., incorporated by reference to
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
*(z) Amendment dated July 14, 1998 to the 1993 Long-Term Incentive Plan of
The Bank of New York Company, Inc incorporated by reference to Exhibit
10(z) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
*(aa) The Bank of New York Company, Inc. 1999 Long-Term Incentive Plan,
incorporated by reference to Exhibit 10(aa) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
*(bb) The Bank of New York Company, Inc. Supplemental Executive
Retirement Plan, incorporated by reference to Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1992.
*(cc) Amendment dated March 9, 1993 to The Bank of New York Company, Inc.
Supplemental Executive Retirement Plan, incorporated by reference to
Exhibit 10(k) to the Company's Annual Report On Form 10-K for the year
ended December 31, 1993.
*(dd) Amendment effective October 11, 1994 to The Bank of New York Company,
Inc. Supplemental Executive Retirement Plan, incorporated by reference
to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
*(ee) Amendment dated June 11, 1996 to The Bank of New York Company, Inc.
Supplemental Executive Retirement Plan, incorporated by reference to
Exhibit 10(a) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
*(ff) Amendment dated November 12, 1996 to The Bank of New York Company,
Inc. Supplemental Executive Retirement Plan, incorporated by reference
to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
*(gg) Amendment dated December 23, 1999 to the Trust Agreement dated
November 16, 1993 related to executive compensation.
*(hh) Trust Agreement dated November 16, 1993 related to certain executive
compensation plans and agreements, incorporated by reference to
Exhibit 10(m) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
*(ii) Amendment dated October 11, 1994 to Trust Agreement dated November 16,
1993, related to certain executive compensation plans and agreements,
incorporated by reference to Exhibit 10(r) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
*(jj) Trust Agreement dated December 15, 1994 related to certain executive
compensation plans and agreements, incorporated by reference to
Exhibit 10(s) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
*(kk) Amendment dated December 10, 1996 to The Bank of New York Company,
Inc. Excess Benefit Plan.
*(ll) Amendment dated January 14, 1997 to the Trust Agreement dated
November 16, 1993 related to executive compensation agreements,
incorporated by reference to Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
*(mm) Amendment dated January 31, 1997 to the Trust Agreement dated
November 16, 1993 related to executive compensation agreements,
incorporated by reference to Exhibit 10(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
*(nn) Consulting Agreement dated June 18, 1999.
*(oo) Amendment dated September 11, 1998 to the Trust Agreement dated
November 16, 1993 related to executive compensation agreements,
Incorporated by reference to Exhibit 10(oo) to the the Company's
Annual Report on Form 10-K for the year ended December 31,1998.
*(pp) Form of Remuneration Agreement between the Company and one of the five
most highly compensated executive officers of the Company incorporated
by reference to Exhibit 10 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1982.
*(qq) 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, incorporated by reference to Exhibit 10(u) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
*(rr) Form of Remuneration Agreement dated October 11, 1994 between the
Company and three of the five most highly compensated officers of the
Company, incorporated by reference to Exhibit 10(v) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
*(ss) The Bank of New York Company, Inc. Retirement Plan for Non-Employee
Directors- incorporated by reference to Exhibit 10(r) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994,
*(tt) Amendment dated November 8, 1994 to The Bank of New York Company, Inc.
Retirement Plan for Non-Employee Directors, incorporated by reference
to Exhibit 10(x) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
*(uu) Amendment dated February 9, 1999 to The Bank of New York Company, Inc.
Retirement Plan for Non-Employee Directors, Incorporated by reference
To Exhibit 10(uu) to the Company's Annual Report on Form 10-K for the
Year ended December 31, 1998.
*(vv) Deferred Compensation Plan for Non-Employee Directors of The Bank of
New York Company, Inc., incorporated by reference to Exhibit 10(s) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
*(ww) Amendment dated November 8, 1994 to Deferred Compensation Plan for
Non-Employee Directors of The Bank of New York Company, Inc.,
incorporated by reference to Exhibit 10(z) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
*(xx) Amendment dated February 11, 1997 to the Directors' Deferred
Compensation Plan for The Bank of New York Company, Inc., incorporated
by reference to Exhibit 10(j) to the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
*(yy) Enhanced Severance Agreement dated July 8, 1997.
12 Statement - Re: Computation of Earnings to Fixed Charges Ratios
13 Portions of the 1999 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule
* Constitutes a Management Contract or Compensatory Plan or Arrangement