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1
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, 2000
[ ] 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% Preferred Trust Securities, Series C NEW YORK STOCK EXCHANGE
7.05% Preferred Securities, Series D NEW YORK STOCK EXCHANGE
6.88% Preferred Trust 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 28, 2001 consisted of:
Common Stock ($7.50 par value) $38,146,022,051
(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 736,694,130 shares on February 28, 2001.
2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2000 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 8, 2001
(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 2000 Annual Report to
Shareholders beginning under the heading "Securities Servicing and Global
Payment Servicing" and continuing through "Retail Banking" 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 bank or bank holding
company, without the prior approval of the Federal Reserve Board. In
addition, bank holding companies that are not financial holding companies are
generally limited to engaging in the business of banking, managing or
controlling banks, and other activities that the Federal Reserve Board has
determined to be so closely related to banking as to be a proper incident
thereto.
Under the Gramm-Leach-Bliley Act (the "GLB Act"), which became effective
on March 11, 2000 with respect to provisions relating to powers, bank holding
companies, each of whose depository institution subsidiaries is "well
capitalized" as defined under the Federal Deposit Insurance Act and "well
managed" as defined under Regulation Y under the BHC Act and which obtain at
least a "satisfactory" rating under the Community Reinvestment Act, have the
ability to declare themselves to be financial holding companies and engage in
a broader range of activities than those traditionally permissible for U.S.
bank holding companies. The Company's declaration to become a financial
holding company became effective on August 11, 2000. As a financial holding
company, the Company may conduct, or acquire a company (other than a U.S.
depository institution or foreign bank) engaged in, activities that are
"financial in nature," as well as additional activities that the Federal
Reserve Board determines (in the case of incidental activities, in conjunction
with the Department of the Treasury) are incidental or complementary to
financial activities, without the prior approval of the Federal Reserve Board.
Under the GLB Act, activities that are financial in nature include insurance,
securities underwriting and dealing, merchant banking, and lending activities.
Under the new merchant banking authority added by the GLB Act, financial
holding companies may invest in companies that engage in activities that are
not otherwise permissible, subject to certain limitations, including that the
financial holding company makes the investment with the intention of limiting
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the investment in duration and does not manage the company on a day-to-day
basis.
Financial holding companies that do not continue to meet all of the
requirements for financial holding company status will, depending on which
requirement they fail to meet, lose the ability to undertake new activities or
acquisitions that are financial in nature or to continue those activities that
are not generally permissible for bank holding companies.
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 and 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 must 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, 2000, 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 8% to 25% of the total
carrying value of certain investments in non-financial companies, including
merchant banking investments. The Company does not believe that such
regulations, if adopted, 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
4
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 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% or a Total Capital
Ratio of less than 8% 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% or a Total Capital Ratio of less than 8% and
it does not meet the definition of critically undercapitalized; and (v)
critically undercapitalized if it maintains a level of tangible equity capital
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 depositary institution that is not well capitalized is subject to
certain limitations on brokered deposits. In addition, as indicated above, if
a depositary institution is not well capitalized, its parent holding company
cannot become, and, subject to a capital restoration plan, cannot remain, a
financial holding company.
5
As of December 31, 2000 and 1999, the capital ratios for the Company and
BNY qualified them as well capitalized as set forth in the table below.
December 31, 2000 December 31, 1999
----------------- -----------------
Well
Capitalized
Company BNY Company BNY Guidelines
------- --- ------- --- -----------
Tier I 8.60% 8.03% 7.51% 7.14% 6%
Total Capital 12.92 11.60 11.67 10.50 10
Leverage 7.49 6.91 7.20 6.85 5
Tangible Common
Equity 5.78 6.96 4.79 6.36
At December 31, 2000, the amounts of capital by which the Company and BNY
exceed the well capitalized guidelines are as follows:
(in millions) Company BNY
------- ---
Tier 1 $1,699 $1,275
Total Capital 1,911 1,006
Leverage 1,870 1,395
The following table presents the components of the Company's risk-based
capital at December 31, 2000 and 1999:
(in millions) 2000 1999
---- ----
Common Stock $6,151 $5,142
Preferred Stock 1 1
Minority Interest - Preferred Securities 1,500 1,500
Adjustments: Intangibles (1,785) (1,624)
Securities Valuation Allowance (244) (58)
------- -------
Tier 1 Capital 5,623 4,961
------- -------
Qualifying Unrealized Equity Security Gains 153 74
Qualifying Subordinated Debt 2,073 2,089
Qualifying Allowance for Loan Losses 603 581
------- -------
Tier 2 Capital 2,829 2,744
------- -------
Total Risk-based Capital $8,452 $7,705
======= =======
6
The following table presents the components of the Company's risk
adjusted assets at December 31, 2000 and 1999:
2000 1999
---------------------------------------------
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 $ 8,462 $ 1,491 $ 10,126 $ 1,727
Securities 7,401 3,080 6,899 2,481
Trading Assets 12,051 - 8,715 -
Fed Funds Sold and Securities
Purchased Under Resale Agreements 5,790 1,003 5,383 957
Loans 36,261 32,119 37,547 32,901
Allowance for Credit Losses (616) - (595) -
Other Assets 7,765 5,712 6,681 4,612
--------- ------- --------- -------
Total Assets $ 77,114 43,405 $ 74,756 42,678
========= ------- ========= -------
Off-Balance Sheet Exposures
- ---------------------------
Commitments to Extend Credit $ 48,625 12,887 $ 51,574 13,484
Securities Lending Indemnifications 106,560 - 61,378 -
Standby Letters of Credit and
Other Guarantees 9,634 8,043 10,399 8,397
Interest Rate Contracts 274,867 534 213,653 535
Foreign Exchange Contracts 76,352 1 102,950 -
--------- ------- --------- -------
Total Off-Balance Sheet Exposures $516,038 21,465 $439,954 22,416
========= ------- ========= -------
Market Risk Equivalent Assets 391 887
Unrealized Equity Security Gains
Qualifying as Risk Based Capital 153 74
------- -------
Risk Adjusted Assets $65,414 $66,055
======= =======
A further 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.
7
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 2000. 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 2.06 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 bank holding companies that
have not qualified as financial holding companies 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. As a
financial holding company, however, the Company is also permitted to acquire
companies engaged in activities that are financial in nature and in activities
that are incidental and complementary to financial activities without prior
Federal Reserve Board approval.
The BHC Act, the Federal Bank Merger Act, the New York Banking Law and
other state statutes 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
8
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.
9
ADDITIONAL FINANCIAL INFORMATION
- --------------------------------
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
- ------------------------------------------------------------------------------
2000 1999 1998
------------------------- ------------------------- ------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------------------------- ------------------------- ------------------------
Assets
- ------
Interest-Bearing
Deposits in Banks
(Primarily Foreign) $ 5,385 $ 273 5.07% $ 5,500 $ 247 4.49% $ 3,437 $ 184 5.35%
Federal Funds Sold
and Securities
Purchased Under
Resale Agreements 4,468 277 6.20 4,236 205 4.83 3,880 203 5.24
Loans
Domestic Offices
Other Consumer 3,527 305 8.65 3,292 270 8.21 3,366 282 8.36
Commercial 15,815 1,125 7.11 16,415 1,148 6.99 16,407 1,229 7.49
Foreign Offices 19,920 1,482 7.44 19,174 1,219 6.36 18,567 1,264 6.81
-------- ------ -------- ------ -------- ------
Total Loans 39,262 2,912* 7.41 38,881 2,637* 6.78 38,340 2,775* 7.24
-------- ------ -------- ------ -------- ------
Securities
U.S. Government
Obligations 3,326 210 6.33 3,373 202 5.98 3,638 213 5.85
Obligations of
States and
Political
Subdivisions 621 50 8.06 588 46 7.86 672 54 7.98
Other Securities,
including Trading
Securities
Domestic Offices 2,445 146 5.97 1,882 85 4.51 2,051 108 5.23
Foreign Offices 9,372 563 6.01 1,702 95 5.56 793 31 3.93
-------- ------ -------- ------ -------- ------
Total Other
Securities 11,817 709 6.00 3,584 180 5.01 2,844 139 4.87
-------- ------ -------- ------ -------- ------
Total Securities 15,764 969 6.15 7,545 428 5.67 7,154 406 5.66
-------- ------ -------- ------ -------- ------
Total Interest-Earning
Assets 64,879 $4,431 6.83% 56,162 $3,517 6.26% 52,811 $3,568 6.76%
====== ====== ======
Allowance for Credit
Losses (608) (613) (643)
Cash and Due from
Banks 3,181 3,174 3,237
Other Assets 9,789 8,054 7,736
-------- -------- --------
Total Assets $77,241 $66,777 $63,141
======== ======== ========
Assets Attributable
to Foreign Offices ** 47.41% 41.39% 38.79%
===== ===== =====
*Includes fees of $115 million in 2000, $130 million in 1999, and $120 million in 1998.
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 $54 million in 2000, $44 million in 1999, and $58 million
in 1998 and are based on the federal statutory tax rate (35%) and applicable state and local
taxes.
**Includes Cayman Islands branch office.
10
Average Balances and Rates on a Taxable Equivalent Basis (dollars in millions)
- ------------------------------------------------------------------------------
2000 1999 1998
--------------------------- -------------------------- -------------------------
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 $ 5,827 $ 290 4.98% $ 5,142 $ 221 4.30% $ 4,998 $ 232 4.65%
Savings 7,599 197 2.59 7,757 177 2.28 7,682 193 2.51
Certificates of
Deposit of $100,000
or More 448 26 5.80 526 26 5.03 687 37 5.41
Other Time Deposits 1,998 101 5.07 2,238 99 4.42 2,299 110 4.80
------- ------ ------- ------ ------- ------
Total Domestic Offices 15,872 614 3.87 15,663 523 3.34 15,666 572 3.65
------- ------ ------- ------ ------- ------
Foreign Offices
Banks in Foreign Countries 6,894 324 4.71 6,402 264 4.12 5,422 246 4.53
Government and
Official Institutions 621 38 6.09 1,178 55 4.67 1,205 65 5.39
Other Time and Saving 20,091 1,035 5.15 12,613 521 4.13 9,784 491 5.02
------- ------ ------- ------ ------- ------
Total Foreign Offices 27,606 1,397 5.06 20,193 840 4.16 16,411 802 4.88
------- ------ ------- ------ ------- ------
Total Interest-
Bearing Deposits 43,478 2,011 4.63 35,856 1,363 3.80 32,077 1,374 4.28
------- ------ ------- ------ ------- ------
Federal Funds Purchased
and Securities Sold
Under Repurchase
Agreements 2,673 153 5.73 2,940 131 4.45 3,147 145 4.60
Other Borrowed Funds 2,099 139 6.62 2,362 126 5.36 3,761 204 5.42
Long-Term Debt 2,884 204 7.06 2,306 152 6.57 1,972 136 6.90
------- ------ ------- ------ ------- ------
Total Interest-Bearing
Liabilities 51,134 $2,507 4.90% 43,464 $1,772 4.07% 40,957 $1,859 4.54%
====== ====== ======
Noninterest-Bearing Deposits
Domestic Offices 11,185 10,613 10,109
Foreign Offices 92 95 76
------- ------- -------
Total Noninterest-
Bearing Deposits 11,277 10,708 10,185
------- ------- -------
Other Liabilities 7,850 6,004 5,850
Minority Interest - Preferred
Securities 1,500 1,487 1,233
Preferred Stock 1 1 1
Common Shareholders' Equity 5,479 5,113 4,915
------- ------- -------
Total Liabilities
and Shareholders' Equity $77,241 $66,777 $63,141
======= ======= =======
Net Interest Earnings and
Interest Rate Spread $1,924 1.93% $1,745 2.19% $1,709 2.22%
====== ====== ======
Net Yield on
Interest-Earning Assets 2.96% 3.11% 3.24%
===== ===== =====
Liabilities Attributable
to Foreign Offices 38.37% 35.77% 31.53%
====== ====== ======
11
Rate/Volume Analysis on a Taxable Equivalent Basis (in millions)
- ----------------------------------------------------------------
2000 vs. 1999 1999 vs. 1998
------------------------------------- ----------------------------------
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 $ (5) $ 31 $ 26 $ 96 $(33) $ 63
Federal Funds Sold and Securities
Purchased Under Resale Agreements 12 60 72 18 (16) 2
Loans
Domestic Offices
Other Consumer 20 15 35 (7) (5) (12)
Commercial (41) 18 (23) 1 (82) (81)
Foreign Offices 50 213 263 40 (85) (45)
----- ------ ------ ------ ----- ------
Total Loans 29 246 275 34 (172) (138)
Securities
U.S. Government Obligations (3) 11 8 (15) 4 (11)
Obligations of States and
Political Subdivisions 3 1 4 (7) (1) (8)
Other Securities, including
Trading Assets
Domestic Offices 29 32 61 (8) (15) (23)
Foreign Offices 460 8 468 43 21 64
----- ------ ------ ------ ----- ------
Total Other Securities 489 40 529 35 6 41
----- ------ ------ ------ ----- ------
Total Securities 489 52 541 13 9 22
----- ------ ------ ------ ----- ------
Total Interest Income 525 389 914 161 (212) (51)
----- ------ ------ ------ ----- ------
Interest Expense
- ----------------
Interest-Bearing Deposits
Domestic Offices
Money Market Rate Accounts 32 37 69 7 (18) (11)
Savings (4) 24 20 2 (18) (16)
Certificate of Deposits of
$100,000 or More (4) 4 - (9) (2) (11)
Other Time Deposits (11) 13 2 (3) (8) (11)
----- ------ ------ ------ ----- ------
Total Domestic Offices 13 78 91 (3) (46) (49)
----- ------ ------ ------ ----- ------
Foreign Offices
Banks in Foreign Countries 21 39 60 42 (24) 18
Government and Official
Institutions (31) 14 (17) (1) (9) (10)
Other Time and Savings 362 152 514 126 (96) 30
----- ------ ------ ------ ----- ------
Total Foreign Offices 352 205 557 167 (129) 38
----- ------ ------ ------ ----- ------
Total Interest-Bearing
Deposits 365 283 648 164 (175) (11)
Federal Funds Purchased and
Securities Sold Under
Repurchase Agreements (13) 35 22 (9) (5) (14)
Other Borrowed Funds (15) 28 13 (76) (2) (78)
Long-Term Debt 40 12 52 22 (6) 16
----- ------ ------ ------ ----- ------
Total Interest Expense 377 358 735 101 (188) (87)
----- ------ ------ ------ ----- ------
Change in Net Interest Income $148 $ 31 $ 179 $ 60 $ (24) $ 36
===== ====== ====== ====== ===== ======
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.
12
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, the timing
of such changes 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.
13
Nonperforming Assets
- --------------------
A summary of nonperforming assets is presented in the following table.
(in millions) December 31,
----------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Nonaccrual
- ----------
Domestic $141 $ 83 $126 $159 $175
Foreign 48 63 53 34 38
---- ---- ---- ---- ----
189 146 179 193 213
Real Estate Acquired
in Satisfaction of Loans 4 12 14 15 41
- ------------------------ ---- ---- ---- ---- ----
$193 $158 $193 $208 $254
==== ==== ==== ==== ====
Past Due 90 Days or More
and Still Accruing Interest
- ---------------------------
Domestic:
Credit Card $ - $ - $ - $ 1 $215
Other Consumer 3 3 3 2 2
Commercial 23 13 26 75 30
---- ---- ---- ---- ----
26 16 29 78 247
Foreign:
Banks - 3 - - -
---- ---- ---- ---- ----
$ 26 $ 19 $ 29 $ 78 $247
==== ==== ==== ==== ====
2000 1999
---- ----
Nonperforming Asset Ratio 0.5% 0.4%
Allowance/Nonperforming Loans 325.6 407.7
Allowance/Nonperforming Assets 319.6 376.9
14
Allowance for Credit Losses
- ---------------------------
The following table details changes in the Company's allowance for credit losses
for the last five years.
(dollars in millions) 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Loans Outstanding, December 31, $36,261 $37,547 $38,386 $35,127 $37,006
Average Loans Outstanding 39,262 38,881 38,340 36,577 36,698
Allowance for Loan Losses
- -------------------------
Balance, January 1
Domestic $ 485 $ 498 $ 441 $ 670 $ 515
Foreign 71 69 44 38 82
Unallocated 39 69 156 193 159
------ ------ ------ ------ ------
Total, January 1 595 636 641 901 756
------ ------ ------ ------ ------
Allocations and Acquisitions (1) - (39) 4 (186) -
Charge-Offs
Domestic
Commercial and Industrial (88) (104) (34) (89) (46)
Real Estate & Construction - (5) - - (11)
Consumer (9) (8) (10) (13) (16)
Credit Card - - - (298) (503)
Foreign (3) (37) (7) (3) (4)
------ ------ ------ ------ ------
Total (100) (154) (51) (403) (580)
------ ------ ------ ------ ------
Recoveries
Domestic
Commercial and Industrial 11 10 7 9 15
Real Estate & Construction 1 2 7 3 -
Consumer 3 4 5 8 7
Credit Card - - - 23 62
Foreign 1 1 3 6 41
------ ------ ------ ------ ------
Total 16 17 22 49 125
Net Charge-Offs (84) (137) (29) (354) (455)
------ ------ ------ ------ ------
Provision 105 135 20 280 600
Balance, December 31,
Domestic 491 485 498 441 670
Foreign 67 71 69 44 38
Unallocated 58 39 69 156 193
------ ------ ------ ------ ------
Total, December 31, $ 616 $ 595 $ 636 $ 641 $ 901
====== ====== ====== ====== ======
Ratios
- ------
Net Charge-Offs to Average Loans
Outstandings 0.21% 0.35% 0.08% 0.97% 1.24%
====== ====== ====== ====== ======
Net Charge-Offs to Total Allowance 13.64% 23.03% 4.56% 55.23% 50.50%
====== ====== ====== ====== ======
Total Allowance to Year-End Loans
Outstanding 1.70% 1.58% 1.66% 1.82% 2.44%
===== ===== ===== ===== =====
(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, 2000, the Company's emerging markets exposures consisted
of $91 million in medium-term loans, $1,633 million in short-term loans,
primarily trade related, and $203 million in investments. In addition, the
Company has $311 million of debt securities of emerging market countries,
including $264 million (book value) of bonds whose principal payments are
collateralized by U.S. Treasury zero coupon obligations and whose interest
payments are partially collateralized. Subsequent to December 31, 2000, the
Company sold $164 million of its emerging market debt securities. 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.
15
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, 2000.
Mortgage/
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 $15 5.76% $ 4 5.77% $175 5.02% $ 24 7.66% $ - -% $218
Over 1 through 5 Years 3 6.18 - - 24 6.00 88 3.97 - - 115
Over 5 through 10 Years - - - - 25 6.87 1 7.12 - - 26
Over 10 years - - - - 13 6.77 280 6.75 - - 293
Mortgage-Backed Securities - - - - - - - - 100 7.24 100
--- --- ---- ---- ---- ----
$18 5.84% $ 4 5.77% $237 5.41% $393 6.18% $100 7.24 $752
=== === ==== ==== ==== ====
Securities Available-
- ---------------------
for-Sale
- ---------
One Year or Less $ 12 5.92% $ 35 6.19% $146 5.07% $ 888 6.42% $ - -% $1,081
Over 1 through 5 Years 1,335 5.78 855 7.18 38 5.61 176 5.91 - - 2,404
Over 5 through 10 Years 20 5.26 334 6.44 81 5.52 123 6.71 - - 558
Over 10 years 101 5.14 - - 183 5.44 353 5.53 - - 637
Mortgage-Backed Securities - - - - - - - - 512 6.83 512
Asset-Backed Securities - - - - - - - - 327 6.26 327
Equity Securities - - - - - - - - 1,130 2.54 1,130
------ ------ ---- ------ ------ ------
$1,468 5.73% $1,224 6.95% $448 5.35% $1,540 6.18% $1,969 4.27% $6,649
====== ====== ==== ====== ====== ======
*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, 2000.
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 $ 386 $ 1,185 $1,450 $ 3,021
Commercial and Industrial Loans 3,110 8,425 2,268 13,803
Other, Excluding Loans to Individuals and those
Collateralized by 1-4 Family Residential Properties 4,031 1,068 60 5,159
------- ------- ------ -------
7,527 10,678 3,778 21,983
Foreign 2,666 1,818 466 4,950
- -------
------- ------- ------ -------
Total $10,193 $12,496 $4,244 $26,933
======= ======= ====== =======
Loans with:
Predetermined Interest Rates $ 3,170 $ 834 $1,377 $ 5,381
Floating Interest Rates 7,023 11,662 2,867 21,552
------- ------- ------ -------
Total $10,193 $12,496 $4,244 $26,933
======= ======= ====== =======
16
Deposits
- --------
The aggregate amount of deposits by foreign customers in domestic offices
was $5.2 billion, $7.1 billion, and $5.4 billion at December 31, 2000, 1999,
and 1998.
The following table shows the maturity breakdown of domestic time
deposits of $100,000 or more at December 31, 2000.
Other
Certificates Time
(in millions) of Deposits Deposits Total
--------------------------------------------
3 Months or Less $490 $3,651 $4,141
Over 3 Through 6 Months 154 - 154
Over 6 Through 12 Months 91 - 91
Over 12 Months 242 33 275
---- ------ ------
Total $977 $3,684 $4,661
==== ====== ======
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 2000, 1999, and 1998 is
presented in the table below.
2000 1999 1998
--------------------------------------------------------------
(dollars in millions) Average Average Average
Amount Rate Amount Rate Amount Rate
------ ------- ------ ------- ------ --------
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements
At December 31 $1,108 4.12% $1,318 2.46% $1,571 3.78%
Average During Year 2,673 5.73 2,940 4.45 3,147 4.60
Maximum Month-End Balance During Year 3,698 6.45 3,639 2.58 4,684 4.65
Other*
At December 31 $1,710 5.07% $1,595 3.97% $2,963 4.86%
Average During Year 2,099 6.62 2,362 5.36 3,761 5.42
Maximum Month-End Balance During Year 2,385 4.97 3,476 4.70 3,467 5.07
*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, 2000, the Company
had cross border exposure of more than 1% of its total assets in United
Kingdom, totaling $3.0 billion, in Germany, totaling $2.1 billion, in Belgium,
totaling $1.2 billion, in Italy, totaling $0.9 billion, and in France,
totaling $0.8 billion. The United Kingdom's assets consisted of $2.2 billion
attributable to banks and other financial institutions and $730 million
attributable to commercial, industrial and other companies. Germany's assets
consisted of $1.7 billion attributable to banks and other financial
institutions, $148 million attributable to public sector entities, and $246
million attributable to commercial, industrial and other companies. Belgium's
assets consisted of $1.0 billion attributable to banks and other financial
institutions, $189 million attributable to public sector entities, and $35
million attributable to commercial, industrial and other companies. Italy's
assets consisted of $917 million attributable to banks and other financial
institutions and $18 million attributable to commercial, industrial and other
companies. France's assets consisted of $292 million attributable to banks
and other financial institutions, $6 million attributable to public sector
entities, and $524 million attributable to commercial, industrial and other
companies.
17
EXECUTIVE OFFICERS OF THE REGISTRANT AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------------------------
Company
Officer
Name Office and Experience Age Since
- ---- --------------------- --- -------
Thomas A. Renyi 1998-2001 Chairman and Chief Executive Officer 55 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
Alan R. Griffith 1996-2001 Vice Chairman of the Company and the Bank 59 1990
Gerald L. Hassell 1998-2001 President of the Company and the Bank 49 1998
1998-1998 Senior Executive Vice President of the Company
1996-1998 Chief Commercial Banking Officer and
Senior Executive Vice President of the Bank
Bruce W. Van Saun 1998-2001 Senior Executive Vice President of the 43 1998
Company and Chief Financial Officer of the
Company and the Bank
1997-1998 Executive Vice President and Chief Financial
Officer of the Bank
1996-1997 Chief Financial Officer Deutsche Bank
North America
Robert J. Mueller 2000-2001 Senior Executive Vice President of the 59 2000
Company and the Bank
1998-2000 Senior Executive Vice President -
Asset Based Lending Sector of the Bank
1996-1998 Senior Executive Vice President and
Chief Credit Policy Officer of the Bank
J. Michael Shepherd 2001 Executive Vice President, General Counsel and 45 2001
Secretary of the Company and Executive Vice
President and General Counsel of the Bank
1996-2001 Partner, Brobeck, Phleger and Harrison, LLP
Thomas J. Mastro 1999-2001 Comptroller of the Company and the Bank 51 1999
1998-1999 Senior Vice President of the Bank
1996-1998 Vice President of the Bank
Robert J. Goebert 1996-2001 Auditor of the Company, Senior Vice 59 1982
President of the Bank
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.
18
ITEM 2. PROPERTIES
- -------------------
At December 31, 2000 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 continues to cooperate with investigations by federal and
state law enforcement and bank regulatory authorities. The investigations
focus on funds transfer activities in certain accounts at BNY, principally
involving wire transfers from Russian and other sources in Eastern Europe, as
well as certain other matters involving BNY and its affiliates. The funds
transfer 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 pled guilty
to various federal criminal charges. The Company cannot predict when or on
what basis the investigations will conclude or their effect, if any, on the
Company.
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. Substantially
all of these reporting requirements and controls are now in place.
Four 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 two 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. On September 1, 2000, plaintiffs in the
two federal actions filed an amended, consolidated complaint that names all of
the directors and certain officers of BNY and the Company as defendants,
repeats the allegations of the original complaints and adds allegations that
certain officers of BNY and the Company participated in a scheme to transfer
cash improperly from Russia to various off-shore accounts and to avoid Russian
customs, currency and tax laws. Management believes that the allegations of
both the original and the amended complaint are without merit. On September
12, 2000, the boards of directors of BNY and the Company authorized a Special
Litigation Committee to consider the response of BNY and the Company to the
state and federal court shareholder derivative actions.
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 twice, alleges that
the Company and BNY and their senior officers knew about, and aided and
abetted the looting of Inkombank by its principals and participated in a
scheme to transfer cash improperly from Russia to various off-shore accounts
and to avoid Russian customs, currency and tax laws. 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"). On March 21,
2001, the court dismissed the second amended complaint without leave to
replead. Plaintiffs have not indicated whether they intend to appeal that
decision.
19
On October 24, 2000, three alleged shareholders of Inkombank filed an
action in the Supreme Court, New York County against the Company, BNY and
Inkombank. The complaint alleges that the defendants fraudulently induced the
plaintiffs to refrain from redeeming their alleged $40 million investment in
Inkombank. The complaint asserts a single cause of action for fraud, seeking
$40 million plus 12% interest from January 1994, punitive damages, costs,
interest and attorney fees. The Company and BNY have moved to dismiss the
amended compliant. That motion is pending. The Company and BNY believe that
the allegations of the complaint are without merit and intend to defend the
action vigorously.
The Company does not expect that any of the foregoing civil actions will
have a material impact on the Company's consolidated financial statements.
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 2000.
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 28,719 common shareholders of record at February 28, 2001.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Selected financial data are incorporated herein by reference from the
corresponding 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.
20
FORWARD LOOKING STATEMENTS
The information presented with respect to, among other things, earnings
growth, projected business volume, the outcome of legal and investigatory
proceedings, the Company's plans and objectives in moving into fee based
business, and future loan losses, is forward looking information. Forward
looking statements are the Company's current estimates or expectations of
future events or future results.
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",
"forecast", "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.
Forward looking statements, including 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, are subject to risks and uncertainties, some of which are discussed
herein, that could cause actual results to differ materially from projected
results. Forward looking statements, projections or future plans, could be
affected by lower than expected performance or higher than expected costs in
connection with acquisitions and integration of acquired businesses, changes
in relationships with customers, variations in management projections or
market forecasts and the actions that management could take in response to
these changes, management's ability to achieve efficiency goals and changes in
customer credit quality, as well as by a number of factors that the Company is
necessarily unable to predict with accuracy. These include future changes in
interest rates, general credit quality, the level of capital market activity,
economic activity, consumer behavior, government monetary policy, domestic and
foreign legislation, regulation and investigation, competition, credit, market
and operating risk, and loan demand. This is not an exhaustive list and as a
result of variations in any of these 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 facts,
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.
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.
Commercial banks, 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
21
wide variety of domestic and foreign companies compete for processing
services.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
See page 12 "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 2001 Annual
Meeting, except for information as to Executive Officers set forth in Part I,
Item 1.
22
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 24 of this report, which information is incorporated by
reference.
(b) Reports on Form 8-K:
October 16, 2000: Unaudited interim financial information and
accompanying discussion for the third quarter of 2000.
December 14, 2000: Projections and earnings estimates presented to the
financial analysts on December 14, 2000.
January 16, 2001: Unaudited interim financial information and
accompanying discussion for the fourth quarter of 2000.
(c) Exhibits:
Submitted as a separate section of this report.
(d) Financial Statements Schedules:
None
23
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, hereunto duly authorized in New York, New York, on
the 13th day of March, 2001.
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 13th day of March, 2001.
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.)
24
\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)
25
INDEX TO EXHIBITS
Exhibit No.
- ----------
3 (a) The By-Laws of The Bank of New York Company, Inc. as amended through
November 14, 2000.
(b) Restated Certificate of Incorporation of The Bank of New York Company,
Inc. dated June 13, 2000, incorporated by reference to Exhibit 3(i) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.
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 18,1985.
(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 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) 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.
*(c) 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.
26
*(d) 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.
*(e) 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.
*(f) 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.
*(g) 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.
*(h) 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.
*(i) 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.
*(j) 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.
*(k) 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.
*(l) 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.
*(m) 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.
*(n) 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.
*(o) 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.
27
*(p) 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.
*(q) 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.
*(r) 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.
*(s) 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.
*(t) 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.
*(u) 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.
*(v) 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.
*(w) 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.
*(x) 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.
*(y) 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.
*(z) 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.
28
*(aa) 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.
*(bb) 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.
*(cc) Amendment dated December 23, 1999 to the Trust Agreement dated
November 16, 1993 related to executive compensation, incorporated by
reference to Exhibit 10(gg) to the Company's Annual Report on Form
10-K for the year ended December 31, 1999.
*(dd) 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.
*(ee) 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.
*(ff) 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.
*(gg) Amendment dated December 10, 1996 to The Bank of New York Company,
Inc. Excess Benefit Plan, incorporated by reference to Exhibit 10(kk)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
*(hh) 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.
*(ii) 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.
*(jj) Consulting Agreement dated June 18, 1999, incorporated by reference
to Exhibit 10(nn) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
*(kk) 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.
*(ll) 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.
*(mm) 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.
29
*(nn) 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.
*(oo) 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,
*(pp) 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.
*(qq) 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.
*(rr) 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.
*(ss) 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.
*(tt) 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.
*(uu) Enhanced Severance Agreement dated July 8, 1997, incorporated by
reference to Exhibit 10(yy) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
*(vv) Amendment to The Bank of New York Company, Inc. 1993 Long-Term
Incentive Plan, incorporated by reference to Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
*(ww) Amendment to The Bank of New York Company, Inc. 1999 Long-Term
Incentive Plan, incorporated by reference to Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
*(xx) Amendment to The Bank of New York Company, Inc. Retirement Plan for
Non-Employee Directors, incorporated by reference to Exhibit 10(c)
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
*(yy) Amendment to Deferred Compensation Plan for Non-Employee Directors Of
The Bank of New York Company, Inc, incorporated by reference to
Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.
*(zz) Amendment to The Bank of New York Company, Inc. Supplemental Executive
Retirement Plan, incorporated by reference to Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000.
30
*(aaa) Amendment Number Twelve To Grantor Trust Agreement, incorporated by
reference to Exhibit 10(f) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000.
*(bbb) Employee Severance Agreement dated July 11, 2000, incorporated
by reference to Exhibit 10(g) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
*(ccc) Employee Severance Agreement dated July 11, 2000, incorporated
by reference to Exhibit 10(h) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
*(ddd) Employee Severance Agreement dated July 11, 2000, incorporated
by reference to Exhibit 10(i) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
*(eee) Employee Severance Agreement dated July 11, 2000, incorporated
by reference to Exhibit 10(j) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
*(fff) Employee Severance Agreement dated July 11, 2000, incorporated
by reference to Exhibit 10(k) to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
*(ggg) Amendment dated February 13, 2001 to The Bank of New York Company,
Inc. Supplemental Executive Retirement Plan.
*(hhh) Employee Severance Agreement dated January 22, 2001 for an executive
officer of the Company.
*(iii) Description of Remuneration Agreement dated December 13, 2000
between the Company and an executive office of the Company.
*(jjj) Amendment Number Thirteen To Grantor Trust Agreement.
12 Statement - Re: Computation of Earnings to Fixed Charges Ratios
13 Portions of the 2000 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
* Constitutes a Management Contract or Compensatory Plan or Arrangement