SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993 Commission File No. 1-7436
REPUBLIC NEW YORK CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland 13-2764867
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
452 Fifth Avenue, New York, N.Y. 10018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (212) 525-6100
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
Common Stock,
Par Value $5.00 Per Share....... New York Stock Exchange
The International Stock
Exchange of the United Kingdom
& The Republic of Ireland Ltd.
Cumulative Preferred Stock,
Floating Rate Series B.......... New York Stock Exchange
$3.375 Cumulative Convertible
Preferred Stock................. New York Stock Exchange
$1.9375 Cumulative Preferred
Stock........................... New York Stock Exchange
8 3/8% Notes Due 1996........... New York Stock Exchange
8 3/8% Debentures Due 2007...... New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE.
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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 the 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. X
The aggregate market value of Common Stock of the registrant
held by non-affiliates at March 8, 1994 was $1,876,476,830.63
based on the closing price on the New York Stock Exchange Composite
Tape on such date.
The number of shares outstanding of each of the registrant's
classes of common stock, as of March 8, 1994: 52,533,288.
Documents Incorporated by Reference:
Document Location in Form 10-K
-------- ---------------------
1993 Annual Report to Stockholders,
to the extent indicated.............. Parts I, II, III and IV
Proxy Statement for 1994 Annual
Meeting, to the extent indicated..... Parts I and III
PART I
Item 1. Business
REPUBLIC NEW YORK CORPORATION
Republic New York Corporation (the "Corporation"), incorporated in
Maryland in 1973, is a bank holding company that commenced
operations in July, 1974. At December 31, 1993, the Corporation
had consolidated total assets of $39.5 billion and stockholders'
equity of $2.7 billion. Its principal asset is the capital stock
of Republic National Bank of New York (the "Bank"). At December
31, 1993, the Bank accounted for approximately 75% of the
consolidated assets and, for the year ended December 31, 1993,
accounted for approximately 75% of consolidated revenues and 85%
of consolidated net income of the Corporation. The Corporation's
other significant banking subsidiary, formerly known as The
Manhattan Savings Bank, is Republic Bank for Savings ("RBS"). See
"Republic Bank for Savings". Republic Factors Corp. ("Factors"),
which commenced operations in 1977, is the other significant
subsidiary of the Corporation. See "Republic Factors Corp."
The executive offices of the Corporation are located at 452
Fifth Avenue, New York, New York 10018 (telephone 212-525-6100).
As used herein, the term "Corporation" includes the
subsidiaries of the Corporation and the terms "Bank" and "RBS"
include the subsidiaries of the Bank and RBS, respectively, unless
the context indicates otherwise.
The Corporation acquired SafraCorp California, the owner of
all the outstanding shares of SafraBank (California), on September
20, 1993 for which the Corporation paid approximately $6,500,000
to Edmond J. Safra, the owner of all the outstanding shares of
SafraCorp California and the principal stockholder of the
Corporation. Pursuant to the Purchase Agreement between Mr. Safra
and the Corporation, such payment approximated the consolidated net
book value of SafraCorp California on September 20, 1993. Such
purchase price was determined by a committee of independent
directors of the Corporation, which had received an opinion from
investment bankers retained by it, to the effect that the
consideration to be paid was fair to the Corporation from a
financial point of view. Effective September 21, 1993, SafraBank
(California) converted from a state-chartered bank to a national
banking association and changed its name to Republic Bank
California N.A. Effective December 1, 1993, SafraCorp California
was merged into the Corporation. Thereafter, on January 13, 1994,
substantially all of the assets of Republic International Bank of
New York (California), the Bank's Edge Act subsidiary in Beverly
Hills, California, were transferred to and its liabilities assumed
by Republic Bank California N.A.
REPUBLIC NATIONAL BANK OF NEW YORK
The Bank, a national banking association organized in 1965,
commenced operations in January, 1966. The Bank provides a variety
of banking and financial services worldwide to corporations,
financial institutions, governmental units and individuals. At
December 31, 1993, the Bank had total assets of $29.7 billion,
total deposits of $19.2 billion and stockholder's equity of $2.2
billion. At December 31, 1993 the Bank was the fifteenth largest
commercial bank in the United States based on total deposits.
The Bank's headquarters and principal banking office is
located at 452 Fifth Avenue, New York, New York. The Bank has 34
domestic branch banking offices in New York City and the suburban
counties of Westchester and Rockland. The Bank maintains foreign
branch offices in London, Milan, Buenos Aires, Santiago, Hong Kong,
Singapore, Tokyo and the Cayman Islands; wholly-owned foreign
banking subsidiaries in London, England, Montreal, Canada, Nassau,
The Bahamas, Singapore, Montevideo, Uruguay and the Cayman Islands;
and an Edge Act subsidiary in Miami, Florida. The Bank also has
foreign representative offices in Beijing, Beirut, Buenos Aires,
Caracas, Jakarta, Mexico City, Montevideo, Moscow, Punta del Este,
Rio de Janeiro, and Taipei. The Bank's facilities are supplemented
by a network of correspondent banks throughout the world.
International Banking
The Bank is active in international banking where it operates
principally as a wholesale bank. It has been its policy to deal
primarily with foreign governments, their agencies, foreign central
banks and foreign commercial banks as borrowers or guarantors. At
December 31, 1993, approximately 75% of the Bank's cross-border net
outstandings were to or guaranteed by such entities.
The Bank's international banking services include accepting
deposits, extending credit, forfait financing, buying and selling
foreign exchange, buying and selling banknotes denominated in
various currencies, issuing letters of credit and bankers'
acceptances and handling the collection and transfer of money.
The Bank increased its international banking services
capabilities in 1993 with the acquisition of Citibank's World
Banknote Services business and with the acquisition of Bank Leumi
(Canada). The Banknote Services business ships U.S. dollars to and
from financial institutions in nearly 40 countries. The acquisition
of Bank Leumi (Canada) provided the Bank with entry into the
Toronto market and added an additional office in Montreal.
Through its International Private Banking Department,
headquartered in New York City, the Bank offers a full range of
financial services to individuals who are citizens or residents of
countries other than the United States, including accepting
deposits, buying and selling foreign exchange, banknotes
denominated in various currencies, precious metals and financial
instruments, issuing letters of credit and handling the collection
and transfer of money.
An analysis of the Corporation's international operations for
each of the years in the three years ended December 31, 1993 is
contained in the following sections of its 1993 Annual Report to
Stockholders filed as an Exhibit to this Report which is hereby
incorporated herein by reference: (a) Note 13 of the Notes to
Consolidated Financial Statements on page 69 in such report for
allocation of the Corporation's total assets, total operating
revenue, income (loss) before income taxes and net income (loss)
among geographic areas for each of the years in the three years
ended December 31, 1993; and (b) "Management's Discussion and
Analysis - Liability and Asset Management" on pages 35 through 44
in such report for other relevant information on international
operations.
For information concerning the Corporation's outstandings in
certain foreign countries, see "Management's Discussion and
Analysis - Liability and Asset Management - Asset Management -
Cross-border Outstandings" on pages 43 and 44 and "Allowance for
Possible Loan Losses" on pages 42 and 43 in the 1993 Annual Report
to Stockholders.
Safra Republic Holdings S.A.
Safra Republic Holdings S.A. ("Safra Republic"), a Luxembourg
holding company, is principally engaged, through wholly-owned
banking subsidiaries in Switzerland, Luxembourg, France, Guernsey
and Gibraltar, in international private banking and commercial
banking, offering a range of private banking services primarily to
wealthy individuals. At December 31, 1993, the Bank owned
approximately 48.8%, Saban S.A., the Corporation's principal
stockholder, owned approximately 20.7% and international investors
owned approximately 30.5% of the outstanding shares of Safra
Republic. At December 31, 1993, Safra Republic had total assets
of $11.3 billion, total deposits of $7.3 billion and total
shareholders' equity of approximately $1.3 billion.
Safra Republic's client services include the accepting of a
wide variety of deposits and the execution of transactions in
foreign exchange, precious metals, securities and banknotes. Safra
Republic also provides credit facilities, portfolio management and
investment advisory services and safekeeping and other fiduciary
services. In addition, Safra Republic offers commercial banking
services to governments, government agencies, banks and
corporations.
Domestic Banking
The Bank provides a full range of domestic banking services,
including commercial, consumer installment and mortgage loans to
individuals and businesses. It also accepts deposits, including
time and savings deposits and regular and special checking
accounts, and issues large denomination negotiable certificates of
deposit of $100,000 or more.
Through its Domestic Corporate Lending Department, the Bank
services the financing requirements of large national companies,
middle-market companies and other businesses in the New York
metropolitan area and selected markets outside of New York.
Information concerning the composition of the Corporation's
domestic and international loan portfolio is presented in the
section "Loan Portfolio" under "Operating Information" found on
page 7 of this report. The Corporation also engages in factoring
activities through Factors, a wholly-owned subsidiary of the
Corporation. See "Republic Factors Corp."
Other banking facilities usually associated with a
full-service commercial bank are offered, among which are safe
deposit boxes, safekeeping and custodial services, collections and
remittances, letters of credit and foreign exchange. The Bank's
Trust Department provides a broad range of fiduciary services to
both individual and corporate accounts.
The following table sets forth the percentages of the
Corporation's domestic and international assets and liabilities,
based upon the location of the obligor or customer, at December 31
in each of the last three years.
ASSETS LIABILITIES
Domestic International Domestic International
1993............ 68.1% 31.9% 59.7% 40.3%
1992............ 59.2 40.8 65.2 34.8
1991............ 53.2 46.8 62.3 37.7
Precious Metals, Foreign Exchange, Securities and Derivative
Transactions
The Bank is a dealer in gold and silver bullion and coins for
sale to commercial and industrial users and investors. For this
activity, the Bank receives and sells gold and silver on
consignment, and the Bank maintains its own inventory. In its
precious metals activities, the Bank, from time to time, takes
positions in precious metals for its own account, but such
positions are taken within guidelines and limits established by
the Bank's Board of Directors at what are considered by management
to be prudent levels. Position limits are periodically reviewed
and changed as appropriate to account for changing market
conditions and to minimize risks. At December 31, 1993,
approximately $24.8 million of the Bank's inventory in precious
metals was unhedged.
Also, with respect to gold and silver bullion and gold coins,
significant activities of the Bank include buying and
simultaneously selling for future delivery, other arbitraging
between markets when, in each case, the respective premium or
differential derived provides an attractive return relative to
alternative investment opportunities, and writing and purchasing
options with other participants in the over-the-counter
institutional and interbank market. Sales of precious metals for
future delivery are generally done through futures contracts
executed on major commodity exchanges in the United States.
The Bank is one of the authorized purchasers to which the
United States Mint sells its gold bullion coins for distribution
throughout the world.
Income from each of these activities is treated as income from
precious metals. The Bank also derives income from acting as a
licensed depository of precious metals for various commodity
exchanges.
On December 31, 1993, the Bank acquired Mase Westpac Limited
from Westpac Banking Corporation of Australia and changed the name
to Republic Mase Bank Limited ("Republic Mase"). Republic Mase is
one of the five members of the London gold fixing. Republic Mase,
an authorized U.K. banking institution, engages in global wholesale
trading in gold, silver, platinum and palladium, including spot,
forward and options dealing, and provides financial services to
central banks, international financial institutions and
institutional investors. Republic Mase also offers production and
inventory financing to mining companies, industrial manufacturers
and end-users. It has subsidiaries in Australia and Hong Kong.
The New York branch of Republic Mase is in the process of being
liquidated, with all its activities being transferred to the Bank.
In Australia, Republic Mase Australia Limited ("RMAL") acts
as a primary market-maker in the domestic and international bullion
markets. RMAL provides a full range of services to Australian and
Asian gold producers. Republic Mase's subsidiary in Hong Kong,
Republic Mase Hong Kong Limited, operates on behalf of Republic
Mase as a primary market-maker servicing the financial requirements
of its Far East and Asian clients, notably in Japan, Taiwan, Hong
Kong and China.
In its foreign exchange trading and arbitrage activities, the
Bank, from time to time, takes positions in foreign currencies for
its own account, but such positions are taken only in currencies
and within guidelines and limits established by the Bank's Board
of Directors at what are considered by management to be prudent
levels. Position limits are periodically reviewed and changed, as
appropriate, to minimize the risks inherent in these activities,
such as currency revaluations, exchange controls and other
regulatory and political policies of foreign governments. The
Bank's activities in foreign exchange also involve servicing the
needs of its customers, including other banks, which do not require
the Bank to assume large positions in foreign currencies. It has
been the Bank's policy to hedge all significant assets and
liabilities due in foreign currencies to United States dollars.
Investment securities represent a significant portion of the
Corporation's interest-earning assets. The Corporation attempts
to manage the return on its assets while also considering the
creditworthiness of borrowers and counterparties, the interest rate
sensitivity of the assets and the maturity of such assets. To
balance these criteria while maintaining an adequate return, the
Corporation's investment securities portfolio consists primarily
of debt securities issued by the United States Government and
United States government agencies. In addition, the Corporation
will invest in debt securities issued by U.S. states and other
political subdivisions, as well as bonds, debentures and redeemable
preferred stock of highly-rated corporations.
Republic Forex Options Corporation ("RFOC"), an operating
subsidiary of the Bank, is a foreign currency options participant
on the Philadelphia Stock Exchange. RFOC is a market-maker in
foreign currency options and trades for its own account.
Information concerning derivative instruments is contained in
the 1993 Annual Report to Stockholders in the section entitled
"Management's Discussion and Analysis - Liability and Asset
Management - Off-balance Sheet Financial Instruments" on pages 44
through 46 and in Note 1G and Notes 15 and 16 of the Notes to
Consolidated Financial Statements on page 56 and pages 70 through
73, respectively, in such report all of which are hereby
incorporated herein by reference.
REPUBLIC BANK FOR SAVINGS
RBS, a wholly-owned New York State chartered savings bank
subsidiary of the Corporation, is engaged in the granting of
mortgages on residential real property located primarily in New
York State, including one to four family dwellings, units within
condominium projects or units within cooperative housing projects.
RBS' deposit activities include accepting savings, demand,
money market, fixed-rate individual retirement, Keogh and NOW
accounts. RBS also provides consumer credit and is active in the
bond market. At December 31, 1993, RBS had total assets of $6.1
billion, total deposits of $4.8 billion and total stockholder's
equity of $478 million.
RBS' headquarters and principal banking office is located at
415 Madison Avenue, New York, New York. RBS has 24 full service
branch banking offices in New York City and Nassau, Suffolk and
Westchester counties and 8 additional branches in Broward and Dade
counties, Florida.
REPUBLIC FACTORS CORP.
Factors is a wholly-owned subsidiary of the Corporation.
Factors purchases, without recourse, accounts receivable from
approximately 450 clients. These receivables are due on average
in 60 days from over 55,000 customers primarily in the retail
apparel industry throughout the United States. In addition,
certain clients receive payment for these receivables prior to
their maturity date. From time to time, Factors makes advances in
excess of the receivables purchased. These advances are seasonal
in nature and may be either secured or unsecured. Letters of
credit accommodations are also provided. For these services,
Factors earns commissions, interest and service fees.
For the year ended December 31, 1993, Factors factored
approximately $4.8 billion of sales making it the fifth largest
factor in the United States based on such sales volume.
Factors' headquarters and principal office is located at 452
Fifth Avenue, New York, New York. In addition, Factors has offices
located in Los Angeles, California and Charlotte, North Carolina.
OTHER FINANCIAL SERVICES
Republic New York Securities Corporation. Republic New York
Securities Corporation ("RNYSC"), a wholly-owned subsidiary of the
Corporation, commenced operations on November 2, 1992 as a full-
service securities brokerage whose principal activities are prime
brokerage, securities borrowing and lending, margin lending, third
party research and vendor services, correspondent clearing, and
asset management and fiduciary services offered primarily to
institutional investors and high net worth individuals. On January
10, 1994, the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") granted approval to RNYSC to underwrite
and deal in all forms of debt and equity securities. RNYSC is a
registered broker-dealer with the Securities and Exchange
Commission and is a member of the National Association of
Securities Dealers, Inc. and the New York Stock Exchange, Inc. In
addition, it is an associate member of the American Stock Exchange
and the Philadelphia Stock Exchange. RNYSC is also a member of the
commodity exchanges set forth below.
In connection with the expansion of RNYSC's activities, in
February 1994, Republic Clearing Corporation ("RCC",) a wholly-
owned subsidiary of the Corporation, was merged into RNYSC in order
to consolidate associated securities, back office, record keeping
and related functions into one business unit. RNYSC is registered
with the Commodity Futures Trading Commission and the National
Futures Association as a futures commission merchant. RNYSC acts
primarily as a commodities broker to the Bank in executing for the
Bank's account futures contracts and options on futures contracts
on the commodity exchanges listed below. It acts to facilitate the
Bank's activities as a dealer in precious metals, financial
instruments and foreign exchange. RNYSC also acts as a futures
commission merchant for the general public to execute futures
contracts and options on futures contracts covering gold and silver
bullion and coins, various financial instruments and foreign
currencies.
As a result of the merger with RCC, RNYSC is now a clearing
member of the Commodity Exchange Inc. and the Chicago Mercantile
Exchange and is also a non-clearing member of the New York Futures
Exchange and the Philadelphia Board of Trade.
Republic New York Securities International Limited. On February
24, 1994, Republic New York Securities International Limited
("RNYSIL"), the Corporation's wholly-owned London based subsidiary,
became a member of the Securities and Futures Authority. It is
anticipated that RNYSIL will commence operations in the second
quarter of 1994 and will provide a range of financial services in
European markets to institutional investors and high net worth
individuals, including prime brokerage, securities borrowing and
lending, third party research and vendor services, and the
processing of transactions related to equity, fixed income and
derivative instruments. The business to be conducted by RNYSIL is
intended to complement the business of RNYSC.
Republic Asset Management Corporation. Republic Asset Management
Corporation ("RAM"), the Corporation's wholly-owned subsidiary,
commenced operations in the second quarter of 1993. RAM provides
a broad range of investment, economic and financial advice to
individuals, corporations and governments, among others. RAM is
a registered investment adviser under the Investment Company Act
of 1940 and is registered as a commodity trading adviser and
commodity pool operator with the Commodity Futures Trading
Commission.
OPERATING INFORMATION
This section provides, on a consolidated basis, certain
statistical data concerning the Corporation and supplements
information contained in the 1993 Annual Report to Stockholders
which is incorporated hereinbelow by reference.
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
Information on the Corporation's consolidated average balances
of assets, liabilities and stockholders' equity, computed
principally on the basis of daily averages, and the interest income
earned and the interest expense paid and the average rates earned
and paid for each of the years in the five years ended December
31, 1993 is found in the table entitled "Average Balances, Net
Interest Differential, Average Rates Earned and Paid" on pages 84
and 85 in the Corporation's 1993 Annual Report to Stockholders
which is incorporated herein by reference. Interest income on
certain tax-exempt obligations included in such table has been
adjusted to a fully-taxable equivalent basis using the tax rate of
44% in 1993 and 42% for all other periods. Information on the
approximate effect on net interest income of changes in volume of
interest-earning assets and interest-bearing liabilities and the
rates earned or paid thereon for the three years ended December 31,
1993 is found on pages 29 and 30 in "Management's Discussion and
Analysis - Results of Operations - Net Interest Income" in such
report which is also incorporated herein by reference.
Information concerning the Corporation's interest rate
sensitivity gap position at December 31, 1993 is found on page 35
in "Management's Discussion and Analysis - Liability and Asset
Management" in the Corporation's 1993 Annual Report to Stockholders
which is hereby incorporated herein by reference.
Deposits
Information concerning the Corporation's deposits, classified
by major categories, at December 31 in each of the last three years
is contained in the 1993 Annual Report to Stockholders in the
section entitled "Management's Discussion and Analysis - Liability
and Asset Management - Liability Management - Deposits" on pages
35 through 37 in such report which is hereby incorporated herein
by reference. Information on the interest rates paid by deposit
type is contained on pages 84 and 85 of the 1993 Annual Report to
Stockholders which is hereby incorporated herein by reference.
Investment Portfolio
For information on the Corporation's portfolio of investment
securities, see "Management's Discussion and Analysis - Liability
and Asset Management - Asset Management - Investment Portfolio" on
pages 39 and 40 of the 1993 Annual Report to Stockholders which is
hereby incorporated herein by reference.
Loan Portfolio
The following table sets forth the composition of the
Corporation's domestic and foreign loan portfolios at December 31
in each of the past five years.
December 31,
1993 1992 1991 1990 1989
(In thousands)
Domestic:
Real estate-residential mortgage...... $1,310,718 $1,454,416 $1,313,793 $1,166,779 $1,117,277
Real estate-commercial................ 1,854,377 2,107,112 2,222,714 2,377,126 472,146
Banks and other financial
institutions....................... 7,384 14,841 18,434 78,177 55,077
Broker loans.......................... 678,490 307,018 250,000 306,002 225,000
Commercial and industrial............. 2,152,691 1,859,595 1,848,587 1,968,525 1,704,132
Loans to individuals.................. 90,218 51,305 71,286 320,349 344,915
All other............................. 16,915 59,852 51,008 43,977 38,916
--------- --------- --------- --------- ---------
6,110,793 5,854,139 5,775,822 6,260,935 3,957,463
--------- --------- --------- --------- ---------
Foreign:
Broker loans 732,812 --- --- --- ---
Government and official
institutions....................... 429,232 341,320 453,639 450,359 528,800
Banks and other financial
institutions....................... 68,416 288,682 279,587 353,275 297,817
Commercial and all other.............. 2,262,130 1,672,038 2,271,625 2,167,939 1,897,890
--------- --------- --------- --------- ---------
3,492,590 2,302,040 3,004,851 2,971,573 2,724,507
Total loans............................ 9,603,383 8,156,179 8,780,673 9,232,508 6,681,970
Less unearned income................. (94,825) (148,722) (211,715) (227,649) (101,581)
---------- ---------- ---------- ---------- ---------
Loans, net of unearned income.......... $9,508,558 $8,007,457 $8,568,958 $9,004,859 $6,580,389
=========== =========== =========== =========== ===========
Maturity Distribution and Interest Sensitivity of Loans
Information presenting the maturity distribution of the
Corporation's domestic and foreign loan portfolios at December 31,
1993 and an analysis of the interest sensitivity of such portfolios
at such date is contained in the section entitled "Management's
Discussion and Analysis - Liability and Asset Management - Asset
Management - Loan Portfolio" on page 41 in the 1993 Annual Report
to Stockholders which is hereby incorporated herein by reference.
Risk Elements
Information presenting the risk elements of the Corporation's
domestic and foreign loan portfolios and foreign outstandings at
December 31, 1993, 1992 and 1991, including past due, non-accrual
and other nonperforming assets, is contained in the section
entitled "Management's Discussion and Analysis - Liability and
Asset Management - Asset Management - Cross-border Outstandings" on
pages 43 and 44 and "Allowance for Possible Loan Losses" on pages
42 and 43 in the 1993 Annual Report to Stockholders which is
hereby incorporated herein by reference.
For information presenting off-balance sheet risk of financial
instruments together with related risk concentrations, see Note 16
of the Notes to Consolidated Financial Statements accompanying the
Corporation's financial statements in the 1993 Annual Report to
Stockholders which is hereby incorporated herein by reference.
For information relating to the effect on the Corporation's
1993 income of loans classified as non-accrual and restructured and
other information on outstandings in certain debtor countries, see
Note 5 of the Notes to the Consolidated Financial Statements and
"Management's Discussion and Analysis - Liability and Asset
Management - Asset Management - Cross-border Outstandings" on pages
43 and 44 and "Allowance for Possible Loan Losses" on pages 42 and
43 in the 1993 Annual Report to Stockholders which is hereby
incorporated herein by reference.
Management periodically reviews the loan portfolio,
particularly non-accrual and restructured loans. The review may
result in a determination that a loan should be placed on a
non-accrual status for income recognition. In addition, to the
extent that management identifies potential losses in the loan
portfolio, it reduces the book value of such loans, through
charge-offs, to their estimated collectible value. The
Corporation's policy is to classify as non-accrual any loan on
which payment of principal or interest is 90 days or more past due.
In addition, a loan will be classified as non-accrual if, in the
opinion of management, based upon a review of the borrower's or
guarantor's financial condition, collateral value and other
factors, payment is questionable, even though payments are not 90
days or more past due.
When a loan, other than a well secured residential mortgage
loan, is classified as non-accrual, any unpaid interest is reversed
against current income. The loan remains in a non-accrual
classification until such time as the loan is brought current, when
it may be returned to accrual classification. When principal and
interest on a non-accrual loan are brought current, if in
management's opinion future payments are questionable, the loan
would remain classified as non-accrual. Subsequent payments of
either interest or principal received on a partially charged-off
non-accrual or restructured loan are first applied to any remaining
balance outstanding, until the loan is reduced to its net
realizable value, then to recoveries and lastly to income.
Interest is included in income thereafter only to the extent
received in cash.
The large number of consumer installment loans and the
relatively small dollar amount of each makes an individual review
impracticable. The Corporation charges off any consumer
installment loan which is past due 90 days or more.
Residential mortgage loans are placed on non-accrual status
when the mortgagor is in bankruptcy, or foreclosure proceedings are
instituted, at which time the loan ceases to accrue interest. Any
accrued interest receivable remains in interest income as an
obligation of the borrower.
Credit Risk Management and Allowance for Possible Loan Losses
Information presenting the Corporation's allowance for
possible loan losses, amounts of domestic loans by loan category
and total foreign loans charged-off and recoveries of such loans
previously charged-off, loans, net of unearned income, and related
ratios is contained in the section entitled "Management's
Discussion and Analysis - Liability and Asset Management - Asset
Management - Allowance for Possible Loan Losses" on pages 42 and 43
in the 1993 Annual Report to Stockholders which is hereby
incorporated herein by reference.
Credit risk and exposure to loss are inherent parts of the
banking business. Management seeks to manage and minimize these
risks through its loan and investment policies and loan review
procedures. Senior management establishes and continually reviews
lending and investment criteria and approval procedures that it
believes reflect the risk averse nature of the Corporation. The
loan review procedures are set to monitor adherence to the
established criteria and to ensure that on a continuing basis such
standards are enforced and maintained.
Management's objective in establishing lending and investment
standards is to minimize the risk of loss and provide for income
generation through pricing policies. In the case of foreign
investments and loans, management emphasizes investments and loans
to, or with guarantees of, governments, government agencies or
banks. In addition, the Corporation places particular emphasis on
the matching of the maturity and interest rate sensitivity of
assets and liabilities. By this policy, the Corporation seeks to
minimize the effect of rate changes, largely externally influenced
and difficult to control, on the portfolio and to limit its
exposure largely to credit risks over which it has more direct
control. One technique which the Corporation utilizes to achieve
these goals are interest rate and currency swaps designed to
protect against rate and currency fluctuations.
The Corporation's loan portfolios are regularly reviewed and
monitored by the Credit Review Department, which, each quarter,
prepares a report containing recommendations as to the amount of
loans to be charged-off. During the preparation of the report, the
Credit Review Department consults with lending officers and the
heads of the lending departments. The report is then submitted for
consideration to certain members of Executive Management who
determine the amount of loans to be charged-off. The Credit Policy
Committee subsequently reviews the loans to be charged-off and
ratifies Executive Management's decision. Rules and formulae
relative to the adequacy of the allowance, although useful as
guidelines to management, are not final determinants. In addition,
any loan or portion thereof which is classified as a "loss" by
regulatory examiners (examinations are generally made annually) is
charged-off. Consistent with its policy of maintaining an adequate
allowance for possible loan losses, management generally
charges-off a loan, or a portion thereof, when a loss is probable.
The allocation of the allowance for possible loan losses
between the Corporation's domestic and foreign components is
contained in Note 5 of the Notes to the Consolidated Financial
Statements found on page 59 of the 1993 Annual Report to
Stockholders which is hereby incorporated herein by reference. In
anticipation of the restructuring programs of various Latin
American obligors, a large provision for possible loan losses was
taken in 1989. Extensive foreign charge-offs related to
restructuring countries debt were taken in 1989 and 1990. In 1991
and 1992, as the value of foreign obligations stabilized, the
previously provided foreign provision was reallocated to domestic
obligations as the domestic economy continued to deteriorate.
Domestic charge-offs exceeded foreign charge-offs in 1991, 1992 and
1993.
In order to comply with certain regulatory reporting
requirements, management has prepared the following allocation of
the Corporation's allowance for possible loan losses among various
categories of the loan portfolio for each of the years in the five-
year period ended December 31, 1993. In management's opinion,
such allocation has, at best, a limited utility. It is based on
management's assessment as of a given point in time of the risk
characteristics of each of the component parts of the total loan
portfolio and is subject to changes as and when the risk factors of
each such component part change. Such allocation is not indicative
of either the specific amounts or the loan categories in which
future charge-offs may be taken, nor should it be taken as an
indicator of future loss trends. In addition, by presenting such
allocation, management does not mean to imply that the allocation
is exact or that the allowance has been precisely determined from
such allocation.
December 31, 1993
Allocation of the Allowance for
Possible Loan Losses by Category
Domestic Foreign Total
Percent Amount Percent Amount Percent Amount
(Dollars in thousands)
Real estate loans................. 42% $ 80,000 8% $ 10,000 29% $ 90,000
Commercial and industrial loans... 40 75,000 25 30,000 34 105,000
Other loans....................... 3 5,000 41 50,000 17 55,000
Unallocated....................... 15 29,499 26 32,356 20 61,855
--- -------- --- -------- --- --------
Total............................. 100% $189,499 100% $122,356 100% $311,855
=== ======== === ========= === ========
December 31, 1992
Allocation of the Allowance for
Possible Loan Losses by Category
Domestic Foreign Total
Percent Amount Percent Amount Percent Amount
(Dollars in thousands)
Real estate loans................. 37% $ 60,000 13% $10,000 29% $ 70,000
Commercial and industrial loans... 34 55,000 25 20,000 31 75,000
Other loans........................ 1 1,000 50 40,000 17 41,000
Unallocated........................ 28 45,699 12 9,321 23 55,020
--- -------- --- ------- --- --------
Total.............................. 100% $161,699 100% $79,321 100% $241,020
=== ======== === ======= === ========
December 31, 1991
Allocation of the Allowance for
Possible Loan Losses by Category
Domestic Foreign Total
Percent Amount Percent Amount Percent Amount
(Dollars in thousands)
Real estate loans.................. 45% $ 45,000 4% $ 5,000 22% $ 50,000
Commercial and industrial loans.... 25 25,000 4 5,000 13 30,000
Other loans........................ 1 1,000 43 55,000 25 56,000
Unallocated........................ 29 29,842 49 61,612 40 91,454
--- -------- --- -------- --- --------
Total.............................. 100% $100,842 100% $126,612 100% $227,454
=== ======== === ======== === ========
December 31, 1990
Allocation of the Allowance for
Possible Loan Losses by Category
Domestic Foreign Total
Percent Amount Percent Amount Percent Amount
(Dollars in thousands)
Real estate loans.................. 85% $35,000 1% $ 1,000 15% $ 36,000
Commercial and industrial loans.... 12 5,000 2 3,000 3 8,000
Other loans........................ 2 1,000 74 146,000 62 147,000
Unallocated........................ 1 310 23 45,324 20 45,634
--- -------- --- -------- --- --------
Total.............................. 100% $41,310 100% $195,324 100% $236,634
=== ======= === ======== === ========
December 31, 1989
Allocation of the Allowance for
Possible Loan Losses by Category
Domestic Foreign Total
Percent Amount Percent Amount Percent Amount
(Dollars in thousands)
Real estate loans.................. 51% $ 17,000 __% $ 1,000 6% $ 18,000
Commercial and industrial loans.... 27 9,000 1 3,000 4 12,000
Other loans........................ 3 1,000 71 179,000 63 180,000
Unallocated........................ 19 6,629 28 70,872 27 77,501
--- -------- --- ------- --- --------
Total.............................. 100% $ 33,629 100% $253,872 100% $287,501
=== ======== === ======== === ========
At December 31, in each of the years 1993 through 1989, the
Corporation's allowance for possible loan losses represented
approximately 198%, 128%, 145%, 159% and 326%, respectively, of
total non-accrual and restructured loans. The coverage of the
allowance for loan losses to non-accrual and restructured loans is
only one subjective measure of the adequacy of the allowance for
loan losses that management utilizes.
The Corporation's policy is to maintain an allowance for loan
losses that is adequate to absorb all inherent credit losses in the
Corporation's credit portfolios, including off-balance sheet credit
instruments. Inherent losses are unconfirmed losses that probably
exist based upon known information regarding the credit quality and
portfolio characteristics prevailing as of the date of the
evaluation. Future events are expected to confirm these losses,
at which time these amounts will be charged off against the
allowance for loan losses.
The Corporation performs a comprehensive and consistently
applied analysis of the various factors that affect collectibility
that is in accordance with regulatory guidance. The process is
complex and includes several different analyses of the portfolio.
Management analyzes its portfolio by three main components:
individually significant loans, homogeneous groups or pools of
loans, and other segmentations of the portfolio into pools of loans
with similar risk characteristics, such as risk classification,
type of loan, industry group, collateral, size and maturity and
country risk characteristics.
The individually significant loans represent larger more
problematic loans which are individually assessed as to
collectibility. For homogeneous portfolios, principally the
consumer retail portfolio, the Corporation utilizes the prior
year's loss experience to estimate an amount necessary to provide
for the upcoming twelve months of expected losses. For the other
segmentations of the portfolio, historical loss rates are
calculated for loans with similar characteristics. These loss
rates are updated quarterly and are based upon the loss experience
incurred for more than the last five years.
While the historical loss rates provide a starting point for
the Corporation's analysis, historical losses are not by themselves
a sufficient basis to determine the appropriate level of the
allowance for loan losses. The actual rate selected for the
analysis may differ from the calculated loss rate as the historical
rate may be adjusted upward or downward to reflect current and
anticipated business and economic conditions and other factors
which are likely to cause the current portfolio to differ from
historical experience. The Corporation's allowance also reflects
a margin for the imprecision in the estimates of expected credit
losses. The resultant allowance for loan losses is viewed by
management as a single, unallocated allowance available for all
credit losses and any segmentation thereof is done only for
compliance with reporting requirements.
Financial Ratios
The following table presents average stockholders' equity as
a percentage of average assets and the Corporation's returns on
average stockholders' equity and average total assets (based on net
income) and its dividend payout ratio (based on net income
applicable to Common Stock) for each of the years in the three
years ended December 31, 1993.
Year Ended December 31,
-----------------------------
1993 1992 1991
Average stockholders' equity as a percentage of average assets... 6.33% 6.43% 5.93%
Return on average stockholders' equity........................... 12.73 11.95 12.33
Return on average total assets................................... .81 .77 .73
Dividend payout ratio............................................ 20.80 22.67 24.10
The rate of the quarterly dividend payable on the
Corporation's Common Stock, adjusted to reflect a three-for-two
stock split distributed on October 21, 1991, was $.213 per share
commencing with the dividend payment on April 1, 1989, was
increased to $.22 per share commencing with the dividend payment
on April 1, 1990, was increased to $.233 per share with the
dividend payment on April 1, 1991, was increased to $.25 per share
commencing with the dividend payment on January 1, 1992, was
increased to $.27 per share commencing with the dividend payment
on April 1, 1993 and will be increased to $.33 commencing with the
dividend payable on April 1, 1994.
Competition
All of the Corporation's banking activities are highly
competitive. The Bank and RBS compete actively with other
commercial banks, savings and loan associations, financing
companies, credit unions and other financial institutions located
throughout the United States and, in some of their activities, with
government agencies. For international business, the Bank competes
with other United States banks which have foreign installations and
with other major foreign banks located throughout the world.
Employees
As of December 31, 1993, the Corporation had approximately
5,300 full-time equivalent employees.
Customers
It is the opinion of management that there is no single
customer or affiliated group of customers whose deposits, if
withdrawn, would have a material adverse effect on the business of
the Corporation.
For information concerning transactions with persons related
to the Corporation and its management see Item 13 in Part III of
this Report and the section entitled "Transactions with Management
and Related Persons" found on pages 19 and 20 under "Election of
Directors" in the Corporation's definitive Proxy Statement dated
March 16, 1994 for its 1994 Annual Meeting of Stockholders filed
pursuant to Section 14 of the Securities Exchange Act of 1934,
which is hereby incorporated herein by reference.
SUPERVISION AND REGULATION
General
The Corporation is a bank holding company within the meaning
of the United States Bank Holding Company Act of 1956, as amended
(the "BHCA"), and is registered as such with the Federal Reserve
Board. As a registered bank holding company, the Corporation is
subject to substantial regulation and supervision by the Federal
Reserve Board. The Corporation's subsidiary banks are subject to
regulation and supervision by federal and state bank regulatory
agencies, including the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation ("FDIC") and the New York
State Banking Department. Federal banking and other laws impose a
number of requirements and restrictions on the operations and
activities of depository institutions. In addition, the federal
banking agencies are currently implementing recently enacted
legislation that might result in additional substantial
restrictions on operations and activities and increased operating
costs.
The BHCA requires the prior approval of the Federal Reserve
Board for the acquisition by a bank holding company of more than
5% of the voting stock or substantially all of the assets of any
bank or bank holding company. In addition, the BHCA prohibits the
Corporation from acquiring direct or indirect control of more than
a 5% interest in a bank or bank holding company located in a state
other than New York unless the laws of such state expressly
authorize such acquisition. Also, under the BHCA, bank holding
companies are prohibited, with certain exceptions, from engaging
in, or from acquiring more than 5% of the voting stock of any
company engaging in, activities other than banking or managing or
controlling banks or furnishing services to or performing services
for their subsidiaries. The BHCA also authorizes the Federal
Reserve Board to permit bank holding companies to engage in, and
to acquire or retain shares of companies that engage in, activities
which the Federal Reserve Board determines to be so closely related
to banking or managing or controlling banks as to be a proper
incident thereto. The effect of the Federal Reserve Board's
findings under this standard has been to expand the financially
related activities in which bank holding companies may engage.
The Federal Reserve Act imposes restrictions on extensions of
credit by subsidiary banks of a bank holding company to the bank
holding company or certain of its subsidiaries, on investments in
the stock or other securities thereof, and on the taking of such
stock or securities as collateral for loans to any borrower.
Further, under the BHCA and the Federal Reserve Board's
regulations, a bank holding company, as well as certain of its
subsidiaries, is prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit or
provision of any property or services.
Under longstanding policy of the Federal Reserve Board, a bank
holding company is expected to act as a source of financial
strength for its subsidiary banks and to commit resources to
support such banks. As a result of such policy, the Corporation
may be required to commit resources to its subsidiary banks in
circumstances where it might not do so absent such policy.
There are also various requirements and restrictions imposed
by the laws of the United States and the State of New York and by
regulations of the Federal Reserve System, of which the Bank is a
member, affecting the operations of the Corporation, the Bank and
their subsidiaries, including the requirement to maintain reserves
against deposits, restrictions relating to the nature and amount
of loans that may be made by the Bank, the interest that may be
charged thereon and restrictions relating to investments, branching
and other activities of the Corporation, the Bank and their
subsidiaries.
RNYSC is subject to supervision and regulation by the Federal
Reserve Board, the Securities and Exchange Commission, the New
York Stock Exchange, the National Association of Securities Dealers
and the Commodity Futures Trading Commission. RAM is also subject
to supervision and regulation by the Federal Reserve Board, the
Securities and Exchange Commission and the Commodity Futures
Trading Commission. As a registered investment adviser and a
commodity trading adviser, RAM is also subject to the provisions
of the Investment Advisers Act of 1940 and the Commodity Exchange
Act, respectively. Both RNYSC and RAM are subject to the rules and
regulations applicable to broker-dealers and investment advisers,
respectively, in each state in which they operate.
Capital Requirements
The Corporation is subject to risk-based capital requirements
for bank holding companies. The requirements provide that the
minimum ratio of total capital to risk-weighted assets (including
certain off-balance sheet activities, such as standby letters of
credit and derivative instruments) be equal to 8.0% of risk-
weighted assets. Of this amount, at least half must be composed
of common equity, minority interest, noncumulative perpetual
preferred stock and a limited amount of cumulative perpetual
preferred stock, less goodwill ("Tier 1 capital"). The remainder
may consist of certain amounts of subordinated debt and cumulative
preferred stock and a limited amount of the allowance for loan
losses ("Tier 2 capital"). A final rule that became effective in
1993 requires the deduction of intangible assets recorded prior to
February 19, 1992, purchased mortgage servicing rights and
purchased credit card relationships, subject to certain minimums.
In addition to the risk-based capital requirements described
above, the Corporation must maintain a minimum leverage ratio of
3% (defined as Tier 1 capital divided by consolidated quarterly
average total assets). Bank holding companies that are
experiencing significant growth or are actively seeking
acquisitions are expected to maintain a leverage ratio of 4% to 5%.
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), which became law on December 19, 1991, further
requires the federal bank regulatory agencies bi-annually to review
risk-based capital standards to ensure that they adequately address
interest rate risk, concentration of credit risk and risks from
non-traditional activities. Regulations incorporating
concentrations of credit risk and risk from non-traditional
activities into bank capital requirements were proposed on March
29, 1993 and reproposed in modified form on February 22, 1994 and
are currently being reviewed by the Corporation. The Corporation
does not believe that the proposed regulations will materially
affect the Corporation's level of Tier 1 capital.
FDICIA also revised bank regulatory structures embodied in
several other federal banking statutes, required the federal
banking regulators to set five capital levels ranging from "well
capitalized" to "critically undercapitalized", authorized federal
banking regulators to intervene in connection with the
deterioration of a bank's capital level, placed limits on real
estate lending and tightened audit requirements. If a banking
institution fails to meet the capital guidelines, banking
regulators could require it to raise additional capital to meet
such capital requirements. An "undercapitalized" bank must develop
a capital restoration plan approved by the appropriate bank
regulators and the bank's compliance with such plan must be
guaranteed by its parent holding company. The liability of the
parent holding company under any such guarantee is limited to the
lesser of 5% of the bank's assets at the time it became
"undercapitalized" or the amount needed to comply with the capital
plan and is accorded a priority, in the event of the bankruptcy of
the parent holding company, over the parent's general unsecured
creditors.
Legislation enacted as part of the Omnibus Budget
Reconciliation Act of 1993 provides for a preference in right of
payment of certain claims realized in the "liquidation or other
resolution" of any depository institution insured by the FDIC.
That statute requires claims to be paid in the following order of
priority: (i) administrative expenses of the receiver; (ii) any
deposit liability of the institution; (iii) any other general or
senior liability of the institution (which is not an obligation
described in clause (iv) or (v) below); (iv) any obligation
subordinated to depositors or general creditors (which is not an
obligation described in clause (v) below); and (v) any obligation
to shareholders or members (including any depository institution
holding company or any shareholder or creditor of such company).
For purposes of the statute, deposit liabilities would include any
deposit payable at an office of the insured depository institution
located in the United States, but would not include any deposit
payable at an office outside the United States or any international
banking facility deposit.
The banking supervisory authorities in the Group of Ten
countries and Luxembourg adopted a framework for standardizing bank
capital adequacy requirements in the international banking system.
The framework establishes minimum levels of capital for
international banks and ties the capital a bank must hold to its
risk-weighted asset mix. The Corporation and certain of its
banking subsidiaries are located in such countries and are subject
to the framework's requirements, as implemented by the appropriate
local supervisory authority.
Insurance Premiums
FDICIA also revised sections of the Federal Deposit Insurance
Act affecting bank regulation, deposit insurance and funding of the
Bank Insurance Fund ("BIF") administered by the FDIC. Among the
significant revisions that could have an impact on the Corporation
is the authority granted the FDIC to impose special assessments on
insured depository institutions to repay FDIC borrowings from the
United States Treasury or other sources and to establish semiannual
assessments on BIF member banks so as to maintain the BIF at the
designated reserve ratio defined in FDICIA.
On September 15, 1992, the FDIC adopted final rules that
revised the assessments paid by insured depository institutions
for deposit insurance. The amended regulations increased the
deposit insurance assessment for certain members of the BIF
effective for the first semiannual period of 1993, and thereafter,
and adopted a transitional risk-based deposit insurance assessment
system.
Under the FDIC's plan, the assessment of 23 cents per $100 of
domestic deposits for all depository institutions was changed,
effective January 1, 1993, to an assessment based on a depository
institution's assessment risk classification depending on whether
it is considered "well capitalized", "adequately capitalized" or
"undercapitalized" and on certain supervisory evaluations of the
institution as "healthy", cause for "supervisory concern" and cause
for "substantial supervisory concern" (designated as supervisory
subgroups "A", "B" and "C", respectively, for reference purposes).
Under the assessment rate schedule adopted, a well capitalized bank
in subgroup "A" will be assessed at the current rate of 23 cents
per $100 of domestic deposits. For purposes of the FDIC's deposit
insurance assessment rules, an institution will be considered "well
capitalized" if it has a total risk-based capital ratio of at least
10%, a Tier 1 risk-based capital ratio of at least 6% and a Tier
1 leverage ratio of at least 5%; "adequately capitalized" if it has
a total risk-based capital ratio of at least 8%, a Tier 1
risk-based capital ratio of at least 4% and a Tier 1 leverage ratio
of at least 4%; and "undercapitalized" if it does not meet either
of the foregoing standards.
FDICIA generally limits the FDIC's ability to protect all
deposits, including those exceeding the $100,000 insurance limit
and foreign deposits. The legislation also provides that only
"well capitalized banks" and "adequately capitalized banks" can use
brokered deposits. "Adequately capitalized banks" can accept
brokered deposits only if they first obtain waivers from the FDIC
and they cannot pay above-market rates on such deposits. "Well
capitalized banks" and "adequately capitalized banks" can insure
accounts on a pass-through basis established under certain
qualified employee benefit plans.
Miscellaneous
Significant provisions of FDICIA require federal banking
regulators to draft standards in a number of other areas to assure
bank safety and soundness, including internal controls, information
systems and internal audit systems, credit underwriting, asset
growth, compensation, loan documentation and interest rate
exposure. FDICIA requires the regulators to establish maximum
ratios of classified assets to capital, and minimum earnings
sufficient to absorb losses without impairing capital. The
legislation also contains provisions which tighten independent
auditing requirements, restrict the activities of state-chartered
banks, amend various consumer banking laws, limit the ability of
"undercapitalized banks" to borrow from the Federal Reserve's
discount window, and require federal banking regulators to perform
annual on-site bank examinations and set standards for real estate
lending.
To date, the banking regulators have issued proposed
regulations and in some cases adopted final regulations under
FDICIA covering (i) real estate lending standards, requiring
depository institutions to develop and implement internal
procedures, including setting specific loan-to-value ratios for
various types of real estate loans; (ii) revisions to the
risk-based capital rules to account for interest rate risk,
concentration of credit risk, and the risks posed by
"non-traditional activities"; (iii) rules requiring depository
institutions to develop and implement internal procedures to
evaluate and control credit and settlement exposure to their
correspondent banks; (iv) risk-based FDIC insurance premiums; (v)
rules prohibiting, with certain exceptions, state banks from making
equity investments of the types and amount not permissible for
national banks; and (vi) rules addressing various "safety and
soundness" issues, including operations and managerial standards,
standards for asset quality, earnings and stock valuations, and
compensation standards for the officers, directors, employees and
principal shareholders of the depository institution. The
Corporation cannot, at this stage, determine what impact, if any,
such rules and regulations may have on its financial condition or
operations. It is anticipated that such rules and regulations and
other provisions of FDICIA will result in increased costs for the
banking industry due to increased FDIC assessments and in more
limitations on activities by all but the most well capitalized
depository institutions.
It should be noted that the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") provides for
cross-guarantees of the liabilities of insured depository
institutions pursuant to which any bank or savings association
subsidiary of a bank holding company may be required to reimburse
the FDIC for any loss or anticipated loss to the FDIC that arises
from a default of any of such holding company's subsidiary banks
or savings associations or for assistance provided by the FDIC to
such an institution in danger of default. The domestic banking
subsidiaries of the Corporation are subject to such a
cross-guarantee.
The federal International Lending Supervision Act of 1983 (the
"Act") requires banking institutions to maintain a special reserve
out of current income against certain international assets. A
special reserve will be required if the relevant bank regulatory
agency determines that the quality of the assets has been impaired
by a protracted inability of public or private borrowers in a
foreign country to make payments on their external indebtedness or
that no definite prospects exist for orderly restoration of debt
service. To date, the foregoing provisions of the Act have not
affected the reserves maintained by the Corporation. It is not
possible to predict the extent to which the provisions of the Act
requiring the establishment of special reserves will affect the
Corporation's earnings in the future.
Dividends
The Corporation's ability to pay dividends is dependent upon
its receipt of dividends from its subsidiaries and on its earnings
from investments. In 1990, the Comptroller of the Currency and the
Federal Reserve Board, regarding state-chartered banks that are
members of the Federal Reserve System, enacted amendments to the
restrictions relating to the way in which national banks calculate
their dividend payment capacity, aligning the treatment of loan
loss reserves for dividend payment purposes with regulatory
reporting standards. The current rule provides, among other
things, that national banks cannot include provisions to their loan
loss reserves as part of income when calculating the amount of
dividends they may pay. National banks are also required to use
only capital surplus that represents earnings, not paid-in capital,
when calculating permissible dividends. The approval of the
Comptroller of the Currency is required if the total of all
dividends declared or proposed to be declared by the Bank in any
calendar year exceeds the Bank's net profits, as defined, for that
year combined with its retained net profits for the preceding two
calendar years. The Comptroller of the Currency also has authority
under the Financial Institutions Supervisory Act to prohibit a
national bank from engaging in what, in his opinion, constitutes
an unsafe or unsound practice in conducting its business. The
payment of dividends could, depending upon the financial condition
of the Bank, be deemed to constitute such an unsafe or unsound
practice. Similarly, in respect of RBS, New York State banking law
requires the approval of the Superintendent of Banks if the total
of all dividends declared were to exceed net profits as defined.
In addition, the agreement pursuant to which the Corporation
acquired RBS provides that dividends may not be paid by RBS if its
primary or total capital is, or as a result of any such dividend
payment would be, below the minimum amounts required by applicable
regulations. Based on the Bank's and RBS' financial position at
December 31, 1993, under the foregoing formulae, the Bank may
declare dividends in 1994 without approval of the Comptroller of
the Currency, and RBS could declare aggregate dividends in 1994,
without regulatory approval, of approximately $187 million and $19
million, respectively, plus an additional amount equal to their
respective net profits for 1994 up to the date of any dividend
declaration. There are no regulatory or contractual restrictions
on Factors' ability to pay dividends to the Corporation.
EFFECT OF GOVERNMENTAL POLICIES
The earnings of the Corporation, the Bank and RBS are affected
not only by general economic conditions, both domestic and foreign,
but also by legislative and regulatory changes which, among other
things, affect lending rates and costs and by the monetary and
fiscal policies of the United States government, its agencies,
including the Federal Reserve Board, and of foreign governments and
international agencies.
The policies of the various governmental authorities influence
to a significant extent the growth of bank loans, investments and
deposits. The nature and impact of future changes in such monetary
and fiscal policies on the Corporation's, the Bank's and RBS'
future business and earnings are not predictable.
Item 2. Properties
The Corporation has its principal offices in its world
headquarters building at 452 Fifth Avenue, New York, New York
10018, which is owned and occupied principally by the Bank, and
also owns properties in Miami, Florida, Buenos Aires, Argentina,
Santiago, Chile, Montevideo, Uruguay, Milan, Italy and London,
England, which house the Bank's offices in those locations. The
Bank and RBS also own other properties in New York City, which are
principally occupied by branches. All of the remainder of the
Corporation's offices and other facilities throughout the world are
leased.
Item 3. Legal Proceedings
The nature of its business generates a certain amount of
litigation against the Corporation involving matters arising in the
ordinary course of the Corporation's business. None of the legal
proceedings currently pending or threatened to which the
Corporation or its subsidiaries is a party or to which any of their
properties are subject will have, in the opinion of management of
the Corporation, a material effect on the business or financial
condition of the Corporation or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
No meetings of security holders were held during the fourth
quarter of 1993.
Item 10. Directors and Executive Officers of the Corporation
(a) Names, Ages and Positions
The names, ages and positions of the executive officers of the
Corporation are as follows:
Position with Position with
Name Age the Corporation* the Bank*
- ---- --- --------------- -------------
Walter H. Weiner.... 63 Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
Jeffrey C. Keil..... 50 President Vice Chairman of the Board
Peter A. Cohen...... 47 Vice Chairman ---
Cyril S. Dwek....... 57 Vice Chairman Vice Chairman of the Board
Ernest Ginsberg..... 63 Vice Chairman and Vice Chairman of the Board
General Counsel
Vito S. Portera..... 51 Vice Chairman Vice Chairman of the Board
Dov C. Schlein...... 46 Vice Chairman President
Nathan Hasson....... 48 Vice Chairman Vice Chairman of the Board
and Treasurer
- --------------
* Except for Peter A. Cohen, a director of the Corporation, each
of the above-named officers is a director of both the Corporation
and the Bank.
Each of the above executive officers is a member of the
respective Management Executive Committees of the Corporation and
the Bank, except for Peter A. Cohen who is not a member the Bank's
Management Executive Committee. The term of each such officer is for a
year, which runs from the annual meeting of the Board of Directors of
the Corporation and the Bank, respectively, following the Annual Meeting of
Stockholders of each, until the next such Annual Meeting or until
removed by the respective Board of Directors. Each of the above
officers' service in his current position is indicated in his
biography below.
Mr. Edmond J. Safra is the Honorary Chairman of the Board of
Directors of the Corporation and the Bank. Mr. Safra is Chairman
of the Board of Republic National Bank of New York (Suisse) S.A.,
the Bank's affiliate in Geneva, Switzerland. In addition, Mr.
Safra is a principal stockholder of the Corporation, owning
approximately 28.4% of the Corporation's outstanding Common Stock,
as of March 8, 1994, through his ownership of all the outstanding
shares of Saban S.A., which owns directly and indirectly 14,959,436
shares of the Corporation's Common Stock and of another corporation
which owns 29,776 shares of the Corporation. The advice of Mr.
Safra, as the principal stockholder, is often sought by the
Corporation with respect to major policy decisions and other
significant matters.
(b) Biographies of Corporation's Executive Officers
The biographical information for the past five years for the
above executive officers of the Corporation is as follows:
Walter H. Weiner has been a director and Chairman of the Board
of the Corporation and the Bank and a director of RBS for over five
years. Mr. Weiner also serves as a member of RBS' Compensation
and Benefits, Credit Review and Executive Committees.
Jeffrey C. Keil has been a director and President of the
Corporation and a director and a Vice Chairman of the Board of the
Bank and a director of RBS for over five years. Mr. Keil also
serves as a member of RBS' Executive Committee.
Peter A. Cohen has been a director and a Vice Chairman of the
Corporation since November 1992. Since such time he also has been
Chairman of RNYSC. From February 1990 to November 1992, Mr. Cohen
was a consultant, principally with Andrew Lauren & Co. Prior to
February 1990, Mr. Cohen was Chairman and Chief Executive Officer
of Shearson Lehman Hutton, Inc.
Cyril S. Dwek has been a director of the Corporation and the
Bank and a Vice Chairman of the Corporation and a Vice Chairman of
the Board of the Bank in charge of the International Department for
over five years. Mr. Dwek has been a director of RBS since April
1990.
Ernest Ginsberg has been a director and a Vice Chairman and
General Counsel of the Corporation and a director and a Vice
Chairman of the Board of the Bank for over five years. Until July
1990, he had also been General Counsel of the Bank for over five
years. Mr. Ginsberg has been a director of RBS and a member of
its Executive Committee for over five years.
Vito S. Portera has been a director of the Corporation for
over five years and a Vice Chairman of the Corporation since April
1989. He has been a director and a Vice Chairman of the Board of
the Bank and RBS for over five years. Mr. Portera also has been
Chairman of the Board of Republic International Bank of New York,
the Miami, Florida Edge Act subsidiary of the Bank, for over five
years.
Dov C. Schlein has been a director and a Vice Chairman of the
Corporation and a director and President of the Bank and a
director of RBS for over five years. Mr. Schlein also serves as
a member of RBS' Compensation and Benefits and Executive
Committees.
Nathan Hasson was elected a director and appointed a Vice
Chairman of the Corporation in January 1993. He has been a
director and a Vice Chairman of the Board of the Bank for over
five years in charge of its Financial Management Group. He also
serves as Treasurer of the Bank and RBS. Mr. Hasson has been a
director of RBS since April 1990.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Information on the market prices of the Corporation's Common
Stock, dividend payments on the Common Stock, the number of
stockholders of record and related matters may be found in the
section entitled "Security Market Information" on page 49 in the
Corporation's 1993 Annual Report to Stockholders which is hereby
incorporated herein by reference.
Item 6. Selected Financial Data
Data for each of the years in the five-year period ended
December 31, 1993 on the Corporation's operating income, net
income, including earnings per share data, assets, long-term debt,
dividends and other relevant matters are presented in the section
entitled "Selected Financial Data" on pages 82 and 83 in the
Corporation's 1993 Annual Report to Stockholders which is hereby
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The section entitled "Management's Discussion and Analysis"
on pages 28 through 49 in the 1993 Annual Report to Stockholders
is hereby incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Corporation as of December 31,
1993 and 1992 and for each of the years in the three year period
ended December 31, 1993 are found on pages 50 through 53 in the
1993 Annual Report to Stockholders and, together with the
accompanying notes thereto found on pages 55 through 76 and the
Independent Auditors' Report on Financial Statements found on page
77 in such report, are hereby incorporated herein by reference.
Selected quarterly data presented on page 80 in such Annual Report
in the section entitled "Selected Financial Data" are also hereby
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
See Item 10 in Part I of this Report for information on
executive officers of the Corporation. Information concerning the
directors of the Corporation and nominees for election as directors
thereof is presented on pages 2 through 5 in the section
entitled"Election of Directors" in the Corporation's definitive
Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting
of Stockholders filed pursuant to Section 14 of the Securities
Exchange Act of 1934, which is hereby incorporated herein by
reference.
Item 11. Executive Compensation
Information concerning compensation of executive officers of
the Corporation is presented in the section "Compensation of
Directors and Executive Officers - Executive Officers" found on
pages 9 through 18 under "Election of Directors" in the
Corporation's definitive Proxy Statement dated March 16, 1994 for
its 1994 Annual Meeting of Stockholders filed pursuant to Section
14 of the Securities Exchange Act of 1934, which is hereby
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information concerning the number of shares of Common Stock
of the Corporation beneficially owned by certain owners and
management is presented on pages 2 through 5 in the section
"Election of Directors" and page 21 in the section entitled
"Ownership of Voting Securities" in the Corporation's definitive
Proxy Statement dated March 16, 1994 for its 1994 Annual Meeting
of Stockholders filed pursuant to Section 14 of the Securities
Exchange Act of 1934, which is hereby incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information concerning transactions between the Corporation
and executive officers and directors and certain related persons
is presented in the section "Transactions with Management and
Related Persons" found on pages 19 and 20 under "Election of
Directors" in the Corporation's definitive Proxy Statement dated
March 16, 1994 for its 1994 Annual Meeting of Stockholders filed
pursuant to Section 14 of the Securities Exchange Act of 1934 and
in Note 17 of the Notes to Consolidated Financial Statements
accompanying the Corporation's financial statements in the 1993
Annual Report to Stockholders, both of which are hereby
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Financial Statements, Financial Statement Schedules and
Exhibits
(i) Financial Statements of Republic New York Corporation
and Subsidiaries, included in the Annual Report to
Stockholders for the year 1993 (on pages indicated below)
and incorporated herein by reference:
Page
Consolidated Statements of Condition, December 31, 1993
and 1992................................................ 50
Consolidated Statements of Income, Years ended December
31, 1993, 1992 and 1991................................. 51
Consolidated Statements of Changes in Stockholders'
Equity, Years ended December 31, 1993, 1992 and 1991.... 52
Consolidated Statements of Cash Flows, Years ended
December 31, 1993, 1992 and 1991........................ 53
Notes to Consolidated Financial Statements.............. 55
Independent Auditors' Report on Financial Statements.... 77
(ii) Financial Statement Schedules of Republic New York
Corporation (Parent Company Only) are shown in the notes
to the respective financial statements. See Note 19 of
the Notes to Consolidated Financial Statements
accompanying the Corporation's financial statements in
the 1993 Annual Report to Stockholders which is hereby
incorporated herein by reference.
(iii) Exhibits
3(a) Articles of Incorporation as amended through April 21, 1993.
(b) By-Laws of the Corporation as amended through July
20, 1988. (1)
4(a) Articles Supplementary creating a series of
Cumulative Preferred Stock, Floating Rate Series B
dated March 7, 1984. (2)
(b) Articles Supplementary creating a series of Dutch
Auction Rate Transferable Securities, Preferred
Stock, Series A and Series B, dated March 27, 1986. (2)
(c) Articles Supplementary creating a series of Money
Market Cumulative Preferred Stock, dated July 22, 1987. (2)
(d) Articles Supplementary creating a series of
Remarketed Preferred Stock, dated July 29, 1987. (2)
(e) Articles Supplementary creating a series of $3.375
Cumulative Convertible Preferred Stock, dated May 14, 1991. (2)
(f) Articles Supplementary creating a series of $1.9375
Cumulative Preferred Stock, dated February 26, 1992. (2)
(g) Indenture, dated as of May 1, 1986, between Republic
New York Corporation and Manufacturers Hanover Trust
Company, as Trustee, for the issuance of the
Corporation's 8 3/8% Notes Due 1996. (3)
(h) Indenture dated January 15, 1987 between Republic
New York Corporation and Bankers Trust Company, as
Trustee, for the issuance of the Corporation's
Putable Capital Notes. (4)
(i) Standard Multiple - Series Indenture Provisions,
dated as of May 15, 1986. (5)
(j) Senior Indenture, dated as of May 15, 1986, between
Republic New York Corporation and Manufacturers
Hanover Trust Company, as Trustee. (5)
(k) First Supplemental Indenture to Senior Indenture,
dated as of May 15, 1991. (6)
(l) Second Supplemental Indenture to Senior Indenture,
dated as of April 15, 1993. (7)
(m) Subordinated Indenture dated as of May 15, 1986,
between Republic New York Corporation and Bankers
Trust Company, as Trustee. (8)
(n) First Supplemental Indenture to Subordinated
Indenture, dated as of May 15, 1991. (6)
(o) Second Supplemental Indenture to Subordinated
Indenture, dated as of April 15, 1993. (7)
(p) Subordinated Indenture, dated as of October 15,
1992, between Republic New York Corporation and
Citibank, N.A., as Trustee. (9)
(q) First Supplemental Indenture to 1992 Subordinated
Indenture, dated as of April 15, 1993. (7)
(r) Form of Senior Security. (10)
(s) Form of Subordinated Security. (10)
10(a) Copy of agreement dated May 27, 1988 among Vito S.
Portera and Republic New York Corporation and
Republic National Bank of New York. (11)
(b) Amended and Restated Deferral Agreement dated
December 31, 1993 between Walter H. Weiner and
Republic New York Corporation.
(c) Form of Amended and Restated Deferral Agreement.
(d) Form of Deferral Agreement.
(e) 1994 Performance Based Incentive Compensation Plan
(as approved by the Board of Directors of the
Corporation on January 19, 1994 subject to
stockholder approval). (12)
11 Computation of Earnings Per Share of Common Stock.
12 Calculation of Ratios of Earnings to Fixed Charges -
Consolidated.
13 Annual Report to Stockholders for year 1993 (to the
extent incorporated herein by reference).
21 Subsidiaries of the Corporation.
23 Consents of Experts and Counsel.
(1) Incorporated herein by reference to such Exhibit filed with
the Corporation's Annual Report on Form 10-K for its fiscal
year ended December 31, 1988 (Exhibit 3(b)).
(2) Filed herewith in Exhibit 3(a).
(3) Incorporated herein by reference to such Exhibit filed with
the Corporation's Registration Statement on Form S-3, No.
33-5074 (Exhibit 4.2).
(4) Incorporated herein by reference to such Exhibit filed with
the Corporation's Annual Report on Form 10-K for its fiscal
year ended December 31, 1987 (Exhibit 4(y)).
(5) Incorporated herein by reference to such Exhibits filed with
the Corporation's Registration Statement on Form S-3, No.
33-5804 (Exhibits 4(a) and 4(b), respectively).
(6) Incorporated herein by reference to such Exhibits filed with
the Corporation's Registration Statement on Form S-3, No.
33-40703 (Exhibits 4(c) and 4(e), respectively).
(7) Incorporated herein by reference to such Exhibits filed with
the Corporation's Registration Statement on Form S-3, No.
33-49507, Amendment No. 1 (Exhibits 4(d), 4(g) and 4(i), respectively).
(8) Incorporated herein by reference to such Exhibit filed with
the Corporation's Current Report on Form 8-K dated February
8, 1989 (Exhibit 4(c)).
(9) Incorporated herein by reference to such Exhibit filed with
the Corporation's Registration Statement on Form S-3, No.
33-48651, Post-Effective Amendment No. 2 (Exhibit 4(f)).
(10) Incorporated herein by reference to such Exhibits filed with
the Corporation's Current Report on Form 8-K dated August
6, 1992 (Exhibits 4(h) and 4(i), respectively).
(11) Incorporated herein by reference to such Exhibits filed with
the Corporation's Annual Report on Form 10-K for its fiscal
year ended December 31, 1991 (Exhibit 10(b)).
(12) Incorporated herein by reference to such Exhibit filed with
the Corporation's definitive Proxy Statement dated March 16,
1994 (Exhibit 99).
(b)The following reports on Form 8-K were filed during the
last quarter of the annual period covered by this Report:
(i) Report dated October 21, 1993 regarding the issuance of
$250 million aggregate principal amount of the
Corporation's 5 7/8% Subordinated Notes due 2008, and
filing the Corporation's press release announcing Results
for Third Quarter and Nine Month Period Ended September
30, 1993.
(ii) Report dated October 22, 1993 regarding the issuance of
$250 million aggregate principal amount of the
Corporation's 5 7/8% Subordinated Notes due 2008, and
filing the Corporation's press release announcing
Results for Third Quarter and Nine Month Period Ended
September 30, 1993.
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.
Dated: March 29, 1994 REPUBLIC NEW YORK CORPORATION
By: WALTER H. WEINER
---------------------------
(Chairman of the Board)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT
OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES
INDICATED.
Signature Title Date
- --------- ----- ----
Director and Chairman
of the Board
WALTER H. WEINER (Principal Executive Officer) March 29, 1994
- -------------------------
Executive Vice President
and Comptroller
(Principal Financial and
JOHN D. KABERLE, JR. Accounting Officer) March 29, 1994
- --------------------------
KURT ANDERSEN Director March 29, 1994
- -------------------------
PETER A. COHEN Director March 29, 1994
- -------------------------
ALBERT S. CORWEN Director March 29, 1994
- -------------------------
CYRIL S. DWEK Director March 29, 1994
- -------------------------
ERNEST GINSBERG Director March 29, 1994
- -------------------------
NATHAN HASSON Director March 29, 1994
- -------------------------
MORRIS HIRSCH Director March 29, 1994
- -------------------------
- -------------------------
(Jeffrey C. Keil) Director
PETER KIMMELMAN Director March 29, 1994
- -------------------------
LEONARD LIEBERMAN Director March 29, 1994
- -------------------------
WILLIAM C. MACMILLEN, JR. Director March 29, 1994
- -------------------------
MARTIN F. MERTZ Director March 29, 1994
- -------------------------
JAMES L. MORICE Director March 29, 1994
- -------------------------
E. DANIEL MORRIS Director March 29, 1994
- -------------------------
JANET L. NORWOOD Director March 29, 1994
- -------------------------
JOHN A. PANCETTI Director March 29, 1994
- -------------------------
- ------------------------- Director
(Javier Perez de Cuellar)
VITO S. PORTERA Director March 29, 1994
- -------------------------
WILBUR M. RABINOWITZ Director March 29, 1994
- -------------------------
WILLIAM P. ROGERS Director March 29, 1994
- -------------------------
DOV C. SCHLEIN Director March 29, 1994
- -------------------------
JACQUES TAWIL Director March 29, 1994
- -------------------------
PETER WHITE Director March 29, 1994
- -------------------------
REPUBLIC NEW YORK CORPORATION
FORM 10-K
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3(a) Articles of Incorporation as amended through
April 21, 1993.
10(b) Amended and Restated Deferral Agreement dated
December 31, 1993 between Walter H. Weiner and
Republic New York Corporation.
(c) Form of Amended and Restated Deferral Agreement.
(d) Form of Deferral Agreement.
11 Computation of Earnings per Share of Common Stock.
12 Calculation of Ratios of Earnings to Fixed Charges -
Consolodated.
13 Annual Report to Stockholders for year 1993
(to the extent incorporated herein by reference).
21 Subsidiaries of the Corporation.
23 Consents of Experts and Counsel.