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:
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.
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.
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
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
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.
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
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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
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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
======= =======
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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
======= =======
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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.
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
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.
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.
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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%
====== ====== ======
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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.
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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 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.
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
|
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.
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.
|
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
======= ======= ====== =======
|
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.
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.
|
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.
|
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.
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.
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
wide variety of domestic and foreign companies compete for processing services.
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.
Supplementary financial information is incorporated herein by reference from the "Quarterly Data" section included in Exhibit 13.
(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
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.)
|
\s\ William R. Chaney Director ------------------------------------ (William R. Chaney) \s\ Nicholas M. Donofrio Director ------------------------------------ (Nicholas M. Donofrio) \s\ Richard J. Kogan Director ------------------------------------ (Richard J. Kogan) \s\ John A. Luke, Jr. Director ------------------------------------ (John A. Luke, Jr.) \s\ John C. Malone Director ------------------------------------ (John C. Malone) \s\ Donald L. Miller Director ----------------------------------- (Donald L. Miller) \s\ Catherine A. Rein Director ------------------------------------ (Catherine A. Rein) \s\ William C. Richardson Director ------------------------------------ (William C. Richardson) \s\ Brian L. Roberts Director ------------------------------------ (Brian L. Roberts) |
INDEX TO EXHIBITS
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.
*(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.
*(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.
*(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.
*(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.
*(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
Exhibit 3(a)
BY-LAWS
of
The Bank of New York Company, Inc.
As Amended through November 14, 2000
ARTICLE I
OFFICES
SECTION 1.1. Principal Office. The principal office of The Bank of New York Company, Inc. (hereinafter called the Company) shall be in the City and County of New York.
SECTION 1.2. Other Offices. The Company may have other offices at such other places as the Board of Directors of the Company (hereinafter called the Board) may from time to time determine and as shall be legally authorized.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. Place of Meeting. Each meeting of the shareholders of the Company (hereinafter called the shareholders) shall be held at the principal office of the Company or at such other place, within or without the State of New York, as shall be specified in the notice of such meeting.
SECTION 2.2. Annual Meetings. The annual meeting of the shareholders for the election of directors and the transaction of such other business as properly may be brought before such meeting shall be held on such date as may be designated by the Board from time to time, at such hour as may be specified in the notice of such meeting.
SECTION 2.3. Special Meetings. A special meeting of the shareholders for any purpose or purposes may be called at any time by order of the Board or by the Chairman of the Board (hereinafter called the Chairman) or, in his absence, the President.
SECTION 2.4. Notice of Meetings. Notice of each meeting of the shareholders shall be in writing and signed by the Chairman, the President or the Secretary. Such notice shall state the purpose or purposes for which such meeting is called and the place, date and hour of the meeting, and, unless it is the annual meeting, shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. If, at any meeting, action is proposed to be taken which would, if taken, entitle shareholders who comply with applicable requirements of law to receive payment for their shares, the notice of such meeting shall include a statement of that purpose and to that effect. Except as otherwise provided by law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten nor more than fifty days before such meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice shall be deemed to have been given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders of the Company, or, if he shall have filed with the Secretary a written request that notices to him be mailed to some other address, then
directed to him at such other address. Unless the Board fixes a new record date for an adjourned meeting of the shareholders, notice thereof need not be given if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. Any previously scheduled meeting of the shareholders may be postponed, and (unless the Certificate of Incorporation otherwise provides) any special meeting of the shareholders may be canceled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of shareholders.
SECTION 2.5. Waiver of Notice. Notice of any meeting of the shareholders need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting, and the attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion thereof the lack of notice of such meeting, shall constitute a waiver of notice thereof by him.
SECTION 2.6. Quorum. Except as otherwise provided by law, at all meetings of the shareholders the presence, in person or by proxy, of the holders of a majority of the shares of the Company entitled to vote thereat shall be necessary to constitute, and shall constitute, a quorum for the transaction of business. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholder. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of the shareholders present in person or by proxy and entitled to vote at such meeting may adjourn such meeting from time to time and from place to place until a quorum shall be present thereat. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called if a quorum then had been present.
SECTION 2.7. Organization. At each meeting of the shareholders, the Chairman or, in his absence, the President or, in his absence, such person as may be designated by the Board or, in the absence of any of the foregoing, a person chosen for the purpose by a majority in voting interest of the shareholders present in person or by proxy and entitled to vote at such meeting, shall act as chairman thereof and preside thereat; and the Secretary or, in his absence, the person whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. The person presiding at the meeting shall establish the rules for the conduct of the meeting, including, without limitation, the order of consideration of matters to be voted upon by the shareholders. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, the person presiding at the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in these By-laws and, if any proposed nomination or business is not in compliance with these By-laws, to declare that such proposal or nomination shall be disregarded.
SECTION 2.8. Voting and Proxies. Subject to the provisions of Section 9.5 of these By-laws and except as otherwise provided in this Section or by law, every shareholder of record of the Company shall be entitled at every meeting of the shareholders to one vote in person or by proxy for every share of stock of the Company standing in his name on the record of shareholders. The person presiding at the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon which shareholders will vote at the meeting.
Treasury shares as of the record date and shares held as of the record date by another domestic or foreign corporation of any type or kind, if a majority of the shares entitled to vote in the election of directors of such other corporation is held as of the record date by the Company, shall not be shares entitled to vote or to be counted in determining the total number of outstanding shares.
Shares held by an administrator, executor, guardian, conservator, committee or other fiduciary, except a trustee, may be voted by him or it, either in person or by proxy, without transfer of such shares into his or its name. Shares held by a trustee may be voted by him or it, either in person or by proxy, only after the shares have been transferred into his or its name as trustee or into the name of his or its nominee.
Shares standing in the name of another domestic or foreign corporation of any type or kind may be voted by such officer, agent or proxy as the by-laws of such corporation may provide, or, in the absence of such provision, as the board of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any person for any sum of money or anything of value except as permitted by law.
Every proxy must be signed by the shareholder or by his duly authorized attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by law. The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the Secretary or any Assistant Secretary.
At all meetings of the shareholders, a quorum being present, all matters, except as otherwise provided by law, the Certificate of Incorporation of the Company or Section 3.4 of these By-laws, shall be authorized by a majority of the votes cast at the meeting by the shareholders present in person or by proxy and entitled to vote thereon.
Unless demanded by a shareholder or shareholders present in person or by proxy at any meeting of the shareholders and owning not less than ten percent in voting interest of the outstanding stock of the Company entitled to be voted thereat, or unless so directed by the chairman of the meeting, the vote thereat on any question need not be by ballot, except in the case of the election of directors.
A list of shareholders as of the record date for the meeting, certified by the Secretary or an Assistant Secretary responsible for its preparation or by a transfer agent for the stock of the Company, shall be produced at any
meeting of the shareholders upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors appointed pursuant to Section 2.9 of these By-laws, or the person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.
SECTION 2.9. Inspectors. The Board, in advance of any meeting of the shareholders, may appoint one or more persons to act as inspectors (with respect to any election to be held, or otherwise) at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at the meeting of the shareholders may, and if so requested by a shareholder entitled to vote thereat shall, appoint one or more persons to act as inspectors. In case any person appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.
At such meeting the inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such other acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them.
SECTION 2.10. Stockholder Proposals and Nominations.
(a) Annual or Special Meetings of Shareholders. At any annual or special meeting of shareholders, proposals by shareholders and persons nominated for election as directors by shareholders shall be considered only if advance notice thereof has been timely given as provided herein and such proposals or nominations are otherwise proper for consideration under applicable law and the Certificate of Incorporation and By-laws of the Company. Notice of any proposal to be presented by any shareholder or of the name of any person to be nominated by any shareholder for election as a director of the Company at any meeting of shareholders shall be delivered to the Secretary of the Company at its principal executive office (i) in the case of an annual meeting, not fewer than 90 nor more than 120 days prior to the date of the meeting (provided that with respect to the 1999 annual meeting a proposal submitted prior to November 30, 1998 for inclusion in the Company's proxy statement shall be deemed timely); provided, however, that if the date of the meeting is first publicly announced fewer than 100 days prior to the date of the meeting, such advance notice shall be given not more than ten days following the earlier of the day on which notice of the date of the meeting was mailed and public announcement
was made; and (ii) in the case of a special meeting at which directors are to
be elected, not later than the close of business on the tenth day following
the earlier of the day on which notice of the date of the meeting was mailed
and public announcement was made. Any shareholder who gives notice of any such
proposal shall deliver therewith the text of the proposal to be presented and
a brief written statement of the reasons why such shareholder favors the
proposal and setting forth such shareholder's name and address, the number and
class of all shares of each class of stock of the Company beneficially owned
by such shareholder and any material interest of such shareholder in the
proposal (other than as a shareholder generally) and whether such person has
received any financial assistance, funding or other consideration from any
other person in respect of the proposal (and the details thereof). Any
shareholder desiring to nominate any person for election as a director of the
Company shall deliver with such notice (i) a statement in writing setting
forth the name of the person to be nominated, the number and class of all
shares of each class of stock of the Company beneficially owned by such
person, the information regarding such person required by paragraphs (a), (e)
and (f) of Item 401 of Regulation S-K adopted by the Securities and Exchange
Commission (or the corresponding provisions of any regulation subsequently
adopted by the Securities and Exchange Commission applicable to the Company),
(ii) such person's signed consent to serve as a director of the Company if
elected, (iii) such shareholder's name and address, (iv) a confirmation of the
number and class of all shares of each class of stock of the Company
beneficially owned by such shareholder, (v) a confirmation that any
governmental approvals required in connection with such person's nomination,
election or taking office as a director of the Company have been obtained by
such stockholder and/or nominee, as applicable, and are in full force and
effect as of the date of submission of such notice of nomination and (vi) a
statement as to whether such person or shareholder received any financial
assistance, funding or consideration from any other person in respect of the
nomination (and the details thereof). As used herein, shares "beneficially
owned" shall include all shares that such person, together with such person's
affiliates and associates (as defined in Rule 12b-2 under the Securities
Exchange Act of 1934), may be deemed to beneficially own pursuant to Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as well as all
shares of which such person, together with such person's affiliates and
associates, has the right to become the beneficial owner pursuant to any
agreement or understanding, or upon the exercise of warrants, options or
rights to convert or exchange (whether such rights are exercisable immediately
or only after the passage of time or the occurrence of conditions). The person
presiding at the meeting, in addition to making any other determinations that
may be appropriate to the conduct of the meeting, shall determine whether such
notice has been duly given and shall direct that proposals and nominees not be
considered if such notice has not been given. In no event shall the public
announcement of an adjournment of an annual or special meeting commence a new
time period for the giving of shareholders notice as described above.
(b) Eligibility of Directors. Only such persons who are nominated in accordance with the procedures set forth in this By-law shall be eligible to serve as directors and only such business shall be conducted at a meeting of shareholders as shall have been brought before a meeting in accordance with the procedures set forth in this By-law.
(c) Public Announcement Defined. For purposes of this By-law, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in
a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(d) Exchange Act Matters. Notwithstanding the foregoing provisions of
this By-law, a shareholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this By-law. Nothing in this By-law shall be deemed
to affect any rights (i) of shareholders to request inclusion of proposals in
the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of preferred stock of the Company, if any,
to elect directors under specified circumstances.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the Company shall be managed by the Board.
SECTION 3.2. Number. The Board shall consist of such number of directors, not less than nine, as shall be fixed from time to time by resolution adopted by a majority of the total number of directors which the Company would have, prior to any increase or decrease, if there were no vacancies on the Board. The tenure of office of a director shall not be affected by any decrease in the number of directors so made by the Board.
SECTION 3.3. Qualifications. No person shall be eligible to serve as a director unless, when his term commences, he is not less than eighteen years of age nor (except in the case of those persons who were named as directors in the Statement of Organization of the Company or who were members of the Board of Trustees of The Bank of New York prior to April 30, 1957) more than seventy years of age. Directors need not be shareholders.
SECTION 3.4. Election and Term. At each annual meeting of the shareholders, directors shall be elected to hold office until the next annual meeting. Subject to the provisions of these By-laws, each director shall hold office until the expiration of the term for which he is elected and until his successor has been elected and qualified.
Directors shall be elected by the shareholders, except as otherwise provided by law or the Certificate of Incorporation of the Company or these By-laws. In order to be elected as a director by the shareholders, a person must, except as otherwise provided by law, receive a plurality of the votes cast by the holders of shares entitled to vote thereon at a meeting of the shareholders for the election of directors at which a quorum shall be present.
SECTION 3.5. Resignations. Any director of the Company may resign at any time by giving written notice to the Chairman, the President or the Secretary.
Such resignation shall take effect at the date of receipt of such notice, or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.6. Removal. Any or all of the directors may be removed for cause by vote of the shareholders or by action of the Board.
SECTION 3.7. Newly Created Directorships and Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason, except the removal of directors by the shareholders without cause, shall be filled by election by the affirmative vote of a majority of the directors then in office, even though less than a quorum exists. Vacancies occurring as a result of the removal of directors by the shareholders without cause shall be filled by the shareholders.
A director elected to fill a vacancy, or to fill a newly created directorship, shall be elected to hold office until the next annual meeting of the shareholders and until his successor has been elected and qualified.
SECTION 3.8. Time and Place of Meetings; Content of Notice, if any. Except as otherwise provided in these By-laws, the Board may hold any meeting within or without the State of New York at such place, and at such time, as from time to time may be designated by resolution of the Board or as shall be specified in the notice of such meeting or in the waivers of notice thereof signed by the directors at the time in office (other than any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice thereof to him). Except as otherwise specifically provided by law or in these By-laws, any notice or waiver of notice of any meeting of the Board need not contain any statement of the purpose or purposes of the meeting or any specification of the business to be transacted thereat, but shall specify the time and place thereof.
SECTION 3.9. Annual Meeting. Following each annual meeting of the shareholders for the election of directors, the Board shall meet for the purposes, without limitation, of organization and the annual election and appointment of officers. The meeting of the Board to be held for such purposes shall be the regular meeting of the Board next following each such annual meeting of the shareholders, unless a special meeting of the Board shall in the meantime have been duly called and held for such purposes.
SECTION 3.10. Regular Meetings. Regular meetings of the Board may be held at such time and place as shall from time to time be specified in a resolution of the Board, and no notice thereof need be given.
SECTION 3.11. Special Meetings. A special meeting of the Board may be called at any time by the Chairman or, in his absence, by the President and shall be called by the Chairman, the President or the Secretary upon the written request of any two directors.
Except as otherwise provided by law, notice of each such meeting shall be given to each director by mail, addressed to him at his residence or usual place of business, not later than noon, New York time, on the third day prior to the day on which the meeting is to be held, or shall be given to him, so addressed, by telegram or cable or radiogram, or given to him personally by messenger or telephone, not later than noon, New York time, on the day before the day on which such meeting is to be held. Notices are deemed to have been given by mail, when deposited in the United States mail, by telegram or cable or radiogram at the time of filing, by messenger at the time of delivery, and by telephone at the time of the telephone call.
Notice of such meeting need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him.
SECTION 3.12. Quorum and Manner of Acting. At all meetings of the Board the presence of one-third of the entire Board shall be necessary to constitute a quorum for the transaction of business thereat, and an act taken by vote of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board, except as otherwise provided by law or these By-laws.
Members of the Board may participate in a meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
Any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents by the members of the Board shall be filed with the minutes of the proceedings of the Board.
A majority of the directors present, whether or not a quorum shall be present, may adjourn any meeting from time to time and from place to place. Notice of any adjournment of a meeting to another time or place shall be given in the manner described in Section 3.11 of these By-laws to the directors who were not present at the time of the adjournment and, unless such time and place are announced at the meeting, to the other directors. At any such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called if a quorum then had been present. The directors shall act only as a Board and the individual directors shall have no power as such.
SECTION 3.13. Organization. At each meeting of the Board, the Chairman or, in his absence, the President or, in his absence, such person as may be designated by the Board or, in the absence of any of the foregoing, a director chosen by a majority of the directors present, shall act as chairman thereof and preside thereat; and the Secretary or, in his absence, the person whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof.
SECTION 3.14. Compensation. Each director, other than officers of the Company or any of its subsidiaries, shall be paid such compensation as the Board from time to time may determine for his services as director or as a member of any committee appointed by or pursuant to the authorization of the Board, and shall, in addition, be reimbursed for such transportation and other expenses as shall be incurred by him in the performance of his duties. Nothing in this Section shall preclude any director from serving the Company in any other capacity and receiving compensation therefor.
SECTION 3.15. Interest of Directors and Officers in Transactions. In the absence of fraud, no contract or other transaction between the Company and one or more of its directors, or between the Company and any other corporation, firm, association or other entity in which one or more of its directors or officers are directors, or have a substantial financial interest, shall be either void or voidable, irrespective of whether such interested director or directors are present at the meeting of the Board, or of a committee thereof, which approves such contract or transaction and irrespective of whether his or their votes are counted for such purpose:
(a) if the material facts as to such director's interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the Board, or a committee thereof, and the Board or committee approves such contract or transaction by a vote sufficient for such purpose without counting the vote of such interested director or, if the votes of the disinterested directors are insufficient to constitute an act of the Board under Section 3.12 of these By- laws, by unanimous vote of the disinterested directors; or
(b) if the material facts as to such director's interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the shareholders entitled to vote thereon, and such contract or transaction is approved by vote of such shareholders.
If there was no such disclosure or knowledge, or if the vote of such interested director was necessary for the approval of such contract or transaction at a meeting of the Board or committee at which it was approved, the Company may avoid the contract or transaction unless the party or parties thereto shall establish affirmatively that the contract or transaction was fair and reasonable as to the Company at the time it was approved by the Board, a committee or the shareholders.
Notwithstanding the foregoing, no loan, except advances in connection with indemnification, shall be made by the Company to any director unless it is authorized by vote of the shareholders without counting any shares of the director who would be the borrower.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 4.1. How Constituted. The Board, by resolution adopted by a majority of the entire Board, may appoint an Executive Committee, which shall consist of the Chairman, the President, and not less than one other director. The Executive Committee shall serve at the pleasure of the Board.
SECTION 4.2. Term of Office. Each member of the Executive Committee, provided he continues to be a director, shall, subject to the provisions of this Article, continue in office as such member until the next annual meeting of the Board and until his successor, if any, shall have been appointed, or until he shall resign or shall have been removed in the manner hereinafter provided.
SECTION 4.3. Vacancies. In case any vacancy shall exist in the Executive Committee resulting from any cause whatsoever, the Board may fill such vacancy by resolution adopted by a majority of the entire Board.
SECTION 4.4. Powers. While the Board is not in session, the Executive Committee shall have and may exercise (unless the Board shall otherwise determine) all the authority and powers of the Board in the management of the business and affairs of the Company, including generally and without limitation all powers conferred upon or vested in the Board by law, by the Certificate of Incorporation of the Company, by these By-laws or otherwise, excepting the powers conferred upon the Board by this Article, and except that the Executive Committee shall not have authority as to the following matters:
(a) the submission to shareholders of any action for which shareholders' authorization is required;
(b) the filling of vacancies in the Board or in the Executive Committee or any other committee having any of the authority of the Board;
(c) the fixing of compensation of the directors for serving on the Board or on the Executive Committee or any other committee;
(d) the amendment or repeal of these By-laws, or the adoption of new By-laws;
(e) the amendment or repeal of any resolution of the Board which by its terms is not amendable or repealable;
(f) the removal or indemnification of directors; or
(g) the taking of action which is expressly required by law to be taken at a meeting of the Board or by a specified proportion of the directors.
SECTION 4.5. Resignations. Any member of the Executive Committee may resign at any time by giving written notice to the Board, the Chairman, the President or the Secretary. Such resignation shall take effect at the time of receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.6. Removal. Any member of the Executive Committee, other than a member who shall at the time be the Chairman or the President, may be removed by the Board with or without cause at any time.
SECTION 4.7. Quorum and Manner of Acting. A majority of the members of the Executive Committee shall be necessary to constitute a quorum, and an act taken by vote of a majority of the members of the Committee present at the time of the vote, if a quorum is present at such time, shall be the act of the Committee. Members of the Executive Committee may participate in a meeting of the Committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Any action required or permitted to be taken by the Executive Committee may be taken without a meeting if all members of the Committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents by the members of the Committee shall be filed with the minutes of the proceedings of the Committee. Subject to the foregoing, and unless the Board shall otherwise decide, the Executive Committee shall fix its rules of procedure, determine its action and fix the time and place of its meetings. The Executive Committee shall keep a record of its proceedings, which shall be at all times available to the directors. All action taken by the Executive Committee shall be reported to the Board at its next meeting.
SECTION 4.8. Alternate Members. The Board, by resolution adopted by a majority of the entire Board, may appoint one or more directors as alternate members of the Executive Committee, to serve, in accordance with the terms of such resolution, as replacements for, and with the authority and powers of, any members of that Committee absent from any meeting thereof.
ARTICLE V
OTHER COMMITTEES
SECTION 5.1. Other Committees of Directors. The Board, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members such other committees consisting of one or more directors as it may deem advisable and grant to any such committee, to the extent provided in the resolution creating it, authority of the Board; provided, however, that no such committee shall be granted any power or authority withheld from the Executive Committee by Section 4.4 of these By- laws. Each such committee shall serve at the pleasure of the Board. All provisions of Sections 4.2, 4.3, 4.5, 4.6, 4.7 and 4.8 of these By-laws shall apply to each such committee and the members thereof with the same force and effect as if such committee were referred to in the text of such provisions in each instance in which the Executive Committee is so referred to.
SECTION 5.2. Other Committees of Directors, Officers and/or Other Persons. The Board may appoint, or authorize the Chairman or, in his absence, the President to appoint, from time to time, such other committees consisting of directors, officers and/or other persons and having such powers, duties and functions in or relating to the business and affairs of the Company as the Board may determine. Each such committee and each member thereof shall serve at the pleasure of the Board and, in the case of any committee appointed by the Chairman or the President, at the pleasure of the Chairman or, in his absence, of the President. A majority of all the members of any such committee, or, in the case of any committee appointed by the Chairman or the President, the Chairman or, in his absence, the President, may determine the rules of order and procedure of such committee and the time and place of its meetings, unless the Board shall otherwise provide.
ARTICLE VI
OFFICERS
SECTION 6.1. Number and Qualifications. The officers of the Company shall be a Chairman, a President, one or more Vice Chairmen of the Board (herein called Vice Chairman or Vice Chairmen), a Secretary, a Treasurer, and such other officers, including but not by way of limitation Vice Presidents (who may include one or more Executive Vice Presidents and Senior Vice Presidents), a Comptroller and an Auditor, as may be elected or appointed in accordance with the provisions of these By-laws. The Chairman, the President and any Vice Chairmen shall be elected, and the other officers may, but need not be, elected or appointed, from among the directors. One person may hold any two or more offices and perform the duties thereof except those of President and Secretary.
SECTION 6.2. Annually Elected Officers. The Chairman, the President, any Vice Chairmen, any Vice Presidents, the Secretary, the Treasurer and such other officers, if any, as the Board may determine, shall be elected by the Board at each annual meeting. Each such officer shall hold office until the next annual meeting of the Board and until his successor, if any, shall have been elected and shall have qualified, or until his death, or until he shall resign or shall be removed in the manner hereinafter provided.
SECTION 6.3. Additional Officers. The Board may from time to time elect such additional officers (including Vice Chairmen and Vice Presidents) as it shall deem advisable. The Board may also delegate to the Chairman or, in his absence, the President the power to appoint such further officers as the Board shall deem advisable. Each such officer shall serve at the pleasure of the Board and, in the case of an officer appointed by the Chairman or the President, also at the pleasure of the Chairman or, in his absence, of the President.
SECTION 6.4. Removal. Any officer may be removed by the Board, and an officer appointed by the Chairman or the President may be removed by the Chairman or, in his absence, the President, at any time, or his authority may be suspended by the Board or the Chairman or, in his absence, the President, with or without cause (in the latter case without prejudice to his contract
rights, if any). The election or appointment of an officer shall not be deemed of itself to create contract rights.
SECTION 6.5. Resignations. Any officer may resign at any time by giving written notice to the Board, the Chairman, the President or the Secretary. Such resignation shall take effect at the date of the receipt of such notice or any later date specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 6.6. Vacancies. A vacancy from any cause in any office referred to above may be filled at any time for the unexpired portion of the term, if any, in the manner prescribed in these By-laws for regular election or appointment to such office.
SECTION 6.7. Salaries. The salaries of the officers elected by the Board shall be fixed from time to time by the Board. The salaries of the officers appointed by the Chairman or the President shall be fixed from time to time by the Board or the Chairman or, in his absence, the President. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Company.
SECTION 6.8. Powers and Duties. The officers of the Company shall have such authority and perform such duties in the management of the Company as may be prescribed by these By-laws or by the Board and, to the extent not so prescribed, they shall have such authority and perform such duties in the management of the Company, subject to the control of the Board, as generally pertain to their respective offices.
The Chairman shall be the chief executive officer of the Company.
The Board may require any officer, agent or employee to give security for the faithful performance of his duties.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 7.1. Indemnification. Except to the extent expressly prohibited by the New York Business Corporation Law, the Company shall indemnify any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Company, or serves or served at the request of the Company any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, penalties, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred in connection with such action or proceeding, or any appeal therein; provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such person established that his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled; and provided further that no such indemnification shall be required with respect to any settlement or other
nonadjudicated disposition of any threatened or pending action or proceeding unless the Company has given its prior consent to such settlement or other disposition.
The Company may advance or promptly reimburse upon request any person entitled to indemnification hereunder for all expenses, including attorneys' fees, reasonably incurred in defending any action or proceeding in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such person to repay such amount if such person is ultimately found not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such person is entitled; provided, however, that such person shall cooperate in good faith with any request by the Company that common counsel be utilized by the parties to an action or proceeding who are similarly situated unless to do so would be inappropriate due to actual or potential differing interests between or among such parties.
Nothing herein shall limit or affect any right of any person otherwise than hereunder to indemnification or expenses, including attorneys' fees, under any statute, rule, regulation, certificate of incorporation, by-law, insurance policy, contract or otherwise.
Anything in these By-laws to the contrary notwithstanding, no elimination of this By-law, and no amendment to this By-law adversely affecting the right of any person to indemnification or advancement of expenses hereunder, shall be effective until the 60th day following notice to such person of such action, and no elimination of or amendment to this By-law shall deprive any person of his or her rights hereunder arising out of alleged or actual occurrences, acts or failures to act prior to such 60th day.
The Company shall not, except by elimination of or amendment to this By- law in a manner consistent with the preceding paragraph, take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any person to, indemnification in accordance with the provisions of this By-law. The indemnification of any person provided by this By-law shall continue after such person has ceased to be a director or officer of the Company and shall inure to the benefit of such person's heirs, executors, administrators and legal representatives.
The Company is authorized to enter into agreements with any of its directors or officers extending rights to indemnification and advancement of expenses to such person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of such person pursuant to this By-law, it being expressly recognized hereby that all directors or officers of the Company by serving as such after the adoption hereof, are acting in reliance hereon and that the Company is estopped to contend otherwise.
In case any provision in this By-law shall be determined at any time to be unenforceable in any respect, the other provisions shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Company to afford indemnification and advancement of expenses to its directors and officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law.
For purposes of this By-law, the Company shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his or her duties to the Company also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan, and excise taxes assessed on a person with respect to any employee benefit plan pursuant to applicable law shall be considered indemnifiable expenses. For purposes of this By-law, the terms "Company" shall include any legal successor to the Company, including any corporation which acquires all or substantially all of the assets of the Company in one or more transactions.
A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in the first paragraph of this By-law shall be indemnified as authorized in such paragraph. Except as provided in the preceding sentence and unless ordered by a court, indemnification under this By-law shall be made by the Company if, and only if, authorized in the specific case:
(1) By the Board of Directors acting by a quorum consisting of directors who are not parties to such action or proceeding upon a finding that the director or officer has met the standard of conduct set forth in the first paragraph of this By-law, or,
(2) If such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs;
(a) by the Board of Directors upon the opinion in writing of independent legal counsel that indemnification is proper in the circumstances because the standard of conduct set forth in the first paragraph of this By- law has been met by such director or officer; or
(b) by the shareholders upon a finding that the director or officer has met the applicable standard of conduct set forth in such paragraph.
If any action with respect to indemnification of directors and officers is taken by way of amendment of these By-laws, resolution of directors, or by agreement, the Company shall, not later than the next annual meeting of shareholders, unless such meeting is held within three months from the date of such action and, in any event, within fifteen months from the date of such action, mail to its shareholders of record at the time entitled to vote for the election of directors a statement specifying the action taken.
ARTICLE VIII
CONTRACTS, CHECKS, DRAFTS, ETC.
SECTION 8.1. Contracts, etc. Except as otherwise provided in these By- laws or by law, all deeds, bonds, mortgages, contracts and other instruments to be executed in the name and on behalf of the Company, either for its own account or in a fiduciary or other capacity, shall be signed by the Chairman, the President, a Vice Chairman, an Executive Vice President, a Senior Vice President, a Vice President, the Treasurer, or the Comptroller, or any other officer or officers or agent or agents of the Company designated for that purpose by the Board or by the Chairman, the President, a Vice Chairman, an Executive Vice President, a Senior Vice President or a Vice President, and the seal of the Company shall if appropriate be affixed hereto by any of such officers or the Secretary or any Assistant Secretary.
SECTION 8.2. Checks, Drafts, etc. Except as otherwise provided in these By-laws or by law, all checks, drafts, bills of exchange and other orders for the payment of money, and all letters of credit, promissory notes and other instruments obligating the Company for the payment of money, shall be signed on behalf of the Company in such manner and by such person or persons as from time to time shall be determined by the Board. Except as the Board may otherwise prescribe, the Chairman, the President, a Vice Chairman, an Executive Vice President, a Senior Vice President, a Vice President, the Treasurer, the Secretary, the Comptroller, an Assistant Vice President if any, any Assistant Treasurer or any Assistant Secretary, or any other officer or officers or agent or agents to whom such power may be delegated by the Board or by the Chairman, the President, a Vice Chairman, an Executive Vice President, a Senior Vice President or a Vice President, may sign on behalf of the Company all checks, drafts, bills of exchange, letters of credit, promissory notes and other instruments obligating the Company for the payment of money, and endorse and deliver for deposit, collection or credit for account of the Company any bill of exchange, draft, check or other order for the payment of money, or any note or other instrument for the payment of money, or any bill of lading, warehouse receipt, insurance policy or other commercial document requiring endorsement for collection or endorsement on behalf of the Company.
SECTION 8.3. Securities of 0ther Corporations. Securities of other corporations held by the Company may be voted by any officer designated by the Board and, in the absence of any such designation, by the Chairman, the President, a Vice Chairman, a Vice President, the Secretary, the Treasurer or the Comptroller.
ARTICLE IX
SHARES OF STOCK
SECTION 9.1. Certificates for Shares of Stock. Each certificate for a share or shares of stock of the Company shall be in such form as shall be approved by the Board, shall be signed by the Chairman, the President, a Vice Chairman, or a Vice President, and by the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer, and shall be sealed with the seal of the Company or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Company itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may nevertheless be issued by the Company with the same effect as if he were such officer at the date of its issue.
If the Company is authorized to issue shares of more than one class, each certificate representing shares issued by the Company shall set forth upon the face or back of the certificate, or shall state that the Company will furnish to any shareholder upon request and without charge, a full statement of the designation, relative rights, preferences and limitations of the shares of each class of shares authorized to be issued and the designation, relative rights, preferences and limitations of each series of any class of preferred shares authorized to be issued so far as the same have been fixed and the authority of the Board to designate and fix the relative rights, preferences and limitations of other series.
Each certificate representing shares shall state upon the face thereof:
(a) that the Company is formed under the laws of the State of New York;
(b) the name of the person or persons to whom issued; and
(c) the number and class of shares, and the designation of the series, if any, which such certificate represents.
SECTION 9.2. Transfer of Shares of Stock. A transfer of shares of stock of the Company shall be made on the record of shareholders of the Company after satisfaction of all legal prerequisites to the Company's duty to register such transfer, including the surrender of the certificate therefor which shall be canceled when the new certificate is issued.
SECTION 9.3. Registered Holders. The Company shall be entitled to treat and shall be protected in treating the persons in whose names shares or any warrants, rights or options stand on the record of shareholders, warrant holders, rights holders or option holders, as the case may be, as the owners thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, any such share, warrant, right or option on the part of any other person, whether or not the Company shall have notice thereof, except as expressly provided otherwise by the statutes of the State of New York.
SECTION 9.4. Lost, Stolen or Destroyed Share Certificates. No certificate for shares of the Company shall be issued in place of any certificate alleged to have been lost, destroyed or wrongfully taken, except, if and to the extent required by the Board, upon:
(a) production of evidence of loss, destruction or wrongful taking;
(b) delivery of a bond indemnifying the Company and its agents against any claim that may be made against it or them on account of the alleged loss, destruction or wrongful taking of the replaced certificate or the issuance of the new certificate;
(c) payment of the expenses of the Company and its agents incurred in connection with the issuance of the new certificate; and
(d) compliance with such other reasonable requirements as may be imposed.
SECTION 9.5. Record Date. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board may fix, in advance, a date not more than fifty days and not less than ten days before the date of such meeting, and not more than fifty days prior to any other action, as the record date for any such determination of shareholders. Upon adjournment of any meeting, the Board may but shall not be required to fix a new record date.
If a record date for any such determination of shareholders is not fixed by the Board, then, the record date for such determination shall be as provided by law.
SECTION 9.6. Regulations, Transfer Agents and Registrars. The Board may make such further rules and regulations as it may deem expedient, not inconsistent with these By-laws or with the Certificate of Incorporation of the Company, concerning the issue, transfer and registration of certificates for shares of stock of the Company. It may appoint one or more transfer agents and one or more registrars of transfers, and may require all certificates of stock to bear the signature of either or both.
ARTICLE X
SEAL
SECTION 10.1. Seal. The Board may adopt a corporate seal, alter such seal at pleasure, and authorize it to be used by causing it or a facsimile to be affixed or impressed or reproduced in any other manner.
ARTICLE XI
FISCAL YEAR
SECTION 11.1. Fiscal Year. The fiscal year of the Company shall be the calendar year.
ARTICLE XII
BOOKS
SECTION 12.1. Books. The Company shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, the Board and the Executive Committee if any. There shall be kept at the principal office of the Company or at the office of its transfer agent or registrar, if any, in the State of New York, a record containing the names and addresses of all shareholders of the Company, the number of shares
held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, records or minutes may be in legible form or in any other form capable of being converted into legible form within a reasonable time.
The Board shall have power to determine from time to time, subject to the laws of the State of New York, whether and to what extent and at what times and places and under what conditions and regulations the accounts, books, records or other documents of the Company, or any of them, shall be open to inspection, and no creditor, security holder or other person shall have any right to inspect any account, book, record or other document of the Company, except as conferred by the laws of the State of New York or these By-laws, unless and until authorized to do so by resolution of the Board or of the shareholders.
ARTICLE XIII
AMENDMENTS
SECTION 13.1. Amendments. By-laws of the Company may be adopted, amended or repealed by vote of the holders of the shares at the time entitled to vote in the election of any directors. By-laws may also be adopted, amended or repealed by the Board, by resolution adopted by a majority of the entire Board, but any By-law adopted by the Board may be amended or repealed by the shareholders entitled to vote thereon as hereinabove provided.
If any By-law regulating an impending election of directors is adopted, amended or repealed by the Board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the By-law so adopted, amended or repealed, together with a concise statement of the changes made.
Exhibit 10(ggg)
AMENDMENT TO
THE BANK OF NEW YORK COMPANY, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, The Bank of New York Company, Inc. Supplemental Executive Retirement Plan (the "Plan") was adopted by the Board of Directors of The Bank of New York Company, Inc., effective as of June 9, 1992; and
WHEREAS, Section 9 of the Plan provides that the Compensation Committee of the Board of Directors may amend the Plan at any time, except in certain respects not material hereto; and
WHEREAS, the Compensation Committee desires to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended in the following respects, effective as of February 13, 2001:
1. Section 4 of the Plan is amended by amending the first paragraph thereof to read as follows:
A Participant shall be entitled to the Benefit provided under
the Plan if his employment terminates on or after the date he
has attained age 60, other than by reason of death.
A Participant whose employment terminates prior to attaining age
60, other than by reason of death, shall not be entitled to a
Benefit under the Plan except as determined by the Committee in
its discretion.
2. Sections 5(b) of the Plan is amended by (i) deleting the first sentence thereof in its entirety and by deleting the word "other" in the second sentence thereof.
3. Section 5(c) of the Plan is amended by amending the second sentence thereof to read as follows:
Unless the Committee, in its discretion, directs payment at a different time, payment shall be made or commenced within 30 days after:
(i) the Participant's termination of employment with the Company, if his employment terminates on or after the date he attains age 60, other than by reason of death, or
(ii) as of such date as determined by the Committee, if the Committee determines that a Participant whose employment terminates prior to attaining age 60, other than by reason of death, is entitled to a Benefit under the Plan.
4. Section 5(c) of the Plan is amended by amending the fourth paragraph thereof to read as follows:
Notwithstanding anything contained herein to the contrary, in the event of a Change in Control (as defined below) (i) any remaining installments to a Participant or a Participant's Beneficiary shall be paid in a lump sum and the Committee may not direct that payment be made at a different time and (ii) the Committee may not direct payment of a Benefit to a Participant's Beneficiary in a different form or at a different time.
5. Exhibit B to the Plan is deleted in its entirety.
IN WITNESS WHEREOF, The Bank of New York Company, Inc. has caused this Amendment to be executed by its duly authorized officers this 5th day of March, 2001.
/s/ Thomas A. Renyi
-------------------
ATTEST:
/s/ Patricia A. Bicket
----------------------
Assistant Secretary
|
Exhibit 10(hhh)
January 22, 2001
J. Michael Shepherd
The Bank of New York
One Wall Street
New York, New York 10286
Dear Mr. Shepherd:
The Bank of New York Company, Inc., a New York corporation (the "Company"), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility, and the uncertainty and questions which it may raise among management of the Company and its principal subsidiary, The Bank of New York (the "Bank"), may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of management of the Company and the Bank to their assigned duties without distraction in circumstances arising from the possibility of a change in control of the Company. In particular, the Board believes it important, should the Company or its shareholders receive a proposal for transfer of control of the Company, that you be able to assess and advise the Board whether such proposal would be in the best interests of the Company and its shareholders and to take such other action regarding such proposal as the Board might determine to be appropriate, without being influenced by the uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this letter agreement sets forth the severance benefits which the Company agrees will be provided to you in the event your employment with the Company or the Bank is terminated subsequent to a "change in control" of the Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(i) Except as otherwise provided in paragraph (ii) below, the Company, the Bank or you may terminate your employment at any time, subject to the
Company's providing the benefits hereinafter specified in accordance with the terms hereof.
(ii) In the event a tender offer or exchange offer is made by a Person (as hereinafter defined) for more than 25% of the combined voting power of the Company's outstanding securities ordinarily having the right to vote at elections of directors ("Voting Securities"), including shares of the common stock of the Company, you agree that you will not leave the employ of the Company or the Bank (other than as a result of Disability or upon Retirement, as such terms are hereinafter defined) and will render the services contemplated in the recitals to this Agreement until such tender offer or exchange offer has been abandoned or terminated or a change in control of the Company, as defined in Section 3 hereof, has occurred. For purposes of this Agreement, the term "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), other than the Company, the Bank, any other subsidiary of the Company or any employee benefit plan(s) sponsored by the Company, the Bank or any other subsidiary of the Company.
2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until December 31, 2002; provided, however, that commencing on January 1, 2003 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 90 days prior to such January 1st date, the Company or you shall have given notice that this Agreement shall not be extended; and provided, further, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of twenty-four (24) months after a change in control of the Company, as defined in Section 3 hereof, if such change in control shall have occurred during the term of this Agreement, as it may be extended by the first proviso set forth above. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company or the Bank terminate your employment prior to a change in control of the Company.
3. Change in Control. For purposes of this Agreement, a "change in control" of the Company shall be deemed to occur if (A) any "person" (as such term is defined in Section 3(a)(9) and as used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding the Company or any of its subsidiaries, a trustee or any fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, an underwriter temporarily holding securities pursuant to an offering of such securities or a corporation owned, directly or indirectly, by stockholders of the Company in substantially the same proportion as their ownership of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities ("Voting Securities"); provided, however, that the event described in this clause (A) shall not be deemed to be a change in control if (x) it involves the acquisition of the Company's Voting Securities from the Company in connection with the acquisition by the Company of a business or operations of or controlled by such person, (y) a majority of the Incumbent Directors (as defined below) approve a resolution providing expressly that such acquisition does not constitute a change in control under this Section 3 and (z) such person does not become the beneficial owner of 35% or more of the Company's Voting Securities; or (B)during any period of not more than two years, individuals who constitute the Board as of the beginning of the period (the "Incumbent Directors") and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (A) or (C) of this sentence) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board, either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination (each such new director shall also be deemed to be an Incumbent Director) cease for any reason to constitute a majority of the Board; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors, as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board or as a result of an actual or threatened acquisition of 25% or more of the Company's Voting Securities shall be deemed to be an Incumbent Director; or (C) there occurs the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company's shareholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (i) at least 60% of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 95% or more of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by the Company's Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Company's Voting Securities among the holders thereof immediately prior to the Business Combination and (ii) after giving effect to the Business Combination, at least (I) a majority of the members of the board of directors of the Surviving Corporation and of any corporation that owns 25% or more but less than 50% of the Voting Securities of the Surviving Corporation or (II) a majority of the members of the board of directors of any corporation that owns at least 50% of the Voting Securities of the Surviving Corporation, were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination; or (D) the shareholders of the Company approve a plan of complete liquidation of the Company; or (E) the consummation of the sale or disposition by the Company of all or substantially all of the Company's assets.
4. Termination Following Change in Control. If any of the events
described in Section 3 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section
5 hereof upon the termination of your employment with the Company or the Bank
within twenty-four (24) months after such event, unless such termination is
(a) because of your death or Retirement, (b) by the Company for Cause or
Disability or (c) by you other than for Good Reason (as all such capitalized
terms are hereinafter defined).
(i) Disability. Termination by the Company of your employment based on "Disability" shall mean your absence from your duties with the Company on a full time basis for one hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness, unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence you shall have returned to the full time performance of your duties.
(ii) Retirement. Termination by you or by the Company of your employment based on "Retirement" shall mean termination on or after your attainment of age sixty-five (65).
(iii) Cause. Termination by the Company or the Bank of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company or the Bank (other than any such failure resulting from your incapacity due to physical or mental illness) after a demand for substantial performance is delivered to you by the Chairman of the Board or President of the Company or the Chief Executive Officer of the Bank, as appropriate, which specifically identifies the manner in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company or the Bank. For purposes of this paragraph (iii), no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company or the Bank. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company or the Bank shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company and the Bank. It is also expressly understood that your attention to matters not directly related to the business of the Company or the Bank shall not provide a basis for termination for Cause so long as the Board has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered
to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in (a) or (b) of this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good Reason" shall mean termination based on:
(A) a determination by you, in your reasonable judgment, that there has been an adverse change in your status or position(s) as an executive officer of the Company or the Bank as in effect immediately prior to the change in control, including, without limitation, any adverse change in your status or position as a result of a diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which are inconsistent with such status or position(s), or any removal of you from or any failure to reappoint or reelect you to such position(s) (except in connection with the termination of your employment for Cause, Disability or Retirement or as a result of your death or by you other than for Good Reason);
(B) a reduction by the Company or the Bank in your base salary as in effect immediately prior to the change in control;
(C) the failure by the Company or the Bank to continue in effect any Plan (as hereinafter defined) in which you are participating at the time of the change in control of the Company (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect at the time of the change in control, or the taking of any action, or the failure to act, by the Company or the Bank which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case on the date of the change in control or which would materially
reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you at the time of the change in control;
(D) the failure by the Company or the Bank to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with its normal vacation policy as in effect immediately prior to the change in control;
(E) the requirement by the Company or the Bank that you be based at an office that is greater than 35 miles from where your office is located immediately prior to the change in control except for required travel on the business of the Company or the Bank to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company or the Bank prior to the change in control;
(F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 6 hereof;
(G) any purported termination by the Company or the Bank of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (v) below (and, if applicable, paragraph (iii) above); and for purposes of this Agreement, no such purported termination shall be effective; or
(H) any refusal by the Company or the Bank to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company or the Bank which, prior to the change in control, you were permitted by the Board to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such as an incentive, stock option or restricted stock plan or any employee benefit plan such as a thrift, pension, profit sharing, medical, disability, accident, life insurance plan or a relocation plan or policy or any other plan, program or policy of the Company or the Bank intended to benefit employees.
(v) Notice of Termination. Any purported termination by the Company or the Bank or by you following a change in control shall be communicated by
written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a change in
control shall mean (a) if your employment is to be terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that you shall
not have returned to the performance of your duties on a full-time basis
during such thirty (30) day period), (b) if your employment is to be
terminated by the Company or the Bank for Cause or by you pursuant to Sections
4(iv)(F) and 6 hereof or for any other Good Reason, the date specified in the
Notice of Termination, or (c) if your employment is to be terminated by the
Company or the Bank for any reason other than Cause, the date specified in the
Notice of Termination, which in no event shall be a date earlier than ninety
(90) days after the date on which a Notice of Termination is given, unless an
earlier date has been expressly agreed to by you in writing either in advance
of, or after, receiving such Notice of Termination. In the case of termination
by the Company or the Bank of your employment for Cause, if you have not
previously expressly agreed in writing to the termination, then within thirty
(30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination shall be the date set
either by mutual written agreement of the parties or by the arbitrators in a
proceeding as provided in Section 13 hereof. During the pendency of any such
dispute, the Company or the Bank will continue to pay you your full
compensation in effect just prior to the time the Notice of Termination is
given and until the dispute is resolved in accordance with Section 13.
5. Compensation Upon Termination or During Disability; Other Agreements
(i) During any period following a change in control of the Company that you fail to perform your duties as a result of incapacity due to physical or mental illness, you shall continue to receive your salary at the rate then in effect and any benefits or awards under any Plans shall continue to accrue during such period, to the extent not inconsistent with such Plans,
until your employment is terminated pursuant to and in accordance with Sections 4(i) and 4(vi) hereof. Thereafter, your benefits shall be determined in accordance with the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a change in control of the Company, the Company or the Bank shall pay you your salary through the Date of Termination at the rate in effect just prior to the time a Notice of Termination is given plus any benefits or awards (including both the cash and stock components) which pursuant to the terms of any Plans have been earned and are otherwise payable, but which have not yet been paid to you. Thereupon the Company and the Bank shall have no further obligations to you under this Agreement.
(iii) If, within twenty-four (24) months after a change in control of the Company shall have occurred, your employment by the Company or the Bank shall be terminated (a) by the Company or the Bank other than for Cause, Disability or Retirement or (b) by you for Good Reason, then the Company shall pay or cause the Bank to pay to you, no later than the fifth business day following the Date of Termination, without regard to any contrary provisions of any Plan, the following:
(A) (x) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given, (y) any
benefits or awards (including both the cash and stock components) which
pursuant to the terms of any Plans have been earned and otherwise payable, but
which have not yet been paid to you and (z) a pro rata portion of your annual
bonus for the fiscal year in which the Date of Termination occurs in an amount
equal to the result of multiplying (1) the greater of (I)(aa) the bonus
payable to you for the prior fiscal year pursuant to the terms of the
Company's 1994 Management Incentive Compensation Plan (the "MICP")(or any
successor plan) and (bb) one plus the average percentage increase (if any) of
(i) the bonus payable under the MICP (or any successor plan) for the fiscal
year in which your Date of Termination occurs, determined based on performance
through your Date of Termination, to each of the officers of the Company who
is both (w) a named executive officer (within the meaning of Item 402 of
Regulation S-K under the Exchange Act) of the Company for the last complete
fiscal year which ended prior to the date of the change in control of the
Company and (v) is a Covered Employee as such term is defined in the 1994 MICP (or a successor plan) for the fiscal year in which the change in control of the Company occurs over (ii) the bonus payable to each of such named executive officers for the fiscal year immediately prior to your Date of Termination and (II) the bonus payable to you under the MICP (or any successor plan) for the fiscal year ended prior to your Date of Termination, and (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365); and
(B) as severance pay a lump sum in cash equal to the sum of the following amounts:
(1) two times the sum of (x) your annual rate of salary in effect just
prior to the time a Notice of Termination is given or, if higher, the annual
salary in effect immediately prior to the change in control of the Company and
(y) the highest annual bonus earned by you from the Company and its affiliates
during the last three (3) completed fiscal years of the Company immediately
preceding your Date of Termination, annualized in the event you were not
employed by the Company or its affiliates for the whole of any such fiscal
year (the "Bonus Amount"); and
(2) the lump sum actuarial equivalent (utilizing actuarial assumptions no less favorable to you than those in effect under the Company's Retirement Plan immediately prior to the change in control) of the excess of the (A) benefits under the Company's Retirement Plan, Excess Benefit Plan and Supplemental Executive Retirement Plan (collectively, the "Defined Benefit Plans") which you would receive if your employment continued for two years after the Date of Termination (and that your age was increased by two years from your age at the Date of Termination), assuming for this purpose that (x) your accrued benefits under the Defined Benefit Plans were fully vested, (y) in each of the two years you received (a) salary at the annual rate in effect immediately prior to the change in control and (b) bonus compensation equal to the Bonus Amount and (z) there were no reduction or offset under the Defined Benefit Plans for the actuarial value of your account under the Employee Stock Ownership Plan of The Bank of New York Company, Inc. (the "ESOP"), over
(B) the vested accrued benefits payable under the Defined Benefit Plans as of the Date of Termination if there were no reduction or offset thereunder for the actuarial value of your ESOP account.
(iv) If, within twenty-four (24) months after a change in control of the
Company, as defined in Section 3 above, shall have occurred, your employment
by the Company or the Bank shall be terminated (a) by the Company or the Bank
other than for Cause, Disability or Retirement or (b) by you for Good Reason,
then the Company shall maintain or cause the Bank to maintain in full force
and effect, for the continued benefit of you and your dependents for a period
terminating on the earliest of (a) two years after the Date of Termination,
(b) the commencement date of equivalent benefits from a new employer or (c)
your attainment of age sixty-five (65), all insured and self-insured employee
welfare benefit Plans in which you were entitled to participate immediately
prior to the Date of Termination, provided that your continued participation
is possible under the general terms and provisions of such Plans (and any
applicable funding media) and you continue to pay an amount equal to your
regular contribution under such plans for such participation. If, at the end
of two years after the Termination Date, you have not reached your sixty-fifth
birthday and you have not previously received or are not then receiving
equivalent benefits from a new employer, the Company shall or cause the Bank
to arrange, at its sole cost and expense, to enable you to convert your and
your dependents' coverage under such Plans to individual policies or programs
upon the same terms as employees of the Company and the Bank may apply for
such conversions. In the event that your participation in any such Plan is
barred, the Company shall or cause the Bank, at its sole cost and expense, to
arrange to have issued for the benefit of you and your dependents individual
policies of insurance providing benefits substantially similar (on an after-
tax basis) to those which you otherwise would have been entitled to receive
under such Plans pursuant to this paragraph (iv) or, if such insurance is not
available at a reasonable cost to the Company or the Bank, the Company shall
or cause the Bank to otherwise provide you and your dependents with equivalent
benefits (on an after-tax basis). You shall not be required to pay any
premiums or other charges in an amount greater than that which you would have
paid in order to participate in such Plans.
(v) In the event it shall be determined that any payment, award, benefit
or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a change in control (or any of its affiliated entities) to
or for your benefit, whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5 (the "Payments"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by you with respect to such
excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Company shall pay you an additional payment (a "Gross-Up Payment") in an
amount such that after payment by you of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and
(y) the product of any deductions disallowed because of the inclusion of the
Gross-up Payment in your adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-up Payment is to be made. For purposes of determining the amount of the
Gross-up Payment, you shall be deemed to (i) pay federal income taxes at the
highest marginal rates of federal income taxation for the calendar year in
which the Gross-up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (iii) have otherwise allowable deductions for federal income
tax purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-up Payment in the Executive's adjusted gross income.
The Gross-up Payment under this paragraph (v) with respect to any Payment
shall be made no later than thirty (30) days following such Payment.
Notwithstanding the foregoing, if it shall be determined that you are entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10% of the portion of the Payments that would be treated as "parachute payments" under Section 280G of the Code, then the amounts payable to you under this
Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to you without giving rise to the Excise Tax (the "Safe Harbor Cap"), and no Gross-Up Payment shall be made to you. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments under Section 5(iii)(B)(1), unless an alternative method of reduction is elected by you. For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment") or Gross-up Payments are made by the Company which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event that you are thereafter required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for your benefit. In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse you for your Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by you (to the extent you have received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company. You shall cooperate, to the extent your expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
(vi) All determinations required to be made under paragraph (v) of this Section, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment or the reduction of the Payments to the Safe Harbor Cap, as well as the assumptions to be utilized in arriving at
such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the change in control (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and you within fifteen (15) business days of the receipt of notice from the Company or you that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in control, you may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder. If the Accounting Firm determines that no Excise Tax is payable by you, it shall furnish you with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on your applicable federal income tax return will not result in the imposition of a negligence or similar penalty. In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish you with a written opinion to such effect. The Determination by the Accounting Firm shall be binding upon the Company and you.
(vii) Except as specifically provided in paragraph (iv) above, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company or the Bank by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise.
6. Successors; Binding Agreement.
(i) The Company will seek, by written request at least five business days prior to the time a Person becomes a Successor (as hereinafter defined), to have such Person by agreement in form and substance satisfactory to you, assent to the fulfillment of the Company's obligations under this Agreement. Failure of such Person to furnish such assent by the later of (A) three
business days prior to the time such Person becomes a Successor or (B) two business days after such Person receives a written request to so assent shall constitute Good Reason for termination by you of your employment if a change in control of the Company occurs or has occurred. For purposes of this Agreement, "Successor" shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company's business directly, by merger or consolidation, or indirectly, by purchase of the Company's Voting Securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Company" shall include any corporation or other entity which is the surviving or continuing entity in respect of any merger, consolidation or form of business combination in which the Company ceases to exist.
7. Fees, Expenses and Interest; Mitigation.
(i) The Company shall, or cause the Bank to, reimburse you, on a current
basis, for all reasonable legal fees and related expenses incurred by you in
connection with the Agreement following a change in control of the Company,
including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any termination of your employment or
incurred by you in seeking advice with respect to the matters set forth in
Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit
provided by this Agreement, in each case, regardless of whether or not your
claim is upheld by a court of competent jurisdiction; provided, however, you
shall be required to repay any such amounts to the Company to the extent that
a court issues a final and non-appealable order setting forth the
determination that the position taken by you was frivolous or advanced by you
in bad faith. In addition to the fees and expenses provided herein, you shall
also be paid interest on any disputed amount ultimately paid to you at the prime rate announced by the Bank from time to time from the date payment should have been made until paid in full.
(ii) You shall not be required to mitigate the amount of any payment the Company or the Bank becomes obligated to make to you in connection with this Agreement, by seeking other employment or otherwise.
8. Taxes. All payments to be made to you under this Agreement will be subject to required withholding of federal, state and local income and employment taxes.
9. Survival. The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 5, 6(ii), 7, 8, 13 and 14 of this Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, in the case of the Company, to the address set forth on the first page of this Agreement or, in the case of the undersigned employee, to the address set forth below his signature, provided that all notices to the Company shall be directed to the attention of the Chairman of the Board or President of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chairman of the Board or President of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York applied without regard to conflict of laws principles.
12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York City by three arbitrators in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators' award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your period of
employment with the Company and the Bank, you will not at any time communicate
or disclose to any unauthorized person, without the written consent of the
Company, any proprietary processes of the Company or any subsidiary or other
confidential information concerning their business, affairs, products,
suppliers or customers which, if disclosed, would have a material adverse
effect upon the business or operations of the Company and its subsidiaries,
taken as a whole; it being understood, however, that the obligations of this
Section 14 shall not apply to the extent that the aforesaid matters (a) are
disclosed in circumstances where you are legally required to do so or (b)
become generally known to and available for use by the public otherwise than
by your wrongful act or omission.
15. Related Agreements. To the extent that any provision of any other agreement between the Company, the Bank or any of the Company's other
subsidiaries and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.
16. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.
Sincerely,
THE BANK OF NEW YORK COMPANY, INC.
By: /s/ Bruce Van Saun ---------------------- Name: Bruce Van Saun Title: SEVP and Chief Financial Officer |
Agreed to this 23rd day
Of February, 2001.
/S/ J. Michael Shepherd ----------------------- J. Michael Shepherd |
Exhibit 10(iii)
In addition to participation in various option, restricted stock and benefit plans of The Bank of New York Company, Inc. and The Bank of New York (the "Bank"), the Bank has agreed to pay to J. Michael Shepherd minimum cash compensation equal to $700,000 for the calendar year 2001 and $350,000 for the calendar year 2002 whether or not his employment is terminated by the Bank for any reason other than cause before the end of 2002.
Exhibit 10(jjj)
AMENDMENT NUMBER THIRTEEN
TO
GRANTOR TRUST AGREEMENT
THIS AGREEMENT, made as of the 22nd day of January, 2001 by and between THE BANK OF NEW YORK COMPANY, INC., a corporation organized and existing under the laws of the State of New York (hereinafter referred to as the "Company"), and THE CHASE MANHATTAN BANK, a corporation organized and existing under the laws of the New York (hereinafter referred to as the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company and the Trustee entered into a Grantor Trust Agreement dated as of November 16, 1993 (as amended from time to time, the "Agreement");
WHEREAS, Article TWELFTH of the Agreement provides that the Company may amend the Agreement; and
WHEREAS, the Company desires to amend the Agreement;
NOW, THEREFORE, the Company and the Trustee agree as follows, effective January 22, 2001:
Exhibit I to the Agreement is amended by deleting Exhibit I in its entirety and substituting therefor Exhibit I in the form attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed in their respective names by their duly authorized officers under their corporate seals as of the day and year first above written.
ATTEST: THE BANK OF NEW YORK COMPANY, INC.
/s/ Russell P. Wellinger By: /s/ Bruce W. Van Saun
------------------------ -------------------------
Bruce W. Van Saun
Senior Executive Vice President
ATTEST: THE CHASE MANHATTAN BANK
/s/ Arthur J. Platt By: /s/ Gerald Stafford-Smith
------------------- -----------------------------
Name: Gerald Stafford-Smith
Title: Vice President
|
1. The Bank of New York Company, Inc. Excess Benefit Plan
2. The Bank of New York Company, Inc. Supplemental Executive Retirement Plan
3. Severance Agreements between The Bank of New York Company, Inc. and the following persons:
Individual Date of Agreement ---------- ----------------- Thomas P. Gibbons July 11, 2000 Leslie V. Godridge July 11, 2000 Alan R. Griffith July 11, 2000 Gerald L. Hassell July 11, 2000 Newton P.S. Merrill July 11, 2000 Donald R. Monks July 11, 2000 Robert J. Mueller July 11, 2000 Richard A. Pace July 11, 2000 Thomas J. Perna July 11, 2000 Charles E. Rappold II September 30, 2000 Thomas A. Renyi July 11, 2000 Brian G. Rogan July 11, 2000 J. Michael Shepherd January 22, 2001 Bruce W. Van Saun July 11, 2000 Joseph M. Velli July 11, 2000 |
EXHIBIT 12
THE BANK OF NEW YORK COMPANY, INC.
Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges,
Distribution on Preferred Trust Securities,
and Preferred Stock Dividends
(Dollars in millions)
For The Years Ended December 31 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
EARNINGS
--------
Income Before Income Taxes $2,364 $2,952 $1,986 $1,838 $1,656
Fixed Charges, Excluding Interest on Deposits 534 442 519 446 502
------ ------ ------ ------ ------
Income Before Income Taxes and Fixed Charges
Excluding Interest on Deposits 2,898 3,394 2,505 2,284 2,158
Interest on Deposits 2,011 1,363 1,374 1,290 1,152
------ ------ ------- ------ ------
Income Before Income Taxes and Fixed Charges,
Including Interest on Deposits $4,909 $4,757 $3,879 $3,574 $3,310
====== ====== ======= ====== ======
FIXED CHARGES
-------------
Interest Expense, Excluding Interest
on Deposits $ 496 $ 409 $ 485 $ 415 $ 470
One-Third Net Rental Expense* 38 33 34 31 32
------ ------ ------ ------ ------
Total Fixed Charges, Excluding Interest on
Deposits 534 442 519 446 502
Interest on Deposits 2,011 1,363 1,374 1,290 1,152
------ ------ ------ ------ ------
Total Fixed Charges, Including Interest on
Deposits $2,545 $1,805 $1,893 $1,736 $1,654
====== ====== ====== ====== ======
DISTRIBUTION ON PREFERRED TRUST
SECURITIES, PRE-TAX BASIS $ 113 $ 112 $ 95 $ 65 $ 2
-------------------------------
====== ====== ====== ====== ======
PREFERRED STOCK DIVIDENDS, PRE-TAX BASIS $ - $ - $ - $ 14 $ 16
----------------------------------------
====== ====== ====== ====== ======
EARNINGS TO FIXED CHARGES RATIOS
--------------------------------
Excluding Interest on Deposits 5.43x 7.68x 4.83x 5.12x 4.30x
Including Interest on Deposits 1.93 2.64 2.05 2.06 2.00
EARNINGS TO COMBINED FIXED CHARGES,
DISTRIBUTION ON PREFERRED TRUST SECURITIES,
& PREFERRED STOCK DIVIDENDS RATIOS
-------------------------------------------
Excluding Interest on Deposits 4.48 6.13 4.08 4.35 4.15
Including Interest on Deposits 1.85 2.48 1.95 1.97 1.98
*The proportion deemed representative of the interest factor.
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EXHIBIT 13
2000 Annual Report to Shareholders
SELECTED FINANCIAL DATA
Dollars in millions,
except per share amounts 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Net Interest Income $ 1,870 $ 1,701 $ 1,651 $ 1,855 $ 1,961
Noninterest Income 3,109 3,493 2,283 2,137 2,130
Provision for Credit Losses 105 135 20 280 600
Noninterest Expense 2,510 2,107 1,928 1,874 1,835
Net Income 1,429 1,739* 1,192 1,104 1,020
Net Income Available to
Common Shareholders 1,429 1,739* 1,192 1,095 1,010
Return on Average Assets 1.85% 2.60%* 1.89% 1.86% 1.90%
Return on Average Common
Shareholders' Equity 26.08 34.00* 24.25 22.13 19.98
Common Dividend Payout Ratio 33.87 25.03* 33.84 34.13 32.50
Per Common Share
Basic Earnings $ 1.95 $ 2.31* $ 1.59 $ 1.44 $ 1.30
Diluted Earnings 1.92 2.27* 1.53 1.36 1.20
Cash Dividends Paid 0.66 0.58 0.54 0.49 0.42
Market Value at Year-End 55.19 40.00 40.25 28.91 16.88
Averages
Securities $15,764 $ 7,545 $ 7,154 $ 5,722 $ 5,343
Loans 39,262 38,881 38,340 36,577 36,698
Total Assets 77,241 66,777 63,141 59,242 53,649
Deposits 54,755 46,564 42,262 39,910 36,599
Long-Term Debt 2,884 2,306 1,972 1,815 1,870
Minority Interest -
Preferred Securities 1,500 1,487 1,233 830 26
Shareholders' Equity:
Preferred 1 1 1 103 113
Common 5,479 5,113 4,915 4,947 5,055
At Year-End
Allowance for Credit Losses
as a Percent of Loans 1.70% 1.58% 1.66% 1.82% 2.44%
Tier 1 Capital Ratio 8.60 7.51 7.89 7.92 8.34
Total Capital Ratio 12.92 11.67 11.90 11.97 12.78
Leverage Ratio 7.49 7.20 7.46 7.59 8.70
Common Equity to Assets Ratio 7.98 6.88 8.58 8.34 8.99
Total Equity to Assets Ratio 7.98 6.88 8.58 8.34 9.19
Common Shares Outstanding
(in millions) 739.926 738.770 771.318 747.670 770.544
Employees 18,861 17,735 17,157 16,494 16,158
The per common share amounts and common shares outstanding have been restated to reflect the
2-for-1 common stock splits effective July 24, 1998 and July 19, 1996.
* These results reflect the $1,020 million gain on the sale of BNY Financial Corporation
("BNYFC"), as well as the $124 million liquidity charge related to the sale of loans. On a
normalized basis, 1999 results were: Net Income of $1,243 million, Net Income Available to Common
Shareholders of $1,243 million, Return on Average Assets of 1.92%, Return on Average Common
Shareholders' Equity of 25.50%, Common Dividend Payout Ratio of 35.01%, Basic Earnings Per Share
of $1.69 per share and Diluted Earnings Per Share of $1.66 per share. See Normalized Earnings.
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The Bank of New York Company, Inc.'s (the "Company") actual results of future operations may differ from those estimated or anticipated in certain forward- looking statements contained herein. When used in this report, the words "plan", "expected", "estimated", "anticipated", "believe", and similar expressions identify forward looking statements. Readers are cautioned that forward looking statements should be read in conjunction with the Company's Form 10-K disclosure under the heading "Forward Looking Statements".
For the year 2000, the Company reported net income of $1,429 million or $1.92 per diluted share, compared with $1,243 million or $1.66 per diluted share on a normalized basis in 1999 and $1,192 million or $1.53 per diluted share in 1998. For 1999, actual net income was $1,739 million or $2.27 per diluted share. The 1999 actual results reflect an after-tax gain of $573 million or 75 cents per share on the sale of BNY Financial Corporation ("BNYFC"), and certain charges related to the decision to exit a portfolio of credits on an accelerated basis. For further discussion of the normalized results of 1999, see Normalized Earnings.
For the year 2000, the Company continued to differentiate itself through consistent and sustainable revenue and earnings growth. These results are driven by the Company's long-term strategic focus on high-growth, fee-based businesses and leading technologies. The Company's continued focus on fee- based businesses resulted in noninterest income growing to 62% of total revenue, up from 61% last year. Securities servicing fee revenues were up 33% to a record $1,650 million in 2000 compared with $1,245 million in 1999. Fee revenue was strong across all product lines with particular strength in global custody, depositary receipts ("DRs"), unit investment trust ("UIT"), and mutual funds as well as global execution and clearing services. Fee revenue also benefited from the acquisition of the Royal Bank of Scotland Trust Bank ("RBSTB") on October 31, 1999. The Company continues to be the world's leading custodian with assets of over $7 trillion, including $2 trillion of cross- border custody assets at year-end. Private client services and asset management fees were up 21% to $296 million in 2000, led by strong business flows in the BNY Hamilton Funds, as well as by the acquisitions of Ivy Asset Management Corp. and Estabrook Capital Management, Inc. Increased cross- selling within the securities servicing client franchise and rapid growth in the Company's foreign exchange e-commerce initiative drove foreign exchange and other trading revenues up 38% to $261 million this year compared with $189 million last year. In 2000, net interest income on a taxable equivalent basis was $1,924 million compared with $1,745 million in 1999, benefiting from the acquisition of RBSTB, which brought approximately $10 billion in highly liquid, short-term assets and liabilities. The provision for credit losses decreased to $105 million from $135 million in 1999.
In 2000, return on average common equity was 26.08% compared with 25.50% on a normalized basis in 1999 and 24.25% in 1998, while return on average assets was 1.85% compared with 1.92% on a normalized basis in 1999 and 1.89% in 1998. For 1999, actual return on average common equity was 34.00% and return on average assets was 2.60%. The 1999 ratios reflect the gain on the sale of BNYFC.
Tangible diluted earnings per share (earnings before the amortization of goodwill and intangibles) were $2.03 per share in 2000 compared with $1.75 per share on a normalized basis in 1999 and $1.62 per share in 1998. For 1999, actual tangible earnings per share were $2.37 per share. Tangible return on average assets was 2.00% in 2000 compared with 2.08% on a normalized basis in 1999 and 2.06% in 1998. Tangible return on average common equity was 40.00% in 2000 compared with 36.76% on a normalized basis in 1999 and 37.13% in 1998. For 1999, actual tangible return on average assets was 2.78% and tangible return on average common equity was 50.23%.
In 1999, securities servicing revenues were up 24% reaching $1,245 million, reflecting particular strength in global custody, mutual funds, securities lending, DRs, and execution services. Market share gains from new business wins, as well as the RBSTB acquisition, resulted in assets under custody reaching $6.3 trillion at year-end. Private client services and asset management fees were up 17% to $244 million in 1999, led by strong results from personal trust, personal asset management, and retail investment products. Higher transaction flows in the Company's European securities servicing business drove foreign exchange and other trading revenues up 12% to $189 million this year compared with $170 million in 1998. In 1999, net interest income on a taxable equivalent basis was $1,745 million compared with $1,709 million in 1998. The provision for credit losses increased to $135 million from $20 million and the Company recorded a liquidity charge to noninterest income of $124 million associated with the decision to exit a portfolio of credits on an accelerated basis.
In 1998, securities servicing fee revenues grew by 27% reaching $1 billion for the year which, when combined with 15% growth in private client services and asset management fees, pushed noninterest income to 58% of revenues. Principal drivers for securities servicing were continued strong growth in securities transaction volumes, augmented by record new business wins and the introduction of new products. Revenue growth was led by DRs, domestic and global custody, securities lending, corporate trust, UIT, and execution services. Private client services and asset management fees were $208 million for 1998, an increase of 15% over 1997, as a result of focused and aggressive new business efforts. Keeping pace with the substantial increase in the Company's processing businesses, foreign exchange and other trading revenues grew to $170 million for 1998 compared with $125 million in 1997, reflecting the customer driven nature of this business. In 1998, net interest income on a taxable equivalent basis was $1,709 million compared with $1,890 million in 1997 and the provision for credit losses was $20 million.
NONINTEREST INCOME
Noninterest income is provided by a wide range of securities servicing, global payment services, private client services and asset management, other fee- based services, and trading activities. Revenues from these activities were $3,109 million in 2000, compared with $3,493 million in 1999 and $2,283 million in 1998. On a proforma basis, reflecting the sale of BNYFC and excluding the liquidity charge on the accelerated disposition of loans, noninterest income for 1999 was $2,532 million.
Securities servicing fees were $1,650 million, $1,245 million, and $1,000 million in 2000, 1999, and 1998. The 33% increase in securities servicing fees from 1999 reflects strong internal growth and the acquisition of RBSTB. Cash servicing fees, principally funds transfer, cash management, and trade finance, were $261 million in 2000, $274 million in 1999, and $256 million in 1998. The decline in cash servicing fees reflects both lower trade finance fees as well as lower cash management and funds transfer fees due to customers' use of compensating balances in lieu of fees in a rising rate environment. Within global payment services, cash management and funds transfer revenues were up 8% in 2000. This growth was primarily due to strong increases in funds transfer with domestic financial service companies, increased cash management revenue associated with CA$H-Register PlusTM, and new U.S. dollar clearing outsourcing contracts. Revenues from the trade finance business were down compared to 1999 primarily due to the sale of BNYFC and reduced pricing, driven by the improved risk profiles of select Asian and Latin American markets. Private client services and asset management fees were $296 million in 2000, $244 million in 1999, and $208 million in 1998. The 21% increase in private client services and asset management from 1999 reflects strong business flows in the BNY Hamilton Funds, as well as the acquisitions of Ivy Asset Management Corp. and Estabrook Capital Management, Inc.
Service charges and fees were $364 million in 2000, compared with $338 million in 1999 and $326 million in 1998. For further discussion of fee revenue, see Segment Profitability.
Securities gains totaled $150 million, $199 million, and $175 million in 2000, 1999, and 1998.
Other noninterest income was $388 million in 2000, $1,193 million in 1999, and $318 million in 1998. Profits from foreign exchange and other trading activities were $261 million, $189 million, and $170 million in 2000, 1999, and 1998. In 2000, other income includes a $26 million payment associated with the termination of a securities clearing contract. In 1999, other noninterest income included a $1,020 million pre-tax gain on the sale of BNYFC and $124 million liquidity charge on loans available-for-sale. In 1998, other noninterest income included a $29 million pre-tax gain on the sale of the Company's property at 48 Wall Street.
NET INTEREST INCOME
Dollars in millions 2000 1999 1998 ------------------- ---- ---- ---- Net Interest Income on a Taxable Equivalent Basis $1,924 $1,745 $1,709 Net Interest Rate Spread 1.93% 2.19% 2.22% Net Yield on Interest Earning Assets 2.96 3.11 3.24 |
For 2000, net interest income on a taxable equivalent basis amounted to $1,924 million compared with $1,745 million in 1999. Average earning assets were $64.9 billion up from $56.2 billion in 1999. The increase in average assets is primarily attributable to the acquisition of RBSTB. Average loans were $39.3 billion in 2000 compared with $38.9 billion in 1999. The net interest rate spread was 1.93% in 2000 compared with 2.19% in 1999, while the net yield on interest earning assets was 2.96% in 2000 and 3.11% in 1999. The expansion of the Company's securities servicing, global payment services, and asset management businesses continues to generate increased levels of deposits. These additional deposits were invested in high quality liquid assets which increased net interest income, although lowering the net interest rate spread and net yield.
For 1999, net interest income on a taxable equivalent basis amounted to $1,745 million compared with $1,709 million in 1998. Average earning assets were $56.2 billion up from $52.8 billion in 1998 reflecting growth in highly liquid, lower yielding assets generated by the Company's securities servicing businesses and the acquisition of RBSTB. Average loans were $38.9 billion in 1999 compared with $38.3 billion in 1998. Growth in the loan portfolio in 1999 was partially offset by the sale of BNYFC. The net interest rate spread was 2.19% in 1999 compared with 2.22% in 1998, while the net yield on interest earning assets was 3.11% in 1999 and 3.24% in 1998. The increase in net interest income and the decline in spread and yield from 1998 were principally caused by growth in highly liquid but lower yielding assets. The yield was also impacted by the Company's stock buyback program.
In 1998, net interest income on a taxable equivalent basis amounted to $1,709 million compared with $1,890 million in 1997. Average earning assets were $52.8 billion up from $48.5 billion in 1997 reflecting the investment of increased customer driven deposits from the Company's securities servicing businesses as well as increased corporate lending. Average loans were $38.3 billion in 1998 compared with $36.6 billion in 1997. The increase in loans was primarily in the special industries lending divisions and asset based lending. The net interest rate spread and yield were 2.22% and 3.24% in 1998 compared with 2.88% and 3.89% in 1997. The decrease in net interest income, net interest rate spread, and yield from 1997 reflect the impact of the sale of the Company's credit card operations and the financing of the stock buyback program.
Interest income would have been increased by $9 million, $8 million, and $10 million if loans on nonaccrual status at December 31, 2000, 1999, and 1998 had been performing for the entire year.
NONINTEREST EXPENSE AND INCOME TAXES
Total noninterest expense was $2,510 million in 2000, $2,107 million in 1999, and $1,928 million in 1998. Salaries and employee benefits increased 19% to $1,488 million in 2000. Net occupancy and furniture and fixture expenses increased by a combined $31 million to $292 million. Other expenses increased by 23% in 2000 to $730 million. The increase in expenses in 2000 was attributable to acquisitions, technology investment, and variable costs associated with increased trading volumes. Technology spending was $493 million in the year 2000, up 23% from $400 million in 1999 and $360 million in 1998.
Total noninterest expense increased 9% in 1999 compared with 1998. The increase in expenses in 1999 was attributable to acquisitions, particularly RBSTB, growth in the Company's fee-based businesses and increased investment in technology. Offsetting these factors was the sale of BNYFC. On a proforma basis, reflecting the sale of BNYFC, noninterest expense for 1999 was $2,054 million. Salaries and employee benefits increased 6% to $1,251 million in 1999. Net occupancy and furniture and fixture expenses increased by a combined $9 million to $261 million in 1999. Other expenses increased by 19% in 1999 to $595 million. Noninterest expense for 1999 includes $20 million related to making computer systems Year 2000 compliant.
The efficiency ratio was 51.3% in 2000 compared with 50.8% in 1999 and 50.5% in 1998. The computation of the efficiency ratio excludes the gain on the sale of BNYFC in 1999.
The Company's consolidated effective tax rates for 2000, 1999, and 1998 were 34.8%, 37.3%, and 35.2%. The 2000 rate reflects lower state and local taxes compared to 1999 and higher tax exempt income. The 1999 rate reflects fewer tax benefits from leasing activities and the impact of the sale of BNYFC. The 1998 rate reflects higher non-taxable income and larger deductions for preferred trust securities partially offset by higher state and local taxes.
LIQUIDITY
The Company maintains its liquidity through the management of its assets and liabilities, utilizing worldwide financial markets. The diversification of liabilities reflects the flexibility of the Company's funding sources under changing market conditions. Stable core deposits, including demand, retail time, and trust deposits from processing businesses, are generated through the Company's diversified network and managed with the use of trend studies and deposit pricing. The use of derivative products such as interest rate swaps and financial futures enhances liquidity through the issue of long-term liabilities with limited exposure to interest rate risk. Liquidity also results from the maintenance of a portfolio of assets which can be easily reduced and the monitoring of unfunded loan commitments, thereby reducing unanticipated funding requirements.
Non-core sources of funds such as money market rate accounts, certificate of deposits greater than $100,000, federal funds purchased and other borrowings were $11.0 billion on an average basis in 2000 and 1999. Stable foreign deposits primarily from the Company's European based securities servicing business increased on average to $27.6 billion from $20.2 billion in 1999 due to the full year impact of the acquisition of RBSTB. Savings and other time deposits declined to $9.6 billion on an average basis from $10.0 billion in 1999.
In 2000, the Company's average commercial paper borrowings were $218 million compared with $690 million in 1999. The Company has backup lines of credit of $350 million at financial institutions supporting these borrowings.
The following comments relate to the information disclosed in the Consolidated Statements of Cash Flows.
Earnings and other operating activities used $2.2 billion in 2000, compared with $1.0 billion in 1999 and were a source of $1.6 billion of cash inflows in 1998. The changes in cash flows from operations in 2000 and 1999 were principally the result of changes in trading activities.
In 2000, cash provided by investing activities was $1.4 billion as compared to $1.1 billion and $5.2 billion used by investing activities in 1999 and 1998. The cash provided in 2000 came from fewer deposits in banks as well as a decline in loans. In 1999, additions to loans, interest-bearing deposits in banks, and federal funds sold and securities purchased under resale agreements were partially offset by the sale of BNYFC. In 1998, additions to commercial loans and interest-bearing deposits were partially offset by sales of securities.
Cash provided by financing activities was $0.6 billion, $1.3 billion, and $1.9 billion in 2000, 1999, and 1998 as the Company used deposits to finance its investing activities. In 2000, 1999, and 1998, financing activities used cash to buy back the Company's common shares, and provided cash through the issuance of long-term debt. Federal funds purchased and securities sold under repurchase agreements were a net use of funds in 2000, 1999 and 1998.
Restrictions on the ability of the Company to obtain funds from its subsidiaries are discussed in Note 10 to the Consolidated Financial Statements.
CAPITAL RESOURCES
Shareholders' equity was $6,152 million at December 31, 2000, compared with $5,143 million at December 31, 1999 and $5,448 million at December 31, 1998. During 2000, the Company retained $946 million of earnings and issued $265 million of medium-term notes, increasing long-term debt to $3,036 million from $2,811 million. The increased long-term debt replaces subordinated debt ceasing to qualify as Tier 2 capital. The Company also repurchased 10 million common shares for $454 million. In October 2000, the Company increased its quarterly common stock dividend to 18 cents per share, up 13% from the beginning of 2000. The Company has a shelf registration statement with a remaining capacity of $104 million of debt, preferred stock, preferred trust securities, or common stock.
In 1999, the Company retained $1,302 million of earnings and issued $200 million of preferred trust securities. The Company also issued $300 million of subordinated notes and $631 million of medium-term notes, increasing long-term debt to $2,811 million from $2,086 million. The increased long-term debt supports assets acquired in the RBSTB acquisition and replaces subordinated debt ceasing to qualify as Tier 2 capital. The Company also repurchased 44 million common shares for $1.6 billion. In October 1999, the Company increased its quarterly common stock dividend to 16 cents per share, up 14% from the beginning of 1999.
In 1998, the Company retained $789 million of earnings and issued $300 million of preferred trust securities and $335 million of medium-term notes. In July 1998, the Company increased its quarterly common stock dividend to 14 cents per share, up 17% from the beginning of 1997. In addition, the conversion of warrants provided $333 million in capital. The Company also repurchased 33 million common shares for $976 million.
ASSET QUALITY AND ALLOWANCE FOR CREDIT LOSSES
The Company has proactively managed asset quality. Over the past five years, the Company has attempted to improve its risk profile through sharper strategic focus on non-lending activities, with a de-emphasis on broad-based loan growth.
- Since 1994 the Company has exited exposures aggregating $9 billion, including in 1999 $4 billion in asset based lending and $1 billion of non-strategic relationships. The Company regularly culls its loan portfolio of credit exposures that no longer meet risk/return criteria, including an assessment of overall relationship profitability.
- As part of the Company's consistent, long-term strategy to emphasize fiduciary, securities servicing and cash processing services, the Company's credit exposure to the financial services sector, a big user of these services, has increased. These exposures tend to be lower-risk secured liquidity facilities to investment grade companies. As a result, financial company outstandings have grown from 14% of the portfolio in 1994 to 25% in 2000. This shift has helped increase the percentage of credits with a rating equivalent to investment grade. These credits have increased from 52% of the total in 1997 to 60% at December 31, 2000. In the non-investment grade portfolio, 48% of the credits mature in less than one year.
The Company's most significant concentrations of credit risk are to the financial services sector and the media and telecommunications sector. Within the Company's specialized group that focuses on the domestic financial services sector, the primary exposures are to the securities firms, investment companies, the insurance industry, fund managers, mutual funds, banks, and others. Loans outstanding to domestic financial service companies were $5.1 billion at December 31, 2000 compared with $5.7 billion in 1999. While the financial service exposures have been increasing, the drop in financial service outstandings at December 31, 2000 reflects reduced borrowings by securities firms.
The media and telecommunications sector is the second largest specialized group in terms of outstandings and consists of loans to the telecommunications industry, cable television companies, publishing, entertainment and four other media and telecommunication sub-sectors. No one individual sub-sector of media and telecommunications comprises over 40% of the total media and telecommunications outstandings.
The Company is active in the international markets, particularly in areas associated with securities servicing and trade finance. These activities result in outstandings to foreign financial service companies of $3.9 billion at December 31, 2000. The Company's modest cross-border exposure to emerging markets is detailed in its Form 10-K. No significant changes in trends occurred in the foreign portfolio in 2000.
The Company's outstandings to consumers, including residential real estate loans, its leasing assets, and its real estate lending each exceed 5% of the loan portfolio. These outstandings are detailed later under "Loans". In addition, the Company's retail, community, and regional commercial banking operations in the New York metropolitan area create a significant geographic concentration.
In 1999, as part of its continuing strategy to align credit products with fiduciary and servicing businesses, the Company reviewed its credit portfolio and decided to accelerate the disposition of certain loans based, in part, on cross-sell potential and overall profitability. As a result, in 1999 the Company categorized over $1 billion of credit exposure as available-for-sale and recorded a liquidity charge of $124 million. At December 31, 2000, sales of the $1 billion of credits categorized as available-for-sale in 1999 have
been substantially completed and no longer represent a material exposure to the Company.
Nonperforming assets increased by $35 million or 22% to $193 million at December 31, 2000. The increase in nonperforming assets during 2000 is attributable to a gradual deterioration in credit quality which resulted in moving $254 million of loans to nonperforming status. The increase was largely offset by charge-offs and writedowns of $86 million and paydowns, sales, and returns to accrual status of $133 million.
The following table shows the distribution of nonperforming assets at December 31, 2000 and 1999:
Dollars in millions 2000 1999 Change
------------------- ---- ---- ------
Category of Loans:
Other Commercial $113 $ 53 $60
Foreign 48 63 (15)
Regional Commercial 28 30 (2)
---- ---- ----
Total Nonperforming Loans 189 146 43
Other Real Estate 4 12 (8)
---- ---- ----
Total Nonperforming Assets $193 $158 $35
==== ==== ====
Nonperforming Asset Ratio 0.5% 0.4%
Allowance/Nonperforming Loans 325.6 407.7
Allowance/Nonperforming Assets 319.6 376.9
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Nonperforming loans are expected to rise given likely economic softness in 2001. The Company expects this will result in a modest increase in provision and charge-offs.
Net charge-offs were $84 million in 2000, $137 million in 1999, and $29 million in 1998. In 2000 and 1998, net charge-offs were primarily related to commercial loans. Net charge-offs in 1999 were primarily related to the decision to accelerate the disposition of certain loans, as well as higher charge-offs in the Company's asset based lending businesses.
The provision for credit losses was $105 million in 2000, compared with $135 million in 1999 and $20 million in 1998. The decline in the provision in 2000 reflects several factors. First, the 1999 decision to accelerate the disposition of $1 billion of credit exposures as well as the sale of BNYFC, which had almost $4 billion of credit exposure, helped reduce the Company's exposure to deteriorating credits in 2000. Second, the 1999 provision reflected higher charge-offs in the Company's asset based lending businesses. And lastly, 2000 reflects a decrease in total loans as well as the continuing growth of the financial services component of credit exposure.
The total allowance for credit losses was $616 million and $595 million at year-end 2000 and 1999. The ratio of the total allowance for credit losses to year-end loans was 1.70% and 1.58% at December 31, 2000 and 1999. Loans at December 31, 2000 were $36.3 billion compared with $37.5 billion at the prior year-end. Average loans increased only 1.0% to $39.3 billion in 2000 from $38.9 billion in 1999. The growth in the allowance in 2000 is attributable to gradually deteriorating asset quality, as evidenced by increasing nonperforming loans and higher risk rated credits, partially offset by the shift in the composition of credit exposure towards the financial services sector and away from more risky general corporate lending.
The Company's allowance at year-end equated to approximately 3.0 times the average charge-offs for the last three years and 3.6 times the average net charge-offs for the same three year period. Because historical charge-offs are not necessarily indicative of future charge-off levels, the Company also gives consideration to other risk indicators when determining the appropriate allowance level.
The allowance for credit losses consists of four elements: (1) an allowance for impaired credits (nonaccrual commercial credits over $1 million), (2) an allowance for higher risk rated credits, (3) an allowance for pass rated credits, and (4) an unallocated allowance based on general economic conditions and risk factors in the Company's individual markets.
The first element - impaired credits - is based on individual analysis of all nonperforming commercial credits over $1 million. The allowance is measured by the difference between the recorded value of impaired loans and their fair value. Fair value is either the present value of the expected future cash flows from borrowers, the market value of the loan, or the fair value of the collateral.
The second element - higher risk rated credits - is based on the assignment of loss factors for each specific risk category of higher risk credits. The Company rates each credit in its portfolio that exceeds $1 million and assigns the credits to specific risk pools. A potential loss factor is assigned to each pool and an amount is included in the allowance equal to the product of the amount of the loan in the pool and the risk factor. Reviews of higher risk rated loans are conducted quarterly and the loan's rating is updated as necessary. The Company prepares a loss migration analysis and compares its actual loss experience to the loss factors on an annual basis to attempt to ensure the accuracy of the loss factors assigned to each pool. Pools of past due consumer loans are included in specific risk categories based on their length of time past due.
The third element - pass rated credits - is based on the assignment of loss factors to the remaining pools of credit exposure. The loss factors are based on the expected average credit losses. Loss factors are periodically compared to rating agency and other default data bases to determine their validity. Commercial loans over $1 million are individually analyzed before being assigned to a risk pool. All current consumer loans are included in the pass rated consumer pools.
The fourth element - the unallocated allowance - is based on management's judgement regarding the following factors:
- Economic conditions including duration of the current cycle
- Past experience including recent loss experience
- Credit quality trends
- Collateral values
- Volume, composition, and growth of the loan portfolio
- Specific credits and industry conditions
- Results of bank regulatory and internal credit exams
- Actions by the Federal Reserve Board
- Delay in receipt of information to evaluate loans or confirm existing
credit deterioration
The allowance at December 31, 2000 was not impacted by any significant changes in estimation methods or assumptions.
Based on an evaluation of these four elements, including individual credits, historical credit losses, and global economic factors, the Company has allocated its allowance for credit losses as follows:
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Domestic
Real Estate 3% 4% 3% 4% 5%
Commercial 76 78 74 64 40
Consumer 1 - 1 1 1
Credit Card - - - - 29
Foreign 11 12 11 7 4
Unallocated 9 6 11 24 21
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
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In 2000, the unallocated allowance increased as well as the allowance allocated to impaired and higher risk rated loans. This was partially offset by a decline in the allowance for pass rated credits. The increase in the allowance for impaired and higher risk credits reflects an increase in the loans in these categories. The increase in the unallocated allowance is attributable to the deterioration in the economy and negative credit quality trends.
Such an allocation is inherently judgmental, and the entire allowance for credit losses is available to absorb credit losses regardless of the nature of the loss.
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.
The Company's risk management process begins with oversight by the Board of Directors, who periodically review risk management policies and controls and approve aggregate levels of risk. The Company's market risk governance structure includes two committees comprised of senior executives who review market risk activities, risk measurement methodologies and risk limits, approve new products, and provide direction for the Company's market risk profile. The Asset/Liability Management Committee oversees the market risk management process for interest rate risk related to asset/liability management activities. The Market Risk Management Committee oversees the market risk management process for trading activities including foreign exchange risk. Both committees are supported by a comprehensive risk management process that is designed to identify, measure, and manage market risk.
TRADING ACTIVITIES AND RISK MANAGEMENT
The Company's trading activities are primarily oriented towards acting as a market maker for the Company's customers. The risk from these market making activities and from the Company's own positions is managed by the Company's traders and limited in total exposure as described below.
The Company manages trading risk through a system of position limits, a value at risk (VAR) methodology, based on a Monte Carlo simulation, stop loss advisory triggers, and other market sensitivity measures. Risk is monitored and reported to senior management by an independent unit on a daily basis. The VAR methodology captures, based on certain assumptions, the potential overnight pre-tax dollar loss from adverse changes in fair values of all trading positions. The calculation assumes a one day holding period for most instruments, utilizes a 99% confidence level, and incorporates the non-linear characteristics of options. As the VAR methodology does not evaluate risk
attributable to extraordinary financial, economic or other occurrences, the risk assessment process includes a number of stress scenarios based upon the risk factors in the portfolio and management's assessment of market conditions. Additional stress scenarios based upon historic market events are also tested.
Average trading assets increased significantly in 2000 due to the full year effect of the acquisition of RBSTB and an increase in the trading of short-term money market instruments. The following table indicates the calculated VAR amounts for the trading portfolio for the years ending December 31, 2000 and 1999. During these periods, the daily trading loss did not exceed the calculated VAR amounts on any given day.
(In millions) 2000 1999
----------------------------------- -----------------------------------
Market Risk Average Minimum Maximum 12/31/00 Average Minimum Maximum 12/31/99
----------- ------- ------- ------- -------- ------- ------- ------- --------
Interest Rate $4.4 $2.7 $ 6.6 $3.3 $5.4 $2.5 $12.6 $4.5
Foreign Exchange 1.6 0.9 3.8 1.2 1.7 0.7 4.0 1.8
Overall Portfolio 5.5 2.5 8.8 2.9 7.1 3.9 13.7 6.3
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ASSET/LIABILITY MANAGEMENT
The Company's asset/liability management activities include lending, investing in securities, accepting deposits, raising money as needed to fund assets, and processing securities and other transactions. The market risks that arise from these activities are interest rate risk, and to a lesser degree, foreign exchange risk. The Company's primary market risk is exposure to movements in US dollar interest rates. Exposure to movements in foreign currency interest rates also exists, but to a significantly lower degree. The Company actively manages interest rate sensitivity (the exposure of net interest income to interest rate movements). In addition to gap analysis, the Company uses earnings simulation and discounted cash flow models to identify interest rate exposures.
An earnings simulation model is the primary tool used to assess changes in pre-tax net interest income. The model incorporates management's assumptions regarding interest rates, balance changes on core deposits, and changes in the prepayment behavior of loans. These assumptions have been developed through a combination of historical analysis and future expected pricing behavior. Derivative financial instruments used for interest rate risk management purposes are also included in this model.
The Company evaluates the effect on earnings by running scenarios with interest rates shocked 200 basis points up and down from a baseline scenario which assumes no changes in interest rates. These scenarios are reviewed to examine the impact of large interest rate movements. Interest rate sensitivity is quantified by calculating the change in pre-tax net interest income between the scenarios over a 12 month measurement period. The measurement of interest rate sensitivity is the percentage change in net interest income calculated by the model under the shock up 200 basis points versus the baseline scenario and under the shock down 200 basis point scenario versus the baseline scenario. Under these shock scenarios, pre-tax net interest income would be positively affected by 3.45% from the baseline scenario for a 200 basis point increase in rates and negatively affected by 5.95% for a 200 basis point decline. These scenarios do not include the strategies that management could employ as interest rate expectations change.
To manage foreign exchange risk, the Company funds foreign currency- denominated assets with liability instruments denominated in the same currency. The Company utilizes various foreign exchange contracts if a liability denominated in the same currency is not available or desired, and to minimize the earnings impact of translation gains or losses created by investments in overseas markets. The foreign exchange risk related to the
interest rate spread on foreign currency-denominated asset/liability positions is managed as part of the Company's trading activities. The Company uses forward foreign exchange contracts to protect the value of its net investment in foreign operations. At December 31, 2000, net investments in foreign operations approximated $937 million and were spread across 15 foreign currencies.
The Company's equity investments of $1.8 billion at December 31, 2000 primarily consisted of venture capital investments, equity positions from debts previously contracted, equity positions in other financial institutions, and minority interests in various subsidiaries. Venture capital activities consist of investments in private equity funds, mezzanine financings, and direct equity investments. The carrying value of the Company's venture capital investments was $485 million at December 31, 2000. The majority of these equity investments are of a long-term nature and accordingly the Company does not view fluctuations in the market prices of these securities as having a material impact on the Company's operations. Changes in prices for marketable equity securities are reflected in the Statements of Changes in Shareholders' Equity. All equity investments are evaluated on a regular basis for permanent impairment.
SEGMENT PROFITABILITY
Segment Data
The Company has an internal information system that produces performance data for its four business segments along product and service lines.
The Servicing and Fiduciary businesses segment provides a broad array of fee-based services. This segment includes the Company's securities servicing, global payment services, and private client services and asset management businesses. Securities servicing includes global custody, securities clearance, mutual funds, UIT, securities lending, DRs, corporate trust, stock transfer and execution services. Global payment services products primarily relate to funds transfer, cash management and trade finance. Private client services and asset management provide traditional banking and trust services to affluent clients and asset management to institutional and private clients.
The Corporate Banking segment focuses on providing lending services, such as term loans, lines of credit, asset based financings, and commercial mortgages, to the largest public and private corporations nationwide, as well as public and private mid-size businesses in the New York metropolitan area. Special industry groups focus on financial institutions, media and telecommunications, energy, real estate, retailing, automotive, and government banking institutions. Through BNY Capital Markets, the Company provides syndicated loans, bond underwriting, private placements of corporate debt and equity securities, and merger, acquisition, and advisory services.
The Retail Banking segment includes consumer lending, residential mortgage lending, and retail deposit services. The Company operates 349 branches in 22 counties in three states.
The Financial Markets segment includes trading of foreign exchange and interest rate products, investing and leasing activities, and treasury services to other segments. This segment offers a comprehensive array of multi-currency hedging and yield enhancement strategies. Offices in New York, London, Brussels, Tokyo, Frankfurt, Hong Kong, Seoul and Taipei provide clients a 24-hour trading capability.
The segments contributed to the Company's profitability as follows:
In Millions Servicing
and
For the Year Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
December 31, 2000 Businesses Banking Banking Markets Items Total
------------------ ---------- --------- ------- --------- ----------- ------------
Net Interest Income $ 672 $543 $510 $122 $ 23 $1,870
Provision for
Credit Losses - 127 6 (1) (27) 105
Noninterest Income 2,443 290 99 249 28 3,109
Noninterest Expense 1,629 213 305 64 299 2,510
----- ---- ---- ---- ----- ------
Income Before Taxes $1,486 $493 $298 $308 $(221) $2,364
====== ==== ==== ==== ===== ======
Average Assets $8,636 $29,812 $4,420 $32,693 $1,680 $77,241
|
In Millions Servicing
and
For the Year Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
December 31, 1999 Businesses Banking Banking Markets Items Total
------------------ ---------- --------- ------- --------- ----------- ------------
Net Interest Income $ 474 $600 $468 $121 $ 38 $1,701
Provision for
Credit Losses - 110 5 (2) 22 135
Noninterest Income 1,910 315 92 216 960 3,493
Noninterest Expense 1,233 248 306 55 265 2,107
----- ---- ---- ---- ---- ------
Income Before Taxes $1,151 $557 $249 $284 $711 $2,952
====== ==== ==== ==== ==== ======
Average Assets $7,692 $31,219 $4,572 $21,821 $1,473 $66,777
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In Millions Servicing
and
For the Year Ended Fiduciary Corporate Retail Financial Reconciling Consolidated
December 31, 1998 Businesses Banking Banking Markets Items Total
------------------ ---------- --------- ------- --------- ----------- ------------
Net Interest Income $ 394 $663 $506 $ 95 $ (7) $1,651
Provision for
Credit Losses - 114 7 7 (108) 20
Noninterest Income 1,579 305 73 252 74 2,283
Noninterest Expense 1,033 262 310 59 264 1,928
----- ---- ---- ---- ---- ------
Income Before Taxes $ 940 $592 $262 $281 $(89) $1,986
====== ==== ==== ==== ==== ======
Average Assets $6,016 $33,783 $4,527 $17,286 $1,529 $63,141
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Segment Highlights
In the Servicing and Fiduciary businesses segment, net interest income increased to $672 million in 2000 from $474 million in 1999 and $394 million in 1998. The increase reflects the investment of the additional funds generated by the Company's Servicing and Fiduciary businesses. Noninterest income was $2,443 million in 2000 compared with $1,910 million in 1999 and $1,579 million in 1998. Securities servicing fees increased to $1,650 million in 2000 as compared with $1,245 million in 1999 and $1,000 million in 1998. Strong internal growth and the acquisition of RBSTB drove fee revenue up 33% in 2000. Fee revenue was strong across all product lines with particular strength in global custody, DRs, UIT, mutual funds, as well as global execution and clearing services. The Company's DR business benefited from record depositary receipt dollar trading volume on US exchanges which grew 78% in 2000. In addition, the Company was named as agent on 114 programs from 33 countries. Market share gains from new business wins and strong markets
resulted in assets under custody reaching $7.0 trillion in 2000, up from $6.3 trillion in 1999 and $5.1 trillion in 1998. The RBSTB acquisition drove custody assets up in 1999.
Fees from global payment services in 2000 were $261 million compared with 1999's $274 million and 1998's $256 million. Cash management revenue was particularly strong in 2000, growing by 9% to $107 million, with fund transfer revenue ahead of the prior year by 2%, reaching $152 million. Trade finance fees were down in 2000 reflecting the sale of BNYFC and reduced pricing driven by the improved risk profile of selected Asian and Latin American markets.
Fees from private client services and asset management grew to $296 million in 2000, as compared with $244 million in 1999 and $208 million in 1998, reflecting strong investment performance which continues to attract new customers and generally strong markets. The acquisition of Ivy Asset Management Corp. and Estabrook Capital Management, Inc. also contributed to the increase. Assets under management were $66.2 billion, $60.4 billion and $48.4 billion in 2000, 1999, and 1998. Assets under administration were $36.4 billion, up from $30.2 billion in 1999 and $25.8 billion in 1998.
Net charge-offs in the Servicing and Fiduciary businesses segment were zero in 2000, 1999, and 1998. Noninterest expense was $1,629 million compared with $1,233 million in 1999 and $1,033 million in 1998. The rise in noninterest expense is consistent with the significant increase in business volumes which produced higher fee revenue, as well as the Company's continued investment in technology.
The Corporate Banking segment's net interest income was $543 million in 2000 compared with $600 million in 1999 and $663 million in 1998. The decrease in 2000 reflects the sale of BNYFC. The provision for credit losses was $127 million in 2000 compared with $110 million and $114 million in 1999 and 1998. The increase in 2000 principally reflects deterioration in the economy. Net charge-offs in the Corporate Banking segment were $78 million, $135 million, and $16 million in 2000, 1999, and 1998. The decrease in noninterest income to $290 million in the current year was due to increased capital markets fees offset by the sale of BNYFC. Capital markets fees in 2000 increased 13% over 1999. In 2000, the Company was the co-manager on 60 underwritings, up from 51 in 1999. Income from the Company's offshore banking subsidiaries in Hong Kong also increased in 2000. Noninterest expense declined in 2000 and 1999 reflecting the sale of BNYFC.
Net interest income in the Retail Banking sector was $510 million in 2000 compared with $468 million in 1999 and $506 million in 1998. Net interest income in the branch banking network in 2000 was positively impacted by the increase in the value of noninterest-bearing sources of funds in a higher rate environment. Noninterest income was $99 million in 2000 compared with $92 million in 1999 and $73 million in 1998. The increase in 2000 reflects new product introductions, and selective price increases. Operating expenses were $305 million in 2000 compared with $306 million in 1999 and $310 million in 1998. Net charge-offs were $7 million, $4 million and $5 million in 2000, 1999, and 1998.
In the Financial Markets segment, net interest income was $122 million in 2000 compared with 1999's $121 million and 1998's $95 million. Noninterest income was $249 million in 2000 compared with $216 million in 1999 and $252 million in 1998. Strong equity markets resulted in a significant and relatively consistent level of securities gains included in noninterest income in 2000, 1999, and 1998. Revenues from foreign exchange proprietary trading activities and foreign exchange advisory fees increased in 2000. Net charge- offs were a recovery of $1 million in 2000 and a recovery of $2 million in
1999 and charge-offs of $7 million in 1998. The increase in expenses in 2000 reflects the acquisition of RBSTB.
The Company's segment data has been determined on an internal management basis of accounting, rather than the generally accepted accounting principles used for consolidated financial reporting. These measurement principles are designed so that reported results of the segments will track their economic performance. Segment results are subject to restatement whenever improvements are made in the measurement principles or organizational changes are made. In 2000, the Company changed certain assumptions related to the duration of sector assets and liabilities and the related interest rates. As a result, sector results for 1999 and 1998 have been restated.
The measure of revenues and profit or loss by operating segment has been adjusted to present segment data on a taxable equivalent basis. The provision for credit losses allocated to each reportable segment is based on management's judgment as to average credit losses that will be incurred in the operations of the segment over a credit cycle of a period of years. Management's judgment includes the following factors among others: historical charge-off experience and the volume, composition and growth of the loan portfolio. This method is different from that required under generally accepted accounting principles as it anticipates future losses which are not yet probable and therefore not recognizable under generally accepted accounting principles. Assets and liabilities are match funded. Support and other indirect expenses are allocated to segments based on general guidelines.
Reconciling items for net interest income primarily relate to the recording of interest income on a taxable equivalent basis, reallocation of capital and the funding of goodwill. Reconciling items for noninterest income primarily relate to the payment associated with the termination of a securities clearing contract, the liquidity charge on the sale of loans, and the gains on the sale of BNYFC, the sale of a building and the sale of certain securities. Reconciling items for noninterest expense include $115 million, $102 million and $101 million of amortization of intangibles in 2000, 1999, and 1998, Year 2000 expenses, and corporate overhead. The adjustment to the provision for credit losses reflects the difference between the aggregate of the credit provision over a credit cycle for the reportable segments and the Company's recorded provision. The reconciling items for average assets consist of goodwill and other intangible assets.
Foreign Operations
The Company's foreign activities consist of banking, trust, and securities and global payment services provided to customers domiciled outside of the United States, principally in Europe and Asia. The 1999 acquisition of RBSTB, which was renamed The Bank of New York (Europe) ("BNYE"), significantly expanded the Company's presence in Europe. In addition to BNYE, which is based in London, the Company operates through 29 branches and representative offices in 26 countries. There were no major customers from whom revenues were individually material to the Company's performance.
2000 1999 1998
---------------------------------- --------------------------------- ---------------------------------
In millions Income Income Income
Before Before Before
Geographic Income Net Total Income Net Total Income Net Total
Data Revenues Taxes Income Assets Revenues Taxes Income Assets Revenues Taxes Income Assets
---------- -------- ------ ------ ------- -------- ------ ------ ------- -------- ------- ------ -------
Domestic $5,146 $2,044 $1,220 $49,829 $5,245 $2,530 $1,474 $49,913 $4,620 $1,806 $1,076 $49,564
Europe 1,788 285 186 19,673 1,098 325 204 16,639 662 101 65 6,912
Asia 256 17 11 3,794 227 16 10 3,744 239 22 14 3,349
Other 296 18 12 3,818 396 81 51 4,460 272 57 37 3,678
------- ------ ------ ------- ------ ------ ------ ------- ------ ------ ------ -------
Total $7,486 $2,364 $1,429 $77,114 $6,966 $2,952 $1,739 $74,756 $5,793 $1,986 $1,192 $63,503
------- ------ ------ ------- ------ ------ ------ ------- ------ ------ ------ -------
------- ------ ------ ------- ------ ------ ------ ------- ------ ------ ------ -------
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Normalized Earnings
Normalized earnings for 1999 reflect net income adjusted for the results of BNYFC, the $1,020 million gain on the sale of BNYFC, the related investment of proceeds, and repurchase of 25 million shares of Company common stock on a pro forma basis as of December 31, 1998; the $124 million liquidity charge related to the sale of loans; a provision normalization of $75 million; and related tax effects. These adjustments are shown in the table below:
(In millions, except per share amounts) 1999
----
Net Income $1,739
Adjustments:
Pre-tax Gain on Sale of BNYFC (1,020)
BNYFC Income Before Tax (104)
Liquidity Charge - Loans Available-
For-Sale 124
Provision Normalization 75
Interest on Proceeds 36
Tax Effects 393
------
Normalized Net Income $1,243
======
Fully Diluted Shares 765
Share Adjustment (14)
------
Adjusted Shares 751
====
Normalized Diluted Earnings Per Share $ 1.66
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LOANS
The following table shows the Company's loan distribution at the end of each of the last five years:
In millions 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
Domestic
Commercial and Industrial Loans(1) $13,803 $14,400 $13,626 $12,585 $11,780
Less: Unearned Income on Commercial
and Industrial Loans (18) (14) (26) (36) (49)
Real Estate Loans
Construction and Land Development 357 275 271 208 139
Other, Principally Commercial
Mortgages 2,664 2,771 2,691 2,669 2,645
Collateralized by Residential
Properties 3,049 2,999 3,010 3,091 2,905
Banks and Other Financial
Institutions 2,014 1,788 1,788 1,899 1,650
Loans for Purchasing or Carrying
Securities 2,697 3,865 3,612 3,479 3,695
Lease Financings 3,092 2,870 2,566 1,953 1,688
Less: Unearned Income on
Lease Financings (880) (880) (856) (651) (483)
Consumer Loans 1,792 1,610 1,243 1,197 6,605
Less: Unearned Income on Consumer Loans (18) (18) (13) (16) (25)
Asset Based Lending - - 2,007 1,844 1,064
Other 448 606 420 341 249
------- ------- ------- ------- -------
Total Domestic 29,000 30,272 30,339 28,563 31,863
------- ------- ------- ------- -------
Foreign
Commercial and Industrial Loans(1) 3,025 3,451 3,349 2,872 2,465
Less: Unearned Income on Commercial
and Industrial Loans (2) (5) (3) (7) (6)
Banks and Other Financial
Institutions 1,761 1,703 1,476 1,756 1,060
Lease Financings 4,827 3,483 3,174 2,488 1,917
Less: Unearned Income on
Lease Financings (2,520) (1,550) (1,472) (1,205) (915)
Government and Official Institutions 134 153 192 110 414
Asset Based Lending - - 1,310 453 129
Other 36 40 21 97 79
------- ------- ------- ------- -------
Total Foreign 7,261 7,275 8,047 6,564 5,143
------- ------- ------- ------- -------
Less: Allowance for Credit Losses 616 595 636 641 901
------- ------- ------- ------- -------
Net Loans $35,645 $36,952 $37,750 $34,486 $36,105
======= ======= ======= ======= =======
(1) The commercial and industrial loan portfolio does not contain any industry
concentration which exceeds 10% of loans.
</TABLE
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QUARTERLY DATA UNAUDITED
2000 1999
------------------------------- ------------------------------
Dollars in millions, Fourth Third Second First Fourth Third Second First
except per share
amounts
Interest Income $1,129 $1,107 $1,107 $1,033 $ 943 $ 834 $ 839 $ 857
Interest Expense 647 628 644 586 502 417 423 430
----- ----- ----- ----- ----- ----- ----- -----
Net Interest Income 482 479 463 447 441 417 416 427
----- ----- ----- ----- ----- ----- ----- -----
Provision for Credit
Losses 35 25 25 20 15 90 15 15
Noninterest Income 805 785 780 737 686 1,531 651 625
Noninterest Expense 644 635 628 602 570 515 513 509
----- ----- ----- ----- ----- ----- ----- -----
Income Before
Income Taxes 608 604 590 562 542 1,343 539 528
Income Taxes 208 213 206 196 187 542 188 184
Distribution on Preferred
Trust Securities 28 28 28 28 28 28 28 28
----- ----- ----- ----- ----- ----- ----- -----
Net Income $ 372 $ 363 $ 356 $ 338 $ 327 $ 773 $ 323 $ 316
===== ===== ===== ===== ===== ===== ===== =====
Net Income
Available to
Common Shareholders $ 372 $ 363 $ 356 $ 338 $ 327 $ 773 $ 323 $ 316
===== ===== ===== ===== ===== ===== ===== =====
Per Common Share Data:
Basic Earnings $0.51 $0.50 $0.49 $0.46 $0.44 $1.04 $0.42 $0.41
Diluted Earnings 0.50 0.49 0.48 0.46 0.44 1.02 0.42 0.41
Cash Dividend 0.18 0.16 0.16 0.16 0.16 0.14 0.14 0.14
Stock Price
High 59.25 57.31 48.63 41.56 44.81 39.56 40.63 39.56
Low 48.56 46.38 39.44 31.00 32.44 32.31 33.88 32.75
Ratios:
Return on Average
Common
Shareholders'
Equity 24.82% 25.75% 26.93% 27.07% 25.98% 61.23% 24.82% 24.48%
Return on Average
Assets 1.92 1.89 1.81 1.78 1.84 4.78 1.95 1.94
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Consolidated Balance Sheets
----------------------------------------------------------------------------------------
Dollars in millions, except per share amounts December 31, 2000 1999
----------------------------------------------------------------------------------------
Assets
Cash and Due from Banks $ 3,125 $ 3,276
Interest-Bearing Deposits in Banks 5,337 6,850
Securities
Held-to-Maturity (fair value of $719 in 2000
and $839 in 1999) 752 871
Available-for-Sale 6,649 6,028
------- -------
Total Securities 7,401 6,899
Trading Assets 12,051 8,715
Federal Funds Sold and Securities Purchased
Under Resale Agreements 5,790 5,383
Loans (less allowance for credit losses of $616 in
2000 and $595 in 1999) 35,645 36,952
Premises and Equipment 924 893
Due from Customers on Acceptances 447 739
Accrued Interest Receivable 354 319
Other Assets 6,040 4,730
------- -------
Total Assets $77,114 $74,756
======= =======
Liabilities and Shareholders' Equity
Deposits
Noninterest-Bearing (principally domestic offices) $13,255 $12,162
Interest-Bearing
Domestic Offices 15,774 16,319
Foreign Offices 27,347 27,270
------- -------
Total Deposits 56,376 55,751
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,108 1,318
Trading Liabilities 2,070 2,353
Other Borrowed Funds 1,687 1,472
Acceptances Outstanding 450 740
Accrued Taxes and Other Expenses 3,283 2,644
Accrued Interest Payable 127 131
Other Liabilities 1,325 893
Long-Term Debt 3,036 2,811
------- -------
Total Liabilities 69,462 68,113
------- -------
Company-Obligated Mandatory Redeemable Preferred Trust Securities
of Subsidiary Trust Holding Solely Junior Subordinated Debentures 1,500 1,500
------- -------
Shareholders' Equity
Class A Preferred Stock-par value $2.00 per share, authorized
5,000,000 shares, outstanding 16,320 shares in 2000 and
16,787 shares in 1999 1 1
Common Stock-par value $7.50 per share, authorized 1,600,000,000
shares, issued 985,528,475 shares in 2000 and
977,961,165 shares in 1999 7,391 7,335
Additional Capital 521 315
Retained Earnings 3,566 2,620
Accumulated Other Comprehensive Income 207 30
------- -------
11,686 10,301
Less: Treasury Stock (244,460,032 shares in 2000
and 237,747,242 shares in 1999), at cost 5,526 5,148
Loan to ESOP (1,142,939 shares in 2000 and
1,444,005 shares in 1999), at cost 8 10
------- -------
Total Shareholders' Equity 6,152 5,143
------- -------
Total Liabilities and Shareholders' Equity $77,114 $74,756
======= =======
See accompanying Notes to Consolidated Financial Statements.
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Consolidated Statements of Income
-----------------------------------------------------------------------------------------
In millions, except per share amounts
For the years ended December 31, 2000 1999 1998
-----------------------------------------------------------------------------------------
Interest Income
Loans $2,910 $2,636 $2,770
Securities
Taxable 323 257 271
Exempt from Federal Income Taxes 63 50 61
------ ------ ------
386 307 332
Deposits in Banks 273 247 184
Federal Funds Sold and Securities
Purchased Under Resale Agreements 277 205 203
Trading Assets 531 78 21
------ ------ ------
Total Interest Income 4,377 3,473 3,510
------ ------ ------
Interest Expense
Deposits 2,011 1,363 1,374
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 153 131 145
Other Borrowed Funds 139 126 204
Long-Term Debt 204 152 136
------ ------ ------
Total Interest Expense 2,507 1,772 1,859
------ ------ ------
Net Interest Income 1,870 1,701 1,651
Provision for Credit Losses 105 135 20
------ ------ ------
Net Interest Income After Provision
for Credit Losses 1,765 1,566 1,631
------ ------ ------
Noninterest Income
Servicing Fees
Securities 1,650 1,245 1,000
Cash 261 274 256
------ ------ ------
1,911 1,519 1,256
Private Client Services and
Asset Management Fees 296 244 208
Service Charges and Fees 364 338 326
Securities Gains 150 199 175
Other 388 1,193 318
------ ------ ------
Total Noninterest Income 3,109 3,493 2,283
------ ------ ------
Noninterest Expense
Salaries and Employee Benefits 1,488 1,251 1,178
Net Occupancy 184 165 166
Furniture and Equipment 108 96 86
Other 730 595 498
------ ------ ------
Total Noninterest Expense 2,510 2,107 1,928
------ ------ ------
Income Before Income Taxes 2,364 2,952 1,986
Income Taxes 822 1,101 699
Distribution on Preferred Trust Securities 113 112 95
------ ------ ------
Net Income $1,429 $1,739 $1,192
====== ====== ======
Net Income Available to Common Shareholders $1,429 $1,739 $1,192
====== ====== ======
Per Common Share
Basic Earnings $ 1.95 $ 2.31 $ 1.59
Diluted Earnings 1.92 2.27 1.53
Cash Dividends Paid 0.66 0.58 0.54
Diluted Shares 745 765 781
See accompanying Notes to Consolidated Financial Statements.
|
Consolidated Statements of Changes in Shareholders' Equity
------------------------------------------------------------------------------------------------------------------------
In millions For the years ended December 31, 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------
Preferred Stock
Balance, January 1 $ 1 $ 1 $ 1
------ ------ ------
Balance, December 31 1 1 1
------ ------ ------
Common Stock
Balance, January 1 7,335 7,281 6,904
Exercise of Warrants (shares: 42,930,224 in 1998) - - 322
Common Stock Issued in Connection
with Employee Benefit Plans (shares: 7,567,310 in 2000,
and 7,193,398 in 1999, and 7,412,305 in 1998 56 54 55
------ ------ ------
Balance, December 31 7,391 7,335 7,281
------ ------ ------
Additional Capital
Balance, January 1 315 142 12
Exercise of Warrants - - 11
Other, Primarily Common Stock issued in Connection
with Employee Benefit Plans 206 173 119
------ ------ ------
Balance, December 31 521 315 142
------ ------ ------
Retained Earnings
Balance, January 1 2,620 1,318 529
Net Income $1,429 1,429 $1,739 1,739 $1,192 1,192
Cash Dividends on Common Stock (483) (437) (403)
------ ------ ------
Balance, December 31 3,566 2,620 1,318
Accumulated Other Comprehensive Income
Securities Valuation Allowance
Balance, January 1 58 340 320
Change in Fair Value of Securities Available-for-Sale,
Net of Taxes of $135 in 2000, ($103) in 1999,
and $90 in 1998 229 229 (147) (147) 145 145
Reclassification Adjustment, Net of Taxes
of $23 in 2000, $74 in 1999, and $69 in 1998 (43) (43) (135) (135) (125) (125)
------ ------ ------
Balance, December 31 244 58 340
Foreign Currency Items
Balance, January 1 (28) (28) (35)
Foreign Currency Translation Adjustment
Net of Taxes of $(6) in 2000 and $5 in 1998 (9) (9) - - 7 7
------ ------ ------
Balance, December 31 (37) (28) (28)
------ ------ ------
Total Comprehensive Income $1,606 $1,457 $1,219
====== ====== ======
Less Treasury Stock
Balance, January 1 5,148 3,593 2,714
Issued (shares: 3,426,777 in 2000, 3,673,172 in 1999,
and 5,507,044 in 1998) (76) (71) (97)
Acquired (shares: 10,139,567 in 2000, 43,771,955 in 1999,
and 32,514,495 in 1998) 454 1,626 976
------ ------ ------
Balance, December 31 5,526 5,148 3,593
------ ------ ------
Less Loan to ESOP
Balance, January 1 10 13 15
Released (shares: 301,066 in 2000, 356,998 in 1999,
and 312,655 in 1998) (2) (3) (2)
------ ------ ------
Balance, December 31 8 10 13
------ ------ ------
Total Shareholders' Equity, December 31 $6,152 $5,143 $5,448
====== ====== =======
See accompanying Notes to Consolidated Financial Statements.
|
Consolidated Statements of Cash Flows
----------------------------------------------------------------------------------------
In millions For the years ended December 31, 2000 1999 1998
----------------------------------------------------------------------------------------
Operating Activities
Net Income $1,429 $1,739 $1,192
Adjustments to Determine Net Cash Attributable to
Operating Activities:
Provision for Losses on Loans
and Other Real Estate 109 135 21
Gain on Sale of BNYFC - (1,020) -
Depreciation and Amortization 247 215 187
Deferred Income Taxes 530 454 260
Securities Gains (150) (199) (175)
Change in Trading Activities (3,872) (1,899) 1,102
Change in Accruals and Other, Net (459) (409) (1,021)
------ ------ ------
Net Cash (Used) Provided by Operating Activities (2,166) (984) 1,566
------ ------ ------
Investing Activities
Change in Interest-Bearing Deposits in Banks 1,414 (739) (2,256)
Purchases of Securities Held-to-Maturity (323) (422) (631)
Maturities of Securities Held-to-Maturity 384 460 814
Purchases of Securities Available-for-Sale (3,687) (2,992) (2,481)
Sales of Securities Available-for-Sale 1,681 865 1,767
Maturities of Securities Available-for-Sale 1,920 1,036 849
Net Principal Received (Disbursed) on Loans to Customers 529 (2,008) (2,561)
Sales of Loans and Other Real Estate 468 367 258
Change in Federal Funds Sold and Securities
Purchased Under Resale Agreements (146) (2,102) (461)
Purchases of Premises and Equipment (106) (97) (88)
Acquisitions, Net of Cash Acquired (286) (490) (166)
Disposition, Net of Cash Included 46 4,867 -
Proceeds from the Sale of Premises and Equipment 3 10 50
Other, Net (487) 179 (268)
------ ------ ------
Net Cash Provided (Used) by Investing Activities 1,410 (1,066) (5,174)
------ ------ ------
Financing Activities
Change in Deposits 1,750 2,215 3,199
Change in Federal Funds Purchased and Securities
Sold Under Repurchase Agreements (441) (253) (758)
Change in Other Borrowed Funds (276) 202 (323)
Proceeds from the Issuance of Preferred Trust Securities - 200 300
Proceeds from the Issuance of Long-Term Debt 265 731 315
Repayments of Long-Term Debt (53) (21) (44)
Issuance of Common Stock 341 301 606
Treasury Stock Acquired (454) (1,626) (976)
Cash Dividends Paid (484) (435) (403)
------ ------ ------
Net Cash Provided by Financing Activities 648 1,314 1,916
------ ------ ------
Effect of Exchange Rate Changes on Cash (43) 13 (78)
------ ------ ------
Change in Cash and Due From Banks (151) (723) (1,770)
Cash and Due from Banks at Beginning of Year 3,276 3,999 5,769
------ ------ ------
Cash and Due from Banks at End of Year $3,125 $3,276 $3,999
====== ====== ======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $2,511 $1,829 $1,853
Income Taxes 258 542 404
Noncash Investing Activity
(Primarily Foreclosure of Real Estate) 2 4 8
See accompanying Notes to Consolidated Financial Statements.
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Notes to Consolidated Financial Statements
1. Summary of Significant Accounting and Reporting Policies
The Bank of New York Company, Inc. (the "Company") provides a complete range of banking and other financial services to corporations and individuals worldwide through its business segments: Servicing and Fiduciary Businesses; Corporate Banking; Retail Banking; and Financial Markets.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Amounts subject to significant estimates and assumptions are items such as the allowance for credit losses, pension and postretirement obligations, and the fair value of financial instruments. Actual results could differ from these estimates.
Securities - Debt and equity securities classified as available-for-sale are carried at fair value, except for those equity securities whose fair value cannot be readily determined. These securities are carried at cost. Equity investments of less than a majority but at least 20% ownership are accounted for by the equity method and classified as other assets. For securities carried at fair value, the after-tax effect of net unrealized gains and losses is reported as a separate component of shareholders' equity.
Securities classified as trading assets are carried at fair value, with net unrealized holding gains and losses recognized currently in income. Debt securities, which the Company has the ability and intent to hold until maturity, are classified as held-to-maturity and stated at cost, adjusted for discount accreted and premium amortized. Realized gains and losses on the sale of debt and equity securities are determined by the specific identification and average cost methods, respectively.
Allowance for Credit Losses - The allowance for credit losses is maintained at a level that, in management's judgment, is adequate to absorb probable losses associated with specifically identified loans, as well as estimated probable credit losses inherent in the remainder of the loan portfolio at the balance sheet date. Management's judgment includes the following factors, among others: risks of individual credits; past experience; the volume, composition, and growth of the loan portfolio; and economic conditions.
The Company conducts a quarterly portfolio review to determine the adequacy of its allowance for credit losses. All commercial loans over $1 million are assigned to specific risk categories. Smaller commercial and consumer loans are evaluated on a pooled basis and assigned to specific risk categories. Following this review, senior management of the Company analyzes the results and determines the allowance for credit losses. The Audit and Examining Committee of the Company's Board of Directors reviews the allowance at the end of each quarter.
The portion of the allowance for credit losses allocated to impaired loans (nonaccrual commercial loans over $1 million) is measured by the difference between their recorded value and fair value. Fair value is either the present value of the expected future cash flows from borrowers, the market value of the loan, or the fair value of the collateral.
Nonperforming Assets - Commercial loans are placed on nonaccrual status when collateral is insufficient and principal or interest is past due 90 days or more, or when there is reasonable doubt that interest or principal will be collected. Accrued interest is usually reversed when a loan is placed on nonaccrual status. Interest payments received on nonaccrual loans may be recognized as income or applied to principal depending upon management's judgment. Nonaccrual loans are restored to accrual status when principal and interest are current or they become fully collateralized. Consumer loans are not classified as nonperforming assets, but are charged off and interest accrued is suspended based upon an established delinquency schedule determined by product. Real estate acquired in satisfaction of loans is carried in other assets at the lower of the recorded investment in the property or fair value minus estimated costs to sell.
Derivative Financial Instruments - Derivative contracts, such as futures, forwards, swaps, options, and similar products used in trading activities, are recorded at market value. Gains and losses are included in other noninterest income. Unrealized gains and losses are reported on a gross basis in trading account assets and other borrowed funds, after taking into consideration master netting agreements.
Derivative contracts are designated as an element of the Company's asset and liability management (ALM) process when they alter the Company's interest rate and foreign currency exposures. Contracts used in the ALM process are linked to specific or groups of similar assets or liabilities where there is a high correlation between the derivative contract and the item altered, both at inception and throughout the contract period. ALM derivative contracts are accounted for on the deferral, accrual, or mark-to-market basis, as noted below. Under the deferral or accrual method, gains and losses on terminated derivative contracts are deferred and amortized over the remaining life of the linked assets or liabilities. Gains and losses on derivative contracts linked to assets or liabilities that are sold are recognized as an adjustment to the gain or loss of the balance sheet item.
Deferral Accounting - This method relates principally to futures and forwards. Deferred gains and losses are reported as adjustments to the carrying value of the linked items. The amortization of deferred gains and losses is reported as interest income or expense related to the linked item.
Accrual Accounting - Interest rate swap and purchased option contracts are accounted for on an accrual basis as an adjustment to interest income or expense related to the linked item.
Mark-to-Market Accounting - This method relates to derivative contracts linked to balance sheet items recorded at fair value. The fair value changes of balance sheet and derivative items are reported in shareholders' equity net of tax. Interest accruals for derivative contracts are reported as interest income related to balance sheet items. Fair value changes in derivative contracts are recorded in earnings when the linked balance sheet item's fair value changes are recorded in earnings.
Recent Accounting Developments - Effective January 1, 2001, the Company adopted a new accounting standard related to derivatives and hedging activities. The new standard requires that all derivatives be included as assets or liabilities in the balance sheet and that such instruments be carried at fair market value through adjustments to either other comprehensive income or current earnings or both, as appropriate.
The adoption of the new standard resulted in zero impact on 2001 net income and a credit of $10 million to accumulated other comprehensive income. In connection with the adoption of the new standard, the Company transferred
investment securities with a carrying value of $0.6 billion and an unrealized loss of $5 million from its held-to-maturity to its available-for-sale and trading portfolios.
Reclassifications - Certain prior year information has been reclassified to conform its presentation with the 2000 financial statements.
2. Acquisitions and Dispositions
The Company continues to be an active acquirer of securities servicing and asset management businesses. In March 2000, the Company completed the acquisition of the correspondent clearing business of SG Cowen Securities Corporation. This transaction supports the Company's ongoing strategy of growth in the correspondent clearing business. In July 2000, the Company completed the acquisition of BHF Securities Corporation, a leading provider of domestic and international correspondent clearing services. In January 2001, the Company acquired the correspondent clearing business of Schroder & Co. Inc, from Salomon Smith Barney Inc. This transaction provides the Company with the opportunity to establish new client relationships and add valuable product capabilities to its securities servicing businesses.
In March 2000, the Company acquired the corporate trust business of Harris Trust and Savings Bank located in Chicago, Illinois. The transaction involved the transfer of approximately 1,700 trustee and agency appointments for corporate and municipal issues of debt securities. In May 2000, the Company completed its purchase of the issuer, agency and depository services business of Barclays Bank PLC. This transaction involves the transfer of several hundred fiscal, principal paying agent and sub-agent appointments as well as depository holdings on behalf of Euroclear and Clearstream Banking SA. In July 2000, the Company acquired the corporate trust business of Sakura Trust Company. In September 2000, the Company acquired the corporate trust business of Dai-Ichi Kangyo Bank of California, a wholly-owned subsidiary of the Dai-Ichi Kangyo Bank Ltd. In September 2000, the Company signed a definitive agreement to acquire the corporate trust business of The Trust Company of Bank of Montreal located in Toronto, Canada. The Trust Company's corporate trust business comprises approximately 300 bond trustee and agency appointments for Canadian and U.S. companies, which issue debt securities into the Canadian market.
In October 2000, the Company acquired Ivy Asset Management Corp., a privately-held asset management firm, based in Garden City, New York. Ivy offers clients hedge fund products and advisory services utilizing multiple managers engaged in niche styles and sophisticated strategies not typically available to the investing public. Also, in October 2000, the Company completed the acquisition of approximately $9 billion in custodial accounts administered by the Bank of America Private Bank in Los Angeles. The acquisition of this book of business expands the Advisory Custody services for investment advisors and their high net worth clients. This is an integral part of the Private Client Services business which currently administers $36 billion in custody assets for private clients, consultants, investment advisors, and family offices.
In January 2000, the Company completed the acquisition of certain assets of Institutional Securities Trading LLC ("IST"). IST is a commission recapture and third-party services firm primarily serving Taft-Hartley organizations and other plan sponsors. In May 2000, the Company completed the acquisition of certain assets of Global Execution Network Associates, Inc. ("GENA"). GENA is a U.S. based broker-dealer, specializing in quantitative and program equity trading in 52 markets globally. GENA's clients are both U.S. and
U.K. institutional investors. The acquisition will enhance the Company's non-dollar trading capabilities for the Company's institutional clients worldwide and furthers the Company's strategy to be a recognized leader in global institutional agency brokerage.
In April 2000, the Company completed the sale of its interest in Banco Credibanco S.A. to Unibanco-Uniao de Bancos Brasileiros S.A.
On October 31,1999, the Company acquired RBS Trust Bank Limited ("RBSTB") from the Royal Bank of Scotland plc. At acquisition, RBSTB had assets of $9.5billion. RBSTB is the largest provider of investor services to pension funds in the United Kingdom, and holds a leading position in the fund manager market, offering retail funds services, trustee and depositary services, as well as pension, banking, and treasury products. The acquisition continued the Company's expansion in the European market.
On November 15, 1999, the Company acquired Estabrook Capital Management Inc., an asset management firm based in New York with approximately $2.5 billion in assets under management in 2000.
Also in 1999, the Company acquired a planned giving service, a eurobond paying agency and depositary business, asset servicing businesses, and the corporate trust businesses of other financial service companies.
In the third quarter of 1999, the Company sold BNY Financial Corporation ("BNYFC")to General Motors Acceptance Corporation. Net income includes a pre-tax gain of $1,020 million ($573 million after-tax) or 75 cents per share from this sale.
During 1998, the Company acquired a merger and advisory firm, a correspondent securities clearing organization and a directed brokerage services firm. The Company also acquired the corporate trust businesses of several smaller banks in 1998 as well as a firm specializing in the research and trading of high yield securities. In 1998, the Company acquired International Factors, Ltd. which was subsequently sold as part of the BNYFC transaction.
The proforma effect of the above acquisitions and dispositions is not material.
3. Securities
The following table sets forth the amortized cost and the fair values of securities at the end of the last two years:
2000
---------------------------------------------
Gross Unrealized
In millions Amortized ---------------- Fair
Cost Gains Losses Value
--------- ----- ------ -----
Securities Held-to-Maturity
US Government Obligations $ 18 $ - $ - $ 18
US Government Agency Obligations 4 - - 4
Obligations of States and
Political Subdivisions 237 1 - 238
Mortgage-Backed Securities 100 2 - 102
Emerging Markets 311 - 37 274
Other Debt Securities 82 2 1 83
------ ---- --- ------
Total Securities Held-to-Maturity 752 5 38 719
------ ---- --- ------
Securities
Available-for-Sale
US Government Obligations 1,459 15 6 1,468
US Government Agency Obligations 1,210 19 5 1,224
Obligations of States and
Political Subdivisions 438 10 - 448
Other Debt Securities 1,540 2 2 1,540
Asset/Mortgage-Backed Securities 835 4 - 839
Equity Securities 790 370 30 1,130
------ ---- --- ------
Total Securities Available-for-Sale 6,272 420 43 6,649
------ ---- --- ------
Total Securities $7,024 $425 $81 $7,368
====== ==== === ======
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1999
---------------------------------------------
Gross Unrealized
In millions Amortized ---------------- Fair
Cost Gains Losses Value
--------- ----- ------ -----
Securities Held-to-Maturity
US Government Obligations $ 12 $ - $ - $ 12
US Government Agency Obligations 4 - - 4
Obligations of States and
Political Subdivisions 275 1 - 276
Mortgage-Backed Securities 114 - 2 112
Emerging Markets 304 - 32 272
Other Debt Securities 162 1 - 163
------ ---- ---- ------
Total Securities Held-to-Maturity 871 2 34 839
------ ---- ---- ------
Securities
Available-for-Sale
US Government Obligations 2,767 - 50 2,717
US Government Agency Obligations 768 - 36 732
Obligations of States and
Political Subdivisions 315 3 1 317
Other Debt Securities 843 4 3 844
Asset/Mortgage-Backed Securities 354 - - 354
Equity Securities 900 221 57 1,064
------ ---- ---- ------
Total Securities Available-for-Sale 5,947 228 147 6,028
------ ---- ---- ------
Total Securities $6,818 $230 $181 $6,867
====== ==== ==== ======
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The amortized cost and fair values of securities at December 31, 2000, by contractual maturity, are as follows:
Held-to-Maturity Available-for-Sale
--------------------- ---------------------
Amortized Fair Amortized Fair
In millions Cost Value Cost Value
--------- ------ --------- ------
Due in One Year or Less $218 $218 $1,081 $1,081
Due After One Year Through
Five Years 115 114 2,369 2,404
Due After Five Years Through
Ten Years 26 26 559 558
Due After Ten Years 293 259 638 637
Asset/Mortgage-Backed Securities 100 102 835 839
Equity Securities - - 790 1,130
---- ---- ------ ------
Total $752 $719 $6,272 $6,649
==== ==== ====== ======
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Realized gross gains on the sale of securities available-for-sale were $130 million and $175 million in 2000 and 1999. There were $13 million of realized gross losses in 2000 and $1 million of realized gross losses in 1999.
At December 31, 2000, assets amounting to $16 billion were pledged primarily for potential borrowing at the Federal Reserve Discount Window. The significant components of pledged assets were as follows: $4.4 billion were securities, $11.3 billion were loans, and the remaining $0.3 billion were primarily trading assets. Included in these pledged assets were securities available-for-sale of $669 million which were pledged as collateral for actual borrowings. The lenders in these borrowings have the right to repledge or sell these securities. The Company obtains securities under resale, securities borrowed and custody agreements on terms which permit it to repledge or resell the securities to others. At December 31, 2000, the Company had pledged $93 million of such securities in connection with the Company's financing activities.
4. Loans
The Company's loan distribution and industry concentrations of credit risk at December 31, 2000 and 1999 are incorporated by reference from "Loans" in the Management's Discussion and Analysis Section of this report. The Company's retail, community, and regional commercial banking operations in the New York metropolitan area create a significant geographic concentration.
In the ordinary course of business, the Company and its banking subsidiaries have made loans at prevailing interest rates and terms to directors and executive officers of the Company and to certain entities to which these individuals are related. The aggregate dollar amount of these loans was $881 million, $432 million, and $1,057 million at December 31, 2000, 1999, and 1998. These loans are primarily with related entities under revolving lines of credit. During 2000, these loans averaged $551 million, and ranged from $378 million to $881 million. All loans were fully performing during this period.
Transactions in the allowance for credit losses are summarized as follows:
In millions 2000 1999 1998
----------- ------ ------ ------
Balance, January 1 $595 $636 $641
Charge-Offs (100) (154) (51)
Recoveries 16 17 22
----- ----- -----
Net Charge-Offs (84) (137) (29)
Provision 105 135 20
Other (1) - (39) 4
----- ----- -----
Balance, December 31 $616 $595 $636
==== ==== ====
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(1) In 1999, $39 million was allocated to BNYFC loans sold.
Nonaccrual and reduced rate loans outstanding at December 31, 2000, 1999, and 1998 were $189 million, $146 million, and $179 million. At December 31, 2000, commitments to borrowers whose loans were classified as nonaccrual or reduced rate were not material.
At December 31, 2000 and 1999, impaired loans aggregated $129 million and $88 million, of which $107 million and $65 million exceeded their fair value by $25 million and $21 million. For 2000 and 1999, the average amount of impaired loans was $114 million and $130 million and interest income recognized on them (limited to cash received) was $1.9 million and $0.2 million in 2000 and 1999.
Interest income recognized on total nonaccrual and reduced rate loans exceeded reversals by $2 million in 2000, $1 million in 1999, and $3 million in 1998. Interest income would have been increased by $9 million, $8 million, and $10 million if loans on nonaccrual status at December 31, 2000, 1999, and 1998 had been performing for the entire year. At year-end, foreign loans on nonperforming status were $48 million in 2000, $63 million in 1999, and $53 million in 1998. Interest income received on foreign nonperforming loans equaled reversals in 2000, 1999, and 1998. If foreign loans on nonaccrual status at December 31, 2000, 1999, and 1998 had been performing for the entire year, interest income would have been increased by $1 million for 2000 and 1999 and $2 million for 1998.
Other real estate was $4 million, $12 million, and $14 million at December 31, 2000, 1999, and 1998. Writedowns of and expenses related to other real estate included in noninterest expense were $4 million, $1 million, and $2 million in 2000, 1999, and 1998.
5. Long-Term Debt
The following is a summary of the contractual maturity and sinking fund requirements of long-term debt at December 31, 2000 and totals for 1999:
2000 1999
--------------------------------------- ------
After
5 Years
Under Through After
In millions 5 Years(1) 10 Years 10 Years Total Total
----------- ------- -------- -------- ------ ------
Fixed $1,467 $700 $838 $3,005 $2,730
Variable - - 31 31 81
------ ---- ---- ------ ------
Total $1,467 $700 $869 $3,036(2) $2,811
====== ==== ==== ====== ======
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(1) The under five years category above includes $0.3 million of fixed rate debt with scheduled maturity of under one year.
(2) At December 31, 2000, long-term debt aggregating $1,085 million is redeemable at the option of the Company as follows: $370 million in 2001; $280 million in 2002; and $435 million in 2003.
Fixed rate debt at December 31, 2000 had interest rates ranging from 6.10% to 8.50%. The weighted average interest rates on fixed rate debt at December 31, 2000 and 1999 were 6.67% and 7.32%. The weighted average interest rates on variable rate debt at December 31, 2000 and 1999 were 6.62% and 5.69%. Exposure to interest rate movements is reduced by interest rate swap agreements. As a result of these agreements, the effective interest rates differ from those stated.
6. Company-Obligated Mandatory Redeemable Preferred Trust Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures
Wholly owned subsidiaries of the Company ("the Trusts") have issued cumulative Preferred Trust Securities. The sole assets of each trust are junior subordinated deferrable interest debentures of the Company, whose maturities and interest rates match the Preferred Trust Securities. The Company's obligations under the agreements that relate to the Preferred Trust Securities, the Trusts and the debentures constitute a full and unconditional guarantee by the Company of the Trusts' obligations under the Preferred Trust Securities.
The following table sets forth a summary of the Preferred Trust Securities issued by the Company as of December 31, 2000:
Dollars Interest Assets Due Call Call in millions Amount Rate of Trust Date Date Price ----------- ------ -------- -------- ---- ---- ------- BNY Institutional Capital Trust A $300 7.78% $309 2026 2006 103.89% BNY Capital I 300 7.97 309 2026 2006 103.99 BNY Capital II 400 7.80 412 2027 2002 Par BNY Capital III 300 7.05 309 2028 2003 Par BNY Capital IV 200 6.88 206 2028 2004 Par |
The Company has the option to shorten the maturity of BNY Capital II, III and IV to 2012, 2013 and 2013 or extend the maturity to 2046, 2047 and 2047.
7. Shareholders' Equity
The Company currently plans to buy back up to 14 million shares of its common stock in 2001. In 1998, the Company's shareholders authorized an increase in the Company's common stock from 800 million common shares to 1.6 billion common shares. The common stock was split two-for-one as of July 24, 1998. Prior period financial statements have been restated to reflect the stock split. The Company's warrants expired in November 1998. In addition to the Class A preferred stock, the Company has 5 million authorized shares of preferred stock having no par value, with no shares outstanding at either December 31, 2000 or 1999.
The Company's preferred stock purchase rights plan provides that if any person or group becomes the beneficial owner of 20% or more of the Company's common stock (an "acquiring person"), then on and after the tenth day thereafter, each right would entitle the holder (other than the acquiring person) to purchase $200 in market value of the Company's common stock for $100. In addition, if there is a business combination between the Company and an acquiring person, or in certain other circumstances, each right (if not previously exercised) would entitle the holder (other than the acquiring person) to purchase $200 in market value of the common stock of the acquiring person for $100. The rights are redeemable by the Company at $0.05 per right until they are exercisable, and will expire in 2004.
At December 31, 2000, the Company had reserved for issuance 47 million common shares pursuant to the terms of securities and employee benefit plans.
Basic and diluted earnings per share are calculated as follows:
In millions, except per share amounts 2000 1999 1998
------------------------------------- ------ ------ ------
Net Income (1) $1,429 $1,739 $1,192
Basic Weighted Average Shares Outstanding 733 751 751
Shares Issuable upon Conversion:
Warrants - - 18
Employee Stock Options 12 14 12
------ ------ ------
Diluted Weighted Average Shares Outstanding 745 765 781
====== ====== ======
Basic Earnings per Share $ 1.95 $ 2.31 $ 1.59
Diluted Earnings per Share $ 1.92 $ 2.27 $ 1.53
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(1) For purposes of calculating earnings per share, net income available to common shareholders and diluted net income are the same for all years presented.
8. Income Taxes
Income taxes included in the consolidated statements of income consist of the following:
2000 1999 1998
---------------------- ---------------------- ----------------------
In millions Current Deferred Total Current Deferred Total Current Deferred Total
------- -------- ----- ------- -------- ----- ------- -------- -----
Federal $132 $397 $529 $422 $342 $ 764 $280 $185 $465
Foreign 129 - 129 101 - 101 75 - 75
State and Local 32 132 164 124 112 236 84 75 159
---- ---- ---- ---- ---- ------ ---- ---- ----
Income Taxes $293 $529 $822 $647 $454 $1,101 $439 $260 $699
==== ==== ==== ==== ==== ====== ==== ==== ====
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The components of income before taxes are as follows:
In millions 2000 1999 1998
----------- ------ ------ ------
Domestic $1,981 $2,691 $1,751
Foreign 383 261 235
------ ------ ------
Income Before Taxes $2,364 $2,952 $1,986
====== ====== ======
|
The Company's net deferred tax liability (included in accrued taxes) at December 31 consisted of the following:
In millions 2000 1999 1998
----------- ------ ------ ------
Lease Financings $2,548 $2,108 $1,696
Depreciation and Amortization 257 239 202
Credit Losses on Loans (321) (322) (317)
Other Assets (217) (151) (97)
Other Liabilities 467 278 334
------ ------ ------
Net Deferred Tax Liability $2,734 $2,152 $1,818
====== ====== ======
|
The Company has not recorded a valuation allowance because it expects to realize all of its deferred tax assets.
The statutory federal income tax rate is reconciled to the Company's effective income tax rate below:
2000 1999 1998
------ ------ ------
Federal Rate 35.0% 35.0% 35.0%
Tax-Exempt Income (1.5) (1.0) (1.2)
Foreign Operations (0.3) (0.1) (0.2)
Leveraged Lease Portfolio (0.2) (0.1) (0.8)
Preferred Trust Securities (1.7) (1.3) (1.7)
State and Local Income Taxes,
Net of Federal Income Tax Benefit 4.4 5.0 5.0
Nondeductible Expenses 0.7 0.5 0.8
Other (1.6) (0.7) (1.7)
----- ----- -----
Effective Rate 34.8% 37.3% 35.2%
===== ===== =====
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9. Employee Benefit Plans
The Company has defined benefit and contribution retirement plans covering substantially all full-time and eligible part-time employees and also provides health care benefits for certain retired employees.
Pension Benefits Healthcare Benefits
------------------ ---------------------
Dollars in millions 2000 1999 2000 1999
------------------- ---- ---- ---- ----
Change in Benefit Obligation
Obligation at Beginning of Period $(496) $(450) $(115) $(125)
Service Cost (25) (22) (1) (1)
Interest Cost (36) (31) (9) (9)
Employee Contributions - - (2) (1)
Actuarial Gain 26 39 4 11
Benefits Paid 34 47 11 10
Net (Acquisitions) Dispositions 30 (79) - -
----- ----- ----- -----
Obligation at End of Period (467) (496) (112) (115)
----- ----- ----- -----
Change in Plan Assets
Fair Value at Beginning of Period 1,375 1,073 59 57
Actual Return on Plan Assets 558 263 6 2
Net Acquisitions (Dispositions) (31) 80 - -
Employer Contributions 7 6 - -
Benefit Payments (34) (47) - -
------ ----- ----- -----
Fair Value at End of Period 1,875 1,375 65 59
------ ----- ----- -----
Funded Status 1,408 879 (47) (56)
Unrecognized Net Transition
(Asset) Obligation (7) (9) 74 81
Unrecognized Prior Service Cost (5) (10) - -
Unrecognized Net Gain (821) (353) (19) (16)
------ ----- ----- -----
Prepaid Benefit Cost $ 575 $ 507 $ 8 $ 9
====== ===== ===== =====
Weighted Average Assumptions
Discount Rate 8.25% 8.00% 8.00% 7.75%
Expected Rate of Return on
Plan Assets 10.5 10.5 8.3 8.3
Rate of Compensation Increase 4.5 4.3
|
The Company uses September 30 as the measurement date for plan assets and obligations.
Pension Benefits Healthcare Benefits
------------------- -------------------
Dollars in millions 2000 1999 1998 2000 1999 1998
------------------- ---- ---- ---- ---- ---- ----
Net Periodic Cost (Income):
Service Cost $ 25 $ 22 $ 17 $ 1 $ 1 $ 1
Interest Cost 36 31 28 9 9 9
Expected Return on Assets (117) (96) (86) (5) (5) (3)
Other (6) (1) (3) 5 5 5
---- ---- ---- ---- ---- ----
Net Periodic Cost (Income) $(62) $(44) $(44) $ 10 $ 10 $ 12
==== ==== ==== ==== ==== ====
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The assumed health care cost trend rate used in determining benefit expense for 2000 is 7.5% decreasing to 5.0% in 2005 and thereafter. An increase in this rate of one percentage point for each year would increase the benefit obligation and the sum of the service and interest costs by 9%. A decrease in this rate of one percentage point for each year would decrease the benefit obligation by 7% and the sum of the service and interest costs by 8%.
The Company has an Employee Stock Ownership Plan ("ESOP") covering substantially all full-time employees with more than one year of service. The ESOP may provide additional retirement benefits. Contributions are made equal to required principal and interest payments on borrowings by the ESOP. Contributions were approximately $0.5 million in each of 2000, 1999 and 1998.
The Company has defined contribution plans for which it recognized a cost of $101 million in 2000, $94 million in 1999 and $82 million in 1998.
10. Company Financial Information
The Bank of New York (the "Bank"), the Company's primary banking subsidiary, is subject to dividend limitations under the Federal Reserve Act and state banking laws. Under these statutes, prior regulatory approval is required for dividends in any year that would exceed the Bank's net profits for such year combined with retained net profits for the prior two years. The Bank is also prohibited from paying a dividend in excess of undivided profits.
Under the first and more significant of these limitations, in 2001 the Bank could declare dividends of $749 million plus net profits earned in 2001.
The Federal Reserve Board can prohibit a dividend if payment would constitute an unsafe or unsound banking practice. The Federal Reserve Board generally considers that a bank's dividends should not exceed earnings from continuing operations.
Regulators require the Company and the Bank to maintain minimum levels of capital in accordance with established quantitative measurements. As of December 31, 2000 and 1999, the Company and the Bank were considered well capitalized on the basis of the ratios (defined by regulation) of Total and Tier 1 capital to risk-weighted assets and leverage (Tier 1 capital to average assets), which are shown as follows:
December 31, 2000 December 31, 1999
--------------------- --------------------- Well
Capitalized
Company Bank Company Bank Guidelines
------- ------ ------- ------ -----------
Tier 1 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
|
The Federal Reserve Act limits and requires collateral for extensions of credit by the Company's banks to the Company and certain of its non-bank affiliates. Also, there are restrictions on the amounts of investments by such banks in stock and other securities of the Company and such affiliates, and restrictions on the acceptance of their securities as collateral for loans by such banks. Extensions of credit by the banks to each of the Company and such affiliates are limited to 10% of such bank's regulatory capital, and in the aggregate for the Company and all such affiliates to 20%.
The subsidiary banks of the Company are required to maintain reserve balances with Federal Reserve Banks under the Federal Reserve Act and Regulation D. Required balances averaged $401 million and $489 million for the years 2000 and 1999.
The Company's condensed financial statements are as follows:
Balance Sheets
In millions December 31, 2000 1999
------------------------------------------------- ------- -------
Assets
Cash and Due from Banks $ 1 $ 1
Securities 321 2
Loans 12 9
Investment in and Advances to Subsidiaries
and Associated Companies
Banks 8,549 7,889
Other 3,721 3,370
------- -------
12,270 11,259
Other Assets 72 97
------- -------
Total Assets $12,676 $11,368
======= =======
Liabilities and Shareholders' Equity
Other Borrowed Funds $ 310 $ 450
Due to Non-Bank Subsidiaries 3,042 2,945
Due to Bank Subsidiaries 50 -
Other Liabilities 118 50
Long-Term Debt 3,004 2,780
------- -------
Total Liabilities 6,524 6,225
------- -------
Shareholders' Equity*
Preferred 1 1
Common 6,151 5,142
------- -------
Total Liabilities and Shareholders' Equity $12,676 $11,368
======= =======
*See Consolidated Statements of Changes in Shareholders' Equity.
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Statements of Income
In millions
For the years ended December 31, 2000 1999 1998
----------------------------------------------- ------- ------ ------
Operating Income
Dividends from Subsidiaries
Banks $ 852 $1,364 $ 564
Other 101 1,322 52
Interest from Subsidiaries
Banks 116 99 88
Other 45 31 24
Other 6 54 56
------ ------ ------
Total 1,120 2,870 784
------ ------ ------
Operating Expenses
Interest (including $208 in 2000, $186 in
1999, and $169 in 1998 to Subsidiaries) 428 379 367
Other 31 19 10
------ ------ ------
Total 459 398 377
------ ------ ------
Income Before Income Taxes and Equity in
Undistributed Earnings of Subsidiaries 661 2,472 407
Income Tax Benefit (96) (98) (116)
------ ------ ------
Income Before Equity in Undistributed
Earnings of Subsidiaries 757 2,570 523
------ ------ ------
Equity in Undistributed Earnings of Subsidiaries
Banks 480 187 411
Other 192 (1,018) 258
------ ------ ------
Total 672 (831) 669
------ ------ ------
Net Income $1,429 $1,739 $1,192
====== ====== ======
|
Statements of Cash Flows
In millions For the years ended December 31, 2000 1999 1998
-------------------------------------------------- ------ ------ ------
Operating Activities
Net Income $1,429 $1,739 $1,192
Adjustments to Determine Net Cash Attributable to
Operating Activities:
Amortization 15 16 11
Equity in Undistributed Earnings of Subsidiaries (672) 831 (669)
Securities Gains 8 (19) (1)
Change in Interest Receivable 6 (21) (16)
Change in Interest Payable (1) 8 4
Change in Taxes Payable 74 (44) (51)
Other, Net 5 11 (26)
------ ------ ------
Net Cash Provided by Operating Activities 864 2,521 444
------ ------ ------
Investing Activities
Purchases of Securities (418) (18) (25)
Sales of Securities 84 - 1
Maturities of Securities 2 4 22
Change in Loans (3) 465 (151)
Acquisition of, Investment in, and Advances to
Subsidiaries (151) (1,736) (286)
Other, Net - - (6)
------ ------ ------
Net Cash Used by Investing Activities (486) (1,285) (445)
------ ------ ------
Financing Activities
Change in Other Borrowed Funds (140) (364) (66)
Proceeds from the Issuance of Long-Term Debt 265 731 286
Repayments of Long-Term Debt (53) (20) (17)
Change in Advances from Subsidiaries 147 168 579
Issuance of Common Stock 341 301 606
Treasury Stock Acquired (454) (1,626) (976)
Cash Dividends Paid (484) (437) (403)
------ ------ ------
Net Cash (Used) Provided by Financing Activities (378) (1,247) 9
------ ------ ------
Change in Cash and Due from Banks - (11) 8
Cash and Due from Banks at Beginning of Year 1 12 4
------ ------ ------
Cash and Due from Banks at End of Year $ 1 $ 1 $ 12
====== ====== ======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year for:
Interest $ 428 $ 369 $ 361
Income Taxes 139 435 339
|
11. Other Noninterest Income and Expense
Other noninterest income includes equity in earnings of unconsolidated subsidiaries of $35 million, $20 million, and $22 million in 2000, 1999, and 1998. In 1999, other noninterest income included a pre-tax gain of $1,020 million on the sale of BNYFC and a liquidity charge of $124 million on the accelerated disposition of certain loans.
Other noninterest expense includes amortization of intangibles of $115 million, $102 million, and $101 million in 2000, 1999, and 1998. Included in other assets at December 31, 2000, 1999, and 1998 were intangible assets of $1,800 million, $1,640 million, and $1,580 million.
12. Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments (i.e., monetary assets and liabilities) are determined under different accounting methods-see Note 1. The following disclosure discusses these instruments on a uniform basis - fair value. However, active markets do not exist for a significant portion of these instruments, principally loans and commitments. As a result, fair value determinations require significant subjective judgments regarding future cash flows. Other judgments would result in different fair values. Among the assumptions used by the Company are discount rates ranging principally from 5% to 10% at December 31, 2000 and 6% to 9% at December 31, 1999. The fair value information supplements the basic financial statements and other traditional financial data presented throughout this report.
A summary of the practices used for determining fair value is as follows:
The carrying amount and estimated fair value of the Company's financial instruments are as follows:
In millions December 31, 2000 1999
---------------------------- -------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
Assets
Securities $ 7,940 $ 7,936 $ 7,250 $ 7,299
Trading Assets 12,051 12,051 8,715 8,715
Loans and Commitments 31,126 31,305 33,030 32,934
Derivatives Used for ALM 34 5 17 15
Other Financial Assets 15,141 15,141 16,421 16,421
------- ------- ------- -------
Total Financial Assets 66,292 $66,438 65,433 $65,384
======= =======
Non-Financial Assets 10,822 9,323
------- -------
Total Assets $77,114 $74,756
======= =======
Liabilities
Noninterest-Bearing Deposits $13,255 $13,255 $12,162 $12,162
Interest-Bearing Deposits 43,121 43,150 43,589 43,607
Borrowings 2,916 2,916 2,913 2,914
Long-Term Debt 3,036 3,042 2,811 2,653
Trading Liabilities 2,070 2,070 2,353 2,353
Preferred Trust Securities 1,500 1,435 1,500 1,307
Derivatives Used for ALM 6 (24) 8 98
------- ------- ------- -------
Total Financial Liabilities 65,904 $65,844 65,336 $65,094
======= =======
Non-Financial Liabilities 5,058 4,277
------- -------
Total Liabilities and
Preferred Trust Securities $70,962 $69,613
======= =======
|
Commitments and contingent items reduced the fair value of loans and commitments by $20 million in 2000 and $11 million in 1999.
The table below summarizes the carrying amount of the financial instruments and the related notional amount and estimated fair value (unrealized gain/loss) of ALM interest rate swaps that were linked to these items:
ALM Interest Rate Swaps
-----------------------
Carrying Notional Unrealized
In millions Amount Amount Gain (Loss)
----------- -------- -------- ---- ----
At December 31, 2000
--------------------
Loans $ 614 $ 614 $ 3 $(12)
Securities Held-for-Sale 200 200 14 -
Deposits 155 155 2 (2)
Borrowings 860 860 23 -
Long-Term Debt 1,440 1,440 26 (25)
At December 31, 1999
--------------------
Loans $ 505 $ 505 $16 $ (1)
Deposits 290 290 1 (11)
Borrowings 218 218 - (2)
Long-Term Debt 1,465 1,465 2 (88)
|
The following table illustrates the notional amount, remaining contracts outstanding, and weighted average rates for ALM interest rate contracts:
Remaining Contracts Outstanding
at December 31,
Total ----------------------------------------
Dollars in millions 12/31/00 2001 2002 2003 2004 2005
-----------------------------------------------------------------------------------------
Receive Fixed Interest Rate Swaps:
Notional Amount $2,325 $1,325 $1,090 $ 655 $ 645 $ 645
Weighted Average Rate 7.14% 7.23% 7.19% 7.15% 7.14% 7.14%
Pay Fixed Interest Rate Swaps:
Notional Amount $ 614 $ 548 $ 495 $ 462 $ 374 $ 325
Weighted Average Rate 6.35% 6.36% 6.36% 6.36% 6.35% 6.30%
Basis Interest Rate Swaps:
Notional Amount $ 330 $ - $ - $ - $ - $ -
Forward LIBOR Rate (1) 6.43% 5.53% 5.82% 5.98% 6.11% 6.11%
(1) The forward LIBOR rate shown above reflects the implied forward yield curve for that index
at December 31, 2000. However, actual repricings for ALM interest rate swaps are generally based
on 3 month LIBOR.
|
The Company's financial assets and liabilities are primarily variable rate instruments. Fixed rate loans and deposits are issued to satisfy customer and investor needs. Derivative financial instruments are utilized to manage exposure to the effect of interest rate changes on fixed rate assets and liabilities, and to enhance liquidity. The Company matches the duration of derivatives to that of the assets and liabilities being hedged, so that changes in fair value resulting from changes in interest rates will be offset.
The Company uses interest rate swaps, futures contracts, and forward rate agreements to convert fixed rate loans, deposits, and long-term debt to floating rates. Basis swaps are used to convert various variable rate borrowings to LIBOR which better matches the assets funded by the borrowings.
The Company uses forward foreign exchange contracts to protect the value of its investments in foreign subsidiaries. The after-tax effects are shown in the cumulative translation adjustment included in shareholders' equity. At December 31, 2000 and 1999, $749 million and $571 million in notional amount of foreign exchange contracts, with fair values of $(21) million and $8 million, hedged corresponding amounts of foreign investments. These foreign exchange contracts had a maturity of less than 2 months at December 31, 2000. At December 31, 2000, $145 million in notional amount of forward foreign exchange contracts, with a fair value of $1 million, hedged planned noninterest expenses denominated in foreign currencies. These foreign exchange contracts had maturity of less than 1 year at December 31, 2000.
Deferred net gains or losses on ALM derivative financial instruments at December 31, 2000 and 1999 were $2 million debit and $27 million credit.
Net interest income increased by $6 million in 2000, $5 million in 1999, and $4 million in 1998 as a result of ALM derivative financial instruments.
A discussion of the credit, market, and liquidity risks inherent in financial instruments is presented under "Liquidity", "Market Risk Management", "Trading Activities and Risk Management", and "Asset/Liability Management" in the unaudited Management's Discussion and Analysis Section of this report and Note 13 to the Consolidated Financial Statements.
13. Trading Activities
The following table shows the fair value of the Company's financial instruments that are held for trading purposes:
2000 1999
---------------------------- ---------------------------
In millions Assets Liabilities Assets Liabilities
------------- ------------- ------------- -------------
Trading Account 12/31 Average 12/31 Average 12/31 Average 12/31 Average
--------------- ----- ------- ----- ------- ----- ------- ----- -------
Interest Rate Contracts:
Futures and Forward
Contracts $ 10 $ 7 $ - $ - $ 2 $ 9 $ - $ -
Swaps 613 1,128 343 891 1,104 692 729 543
Written Options - - 761 710 - - 760 567
Purchased Options 75 66 - - 60 69 - -
Foreign Exchange Contracts:
Written Options - - 106 56 - - 164 224
Purchased Options 128 108 - - 254 240 - -
Commitments to Purchase
and Sell Foreign
Exchange 869 875 835 849 600 560 577 535
Debt Securities 10,349 9,044 23 25 6,695 1,367 123 165
Credit Derivatives 7 4 2 - - - - -
------- ------- ------ ------ ------ ------ ------ ------
Total Trading Account $12,051 $11,232 $2,070 $2,531 $8,715 $2,937 $2,353 $2,034
======= ======= ====== ====== ====== ====== ====== ======
|
Other noninterest income included the following income related to trading activities:
In millions 2000 1999 1998
----------- ----- ----- -----
Foreign Exchange $215 $137 $126
Interest Rate Contracts 29 20 26
Debt and Other Securities 14 32 18
Credit Derivatives 3 - -
----- ----- -----
$261 $189 $170
==== ==== ====
|
Foreign exchange includes income from purchasing and selling foreign exchange, futures, and options. Interest rate contracts reflect results from futures and forward contracts, interest rate swaps, foreign currency swaps, and options. Debt and other securities primarily reflect income from debt securities.
14. Commitments and Contingent Liabilities
In the normal course of business, various commitments and contingent liabilities are outstanding which are not reflected in the accompanying consolidated balance sheets. Management does not expect any material losses to result from these matters.
The Company's significant trading and off-balance-sheet risks are securities, foreign currency and interest rate risk management products, commercial lending commitments, letters of credit, and securities lending indemnifications. The Company assumes these risks to reduce interest rate and foreign currency risks, to provide customers with the ability to meet credit and liquidity needs, to hedge foreign currency and interest rate risks, and to trade for its own account. These items involve, to varying degrees, credit, foreign exchange, and interest rate risk not recognized in the balance sheet. The Company's off-balance-sheet risks are managed and monitored in manners similar to those used for on-balance-sheet risks. There are no significant industry concentrations of such risks.
A summary of the notional amount of the Company's off-balance-sheet credit transactions, net of participations, at December 31, 2000 and 1999 follows:
Off-Balance-Sheet Credit Risks In millions 2000 1999 ----------- ------- ------- Commercial Lending Commitments $ 47,688 $50,721 Standby Letters of Credit 7,743 8,257 Commercial Letters of Credit 1,230 1,329 Securities Lending Indemnifications 106,560 61,378 |
The total potential loss on undrawn commitments, standby and commercial letters of credit, and securities lending indemnifications is equal to the total notional amount if drawn upon, which does not consider the value of any collateral. Since many of the commitments are expected to expire without being drawn upon, the total amount does not necessarily represent future cash requirements. In securities lending transactions, the Company requires the borrower to provide collateral, thus reducing credit risk.
The notional amounts for other off-balance-sheet risks express the dollar volume of the transactions; however, credit risk is much smaller. The Company performs credit reviews and enters into netting agreements to minimize the credit risk of foreign currency and interest rate risk management products. The Company enters into offsetting positions to reduce exposure to foreign exchange and interest rate risk.
Standby letters of credit principally support corporate obligations and include $0.4 billion that were collateralized with cash and securities at December 31, 2000 and 1999. At December 31, 2000 and 1999, securities lending indemnifications were secured by collateral of $106.6 billion and $61.4 billion. At December 31, 2000, approximately $6.3 billion of the standbys will expire within one year, and the balance between one to five years.
At December 31, 2000, approximately $100.4 billion of interest rate contracts will mature within one year, $137.3 billion between one and five years, and the balance after five years. At December 31, 2000, approximately $74.7 billion of foreign exchange contracts will mature within one year and $1.5 billion between one and five years. There were no derivative financial instruments on nonperforming status at year-end 2000.
Use of derivative financial instruments involves reliance on counterparties. Failure of a counterparty to honor its obligation under a derivative contract is a risk the Company assumes whenever it engages in a derivative contract.
A summary of the notional amount and credit exposure of the Company's derivative financial instruments at December 31, 2000 and 1999 follows:
Derivative Financial Instruments
Notional Amount Credit Exposure
--------------- ---------------
In millions 2000 1999 2000 1999
----------- ------ ------- ----- ------
Interest Rate Contracts:
Futures and Forward Contracts $ 36,614 $20,537 $ 1 $ 2
Swaps 109,525 86,341 1,327 1,124
Written Options 87,979 70,009 - -
Purchased Options 40,749 36,766 352 287
Foreign Exchange Contracts:
Swaps 235 147 18 16
Written Options 14,172 24,639 40 28
Purchased Options 16,545 27,968 189 287
Commitments to Purchase and Sell
Foreign Exchange 45,400 50,196 1,022 694
Equity Derivatives:
Purchased Options - 3 - -
Credit Derivatives:
Swaps 1,643 325 7 83
------ ------
2,956 2,521
Effect of Master Netting Agreements (1,567) (1,558)
------ ------
Total Credit Exposure $1,389 $ 963
====== ======
|
Operating Leases
Net rent expense for premises and equipment was $113 million in 2000, $100 million in 1999, and $101 million in 1998.
At December 31, 2000, the Company and its subsidiaries were obligated under various noncancelable lease agreements, some of which provide for additional rents based upon real estate taxes, insurance, and maintenance and for various renewal options. The minimum rental commitments under noncancelable operating leases for premises and equipment having a term of more than one year from December 31, 2000 are as follows:
Year ending December 31, In millions
-----------------------------------------------------
2001 $ 90
2002 77
2003 63
2004 55
2005 52
Thereafter 234
-----
Total Minimum Lease Payments $ 571
=====
|
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 upon the Company's consolidated financial statements.
15. Stock Option Plans
The Company's stock option plans ("the Option Plans") provide for the issuance of stock options at fair market value at the date of grant to officers and employees of the Company and its subsidiaries. Under the Company's plan, options to acquire common stock may be granted in amounts that do not exceed 70 million shares. Generally, each option granted under the Option Plans is exercisable between one and ten years from the date of grant.
The Company accounts for its Option Plans under Accounting Principles Board Opinion 25. As a result, compensation cost is not recorded. If compensation cost for these plans had been based on fair value, net income would have been reduced by $37 million in 2000, $31 million in 1999, and $24 million in 1998. Also, diluted earnings per share would have been reduced by 5 cents per share in 2000, 4 cents per share in 1999, and 3 cents per share in 1998.
The assumptions used in the Black-Scholes Model for determining the impact
of accounting for the Option Plans at fair value for 2000 are as follows:
dividend yield of 3%; expected volatility of 29%; risk free interest rate of
6.70%; and expected option lives of 5 years.
A summary of the status of the Company's Option Plans as of December 31, 2000, 1999, and 1998, and changes during the years ending on those dates is presented below:
2000 1999 1998
--------------------- ---------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Shares Price Shares Price Shares Price
------- --------- --------- --------- --------- --------- ---------
Outstanding at
Beginning of Year 30,340,627 $22.04 28,195,178 $16.72 24,662,436 $10.31
Granted 9,489,700 39.65 7,322,850 35.60 9,206,000 29.37
Exercised (5,619,925) 15.62 (4,579,044) 10.12 (5,273,966) 8.34
Canceled (717,382) 37.18 (598,357) 28.64 (399,292) 22.68
---------- ---------- ----------
Outstanding at
End of Year 33,493,020 27.78 30,340,627 22.04 28,195,178 16.72
========== ========== ==========
Options Exercisable
at Year-end 16,539,056 18.57 16,223,731 13.38 16,414,092 10.09
Weighted Average
Fair Value of
Options Granted
During the Year $10.93 $8.18 $6.24
|
The following table summarizes information about stock options outstanding at December 31, 2000:
Options Outstanding Options Exercisable
--------------------------------- ---------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/00 Life Price at 12/31/00 Price
--------------- ----------- ----------- -------- ----------- --------
$ 3 to 7 4,384,043 3.0 Years $ 6.70 4,384,043 $ 6.70
11 to 17 6,273,441 5.6 15.09 5,989,459 14.99
20 to 25 43,984 6.4 21.51 34,536 21.61
27 to 30 5,818,009 7.0 27.48 3,782,035 27.48
31 to 42 16,646,493 8.6 37.80 2,348,983 35.49
43 to 57 327,050 9.6 50.21 - -
----------- -----------
3 to 57 33,493,020 7.0 27.78 16,539,056 18.57
=========== ===========
|
Report of Independent Auditors
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THE BANK OF NEW YORK COMPANY, INC.
NEW YORK, NEW YORK
We have audited the accompanying consolidated balance sheets of The Bank of New York Company, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Bank of New York Company, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.
/S/ Ernst & Young LLP
NEW YORK, NEW YORK
JANUARY 26, 2001
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Securities Servicing and Global Payment Services
We are the world's premier asset servicer and global payments provider. Our array of products exceeds those of our competitors, and we rank as the number one or two provider in most of the markets we serve. Growth across business lines accelerated in 2000, produced by strong sales momentum, revenues from strategic acquisitions, and expansion of global financial markets. Aggressive investment in leading-edge technology helped us capitalize on a rapidly changing global market. 2000 fee revenue from these businesses grew to $1.91 billion, a 26% increase.
We are well positioned to take advantage of the growth in financial assets and trading activity occurring around the globe. This expansion is driven by increased cross-border investments, substantial growth of overseas pension and mutual funds, and the opening of new investment markets.
By focusing on specific industries, we are able to provide consultative expertise and tailored solutions to mutual funds, fund managers, insurance companies, banks, government agencies, endowments, corporate pension funds, central banks, and broker/dealers. We serve as a partner to these key client segments, leveraging our core strengths to enable them to build their own competitive advantage. Our commitment to ongoing product innovation enables us to deliver an expanded range of services designed to help our clients mitigate risk, maximize performance, and manage costs.
Escalating financial and competitive pressures are compelling many institutional investors and broker/dealers to outsource middle- and back- office functions at an accelerating rate. As a leading outsourcing provider, The Bank of New York allows clients to use our expertise and infrastructure, and to deploy their resources to compete more effectively in their core businesses. During 2000 the Bank was appointed as an outsourcing partner by Julius Baer International, the London-based private client asset management arm of Julius Baer, to provide administration and custody services. This was the first outsource transaction of its kind involving a Continental European institution and represents the beginning of a trend that we expect to continue in 2001 and beyond.
Strategic investment, partnership and product innovation in 2000 resulted in the following:
- BNY Clearing's acquisitions of BHF Securities Corporation, certain assets of SG Cowen Securities Corporation, and Schroder & Co. Inc. expanded our capabilities in the correspondent clearing business. These services help brokers package and process a range of investments for their customers, while providing our institutional clients an opportunity to distribute their asset management products to brokers;
- A strategic alliance with RiskMetrics expanded our analytic capabilities to our pension clients by enhancing value-at-risk services;
- The establishment of EnergyClear, which is the first industry-sponsored clearinghouse to offer comparison, netting and settlement of wholesale energy
contracts for the over-the-counter (OTC) marketplace. These financial services will ultimately increase the market depth and liquidity of the OTC energy markets by reducing the credit, legal, operational, and liquidity risks;
- The formation of an alliance between Agricultural Bank of China and The Bank of New York to provide consultancy services covering technology, fund operations and training while Agricultural Bank prepares to launch open-end mutual funds in China; and
- The ranking of AIB/BNY Fund Management (Ireland) Limited as the fastest- growing fund administrator in Dublin, validating our commitment to offshore administrative services.
These developments are testament to the success of our ongoing approach - to leverage technology, create alliances and make acquisitions to extend our product and market reach. As the needs of global investors and broker/dealers grow increasingly sophisticated, our ability to consistently deliver innovative services that anticipate evolving client needs will continue to distinguish us in the marketplace and position us for sustained growth.
Depositary Receipts (DRs) enable individuals worldwide to invest in dollar- denominated securities of non-U.S. companies and provide the issuers of these securities access to the U.S. and European capital markets.
2000 was another record year for the depositary receipt industry with trading volume reaching a high of 29 billion shares valued at $1.2 trillion. Continuing our leadership, we achieved a 64% share of all new public sponsored programs by adding 114 new clients from 33 countries including 50 programs that listed on a U.S. exchange for the first time. Among the new listings were Pearson, BASF, VSNL and China Unicom. Also 17 clients named the Bank as successor depositary, including Zurich Financial Services and Compania Anonima Nacional Telefonos de Venezuela (CANTV). We are the world leader with a market share of 65% of all DR programs with more than 1,400 clients from 69 countries. DR revenues grew largely due to an increase in cross-border mergers, acquisitions and trading activity.
We launched 12 new HOLDRs(service mark) Trusts , which are exchange-traded equity basket securities. The trusts issue depositary receipts, which represent common shares of specified companies as well as depositary receipts. Basket securities offer flexibility, diversification and reduced investment costs.
We also introduced DR Alert(service mark) our daily on-line notification system for depositary receipt clients. DR Alert tracks price and share activity, and reports activity, outside of predetermined parameters, directly to the issuer on a daily basis. DR Alert is delivered through our internet-based, client-reporting platform INFORM. Currently, INFORM is used by 450 depositary receipt clients from 50 countries.
We acted as tender and exchange agent in some of the largest cross-border acquisitions using depositary receipts, including Vivendi, Seagram and Canal
Plus, which merged to form Vivendi Universal as well as Glaxo Wellcome and SmithKline Beecham, which merged to form GlaxoSmithKline.
We remain the world market leader for innovative, high-quality corporate trust services. Our portfolio grew to more than 75,000 trust and agency appointments representing more than $750 billion in outstanding securities for issuers globally. Our diversified strategy continues to provide excellent core growth, with most products generating revenue growth of more than 15% and with several producing more than 30%. Corporate Trust products include global finance, structured finance, and dealing and trading services.
Three strategic acquisitions were completed in 2000 adding new products and improved market penetration. Most notable was the Harris Trust and Savings Bank transaction in March 2000. The 1,700 appointments in the Chicago-based portfolio added both new structured products and an improved access to the U.S. Midwest markets - an important complement to our portfolio.
We continued to enhance and differentiate our services for sophisticated asset-backed, collateralized debt obligations (CDOs) and other complex structured debt products. Our unique ability to integrate customized asset servicing through BNY Asset Solutions, advanced web-based analytic and reporting services, and some of the most advanced trust services available provides our clients with a comprehensive, one-stop solution for their complex financings.
The success of our strategy is also reflected in the robust growth of our Global Trust Services Division, which maintained its position as the fastest growing global trust group in the industry. Record core growth, combined with the successful integration of two acquisitions completed in late 1999, produced impressive revenue growth in 2000.
As one of the world's largest stock transfer agents, we provide a full range of technology enhanced services such as recordkeeping, dividend payment and reinvestment, proxy tabulation and exchange agent services to over 14.5 million shareholders representing 550 issuers. In 2000 our shareholder accounts grew by more than 25%, testament to our reputation for quality, service and new business efforts.
Our ability to empower our clients and shareholders with access to their records on a real-time basis and to perform financial transactions on the internet is at the core of our strategy. We further enhanced our straight- through-processing capabilities through our imaging platform by deploying image-enabled workstations to all of our customer service representatives and operational personnel.
BNY ESI & CO., our equity brokerage business, had another year of superior performance. Growth was fueled by the expansion of corporate, asset management, mutual fund, and plan sponsor client segments. Another important factor was the cross-sell of trade execution to a large number of the Bank's key client segments as well as other bank services.
To strengthen BNY ESI's international capabilities, we acquired an institutional agency broker specializing in program trading of non-dollar equity securities. This new trading capability has been integrated into the Bank's non-dollar clearing services and global custody, creating an institutional Straight Through Execution and Processing (STEP) product. This
product allows clients to execute trades in most of the world's capital markets and have their trades automatically posted to their custody accounts.
We are a global market leader in payment services, offering solutions that optimize cash flow, integrate systems and increase investment returns to financial institutions and corporations. CA$H-Register Plus(trademark), an innovative internet-based, cash management delivery system, offers a broad range of services on a browser-based platform. It enables customers to conduct a growing range of transactions, including wire transfers, ACH payments and collections, letters of credit, information reporting and the retrieval of check images.
The Bank is the second leading provider of funds transfer services in the U.S. and the only Bank that has consistently increased its market share over the past five years, growing from 7.9% to 12.8%. We process over 140,000 transactions daily with an aggregate value of $800 billion. The underlying business activity reflects global trade, securities and foreign exchange transactions.
We deliver trade services that facilitate global trade, including letters of credit, documentary collections, reimbursements, automated inquiry and reporting as well as outsourcing trade services. Our customers include import and export corporations and banks that deliver trade services around the world.
In 2000 we completed a large-scale trade services outsourcing arrangement for Canadian Imperial Bank of Commerce, which included both back-office processing and a suite of front-office internet enabled products. This outsourcing leverages our advanced internet technology, our imaging capabilities and expertise in global trade processing.
We offer deposit services to corporate and institutional customers designed to facilitate the receipt and disbursement of cash and provide sophisticated reporting capabilities. Our services range from traditional check processing to an image-based, nationwide wholesale lockbox system.
BNY Asset Management And Private Client Services
BNY Asset Management and Private Client Services provide a comprehensive range of investment products and capabilities designed to meet the current and emerging needs of institutions and high-net-worth individuals worldwide.
In 2000 superior long-term investment performance, aggressive new business development, expanded investment capabilities and favorable growth trends resulted in record fee revenue of $296 million, 21% more than last year.
BNY Asset Management is a premier investment manager offering client- specific solutions and exceptional results. We are one of the largest investment managers in the United States with over $66 billion in assets under management, and growth last year of $6 billion. Despite substantial market volatility in 2000, BNY Asset Management delivered another year of solid returns.
The acquisition of Ivy Asset Management and the integration of Estabrook Capital Management, a 1999 acquisition, further supported our strategy of delivering innovative investment solutions. Ivy Asset Management is one of the nation's leading multi-manager, alternative investment specialists offering hedge fund products and customized portfolio solutions. Ivy has $3.1 billion in assets under management for institutions and private clients in 15 countries.
Reflecting our commitment to client-specific investment solutions, we introduced new proprietary funds: the domestic BNY Partners Multi-Manager Hedge Fund LLC and the offshore BNY Partners Multi-Manager Hedge Fund Ltd. We also marked the first full year of our inaugural private equity fund, the BNY Partners Fund. While expanding our alternative and value-investing capabilities, we continue to offer equity, fixed income, and balanced portfolio management as well as short-term money management, index funds, BNY Hamilton Funds and special investment products.
Our investment strategy and portfolio allocations are determined by following a core growth orientation and a disciplined investment approach. Capitalizing on proprietary research, our investment strategy is based on fundamental analysis, relative value, and high quality. This rigorous and sustained investment approach once again provided our clients with another year of strong returns.
Private client services provides clients with objective, value-added advice, supported by highly complementary services. Our individually tailored solutions are designed to help clients grow and protect their wealth while addressing key generational planning issues. We are well positioned to deliver investment services to this market, which has grown 12% over the past decade.
Our primary target market consists of high-net-worth individuals and families, corporate executives, entrepreneurs and business owners. Domestically, private client services are delivered via a network of 12 offices in the tri-state area and by an affiliate in Florida.
Our Private Client Special Industries Division is designed to meet the unique needs of clients within the real estate, non-profit and media industries as well as private equity sponsor firms. In 2000 International Private Client Services focused on delivery of global wealth management services to high-net-worth individuals, their families and related entities in the Middle East, Europe, Asia and Latin America. Our emphasis is on long-term relationships, drawing on our world-class expertise in asset management, fiduciary services, global custody and related banking services.
Our fully integrated wealth management solutions are derived from a key set of core competencies which include financial planning, personal trust and estate administration, customized finance and banking services, personal portfolio management, alternative asset classes, and personal and advisory custody. Our custody business had outstanding growth in 2000 with assets under administration increasing 19% from 1999. This business benefited from the strategic acquisition of the Bank of America's private client advisory custody activity.
Corporate Banking
Corporate Banking is responsible for the worldwide management of commercial and institutional relationships. Experienced relationship managers oversee the delivery of the full range of the Bank's credit and non-credit products and focus on cross-selling the Bank's fee-based services.
We are focused on maintaining strong asset quality and balancing the risks and profitability of every client relationship. An important result of this strategy is that our credit-only exposures have declined from 45% of the portfolio in 1994 to only 8% in 2000, as our risk profile improved.
Financial companies services provides sophisticated, company-specific solutions to meet the securities services, cash management and financing needs of our clients. Financial companies - mutual funds, insurance companies, banks, investment managers, government agencies and broker/dealers - remain the Bank's largest and fastest growing market and are the largest users of our securities services infrastructure.
As a leader in special industries banking, we provide banking services and financing to such key industry sectors as media and telecommunications, energy, retailing, real estate, automotive and healthcare.
In U.S. commmercial banking we target major domestic companies from traditional manufacturers to leading distribution and service companies. This diverse client base provides a foundation for cross-selling our fee-based services.
Regional commercial banking offers a wide range of banking services, including traditional lending, cash management, leasing, trade finance, capital markets and corporate finance to mid-sized companies in the metropolitan New York area. Additionally, we offer a full range of private banking and asset management services to the principals as well as retirement plan services for the employees of these companies.
BNY Capital Markets, Inc., a subsidiary, provides its clients with a broad range of capital markets and investment banking services including the structuring and syndication of credit facilities, the underwriting and distribution of corporate bonds and investment grade tax-exempt securities and the private placement of debt, mezzanine and equity securities.
The group also provides merger, acquisition, valuation, fairness opinions and other advisory services and invests as a principal in junior capital including debt, equity and hybrid securities through its affiliate BNY Capital Partners, LP.
BNY Capital Funding LLC, one of the largest bank-owned leasing companies in the United States, develops innovative structuring to meet the tax-oriented equipment financing needs of domestic and international customers. BNY Capital Resources Corporation provides financing for corporate banking clients. Our BNY Leasing Edge(service mark) product provides leasing alternatives to our retail and middle-market clients.
International Banking includes 29 international branches and representative offices in 26 countries and a network of over 2,300 correspondent banks. Our international bankers are focused on the securities servicing, global payment and trade finance needs of our clients. We are among the top five U.S. issuers of import-trade letters of credit and a major player in facilitating export-trade transactions.
Global Markets
Global Markets encompasses the Bank's foreign exchange and interest rate risk management businesses including our global trading and sales activities. Successful cross-selling of our growing global securities servicing client base, combined with the sale of new products and solutions, led to record revenues of $261 million for 2000.
The Bank is a premier Foreign Exchange (FX) provider, trading in over 100 currency markets around the world. In 2000 we expanded our global investment manager customer base by 20% and increased trading activity by 32%.
Our global risk management services include a suite of risk management alternatives, supplemented by unique proprietary research, which is available through e-commerce channels and traditional media. As these services are focused on relationships, we tailor our products and services to provide value to the Bank's core clients.
iFX MANAGER(service mark) is the Bank's internet-based FX trade-order management and execution system, offering institutional clients true end-to-end straight-through processing. iFX Manager automates all aspects of FX trading for clients. FX Week, an industry magazine, voted iFX Manager one of the top three bank-offered FX trading systems.
In November 2000 the Bank joined FXall(trademark), the global currency trading and research platform, as an equity participant. FXall allows clients to have a single point of access to all participating FX providers with whom they have a business relationship. In joining FXall, the Bank contributed the advanced technical functionality of iFX Manager to help FXall provide a robust trading platform for the benefit of clients and providers worldwide.
The Bank is a premier provider of interest rate and currency derivatives, including currency and interest rate options. Our derivatives business is client-driven, and complemented by sophisticated risk management systems. Broader product capabilities and focused relationship management were key drivers of revenue growth as business increased by 30% in 2000. European business expansion initiatives resulted in revenue growth for that region. In addition, we solidified our leading market position with U.S. government agencies while increasing our derivative presence with corporate, financial institution and investment manager clients.
Our strategy and research professionals publish in-depth fundamental and technical analyses of foreign exchange and interest rate markets on the Bank's website: www.bankofny.com. We also provide a proprietary model that monitors cross-border investment flows among the international equity and fixed-income markets.
BNY Overlay Associates is the Bank's specialist currency overlay manager, providing investment advisory services to institutional investors. Existing client currency exposures are managed to mitigate risk and achieve increased portfolio returns.
Retail Banking
We operate a network of 349 full-service branches, establishing us as a leader in the suburban metropolitan New York market. Our branches offer a combination of traditional banking and alternative banking services including financial planning and insurance products to approximately three quarters of a million individual households and businesses.
With over $14 billion in core deposits, retail banking continues to provide a stable, low-cost funding source that supports lending activities throughout the Bank. 2000 produced exceptional results with mutual fund swept balances and total non-interest income increasing by 27% and 15%, respectively.
Our strategy of offering third-party, non-traditional products increases our range of products, deepens and strengthens client relationships, and increases non-interest income. The BNY Investment Center, Inc. (BNYIC) operates throughout our extensive branch network and business centers. BNYIC focuses on meeting the planning and investment needs of both personal and business customers. BNYIC increased sales by 18% and revenue by 15% in 2000.
Our new CheckInvest Select product, a personal cash management tool, is similar to business CheckInvest(registered trademark), which automatically sweeps excess balances from a traditional checking account to a third-party mutual fund. Since its April 2000 introduction, CheckInvest Select mutual fund balances grew to over $100 million.
The Direct 24(service mark) Debit Card increases the utility of checking accounts while building fee income. The card is actively used by over a third of our personal customers. Card-derived fee income increased 66% over 1999. In June of 2000, we expanded the debit card program to include small business customers.
Consumer loan balance growth in 2000 was over 17%. We focused on building relationships with creditworthy homeowners with premier products like EquityLink(registered trademark) and Homeowners Edge(registered trademark). Additionally, our Credit Options program provides alternatives to certain loan applicants.
Participation in the Group Banking Program, which offers a package of preferred rates and banking services to employees of our corporate customers, grew by 13%.
In 2000 we launched 12 new Business Centers throughout our branch network. We also introduced new fee-income-generating services including the Business Tax Payment Service, Direct24(service mark) Debit BusinessCard and Business Checking Edge(service mark), a customized checking account for companies that have low transaction volume and limited cash balances. We added additional fund options to CheckInvest, our innovative business checking account that allows businesses to earn dividends on balances swept into a mutual fund. Product sales exceeded expectations with fee income growing in excess of 30% since 1999.
For small business customers, we lowered loan minimums to $5,000, introduced a simplified "express" application for credit requests up to $100,000 and streamlined the approval process. Lending activity grew by 18% led by Business Creditlinksm, a revolving line of credit, which grew by 45% in 2000.
EXHIBIT 21
Subsidiaries Of The Registrant
Significant subsidiaries of The Bank of New York Company, Inc. are as follows:
The Bank of New York, a New York State Chartered Bank
The Bank of New York Europe*
BNY Holdings (Delaware) Corporation, a Delaware Corporation
The Bank of New York (Delaware)**, a Delaware State Chartered Bank
* Subsidiary of The Bank of New York.
** Subsidiary of BNY Holdings (Delaware) Corporation
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of The Bank of New York Company, Inc. of our report dated January 26, 2001, included in the 2000 Annual Report to Shareholders of The Bank of New York Company, Inc.
We also consent to the incorporation by reference in the following Registration Statements of The Bank of New York Company, Inc. of our report dated January 26, 2001, with respect to the consolidated financial statements of The Bank of New York Company, Inc. incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 2000:
Registration Statement Number Form Description
----------------------------- ---- -----------
No. 333-03811 S-3 Dividend Reinvestment and Stock
Purchase Plan
No. 333-15951 S-3 Preferred Trust Securities in the
No. 333-15951-01 amount of $700 million
No. 333-15951-02
No. 333-15951-03
No. 333-15951-04
No. 333-15951-05
No. 333-40837 S-3 Preferred Trust Securities in the
No. 333-40837-01 amount of $500 million
No. 333-40837-02
No. 333-40837-03
No. 333-70187 S-3 Debt Securities, Preferred Stock,
No. 333-70187-01 Common Stock, and Preferred Trust
No. 333-70187-02 Securities in the amount of
No. 333-70187-03 $1.3 billion
No. 333-70187-04
No. 33-59225 S-4 Proxy Statement related to merger
with National Community Banks, Inc.
No. 33-25805 S-4 Proxy Statement related to merger
with Putnam Trust Company of Greenwich
No. 333-78685 S-8 Employees Stock Purchase Plan
Employees Profit Sharing Plan
1993 Long-Term Incentive Plan
1999 Long-Term Incentive Plan
No. 33-56863 S-8 Employee Stock Purchase Plan,
Employee Preferred Stock Plan and
1993 Long-Term Incentive Plan
No. 33-57670 S-8 Employee Stock Purchase Plan,
Employee Preferred Stock Plan and
1993 Long-Term Incentive Plan
No. 2-95764 S-8 1984 Stock Option Plan
No. 33-20999 S-8 1988 Long-Term Incentive Plan
No. 33-33460 S-8 Amendment to 1988 Long-Term Incentive
Plan
No. 33-49963 S-8 NCB Employee Incentive Savings Plan
No. 33-62267 S-8 Putnam Profit Sharing Plan, Putnam
Stock Option Plan and Putnam Incentive
Stock Option Plan
\s\ Ernst & Young LLP
Ernst & Young LLP
New York, New York
March 27, 2001
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