<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - January 13, 1994
MELLON BANK CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania 1-7410 25-1233834
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (412) 234-5000
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
99.1 Mellon Bank Corporation's Press Release, dated
January 13, 1994, regarding fourth quarter and
full-year 1993 results of operations.
</TABLE>
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
MELLON BANK CORPORATION
Date: January 14, 1994 By: /s/ Steven G. Elliott
----------------------
Steven G. Elliott
Vice Chairman, Chief
Financial Officer and
Treasurer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Method of Filing
<S> <C> <C>
99.1 Press Release dated Filed herewith
January 13, 1994
</TABLE>
<PAGE>
[LOGO OF MELLON BANK CORPORATION APPEARS HERE] EX-99.1
ANALYSTS:
Charles M. Johnston John W. Calnan
412-234-5601 412-234-4633
MEDIA: Corporate Affairs Group
Contact: Thomas W. Butch One Mellon Bank Center
412-234-6436 Pittsburgh, PA 15258-0001
FOR IMMEDIATE RELEASE
MELLON REPORTS FOURTH QUARTER AND FULL YEAR 1993 RESULTS
. Corporation Earns $1.50 Per Share In Fourth Quarter 1993,
Up 36 Percent From Pro Forma Results in Fourth Quarter 1992
. Nonperforming Assets Decrease by $53 Million, or 13 Percent,
in Fourth Quarter; NPAs Decrease $254 Million, or 43
Percent, For Year
. Fee Revenue Increases 48 Percent in Fourth Quarter; Fee
Revenue For Full Year Surpasses $1 Billion for First Time
PITTSBURGH, January 13, 1994 -- Mellon Bank Corporation today reported
net income of $114 million, or $1.50 per common share, in the fourth
quarter of 1993. These results compare with pro forma fully taxed net
income of $76 million, or $1.10 per common share, in the fourth quarter
of 1992.
For the full year 1993, the Corporation's net income, excluding a
restructuring charge and securities gains, was $420 million, or $5.59
per common share. This compares with pro forma fully taxed net income
in 1992 of $307 million, or $4.63 per common share. Including the
restructuring charge and securities gains, the Corporation's full year
1993 net income and net income per common share were $361 million and
$4.63, respectively.
-more-
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 2
"Our strong fourth quarter results capped an exceptionally successful
and productive year for Mellon," said Frank V. Cahouet, Mellon
chairman, president and chief executive officer. "In addition to
sustaining earnings momentum in our core businesses and further
improving credit quality, we continued to secure the Corporation's
position in the rapidly evolving financial services industry.
Completion of The Boston Company transaction and our announcement of a
planned merger with The Dreyfus Corporation have established Mellon as
a banking institution unique in its character and capabilities. Thanks
to another outstanding effort by all the people of Mellon, we enter
1994--our 125th year in business--looking eagerly and confidently
toward the future."
The Corporation's 1992 fourth quarter and full year results were
affected favorably by the Corporation's tax position at that time. The
Corporation returned to fully taxed status in 1993, as all remaining
tax benefit carryforwards were exhausted in late 1992. Including tax
benefits of $29 million, the Corporation's net income in the fourth
quarter of 1992 was $105 million, or $1.62 per common share. For the
full year 1992, the Corporation's net income and net income per common
share, including tax benefits of $130 million, were $437 million and
$6.96 per common share, respectively.
-more-
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 3
Fourth Quarter 1993
Compared with the fourth quarter of 1992, the Corporation's fourth
quarter 1993 results reflected higher net interest revenue and fee
revenue, as well as a lower provision for credit losses, offset in part
by higher operating expense.
Net interest revenue for the quarter increased to $339 million, up
12 percent from $301 million in the fourth quarter of 1992. The
increase was due primarily to The Boston Company and Meritor
acquisitions. Fee revenue increased to $342 million, up 48 percent
from $232 million in the prior-year period. The sharp increase in fee
revenue was due primarily to the effect of The Boston Company
acquisition.
Operating expense for the fourth quarter was $471 million, compared
with $381 million in the prior-year period. The increase resulted
primarily from the effect of The Boston Company acquisition and the
December 1992 acquisition of Meritor Savings Bank, offset in part by a
decrease in the net expense of acquired property. Operating expense in
the fourth quarter 1992 included an $18 million restructuring charge
related to the Meritor acquisition.
The provision for credit losses was $25 million in the fourth quarter
of 1993, down from $35 million in the prior-year period. Net credit
losses were $22 million, compared with $83 million in the fourth
quarter of 1992. Nonperforming assets were $341 million at Dec. 31,
1993, down $53 million, or 13 percent, from $394 million at Sept. 30,
1993.
-more-
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 4
Annualized return on assets and return on common shareholders' equity
were 1.26 percent and 14.62 percent, respectively, in the fourth
quarter of 1993, compared with pro forma fully taxed returns on assets
and common shareholders' equity of 1.00 percent and 12.41 percent,
respectively, in the fourth quarter of 1992.
Full Year 1993
Compared with 1992, the Corporation's 1993 results reflected increases
in net interest revenue and fee revenue, as well as a lower provision
for credit losses, offset in part by higher operating expense and lower
gains on the sale of securities.
Net interest revenue for the year increased to $1.307 billion, up
13 percent from $1.154 billion in 1992, principally reflecting The
Boston Company and Meritor acquisitions. Fee revenue increased to
$1.189 billion, up 41 percent from $844 million in 1992. The increase
was due primarily to The Boston Company acquisition. Gains on the sale
of securities were $87 million in 1993, compared with $121 million in
1992.
Operating expense for 1993 was $1.858 billion, compared with $1.449
billion in 1992. The increase was principally attributable to The
Boston Company and Meritor acquisitions, including the $175 million
restructuring expense related to The Boston Company acquisition.
-more-
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 5
The provision for credit losses was $125 million in 1993, down from
$185 million in 1992. Net credit losses in 1993 were $139 million,
compared with $277 million in 1992. The reserve as a percentage of
nonperforming loans was 297 percent at Dec. 31, 1993, up from
152 percent at Dec. 31, 1992. Nonperforming assets totaled
$341 million at Dec. 31, 1993, down 43 percent from $595 million at
Dec. 31, 1992.
Return on assets and return on common shareholders' equity in 1993,
excluding the effect of the securities gains and the restructuring
expense related to The Boston Company, were 1.21 percent and 14.06
percent, respectively. These ratios compare with pro forma fully taxed
return on assets and return on common shareholders' equity of 1.03
percent and 13.58 percent, in 1992.
With assets of approximately $36 billion, Mellon Bank Corporation is a
major bank holding company. Through its subsidiaries, it provides
wholesale, middle market and retail banking, as well as numerous
fee-based products including trust and investment, cash management and
mortgage banking.
NOTE: Detailed supplemental information follows.
##
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 6
SUPPLEMENTAL INFORMATION
- ------------------------
AFCO CREDIT CORPORATION ACQUISITION
- -----------------------------------
On December 21, 1993, the Corporation completed the acquisition of AFCO Credit
Corporation (AFCO) and CAFO, Inc., the insurance premium financing subsidiaries
of The Continental Corporation. The Corporation paid $100 million in cash at
closing, with a contingent payment over five years of up to $78 million based on
loan originations during the first five years after the purchase. AFCO is a
subsidiary of Mellon Bank, N.A. and CAFO is a subsidiary of Mellon Bank Canada.
Goodwill and intangibles created by this acquisition totaled $60 million. AFCO
and CAFO's combined total assets at December 31, 1993 were $1.2 billion,
consisting almost entirely of collateralized commercial loans.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 7
NET INTEREST REVENUE
- --------------------
<TABLE>
<CAPTION>
(taxable equivalent basis) Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1993 1992 Inc/(Dec) 1993 1992 Inc/(Dec)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest revenue $341 $304 $ 37 $1,317 $1,166 $ 151
- -----------------------------------------------------------------------------------------------------------------
Average interest-earning assets $30,753 $26,317 $4,436 $29,971 $26,250 $3,721
- -----------------------------------------------------------------------------------------------------------------
Net interest margin 4.39% 4.59% (20)bp 4.39% 4.44% (5)bp
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The 12% improvement in net interest revenue in the fourth quarter of 1993,
compared with the fourth quarter of 1992, primarily reflected a higher level of
interest-earning assets resulting from the second quarter 1993 acquisition of
The Boston Company and the December 1992 Meritor branch acquisition. A
reduction in nonperforming assets also contributed to the improved net interest
revenue compared with the prior-year period. Partially offsetting these positive
factors was the impact on net interest revenue and the net interest margin from
the reduction in higher-yielding securities that were sold in the first quarter
of 1993 as part of the financing plan and balance sheet restructuring related to
the acquisition of The Boston Company.
The improvement in net interest revenue in the full year of 1993 principally
resulted from the same factors responsible for the fourth quarter increase, as
well as the negative impact of a higher level of long term debt issued in
connection with The Boston Company acquisition.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 8
CREDIT QUALITY EXPENSE AND NET CREDIT LOSSES
- -------------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1993 1992 Inc/(Dec) 1993 1992 Inc/(Dec)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for credit losses $ 25 $ 35 $ (10) $125 $ 185 $ (60)
Net expense of acquired property 7 31 (24) 59 95 (36)
- ----------------------------------------------------------------------------------------------------------------------
Credit quality expense $ 32 $ 66 $ (34) $184 $ 280 $ (96)
- ----------------------------------------------------------------------------------------------------------------------
Net credit losses(a):
Domestic:
Consumer credit $ 16 $ 14 $ 2 $ 62 $ 63 $ (1)
Commercial real estate (2) 50 (52) 61 155 (94)
Commercial and financial 7 18 (11) 15 46 (31)
- ----------------------------------------------------------------------------------------------------------------------
Total domestic 21 82 (61) 138 264 (126)
- ----------------------------------------------------------------------------------------------------------------------
International 1 1 - 1 13 (12)
- ----------------------------------------------------------------------------------------------------------------------
Total net credit losses $ 22 $ 83 $ (61) $139 $ 277 $(138)
- ----------------------------------------------------------------------------------------------------------------------
Annualized net credit losses to average loans .37% 1.79% (142)bp .64% 1.52% (88)bp
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets.
Credit quality expense, defined as the provision for credit losses plus the net
expense of acquired property, was $34 million lower in the fourth quarter of
1993, compared with the prior-year period, reflecting continuing improvement in
the credit quality of the loan portfolio and the lower level of real estate
acquired. Net credit losses decreased $61 million compared with the fourth
quarter of 1992 primarily resulting from lower commercial real estate net credit
losses.
Credit quality expense was $184 million for the full year of 1993, down $96
million compared with the full year of 1992. Net credit losses in the full year
of 1993 were down by $138 million resulting from lower net credit losses in each
loan category, with commercial real estate net credit losses decreasing by $94
million.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 9
NONINTEREST REVENUE
- -------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1993 1992 Inc/(Dec) 1993 1992 Inc/(Dec)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment management $ 180 $ 76 $ 104 $ 529 $291 $238
Cash management and deposit
transaction charges 49 57 (8) 192 182 10
Information services 35 39 (4) 152 142 10
Mortgage servicing 14 12 2 62 41 21
Credit card 18 16 2 61 54 7
Foreign currency and securities
trading 16 4 12 45 19 26
Other 30 28 2 148 115 33
- ------------------------------------------------------------------------------------------------------------
Total fee revenue 342 232 110 1,189 844 345
Gains on sale of securities - - - 87 121 (34)
Other noninterest revenue - 2 (2) - 7 (7)
- ------------------------------------------------------------------------------------------------------------
Total noninterest revenue $ 342 $234 $ 108 $1,276 $972 $304
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Fee revenue increased by $110 million, or 48%, in the fourth quarter of 1993,
compared with the fourth quarter of 1992, primarily reflecting $109 million of
fee revenue attributable to The Boston Company. Excluding the effect of all
acquisitions and divestitures and certain favorable one-time accrual adjustments
made in the fourth quarter of 1992, fee revenue increased 9% in the fourth
quarter of 1993, compared with the fourth quarter of 1992.
The $104 million improvement in trust and investment management fees in the
fourth quarter of 1993 resulted principally from $97 million of these fees
earned at The Boston Company. The $8 million decrease in cash management and
deposit transaction charges, compared with the fourth quarter of 1992, was the
result of a $13 million one-time accrual adjustment in the fourth quarter of
1992 partially offset by increased volume.
Information services fees decreased $4 million compared with the prior-year
period, primarily as a result of a $5 million one-time accrual adjustment in the
fourth quarter of 1992 as well as the Corporation's completed sale of two
information services businesses on December 1, 1993. The two businesses sold
generated monthly revenues of approximately $7 million.
Partially offsetting the decrease in information services fees was revenue
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 10
generated by a Canadian stock transfer company, the acquisition of which was
completed in the second quarter of 1993.
The increase in foreign currency and securities trading in the fourth quarter of
1993 was attributable to foreign exchange fees earned, primarily from global
custody customers, at The Boston Company.
Fee revenue in the full year of 1993 was up $345 million, or 41%, from the full
year of 1992, primarily reflecting $252 million of fee revenue attributable to
The Boston Company. Excluding the full year impact of all acquisitions and
divestitures and the fourth quarter 1992 one-time accrual adjustments, fee
revenue increased 11% compared with the full year of 1992. Gains on sales of
securities from the available for sale portfolio for the full year of 1993 were
$87 million. These sales were undertaken as part of the financing plan and
balance sheet restructuring related to the acquisition of The Boston Company.
OPERATING EXPENSE
- -----------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1993 1992 Inc/(Dec) 1993 1992 Inc/(Dec)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $207 $145 $ 62 $ 745 $ 578 $167
Net occupancy expense 47 38 9 168 147 21
Professional, legal and other purchased
services 44 34 10 150 119 31
Amortization of goodwill and other
intangibles 32 22 10 122 79 43
Equipment expense 32 25 7 113 98 15
FDIC assessment and regulatory
examination fees 16 13 3 60 53 7
Other expense 86 55 31 266 244 22
- ----------------------------------------------------------------------------------------------------
Operating expense before the net
expense of acquired property and
restructuring expense 464 332 132 1,624 1,318 306
- ----------------------------------------------------------------------------------------------------
Net expense of acquired property 7 31 (24) 59 95 (36)
- ----------------------------------------------------------------------------------------------------
Restructuring expense - 18 (18) 175 36 139
- ----------------------------------------------------------------------------------------------------
Total operating expense $471 $381 $ 90 $1,858 $1,449 $409
- ----------------------------------------------------------------------------------------------------
Average full-time equivalent staff 21,700 17,600 4,100 20,200 17,500 2,700
- ----------------------------------------------------------------------------------------------------
Efficiency ratio*:
Including amortization of intangibles 68% 64% 4bp 65% 66% (1)bp
Excluding amortization of intangibles 63 60 3 60 62 (2)
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Operating expense before the net expense of acquired property and
restructuring expense as a percentage of net interest revenue (computed on a
fully taxable equivalent basis) and noninterest revenue excluding securities
gains and nonrecurring items.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 11
Operating expense before the net expense of acquired property and restructuring
expense increased by $132 million, or 40%, in the fourth quarter of 1993,
compared with the fourth quarter of 1992. The increase was primarily the result
of $93 million of expense attributable to The Boston Company, as well as
expenses associated with the acquisition of the Meritor branches. In addition,
the fourth quarter of 1993 included nonrecurring expenses of approximately $13
million related to winding down certain data processing operations that were not
part of the fourth quarter sale.
The increase in average full-time equivalent staff level, compared with the
prior-year quarter, primarily reflected the addition of the employees of The
Boston Company and the Meritor branches. The acquisition of The Boston Company
contributed approximately 3,200 to the average full-time equivalent staff in the
fourth quarter of 1993.
Operating expense before the net expense of acquired property and restructuring
expense increased by $306 million in the full year of 1993 compared with the
prior-year period. The increase was primarily the result of $228 million of
expense attributable to The Boston Company, as well as expenses of the Meritor
branches.
A restructuring charge of $175 million pretax, or $112 million after-tax, was
recorded in the first quarter of 1993 to reflect management's estimate of
restructuring costs associated with the integration of The Boston
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 12
Company. This charge included estimates of additional loan loss reserve,
systems conversion costs, staff related expenses, legal and consulting
expenses and other restructuring charges. Restructuring expenses for the
full year of 1992 include $18 million related to the Corporation's fourth
quarter Meritor branch acquisition and $18 million recorded in the
third quarter related to the Corporation's expense reduction program.
INCOME TAXES
- ------------
The Corporation returned to a fully taxable status in 1993 as all remaining tax
benefit carryforwards were exhausted in late 1992. The provision for income
taxes totaled $239 million in the full year of 1993, for an effective tax rate
of approximately 40%, compared with $55 million in the full year of 1992.
Without the availability of unrecognized tax benefits to offset federal income
taxes, the Corporation's provision for income taxes in the full year of 1992
would have been $185 million.
New tax legislation was enacted during the third quarter of 1993 that resulted
in a net benefit for the Corporation. As a result of this legislation, the
Corporation revalued its net federal deferred tax asset at the new statutory tax
rate and is permitted to deduct the amortization of certain intangibles.
Primarily as a result of the deductibility of certain intangibles amortization,
the Corporation's fourth quarter effective tax rate of 38.5% was lower than the
full year rate of approximately 40%. It is currently anticipated that the
ongoing effective tax rate will be approximately 38.5%.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 13
CREDIT QUALITY
- --------------
NONPERFORMING ASSETS(a)
- --------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1993 1993 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Commercial real estate $ 89 $ 100 $ 121 $ 187
Consumer mortgage 61 68 73 29
Other domestic 45 59 79 110
International nonperforming loans 7 7 8 8
- ------------------------------------------------------------------------------------------
Total nonperforming loans 202 234 281 334
- ------------------------------------------------------------------------------------------
Acquired property:
Real estate acquired through
foreclosures 100 110 123 96
In-substance real estate foreclosures 75 77 83 154
Reserve for real estate acquired (37) (28) (18) (10)
- ------------------------------------------------------------------------------------------
Real estate acquired, net of
reserves 138 159 188 240
Other assets acquired 1 1 9 21
- ------------------------------------------------------------------------------------------
Total acquired property 139 160 197 261
- ------------------------------------------------------------------------------------------
Total nonperforming assets $ 341 $ 394 $ 478 $ 595
- ------------------------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .83% 1.00% 1.18% 1.67%
Total nonperforming assets as a percentage
of total loans and net acquired property 1.39% 1.67% 1.99% 2.94%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
Nonperforming assets totaled $341 million at December 31, 1993, a decrease of
$53 million, or 13%, compared with September 30, 1993. Nonperforming commercial
real estate assets, which include nonperforming commercial real estate loans and
real estate acquired net of the reserve, decreased by $32 million during the
quarter primarily as a result of sales and repayments. Other domestic
nonperforming loans decreased by $14 million during the quarter, primarily as a
result of repayments and returns to accrual status.
Nonperforming assets decreased by $254 million, or 43%, compared with December
31, 1992, primarily due to the $200 million reduction in nonperforming
commercial real estate assets. These reductions resulted primarily from sales,
returns to accrual status and credit losses. Other domestic nonperforming loans
decreased $65 million in 1993 primarily due to repayments and credit losses.
The $32 million increase in nonperforming consumer mortgages, compared with
December 31, 1992, primarily reflects additions from The Boston Company. The
$20 million decrease in other assets acquired resulted from asset sales and
write-downs.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 14
SEGREGATED ASSETS (a)
- ---------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(in millions) 1993 1993 1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonaccrual loans $ 112 $ 179 $ 196 $ 259
Real estate acquired 75 65 73 -
- ---------------------------------------------------------------------------------
Total segregated assets 187 244 269 259
Less: FDIC loss sharing (b) (178) (232) (256) (237)
- ---------------------------------------------------------------------------------
Maximum credit exposure $ 9 $ 12 $ 13 $ 22
Reserve for segregated assets (c)
- ---------------------------------------------------------------------------------
Reserve balance at beginning of period $ 4 $ 5 $ 5 $ -
Segregated asset net losses - (1) - -
- ---------------------------------------------------------------------------------
Reserve balance at end of period $ 4 $ 4 $ 5 $ 18
- ---------------------------------------------------------------------------------
</TABLE>
(a) Assets acquired in the Meritor branch acquisition that are classified as
nonaccrual.
(b) Represents the FDIC loss sharing arrangement of 80% of the first $60
million of net credit losses and 95% of the remaining balance of segregated
assets. At December 31, 1993, the entire balance of segregated assets was
insured at the 95% rate as the $60 million credit loss threshold was met in
the first quarter of 1993. Total net credit losses on segregated assets,
before FDIC loss sharing, were $4 million and $97 million in the fourth
quarter and full year of 1993, respectively.
(c) This reserve is not included in the reserve for credit losses.
The $72 million decrease in segregated assets in 1993 resulted primarily from
credit losses, returns to accrual status and repayments.
RESERVE FOR CREDIT LOSSES
- -------------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1993 1993 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $ 600 $ 588 $ 586 $ 506
Reserve as a percentage of total loans 2.45% 2.50% 2.46% 2.54%
Reserve as a percentage of nonperforming
loans 297% 251% 208% 152%
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
The ratio of reserve as a percentage of nonperforming loans continues to
indicate strong reserve coverage, increasing to 297% at December 31, 1993,
from 251% at September 30, 1993, and 152% at December 31, 1992. The increase in
the reserve at December 31, 1993, compared with September 30, 1993, is due, in
part, to $9 million of reserves acquired in the December 21, 1993, AFCO
acquisition.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1994
Page 15
SELECTED CAPITAL DATA
- ---------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1993 1993 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $2,721 $2,678 $ 2,585 $2,090
Common shareholders' equity to
assets ratio 7.53% 7.66% 7.15% 6.62%
Tangible common shareholders'
equity to assets ratio (a) 5.37% 5.58% 5.13% 5.48%
Total shareholders' equity $3,313 $3,339 $ 3,246 $2,557
Total shareholders' equity to
assets ratio 9.17% 9.55% 8.97% 8.10%
Tier I capital ratio 7.4%(b) 7.94% 7.42% 7.62%
Total (Tier I and Tier II) capital
ratio 11.0%(b) 11.70% 10.63% 11.30%
Leverage capital ratio 6.9%(b) 6.91% 6.99% 7.10%
Book value per common share (c) $41.75 $40.86 $ 39.81 $36.96
Closing common stock price $53.00 $55.00 $56.375 $53.00
- ----------------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill divided by total assets less
goodwill.
(b) Estimated.
(c) The book value per common share assumes full conversion of the Series D
preferred stock to common stock. Accordingly, this includes the additional
paid-in capital on the Series D preferred stock because this paid-in
capital has no liquidation preference over the common stock.
The increase in the Corporation's common shareholders' equity in the fourth
quarter of 1993, compared with September 30, 1993, was primarily the result of
earnings retention, partially offset by the acquisition of treasury stock. The
decrease in total shareholders' equity in the fourth quarter of 1993, compared
with September 30, 1993, resulted from the redemption of the $68 million of
Series B preferred stock on December 1, 1993. The decrease in the Corporation's
capital ratios from September 30, 1993, primarily resulted from the impact of a
higher total asset level, including the goodwill and intangibles, following the
AFCO acquisition on December 21, 1993.
On November 16, 1993, the Corporation announced a 47% increase in its quarterly
common stock dividend, to $.56 per share, from $.38 per share. The increased
dividend is payable on February 15, 1994.
<PAGE>
SUMMARY DATA
MELLON BANK CORPORATION (AND ITS SUBSIDIARIES)
<TABLE>
<CAPTION>
(dollar amounts in millions, Quarter ended Year ended
except per share amounts; Dec. 31, Dec. 31,
common shares in thousands) --------------- --------------
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
SELECTED KEY DATA (a)
- ---------------------
Primary net income per common share $ 1.50 $ 1.62 $ 4.63 $ 6.96
Return on assets 1.26% 1.39% 1.04% 1.46%
Return on common shareholders' equity 14.62% 18.30% 11.93% 21.12%
Yield on interest-earning
assets, on a taxable equivalent basis 6.41% 7.15% 6.58% 7.67%
Cost of funds supporting interest-
earning assets 2.02% 2.56% 2.19% 3.23%
Dividends per common share $ .38 $ .35 $ 1.52 $ 1.40
- - - - - - - - - - - - - - - - - - -
PRO FORMA (b)
- ------------
Primary net income per common share $ 1.50 $ 1.10 $ 5.59 $ 4.63
Return on assets 1.26% 1.00% 1.21% 1.03%
Return on common shareholders' equity 14.62% 12.41% 14.06% 13.58%
- - - - - - - - - - - - - - - - - - -
AVERAGE BALANCES FOR THE PERIOD (c)
- -----------------------------------
Money market investments $ 2,786 $ 1,836 $ 3,521 $ 1,663
Trading account securities 206 244 269 308
Securities 4,541 5,687 4,426 6,052
Loans 23,220 18,550 21,755 18,227
Total interest-earning assets 30,753 26,317 29,971 26,250
Total assets 35,769 30,075 34,736 29,889
Deposits 27,476 23,427 26,511 22,641
Total interest-bearing liabilities 24,211 20,585 23,824 21,272
Common shareholders' equity 2,692 2,026 2,531 1,842
Total shareholders' equity 3,329 2,520 3,172 2,351
COMPUTATION OF PRIMARY NET INCOME PER COMMON SHARE
- --------------------------------------------------
Net income applicable to common stock (d) $ 99 $ 93 $ 302 $ 389
======= ======= ======= =======
Average common shares outstanding 63,735 54,358 62,029 52,926
Average common shares issuable upon
conversion of Series D preferred stock 1,702 1,607 1,640 1,552
Other common stock equivalents, net of
shares assumed repurchased 1,036 1,516 1,510 1,434
------- ------- ------- -------
Total stock and stock equivalents 66,473 57,481 65,179 55,912
======= ======= ======= =======
Primary net income per common share (e) $ 1.50 $ 1.62 $ 4.63 $ 6.96
======= ======= ======= =======
</TABLE>
- ---------------
(a) Percentages are annualized where applicable. All amounts are based on
unrounded numbers.
(b) Pro forma results for 1993 exclude $112 million after-tax in restructuring
expense and $53 million in after-tax gains on the sale of securities. Pro
forma results for 1992 were calculated by applying a normalized effective
tax rate of approximately 38% to pretax income. The unrecorded tax benefit
that existed at the beginning of each period presented was included in the
determination of the return on common shareholders' equity.
(c) Computed on a daily average basis.
(d) After adding back Series D preferred stock dividends.
(e) Based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
MELLON BANK CORPORATION
<TABLE>
<CAPTION>
Quarter ended Year ended
(in millions, except per Dec. 31, Dec. 31,
share amounts) ---------------- ---------------
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST REVENUE
----------------
Loans and loan fees $411 $352 $1,587 $1,460
Money market investments 23 15 116 63
Trading account securities 2 4 15 21
Securities 59 99 243 456
---- ---- ------ ------
Total interest revenue 495 470 1,961 2,000
INTEREST EXPENSE
----------------
Deposits in domestic offices 100 114 414 585
Deposits in foreign offices 10 11 40 49
Short-term borrowings 17 20 79 118
Notes and debentures (with original
maturities over one year) 29 24 121 94
---- ---- ------ ------
Total interest expense 156 169 654 846
---- ---- ------ ------
Net interest revenue 339 301 1,307 1,154
Provision for credit losses 25 35 125 185
---- ---- ------ ------
Net interest revenue after
provision for credit losses 314 266 1,182 969
NONINTEREST REVENUE
-------------------
Fee revenue 342 232 1,189 844
Gains on sale of securities - - 87 121
Other noninterest revenue - 2 - 7
---- ---- ------ ------
Total noninterest revenue 342 234 1,276 972
OPERATING EXPENSE
-----------------
Staff expense 207 145 745 578
Net occupancy expense 47 38 168 147
Professional, legal and other
purchased services 44 34 150 119
Amortization of goodwill and other
intangibles 32 22 122 79
Equipment expense 32 25 113 98
FDIC assessment and regulatory
examination fees 16 13 60 53
Other expense 86 55 266 244
Net expense of acquired property 7 31 59 95
Restructuring expense - 18 175 36
---- ---- ------ ------
Total operating expense 471 381 1,858 1,449
---- ---- ------ ------
Income before income taxes 185 119 600 492
Provision for income taxes 71 14 239 55
---- ---- ------ ------
Net income 114 105 361 437
Dividends on preferred stock 16 12 63 51
---- ---- ------ ------
Net income applicable to common
stock $ 98 $ 93 $ 298 $ 386
==== ==== ====== ======
Primary net income per common share $1.50 $1.62 $4.63 $6.96
===== ===== ===== =====
Fully diluted net income per common
share $1.50 $1.55 $4.63 $6.84
===== ===== ===== =====
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Dec. 31, Dec. 31,
1993 1992
-------- --------
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 2,169 $ 1,974
Money market investments 1,467 1,480
Trading account securities 116 106
Securities:
Available for sale (approximate market
value of $2,920 and $3,707) 2,916 3,613
Investment (approximate market value
of $2,139 and $2,128) 2,096 2,125
Loans, net of unearned discount of $74 and $62 24,473 19,956
Reserve for credit losses (600) (506)
------- -------
Net loans 23,873 19,450
Premises and equipment 463 433
Acquired property, net of reserves of
$37 and $10 139 261
Goodwill 825 380
Other intangibles 462 443
Segregated assets, net of reserves
of $4 and $18 183 241
Other assets 1,430 1,068
------- -------
Total assets $36,139 $31,574
======= =======
Liabilities
- -----------
Deposits in domestic offices $26,355 $24,190
Deposits in foreign offices 1,183 940
Short-term borrowings 2,126 1,710
Other liabilities 1,172 590
Notes and debentures (with original maturities
over one year) 1,990 1,587
------- -------
Total liabilities 32,826 29,017
Shareholders' equity
- --------------------
Preferred stock 592 467
Common stock - $.50 par value
Authorized - 200,000,000 and 120,000,000 shares
Issued - 63,843,493 and 54,962,761 shares 32 27
Additional paid-in capital 1,774 1,349
Retained earnings 898 708
Warrants 37 6
Treasury stock - 365,700 shares at cost (20) -
------- -------
Total shareholders' equity 3,313 2,557
------- -------
Total liabilities and shareholders' equity $36,139 $31,574
======= =======
</TABLE>
