<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) - October 18, 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
Exhibit
Number Description
99.1 Mellon Bank Corporation's Press Release, dated
October 18, 1994, regarding third quarter results
of operations.
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: October 18, 1994 By: Steven G. Elliott
Steven G. Elliott
Vice Chairman, Chief
Financial Officer and
Treasurer
<PAGE>
EXHIBIT INDEX
Number Description Method of Filing
99.1 Press Release dated Filed herewith
October 18, 1994
<PAGE>
Mellon News Release
LOGO OF MELLON BANK
EX-99.1
ANALYSTS:
Donald J. MacLeod John W. Calnan
(412) 234-5601 (412) 234-4633
Contact: MEDIA: Corporate Affairs Group
Margaret K. Cohen One Mellon Bank Center
(412) 234-0850 Pittsburgh, PA 15258-0001
FOR IMMEDIATE RELEASE
MELLON REPORTS SHARPLY HIGHER THIRD QUARTER 1994 EARNINGS
o Earnings Per Share Increases 22 Percent to $1.53 Per Share
in Third Quarter 1994 on a Pre-Split Basis Excluding
Dreyfus-Related Charges
o Return on Common Equity Reaches 16.1 Percent for Quarter,
Return on Assets Reaches 1.74 Percent Excluding
Dreyfus-Related Charges
PITTSBURGH, Oct. 18, 1994 -- Mellon Bank Corporation (NYSE:MEL)
today reported third quarter 1994 net income of $167 million, or $1.53
per common share, on a pre-split basis, excluding $79 million in
after-tax merger expenses related to Mellon's August 1994 merger with
The Dreyfus Corporation and $10 million in after-tax, one-time losses
on the disposition of investment securities previously owned by
Dreyfus. As a result of the Dreyfus transaction, all prior periods
have been restated to reflect the pooling-of-interests method of
accounting for the merger. The Corporation's third quarter 1994
results compare with net income of $139 million, or $1.25 per common
share, in the third quarter of 1993.
Including Dreyfus-related charges, third quarter 1994 net income was
$78 million, or $.64 per common share, on a pre-split basis. On a
post-split basis, reflecting the Corporation's recently announced
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 2
three-for-two common stock split, effective Nov. 15, 1994, third quarter 1994
net income was $.42 per common share, compared with $.83 per common share in
the third quarter of 1993.
"Our strong third quarter earnings were driven by net interest revenue growth
and substantially reduced credit quality expense," said Mellon Chairman,
President and Chief Executive Officer Frank V. Cahouet. "Because of our solid
earnings and capital position, we were pleased to announce a 21 percent
increase in the Corporation's common dividend and a three-for-two common stock
split last month."
Net interest revenue was $376 million, up 10 percent from $343 million in the
prior-year period, primarily reflecting a higher yielding asset mix. Fee
revenue was $399 million in the third quarter of 1994, compared with $419
million in the third quarter of 1993. The decrease in fee revenue, offset
partially by business growth, reflects the impact of divestitures and lower
mutual fund management and administration revenues.
Operating expense for the third quarter of 1994 was $595 million, compared
with $520 million in the prior-year period. The increase primarily reflects
$104 million of merger expenses associated with the Corporation's Dreyfus
transaction, partially offset by a $26 million decrease in acquired property
expense reflecting gains on the sale of acquired assets.
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 3
The provision for credit losses was $15 million in the third quarter of 1994,
compared with $30 million in the prior-year period. Net credit losses were
$16 million, down significantly from $28 million in the third quarter of
1993. Nonperforming assets totaled $260 million at Sept. 30, 1994, down
slightly from $264 million at June 30, 1994. Nonperforming assets decreased
by $134 million, or 34 percent, from $394 million at Sept. 30, 1993.
Annualized return on common shareholders' equity and return on assets,
excluding Dreyfus-related charges, were 16.1 percent and 1.74 percent,
respectively, in the third quarter of 1994. Annualized return on common
shareholders' equity and return on assets, including Dreyfus-related charges,
were 6.76 percent and .81 percent, respectively, in the third quarter of 1994,
compared with 14.34 percent and 1.47 percent, in the third quarter of 1993.
With balance sheet assets of approximately $39 billion and assets under
management and administration of more than $850 billion, Mellon Bank
Corporation is a major financial services company headquartered in Pittsburgh,
providing a full range of banking and investment products and services to
individuals and small, mid-sized and large businesses and institutions.
# # #
NOTE: Detailed supplemental information follows.
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 4
SUPPLEMENTAL INFORMATION
- ------------------------
Merger with The Dreyfus Corporation
- -----------------------------------
On August 24, 1994, the Corporation merged with The Dreyfus Corporation
(Dreyfus), creating the largest combination of a banking institution and a
mutual fund company in the history of the financial services industry. As a
result of the merger, the Corporation is the nation's second largest investment
management firm, with assets under management totaling approximately $200
billion and is by far the largest bank manager of mutual funds. The Corporation
expects annual revenues to be approximately $3.1 billion, of which more than
half will come from fee revenue.
The transaction was accounted for under the pooling-of-interests method, with
prior period financial results restated to reflect the merger. Dreyfus
shareholders received 0.88017 shares of the Corporation's common stock for each
of the 36.7 million Dreyfus shares outstanding resulting in 32.2 million shares
of the Corporation's common stock being issued. Following this merger, the
Corporation's return on assets, excluding Dreyfus merger-related charges,
improved 27 basis points to 1.74 percent. In addition, the Corporation's common
shareholders' equity to assets ratio improved 166 basis points compared with the
pre-merger prior quarter-end ratio. However, as a result of the issuance of the
additional shares, earnings per common share for the Corporation's prior four
quarters, on a restated basis, were approximately 17% to 19% lower than
previously reported amounts.
In connection with the merger, the Corporation recorded one-time merger expenses
in the third quarter of 1994 of $104 million, or $79 million after-tax. The
Corporation also incurred losses of $15 million, or $10
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 5
million after-tax, on the disposition of securities classified as available for
sale that were held by Dreyfus. These securities did not meet the investment
objectives, interest rate or credit risk characteristics required by the
Corporation. The $10 million after-tax losses on the disposition of these
securities did not impact shareholders' equity because Dreyfus had previously
recorded a fair value adjustment to equity to reflect the unrealized losses on
these securities in accordance with FAS No. 115. The merger expenses primarily
consisted of: estimated required payouts due under pre-existing employee benefit
programs and severance programs; the write-down of certain facilities and
assets; professional fees, proxy solicitation and other expenses.
<TABLE>
<CAPTION>
Net Interest Revenue
- --------------------
(taxable equivalent basis) Three months Nine months
ended Sept. 30, ended Sept. 30,
(dollar amounts in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest revenue $380 $347 $ 33 $1,118 $999 $119
- ---------------------------------------------------------------------------------------------------------
Average interest-earning assets $32,322 $32,359 $(37) $32,055 $30,401 $1,654
- ---------------------------------------------------------------------------------------------------------
Net interest margin 4.66% 4.25% 41bp 4.66% 4.39% 27bp
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The 10% improvement in net interest revenue and the net interest margin in the
third quarter of 1994, compared with the third quarter of 1993, primarily
resulted from a higher yielding asset mix as lower-margin money market assets
were replaced with higher-margin loans and securities. Average loans increased
$1.9 billion and average securities increased $700 million, replacing $2.7
billion of money market assets. The increase in average loans included $1.3
billion related to the December 1993 acquisition of AFCO Credit Corporation,
a $600 million increase in retail lending and a $475 million increase in credit
card loans. The increase in average credit card loans in the third quarter of
1994, compared with the prior-year period, was primarily driven by the
CornerStone credit card product introduced during the first quarter of 1994.
At September 30, 1994, this product had generated 627,000 new accounts with
total
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 6
outstandings of $500 million. A further reduction in nonperforming assets, a
lower level of long-term debt and higher loan fees also contributed to the
improved net interest revenue and net interest margin compared with the
prior-year period.
The improvement in net interest revenue in the first nine months of 1994
resulted principally from the same factors responsible for the third quarter
increase, as well as a higher level of average interest-earning assets resulting
from the second quarter 1993 acquisition of The Boston Company.
Average loans increased $830 million in the third quarter of 1994, compared with
the second quarter of 1994, a 14% annualized increase. The increase primarily
resulted from a $270 million increase in credit card loans, a $200 million
increase in retail lending and a $180 million increase in domestic wholesale
loans.
<TABLE>
<CAPTION>
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
Three months Nine months
ended Sept. 30, ended Sept. 30,
(dollar amounts in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for credit losses $ 15 $30 $(15) $55 $100 $ (45)
Net expense (revenue) of
acquired property (12) 14 (26) (23) 52 (75)
- -------------------------------------------------------------------------------------------
Credit quality expense $ 3 $44 $(41) $32 $152 $(120)
- -------------------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Consumer credit $ 14 $18 $ (4) $40 $ 46 $ (6)
Commercial real estate 1 6 (5) (2) 63 (65)
Commercial and financial 1 3 (2) 6 8 (2)
- -------------------------------------------------------------------------------------------
Total domestic 16 27 (11) 44 117 (73)
- -------------------------------------------------------------------------------------------
International - 1 (1) 3 - 3
- -------------------------------------------------------------------------------------------
Total net credit losses $ 16 $28 $(12) $47 $117 $(70)
- -------------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .25% .48% (23)bp .25% .74% (49)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 $41 million lower in the third quarter of
1994, compared with the prior-year period, reflecting the
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 7
improved credit quality of the loan portfolio and the lower level of real estate
acquired (OREO). The $12 million in net revenue from acquired property in the
third quarter of 1994 resulted from $12 million in net gains on the sale of
acquired property, as well as no provision to the reserve for OREO. Net expense
of acquired property in the third quarter of 1993 resulted from a $14 million
provision to the reserve for OREO. Net credit losses decreased $12 million
compared with the third quarter of 1993 reflecting decreases in all major loan
categories. Domestic net credit losses in the third quarter of 1994 included $4
million on loans from the September 1994 Glendale Bancorporation (Glendale)
acquisition.
Credit quality expense was $120 million lower in the first nine months of 1994,
compared with the first nine months of 1993. Improved credit quality led to a
$45 million decrease in the provision for credit losses. The net expense of
acquired property decreased $75 million as the first nine months of 1994
included $24 million in net gains on the sale of acquired property and no
provision to the reserve for OREO, compared with the first nine months of 1993
that included a $44 million OREO reserve provision. Net credit losses in the
first nine months of 1994 were down by $70 million compared with the first nine
months of 1993, primarily resulting from lower commercial real estate net credit
losses.
<TABLE>
<CAPTION>
Noninterest Revenue
- -------------------
Three months Nine months
ended Sept. 30, ended Sept. 30,
(in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment management $232 $252 $(20) $ 729 $ 592 $137
Cash management and deposit
transaction charges 49 48 1 148 143 5
Information services 20 40 (20) 58 117 (59)
Mortgage servicing 21 15 6 54 48 6
Credit card 19 15 4 51 43 8
Foreign currency and
securities trading 21 16 5 54 30 24
Other 37 33 4 153 136 17
- -------------------------------------------------------------------------------------
Total fee revenue 399 419 (20) 1,247 1,109 138
Gains (losses) on sale
of securities (15) 7 (22) (5) 90 (95)
- -------------------------------------------------------------------------------------
Total noninterest revenue $384 $426 $(42) $1,242 $1,199 $ 43
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 8
The $20 million decrease in trust and investment management fees in the third
quarter of 1994, compared with the prior-year period, resulted from several
factors. Mutual fund administration fees decreased $14 million and included a
$7 million decrease in revenue related to the second quarter 1994 sale of the
Boston-based third-party mutual fund administration business. In addition,
revenue from the management of Dreyfus mutual fund assets decreased $7 million
while securities lending revenue decreased $5 million. The lower revenue from
the management of mutual funds resulted from a lower average level of mutual
fund assets managed at Dreyfus. Average funds managed at Dreyfus in the third
quarter of 1994 were $69 billion compared with $80 billion in the third quarter
of 1993. This decrease resulted from a $7 billion reduction in average
institutional money market assets managed as well as an overall drop in the
market values of assets managed paralleling the decline in the bond markets over
the past 12 months. At September 30, 1994, compared to September 30, 1993, the
Lehman Brothers Long Term Government Bond Index decreased 11%. The decrease in
securities lending revenue primarily resulted from narrowing margins in a period
of rapidly rising short-term interest rates. Partially offsetting these
decreases was higher revenue from growth in other trust and investment products.
Fee revenue for Dreyfus was $76 million and $245 million in the third quarter
and first nine months of 1994, compared with $85 million and $262 million in the
third quarter and first nine months of 1993.
Information services fees decreased $20 million, compared with the prior-year
period, primarily as a result of the Corporation's December 1993 sale of two
information services businesses that generated quarterly revenues of
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 9
approximately $21 million. The $6 million increase in mortgage servicing fees,
compared with the prior-year period, resulted from acquisitions of mortgage
servicing rights coupled with a lower rate of prepayments. On August 11, 1994,
the Corporation acquired $3.6 billion of mortgage servicing rights from U.S.
Bancorp Mortgage Company which generated $1 million in fees in the third quarter
of 1994. The Corporation expects the mortgage servicing rights acquired from
U.S. Bancorp Mortgage Company to generate mortgage servicing revenue of
approximately $3 million per quarter.
The $4 million increase in credit card revenue in the third quarter of 1994,
compared with the third quarter of 1993, primarily resulted from revenue
generated by the Corporation's CornerStone credit card product.
The increase in foreign currency and securities trading fee revenue in the third
quarter of 1994 was primarily attributable to foreign exchange fees earned,
primarily as a result of increased global custody and corporate customer
activity.
The $15 million in pretax losses on securities available for sale in the third
quarter of 1994 related to the disposition of securities held by Dreyfus that
did not meet the investment objectives, interest rate or credit risk
characteristics required by the Corporation.
Fee revenue in the first nine months of 1994 was up $138 million, or 12%, from
the first nine months of 1993, primarily as a result of a nine month impact of
The Boston Company in 1994, compared with a partial impact in 1993.
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 10
The Corporation recorded $5 million in losses and $90 million in gains on the
sale of securities during the first nine months of 1994 and 1993, respectively,
resulting from the sale of securities from the available for sale portfolio.
Sales undertaken as part of the financing plan and balance sheet restructuring
relating to the acquisition of The Boston Company resulted in gains of $87
million in the first nine months of 1993.
<TABLE>
<CAPTION>
Operating Expense
- -----------------
Three months Nine months
ended Sept. 30, ended Sept. 30,
(dollar amounts in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $237 $237 $ - $ 719 $ 620 $ 99
Net occupancy expense 50 50 - 152 134 18
Professional, legal and
other purchased services 51 48 3 148 115 33
Equipment expense 30 31 (1) 97 86 11
Amortization of goodwill,
core deposit and other
identified intangibles 23 23 - 73 56 17
FDIC assessment and regulatory
examination fees 15 16 (1) 47 45 2
Amortization of purchased mortgage
servicing rights and purchased
credit card relationships 9 12 (3) 31 34 (3)
Other expense 88 89 (1) 285 233 52
- --------------------------------------------------------------------------------------------
Operating expense before the
net expense (revenue) of acquired
property and merger expenses 503 506 (3) 1,552 1,323 229
- --------------------------------------------------------------------------------------------
Net expense (revenue) of
acquired property (12) 14 (26) (23) 52 (75)
- --------------------------------------------------------------------------------------------
Merger expenses 104 - 104 104 175 (71)
- --------------------------------------------------------------------------------------------
Total operating expense $595 $520 $ 75 $1,633 $1,550 $ 83
- --------------------------------------------------------------------------------------------
Average full-time equivalent staff 24,400 24,000 400 24,100 21,700 2,400
- --------------------------------------------------------------------------------------------
Efficiency ratio (a) 64% 66% (2) 65% 63% 2
Efficiency ratio excluding
amortization of goodwill, core
deposit and other identified
intangibles recorded in
connection with acquisitions 61 63 (2) 62 60 2
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before the net expense (revenue) of acquired property and
merger expenses as a percentage of revenue, computed on a fully taxable
equivalent basis, excluding securities gains (losses).
Operating expense before the net expense (revenue) of acquired property and
merger expenses decreased by $3 million in the third quarter of 1994, compared
with the third quarter of 1993. This decrease was the result of the sale of the
information services businesses in December 1993 and the third-party mutual fund
administration business in the second quarter of 1994. The decrease in expenses
resulting from the sale of these businesses
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 11
more than offset modest expense growth, as well as an increase in expenses
related to the December 1993 AFCO acquisition and other smaller acquisitions
that have occurred in 1994. On a stand-alone basis, Dreyfus' operating expense
before merger expenses increased to $62 million in the third quarter of 1994,
compared with $57 million in the prior-year period primarily due to higher
marketing expenses.
Operating expense before the net expense of acquired property and merger
expenses totaled $1,552 million in the first nine months of 1994, compared with
$1,323 million in the first nine months of 1993. The increase was primarily the
result of a nine month impact of The Boston Company in 1994, compared with a
partial impact in 1993, as well as an increase in marketing expense of $27
million, recorded in the first nine months of 1994, primarily related to the
introduction of the Corporation's CornerStone credit card product. Dreyfus
incurred operating expenses before merger expenses of $174 million and $163
million in the first nine months of 1994 and 1993, respectively.
Except for the merger with Dreyfus, which was accounted for under the pooling-
of-interests method, the Corporation has historically accounted for business
combinations under the purchase method of accounting, resulting in the recording
of goodwill and other identified intangibles which are amortized in future years
into operating expense. These intangibles primarily include goodwill from The
Boston Company and Meritor acquisitions as well as core deposit intangibles and
covenants not to compete. Excluding the Dreyfus merger-related charges, net
income, excluding the after-tax impact of the amortization expense of
intangibles recorded in purchase acquisitions of $16 million and $56 million for
the third quarter
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 12
and first nine months of 1994, would have been $183 million and $537 million,
respectively.
Merger expenses of $104 million, or $79 million after-tax, were recorded in the
third quarter of 1994 to reflect expenses associated with the Dreyfus merger.
Merger expenses of $175 million, or $112 million after-tax, were recorded in the
first quarter of 1993 for expenses associated with the acquisition of The Boston
Company.
Income Taxes
- ------------
The provision for income taxes totaled $269 million in the first nine months of
1994, compared with $213 million in the first nine months of 1993. Excluding
the impact of the Dreyfus merger-related expenses and losses on the disposition
of securities in the third quarter of 1994, the Corporation's effective tax rate
for the first nine months was 38.25%. Excluding the impact of The Boston
Company merger-related expenses, securities gains and a one-time tax benefit of
$5 million resulting from a 1993 change in tax legislation, the Corporation's
effective tax rate for the first nine months of 1993 was 39%. The Corporation's
effective tax rate for the third quarter of 1994 was 38% and it is currently
anticipated that the effective tax rate will remain at approximately 38% for the
foreseeable future.
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 13
CREDIT QUALITY
- ---------------
Nonperforming Assets(a)
- -----------------------
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31, Sept. 30,
(dollar amounts in millions) 1994 1994 1993 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 51 $ 61 $ 61 $ 68
Commercial real estate 32 35 89 100
Other domestic 72 53 45 59
International nonperforming loans 1 6 7 7
- ----------------------------------------------------------------------------------------
Total nonperforming loans 156 155 202 234
- ----------------------------------------------------------------------------------------
Acquired property:
Real estate acquired
through foreclosures 105 109 100 110
In-substance real estate foreclosures 28 30 75 77
Reserve for real estate acquired (30) (31) (37) (28)
- ----------------------------------------------------------------------------------------
Real estate acquired, net of reserve 103 108 138 159
Other assets acquired 1 1 1 1
- ----------------------------------------------------------------------------------------
Total acquired property 104 109 139 160
- ----------------------------------------------------------------------------------------
Total nonperforming assets $ 260 $ 264 $ 341 $ 394
- ----------------------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .60% .63% .83% 1.00%
Total nonperforming assets as a
percentage of total loans and net
acquired property .99% 1.06% 1.39% 1.67%
- ----------------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
Nonperforming assets totaled $260 million at September 30, 1994, down slightly
from $264 million at June 30, 1994 despite the addition of $12 million of
nonperforming assets from the September 1994 acquisition of Glendale. Domestic
nonperforming real estate assets, which include nonperforming commercial and
consumer real estate loans and OREO net of the reserve, decreased by $18 million
during the quarter primarily as a result of loans returning to accrual status,
sales and repayments. The increase in other domestic nonperforming loans
resulted from the addition of a loan to a consumer finance company and $9
million of commercial and industrial loans from Glendale. The decrease in
international nonperforming loans resulted from repayments.
Nonperforming assets decreased by $134 million, or 34%, compared with September
30, 1993, primarily due to the $141 million reduction in domestic nonperforming
real estate assets. The reduction resulted primarily from returns to accrual
status, asset sales and repayments.
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 14
Reserve for Credit Losses
- --------------------------
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31, Sept. 30,
(dollar amounts in millions) 1994 1994 1993 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $611(b) $ 609 $ 600 $ 588
Reserve as a percentage of total loans 2.35% 2.46% 2.45% 2.50%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
(b) The September 1994 acquisition of Glendale added $3 million to the
reserve.
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(dollar amounts in millions, Sept. 30, June 30, Dec. 31, Sept. 30,
except per share amounts) 1994 1994 1993 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $3,695 $3,716 $3,546 $3,485
Common shareholders' equity to assets ratio 9.41% 9.80% 9.57% 9.72%
Tangible common shareholders' equity to assets ratio (a) 6.88% 7.33% 6.84% 7.01%
Total shareholders' equity $4,285 $4,308 $4,138 $4,145
Total shareholders' equity to assets ratio 10.92% 11.37% 11.17% 11.56%
Tier I capital ratio 10.0%(b) 10.27% 9.70% 10.29%
Total (Tier I and Tier II) capital ratio 13.5%(b) 13.74% 13.22% 14.00%
Leverage capital ratio 9.2%(b) 9.54% 9.00% 8.94%
Book value per common share:
Pre-stock split $37.72 $38.03 $36.42 $35.67
Post-stock split (d) $25.15 $25.35(c) $24.28(c) $23.78(c)
Closing common stock price:
Pre-stock split $56.25 $56.25 $53.00 $55.00
Post-stock split (d) $37.50 $37.50 $35.33 $36.67
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill, core deposit and other
identified intangibles divided by total assets less goodwill, core deposit
and other identified intangibles recorded in connection with acquisitions.
(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 had no liquidation preference over the common stock. The Series D
preferred stock was converted to common stock in August 1994.
(d) Restated to reflect a three-for-two common stock split declared September
20, 1994, payable November 15, 1994.
On September 20, 1994, the board of directors of the Corporation approved a
three-for-two split of the Corporation's common stock to be distributed on
November 15, 1994, to shareholders of record on November 1, 1994. Also, on
September 20, 1994, the board of directors approved a 21% increase in the
<PAGE>
Mellon Reports Earnings
Oct. 18, 1994
Page 15
common stock dividend to $.675 per share on a pre-split basis. The increased
dividend is payable on November 15, 1994. On a post-split basis, the
Corporation's quarterly dividend will be $.45 per share.
The decrease in the Corporation's common and total shareholders' equity in the
third quarter of 1994, compared with June 30, 1994, primarily resulted from the
declaration of two common stock dividends in the third quarter of 1994. The
Corporation typically declares one common dividend per quarter, but an
additional common dividend of $66 million was declared in the third quarter when
the dividend increase and common stock split were announced. As a result of the
additional common dividend declaration in the third quarter that is payable
November 15, 1994, it is anticipated that no common dividend will be declared in
the fourth quarter.
The declaration of the additional common dividend in the third quarter of 1994
resulted in a 17 basis point reduction in the common shareholders' equity to
assets ratio, with the remaining reduction resulting from a higher level of
assets.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation (and its subsidiaries)
<TABLE>
<CAPTION>
(dollar amounts in millions, Three months ended Nine emonths ended
except per share amounts; Sept. 30, Sept. 30,
common shares in thousands) ------------------ ------------------
1994 1993(a) 1994 1993(a)
------- --------- ------- -------
<S> <C> <C> <C> <C>
Selected key data (b)
- ---------------------
Primary net income per common share:
Pre-stock split $ .64 $ 1.25 $ 3.53 $ 2.84
Post-stock split (c) .42 .83 2.35 1.89
Return on assets .81% 1.47% 1.39% 1.22%
Return on common shareholders' equity 6.76% 14.34% 12.77% 11.37%
Yield on interest-earning assets,
on a taxable equivalent basis 7.32% 6.36% 6.94% 6.58%
Cost of funds supporting
interest-earning assets 2.66% 2.11% 2.28% 2.19%
- ---------------------------------------
Results excluding certain items (b)(d)
- ---------------------------------------
Primary net income per common share:
Pre-stock split $ 1.53 $ 1.25 $ 4.42 $ 3.45
Post-stock split (c) 1.02 .83 2.95 2.30
Return on assets 1.74% 1.47% 1.70% 1.44%
Return on common shareholders' equity 16.10% 14.34% 15.99% 13.67%
- ----------------------------------
Average balances for the period (e)
- ----------------------------------
Money market investments $ 1,466 $ 4,158 $ 1,806 $ 4,058
Trading account securities 351 266 413 290
Securities 5,421 4,703 5,178 4,784
Loans 25,084 23,232 24,658 21,269
Total interest-earning assets 32,322 32,359 32,055 30,401
Total assets 38,016 37,466 37,875 35,280
Deposits 26,963 27,776 27,244 26,217
Total interest-bearing liabilities 25,601 25,213 25,128 23,724
Common shareholders' equity 3,755 3,420 3,672 3,261
Total shareholders' equity 4,346 4,080 4,264 3,904
Computation of primary net income per common share (c)
- ------------------------------------------------------
Net income applicable to common stock (f) $ 64 $ 124 $ 351 $ 278
======== ======== ======== ========
Average common shares outstanding 145,591 143,610 144,355 140,852
Average common shares issuable upon
conversion of Series D preferred stock 1,692 2,469 2,263 2,430
Other common stock equivalents, net of
shares assumed repurchased 2,610 3,159 2,630 3,201
--------- --------- -------- --------
Total stock and stock equivalents 149,893 149,238 149,248 146,483
======== ======== ======== ========
Primary net income per common share (g) $ .42 $ .83 $ 2.35 $ 1.89
</TABLE>
<PAGE>
- ---------------
(a) Restated to reflect the merger with Dreyfus which was accounted for as a
pooling-of-interests.
(b) Percentages are annualized where applicable. All amounts are based on
unrounded numbers.
(c) Restated to reflect a three-for-two stock split declared September 20, 1994,
payable on November 15, 1994.
(d) Results for the third quarter and first nine months of 1994 exclude $79
million of after-tax merger expenses and $10 million of after-tax losses on
the disposition of Dreyfus securities. Results for the first nine months of
1993 exclude $112 million of after-tax merger expenses and $53 million in
after-tax gains on the sale of securities.
(e) Computed on a daily average basis.
(f) After adding back Series D preferred stock dividends.
(g) Based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Nine months ended
(in millions, except per Sept. 30, Sept. 30,
share amounts) -------------------- -----------------
1994 1993(a) 1994 1993(a)
----- ------- ---- ------
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Loans and loan fees $491 $ 415 $1,371 $1,177
Money market investments 16 34 51 100
Trading account securities 6 4 19 13
Securities 80 62 213 195
---- ----- ------ ------
Total interest revenue 593 515 1,654 1,485
Interest expense
- ----------------
Deposits in domestic offices 120 108 312 314
Deposits in foreign offices 25 11 51 30
Short-term borrowings 45 22 101 63
Notes and debentures (with original
maturities over one year) 27 31 83 92
---- ------ ------ ------
Total interest expense 217 172 547 499
---- ------ ------ ------
Net interest revenue 376 343 1,107 986
Provision for credit losses 15 30 55 100
---- ------ ------ ------
Net interest revenue after
provision for credit losses 361 313 1,052 886
Noninterest revenue
- -------------------
Fee revenue 399 419 1,247 1,109
Gains (losses) on sales of securities (15) 7 (5) 90
---- ------ ------ ------
Total noninterest revenue 384 426 1,242 1,199
Operating expense
- -----------------
Staff expense 237 237 719 620
Net occupancy expense 50 50 152 134
Professional, legal and other
purchased services 51 48 148 115
Equipment expense 30 31 97 86
Amortization of goodwill, core deposit
and other identified intangibles 23 23 73 56
FDIC assessment and
regulatory examination fees 15 16 47 45
Amortization of purchased mortgage
servicing rights and purchased
credit card relationships 9 12 31 34
Other expense 88 89 285 233
Net expense (revenue) of acquired
property (12) 14 (23) 52
Merger expenses 104 - 104 175
---- ------ ------ ------
Total operating expense 595 520 1,633 1,550
---- ------ ------ ------
Income before income taxes 150 219 661 535
Provision for income taxes 72 80 269 213
---- ------ ------ ------
Net income 78 139 392 322
Dividends on preferred stock 15 16 45 47
---- ------ ------ ------
Net income applicable to common stock $ 63 $ 123 $ 347 $ 275
==== ====== ====== ======
Primary net income per common share
Pre-stock split $.64 $ 1.25 $ 3.53 $ 2.84
==== ====== ====== =====
Post-stock split (b) $.42 $ .83 $ 2.35 $ 1.89
==== ====== ====== =====
Fully diluted net income per common
share
Pre-stock split $.64 $1.25 $ 3.53 $ 2.84
==== ===== ====== ======
Post-stock split (b) $.42 $ .83 $ 2.35 $ 1.89
==== ===== ====== ======
</TABLE>
<PAGE>
(a) Restated to reflect the merger with Dreyfus which was accounted for as
a pooling-of-interests.
(b) Per common share amounts have been restated to reflect a three-for-two
common stock split declared September 20, 1994, payable on November 15,
1994.
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Sept. 30, Dec. 31, Sept. 30,
1994 1993(a) 1993(a)
---------- --------- ----------
<S> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 2,222 $ 2,171 $ 1,616
Money market investments 1,025 1,766 2,378
Trading account securities 310 116 301
Securities:
Available for sale (approximate fair value of
$2,920 and $2,749 at December 31, 1993 and
September 30, 1993, respectively) 2,847 2,916 2,740
Investment (approximate fair value
of $3,130, $2,486 and $2,444) 3,301 2,432 2,368
Loans, net of unearned discount of $72, $74 and $45 26,012 24,484 23,472
Reserve for credit losses (611) (600) (588)
------- ------- -------
Net loans 25,401 23,884 22,884
Premises and equipment 546 524 542
Acquired property, net of reserves of
$30, $37 and $28 104 139 160
Goodwill 843 826 773
Core deposit and other identified intangibles 224 258 273
Purchased mortgage servicing rights and
purchased credit card relationships 323 204 194
Segregated assets, net of reserves
of $4, $4 and $4 111 183 240
Other assets 1,994 1,633 1,376
------- ------- -------
Total assets $39,251 $37,052 $35,845
======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $23,972 $26,381 $25,213
Deposits in foreign offices 3,160 1,183 1,120
Short-term borrowings 4,515 2,133 2,227
Other liabilities 1,747 1,227 1,119
Notes and debentures (with original maturities
over one year) 1,572 1,990 2,021
------- ------- -------
Total liabilities 34,966 32,914 31,700
Shareholders' equity
- --------------------
Preferred stock 590 592 660
Common shareholders' equity: (b)
Common stock - $.50 par value
Authorized - 200,000,000 shares
Issued - 146,934,696; 103,427,262
and 103,426,971 shares 73 52 52
Additional paid-in capital 1,844 2,038 2,038
Retained earnings 1,773 1,629 1,549
Warrants 37 37 37
Net unrealized loss on assets
available for sale (net of taxes) (c) (32) - -
Treasury stock of , - ; 7,774,346 and 7,413,377
shares at cost - (210) (191)
------- ------- -------
Total common shareholders' equity 3,695 3,546 3,485
------- ------- -------
Total shareholders' equity 4,285 4,138 4,145
------- ------- -------
Total liabilities and shareholders' equity $39,251 $37,052 $35,845
======= ======= =======
- --------------------------
</TABLE>
(a) Restated to reflect the merger with Dreyfus which was accounted for as a
pooling-of-interests.
<PAGE>
(b) Common stock issued at September 30, 1994, reflects the three-for-two
common stock split declared September 20, 1994, payable on November 15,
1994.
(c) In accordance with the January 1, 1994 adoption of FAS No. 115, certain
assets available for sale are reported at fair value at September 30, 1994
with the unrealized loss of $32 million, net of taxes, included in common
shareholders' equity. The impact of recording the unrealized loss resulted
in a reduction of book value per common share at September 30, 1994 of
$.33 on a pre-stock split basis or $.22 on a post-stock split basis.
