<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, 1995
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 Press Release, dated January 13, 1995,
regarding fourth quarter and full-year 1994 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: January 13, 1995 By: Steven G. Elliott
Steven G. Elliott
Vice Chairman, Chief
Finance Officer and Treasurer
<PAGE>
EXHIBIT INDEX
Number Description Method of Filing
99.1 Press Release dated Filed herewith
January 13, 1995
<PAGE>
EX-99.1
MELLON NEWS RELEASE
[LOGO OF MELLON BANK]
ANALYSTS:
Donald J. MacLeod John W. Calnan
(412) 234-5601 (412) 234-4633
Contact: MEDIA:
Margaret Kirch Cohen
(412) 234-0850
Corporate Affairs Group
One Mellon Bank Center
Pittsburgh, PA 15258-0001
- --------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
MELLON REPORTS FOURTH QUARTER AND FULL YEAR 1994 RESULTS
- --------------------------------------------------------
. Corporation Earns $1.05 Per Share in Fourth Quarter 1994, Excluding Certain
Items, Up 25 Percent from Fourth Quarter 1993
. Return on Common Equity and Return on Assets Reach 16.5 Percent and 1.74
Percent, Respectively, for the 1994 Fourth Quarter, Excluding Certain Items
PITTSBURGH, Jan. 13, 1995 -- Mellon Bank Corporation (NYSE:MEL) today reported
net income of $171 million in the fourth quarter of 1994, excluding a previously
announced one-time, after-tax charge of $130 million resulting from actions
taken on behalf of securities lending clients. Net income per common share for
the fourth quarter of 1994 was $1.05, excluding the charge and the previously
announced redemption of the Corporation's Series H preferred stock. These
results compare with net income of $138 million, or $.84 per common share, in
the fourth quarter of 1993. Including the one-time charge and the preferred
stock redemption, fourth quarter 1994 net income was $41 million, or $.07 per
common share.
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<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 2
For the full year 1994, the Corporation reported net income of $652
million, excluding the securities lending charge and $89 million in after-tax,
Dreyfus-related charges. Excluding these items and the Corporation's Series H
preferred stock redemption, 1994 net income per common share was $4.00. These
results compare with 1993 net income of $519 million, or $3.14 per common share,
excluding merger expenses and securities gains related to the Corporation's 1993
acquisition of The Boston Company.
Mellon reported 1994 net income of $433 million, or $2.42 per common share,
including the securities lending charge, Dreyfus-related charges and preferred
stock redemption. This compares with 1993 net income of $460 million, or $2.73
per common share, which included merger expenses and securities gains related to
The Boston Company acquisition.
"1994 was marked by a number of significant accomplishments for the
Corporation, including the completion of our landmark merger with The Dreyfus
Corporation, one of the greatest names in the mutual fund industry," said Frank
V. Cahouet, Mellon chairman, president and chief executive officer. "We are
pleased with our operating performance and with the long-term strategic
direction we've set for the Corporation. Despite the one-time charge stemming
from our securities lending business-which we took on behalf of our clients-we
remain the highest capitalized large bank holding company in the United States."
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<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 3
Fourth Quarter 1994
- -------------------
Compared with the fourth quarter of 1993, Mellon's fourth quarter 1994
results reflected higher net interest revenue and lower credit quality expense,
offset in part by lower fee revenue.
Net interest revenue was $401 million, up 17 percent from $343 million in
the fourth quarter of 1993, primarily reflecting a higher level of interest-
earning assets as well as a higher yielding asset mix. Fee revenue was $405
million in the fourth quarter of 1994, compared with $429 million in the fourth
quarter of 1993. The decrease in fee revenue reflects the impact of
divestitures, lower securities lending revenues and lower mutual fund management
and administration revenues.
Operating expense for the fourth quarter of 1994 was $741 million, compared
with $534 million in the prior-year period. Excluding the pretax securities
lending charge of $223 million, operating expense declined slightly compared
with the prior-year period.
The provision for credit losses was $15 million in the fourth quarter of
1994, down from $25 million in the prior-year period. Net credit losses were
$20 million in the fourth quarter of 1994, compared with $22 million in the
fourth quarter of 1993. Nonperforming assets totaled $239 million at Dec. 31,
1994, down $21 million, or 8 percent, from $260 million at Sept. 30, 1994.
Nonperforming assets decreased by $102 million, or 30 percent, from $341 million
at Dec. 31, 1993. The Corporation's
-more-
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 4
nonperforming assets ratio at Dec. 31, 1994, was .89 percent, compared with .99
percent at Sept. 30, 1994, and 1.39 percent at Dec. 31, 1993.
Annualized return on common shareholders' equity and return on assets,
excluding the securities lending charge and preferred stock redemption, were
16.5 percent and 1.74 percent, respectively, in the fourth quarter of 1994.
These results compare with an annualized return on common shareholders' equity
and return on assets of 14.0 percent and 1.50 percent, respectively, in the
fourth quarter of 1993. Annualized return on common shareholders' equity and
return on assets, including the securities lending charge and the preferred
stock redemption, were 1.1 percent and .42 percent, respectively, in the fourth
quarter of 1994.
Full Year 1994
- --------------
Compared with 1993, the Corporation's 1994 results reflected increases in
net interest and fee revenue as well as lower credit quality expense, offset by
higher operating expense and losses on the sale of securities.
Net interest revenue for the year increased to $1.508 billion, up 13
percent from $1.329 billion in 1993, principally reflecting a higher yielding
asset mix and the impact of the Corporation's 1993 acquisitions of The Boston
Company and AFCO Credit Corporation. Fee revenue increased to $1.652 billion,
up 7 percent from $1.538 billion in 1993, principally reflecting the full-year
impact of The Boston Company acquisition,
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<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 5
offset in part by the impact of divestitures, lower securities lending revenues
and lower mutual fund management and administration fee revenue.
Operating expense, before the net expense of acquired property, the
securities lending charge and merger expenses, was $2.075 billion for 1994,
compared with $1.850 billion in 1993. The increase primarily resulted from the
full-year impact of The Boston Company acquisition.
Net revenue from acquired property totaled $28 million in 1994, an $87
million improvement over 1993.
The provision for credit losses was $70 million in 1994, down $55 million
from $125 million in 1993. Net credit losses in 1994 were $67 million, down
significantly from $139 million in 1993.
1994 return on common shareholders' equity and return on assets were 16
percent and 1.71 percent, respectively, excluding the securities lending charge,
Dreyfus-related charges and preferred stock redemption. This compares with 1993
return on common shareholders' equity and return on assets of 13.7 percent and
1.46 percent, respectively, excluding merger expenses and securities gains
related to The Boston Company acquisition.
Including the securities lending charge, Dreyfus-related charges and
preferred stock redemption, 1994 return on common shareholders' equity and
return on
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<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 6
assets were 9.8 percent and 1.14 percent, respectively. Including the merger
expenses and securities gains related to The Boston Company acquisition, 1993
return on common shareholders' equity and return on assets were 12.1 percent and
1.29 percent, respectively.
With balance sheet assets of approximately $39 billion and assets under
management and administration of approximately $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
Jan. 13, 1995
Page 7
SUPPLEMENTAL INFORMATION
- ------------------------
Repositioning of Clients' Securities Lending Investment Portfolios
- ------------------------------------------------------------------
In the fourth quarter of 1994, the Corporation recorded a one-time, after-tax
charge of $130 million, or $.87 per share, as a result of actions taken on
behalf of certain securities lending clients. It was determined that the
interest rate sensitivity of these clients' portfolios was inconsistent with
prevailing market conditions. The actions taken have reduced the interest rate
sensitivity of those portfolios.
Under a securities lending program, banks, acting as agent on behalf of their
trust and custody clients, lend participating clients' securities primarily to
broker-dealers that periodically need these securities. Agents typically
receive cash collateral from the borrowing brokers--paying an overnight interest
rate for the use of cash--and then invest this cash collateral in debt
instruments. Clients benefit when returns from these instruments exceed
interest paid to the brokers for use of the cash. However, recent sharp
increases in interest rates significantly impacted this interest spread.
In order to reduce the interest rate sensitivity of these securities lending
portfolios, the Corporation arranged for a third-party to enter into interest
rate swap contracts that convert the income generated by the securities lending
cash collateral investments to a shorter-term floating rate. The charge to
earnings reflects the cost of arranging the third party transactions.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 8
<TABLE>
<CAPTION>
Net Interest Revenue
- --------------------
(taxable equivalent basis) Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1994 1993 Increase 1994 1993 Increase
- --------------------------------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net interest revenue $ 403 $ 347 $ 56 $ 1,521 $ 1,346 $ 175
- --------------------------------- ------- ------- ------ ------- ------- ------
Average interest-earning assets $32,957 $31,416 $1,541 $32,282 $30,657 $1,625
- --------------------------------- ------- ------- ------ ------- ------- ------
Net interest margin 4.85% 4.39% 46 bp 4.71% 4.39% 32 bp
- --------------------------------- ------- ------- ------ ------- ------- ------
</TABLE>
The 16% improvement in net interest revenue in the fourth quarter of 1994,
compared with the fourth quarter of 1993, primarily resulted from a higher level
of interest-earning assets, as well as a higher yielding asset mix as lower-
yielding money market assets were replaced with higher-yielding loans. Average
loans increased $3.2 billion while money market assets decreased $1.9 billion.
The increase in average loans included $1.1 billion related to the December 1993
acquisition of AFCO Credit Corporation, a $850 million increase in retail loans,
a $750 million increase in credit card loans and a $600 million increase in
domestic wholesale loans. The increase in average credit card loans was
primarily driven by the CornerStone/sm/ credit card product introduced during
the first quarter of 1994. At December 31, 1994, this product had generated
approximately 695,000 new accounts with total outstandings of $725 million. A
further reduction in nonperforming assets and higher loan fees also contributed
to the improved net interest revenue and net interest margin.
The improvement in net interest revenue and the net interest margin in the full
year of 1994 resulted principally from the same factors responsible for the
fourth quarter increase, as well as a higher level of average interest-earning
assets resulting from the second quarter 1993 acquisition of The Boston Company
and a lower level of long-term debt.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 9
Average loans increased $1.3 billion in the fourth quarter of 1994, compared
with the third quarter of 1994. The increase primarily resulted from a $325
million increase in retail loans, a $300 million increase in short-term
commercial loans, a $300 million increase in credit card loans, and a $250
million increase in domestic wholesale loans.
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for credit losses $15 $25 $(10) $70 $125 $ (55)
Net expense (revenue) of
acquired property (5) 7 (12) (28) 59 (87)
- ------------------------------------------------------------------------------------------
Credit quality expense $10 $32 $(22) $42 $184 $(142)
- ------------------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Consumer credit $23 $16 $ 7 $63 $ 62 $ 1
Commercial real estate 4 (2) 6 2 61 (59)
Commercial and financial (5) 7 (12) 1 15 (14)
- ------------------------------------------------------------------------------------------
Total domestic 22 21 1 66 138 (72)
- ------------------------------------------------------------------------------------------
International (2) 1 (3) 1 1 -
- ------------------------------------------------------------------------------------------
Total net credit losses $20 $22 $ (2) $67 $139 $ (72)
- ------------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .30% .37% (7)bp .27% .64% (37)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 $22 million lower in the fourth quarter of
1994, compared with the prior-year period, reflecting the improved credit
quality of the loan portfolio and the lower level of real estate acquired
(OREO). Net revenue from acquired property totaled $5 million in the fourth
quarter of 1994, resulting from $6 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 fourth quarter of 1993 resulted from a $10 million
provision to the reserve for OREO. Net credit losses decreased $2 million
compared with the fourth quarter of 1993 primarily resulting from net recoveries
on commercial loans. The increase in consumer credit losses related primarily
to higher losses on credit card loans.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 10
Credit quality expense was $142 million lower in the full year of 1994, compared
with the full year of 1993. Improved credit quality led to a $55 million
decrease in the provision for credit losses. The net expense of acquired
property decreased $87 million because the full year of 1994 included $30
million in net gains on the sale of acquired property and no provision to the
reserve for OREO, compared with the full year of 1993 that included a $54
million OREO reserve provision. Net credit losses in the full year of 1994 were
down by $72 million compared with the full year of 1993, primarily resulting
from lower commercial real estate net credit losses.
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment management $224 $261 $(37) $ 953 $ 853 $100
Cash management and deposit
transaction charges 49 49 - 197 192 5
Information services 20 35 (15) 78 152 (74)
Mortgage servicing 24 14 10 78 62 16
Credit card 21 18 3 72 61 11
Foreign currency and
securities trading 22 16 6 76 46 30
Other 45 36 9 198 172 26
- -------------------------------------------------------------------------------------
Total fee revenue 405 429 (24) 1,652 1,538 114
Gains (losses) on sale
of securities - 10 (10) (5) 100 (105)
- -------------------------------------------------------------------------------------
Total noninterest revenue $405 $439 $(34) $1,647 $1,638 $ 9
- -------------------------------------------------------------------------------------
</TABLE>
The $37 million decrease in trust and investment management fees in the fourth
quarter of 1994, compared with the prior-year period, resulted from several
factors. Mutual fund administration fees decreased $13 million and included a
$6 million decrease in revenue related to the second quarter 1994 sale of the
Boston-based third-party mutual fund administration business. In addition,
securities lending revenue decreased $12 million, while revenue from the
management of Dreyfus mutual fund assets decreased $9 million. The decrease in
securities lending revenue primarily resulted from narrowing margins in a period
of rapidly rising short-term interest rates. Although actions were taken in the
fourth quarter to reduce the
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 11
interest rate sensitivity of certain securities lending portfolios, further
fluctuations in securities lending margins could occur depending on the
frequency and magnitude of future interest rate changes. The lower revenue from
the management of mutual funds resulted from a lower average level of mutual
fund assets managed. Average funds managed in the fourth quarter of 1994 were
$68 billion compared with $80 billion in the fourth 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 fixed-
income investments, paralleling the decline in the bond markets over the past 12
months. At December 31, 1994, compared to December 31, 1993, the Lehman
Brothers Long Term Government Bond Index decreased 7%.
Fee revenue for Dreyfus was $74 million and $319 million in the fourth quarter
and full year of 1994, compared with $86 million and $348 million in the fourth
quarter and full year of 1993.
Information services fees decreased $15 million, compared with the prior-year
period, primarily as a result of the Corporation's December 1993 sale of two
information services businesses. The $10 million increase in mortgage servicing
fees, compared with the prior-year period, primarily resulted from acquisitions
of mortgage servicing rights coupled with a lower rate of prepayments.
The $3 million increase in credit card revenue in the fourth quarter of 1994,
compared with the fourth quarter of 1993, primarily resulted from fee revenue
generated by the Corporation's CornerStone/sm/ credit card product.
The increase in foreign currency and securities trading fee revenue in the
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 12
fourth quarter of 1994 primarily was attributable to foreign exchange fees
earned, primarily as a result of increased global custody and corporate customer
activity.
Fee revenue for the full year of 1994 was up $114 million, or 7%, from the full
year of 1993, primarily as a result of a full year impact of The Boston Company
in 1994, compared with a partial impact in 1993.
The Corporation recorded $5 million in losses on securities available for sale
in the full year of 1994, resulting from the third quarter 1994 loss of $15
million, or $10 million after-tax, from the disposition of securities held by
Dreyfus that did not meet the investment objectives, interest rate or credit
risk characteristics required by the Corporation. The Corporation recorded $100
million in gains on the sale of securities during the full year of 1993.
Included in the $100 million in gains were $87 million which resulted from sales
undertaken as part of the financing plan and balance sheet restructuring related
to the acquisition of The Boston Company.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 13
<TABLE>
<CAPTION>
Operating Expense
- -----------------
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1994 1993 Inc/(Dec) 1994 1993 Inc/(Dec)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $237 $234 $ 3 $ 956 $ 854 $102
Professional, legal and
other purchased services 62 48 14 210 163 47
Net occupancy expense 54 52 2 206 186 20
Equipment expense 35 35 - 132 121 11
Amortization of goodwill, core deposit
and other identified intangibles 25 22 3 98 78 20
FDIC assessment and regulatory
examination fees 16 15 1 63 60 3
Amortization of purchased mortgage
servicing rights and purchased
credit card relationships 9 10 (1) 40 44 (4)
Other expense 85 111 (26) 370 344 26
- -----------------------------------------------------------------------------------------------
Operating expense before the net
expense (revenue) of acquired
property, the securities lending
charge and merger expenses 523 527 (4) 2,075 1,850 225
- -----------------------------------------------------------------------------------------------
Net expense (revenue) of
acquired property (5) 7 (12) (28) 59 (87)
- -----------------------------------------------------------------------------------------------
Securities lending charge 223 - 223 223 - 223
- -----------------------------------------------------------------------------------------------
Merger expenses - - - 104 175 (71)
- -----------------------------------------------------------------------------------------------
Total operating expense $741 $534 $207 $2,374 $2,084 $290
- -----------------------------------------------------------------------------------------------
Average full-time equivalent staff 24,800 23,900 900 24,300 22,300 2,000
- -----------------------------------------------------------------------------------------------
Efficiency ratio (a) 65% 68% (3) 65% 64% 1
Efficiency ratio excluding amortization
of goodwill, core deposit and other
identified intangibles recorded in
connection with acquisitions 62 65 (3) 62 61 1
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before the net expense (revenue) of acquired property, the
securities lending charge 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, the
securities lending charge and merger expenses decreased by $4 million in the
fourth quarter of 1994, compared with the fourth quarter of 1993. This decrease
resulted from several factors primarily relating to acquisitions and
divestitures which offset modest expense growth. Expenses decreased as 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. In addition, the fourth quarter of 1993 included nonrecurring expenses of
approximately $13 million related to the winding down of certain data processing
operations that were not part of the fourth quarter 1993 sale of the information
services businesses. Partially offsetting the decrease in expense from
divestitures were increased expenses resulting from the December 1993 AFCO
acquisition, the
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 14
September 1994 Glendale Bancorporation (Glendale) acquisition and other smaller
acquisitions in 1994. In addition, the $14 million increase in professional,
legal and other purchased services in the fourth quarter of 1994, compared to
the prior-year period, primarily resulted from higher legal and consulting fees.
On a stand-alone basis, Dreyfus' operating expense decreased to $56 million in
the fourth quarter of 1994, compared with $62 million in the prior-year period.
Operating expense before the net expense of acquired property, the securities
lending charge and merger expenses totaled $2,075 million in the full year of
1994, compared with $1,850 million in the full year of 1993. The increase was
primarily the result of a full year impact of The Boston Company in 1994,
compared with a partial impact in 1993, as well as marketing expense of $27
million, recorded in 1994, related to the introduction of the Corporation's
CornerStone/sm/ credit card product. Dreyfus incurred operating expense before
merger expenses of $230 million and $225 million in the full year of 1994 and
1993, 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.
Except for the merger with Dreyfus, which was accounted for under the pooling-
of-interests method, the Corporation historically has accounted for business
combinations under the purchase method of accounting, resulting in the recording
of goodwill and other identified intangibles which are
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 15
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. The amortization expense
of these intangibles was $25 million pre-tax, or $20 million after-tax, in the
fourth quarter of 1994 and $98 million pre-tax, or $76 million after-tax, for
the full year 1994.
Income Taxes
- ------------
The provision for income taxes totaled $278 million in the full year of 1994,
compared with $298 million in the full year of 1993. Excluding the impact of
the Dreyfus merger-related expenses and losses on the disposition of Dreyfus
securities in the third quarter of 1994 and the securities lending charge in the
fourth quarter of 1994, the Corporation's effective tax rate for the full year
was 38%. Excluding the impact of The Boston Company merger-related expenses and
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 full
year of 1993 was 39.5%.
The Corporation's effective tax rate for the fourth quarter of 1994, excluding
the impact of the securities lending charge, was approximately 38% and it is
currently anticipated that the effective tax rate will remain at approximately
38% for the foreseeable future.
<TABLE>
<CAPTION>
Reserve for Credit Losses
- ---------------------------------------------
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1994 1994 1994 1993
- --------------------------------------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $ 607 $ 611 $ 609 $ 600
Reserve as a percentage of
total loans 2.27% 2.35% 2.46% 2.45%
- --------------------------------------------- ----- ----- ----- -----
(a) Excludes reserve for segregated assets.
</TABLE>
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 16
<TABLE>
<CAPTION>
Nonperforming Assets(a)
- -------------------------------------------
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1994 1994 1994 1993
- ------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 56 $ 51 $ 61 $ 61
Commercial real estate 28 32 35 89
Other domestic 66 72 53 45
International nonperforming loans 1 1 6 7
- ------------------------------------------- ----- ----- ----- -----
Total nonperforming loans 151 156 155 202
- ------------------------------------------- ----- ----- ----- -----
Acquired property:
Real estate acquired
through foreclosures 89 105 109 100
In-substance real estate foreclosures 27 28 30 75
Reserve for real estate acquired (29) (30) (31) (37)
- ------------------------------------------- ----- ----- ----- -----
Real estate acquired, net of reserve 87 103 108 138
Other assets acquired 1 1 1 1
- ------------------------------------------- ----- ----- ----- -----
Total acquired property 88 104 109 139
- ------------------------------------------- ----- ----- ----- -----
Total nonperforming assets $ 239 $ 260 $ 264 $ 341
- ------------------------------------------- ----- ----- ----- -----
Nonperforming loans as a percentage of
total loans .56% .60% .63% .83%
Total nonperforming assets as a
percentage of total loans and net
acquired property .89% .99% 1.06% 1.39%
- ------------------------------------------- ----- ----- ----- -----
(a) Excludes segregated assets.
</TABLE>
Nonperforming assets totaled $239 million at December 31, 1994, a decrease of
$21 million, or 8%, from $260 million at September 30, 1994. Nonperforming real
estate assets, which include nonperforming commercial and consumer real estate
loans and OREO net of the reserve, decreased by $15 million during the quarter
primarily as a result of sales and credit losses. The decrease in other
domestic nonperforming loans resulted from sales and repayments, offset in part
by additions.
Nonperforming assets decreased by $102 million, or 30%, compared with December
31, 1993, primarily as a result of the $117 million reduction in nonperforming
real estate assets. The reduction resulted primarily from returns to accrual
status, asset sales and repayments. The increase in other domestic
nonperforming loans resulted from $11 million of commercial and industrial loans
from Glendale, as well as other additions, offset in part by repayments and
credit losses.
<PAGE>
Mellon Reports Earnings
Jan. 13, 1995
Page 17
<TABLE>
<CAPTION>
Selected Capital Data
- ---------------------
(dollar amounts in millions, Dec. 31, Sept. 30, June 30, Dec. 31,
except per share amounts) 1994 1994 1994 1993
- -------------------------- ------- ------ ------ -------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 3,687 $3,695 $3,716 $ 3,546
Common shareholders' equity
to assets ratio 9.54% 9.41% 9.80% 9.57%
Tangible common shareholders'
equity to assets ratio (a) 7.05% 6.88% 7.33% 6.84%
Total shareholders' equity $ 4,122 $4,285 $4,308 $ 4,138
Total shareholders' equity
to assets ratio 10.67% 10.92% 11.37% 11.17%
Tier I capital ratio 9.5%(b) 10.03% 10.27% 9.70%
Total (Tier I and Tier II)
capital ratio 12.9%(b) 13.50% 13.74% 13.22%
Leverage capital ratio 8.6%(b) 9.16% 9.54% 9.00%
Book value per common share $ 25.06 $25.15 $ 25.35(c) $ 24.28(c)
Closing common stock price $30.625 $37.50 $37.50 $35.375
Market capitalization $ 4,507 $5,510 $5,400 $ 5,070
- --------------------- ------- ------ ------ -------
</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 assumed full conversion of the Series D
preferred stock to common stock. Accordingly, this included 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.
The decrease in the Corporation's total shareholders' equity in the fourth
quarter of 1994 primarily resulted from the previously announced redemption of
the $160 million Series H Preferred Stock. This redemption reduced the December
31, 1994 regulatory capital ratios by approximately 45 basis points. This
redemption will also reduce preferred stock dividend requirements annually, by
$17 million, beginning in 1995.
Fourth quarter 1994 preferred stock dividends reflect an additional $16 million
for the Series H redemption premium, unamortized issuance costs and dividends
accrued through the redemption date. These additional items reduced fourth
quarter 1994 earnings per common share by $.11, but had no impact on net income.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation (and its subsidiaries)
<TABLE>
<CAPTION>
(dollar amounts in millions, Quarter ended Year ended
except per share amounts; December 31, December 31,
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 $ .07 $ .84 $ 2.42 $ 2.73
Return on common shareholders' equity 1.10% 14.03% 9.79% 12.08%
Return on assets .42% 1.50% 1.14% 1.29%
Yield on interest-earning assets,
on a taxable equivalent basis 7.92% 6.37% 7.19% 6.53%
Cost of funds supporting interest-
earning assets 3.07% 1.98% 2.48% 2.14%
Results excluding certain items (b)(c)
- --------------------------------------
Primary net income per common share $ 1.05 $ .84 $ 4.00 $ 3.14
Return on common shareholders' equity 16.49% 14.03% 16.02% 13.71%
Return on assets 1.74% 1.50% 1.71% 1.46%
Average balances for the period (d)
- ------------------------------------
Money market investments $ 1,213 $ 3,120 $ 1,656 $ 3,821
Trading account securities 281 206 380 269
Securities 5,062 4,861 5,149 4,804
Loans 26,401 23,229 25,097 21,763
Total interest-earning assets 32,957 31,416 32,282 30,657
Total assets 38,792 36,688 38,106 35,635
Deposits 27,260 27,503 27,248 26,541
Total interest-bearing liabilities 26,373 24,247 25,441 23,856
Common shareholders' equity 3,745 3,504 3,691 3,323
Total shareholders' equity 4,313 4,141 4,277 3,964
Computation of primary net income per common share
- --------------------------------------------------
Net income applicable to common stock $ 11 $ 123(e) $ 361(e) $ 401(e)
======= ======= ======= ======
Average common shares outstanding 147,059 143,862 145,037 141,611
Average common shares issuable upon
conversion of Series D preferred stock - 2,553 1,692 2,460
Other common stock equivalents, net of
shares assumed repurchased 1,541 2,375 2,340 3,012
-------- -------- -------- --------
Total stock and stock equivalents 148,600 148,790 149,069 147,083
======== ======== ======== ========
Primary net income per common share (f) $ .07 $ .84 $ 2.42 $ 2.73
======== ======== ======== ========
- --------------------
</TABLE>
(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) Results for the fourth quarter of 1994 exclude the $130 million after tax
securities lending charge, as well as the additional $16 million of
preferred stock dividends recorded in connection with the redemption of the
Series H preferred stock. Results for the full year of 1994 exclude $79
million after tax of merger expenses and $10 million after tax of losses on
the disposition of investment securities previously owned by Dreyfus, the
$130 million after tax securities lending charge, as well as the $16 million
of preferred stock dividends recorded in connection with the redemption of
the Series H preferred stock. Results for the full year of 1993 exclude
$112 million after tax of merger expenses and $53 million after tax in gains
on the sale of securities related to the Corporation's acquisition of The
Boston Company.
(d) Computed on a daily average basis.
(e) After adding back Series D preferred stock dividends.
(f) Based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
(in millions, except per Quarter ended Year ended
share amounts) December 31, December 31,
------------------- ------------------
1994 1993(a) 1994 1993(a)
----- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Loans and loan fees $ 555 $411 $1,926 $1,588
Money market investments 19 25 70 125
Trading account securities 5 2 24 15
Securities 77 61 290 256
----- ---- ------ ------
Total interest revenue 656 499 2,310 1,984
Interest expense
- ----------------
Deposits in domestic offices 135 101 447 415
Deposits in foreign offices 41 10 92 40
Short-term borrowings 52 16 153 79
Notes and debentures (with original
maturities over one year) 27 29 110 121
----- ---- ------ ------
Total interest expense 255 156 802 655
----- ---- ------ ------
Net interest revenue 401 343 1,508 1,329
Provision for credit losses 15 25 70 125
----- ---- ------ ------
Net interest revenue after provision
for credit losses 386 318 1,438 1,204
Noninterest revenue
- -------------------
Fee revenue 405 429 1,652 1,538
Gains (losses) on sales of securities - 10 (5) 100
----- ---- ------ ------
Total noninterest revenue 405 439 1,647 1,638
Operating expense
- -----------------
Staff expense 237 234 956 854
Professional, legal and other
purchased services 62 48 210 163
Net occupancy expense 54 52 206 186
Equipment expense 35 35 132 121
Amortization of goodwill, core deposit
and other identified intangibles 25 22 98 78
FDIC assessment and
regulatory examination fees 16 15 63 60
Amortization of purchased mortgage
servicing rights and purchased
credit card relationships 9 10 40 44
Other expense 85 111 370 344
Net expense (revenue) of acquired property (5) 7 (28) 59
Securities lending charge 223 - 223 -
Merger expenses - - 104 175
----- ---- ------ ------
Total operating expense 741 534 2,374 2,084
----- ---- ------ ------
Income before income taxes 50 223 711 758
Provision for income taxes 9 85 278 298
----- ---- ------ ------
Net income 41 138 433 460
Dividends on preferred stock 30 16 75 63
----- ---- ------ ------
Net income applicable to common stock $ 11 $122 $ 358 $ 397
===== ==== ====== ======
Primary net income per common share $.07 $.84 $2.42 $2.73
===== ==== ====== ======
Fully diluted net income per common share $.07 $.84 $2.42 $2.73
===== ==== ====== ======
- --------------------
</TABLE>
(a) Restated to reflect the merger with Dreyfus which was accounted for as a
pooling-of-interests.
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Dec. 31, Dec. 31,
1994 1993(a)
--------- ---------
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 2,285 $ 2,171
Money market investments 860 1,766
Trading account securities 71 116
Securities:
Available for sale (approximate fair value of
$2,920 at December 31, 1993) 1,881 2,916
Investment (approximate fair value
of $3,033 and $2,486) 3,244 2,432
Loans, net of unearned discount of $62 and $74 26,733 24,484
Reserve for credit losses (607) (600)
------- -------
Net loans 26,126 23,884
Premises and equipment 558 524
Acquired property, net of reserves of
$29 and $37 88 139
Goodwill 824 826
Core deposit and other identified intangibles 212 258
Purchased mortgage servicing rights and
purchased credit card relationships 352 204
Segregated assets, net of reserves
of $4 and $4 85 183
Other assets 2,058 1,633
------- -------
Total assets $38,644 $37,052
======= =======
Liabilities
- -----------
Deposits in domestic offices $24,100 $26,381
Deposits in foreign offices 3,470 1,183
Short-term borrowings 3,472 2,133
Other liabilities 1,912 1,227
Notes and debentures (with original maturities
over one year) 1,568 1,990
------- -------
Total liabilities 34,522 32,914
Shareholders' equity
- --------------------
Preferred stock 435 592
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 200,000,000 shares
Issued - 147,165,480 (b) and 103,427,262 shares 74 52
Additional paid-in capital 1,851 2,038
Retained earnings 1,780 1,629
Warrants 37 37
Net unrealized loss on assets
available for sale (net of taxes) (c) (55) -
Treasury stock of - and 7,774,346
shares at cost - (210)
------- -------
Total common shareholders' equity 3,687 3,546
------- -------
Total shareholders' equity 4,122 4,138
------- -------
Total liabilities and shareholders' equity $38,644 $37,052
======= =======
- ---------------------
</TABLE>
(a) Restated to reflect the merger with Dreyfus which was accounted for as a
pooling-of-interests.
(b) Reflects the three-for-two common stock split distributed 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 December 31, 1994,
with the unrealized loss of $55 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 December 31,
1994 of $.38.
