<PAGE> 1
THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-7410
MELLON BANK CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1233834
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258-0001
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code -- (412) 234-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding as of
Class March 31, 1995
----- --------------
<S> <C>
Common Stock, $.50 par value 146,486,654
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS AND 10-Q CROSS-REFERENCE INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
- ------------------------------
Financial Highlights 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Item 2) 3
Financial Statements (Item 1):
Consolidated Income Statement 34
Consolidated Balance Sheet 36
Consolidated Statement of Cash Flows 37
Consolidated Statement of Changes in Shareholders' Equity 38
Notes to Financial Statements 39
Selected Statistical Information:
Consolidated Balance Sheet - Average Balances and Interest
Yields/Rates 44
Deposits 46
Part II - Other Information
- ---------------------------
Legal Proceedings (Item 1) 46
Exhibits and Reports on Form 8-K (Item 6) 46
Signature 47
Corporate Information 48
Index to Exhibits 49
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(dollar amounts in millions, except per share amounts) 1995 1994(a)
- --------------------------------------------------------------------------------
<S> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31
Net income $ 170 $ 156
Net income applicable to common stock 160 141
Dividends paid on common stock 66 43
Per common share:
Net income $ 1.08 $ .96
Dividends (b) .45 .37
Annualized return on common shareholders' equity 17.55% 16.12%
Annualized return on assets 1.77% 1.67%
Efficiency ratio 63% 67%
Efficiency ratio excluding amortization of intangibles (c) 60% 63%
Average common shares and equivalents
outstanding (in thousands) 148,766 148,542
- --------------------------------------------------------------------------------
BALANCES AT MARCH 31
Loans $26,696 $24,537
Total assets 39,619 37,544
Deposits 27,005 26,786
Common shareholders' equity 3,755 3,635
Market capitalization 5,969 5,371
Closing common stock price $ 40.75 $37.375
Book value per common share 25.63 24.85
Common shareholders' equity to assets ratio 9.48% 9.68%
Tier I capital ratio 9.49% 10.00%
Total (Tier I plus Tier II) capital ratio 12.86% 13.50%
Leverage capital ratio 8.84% 8.99%
- --------------------------------------------------------------------------------
<FN>
(a) Amounts have been restated to reflect the merger with Dreyfus, which was
accounted for as a pooling of interests. Per share amounts have also been
restated to reflect the three-for-two common stock split.
(b) Dividends per common share have not been restated to reflect the Dreyfus
merger.
(c) Excludes amortization of goodwill, core deposit and other identified
intangibles recorded in connection with acquisitions.
</TABLE>
NOTE: THROUGHOUT THIS REPORT, RATIOS ARE BASED ON UNROUNDED NUMBERS, AND FACTORS
CONTRIBUTING TO CHANGES BETWEEN PERIODS ARE NOTED IN DESCENDING ORDER OF
MATERIALITY.
2
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW OF FIRST QUARTER 1995 RESULTS
- --------------------------------------------------------------------------------
The Corporation recorded earnings per common share of $1.08 and net income
applicable to common stock of $160 million in the first quarter of 1995
compared with $.96 per common share and $141 million, respectively, in the
first quarter of 1994. Annualized return on common shareholders' equity
and return on assets were 17.55% and 1.77%, respectively, in the first
quarter of 1995 compared with 16.12% and 1.67%, respectively, in the first
quarter of 1994.
Net interest revenue was $389 million in the first quarter of 1995, up from
$367 million in the first quarter of 1994, primarily resulting from a
higher level of interest-earning assets as well as a higher-yielding asset
mix. Fee revenue was $399 million, down $37 million from the prior-year
period. The decrease in fee revenue primarily reflects one-time net gains
recorded at Dreyfus in the first quarter of 1994 from the sale of certain
nonstrategic interests in partnerships in anticipation of the August 1994
merger with the Corporation, as well as lower mutual fund management and
administration revenues and lower securities lending revenue in the first
quarter of 1995.
The provision for credit losses was $20 million in the first quarter of
1995, unchanged from the prior-year period. Net credit losses were $26
million, up from $17 million in the first quarter of 1994, principally
reflecting higher losses on the CornerStone(sm) credit card product, which
experienced a significant increase in outstanding balances generated since
its introduction in January 1994. Nonperforming assets totaled $243
million at March 31, 1995, compared with $239 million at December 31, 1994,
and $314 million at March 31, 1994. At March 31, 1995, the Corporation's
ratio of nonperforming assets to total loans and net acquired property was
.91%, compared with .89% and 1.27% at December 31, 1994 and March 31, 1994,
respectively.
Operating expense before the net revenue from acquired property was $499
million for the first quarter of 1995 compared with $538 million in the
prior-year period. This decrease primarily resulted from lower marketing
expense related to the CornerStone(sm) credit card as well as lower expenses
for professional and other purchased services.
DIVIDEND INCREASE
- --------------------------------------------------------------------------------
On April 17, 1995, the executive committee of the board of directors of the
Corporation approved an 11% increase in the quarterly cash dividend to $.50
per common share. The increased dividend is payable on May 15, 1995, to
shareholders of record on April 28, 1995. This is the third common
dividend increase that the Corporation has announced since the beginning of
1994, resulting in a total common dividend per share increase of 97%.
3
<PAGE> 5
BUSINESS SECTORS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
Consumer Corporate/Institutional
(dollar amounts in millions, Investment Services Banking Services Investment Services Banking Services
averages in billions) 1995 1994 1995 1994 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 92 $ 95 $ 333 $ 305 $233 $252 $ 96 $ 112
Credit quality expense (revenue) - - 29 19 - - - (1)
Operating expense 63 66 207 226 184 187 39 49
- -----------------------------------------------------------------------------------------------------------------------------------
Income before taxes 29 29 97 60 49 65 57 64
Income taxes 12 12 38 24 20 27 20 23
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 17 $ 17 $ 59 $ 36 $ 29 $ 38 $ 37 $ 41
- -----------------------------------------------------------------------------------------------------------------------------------
Average assets $0.4 $0.4 $21.3 $21.8 $1.4 $0.8 $13.3 $13.4
Average common equity $0.2 $0.2 $ 1.1 $ 1.0 $0.4 $0.4 $ 1.0 $ 1.1
Return on common
shareholders' equity (a) 39% 39% 22% 14% 27% 34% 14% 15%
Return on assets (a) NM NM 1.13% .68% NM NM 1.12% 1.23%
Pretax operating margin 31% 30% 29% 20% 21% 26% 59% 57%
Pretax operating margin
excluding amortization of
intangibles 32% 31% 33% 25% 24% 29% 62% 58%
Efficiency ratio excluding
amortization of intangibles 68% 69% 58% 69% 76% 71% 38% 43%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Annualized.
NM - Not meaningful.
</TABLE>
Note: The table above and discussion that follows present the operating
results of the Corporation's major business sectors, analyzed on an
internal management reporting basis. Amounts are presented on a fully
taxable equivalent basis. Capital is allocated quarterly using the federal
regulatory guidelines as a basis, coupled with management's judgment
regarding the operational risks inherent in the businesses. The capital
allocations may not be representative of the capital levels that would be
required if these sectors were nonaffiliated business units.
Upon completion of the merger with Dreyfus, the Corporation's core business
lines were realigned to reflect the distinct customers that are
serviced--consumers and corporations/institutions--and the products that
are offered--investment and banking. Accordingly, the business sector
results for the quarter ended March 31, 1994, have been realigned to
reflect the change in methodology used by the Corporation to report
business sector results.
Income before taxes for the Corporation's core sectors was $232 million in
the first quarter of 1995, up $14 million, or 6%, compared with the prior
year quarter. The improvement resulted from lower expenses offset, in
part, by higher credit quality expense. Return on common shareholders'
equity for the core sectors was 21% in the first quarter of 1995, compared
with 19% in the prior-year quarter, and return on assets was 1.58% in the
first quarter of 1995 compared with 1.46% in the prior-year quarter.
Results in the real estate workout sector also showed improvement, as a result
of lower credit quality expense, with income before taxes improving to $16
million compared with $8 million in the prior-year quarter.
Consumer Investment Services
Consumer Investment Services includes private asset management services and
retail mutual funds. Income before taxes for the Consumer Investment sector was
$29 million, unchanged from the prior-year period. The decline in revenue was
due to lower fees in the mutual fund business resulting from a lower average
level of assets managed. Offsetting the revenue decline was a decrease in
operating expense due to expense management efforts. This sector continues to
provide excellent returns, with an annualized return on common shareholders'
equity of 39% in both the first quarter of 1995 and 1994.
4
<PAGE> 6
BUSINESS SECTORS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Total Real Estate Other Total All
Core Sectors Workout Corporate Activity Sectors
1995 1994 1995 1994 1995 1994 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 754 $ 764 $ 4 $ 3 $ 35 $ 42 $ 793 $ 809
29 18 (13) (7) - 1 16 12
493 528 1 2 5 8 499 538
- ----------------------------------------------------------------------------------
232 218 16 8 30 33 278 259
90 86 6 3 12 14 108 103
- ----------------------------------------------------------------------------------
$ 142 $ 132 $ 10 $ 5 $ 18 $ 19 $ 170 $ 156
- ----------------------------------------------------------------------------------
$36.4 $36.4 $0.2 $0.4 $2.3 $1.3 $38.9 $38.1
$ 2.7 $ 2.7 $ - $ - $1.0 $0.9 $ 3.7 $ 3.6
21% 19% NM NM NM NM 18% 16%
1.58% 1.46% NM NM NM NM 1.77% 1.67%
31% 28% NM NM NM NM 35% 32%
34% 32% NM NM NM NM 38% 35%
62% 66% NM NM NM NM 60% 63%
- ----------------------------------------------------------------------------------
</TABLE>
Consumer Banking Services
Consumer Banking Services includes consumer lending, business banking, branch
banking, credit card, mortgage loan origination and servicing and jumbo
residential mortgage lending. Income before taxes for this sector totaled $97
million in the first quarter of 1995, an increase of $37 million, compared with
the first quarter of 1994, despite the loss of revenue related to the
cancellation of the Corporation's seasonal tax refund anticipation loan
program. Revenue increased $28 million compared with the prior-year period,
primarily as a result of increased levels of average loans as well as fees
generated from electronic tax return filings. The $19 million decrease in
operating expense primarily resulted from higher marketing expense in the first
quarter of 1994 related to the January 1994 introduction of the CornerStone(sm)
credit card. The increase in credit quality expense principally reflects higher
credit card losses resulting from the significant increase in CornerStone(sm)
outstanding balances. The annualized return on common shareholders' equity for
this sector was 22% in the first quarter of 1995, compared with 14% in the first
quarter of 1994.
Corporate/Institutional Investment Services
Corporate/Institutional Investment Services includes institutional trust
and custody, institutional asset and institutional mutual fund management
and administration, securities lending, foreign exchange, cash management and
stock transfer. Income before taxes for this sector was $49 million in the
first quarter of 1995, a decrease of $16 million, compared with the first
quarter of 1994. Revenue decreased $19 million, or 8%, primarily as a result of
a $10 million decrease in securities lending revenue and an $8 million decrease
in revenue related to the second quarter 1994 sale of the Boston-based
third-party mutual fund administration business. Partially offsetting these
decreases was a $5 million increase in revenue from foreign exchange fees. The
$3 million decrease in operating expense primarily reflects the sale of the
third-party mutual fund business and expense management efforts, offset
partially by expense growth in support of strategic investments. The annualized
return on common shareholders' equity for this sector was 27% in the first
quarter of 1995, compared with 34% in the first quarter of 1994.
5
<PAGE> 7
BUSINESS SECTORS (CONTINUED)
- -------------------------------------------------------------------------------
Corporate/Institutional Banking Services
Corporate/Institutional Banking Services includes large corporate and middle
market lending, asset-based lending, certain capital markets and leasing
activities, commercial real estate lending and insurance premium financing.
Income before taxes for the Corporate/Institutional Banking sector was $57
million, a decrease of $7 million, compared with the first quarter of 1994.
Revenue decreased primarily as a result of lower fees from large corporate
customers, lower insurance premium finance spreads and a decline in securities
trading revenue. The decrease in operating expenses reflects lower overhead
charges as well as the results of infrastructure reengineering in the insurance
premium finance business. The annualized return on common shareholders' equity
for this sector was 14% in the first quarter of 1995, compared with 15% in the
first quarter of 1994.
Real Estate Workout
Real Estate Workout includes commercial real estate recovery and mortgage
banking recovery operations. Income before taxes for Real Estate workout
was $16 million in the first quarter of 1995, compared with $8 million in the
first quarter of 1994. The improvement primarily reflects a lower level of
required reserves given the decline in both the volume and loss experience of
the portfolio.
Other
The Other sector's pretax income of $30 million in the first quarter of
1995 principally reflects earnings on capital above that required in the
core sectors. The results for the first quarter of 1994 reflect approximately
$13 million of one-time net gains from the sale of nonstrategic partnership
interests, as well as earnings on excess capital.
The tables below distribute net income and return on common shareholders'
equity for the Corporation's core sectors between customers serviced and
products offered.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Customers Serviced
-----------------------------
Total
FOR THE THREE MONTHS Total Corporate/
ENDED MARCH 31, Consumer Institutional
(dollar amounts in millions) 1995 1994 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $76 $53 $66 $79
Return on common
shareholders' equity (a) 24% 18% 18% 21%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
Products Offered
-----------------------------
FOR THE THREE MONTHS Total Total
ENDED MARCH 31, Investment Banking
(dollar amounts in millions) 1995 1994 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $46 $55 $96 $77
Return on common
shareholders' equity (a) 31% 35% 18% 15%
- -------------------------------------------------------------------------------
<FN>
(a) Annualized.
</TABLE>
6
<PAGE> 8
NET INTEREST REVENUE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
(taxable equivalent basis, AVERAGE AVERAGE Average Average
dollar amounts in millions) BALANCE RATE balance rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money market investments $ 1,230 5.90% $ 2,147 3.37%
Trading account securities 316 7.59 504 5.57
Securities 4,890 6.53 4,798 5.30
Loans 26,670 8.90 24,636 7.22
------- -------
Total interest-earning assets $33,106 8.42% $32,085 6.65%
- -------------------------------------------------------------------------------
Financed by:
Interest-bearing liabilities $27,050 4.44% $24,851 2.53%
Noninterest-bearing liabilities 6,056 - 7,234 -
------- -------
Total $33,106 3.62% $32,085 1.96%
- -------------------------------------------------------------------------------
Net interest revenue $ 392 4.80% $ 371 4.69%
- -------------------------------------------------------------------------------
<FN>
Note: Average rates are annualized and are calculated on a taxable equivalent
basis at tax rates approximating 35%. Loan fees, as well as nonaccrual loans
and their related income effect, have been included in the calculation of
average rates.
</TABLE>
Net interest revenue, on a fully taxable equivalent basis, for the first
quarter of 1995, totaled $392 million, up $21 million, or 6%, compared with
the first quarter of 1994. The net interest margin was 4.80% in the first
quarter of 1995, up 11 basis points from 4.69%.
The improvement in net interest revenue and the net interest margin in the
first quarter of 1995, compared with the first quarter of 1994, 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. Net interest revenue increased in the first
quarter of 1995, despite the loss of revenue from the Corporation's seasonal
tax refund anticipation loan program that was not offered in 1995. This
program contributed 11 basis points to the net interest margin in the first
quarter of 1994.
Average loans increased $2.0 billion, or 8%, while money market assets
decreased $.9 billion. The increase in average loans resulted primarily from
a $1.0 billion increase in credit card loans, including $.8 billion related
to the CornerStone(sm) credit card product, a $.9 billion increase in retail
loans and a $.8 billion increase in domestic wholesale loans. The increase
in retail loans resulted from increases in several categories including home
equity and student loans, while the increase in wholesale loans primarily was
driven by corporate/institutional banking and middle market lending. Loan
growth was offset in part by a $.5 billion decrease in average loans related
to the Corporation's seasonal tax refund anticipation loan program that was
not offered in 1995. Excluding the tax refund anticipation loans, average
loans increased 10% in the first quarter of 1995 compared with the first
quarter of 1994.
7
<PAGE> 9
CREDIT QUALITY EXPENSE AND RESERVE FOR CREDIT LOSSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
(in millions) 1995 1994 Inc/(Dec)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for credit losses $20 $20 $ -
Net revenue from acquired property (4) (8) (4)
- -------------------------------------------------------------------------------
Credit quality expense $16 $12 $ 4
- -------------------------------------------------------------------------------
</TABLE>
Credit quality expense, defined as the provision for credit losses plus the
net revenue from acquired property, increased in the first quarter of 1995,
compared with the prior-year period, as a result of lower gains on the sale
of acquired property. The provision for credit losses was unchanged.
The Corporation maintains a reserve for credit losses that, in management's
judgment, is adequate to absorb future losses inherent in the loan portfolio.
Management establishes the credit loss reserve using a documented loan loss
assessment process that estimates loss potential in the portfolio as a whole,
not just nonperforming loans. For further information regarding the
methodology used in determining the adequacy of the reserve, see the "Reserve
for credit losses and review of net credit losses" discussion in the
Corporation's 1994 Annual Report on Form 10-K. The reserve for credit losses
totaled $601 million at March 31, 1995, compared with $603 million at March
31, 1994. The ratio of the loan loss reserve to nonperforming loans at March
31, 1995, was 386%, compared with 308% at March 31, 1994. This ratio is not
the result of a target or objective, but rather is an outcome of two
interrelated but separate processes: the establishment of an appropriate
loan loss reserve level for the portfolio as a whole, including but not
limited to the nonperforming component in the portfolio; and the
classification of certain assets as nonperforming in accordance with
established accounting, regulatory and management policies. The ratio can
vary significantly over time as the credit quality characteristics of the
entire loan portfolio change. This ratio can also vary with shifts in loan
portfolio mix.
A summary of the Corporation's net credit losses is presented in the table
on the following page. The increase in net credit losses in the first
quarter of 1995, compared with the prior-year period, resulted from a $17
million increase in credit card losses, including $15 million related to
the CornerStone(sm) portfolio. The Corporation expects further increases in
the level of net credit losses from the CornerStone(sm) portfolio as a result
of the significant increase in outstandings that this product has generated
since it was introduced in January 1994. At March 31, 1995, this
portfolio, which has yet to reach a mature level of delinquencies and
credit losses, had total outstanding balances of $902 million.
8
<PAGE> 10
CREDIT QUALITY EXPENSE AND RESERVE FOR CREDIT LOSSES (CONTINUED)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CREDIT LOSS RESERVE ACTIVITY (a) Three months ended
March 31, Inc/
(dollar amounts in millions) 1995 1994 (Dec)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Reserve at beginning of period $607 $600 $ 7
Credit losses:
Domestic:
Commercial and financial 3 11 (8)
Commercial real estate 3 2 1
Consumer credit:
Credit cards 29 12 17
Consumer mortgage 2 3 (1)
Other consumer credit 4 5 (1)
- -----------------------------------------------------------------------------
Total domestic 41 33 8
- -----------------------------------------------------------------------------
International - 3 (3)
- -----------------------------------------------------------------------------
Total credit losses 41 36 5
- -----------------------------------------------------------------------------
Recoveries:
Domestic:
Commercial and financial (6) (8) (2)
Commercial real estate (3) (5) (2)
Consumer credit:
Credit cards (2) (2) -
Consumer mortgage (1) (1) -
Other consumer credit (1) (3) (2)
- -----------------------------------------------------------------------------
Total domestic (13) (19) (6)
- -----------------------------------------------------------------------------
International (2) - 2
- -----------------------------------------------------------------------------
Total recoveries (15) (19) (4)
- -----------------------------------------------------------------------------
Net credit losses (recoveries):
Domestic:
Commercial and financial (3) 3 (6)
Commercial real estate - (3) 3
Consumer credit:
Credit cards 27 10 17
Consumer mortgage 1 2 (1)
Other consumer credit 3 2 1
- -----------------------------------------------------------------------------
Total domestic 28 14 14
- -----------------------------------------------------------------------------
International (2) 3 (5)
- -----------------------------------------------------------------------------
Total net credit losses 26 17 9
- -----------------------------------------------------------------------------
Provision for credit losses 20 20 -
- -----------------------------------------------------------------------------
Reserve at end of period $601 $603 $ (2)
- -----------------------------------------------------------------------------
Reserve as a percentage of total loans 2.25% 2.46% (21)bp
- -----------------------------------------------------------------------------
Annualized net credit losses
to average loans .40% .27% 13 bp
- -----------------------------------------------------------------------------
<FN>
(a) Excludes the reserve for segregated assets and net credit losses on
segregated assets.
</TABLE>
9
<PAGE> 11
NONINTEREST REVENUE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31, Inc/
(in millions) 1995 1994 (Dec)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Fee revenue:
Trust and investment management:
Mutual fund:
Management $ 71 $ 76 $ (5)
Administration/Custody 30 47 (17)
Institutional trust 51 62 (11)
Institutional asset management 34 36 (2)
Private asset management 33 34 (1)
- -------------------------------------------------------------------------------
Total trust and investment management 219 255 (36)
Cash management and deposit transaction charges 47 51 (4)
Mortgage servicing 25 16 9
Foreign currency and securities trading 24 19 5
Credit card 19 14 5
Information services 16 20 (4)
Other 49 61 (12)
- -------------------------------------------------------------------------------
Total fee revenue 399 436 (37)
Gains (losses) on sale of securities (1) 2 (3)
- -------------------------------------------------------------------------------
Total noninterest revenue $398 $438 $(40)
- -------------------------------------------------------------------------------
</TABLE>
Reflecting the Corporation's strategy of maintaining a well-balanced
revenue base, revenues from the fee-generating businesses represented 51%
of the Corporation's total revenue for the quarter. These revenues
decreased in the first quarter of 1995 by $37 million, or 8%, from the
first quarter of 1994, reflecting the impact of one-time gains on the sale
of certain nonstrategic interests in partnerships, lower mutual fund
administration and management revenues and lower securities lending
revenue.
The $36 million decrease in trust and investment management fees in the
first quarter of 1995, compared with the prior-year period, resulted from
several factors. Mutual fund administration/custody fees decreased $17
million and included an $8 million decrease in revenue related to the
second quarter 1994 sale of the Boston-based third-party mutual fund
administration business as well as a $4 million decrease at Dreyfus.
Securities lending revenue, which is included in institutional trust
revenue, decreased $10 million from its peak level in the first quarter of
1994. The decrease in securities lending revenue primarily resulted from
narrowing margins in a period of rising short-term interest rates as well
as a lower volume of securities lent in the first quarter of 1995. In
addition, revenue from the management of Dreyfus' proprietary mutual fund
assets decreased $5 million. The decrease in Dreyfus mutual fund
management revenue is discussed on page 12.
10
<PAGE> 12
NONINTEREST REVENUE (CONTINUED)
- -------------------------------------------------------------------------------
As shown in the table below, the market value of assets under management
and administration/custody for the Corporation was $880 billion at March
31, 1995, up $33 billion compared with $847 billion at December 31, 1994.
The $25 billion increase in the market value of assets under
administration/custody primarily reflected a general market increase,
higher levels of institutional business resulting from new clients and
increased funding by existing clients. The $8 billion increase in the
market value of assets under management resulted from the improved bond and
equity markets. At March 31, 1995, compared with December 31, 1994, the
Lehman Brothers Long Term Government Bond index increased 6%, while the S&P
500 index increased 9%.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
MARKET VALUE OF ASSETS UNDER MANAGEMENT AND ADMINISTRATION/CUSTODY
MARCH 31, Dec. 31, Sept. 30, June 30, March 31,
(in billions) 1995 1994 1994 1994 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional trust:
Management $ 3 $ 3 $ 2 $ 2 $ 2
Administration/Custody 599 568 538 498 491
Mutual fund:
Management 76 73 76 77 79
Administration/Custody 69 76 108 107 130
Institutional asset management:
Management 97 93 101 100 101
Private asset management:
Management 22 21 22 21 21
Administration/Custody 14 13 13 13 13
- ----------------------------------------------------------------------------------------
Total:
Management $198 $190 $201 $200 $203
Administration/Custody $682 $657 $659 $618 $634
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
MANAGED MUTUAL FUND ASSETS BY FUND CATEGORY
MARCH 31, Dec. 31, Sept. 30, June 30, March 31,
(in billions) 1995 1994 1994 1994 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proprietary funds:
Taxable money market funds:
Institutions $19 $18 $18 $19 $21
Individuals 11 10 10 10 10
Tax-exempt money market funds 7 7 8 9 9
Tax-exempt bond funds 18 18 19 19 19
Fixed-income funds 4 4 4 5 5
Equity funds 10 9 10 9 9
- ----------------------------------------------------------------------------------------
Total proprietary funds 69 66 69 71 73
Other managed funds 7 7 7 6 6
- ----------------------------------------------------------------------------------------
Total managed mutual fund assets $76 $73 $76 $77 $79
- ----------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 13
NONINTEREST REVENUE (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MANAGED MUTUAL FUND FEE REVENUE Three months ended
March 31, Inc/
(in millions) 1995 1994 (Dec)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Managed mutual fund fees $83 $90 $(7)
Less: Fees waived 9 12 (3)
Less: Fund expense reimbursements 3 2 1
- -------------------------------------------------------------------------------
Net managed mutual fund fees $71 $76 $(5)
- -------------------------------------------------------------------------------
Net managed mutual fund fees by fund category:
Proprietary funds:
Taxable money market funds:
Institutions $10 $12 $(2)
Individuals 10 10 -
Tax-exempt money market funds 5 5 -
Tax-exempt bond funds 23 27 (4)
Fixed income funds 5 6 (1)
Equity funds 15 13 2
- -------------------------------------------------------------------------------
Total proprietary funds 68 73 (5)
Other managed funds 3 3 -
- -------------------------------------------------------------------------------
Net managed mutual fund fees $71 $76 $(5)
- -------------------------------------------------------------------------------
</TABLE>
Mutual fund management fees are based on the average net assets of each
fund. Average proprietary funds managed at Dreyfus in the first quarter of
1995 were $68 billion, compared with $78 billion in the first quarter of
1994. This decrease resulted primarily from a $5 billion reduction in
average institutional money market assets managed and a $4 billion
reduction in average bond funds.
The $4 million decrease in cash management and deposit transaction charges
primarily reflected a shift to deposit balance-based compensation from
fee-based compensation as the method of payment for cash management
services, due to the 300 basis point increase in short-term interest rates
since the first quarter of 1994. Including the revenue generated from
deposit balances, which is in net interest revenue, cash management and
deposit transaction charges increased slightly compared with the first
quarter of 1994.
The $9 million increase in mortgage servicing fees, compared with the
prior-year period, primarily resulted from ongoing acquisitions of mortgage
servicing rights. At March 31, 1995, the Corporation's total servicing
portfolio was $37 billion, compared with $26 billion at March 31, 1994.
The $5 million increase in foreign currency and securities trading fee
revenue in the first quarter of 1995 was attributable to foreign exchange
fees earned, primarily as a result of increased global custody and
corporate customer activity.
12
<PAGE> 14
NONINTEREST REVENUE (CONTINUED)
- -------------------------------------------------------------------------------
The $5 million increase in credit card fee revenue in the first quarter of
1995, compared with the first quarter of 1994, primarily resulted from fee
revenue generated by the Corporation's CornerStone(sm) credit card product.
The $4 million decrease in information services fees compared with the
prior-year period resulted in part from revenue recorded in the first
quarter of 1994 related to special stock transfer services transactions as
well as lower customer activity in this period. On May 1, 1995, the
Corporation and Chemical Banking Corporation completed their previously
announced joint venture and have formed Chemical Mellon Shareholder
Services (CMSS). As part of the joint venture agreement, the Corporation
contributed the assets of its Mellon Securities Transfer Services (MSTS)
subsidiary to CMSS. The equity method of accounting will be used to report
the net results of CMSS which will further reduce information services
revenue. In the first quarter of 1995 MSTS recorded information services
fee revenue of $7 million. The Corporation does not expect this
transaction to have a significant impact on its financial results.
Other fee revenue decreased $12 million in the first quarter of 1995,
compared with the first quarter of 1994. This decrease primarily resulted
from approximately $13 million of one-time net gains recorded at Dreyfus in
the first quarter of 1994 from the sale of certain nonstrategic interests
in Dreyfus partnerships, in anticipation of the August 1994 merger of
Dreyfus with the Corporation. Cancellation of the Corporation's seasonal
tax refund anticipation loan program reduced other fee revenue $10 million,
compared with a year ago, partially offset by a $7 million increase in
revenue generated from the electronic filing of income tax returns.
The following table summarizes the major components of the change in fee
revenue in the first quarter of 1995, compared with the first quarter of
1994.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SUMMARY OF MAJOR COMPONENTS OF THE CHANGE IN FEE REVENUE First quarter 1995 compared
to first quarter 1994
(in millions) Inc/(Dec)
- -----------------------------------------------------------------------------------------------
<S> <C>
Gains on sale of partnerships $(13)
Mutual fund administration and custody fees
The Boston Company (including $8 million relating to divestitures) (13)
Dreyfus (4)
Securities lending revenue (10)
Tax refund anticipation loan fees (10)
Mutual fund management fees (5)
Mortgage servicing revenue 9
Electronic filing of income tax return fees 7
Other 2
- -----------------------------------------------------------------------------------------------
Total change in fee revenue $(37)
- -----------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
OPERATING EXPENSE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Three months ended
March 31, Inc/
(dollar amounts in millions) 1995 1994 (Dec)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Staff expense $240 $245 $ (5)
Net occupancy expense 51 50 1
Professional, legal and other purchased services 38 46 (8)
Equipment expense 34 37 (3)
Business development 33 53 (20)
Amortization of goodwill, core deposit and other identified
intangibles recorded in connection with acquisitions 24 27 (3)
Communications expense 22 21 1
FDIC assessment and regulatory examination fees 15 16 (1)
Amortization of purchased mortgage servicing
rights and purchased credit card relationships 13 12 1
Other expense 29 31 (2)
- --------------------------------------------------------------------------------------------------
Operating expense before the net
revenue from acquired property 499 538 (39)
Net revenue from acquired property (4) (8) (4)
- --------------------------------------------------------------------------------------------------
Total operating expense $495 $530 $(35)
- --------------------------------------------------------------------------------------------------
Average full-time equivalent staff 24,300 23,900 400
- --------------------------------------------------------------------------------------------------
Efficiency ratio (a) 63% 67% (4)
Efficiency ratio excluding amortization of goodwill,
core deposit and other identified intangibles
recorded in connection with acquisitions 60 63 (3)
- --------------------------------------------------------------------------------------------------
<FN>
(a) Operating expense before the net revenue from acquired property, as a
percentage of revenue, computed on a taxable equivalent basis, excluding
securities gains (losses).
</TABLE>
Operating expense before the net revenue from acquired property decreased
$39 million in the first quarter of 1995, compared with the first quarter
of 1994. This decrease resulted primarily from a reduction in marketing
expense related to the CornerStone(sm) credit card as well as lower
professional, legal and other purchased services and staff expense.
Marketing expense, which is included in business development expense in the
table above, was $18 million lower in the first quarter of 1995, compared
with the first quarter of 1994 when the CornerStone(sm) credit card was
introduced. The reduction in professional, legal and other purchased
services resulted from the integration of data processing operations at The
Boston Company and lower consulting expense. The decrease in staff expense
primarily resulted from lower pension expense.
On January 31, 1995, the Federal Deposit Insurance Corporation (FDIC) staff
proposed a reduction in the premium banks pay for deposit insurance. For
well-capitalized institutions, it is proposed that the premium be reduced
by 83% from the current $.23 for every $100 of deposits to $.04 for every
$100 of deposits. At March 31, 1995, all of the Corporation's banking
subsidiaries qualified as well-capitalized. It is uncertain if the
proposal will be adopted and if adopted when it would be effective.
14
<PAGE> 16
OPERATING EXPENSE (CONTINUED)
- -------------------------------------------------------------------------------
Merger expenses of $104 million pretax, or $79 million after-tax, were
recorded in 1994 to reflect expenses associated with the Dreyfus merger.
In addition, merger expenses of $175 million, or $112 million after-tax,
were recorded in 1993 for expenses associated with the acquisition of The
Boston Company. The tables below show expenditures through March 31, 1995.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MERGER EXPENSES ANALYSIS (THE DREYFUS CORPORATION) Expected
Expenditures expenditures
and asset --------------------------
Total adjustments at Remainder of Full year
(in millions) expenses March 31, 1995 1995 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit and severance programs $ 42 $31 $4 $7
Professional, consulting and other 27 26 1 -
Facilities and assets 25 25 - -
Proxy solicitation 10 10 - -
- ------------------------------------------------------------------------------------------------------
Total merger expenses $104 $92 $5 $7
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MERGER EXPENSES ANALYSIS (THE BOSTON COMPANY)
Expenditures
and asset Expected
Total adjustments at expenditures
(in millions) expenses March 31, 1995 remainder of 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Systems integration $ 67 $ 52 $15
Adjustment to The Boston Company
credit loss reserve 51 51 -
Professional and consulting 16 15 1
Severance, incentive retention plan,
relocation and travel 12 9 3
Facilities expense 8 5 3
Other 21 18 3
- ------------------------------------------------------------------------------------------------------
Total merger expenses $175 $150 $25
- ------------------------------------------------------------------------------------------------------
</TABLE>
INCOME TAXES
- -------------------------------------------------------------------------------
The provision for income taxes totaled $102 million in the first quarter of
1995, compared with $99 million in the first quarter of 1994. The
Corporation's effective tax rate for the first quarter of 1995 was 37.5%
compared with a 38.5% effective tax rate for the first quarter of 1994. It
is currently anticipated that the effective tax rate will remain at
approximately 37.5% for the foreseeable future.
15
<PAGE> 17
ASSET/LIABILITY MANAGEMENT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three months ended
March 31,
(average balances in millions) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Money market investments $ 1,230 $ 2,147
Trading account securities 316 504
Securities 4,890 4,798
Loans 26,670 24,636
- -------------------------------------------------------------------------------
Total interest-earning assets 33,106 32,085
Noninterest-earning assets 6,387 6,638
Reserve for credit losses (607) (610)
- -------------------------------------------------------------------------------
Total assets $38,886 $38,113
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FUNDS SUPPORTING TOTAL ASSETS:
Core funds $30,656 $33,336
Wholesale and purchased funds 8,230 4,777
- -------------------------------------------------------------------------------
Funds supporting total assets $38,886 $38,113
- -------------------------------------------------------------------------------
</TABLE>
The change in the mix of the Corporation's average assets in the first
quarter of 1995, compared with the first quarter of 1994, reflects a higher
level of interest-earning assets and a higher-yielding asset mix. Average
loans increased $2.0 billion while money market investments decreased $.9
billion. The mix of the Corporation's funding changed substantially in the
first quarter of 1995, compared with the prior-year quarter, as a decrease
in demand, money market and savings deposits was replaced with wholesale
and purchased funds.
Core funds, which are considered to be the most stable sources of funding,
are defined principally as money market and other savings deposits, demand
deposits, savings certificates, shareholders' equity and notes and
debentures with original maturities over one year. Core funds primarily
support core assets, which consist of loans, net of the reserve, and
noninterest-earning assets. Average core assets increased $1.8 billion in
the first quarter of 1995 from the prior-year period, primarily reflecting
increased consumer loan levels. Average core funds decreased $2.7 billion
in the first quarter of 1995 from the prior-year period, primarily
reflecting a lower level of money market and savings and demand deposits.
Core funds averaged 94% of core assets in the first quarter of 1995, down
from 97% in the fourth quarter of 1994 and 109% in the first quarter of
1994.
Wholesale and purchased funds are defined as deposits in foreign offices
and other time deposits, federal funds purchased and securities under
repurchase agreements, U.S. Treasury tax and loan demand notes, negotiable
certificates of deposit, commercial paper and other funds borrowed.
Average wholesale and purchased funds increased $3.5 billion compared with
a year ago, primarily reflecting an increase in overnight foreign office
deposits as the Corporation continued to take advantage of slightly
lower-cost short-term Eurodeposit rates. As a percentage of total average
assets, average wholesale and purchased funds increased to 21% in the first
quarter of 1995 from 19% in the fourth quarter of 1994 and 13% in the
prior-year period.
16
<PAGE> 18
COMPOSITION OF LOAN PORTFOLIO
- -------------------------------------------------------------------------------
The loan portfolio increased $2.159 billion, or 9%, at March 31, 1995,
compared with March 31, 1994, primarily as a result of new product
development and increased loan demand. Loan growth through March 31, 1995
reflects a $938 million increase in credit card loans, a $621 million
increase in commercial and financial loans and a $520 million increase in
consumer mortgages. At March 31, 1995, the composition of the loan
portfolio was 51% consumer and 49% commercial.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARCH 31, Dec. 31, Sept. 30, June 30, March 31,
(in millions) 1995 1994 1994 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC LOANS
Commercial and financial $ 9,820(a) $10,015 $ 9,903 $ 9,339 $ 9,199
- ------------------------------------------------------------------------------------------------------------------
Commercial real estate 1,588(b) 1,624 1,608 1,622 1,638
- ------------------------------------------------------------------------------------------------------------------
Consumer credit:
Consumer mortgage 8,686 8,680 8,503 8,156 8,166
Credit card 2,423 2,381 1,985 1,666 1,485
Other consumer credit 2,534 2,455 2,418 2,378 2,481
- ------------------------------------------------------------------------------------------------------------------
Total consumer credit 13,643 13,516 12,906 12,200 12,132
- ------------------------------------------------------------------------------------------------------------------
Lease finance assets 815 815 744 704 715
- ------------------------------------------------------------------------------------------------------------------
Total domestic loans 25,866 25,970 25,161 23,865 23,684
- ------------------------------------------------------------------------------------------------------------------
INTERNATIONAL LOANS 830 763 851 866 853
- ------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned discount (c) $26,696 $26,733 $26,012 $24,731 $24,537
- ------------------------------------------------------------------------------------------------------------------
<FN>
(a) Includes $30 million of FDIC loss share loans.
(b) Includes $131 million of FDIC loss share loans.
(c) Excludes segregated assets.
</TABLE>
Commercial and financial
The domestic commercial and financial loan portfolio primarily consists of
loans to corporate borrowers in the manufacturing, service, energy,
communications, wholesale and retail trade, public utilities and financial
services industries. Total domestic commercial and financial loans
increased by $621 million, or 7%, at March 31, 1995, compared to March 31,
1994, primarily as a result of increases in corporate/institutional banking
and middle market banking. Commercial and financial loans represented 37%
of the total loan portfolio at both March 31, 1995 and 1994. At March 31,
1995, nonperforming domestic commercial and financial loans and leases were
.55% of total domestic commercial and financial loans and leases, compared
with .53% at March 31, 1994.
Commercial real estate
The Corporation's $1.588 billion domestic commercial real estate loan
portfolio consists of commercial mortgages, which generally are secured by
nonresidential and multifamily residential properties and commercial
construction loans generally with maturities of 60 months or less. Also
included in this portfolio are loans that are secured by owner-occupied
real estate, but made for purposes other than the construction or purchase
of real estate. The commercial real estate loan portfolio includes $131
million of loans acquired in the December 1992 Meritor acquisition that are
subject to a five-year 95% loss-sharing arrangement with the FDIC.
Domestic commercial real estate loans decreased by $50 million, or 3%, at
March 31, 1995 compared with March 31, 1994. The decrease primarily was a
result of paydowns, sales, transfers to OREO and net credit losses
partially offset by new loan originations. Domestic commercial real estate
loans were 6% of total loans at March 31, 1995, down from 7% a year
earlier. Nonperforming commercial real estate loans were 2.31% of total
domestic commercial real estate loans at March 31, 1995, compared with
3.45% at March 31, 1994.
17
<PAGE> 19
COMPOSITION OF LOAN PORTFOLIO (CONTINUED)
- -------------------------------------------------------------------------------
Consumer mortgage
The consumer mortgage portfolio includes jumbo residential mortgages,
traditional one-to-four family residential mortgages, home equity loans and
personal loans secured by residential properties. At March 31, 1995, this
portfolio grew to $8.686 billion, from $8.166 billion at March 31, 1994.
The $520 million increase in this portfolio from the prior-year period
primarily reflects increases in home equity loans, personal loans secured
by residential properties and one-to-four family residential mortgage
loans.
Jumbo mortgages are residential mortgages that range from $250,000 to
$3,000,000. These loans increased approximately $50 million from March 31,
1994, to $4.2 billion at March 31, 1995. Home equity loans increased
approximately $210 million to $1.4 billion, resulting from successful
marketing efforts, as well as an improving economy. Personal loans secured
by residential properties increased approximately $160 million to $1.2
billion and loans secured by one-to-four family residential mortgages
increased approximately $100 million to $1.9 billion. Nonperforming
consumer mortgages were .67% of total consumer mortgages at March 31, 1995,
compared with .83% at March 31, 1994.
Credit card
At March 31, 1995, credit card loans totaled $2.423 billion, a $938
million, or 63%, increase from March 31, 1994. This increase primarily was
driven by the CornerStone(sm) credit card product which was introduced in
January 1994. At March 31, 1995, this product had total outstanding
balances of $902 million.
Other loans
Other consumer credit, which principally consists of installment loans,
unsecured personal credit lines and student loans, increased by $53 million
from March 31, 1994. This increase reflected growth in the student loan
portfolio. Lease finance assets increased to $815 million, up from $715
million at March 31, 1994. Loans to international borrowers decreased to
$830 million at March 31, 1995, from $853 million at March 31, 1994.
18
<PAGE> 20
CAPITAL
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED CAPITAL DATA
(dollar amounts in millions, MARCH 31, Dec. 31, March 31,
except per share amounts) 1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shareholders' equity $3,755 $ 3,687 $ 3,635
Common shareholders' equity to assets ratio 9.48% 9.54% 9.68%
Tangible common equity ratio (a) 7.10 7.05 7.07
Total shareholders' equity $4,190 $ 4,122 $ 4,227
Total shareholders' equity to assets ratio 10.57% 10.67% 11.26%
Tier I capital ratio 9.49 9.48 10.00
Total (Tier I plus Tier II) capital ratio 12.86 12.90 13.50
Leverage capital ratio 8.84 8.67 8.99
Book value per common share $25.63 $ 25.06 $ 24.85 (b)
Closing common stock price $40.75 $30.625 $37.375
Market capitalization $5,969 $ 4,507 $ 5,371
- -------------------------------------------------------------------------------
<FN>
(a) Common shareholders' equity less goodwill, core deposit and other
identified intangibles recorded in connection with acquisitions divided by
total assets less goodwill, core deposit and other identified intangibles.
(b) The March 31, 1994, 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 into common stock in August 1994,
pursuant to the terms of the Series D statement of designation.
</TABLE>
The increase in the Corporation's common shareholders' equity, compared
with a year ago, resulted from earnings retention. The decrease in total
shareholders' equity, compared with March 31, 1994, resulted from the
redemption of the Corporation's $160 million Series H preferred stock.
This redemption reduced the March 31, 1995, total shareholders' equity to
assets ratio and the regulatory capital ratios by 40 to 45 basis points.
In accordance with the January 1, 1994, adoption of FAS No. 115, certain
assets available for sale are reported at fair value at March 31, 1995,
with an unrealized loss of $53 million, net of taxes, included in common
shareholders' equity. The impact of recording the unrealized loss at March
31, 1995, resulted in a reduction of book value per common share of $.36
and a reduction of 12 basis points in the common shareholders' equity to
assets ratio. Increased volatility of shareholders' equity, certain
related capital ratios and book value per common share could result from
future changes in unrealized gains and losses on assets classified as
available for sale.
19
<PAGE> 21
CAPITAL (CONTINUED)
- -------------------------------------------------------------------------------
The Corporation's qualifying capital under the Federal Reserve Board's
risk-based capital regulations is shown in the table below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RISK-BASED AND LEVERAGE CAPITAL RATIOS March 31,
(dollar amounts in millions) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Tier I capital:
Common shareholders' equity (a)(b) $ 3,808 $ 3,614
Qualifying preferred stock (b) 435 629
Minority interest 12 12
Goodwill and certain other intangibles (888) (907)
- -------------------------------------------------------------------------------
Total Tier I capital $ 3,367 $ 3,348
Tier II capital 1,197 1,173
- -------------------------------------------------------------------------------
Total qualifying capital $ 4,564 $ 4,521
- -------------------------------------------------------------------------------
Risk-adjusted assets:
On-balance-sheet $25,887 $24,342
Off-balance-sheet 9,595 9,139
- -------------------------------------------------------------------------------
Total risk adjusted assets $35,482 $33,481
- -------------------------------------------------------------------------------
Average assets-leverage capital basis $38,107 $37,237
- -------------------------------------------------------------------------------
Tier I capital ratio (c) 9.49% 10.00%
Total capital ratio (c) 12.86 13.50
Leverage capital ratio (c) 8.84 8.99
- -------------------------------------------------------------------------------
<FN>
(a) Regulatory guidelines require that any adjustment to shareholders' equity
required by FAS No. 115 be excluded from the calculation of risk-based
capital. Therefore, the $53 million and $16 million, net of tax, of
unrealized losses on assets classified as available for sale at March 31,
1995 and 1994, respectively, have been excluded.
(b) For the purpose of this computation, the additional paid-in capital on the
Series D preferred stock, totaling $37 million at March 31, 1994, was
included in "Qualifying preferred stock" rather than in "Common
shareholders' equity."
(c) The required minimum Tier I, Total and Leverage capital ratios are 4%, 8%
and 3%, respectively.
</TABLE>
Tier I and Total capital are expressed as a percentage of risk-adjusted
assets, which include various credit risk-weighted percentages of
on-balance-sheet assets, as well as off-balance-sheet exposures. The
Leverage capital ratio evaluates capital adequacy on the basis of the ratio
of Tier I capital to quarterly average total assets as reported on the
Corporation's regulatory financial statements, net of the loan loss
reserve, goodwill and certain other intangibles.
Federal regulators have adopted a capital-based supervisory system for all
insured financial institutions. Should a financial institution's capital
ratios decline below predetermined levels, it would become subject to a
series of increasingly restrictive regulatory actions. The system
categorizes a financial institution's capital position into one of five
categories ranging from well capitalized to critically undercapitalized.
For an institution to qualify as well capitalized, Tier I, Total and
Leverage capital ratios must be at least 6%, 10% and 5%, respectively. All
of the Corporation's banking subsidiaries qualified as well capitalized at
March 31, 1995. The Corporation intends to maintain the ratios of its
banking subsidiaries at the well capitalized levels.
20
<PAGE> 22
CAPITAL (CONTINUED)
- -------------------------------------------------------------------------------
When computing Tier I capital, the Corporation deducts all goodwill and
certain other identifiable intangibles acquired subsequent to February 19,
1992, except purchased mortgage servicing rights and purchased credit card
relationships.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MARCH 31, Dec. 31, March 31,
(in millions) 1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill $813 $824 $811
- -------------------------------------------------------------------------------
</TABLE>
The $2 million increase in goodwill at March 31, 1995, compared with March
31, 1994, primarily resulted from $27 million related to the U.S. Bancorp
Mortgage Company transaction and $22 million related to the acquisition of
Glendale Bancorporation, partially offset by amortization of $50 million
during the last 12 months. Based upon the current level and amortization
schedule, the future amortization of goodwill over the next 12 months is
expected to be approximately $52 million. The future annual amortization
of goodwill for the full years 1996 through 2000 is expected to remain at
approximately $52 million.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MARCH 31, Dec. 31, March 31,
(in millions) 1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased core deposit intangible $127 $133 $149
Covenants not to compete 34 38 51
Other identified intangibles 40 41 45
- -------------------------------------------------------------------------------
Total purchased core deposit
and other identified intangibles $201 $212 $245
- -------------------------------------------------------------------------------
</TABLE>
Based upon the current level and amortization schedule, the future annual
amortization of purchased core deposit and other identified intangibles
over the next 12 months will be approximately $42 million. The future
annual amortization of purchased core deposit and other identified
intangibles for the full years 1996 through 2000 will be approximately $42
million, $30 million, $26 million, $26 million and $14 million,
respectively.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
MARCH 31, Dec. 31, March 31,
(in millions) 1995 1994 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased mortgage servicing rights $317 $292 $176
Purchased credit card relationships 58 60 61
- -------------------------------------------------------------------------------
Total purchased mortgage servicing rights
and purchased credit card relationships $375 $352 $237
- -------------------------------------------------------------------------------
</TABLE>
The increase in purchased mortgage servicing rights at March 31, 1995,
compared with December 31, 1994, primarily resulted from the ongoing
acquisition of purchased mortgage servicing rights.
In March 1995, the Financial Accounting Standards Board released FAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." FAS No. 121 established guidelines for
recognition of impairment losses related to long-lived assets and certain
intangibles and related goodwill for both assets to be held and used as
well as assets to be disposed of. This statement excludes financial
instruments, long-term customer relationships of financial institutions,
mortgage and other servicing rights and deferred tax assets. This standard
becomes effective on January 1, 1996. Adoption of FAS No. 121 is not
expected to result in material changes to the Corporation's financial
position or results of operations.
21
<PAGE> 23
LIQUIDITY AND DIVIDENDS
- -------------------------------------------------------------------------------
The Corporation's liquidity management objective is to maintain the ability
to meet commitments to fund loans and to purchase securities, as well as to
repay deposits and other liabilities in accordance with their terms,
including during periods of market or financial stress. The Corporation's
overall approach to liquidity management is to ensure that sources of
liquidity are sufficient in amount and diversity to accommodate changes in
loan demand and core funding routinely without a material adverse impact on
net income. The Corporation's funding needs are evaluated continually and
its liquidity position is managed by maintaining adequate levels of liquid
assets, such as money market assets and securities available for sale.
Additional liquidity is available through the Corporation's ability to
participate or sell commercial loans and to securitize selected loan
portfolios. The Corporation also has a $200 million revolving credit
agreement and a $25 million backup line of credit to provide support
facilities for its commercial paper borrowings and for general corporate
purposes.
As shown in the Consolidated Statement of Cash Flows, cash and due from
banks decreased by $155 million during the first quarter of 1995 to $2,130
million at March 31, 1995. The decrease reflected $276 million of net cash
used in investing activities and $236 million of net cash used by operating
activities offset, in part, by $351 million of net cash provided by
financing activities. Net cash used in investing activities principally
reflected a net increase in securities available for sale. Net cash
provided by financing activities primarily reflected increases in
short-term borrowings and customer term deposits offset, in part, by a
decrease in transaction and savings deposits.
Included in noncash charges and credits is the amortization expense of
goodwill, core deposit and other identified intangibles that the
Corporation has recorded as a result of accounting for business
combinations under the purchase method of accounting. Had the Corporation
accounted for these transactions under the pooling of interests method of
accounting, these intangibles and their related amortization would not have
been reported. Net income applicable to common stock, excluding the
after-tax impact of the amortization of these intangibles, is shown in the
table below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Quarter ended
March 31,
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Net income applicable to common stock $160 $141
After-tax impact of amortization of intangibles
from purchase acquisitions 18 21
- -------------------------------------------------------------------------------
Total $178 $162
- -------------------------------------------------------------------------------
</TABLE>
On March 1, 1995, the Corporation redeemed the $160 million Series H
preferred stock at the contractual redemption price of $26.30 per share
plus accrued dividends. This transaction was funded with cash on hand.
Contractual maturities of the Corporation's term debt were $1 million in
the first quarter of 1995. Contractual maturities of term debt will total
$326 million in the remainder of 1995. The Corporation expects to fund its
debt maturities with a combination of cash presently on hand, other
internal funding sources and, if necessary, with the proceeds from the
public and/or private issuance of securities. At March 31, 1995, the
Corporation's senior debt was rated "A2" by Moody's and "A" by Standard and
Poor's.
On March 31, 1995, Mellon Bank, N.A., the Corporation's principal banking
subsidiary, made available an offering circular to issue, from time to
time, up to $2 billion of bank notes. Mellon Bank, N.A. can issue up to
$1.5 billion of bank notes with maturities ranging from 30 to 270 days and
$.5 billion of bank notes with maturities ranging from more than 270 days
to 15 years. Proceeds from the issuance of the bank notes will be used by
Mellon Bank, N.A. for general funding purposes.
22
<PAGE> 24
LIQUIDITY AND DIVIDENDS (CONTINUED)
- -------------------------------------------------------------------------------
On April 17, 1995, the executive committee of the board of directors of the
Corporation approved an 11% increase in the quarterly cash dividend to $.50
per common share. The increased dividend is payable on May 15, 1995, to
shareholders of record on April 28, 1995. This is the third common
dividend increase that the Corporation has announced since the beginning of
1994, resulting in a total common dividend per share increase of 97%.
The Corporation paid $66 million in common dividends for the first quarter
of 1995 compared with $43 million in the prior-year period. In addition,
the Corporation paid $10 million in dividends on its outstanding shares of
preferred stock during the first quarter of 1995. The common stock
dividend payout ratio was 41% in the first quarter of 1995, compared with
31% in the first quarter of 1994. Using the new common dividend rate of
$.50 per share, annualized dividend requirements for the common and
preferred stock are expected to be approximately $330 million.
The parent Corporation's principal sources of cash are dividends and
interest from its subsidiaries. There are, however, certain limitations on
the payment of dividends to the parent Corporation by its national bank
subsidiaries. For a discussion of these limitations, see note 17 in the
Corporation's 1994 Annual Report on Form 10-K. Under the more restrictive
limitation, the Corporation's national bank subsidiaries can, without prior
regulatory approval, declare dividends subsequent to March 31, 1995, of up
to approximately $456 million, less any dividends declared and plus or
minus net profits or losses, as defined, between April 1, 1995, and the
date of any such dividend declaration.
The national bank subsidiaries declared dividends to the parent Corporation
of $100 million in the first quarter of 1995, $366 million in the full-year
1994 and $185 million in 1993. Dividends paid to the parent Corporation by
nonbank subsidiaries totaled $4.5 million in the first quarter of 1995,
$122 million in the full-year 1994 and $116 million in 1993.
INTEREST RATE SENSITIVITY ANALYSIS
- -------------------------------------------------------------------------------
The Corporation actively manages its interest rate sensitivity position
through the use of on- and off-balance-sheet financial instruments, in
order to maintain an appropriate balance between the repricing
characteristics of its assets and liabilities. Financial instruments that
the Corporation uses to manage interest rate sensitivity include securities
classified as available for sale, money market assets, interest rate swaps,
futures and forwards and interest rate caps and floors. The interest rate
sensitivity table on page 25 shows the repricing characteristics of the
Corporation's interest-earning assets and supporting funds at March 31,
1995. The data are based upon contractual repricing or maturities and,
where applicable, management's assumptions as to the estimated repricing
characteristics of certain assets and supporting funds.
At March 31, 1995, the Corporation had an asset-sensitive interest rate
risk position. Generally, an asset-sensitive gap indicates that rising
interest rates could positively affect net interest revenue, and falling
rates could negatively affect net interest revenue. Assets and liabilities
with similar contractual repricing characteristics, however, may not
reprice at the same time or to the same degree. As a result, the
Corporation's static interest rate sensitivity gap position does not
necessarily predict the impact of changes in general levels of interest
rates on net interest revenue.
23
<PAGE> 25
INTEREST RATE SENSITIVITY ANALYSIS (CONTINUED)
- -------------------------------------------------------------------------------
The cumulative gap at the one-year repricing period, before the utilization
of off-balance-sheet instruments, was asset-sensitive in the amount of $5.2
billion, or 13.2% of total assets, at March 31, 1995. However, because the
Corporation did not want to accept the level of interest rate risk
presented by its naturally asset-sensitive balance sheet, it entered into
interest rate swaps and other off-balance-sheet instruments that resulted
in a net reduction of $3.6 billion in this cumulative asset-sensitive
position. These instruments reduced the cumulative gap at the one-year
repricing period to an asset-sensitive amount of $1.6 billion, or 4.0% of
total assets. The Corporation uses off-balance-sheet instruments primarily
to convert fixed-rate long-term deposits to variable-rate deposits that
generally reprice quarterly. Alternatively, the Corporation could have
acquired additional fixed-rate investment securities or other fixed-rate
interest-earning assets of approximately $3.6 billion to accomplish this
objective. Correspondingly, the Corporation would also have had to acquire
a comparable amount of wholesale funds in order to fund these additional
interest-earning assets. By using off-balance-sheet instruments to manage
interest rate risk, the effect is a smaller, more efficient balance sheet,
with a lower wholesale funding requirement and a higher return on assets
and net interest margin with a comparable level of net interest revenue and
return on common shareholders' equity.
In order to measure the effects of interest rate fluctuations on the
Corporation's net interest margin, management simulates the potential
effects of changing interest rates through computer modeling, incorporating
both the current gap position and the expected magnitude of the repricing
of specific asset and liability categories. The analysis of the impact of
both a 100 basis point and 200 basis point upward or downward movement in
interest rates is shown in the table below. This analysis was done
assuming earning asset levels at March 31, 1995, remained constant and
assumes an unchanged level of loan fees. The impact of the rate movements
was developed by simulating the effect of rates changing over a six-month
period from the March 31, 1995 levels. The simulated impact of rate
changes shown in the following table is compared to the first quarter
actual results annualized.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY ANALYSIS
Movements in interest rates from March 31, 1995 rates
- -------------------------------------------------------------------------------------------------------
Anticipated impact in the next 12 months Increase Decrease
compared with first quarter 1995 ------------------ ------------------
actual results annualized: +100 bp +200 bp -100 bp -200 bp
-----------------------------------------
<S> <C> <C> <C> <C>
Net interest revenue increase +.3% -(.8)% +.9% +.5%
Earnings per share increase $.02 $.(05) $.06 $.03
- -------------------------------------------------------------------------------------------------------
</TABLE>
The anticipated increase in net interest revenue in the next 12 months,
compared with annualized first quarter 1995 actual results, is less
favorable under an increasing-rate scenario as a result of the impact of
interest rate caps on $3.3 billion of adjustable rate mortgage (ARM) loans
and $1.5 billion of ARM securities carried by the Corporation. At March
31, 1995, these ARMs have an interest rate cap feature that limits the
interest rate increase to 200 basis points and 100 basis points,
respectively, every 12 months.
24
<PAGE> 26
INTEREST RATE SENSITIVITY ANALYSIS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY GAP AT MARCH 31, 1995
Repricing period
-----------------------------------------------------
0-30 31-90 91-180 181-365 1-5 Over 5
(dollar amounts in millions) days days days days years years Total
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Money market investments $ 868 $ 68 $ 2 $ 10 $ - $ - $ 948
Trading account securities 233 - - - - - 233
Securities 1,360 489 511 936 650 1,364 5,310
Loans 9,860 6,135 3,038 1,907 3,489 2,267 26,696
- ------------------------------------------------------------------------------------------------------
Total interest-earning assets $12,321 $ 6,692 $3,551 $2,853 $4,139 $ 3,631 $33,187
Funds supporting interest-
earning assets:
Interest-bearing deposits $ 4,838 $ 5,111 $3,160 $1,572 $2,770 $ 4,050 $21,501
Other borrowed funds 3,648 497 400 - - 115 4,660
Notes and debentures (with original
maturities over one year) - 26 100 220 458 788 1,592
Noninterest-bearing liabilities 122 154 233 106 - 4,819 5,434
- ------------------------------------------------------------------------------------------------------
Total funds supporting
interest-earning assets $ 8,608 $ 5,788 $3,893 $1,898 $3,228 $ 9,772 $33,187
- ------------------------------------------------------------------------------------------------------
Subtotal $ 3,713 $ 904 $ (342) $ 955 $ 911 $(6,141) $ -
- ------------------------------------------------------------------------------------------------------
Off-balance-sheet instruments $(3,241) $(2,090) $ 340 $1,335 $3,214 $ 442 $ -
- ------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap $ 472 $(1,186) $ (2) $2,290 $4,125 $(5,699) $ -
- ------------------------------------------------------------------------------------------------------
Cumulative gap $ 472 $ (714) $ (716) $1,574 $5,699 $ - $ -
- ------------------------------------------------------------------------------------------------------
Cumulative gap as a percentage
of total assets 1.2% (1.8)% (1.8)% 4.0% 14.4%
- ------------------------------------------------------------------------------------------------------
<FN>
Note: Repricing periods for securities, loans, interest-bearing deposits,
noninterest-bearing liabilities and off-balance-sheet instruments are based upon
contractual maturities, where applicable, as well as the Corporation's
historical experience of the impact of interest rate fluctuations on the
prepayment, repricing and withdrawal patterns of certain assets and liabilities.
</TABLE>
MANAGING INTEREST RATE RISK WITH OFF-BALANCE-SHEET INSTRUMENTS
The Corporation uses off-balance-sheet instruments, primarily interest rate
swaps, in managing the interest rate risk on specific liabilities and
assets. These instruments provide the Corporation flexibility in adjusting
its interest rate risk position without exposure to principal risk and
funding requirements because swaps only involve the exchange of fixed or
floating interest rate payments, not the notional amounts. The Corporation
uses non-leveraged generic and index amortizing swaps to accomplish its
objectives. Generic swaps involve the exchange of fixed and variable
interest rates based upon underlying contractual notional amounts. Index
amortizing swaps involve the exchange of fixed and variable interest rates;
however, their notional amount and maturities vary based upon certain
underlying indices. In addition, the Corporation has entered into other
off-balance-sheet instruments, primarily interest rate caps and floors and
futures and forward contracts, to manage interest rate sensitivity on
specific liability and asset instruments. The Corporation's
off-balance-sheet instruments used to manage its interest rate risk are
shown in the table on the following page.
25
<PAGE> 27
INTEREST RATE SENSITIVITY ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
MATURITIES OF OFF-BALANCE-SHEET INSTRUMENTS USED TO MANAGE INTEREST RATE RISK AT MARCH 31, 1995
Total at
March 31,
(notional amounts in millions) 1995 1996 1997 1998 1999 2000+ 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay floating
generic swaps: (a)
Notional amount $ 340 $ 260 $ 160 $ 15 $2,125 $ 400 $ 3,300
Weighted average rate:
Receive 6.07% 5.30% 6.36% 5.22% 5.29% 6.32% 5.55%
Pay 6.34% 6.32% 6.30% 6.30% 6.30% 6.59% 6.34%
Receive fixed/pay floating
indexed amortizing swaps: (b)
Notional value $ 783 $2,374 $ 660 $ 53 $ 603 $ 230 $ 4,703
Weighted average rate:
Receive 5.92% 5.31% 6.21% 7.19% 7.11% 7.19% 5.88%
Pay 6.32% 6.30% 6.29% 6.31% 6.37% 6.31% 6.31%
Pay fixed/receive floating
generic swaps: (a)
Notional amount $ 201 $ 20 $2,128 $ 20 $ 3 $ 10 $ 2,382
Weighted average rate:
Receive 6.34% 6.09% 6.30% 3.35% 7.16% 6.09% 6.27%
Pay 5.68% 9.39% 4.75% 5.21% 8.41% 6.49% 4.88%
Other products (c) $ 85 $ 255 $ 100 $ 4 $ 2 $ 103 $ 549
- -------------------------------------------------------------------------------------------------------
Total notional amount $1,409 $2,909 $3,048 $ 92 $2,733 $ 743 $10,934
- -------------------------------------------------------------------------------------------------------
<FN>
(a) Generic swaps' notional amounts and lives are not based on interest
rate indices.
(b) Amortizing swaps' notional amounts and lives change, based on certain
interest rate indices. Generally, as rates fall, the notional amounts
decline more rapidly and, as rates increase, notional amounts decline
more slowly.
(c) Average rates are not meaningful for these products.
</TABLE>
The gross notional amount of off-balance-sheet products used to manage the
Corporation's interest rate risk was $10.9 billion at March 31, 1995, a
decrease of $.4 billion from December 31, 1994. This gross notional
amount, which is presented in the table above, must be viewed in the
context of the Corporation's overall interest rate risk management
activities in order to assess its impact on the net interest margin. As
discussed on pages 23 and 24, these off-balance-sheet instruments modified
the Corporation's asset-sensitive position, including the modification of
the cumulative asset-sensitive position at the one-year repricing period,
of $5.2 billion, before the utilization of these instruments, to a
cumulative one-year asset-sensitive position of $1.6 billion at March 31,
1995.
26
<PAGE> 28
INTEREST RATE SENSITIVITY ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
The following table presents the gross notional amounts of off-balance-sheet
instruments used to manage interest rate risk, identified by the underlying
interest rate-sensitive instruments.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(notional amounts in millions) March 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
Instruments associated with deposits $ 8,796
Instruments associated with other liabilities 420
Instruments associated with loans 1,718
- --------------------------------------------------------------------------------
Total notional amount $10,934
- --------------------------------------------------------------------------------
</TABLE>
The Corporation entered into these off-balance-sheet instruments to
neutralize the natural interest rate risk embedded in its assets and
liabilities. The interest received and interest paid are recorded on an
accrual basis in interest revenue and interest expense associated with the
underlying assets and liabilities. The net differential was interest
receipts of less than $1 million in the first quarter of 1995, compared
with $49 million in the first quarter of 1994. The lower net interest
revenue impact in the 1995 period, compared with the 1994 period, resulted
from the effect of rising interest rates. As expected, this impact was
offset by higher net interest revenue generated from on-balance-sheet
instruments. The effect on the Corporation's financial statements of
utilizing off-balance-sheet instruments as part of its interest rate risk
management, versus using on-balance-sheet assets and liabilities, is a
smaller, more efficient balance sheet, reduced wholesale funding
requirements and a higher return on assets and net interest margin.
Utilization of off-balance-sheet instruments versus on-balance-sheet
instruments results in a comparable amount of net interest revenue, net
income and return on common shareholders' equity. Assuming interest rates
continue to rise, growth in revenue on interest-earning assets would be
expected to mitigate a reduction of revenue from off-balance-sheet
instruments, which is consistent with the Corporation's simulation model
described on pages 23 and 24. The Corporation's analysis using current
interest rate scenarios indicates that off-balance-sheet instruments will
have a negative impact on the net interest margin in the remainder of 1995
before considering the positive effect of on-balance-sheet instruments.
The Corporation did not terminate any interest rate agreements in the first
quarter of 1995. Terminations of interest rate swaps in 1994 resulted in
the amortization of less than $1 million of net deferred gains into net
interest revenue in the first quarter of 1995. These gains are being
amortized over the remaining period of the original hedge, which is less
than one year. The Corporation did not have any off-balance-sheet
instruments associated with anticipated transactions at March 31, 1995.
The estimated unrealized fair value of the Corporation's interest rate
management off-balance-sheet instruments at March 31, 1995, was a negative
$195 million, compared with a negative $344 million at December 31, 1994.
This improvement was consistent with the decrease in long-term interest
rates during the first quarter of 1995, which had the corresponding effect
of decreasing the fair value of on-balance-sheet core deposits. These
values should be viewed in the context of the overall financial structure
of the Corporation including the aggregate net position of all on- and
off-balance-sheet instruments.
OFF-BALANCE-SHEET INSTRUMENTS USED FOR OTHER THAN INTEREST RATE RISK
MANAGEMENT PURPOSES
The Corporation offers off-balance-sheet financial instruments, primarily
foreign exchange contracts and option contracts, interest rate swaps and
interest rate caps and floors to enable customers to meet their financing
objectives and to manage their interest-and currency-rate risk. Supplying
these instruments provides the Corporation with fee revenue. The
Corporation also uses the instruments previously mentioned, as well as
futures and forward contracts, as part of its proprietary trading account
activities. In the first quarter of 1995, the Corporation recorded $24
million of fee revenue from these activities, compared with $20 million in
the first quarter of 1994, primarily from foreign
27
<PAGE> 29
INTEREST RATE SENSITIVITY ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
exchange contracts entered into on behalf of customers. The notional
values of these contracts were $40 billion at March 31, 1995, $34 billion
at December 31, 1994 and $31 billion at March 31, 1994, and are included on
the "Off-balance-sheet instruments used for other than interest rate risk
management purposes table" on page 33.
These off-balance-sheet instruments are subject to credit and market risk.
Credit risk is limited to the estimated aggregate replacement cost of
contracts in a gain position, should counterparties fail to perform under
the terms of those contracts and any underlying collateral proves to be of
no value. Credit risk is managed by subjecting the counterparties to the
Corporation's credit approval and monitoring policies and procedures.
Counterparty limits are monitored on an ongoing basis. Credit risk is
further mitigated by contractual agreements to net replacement cost gains
and losses on multiple transactions with the same counterparty through the
use of master netting agreements. The Corporation has master netting
agreements on interest rate swaps, interest rate caps and floors, options
contracts, futures contracts and forward rate agreements. The total credit
risk of contracts used for other than interest rate risk management
purposes, which is included in "Other assets" in the balance sheet, was
$957 million at March 31, 1995. Market risk arises from changes in the
market value of contracts as a result of the fluctuations in interest and
currency rates. The Corporation limits its exposure to market risk by
entering into generally matching or offsetting positions and by
establishing and monitoring limits on unmatched positions. Position limits
are set by the Finance Committee, approved by the board of directors and
monitored daily by senior managers. Portfolio outstandings are monitored
against such limits on an ongoing basis. The Corporation also manages
market risk by adjusting its portfolio of customer and corporate
off-balance-sheet instrument dealer positions when necessary. These
instruments are carried at market value with realized and unrealized gains
and losses included in foreign currency and securities trading revenue.
The Corporation measures the effects of interest rate and currency value
fluctuations on the portfolio used for other than interest rate risk
management through computer modeling. Because the Corporation generally
matches or offsets positions, the analyses indicate that even severe
changes in interest rates or foreign currency values would impact net
income by less than $1 million. For additional information on
off-balance-sheet financial instruments, see note 19 in the Corporation's
1994 Annual Report on Form 10-K.
NONPERFORMING ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, Dec. 31, Sept. 30, June 30, March 31,
(dollar amounts in millions) 1995 1994 1994 1994 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans $156 $151 $156 $155 $196
Acquired property, net of the OREO reserve 87 88 104 109 118
- ---------------------------------------------------------------------------------------------------
Total nonperforming assets (a) $243 $239 $260 $264 $314
- ---------------------------------------------------------------------------------------------------
Nonperforming loans as a percentage of total loans .58% .56% .60% .63% .80%
Total nonperforming assets as a percentage
of total loans and net acquired property .91% .89% .99% 1.06% 1.27%
- ---------------------------------------------------------------------------------------------------
<FN>
(a) Excludes segregated assets.
</TABLE>
"Nonperforming assets" is a term used to describe assets on which revenue
recognition has been discontinued or is restricted. Nonperforming assets
include both nonperforming loans and acquired property, primarily other
real estate owned (OREO) acquired in connection with the collection effort
on loans. Nonperforming loans include both nonaccrual and "troubled debt"
restructured loans. Nonperforming assets do not include the segregated
assets acquired in the December 1992 Meritor retail office acquisition.
When a loan is placed on nonaccrual status, previously accrued and
uncollected interest is reversed against current period interest revenue.
Interest receipts on nonaccrual loans are recognized as interest revenue or
are applied to principal when management believes the ultimate
collectibility of principal is in doubt. Nonaccrual loans generally are
restored to an accrual basis when principal and interest payments become
current or when the loan becomes well-secured and is in the process of
collection. Past-due commercial loans
28
<PAGE> 30
NONPERFORMING ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
are those that are contractually past due 90 days or more, but are not on
nonaccrual status because they are well-secured and in the process of
collection. Additional information regarding nonperforming assets is
presented in the "Nonperforming assets" discussion and in note 1 in the
Corporation's 1994 Annual Report on Form 10-K.
At March 31, 1995, nonperforming assets totaled $243 million, up $4 million
compared with December 31, 1994. The increase resulted as new additions
slightly exceeded repayments, credit losses and asset sales.
Nonperforming assets decreased by $71 million, or 23%, compared with March
31, 1994, primarily as a result of a $60 million reduction in domestic
nonperforming real estate assets. These assets consist of nonperforming
commercial and consumer real estate loans and OREO net of the reserve. The
reductions primarily resulted from repayments, asset sales and credit
losses.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NONPERFORMING AND PAST-DUE ASSETS (a) MARCH 31, Dec. 31, Sept. 30, June 30, March 31,
(dollar amounts in millions) 1995 1994 1994 1994 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic nonaccrual loans:
Commercial and financial $ 55 $ 61 $ 62 $ 43 $ 49
Commercial real estate 34 25 29 32 43
Consumer credit:
Consumer mortgage 58 56 51 61 67
Other consumer credit 2 - 1 2 3
- -----------------------------------------------------------------------------------------------------------------------
Total domestic nonaccrual loans 149 142 143 138 162
International nonaccrual loans - 1 1 6 16
- -----------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 149 143 144 144 178
- -----------------------------------------------------------------------------------------------------------------------
Domestic restructured loans:
Commercial and financial 4 5 9 8 4
Commercial real estate 3 3 3 3 14
- -----------------------------------------------------------------------------------------------------------------------
Total domestic restructured loans 7 8 12 11 18
- -----------------------------------------------------------------------------------------------------------------------
Total nonperforming loans:
Domestic 156 150 155 149 180
International - 1 1 6 16
- -----------------------------------------------------------------------------------------------------------------------
Total nonperforming loans (b) 156 151 156 155 196
- -----------------------------------------------------------------------------------------------------------------------
Acquired property:
Real estate acquired 112 116 133 139 152
Reserve for real estate acquired (26) (29) (30) (31) (35)
- -----------------------------------------------------------------------------------------------------------------------
Net real estate acquired 86 87 103 108 117
Other assets acquired 1 1 1 1 1
- -----------------------------------------------------------------------------------------------------------------------
Total acquired property 87 88 104 109 118
- -----------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $243 $239 $260 $264 $314
- -----------------------------------------------------------------------------------------------------------------------
Nonperforming loans as a percentage of respective
loan portfolio segments:
Domestic commercial and financial loans and leases .55% .60% .67% .51% .53%
Domestic commercial real estate loans 2.31 1.73 1.98 2.15 3.45
Domestic consumer mortgage loans .67 .64 .61 .75 .83
Total loans .58 .56 .60 .63 .80
Nonperforming assets as a percentage of
total loans and net acquired property .91 .89 .99 1.06 1.27
- -----------------------------------------------------------------------------------------------------------------------
Past-due loans:
Consumer credit $ 75 $ 69 $ 61 $ 52 $ 53
Real estate, primarily consumer mortgages 32 27 19 23 22
Commercial 9 10 45 43 5
- -----------------------------------------------------------------------------------------------------------------------
Total past-due loans $116 $106 $125 $118 $ 80
- -----------------------------------------------------------------------------------------------------------------------
<FN>
(a) Excludes segregated assets.
(b) Includes $69 million, $58 million, $60 million, $47 million and $65
million, respectively, of loans with both principal and interest less
than 90 days past due but placed on nonaccrual status by management
discretion.
</TABLE>
29
<PAGE> 31
NONPERFORMING ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
CHANGE IN NONPERFORMING LOANS FOR THE THREE MONTHS ENDED MARCH 31 (a)
Domestic
-------------------------------------- Total
Commercial Commercial Consumer -------------
(in millions) & Financial Real Estate Credit International 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nonperforming loans at beginning of period $ 66 $28 $56 $ 1 $151 $202
Additions 29 12 14 - 55 60
Payments (b) (33) - (3) (1) (37) (17)
Return to accrual status - - (3) - (3) (29)
Credit losses (2) (3) (2) - (7) (18)
Transfers to acquired property (1) - (2) - (3) (2)
- ------------------------------------------------------------------------------------------------------------------------
Nonperforming loans at March 31 $ 59 $37 $60 $ - $156 $196
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Excludes segregated assets.
(b) Includes interest applied to principal and sales.
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ADDITIONAL NONPERFORMING LOAN DATA (a) March 31,
(dollar amounts in millions) 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Book balance $156 $196
Contractual balance of nonperforming loans 222 308
Book balance as a percentage of
contractual balance 70% 64%
Year-to-date interest receipts applied to reduce principal $ 2 $ 3
Year-to-date interest receipts recognized in interest revenue 2 2
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Excludes segregated assets.
</TABLE>
On January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (FAS) No. 114, "Accounting by Creditors for Impairment
of a Loan," and FAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosure." See note 2 in the Notes to
Financial Statements for a further discussion of FAS Nos. 114 and 118. A
loan is considered impaired when, based upon current information and
events, it is probable that the Corporation will be unable to collect all
principal and interest amounts due according to the contractual terms of
the loan agreement. At March 31, 1995, the Corporation's impaired loans
totaled $156 million, which was equal to the nonperforming loans total.
There was no specific reserve for impaired loans at March 31, 1995.
Average impaired loans during the first quarter of 1995 were $162 million.
During the quarter, the Corporation recognized $2 million of interest
income on impaired loans, all of which was recognized using the cash basis
method of income recognition.
30
<PAGE> 32
NONPERFORMING ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
Acquired property consists of OREO and other assets acquired in connection
with loan settlements. OREO, net of the reserve, totaled $86 million at
March 31, 1995, compared with $87 million at December 31, 1994, and $117
million at March 31, 1994. The decrease from March 31, 1994, primarily
resulted from sales, partially offset by new transfers to OREO.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
CHANGE IN ACQUIRED PROPERTY Three months ended
March 31,
(in millions) 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
OREO at beginning of period, net of the OREO reserve $87 $138
Foreclosures 6 3
Sales (7) (18)
Write-downs, credit losses, OREO
provision and other - (6)
- --------------------------------------------------------------------------------------
OREO at end of period, net of the OREO reserve 86 117
Other acquired assets 1 1
- --------------------------------------------------------------------------------------
Total acquired property at end of period, net of the OREO reserve (a) $87 $118
- --------------------------------------------------------------------------------------
<FN>
(a) Excludes segregated assets.
</TABLE>
The Corporation recognizes any estimated potential decline in the value of
OREO between appraisal dates on a property-by-property basis through
periodic additions to the OREO reserve. Write-downs charged against this
reserve are taken when OREO is sold at a loss or upon the receipt of
appraisals which indicate a deterioration in the fair value of the
property. Activity in the Corporation's OREO reserve is presented in the
following table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
RESERVE FOR REAL ESTATE ACQUIRED (OREO RESERVE) Three months ended
March 31,
(in millions) 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $29 $37
Write-downs on real estate acquired - (2)
Provision (3) -
- --------------------------------------------------------------------------------------
Ending balance $26 $35
- --------------------------------------------------------------------------------------
</TABLE>
SEGREGATED ASSETS
- -------------------------------------------------------------------------------
Segregated assets represent commercial real estate and other commercial
loans acquired in the December 1992 Meritor retail office acquisition that
are on nonaccrual status or are foreclosed properties. As a result of a
loss sharing arrangement with the FDIC, any of the performing commercial
loans or performing commercial real estate loans acquired in the Meritor
acquisition that become nonaccrual before December 1997 will be
reclassified to segregated assets. These delinquent assets are reported in
other assets in the balance sheet, net of reserve. The reserve for
segregated assets is not included in the reserve for credit losses. At
March 31, 1995, segregated assets totaled $74 million, or $70 million net
of a $4 million reserve, compared with $176 million, or $172 million net of
a $4 million reserve, at March 31, 1994. The Corporation recorded net
recoveries of less than $1 million in the first quarter of 1995 and net
credit losses of less than $1 million in the first quarter of 1994, on
segregated assets. Additional information regarding segregated assets is
presented in note 8 in the Corporation's 1994 Annual Report on Form 10-K.
31
<PAGE> 33
OFF-BALANCE-SHEET RISK
- -------------------------------------------------------------------------------
In the normal course of business, the Corporation becomes a party to
various financial transactions that generally do not involve funding.
These instruments involve various risks including market and credit risk.
Because these transactions generally are not funded, they are not reflected
on the balance sheet and are referred to as financial instruments with off-
balance-sheet risk. The Corporation offers these financial instruments to
enable its customers to meet their financing objectives and manage their
interest- and currency-rate risk. Supplying these instruments provides the
Corporation with an ongoing source of fee revenue. The Corporation also
enters into these transactions to manage its own risks arising from
movements in interest and currency rates and as a part of its proprietary
trading and funding activities.
Off-balance-sheet financial instruments involve varying degrees of market
and credit risk that exceed the amounts recognized on the balance sheet.
The Corporation limits its exposure to loss from these instruments by
subjecting them to the same credit approval and monitoring procedures as
for on-balance-sheet instruments, as well as by entering into offsetting or
matching positions to hedge interest- and currency-rate risk.
A discussion of the Corporation's use of off-balance-sheet instruments is
presented on pages 23 through 28. In addition, further discussion of the
Corporation's financial instruments with off-balance-sheet risk is
presented in note 19 in the Corporation's 1994 Annual Report on Form 10-K.
32
<PAGE> 34
OFF-BALANCE-SHEET RISK (CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH CONTRACT AMOUNTS THAT REPRESENT CREDIT RISK
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
(in millions) 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit $16,476(a) $13,154
Standby letters of credit and foreign guarantees 3,204(b) 3,345
Commercial letters of credit 135 155
Residential mortgage loans serviced with recourse 176 303
Custodian securities lent with indemnification
against broker default of return of securities 14,808 12,526
- -----------------------------------------------------------------------------------------
<FN>
(a) Approximately 28% of these commitments are scheduled to expire within
one year, with an additional 56% scheduled to expire within five years.
(b) Net of participations and cash collateral totaling $226 million.
</TABLE>
OFF-BALANCE-SHEET INSTRUMENTS USED FOR OTHER THAN INTEREST RATE RISK MANAGEMENT
PURPOSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1995 1994
-------- --------
NOTIONAL Notional
(in millions) AMOUNT Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Foreign currency contracts (a):
Commitments to purchase $12,586 $10,237
Commitments to sell 12,660 10,151
Foreign currency and other option contracts written 155 310
Foreign currency and other option contracts purchased 177 613
Futures and forward contracts 1,651 1,310
Interest rate agreements (a):
Interest rate swaps 6,692 4,550
Options, caps and floors purchased 3,155 3,883 (b)
Options, caps and floors written 2,822 -
Forward rate agreements - 34
- -----------------------------------------------------------------------------------------
<FN>
(a) The amount of credit risk associated with these instruments is limited
to the cost of replacing a contract in a gain position, on which a
counter party has defaulted. Credit risk associated with foreign
currency contracts and interest rate agreements was $910 million and $47
million, respectively at March 31, 1995.
(b) Options, caps and floors purchased and written are aggregated for
March 31, 1994.
</TABLE>
OFF-BALANCE-SHEET INSTRUMENTS USED FOR INTEREST RATE RISK MANAGEMENT PURPOSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1995 1994
-------- --------
NOTIONAL Notional
(in millions) AMOUNT Amount
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate agreements (a):
Interest rate swaps $10,385 $12,623
Options, caps and floors purchased (b) 543 292
Futures and forward contracts 6 1,500
Foreign currency contracts 50 -
- -----------------------------------------------------------------------------------------
<FN>
(a) The amount of credit risk associated with these instruments is limited
to the cost of replacing a contract in a gain position, on which a
counter party has defaulted. Credit risk associated with interest rate
agreements was $7 million at March 31, 1995.
(b) At March 31, 1995, there were no options, caps and floors written.
Options, caps and floors purchased and written are aggregated for March
31, 1994.
</TABLE>
33
<PAGE> 35
CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation (and its subsidiaries)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------
MARCH 31,
(in millions, except per share amounts) 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest revenue Interest and fees on loans (loan fees of $16, $22, $18, $17 and $30) $ 583
Interest-bearing deposits with banks 7
Federal funds sold and securities under resale agreements 11
Other money market investments -
Trading account securities 6
Securities 78
---------------------------------------------------------------------------------
Total interest revenue 685
- -----------------------------------------------------------------------------------------------------
Interest expense Deposits in domestic offices 153
Deposits in foreign offices 52
Federal funds purchased and securities under repurchase agreements 29
Other short-term borrowings 34
Notes and debentures 28
---------------------------------------------------------------------------------
Total interest expense 296
- -----------------------------------------------------------------------------------------------------
Net interest Net interest revenue 389
revenue Provision for credit losses 20
---------------------------------------------------------------------------------
Net interest revenue after provision for losses 369
- -----------------------------------------------------------------------------------------------------
Noninterest Trust and investment management fees 219
revenue Cash management and deposit transaction charges 47
Mortgage servicing fees 25
Foreign currency and securities trading 24
Credit card fees 19
Other income 65
---------------------------------------------------------------------------------
Total fee revenue 399
Gains (losses) on sale of securities (1)
---------------------------------------------------------------------------------
Total noninterest revenue 398
- -----------------------------------------------------------------------------------------------------
Operating Staff expense 240
expense Net occupancy expense 51
Professional, legal and other purchased services 38
Equipment expense 34
Amortization of goodwill and other intangible assets 24
FDIC assessment and regulatory examination fees 15
Amortization of purchased mortgage servicing rights and purchased
credit card relationships 13
Other expense 84
Net revenue from acquired property (4)
Securities lending charge -
Merger expense -
---------------------------------------------------------------------------------
Total operating expense 495
- -----------------------------------------------------------------------------------------------------
Income Income before income taxes 272
Provision for income taxes 102
---------------------------------------------------------------------------------
Net income 170
Dividends on preferred stock 10
---------------------------------------------------------------------------------
Net income applicable to common stock $ 160
---------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Per common share Primary net income $1.08
Fully diluted net income $1.07
---------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
34
<PAGE> 36
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three months ended
- --------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31,
1994 1994 1994 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$555 $491 $444 $436
8 8 9 9
9 7 7 7
2 1 1 2
5 6 6 7
77 80 72 61
- --------------------------------------------------------------------------------
656 593 539 522
- --------------------------------------------------------------------------------
135 120 100 92
41 25 17 9
30 23 13 10
22 22 17 16
27 27 28 28
- --------------------------------------------------------------------------------
255 217 175 155
- --------------------------------------------------------------------------------
401 376 364 367
15 15 20 20
- --------------------------------------------------------------------------------
386 361 344 347
- --------------------------------------------------------------------------------
224 232 242 255
49 49 48 51
24 21 17 16
22 21 14 19
21 19 18 14
65 57 73 81
- --------------------------------------------------------------------------------
405 399 412 436
- (15) 8 2
- --------------------------------------------------------------------------------
405 384 420 438
- --------------------------------------------------------------------------------
237 237 237 245
54 50 52 50
62 51 51 46
35 30 30 37
25 23 23 27
16 15 16 16
9 9 10 12
85 88 92 105
(5) (12) (3) (8)
223 - - -
- 104 - -
- --------------------------------------------------------------------------------
741 595 508 530
- --------------------------------------------------------------------------------
50 150 256 255
9 72 98 99
- --------------------------------------------------------------------------------
41 78 158 156
30 15 15 15
- --------------------------------------------------------------------------------
$ 11 $ 63 $143 $141
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$.07 $.42 $.97 $.96
$.07 $.42 $.97 $.96
- --------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 37
CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation (and its subsidiaries)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, Dec. 31, March 31,
(dollar amounts in millions) 1995 1994 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets Cash and due from banks $ 2,130 $ 2,285 $ 1,803
Interest-bearing deposits with banks 501 429 1,168
Federal funds sold and securities under resale agreements 414 383 320
Other money market investments 33 48 111
Trading account securities 233 71 268
Securities available for sale 2,112 1,881 2,993
Investment securities (approximate fair value
of $3,103, $3,033 and $2,804) 3,198 3,244 2,863
Loans, net of unearned discount of $63, $62 and $71 26,696 26,733 24,537
Reserve for credit losses (601) (607) (603)
Customers' acceptance liability 215 234 112
Premises and equipment 552 558 519
Acquired property, net of reserves of $26, $29 and $35 87 88 118
Goodwill and other intangibles 1,014 1,036 1,056
Purchased mortgage servicing rights and
purchased credit card relationships 375 352 237
Other assets 2,660 1,909 2,042
----------------------------------------------------------------------------------------------------
Total assets $39,619 $38,644 $37,544
----------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Liabilities Noninterest-bearing deposits in domestic offices $ 5,504 $ 5,979 $ 6,275
Interest-bearing deposits in domestic offices 17,775 18,121 18,913
Interest-bearing deposits in foreign offices 3,726 3,470 1,598
----------------------------------------------------------------------------------------------------
Total deposits 27,005 27,570 26,786
Federal funds purchased and securities under
repurchase agreements 2,461 2,023 1,470
Term federal funds purchased 496 333 9
U.S. Treasury tax and loan demand notes 420 567 895
Commercial paper 228 178 118
Other funds borrowed 1,055 371 415
Acceptances outstanding 215 234 112
Other liabilities 1,957 1,678 1,588
Notes and debentures (with original maturities over one year) 1,592 1,568 1,924
----------------------------------------------------------------------------------------------------
Total liabilities 35,429 34,522 33,317
- --------------------------------------------------------------------------------------------------------------------
Shareholders' Preferred stock 435 435 592
equity Common shareholders' equity:
Common stock - $.50 par value
Authorized - 200,000,000 shares
Issued - 147,165,480 (a); 147,165,480 (a); and 103,504,048 shares 74 74 52
Additional paid-in capital 1,856 1,851 2,043
Retained earnings 1,867 1,780 1,725
Warrants 37 37 37
Net unrealized loss on assets available for sale (net of taxes) (53) (55) (16)
Treasury stock of 678,826; - ; and 7,701,783 shares, at cost (26) - (206)
----------------------------------------------------------------------------------------------------
Total common shareholders' equity 3,755 3,687 3,635
----------------------------------------------------------------------------------------------------
Total shareholders' equity 4,190 4,122 4,227
----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $39,619 $38,644 $37,544
----------------------------------------------------------------------------------------------------
<FN>
(a) Reflects the three-for-two common stock split distributed on
November 15, 1994.
</TABLE>
See accompanying Notes to Financial Statements.
36
<PAGE> 38
CONSOLIDATED STATEMENT OF CASH FLOWS
Mellon Bank Corporation (and its subsidiaries)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
(in millions) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from Net income $ 170 $ 156
operating activities Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Amortization of goodwill and other intangible assets 24 27
Amortization of purchased mortgage servicing rights
and purchased credit card relationships 13 12
Depreciation and other amortization 26 23
Deferred income tax expense 33 24
Provision for credit losses 20 20
Provision for real estate acquired and other losses (2) -
Net gains on dispositions of acquired property (2) (8)
Net (increase) decrease in accrued interest receivable (16) 1
Net increase in trading account securities (162) (148)
Net increase in accrued interest payable,
net of amounts prepaid 21 7
Net increase in residential mortgages held for sale (28) (46)
Net increase (decrease) in other operating activities (333) 47
------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (236) 115
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from Net increase in term deposits and other money market
investing activities investments (57) (87)
Net (increase) decrease in federal funds sold and
securities under resale agreements (31) 254
Funds invested in securities available for sale (2,078) (2,971)
Proceeds from sales of securities available for sale 1,135 35
Proceeds from maturities of securities available for sale 737 3,053
Funds invested in investment securities (7) (821)
Proceeds from maturities of investment securities 52 203
Net (increase) decrease in credit card loans (65) 42
Net principal collected (disbursed) on loans to customers 34 (11)
Loan portfolio purchases - (129)
Proceeds from the sale of loan portfolios 65 52
Purchases of premises and equipment (18) (27)
Proceeds from sales of premises and equipment - 1
Proceeds from sales of acquired property 10 27
Net (increase) decrease in other investing activities (53) 10
------------------------------------------------------------------------------------------------------
Net cash used in investing activities (276) (369)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
37
<PAGE> 39
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
Mellon Bank Corporation (and its subsidiaries)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
(in millions) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from Net decrease in transaction and savings deposits (886) (403)
financing activities Net increase (decrease) in customer term deposits 321 (375)
Net increase in federal funds purchased and
securities under repurchase agreements 438 492
Net increase (decrease) in U.S. Treasury tax and loan demand notes (147) 184
Net increase in short-term bank notes 440 -
Net increase in term federal funds purchased 163 1
Net increase (decrease) in commercial paper 50 (16)
Repurchase and repayments of longer-term debt (1) (67)
Net proceeds from issuance of longer-term debt 25 -
Series H preferred stock redemption (155) -
Proceeds from issuance of common stock 16 5
Dividends paid on common and preferred stock (94) (58)
Repurchase of common stock for employee benefit purposes (61) -
Net increase in other financing activities 242 119
---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 351 (118)
Effect of foreign currency exchange rates 6 4
- ----------------------------------------------------------------------------------------------------------------------------------
Change in cash and Net decrease in cash and due from banks (155) (368)
due from banks Cash and due from banks at beginning of period 2,285 2,171
---------------------------------------------------------------------------------------------------------
Cash and due from banks at end of period $2,130 $1,803
---------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Interest paid $ 275 $ 148
disclosures Net income taxes paid - 23
- ----------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Mellon Bank Corporation (and its subsidiaries)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
(dollar amounts in millions, except per share amounts) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shareholders' equity Balance at beginning of period $4,122 $4,138
Net income 170 156
Dividends on preferred stock:
Series I (4) (4)
Series J (2) (2)
Series K (4) (4)
Series D - (1)
Series H - (4)
Dividends on common stock at $.45 per share in 1995 and
$.3733 per share in 1994 (66) (43)
Purchase of treasury stock (61) -
Common stock issued under dividend reinvestment and
common stock purchase plan 3 4
Exercise of stock options 23 1
Unrealized gain (loss), net of tax, on assets classified as available
for sale 2 (16)
Other 7 2
---------------------------------------------------------------------------------------------------------
Balance at end of period $4,190 $4,227
---------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Statements.
</TABLE>
38
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 1 -- Basis of presentation
On August 24, 1994, the Corporation merged with The Dreyfus
Corporation. The merger was accounted for as a pooling of
interests. The financial information for all prior periods has been
restated to present the combined balance sheet and results of
operations of both companies as if the merger had been in effect for
all periods presented. Further information pertaining to the merger
is presented in note 3 -- Merger with The Dreyfus Corporation.
The unaudited consolidated financial statements of the
Corporation are prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. These
financial statements should be read in conjunction with the
Corporation's 1994 Annual Report on Form 10-K. In the opinion of
management, all normal recurring adjustments necessary for a fair
presentation of the financial position and results of operations for
the periods have been included.
Note 2 -- Adoption of Financial Accounting Standards
On January 1, 1995, the Corporation adopted FAS No. 114,
"Accounting by Creditors for Impairment of a Loan" and FAS No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosure." FAS No. 114 provides guidelines for measuring
impairment losses on loans. A loan is considered to be impaired
when it is probable that the creditor will be unable to collect all
principal and interest amounts due according to the contractual
terms of the loan agreement. Under FAS No. 114, impaired loans
subject to the statement are required to be measured based upon the
present value of expected future cash flows discounted at the loan's
initial effective interest rate or at the loan's market price or
fair value of the collateral if the loan is collateral dependent. If
the loan valuation is less than the recorded value of the loan, an
impairment reserve must be established for the difference. The
impairment reserve is established by either an allocation of the
reserve for credit losses or by a provision for credit losses,
depending on the adequacy of the reserve for credit losses. FAS No.
118 permits existing income recognition practices to continue.
At March 31, 1995, all of the Corporation's nonperforming loans
were considered to be impaired loans and totaled $156 million.
There was no specific reserve for impaired loans at March 31, 1995.
Average impaired loans during the first quarter of 1995 were $162
million. During the quarter, the Corporation recognized $2 million
of interest income on impaired loans, all of which was recognized
using the cash basis method of income recognition.
Note 3 -- Merger with The Dreyfus Corporation
On August 24, 1994, the Corporation merged with The Dreyfus
Corporation, a mutual fund company that employs approximately 2,000
people and is headquartered in New York City. The merger was
accounted for under the pooling of interests method of accounting.
As provided for in the merger agreement, each share of Dreyfus
common stock was converted into 0.88017 shares of the Corporation's
common stock, resulting in the Corporation issuing 32.2 million
shares of stock on a pre-stock split basis, or 48.3 million
shares of stock on a post-stock split basis.
In accordance with the pooling of interests method of
accounting, the Corporation's financial statements have been
restated for all periods presented to include the results of
Dreyfus. Operating results for the
39
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Note 3 -- Merger with The Dreyfus Corporation (continued)
Corporation and Dreyfus for the three months ended March 31,
1994, and six months ended June 30, 1994, prior to restatement, are
presented in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three months ended Six months ended
(in millions) March 31, 1994 June 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
The Corporation
Total revenue $705 $1,398
Net income $131 $ 265
Net income applicable to common stock $116 $ 235
- --------------------------------------------------------------------------------
Dreyfus
Total revenue $100 $ 191
Net income $ 25 $ 49
Net income applicable to common stock $ 25 $ 49
- --------------------------------------------------------------------------------
Combined
Total revenue $805 $1,589
Net income $156 $ 314
Net income applicable to common stock $141 $ 284
- --------------------------------------------------------------------------------
</TABLE>
Note 4 -- Foreign currency and securities trading revenue
The Corporation's trading activities involve a variety of
financial instruments, including U.S. government securities,
municipal securities and money market securities, as well as
off-balance-sheet instruments. The majority of the Corporation's
trading revenue is earned by structuring and executing
off-balance-sheet instruments for customers. The resulting risks
are limited by entering into generally matching or offsetting
positions. The Corporation also enters into positions in the
interest rate, foreign exchange and debt markets based upon
expectations of future market conditions. Unmatched positions are
monitored through established limits. In order to maximize net
trading revenues, the market-making and proprietary positions are
managed together, by product. The results of the Corporation's
foreign currency and securities trading activities are presented in
the table below, by class of financial instrument.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOREIGN CURRENCY AND SECURITIES TRADING REVENUE QUARTER ENDED
MARCH 31,
(in millions) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Foreign exchange contracts $24 $19
Debt instruments - (1)
Interest rate contracts - 1
- -------------------------------------------------------------------------------
Total foreign currency and securities trading revenue $24 $19
- -------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Note 5 -- Securities
SECURITIES AVAILABLE FOR SALE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1995 March 31, 1994
------------------------------------------ -------------------------------------
AMORTIZED GROSS UNREALIZED FAIR Amortized Gross unrealized Fair
(in millions) COST GAINS LOSSES VALUE cost Gains Losses value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 400 $- $ - $ 400 $ 805 $ - $ 4 $ 801
U.S. agency mortgage-backed 525 1 25 501 551 2 17 536
Other U.S. agency 1,130 - - 1,130 1,386 - - 1,386
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Treasury
and agency securities 2,055 1 25 2,031 2,742 2 21 2,723
Obligations of states and
political subdivisions 1 - - 1 1 - - 1
Other mortgage-backed 8 - - 8 18 - - 18
Other securities 72 1 1 72 246 11 6 251
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $2,136 $2 $26 $2,112 $3,007 $13 $27 $2,993
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Note: There were no gross realized gains in the first quarter of 1995. Gross
realized gains in the first quarter of 1994 were $3 million. Gross realized
losses were $1 million in the first quarter of 1995 and 1994, respectively.
Proceeds from the sale of securities available for sale totaled $1.135
billion and $35 million in the first quarter of 1995 and 1994, respectively.
At March 31, 1995, net unrealized losses of $24 million are recorded in
shareholders' equity, net of taxes, in accordance with FAS No. 115.
</TABLE>
INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1995 March 31, 1994
------------------------------------------ -------------------------------------
AMORTIZED GROSS UNREALIZED FAIR Amortized Gross unrealized Fair
(in millions) COST GAINS LOSSES VALUE cost Gains Losses value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 26 $- $ - $ 26 $ 32 $ - $ - $ 32
U.S. agency mortgage-backed 2,973 4 98 2,879 2,549 5 66 2,488
Other U.S. agency 4 - - 4 4 - - 4
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Treasury
and agency securities 3,003 4 98 2,909 2,585 5 66 2,524
Obligations of states and
political subdivisions 68 - - 68 113 1 - 114
Other mortgage-backed 47 - 1 46 61 - - 61
Other investment securities 80 1 1 80 104 2 1 105
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities $3,198 $5 $100 $3,103 $2,863 $8 $67 $2,804
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 6 --Other assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, Dec. 31, March 31,
(in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prepaid expense $ 332 $ 294 $ 320
Interest receivable 215 199 156
Accounts receivable 171 218 200
Receivables related to
off-balance-sheet instruments 964 257 309
Other 978 941 1,057
- ------------------------------------------------------------------------------------------------------------------------------------
Total other assets $2,660 $1,909 $2,042
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 43
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Note 7 -- Preferred stock
The following table summarizes the Corporation's preferred
stock outstanding. Each series of preferred stock has a par value
of $1.00 per share. A detailed description of the Corporation's
outstanding preferred stock is provided in note 11 in the
Corporation's 1994 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Balances at
Liquidation -----------------------------------
(dollar amounts in millions, preference Shares Shares MARCH 31, Dec. 31, March 31,
except per share amounts) per share authorized issued 1995 1994 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9.60% preferred stock (Series I) $25.00 6,000,000 6,000,000 $145 $145 $145
8.50% preferred stock (Series J) 25.00 4,000,000 4,000,000 97 97 97
8.20% preferred stock (Series K) 25.00 8,000,000 8,000,000 193 193 193
Junior convertible preferred
stock (Series D) 1.00 - - - - 2
10.40% preferred stock (Series H) 25.00 - - - - 155
---- ---- ----
Total preferred stock $435 $435 $592
---- ---- ----
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 8 -- Supplemental information to the Consolidated Statement of Cash Flows
Noncash investing and financing transactions that appropriately
were not reflected in the Consolidated Statement of Cash Flows are
listed below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Three months ended
March 31,
(in millions) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Net transfers to real estate acquired $ 6 $ 3
Net transfers to segregated assets 1 10
- -----------------------------------------------------------------------------
</TABLE>
Note 9 -- Legal proceedings
A discussion of legal actions and proceedings against the
Corporation and its subsidiaries is presented in Part II, Item 1, of
this Form 10-Q.
42
<PAGE> 44
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
Note 10 -- Computation of primary and fully diluted net income
per common share
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Three months ended
(dollar amounts in millions, except per March 31,
share amounts; common shares in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
PRIMARY NET INCOME PER COMMON SHARE
Net income applicable to common stock (a) $160 $142
- ----------------------------------------------------------------------------
Stock and stock equivalents (average shares):
Common shares outstanding 146,913 143,595
Common shares issuable upon conversion
of Series D preferred stock - 2,552
Other common stock equivalents, net of shares assumed
to be repurchased under the treasury stock method:
Stock options 1,444 1,966
Warrants 409 428
Series D preferred stock subscription rights - 1
- ----------------------------------------------------------------------------
Total stock and stock equivalents 148,766 148,542
- ----------------------------------------------------------------------------
Primary net income per common share (c) $1.08 $ .96
- ----------------------------------------------------------------------------
FULLY DILUTED NET INCOME PER COMMON SHARE
Net income applicable to common stock (a)(b) $160 $142
- ----------------------------------------------------------------------------
Stock, stock equivalents and potentially
dilutive items (average shares):
Common shares outstanding 146,913 143,595
Common shares issuable upon conversion of
Series D preferred stock - 2,552
Other common stock equivalents, net of shares assumed
to be repurchased under the treasury stock method 2,918 2,563
7 1/4% Convertible Subordinated Capital Notes 132 134
- ----------------------------------------------------------------------------
Total stock, stock equivalents
and other dilutive items 149,963 148,844
- ----------------------------------------------------------------------------
Fully diluted net income per common share (c) $1.07 $ .96
- ----------------------------------------------------------------------------
<FN>
(a) After adding back Series D preferred stock dividends of $1 million in
the first quarter of 1994.
(b) The after-tax benefit of interest expense on assumed conversion of the
7 1/4% Convertible Subordinated Capital Notes was less than $1 million
for all periods shown.
(c) Calculated based on unrounded numbers.
</TABLE>
43
<PAGE> 45
CONSOLIDATED BALANCE SHEET -- AVERAGE BALANCES AND INTEREST YIELDS/RATES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION> ---------------------
MARCH 31, 1995
AVERAGE AVERAGE
(dollar amounts in millions) BALANCE YIELDS/RATES
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Interest-earning assets:
Interest-bearing deposits with banks $ 431 6.26%
Federal funds sold and securities under
resale agreements 757 5.75
Other money market investments 42 4.90
Trading account securities 316 7.59
Securities:
U.S. Treasury and agency securities (a) 4,640 6.49
Obligations of states and political
subdivisions (a) 70 7.57
Other (a) 214 5.89
Loans, net of unearned discount (a) 26,717 8.88
------
Total interest-earning assets 33,187 8.42%
Cash and due from banks 2,109
Customers' acceptance liability 190
Premises and equipment 557
Net acquired property 87
Other assets (a) 3,415
Reserve for credit losses (607)
------------------------------------------------------------------------------------------------------------------
Total assets $38,938
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities Interest-bearing liabilities:
and Deposits in domestic offices:
shareholders' Demand (b) $ 1,997 1.96%
equity Money market and other savings accounts 8,703 2.92
Retail savings certificates 6,828 4.74
Other time deposits 208 2.52
Deposits in foreign offices 3,616 5.82
------
Total interest-bearing deposits 21,352 3.90
Federal funds purchased and securities under
repurchase agreements 1,996 5.85
U.S. Treasury tax and loan demand notes 571 5.57
Commercial paper 268 5.90
Other funds borrowed 1,281 7.06
Notes and debentures (with original maturities
over one year) 1,582 7.18
------
Total interest-bearing liabilities 27,050 4.44%
Total noninterest-bearing deposits 5,966
Acceptances outstanding 190
Other liabilities 1,545
------------------------------------------------------------------------------------------------------------------
Total liabilities 34,751
------------------------------------------------------------------------------------------------------------------
Shareholders' equity (a) 4,187
------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $38,938
- ----------------------------------------------------------------------------------------------------------------------------------
Rates Yield on total interest-earning assets 8.42%
Cost of funds supporting interest-earning assets 3.62%
------------------------------------------------------------------------------------------------------------------
Net interest margin:
Taxable equivalent basis 4.80%
Without taxable equivalent increments 4.76%
------------------------------------------------------------------------------------------------------------------
<FN>
(a) Amounts and yields exclude adjustments to fair value required by FAS No. 115.
(b) In the first and second quarters of 1994, revenue generated through the use of off-balance-sheet
instruments more than offset the interest expense on demand deposits.
Note: Average rates are annualized and calculated on a taxable equivalent basis, at tax rates
</TABLE>
44
<PAGE> 46
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Three months ended
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, 1994 Sept. 30, 1994 June 30, 1994 March 31,1994
Average Average Average Average Average Average Average Average
balance yields/rates balance yields/rates balance yields/rates balance yields/rates
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 416 7.63% $ 670 4.58% $ 893 4.08% $ 1,033 3.68%
730 5.20 697 4.24 779 3.64 844 3.01
67 7.11 99 4.40 141 4.05 270 3.33
281 7.23 351 6.60 386 6.15 504 5.57
4,761 6.04 5,021 5.88 4,824 5.52 4,239 5.37
97 6.83 108 7.23 109 7.03 125 7.39
242 6.35 326 5.09 413 4.13 430 4.05
26,423 8.35 25,103 7.80 24,251 7.38 24,636 7.22
------ ------ ------ ------
33,017 7.92% 32,375 7.32% 31,796 6.85% 32,081 6.65%
2,164 2,253 2,381 2,554
245 147 132 137
557 541 526 523
99 108 116 130
3,366 3,245 3,183 3,294
(618) (617) (610) (610)
- -----------------------------------------------------------------------------------------------------------------------------------
$38,830 $38,052 $37,524 $38,109
- -----------------------------------------------------------------------------------------------------------------------------------
$ 2,094 1.46% $ 2,162 .79% $ 2,157 (.66)% $ 2,158 (.76)%
8,924 2.46 9,372 2.13 9,588 1.84 9,885 1.56
6,632 4.19 6,495 3.73 6,552 3.45 6,712 3.20
167 5.16 165 10.77 307 4.13 347 5.91
3,072 5.18 2,265 4.33 1,685 3.97 1,167 3.50
------ ------ ------ ------
20,889 3.33 20,459 2.81 20,289 2.31 20,269 2.04
2,354 5.13 2,039 4.45 1,406 3.83 1,293 3.01
450 4.98 528 4.35 689 3.69 594 3.03
190 5.06 181 4.53 138 3.88 111 3.26
919 6.15 776 7.36 476 7.86 619 6.71
1,571 6.76 1,618 6.52 1,924 5.92 1,965 5.77
------ ------ ------ ------
26,373 3.83% 25,601 3.35% 24,922 2.83% 24,851 2.53%
6,371 6,504 6,700 7,521
245 147 132 137
1,490 1,418 1,483 1,419
- -----------------------------------------------------------------------------------------------------------------------------------
34,479 33,670 33,237 33,928
- -----------------------------------------------------------------------------------------------------------------------------------
4,351 4,382 4,287 4,181
- -----------------------------------------------------------------------------------------------------------------------------------
$38,830 $38,052 $37,524 $38,109
- -----------------------------------------------------------------------------------------------------------------------------------
7.92% 7.32% 6.85% 6.65%
3.07% 2.66% 2.22% 1.96%
- -----------------------------------------------------------------------------------------------------------------------------------
4.85% 4.66% 4.63% 4.69%
4.82% 4.62% 4.59% 4.64%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
approximating 35%, using dollar amounts in thousands and actual number of days in the periods and are before the effect of reserve
requirements. Loan fees, as well as nonaccrual loans and their related income effect, have been included in the calculation of
average interest yields/rates.
</TABLE>
45
<PAGE> 47
SELECTED STATISTICAL INFORMATION
- -------------------------------------------------------------------------------
DEPOSITS
Mellon Bank Corporation (and its subsidiaries)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, Dec. 31, Sept. 30, June 30, March 31,
(in millions) 1995 1994 1994 1994 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Deposits in domestic offices:
Interest-bearing:
Demand deposit accounts $ 1,979 $ 2,125 $ 2,121 $ 2,175 $ 2,175
Money market and other savings accounts 8,795 9,090 9,391 9,601 9,783
Retail savings certificates 6,832 6,707 6,566 6,513 6,610
Other time deposits 169 199 166 280 345
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing 17,775 18,121 18,244 18,569 18,913
Noninterest-bearing 5,504 5,979 5,728 5,772 6,275
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits in domestic offices 23,279 24,100 23,972 24,341 25,188
- -----------------------------------------------------------------------------------------------------------------------------------
Deposits in foreign offices 3,726 3,470 3,160 1,867 1,598
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits $27,005 $27,570 $27,132 $26,208 $26,786
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PART II - OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 1. Legal Proceedings.
-----------------
Various legal actions and proceedings are pending or are threatened against
the Corporation and its subsidiaries, some of which seek relief or damages
in amounts that are substantial. These actions and proceedings arise in
the ordinary course of the Corporation's businesses and include suits
relating to its lending, collections, servicing, investment, mutual fund,
advisory, trust and other activities. Because of the complex nature of
some of these actions and proceedings, it may be a number of years before
such matters ultimately are resolved. After consultation with legal
counsel, management believes that the aggregate liability, if any,
resulting from such pending and threatened actions and proceedings will not
have a material adverse effect on the Corporation's financial condition.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
3.1 Statement Affecting Series H Preferred Stock, $1.00 Par Value
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends
(parent Corporation).
12.2 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends
(Mellon Bank Corporation and its subsidiaries).
(b) Reports on Form 8-K
During the first quarter of 1995, the Corporation filed the following
Current Reports on Form 8-K:
(1) A report dated January 13, 1995, which included, under Item 7,
the Corporation's press release regarding fourth quarter and
full-year 1994 financial results.
46
<PAGE> 48
SIGNATURE
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
(Registrant)
Date: May 12, 1995 By: Steven G. Elliott
---------------------------
Steven G. Elliott
Vice Chairman,
Chief Financial Officer
and Treasurer
(Duly Authorized Officer
and Principal Financial
Officer of the Registrant)
47
<PAGE> 49
CORPORATE INFORMATION
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Business Mellon Bank Corporation is a multibank holding company incorporated under the laws of Pennsylvania in August 1971
of the and registered under the Federal Bank Holding Company Act of 1956, as amended. Its principal wholly owned
Corporation subsidiaries are Mellon Bank, N.A., The Boston Company, Inc., Mellon Bank (DE) National Association,
Mellon Bank (MD), Mellon PSFS Bancorporation and the companies known as Mellon Financial Services Corporations.
The Corporation also owns a federal savings bank located in New Jersey, Mellon Bank, F.S.B. The Dreyfus
Corporation, one of the nation's largest mutual fund companies, is a wholly owned subsidiary of Mellon Bank,
N.A. The Corporation's banking subsidiaries engage in retail banking, commercial banking, trust and investment
management services, residential real estate loan financing, mortgage servicing, mutual fund and various
securities-related activities. The Mellon Financial Services Corporations and their subsidiaries provide a
broad range of bank-related services - including commercial financial services, equipment leasing,
commercial loan financing, stock transfer services, cash management and numerous trust and investment management
services. The Corporation's principal executive office is located at One Mellon Bank Center, 500 Grant Street,
Pittsburgh, PA, 15258-0001 (Telephone: 412-234-5000).
Exchange Mellon Bank Corporation's common, Series I preferred, Series J preferred and Series K preferred stocks are
listing traded on the New York Stock Exchange. The trading symbols are MEL (common stock) and MEL Pr I, MEL Pr J and MEL
Pr K (preferred stocks). The Transfer Agent and Registrar is Mellon Bank, N.A., c/o Securities Transfer Services,
85 Challenger Road, Overpeck Center, Ridgefield Park, NJ 07660-9940.
Dividend Subject to approval of the board of directors, dividends are paid on Mellon Bank Corporation's common and
payments preferred stocks on or about the 15th day of February, May, August and November.
Dividend Under the Dividend Reinvestment and Common Stock Purchase Plan, registered holders of Mellon Bank
Reinvestment Corporation's common stock may purchase additional common shares at the market value for such shares
and Common through reinvestment of common dividends and/or optional cash payments. Purchases of shares
Stock Pur- through optional cash payments are subject to limitations. Plan details are in a Prospectus dated
chase Plan December 15, 1993, which may be obtained from the Secretary of the Corporation.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Phone Corporate Communications/Media Relations (412) 236-1264
contacts Dividend Reinvestment Plan (412) 236-8000
Investor Relations (412) 234-5601
Publication Requests (412) 234-8252
Stock Transfer Agent (412) 236-8000
</TABLE>
48
<PAGE> 50
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- --------------------------------------------------------------
<S> <C>
3.1 Statement Affecting Series H Preferred Stock, $1.00 Par Value.
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends (parent Corporation).
12.2 Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends (Mellon Bank Corporation and its subsidiaries).
27.1 Financial Data Schedule
</TABLE>
49
<PAGE> 1
EX-3.1
MELLON BANK CORPORATION
227630
STATEMENT AFFECTING 10.40% SERIES H PREFERRED STOCK
$1.00 PAR VALUE
DECREASING THE AUTHORIZED NUMBER OF SHARES OF SUCH SERIES
---------------------------------------------------------
PURSUANT TO THE REQUIREMENTS OF SECTION 1522 OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW
The undersigned Corporation, desiring to decrease the authorized number
of shares of its 10.40% Series H Preferred Stock, $1.00 par value (the "Series
H Preferred Stock"), hereby certifies that:
1. The name of the Corporation is Mellon Bank Corporation.
2. The resolution of the Board of Directors of the Corporation
establishing and designating the Series H Preferred Stock as
the ninth series of Preferred Stock $1.00 par value, of the
Corporation authorized to be issued by Article FIFTH of its
Articles, as heretofore restated and amended, was filed with the
Department of State in a Statement of Designation on March 29, 1990.
3. By resolutions dated April 19, 1994, (copy attached hereto), the
Board of Directors, as part of the Corporation's Capital and
Funding Plan for 1994, approved the concept of redeeming the Series
H Preferred Stock, authorized the restoration of any shares redeemed
to the status of authorized but unissued shares of preferred stock
of the Corporation, and further appointed a special committee (the
"Redemption Committee) to have and to exercise all authority of the
Board with respect to the redemption of the Series H Preferred
Stock.
4. By resolutions dated December 19, 1994, (copy attached), the
Redemption Committee authorized the Corporation to redeem all
outstanding shares of its Series H Preferred Stock and further
established the terms and conditions of such redemption.
5. Accordingly, the number of shares of preferred stock previously
designated as Series H Preferred Stock is hereby decreased from
6,400,000 shares to -0- shares.
6. Since the filing of the Corporation's Restated Articles of
Incorporation on September 2, 1993, there have been no
statements filed under the Pennsylvania Business Corporation Law
pertaining the Series H Preferred Stock.
<PAGE> 2
7. This Statement shall be effective upon the filing thereof in
the Department of Statement.
IN TESTIMONY WHEREOF, THE UNDERSIGNED Corporation has caused this
Statement to be signed by a duly authorized officer thereof this 1st day of
March, 1995.
MELLON BANK CORPORATION
By: STEVEN G. ELLIOTT
------------------------
Steven G. Elliott
Vice Chairman, Chief
Financial Officer
and Treasurer
(SEAL)
Attest:
JAMES M. GOCKLEY
- --------------------
James M. Gockley
Secretary
<PAGE> 3
MELLON BANK CORPORATION
RESOLUTIONS AUTHORIZING
REDEMPTION OF 10.40% SERIES H PREFERRED STOCK
WHEREAS, Mellon Bank Corporation (the
"Corporation") has issued 10.40% Series H
Preferred Stock, $1.00 par value (the
"Series H Preferred Stock") which by its
terms, is redeemable at the option of the
Corporation, in whole or from time to time
in part, at any time on or after March 1,
1995 and prior to March 1, 2000, at prices
declining from $26.30 to $25.26, plus
accrued dividends, and thereafter at par,
plus accrued dividends, the election of the
Corporation to so redeem the Series H
Preferred Stock to be evidenced by a
resolution of this Board; NOW, THEREFORE,
BE IT
RESOLVED, That a special committee (the
"Redemption Committee") of this Board be,
and it hereby is, appointed to have and to
exercise all authority of this Board with
respect to the redemption of the Series H
Preferred Stock, including, without
limitation, the designation of amounts,
times and methods of redemption; and it is
further
RESOLVED, That the Redemption Committee
shall consist of the following Directors:
Frank V. Cahouet, W. Keith Smith, Andrew
W. Mathieson, Charles A. Corry, Ira J.
Gumberg, H. Robert Sharbaugh and Wesley
W. von Schack, and that the Committee
shall meet at such times and places as it
may deem appropriate to exercise the
authority granted to it by the foregoing
resolutions; and it is further
RESOLVED, That a majority of the members
at any meeting of the Redemption Committee
shall constitute a quorum necessary and
sufficient to transact business; however,
if a quorum is not present, those
Committee members who are present shall
have the authority to appoint any member
of the Board of Directors as alternate
members of the Redemption Committee, and
the Committee as then constituted shall
exercise the powers granted by the
foregoing resolutions; and it is further
RESOLVED, That upon the instruction and
authorization of the Redemption Committee,
the Chairman, the Chief Executive Officer,
the President, any Vice Chairman or the
Secretary of the Corporation be, and each
hereby is,
<PAGE> 4
authorized and directed in the
name and on behalf of the Corporation, to
implement the redemption of the Series H
Preferred Stock, in whole or from time to
time in part, in accordance with its terms
and upon such further specific terms and
conditions as such officer shall approve,
the approval of such officer and of this
Board to be evidenced conclusively by the
action of such officers; and it is further
RESOLVED, That in accordance with the
terms of the Series H Preferred Stock, any
shares of such stock so redeemed, shall be
restored to the status of authorized but
unissued shares of preferred stock of the
Corporation, without designation as to
series, until such shares are once more
designated as part of a particular series
by this Board; and it is further
RESOLVED, That the Chairman, the Chief
Executive Officer, the President, any Vice
Chairman or the Secretary of the
Corporation be, and each hereby is,
authorized and directed in the name and on
behalf of the Corporation to execute any
and all agreements and other documents,
make such filings and take any other such
actions as such officer may deem necessary,
appropriate or desirable to effectuate the
purposes of the foregoing resolutions.
<PAGE> 5
MELLON BANK CORPORATION
SPECIAL REDEMPTION COMMITTEE
RESOLUTIONS ADOPTED ON DECEMBER 19, 1994
WHEREAS, The Corporation has issued and
outstanding a series of preferred stock,
par value $1.00 per share, designated as
10.40% Series H Preferred Stock (the
"Series H Preferred Stock"); and
WHEREAS, Under the terms pursuant to which
the Series H Preferred Stock was issued,
such stock is redeemable at the option of
the Corporation, in whole or from time to
time in part, at any time on or after March
1, 1995 and prior to March 1, 2000, at prices
declining from $26.30 to $25.26, plus accrued
dividends; thereafter, the Series H Preferred
Stock is redeemable at a price of $25.00 per
share, plus accrued dividends; and
WHEREAS, By action taken on March 14, 1994,
the Board of Directors, as part of the
Corporation's Capital and Funding Plan for
1994, approved the concept of redeeming the
Series H Preferred Stock and granted unto
this Committee all authority of the Board
with respect to such redemption, including,
without limitation, the designation of
amounts, times and methods of redemption;
NOW, THEREFORE, BE IT
RESOLVED, That the Corporation be, and it
hereby is, authorized to redeem all the
outstanding shares of its Series H
Preferred Stock on March 1, 1995 (the
"Redemption Date"), at
<PAGE> 6
a redemption price of $26.30 per share, plus
all dividends accrued and unpaid on such
shares to the Redemption Date, even though not
yet declared, (collectively such funds to be
referred to as the "Redemption Funds"); and
it is further
RESOLVED, That in accordance with the terms
of the Series H Preferred Stock as set
forth in the Statement of Designation of
such Series, the Secretary of the
Corporation be, and he hereby is,
authorized to send via first class mail to
all holders of Series H Preferred Stock, at
their respective addresses on the books of
the Corporation, a notice, substantially in
the form attached hereto as Annex A (the
"Redemption Notice"), with such changes and
modifications as the Chairman, the Chief
Executive Officer, the President, any Vice
Chairman, or the Secretary of the
Corporation shall approve, the approval of
such officer and of this Committee to be
evidenced conclusively by the action of
such officer; and it is further
RESOLVED, That on or before the Redemption
Date, such amount of money as is necessary
for the redemption of all shares of the
Series H Preferred Stock in accordance with
its terms, be deposited in a separate
account with the Corporation's Stock
Transfer Agent (Mellon Bank, N.A.) to be
held in trust for the account of the
holders of the shares of Series H Preferred
Stock called for redemption, with
irrevocable instructions and authority to
pay the Redemption Funds to the holders of
such shares upon surrender of certificates
therefor at any time on or after the
Redemption Date; and
RESOLVED, That the Chairman, the Chief
Executive Officer, the President, any Vice
Chairman, the General Counsel, the
Secretary or any other person so designated
by any such officer, be, and each hereby
is, authorized and directed in the name and
on behalf of the Corporation, to make all
filings with regulatory authorities and to
take any related actions as such officer or
designee may approve as necessary,
appropriate or desirable in connection with
such authorities' consideration of the
redemption of the Series H Preferred Stock,
the filing or doing of any such related
action by such person conclusively
establishing that person's authority
therefor from this Committee and the
approval and ratification by this Committee
of the actions so taken; and
<PAGE> 7
WHEREAS, In accordance with the terms of
the Series H Preferred Stock, any shares of
such stock so redeemed shall be restored to
the status of authorized but unissued
shares of preferred stock of the
Corporation, without designation as to
series, until such shares are once more
designated as part of a particular series
by the Board; NOW, THEREFORE, BE IT
RESOLVED, That in connection with the
redemption of the Series H Preferred Stock
as authorized hereby and upon the issuance
of the Redemption Notice, the deposit of
the Redemption Funds and the occurrence of
the Redemption Date, the Chairman, the
Chief Executive Officer, the President, any
Vice Chairman, or the Secretary of the
Corporation be, and each hereby is,
authorized and directed in the name and on
behalf of the Corporation, under the
corporate seal of the Corporation attested
by its Secretary. to execute and to cause a
Statement Affecting Series H Preferred
Stock to be filed with the Department of
State of the Commonwealth of Pennsylvania
in accordance with Section 1522 of the
Pennsylvania Business Corporation Law; and
it is further
RESOLVED, That the Chairman, the Chief
Executive Officer, the President, any Vice
Chairman or the Secretary of the
Corporation be, and each hereby is,
authorized and directed in the name and on
behalf of the Corporation to execute any
and all agreements and other documents,
make such filings and take any other such
actions as such officer may deem necessary,
appropriate or desirable to effectuate the
purposes of the foregoing resolutions.
<PAGE> 1
EX. 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Mellon Bank Corporation (parent Corporation) (a)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
(dollar amounts in thousands) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Income before income taxes and equity in
undistributed net income (loss) of subsidiaries $ 91,890 $46,740
Fixed charges: interest expense, one-third of
rental expense net of income from subleases,
and amortization of debt issuance costs 24,503 24,370
- -----------------------------------------------------------------------------
Total earnings (as defined) $116,393 $71,110
- -----------------------------------------------------------------------------
Preferred stock dividend requirements (b) $ 15,720 $25,039
- -----------------------------------------------------------------------------
Ratio of earnings (as defined) to fixed charges 4.75 2.92
Ratio of earnings (as defined) to combined fixed
charges and preferred stock dividends 2.89 1.44
- -----------------------------------------------------------------------------
<FN>
(a) The parent Corporation ratios include the accounts of Mellon Bank
Corporation (the "Corporation") and Mellon Financial Company, a
wholly owned subsidiary of the Corporation that functions as a
financing entity for the Corporation and its subsidiaries by issuing
commercial paper and other debt guaranteed by the Corporation. Because
these ratios exclude from earnings the equity in undistributed net
income (loss) of subsidiaries, these ratios vary with the payments of
dividends by such subsidiaries.
(b) Preferred stock dividend requirements represent the pretax
amounts required to cover preferred stock dividends.
</TABLE>
50
<PAGE> 1
EX. 12.2
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Mellon Bank Corporation (and its subsidiaries)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
March 31,
(dollar amounts in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Income before income taxes $271,898 $254,881
Fixed charges: interest expense (excluding
interest on deposits), one-third of rental
expense net of income from subleases, and
amortization of debt issuance costs 101,990 62,926
- ----------------------------------------------------------------------------
Total earnings (as defined), excluding
interest on deposits 373,888 317,807
Interest on deposits 205,231 102,000
- ----------------------------------------------------------------------------
Total earnings (as defined) $579,119 $419,807
- ----------------------------------------------------------------------------
Preferred stock dividend requirements (a) $ 15,720 $ 25,039
- ----------------------------------------------------------------------------
Ratio of earnings (as defined) to fixed charges:
Excluding interest on deposits 3.67 5.05
Including interest on deposits 1.89 2.55
Ratio of earnings (as defined) to combined
fixed charges and preferred stock dividends:
Excluding interest on deposits 3.18 3.61
Including interest on deposits 1.79 2.21
- ----------------------------------------------------------------------------
<FN>
(a) Preferred stock dividend requirements represent the
pretax amounts required to cover preferred stock dividends.
</TABLE>
51
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000064782
<NAME> MELLON BANK CORP.
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 2,130
<INT-BEARING-DEPOSITS> 501
<FED-FUNDS-SOLD> 414
<TRADING-ASSETS> 233
<INVESTMENTS-HELD-FOR-SALE> 2,112
<INVESTMENTS-CARRYING> 3,198
<INVESTMENTS-MARKET> 3,103
<LOANS> 26,696
<ALLOWANCE> (601)
<TOTAL-ASSETS> 39,619
<DEPOSITS> 27,005
<SHORT-TERM> 4,660
<LIABILITIES-OTHER> 2,172
<LONG-TERM> 1,592
<COMMON> 74
0
435
<OTHER-SE> 3,681
<TOTAL-LIABILITIES-AND-EQUITY> 39,619
<INTEREST-LOAN> 583
<INTEREST-INVEST> 78
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 685
<INTEREST-DEPOSIT> 205
<INTEREST-EXPENSE> 296
<INTEREST-INCOME-NET> 389
<LOAN-LOSSES> 20
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 495
<INCOME-PRETAX> 272
<INCOME-PRE-EXTRAORDINARY> 272
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 4.80
<LOANS-NON> 156
<LOANS-PAST> 116
<LOANS-TROUBLED> 7
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 607
<CHARGE-OFFS> 41
<RECOVERIES> 15
<ALLOWANCE-CLOSE> 601
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
