<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - January 10, 1996
MELLON BANK CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania 1-7410 25-1233834
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (412) 234-5000
<PAGE>
ITEM 5. OTHER EVENT
A. Mellon Bank Corporation announces fourth quarter and full-year
1995 results of operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Mellon Bank Corporation Press Release, dated January 10, 1996
announcing fourth quarter and full-year 1995 results of operations.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: January 11, 1996 By: STEVEN G. ELLIOTT
Steven G. Elliott
Vice Chairman, Chief Financial
Officer & Treasurer
<PAGE>
EXHIBIT INDEX
Number Description Method of Filing
99.1 Press Release dated January 10, 1996 Filed herewith
<PAGE>
EX - 99.1
[LOGO] Mellon News Release
ANALYSTS:
---------
Donald J. MacLeod David T. Lamar
Contact: (412) 234-5601 (412) 234-4633 Corporate Affairs
MEDIA: One Mellon Bank Center
------ Pittsburgh, PA 15258-0001
Stephen K. Dishart
(412) 234-0850
_______________________________________________________________________________
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD FOURTH QUARTER AND FULL YEAR 1995 RESULTS
- ---------------------------------------------------------------
. Mellon Reports Record Earnings in 1995 of $4.50 Per Common Share, Up
13 Percent from 1994, Excluding Certain Items.
. Return on Common Equity is 17.8 Percent and Return on Assets is 1.72
Percent for 1995.
. Mellon Reports Record Earnings of $1.18 Per Common Share for Fourth Quarter
1995, Up 12 Percent from Fourth Quarter 1994, Excluding Certain Items.
. Return on Common Equity Reaches 18.1 Percent and Return on Assets is
1.68 Percent for the 1995 Fourth Quarter.
PITTSBURGH, Jan. 10, 1996--Mellon Bank Corporation (NYSE:MEL) today reported
record 1995 earnings of $4.50 per common share, up 13 percent from 1994.
For the full year 1994, the Corporation reported earnings of $4.00 per common
share, excluding certain items.
"1995 was the best year in Mellon's history, setting record earnings,"
said Frank V. Cahouet, Mellon chairman, president and chief executive officer.
"This was captured in our stock price for 1995 which appreciated 76 percent
and recently set an all-time high. We saw excellent growth in a number
of our key businesses and are poised to continue that growth as we proceed
into 1996."
For the full year 1995, Mellon reported net income applicable to common
stock of $652 million, compared with $593 million for the full year 1994,
excluding a $130 million one-time securities lending charge, $89 million in
Dreyfus merger-related charges, and $16 million of preferred stock dividends
recorded in connection with the
-more-
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 2
redemption of the Series H preferred stock. Mellon reported 1994 net income
applicable to common stock of $358 million, or $2.42 per common share,
including the securities lending charge, Dreyfus merger-related charges
and preferred stock dividends.
Fourth Quarter 1995
- -------------------
For the fourth quarter of 1995, Mellon reported net income applicable
to common stock of $164 million, or $1.18 per common share, compared with
$157 million, or $1.05 per common share, in the fourth quarter of 1994,
excluding the securities lending charge and preferred stock redemption.
Including those items, fourth quarter 1994 net income applicable to common
stock was $11 million, or $.07 per common share.
Compared with the fourth quarter of 1994, Mellon's fourth quarter
1995 results reflected higher fee revenue offset in part by higher credit
quality expense and lower net interest revenue.
Net interest revenue was $382 million in the fourth quarter of 1995,
down from $401 million in the fourth quarter of 1994, reflecting higher
funding costs and the credit card securitization transaction that occurred
in late November. Fee revenue was $444 million in the fourth quarter of
1995, compared with $405 million in the fourth quarter of 1994. The increase
in fee revenue primarily resulted from higher mortgage servicing revenue
as a result of acquisitions and credit card revenues. The increase in credit
card revenue is primarily related to the credit card securitization
transaction.
Operating expense for the fourth quarter of 1995 was $526 million,
compared with $741 million in the prior-year period. Excluding the fourth
quarter 1994 pretax securities lending charge of $223 million, fourth quarter
1995 operating expense increased one percent, compared with the prior-year
period.
The provision for credit losses was $35 million in the fourth quarter
of 1995, up from $15 million in the prior-year period. Net credit losses
were $138 million in the fourth quarter of 1995, compared with $20 million
in the fourth quarter of 1994. The increase resulted primarily from $106
million of credit losses on $193 million of CornerStone/SM/ credit card
loans that were transferred to an accelerated resolution portfolio at their
estimated net realizable value. Nonperforming assets totaled $236
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<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 3
million at Dec. 31, 1995, down $25 million, or 10 percent, from $261 million
at Sept. 30, 1995. Nonperforming assets decreased by $3 million, from $239
million at Dec. 31, 1994. The Corporation's nonperforming assets ratio at
Dec. 31, 1995, was .85 percent, compared with .93 percent at Sept. 30, 1995,
and .89 percent at Dec. 31, 1994.
Annualized return on common shareholders' equity and return on assets
were 18.1 percent and 1.68 percent, respectively, in the fourth quarter
of 1995. Annualized return on common shareholders' equity and return on
assets, excluding the securities lending charge and preferred stock redemption,
were 16.5 percent and 1.74 percent, respectively, in the fourth quarter
of 1994. Annualized return on common shareholders' equity and return on
assets, including the securities lending charge and the preferred stock
redemption, were 1.1 percent and .42 percent, respectively, in the fourth
quarter of 1994.
Full Year 1995
- --------------
Compared with 1994, the Corporation's 1995 results reflected increases
in net interest and fee revenue as well as lower operating expense, partially
offset by higher credit quality expense.
Net interest revenue for the year increased to $1.548 billion, up
$40 million from $1.508 billion in 1994, principally reflecting a higher
average level of loans. Fee revenue increased to $1.670 billion, compared
with $1.652 billion in 1994. Higher mortgage servicing fees, credit card
fees and foreign currency and securities trading fees were partially offset
by lower trust and investment management fees, the loss of revenue from
the seasonal tax refund anticipation loan program, which was discontinued
in 1995, as well as the effect of divestitures.
Operating expense, before the net revenue from acquired property,
was well managed at $2.047 billion in 1995, down from $2.075 billion for
1994, before the securities lending charge and merger expense.
The provision for credit losses was $105 million in 1995, up $35
million from $70 million in 1994. Net credit losses in 1995 were $249 million,
up significantly from $67 million in 1994, reflecting higher net credit
losses on credit card loans including the $106 million credit card loss
on certain CornerStone/sm/ accounts recorded in the fourth quarter of 1995.
-more-
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 4
Return on common shareholders' equity and return on assets were 17.8
percent and 1.72 percent, respectively, in 1995. 1994 return on common
shareholders' equity and return on assets were 16.0 percent and 1.71 percent,
respectively, excluding the securities lending charge, Dreyfus merger-related
charges and preferred stock redemption.
Including the securities lending charge, Dreyfus merger-related charges
and preferred stock redemption, 1994 return on common shareholders' equity
and return on assets were 9.8 percent and 1.14 percent, respectively.
With balance sheet assets of approximately $41 billion and assets
under management or administration of more than $900 billion, Mellon Bank
Corporation is a major financial services company headquartered in Pittsburgh;
its primary subsidiary is Mellon Bank, N.A. Mellon provides a full range
of banking and investment products and services to individuals and small,
midsize and large businesses and institutions. Its principal mutual fund
business is The Dreyfus Corporation.
###
NOTE: Detailed supplemental information follows.
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 5
Net Interest Revenue
- ----------------------------
<TABLE>
<CAPTION>
(taxable equivalent basis) Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Net interest revenue $ 384 $ 403 $ (19) $ 1,558 $ 1,521 $ 37
- -----------------------------------------------------------------------------------------
Average loans $27,747 $26,401 $1,346 $27,321 $25,097 $2,224
- -----------------------------------------------------------------------------------------
Average interest-earning
assets $34,414 $32,957 $1,457 $33,761 $32,282 $1,479
- -----------------------------------------------------------------------------------------
Net interest margin 4.43% 4.85% (42)bp 4.62% 4.71% (9)bp
- -----------------------------------------------------------------------------------------
</TABLE>
The decrease in net interest revenue and the net interest margin in the fourth
quarter of 1995, compared with the fourth quarter of 1994, primarily resulted
from the migration of retail customers from lower cost deposit products to
higher cost products and the effect of a credit card securitization which offset
loan growth. The $950 million credit card securitization transaction occurred
in late November and reduced average credit card loans by $423 million for the
quarter. Adjusted for the effect of the credit card securitization, net
interest revenue in the fourth quarter of 1995 would have been $394 million and
the net interest margin for the fourth quarter of 1995 would have been 4.49%.
In accordance with generally accepted accounting principles, the foregone net
interest revenue from the securitized credit card receivables is substantially
offset by higher servicing fee revenue and lower net credit losses.
Average loans increased in the fourth quarter of 1995, compared with the prior-
year period by $1.3 billion, or 5%, primarily as a result of an $800 million
increase in mortgage warehouse loans, a $500 million increase in retail loans
and a $500 million increase in domestic wholesale loans, which more than offset
a $300 million decrease in jumbo residential mortgage loans, due in part to loan
sales.
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 6
The improvement in net interest revenue in the full year of 1995 principally
resulted from loan growth. The decrease in the net interest margin in the full
year of 1995 principally resulted from the same factors responsible for the
fourth quarter decline.
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Provision for credit losses $ 35 $15 $ 20 $105 $70 $ 35
Net revenue from acquired property (5) (5) - (20) (28) (8)
- ----------------------------------------------------------------------------------
Credit quality expense $ 30 $10 $ 20 $ 85 $42 $ 43
- ----------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Credit card $ 36 $17 $ 19 $153 $52 $101
Other consumer credit 3 6 (3) 14 11 3
Commercial real estate (3) 4 (7) (22) 2 (24)
Commercial and financial (4) (5) 1 3 1 2
- -----------------------------------------------------------------------------------
Total domestic 32 22 10 148 66 82
International - (2) 2 (5) 1 (6)
- ----------------------------------------------------------------------------------
Net credit losses 32 20 12 143 67 76
Credit losses on assets held for
accelerated resolution 106 - 106 106 - 106
- ---------------------------------------------------------------------------------
Total net credit losses $138 $20 $118 $249 $67 $182
- ---------------------------------------------------------------------------------
Annualized net credit losses
to average loans 1.97% .30% 167bp .91% .27% 64bp
Annualized net credit losses to
average loans excluding net
credit losses on assets held
for accelerated resolution .46% .30% 16bp .53% .27% 26bp
- ----------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets.
Credit quality expense increased in the fourth quarter and full year of 1995,
compared with the prior-year periods, primarily as a result of a higher
provision for credit losses, which was made in response to credit losses from
the CornerStone/sm/ credit card portfolio.
The $118 million increase in net credit losses compared with the fourth quarter
of 1994 resulted from a $123 million increase in net credit card losses from the
CornerStone/sm/ portfolio. In December 1995, the Corporation
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 7
segregated $193 million of CornerStone/sm/ credit card loans into an accelerated
resolution portfolio. CornerStone/sm/ outstandings were $845 million at that
time, compared with $880 million at June 30, 1995 and $810 million at March 31,
1995. In connection with this $193 million transfer, the Corporation evaluated
the carrying value of these loans, which have a history of delinquency, and
recorded a credit loss of $106 million to reflect an estimated net realizable
value of $87 million. Interest receipts, fees and loan loss recoveries on loans
in this portfolio are applied to reduce the carrying value of this portfolio,
which totaled $82 million at December 31, 1995. No revenue will be recorded on
this portfolio until the net realizable value is recovered.
Total net credit losses in the fourth quarter of 1995 on the CornerStone/sm/
credit card portfolio were $128 million, including the $106 million of credit
losses on the loans transferred to the accelerated resolution portfolio and $22
million of credit losses recorded prior to the formation of the accelerated
resolution portfolio. Excluding these credit losses, the ratio of annualized
net credit losses to average loans was 15 basis points. The Corporation expects
a significant reduction in net credit card credit losses in 1996 as a result of
the actions taken on the delinquent portion of the CornerStone/sm/ portfolio as
well as the securitization of $950 million of credit card loans.
Net credit losses increased $182 million in the full year of 1995 compared with
the full year of 1994, reflecting the higher level of credit card losses during
the year. Partially offsetting these credit losses were strong credit
recoveries on commercial real estate and other commercial loans in 1995.
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 8
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
Fee revenue:
Trust and investment management:
Mutual fund:
Management $ 82 $ 72 $ 10 $ 309 $ 294 $ 15
Administration/Custody 25 35 (10) 115 159 (44)
Institutional trust 50 50 - 206 223 (17)
Institutional asset management 35 35 - 135 143 (8)
Private asset management 37 32 5 141 134 7
- -------------------------------------------------------------------------------------
Total trust and investment
management fees 229 224 5 906 953 (47)
Cash management and deposit
transaction charges 47 49 (2) 191 197 (6)
Mortgage servicing fees 40 24 16 122 78 44
Foreign currency and
securities trading 18 22 (4) 91 76 15
Credit card fees 28 21 7 90 72 18
Other 82 65 17 270 276 (6)
- -------------------------------------------------------------------------------------
Total fee revenue 444 405 39 1,670 1,652 18
Gains (losses) on sale
of securities 6 - 6 6 (5) 11
- -------------------------------------------------------------------------------------
Total noninterest revenue $450 $405 $ 45 $1,676 $1,647 $ 29
- -------------------------------------------------------------------------------------
</TABLE>
The $5 million increase in trust and investment management fees in the fourth
quarter of 1995, compared with the prior-year period, primarily resulted from a
$10 million increase in mutual fund management revenue and a $5 million increase
in private asset management fees. Partially offsetting these increases was a
$10 million decrease in mutual fund administration and custody fees. The higher
revenue from the management of mutual funds resulted from a higher average level
of mutual fund assets managed and lower fee waivers at Dreyfus. Mutual fund
management revenues grew to $82 million in the fourth quarter from $80 million
in the third quarter, $76 million in the second quarter and $71 million in the
first quarter, paralleling the growth in these assets. Average proprietary
funds managed at Dreyfus in the fourth quarter of 1995 were $78 billion,
compared with $77 billion in the third quarter, $72 billion in the second
quarter and $68 billion in the first quarter. These increases primarily
resulted from higher average institutional money market funds, as well as an
overall increase in the
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 9
market values of assets managed, reflecting the improvement in the fixed income
and equity markets in 1995. At December 31, 1995, total mutual fund assets
managed at Dreyfus were $77 billion, an increase of $11 billion from December
31, 1994.
The increase in mortgage servicing fees in the fourth quarter of 1995, compared
with the prior-year period, resulted from the acquisition of mortgage servicing
rights. The third quarter 1995 acquisition of Metmor, a residential and
commercial mortgage banking company, generated $14 million in fee revenue in the
fourth quarter. The Corporation's total mortgage servicing portfolio was $53
billion at December 31, 1995, compared with $37 billion at December 31, 1994.
Credit card revenue increased in the fourth quarter of 1995, compared with the
fourth quarter of 1994, primarily as a result of servicing revenue related to
the credit card portfolio that was securitized in late November 1995. The
amount of credit card interest revenue and fee revenue in excess of interest
paid to securitization certificate holders and credit losses is recognized
monthly in credit card fee revenue. The decrease in foreign currency and
securities trading fee revenue in the fourth quarter of 1995 was attributable to
lower trading account fee revenue.
The increase in fee revenue for the full year of 1995, compared with the prior-
year period, resulted from higher mortgage servicing revenue, credit card fees
and foreign currency and securities trading revenue, partially offset by lower
trust and investment management fees.
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 10
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1995 1994 Inc/(Dec) 1995 1994 Inc/(Dec)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Staff expense $248 $237 $11 $957 $ 956 $1
Net occupancy expense 52 54 (2) 205 206 (1)
Professional, legal and
other purchased services 51 62 (11) 186 210 (24)
Equipment expense 40 35 5 143 132 11
Amortization of goodwill
and other intangible assets 24 25 (1) 96 98 (2)
Amortization of mortgage
servicing rights and purchased
credit card relationships 25 9 16 68 40 28
FDIC assessment and regulatory
examination fees - 16 (16) 31 63 (32)
Other expense 91 85 6 361 370 (9)
- -----------------------------------------------------------------------------------------
Operating expense before the net
revenue from acquired property,
the securities lending charge
and merger expense 531 523 8 2,047 2,075 (28)
- -----------------------------------------------------------------------------------------
Net revenue from acquired property (5) (5) - (20) (28) (8)
Securities lending charge - 223 (223) - 223 (223)
Merger expense - - - - 104 (104)
- -----------------------------------------------------------------------------------------
Total operating expense $526 $741 $(215) $2,027 $2,374 $(347)
- -----------------------------------------------------------------------------------------
Average full-time equivalent staff 24,500 24,800 (300) 24,300 24,300 -
- -----------------------------------------------------------------------------------------
Efficiency ratio (a) 64% 65% (1) 63% 65% (2)
Efficiency ratio excluding
amortization of goodwill and
other intangible assets 61 62 (1) 60 62 (2)
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before the net revenue from acquired property, the
securities lending charge and merger expense as a percentage of revenue,
computed on a taxable equivalent basis, excluding gains (losses) on the
sale of securities.
Operating expense before the net revenue from acquired property, the securities
lending charge and merger expense increased $8 million, or 1%, in the fourth
quarter of 1995, compared with the prior-year period. This increase primarily
resulted from increases in the amortization of purchased mortgage servicing
rights, staff expense and equipment expense. These increases were partially
offset by lower FDIC deposit insurance assessment expense and professional,
legal and other purchased services expense.
The increase in the amortization of mortgage servicing rights reflects the $16
billion, or 44%, increase in the Corporation's mortgage servicing portfolio from
December 31, 1994. The increase in staff expense reflects
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 11
higher incentive accruals. The increase in equipment expense primarily reflects
the internalization of certain data processing operations at The Boston Company
as well as various equipment upgrades. This increase is partially offset by a
reduction in expense for purchased data processing services. Partially
offsetting these increases were a decrease in the FDIC deposit insurance
assessment resulting from a reduction in the assessment rate from $.23 to $.04
for every $100 of deposits and a decrease in professional, legal and other
purchased services resulting from lower consulting and legal expense.
The $28 million decrease in operating expense before the net revenue from
acquired property, the securities lending charge and merger expense in the full
year of 1995, compared with the full year of 1994, resulted from a lower FDIC
assessment charge, lower marketing expense related to the CornerStone/sm/ credit
cards and a reduction in professional, legal and other purchased services.
Partially offsetting these decreases were increases in the amortization of
mortgage servicing rights and purchased credit card relationships and higher
equipment expense. The efficiency ratio improved two percentage points in 1995.
In the fourth quarter of 1994, the Corporation recorded a one-time charge of
$223 million, or $130 million after-tax, as a result of actions taken to reduce
the interest rate sensitivity of certain securities lending clients' portfolios.
Merger expense of $104 million, or $79 million after-tax, was recorded in the
third quarter of 1994 to reflect expense associated with the Dreyfus merger.
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 12
Except for the merger with Dreyfus, which was accounted for as a pooling of
interests, the Corporation historically has accounted for business combinations
under the purchase method of accounting, resulting in the recording of goodwill
and other identified intangibles which are amortized into operating expense in
future years. Net income applicable to common stock, return on tangible equity
and return on tangible assets, excluding the after-tax impact of the
amortization of these intangibles, are shown in the table below:
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income applicable
to common stock (a) $ 164 $ 157 $ 652 $ 593
After-tax impact of
amortization of intangibles
from purchase acquisitions 18 20 73 76
- ------------------------------------------------------------------------------------------------------
Total $ 182 $ 177 $ 725 $ 669
Return on tangible common equity 27.3% 25.9% 27.1% 25.3%
Return on tangible assets 1.90% 2.00% 1.96% 1.97%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Results for the fourth quarter of 1994 exclude the $130 million
securities lending charge, as well as the additional $16 million of
preferred stock dividends recorded in connection with the redemption of the
Series H preferred stock. Results for the full year 1994 also exclude $89
million of Dreyfus merger-related charges.
Income Taxes
- ------------
The Corporation's effective tax rate for the full year of 1995 was 36.65%. It
is currently anticipated that the effective tax rate will decline to
approximately 36.5% in 1996.
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 13
Nonperforming Assets(a)
- -----------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1995 1995 1995 1994
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Domestic nonperforming loans:
Consumer mortgage $ 61 $ 62 $ 59 $ 56
Commercial real estate 39 32 42 28
Other domestic 67 89 98 66
International nonperforming loans - - - 1
- ---------------------------------------------------------------------------------------
Total nonperforming loans 167 183 199 151
- ---------------------------------------------------------------------------------------
Acquired property:
Real estate acquired 87 99 98 116
Reserve for real estate acquired (18) (21) (21) (29)
- ---------------------------------------------------------------------------------------
Real estate acquired, net of reserve 69 78 77 87
Other assets acquired - - - 1
- ---------------------------------------------------------------------------------------
Total acquired property 69 78 77 88
- ---------------------------------------------------------------------------------------
Total nonperforming assets $ 236 $ 261 $ 276 $ 239
- ---------------------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .60% .65% .72% .56%
Total nonperforming assets as a
percentage of total loans and net
acquired property .85% .93% .99% .89%
- ---------------------------------------------------------------------------------------
(a) Excludes segregated assets.
</TABLE>
The $25 million reduction in nonperforming assets from September 30, 1995,
resulted from a $16 million decrease in nonperforming loans and a $9 million
decrease in acquired property. The decrease in nonperforming loans resulted
from returns to accrual status, repayments and credit losses. The reduction in
total acquired property primarily resulted from transfers to nonperforming
loans. Total nonperforming assets decreased $3 million compared with December
31, 1994 as an increase in nonperforming loans was more than offset by a
decrease in acquired property.
Reserve for Credit Losses
- -------------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1995 1995 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $ 471 $ 574 $ 583 $ 607
Reserve as a percentage of
total loans 1.70% 2.04% 2.10% 2.27%
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
The $103 million decrease in the reserve for credit losses from September 30,
1995, primarily resulted from the $106 million of credit losses taken on the
CornerStone/sm/ credit card loans that were transferred to an accelerated
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 14
resolution portfolio. These loans were transferred at their estimated net
realizable value. The excess of the carrying value over the estimated
realizable value was recorded as a credit loss.
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(dollar amounts in millions, Dec. 31, Sept. 30, June 30, Dec. 31,
except per share amounts) 1995 1995 1995 1994
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
Common shareholders' equity $3,590 $3,693 $ 3,643 $ 3,687
Common shareholders' equity
to assets ratio 8.83% 8.81% 9.10% 9.54%
Tangible common shareholders'
equity $2,632 $2,725 $ 2,646 $ 2,651
Tangible common shareholders'
equity to assets ratio (a) 6.63% 6.66% 6.78% 7.05%
Total shareholders' equity $4,025 $4,128 $ 4,078 $ 4,122
Total shareholders' equity
to assets ratio 9.90% 9.85% 10.19% 10.67%
Tier I capital ratio 8.30%(b) 8.77% 8.98% 9.48%
Total (Tier I and Tier II)
capital ratio 11.50%(b) 12.00% 12.31% 12.90%
Leverage capital ratio 7.80%(b) 8.20% 8.32% 8.67%
Book value per common share $26.17 $26.13 $ 25.59 $ 25.06
Closing common stock price $53.75 $44.75 $41.625 $30.625
Market capitalization $7,374 $6,324 $ 5,925 $ 4,507
- ------------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill and other intangibles divided
by total assets less goodwill and other intangibles.
(b) Estimated.
The decrease in the Corporation's common and total shareholders' equity at
December 31, 1995, compared with September 30, 1995 and December 31, 1994,
primarily resulted from repurchases of common stock offset in part by earnings
retention. In addition, asset growth resulted in a decrease in the
Corporation's capital ratios compared with December 31, 1994.
In the second quarter of 1995, the Corporation repurchased 3.75 million shares
of common stock as well as warrants for an additional 4.5 million shares of
stock issued in 1993 as part of the purchase price of The Boston Company. In
the fourth quarter of 1995, the board of directors of the Corporation authorized
the repurchase of up to 8 million additional shares of
<PAGE>
Mellon Reports Earnings
Jan. 10, 1996
Page 15
the Corporation's common stock. At December 31, 1995, the Corporation has
repurchased 3.5 million shares under this authorization and expects to complete
this repurchase by March 31, 1996. In addition, during 1995 the Corporation
repurchased 5.5 million shares of its common stock to be used to meet its
current and near-term common stock requirements for its stock-based benefit
plans and its dividend reinvestment plan. As of December 31, 1995, the
Corporation had reissued 2.8 million of these repurchased shares. During 1995,
the Corporation spent $632 million, prior to any reissuances, to purchase 12.8
million shares of common stock, or 9% of common shares outstanding at the
beginning of the year, as well as warrants to purchase 4.5 million shares of
common stock.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation (and its subsidiaries)
<TABLE>
<CAPTION>
Quarter ended Year ended
(dollar amounts in millions, Dec. 31, Dec. 31,
except per share amounts; ----------------- ---------------
common shares in thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Selected key data (a)
- ---------------------
Primary net income per common share $ 1.18 $ .07 $ 4.50 $ 2.42
Return on common shareholders' equity 18.08% 1.10% 17.77% 9.79%
Return on assets 1.68% .42% 1.72% 1.14%
Yield on interest-earning assets,
on a taxable equivalent basis 8.33% 7.92% 8.44% 7.19%
Cost of funds supporting interest-
earning assets 3.90% 3.07% 3.82% 2.48%
Results excluding certain items (a)(b)
- --------------------------------------
Primary net income per common share $ 1.18 $ 1.05 $ 4.50 $ 4.00
Return on common shareholders' equity 18.08% 16.49% 17.77% 16.02%
Return on assets 1.68% 1.74% 1.72% 1.71%
Average balances for the period (c)
- -----------------------------------
Money market investments $ 1,206 $ 1,213 $ 1,222 $ 1,656
Trading account securities 283 281 296 380
Securities 5,178 5,062 4,922 5,149
Loans 27,747 26,401 27,321 25,097
Total interest-earning assets 34,414 32,957 33,761 32,282
Total assets 41,141 38,792 40,097 38,106
Deposits 28,946 27,260 27,951 27,248
Total interest-bearing liabilities 28,629 26,373 27,774 25,441
Common shareholders' equity 3,610 3,745 3,671 3,691
Total shareholders' equity 4,045 4,313 4,106 4,277
Computation of primary net income per common share
- ----------------------------------------------------
Net income applicable to
common stock $ 164 $ 11 $ 652 $361(d)
======== ======== ======== ========
Average common shares outstanding 139,535 147,059 143,428 145,037
Average common shares issuable upon
conversion of Series D preferred stock - - - 1,692
Other common stock equivalents, net of
shares assumed repurchased 1,901 1,541 1,646 2,340
-------- -------- -------- --------
Total stock and stock equivalents 141,436(e) 148,600 145,074(e) 149,069
======== ======== ======== ========
Primary net income per common share (f) $ 1.18 $ .07 $ 4.50 $ 2.42
======== ======== ======== ========
</TABLE>
- -----------------------
(a) Percentages are annualized where applicable. All amounts are based on
unrounded numbers.
(b) Results for the fourth quarter of 1994 exclude the $130 million
securities lending charge, as well as the additional $16 million of
preferred stock dividends recorded in connection with the redemption of the
Series H preferred stock. Results for the full year of 1994 exclude $79
million of merger expenses and $10 million of losses on the disposition of
securities available for sale previously owned by Dreyfus, the $130 million
securities lending charge, as well as the $16 million of preferred stock
dividends recorded in connection with the redemption of the Series H
preferred stock.
(c) Computed on a daily average basis.
(d) After adding back Series D preferred stock dividends.
(e) At December 31, 1995, common stock and stock equivalents totaled 139.2
million shares.
(f) Based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Quarter ended Year ended
Dec. 31, Dec. 31,
(in millions, except per ------------------ ----------------
share amounts) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees
of $24, $22, $79, and $87) $ 610 $ 555 $2,425 $1,926
Interest-bearing deposits with banks 11 8 36 34
Federal funds sold and securities
under resale agreements 7 9 34 30
Other money market investments 1 2 2 6
Trading account securities 4 5 19 24
Securities 87 77 322 290
---- ---- ------ -----
Total interest revenue 720 656 2,838 2,310
Interest expense
- ----------------
Interest on deposits 237 176 889 539
Federal funds purchased and securities
under repurchase agreements 31 30 125 76
Other short-term borrowings 42 22 159 77
Notes and debentures 28 27 117 110
---- ---- ------ -----
Total interest expense 338 255 1,290 802
---- ---- ------ -----
Net interest revenue 382 401 1,548 1,508
Provision for credit losses 35 15 105 70
---- ---- ------ -----
Net interest revenue after provision
for credit losses 347 386 1,443 1,438
Noninterest revenue
- -------------------
Trust and investment management fees 229 224 906 953
Cash management and deposit
transaction charges 47 49 191 197
Mortgage servicing fees 40 24 122 78
Foreign currency and securities trading 18 22 91 76
Credit card fees 28 21 90 72
Other 82 65 270 276
----- ---- ------ -----
Total fee revenue 444 405 1,670 1,652
Gains (losses) on sale of securities 6 - 6 (5)
----- ---- ------ -----
Total noninterest revenue 450 405 1,676 1,647
Operating expense
- -----------------
Staff expense 248 237 957 956
Net occupancy expense 52 54 205 206
Professional, legal and other
purchased services 51 62 186 210
Equipment expense 40 35 143 132
Amortization of goodwill and
other intangible assets 24 25 96 98
Other expense 116 110 460 473
Net revenue from acquired property (5) (5) (20) (28)
Securities lending charge - 223 - 223
Merger expense - - - 104
----- ---- ------ -----
Total operating expense 526 741 2,027 2,374
----- ---- ------ -----
Income before income taxes 271 50 1,092 711
Provision for income taxes 97 9 401 278
----- ---- ------ -----
Net income 174 41 691 433
Dividends on preferred stock 10 30 39 75
----- ---- ------ -----
Net income applicable to common stock $ 164 $ 11 $ 652 $ 358
===== ==== ====== ======
Primary net income per common share $1.18 $.07 $ 4.50 $ 2.42
===== ==== ====== ======
Fully diluted net income per common share $1.16 $.07 $ 4.46 $ 2.42
===== ==== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Dec. 31, Dec. 31,
1995 1994
- --------------------------------------------------- -------- --------
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 2,342 $ 2,285
Money market investments 860 860
Trading account securities 62 71
Securities:
Available for sale 2,913 1,881
Investment (approximate fair value
of $2,554 and $3,033) 2,519 3,244
Loans, net of unearned discount of
$44 and $62 27,690 26,733
Reserve for credit losses (471) (607)
Premises and equipment 556 558
Acquired property, net of reserves of
$18 and $29 69 88
Goodwill and other intangibles 958 1,036
Mortgage servicing rights and purchased
credit card relationships 682 352
Other assets 2,466 2,143
------- -------
Total assets $40,646 $38,644
======= =======
Liabilities
- -----------
Deposits in domestic offices $24,870 $24,100
Deposits in foreign offices 4,391 3,470
Short-term borrowings 4,317 3,472
Other liabilities 1,600 1,912
Notes and debentures (with original maturities
over one year) 1,443 1,568
------- -------
Total liabilities 36,621 34,522
Shareholders' equity
- --------------------
Preferred stock 435 435
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 200,000,000 shares
Issued - 147,165,480 shares 74 74
Additional paid-in capital 1,850 1,851
Retained earnings 2,118 1,780
Warrants - 37
Net unrealized gain (loss) on assets
available for sale (net of taxes) 18 (55)
Treasury stock of 9,978,407
and - shares at cost (470) -
------- -------
Total common shareholders' equity 3,590 3,687
------- -------
Total shareholders' equity 4,025 4,122
------- -------
Total liabilities and shareholders' equity $40,646 $38,644
======= =======
</TABLE>
