Back to GetFilings.com
1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934 [Fee Required]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934 [No Fee Required]
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 Identification No.)
incorporation or organization)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.50 Par Value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
Preferred Stock, Series H, $1.00 Par Value New York Stock Exchange
Preferred Stock, Series I, $1.00 Par Value New York Stock Exchange
Preferred Stock, Series J, $1.00 Par Value New York Stock Exchange
Preferred Stock, Series K, $1.00 Par Value New York Stock Exchange
7-1/4% Convertible Subordinated Capital Notes Due 1999 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
As of February 15, 1994, there were 63,583,252 shares outstanding of the
registrant's voting common stock, $0.50 par value per share, of which
63,073,355 common shares having a market value of $3,405,961,000 were held by
nonaffiliates. As of such date, there were 2,236,226 shares outstanding of the
registrant's Series D Junior Preferred Stock, $1.00 par value per share, of
which 2,164,154 shares having an aggregate issue price of $37,873,000 were held
by nonaffiliates. Such shares of Series D Junior Preferred Stock, which are
not publicly traded, are subject to voting covenants.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in the
following parts of this Annual Report.
Mellon Bank Corporation 1994 Proxy Statement-Part III
Mellon Bank Corporation 1993 Annual Report to Shareholders-
Parts I, II and IV
- --------------------------------------------------------------------------------
2
The Form 10-K filed with the Securities and Exchange Commission contains the
Exhibits listed on the Index to Exhibits beginning on page 27, including the
Financial Review and Statements and Notes; Principal Locations and Operating
Entities; Directors and Senior Management Committee; and Corporate Information
Sections of the Registrant's 1993 Annual Report to Shareholders. Copies of the
Registrant's 1993 Annual Report to Shareholders and the Proxy Statement for its
1994 Annual Meeting may be obtained free of charge by writing to:
Secretary,
Mellon Bank Corporation
Room 1820
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
2
3
MELLON BANK CORPORATION
Form 10-K Index
________________________________________________________________________________
PART I Page
Item 1. Business
Description of Business 4
Supervision and Regulation 7
Competition 9
Employees 10
Statistical Disclosure by Bank Holding Companies 10
Item 2. Properties 17
Item 3. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 20
Executive Officers of the Registrant 21
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 23
Item 6. Selected Financial Data 23
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 24
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 24
PART III
Item 10. Directors and Executive Officers of the Registrant 24
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners and Management 24
Item 13. Certain Relationships and Related Transactions 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25
3
4
PART I
ITEM 1. BUSINESS
Description of Business
Mellon Bank Corporation (the "Corporation") is a multibank holding company
incorporated under the laws of Pennsylvania in August 1971 and registered under
the Federal Bank Holding Company Act of 1956, as amended. The Corporation
provides a comprehensive range of financial products and services in domestic
and selected international markets. The Corporation's banking subsidiaries are
located in the states of Pennsylvania, Massachusetts, Delaware and Maryland,
while other subsidiaries are located in key business centers throughout the
United States and abroad. At December 31, 1993, the Corporation was the
twenty-third largest bank holding company in the United States in terms of
assets.
The Corporation's principal wholly owned subsidiaries are Mellon Bank, N.A.
("Mellon Bank"), The Boston Company, Inc. ("TBC"), Mellon Bank (DE) National
Association, Mellon Bank (MD) and a number of companies known as Mellon
Financial Services Corporations. The Corporation's banking subsidiaries engage
in domestic retail banking, worldwide commercial banking, trust banking,
investment management and other financial services and various
securities-related activities.
Mellon Bank, which has its executive offices in Pittsburgh, Pennsylvania,
became a subsidiary of the Corporation in November 1972. With its
predecessors, Mellon Bank has been in business since 1869. Mellon Bank is
comprised of six operating regions:
Mellon Bank-Western Region, which includes Mellon Bank's
Pittsburgh-based executive offices, serves consumer and small to
mid-sized commercial markets in western Pennsylvania, as well as
large commercial and financial institution markets throughout the
United States and selected international markets.
Mellon Bank-Central Region, headquartered in State College,
Pennsylvania, serves consumer and small to mid-sized commercial
markets in central Pennsylvania.
Mellon Bank-Commonwealth Region, headquartered in Harrisburg,
Pennsylvania, serves consumer and small to mid-sized commercial
markets in south central Pennsylvania.
Mellon Bank-Northern Region, headquartered in Erie, Pennsylvania,
serves consumer and small to mid-sized commercial markets in
northwestern Pennsylvania.
Mellon Bank - Northeastern Region, headquartered in Wilkes-Barre,
Pennsylvania, serves consumer and small to mid-sized commercial
markets in northeastern Pennsylvania.
Mellon PSFS, headquartered in Philadelphia, Pennsylvania, serves
consumer and small commercial markets in eastern Pennsylvania and
mid-sized commercial customers in eastern Pennsylvania and portions
of New Jersey.
On December 21, 1993, the Corporation completed its acquisition of
AFCO Credit Corporation (AFCO) and CAFO, Inc. AFCO is headquartered
in New York, New York, while CAFO is headquartered in Toronto,
Canada. These companies provide property and casualty insurance
premium financing to small, mid-size and large companies. AFCO is a
subsidiary of Mellon Bank, N.A. CAFO is a subsidiary of Mellon Bank
Canada.
TBC, through Boston Safe Deposit and Trust Company and other subsidiaries,
engages in the business of mutual fund administration, institutional trust and
custody, institutional asset management and private banking services. TBC is
headquartered in Boston, Massachusetts.
4
5
Description of Business (continued)
Mellon Bank (DE) National Association, headquartered in Wilmington, Delaware,
serves consumer and small to mid-sized commercial markets throughout Delaware,
and provides nationwide cardholder processing services. Mellon Bank (MD) is
headquartered in Rockville, Maryland, and serves consumer and small to
mid-sized commercial markets throughout Maryland. Mellon Bank (MD) has a
Maryland state charter and is a member of the Federal Reserve System.
The Corporation's banking subsidiaries operate 631 domestic retail banking
locations, including 432 branch offices. The deposits of the national banking
subsidiaries, Boston Safe Deposit and Trust and Mellon Bank (MD) are insured by
the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by
law.
Other subsidiaries of the Corporation provide a broad range of bank-related
services -- including commercial financial services, equipment leasing,
residential real estate loan financing, commercial loan financing, stock
transfer services, cash management, mortgage servicing, numerous trust and
investment management services and real estate investment management services.
The types of financial products and services offered by the Corporation's
subsidiaries are subject to ongoing change.
For analytical purposes, management has focused the Corporation into four
business sectors: Wholesale Banking, Retail Financial Services and Service
Products, which comprise the core business sectors, and Real Estate Banking.
Further information regarding the Corporation's designated business sectors is
presented in the Business Sectors section on pages 20 through 22 of the
Corporation's 1993 Annual Report to Shareholders, which pages are incorporated
herein by reference. A brief discussion of the business sectors is presented
below. There is considerable interrelationship among these sectors.
Wholesale Banking
The Corporation provides lending and other wholesale banking
services to domestic and selected international markets through its
Corporate Banking, Capital Markets and Leasing departments. These
markets generally include large domestic commercial and industrial
customers, U.S. operations of foreign companies, multinational
corporations and various financial institutions--including banks,
securities broker/dealers, insurance companies, finance companies
and mutual funds. The Corporation also offers corporate finance and
rate/risk management products; syndicates, participates out and
sells loans; offers a variety of capital markets products and
services, including private placements and money market and foreign
exchange transactions; and provides equipment leasing, financing and
lease advisory services. The Corporation maintains foreign offices
in London, Tokyo, Hong Kong, Toronto, and Grand Cayman, British West
Indies. Through these offices, the Corporation conducts trade
finance activities, engages in correspondent banking, provides
corporate banking and capital markets services, and engages in
funding and trading activities.
As part of the Corporation's Wholesale Banking sector, Middle Market
Banking serves companies in the Central Atlantic region with annual
sales between $10 million and $250 million and provides specialized
lending expertise to state and local governments in its regional
markets and health care on a national basis. It also operates a
nationwide asset-based lending division which provides secured
lending, principally through accounts receivable and inventory
financing. The Middle Market Banking department sells the
Corporation's full complement of banking products and services to
its customers.
Retail Financial Services
Retail financial products and services are offered through the
Corporation's banking subsidiaries in the Central Atlantic region.
5
6
Description of Business (continued)
Retail Financial Services
This banking network provides a full range of products to
individuals and small businesses including short and long-term
credit facilities, mortgages, credit cards, investment products,
checking, savings, and time deposits, money market accounts, money
transfer, safe deposit facilities, access to automated teller
machines and cash management services. These services are delivered
through a combination of the Corporation's 402 branch offices, 29
supermarket facilities, 586 ATMs, 7 loan sales offices and a
telephone banking center.
Service Products
The Corporation offers a number of service products through its
various subsidiaries. These fee-based businesses generally are not
as asset or capital intensive as are the Wholesale and Retail
Financial Services sectors.
The Corporation's subsidiaries provide a wide variety of trust and
investment management services operating under the umbrella name
"Mellon Trust". These include corporate trust, master trust,
personal trust, investment-related services, mutual fund
administration, custody and account administration services. The
Corporation also owns a number of subsidiaries that provide a
variety of active and passive equity and fixed income investment
management services, including management of international
securities and real estate assets; security transfer agency
services; and accounting and processing related services. Through
these functions, the Corporation serves the employee benefit,
institutional and individual markets.
On May 21, 1993, the Corporation completed its acquisition of TBC.
The Corporation now ranks among the largest national competitors in
each of these major trust and investment businesses: mutual fund
administration; institutional trust and custody; institutional asset
management; and private banking management. In December 1993, the
Corporation entered into a definitive agreement to merge with The
Dreyfus Corporation (Dreyfus). Completion of the merger is subject
to the approval of the shareholders of the Corporation and Dreyfus,
various regulatory approvals and certain approvals by the
shareholders of the mutual funds advised by Dreyfus. Upon
completion of the merger with Dreyfus, the Corporation expects to
substantially increase its trust and investment management fee
revenue and become the largest bank manager of mutual funds.
Further information regarding these transactions is presented in the
Corporation's 1993 Annual Report to Shareholders in the Significant
events in 1993 section on page 19 and in note 21 of Notes to
Financial Statements on pages 71 and 72, which portions are
incorporated herein by reference.
The Global Cash Management department provides a broad range of cash
management services, including check collections and disbursements,
remittance processing, electronic funds transfer services,
information reporting and automated investment services.
Also included in the service products sector are the core servicing
functions of the Corporation's mortgage banking operations, located
in Houston, Denver and Cleveland, through which the Corporation
originates and services residential and commercial mortgages for
institutional investors and makes residential mortgage loans.
Real Estate Banking
Real estate banking consists of the Corporation's commercial real
estate lending activities, through which it originates financing for
residential, commercial, multifamily and other projects.
6
7
Description of Business (continued)
The 1993 Annual Report to Shareholders summarizes principal locations and
operating entities on pages 78 through 80, which pages are incorporated herein
by reference. Exhibit 21.1 to this Annual Report on Form 10-K presents a list
of the subsidiaries of the Corporation as of December 31, 1993.
Supervision and Regulation
The Corporation, as a bank holding company, is regulated under the Bank Holding
Company Act of 1956, as amended (the "Act"), and is subject to the supervision
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"). Generally, the Act limits the business of bank holding companies to
banking, managing or controlling banks, performing certain servicing activities
for subsidiaries, and engaging in such other activities as the Federal Reserve
Board may determine to be closely related to banking and a proper incident
thereto. Certain of the Corporation's subsidiaries are themselves bank holding
companies under the Act.
The Corporation's national banking subsidiaries are subject to primary
supervision, regulation and examination by the Office of the Comptroller of the
Currency (the "OCC"); Boston Safe Deposit and Trust Company ("BSDT") is subject
to supervision, regulation and examination by the Federal Deposit Insurance
Corporation (the "FDIC") and the Massachusetts Office of the Commissioner of
Banks; and Mellon Bank (MD) is subject to supervision, regulation and
examination by the Federal Reserve Board and the State of Maryland. Mellon
Securities Trust Company and Boston Safe Deposit and Trust Company of New York
are New York trust companies and are supervised by the New York State
Department of Banking. Boston Safe Deposit and Trust Company of California is
a California trust company and is supervised by the State of California Banking
Department.
The Corporation's securities-related subsidiaries are regulated by the
Securities and Exchange Commission (the "SEC"). InvestNet, a subsidiary
of the Corporation, conducts a brokerage operation and Mellon Investment
Products Company, a subsidiary of Mellon Bank, engages in the sale, as agent,
of certain mutual fund and unit investment trust products. Both InvestNet and
Mellon Investment Products Company are registered broker/dealers and members of
the National Association of Securities Dealers, Inc., a securities industry
self-regulatory organization.
Certain subsidiaries of the Corporation are registered investment advisers
under the Investment Advisers Act of 1940 and, as such, are supervised by the
SEC. Certain of the Corporation's public finance activities are regulated by
the Municipal Securities Rulemaking Board. Mellon Bank and certain of the
Corporation's other subsidiaries are registered with the Commodity Futures
Trading Commission (the "CFTC") as commodity pool operators or commodity
trading advisors and, as such, are subject to CFTC regulation.
The Corporation and its subsidiaries are subject to an extensive scheme of
banking laws and regulations that are intended primarily for the protection of
the customers and depositors of the Corporation's subsidiaries rather than
holders of the Corporation's securities. These laws and regulations govern
such areas as permissible activities, loans and investments, rates of interest
that can be charged on loans and reserves. The Corporation and its
subsidiaries also are subject to general U.S. federal laws and regulations and
to the laws and regulations of the states or countries in which they conduct
their business. Set forth below are brief descriptions of selected laws and
regulations applicable to the Corporation and its subsidiaries.
Pennsylvania legislation authorizes bank holding companies in any state to
acquire Pennsylvania banks or bank holding companies provided that Pennsylvania
bank holding companies enjoy reciprocal privileges in those jurisdictions.
Most states outside the Southeast currently have such reciprocal laws. As a
result, the Corporation can acquire banks in any state which has a reciprocal
law.
There are certain restrictions on the ability of the Corporation and certain of
its non-bank affiliates to borrow from, and engage in other transactions with,
its banking subsidiaries and on the ability of such banking subsidiaries to pay
dividends to the Corporation. These restrictions are discussed in note 16 of
the Notes to Financial Statements on page 62 of the Corporation's 1993 Annual
Report to Shareholders. This note is incorporated herein by reference.
7
8
Supervision and Regulation (continued)
The OCC has authority under the Financial Institutions Supervisory Act to
prohibit national banks from engaging in any activity which, in the OCC's
opinion, constitutes an unsafe or unsound practice in conducting their
businesses. The Federal Reserve Board has similar authority with respect to
the Corporation, its Maryland banking subsidiary and its non-bank subsidiaries,
including Mellon Securities Trust Company, a member of the Federal Reserve
System. The FDIC has similar authority with respect to BSDT.
The deposits of each of the banking subsidiaries are insured up to applicable
limits by the FDIC and are subject to deposit insurance assessments to maintain
the Bank Insurance Fund ("BIF") of the FDIC. The FDIC has adopted a risk-based
assessment system to replace the previous flat-rate system. The risk-based
system imposes insurance premiums based upon a matrix that takes into account a
bank's capital level and supervisory rating. Under this risk-based system, the
assessment rate imposed on banks ranges from 23 cents for each $100 of domestic
deposits for the healthiest institutions to 31 cents for each $100 of domestic
deposits for the weakest institutions.
The Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA")
contains a "cross-guarantee" provision which could result in any insured
depository institution owned by the Corporation being assessed for losses
incurred by the FDIC in connection with assistance provided to, or the failure
of, any other depository institution owned by the Corporation. Also, under
Federal Reserve Board policy, the Corporation may be expected to act as a
source of financial strength to each of its banking subsidiaries and to commit
resources to support each such bank in circumstances where such bank might not
be in a financial position to support itself.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
substantially revised the depository institution regulatory and funding
provisions of the Federal Deposit Insurance Act and made revisions to several
other federal banking statutes. Among other things, federal banking regulators
are required to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements. FDICIA identifies
the following capital tiers for financial institutions: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized.
Rules adopted by the federal banking agencies under FDICIA provide that an
institution is deemed to be: "well capitalized" if the institution has a Total
risk-based capital ratio of 10.0% or greater, a Tier I risk-based ratio of 6.0%
or greater, and a leverage ratio of 5.0% or greater, and the institution is not
subject to an order, written agreement, capital directive, or prompt corrective
action directive to meet and maintain a specific level for any capital measure;
"adequately capitalized" if the institution has a Total risk-based capital
ratio of 8.0% or greater, a Tier I risk-based capital ratio of 4.0% or greater,
and a leverage ratio of 4.0% or greater (or a leverage ratio of 3.0% or greater
if the institution is rated composite 1 in its most recent report of
examination, subject to appropriate Federal banking agency guidelines), and the
institution does not meet the definition of a well capitalized institution;
"undercapitalized" if the institution has a Total risk-based capital ratio that
is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or
a leverage ratio that is less than 4.0% (or a leverage ratio that is less than
3.0% if the institution is rated composite 1 in its most recent report of
examination, subject to appropriate Federal banking agency guidelines) and the
institution does not meet the definition of a significantly undercapitalized or
critically undercapitalized institution; "significantly undercapitalized" if
the institution has a Total risk-based capital ratio that is less than 6.0%, a
Tier I risk-based capital ratio that is less than 3.0%, or a leverage ratio
that is less than 3.0% and the institution does not meet the definition of a
critically undercapitalized institution; and "critically undercapitalized" if
the institution has a ratio of tangible equity to total assets that is equal to
or less than 2.0%. FDICIA imposes progressively more restrictive constraints
on operations, management and capital distributions, depending on the capital
category in which an institution is classified.
At December 31, 1993, the Corporation and all of the Corporation's banking
subsidiaries fell into the well capitalized category based on the ratios and
guidelines noted above.
The appropriate Federal banking agency may, under certain circumstances,
reclassify a well capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an adequately
8
9
Supervision and Regulation (continued)
capitalized or undercapitalized institution to comply with the supervisory
provisions as if the institution were in the next lower category (but not treat
a significantly undercapitalized institution as critically undercapitalized)
based on supervisory information other than the capital levels of the
institution.
The statute provides that an institution may be reclassified if the appropriate
Federal banking agency determines (after notice and opportunity for hearing)
that the institution is in an unsafe or unsound condition or deems the
institution to be engaging in an unsafe or unsound practice.
Legislation enacted in August 1993 provides that deposits and certain claims
for administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general
unsecured claims against such an institution in the "liquidation or other
resolution" of such an institution by any receiver.
During 1993, regulatory guidelines were adopted, and legislation was proposed
in Congress, to address concerns regarding retail sales by banks of various
nondeposit investment products, including mutual funds. Legislative and
regulatory attention to these matters is likely to continue, and may intensify,
in the future. Although existing statutory and regulatory requirements in this
regard have not had a significant effect on the Corporation's business, there
can be no assurance that future requirements will not have such an effect on
the Corporation's business, as currently conducted or as proposed to be
conducted after the proposed merger with The Dreyfus Corporation. Various
other legislation, including proposals to restructure the banking regulatory
system, provide for nationwide interstate banking and to limit the investments
that a depository institution may make with insured funds, are from time to
time introduced in Congress. The Corporation cannot determine the ultimate
effect that any such potential legislation, if enacted, would have upon its
financial condition or operations.
Competition
The Corporation and its subsidiaries continue to be subject to intense
competition in all aspects and areas of their businesses from banks; other
domestic and foreign financial institutions, such as savings and loan
associations, savings banks, finance companies and credit unions; and other
providers of financial services, such as money market funds, brokerage firms,
investment companies, credit companies and insurance companies. The
Corporation also competes with nonfinancial institutions, including retail
stores and manufacturers of consumer products that maintain their own credit
programs, as well as governmental agencies that make available loans to certain
borrowers. Also, in the Service Products business sector, the Corporation
competes with a wide range of technologically capable service providers.
In terms of domestic deposits, Mellon Bank is the largest commercial banking
institution in Pennsylvania where it competes with approximately 260 commercial
banks, 140 thrifts and numerous credit unions and consumer finance
institutions. Mellon Bank competes with approximately 30 commercial banks and
40 thrifts in the six-county Pittsburgh area of Western Pennsylvania. Mellon
Bank competes with approximately 45 commercial banks and 50 thrifts in the
five-county Philadelphia area, one of the largest metropolitan areas in the
United States. In most of the markets in which the Corporation's banking
subsidiaries operate, they compete with large regional and other banking
organizations in making commercial, industrial and consumer loans, and in
providing products and services.
Competition has continued to increase in recent years in many areas in which
the Corporation and its subsidiaries operate, in substantial part because other
types of financial institutions and other entities are increasingly engaging in
activities traditionally engaged in by commercial banks. Commercial banks face
significant competition in acquiring quality assets due to such factors as the
increase in commercial paper and long-term debt issued by industrial companies,
increased activities by foreign banks and credit unions, and the increased
lending powers granted to and
9
10
Competition (continued)
employed by many types of thrift institutions and credit unions. Commercial
banks also face competition in attracting deposits at reasonable prices due to
the activities of money market funds; increased activities of non-bank deposit
takers, including brokerage firms; alternatives presented by foreign banks; and
the increased availability of demand deposit type accounts at thrift
institutions and credit unions. Unlike the Corporation, many of these
competitors, with the particular exception of thrift institutions, are not
subject to regulation as extensive as that described under the "Supervision and
Regulation" section and, as a result, they may have a competitive advantage
over the Corporation in certain respects.
Employees
The Corporation and its subsidiaries had approximately 21,400 full-time
equivalent employees in December 1993.
Statistical Disclosure by Bank Holding Companies
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest Differential
Information required by this section of Securities Act Industry Guide 3,
or Exchange Act Industry Guide 3, ("Guide 3") is presented in the
Rate/Volume Variance Analysis on page 11. Required information is also
presented in the Financial Section of the Corporation's 1993 Annual
Report to Shareholders in the Consolidated Balance Sheet -- Average
Balances and Interest Yields/Rates on pages 76 and 77, and in Net
Interest Revenue, on page 22, which is incorporated herein by reference.
10
11
Statistical Disclosure by Bank Holding Companies (continued)
RATE/VOLUME VARIANCE ANALYSIS
- -----------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------------
1993 over (under) 1992 1992 over (under) 1991
------------------------ --------------------------
Due to change in Net Due to change in Net
---------------- ----------------
(in millions) Rate Volume change Rate Volume change
----- ------- ------- ----- ------- -------
Increase (decrease) in interest
revenue from interest-earning
assets:
Interest-bearing deposits with banks $ (5) $ 28 $ 23 $ (21) $ 6 $ (15)
Federal funds sold and securities
purchased under agreements to resell (4) 31 27 (17) 9 (8)
Other money market investments - 3 3 - 1 1
Trading account securities (3) (3) (6) (2) - (2)
Securities:
U.S. Treasury and agency securities (99) (96) (195) (60) 98 38
Obligations of states and political
subdivisions (1) - (1) (1) (33) (34)
Other (7) (10) (17) (6) (15) (21)
Loans (includes loan fees) (142) 267 125 (251) (26) (277)
----- ----- ----- ----- ----- -----
Total (261) 220 (41) (358) 40 (318)
Increase (decrease) in interest
expense on interest-bearing
liabilities:
Deposits in domestic offices:
Demand (44) 6 (38) (28) 11 (17)
Money market and other savings accounts (106) 61 (45) (105) 33 (72)
Retail savings certificates (82) (1) (83) (179) (38) (217)
Negotiable certificates of deposit (2) (2) (4) 10 (39) (29)
Other time deposits (1) - (1) (3) 2 (1)
Deposits in foreign offices (14) 5 (9) (21) (12) (33)
Federal funds purchased and securities
sold under agreements to repurchase (6) (17) (23) (42) (33) (75)
Other short-term borrowings 1 (17) (16) (19) 3 (16)
Notes and debentures (with original
maturities over one year) (12) 39 27 (17) (6) (23)
----- ----- ----- ----- ----- -----
Total (266) 74 (192) (404) (79) (483)
----- ----- ----- ----- ----- -----
Increase in net
interest revenue $ 5 $ 146 $ 151 $ 46 $ 119 $ 165
===== ===== ===== ===== ===== =====
Note: Amounts are calculated on a taxable equivalent basis where applicable, at
tax rates approximating 35% in 1993 and 34% in 1992 and 1991, and are before
the effect of reserve requirements. Changes in interest revenue or interest
expense arising from the combination of rate and volume variances are allocated
proportionally to rate and volume based on their relative absolute magnitudes.
11
12
Statistical Disclosure by Bank Holding Companies (continued)
II. Securities Portfolio
A. Book values of securities at year end are as follows:
December 31,
---------------------------------
1993 1992 1991
------ ------ ------
(in millions)
U.S. Treasury and agency securities $4,737 $5,340 $5,049
Obligations of states and political
subdivisions 6 2 39
Other securities:
Other mortgage-backed securities 107 168 463
Bonds, notes and debentures 103 174 139
Stock of Federal Reserve Bank 44 38 38
Other 15 16 16
------ ------ ------
Total other securities 269 396 656
------ ------ ------
Total securities $5,012 $5,738 $5,744
====== ====== ======
B. Maturity Distribution of Securities
Information required by this section of Guide 3 is presented in the
Financial Section of the Corporation's 1993 Annual Report to Shareholders
in note 3 of Notes to Financial Statements on Securities on pages 50
through 52, which note is incorporated herein by reference.
12
13
Statistical Disclosure by Bank Holding Companies (continued)
III. Loan Portfolio
A. Types of Loans
Information required by this section of Guide 3 is presented in the
Credit Risk and Asset Quality section of the Financial Section of
the Corporation's 1993 Annual Report to Shareholders on pages 31
through 40 which portions are incorporated herein by reference.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates
Maturity distribution of loans at December 31, 1993:
(in millions) Within 1 year* 1-5 years Over 5 years Total
---------------------------------------------------------------------------------------------------------------------
Domestic:**
Commercial and financial $4,543 $2,829 $1,719 $ 9,091
Commercial real estate 484 786 451 1,721
---------------------------------------------------------------------------------------------------------------------
Total domestic 5,027 3,615 2,170 10,812
International 601 104 245 950
---------------------------------------------------------------------------------------------------------------------
Total $5,628 $3,719 $2,415 $11,762
---------------------------------------------------------------------------------------------------------------------
Note: Maturity distributions are based on remaining contractual
maturities.
* Includes demand loans and loans with no stated maturity.
** Excludes consumer mortgages, other consumer credit and lease
finance assets.
Sensitivity of loans at December 31, 1993 to Changes in Interest
Rates:
Domestic International
(in millions) operations* operations Total
---------------------------------------------------------------------------------------------------------------------
Loans due in one year or less** $ 5,027 $601 $ 5,628
Loans due after one year:
Variable rates 4,942 221 5,163
Fixed rates 843 128 971
---------------------------------------------------------------------------------------------------------------------
Total loans $10,812 $950 $11,762
---------------------------------------------------------------------------------------------------------------------
Note: Maturity distributions are based on remaining contractual
maturities.
* Excludes consumer mortgages, other consumer credit and lease
finance assets.
** Includes demand loans and loans with no stated maturity.
C. Risk Elements
Information required by this section of Guide 3 is presented in the
Financial Section of the Corporation's 1993 Annual Report to
Shareholders in the Credit Risk and Asset Quality section on pages
31 through 40, which portions are incorporated herein by reference.
13
14
Statistical Disclosure by Bank Holding Companies (continued)
IV. Summary of Loan Loss Experience
The Corporation employs various estimation techniques in developing
the credit loss reserve. Management reviews the specific
circumstances of individual loans subject to more than the customary
potential for exposure to loss. In establishing the level of the
reserve, management also identifies market concentrations, changing
business trends, industry risks and general economic conditions that
may adversely affect loan collectibility. In addition, management
assesses volatile factors such as interest rates and real estate
market conditions that may significantly alter loss potential. Based
on this evaluation, management believes that the credit loss reserve
is adequate to absorb future losses inherent in the portfolio.
The reserve is not specifically associated with individual loans or
portfolio segments. Thus, the reserve is available to absorb credit
losses arising from any individual loan or portfolio segment. When
losses on specific loans are identified, management charges off the
portion deemed uncollectible. In view of the fungible nature of the
reserve and management's practice of charging off known losses, the
Corporation does not maintain truly specific reserves on any loan.
However, management has developed a loan loss reserve methodology
designed to provide procedural discipline in assessing the adequacy of
the reserve. The allocation of the Corporation's reserve for credit
losses presented below is based on this loan loss reserve methodology.
December 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
(in millions)
Domestic reserve:
Commercial and financial $182 $170 $193 $163 $136
Real estate:
Commercial 189 212 277 242 145
Consumer 91 18 9 9 7
Consumer credit 102 83 77 48 44
Lease financing 15 4 6 6 6
---- ---- ---- ---- ----
Total domestic reserve 579 487 562 468 338
International reserve 21 19 34 57 272
---- ---- ---- ---- ----
Total reserve $600 $506 $596 $525 $610
==== ==== ==== ==== ====
Further information on the Corporation's credit policies, the factors
that influenced management's judgment in determining the level of the
reserve for credit losses, and the analyses of the credit loss reserve
for the years 1989-1993 are set forth in the Financial Section of the
Corporation's 1993 Annual Report to Shareholders in the Credit
Management section on page 31, the Reserve for Credit Losses and
Review of Net Credit Losses section on pages 39 and 40, in note 1 of
Notes to Financial Statements under Reserve for Credit Losses on page
48 and in note 5 on page 52; which portions are incorporated herein by
reference.
14
15
Statistical Disclosure by Bank Holding Companies (continued)
IV. Summary of Loan Loss Experience (continued)
For each category on the prior page, the ratio of loans to
consolidated total loans is as follows:
December 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Domestic banking:
Commercial and financial 37.2% 40.7% 43.3% 43.2% 49.1%
Real estate:
Commercial 7.0 9.4 10.3 11.8 13.7
Consumer 33.4 21.4 17.3 15.6 7.6
Consumer credit 15.6 18.1 18.4 17.5 17.3
Lease financing 2.9 3.2 3.4 3.7 2.2
----- ----- ----- ----- -----
Total domestic loans 96.1 92.8 92.7 91.8 89.9
International loans 3.9 7.2 7.3 8.2 10.1
----- ----- ----- ----- -----
Total loans 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
V. Deposits
Maturity distribution of domestic time deposits at December 31, 1993
Within 4-6 7-12 Over
(in millions) 3 months months months 1 year Total
-----------------------------------------------------------------------------------------------------------------------
Time certificates of deposit in denominations
of $100,000 or greater $ 401 $ 189 $ 110 $ 236 $ 936
Time certificates of deposit in denominations
of less than $100,000 1,950 1,734 920 1,524 6,128
-----------------------------------------------------------------------------------------------------------------------
Total time certificates of deposit 2,351 1,923 1,030 1,760 7,064
-----------------------------------------------------------------------------------------------------------------------
Other time deposits in denominations
of $100,000 or greater 145 1 - 28 174
Other time deposits in denominations
of less than $100,000 36 - 1 1 38
-----------------------------------------------------------------------------------------------------------------------
Total other time deposits 181 1 1 29 212
-----------------------------------------------------------------------------------------------------------------------
Total domestic time deposits $2,532 $1,924 $1,031 $1,789 $7,276
-----------------------------------------------------------------------------------------------------------------------
The majority of foreign deposits of approximately $1.2 billion at
December 31, 1993 were in amounts in excess of $100,000. Additional
information required by this section of Guide 3 is set forth in the
Financial Section of the Corporation's 1993 Annual Report to
Shareholders in Consolidated Balance Sheet -- Average Balances and
Interest Yields/Rates on pages 76 and 77, which portions are
incorporated herein by reference.
15
16
Statistical Disclosure by Bank Holding Companies (continued)
VI. Return on Equity and Assets
Year ended December 31,
--------------------------------------------
1993 1992 1991
---------- ---------- ----------
(1) Return on total assets(a), based on:
Net income 1.04% 1.46% .96%
Net income applicable to common
stock(b) .87 1.30 .80
(2) Return on equity(a):
Return on common shareholders' equity,
based on net income applicable to
common stock(b) 11.93 21.12 15.80
Return on total shareholders' equity,
based on net income 11.37 18.58 14.68
Return on total shareholders' equity
and Series A redeemable preferred
stock(c), based on net income 11.37 18.58 14.30
(3) Dividend payout ratio of common
stock, based on:
Primary net income per share 33.04 20.26 30.04
Fully diluted net income
per share 33.06 20.61 30.37
(4) Equity to total assets(a),
based on:
Common shareholders' equity 7.29 6.16 5.09
Total shareholders' equity 9.13 7.87 6.55
Total shareholders' equity and
Series A redeemable preferred
stock(c) 9.13 7.87 6.73
(a) Computed on a daily average basis.
(b) Computed using net income applicable to common stock after adding
back Series D preferred stock dividends.
(c) The Series A redeemable preferred stock was redeemed by the
Corporation in July 1991.
VII. Short-Term Borrowings
Information required by this section of Guide 3 is contained in the
Financial Section of the Corporation's 1993 Annual Report to
Shareholders in the Consolidated Balance Sheet on page 44, and in note
9 of Notes to Financial Statements on Short-term borrowings on pages
53 and 54, which portions are incorporated herein by reference.
16
17
ITEM 2. PROPERTIES
Pittsburgh properties
In 1983, Mellon Bank entered into a long-term lease of One Mellon Bank Center,
a 54-story office building in Pittsburgh, Pennsylvania. At December 31, 1993,
Mellon Bank occupied approximately 59% of the building's 1,525,000 square feet
of rentable space and subleased substantially all of the remaining space to
third parties.
During 1984, Mellon Bank entered into a sale/leaseback arrangement of the Union
Trust Building in Pittsburgh, Pennsylvania, also known as Two Mellon Bank
Center, while retaining title to the land thereunder. At December 31, 1993,
Mellon Bank occupied approximately 74% of this building's approximately 595,000
square feet of rentable space and subleased substantially all of the remaining
space to third parties.
Mellon Bank owns the 41-story office building in Pittsburgh, Pennsylvania,
known as Three Mellon Bank Center. At December 31, 1993, Mellon Bank occupied
approximately 96% of the approximately 943,000 square feet of rentable space,
with the remainder leased to third parties.
Philadelphia properties
Mellon Bank owns a building known as One Mellon Bank Center located at the
corner of Broad and Chestnut Streets in the Center City area of Philadelphia,
Pennsylvania. At December 31, 1993, Mellon Bank occupied all of One Mellon
Bank Center's approximately 63,700 square feet of rentable space.
Mellon Bank also leases a large portion of a building in Philadelphia,
Pennsylvania, known as Mellon Independence Center. At December 31, 1993,
Mellon Bank leased approximately 74% of Mellon Independence Center's
approximately 881,700 square feet of rentable space. Of the space leased by
Mellon Bank, approximately 200,000 square feet was subleased to third parties
at December 31, 1993.
In 1987, Mellon Bank entered into a 25-year lease for a portion of a 53-story
office building known as Mellon Bank Center, at the corner of 18th and Market
Streets in the Center City area of Philadelphia, Pennsylvania. At December 31,
1993, Mellon Bank leased approximately 19% of the building's approximately
1,245,000 square feet of rentable space.
Boston properties
The Boston Company leases space in two downtown Boston office buildings:
41-story One Boston Place located at the corner of Court Street and Washington
Street and 41-story Exchange Place located at 53 State Street. As of December
31, 1993, The Boston Company leased approximately 30% of One Boston Place's
769,150 square feet of rentable space and approximately 26% of Exchange Place's
1,063,750 square feet of rentable space. Of The Boston Company's leased space
at Exchange Place, 141,900 square feet is subleased to third parties. The
Boston Company also leases 82,900 square feet in the Park Square Building, 31
St. James Avenue, Boston.
As of December 31, 1993, The Boston Company also occupies space in two office
buildings in the Wellington Business Center located in Medford, MA, about two
miles north of downtown Boston. The Boston Company owns a substantial interest
in and fully occupies the 117,000 square foot building known as Client Services
Center II. Across the street, The Boston Company leases 100% of the 319,600
square foot facility known as Client Services Center III. Approximately 40% of
Client Services Center III is subleased to a third party.
Other properties
Mellon Bank owns and occupies 100% of an office building in State College,
Pennsylvania, which serves as the headquarters for Mellon Bank-Central Region.
Mellon Bank owns and occupies 100% of two small office buildings in Erie,
Pennsylvania which serves as the headquarters of Mellon Bank-Northern Region.
17
18
PROPERTIES (continued)
Mellon Bank owns its five-story Mellon Bank-Commonwealth Region headquarters
building, which includes a banking office in Harrisburg, Pennsylvania. Mellon
Bank occupies approximately 80% of the approximately 75,000 square feet of
rentable space in this building.
Mellon Bank owns the Mellon Bank-Northeastern Region headquarters building in
Wilkes-Barre, Pennsylvania. Mellon Bank occupies approximately 9% of this
building's approximately 142,000 square feet, with the remainder leased to
third parties.
Mellon Bank (DE) owns a three-story office building known as the Pike Creek
Building in New Castle County, Delaware, and currently occupies the building's
entire 84,000 square feet of available floor space. Mellon Bank (DE) also
leases approximately 16%, or 34,000 square feet, of an 18-story office building
in Wilmington, Delaware.
Mellon Bank (MD) leases approximately 40% of an office building in Rockville,
Maryland, which is used for its headquarters.
The banking subsidiaries' branches are located in 33 counties in western,
northwestern, central, northeastern and eastern Pennsylvania, all three of
Delaware's counties, four Maryland counties in the northern suburbs of
Washington, D.C. and a single retail branch in Boston, Massachusetts. At
December 31, 1993, the banking subsidiaries of the Corporation owned 215 of the
Corporation's 432 bank branch buildings and leased the remainder with leases
expiring at various times through 2020.
Other subsidiaries of the Corporation lease office space primarily for their
operations at many of the locations listed on pages 78 through 80 of the
Principal Locations and Operating Entities Section of the Corporation's 1993
Annual Report, which pages are incorporated herein by reference. For
additional information on the Corporation's premises and equipment, see note 6
of Notes to Financial Statements on page 52 of the Corporation's 1993 Annual
Report, which note is incorporated herein by reference.
ITEM 3. 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, investments and trust activities. Due to
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.
On February 12, 1991, a jury in Colorado rendered a verdict in a lender
liability lawsuit in which the Corporation is one of the defendants. The jury
awarded actual damages of $42 million and punitive damages of $23 million in
favor of the plaintiffs. In the lawsuit, the plaintiffs contended that the
Corporation breached certain obligations and failed to disclose certain
information in connection with its lending relationships with the plaintiffs.
On June 6, 1991, a district judge in Colorado entered a judgment reducing the
award to $16 million in actual damages, plus interest, and $12 million in
punitive damages. On January 27, 1994, the Colorado Court of Appeals affirmed
the judgment for plaintiffs for compensatory damages in the reduced amount of
$5.36 million, plus interest since November 1, 1989, and vacated the judgment
for punitive damages and remanded to the trial court with the direction to
reconsider the amount, if any, of punitive damages. By Colorado law, the
amount of punitive damages cannot exceed the amount of the compensatory
damages. The Corporation intends to petition the Colorado Court of Appeals for
rehearing and it is possible that the other parties may also appeal. Because
of the uncertainty as to the ultimate resolution, no provision has been made in
the financial statements for this matter.
On August 7, 1992, a judge in the United States District Court for the Eastern
District of Pennsylvania entered a judgment ordering Mellon Bank to reimburse
certain of its trust customers the amount of sweep fees which were charged
18
19
Legal Proceedings (continued)
to their trust accounts since 1981, plus interest. In this class-action
proceeding, the plaintiffs claimed that Mellon Bank, and other banks, breached
their fiduciary duties with regard to the provision of sweep services, alleging
that the banks charged unreasonable fees, failed to disclose fully their fees
for sweep services and wrongfully invested sweep funds in internal or
affiliated accounts or investment vehicles. The court found that the total
amount of sweep fees collected by Mellon Bank since 1981 for both fiduciary and
non-fiduciary accounts was approximately $55 million. On May 18, 1993, the
Third Circuit Court of Appeals vacated the judgment entered by the district
court and remanded the case for dismissal. On June 18, 1993, the Third Circuit
Court of Appeals denied plaintiff's Petition for Rehearing. The district court
ordered the case dismissed on July 6, 1993. On September 13, 1993, the
plaintiffs petitioned the United States Supreme Court for a writ of certiorari,
and on November 8, 1993, the Supreme Court denied this petition.
On July 28, 1993, a second lawsuit arising out of Mellon Bank's sweep fees
practices was filed with the United States District Court for the Eastern
District of Pennsylvania against Mellon Bank and its directors. On August 30,
1993, a third lawsuit, similar to the second, was filed in the same court and
was consolidated with the second. On December 16, 1993, these suits also were
dismissed. Plaintiffs initially appealed this dismissal but the appeals have
been withdrawn.
On September 10, 1993, the Corporation filed complaints in the United States
District Court for the Western District of Pennsylvania against four financial
services companies. The complaints involved claims arising from the breach of
the contract under which the Corporation purchased The Boston Company, as well
as violations of other obligations to the Corporation. The claims related to
administration services the Corporation provides to a family of mutual funds
then known as the Smith Barney Shearson Funds. The defendant companies were:
Smith Barney, Harris Upham & Co. Incorporated (Smith Barney); its parent
organization, Primerica Corporation (now The Travelers Inc.); Lehman Brothers
Inc. (formerly Shearson Lehman Brothers); and its parent organization,
American Express Company. The Corporation's mutual funds administration
services are provided through The Boston Company.
In its complaint against Smith Barney and Primerica (which purchased Shearson's
mutual fund and brokerage businesses in 1993), the Corporation asserted that,
despite expressly agreeing that they were bound by, and would comply with, the
terms and provisions of the contract between Shearson and the Corporation,
Smith Barney and Primerica violated that contract. The Corporation sought
money damages against each of the defendants and further sought a court order
requiring that Smith Barney and Primerica cease their unlawful conduct and
honor the contract between the Corporation and Shearson.
A hearing was held in November 1993. As a result, the Corporation was granted
injunctive relief preventing Smith Barney, for a period of seven years, from
competing with Mellon in providing administration services to funds in the
Smith Barney Shearson family, other than Smith Barney funds that existed prior
to Smith Barney's March 12, 1993, agreement to purchase Shearson Lehman
Brothers' mutual fund and brokerage businesses. The injunction covered all new
funds created or underwritten by Smith Barney, however named, after March 12,
1993, and obligated Smith Barney to recommend Mellon as the provider of
administration services.
Effective January 1, 1994, Mellon and Smith Barney Shearson Inc. settled their
litigation. Under the terms of the settlement agreement, which will remain in
effect through May 2000, the companies will work together to provide
administration services to certain funds affiliated with Smith Barney. Smith
Barney will seek to be appointed administrator for certain of its affiliated
funds, in addition to its current roles as investment advisor and distributor.
Smith Barney would, in turn, enter into sub-administration agreements with
Mellon for certain administration services.
Incorporated in the settlement agreement are certain Smith Barney Shearson
funds that existed prior to Smith Barney's March 12, 1993, agreement to
purchase Shearson Lehman Brothers' mutual fund and brokerage businesses, as
well as certain Smith Barney Shearson sponsored funds covered by the above
injunction. In connection with such settlement, actions against all defendants
were dismissed.
Subsequent to the announcement of the proposed merger with Dreyfus described in
Item 1 above, plaintiffs who claim to be shareholders of Dreyfus commenced six
purported class action suits in the Supreme Court of the State of New York,
19
20
Legal Proceedings (continued)
County of New York, naming Dreyfus, the individual directors of Dreyfus and (in
two of the cases) the Corporation as defendants. In these complaints, the
plaintiffs, among other things, object to the terms of the proposed merger and
seek injunctive relief against its consummation, as well as compensatory and
punitive damages. The Corporation believes that these complaints lack merit
and intends to defend them vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders for vote during the fourth
quarter of 1993.
20
21
EXECUTIVE OFFICERS OF THE REGISTRANT
The name and age of, and the positions and offices held by, each executive
officer of the Corporation as of December 31, 1993, together with the offices
held by each such person during the last five years, are listed below. Certain
of the executive officers have executed employment contracts with the
Corporation. All other executive officers serve at the pleasure of their
appointing authority. No executive officer has a family relationship to any
other listed executive officer.
Age Position and Year Elected
--- -------------------------
Frank V. Cahouet 61 Chairman, President and Chief Executive 1990 (1)
Officer of the Corporation and of Mellon
Bank
Thomas F. Donovan 60 Vice Chairman of the Corporation and of 1990
Mellon Bank
Chairman, President and Chief Executive 1988
Officer of Mellon PSFS
Steven G. Elliott 47 Vice Chairman and Chief Financial 1992 (2)
Officer of the Corporation and
of Mellon Bank
Treasurer of Mellon Bank Corporation 1990
Richard A. Gaugh 53 Vice Chairman, Special Banking Services of 1993 (3)
the Corporation and of Mellon Bank
Martin G. McGuinn 51 Vice Chairman, Retail Financial Services of 1993 (4)
the Corporation and of Mellon Bank
Jeffrey L. Morby 56 Vice Chairman, Wholesale Banking of the 1990 (5)
Corporation and of Mellon Bank
Keith P. Russell 48 Vice Chairman, Credit Policy and Chief 1992 (6)
Credit Officer of the Corporation
and of Mellon Bank
Chairman, Credit Policy Committee of 1991
Mellon Bank Corporation
W. Keith Smith 59 Vice Chairman of the Corporation 1993 (7)
and of Mellon Bank
Chairman and Chief Executive Officer, The 1993
Boston Company
(continued)
21
22
Executive Officers of the Registrant (continued)
Michael K. Hughey 42 Senior Vice President and Controller of 1990 (8)
the Corporation and Senior Vice
President, Director of Taxes and
Controller of Mellon Bank
(1) From June 1987 to January 1990, Mr. Cahouet was Chairman and Chief
Executive Officer of the Corporation and of Mellon Bank. In January 1990,
he assumed the additional title of President. Mr. Cahouet has executed an
employment contract with the Corporation which terminates May 31, 1997.
(2) From August 1987 to January 1990, Mr. Elliott was Executive Vice President
and head of the Finance Department of Mellon Bank. From February 1988 to
January 1990, Mr. Elliott was Assistant Treasurer of Mellon Bank
Corporation. From January 1990 to June 1992, Mr. Elliott was Executive
Vice President, Chief Financial Officer and Treasurer of the Corporation
and Executive Vice President and Chief Financial Officer of Mellon Bank.
(3) From July 1985 to January 1990, Mr. Gaugh was Executive Vice President and
head of Retail Banking of Mellon Bank. From January 1990 to November
1993, Mr. Gaugh was Vice Chairman, Retail Bank of the Corporation and of
Mellon Bank.
(4) From February 1988 to January 1990, Mr. McGuinn was General Counsel and
Secretary of the Corporation and General Counsel of Mellon Bank. From
January 1990 to October 1990, he assumed the additional title of Vice
Chairman, Administration of the Corporation and of Mellon Bank. From
November 1990 to October 1992, Mr. McGuinn was Vice Chairman, Real Estate
Finance, General Counsel and Secretary of the Corporation and Vice
Chairman, Real Estate Finance and General Counsel of Mellon Bank. From
October 1992 to November 1993, Mr. McGuinn was Vice Chairman, Special
Banking Services of the Corporation and of Mellon Bank.
(5) From June 1988 to January 1990, Mr. Morby was a special consultant to the
Chairman and to the President of Mellon Bank.
(6) From 1983 to August 1991, Mr. Russell was President and Chief Operating
Officer of GLENFED/Glendale Federal Bank. From September 1991 to November
1991, Mr. Russell was Executive Vice President, Information Management and
Research, Technology Products and Mortgage Banking of Mellon Bank. From
November 1991 to June 1992, Mr. Russell was Executive Vice President,
Credit Policy of the Corporation and of Mellon Bank.
(7) From July 1987 to January 1990, Mr. Smith was Vice Chairman, Chief
Financial Officer and Treasurer of the Corporation and Vice Chairman and
Chief Financial Officer of Mellon Bank. From January 1990 to November
1993, Mr. Smith was Vice Chairman, Service Products of the Corporation and
of Mellon Bank. Mr. Smith has executed an employment contract with the
Corporation which terminates on July 31, 1996.
(8) From 1986 to 1990, Mr. Hughey was Senior Vice President and Director of
Taxes of Mellon Bank.
22
23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is set forth in the Financial Section of
the Corporation's 1993 Annual Report to Shareholders in Liquidity and Dividends
on pages 28 and 29, in Selected Quarterly Data on page 42, in note 16 of Notes
to Financial Statements on page 62 and in Corporate Information on page 84,
which portions are incorporated herein by reference.
In August 1989, the Corporation adopted a Shareholder Protection Rights Plan
under which each shareholder receives one Right for each share of common stock
or Series D Junior Preferred Stock of the Corporation (together, the "voting
stock") held. The Rights are currently represented by the certificates for,
and trade only with, the voting stock. The Rights would separate from the
voting stock and become exercisable only if a person or group acquires 20
percent or more of the voting power of the voting stock or ten days after a
person or group commences a tender offer that would result in ownership of 20
percent or more of such voting power. At that time, each Right would entitle
the holder to purchase for $200 (the "exercise price") one one-hundredth of a
share of participating preferred stock. Each share of such preferred stock
would be entitled to cumulative dividends equal to 1 percent per annum, plus
the amount of dividends that would be payable on 100 shares of the
Corporation's common stock, and would have a liquidation preference of the
greater of 100 times the exercise price or the amount to be distributed in
liquidation to a holder of 100 shares of the Corporation's common stock.
Should a person or group actually acquire 20 percent or more of the voting
power of the voting stock, each Right held by the acquiring person or group (or
their transferees) would become void and each Right held by the Corporation's
other shareholders would entitle those holders to purchase for the exercise
price a number of shares of the Corporation's common stock having a market
value of twice the exercise price. Should the Corporation be involved in a
merger or similar transaction with a 20 percent owner or sell more than 50
percent of its assets or assets generating more than 50 percent of its
operating income or cash flow to any person or group, each outstanding Right
would then entitle its holder to purchase for the exercise price a number of
shares of such other company having a market value of twice the exercise price.
In addition, if any person or group acquires between 20 percent and 50 percent
of the voting power of the voting stock, the Corporation may, at its option,
exchange one share of common stock for each outstanding Right. The Rights are
not exercisable until the above events occur and will expire on August 15, 1999
unless earlier exchanged or redeemed by the Corporation. The Corporation may
redeem the Rights for $.01 per Right under certain circumstances. The
distribution of the Rights was not a taxable event.
Common shares outstanding or issuable at December 31, 1993
Maximum Common shares assumed issued
common for book value per
(number of shares) shares common share computation
- --------------------------------------------------------------------------------------------------------------------------------
Common shares issuable from options and potentially
dilutive securities:
Stock options (at exercise prices of
$19.75 to $60.125) 3,596,005 -
Series D preferred stock (conversion price $23.00) 1,701,476 1,701,476
Subscription rights on Series D preferred stock 1,444 -
Warrants (exercise price $25.00 and $50.00) 3,014,605 -
7-1/4% Convertible Subordinated Capital Notes
(conversion price $50.51) 89,527 -
- --------------------------------------------------------------------------------------------------------------------------------
Total common shares issuable 8,403,057 1,701,476
Common shares issued and outstanding 63,477,793 63,477,793
- --------------------------------------------------------------------------------------------------------------------------------
Total common shares outstanding or issuable 71,880,850 65,179,269
- --------------------------------------------------------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the Corporation's 1993
Annual Report to Shareholders in the Financial Summary on page 17, in the
Overview of 1993 results on pages 18 and 19, in the Significant events in 1993
on
23
24
ITEM 6. SELECTED FINANCIAL DATA (continued)
page 19, in note 1 of Notes to Financial Statements on pages 47 through 49, and
in the Consolidated Balance Sheet -- Average Balances and Interest Yields/Rates
on pages 76 and 77, which portions are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is set forth in the Corporation's 1993
Annual Report to Shareholders in the Financial Review on pages 17 through 42
and in note 16 of Notes to Financial Statements on page 62, which portions are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Item 14 on page 25 hereof for a detailed listing of the
items under Financial Statements, Financial Statement Schedules, and Other
Financial Data which are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item pertaining to directors of the
Corporation is included in the Corporation's proxy statement for its 1994
Annual Meeting of Shareholders (the "1994 Proxy Statement") in the Election of
Directors-Biographical Summaries of Nominees section on pages 3 through 5, and
is incorporated herein by reference. The information required by this Item
pertaining to executive officers of the Corporation has been included in Part I
of this Form 10-K under the heading "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the 1994 Proxy Statement
in the Directors' Compensation section on pages 7 and 8 and in the Executive
Compensation section on pages 13 through 21, and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in the 1994 Proxy Statement
in the Beneficial Ownership of Stock section on pages 10 through 12, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in the 1994 Proxy Statement
in the Business Relationships; Related Transactions and Certain Legal
Proceedings section on pages 8 and 9, and is incorporated herein by reference.
24
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The financial statements and schedules required for the Annual Report of
the Corporation on Form 10-K are included, attached or incorporated by
reference as indicated in the following index. Page numbers below refer
to pages of the Financial Section of the Corporation's 1993 Annual Report
to Shareholders:
(i) Financial Statements Page No.
Mellon Bank Corporation (and its subsidiaries):
Consolidated Income Statement 43
Consolidated Balance Sheet 44
Consolidated Statement of Cash Flows 45
Consolidated Statement of Changes in Shareholders' Equity 46
Notes to Financial Statements 47 through 74
Report of Independent Auditors 75
(ii) Financial Statement Schedules
Schedules I and II and all other schedules are omitted either because
they are not required or are not applicable, or because the required
information is shown in the financial statements or notes thereto.
(iii) Other Financial Data
Selected Quarterly Data 42
(b) Current Reports on Form 8-K during the fourth quarter of 1993:
A report dated October 12, 1993, which included the Corporation's press
release regarding third quarter and year-to-date 1993 financial results.
A report dated October 19, 1993, which included the Corporation's press
release announcing the redemption of the Corporation's Series B Preferred
Stock and 8.6% Debentures Due 2009. Also included in this filing was a
second press release announcing the Corporation's expectation to
repurchase up to 1 million shares of its common stock.
A report dated November 16, 1993, which included the Corporation's press
release announcing the increase in the Corporation's common stock
dividend and the elimination of the discount offered on purchases made
under the Corporation's Dividend Reinvestment and Common Stock Purchase
Plan.
A report dated December 1, 1993, which included the Corporation's press
release announcing that an injunction had been granted to the Corporation
against Smith Barney Shearson Inc. in its mutual fund administration
case. Also included in this filing was a second press release announcing
that the Corporation completed the sale of two of its outsourcing
businesses to FIserv, Inc.
A report dated December 2, 1993, which included a joint press release of
the Corporation and Electronic Payment Services, Inc. (EPS) announcing
that the Corporation intends to become an equity partner in EPS.
A report dated December 6, 1993, which included a joint press release of
the Corporation and The Dreyfus Corporation announcing the definitive
agreement to merge the two entities.
(c) Exhibits
The exhibits listed on the Index to Exhibits on pages 27 through 31
hereof are incorporated by reference or filed herewith in response to
this item.
25
26
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Corporation has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Mellon Bank Corporation
By: /s/ Frank V. Cahouet
--------------------------
Frank V. Cahouet
Chairman, President
and Chief Executive
Officer
DATED: March 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Corporation and in the capacities and on the dates indicated:
Signature Capacities
- ----------------------------------------- ---------------------------
By: /s/ Frank V. Cahouet
------------------------------------ Director and Principal
Frank V. Cahouet Executive Officer
By: /s/ Steven G. Elliott
----------------------------------- Principal Financial Officer
Steven G. Elliott and Principal Accounting
Officer
Burton C. Borgelt; Carol R. Brown; Directors
J. W. Connolly; Charles A. Corry;
C. Frederick Fetterolf; Ira J. Gumberg;
Pemberton Hutchinson; Rotan E. Lee;
John C. Marous; Andrew W. Mathieson;
Robert Mehrabian; Seward Prosser Mellon;
David S. Shapira; H. Robert Sharbaugh;
Richard M. Smith; W. Keith Smith;
Joab L. Thomas; Wesley W. von Schack;
and William J. Young
By: /s/ James M. Gockley DATED: March 23, 1994
------------------------------
James M. Gockley
Attorney-in-fact
26
27
Index to Exhibits
Exhibit
No. Description Method of Filing
- ------- --------------------------------- -----------------------------------
3.1 Restated Articles of Incorporation of Previously filed as Exhibit 3.1 to
Mellon Bank Corporation, as amended the Quarterly Report on Form 10-Q for
and restated as of September 2, 1993. quarter ended September 30, 1993, and
incorporated herein by reference.
3.2 Statement Affecting Series B Preferred Filed herewith
Stock, $1.00 Par Value.
3.3 By-Laws of Mellon Bank Corporation, Previously filed as Exhibit 3.2 to
as amended, effective July 17, 1990. Annual Report on Form 10-K for the
year ended December 31, 1990, and
incorporated herein by reference.
4.1 Instruments defining the rights See Exhibits 3.1, 3.2 above
of securities holders. and the undertaking on page 31.
4.2 Shareholder Protection Rights Agreement Previously filed as Exhibit 1 to Form
between Mellon Bank Corporation and 8-A Registration Statement dated
Mellon Bank, N.A., as Rights Agent, August 15, 1989, and incorporated
dated as of August 15, 1989. herein by reference.
4.3 Form of Warrant Agreement and Form Previously filed as Exhibit 4.1
of Warrant Certificate. to Registration Statement on Form
S-3 (Registration No. 33-61822) and
is incorporated herein by reference.
10.1 Purchase Agreement, dated as of Previously filed as Exhibit 10.1
July 25, 1988, among Mellon Bank to Quarterly Report on Form 10-Q
Corporation (as Seller) and Warburg, for the quarter ended September 30,
Pincus Capital Company, L.P. and 1988, and incorporated herein by
Warburg, Pincus Capital Partners, reference.
L.P. (as Purchasers) relating to the
sale and purchase of Mellon Series D
Junior Preferred Stock.
10.2 Purchase Agreement, dated as of Previously filed as Exhibit 10.2
July 25, 1988, between Mellon Bank to Quarterly Report on Form 10-Q for
Corporation (as Seller) and Drexel the quarter ended September 30,
Burnham Lambert Incorporated (as 1988, and incorporated herein by
Purchaser) relating to the sale reference.
and purchase of Mellon Series
D Junior Preferred Stock.
27
28
Index to Exhibits (continued)
Exhibit
No. Description Method of Filing
- ------- ----------------------------------- -------------------------------
10.3 Exchange Agreement dated as of Previously filed as Exhibit 10.4
March 30, 1990, between Warburg, to Annual Report on Form 10-K for
Pincus Capital Company, L. P., the year ended December 31, 1990,
Warburg, Pincus Capital Partners, and incorporated herein by
L. P. and Mellon relating to the reference.
exchange of Series D Preferred Stock
for shares of Mellon's Common Stock.
10.4 Lease dated as of February 1, 1983, Previously filed as Exhibit 10.4
between 500 Grant Street Associates to Annual Report on Form 10-K for
Limited Partnership and Mellon the year ended December 31, 1992,
Bank, N.A. with respect to One Mellon and incorporated herein by
Bank Center. reference.
10.5 First Amendment to Lease Agreement Previously filed as Exhibit 10.1
dated as of November 1, 1983, to Registration Statement on Form
between 500 Grant Street S-15 (Registration No. 2-88266)
Associates Limited Partnership and incorporated herein by
and Mellon Bank, N.A. reference.
10.6* Mellon Bank Corporation Profit Previously filed as Exhibit 10.7
Bonus Plan, as amended. to Annual Report on Form 10-K for
the year ended December 31, 1990,
and incorporated herein by reference.
10.7* Mellon Bank Corporation Long-Term Previously filed as Exhibit 10.1 to
Profit Incentive Plan (1981), Quarterly Report on Form 10-Q for
as amended. the quarter ended June 30, 1993,
and incorporated herein by reference.
10.8* Mellon Bank Corporation Stock Previously filed as Exhibit 10.2
Option Plan for Outside Directors to Quarterly Report on Form 10-Q for
(1989), as amended. the quarter ended June 30, 1993, and
incorporated herein by reference.
10.9* Mellon Bank Corporation 1990 Previously filed as Exhibit 19.1
Elective Deferred Compensation Plan to Quarterly Report on Form 10-Q
for Directors and Members of the for the quarter ended September 30,
Advisory Board, as amended and 1992, and incorporated herein by
restated, effective July 21, 1992. reference.
10.10* Mellon Bank Corporation Elective Previously filed as Exhibit 19.2
Deferred Compensation Plan for to Quarterly Report on Form 10-Q
Senior Officers, as amended and for the quarter ended September 30,
restated, effective July 21, 1992. 1992, and incorporated herein by
reference.
* Management contract or compensatory plan arrangement.
28
29
Index to Exhibits (continued)
Exhibit
No. Description Method of Filing
- ------- --------------------------------- -----------------------------------
10.11* Mellon Bank IRC Section 401(a)(17) Previously filed as Exhibit 10.11 to
Plan, as amended and restated, effective Annual Report on Form 10-K for year
January 1, 1993. ended December 31, 1992, and
incorporated herein by reference.
10.12* Mellon Bank Optional Life Previously filed as Exhibit 10.12 to
Insurance Plan, effective January 1, Annual Report on Form 10-K for year
1993. ended December 31, 1992, and
incorporated herein by reference.
10.13* Mellon Bank Executive Life Previously filed as Exhibit 10.13 to
Insurance Plan, effective January 1, Annual Report on Form 10-K for year
1993. ended December 31, 1992, and
incorporated herein by reference.
10.14* Mellon Bank Senior Executive Previously filed as Exhibit 10.14 to
Life Insurance Plan, effective Annual Report on Form 10-K for year
January 1, 1993. ended December 31, 1992, and
incorporated herein by reference.
10.15* Employment Agreement between Previously filed as Exhibit 10.1
Mellon Bank, N.A. and Frank V. to Quarterly Report on Form 10-Q
Cahouet, effective as of for the quarter ended September 30,
July 25, 1993. 1993, and incorporated herein by
reference.
10.16* Employment Agreement between Previously filed as Exhibit 10.2
Mellon Bank, N.A. and to Quarterly Report on Form 10-Q
W. Keith Smith, effective as of for the quarter ended September 30,
July 25, 1993. 1993, and incorporated herein by
reference.
10.17 Revolving Credit Agreement dated Filed herewith
as of July 23, 1993, among Mellon
Financial Company, Mellon Bank
Corporation, the Banks listed
therein and The Chase Manhattan
Bank (National Association) as Agent.
10.18 Stock Purchase Agreement dated as Previously filed as Exhibit 2.1
of September 14, 1992, between to Current Report on Form 8-K
Shearson Lehman Brothers Inc. and dated September 14, 1992, and
the Corporation (including the form incorporated herein by reference.
of Warrant Agreement attached
thereto as Exhibit C).
* Management contract or compensatory plan arrangement.
29
30
Index to Exhibits (continued)
Exhibit
No. Description Method of Filing
- ------- --------------------------------- --------------------------------
10.19 Agreement and Plan of Merger dated Omitted. Confidential treatment
as of December 5, 1993, by and among requested pursuant to Rule 24b-2.
Mellon Bank Corporation, Mellon Filed separately with the Commission.
Bank, N.A., XYZ Sub Corporation and
The Dreyfus Corporation
11.1 Computation of Primary and Fully Filed herewith
Diluted Net Income Per Common Share.
12.1 Computation of Ratio of Earnings Filed herewith
to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges
and Preferred Stock Dividends--parent
Corporation.
12.2 Computation of Ratio of Earnings Filed herewith
to Fixed Charges and Ratio of
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends--Mellon Bank Corporation
and its subsidiaries.
13.1 All portions of the Mellon Bank Corporation Filed herewith
1993 Annual Report to Shareholders that
are incorporated herein by reference.
21.1 List of Subsidiaries of the Filed herewith
Corporation.
23.1 Consent of Independent Accountants. Filed herewith
24.1 Powers of Attorney. Filed herewith
30
31
Index to Exhibits (continued)
The documents identified below, which define the rights of holders of long-term
debt of the Corporation, are not filed herewith as the total amount of
securities authorized under each of them does not exceed 10% of the total
assets of the Corporation and its subsidiaries on a consolidated basis. The
Corporation hereby agrees to furnish a copy of such documents to the Securities
and Exchange Commission upon request.
1 Indenture dated as of September 10, 1987, between the Corporation
and Bank of New York, as Trustee, relating to 7-1/4% Convertible
Subordinated Capital Notes Due 1999.
2 Indenture dated as of May 2, 1988, as supplemented by the First
Supplemental Indenture dated as of November 29, 1990, among Mellon
Financial Company, the Corporation and The Chase Manhattan Bank
(National Association), as Trustee, providing for the issuance of
debt securities in series from time to time.
3 Fiscal Agency Agreement dated as of July 14, 1989, between the
Corporation, as Issuer, and Chemical Bank, as Fiscal Agent,
relating to U.S. $200,000,000 Floating Rate Notes Due July 1994.
4 Indenture dated as of April 15, 1991, as supplemented by the First
Supplemental Indenture dated as of November 24, 1992, among Mellon
Financial Company, the Corporation and Continental Bank, National
Association, providing for the issuance of subordinated debt
securities in series from time to time.
5 Fiscal and Paying Agency Agreement dated as of May 17, 1993,
between Mellon Bank, N.A. as Issuer, and The Chase Manhattan Bank
(National Association), as Fiscal and Paying Agent relating to
6-1/2% Subordinated Notes due August 1, 2005 and 6-3/4%
Subordinated Notes due June 1, 2003.
31