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THIS REPORT HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION VIA EDGAR
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1994
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
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Common Stock, $0.50 Par Value New York Stock Exchange
Rights to Purchase Common Stock 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. [ ]
As of February 15, 1995, there were 146,728,316 shares outstanding of the
registrant's voting common stock, $0.50 par value per share, of which
144,415,293 common shares having a market value of $5,415,573,488 were held by
nonaffiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in the
following parts of this Annual Report.
Mellon Bank Corporation 1995 Proxy Statement-Part III
Mellon Bank Corporation 1994 Annual Report to Shareholders-Parts I, II
and IV
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The Form 10-K filed with the Securities and Exchange Commission contains the
Exhibits listed on the Index to Exhibits beginning on page 26, 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 1994 Annual Report to Shareholders. Copies of the
Registrant's 1994 Annual Report to Shareholders and the Proxy Statement for its
1995 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
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MELLON BANK CORPORATION
Form 10-K Index
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PART I Page
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Item 1. Business
Description of Business 4
Supervision and Regulation 7
Competition 10
Employees 10
Statistical Disclosure by Bank Holding Companies 10
Item 2. Properties 17
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Executive Officers of the Registrant 20
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 22
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 23
PART III
Item 10. Directors and Executive Officers of the Registrant 23
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners and Management 23
Item 13. Certain Relationships and Related Transactions 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 24
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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 Pennsylvania, Massachusetts, Delaware, Maryland, and New Jersey.
Other subsidiaries are located in key business centers throughout the United
States and abroad. At December 31, 1994, the Corporation was the twenty-fourth
largest bank holding company in the United States in terms of assets.
The Corporation's principal direct subsidiaries are Mellon Bank, N.A. ("Mellon
Bank"), The Boston Company, Inc. ("TBC"), Mellon Bank (DE) National
Association, Mellon Bank (MD), Mellon PSFS Bancorporation and a number of
companies known as Mellon Financial Services Corporations. The Corporation
also owns a federal savings bank located in New Jersey, Mellon Bank, F.S.B.
The Dreyfus Corporation ("Dreyfus"), one of the nation's largest mutual fund
companies, is a wholly owned subsidiary of Mellon Bank. The Corporation's
banking subsidiaries engage in retail banking, commercial banking, trust and
investment management services, residential real estate loan financing,
mortgage servicing, mutual fund and various securities-related activities.
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 August 24, 1994, Mellon Bank acquired Dreyfus as an operating subsidiary.
Dreyfus, headquartered in New York, New York, serves primarily as an investment
adviser and manager of mutual funds.
TBC, through Boston Safe Deposit and Trust Company and other subsidiaries,
engages in the business of institutional trust and custody, institutional asset
management, private investment management and banking services. TBC is
headquartered in Boston, Massachusetts.
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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. Mellon
Bank, F.S.B., headquartered in Paramus, New Jersey, serves consumer and small
to mid-sized commercial markets.
On September 20, 1994, the Corporation acquired Glendale Bancorporation, a bank
holding company located in Voorhees, New Jersey. Its subsidiaries, Glendale
National Bank of New Jersey ("Glendale NJ") and Glendale Bank of Pennsylvania
("Glendale PA"), are now subsidiaries of Mellon PSFS Bancorporation. Glendale
NJ, which is a national bank, and Glendale PA, which is a
Pennsylvania-chartered bank, serve consumer and small commercial markets in
southern New Jersey and eastern Pennsylvania.
The Corporation's banking subsidiaries operate 1,060 domestic retail banking
locations, including 449 retail offices. The deposits of the national banking
subsidiaries, Boston Safe Deposit and Trust, Mellon Bank (MD), Glendale PA and
Mellon Bank, F.S.B. 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 and numerous trust and
investment management services. The types of financial products and services
offered by the Corporation's subsidiaries are subject to change.
For analytical purposes, management has focused the Corporation into four core
business sectors: Consumer Investment Services, Consumer Banking Services,
Corporate/Institutional Investment Services and Corporate/Institutional Banking
Services. Further information regarding the Corporation's core business
sectors, as well as certain non-core sectors such as Real Estate Workout, is
presented in the Business Sectors section on pages 10 through 12 of the
Corporation's 1994 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.
Consumer Investment Services
The Corporation provides a broad array of personal trust services, investment
services and retail mutual funds to consumers. These products and services are
offered principally through the Private Asset Management trust group of Mellon
Bank and Boston Safe Deposit and Trust Company, through Dreyfus and throughout
the Corporation's retail banking network.
Consumer Banking Services
The Consumer Banking Services sector includes consumer lending, branch banking,
small business banking, credit card, jumbo residential mortgage lending and
mortgage loan origination and servicing. The consumer lending, branch banking
and small business banking services primarily are offered through the
Corporation's retail banking network which is comprised of 406 branch offices,
42 supermarket facilities, 611 ATM's, 10 loan sales offices and a telephone
banking center. This network is primarily located in the Central Atlantic
region of the United States. This banking network provides a full range of
products to individuals including short- and long-term credit facilities,
credit cards, mortgages, safe deposit facilities and access to ATM's. Jumbo
residential mortgage lending is offered nationally through the private asset
management representative offices. This sector also includes the core
servicing function 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 loans nationwide.
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Description of Business (continued)
Corporate/Institutional Investment Services
The Corporate/Institutional Investment Services sector serves the institutional
markets (including employee benefit plans) by providing institutional trust and
custody, institutional asset and institutional mutual fund management and
administration, securities lending, foreign exchange, cash management and stock
transfer services. The Corporation's subsidiaries provide these trust and
investment management services while operating under the umbrella name "Mellon
Trust." 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. Through the Global
Cash Management department, the Corporation offers a broad range of cash
management services, including remittance processing, collections and
disbursements, check processing and electronic wire transfer services. The
Corporation's subsidiaries also provide services relating to defined
contribution employee benefit plans under the umbrella name "Dreyfus Retirement
Services."
Corporate/Institutional Banking Services
Corporate/Institutional Banking Services includes large corporate and middle
market lending, asset based lending, certain capital markets and leasing
activities, commercial real estate lending and insurance premium financing.
The Corporation provides lending and other institutional banking services to
domestic and selected international markets through its Corporate Banking,
Institutional Banking, Capital Markets and Leasing departments. These markets
generally include large domestic commercial and industrial customers, U.S.
operations of foreign companies, multinational corporations, state and local
governments 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 placement and money market
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 and provides corporate banking and capital markets services. Included
in this sector is a nationwide asset based lending division which provides
secured lending, principally through accounts receivable and inventory
financing. As part of this sector, Middle Market Banking serves companies with
annual sales between $10 million and $250 million and the health care industry
on a national basis.
Real Estate lending consists of the Corporation's commercial real estate
lending activities, through which it originates financing for residential,
commercial, multi-family and other products.
The Corporation provides property and casualty insurance premium financing to
small, mid-size and large companies in the United States through the AFCO
Credit Corporation and in Canada through CAFO.
The 1994 Annual Report to Shareholders summarizes principal locations and
operating entities on pages 84 through 86, 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, 1994.
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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. As a result of its 1994 acquisition of Dreyfus and
its subsidiary that is now Mellon Bank, F.S.B., the Corporation is also
regulated under the Home Owner's Loan Act of 1933 as a savings and loan holding
company.
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; Mellon Bank (MD) is subject to supervision, regulation and examination
by the Federal Reserve Board and the State of Maryland; Glendale PA is subject
to supervision, regulation and examination by the Federal Reserve Board; and
Mellon Bank, F.S.B. is subject to supervision, regulation and examination by
the Office of Thrift Supervision ("OTS"). Mellon Securities Trust Company,
Dreyfus 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 subsidiaries engaged in securities related activities are
regulated by the Securities and Exchange Commission (the "SEC"). Dreyfus
Investment Services Corporation, 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. Dreyfus Service Corporation, a subsidiary of
Dreyfus, acts as a broker/dealer for the sale of shares of the Dreyfus family
of mutual funds. Dreyfus Investment Services Corporation, Mellon Investment
Products Company and Dreyfus Service Corporation 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. They are also subject to various federal and state laws and regulations
and to the laws of any countries in which they do business. These laws and
regulations are primarily intended to benefit clients and fund shareholders and
generally grant supervisory agencies broad administrative powers, including the
power to limit or restrict the carrying on of business for failure to comply
with such laws and regulations. In such event, the possible sanctions which
may be imposed include the suspension of individual employees, limitations on
engaging in business for specific periods, the revocation of the registration
as an investment advisor, censures and fines. Each investment company (as
defined in the Investment Company Act of 1940) which is advised by a subsidiary
of the Corporation, including the Dreyfus family of mutual funds, is registered
with the SEC, and the shares of most are qualified for sale in all states in
the United States and the District of Columbia, except for investment companies
offered only to residents of a particular state or of a foreign country and
except for certain other investment companies which are exempt from such
registration or qualification.
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 system 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, reserves, loans and investments, and
rates of interest that can be charged on loans. 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 businesses. Set forth below are brief descriptions of selected laws and
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Supervision and Regulation (continued)
regulations applicable to the Corporation and its subsidiaries. The references
are not intended to be complete and are qualified in their entirety by
reference to the statutes and regulations themselves. Changes in applicable
law or regulation may have a material effect on the business of the
Corporation.
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 that has a reciprocal
law. On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was enacted into Federal law.
Under the Interstate Act, commencing on September 29, 1995, bank holding
companies will be permitted to acquire banks located in any state regardless of
the state law in effect at the time. The Interstate Act also provides for the
nationwide interstate branching of banks. Under the Interstate Act, both
national and state-chartered banks will be permitted to merge across state
lines (and thereby create interstate branches) commencing June 1, 1997. States
are permitted to "opt-out" of the interstate branching authority by taking
action prior to the commencement date. States may also "opt-in" early (i.e.,
prior to June 1, 1997) to the interstate branching provisions.
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 17 of
the Notes to Financial Statements on page 66 of the Corporation's 1994 Annual
Report to Shareholders. This note is incorporated herein by reference.
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, Mellon Bank (MD), Glendale PA and the Corporation's non-bank
subsidiaries, including Mellon Securities Trust Company, a member of the
Federal Reserve System. The FDIC has similar authority with respect to BSDT
and the OTS has similar authority with respect to Mellon Bank, F.S.B.
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. On January 31, 1995, the FDIC staff
proposed a reduction in the assessment rates applicable to the BIF (but not in
rates applicable to the Savings Association Insurance Fund). For well
capitalized institutions, the premium would be reduced by 83% from the current
23 cents for every $100 of deposits to 4 cents per $100 of deposits. If
adopted, the proposal would not be expected to become effective before the
second half of 1995.
The Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA")
contains a "cross-guarantee" provision that 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.
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Supervision and Regulation (continued)
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, 1994, 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
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 recent years, regulatory guidelines have been adopted, and legislation
has been 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. Various other legislation, including proposals to
restructure the banking regulatory system and the separation of banking from
certain securities and other commercial activities, 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.
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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 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 Corporate/Institutional Investment Services business sector, the
Corporation competes with a wide range of technologically capable service
providers, such as data processing and outsourcing firms.
In terms of domestic deposits, Mellon Bank is the second largest commercial
banking institution in Pennsylvania where it competes with approximately 250
commercial banks, 130 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 40 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 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 25,000 full-time
equivalent employees in December 1994.
Statistical Disclosure by Bank Holding Companies
All prior years' amounts have been restated to reflect the merger with Dreyfus
in August 1994, which was accounted for as a pooling of interests. Per share
amounts have also been restated to reflect the three-for-two common stock split
in November 1994.
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 1994 Annual Report to Shareholders in the Consolidated
Balance Sheet -- Average Balances and Interest Yields/Rates on pages
82 and 83, and in Net Interest Revenue, on page 13, which is
incorporated herein by reference.
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Statistical Disclosure by Bank Holding Companies (continued)
RATE/VOLUME VARIANCE ANALYSIS
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Year ended December 31,
1994 over (under) 1993 1993 over (under) 1992
Due to change in Net Due to change in Net
(in millions) Rate Volume change Rate Volume change
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Increase (decrease) in interest
revenue from interest-earning
assets:
Interest-bearing deposits with banks $ 12 $ (36) $ (24) $ (5) $ 28 $ 23
Federal funds sold and securities
purchased under agreements to resell 14 (38) (24) (4) 31 27
Other money market investments 2 (12) (10) (8) 7 (1)
Trading account securities 2 7 9 (3) (3) (6)
Securities:
U.S. Treasury and agency securities 9 34 43 (100) (97) (197)
Obligations of states and political
subdivisions 1 (4) (3) (1) 1 -
Other 1 (8) (7) (9) (11) (20)
Loans (includes loan fees) 83 255 338 (143) 266 123
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Total 124 198 322 (273) 222 (51)
Increase (decrease) in interest
expense on interest-bearing
liabilities:
Deposits in domestic offices:
Demand 2 - 2 (44) 6 (38)
Money market and other savings accounts 27 15 42 (107) 60 (47)
Retail savings certificates 32 (33) (1) (82) (1) (83)
Other time deposits - (11) (11) (3) (2) (5)
Deposits in foreign offices 7 45 52 (14) 5 (9)
Federal funds purchased and securities
sold under agreements to repurchase 17 26 43 (6) (17) (23)
Other short-term borrowings 5 26 31 1 (17) (16)
Notes and debentures (with original
maturities over one year) 2 (13) (11) (12) 39 27
- -----------------------------------------------------------------------------------------------------------------------
Total 92 55 147 (267) 73 (194)
- -----------------------------------------------------------------------------------------------------------------------
Increase in net
interest revenue $ 32 $ 143 $ 175 $ (6) $ 149 $ 143
- -----------------------------------------------------------------------------------------------------------------------
Note: Amounts are calculated on a taxable equivalent basis where applicable, at
tax rates approximating 35% in 1994 and 1993 and 34% in 1992, 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. Carrying values of securities at year-end are as follows:
- --------------------------------------------------------------------------------------
INVESTMENT SECURITIES
December 31,
(in millions) 1994 1993 1992
- --------------------------------------------------------------------------------------
U.S. Treasury and agency securities $3,045 $1,897 $2,023
Obligations of states and political
subdivisions 70 129 155
Other securities:
Other mortgage-backed securities 48 85 126
Bonds, notes and debentures 29 85 6
Stock of Federal Reserve Bank 50 44 38
Other 2 192 277
- --------------------------------------------------------------------------------------
Total other securities 129 406 447
- --------------------------------------------------------------------------------------
Total securities $3,244 $2,432 $2,625
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
December 31,
(in millions) 1994 1993 1992
- --------------------------------------------------------------------------------------
U.S. Treasury and agency securities $1,739 $2,857 $3,381
Obligations of states and political
subdivisions 1 1 1
Other securities:
Other mortgage-backed securities 9 22 42
Bonds, notes and debentures 12 21 174
Other 120 15 15
- --------------------------------------------------------------------------------------
Total other securities 141 58 231
- --------------------------------------------------------------------------------------
Total securities $1,881 $2,916 $3,613
- --------------------------------------------------------------------------------------
B. Maturity Distribution of Securities
Information required by this section of Guide 3 is presented in the
Corporation's 1994 Annual Report to Shareholders in note 3 of Notes to
Financial Statements on Securities on pages 52 through 54, 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 section of the Corporation's 1994 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, 1994
----------------------------------------------------------------------------------------------------
(in millions) Within 1 year (a) 1-5 years Over 5 years Total
----------------------------------------------------------------------------------------------------
Domestic:(b)
Commercial and financial $4,387 $3,660 $1,968 $10,015
Commercial real estate 450 778 396 1,624
----------------------------------------------------------------------------------------------------
Total domestic 4,837 4,438 2,364 11,639
International 483 87 193 763
----------------------------------------------------------------------------------------------------
Total $5,320 $4,525 $2,557 $12,402
----------------------------------------------------------------------------------------------------
Note: Maturity distributions are based on remaining contractual
maturities.
(a) Includes demand loans and loans with no stated maturity.
(b) Excludes consumer mortgages, other consumer credit and lease
finance assets.
Sensitivity of loans at December 31, 1994 to Changes in Interest Rates
-----------------------------------------------------------------------------------------------
Domestic International
(in millions) operations (a) operations Total
-----------------------------------------------------------------------------------------------
Loans due in one year or less (b) $ 4,837 $483 $ 5,320
Loans due after one year:
Variable rates 5,895 173 6,068
Fixed rates 907 107 1,014
-----------------------------------------------------------------------------------------------
Total loans $11,639 $763 $12,402
-----------------------------------------------------------------------------------------------
Note: Maturity distributions are based on remaining contractual
maturities.
(a) Excludes consumer mortgages, other consumer credit and lease
finance assets.
(b) Includes demand loans and loans with no stated maturity.
C. Risk Elements
Information required by this section of Guide 3 is presented in the
Corporation's 1994 Annual Report to Shareholders in the Credit Risk
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 specific and general economic
factors that may adversely affect loan collectibility. Other factors
considered in determining the level of the reserve include: trends in
portfolio volume, quality, maturity and composition; historical loss
experience; lending policies; new products; the status and amount of
nonperforming and past-due loans; adequacy of collateral; and current,
as well as anticipated specific and general economic factors that may
affect certain borrowers. 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,
(in millions) 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------
Domestic reserve:
Commercial and financial $195 $182 $170 $193 $163
Real estate:
Commercial 157 189 212 277 242
Consumer 75 91 18 9 9
Consumer credit 141 102 83 77 48
Lease financing 17 15 4 6 6
----------------------------------------------------------------------------------------------------------
Total domestic reserve 585 579 487 562 468
International reserve 22 21 19 34 57
----------------------------------------------------------------------------------------------------------
Total reserve $607 $600 $506 $596 $525
----------------------------------------------------------------------------------------------------------
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 1990-1994 are set forth in the Financial Section of the
Corporation's 1994 Annual Report to Shareholders in the Credit Risk
section on pages 31 and 32, 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 49 and in
note 5 on page 54; 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,
1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------------------
Domestic loans:
Commercial and financial 37.5% 37.2% 40.7% 43.3% 43.2%
Real estate:
Commercial 6.1 7.0 9.4 10.3 11.8
Consumer 32.5 33.4 21.4 17.3 15.6
Consumer credit 18.1 15.6 18.1 18.4 17.5
Lease financing 3.0 2.9 3.2 3.4 3.7
--------------------------------------------------------------------------------------------------------------
Total domestic loans 97.2 96.1 92.8 92.7 91.8
International loans 2.8 3.9 7.2 7.3 8.2
--------------------------------------------------------------------------------------------------------------
Total loans 100.0% 100.0% 100.0% 100.0% 100.0%
--------------------------------------------------------------------------------------------------------------
V. Deposits
----------------------------------------------------------------------------------------------------------------
Maturity distribution of domestic time deposits at December 31, 1994
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 $ 411 $ 159 $ 201 $ 181 $ 952
Time certificates of deposit in denominations
of less than $100,000 1,570 1,441 1,335 1,587 5,933
----------------------------------------------------------------------------------------------------------------
Total time certificates of deposit 1,981 1,600 1,536 1,768 6,885
----------------------------------------------------------------------------------------------------------------
Other time deposits in denominations
of $100,000 or greater 1 3 4 12 20
Other time deposits in denominations
of less than $100,000 22 - - - 22
----------------------------------------------------------------------------------------------------------------
Total other time deposits 23 3 4 12 42
----------------------------------------------------------------------------------------------------------------
Total domestic time deposits $2,004 $1,603 $1,540 $1,780 $6,927
----------------------------------------------------------------------------------------------------------------
The majority of foreign deposits of approximately $3.5 billion at
December 31, 1994, were in amounts in excess of $100,000. Additional
information required by this section of Guide 3 is set forth in the
Corporation's 1994 Annual Report to Shareholders in Consolidated
Balance Sheet -- Average Balances and Interest Yields/Rates on pages
82 and 83, which pages are incorporated herein by reference.
15
16
Statistical Disclosure by Bank Holding Companies (continued)
VI. Return on Equity and Assets
Year ended December 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
(1) Return on total assets(a), based on:
Net income 1.14% 1.29% 1.72%
Net income applicable to common
stock(b) .95 1.13 1.56
(2) Return on common shareholders' equity,
based on net income applicable to common stock(b) 9.79 12.08 18.45
Return on total shareholders' equity,
based on net income 10.13 11.61 16.97
(3) Dividend payout ratio of common
stock, based on:
Primary net income per share 54.66 31.28 21.11
Fully diluted net income
per share 54.63 30.94 20.90
(4) Equity to total assets(a),
based on:
Common shareholders' equity 9.68 9.32 8.46
Total shareholders' equity 11.22 11.12 10.12
(a) Computed on a daily average basis.
(b) Computed using net income applicable to common stock after adding
back Series D preferred stock dividends.
VII. Short-Term Borrowings
Information required by this section of Guide 3 is contained in the
Corporation's 1994 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 page 56, 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, 1994,
Mellon Bank occupied approximately 64% 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, 1994,
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, 1994, 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, 1994, 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, 1994,
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, 1994.
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,
1994, 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, 1994, 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, 238,426 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, 1994, The Boston Company also occupies space in three office
buildings in the Wellington Business Center located in Medford, Massachusetts,
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 was recently vacated by a
third-party tenant and The Boston Company intends to use this space for growth.
Finally, The Boston Company leases approximately 36,000 square feet of rentable
space in the building known as Wellington I.
New York properties
The Dreyfus Corporation leases 268,859 square feet at 200 Park Avenue in New
York City. The majority of this lease runs until March 2005. Other than a
sublease for 9,003 square feet, all of the space is currently occupied by
Dreyfus.
In Uniondale, New York, Dreyfus leases 126,260 square feet for its telephone
sales and support area in EAB Plaza. This space is 100% occupied by Dreyfus.
17
18
PROPERTIES (continued)
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.
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, and 42,000 square feet in Pencader, Delaware, for a
credit card operations center.
Mellon Bank (MD) leases approximately 40% of an office building in Rockville,
Maryland, which is used for its headquarters.
Glendale National Bank of New Jersey owns a three-story office building located
in Camden County, New Jersey, known as the Glendale Building. The building
comprises approximately 27,000 square feet which is 100% occupied by the bank.
The banking subsidiaries' branches are located in 33 counties in western,
northwestern, central, northeastern and eastern Pennsylvania, all three of
Delaware's counties, two counties in New Jersey, four Maryland counties in the
northern suburbs of Washington, D.C. and a single retail branch in Boston,
Massachusetts. At December 31, 1994, the banking subsidiaries of the
Corporation owned 218 of the Corporation's 449 bank branch buildings and leased
the remainder with leases expiring at various times through the year 2020.
Other subsidiaries of the Corporation lease office space primarily for their
operations at many of the locations listed on pages 84 through 86 of the
Principal Locations and Operating Entities Section of the Corporation's 1994
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 pages 54 and 55 of the Corporation's 1994
Annual Report, which note is incorporated herein by reference.
18
19
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, investment, mutual fund, advisory, trust
and other activities. Because of the complex nature of some of these actions
and proceedings, it may be a number of years before such matters ultimately are
resolved. After consultation with legal counsel, management believes that the
aggregate liability, if any, resulting from such pending and threatened actions
and proceedings will not have a material adverse effect on the Corporation's
financial condition.
On November 29, 1994, a shareholder of the Corporation brought a derivative
action in federal court in Pittsburgh, purportedly on behalf of the
Corporation, against various directors of the Corporation. The lawsuit alleges
that those directors breached their fiduciary duty to the Corporation by
grossly mismanaging and wasting corporate assets in connection with the $130
million fourth quarter, after-tax loss to the Corporation as a result of
actions taken in its securities lending business. On March 13, 1995, the
plaintiff on his own motion and without payment from the Corporation or any
other defendent, withdrew the lawsuit.
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 1994.
19
20
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, 1994, 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 62 Chairman, President and Chief Executive 1990 (1)
Officer of the Corporation and of Mellon
Bank
Christopher M. Condron 47 Vice Chairman, Deputy Director Mellon Trust 1994 (2)
Vice Chairman, The Boston Company
Thomas F. Donovan 61 Vice Chairman of the Corporation 1990
and of Mellon Bank
Chairman and Chief Executive Officer 1988
of Mellon PSFS
Steven G. Elliott 48 Vice Chairman and Chief Financial 1992 (3)
Officer of the Corporation and
of Mellon Bank
Treasurer of Mellon Bank Corporation 1990
David R. Lovejoy 46 Vice Chairman, Corporate Strategy and 1994 (4)
Development
Martin G. McGuinn 52 Vice Chairman, Retail Financial Services 1993 (5)
Jeffrey L. Morby 57 Vice Chairman, Wholesale Banking 1990 (6)
Keith P. Russell 49 Vice Chairman, Chief Risk and Credit 1992 (7)
Officer
Chairman, Credit Policy Committee of 1991
Mellon Bank Corporation
W. Keith Smith 60 Vice Chairman, Mellon Trust 1993 (8)
Vice Chairman and Chief Operating 1994
Officer, The Dreyfus Corporation
Chairman and Chief Executive Officer, The 1993
Boston Company
(continued)
20
21
Executive Officers of the Registrant (continued)
Michael K. Hughey 43 Senior Vice President and Controller of 1990 (9)
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 June 1989 to January 1994, Mr. Condron was President of Boston Safe
Deposit and Trust and Executive Vice President of The Boston Company. In
January 1994, he assumed the title of Vice Chairman of The Boston Company
and in November 1994, he assumed the title of Vice Chairman, Deputy
Director, Mellon Trust of the Corporation and of Mellon Bank.
(3) 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.
(4) From July 1970 to December 1990, Mr. Lovejoy worked for Security Pacific
Corporation, where from 1987 to 1990, he was a Vice Chairman and member of
the Office of the Chief Executive. From January 1991 to December 1991, he
was self-employed. From January 1992 to December 1992, he was Chairman
and Chief Executive Officer of Western Energy Management. From January
1993 to October 1994, he was Executive Vice President of Strategic
Planning of Mellon Bank Corporation. In November 1994, Mr. Lovejoy
assumed the title Vice Chairman Corporate Strategy and Development of
Mellon Bank Corporation.
(5) 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.
(6) From June 1988 to January 1990, Mr. Morby was a special consultant to the
Chairman and to the President of Mellon Bank.
(7) 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.
(8) 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.
(9) From 1986 to 1990, Mr. Hughey was Senior Vice President and Director of
Taxes of Mellon Bank.
21
22
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 Corporation's 1994
Annual Report to Shareholders in Liquidity and Dividends on pages 23 and 24, in
Selected Quarterly Data on page 42, in note 17 of Notes to Financial Statements
on page 66 and in Corporate Information on page 90, 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
("voting stock") of the Corporation 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% 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% 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% 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% and 50% 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.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the Corporation's 1994
Annual Report to Shareholders in the Financial Summary on page 5, in the
Significant Events in 1994 on pages 6 and 7, in the Overview of 1994 results on
pages 8 and 9, in note 1 of Notes to Financial Statements on pages 48 through
51, and in the Consolidated Balance Sheet -- Average Balances and Interest
Yields/Rates on pages 82 and 83, 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 1994
Annual Report to Shareholders in the Financial Review on pages 5 through 42 and
in note 17 of Notes to Financial Statements on page 66, which portions are
incorporated herein by reference.
22
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Item 14 on page 24 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 is included in the Corporation's proxy
statement for its 1995 Annual Meeting of Shareholders (the "1995 Proxy
Statement") in the Election of Directors-Biographical Summaries of Nominees and
Continuing Directors section on pages 3 through 6 and in the Additional
Information section on page 24, each of which sections is incorporated herein
by reference, and 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 1995 Proxy Statement
in the Directors' Compensation section on pages 8 and 9 and in the Executive
Compensation section on pages 13 through 23, 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 1995 Proxy Statement
in the Beneficial Ownership of Stock section on pages 11 and 12, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included in the 1995 Proxy Statement
in the Business Relationships; Related Transactions and Certain Legal
Proceedings section on page 10, and is incorporated herein by reference.
23
24
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 1994 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 and 46
Consolidated Statement of Changes in Shareholders' Equity 47
Notes to Financial Statements 48 through 80
Report of Independent Auditors 81
(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 1994:
A Form 8-K/A dated October 17, 1994 (amending Current Report on Form 8-K
dated August 24, 1994), which included the Corporation and Subsidiaries
and The Dreyfus Corporation and Subsidiaries Pro Forma Combined Financial
Statements (unaudited).
A report dated October 18, 1994, which included the Corporation's press
release regarding third quarter and year-to-date 1994 financial results.
A report dated November 28, 1994, which included the Corporation's press
release announcing a one-time charge to earnings to reposition clients'
securities lending investment portfolios and a second press release
announcing that the Board of Directors has authorized the Corporation's
repurchase of up to 3,000,000 shares of its common stock.
A report dated December 19, 1994, which included the Corporation's press
release announcing the upcoming redemption of the Corporation's Series H
Preferred Stock.
(c) Exhibits
The exhibits listed on the Index to Exhibits on pages 26 through 31
hereof are incorporated by reference or filed herewith in response to
this item.
24
25
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: Frank V. Cahouet
-------------------------
Frank V. Cahouet
Chairman, President
and Chief Executive
Officer
DATED: March 14, 1995
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: Frank V. Cahouet Director and Principal
------------------------------------- Executive Officer
Frank V. Cahouet
By: Steven G. Elliott Principal Financial Officer
------------------------------------- and Principal Accounting
Steven G. Elliott Officer
Burton C. Borgelt; Carol R. Brown; Directors
J. W. Connolly; Charles A. Corry;
C. Frederick Fetterolf; Ira J. Gumberg;
Rotan E. Lee; Andrew W. Mathieson;
Edward J. McAniff; Robert Mehrabian;
Seward Prosser Mellon; David S. Shapira;
W. Keith Smith; Howard Stein; Joab L. Thomas;
Wesley W. von Schack; and William J. Young
By: James M. Gockley DATED: March 14, 1995
-------------------------------------
James M. Gockley
Attorney-in-fact
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26
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
and restated as of September 2, 1993. for quarter ended September 30, 1993,
and incorporated herein by reference.
3.2 Statement Affecting Series B Preferred Previously filed as Exhibit 3.2 to the
Stock, $1.00 Par Value. Annual Report on Form 10-K for the
year ended December 31, 1993, and
incorporated herein by reference.
3.3 Statement Affecting Series D Preferred Filed herewith.
Stock, $1.00 Par Value.
3.4 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 and 3.3 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.
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.
26
27
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 Filed herewith.
Profit Incentive Plan (1981),
as adjusted to reflect the Corporation's
three-for-two common stock split
declared in November 1994 (the "Common
Stock Split").
10.8* Mellon Bank Corporation Stock Filed herewith.
Option Plan for Outside Directors
(1989), as adjusted to reflect the
Common Stock Split.
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 Filed herewith.
Deferred Compensation Plan for
Senior Officers, as amended and
restated, effective June 1, 1994.
* Management contract or compensatory plan arrangement.
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28
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* Mellon Bank Corporation Retirement Plan Previously filed as Exhibit 10.2 to
for Outside Directors, effective Quarterly Report on Form 10-Q for
January 1, 1994. the quarter ended March 31, 1994.
10.17* 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.
10.18* Employment Agreement between Previously filed as Exhibits 10.1
Mellon Bank, N.A. and and 10.2 to Quarterly Reports on
W. Keith Smith, effective as of Form 10-Q for the quarters ended
July 25, 1993, and the First September 30, 1993 and
Amendment thereto, effective as of September 30, 1994, respectively, and
August 1, 1994. incorporated herein by
reference.
10.19* The Dreyfus Corporation 1989 Filed herewith.
Non-Qualified Stock Option Plan.
10.20* The Dreyfus Corporation Amended Previously filed as Exhibit 10(iii)(A)
Deferred Compensation Plan. to The Dreyfus Corporation's Annual
Report on Form 10-K for the year
ended December 31, 1992 and
incorporated herein by reference.
* Management contract or compensatory plan arrangement.
28
29
Index to Exhibits (continued)
Exhibit
No. Description Method of Filing
- ------- --------------------------------- --------------------------------
10.21* The Dreyfus Corporation Contingent Filed herewith.
Benefit Plan.
10.22 Revolving Credit Agreement dated Previously filed as Exhibit 10.17
as of July 23, 1993, among Mellon to the Annual Report on Form 10-K
Financial Company, Mellon Bank for the year ended December 31,
Corporation, the Banks listed 1993, and incorporated herein by
therein and The Chase Manhattan reference.
Bank (National Association) as Agent.
10.23 Amendment No. 1 dated as of July 15, Filed herewith.
1994 to the Revolving Credit Agreement
dated as of July 23, 1993, among Mellon
Finance Company, Mellon Bank Corporation,
the Banks listed therein and The Chase
Manhattan Bank (National Association).
10.24 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).
10.25 Agreement and Plan of Merger dated Previously filed as Exhibit 10.19
as of December 5, 1993, by and among to the Annual Report on Form 10-K
Mellon Bank Corporation, Mellon for the year ended December 31,
Bank, N.A., XYZ Sub Corporation and 1993, and incorporated herein by
The Dreyfus Corporation reference.
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
1994 Annual Report to Shareholders that
are incorporated herein by reference.
29
30
Index to Exhibits (continued)
Exhibit
No. Description Method of Filing
- ------- --------------------------------- --------------------------------
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
27.1 Financial Data Schedule. 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 because 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 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.
4 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