ML20239A011
| ML20239A011 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 06/30/1987 |
| From: | Cahouet F MELLON BANK CORP. |
| To: | |
| Shared Package | |
| ML20239A003 | List: |
| References | |
| NUDOCS 8709170015 | |
| Download: ML20239A011 (24) | |
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)In The Second Quu.rter 1987 The Corporation recorded a Service revenue increased by 11 net loss of $566 million, or $24 million, or 19%, from
$20.67 per common share. the second quarter of1986.
The Corporation made a $415 Deposits increased by million addition to the reserve $1.5 billion, or 7%, from for possible credit losses. June 30,1986.' idollar amounts in millions, except per share amounts) 1986 1987 For the three months ended June 30 Net income /(loss) $ 55 $ (566) Net income /(loss) applicable to common stock 51 (570) Dividends on common stock 19 10 Per common share: Net income /(loss) $ 1.87 $ (20.67) Dividends .69 .35 For the six months ended June 30 Net income /(loss) $ 115 $ (626) Net income /(loss) applicable to common stock 109 (634) Dividends on common stock- 38 29 Per common share: Net income /(loss) $ 4.00 $ (22.98) Dividends 1.38 1.04 Balances at June 30 Total assets $36,179 $33,165 Loans and lease finance assets 23,549 21,671 Deposits 21,588 23,081 Common shareholders' equity 1,720 1,097 Second quarter ratios Return on assets (annualizedi .60% *
. Assets to common shareholders' equity 20.0 21.7 Return on common shareholders' equity tannualized) 12.0 %
- Six month ratios Return on assets (annualized) .65%
- Assets to common shareholders' equity 19.9 20.4 Return on common ahawholders' t equity (annualizedi 13.0 %
- Primary capital as a percentage of total assets 6.70 % 6.93c/c
*Not meaningful.
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To Our Shareholders On June 15, Mellon Bank productivity, and to con- Corporation recorded a net Corporation's board of direc- tinue strengthening our loss of $566 million, or tors elected me chairman credit controls. On July 10, $20.67 per common share. and chiefexecutive officer. I we announced the formation Despite this loss, and a proj-assumed this position with of a Profat Improvement ected loss for the full year i enthusiasm as Mellen is one Committee, which has as its 1987, Mellon remains highly ofour country's outstanding mission the reduction of liquid, with ongoing access fmancial services organiza- ongcing expenses. The com. to adequate funding. In ! tions. It is a pleasure to be mittee's initial actions addition, our primary capi-working with the board, include a six month delay of tal ratio was 6.93 percent at management and employees normal merit salary June 30,1987, well above to restore the profitability increases for all exempt the U.S. regulatory require-and industry leadership employees (primarily mana- ment of 5.5 percent. your Corporation has gerial and professional enjoyed throughout its stafD, as well as a six month Organizational Changes history. moratorium on replace- As an initial step in Although this is a chal- ments and additions to realigning the Corporation's lenging time for Mellon, the exempt staff. organizational structure, we Corporation has the ability We also are carefully have formed the Omce of to address its difficulties and evaluating our various busi- the Chairman to replace the emerge stronger than ever, nesses and, where appropri- former Corporate Office. In ensuring its continued role ate, divesting some of those addition to myself, the as a mqior participant in the businesses that are not cen- Office of the Chairman will fmancial services industry. tral to attainment ofour include as metabers Mellon has many strengths objectives. For example, we Anthony P. Terracciano, on which to build its future, have announced plans to whojoined the Corporation including a significant share merge our Florida trust sub- and Mellon Bank, N.A. as of business in our key mar- sidiaries in Boca Raton and president and chiefoperat-kets; a strong base of core Sarasota with SunTrust ing officer, and a director, on deposits; a community bank- Banks, Inc.; agreements to July 24; George T. Farrell, ing network that spans sell branch offices ofour named senior vice chairman much of the Central Atlan- banking subsidiaries; and on July 22; Richard H. tic region, serving 12 million the sale ofour interest in Daniel, vice chairman and households through 350 Network Finance Limited, chiefcredit officer; and W.
' community offices; strong an Australian mortgage Keith Smith, who joined the and enduring relationships banking and real estate Corporation on July 8 as with our customers; company. We are, however, vice chairman and chief advanced technological re-evaluating our previously financial officer.
capabilities; and, above all, announced plan to sell our Mr. Terracciano joins loyal employees with the Chicago-based commercial Mellon from Chase Man-skills and dedication nec- and consumer finance hattan Corporation, where essary to revitalize the operation. he most recently served as Corporation. vice chairtaan of the corpo-The many Mellon Second Quarter Results ration and its principal sub-employees whom I have met C<mcurrent with myjoining sidiary, Chase Manhattan and with whom I have Mellon, the Corporation Bank, N.A. In that capacity, worked sincejoining the announced signifcant Mr. Terracciano was respon-company all share in the action to address problems sible for Chase's worldwide determination to restore the in the loan partfolio. The wholesale business. In his Corporation to strong finan- second quarter provision for years with Chase, which he cial performance. We are possible credit losses was joined in 1964, Mr. confronting our problems $533 million, including a Terracciano held a number realistically and aggres- $415 million increase to the ofsenior management posi-sively, broadening reserve and $118 million in tions, including chief finan-initiatives underway to con- net credit losses. cial officer, and executive trol expenses, to improve For the quarter, the vice president and treasurer. 1
Mr. Farrell, who was Bancorp in 1983, was vice Frank V. Cahouet brings president ofthe Corporation chairman responsible for nearly 30 years ofcommer-and Mellon Bank, N.A. since coordinating retail banking cial banking exp ritnce to
' 1981 and has held a number and small business and mid- his position as chairman ofsenior management posi- die market lending. Mr. and chiefexecutive o$cer of tions sincejoining Mellon in Steere, who was with Mellon Bank Corpomtion.
1955, will continue to Mellon 30 years, was vice Prior tojoining Mellon, Mr. develop major customer chairman responsible for Cahouet was, for the previ-relationships and will be coordinating wholesale ous nine months, president, heavily involved in the com- banking activities world- chiefoperating o$cerand a munities where Mellon is wide. Both men served directorof the Federal prominent. Mellon loyally and contri- National Mortgage Associa-Mr. Smith,52, comes to buted significantly to the tion in Washington, D.C. Mellon from PACCAR, a Corporation. We wish them Previously, Mr. Cahouet manufacturer of heavy-duty well in the future, was chairman, president trucks based in Bellevue, Washington. While at and chiefexecutive o$cer of Acknowledgment Crocker National Corpora-PACCAR, which hejoined in On behalfof the Corpora- tion and its principal sub- 5 September 1986, Mr. Smith tion's management,I would sidiary, Crocker Natwnal managed its finance and like to recognize the efforts Bank. He is credited with leasir.g subsidiaries. He ofNathan W. Pearson, who havingplayed a majorrole joined PACCAR from skillfully guided Mellon as in turning amund Crocker's Crocker National Bank, chairman for almost three performance. where he served as execu- months following the retire- From 1960 until the tive vice president and chief ment ofJ. David Barnes. spring ofl984, Mr. Cahouet financial officer during my Mr. Pearson, whose insights held various positions with two and one-halfyear ten- as a director have benefited Security hei$c Corpomtion ure as Crocker's chairman, the Corporation for more and its principal subsidiary,
' His experience also includes than 15 years, accomplished Security heibe National senior positions with the much in his brief tenure as Bank, ultimately serving as Bank of Montreal,( ntral chairman. I look forward to vice chairman, chieffman.
National Bank in Ch ago, his continued guidance as a Booz Allen & Hamilton, cialo$cer and a member of senior member ofour board the O$ce of the Chairman. Inc., and Haskins & Sells. ofdirectors. Mr. Cahouet, 55, is a Mr. Smith succeeds G. Mr. Pearson's efforts native ofBoston and a grad. Christian Lantzsch, who has typify the spirit ofyour Cor- unte ofHarvard University retired. Mr. Lantzsch had a roration. I can assure you and the Wharton Graduate considerable record of that all of us are committed School ofFinance, Univer-accomplishment in his 18 to seeing that Mellon contin- sity ofPbnnsylvania. years at Mellon, and we ues to effectively serve its wish him wellin retirement. shareholders, customers and As a result of the employees, now and in the restructuring through future. which the Office of the Chairman was formed, Sincerely, Elmer G. Grant and Nor-man M. Steere elected to retire and have resigned their positions as vice chair-men of the Corporation and Mellon Bank, N.A., and as { * . directors of both Frank V, Cahouet organizations. Chairman and Mr. Grant, whojoined ChiefExecutive O$cer Mehen when the Corpora-tion merged with CCB July 24,1987 2
Finr.ncEl Revisw Earnings performance Six months Three months ended June 30, ended June 30, tin millions, except per share amounts! 1986 1987 1986 1987 Net income /(lossi $115 8 (626) $ 55 $ (566) Net income /(loss) applicable to common stock 109 (634) 51 (570) Net income /(loss) per common share 4.00 (22.98) 1.87 (20.67) The Corporation recorded a net loss of $566 million in possible credit losses, $213 million in net credit losses the second quarter of1987, compared with net income and the same factors responsible for the second quarter of $55 million in the second quarter of1986. The net loss, loss was primarily the result of a $533 million provision The net loss for the second quarter ofl987 was for possible credit losses, up substantially from the $79 not reduced by the recognition of related tax benefits. million provision recorded in the second quarter of At June 30,1987, approximately $264 million of 1986. The 1987 provision reflected a $415 million addi- unrecognized tax benefits are available to offset taxes tion to the reserve fur possible credit losres. This on profits earned in future periods. included a $290 million addition to the reserve allo- The Corporation acquired Commonwealth National cated to international operations for losses that may Financial Corporation in April 1986; most of the busi-arise from loans to Lesser Developed Countries. ness of Community Savings and Loan, Inc. of Bethesda, ! Results for the second quarter of1987 also included Maryland, in May 1986; and certain other financial a 19% increase in service revenue, but significantly services companies during 1986 (the " mergers"t The lower gains on the sale ofinvestment securities, lower results ofoperations of these companies were included trading revenue and lower net interest revenue, com- in the Corporation's financial statements from their pared with the prior year. Operating expense increased respective dates of merger. Including the Corporation's in the second quarter ofl987 from the prior year interest cost of carrying its investment in and the con-period, primarily reflecting certain nonrecurring vertible preferred stock dividend requirement associ-expenses, significantly higher net expense of real estate ated with the merged companies, the mergers adversely acquired and the effect ofl986 mergers. affected the Corporation's financial results by $13 mil-The net loss of $626 million for the first half of1987 lion in the first six months ofl987, compared with resulted from a $495 million addition to the reserve for $4 million in the first six months ofl986. Net interest revenue Six months Three months ended June 30, ended June 30, (dollar amounts in millions) 1986 1987 1986 1987 Interest revenue $1,409 $1,269 $706 $641 Interest expense 942 842 465 434 Net interest revenue 467 427 241 207 Taxable equivalent increments to net interest revenue 74 55 36 27 Net interest revenue (taxable equivalent basis) $ 541 $ 482 $277 $234 Net interest margin 3.76 % 3.22 % 3.74 % 3.09 % Net interest revenue, on a taxable equivalent basis, and $10 million for the same periods of1986. The decreased 16% in the second quarter and 11% in the decrease in net interest revenue and the net interest first halfof1987 compared with these periods in 1986. margin also reflected the decreased benefit oflow-cost The decrease in net interest revenue and the net inter- core deposits in the lower rate environment of 1987. est margin resulted principally from the effect of The 1987 change in the federal income tax rate, from l nonperforming loans. The net reduction in interest 46% to 40%, reduced the taxable equivalent yields on revenue that resulted from nonperforming loans tax 4 xempt assets in 1987. This also had an unfavorable totaled $31 million in the second quarter and $49 mil- impact on net interest revenue, on a taxable equivalent f lion for the first halfofl987, compared with $6 million basis, and on the net interest margin. Total average 1 3
o Financial Review continued Net interest revenue continued _ 5terest-earning assets increased $654 million in the Loans and Initial Direct Costs of Leases"), which will second quarter and $1,175 million in the first halfof require the deferral ofcertain loan fees but which wili 1987, compared with the 1986 periods. The increase in permit the deferral of only those incremental direct average interest-earning assets in the first halfor 1987 costs related to loan origination. The Corporation must from the prior year period was primarily due to the mergers. adopt this new accounting standard beginning in 1988. Based on loan fee activity fbr the six months ended Loan fees in excess of the Corporation's estimate of June 30,1987, and assuming no restatement of pnor its loan origination costs are generally deferred and period financial results, the Corporation estimates that amortized over the loan period. In December 1986, the Financial Accounting Standards Board issued State- the application of this statement will reduce pretax income by less than $25 million in the first full year of ment No. 91(" Accounting for the Nonrefundable Fees implementation. and Costs Associated with Originating or Acquiring Service and other revenue Six months Three months Un thousands) ended June 30, ended June 30, 1986 1987 1986 1987 Service revenue: Trust and investment management fees S 84,934 $123,450 $ 48,353 $ 64,447 Cash management fees and deposit transaction charges 38,661 45,779 19,745 Data processing fees 22.095 32,011 39,508 17,414 19,101 Mortgage servicing fees 18,724 Charge service fees 23,386 9,691 12,144 17,505 20,688 9,288 9,990 Letters ofcredit and acceptance financing fees 17,582 16,376 Other 8,858 7,728 23,757 31,890 12,827 14,994 Totalservice evenue 233,174 301,077 Trading revenue: 126,176 150,499 Trading account profits and commissions 11,741 (249) 2,479 2,305 Gains on sale of mortgages and mortgage backed securities (net of market revaluation) 7,426 (13,482) Foreign exchange gains 2,315 (19,960) 4,912 4,259 2,852 3,411 Total trading revenue 24,079 (9.472) 7,646 (14,244) Gains on sale ofinvestment securities 101,103 2,426 Other revenue 50,874 64 11,283 18,186 7,075 13,151 Total service and other revenue $369,639 $312,217 $191,771 $149,470 Service revenue for the second quarter and first half of reflected a larger servicing portfolio in 1987 than in 1986. 1987 increased by $24 million, or 19fc, and $68 million, The declines in trading revenue in the second quar-or 29?o, compared with the prior year periods. The mer-gers contributed $8 million and $30 million to the sec- ter and first half of1987 from the prior year periods pri-marily reflected losses on the sale and revaluation to mar-ond quarter and first halfincreases in service revenue. ket value ofmortgages and mortgage-backed securities. The growth in trust and investment management Losses from securities trading also contributed to the fees in the secont' . arter and first half ofl987 was due decline in trading revenue in the first halfof1987 com-primarily to the ettect of the mergers, increases in serv-pared with the first halfof1986. Gains on the sale of ices provided to employee benefit funds and institutions, investment securities in the second quarter and first and growth in Master Trust / Custody and related serv-half of 1987 were well below the substantial gains of $51 ices. Cash management fees and deposit transaction million and $101 million in the same periods ofl986. charges increased in 1987 due to growth in cash man-Other revenue consisted primarily ofgains on the agement business and a first quarter 1987 increase in sale of equity securities, including gains on the sale of the prices charged fbr these services. Increases in data securities previously acquired in connection with loan processing fees resulted primarily from the effect of the settlements, and gains on the disposition ofother assets, mergers, and increased services to new and existing The 1987 increases from the prior year periods primari-customers. The increase in mortgage servicing fees ly reflected higher gains on the sale ofequity securities. 4
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Provision for possible credit losses Six months Three months ended June 30, ended June 30, (in thousands 1 1986 1987 1986 1987 Provision for possible credit losses $169.154 $708,000 $78,761 $533,000 Net credit losses 103,176 213,309 74,761 118,497 The provision for possible credit losses in the second in the second quarter ofl987 was assigned to the quarter of1987 reflected a $415 million addition to the domestic loan portfolio, principally in response to con-reserve for possible credit losses and $118 million in net tinuing deterioration in the credit quality ofloans to ' credit losses. This compares with a $4 million addition residential real estate developers in the Texas and Colo-to the reserve and net credit losses ofS75 million in the rado markets served by the Corporation's mortgage second quarter ofl986. The reserve for possible credit banking companies. When combined r n the $91 mil-losses totaled $989 million at June 30,1987, and as a lion addition to the domestic reserve in the first quarter percentage ofloans and leases was 4.56%, compared with 2.577, at March 31,1987, and 1.879o at June 30,1986. -which was made to address concerns about loans to t oil and gas related borrowers, loans to commercial and Approximately $290 million of the second quarter residential real estate developers, and loans to some 1987 increase to the reserve was allocated to interna- basic manufacturing companies-this increased the tional operations, which increased the international domestic reserve to 2.9% of domestic loans and leases. reserve to 14% of total international loans. At June 30, Net credit losses in the second quarter and first half 1987, the Corporation's reserve for possible credit losses related to certain Lesser Developed Countries was of1987 included $58 million and $78 million on loans to commercial and residential real estate developers, pri-approximately $435 million, or 27%, of the $1.6 billion marily in the Texas and Colorado markets served by the in outstanding to these countries. Outstanding Corporation's mortgage banking subsidiaries; $26 mil-include loans, acceptances, interest-bearing deposits with other banks, accrued interest and other invest- lion and $56 million on loans to domestic oil and cas related borrowers; and $7 miilion and $27 million on ments. Including prior write-downs on public sector loans to Mexican private sector borrowers. The loans, the Corporation's reserve allocated to these coun-annualized ratios of net credit losses to average loans tries was approximately 29% of outstanding prior to and leases were 2.17% and IS4fo in the second quarter these write-downs. and first halfof1987, compared with 1.307e and .929 in The remaining $125 million increase to the reserve the second quarter and first halfor1986. Operating expense Six months Three months ended June 30, ended June 30, rdollar amounts in thousands) 1986 1987 1986 1987 Salaries and wages
$220,237 $265,625 $117,393 $139,259 Employee benefits 49,469 55,421 26,154 31,183 Net occupancy expense 59,034 63,137 29,999 32,769 Net expense of real estate acquired 2,472 43,890 Equioment expense 1,997 34,029 40,730 43,893 21,212 22,300 Amortization ofgoodwill and other intangibles 10,740 19,368 6,518 11,228 Forms and supplies 14,883 18,139 8,718 10,484 Telephone and telegraph 15,215 14,232 7,874 7,324 FDIC assessment and regulatory examination fees 7,963 9,485 4,109 4,886 Travel 9,951 9,052 5,656 5,046 Shares, capital and franchise taxes 8,482 8,966 4,376 4,731 Other expense 82,458 124,659 46,195 78,826 Total operating expense $521,634 $675,837 $280,201 $382.965 Average full time equivalent staff 17,550' 19,524' 18,750* 19,497
- Prior period amounts have been resta ted to include certain temporary statfequsvalents, the cost of schich is included in salaries and neages expense beginning in the second quarter of 1987. Previously, these costs um included in other expense.
5
C Fiianci;I Revid l-l . continued l l l Operating expense continued Excluding approximately a $37 million increase in fits of the employing subsidiary. nonrecurring expenses in the second quarter of1987, a The board acted to protect the pensions of active L $33 million increase in the net expense of real estate and retired employees and their survivors in the event j required and a $9 million increase from the effect of the of a change ofCorporate control not sanctioned by the m:rgers, operating expense increased by 9% in the sec- board, by providing that all plan members would imme-ond quarter ofl987 compared with the second quarter diately have nonforfeitable rights to their accrued bene- J of1986. For the first halfof1987, operating expense fits. In addition, if plan assets exceed plan liabilities, iners: sed by 6% excluding these items. benefits to both retired and active employees would be Salaries and wages included severance expense of increased. The purpose of the board's action is to ensure
$8 million and $9 million in the second quarter and first that all pension plan assets would be used for the bene-hilfofl987. The effect of the mergers increased salaries fit of plan members in the event of a change of Corpo-and wages by $4 million and $19 million in the second rate control not sanctioned by the board.
qur.rt:r and first halfof1987. Excluding these items, Net expense of real estate acquired in the second salaries and wages increased by $9 million, or 6%,in quarter ofl987 included $32 million of reductions in the second quarter of1987 and by $17 million, or 8%,in the carrying value of real estate acquired, reflecting the the first halfofl987 compared with the prior year. continued deterioration ofcertain commercial and resi-Th:se increases were due to salary increases and higher dential real estate markets. The increase in amortiza-staff 1:vels. Excluding a $3 million accrual for an early tion ofgoodwill and other intangibles from 1986 retir: ment program initiated in the second quarter of reflected the effect of the mergers and a partial w rite-off 1987 as part of an expense reduction program, sever- of the mortgage servicing intangible as a result ofloan i ancs expense and the impact of the mergers, employee prepayments. Decreases in telephone and telegraph, benzfits expense increased by 2% in the second quarter and travel expenses in 1987 resulted from expense of1987, compared with the second quarter of1986. The reduction efforts. Corporation may incur additional severance expense The increase in other operating expense in the sec. during the second halfor1987. ond quarter ofl987, compared with the prior year The board of directors of Mellon Bank Corporation, period, primarily reflected a $15 mi41 ion accrual fbr at its June 15 meeting, took action to provide an addi- uncollectible amounts arising from the Corporation's tional measure ofemployment security for Mellon trust activities; a $6 million increase in unreimbursed Bank Corporation employees. If a change ofCorporate foreclosure expenses associated with the Corporation's control not sanctioned by the board were to occur, mortgage servicing business; a $5 million write-down in employees terminated within the following three years the carrying value of a foreign investment; and a $3 would receive a twelve-month extension of base salary million increase in professional, consulting and legal fees. and benefits in addition to the standard severance bene-Liquidity / Capital A fundamental aspect of the Corporation's asset /liabil- Principal sources of asset liquidity are money mar-ity management strategy is to maintain adequate ket investmer,ts, state and municipal securities and liquidity in order to ibnd assets and repay maturing lia- loans maturing within one year. Average money market bilitics and customer deposits in accordance with their investments increased to $4.2 billion in the second quar-terms. The Corporation maintains adequate liquidity ter ofl987, from $3.0 billion in the first quarter of1987 through management ofits worldwide mix of asset and and $2.5 billion in the second quarter of1986. The Cor-liability positions and its ability to adjust these posi- poration has additional liquidity available through its tions throughout its worldwide network. ability to securitize selected consumer loan portfolios During the second quarter ofl987, public credit and to sell or participate commercial loans. rating agencies reduced their ratings on the Corpora- Purchased funds are sources of funding, other than tion's debt securities and other obligations. Although core deposits and notes and debentures, with maturities these rating changes reduced the availability of funds less than or equal to one year. The Corporation's aver-to the Corporation, its fbnding capacity remains in age domestic purchased funds ratio-which measures excess of current requirements. the proportion of assets, other than liquid assets, that 6
I l Liquidity / Capital continued are supported by domestic purchased funds-was 25% 1987 and 40% in the second quarter ofl986. for both the first and second quarters ofl987, down At June 30,1987, notes and debentures (with origi-from 31% for the second quarter of1986. nal maturities in excecs ofone year) totaled $1.8 billion, Core funds decreased on average in the second essentially unchanged from year-end 1986. The Corpo-quarter of1987 by $166 million, or 1?c, compared with ration's total capital, as defined under regulations of the first quarter of1987, and increased by $904 million, the Federal Reserve Board, was $2.9 billion at June 30, or 7%, compared with the second quarter ofi986. Core 1987, and resulted in a total capital ratio of 8.40%, com-funds-defined principally as all demand and money pared with 8.66% at December 31,1986, and 8.21% at market deposits, savings accounts and certificates, and June 30,1986. The Corporation's primary capital at negotiable certificates of deposit with maturities in June 30,1987, was $2.4 billion and resulted in a pri-excess of one year-were 43% of total average assets in mary capital ratio of 6.93%, compared with 7.23% at the second quarter of1987,44% in the first quarter of year-end 1986 and 6.70% at June 30,1986. Interest rate sensitivity Mellon manages its interest rate sensitivity to maintain interest-sensitive funds for assets and funds that an appropriate balance between the maturity and reprice within three months was $870 millien; the repricing characteristics of assets and liabilities and to cumulative exceso ofinterest-sensitive funds over maximize net interest revenue during periods of both interest-sensitive assets for funds and assets that stable and volatile interest rates. At June 30,1987, the reprice within six months and one year was $421 l cumulative excess ofinterest-sensitive assets over million and $946 million. I Nonaccrual, past due and restructured loans and lease finance assets Nonaccrual loans and lease finance assets are those on companies and the guidelines of bank regulators. This which the accrual ofinterest has been discontinued. change did not have a material impact on either the Through March 31,1987, the Corporation placed com. financial results or the amount of nonaccrual loans for J mercial loans on nonaccrual status when interest was the second quarter. more then 60 days past due, when principal was past Past due loans and lease finance assets are those due 90 days or more, or when management believed col- that are contractually past due 90 days or more but are lection ofinterest was doubtful. not on nonaccrual status because they are either con- l Beginning in the second quarter of1987, the Corpo- sumer loans or are well secured and in the process of ration placed commercial loans on nonaccrual status ) collection. Restructured loans and lease finance assets when either interest or principal was past due 90 days are those that have been renegotiated at concessionary or more, or when management believed collection of terms, including reduction or deferral ofinterest or interest was doubtful. This policy was adopted to con- principal, due to the borrower's financial difficulties. f form Mellon's practices to those of most bank holding l December 31,1986 June 30,1987 , Non- Past Restruc- Non. Past Restruc- 1 Idollar amounts in millional accrual due tured Total accrual due tured Total Domestic loans and leases: { i Commercial and financial: Oil and gas related $127 $- $- $127 $ 272 5- $- S 272 Other 251 - 3 254 329 3 3 335
)
i Real estate 223 7 60 290 398 9 123 530 i Consumer credit 7 12 - 19 5 7 - 12 Total domestic loans and leases 608 { 19 63 690 1,004 19 126 1,149 I International loans 227 11 - 238 415 6 - 421 l Total loans and leases $835 $30 $63 $928 $1,419 $25 $126 $1,570 f Total nonaccrual, past due and
)
I restructured as a percentage
, of total loans and leases 3.94 % 7.24 %
7 I
Fin:ncial RwiAw continued Nonaccrual, past due and restructured loans and lease finance assets continued j The increase in domestic nonaccrual loans and The increase in international nonaccrual loans ) leases at June 30,1987, compared with December 31, principally reflected the addition in the first quarter of 1986, principally reflected the addition of a number of $307 million ofloans to borrowers in Brazil and $27 mil-loans to commercial and residential real estate devel- J lion ofloans to Ecuador, partially offset by the removal i opers during the first and second quarters, loans to oil in the first quarter of $83 million of fully-current loans and gas exploration and development firms during the to Argentina and $27 million of fully-current loans to first quarter, and loans to some mining and manufactur- Peru. Excluding the $307 million first quarter addition ing companies during the second quarter. The increase to nonaccrual status ofloans to borrowers in Brazil at in the domestic restructured category principally June 30,1987, nonaccrual, past due and restructured reflected the addition of a loan to a commercial real loans and leases totaled $1,263 million, or 5.87c, of total estate developer during the first quarter. loans and leases. Real estate acquired Real estate acquired in connection with loan settle- The decrease from March 31,1987, was principally due : ments is included in other assets and totaled $165 mil- to second quarter reductions in the carrying value of lion at June 30,1987, compared with $205 million at real estate acquired. March 31,1987, and $178 million at December 31,1986. International outstanding The tables and discussions that follow summarize During the second quarter of 1987, the government ; changes in outstanding to borrowers in Mexico and of Me.tico executed the legal documentation related to j Brazil and recent developments concerning its 1986/'87 Financing Plan, which in 1986 was i refinancing on these obligations. approved by the International Monetary Fund, The fin millions) World Bank, the Paris Club (the governments of certain l Mexico Brazil developed nations that lend to developing countries) Outstanding at March 31,1987 $539 $343 and The Bank Advisory Group for Mexico. Net change in short term In early 1987, the Mexican government obtained trade credits - (15) from foreign commercial banks new loan commitments Additional outstanding l 26 - Interest revenue accrued ofapproximately $5 billion on a parallel basis, and $1 l 11 - Collections of: billion on a co-financing basis with The World Bank, of which approximately $500 million is World Bank guar-cerued interest (1 anteed, to amortize in the period between 1991 and Other (16) (5) 2001 at an mterest rate of.81259c over the London Outstanding at June 30,1987 $544 $323 Interbank Offered Rate (LIBOR) or a comparable domestic interest rate. The Corporation's share of this Mexico new money financing is $42 million on a parallel basis At June 30,1987, the Corporation had $544 million in and $9 million on a co-financing basis. The Corporation outstanding to borrowers in Mexico, including $38 will obtain a World Bank guarantee on approximately million in short-term trade credits. Of these outstand- $5 million of the co-financing loan for a fee. During the ings, $433 million was to the public sector and $111 mil- second quarter ofl987, the Corporation disbursed $22 lion was to the private sector. None of the public sector million under parallel new money agreements and $4 outstanding and $32 million in private sector outstand- million under co-financing new money agreements. ings were classified as nonaccrual at June 30,1987. 8 l
Internationni outstanding continued The government of Mexico also obtained from the Brazil banks contingent loan commitments of approximately At June 30,1987, the Corporation had approximately
$1.7 billion, of which approximately $250 million is $323 million in outstanding to public and private sec-World Bank guaranteed, to amortize in the period tor borrowers in Brazil, including $7 million in short-between 1990 and 2000 at an interest rate of.8125% term trade credits.
over LIBOR or a comparable domestic interest rate. On February 20,1987, Brazilian authorities noti-Availability of these facilities is contingent upon several fled foreign commercial bank creditors that, pending macroeconomic indicators, including the level of oil negotiations on the restructuring ofits commercial prices. As ofJune 30,1987, the Corporation's commit- bank term debt, all interest payments related to the ment to lend under the contingent facilities was $11 term debt would be paid into a deposit facility at Bra-million. The Corporation will obtain a World Bank zil's Central Bank in the currency of the underlying guarantee on $2 million of this commitment for a foe, debt. Although negotiations between Brazil and The No disbursements were made under these contingent Bank Advisory Committee for Brazil were ongoing at loan commitments during the second quarter ofl987. the time and interest payments were not delinquent 90 In connection with this public sector refinancing days or more, the Corporation added to nonaccrual package, the government of Mexico and The Bank status, and reversed interest revenue on, $307 million Advisory Group for Mexico agreed in principle to cer- of Brazilian term debt in the first quarter ofl987. tain modifications to FICORCA, a Mexican government As a result, the Corporation has not recognized trust established to provide foreign exchange to private approximately $18 million of related interest revenue sector debtors for the purpose of debt service. At June through the first six months of1987, including $9 mil-30,1987, the Corporation had approximately $71 mil- lion in the second quarter. This adversely impacted the lion of private sector outstanding and $16 million in Corporation's financial results for the first half of 1987 letters ofcredit that may be affected by these proposed by $15 million, including $9 million in the second quar-modifications to FICORCA. This debt is presently schod- ter. If no cash interest payments are received on uled to amortize between 1988 and 1993 at interest Brazilian term debt for the remainder of the year, based rates ranging from 1.0% over LIBOR to either 3.0% on current interest rates, full year 1987 interest reve-over LIBOR or 1.75% over Prime. nue will be reduced by approximately $35 million and Under the proposal,if these debtors are to retain full year financial results will be reduced by $32 mil- J their current access to foreign currency under the lion, given the Corporation's inability to recognize tax FICOHCA trust, their foreign creditors must agree to l benefits. l one of two alternatives. The creditors must either Brazil has requested am extension of maturities on refinance the private sector obligations so that principal its approximately $67 billion foreign commercial bank repayments do not occur more rapidly than refinanced debt. Formal negotiations are tentatively scheduled to ! public sector debt amortizes, or, to the extent that commence in September 1987. I existing amortization schedules result in the repayment The Corporation elected in 1986 to participate in of principal at a more rapid rate than refinanced public the Resolution 63 Insurance Program, which provides a sector debt, relend such amounts to FICORCA. The limited guaranty by the Central Bank of Brazil. At impact of these proposed modifications will be depend- June 30,1987, approximately $59 million of the Corpo-ent upon continued participation in the PICORCA pro- ration's term outstanding to Brazilian commercial gram of, and negotiations with, individual private sec- banks are included under this program, which covers tor borrowers. The Corporation is evaluating draft liquidations, interventions and bankruptcies. documentation related to these proposed modifications. l l l 9
i
" Consolidated Income Statement Mellon Bank Corporation (and its subsidiaries) l Six months Three months ended June 30, ended June 30, tin thousands, except per share amounts) 1986 1987 1986 1987 . Intzrest revenue Loans $1,080,372 $ 917,715 $540,146 $ 455,710 Fees on loans 57,162 54,155 28,543 26,009 1 Lease fmancing revenue 19,666 20,275 9,801 10,336 Money market investments:
Interest-bearing deposits with banks 59,024 82,982 31,147 50,474 Federal funds sold and securities purchased under agreements to resell 31,201 30,959 14,293 17,408 Other 6,959 2,199 3,291 1,260 Trading account securities 20,129 10,672 6,564 4,065 Investment securities: U.S. Treasury and agency securities 88,680 93,007 47,870 45,386 Obligations ofstates and political subdivisions 41,362 48,784 21,581 23,855 Other 4,975 8,497 3,092 5,475 Totalinterest revenue 1,409,530 1,269,245 706,328 640,578 Interest expense Deposits: Domestic offices 477,801 456,361 242,811 235,048 Foreign offices 102,212 99,009 50,833 58,221 Federal funds purchased and securities sold under agreements to repurchase 236,202 165,880 109,174 77.841 Commercial paper 53,696 36,954 26,171 19,398 Other funds borrowed 16,099 18,585 6,941 10,298 4 Notes and debentures I (with original maturities over one year) 56,358 65,531 29,278 32,788 l Totalinterest expense 942,368 842,320 465,208 433,594 Net interest Net interest revenue 467,162 426,925 241,120 206.984 revenue Provision for possible credit losses 169,154 708,000 78,761 533,000 I Net interest revenue after provision for possible credit losses 298,008 (281,075) 162,359 (326.016) Urvice and Service revenue 233,174 301,077 126,176 150,499 other revenue Trading revenue 24,079 (9,472) 7,646 (14,244) Gains on sale ofinvestment securities 101,103 2,426 50,874 64 Other revenue 11,283 18,186 7,075 13,151 Total service and other revenue 369.639 312,217 191,771 149,470 Operating Salaries and wages 220,237 265,625 117,393 139,259 expense Employee benefits 49,469 55,421 26,154 31,183 Net occupancy expense 59,034 63,137 29,999 32,769 Net expense of real estate acquired 2,472 43,890 1,997 34,929 Equipment expense 40,730 43,863 21,212 22,300 Shares, capital and franchise taxes 8,482 8,966 4,376 4,731 Other expense 141,210 194,935 79,070 117,794 Total operating expense 521,634 675,837 280,201 382,965 Income Income /(loss) before income taxes 146,013 (644,695) 73,929 (559,511) Provision for income taxes 30,740 (18,560) 19,088 6,820 Net income /(loss) 115,273 (626,135) 54,841 (566,331) Dividends on preferred stock 6,267 7,416 3,744 3,745 Net income /(loss) applicable to common stock $ 109,006 $ (633,551) $ 51,097 $(570,076) l Per common (llased on 27,240,560; 27,571,562; sh:re 27,312,411 and 27,606,344 average shares of common stock outstanding) Net income /(loss) $4.00 $(22.98) $1.87 $(20.67) See accompanying notes to financial statements. 10 1 _ - _ - _ _ _ _ _ _ _ _ _.
Consolidated Bilanc5Sh:et , Mellon Bank Corporation (and its subsidiaries)
' 1
, December 31, June 30, '
~
lin thousandsI 1986 1987 , Assets Cash and due from banks $ 1,815,690 $ 1,494,321 Money market investments: Interest bearing deposits with banks 2,095,679 3,680,466' "ederal funds sold and securities purchased under agreements to resell 942,663 609,087 Other 73,668 56,590 Trading account securities 322,474 367,936 Investment securities: U.S. Treasury and agency securities 2,291,265 2,602,870 Obligations of states and political subdivisions 1,365,567 1,266,239 Other 151,878 289,360 Total investment securities (market value of $3,930,341 and $4,088,807) 3,808,710 4,158,469 ' Loans, net of unearned discount of $218,734 and $227,096 23,115,149 21,240,521 ; Lease finance assets 413,451 430,287 Totalloans and lease finance assets 23,528,600 21,670,808-Reserve for possible credit losses (493,845) (988,536) Net loans and lease finance assets 23,034,755 20,682,272 Customers' acceptance liability 515,691 261,480 Premises and equipment 450,726 465,630 Other assets 1,439,314 1,388,441 Total assets $34,499,370 $33,164,692 Liabilities Deposits in domestic offices: Noninterest-bearing $ 4,381,795 $ 4,167,374 ; Interest bearing 14,520,037 14,990,613 Deposits in foreign offices: Noninterest bearing 13,808 14,953 Interest-bearing 2,731,512 3,907,760 j Total deposits 21,647,152 23,080,700 Federal funds purchased and securities sold under agreements to repurchase 6,402,857 4,690,931 Commercial paper 1,227,686 1,036,969 Other funds borrowed 507,330 560,886 Acceptances outstanding 519,387 262,030 Other liabilities 516,289 502,947 Notes and debentures (with original maturaties over one year) 1,766,0C9 1,772,103 , Totalliabilities 32,586,710 31,906,566 Redeemable Redeemable preferred stock-$1.00 par value preferred stock Authorized-3,750,000 shares Issued 4,659,584 and 3,660,397 shares Series A 93,678 93,699 j Shareholders' Convertible preferred stock-81.00 par value equity Authorized-6,250,000 shares Issued-2,716,447 shares Series B 67,911 67,911 Common stock-$.50 par value Authorized-120,000 000 shares Issued-28,063,896 and 28,201,710 shares 14,033 14.101 Surplus 627,141 632,280 Undivided profits 1,124,117 464,355 i Treasury stock-567,077 shares at cost (14,220) (14,220) Total shareholders' equity 1,818,982 1,164,427 Total liabilities, redeemable preferred stock f and shareholders' equity $34,499,370 $33,164,692 See accompanying notes to fnancial statements. 11 I 1
Consolidated Statement of Changes in Financial Position Mellon Bank Corporation (and its subsidiaries) Six months ended June 30, (in thousandai 1986 1987 Increase /(decrease) in Financial resources derived from/(applied to): financial resources Operations: invested in interest- Net income /(loss) $ 115,273 $ (626,135) earning assets Provision for possible credit losses 169,154 708,000 Deferred taxes, depreciation and other nonfund items 16,848 161,890 Financial resources derived from operations 301,275 243,755 Dividends on common and preferred stock (43,812) (36,045) 257,463 207,710 Deposits and other financing activities: Deposits 1,551,855 1,433,548 Borrowed funds (445,830) (1,849,087) Notes and debentures 406,512 6,094 Deposits and other funds acquired in mergers 1,709,540 - Convertible preferred stock issued in merger 67,956 - Other activities: i l Cash and due from banks (405,658) 321,369 i Premises and equipment (39,299) (46,386) ! Assets and liabilities acquired in mergers, net (426,669) - Other, net (47,359) (301,686) l (918,985) (26,703) Increase /(decrease)in financial resources invested in interest-earning assets $2,628.511 $ (228,438) Erease/(decrease) Money market investments $ 162,920 $ 1,234,133 in interest earning Money market investments acquired in mergers 252,754 - assets Trading account securities . (332,144) 45,462 Investment securities 1,051,781 349,759 Investment securities acquired in mergers 263,155 - Loans and lease finance assets 283,220 (1,857,792) Loans and lease finance assets acquired in mergers 946,825 - Increase /(decrease) in interest-earning assets $2,628,511 $ (228,438) ( i Consolidated Statement of Changes in Shareholders' Equity Mellon Bank Corporation (and its subsidiaries) Six months ended June 30, lin thousands) 1986 1987 Shareholders' Balance at beginning of period $1,637,182 equity $1,818,982 Additions /(deductionst Net income /(loss) 115,273 (626,135) Dividends on redeemable preferred stock at $1.40 per share (5,120) (5,124) Dividends on convertible preferred stock at $.42 and $.84 per share (1,147) (2,292) Dividends on common stock at $1.38 and $1.04 per share (37,545) (28,629) Convertible preferred stock issued in merger 67,956 - Issuance ofstock under option plans, net, dividend reinvestment plan and conversion of 5.375% Convertible Capital Notes 12,737 5,207 Foreign currency translation (1,423) 2,418 Balance at end of period $1,787.913 $1,164,427 See accompanying notes to financial statements- _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - _ _ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - - - -- -
I YVctes to Fin 5ncial Sstements.
. 1 Composition of December 31, June 30, j loan and lease (in millions) '1986 1987 i portfoli Domestic operations: I Loans:
Commercial and industrial $ 9,124 8 8,355 Financial institutions .1,390 1,086 Other 838 398 Total commercial and financial 11,352 9,839 Cunmercial construction 2,398 2.469 C,mmercial mortgage 1,455 1,558 _,. Sonsumer mortgage 1,787 1,405 Total real estate 5,640 5,432 Consumer credit 2,696 2,693 . Totalloans 19,688 17,964 Lease finance assets 413 430 Total domestic operations 20,101 18,394 ) International operations: 1 Commercial and industrial 1,797 1,739=l Financialinstitutions 1,055 925 Governments and official institutions 557 609 Other 19 4 i Total international operations 3,428 3,277 ) Total loans and lease finance assets, net of unearned discount $23,529 $21,671 - Reserve for Activity is as follows: Six months Three months -l possible ended June 30, ended June 30, credit losses (in thousands) 1986 1987 1986- 1987 Balance at beginning of period $ 361,485 8 493,845 $423,463 $ 574,033 Reserves acquired in mergers 11,988 - 11,988 - Additions /(deductions): Credit losses (121,590) (230,098) (80,910) (125,775) Recoveries 18,414 16,789 6,149 7,278 Net credit losses (103,176) (213,309) (74,761) (118,497) Provision charged to expense 169,154 708,000 78,761 '533,000 Balance at end of period $ 439,451 8 988.536 $439,451 $ 988,536 Legal Following the Corporation's announcement ofits estimated loss in the first quarter of proceedings 1987 and a planned reduction in its 1987 second quarter common stock dividend, nine class action lawsuits were brought on behalfofcertain shareholders of the Corporation, naming as defendants the Corporation and certain ofits directors and officers. The com-plaints alleged the.t the Corporation issued false and misleading financial sta?ments in violation of federal securities laws, violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) and common law fraud. Two of the complaints also included derivative claims that the individual defendants are liable to the Corporation for breach of fiduciary duty and waste of corporate assets. All of the complaints alleged damages in unspecified amounts. On July 20,1987, a pretrial order was issued consolidating all nine of these cases. The consolidated complaint realleges the securities law claims and deriva-tive claims but contains no RICO claims. Although these actions are in an early stage, , 7 management believes that these lawsuits are without merit and intends to defend them I vigorously, In addition to the foregoing, various other proceedings are pending against the Cor-i poration and its subsidiaries. Management believes that the aggregate liability, if any, I arising from such proceedings will not have a material adverse effect on the Corporation. 13 l _ - _ - _ .
' Consolidated Balance Sheet-Average Balances and Interest Rates Mellon Bank Corporation (and its subsidiaries)
Six months ended, June 30,1986 June 30,1987 Average Average Average Average idollar amounts in millions) balance rate balance rate Assets Interest-earning assets: Money market investments: Interest-bearing deposits with banks $ 1,456 8.18 % $ 2,559 6.54 % Federal funds sold and securities purchased under agreements to resell 859 7.33 Other 983 6.35 154 9.06 56 7.83 Trading account securities 561 8.64 317 6.84 Investment securities: U.S. Treasury and agency securities 2,148 8.32 2,574 7.27 Obligations of states and political subdivisions 1.135 12.75 1,300 12.00 Other 125 9.09 Loans, net of unearned discount 213 8.49 22,154 10.69 21,738 9.24 Lease finance assets 397 11.18 424 10.48 Totalloans and lease finance assets 22,551 10.69 22,162 9.27 Totalinterest-earning assets 28,989 10.32 % 30,164 8.869c Cash and due from banks 1,486 1,670 Customers' acceptance liability 1,901 { Premises and equipment 553 \ 427 461 Other assets 1,174 1,388 Reserve for possible credit losses (411) (547) Total assets $33.566 $33,689 Liabilities, Interest bearing liabilities-redeemable Deposits in domestic offices: preferred Demand stock and Savings accounts
$ 761 5.22 % $ 1,012 4.57Cc 974 5.14 1,088 4.77 shareholders' Money market deposit accounts 3.998 6.52 4,736 equity Retail savings certificates 5.39 3,153 8.46 2,938 7.19 Negotiable certificates ofdeposit 3,766 7.84 4,591 6.93 Other time deposits 619 8.27 522 Deposits in foreign offices 7.18 2.539 8.12 2.946 6.78 Total interest bearing deposits 15,810 7.40 1933 6.28 Federal funds purchased and securities sold under agreements to repurchase 6,735 7.07 5,411 Commercial paper 6.18 1,450 7.47 1,162 6.41 Other funds borrowed 419 7.76 532 7.04 Notes and debentures twith original maturities over one year) 1.300 8.75 1,777 7.44 Total interest-bearing liabilities 25,714 7.39 % 26,715 6.36Fc Deposits in domestic offices-noninterest-bearing 3,526 4,044 Deposits in foreign offices-noninterest-bearing 11 13 Total noninterest bearing deposits 3,537 4,057 Acceptances outstanding 1,901 555 Other liabilities 598 550 Total liabilities 31,750 31,877 Redeemable preferred stock 94 94 Shareholders' equity 1,722 1,718 Total liabilities, redeemable preferred stock and shareholders' equity $33.566 833,689 Rates Yiold on total interest. earning assets 10.32 % 8.86 %
Cost of funds supporting interest earning assets 6.56 5.64 Net interest margin 3.76 % 3.22 % Note: Rates are calculated on a taxable equivalent basis at a rate approximating 46% in 1986 and 40% in 1987, ustng actual number ofdays in the periods, and are before elfect of reserve requirements. Fees on 14
I e I , . i Three months ended, June 30,1986. September 30,1986 December 31,1986 March 31,1987 June 30,1987 Average Average Average Average Average Average Average Average Average Average balance' rate balance rate balance rate balance rate balance rate , I i
$ 1,563 7.99 % $ 1,649 6.97 % $ 1,793 6.62 % $ 2,022 6.52 % $ 3,089 6.55 %
.791 7.25 835 6.34 837 6.30 886 6.20 1,078 6.48 1 142 9.30 128 8.29 76 5.96 56 6.87 58 8.73 368 7.30 553 6.88 298 6.70 416 6.51 220 7.45 2,437 7.85 2,652 7.49 2,569 7.23 2,650 7.27 2,499 7.27 1,179 12.71 1,513 12.27 1,544 12.25 1,330 12.07 1,271 11.93 154 8.87 178 8.49 183 8.55 160 8.26 264 8.63 22,649 10.40 22,653 9.80 22.237 9.61 22,051 9.23 21,429 9.26 ;
398 11.15 407 11.32 414 8.28 420 10.59 427 10.37 23,047 10.41 23,060 9.83 22,651 9.58 22,471 9.26 21,856 9.28 4 29,681 10.03 % 30,568 9.43 % 29,951 9.21 % 29,991 8.88 % 30,335 8.83 % 1,536 1,596 1,676 1,634 1,706 1,773 1,123 l 722 666 442 ' 443 451 452 456 465 l 1,240 1,237 1,338 1,366 1,410 (445) (453) (465) (506) (587)
$34,228 $34,522 $33,674 $33,607 $33,771
$ 836 5.18 % $ 876 5.13 % $ 943 4.86 % $ 1,008 4.65 % $ 1,016 4.50 9 1,028 5.20 1,024 5.21 1,047 5.26 1,081 4.82 1,095 4.72 4,228 6.21 4,534 5.76 4,714 5.27 4,808 5.30 4,666 5.49 3,356 8.29 3,294 7.95 3,117 7.45 3,007 7.24 2,869 7.13 3,832 7.47 4,026 7.08 4,067 6.62 4,376 6.79 4,805 7.05 632 7.92 583 7.55 580 7.40 429 6.69 613 7.52 2,561 7.96 2,546 7.05 2.514 6.89 2 469 6.70 3,417 6.83 16,473 7.15 16,883 6.69 16,982 6.28 17,178 6.19 18,481 6.37 6,467 6.77 6,711 6.23 5,831 6.14 5,945 6.01 4,882 6.40 {
1.d "2 7.08 1,373 6.41 1,445 5.94 1,156 6.16 1,167 6.66 ; d86 7.21 388 7.06 447 6.35 492 6.83 572 7.22 l 1,378 8.53 1,568 7.79 1,548 7.50 1,780 7.47 1,774 7.42 26,186 7.13 % 26,923 6.63 % 26,253 6.30 % 26,551 6.24 % 26,876 6.47 % 3,761 3,984 4,227 3,964 4,123 11 13 13 13 12 3,772 3,997 4,240 3,977 4,135 1,773 1,123 723 669 442 622 582 543 504 599 32,353 32,625 31,759 31,701 32,052 94 94 94 94 94 1,781 1,803 1,821 1,812 1,625
$34.228 $34,522 $33,674 $33,607 $33,771 10.03 % 9.43 % 9.21 % 8.88 % 8.83 %
6.29 5.84 5.53 5.52 5.74 3.74 % 3.59 % 3.68 % 3.36 % 3.09 % i loans are included in the calculation of rates. Nonaccrualloans and the related income efect have been included in the j calculation of rates. 15 l
l Frincipil Locitirnsind Operating Entities D:mestic Naples Louisiana i Datacenter regionaloffice New Orleans C:llfornia 5811 Pelican Bay Boulevard Mortgage Banking Group
- l Los Angeles Naples, Florida 33963 l Corporate Bankingand Community Telephone: 813 597-1611 3850 North Causeway Boulevard i Metairie, Louisiana ,0002 !
Banking representative offices Telephone: 504 8314811 1 555 South Flower Street Sarasota Lc) Angeles, California 90071 Mellon Bank (FL> National Association Maryland l i Tzl: phone: 213 624-0913 Provides trust services. Baltirnore ! San F,rancisco 556 Sout6 Pinoapple Avenue Community Ban king represer tative o// ice Sarasota, Florida 33577 1122 Kenilworth Drive Mellon CapitalManagemenf
- Telephone: 813-951-0065 Towson, Marvland 21204 Provides portfolio and investment Telephone: 361583-4676 minagement services. Georgia Corporate Banking and AtIanta Bethesda Leasing CommunityGrok*n; king representative Leasing officesGroup *; Corporate Banking Mellon Bank (MD) 595 Market Street and Communsty Banking represento- Serves consumer and small commercial San Fitncisco, California 94105 tive offices markets throughout Maryland.
Taliphone:415-495-5180 255 Peachtree Street, N.E. 6500 Rock Spring Drive Atlanta. Georgia 30303 Bethesda, Maryland 20817 Colorado Telephone:404 222 2250 Telephone: 301-493 6555 Denver Mortgage Banking Group *: Corporate Illinois Massachusetts Banking and CommercialReal Estate Chicago Boston Construction representative o/fices Leasing Group *; Corporate Banking 1775 Sherman Street Franklin Ibrtfolio Associates 7> ust
- and Commercial Real Estate Cons true. Providesinvestment management Denver, Colorado 80203 tion representative offices T21rphone: 303-837 2180 services for employee benefit funds 55 West Monroe Street and institutional clients.
o Connecticut Chicako, Illinois 60603 Telep ne: 312-341-6666 mte Bankingand Custom Co $ing Ban representative offices Me i n Un verse Management Group
- Datacenter regionaloffice P Provides active management to invest- 55 East Jackson Boulevard on M ch sett 02109 Chicago,Ilhnois 60604 Telephone:617 423-4151 m nt universes.
Community Banking repmsentative office Telephone: 312 341-6600 MutualFundService Group
- Six Stamford Forum Oakbrook Terrace Provides mutual fhnd record keeping Stamfbrd, Connecticut 06901 and shareholder services.
Telephone:203-324 2510 Comme Group.rcialand Consumer Finance One Athenaeum Street c . . . 9pecialias m commercial and Cambridge, Massachusetts 02142 Del: ware Telephone: 617 225-3400 Wiltni industrial loans to smaller businesses, Mellon *** " n DE) National Association ga; ,'Nn$nc p$ans and re oY'tYn1 *"' ' # "*I* ' Serves consumer and small- to middle- sharing loans. 265 Winter Street sized commercial markets throughout Delawcre. Also provides nationwide Community Banking represen totive office T ep e$17 3 c:rdholder processingservices. loth & Market Streets ha]br k r ce Il$ois60181 Community Banking represen to tive office Wilmmgton, Delaware 19801 Telephone: 312 572-2000 55 William Street TelePhone:302-479-4600 Wellesley, Massachusetts 02181 Indiana Telephone:617 239-1110
.da South Bend "E
c gaton Data. Link Systems,Inc. New Jersey Mellon Bank (FL> National Association Provides data processing services and Edison Provides trust services. software hcensing to fmancial Communsty Banking represen ta tive oflice institutions throughout the United Raritan Center Custom Banking and CommercialReal States and Canada. Estote Construction representative offices Edison, New Jersey 08837 1818 Commerce Drive Telephone:201-225-4790 5550 Glades Road South Bend.1ndiana 46628 Boca Riton, Florida 33431 Telephone: 219-282-3300 Telephone: 305-368 6080 Fort Lee Fiduciary Services Group- Securities 7>ansferService
- j Provides securities transfer and shareholder services.
One Executive Drive Fort Lee, New Jersey 07024 Telephone: 201592-4000 16
l
.o New York Philadelphia Texas New York Mellon Bank tBast) National Dallas Mellon Real EstateInvestment Association Management Corporation
- Serves consumer and small commercial Leasing Group *;BankingCorporate and Communtty Provides real estate investment markets in eastern Pennsylvania, representative offices management and consulting services. and the middle market in many 2121 San Jacinto Tower Leasing Group *; Corporate Banking. eastern states. Dallas, Texas 75201 Community Banking. Custom Banking Mellon Bank Center Telephone: 214-979-0053 and FinancialInstitutions Philadelphia, Pennsylvania 19102 l representative offices Telephone: 215-553-8000 Houston 551 Madison Avenue Corporate Banking representative office New York, New York 10022 Datacenter regionaloffice 1100 Louisiana Street Telephone: 212-702 4036 2nd & Chestnut Streets Houston, Texas 77002 Philadelphia, Pennsylvania 19106 Telephone: 713-650-6063 4 Mellon Bank International Telephone: 215-351-4819 1 Engages in international banking Mortgage Banking Group--
services for domestic & reign Pittsburgh Mortgage and Trust,Inc
- corporations and foreign corre. Mellon Bank, N.A. 3100 Travis Street spondent banks. Serves consumer and small commercial Houston, Texas 77006 88 Pine Street markets in western Pennsylvania, Telephone: 713-525-8000 New York, New York 1000s much of the national middle market, Telephone: 212 709-8600 and fmancialinstitution and large commercial markets throughout the Abroad Mellon Securities 7)ust Company United States and worldwide.
Provides securities processing and InvestNet Corporation Argentina custody services. Buenos Aires Provides discount brokerage services. International representative office Datacenter regionaloffice Mellon Bond Associates Corporation
- i Av.Corrientes 311 120 Broadway Provides structured management for 1043 Buenos Aires, Argentina New York, New York 10271 bond portfolios oflarge national insti- Telephone: 312-5702 Telephone: 212 3741970 tutional clients.
Mellon InvestData Corporation MeHon Equity Associa tes Corporation
- Australla Providen recurities pricing services Provides s,pecialized equity manage. Melbourne to the financialindustry. ment services to the national pension International represen tative office l and public fund markets. Level 44 Rialto 161 William Street New York,New York 10038 Mellen Bank Center 525 Collins Street Telephone: 212 766-2729 Pittsburgh, Pennsylvania 15258 Melbourne, Victoria 3000, Australia Telephone: 412 234-5000 Telephone: 6144711 le eland ngle oho Associates,Inc * %dney Provides active uity mana In terna tional represen tative office Mortgage Banking Group. using systematihaetors metkement ods. Level 60,MLC Centre 1255 Euclid Avenue One Oxford Centre 19 Martin Place Cleveland, Ohio 44115 Pittsburgh, Pennsylvania 15219 Sydney,N.S.W.2000, Australia Telephone: 216-696-5432 Telephone: 232-7744 Telephone:412-234 7500 Columbus Fiduciary Services Group-Accounting Brazil Consumer representativeoffice Service
- Rio de Janeiro 2550 Corporate Exchange Drive Provides trust accounting, cash man. International represenmtive o/fice Columbus, Ohio 43229 agement processing and IRA record-Telephone: 614-899 2005 Av. Rio Branco,138 keeping services, data processing sys- RiodeJaneiro, Brazil j tems, and retail marketing products to Telephone:2211445 Pennsylvania the domestic and international finan-Harrisburg cial services industry. Canada The Commonu ealth NationalBank Four Station Square Toronto Serves consumer and small to middle- Pittsburgh, Pennsylvania 15219 Mellon Bank Canada !
sized commercial markets in south Telephone: 412 3915210 central Pennsylvania. A chartered Canadian bank providing l 10 South Market Square State College services to the co$ rate market i throughout Cana i Harrisburg, Pennsylvania 17101 Mellon Bank (CentraDNational Telephone:717 564-9500 Association One First Canadian Place l Toronto. Ontario, MSX 1 A4, Canada Servesconsumerandsmall to l OilCity Telephone:416-3624051 middle-sized commercial markets - Mellon Bank (North > National in central Pennsylvania. Association 341 North Science Park Road Serves consumer and small to middle. State College, Pennsylvania 16803 sized commercial markets in north. Telephone: 814-231-2500 western Pennsylvania. 100 Seneca Street Oil City, Pennsylvania 16301 Telephone: 814676-7123 , j 17 I - - - _ _ - _ . I
Directors Ceyman Islands Office Descriptions Mellon Bank Corporation Gr:nd Cayman Commercial Real Estate Construction John M. Arthur International branch office representatsveoffices market construc- Chairman P.O. Box 710 tion finance products to middle-sized, Duquesne Lighe Company Grand Cayman, British West Indies [aMond very large real estate e Electric utility Hong Kong CommunityBanking representative yegg 7g o, gggyg7,37, Hong Kong offices market credit services to commer-Retired Chairman and cialcustomers with annual sales Internationalbranch office between $5 million and $125 million. ChiefExecutive Oficer 3701 Edinburgh Tower The Consumer representative oflice Carpenter Technology Corporation 15 Queens Road Central, Hong Kong markets credit services to consumers, Wrought specialty steel producer Telephone: 252-353 including personal credit lines and home equity loans. Frank V. Cahouez Japan Corporate Bankinn representative Chairman and Tokyo offices marketcreditand relatedservices ChiefExecutive Officer International branch office to corporate customers with annual sales Mellon Bank Corporation and New Yurakucho Building 424 "' MeH n BankJA. 1121, Yurakucho fn ne a nst tut o Custom Banking representative Alexander W. Calder eler o e 5 oks h$etwor n av dua s. etin ma n, sident and Ntacenterregionaloffices market ChiefExecutive Officer MCxico data processing and management infor. J yManuf acturingCompany Mexico City mation services to financial institutions. Machinery and equipment In terna tional represen ta tive oflice The FinancialInstitutions re Edificio Omega sentative o# ice markets credit anfre. Edward Donley related services to financial institutions, Cam Eliseos 345 Chairman of the Executive Committee Colon Polanco including banks, thrifts, brokers, insur. Air Products and Chemicals. Inc. 11560 Mexico, D.F. ance companies, equity syndicators, and Industrial gases, chemical products and Telephone: 596-8722 finance compames. industrial process equipment International bmnch offices provide Philippines international banking services includ- Donna R. Ecton ggg8 ing trade banking, demand deposits, Vice President-Administration International representative office loans, capital markets products and for- CampbellSoup Company e,ign exchange to domestic and interna-Solidbank Buildmg tional customers. Food processing and consumer prod ucts 777 Paseo de Roxas Avenue International representative offices Makati, Metro Manila, Philippines George T. Farrell serve as the liaison between the Corpora- Senior Vice Chairman Telephone: 817-9681 tion's banking subsidiaries and overseas customerr. Mellon Bank Corpomtion and
. United Kingdom *The Leasing Group markets a McHon Bank, N.
London broad range ofleasing and lease related Mellon Securitles Limited services to corporations throughout the C. Frederick Fetterolf 1 o ore President and Chief Opem ting Officer Underwrites and trades Eurosecurities. Internationalbranch o// ice ta 6 mi$ lion,lth annga h CmM'hh tions in the Central Atlantic region with Production and sale ofalumina and 6 Devonshire Square annual sales between $5 million and $60 chemical products, primary aluminum London, EC2M 4LB, England million. and aluminum mill products Telephone: 626-9828 'The Mortgage Banking Group mar-kets credit secund by rer.1 estate to Themas C. Graham Mellon Pictet International individuals and small- and medium-sized Presideni Management, Limited corporate customers, and offers real USS, a Division of USX Corpomtion Provides investment management of estate-related services to medium-sized Diversified manufacturing and international securities for institutional and large corporate customers and clients. tnvestors. energy-producingcompany Cutlers Gardens Additional Locations Bryce Jordan 5 Devonshire Square The Corpontion 's banking entities- President London, EC2M 4LD, England Commonwecith National Bank. Mellon Thelknnsylvania State University Telephone: 283 7471 Bank <Centmi). Mellon Bank (DE), Mellon Bank (East), Mellon Bank (MDI, Andrew W.Mathieson Venezuela Mellan Bank, N.A. and Mellon Bank Executive VicePr?sndent Cartcan (North 1-opemte 624 domestic retail Richard K. Mellon and Sons In terna tsonal represen ta tive office bank,ing locations, including 361 com- Investments and philanthropy y es munity offices. Mellon FinancialServices Ed o it
- or ij e ste operates 146consumerfinance and Seward Prosser Mellon 5,, " mortgage banksng branch offices in 21 Pressdent c5eph Te e: 98 Y11 sta tes.
Richard K. Mellon and Sons
'A Mellon FinancialServices entity, Investments and philanthropy (Mellon Financial Services is a collective name forsubsidiaries engaging in vari-ous ban k.related services, including con-sumer retail tinonce, leasing, mortgage banking, and certain trust services.) Directors as ofJuly 24,1987.
18
l . i 6[ p Advisory Board Mellon Bank (East)
. Charles F. Merrill -
Fletcher L. Byrom Howard O. Beaver, Jr. { chairman Presidentand - Michael D. Dmgman Lewis W. Bluemle,~Jr. l Chief Executiee O#icer William B. Eagleson,Jr. i William B. Eagleson, Jr. Commonwealth National Bank W. H. Krome George Craig G. Ford Edward A. Montgomery,Jr. Robert E. Kirby Vmeent E. Furey,Jr. vice Chairman Gerald G. Probst Pemberton Hutchinson Afellon Bank Corporation William P.SnyderIII Thomas V. Lefevre Chairman and Chie James W. Wilcock Margy Ellin Meyerson Mellon Bank (East,fExecutive O#icer Edward A. Montgomery,Jr. Nathan W. Pearson Chairmen Emeriti Roland Morris J. David Barnes H. Robert Sharbaugh Financial Advisor Richard M. Smith Ibul Mellon FamilyInterests William B. Eagleson,Jr. James H. Higgins Francis R. Strawbridge III re ide t h e/ExecutiveO#icer athar brson i$l$ ani ng Giant Eagle. Inc. Hetail grocery store chain Mellon Bank (MD) Commonwealth NationalBank Irwin P. Barney H. Robert Sharbaugh Barrie G. Christman Retired Chairman Glenn R. Aldinger,Sr. Craig G. Ford j Sun Company, Inc. William H. Alexander John R. Biechler Peter D. Heller l Energy Ronald M. Skanderson 1 Jack F. Cook Richard M. Smith Craig G. Ford Mellon Bank, N.A. Retired Vice Chairman Henry E. L. Luhrs John M, Arthur Bethlehem Steel Corpomtion l Horace C. McCarty Howard O. Beaver,Jr. Integrated steel producer engaged Charles F.Merrill primanly in the manufacture and Morris Schwab Frank V. Cahouet Alexander W.Calder . sale ofsteel and steel products R. Wesley Shope Edward Donley , W. Keith Smith Robert L. Summers ; Gregory L. Sutliff Donna R. Ecton Vice Chairman. Chief Financial George T. Farrell O#icer and 7reasurer Mellon Bank (Central) C. Frederick Fetterolf Mellon Bank Corporation Thomas C. Graham ViceChairman and Chief Galen E. Dreibelbis Bryce Jordan CraigG. Ford Financial O#icer Sidney Friedman Andrew W.Mathieson Mellon Bank. N.A. John Lloyd Hanson Seward Prosser Mellon F. Ellis Harley Charles F. Merrill Leon H. Sullivan Edward A. Montgomery,Jr. Ibstor Robert R. Hoover Zion Baptist Church ofPhiladelphia BryceJordan Nathan W. Pearson S.WadeJudy David S. Shapira Chairman of the Board H. Robert Sharbaugh OICInternational. Inc. Edwin E. Lash Manpower skills. worldwide training Robert F.Mattern Richard M. Smith for the unskilled and unemployed Richard L.McMaster W. Keith Smith Dale W. Miller Leon H.Sullivan t ony P.T accian Anthony P.Terracciano Robert W. Neff
*'"'"" 'I Charles C. Pearson,Jr. L.Stanton Williams William J. Young AlvinL.Sn wiss Me n nk C r ration and o elham Mellon Bank, N.A. Mellon Bank (North)
James D. BerryIII i L.Stanton Williams William S. DeArment ! Retired Chairman and Mellon Bank (DE) ' John S. Barry Allan R. Dennison ChiefExecutiec O#ieer James Beebe,Jr. John J. Finn PPG industries,Inc. Craig G. Ford j Manufacturer of flat glass. chemicals, Courtland A. Bell,Jr. ' Eugene D. Bookhammer M. Fletcher Gornall coatings and resins and fiber glass Robin D. Hart Robert D. Burris George A.Lang Jr. William J. Young Betty L. Chambers Retired President Robert C. Cole, Jr, Richard C.Lyons Ibrtland Cement Association Charles J. Myron Carl DeMartino John S. Patton Trade association for the porth.nd Arden B. Engebretsen cement industry Craig G. Ford Robert R. Price Paul D. Shafer, Jr. H. Harrison Kephart,Jr. Garrett B. Lyons James A.Stranahan III a W. Charles Paradee,Jr. Quentin E. Wood Bruce M. Stargatt John G.Townsend II 19
$ KnisrMknrg5m:nf j i
- Of2caof the Chairman . George P. DiNardo Theodore C. Miller '
Fr:nk V.Cahouet Executive VicePresident Executive Vice President information Management and RealEstate . Chairman and ChiefExecutive OMcer Research
' Anthony P.Terrac,iano - . Edward A. Montgomery,Jr.-
Craig G. Ford Vice Chairman
; President and Chief
, Operating OMcer Executive VicePresident Mellon Bank Corporation LegalEntities Liaison Chairman and ChiefExecutive OMcer
; George T Farrell Senior Vice Chairman , Vincent E. Furey, Jr. ' " " "" "'#
P tsident Charles J. Myron Richard H. Daniel Mellon Bank (East) Chairman and ChiefExecutive OMcer Vice Chairman and Richard A.Gaugh Men nBan (N rth)
. ChiefCredit OMcer Executive Vice President John B.Olsen
- W. Keith Smith Community Banking Senior Vice President -
- Vice Chairman. ChiefFinancial - Thomas A. Haeussler Corpomte Planning Ofncer and heasurer President Donald J.O'Reilly Mellon Financial Services. Commercial. Senior Vice President and Chief Principal Entities and ConsumerFinance Group Auditor
> ;'and Departments David L. Johns . Auditing Executive Vice President Charles C. Pearson,Jr.
' Frederick K. Beard TechnologyProducts Chairman. President and Executive Vice President Co'P*mte BankinE -
y' y "i"*" gePy"U y(* ChiefExecuhveO@ er Chairman. Presn. dent an'd Mellon Bank (Central)
- Milton E. Berglund,Jr. ChiefExecutive Omeer Norman Robertson Senior VicePresident . ~ Mellon Bank (DE) Senior Vice President Credit Review ## " "5'8 Harry R. Leggett T. Ronald Casper President - James D.Roy _
' Executive Vice President Mellon FinancialServices, Leasing Senior Vice President Credit Pblicy Gmup Finance I "
E. MichaelCaulfield $"Agc Peter Rzasnicki 1, Executive Vice President Senior Vice President '
' Capital Markets David L. Martin Corpomte Consulting Senior Vice President Barrie G. Christman Corporate Development William J.Stallkamp Chairman, President and j Executive Vice President ChiefExecutive OMcer Martin G.McGuinn FinancialInstitutions i
Mellon Bank IMD) i Se or i e President and General Gerardo P. van Tienhoven !
. J. Thomas Churan Legaland Corporate Afairs Executive VicePresident Senior Vice President InternationalBanks_ng Human Resourres Donal A e ullen,Jr.
Joseph F. DiMario Charles M.Vollmer 7hnst andInvestment Executive Vice President Executive VicePresident Mellon Bank (East) Community
~OpsratingServices Charles F. Merrill Banking Chairman, President and ChiefExecutive Omeer Commonwealth NationalBank l
l l l
' Management as ofJuly 24. !987. ' 20 i
! l
Corporate Information Exchangelisting The stock of Mellon Bank Corporation is traded on the New York Stock Exchange. The trading symbols are MEL(common stock) and MEL Pr A and MEL Pr B (Series A and [ Series B preferred stockL The Transfer Agent and Registrar is Mellon Bank, N.A., Four \ Station Square, Pittsburgh, Pennsylvania 15219. Dividend Reinvestment Registered holders ofMellon Bank Corporation stock may purchase Mellon common and Common Stock stock at a 5?c discount from market value through reinvestment ofcommon dividends, Purchase Plan preferred dividends or both. Registered shareholders may also buy Mellon common stock at market value with optional cash payments of at least $50 for each purchase up to l $5,000 per calendar quarter. There are no brokerage commissions or service fees charged l on purchases made through the Plan. Plan details are contained in a Prospectus dated December 31,1984, which may be obtained from the Secretary of the Corporation. Dividend payments Subject to approval of the Board of Directors, dividends are paid on Mellon Bank Corpora-tion's common stock and Series A and Series B preferred stock on or about the 15th day of February, May, August and November. Investor, broker, Investors, brokers, security analysts and others desiring financial information should con-security analyst contact tact Donald W. Ebbert, Jr., Director ofInvestor Relations for Mellon Bank Corporation. Telephone: 412-234-5601 or Outside Pennsylvania 800-245-1094 Inside Pennsylvania 800-872-3019 Shareholder, noteholder Requests for information or assistance regarding stock records or notes should be directed inquiries to the Secretary of the Corporation, Legal and Corporate Affairs Department, 3045 One Mellon Bank Center, Pittsburgh, Pennsylvania 15258. Mellon entities are Equal Employment Opportunity / Affirmative Action Employers. Mellor, is com mitted to providing equal employment opportunities to every associate and every appli. cant foremployment regardless of, but not limited to, such factors as mee, sex, relignon, national origin, age or nonjob-related hexndicap. A beliefin the dignity ofevery individual and a sense of responsibility to the common good are the foundations ofour commitment.
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