<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - October 15, 1996
MELLON BANK CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania 1-7410 25-1233834
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (412) 234-5000
<PAGE>
ITEM 5. OTHER EVENTS
By press release dated October 15, 1996, Mellon Bank Corporation (the
"Corporation") announced the adoption of a new Shareholder Protection Rights
Agreement. The Corporation also announced approval of the establishment of an
employee stock benefit trust.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Mellon Bank Corporation Press Release, dated October 15, 1996,
announcing the matters referenced in Item 5 above.
99.2 Mellon Bank Corporation Press Release, dated October 15, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: October 16, 1996 By: STEVEN G. ELLIOTT
---------------------
Steven G. Elliott
Vice Chairman, Chief
Financial Officer & Treasurer
<PAGE>
EXHIBIT INDEX
Number Description Method of Filing
99.1 Press Release dated October 15, 1996 Filed herewith
99.2 Press Release dated October 15, 1996 Filed herewith
<PAGE>
Exhibit 99.1
[LOGO OF MELLON] News Release
MEDIA ANALYSTS
----- --------
Contact: Stephen K. Dishart Donald J. MacLeod Corporate Affairs
(412) 234-0850 (412) 234-5601 One Mellon Bank Center
James J. Dever David T. Lamar Pittsburgh, PA 15258-0001
(412) 236-1752 (412) 234-4633
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
MELLON BANK CORPORATION DECLARES QUARTERLY DIVIDENDS:
-----------------------------------------------------
REVISES SHAREHOLDER RIGHTS PLAN:
--------------------------------
AND ADOPTS EMPLOYEE STOCK BENEFIT TRUST
---------------------------------------
PITTSBURGH, Oct. 15, 1996--At its regular meeting, the board of directors of
Mellon Bank Corporation (NYSE:MEL) today declared a quarterly dividend of 60
cents per share on the Corporation's common stock.
The board also declared quarterly dividends on Mellon Series I preferred
stock (NYSE:MEL Pr I) at the rate of $2.40 per share per annum; Mellon Series J
preferred stock (NYSE:MEL Pr J) at the rate of $2.125 per share per annum; and
Mellon Series K preferred stock (NYSE:MEL Pr K) at the rate of $2.05 per share
annum.
Dividends on Mellon common stock, Series I preferred stock, Series J
preferred stock and Series K preferred stock are payable on Nov. 15, 1996, to
shareholders of record at the close of business on Oct. 31, 1996.
Mellon's board also adopted a new Shareholder Protection Rights Agreement.
Under the new agreement, rights would become exercisable if a person or a group
acquired 15 percent or more of the Corporation's voting stock, and the exercise
price for the rights is $225. In connection with the new plan, Mellon approved
the redemption of rights issued under the 1989 rights agreement. The board also
approved the establishment of an employee stock benefit trust which will
purchase 9 million treasury shares from the Corporation to prefund obligations
under Mellon's stock-related benefits plans, including its stock option and
401(k) plans. Holders of stock options will vote the shares held in the trust
with each active plan participant having an equal vote.
-more-
<PAGE>
Mellon Declares Dividend
Oct. 15, 1996
Page 2
With balance sheet assets of more than $43 billion and assets under
management or administration of more than $1.1 trillion, Mellon Bank Corporation
is a major financial services company headquartered in Pittsburgh; its primary
subsidiary is Mellon Bank, N.A. Mellon provides a full range of banking and
investment products and services to individuals and small, midsize and large
businesses and institutions. Its principal mutual fund business is The Dreyfus
Corporation.
###
<PAGE>
Exhibit 99.2
[LOGO OF MELLON] News Release
MEDIA ANALYSTS
----- --------
Contact: Stephen K. Dishart Donald J. MacLeod Corporate Affairs
(412) 234-0850 (412) 234-5601 One Mellon Bank Center
James J. Dever David T. Lamar Pittsburgh, PA 15258-0001
(412) 236-1752 (412) 234-4633
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD THIRD QUARTER 1996 RESULTS
------------------------------------------------
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
Financial Highlights 1996 1995 Change 1996 1995 Change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share (fully diluted) $1.31 $1.14 15% $3.81 $3.30 15%
Return on common equity* 20.6% 18.0% 260 bp 20.2% 17.7% 250 bp
Return on tangible common equity* 31.2% 27.4% 380 bp 30.8% 27.0% 380 bp
Return on assets* 1.71% 1.70% 1 bp 1.72% 1.74% (2) bp
Return on tangible assets* 1.92% 1.92% - bp 1.94% 1.98% (4) bp
Average common shares and equivalents
outstanding (fully diluted) (000) 131,917 144,340 (12,423) 134,122 147,935 (13,813)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
PITTSBURGH, Oct. 15, 1996--Mellon Bank Corporation (NYSE: MEL) today reported
record third quarter 1996 fully diluted earnings per common share of $1.31, an
increase of 15 percent, compared with $1.14 per common share in the third
quarter of 1995. Net income applicable to common stock was $172 million,
compared with $166 million in the third quarter of 1995. Annualized return on
common shareholders' equity and return on assets were 20.6 percent and 1.71
percent, respectively, in the third quarter of 1996, compared with 18 percent
and 1.70 percent, respectively, in the third quarter of 1995.
"Our significant earnings per common share increase is evidence that our
strategy of balance is working very well," said Frank V. Cahouet, Mellon
chairman, president and chief executive officer. "In addition, our return on
common equity and return on assets place us among the leaders in our industry.
Our strategy and execution are driving this performance."
-more-
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 2
Earnings per common share in the third quarter of 1996 reflects the 1995
and 1996 repurchases of 22 million common shares, prior to any reissuances, as
well as the repurchase of warrants for 4.5 million common shares. The
Corporation's average level of treasury stock was approximately $660 million
higher in the third quarter of 1996 compared with the third quarter of 1995.
After giving effect to funding the higher level of treasury stock, valued at the
short-term funding rate, the lower share count increased earnings per share 6
percent while ongoing business growth increased earnings per share 9 percent.
Earnings per common share in the third quarter of 1996 increased 16
percent, on an annualized basis, compared with $1.26 per common share in the
second quarter of 1996. This increase resulted from an annualized increase of 12
percent in ongoing business growth and 4 percent from a lower share count.
Net interest revenue for the third quarter of 1996 was $372 million, down
$20 million or 5 percent, from $392 million in the same prior-year period. This
reduction resulted from the credit card and home equity loan securitizations and
the repurchase of common shares. Fee revenue was $476 million, up $54 million or
13 percent, from $422 million in the third quarter of 1995. The increase in fee
revenue was attributable to higher mortgage servicing fees, higher institutional
trust fees and mutual fund management revenue, and increased credit card
revenue. The increase in credit card revenue resulted from the credit card
securitization.
Operating expense before net revenue from acquired property for the third
quarter of 1996 was $537 million, up $28 million or 5 percent, from $509 million
in the third quarter of 1995. The increase resulted primarily from higher staff
expense and higher amortization expense of mortgage servicing rights, primarily
from mortgage servicing acquisitions.
-more-
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 3
Credit quality expense was $24 million in the third quarter of 1996,
compared with $27 million in the third quarter of 1995. This decrease resulted
from a $5 million decrease in the provision for credit losses. Net credit losses
were $34 million in the third quarter of 1996, compared with $39 million in the
third quarter of 1995. The decrease primarily resulted from lower credit card
net credit losses.
Nonperforming assets totaled $209 million at Sept. 30, 1996, compared with
$203 million at June 30, 1996, and $261 million at Sept. 30, 1995. The
Corporation's nonperforming assets ratio was .74 percent at Sept. 30, 1996, and
June 30, 1996, and .93 percent at Sept. 30, 1995.
With balance sheet assets of more than $43 billion and assets under
management or administration of approximately $1.1 trillion, Mellon Bank
Corporation is a major financial services company headquartered in Pittsburgh;
its primary subsidiary is Mellon Bank, N.A. Mellon provides a full range of
banking and investment products and services to individuals and small, midsize
and large businesses and institutions. Its principal mutual fund business is The
Dreyfus Corporation.
###
NOTE: Detailed supplemental information follows.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 4
Tangible Operating Results
- --------------------------
Except for the merger with Dreyfus, which was accounted for under the "pooling
of interests" method, the Corporation has been required to account for business
combinations under the "purchase" method of accounting. The purchase method
results in the recording of goodwill and other identified intangibles which are
amortized as noncash charges in future years into operating expense. Had the
Corporation accounted for these business combinations under the pooling of
interests method, these intangibles and their related amortization would not
have been recorded. The tangible operating results are shown in the table below.
<TABLE>
<CAPTION>
(dollar amounts in millions, Three months Nine months
common shares in thousands, ended Sept. 30, ended Sept. 30,
ratios annualized) 1996 1995 Change 1996 1995 Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income applicable to
common stock $ 172 $ 166 $ 6 $ 510 $ 488 $ 22
After tax impact of
amortization of
intangibles from
purchase acquisitions 18 18 - 55 55 -
- --------------------------------------------------------------------------------------
Tangible net income
applicable to
common stock $ 190 $ 184 $ 6 $ 565 $ 543 $ 22
- --------------------------------------------------------------------------------------
Average common equity $ 3,327 $ 3,648 $ (321) $ 3,371 $ 3,691 $ (320)
Average goodwill and
other intangibles 898 985 (87) 923 1,005 (82)
- --------------------------------------------------------------------------------------
Average tangible
common equity $ 2,429 $ 2,663 $ (234) $ 2,448 $ 2,686 $ (238)
Return on tangible
common equity 31.2% 27.4% 380 bp 30.8% 27.0% 380 bp
- --------------------------------------------------------------------------------------
Average total assets $42,461 $40,955 $1,506 $41,804 $39,745 $2,059
Average tangible
assets $41,563 $39,970 $1,593 $40,881 $38,740 $2,141
Return on tangible assets 1.92% 1.92% - bp 1.94% 1.98% (4)bp
- --------------------------------------------------------------------------------------
Average common shares and
equivalents outstanding
(fully diluted) 131,917 144,340 (12,423) 134,122 147,935 (13,813)
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 5
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
(in millions) 1996 1995 Change 1996 1995 Change
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $ 374 $ 395 $ (21) $ 1,114 $ 1,174 $ (60)
Net interest margin (FTE) 4.20% 4.56% (36)bp 4.28% 4.68% (40)bp
Average securities $ 6,538 $ 4,938 $1,600 $ 6,180 $ 4,836 $1,344
Average loans $27,170 $27,774 $ (604) $27,009 $27,177 $ (168)
Average interest-earning
assets $35,450 $34,361 $1,089 $34,769 $33,541 $1,228
- -----------------------------------------------------------------------------------------------
</TABLE>
The decrease in net interest revenue and the net interest margin in the third
quarter of 1996, compared with the third quarter of 1995, resulted from the
effect of the November 1995 $950 million credit card securitization, the March
1996 $650 million home equity loan securitization and funding costs related to
the repurchase of common stock. Excluding the effect of the loan securitizations
and the equity repurchases, the net interest revenue and net interest margin for
the third quarter of 1996 would have been approximately $415 million and 4.46%,
compared with approximately $400 million and 4.62% in the third quarter of 1995.
The foregone net interest revenue from the loan securitizations is substantially
offset by higher servicing fee revenue and lower net credit losses. Net interest
revenue in the third quarter of 1996 was favorably impacted by higher loan fees,
loan levels and a higher level of noninterest-bearing deposits.
Average loans decreased $604 million in the third quarter of 1996, compared with
the prior-year period, primarily as a result of the loan securitizations and
jumbo residential mortgage loan sales. Excluding the loan securitizations and
sales, loans increased approximately $1.8 billion, compared with the prior-year
period, primarily as a result of increases in wholesale, retail and credit card
loans.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 6
The decrease in net interest revenue and the net interest margin in the first
nine months of 1996 principally resulted from the same factors responsible for
the third quarter decrease.
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
(in millions) 1996 1995 Change 1996 1995 Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for credit losses $25 $30 $ (5) $ 75 $ 70 $ 5
Net revenue from acquired property (1) (3) (2) (10) (15) (5)
- ---------------------------------------------------------------------------------------------
Credit quality expense $24 $27 $ (3) $ 65 $ 55 $ 10
- ---------------------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Credit card $38 $49 $(11) $ 81 $117 $(36)
Other consumer credit 2 3 (1) 10 11 (1)
Commercial real estate - (14) 14 1 (19) 20
Commercial and financial (6) 2 (8) (3) 7 (10)
- ---------------------------------------------------------------------------------------------
Total domestic 34 40 (6) 89 116 (27)
International - (1) 1 (1) (5) 4
- ---------------------------------------------------------------------------------------------
Total net credit losses $34 $39 $ (5) $ 88 $111 $(23)
- ---------------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .50% .57% (7)bp .44% .55% (11)bp
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets and assets held for
accelerated resolution.
Credit quality expense decreased $3 million in the third quarter of 1996,
compared with the third quarter of 1995, as a result of a $5 million decrease in
the provision for credit losses.
The $5 million decrease in net credit losses, compared with the third quarter of
1995, resulted from a lower level of credit card net credit losses, partially
offset by lower commercial loan recoveries. The reduction in credit card losses
resulted from the credit card securitization in the fourth quarter of 1995 and
the December 1995 transfer of certain CornerStone/sm/ credit card loans, which
had a history of delinquency, into an accelerated resolution portfolio. The net
carrying value of the accelerated resolution portfolio at September 30, 1996,
was $40 million, compared with $52 million at June 30, 1996, and $82 million at
year-end 1995.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 7
Net credit losses decreased $23 million in the first nine months of 1996,
compared with the first nine months of 1995, resulting from the same factors
responsible for the third quarter decrease.
Net credit losses of $34 million in the third quarter of 1996 increased $8
million from the second quarter of 1996 as a result of an $11 million increase
in credit card net credit losses. The increase in credit card net credit losses
resulted in part from the expected return to a more normal level of
delinquencies in the CornerStone/sm/ portfolio following the creation of the
accelerated resolution portfolio in December 1995.
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
(in millions) 1996 1995 Change 1996 1995 Change
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment management:
Mutual fund:
Management $ 85 $ 80 $ 5 $ 252 $ 227 $ 25
Administration/Custody 26 30 (4) 79 90 (11)
Institutional trust 62 54 8 183 156 27
Institutional asset management 34 32 2 103 100 3
Private asset management 39 37 2 118 104 14
- ---------------------------------------------------------------------------------------
Total trust and investment
management fees 246 233 13 735 677 58
Cash management and deposit
transaction charges 54 49 5 155 144 11
Mortgage servicing fees 46 32 14 131 82 49
Credit card fees 29 21 8 92 62 30
Foreign currency and
securities trading 20 24 (4) 61 73 (12)
Other 81 63 18 279 188 91
- ---------------------------------------------------------------------------------------
Total fee revenue 476 422 54 1,453 1,226 227
Gains on sale of securities - - - 1 - 1
- ---------------------------------------------------------------------------------------
Total noninterest revenue $476 $422 $ 54 $1,454 $1,226 $228
- ---------------------------------------------------------------------------------------
</TABLE>
Noninterest revenue increased $54 million, or 13%, in the third quarter of 1996,
compared with the prior-year period.
The $13 million, or 6%, increase in trust and investment management fees in the
third quarter of 1996, compared with the prior-year period, primarily
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 8
resulted from an $8 million, or 14%, increase in institutional trust fees and a
$5 million, or 5%, increase in mutual fund management revenue. The increase in
institutional trust revenue resulted from new business, including the 1995
acquisition of two corporate trust businesses, and a $5 million increase in
securities lending revenue. The increase in securities lending revenue primarily
resulted from improved margins, as well as a higher volume of securities lent in
the third quarter of 1996. The higher revenue from the management of mutual
funds resulted from a higher average level of mutual fund assets managed at
Dreyfus.
Average proprietary funds managed at Dreyfus in the third quarter of 1996 were
$80 billion, compared with $77 billion in the third quarter of 1995. This
increase primarily resulted from higher average equity funds and institutional
money market funds.
The increase in cash management fees and deposit transaction charges primarily
resulted from higher volumes of business in customer receivable, payable and
treasury management solution products.
The increase in mortgage servicing fees in the third quarter of 1996, compared
with the prior-year period, resulted from the acquisition of mortgage servicing
rights, including a full quarter impact of the August 1995 Metmor acquisition,
compared with a partial quarter impact in 1995.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 9
Credit card revenue increased in the third quarter of 1996, compared with the
third quarter of 1995, as a result of servicing fee revenue from the securitized
credit card receivables. The decrease in foreign currency and securities trading
fee revenue in the third quarter of 1996, compared to the prior-year period, was
attributable to lower foreign exchange fees earned as a result of lower levels
of market volatility and customer activity.
Other fee revenue increased $18 million in the third quarter of 1996, compared
with the prior-year period. This increase primarily resulted from gains on the
disposition of assets and servicing fee revenue from the securitization of home
equity loans.
The increase in fee revenue in the first nine months of 1996, compared with the
prior-year period, primarily resulted from the same factors responsible for the
third quarter increase. Also affecting the comparison of year-to-date results
were the following factors which were recorded in other fee revenue in the first
half of 1996: a $28 million gain on the home equity loan securitization; a $14
million increase in gains on disposition of assets; a $13 million gain on the
partial sale of an equity interest in an institutional investment management
firm; and a $10 million increase in fees relating to the electronic filing of
income tax returns.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 10
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Three months Nine months
ended Sept. 30, ended Sept. 30,
(dollar amounts in millions) 1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $ 256 $240 $ 16 $788 $ 709 $ 79
Net occupancy expense 50 54 (4) 156 153 3
Professional, legal and
other purchased services 48 47 1 145 135 10
Equipment expense 35 35 - 106 103 3
Amortization of mortgage
servicing rights and purchased
credit card relationships 27 17 10 82 43 39
Amortization of goodwill
and other intangible assets 24 24 - 73 72 1
FDIC assessment and regulatory
examination fees 2 1 1 5 31 (26)
Other expense 95 91 4 291 270 21
- ----------------------------------------------------------------------------------------
Operating expense before net
revenue from acquired property 537 509 28 1,646 1,516 130
- ----------------------------------------------------------------------------------------
Net revenue from acquired property (1) (3) (2) (10) (15) (5)
- ----------------------------------------------------------------------------------------
Total operating expense $536 $506 $ 30 $1,636 $1,501 $135
- ----------------------------------------------------------------------------------------
Average full-time equivalent staff 24,500 24,200 300 24,500 24,200 300
- ----------------------------------------------------------------------------------------
Efficiency ratio (a) 63% 62% 1 64% 63% 1
Efficiency ratio excluding
amortization of goodwill and other
intangible assets 60 59 1 61 60 1
- ----------------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before net revenue from acquired property as a percentage
of revenue, computed on a taxable equivalent basis, excluding gains (losses)
on the sale of securities.
Operating expense before net revenue from acquired property increased $28
million, or 5%, in the third quarter of 1996, compared with the prior-year
period. This increase resulted primarily from increases in staff expense and the
amortization of mortgage servicing rights.
The increase in staff expense resulted primarily from an $8 million increase in
base salaries and higher incentive expense. The increase in the amortization of
mortgage servicing rights reflects growth in the Corporation's mortgage
servicing portfolio including the impact of a full quarter's amortization of the
mortgage servicing rights acquired in the August 1995 Metmor acquisition,
compared with a partial quarter impact in 1995.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 11
The $130 million increase in operating expense before net revenue from acquired
property in the first nine months of 1996, compared with the first nine months
of 1995, primarily resulted from the same factors responsible for the third
quarter increase, as well as the following charges recorded in the first quarter
of 1996: an $18 million charge for the Corporation's early retirement
enhancement program; $4 million of severance expense; and $6 million of expense
related to the further reconfiguration of the retail delivery system. Partially
offsetting these increases was lower FDIC deposit insurance assessment expense
in the first nine months of 1996 compared with the first nine months of 1995,
resulting from the suspension of this assessment in 1996 for healthy
institutions. In the third quarter of 1996, legislation was passed that imposed
a special one-time assessment on certain deposits in order to recapitalize the
Savings Association Insurance Fund. The Corporation's one-time assessment was
minimal.
Nonperforming Assets(a)
- --------------------
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31, Sept. 30,
(in millions) 1996 1996 1995 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 52 $ 58 $ 61 $ 62
Commercial real estate 34 40 39 32
Other domestic 45 32 67 89
- -------------------------------------------------------------------------------------
Total nonperforming loans 131 130 167 183
Acquired property:
Real estate acquired 88 84 87 99
Reserve for real estate acquired (10) (11) (18) (21)
- -------------------------------------------------------------------------------------
Total acquired property, net of
reserve 78 73 69 78
- -------------------------------------------------------------------------------------
Total nonperforming assets $ 209 $ 203 $ 236 $ 261
- -------------------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .46% .47% .60% .65%
Nonperforming assets as a
percentage of total loans and net
acquired property .74% .74% .85% .93%
- -------------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
Nonperforming assets increased $6 million, or 3%, from June 30, 1996. This
increase resulted from $10 million of nonperforming leases acquired in the
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 12
September 30, 1996, acquisition of a $1.4 billion business equipment financing
lease portfolio from USL Capital Corporation. Nonperforming assets decreased $52
million, or 20%, compared with September 30, 1995, primarily as a result of
repayments, returns to accrual status, sales and credit losses. The
nonperforming assets ratio was .74% at September 30, 1996 and June 30, 1996, and
.93% at September 30, 1995.
Reserve for Credit Losses
- -------------------------
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31, Sept. 30,
(in millions) 1996 1996 1995 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $478 $467 $471 $574
Reserve as a percentage of total loans 1.69% 1.71% 1.70% 2.04%
- ----------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
The $96 million decrease in the reserve for credit losses from September 30,
1995, primarily resulted from credit losses taken on the CornerStone/sm/ credit
card loans in the fourth quarter of 1995, including the loans that were
transferred to the accelerated resolution portfolio. Partially offsetting this
decrease was $20 million of reserves acquired in the USL Capital lease
acquisition.
<PAGE>
Mellon Reports Earnings
Oct. 15, 1996
Page 13
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(in millions, except Sept. 30, June 30, Dec. 31, Sept. 30,
per share amounts) 1996 1996 1995 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 3,399 $ 3,332 $ 3,590 $ 3,693
Common shareholders' equity
to assets ratio 7.78% 7.79% 8.83% 8.81%
Tangible common shareholders'
equity $ 2,221 $ 2,426 $ 2,632 $ 2,725
Tangible common shareholders'
equity to assets ratio (a) 5.22% 5.79% 6.63% 6.66%
Total shareholders' equity $ 3,834 $ 3,767 $ 4,025 $ 4,128
Total shareholders' equity
to assets ratio 8.78% 8.81% 9.90% 9.85%
Tier I capital ratio 6.70 (b) 7.51 8.14 8.77
Total (Tier I and Tier II)
capital ratio 11.20 (b) 11.89 11.29 12.00
Leverage capital ratio 6.70 (b) 7.24 7.80 8.20
Book value per common share $ 26.26 $ 25.61 $ 26.17 $ 26.13
Tangible book value per common share 17.15 18.65 19.19 19.28
Closing common stock price 59.25 57.00 53.75 44.75
Market capitalization 7,668 7,414 7,374 6,324
Common shares outstanding (000) 129,415 130,069 137,187 141,309
- -----------------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill and other intangibles divided by
total assets less goodwill and other intangibles.
(b) Estimated.
The decrease in shareholders' equity at September 30, 1996, compared with
September 30, 1995, resulted from repurchases of common stock, offset in part by
earnings retention. In addition, asset growth, including a higher level of
goodwill and other intangibles primarily from the USL Capital lease acquisition,
resulted in a decrease in the Corporation's capital ratios compared with the
prior periods.
During the third quarter of 1996, the Corporation repurchased approximately 1
million shares of common stock. Since the beginning of 1995, the Corporation has
repurchased 22 million common shares, prior to any reissuances, as well as
warrants for 4.5 million shares of common stock. At September 30, 1996, common
stock and stock equivalents totaled 131.4 million shares.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Nine months ended
(dollar amounts in millions, Sept. 30, Sept. 30,
except per share amounts; ------------------ -----------------
common shares in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share - primary $ 1.31 $ 1.15 $ 3.81 $ 3.32
Net income per common share -
fully diluted $ 1.31 $ 1.14 $ 3.81 $ 3.30
Net income applicable to
common stock $ 172 $ 166 $ 510 $ 488
Tangible net income applicable to
common stock (a) $ 190 $ 184 $ 565 $ 543
Return on common shareholders'
equity (b) 20.6% 18.0% 20.2% 17.7%
Return on tangible common
shareholders' equity (a)(b) 31.2% 27.4% 30.8% 27.0%
Return on assets (b) 1.71% 1.70% 1.72% 1.74%
Return on tangible assets (a)(b) 1.92% 1.92% 1.94% 1.98%
Common equity to assets 7.78% 8.81% 7.78% 8.81%
Tangible common equity to assets 5.22% 6.66% 5.22% 6.66%
Average balances for the period
- -------------------------------
Money market investments $ 1,573 $ 1,286 $ 1,417 $ 1,228
Trading account securities 169 363 163 300
Securities 6,538 4,938 6,180 4,836
Loans 27,170 27,774 27,009 27,177
Total interest-earning assets 35,450 34,361 34,769 33,541
Total assets 42,461 40,955 41,804 39,745
Total tangible assets 41,563 39,970 40,881 38,740
Deposits 31,542 28,417 30,592 27,615
Total interest-bearing liabilities 28,806 28,159 28,379 27,486
Common shareholders' equity 3,327 3,648 3,371 3,691
Tangible common shareholders' equity 2,429 2,663 2,448 2,686
Total shareholders' equity 3,762 4,083 3,806 4,126
Computation of net income per
common share
- -----------------------------------------
Net income applicable to common stock $ 172 $ 166 $ 510 $ 488
======== ======== ======== ========
Total stock and stock equivalents - primary 131,598 143,969 133,769 146,916
======== ======== ======== ========
Total stock and stock
equivalents - fully diluted 131,917 144,340 134,122 147,935
======== ======== ======== ========
Net income per common share - primary $ 1.31 $ 1.15 $ 3.81 $ 3.32
======== ======== ======== ========
Net income per common
share - fully diluted $ 1.31 $ 1.14 $ 3.81 $ 3.30
======== ======== ======== ========
</TABLE>
_______________________
(a) Tangible net income applicable to common stock, return on tangible common
shareholders' equity and return on tangible assets exclude the after-tax
impact of the amortization of goodwill and other identified intangibles
resulting from accounting for business combinations under the purchase
method of accounting.
(b) Annualized. All amounts are based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, Sept. 30,
(in millions, except per -------------------- -------------------
share amounts) 1996 1995 1996 1995
------- ----------- --------- --------
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees
of $24, $20, $72 and $55) $ 558 $ 623 $1,674 $1,815
Interest-bearing deposits with banks 9 10 28 25
Federal funds sold and securities
under resale agreements 10 8 23 27
Other money market investments 3 - 6 1
Trading account securities 2 6 6 15
Securities 108 80 303 235
----- ----- ------ ------
Total interest revenue 690 727 2,040 2,118
Interest expense
- ----------------
Interest on deposits 229 227 663 652
Federal funds purchased and securities
under repurchase agreements 21 32 74 94
Other short-term borrowings 31 44 97 117
Notes and debentures 37 32 99 89
----- ----- ------ ------
Total interest expense 318 335 933 952
----- ----- ------ ------
Net interest revenue 372 392 1,107 1,166
Provision for credit losses 25 30 75 70
----- ----- ------ ------
Net interest revenue after
provision for credit losses 347 362 1,032 1,096
Noninterest revenue
- -------------------
Trust and investment management fees 246 233 735 677
Cash management and deposit
transaction charges 54 49 155 144
Mortgage servicing fees 46 32 131 82
Credit card fees 29 21 92 62
Foreign currency and securities trading 20 24 61 73
Other 81 63 279 188
----- ----- ------ ------
Total fee revenue 476 422 1,453 1,226
Gains on sale of securities - - 1 -
----- ----- ------ ------
Total noninterest revenue 476 422 1,454 1,226
Operating expense
- -----------------
Staff expense 256 240 788 709
Net occupancy expense 50 54 156 153
Professional, legal and other
purchased services 48 47 145 135
Equipment expense 35 35 106 103
Amortization of mortgage servicing
rights and purchased credit card
relationships 27 17 82 43
Amortization of goodwill and other
intangible assets 24 24 73 72
Other expense 97 92 296 301
Net revenue from acquired property (1) (3) (10) (15)
----- ----- ------ ------
Total operating expense 536 506 1,636 1,501
----- ----- ------ ------
Income before income taxes 287 278 850 821
Provision for income taxes 106 103 311 304
----- ----- ------ ------
Net income 181 175 539 517
Dividends on preferred stock 9 9 29 29
----- ----- ------ ------
Net income applicable to
common stock $ 172 $ 166 $ 510 $ 488
===== ===== ====== ======
Net income per common share - primary $1.31 $1.15 $3.81 $3.32
===== ===== ====== ======
Net income per common
share - fully diluted $1.31 $1.14 $3.81 $3.30
===== ===== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Sept. 30, Dec. 31, Sept. 30,
1996 1995 1995
---------- --------- ----------
<S> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 3,128 $ 2,342 $ 2,515
Money market investments 1,136 860 1,370
Trading account securities 51 62 302
Securities available for sale 4,113 2,913 2,276
Investment securities(approximate fair
value of $2,410, $2,554 and $3,211) 2,439 2,519 3,189
Loans, net of unearned discount of
$60, $44 and $56 28,229 27,690 28,073
Reserve for credit losses (478) (471) (574)
Premises and equipment 560 556 550
Acquired property, net of reserves of
$10, $18 and $21 78 69 78
Goodwill and other intangibles 1,178 958 968
Mortgage servicing rights and purchased
credit card relationships 782 682 637
Other assets 2,460 2,466 2,523
------- ------- -------
Total assets $43,676 $40,646 $41,907
======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $29,506 $24,870 $23,934
Deposits in foreign offices 3,049 4,391 5,377
Short-term borrowings 3,204 4,317 4,775
Other liabilities 1,564 1,600 1,791
Notes and debentures (with original
maturities over one year) 2,519 1,443 1,902
------- ------- -------
Total liabilities 39,842 36,621 37,779
Shareholders' equity
- --------------------
Preferred stock 435 435 435
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 200,000,000 shares
Issued - 147,165,480 shares 74 74 74
Additional paid-in capital 1,858 1,850 1,846
Retained earnings 2,390 2,118 2,039
Net unrealized gain (loss) on assets
available for sale, net of tax (20) 18 (17)
Treasury stock of 17,750,459; 9,978,407
and 5,856,254 shares at cost (903) (470) (249)
------- ------- -------
Total common shareholders' equity 3,399 3,590 3,693
------- ------- -------
Total shareholders' equity 3,834 4,025 4,128
------- ------- -------
Total liabilities and shareholders'
equity $43,676 $40,646 $41,907
======= ======= =======
</TABLE>
