<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) - July 16, 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 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Mellon Bank Corporation Press Release, dated July 16, 1996
regarding second quarter results of operations.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: July 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 July 16, 1996 Filed herewith
<PAGE>
EX-99.1
[LOGO] Mellon News Release
Contact: MEDIA: ANALYSTS:
----- --------
James J. Dever Donald J. MacLeod Corporate Affairs
(412) 236-1752 (412) 234-5601 One Mellon Bank Center
David T. Lamar Pittsburgh, PA 15258-0001
(412) 234-4633
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD SECOND QUARTER 1996 RESULTS
-------------------------------------------------
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
Financial Highlights 1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share (primary) $1.26 $1.09 16% $2.50 $2.17 15%
Earnings per common share (fully diluted) $1.26 $1.09 16% $2.50 $2.16 16%
Return on common equity* 20.4% 17.5% 290 bp 20.0% 17.5% 250 bp
Return on tangible common equity* 31.3% 26.6% 470 bp 30.7% 26.8% 390 bp
Return on assets* 1.70% 1.75% (5) bp 1.73% 1.76% (3) bp
Return on tangible assets* 1.92% 1.99% (7) bp 1.96% 2.00% (4) bp
Average common shares
outstanding (primary) (000) 133,229 148,055 (14,826) 134,869 148,398 (13,529)
- ----------------------------------------------------------------------------------------------------------
* Annualized
</TABLE>
PITTSBURGH, July 16, 1996 -- Mellon Bank Corporation (NYSE: MEL) today reported
record second quarter 1996 earnings per common share of $1.26, an increase of 16
percent, compared with $1.09 per common share in the second quarter of 1995.
Net income applicable to common stock was $169 million compared with $162
million in the second quarter of 1995. Annualized return on common
shareholders' equity and return on assets were 20.4 percent and 1.70 percent,
respectively, in the second quarter of 1996, compared with 17.5 percent and 1.75
percent, respectively, in the second quarter of 1995.
-more-
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 2
"Our individual lines of business are doing very well, and our earnings
reflect broad-based favorable results across all four of our major business
sectors," said Frank V. Cahouet, Mellon chairman, president and chief executive
officer. "We believe our strategy of balance is continuing to perform well for
shareholders."
Earnings per common share in the second quarter of 1996 reflects the 1995
and 1996 repurchases of 21 million common shares, prior to any reissuances, as
well as the repurchase of warrants for 4.5 million common shares. After
giving effect to net repurchases of approximately $760 million of common shares
and warrants outstanding, valued at the short-term funding rate, the lower share
count increased earnings per share 7 percent while ongoing business growth
increased earnings per share 9 percent.
Net interest revenue for the quarter was $372 million, down $13 million, or
4 percent, from $385 million in the same prior-year period. This reduction
resulted primarily from the credit card and home equity loan securitizations and
the repurchase of common shares and warrants. Fee revenue was $474 million, up
$69 million, or 17 percent, from $405 million in the second quarter of 1995.
The increase in fee revenue was attributable to higher institutional trust fees
and mutual fund management revenue, higher mortgage servicing fees, increased
credit card revenue and a gain on a partial sale of an equity interest. The
increase in credit card revenue resulted from the credit card securitization.
Operating expense before net revenue from acquired property for the second
quarter of 1996 was $541 million, up $33 million or 7 percent, from $508 million
in the second quarter of 1995. The increase resulted primarily from higher
staff expense and higher amortization expense from purchased mortgage servicing
rights, offset in part by lower FDIC deposit insurance assessment expense.
-more-
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 3
Credit quality expense was $24 million in the second quarter of 1996,
compared with $12 million in the second quarter of 1995. This increase resulted
from a $7 million decrease in net revenue from acquired property and a $5
million increase in the provision for credit losses. Net credit losses were $26
million in the second quarter of 1996, compared with $46 million in the second
quarter of 1995, primarily as a result of lower credit card and commercial loan
net credit losses.
Nonperforming assets totaled $203 million at June 30, 1996, their lowest
level since 1982, compared with $250 million at March 31, 1996, and $276 million
at June 30, 1995. The Corporation's nonperforming assets ratio at June 30,
1996, was .74 percent, compared with .93 percent at March 31, 1996, and .99
percent at June 30, 1995.
With balance sheet assets of approximately $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.
###
NOTE: Detailed supplemental information follows.
<PAGE>
Mellon Reports Earnings
July 16, 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 Six months
common shares in thousands, ended June 30, ended June 30,
ratios annualized) 1996 1995 Change 1996 1995 Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income applicable to
common stock $ 169 $ 162 $ 7 $ 338 $ 322 $ 16
After tax impact of
amortization of
intangibles from
purchase acquisitions 18 19 (1) 37 37 --
- ------------------------------------------------------------------------------------------
Tangible net income
applicable to
common stock $ 187 $ 181 $ 6 $ 375 $ 359 $ 16
- ------------------------------------------------------------------------------------------
Average common equity $ 3,327 $ 3,726 $ (399) $ 3,393 $ 3,713 $ (320)
Average goodwill and
other intangibles 923 1,004 (81) 934 1,015 (81)
- ------------------------------------------------------------------------------------------
Average tangible
common equity $ 2,404 $ 2,722 $ (318) $ 2,459 $ 2,698 $ (239)
Return on tangible
common equity 31.3% 26.6% 470 bp 30.7% 26.8% 390 bp
- ------------------------------------------------------------------------------------------
Average total assets $ 42,096 $ 39,370 $ 2,726 $ 41,472 $ 39,130 $ 2,342
Average goodwill and
other intangibles 923 1,004 (81) 934 1,015 (81)
- ------------------------------------------------------------------------------------------
Average tangible
assets $ 41,173 $ 38,366 $ 2,807 $ 40,538 $ 38,115 $ 2,423
Return on tangible assets 1.92% 1.99% (7)bp 1.96% 2.00% (4)bp
- ------------------------------------------------------------------------------------------
Average common shares and
equivalents outstanding
(primary) 133,229 148,055 (14,826) 134,869 148,398 (13,529)
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 5
<TABLE>
<CAPTION>
Net Interest Revenue
- --------------------
Three months Six months
ended June 30, ended June 30,
(in millions) 1996 1995 Change 1996 1995 Change
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $374 $387 $ (13) $740 $779 $ (39)
Net interest margin (FTE) 4.30% 4.69% (39)bp 4.32% 4.75% (43)bp
Average securities $ 6,658 $ 4,681 $1,977 $ 5,999 $ 4,785 $1,214
Average loans $26,798 $27,076 $ (278) $26,928 $26,874 $ 54
Average interest-earning
assets $35,024 $33,142 $1,882 $34,425 $33,124 $1,301
- -------------------------------------------------------------------------------------------
</TABLE>
The decrease in net interest revenue and the net interest margin in the second
quarter of 1996, compared with the second 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 and warrants. Excluding the effect of the loan
securitizations and the equity repurchases, the net interest revenue and net
interest margin for the second quarter of 1996 would have been approximately
$415 million and 4.55%. 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 second quarter of 1996 was
favorably impacted by higher loan fees and a higher level of retail demand
deposits which were partially offset by the migration of retail customers from
lower cost interest-bearing deposit products to higher cost products.
Average loans decreased $278 million in the second 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 $2.1 billion, compared with the prior
year period, primarily as a result of increases in domestic wholesale, credit
card, retail and mortgage warehouse loans.
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 6
The decrease in net interest revenue and the net interest margin in the first
six months of 1996 principally resulted from the same factors responsible for
the second quarter decrease.
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
(in millions) 1996 1995 Change 1996 1995 Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for credit losses $25 $20 $ 5 $50 $40 $ 10
Net revenue from acquired property (1) (8) (7) (9) (12) (3)
- ------------------------------------------------------------------------------------------
Credit quality expense $24 $12 $ 12 $41 $28 $ 13
- ------------------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Credit card $27 $41 $(14) $43 $68 $(25)
Other consumer credit 3 4 (1) 8 8 -
Commercial real estate (2) (5) 3 1 (5) 6
Commercial and financial (2) 8 (10) 3 5 (2)
- ------------------------------------------------------------------------------------------
Total domestic 26 48 (22) 55 76 (21)
International - (2) 2 (1) (4) 3
- ------------------------------------------------------------------------------------------
Total net credit losses $26 $46 $(20) $54 $72 $(18)
- ------------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .40% .67% (27)bp .41% .54% (13)bp
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets and assets held for
accelerated resolution.
Credit quality expense increased $12 million in the second quarter of 1996,
compared with the second quarter of 1995, as a result of a $7 million decrease
in net revenue from acquired property and a $5 million increase in the provision
for credit losses.
The $20 million decrease in net credit losses, compared with the second quarter
of 1995, primarily resulted from a lower level of credit card and commercial
loan net credit losses. The reduction in credit card net credit losses resulted
from 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 June 30, 1996,
was $52 million, compared with $65 million at March 31, 1996, and $82 million at
year-end 1995. The credit card
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 7
securitization in the fourth quarter of 1995 also was a factor in the reduction
of credit card net credit losses.
Net credit losses decreased $18 million in the first half of 1996, compared with
the first half of 1995, reflecting the lower level of credit card net credit
losses, partially offset by higher commercial real estate net credit losses.
Net credit losses of $26 million in the second quarter of 1996 were down $2
million from the first quarter of 1996 as an $11 million increase in credit card
net credit losses was substantially offset by lower commercial loan net credit
losses. The increase in credit card net credit losses reflected the expected
return to a higher level of delinquencies in the CornerStone/sm/ portfolio
following the creation of the accelerated resolution portfolio. The Corporation
expects a further increase in credit card net credit losses in the third quarter
of 1996, which will fully reflect the delinquency characteristics of the
CornerStone/sm/ portfolio following the creation of the accelerated resolution
portfolio.
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 8
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 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 $ 84 $ 76 $ 8 $167 $147 $ 20
Administration/Custody 26 30 (4) 53 60 (7)
Institutional trust 62 51 11 121 102 19
Institutional asset management 35 34 1 69 68 1
Private asset management 41 34 7 79 67 12
- ----------------------------------------------------------------------------------------
Total trust and investment
management fees 248 225 23 489 444 45
Cash management and deposit
transaction charges 52 48 4 101 95 6
Mortgage servicing fees 44 25 19 85 50 35
Credit card fees 30 22 8 63 41 22
Foreign currency and
securities trading 20 25 (5) 41 49 (8)
Other 80 60 20 198 125 73
- ----------------------------------------------------------------------------------------
Total fee revenue 474 405 69 977 804 173
Gains on sale of securities - 1 (1) 1 - 1
- ----------------------------------------------------------------------------------------
Total noninterest revenue $474 $406 $ 68 $978 $804 $174
- ----------------------------------------------------------------------------------------
</TABLE>
Noninterest revenue increased $68 million, or 17%, in the second quarter of
1996, compared with the prior-year period.
The $23 million, or 10%, increase in trust and investment management fees in the
second quarter of 1996, compared with the prior-year period, primarily resulted
from an $11 million, or 23%, increase in institutional trust fees, an $8
million, or 10%, increase in mutual fund management revenue and a $7 million, or
20%, increase in private asset 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 in 1996, as well as a higher volume of
securities lent in the second quarter of 1996. The higher revenue from the
management of mutual funds resulted from a higher average level of
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 9
mutual fund assets managed and lower fee waivers at Dreyfus. The increase in
private asset management revenue primarily resulted from an increase in the
market value of assets under management and new business.
Average proprietary funds managed at Dreyfus in the second quarter of 1996 were
$79 billion, compared with $72 billion in the second quarter of 1995. This
increase primarily resulted from higher average institutional money market funds
and equity funds.
The increase in cash management fees and deposit transaction charges primarily
resulted from higher volumes of new business in remittance processing and
electronic products.
The increase in mortgage servicing fees in the second quarter of 1996, compared
with the prior-year period, resulted from the acquisition of mortgage servicing
rights, including the third quarter 1995 acquisition of Metmor Financial, Inc.
Credit card revenue increased in the second quarter of 1996, compared with the
second 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 second 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 $20 million in the second quarter of 1996, compared
with the prior-year period. This increase primarily resulted from a gain on the
partial sale of an equity interest in an institutional
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 10
investment management firm and servicing fee revenue from the securitized home
equity loans.
The increase in fee revenue in the first six months of 1996, compared with the
prior-year period, primarily resulted from the same factors responsible for the
second quarter increase. Also impacting the comparison of year-to-date results
were the following first quarter 1996 factors which were recorded in other fee
revenue: a $28 million gain on the home equity loan securitization; a $14
million increase in gains on disposition of assets and sales of equity
securities; and a $10 million increase in fees relating to the electronic filing
of income tax returns.
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
(dollar amounts in millions) 1996 1995 Change 1996 1995 Change
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $255 $229 $ 26 $532 $469 $ 63
Net occupancy expense 50 48 2 106 99 7
Professional, legal and
other purchased services 50 50 - 97 88 9
Equipment expense 36 34 2 71 68 3
Amortization of mortgage
servicing rights and purchased
credit card relationships 27 13 14 55 26 29
Amortization of goodwill
and other intangible assets 24 24 - 49 48 1
FDIC assessment and regulatory
examination fees 2 15 (13) 3 30 (27)
Other expense 97 95 2 196 179 17
- -------------------------------------------------------------------------------------
Operating expense before net
revenue from acquired property 541 508 33 1,109 1,007 102
- -------------------------------------------------------------------------------------
Net revenue from acquired property (1) (8) (7) (9) (12) (3)
- -------------------------------------------------------------------------------------
Total operating expense $540 $500 $ 40 $1,100 $ 995 $105
- -------------------------------------------------------------------------------------
Average full-time equivalent staff 24,600 24,100 500 24,600 24,200 400
- -------------------------------------------------------------------------------------
Efficiency ratio (a) 64% 64% - 64% 63% 1
Efficiency ratio excluding
amortization of goodwill and other
intangible assets 61 61 - 62 60 2
- -------------------------------------------------------------------------------------
</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 $33
million, or 7%, in the second quarter of 1996, compared with the prior-
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 11
year period. This increase resulted primarily from increases in staff expense
and the amortization of mortgage servicing rights, partially offset by lower
FDIC deposit insurance assessment expense.
The increase in staff expense resulted primarily from a $16 million increase in
incentive and commission expense, compared with a relatively low level in the
second quarter of 1995, and a $9 million increase in base salaries, resulting in
part from acquisitions. The increase in the amortization of mortgage servicing
rights reflects the increase in the Corporation's mortgage servicing portfolio
from June 30, 1995. Partially offsetting these increases was a decrease in the
FDIC deposit insurance assessment which resulted from the suspension of this
assessment in 1996 for healthy institutions.
The $102 million increase in operating expense before net revenue from acquired
property in the first half of 1996, compared with the first half of 1995,
primarily resulted from the same factors responsible for the second 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 which was offered during the first quarter of 1996; $4 million of
severance expense; and $6 million of expense related to the further
reconfiguration of the retail delivery system.
Excluding the expense from the early retirement enhancement program, severance
and the reconfiguration of the retail delivery system, operating expense before
net revenue from acquired property totaled $540 million in the first quarter of
1996, compared with $541 million in the second quarter of 1996.
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 12
Nonperforming Assets(a)
- -----------------------
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, June 30,
(in millions) 1996 1996 1995 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 58 $ 53 $ 61 $ 59
Commercial real estate 40 53 39 42
Other domestic 32 71 67 98
- ------------------------------------------------------------------------------------
Total nonperforming loans 130 177 167 199
Acquired property:
Real estate acquired 84 86 87 98
Reserve for real estate acquired (11) (13) (18) (21)
- ------------------------------------------------------------------------------------
Total acquired property, net of
reserve 73 73 69 77
- ------------------------------------------------------------------------------------
Total nonperforming assets $ 203 $ 250 $ 236 $ 276
- ------------------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .47% .66% .60% .72%
Nonperforming assets as a
percentage of total loans and net
acquired property .74% .93% .85% .99%
- ------------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
Nonperforming assets decreased $47 million, or 19%, from March 31, 1996, and are
at their lowest level since 1982. This decrease resulted from lower
nonperforming loans due to the partial sale and repayment of commercial loans to
an engineering/construction company as well as credit losses, repayments and
returns to accrual status. Nonperforming assets decreased $73 million, or 27%,
compared with June 30, 1995, primarily as a result of the same factors
responsible for the second quarter decrease. The nonperforming assets ratio at
June 30, 1996, was .74%, compared with .93% at March 31, 1996, and .99% at June
30, 1995.
Reserve for Credit Losses
- -------------------------
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, June 30,
(in millions) 1996 1996 1995 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $ 467 $ 468 $ 471 $ 583
Reserve as a percentage of total loans 1.71% 1.74% 1.70% 2.10%
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
The $116 million decrease in the reserve for credit losses from June 30, 1995,
primarily resulted from credit losses taken on the CornerStone/sm/ credit card
loans during 1995, including the loans that were transferred to the accelerated
resolution portfolio in the fourth quarter.
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 13
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(in millions, except June 30, March 31, Dec. 31, June 30,
per share amounts) 1996 1996 1995 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 3,332 $ 3,384 $ 3,590 $ 3,643
Common shareholders' equity
to assets ratio 7.79% 8.14% 8.83% 9.10%
Tangible common shareholders'
equity $ 2,426 $ 2,450 $ 2,632 $ 2,646
Tangible common shareholders'
equity to assets ratio (a) 5.79% 6.03% 6.63% 6.78%
Total shareholders' equity $ 3,767 $ 3,819 $ 4,025 $ 4,078
Total shareholders' equity
to assets ratio 8.81% 9.19% 9.90% 10.19%
Tier I capital ratio 7.50 (b) 7.69 8.14 8.98
Total (Tier I and Tier II)
capital ratio 11.90 (b) 12.20 11.29 12.31
Leverage capital ratio 7.20 (b) 7.52 7.80 8.32
Book value per common share $ 25.61 $ 25.55 $ 26.17 $ 25.59
Closing common stock price 57.00 55.25 53.75 41.625
Market capitalization 7,414 7,317 7,374 5,925
Common shares outstanding (000) 130,069 132,443 137,187 142,353
</TABLE>
(a) Common shareholders' equity less goodwill and other intangibles divided
by total assets less goodwill and other intangibles.
(b) Estimated.
The decrease in the Corporation's common and total shareholders' equity at June
30, 1996, compared with March 31, 1996, and June 30, 1995, resulted from
repurchases of common stock offset in part by earnings retention. In addition,
asset growth resulted in a decrease in the Corporation's capital ratios compared
with the prior-year periods.
In May 1996, the board of directors of the Corporation authorized the repurchase
of up to 5 million shares of common stock. This repurchase program is in
addition to the 3.5 million share repurchase program announced in the first
quarter of 1996. At June 30, 1996, the Corporation had completed the 3.5
million share repurchase program and had repurchased .2 million shares under the
5 million share repurchase program. Since the beginning of 1995, the
Corporation has repurchased 21 million common shares, prior to any
<PAGE>
Mellon Reports Earnings
July 16, 1996
Page 14
reissuances, as well as warrants for 4.5 million shares of common stock. At
June 30, 1996, common stock and stock equivalents totaled 132.0 million shares.
On April 16, 1996, the Corporation announced a 9% increase in the quarterly
common dividend to $.60 per common share. The increased dividend was paid on
May 15, 1996, to shareholders of record on April 30, 1996. This is the fifth
quarterly common dividend increase that the Corporation has announced since the
beginning of 1994, resulting in a total common dividend per share increase of
137%.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions, Three months ended Six months ended
except per share amounts; June 30, June 30,
common shares in thousands) ------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share
(primary) $ 1.26 $ 1.09 $ 2.50 $ 2.17
Net income per common share
(fully diluted) $ 1.26 $ 1.09 $ 2.50 $ 2.16
Net income applicable to
common stock $ 169 $ 162 $ 338 $ 322
Tangible net income applicable to
common stock (a) $ 187 $ 181 $ 375 $ 359
Return on common shareholders'
equity (b) 20.4% 17.5% 20.0% 17.5%
Return on tangible common
shareholders' equity (a)(b) 31.3% 26.6% 30.7% 26.8%
Return on assets (b) 1.70% 1.75% 1.73% 1.76%
Return on tangible assets (a)(b) 1.92% 1.99% 1.96% 2.00%
Common equity to assets 7.79% 9.10% 7.79% 9.10%
Tangible common equity to assets 5.79% 6.78% 5.79% 6.78%
Average balances for the period
- -------------------------------
Money market investments $ 1,387 $ 1,165 $ 1,338 $ 1,197
Trading account securities 181 220 160 268
Securities 6,658 4,681 5,999 4,785
Loans 26,798 27,076 26,928 26,874
Total interest-earning assets 35,024 33,142 34,425 33,124
Total assets 42,096 39,370 41,472 39,130
Total tangible assets 41,173 38,366 40,538 38,115
Deposits 30,949 27,100 30,112 27,208
Total interest-bearing liabilities 28,342 27,236 28,164 27,144
Common shareholders' equity 3,327 3,726 3,393 3,713
Tangible common shareholders' equity 2,404 2,722 2,459 2,698
Total shareholders' equity 3,762 4,161 3,828 4,148
Computation of net income per common
share (primary)
- ------------------------------------
Net income applicable to common stock $ 169 $ 162 $ 338 $ 322
======== ======== ======== ========
Average common shares outstanding 131,350 145,465 133,010 146,185
Other common stock equivalents, net of
shares assumed repurchased:
Stock options 1,879 1,929 1,859 1,672
Warrants - 661 - 541
-------- -------- -------- --------
Total stock and stock equivalents (c) 133,229 148,055 134,869 148,398
======== ======== ======== ========
Net income per common share $ 1.26 $ 1.09 $ 2.50 $ 2.17
======== ======== ======== ========
</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.
(c) Fully diluted stock and stock equivalents were 133,413 and 135,118 for the
second quarter and first half of 1996, respectively, compared with 148,291
and 149,288 for the second quarter and first half of 1995, respectively.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Six months ended
(in millions, except per June 30, June 30,
share amounts) -------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees
of $24, $19, $48 and $35) $ 550 $ 609 $1,116 $1,192
Interest-bearing deposits with banks 10 8 19 15
Federal funds sold and securities
under resale agreements 7 8 13 19
Other money market investments 1 1 3 1
Trading account securities 2 3 4 9
Securities 107 77 195 155
----- ----- ------ ------
Total interest revenue 677 706 1,350 1,391
Interest expense
- ----------------
Interest on deposits 216 220 434 425
Federal funds purchased and securities
under repurchase agreements 26 33 53 62
Other short-term borrowings 29 39 66 73
Notes and debentures 34 29 62 57
----- ----- ------ ------
Total interest expense 305 321 615 617
----- ----- ------ ------
Net interest revenue 372 385 735 774
Provision for credit losses 25 20 50 40
----- ----- ------ ------
Net interest revenue after
provision for credit losses 347 365 685 734
Noninterest revenue
- -------------------
Trust and investment management fees 248 225 489 444
Cash management and deposit
transaction charges 52 48 101 95
Mortgage servicing fees 44 25 85 50
Credit card fees 30 22 63 41
Foreign currency and securities trading 20 25 41 49
Other 80 60 198 125
----- ----- ------ ------
Total fee revenue 474 405 977 804
Gains on sale of securities - 1 1 -
----- ----- ------ ------
Total noninterest revenue 474 406 978 804
Operating expense
- -----------------
Staff expense 255 229 532 469
Net occupancy expense 50 48 106 99
Professional, legal and other
purchased services 50 50 97 88
Equipment expense 36 34 71 68
Amortization of mortgage servicing
rights and purchased credit card
relationships 27 13 55 26
Amortization of goodwill and other
intangible assets 24 24 49 48
Other expense 99 110 199 209
Net revenue from acquired property (1) (8) (9) (12)
----- ----- ------ ------
Total operating expense 540 500 1,100 995
----- ----- ------ ------
Income before income taxes 281 271 563 543
Provision for income taxes 102 99 205 201
----- ----- ------ ------
Net income 179 172 358 342
Dividends on preferred stock 10 10 20 20
----- ----- ------ ------
Net income applicable to
common stock $ 169 $ 162 $ 338 $ 322
===== ===== ====== ======
Primary net income per common share $1.26 $1.09 $2.50 $2.17
===== ===== ====== ======
Fully diluted net income per
common share $1.26 $1.09 $2.50 $2.16
===== ===== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) June 30, Dec. 31, June 30,
1996 1995 1995
--------- --------- ---------
<S> <C> <C> <C>
Assets
- -------
Cash and due from banks $ 2,765 $ 2,342 $ 2,218
Money market investments 1,258 860 833
Trading account securities 112 62 267
Securities available for sale 4,450 2,913 1,953
Investment securities(approximate fair
value of $2,481, $2,554 and $3,136) 2,515 2,519 3,133
Loans, net of unearned discount of
$59, $44 and $58 27,356 27,690 27,765
Reserve for credit losses (467) (471) (583)
Premises and equipment 556 556 554
Acquired property, net of reserves of
$11, $18 and $21 73 69 77
Goodwill and other intangibles 906 958 997
Mortgage servicing rights and purchased
credit card relationships 734 682 432
Other assets 2,511 2,466 2,370
------- ------- -------
Total assets $42,769 $40,646 $40,016
======= ======= =======
Liabilities
- ------------
Deposits in domestic offices $27,258 $24,870 $23,559
Deposits in foreign offices 4,446 4,391 3,248
Short-term borrowings 3,761 4,317 5,648
Other liabilities 1,566 1,600 1,615
Notes and debentures (with original
maturities over one year) 1,971 1,443 1,868
------- ------- -------
Total liabilities 39,002 36,621 35,938
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 1,855 1,850 1,843
Retained earnings 2,297 2,118 1,950
Net unrealized gain (loss) on assets
available for sale, net of tax (30) 18 (21)
Treasury stock of 17,096,369; 9,978,407
and 4,812,259 shares at cost (864) (470) (203)
------- ------- -------
Total common shareholders' equity 3,332 3,590 3,643
------- ------- -------
Total shareholders' equity 3,767 4,025 4,078
------- ------- -------
Total liabilities and shareholders'
equity $42,769 $40,646 $40,016
======= ======= =======
</TABLE>
