<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) - April 14, 1997
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
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
By press release dated April 14, 1997, Mellon Bank Corporation (the
"Corporation") and 1st Business Corporation announced a definitive agreement
under which the Corporation will acquire 1st Business Corporation and its
principal subsidiary, 1st Business Bank, a full-service commercial bank serving
midsize business firms in southern California.
By release dated April 15, 1997, the Corporation announced first quarter 1997
results of operations. In the same release, the Corporation announced an
increase in the quarterly cash dividend and a two-for-one split of the
Corporation's Common Stock. The Corporation increased its Common Stock dividend
by 10 percent to 66 cents per share on a pre-split basis, payable on May 15,
1997, to shareholders of record at the close of business on April 30, 1997. The
Corporation also announced a two-for-one stock split of its Common Stock which
is being structured as a stock dividend of one additional share of Common Stock
being paid on each currently outstanding share of Common Stock. The additional
shares resulting from the split will be distributed on June 2, 1997, to
shareholders of record at the close of business on May 1, 1997.
By release dated April 15, 1997, the Corporation announced that its shareholders
have approved an amendment to its Articles of Incorporation increasing the
authorized number of shares of common stock from 200 million to 400 million
shares.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Mellon Bank Corporation Press Release, dated April 14, 1997, announcing
the signing of a definitive agreement with 1st Business Corporation.
99.2 Mellon Bank Corporation Press Release, dated April 15, 1997, announcing
the Corporation's first quarter results of operations, an increase in
the Corporation's Common Stock dividend, and a two-for-one stock split
of the Corporation's Common Stock.
99.3 Mellon Bank Corporation Press Release, dated April 15, 1997, announcing
the approval by shareholders of an amendment to the Corporation's
Articles of Incorporation.
<PAGE>
SIGNATURES
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: April 15, 1997 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 April 14, 1997 Filed herewith
99.2 Press Release dated April 15, 1997 Filed herewith
99.3 Press Release dated April 15, 1997 Filed herewith
<PAGE>
EX-99.1
[LOGO OF MELLON BANK CORPORATION] [LOGO OF 1ST BUSINESS BANK]
Mellon 1st Business Bank
------ ------------------
Contacts: Media: Stephen K. Dishart Robert W. Kummer, Jr.
(213) 553-9570 (213) 489-1000
(412) 234-0850
Analysts: Donald J. MacLeod
(412) 234-5601
FOR IMMEDIATE RELEASE
MELLON TO ACQUIRE 1st BUSINESS BANK
PITTSBURGH and LOS ANGELES, April 14, 1997--Mellon Bank Corporation (NYSE: MEL)
and 1st Business Corporation today announced a definitive agreement under which
Mellon will acquire 1st Business Corporation and its principal subsidiary, 1st
Business Bank, a full-service commercial bank serving midsize business firms in
southern California. The agreement combines 1st Business Bank's strong middle
market and small business banking presence with Mellon's broad array of banking,
trust and investment services to create a distinctive and significant competitor
serving this fast-growing market segment.
With approximately $1.1 billion in assets, 1st Business Bank is a
state-chartered bank with headquarters in Los Angeles and regional banking
offices in Orange County, the San Fernando Valley, the South Bay and West Los
Angeles. 1st Business Bank serves approximately 1,700 business customers in the
manufacturing, wholesale trade and service industries with annual revenues
between $5 million and $300 million. 1st Business Bank also provides personal
banking services to professionals, entrepreneurs, and owners and officers of its
business clients.
Mellon will purchase 1st Business Corporation with stock. Other terms
of the agreement were not disclosed. Mellon's management will recommend to its
board of directors that the board authorize the repurchase of a comparable
number of shares of Mellon common stock. 1st Business Bank will operate as a
separate entity under the name Mellon 1st Business Bank. Mellon expects to
retain virtually all of 1st Business Bank's approximately 200 employees. The
transaction, expected to close in the third quarter of this year, is subject to
internal and regulatory approvals and certain closing conditions.
-more-
<PAGE>
Mellon to Acquire 1st Business Bank
Page 2
"1st Business Bank is a leading provider of middle market banking
services in the region and has built strong customer relationships based on a
reputation for integrity, responsiveness and excellent customer service," said
Keith P. Russell, Mellon vice chairman, West Coast. "This transaction, along
with our existing West Coast presence and our 1996 acquisition of the Business
Equipment Finance unit of San Francisco-based USL Capital Corporation,
efficiently builds a significant middle market position for Mellon on the West
Coast. We look forward to providing Mellon's broad array of investment, trust
and banking products through this enhanced distribution capability in the
western states."
Mellon today employs more than 1,600 individuals on the West Coast in
13 western states. In these states, the organization provides 26 product lines
through 77 offices.
"As businesses in this region continue to grow, they require a
sophisticated selection of financial products and services to meet their needs,"
said Robert W. Kummer, Jr., chairman and chief executive officer of 1st Business
Bank. "We're excited about the opportunity to provide our customers with
Mellon's extraordinary array of products for businesses and entrepreneurs."
Widely recognized as one of the premier business banks in California,
1st Business Bank provides full commercial banking services to midsize business
firms, professionals, entrepreneurs and business owners. Since its founding in
1981, 1st Business Corporation has reported 16 consecutive years of sound growth
and record earnings. 1st Business Corporation is privately owned by John E.
Anderson, one of southern California's most successful entrepreneurs and civic
leaders. Mr. Anderson will remain on the board of directors of Mellon 1st
Business Bank. Mr. Russell will join the board of directors of Mellon 1st
Business Bank.
With balance sheet assets of approximately $42 billion and assets
under management or administration of approximately $1.3 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, investment and trust products and services to individuals and small,
midsize and large businesses and institutions. Its mutual fund business is The
Dreyfus Corporation.
Media Advisory: Keith Russell, Mellon vice chairman and head of Mellon Financial
GroupWest Coast, and Robert W. Kummer, Jr., 1st Business Bank chairman and chief
executive officer, will be available to speak to reporters between 12:30 and 4
p.m. EDT today. Call Steve Dishart at (213) 553-9570 to schedule an interview.
Press releases and other information about Mellon Bank Corporation and
its products and services are available at http://www.mellon.com on the
Internet. For Mellon press releases by fax, call 1 800 758-5804, identification
number 552187.
###
<PAGE>
EX-99.2
[MELLON LOGO] News Release
Contact: MEDIA: ANALYSTS:
------ --------
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 FIRST QUARTER 1997 RESULTS,
INCREASES COMMON STOCK DIVIDEND, ANNOUNCES COMMON STOCK SPLIT
Earnings Per Share Increases 11 Percent to $1.38 Per Share
on a Pre-Split Basis
Quarterly Common Dividend Increases 10 Percent to 66 cents Per Share
on a Pre-Split Basis
Announces a Two-for-One Common Stock Split
Return on Common Equity is 21.2 Percent and Return on Assets is 1.83 Percent
<TABLE>
<CAPTION>
First Quarter
Financial Highlights 1997 1996 Change
- ------------------------------------------------------------ --------- --------- -------
<S> <C> <C> <C>
Earnings per common share* $ 1.38 $ 1.24 11%
Tangible earnings per common share* $ 1.54 $ 1.37 12%
Return on common equity** 21.2% 19.7% 150 bp
Return on tangible common equity** 36.3% 30.1% 620 bp
Return on assets** 1.83% 1.76% 7 bp
Return on tangible assets** 2.09% 1.99% 10 bp
Average common shares and
equivalents outstanding* (000) 131,602 136,721 (5,119)
- ------------------------------------------------------------ -------- -------- ------
</TABLE>
* Fully diluted before the two-for-one common stock split.
** Annualized.
PITTSBURGH, April 15, 1997--Mellon Bank Corporation (NYSE: MEL) today
reported record first quarter 1997 fully diluted earnings per common share of
$1.38, on a pre-stock split basis, an increase of 11 percent compared with $1.24
per common share in the first quarter of 1996. The Corporation also announced a
10 percent increase in the quarterly cash dividend and a two-for-one split of
the Corporation's common stock.
The Corporation increased its common dividend by 10 percent to 66 cents per
share on a pre-stock split basis. The Corporation also declared a quarterly
dividend on its Series K preferred stock (NYSE: MEL Pr K) at the rate of $2.05
per share per annum. Dividends on the Corporation's common stock and Series K
preferred stock are payable on May 15, 1997, to shareholders of record at the
close of business on April 30, 1997.
-more-
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 2
The two-for-one common stock split is subject to approval of the proposal
to increase the authorized number of common shares, which will be voted upon at
today's annual meeting of shareholders. The split is being structured as a
stock dividend of one additional share of common stock being paid on each
currently outstanding share of common stock. The additional shares resulting
from the split will be distributed on June 2, 1997, to shareholders of record at
the close of business on May 1, 1997. On a post-stock split basis, the
Corporation's quarterly dividend will be 33 cents per share.
On a post-stock split basis, the Corporation's first quarter 1997 net
income was 69 cents per common share, compared with 62 cents per common share in
the first quarter of 1996.
"Along with our excellent financial performance, we're very pleased to
announce that the Corporation has increased the common dividend by 10 percent
and authorized a two-for-one common stock split," said Frank V. Cahouet, Mellon
chairman, president and chief executive officer. "The stock split will create a
more liquid market for individual investors while allowing shareholders to
maintain their same percentage of ownership in the Corporation."
Annualized return on common shareholders' equity and return on assets were
21.2 percent and 1.83 percent, respectively, in the first quarter of 1997,
compared with 19.7 percent and 1.76 percent, respectively, in the first quarter
of 1996. Annualized return on tangible common shareholders' equity and return
on tangible assets were 36.3 percent and 2.09 percent, respectively, in the
first quarter of 1997, compared with 30.1 percent and 1.99 percent,
respectively, in the first quarter of 1996. Fully diluted tangible earnings per
common share in the first quarter of 1997 were $1.54, on a pre-stock split
basis, a 12 percent increase compared with $1.37 in the first quarter of 1996.
Earnings per common share in the first quarter of 1997 reflects the
repurchase of 11.6 million common shares, prior to any reissuances, during 1996
and the first quarter of 1997. The Corporation's average level of treasury
stock was approximately $345 million higher in the first quarter of 1997,
compared with the first quarter of 1996. After giving effect to funding the
higher level of treasury stock, valued at a short-term funding rate, the lower
share count increased earnings per share 2 percent while ongoing business growth
increased earnings per share 9 percent.
Compared with the first quarter of 1996, Mellon's first quarter 1997
results reflected higher fee revenue and higher net interest revenue, offset in
part by higher operating expense. The quarter's net income applicable to common
stock also included an additional $3 million charge, or 3 cents per share on a
pre-stock split basis, for issue costs recorded as preferred stock dividends in
connection with the redemption of the Series J preferred stock.
Net interest revenue for the first quarter of 1997 was $370 million, up $7
million from $363 million in the prior-year period. This increase resulted from
the Mellon-US Leasing and Mellon-First United Leasing acquisitions in 1996 and a
higher level of interest-free funds, partially offset by the sale of the AAA
credit card portfolio, the home equity and insurance premium finance loan
securitizations, lower loan fees and the repurchase of common shares. Fee
revenue was $536 million in the first quarter of 1997, up 13 percent compared
with the prior-year period, excluding the $28 million gain on the home equity
loan securitization recorded in the first quarter of 1996. The increase in fee
revenue was attributable to higher trust and investment management fees, higher
mortgage servicing fee revenue and higher cash management and deposit
transaction charges.
-more-
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 3
Operating expense before net revenue from acquired property and trust-
preferred securities expense for the first quarter of 1997 was $565 million,
down $3 million from $568 million in the first quarter of 1996. Operating
expense in the first quarter of 1996 included $22 million of staff expense
resulting from the retirement enhancement plan and severance expense, and $6
million of expense related to the reconfiguration of the retail delivery system.
Excluding these items, operating expense before net revenue from acquired
property and trust-preferred securities expense increased $25 million, or 5
percent, in the first quarter of 1997 compared with the prior-year period. The
increase resulted primarily from acquisitions and business growth.
Credit quality expense was $22 million in the first quarter of 1997,
compared with $17 million in the first quarter of 1996. This $5 million
increase resulted from lower net revenue from acquired property. Net credit
losses were $32 million in the first quarter of 1997, up from $28 million in the
first quarter of 1996.
Nonperforming assets totaled $170 million at March 31, 1997, compared with
$174 million at Dec. 31, 1996, and $250 million at March 31, 1996. The
Corporation's nonperforming assets ratio was .62 percent at March 31, 1997, the
lowest ratio in the Corporation's recent history, compared with .63 percent at
Dec. 31, 1996, and .93 percent at March 31, 1996.
With balance sheet assets of approximately $42 billion and assets under
management or administration of approximately $1.3 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, investment and trust products and services to individuals and small,
midsize and large businesses and institutions. Its mutual fund business is The
Dreyfus Corporation.
Press releases and other information about Mellon Bank Corporation and its
products and services are available at http://www.mellon.com on the Internet.
For Mellon press releases by fax, call 1 800 758-5804, identification number
552187.
# # #
NOTE: Detailed supplemental information follows.
<PAGE>
Mellon Reports Earnings
April 15, 1997
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 that are
amortized as noncash charges in future years into operating expense. The
pooling of interests method does not result in the recording of goodwill or
intangibles. Since goodwill and intangible amortization expense does not result
in a cash expense, the economic value to shareholders under either accounting
method is essentially the same. Results, excluding the impact of intangibles,
are shown in the table below.
<TABLE>
<CAPTION>
Quarter ended
(dollar amounts in millions, March 31,
ratios annualized) 1997 1996 Change
- ------------------------------------------ ---------- -------- -------
<S> <C> <C> <C>
Net income applicable to common stock $ 182 $ 169 $ 13
After tax impact of amortization of
intangibles from purchase acquisitions 21 19 2
- ------------------------------------------ ------- ------- ------
Tangible net income applicable
to common stock $ 203 $ 188 $ 15
Tangible earnings per common
share-fully diluted (pre-split) $ 1.54 $ 1.37 12%
- ------------------------------------------ ------- ------- ------
Average common equity $ 3,490 $ 3,459 $ 31
Average goodwill and other intangibles 1,223 946 277
- ------------------------------------------ ------- ------- ------
Average tangible common equity $ 2,267 $ 2,513 $ (246)
Return on tangible common equity 36.3% 30.1% 620 bp
- ------------------------------------------ ------- ------- ------
Average total assets $42,187 $40,848 $1,339
Average tangible assets $40,964 $39,902 $1,062
Return on tangible assets 2.09% 1.99% 10 bp
- ------------------------------------------ ------- ------- ------
</TABLE>
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 5
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Quarter ended
March 31,
(in millions) 1997 1996 Change
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net interest revenue (FTE) $ 373 $ 366 $ 7
Net interest margin (FTE) 4.37% 4.35% 2bp
Average securities $ 6,018 $ 5,339 $679
Average loans $27,404 $27,058 $346
Average interest-earning assets $34,615 $33,825 $790
- ----------------------------------------------------------------
</TABLE>
The increase in net interest revenue and the net interest margin in the first
quarter of 1997, compared with the first quarter of 1996, resulted from $1.6
billion of lease financing acquisitions, the use of the proceeds from the $1
billion of trust-preferred securities issued in December 1996, the impact of a
higher level of noninterest-bearing deposits and loan growth. The cost of the
trust-preferred securities is reported in operating expense. Primarily
offsetting these factors was the effect of the November 1996 sale of a $770
million American Automobile Association (AAA) credit card portfolio, lower loan
fees, the December 1996 $500 million insurance premium finance securitization,
the March 1996 $650 million home equity loan securitization and the funding
costs related to the repurchase of common stock. The foregone net interest
revenue from the loan securitizations is substantially offset by higher
servicing fee revenue and lower net credit losses.
Excluding the effect of loan securitizations, the AAA credit card sale and lease
financing acquisitions, the Corporation experienced loan growth of approximately
$650 million in the first quarter of 1997 compared with the prior-year period,
primarily in wholesale and retail lending.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 6
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Quarter ended
March 31,
(in millions) 1997 1996 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for credit losses $ 25 $ 25 $ -
Net revenue from acquired property (3) (8) (5)
- --------------------------------------------------------------------------------
Credit quality expense $ 22 $ 17 $ 5
- --------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Credit card $ 31 $ 16 $15
Other consumer credit 3 5 (2)
Commercial real estate (2) 3 (5)
Commercial and financial 5 5 -
- --------------------------------------------------------------------------------
Total domestic 37 29 8
International (5) (1) (4)
- --------------------------------------------------------------------------------
Total net credit losses $ 32 $ 28 $ 4
- --------------------------------------------------------------------------------
Annualized net credit losses
to average loans .48% .41% 7bp
- --------------------------------------------------------------------------------
(a) Excludes net credit losses on segregated assets.
</TABLE>
Credit quality expense increased $5 million in the first quarter of 1997,
compared with the first quarter of 1996, as a result of a $5 million decrease in
net revenue from acquired property.
The $4 million increase in net credit losses, compared with the first quarter of
1996, resulted from a $15 million increase in credit card net credit losses,
partially offset by a reduction in commercial real estate net credit losses and
an increase in international loan recoveries. The increase in credit card net
credit losses resulted from the return to a more normal level of delinquencies
in the CornerStone/sm/ portfolio following the creation of the accelerated
resolution portfolio in December 1995, offset in part by a decrease in credit
losses resulting from the sale of the AAA credit card portfolio. At March 31,
1997, the CornerStone/sm/ credit card portfolio had total outstandings of $574
million, compared with $631 million at December 31, 1996 and $720 million at
March 31, 1996. The net carrying value of the accelerated resolution portfolio
at March 31, 1997, was $19 million, compared with $30 million at December 31,
1996, and $65 million at March 31, 1996.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 7
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended
March 31,
(in millions) 1997 1996 Change
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Fee revenue:
Trust and investment management:
Mutual fund:
Management $ 87 $ 83 $ 4
Administration/Custody 30 27 3
Institutional trust 66 59 7
Institutional asset management 37 34 3
Private asset management 46 38 8
- ------------------------------------------------------------------------------
Total trust and investment management fees 266 241 25
Cash management and deposit transaction charges 56 49 7
Mortgage servicing fees 51 41 10
Foreign currency and securities trading revenue 25 21 4
Credit card fees 24 33 (9)
Information services fees 13 9 4
Other 101 109 (8)
- ------------------------------------------------------------------------------
Total fee revenue 536 503 33
Gains on sale of securities - 1 (1)
- ------------------------------------------------------------------------------
Total noninterest revenue $ 536 $ 504 $32
- ------------------------------------------------------------------------------
Fee revenue as a percentage of total revenue (FTE) 59% 58% 1
Trust and investment management revenue
as a percentage of total revenue (FTE) 29% 28% 1
- ------------------------------------------------------------------------------
</TABLE>
Fee revenue increased $61 million, or 13%, in the first quarter of 1997,
compared with the prior-year period, excluding the $28 million gain on the home
equity loan securitization recorded in the first quarter of 1996. Including the
securitization gain, fee revenue increased $33 million, or 7%, compared with the
prior-year period.
The $25 million, or 11%, increase in trust and investment management fees in the
first quarter of 1997, compared with the prior-year period, primarily resulted
from an $8 million, or 21%, increase in private asset management revenue, a $7
million, or 13%, increase in institutional trust fees and a $4 million, or 4%,
increase in mutual fund management revenue. The increase in private asset
management revenue resulted from new business and an increase in the market
value of assets under management. The increase in institutional trust revenue
resulted from new business and a $5 million increase in securities lending
revenue. The higher revenue from the management of mutual funds resulted from a
higher average level of mutual fund assets managed at Dreyfus, which was
partially offset by an increase of $2 million in management fee waivers.
Proprietary funds managed at Dreyfus in the first quarter of 1997 averaged $85
billion, compared with $81 billion in the first quarter of 1996. This increase
primarily resulted from a $4 billion average increase in equity funds.
The 15% increase in cash management fees and deposit transaction charges
primarily resulted from higher volumes of business in customer receivable,
payable and treasury management products.
The 25% increase in mortgage servicing fees in the first quarter of 1997,
compared with the prior-year period, resulted from a higher level of mortgage
servicing rights acquired through acquisitions.
The 16% increase in foreign currency and securities trading revenue was
attributable to higher foreign exchange fees earned as a result of higher levels
of market volatility and customer activity.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 8
Credit card revenue decreased 26% in the first quarter of 1997, compared with
the first quarter of 1996, as a result of lower fee revenue from the securitized
credit card portfolio, due in part to higher credit losses in this portfolio,
and the sale of the AAA credit card portfolio in November 1996.
The 50% increase in information services fee revenue compared with the first
quarter of 1996 resulted from higher ATM network processing fees and the
ChaseMellon Shareholder Services joint venture.
Other fee revenue decreased $8 million in the first quarter of 1997, compared
with the prior-year period. This decrease primarily resulted from the $28
million gain on the home equity loan securitization recorded in the first
quarter of 1996. Partially offsetting this decrease was an $11 million increase
in servicing fee revenue from the securitization of insurance premium finance
and home equity loans, a $6 million increase resulting from the disposition of
assets and sale of equity securities and a $5 million increase in fees relating
to the electronic filing of income tax returns.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 9
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Quarter ended
March 31,
(dollar amounts in millions) 1997 1996 Change
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Staff expense $ 268 $ 277 $ (9)
Net occupancy expense 52 56 (4)
Professional, legal and other purchased services 46 47 (1)
Equipment expense 36 35 1
Amortization of mortgage servicing rights
and purchased credit card relationships 28 28 -
Amortization of goodwill
and other intangible assets 27 25 2
Other expense 108 100 8
- ------------------------------------------------------------------------------
Operating expense before net
revenue from acquired property and trust-
preferred securities expense 565 568 (3)
Trust-preferred securities expense 20 - 20
Net revenue from acquired property (3) (8) 5
- ------------------------------------------------------------------------------
Total operating expense $ 582 $ 560 $ 22
- ------------------------------------------------------------------------------
Average full-time equivalent staff 25,200 24,600 600
- ------------------------------------------------------------------------------
Efficiency ratio (a) 62% 65% (3)
Efficiency ratio excluding amortization of
goodwill and other intangible assets 59 62 (3)
- ------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before net revenue from acquired property and trust-
preferred securities expense, as a percentage of revenue, computed on a
taxable equivalent basis, excluding gains on the sale of securities.
Operating expense before net revenue from acquired property and trust-preferred
securities expense decreased $3 million in the first quarter of 1997, compared
with the prior-year period. Excluding an $18 million charge for the
Corporation's retirement enhancement program, $4 million of severance accruals
and $6 million of expense relating to the reconfiguration of the retail delivery
system recorded in the first quarter of 1996, operating expense before net
revenue from acquired property and trust-preferred securities expense increased
$25 million, or 5%, compared with the first quarter of 1996.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 10
Staff expense increased $13 million, excluding the $22 million of expense for
the retirement enhancement program and severance accruals recorded in the first
quarter of 1996, primarily from higher salaries expense, due in part to the
leasing acquisitions, as well as an increase in incentive expense. The decrease
in net occupancy expense resulted from the expense related to the
reconfiguration of the retail delivery system recorded in the first quarter of
1996. The increase in the amortization of goodwill and other intangibles
resulted from the 1996 leasing acquisitions while the increase in other expense
resulted from higher expenses in support of revenue growth. The $20 million of
trust-preferred securities expense resulted from the issuance of $1 billion of
these securities in December 1996. The proceeds from these securities are used
to fund interest-earning assets.
Income Taxes
- ------------
The Corporation's effective tax rate for the first quarter of 1997 was 36.3%,
compared with 36.5% for the first quarter of 1996. It is currently anticipated
that the effective tax rate will remain at approximately this same level for the
remainder of 1997.
Nonperforming Assets(a)
- -----------------------
<TABLE>
<CAPTION>
March 31, Dec. 31, March 31,
(in millions) 1997 1996 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 52 $ 50 $ 53
Commercial real estate 14 16 53
Other domestic 29 28 71
- ----------------------------------------------------------------------------
Total nonperforming loans 95 94 177
Acquired property:
Real estate acquired 80 86 86
Reserve for real estate acquired (9) (10) (13)
- ----------------------------------------------------------------------------
Net real estate acquired 71 76 73
Other assets acquired 4 4 -
- ----------------------------------------------------------------------------
Total acquired property 75 80 73
- ----------------------------------------------------------------------------
Total nonperforming assets $ 170 $ 174 $ 250
- ----------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .35% .35% .66%
Nonperforming assets as a
percentage of total loans and net
acquired property .62% .63% .93%
- ----------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 11
Nonperforming assets decreased $4 million from December 31, 1996, as a result of
a decrease in acquired property.
The $80 million decrease in nonperforming assets from March 31, 1996, primarily
resulted from the repayment of commercial real estate loans and the resolution
of commercial loans made to an engineering/construction company, as well as
other repayments, credit losses and returns to accrual status.
Reserve for Credit Losses
- -------------------------
<TABLE>
<CAPTION>
March 31, Dec. 31, March 31,
(in millions) 1997 1996 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Reserve for credit losses (a) $ 518 $ 525 $ 468
Reserve as a percentage of total loans 1.88% 1.92% 1.74%
- ------------------------------------------------------------------------------
(a) Excludes reserve for segregated assets.
</TABLE>
The $50 million increase in the reserve for credit losses from March 31, 1996,
reflects the additional fourth quarter 1996 credit loss provision related to the
credit card portfolio and $23 million of reserves acquired in the lease
financing acquisitions.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 12
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(in millions, except March 31, Dec. 31, March 31,
per share amounts) 1997 1996 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Common shareholders' equity $ 3,503 $ 3,456 $ 3,384
Common shareholders' equity
to assets ratio 8.33% 8.11% 8.14%
Tangible common shareholders'
equity $ 2,289 $ 2,218 $ 2,450
Tangible common shareholders'
equity to assets ratio (a) 5.60% 5.36% 6.03%
Total shareholders' equity $ 3,696 $ 3,746 $ 3,819
Total shareholders' equity
to assets ratio 8.79% 8.79% 9.19%
Tier I capital ratio 8.70 (b) 8.38 7.69
Total (Tier I and Tier II)
capital ratio 13.70 (b) 13.58 12.20
Leverage capital ratio 8.70 (b) 8.31 7.52
Book value per common share:
Pre-stock split $ 27.19 $ 26.86 $ 25.55
Post-stock split (c) 13.60 13.43 12.78
Tangible book value per common share:
Pre-stock split 17.76 17.24 18.50
Post-stock split (c) 8.88 8.62 9.25
Closing common stock price:
Pre-stock split 72.75 71.00 55.25
Post-stock split (c) 36.375 35.50 27.625
Market capitalization 9,372 9,134 7,317
Common shares outstanding (000):
Pre-stock split 128,831 128,647 132,443
Post-stock split (c) 257,662 257,294 264,886
- ---------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill and other intangibles divided
by total assets less goodwill and other intangibles.
(b) Estimated.
(c) Restated to reflect a two-for-one common stock split payable June 2,
1997.
The increase in common shareholders' equity at March 31, 1997, compared with
March 31, 1996, resulted from earnings retention partially offset by net common
stock repurchases. The decrease in total shareholders' equity from March 31,
1996, resulted from the December 1996 redemption of the $150 million Series I
preferred stock and the February 1997 redemption of the $100 million Series J
preferred stock. The quarter's net income applicable to common stock included an
additional $3 million charge, or $.03 per share on a pre-stock split basis, for
issue costs recorded as preferred stock dividends in connection with the
redemption of the Series J preferred stock.
<PAGE>
Mellon Reports Earnings
April 15, 1997
Page 13
The increase in the Corporation's regulatory capital ratios, compared with March
31, 1996, reflects the issuance of $1 billion of trust-preferred securities in
December 1996 following the decision by the Federal Reserve that accorded these
securities Tier I capital status. The ability to apply Tier I capital
treatment, as well as to deduct the expense for income tax purposes, provided
the Corporation with a cost-effective way to raise capital for regulatory
purposes. The trust-preferred securities are not included as a component of
total shareholders' equity on the Corporation's balance sheet.
During the first quarter of 1997, the Corporation repurchased approximately .8
million shares of common stock. Since the beginning of 1996, the Corporation
has repurchased 11.6 million common shares. At March 31, 1997, approximately
1.5 million shares remain available for repurchase under a 5 million share
repurchase program authorized by the board of directors in May 1996. In
addition, the Corporation has authorized the repurchase of a number of common
shares, up to the number that will be issued in connection with the acquisitions
of Buck Consultants, Inc. and 1/st/ Business Bank.
---
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions, Quarter ended
except per share amounts; March 31, Dec. 31, Sept. 30, June 30, March 31,
common shares in thousands) 1997 1996 1996 1996 1996
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share -
fully diluted:
Pre-stock split $ 1.38 $ 1.34 $ 1.31 $ 1.26 $1.24
Post-stock split (a) $ .69 $ .67 $ .66 $ .63 $ .62
Tangible net income per common
share - fully diluted (b):
Pre-stock split $ 1.54 $ 1.49 $ 1.45 $ 1.40 $1.37
Post-stock split (a) $ .77 $ .75 $ .72 $ .70 $ .69
Net income applicable to
common stock $ 182 $ 179 $ 172 $ 169 $169
Tangible net income applicable
to common stock (b) $ 203 $ 200 $ 190 $ 187 $188
Return on common shareholders'
equity (c) 21.2% 20.9% 20.6% 20.4% 19.7%
Return on tangible common
shareholders' equity (b)(c) 36.3% 36.6% 31.2% 31.3% 30.1%
Return on assets (c) 1.83% 1.80% 1.71% 1.70% 1.76%
Return on tangible assets (b)(c) 2.09% 2.06% 1.92% 1.92% 1.99%
Common equity to assets 8.33% 8.11% 7.78% 7.79% 8.14%
Tangible common equity to assets 5.60% 5.36% 5.22% 5.79% 6.03%
Average balances for the period
- ----------------------------------
Money market investments $ 1,032 $ 1,272 $ 1,573 $ 1,387 $ 1,290
Trading account securities 161 96 169 181 138
Securities 6,018 6,198 6,538 6,658 5,339
Loans 27,404 27,900 27,170 26,798 27,058
Total interest-earning assets 34,615 35,466 35,450 35,024 33,825
Total assets 42,187 42,636 42,461 42,096 40,848
Total tangible assets 40,964 41,395 41,563 41,173 39,902
Deposits 30,280 31,569 31,542 30,949 29,274
Total interest-bearing
liabilities 27,485 29,210 28,806 28,342 27,986
Common shareholders' equity 3,490 3,410 3,327 3,327 3,459
Tangible common shareholders'
equity 2,267 2,169 2,429 2,404 2,513
Total shareholders' equity 3,735 3,820 3,762 3,762 3,894
</TABLE>
<TABLE>
<CAPTION>
Computation of net income per
common share
- ---------------------------------- Quarter ended
March 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Net income applicable to common stock $ 182 $ 169
======= ========
Total stock and stock equivalents-pre-stock split
Primary 131,520 136,506
======= ========
Fully diluted 131,602 136,721
======= ========
Net income per common share-primary:
Pre-stock split $ 1.38 $ 1.24
======= ========
Post-stock split (a) $ .69 $ .62
======= ========
Net income per common share-fully diluted:
Pre-stock split $ 1.38 $ 1.24
======= ========
Post-stock split (a) $ .69 $ .62
======= ========
- -----------------------
</TABLE>
(a) Per common share amounts have been restated to reflect a two-for-one common
stock split payable June 2, 1997.
(b) Excludes 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.
(c) Annualized. All amounts are based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Quarter ended
(in millions, except per March 31,
share amounts) ----------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees of $17 and $24) $ 553 $ 566
Interest-bearing deposits with banks 7 9
Federal funds sold and securities under resale agreements 5 6
Other money market investments 1 2
Trading account securities 2 2
Securities 99 88
----- -----
Total interest revenue 667 673
Interest expense
- ----------------
Interest on deposits 215 218
Federal funds purchased and securities
under repurchase agreements 18 27
Other short-term borrowings 20 37
Notes and debentures 44 28
----- -----
Total interest expense 297 310
----- -----
Net interest revenue 370 363
Provision for credit losses 25 25
----- -----
Net interest revenue after provision for credit losses 345 338
Noninterest revenue
- -------------------
Trust and investment management fees 266 241
Cash management and deposit transaction charges 56 49
Mortgage servicing fees 51 41
Foreign currency and securities trading revenue 25 21
Credit card fees 24 33
Information services fees 13 9
Other 101 109
----- -----
Total fee revenue 536 503
Gain on sale of securities - 1
----- -----
Total noninterest revenue 536 504
Operating expense
- -----------------
Staff expense 268 277
Net occupancy expense 52 56
Professional, legal and other purchased services 46 47
Equipment expense 36 35
Amortization of mortgage servicing assets and
purchased credit card relationships 28 28
Amortization of goodwill and other intangible assets 27 25
Other expense 108 100
Trust-preferred securities expense 20 -
Net revenue from acquired property (3) (8)
----- -----
Total operating expense 582 560
----- -----
Income before income taxes 299 282
Provision for income taxes 108 103
----- -----
Net income 191 179
Dividends on preferred stock 9 10
----- -----
Net income applicable to common stock $ 182 $ 169
===== =====
Net income per common share - primary:
Pre-stock split $1.38 $1.24
===== =====
Post-stock split (a) $.69 $.62
===== =====
Net income per common share - fully diluted:
Pre-stock split $1.38 $1.24
===== =====
Post-stock split (a) $.69 $.62
===== =====
- -----------------------
</TABLE>
(a) Per common share amounts have been restated to reflect a two-for-one common
stock split payable June 2, 1997.
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) March 31, Dec. 31, March 31,
1997 1996 1996
---------- --------- ----------
<S> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 2,915 $ 2,846 $ 2,749
Money market investments 859 992 1,535
Trading account securities 110 84 168
Securities available for sale 3,376 4,111 3,164
Investment securities(approximate fair
value of $2,274, $2,365 and $2,608) 2,306 2,375 2,628
Loans, net of unearned discount of
$50, $57 and $57 27,525 27,393 26,857
Reserve for credit losses (518) (525) (468)
------- ------- -------
Net loans 27,007 26,868 26,389
Premises and equipment 572 569 555
Acquired property, net of reserves of
$9, $10 and $13 75 80 73
Goodwill and other intangibles 1,214 1,238 934
Mortgage servicing assets and purchased
credit card relationships 849 774 701
Other assets 2,785 2,659 2,686
------- ------- -------
Total assets $42,068 $42,596 $41,582
======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $27,258 $28,657 $26,572
Deposits in foreign offices 2,678 2,717 3,326
Short-term borrowings 3,130 2,247 4,163
Other liabilities 1,804 1,721 1,730
Notes and debentures (with original
maturities over one year) 2,512 2,518 1,972
------- ------- -------
Total liabilities 37,382 37,860 37,763
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial interests
in Corporation's junior subordinated
deferrable interest debentures 990 990 -
Shareholders' equity (a)
- ------------------------
Preferred stock 193 290 435
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 1,875 1,866 1,854
Retained earnings 2,569 2,480 2,207
Net unrealized loss on assets
available for sale, net of tax (38) (1) (23)
Treasury stock of 18,334,060; 18,518,290;
and 14,722,287 shares at cost (977) (963) (728)
------- ------- -------
Total common shareholders' equity 3,503 3,456 3,384
------- ------- -------
Total shareholders' equity 3,696 3,746 3,819
------- ------- -------
Total liabilities, trust-preferred
securities and shareholders' equity $42,068 $42,596 $41,582
======= ======= =======
</TABLE>
(a) Shareholders' equity at March 31, 1997, does not reflect the two-for-one
stock split payable June 2, 1997.
Mellon Bank Corp. press releases are available through Company News On-Call by
fax, 800-758-5804, ext. 552187, or at http://www.prnewswire.com (MEL)
<PAGE>
EX-99.3
Contact: Media: Jim Dever
(412) 236-1752 Corporate Affairs
Analysts: David T. Lamar One Mellon Bank Center
(412) 234-4633 Pittsburgh, PA 15258-0001
FOR IMMEDIATE RELEASE
MELLON SHAREHOLDER ACTION PERMITS TWO-FOR-ONE STOCK SPLIT
PITTSBURGH April 15, 1997--Mellon Bank Corporation (NYSE: MEL) today announced
that its shareholders have approved an amendment to its Articles of
Incorporation increasing the authorized number of shares of common stock from
200 million to 400 million.
Earlier today, Mellon announced a two-for-one common stock split subject to
favorable shareholder action on this proposed amendment. Mellon's shareholders
then took this favorable action at Mellon's annual shareholders meeting this
morning in Pittsburgh.
The two-for-one stock split is being structured as a stock dividend of one
additional share of common stock being paid on each currently outstanding share
of common stock. The additional shares resulting from the split will be
distributed on June 2, 1997, to shareholders of record at the close of business
on May 1, 1997.
With balance sheet assets of approximately $42 billion and assets under
management or administration of approximately $1.3 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, investment and trust products and services to individuals and small,
midsize and large businesses and institutions. Its mutual fund business is The
Dreyfus Corporation.
Press releases and other information about Mellon Bank Corporation and its
products and services are available on the Internet at http://www.mellon.com.
For Mellon press releases by fax, call 1 800 758-5804, identification number
552187.
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