<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 15, 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
<PAGE>
ITEM 5. OTHER EVENTS
By release dated July 15, 1997, Mellon Bank Corporation (the "Corporation")
announced second quarter 1997 results of operations. In the same release, the
Corporation announced a 6 million common share repurchase program.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Mellon Bank Corporation Press Release, dated July 15, 1997 announcing
the matters referenced in Item 5 above.
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: July 11, 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 July 15, 1997 Filed herewith
<PAGE>
Exhibit 99.1
[MELLON LOGO] News Release
Contact: MEDIA: ANALYSTS:
------ ---------
Stephen K. Dishart Donald J. MacLeod
(412) 234-0850 (412) 234-5601 Corporate Affairs
James J. Dever David T. Lamar One Mellon Bank Center
(412) 236-1752 (412) 234-4633 Pittsburgh, PA 15258-0001
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD SECOND QUARTER 1997 RESULTS
-------------------------------------------------
. Quarterly Earnings Per Share Increases to $.71 Per Share, Up 13 Percent Over
Same Period Last Year
. Return on Common Equity is 21.9 Percent and Return on Assets is 1.79 Percent
. Announces 6 Million Common Share Repurchase Program
. Announces Regular Quarterly Common and Preferred Stock Dividends
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, March 31, June 30, June 30, June 30,
Financial Highlights 1997 1997 1996 1997 1996
- ----------------------------------------------------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings per common share* $ .71 $ .69 $ .63 $1.40 $1.25
Net income applicable to common stock $ 186 $ 182 $ 169 $ 368 $ 338
Return on common equity (annualized) 21.9% 21.2% 20.4% 21.5% 20.0%
Return on assets (annualized) 1.79% 1.83% 1.70% 1.81% 1.73%
Fee revenue as a percentage
of total revenue (FTE) 59% 59% 56% 59% 57%
Efficiency ratio excluding
amortization of intangibles and
trust-preferred securities expense 59% 59% 61% 59% 62%
- ----------------------------------------------------- ----- ----- ----- ----- -----
</TABLE>
Note: Per common share amounts have been restated to reflect the two-for-one
common stock split distributed on June 2, 1997.
* Fully diluted.
PITTSBURGH, July 15, 1997--Mellon Bank Corporation (NYSE: MEL) today reported
record second quarter 1997 fully diluted earnings per common share of 71 cents,
an increase of 13 percent, compared with 63 cents in the second quarter of 1996.
Earnings per common share totaled 69 cents in the first quarter of 1997. Net
income applicable to common stock was $186 million in the second quarter of
1997, compared with $169 million in the second quarter of 1996 and $182 million
in the first quarter of 1997.
"Mellon's focus on broad-based growth in key business segments continues to
produce solid results for our shareholders, as evidenced by our outstanding
return on common equity," said Frank V. Cahouet, Mellon chairman, president and
chief executive officer. "We continue to perform well across our spectrum of
businesses, and our strong returns position Mellon at the forefront of its peers
in the financial services industry."
-more-
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 2
The Corporation also announced that its board of directors authorized the
repurchase of up to 6 million additional shares of common stock. Since the
beginning of 1995, the Corporation has repurchased approximately 56 million
common shares, prior to any reissuances, as well as warrants for 9 million
shares of common stock.
The Corporation also declared its regular quarterly common dividend of 33
cents per share and its regular quarterly preferred 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 Aug. 15, 1997, to shareholders of record at the close of business on
July 31, 1997.
Annualized return on common shareholders' equity and return on assets were
21.9 percent and 1.79 percent, respectively, in the second quarter of 1997,
compared with 20.4 percent and 1.70 percent, respectively, in the second quarter
of 1996 and 21.2 percent and 1.83 percent, respectively, in the first quarter of
1997.
Net interest revenue for the second quarter of 1997 was nearly unchanged at
$370 million, compared with $372 million in the prior-year period and $370
million in the first quarter of 1997.
Fee revenue was $540 million in the second quarter of 1997, up $66 million
or 14 percent compared with $474 million in the second quarter of 1996 and up $4
million compared with $536 million in the first quarter of 1997. The increase
in fee revenue, compared with the prior-year period, was primarily attributable
to higher trust and investment management fees which resulted from new business,
an increase in the market value of assets under management, higher transaction
volumes and an increase in securities lending revenue. The increase in nearly
every fee category compared with the first quarter of 1997 was primarily offset
by the seasonal decrease in the second quarter of 1997 of fees from electronic
filing of income tax returns.
Operating expense before net revenue from acquired property and trust-
preferred securities expense for the second quarter of 1997 was $571 million, up
$30 million from $541 million in the second quarter of 1996 and up $6 million
from $565 million in the first quarter of 1997. These increases resulted
primarily from acquisitions and business growth.
Credit quality expense was $22 million in the second quarter of 1997,
compared with $24 million in the second quarter of 1996 and unchanged from the
first quarter of 1997. Nonperforming assets totaled $162 million at June 30,
1997, compared with $170 million at March 31, 1997, and $203 million at June 30,
1996. The ratio of nonperforming assets to total loans and net acquired
property was .57 percent at June 30, 1997, the lowest level in the Corporation's
history. This ratio has been lower than 1 percent for 12 consecutive quarters.
Mellon Bank Corporation is a broad-based financial services company with a
bank at its core. With balance sheet assets of nearly $44 billion and assets
under management and administration of approximately $1.3 trillion, Mellon
provides a full range of banking, investment and trust products and services to
individuals and small, midsize and large businesses and institutions.
Headquartered in Pittsburgh, Mellon's primary subsidiary is Mellon Bank, N.A.
and 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.
# # #
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 3
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 Six months ended
------------------------------- ---------------------
(dollar amounts in millions, June 30, March 31, June 30, June 30, June 30,
ratios annualized) 1997 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income applicable
to common stock $ 186 $ 182 $ 169 $ 368 $ 338
After tax impact of
amortization of
intangibles from
purchase acquisitions 20 21 18 41 37
- ------------------------------------------------------------------------------------------
Tangible net income
applicable to
common stock $ 206 $ 203 $ 187 $ 409 $ 375
Tangible earnings per
common share-fully
diluted $ .79 $ .77 $ .70 $1.56 $ 1.39
- ------------------------------------------------------------------------------------------
Average common equity $ 3,393 $ 3,490 $ 3,327 $ 3,441 $ 3,393
Average goodwill and
other intangibles 1,206 1,223 923 1,215 934
- ------------------------------------------------------------------------------------------
Average tangible
common equity $ 2,187 $ 2,267 $ 2,404 $ 2,226 $ 2,459
Return on tangible
common equity 37.7% 36.3% 31.3% 37.0% 30.7%
- ------------------------------------------------------------------------------------------
Average total assets $42,413 $42,187 $42,096 $42,301 $41,472
Average tangible assets $41,207 $40,964 $41,173 $41,086 $40,538
Return on tangible assets 2.04% 2.09% 1.92% 2.07% 1.96%
- ------------------------------------------------------------------------------------------
</TABLE>
Note: Per common share amounts have been restated to reflect the two-for-one
common stock split distributed on June 2, 1997.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 4
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
-------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
(in millions) 1997 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $371 $373 $374 $744 $740
Net interest margin (FTE) 4.29% 4.37% 4.30% 4.33% 4.32%
Average securities $ 5,600 $ 6,018 $ 6,658 $ 5,808 $ 5,999
Average loans $27,806 $27,404 $26,798 $27,606 $26,928
Average interest-earning
assets $34,697 $34,615 $35,024 $34,656 $34,425
- ------------------------------------------------------------------------------------------
</TABLE>
The $3 million decrease in net interest revenue in the second quarter of 1997,
compared with the second quarter of 1996, resulted from the effect of the
November 1996 sale of a $770 million American Automobile Association (AAA)
credit card portfolio, the funding costs related to the repurchase of common
stock, the December 1996 $500 million insurance premium finance securitization
and lower loan fees. Primarily offsetting these factors was $1.6 billion of
leases acquired in the Mellon US Leasing and Mellon First United Leasing
acquisitions in 1996, the use of the proceeds from the $1 billion of trust-
preferred securities issued in December 1996 and loan growth. The cost of the
trust-preferred securities is reported in operating expense. Net interest
revenue was virtually unchanged compared with the first quarter of 1997.
Excluding the effects of the lease financing acquisitions, the AAA credit card
sale and loan securitization, the Corporation experienced loan growth of
approximately $685 million, or 3%, in the second quarter of 1997 compared with
the prior-year period, due to higher corporate banking, middle market and
institutional lending.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 5
The increase in net interest revenue in the first six months of 1997, compared
with the prior-year period, principally resulted from the lease financing
acquisitions, the use of the proceeds from the $1 billion of trust-preferred
securities, a higher level of noninterest-bearing deposits and loan growth.
Primarily offsetting these factors was the sale of the AAA credit card
portfolio, the insurance premium finance securitization, funding costs related
to the repurchase of common stock and lower loan fees.
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
------------------------------- --------------------
June 30, March 31, June 30, June 30, June 30,
(in millions) 1997 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for credit losses $25 $25 $25 $50 $50
Net revenue from acquired property (3) (3) (1) (6) (9)
- ------------------------------------------------------------------------------------------------
Credit quality expense $22 $22 $24 $44 $41
- ------------------------------------------------------------------------------------------------
Net credit losses (recoveries) (a):
Domestic:
Credit card $30 $31 $27 $61 $43
Other consumer credit 5 3 3 8 8
Commercial real estate (2) (2) (2) (4) 1
Commercial and financial (1) 5 (2) 4 3
- ------------------------------------------------------------------------------------------------
Total domestic 32 37 26 69 55
International -- (5) -- (5) (1)
- ------------------------------------------------------------------------------------------------
Total net credit losses $32 $32 $26 $64 $54
- ------------------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .46% .48% .40% .47% .41%
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets.
Credit quality expense decreased $2 million in the second quarter of 1997,
compared with the second quarter of 1996, as a result of a $2 million increase
in net revenue from acquired property.
The $6 million increase in net credit losses, compared with the second quarter
of 1996, primarily resulted from a $3 million increase in credit card net credit
losses and a $2 million increase in other consumer credit. Net credit losses
were unchanged compared with the first quarter of 1997,
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 6
reflecting lower domestic commercial losses and lower credit card net credit
losses offset by lower international recoveries. The decrease in credit card net
credit losses resulted from lower losses in the CornerStone(sm) portfolio. At
June 30, 1997, the CornerStone(sm) credit card portfolio had total outstandings
of $539 million, compared with $574 million at March 31, 1997, and $631 million
at year-end 1996.
Net credit losses increased $10 million in the first half of 1997, compared with
the first half of 1996, reflecting the higher level of credit card net credit
losses partially offset by lower 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. The net carrying value of the
accelerated resolution portfolio was $9 million at June 30, 1997, compared with
$19 million at March 31, 1997, and $30 million at year-end 1996.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 7
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
(in millions) 1997 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment revenue:
Investment management:
Mutual fund $ 90 $ 87 $ 84 $177 $167
Private asset 42 42 38 84 73
Institutional asset 41 37 35 78 69
- ---------------------------------------------------------------------------------------------
Total investment management
revenue 173 166 157 339 309
Administration/Custody:
Mutual fund 33 30 26 63 53
Private asset 4 4 3 8 6
Institutional trust 73 66 62 139 121
- ---------------------------------------------------------------------------------------------
Total administration/
custody revenue 110 100 91 210 180
- ---------------------------------------------------------------------------------------------
Total trust and investment
fee revenue 283 266 248 549 489
Cash management and deposit
transaction charges 59 56 52 115 101
Mortgage servicing fees 53 51 44 104 85
Foreign currency and securities
trading revenue 25 25 20 50 41
Credit card fees 25 24 30 49 63
Information services fees 13 13 11 26 20
Other 82 101 69 183 178
- ---------------------------------------------------------------------------------------------
Total fee revenue 540 536 474 1,076 977
Gains on sale of securities -- -- -- -- 1
- ---------------------------------------------------------------------------------------------
Total noninterest revenue $540 $536 $474 $1,076 $978
- ---------------------------------------------------------------------------------------------
Fee revenue as a percentage of
total revenue (FTE) 59% 59% 56% 59% 57%
Trust and investment fee
revenue as a percentage of
total revenue (FTE) 31% 29% 29% 30% 28%
- ---------------------------------------------------------------------------------------------
</TABLE>
Fee revenue increased $66 million, or 14%, in the second quarter of 1997,
compared with the second quarter of 1996.
The $35 million, or 14%, increase in trust and investment management fees in the
second quarter of 1997, compared with the prior-year period, resulted from a $16
million, or 10%, increase in management revenue and a $19 million, or 19%,
increase in administration/custody revenue.
The increase in investment management revenue resulted from a $6 million, or
19%, increase in institutional asset management revenue, a $6 million, or 7%,
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 8
increase in mutual fund management revenue and a $4 million, or 12%, increase in
private asset management revenue. The increases in institutional asset and
private asset management revenue resulted primarily from new business and an
increase in the market value of assets under management. The higher revenue
from the management of mutual funds resulted from a higher average level of
mutual fund assets managed at Dreyfus. Proprietary funds managed at Dreyfus in
the second quarter of 1997 averaged $85 billion, unchanged from the first
quarter of 1997 and up $6 billion from $79 billion in the second quarter of
1996. The increase from the prior-year period primarily resulted from a $4
billion average increase in equity funds, which averaged $17 billion in the
second quarter of 1997 and totaled $19 billion at June 30, 1997.
The increase in administration/custody fee revenue resulted from an $11 million,
or 17%, increase in institutional trust fees and a $7 million, or 23%, increase
in mutual fund administration/custody revenue. These increases resulted
primarily from new business and higher transaction volumes, as well as a $6
million increase in securities lending revenue, which is included in
institutional trust fees.
The 12% increase in cash management fees and deposit transaction charges in the
second quarter of 1997, compared with the prior-year period, primarily resulted
from higher volumes of business in customer receivables, payables and treasury
management products.
The 19% increase in mortgage servicing fees in the second quarter of 1997,
compared with the prior-year period, resulted from a higher level of mortgage
servicing rights acquired through portfolio acquisitions.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 9
The 24% increase in foreign currency and securities trading revenue in the
second quarter of 1997, compared with the prior-year period was attributable to
higher foreign exchange fees earned as a result of higher levels of market
volatility and customer activity.
Credit card revenue decreased 17% in the second quarter of 1997, compared with
the second quarter of 1996, as a result of the sale of the AAA credit card
portfolio in November 1996 and lower fee revenue from the securitized credit
card portfolio, due in part to higher credit losses in this portfolio.
The 15% increase in information services fee revenue, compared with the second
quarter of 1996, resulted from higher ATM network processing fees.
Other fee revenue increased $13 million in the second quarter of 1997, compared
with the prior-year period. This increase resulted from a $7 million increase
in servicing fee revenue from the insurance premium finance loan securitization
and a net $6 million increase resulting from the realization of lease residuals,
the sale of equity securities and other assets, and higher syndication fees.
Fee revenue increased $4 million in the second quarter of 1997, compared with
the first quarter of 1997. Trust and investment fee revenue increased $17
million, or 6%. This increase resulted from higher transaction volumes, new
business and higher market values of assets managed. Other fee revenue
decreased $19 million due to the seasonal decrease in the second quarter of 1997
of fees from electronic filing of income tax returns. Substantially all of this
revenue is recognized in the first quarter of each year.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 10
The $99 million increase in fee revenue in the first six months of 1997,
compared with the prior-year period, primarily resulted from the same factors
responsible for the second quarter 1997 increase as compared to the prior-year
period. Partially offsetting this increase was the $28 million gain on the home
equity loan securitization that was recorded in other fee revenue during the
first quarter of 1996.
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
------------------------------- ---------------------
June 30, March 31, June 30, June 30, June 30,
(dollar amounts in millions) 1997 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Staff expense $276 $268 $255 $ 544 $ 532
Net occupancy expense 54 52 50 106 106
Professional, legal and
other purchased services 46 46 50 92 97
Equipment expense 36 36 36 72 71
Amortization of mortgage
servicing rights and purchased
credit card relationships 28 28 27 56 55
Amortization of goodwill
and other intangible assets 27 27 24 54 49
Other expense 104 108 99 212 199
- -------------------------------------------------------------------------------------------
Operating expense before
net revenue from acquired
property and trust-preferred
securities expense 571 565 541 1,136 1,109
Trust-preferred
securities expense 19 20 -- 39 --
Net revenue from
acquired property (3) (3) (1) (6) (9)
- --------------------------------------------------------------------------------------------
Total operating expense $587 $582 $540 $1,169 $1,100
- --------------------------------------------------------------------------------------------
Average full-time equivalent
staff 25,500 25,200 24,600 25,400 24,600
- --------------------------------------------------------------------------------------------
Efficiency ratio (a) 62% 62% 64% 62% 64%
Efficiency ratio excluding
amortization of goodwill and
other intangible assets 59% 59% 61% 59% 62%
- -------------------------------------------------------------------------------------------
</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 increased $30 million, or 5%, in the second quarter of 1997,
compared with the prior-year period.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 11
Staff expense increased $21 million, compared with the second quarter of 1996,
primarily from higher salaries expense, due in part to the leasing acquisitions,
an increase in incentive expense and higher expense of temporary help and
contract programmers.
The $3 million increase in the amortization of goodwill and other intangibles,
compared with the second quarter of 1996, resulted from the 1996 leasing
acquisitions while the increase in other expense resulted from higher expenses
in support of revenue growth. The $19 million of trust-preferred securities
expense resulted from the issuance of $1 billion of these securities in December
1996. The proceeds from these securities were used to fund interest-earning
assets.
Operating expense before net revenue from acquired property and trust-preferred
securities expense increased $6 million in the second quarter of 1997, compared
with the first quarter of 1997. This increase primarily resulted from an $8
million increase in staff expense, partially offset by a $4 million decrease in
other expense. The increase in staff expense primarily reflects higher
incentive expense and higher expense of temporary help and contract programmers.
The $27 million increase in operating expense before net revenue from acquired
property and trust-preferred securities expense in the first half of 1997,
compared with the first half of 1996, primarily resulted from the same factors
responsible for the second quarter 1997 increase as compared to the prior-year
period. Also impacting this comparison were charges recorded in the first
quarter of 1996 of $18 million for the Corporation's retirement enhancement
program and $6 million related to the reconfiguration of the retail delivery
system.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 12
Income Taxes
- ------------
The Corporation's effective tax rate for the second quarter of 1997 was 36.3%.
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>
June 30, March 31, Dec. 31, June 30,
(in millions) 1997 1997 1996 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 54 $ 52 $ 50 $ 58
Commercial real estate 9 14 16 40
Other domestic 27 29 28 32
- --------------------------------------------------------------------------------
Total nonperforming loans 90 95 94 130
Acquired property:
Real estate acquired 77 80 86 84
Reserve for real estate acquired (9) (9) (10) (11)
- --------------------------------------------------------------------------------
Net real estate acquired 68 71 76 73
Other assets acquired 4 4 4 -
- --------------------------------------------------------------------------------
Total acquired property 72 75 80 73
- --------------------------------------------------------------------------------
Total nonperforming assets $ 162 $ 170 $ 174 $ 203
- --------------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .32% .35% .35% .47%
Nonperforming assets as a
percentage of total loans
and net acquired property .57% .62% .63% .74%
- --------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
Nonperforming assets decreased $8 million from March 31, 1997, primarily as a
result of the repayment of commercial loans and a $3 million decrease in
acquired property. The ratio of nonperforming assets to total loans and net
acquired property was .57% at June 30, 1997, the lowest level in the
Corporation's history. This ratio has been lower than 1% for 12 consecutive
quarters.
The $41 million decrease in nonperforming assets from June 30, 1996, primarily
resulted from the repayment of commercial real estate loans, as well as other
repayments, returns to accrual status and credit losses.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 13
Reserve for Credit Losses
- -------------------------
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, June 30,
(in millions) 1997 1997 1996 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $ 511 $ 518 $ 525 $ 467
Reserve as a percentage of total loans 1.82% 1.88% 1.92% 1.71%
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
The $44 million increase in the reserve for credit losses from June 30, 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.
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(in millions, except June 30, March 31, Dec. 31, June 30,
per share amounts) 1997 1997 1996 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 3,377 $ 3,503 $ 3,456 $ 3,332
Common shareholders' equity
to assets ratio 7.72% 8.33% 8.11% 7.79%
Tangible common shareholders'
equity $ 2,180 $ 2,289 $ 2,218 $ 2,426
Tangible common shareholders'
equity to assets ratio (a) 5.13% 5.60% 5.36% 5.79%
Total shareholders' equity $ 3,570 $ 3,696 $ 3,746 $ 3,767
Total shareholders' equity
to assets ratio 8.17% 8.79% 8.79% 8.81%
Tier I capital ratio 8.00(b) 8.74 8.38 7.51
Total (Tier I and Tier II)
capital ratio 13.30(b) 13.65 13.58 11.89
Leverage capital ratio 8.20(b) 8.75 8.31 7.24
Book value per common share (c) $ 13.42 $ 13.60 $ 13.43 $ 12.81
Tangible book value per common share (c) 8.66 8.88 8.62 9.33
Closing common stock price (c) 45.125 36.375 35.50 28.50
Market capitalization 11,353 9,372 9,134 7,414
Common shares outstanding (000) (c) 251,599 257,662 257,294 260,138
- --------------------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill and other intangibles divided by
total assets less goodwill and other intangibles.
(b) Estimated.
(c) Prior period amounts have been restated to reflect the two-for-one common
stock split distributed on June 2, 1997.
On April 15, 1997, the Corporation announced a two-for-one split of the
Corporation's common stock. The two-for-one stock split was structured as a
stock dividend of one additional share of common stock paid on each
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 14
outstanding share of common stock. The additional shares resulting from the
split were distributed on June 2, 1997, to shareholders of record at the close
of business on May 1, 1997.
Common and total shareholders' equity at June 30, 1997, compared with March 31,
1997, and June 30, 1996, reflects earnings retention offset by net common stock
repurchases. The decrease in total shareholders' equity from June 30, 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 reduction in the Corporation's capital ratios at June 30,
1997, compared with the prior periods, also reflects the impact of balance sheet
growth.
Earnings per common share in the second quarter of 1997 reflects the repurchase
of common shares, prior to any reissuances, during 1996 and the first half of
1997. The Corporation's average level of treasury stock was approximately $325
million higher in the second quarter of 1997, compared with the second 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 1 percent while ongoing business growth increased earnings per share
12 percent.
The increase in the Corporation's regulatory capital ratios, compared with June
30, 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 trust-preferred securities are not
included as a component of total shareholders' equity on the Corporation's
balance sheet.
<PAGE>
Mellon Reports Earnings
July 15, 1997
Page 15
During the second quarter of 1997, the Corporation repurchased approximately 3
million shares of common stock, completing the 10 million share repurchase
program authorized by the board of directors in May 1996. In addition, during
the second quarter of 1997 the Corporation repurchased approximately 3.5 million
shares of common stock that were issued in connection with the Buck Consultants
Inc. acquisition on July 1, 1997. Since the beginning of 1995, the Corporation
has repurchased approximately 56 million common shares, prior to any
reissuances, as well as warrants for 9 million shares of common stock.
The Corporation also announced that its board of directors has authorized the
repurchase of up to 6 million additional shares of common stock. In addition,
the board of directors has authorized the repurchase of an equivalent number of
common shares that will be issued in connection with the acquisition of 1st
Business Corporation.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Six months ended
(dollar amounts in millions, June 30, June 30,
except per share amounts; ----------------- -----------------
common shares in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share (a) $ .71 $ .63 $ 1.40 $ 1.25
Tangible net income per
common share (a)(b) $ .79 $ .70 $ 1.56 $ 1.39
Net income applicable to
common stock $ 186 $ 169 $ 368 $ 338
Tangible net income applicable
to common stock (b) $ 206 $ 187 $ 409 $ 375
Return on common shareholders'
equity (c) 21.9% 20.4% 21.5% 20.0%
Return on tangible common
shareholders' equity (b)(c) 37.7% 31.3% 37.0% 30.7%
Return on assets (c) 1.79% 1.70% 1.81% 1.73%
Return on tangible assets (b)(c) 2.04% 1.92% 2.07% 1.96%
Common equity to assets 7.72% 7.79% 7.72% 7.79%
Tangible common equity to assets 5.13% 5.79% 5.13% 5.79%
Average balances for the period
- -------------------------------
Money market investments $ 1,081 $ 1,387 $ 1,056 $ 1,338
Trading account securities 210 181 186 160
Securities 5,600 6,658 5,808 5,999
Loans 27,806 26,798 27,606 26,928
Total interest-earning assets 34,697 35,024 34,656 34,425
Total assets 42,413 42,096 42,301 41,472
Total tangible assets 41,207 41,173 41,086 40,538
Deposits 30,113 30,949 30,196 30,112
Total interest-bearing
liabilities 27,830 28,342 27,659 28,164
Common shareholders' equity 3,393 3,327 3,441 3,393
Tangible common shareholders'
equity 2,187 2,404 2,226 2,459
Total shareholders' equity 3,586 3,762 3,660 3,828
Computation of net income per common
share
- ------------------------------------
Net income applicable to common stock $ 186 $ 169 $ 368 $ 338
Total stock and stock equivalents:
Primary 259,371 266,458 261,218 269,738
Fully diluted 259,816 266,826 261,899 270,236
Primary net income per common share $ .72 $ .63 $ 1.41 $ 1.25
Fully diluted net income per
common share $ .71 $ .63 $ 1.40 $ 1.25
</TABLE>
_______________________
(a) Fully diluted.
(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.
Note: Per common share amounts and average shares outstanding have been
restated to reflect the two-for-one common stock split distributed on
June 2, 1997.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
(dollar amounts in millions, ----------------- -----------------
except per share amounts) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees
of $19, $24, $36 and $48) $ 571 $ 550 $1,124 $1,116
Interest-bearing deposits with banks 7 10 14 19
Federal funds sold and securities
under resale agreements 6 7 11 13
Other money market investments 1 1 2 3
Trading account securities 3 2 5 4
Securities 96 107 195 195
----- ----- ------ ------
Total interest revenue 684 677 1,351 1,350
Interest expense
- ----------------
Interest on deposits 219 216 434 434
Federal funds purchased and securities
under repurchase agreements 20 26 38 53
Other short-term borrowings 28 29 48 66
Notes and debentures 47 34 91 62
----- ----- ------ ------
Total interest expense 314 305 611 615
----- ----- ------ ------
Net interest revenue 370 372 740 735
Provision for credit losses 25 25 50 50
----- ----- ------ ------
Net interest revenue after
provision for credit losses 345 347 690 685
Noninterest revenue
- -------------------
Trust and investment fee revenue 283 248 549 489
Cash management and deposit
transaction charges 59 52 115 101
Mortgage servicing fees 53 44 104 85
Foreign currency and securities
trading revenue 25 20 50 41
Credit card fees 25 30 49 63
Information services fees 13 11 26 20
Other 82 69 183 178
----- ----- ------ ------
Total fee revenue 540 474 1,076 977
Gains on sales of securities -- -- -- 1
----- ----- ------ ------
Total noninterest revenue 540 474 1,076 978
Operating expense
- -----------------
Staff expense 276 255 544 532
Net occupancy expense 54 50 106 106
Professional, legal and other
purchased services 46 50 92 97
Equipment expense 36 36 72 71
Amortization of mortgage servicing
assets and purchased credit card
relationships 28 27 56 55
Amortization of goodwill and other
intangible assets 27 24 54 49
Other expense 104 99 212 199
Trust-preferred securities expense 19 - 39 -
Net revenue from acquired property (3) (1) (6) (9)
----- ----- ------ ------
Total operating expense 587 540 1,169 1,100
----- ----- ------ ------
Income before income taxes 298 281 597 563
Provision for income taxes 108 102 216 205
----- ----- ------ ------
Net income 190 179 381 358
Dividends on preferred stock 4 10 13 20
----- ----- ------ ------
Net income applicable to
common stock $ 186 $ 169 $ 368 $ 338
===== ===== ====== ======
Primary net income per common share $.72 $.63 $1.41 $1.25
===== ===== ====== ======
Fully diluted net income per
common share $.71 $.63 $1.40 $1.25
===== ===== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, June 30,
(dollar amounts in millions) 1997 1997 1996 1996
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 3,447 $ 2,915 $ 2,846 $ 2,765
Money market investments 1,260 859 992 1,258
Trading account securities 112 110 84 112
Securities available for sale 3,333 3,376 4,111 4,450
Investment securities(approximate fair
value of $2,257, $2,274, $2,365 and
$2,481) 2,249 2,306 2,375 2,515
Loans, net of unearned discount of
$48, $50, $57 and $59 28,144 27,525 27,393 27,356
Reserve for credit losses (511) (518) (525) (467)
------- ------- ------- -------
Net loans 27,633 27,007 26,868 26,889
Premises and equipment 581 572 569 556
Acquired property, net of reserves of
$9, $9, $10 and $11 72 75 80 73
Goodwill and other intangibles 1,197 1,214 1,238 906
Mortgage servicing assets and purchased
credit card relationships 986 849 774 734
Other assets 2,842 2,785 2,659 2,511
------- ------- ------- -------
Total assets $43,712 $42,068 $42,596 $42,769
======= ======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $28,914 $27,258 $28,657 $27,258
Deposits in foreign offices 2,412 2,678 2,717 4,446
Short-term borrowings 2,999 3,130 2,247 3,761
Other liabilities 1,868 1,804 1,721 1,566
Notes and debentures (with original
maturities over one year) 2,959 2,512 2,518 1,971
------- ------- ------- -------
Total liabilities 39,152 37,382 37,860 39,002
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial interests
in Corporation's junior subordinated
deferrable interest debentures 990 990 990 --
Shareholders' equity
- --------------------
Preferred stock 193 193 290 435
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 400,000,000 shares
Issued - 294,330,960 (a); 147,165,480;
147,165,480; and 147,165,480 shares 147 74 74 74
Additional paid-in capital 1,812 1,875 1,866 1,855
Retained earnings 2,664 2,569 2,480 2,297
Net unrealized gain (loss) on assets
available for sale, net of tax 2 (38) (1) (30)
Treasury stock of 42,732,010 (a);
18,334,060; 18,518,290; and 17,096,369
shares at cost (1,248) (977) (963) (864)
------- ------- ------- -------
Total common shareholders' equity 3,377 3,503 3,456 3,332
------- ------- ------- -------
Total shareholders' equity 3,570 3,696 3,746 3,767
------- ------- ------- -------
Total liabilities, trust-preferred
securities and shareholders' equity $43,712 $42,068 $42,596 $42,769
======= ======= ======= =======
</TABLE>
- -----------------------
(a) Reflects the two-for-one common stock split distributed on June 2, 1997.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
Quarter ended
(dollar amounts in millions, -------------------------------------------------------
except per share amounts; June 30, March 31, Dec. 31, Sept. 30, June 30,
common shares in thousands) 1997 1997 1996 1996 1996
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share (a) $ .71 $ .69 $ .67 $ .66 $ .63
Tangible net income per
common share (a)(b) $ .79 $ .77 $ .75 $ .72 $ .70
Net income applicable to
common stock $ 186 $ 182 $ 179 $ 172 $ 169
Tangible net income applicable
to common stock (b) $ 206 $ 203 $ 200 $ 190 $ 187
Return on common shareholders'
equity (c) 21.9% 21.2% 20.9% 20.6% 20.4%
Return on tangible common
shareholders' equity (b)(c) 37.7% 36.3% 36.6% 31.2% 31.3%
Return on assets (c) 1.79% 1.83% 1.80% 1.71% 1.70%
Return on tangible assets (b)(c) 2.04% 2.09% 2.06% 1.92% 1.92%
Common equity to assets 7.72% 8.33% 8.11% 7.78% 7.79%
Tangible common equity to assets 5.13% 5.60% 5.36% 5.22% 5.79%
Fee revenue as a percentage of
total revenue (FTE) 59% 59% 58%(d) 56% 56%
Efficiency ratio excluding
amortization of intangibles
and trust-preferred
securities expense 59% 59% 60%(d) 60% 61%
Average common shares and
equivalents outstanding (a) 259,816 263,204 263,412 263,834 266,826
Average balances for the period
- -------------------------------
Money market investments $ 1,081 $ 1,032 $ 1,272 $ 1,573 $ 1,387
Trading account securities 210 161 96 169 181
Securities 5,600 6,018 6,198 6,538 6,658
Loans 27,806 27,404 27,900 27,170 26,798
Total interest-earning assets 34,697 34,615 35,466 35,450 35,024
Total assets 42,413 42,187 42,636 42,461 42,096
Total tangible assets 41,207 40,964 41,395 41,563 41,173
Deposits 30,113 30,280 31,569 31,542 30,949
Total interest-bearing
liabilities 27,830 27,485 29,210 28,806 28,342
Common shareholders' equity 3,393 3,490 3,410 3,327 3,327
Tangible common shareholders'
equity 2,187 2,267 2,169 2,429 2,404
Total shareholders' equity 3,586 3,735 3,820 3,762 3,762
</TABLE>
- -----------------------
(a) Fully diluted.
(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.
(d) Excludes the gain on the sale of the AAA credit card portfolio.
Note: Per common share amounts and average shares outstanding have been
restated to reflect the two-for-one common stock split distributed on
June 2, 1997.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
Quarter ended
------------------------------------------------------
(in millions, except per; June 30, March 31, Dec. 31, Sept. 30, June 30,
share amounts) 1997 1997 1996 1996 1996
-------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees
of $19, $17, $24, $24 and $24) $ 571 $ 553 $ 579 $ 558 $ 550
Interest-bearing deposits with banks 7 7 8 9 10
Federal funds sold and securities
under resale agreements 6 5 7 10 7
Other money market investments 1 1 1 3 1
Trading account securities 3 2 1 2 2
Securities 96 99 103 108 107
----- ----- ----- ----- ------
Total interest revenue 684 667 699 690 677
Interest expense
- ----------------
Interest on deposits 219 215 240 229 216
Federal funds purchased and securities
under repurchase agreements 20 18 20 21 26
Other short-term borrowings 28 20 24 31 29
Notes and debentures 47 44 44 37 34
----- ----- ----- ----- ------
Total interest expense 314 297 328 318 305
----- ----- ----- ----- ------
Net interest revenue 370 370 371 372 372
Provision for credit losses 25 25 80 25 25
Net interest revenue after ----- ----- ----- ----- ------
provision for credit losses 345 345 291 347 347
Noninterest revenue
- -------------------
Trust and investment fee revenue 283 266 259 246 248
Cash management and deposit
transaction charges 59 56 56 54 52
Mortgage servicing fees 53 51 49 46 44
Foreign currency and securities
trading revenue 25 25 19 20 20
Credit card fees 25 24 28 29 30
Information services fees 13 13 16 14 11
Gain on sale of credit card portfolio -- -- 57 -- --
Other 82 101 82 67 69
----- ----- ----- ----- ------
Total fee revenue 540 536 566 476 474
Gains on sales of securities -- -- 3 -- --
----- ----- ----- ----- ------
Total noninterest revenue 540 536 569 476 474
Operating expense
- -----------------
Staff expense 276 268 267 256 255
Net occupancy expense 54 52 49 50 50
Professional, legal and other
purchased services 46 46 50 48 50
Equipment expense 36 36 39 35 36
Amortization of mortgage servicing
assets and purchased credit card
relationships 28 28 25 27 27
Amortization of goodwill and other
intangible assets 27 27 27 24 24
Other expense 104 108 102 97 99
Trust-preferred securities expense 19 20 3 -- --
Net revenue from acquired property (3) (3) (3) (1) (1)
----- ----- ----- ----- ------
Total operating expense 587 582 559 536 540
----- ----- ----- ----- ------
Income before income taxes 298 299 301 287 281
Provision for income taxes 108 108 107 106 102
----- ----- ----- ----- ------
Net income 190 191 194 181 179
Dividends on preferred stock 4 9 15 9 10
----- ----- ----- ----- ------
Net income applicable to $ 186 $ 182 $ 179 $ 172 $ 169
common stock ===== ===== ===== ===== =====
Primary net income per common share $ .72 $ .69 $ .68 $ .66 $ .63
===== ===== ===== ===== =====
Fully diluted net income per common $ .71 $ .69 $ .67 $ .66 $ .63
share ===== ===== ===== ===== =====
</TABLE>
