<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) - January 17, 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) dentification 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
Mellon Bank Corporation announces fourth quarter and full-year 1996
results of operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Mellon Bank Corporation Press Release, dated January 17, 1997,
announcing the matter referenced in Item 5 above.
MELLON BANK CORPORATION
Date: January 17, 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 January 17, 1997 Filed herewith
<PAGE>
[MELLON LOGO] EX-99.1
News Release
MEDIA ANALYSTS
Contact: ----- --------
Stephen K. Dishart Donald J. MacLeod Corporate Affairs
(412) 234-0850 (412) 234-5601 One Mellon Bank Center
James J. Dever David T. Lamar Pittsburgh, PA 15258-0001
(412) 236-1752 (412) 234-4633
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD FULL YEAR AND FOURTH QUARTER 1996 RESULTS
---------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Three months ended
Dec. 31, Dec. 31,
Financial Highlights 1996 1995 Change 1996 1995 Change
- ----------------------------------- --------- --------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share* $ 5.15 $ 4.46 15% $ 1.34 $ 1.16 16%
Tangible earnings per common
share* $ 5.71 $ 4.96 15% $ 1.49 $ 1.29 16%
Return on common equity 20.4% 17.8% 260 bp 20.9% 18.1% 280 bp
Return on tangible common equity 32.2% 27.1% 510 bp 36.6% 27.3% 930 bp
Return on assets 1.74% 1.72% 2 bp 1.80% 1.68% 12 bp
Return on tangible assets 1.97% 1.96% 1 bp 2.06% 1.90% 16 bp
Average common shares and
equivalents outstanding* (000) 133,912 146,182 (12,270) 131,706 141,686 (9,980)
- ----------------------------------- -------- -------- ------- -------- -------- ------
</TABLE>
Quarterly returns are annualized.
* Fully diluted
PITTSBURGH, Jan. 17, 1997--Mellon Bank Corporation (NYSE: MEL) today reported
record 1996 fully diluted earnings per common share of $5.15, an increase of 15
percent, compared with $4.46 per common share in 1995. For the full year 1996,
Mellon reported net income applicable to common stock of $689 million, compared
with $652 million for the full year 1995.
"With Mellon's record earnings performance in 1996, our shareholders have
been rewarded with another excellent year," said Frank V. Cahouet, Mellon
chairman, president and chief executive officer. "Particularly significant is
the fact that while increasing the shareholder value of our company, we
continued to reinvest and build product strength to help us succeed in 1997 and
beyond."
-more-
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 2
From 1990 through 1996, the Corporation has experienced a 32 percent
compounded annual growth rate in net income applicable to common stock and a 29
percent compounded annual growth rate in earnings per common share. For
purposes of these calculations, results for 1990 assume a normalized tax rate.
Over the same period, the compounded annual return on common stock, including
reinvested dividends, was 34 percent.
Full Year 1996
- --------------
Return on common shareholders' equity and return on assets were 20.4
percent and 1.74 percent, respectively, in 1996, compared with 17.8 percent and
1.72 percent, respectively, in 1995. Return on tangible common shareholders'
equity and return on tangible assets were 32.2 percent and 1.97 percent,
respectively, in 1996, compared with 27.1 percent and 1.96 percent,
respectively, in 1995. Fully diluted tangible earnings per common share in 1996
were $5.71, an increase of 15 percent, compared with $4.96 in 1995.
Earnings per common share in 1996 reflects the 1995 and 1996 repurchases of
23.6 million common shares, prior to any reissuances, as well as the repurchase
of warrants for 4.5 million common shares. The Corporation's average level of
treasury stock was approximately $640 million higher in 1996, compared with
1995. After giving effect to funding the higher level of treasury stock, valued
at the short-term funding rate, the lower share count increased earnings per
share 6 percent while ongoing business growth increased earnings per share 9
percent.
Compared with 1995, the Corporation's 1996 results reflected an increase in
fee revenue, partially offset by higher operating expense, higher credit quality
expense and lower net interest revenue.
Net interest revenue for the full year 1996 was $1,478 million, a decrease
of $70 million, or 4 percent, from $1,548 million in 1995, principally
reflecting the credit card and home equity loan securitizations and the
repurchase of common shares offset, in part, by a higher level of free funds and
loan growth. Fee revenue
-more-
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 3
increased $349 million, or 21 percent, to $2,019 million in 1996, compared with
$1,670 million in 1995, resulting from increases in virtually every fee revenue
category as well as a $57 million gain on the sale of an American Automobile
Association (AAA) credit card portfolio recorded in the fourth quarter of 1996.
Excluding the gain on the sale of the AAA credit card portfolio, fee revenue
increased 17 percent.
Operating expense before net revenue from acquired property was $2,208
million in 1996, up $161 million, or 8 percent, from $2,047 million in 1995.
The increase primarily resulted from higher staff expense, due in part to higher
incentive expense and the early retirement enhancement program, as well as
higher amortization expense of mortgage servicing rights.
Credit quality expense was $142 million in 1996, an increase of $57 million
compared with 1995, primarily resulting from an increase in the provision for
credit losses related to the credit card portfolio. Net credit losses in 1996
were $124 million, a decrease of $125 million from $249 million in 1995. The
higher level of credit losses in 1995 primarily resulted from $106 million of
credit losses recorded on $193 million of CornerStone/sm/ credit card loans that
were transferred to an accelerated resolution portfolio in the fourth quarter of
1995.
Nonperforming assets totaled $174 million at Dec. 31, 1996, compared with
$209 million at Sept. 30, 1996, and $236 million at Dec. 31, 1995. The
Corporation's nonperforming assets ratio was .63 percent at Dec. 31, 1996, the
lowest ratio in the Corporation's recorded history, compared with .74 percent at
Sept. 30, 1996, and .85 percent at Dec. 31, 1995.
Fourth Quarter 1996
- -------------------
Annualized return on common shareholders' equity and return on assets were
20.9 percent and 1.80 percent, respectively, in the fourth quarter of 1996,
compared with 18.1 percent and 1.68 percent, respectively,
-more-
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 4
in the fourth quarter of 1995. Annualized return on tangible common
shareholders' equity and return on tangible assets were 36.6 percent and 2.06
percent, respectively, in the fourth quarter of 1996, compared with 27.3 percent
and 1.90 percent, respectively, in the fourth quarter of 1995. Fully diluted
tangible earnings per common share in the fourth quarter of 1996 were $1.49, a
16 percent increase, compared with $1.29 in 1995.
Compared with the fourth quarter of 1995, Mellon's fourth quarter 1996
results reflected higher fee revenue, offset in part by a higher provision for
credit losses, higher operating expense and lower net interest revenue. The
quarter's earnings per share also included an additional $5 million charge, or 4
cents per share, for issue costs recorded as preferred stock dividends in
connection with the redemption of the Series I Preferred Stock.
Net interest revenue for the fourth quarter of 1996 was $371 million, down
$11 million, or 3 percent, from $382 million in the prior-year period. This
reduction resulted from the loan securitizations, the repurchase of common
shares and the sale of the AAA credit card portfolio, partially offset by
increased revenue from lease financing acquisitions, a higher level of free
funds and higher loan levels. Fee revenue was $566 million, up $122 million, or
27 percent, from $444 million in the fourth quarter of 1995. The increase in
fee revenue was attributable to the $57 million gain on the sale of the AAA
credit card portfolio, higher institutional trust and private asset management
fees, higher mutual fund management revenue and higher mortgage servicing and
cash management fee revenue. Excluding the gain on the sale of the AAA credit
card portfolio, fee revenue increased 15 percent.
Operating expense before net revenue from acquired property for the fourth
quarter of 1996 was $562 million, up $31 million, or 6 percent, from $531
million in the fourth quarter of 1995. The increase resulted primarily from
higher staff expense, due in part to higher incentive expense and higher
goodwill and intangible amortization.
-more-
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 5
Credit quality expense was $77 million in the fourth quarter of 1996,
compared with $30 million in the fourth quarter of 1995. This $47 million
increase resulted from a higher provision for credit losses. Net credit losses
were $36 million in the fourth quarter of 1996, down from $138 million in the
fourth quarter of 1995. The decrease resulted from the $106 million credit loss
recorded on the accelerated resolution credit card portfolio in the fourth
quarter of 1995.
With balance sheet assets of approximately $43 billion and assets under
management or administration of more than $1.1 trillion, Mellon Bank Corporation
is a major financial services company headquartered in Pittsburgh; its primary
subsidiary is Mellon Bank, N.A. Mellon provides a full range of banking,
investment and trust products and services to individuals and small, midsize and
large businesses and institutions. Its principal 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
Jan. 17, 1997
Page 6
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 Year ended
(dollar amounts in millions, December 31, December 31,
quarterly ratios annualized) 1996 1995 Change 1996 1995 Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income applicable to
common stock $ 179 $ 164 $ 15 $ 689 $ 652 $37
After tax impact of
amortization of
intangibles from
purchase acquisitions 21 18 3 76 73 3
- -------------------------------------------------------------------------------------
Tangible net income
applicable to
common stock $ 200 $ 182 $ 18 $ 765 $ 725 $40
Tangible earnings per
common share (fully
diluted) $ 1.49 $ 1.29 16% $ 5.71 $ 4.96 15%
- ------------------------------------------------------------------------------------
Average common equity $ 3,410 $ 3,610 $ (200) $ 3,381 $ 3,671 $ (290)
Average goodwill and
other intangibles 1,241 958 283 1,003 993 10
- ------------------------------------------------------------------------------------
Average tangible
common equity $ 2,169 $ 2,652 $ (483) $ 2,378 $ 2,678 $ (300)
Return on tangible
common equity 36.6% 27.3% 930 bp 32.2% 27.1% 510 bp
- ------------------------------------------------------------------------------------
Average total assets $42,636 $41,141 $1,495 $42,013 $40,097 $1,916
Average tangible assets $41,395 $40,183 $1,212 $41,010 $39,104 $1,906
Return on tangible assets 2.06% 1.90% 16 bp 1.97% 1.96% 1 bp
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 7
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1996 1995 Change 1996 1995 Change
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $ 374 $ 384 $ (10) $ 1,488 $ 1,558 $ (70)
Net interest margin (FTE) 4.20% 4.43% (23)bp 4.26% 4.62% (36)bp
Average securities $ 6,198 $ 5,178 $ 1,020 $ 6,184 $ 4,922 $1,262
Average loans $27,900 $27,747 $ 153 $27,233 $27,321 $ (88)
Average interest-earning
assets $35,466 $34,414 $ 1,052 $34,944 $33,761 $1,183
- -----------------------------------------------------------------------------------------------
</TABLE>
The decrease in net interest revenue and the net interest margin in the fourth
quarter of 1996, compared with the fourth quarter of 1995, resulted from the
effect of the November 1995 $950 million credit card securitization, the March
1996 $650 million home equity loan securitization, funding costs related to the
repurchase of common stock and the November 1996 sale of a $770 million American
Automobile Association (AAA) credit card portfolio. Partially offsetting these
decreases was the impact of a higher level of noninterest-bearing deposits, $1.6
billion of lease financing acquisitions and loan growth. Excluding the effect
of the loan securitizations and the common equity repurchases, the net interest
revenue and net interest margin for the fourth quarter of 1996 would have been
approximately $419 million and 4.49%, compared with approximately $401 million
and 4.57% in the fourth quarter of 1995. The foregone net interest revenue from
the loan securitizations is substantially offset by higher servicing fee revenue
and lower net credit losses.
In addition to the loan securitizations discussed above, the Corporation
securitized $500 million of insurance premium finance loans in December 1996.
Excluding the effect of the loan securitizations, sales and lease acquisitions,
the Corporation experienced loan growth of approximately $1.0 billion in the
fourth quarter of 1996 compared with the prior-year period, primarily in
wholesale and retail lending.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 8
The decrease in net interest revenue and the net interest margin for the full
year of 1996 principally resulted from the same factors responsible for the
fourth quarter decrease, offset in part by higher loan fees.
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for credit losses $80 $ 35 $ 45 $155 $105 $ 50
Net revenue from acquired property (3) (5) (2) (13) (20) (7)
- ----------------------------------------------------------------------------------------
Credit quality expense $77 $ 30 $ 47 $142 $ 85 $ 57
- ----------------------------------------------------------------------------------------
Net credit losses (recoveries)(a):
Domestic:
Credit card $33 $ 36 $ (3) $114 $153 $ (39)
Other consumer credit 5 3 2 15 14 1
Commercial real estate (3) (3) - (2) (22) 20
Commercial and financial 1 (4) 5 (2) 3 (5)
- ----------------------------------------------------------------------------------------
Total domestic 36 32 4 125 148 (23)
International - - - (1) (5) 4
- ----------------------------------------------------------------------------------------
Net credit losses $36 $ 32 $ 4 $124 $143 (19)
Credit losses on assets held
for accelerated resolution - 106 (106) - 106 (106)
- ----------------------------------------------------------------------------------------
Total net credit losses $36 $138 $(102) $124 $249 $(125)
- ----------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .51% 1.97% (146)bp .46% .91% (45)bp
Annualized net credit losses to
average loans excluding net
credit losses on assets held
for accelerated resolution .51% .46% 5 bp .46% .53% (7)bp
- ----------------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets.
Credit quality expense increased $47 million in the fourth quarter of 1996,
compared with the fourth quarter of 1995, as a result of a $45 million increase
in the provision for credit losses relating to credit card loans.
The $102 million decrease in net credit losses, compared with the fourth quarter
of 1995, resulted from the $106 million of credit losses recorded in December
1995, relating to the transfer of $193 million of CornerStone/sm/ credit card
loans, which had a history of delinquency, into an accelerated resolution
portfolio. The net carrying value of the accelerated resolution
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 9
portfolio at December 31, 1996, was $30 million, compared with $40 million at
September 30, 1996, and $82 million at year-end 1995. The credit card
securitization and AAA credit card sale also were factors in the lower credit
losses in the fourth quarter of 1996. At December 31, 1996, the CornerStone/sm/
credit card portfolio had total outstandings of $631 million, compared with $690
million at December 31, 1995.
Net credit losses decreased $125 million in the full year of 1996, compared with
the full year of 1995, resulting from the same factors responsible for the
fourth quarter decrease, partially offset by lower commercial real estate
recoveries in 1996.
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(in millions) 1996 1995 Change 1996 1995 Change
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment management:
Mutual fund:
Management $ 88 $ 82 $ 6 $ 340 $ 309 $ 31
Administration/Custody 29 25 4 108 115 (7)
Institutional trust 64 50 14 247 206 41
Institutional asset management 34 35 (1) 137 135 2
Private asset management 44 37 7 162 141 21
- --------------------------------------------------------------------------------------
Total trust and investment
management fees 259 229 30 994 906 88
Cash management and deposit
transaction charges 56 47 9 211 191 20
Mortgage servicing fees 49 40 9 180 122 58
Credit card fees 28 28 - 120 90 30
Foreign currency and
securities trading 19 18 1 80 91 (11)
Information services fees 16 11 5 50 48 2
Gain on sale of credit card portfolio 57 - 57 57 - 57
Other 82 71 11 327 222 105
- --------------------------------------------------------------------------------------
Total fee revenue 566 444 122 2,019 1,670 349
Gains on sale of securities 3 6 (3) 4 6 (2)
- --------------------------------------------------------------------------------------
Total noninterest revenue $569 $450 $119 $2,023 $1,676 $347
- --------------------------------------------------------------------------------------
</TABLE>
Fee revenue increased $122 million, or 27%, in the fourth quarter of 1996,
compared with the prior-year period. Excluding the gain on the sale of the AAA
credit card portfolio, fee revenue increased 15%.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 10
The $30 million, or 13%, increase in trust and investment management fees in the
fourth quarter of 1996, compared with the prior-year period, primarily resulted
from a $14 million, or 30%, increase in institutional trust fees, a $7 million,
or 18%, increase in private asset management revenue and a $6 million, or 7%,
increase in mutual fund management revenue. The increase in institutional trust
revenue resulted from a $7 million increase in securities lending revenue and
new business, including the fourth quarter 1995 acquisition of two corporate
trust businesses. The increase in securities lending revenue primarily resulted
from improved margins, as well as a higher volume of securities lent in the
fourth quarter of 1996. The increase in private asset management revenue
resulted 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.
Average proprietary funds managed at Dreyfus in the fourth quarter of 1996 were
$82 billion, compared with $78 billion in the fourth quarter of 1995. This
increase primarily resulted from a $5 billion increase in average equity funds.
The increase in cash management fees and deposit transaction charges primarily
resulted from higher volumes of business in customer receivable, payable and
treasury management products.
The increase in mortgage servicing fees in the fourth quarter of 1996, compared
with the prior-year period, resulted from mortgage servicing rights acquired
through acquisitions.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 11
Credit card revenue was unchanged in the fourth quarter of 1996, compared with
the fourth quarter of 1995, as an increase in servicing fee revenue from the
securitized credit card receivables was offset by a decrease in fee revenue
resulting from the sale of the AAA credit card portfolio.
In early November 1996, the Corporation sold the credit card portfolios of 50
AAA clubs with outstanding balances of approximately $770 million. The
Corporation recorded a net gain of $57 million on the sale.
The increase in information services fee revenue compared with the fourth
quarter of 1995 resulted from the ChaseMellon Shareholder Services joint venture
and higher ATM fees.
Other fee revenue increased $11 million in the fourth quarter of 1996, compared
with the prior-year period. This increase primarily resulted from gains on the
sale of equity securities, servicing fee revenue from the securitization of home
equity loans and higher syndication management fees.
The increase in fee revenue in the full year of 1996, compared with the prior-
year period, primarily resulted from the same factors responsible for the fourth
quarter increase. Also affecting the comparison of year-to-date results were
the following factors which were recorded in other fee revenue in the first half
of 1996: a $28 million gain on the home equity loan securitization; a $14
million increase in gains on disposition of assets; and a $13 million gain on
the partial sale of an equity interest in an institutional investment management
firm.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 12
Operating Expense
- ------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
(dollar amounts in millions) 1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Staff expense $ 267 $ 248 $19 $1,055 $ 957 $98
Net occupancy expense 49 52 (3) 205 205 -
Professional, legal and
other purchased services 50 51 (1) 195 186 9
Equipment expense 39 40 (1) 145 143 2
Amortization of mortgage
servicing rights and purchased
credit card relationships 25 25 - 107 68 39
Amortization of goodwill
and other intangible assets 27 24 3 100 96 4
FDIC assessment and regulatory
examination fees 1 - 1 6 31 (25)
Other expense 104 91 13 395 361 34
- -----------------------------------------------------------------------------------
Operating expense before net
revenue from acquired property 562 531 31 2,208 2,047 161
Net revenue from acquired property (3) (5) (2) (13) (20) (7)
- -----------------------------------------------------------------------------------
Total operating expense $559 $526 $ 33 $2,195 $2,027 $168
- -----------------------------------------------------------------------------------
Average full-time equivalent staff 24,700 24,500 200 24,600 24,300 300
- -----------------------------------------------------------------------------------
Efficiency ratio (a) 63% 64% (1) 64% 63% 1
Efficiency ratio excluding
amortization of goodwill and other
intangible assets 60 61 (1) 61 60 1
- -----------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before net revenue from acquired property, excluding
trust-preferred securities expense, as a percentage of revenue, computed on
a taxable equivalent basis, excluding gains on the sale of securities and
the gain on the sale of the AAA credit card portfolio.
Operating expense before net revenue from acquired property increased $31
million, or 6%, in the fourth quarter of 1996, compared with the prior- year
period. The increase in staff expense resulted primarily from an increase in
incentive and commission expense as well as higher base salaries, due in part to
the leasing acquisitions. The increase in the amortization of goodwill and
other intangibles resulted from the leasing acquisitions while the increase in
other expense resulted from higher expenses in support of revenue growth.
The $161 million, or 8%, increase in operating expense before net revenue from
acquired property in the full year of 1996, compared with the full year of 1995,
primarily resulted from the same factors responsible for the fourth
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 13
quarter increase. Also impacting full year 1996 staff expense was an
$18 million charge for the Corporation's early retirement enhancement program
recorded in the first quarter and higher severance expense. The increase in the
amortization of mortgage servicing rights reflects growth in the Corporation's
mortgage servicing portfolio. Partially offsetting these increases was lower
FDIC deposit insurance assessment expense in the full year of 1996 compared with
the full year of 1995, resulting from the suspension of this assessment in 1996
for healthy institutions.
Income Taxes
- ------------
The Corporation's effective tax rate for the full year of 1996 was 36.3%. It is
currently anticipated that the effective tax rate will remain at approximately
this level in 1997.
Nonperforming Assets(a)
- ----------------------------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(in millions) 1996 1996 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 50 $ 52 $ 58 $ 61
Commercial real estate 16 34 40 39
Other domestic 28 45 32 67
- ------------------------------------------------------------------------------------
Total nonperforming loans 94 131 130 167
Acquired property:
Real estate acquired 86 88 84 87
Reserve for real estate acquired (10) (10) (11) (18)
- ------------------------------------------------------------------------------------
Net real estate acquired 76 78 73 69
Other assets acquired 4 - - -
- ------------------------------------------------------------------------------------
Total acquired property 80 78 73 69
- ------------------------------------------------------------------------------------
Total nonperforming assets $ 174 $ 209 $ 203 $ 236
- ------------------------------------------------------------------------------------
Nonperforming loans as a percentage of
total loans .35% .46% .47% .60%
Nonperforming assets as a
percentage of total loans and net
acquired property .63% .74% .74% .85%
- ------------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 14
Nonperforming assets decreased $35 million, or 17%, from September 30, 1996,
primarily as a result of 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.
Nonperforming assets decreased $62 million, or 26%, compared with December 31,
1995. This decrease primarily resulted from the same factors impacting the
fourth quarter. The nonperforming assets ratio was .63% at December 31, 1996,
the lowest level in the Corporation's recorded history, compared with .74% at
September 30, 1996, and .85% at December 31, 1995.
Reserve for Credit Losses
- ---------------------------------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(in millions) 1996 1996 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $525 $478 $467 $471
Reserve as a percentage of total loans 1.92% 1.69% 1.71% 1.70%
- ------------------------------------------------------------------------------------------
(a) Excludes reserve for segregated assets.
</TABLE>
The $54 million increase in the reserve for credit losses from December 31,
1995, reflects the continued concern about the credit quality of the credit card
portfolio and $23 million of reserves acquired in the lease financing
acquisitions.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 15
Selected Capital Data
- -------------------------------
<TABLE>
<CAPTION>
(in millions, except Dec. 31, Sept. 30, June 30, Dec. 31,
per share amounts) 1996 1996 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $3,456 $3,399 $3,332 $3,590
Common shareholders' equity
to assets ratio 8.11% 7.78% 7.79% 8.83%
Tangible common shareholders'
equity $2,218 $2,221 $2,426 $2,632
Tangible common shareholders'
equity to assets ratio (a) 5.36% 5.22% 5.79% 6.63%
Total shareholders' equity $3,746 $3,834 $3,767 $4,025
Total shareholders' equity
to assets ratio 8.79% 8.78% 8.81% 9.90%
Tier I capital ratio 8.40 (b) 6.74 7.51 8.14
Total (Tier I and Tier II)
capital ratio 13.60 (b) 11.26 11.89 11.29
Leverage capital ratio 8.30 (b) 6.68 7.24 7.80
Book value per common share $ 26.86 $ 26.26 $ 25.61 $ 26.17
Tangible book value per common share 17.24 17.15 18.65 19.19
Closing common stock price 71.00 59.25 57.00 53.75
Market capitalization 9,134 7,668 7,414 7,374
Common shares outstanding (000) 128,647 129,415 130,069 137,187
- -------------------------------------------------------------------------------
</TABLE>
(a) Common shareholders' equity less goodwill and other intangibles divided
by total assets less goodwill and other intangibles.
(b) Estimated.
The decrease in shareholders' equity at December 31, 1996, compared with
December 31, 1995, resulted from repurchases of common stock and the redemption
of the $150 million Series I Preferred Stock, offset in part by earnings
retention.
The increase in the Corporation's regulatory capital ratios resulted from 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 interest payments 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.
<PAGE>
Mellon Reports Earnings
Jan. 17, 1997
Page 16
During the fourth quarter of 1996, the Corporation repurchased approximately 1.6
million shares of common stock, bringing total repurchases to 10.8 million
shares in 1996. Since the beginning of 1995, the Corporation has repurchased
23.6 million common shares, prior to any reissuances, as well as warrants for
4.5 million shares of common stock. At December 31, 1996, common stock and
stock equivalents totaled 131.2 million shares, compared to an average level of
common stock and equivalents of 133.9 million shares used in the calculation of
fully diluted earnings per common share in 1996.
On January 8, 1997, the Corporation announced that it will redeem its $100
million of Series J Preferred Stock on February 18, 1997.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions, Quarter ended Year ended
except per share amounts; Dec. 31, Dec. 31,
common shares in thousands) ----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Selected key data
- -----------------------------------------
Net income per common share - primary $ 1.36 $ 1.18 $ 5.17 $ 4.50
Net income per common share -
fully diluted $ 1.34 $ 1.16 $ 5.15 $ 4.46
Tangible net income per common
share - fully diluted (a) $ 1.49 $ 1.29 $ 5.71 $ 4.96
Net income applicable to
common stock $ 179 $ 164 $ 689 $ 652
Tangible net income applicable to
common stock (a) $ 200 $ 182 $ 765 $ 725
Return on common shareholders'
equity (b) 20.9% 18.1% 20.4% 17.8%
Return on tangible common
shareholders' equity (a)(b) 36.6% 27.3% 32.2% 27.1%
Return on assets (b) 1.80% 1.68% 1.74% 1.72%
Return on tangible assets (a)(b) 2.06% 1.90% 1.97% 1.96%
Common equity to assets 8.11% 8.83% 8.11% 8.83%
Tangible common equity to assets 5.36% 6.63% 5.36% 6.63%
Average balances for the period
- -----------------------------------------
Money market investments $ 1,272 $ 1,206 $ 1,381 $ 1,222
Trading account securities 96 283 146 296
Securities 6,198 5,178 6,184 4,922
Loans 27,900 27,747 27,233 27,321
Total interest-earning assets 35,466 34,414 34,944 33,761
Total assets 42,636 41,141 42,013 40,097
Total tangible assets 41,395 40,183 41,010 39,104
Deposits 31,569 28,946 30,838 27,951
Total interest-bearing liabilities 29,210 28,629 28,588 27,774
Common shareholders' equity 3,410 3,610 3,381 3,671
Tangible common shareholders' equity 2,169 2,652 2,378 2,678
Total shareholders' equity 3,820 4,045 3,810 4,106
Computation of net income per
common share
- -----------------------------------------
Net income applicable to common stock $ 179 $ 164 $ 689 $ 652
======== ======== ======== ========
Total stock and stock equivalents - primary 131,429 141,436 133,195 145,074
======== ======== ======== ========
Total stock and stock
equivalents - fully diluted 131,706 141,686 133,912 146,182
======== ======== ======== ========
Net income per common share - primary $ 1.36 $ 1.18 $ 5.17 $ 4.50
======== ======== ======== ========
Net income per common
share - fully diluted $ 1.34 $ 1.16 $ 5.15 $ 4.46
======== ======== ======== ========
</TABLE>
_______________________
(a) 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.
(b) Quarterly amounts are annualized. All amounts are based on unrounded
numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
(in millions, except per Quarter ended Year ended
share amounts) Dec. 31, Dec. 31,
---------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan fees
of $24, $24, $96 and $79) $ 579 $ 610 $2,253 $2,425
Interest-bearing deposits with banks 8 11 36 36
Federal funds sold and securities
under resale agreements 7 7 30 34
Other money market investments 1 1 7 2
Trading account securities 1 4 7 19
Securities 103 87 406 322
----- ----- ------ ------
Total interest revenue 699 720 2,739 2,838
Interest expense
- ----------------
Interest on deposits 240 237 903 889
Federal funds purchased and securities
under repurchase agreements 20 31 94 125
Other short-term borrowings 24 42 121 159
Notes and debentures 44 28 143 117
----- ----- ------ ------
Total interest expense 328 338 1,261 1,290
----- ----- ------ ------
Net interest revenue 371 382 1,478 1,548
Provision for credit losses 80 35 155 105
----- ----- ------ ------
Net interest revenue after
provision for credit losses 291 347 1,323 1,443
Noninterest revenue
- -------------------
Trust and investment management fees 259 229 994 906
Cash management and deposit
transaction charges 56 47 211 191
Mortgage servicing fees 49 40 180 122
Credit card fees 28 28 120 90
Foreign currency and securities trading 19 18 80 91
Information services fees 16 11 50 48
Gain on sale of credit card portfolio 57 - 57 -
Other 82 71 327 222
----- ----- ------ ------
Total fee revenue 566 444 2,019 1,670
Gain on sale of securities 3 6 4 6
----- ----- ------ ------
Total noninterest revenue 569 450 2,023 1,676
Operating expense
- -----------------
Staff expense 267 248 1,055 957
Net occupancy expense 49 52 205 205
Professional, legal and other
purchased services 50 51 195 186
Equipment expense 39 40 145 143
Amortization of mortgage servicing
rights and purchased credit card
relationships 25 25 107 68
Amortization of goodwill and other
intangible assets 27 24 100 96
Other expense 105 91 401 392
Net revenue from acquired property (3) (5) (13) (20)
----- ----- ------ ------
Total operating expense 559 526 2,195 2,027
----- ----- ------ ------
Income before income taxes 301 271 1,151 1,092
Provision for income taxes 107 97 418 401
----- ----- ------ ------
Net income 194 174 733 691
Dividends on preferred stock 15 10 44 39
----- ----- ------ ------
Net income applicable to
common stock $ 179 $ 164 $ 689 $ 652
===== ===== ====== ======
Net income per common share - primary $1.36 $1.18 $5.17 $4.50
===== ===== ====== ======
Net income per common
share - fully diluted $1.34 $1.16 $5.15 $4.46
===== ===== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Dec. 31, Dec. 31,
1996 1995
--------- ---------
<S> <C> <C>
Assets
- -------
Cash and due from banks $ 2,846 $ 2,342
Money market investments 992 860
Trading account securities 84 62
Securities available for sale 4,111 2,913
Investment securities(approximate fair
value of $2,365 and $2,554) 2,375 2,519
Loans, net of unearned discount of
$57 and $44 27,393 27,690
Reserve for credit losses (525) (471)
------- -------
Net loans 26,868 27,219
Premises and equipment 569 556
Acquired property, net of reserves of
$10 and $18 80 69
Goodwill and other intangibles 1,238 958
Mortgage servicing rights and purchased
credit card relationships 774 682
Other assets 2,659 2,466
------- -------
Total assets $42,596 $40,646
======= =======
Liabilities
- ------------
Deposits in domestic offices $28,657 $24,870
Deposits in foreign offices 2,717 4,391
Short-term borrowings 2,247 4,317
Other liabilities 1,721 1,600
Notes and debentures (with original
maturities over one year) 2,518 1,443
------- -------
Total liabilities 37,860 36,621
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial interests in Corporation's
junior subordinated deferrable interest debentures 990 -
Shareholders' equity
- --------------------
Preferred stock 290 435
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 200,000,000 shares
Issued - 147,165,480 shares 74 74
Additional paid-in capital 1,866 1,850
Retained earnings 2,480 2,118
Net unrealized gain (loss) on assets
available for sale, net of tax (1) 18
Treasury stock of 18,518,290 and
9,978,407 shares at cost (963) (470)
------- -------
Total common shareholders' equity 3,456 3,590
------- -------
Total shareholders' equity 3,746 4,025
------- -------
Total liabilities, trust-preferred
securities and shareholders' equity $42,596 $40,646
======= =======
</TABLE>
