<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 16, 1998
MELLON BANK CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania 1-7410 25-1233834
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number Identification No.)
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (412) 234-5000
<PAGE>
ITEM 5. OTHER EVENTS
By press release dated January 16, 1998, Mellon Bank Corporation
("Corporation") announced full year and fourth quarter 1997 results of
operations.
In a separate release dated January 16, 1998, the Corporation announced
that its board of directors approved a management succession plan.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated January 16, 1998,
announcing results of operations.
99.2 Mellon Bank Corporation Press Release, dated January 16, 1998,
announcing the board approved management succession plan.
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: January 20, 1998 By: /s/ 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 Filed herewith
January 16, 1998
99.2 Press Release dated Filed herewith
January 16, 1998
<PAGE>
Exhibit 99.1
MEDIA: ANALYSTS:
Stephen K. Dishart Donald J. MacLeod
(412) 234-0850 (412) 234-5601
David T. Lamar
(412) 234-4633
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD FULL YEAR AND FOURTH QUARTER 1997 RESULTS
. 1997 Diluted Earnings Per Share Increases to $2.88 Per Share, Up 12 Percent
Over Last Year
. Return on Common Equity is 21.5 Percent and Return on Assets is 1.80 Percent
for 1997
. Announces Regular Quarterly Common and Preferred Stock Dividends
<TABLE>
<CAPTION>
Financial Highlights Year ended Quarter ended
-------------------- --------------------------------------
(dollar amounts in millions, Dec. 31, Dec. 31, Dec. 31, Sept. 30, Dec. 31,
except per share amounts) 1997 1996 1997 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Diluted earnings per common share $2.88 $2.58 (a) $ .75 $ .73 $ .67 (a)
Diluted tangible earnings per common share $3.19 $2.87 (a) $ .83 $ .80 $ .76 (a)
Net income applicable to common stock $ 750 $ 689 $ 191 $ 191 $ 179
Tangible net income applicable to
common stock $ 832 $ 765 $ 212 $ 211 $ 200
Return on common equity 21.5% 20.4% 21.2% 21.6% 20.9%
Return on tangible common equity 37.5% 32.2% 38.3% 37.6% 36.6%
Return on assets 1.80% 1.74% 1.75% 1.81% 1.80%
Return on tangible assets 2.05% 1.97% 2.00% 2.05% 2.06%
Fee revenue as a percentage
of total revenue (FTE) 62% 58% 66% 63% 60%
Efficiency ratio excluding
amortization of intangibles and
trust-preferred securities expense 62% 60% 65% 62% 56%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Restated to reflect the two-for-one common stock split distributed on
June 2, 1997.
Note: Quarterly returns are annualized.
PITTSBURGH, Jan. 16, 1998--Mellon Bank Corporation (NYSE: MEL) today reported
record 1997 diluted earnings per common share of $2.88, an increase of 12
percent, compared with $2.58 per common share in 1996. Mellon reported net
income applicable to common stock of $750 million, compared with $689 million
for the full year 1996.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 2
"We continued our strong revenue growth performance in the fourth quarter,
which helped us to achieve outstanding results in 1997," said Frank V. Cahouet,
Mellon chairman, president and chief executive officer. "This performance again
provided shareholders with superior returns on equity and assets, record
earnings per share as well as a new record stock price achieved during the
quarter. We attribute this success to our employees' consistent execution of
Mellon's strategy of being a broad-based financial services company with a bank
at its core."
The Corporation also declared its regular common dividend of 33 cents per
share and its regular quarterly preferred dividend on its Series K preferred
stock (NYSE: MEL PrK) at the rate of $2.05 per share per annum. Dividends on
the Corporation's common stock and Series K preferred stock are payable Feb. 17,
1998, to shareholders of record at the close of business on Jan. 30, 1998. The
Corporation previously announced that the Series K preferred stock will be
redeemed on Feb. 17, 1998.
Full Year 1997
Return on common shareholders' equity and return on assets were 21.5
percent and 1.80 percent, respectively, in 1997, compared with 20.4 percent and
1.74 percent, respectively, in 1996. Return on tangible common shareholders'
equity and return on tangible assets were 37.5 percent and 2.05 percent,
respectively, in 1997, compared with 32.2 percent and 1.97 percent,
respectively, in 1996.
Net interest revenue for the full year 1997 was $1,467 million, a decrease
of $11 million compared with $1,478 million in 1996, principally resulting from
loan sales and securitizations, funding costs related to the repurchase of
common stock and lower loan fees primarily offset by the 1996 lease financing
acquisitions and the use of proceeds from the trust-preferred securities.
Fee revenue was $2,418 million in 1997, up $399 million, compared with
$2,019 million in 1996. The increase in fee revenue was primarily attributable
to higher trust and investment fees resulting from the Buck Consultants, Inc.
(Buck) acquisition on July 1, 1997, new business and an increase in the market
value of assets under management. Excluding the Buck acquisition and the gain
on the sale of the corporate trust business, both in 1997, and the gain on the
sale of the American Automobile Association (AAA) credit card portfolio in 1996,
fee revenue increased $260 million, or 13 percent, compared with 1996.
Operating expense before net revenue from acquired property and trust-
preferred securities expense was $2,509 million in 1997, up $304 million from
$2,205 million in 1996. The increase primarily resulted from the Buck
acquisition, a full-year impact of the 1996 lease financing acquisitions and
business growth. The Corporation's effective tax rate for 1997 was 34.1
percent, compared with 36.3 percent for 1996. The lower tax rate resulted from
a fourth quarter 1997 realignment of Corporate entities.
Credit quality expense was $129 million in 1997, a decrease of $13 million
compared with 1996, reflecting a decrease in the provision for credit losses and
higher gains on the sale of other real estate owned (OREO). Nonperforming
assets totaled $181 million at Dec. 31, 1997, compared with $175 million at
Sept. 30, 1997, and $174 million at Dec. 31, 1996. The ratio of nonperforming
assets to total loans and net acquired property was .62 percent at Dec. 31,
1997. This ratio has been lower than 1 percent for 14 consecutive quarters.
Fourth Quarter 1997
Fourth quarter 1997 diluted earnings per common share was 75 cents, an
increase of 12 percent compared with 67 cents in the fourth quarter of 1996.
Net income applicable to common stock totaled
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 3
$191 million in the fourth quarter of 1997, compared with $179 million in the
prior-year period. Annualized return on common shareholders' equity and return
on assets were 21.2 percent and 1.75 percent, respectively, in the fourth
quarter of 1997, compared with 20.9 percent and 1.80 percent, respectively, in
the fourth quarter of 1996. Annualized return on tangible common shareholders'
equity and return on tangible assets were 38.3 percent and 2.00 percent,
respectively, in the fourth quarter of 1997, compared with 36.6 percent and 2.06
percent, respectively, in the fourth quarter of 1996.
Net interest revenue for the fourth quarter of 1997 was $361 million, down
$10 million compared with $371 million in the prior-year period.
Fee revenue was $707 million in the fourth quarter of 1997, up $141
million, compared with $566 million in the fourth quarter of 1996. The increase
was primarily attributable to higher trust and investment fees resulting from
the Buck acquisition on July 1, 1997, new business and an increase in the market
value of assets under management. Excluding the Buck acquisition and the gain
on the sale of the corporate trust business, both in 1997, and the gain on the
sale of the AAA credit card portfolio in 1996, fee revenue increased $79
million, or 16 percent, compared with the prior-year period.
Operating expense before net revenue from acquired property and trust-
preferred securities expense for the fourth quarter of 1997 was $722 million, up
$163 million from $559 million in the fourth quarter of 1996. The increase
primarily resulted from the Buck acquisition, business growth, business
development and reengineering initiatives, and higher equipment expense.
Credit quality expense was $61 million in the fourth quarter of 1997, a $16
million decrease compared with $77 million in the fourth quarter of 1996. The
decrease reflected a $9 million increase in the net revenue from acquired
property and a $7 million decrease in the provision for credit losses.
A broad-based financial services company with a bank at its core, Mellon
Bank Corporation ranks among the nation's largest bank holding companies in
market capitalization. With more than $300 billion of assets under management
and approximately $1.5 trillion of assets under administration, 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 company, The Dreyfus Corporation, places Mellon as the leading bank
manager of mutual funds. Headquartered in Pittsburgh, Mellon's principal
subsidiary is Mellon Bank, N.A.
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
January 16, 1998
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 Year ended
-------------------------------- --------------------
(dollar amounts in millions, Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
ratios annualized) 1997 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income applicable
to common stock $ 191 $ 191 $ 179 $ 750 $ 689
After-tax impact of
amortization of
intangibles from
purchase acquisitions 21 20 21 82 76
- ---------------------------------------------------------------------------------------------------
Tangible net income
applicable to
common stock $ 212 $ 211 $ 200 $ 832 $ 765
Tangible earnings per
common share - diluted (a) $ .83 $ .80 $ .76 $3.19 $ 2.87
- ---------------------------------------------------------------------------------------------------
Average common equity $ 3,573 $ 3,520 $ 3,410 $3,494 $ 3,381
Average goodwill and
other intangibles 1,378 1,291 1,241 1,275 1,003
- ---------------------------------------------------------------------------------------------------
Average tangible
common equity $ 2,195 $ 2,229 $ 2,169 $ 2,219 $ 2,378
Return on tangible
common equity 38.3% 37.6% 36.6% 37.5% 32.2%
- ---------------------------------------------------------------------------------------------------
Average total assets $44,266 $42,879 $42,636 $42,942 $42,013
Average tangible assets $42,888 $41,588 $41,395 $41,667 $41,010
Return on tangible assets 2.00% 2.05% 2.06% 2.05% 1.97%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings per share are presented in accordance with the requirements of
Financial Accounting Standard No. 128, "Earnings per Share," which was
adopted by the Corporation in the fourth quarter of 1997. Prior-period
amounts have been restated. In addition, 1996 amounts were restated to
reflect the two-for-one common stock split distributed on June 2, 1997.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 5
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
-------------------------------- ---------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
(in millions) 1997 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $362 $369 $374 $1,475 $1,488
Net interest margin (FTE) 4.07% 4.24% 4.20% 4.24% 4.26%
Average securities $ 5,293 $ 5,469 $ 6,198 $ 5,593 $ 6,184
Average loans $28,476 $27,596 $27,900 $27,823 $27,233
Average interest-earning
assets $35,325 $34,467 $35,466 $34,777 $34,944
- ----------------------------------------------------------------------------------------------------
</TABLE>
The $12 million decrease in fully taxable equivalent net interest revenue in the
fourth quarter of 1997, compared with the fourth quarter of 1996, resulted from
the funding costs related to the repurchase of common stock, the December 1996
$500 million insurance premium finance securitization and the effect of the
November 1996 sale of a $770 million American Automobile Association (AAA)
credit card portfolio. Primarily offsetting these factors was the use of the
proceeds from the $1 billion of trust-preferred securities issued in December
1996. The cost of the trust-preferred securities is reported in operating
expense. Excluding the effect of the loan securitizations and equity
repurchases, net interest revenue and the net interest margin for the fourth
quarter and full year 1997 would have been approximately $420 million and 4.46%
and $1,696 million and 4.60%, respectively, compared with approximately $419
million and 4.49% and $1,649 million and 4.53%, respectively, in the fourth
quarter and full year 1996.
The $13 million decrease in fully taxable equivalent net interest revenue in the
full year 1997, compared with the full year 1996, principally resulted from the
sale of the AAA credit card portfolio, funding costs related to the repurchase
of common stock, the insurance premium finance securitization and lower loan
fees. Primarily offsetting these factors were the full-year impact of the $1.6
billion lease financing acquisitions in 1996 and the use of proceeds from the $1
billion of trust-preferred securities.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 6
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
-------------------------------- --------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
(in millions) 1997 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for credit losses $ 73 $ 25 $ 80 $ 148 $ 155
Net revenue from acquired property (12) (1) (3) (19) (13)
- ---------------------------------------------------------------------------------------------------
Credit quality expense $ 61 $ 24 $ 77 $ 129 $ 142
- ---------------------------------------------------------------------------------------------------
Net credit (losses) recoveries(a):
Domestic:
Credit card $ (20) $(26) $(33) $(107) $(114)
Other consumer credit (4) (4) (5) (16) (15)
Commercial real estate (15) 1 3 (10) 2
Commercial and financial (2) (2) (1) (8) 2
- ---------------------------------------------------------------------------------------------------
Total domestic (41) (31) (36) (141) (125)
International - - - 5 1
- ---------------------------------------------------------------------------------------------------
Net credit losses (41) (31) (36) (136) (124)
Credit losses on assets held
for accelerated resolution (65) - - (65) -
- ---------------------------------------------------------------------------------------------------
Total net credit losses $(106) $(31) $(36) $(201) $(124)
- ---------------------------------------------------------------------------------------------------
Annualized net credit losses
to average loans 1.48% .45% .51% .72% .46%
Annualized net credit losses to
average loans excluding net
credit losses on assets held for
accelerated resolution .56% .45% .51% .49% .46%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes net credit losses on segregated assets.
Credit quality expense in the fourth quarter of 1997 decreased $16 million
compared with the fourth quarter of 1996, as a result of a $9 million increase
in net revenue from acquired property and a $7 million decrease in the provision
for credit losses. The increase in net revenue from acquired property was
primarily due to gains on the sale of OREO properties. The fourth quarters of
1997 and 1996 included $48 million and $55 million, respectively, of additional
provision for credit losses primarily related to the credit card portfolio.
These additional credit loss provisions were made in response to credit losses
from the CornerStone(SM) credit card portfolio.
The $70 million increase in net credit losses, compared with the fourth quarter
of 1996, resulted from a $52 million increase in credit card net
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 7
credit losses due to losses in the CornerStone(SM) portfolio and an $18 million
increase in commercial real estate net credit losses, primarily from one
commercial real estate loan.
In December 1997, the Corporation transferred $231 million of CornerStone(SM)
credit card loans into the accelerated resolution portfolio that was established
in 1995. In connection with this $231 million transfer, the Corporation
evaluated the carrying value of these loans and recorded a credit loss of $65
million to reflect this portfolio's estimated net realizable value of $166
million. Substantially all of the interest and principal receipts, fees and
loan loss recoveries on loans in this portfolio are applied to reduce the
carrying value of this portfolio, which totaled $157 million at December 31,
1997. The accelerated resolution portfolio had a net carrying value of zero at
September 30, 1997, and $30 million at year-end 1996.
Total net credit losses in the fourth quarter of 1997 on the CornerStone(SM)
credit card portfolio were $78 million, including the $65 million of credit
losses on the loans transferred to the accelerated resolution portfolio and $13
million of credit losses recorded prior to this transfer. Excluding these
credit losses, the ratio of annualized net credit losses to average loans in the
fourth quarter of 1997 was 38 basis points. Remaining CornerStone(SM) credit
card loans not transferred to the accelerated resolution portfolio totaled $266
million at December 31, 1997, compared with $631 million at December 31, 1996.
The Corporation expects a significant reduction in net credit card credit losses
in 1998 as a result of the actions taken on the CornerStones(SM) portfolio.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 8
Net credit losses increased $77 million in the full year 1997, compared with the
full year 1996, reflecting the higher level of credit card and commercial loan
net credit losses during the year. Partially offsetting these credit losses
were higher recoveries on international loans.
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
-------------------------------- --------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
(in millions) 1997 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fee revenue:
Trust and investment revenue:
Investment management:
Mutual fund $100 $ 97 $ 88 $ 374 $ 340
Private asset 51 47 41 182 150
Institutional asset 48 45 34 171 137
- ---------------------------------------------------------------------------------------------------
Total investment management
revenue 199 189 163 727 627
Administration/custody/consulting:
Mutual fund 36 34 29 133 108
Private asset 4 4 3 16 12
Institutional trust 94 94 64 327 247
Benefits consulting 54 54 - 108 -
- ---------------------------------------------------------------------------------------------------
Total administration/
custody/consulting revenue 188 186 96 584 367
- ---------------------------------------------------------------------------------------------------
Total trust and investment
fee revenue 387 375 259 1,311 994
Cash management and deposit
transaction charges 65 62 56 242 211
Mortgage servicing fees 56 53 49 213 180
Foreign currency and securities
trading revenue 36 32 19 118 80
Credit card fees 24 24 28 97 120
Information services fees 9 7 16 42 50
Gain on sale of corporate
trust business 43 - - 43 -
Gain on sale of credit card portfolio - - 57 - 57
Other 87 82 82 352 327
- ---------------------------------------------------------------------------------------------------
Total fee revenue 707 635 566 2,418 2,019
Gains on sale of securities - - 3 - 4
- ---------------------------------------------------------------------------------------------------
Total noninterest revenue $707 $635 $569 $2,418 $2,023
- ---------------------------------------------------------------------------------------------------
Fee revenue as a percentage of
total revenue (FTE) 66% 63% 60% 62% 58%
Trust and investment fee
revenue as a percentage of
total revenue (FTE) 36% 37% 27% 34% 28%
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 9
Fee revenue increased $141 million, or 25%, in the fourth quarter of 1997,
compared with the fourth quarter of 1996. Excluding $76 million of revenue
resulting from the Buck acquisition, the $43 million gain on the sale of the
corporate trust business, both in 1997, and the $57 million gain on the sale of
the AAA credit card portfolio in 1996, fee revenue increased $79 million, or
16%, compared with the prior-year period.
The $128 million, or 49%, increase in trust and investment fees in the fourth
quarter of 1997, compared with the prior-year period, reflects $54 million of
benefits consulting fees and $22 million of institutional trust fees resulting
from the Buck acquisition. Excluding the fees resulting from the Buck
acquisition, trust and investment fees increased $52 million, or 20%, compared
with the fourth quarter of 1996.
The $36 million increase in investment management revenue resulted from a $12
million, or 15%, increase in mutual fund management revenue, a $10 million, or
22%, increase in private asset management revenue and a $14 million, or 41%,
increase in institutional asset management revenue. These increases resulted
from new business and an increase in the market value of assets under
management. Proprietary funds managed at Dreyfus in the fourth quarter of 1997
averaged $93 billion, up $2 billion from $91 billion in the third quarter of
1997 and up $11 billion from $82 billion in the fourth quarter of 1996. The
increase from the prior-year periods primarily resulted from increases in equity
funds and taxable money market funds. Equity funds averaged $22 billion in the
fourth quarter of 1997, compared with $15 billion in the fourth quarter of 1996.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 10
Administration/custody/consulting fee revenue increased $92 million in the
fourth quarter of 1997 compared with the fourth quarter of 1996 and included $54
million of benefits consulting fees and $22 million of institutional trust fees
resulting from the Buck acquisition. Institutional trust fees, excluding the
$22 million of fees resulting from the Buck acquisition, increased $8 million,
or 10%, while mutual fund administration/custody revenue increased $7 million,
or 29%. These increases resulted primarily from new business and higher
transaction volumes.
The 18% increase in cash management fees and deposit transaction charges in the
fourth 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 13% increase in mortgage servicing fees in the fourth quarter of 1997,
compared with the prior-year period, resulted from a higher level of mortgage
servicing rights acquired through portfolio acquisitions.
The 85% increase in foreign currency and securities trading revenue in the
fourth 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, primarily in the Corporation's global custody
business.
Credit card revenue decreased 15% in the fourth quarter of 1997, compared with
the fourth quarter of 1996, as a result of lower fee revenue from the
securitized credit card portfolio and the sale of the AAA credit card portfolio
in November 1996.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 11
The $7 million decrease in information services fee revenue, compared with the
fourth quarter of 1996, primarily resulted from the third quarter 1997 sale of
50% of the Corporation's interest in the R-M Trust Company to the Canadian
Imperial Bank of Commerce (CIBC). The R-M Trust Company was subsequently
renamed CIBC Mellon Trust Company. The Corporation accounts for its interest in
CIBC Mellon Trust Company under the equity method of accounting, with net
results recorded as information services fee revenue.
In late November 1997, the Corporation sold its corporate trust business to
Chase Manhattan Bank. This business generated $18 million of revenue in the
first nine months of 1997 including approximately $12 million of fee revenue.
The Corporation recorded a gain of $43 million on the sale.
Other fee revenue increased $5 million in the fourth quarter of 1997, compared
with the prior-year period. This increase primarily resulted from a $6 million
increase in servicing fee revenue from the insurance premium finance loan
securitization.
Fee revenue increased $399 million, or 20%, in the full year of 1997, compared
with 1996. Excluding the $153 million of revenue resulting from the Buck
acquisition, the $43 million gain on the sale of the corporate trust business,
both in 1997, and the $57 million gain on the sale of the AAA credit card
portfolio in 1996, fee revenue increased $260 million, or 13%, compared with the
prior year. Excluding the $153 million of revenue from the Buck acquisition,
trust and investment fees increased $164 million, or 16%, in 1997 compared with
the full year 1996.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 12
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Quarter ended Year ended
-------------------------------- --------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
(dollar amounts in millions) 1997 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Staff expense $354 $344 $267 $1,242 $1,055
Net occupancy expense 64 55 49 225 205
Professional, legal and
other purchased services 72 55 50 219 195
Equipment expense 65 38 39 175 145
Amortization of mortgage
servicing assets and purchased
credit card relationships 33 29 25 118 107
Amortization of goodwill
and other intangible assets 26 25 27 105 100
Other expense 108 105 102 425 398
- ---------------------------------------------------------------------------------------------------
Operating expense before
net revenue from acquired
property and trust-preferred
securities expense 722 651 559 2,509 2,205
Trust-preferred
securities expense 19 20 3 78 3
Net revenue from
acquired property (12) (1) (3) (19) (13)
- ---------------------------------------------------------------------------------------------------
Total operating expense $729 $670 $559 $2,568 $2,195
- ---------------------------------------------------------------------------------------------------
Average full-time equivalent
staff 27,500 27,300 24,700 26,400 24,600
- ---------------------------------------------------------------------------------------------------
Efficiency ratio (a) 67% 65% 59% 64% 63%
Efficiency ratio excluding
amortization of goodwill and
other intangible assets 65% 62% 56% 62% 60%
- ---------------------------------------------------------------------------------------------------
</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 $163 million, or 29%, in the fourth quarter of
1997, compared with the prior-year period, resulting from the Buck acquisition,
business growth, business development and reengineering initiatives, and higher
equipment expense.
Staff expense increased $87 million in the fourth quarter of 1997, compared with
the prior-year period, primarily from the Buck acquisition as well as an
increase in incentive expense and higher expense of temporary help and contract
programmers.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 13
Net occupancy expense increased $15 million in the fourth quarter of 1997,
compared with the prior-year period, primarily from write-downs related to the
consolidation of branch and processing locations, as well as from the Buck
acquisition.
Professional, legal and other purchased services increased $22 million in the
fourth quarter of 1997, compared with the prior-year period, primarily from an
increase in consulting expenses related to business growth and reengineering
initiatives and from the Buck acquisition.
Equipment expense increased $26 million in the fourth quarter of 1997, compared
with the prior-year period, primarily from the one-time expense of upgrading
computer hardware and from the Buck acquisition.
The amortization of mortgage servicing assets and purchased credit card
relationships increased $8 million in the fourth quarter of 1997, compared with
the prior-year period, resulting primarily from a higher level of mortgage
servicing rights acquired through portfolio acquisitions and a higher level of
mortgage prepayments.
The $16 million increase in trust-preferred securities expense in the fourth
quarter of 1997, compared with the prior-year period, resulted from a full
quarter's impact of the issuance of $1 billion of these securities in December
1996. The proceeds from these securities were used to fund interest-earning
assets. The $9 million increase in net revenue from acquired property resulted
from higher gains on the sale of OREO properties.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 14
The $304 million, or 14%, increase in operating expense before net revenue from
acquired property and trust-preferred securities expense in the full year 1997,
compared with the full year 1996, primarily resulted from the Buck acquisition
and the other factors responsible for the fourth quarter 1997 increase, as well
as the full-year impact of the 1996 lease financing acquisitions.
Income Taxes
- ------------
The Corporation's effective tax rate for 1997 was 34.1%, compared with 36.3% for
1996. The lower effective tax rate in 1997 resulted from a fourth quarter 1997
realignment of Corporate entities. It is currently anticipated that the
effective tax rate will be approximately 35.3% in 1998.
Nonperforming Assets(a)
- -----------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(in millions) 1997 1997 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 52 $ 52 $ 54 $ 50
Commercial real estate 49 14 9 16
Other domestic 32 38 27 28
- --------------------------------------------------------------------------------
Total nonperforming loans 133 104 90 94
Acquired property:
Real estate acquired 52 76 77 86
Reserve for real estate acquired (9) (9) (9) (10)
- --------------------------------------------------------------------------------
Net real estate acquired 43 67 68 76
Other assets acquired 5 4 4 4
- --------------------------------------------------------------------------------
Total acquired property 48 71 72 80
- --------------------------------------------------------------------------------
Total nonperforming assets $ 181 $ 175 $ 162 $ 174
- --------------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .46% .37% .32% .35%
Nonperforming assets as a
percentage of total loans
and net acquired property .62% .62% .57% .63%
- --------------------------------------------------------------------------------
</TABLE>
(a) Excludes segregated assets.
Nonperforming assets increased $6 million from September 30, 1997. This
increase resulted primarily from the addition of a commercial real estate
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 15
loan to nonperforming status, partially offset by a lower level of OREO. The
ratio of nonperforming assets to total loans and net acquired property was .62%
at December 31, 1997. This ratio has been lower than 1% for 14 consecutive
quarters.
The $7 million increase in nonperforming assets from December 31, 1996,
primarily resulted from the same factors impacting the fourth quarter.
<TABLE>
<CAPTION>
Reserve for Credit Losses
- -------------------------
Dec. 31, Sept. 30, June 30, Dec. 31,
(in millions) 1997 1997 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserve for credit losses (a) $ 475 $ 505 $ 511 $ 525
Reserve as a percentage of total loans 1.63% 1.78% 1.82% 1.92%
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Excludes reserve for segregated assets.
The $30 million decrease in the reserve for credit losses from September 30,
1997, resulted primarily from credit losses on the CornerStone(SM) credit card
loans including the $65 million of credit losses taken on the CornerStone(SM)
loans that were transferred to the accelerated resolution portfolio in December
1997. These loans were transferred at their estimated net realizable value.
The excess of the carrying value over the estimated realizable value was
recorded as a credit loss.
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 16
<TABLE>
<CAPTION>
Selected Capital Data
- ---------------------
(in millions, except Dec. 31, Sept. 30, June 30, Dec. 31,
per share amounts) 1997 1997 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 3,652 $ 3,585 $ 3,377 $3,456
Common shareholders' equity
to assets ratio 8.13% 8.25% 7.72% 8.11%
Tangible common shareholders'
equity $ 2,227 $ 2,265 $ 2,180 $2,218
Tangible common shareholders'
equity to assets ratio (a) 5.12% 5.37% 5.13% 5.36%
Total shareholders' equity $ 3,845 $ 3,778 $ 3,570 $3,746
Total shareholders' equity
to assets ratio 8.56% 8.69% 8.17% 8.79%
Tier I capital ratio 7.70 (b) 8.08 7.94 8.38
Total (Tier I and Tier II)
capital ratio 12.70 (b) 13.24 13.24 13.58
Leverage capital ratio 8.00 (b) 8.37 8.20 8.31
Book value per common share $ 14.39 $ 14.08 $ 13.42 $ 13.43 (c)
Tangible book value per common share 8.77 8.90 8.66 8.62 (c)
Closing common stock price 60.63 54.75 45.125 35.50 (c)
Market capitalization 15,386 13,938 11,353 9,134
Common shares outstanding (000) 253,786 254,578 251,599 257,294 (c)
- ------------------------------------------------------------------------------------
</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 the two-for-one common stock split distributed on June
2, 1997.
The increase in common and total shareholders' equity at December 31, 1997,
compared with December 31, 1996, reflects earnings retention and the common
shares issued in the Buck acquisition, partially offset by common stock
repurchases. Also impacting total shareholders' equity was the February 1997
redemption of the $100 million Series J preferred stock.
The Corporation's average level of treasury stock was approximately $280 million
higher in the fourth quarter of 1997, compared with the fourth 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
<PAGE>
Mellon Reports Earnings
January 16, 1998
Page 17
earnings per share 1% while ongoing business growth increased earnings per share
11%.
The decrease in the Corporation's regulatory capital ratios, compared with
December 31, 1996, reflects a higher level of risk-adjusted assets at December
31, 1997, compared with December 31, 1996, as well as a higher level of goodwill
and other intangibles.
During the fourth quarter of 1997, the Corporation repurchased approximately 1.2
million shares of common stock, bringing total repurchases in 1997 to 12 million
common shares, prior to any reissuances. Since the beginning of 1995, the
Corporation has repurchased approximately 59 million common shares, prior to any
reissuances, as well as warrants for 9 million shares of common stock.
On January 8, 1998, the Corporation announced that it will redeem its $200
million Series K preferred stock on February 17, 1998.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Year ended
(dollar amounts in millions, Dec. 31, Dec. 31,
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)(b) $ .75 $ .67 $ 2.88 $ 2.58
Tangible net income per
common share (a)(b)(c) $ .83 $ .76 $ 3.19 $ 2.87
Net income applicable to
common stock $ 191 $ 179 $ 750 $ 689
Tangible net income applicable
to common stock (c) $ 212 $ 200 $ 832 $ 765
Return on common shareholders'
equity (d) 21.2% 20.9% 21.5% 20.4%
Return on tangible common
shareholders' equity (c)(d) 38.3% 36.6% 37.5% 32.2%
Return on assets (d) 1.75% 1.80% 1.80% 1.74%
Return on tangible assets (c)(d) 2.00% 2.06% 2.05% 1.97%
Common equity to assets 8.13% 8.11% 8.13% 8.11%
Tangible common equity to assets 5.12% 5.36% 5.12% 5.36%
Average balances for the period
- -------------------------------
Money market investments $ 1,397 $ 1,272 $ 1,186 $ 1,381
Trading account securities 159 96 175 146
Securities 5,293 6,198 5,593 6,184
Loans 28,476 27,900 27,823 27,233
Total interest-earning assets 35,325 35,466 34,777 34,944
Total assets 44,266 42,636 42,942 42,013
Total tangible assets 42,888 41,395 41,667 41,010
Deposits 31,085 31,569 30,459 30,838
Total interest-bearing liabilities 28,123 29,210 27,677 28,588
Common shareholders' equity 3,573 3,410 3,494 3,381
Tangible common shareholders' equity 2,195 2,169 2,219 2,378
Total shareholders' equity 3,766 3,820 3,700 3,810
Computation of net income per common
share (b)
- ------------------------------------
Net income applicable to common stock $ 191 $ 179 $ 750 $ 689
Total stock and stock equivalents:
Basic 253,886 258,210 255,356 262,411
Diluted 259,430 263,045 260,829 266,591
Basic net income per common share $ .76 $ .69 $ 2.94 $ 2.63
Diluted net income per
common share $ .75 $ .67 $ 2.88 $ 2.58
_______________________
</TABLE>
(a) Diluted.
(b) Earnings per share are presented in accordance with the requirements of
Financial Accounting Standard No. 128, "Earnings per Share," which was
adopted by the Corporation in the fourth quarter of 1997. Prior-period
amounts have been restated. In addition, 1996 amounts were restated to
reflect the two-for-one common stock split distributed on June 2, 1997.
(c) 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.
(d) Quarterly returns are annualized.
Note: All calculations are based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Year ended
Dec. 31, Dec. 31,
(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 $23, $24, $81 and $96) $ 577 $ 579 $2,268 $2,253
Interest-bearing deposits with banks 6 8 26 36
Federal funds sold and securities
under resale agreements 10 7 30 30
Other money market investments 2 1 6 7
Trading account securities 2 1 9 7
Securities 88 103 377 406
----- ----- ------ ------
Total interest revenue 685 699 2,716 2,739
Interest expense
- ----------------
Interest on deposits 224 240 878 903
Federal funds purchased and securities
under repurchase agreements 22 20 77 94
Other short-term borrowings 29 24 105 121
Notes and debentures 49 44 189 143
----- ----- ------ ------
Total interest expense 324 328 1,249 1,261
----- ----- ------ ------
Net interest revenue 361 371 1,467 1,478
Provision for credit losses 73 80 148 155
----- ----- ------ ------
Net interest revenue after
provision for credit losses 288 291 1,319 1,323
Noninterest revenue
- -------------------
Trust and investment fee revenue 387 259 1,311 994
Cash management and deposit
transaction charges 65 56 242 211
Mortgage servicing fees 56 49 213 180
Foreign currency and securities
trading revenue 36 19 118 80
Credit card fees 24 28 97 120
Information services fees 9 16 42 50
Gain on sale of corporate trust business 43 - 43 -
Gain on sale of credit card portfolio - 57 - 57
Other 87 82 352 327
----- ----- ------ ------
Total fee revenue 707 566 2,418 2,019
Gains on sales of securities - 3 - 4
----- ----- ------ ------
Total noninterest revenue 707 569 2,418 2,023
Operating expense
- -----------------
Staff expense 354 267 1,242 1,055
Net occupancy expense 64 49 225 205
Professional, legal and other
purchased services 72 50 219 195
Equipment expense 65 39 175 145
Amortization of mortgage servicing
assets and purchased credit card
relationships 33 25 118 107
Amortization of goodwill and other
intangible assets 26 27 105 100
Other expense 108 102 425 398
Trust-preferred securities expense 19 3 78 3
Net revenue from acquired property (12) (3) (19) (13)
----- ----- ------ ------
Total operating expense 729 559 2,568 2,195
----- ----- ------ ------
Income before income taxes 266 301 1,169 1,151
Provision for income taxes 71 107 398 418
----- ----- ------ ------
Net income 195 194 771 733
Dividends on preferred stock 4 15 21 44
----- ----- ------ ------
Net income applicable to
common stock $ 191 $ 179 $ 750 $ 689
===== ===== ====== ======
Basic net income per common share $ .76 $ .69 $ 2.94 $ 2.63
===== ===== ====== ======
Diluted net income per common share $ .75 $ .67 $ 2.88 $ 2.58
===== ===== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, Dec. 31,
(dollar amounts in millions) 1997 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 3,650 $ 3,032 $ 2,846
Money market investments 1,008 871 992
Trading account securities 75 88 84
Securities available for sale 2,767 3,354 4,111
Investment securities (approximate fair
value of $2,118, $2,195 and $2,365) 2,082 2,168 2,375
Loans, net of unearned discount of
$48, $50 and $57 29,142 28,279 27,393
Reserve for credit losses (475) (505) (525)
------- ------- -------
Net loans 28,667 27,774 26,868
Premises and equipment 573 589 569
Acquired property, net of reserves of
$9, $9 and $10 48 71 80
Goodwill and other intangibles 1,425 1,320 1,238
Mortgage servicing assets and purchased
credit card relationships 1,075 1,026 774
Other assets 3,522 3,172 2,659
------- ------- -------
Total assets $44,892 $43,465 $42,596
======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $27,929 $27,462 $28,657
Deposits in foreign offices 3,376 2,727 2,717
Short-term borrowings 3,744 3,504 2,247
Other liabilities 2,434 2,190 1,721
Notes and debentures (with original
maturities over one year) 2,573 2,814 2,518
------- ------- -------
Total liabilities 40,056 38,697 37,860
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial interests
in Corporation's junior subordinated
deferrable interest debentures 991 990 990
Shareholders' equity
- --------------------
Preferred stock 193 193 290
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 400,000,000 shares
Issued - 294,330,960 (a); 294,330,960 (a);
and 147,165,480 shares 147 147 74
Additional paid-in capital 1,818 1,810 1,866
Retained earnings 2,872 2,770 2,480
Net unrealized gain (loss) on assets
available for sale, net of tax 33 24 (1)
Treasury stock of 40,545,114 (a);
39,753,178 (a); and 18,518,290 shares at cost (1,218) (1,166) (963)
------- ------- -------
Total common shareholders' equity 3,652 3,585 3,456
------- ------- -------
Total shareholders' equity 3,845 3,778 3,746
------- ------- -------
Total liabilities, trust-preferred
securities and shareholders' equity $44,892 $43,465 $42,596
======= ======= =======
- -------------
</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; Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
common shares in thousands) 1997 1997 1997 1997 1996
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share (a)(b) $ .75 $ .73 $ .71 $ .69 $ .67
Tangible net income per
common share (a)(b)(c) $ .83 $ .80 $ .79 $ .77 $ .76
Net income applicable to
common stock $ 191 $ 191 $ 186 $ 182 $ 179
Tangible net income applicable
to common stock (c) $ 212 $ 211 $ 206 $ 203 $ 200
Return on common shareholders'
equity (d) 21.2% 21.6% 21.9% 21.2% 20.9%
Return on tangible common
shareholders' equity (c)(d) 38.3% 37.6% 37.7% 36.3% 36.6%
Return on assets (d) 1.75% 1.81% 1.79% 1.83% 1.80%
Return on tangible assets (c)(d) 2.00% 2.05% 2.04% 2.09% 2.06%
Common equity to assets 8.13% 8.25% 7.72% 8.33% 8.11%
Tangible common equity to assets 5.12% 5.37% 5.13% 5.60% 5.36%
Fee revenue as a percentage of
total revenue (FTE) 66% 63% 59% 59% 60%
Efficiency ratio excluding
amortization of intangibles
and trust-preferred
securities expense 65% 62% 59% 59% 56%
Average common shares and
equivalents outstanding (a)(b) 259,430 260,306 259,475 263,204 263,045
Average balances for the period
- -------------------------------
Money market investments $ 1,397 $ 1,231 $ 1,081 $ 1,032 $ 1,272
Trading account securities 159 171 210 161 96
Securities 5,293 5,469 5,600 6,018 6,198
Loans 28,476 27,596 27,806 27,404 27,900
Total interest-earning assets 35,325 34,467 34,697 34,615 35,466
Total assets 44,266 42,879 42,413 42,187 42,636
Total tangible assets 42,888 41,588 41,207 40,964 41,395
Deposits 31,085 30,349 30,113 30,280 31,569
Total interest-bearing
liabilities 28,123 27,266 27,830 27,485 29,210
Common shareholders' equity 3,573 3,520 3,393 3,490 3,410
Tangible common shareholders'
equity 2,195 2,229 2,187 2,267 2,169
Total shareholders' equity 3,766 3,713 3,586 3,735 3,820
</TABLE>
_______________________
(a) Diluted.
(b) Earnings per share are presented in accordance with the requirements of
Financial Accounting Standard No. 128, "Earnings per Share," which was
adopted by the Corporation in the fourth quarter of 1997. Prior-period
amounts have been restated. In addition, amounts were restated to reflect
the two-for-one common stock split distributed on June 2, 1997.
(c) 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.
(d) Annualized.
Note: All calculations are based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
Quarter ended
--------------------------------------------------
(in millions, except per Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
share amounts) 1997 1997 1997 1997 1996
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $23, $22, $19, $17 and $24) $ 577 $ 567 $ 571 $ 553 $ 579
Interest-bearing deposits with banks 6 6 7 7 8
Federal funds sold and securities
under resale agreements 10 9 6 5 7
Other money market investments 2 2 1 1 1
Trading account securities 2 2 3 2 1
Securities 88 94 96 99 103
----- ----- ----- ----- -----
Total interest revenue 685 680 684 667 699
Interest expense
- ----------------
Interest on deposits 224 220 219 215 240
Federal funds purchased and securities
under repurchase agreements 22 17 20 18 20
Other short-term borrowings 29 28 28 20 24
Notes and debentures 49 49 47 44 44
----- ----- ----- ----- -----
Total interest expense 324 314 314 297 328
----- ----- ----- ----- -----
Net interest revenue 361 366 370 370 371
Provision for credit losses 73 25 25 25 80
----- ----- ----- ----- -----
Net interest revenue after
provision for credit losses 288 341 345 345 291
Noninterest revenue
- -------------------
Trust and investment fee revenue 387 375 283 266 259
Cash management and deposit
transaction charges 65 62 59 56 56
Mortgage servicing fees 56 53 53 51 49
Foreign currency and securities
trading revenue 36 32 25 25 19
Credit card fees 24 24 25 24 28
Information services fees 9 7 13 13 16
Gain on sale of corporate trust business 43 - - - -
Gain on sale of credit card portfolio - - - - 57
Other 87 82 82 101 82
----- ----- ----- ----- -----
Total fee revenue 707 635 540 536 566
Gains on sales of securities - - - - 3
----- ----- ----- ----- -----
Total noninterest revenue 707 635 540 536 569
Operating expense
- -----------------
Staff expense 354 344 276 268 267
Net occupancy expense 64 55 54 52 49
Professional, legal and other
purchased services 72 55 46 46 50
Equipment expense 65 38 36 36 39
Amortization of mortgage servicing
assets and purchased credit card
relationships 33 29 28 28 25
Amortization of goodwill and other
intangible assets 26 25 27 27 27
Other expense 108 105 104 108 102
Trust-preferred securities expense 19 20 19 20 3
Net revenue from acquired property (12) (1) (3) (3) (3)
----- ----- ----- ----- -----
Total operating expense 729 670 587 582 559
----- ----- ----- ----- -----
Income before income taxes 266 306 298 299 301
Provision for income taxes 71 111 108 108 107
----- ----- ----- ----- -----
Net income 195 195 190 191 194
Dividends on preferred stock 4 4 4 9 15
----- ----- ----- ----- -----
Net income applicable to
common stock $ 191 $ 191 $ 186 $ 182 $ 179
===== ===== ===== ===== =====
Basic net income per common share $ .76 $ .75 $ .73 $ .70 $ .69
===== ===== ===== ===== =====
Diluted net income per common share $ .75 $ .73 $ .71 $ .69 $ .67
===== ===== ===== ===== =====
</TABLE>
<PAGE>
EXHIBIT 99.2
Media Analysts
Stephen K. Dishart Donald J. MacLeod
(412) 234-0850 (412) 234-5601
FOR IMMEDIATE RELEASE
MELLON BOARD OF DIRECTORS ANNOUNCES MANAGEMENT SUCCESSION
-Martin G. McGuinn to succeed Frank V. Cahouet as Mellon CEO-
-Christopher M. Condron named President and Chief Operating Officer-
PITTSBURGH, Jan. 16, 1998--Mellon Bank Corporation (NYSE: MEL) today announced
that its board of directors approved a management succession plan that
designates Mellon Vice Chairman Martin G. McGuinn to succeed Mellon Chairman,
President and Chief Executive Officer Frank V. Cahouet. Cahouet will remain
chairman and chief executive officer of Mellon Bank Corporation, the bank
holding company, until his retirement on Dec. 31, 1998.
Effective April 1, 1998, McGuinn will become chairman and chief executive
officer of Mellon Bank, and Mellon Vice Chairman Christopher M. "Kip" Condron
will become president and chief operating officer of Mellon Bank. Following
Cahouet's retirement at year end, McGuinn also will become chairman and chief
executive officer of the holding company, and Condron also will become president
and chief operating officer of the holding company. Both McGuinn and Condron
also were elected to the Corporation's board of directors by the board at its
regular meeting today. These elections are effectively immediately. In
addition, Mellon Vice Chairmen Steven G. Elliott and W. Keith Smith were named
to new positions as senior vice chairmen.
"There is no one better suited to continue our strategy of being a broad-
based financial services company with a bank at its core than Marty McGuinn,"
said Cahouet. "He has been a key member of the management team that has
successfully executed our strategy and demonstrated leadership in building our
organization. Marty's exceptional skills and his broad range of experience make
him the natural choice to lead Mellon into the next century and continue our
superior performance for years to come."
-more-
<PAGE>
Mellon Announces Succession
Jan. 16, 1998
Page 2
McGuinn has held several key posts during his 17-year tenure with Mellon
and currently heads the Corporation's retail financial services business.
"Under Frank Cahouet, our team has built a strong and diversified financial
services company focused on meeting customers' needs and enhancing shareholder
value," said McGuinn. "It is with great pride and respect for Frank and my
fellow employees that I take on the opportunity of reinforcing that focus and
leading the organization to continued growth. I am honored by the board's
confidence in me, and we are all pleased that Frank will continue his leadership
of Mellon through the transition."
Condron, who heads Mellon's mutual fund business and investment management
subsidiaries, said, "We have been working as a cohesive team, and this new
structure presents a tremendous opportunity to continue to build Mellon's
stature as a balanced financial services company."
Andrew W. Mathieson, a member of Mellon's board of directors and chairman
of the board's Human Resources Committee, said the board's action was the
outcome of its planned succession management process and will ensure the
consistent execution of Mellon's strategy and long-term growth of the
Corporation. "Frank Cahouet's leadership and innovation over the past decade
have set a course for success that the board strongly recognizes as the right
course for the future," said Mathieson. "Mellon is fortunate to have the talent
within its ranks to continue our strategic direction. This affirms the board of
directors' commitment to continuing the strategy put in place by Frank and his
team."
The new management structure will be effective on April 1, 1998, and
includes the following changes:
. Cahouet, 65, currently Mellon chairman, president and CEO, will continue
to oversee the organization's strategic planning and corporate governance
as chairman and chief executive officer of Mellon Bank Corporation, the
entity's bank holding company, until his retirement on Dec. 31, 1998.
Cahouet joined Mellon in 1987 and has steadily built the Corporation's
product and distribution capabilities across the spectrum of financial
services. The landmark acquisitions of The Boston Company in 1993 and The
Dreyfus Corporation in 1994 are the most prominent in a series of
acquisitions that have transformed Mellon beyond its roots into a leading
institution with a highly valued balance of fee-based and traditional
banking businesses. Before joining Mellon, Cahouet served as president and
chief executive officer of the Federal National Mortgage Association from
1986 to 1987, and as chairman, president
-more-
<PAGE>
Mellon Announces Succession
Jan. 16, 1998
Page 3
and chief executive officer of Crocker National Bank from 1984 to 1986.
Prior to his position at Crocker, Mr. Cahouet was vice chairman, chief
financial officer and a member of the Office of The Chairman of Security
Pacific National Bank. He joined Security Pacific in 1960 and served there
for 24 years.
. McGuinn, 55, vice chairman and head of Retail Financial Services, will
serve as chairman and CEO of the Bank. Following Cahouet's retirement, he
will assume the additional roles of CEO and chairman of Mellon Bank
Corporation. McGuinn has led a reconfiguration of the Bank's retail
delivery system, including the introduction of supermarket branches and
video banking technology. Since joining Mellon in 1981, McGuinn has been a
dynamic presence throughout Mellon's transition from a traditional bank to
its present position of balance among fee-based and non-fee businesses.
McGuinn took on the role as head of Mellon's Retail Financial Services in
late 1993. In that role, he is responsible for the Corporation's retail
delivery system, consumer and small business lending, and private banking.
He also directs Mellon's Credit Card business and is responsible for
Legal, Corporate Affairs, and Government Affairs and Community Investment.
In 1996 he assumed responsibility for the Corporation's mid-Atlantic
strategy, a focused effort to coordinate the Corporation's businesses in
the mid-Atlantic states. Before 1993, McGuinn had responsibility for
Mellon's Cash Management, Mortgage Banking and Real Estate Finance
businesses and many of Mellon's Corporate support units.
. Condron, 50, Mellon vice chairman and Dreyfus president and chief
executive officer, will become president and chief operating officer of
the Bank. His principal office will continue to be in New York City.
Following Cahouet's retirement, he will assume the additional roles of
president and chief operating officer of Mellon Bank Corporation. As head
of Dreyfus, Condron has built the mutual fund company into a strong
competitor with $95 billion in assets under management. Condron has also
guided the development of all of Mellon's asset management subsidiaries
into an investment management powerhouse with combined assets under
management of more than $300 billion. In addition to his current role as
head of Dreyfus, Condron is a vice chairman of The Boston Company and
deputy director of Mellon Trust, the umbrella name for Mellon's trust and
investment businesses. He joined The Boston Company in 1989 as head of its
Private Client Group, now called Mellon Private Asset Management. He was
named vice chairman in 1994 and was appointed president and
-more-
<PAGE>
Mellon Announces Succession
Jan. 16, 1998
Page 4
chief operating officer of Dreyfus in 1995 and CEO of Dreyfus in 1996.
Before joining The Boston Company, Mr. Condron was co-president of Ayco
Corporation, the financial and tax planning company formerly owned by
American Express. He joined Ayco in 1985 through its acquisition of
Condron Associates, his Pittsburgh-based financial firm, of which he was
the founder and president.
. Steven G. Elliott, 51, vice chairman and chief financial officer, will
become senior vice chairman. Elliott is currently responsible for the
Finance and the Information Management and Research departments as well as
the Corporation's process improvement initiatives. Elliott joined Mellon
in 1987 as executive vice president and head of the Finance department and
was named chief financial officer in 1990 and vice chairman in 1992.
Previously, he served as executive vice president and chief financial
officer of First Commerce Corporation and was senior vice president and
corporate controller at Crocker National Bank from 1984 until Crocker's
merger with Wells Fargo & Co. Before joining Crocker, Elliott served as a
senior vice president for Continental Illinois National Bank, and as vice
president and corporate controller at First Interstate Bank of California.
. W. Keith Smith, 63, vice chairman, Mellon Trust, and chairman and CEO, The
Boston Company, will become senior vice chairman. Smith indicated his
intention to retire at the end of 1998 in keeping with his long-standing
plans. Smith is currently responsible for Mellon's trust and investment
businesses, including The Boston Company and Boston Safe Deposit and Trust
Company. He is chairman of The Dreyfus Corporation and Buck Consultants,
Inc., a leading global benefits consulting firm, which merged with Mellon
in 1997. From 1990 to 1993, Smith served as head of Mellon's service
products businesses, which included all of Mellon's fee-based services and
its information management function. Smith joined Mellon in 1987 as vice
chairman and chief financial officer of Mellon Bank Corporation and Mellon
Bank, N.A., and served as CFO until 1990. Before joining Mellon, Smith
managed the finance and leasing subsidiaries and corporate staff
departments at PACCAR, Inc., a manufacturer of heavy-duty trucks.
Previously, he served as executive vice president and chief financial
officer of Crocker National Bank, and as senior vice president of
accounting and control for the Bank of Montreal. He also has held
executive positions at Central National Bank in Chicago, Central National
Chicago Corporation, and Booz, Allen & Hamilton, Inc.
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<PAGE>
Mellon Announces Succession
Jan. 16, 1998
Page 5
A broad-based financial services company with a bank at its core, Mellon
Bank Corporation ranks among the nation's largest bank holding companies in
market capitalization. With approximately $300 billion of assets under
management and approximately $1.5 trillion of assets under administration,
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 company, The Dreyfus Corporation, places Mellon
as the leading bank manager of mutual funds. Headquartered in Pittsburgh,
Mellon's principal subsidiary is Mellon Bank, N.A.
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.
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