<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - April 21, 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 April 21, 1998, Mellon Bank Corporation (the
"Corporation") announced first quarter 1998 results of operations. In
the same release, the Corporation announced an increase in the
quarterly cash dividend. The Corporation increased its Common Stock
dividend by 9 percent to 36 cents per share, payable on May 15, 1998,
to shareholders of record at the close of business on April 30, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated April 21, 1998, announcing
the Corporation's first quarter results of operations and an increase
in the Corporation's Common Stock dividend.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: April 22, 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
April 21, 1998
<PAGE>
Exhibit No. 99.1
MEDIA: ANALYSTS:
Ronald R. Gruendl Donald J. MacLeod
(412) 234-7157 (412) 234-5601
David T. Lamar
(412) 234-4633
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD FIRST QUARTER 1998 RESULTS,
INCREASES COMMON STOCK DIVIDEND
. Earnings Per Share Increases to $.78 Per Share, Up 13 Percent Over Same Period
Last Year
. Return on Common Equity is 21.6 Percent and Return on Assets is 1.89 Percent
. Tangible Earnings Per Share Increases to $.88, up 14 Percent Over Same Period
Last Year
. Return on Tangible Common Equity is 43.3 Percent and Return on Tangible Assets
is 2.18 Percent
. Quarterly Common Dividend Increases 9 Percent to 36 Cents Per Share
Financial Highlights Quarter ended
(dollar amounts in millions, March 31, Dec. 31, March 31,
except per share amounts) 1998 1997 1997
Diluted earnings per common share $.78 $.75 $.69
Diluted tangible earnings per common share $.88 $.83 $.77
Net income applicable to common stock $206 $191 $182
Tangible net income applicable to
common stock $231 $212 $203
Return on common equity (annualized) 21.6% 21.2% 21.2%
Return on tangible common equity (annualized) 43.3% 38.3% 36.3%
Return on assets (annualized) 1.89% 1.75% 1.83%
Return on tangible assets (annualized) 2.18% 2.00% 2.09%
Fee revenue as a percentage
of total revenue (FTE) 66% 66% 59%
Efficiency ratio excluding
amortization of intangibles 62% 65% 59%
PITTSBURGH, April 21, 1998--Mellon Bank Corporation (NYSE: MEL) today reported
record first quarter 1998 diluted earnings per common share of 78 cents, an
increase of 13 percent, compared with 69 cents per common share in the first
quarter of 1997. Net income applicable to common stock in the first quarter of
1998 was $206 million, an increase of 13 percent, compared with $182 million in
the first quarter of 1997. Diluted tangible earnings per common share totaled 88
cents in the first quarter of 1998, an increase of 14 percent compared with 77
cents in the first quarter of 1997. Diluted earnings per common share totaled 75
cents, and net income applicable to common stock was $191 million in the fourth
quarter of 1997.
-more-
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 2
"We're pleased with this outstanding financial performance that produced
record first quarter 1998 results which should continue to place the Corporation
among the industry leaders," said Frank V. Cahouet, Mellon chairman, president
and chief executive officer.
The Corporation increased its quarterly common dividend by 9 percent to 36
cents per share. Dividends on the Corporation's common stock are payable on May
15, 1998, to shareholders of record at the close of business on April 30, 1998.
Annualized return on common shareholders' equity and return on assets were
21.6 percent and 1.89 percent, respectively, in the first quarter of 1998,
compared with 21.2 percent and 1.83 percent, respectively, in the first quarter
of 1997 and 21.2 percent and 1.75 percent, respectively, in the fourth quarter
of 1997. Annualized return on tangible common shareholders' equity and return on
tangible assets were 43.3 percent and 2.18 percent, respectively, in the first
quarter of 1998, compared with 36.3 percent and 2.09 percent, respectively, in
the first quarter of 1997 and 38.3 percent and 2.00 percent, respectively, in
the fourth quarter of 1997.
Net interest revenue, on a fully taxable equivalent basis, for the first
quarter of 1998 was $367 million, down $6 million compared with $373 million in
the prior-year period and up $5 million from $362 million in the fourth quarter
of 1997. The decrease from the prior-year period primarily resulted from funding
costs related to the repurchase of common stock, the December 1997 transfer of
CornerStone(sm) credit card loans into an accelerated resolution portfolio, and
preferred stock redemptions, primarily offset by the favorable effect of
acquisitions and loan growth.
Fee revenue was $698 million in the first quarter of 1998, up $162 million,
or 30 percent, compared with $536 million in the first quarter of 1997 and up
$34 million, or 5 percent, compared with $664 million in the fourth quarter of
1997, excluding the $43 million gain on the sale of the corporate trust business
recorded in the fourth quarter. The increase from the prior-year period was
primarily attributable to higher trust and investment fees resulting from the
mid-1997 Buck Consultants, Inc. acquisition, an increase in the market value of
assets under management and new business, as well as higher foreign exchange
fees. Excluding the $78 million of fee revenue in the first quarter of 1998
related to the Buck acquisition, fee revenue increased $84 million, or 16
percent, compared with the prior-year period.
Operating expense before trust-preferred securities expense and net revenue
from acquired property for the first quarter of 1998 was $697 million, up $132
million from $565 million in the first quarter of 1997 and down $25 million from
$722 million in the fourth quarter of 1997. The increase from the prior-year
period primarily resulted from the Buck and Dreyfus Brokerage Services
acquisitions in 1997, the Mellon United National Bank and Mellon 1st Business
Bank acquisitions in February 1998, and business growth.
-more-
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 3
Credit quality expense was $14 million in the first quarter of 1998,
compared with $22 million in the first quarter of 1997, reflecting a $10 million
decrease in the provision for credit losses. Credit quality expense was $61
million in the fourth quarter of 1997, reflecting additional provision for
credit losses related to the credit card portfolio. Nonperforming assets totaled
$191 million at March 31, 1998, compared with $181 million at Dec. 31, 1997, and
$170 million at March 31, 1997. The ratio of nonperforming assets to total loans
and net acquired property was .63 percent at March 31, 1998, compared with .62
percent at both Dec. 31, 1997, and March 31, 1997.
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 $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 companies, The
Dreyfus Corporation and Founders Asset Management, 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 www.mellon.com on the Internet. For
Mellon press releases by fax, call 1 800 758-5804, identification number 552187.
###
<PAGE>
Mellon Reports Earnings
April 21, 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
---------------------------------
(in millions, except per share amounts; March 31, Dec. 31, March 31,
ratios annualized) 1998 1997 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable to common stock $ 206 $ 191 $ 182
After-tax impact of amortization of
intangibles from purchase acquisitions 25 21 21
- --------------------------------------------------------------------------------
Tangible net income applicable
to common stock $ 231 $ 212 $ 203
Tangible earnings per
common share - diluted $ .88 $ .83 $ .77
Average common equity $ 3,873 $ 3,573 $ 3,490
Average goodwill and other
identified intangibles 1,711 1,378 1,223
- --------------------------------------------------------------------------------
Average tangible common equity $ 2,162 $ 2,195 $ 2,267
Return on tangible common equity 43.3% 38.3% 36.3%
Average total assets $46,229 $44,266 $42,187
Average tangible assets $44,518 $42,888 $40,964
Return on tangible assets 2.18% 2.00% 2.09%
- --------------------------------------------------------------------------------
</TABLE>
Tangible results for the first quarter of 1998, compared with the first quarter
of 1997, reflect the effect of the acquisitions of Buck Consultants,
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 5
Inc. (Buck) in mid-1997, Dreyfus Brokerage Services, Inc. in November 1997, and
Mellon United National Bank and Mellon 1st Business Bank in February 1998.
Net Interest Revenue
- --------------------
Quarter ended
----------------------------------
March 31, Dec. 31, March 31,
(in millions) 1998 1997 1997
- -----------------------------------------------------------------------------
Net interest revenue (FTE) $367 $362 $373
Net interest margin (FTE) 4.06% 4.07% 4.37%
Average securities $ 5,301 $ 5,293 $ 6,018
Average loans $29,389 $28,476 $27,404
Average interest-earning assets $36,644 $35,325 $34,615
- ----------------------------------------------------------------------------
The $6 million decrease in fully taxable equivalent net interest revenue in the
first quarter of 1998, compared with the first quarter of 1997, primarily
resulted from the funding costs related to the repurchase of common stock, the
effect of the December 1997 transfer of $231 million of CornerStone(sm) credit
card loans into an accelerated resolution portfolio and preferred stock
redemptions. Primarily offsetting these factors were the favorable impacts of
the Mellon United National Bank, Mellon 1st Business Bank and Dreyfus Brokerage
Services, Inc. acquisitions, net of funding costs, and loan growth.
Excluding the effect of the acquisitions, average loans in the first quarter of
1998 grew by approximately $1.1 billion, compared with the prior-year period,
primarily in the residential mortgage warehouse portfolio and wholesale lending.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 6
Credit Quality Expense and Net Credit Losses
- --------------------------------------------
Quarter ended
----------------------------------
March 31, Dec. 31, March 31,
(in millions) 1998 1997 1997
- --------------------------------------------------------------------------
Provision for credit losses $ 15 $ 73 $ 25
Net revenue from acquired property (1) (12) (3)
- --------------------------------------------------------------------------
Credit quality expense $ 14 $ 61 $ 22
- --------------------------------------------------------------------------
Net credit (losses) recoveries:
Domestic:
Credit card $ (9) $ (20) $(31)
Other consumer credit (3) (4) (3)
Commercial real estate (4) (15) 2
Commercial and financial (2) (2) (5)
- --------------------------------------------------------------------------
Total domestic (18) (41) (37)
International - - 5
- --------------------------------------------------------------------------
Net credit losses (18) (41) (32)
Credit losses on assets held
for accelerated resolution - (65) -
- --------------------------------------------------------------------------
Total net credit losses $(18) $(106) $(32)
- --------------------------------------------------------------------------
Annualized net credit losses
to average loans .24% 1.48% .48%
Annualized net credit losses to
average loans excluding net
credit losses on assets held for
accelerated resolution .24% .56% .48%
- --------------------------------------------------------------------------
Credit quality expense in the first quarter of 1998 decreased $8 million
compared with the first quarter of 1997, as a result of a $10 million decrease
in the provision for credit losses partially offset by a $2 million decrease in
net revenue from acquired property. The decrease in the provision for credit
losses primarily resulted from lower credit card net credit losses following the
December 1997 transfer of $231 million of CornerStone(sm) credit card loans into
an accelerated resolution portfolio.
Net credit losses decreased $14 million, compared with the first quarter of
1997, primarily as a result of a $22 million decrease in credit card net credit
losses, partially offset by lower international loan recoveries.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 7
Credit quality expense in the first quarter of 1998 decreased $47 million
compared with the fourth quarter of 1997, as a result of a $58 million decrease
in the provision for credit losses partially offset by an $11 million decrease
in net gains on the sale of OREO properties. The higher provision for credit
losses in the fourth quarter of 1997 was primarily made in response to the $65
million of credit losses recorded upon the transfer of CornerStone(sm) credit
card loans to an accelerated resolution portfolio.
Net credit losses decreased by $88 million, compared with the fourth quarter of
1997, primarily due to the decrease in credit card net credit losses as well as
lower commercial real estate net credit losses. The net carrying value of the
accelerated resolution portfolio was $130 million at March 31, 1998, compared
with $157 million at December 31, 1997. The Corporation expects a significant
reduction in credit card net credit losses throughout 1998 as a result of the
actions taken on the CornerStone(sm) portfolio in December 1997.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 8
Noninterest Revenue
- -------------------
Quarter ended
-----------------------------------
March 31, Dec. 31, March 31,
(in millions) 1998 1997 1997
- ----------------------------------------------------------------------------
Fee revenue:
Trust and investment revenue:
Investment management:
Mutual fund $100 $100 $ 87
Private asset 52 51 42
Institutional asset 50 48 37
- ----------------------------------------------------------------------------
Total investment management revenue 202 199 166
Administration/custody/consulting:
Mutual fund 33 36 30
Private asset 4 4 4
Institutional trust 92 94 66
Benefits consulting 55 54 -
- ----------------------------------------------------------------------------
Total administration/
custody/consulting revenue 184 188 100
- ----------------------------------------------------------------------------
Total trust and investment fee revenue 386 387 266
Cash management and deposit
transaction charges 61 65 56
Mortgage servicing fees 55 56 51
Foreign currency and securities
trading revenue 41 36 25
Credit card fees 24 24 24
Gain on sale of corporate trust business - 43 -
Other 131 96 114
- ----------------------------------------------------------------------------
Total fee revenue 698 707 536
Gains on sale of securities - - -
- ----------------------------------------------------------------------------
Total noninterest revenue $698 $707 $536
- ----------------------------------------------------------------------------
Fee revenue as a percentage of
total revenue (FTE) 66% 66% 59%
Trust and investment fee revenue as
a percentage of total revenue (FTE) 36% 36% 29%
- ----------------------------------------------------------------------------
Fee revenue increased $162 million, or 30%, in the first quarter of 1998,
compared with the first quarter of 1997. Excluding $78 million of revenue
resulting from the Buck acquisition, fee revenue increased $84 million, or 16%,
compared with the prior-year period.
The $120 million, or 45%, increase in trust and investment fees in the first
quarter of 1998, compared with the prior-year period, reflects $55 million of
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 9
benefits consulting fees and $23 million of institutional trust fees from Buck.
Excluding the Buck fees, trust and investment fees increased $42 million, or
16%, compared with the first quarter of 1997.
The $36 million increase in investment management revenue resulted from a
$13 million, or 15%, increase in mutual fund management revenue, a $10 million,
or 22%, increase in private asset management revenue and a $13 million, or 35%,
increase in institutional asset management revenue. These increases resulted
from an increase in the market value of assets under management and new
business. Average net assets of proprietary funds managed at Dreyfus in the
first quarter of 1998 were $97 billion, up $12 billion from $85 billion in the
first quarter of 1997 and up $4 billion from $93 billion in the fourth quarter
of 1997. The increase from the prior-year periods primarily resulted from
increases in average net assets of equity mutual funds and taxable money market
funds. Equity mutual funds averaged $23 billion in the first quarter of 1998,
compared with $16 billion in the first quarter of 1997, and had a period-end
total at March 31, 1998 of $26 billion. With the acquisition of Founders Asset
Management, LLC., on April 1, 1998, proprietary equity mutual funds now total
more than $31 billion.
Administration/custody/consulting fee revenue increased $84 million in the first
quarter of 1998 compared with the first quarter of 1997 and included $55 million
of benefits consulting fees and $23 million of institutional trust fees
resulting from the Buck acquisition. Institutional trust fees increased $6
million, or 10%, compared with the prior-year period, excluding
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 10
the Buck fees from the first quarter of 1998 and excluding the fees from the
corporate trust business from the first quarter of 1997. The corporate trust
business was sold in November 1997. Mutual fund administration/custody revenue
increased $3 million, or 10%, in the first quarter of 1998, compared with the
prior-year period. These increases resulted primarily from new business and
higher transaction volumes.
The 8% increase in cash management fees and deposit transaction charges in the
first quarter of 1998, compared with the prior-year period, primarily resulted
from higher volumes of business in customer receivables, payables and treasury
management products.
The 8% increase in mortgage servicing fees in the first quarter of 1998,
compared with the prior-year period, resulted from a higher level of mortgage
servicing rights.
The 68% increase in foreign currency and securities trading revenue in the first
quarter of 1998, compared with the prior-year period, was attributable to higher
foreign exchange fees earned as a result of higher levels of customer activity,
primarily in the Corporation's global custody business, and market volatility.
Other fee revenue increased $17 million in the first quarter of 1998, compared
with the prior-year period. This increase resulted, in part, from fees generated
by Dreyfus Brokerage Services, Inc., as well as from higher gains from the sale
of equity securities and other assets and the realization of lease residuals.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 11
Excluding the $43 million gain on the sale of the corporate trust business in
November 1997, fee revenue increased $34 million in the first quarter of 1998,
compared with the fourth quarter of 1997. This increase primarily resulted from
the seasonal fees from the electronic filing of income tax returns in the first
quarter of 1998, as well as higher gains on the sale of assets and equity
securities, partially offset by lower syndication fees. Fee revenue in the first
quarter of 1998 compared with the fourth quarter of 1997 was also impacted by
two fewer days in the first quarter of 1998 compared with the prior quarter.
Many of the Corporation's fee based businesses earn and record revenue on a
daily basis and therefore reported results are impacted by the number of days in
the reporting periods.
Operating Expense
- -----------------
Quarter ended
---------------------------------
March 31, Dec. 31, March 31,
(dollar amounts in millions) 1998 1997 1997
- --------------------------------------------------------------------------
Staff expense $357 $354 $268
Net occupancy expense 56 64 52
Professional, legal and
other purchased services 61 72 46
Equipment expense 39 65 36
Amortization of mortgage servicing assets
and purchased credit card relationships 45 33 28
Amortization of goodwill
and other intangible assets 30 26 27
Other expense 109 108 108
- --------------------------------------------------------------------------
Operating expense before trust-
preferred securities expense and
net revenue from acquired property 697 722 565
Trust-preferred securities expense 20 19 20
Net revenue from acquired property (1) (12) (3)
- --------------------------------------------------------------------------
Total operating expense $716 $729 $582
- --------------------------------------------------------------------------
Average full-time equivalent staff 27,900 27,500 25,200
- --------------------------------------------------------------------------
Efficiency ratio (a) 65% 67% 62%
Efficiency ratio excluding amortization
of goodwill and other intangible assets 62% 65% 59%
- --------------------------------------------------------------------------
(a) Operating expense before trust-preferred securities expense and net
revenue from acquired property, as a percentage of revenue, computed on a
taxable equivalent basis, excluding gains on the sale of securities.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 12
Operating expense before trust-preferred securities expense and net revenue from
acquired property increased $132 million, or 23%, in the first quarter of 1998,
compared with the prior-year period, resulting from the Buck, Dreyfus Brokerage
Services, Inc., Mellon United National Bank and Mellon 1st Business Bank
acquisitions, higher amortization of mortgage servicing assets, as well as from
business growth. Excluding the effect of acquisitions and the increase in the
amortization of mortgage servicing assets and purchased credit card
relationships, operating expense before trust-preferred securities expense and
net revenue from acquired property increased approximately 4%.
Staff expense increased $89 million in the first quarter of 1998, compared with
the prior-year period, primarily from the above acquisitions as well as an
increase in performance-based incentive expense and higher expense of temporary
help and contract programmers.
Net occupancy expense increased $4 million in the first quarter of 1998,
compared with the prior-year period, primarily from acquisitions. Professional,
legal and other purchased services increased $15 million in the first quarter of
1998, compared with the prior-year period, primarily from an increase in
consulting expenses related to business growth and reengineering initiatives,
and from the acquisitions.
The amortization of mortgage servicing assets and purchased credit card
relationships increased $17 million in the first quarter of 1998, compared
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 13
with the prior-year period, resulting from a higher level of mortgage servicing
rights and an acceleration of amortization due to a higher level of mortgage
prepayments.
Operating expense before trust-preferred securities expense and net revenue from
acquired property decreased $25 million in the first quarter of 1998, compared
with the fourth quarter of 1997. This decrease primarily resulted from the one-
time expense of upgrading computer hardware, write-downs related to the
consolidation of branch and processing locations and higher consulting expenses
in the fourth quarter of 1997, offset, in part, by an increase in the first
quarter of 1998 in the amortization of mortgage servicing assets and the effect
of acquisitions.
Income Taxes
- ------------
The Corporation's effective tax rate for the first quarter of 1998 was 35.3%,
compared with 36.3% for the first quarter of 1997. It is currently anticipated
that the effective tax rate will remain at approximately 35.3% for the remainder
of 1998.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 14
Nonperforming Assets
- --------------------
March 31, Dec. 31, March 31,
(in millions) 1998 1997 1997
- --------------------------------------------------------------------------
Domestic nonperforming loans:
Consumer mortgage $ 56 $ 52 $ 52
Commercial real estate 53 49 14
Other domestic 33 32 29
- --------------------------------------------------------------------------
Total nonperforming loans 142 133 95
Acquired property:
Real estate acquired 53 52 80
Reserve for real estate acquired (9) (9) (9)
- --------------------------------------------------------------------------
Net real estate acquired 44 43 71
Other assets acquired 5 5 4
- --------------------------------------------------------------------------
Total acquired property 49 48 75
- --------------------------------------------------------------------------
Total nonperforming assets $191 $181 $170
- --------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .47% .46% .35%
Nonperforming assets as a percentage of
total loans and net acquired property .63% .62% .62%
- --------------------------------------------------------------------------
Nonperforming assets increased $10 million from December 31, 1997. This increase
resulted primarily from the reclassification of $10 million of commercial real
estate loans to nonperforming loans and $2 million to real estate acquired from
segregated assets following the expiration of the loss-sharing arrangement with
the FDIC on January 1, 1998. In addition, the acquisitions of Mellon United
National Bank and Mellon 1st Business Bank added $6 million to nonperforming
loans. The ratio of nonperforming assets to total loans and net acquired
property was .63% at March 31, 1998. This ratio has been lower than 1% for
15 consecutive quarters.
The $21 million increase in nonperforming assets from March 31, 1997, primarily
resulted from the same factors responsible for the increase from December 31,
1997, as well as the addition of a commercial real estate loan to nonperforming
status, partially offset by a lower level of OREO, due to dispositions.
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 15
Reserve for Credit Losses
- -------------------------
March 31, Dec. 31, March 31,
(in millions) 1998 1997 1997
- ----------------------------------------------------------------------------
Reserve for credit losses $496 $475 $518
Reserve as a percentage of total loans 1.63% 1.63% 1.88%
- ----------------------------------------------------------------------------
The $21 million increase in the reserve for credit losses from December 31,
1997, resulted from the addition of $24 million of reserves acquired in the
Mellon United National Bank and Mellon 1st Business Bank acquisitions.
Selected Capital Data
- ---------------------
(in millions, except March 31, Dec. 31, March 31,
per share amounts) 1998 1997 1997
- ---------------------------------------------------------------------------
Common shareholders' equity $ 4,086 $ 3,652 $ 3,503
Common shareholders' equity
to assets ratio 8.62% 8.13% 8.33%
Tangible common shareholders' equity $ 2,168 $ 2,227 $ 2,289
Tangible common shareholders'
equity to assets ratio (a) 4.76% 5.12% 5.60%
Total shareholders' equity $ 4,086 $ 3,845 $ 3,696
Total shareholders' equity
to assets ratio 8.62% 8.56% 8.79%
Tier I capital ratio 6.8 (b) 7.77 8.74
Total (Tier I and Tier II)
capital ratio 11.2 (b) 12.73 13.65
Leverage capital ratio 7.0 (b) 8.02 8.75
Book value per common share $ 15.70 $ 14.39 $ 13.60
Tangible book value per common share 8.33 8.77 8.88
Closing common stock price 63.50 60.63 36.375
Market capitalization 16,523 15,386 9,372
Common shares outstanding (000) 260,210 253,786 257,662
- ---------------------------------------------------------------------------
(a) Common shareholders' equity less goodwill and other intangibles divided by
total assets less goodwill and other intangibles.
(b) Estimated.
The increase in shareholders' equity at March 31, 1998, compared with March 31,
1997, primarily reflects earnings retention. The increase in
<PAGE>
Mellon Reports Earnings
April 21, 1998
Page 16
shareholders' equity at March 31, 1998, compared with December 31, 1997, also
reflects the common shares issued in the Mellon United National Bank
acquisition. During the first quarter of 1998, the Corporation issued
approximately 5 million shares of common stock in connection with the Mellon
United National Bank acquisition. These shares were repurchased in 1997.
There were no common stock repurchases in the first quarter of 1998.
Also impacting total shareholders' equity was the February 1998 redemption of
the $200 million Series K preferred stock. The quarter's net income applicable
to common stock included an additional $7 million charge, or $.03 per share,
for issue costs recorded as preferred stock dividends in connection with the
redemption of the Series K preferred stock.
The decrease in the Corporation's regulatory capital ratios, compared with
December 31, 1997 and March 31, 1997, reflects a higher level of risk-adjusted
assets, and goodwill and other intangibles resulting from acquisitions as well
as the effect of the preferred stock redemption.
The Corporation's average level of common stock and stock equivalents used for
the computation of diluted earnings per common share in the first quarter of
1998 was approximately 263 million, virtually unchanged compared with the first
quarter of 1997.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
(dollar amounts in millions, Quarter ended
except per share amounts; ------------------------------------------------------
common shares in thousands) March 31, Dec. 31, Sept. 30, June 30, March 31,
1998 1997 1997 1997 1997
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Selected key data
- -----------------
Net income per common share (a) $ .78 $ .75 $ .73 $ .71 $ .69
Tangible net income per
common share (a)(b) $ .88 $ .83 $ .80 $ .79 $ .77
Net income applicable to
common stock $ 206 $ 191 $ 191 $ 186 $ 182
Tangible net income applicable
to common stock (b) $ 231 $ 212 $ 211 $ 206 $ 203
Return on common shareholders'
equity (c) 21.6% 21.2% 21.6% 21.9% 21.2%
Return on tangible common
shareholders' equity (b)(c) 43.3% 38.3% 37.6% 37.7% 36.3%
Return on assets (c) 1.89% 1.75% 1.81% 1.79% 1.83%
Return on tangible assets (b)(c) 2.18% 2.00% 2.05% 2.04% 2.09%
Common equity to assets 8.62% 8.13% 8.25% 7.72% 8.33%
Tangible common equity to assets 4.76% 5.12% 5.37% 5.13% 5.60%
Fee revenue as a percentage of
total revenue (FTE) 66% 66% 63% 59% 59%
Efficiency ratio excluding
amortization of intangibles 62% 65% 62% 59% 59%
Average common shares and
equivalents outstanding:
Basic 257,714 253,886 255,081 254,508 258,010
Diluted 263,136 259,430 260,306 259,475 263,204
Average balances for the period
- -------------------------------
Money market investments $ 1,712 $ 1,397 $ 1,231 $ 1,081 $ 1,032
Trading account securities 242 159 171 210 161
Securities 5,301 5,293 5,469 5,600 6,018
Loans 29,389 28,476 27,596 27,806 27,404
Total interest-earning assets 36,644 35,325 34,467 34,697 34,615
Total assets 46,229 44,266 42,879 42,413 42,187
Total tangible assets 44,518 42,888 41,588 41,207 40,964
Deposits 32,725 31,085 30,349 30,113 30,280
Total interest-bearing
liabilities 29,348 28,123 27,266 27,830 27,485
Common shareholders' equity 3,873 3,573 3,520 3,393 3,490
Tangible common shareholders'
equity 2,162 2,195 2,229 2,187 2,267
Total shareholders' equity 3,974 3,766 3,713 3,586 3,735
</TABLE>
_______________________
(a) Diluted.
(b) Excludes the after-tax impact of the amortization of goodwill and other
identified intangibles resulting from accounting for business combinations
under the purchase method of accounting.
(c) Annualized.
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 March 31, Dec. 31, Sept. 30, June 30, March 31,
share amounts) 1998 1997 1997 1997 1997
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $17, $23, $22, $19 and $17) $ 577 $ 577 $ 567 $ 571 $ 553
Interest-bearing deposits with banks 9 6 6 7 7
Federal funds sold and securities
under resale agreements 13 10 9 6 5
Other money market investments 1 2 2 1 1
Trading account securities 4 2 2 3 2
Securities 90 88 94 96 99
----- ----- ----- ----- -----
Total interest revenue 694 685 680 684 667
Interest expense
- ----------------
Interest on deposits 229 224 220 219 215
Federal funds purchased and securities
under repurchase agreements 24 22 17 20 18
Other short-term borrowings 28 29 28 28 20
Notes and debentures 48 49 49 47 44
----- ----- ----- ----- -----
Total interest expense 329 324 314 314 297
----- ----- ----- ----- -----
Net interest revenue 365 361 366 370 370
Provision for credit losses 15 73 25 25 25
----- ----- ----- ----- -----
Net interest revenue after
provision for credit losses 350 288 341 345 345
Noninterest revenue
- -------------------
Trust and investment fee revenue 386 387 375 283 266
Cash management and deposit
transaction charges 61 65 62 59 56
Mortgage servicing fees 55 56 53 53 51
Foreign currency and securities
trading revenue 41 36 32 25 25
Credit card fees 24 24 24 25 24
Gain on sale of corporate trust business - 43 - - -
Other 131 96 89 95 114
----- ----- ----- ----- -----
Total fee revenue 698 707 635 540 536
Gains on sales of securities - - - - -
----- ----- ----- ----- -----
Total noninterest revenue 698 707 635 540 536
Operating expense
- -----------------
Staff expense 357 354 344 276 268
Net occupancy expense 56 64 55 54 52
Professional, legal and other
purchased services 61 72 55 46 46
Equipment expense 39 65 38 36 36
Amortization of mortgage servicing
assets and purchased credit card
relationships 45 33 29 28 28
Amortization of goodwill and other
intangible assets 30 26 25 27 27
Other expense 109 108 105 104 108
Trust-preferred securities expense 20 19 20 19 20
Net revenue from acquired property (1) (12) (1) (3) (3)
----- ----- ----- ----- -----
Total operating expense 716 729 670 587 582
----- ----- ----- ----- -----
Income before income taxes 332 266 306 298 299
Provision for income taxes 117 71 111 108 108
----- ----- ----- ----- -----
Net income 215 195 195 190 191
Dividends on preferred stock 9 4 4 4 9
----- ----- ----- ----- -----
Net income applicable to
common stock $ 206 $ 191 $ 191 $ 186 $ 182
===== ===== ===== ===== =====
Basic net income per common share $ .80 $ .76 $ .75 $ .73 $ .70
===== ===== ===== ===== =====
Diluted net income per common share $ .78 $ .75 $ .73 $ .71 $ .69
===== ===== ===== ===== =====
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) March 31, Dec. 31, March 31,
1998 1997 1997
--------- -------- ---------
<S> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 3,312 $ 3,650 $ 2,915
Money market investments 1,263 1,008 859
Trading account securities 140 75 110
Securities available for sale 3,547 2,767 3,376
Investment securities (approximate fair
value of $2,022, $2,118 and $2,274) 1,987 2,082 2,306
Loans, net of unearned discount of
$64, $48 and $50 30,343 29,142 27,525
Reserve for credit losses (496) (475) (518)
------- ------- -------
Net loans 29,847 28,667 27,007
Premises and equipment 557 573 572
Acquired property, net of reserves of
$9, $9 and $9 49 48 75
Goodwill and other intangibles 1,918 1,425 1,214
Mortgage servicing assets and purchased
credit card relationships 1,130 1,075 849
Other assets 3,664 3,522 2,785
------- ------- -------
Total assets $47,414 $44,892 $42,068
======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $30,461 $27,929 $27,258
Deposits in foreign offices 2,635 3,376 2,678
Short-term borrowings 4,054 3,744 3,130
Other liabilities 2,184 2,434 1,804
Notes and debentures (with original
maturities over one year) 3,003 2,573 2,512
------- ------- -------
Total liabilities 42,337 40,056 37,382
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial interests
in Corporation's junior subordinated
deferrable interest debentures 991 991 990
Shareholders' equity
- --------------------
Preferred stock - 193 193
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 1,855 1,818 1,875
Retained earnings (b) 3,003 2,884 2,576
Accumulated unrealized gains (losses),
net of tax (b) 30 21 (45)
Treasury stock of 34,120,588 (a);
40,545,114 (a); and 18,334,060 shares at cost (949) (1,218) (977)
------- ------- -------
Total common shareholders' equity 4,086 3,652 3,503
------- ------- -------
Total shareholders' equity 4,086 3,845 3,696
------- ------- -------
Total liabilities, trust-preferred
securities and shareholders' equity $47,414 $44,892 $42,068
======= ======= =======
</TABLE>
_________________
(a) Reflects the two-for-one common stock split distributed on June 2, 1997.
(b) Presented in accordance with the requirements of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income." Prior-period amounts
have been restated.
