<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) - October 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 October 16, 1998, Mellon Bank Corporation
announced that it has completed its acquisition of Newton Management
Limited.
By press release dated October 20, 1998, Mellon Bank Corporation
announced third quarter 1998 results of operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated October 16, 1998,
announcing the completion of its acquisition of Newton Management
Limited.
99.2 Mellon Bank Corporation Press Release, dated October 20, 1998,
announcing third quarter 1998 results of operations.
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: October 20, 1998 By: /s/ STEVEN G. ELLIOTT
Steven G. Elliott
Vice Chairman and Chief Financial
Officer
<PAGE>
EXHIBIT INDEX
Number Description Method of Filing
99.1 Press Release dated Filed herewith
October 16, 1998
99.2 Press Release dated Filed herewith
October 20, 1998
<PAGE>
EXHIBIT 99.1
Media Analysts
Steve Dishart Donald J. MacLeod
(412) 234-0850 (412) 234-5601
FOR IMMEDIATE RELEASE
MELLON COMPLETES ACQUISITION OF MAJORITY INTEREST IN NEWTON
PITTSBURGH, Oct. 16, 1998--Mellon Bank Corporation (NYSE: MEL) today announced
the completion of its acquisition of a majority interest in Newton Management
Limited, a leading U.K.-based investment manager with funds under management in
excess of $19.3 billion ((Pounds)11.4 billion). As previously announced, the
transaction, based on an initial value of Newton of approximately $277 million
((Pounds)170 million), gives Mellon a 75 percent stake in Newton, with
management and staff of Newton retaining an interest in 25 percent of the
company either directly or through options.
A broad-based financial services company with a bank at its core, Mellon
ranks among the largest bank holding companies in market capitalization in the
United States. With about $350 billion ((Pounds)215 billion) of assets under
management under the Dreyfus name and nearly $1.8 trillion ((Pounds)1.1
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 U.S.-based mutual fund
companies, The Dreyfus Corporation and Founders Asset Management, together with
newly-acquired Newton, place Mellon as the leading bank manager of mutual funds
in the world. 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>
Exhibit 99.2
MEDIA: ANALYSTS:
Stephen K. Dishart Donald J. MacLeod
(412) 234-0850 (412) 234-5601
Gregg P. Stein David T. Lamar
(412) 236-0082 (412) 234-4633
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD THIRD QUARTER 1998 RESULTS
. Earnings Per Share Increases to 82 Cents, Up 12 Percent Over Same Period
Last Year
. Return on Common Equity is 20.3 Percent and Return on Assets is 1.81 Percent
. Tangible Earnings Per Share Increases to 93 Cents, Up 16 Percent Over Same
Period Last Year
. Return on Tangible Common Equity is 45.9 Percent and Return on Tangible Assets
is 2.13 Percent
. Nonperforming Assets Ratio at Record Low
. Announces Regular Quarterly Common Stock Dividend of 36 Cents Per Share
<TABLE>
<CAPTION>
Financial Highlights Quarter ended Nine months ended
(dollar amounts in millions, Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
except per share amounts) 1998 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C>
Reported operating results:
Diluted earnings per common share $ .82 $ .81 $ .73 $2.41 $2.13
Net income applicable to common stock $ 218 $ 215 $ 191 $ 639 $ 559
Return on common equity (annualized) 20.3% 20.8% 21.6% 20.9% 21.5%
Return on assets (annualized) 1.81% 1.79% 1.81% 1.83% 1.81%
Tangible operating results:
Diluted earnings per common share $ .93 $ .91 $ .80 $2.72 $2.36
Net income applicable to common stock $ 246 $ 243 $ 211 $ 720 $ 620
Return on common equity (annualized) 45.9% 49.7% 37.6% 46.2% 37.2%
Return on assets (annualized) 2.13% 2.13% 2.05% 2.15% 2.06%
Fee revenue as a percentage
of total revenue (FTE) 66% 66% 63% 66% 61%
Efficiency ratio excluding
amortization of intangibles 62% 63% 62% 63% 60%
</TABLE>
PITTSBURGH, Oct. 20, 1998--Mellon Bank Corporation (NYSE: MEL) today reported
record third quarter 1998 diluted earnings per common share of 82 cents, an
increase of 12 percent compared with 73 cents per common share in the third
quarter of 1997. Net income applicable to common stock in the third quarter of
1998 was $218 million, an increase of 14 percent compared with $191 million in
the third quarter of 1997.
--more--
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 2
"Mellon's third-quarter performance is further evidence that our strategy of
being a broad-based financial services company with a bank at its core is
working well," said Frank V. Cahouet, Mellon chairman, president and chief
executive officer. "While volatile markets remain a concern for all financial
institutions, Mellon's stability was demonstrated by our excellent risk
management and financial results."
The Corporation also declared its regular quarterly common stock dividend of 36
cents per share. Dividends on the Corporation's common stock are payable on
Nov. 16, 1998, to shareholders of record at the close of business on Oct. 30,
1998.
Fee revenue for the third quarter of 1998 was $712 million, up $77 million from
$635 million in the prior-year period. Excluding the fee revenue resulting from
the acquisitions of Founders Asset Management, LLC and Dreyfus Brokerage
Services, Inc., fee revenue increased 9 percent in the third quarter of 1998
compared with the third quarter of 1997. This increase was primarily
attributable to higher trust and investment fees, foreign exchange fees and
other fee revenue. Fee revenue was unchanged compared with the second quarter
of 1998 as higher trust and investment fees and other fees were offset by lower
mortgage servicing fees.
Net interest revenue, on a fully taxable equivalent basis, for the third quarter
of 1998 was $376 million, up $7 million compared with $369 million in the prior-
year period and up $2 million from $374 million in the second quarter of 1998.
Operating expense before trust-preferred securities expense and net revenue from
acquired property for the third quarter of 1998 was $717 million, up $66 million
from $651 million in the third quarter of 1997 and down $4 million from $721
million in the second quarter of 1998. The $66 million increase primarily
resulted from the impact of acquisitions and business growth.
Credit quality expense was $12 million in the third quarter of 1998, compared
with $24 million in the third quarter of 1997 and $13 million in the second
quarter of 1998. Nonperforming assets totaled $140 million at Sept. 30, 1998,
compared with $170 million at June 30, 1998, and $175 million at Sept. 30, 1997.
The ratio of nonperforming assets to total loans and net acquired property was
.45 percent at Sept. 30, 1998, compared with .55 percent at June 30, 1998, and
.62 percent at Sept. 30, 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 approximately $350 billion of assets under management and
approximately $1.8 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, place Mellon
as the leading bank manager of mutual funds. Headquartered in Pittsburgh,
Mellon's principal subsidiary is Mellon Bank, N.A.
We invite you to hear taped comments from Mellon's chief financial officer,
Steven G. Elliott, regarding the 1998 third quarter earnings by calling 412 236-
5385 between 2 p.m. EDT on Tuesday, Oct. 20, 1998, and 5 p.m. EDT on Friday,
Oct. 30, 1998. 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
October 20, 1998
Page 3
Fee Revenue
- -----------
<TABLE>
<CAPTION>
Quarter ended Nine months ended
-------------------------------- ---------------------
(dollar amounts Sept. 30, June 30, Sept. 30, Sept. 30, Sept.30,
in millions) 1998 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust and investment
fee revenue:
Investment management:
Mutual fund $122 $120 $ 97 $ 342 $274
Private asset 56 54 47 162 131
Institutional asset 51 53 45 154 123
- ----------------------------------------------------------------------------------------
Total investment
management revenue 229 227 189 658 528
Administration and custody:
Mutual fund 34 34 34 101 97
Private asset 5 5 4 14 12
Institutional trust 95 98 94 288 233
- ----------------------------------------------------------------------------------------
Total administration
and custody revenue 134 137 132 403 342
Benefits consulting 58 54 54 164 54
Brokerage fees (a) 11 11 3 32 8
- ----------------------------------------------------------------------------------------
Total trust and investment
fee revenue 432 429 378 1,257 932
Cash management and deposit
transaction charges 66 65 62 192 177
Mortgage servicing fees 44 53 53 152 157
Foreign currency and
securities trading
revenue 39 38 32 118 82
Credit card fees 23 23 24 70 73
Other (a) 108 104 86 333 290
- ----------------------------------------------------------------------------------------
Total fee revenue $712 $712 $635 $2,122 $1,711
- ----------------------------------------------------------------------------------------
Fee revenue as a percentage
of total revenue (FTE) 66% 66% 63% 66% 61%
Trust and investment fee
revenue as a percentage
of total revenue (FTE) (a) 40% 39% 38% 39% 33%
- ----------------------------------------------------------------------------------------
</TABLE>
(a) Brokerage fees were previously reported in other fee revenue. Prior periods
have been reclassified.
Fee revenue increased $77 million, or 12%, in the third quarter of 1998,
compared with the third quarter of 1997. Excluding the revenue resulting from
the acquisitions of Founders Asset Management, LLC (Founders) in April 1998 and
Dreyfus Brokerage Services, Inc. in November 1997, fee revenue increased 9%
compared with the prior-year period.
Trust and investment fees increased $54 million, or 14%, compared with the
prior-year period. This increase reflects new business, higher transaction
volumes and an increase in the market value of assets under management, as well
as revenue resulting from the Founders and Dreyfus Brokerage Services
acquisitions. Excluding the Founders and Dreyfus Brokerage Services revenue,
trust and investment fees increased 9% compared with the third quarter of 1997.
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 4
The $40 million increase in investment management revenue in the third quarter
of 1998, compared with the prior-year period, resulted from a $25 million, or
26%, increase in mutual fund management revenue, a $9 million, or 20%, increase
in private asset management revenue and a $6 million, or 13%, increase in
institutional asset management revenue. These increases resulted from new
business, the Founders acquisition and an increase in the market value of assets
under management.
Including the Founders funds of approximately $7 billion, the average net assets
of proprietary mutual funds managed at Dreyfus/Founders in the third quarter of
1998 were $108 billion, up $17 billion from $91 billion in the third quarter of
1997 and down $1 billion from $109 billion in the second quarter of 1998. The
increase from the prior-year period primarily resulted from increases in average
net assets of equity mutual funds and taxable money market funds. Proprietary
equity mutual funds, including the $7 billion of funds related to Founders,
averaged $32 billion in the third quarter of 1998, compared with $21 billion in
the third quarter of 1997 and $33 billion in the second quarter of 1998.
Administration and custody fee revenue increased $2 million in the third quarter
of 1998 compared with the third quarter of 1997, primarily resulting from new
business and higher transaction volumes. Excluding the fees from the corporate
trust business which was sold in November 1997, from the third quarter of 1997,
institutional trust fees increased 6% compared with the prior-year period.
Administration and custody fee revenue decreased $3 million compared with the
second quarter of 1998, primarily resulting from a decrease in securities
lending revenue, which is included in institutional trust fees.
Benefits consulting fees increased $4 million in the third quarter of 1998,
compared with the prior-year period, primarily resulting from new business and
increased project activity with existing clients. The $8 million increase in
brokerage fees primarily resulted from the acquisition of Dreyfus Brokerage
Services.
The 6% increase in cash management fees and deposit transaction charges in the
third quarter of 1998, compared with the prior-year period, primarily resulted
from higher volumes of business in customer receivables, payables and treasury
management products.
Mortgage servicing fees decreased $9 million, or 17%, in the third quarter of
1998, compared with the third quarter of 1997. This decrease primarily resulted
from a higher level of mortgage prepayments as well as from the sale of certain
mortgage servicing rights.
The 20% increase in foreign currency and securities trading revenue in the third
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 $22 million in the third quarter of 1998, compared
with the prior-year period. This increase primarily resulted
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 5
from higher fees from many fee-based services and higher gains from the sale of
equity securities and other assets.
Fee revenue was unchanged compared with the second quarter of 1998 as higher
trust and investment fees and other fees were offset by lower mortgage servicing
fees.
The $411 million increase in fee revenue in the first nine months of 1998,
compared with the prior-year period, primarily resulted from the full period
impact of the July 1997 acquisition of Buck Consultants, Inc. (Buck) as well as
the same factors responsible for the third quarter of 1998 increase as compared
to the prior-year period. Excluding the revenue resulting from the Buck,
Founders and Dreyfus Brokerage Services acquisitions, fee revenue increased 12%
compared with the first nine months of 1997.
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Quarter ended Nine months ended
---------------------------------- -----------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
(dollar amounts in millions) 1998 1998 1997 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $376 $374 $369 $1,117 $ 1,113
Net interest margin (FTE) 3.95% 3.97% 4.24% 3.99% 4.30%
Average securities $ 5,754 $ 5,596 $ 5,469 $ 5,552 $ 5,694
Average loans $30,426 $30,302 $27,596 $30,043 $27,603
Average interest-earning
assets $37,797 $37,734 $34,467 $37,396 $34,593
- --------------------------------------------------------------------------------------
</TABLE>
Net interest revenue on a fully taxable equivalent basis increased $7 million in
the third quarter of 1998, compared with the third quarter of 1997. This
increase was due to the favorable impacts of the acquisitions of Mellon United
National Bank and Mellon 1st Business Bank in February 1998 and Dreyfus
Brokerage Services, net of funding costs, partially offset by the December 1997
transfer of $231 million of CornerStone/sm/ credit card loans into an
accelerated resolution portfolio and the February 1998 Series K preferred stock
redemption.
Net interest revenue increased $4 million in the first nine months of 1998,
compared with the prior-year period. This increase primarily resulted from the
same factors responsible for the third quarter of 1998 increase as compared to
the prior-year period.
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 6
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Quarter ended Nine months ended
-------------------------------- -----------------------
(dollar amounts in Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
millions) 1998 1998 1997 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Staff expense $358 $355 $344 $1,070 $ 888
Professional, legal and
other purchased services 72 67 55 200 147
Net occupancy expense 59 59 55 174 161
Equipment expense 42 41 38 122 110
Amortization of mortgage
servicing assets and
purchased credit card
relationships 43 44 29 132 85
Amortization of goodwill
and other intangible
assets 35 35 25 100 79
Other expense 108 120 105 337 317
- -------------------------------------------------------------------------------------
Operating expense
before trust-preferred
securities expense and
net revenue from
acquired property 717 721 651 2,135 1,787
Trust-preferred
securities expense 20 19 20 59 59
Net revenue from
acquired property (3) (2) (1) (6) (7)
- -------------------------------------------------------------------------------------
Total operating expense $734 $738 $670 $2,188 $1,839
- -------------------------------------------------------------------------------------
Average full-time
equivalent staff 28,400 28,600 27,300 28,300 26,000
- -------------------------------------------------------------------------------------
Efficiency ratio (a) 66% 66% 65% 66% 63%
Efficiency ratio excluding
amortization of goodwill
and other intangible assets 62% 63% 62% 63% 60%
- -------------------------------------------------------------------------------------
</TABLE>
(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.
Operating expense before trust-preferred securities expense and net revenue from
acquired property increased $66 million, or 10%, in the third quarter of 1998,
compared with the prior-year period, resulting from acquisitions, business
growth and higher amortization of mortgage servicing assets. The increase in the
amortization of mortgage servicing assets and purchased credit card
relationships primarily resulted from an acceleration of amortization due to a
higher level of mortgage prepayments. 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 2%.
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 7
Operating expense before trust-preferred securities expense and net revenue from
acquired property decreased $4 million in the third quarter of 1998, compared
with the second quarter of 1998. This decrease resulted primarily from lower
advertising, sales promotions and travel expense.
The $348 million, or 19%, increase in operating expense before trust-preferred
securities expense and net revenue from acquired property in the first nine
months of 1998, compared to the first nine months of 1997, primarily resulted
from the same factors responsible for the third quarter 1998 increase as
compared to the prior-year period. 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 3%.
Credit Quality Expense and Reserve for Credit Losses
- ----------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Nine months ended
--------------------------------- ----------------------
(dollar amounts in Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
millions) 1998 1998 1997 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for credit
losses $ 15 $ 15 $ 25 $ 45 $ 75
Net revenue from acquired
property (3) (2) (1) (6) (7)
- ------------------------------------------------------------------------------------
Credit quality expense $ 12 $ 13 $ 24 $ 39 $ 68
- ------------------------------------------------------------------------------------
Net credit (losses) recoveries:
Domestic:
Credit card $(10) $(10) $(26) $(29) $(87)
Other consumer credit (4) (1) (4) (8) (12)
Commercial real estate 2 - 1 (2) 5
Commercial and financial (3) (2) (2) (7) (6)
- ------------------------------------------------------------------------------------
Total domestic (15) (13) (31) (46) (100)
International - - - - 5
- ------------------------------------------------------------------------------------
Total net credit losses $(15) $(13) $(31) $(46) $(95)
- ------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .19% .17% .45% .20% .46%
- ------------------------------------------------------------------------------------
Reserve for credit losses
at end of period $498 $498 $505
Reserve as a percentage of
total loans 1.60% 1.62% 1.78%
- ------------------------------------------------------------------------------------
</TABLE>
The $10 million and $30 million decreases in the provision for credit losses in
the third quarter of 1998 compared to the third quarter of 1997, and the first
nine months of 1998 compared to the first nine months of 1997, respectively,
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. The net carrying value of the CornerStone/sm/
accelerated resolution portfolio was $86 million at September 30, 1998, compared
with $106 million at June 30, 1998, and $157 million at December 31, 1997.
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 8
Nonperforming Assets
- ---------------------
<TABLE>
<CAPTION>
Sept. 30, June 30, Dec. 31, Sept. 30,
(dollar amounts in millions) 1998 1998 1997 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 53 $ 55 $ 52 $ 52
Commercial real estate 8 18 49 14
Other domestic 42 34 32 38
- ------------------------------------------------------------------------------------
Total nonperforming loans 103 107 133 104
Acquired property:
Real estate acquired 40 69 52 76
Reserve for real estate acquired (5) (9) (9) (9)
- ------------------------------------------------------------------------------------
Net real estate acquired 35 60 43 67
Other assets acquired 2 3 5 4
- ------------------------------------------------------------------------------------
Total acquired property 37 63 48 71
- ------------------------------------------------------------------------------------
Total nonperforming assets $140 $170 $181 $175
- ------------------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .33% .35% .46% .37%
Nonperforming assets as a percentage
of total loans and net acquired
property .45% .55% .62% .62%
- ------------------------------------------------------------------------------------
</TABLE>
Nonperforming assets decreased $30 million from June 30, 1998, primarily due to
the sale of a foreclosed property in the third quarter of 1998. The ratio of
nonperforming assets to total loans and net acquired property was .45% at
September 30, 1998, the lowest quarter-end ratio in the Corporation's history.
This ratio has been lower than 1% for 17 consecutive quarters. At September 30,
1998, the Corporation had no direct Southeast Asian, Russian or hedge fund
exposure.
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 9
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(dollar amounts in millions, Sept. 30, June 30, Dec. 31, Sept. 30,
except per share amounts) 1998 1998 1997 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 4,358 $ 4,234 $ 3,652 $ 3,585
Common shareholders' equity
to assets ratio 9.03% 8.92% 8.13% 8.25%
Tangible common shareholders'
equity $ 2,243 $ 2,078 $ 2,227 $ 2,265
Tangible common shareholders'
equity to assets ratio (a) 4.86% 4.59% 5.12% 5.37%
Total shareholders' equity $ 4,358 $ 4,234 $ 3,845 $ 3,778
Total shareholders' equity
to assets ratio 9.03% 8.92% 8.56% 8.69%
Tier I capital ratio 6.8 (b) 6.51 7.77 8.08
Total (Tier I plus Tier II)
capital ratio 11.2 (b) 10.83 12.73 13.24
Leverage capital ratio 7.1 (b) 6.65 8.02 8.37
Book value per common share $ 16.69 $ 16.24 $ 14.39 $ 14.08
Tangible book value per common
share $ 8.59 $ 7.97 $ 8.77 $ 8.90
Closing common stock price $ 55.00 $69.688 $ 60.63 $ 54.75
Market capitalization $14,363 $18,168 $15,386 $13,938
Common shares outstanding (000) 261,140 260,708 253,786 254,578
- ------------------------------------------------------------------------------------
</TABLE>
(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 September 30, 1998, compared with
September 30, 1997, primarily reflects earnings retention and common shares
issued in the Mellon United National Bank acquisition in February 1998. Also
impacting total shareholders' equity, compared with September 30, 1997, was the
February 1998 redemption of the $200 million Series K preferred stock. The
Corporation repurchased approximately 500 thousand shares of its common stock in
the third quarter of 1998.
The decrease in the Corporation's regulatory capital ratios, compared with
September 30, 1997, reflects an increase in goodwill and other intangibles and a
higher level of risk-adjusted assets, resulting from acquisitions, as well as
the Series K preferred stock redemption.
<PAGE>
Mellon Reports Earnings
October 20, 1998
Page 10
Impact of accounting principle change
- -------------------------------------
Due to a change of an accounting principle, the Corporation will recognize a
one-time after-tax charge of approximately $27 million in the first quarter of
1999. The charge is related to underwriting fees associated with the successful
introduction, earlier this year, of a $920 million Dreyfus closed-end mutual
fund, on which management fees are being earned. The action is the result of a
Financial Accounting Standards Board staff announcement at a meeting of the
Emerging Issues Task Force related to the reporting requirements for fees paid
by advisors of closed-end funds.
The unamortized pre-tax cost as of January 1, 1999, will be approximately
$43 million and will be recognized in its entirety, net of tax, instead of being
amortized over future years, as a cumulative effect of a change in accounting
principle upon adoption of the American Institute of Certified Public
Accountants Statement of Position No. 98-5 on Start-Up Activities. This
accounting change will have no impact on a cash-flow basis in 1999 or future
periods since the underwriting fees were paid in the first half of 1998.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions, Three months ended Nine months ended
except per share amounts; Sept. 30, Sept. 30,
common shares in thousands) ------------------- -------------------
1998 1997 1998 1997
-------- -------- ------- -------
Selected key data
- -----------------
<S> <C> <C> <C> <C>
Reported operating results:
Diluted earnings per common
share $ .82 $ .73 $ 2.41 $ 2.13
Net income applicable to
common stock $ 218 $ 191 $ 639 $ 559
Return on common
shareholders' equity (a) 20.3% 21.6% 20.9% 21.5%
Return on assets (a) 1.81% 1.81% 1.83% 1.81%
Common equity to assets 9.03% 8.25% 9.03% 8.25%
Tangible operating results:
Diluted earnings per common
share (b) $ .93 $ .80 $ 2.72 $ 2.36
Net income applicable to
common stock (b) $ 246 $ 211 $ 720 $ 620
Return on common
shareholders' equity (a)(b) 45.9% 37.6% 46.2% 37.2%
Return on assets (a)(b) 2.13% 2.05% 2.15% 2.06%
Common equity to assets 4.86% 5.37% 4.86% 5.37%
Fee revenue as a percentage
of total revenue (FTE) 66% 63% 66% 61%
Efficiency ratio excluding
amortization of intangibles 62% 62% 63% 60%
Average common shares and
equivalents outstanding:
Basic 261,078 255,081 259,775 255,852
Diluted 265,774 260,306 264,942 261,063
Average balances for the period
- -------------------------------
Money market investments $ 1,351 $ 1,231 $ 1,552 $ 1,115
Trading account securities 266 171 249 181
Securities 5,754 5,469 5,552 5,694
Loans 30,426 27,596 30,043 27,603
Total interest-earning
assets 37,797 34,467 37,396 34,593
Total assets 47,937 42,879 47,384 42,496
Total tangible assets 45,797 41,588 45,378 41,256
Deposits 33,399 30,349 33,227 30,248
Total interest-bearing
liabilities 31,104 27,266 30,539 27,526
Common shareholders'
equity 4,265 3,520 4,089 3,468
Tangible common
shareholders' equity 2,125 2,229 2,083 2,228
Total shareholders' equity 4,265 3,713 4,123 3,678
</TABLE>
_______________________
(a) Annualized.
(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.
Note: All calculations are based on unrounded numbers.
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Three months ended Nine months ended
(in millions, except Sept. 30, Sept. 30,
per share amounts) ------------------ -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $21, $22, $55 and $58) $ 616 $ 567 $1,799 $1,691
Federal funds sold and securities
under resale agreements 12 9 37 20
Interest-bearing deposits with
banks 8 6 23 20
Other money market investments 1 2 5 4
Trading account securities 4 2 11 7
Securities 95 94 278 289
----- ----- ----- -----
Total interest revenue 736 680 2,153 2,031
Interest expense
- ----------------
Interest on deposits 248 220 717 654
Federal funds purchased and
securities under repurchase
agreements 35 17 89 55
Other short-term borrowings 27 28 85 76
Notes and debentures 51 49 151 140
----- ----- ----- -----
Total interest expense 361 314 1,042 925
----- ----- ----- -----
Net interest revenue 375 366 1,111 1,106
Provision for credit losses 15 25 45 75
----- ----- ----- -----
Net interest revenue after
provision for credit losses 360 341 1,066 1,031
Noninterest revenue
- -------------------
Trust and investment fee revenue 432 378 1,257 932
Cash management and deposit
transaction charges 66 62 192 177
Mortgage servicing fees 44 53 152 157
Foreign currency and securities
trading revenue 39 32 118 82
Credit card fees 23 24 70 73
Other 108 86 333 290
----- ----- ----- -----
Total fee revenue 712 635 2,122 1,711
Gains on sales of securities - - 1 -
----- ----- ----- -----
Total noninterest revenue 712 635 2,123 1,711
Operating expense
- -----------------
Staff expense 358 344 1,070 888
Professional, legal and other
purchased services 72 55 200 147
Net occupancy expense 59 55 174 161
Equipment expense 42 38 122 110
Amortization of mortgage
servicing assets and purchased
credit card relationships 43 29 132 85
Amortization of goodwill and
other intangible assets 35 25 100 79
Other expense 108 105 337 317
Trust-preferred securities expense 20 20 59 59
Net revenue from acquired property (3) (1) (6) (7)
----- ----- ----- -----
Total operating expense 734 670 2,188 1,839
----- ----- ----- -----
Income before income taxes 338 306 1,001 903
Provision for income taxes 120 111 353 327
----- ----- ----- -----
Net income 218 195 648 576
Dividends on preferred stock - 4 9 17
----- ----- ----- -----
Net income applicable to
common stock $ 218 $ 191 $ 639 $ 559
===== ===== ===== =====
Basic net income per common share $ .84 $ .75 $ 2.46 $ 2.18
===== ===== ===== =====
Diluted net income per common
share $ .82 $ .73 $ 2.41 $ 2.13
===== ===== ===== =====
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Sept. 30, June 30, Dec. 31, Sept. 30,
1998 1998 1997 1997
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 2,839 $ 2,993 $ 3,650 $ 3,032
Money market investments 988 882 1,008 871
Trading account securities 178 126 75 88
Securities available for sale 4,190 3,957 2,767 3,354
Investment securities (approximate
fair value of $1,787, $1,899,
$2,118 and $2,195) 1,743 1,861 2,082 2,168
Loans, net of unearned discount
of $65, $68, $48 and $50 31,052 30,654 29,142 28,279
Reserve for credit losses (498) (498) (475) (505)
--------- -------- -------- ---------
Net loans 30,554 30,156 28,667 27,774
Premises and equipment 562 559 573 589
Acquired property, net of
reserves of $5, $9, $9 and $9 37 63 48 71
Goodwill and other intangibles 2,115 2,156 1,425 1,320
Mortgage servicing assets and
purchased credit card
relationships 1,031 1,010 1,075 1,026
Other assets 4,006 3,685 3,522 3,172
--------- -------- -------- ---------
Total assets $48,243 $47,448 $44,892 $43,465
========= ======== ======== =========
Liabilities
- -----------
Deposits in domestic offices $29,659 $30,230 $27,929 $27,462
Deposits in foreign offices 3,294 2,967 3,376 2,727
Short-term borrowings 4,483 3,901 3,744 3,504
Other liabilities 2,454 2,122 2,434 2,190
Notes and debentures (with original
maturities over one year) 3,004 3,003 2,573 2,814
--------- -------- -------- ---------
Total liabilities 42,894 42,223 40,056 38,697
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial
interests in Corporation's junior
subordinated deferrable interest
debentures 991 991 991 990
Shareholders' equity
- --------------------
Preferred stock - - 193 193
Common shareholders' equity:
Common stock - $.50 par value
Authorized - 800,000,000 shares
Issued - 294,330,960 shares 147 147 147 147
Additional paid-in capital 1,867 1,879 1,818 1,810
Retained earnings (a) 3,244 3,124 2,884 2,778
Accumulated unrealized gains,
net of tax (a) 29 19 21 16
Treasury stock of 33,191,388;
33,623,356; 40,545,114; and
39,753,178 shares at cost (929) (935) (1,218) (1,166)
--------- -------- -------- ---------
Total common shareholders'
equity 4,358 4,234 3,652 3,585
--------- -------- -------- ---------
Total shareholders' equity 4,358 4,234 3,845 3,778
--------- -------- -------- ---------
Total liabilities, trust-
preferred securities and
shareholders' equity $48,243 $47,448 $44,892 $43,465
========= ======== ======== =========
_________________
</TABLE>
(a) Presented in accordance with the requirements of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income," which was adopted by
the Corporation in the first quarter of 1998. Prior-period amounts have
been restated.
<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) Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
1998 1998 1998 1997 1997
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Selected key data
- -----------------
Reported operating results:
Diluted earnings per common
share $ .82 $ .81 $ .78 $ .75 $ .73
Net income applicable to
common stock $ 218 $ 215 $ 206 $ 191 $ 191
Return on common
shareholders' equity (a) 20.3% 20.8% 21.6% 21.2% 21.6%
Return on assets (a) 1.81% 1.79% 1.89% 1.75% 1.81%
Common equity to assets 9.03% 8.92% 8.62% 8.13% 8.25%
Tangible operating results:
Diluted earnings per common
share (b) $ .93 $ .91 $ .88 $ .83 $ .80
Net income applicable to
common stock (b) $ 246 $ 243 $ 231 $ 212 $ 211
Return on common
shareholders' equity (a)(b) 45.9% 49.7% 43.3% 38.3% 37.6%
Return on assets (a)(b) 2.13% 2.13% 2.18% 2.00% 2.05%
Common equity to assets 4.86% 4.59% 4.76% 5.12% 5.37%
Fee revenue as a percentage
of total revenue (FTE) 66% 66% 66% 66% 63%
Efficiency ratio excluding
amortization of intangibles 62% 63% 62% 65% 62%
Average common shares and
equivalents outstanding:
Basic 261,078 260,495 257,714 253,886 255,081
Diluted 265,774 265,848 263,136 259,430 260,306
Average balances for the period
- -------------------------------
Money market investments $ 1,351 $ 1,597 $ 1,712 $ 1,397 $ 1,231
Trading account securities 266 239 242 159 171
Securities 5,754 5,596 5,301 5,293 5,469
Loans 30,426 30,302 29,389 28,476 27,596
Total interest-earning assets 37,797 37,734 36,644 35,325 34,467
Total assets 47,937 47,965 46,229 44,266 42,879
Total tangible assets 45,797 45,804 44,518 42,888 41,588
Deposits 33,399 33,548 32,725 31,085 30,349
Total interest-bearing
liabilities 31,104 31,145 29,348 28,123 27,266
Common shareholders' equity 4,265 4,126 3,873 3,573 3,520
Tangible common shareholders'
equity 2,125 1,965 2,162 2,195 2,229
Total shareholders' equity 4,265 4,126 3,974 3,766 3,713
</TABLE>
_______________________
(a) Annualized.
(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.
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 Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
share amounts) 1998 1998 1998 1997 1997
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $21, $17, $17, $23 and $22) $ 616 $ 606 $ 577 $ 577 $ 567
Federal funds sold and securities
under resale agreements 12 12 13 10 9
Interest-bearing deposits with banks 8 6 9 6 6
Other money market investments 1 3 1 2 2
Trading account securities 4 3 4 2 2
Securities 95 93 90 88 94
--------- -------- --------- -------- ---------
Total interest revenue 736 723 694 685 680
Interest expense
- ----------------
Interest on deposits 248 240 229 224 220
Federal funds purchased and
securities under repurchase
agreements 35 30 24 22 17
Other short-term borrowings 27 30 28 29 28
Notes and debentures 51 52 48 49 49
--------- -------- --------- -------- ---------
Total interest expense 361 352 329 324 314
--------- -------- --------- -------- ---------
Net interest revenue 375 371 365 361 366
Provision for credit losses 15 15 15 73 25
--------- -------- --------- -------- ---------
Net interest revenue after
provision for credit losses 360 356 350 288 341
Noninterest revenue
- -------------------
Trust and investment fee revenue 432 429 396 391 378
Cash management and deposit
transaction charges 66 65 61 65 62
Mortgage servicing fees 44 53 55 56 53
Foreign currency and securities
trading revenue 39 38 41 36 32
Credit card fees 23 23 24 24 24
Gain on sale of corporate trust
business - - - 43 -
Other 108 104 121 92 86
--------- -------- --------- -------- ---------
Total fee revenue 712 712 698 707 635
Gains on sales of securities - 1 - - -
--------- -------- --------- -------- ---------
Total noninterest revenue 712 713 698 707 635
Operating expense
- -----------------
Staff expense 358 355 357 354 344
Professional, legal and other
purchased services 72 67 61 72 55
Net occupancy expense 59 59 56 64 55
Equipment expense 42 41 39 65 38
Amortization of mortgage
servicing assets and purchased
credit card relationships 43 44 45 33 29
Amortization of goodwill and
other intangible assets 35 35 30 26 25
Other expense 108 120 109 108 105
Trust-preferred securities expense 20 19 20 19 20
Net revenue from acquired property (3) (2) (1) (12) (1)
--------- -------- --------- -------- ---------
Total operating expense 734 738 716 729 670
--------- -------- --------- -------- ---------
Income before income taxes 338 331 332 266 306
Provision for income taxes 120 116 117 71 111
--------- -------- --------- -------- ---------
Net income 218 215 215 195 195
Dividends on preferred stock - - 9 4 4
--------- -------- --------- -------- ---------
Net income applicable to
common stock $ 218 $ 215 $ 206 $ 191 $ 191
========= ======== ========= ======== =========
Basic net income per common share $ .84 $ .82 $ .80 $ .76 $ .75
========= ======== ========= ======== =========
Diluted net income per common share $ .82 $ .81 $ .78 $ .75 $ .73
========= ======== ========= ======== =========
</TABLE>
