<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 20, 1999
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 20, 1999, Mellon Bank Corporation (the
"Corporation") announced first quarter 1999 results of operations. In
the same release, the Corporation announced an increase in the
quarterly cash dividend and a two-for-one split of the Corporation's
Common Stock. The Corporation increased its quarterly Common Stock
dividend by 11 percent to 40 cents per share on a pre-split basis,
payable on May 17, 1999, to shareholders of record at the close of
business on April 30, 1999. The Corporation's two-for-one stock split
of its Common Stock is being structured as a stock dividend of one
additional share of Common Stock being paid on each currently issued
share of Common Stock. The additional shares resulting from the split
will be distributed on May 17, 1999, to shareholders of record at the
close of business on May 3, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated April 20, 1999, announcing
the matters referenced in Item 5 above.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MELLON BANK CORPORATION
Date: April 20, 1999 By: /s/ STEVEN G. ELLIOTT
-------------------------------
Steven G. Elliott
Senior Vice Chairman and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description Method of Filing
99.1 Press Release dated Filed herewith
April 20, 1999
<PAGE>
EXHIBIT 99.1
[Logo of Mellon]
News Release
Contact: MEDIA: ANALYSTS:
Stephen K. Dishart Donald J. MacLeod
(412) 234-0850 (412) 234-5601 Corporate Affairs
Gregg P. Stein David T. Lamar One Mellon Bank Center
(412) 236-0082 (412) 234-4633 Pittsburgh, PA 15258-0001
- - --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD FIRST QUARTER 1999 RESULTS, INCREASES
-----------------------------------------------------------
COMMON STOCK DIVIDEND, ANNOUNCES COMMON STOCK SPLIT
---------------------------------------------------
. Operating Earnings Per Share Increases to 87 Cents, Up 12 Percent Over Same
Period Last Year on a Pre-Split Basis
. Return on Common Equity is 20.9 Percent and Return on Assets is 1.84 Percent,
Excluding a Net Gain from Divestitures and a Charge for the Effect of an
Accounting Change
. Quarterly Common Dividend Increases 11 Percent to 40 Cents Per Share on a
Pre-Split Basis
. Announces Two-For-One Common Stock Split
<TABLE>
<CAPTION>
Quarter ended
---------------------------------
Financial Highlights March 31, Dec. 31, March 31,
(dollar amounts in millions, except per share amounts) 1999 1998 1998
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating results (a):
Diluted earnings per common share (b) $ .87 $ .84 $ .78
Net income applicable to common stock $ 231 $ 222 $ 206
Return on common equity (annualized) 20.9% 20.1% 21.6%
Return on assets (annualized) 1.84% 1.76% 1.89%
Tangible operating results (a):
Diluted earnings per common share (b) $ .98 $ .94 $ .88
Net income applicable to common stock $ 260 $ 252 $ 231
Return on common equity (annualized) 40.4% 40.2% 39.5%
Return on assets (annualized) 2.16% 2.07% 2.17%
Reported results:
Diluted earnings per common share (b) $ .96 $ .84 $ .78
Net income applicable to common stock $ 254 $ 222 $ 206
Return on common equity (annualized) 23.1% 20.1% 21.6%
Return on assets (annualized) 2.03% 1.76% 1.89%
Fee revenue as a percentage of net interest and fee
revenue (FTE) 68% 68% 66%
Efficiency ratio excluding amortization of intangibles 62% 65% 62%
- - ------------------------------------------------------------------------------------------
</TABLE>
(a) Operating and tangible operating results for the first quarter of 1999
exclude a $49 million after-tax net gain from divestitures and a $26 million
after-tax charge for the cumulative effect of a change in accounting
principle.
(b) Earnings per common share calculated on a pre-stock split basis.
-- more --
Logos of
Mellon
Dreyfus THE BOSTON COMPANY
The Dreyfus Corporation and The Boston Company are companies of Mellon Bank
Corporation.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 2
PITTSBURGH, April 20, 1999--Mellon Bank Corporation (NYSE: MEL) today reported
record first quarter 1999 diluted operating earnings per common share of 87
cents, an increase of 12 percent compared with 78 cents per common share in the
first quarter of 1998. Operating net income applicable to common stock totaled
$231 million in the first quarter of 1999, an increase of 12 percent compared
with $206 million in the prior year period. Mellon also announced an 11 percent
increase in its quarterly cash dividend and a two-for-one split of the
Corporation's common stock.
"Mellon's excellent first-quarter results demonstrate that we are quickly making
great strides toward becoming the best performing financial services company,
and our shareholders are clearly benefiting from our continuing strategy of
producing sustainable revenue growth and high returns," said Martin G. McGuinn,
Mellon chairman and chief executive officer. "By heightening our focus on our
customers and becoming the employer of choice, we are winning new business and
attracting and retaining talented people. Simply stated, this is an exciting
time to be one of our customers or shareholders and to work at Mellon."
First quarter 1999 reported results included a $49 million after-tax net gain
from divestitures and a $26 million after-tax charge for the cumulative effect
of a change in accounting principle. Including these items, diluted earnings
per common share totaled 96 cents and net income applicable to common stock was
$254 million.
The Corporation increased its quarterly common dividend by 11 percent to 40
cents per share on a pre-split basis, or 20 cents per share on a post-split
basis. This cash dividend on the Corporation's common stock is payable on May
17, 1999, to shareholders of record at the close of business on April 30, 1999.
The two-for-one common stock split is being structured as a stock dividend of
one additional share of common stock paid on each currently issued share of
common stock. The additional shares resulting from the split will be
distributed on May 17, 1999, to shareholders of record at the close of business
on May 3, 1999. On a post-stock split basis, the Corporation's first quarter
1999 diluted operating earnings per common share was 43 cents, compared with 39
cents and 42 cents per common share in the first quarter and fourth quarter of
1998, respectively.
Fee revenue for the first quarter of 1999 was $789 million, up $91 million from
$698 million in the prior-year period. The first quarter of 1998 included $22
million of fee revenue from the electronic filing of income tax returns. This
service was discontinued at the end of 1998. Excluding the impact on fee
revenue from the 1998 acquisitions of Founders Asset Management, LLC and Newton
Management Limited and fees from the electronic filing of income tax returns in
the first quarter of 1998, fee revenue increased 11 percent in the first quarter
of 1999 compared with the first quarter of 1998. This fee revenue increase was
led by higher investment management revenue, up 15 percent over the prior-year
period. Excluding the gain on the sale of the merchant card processing business
in December 1998, fee revenue increased approximately 3 percent, or at an
annualized rate of 13 percent, compared with the fourth quarter of 1998.
Net interest revenue on a fully taxable equivalent basis for the first quarter
of 1999 was $371 million, up $4 million compared with $367 million in the prior-
year period. This increase primarily resulted from a higher level of interest-
earning assets.
-- more --
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 3
Operating expense before trust-preferred securities expense and net revenue from
acquired property for the first quarter of 1999 was $760 million, up $63 million
from $697 million in the first quarter of 1998. This increase primarily
resulted from the impact of acquisitions and business growth. Excluding the
effect of acquisitions, operating expense before trust-preferred securities
expense and net revenue from acquired property increased less than 2 percent
compared with the first quarter of 1998.
Credit quality expense was $15 million in the first quarter of 1999 compared
with $14 million in the first quarter of 1998. Nonperforming assets totaled
$161 million at March 31, 1999, compared with $140 million at December 31, 1998,
and $191 million at March 31, 1998. The ratio of nonperforming assets to total
loans and net acquired property was .53 percent at March 31, 1999, compared with
.44 percent at December 31, 1998 and .63 percent at March 31, 1998.
A broad-based financial services company with a bank at its core, Mellon Bank
Corporation ranks among the nation's largest financial services companies in
market capitalization. With more than $2.3 trillion in assets under management,
administration or custody, including approximately $400 billion under
management, 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 senior vice chairman and
chief financial officer, Steven G. Elliott, regarding first quarter 1999
earnings by calling (412) 236-5385 between 9 a.m. EDT on Tuesday, April 20,
1999, and 5 p.m. EDT on Tuesday, April 27, 1999. 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 20, 1999
Page 4
Net Gain From Divestitures and Charge for a Change in Accounting Principle
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Net gain from divestitures
In the first quarter of 1999, the Corporation recorded an $83 million pre-tax
net gain from completed and pending divestitures. The after-tax impact from
these transactions totaled $49 million or $.19 per common share. In January
1999, the Corporation announced its intentions to sell its credit card business,
mortgage businesses and network services transaction processing unit. The sale
of the credit card business was completed on March 31, 1999, and a definitive
sale agreement was signed on March 31, 1999, for the commercial mortgage
servicing business. The Corporation expects to complete the sales of the
commercial mortgage servicing business in the second quarter of 1999 and the
residential mortgage business and the network services transaction processing
unit by the end of the third quarter of 1999. The net gain recorded in the
first quarter resulted from a gain on the sale of the credit card business
partially offset by a loss on the commercial mortgage servicing business and a
write-down to reflect the estimated sale proceeds to be received for the
residential mortgage business.
Cumulative effect of a change in accounting principle
On January 1, 1999, the Corporation adopted the provisions of the American
Institute of Certified Public Accountants Statement of Position (SOP) No. 98-5
on reporting on the costs of start-up activities. This SOP requires that costs
of start-up activities be expensed as incurred. Initial application of the SOP
is to be reported as a cumulative effect of a change in accounting principle.
Due to this change in accounting principle, the Corporation recognized a one-
time after-tax charge of $26 million, or $.10 per share, (pre-tax cost of $43
million) in the first quarter of 1999. The charge was related to underwriting
fees paid by the Corporation during the successful initial public offering in
the second quarter of 1998 of a $920 million Dreyfus closed-end mutual fund. In
September 1998, the Financial Accounting Standards Board staff concluded that
fees paid by advisors of closed-end funds should be expensed as incurred and
that any fees capitalized prior to July 24, 1998, should be written off upon the
adoption of SOP 98-5 and reported as a cumulative effect of a change in
accounting principle. 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>
Mellon Reports Earnings
April 20, 1999
Page 5
Fee Revenue
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<TABLE>
<CAPTION>
Quarter ended
---------------------------------
March 31, Dec. 31, March 31,
(dollar amounts in millions) 1999 1998 1998
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<S> <C> <C> <C>
Trust and investment fee revenue:
Investment management:
Mutual fund $ 144 $ 136 $ 100
Private asset 71 63 52
Institutional asset 63 58 50
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Total investment management revenue 278 257 202
Administration and custody:
Institutional trust 97 100 95
Mutual fund 34 32 33
Private asset 5 5 4
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Total administration and custody revenue 136 137 132
Benefits consulting 59 59 52
Brokerage fees 15 12 10
- - -------------------------------------------------------------------------------------------------
Total trust and investment fee revenue 488 465 396
Cash management and deposit transaction charges 66 70 61
Mortgage servicing fees 52 48 55
Foreign currency and securities trading revenue 43 47 41
Credit card fees 18 22 24
Gain on sale of merchant card processing business - 35 -
Other 122 112 121
- - -------------------------------------------------------------------------------------------------
Total fee revenue $ 789 $ 799 $ 698
- - -------------------------------------------------------------------------------------------------
Fee revenue as a percentage of net interest
and fee revenue (FTE) 68% 68% 66%
Trust and investment fee revenue as
a percentage of net interest and fee revenue (FTE) 42% 39% 37%
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</TABLE>
Fee revenue increased $91 million, or 13%, in the first quarter of 1999,
compared with the first quarter of 1998. Excluding the fee revenue resulting
from the acquisitions of Founders Asset Management, LLC (Founders) in April 1998
and Newton Management Limited (Newton) in October 1998 and fees from the
electronic filing of income tax returns in the first quarter of 1998, fee
revenue increased 11% compared with the prior-year period. The electronic
filing of income tax returns service was discontinued at the end of 1998.
Trust and investment fees increased $92 million, or 23%, compared with the
prior-year period. This increase reflects net new business, higher transaction
volumes and an increase in the market value of assets under management, as well
as revenue resulting from the Newton and Founders acquisitions. Excluding the
revenue from these acquisitions, trust and investment fees increased 12%
compared with the first quarter of 1998.
The $76 million increase in investment management revenue in the first quarter
of 1999 compared with the prior-year period resulted from a $44 million, or 44%,
increase in mutual fund management revenue, a $19 million, or 36%, increase in
private asset management revenue and a $13 million, or 23%, increase in
institutional asset management revenue.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 6
These increases resulted from acquisitions, net new business and an increase in
the market value of assets under management.
Average net assets of proprietary funds managed at Dreyfus/Founders/Newton in
the first quarter of 1999 were $125 billion, up $28 billion from $97 billion in
the first quarter of 1998 and up $7 billion from $118 billion in the fourth
quarter of 1998. The increase from the prior-year period primarily resulted from
increases in average net assets of equity funds, institutional taxable money
market funds and fixed income funds, due in part to the Founders and Newton
acquisitions. Proprietary equity funds, including $7 billion of funds related to
Founders and $4 billion of unit trusts related to Newton, averaged $42 billion
in the first quarter of 1999, compared with $23 billion in the first quarter of
1998 and $37 billion in the fourth quarter of 1998.
Administration and custody fee revenue increased $4 million in the first quarter
of 1999 compared with the first quarter of 1998, primarily resulting from net
new business and higher transaction volumes. Administration and custody fee
revenue decreased $1 million compared with the fourth quarter of 1998. This
decrease resulted, in part, from accounting for the results of the
Russell/Mellon Analytical Services Inc. joint venture under the equity method of
accounting, which reports the results of the joint venture on a net basis,
rather than reporting the revenues and expenses separately. In addition,
securities lending revenue was lower in the first quarter of 1999 compared with
the fourth quarter of 1998.
Benefits consulting fees increased $7 million in the first quarter of 1999
compared with the prior-year period, primarily resulting from new business and
increased project activity with existing clients. The $5 million increase in
brokerage fees primarily resulted from higher trading volumes. Dreyfus
Brokerage Services, Inc. averaged approximately 9,600 trades per day in the
first quarter of 1999, compared with approximately 8,300 trades per day in the
fourth quarter of 1998 and 5,600 trades per day in the first quarter of 1998.
The 9% increase in cash management fees and deposit transaction charges in the
first quarter of 1999 compared with the prior-year period, primarily resulted
from higher volumes.
Mortgage servicing fees decreased $3 million, or 6%, in the first quarter of
1999 compared with the first quarter of 1998. This decrease primarily resulted
from a higher level of mortgage prepayments.
Foreign currency and securities trading revenue increased $2 million in the
first quarter of 1999 compared with the prior-year period. This increase was
primarily related to growth in the number of foreign exchange customers and
related volumes, partially offset by lower securities trading gains. The $4
million decrease compared with the fourth quarter of 1998 resulted from lower
foreign exchange customer volumes, relative to the record levels of the prior
period, reduced market volatility and lower securities trading gains. The
January 1, 1999 introduction of the Euro was a factor contributing to lower
foreign exchange volumes.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 7
Credit card fees decreased $6 million in the first quarter of 1999 compared with
the prior-year period. This decrease was primarily due to the sale of the
Corporation's merchant card processing business in December 1998. On March 31,
1999, the Corporation sold its credit card business to Citibank, a unit of
Citigroup.
Other fee revenue increased $1 million in the first quarter of 1999, compared
with the prior-year period. This increase primarily resulted from higher
revenue from joint ventures and partnerships, as well as other factors, none of
which were individually significant. This increase was primarily offset by the
elimination of fees from the electronic filing of income tax returns due to the
expiration of a contract with a major income tax return preparer at the end of
1998. The Corporation recorded $22 million of fee revenue from this service in
the first quarter of 1998. The Corporation accounts for its interest in joint
ventures under the equity method of accounting with the net results primarily
recorded as other fee revenue. The Corporation's joint ventures generated
approximately $70 million of gross fee revenue in the first quarter of 1999,
compared with approximately $52 million in both the fourth and first quarters of
1998.
Excluding the $35 million gain on the sale of the merchant card processing
business in December 1998, fee revenue increased $25 million or 3%, or at an
annualized rate of 13%, compared with the fourth quarter of 1998, primarily
reflecting growth in trust and investment fee revenue and other revenue.
Compared with the fourth quarter of 1998, trust and investment fee revenue
increased 5%,or at an annualized rate of 19%.
Net Interest Revenue
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<TABLE>
<CAPTION>
Quarter ended
---------------------------------
March 31, Dec. 31, March 31,
(dollar amounts in millions) 1999 1998 1998
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<S> <C> <C> <C>
Net interest revenue (FTE) $ 371 $ 382 $ 367
Net interest margin (FTE) 3.78% 3.86% 4.06%
Average securities $ 6,767 $ 6,141 $ 5,301
Average loans $31,467 $31,503 $29,389
Average interest-earning assets $39,811 $39,427 $36,644
- - --------------------------------------------------------------------
</TABLE>
Net interest revenue on a fully taxable equivalent basis increased $4 million in
the first quarter of 1999 compared with the first quarter of 1998. This
increase was primarily due to the higher level of interest-earning assets
partially offset by acquisition funding costs, funding costs related to the
repurchase of common stock, and narrowing spreads.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 8
Net interest revenue decreased $11 million in the first quarter of 1999 compared
with the fourth quarter of 1998. This decrease primarily resulted from the
common stock repurchase costs, narrowing spreads, lower loan fees and the impact
of two fewer days in the first quarter of 1999 compared with the fourth quarter
of 1998.
Operating Expense
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<TABLE>
<CAPTION>
Quarter ended
--------------------------------
March 31, Dec. 31, March 31,
(dollar amounts in millions) 1999 1998 1998
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<S> <C> <C> <C>
Staff expense $ 391 $ 386 $ 357
Professional, legal and other
purchased services 71 97 61
Net occupancy expense 61 63 56
Equipment expense 41 59 39
Amortization of mortgage servicing
assets and purchased credit card
relationships 42 47 45
Amortization of goodwill and other
intangible assets 37 37 30
Other expense 117 116 109
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Operating expense before
trust-preferred securities
expense and net revenue from
acquired property 760 805 697
Trust-preferred securities expense 20 20 20
Net revenue from acquired property - - (1)
- - ---------------------------------------------------------------------
Total operating expense $ 780 $ 825 $ 716
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Average full-time equivalent staff 29,100 28,500 27,900
- - ---------------------------------------------------------------------
Efficiency ratio (a) 65% 68% 65%
Efficiency ratio excluding
amortization of goodwill
and other intangible assets 62% 65% 62%
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</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 the net gain on divestitures and the sale of
securities.
Operating expense before trust-preferred securities expense and net revenue from
acquired property increased $63 million, or 9%, in the first quarter of 1999,
compared with the prior-year period, resulting from acquisitions as well as
business growth. Excluding the effect of acquisitions, operating expense before
trust-preferred securities expense and net revenue from acquired property
increased less than 2% compared with the first quarter of 1998.
Operating expense before trust-preferred securities expense and net revenue from
acquired property decreased $45 million in the first quarter of 1999 compared
with the fourth quarter of 1998. This decrease primarily resulted from lower
consulting and equipment expenses. The decrease in consulting and equipment
expenses primarily related to fourth quarter 1998 expenditures for strategic
business and reengineering initiatives and the upgrade of computer
hardware.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 9
Income Taxes
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The Corporation's effective tax rate, excluding the effect of a change in
accounting principle, for the first quarter of 1999 was 37.3% compared with
35.3% for the first quarter of 1998. Excluding the effect of divestitures, the
effective tax rate was 36.5% for the first quarter of 1999. It is currently
anticipated that the effective tax rate will remain at approximately 36.5% for
the remainder of 1999.
Credit Quality Expense and Reserve for Credit Losses
- - ----------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended
---------------------------------
March 31, Dec. 31, March 31,
(dollar amounts in millions) 1999 1998 1998
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<S> <C> <C> <C>
Provision for credit losses $ 15 $ 15 $ 15
Net revenue from acquired property - - (1)
- - ---------------------------------------------------------------------------
Credit quality expense $ 15 $ 15 $ 14
- - ---------------------------------------------------------------------------
Net credit (losses) recoveries:
Domestic:
Credit card $ (10) $ (11) $ (9)
Other consumer credit (4) (4) (3)
Commercial real estate - (1) (4)
Commercial and financial (3) (1) (2)
- - ---------------------------------------------------------------------------
Total net credit losses $ (17) $ (17) $ (18)
- - ---------------------------------------------------------------------------
Annualized net credit losses to
average loans .22% .22% .24%
- - ---------------------------------------------------------------------------
Reserve for credit losses at end
of period $ 410 $ 496 $ 496
Reserve as a percentage of total loans 1.34% 1.54% 1.63%
- - ---------------------------------------------------------------------------
</TABLE>
Credit quality expense and total net credit losses for the first quarter of 1999
were nearly unchanged compared with both the first and fourth quarters of 1998.
The $86 million decrease in the reserve for credit losses at March 31, 1999,
compared with December 31, 1998 and March 31, 1998, was due to the sale of the
credit card business. In conjunction with this sale, $84 million that had been
associated with the credit card portfolio was removed from the reserve for
credit losses. The Corporation expects that net credit losses will be lower in
the remainder of 1999, compared with the first quarter of 1999, due to this
sale. Annualized net credit losses to average loans, excluding credit card net
credit losses, was .10% in the first quarter of 1999. The CornerStone(sm) credit
card accelerated resolution portfolio, which had a net carrying value of $67
million at December 31, 1998, and $130 million at March 31, 1998, was included
in the sale. This portfolio had been carried in Other Assets on the balance
sheet.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 10
Nonperforming Assets
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<TABLE>
<CAPTION>
March 31, Dec. 31, Sept. 30, March 31,
(dollar amounts in millions) 1999 1998 1998 1998
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<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 44 $ 44 $ 53 $ 56
Commercial real estate 6 6 8 53
Other domestic 77 53 42 33
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Total nonperforming loans 127 103 103 142
Acquired property:
Real estate acquired 37 40 40 53
Reserve for real estate acquired (5) (5) (5) (9)
- - ----------------------------------------------------------------------------------
Net real estate acquired 32 35 35 44
Other assets acquired 2 2 2 5
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Total acquired property 34 37 37 49
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Total nonperforming assets $ 161 $ 140 $ 140 $ 191
- - ----------------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .41% .32% .33% .47%
Nonperforming assets as a
percentage of total loans and
net acquired property .53% .44% .45% .63%
- - ----------------------------------------------------------------------------------
</TABLE>
Nonperforming assets increased $21 million compared with December 31, 1998, and
decreased $30 million compared with March 31, 1998. The increase from December
31, 1998, resulted from the addition of a commercial loan to a customer in the
steel industry to nonperforming status during the first quarter of 1999. The
decrease from the prior-year period primarily resulted from a lower level of
acquired property and nonperforming consumer mortgages. In addition, a decrease
in nonperforming commercial real estate loans was partially offset by the
addition of the previously mentioned commercial loan to nonperforming status.
<PAGE>
Mellon Reports Earnings
April 20, 1999
Page 11
Selected Capital Data
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<TABLE>
<CAPTION>
(dollar amounts in millions, March 31, Dec. 31, Sept. 30, March 31,
except per share amounts) 1999 1998 1998 1998
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total shareholders' equity $ 4,502 $ 4,521 $ 4,358 $ 4,086
Total shareholders' equity
to assets ratio 9.12% 8.90% 9.03% 8.62%
Tangible shareholders' equity $ 2,659(a) $ 2,641(a) $ 2,540 $ 2,374
Tangible shareholders' equity to
assets ratio (b) 5.60% 5.41% 5.47% 5.19%
Tier I capital ratio 6.9(c) 6.53 6.78 6.80
Total (Tier I plus Tier II)
capital ratio 11.2(c) 10.80 11.22 11.28
Leverage capital ratio 6.6(c) 6.73 7.06 7.04
Book value per common share:
Pre-stock split $ 17.28 $ 17.26 $ 16.69 $ 15.70
Post-stock split (d) 8.64 8.63 8.35 7.85
Tangible book value per common
share:
Pre-stock split $ 10.21 $ 10.08 $ 9.73 $ 9.12
Post-stock split (d) 5.11 5.04 4.87 4.56
Closing common stock price:
Pre-stock split $ 70.38 $ 68.75 $ 55.00 $ 63.50
Post-stock split (d) 35.19 34.38 27.50 31.75
Market capitalization $ 18,335 $ 18,007 $ 14,363 $ 16,523
Common shares outstanding (000):
Pre-stock split 260,532 261,923 261,140 260,210
Post-stock split (d) 521,064 523,846 522,280 520,420
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</TABLE>
(a) Includes $62 million and $60 million, respectively of minority interest,
primarily related to Newton.
(b) Shareholders' equity plus minority interest and less goodwill and other
intangibles recorded in connection with purchase acquisitions divided by
total assets less goodwill and other intangibles recorded in connection with
purchase acquisitions. Beginning at December 31, 1998, the amount of
goodwill and other intangibles subtracted from shareholders' equity and
total assets is net of any tax deductible portion. Prior period amounts and
ratios were restated.
(c) Estimated.
(d) Reflects the two-for-one common stock split payable May 17, 1999.
The increase in shareholders' equity at March 31, 1999, compared with March 31,
1998, primarily reflects earnings retention. The decrease in shareholders'
equity compared with December 31, 1998, resulted from common stock repurchases
partially offset by earnings retention.
In January 1999, the board of directors approved an enhancement to an existing
common share repurchase authorization by increasing the number of shares
authorized for repurchase to 10 million shares, on a pre-split basis, of the
Corporation's common stock. In the first quarter of 1999, 2.7 million shares of
common stock, on a pre-split basis, were repurchased.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
Quarter ended
(dollar amounts in millions, ---------------------------------------------------------
except per share amounts; March 31, Dec. 31, Sept. 30, June 30, March 31,
common shares in thousands) 1999 1998 1998 1998 1998
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected key data - Pre-split basis
- - -----------------------------------
Diluted earnings per
common share:
Operating $.87 (a) $.84 $.82 $.81 $.78
Tangible operating (b) .98 (a) .94 .93 .91 .88
Reported .96 .84 .82 .81 .78
Net income applicable to common stock:
Operating $231 (a) $222 $218 $215 $206
Tangible operating (b) 260 (a) 252 246 243 231
Reported 254 222 218 215 206
Return on common equity (c):
Operating 20.9% (a) 20.1% 20.3% 20.8% 21.6%
Tangible operating (d) 40.4 (a) 40.2 40.2 44.1 39.5
Reported 23.1 20.1 20.3 20.8 21.6
Return on assets (c):
Operating 1.84% (a) 1.76% 1.81% 1.79% 1.89%
Tangible operating (d) 2.16 (a) 2.07 2.11 2.12 2.17
Reported 2.03 1.76 1.81 1.79 1.89
Shareholders' equity to assets:
Reported 9.12% 8.90% 9.03% 8.92% 8.62%
Tangible (d) 5.60 5.41 5.47 5.22 5.19
- - -------------------------------------------------------------------------------------------------
Fee revenue as a percentage of net
interest and fee revenue (FTE) 68% 68% 66% 66% 66%
Efficiency ratio excluding
amortization of intangibles 62% 65% 62% 63% 62%
Average common shares and
equivalents outstanding:
Basic 261,724 261,541 261,078 260,495 257,714
Diluted 265,644 265,748 265,774 265,848 263,136
- - -------------------------------------------------------------------------------------------------
Selected key data - Post-split basis
- - ------------------------------------
Diluted earnings per common share:
Operating $.43 (a) $.42 $.41 $.40 $.39
Tangible operating (b) .49 (a) .47 .47 .45 .44
Reported .48 .42 .41 .40 .39
Average common shares and
equivalents outstanding -
Diluted 531,288 531,496 531,548 531,696 526,272
- - -------------------------------------------------------------------------------------------------
</TABLE>
- continued -
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
Five Quarter Trend
(continued)
<TABLE>
<CAPTION>
Quarter ended
--------------------------------------------------
March 31, Dec. 31, Sept. 30, June 30, March 31,
(dollar amounts in millions) 1999 1998 1998 1998 1998
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average balances for the period
- - ---------------------------------
Money market investments $ 1,286 $ 1,525 $ 1,351 $ 1,597 $ 1,712
Trading account securities 291 258 266 239 242
Securities 6,767 6,141 5,754 5,596 5,301
Loans 31,467 31,503 30,426 30,302 29,389
Total interest-earning assets 39,811 39,427 37,797 37,734 36,644
Total assets 50,677 50,110 47,937 47,965 46,229
Total tangible assets (d) 48,755 48,153 46,096 46,057 44,726
Deposits 34,087 34,492 33,399 33,548 32,725
Total interest-bearing
liabilities 32,825 32,406 31,104 31,145 29,348
Total shareholders' equity 4,469 4,391 4,265 4,126 3,974
Tangible shareholders'
equity (d) 2,608 2,487 2,424 2,218 2,370
- - --------------------------------------------------------------------------------------
</TABLE>
(a) For the quarter ended March 31, 1999, operating and tangible operating
results exclude the $49 million after-tax net gain from divestitures and the
$26 million after-tax charge for the cumulative effect of a change in
accounting principle.
(b) Excludes the after-tax impact of the amortization of goodwill and other
intangibles from purchase acquisitions.
(c) Annualized.
(d) Certain goodwill and other intangibles amortization is tax deductible.
Beginning at December 31, 1998, the amount of goodwill and other identified
intangibles subtracted from common equity and total assets is net of the tax
deductible portion. Prior period ratios and amounts were restated.
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) 1999 1998 1998 1998 1998
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest revenue
- - ----------------
Interest and fees on loans (loan
fees of $16, $18, $21, $17 and $17) $ 580 $ 614 $ 616 $ 606 $ 577
Federal funds sold and securities
under resale agreements 9 12 12 12 13
Interest-bearing deposits with banks 9 10 8 6 9
Other money market investments 1 1 1 3 1
Trading account securities 4 4 4 3 4
Securities 108 98 95 93 90
----- ----- ----- ----- -----
Total interest revenue 711 739 736 723 694
Interest expense
- - ----------------
Interest on deposits 221 243 248 240 229
Federal funds purchased and
securities under repurchase
agreements 37 34 35 30 24
Other short-term borrowings 29 29 27 30 28
Notes and debentures 55 53 51 52 48
----- ----- ----- ----- -----
Total interest expense 342 359 361 352 329
----- ----- ----- ----- -----
Net interest revenue 369 380 375 371 365
Provision for credit losses 15 15 15 15 15
----- ----- ----- ----- -----
Net interest revenue after
provision for credit losses 354 365 360 356 350
Noninterest revenue
- - -------------------
Trust and investment fee revenue 488 465 432 429 396
Cash management and deposit
transaction charges 66 70 66 65 61
Mortgage servicing fees 52 48 44 53 55
Foreign currency and securities
trading revenue 43 47 39 38 41
Credit card fees 18 22 23 23 24
Other 122 147 108 104 121
----- ----- ----- ----- -----
Total fee revenue 789 799 712 712 698
Net gain from divestitures 83 - - - -
Gains on sales of securities - - - 1 -
----- ----- ----- ----- -----
Total noninterest revenue 872 799 712 713 698
Operating expense
- - -----------------
Staff expense 391 386 358 355 357
Professional, legal and other
purchased services 71 97 72 67 61
Net occupancy expense 61 63 59 59 56
Equipment expense 41 59 42 41 39
Amortization of mortgage
servicing assets and purchased
credit card relationships 42 47 43 44 45
Amortization of goodwill and
other intangible assets 37 37 35 35 30
Other expense 117 116 108 120 109
Trust-preferred securities expense 20 20 20 19 20
Net revenue from acquired property - - (3) (2) (1)
----- ----- ----- ----- -----
Total operating expense 780 825 734 738 716
----- ----- ----- ----- -----
</TABLE>
- continued -
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
Five Quarter Trend
(continued)
<TABLE>
<CAPTION>
Quarter ended
----------------------------------------------------
(in millions, except per March 31, Dec. 31, Sept. 30, June 30, March 31,
share amounts) 1999 1998 1998 1998 1998
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income before income taxes
and cumulative effect of
accounting change 446 339 338 331 332
Provision for income taxes 166 117 120 116 117
----- ----- ----- ----- -----
Income before cumulative effect
of accounting change 280 222 218 215 215
Cumulative effect of
accounting change (26) - - - -
----- ----- ----- ----- -----
Net income 254 222 218 215 215
Dividends on preferred stock - - - - 9
----- ----- ----- ----- -----
Net income applicable to
common stock $ 254 $ 222 $ 218 $ 215 $ 206
===== ===== ===== ===== =====
Earnings per share
- - ------------------
Basic net income per common share:
Income before cumulative effect
of accounting change $1.07 $ .85 $ .84 $ .82 $ .80
Cumulative effect of
accounting change (.10) - - - -
----- ----- ----- ----- -----
Net income, pre-split $ .97 $ .85 $ .84 $ .82 $ .80
===== ===== ===== ===== =====
Net income, post-split $ .49 $ .42 $ .42 $ .41 $ .40
===== ===== ===== ===== =====
Diluted net income per common share:
Income before cumulative effect
of accounting change $1.06 $ .84 $ .82 $ .81 $ .78
Cumulative effect of
accounting change (.10) - - - -
----- ----- ----- ----- -----
Net income, pre-split $ .96 $ .84 $ .82 $ .81 $ .78
===== ===== ===== ===== =====
Net income, post-splt $ .48 $ .42 $ .41 $ .40 $ .39
===== ===== ===== ===== =====
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) March 31, Dec. 31, Sept. 30, March 31,
1999 1998 1998 1998
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Assets
- - ------
Cash and due from banks $ 3,011 $ 2,926 $ 2,839 $ 3,312
Money market investments 939 798 988 1,263
Trading account securities 242 193 178 140
Securities available for sale 5,451 5,373 4,190 3,547
Investment securities (approximate
fair value of $1,443, $1,634,
$1,787 and $2,022) 1,421 1,602 1,743 1,987
Loans, net of unearned discount
of $57, $54, $65 and $64 30,554 32,093 31,052 30,343
Reserve for credit losses (410) (496) (498) (496)
------- ------- ------- -------
Net loans 30,144 31,597 30,554 29,847
Premises and equipment 561 569 562 557
Acquired property, net of
reserves of $5, $5, $5 and $9 34 37 37 49
Goodwill and other intangibles 2,276 2,313 2,115 1,918
Mortgage servicing assets and
purchased credit card
relationships 1,098 1,132 1,031 1,130
Other assets 4,207 4,237 4,006 3,664
------- ------- ------- -------
Total assets $49,384 $50,777 $48,243 $47,414
======= ======= ======= =======
Liabilities
- - -----------
Deposits in domestic offices $30,419 $31,269 $29,659 $30,461
Deposits in foreign offices 2,929 3,114 3,294 2,635
Short-term borrowings 4,023 4,942 4,483 4,054
Other liabilities 3,117 2,637 2,454 2,184
Notes and debentures (with original
maturities over one year) 3,403 3,303 3,004 3,003
------- ------- ------- -------
Total liabilities 43,891 45,265 42,894 42,337
Trust-preferred securities
- - --------------------------
Guaranteed preferred beneficial
interests in Corporation's junior
subordinated deferrable interest
debentures 991 991 991 991
Shareholders' equity (a)
- - ------------------------
Common stock - $.50 par value
Authorized - 800,000,000 shares
Issued 294,330,960 shares 147 147 147 147
Additional paid-in capital 1,907 1,887 1,867 1,855
Retained earnings 3,468 3,353 3,244 3,003
Accumulated unrealized (loss)
gain, net of tax (15) 25 29 30
Treasury stock of 33,798,582;
32,407,960; 33,191,388; and
34,120,588 shares at cost (1,005) (891) (929) (949)
------- ------- ------- -------
Total shareholders' equity 4,502 4,521 4,358 4,086
------- ------- ------- -------
Total liabilities, trust-
preferred securities and
shareholders' equity $49,384 $50,777 $48,243 $47,414
======= ======= ======= =======
</TABLE>
_______________________
(a) Shareholders' equity at March 31, 1999, does not reflect the two-for-one
stock split payable May 17, 1999.
