<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - January 15, 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 January 15, 1999, Mellon Bank Corporation (the
"Corporation") announced full year and fourth quarter 1998 results of
operations.
In a second press release dated January 15, 1999, the Corporation
announced that it plans to sell its mortgage business, credit card
portfolio and Network Services transaction processing unit as part of
an initiative to sharpen its strategic focus on businesses with the
highest return potential. The Corporation also announced an enhanced
common share repurchase authorization.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated January 15, 1999,
announcing results of operations.
99.2 Mellon Bank Corporation Press Release, dated January 15, 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: January 19, 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
January 15, 1999
99.2 Press Release dated Filed herewith
January 15, 1999
<PAGE>
EXHIBIT 99.1
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 FULL-YEAR AND FOURTH QUARTER 1998 RESULTS
. 1998 Diluted Earnings Per Share Increases to $3.25, Up 13 Percent Over 1997
. Return on Common Equity is 20.7 Percent and Return on Assets is 1.81 Percent
for 1998
. 1998 Tangible Earnings Per Share Increases to $3.66, Up 15 Percent Over 1997
. Return on Tangible Common Equity is 46.1 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 Year ended Quarter ended
(dollar amounts in millions, Dec. 31, Dec. 31, Dec. 31, Sept. 30, Dec. 31,
except per share amounts) 1998 1997 1998 1998 1997
<S> <C> <C> <C> <C> <C>
Reported operating results:
Diluted earnings per
common share $3.25 $2.88 $ .84 $ .82 $ .75
Net income applicable to
common stock $ 861 $ 750 $ 222 $ 218 $ 191
Return on common equity 20.7% 21.5% 20.1% 20.3% 21.2%
Return on assets 1.81% 1.80% 1.76% 1.81% 1.75%
Tangible operating results:
Diluted earnings per
common share $3.66 $3.19 $ .94 $ .93 $ .83
Net income applicable to
common stock $ 972 $ 832 $ 252 $ 246 $ 212
Return on common equity 46.1% 37.5% 46.4% 45.9% 38.3%
Return on assets 2.13% 2.05% 2.09% 2.13% 2.00%
Fee revenue as a percentage
of total revenue (FTE) 66% 62% 68% 66% 66%
Efficiency ratio excluding
amortization of
intangibles 63% 62% 65% 62% 65%
Note: Quarterly returns
are annualized.
</TABLE>
PITTSBURGH, Jan. 15, 1999--Mellon Bank Corporation (NYSE: MEL) today reported
record 1998 diluted earnings per common share of $3.25, an increase of 13
percent compared with $2.88 per common share in 1997. The Corporation reported
net income applicable to common stock of $861 million, an increase of 15 percent
compared with $750 million for the full-year 1997.
-more-
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 2
"Mellon showed excellent momentum in the fourth quarter, capping off a year of
record earnings," said Mellon Chairman and Chief Executive Officer Martin G.
McGuinn. "For the year, our earnings per share growth of 13 percent on a
reported basis and 15 percent on a tangible basis, as well as our outstanding
returns on equity and assets, demonstrate that we are well-positioned to reward
our shareholders in 1999 and beyond."
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
Feb. 16, 1999, to shareholders of record at the close of business on Jan. 29,
1999.
Full-Year 1998
Full-year 1998 diluted tangible earnings per common share was $3.66, an increase
of 15 percent compared with $3.19 per common share in 1997. Tangible net income
applicable to common stock totaled $972 million, an increase of 17 percent
compared with $832 million for the full-year 1997.
Fee revenue was $2,921 million in 1998, up $503 million from $2,418 million in
1997. Excluding the impact on fee revenue from acquisitions and one-time gains
from the sales of the merchant card processing business in 1998 and the
corporate trust business in 1997, fee revenue increased 12 percent in 1998
compared with 1997. This increase was primarily attributable to higher trust
and investment fees, foreign exchange fees and other fee revenue.
Net interest revenue, on a fully taxable equivalent basis, was $1,499 million in
1998, up $24 million compared with $1,475 million in 1997, primarily resulting
from a higher level of interest-earning assets.
Operating expense before trust-preferred securities expense and net revenue from
acquired property was $2,940 million in 1998, up $431 million from $2,509
million in 1997. This increase primarily resulted from the impact of
acquisitions, business growth and higher amortization of mortgage servicing
assets. Excluding the effect of acquisitions and higher amortization of mortgage
servicing assets, operating expense before trust-preferred securities expense
and net revenue from acquired property increased approximately 3 percent.
Credit quality expense was $54 million in 1998, compared with $129 million in
1997. This decrease primarily resulted from lower credit card net credit
losses. Nonperforming assets totaled $140 million at Dec. 31, 1998, compared
with $140 million at Sept. 30, 1998, and $181 million at Dec. 31, 1997. The
ratio of nonperforming assets to total loans and net acquired property was .44
percent at Dec. 31, 1998, the lowest quarter-end ratio in the Corporation's
history. The ratio was .45 percent at Sept. 30, 1998, and .62 percent at Dec.
31, 1997.
Fourth Quarter 1998
Fourth quarter 1998 diluted earnings per common share was 84 cents, an increase
of 12 percent compared with 75 cents in the fourth quarter of 1997. Net income
applicable to common stock totaled $222 million in the fourth quarter of 1998,
an increase of 16 percent compared with $191 million in the fourth quarter of
1997.
-more-
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 3
Fourth quarter 1998 diluted tangible earnings per common share was 94 cents, an
increase of 14 percent compared with 83 cents in the fourth quarter of 1997.
Tangible net income applicable to common stock totaled $252 million in the
fourth quarter of 1998, an increase of 19 percent compared with $212 million in
the fourth quarter of 1997.
Fee revenue for the fourth quarter of 1998 was $799 million, up $92 million from
$707 million in the prior-year period. Excluding the impact on fee revenue from
acquisitions and one-time gains from the sales of the merchant card processing
business in 1998 and the corporate trust business in 1997, fee revenue increased
9 percent in the fourth quarter of 1998 compared with the fourth quarter of
1997. This increase was primarily attributable to higher trust and investment
fees, foreign exchange fees and other fee revenue. Excluding the gain on the
sale of the merchant card processing business and the revenue resulting from the
Newton acquisition, fee revenue increased approximately 4 percent, or at an
annualized rate of 15 percent, compared with the third quarter of 1998.
Net interest revenue, on a fully taxable equivalent basis, for the fourth
quarter of 1998 was $382 million, up $20 million compared with $362 million in
the prior-year period. This increase primarily resulted from a higher level of
interest-earning assets.
Operating expense before trust-preferred securities expense and net revenue from
acquired property for the fourth quarter of 1998 was $805 million, up $83
million from $722 million in the fourth quarter of 1997. This increase
primarily resulted from the impact of acquisitions, business growth and higher
amortization of mortgage servicing assets. Excluding the effect of acquisitions
and higher amortization of mortgage servicing assets, operating expense before
trust-preferred securities expense and net revenue from acquired property
increased approximately 2 percent.
Credit quality expense was $15 million in the fourth quarter of 1998, compared
with $61 million in the fourth quarter of 1997. The fourth quarter of 1997
included a significant loan loss provision related to the credit card portfolio.
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 approximately $2.2 trillion in assets under
management or administration, including approximately $390 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 1998 earnings by calling
(412) 236-5385 between 1 p.m. EST on Friday Jan. 15, 1999, and 5 p.m. EST on
Friday, Jan. 22, 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
January 15, 1999
Page 4
<TABLE>
<CAPTION>
Fee Revenue
- -----------
Quarter ended Year ended
--------------------------------- ---------------------
(dollar amounts Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
in millions) 1998 1998 1997 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust and investment
fee revenue:
Investment management:
Mutual fund $136 $122 $100 $ 478 $374
Private asset 63 56 51 225 182
Institutional asset 58 51 48 212 171
- -------------------------------------------------------------------------------------
Total investment
management revenue 257 229 199 915 727
Administration and custody:
Institutional trust 100 95 94 388 327
Mutual fund 32 34 36 133 133
Private asset 5 5 4 19 16
- -------------------------------------------------------------------------------------
Total administration
and custody revenue 137 134 134 540 476
Benefits consulting 59 58 54 223 108
Brokerage fees (a) 12 11 4 44 12
- -------------------------------------------------------------------------------------
Total trust and investment
fee revenue 465 432 391 1,722 1,323
Cash management and deposit
transaction charges 70 66 65 262 242
Mortgage servicing fees 48 44 56 200 213
Foreign currency and
securities trading
revenue 47 39 36 165 118
Credit card fees 22 23 24 92 97
Gain on sale of merchant
card processing business 35 - - 35 -
Gain on sale of corporate
trust business - - 43 - 43
Other (a) 112 108 92 445 382
- -------------------------------------------------------------------------------------
Total fee revenue $799 $712 $707 $2,921 $2,418
- -------------------------------------------------------------------------------------
Fee revenue as a percentage
of total revenue (FTE) 68% 66% 66% 66% 62%
Trust and investment fee
revenue as a percentage
of total revenue (FTE) (a) 39% 40% 36% 39% 34%
- -------------------------------------------------------------------------------------
</TABLE>
(a) Prior to the third quarter of 1998, brokerage fees were reported in other
fee revenue. Fourth quarter and full-year 1997 have been reclassified.
Fee revenue increased $92 million, or 13%, in the fourth quarter of 1998,
compared with the fourth quarter of 1997. Excluding the fee revenue resulting
from the acquisitions of Dreyfus Brokerage Services, Inc. in November 1997,
Founders Asset Management, LLC (Founders) in April 1998 and Newton Management
Limited (Newton) in October 1998, the gain on the sale of the merchant card
processing business in December 1998, and the gain on the sale of the corporate
trust business in November 1997, fee revenue increased 9% compared with the
prior-year period.
Trust and investment fees increased $74 million, or 19%, compared with the
prior-year period. This increase reflects new business, higher transaction
volumes and an increase in the market value of assets under
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 5
management, as well as revenue resulting from the Newton and Founders
acquisitions and the full-quarter impact of the Dreyfus Brokerage Services
acquisition. Excluding the revenue from these acquisitions, trust and
investment fees increased 9% compared with the fourth quarter of 1997.
The $58 million increase in investment management revenue in the fourth quarter
of 1998, compared with the prior-year period, resulted from a $36 million, or
35%, increase in mutual fund management revenue, a $12 million, or 23%, increase
in private asset management revenue and a $10 million, or 23%, increase in
institutional asset management revenue. These increases resulted from
acquisitions, new business and an increase in the market value of assets under
management.
Including the Founders mutual funds of approximately $7 billion and the Newton
unit trust funds of approximately $4 billion, the average net assets of
proprietary funds managed at Dreyfus/Founders/Newton in the fourth quarter of
1998 were $118 billion, up $25 billion from $93 billion in the fourth quarter of
1997 and up $10 billion from $108 billion in the third quarter of 1998. The
increase from the prior-year period primarily resulted from increases in average
net assets of equity funds and institutional taxable money market funds.
Proprietary equity funds, including the $7 billion of funds related to Founders
and the $4 billion of funds related to Newton, averaged $37 billion in the
fourth quarter of 1998, compared with $22 billion in the fourth quarter of 1997
and $32 billion in the third quarter of 1998.
Administration and custody fee revenue increased $3 million in the fourth
quarter of 1998 compared with the fourth quarter of 1997, primarily resulting
from new business and higher transaction volumes. Excluding the fees from the
corporate trust business that was sold in November 1997, from the fourth quarter
1997 results, institutional trust fees increased 8% compared with the prior-year
period. Administration and custody fee revenue increased $3 million compared
with the third quarter of 1998, primarily resulting from an increase in
securities lending revenue, which is included in institutional trust fees.
Benefits consulting fees increased $5 million in the fourth 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 full-quarter impact of the Dreyfus
Brokerage Services acquisition.
The 7% increase in cash management fees and deposit transaction charges in the
fourth 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 $8 million, or 13%, in the fourth quarter of
1998, compared with the fourth 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.
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 6
The 29% increase in foreign currency and securities trading revenue in the
fourth 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.
Credit card fees decreased $2 million in the fourth quarter of 1998, compared
with the prior-year period. In mid-December 1998, the Corporation sold its
merchant card processing business. This business generated approximately $31
million of fee and net interest revenue in 1998. The Corporation recorded a
gain of $35 million on the sale.
Other fee revenue increased $20 million in the fourth quarter of 1998, compared
with the prior-year period. This increase primarily resulted from higher gains
from the sale of assets and higher fees from many fee-based services.
Fee revenue increased $87 million compared with the third quarter of 1998.
Excluding the gain on the sale of the merchant card processing business and the
revenue resulting from the Newton acquisition, fee revenue increased
approximately 4%, or at an annualized rate of 15%, compared with the third
quarter of 1998, reflecting growth in nearly all categories.
The $503 million increase in fee revenue in the full-year 1998, compared with
the prior year, primarily resulted from the full-year impact of the July 1997
acquisition of Buck Consultants, Inc. (Buck) as well as the same factors
responsible for the fourth quarter of 1998 increase as compared to the prior-
year period. Excluding the revenue from the Buck, Dreyfus Brokerage Services,
Founders and Newton acquisitions, the gains from the sales of the merchant card
processing business in 1998 and the corporate trust business in 1997, total fee
revenue increased 12% compared with the full-year 1997. Trust and investment
fees increased 13% compared with the full-year 1997, excluding the impact of
acquisitions.
<TABLE>
<CAPTION>
Net Interest Revenue
- --------------------
Quarter ended Year ended
---------------------------------- ----------------------
Dec. 31, Sept.30, Dec. 31, Dec. 31, Dec. 31,
(dollar amounts in millions) 1998 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $382 $376 $362 $1,499 $1,475
Net interest margin (FTE) 3.86% 3.95% 4.07% 3.96% 4.24%
Average securities $ 6,141 $ 5,754 $ 5,293 $ 5,701 $ 5,593
Average loans $31,503 $30,426 $28,476 $30,411 $27,823
Average interest-earning
assets $39,427 $37,797 $35,325 $37,907 $34,777
- ---------------------------------------------------------------------------------------
</TABLE>
Net interest revenue on a fully taxable equivalent basis increased $20 million
in the fourth quarter of 1998, compared with the fourth quarter of 1997. This
increase was primarily due to the favorable
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 7
impacts of the acquisitions of Mellon United National Bank and Mellon 1st
Business Bank in February 1998, net of funding costs, as well as a higher level
of interest-earning assets.
Net interest revenue increased $24 million in the full-year 1998, compared with
the full-year 1997. This increase primarily resulted from the same factors
responsible for the fourth quarter of 1998 increase as compared to the prior-
year period as well as the full-year favorable impact of the acquisition of
Dreyfus Brokerage Services, net of funding costs. Partially offsetting these
increases were 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.
<TABLE>
<CAPTION>
Operating Expense
- -----------------
Quarter ended Year ended
---------------------------------- ---------------------
(dollar amounts in Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
millions) 1998 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Staff expense $386 $358 $354 $1,456 $1,242
Professional, legal and
other purchased services 97 72 72 297 219
Net occupancy expense 63 59 64 237 225
Equipment expense 59 42 65 181 175
Amortization of mortgage
servicing assets and
purchased credit card
relationships 47 43 33 179 118
Amortization of goodwill
and other intangible
assets 37 35 26 137 105
Other expense 116 108 108 453 425
- ---------------------------------------------------------------------------------------------
Operating expense
before trust-preferred
securities expense and
net revenue from
acquired property 805 717 722 2,940 2,509
Trust-preferred
securities expense 20 20 19 79 78
Net revenue from
acquired property - (3) (12) (6) (19)
- ---------------------------------------------------------------------------------------------
Total operating expense $825 $734 $729 $3,013 $2,568
- ---------------------------------------------------------------------------------------------
Average full-time
equivalent staff 28,500 28,400 27,500 28,300 26,400
- ---------------------------------------------------------------------------------------------
Efficiency ratio (a) 68% 66% 67% 66% 64%
Efficiency ratio excluding
amortization of goodwill
and other intangible assets 65% 62% 65% 63% 62%
- ---------------------------------------------------------------------------------------------
</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 $83 million, or 12%, in the fourth quarter of 1998,
compared with the prior-year period, resulting
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 8
from acquisitions, higher consulting expense, business growth and higher
amortization of mortgage servicing assets. The increase in consulting expense
related to strategic business and reengineering initiatives. 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%.
Operating expense before trust-preferred securities expense and net revenue from
acquired property increased $88 million in the fourth quarter of 1998, compared
with the third quarter of 1998. This increase primarily resulted from the
Newton acquisition and higher consulting, equipment and incentive expenses. The
increase in consulting expense related to strategic business and reengineering
initiatives. The increase in equipment expense was primarily due to upgrading
computer hardware. The higher level of incentive expense primarily resulted
from higher revenue in the fee based businesses, as well as higher incentive
expense for incentive plans that are linked to the Corporation's common share
price, which increased 25% in the fourth quarter of 1998.
The $431 million, or 17%, increase in operating expense before trust-preferred
securities expense and net revenue from acquired property in the full-year 1998,
compared to the full-year 1997, primarily resulted from the same factors
responsible for the fourth quarter 1998 increase as compared to the prior-year
period as well as a full-year impact of the Buck and Dreyfus Brokerage Services
acquisitions. 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%.
Income Taxes
- ------------
The Corporation's effective tax rate for 1998 was 35.1%, compared with 34.1% for
1997. It is currently anticipated that the effective tax rate for 1999 will be
approximately 37.0%.
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 9
Credit Quality Expense and Reserve for Credit Losses
- ----------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Year ended
--------------------------------- ---------------------
(dollar amounts in Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
millions) 1998 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for credit
losses $ 15 $ 15 $ 73 $ 60 $ 148
Net revenue from acquired
property - (3) (12) (6) (19)
- ----------------------------------------------------------------------------------------
Credit quality expense $ 15 $ 12 $ 61 $ 54 $ 129
---------------------------------------------------------------------------------------
Net credit (losses) recoveries:
Domestic:
Credit card $ (11) $(10) $ (20) $(40) $ (107)
Other consumer credit (4) (4) (4) (12) (16)
Commercial real estate (1) 2 (15) (3) (10)
Commercial and financial (1) (3) (2) (8) (8)
- ----------------------------------------------------------------------------------------
Total domestic (17) (15) (41) (63) (141)
International - - - - 5
- ----------------------------------------------------------------------------------------
Net credit losses (17) (15) (41) (63) (136)
- ----------------------------------------------------------------------------------------
Credit losses on assets
held for accelerated
resolution - - (65) - (65)
- ----------------------------------------------------------------------------------------
Total net credit losses $ (17) $(15) $(106) $(63) $(201)
- ----------------------------------------------------------------------------------------
Annualized net credit losses
to average loans .22% .19% 1.48% .21% .72%
Annualized net credit losses
to average loans excluding
net credit losses on assets
held for accelerated
resolution .22% .19% .56% .21% .49%
- -----------------------------------------------------------------------------------------
Reserve for credit losses
at end of period $496 $498 $475
Reserve as a percentage of
total loans 1.54% 1.60% 1.63%
- ---------------------------------------------------------
</TABLE>
The $58 million and $88 million decreases in the provision for credit losses in
the fourth quarter of 1998 compared to the fourth quarter of 1997, and the full-
year 1998 compared to the full-year 1997, respectively, resulted from lower
credit card net credit losses. The fourth quarter of 1997 included a
significant provision for credit losses related to the credit card portfolio.
The decreases in total net credit losses in the fourth quarter and full-year
1998, compared with the fourth quarter and full-year 1997 primarily resulted
from lower credit card net credit losses in 1998 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 $67 million at December 31, 1998, compared
with $86 million at September 30, 1998, and $157 million at December 31, 1997.
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 10
The decreases in net revenue from acquired property in the fourth quarter and
full-year 1998, compared to the fourth quarter and the full-year 1997, were
primarily due to lower gains on the sale of other real estate acquired (OREO)
properties.
Nonperforming Assets
- --------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30, June 30, Dec. 31,
(dollar amounts in millions) 1998 1998 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 44 $ 53 $ 55 $ 52
Commercial real estate 6 8 18 49
Other domestic 53 42 34 32
- ----------------------------------------------------------------------------------
Total nonperforming loans 103 103 107 133
Acquired property:
Real estate acquired 40 40 69 52
Reserve for real estate acquired (5) (5) (9) (9)
- ----------------------------------------------------------------------------------
Net real estate acquired 35 35 60 43
Other assets acquired 2 2 3 5
- ----------------------------------------------------------------------------------
Total acquired property 37 37 63 48
- ----------------------------------------------------------------------------------
Total nonperforming assets $ 140 $ 140 $ 170 $ 181
- ----------------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .32% .33% .35% .46%
Nonperforming assets as a percentage
of total loans and net acquired
property .44% .45% .55% .62%
- ----------------------------------------------------------------------------------
</TABLE>
Nonperforming assets were unchanged compared with September 30, 1998, and down
$41 million compared with December 31, 1997. The decrease from the prior year
end primarily resulted from lower nonperforming commercial real estate loans
offset, in part, by a higher level of nonperforming commercial loans. The ratio
of nonperforming assets to total loans and net acquired property was .44% at
December 31, 1998, the lowest quarter-end ratio in the Corporation's history.
This ratio has been lower than 1% for 18 consecutive quarters.
<PAGE>
Mellon Reports Earnings
January 15, 1999
Page 11
Selected Capital Data
- ---------------------
<TABLE>
<CAPTION>
(dollar amounts in millions, Dec. 31, Sept. 30, June 30, Dec. 31,
except per share amounts) 1998 1998 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shareholders' equity $ 4,521 $ 4,358 $ 4,234 $ 3,652
Common shareholders' equity
to assets ratio 8.90% 9.03% 8.92% 8.13%
Tangible common shareholders'
equity $ 2,268(a) $ 2,243 $ 2,078 $ 2,227
Tangible common shareholders'
equity to assets ratio (b) 4.68% 4.86% 4.59% 5.12%
Total shareholders' equity $ 4,521 $ 4,358 $ 4,234 $ 3,845
Total shareholders' equity
to assets ratio 8.90% 9.03% 8.92% 8.56%
Tier I capital ratio 6.5(c) 6.78 6.51 7.77
Total (Tier I plus Tier II)
capital ratio 10.8(c) 11.22 10.83 12.73
Leverage capital ratio 6.7(c) 7.06 6.65 8.02
Book value per common share $ 17.26 $ 16.69 $ 16.24 $ 14.39
Tangible book value per common
share $ 8.66 $ 8.59 $ 7.97 $ 8.77
Closing common stock price $ 68.75 $ 55.00 $ 69.688 $ 60.63
Market capitalization $ 18,007 $ 14,363 $ 18,168 $ 15,386
Common shares outstanding (000) 261,923 261,140 260,708 253,786
- --------------------------------------------------------------------------------
</TABLE>
(a) Includes $60 million of minority interest.
(b) Common shareholders' equity plus minority interest and less goodwill and
other intangibles divided by total assets less goodwill and other
intangibles.
(c) Estimated.
The increase in shareholders' equity at December 31, 1998, compared with
December 31, 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 December 31, 1997, was the
February 1998 redemption of the $200 million Series K preferred stock. There
were no common stock repurchases in the fourth quarter of 1998. The Corporation
repurchased approximately 500 thousand shares of its common stock in the full-
year 1998.
The decrease in the Corporation's regulatory capital ratios, compared with
September 30, 1998, and December 31, 1997, reflects an increase in goodwill and
other intangibles and a higher level of risk-adjusted assets. The Series K
preferred stock redemption also contributed to the decrease in the comparison
with the prior-year end.
<PAGE>
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
Quarter ended Year ended
(dollar amounts in millions, Dec. 31, Dec. 31,
except per share amounts; --------------------- -------------------
common shares in thousands) 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Selected key data
- -----------------
Reported operating results:
Diluted earnings per common
share $ .84 $ .75 $ 3.25 $ 2.88
Net income applicable to
common stock $ 222 $ 191 $ 861 $ 750
Return on common
shareholders' equity (a) 20.1% 21.2% 20.7% 21.5%
Return on assets (a) 1.76% 1.75% 1.81% 1.80%
Common equity to assets 8.90% 8.13% 8.90% 8.13%
Tangible operating results:
Diluted earnings per common
share (b) $ .94 $ .83 $ 3.66 $ 3.19
Net income applicable to
common stock (b) $ 252 $ 212 $ 972 $ 832
Return on common
shareholders' equity (a)(b) 46.4% 38.3% 46.1% 37.5%
Return on assets (a)(b) 2.09% 2.00% 2.13% 2.05%
Common equity to assets 4.68% 5.12% 4.68% 5.12%
Fee revenue as a percentage
of total revenue (FTE) 68% 66% 66% 62%
Efficiency ratio excluding
amortization of intangibles 65% 65% 63% 62%
Average common shares and
equivalents outstanding:
Basic 261,541 253,886 260,220 255,356
Diluted 265,748 259,430 265,207 260,829
Average balances for the period
- ---------------------------------
Money market investments $ 1,525 $ 1,397 $ 1,544 $ 1,186
Trading account securities 258 159 251 175
Securities 6,141 5,293 5,701 5,593
Loans 31,503 28,476 30,411 27,823
Total interest-earning
assets 39,427 35,325 37,907 34,777
Total assets 50,110 44,266 48,071 42,942
Total tangible assets 47,818 42,888 45,993 41,667
Deposits 34,492 31,085 33,546 30,459
Total interest-bearing
liabilities 32,406 28,123 31,009 27,677
Common shareholders'
equity 4,391 3,573 4,165 3,494
Tangible common
shareholders' equity 2,152 2,195 2,108 2,219
Total shareholders' equity 4,391 3,766 4,190 3,700
</TABLE>
_______________________
(a) Quarterly returns are 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>
Quarter ended Year ended
Dec. 31, Dec. 31,
(in millions, except ---------------- ----------------
per share amounts) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest revenue
- -----------------
Interest and fees on loans (loan
fees of $18, $23, $73 and $81) $ 614 $ 577 $2,413 $2,268
Federal funds sold and securities
under resale agreements 12 10 49 30
Interest-bearing deposits with
banks 10 6 33 26
Other money market investments 1 2 6 6
Trading account securities 4 2 15 9
Securities 98 88 376 377
----- ----- ------ ------
Total interest revenue 739 685 2,892 2,716
Interest expense
- ----------------
Interest on deposits 243 224 960 878
Federal funds purchased and
securities under repurchase
agreements 34 22 123 77
Other short-term borrowings 29 29 114 105
Notes and debentures 53 49 204 189
----- ----- ------ ------
Total interest expense 359 324 1,401 1,249
----- ----- ------ ------
Net interest revenue 380 361 1,491 1,467
Provision for credit losses 15 73 60 148
----- ----- ------ ------
Net interest revenue after
provision for credit losses 365 288 1,431 1,319
Noninterest revenue
- -------------------
Trust and investment fee revenue 465 391 1,722 1,323
Cash management and deposit
transaction charges 70 65 262 242
Mortgage servicing fees 48 56 200 213
Foreign currency and securities
trading revenue 47 36 165 118
Credit card fees 22 24 92 97
Gain on sale of merchant
card processing business 35 - 35 -
Gain on sale of corporate trust
business - 43 - 43
Other 112 92 445 382
----- ----- ------ ------
Total fee revenue 799 707 2,921 2,418
Gains on sales of securities - - 1 -
----- ----- ------ ------
Total noninterest revenue 799 707 2,922 2,418
Operating expense
- -----------------
Staff expense 386 354 1,456 1,242
Professional, legal and other
purchased services 97 72 297 219
Net occupancy expense 63 64 237 225
Equipment expense 59 65 181 175
Amortization of mortgage
servicing assets and purchased
credit card relationships 47 33 179 118
Amortization of goodwill and
other intangible assets 37 26 137 105
Other expense 116 108 453 425
Trust-preferred securities expense 20 19 79 78
Net revenue from acquired property - (12) (6) (19)
----- ----- ------ ------
Total operating expense 825 729 3,013 2,568
----- ----- ------ ------
Income before income taxes 339 266 1,340 1,169
Provision for income taxes 117 71 470 398
----- ----- ------ ------
Net income 222 195 870 771
Dividends on preferred stock - 4 9 21
----- ----- ------ ------
Net income applicable to
common stock $ 222 $ 191 $ 861 $ 750
===== ===== ====== ======
Basic net income per common share $.85 $.76 $3.31 $2.94
===== ===== ====== ======
Diluted net income per common
share $.84 $.75 $3.25 $2.88
===== ===== ====== ======
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
(dollar amounts in millions) Dec. 31, Sept. 30, June 30, Dec. 31,
1998 1998 1998 1997
<S> <C> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 2,926 $ 2,839 $ 2,993 $ 3,650
Money market investments 798 988 882 1,008
Trading account securities 193 178 126 75
Securities available for sale 5,373 4,190 3,957 2,767
Investment securities (approximate
fair value of $1,634, $1,787,
$1,899 and $2,118) 1,602 1,743 1,861 2,082
Loans, net of unearned discount
of $54, $65, $68 and $48 32,093 31,052 30,654 29,142
Reserve for credit losses (496) (498) (498) (475)
------- ------- ------- -------
Net loans 31,597 30,554 30,156 28,667
Premises and equipment 569 562 559 573
Acquired property, net of
reserves of $5, $5, $9 and $9 37 37 63 48
Goodwill and other intangibles 2,313 2,115 2,156 1,425
Mortgage servicing assets and
purchased credit card
relationships 1,132 1,031 1,010 1,075
Other assets 4,237 4,006 3,685 3,522
------- ------- ------- -------
Total assets $50,777 $48,243 $47,448 $44,892
======= ======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $31,269 $29,659 $30,230 $27,929
Deposits in foreign offices 3,114 3,294 2,967 3,376
Short-term borrowings 4,942 4,483 3,901 3,744
Other liabilities 2,637 2,454 2,122 2,434
Notes and debentures (with original
maturities over one year) 3,303 3,004 3,003 2,573
------- ------- ------- --------
Total liabilities 45,265 42,894 42,223 40,056
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial
interests in Corporation's junior
subordinated deferrable interest
debentures 991 991 991 991
Shareholders' equity
- --------------------
Preferred stock - - - 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 1,887 1,867 1,879 1,818
Retained earnings 3,353 3,244 3,124 2,884
Accumulated unrealized gains,
net of tax 25 29 19 21
Treasury stock of 32,407,960;
33,191,388; 33,623,356; and
40,545,114 shares at cost (891) (929) (935) (1,218)
------- ------- ------- -------
Total common shareholders'
equity 4,521 4,358 4,234 3,652
------- ------- ------- -------
Total shareholders' equity 4,521 4,358 4,234 3,845
------- ------- ------- -------
Total liabilities, trust-
preferred securities and
shareholders' equity $50,777 $48,243 $47,448 $44,892
======= ======= ======= =======
</TABLE>
<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) Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
1998 1998 1998 1998 1997
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Selected key data
- -----------------
Reported operating results:
Diluted earnings per common
share $ .84 $ .82 $ .81 $ .78 $ .75
Net income applicable to
common stock $ 222 $ 218 $ 215 $ 206 $ 191
Return on common
shareholders' equity (a) 20.1% 20.3% 20.8% 21.6% 21.2%
Return on assets (a) 1.76% 1.81% 1.79% 1.89% 1.75%
Common equity to assets 8.90% 9.03% 8.92% 8.62% 8.13%
Tangible operating results:
Diluted earnings per common
share (b) $ .94 $ .93 $ .91 $ .88 $ .83
Net income applicable to
common stock (b) $ 252 $ 246 $ 243 $ 231 $ 212
Return on common
shareholders' equity (a)(b) 46.4% 45.9% 49.7% 43.3% 38.3%
Return on assets (a)(b) 2.09% 2.13% 2.13% 2.18% 2.00%
Common equity to assets 4.68% 4.86% 4.59% 4.76% 5.12%
Fee revenue as a percentage
of total revenue (FTE) 68% 66% 66% 66% 66%
Efficiency ratio excluding
amortization of intangibles 65% 62% 63% 62% 65%
Average common shares and
equivalents outstanding:
Basic 261,541 261,078 260,495 257,714 253,886
Diluted 265,748 265,774 265,848 263,136 259,430
Average balances for the period
- -------------------------------
Money market investments $ 1,525 $ 1,351 $ 1,597 $ 1,712 $ 1,397
Trading account securities 258 266 239 242 159
Securities 6,141 5,754 5,596 5,301 5,293
Loans 31,503 30,426 30,302 29,389 28,476
Total interest-earning assets 39,427 37,797 37,734 36,644 35,325
Total assets 50,110 47,937 47,965 46,229 44,266
Total tangible assets 47,818 45,797 45,804 44,518 42,888
Deposits 34,492 33,399 33,548 32,725 31,085
Total interest-bearing
liabilities 32,406 31,104 31,145 29,348 28,123
Common shareholders' equity 4,391 4,265 4,126 3,873 3,573
Tangible common shareholders'
equity 2,152 2,125 1,965 2,162 2,195
Total shareholders' equity 4,391 4,265 4,126 3,974 3,766
</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 Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
share amounts) 1998 1998 1998 1998 1997
-------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $18, $21, $17, $17 and $23) $ 614 $ 616 $ 606 $ 577 $ 577
Federal funds sold and securities
under resale agreements 12 12 12 13 10
Interest-bearing deposits with banks 10 8 6 9 6
Other money market investments 1 1 3 1 2
Trading account securities 4 4 3 4 2
Securities 98 95 93 90 88
----- ----- ----- ----- -----
Total interest revenue 739 736 723 694 685
Interest expense
- ----------------
Interest on deposits 243 248 240 229 224
Federal funds purchased and
securities under repurchase
agreements 34 35 30 24 22
Other short-term borrowings 29 27 30 28 29
Notes and debentures 53 51 52 48 49
----- ----- ----- ----- -----
Total interest expense 359 361 352 329 324
----- ----- ----- ----- -----
Net interest revenue 380 375 371 365 361
Provision for credit losses 15 15 15 15 73
----- ----- ----- ----- -----
Net interest revenue after
provision for credit losses 365 360 356 350 288
Noninterest revenue
- -------------------
Trust and investment fee revenue 465 432 429 396 391
Cash management and deposit
transaction charges 70 66 65 61 65
Mortgage servicing fees 48 44 53 55 56
Foreign currency and securities
trading revenue 47 39 38 41 36
Credit card fees 22 23 23 24 24
Gain on sale of merchant card
processing business 35 - - - -
Gain on sale of corporate trust
business - - - - 43
Other 112 108 104 121 92
----- ----- ----- ----- -----
Total fee revenue 799 712 712 698 707
Gains on sales of securities - - 1 - -
----- ----- ----- ----- -----
Total noninterest revenue 799 712 713 698 707
Operating expense
- -----------------
Staff expense 386 358 355 357 354
Professional, legal and other
purchased services 97 72 67 61 72
Net occupancy expense 63 59 59 56 64
Equipment expense 59 42 41 39 65
Amortization of mortgage
servicing assets and purchased
credit card relationships 47 43 44 45 33
Amortization of goodwill and
other intangible assets 37 35 35 30 26
Other expense 116 108 120 109 108
Trust-preferred securities expense 20 20 19 20 19
Net revenue from acquired property - (3) (2) (1) (12)
----- ----- ----- ----- -----
Total operating expense 825 734 738 716 729
----- ----- ----- ----- -----
Income before income taxes 339 338 331 332 266
Provision for income taxes 117 120 116 117 71
----- ----- ----- ----- -----
Net income 222 218 215 215 195
Dividends on preferred stock - - - 9 4
----- ----- ----- ----- -----
Net income applicable to
common stock $ 222 $ 218 $ 215 $ 206 $ 191
===== ===== ===== ===== =====
Basic net income per common share $ .85 $ .84 $ .82 $ .80 $ .76
===== ===== ===== ===== =====
Diluted net income per common share $ .84 $ .82 $ .81 $ .78 $ .75
===== ===== ===== ===== =====
</TABLE>
<PAGE>
EXHIBIT 99.2
[MELLON LOGO]
News Release
Contact: Media Analysts Corporate Affairs
Stephen K. Dishart Donald J. MacLeod One Mellon Bank Center
(412) 234-0850 (412) 234-5601 Pittsburgh, PA 15258-0001
_______________________________________________________________________________
FOR IMMEDIATE RELEASE
MELLON TO SELL MORTGAGE, CREDIT CARD AND NETWORK SERVICES BUSINESSES
--To Focus Its Resources on Businesses with Greatest Return Potential--
--Enhances Stock Buyback Program--
PITTSBURGH, Jan. 15, 1999--Mellon Bank Corporation (NYSE: MEL) today announced
that it plans to sell its mortgage business, credit card portfolio and Network
Services transaction processing unit as part of an initiative to sharpen its
strategic focus on businesses with the highest return potential.
Mellon will retain its jumbo mortgage loan business conducted
nationwide through The Boston Company. Consistent with Mellon's overall strategy
to focus on customer relationships, the large-balance jumbo mortgages are a key
product particularly for private banking and private asset management customers.
"While mortgage, credit card and Network Services do not fit with
Mellon's competitive strengths and long-range focus, each has strong product and
customer positions that offer greater potential in the hands of organizations
better positioned to leverage their strengths," said Mellon Chairman and Chief
Executive Officer Martin G. McGuinn. "Our commitment to being the best
performing financial services company requires that we continually evaluate our
lines of business against the key objectives of our strategy. The future of
Mellon and its competitive edge are in those financial services businesses
through which our market position, expertise and technology enhance our ability
to achieve sustainable, profitable growth.
-more-
<PAGE>
Mellon Plans Divestitures
Jan. 15, 1999
Page 2
"Taking these steps is consistent with our focus on sustainable
earnings growth and returns, not balance sheet size," said McGuinn. "In
particular, the sales of the credit card and mortgage businesses will reduce our
exposure to higher-risk assets and reduce potential earnings volatility by
eliminating approximately $3.5 billion in loans and mortgage servicing rights
from Mellon's balance sheet."
Proceeds from the sales of the three units will be invested in Mellon's
remaining businesses, used for acquisitions or to repurchase common stock.
Regarding repurchases, Mellon's board of directors today approved an enhancement
to an existing common share repurchase authorization. Following the action, the
Corporation is authorized to repurchase an aggregate of 10 million shares of
Mellon's common stock.
The combined impact of the divestitures is expected to reduce Mellon's
balance sheet by more than $4 billion. Subject to any necessary regulatory
approvals, the transactions are expected to be completed by the end of the third
quarter of 1999.
Goldman Sachs & Co. will advise Mellon on the sales of the mortgage and
credit card businesses. Morgan Stanley Dean Witter & Co. will be the adviser in
connection with the sale of Network Services.
Separately today, Mellon reported it achieved record 1998 diluted
earnings per common share of $3.25, an increase of 13 percent, compared with
$2.88 per common share in 1997. The results place the Corporation's return on
equity at 20.7 percent and return on assets at 1.81 percent. Mellon reported net
income applicable to common stock of $861 million for the year, up 15 percent
over 1997. On a tangible basis (excluding goodwill amortization), Mellon's
earnings per share were up 15 percent for the year, while its ROE and ROA were
at 46.1 percent and 2.13 percent, respectively. (See separate release for
details.)
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 approximately $2.2 trillion in assets
under management or administration, including approximately $390 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, Mellons 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.
# # #
