<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) - July 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 July 20, 1999, Mellon Bank Corporation
announced second quarter 1999 results of operations.
On July 21, 1999, Mellon Bank (MD) National Association entered into
an agreement with Sandy Spring National Bank of Maryland, a subsidiary
of Sandy Spring Bancorp, Inc., providing for the sale by Mellon Bank
(MD) of seven retail offices located in Montgomery and Anne Arundel
counties, Maryland and Northern Virginia together with approximately
$235 million in deposits and a portfolio of consumer and small
business loans. The sale, which is subject to regulatory approval, is
expected to be completed by the end of the third quarter.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Description
Number
99.1 Mellon Bank Corporation Press Release, dated July 20, 1999, announcing
second quarter earnings.
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: July 21, 1999 By: /s/ Steven G. Elliott
Steven G. Elliott
Senior Vice Chairman and Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Method of Filing
<S> <C> <C>
99.1 Press Release dated Filed herewith
July 20, 1999
</TABLE>
<PAGE>
EXHIBIT 99.1
[LOGO of Mellon APPEARS HERE]
News Release
Contact: MEDIA: ANALYSTS:
----- -----------------
Stephen K. Dishart Donald J. MacLeod Corporate Affairs
(412) 234-0850 (412) 234-5601 One Mellon Bank Center
Glenn R. Boyet David T. Lamar Pittsburgh, PA 15258-0001
(412) 236-0082 (412) 234-4633
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
MELLON REPORTS RECORD SECOND QUARTER 1999 RESULTS
-------------------------------------------------
. Quarterly Operating Earnings Per Share at 45 Cents, Up 13 Percent Over Last
Year
. Return on Common Equity is 21.4 Percent and Return on Assets is 1.90
Percent, Excluding a Net Gain from Divestitures and Nonrecurring Expenses
. Quarterly Tangible Operating Earnings Per Share at 50 Cents, Up 11 Percent
Over Last Year
. Return on Tangible Common Equity is 41.1 Percent and Return on Tangible
Assets is 2.23 Percent
. Declares Regular Quarterly Common Stock Dividend
<TABLE>
<CAPTION>
Financial Highlights Quarter ended Six months ended
---------------------------------- --------------------
(dollar amounts in millions, June 30, March 31, June 30, June 30, June 30,
except per share amounts) 1999 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results (a):
Diluted earnings per common share (b) $ .45 $ .43 $ .40 $ .88 $ .79
Net income applicable to common stock $ 236 $ 231 $ 215 $ 467 $ 421
Return on common equity (annualized) 21.4% 20.9% 20.8% 21.2% 21.2%
Return on assets (annualized) 1.90% 1.84% 1.79% 1.87% 1.84%
Tangible operating results (a):
Diluted earnings per common share (b) $ .50 $ .49 $ .45 $ .99 $ .89
Net income applicable to common stock $ 266 $ 260 $ 243 $ 526 $ 474
Return on common equity (annualized) 41.1% 40.4% 44.1% 40.8% 41.3%
Return on assets (annualized) 2.23% 2.16% 2.12% 2.19% 2.14%
Reported results:
Diluted earnings per common share (b) $ .45 $ .48 $ .40 $ .93 $ .79
Net income applicable to common stock $ 238 $ 254 $ 215 $ 492 $ 421
Return on common equity (annualized) 21.6% 23.1% 20.8% 22.3% 21.2%
Return on assets (annualized) 1.92% 2.03% 1.79% 1.97% 1.84%
Fee revenue as a percentage of net interest
and fee revenue (FTE) 69% 68% 66% 68% 66%
Efficiency ratio excluding amortization of
intangibles 62% 62% 63% 62% 63%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Operating and tangible operating results for the second quarter of 1999
exclude a $38 million after-tax net gain from divestitures and $36 million
of nonrecurring expenses after taxes. The first quarter of 1999 excludes 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.
Tangible results exclude the after-tax impact of the amortization of
goodwill and other intangibles from purchase acquisitions.
(b) Earnings per common share have been restated to reflect the two-for-one
common stock split distributed on May 17, 1999.
---more---
[LOGO OF Mellon APPEARS HERE]
[LOGO OF Dreyfus APPEARS HERE] [LOGO OF THE BOSTON COMPANY
APPEARS HERE]
The Dreyfus Corporation and The Boston Company are companies of Mellon Bank
Corporation.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 2
PITTSBURGH, July 20, 1999--Mellon Bank Corporation (NYSE: MEL) today reported
record second quarter 1999 diluted operating earnings per common share of 45
cents, an increase of 13 percent compared with 40 cents per common share in the
second quarter of 1998. Operating net income applicable to common stock totaled
$236 million in the second quarter of 1999, an increase of 10 percent compared
with $215 million in the second quarter of 1998. In the first quarter of 1999,
diluted operating earnings per common share totaled 43 cents and operating net
income applicable to common stock was $231 million. Earnings per common share
amounts have been restated to reflect the two-for-one common stock split
distributed on May 17, 1999.
"We are pleased that our strong second quarter earnings show that we are already
benefiting from the sharpening of our strategic focus on our high-growth, high-
return businesses," said Martin G. McGuinn, Mellon chairman and chief executive
officer. "We also made two significant announcements in the second quarter:
ShareSuccess, our broad-based employee stock ownership program which directly
links employee and shareholder interests, and that our mission-critical systems
are ready for the year 2000."
The Corporation also declared a regular quarterly common dividend of 20 cents
per share on a post-split basis. This cash dividend is payable on Aug. 16, 1999,
to shareholders of record at the close of business on July 30, 1999.
Fee revenue for the second quarter of 1999 was impacted by the March 1999 sale
of the credit card business. Excluding credit card revenue from the prior
periods, fee revenue, which totaled $787 million in the second quarter of 1999,
increased $98 million compared with the second quarter of 1998 and $16 million
compared with the first quarter of 1999. Excluding the impact on fee revenue
from the sale of the credit card business and the October 1998 acquisition of
Newton Management Limited, fee revenue increased 10 percent in the second
quarter of 1999 compared with the second quarter of 1998. This increase was led
by higher investment management revenue, up 11 percent over the prior-year
period excluding the Newton acquisition. The $16 million, or 8 percent
annualized, increase excluding credit card revenue, compared with the first
quarter of 1999, primarily resulted from higher trust and investment management
revenue.
Net interest revenue on a fully taxable equivalent basis for the second quarter
of 1999 was $363 million, down $11 million compared with $374 million in the
prior-year period and down $8 million from $371 million in the first quarter of
1999. These decreases resulted from the sale of the credit card business.
Excluding the net interest revenue generated by the credit card business in the
prior periods, net interest revenue increased $4 million compared with the
second quarter of 1998 and $7 million compared with the first quarter of 1999,
reflecting a higher level of interest free funds.
---more---
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 3
Operating expense before trust-preferred securities expense and net revenue from
acquired property for the second quarter of 1999 was $809 million, up $88
million from $721 million in the second quarter of 1998 and up $49 million from
$760 million in the first quarter of 1999. These increases primarily resulted
from $56 million of nonrecurring expenses recorded in the second quarter of 1999
as well as the impact of acquisitions and business growth. In the second quarter
of 1999, the Corporation recorded a $30 million charitable contribution expense
for a contribution to the Mellon Bank Foundation, as well as $26 million of
expenses primarily related to replacing obsolete equipment and closing
facilities as part of Mellon's Third Century strategic initiatives. Excluding
the effect of the nonrecurring expenses, acquisitions and the credit card
divestiture, operating expense before trust-preferred securities expense and net
revenue from acquired property increased 2 percent compared with the second
quarter of 1998 and 1 percent compared with the first quarter of 1999.
Credit quality expense was $5 million in the second quarter of 1999 compared
with $13 million in the second quarter of 1998 and $15 million in the first
quarter of 1999. The lower expense in the second quarter of 1999 compared with
the prior periods primarily resulted from a lower provision for credit losses
due to the sale of the credit card business, as well as higher net revenue from
acquired property. Nonperforming assets totaled $142 million at June 30, 1999,
compared with $161 million at March 31, 1999, and $170 million at June 30, 1998.
The ratio of nonperforming assets to total loans and net acquired property was
.46 percent at June 30, 1999, compared with .53 percent at March 31, 1999, and
.55 percent at June 30, 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 approximately $2.4 trillion in assets under
management, administration or custody, including approximately $415 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 in the United States, and Newton Management Limited in the
United Kingdom, place Mellon as one of the world's leading managers of mutual
funds. Mellon also is a global leader in benefits consulting through its Buck
Consultants, Inc. subsidiary in New York. Headquartered in Pittsburgh, Mellon's
principal subsidiary is Mellon Bank, N.A.
We invite you to hear taped comments from Steven G. Elliott, Mellon senior vice
chairman and chief financial officer, regarding the Corporation's second quarter
1999 earnings by calling (412) 236-5385 beginning at approximately 1 p.m. EDT or
30 minutes after this press release is available on the newswire on Tuesday,
July 20, 1999, through 5 p.m. EDT on Tuesday, July 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
July 20, 1999
Page 4
Noninterest Revenue
- -------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
---------------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
(dollar amounts in millions) 1999 1999 1998 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trust and investment fee
revenue:
Investment management:
Mutual fund $ 149 $ 144 $ 120 $ 293 $ 220
Private asset 73 71 54 144 106
Institutional asset 62 63 53 125 103
- ------------------------------------------------------------------------------------
Total investment
management revenue 284 278 227 562 429
Administration and custody:
Institutional trust 104 100 98 204 193
Mutual fund 38 34 34 72 67
Private asset 5 5 5 10 9
- ------------------------------------------------------------------------------------
Total administration and
custody revenue 147 139 137 286 269
Benefits consulting 61 56 54 117 106
Brokerage fees 16 15 11 31 21
- ------------------------------------------------------------------------------------
Total trust and investment
fee revenue 508 488 429 996 825
Cash management and deposit
transaction charges 70 66 65 136 126
Mortgage servicing fees 51 52 53 103 108
Foreign currency and securities
trading revenue 45 43 38 88 79
Credit card fees - 18 23 18 47
Other 113 122 104 235 225
- ------------------------------------------------------------------------------------
Total fee revenue 787 789 712 1,576 1,410
Net gain from divestitures 59 83 - 142 -
Gains on sales of securities - - 1 - 1
- ------------------------------------------------------------------------------------
Total noninterest revenue $ 846 $ 872 $ 713 $1,718 $1,411
- ------------------------------------------------------------------------------------
Fee revenue as a percentage
of net interest and fee
revenue (FTE) 69% 68% 66% 68% 66%
Trust and investment fee revenue
as a percentage of net interest
and fee revenue (FTE) 44% 42% 39% 43% 38%
- ------------------------------------------------------------------------------------
2nd Qtr. 1999 2nd Qtr. 1999 Six Mo. 1999
over over over
2nd Qtr. 1998 1st Qtr. 1999 Six Mo. 1998
- ------------------------------------------------------------------------------------
Fee revenue growth (a) 10% 8% (b) 11%
- ------------------------------------------------------------------------------------
</TABLE>
(a) Excluding credit card fees, the effect of acquisitions and fees from the
electronic filing of income tax returns.
(b) Presented on an annualized basis.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 5
Fee revenue
Fee revenue increased $75 million, or 11%, in the second quarter of 1999
compared with the second quarter of 1998. Fee revenue in the second quarter of
1999 was impacted by the March 1999 sale of the credit card business and the
October 1998 acquisition of Newton Management Limited (Newton). Excluding credit
card fees from the second quarter of 1998 and fee revenue resulting from the
Newton acquisition, fee revenue increased 10% compared with the prior-year
period, primarily due to higher investment management revenue.
Trust and investment fee revenue increased $79 million, or 19%, compared with
the second quarter of 1998. 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 acquisition. Excluding
the revenue from this acquisition, trust and investment fee revenue increased
12% compared with the second quarter of 1998.
The $57 million increase in investment management revenue in the second quarter
of 1999 compared with the prior-year period resulted from a $29 million, or 25%,
increase in mutual fund management revenue, a $19 million, or 34%, increase in
private asset management revenue and a $9 million, or 18%, increase in
institutional asset management revenue. These increases resulted from the Newton
acquisition, net new business and an increase in the market value of assets
under management.
The average net assets of proprietary funds managed at Dreyfus/Founders/
Newton in the second quarter of 1999 were $126 billion, up $17 billion from $109
billion in the second quarter of 1998 and up $1 billion from $125 billion in the
first quarter of 1999. 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 averaged $44 billion in the
second quarter of 1999, compared with $33 billion in the second quarter of 1998
and $42 billion in the first quarter of 1999.
Administration and custody fee revenue increased $10 million, or 7%, in the
second quarter of 1999 compared with the second quarter of 1998. This increase
resulted from a $6 million, or 7%, increase in institutional trust and custody
revenue, primarily the result of net new business and higher transaction
volumes, and a $4 million, or 8%, increase in mutual fund administration
revenue. The growth within institutional trust and custody revenue was tempered
by the contribution of clients to the Russell/Mellon Analytical Services Inc.
joint venture. The results of this joint venture are accounted for 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. Including
the institutional trust and custody gross revenue generated by the Corporation's
joint ventures that provide institutional trust and custody services,
institutional trust and custody revenue increased $23 million, or 22%, compared
with the second quarter of 1998 and $5 million, or 4%, compared with the first
quarter of 1999. Mutual fund administration and custody fees are expected to be
adversely impacted
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 6
beginning in the second quarter of 2000 as a long-term contract with a third
party expires in May 2000. Fees from this contract totaled approximately $22
million in the second quarter of 1999.
Benefits consulting fees increased $7 million, or 14%, in the second quarter of
1999 compared with the prior-year period, and increased $5 million, or 11%,
compared with the first quarter of 1999, primarily resulting from new business
and increased project activity with existing clients. The $5 million, or 38%,
increase in brokerage fees in the second quarter of 1999 compared to the
prior-year period primarily resulted from higher trading volumes. Dreyfus
Brokerage Services, Inc. averaged approximately 9,800 trades per day in the
second quarter of 1999, compared with approximately 9,600 trades per day in the
first quarter of 1999 and 5,900 trades per day in the second quarter of 1998.
The $5 million, or 7%, increase in cash management fees and deposit transaction
charges in the second quarter of 1999, compared with the prior-year period,
primarily resulted from higher volumes.
Mortgage servicing fees decreased $2 million, or 4%, in the second quarter of
1999 compared with the second quarter of 1998. This decrease primarily resulted
from a lower principal balance of mortgages serviced.
Foreign currency and securities trading revenue increased $7 million, or 19%, in
the second 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.
The absence of credit card fees in the second quarter of 1999 resulted from the
divestiture of the credit card business.
Other fee revenue increased $9 million, or 8%, in the second quarter of 1999,
compared with the prior-year period. This increase primarily resulted from
increased revenue from many fee-based services. Other fee revenue includes the
fee revenue generated by the network services transaction processing unit that
was sold on June 30, 1999. This business generated $14 million and $27 million
of fee revenue, respectively, in the second quarter and first six months of
1999.
As discussed previously, the Corporation has entered into several joint
ventures, including shareholder services and global custody joint ventures. The
Corporation's joint ventures generated approximately $115 million of gross fee
revenue in the second quarter of 1999, compared with approximately $100 million
in the first quarter of 1999 and approximately $70 million in the second quarter
of 1998. The net results of the Corporation's interest in these ventures are
primarily recorded as other fee revenue in addition to trust and investment
revenue, as previously discussed.
Fee revenue, excluding credit card revenue, increased $16 million, or 2%, or at
an annualized rate of 8%, compared with the first quarter of 1999. This increase
resulted from growth in trust and investment fee revenue. Compared with the
first quarter of 1999, trust and investment fee revenue increased 4%, or at an
annualized rate of 17%.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 7
Fee revenue totaled $1.576 billion in the first six months of 1999, a $166
million increase compared with $1.410 billion in the first six months of 1998.
This increase primarily resulted from the same factors responsible for the
second quarter of 1999 increase as compared to the second quarter of 1998 as
well as fee revenue resulting from the acquisition of Founders Asset Management,
LLC in April of 1998. This increase was partially offset by the elimination of
fees from the electronic filing of income tax returns, a service which was
discontinued at the end of 1998. Excluding credit card fees, fee revenue
resulting from acquisitions and fees from the electronic filing of income tax
returns in the first six months of 1998, fee revenue increased 11% compared with
the first six months of 1998.
Net gain from divestitures
In January 1999, the Corporation announced its intentions to sell its credit
card business, mortgage businesses and network services transaction processing
unit. In the second quarter of 1999, the Corporation recorded a $59 million
pre-tax net gain from completed and pending divestitures. The after-tax gain
from these transactions totaled $38 million, or $.07 per common share. The net
gain primarily resulted from a gain on the sale of the network services
transaction processing unit, which was completed on June 30, 1999, partially
offset by an adjustment to the write-down that was recorded in the first quarter
of 1999 to reflect the currently estimated sales proceeds to be received for the
residential mortgage business. Including the $83 million pre-tax net gain from
the first quarter of 1999, the pre-tax net gain from completed and pending
divestitures totaled $142 million for the first half of 1999. The commercial
mortgage transaction, which is closing on a portfolio-by-portfolio basis, is
expected to be completed during the third quarter of 1999. The Corporation
currently expects to complete the sale of the residential mortgage business by
the end of the third quarter of 1999.
Net Interest Revenue
- --------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
------------------------------ ------------------
June 30, March 31, June 30, June 30, June 30,
(dollar amounts in millions) 1999 1999 1998 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest revenue (FTE) $363 $371 $374 $734 $741
Net interest margin (FTE) 3.74% 3.78% 3.97% 3.76% 4.02%
Average securities $ 6,652 $ 6,767 $ 5,596 $ 6,709 $ 5,450
Average loans $30,504 $31,467 $30,302 $30,983 $29,848
Average interest-earning
assets $39,015 $39,811 $37,734 $39,410 $37,192
- ------------------------------------------------------------------------------------
</TABLE>
Net interest revenue on a fully taxable equivalent basis in the second quarter
of 1999 decreased $11 million compared with the second quarter of 1998 and $8
million compared with the first quarter of 1999. These decreases resulted from
the sale of the credit card business. Excluding the net interest revenue
generated by the credit card business in the prior periods, net interest revenue
increased $4 million compared with
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 8
the second quarter of 1998 and $7 million compared with the first quarter of
1999, reflecting a higher level of interest free funds.
Net interest revenue decreased $7 million in the first six months of 1999
compared with the prior-year period. This decrease resulted from the sale of the
credit card business, partially offset by a higher level of interest-free funds.
Excluding the net interest revenue generated by the credit card business in the
first quarter of 1999 and first half of 1998, net interest revenue increased $6
million compared with the first six months of 1998.
Operating Expense
- -----------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
------------------------------ ------------------
June 30, March 31, June 30, June 30, June 30,
(dollar amounts in millions) 1999 1999 1998 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Staff expense $ 397 $ 391 $ 355 $ 788 $ 712
Professional, legal and other
purchased services 73 71 67 144 128
Net occupancy expense 64 61 59 125 115
Equipment expense 63 41 41 104 80
Amortization of mortgage
servicing assets and purchased
credit card relationships 37 42 44 79 89
Amortization of goodwill and
other intangible assets 37 37 35 74 65
Other expense 138 117 120 255 229
- ------------------------------------------------------------------------------------
Operating expense before
trust-preferred securities
expense and net revenue
from acquired property 809 760 721 1,569 1,418
Trust-preferred securities
expense 19 20 19 39 39
Net revenue from acquired
property (5) - (2) (5) (3)
- ------------------------------------------------------------------------------------
Total operating expense $ 823 $ 780 $ 738 $1,603 $1,454
- ------------------------------------------------------------------------------------
Average full-time
equivalent staff 28,700 29,100 28,600 28,900 28,200
- ------------------------------------------------------------------------------------
Efficiency ratio (a) 65% 65% 66% 65% 66%
Efficiency ratio excluding
amortization of goodwill
and other intangible assets 62% 62% 63% 62% 63%
- ------------------------------------------------------------------------------------
2nd Qtr. 1999 2nd Qtr. 1999 Six Mo. 1999
over over over
2nd Qtr. 1998 1st Qtr. 1999 Six Mo. 1998
- ------------------------------------------------------------------------------------
Operating expense growth (b) 2% 3% (c) 3%
- ------------------------------------------------------------------------------------
</TABLE>
(a) Operating expense before trust-preferred securities expense, net revenue
from acquired property and second quarter 1999 nonrecurring expenses, as a
percentage of revenue, computed on a taxable equivalent basis, excluding
the net gain on divestitures and the sale of securities.
(b) Operating expense before trust-preferred securities expense and net revenue
from acquired property excluding nonrecurring expenses and the effect of
acquisitions and the credit card divestiture.
(c) Presented on an annualized basis.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 9
Operating expense before trust-preferred securities expense and net revenue from
acquired property was $809 million in the second quarter of 1999, including $56
million of nonrecurring expenses. In the second quarter of 1999, the Corporation
recorded a $30 million charitable contribution expense for a contribution to the
Mellon Bank Foundation. This expense was classified as other expense. In
addition, the Corporation recorded $26 million of expenses in connection with
replacing obsolete computer equipment and closing facilities as part of Mellon's
Third Century initiatives, a strategic planning process designed to drive
long-term growth in the Corporation while continuing to produce high returns on
capital. The Third Century expenses were recorded as $21 million of equipment
expense and $5 million of net occupancy expense. Excluding these expenses, the
effect of acquisitions and expenses related to the credit card business,
operating expense before trust-preferred securities expense and net revenue from
acquired property increased 2% compared with the second quarter of 1998 and
increased 1% compared with the first quarter of 1999.
Operating expense before trust-preferred securities expense and net revenue from
acquired property increased $151 million in the first six months of 1999
compared with the prior-year period. This increase resulted from the same
factors responsible for the second quarter of 1999 increase as compared with the
second quarter of 1998. Excluding the effect of the nonrecurring expenses,
acquisitions and expenses related to the credit card business, operating expense
before trust-preferred securities expense and net revenue from acquired property
increased 3% compared with the prior-year period.
Income Taxes
- ------------
The Corporation's effective tax rate for the second quarter of 1999 was 36.4%
compared with 35.3% for the second quarter of 1998. Excluding the effect of
divestitures and nonrecurring expenses, the effective tax rate was 36.5% for the
second quarter of 1999. It is currently anticipated that the effective tax rate,
excluding the effect of divestitures and nonrecurring expenses, will remain at
approximately 36.5% for the remainder of 1999.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 10
Credit Quality Expense, Net Credit Losses and Reserve for Credit Losses
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter ended Six months ended
------------------------------ --------------------
June 30, March 31, June 30, June 30, June 30,
(dollar amounts in millions) 1999 1999 1998 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for credit losses $ 10 $ 15 $ 15 $ 25 $ 30
Net revenue from acquired
property (5) - (2) (5) (3)
- -----------------------------------------------------------------------------------
Credit quality expense $ 5 $ 15 $ 13 $ 20 $ 27
- -----------------------------------------------------------------------------------
Net credit (losses) recoveries:
Credit card $ - $ (10) $ (10) $ (10) $ (19)
Other consumer credit (4) (4) (1) (8) (4)
Commercial real estate - - - - (4)
Commercial and financial (7) (3) (2) (10) (4)
- -----------------------------------------------------------------------------------
Total net credit losses $ (11) $ (17) $ (13) $ (28) $ (31)
- -----------------------------------------------------------------------------------
Annualized net credit losses
to average loans .13% .22% .17% .18% .21%
- -----------------------------------------------------------------------------------
Reserve for credit losses at
end of period $409 $410 $498
Reserve as a percentage of
total loans 1.34% 1.34% 1.62%
- --------------------------------------------------------------
</TABLE>
Credit quality expense and total net credit losses for the second quarter of
1999 were lower compared with both the second quarter of 1998 and the first
quarter of 1999. The reduction resulted from the sale of the credit card
business as well as higher net revenue from acquired property.
The $89 million decrease in the reserve for credit losses at June 30, 1999,
compared with June 30, 1998, also was due to the sale of the credit card
business in March 1999. In conjunction with this sale, $84 million that had been
associated with the credit card portfolio was removed from the reserve for
credit losses.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 11
<TABLE>
<CAPTION>
Nonperforming Assets
- --------------------
June 30, March 31, Dec. 31, June 30,
(dollar amounts in millions) 1999 1999 1998 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic nonperforming loans:
Consumer mortgage $ 43 $ 44 $ 44 $ 55
Commercial real estate 6 6 6 18
Other domestic 72 77 53 34
- ------------------------------------------------------------------------------------
Total nonperforming loans 121 127 103 107
Acquired property:
Real estate acquired 24 37 40 69
Reserve for real estate acquired (4) (5) (5) (9)
- -----------------------------------------------------------------------------------
Net real estate acquired 20 32 35 60
Other assets acquired 1 2 2 3
- ------------------------------------------------------------------------------------
Total acquired property 21 34 37 63
- ------------------------------------------------------------------------------------
Total nonperforming assets $142 $161 $140 $170
- ------------------------------------------------------------------------------------
Nonperforming loans as a
percentage of total loans .40% .41% .32% .35%
Nonperforming assets as a
percentage of total loans and
net acquired property .46% .53% .44% .55%
- ------------------------------------------------------------------------------------
</TABLE>
Nonperforming assets decreased $19 million compared with March 31, 1999, and $28
million compared with June 30, 1998. These decreases primarily resulted from
sales of acquired property.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 12
<TABLE>
<CAPTION>
Selected Capital Data
- ---------------------
(dollar amounts in millions, June 30, March 31, Dec. 31, June 30,
except per share amounts) 1999 1999 1998 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total shareholders' equity $ 4,303 $ 4,502 $ 4,521 $ 4,234
Total shareholders' equity
to assets ratio 8.77% 9.12% 8.90% 8.92%
Tangible shareholders' equity (a) $ 2,498 $ 2,659 $ 2,641 $ 2,378
Tangible shareholders' equity to
assets ratio (b) 5.29% 5.60% 5.41% 5.22%
Tier I capital ratio 6.9(c) 6.89 6.53 6.51
Total (Tier I plus Tier II)
capital ratio 11.2(c) 11.22 10.80 10.83
Leverage capital ratio 6.7(c) 6.60 6.73 6.65
Book value per common share (d) $ 8.37 $ 8.64 $ 8.63 $ 8.12
Tangible book value per common
share (d) $ 4.86 $ 5.11 $ 5.04 $ 4.56
Closing common stock price (d) $ 36.38 $ 35.19 $ 34.38 $ 34.84
Market capitalization $18,704 $18,335 $18,007 $18,168
Common shares outstanding (000)(d) 514,211 521,064 523,846 521,416
- ------------------------------------------------------------------------------------
</TABLE>
(a) Includes $64 million, $62 million, $60 million and $- million,
respectively, of minority interest, primarily related to Newton. In
addition, includes $368 million, $371 million, $373 million and $300
million, respectively, of tax benefits related to tax deductible goodwill
and other intangibles.
(b) Shareholders' equity plus minority interest less goodwill and other
intangibles recorded in connection with purchase acquisitions divided by
total assets less goodwill and other intangibles. Beginning December 31,
1998, the amount of goodwill and other intangibles subtracted from
shareholders' equity and total assets is net of any tax benefit. Prior
period amounts and ratios were restated.
(c) Estimated.
(d) Prior period amounts have been restated to reflect the two-for-one common
stock split distributed on May 17, 1999.
On April 20, 1999, the Corporation announced a two-for-one split of its common
stock. The additional shares resulting from the split were distributed on May
17, 1999, to shareholders of record at the close of business on May 3, 1999.
The increase in shareholders' equity at June 30, 1999, compared with June 30,
1998, primarily reflects earnings retention partially offset by common stock
repurchases. The decrease in shareholders' equity compared with March 31, 1999,
resulted from common stock repurchases partially offset by earnings retention.
During the second quarter of 1999, 8 million shares of common stock were
repurchased, bringing year-to-date repurchases to 13.4 million shares and
leaving 6.6 million shares available for repurchase as authorized by the board
of directors in January 1999.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 13
SUMMARY DATA
Mellon Bank Corporation
<TABLE>
<CAPTION>
Quarter ended Six months ended
(dollar amounts in millions, June 30, June 30,
except per share amounts; ------------------------ -----------------------
common shares in thousands) 1999 1998 1999 1998
- ---------------------------------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Selected key data
Diluted earnings per common share:
Operating $.45 (a) $.40 $.88 (a) $.79
Tangible operating (b) .50 (a) .45 .99 (a) .89
Reported .45 .40 .93 .79
Net income applicable to common stock:
Operating $236 (a) $215 $467 (a) $421
Tangible operating (b) 266 (a) 243 526 (a) 474
Reported 238 215 492 421
Return on common equity (annualized):
Operating 21.4% (a) 20.8% 21.2% (a) 21.2%
Tangible operating (b) 41.1 (a) 44.1 40.8 (a) 41.3
Reported 21.6 20.8 22.3 21.2
Return on assets (annualized):
Operating 1.90% (a) 1.79% 1.87% (a) 1.84%
Tangible operating (b) 2.23 (a) 2.12 2.19 (a) 2.14
Reported 1.92 1.79 1.97 1.84
Shareholders' equity to assets:
Reported 8.77% 8.92% 8.77% 8.92%
Tangible (b) 5.29 5.22 5.29 5.22
- --------------------------------------------------------------------------------------
Fee revenue as a percentage
of net interest and fee
revenue (FTE) 69% 66% 68% 66%
Efficiency ratio excluding
amortization of intangibles 62% (c) 63% 62% (c) 63%
Average common shares and
equivalents outstanding:
Basic 518,273 520,990 520,846 518,226
Diluted 525,712 531,696 528,516 529,036
- --------------------------------------------------------------------------------------
</TABLE>
- continued -
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 14
SUMMARY DATA
Mellon Bank Corporation
(continued)
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, June 30,
--------------------- ---------------------
(dollar amounts in millions) 1999 1998 1999 1998
- ---------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Average balances for the period
- -------------------------------
Money market investments $ 1,445 $ 1,597 $ 1,365 $ 1,654
Trading account securities 414 239 353 240
Securities 6,652 5,596 6,709 5,450
Loans 30,504 30,302 30,983 29,848
Total interest-earning assets 39,015 37,734 39,410 37,192
Total assets 49,766 47,965 50,219 47,102
Total tangible assets (b) 47,878 46,057 48,314 45,419
Deposits 33,358 33,548 33,721 33,139
Total interest-bearing
liabilities 31,634 31,145 32,226 30,251
Total shareholders' equity 4,417 4,126 4,442 4,050
Tangible common shareholders'
equity (b) 2,591 2,218 2,600 2,317
- -----------------------------------------------------------------------------------
</TABLE>
(a) For the quarter ended June 30, 1999, operating and tangible operating
results exclude a $38 million after-tax net gain from divestitures and
$36 million of nonrecurring expenses after taxes. The first quarter of
1999 excludes 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) Excludes the after-tax impact of the amortization of goodwill and other
intangibles from purchase acquisitions. In addition, beginning December
31, 1998, the amount of goodwill and other identified intangibles
subtracted from common equity and total assets is net of any tax benefit.
Prior-period ratios and amounts were restated.
(c) Also excludes $56 million of nonrecurring expenses recorded in the second
quarter of 1999.
Note: All calculations are based on unrounded numbers. In addition, per common
share amounts and average shares outstanding have been restated to
reflect the two-for-one common stock split distributed on May 17, 1999.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 15
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, June 30,
(in millions, except ------------------ ------------------
per share amounts) 1999 1998 1999 1998
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $15, $17, $31 and $34) $ 555 $ 606 $1,135 $1,183
Interest-bearing deposits with banks 9 6 18 15
Federal funds sold and securities
under resale agreements 5 12 14 25
Other money market investments - 3 1 4
Trading account securities 5 3 9 7
Securities 106 93 214 183
----- ----- ------ ------
Total interest revenue 680 723 1,391 1,417
Interest expense
- ----------------
Interest on deposits 207 240 428 469
Federal funds purchased and
securities under repurchase
agreements 23 30 60 54
Other short-term borrowings 34 30 63 58
Notes and debentures 55 52 110 100
----- ----- ------ ------
Total interest expense 319 352 661 681
----- ----- ------ ------
Net interest revenue 361 371 730 736
Provision for credit losses 10 15 25 30
----- ----- ------ ------
Net interest revenue after
provision for credit losses 351 356 705 706
Noninterest revenue
- -------------------
Trust and investment fee revenue 508 429 996 825
Cash management and deposit
transaction charges 70 65 136 126
Mortgage servicing fees 51 53 103 108
Foreign currency and securities
trading revenue 45 38 88 79
Credit card fees - 23 18 47
Other 113 104 235 225
----- ----- ------ ------
Total fee revenue 787 712 1,576 1,410
Net gain from divestitures 59 - 142 -
Gains on sales of securities - 1 - 1
----- ----- ------ ------
Total noninterest revenue 846 713 1,718 1,411
Operating expense
- -----------------
Staff expense 397 355 788 712
Professional, legal and other
purchased services 73 67 144 128
Net occupancy expense 64 59 125 115
Equipment expense 63 41 104 80
Amortization of mortgage
servicing assets and purchased
credit card relationships 37 44 79 89
Amortization of goodwill and
other intangible assets 37 35 74 65
Other expense 138 120 255 229
Trust-preferred securities expense 19 19 39 39
Net revenue from acquired property (5) (2) (5) (3)
----- ----- ------ ------
Total operating expense 823 738 1,603 1,454
----- ----- ------ ------
</TABLE>
- continued -
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 16
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
(continued)
<TABLE>
<CAPTION>
Quarter ended Six months ended
(in millions, except June 30, June 30,
------------------ ------------------
per share amounts) 1999 1998 1999 1998
- ------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Income before income taxes
and cumulative effect of
accounting change 374 331 820 663
Provision for income taxes 136 116 302 233
----- ----- ----- -----
Income before cumulative effect
of accounting change 238 215 518 430
Cumulative effect of
accounting change - - (26) -
----- ----- ----- -----
Net income 238 215 492 430
Dividends on preferred stock - - - 9
----- ----- ----- -----
Net income applicable to
common stock $ 238 $ 215 $ 492 $ 421
===== ===== ===== =====
Earnings per share (a)
- ------------------
Basic net income per common share:
Income before cumulative effect
of accounting change $ .45 $ .41 $ .99 $ .81
Cumulative effect of
accounting change - - (.05) -
----- ----- ----- -----
Net income $ .45 $ .41 $ .94 $ .81
===== ===== ===== =====
Diluted net income per common share:
Income before cumulative effect
of accounting change $ .45 $ .40 $ .98 $ .79
Cumulative effect of
accounting change - - (.05) -
----- ----- ----- -----
Net income $ .45 $ .40 $ .93 $ .79
===== ===== ===== =====
</TABLE>
- -----------------------
(a) Per common share amounts have been restated to reflect the two-for-one
common stock split distributed on May 17, 1999.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 17
CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Bank Corporation
<TABLE>
<CAPTION>
June 30, March 31, Dec. 31, June 30,
(dollar amounts in millions) 1999 1999 1998 1998
- ---------------------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Assets
- ------
Cash and due from banks $ 3,140 $ 3,011 $ 2,926 $ 2,993
Money market investments 1,075 939 798 882
Trading account securities 318 242 193 126
Securities available for sale 5,241 5,451 5,373 3,957
Investment securities (approximate
fair value of $1,332, $1,443,
$1,634 and $1,899) 1,330 1,421 1,602 1,861
Loans, net of unearned discount
of $70, $57, $54 and $68 30,544 30,554 32,093 30,654
Reserve for credit losses (409) (410) (496) (498)
------- ------ ------ ------
Net loans 30,135 30,144 31,597 30,156
Premises and equipment 552 561 569 559
Acquired property, net of
reserves of $4, $5, $5 and $9 21 34 37 63
Goodwill and other intangibles 2,237 2,276 2,313 2,156
Mortgage servicing assets and
purchased credit card
relationships 1,069 1,098 1,132 1,010
Other assets 3,970 4,207 4,237 3,685
------- ------- ------- -------
Total assets $49,088 $49,384 $50,777 $47,448
======= ======= ======= =======
Liabilities
- -----------
Deposits in domestic offices $29,574 $30,419 $31,269 $30,230
Deposits in foreign offices 3,401 2,929 3,114 2,967
Short-term borrowings 4,765 4,023 4,942 3,901
Other liabilities 2,751 3,117 2,637 2,122
Notes and debentures (with original
maturities over one year) 3,303 3,403 3,303 3,003
------- ------- ------- -------
Total liabilities 43,794 43,891 45,265 42,223
Trust-preferred securities
- --------------------------
Guaranteed preferred beneficial
interests in Corporation's junior
subordinated deferrable interest
debentures 991 991 991 991
Shareholders' equity
- --------------------
Common stock - $.50 par value
Authorized - 800,000,000 shares
Issued - 588,661,920 (a);
294,330,960; 294,330,960; and
294,330,960 shares 294 147 147 147
Additional paid-in capital 1,765 1,907 1,887 1,879
Retained earnings 3,587 3,468 3,353 3,124
Accumulated unrealized (loss)
gain, net of tax (90) (15) 25 19
Treasury stock of 74,450,718 (a);
33,798,582; 32,407,960; and
33,623,356 shares at cost (1,253) (1,005) (891) (935)
------- ------- ------- -------
Total shareholders' equity 4,303 4,502 4,521 4,234
------- ------- ------- -------
Total liabilities, trust-
preferred securities and
shareholders' equity $49,088 $49,384 $50,777 $47,448
======= ======= ======= =======
</TABLE>
- -----------------------
(a) Reflects the two-for-one common stock split distributed on May 17, 1999.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 18
SUMMARY DATA
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
(dollar amounts in millions, Quarter ended
--------------------------------------------------------------
except per share amounts; June 30, March 31, Dec. 31, Sept. 30, June 30,
common shares in thousands) 1999 1999 1998 1998 1998
- -------------------------------------------------------------------------------------------
Selected key data
- -----------------
<S> <C> <C> <C> <C> <C>
Diluted earnings per common share:
Operating $.45 (a) $.43 (a) $.42 $.41 $.40
Tangible operating (b) .50 (a) .49 (a) .47 .47 .45
Reported .45 .48 .42 .41 .40
Net income applicable to common stock:
Operating $236 (a) $231 (a) $222 $218 $215
Tangible operating (b) 266 (a) 260 (a) 252 246 243
Reported 238 254 222 218 215
Return on common equity (annualized):
Operating 21.4% (a) 20.9% (a) 20.1% 20.3% 20.8%
Tangible operating (b) 41.1 (a) 40.4 (a) 40.2 40.2 44.1
Reported 21.6 23.1 20.1 20.3 20.8
Return on assets (annualized):
Operating 1.90% (a) 1.84% (a) 1.76% 1.81% 1.79%
Tangible operating (b) 2.23 (a) 2.16 (a) 2.07 2.11 2.12
Reported 1.92 2.03 1.76 1.81 1.79
Shareholders' equity to assets:
Reported 8.77% 9.12% 8.90% 9.03% 8.92%
Tangible (b) 5.29 5.60 5.41 5.47 5.22
- --------------------------------------------------------------------------------------------
Fee revenue as a percentage
of net interest and fee
revenue (FTE) 69% 68% 68% 66% 66%
Efficiency ratio excluding
amortization of intangibles 62% (c) 62% 65% 62% 63%
Average common shares and
equivalents outstanding:
Basic 518,273 523,448 523,082 522,156 520,990
Diluted 525,712 531,288 531,496 531,548 531,696
- --------------------------------------------------------------------------------------------
</TABLE>
- continued -
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 19
SUMMARY DATA
Mellon Bank Corporation
Five Quarter Trend
(continued)
<TABLE>
<CAPTION>
Quarter ended
--------------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30,
(dollar amounts in millions) 1999 1999 1998 1998 1998
- --------------------------------------------------------------------------------------
Average balances for the period
- -------------------------------
<S> <C> <C> <C> <C> <C>
Money market investments $ 1,445 $ 1,286 $ 1,525 $ 1,351 $ 1,597
Trading account securities 414 291 258 266 239
Securities 6,652 6,767 6,141 5,754 5,596
Loans 30,504 31,467 31,503 30,426 30,302
Total interest-earning assets 39,015 39,811 39,427 37,797 37,734
Total assets 49,766 50,677 50,110 47,937 47,965
Total tangible assets (b) 47,878 48,755 48,153 46,096 46,057
Deposits 33,358 34,087 34,492 33,399 33,548
Total interest-bearing
liabilities 31,634 32,825 32,406 31,104 31,145
Total shareholders' equity 4,417 4,469 4,391 4,265 4,126
Tangible shareholders'
equity (b) 2,591 2,608 2,487 2,424 2,218
- --------------------------------------------------------------------------------------
</TABLE>
(a) For the quarter ended June 30, 1999, operating and tangible operating
results exclude a $38 million after-tax net gain from divestitures and $36
million of nonrecurring expenses after taxes. The first quarter of 1999
excludes 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) Excludes the after-tax impact of the amortization of goodwill and other
intangibles from purchase acquisitions. In addition, beginning December 31,
1998, the amount of goodwill and other identified intangibles subtracted
from common equity and total assets is net of any tax benefit. Prior-period
ratios and amounts were restated.
(c) Also excludes $56 million of nonrecurring expenses recorded in the second
quarter of 1999.
Note: All calculations are based on unrounded numbers. In addition, per common
share amounts and average shares outstanding have been restated to reflect
the two-for-one common stock split distributed on May 17, 1999.
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 20
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
Five Quarter Trend
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------
(in millions, except per June 30, March 31, Dec. 31, Sept. 30, June 30,
share amounts) 1999 1999 1998 1998 1998
- ------------------------------------ --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Interest revenue
- ----------------
Interest and fees on loans (loan
fees of $15, $16, $18, $21 and $17) $ 555 $ 580 $ 614 $ 616 $ 606
Interest-bearing deposits with banks 9 9 10 8 6
Federal funds sold and securities
under resale agreements 5 9 12 12 12
Other money market investments - 1 1 1 3
Trading account securities 5 4 4 4 3
Securities 106 108 98 95 93
--------- --------- -------- --------- --------
Total interest revenue 680 711 739 736 723
Interest expense
- ----------------
Interest on deposits 207 221 243 248 240
Federal funds purchased and
securities under repurchase
agreements 23 37 34 35 30
Other short-term borrowings 34 29 29 27 30
Notes and debentures 55 55 53 51 52
--------- --------- -------- --------- --------
Total interest expense 319 342 359 361 352
--------- --------- -------- --------- --------
Net interest revenue 361 369 380 375 371
Provision for credit losses 10 15 15 15 15
--------- --------- -------- --------- --------
Net interest revenue after
provision for credit losses 351 354 365 360 356
Noninterest revenue
- -------------------
Trust and investment fee revenue 508 488 465 432 429
Cash management and deposit
transaction charges 70 66 70 66 65
Mortgage servicing fees 51 52 48 44 53
Foreign currency and securities
trading revenue 45 43 47 39 38
Credit card fees - 18 22 23 23
Other 113 122 147 108 104
--------- --------- -------- --------- --------
Total fee revenue 787 789 799 712 712
Net gain from divestitures 59 83 - - -
Gains on sales of securities - - - - 1
--------- --------- -------- --------- --------
Total noninterest revenue 846 872 799 712 713
Operating expense
- -----------------
Staff expense 397 391 386 358 355
Professional, legal and other
purchased services 73 71 97 72 67
Net occupancy expense 64 61 63 59 59
Equipment expense 63 41 59 42 41
Amortization of mortgage
servicing assets and purchased
credit card relationships 37 42 47 43 44
Amortization of goodwill and
other intangible assets 37 37 37 35 35
Other expense 138 117 116 108 120
Trust-preferred securities expense 19 20 20 20 19
Net revenue from acquired property (5) - - (3) (2)
--------- --------- -------- --------- --------
Total operating expense 823 780 825 734 738
--------- --------- -------- --------- --------
</TABLE>
- continued -
<PAGE>
Mellon Reports Earnings
July 20, 1999
Page 21
CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Bank Corporation
Five Quarter Trend
(continued)
<TABLE>
<CAPTION>
Quarter ended
--------------------------------------------------
(in millions, except per June 30, March 31, Dec. 31, Sept. 30, June 30,
share amounts) 1999 1999 1998 1998 1998
- -------------------------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Income before income taxes
and cumulative effect of
accounting change 374 446 339 338 331
Provision for income taxes 136 166 117 120 116
-------- --------- -------- --------- --------
Income before cumulative effect
of accounting change 238 280 222 218 215
Cumulative effect of
accounting change - (26) - - -
-------- --------- -------- --------- --------
Net income 238 254 222 218 215
Dividends on preferred stock - - - - -
-------- --------- -------- --------- --------
Net income applicable to
common stock $ 238 $ 254 $ 222 $ 218 $ 215
======== ========= ======== ========= ========
Earnings per share (a)
- ------------------
Basic net income per common share:
Income before cumulative effect
of accounting change $ .45 $ .54 $ .42 $ .42 $ .41
Cumulative effect of
accounting change - (.05) - - -
======== ========= ======== ========= ========
Net income $ .45 $ .49 $ .42 $ .42 $ .41
======== ========= ======== ========= ========
Diluted net income per common share:
Income before cumulative effect
of accounting change $ .45 $ .53 $ .42 $ .41 $ .40
Cumulative effect of
accounting change - (.05) - - -
======== ========= ======== ========= ========
Net income $ .45 $ .48 $ .42 $ .41 $ .40
======== ========= ======== ========= ========
</TABLE>
________________________
(a) Per common share amounts have been restated to reflect the two-for-one
common stock split distributed on May 17, 1999.
