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MELLON FINANCIAL CORP
8-K, EX-99.2, 2000-10-18
NATIONAL COMMERCIAL BANKS

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					EX-99.2
				News Release
	MEDIA:		ANALYSTS:	Corporate Affairs
	Ken Herz		Donald J. MacLeod	One Mellon Center
	(412) 234-0850		(412) 234-5601	Pittsburgh, PA 15258-0001
	Ron Sommer		Andrew J. Clark
	(412) 236-0082		(412) 234-4633

FOR IMMEDIATE RELEASE

	MELLON REPORTS RECORD THIRD QUARTER 2000 RESULTS
	— Core business sectors earnings per share contribution increased 22% —

PITTSBURGH, Oct. 17, 2000—Mellon Financial Corporation (NYSE: MEL) today announced record third quarter 2000 diluted earnings per share of 51 cents, an increase of 11 percent compared with 46 cents per share, on an operating basis, in the third quarter of 1999. The earnings per share increase was achieved despite the impact of the previously-disclosed May 2000 expiration of a long-term mutual fund administration contract with a third party. Core business sectors earnings per share contribution, which excludes the revenues and related expenses from this contract as well as the impact of divestitures, and real estate workout and other non-core activity from both periods, increased 22 percent.

Financial Highlights					Quarter ended						Nine months ended
(dollar amounts in millions, except per share	Sept. 30,				June 30,		Sept. 30,				Sept. 30,		Sept. 30,
amounts; returns are annualized)	2000				2000		1999				2000		1999
Operating results (a):
Diluted earnings per share	$		.51		$ .50		$		.46		$ 1.51		$		1.34
Net income	$		252		$247		$		236		$ 752		$		703
Return on equity	25.8			%	26.2	%	22.3			%	26.0	%	21.5			%
Return on assets	2.18			%	2.12	%	1.92			%	2.15	%	1.89			%
Cash operating results (a):
Diluted earnings per share	$		.56		$ .56		$		.52		$1.68		$		1.51
Net income	$		279		$274		$		266		$ 835		$		792
Return on equity	48.8			%	51.4	%	43.7			%	50.6	%	41.7			%
Return on assets	2.50			%	2.44	%	2.25			%	2.48	%	2.21			%
Reported results:
Diluted earnings per share	$		.51		$ .50		$		.45		$1.51		$		1.38
Net income	$		252		$247		$		231		$ 752		$		723
Return on equity	25.8			%	26.2	%	21.8			%	26.0	%	22.1			%
Return on assets	2.18			%	2.12	%	1.87			%	2.15	%	1.94			%
Fee revenue as a percentage of net interest and
fee revenue (FTE)	69			%	69	%	69			%	69	%			69	%
Trust and investment fee revenue as a percentage
of net interest and fee revenue (FTE)	49			%	50	%	46			%	50	%			44	%
Efficiency ratio excluding amortization of intangibles	59			%	59	%	61			%	59	%			61	%

(a)

Operating results equaled reported results in each quarter of 2000. Operating and cash operating results for the third quarter of 1999 exclude a $5 million after-tax net loss from divestitures. Also excluded from operating and cash operating results in the first nine months of 1999 are an $87 million after-tax net gain from divestitures, $36 million of nonrecurring expenses after taxes and a $26 million after-tax charge for the cumulative effect of a change in accounting principle. Cash operating results exclude the after-tax impact of the amortization of goodwill and other intangibles from purchase acquisitions.

Mellon Reports Earnings
Oct. 17, 2000

“Our third-quarter earnings continue the strong level of performance we’ve demonstrated since we sharpened our strategic focus at the beginning of last year on growing our fee-based businesses,” said Martin G. McGuinn, Mellon chairman and chief executive officer. “Particularly gratifying from a strategic standpoint was the performance of our growth business sectors, which registered a 15 percent increase in revenue and a 23 percent increase in income before taxes during the quarter.”

The Corporation also declared a regular quarterly common dividend of 22 cents per share. This cash dividend is payable on Nov. 15, 2000, to shareholders of record at the close of business on Oct. 31, 2000.

Third Quarter 2000 Financial Highlights:

• Return on equity increased to 25.8 percent from 22.3 percent and return on assets increased to 2.18 percent from 1.92 percent, on an operating basis, compared to a year ago.
  
• Total revenue for the growth sectors comprised 60 percent of total core business sector revenue in the third quarter of 2000, compared with 57 percent in the third quarter of 1999. Income before taxes for the growth sectors represented 56 percent of core business sector pretax income, up from 51 percent in the third quarter of 1999.
  
• Fee revenue increased 12 percent compared to a year ago, excluding the 1999 mortgage banking divestitures and the May 2000 expiration of the long-term mutual fund administration contract with a third party, primarily due to a 13 percent increase in trust and investment fee revenue.
  
• Fee revenue totaled 69 percent of net interest and fee revenue in both the third quarter of 2000 and the third quarter of 1999. Trust and investment fee revenue totaled 49 percent of net interest and fee revenue in the third quarter of 2000, compared with 46 percent in the third quarter of 1999.
  
• Assets under management grew to $540 billion with assets under management, administration or custody totaling approximately $2.8 trillion at Sept. 30, 2000. Assets managed by subsidiaries and affiliates outside the United States totaled $65 billion at Sept. 30, 2000.
  
• Operating expenses were flat compared with the second quarter of 2000.
  
• The net interest margin was 3.95 percent at Sept. 30, 2000, up from 3.86 percent at June 30, 2000, and 3.63 percent at Sept. 30, 1999.
  
• Nonperforming assets totaled $222 million at Sept. 30, 2000, down from $228 million at June 30, 2000.
  
• Approximately 1.8 million common shares were repurchased during the quarter, leaving 21.7 million additional shares available for repurchase under the current 25 million share repurchase program. Since Jan. 1, 1999, the Corporation’s common shares outstanding have been reduced by 35.9 million shares, or nearly 7 percent, net of reissuances, due to stock repurchases totaling approximately $1.7 billion, at an average share price of $34.52 per share.
  

Mellon Financial Corporation is a global financial services company. Headquartered in Pittsburgh, Mellon offers a comprehensive array of banking services for individuals and corporations and is one of the world’s leading providers of asset management, trust, custody and benefits consulting services. Mellon has approximately $2.8 trillion in assets under management, administration or custody, including $540 billion under management. Its asset management companies include The Dreyfus Corporation and Newton Management Limited (U.K.).

Taped comments from Steven G. Elliott, senior vice chairman and chief financial officer, regarding third quarter 2000 earnings are available by calling (412) 236-5385 beginning at approximately 1 p.m. EDT on Tuesday, Oct. 17, 2000, through 5 p.m. EDT on Friday, Oct. 27, 2000. These comments may include forward-looking or other material information. Mr. Elliott’s pre-recorded commentary, plus a related series of graphics, also will be available at our Web site (www.mellon.com) during the same period. Press releases and other information about Mellon Financial Corporation and its products and services also are available at our Web site. For press releases by fax, call 1 (800) 758-5804, identification number 552187.

Note: Detailed supplemental financial information follows.

Business Sectors

Summary
	% of				% of Core				% of				% of Core
	Core Sector				Sector Income				Core Sector				Sector Income
	Revenue				Before Taxes				Revenue				Before Taxes
	3Q00		3Q99		3Q00		3Q99		YTD00		YTD99		YTD00		YTD99
Growth Sectors	60	%	57	%	56	%	51	%	60	%	57	%	56	%	52	%
Return Sectors	40	%	43	%	44	%	49	%	40	%	43	%	44	%	48	%
Total Core Business Sectors	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

 

Earnings Per Share Contribution From Total Core Business Sectors
(in millions, except
per share amounts)	3Q00			3Q99			Growth		YTD00			YTD99			Growth
Net Income	$		246	$		214	15%		$		715	$		605	18%
Average Shares and
Equivalents - diluted			495.3			518.6	(4)%				497.4			525.2	(5)%
EPS Contribution	$		.50	$		.41	22%		$		1.44	$		1.15	25%

 

Earnings Per Share Contribution From Total Core Business Sectors - Five Quarter Trend
(in millions, except per share amounts)	3Q00			2Q00			1Q00			4Q99			3Q99
Net Income	$	246		$	237		$	232		$	219		$	214
Average Shares and Equivalents - diluted	495.3			495.1			502.1			512.5			518.6
EPS Contribution	$	.50		$	.48		$	.46		$	.43		$	.41

 

(dollar amounts in millions)	Third Quarter 2000								Third Quarter 1999
				Income			Return on					Income			Return on
	Total			Before			Common		Total			Before			Common
Sector	Revenue			Taxes			Equity		Revenue			Taxes			Equity
Managed for Growth:
Wealth Management	$	115		$	49		50	%	$	101		$	46		55	%
Global Investment Management		286			110		45			245			83		36
Global Investment Services		269			62		31			238			51		24
Total Growth Sectors		670			221		40			584			180		34
Managed for Return:
Regional Consumer Banking		165			60		23			162			52		20
Specialized Commercial Banking		137			63		18			138			74		24
Large Corporate Banking		149			53		17			133			44		12
Total Return Sectors		451			176		19			433			170		18
Total Core Business Sectors	$	1,121		$	397		27	%	$	1,017		$	350		24	%

Note: In the second quarter of 2000, the Corporation realigned its jumbo residential mortgage origination business to focus primarily on existing private client relationships. The jumbo mortgage lending results, previously a part of Wealth Management, were moved to Divestitures, a non-Core Business Sector. Prior period results have been restated.

(dollar amounts in millions)	First Nine Months 2000								First NineMonths 1999
				Income			Return on					Income			Return on
	Total			Before			Common		Total			Before			Common
Sector	Revenue			Taxes			Equity		Revenue			Taxes			Equity
Managed for Growth:
Wealth Management	$	331		$	141		51	%	$	291		$	118		52	%
Global Investment Management		862			313		44			723			242		37
Global Investment Services		802			196		33			707			157		26
Total Growth Sectors		1,995			650		41			1,721			517		34
Managed for Return:
Regional Consumer Banking		491			167		22			493			151		19
Specialized Commercial Banking		414			196		19			392			184		21
Large Corporate Banking		433			144		15			402			140		13
Total Return Sectors		1,338			507		18			1,287			475		17
Total Core Business Sectors	$	3,333		$	1,157		26	%	$	3,008		$	992		23	%

Note: In the second quarter of 2000, the Corporation realigned its jumbo residential mortgage origination business to focus primarily on existing private client relationships. The jumbo mortgage lending results, previously a part of Wealth Management, were moved to Divestitures, a non-Core Business Sector. Prior period results have been restated.

The Corporation manages its business sectors utilizing growth and return strategies. The sectors managed for growth include businesses which are predominantly fee-based in nature. The Corporation invests in these businesses for future growth. The sectors managed for return, which include the more slowly growing, traditional banking businesses, are managed to drive profitability and higher returns on equity, primarily focusing on improving productivity through re-engineering and effective capital management.

Sectors Managed for Growth

3Q 2000 vs. 3Q 1999	Total Revenue		Operating Expense		Income Before
	Growth		Growth		Taxes Growth
Wealth Management	14%		12%		8%
Global Investment Management	17%		9%		32%
Global Investment Services	13%		11%		21%
Total Growth Sectors	15%		11%		23%

 

YTD 2000 vs. YTD 1999	Total Revenue		Operating Expense		Income Before
	Growth		Growth		Taxes Growth
Wealth Management	14%		8%		19%
Global Investment Management	19%		14%		29%
Global Investment Services	14%		10%		25%
Total Growth Sectors	16%		12%		26%

The Corporation’s growth sectors continued to show strong growth in revenue and income before taxes for the third quarter and first nine months of 2000. Revenue for the growth sectors grew 15% and 16%, respectively, for the third quarter and first nine months of 2000, while income before taxes grew 23% and 26% for the same periods.

Sectors Managed for Return
	Pretax Operating				Return on					Average
	Margin (a)				Common Equity					Allocated Equity
(dollar amounts in millions)	3Q00		3Q99		3Q00		3Q99			3Q00			3Q99
Regional Consumer Banking	41	%	40	%	23	%	20	%	$	688		$	719
Specialized Commercial Banking	54	%	61	%	18	%	24	%	$	1,020		$	894
Large Corporate Banking	39	%	38	%	17	%	12	%	$	1,040		$	1,224
Total Return Sectors	44	%	46	%	19	%	18	%	$	2,748		$	2,837

(a) Excludes amortization of intangibles and trust-preferred securities expense.

	Pretax Operating				Return on					Average
	Margin (a)				Common Equity					Allocated Equity
(dollar amounts in millions)	YTD00		YTD99		YTD00		YTD99		YTD00			YTD99
Regional Consumer Banking	41	%	39	%	22	%	19	%	$	693		$	715
Specialized Commercial Banking	55	%	55	%	19	%	21	%	$	987		$	876
Large Corporate Banking	37	%	39	%	15	%	13	%	$	1,075		$	1,248
Total Return Sectors	44	%	44	%	18	%	17	%	$	2,755		$	2,839

(a) Excludes amortization of intangibles and trust-preferred securities expense.

The results in the third quarter and first nine months of 2000 for the return sectors continue to demonstrate the Corporation’s strategy of driving profitability and higher returns on equity, primarily focusing on improving productivity through re-engineering and effective capital management. The Corporation aggressively manages capital levels in the return sectors. Average allocated equity decreased $89 million in the third quarter of 2000, and the return on common equity increased to 19%, up from 18% in the third quarter of 1999. The pretax operating margin in the third quarter of 2000 was 44%, down 2% from the third quarter of 1999, primarily reflecting higher credit quality and other expenses in the Specialized Commercial Banking sector. The cash management business line, which is included in the Large Corporate Banking sector, continued to produce strong results. The cash management business line’s revenue improved by $15 million, or 19%, in the third quarter of 2000 compared to the third quarter of 1999, and income before taxes improved by $7 million, or 34% in the third quarter of 2000 compared to the third quarter of 1999. The pretax operating margin for the return sectors for the first nine months of 2000 was 44%, unchanged from the prior year period. Return on common equity was 18% for the first nine months of 2000, compared with 17% in the first nine months of 1999. Average allocated equity decreased $84 million in the first nine months of 1999, compared to the prior-year period.

Noninterest Revenue
		Quarter ended								Nine months ended
(dollar amounts in millions,	Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,
unless otherwise noted)	2000			2000			1999			2000			1999
Trust and investment fee revenue:
Investment management fee revenue:
Mutual funds	$	176		$	167		$	152		$	509		$	445
Private clients		78			77			73			231			217
Institutional		75			66			65			223			190
Total investment management fee revenue		329			310			290			963			852
Administration and custody fee revenue:
Institutional trust		122			134			96			377			300
Mutual funds		22			35			47			105			134
Private clients		6			4			5			14			15
Total administration and custody fee revenue		150			173			148			496			449
Benefits consulting		66			63			66			185			183
Brokerage fees		16			19			13			60			44
Total trust and investment fee revenue		561			565			517			1,704			1,528
Cash management and deposit transaction charges		83			83			78			240			228
Foreign currency and securities trading revenue		42			42			42			135			130
Financing-related revenue		44			43			39			126			137
Equity investment revenue		20			17			17			73			47
Mortgage servicing fees		3			2			48			7			151
Other		20			21			24			59			120
Total fee and other revenue		773			773			765			2,344			2,341
Net gain (loss) from divestitures		-			-			(8	)		-			134
Gains on sales of securities		-			-			-			-			-
Total noninterest revenue	$	773		$	773		$	757		$	2,344		$	2,475
Fee revenue as a percentage of net interest and
fee revenue (FTE)		69	%		69	%		69	%		69	%		69	%
Trust and investment fee revenue as a percentage
of net interest and fee revenue (FTE)		49	%		50	%		46	%		50	%		44	%
Assets under management at period end (in billions)	$	540		$	521		$	446
Assets under administration or custody at period
end (in billions)	$	2,298		$	2,257		$	2,156

Note: In the first quarter of 2000, various items previously reported in other fee revenue were reclassified to mutual fund administration and custody revenue in trust and investment fee revenue; cash management and deposit transaction charges; financing-related revenue and equity investment revenue. Third quarter 1999 and nine months ended Sept. 30, 1999, have been restated and the percentages of trust and investment fee revenue to net interest and fee revenue have been recalculated. For analytical purposes, the term “fee revenue,” as utilized throughout this earnings release, is defined as total noninterest revenue less gains on the sales of securities and the net gain (loss) from divestitures.

Memo: Fee and other revenue including gross joint venture fee revenue

The Corporation accounts for its interests in joint ventures under the equity method of accounting, with net results recorded primarily as trust and investment fee revenue. The gross joint venture fee revenue is not included in the reported fee revenue. The table below presents the components of total fee and other revenue, including gross joint venture fee revenue.

		Quarter ended									Nine months ended
		Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,
(in millions)		2000			2000			1999			2000			1999
Trust and investment fee revenue		$	657		$	675		$	618		$	2,034		$	1,815
Foreign currency and securities trading revenue			48			48			45			154			137
Non-impacted components of fee and other revenue			170			166			206			505			683
	Total fee and other revenue including gross
	joint venture fee revenue		875			889			869			2,693		2,635
Less:	Trust and investment gross joint venture
	fee revenue		(96	)		(110	)		(101	)		(330	)		(287	)
	Foreign currency and securities trading
	gross joint venture fee revenue		(6	)		(6	)		(3	)		(19	)		(7	)
	Total gross joint venture fee revenue (a)		(102	)		(116	)		(104	)		(349	)		(294	)
	Total fee and other revenue as reported	$	773		$	773		$	765		$	2,344		$	2,341

(a) The gross joint venture fee revenue presented above is shown net of the equity income earned from the joint ventures.

Fee revenue

Fee revenue of $773 million in the third quarter of 2000 was impacted by the third quarter 1999 mortgage banking divestitures and the previously-disclosed May 2000 expiration of a long-term mutual fund administration contract with a third party. Excluding these factors, fee revenue increased 12% in the third quarter of 2000 compared with the third quarter of 1999, primarily due to a 13% increase in trust and investment fee revenue.

Excluding the effect of the expiration of the long-term mutual fund administration contract with a third party, fee revenue increased 2% in the third quarter of 2000 compared with the second quarter of 2000, primarily resulting from higher trust and investment fee revenue.

	3rd Qtr. 2000			3rd Qtr. 2000		Nine Mo. 2000
	over			over		over
Fee revenue growth (a)	3rd Qtr. 1999			2nd Qtr. 2000		Nine Mo. 1999
Trust and investment fee revenue growth	13	%		2%		14%
Total fee revenue growth	12	%		2%		11%

(a) Excluding the effect of divestitures and the expiration of the long-term mutual fund administration contract with a third party.

Investment management fee revenue

Investment management fee revenue increased $39 million, or 13%, in the third quarter of 2000, compared with the third quarter of 1999, and increased $111 million, or 13%, in the first nine months of 2000, compared with the first nine months of 1999. The increase in the third quarter of 2000 compared to the third quarter of 1999 resulted from a $24 million, or 16%, increase in mutual fund management revenue; a $10 million, or 15%, increase in institutional asset management revenue; and a $5 million, or 6%, increase in private client asset management revenue. These increases resulted from net new business and an increase in the market value of assets under management.

Mutual fund management fees are based upon the average net assets of each fund. The average assets of proprietary mutual funds managed in the third quarter of 2000 were $142 billion, up $18 billion, or 14%, from $124 billion in the third quarter of 1999, and up $6 billion, or 4%, from $136 billion in the second quarter of 2000. The increase resulted from increases in average net assets of equity funds. Proprietary equity funds averaged $59 billion in the third quarter of 2000, compared with $45 billion in the third quarter of 1999.

As shown in the table below, the market value of assets under management was $540 billion at Sept. 30, 2000, a $19 billion, or 4%, increase from $521 billion at June 30, 2000, and a $94 billion, or 21%, increase from $446 billion at Sept. 30, 1999. The increase at Sept. 30, 2000, compared to June 30, 2000, was primarily due to net new business and market appreciation. A key bond market benchmark, the Lehman Brothers Long-Term Government Bond Index, increased 2.7% in the third quarter of 2000, while the equity market, as measured by the Standard and Poor’s 500 Index, decreased 1.2% in the third quarter of 2000.

Market value of assets under management
Sept. 30,				June 30,			March 31,			Dec. 31,			Sept. 30,
(in billions)	2000			2000			2000			1999			1999
Mutual funds managed:
Equity funds	$	60		$	59		$	59		$	54		$	45
Taxable money market funds:
Institutional		47			41			41			42			38
Individuals		9			10			11			9			10
Tax-exempt bond funds		14			14			14			14			15
Fixed-income funds		7			7			7			7			7
Tax-exempt money market funds		8			7			8			8			7
Nonproprietary		32			31			31			30			26
Total mutual fund assets managed		177			169			171			164			148
Private clients		54			54			54			55			53
Institutional (a)		309			298			286			269			245
Total market value of assets
under management	$	540		$	521		$	511		$	488		$	446

(a)	Includes assets managed at Pareto Partners of $29 billion at Sept. 30, 2000; $30 billion at June 30, 2000; $32 billion at March 31, 2000; $32 billion at Dec. 31, 1999; and $28 billion at Sept. 30, 1999. The Corporation has a 30% equity interest in Pareto Partners.

Administration and custody fee revenue

Administration and custody fee revenue increased $2 million, or 2%, in the third quarter of 2000 compared with the third quarter of 1999, and increased $47 million, or 11%, in the first nine months of 2000 compared to the first nine months of 1999. The increase in the third quarter of 2000 compared to the third quarter of 1999 resulted from a $26 million, or 28%, increase in institutional trust and custody revenue resulting from net new business, including an $8 million increase in securities lending revenue. The $12 million, or 10%, decrease in institutional trust and custody revenue compared with the second quarter of 2000 primarily resulted from lower equity income from joint ventures and lower securities lending revenue. The equity income from joint ventures in the second quarter of 2000 was positively impacted by earnings from large one-time projects for clients.

The $25 million, or 52%, decrease in mutual fund administration and custody fee revenue in the third quarter of 2000 compared with the third quarter of 1999 was due to the May 2000 expiration of the long-term mutual fund administration contract with a third party. Fees from this contract totaled approximately $22 million pre-tax, or $.03 per common share, in the third quarter of 1999. Fees from this contract totaled approximately $13 million pre-tax, or $.015 per common share, in the second quarter through May 2000, when the contract expired.

The market value of assets under administration or custody, shown in the table below was $2,298 billion at Sept. 30, 2000, an increase of $41 billion, or 2%, compared with $2,257 billion at June 30, 2000, and an increase of $142 billion, or 7%, compared with $2,156 billion at Sept. 30, 1999.

Market value of assets under administration or custody
	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,
(in billions)	2000			2000			2000			1999			1999
Institutional trust (a)(b)	$	2,153		$	2,122		$	2,131		$	2,074		$	2,046
Mutual funds		111			100			93			87			76
Private clients		34			35			37			37			34
Total market value of assets under
administration or custody	$	2,298		$	2,257		$	2,261		$	2,198		$	2,156

(a)	Includes $330 billion of assets at Sept. 30, 2000; $320 billion of assets at June 30, 2000; $325 billion of assets at March 31, 2000; $324 billion of assets at Dec. 31, 1999; and $350 billion of assets at Sept. 30, 1999, administered by CIBC Mellon Global Securities Services, a joint venture.
(b)	Assets administered by the Corporation under ABN AMRO Mellon, a strategic alliance of the Corporation and ABN AMRO, were $84 billion at Sept. 30, 2000; $64 billion at June 30, 2000; $60 billion at March 31, 2000; $58 billion at Dec. 31, 1999; and $32 billion at Sept. 30, 1999.

Benefits consulting fees generated by Buck Consultants remained unchanged in the third quarter of 2000, compared with the third quarter of 1999. The $3 million, or 21%, increase in brokerage fees in the third quarter of 2000 compared to the prior-year period primarily resulted from higher trading volumes in the active equities markets. Dreyfus Brokerage Services, Inc. averaged approximately 11,000 trades per day in the third quarter of 2000, compared with approximately 13,200 trades per day in the second quarter of 2000 and approximately 8,500 trades per day in the third quarter of 1999.

Cash management fees and deposit transaction charges increased $5 million, or 7%, in the third quarter of 2000, compared with the prior-year period, primarily resulting from higher volumes of business in cash management, especially in electronic payment services. The increase in cash management fees was partially offset by customers holding compensating balances on deposits in lieu of paying fees. The earnings on the compensating balances are recognized in net interest revenue. Foreign currency and securities trading revenue remained unchanged in the third quarter of 2000, compared with the prior-year period.

Financing-related and equity investment revenue totaled $64 million in the third quarter of 2000 compared with $60 million in the second quarter of 2000 and $56 million in the third quarter of 1999. Financing-related revenue, which primarily includes loan commitment fees; letters of credit and acceptance fees; loan securitization revenue; gains or losses on loan securitizations and sales; and gains or losses on lease residuals, increased $5 million in the third quarter of 2000 compared with the third quarter of 1999. Equity investment revenue, which includes gains and losses on venture capital investments, increased $3 million in the third quarter of 2000 compared with the third quarter of 1999.

The $3 million of mortgage servicing fees in the third quarter of 2000 relates to the servicing of jumbo mortgages retained by the Corporation following the 1999 divestiture of the mortgage businesses.

Other revenue decreased $4 million in the third quarter of 2000 compared with the prior-year period. The decrease primarily related to lower gains on the sales of assets.

Fee revenue for the first nine months of 2000 totaled $2.344 billion, a $3 million increase compared with $2.341 billion for the first nine months of 1999. Fee revenue for the first nine months of 2000 was impacted by the divestitures of the credit card business, network services transaction processing unit and the mortgage banking businesses, as well as the expiration of the long-term mutual fund administration contract with a third party. Excluding the effect of these factors, fee revenue for the first nine months of 2000 increased 11% compared with the first nine months of 1999, due to a 14% increase in trust and investment fee revenue.

Net gain (loss) from divestitures

In the third quarter of 1999, the Corporation recorded an $8 million pre-tax net loss from divestitures. The after-tax impact totaled $5 million, or $.01 per common share. The net loss primarily resulted from an adjustment to previous write-downs recorded to reflect the net sales proceeds received for the residential and commercial mortgage servicing businesses. This loss was partially offset by an additional gain related to the divestiture of the network services transaction processing unit as more customers converted to the purchaser, as well as a gain on the sale of seven Mellon (MD) retail offices in September 1999. Including the $142 million pre-tax net gain from divestitures recorded in the first six months of 1999, the pre-tax net gain from divestitures for the nine months ended Sept. 30, 1999, totaled $134 million.

 

Net Interest Revenue
	Quarter ended									Nine months ended
	Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,
(dollar amounts in millions)	2000			2000			1999			2000			1999
Net interest revenue (FTE)	$	359		$	352		$	352		$	1,062		$	1,086
Net interest margin (FTE)		3.95	%		3.86	%		3.63	%		3.85	%		3.71	%
Average securities	$	6,166		$	6,121		$	6,364		$	6,148		$	6,593
Average loans	$	27,430		$	27,943		$	30,177		$	28,216		$	30,711
Average interest-earning assets	$	35,927		$	36,497		$	38,407		$	36,605		$	39,072

Net interest revenue on a fully taxable equivalent basis in the third quarter of 2000 increased $7 million, or 2%, compared with the third quarter of 1999. Excluding the net interest revenue generated by the mortgage banking businesses, net interest revenue increased 3% compared with the third quarter of 1999, reflecting improved spreads and the positive impact of interest-free funds in a higher rate environment, including compensating deposits held in lieu of customers paying cash management fees, partially offset by higher funding costs related to the repurchase of common stock. Average loans decreased $2.747 billion in the third quarter of 2000 compared to the third quarter of 1999, reflecting a lower level of wholesale loans, and the divestiture of the residential mortgage business in September 1999. Average loans in the third quarter of 1999 included approximately $540 million of subsequently divested residential mortgages.

Net interest revenue on a fully taxable basis in the third quarter of 2000 increased $7 million, or 2%, compared with the second quarter of 2000. This increase primarily resulted from improved spreads and the positive impact of interest-free funds.

Net interest revenue on a fully taxable equivalent basis decreased $24 million in the first nine months of 2000 compared with the prior-year period. This decrease primarily resulted from the divestitures of the credit card and mortgage banking businesses, as well as higher funding costs related to the repurchase of common stock, partially offset by the positive impact of interest-free funds. Excluding the net interest revenue generated by the divested businesses, net interest revenue increased 1% compared with the first nine months of 1999.

Operating Expense
	Quarter ended												Nine months ended
	Sept. 30,				June 30,				Sept. 30,			Sept. 30,			Sept. 30,
(dollar amounts in millions)	2000				2000				1999			2000			1999
Staff expense	$		399		$		390		$	387		$	1,186		$	1,175
Professional, legal and other purchased services			77				70			63			214			207
Net occupancy expense			57				58			61			179			186
Equipment expense			35				38			40			110			144
Amortization of goodwill and other intangible assets			32				33			37			102			111
Amortization of mortgage servicing assets and
purchased credit card relationships			2				1			33			4			112
Other expense			100				114			95			330			350
Operating expense before trust-preferred securities
expense and net expense (revenue) from acquired
property			702				704			716			2,125			2,285
Trust-preferred securities expense			20				19			20			59			59
Net expense (revenue) from acquired property			2				1			(5	)		2			(10	)
Total operating expense	$		724		$		724		$	731		$	2,186		$	2,334
Average full-time equivalent staff	25,800				26,000				28,300			25,900			28,700
Efficiency ratio (a)	62			%	62			%		64	%		62	%		66	%
Efficiency ratio excluding amortization of goodwill
and other intangible assets	59			%	59			%		61	%		59	%		61	%

(a) Operating expense before trust-preferred securities expense, net expense (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 (loss) on divestitures and gains on the sales of securities.

Operating expense before trust-preferred securities expense and net expense (revenue) from acquired property totaled $702 million in the third quarter of 2000, a decrease of $14 million compared with the third quarter of 1999, primarily resulting from the divestiture of the mortgage banking businesses. Excluding the effect of this divestiture, operating expense before trust-preferred securities expense and net expense (revenue) from acquired property increased 8% compared with the third quarter of 1999, reflecting higher staff expense as well as other expenses in support of business growth.

	3rd Qtr. 2000	3rd Qtr. 2000	Nine mo. 2000
	over	over	over
Operating expense growth	3rd Qtr. 1999	2nd Qtr. 2000	Nine mo. 1999
Operating expense growth	8% (a)	-%	7	%	(a)(b)

(a) Excludes the effect of divestitures.
(b) Excludes the effect of the second quarter 1999 nonrecurring expenses.

Operating expense before trust-preferred securities expense and net expense (revenue) from acquired property decreased $2 million in the third quarter of 2000 compared with the second quarter of 2000, primarily due to lower business development and other expenses, primarily offset by higher staff expense and professional and purchased services expense.

 

Operating expense before trust-preferred securities expense and net expense (revenue) from acquired property totaled $2.125 billion in the first nine months of 2000, a decrease of $160 million, compared with $2.285 billion in the first nine months of 1999. The decrease primarily resulted from the 1999 divestitures of the credit card, network services transaction processing unit and the mortgage banking businesses, as well as $56 million of nonrecurring expenses recorded in the second quarter of 1999. The nonrecurring expenses included a $30 million charitable contribution to the Mellon Financial Corporation Foundation, classified as other expense in the table on the prior page, and $26 million of expenses in connection with replacing obsolete computer equipment and closing facilities as part of Mellon’s Third Century strategic initiatives. The Third Century expenses were recorded as $21 million of equipment expense and $5 million of net occupancy expense in the table on the prior page. Excluding the effect of the divestitures and nonrecurring expenses, operating expense before trust-preferred securities expense and net expense (revenue) from acquired property increased 7% during the first nine months of 2000 compared with the prior-year period.

Income Taxes

The Corporation’s effective tax rate for the third quarter of 2000 was 36.3%, substantially unchanged from the third quarter of 1999, excluding the effect of the net loss from divestitures. It is currently anticipated that the effective tax rate will be approximately the same for the remainder of 2000.

Credit Quality Expense, Net Credit Losses and Reserve for Credit Losses

	Quarter ended												Nine months ended
	Sept. 30,				June 30,				Sept. 30,				Sept. 30,				Sept. 30,
(dollar amounts in millions)	2000				2000				1999				2000				1999
Provision for credit losses	$		10		$		10		$		10		$		30		$		35
Net expense (revenue) from acquired property			2				1				(5	)			2				(10	)
Credit quality expense	$		12		$		11		$		5		$		32		$		25
Net credit (losses) recoveries:
Credit card	$		-		$		-		$		-		$		-		$		(10	)
Other consumer credit			(2	)			(3	)			(2	)			(8	)			(10	)
Commercial real estate			(1	)			-				-				4				-
Commercial and financial			(8	)			(8	)			(8	)	(29			)			(18	)
Total net credit losses	$		(11	)	$		(11	)	$		(10	)	$		(33	)	$		(38	)
Annualized net credit losses to average loans	.16			%	.15			%	.14			%	.16			%	.17			%
Reserve for credit losses at end of period	$		400		$		401		$		405
Reserve as a percentage of total loans	1.46			%	1.45			%	1.39			%

!-- 1 BODY_START -->

 

Nonperforming Assets
	Sept. 30,				June 30,				Dec. 31,				Sept. 30,
(dollar amounts in millions)	2000				2000				1999				1999
Nonperforming loans:
Consumer mortgage	$		21		$		32		$		40		$		47
Commercial real estate			7				8				6				6
Other			176				167				96				101
Total nonperforming loans			204				207				142				154
Acquired property:
Real estate acquired			12				13				15				15
Reserve for real estate acquired			-				(1	)			(1	)			(3	)
Net real estate acquired			12				12				14				12
Other assets acquired			6				9				3				3
Total acquired property			18				21				17				15
Total nonperforming assets	$		222		$		228		$		159		$		169
Nonperforming loans as a percentage of total loans	.74			%	.75			%	.47			%	.53			%
Nonperforming assets as a percentage of total loans
and net acquired property	.81			%	.82			%	.53			%	.58			%

Nonperforming assets decreased $6 million compared with June 30, 2000, and increased $53 million compared with Sept. 30, 1999. The higher level of nonperforming assets, compared with Sept. 30, 1999, primarily resulted from the assignment of nonperforming status to commercial loans to a health care provider and its affiliated companies in the first quarter of 2000.

On Oct. 5, 2000, a borrower in the building materials manufacturing industry voluntarily filed for Chapter 11 bankruptcy protection as the result of the financial burden caused by asbestos liability litigation claims. At Sept. 30, 2000, loans outstanding to this borrower totaled $34 million, which is not included in the table above, with an additional $6 million of exposure in letters of credit.

Selected Capital Data
		Sept. 30,			June 30,				Dec. 31,				Sept. 30,
(dollar amounts in millions, except per share amounts)		2000			2000				1999				1999
Total shareholders’ equity		$	4,032	(a)	$		3,864		$		4,016		$		4,219	(a)
Total shareholders’ equity to assets ratio			8.89%				8.39%				8.38%				9.00%
Tangible shareholders’ equity (c)		$	2,425	(b)	$		2,228		$		2,288		$		2,454	(b)
Tangible shareholders’ equity to assets ratio (d)			5.56%				5.03%				4.96%				5.45%
Tier I capital ratio			7.2%	(e)			6.72%				6.60%				7.12%
Total (Tier I plus Tier II) capital ratio			11.7%	(e)	10.97%				10.76%				11.58%
Leverage capital ratio			7.2%	(e)			6.69%				6.72%				6.82%
Book value per common share		$	8.26		$		7.91		$		8.02		$		8.29
Tangible book value per common share		$	4.97		$		4.56		$		4.57		$		4.83
Closing common stock price		$	46.38		$		36.44		$		34.06		$		33.63
Market capitalization		$	22,631		$		17,788		$		17,052		$		17,103
Common shares outstanding (000)		487,990			488,171				500,623				508,650

(a) Average total shareholders’ equity for the first nine months of 2000 and 1999 were $3.863 billion and $4.365 billion.

(b) Average tangible shareholders’ equity for the first nine months of 2000 and 1999 were $2.204 billion and $2.538 billion.

(c) Includes $81 million, $77 million, $67 million and $64 million, respectively, of minority interest, primarily related to Newton. In addition, includes $313 million, $319 million, $345 million and $353 million, respectively, of tax benefits related to tax deductible goodwill and other intangibles.

(d) 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. The amount of goodwill and other intangibles subtracted from shareholders’ equity and total assets is net of any tax benefit.

(e) Estimated

The Corporation’s capital ratios continued to improve in the third quarter of 2000, reflecting earnings retention as well as a decrease in asset levels partially offset by common stock repurchases. During the third quarter of 2000, approximately 1.8 million shares of common stock were repurchased, bringing year-to-date repurchases to approximately 18.1 million shares at a purchase price of approximately $600 million for an average share price of $33.15 per share. Common shares outstanding at Sept. 30, 2000, were 6.8% lower than at Dec. 31, 1998, reflecting a 35.9 million reduction, net of shares reissued primarily for employee benefit plan purposes, due to stock repurchases totaling approximately $1.7 billion, at an average share price of $34.52 per share. There are an additional 21.7 million shares available for repurchase under the current 25 million share repurchase program authorized by the board of directors in May 2000.

The Corporation’s average level of treasury stock was approximately $800 million higher in the third quarter of 2000 compared with the third quarter of 1999. After giving effect to funding the higher level of treasury stock, valued at a short-term funding rate, the lower share count increased diluted earnings per share by approximately 3%.

(dollar amounts in millions,										Quarter ended
except per share amounts;	Sept. 30,					June 30,				March 31,				Dec. 31,				Sept. 30,
common shares in thousands)	2000					2000				2000				1999				1999
Selected key data
Diluted earnings per share:
Operating (a)	$		.51			$		.50		$		.50		$		.48		$		.46
Cash operating (a)(b)			.56					.56				.56				.53				.52
Reported			.51					.50				.50				.47				.45
Net income:
Operating (a)	$		252			$		247		$		253		$		245		$		236
Cash operating (a)(b)			279					274				282				274				266
Reported			252					247				253				240				231
Return on equity (annualized):
Operating (a)	25.8			%		26.2			%	26.0			%			23.5%		22.3%
Cash operating (a)(b)	48.8					51.4				51.8				45.6				43.7
Reported	25.8					26.2				26.0				23.1				21.8
Return on assets (annualized):
Operating (a)	2.18			%		2.12			%			2.15	%	2.05			%	1.92			%
Cash operating (a)(b)	2.50					2.44				2.50				2.38				2.25
Reported	2.18					2.12				2.15				2.01				1.87
Shareholders’ equity to assets:
Reported	8.89			%		8.39			%	8.13			%	8.38			%	9.00			%
Tangible (b)	5.56					5.03				4.80				4.96				5.45
Fee revenue as a percentage of net interest and
fee revenue (FTE)	69			%		69			%	70			%	69			%	69			%
Trust and investment fee revenue as a percentage
of net interest and fee revenue (FTE)	49			%		50			%	50			%	49			%	46			%
Efficiency ratio excluding amortization of intangibles	59			%		59			%	59			%	59			%			61	%
Average common shares and equivalents outstanding:
Basic	488,188			(c)		489,480				496,740				505,891				511,777				(c)
Diluted	495,332			(c)		495,103				502,082				512,496				518,605				(c)

---

- continued -

		SUMMARY DATA
		Mellon Financial Corporation
		Five Quarter Trend
		(continued)
							Quarter ended
	Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,
(dollar amounts in millions)	2000			2000			2000			1999			1999
Average balances for the quarter
Money market investments	$	2,009		$	2,219		$	1,713		$	2,267		$	1,463
Trading account securities		322			214			248			372			403
Securities		6,166			6,121			6,155			6,275			6,364
Loans		27,430			27,943			29,283			29,159			30,177
Total interest-earning assets		35,927			36,497			37,399			38,073			38,407
Total assets		46,058	(d)		46,978			47,205			47,451			48,871	(d)
Total tangible assets (b)		44,357	(e)		45,257			45,419			45,640			47,012	(e)
Deposits		32,114			32,762			32,220			32,540			33,462
Total interest-bearing liabilities		29,746			30,376			31,045			31,221			31,349
Total shareholders’ equity		3,893			3,793			3,905			4,133			4,212
Tangible shareholders’ equity (b)		2,269			2,147			2,190			2,388			2,417

(a) Operating results equaled reported results in each quarter of 2000. Operating and cash operating results for the fourth and third quarters of 1999 each exclude a $5 million after-tax net loss from divestitures.

(b) Excludes the after-tax impact of the amortization of goodwill and other intangibles from purchase acquisitions. In addition, the amount of goodwill and other identified intangibles subtracted from common equity and total assets is net of any tax benefit.

(c) The basic average common shares and equivalents outstanding for the nine months ended Sept. 30, 2000, and Sept. 30, 1999, were 491,458,000 and 517,790,000, respectively. The diluted average common shares and equivalents outstanding for the nine months ended Sept. 30, 2000, and Sept. 30, 1999, were 497,439,000 and 525,182,000, respectively.

(d) Average total assets for the nine months ended Sept. 30, 2000, and Sept. 30, 1999, were $46.745 billion and $49.765 billion, respectively.

(e) Average total tangible assets for the nine months ended Sept. 30, 2000, and Sept. 30, 1999, were $45.010 billion and $47.876 billion, respectively.

Note: All calculations are based on unrounded numbers. FTE denotes presentation on a fully taxable equivalent basis.

CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Financial Corporation
Five Quarter Trend
								Quarter ended
		Sept. 30,			June 30,			March 31,			Dec. 31,			Sept. 30,
(inmillions, except per share amounts)		2000				2000		2000			1999			1999
Interest revenue
Interest and fees on loans (loan fees of
$	15, $15, $14, $14 and $14)	$	575		$	563		$	565		$	550		$	553
Federal funds sold and securities under resale
agreements			12			17			13			18			9
Interest-bearing deposits with banks			17			15			10			12			9
Other money market investments			1			1			1			1			1
Trading account securities			5			4			4			5			5
Securities			103			104			103			103			102
	Total interest revenue		713			704			696			689			679
Interest expense
Interest on deposits			250			244			233			225			218
Federal funds purchased and securities under
repurchase agreements			27			25			23			20			22
Other short-term borrowings			20			27			34			34			34
Notes and debentures			60			57			58			59			56
	Total interest expense		357			353			348			338			330
	Net interest revenue		356			351			348			351			349
Provision for credit losses			10			10			10			10			10
	Net interest revenue after provision for
	credit losses		346			341			338			341			339
Noninterest revenue
Trust and investment fee revenue			561			565			578			546			517
Cash management and deposit transaction charges			83			83			74			76			78
Foreign currency and securities trading revenue			42			42			51			43			42
Financing-related revenue			44			43			39			56			39
Equity investment revenue			20			17			36			16			17
Mortgage servicing fees			3			2			2			2			48
Other			20			21			18			20			24
	Total fee and other revenue		773			773			798			759			765
Net loss from divestitures			-			-			-			(7	)		(8	)
Gains on sales of securities			-			-			-			-			-
	Total noninterest revenue		773			773			798			752			757
Operating expense
Staff expense			399			390			397			384			387
Professional, legal and other purchased services			77			70			67			73			63
Net occupancy expense			57			58			64			57			61
Equipment expense			35			38			37			42			40
Amortization of goodwill and other intangible assets			32			33			37			37			37
Amortization of mortgage servicing assets			2			1			1			1			33
Other expense			100			114			116			105			95
Trust-preferred securities expense			20			19			20			20			20
Net expense (revenue) from acquired property			2			1			(1	)		(4	)		(5	)
	Total operating expense		724			724			738			715			731
	Income before income taxes		395			390			398			378			365
Provision for income taxes			143			143			145			138			134
	Net income	$	252		$	247		$	253		$	240		$	231
Basic net income per share		$	.52		$	.50		$	.51		$	.47		$	.46
Diluted net income per share		$	.51		$	.50		$	.50		$	.47		$	.45

CONDENSED CONSOLIDATED BALANCE SHEET
Mellon Financial Corporation
				Sept. 30,			June 30,			Dec. 31,			Sept. 30,
(dollar amounts in millions)				2000			2000			1999			1999
Assets
Cash and due from banks				$	2,888		$	3,580		$	3,410		$	3,340
Money market investments					1,214			1,435			1,358			1,252
Trading account securities					371			151			144			288
Securities available for sale					5,323			5,160			5,159			5,209
Investment securities (approximate fair value of $1,058,
	$1,094, $1,183 and $1,246)				1,063			1,110			1,197			1,251
Loans, net of unearned discount of $74, $73, $79 and $77				27,421			27,667			30,248			29,156
Reserve for credit losses					(400	)		(401	)		(403	)		(405	)
		Net loans		27,021			27,266			29,845			28,751
Premises and equipment					598			572			562			537
Goodwill and other intangibles					2,001			2,032			2,140			2,182
Mortgage servicing assets					25			22			16			17
Other assets					4,833			4,701			4,115			4,034
		Total assets		$	45,337		$	46,029		$	47,946		$	46,861
Liabilities
Deposits in domestic offices				$	28,634		$	29,626		$	30,128		$	28,928
Deposits in foreign offices					3,111			2,992			3,293			3,101
Short-term borrowings					2,306			2,456			3,650			3,570
Other liabilities					2,732			2,563			2,430			2,354
Notes and debentures (with original maturities over one year)					3,531			3,537			3,438			3,698
		Total liabilities		40,314			41,174			42,939			41,651
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 shares			294			294			294			294
Additional paid-in capital					1,821			1,806			1,788			1,773
Retained earnings					4,155			4,043			3,808			3,698
Accumulated unrealized (loss), net of tax					(87	)		(146	)		(135	)		(105	)
Treasury stock of 100,671,971; 100,490,756; 88,038,848;
and 80,011,896 shares at cost					(2,151	)		(2,133	)		(1,739	)		(1,441	)
		Total shareholders’ equity			4,032			3,864			4,016			4,219
		Total liabilities, trust-preferred securities and
		shareholders’ equity		$	45,337		$	46,029		$	47,946		$	46,861

CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Financial Corporation
		Nine months ended
		Sept. 30,
(in millions, except per share amounts)		2000			1999
Interest revenue
Interest and fees on loans (loan fees of $44 and $45)	$	1,703		$	1,688
Federal funds sold and securities under resale agreements		42			23
Interest-bearing deposits with banks		42			27
Other money market investments		3			2
Trading account securities		13			14
Securities		310			316
Total interest revenue		2,113			2,070
Interest expense
Interest on deposits		727			646
Federal funds purchased and securities under repurchase agreements		75			82
Other short-term borrowings		81			97
Notes and debentures		175			166
Total interest expense		1,058			991
Net interest revenue		1,055			1,079
Provision for credit losses		30			35
Net interest revenue after provision for credit losses		1,025			1,044
Noninterest revenue
Trust and investment fee revenue		1,704			1,528
Cash management and deposit transaction charges		240			228
Foreign currency and securities trading revenue		135			130
Financing-related revenue		126			137
Equity investment revenue		73			47
Mortgage servicing fees		7			151
Other		59			120
Total fee and other revenue		2,344			2,341
Net gain from divestitures		-			134
Gains on sales of securities		-			-
Total noninterest revenue		2,344			2,475
Operating expense
Staff expense		1,186			1,175
Professional, legal and other purchased services		214			207
Net occupancy expense		179			186
Equipment expense		110			144
Amortization of goodwill and other intangible assets		102			111
Amortization of mortgage servicing assets and purchased credit card relationships		4			112
Other expense		330			350
Trust-preferred securities expense		59			59
Net expense (revenue) from acquired property		2			(10	)
Total operating expense		2,186			2,334

- continued -

CONDENSED CONSOLIDATED INCOME STATEMENT
Mellon Financial Corporation
(continued)
		Nine months ended
		Sept. 30,
(in millions, except per share amounts)	2000			1999
Income before income taxes and cumulative effect
of accounting change	1,183			1,185
Provision for income taxes		431				436
Income before cumulative effect of accounting change		752				749
Cumulative effect of accounting change		-				(26	)
Net income	$	752			$	723
Earnings per share
Basic net income per share:
Income before cumulative effect of accounting change	$	1.53			$	1.45
Cumulative effect of accounting change		-		(.05			)
Net income	$	1.53			$	1.40
Diluted net income per share:
Income before cumulative effect of accounting change	$	1.51			$	1.43
Cumulative effect of accounting change		-		(.05			)
Net income	$	1.51			$	1.38