SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - October 16, 2001
MELLON FINANCIAL CORPORATION
(Exact name of registrant as specified in charter)
Pennsylvania |
1-7410 |
25-1233834 |
(State or other jurisdiction of incorporation) |
(Commission
|
(I.R.S. Employer Identification No.) |
One Mellon Center
|
|
Registrant's telephone number, including area code - (412) 234-5000
ITEM 5. | OTHER EVENTS |
By press release dated October 16, 2001, Mellon Financial Corporation (the "Corporation") announced third quarter 2001 results of operations. | |
In the same release, the Corporation also announced it declared a quarterly common stock dividend of 12 cents per share payable on November 15, 2001 to shareholders of record at the close of business on October 31, 2001. The Corporation previously announced on July 17, 2001 that it was realigning its dividend to be consistent with other growth companies in the financial services industry. | |
ITEM 7. | FINANCIAL STATEMENTS AND EXHIBITS |
Exhibit
Number |
Description |
99.1 | Mellon Financial Corporation Press Release dated October 16, 2001, announcing the matters referenced in Item 5 above. |
SIGNATURES | |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. |
MELLON FINANCIAL CORPORATION | ||
Date: October 16, 2001 | By: | /s/ STEVEN G. ELLIOTT |
Steven G. Elliott
Senior Vice Chairman & Chief Financial Officer |
EXHIBIT INDEX
Number |
Description |
Method of Filing |
99.1 |
Press Release dated October 16, 2001 |
Filed herewith |
EXHIBIT 99.1
[LOGO] Mellon
News Release | |||
MEDIA: | ANALYSTS: | Corporate Affairs | |
Ken Herz
(412) 234-0850 Ron Sommer (412) 236-0082 |
Don MacLeod
(412) 234-5601 Andy Clark (412) 234-4633 |
One Mellon Center
Pittsburgh, PA 15258-0001 |
|
FOR IMMEDIATE RELEASE |
MELLON REPORTS THIRD QUARTER 2001 RESULTS
Core business sectors earnings per share contribution increased 9%
PITTSBURGH, Oct. 16, 2001Mellon Financial Corporation (NYSE: MEL) today announced third quarter 2001 income from continuing operations of $178 million, or 38 cents per share, compared with $195 million or 40 cents per share reported in the third quarter of 2000. Results in the third quarter of 2001 reflect the weakness in the equity markets and the economy during the quarter that was further intensified by the events of Sept. 11, 2001. Continuing operations returned 20.6 percent on equity and 2.02 percent on assets in the third quarter of 2001 compared with 20.0 percent and 2.55 percent, respectively, in the third quarter of 2000. Core business sectors contribution to earnings per share, which excludes the revenues and expenses from discontinued operations, and other non-core activity from both periods, increased 9 percent in the third quarter 2001 over third quarter 2000.
As previously announced on July 17, 2001, the Corporation reached an agreement to sell its mid-Atlantic region consumer, small business and certain middle market banking operations to Citizens Financial Group, Inc. As a result of this agreement and other divestitures completed in the second quarter of 2001, the Corporation is reporting the financial results of these and certain other businesses using the discontinued operations method of accounting. In accordance with generally accepted accounting principles, earnings and net assets or liabilities of these businesses are shown separately in the income statement and balance sheet, respectively, for all periods presented. Accordingly, all information in this earnings release, including all supplemental information, reflects continuing operations, unless otherwise noted.
Quarter ended | Nine months ended | ||||||||||||||||
Financial Highlights | |
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|||||||||||||||
(dollar amounts in millions, except per share | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | |||||||||||||
amounts; returns are annualized) | 2001 | 2000 | 2001 | 2000 | |||||||||||||
|
|||||||||||||||||
Operating results continuing operations: | |||||||||||||||||
Diluted earnings per share | $ | .38 | $ | .40 | $ | 1.19 | (a) | $ | 1.17 | ||||||||
Income from continuing operations | $ | 178 | $ | 195 | $ | 570 | (a) | $ | 580 | ||||||||
Return on equity | 20.6 | % | 20.0 | % | 20.5 | % | (a) | 20.1 | % | ||||||||
Return on assets | 2.02 | % | 2.55 | % | 2.33 | % | (a) | 2.50 | % | ||||||||
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Net income: | |||||||||||||||||
Diluted earnings per share | $ | .40 | $ | .51 | $ | 1.06 | $ | 1.51 | |||||||||
Net income | $ | 192 | $ | 252 | $ | 511 | $ | 752 | |||||||||
Return on equity | 22.2 | % | 25.8 | % | 18.4 | % | 26.0 | % | |||||||||
Return on assets | 1.68 | % | 2.18 | % | 1.47 | % | 2.15 | % | |||||||||
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Mellon Reports Earnings
Oct. 16, 2001
Page 2
Quarter ended | Nine months ended | ||||||||||||||||
Financial Highlights | |
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|||||||||||||||
(dollar amounts in millions, except per share | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | |||||||||||||
amounts; returns are annualized) | 2001 | 2000 | 2001 | 2000 | |||||||||||||
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Operating results continuing operations excluding | |||||||||||||||||
goodwill amortization (b): | |||||||||||||||||
Diluted earnings per share | $ | .42 | $ | .43 | $ | 1.30 | (a) | $ | 1.27 | ||||||||
Income from continuing operations | $ | 197 | $ | 213 | $ | 625 | (a) | $ | 632 | ||||||||
Return on equity | 22.7 | % | 21.8 | % | 22.4 | % | (a) | 21.9 | % | ||||||||
Return on assets | 2.23 | % | 2.77 | % | 2.56 | % | (a) | 2.73 | % | ||||||||
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Fee revenue as a percentage of net interest and fee | |||||||||||||||||
revenue (FTE) | 83 | % | 83 | % | 84 | % | (c) | 84 | % | ||||||||
Trust and investment fee revenue as a percentage of net | |||||||||||||||||
interest and fee revenue (FTE) | 68 | % | 64 | % | 67 | % | (c) | 64 | % | ||||||||
Efficiency ratio excluding amortization of goodwill | 66 | % | 62 | % | 65 | % | (c) | 62 | % | ||||||||
S&P 500 Index at period end | 1,041 | 1,437 | |||||||||||||||
|
(a)
|
Results from continuing operations for the first nine months of 2001 exclude a $91 million, or 19 cents per share, after-tax charge for the fair value adjustment of investments in the venture capital portfolio, recorded in the second quarter of 2001. | ||
(b)
|
Excludes the after-tax impact of the amortization of goodwill from purchase acquisitions. See page 15 for further discussion of these amounts and ratios | ||
(c)
|
Ratios for the first nine months of 2001 exclude the $140 million pre-tax venture capital fair value adjustment, recorded in the second quarter of 2001 |
Having increased retail account deposits by approximately $1 billion since the announcement of our agreement with Citizens, were on track for a successful completion of that transaction. And the nine-percent increase in earnings contribution from our core business sectors over the same period a year ago despite extremely challenging external conditions clearly demonstrates that our strategic vision is sound and achievable, said Martin G. McGuinn, Mellon chairman and chief executive officer.
The Corporation also declared a quarterly common stock dividend of 12 cents per share. This cash dividend is payable on Nov. 15, 2001, to shareholders of record at the close of business on Oct.
31, 2001. The Corporation previously announced on July 17, 2001, that it was realigning its dividend to be consistent with other growth companies in the financial services industry. This will enable the Corporation to re-deploy additional capital to
continue to invest in its fee businesses, including acquisitions, and to repurchase shares. The lower dividend will result in additional annual capital for reinvestment of approximately $225 million.
Third Quarter 2001 Financial Data Continuing Operations:
| Core business sectors contribution to earnings per share increased 9 percent over the third quarter of 2000, resulting from good performance in the Private Client Services, and the Processing and Corporate Services sectors. | |
| Return on equity totaled 20.6 percent compared with 20.0 percent in the third quarter of 2000. Return on assets was 2.02 percent compared with 2.55 percent in the third quarter of 2000. | |
| Fee revenue totaled 83 percent of net interest and fee revenue in the third quarter of 2001, unchanged from the third quarter of 2000. Trust and investment fee revenue totaled 68 percent of net interest and fee revenue in the third quarter of 2001, compared with 64 percent in the third quarter of 2000. |
Mellon Reports Earnings
Oct. 16, 2001
Page 3
| Fee revenue decreased 5 percent compared to the prior-year period excluding the impact of acquisitions, reflecting the weakness in the equity markets. Trust and investment fee revenue was down only 1 percent as business growth primarily offset the impact of a capital markets slowdown. | |
| Assets under management totaled $547 billion, compared with $546 billion at June 30, 2001, with assets under management, administration or custody totaling more than $2.6 trillion at Sept. 30, 2001. The July 2001 acquisition of Standish Mellon Asset Management added $41 billion to managed assets in the third quarter of 2001. Assets managed by subsidiaries and affiliates outside the United States totaled $67 billion at Sept. 30, 2001. The equity markets at Sept. 30, 2001, as measured by the Standard and Poors 500 Index, decreased 15 percent compared with June 30, 2001. | |
| Operating expense was essentially unchanged in the third quarter of 2001 compared with the third quarter of 2000, excluding the impact of acquisitions. | |
| Nonperforming assets totaled $126 million, or 1.23 percent of total loans and net acquired property at Sept. 30, 2001, compared with $128 million, or 1.28 percent of total loans and net acquired property at June 30, 2001. | |
| The Corporation repurchased approximately 3.4 million common shares during the quarter, bringing year-to-date repurchases to approximately 23.4 million shares. Since Jan. 1, 1999, the Corporations common shares outstanding have been reduced by 56.0 million shares, or 10.7 percent, net of reissuances, due to stock repurchases totaling approximately $2.8 billion, at an average share price of $38.12 per share. In addition, during the third quarter of 2001 the Corporation entered into forward stock repurchase contracts for 9.8 million shares of its common stock totaling $342 million, at an average share price of $34.76 per share. These contracts will settle, and the Corporation will acquire the shares, no later than Jan. 2002. At Sept. 30, 2001, after considering the shares repurchased and those committed to be repurchased, an additional 10.4 million shares were available for repurchase under the current program. During the third quarter of 2001, the board of directors also authorized the repurchase of the number of common shares that will be issued in connection with the acquisition of Eagle Investment Systems, expected to close in the fourth quarter of 2001. | |
Mellon Financial Corporation is a global financial services company. Headquartered in Pittsburgh, Mellon is one of the worlds leading providers of asset management, trust, custody, benefits consulting and administration, shareholder services and cash management, and offers a comprehensive array of financial services for affluent individuals and corporations. Mellon has more than $2.6 trillion in assets under management, administration or custody, including $547 billion under management. Its asset management companies include The Dreyfus Corporation and Newton Investment Management Limited (U.K.). | ||
Pre-recorded comments from Steven G. Elliott, senior vice chairman and chief financial officer, regarding third quarter 2001 earnings and Mellons outlook for the fourth quarter of 2001 and full year 2002 are available by calling (412) 236-5385 beginning at approximately 1:30 p.m. EDT on Tuesday, Oct. 16, 2001, through 5 p.m. EDT on Tuesday, Oct. 23, 2001. These comments may include additional forward-looking or other material information. Mr. Elliotts pre-recorded commentary, plus a related series of graphics, also will be available at our Web site (www.mellon.com) during the same period. | ||
Note: Detailed supplemental financial information follows. |
Mellon Reports Earnings
Oct. 16, 2001
Page 4
Discontinued Operations
The results of regional consumer banking, small business banking, middle market banking, jumbo and other consumer mortgages, as well as the Mellon Leasing Corporation businesses that served mid-to-large corporations and vendors of small ticket equipment, and Mellon Business Credit, which were sold in June 2001, are reflected as discontinued operations throughout the Corporations financial statements. In accordance with generally accepted accounting principles, earnings and net assets or liabilities of these businesses are shown separately in the income statement and balance sheet, respectively, for all periods presented. The discussion and financial information in this earnings release, including all supplemental information, reflects continuing operations, unless otherwise noted.
Business Sectors
The presentation of the Corporations core business sectors results is consistent with its emphasis on high growth, fee-based businesses. The core business sectors are classified as either Asset Management or Processing and Corporate Services sectors.
|
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Summary | % of Core
Sector Revenue |
% of Core
Sector Income Before Taxes |
% of Core
Sector Revenue |
% of Core
Sector Income Before Taxes |
|||||||||||
3Q01 | 3Q00 | 3Q01 | 3Q00 | YTD01 | YTD00 | YTD01 | YTD00 | ||||||||
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Asset Management | 43% | 47% | 48% | 53% | 42% | 47% | 47% | 53% | |||||||
Processing and Corporate | |||||||||||||||
Services | 57% | 53% | 52% | 47% | 58% | 53% | 53% | 47% | |||||||
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|
|
|
|
|
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||||||||
Total Core Business Sectors | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||
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Contribution To Earnings Per Share From Total Core Business Sectors | |||||||||||||||
(in millions, except per share amounts) | 3Q01 | 3Q00 | Growth | YTD01 | YTD00 | Growth | |||||||||
|
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Net Income | $178 | $175 | 2% | $ 546 | $ 513 | 6% | |||||||||
Contribution to EPS | $ .38 | $ .35 | 9% | $1.14 | $1.03 | 11% | |||||||||
Contribution to EPS excluding goodwill amortization | $ .41 | $ .39 | 5% | $1.24 | $1.13 | 10% | |||||||||
|
|
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Contribution To Earnings Per Share From Total Core Business Sectors
Five-Quarter Trend |
||||||||||||||
(in millions, except per share amounts) | 3Q01 | 2Q01 | 1Q01 | 4Q00 | 3Q00 | |||||||||
|
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Net Income | $178 | $188 | $180 | $176 | $175 | |||||||||
Contribution to EPS | $ .38 | $ .39 | $ .37 | $ .36 | $ .35 | |||||||||
Contribution to EPS excluding goodwill amortization | $ .41 | $ .43 | $ .40 | $ .39 | $ .39 | |||||||||
|
Mellon Reports Earnings
Oct. 16, 2001
Page 5
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||||||||||||||
(dollar amounts in millions,
presented on a FTE basis) |
Third Quarter 2001
|
Third Quarter 2000
|
||||||||||||
Sector | Total
Revenue |
Income
Before Taxes |
Return on
Common Equity |
Total
Revenue |
Income
Before Taxes |
Return on
Common Equity |
||||||||
|
|
|
|
|
|
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Asset Management: | ||||||||||||||
Private Client Services | $126 | $ | 61 | 66 | % | $114 | $ 49 | 50 | % | |||||
Global Investment Management | 271 | 79 | 29 | 278 | 105 | 44 | ||||||||
|
|
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Total Asset Management Sectors | 397 | 140 | 39 | 392 | 154 | 45 | ||||||||
Processing and Corporate Services: | ||||||||||||||
Global Investment Services | 326 | 69 | 27 | 268 | 64 | 31 | ||||||||
Global Cash Management | 112 | 39 | 67 | 95 | 29 | 50 | ||||||||
Relationship Lending | 78 | 43 | 17 | 87 | 41 | 12 | ||||||||
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Total Processing and Corporate | ||||||||||||||
Services Sectors | 516 | 151 | 27 | 450 | 134 | 23 | ||||||||
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Total Core Business Sectors | $913 | $ | 291 | 32 | % | $842 | $288 | 31 | % | |||||
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|
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(dollar amounts in millions,
presented on a FTE basis) |
First Nine Months 2001
|
First Nine Months 2000 |
||||||||||||
Sector | Total
Revenue |
Income
Before Taxes |
Return on
Common Equity |
Total
Revenue |
Income
Before Taxes |
Return on
Common Equity |
||||||||
|
|
|
|
|
|
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Asset Management: | ||||||||||||||
Private Client Services | $ 366 | $170 | 62 | % | $ | 329 | $141 | 51 | % | |||||
Global Investment Management | 789 | 250 | 32 | 828 | 298 | 43 | ||||||||
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Total Asset Management Sectors | 1,155 | 420 | 40 | 1,157 | 439 | 45 | ||||||||
Processing and Corporate Services: | ||||||||||||||
Global Investment Services | 1,023 | 243 | 33 | 802 | 198 | 34 | ||||||||
Global Cash Management | 317 | 99 | 53 | 276 | 81 | 50 | ||||||||
Relationship Lending | 240 | 125 | 15 | 243 | 117 | 12 | ||||||||
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Total Processing and Corporate | ||||||||||||||
Services Sectors | 1,580 | 467 | 26 | 1,321 | 396 | 23 | ||||||||
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Total Core Business Sectors | $2,735 | $887 | 31 | % | $ | 2,478 | $835 | 31 | % | |||||
|
Mellon Reports Earnings
Oct. 16, 2001
Page 6
Asset Management | |||||||||
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3Q 2001 vs. 3Q 2000 | Total Revenue | Operating Expense | Income Before | ||||||
Growth | Growth | Taxes Growth | |||||||
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Private Client Services | 11 | % | 1% | 23 | % | ||||
Global Investment Management | (2 | )% | 12% | (24 | )% | ||||
Total Asset Management | 2 | % | 9% | (9 | )% | ||||
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YTD 2001 vs. YTD 2000 | Total Revenue | Operating Expense | Income Before | ||||||
Growth | Growth | Taxes Growth | |||||||
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Private Client Services | 11 | % | 5% | 20 | % | ||||
Global Investment Management | (5 | )% | 2% | (16 | )% | ||||
Total Asset Management | | % | 2% | (4 | )% | ||||
|
The Asset Management sectors results reflect the continued weakness in the equity markets, as represented by the Standard and Poors 500 Index, which was down 27.5% at Sept. 30, 2001 compared with Sept. 30, 2000, partially offset by a stronger fixed income market as represented by the Lehman Brothers Long-Term Government Bond Index, which is up 14.3% over the same period. The Private Client Services sector continued to show good revenue and income before taxes growth for the third quarter and first nine months of 2001, primarily resulting from higher net interest revenue and effective expense management. The results of the Global Investment Management sector were impacted by the July 2001 Standish Mellon Asset Management acquisition Excluding the impact of the acquisition, revenue decreased 7% and 6% respectively, for the third quarter and first nine months of 2001, while expenses increased 4% for the third quarter and decreased 1% for the first nine months of 2001. The lower revenue levels reflected the equity market conditions in 2001.
Processing and Corporate Services
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3Q 2001 vs. 3Q 2000 | Total Revenue | Operating Expense | Income Before | ||||||
Growth | Growth | Taxes Growth | |||||||
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Global Investment Services | 21 | % | 25 | % | 10% | ||||
Global Cash Management | 17 | % | 5 | % | 45% | ||||
Relationship Lending | (5 | )% | (9 | )% | 8% | ||||
Total Processing and Corporate Services | 15 | % | 16 | % | 17% | ||||
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YTD 2001 vs. YTD 2000 | Total Revenue | Operating Expense | Income Before | ||||||
Growth | Growth | Taxes Growth | |||||||
|
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Global Investment Services | 28 | % | 29 | % | 23% | ||||
Global Cash Management | 15 | % | 12 | % | 22% | ||||
Relationship Lending | (1 | )% | (1 | )% | 7% | ||||
Total Processing and Corporate Services | 20 | % | 22 | % | 18% | ||||
|
Mellon Reports Earnings
Oct. 16, 2001
Page 7
Processing and Corporate Services revenue increased 15% and 20%, respectively, for the third quarter and first nine months of 2001, while income before taxes increased 17% and 18% for the same periods. The results of the Global Investment Services sector were favorably impacted by the December 2000 acquisition of the remaining 50% interest in Mellon Investor Services. Excluding the impact of the acquisition, revenue for this sector increased 4% and 9%, respectively, for the third quarter and first nine months of 2001, while operating expenses increased 5% and 6%, respectively, for the third quarter and for the first nine months of 2001. The Global Cash Management sector reported excellent growth in revenue and income before taxes from new business and higher volumes from existing customers. The results of the Relationship Lending sector reflected lower fee revenue offset by lower operating expenses compared with the prior periods.
Noninterest Revenue
Quarter ended | Nine months ended | |||||||||||||||
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(dollar amounts in millions, | Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | ||||||||||||
unless otherwise noted) | 2001 | 2000 | 2001 | 2000 | ||||||||||||
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Trust and investment fee revenue: | ||||||||||||||||
Investment management fee revenue: | ||||||||||||||||
Managed mutual funds | $ | 182 | $ | 173 | $ | 520 | $ | 499 | ||||||||
Institutional | 83 | 75 | 240 | 223 | ||||||||||||
Private clients | 80 | 78 | 241 | 231 | ||||||||||||
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Total investment management fee revenue | 345 | 326 | 1,001 | 953 | ||||||||||||
Administration and custody fee revenue | 188 | 150 | 602 | 496 | ||||||||||||
Benefits consulting | 70 | 66 | 205 | 185 | ||||||||||||
Brokerage fees | 7 | 11 | 30 | 45 | ||||||||||||
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Total trust and investment fee revenue | 610 | 553 | 1,838 | 1,679 | ||||||||||||
Cash management revenue | 62 | 53 | 176 | 150 | ||||||||||||
Foreign currency and securities trading revenue | 39 | 42 | 141 | 135 | ||||||||||||
Financing-related revenue | 40 | 37 | 117 | 104 | ||||||||||||
Equity investment revenue | (20 | ) | 20 | (157 | ) | 73 | ||||||||||
Other | 10 | 7 | 30 | 29 | ||||||||||||
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Total fee and other revenue | 741 | 712 | 2,145 | 2,170 | ||||||||||||
Gains on sales of securities | | | | | ||||||||||||
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Total noninterest revenue | $ | 741 | $ | 712 | $ | 2,145 | $ | 2,170 | ||||||||
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Fee revenue as a percentage of net interest and | ||||||||||||||||
fee revenue (FTE) | 83 | % | 83 | % | 84 | % | (a) | 84 | % | |||||||
Trust and investment fee revenue as a percentage of | ||||||||||||||||
net interest and fee revenue (FTE) | 68 | % | 64 | % | 67 | % | (a) | 64 | % | |||||||
Assets under management at period end (in billions) | $ | 547 | $ | 540 | ||||||||||||
Assets under administration or custody at period | ||||||||||||||||
end (in billions) | $ | 2,077 | $ | 2,298 | ||||||||||||
S&P 500 Index at period end | 1,041 | 1,437 | ||||||||||||||
|
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(a) Excludes the second quarter 2001 $140 million pre-tax impact of the fair value adjustment of venture capital investments. | ||||||||||||||||
Note: 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. |
Mellon Reports Earnings
Oct. 16, 2001
Page 8
Fee revenue
Fee revenue of $741 million in the third quarter of 2001 when compared with the third quarter of 2000 was impacted by the December 2000 acquisition of the remaining 50% interest in Mellon Investor Services and the July 2001 acquisition of Standish Mellon Asset Management. Excluding the impact of acquisitions, fee revenue decreased 5% in the third quarter of 2001, compared with the third quarter of 2000, reflecting the weakness in the equity markets. Trust and investment fee revenue excluding the effect of acquisitions was down only 1% in the third quarter of 2001 compared with the third quarter of 2000, despite the 27.5% drop in the equity markets as represented by the Standard and Poors 500 Index.
3rd Qtr. 2001 | Nine Mo. 2001 | |||||
over | over | |||||
Fee revenue growth (a) | 3rd Qtr. 2000 | Nine Mo. 2000 | ||||
|
||||||
Trust and investment fee revenue growth | (1 | )% | 2 | % | ||
Total fee revenue growth (b) | (5 | )% | (1 | )% | ||
excluding equity investment revenue | 1 | % | 3 | % | ||
S&P 500 Index at period end | 1,041 | 1,437 | ||||
|
(a)
|
Excludes the effect of acquisitions and the May 2000 expiration of the long-term mutual fund administration contract with a third party. | |
(b)
|
Also excludes the second quarter 2001 $140 million pre-tax fair value adjustment of venture capital investments. |
Investment management fee revenue
Investment management fee revenue increased $19 million, or 6%, in the third quarter of 2001, compared with the third quarter of 2000, and increased $48 million, or 5%, in the first nine months of 2001, compared with the first nine months of 2000. The increase in the third quarter of 2001 compared to the third quarter of 2000 primarily resulted from increased investment management fee revenue relating to fixed-income and money market mutual funds as well as the Standish Mellon acquisition. Excluding the effect of this acquisition, investment management fee revenue increased 2% as the positive effect of new business offset the effect of the weakened equity markets.
Mutual fund management fees are based upon the daily average net assets of each fund. The average assets of proprietary mutual funds managed in the third quarter of 2001 were $164 billion, up $22 billion, or 15%, from $142 billion in the third quarter of 2000. The increase primarily resulted from increases in average net assets of institutional taxable money market funds, offset in part by lower average net assets of equity funds. Proprietary equity funds averaged $47 billion in the third quarter of 2001, a decrease of $12 billion, or 20%, compared with $59 billion in the third quarter of 2000.
As shown in the table on the following page, the market value of assets under management was $547 billion at Sept. 30, 2001, a $1 billion increase from $546 billion at June 30, 2001, and a $7 billion increase from $540 billion at Sept. 30, 2000. The increase compared with the prior periods was due to the Standish Mellon acquisition, which added $41 billion to managed assets, offsetting the effect of weakness in equity markets in 2001. The equity markets at Sept. 30, 2001, as measured by the Standard and Poors 500 Index, decreased
Mellon Reports Earnings
Oct. 16, 2001
Page 9
15.0% compared with June 30, 2001, and decreased 27.5% compared with Sept. 30, 2000, while a key bond market benchmark, the Lehman Brothers Long-Term Government Bond Index, increased 6.6% at Sept. 30, 2001, compared to June 30, 2001, and increased 14.3% compared to Sept. 30, 2000.
Market value of assets under management, administration or custody at period end | |||||||||||||||
Sept. 30, | June 30, | March 31, | Dec. 31, | Sept. 30, | |||||||||||
(in billions) | 2001 | 2001 | 2001 | 2000 | 2000 | ||||||||||
|
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Mutual funds managed: | |||||||||||||||
Equity funds | $ | 43 | $ | 51 | $ | 47 | $ | 54 | $ | 60 | |||||
Money market funds | 93 | 92 | 81 | 68 | 64 | ||||||||||
Bond and fixed-income funds | 27 | 22 | 22 | 21 | 21 | ||||||||||
Nonproprietary | 22 | 25 | 23 | 31 | 32 | ||||||||||
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Total mutual funds managed | 185 | 190 | 173 | 174 | 177 | ||||||||||
Institutional (a) | 316 | 306 | 298 | 302 | 309 | ||||||||||
Private clients | 46 | 50 | 49 | 54 | 54 | ||||||||||
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Total market value of assets | |||||||||||||||
under management | $ | 547 | $ | 546 | $ | 520 | $ | 530 | $ | 540 | |||||
Market value of assets under | |||||||||||||||
administration or custody (b)(c) | $ | 2,077 | $ | 2,295 | $ | 2,251 | $ | 2,267 | $ | 2,298 | |||||
|
|||||||||||||||
Total market value of assets under | |||||||||||||||
management, administration or custody | $ | 2,624 | $ | 2,841 | $ | 2,771 | $ | 2,797 | $ | 2,838 | |||||
S&P 500 Index at period end | 1,041 | 1,224 | 1,160 | 1,320 | 1,437 | ||||||||||
|
(a)
|
Includes assets managed at Pareto Partners of $28 billion at Sept. 30, 2001, $29 billion at June 30, 2001, $28 billion at March 31, 2001, $29 billion at Dec. 31, 2000, and $29 billion at Sept. 30, 2000.
The Corporation has a 30% equity interest in Pareto Partners.
|
(b)
|
Includes $276 billion of assets at Sept. 30, 2001; $299 billion of assets at June 30, 2001; $300 billion of assets at March 31, 2001; $323 billion of assets at Dec. 31, 2000; and $330 billion of assets
at Sept. 30, 2000, administered by CIBC Mellon Global Securities Services, a joint venture between the Corporation and the Canadian Imperial Bank of Commerce.
|
(c)
|
Assets administered by the Corporation under ABN AMRO Mellon, a strategic alliance of the Corporation and ABN AMRO, included in the table above, were $118 billion at Sept. 30, 2001; $123 billion at June
30, 2001; $103 billion at March 31, 2001; $95 billion at Dec. 31, 2000; and $84 billion at Sept. 30, 2000.
|
Administration and custody fee revenue
Administration and custody fee revenue increased $38 million, or 25%, in the third quarter of 2001 compared with the third quarter of 2000, and increased $106 million, or 21%, in the first nine months of 2001, compared with the first nine months of 2000. These increases resulted from the December 2000 acquisition of the remaining 50% interest in Mellon Investor Services. Excluding the acquisition, administration and custody fee revenue decreased 5% compared to the third quarter of 2000, primarily due to lower securities lending revenue and lower mutual fund administration revenue. The results of Mellon Investor Services had been accounted for under the equity method of accounting prior to the acquisition, with the net results recorded as institutional trust and custody revenue. Following the acquisition, the gross fee revenue from this business is primarily included in institutional trust and custody revenue. Mellon Investor Services generated $49 million of gross fee revenue in the third quarter of 2001.
The market value of assets under administration or custody, shown in the table above, was $2,077 billion at Sept. 30, 2001, a decrease of $218 billion, or 10% unannualized, compared with $2,295 billion at June 30, 2001, and a decrease of $221 billion, or 10%, compared with $2,298 billion at Sept. 30, 2000, reflecting, in large part, the weakened equity market.
Mellon Reports Earnings
Oct. 16, 2001
Page 10
Benefits consulting fees generated by Buck Consultants increased $4 million, or 6%, in the third quarter of 2001, compared with the third quarter of 2000. This increase primarily reflects new client project activity and revenue from existing clients.
The $4 million, or 34%, decrease in brokerage fees in the third quarter of 2001 compared to the third quarter of 2000 resulted from lower trading volumes in the volatile equities markets. Dreyfus Brokerage Services, Inc. averaged approximately 5,300 trades per day in the third quarter of 2001, compared with approximately 11,000 trades per day in the third quarter of 2000.
Cash management revenue increased $9 million, or 19%, in the third quarter of 2001, compared with the prior-year period. The increase primarily resulted from higher volumes of cash management business, particularly in electronic and lockbox services. Cash management revenue does not include revenue from customers holding compensating balances on deposits in lieu of paying cash fees. The earnings on the compensating balances are recognized in net interest revenue.
Foreign currency and securities trading revenue decreased $3 million, or 8%, to $39 million in the third quarter of 2001, compared with the prior-year period, primarily due in part to lower securities trading revenue.
Financing-related and equity investment revenue totaled $20 million in the third quarter of 2001, compared with $57 million of revenue in the third quarter of 2000. Financing-related revenue, which primarily includes loan commitment fees; letters of credit and acceptance fees; gains or losses on loan sales; and gains or losses on lease residuals, increased $3 million in the third quarter of 2001 compared with the third quarter of 2000. Equity investment revenue, which includes realized and unrealized gains and losses on venture capital and non-venture capital investments, decreased $40 million in the third quarter of 2001, compared with the third quarter of 2000, primarily due to additional charges for fair value adjustments of investments in the venture capital portfolio. A net charge of $28 million pre-tax, $18 million after-tax, or $.04 per share, for the venture capital portfolio was recorded in the third quarter of 2001, compared with net gains of $8 million pre-tax, $5 million after-tax, or $.01 per share in the third quarter of 2000. The Corporation recorded a $140 million pre-tax, $91 million after-tax, or $.19 per share, charge for fair value adjustments in the second quarter of 2001.
Fee revenue for the first nine months of 2001 totaled $2.145 billion, a $25 million decrease compared with the first nine months of 2000. Fee revenue in the first nine months of 2001 was positively impacted by the December 2000 acquisition of the remaining 50% interest in Mellon Investor Services and the July 2001 acquisition of Standish Mellon, offset by the previously-disclosed May 2000 expiration of a long-term mutual fund administration contract with a third party, and the second quarter 2001 fair value adjustment of venture capital investments. Excluding these factors, fee revenue for the first nine months of 2001 decreased 1% compared with the first nine months of 2000, due to lower equity investment revenue, offset in part by higher trust and investment and cash management revenue.
Mellon Reports Earnings
Oct. 16, 2001
Page 11
Net Interest Revenue | ||||||||||||
|
||||||||||||
Quarter ended | Nine months ended | |||||||||||
|
|
|||||||||||
Sept. 30, | Sept. 30, | Sept. 30, | Sept. 30, | |||||||||
(dollar amounts in millions) | 2001 | 2000 | 2001 | 2000 | ||||||||
|
||||||||||||
Net interest revenue (FTE) | $ | 151 | $ | 147 | $ | 437 | $ | 428 | ||||
Net interest margin (FTE) | 2.36 | % | 2.93 | % | 2.51 | % | 2.82 | % | ||||
Average money market investments | $ | 4,296 | $ | 2,005 | $ | 3,114 | $ | 1,976 | ||||
Average trading account securities | $ | 345 | $ | 322 | $ | 363 | $ | 262 | ||||
Average securities | $ | 10,888 | $ | 6,166 | $ | 9,378 | $ | 6,148 | ||||
Average loans | $ | 10,026 | $ | 11,252 | $ | 10,461 | $ | 11,685 | ||||
|
|
|
|
|||||||||
Average interest-earning assets | $ | 25,555 | $ | 19,745 | $ | 23,316 | $ | 20,071 | ||||
|
Net interest revenue on a fully taxable equivalent basis increased $4 million in the third quarter of 2001 compared with the third quarter of 2000, on a higher level of interest-earning assets, while the net interest margin of 2.36% was 57 basis points lower than in the prior-year period, reflecting a lower yielding asset mix. Average interest-earning assets increased $5.8 billion, as a $4.7 billion increase in average securities and a $2.3 billion increase in average money market investments were partially offset by a $1.2 billion decrease in average loans.
Net interest revenue on a fully taxable equivalent basis increased $9 million, or 2%, in the first nine months of 2001 compared with the prior-year period. This increase primarily resulted from the same factors that impacted the quarterly comparisons.
Operating Expense | |||||||||||||
|
|||||||||||||
Quarter ended | Nine months ended | ||||||||||||
|
|
||||||||||||
(dollar amounts in millions) | Sept. 30,
2001 |
Sept. 30,
2000 |
Sept. 30,
2001 |
Sept. 30,
2000 |
|||||||||
|
|||||||||||||
Staff expense | $ | 364 | $ | 338 | $ | 1,101 | $ | 1,002 | |||||
Professional, legal and other purchased services | 78 | 69 | 228 | 192 | |||||||||
Net occupancy expense | 54 | 45 | 159 | 135 | |||||||||
Equipment expense | 40 | 32 | 113 | 97 | |||||||||
Amortization of goodwill | 20 | 18 | 59 | 55 | |||||||||
Amortization of other intangible assets | 2 | 2 | 5 | 5 | |||||||||
Other expense | 54 | 57 | 176 | 193 | |||||||||
|
|||||||||||||
Total operating expense | $ | 612 | $ | 561 | $ | 1,841 | $ | 1,679 | |||||
|
|||||||||||||
Efficiency ratio (a) | 68 | % | 65 | % | 67 | % | 64 | % | |||||
Efficiency ratio excluding amortization of goodwill | 66 | % | 62 | % | 65 | % | 62 | % | |||||
|
(a) | Operating expense as a percentage of fee and net interest revenue, computed on a taxable equivalent basis, excluding the second quarter 2001 fair value adjustment of venture capital investments, and the gains on the sales of securities. |
The higher levels of operating expense in 2001 compared with the comparable periods in 2000 were due to acquisitions. Excluding the effect of acquisitions, operating expense was essentially flat compared with the prior-year periods.
Mellon Reports Earnings
Oct. 16, 2001
Page 12
3rd Qtr. 2001 | Nine mo. 2001 | |||||||
over | over | |||||||
Operating expense growth | 3rd Qtr. 2000 | Nine mo. 2000 | ||||||
|
||||||||
Operating expense growth (a) | % | 1% | ||||||
|
||||||||
(a) | Excludes the effect of acquisitions. |
Income Taxes
The Corporations effective tax rate on income from continuing operations for the first nine months of 2001 was 35.5% compared with 36.3% for the first nine months of 2000. It is currently anticipated that the effective tax rate will be approximately the same for the remainder of 2001.
Provision for Credit Losses, Reserve for Credit Losses and Review of Net Credit Losses
Quarter ended | Nine months ended | ||||||||||||
|
|
||||||||||||
(dollar amounts in millions) | Sept. 30,
2001 |
Sept. 30,
2000 |
Sept. 30,
2001 |
Sept. 30,
2000 |
|||||||||
|
|||||||||||||
Provision for credit losses | $ | 5 | $ | (8 | ) | $ | (9 | ) | $ | 4 | |||
|
|||||||||||||
Net credit (losses) recoveries: | |||||||||||||
Commercial real estate | $ | | $ | | $ | | $ | 5 | |||||
Commercial and financial | (21 | ) | (3 | ) | (42 | ) | (16 | ) | |||||
Consumer credit | | (1 | ) | | (1 | ) | |||||||
|
|||||||||||||
Total net credit losses | $ | (21 | ) | $ | (4 | ) | $ | (42 | ) | $ | (12 | ) | |
|
|||||||||||||
Annualized net credit losses to average loans | .85 | % | .13 | % | .55 | % | .14 | % | |||||
|
|||||||||||||
Reserve for credit losses at end of period | $ | 221 | $ | 280 | |||||||||
Reserve as a percentage of total loans | 2.16 | % | 2.47 | % | |||||||||
Reserve as a percentage of nonperforming loans | 180 | % | 214 | % | |||||||||
|
Net credit losses totaled $21 million in the third quarter of 2001 and primarily resulted from credit losses on loans that were on nonperforming status, which were sold in the third quarter of 2001. An impairment reserve, which approximated the amount of the credit losses, had been previously assigned to these loans. The reserve for credit losses as a percentage of loans was 2.16% at Sept. 30, 2001, compared with 2.47% at Sept. 30, 2000.
Mellon Reports Earnings
Oct. 16, 2001
Page 13
Nonperforming Assets | |||||||||||||
|
|||||||||||||
(dollar amounts in millions) | Sept. 30,
2001 |
June 30,
2001 |
Dec. 31,
2000 |
Sept. 30,
2000 |
|||||||||
|
|||||||||||||
Nonperforming loans: | |||||||||||||
Commercial and financial | $ | 121 | $ | 121 | $ | 159 | $ | 121 | |||||
Consumer credit | 1 | 2 | 5 | 7 | |||||||||
Commercial real estate | 1 | 1 | 1 | 3 | |||||||||
|
|||||||||||||
Total nonperforming loans | 123 | 124 | 165 | 131 | |||||||||
Real estate acquired | 2 | 3 | 7 | 4 | |||||||||
Other assets acquired | 1 | 1 | | | |||||||||
|
|||||||||||||
Total acquired property | 3 | 4 | 7 | 4 | |||||||||
|
|||||||||||||
Total nonperforming assets | $ | 126 | $ | 128 | $ | 172 | $ | 135 | |||||
|
|||||||||||||
Nonperforming loans as a percentage of total loans | 1.20 | % | 1.24 | % | 1.51 | % | 1.16 | % | |||||
Nonperforming assets as a percentage of total loans | |||||||||||||
and net acquired property | 1.23 | % | 1.28 | % | 1.58 | % | 1.19 | % | |||||
Nonperforming assets as a percentage of Tier I capital | |||||||||||||
plus the reserve for credit losses | 4.67 | % | 4.23 | % | 4.95 | % | 3.89 | % | |||||
|
Nonperforming assets decreased $2 million, compared with June 30, 2001, $46 million compared with Dec. 31, 2000, and $9 million, compared with Sept. 30, 2000. The decreases resulted from the sale of nonperforming loans and principal repayments offset in part by the addition of new credits to nonperforming status. Approximately one-third of the $126 million balance of total nonperforming assets at Sept. 30, 2001, resulted from $41 million of outstandings to a California-based electric and natural gas utility company that voluntarily filed for Chapter 11 bankruptcy protection in the second quarter of 2001 as the result of its inability, due to rules governing the industrys deregulation, to increase rates to levels needed to cover higher costs for power. The borrower expects that a proposed reorganization plan will become effective during the fourth quarter of 2002.
Mellon Reports Earnings
Oct. 16, 2001
Page 14
Selected Capital Data | ||||||||||
|
||||||||||
(dollar amounts in millions, except per share
amounts; common shares in thousands) |
Sept. 30,
2001 |
Dec. 31,
2000 |
Sept. 30,
2000 |
|||||||
|
||||||||||
Total shareholders equity | $ | 3,560 | $ | 4,152 | $ | 4,032 | ||||
Total shareholders equity to assets ratio | 9.55 | % | 11.92 | % | 13.43 | % | ||||
Tangible shareholders equity (a) | $ | 2,159 | $ | 2,967 | $ | 2,870 | ||||
Tangible shareholders equity to assets ratio (b) | 6.02 | % | 8.84 | % | 9.97 | % | ||||
Tier I capital ratio (c) | 6.4 | % (d) | 7.23 | % | 7.21 | % | ||||
Total (Tier I plus Tier II) capital ratio (c) | 10.5 | % (d) | 11.74 | % | 11.72 | % | ||||
Leverage capital ratio (c) | 5.7 | % (d) | 7.11 | % | 7.18 | % | ||||
Book value per common share | $ | 7.61 | $ | 8.53 | $ | 8.26 | ||||
Tangible book value per common share | $ | 4.61 | $ | 6.10 | $ | 5.88 | ||||
Closing common stock price | $ | 32.33 | $ | 49.19 | $ | 46.38 | ||||
Market capitalization | $ | 15,125 | $ | 23,941 | $ | 22,631 | ||||
Common shares outstanding | 467,834 | 486,739 | 487,990 | |||||||
|
(a) | Includes $47 million, $89 million and $81 million, respectively, of minority interest, primarily related to Newton. In addition, includes $ 291 million, $191 million and $169 million, respectively, of tax benefits related to tax deductible goodwill and intangible assets. |
(b) | Shareholders equity plus minority interest and less goodwill and intangible assets divided by total assets less goodwill and intangible assets. The amount of goodwill and intangible assets subtracted from shareholders equity and total assets is net of the tax benefit. |
(c) | Includes discontinued operations |
(d) | Estimated. |
The Corporations equity to assets capital ratios compared with Dec. 31, 2000, reflect the effect of common stock repurchases and a higher level of assets, primarily due to a higher level of money market investments and securities. The decrease in the Corporations risk-based capital ratios compared with Dec. 31, 2000, reflect the effect of common stock repurchases partially offset by a lower level of risk-weighted assets. The risk-based capital ratios include discontinued operations.
During the third quarter of 2001, approximately 3.4 million shares of common stock were repurchased, bringing year-to-date repurchases to approximately 23.4 million shares at a purchase price of $1.045 billion for an average share price of $44.64 per share. Common shares outstanding at Sept. 30, 2001, were 10.7% lower than at Dec. 31, 1998, reflecting a 56.0 million share reduction, net of shares reissued, primarily for employee benefit plan purposes. This reduction was due to stock repurchases totaling approximately $2.8 billion, at an average share price of $38.12 per share. In addition, during the third quarter of 2001 the Corporation entered into forward stock repurchase contracts for 9.8 million shares of its common stock totaling $342 million, at an average share price of $34.76 per share. These contracts will settle, and the Corporation will acquire the shares, no later than Jan. 2002. At Sept. 30, 2001, after considering the shares repurchased and those committed to be repurchased, an additional 10.4 million common shares were available for repurchase under the current share repurchase program authorized by the board of directors in May 2001. During the third quarter of 2001, the board of directors also authorized the repurchase of the number of common shares that will be issued in connection with the acquisition of Eagle Investment Systems, expected to close in the fourth quarter of 2001.
Mellon Reports Earnings
Oct. 16, 2001
Page 15
Impact of New Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards (FAS) No. 141, Business Combinations and FAS No. 142, Goodwill and Other Intangible Assets. These standards, among other things, eliminated the pooling of interests method of accounting and require that goodwill no longer be amortized, but goodwill is subject to impairment testing. The effective date for the elimination of the pooling of interest method was July 1, 2001. For acquisitions completed prior to July 1, 2001, existing goodwill is being amortized through the end of 2001 after which amortization will cease. For acquisitions completed after June 30, 2001, including the Standish Mellon acquisition, the goodwill is not being amortized. Results excluding the impact of goodwill amortization are shown in the table below.
Pro forma financial results - excluding the amortization of goodwill | ||||||||||||||
|
||||||||||||||
Quarter ended | Nine months ended | |||||||||||||
|
|
|||||||||||||
(dollar amounts in millions, except
per share amounts; ratios annualized) |
Sept. 30,
2001 |
Sept. 30,
2000 |
Sept. 30,
2001 |
(a) | Sept. 30,
2000 |
|||||||||
| ||||||||||||||
Operating results - income from continuing operations | $ | 178 | $ | 195 | $ | 570 | $ | 580 | ||||||
Plus after-tax impact of amortization of goodwill | ||||||||||||||
from purchase acquisitions: | ||||||||||||||
Goodwill | 17 | 17 | 51 | 48 | ||||||||||
Other (b) | 2 | 1 | 4 | 4 | ||||||||||
|
||||||||||||||
Pro forma income from continuing operations | $ | 197 | $ | 213 | $ | 625 | $ | 632 | ||||||
Pro forma earnings per share - diluted | $ | .42 | $ | .43 | $ | 1.30 | $ | 1.27 | ||||||
Pro forma return on common equity | 22.7 | % | 21.8 | % | 22.4 | % | 21.9 | % | ||||||
Pro forma return on assets | 2.23 | % | 2.77 | % | 2.56 | % | 2.73 | % | ||||||
|
(a)
|
Results from continuing operations for the first nine months of 2001 exclude a $91 million after-tax charge for the fair value adjustment of investments in the
ventures capital portfolio, which was recorded in the second quarter of 2001.
|
(b)
|
Primarily relates to the goodwill on investments in joint ventures.
|
(dollar amounts in millions,
except per share amounts; common shares in thousands) |
Quarter ended
Sept. 30, |
Nine months ended
Sept. 30, |
|||||||||||||||
2001 | 2000 | 2001 | 2000 | ||||||||||||||
|
|||||||||||||||||
Selected key data | |||||||||||||||||
Continuing operations (a): | |||||||||||||||||
Diluted earnings per share | $ | .38 | $ | .40 | $ | 1.00 | $ | 1.17 | |||||||||
Income from continuing operations | $ | 178 | $ | 195 | $ | 479 | $ | 580 | |||||||||
Return on equity | 20.6 | %
|
20.0 | % | 17.2 | % | 20.1 | %
|
|||||||||
Return on assets | 2.02 | %
|
2.55 | %
|
1.96 | % | 2.50 | %
|
|||||||||
Net income (a): | |||||||||||||||||
Diluted earnings per share | $ | .40 | $ | .51 | $ | 1.06 | $ | 1.51 | |||||||||
Net income | $ | 192 | $ | 252 | $ | 511 | $ | 752 | |||||||||
Return on equity | 22.2 | % | 25.8 | %
|
18.4 | % | 26.0 | %
|
|||||||||
Return on assets | 1.68 | % | 2.18 | %
|
1.47 | % | 2.15 | %
|
|||||||||
|
|||||||||||||||||
Operating resultscontinuing operations (b): | |||||||||||||||||
Diluted earnings per share | $ | .38 | $ | .40 | $ | 1.19 | $ | 1.17 | |||||||||
Income from continuing operations | $ | 178 | $ | 195 | $ | 570 | $ | 580 | |||||||||
Return on equity | 20.6 | % | 20.0 | %
|
20.5 | % | 20.1 | %
|
|||||||||
Return on assets | 2.02 | % | 2.55 | %
|
2.33 | % | 2.50 | %
|
|||||||||
Operating resultscontinuing operations excluding | |||||||||||||||||
goodwill amortization (b): | |||||||||||||||||
Diluted earnings per share | $ | .42 | $ | .43 | $ | 1.30 | $ | 1.27 | |||||||||
Income from continuing operations | $ | 197 | $ | 213 | $ | 625 | $ | 632 | |||||||||
Return on equity | 22.7 | % | 21.8 | %
|
22.4 | % | 21.9 | % | |||||||||
Return on assets | 2.23 | % | 2.77 | %
|
2.56 | % | 2.73 | % | |||||||||
|
|||||||||||||||||
Fee revenue as a percentage of net interest and fee revenue
(FTE) |
83 | % | 83 | %
|
84% | (c) | 84 | %
|
|||||||||
Trust and investment fee revenue as a percentage of net interest
and fee revenue (FTE) |
68 | % | 64 | %
|
67% | (c) | 64 | %
|
|||||||||
Efficiency ratio excluding amortization of goodwill | 66 | % | 62 | %
|
65% | (c) | 62 | %
|
|||||||||
Average common shares and equivalents outstanding: | |||||||||||||||||
Basic | 468,579 | 488,188 | 475,232 | 491,458 | |||||||||||||
Diluted | 473,076 | 495,332 | 480,892 | 497,439 |
Mellon Reports Earnings
Oct. 16, 2001
Page 17
SUMMARY DATA
Mellon Financial Corporation
(continued)
Quarter ended | Nine months ended | ||||||||||
Sept. 30, | Sept. 30, | ||||||||||
|
|
||||||||||
(dollar amounts in millions) | 2001 | 2000 | 2001 | 2000 | |||||||
|
|||||||||||
Average balances | |||||||||||
|
|||||||||||
Money market investments | $ | 4,296 | $ | 2,005 | $ | 3,114 | $ | 1,976 | |||
Trading account securities | 345 | 322 | 363 | 262 | |||||||
Securities | 10,888 | 6,166 | 9,378 | 6,148 | |||||||
|
|
|
|
||||||||
Total money market investments and securities | 15,529 | 8,493 | 12,855 | 8,386 | |||||||
Loans | 10,026 | 11,252 | 10,461 | 11,685 | |||||||
|
|
|
|
||||||||
Total interest-earning assets | 25,555 | 19,745 | 23,316 | 20,071 | |||||||
Total assets | 35,005 | 30,546 | 32,672 | 30,983 | |||||||
Deposits | 18,101 | 17,076 | 18,278 | 17,059 | |||||||
Total shareholders equity | 3,444 | 3,893 | 3,722 | 3,863 | |||||||
|
(a) | Computed in accordance with generally accepted accounting principles. |
(b) | Operating results for the first nine months of 2001 exclude a $91 million after-tax charge for the fair value adjustment of investments in the venture capital portfolio, which was recorded in the second quarter of 2001. |
(c) | Ratios for the first nine months of 2001 exclude the $140 million pre-tax venture capital fair value adjustment. |
Note: | All calculations are based on unrounded numbers. FTE denotes presentation on a fully taxable equivalent basis.
Returns are annualized. |
|
|
Quarter ended
Sept. 30, |
Nine months
ended Sept. 30, |
|||||||||||||||
(in millions, except per share amounts) | 2001 | 2000 | 2001 | 2000 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
||||||||||||||||
Net Interest revenue | ||||||||||||||||
Net interest revenue | $ | 148 | $ | 144 | $ | 431 | $ | 424 | ||||||||
Provision for credit losses | 5 | (8 | ) | (9 | ) | 4 | ||||||||||
|
|
|
|
|||||||||||||
Net interest revenue after provision for credit losses | 143 | 152 | 440 | 420 | ||||||||||||
Noninterest revenue | ||||||||||||||||
Trust and investment fee revenue | 610 | 553 | 1,838 | 1,679 | ||||||||||||
Cash management revenue | 62 | 53 | 176 | 150 | ||||||||||||
Foreign currency and securities trading revenue | 39 | 42 | 141 | 135 | ||||||||||||
Financing-related revenue | 40 | 37 | 117 | 104 | ||||||||||||
Equity investment revenue | (20 | ) | 20 | (157 | ) | 73 | ||||||||||
Other | 10 | 7 | 30 | 29 | ||||||||||||
|
|
|
|
|||||||||||||
Total fee and other revenue | 741 | 712 | 2,145 | 2,170 | ||||||||||||
Gains on sales of securities | | | | | ||||||||||||
|
|
|
|
|||||||||||||
Total noninterest revenue | 741 | 712 | 2,145 | 2,170 | ||||||||||||
Operating expense | ||||||||||||||||
Staff expense | 364 | 338 | 1,101 | 1,002 | ||||||||||||
Professional, legal and other purchased services | 78 | 69 | 228 | 192 | ||||||||||||
Net occupancy expense | 54 | 45 | 159 | 135 | ||||||||||||
Equipment expense | 40 | 32 | 113 | 97 | ||||||||||||
Amortization of goodwill | 20 | 18 | 59 | 55 | ||||||||||||
Amortization of other intangible assets | 2 | 2 | 5 | 5 | ||||||||||||
Other expense | 54 | 57 | 176 | 193 | ||||||||||||
|
|
|
|
|||||||||||||
Total operating expense | 612 | 561 | 1,841 | 1,679 | ||||||||||||
|
|
|
|
|||||||||||||
Income from continuing operations before income taxes | 272 | 303 | 744 | 911 | ||||||||||||
Provision for income taxes | 94 | 108 | 265 | 331 | ||||||||||||
|
|
|
|
|||||||||||||
Income from continuing operations | 178 | 195 | 479 | 580 | ||||||||||||
Discontinued operations: | ||||||||||||||||
Income from operations after tax | 14 | 57 | 133 | 172 | ||||||||||||
Loss on disposal after tax | | | (101 | ) | | |||||||||||
|
|
|
|
|||||||||||||
Income from discontinued
operations (net of applicable tax
expense of $10, $35, $46 and $100) |
14 | 57 | 32 | 172 | ||||||||||||
|
|
|
|
|||||||||||||
Net income | $ | 192 | $252 | $511 | $752 | |||||||||||
|
|
|
|
|||||||||||||
Earnings per common share | ||||||||||||||||
Continuing operations | ||||||||||||||||
Basic | $ | .38 | $ | .40 | $ | 1.01 | $ | 1.18 | ||||||||
Diluted | $ | .38 | $ | .40 | $ | 1.00 | $ | 1.17 | ||||||||
Net income | ||||||||||||||||
Basic | $ | .41 | $ | .52 | $ | 1.08 | $ | 1.53 | ||||||||
Diluted | $ | .40 | $ | .51 | $ | 1.06 | $ | 1.51 |
(dollar amounts in millions) | Sept. 30,
2001 |
Dec. 31,
2000 |
Sept. 30,
2000 |
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---|---|---|---|---|---|---|---|---|---|
|
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Assets | |||||||||
Cash and due from banks | $ | 3,456 | $ | 3,234 | $
|
2,624 | |||
Money market investments | 5,577 | 3,909 | 1,208 | ||||||
Trading account securities | 224 | 276 | 371 | ||||||
Securities available for sale | 9,949 | 7,910 | 5,323 | ||||||
Investment securities (approximate fair value of $860, $1,027 and $1,058) | 838 | 1,022 | 1,063 | ||||||
Loans | 10,213 | 10,884 | 11,331 | ||||||
Reserve for credit losses | (221 | ) | (273 | ) | (280 | ) | |||
|
|
|
|||||||
Net loans | 9,992 | 10,611 | 11,051 | ||||||
Premises and equipment | 640 | 581 | 466 | ||||||
Goodwill | 1,692 | 1,441 | 1,387 | ||||||
Other intangibles | 47 | 24 | 25 | ||||||
Net assets of discontinued operations | | 1,150 | 1,879 | ||||||
Other assets | 4,882 | 4,687 | 4,630 | ||||||
|
|
|
|||||||
Total assets | $
|
37,297 | $ | 34,845 | $ | 30,027 | |||
|
|
|
|||||||
Liabilities | |||||||||
Deposits | $ | 19,248 | 21,940 | $ | 16,771 | ||||
Short-term borrowings | 2,102 | 2,024 | 2,279 | ||||||
Other liabilities | 2,677 | 2,217 | 2,423 | ||||||
Notes and debentures (with original maturities over one year) | 3,767 | 3,520 | 3,531 | ||||||
Trust-preferred securities | 1,015 | 992 | 991 | ||||||
Net liabilities of discontinued operations | 4,928 | | | ||||||
|
|
|
|||||||
Total liabilities | 33,737 | 30,693 | 25,995 | ||||||
Shareholders equity | |||||||||
Common stock$.50 par value
Authorized800,000,000 shares Issued 588,661,920 shares |
294 | 294 | 294 | ||||||
Additional paid-in capital | 1,863 | 1,837 | 1,821 | ||||||
Retained earnings | 4,355 | 4,270 | 4,155 | ||||||
Accumulated unrealized gain (loss), net of tax | 103 | (38 | ) | (87 | ) | ||||
Treasury stock of 120,828,054; 101,922,986, and 100,671,971 shares at cost | (3,055 | ) | (2,211 | ) | (2,151 | ) | |||
|
|
|
|||||||
Total shareholders equity | 3,560 | 4,152 | 4,032 | ||||||
|
|
|
|||||||
Total liabilities and shareholders equity | $ | 37,297 | $ | 34,845 | $ | 30,027 | |||
|
|
|