-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fw+DxFGHufTiZJ14mQ/jqVp5Q4Pd3GMdF5npy86nVddLppZOKZL4wN88HzckK2Yz +lT/iwTxE41fz4flRnO4Yw== 0000950132-97-000290.txt : 19970421 0000950132-97-000290.hdr.sgml : 19970421 ACCESSION NUMBER: 0000950132-97-000290 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970414 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970418 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MELLON BANK CORP CENTRAL INDEX KEY: 0000064782 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 251233834 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07410 FILM NUMBER: 97583251 BUSINESS ADDRESS: STREET 1: ONE MELLON BANK CENTER STREET 2: 500 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15258-0001 BUSINESS PHONE: 4122345000 FORMER COMPANY: FORMER CONFORMED NAME: MELLON NATIONAL CORP DATE OF NAME CHANGE: 19841014 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - April 14, 1997 MELLON BANK CORPORATION (Exact name of registrant as specified in charter) Pennsylvania 1-7410 25-1233834 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) One Mellon Bank Center 500 Grant Street Pittsburgh, Pennsylvania 15258 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code - (412) 234-5000 Not Applicable (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS By press release dated April 14, 1997, Mellon Bank Corporation (the "Corporation") and 1st Business Corporation announced a definitive agreement under which the Corporation will acquire 1st Business Corporation and its principal subsidiary, 1st Business Bank, a full-service commercial bank serving midsize business firms in southern California. By release dated April 15, 1997, the Corporation announced first quarter 1997 results of operations. In the same release, the Corporation announced an increase in the quarterly cash dividend and a two-for-one split of the Corporation's Common Stock. The Corporation increased its Common Stock dividend by 10 percent to 66 cents per share on a pre-split basis, payable on May 15, 1997, to shareholders of record at the close of business on April 30, 1997. The Corporation also announced a two-for-one stock split of its Common Stock which is being structured as a stock dividend of one additional share of Common Stock being paid on each currently outstanding share of Common Stock. The additional shares resulting from the split will be distributed on June 2, 1997, to shareholders of record at the close of business on May 1, 1997. By release dated April 15, 1997, the Corporation announced that its shareholders have approved an amendment to its Articles of Incorporation increasing the authorized number of shares of common stock from 200 million to 400 million shares. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit Number Description 99.1 Mellon Bank Corporation Press Release, dated April 14, 1997, announcing the signing of a definitive agreement with 1st Business Corporation. 99.2 Mellon Bank Corporation Press Release, dated April 15, 1997, announcing the Corporation's first quarter results of operations, an increase in the Corporation's Common Stock dividend, and a two-for-one stock split of the Corporation's Common Stock. 99.3 Mellon Bank Corporation Press Release, dated April 15, 1997, announcing the approval by shareholders of an amendment to the Corporation's Articles of Incorporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MELLON BANK CORPORATION Date: April 15, 1997 By: STEVEN G. ELLIOTT Steven G. Elliott Vice Chairman, Chief Financial Officer & Treasurer EXHIBIT INDEX Number Description Method of Filing 99.1 Press Release dated April 14, 1997 Filed herewith 99.2 Press Release dated April 15, 1997 Filed herewith 99.3 Press Release dated April 15, 1997 Filed herewith EX-99.1 2 PRESS RELEASE DATED APRIL 14, 1997 EX-99.1 [LOGO OF MELLON BANK CORPORATION] [LOGO OF 1ST BUSINESS BANK] Mellon 1st Business Bank ------ ------------------ Contacts: Media: Stephen K. Dishart Robert W. Kummer, Jr. (213) 553-9570 (213) 489-1000 (412) 234-0850 Analysts: Donald J. MacLeod (412) 234-5601 FOR IMMEDIATE RELEASE MELLON TO ACQUIRE 1st BUSINESS BANK PITTSBURGH and LOS ANGELES, April 14, 1997--Mellon Bank Corporation (NYSE: MEL) and 1st Business Corporation today announced a definitive agreement under which Mellon will acquire 1st Business Corporation and its principal subsidiary, 1st Business Bank, a full-service commercial bank serving midsize business firms in southern California. The agreement combines 1st Business Bank's strong middle market and small business banking presence with Mellon's broad array of banking, trust and investment services to create a distinctive and significant competitor serving this fast-growing market segment. With approximately $1.1 billion in assets, 1st Business Bank is a state-chartered bank with headquarters in Los Angeles and regional banking offices in Orange County, the San Fernando Valley, the South Bay and West Los Angeles. 1st Business Bank serves approximately 1,700 business customers in the manufacturing, wholesale trade and service industries with annual revenues between $5 million and $300 million. 1st Business Bank also provides personal banking services to professionals, entrepreneurs, and owners and officers of its business clients. Mellon will purchase 1st Business Corporation with stock. Other terms of the agreement were not disclosed. Mellon's management will recommend to its board of directors that the board authorize the repurchase of a comparable number of shares of Mellon common stock. 1st Business Bank will operate as a separate entity under the name Mellon 1st Business Bank. Mellon expects to retain virtually all of 1st Business Bank's approximately 200 employees. The transaction, expected to close in the third quarter of this year, is subject to internal and regulatory approvals and certain closing conditions. -more- Mellon to Acquire 1st Business Bank Page 2 "1st Business Bank is a leading provider of middle market banking services in the region and has built strong customer relationships based on a reputation for integrity, responsiveness and excellent customer service," said Keith P. Russell, Mellon vice chairman, West Coast. "This transaction, along with our existing West Coast presence and our 1996 acquisition of the Business Equipment Finance unit of San Francisco-based USL Capital Corporation, efficiently builds a significant middle market position for Mellon on the West Coast. We look forward to providing Mellon's broad array of investment, trust and banking products through this enhanced distribution capability in the western states." Mellon today employs more than 1,600 individuals on the West Coast in 13 western states. In these states, the organization provides 26 product lines through 77 offices. "As businesses in this region continue to grow, they require a sophisticated selection of financial products and services to meet their needs," said Robert W. Kummer, Jr., chairman and chief executive officer of 1st Business Bank. "We're excited about the opportunity to provide our customers with Mellon's extraordinary array of products for businesses and entrepreneurs." Widely recognized as one of the premier business banks in California, 1st Business Bank provides full commercial banking services to midsize business firms, professionals, entrepreneurs and business owners. Since its founding in 1981, 1st Business Corporation has reported 16 consecutive years of sound growth and record earnings. 1st Business Corporation is privately owned by John E. Anderson, one of southern California's most successful entrepreneurs and civic leaders. Mr. Anderson will remain on the board of directors of Mellon 1st Business Bank. Mr. Russell will join the board of directors of Mellon 1st Business Bank. With balance sheet assets of approximately $42 billion and assets under management or administration of approximately $1.3 trillion, Mellon Bank Corporation is a major financial services company headquartered in Pittsburgh; its primary subsidiary is Mellon Bank, N.A. Mellon provides a full range of banking, investment and trust products and services to individuals and small, midsize and large businesses and institutions. Its mutual fund business is The Dreyfus Corporation. Media Advisory: Keith Russell, Mellon vice chairman and head of Mellon Financial GroupWest Coast, and Robert W. Kummer, Jr., 1st Business Bank chairman and chief executive officer, will be available to speak to reporters between 12:30 and 4 p.m. EDT today. Call Steve Dishart at (213) 553-9570 to schedule an interview. Press releases and other information about Mellon Bank Corporation and its products and services are available at http://www.mellon.com on the Internet. For Mellon press releases by fax, call 1 800 758-5804, identification number 552187. ### EX-99.2 3 PRESS RELEASE DATED APRIL 15, 1997 EX-99.2 [MELLON LOGO] News Release Contact: MEDIA: ANALYSTS: ------ -------- Stephen K. Dishart Donald J. MacLeod Corporate Affairs (412) 234-0850 (412) 234-5601 One Mellon Bank Center James J. Dever David T. Lamar Pittsburgh, PA 15258-0001 (412) 236-1752 (412) 234-4633 FOR IMMEDIATE RELEASE MELLON REPORTS RECORD FIRST QUARTER 1997 RESULTS, INCREASES COMMON STOCK DIVIDEND, ANNOUNCES COMMON STOCK SPLIT Earnings Per Share Increases 11 Percent to $1.38 Per Share on a Pre-Split Basis Quarterly Common Dividend Increases 10 Percent to 66 cents Per Share on a Pre-Split Basis Announces a Two-for-One Common Stock Split Return on Common Equity is 21.2 Percent and Return on Assets is 1.83 Percent
First Quarter Financial Highlights 1997 1996 Change - ------------------------------------------------------------ --------- --------- ------- Earnings per common share* $ 1.38 $ 1.24 11% Tangible earnings per common share* $ 1.54 $ 1.37 12% Return on common equity** 21.2% 19.7% 150 bp Return on tangible common equity** 36.3% 30.1% 620 bp Return on assets** 1.83% 1.76% 7 bp Return on tangible assets** 2.09% 1.99% 10 bp Average common shares and equivalents outstanding* (000) 131,602 136,721 (5,119) - ------------------------------------------------------------ -------- -------- ------
* Fully diluted before the two-for-one common stock split. ** Annualized. PITTSBURGH, April 15, 1997--Mellon Bank Corporation (NYSE: MEL) today reported record first quarter 1997 fully diluted earnings per common share of $1.38, on a pre-stock split basis, an increase of 11 percent compared with $1.24 per common share in the first quarter of 1996. The Corporation also announced a 10 percent increase in the quarterly cash dividend and a two-for-one split of the Corporation's common stock. The Corporation increased its common dividend by 10 percent to 66 cents per share on a pre-stock split basis. The Corporation also declared a quarterly dividend on its Series K preferred stock (NYSE: MEL Pr K) at the rate of $2.05 per share per annum. Dividends on the Corporation's common stock and Series K preferred stock are payable on May 15, 1997, to shareholders of record at the close of business on April 30, 1997. -more- Mellon Reports Earnings April 15, 1997 Page 2 The two-for-one common stock split is subject to approval of the proposal to increase the authorized number of common shares, which will be voted upon at today's annual meeting of shareholders. The split is being structured as a stock dividend of one additional share of common stock being paid on each currently outstanding share of common stock. The additional shares resulting from the split will be distributed on June 2, 1997, to shareholders of record at the close of business on May 1, 1997. On a post-stock split basis, the Corporation's quarterly dividend will be 33 cents per share. On a post-stock split basis, the Corporation's first quarter 1997 net income was 69 cents per common share, compared with 62 cents per common share in the first quarter of 1996. "Along with our excellent financial performance, we're very pleased to announce that the Corporation has increased the common dividend by 10 percent and authorized a two-for-one common stock split," said Frank V. Cahouet, Mellon chairman, president and chief executive officer. "The stock split will create a more liquid market for individual investors while allowing shareholders to maintain their same percentage of ownership in the Corporation." Annualized return on common shareholders' equity and return on assets were 21.2 percent and 1.83 percent, respectively, in the first quarter of 1997, compared with 19.7 percent and 1.76 percent, respectively, in the first quarter of 1996. Annualized return on tangible common shareholders' equity and return on tangible assets were 36.3 percent and 2.09 percent, respectively, in the first quarter of 1997, compared with 30.1 percent and 1.99 percent, respectively, in the first quarter of 1996. Fully diluted tangible earnings per common share in the first quarter of 1997 were $1.54, on a pre-stock split basis, a 12 percent increase compared with $1.37 in the first quarter of 1996. Earnings per common share in the first quarter of 1997 reflects the repurchase of 11.6 million common shares, prior to any reissuances, during 1996 and the first quarter of 1997. The Corporation's average level of treasury stock was approximately $345 million higher in the first quarter of 1997, compared with the first quarter of 1996. After giving effect to funding the higher level of treasury stock, valued at a short-term funding rate, the lower share count increased earnings per share 2 percent while ongoing business growth increased earnings per share 9 percent. Compared with the first quarter of 1996, Mellon's first quarter 1997 results reflected higher fee revenue and higher net interest revenue, offset in part by higher operating expense. The quarter's net income applicable to common stock also included an additional $3 million charge, or 3 cents per share on a pre-stock split basis, for issue costs recorded as preferred stock dividends in connection with the redemption of the Series J preferred stock. Net interest revenue for the first quarter of 1997 was $370 million, up $7 million from $363 million in the prior-year period. This increase resulted from the Mellon-US Leasing and Mellon-First United Leasing acquisitions in 1996 and a higher level of interest-free funds, partially offset by the sale of the AAA credit card portfolio, the home equity and insurance premium finance loan securitizations, lower loan fees and the repurchase of common shares. Fee revenue was $536 million in the first quarter of 1997, up 13 percent compared with the prior-year period, excluding the $28 million gain on the home equity loan securitization recorded in the first quarter of 1996. The increase in fee revenue was attributable to higher trust and investment management fees, higher mortgage servicing fee revenue and higher cash management and deposit transaction charges. -more- Mellon Reports Earnings April 15, 1997 Page 3 Operating expense before net revenue from acquired property and trust- preferred securities expense for the first quarter of 1997 was $565 million, down $3 million from $568 million in the first quarter of 1996. Operating expense in the first quarter of 1996 included $22 million of staff expense resulting from the retirement enhancement plan and severance expense, and $6 million of expense related to the reconfiguration of the retail delivery system. Excluding these items, operating expense before net revenue from acquired property and trust-preferred securities expense increased $25 million, or 5 percent, in the first quarter of 1997 compared with the prior-year period. The increase resulted primarily from acquisitions and business growth. Credit quality expense was $22 million in the first quarter of 1997, compared with $17 million in the first quarter of 1996. This $5 million increase resulted from lower net revenue from acquired property. Net credit losses were $32 million in the first quarter of 1997, up from $28 million in the first quarter of 1996. Nonperforming assets totaled $170 million at March 31, 1997, compared with $174 million at Dec. 31, 1996, and $250 million at March 31, 1996. The Corporation's nonperforming assets ratio was .62 percent at March 31, 1997, the lowest ratio in the Corporation's recent history, compared with .63 percent at Dec. 31, 1996, and .93 percent at March 31, 1996. With balance sheet assets of approximately $42 billion and assets under management or administration of approximately $1.3 trillion, Mellon Bank Corporation is a major financial services company headquartered in Pittsburgh; its primary subsidiary is Mellon Bank, N.A. Mellon provides a full range of banking, investment and trust products and services to individuals and small, midsize and large businesses and institutions. Its mutual fund business is The Dreyfus Corporation. Press releases and other information about Mellon Bank Corporation and its products and services are available at http://www.mellon.com on the Internet. For Mellon press releases by fax, call 1 800 758-5804, identification number 552187. # # # NOTE: Detailed supplemental information follows. Mellon Reports Earnings April 15, 1997 Page 4 Tangible Operating Results - -------------------------- Except for the merger with Dreyfus, which was accounted for under the "pooling of interests" method, the Corporation has been required to account for business combinations under the "purchase" method of accounting. The purchase method results in the recording of goodwill and other identified intangibles that are amortized as noncash charges in future years into operating expense. The pooling of interests method does not result in the recording of goodwill or intangibles. Since goodwill and intangible amortization expense does not result in a cash expense, the economic value to shareholders under either accounting method is essentially the same. Results, excluding the impact of intangibles, are shown in the table below.
Quarter ended (dollar amounts in millions, March 31, ratios annualized) 1997 1996 Change - ------------------------------------------ ---------- -------- ------- Net income applicable to common stock $ 182 $ 169 $ 13 After tax impact of amortization of intangibles from purchase acquisitions 21 19 2 - ------------------------------------------ ------- ------- ------ Tangible net income applicable to common stock $ 203 $ 188 $ 15 Tangible earnings per common share-fully diluted (pre-split) $ 1.54 $ 1.37 12% - ------------------------------------------ ------- ------- ------ Average common equity $ 3,490 $ 3,459 $ 31 Average goodwill and other intangibles 1,223 946 277 - ------------------------------------------ ------- ------- ------ Average tangible common equity $ 2,267 $ 2,513 $ (246) Return on tangible common equity 36.3% 30.1% 620 bp - ------------------------------------------ ------- ------- ------ Average total assets $42,187 $40,848 $1,339 Average tangible assets $40,964 $39,902 $1,062 Return on tangible assets 2.09% 1.99% 10 bp - ------------------------------------------ ------- ------- ------
Mellon Reports Earnings April 15, 1997 Page 5 Net Interest Revenue - --------------------
Quarter ended March 31, (in millions) 1997 1996 Change - ---------------------------------------------------------------- Net interest revenue (FTE) $ 373 $ 366 $ 7 Net interest margin (FTE) 4.37% 4.35% 2bp Average securities $ 6,018 $ 5,339 $679 Average loans $27,404 $27,058 $346 Average interest-earning assets $34,615 $33,825 $790 - ----------------------------------------------------------------
The increase in net interest revenue and the net interest margin in the first quarter of 1997, compared with the first quarter of 1996, resulted from $1.6 billion of lease financing acquisitions, the use of the proceeds from the $1 billion of trust-preferred securities issued in December 1996, the impact of a higher level of noninterest-bearing deposits and loan growth. The cost of the trust-preferred securities is reported in operating expense. Primarily offsetting these factors was the effect of the November 1996 sale of a $770 million American Automobile Association (AAA) credit card portfolio, lower loan fees, the December 1996 $500 million insurance premium finance securitization, the March 1996 $650 million home equity loan securitization and the funding costs related to the repurchase of common stock. The foregone net interest revenue from the loan securitizations is substantially offset by higher servicing fee revenue and lower net credit losses. Excluding the effect of loan securitizations, the AAA credit card sale and lease financing acquisitions, the Corporation experienced loan growth of approximately $650 million in the first quarter of 1997 compared with the prior-year period, primarily in wholesale and retail lending. Mellon Reports Earnings April 15, 1997 Page 6 Credit Quality Expense and Net Credit Losses - --------------------------------------------
Quarter ended March 31, (in millions) 1997 1996 Change - -------------------------------------------------------------------------------- Provision for credit losses $ 25 $ 25 $ - Net revenue from acquired property (3) (8) (5) - -------------------------------------------------------------------------------- Credit quality expense $ 22 $ 17 $ 5 - -------------------------------------------------------------------------------- Net credit losses (recoveries)(a): Domestic: Credit card $ 31 $ 16 $15 Other consumer credit 3 5 (2) Commercial real estate (2) 3 (5) Commercial and financial 5 5 - - -------------------------------------------------------------------------------- Total domestic 37 29 8 International (5) (1) (4) - -------------------------------------------------------------------------------- Total net credit losses $ 32 $ 28 $ 4 - -------------------------------------------------------------------------------- Annualized net credit losses to average loans .48% .41% 7bp - -------------------------------------------------------------------------------- (a) Excludes net credit losses on segregated assets.
Credit quality expense increased $5 million in the first quarter of 1997, compared with the first quarter of 1996, as a result of a $5 million decrease in net revenue from acquired property. The $4 million increase in net credit losses, compared with the first quarter of 1996, resulted from a $15 million increase in credit card net credit losses, partially offset by a reduction in commercial real estate net credit losses and an increase in international loan recoveries. The increase in credit card net credit losses resulted from the return to a more normal level of delinquencies in the CornerStone/sm/ portfolio following the creation of the accelerated resolution portfolio in December 1995, offset in part by a decrease in credit losses resulting from the sale of the AAA credit card portfolio. At March 31, 1997, the CornerStone/sm/ credit card portfolio had total outstandings of $574 million, compared with $631 million at December 31, 1996 and $720 million at March 31, 1996. The net carrying value of the accelerated resolution portfolio at March 31, 1997, was $19 million, compared with $30 million at December 31, 1996, and $65 million at March 31, 1996. Mellon Reports Earnings April 15, 1997 Page 7 Noninterest Revenue - -------------------
Quarter ended March 31, (in millions) 1997 1996 Change - ------------------------------------------------------------------------------ Fee revenue: Trust and investment management: Mutual fund: Management $ 87 $ 83 $ 4 Administration/Custody 30 27 3 Institutional trust 66 59 7 Institutional asset management 37 34 3 Private asset management 46 38 8 - ------------------------------------------------------------------------------ Total trust and investment management fees 266 241 25 Cash management and deposit transaction charges 56 49 7 Mortgage servicing fees 51 41 10 Foreign currency and securities trading revenue 25 21 4 Credit card fees 24 33 (9) Information services fees 13 9 4 Other 101 109 (8) - ------------------------------------------------------------------------------ Total fee revenue 536 503 33 Gains on sale of securities - 1 (1) - ------------------------------------------------------------------------------ Total noninterest revenue $ 536 $ 504 $32 - ------------------------------------------------------------------------------ Fee revenue as a percentage of total revenue (FTE) 59% 58% 1 Trust and investment management revenue as a percentage of total revenue (FTE) 29% 28% 1 - ------------------------------------------------------------------------------
Fee revenue increased $61 million, or 13%, in the first quarter of 1997, compared with the prior-year period, excluding the $28 million gain on the home equity loan securitization recorded in the first quarter of 1996. Including the securitization gain, fee revenue increased $33 million, or 7%, compared with the prior-year period. The $25 million, or 11%, increase in trust and investment management fees in the first quarter of 1997, compared with the prior-year period, primarily resulted from an $8 million, or 21%, increase in private asset management revenue, a $7 million, or 13%, increase in institutional trust fees and a $4 million, or 4%, increase in mutual fund management revenue. The increase in private asset management revenue resulted from new business and an increase in the market value of assets under management. The increase in institutional trust revenue resulted from new business and a $5 million increase in securities lending revenue. The higher revenue from the management of mutual funds resulted from a higher average level of mutual fund assets managed at Dreyfus, which was partially offset by an increase of $2 million in management fee waivers. Proprietary funds managed at Dreyfus in the first quarter of 1997 averaged $85 billion, compared with $81 billion in the first quarter of 1996. This increase primarily resulted from a $4 billion average increase in equity funds. The 15% increase in cash management fees and deposit transaction charges primarily resulted from higher volumes of business in customer receivable, payable and treasury management products. The 25% increase in mortgage servicing fees in the first quarter of 1997, compared with the prior-year period, resulted from a higher level of mortgage servicing rights acquired through acquisitions. The 16% increase in foreign currency and securities trading revenue was attributable to higher foreign exchange fees earned as a result of higher levels of market volatility and customer activity. Mellon Reports Earnings April 15, 1997 Page 8 Credit card revenue decreased 26% in the first quarter of 1997, compared with the first quarter of 1996, as a result of lower fee revenue from the securitized credit card portfolio, due in part to higher credit losses in this portfolio, and the sale of the AAA credit card portfolio in November 1996. The 50% increase in information services fee revenue compared with the first quarter of 1996 resulted from higher ATM network processing fees and the ChaseMellon Shareholder Services joint venture. Other fee revenue decreased $8 million in the first quarter of 1997, compared with the prior-year period. This decrease primarily resulted from the $28 million gain on the home equity loan securitization recorded in the first quarter of 1996. Partially offsetting this decrease was an $11 million increase in servicing fee revenue from the securitization of insurance premium finance and home equity loans, a $6 million increase resulting from the disposition of assets and sale of equity securities and a $5 million increase in fees relating to the electronic filing of income tax returns. Mellon Reports Earnings April 15, 1997 Page 9 Operating Expense - -----------------
Quarter ended March 31, (dollar amounts in millions) 1997 1996 Change - ------------------------------------------------------------------------------ Staff expense $ 268 $ 277 $ (9) Net occupancy expense 52 56 (4) Professional, legal and other purchased services 46 47 (1) Equipment expense 36 35 1 Amortization of mortgage servicing rights and purchased credit card relationships 28 28 - Amortization of goodwill and other intangible assets 27 25 2 Other expense 108 100 8 - ------------------------------------------------------------------------------ Operating expense before net revenue from acquired property and trust- preferred securities expense 565 568 (3) Trust-preferred securities expense 20 - 20 Net revenue from acquired property (3) (8) 5 - ------------------------------------------------------------------------------ Total operating expense $ 582 $ 560 $ 22 - ------------------------------------------------------------------------------ Average full-time equivalent staff 25,200 24,600 600 - ------------------------------------------------------------------------------ Efficiency ratio (a) 62% 65% (3) Efficiency ratio excluding amortization of goodwill and other intangible assets 59 62 (3) - ------------------------------------------------------------------------------
(a) Operating expense before net revenue from acquired property and trust- preferred securities expense, as a percentage of revenue, computed on a taxable equivalent basis, excluding gains on the sale of securities. Operating expense before net revenue from acquired property and trust-preferred securities expense decreased $3 million in the first quarter of 1997, compared with the prior-year period. Excluding an $18 million charge for the Corporation's retirement enhancement program, $4 million of severance accruals and $6 million of expense relating to the reconfiguration of the retail delivery system recorded in the first quarter of 1996, operating expense before net revenue from acquired property and trust-preferred securities expense increased $25 million, or 5%, compared with the first quarter of 1996. Mellon Reports Earnings April 15, 1997 Page 10 Staff expense increased $13 million, excluding the $22 million of expense for the retirement enhancement program and severance accruals recorded in the first quarter of 1996, primarily from higher salaries expense, due in part to the leasing acquisitions, as well as an increase in incentive expense. The decrease in net occupancy expense resulted from the expense related to the reconfiguration of the retail delivery system recorded in the first quarter of 1996. The increase in the amortization of goodwill and other intangibles resulted from the 1996 leasing acquisitions while the increase in other expense resulted from higher expenses in support of revenue growth. The $20 million of trust-preferred securities expense resulted from the issuance of $1 billion of these securities in December 1996. The proceeds from these securities are used to fund interest-earning assets. Income Taxes - ------------ The Corporation's effective tax rate for the first quarter of 1997 was 36.3%, compared with 36.5% for the first quarter of 1996. It is currently anticipated that the effective tax rate will remain at approximately this same level for the remainder of 1997. Nonperforming Assets(a) - -----------------------
March 31, Dec. 31, March 31, (in millions) 1997 1996 1996 - ---------------------------------------------------------------------------- Domestic nonperforming loans: Consumer mortgage $ 52 $ 50 $ 53 Commercial real estate 14 16 53 Other domestic 29 28 71 - ---------------------------------------------------------------------------- Total nonperforming loans 95 94 177 Acquired property: Real estate acquired 80 86 86 Reserve for real estate acquired (9) (10) (13) - ---------------------------------------------------------------------------- Net real estate acquired 71 76 73 Other assets acquired 4 4 - - ---------------------------------------------------------------------------- Total acquired property 75 80 73 - ---------------------------------------------------------------------------- Total nonperforming assets $ 170 $ 174 $ 250 - ---------------------------------------------------------------------------- Nonperforming loans as a percentage of total loans .35% .35% .66% Nonperforming assets as a percentage of total loans and net acquired property .62% .63% .93% - ----------------------------------------------------------------------------
(a) Excludes segregated assets. Mellon Reports Earnings April 15, 1997 Page 11 Nonperforming assets decreased $4 million from December 31, 1996, as a result of a decrease in acquired property. The $80 million decrease in nonperforming assets from March 31, 1996, primarily resulted from the repayment of commercial real estate loans and the resolution of commercial loans made to an engineering/construction company, as well as other repayments, credit losses and returns to accrual status. Reserve for Credit Losses - -------------------------
March 31, Dec. 31, March 31, (in millions) 1997 1996 1996 - ------------------------------------------------------------------------------ Reserve for credit losses (a) $ 518 $ 525 $ 468 Reserve as a percentage of total loans 1.88% 1.92% 1.74% - ------------------------------------------------------------------------------ (a) Excludes reserve for segregated assets.
The $50 million increase in the reserve for credit losses from March 31, 1996, reflects the additional fourth quarter 1996 credit loss provision related to the credit card portfolio and $23 million of reserves acquired in the lease financing acquisitions. Mellon Reports Earnings April 15, 1997 Page 12 Selected Capital Data - ---------------------
(in millions, except March 31, Dec. 31, March 31, per share amounts) 1997 1996 1996 - --------------------------------------------------------------------------- Common shareholders' equity $ 3,503 $ 3,456 $ 3,384 Common shareholders' equity to assets ratio 8.33% 8.11% 8.14% Tangible common shareholders' equity $ 2,289 $ 2,218 $ 2,450 Tangible common shareholders' equity to assets ratio (a) 5.60% 5.36% 6.03% Total shareholders' equity $ 3,696 $ 3,746 $ 3,819 Total shareholders' equity to assets ratio 8.79% 8.79% 9.19% Tier I capital ratio 8.70 (b) 8.38 7.69 Total (Tier I and Tier II) capital ratio 13.70 (b) 13.58 12.20 Leverage capital ratio 8.70 (b) 8.31 7.52 Book value per common share: Pre-stock split $ 27.19 $ 26.86 $ 25.55 Post-stock split (c) 13.60 13.43 12.78 Tangible book value per common share: Pre-stock split 17.76 17.24 18.50 Post-stock split (c) 8.88 8.62 9.25 Closing common stock price: Pre-stock split 72.75 71.00 55.25 Post-stock split (c) 36.375 35.50 27.625 Market capitalization 9,372 9,134 7,317 Common shares outstanding (000): Pre-stock split 128,831 128,647 132,443 Post-stock split (c) 257,662 257,294 264,886 - ---------------------------------------------------------------------------
(a) Common shareholders' equity less goodwill and other intangibles divided by total assets less goodwill and other intangibles. (b) Estimated. (c) Restated to reflect a two-for-one common stock split payable June 2, 1997. The increase in common shareholders' equity at March 31, 1997, compared with March 31, 1996, resulted from earnings retention partially offset by net common stock repurchases. The decrease in total shareholders' equity from March 31, 1996, resulted from the December 1996 redemption of the $150 million Series I preferred stock and the February 1997 redemption of the $100 million Series J preferred stock. The quarter's net income applicable to common stock included an additional $3 million charge, or $.03 per share on a pre-stock split basis, for issue costs recorded as preferred stock dividends in connection with the redemption of the Series J preferred stock. Mellon Reports Earnings April 15, 1997 Page 13 The increase in the Corporation's regulatory capital ratios, compared with March 31, 1996, reflects the issuance of $1 billion of trust-preferred securities in December 1996 following the decision by the Federal Reserve that accorded these securities Tier I capital status. The ability to apply Tier I capital treatment, as well as to deduct the expense for income tax purposes, provided the Corporation with a cost-effective way to raise capital for regulatory purposes. The trust-preferred securities are not included as a component of total shareholders' equity on the Corporation's balance sheet. During the first quarter of 1997, the Corporation repurchased approximately .8 million shares of common stock. Since the beginning of 1996, the Corporation has repurchased 11.6 million common shares. At March 31, 1997, approximately 1.5 million shares remain available for repurchase under a 5 million share repurchase program authorized by the board of directors in May 1996. In addition, the Corporation has authorized the repurchase of a number of common shares, up to the number that will be issued in connection with the acquisitions of Buck Consultants, Inc. and 1/st/ Business Bank. --- SUMMARY DATA Mellon Bank Corporation
(dollar amounts in millions, Quarter ended except per share amounts; March 31, Dec. 31, Sept. 30, June 30, March 31, common shares in thousands) 1997 1996 1996 1996 1996 --------- -------- --------- -------- -------- Selected key data - ----------------- Net income per common share - fully diluted: Pre-stock split $ 1.38 $ 1.34 $ 1.31 $ 1.26 $1.24 Post-stock split (a) $ .69 $ .67 $ .66 $ .63 $ .62 Tangible net income per common share - fully diluted (b): Pre-stock split $ 1.54 $ 1.49 $ 1.45 $ 1.40 $1.37 Post-stock split (a) $ .77 $ .75 $ .72 $ .70 $ .69 Net income applicable to common stock $ 182 $ 179 $ 172 $ 169 $169 Tangible net income applicable to common stock (b) $ 203 $ 200 $ 190 $ 187 $188 Return on common shareholders' equity (c) 21.2% 20.9% 20.6% 20.4% 19.7% Return on tangible common shareholders' equity (b)(c) 36.3% 36.6% 31.2% 31.3% 30.1% Return on assets (c) 1.83% 1.80% 1.71% 1.70% 1.76% Return on tangible assets (b)(c) 2.09% 2.06% 1.92% 1.92% 1.99% Common equity to assets 8.33% 8.11% 7.78% 7.79% 8.14% Tangible common equity to assets 5.60% 5.36% 5.22% 5.79% 6.03% Average balances for the period - ---------------------------------- Money market investments $ 1,032 $ 1,272 $ 1,573 $ 1,387 $ 1,290 Trading account securities 161 96 169 181 138 Securities 6,018 6,198 6,538 6,658 5,339 Loans 27,404 27,900 27,170 26,798 27,058 Total interest-earning assets 34,615 35,466 35,450 35,024 33,825 Total assets 42,187 42,636 42,461 42,096 40,848 Total tangible assets 40,964 41,395 41,563 41,173 39,902 Deposits 30,280 31,569 31,542 30,949 29,274 Total interest-bearing liabilities 27,485 29,210 28,806 28,342 27,986 Common shareholders' equity 3,490 3,410 3,327 3,327 3,459 Tangible common shareholders' equity 2,267 2,169 2,429 2,404 2,513 Total shareholders' equity 3,735 3,820 3,762 3,762 3,894
Computation of net income per common share - ---------------------------------- Quarter ended March 31, ----------------- 1997 1996 ------- ------- Net income applicable to common stock $ 182 $ 169 ======= ======== Total stock and stock equivalents-pre-stock split Primary 131,520 136,506 ======= ======== Fully diluted 131,602 136,721 ======= ======== Net income per common share-primary: Pre-stock split $ 1.38 $ 1.24 ======= ======== Post-stock split (a) $ .69 $ .62 ======= ======== Net income per common share-fully diluted: Pre-stock split $ 1.38 $ 1.24 ======= ======== Post-stock split (a) $ .69 $ .62 ======= ======== - -----------------------
(a) Per common share amounts have been restated to reflect a two-for-one common stock split payable June 2, 1997. (b) Excludes the after-tax impact of the amortization of goodwill and other identified intangibles resulting from accounting for business combinations under the purchase method of accounting. (c) Annualized. All amounts are based on unrounded numbers. CONDENSED CONSOLIDATED INCOME STATEMENT Mellon Bank Corporation
Quarter ended (in millions, except per March 31, share amounts) ---------------------- 1997 1996 ---------- ---------- Interest revenue - ---------------- Interest and fees on loans (loan fees of $17 and $24) $ 553 $ 566 Interest-bearing deposits with banks 7 9 Federal funds sold and securities under resale agreements 5 6 Other money market investments 1 2 Trading account securities 2 2 Securities 99 88 ----- ----- Total interest revenue 667 673 Interest expense - ---------------- Interest on deposits 215 218 Federal funds purchased and securities under repurchase agreements 18 27 Other short-term borrowings 20 37 Notes and debentures 44 28 ----- ----- Total interest expense 297 310 ----- ----- Net interest revenue 370 363 Provision for credit losses 25 25 ----- ----- Net interest revenue after provision for credit losses 345 338 Noninterest revenue - ------------------- Trust and investment management fees 266 241 Cash management and deposit transaction charges 56 49 Mortgage servicing fees 51 41 Foreign currency and securities trading revenue 25 21 Credit card fees 24 33 Information services fees 13 9 Other 101 109 ----- ----- Total fee revenue 536 503 Gain on sale of securities - 1 ----- ----- Total noninterest revenue 536 504 Operating expense - ----------------- Staff expense 268 277 Net occupancy expense 52 56 Professional, legal and other purchased services 46 47 Equipment expense 36 35 Amortization of mortgage servicing assets and purchased credit card relationships 28 28 Amortization of goodwill and other intangible assets 27 25 Other expense 108 100 Trust-preferred securities expense 20 - Net revenue from acquired property (3) (8) ----- ----- Total operating expense 582 560 ----- ----- Income before income taxes 299 282 Provision for income taxes 108 103 ----- ----- Net income 191 179 Dividends on preferred stock 9 10 ----- ----- Net income applicable to common stock $ 182 $ 169 ===== ===== Net income per common share - primary: Pre-stock split $1.38 $1.24 ===== ===== Post-stock split (a) $.69 $.62 ===== ===== Net income per common share - fully diluted: Pre-stock split $1.38 $1.24 ===== ===== Post-stock split (a) $.69 $.62 ===== ===== - -----------------------
(a) Per common share amounts have been restated to reflect a two-for-one common stock split payable June 2, 1997. CONDENSED CONSOLIDATED BALANCE SHEET Mellon Bank Corporation
(dollar amounts in millions) March 31, Dec. 31, March 31, 1997 1996 1996 ---------- --------- ---------- Assets - ------ Cash and due from banks $ 2,915 $ 2,846 $ 2,749 Money market investments 859 992 1,535 Trading account securities 110 84 168 Securities available for sale 3,376 4,111 3,164 Investment securities(approximate fair value of $2,274, $2,365 and $2,608) 2,306 2,375 2,628 Loans, net of unearned discount of $50, $57 and $57 27,525 27,393 26,857 Reserve for credit losses (518) (525) (468) ------- ------- ------- Net loans 27,007 26,868 26,389 Premises and equipment 572 569 555 Acquired property, net of reserves of $9, $10 and $13 75 80 73 Goodwill and other intangibles 1,214 1,238 934 Mortgage servicing assets and purchased credit card relationships 849 774 701 Other assets 2,785 2,659 2,686 ------- ------- ------- Total assets $42,068 $42,596 $41,582 ======= ======= ======= Liabilities - ----------- Deposits in domestic offices $27,258 $28,657 $26,572 Deposits in foreign offices 2,678 2,717 3,326 Short-term borrowings 3,130 2,247 4,163 Other liabilities 1,804 1,721 1,730 Notes and debentures (with original maturities over one year) 2,512 2,518 1,972 ------- ------- ------- Total liabilities 37,382 37,860 37,763 Trust-preferred securities - -------------------------- Guaranteed preferred beneficial interests in Corporation's junior subordinated deferrable interest debentures 990 990 - Shareholders' equity (a) - ------------------------ Preferred stock 193 290 435 Common shareholders' equity: Common stock - $.50 par value Authorized - 200,000,000 shares Issued - 147,165,480 shares 74 74 74 Additional paid-in capital 1,875 1,866 1,854 Retained earnings 2,569 2,480 2,207 Net unrealized loss on assets available for sale, net of tax (38) (1) (23) Treasury stock of 18,334,060; 18,518,290; and 14,722,287 shares at cost (977) (963) (728) ------- ------- ------- Total common shareholders' equity 3,503 3,456 3,384 ------- ------- ------- Total shareholders' equity 3,696 3,746 3,819 ------- ------- ------- Total liabilities, trust-preferred securities and shareholders' equity $42,068 $42,596 $41,582 ======= ======= =======
(a) Shareholders' equity at March 31, 1997, does not reflect the two-for-one stock split payable June 2, 1997. Mellon Bank Corp. press releases are available through Company News On-Call by fax, 800-758-5804, ext. 552187, or at http://www.prnewswire.com (MEL) EX-99.3 4 PRESS RELEASE DATED APRIL 15, 1997 EX-99.3 Contact: Media: Jim Dever (412) 236-1752 Corporate Affairs Analysts: David T. Lamar One Mellon Bank Center (412) 234-4633 Pittsburgh, PA 15258-0001 FOR IMMEDIATE RELEASE MELLON SHAREHOLDER ACTION PERMITS TWO-FOR-ONE STOCK SPLIT PITTSBURGH April 15, 1997--Mellon Bank Corporation (NYSE: MEL) today announced that its shareholders have approved an amendment to its Articles of Incorporation increasing the authorized number of shares of common stock from 200 million to 400 million. Earlier today, Mellon announced a two-for-one common stock split subject to favorable shareholder action on this proposed amendment. Mellon's shareholders then took this favorable action at Mellon's annual shareholders meeting this morning in Pittsburgh. The two-for-one stock split is being structured as a stock dividend of one additional share of common stock being paid on each currently outstanding share of common stock. The additional shares resulting from the split will be distributed on June 2, 1997, to shareholders of record at the close of business on May 1, 1997. With balance sheet assets of approximately $42 billion and assets under management or administration of approximately $1.3 trillion, Mellon Bank Corporation is a major financial services company headquartered in Pittsburgh; its primary subsidiary is Mellon Bank, N.A. Mellon provides a full range of banking, investment and trust products and services to individuals and small, midsize and large businesses and institutions. Its mutual fund business is The Dreyfus Corporation. Press releases and other information about Mellon Bank Corporation and its products and services are available on the Internet at http://www.mellon.com. For Mellon press releases by fax, call 1 800 758-5804, identification number 552187. # # # -----END PRIVACY-ENHANCED MESSAGE-----