-----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, O02tvhXvypoHOWrqwMgh/hkxB90gF9Q8CelMrkACM4E2L5UB6BWUljOx+tqDY7Ye WRwgnWRpHhb6pKlR94IeLA== 0000950132-99-000396.txt : 19990504 0000950132-99-000396.hdr.sgml : 19990504 ACCESSION NUMBER: 0000950132-99-000396 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990420 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MELLON BANK CORP CENTRAL INDEX KEY: 0000064782 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 251233834 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07410 FILM NUMBER: 99598235 BUSINESS ADDRESS: STREET 1: ONE MELLON BANK CTR 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 20, 1999 MELLON BANK CORPORATION (Exact name of registrant as specified in charter) Pennsylvania 1-7410 25-1233834 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) (Identification No.) One Mellon Bank Center 500 Grant Street Pittsburgh, Pennsylvania 15258 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code - (412) 234-5000 ITEM 5. OTHER EVENTS By press release dated April 20, 1999, Mellon Bank Corporation (the "Corporation") announced first quarter 1999 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 quarterly Common Stock dividend by 11 percent to 40 cents per share on a pre-split basis, payable on May 17, 1999, to shareholders of record at the close of business on April 30, 1999. The Corporation's two-for-one stock split of its Common Stock is being structured as a stock dividend of one additional share of Common Stock being paid on each currently issued share of Common Stock. The additional shares resulting from the split will be distributed on May 17, 1999, to shareholders of record at the close of business on May 3, 1999. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit Description Number 99.1 Mellon Bank Corporation Press Release, dated April 20, 1999, announcing the matters referenced in Item 5 above. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MELLON BANK CORPORATION Date: April 20, 1999 By: /s/ STEVEN G. ELLIOTT ------------------------------- Steven G. Elliott Senior Vice Chairman and Chief Financial Officer EXHIBIT INDEX Number Description Method of Filing 99.1 Press Release dated Filed herewith April 20, 1999 EX-99.1 2 PRESS RELEASE DATED APRIL 20, 1999 EXHIBIT 99.1 [Logo of Mellon] News Release Contact: MEDIA: ANALYSTS: Stephen K. Dishart Donald J. MacLeod (412) 234-0850 (412) 234-5601 Corporate Affairs Gregg P. Stein David T. Lamar One Mellon Bank Center (412) 236-0082 (412) 234-4633 Pittsburgh, PA 15258-0001 - - -------------------------------------------------------------------------------- FOR IMMEDIATE RELEASE MELLON REPORTS RECORD FIRST QUARTER 1999 RESULTS, INCREASES ----------------------------------------------------------- COMMON STOCK DIVIDEND, ANNOUNCES COMMON STOCK SPLIT --------------------------------------------------- . Operating Earnings Per Share Increases to 87 Cents, Up 12 Percent Over Same Period Last Year on a Pre-Split Basis . Return on Common Equity is 20.9 Percent and Return on Assets is 1.84 Percent, Excluding a Net Gain from Divestitures and a Charge for the Effect of an Accounting Change . Quarterly Common Dividend Increases 11 Percent to 40 Cents Per Share on a Pre-Split Basis . Announces Two-For-One Common Stock Split
Quarter ended --------------------------------- Financial Highlights March 31, Dec. 31, March 31, (dollar amounts in millions, except per share amounts) 1999 1998 1998 - - ------------------------------------------------------------------------------------------ Operating results (a): Diluted earnings per common share (b) $ .87 $ .84 $ .78 Net income applicable to common stock $ 231 $ 222 $ 206 Return on common equity (annualized) 20.9% 20.1% 21.6% Return on assets (annualized) 1.84% 1.76% 1.89% Tangible operating results (a): Diluted earnings per common share (b) $ .98 $ .94 $ .88 Net income applicable to common stock $ 260 $ 252 $ 231 Return on common equity (annualized) 40.4% 40.2% 39.5% Return on assets (annualized) 2.16% 2.07% 2.17% Reported results: Diluted earnings per common share (b) $ .96 $ .84 $ .78 Net income applicable to common stock $ 254 $ 222 $ 206 Return on common equity (annualized) 23.1% 20.1% 21.6% Return on assets (annualized) 2.03% 1.76% 1.89% Fee revenue as a percentage of net interest and fee revenue (FTE) 68% 68% 66% Efficiency ratio excluding amortization of intangibles 62% 65% 62% - - ------------------------------------------------------------------------------------------
(a) Operating and tangible operating results for the first quarter of 1999 exclude a $49 million after-tax net gain from divestitures and a $26 million after-tax charge for the cumulative effect of a change in accounting principle. (b) Earnings per common share calculated on a pre-stock split basis. -- more -- Logos of Mellon Dreyfus THE BOSTON COMPANY The Dreyfus Corporation and The Boston Company are companies of Mellon Bank Corporation. Mellon Reports Earnings April 20, 1999 Page 2 PITTSBURGH, April 20, 1999--Mellon Bank Corporation (NYSE: MEL) today reported record first quarter 1999 diluted operating earnings per common share of 87 cents, an increase of 12 percent compared with 78 cents per common share in the first quarter of 1998. Operating net income applicable to common stock totaled $231 million in the first quarter of 1999, an increase of 12 percent compared with $206 million in the prior year period. Mellon also announced an 11 percent increase in its quarterly cash dividend and a two-for-one split of the Corporation's common stock. "Mellon's excellent first-quarter results demonstrate that we are quickly making great strides toward becoming the best performing financial services company, and our shareholders are clearly benefiting from our continuing strategy of producing sustainable revenue growth and high returns," said Martin G. McGuinn, Mellon chairman and chief executive officer. "By heightening our focus on our customers and becoming the employer of choice, we are winning new business and attracting and retaining talented people. Simply stated, this is an exciting time to be one of our customers or shareholders and to work at Mellon." First quarter 1999 reported results included a $49 million after-tax net gain from divestitures and a $26 million after-tax charge for the cumulative effect of a change in accounting principle. Including these items, diluted earnings per common share totaled 96 cents and net income applicable to common stock was $254 million. The Corporation increased its quarterly common dividend by 11 percent to 40 cents per share on a pre-split basis, or 20 cents per share on a post-split basis. This cash dividend on the Corporation's common stock is payable on May 17, 1999, to shareholders of record at the close of business on April 30, 1999. The two-for-one common stock split is being structured as a stock dividend of one additional share of common stock paid on each currently issued share of common stock. The additional shares resulting from the split will be distributed on May 17, 1999, to shareholders of record at the close of business on May 3, 1999. On a post-stock split basis, the Corporation's first quarter 1999 diluted operating earnings per common share was 43 cents, compared with 39 cents and 42 cents per common share in the first quarter and fourth quarter of 1998, respectively. Fee revenue for the first quarter of 1999 was $789 million, up $91 million from $698 million in the prior-year period. The first quarter of 1998 included $22 million of fee revenue from the electronic filing of income tax returns. This service was discontinued at the end of 1998. Excluding the impact on fee revenue from the 1998 acquisitions of Founders Asset Management, LLC and Newton Management Limited and fees from the electronic filing of income tax returns in the first quarter of 1998, fee revenue increased 11 percent in the first quarter of 1999 compared with the first quarter of 1998. This fee revenue increase was led by higher investment management revenue, up 15 percent over the prior-year period. Excluding the gain on the sale of the merchant card processing business in December 1998, fee revenue increased approximately 3 percent, or at an annualized rate of 13 percent, compared with the fourth quarter of 1998. Net interest revenue on a fully taxable equivalent basis for the first quarter of 1999 was $371 million, up $4 million compared with $367 million in the prior- year period. This increase primarily resulted from a higher level of interest- earning assets. -- more -- Mellon Reports Earnings April 20, 1999 Page 3 Operating expense before trust-preferred securities expense and net revenue from acquired property for the first quarter of 1999 was $760 million, up $63 million from $697 million in the first quarter of 1998. This increase primarily resulted from the impact of acquisitions and business growth. Excluding the effect of acquisitions, operating expense before trust-preferred securities expense and net revenue from acquired property increased less than 2 percent compared with the first quarter of 1998. Credit quality expense was $15 million in the first quarter of 1999 compared with $14 million in the first quarter of 1998. Nonperforming assets totaled $161 million at March 31, 1999, compared with $140 million at December 31, 1998, and $191 million at March 31, 1998. The ratio of nonperforming assets to total loans and net acquired property was .53 percent at March 31, 1999, compared with .44 percent at December 31, 1998 and .63 percent at March 31, 1998. A broad-based financial services company with a bank at its core, Mellon Bank Corporation ranks among the nation's largest financial services companies in market capitalization. With more than $2.3 trillion in assets under management, administration or custody, including approximately $400 billion under management, Mellon provides a full range of banking, investment and trust products and services to individuals and small, midsize and large businesses and institutions. Its mutual fund companies, The Dreyfus Corporation and Founders Asset Management, place Mellon as the leading bank manager of mutual funds. Headquartered in Pittsburgh, Mellon's principal subsidiary is Mellon Bank, N.A. We invite you to hear taped comments from Mellon's senior vice chairman and chief financial officer, Steven G. Elliott, regarding first quarter 1999 earnings by calling (412) 236-5385 between 9 a.m. EDT on Tuesday, April 20, 1999, and 5 p.m. EDT on Tuesday, April 27, 1999. Press releases and other information about Mellon Bank Corporation and its products and services are available at www.mellon.com on the Internet. For Mellon press releases by fax, call 1 800 758-5804, identification number 552187. # # # Mellon Reports Earnings April 20, 1999 Page 4 Net Gain From Divestitures and Charge for a Change in Accounting Principle - - -------------------------------------------------------------------------- Net gain from divestitures In the first quarter of 1999, the Corporation recorded an $83 million pre-tax net gain from completed and pending divestitures. The after-tax impact from these transactions totaled $49 million or $.19 per common share. In January 1999, the Corporation announced its intentions to sell its credit card business, mortgage businesses and network services transaction processing unit. The sale of the credit card business was completed on March 31, 1999, and a definitive sale agreement was signed on March 31, 1999, for the commercial mortgage servicing business. The Corporation expects to complete the sales of the commercial mortgage servicing business in the second quarter of 1999 and the residential mortgage business and the network services transaction processing unit by the end of the third quarter of 1999. The net gain recorded in the first quarter resulted from a gain on the sale of the credit card business partially offset by a loss on the commercial mortgage servicing business and a write-down to reflect the estimated sale proceeds to be received for the residential mortgage business. Cumulative effect of a change in accounting principle On January 1, 1999, the Corporation adopted the provisions of the American Institute of Certified Public Accountants Statement of Position (SOP) No. 98-5 on reporting on the costs of start-up activities. This SOP requires that costs of start-up activities be expensed as incurred. Initial application of the SOP is to be reported as a cumulative effect of a change in accounting principle. Due to this change in accounting principle, the Corporation recognized a one- time after-tax charge of $26 million, or $.10 per share, (pre-tax cost of $43 million) in the first quarter of 1999. The charge was related to underwriting fees paid by the Corporation during the successful initial public offering in the second quarter of 1998 of a $920 million Dreyfus closed-end mutual fund. In September 1998, the Financial Accounting Standards Board staff concluded that fees paid by advisors of closed-end funds should be expensed as incurred and that any fees capitalized prior to July 24, 1998, should be written off upon the adoption of SOP 98-5 and reported as a cumulative effect of a change in accounting principle. This accounting change will have no impact on a cash-flow basis in 1999 or future periods since the underwriting fees were paid in the first half of 1998. Mellon Reports Earnings April 20, 1999 Page 5 Fee Revenue - - -----------
Quarter ended --------------------------------- March 31, Dec. 31, March 31, (dollar amounts in millions) 1999 1998 1998 - - ------------------------------------------------------------------------------------------------- Trust and investment fee revenue: Investment management: Mutual fund $ 144 $ 136 $ 100 Private asset 71 63 52 Institutional asset 63 58 50 - - ------------------------------------------------------------------------------------------------- Total investment management revenue 278 257 202 Administration and custody: Institutional trust 97 100 95 Mutual fund 34 32 33 Private asset 5 5 4 - - ------------------------------------------------------------------------------------------------- Total administration and custody revenue 136 137 132 Benefits consulting 59 59 52 Brokerage fees 15 12 10 - - ------------------------------------------------------------------------------------------------- Total trust and investment fee revenue 488 465 396 Cash management and deposit transaction charges 66 70 61 Mortgage servicing fees 52 48 55 Foreign currency and securities trading revenue 43 47 41 Credit card fees 18 22 24 Gain on sale of merchant card processing business - 35 - Other 122 112 121 - - ------------------------------------------------------------------------------------------------- Total fee revenue $ 789 $ 799 $ 698 - - ------------------------------------------------------------------------------------------------- Fee revenue as a percentage of net interest and fee revenue (FTE) 68% 68% 66% Trust and investment fee revenue as a percentage of net interest and fee revenue (FTE) 42% 39% 37% - - -------------------------------------------------------------------------------------------------
Fee revenue increased $91 million, or 13%, in the first quarter of 1999, compared with the first quarter of 1998. Excluding the fee revenue resulting from the acquisitions of Founders Asset Management, LLC (Founders) in April 1998 and Newton Management Limited (Newton) in October 1998 and fees from the electronic filing of income tax returns in the first quarter of 1998, fee revenue increased 11% compared with the prior-year period. The electronic filing of income tax returns service was discontinued at the end of 1998. Trust and investment fees increased $92 million, or 23%, compared with the prior-year period. This increase reflects net new business, higher transaction volumes and an increase in the market value of assets under management, as well as revenue resulting from the Newton and Founders acquisitions. Excluding the revenue from these acquisitions, trust and investment fees increased 12% compared with the first quarter of 1998. The $76 million increase in investment management revenue in the first quarter of 1999 compared with the prior-year period resulted from a $44 million, or 44%, increase in mutual fund management revenue, a $19 million, or 36%, increase in private asset management revenue and a $13 million, or 23%, increase in institutional asset management revenue. Mellon Reports Earnings April 20, 1999 Page 6 These increases resulted from acquisitions, net new business and an increase in the market value of assets under management. Average net assets of proprietary funds managed at Dreyfus/Founders/Newton in the first quarter of 1999 were $125 billion, up $28 billion from $97 billion in the first quarter of 1998 and up $7 billion from $118 billion in the fourth quarter of 1998. The increase from the prior-year period primarily resulted from increases in average net assets of equity funds, institutional taxable money market funds and fixed income funds, due in part to the Founders and Newton acquisitions. Proprietary equity funds, including $7 billion of funds related to Founders and $4 billion of unit trusts related to Newton, averaged $42 billion in the first quarter of 1999, compared with $23 billion in the first quarter of 1998 and $37 billion in the fourth quarter of 1998. Administration and custody fee revenue increased $4 million in the first quarter of 1999 compared with the first quarter of 1998, primarily resulting from net new business and higher transaction volumes. Administration and custody fee revenue decreased $1 million compared with the fourth quarter of 1998. This decrease resulted, in part, from accounting for the results of the Russell/Mellon Analytical Services Inc. joint venture under the equity method of accounting, which reports the results of the joint venture on a net basis, rather than reporting the revenues and expenses separately. In addition, securities lending revenue was lower in the first quarter of 1999 compared with the fourth quarter of 1998. Benefits consulting fees increased $7 million in the first quarter of 1999 compared with the prior-year period, primarily resulting from new business and increased project activity with existing clients. The $5 million increase in brokerage fees primarily resulted from higher trading volumes. Dreyfus Brokerage Services, Inc. averaged approximately 9,600 trades per day in the first quarter of 1999, compared with approximately 8,300 trades per day in the fourth quarter of 1998 and 5,600 trades per day in the first quarter of 1998. The 9% increase in cash management fees and deposit transaction charges in the first quarter of 1999 compared with the prior-year period, primarily resulted from higher volumes. Mortgage servicing fees decreased $3 million, or 6%, in the first quarter of 1999 compared with the first quarter of 1998. This decrease primarily resulted from a higher level of mortgage prepayments. Foreign currency and securities trading revenue increased $2 million in the first quarter of 1999 compared with the prior-year period. This increase was primarily related to growth in the number of foreign exchange customers and related volumes, partially offset by lower securities trading gains. The $4 million decrease compared with the fourth quarter of 1998 resulted from lower foreign exchange customer volumes, relative to the record levels of the prior period, reduced market volatility and lower securities trading gains. The January 1, 1999 introduction of the Euro was a factor contributing to lower foreign exchange volumes. Mellon Reports Earnings April 20, 1999 Page 7 Credit card fees decreased $6 million in the first quarter of 1999 compared with the prior-year period. This decrease was primarily due to the sale of the Corporation's merchant card processing business in December 1998. On March 31, 1999, the Corporation sold its credit card business to Citibank, a unit of Citigroup. Other fee revenue increased $1 million in the first quarter of 1999, compared with the prior-year period. This increase primarily resulted from higher revenue from joint ventures and partnerships, as well as other factors, none of which were individually significant. This increase was primarily offset by the elimination of fees from the electronic filing of income tax returns due to the expiration of a contract with a major income tax return preparer at the end of 1998. The Corporation recorded $22 million of fee revenue from this service in the first quarter of 1998. The Corporation accounts for its interest in joint ventures under the equity method of accounting with the net results primarily recorded as other fee revenue. The Corporation's joint ventures generated approximately $70 million of gross fee revenue in the first quarter of 1999, compared with approximately $52 million in both the fourth and first quarters of 1998. Excluding the $35 million gain on the sale of the merchant card processing business in December 1998, fee revenue increased $25 million or 3%, or at an annualized rate of 13%, compared with the fourth quarter of 1998, primarily reflecting growth in trust and investment fee revenue and other revenue. Compared with the fourth quarter of 1998, trust and investment fee revenue increased 5%,or at an annualized rate of 19%. Net Interest Revenue - - --------------------
Quarter ended --------------------------------- March 31, Dec. 31, March 31, (dollar amounts in millions) 1999 1998 1998 - - -------------------------------------------------------------------- Net interest revenue (FTE) $ 371 $ 382 $ 367 Net interest margin (FTE) 3.78% 3.86% 4.06% Average securities $ 6,767 $ 6,141 $ 5,301 Average loans $31,467 $31,503 $29,389 Average interest-earning assets $39,811 $39,427 $36,644 - - --------------------------------------------------------------------
Net interest revenue on a fully taxable equivalent basis increased $4 million in the first quarter of 1999 compared with the first quarter of 1998. This increase was primarily due to the higher level of interest-earning assets partially offset by acquisition funding costs, funding costs related to the repurchase of common stock, and narrowing spreads. Mellon Reports Earnings April 20, 1999 Page 8 Net interest revenue decreased $11 million in the first quarter of 1999 compared with the fourth quarter of 1998. This decrease primarily resulted from the common stock repurchase costs, narrowing spreads, lower loan fees and the impact of two fewer days in the first quarter of 1999 compared with the fourth quarter of 1998. Operating Expense - - -----------------
Quarter ended -------------------------------- March 31, Dec. 31, March 31, (dollar amounts in millions) 1999 1998 1998 - - --------------------------------------------------------------------- Staff expense $ 391 $ 386 $ 357 Professional, legal and other purchased services 71 97 61 Net occupancy expense 61 63 56 Equipment expense 41 59 39 Amortization of mortgage servicing assets and purchased credit card relationships 42 47 45 Amortization of goodwill and other intangible assets 37 37 30 Other expense 117 116 109 - - --------------------------------------------------------------------- Operating expense before trust-preferred securities expense and net revenue from acquired property 760 805 697 Trust-preferred securities expense 20 20 20 Net revenue from acquired property - - (1) - - --------------------------------------------------------------------- Total operating expense $ 780 $ 825 $ 716 - - --------------------------------------------------------------------- Average full-time equivalent staff 29,100 28,500 27,900 - - --------------------------------------------------------------------- Efficiency ratio (a) 65% 68% 65% Efficiency ratio excluding amortization of goodwill and other intangible assets 62% 65% 62% - - ---------------------------------------------------------------------
(a) Operating expense before trust-preferred securities expense and net revenue from acquired property, as a percentage of revenue, computed on a taxable equivalent basis, excluding the net gain on divestitures and the sale of securities. Operating expense before trust-preferred securities expense and net revenue from acquired property increased $63 million, or 9%, in the first quarter of 1999, compared with the prior-year period, resulting from acquisitions as well as business growth. Excluding the effect of acquisitions, operating expense before trust-preferred securities expense and net revenue from acquired property increased less than 2% compared with the first quarter of 1998. Operating expense before trust-preferred securities expense and net revenue from acquired property decreased $45 million in the first quarter of 1999 compared with the fourth quarter of 1998. This decrease primarily resulted from lower consulting and equipment expenses. The decrease in consulting and equipment expenses primarily related to fourth quarter 1998 expenditures for strategic business and reengineering initiatives and the upgrade of computer hardware. Mellon Reports Earnings April 20, 1999 Page 9 Income Taxes - - ------------ The Corporation's effective tax rate, excluding the effect of a change in accounting principle, for the first quarter of 1999 was 37.3% compared with 35.3% for the first quarter of 1998. Excluding the effect of divestitures, the effective tax rate was 36.5% for the first quarter of 1999. It is currently anticipated that the effective tax rate will remain at approximately 36.5% for the remainder of 1999. Credit Quality Expense and Reserve for Credit Losses - - ----------------------------------------------------
Quarter ended --------------------------------- March 31, Dec. 31, March 31, (dollar amounts in millions) 1999 1998 1998 - - --------------------------------------------------------------------------- Provision for credit losses $ 15 $ 15 $ 15 Net revenue from acquired property - - (1) - - --------------------------------------------------------------------------- Credit quality expense $ 15 $ 15 $ 14 - - --------------------------------------------------------------------------- Net credit (losses) recoveries: Domestic: Credit card $ (10) $ (11) $ (9) Other consumer credit (4) (4) (3) Commercial real estate - (1) (4) Commercial and financial (3) (1) (2) - - --------------------------------------------------------------------------- Total net credit losses $ (17) $ (17) $ (18) - - --------------------------------------------------------------------------- Annualized net credit losses to average loans .22% .22% .24% - - --------------------------------------------------------------------------- Reserve for credit losses at end of period $ 410 $ 496 $ 496 Reserve as a percentage of total loans 1.34% 1.54% 1.63% - - ---------------------------------------------------------------------------
Credit quality expense and total net credit losses for the first quarter of 1999 were nearly unchanged compared with both the first and fourth quarters of 1998. The $86 million decrease in the reserve for credit losses at March 31, 1999, compared with December 31, 1998 and March 31, 1998, was due to the sale of the credit card business. In conjunction with this sale, $84 million that had been associated with the credit card portfolio was removed from the reserve for credit losses. The Corporation expects that net credit losses will be lower in the remainder of 1999, compared with the first quarter of 1999, due to this sale. Annualized net credit losses to average loans, excluding credit card net credit losses, was .10% in the first quarter of 1999. The CornerStone(sm) credit card accelerated resolution portfolio, which had a net carrying value of $67 million at December 31, 1998, and $130 million at March 31, 1998, was included in the sale. This portfolio had been carried in Other Assets on the balance sheet. Mellon Reports Earnings April 20, 1999 Page 10 Nonperforming Assets - - --------------------
March 31, Dec. 31, Sept. 30, March 31, (dollar amounts in millions) 1999 1998 1998 1998 - - ---------------------------------------------------------------------------------- Domestic nonperforming loans: Consumer mortgage $ 44 $ 44 $ 53 $ 56 Commercial real estate 6 6 8 53 Other domestic 77 53 42 33 - - ---------------------------------------------------------------------------------- Total nonperforming loans 127 103 103 142 Acquired property: Real estate acquired 37 40 40 53 Reserve for real estate acquired (5) (5) (5) (9) - - ---------------------------------------------------------------------------------- Net real estate acquired 32 35 35 44 Other assets acquired 2 2 2 5 - - ---------------------------------------------------------------------------------- Total acquired property 34 37 37 49 - - ---------------------------------------------------------------------------------- Total nonperforming assets $ 161 $ 140 $ 140 $ 191 - - ---------------------------------------------------------------------------------- Nonperforming loans as a percentage of total loans .41% .32% .33% .47% Nonperforming assets as a percentage of total loans and net acquired property .53% .44% .45% .63% - - ----------------------------------------------------------------------------------
Nonperforming assets increased $21 million compared with December 31, 1998, and decreased $30 million compared with March 31, 1998. The increase from December 31, 1998, resulted from the addition of a commercial loan to a customer in the steel industry to nonperforming status during the first quarter of 1999. The decrease from the prior-year period primarily resulted from a lower level of acquired property and nonperforming consumer mortgages. In addition, a decrease in nonperforming commercial real estate loans was partially offset by the addition of the previously mentioned commercial loan to nonperforming status. Mellon Reports Earnings April 20, 1999 Page 11 Selected Capital Data - - ---------------------
(dollar amounts in millions, March 31, Dec. 31, Sept. 30, March 31, except per share amounts) 1999 1998 1998 1998 - - ---------------------------------------------------------------------------------------- Total shareholders' equity $ 4,502 $ 4,521 $ 4,358 $ 4,086 Total shareholders' equity to assets ratio 9.12% 8.90% 9.03% 8.62% Tangible shareholders' equity $ 2,659(a) $ 2,641(a) $ 2,540 $ 2,374 Tangible shareholders' equity to assets ratio (b) 5.60% 5.41% 5.47% 5.19% Tier I capital ratio 6.9(c) 6.53 6.78 6.80 Total (Tier I plus Tier II) capital ratio 11.2(c) 10.80 11.22 11.28 Leverage capital ratio 6.6(c) 6.73 7.06 7.04 Book value per common share: Pre-stock split $ 17.28 $ 17.26 $ 16.69 $ 15.70 Post-stock split (d) 8.64 8.63 8.35 7.85 Tangible book value per common share: Pre-stock split $ 10.21 $ 10.08 $ 9.73 $ 9.12 Post-stock split (d) 5.11 5.04 4.87 4.56 Closing common stock price: Pre-stock split $ 70.38 $ 68.75 $ 55.00 $ 63.50 Post-stock split (d) 35.19 34.38 27.50 31.75 Market capitalization $ 18,335 $ 18,007 $ 14,363 $ 16,523 Common shares outstanding (000): Pre-stock split 260,532 261,923 261,140 260,210 Post-stock split (d) 521,064 523,846 522,280 520,420 - - ----------------------------------------------------------------------------------------
(a) Includes $62 million and $60 million, respectively of minority interest, primarily related to Newton. (b) Shareholders' equity plus minority interest and less goodwill and other intangibles recorded in connection with purchase acquisitions divided by total assets less goodwill and other intangibles recorded in connection with purchase acquisitions. Beginning at December 31, 1998, the amount of goodwill and other intangibles subtracted from shareholders' equity and total assets is net of any tax deductible portion. Prior period amounts and ratios were restated. (c) Estimated. (d) Reflects the two-for-one common stock split payable May 17, 1999. The increase in shareholders' equity at March 31, 1999, compared with March 31, 1998, primarily reflects earnings retention. The decrease in shareholders' equity compared with December 31, 1998, resulted from common stock repurchases partially offset by earnings retention. In January 1999, the board of directors approved an enhancement to an existing common share repurchase authorization by increasing the number of shares authorized for repurchase to 10 million shares, on a pre-split basis, of the Corporation's common stock. In the first quarter of 1999, 2.7 million shares of common stock, on a pre-split basis, were repurchased. SUMMARY DATA Mellon Bank Corporation Five Quarter Trend
Quarter ended (dollar amounts in millions, --------------------------------------------------------- except per share amounts; March 31, Dec. 31, Sept. 30, June 30, March 31, common shares in thousands) 1999 1998 1998 1998 1998 - - -------------------------------------------------------------------------------------------------- Selected key data - Pre-split basis - - ----------------------------------- Diluted earnings per common share: Operating $.87 (a) $.84 $.82 $.81 $.78 Tangible operating (b) .98 (a) .94 .93 .91 .88 Reported .96 .84 .82 .81 .78 Net income applicable to common stock: Operating $231 (a) $222 $218 $215 $206 Tangible operating (b) 260 (a) 252 246 243 231 Reported 254 222 218 215 206 Return on common equity (c): Operating 20.9% (a) 20.1% 20.3% 20.8% 21.6% Tangible operating (d) 40.4 (a) 40.2 40.2 44.1 39.5 Reported 23.1 20.1 20.3 20.8 21.6 Return on assets (c): Operating 1.84% (a) 1.76% 1.81% 1.79% 1.89% Tangible operating (d) 2.16 (a) 2.07 2.11 2.12 2.17 Reported 2.03 1.76 1.81 1.79 1.89 Shareholders' equity to assets: Reported 9.12% 8.90% 9.03% 8.92% 8.62% Tangible (d) 5.60 5.41 5.47 5.22 5.19 - - ------------------------------------------------------------------------------------------------- Fee revenue as a percentage of net interest and fee revenue (FTE) 68% 68% 66% 66% 66% Efficiency ratio excluding amortization of intangibles 62% 65% 62% 63% 62% Average common shares and equivalents outstanding: Basic 261,724 261,541 261,078 260,495 257,714 Diluted 265,644 265,748 265,774 265,848 263,136 - - ------------------------------------------------------------------------------------------------- Selected key data - Post-split basis - - ------------------------------------ Diluted earnings per common share: Operating $.43 (a) $.42 $.41 $.40 $.39 Tangible operating (b) .49 (a) .47 .47 .45 .44 Reported .48 .42 .41 .40 .39 Average common shares and equivalents outstanding - Diluted 531,288 531,496 531,548 531,696 526,272 - - -------------------------------------------------------------------------------------------------
- continued - SUMMARY DATA Mellon Bank Corporation Five Quarter Trend (continued)
Quarter ended -------------------------------------------------- March 31, Dec. 31, Sept. 30, June 30, March 31, (dollar amounts in millions) 1999 1998 1998 1998 1998 - - -------------------------------------------------------------------------------------- Average balances for the period - - --------------------------------- Money market investments $ 1,286 $ 1,525 $ 1,351 $ 1,597 $ 1,712 Trading account securities 291 258 266 239 242 Securities 6,767 6,141 5,754 5,596 5,301 Loans 31,467 31,503 30,426 30,302 29,389 Total interest-earning assets 39,811 39,427 37,797 37,734 36,644 Total assets 50,677 50,110 47,937 47,965 46,229 Total tangible assets (d) 48,755 48,153 46,096 46,057 44,726 Deposits 34,087 34,492 33,399 33,548 32,725 Total interest-bearing liabilities 32,825 32,406 31,104 31,145 29,348 Total shareholders' equity 4,469 4,391 4,265 4,126 3,974 Tangible shareholders' equity (d) 2,608 2,487 2,424 2,218 2,370 - - --------------------------------------------------------------------------------------
(a) For the quarter ended March 31, 1999, operating and tangible operating results exclude the $49 million after-tax net gain from divestitures and the $26 million after-tax charge for the cumulative effect of a change in accounting principle. (b) Excludes the after-tax impact of the amortization of goodwill and other intangibles from purchase acquisitions. (c) Annualized. (d) Certain goodwill and other intangibles amortization is tax deductible. Beginning at December 31, 1998, the amount of goodwill and other identified intangibles subtracted from common equity and total assets is net of the tax deductible portion. Prior period ratios and amounts were restated. Note: All calculations are based on unrounded numbers. CONDENSED CONSOLIDATED INCOME STATEMENT Mellon Bank Corporation Five Quarter Trend
Quarter ended ---------------------------------------------------- (in millions, except per March 31, Dec. 31, Sept. 30, June 30, March 31, share amounts) 1999 1998 1998 1998 1998 - - ---------------------------------------------------------------------------------------- Interest revenue - - ---------------- Interest and fees on loans (loan fees of $16, $18, $21, $17 and $17) $ 580 $ 614 $ 616 $ 606 $ 577 Federal funds sold and securities under resale agreements 9 12 12 12 13 Interest-bearing deposits with banks 9 10 8 6 9 Other money market investments 1 1 1 3 1 Trading account securities 4 4 4 3 4 Securities 108 98 95 93 90 ----- ----- ----- ----- ----- Total interest revenue 711 739 736 723 694 Interest expense - - ---------------- Interest on deposits 221 243 248 240 229 Federal funds purchased and securities under repurchase agreements 37 34 35 30 24 Other short-term borrowings 29 29 27 30 28 Notes and debentures 55 53 51 52 48 ----- ----- ----- ----- ----- Total interest expense 342 359 361 352 329 ----- ----- ----- ----- ----- Net interest revenue 369 380 375 371 365 Provision for credit losses 15 15 15 15 15 ----- ----- ----- ----- ----- Net interest revenue after provision for credit losses 354 365 360 356 350 Noninterest revenue - - ------------------- Trust and investment fee revenue 488 465 432 429 396 Cash management and deposit transaction charges 66 70 66 65 61 Mortgage servicing fees 52 48 44 53 55 Foreign currency and securities trading revenue 43 47 39 38 41 Credit card fees 18 22 23 23 24 Other 122 147 108 104 121 ----- ----- ----- ----- ----- Total fee revenue 789 799 712 712 698 Net gain from divestitures 83 - - - - Gains on sales of securities - - - 1 - ----- ----- ----- ----- ----- Total noninterest revenue 872 799 712 713 698 Operating expense - - ----------------- Staff expense 391 386 358 355 357 Professional, legal and other purchased services 71 97 72 67 61 Net occupancy expense 61 63 59 59 56 Equipment expense 41 59 42 41 39 Amortization of mortgage servicing assets and purchased credit card relationships 42 47 43 44 45 Amortization of goodwill and other intangible assets 37 37 35 35 30 Other expense 117 116 108 120 109 Trust-preferred securities expense 20 20 20 19 20 Net revenue from acquired property - - (3) (2) (1) ----- ----- ----- ----- ----- Total operating expense 780 825 734 738 716 ----- ----- ----- ----- -----
- continued - CONDENSED CONSOLIDATED INCOME STATEMENT Mellon Bank Corporation Five Quarter Trend (continued)
Quarter ended ---------------------------------------------------- (in millions, except per March 31, Dec. 31, Sept. 30, June 30, March 31, share amounts) 1999 1998 1998 1998 1998 - - ---------------------------------------------------------------------------------------- Income before income taxes and cumulative effect of accounting change 446 339 338 331 332 Provision for income taxes 166 117 120 116 117 ----- ----- ----- ----- ----- Income before cumulative effect of accounting change 280 222 218 215 215 Cumulative effect of accounting change (26) - - - - ----- ----- ----- ----- ----- Net income 254 222 218 215 215 Dividends on preferred stock - - - - 9 ----- ----- ----- ----- ----- Net income applicable to common stock $ 254 $ 222 $ 218 $ 215 $ 206 ===== ===== ===== ===== ===== Earnings per share - - ------------------ Basic net income per common share: Income before cumulative effect of accounting change $1.07 $ .85 $ .84 $ .82 $ .80 Cumulative effect of accounting change (.10) - - - - ----- ----- ----- ----- ----- Net income, pre-split $ .97 $ .85 $ .84 $ .82 $ .80 ===== ===== ===== ===== ===== Net income, post-split $ .49 $ .42 $ .42 $ .41 $ .40 ===== ===== ===== ===== ===== Diluted net income per common share: Income before cumulative effect of accounting change $1.06 $ .84 $ .82 $ .81 $ .78 Cumulative effect of accounting change (.10) - - - - ----- ----- ----- ----- ----- Net income, pre-split $ .96 $ .84 $ .82 $ .81 $ .78 ===== ===== ===== ===== ===== Net income, post-splt $ .48 $ .42 $ .41 $ .40 $ .39 ===== ===== ===== ===== =====
CONDENSED CONSOLIDATED BALANCE SHEET Mellon Bank Corporation
(dollar amounts in millions) March 31, Dec. 31, Sept. 30, March 31, 1999 1998 1998 1998 ---------- --------- ---------- ---------- Assets - - ------ Cash and due from banks $ 3,011 $ 2,926 $ 2,839 $ 3,312 Money market investments 939 798 988 1,263 Trading account securities 242 193 178 140 Securities available for sale 5,451 5,373 4,190 3,547 Investment securities (approximate fair value of $1,443, $1,634, $1,787 and $2,022) 1,421 1,602 1,743 1,987 Loans, net of unearned discount of $57, $54, $65 and $64 30,554 32,093 31,052 30,343 Reserve for credit losses (410) (496) (498) (496) ------- ------- ------- ------- Net loans 30,144 31,597 30,554 29,847 Premises and equipment 561 569 562 557 Acquired property, net of reserves of $5, $5, $5 and $9 34 37 37 49 Goodwill and other intangibles 2,276 2,313 2,115 1,918 Mortgage servicing assets and purchased credit card relationships 1,098 1,132 1,031 1,130 Other assets 4,207 4,237 4,006 3,664 ------- ------- ------- ------- Total assets $49,384 $50,777 $48,243 $47,414 ======= ======= ======= ======= Liabilities - - ----------- Deposits in domestic offices $30,419 $31,269 $29,659 $30,461 Deposits in foreign offices 2,929 3,114 3,294 2,635 Short-term borrowings 4,023 4,942 4,483 4,054 Other liabilities 3,117 2,637 2,454 2,184 Notes and debentures (with original maturities over one year) 3,403 3,303 3,004 3,003 ------- ------- ------- ------- Total liabilities 43,891 45,265 42,894 42,337 Trust-preferred securities - - -------------------------- Guaranteed preferred beneficial interests in Corporation's junior subordinated deferrable interest debentures 991 991 991 991 Shareholders' equity (a) - - ------------------------ Common stock - $.50 par value Authorized - 800,000,000 shares Issued 294,330,960 shares 147 147 147 147 Additional paid-in capital 1,907 1,887 1,867 1,855 Retained earnings 3,468 3,353 3,244 3,003 Accumulated unrealized (loss) gain, net of tax (15) 25 29 30 Treasury stock of 33,798,582; 32,407,960; 33,191,388; and 34,120,588 shares at cost (1,005) (891) (929) (949) ------- ------- ------- ------- Total shareholders' equity 4,502 4,521 4,358 4,086 ------- ------- ------- ------- Total liabilities, trust- preferred securities and shareholders' equity $49,384 $50,777 $48,243 $47,414 ======= ======= ======= =======
_______________________ (a) Shareholders' equity at March 31, 1999, does not reflect the two-for-one stock split payable May 17, 1999. -----END PRIVACY-ENHANCED MESSAGE-----