-----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, GhTlWcJsPZuRGfpi5DWiCpb2kAup5Z+YSuZ91Q/ufrim4FpMpeUI8rLxoBRl/y+s zKwZcG/98aLOeOtAgl7McA== 0000950132-96-000433.txt : 19960718 0000950132-96-000433.hdr.sgml : 19960718 ACCESSION NUMBER: 0000950132-96-000433 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960716 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960717 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: 96595789 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) - July 16, 1996 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 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit Number Description 99.1 Mellon Bank Corporation Press Release, dated July 16, 1996 regarding second quarter results of operations. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MELLON BANK CORPORATION Date: July 16, 1996 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 July 16, 1996 Filed herewith EX-99.1 2 PRESS RELEASE EX-99.1 [LOGO] Mellon News Release Contact: MEDIA: ANALYSTS: ----- -------- James J. Dever Donald J. MacLeod Corporate Affairs (412) 236-1752 (412) 234-5601 One Mellon Bank Center David T. Lamar Pittsburgh, PA 15258-0001 (412) 234-4633 FOR IMMEDIATE RELEASE MELLON REPORTS RECORD SECOND QUARTER 1996 RESULTS -------------------------------------------------
Three months Six months ended June 30, ended June 30, Financial Highlights 1996 1995 Change 1996 1995 Change - ---------------------------------------------------------------------------------------------------------- Earnings per common share (primary) $1.26 $1.09 16% $2.50 $2.17 15% Earnings per common share (fully diluted) $1.26 $1.09 16% $2.50 $2.16 16% Return on common equity* 20.4% 17.5% 290 bp 20.0% 17.5% 250 bp Return on tangible common equity* 31.3% 26.6% 470 bp 30.7% 26.8% 390 bp Return on assets* 1.70% 1.75% (5) bp 1.73% 1.76% (3) bp Return on tangible assets* 1.92% 1.99% (7) bp 1.96% 2.00% (4) bp Average common shares outstanding (primary) (000) 133,229 148,055 (14,826) 134,869 148,398 (13,529) - ---------------------------------------------------------------------------------------------------------- * Annualized
PITTSBURGH, July 16, 1996 -- Mellon Bank Corporation (NYSE: MEL) today reported record second quarter 1996 earnings per common share of $1.26, an increase of 16 percent, compared with $1.09 per common share in the second quarter of 1995. Net income applicable to common stock was $169 million compared with $162 million in the second quarter of 1995. Annualized return on common shareholders' equity and return on assets were 20.4 percent and 1.70 percent, respectively, in the second quarter of 1996, compared with 17.5 percent and 1.75 percent, respectively, in the second quarter of 1995. -more- Mellon Reports Earnings July 16, 1996 Page 2 "Our individual lines of business are doing very well, and our earnings reflect broad-based favorable results across all four of our major business sectors," said Frank V. Cahouet, Mellon chairman, president and chief executive officer. "We believe our strategy of balance is continuing to perform well for shareholders." Earnings per common share in the second quarter of 1996 reflects the 1995 and 1996 repurchases of 21 million common shares, prior to any reissuances, as well as the repurchase of warrants for 4.5 million common shares. After giving effect to net repurchases of approximately $760 million of common shares and warrants outstanding, valued at the short-term funding rate, the lower share count increased earnings per share 7 percent while ongoing business growth increased earnings per share 9 percent. Net interest revenue for the quarter was $372 million, down $13 million, or 4 percent, from $385 million in the same prior-year period. This reduction resulted primarily from the credit card and home equity loan securitizations and the repurchase of common shares and warrants. Fee revenue was $474 million, up $69 million, or 17 percent, from $405 million in the second quarter of 1995. The increase in fee revenue was attributable to higher institutional trust fees and mutual fund management revenue, higher mortgage servicing fees, increased credit card revenue and a gain on a partial sale of an equity interest. The increase in credit card revenue resulted from the credit card securitization. Operating expense before net revenue from acquired property for the second quarter of 1996 was $541 million, up $33 million or 7 percent, from $508 million in the second quarter of 1995. The increase resulted primarily from higher staff expense and higher amortization expense from purchased mortgage servicing rights, offset in part by lower FDIC deposit insurance assessment expense. -more- Mellon Reports Earnings July 16, 1996 Page 3 Credit quality expense was $24 million in the second quarter of 1996, compared with $12 million in the second quarter of 1995. This increase resulted from a $7 million decrease in net revenue from acquired property and a $5 million increase in the provision for credit losses. Net credit losses were $26 million in the second quarter of 1996, compared with $46 million in the second quarter of 1995, primarily as a result of lower credit card and commercial loan net credit losses. Nonperforming assets totaled $203 million at June 30, 1996, their lowest level since 1982, compared with $250 million at March 31, 1996, and $276 million at June 30, 1995. The Corporation's nonperforming assets ratio at June 30, 1996, was .74 percent, compared with .93 percent at March 31, 1996, and .99 percent at June 30, 1995. With balance sheet assets of approximately $43 billion and assets under management or administration of more than $1.1 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 and investment products and services to individuals and small, midsize and large businesses and institutions. Its principal mutual fund business is The Dreyfus Corporation. ### NOTE: Detailed supplemental information follows. Mellon Reports Earnings July 16, 1996 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 which are amortized as noncash charges in future years into operating expense. Had the Corporation accounted for these business combinations under the pooling of interests method, these intangibles and their related amortization would not have been recorded. The tangible operating results are shown in the table below.
(dollar amounts in millions, Three months Six months common shares in thousands, ended June 30, ended June 30, ratios annualized) 1996 1995 Change 1996 1995 Change - ------------------------------------------------------------------------------------------ Net income applicable to common stock $ 169 $ 162 $ 7 $ 338 $ 322 $ 16 After tax impact of amortization of intangibles from purchase acquisitions 18 19 (1) 37 37 -- - ------------------------------------------------------------------------------------------ Tangible net income applicable to common stock $ 187 $ 181 $ 6 $ 375 $ 359 $ 16 - ------------------------------------------------------------------------------------------ Average common equity $ 3,327 $ 3,726 $ (399) $ 3,393 $ 3,713 $ (320) Average goodwill and other intangibles 923 1,004 (81) 934 1,015 (81) - ------------------------------------------------------------------------------------------ Average tangible common equity $ 2,404 $ 2,722 $ (318) $ 2,459 $ 2,698 $ (239) Return on tangible common equity 31.3% 26.6% 470 bp 30.7% 26.8% 390 bp - ------------------------------------------------------------------------------------------ Average total assets $ 42,096 $ 39,370 $ 2,726 $ 41,472 $ 39,130 $ 2,342 Average goodwill and other intangibles 923 1,004 (81) 934 1,015 (81) - ------------------------------------------------------------------------------------------ Average tangible assets $ 41,173 $ 38,366 $ 2,807 $ 40,538 $ 38,115 $ 2,423 Return on tangible assets 1.92% 1.99% (7)bp 1.96% 2.00% (4)bp - ------------------------------------------------------------------------------------------ Average common shares and equivalents outstanding (primary) 133,229 148,055 (14,826) 134,869 148,398 (13,529) - ------------------------------------------------------------------------------------------
Mellon Reports Earnings July 16, 1996 Page 5
Net Interest Revenue - -------------------- Three months Six months ended June 30, ended June 30, (in millions) 1996 1995 Change 1996 1995 Change - ------------------------------------------------------------------------------------------- Net interest revenue (FTE) $374 $387 $ (13) $740 $779 $ (39) Net interest margin (FTE) 4.30% 4.69% (39)bp 4.32% 4.75% (43)bp Average securities $ 6,658 $ 4,681 $1,977 $ 5,999 $ 4,785 $1,214 Average loans $26,798 $27,076 $ (278) $26,928 $26,874 $ 54 Average interest-earning assets $35,024 $33,142 $1,882 $34,425 $33,124 $1,301 - -------------------------------------------------------------------------------------------
The decrease in net interest revenue and the net interest margin in the second quarter of 1996, compared with the second quarter of 1995, resulted from the effect of the November 1995 $950 million credit card securitization, the March 1996 $650 million home equity loan securitization and funding costs related to the repurchase of common stock and warrants. Excluding the effect of the loan securitizations and the equity repurchases, the net interest revenue and net interest margin for the second quarter of 1996 would have been approximately $415 million and 4.55%. The foregone net interest revenue from the loan securitizations is substantially offset by higher servicing fee revenue and lower net credit losses. Net interest revenue in the second quarter of 1996 was favorably impacted by higher loan fees and a higher level of retail demand deposits which were partially offset by the migration of retail customers from lower cost interest-bearing deposit products to higher cost products. Average loans decreased $278 million in the second quarter of 1996, compared with the prior-year period, primarily as a result of the loan securitizations and jumbo residential mortgage loan sales. Excluding the loan securitizations and sales, loans increased approximately $2.1 billion, compared with the prior year period, primarily as a result of increases in domestic wholesale, credit card, retail and mortgage warehouse loans. Mellon Reports Earnings July 16, 1996 Page 6 The decrease in net interest revenue and the net interest margin in the first six months of 1996 principally resulted from the same factors responsible for the second quarter decrease. Credit Quality Expense and Net Credit Losses - --------------------------------------------
Three months Six months ended June 30, ended June 30, (in millions) 1996 1995 Change 1996 1995 Change - ------------------------------------------------------------------------------------------ Provision for credit losses $25 $20 $ 5 $50 $40 $ 10 Net revenue from acquired property (1) (8) (7) (9) (12) (3) - ------------------------------------------------------------------------------------------ Credit quality expense $24 $12 $ 12 $41 $28 $ 13 - ------------------------------------------------------------------------------------------ Net credit losses (recoveries)(a): Domestic: Credit card $27 $41 $(14) $43 $68 $(25) Other consumer credit 3 4 (1) 8 8 - Commercial real estate (2) (5) 3 1 (5) 6 Commercial and financial (2) 8 (10) 3 5 (2) - ------------------------------------------------------------------------------------------ Total domestic 26 48 (22) 55 76 (21) International - (2) 2 (1) (4) 3 - ------------------------------------------------------------------------------------------ Total net credit losses $26 $46 $(20) $54 $72 $(18) - ------------------------------------------------------------------------------------------ Annualized net credit losses to average loans .40% .67% (27)bp .41% .54% (13)bp - ------------------------------------------------------------------------------------------
(a) Excludes net credit losses on segregated assets and assets held for accelerated resolution. Credit quality expense increased $12 million in the second quarter of 1996, compared with the second quarter of 1995, as a result of a $7 million decrease in net revenue from acquired property and a $5 million increase in the provision for credit losses. The $20 million decrease in net credit losses, compared with the second quarter of 1995, primarily resulted from a lower level of credit card and commercial loan net credit losses. The reduction in credit card net credit losses resulted from the December 1995 transfer of certain CornerStone/sm/ credit card loans, which had a history of delinquency, into an accelerated resolution portfolio. The net carrying value of the accelerated resolution portfolio at June 30, 1996, was $52 million, compared with $65 million at March 31, 1996, and $82 million at year-end 1995. The credit card Mellon Reports Earnings July 16, 1996 Page 7 securitization in the fourth quarter of 1995 also was a factor in the reduction of credit card net credit losses. Net credit losses decreased $18 million in the first half of 1996, compared with the first half of 1995, reflecting the lower level of credit card net credit losses, partially offset by higher commercial real estate net credit losses. Net credit losses of $26 million in the second quarter of 1996 were down $2 million from the first quarter of 1996 as an $11 million increase in credit card net credit losses was substantially offset by lower commercial loan net credit losses. The increase in credit card net credit losses reflected the expected return to a higher level of delinquencies in the CornerStone/sm/ portfolio following the creation of the accelerated resolution portfolio. The Corporation expects a further increase in credit card net credit losses in the third quarter of 1996, which will fully reflect the delinquency characteristics of the CornerStone/sm/ portfolio following the creation of the accelerated resolution portfolio. Mellon Reports Earnings July 16, 1996 Page 8 Noninterest Revenue - -------------------
Three months Six months ended June 30, ended June 30, (in millions) 1996 1995 Change 1996 1995 Change - ---------------------------------------------------------------------------------------- Fee revenue: Trust and investment management: Mutual fund: Management $ 84 $ 76 $ 8 $167 $147 $ 20 Administration/Custody 26 30 (4) 53 60 (7) Institutional trust 62 51 11 121 102 19 Institutional asset management 35 34 1 69 68 1 Private asset management 41 34 7 79 67 12 - ---------------------------------------------------------------------------------------- Total trust and investment management fees 248 225 23 489 444 45 Cash management and deposit transaction charges 52 48 4 101 95 6 Mortgage servicing fees 44 25 19 85 50 35 Credit card fees 30 22 8 63 41 22 Foreign currency and securities trading 20 25 (5) 41 49 (8) Other 80 60 20 198 125 73 - ---------------------------------------------------------------------------------------- Total fee revenue 474 405 69 977 804 173 Gains on sale of securities - 1 (1) 1 - 1 - ---------------------------------------------------------------------------------------- Total noninterest revenue $474 $406 $ 68 $978 $804 $174 - ----------------------------------------------------------------------------------------
Noninterest revenue increased $68 million, or 17%, in the second quarter of 1996, compared with the prior-year period. The $23 million, or 10%, increase in trust and investment management fees in the second quarter of 1996, compared with the prior-year period, primarily resulted from an $11 million, or 23%, increase in institutional trust fees, an $8 million, or 10%, increase in mutual fund management revenue and a $7 million, or 20%, increase in private asset management revenue. The increase in institutional trust revenue resulted from new business, including the 1995 acquisition of two corporate trust businesses, and a $5 million increase in securities lending revenue. The increase in securities lending revenue primarily resulted from improved margins in 1996, as well as a higher volume of securities lent in the second quarter of 1996. The higher revenue from the management of mutual funds resulted from a higher average level of Mellon Reports Earnings July 16, 1996 Page 9 mutual fund assets managed and lower fee waivers at Dreyfus. The increase in private asset management revenue primarily resulted from an increase in the market value of assets under management and new business. Average proprietary funds managed at Dreyfus in the second quarter of 1996 were $79 billion, compared with $72 billion in the second quarter of 1995. This increase primarily resulted from higher average institutional money market funds and equity funds. The increase in cash management fees and deposit transaction charges primarily resulted from higher volumes of new business in remittance processing and electronic products. The increase in mortgage servicing fees in the second quarter of 1996, compared with the prior-year period, resulted from the acquisition of mortgage servicing rights, including the third quarter 1995 acquisition of Metmor Financial, Inc. Credit card revenue increased in the second quarter of 1996, compared with the second quarter of 1995, as a result of servicing fee revenue from the securitized credit card receivables. The decrease in foreign currency and securities trading fee revenue in the second quarter of 1996, compared to the prior-year period, was attributable to lower foreign exchange fees earned as a result of lower levels of market volatility and customer activity. Other fee revenue increased $20 million in the second quarter of 1996, compared with the prior-year period. This increase primarily resulted from a gain on the partial sale of an equity interest in an institutional Mellon Reports Earnings July 16, 1996 Page 10 investment management firm and servicing fee revenue from the securitized home equity loans. The increase in fee revenue in the first six months of 1996, compared with the prior-year period, primarily resulted from the same factors responsible for the second quarter increase. Also impacting the comparison of year-to-date results were the following first quarter 1996 factors which were recorded in other fee revenue: a $28 million gain on the home equity loan securitization; a $14 million increase in gains on disposition of assets and sales of equity securities; and a $10 million increase in fees relating to the electronic filing of income tax returns. Operating Expense - -----------------
Three months Six months ended June 30, ended June 30, (dollar amounts in millions) 1996 1995 Change 1996 1995 Change - ------------------------------------------------------------------------------------- Staff expense $255 $229 $ 26 $532 $469 $ 63 Net occupancy expense 50 48 2 106 99 7 Professional, legal and other purchased services 50 50 - 97 88 9 Equipment expense 36 34 2 71 68 3 Amortization of mortgage servicing rights and purchased credit card relationships 27 13 14 55 26 29 Amortization of goodwill and other intangible assets 24 24 - 49 48 1 FDIC assessment and regulatory examination fees 2 15 (13) 3 30 (27) Other expense 97 95 2 196 179 17 - ------------------------------------------------------------------------------------- Operating expense before net revenue from acquired property 541 508 33 1,109 1,007 102 - ------------------------------------------------------------------------------------- Net revenue from acquired property (1) (8) (7) (9) (12) (3) - ------------------------------------------------------------------------------------- Total operating expense $540 $500 $ 40 $1,100 $ 995 $105 - ------------------------------------------------------------------------------------- Average full-time equivalent staff 24,600 24,100 500 24,600 24,200 400 - ------------------------------------------------------------------------------------- Efficiency ratio (a) 64% 64% - 64% 63% 1 Efficiency ratio excluding amortization of goodwill and other intangible assets 61 61 - 62 60 2 - -------------------------------------------------------------------------------------
(a) Operating expense before net revenue from acquired property as a percentage of revenue, computed on a taxable equivalent basis, excluding gains (losses) on the sale of securities. Operating expense before net revenue from acquired property increased $33 million, or 7%, in the second quarter of 1996, compared with the prior- Mellon Reports Earnings July 16, 1996 Page 11 year period. This increase resulted primarily from increases in staff expense and the amortization of mortgage servicing rights, partially offset by lower FDIC deposit insurance assessment expense. The increase in staff expense resulted primarily from a $16 million increase in incentive and commission expense, compared with a relatively low level in the second quarter of 1995, and a $9 million increase in base salaries, resulting in part from acquisitions. The increase in the amortization of mortgage servicing rights reflects the increase in the Corporation's mortgage servicing portfolio from June 30, 1995. Partially offsetting these increases was a decrease in the FDIC deposit insurance assessment which resulted from the suspension of this assessment in 1996 for healthy institutions. The $102 million increase in operating expense before net revenue from acquired property in the first half of 1996, compared with the first half of 1995, primarily resulted from the same factors responsible for the second quarter increase, as well as the following charges recorded in the first quarter of 1996: an $18 million charge for the Corporation's early retirement enhancement program which was offered during the first quarter of 1996; $4 million of severance expense; and $6 million of expense related to the further reconfiguration of the retail delivery system. Excluding the expense from the early retirement enhancement program, severance and the reconfiguration of the retail delivery system, operating expense before net revenue from acquired property totaled $540 million in the first quarter of 1996, compared with $541 million in the second quarter of 1996. Mellon Reports Earnings July 16, 1996 Page 12 Nonperforming Assets(a) - -----------------------
June 30, March 31, Dec. 31, June 30, (in millions) 1996 1996 1995 1995 - ------------------------------------------------------------------------------------ Domestic nonperforming loans: Consumer mortgage $ 58 $ 53 $ 61 $ 59 Commercial real estate 40 53 39 42 Other domestic 32 71 67 98 - ------------------------------------------------------------------------------------ Total nonperforming loans 130 177 167 199 Acquired property: Real estate acquired 84 86 87 98 Reserve for real estate acquired (11) (13) (18) (21) - ------------------------------------------------------------------------------------ Total acquired property, net of reserve 73 73 69 77 - ------------------------------------------------------------------------------------ Total nonperforming assets $ 203 $ 250 $ 236 $ 276 - ------------------------------------------------------------------------------------ Nonperforming loans as a percentage of total loans .47% .66% .60% .72% Nonperforming assets as a percentage of total loans and net acquired property .74% .93% .85% .99% - ------------------------------------------------------------------------------------
(a) Excludes segregated assets. Nonperforming assets decreased $47 million, or 19%, from March 31, 1996, and are at their lowest level since 1982. This decrease resulted from lower nonperforming loans due to the partial sale and repayment of commercial loans to an engineering/construction company as well as credit losses, repayments and returns to accrual status. Nonperforming assets decreased $73 million, or 27%, compared with June 30, 1995, primarily as a result of the same factors responsible for the second quarter decrease. The nonperforming assets ratio at June 30, 1996, was .74%, compared with .93% at March 31, 1996, and .99% at June 30, 1995. Reserve for Credit Losses - -------------------------
June 30, March 31, Dec. 31, June 30, (in millions) 1996 1996 1995 1995 - -------------------------------------------------------------------------------------------- Reserve for credit losses (a) $ 467 $ 468 $ 471 $ 583 Reserve as a percentage of total loans 1.71% 1.74% 1.70% 2.10% - --------------------------------------------------------------------------------------------
(a) Excludes reserve for segregated assets. The $116 million decrease in the reserve for credit losses from June 30, 1995, primarily resulted from credit losses taken on the CornerStone/sm/ credit card loans during 1995, including the loans that were transferred to the accelerated resolution portfolio in the fourth quarter. Mellon Reports Earnings July 16, 1996 Page 13 Selected Capital Data - ---------------------
(in millions, except June 30, March 31, Dec. 31, June 30, per share amounts) 1996 1996 1995 1995 - ----------------------------------------------------------------------------------- Common shareholders' equity $ 3,332 $ 3,384 $ 3,590 $ 3,643 Common shareholders' equity to assets ratio 7.79% 8.14% 8.83% 9.10% Tangible common shareholders' equity $ 2,426 $ 2,450 $ 2,632 $ 2,646 Tangible common shareholders' equity to assets ratio (a) 5.79% 6.03% 6.63% 6.78% Total shareholders' equity $ 3,767 $ 3,819 $ 4,025 $ 4,078 Total shareholders' equity to assets ratio 8.81% 9.19% 9.90% 10.19% Tier I capital ratio 7.50 (b) 7.69 8.14 8.98 Total (Tier I and Tier II) capital ratio 11.90 (b) 12.20 11.29 12.31 Leverage capital ratio 7.20 (b) 7.52 7.80 8.32 Book value per common share $ 25.61 $ 25.55 $ 26.17 $ 25.59 Closing common stock price 57.00 55.25 53.75 41.625 Market capitalization 7,414 7,317 7,374 5,925 Common shares outstanding (000) 130,069 132,443 137,187 142,353
(a) Common shareholders' equity less goodwill and other intangibles divided by total assets less goodwill and other intangibles. (b) Estimated. The decrease in the Corporation's common and total shareholders' equity at June 30, 1996, compared with March 31, 1996, and June 30, 1995, resulted from repurchases of common stock offset in part by earnings retention. In addition, asset growth resulted in a decrease in the Corporation's capital ratios compared with the prior-year periods. In May 1996, the board of directors of the Corporation authorized the repurchase of up to 5 million shares of common stock. This repurchase program is in addition to the 3.5 million share repurchase program announced in the first quarter of 1996. At June 30, 1996, the Corporation had completed the 3.5 million share repurchase program and had repurchased .2 million shares under the 5 million share repurchase program. Since the beginning of 1995, the Corporation has repurchased 21 million common shares, prior to any Mellon Reports Earnings July 16, 1996 Page 14 reissuances, as well as warrants for 4.5 million shares of common stock. At June 30, 1996, common stock and stock equivalents totaled 132.0 million shares. On April 16, 1996, the Corporation announced a 9% increase in the quarterly common dividend to $.60 per common share. The increased dividend was paid on May 15, 1996, to shareholders of record on April 30, 1996. This is the fifth quarterly common dividend increase that the Corporation has announced since the beginning of 1994, resulting in a total common dividend per share increase of 137%. SUMMARY DATA Mellon Bank Corporation
(dollar amounts in millions, Three months ended Six months ended except per share amounts; June 30, June 30, common shares in thousands) ------------------ ---------------- 1996 1995 1996 1995 ---- ---- ---- ---- Selected key data - ----------------- Net income per common share (primary) $ 1.26 $ 1.09 $ 2.50 $ 2.17 Net income per common share (fully diluted) $ 1.26 $ 1.09 $ 2.50 $ 2.16 Net income applicable to common stock $ 169 $ 162 $ 338 $ 322 Tangible net income applicable to common stock (a) $ 187 $ 181 $ 375 $ 359 Return on common shareholders' equity (b) 20.4% 17.5% 20.0% 17.5% Return on tangible common shareholders' equity (a)(b) 31.3% 26.6% 30.7% 26.8% Return on assets (b) 1.70% 1.75% 1.73% 1.76% Return on tangible assets (a)(b) 1.92% 1.99% 1.96% 2.00% Common equity to assets 7.79% 9.10% 7.79% 9.10% Tangible common equity to assets 5.79% 6.78% 5.79% 6.78% Average balances for the period - ------------------------------- Money market investments $ 1,387 $ 1,165 $ 1,338 $ 1,197 Trading account securities 181 220 160 268 Securities 6,658 4,681 5,999 4,785 Loans 26,798 27,076 26,928 26,874 Total interest-earning assets 35,024 33,142 34,425 33,124 Total assets 42,096 39,370 41,472 39,130 Total tangible assets 41,173 38,366 40,538 38,115 Deposits 30,949 27,100 30,112 27,208 Total interest-bearing liabilities 28,342 27,236 28,164 27,144 Common shareholders' equity 3,327 3,726 3,393 3,713 Tangible common shareholders' equity 2,404 2,722 2,459 2,698 Total shareholders' equity 3,762 4,161 3,828 4,148 Computation of net income per common share (primary) - ------------------------------------ Net income applicable to common stock $ 169 $ 162 $ 338 $ 322 ======== ======== ======== ======== Average common shares outstanding 131,350 145,465 133,010 146,185 Other common stock equivalents, net of shares assumed repurchased: Stock options 1,879 1,929 1,859 1,672 Warrants - 661 - 541 -------- -------- -------- -------- Total stock and stock equivalents (c) 133,229 148,055 134,869 148,398 ======== ======== ======== ======== Net income per common share $ 1.26 $ 1.09 $ 2.50 $ 2.17 ======== ======== ======== ========
- ---------------------- (a) Tangible net income applicable to common stock, return on tangible common shareholders' equity and return on tangible assets, exclude 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. (b) Annualized. All amounts are based on unrounded numbers. (c) Fully diluted stock and stock equivalents were 133,413 and 135,118 for the second quarter and first half of 1996, respectively, compared with 148,291 and 149,288 for the second quarter and first half of 1995, respectively. CONDENSED CONSOLIDATED INCOME STATEMENT Mellon Bank Corporation
Three months ended Six months ended (in millions, except per June 30, June 30, share amounts) -------------------- ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Interest revenue - ---------------- Interest and fees on loans (loan fees of $24, $19, $48 and $35) $ 550 $ 609 $1,116 $1,192 Interest-bearing deposits with banks 10 8 19 15 Federal funds sold and securities under resale agreements 7 8 13 19 Other money market investments 1 1 3 1 Trading account securities 2 3 4 9 Securities 107 77 195 155 ----- ----- ------ ------ Total interest revenue 677 706 1,350 1,391 Interest expense - ---------------- Interest on deposits 216 220 434 425 Federal funds purchased and securities under repurchase agreements 26 33 53 62 Other short-term borrowings 29 39 66 73 Notes and debentures 34 29 62 57 ----- ----- ------ ------ Total interest expense 305 321 615 617 ----- ----- ------ ------ Net interest revenue 372 385 735 774 Provision for credit losses 25 20 50 40 ----- ----- ------ ------ Net interest revenue after provision for credit losses 347 365 685 734 Noninterest revenue - ------------------- Trust and investment management fees 248 225 489 444 Cash management and deposit transaction charges 52 48 101 95 Mortgage servicing fees 44 25 85 50 Credit card fees 30 22 63 41 Foreign currency and securities trading 20 25 41 49 Other 80 60 198 125 ----- ----- ------ ------ Total fee revenue 474 405 977 804 Gains on sale of securities - 1 1 - ----- ----- ------ ------ Total noninterest revenue 474 406 978 804 Operating expense - ----------------- Staff expense 255 229 532 469 Net occupancy expense 50 48 106 99 Professional, legal and other purchased services 50 50 97 88 Equipment expense 36 34 71 68 Amortization of mortgage servicing rights and purchased credit card relationships 27 13 55 26 Amortization of goodwill and other intangible assets 24 24 49 48 Other expense 99 110 199 209 Net revenue from acquired property (1) (8) (9) (12) ----- ----- ------ ------ Total operating expense 540 500 1,100 995 ----- ----- ------ ------ Income before income taxes 281 271 563 543 Provision for income taxes 102 99 205 201 ----- ----- ------ ------ Net income 179 172 358 342 Dividends on preferred stock 10 10 20 20 ----- ----- ------ ------ Net income applicable to common stock $ 169 $ 162 $ 338 $ 322 ===== ===== ====== ====== Primary net income per common share $1.26 $1.09 $2.50 $2.17 ===== ===== ====== ====== Fully diluted net income per common share $1.26 $1.09 $2.50 $2.16 ===== ===== ====== ======
CONDENSED CONSOLIDATED BALANCE SHEET Mellon Bank Corporation
(dollar amounts in millions) June 30, Dec. 31, June 30, 1996 1995 1995 --------- --------- --------- Assets - ------- Cash and due from banks $ 2,765 $ 2,342 $ 2,218 Money market investments 1,258 860 833 Trading account securities 112 62 267 Securities available for sale 4,450 2,913 1,953 Investment securities(approximate fair value of $2,481, $2,554 and $3,136) 2,515 2,519 3,133 Loans, net of unearned discount of $59, $44 and $58 27,356 27,690 27,765 Reserve for credit losses (467) (471) (583) Premises and equipment 556 556 554 Acquired property, net of reserves of $11, $18 and $21 73 69 77 Goodwill and other intangibles 906 958 997 Mortgage servicing rights and purchased credit card relationships 734 682 432 Other assets 2,511 2,466 2,370 ------- ------- ------- Total assets $42,769 $40,646 $40,016 ======= ======= ======= Liabilities - ------------ Deposits in domestic offices $27,258 $24,870 $23,559 Deposits in foreign offices 4,446 4,391 3,248 Short-term borrowings 3,761 4,317 5,648 Other liabilities 1,566 1,600 1,615 Notes and debentures (with original maturities over one year) 1,971 1,443 1,868 ------- ------- ------- Total liabilities 39,002 36,621 35,938 Shareholders' equity - --------------------- Preferred stock 435 435 435 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 1,855 1,850 1,843 Retained earnings 2,297 2,118 1,950 Net unrealized gain (loss) on assets available for sale, net of tax (30) 18 (21) Treasury stock of 17,096,369; 9,978,407 and 4,812,259 shares at cost (864) (470) (203) ------- ------- ------- Total common shareholders' equity 3,332 3,590 3,643 ------- ------- ------- Total shareholders' equity 3,767 4,025 4,078 ------- ------- ------- Total liabilities and shareholders' equity $42,769 $40,646 $40,016 ======= ======= =======
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