Mellon Reports Record First Quarter 2001 Results; Increases Common Stock Dividend by 9 Percent

Apr 17, 2001, 01:00 ET from Mellon Financial Corporation

    PITTSBURGH, April 17 /PRNewswire/ -- Mellon Financial Corporation
 (NYSE:   MEL) today announced record first quarter 2001 diluted earnings per
 share of 54 cents, an increase of 8 percent compared with 50 cents per share
 reported in the first quarter of 2000.  The Corporation also announced a
 record return on equity of 26.9 percent and a record return on assets of
 2.22 percent.  These results were achieved despite the impact of the
 previously disclosed May 2000 expiration of a long-term mutual fund
 administration contract with a third party.  Core business sectors'
 contribution to earnings per share, which excludes the revenues and related
 expenses from this contract, and other business exits/divestitures activity
 from both periods, increased 20 percent quarter over quarter.
 
     Financial Highlights
     (dollar amounts in millions,                  Quarter ended
      except per share               March 31,        Dec. 31,      March 31,
      amounts; returns are annualized)  2001            2000           2000
 
     Reported results (a):
     Diluted earnings per share         $.54            $.52          $.50
     Net income                         $264            $255          $253
     Return on equity                  26.9%           25.2%         26.0%
     Return on assets                  2.22%           2.17%         2.15%
 
 
     Results excluding
      goodwill amortization (b):
     Diluted earnings per share         $.59            $.56          $.55
     Net income                         $291            $280          $279
     Return on equity                  29.6%           27.7%         28.7%
     Return on assets                  2.45%           2.39%         2.37%
 
 
     Fee revenue as a percentage
      of net interest and
      fee revenue (FTE)                  73%             71%           71%
     Trust and investment fee revenue
      as a percentage of net interest
      and fee revenue (FTE)              52%             51%           51%
     Efficiency ratio excluding
      amortization of goodwill           61%             60%           61%
 
     (a)   Computed in accordance with generally accepted accounting
           principles.
     (b)   Results exclude the after-tax impact of the amortization of goodwill
           from purchase acquisitions.  See page 17 for the definition of these
           amounts and ratios.
 
     "As our first-quarter performance indicates, we've established a clear
 connection between delivering on the Mellon brand promise of meeting or
 exceeding our customers expectations and successfully implementing a business
 strategy based on growing the fee-based segments of our business, lowering our
 risk profile and re-engineering our businesses to achieve strong customer
 relationships and substantial levels of return.  We're confident that our
 strategy will continue to serve us well, even as we respond to weakened
 economic conditions," said Martin G. McGuinn, Mellon chairman and chief
 executive officer.
     The Corporation increased its quarterly common stock dividend by 9 percent
 to 24 cents per share.  This cash dividend is payable on May 15, 2001, to
 shareholders of record at the close of business on April 30, 2001.  This is
 the 11th quarterly common dividend increase that the Corporation has announced
 since the beginning of 1993, resulting in a total common dividend per share
 increase of 311 percent.
 
     First Quarter 2001 Financial Highlights:
 
     --    Return on equity increased to 26.9 percent from 26.0 percent in the
           first quarter of 2000 and 25.2 percent in the fourth quarter of
           2000.
 
     --    Return on assets increased to 2.22 percent from 2.15 percent in the
           first quarter of 2000 and 2.17 percent in the fourth quarter of
           2000.
 
     --    Fee revenue totaled 73 percent of net interest and fee revenue in
           the first quarter of 2001, compared with 71 percent in both the
           first and fourth quarters of 2000.  Trust and investment fee revenue
           totaled 52 percent of net interest and fee revenue in the first
           quarter of 2001, compared with 51 percent in both the first and
           fourth quarters of 2000.
 
     --    Fee revenue increased 4 percent compared to the prior-year period
           and 1 percent compared to the fourth quarter of 2000, excluding the
           impact of acquisitions as well as the previously disclosed May 2000
           expiration of the long-term mutual fund administration contract with
           a third party.  Fees from that contract totaled $24 million pre-tax,
           or approximately 3 cents per common share, in the first quarter of
           2000.
 
     --    Assets under management totaled $520 billion, with assets under
           management, administration or custody totaling approximately
           $2.8 trillion at March 31, 2001.  Assets managed by subsidiaries and
           affiliates outside the United States totaled $66 billion at
           March 31, 2001.
 
     --    The net interest margin was 3.52 percent in the first quarter of
           2001, down from 3.54 percent in the first quarter of 2000, and 3.62
           percent in the fourth quarter of 2000, primarily due to higher
           funding costs related to the repurchase of common stock, as well as
           a lower yielding and more liquid asset mix.
 
     --    Operating expense decreased 2 percent in the first quarter of 2001
           compared with the first quarter of 2000, and was substantially
           unchanged compared with the fourth quarter of 2000, excluding the
           impact of acquisitions.
 
     --    The Corporation repurchased approximately 11.4 million common shares
           during the quarter, leaving 7.2 million shares available for
           repurchase under the current 25 million share repurchase program.
           Since Jan. 1, 1999, the Corporation's common shares outstanding have
           been reduced by 46.6 million shares, or 8.9 percent, net of
           reissuances, due to stock repurchases totaling approximately
           $2.3 billion, at an average share price of $37.16 per share.
 
     Mellon Financial Corporation is a global financial services company.
 Headquartered in Pittsburgh, Mellon is one of the world's leading providers of
 asset management, trust, custody and benefits consulting services and offers a
 comprehensive array of banking services for individuals and corporations.
 Mellon has approximately $2.8 trillion in assets under management,
 administration or custody, including $520 billion under management.  Its asset
 management companies include The Dreyfus Corporation and Newton Investment
 Management Limited (U.K.).
     Pre-recorded comments from Steven G. Elliott, senior vice chairman and
 chief financial officer, regarding first quarter 2001 earnings are available
 by calling 412-236-5385 beginning at approximately 9 a.m. EDT on Tuesday,
 April 17, 2001, through 5 p.m. EDT on Tuesday, April 24, 2001.  These comments
 may include forward-looking or other material information.  Mr. Elliott's
 pre-recorded commentary, plus a related series of graphics, also will be
 available at our Web site (www.mellon.com) during the same period.  Press
 releases and other information about Mellon Financial Corporation and its
 products and services also are available at our Web site.  For press releases
 by fax, call 1 (800) 758-5804, identification number 552187.
 
     Note:  Detailed supplemental financial information follows.
 
 
     Business Sectors
 
     Summary                          % of                   % of Core
                                  Core Sector              Sector Income
                                    Revenue                Before Taxes
                           1Q01     4Q00    1Q00       1Q01    4Q00    1Q00
     Growth Sectors         70%      71%     70%       61%      62%      68%
     Return Sectors         30%      29%     30%       39%      38%      32%
       Total Core
        Business Sectors   100%     100%    100%      100%     100%     100%
 
 
     Contribution To Earnings Per Share
      From Total Core Business Sectors
     (in millions, except
      per share amounts)   1Q01     1Q00    Growth     1Q01    4Q00    Growth
                                                                        (a)
 
     Net Income             257     $220     17%      $257     $244       5%
     Contribution
      to EPS               $.53     $.44     20%      $.53     $.50       6%
     (a) Unannualized.
 
 
     Contribution To Earnings
      Per Share From Total
      Core Business Sectors
      - Five-Quarter Trend
     (in millions, except
      per share amounts)            1Q01     4Q00    3Q00       2Q00   1Q00
     Net Income                     $257    $244     $241      $232     $220
     Contribution to EPS            $.53    $.50     $.48      $.47     $.44
 
     The Corporation manages its business sectors utilizing growth and return
 strategies.  The sectors managed for growth include businesses which are
 predominantly fee-based in nature.  The Corporation invests in these busi-
 nesses for future growth.  The sectors managed for return include the more
 slowly growing, traditional banking businesses.  These sectors are managed to
 drive profitability and higher returns on equity, primarily focusing on
 improving productivity through re-engineering and effective capital manage-
 ment.
 
     (dollar amounts
      in millions)            First Quarter 2001        First Quarter 2000
                                    Income  Return on        Income Return on
                            Total   Before   Common   Total  Before   Common
     Sector                Revenue  Taxes    Equity  Revenue  Taxes   Equity
 
     Managed for Growth:
     Wealth Management       $117    $52      58%     $104     $43      50%
     Global Investment
      Management              271     86      34       302     114      50
     Global Investment
      Services                343     85      35       260      62      32
     Global Cash Management    98     28      43        85      25      47
       Total Growth Sectors   829    251      39       751     244      43
     Managed for Return:
     Regional Banking         215    103      41       190      68      25
     Relationship Lending     104     51      13       100      40       9
     Businesses Under
      Strategic Review         28      9      12        28       7       9
       Total Return
        Sectors               347    163      23       318     115      15
 
     Total Core Business
      Sectors              $1,176   $414     30%    $1,069    $359      26%
 
     Note:  During the first quarter of 2001, the Corporation made several
 reclassifications to its Core Business Sectors.  The Corporation reclassified
 its cash management business line from the former Large Corporate Banking
 sector to a new growth sector titled Global Cash Management.  The presentation
 of the Specialized Commercial Banking and Large Corporate Banking sectors was
 discontinued, with the various lines of business reallocated as follows.  The
 results of Small Business Banking were reclassified from the former Special-
 ized Commercial Banking sector to the newly named Regional Banking sector,
 which also includes the lines of business from the former Regional Consumer
 Banking sector.  As previously disclosed, the Corporation is conducting a
 strategic review of the Mellon leasing businesses that serve mid-to-large
 corporations and vendors of small ticket equipment, and Mellon Business
 Credit, which provides asset-based lending products.  The results of these
 businesses were removed from Specialized Commercial Banking and displayed in a
 newly formed sector titled Businesses Under Strategic Review.  Finally, the
 Relationship Lending sector was formed from the remaining portion of the
 former Specialized Commercial Banking sector, which included middle market
 lending, commercial real estate lending and insurance premium financing, and
 the remaining portion of the former Large Corporate Banking Sector.
 
     (dollar amounts
      in millions)            First Quarter 2001       Fourth Quarter 2000
                                    Income  Return on        Income Return on
                            Total   Before   Common   Total  Before   Common
     Sector                Revenue  Taxes    Equity  Revenue  Taxes   Equity
 
     Managed for Growth:
     Wealth Management       $117    $52    58%      $121     $59     61%
     Global Investment
      Management              271     86     34       302     101      41
     Global Investment
      Services                343     85     35       281      60      27
     Global Cash
      Management               98     28     43        97      26      44
       Total Growth Sectors   829    251     39       801     246      40
 
     Managed for Return:
     Regional Banking         215    103     41       197      86      31
     Relationship Lending     104     51     13       101      47      12
     Businesses Under
      Strategic Review         28      9     12        33      16      21
       Total Return
        Sectors               347    163     23       331     149      20
 
     Total Core Business
      Sectors              $1,176   $414    30%    $1,132    $395     29%
 
 
     Sectors Managed for Growth
 
     1Q 2001 vs. 1Q 2000       Total Revenue Operating Expense  Income Before
                                   Growth          Growth       Taxes Growth
     Wealth Management              12%               6%             21%
     Global Investment Management   (10)%            (2)%           (25)%
     Global Investment Services     32%              30%             38%
     Global Cash Management         16%              18%             12%
 
       Total Growth Sectors         10%              14%              3%
 
 
     1Q 2001 vs. 4Q 2000 (a)   Total Revenue Operating Expense Income Before
                                   Growth          Growth       Taxes Growth
     Wealth Management                (3)%            5%            (11)%
     Global Investment Management    (10)%           (7)%           (16)%
     Global Investment Services      22%             17%             41%
     Global Cash Management           2%             (1)%             8%
 
       Total Growth Sectors           4%              4%              2%
 
     (a)  Ratios are annualized.
 
     The Corporation's growth sectors, with the exception of the Global
 Investment Management sector, showed good growth in revenue and income before
 taxes for the first quarter of 2001 compared with the first quarter of 2000.
 The results of the Global Investment Management sector were negatively
 impacted by lower brokerage services and asset management revenue reflecting
 the impact of the unfavorable equity market conditions in the first quarter of
 2001.  The results of the Global Investment Services sector were favorably
 impacted by the December 2000 acquisition of the remaining 50% interest in
 Mellon Investor Services.  However, excluding the impact of the acquisition,
 revenue for this sector increased 11% and income before taxes increased 23%,
 reflecting higher institutional trust and custody, and higher benefits
 consulting revenue.  Revenue for the growth sectors grew 10% in the first
 quarter of 2001 compared with the first quarter of 2000, while income before
 taxes grew 3% over the same period.  The pretax operating margin, excluding
 the amortization of intangibles, for the growth sectors was 32% in the first
 quarter of 2001, compared with 34% in the first quarter of 2000.
     Excluding the full quarter impact of the December 2000 acquisition of
 Mellon Investor Services, revenue, expense and income before taxes for the
 growth sectors were essentially flat in the first quarter of 2001 compared
 with the fourth quarter of 2000.  Results for the Wealth Management and Global
 Investment Management sectors reflected the impact of the equity market
 conditions in the first quarter of 2001.  These results were offset by revenue
 growth and operating expense management in the Global Investment Services and
 Global Cash Management sectors.
 
     Sectors Managed for Return
 
                    Pretax Operating     Return on           Average
                       Margin (a)      Common Equity    Allocated Equity
     (dollar amounts
      in millions)   1Q01  4Q00 1Q00  1Q01 4Q00  1Q00  1Q01   4Q00     1Q00
     Regional Banking 52%  47%  42%   41%   31%  25%   $709    $742    $747
     Relationship
      Lending         53%  50%  44%   13%   12%   9% $1,318  $1,309  $1,431
     Businesses
      Under Strategic
      Review          46%  59%  38%   12%   21%   9%   $230    $220    $219
       Total Return
        Sectors       51%  50%  42%   23%   20%  15% $2,257  $2,271  $2,397
 
     (a)  Excludes amortization of intangibles.
 
     The results in the first quarter of 2001 for the return sectors continue
 to demonstrate the Corporation's strategy of driving profitability and higher
 returns on equity, primarily focusing on improving productivity through re-
 engineering and effective capital management.  The Corporation aggressively
 manages capital levels in the return sectors.  Average allocated equity
 decreased $14 million in the first quarter of 2001, compared with the fourth
 quarter of 2000, and decreased $140 million compared with the first quarter of
 2000.  The return on common equity increased to 23%, up from 20% in the fourth
 quarter of 2000, and up from 15% in the first quarter of 2000.  The improved
 results in the return sectors in the first quarter of 2001 compared with the
 prior year quarters primarily reflected higher loan securitization gains,
 lower asset quality expense and effective operating expense management.  The
 results for Businesses Under Strategic Review reflected a higher level of
 lease residual gains in the fourth quarter of 2000 as compared with the first
 quarters of both 2001 and 2000.  The pretax operating margin in the first
 quarter of 2001 was 51%, up from 50% in the fourth quarter of 2000, and up
 from 42% in the prior year period.  Credit losses in the return sectors
 consumed $14 million, or 4%, of revenue in the first quarter of 2001 compared
 with $19 million, or 6% in the fourth quarter of 2000, and $22 million, or 7%,
 in the first quarter of 2000.
 
 
     Noninterest Revenue
 
                                                   Quarter ended
      (dollar amounts in millions,          March 31,   Dec. 31, March 31,
      unless otherwise noted)                 2001        2000     2000
     Trust and investment fee revenue:
       Investment management fee revenue:
         Managed mutual funds                 $174        $172     $166
         Institutional                          80          95       82
         Private clients                        80          81       76
           Total investment management
            fee revenue                        334         348      324
       Administration and custody fee revenue:
         Institutional trust                   183         134      121
         Mutual funds                           16          20       48
         Private clients                         6           8        4
           Total administration and
            custody fee revenue                205         162      173
       Benefits consulting                      66          65       56
       Brokerage fees                           16          16       25
           Total trust and
            investment fee revenue             621         591      578
     Cash management and deposit
      transaction charges                       83          86       74
     Foreign currency and
      securities trading revenue                55          43       51
     Financing-related revenue                  67          58       39
     Equity investment revenue                   9           5       36
     Other                                      24          23       20
           Total fee and other revenue         859         806      798
     Gains on sales of securities                -           -        -
           Total noninterest revenue          $859        $806     $798
 
     Fee revenue as a percentage of net
      interest and fee revenue (FTE)           73%         71%      71%
     Trust and investment fee revenue as
      a percentage of net interest
      and fee revenue (FTE)                    52%         51%      51%
 
     Assets under management at period
      end (in billions)                       $520        $530     $511
     Assets under administration or
      custody at period end (in billions)   $2,251      $2,267   $2,261
 
     S&P 500 Index                           1,160       1,320    1,499
 
     Note:  For analytical purposes, the term "fee revenue," as utilized
 throughout this earnings release, is defined as total noninterest revenue less
 gains on the sales of securities.
 
 
     Fee revenue
     Fee revenue of $859 million in the first quarter of 2001 was impacted by
 the previously disclosed May 2000 expiration of a long-term mutual fund
 administration contract with a third party, and the December 2000 acquisition
 of the remaining 50% interest in Mellon Investor Services.  Excluding these
 factors, fee revenue increased 4% in the first quarter of 2001, compared with
 the first quarter of 2000, primarily due to higher trust and investment fee
 revenue, and cash management and deposit transaction charges.
 
 
                                             1st Qtr. 2001    1st Qtr. 2001
                                                  over             over
     Fee revenue growth (a)                  1st Qtr. 2000    4th Qtr. 2000
 
     Trust and investment fee revenue growth       2%           (2)% (b)
     Total fee revenue growth                      4%            1%  (b)
 
     (a) Excludes the effect of acquisitions and the expiration of the long-
 term mutual fund administration contract with a third party.
     (b) Unannualized.
 
     Excluding the full-quarter effect of the acquisition of the remaining 50%
 interest in Mellon Investor Services, fee revenue increased 1% unannualized in
 the first quarter of 2001 compared with the fourth quarter of 2000, primarily
 resulting from higher foreign currency and securities trading revenue, and
 higher financing-related and equity investment revenue.
 
     Investment management fee revenue
     Investment management fee revenue increased $10 million, or 3%, in the
 first quarter of 2001, compared with the first quarter of 2000, and decreased
 $14 million, or 4% unannualized, in the first quarter of 2001, compared with
 the fourth quarter of 2000.  The increase in the first quarter of 2001
 compared to the first quarter of 2000 primarily resulted from an $8 million,
 or 5%, increase in mutual fund management revenue; and a $4 million, or 5%,
 increase in private client asset management revenue.  The decrease in institu-
 tional asset management revenue compared with the fourth quarter of 2000
 reflects a lower level of performance fees, which are primarily recorded in
 the fourth quarter of each year.  These fees are earned by investment managers
 as the investment performance of their products exceed various benchmarks.
     Mutual fund management fees are based upon the average net assets of each
 fund.  The average assets of proprietary mutual funds managed in the first
 quarter of 2001 were $150 billion, up $13 billion, or 9%, from $137 billion in
 the first quarter of 2000, and up $5 billion, or 3% unannualized, from
 $145 billion in the fourth quarter of 2000.  The increase compared with the
 first quarter of 2000 resulted primarily from increases in average net assets
 of institutional taxable money market funds, offset in part by lower average
 net assets of equity funds.  Proprietary equity funds averaged $51 billion in
 the first quarter of 2001, a decrease of $4 billion, or 7%, compared with
 $55 billion in the first quarter of 2000, and a decrease of $5 billion, or 8%,
 compared with $56 billion in the fourth quarter of 2000.
     As shown in the table on the following page, the market value of assets
 under management was $520 billion at March 31, 2001, a $10 billion, or 2%
 unannualized, decrease from $530 billion at Dec. 31, 2000, and a $9 billion,
 or 2%, increase from $511 billion at March 31, 2000.  The decrease at
 March 31, 2001, compared to Dec. 31, 2000, was primarily due to a decline in
 the equity markets in the first quarter of 2001 partially offset by net new
 business.  The equity markets at March 31, 2001, as measured by the Standard
 and Poor's 500 Index, decreased 12.1% compared with Dec. 31, 2000, and
 decreased 22.6% compared with March 31, 2000, while a key bond market bench-
 mark, the Lehman Brothers Long-Term Government Bond Index, increased 1.7% at
 March 31, 2001, compared to Dec. 31, 2000, and increased 13.2% compared to
 March 31, 2000.
 
 
     Market value of assets under management at period end
                           March 31,  Dec. 31,  Sept. 30,  June 30,  March 31,
     (in billions)           2001       2000       2000      2000      2000
     Mutual funds managed:
       Equity funds           $47        $54       $60       $59       $59
       Money market funds      81         68        64        58        60
       Bond and fixed-income
        funds                  22         21        21        21        21
       Nonproprietary          23         31        32        31        31
         Total mutual funds
          managed             173        174       177       169       171
     Institutional (a)        298        302       309       298       286
     Private clients           49         54        54        54        54
         Total market
          value of assets
          under
          management         $520       $530      $540      $521      $511
 
     S&P 500 Index          1,160      1,320     1,437     1,455     1,499
 
     (a) Includes assets managed at Pareto Partners of $28 billion at March 31,
 2001, $29 billion at Dec. 31, 2000; $29 billion at Sept. 30, 2000; $30 billion
 at June 30, 2000; and $32 billion at March 31, 2000.  The Corporation has a
 30% equity interest in Pareto Partners.
 
     Administration and custody fee revenue
     Administration and custody fee revenue increased $32 million, or 19%, in
 the first quarter of 2001 compared with the first quarter of 2000 and in-
 creased $43 million, or 27% unannualized, in the first quarter of 2001,
 compared with the fourth quarter of 2000.  The increase compared with the
 first quarter of 2000 was impacted by the December 2000 acquisition of the
 remaining 50% interest in Mellon Investor Services and by the May 2000
 expiration of the long-term mutual fund administration contract with a third
 party.  Excluding these factors, administration and custody fee revenue
 increased 3% compared to the first quarter of 2000.  The results of Mellon
 Investor Services had been accounted for under the equity method of accounting
 prior to the acquisition, with the net results recorded as institutional trust
 and custody revenue.  Following the acquisition, the gross fee revenue from
 this business is primarily included in institutional trust and custody
 revenue.  Mellon Investor Services generated approximately $59 million of
 gross fee revenue in the first quarter of 2001.  Fees from the long-term
 mutual fund administration contract totaled $24 million pre-tax, or approxi-
 mately $.03 per common share, in the first quarter of 2000.
     Administration and custody fee revenue increased 3% in the first quarter
 of 2001 compared to the fourth quarter of 2000, excluding the full quarter
 impact of the December 2000 acquisition of Mellon Investor Services.  This
 increase was primarily due to higher securities lending revenue.
     The market value of assets under administration or custody, shown in the
 table on the following page, was $2,251 billion at March 31, 2001, a decrease
 of $16 billion, or 1% unannualized, compared with $2,267 billion at Dec. 31,
 2000, and a decrease of $10 billion, or less than 1%, compared with
 $2,261 billion at March 31, 2000, reflecting the decrease in the Standard and
 Poor's 500 Index.
 
 
     Market value of assets under administration or custody at period end
                           March 31,  Dec. 31,  Sept. 30,  June 30,  March 31,
     (in billions)           2001       2000      2000       2000       2000
     Institutional
      trust (a)(b)          $2,108     $2,118    $2,153     $2,122     $2,131
     Mutual funds              112        116       111        100         93
     Private clients            31         33        34         35         37
         Total market
          value of assets
          under
          administration
          or custody        $2,251     $2,267    $2,298     $2,257     $2,261
 
         S&P 500 Index       1,160      1,320     1,437      1,455      1,499
 
     (a) Includes $300 billion of assets at March 31, 2001; $323 billion of
 assets at Dec. 31, 2000; $330 billion of assets at Sept. 30, 2000;
 $320 billion of assets at June 30, 2000; and $325 billion of assets at
 March 31, 2000, administered by CIBC Mellon Global Securities Services, a
 joint venture between the Corporation and the Canadian Imperial Bank of
 Commerce.
     (b) Assets administered by the Corporation under ABN AMRO Mellon, a
 strategic alliance of the Corporation and ABN AMRO, included in the table
 above, were $103 billion at March 31, 2001; $95 billion at Dec. 31, 2000;
 $84 billion at Sept. 30, 2000; $64 billion at June 30, 2000; and $60 billion
 at March 31, 2000.
 
     Benefits consulting fees generated by Buck Consultants increased
 $10 million, or 19%, in the first quarter of 2001, compared with the first
 quarter of 2000, and increased $1 million, or 2% unannualized, compared with
 the fourth quarter of 2000.  The increase compared with the first quarter of
 2000 primarily reflects increased project activity and revenue from existing
 clients.
     The $9 million, or 37%, decrease in brokerage fees in the first quarter of
 2001 compared to the prior-year period primarily resulted from lower trading
 volumes in the volatile equities markets.  Brokerage fees remained unchanged,
 compared to the fourth quarter of 2000.  Dreyfus Brokerage Services, Inc.
 averaged approximately 10,100 trades per day in the first quarter of 2001,
 compared with approximately 11,000 trades per day in the fourth quarter of
 2000 and approximately 16,500 trades per day in the first quarter of 2000.
     Cash management fees and deposit transaction charges increased $9 million,
 or 11%, in the first quarter of 2001, compared with the prior-year period, and
 decreased $3 million, or 4%, compared with the fourth quarter of 2000.  The
 increase in the first quarter of 2001 compared with the first quarter of 2000
 primarily resulted from higher volumes of cash management business, particu-
 larly in electronic services.  Cash management fees do not include revenue
 from customers holding compensating balances on deposits in lieu of paying
 cash fees.  The earnings on the compensating balances are recognized in net
 interest revenue.
     Foreign currency and securities trading revenue increased by 6% to a
 record $55 million in the first quarter of 2001, compared with the prior-year
 period, primarily due to higher securities trading revenue and increased by
 $12 million, or 27%, compared with the fourth quarter of 2000, primarily due
 to higher foreign exchange revenue.
     Financing-related and equity investment revenue totaled $76 million in the
 first quarter of 2001, compared with $63 million in the fourth quarter of 2000
 and $75 million in the first quarter of 2000.  Financing-related revenue,
 which primarily includes loan commitment fees; letters of credit and accep-
 tance fees; loan securitization revenue; gains or losses on loan securitiza-
 tions and sales; and gains or losses on lease residuals, increased $28 million
 in the first quarter of 2001 compared with the first quarter of 2000, primar-
 ily due to a gain on a home equity loan securitization.  Equity investment
 revenue, which includes realized and unrealized gains and losses on venture
 capital investments, decreased $27 million in the first quarter of 2001,
 compared with the first quarter of 2000, primarily due to lower levels of
 realized gains.
     Other revenue increased $4 million in the first quarter of 2001 compared
 with the prior-year period, due in part to higher gains on the sale of assets.
 
     Fee and other revenue including gross joint venture fee revenue
     The Corporation accounts for its interests in joint ventures under the
 equity method of accounting, with net results recorded primarily as trust and
 investment fee revenue.  The gross joint venture fee revenue is not included
 in the reported fee revenue.  Approximately half of the trust and investment
 gross joint venture fee revenue for the first quarter of 2000 presented in the
 table below is attributable to Mellon Investor Services.  Following the
 December 2000 acquisition of the remaining 50% interest in the joint venture,
 this gross revenue began to be included in reported fee revenue.  The table
 below presents the components of total fee and other revenue, including gross
 joint venture fee revenue.
 
                                                Quarter ended
                                      March 31,       Dec. 31,     March 31,
     (in millions)                      2001            2000         2000
     Trust and investment fee revenue   $688            $690          $713
     Foreign currency and securities
      trading revenue                     62              48            58
     Non-impacted components of fee
      and other revenue                  183             172           169
         Total fee and other revenue
          including gross joint venture
          fee revenue                    933             910           940
     Less: Trust and investment gross
            joint venture fee revenue    (67)            (99)(a)      (135)
           Foreign currency and securities
            trading gross joint venture
            fee revenue                   (7)             (5)           (7)
             Total gross joint venture fee
              revenue (b)                (74)           (104)         (142)
             Total fee and other revenue
              as reported               $859            $806          $798
 
     (a)   The fourth quarter 2000 amount includes 2 months of gross revenue
           from Mellon Investor Services, as the Corporation purchased the
           remaining 50% interest in this joint venture on Dec. 1, 2000.
     (b)   The gross joint venture fee revenue presented above is shown net of
           the equity income earned from the joint ventures.
 
 
     Net Interest Revenue
                                                  Quarter ended
                                    March 31,       Dec. 31,       March 31,
     (dollar amounts in millions)      2001           2000           2000
 
     Net interest revenue (FTE)         $327            $335          $331
     Net interest margin (FTE)         3.52%           3.62%         3.54%
 
     Average money market
      investments                     $2,708          $2,492        $1,713
     Average trading account
      securities                        $363            $453          $248
     Average securities               $8,709          $6,873        $6,155
     Average loans                   $25,847         $26,857       $29,283
     Average interest-earning
      assets                         $37,627         $36,675       $37,399
 
 
     Net interest revenue on a fully taxable equivalent basis in the first
 quarter of 2001 decreased $4 million, or 1%, compared with the first quarter
 of 2000, primarily reflecting higher funding costs related to the repurchase
 of common stock.  The net interest margin of 3.52% was 2 basis points lower
 than in the prior year period.  Average interest-earning assets increased
 $228 million as a $3.4 billion decrease in average loans was offset by a
 $2.6 billion increase in average securities and a $995 million increase in
 average money market investments.  The increase in average securities and
 money market investments was due in large part to the short-term investment of
 funds resulting from customer driven liquidity in excess of typical levels,
 during both the first quarter of 2001 and the fourth quarter of 2000.  The
 decrease in loans primarily reflected a lower level of consumer and wholesale
 loans.
     Net interest revenue on a fully taxable equivalent basis in the first
 quarter of 2001 decreased $8 million, or 2%, unannualized, compared with the
 fourth quarter of 2000.  This decrease resulted in part from higher funding
 costs related to the repurchase of common stock as well as a lower yielding
 asset mix discussed above, and two fewer days in the first quarter of 2001
 compared to the fourth quarter of 2000.  The net interest margin decreased 10
 basis points in the first quarter of 2001 compared with the fourth quarter of
 2000.
 
     Operating Expense
                                                 Quarter ended
                                     March 31,        Dec. 31,       March 31,
     (dollar amounts in millions)      2001             2000           2000
 
     Staff expense                      $426            $409          $397
     Professional, legal and
      other purchased services            80              72            67
     Net occupancy expense                68              62            64
     Equipment expense                    43              40            37
     Amortization of goodwill             30              28            29
     Amortization of other intangible
      assets                               3               4             8
     Net revenue from acquired property    -               -             (1)
     Other expense                       105             109           117
       Total operating expense          $755            $724          $718
 
     Efficiency ratio (a)                63%             63%           63%
     Efficiency ratio excluding
      amortization of goodwill           61%             60%           61%
 
     Average full-time equivalent
      staff                           26,800          25,300        25,400
 
     (a)   Operating expense before net revenue from acquired property, as a
           percentage of revenue, computed on a taxable equivalent basis,
           excluding gains on the sales of securities.
 
     Operating expense totaled $755 million in the first quarter of 2001, an
 increase of $37 million compared with the first quarter of 2000, primarily
 resulting from the December 2000 acquisition of the remaining 50% interest in
 Mellon Investor Services.  Excluding the effect of acquisitions, operating
 expense decreased 2% compared with the first quarter of 2000, due in part to
 lower incentive and advertising expense.  The increase in the average
 full-time equivalent staff in the first quarter of 2001 compared to the fourth
 quarter of 2000, was primarily due to the acquisition of the remaining 50%
 interest in Mellon Investor Services.
 
 
                                                 1st Qtr. 2001   1st Qtr. 2001
                                                      over           over
     Operating expense growth                    1st Qtr. 2000   4th Qtr. 2000
 
     Operating expense growth (a)                      (2)%          -%  (b)
 
     (a)   Excluding the impact of acquisitions and before the net revenue from
           acquired property.
     (b)   Unannualized.
 
     Excluding the effect of acquisitions, operating expense was substantially
 unchanged in the first quarter of 2001 compared with the fourth quarter of
 2000.
 
     Income Taxes
     The Corporation's effective tax rate for the first quarter of 2001 was
 36%, compared with 36.5% in the first quarter of 2000.  It is currently
 anticipated that the effective tax rate will be approximately the same for the
 remainder of 2001.
 
     Provision for Credit Losses, Net Credit Losses and Reserve for Credit
      Losses
 
                                                  Quarter ended
                                     March 31,      Dec. 31,       March 31,
     (dollar amounts in millions)       2001          2000            2000
 
     Provision for credit losses         $15            $15           $10
 
     Net credit (losses) recoveries:
      Consumer credit                     (3)            (6) (a)       (3)
      Commercial real estate               -              1             5
      Commercial and financial           (13)           (15)          (13)
     Total net credit losses            $(16)          $(20)         $(11)
 
     Annualized net credit
      losses to average loans           .24%           .30% (b)      .15%
 
     Reserve for credit
      losses at end of period           $391           $393          $402
     Reserve as a percentage
      of total loans                   1.54%          1.49%         1.42%
 
     (a)   Includes $4 million of credit losses resulting from the adoption at
           year-end 2000 of new standards for the classification and management
           of retail credit, published by the banking regulators.
     (b)   The ratio of net credit losses to average loans, excluding the
           credit losses resulting from the adoption of the new regulatory
           standards, was .24% for the fourth quarter of 2000.
 
     The reserve for credit losses as a percentage of total loans was 1.54% at
 March 31, 2001, a 12 basis point increase compared with the prior-year period
 reflecting a $2.9 billion, or 10%, lower level of loans outstanding.
 
 
     Nonperforming Assets
 
     (dollar amounts         March 31,     Dec. 31,     Sept. 30,    March 31,
       in millions)             2001         2000          2000         2000
     Nonperforming loans:
      Consumer mortgage         $15           $23          $21           $38
      Commercial real estate      5             5            7             6
      Other                     271           224          176           144
       Total nonperforming
        loans                   291           252          204           188
     Acquired property:
      Real estate acquired       13            13           12            14
      Reserve for real
       estate acquired            -             -            -            (1)
       Net real
        estate acquired          13            13           12            13
      Other assets acquired       6             6            6             9
       Total acquired property   19            19           18            22
       Total nonperforming
        assets                 $310          $271         $222          $210
 
     Nonperforming loans
      as a percentage
      of total loans          1.15%          .95%         .74%          .67%
     Nonperforming assets
      as a percentage of
      total loans and net
      acquired property       1.22%         1.03%         .81%          .74%
 
 
     Nonperforming assets increased $39 million, compared with Dec. 31, 2000,
 and $100 million, compared with March 31, 2000.  The higher level of
 nonperforming assets, compared with Dec. 31, 2000, resulted in part from the
 assignment of nonperforming status to a commercial loan to a borrower in the
 financial services industry in the first quarter of 2001, as well as from the
 addition of various other loans, partially offset by principal repayments and
 credit losses.  The higher level of nonperforming assets, compared with
 March 31, 2000, also resulted from the assignment of nonperforming status to
 commercial loans totaling $38 million to a borrower in the building materials
 manufacturing industry, who voluntarily filed for Chapter 11 bankruptcy
 protection in October 2000 as a result of the financial burden caused by
 asbestos liability litigation claims.
     On April 6, 2001, a California-based electric and natural gas utility
 company voluntarily filed for Chapter 11 bankruptcy protection as the result
 of its inability, due to rules governing the industry's deregulation, to
 increase rates to levels needed to cover higher costs for power.  At March 31,
 2001, loans outstanding to the borrower totaled $40 million with an additional
 $1 million of commercial paper held by the Corporation, neither of which is
 included in the table above.
     As disclosed previously, the Corporation is conducting a strategic review
 of Mellon Leasing Corporation businesses that serve mid-to-large corporations
 and vendors of small ticket equipment, along with Mellon Business Credit,
 which provides asset-based lending products.  Nonperforming assets at
 March 31, 2001, for these businesses totaled $42 million.
 
 
     Selected Capital Data
 
                                   March 31,    Dec. 31,   Sept. 30, March 31,
     (dollar amounts in               2001        2000       2000      2000
      millions, except
      per share amounts)
 
     Total shareholders' equity      $3,878       $4,152    $4,032    $3,851
     Total shareholders' equity
      to assets ratio                 8.38%        8.24%     8.89%     8.13%
 
     Tangible shareholders'
      equity (a)                     $2,286       $2,535    $2,425    $2,190
     Tangible shareholders'
      equity to assets ratio (b)      5.13%        5.21%     5.56%     4.80%
 
     Tier I capital ratio              6.7%(c)     7.23%     7.21%     6.49%
     Total (Tier I plus Tier II)
      capital ratio                   11.0%(c)    11.74%    11.72%    10.61%
     Leverage capital ratio            6.3%(c)     7.11%     7.18%     6.61%
 
     Book value per common share      $8.13        $8.53     $8.26     $7.84
     Tangible book value per common
      share                           $4.79        $5.21     $4.97     $4.46
 
     Closing common stock price      $40.52       $49.19    $46.38    $29.50
     Market capitalization          $19,336      $23,941   $22,631   $14,491
     Common shares outstanding
      (000)                         477,204      486,739   487,990   491,210
 
     (a)   Includes $87 million, $89 million, $81 million and $74 million,
           respectively, of minority interest, primarily related to Newton.  In
           addition, includes $329 million, $334 million, $313 million and
           $323 million, respectively, of tax benefits related to tax
           deductible goodwill and other intangibles.
     (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.  The amount of goodwill
           and other intangibles subtracted from shareholders' equity and total
           assets is net of any tax benefit.
     (c)  Estimated.
 
     The decrease in the Corporation's risk-based capital ratios compared with
 Dec. 31, 2000, reflects the effect of common stock repurchases partially
 offset by earnings retention and lower asset levels.  The increase in the
 Corporation's risk-based capital ratios compared with March 31, 2000, reflects
 lower asset levels as well as a lower risk-weighted mix of assets.
     During the first quarter of 2001, approximately 11.4 million shares of
 common stock were repurchased at a purchase price of $528 million for an
 average share price of $46.24 per share.  Common shares outstanding at
 March 31, 2001, were 8.9% lower than at Dec. 31, 1998, reflecting a
 46.6 million share reduction, net of shares reissued primarily for employee
 benefit plan purposes.  This reduction was due to stock repurchases totaling
 approximately $2.3 billion, at an average share price of $37.16 per share.
 There are an additional 7.2 million shares available for repurchase under the
 current 25 million share repurchase program authorized by the board of
 directors in May 2000.
     The Corporation's average level of treasury stock was approximately
 $541 million higher in the first quarter of 2001 compared with the first
 quarter of 2000.  After giving effect to funding the higher level of treasury
 stock, valued at a short-term funding rate, the lower share count increased
 diluted earnings per share by approximately 2%, comparing the first quarter of
 2001 with the first quarter of 2000.
 
     Impact of Proposed New Goodwill Accounting Standard
     Except for the 1994 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 the same assuming a given
 financing mix.
     The Financial Accounting Standards Board has issued an exposure draft on
 business combinations that would, among other things, eliminate the pooling of
 interests method of accounting for future acquisitions and require that
 goodwill no longer be amortized, but would be subject to impairment testing.
 Results, excluding the impact of goodwill amortization, according to the
 proposed new accounting standard, are shown in the table below.
 
     Financial results - in accordance with proposed new accounting standard
 
                                                      Quarter ended
     (dollar amounts in millions, except    March 31,   Dec. 31,  March 31,
      per share amounts; ratios annualized)    2001       2000       2000
 
     Net income                                $264      $255       $253
     Plus after-tax impact of amortization
      of goodwill from purchase acquisitions:
         Goodwill                                26        24         25
         Other (a)                                1         1          1
           Pro forma net income                $291      $280       $279
           Increase over prior-year period       4%        4%(b)      9%(b)
 
     Pro forma earnings per share - diluted    $.59      $.56       $.55
     Increase over prior-year period             7%        6%(b)     15%(b)
 
     Pro forma return on common equity        29.6%     27.7%      28.7%
 
     Pro forma return on assets               2.45%     2.39%      2.37%
 
     (a)   Primarily relates to the goodwill on investments in joint ventures.
     (b)   As compared to fourth quarter 1999 and first quarter 1999 operating
           results, respectively.
 
 
                                  SUMMARY DATA
                          Mellon Financial Corporation
                               Five Quarter Trend
 
 
     (dollar amounts in millions,
      except per share amounts;
      common shares in thousands)
 
                                               Quarter ended
                            March 31, Dec. 31,   Sept. 30, June 30,  March 31,
                              2001      2000       2000      2000      2000
 
     Selected key data
 
     Reported results (a):
     Diluted earnings
      per share                $.54      $.52       $.51      $.50      $.50
     Net income                $264      $255       $252      $247      $253
     Return on equity         26.9%     25.2%      25.8%     26.2%     26.0%
     Return on assets         2.22%     2.17%      2.18%     2.12%     2.15%
 
 
     Results excluding
      goodwill amortization:
     Diluted earnings
      per share                $.59      $.56       $.56      $.56      $.55
     Net income                $291      $280       $278      $273      $279
     Return on equity         29.6%     27.7%      28.4%     29.0%     28.7%
     Return on assets         2.45%     2.39%      2.40%     2.34%     2.37%
 
 
     Shareholders' equity
      to assets:
       Reported               8.38%     8.24%      8.89%     8.39%     8.13%
       Tangible (b)            5.13      5.21       5.56      5.03      4.80
 
 
     Fee revenue as a
      percentage of net
      interest and
      fee revenue (FTE)         73%       71%        70%       70%       71%
     Trust and investment
      fee revenue as a
      percentage of net
      interest and fee
      revenue (FTE)             52%       51%        50%       51%       51%
     Efficiency ratio
      excluding amortization
      of goodwill               61%       60%        60%       61%       61%
 
     Average common shares
      and equivalents
      outstanding:
       Basic                482,718   487,398    488,188   489,480   496,740
       Diluted              489,328   494,986    495,332   495,103   502,082
 
                                  SUMMARY DATA
                          Mellon Financial Corporation
                               Five Quarter Trend
                                  (continued)
 
     (dollar amounts in millions)
                                           Quarter ended
                      March 31,   Dec. 31,    Sept. 30,   June 30,   March 31,
                        2001        2000         2000       2000       2000
 
     Average balances
      for the quarter
 
     Money market
      investments       $2,708     $2,492       $2,009      $2,219    $1,713
     Trading account
      securities           363        453          322         214       248
     Securities          8,709      6,873        6,166       6,121     6,155
       Total money market
        investments and
        securities      11,780      9,818        8,497       8,554     8,116
     Loans              25,847     26,857       27,430      27,943    29,283
       Total
        interest-earning
        assets          37,627     36,675       35,927      36,497    37,399
     Total assets       48,198     46,741       46,058      46,978    47,205
     Deposits           33,601     32,762       32,114      32,762    32,220
     Total interest-
      bearing
      liabilities       32,160     31,069       30,738      31,367    32,036
     Total shareholders'
      equity             3,992      4,023        3,893       3,793     3,905
 
 
     (a) Computed in accordance with generally accepted accounting principles.
     (b) See page 16 for the definition of this ratio.
 
     Note: All calculations are based on unrounded numbers.  FTE denotes
           presentation on a fully taxable equivalent basis.  Quarterly returns
           are annualized.
 
 
                    CONDENSED CONSOLIDATED INCOME STATEMENT
                          Mellon Financial Corporation
                               Five Quarter Trend
 
                                              Quarter ended
     (in millions, except   March 31,  Dec. 31, Sept. 30,  June 30,  March 31,
      per share amounts)       2001      2000      2000      2000       2000
     Interest revenue
     Interest and fees on
      loans (loan fees of
      $16, $14, $15,
      $15 and $14)              $507      $557      $575      $563      $565
     Interest-bearing
      deposits with banks         19        18        17        15        10
     Federal funds sold and
      securities under resale
      agreements                  16        20        12        17        13
     Other money
      market investments           2         2         1         1         1
     Trading account securities    5         5         5         4         4
     Securities                  136       114       103       104       103
       Total interest revenue    685       716       713       704       696
     Interest expense
     Interest on deposits        240       260       250       244       233
     Federal funds purchased
      and securities under
      repurchase agreements       28        29        27        25        23
     Other short-term borrowings  14        13        20        27        34
     Notes and debentures         59        62        60        57        58
     Trust-preferred securities   20        20        20        19        20
       Total interest expense    361       384       377       372       368
       Net interest revenue      324       332       336       332       328
     Provision for credit losses  15        15        10        10        10
     Net interest revenue after
      provision for
      credit losses              309       317       326       322       318
     Noninterest revenue
     Trust and investment
      fee revenue                621       591       561       565       578
     Cash management and
      deposit transaction
      charges                     83        86        83        83        74
     Foreign currency and
      securities trading revenue  55        43        42        42        51
     Financing-related revenue    67        58        44        43        39
     Equity investment revenue     9         5        20        17        36
     Other                        24        23        23        23        20
       Total fee and
        other revenue            859       806       773       773       798
     Gains on sales
      of securities                -         -         -         -         -
       Total noninterest
        revenue                  859       806       773       773       798
     Operating expense
     Staff expense               426       409       399       390       397
     Professional, legal and
      other purchased services    80        72        77        70        67
     Net occupancy expense        68        62        57        58        64
     Equipment expense            43        40        35        38        37
     Amortization of goodwill     30        28        29        29        29
     Amortization of other
      intangible assets            3         4         3         4         8
     Net expense (revenue) from
      acquired property            -         -         2         1        (1)
     Other expense               105       109       102       115       117
       Total operating expense   755       724       704       705       718
       Income before
        income taxes             413       399       395       390       398
     Provision for income taxes  149       144       143       143       145
       Net income               $264      $255      $252      $247      $253
     Basic net income
      per share                 $.55      $.52      $.52      $.50      $.51
     Diluted net
      income per share          $.54      $.52      $.51      $.50      $.50
 
 
                      CONDENSED CONSOLIDATED BALANCE SHEET
                          Mellon Financial Corporation
 
     (dollar amounts           March 31,    Dec. 31,   Sept. 30,     March 31,
      in millions)               2001         2000        2000         2000
 
     Assets
     Cash and due from banks    $2,873       $3,506      $2,888       $2,958
     Money market investments    2,111        3,917       1,214        2,870
     Trading account securities    310          276         371          139
     Securities available
      for sale                   7,107        7,910       5,323        5,055
     Investment securities
      (approximate fair value
      of $974, $1,027,
      $1,058 and $1,140)           961        1,022       1,063        1,153
     Loans, net of unearned
      discount of $61, $66,
      $74 and $71               25,350       26,369      27,421       28,285
     Reserve for credit losses    (391)        (393)       (400)        (402)
       Net loans                24,959       25,976      27,021       27,883
     Premises and equipment        726          698         598          572
     Goodwill                    1,971        1,993       1,951        2,002
     Other intangibles              37           47          50           56
     Mortgage servicing assets      22           24          25           17
     Other assets                5,206        4,995       4,833        4,676
       Total assets            $46,283      $50,364     $45,337      $47,381
 
 
     Liabilities
     Deposits in
      domestic offices         $28,873      $33,018     $28,634      $30,735
     Deposits in
      foreign offices            2,840        3,872       3,111        2,611
     Short-term borrowings       3,355        2,046       2,306        2,936
     Other liabilities           2,753        2,764       2,732        2,817
     Notes and debentures
      (with original
      maturities over one year)  3,590        3,520       3,531        3,440
     Trust-preferred securities    994          992         991          991
       Total liabilities        42,405       46,212      41,305       43,530
 
     Shareholders' equity
     Common stock - $.50 par value
      Authorized -
       800,000,000 shares
      Issued -
       588,661,920 shares          294          294         294          294
     Additional paid-in capital  1,852        1,837       1,821        1,793
     Retained earnings           4,378        4,270       4,155        3,938
     Accumulated unrealized
      gain (loss), net of tax        6          (38)        (87)        (151)
     Treasury stock of
      111,457,855; 101,922,986;
      100,671,971; and 97,452,373
      shares at cost            (2,652)      (2,211)     (2,151)      (2,023)
       Total shareholders'
        equity                   3,878        4,152       4,032        3,851
       Total liabilities and
        shareholders' equity   $46,283      $50,364     $45,337      $47,381
 
 

SOURCE Mellon Financial Corporation
    PITTSBURGH, April 17 /PRNewswire/ -- Mellon Financial Corporation
 (NYSE:   MEL) today announced record first quarter 2001 diluted earnings per
 share of 54 cents, an increase of 8 percent compared with 50 cents per share
 reported in the first quarter of 2000.  The Corporation also announced a
 record return on equity of 26.9 percent and a record return on assets of
 2.22 percent.  These results were achieved despite the impact of the
 previously disclosed May 2000 expiration of a long-term mutual fund
 administration contract with a third party.  Core business sectors'
 contribution to earnings per share, which excludes the revenues and related
 expenses from this contract, and other business exits/divestitures activity
 from both periods, increased 20 percent quarter over quarter.
 
     Financial Highlights
     (dollar amounts in millions,                  Quarter ended
      except per share               March 31,        Dec. 31,      March 31,
      amounts; returns are annualized)  2001            2000           2000
 
     Reported results (a):
     Diluted earnings per share         $.54            $.52          $.50
     Net income                         $264            $255          $253
     Return on equity                  26.9%           25.2%         26.0%
     Return on assets                  2.22%           2.17%         2.15%
 
 
     Results excluding
      goodwill amortization (b):
     Diluted earnings per share         $.59            $.56          $.55
     Net income                         $291            $280          $279
     Return on equity                  29.6%           27.7%         28.7%
     Return on assets                  2.45%           2.39%         2.37%
 
 
     Fee revenue as a percentage
      of net interest and
      fee revenue (FTE)                  73%             71%           71%
     Trust and investment fee revenue
      as a percentage of net interest
      and fee revenue (FTE)              52%             51%           51%
     Efficiency ratio excluding
      amortization of goodwill           61%             60%           61%
 
     (a)   Computed in accordance with generally accepted accounting
           principles.
     (b)   Results exclude the after-tax impact of the amortization of goodwill
           from purchase acquisitions.  See page 17 for the definition of these
           amounts and ratios.
 
     "As our first-quarter performance indicates, we've established a clear
 connection between delivering on the Mellon brand promise of meeting or
 exceeding our customers expectations and successfully implementing a business
 strategy based on growing the fee-based segments of our business, lowering our
 risk profile and re-engineering our businesses to achieve strong customer
 relationships and substantial levels of return.  We're confident that our
 strategy will continue to serve us well, even as we respond to weakened
 economic conditions," said Martin G. McGuinn, Mellon chairman and chief
 executive officer.
     The Corporation increased its quarterly common stock dividend by 9 percent
 to 24 cents per share.  This cash dividend is payable on May 15, 2001, to
 shareholders of record at the close of business on April 30, 2001.  This is
 the 11th quarterly common dividend increase that the Corporation has announced
 since the beginning of 1993, resulting in a total common dividend per share
 increase of 311 percent.
 
     First Quarter 2001 Financial Highlights:
 
     --    Return on equity increased to 26.9 percent from 26.0 percent in the
           first quarter of 2000 and 25.2 percent in the fourth quarter of
           2000.
 
     --    Return on assets increased to 2.22 percent from 2.15 percent in the
           first quarter of 2000 and 2.17 percent in the fourth quarter of
           2000.
 
     --    Fee revenue totaled 73 percent of net interest and fee revenue in
           the first quarter of 2001, compared with 71 percent in both the
           first and fourth quarters of 2000.  Trust and investment fee revenue
           totaled 52 percent of net interest and fee revenue in the first
           quarter of 2001, compared with 51 percent in both the first and
           fourth quarters of 2000.
 
     --    Fee revenue increased 4 percent compared to the prior-year period
           and 1 percent compared to the fourth quarter of 2000, excluding the
           impact of acquisitions as well as the previously disclosed May 2000
           expiration of the long-term mutual fund administration contract with
           a third party.  Fees from that contract totaled $24 million pre-tax,
           or approximately 3 cents per common share, in the first quarter of
           2000.
 
     --    Assets under management totaled $520 billion, with assets under
           management, administration or custody totaling approximately
           $2.8 trillion at March 31, 2001.  Assets managed by subsidiaries and
           affiliates outside the United States totaled $66 billion at
           March 31, 2001.
 
     --    The net interest margin was 3.52 percent in the first quarter of
           2001, down from 3.54 percent in the first quarter of 2000, and 3.62
           percent in the fourth quarter of 2000, primarily due to higher
           funding costs related to the repurchase of common stock, as well as
           a lower yielding and more liquid asset mix.
 
     --    Operating expense decreased 2 percent in the first quarter of 2001
           compared with the first quarter of 2000, and was substantially
           unchanged compared with the fourth quarter of 2000, excluding the
           impact of acquisitions.
 
     --    The Corporation repurchased approximately 11.4 million common shares
           during the quarter, leaving 7.2 million shares available for
           repurchase under the current 25 million share repurchase program.
           Since Jan. 1, 1999, the Corporation's common shares outstanding have
           been reduced by 46.6 million shares, or 8.9 percent, net of
           reissuances, due to stock repurchases totaling approximately
           $2.3 billion, at an average share price of $37.16 per share.
 
     Mellon Financial Corporation is a global financial services company.
 Headquartered in Pittsburgh, Mellon is one of the world's leading providers of
 asset management, trust, custody and benefits consulting services and offers a
 comprehensive array of banking services for individuals and corporations.
 Mellon has approximately $2.8 trillion in assets under management,
 administration or custody, including $520 billion under management.  Its asset
 management companies include The Dreyfus Corporation and Newton Investment
 Management Limited (U.K.).
     Pre-recorded comments from Steven G. Elliott, senior vice chairman and
 chief financial officer, regarding first quarter 2001 earnings are available
 by calling 412-236-5385 beginning at approximately 9 a.m. EDT on Tuesday,
 April 17, 2001, through 5 p.m. EDT on Tuesday, April 24, 2001.  These comments
 may include forward-looking or other material information.  Mr. Elliott's
 pre-recorded commentary, plus a related series of graphics, also will be
 available at our Web site (www.mellon.com) during the same period.  Press
 releases and other information about Mellon Financial Corporation and its
 products and services also are available at our Web site.  For press releases
 by fax, call 1 (800) 758-5804, identification number 552187.
 
     Note:  Detailed supplemental financial information follows.
 
 
     Business Sectors
 
     Summary                          % of                   % of Core
                                  Core Sector              Sector Income
                                    Revenue                Before Taxes
                           1Q01     4Q00    1Q00       1Q01    4Q00    1Q00
     Growth Sectors         70%      71%     70%       61%      62%      68%
     Return Sectors         30%      29%     30%       39%      38%      32%
       Total Core
        Business Sectors   100%     100%    100%      100%     100%     100%
 
 
     Contribution To Earnings Per Share
      From Total Core Business Sectors
     (in millions, except
      per share amounts)   1Q01     1Q00    Growth     1Q01    4Q00    Growth
                                                                        (a)
 
     Net Income             257     $220     17%      $257     $244       5%
     Contribution
      to EPS               $.53     $.44     20%      $.53     $.50       6%
     (a) Unannualized.
 
 
     Contribution To Earnings
      Per Share From Total
      Core Business Sectors
      - Five-Quarter Trend
     (in millions, except
      per share amounts)            1Q01     4Q00    3Q00       2Q00   1Q00
     Net Income                     $257    $244     $241      $232     $220
     Contribution to EPS            $.53    $.50     $.48      $.47     $.44
 
     The Corporation manages its business sectors utilizing growth and return
 strategies.  The sectors managed for growth include businesses which are
 predominantly fee-based in nature.  The Corporation invests in these busi-
 nesses for future growth.  The sectors managed for return include the more
 slowly growing, traditional banking businesses.  These sectors are managed to
 drive profitability and higher returns on equity, primarily focusing on
 improving productivity through re-engineering and effective capital manage-
 ment.
 
     (dollar amounts
      in millions)            First Quarter 2001        First Quarter 2000
                                    Income  Return on        Income Return on
                            Total   Before   Common   Total  Before   Common
     Sector                Revenue  Taxes    Equity  Revenue  Taxes   Equity
 
     Managed for Growth:
     Wealth Management       $117    $52      58%     $104     $43      50%
     Global Investment
      Management              271     86      34       302     114      50
     Global Investment
      Services                343     85      35       260      62      32
     Global Cash Management    98     28      43        85      25      47
       Total Growth Sectors   829    251      39       751     244      43
     Managed for Return:
     Regional Banking         215    103      41       190      68      25
     Relationship Lending     104     51      13       100      40       9
     Businesses Under
      Strategic Review         28      9      12        28       7       9
       Total Return
        Sectors               347    163      23       318     115      15
 
     Total Core Business
      Sectors              $1,176   $414     30%    $1,069    $359      26%
 
     Note:  During the first quarter of 2001, the Corporation made several
 reclassifications to its Core Business Sectors.  The Corporation reclassified
 its cash management business line from the former Large Corporate Banking
 sector to a new growth sector titled Global Cash Management.  The presentation
 of the Specialized Commercial Banking and Large Corporate Banking sectors was
 discontinued, with the various lines of business reallocated as follows.  The
 results of Small Business Banking were reclassified from the former Special-
 ized Commercial Banking sector to the newly named Regional Banking sector,
 which also includes the lines of business from the former Regional Consumer
 Banking sector.  As previously disclosed, the Corporation is conducting a
 strategic review of the Mellon leasing businesses that serve mid-to-large
 corporations and vendors of small ticket equipment, and Mellon Business
 Credit, which provides asset-based lending products.  The results of these
 businesses were removed from Specialized Commercial Banking and displayed in a
 newly formed sector titled Businesses Under Strategic Review.  Finally, the
 Relationship Lending sector was formed from the remaining portion of the
 former Specialized Commercial Banking sector, which included middle market
 lending, commercial real estate lending and insurance premium financing, and
 the remaining portion of the former Large Corporate Banking Sector.
 
     (dollar amounts
      in millions)            First Quarter 2001       Fourth Quarter 2000
                                    Income  Return on        Income Return on
                            Total   Before   Common   Total  Before   Common
     Sector                Revenue  Taxes    Equity  Revenue  Taxes   Equity
 
     Managed for Growth:
     Wealth Management       $117    $52    58%      $121     $59     61%
     Global Investment
      Management              271     86     34       302     101      41
     Global Investment
      Services                343     85     35       281      60      27
     Global Cash
      Management               98     28     43        97      26      44
       Total Growth Sectors   829    251     39       801     246      40
 
     Managed for Return:
     Regional Banking         215    103     41       197      86      31
     Relationship Lending     104     51     13       101      47      12
     Businesses Under
      Strategic Review         28      9     12        33      16      21
       Total Return
        Sectors               347    163     23       331     149      20
 
     Total Core Business
      Sectors              $1,176   $414    30%    $1,132    $395     29%
 
 
     Sectors Managed for Growth
 
     1Q 2001 vs. 1Q 2000       Total Revenue Operating Expense  Income Before
                                   Growth          Growth       Taxes Growth
     Wealth Management              12%               6%             21%
     Global Investment Management   (10)%            (2)%           (25)%
     Global Investment Services     32%              30%             38%
     Global Cash Management         16%              18%             12%
 
       Total Growth Sectors         10%              14%              3%
 
 
     1Q 2001 vs. 4Q 2000 (a)   Total Revenue Operating Expense Income Before
                                   Growth          Growth       Taxes Growth
     Wealth Management                (3)%            5%            (11)%
     Global Investment Management    (10)%           (7)%           (16)%
     Global Investment Services      22%             17%             41%
     Global Cash Management           2%             (1)%             8%
 
       Total Growth Sectors           4%              4%              2%
 
     (a)  Ratios are annualized.
 
     The Corporation's growth sectors, with the exception of the Global
 Investment Management sector, showed good growth in revenue and income before
 taxes for the first quarter of 2001 compared with the first quarter of 2000.
 The results of the Global Investment Management sector were negatively
 impacted by lower brokerage services and asset management revenue reflecting
 the impact of the unfavorable equity market conditions in the first quarter of
 2001.  The results of the Global Investment Services sector were favorably
 impacted by the December 2000 acquisition of the remaining 50% interest in
 Mellon Investor Services.  However, excluding the impact of the acquisition,
 revenue for this sector increased 11% and income before taxes increased 23%,
 reflecting higher institutional trust and custody, and higher benefits
 consulting revenue.  Revenue for the growth sectors grew 10% in the first
 quarter of 2001 compared with the first quarter of 2000, while income before
 taxes grew 3% over the same period.  The pretax operating margin, excluding
 the amortization of intangibles, for the growth sectors was 32% in the first
 quarter of 2001, compared with 34% in the first quarter of 2000.
     Excluding the full quarter impact of the December 2000 acquisition of
 Mellon Investor Services, revenue, expense and income before taxes for the
 growth sectors were essentially flat in the first quarter of 2001 compared
 with the fourth quarter of 2000.  Results for the Wealth Management and Global
 Investment Management sectors reflected the impact of the equity market
 conditions in the first quarter of 2001.  These results were offset by revenue
 growth and operating expense management in the Global Investment Services and
 Global Cash Management sectors.
 
     Sectors Managed for Return
 
                    Pretax Operating     Return on           Average
                       Margin (a)      Common Equity    Allocated Equity
     (dollar amounts
      in millions)   1Q01  4Q00 1Q00  1Q01 4Q00  1Q00  1Q01   4Q00     1Q00
     Regional Banking 52%  47%  42%   41%   31%  25%   $709    $742    $747
     Relationship
      Lending         53%  50%  44%   13%   12%   9% $1,318  $1,309  $1,431
     Businesses
      Under Strategic
      Review          46%  59%  38%   12%   21%   9%   $230    $220    $219
       Total Return
        Sectors       51%  50%  42%   23%   20%  15% $2,257  $2,271  $2,397
 
     (a)  Excludes amortization of intangibles.
 
     The results in the first quarter of 2001 for the return sectors continue
 to demonstrate the Corporation's strategy of driving profitability and higher
 returns on equity, primarily focusing on improving productivity through re-
 engineering and effective capital management.  The Corporation aggressively
 manages capital levels in the return sectors.  Average allocated equity
 decreased $14 million in the first quarter of 2001, compared with the fourth
 quarter of 2000, and decreased $140 million compared with the first quarter of
 2000.  The return on common equity increased to 23%, up from 20% in the fourth
 quarter of 2000, and up from 15% in the first quarter of 2000.  The improved
 results in the return sectors in the first quarter of 2001 compared with the
 prior year quarters primarily reflected higher loan securitization gains,
 lower asset quality expense and effective operating expense management.  The
 results for Businesses Under Strategic Review reflected a higher level of
 lease residual gains in the fourth quarter of 2000 as compared with the first
 quarters of both 2001 and 2000.  The pretax operating margin in the first
 quarter of 2001 was 51%, up from 50% in the fourth quarter of 2000, and up
 from 42% in the prior year period.  Credit losses in the return sectors
 consumed $14 million, or 4%, of revenue in the first quarter of 2001 compared
 with $19 million, or 6% in the fourth quarter of 2000, and $22 million, or 7%,
 in the first quarter of 2000.
 
 
     Noninterest Revenue
 
                                                   Quarter ended
      (dollar amounts in millions,          March 31,   Dec. 31, March 31,
      unless otherwise noted)                 2001        2000     2000
     Trust and investment fee revenue:
       Investment management fee revenue:
         Managed mutual funds                 $174        $172     $166
         Institutional                          80          95       82
         Private clients                        80          81       76
           Total investment management
            fee revenue                        334         348      324
       Administration and custody fee revenue:
         Institutional trust                   183         134      121
         Mutual funds                           16          20       48
         Private clients                         6           8        4
           Total administration and
            custody fee revenue                205         162      173
       Benefits consulting                      66          65       56
       Brokerage fees                           16          16       25
           Total trust and
            investment fee revenue             621         591      578
     Cash management and deposit
      transaction charges                       83          86       74
     Foreign currency and
      securities trading revenue                55          43       51
     Financing-related revenue                  67          58       39
     Equity investment revenue                   9           5       36
     Other                                      24          23       20
           Total fee and other revenue         859         806      798
     Gains on sales of securities                -           -        -
           Total noninterest revenue          $859        $806     $798
 
     Fee revenue as a percentage of net
      interest and fee revenue (FTE)           73%         71%      71%
     Trust and investment fee revenue as
      a percentage of net interest
      and fee revenue (FTE)                    52%         51%      51%
 
     Assets under management at period
      end (in billions)                       $520        $530     $511
     Assets under administration or
      custody at period end (in billions)   $2,251      $2,267   $2,261
 
     S&P 500 Index                           1,160       1,320    1,499
 
     Note:  For analytical purposes, the term "fee revenue," as utilized
 throughout this earnings release, is defined as total noninterest revenue less
 gains on the sales of securities.
 
 
     Fee revenue
     Fee revenue of $859 million in the first quarter of 2001 was impacted by
 the previously disclosed May 2000 expiration of a long-term mutual fund
 administration contract with a third party, and the December 2000 acquisition
 of the remaining 50% interest in Mellon Investor Services.  Excluding these
 factors, fee revenue increased 4% in the first quarter of 2001, compared with
 the first quarter of 2000, primarily due to higher trust and investment fee
 revenue, and cash management and deposit transaction charges.
 
 
                                             1st Qtr. 2001    1st Qtr. 2001
                                                  over             over
     Fee revenue growth (a)                  1st Qtr. 2000    4th Qtr. 2000
 
     Trust and investment fee revenue growth       2%           (2)% (b)
     Total fee revenue growth                      4%            1%  (b)
 
     (a) Excludes the effect of acquisitions and the expiration of the long-
 term mutual fund administration contract with a third party.
     (b) Unannualized.
 
     Excluding the full-quarter effect of the acquisition of the remaining 50%
 interest in Mellon Investor Services, fee revenue increased 1% unannualized in
 the first quarter of 2001 compared with the fourth quarter of 2000, primarily
 resulting from higher foreign currency and securities trading revenue, and
 higher financing-related and equity investment revenue.
 
     Investment management fee revenue
     Investment management fee revenue increased $10 million, or 3%, in the
 first quarter of 2001, compared with the first quarter of 2000, and decreased
 $14 million, or 4% unannualized, in the first quarter of 2001, compared with
 the fourth quarter of 2000.  The increase in the first quarter of 2001
 compared to the first quarter of 2000 primarily resulted from an $8 million,
 or 5%, increase in mutual fund management revenue; and a $4 million, or 5%,
 increase in private client asset management revenue.  The decrease in institu-
 tional asset management revenue compared with the fourth quarter of 2000
 reflects a lower level of performance fees, which are primarily recorded in
 the fourth quarter of each year.  These fees are earned by investment managers
 as the investment performance of their products exceed various benchmarks.
     Mutual fund management fees are based upon the average net assets of each
 fund.  The average assets of proprietary mutual funds managed in the first
 quarter of 2001 were $150 billion, up $13 billion, or 9%, from $137 billion in
 the first quarter of 2000, and up $5 billion, or 3% unannualized, from
 $145 billion in the fourth quarter of 2000.  The increase compared with the
 first quarter of 2000 resulted primarily from increases in average net assets
 of institutional taxable money market funds, offset in part by lower average
 net assets of equity funds.  Proprietary equity funds averaged $51 billion in
 the first quarter of 2001, a decrease of $4 billion, or 7%, compared with
 $55 billion in the first quarter of 2000, and a decrease of $5 billion, or 8%,
 compared with $56 billion in the fourth quarter of 2000.
     As shown in the table on the following page, the market value of assets
 under management was $520 billion at March 31, 2001, a $10 billion, or 2%
 unannualized, decrease from $530 billion at Dec. 31, 2000, and a $9 billion,
 or 2%, increase from $511 billion at March 31, 2000.  The decrease at
 March 31, 2001, compared to Dec. 31, 2000, was primarily due to a decline in
 the equity markets in the first quarter of 2001 partially offset by net new
 business.  The equity markets at March 31, 2001, as measured by the Standard
 and Poor's 500 Index, decreased 12.1% compared with Dec. 31, 2000, and
 decreased 22.6% compared with March 31, 2000, while a key bond market bench-
 mark, the Lehman Brothers Long-Term Government Bond Index, increased 1.7% at
 March 31, 2001, compared to Dec. 31, 2000, and increased 13.2% compared to
 March 31, 2000.
 
 
     Market value of assets under management at period end
                           March 31,  Dec. 31,  Sept. 30,  June 30,  March 31,
     (in billions)           2001       2000       2000      2000      2000
     Mutual funds managed:
       Equity funds           $47        $54       $60       $59       $59
       Money market funds      81         68        64        58        60
       Bond and fixed-income
        funds                  22         21        21        21        21
       Nonproprietary          23         31        32        31        31
         Total mutual funds
          managed             173        174       177       169       171
     Institutional (a)        298        302       309       298       286
     Private clients           49         54        54        54        54
         Total market
          value of assets
          under
          management         $520       $530      $540      $521      $511
 
     S&P 500 Index          1,160      1,320     1,437     1,455     1,499
 
     (a) Includes assets managed at Pareto Partners of $28 billion at March 31,
 2001, $29 billion at Dec. 31, 2000; $29 billion at Sept. 30, 2000; $30 billion
 at June 30, 2000; and $32 billion at March 31, 2000.  The Corporation has a
 30% equity interest in Pareto Partners.
 
     Administration and custody fee revenue
     Administration and custody fee revenue increased $32 million, or 19%, in
 the first quarter of 2001 compared with the first quarter of 2000 and in-
 creased $43 million, or 27% unannualized, in the first quarter of 2001,
 compared with the fourth quarter of 2000.  The increase compared with the
 first quarter of 2000 was impacted by the December 2000 acquisition of the
 remaining 50% interest in Mellon Investor Services and by the May 2000
 expiration of the long-term mutual fund administration contract with a third
 party.  Excluding these factors, administration and custody fee revenue
 increased 3% compared to the first quarter of 2000.  The results of Mellon
 Investor Services had been accounted for under the equity method of accounting
 prior to the acquisition, with the net results recorded as institutional trust
 and custody revenue.  Following the acquisition, the gross fee revenue from
 this business is primarily included in institutional trust and custody
 revenue.  Mellon Investor Services generated approximately $59 million of
 gross fee revenue in the first quarter of 2001.  Fees from the long-term
 mutual fund administration contract totaled $24 million pre-tax, or approxi-
 mately $.03 per common share, in the first quarter of 2000.
     Administration and custody fee revenue increased 3% in the first quarter
 of 2001 compared to the fourth quarter of 2000, excluding the full quarter
 impact of the December 2000 acquisition of Mellon Investor Services.  This
 increase was primarily due to higher securities lending revenue.
     The market value of assets under administration or custody, shown in the
 table on the following page, was $2,251 billion at March 31, 2001, a decrease
 of $16 billion, or 1% unannualized, compared with $2,267 billion at Dec. 31,
 2000, and a decrease of $10 billion, or less than 1%, compared with
 $2,261 billion at March 31, 2000, reflecting the decrease in the Standard and
 Poor's 500 Index.
 
 
     Market value of assets under administration or custody at period end
                           March 31,  Dec. 31,  Sept. 30,  June 30,  March 31,
     (in billions)           2001       2000      2000       2000       2000
     Institutional
      trust (a)(b)          $2,108     $2,118    $2,153     $2,122     $2,131
     Mutual funds              112        116       111        100         93
     Private clients            31         33        34         35         37
         Total market
          value of assets
          under
          administration
          or custody        $2,251     $2,267    $2,298     $2,257     $2,261
 
         S&P 500 Index       1,160      1,320     1,437      1,455      1,499
 
     (a) Includes $300 billion of assets at March 31, 2001; $323 billion of
 assets at Dec. 31, 2000; $330 billion of assets at Sept. 30, 2000;
 $320 billion of assets at June 30, 2000; and $325 billion of assets at
 March 31, 2000, administered by CIBC Mellon Global Securities Services, a
 joint venture between the Corporation and the Canadian Imperial Bank of
 Commerce.
     (b) Assets administered by the Corporation under ABN AMRO Mellon, a
 strategic alliance of the Corporation and ABN AMRO, included in the table
 above, were $103 billion at March 31, 2001; $95 billion at Dec. 31, 2000;
 $84 billion at Sept. 30, 2000; $64 billion at June 30, 2000; and $60 billion
 at March 31, 2000.
 
     Benefits consulting fees generated by Buck Consultants increased
 $10 million, or 19%, in the first quarter of 2001, compared with the first
 quarter of 2000, and increased $1 million, or 2% unannualized, compared with
 the fourth quarter of 2000.  The increase compared with the first quarter of
 2000 primarily reflects increased project activity and revenue from existing
 clients.
     The $9 million, or 37%, decrease in brokerage fees in the first quarter of
 2001 compared to the prior-year period primarily resulted from lower trading
 volumes in the volatile equities markets.  Brokerage fees remained unchanged,
 compared to the fourth quarter of 2000.  Dreyfus Brokerage Services, Inc.
 averaged approximately 10,100 trades per day in the first quarter of 2001,
 compared with approximately 11,000 trades per day in the fourth quarter of
 2000 and approximately 16,500 trades per day in the first quarter of 2000.
     Cash management fees and deposit transaction charges increased $9 million,
 or 11%, in the first quarter of 2001, compared with the prior-year period, and
 decreased $3 million, or 4%, compared with the fourth quarter of 2000.  The
 increase in the first quarter of 2001 compared with the first quarter of 2000
 primarily resulted from higher volumes of cash management business, particu-
 larly in electronic services.  Cash management fees do not include revenue
 from customers holding compensating balances on deposits in lieu of paying
 cash fees.  The earnings on the compensating balances are recognized in net
 interest revenue.
     Foreign currency and securities trading revenue increased by 6% to a
 record $55 million in the first quarter of 2001, compared with the prior-year
 period, primarily due to higher securities trading revenue and increased by
 $12 million, or 27%, compared with the fourth quarter of 2000, primarily due
 to higher foreign exchange revenue.
     Financing-related and equity investment revenue totaled $76 million in the
 first quarter of 2001, compared with $63 million in the fourth quarter of 2000
 and $75 million in the first quarter of 2000.  Financing-related revenue,
 which primarily includes loan commitment fees; letters of credit and accep-
 tance fees; loan securitization revenue; gains or losses on loan securitiza-
 tions and sales; and gains or losses on lease residuals, increased $28 million
 in the first quarter of 2001 compared with the first quarter of 2000, primar-
 ily due to a gain on a home equity loan securitization.  Equity investment
 revenue, which includes realized and unrealized gains and losses on venture
 capital investments, decreased $27 million in the first quarter of 2001,
 compared with the first quarter of 2000, primarily due to lower levels of
 realized gains.
     Other revenue increased $4 million in the first quarter of 2001 compared
 with the prior-year period, due in part to higher gains on the sale of assets.
 
     Fee and other revenue including gross joint venture fee revenue
     The Corporation accounts for its interests in joint ventures under the
 equity method of accounting, with net results recorded primarily as trust and
 investment fee revenue.  The gross joint venture fee revenue is not included
 in the reported fee revenue.  Approximately half of the trust and investment
 gross joint venture fee revenue for the first quarter of 2000 presented in the
 table below is attributable to Mellon Investor Services.  Following the
 December 2000 acquisition of the remaining 50% interest in the joint venture,
 this gross revenue began to be included in reported fee revenue.  The table
 below presents the components of total fee and other revenue, including gross
 joint venture fee revenue.
 
                                                Quarter ended
                                      March 31,       Dec. 31,     March 31,
     (in millions)                      2001            2000         2000
     Trust and investment fee revenue   $688            $690          $713
     Foreign currency and securities
      trading revenue                     62              48            58
     Non-impacted components of fee
      and other revenue                  183             172           169
         Total fee and other revenue
          including gross joint venture
          fee revenue                    933             910           940
     Less: Trust and investment gross
            joint venture fee revenue    (67)            (99)(a)      (135)
           Foreign currency and securities
            trading gross joint venture
            fee revenue                   (7)             (5)           (7)
             Total gross joint venture fee
              revenue (b)                (74)           (104)         (142)
             Total fee and other revenue
              as reported               $859            $806          $798
 
     (a)   The fourth quarter 2000 amount includes 2 months of gross revenue
           from Mellon Investor Services, as the Corporation purchased the
           remaining 50% interest in this joint venture on Dec. 1, 2000.
     (b)   The gross joint venture fee revenue presented above is shown net of
           the equity income earned from the joint ventures.
 
 
     Net Interest Revenue
                                                  Quarter ended
                                    March 31,       Dec. 31,       March 31,
     (dollar amounts in millions)      2001           2000           2000
 
     Net interest revenue (FTE)         $327            $335          $331
     Net interest margin (FTE)         3.52%           3.62%         3.54%
 
     Average money market
      investments                     $2,708          $2,492        $1,713
     Average trading account
      securities                        $363            $453          $248
     Average securities               $8,709          $6,873        $6,155
     Average loans                   $25,847         $26,857       $29,283
     Average interest-earning
      assets                         $37,627         $36,675       $37,399
 
 
     Net interest revenue on a fully taxable equivalent basis in the first
 quarter of 2001 decreased $4 million, or 1%, compared with the first quarter
 of 2000, primarily reflecting higher funding costs related to the repurchase
 of common stock.  The net interest margin of 3.52% was 2 basis points lower
 than in the prior year period.  Average interest-earning assets increased
 $228 million as a $3.4 billion decrease in average loans was offset by a
 $2.6 billion increase in average securities and a $995 million increase in
 average money market investments.  The increase in average securities and
 money market investments was due in large part to the short-term investment of
 funds resulting from customer driven liquidity in excess of typical levels,
 during both the first quarter of 2001 and the fourth quarter of 2000.  The
 decrease in loans primarily reflected a lower level of consumer and wholesale
 loans.
     Net interest revenue on a fully taxable equivalent basis in the first
 quarter of 2001 decreased $8 million, or 2%, unannualized, compared with the
 fourth quarter of 2000.  This decrease resulted in part from higher funding
 costs related to the repurchase of common stock as well as a lower yielding
 asset mix discussed above, and two fewer days in the first quarter of 2001
 compared to the fourth quarter of 2000.  The net interest margin decreased 10
 basis points in the first quarter of 2001 compared with the fourth quarter of
 2000.
 
     Operating Expense
                                                 Quarter ended
                                     March 31,        Dec. 31,       March 31,
     (dollar amounts in millions)      2001             2000           2000
 
     Staff expense                      $426            $409          $397
     Professional, legal and
      other purchased services            80              72            67
     Net occupancy expense                68              62            64
     Equipment expense                    43              40            37
     Amortization of goodwill             30              28            29
     Amortization of other intangible
      assets                               3               4             8
     Net revenue from acquired property    -               -             (1)
     Other expense                       105             109           117
       Total operating expense          $755            $724          $718
 
     Efficiency ratio (a)                63%             63%           63%
     Efficiency ratio excluding
      amortization of goodwill           61%             60%           61%
 
     Average full-time equivalent
      staff                           26,800          25,300        25,400
 
     (a)   Operating expense before net revenue from acquired property, as a
           percentage of revenue, computed on a taxable equivalent basis,
           excluding gains on the sales of securities.
 
     Operating expense totaled $755 million in the first quarter of 2001, an
 increase of $37 million compared with the first quarter of 2000, primarily
 resulting from the December 2000 acquisition of the remaining 50% interest in
 Mellon Investor Services.  Excluding the effect of acquisitions, operating
 expense decreased 2% compared with the first quarter of 2000, due in part to
 lower incentive and advertising expense.  The increase in the average
 full-time equivalent staff in the first quarter of 2001 compared to the fourth
 quarter of 2000, was primarily due to the acquisition of the remaining 50%
 interest in Mellon Investor Services.
 
 
                                                 1st Qtr. 2001   1st Qtr. 2001
                                                      over           over
     Operating expense growth                    1st Qtr. 2000   4th Qtr. 2000
 
     Operating expense growth (a)                      (2)%          -%  (b)
 
     (a)   Excluding the impact of acquisitions and before the net revenue from
           acquired property.
     (b)   Unannualized.
 
     Excluding the effect of acquisitions, operating expense was substantially
 unchanged in the first quarter of 2001 compared with the fourth quarter of
 2000.
 
     Income Taxes
     The Corporation's effective tax rate for the first quarter of 2001 was
 36%, compared with 36.5% in the first quarter of 2000.  It is currently
 anticipated that the effective tax rate will be approximately the same for the
 remainder of 2001.
 
     Provision for Credit Losses, Net Credit Losses and Reserve for Credit
      Losses
 
                                                  Quarter ended
                                     March 31,      Dec. 31,       March 31,
     (dollar amounts in millions)       2001          2000            2000
 
     Provision for credit losses         $15            $15           $10
 
     Net credit (losses) recoveries:
      Consumer credit                     (3)            (6) (a)       (3)
      Commercial real estate               -              1             5
      Commercial and financial           (13)           (15)          (13)
     Total net credit losses            $(16)          $(20)         $(11)
 
     Annualized net credit
      losses to average loans           .24%           .30% (b)      .15%
 
     Reserve for credit
      losses at end of period           $391           $393          $402
     Reserve as a percentage
      of total loans                   1.54%          1.49%         1.42%
 
     (a)   Includes $4 million of credit losses resulting from the adoption at
           year-end 2000 of new standards for the classification and management
           of retail credit, published by the banking regulators.
     (b)   The ratio of net credit losses to average loans, excluding the
           credit losses resulting from the adoption of the new regulatory
           standards, was .24% for the fourth quarter of 2000.
 
     The reserve for credit losses as a percentage of total loans was 1.54% at
 March 31, 2001, a 12 basis point increase compared with the prior-year period
 reflecting a $2.9 billion, or 10%, lower level of loans outstanding.
 
 
     Nonperforming Assets
 
     (dollar amounts         March 31,     Dec. 31,     Sept. 30,    March 31,
       in millions)             2001         2000          2000         2000
     Nonperforming loans:
      Consumer mortgage         $15           $23          $21           $38
      Commercial real estate      5             5            7             6
      Other                     271           224          176           144
       Total nonperforming
        loans                   291           252          204           188
     Acquired property:
      Real estate acquired       13            13           12            14
      Reserve for real
       estate acquired            -             -            -            (1)
       Net real
        estate acquired          13            13           12            13
      Other assets acquired       6             6            6             9
       Total acquired property   19            19           18            22
       Total nonperforming
        assets                 $310          $271         $222          $210
 
     Nonperforming loans
      as a percentage
      of total loans          1.15%          .95%         .74%          .67%
     Nonperforming assets
      as a percentage of
      total loans and net
      acquired property       1.22%         1.03%         .81%          .74%
 
 
     Nonperforming assets increased $39 million, compared with Dec. 31, 2000,
 and $100 million, compared with March 31, 2000.  The higher level of
 nonperforming assets, compared with Dec. 31, 2000, resulted in part from the
 assignment of nonperforming status to a commercial loan to a borrower in the
 financial services industry in the first quarter of 2001, as well as from the
 addition of various other loans, partially offset by principal repayments and
 credit losses.  The higher level of nonperforming assets, compared with
 March 31, 2000, also resulted from the assignment of nonperforming status to
 commercial loans totaling $38 million to a borrower in the building materials
 manufacturing industry, who voluntarily filed for Chapter 11 bankruptcy
 protection in October 2000 as a result of the financial burden caused by
 asbestos liability litigation claims.
     On April 6, 2001, a California-based electric and natural gas utility
 company voluntarily filed for Chapter 11 bankruptcy protection as the result
 of its inability, due to rules governing the industry's deregulation, to
 increase rates to levels needed to cover higher costs for power.  At March 31,
 2001, loans outstanding to the borrower totaled $40 million with an additional
 $1 million of commercial paper held by the Corporation, neither of which is
 included in the table above.
     As disclosed previously, the Corporation is conducting a strategic review
 of Mellon Leasing Corporation businesses that serve mid-to-large corporations
 and vendors of small ticket equipment, along with Mellon Business Credit,
 which provides asset-based lending products.  Nonperforming assets at
 March 31, 2001, for these businesses totaled $42 million.
 
 
     Selected Capital Data
 
                                   March 31,    Dec. 31,   Sept. 30, March 31,
     (dollar amounts in               2001        2000       2000      2000
      millions, except
      per share amounts)
 
     Total shareholders' equity      $3,878       $4,152    $4,032    $3,851
     Total shareholders' equity
      to assets ratio                 8.38%        8.24%     8.89%     8.13%
 
     Tangible shareholders'
      equity (a)                     $2,286       $2,535    $2,425    $2,190
     Tangible shareholders'
      equity to assets ratio (b)      5.13%        5.21%     5.56%     4.80%
 
     Tier I capital ratio              6.7%(c)     7.23%     7.21%     6.49%
     Total (Tier I plus Tier II)
      capital ratio                   11.0%(c)    11.74%    11.72%    10.61%
     Leverage capital ratio            6.3%(c)     7.11%     7.18%     6.61%
 
     Book value per common share      $8.13        $8.53     $8.26     $7.84
     Tangible book value per common
      share                           $4.79        $5.21     $4.97     $4.46
 
     Closing common stock price      $40.52       $49.19    $46.38    $29.50
     Market capitalization          $19,336      $23,941   $22,631   $14,491
     Common shares outstanding
      (000)                         477,204      486,739   487,990   491,210
 
     (a)   Includes $87 million, $89 million, $81 million and $74 million,
           respectively, of minority interest, primarily related to Newton.  In
           addition, includes $329 million, $334 million, $313 million and
           $323 million, respectively, of tax benefits related to tax
           deductible goodwill and other intangibles.
     (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.  The amount of goodwill
           and other intangibles subtracted from shareholders' equity and total
           assets is net of any tax benefit.
     (c)  Estimated.
 
     The decrease in the Corporation's risk-based capital ratios compared with
 Dec. 31, 2000, reflects the effect of common stock repurchases partially
 offset by earnings retention and lower asset levels.  The increase in the
 Corporation's risk-based capital ratios compared with March 31, 2000, reflects
 lower asset levels as well as a lower risk-weighted mix of assets.
     During the first quarter of 2001, approximately 11.4 million shares of
 common stock were repurchased at a purchase price of $528 million for an
 average share price of $46.24 per share.  Common shares outstanding at
 March 31, 2001, were 8.9% lower than at Dec. 31, 1998, reflecting a
 46.6 million share reduction, net of shares reissued primarily for employee
 benefit plan purposes.  This reduction was due to stock repurchases totaling
 approximately $2.3 billion, at an average share price of $37.16 per share.
 There are an additional 7.2 million shares available for repurchase under the
 current 25 million share repurchase program authorized by the board of
 directors in May 2000.
     The Corporation's average level of treasury stock was approximately
 $541 million higher in the first quarter of 2001 compared with the first
 quarter of 2000.  After giving effect to funding the higher level of treasury
 stock, valued at a short-term funding rate, the lower share count increased
 diluted earnings per share by approximately 2%, comparing the first quarter of
 2001 with the first quarter of 2000.
 
     Impact of Proposed New Goodwill Accounting Standard
     Except for the 1994 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 the same assuming a given
 financing mix.
     The Financial Accounting Standards Board has issued an exposure draft on
 business combinations that would, among other things, eliminate the pooling of
 interests method of accounting for future acquisitions and require that
 goodwill no longer be amortized, but would be subject to impairment testing.
 Results, excluding the impact of goodwill amortization, according to the
 proposed new accounting standard, are shown in the table below.
 
     Financial results - in accordance with proposed new accounting standard
 
                                                      Quarter ended
     (dollar amounts in millions, except    March 31,   Dec. 31,  March 31,
      per share amounts; ratios annualized)    2001       2000       2000
 
     Net income                                $264      $255       $253
     Plus after-tax impact of amortization
      of goodwill from purchase acquisitions:
         Goodwill                                26        24         25
         Other (a)                                1         1          1
           Pro forma net income                $291      $280       $279
           Increase over prior-year period       4%        4%(b)      9%(b)
 
     Pro forma earnings per share - diluted    $.59      $.56       $.55
     Increase over prior-year period             7%        6%(b)     15%(b)
 
     Pro forma return on common equity        29.6%     27.7%      28.7%
 
     Pro forma return on assets               2.45%     2.39%      2.37%
 
     (a)   Primarily relates to the goodwill on investments in joint ventures.
     (b)   As compared to fourth quarter 1999 and first quarter 1999 operating
           results, respectively.
 
 
                                  SUMMARY DATA
                          Mellon Financial Corporation
                               Five Quarter Trend
 
 
     (dollar amounts in millions,
      except per share amounts;
      common shares in thousands)
 
                                               Quarter ended
                            March 31, Dec. 31,   Sept. 30, June 30,  March 31,
                              2001      2000       2000      2000      2000
 
     Selected key data
 
     Reported results (a):
     Diluted earnings
      per share                $.54      $.52       $.51      $.50      $.50
     Net income                $264      $255       $252      $247      $253
     Return on equity         26.9%     25.2%      25.8%     26.2%     26.0%
     Return on assets         2.22%     2.17%      2.18%     2.12%     2.15%
 
 
     Results excluding
      goodwill amortization:
     Diluted earnings
      per share                $.59      $.56       $.56      $.56      $.55
     Net income                $291      $280       $278      $273      $279
     Return on equity         29.6%     27.7%      28.4%     29.0%     28.7%
     Return on assets         2.45%     2.39%      2.40%     2.34%     2.37%
 
 
     Shareholders' equity
      to assets:
       Reported               8.38%     8.24%      8.89%     8.39%     8.13%
       Tangible (b)            5.13      5.21       5.56      5.03      4.80
 
 
     Fee revenue as a
      percentage of net
      interest and
      fee revenue (FTE)         73%       71%        70%       70%       71%
     Trust and investment
      fee revenue as a
      percentage of net
      interest and fee
      revenue (FTE)             52%       51%        50%       51%       51%
     Efficiency ratio
      excluding amortization
      of goodwill               61%       60%        60%       61%       61%
 
     Average common shares
      and equivalents
      outstanding:
       Basic                482,718   487,398    488,188   489,480   496,740
       Diluted              489,328   494,986    495,332   495,103   502,082
 
                                  SUMMARY DATA
                          Mellon Financial Corporation
                               Five Quarter Trend
                                  (continued)
 
     (dollar amounts in millions)
                                           Quarter ended
                      March 31,   Dec. 31,    Sept. 30,   June 30,   March 31,
                        2001        2000         2000       2000       2000
 
     Average balances
      for the quarter
 
     Money market
      investments       $2,708     $2,492       $2,009      $2,219    $1,713
     Trading account
      securities           363        453          322         214       248
     Securities          8,709      6,873        6,166       6,121     6,155
       Total money market
        investments and
        securities      11,780      9,818        8,497       8,554     8,116
     Loans              25,847     26,857       27,430      27,943    29,283
       Total
        interest-earning
        assets          37,627     36,675       35,927      36,497    37,399
     Total assets       48,198     46,741       46,058      46,978    47,205
     Deposits           33,601     32,762       32,114      32,762    32,220
     Total interest-
      bearing
      liabilities       32,160     31,069       30,738      31,367    32,036
     Total shareholders'
      equity             3,992      4,023        3,893       3,793     3,905
 
 
     (a) Computed in accordance with generally accepted accounting principles.
     (b) See page 16 for the definition of this ratio.
 
     Note: All calculations are based on unrounded numbers.  FTE denotes
           presentation on a fully taxable equivalent basis.  Quarterly returns
           are annualized.
 
 
                    CONDENSED CONSOLIDATED INCOME STATEMENT
                          Mellon Financial Corporation
                               Five Quarter Trend
 
                                              Quarter ended
     (in millions, except   March 31,  Dec. 31, Sept. 30,  June 30,  March 31,
      per share amounts)       2001      2000      2000      2000       2000
     Interest revenue
     Interest and fees on
      loans (loan fees of
      $16, $14, $15,
      $15 and $14)              $507      $557      $575      $563      $565
     Interest-bearing
      deposits with banks         19        18        17        15        10
     Federal funds sold and
      securities under resale
      agreements                  16        20        12        17        13
     Other money
      market investments           2         2         1         1         1
     Trading account securities    5         5         5         4         4
     Securities                  136       114       103       104       103
       Total interest revenue    685       716       713       704       696
     Interest expense
     Interest on deposits        240       260       250       244       233
     Federal funds purchased
      and securities under
      repurchase agreements       28        29        27        25        23
     Other short-term borrowings  14        13        20        27        34
     Notes and debentures         59        62        60        57        58
     Trust-preferred securities   20        20        20        19        20
       Total interest expense    361       384       377       372       368
       Net interest revenue      324       332       336       332       328
     Provision for credit losses  15        15        10        10        10
     Net interest revenue after
      provision for
      credit losses              309       317       326       322       318
     Noninterest revenue
     Trust and investment
      fee revenue                621       591       561       565       578
     Cash management and
      deposit transaction
      charges                     83        86        83        83        74
     Foreign currency and
      securities trading revenue  55        43        42        42        51
     Financing-related revenue    67        58        44        43        39
     Equity investment revenue     9         5        20        17        36
     Other                        24        23        23        23        20
       Total fee and
        other revenue            859       806       773       773       798
     Gains on sales
      of securities                -         -         -         -         -
       Total noninterest
        revenue                  859       806       773       773       798
     Operating expense
     Staff expense               426       409       399       390       397
     Professional, legal and
      other purchased services    80        72        77        70        67
     Net occupancy expense        68        62        57        58        64
     Equipment expense            43        40        35        38        37
     Amortization of goodwill     30        28        29        29        29
     Amortization of other
      intangible assets            3         4         3         4         8
     Net expense (revenue) from
      acquired property            -         -         2         1        (1)
     Other expense               105       109       102       115       117
       Total operating expense   755       724       704       705       718
       Income before
        income taxes             413       399       395       390       398
     Provision for income taxes  149       144       143       143       145
       Net income               $264      $255      $252      $247      $253
     Basic net income
      per share                 $.55      $.52      $.52      $.50      $.51
     Diluted net
      income per share          $.54      $.52      $.51      $.50      $.50
 
 
                      CONDENSED CONSOLIDATED BALANCE SHEET
                          Mellon Financial Corporation
 
     (dollar amounts           March 31,    Dec. 31,   Sept. 30,     March 31,
      in millions)               2001         2000        2000         2000
 
     Assets
     Cash and due from banks    $2,873       $3,506      $2,888       $2,958
     Money market investments    2,111        3,917       1,214        2,870
     Trading account securities    310          276         371          139
     Securities available
      for sale                   7,107        7,910       5,323        5,055
     Investment securities
      (approximate fair value
      of $974, $1,027,
      $1,058 and $1,140)           961        1,022       1,063        1,153
     Loans, net of unearned
      discount of $61, $66,
      $74 and $71               25,350       26,369      27,421       28,285
     Reserve for credit losses    (391)        (393)       (400)        (402)
       Net loans                24,959       25,976      27,021       27,883
     Premises and equipment        726          698         598          572
     Goodwill                    1,971        1,993       1,951        2,002
     Other intangibles              37           47          50           56
     Mortgage servicing assets      22           24          25           17
     Other assets                5,206        4,995       4,833        4,676
       Total assets            $46,283      $50,364     $45,337      $47,381
 
 
     Liabilities
     Deposits in
      domestic offices         $28,873      $33,018     $28,634      $30,735
     Deposits in
      foreign offices            2,840        3,872       3,111        2,611
     Short-term borrowings       3,355        2,046       2,306        2,936
     Other liabilities           2,753        2,764       2,732        2,817
     Notes and debentures
      (with original
      maturities over one year)  3,590        3,520       3,531        3,440
     Trust-preferred securities    994          992         991          991
       Total liabilities        42,405       46,212      41,305       43,530
 
     Shareholders' equity
     Common stock - $.50 par value
      Authorized -
       800,000,000 shares
      Issued -
       588,661,920 shares          294          294         294          294
     Additional paid-in capital  1,852        1,837       1,821        1,793
     Retained earnings           4,378        4,270       4,155        3,938
     Accumulated unrealized
      gain (loss), net of tax        6          (38)        (87)        (151)
     Treasury stock of
      111,457,855; 101,922,986;
      100,671,971; and 97,452,373
      shares at cost            (2,652)      (2,211)     (2,151)      (2,023)
       Total shareholders'
        equity                   3,878        4,152       4,032        3,851
       Total liabilities and
        shareholders' equity   $46,283      $50,364     $45,337      $47,381
 
 SOURCE  Mellon Financial Corporation

RELATED LINKS

http://www.mellon.com