Filed by The Bank of New York Company, Inc.
Pursuant to Rule 425
under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Companies: The Bank of New York Company, Inc.
(Commission File No.: 1-06152)
Mellon Financial Corporation
(Commission File No.: 1-07410)
Forward-Looking Statements
The information presented above may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based upon the Company's current beliefs and
expectations and are subject to significant risks and uncertainties. The
following risks, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in
the forward-looking statements: (1) the businesses of The Bank of New York
Company, Inc. and Mellon Financial Corporation may not be integrated
successfully or the integration may be more difficult, time-consuming or
costly than expected; (2) the combined company may not realize, to the extent
or at the time expected, revenue synergies and cost savings from the
transaction; (3) revenues following the transaction may be lower than
expected as a result of losses of customers or other reasons; (4) deposit
attrition, operating costs, customer loss and business disruption following
the transaction, including, without limitation, difficulties in maintaining
relationships with employees, may be greater than expected; and
(5) governmental or shareholder approvals of the transaction may not be
obtained on the proposed terms or expected timeframe or at all. Additional
factors that could cause The Bank of New York Company, Inc.'s and Mellon
Financial Corporation's results to differ materially from those described in
the forward-looking statements can be found in The Bank of New York Company,
Inc.'s and Mellon Financial Corporation's reports (such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K)
filed with the Securities and Exchange Commission.
Additional Information About this Transaction
The proposed transaction between The Bank of New York Company, Inc. and
Mellon Financial Corporation will be submitted to The Bank of New York
Company, Inc.'s and Mellon Financial Corporation's shareholders for their
consideration. Shareholders are urged to read the joint proxy
statement/prospectus regarding the proposed transaction between The Bank of
New York Company, Inc. and Mellon Financial Corporation because it will
contain important information. Shareholders will be able to obtain a free
copy of the joint proxy statement/prospectus, as well as other filings
containing information about The Bank of New York Company, Inc. and Mellon
Financial Corporation, without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and
other SEC filings that will be incorporated by reference in the joint proxy
statement/prospectus will also be available, without charge, from The Bank of
New York Company, Inc., Investor Relations, One Wall Street, 31st Floor, New
York, New York 10286 (212-635-1578), or from Mellon Financial Corporation,
Secretary of Mellon Financial Corporation, One Mellon Center, Pittsburgh,
Pennsylvania 15258-0001 (800-205-7699).
Directors and executive officers of The Bank of New York Company, Inc.
and Mellon Financial Corporation and other persons may be deemed to be
participants in the solicitation of proxies from the shareholders of The Bank
of New York Company, Inc and/or Mellon Financial Corporation. in respect of
the proposed transaction. Information about the directors and executive
officers of The Bank of New York Company, Inc. is set forth in the proxy
statement for The Bank of New York Company, Inc.'s 2006 annual meeting of
shareholders, as filed with the SEC on March 24, 2006. Information about the
directors and executive officers of Mellon Financial Corporation is set forth
in the proxy statement for Mellon Financial Corporation's 2006 annual meeting
of shareholders, as filed with the SEC on March 15, 2006. Additional
information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the joint proxy statement/prospectus when it
becomes available.
The following is the press release containing unaudited interim financial
information and accompanying discussion for the fourth quarter of 2006 filed
on January 18, 2007.
1
Exhibit 99.1
News Release
For Immediate Release
THE BANK OF NEW YORK COMPANY, INC. REPORTS
FOURTH QUARTER NET INCOME OF $2.36 PER SHARE;
$0.58 PER SHARE ON AN OPERATING BASIS REFLECTING
STRONG PERFORMANCE ACROSS ALL BUSINESS LINES
NEW YORK, N.Y., January 18, 2007 -- The Bank of New York Company, Inc. (NYSE:
BK) reported today fourth quarter net income of $1,789 million and diluted
earnings per share of $2.36. On an adjusted basis, excluding merger and
integration costs and the gain on the sale of the Retail Business, fourth
quarter diluted earnings per share was 58 cents, an increase of 9% from 53
cents in the fourth quarter of 2005, and net income was $435 million, up from
$405 million in last year's fourth quarter. See "Supplemental Financial
Information."
Full-year 2006 net income was $3,011 million and diluted earnings per
share was $3.93. On an adjusted basis, excluding merger and integration
costs and the gain on the sale of the Retail Business, full-year 2006 diluted
earnings per share was $2.26, an increase of 11% over $2.03 in 2005 and net
income was $1,731 million, compared with $1,571 million last year.
FOURTH QUARTER PERFORMANCE HIGHLIGHTS
* Outstanding issuer services results, reflecting double-digit revenue
growth in the Company's existing corporate trust business over the
fourth quarter of 2005 and another excellent quarter for depositary
receipts;
* Broker-dealer services revenue growth of 16% over the fourth quarter of
2005, driven by collateral management and global clearance activities;
* Strong performance in global custody activities, demonstrated by a 10%
growth in investor services fees over the fourth quarter of 2005;
* Private banking and asset management fees were up 25% sequentially
reflecting organic growth and higher performance fees;
* Strong net interest margin reflecting robust levels of customer
activity;
* Continued excellent asset quality.
"Our strong performance in the fourth quarter caps off a watershed year
for our Company," stated Thomas A. Renyi, Chairman and Chief Executive
Officer. "Throughout the year we delivered on our strategy, achieved our
performance objectives and identified significant opportunities to accelerate
our growth and increase the value we deliver to shareholders. The agreement
to merge with Mellon Financial Corporation, together with the formation of
BNY ConvergEx Group and the asset swap that made us the leader in global
corporate trust, creates a compelling growth story. These transactions are
reshaping the Company, expanding our capacity for growth and profitability,
and redefining what it means to be a premier provider of securities servicing
and asset management.
"We are very pleased with our financial performance in the fourth
quarter as well as our progress on key strategic initiatives. Our results
demonstrate the power of our business model, which is built
2
upon an expectation for the increased globalization of financial markets
and asset flows. This trend continued to be strong in the fourth quarter,
and our performance reflects our ability to capitalize on the heightened
market activity. In addition, we closed the asset swap and BNY ConvergEx
transactions early in the quarter, and the corporate trust integration
remains on schedule and results are on plan. Our demonstrated success in
executing on our strategic and financial goals gives us great confidence in
our ability to again achieve strong results in the year ahead."
SUPPLEMENTAL FINANCIAL INFORMATION
On October 1, 2006, the Company acquired JPMorgan Chase's corporate
trust business ("Acquired Corporate Trust Business") and sold to JPMorgan
Chase the Company's retail and regional middle market banking businesses
("Retail Business"). In the second quarter of 2006, the Company adopted
discontinued operations accounting for its Retail Business. Therefore, the
results from continuing operations through December 31, 2006 exclude the
results of the Company's Retail Business but only include the operations of
the Acquired Corporate Trust Business for the fourth quarter of 2006.
Adjusted financial statements combining continuing and discontinued
operations are presented in the Appendix.
The following table shows the impact of the gain on the sale of the
Company's Retail Business and merger and integration costs on diluted
earnings per share for the three months and twelve months ended December 31,
2006:
Diluted Earnings Per Share
-----------------------------------------------------------------------------
Three Months Ended December 31, 2006 Twelve Months Ended December 31, 2006
------------------------------------- -------------------------------------
Continuing Discontinued Continuing Discontinued
(In dollars) Operations Operations Adjusted(1) Operations Operations Adjusted(1)
---------- ------------ -------- ---------- ------------ --------
As Reported $ 0.56 $ 1.80 $ 2.36 $ 1.93 $ 2.00 $ 3.93
Merger & Integration
Costs (2) 0.02 0.02 0.04 0.09 0.04 0.13
Gain on Sale of Retail
Business (3) - (1.82) (1.82) - (1.80) (1.80)
------- ------- ------- ------- ------- -------
Operating (4) $ 0.58 $ - $ 0.58 $ 2.02 $ 0.24 $ 2.26
======= ======= ======= ======= ======= =======
(1) Adjusted results combine continuing and discontinued operations to provide continuity with
historical results.
(2) Merger and integration costs include investment portfolio restructuring costs, employee-
related costs, and other transaction-related expenses.
(3) The Company recorded an after-tax gain on the sale of the Retail Business of $1,381 million
($2,159 million pre-tax).
(4) Operating excludes merger & integration costs and the gain on the sale of the Retail
Business.
3
NONINTEREST INCOME (Continuing Operations)
Percent Inc/(Dec)
Quarter ----------------- Year Percent
------------------ 4Q06 vs. 4Q06 vs. -------------- Inc/
(In millions) 4Q06 3Q06 4Q05 3Q06 4Q05 2006 2005 (Dec)
------ ------ ------ -------- ------- ------ ------ -------
Securities Servicing Fees
Execution and Clearing
Services $ 264 $ 301 $ 326 (12)% (19)% $1,245 $1,222 2%
Issuer Services 341 194 171 76 99 895 639 40
Investor Services 286 279 259 3 10 1,138 1,056 8
Broker-Dealer Services 67 65 58 3 16 259 227 14
------ ------ ------ ------ ------
Securities Servicing Fees 958 839 814 14 18 3,537 3,144 13
Global Payment Services 61 66 60 (8) 2 252 260 (3)
Private Banking
and Asset Management Fees 168 134 118 25 42 569 452 26
Service Charges and Fees 51 52 56 (2) (9) 207 228 (9)
Foreign Exchange and
Other Trading Activities 97 84 96 15 1 425 379 12
Securities Gains 27 21 18 29 50 88 68 29
Net Economic Value Payments 23 - - NM NM 23 - NM
Other 52 63 41 (17) 27 221 167 32
------ ------ ------ ------ ------
Total Noninterest
Income $1,437 $1,259 $1,203 14 19 $5,322 $4,698 13
====== ====== ====== ====== ======
NM - Not meaningful
The increase in noninterest income versus the year-ago quarter reflects
growth in securities servicing and private banking and asset management fees,
as well as a higher level of securities gains and other income, partially
offset by declines in service charges. Most of these same trends explain the
year-over-year and sequential increases in noninterest income. The fourth
quarter of 2006's results also reflects higher revenue from the new business
mix resulting from the Acquired Corporate Trust Business, offset by the BNY
ConvergEx transaction.
The decline in execution and clearing fees versus the fourth quarter of
2005 and the third quarter of 2006 reflects the disposition of certain
execution businesses in the BNY ConvergEx transaction. These businesses had
revenues of $66 million in the third quarter of 2006 and $82 million in the
fourth quarter of 2005. At Pershing, revenue was up, compared with both the
fourth quarter and full-year 2005 and the previous quarter, reflecting good
organic growth in asset-driven fees and retirement products. Comparisons to
2005 periods are impacted by the previously disclosed loss of a significant
customer. The execution and clearing businesses currently include electronic
trading and, through Pershing, correspondent clearing services such as
clearing, execution, financing, and custody for introducing broker-dealers.
Issuer services fees continued to exhibit strong growth for the quarter
compared with last year's fourth quarter and full-year 2005. The Acquired
Corporate Trust Business had a significant impact on comparisons with all
prior periods, as fee revenues for the fourth quarter were $129 million.
Existing corporate trust fees had double-digit growth over the fourth quarter
of 2005 reflecting continued strong performance in global products and
structured finance, notably asset-backed and mortgage-backed securities. The
sequential quarter and full-year increases are attributable to the same
factors affecting quarterly year-over-year results. The depositary receipts
business continues to benefit from both a higher level of net issuance,
reflecting the continued growth in cross-border
4
investing activity, as well as increased corporate actions related to
dividends and mergers and acquisitions. Issuer services includes corporate
trust, depositary receipts, employee investment plan services, and stock
transfer.
Investor services fees increased from all prior periods due to increased
transaction volumes and organic growth across all business products,
especially global custody, mutual funds, exchange-traded funds and hedge fund
servicing. The fourth quarter growth in these businesses was partially
offset by a decline in securities lending, which was adversely impacted by
tight financing spreads. Investor services includes global fund services,
global custody, securities lending, global liquidity services, outsourcing,
and hedge fund servicing.
Broker-dealer services fees were up significantly from both the fourth
quarter and full-year 2005 reflecting continued strong performance in global
clearance and collateral management. The performance was driven by both an
increase in transaction volumes and strong net new business flows. Broker-
dealer services fees increased from the third quarter of 2006 reflecting the
same trends impacting year-over-year comparisons.
Global payment services fees increased from the fourth quarter of 2005
reflecting greater funds transfer volume, although fees declined from the
third quarter of 2006 and for the full year 2006. While the payments
business continues to grow, as evidenced by increases in funds transfer
volume and net new business, the level of fees has been impacted by customers
paying with a higher value of compensatory balances in lieu of fees. On an
invoiced services basis, total revenue was up 3% over the fourth quarter of
2005 and 1% on a sequential-quarter basis. On the same basis, total revenue
was up 6% for the full year of 2006.
Private banking and asset management fees increased significantly over
the fourth quarter and full-year 2005 primarily due to acquisitions and
improved performance fees at Ivy Asset Management. The sequential-quarter
increase in fees is attributable to organic growth in assets under management
and higher performance fees at Ivy Asset Management and Alcentra, as well as
increased fees in the private bank. Total assets under management for
private banking and asset management were $131 billion at December 31, 2006,
up from $105 billion at December 31, 2005 and $120 billion at September 30,
2006.
Service charges and fees were down from the fourth quarter and full year
of 2005 and sequentially principally due to lower capital market fees, in
line with the Company's reduced risk appetite.
Foreign exchange and other trading revenues rose from both the fourth
quarter of 2005 and the third quarter of 2006 reflecting an increase in fixed
income trading activity. Foreign exchange results were down from the fourth
quarter of 2005 and up only slightly on a sequential-quarter basis reflecting
lower market volatility. Foreign exchange was up significantly for the full
year of 2006 reflecting increased cross-border activity, greater business
from existing clients, and favorable market conditions in the first half of
the year.
Securities gains were up significantly from the fourth quarter of 2005
and the third quarter of 2006. In the fourth quarter, the Company sold one of
its sponsor fund investments to a third party for a realized gain of $11
million. The gains in the quarter were also attributable to continued strong
returns on investments in the sponsor fund portfolio. The increase in
securities gains for the full year reflect favorable market conditions and
liquidity in the private equity markets.
Net economic value payments are amounts received from JPMorgan Chase for
the economic value of certain deposits that have not yet been transitioned to
the Company's balance sheet. The transition is expected to occur during the
second quarter of 2007.
Other noninterest income increased versus the fourth quarter and full
year of 2005 reflecting higher asset-related gains. The sequential quarter
decline reflects fewer asset-related gains partly
5
offset by higher income from equity investments and stable sources. The
fourth quarter of 2006's result includes a $6 million loss related to low-
income housing investments. The full-year 2006 result includes a pre-tax gain
of $35 million related to the conversion of the Company's New York Stock
Exchange seats into cash and shares of NYSE Group, Inc. common stock. The
full-year 2005 result includes a $17 million gain on the sale of the Company's
interest in Financial Models Company, Inc.
NET INTEREST INCOME (Continuing Operations)
Percent Inc/(Dec) Year-to-date
----------------- ------------- Percent
(Dollars in millions) 4Q06 vs. 4Q06 vs. 2006 2005 Inc/
4Q06 3Q06 4Q05 3Q06 4Q05 (Dec)
---- ---- ---- ------- --------- ---- ---- -------
Net Interest Income $450 $351 $344 28% 31% $1,499 $1,340 12%
Tax Equivalent
Adjustment* 2 7 6 22 27
---- ---- ---- ------ ------
Net Interest Income
on a Tax Equivalent
Basis $452 $358 $350 26 29 $1,521 $1,367 11
==== ==== ==== ====== ======
Net Interest Margin 2.27% 1.89% 1.96% 2.01% 2.02%
* A number of amounts related to net interest income are presented on a "tax equivalent basis." The Company
believes that this presentation provides comparability of net interest income arising from both taxable and
tax-exempt sources and is consistent with industry standards.
Comparisons with all prior periods are impacted by higher deposit
balances associated with the Acquired Corporate Trust Business. Compared to
prior year periods, net interest income also benefited from higher amounts of
interest-earning assets and interest-free balances as well as the higher
value of interest-free balances in a rising rate environment. The sequential
increases in net interest income and net interest margin were primarily
driven by higher interest-free balances, particularly from the Acquired
Corporate Trust Business.
Net interest income does not reflect the impact of certain deposits of
the Acquired Corporate Trust Business which are expected to transition to the
Company in the second quarter of 2007. Pro forma for the inclusion of these
deposits and the associated economic value on these deposits, the net
interest margin would have been 2.09%.
6
NONINTEREST EXPENSE AND INCOME TAXES (Continuing Operations)
Percent Inc/(Dec)
Quarter ----------------- Year Percent
-------------------- 4Q06 vs. 4Q06 vs. -------------- Inc/
(Dollars in million) 4Q06 3Q06 4Q05 3Q06 4Q05 2006 2005 (Dec)
------ ------ ------ -------- -------- ------ ------ -------
Salaries and
Employee Benefits $ 736 $ 644 $ 587 14% 25% $2,640 $2,310 14%
Net Occupancy 73 70 66 4 11 279 250 12
Furniture and Equipment 44 46 51 (4) (14) 190 199 (5)
Clearing 33 47 50 (30) (34) 183 187 (2)
Sub-custodian Expenses 34 31 24 10 42 134 96 40
Software 59 53 53 11 11 220 214 3
Communications 23 26 25 (12) (8) 97 91 7
Amortization
of Intangibles 34 14 12 143 183 76 40 90
Merger and Integration Costs 17 89 - (81) NM 106 - NM
Other 228 172 176 33 30 746 680 10
------ ------ ------ ------ ------
Total Noninterest Expense 1,281 1,192 1,044 7 23 4,671 4,067 15
Merger and Integration Costs (17) (89) - NM NM (106) - NM
------ ------ ------ ------ ------
Total Noninterest
Expense Excluding
Merger and Integration
Costs $1,264 $1,103 $1,044 15 21 $4,565 $4,067 12
====== ====== ====== ====== ======
NM - Not meaningful
Excluding merger and integration costs, noninterest expense was up
compared with the fourth quarter and full year of 2005 and on a sequential-
quarter basis. Expenses for the fourth quarter and full year of 2006 reflect
increases related to the Acquired Corporate Trust Business partially offset
by the disposition of certain execution businesses in the BNY ConvergEx
transaction.
Relative to the year-ago periods, salaries and benefits increased
reflecting higher staff levels tied to new businesses, acquisitions,
incentive compensation, and temporary help. Pension expense was also higher
on a year-over-year basis. The sequential-quarter increase also reflects a
higher level of incentive compensation tied to performance fees and other
revenue increases and higher temporary help and medical costs.
The lower level of clearing expenses reflects the BNY ConvergEx
transaction. Sub-custodian expenses were higher for the year reflecting
increased asset values and transaction volumes of assets under custody, and
increased activity in depositary receipts.
The rise in amortization of intangibles in the fourth quarter of 2006
is due to the Acquired Corporate Trust Business and also includes a $6
million impairment charge related to the write-off of customer intangibles in
Europe.
Other expense in the fourth quarter of 2006 included a $22 million
transition services expense and other costs related to the Acquired Corporate
Trust Business.
Merger and integration costs for the full year of 2006 included a loss
in connection with the restructuring of the Company's investment portfolio,
employee-related costs such as severance and other transaction-related
expenses.
The effective tax rate for the fourth quarter of 2006 was 31.2%,
compared to 32.2% in the fourth quarter of 2005 and 29.4% in the third quarter
of 2006. The effective tax rate for the full year of 2006 was 32.0% compared
with 32.1% in 2005. The decrease from the fourth quarter of 2005
7
primarily reflects the impact of discontinued operations accounting.
The sequential quarter increase reflects higher state and local taxes.
CAPITAL
The Company's estimated Tier 1 and Total Capital ratios were 7.80% and
12.07% at December 31, 2006, compared with 8.38% and 12.48% at December 31,
2005 and 8.17% and 12.32% at September 30, 2006. The estimated leverage
ratio was 6.40% at December 31, 2006, compared with 6.60% at December 31,
2005 and 6.56% at September 30, 2006. The Company's estimated tangible common
equity ratio was 5.14% at December 31, 2006, compared with 5.58% at December
31, 2005 and 5.58% at September 30, 2006. The decline in the capital ratios
primarily reflects the impact of the goodwill and intangibles associated with
the Acquired Corporate Trust Business and the adoption of a new accounting
standard related to pensions which reduced capital by $257 million.
The Company repurchased 12.1 million shares of its common stock on
October 3, 2006 in connection with the BNY ConvergEx transaction.
ASSET QUALITY (Continuing Operations)
Asset quality continued to be strong as nonperforming assets remained
unchanged at low levels. Nonperforming assets were $38 million at December
31, 2006, essentially flat compared with $39 million at December 31, 2005 and
$38 million at September 30, 2006. Net charge-offs were $24 million in the
fourth quarter of 2006, compared with $140 million in the fourth quarter of
2005 and zero in the third quarter of 2006. During the fourth quarter of
2006, the Company sold $38 million of leasing exposure to a domestic airline
resulting in a charge-off of $23 million. During the fourth quarter of 2005,
the Company charged off $140 million of leases with two bankrupt airline
customers.
The provision of credit losses for the fourth quarter of 2006 was a
credit of $15 million, compared with a provision of $3 million in the fourth
quarter of 2005 and a credit of $4 million in the third quarter of 2006. The
sequential increase in the credit to the provision is consistent with a
continued strong credit environment.
MERGER AGREEMENT WITH MELLON FINANCIAL CORPORATION ("MELLON")
On December 3, 2006, the Company and Mellon entered into an Agreement
and Plan of Merger (the "Merger Agreement"), pursuant to which the Company
and Mellon will each merge with and into a newly formed corporation to be
called The Bank of New York Mellon Corporation. The boards of directors of
both companies have unanimously approved the Merger Agreement. The board of
directors of each company has adopted a resolution recommending the adoption
of the Merger Agreement by its respective shareholders, and each party has
agreed to put these matters before their respective shareholders for
consideration. Subject to the customary closing conditions, the merger is
expected to close early in the third quarter of 2007.
It is currently anticipated that the Company and Mellon will file a joint
proxy statement/prospectus with the SEC regarding the proposed merger in late
February or early March, after each party files its annual report on Form 10-K
with the SEC.
8
CONFERENCE CALL INFORMATION
Thomas A. Renyi, chairman and chief executive officer, Bruce W. Van
Saun, vice chairman, and Todd Gibbons, senior executive vice president and
chief financial officer, will review the quarterly results in a live
conference call and audio webcast today at 8:30 a.m. EST.
The presentation will be accessible:
* From the Company's website at www.bankofny.com/earnings and
* By telephone at (888) 677-2456 within the United States or (517) 623-
4161 internationally; the passcode is "The Bank of New York."
* A replay of the call will be available through the Company's website
and also by telephone at (800) 294-0360 within the United States or
(402) 220-9750 internationally.
The Bank of New York Company, Inc. (NYSE: BK) is a global leader in
providing a comprehensive array of services that enable institutions and
individuals to move and manage their financial assets in more than 100
markets worldwide. The Company has a long tradition of collaborating with
clients to deliver innovative solutions through its core competencies:
securities servicing, treasury management, asset management, and private
banking. The Company's extensive global client base includes a broad range
of leading financial institutions, corporations, government entities,
endowments and foundations. Its principal subsidiary, The Bank of New York,
founded in 1784, is the oldest bank in the United States and has consistently
played a prominent role in the evolution of financial markets worldwide.
Additional information is available at www.bankofny.com.
***************************
Contact Information
Media: Investors:
------ ----------
R. Jeep Bryant, EVP Kenneth A. Brause, MD
(212) 635-1569 (212) 635-1578
9
FORWARD-LOOKING STATEMENTS
All statements in this press release other than statements of historical
fact are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based upon
the Company's current beliefs and expectations including, among other things,
projections with respect to revenue and earnings and the Company's plans and
objectives and as such are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in the
forward-looking statements. These include lower than expected performance or
higher than expected costs in connection with acquisitions and integration of
acquired businesses and the BNY ConvergEx transaction, the completion and
timing of potential transactions, the level of capital market and trading
activity, changes in customer credit quality, market performance, the effects
of capital reallocation, portfolio performance, changes in regulatory
expectations and standards, ultimate differences from management projections
or market forecasts and the actions that management could take in response to
these changes.
In addition, with respect to the Mellon transaction, the following
risks, among others, could cause actual results to differ materially from the
anticipated results or other expectations expressed in the forward-looking
statements: (1) the businesses of The Bank of New York Company, Inc. and
Mellon Financial Corporation may not be integrated successfully or the
integration may be more difficult, time-consuming or costly than expected;
(2) the combined company may not realize, to the extent or at the time
expected, revenue synergies and cost savings from the transaction;
(3) revenues following the transaction may be lower than expected as a result
of losses of customers or other reasons; (4) deposit attrition, operating
costs, customer loss and business disruption following the transaction,
including, without limitation, difficulties in maintaining relationships with
employees, may be greater than expected; and (5) governmental or shareholder
approvals of the transaction may not be obtained on the proposed terms or
expected timeframe or at all.
Additional factors that could cause The Bank of New York Company,
Inc.'s and Mellon Financial Corporation's results to differ materially from
those described in the forward-looking statements can be found in The Bank of
New York Company, Inc.'s and Mellon Financial Corporation's reports (such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K) filed with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date they are made. The
Company will not update forward-looking statements to reflect factual
assumptions, circumstances or events that have changed after a forward-
looking statement was made.
(Financial highlights and detailed financial statements are attached.)
ADDITIONAL INFORMATION
The proposed transaction between The Bank of New York Company, Inc. and
Mellon Financial Corporation will be submitted to The Bank of New York
Company, Inc.'s and Mellon Financial Corporation's shareholders for their
consideration. Shareholders are urged to read the joint proxy
statement/prospectus regarding the proposed transaction between The Bank of
New York Company, Inc. and Mellon Financial Corporation because it will
contain important information. Shareholders will be able to obtain a free
copy of the joint proxy statement/prospectus, as well as other filings
containing information about The Bank of New York Company, Inc. and Mellon
Financial Corporation, without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and
other SEC filings that will be incorporated by reference in the joint proxy
statement/prospectus will also be available, without charge, from The Bank of
New York Company, Inc., Investor Relations, One Wall Street, 31st Floor, New
York, New York 10286 (212-635-1578), or from Mellon Financial Corporation,
Secretary of Mellon Financial Corporation, One Mellon Center, Pittsburgh,
Pennsylvania 15258-0001 (800-205-7699).
Directors and executive officers of The Bank of New York Company, Inc.
and Mellon Financial Corporation and other persons may be deemed to be
participants in the solicitation of proxies from the shareholders of The Bank
of New York Company, Inc. and/or Mellon Financial Corporation in respect of
the proposed transaction. Information about the directors and executive
officers of The Bank of New York Company, Inc. is set forth in the proxy
statement for The Bank of New York Company, Inc.'s 2006 annual meeting of
shareholders, as filed with the SEC on March 24, 2006. Information about the
directors and executive officers of Mellon Financial Corporation is set forth
in the proxy statement for Mellon Financial Corporation's 2006 annual meeting
of shareholders, as filed with the SEC on March 15, 2006. Additional
information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the joint proxy statement/prospectus when it
becomes available.
10
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Financial Highlights
(Unaudited)
--------------------------------------------------------------------------------------------------
Quarter ended Twelve months ended
--------------------------------- -------------------
(dollar amounts in millions, except per Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
share amounts and unless otherwise noted) 2006 2006 2005 2006 2005
--------------------------------------------------------------------------------------------------
Continuing Operations:
----------------------
Key Metrics
-----------
Noninterest Income $ 1,437 $ 1,259 $ 1,203 $ 5,322 $ 4,698
Net Interest Income 450 351 344 1,499 1,340
-------- -------- -------- -------- --------
Total Revenue $ 1,887 $ 1,610 $ 1,547 $ 6,821 $ 6,038
Total Expense 1,281 1,192 1,044 4,671 4,067
Pre-tax Operating Margin 33% 26% 32% 32% 33%
Net Interest Margin 2.27 1.89 1.96 2.01 2.02
Net Interest Income on Tax
Equivalent Basis $ 452 $ 358 $ 350 $ 1,521 $ 1,367
Net Income 427 298 339 1,476 1,343
Basic EPS 0.57 0.40 0.44 1.95 1.75
Diluted EPS 0.56 0.39 0.44 1.93 1.74
Performance Ratios
------------------
Return on Average Common Equity 14.95% 11.61% 13.89% 14.29% 14.18%
Return on Average Common Equity Excluding
Merger & Integration Costs 15.36 13.95 13.89 14.98 14.18
Return on Average Assets 1.66 1.19 1.40 1.47 1.44
Return on Average Assets Excluding
Merger & Integration Costs 1.70 1.43 1.40 1.54 1.44
Return on Average Tangible Common Equity 36.45 22.17 25.70 29.12 26.14
Return on Average Tangible Common Equity
Excluding Merger & Integration Costs 37.39 26.49 25.70 30.49 26.14
Return on Average Tangible Assets 1.87 1.29 1.50 1.61 1.54
Return on Average Tangible Assets
Excluding Merger & Integration Costs 1.92 1.54 1.50 1.68 1.54
Selected Average Balances
-------------------------
Interest-earning Assets $ 79,841 $ 76,088 $ 71,475 $ 75,606 $ 67,715
Total Assets 102,138 95,579 90,526 96,478 86,319
Interest-bearing Deposits 44,344 43,905 39,796 43,143 37,070
Noninterest-bearing Deposits 14,721 10,687 10,577 11,609 10,078
Shareholders' Equity 11,340 10,262 9,699 10,333 9,473
Employees 22,361 20,456 19,944
Credit Loss Provision and Net Charge-Offs
-----------------------------------------
Total Provision $ (15) $ (4) $ 3 $ (20) $ (7)
Total Net (Charge-offs)/Recoveries (24) - (140) (13) (150)
Loans
-----
Allowance for Loan Losses
As a Percent of Total Loans 0.76% 1.00% 0.99%
As a Percent of Non-Margin Loans 0.88 1.16 1.21
Total Allowance for Credit Losses
As a Percent of Total Loans 1.16 1.40 1.43
As a Percent of Non-Margin Loans 1.34 1.63 1.75
Nonperforming Assets
--------------------
Total Nonperforming Assets $ 38 $ 38 $ 39
Nonperformance Assets Ratio 0.1% 0.1% 0.1%
11
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Financial Highlights(Supplemental Information)
(Unaudited)
--------------------------------------------------------------------------------------------------
Quarter ended Twelve months ended
--------------------------------- -------------------
(dollar amounts in millions, except per Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
share amounts and unless otherwise noted) 2006 2006 2005 2006 2005
--------------------------------------------------------------------------------------------------
Adjusted Results:
-----------------
Key Metrics
-----------
Noninterest Income $ 3,611 $ 1,325 $ 1,274 $ 7,694 $ 4,956
Net Interest Income 450 506 492 1,956 1,909
-------- -------- -------- -------- --------
Total Revenue $ 4,061 $ 1,831 $ 1,766 $ 9,650 $ 6,865
Total Expense 1,325 1,318 1,148 5,069 4,483
Pre-tax Operating Margin 68% 28% 34% 48% 34%
Net Interest Margin 2.27 2.33 2.35 2.32 2.36
Net Interest Income on Tax
Equivalent Basis $ 452 $ 514 $ 499 $ 1,981 $ 1,938
Net Income 1,789 352 405 3,011 1,571
Basic EPS 2.39 0.47 0.53 3.98 2.05
Diluted EPS 2.36 0.46 0.53 3.93 2.03
Performance Ratios
------------------
Return on Average Common Equity 62.60% 13.70% 16.57% 29.14% 16.59%
Return on Average Common Equity Excluding
Merger & Integration Costs & Gain on
Sale of Retail Business 15.24 16.56 16.57 16.75 16.59
Return on Average Assets 6.95 1.29 1.53 2.82 1.55
Return on Average Assets Excluding
Merger & Integration Costs & Gain on
Sale of Retail Business 1.69 1.55 1.53 1.62 1.55
Return on Average Tangible Common Equity 146.46 26.51 31.18 59.25 31.13
Return on Average Tangible Common Equity
Excluding Merger & Integration Costs
& Gain on Sale of Retail Business 37.02 31.90 31.18 34.47 31.13
Return on Average Tangible Assets 7.51 1.38 1.63 3.01 1.65
Return on Average Tangible Assets Excluding
Merger & Integration Costs & Gain on
Sale of Retail Business 1.90 1.66 1.63 1.75 1.65
Employees 22,919 23,808 23,451
12
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Financial Highlights
(Unaudited)
---------------------------------------------------------------------------------------------------
Quarter ended Twelve months ended
--------------------------------- --------------------
(dollar amounts in millions, except per Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
share amounts and unless otherwise noted) 2006 2006 2005 2006 2005
---------------------------------------------------------------------------------------------------
Assets Under Custody (in trillions)(1)
--------------------------------------
Assets Under Custody $ 13.0 $ 12.2 $ 10.9
Equity Securities 33% 31% 32%
Fixed Income Securities 67 69 68
Cross-Border Assets $ 4.7 $ 4.2 $ 3.4
Assets Under Management (in billions)(1)
----------------------------------------
Asset Management Sector
Equity Securities $ 39 $ 36 $ 37
Fixed Income Securities 21 20 20
Alternative Investments 33 30 15
Liquid Assets 38 34 33
-------- -------- --------
Asset Management Sector $ 131 $ 120 $ 105
Foreign Exchange Overlay 11 11 10
Securities Lending Short-term
Investment Funds 48 48 40
-------- -------- --------
Total Assets Under Management $ 190 $ 179 $ 155
======== ======== ========
Capital Ratios
--------------
Tier 1 Capital Ratio 7.80%(1) 8.17% 8.38%
Total Capital Ratio 12.07 (1) 12.32 12.48
Leverage Ratio 6.40 (1) 6.56 6.60
Tangible Common Equity Ratio 5.14 (1) 5.58 5.58
Average Shares Outstanding (in thousands)
-----------------------------------------
Basic 747,550 756,780 762,489 756,067 764,963
Diluted 757,981 766,665 771,091 765,708 772,851
Other
-----
Book Value per Common Share $ 15.35 $ 13.70 $ 12.81
Tangible Book Value per Common Share 6.58 7.44 7.06
Period-End Shares Outstanding
(in thousands) 755,861 763,993 771,129
Dividends per Share $ 0.22 $ 0.22 $ 0.21
Dividend Yield 2.24% 2.50% 2.64%
Closing Common Stock Price per Share $ 39.37 $ 35.26 $ 31.85
Market Capitalization (in billions) 29.8 26.9 24.6
(1) Estimated
13
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
Quarter Ended Twelve Months Ended
--------------------------------- ---------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2006 2006 2005 2006 2005
--------- --------- -------- --------- ---------
Interest Income
---------------
Loans $ 422 $ 367 $ 297 $ 1,449 $ 1,045
Margin loans 83 85 79 330 267
Securities
Taxable 274 282 248 1,101 823
Exempt from Federal Income Taxes 1 10 10 29 38
--------- -------- -------- --------- ---------
275 292 258 1,130 861
Deposits in Banks 166 166 68 538 274
Federal Funds Sold and Securities Purchased
Under Resale Agreements 78 22 19 130 70
Trading Assets 32 28 53 163 152
--------- -------- -------- --------- ---------
Total Interest Income 1,056 960 774 3,740 2,669
--------- -------- -------- --------- ---------
Interest Expense
----------------
Deposits 397 391 270 1,434 839
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 16 34 12 104 35
Other Borrowed Funds 30 27 25 100 58
Customer Payables 43 42 40 167 128
Long-Term Debt 120 115 83 436 269
--------- -------- -------- --------- ---------
Total Interest Expense 606 609 430 2,241 1,329
--------- -------- -------- --------- ---------
Net Interest Income 450 351 344 1,499 1,340
-------------------
Provision for Credit Losses (15) (4) 3 (20) (7)
--------- -------- -------- --------- ---------
Net Interest Income After Provision
for Credit Losses 465 355 341 1,519 1,347
--------- -------- -------- --------- ---------
Noninterest Income
------------------
Securities Servicing Fees
Execution and Clearing Services 264 301 326 1,245 1,222
Issuer Services 341 194 171 895 639
Investor Services 286 279 259 1,138 1,056
Broker-Dealer Services 67 65 58 259 227
--------- -------- -------- --------- ---------
Securities Servicing Fees 958 839 814 3,537 3,144
Global Payment Services 61 66 60 252 260
Private Banking and Asset Management Fees 168 134 118 569 452
Service Charges and Fees 51 52 56 207 228
Foreign Exchange and Other Trading Activities 97 84 96 425 379
Securities Gains 27 21 18 88 68
Net Economic Value Payments 23 - - 23 -
Other 52 63 41 221 167
--------- -------- -------- --------- ---------
Total Noninterest Income 1,437 1,259 1,203 5,322 4,698
--------- -------- -------- --------- ---------
Noninterest Expense
-------------------
Salaries and Employee Benefits 736 644 587 2,640 2,310
Net Occupancy 73 70 66 279 250
Furniture and Equipment 44 46 51 190 199
Clearing 33 47 50 183 187
Sub-custodian Expenses 34 31 24 134 96
Software 59 53 53 220 214
Communications 23 26 25 97 91
Amortization of Intangibles 34 14 12 76 40
Merger and Integration Costs 17 89 - 106 -
Other 228 172 176 746 680
--------- -------- -------- --------- ---------
Total Noninterest Expense 1,281 1,192 1,044 4,671 4,067
--------- -------- -------- --------- ---------
Income from Continuing Operations
before Income Taxes 621 422 500 2,170 1,978
Income Taxes 194 124 161 694 635
--------- -------- -------- --------- ---------
Income from Continuing Operations 427 298 339 1,476 1,343
--------- -------- -------- --------- ---------
14
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
Quarter Ended Twelve Months Ended
--------------------------------- ---------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2006 2006 2005 2006 2005
--------- --------- -------- --------- ---------
Discontinued Operations
Income from Discontinued Operations $ 2,130 $ 96 $ 108 $ 2,426 $ 389
Income Taxes 768 42 42 891 161
--------- -------- -------- --------- ---------
Discontinued Operations, Net 1,362 54 66 1,535 228
--------- -------- -------- --------- ---------
Net Income $ 1,789 $ 352 $ 405 $ 3,011 $ 1,571
---------- ========= ======== ======== ========= =========
Per Common Share Data:
----------------------
Basic Earnings
Income from Continuing Operations $ 0.57 $ 0.40 $ 0.44 $ 1.95 $ 1.75
Income from Discontinued Operations, Net 1.82 0.07 0.09 2.03 0.30
Net Income 2.39 0.47 0.53 3.98 2.05
Diluted Earnings
Income from Continuing Operations $ 0.56 $ 0.39 $ 0.44 $ 1.93 $ 1.74
Income from Discontinued Operations, Net 1.80 0.07 0.09 2.00 0.29
Net Income 2.36 0.46 0.53 3.93 2.03
Cash Dividends Paid 0.22 0.22 0.21 0.86 0.82
Diluted Shares Outstanding 758 767 771 766 773
15
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
(Unaudited)
December 31, 2006 September 30, 2006 December 31, 2005
------------------ ------------------ -----------------
Assets
------
Cash and Due from Banks $ 2,840 $ 2,072 $ 2,882
Interest-Bearing Deposits in Banks 13,172 16,753 8,644
Securities
Held-to-Maturity (fair value of $1,710 at 12/31/06
$1,716 at 09/30/06 and $1,847 at 12/31/05) 1,729 1,737 1,872
Available-for-Sale 19,377 20,278 25,346
------------------ ------------------ -----------------
Total Securities 21,106 22,015 27,218
Trading Assets at Fair Value 5,544 3,266 5,930
Federal Funds Sold and Securities Purchased
Under Resale Agreements 5,114 5,139 2,425
Loans (less allowance for loan losses of $287 at
12/31/06, $339 at 09/30/06 and $326 at 12/31/05) 37,510 33,619 32,601
Premises and Equipment 974 1,009 960
Due from Customers on Acceptances 213 311 212
Accrued Interest Receivable 422 406 363
Goodwill 5,172 3,801 3,510
Intangible Assets 1,453 872 811
Other Assets 9,929 8,545 7,710
Assets of Discontinued Operations Held for Sale 18 8,828 8,808
------------------ ------------------ ------------------
Total Assets $ 103,467 $ 106,636 $ 102,074
================== ================== =================
Liabilities and Shareholders' Equity
------------------------------------
Deposits
Noninterest-Bearing (principally domestic offices) $ 19,554 $ 11,451 $ 12,706
Interest-Bearing
Domestic Offices 10,041 9,785 10,415
Foreign Offices 32,551 33,717 26,666
------------------ ------------------ -----------------
Total Deposits 62,146 54,953 49,787
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 790 1,040 834
Trading Liabilities 2,507 2,102 2,401
Payables to Customers and Broker-Dealers 7,266 6,673 8,623
Other Borrowed Funds 1,593 1,121 860
Acceptances Outstanding 215 318 212
Accrued Taxes and Other Expenses 5,152 4,140 4,123
Accrued Interest Payable 200 201 163
Other Liabilities (including allowance for
lending-related commitments of
$150 at 12/31/06, $137 at 09/30/06
and $144 at 12/31/05) 3,162 4,152 2,697
Long-Term Debt 8,773 8,434 7,817
Liabilities of Discontinued Operations Held for Sale 64 13,035 14,681
------------------ ------------------ -----------------
Total Liabilities 91,868 96,169 92,198
------------------ ------------------ -----------------
Shareholders' Equity
Common Stock-par value $7.50 per share,
authorized 2,400,000,000 shares, issued
1,053,752,916 shares at 12/31/06,
1,049,888,635 shares at 09/30/06 and
1,044,994,517 shares at 12/31/05 7,903 7,874 7,838
Additional Capital 2,142 2,015 1,826
Retained Earnings 9,444 7,820 7,089
Accumulated Other Comprehensive Income (311) (66) (134)
------------------ ------------------ ----------------
19,178 17,643 16,619
Less: Treasury Stock (297,790,159 shares at 12/31/06,
285,692,282 shares at 09/30/06 and
273,662,218 shares at 12/31/05), at cost 7,576 7,169 6,736
Loan to ESOP (101,753 shares at 12/31/06
and 203,507 shares at 09/30/06 and
12/31/05), at cost 3 7 7
------------------ ------------------ ----------------
Total Shareholders' Equity 11,599 10,467 9,876
------------------ ------------------ ----------------
Total Liabilities and Shareholders' Equity $ 103,467 $ 106,636 $ 102,074
================== ================== ================
Note: The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date.
16
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Preliminary)
(Dollars in millions)
For the three months For the three months
ended December 31, 2006 ended December 31, 2005
---------------------------- ----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
ASSETS
------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 15,157 $ 166 4.35% $ 8,369 $ 68 3.20%
Federal Funds Sold and Securities
Purchased Under Resale Agreements 5,965 78 5.14 2,170 19 3.48
Margin Loans 5,177 83 6.36 6,470 79 4.87
Non-Margin Loans
Domestic Offices 19,117 260 5.42 15,599 165 4.19
Foreign Offices 11,041 162 5.80 10,885 132 4.81
--------- -------- --------- --------
Total Non-Margin Loans 30,158 422 5.56 26,484 297 4.45
--------- -------- --------- --------
Securities
U.S. Government Obligations 121 1 4.76 226 2 4.17
U.S. Government Agency Obligations 2,882 36 5.03 3,992 43 4.27
Obligations of States and
Political Subdivisions 93 2 8.59 123 3 8.40
Other Securities 17,643 237 5.36 18,712 215 4.61
Trading Securities 2,645 33 4.98 4,929 54 4.44
--------- -------- --------- --------
Total Securities 23,384 309 5.29 27,982 317 4.54
--------- -------- --------- --------
Total Interest-Earning Assets 79,841 1,058 5.27 71,475 780 4.35
-------- --------
Allowance for Credit Losses (337) (476)
Cash and Due from Banks 2,085 2,831
Other Assets 20,549 16,696
Assets of Discontinued Operations
Held for Sale - - 14,542 182 4.99
--------- -------- --------- --------
TOTAL ASSETS $ 102,138 $ 1,058 $ 105,068 $ 962
========= ======== ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts $ 6,100 $ 44 2.87% $ 6,488 $ 36 2.18%
Savings 423 2 1.61 517 1 0.95
Certificates of Deposit of
$100,000 & Over 3,796 52 5.42 3,567 37 4.16
Other Time Deposits 320 4 4.87 688 7 3.83
Foreign Offices 33,705 295 3.48 28,536 189 2.62
--------- -------- --------- --------
Total Interest-Bearing Deposits 44,344 397 3.55 39,796 270 2.68
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 1,360 16 4.64 1,348 12 3.55
Other Borrowed Funds 2,229 30 5.38 1,966 25 4.95
Payables to Customers and Broker-Dealers 4,683 43 3.60 5,979 40 2.65
Long-Term Debt 8,677 120 5.45 7,577 83 4.36
--------- -------- --------- --------
Total Interest-Bearing Liabilities 61,293 606 3.92 56,666 430 3.00
-------- --------
Noninterest-Bearing Deposits 14,721 10,577
Other Liabilities 14,784 13,584
Common Shareholders' Equity 11,340 9,699
Liabilities of Discontinued Operations
Held for Sale - - 14,542 34 0.96
--------- -------- --------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 102,138 $ 606 $ 105,068 $ 464
========= ======== ========= =======
Interest Earnings
and Interest Rate Spread (Continuing) $ 452 1.35% $ 350 1.35%
======== ======= ======== =======
Net Interest Margin (Continuing) 2.27% 1.96%
======= =======
(1) Average balances and rates have been impacted by allocations made to match assets of discontinued operations held
for sale with liabilities of discontinued operations held for sale.
17
THE BANK OF NEW YORK COMPANY, INC.
Average Balances and Rates on a Taxable Equivalent Basis
(Preliminary)
(Dollars in millions)
For the twelve months For the twelve months
ended December 31, 2006 ended December 31, 2005
---------------------------- ----------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
ASSETS
------
Interest-Bearing
Deposits in Banks
(primarily foreign) $ 13,327 $ 538 4.04% $ 8,996 $ 274 3.04%
Federal Funds Sold and Securities
Purchased Under Resale Agreements 2,791 130 4.67 2,399 70 2.90
Margin Loans 5,372 330 6.15 6,403 267 4.17
Non-Margin Loans
Domestic Offices 17,125 820 4.79 15,192 591 3.89
Foreign Offices 11,115 629 5.66 10,474 454 4.33
--------- -------- --------- --------
Total Non-Margin Loans 28,240 1,449 5.13 25,666 1,045 4.07
--------- -------- --------- --------
Securities
U.S. Government Obligations 190 8 4.32 273 9 3.43
U.S. Government Agency Obligations 3,565 169 4.73 3,766 153 4.05
Obligations of States and
Political Subdivisions 105 9 8.34 141 12 8.39
Other Securities 18,448 964 5.23 16,522 713 4.32
Trading Securities 3,568 165 4.63 3,549 153 4.34
--------- -------- --------- --------
Total Securities 25,876 1,315 5.09 24,251 1,040 4.29
--------- -------- --------- --------
Total Interest-Earning Assets 75,606 3,762 4.98 67,715 2,696 3.98
-------- --------
Allowance for Credit Losses (340) (474)
Cash and Due from Banks 2,910 2,772
Other Assets 18,302 16,306
Assets of Discontinued Operations
Held for Sale 10,364 568 5.48 15,116 687 4.55
--------- -------- --------- --------
TOTAL ASSETS $ 106,842 $ 4,330 $ 101,435 $ 3,383
========= ======== ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Interest-Bearing Deposits
Money Market Rate Accounts $ 5,465 $ 145 2.66% $ 6,320 $ 109 1.73%
Savings 452 6 1.36 597 5 0.87
Certificates of Deposit of
$100,000 & Over 4,114 210 5.12 3,155 107 3.40
Other Time Deposits 551 26 4.70 437 16 3.38
Foreign Offices 32,561 1,047 3.22 26,561 602 2.26
--------- -------- --------- --------
Total Interest-Bearing Deposits 43,143 1,434 3.33 37,070 839 2.26
Federal Funds Purchased and
Securities Sold Under Repurchase
Agreements 2,237 104 4.65 1,284 35 2.73
Other Borrowed Funds 2,091 100 4.77 1,865 58 3.10
Payables to Customers and Broker-Dealers 4,899 167 3.40 6,014 128 2.12
Long-Term Debt 8,295 436 5.26 7,312 269 3.68
--------- -------- --------- --------
Total Interest-Bearing Liabilities 60,665 2,241 3.69 53,545 1,329 2.48
-------- --------
Noninterest-Bearing Deposits 11,609 10,078
Other Liabilities 13,871 13,223
Common Shareholders' Equity 10,333 9,473
Liabilities of Discontinued Operations
Held for Sale 10,364 111 1.07 15,116 118 0.78
--------- -------- --------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 106,842 $ 2,352 $ 101,435 $ 1,447
========= ======== ========= =======
Interest Earnings
and Interest Rate Spread (Continuing) $ 1,521 1.29% $ 1,367 1.50%
======== ======= ======== =======
Net Interest Margin (Continuing) 2.01% 2.02%
======= =======
(1) Average balances and rates have been impacted by allocations made to match assets of discontinued operations held
for sale with liabilities of discontinued operations held for sale.
18
APPENDIX
--------
Supplemental Information
(Page 1 of 4)
On October 1, 2006, the Company acquired JPMorgan Chase's corporate trust
business and sold to JPMorgan Chase the Company's Retail Business. The
transaction further increased the Company's focus on the securities services
and asset management businesses that are at the core of its long-term business
strategy.
For the quarters ended December 31, 2006, September 30, 2006, and
December 31, 2005 and twelve-month periods ended December 31, 2006 and 2005,
the Company has prepared supplemental financial information as follows:
* Full income statements for the Retail Business, which is reflected as
discontinued operations
* Adjusted results, which combine continuing and discontinued operations
to provide continuity with historical results
* Continuing operations and adjusted results including and excluding
merger and integration costs and the gain on the sale of the Retail
Business.
The Company believes that providing supplemental adjusted non-GAAP
financial information is useful to investors in understanding the underlying
operating performance of the Company and its businesses and performance
trends, particularly in view of the materiality and strategic significance of
the JPMorgan Chase transaction. By combining the results of continuing and
discontinued operations and excluding merger and integration costs and the
gain on the sale of the Retail Business, the Company believes investors can
gain greater insight into the operating performance of the Company in relation
to historic results. Although the Company believes that the non-GAAP
financial measures presented in this report enhance investors' understanding
of the Company's business and performance, these non-GAAP measures should not
be considered an alternative to GAAP.
19
APPENDIX
--------
Supplemental Information
(Page 2 of 4)
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
(Unaudited)
Quarter Ended December 31, 2006 Quarter Ended December 31, 2005
---------------------------------------- -----------------------------------------
Continuing Discontinued Adjusted Continuing Discontinued Adjusted
Operations Operations Results(1) Operations Operations Results(1)
---------- ------------ ---------- ---------- ------------ ----------
Net Interest Income $ 450 $ - $ 450 $ 344 $ 148 $ 492
-------------------
Provision for Credit Losses (15) - (15) 3 7 10
----- ----- ----- ----- ----- -----
Net Interest Income After
Provision for Credit Losses 465 - 465 341 141 482
----- ----- ----- ----- ----- -----
Noninterest Income
------------------
Securities Servicing Fees 958 - 958 814 - 814
Global Payment Services 61 - 61 60 8 68
Private Banking and
Asset Management Fees 168 1 169 118 10 128
Service Charges and Fees 51 - 51 56 38 94
Foreign Exchange and Other
Trading Activities 97 - 97 96 3 99
Securities Gains 27 - 27 18 - 18
Net Economic Value Payments 23 - 23 - - -
Other 52 2,173 2,225 41 12 53
----- ----- ----- ----- ----- -----
Total Noninterest Income 1,437 2,174 3,611 1,203 71 1,274
----- ----- ----- ----- ----- -----
Noninterest Expense
-------------------
Salaries and
Employee Benefits 736 14 750 587 60 647
Net Occupancy 73 1 74 66 18 84
Furniture and Equipment 44 1 45 51 2 53
Clearing 33 - 33 50 - 50
Sub-custodian Expenses 34 - 34 24 - 24
Software 59 - 59 53 - 53
Communications 23 - 23 25 1 26
Amortization of Intangibles 34 - 34 12 - 12
Merger and Integration Costs 17 24 41 - - -
Other 228 4 232 176 23 199
----- ----- ----- ----- ----- -----
Total Noninterest Expense 1,281 44 1,325 1,044 104 1,148
----- ----- ----- ----- ----- -----
Income Before Income Taxes 621 2,130 2,751 500 108 608
Income Taxes 194 768 962 161 42 203
----- ----- ----- ----- ----- -----
Net Income 427 1,362 1,789 339 66 405
Merger & Integration Costs,
Net of Taxes 12 15 27 - - -
Gain on Sale of Retail
Business, Net of Taxes - (1,381) (1,381) - - -
----- ----- ----- ----- ----- -----
Net Income Excluding Merger
& Integration Costs and Gain
on Sale of Retail Business $ 439 $ (4) $ 435 $ 339 $ 66 $ 405
===== ====== ====== ===== ===== =====
Diluted Earnings Per Share $0.56 $1.80 $2.36 $ 0.44 $ 0.09 $0.53
Diluted Earnings Per Share
Excluding Merger &
Integration Costs and Gain
on Sale of Retail Business 0.58 - 0.58 0.44 0.09 0.53
Note:
(1) Adjusted results combine continuing and discontinued operations to provide continuity
with historical results.
20
APPENDIX
--------
Supplemental Information
(Page 3 of 4)
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
(Unaudited)
Quarter Ended September 30, 2006
---------------------------------------
Continuing Discontinued Adjusted
Operations Operations Results(1)
---------- ------------ ----------
Net Interest Income $ 351 $ 155 $ 506
-------------------
Provision for Credit Losses (4) (1) (5)
----- ----- -----
Net Interest Income After
Provision for
Credit Losses 355 156 511
----- ----- -----
Noninterest Income
------------------
Securities Servicing Fees 839 - 839
Global Payment Services 66 8 74
Private Banking and
Asset Management Fees 134 11 145
Service Charges and Fees 52 38 90
Foreign Exchange and Other
Trading Activities 84 2 86
Securities Gains 21 - 21
Other 63 7 70
----- ----- -----
Total Noninterest Income 1,259 66 1,325
----- ----- -----
Noninterest Expense
-------------------
Salaries and Employee Benefits 644 62 706
Net Occupancy 70 18 88
Furniture and Equipment 46 2 48
Clearing 47 - 47
Sub-custodian Expenses 31 - 31
Software 53 1 54
Communications 26 1 27
Amortization of Intangibles 14 - 14
Merger and Integration Costs 89 21 110
Other 172 21 193
----- ----- -----
Total Noninterest Expense 1,192 126 1,318
----- ----- -----
Income Before Income Taxes 422 96 518
Income Taxes 124 42 166
----- ----- -----
Net Income 298 54 352
Merger and Integration Costs, Net
of Taxes 62 12 74
----- ----- -----
Net Income Excluding Merger
and Integration Costs $ 360 $ 66 $ 426
===== ===== =====
Diluted Earnings Per Share $0.39 $0.07 $0.46
Diluted Earnings Per Share Excluding
Merger and Integration Costs 0.47 0.09 0.56
Note:
(1) Adjusted results combine continuing and discontinued operations to provide continuity
with historical results.
21
APPENDIX
--------
Supplemental Information
(Page 4 of 4)
THE BANK OF NEW YORK COMPANY, INC.
Consolidated Statements of Income
(Dollars in millions, except per share amounts)
(Unaudited)
Year Ended December 31, 2006 Year Ended December 31, 2005
---------------------------------------- -----------------------------------------
Continuing Discontinued Adjusted Continuing Discontinued Adjusted
Operations Operations Results(1) Operations Operations Results(1)
---------- ------------ ---------- ---------- ------------ ----------
Net Interest Income $1,499 $ 457 $1,956 $1,340 $ 569 $1,909
-------------------
Provision for Credit Losses (20) 5 (15) (7) 22 15
------ ----- ------ ------ ----- ------
Net Interest Income After
Provision for Credit Losses 1,519 452 1,971 1,347 547 1,894
------ ----- ------ ------ ----- ------
Noninterest Income
------------------
Securities Servicing Fees 3,537 - 3,537 3,144 - 3,144
Global Payment Services 252 24 276 260 34 294
Private Banking and
Asset Management Fees 569 35 604 452 42 494
Service Charges and Fees 207 113 320 228 154 382
Foreign Exchange and Other
Trading Activities 425 6 431 379 12 391
Securities Gains 88 - 88 68 - 68
Net Economic Value Payments 23 - 23 - - -
Other 221 2,194 2,415 167 16 183
------ ----- ------ ------ ----- ------
Total Noninterest Income 5,322 2,372 7,694 4,698 258 4,956
------ ----- ------ ------ ----- ------
Noninterest Expense
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Salaries and
Employee Benefits 2,640 208 2,848 2,310 239 2,549
Net Occupancy 279 56 335 250 73 323
Furniture and Equipment 190 7 197 199 9 208
Clearing 183 - 183 187 - 187
Sub-custodian Expenses 134 - 134 96 - 96
Software 220 2 222 214 1 215
Communications 97 3 100 91 4 95
Amortization of Intangibles 76 - 76 40 - 40
Merger and Integration Costs 106 45 151 - - -
Other 746 77 823 680 90 770
------ ----- ------ ------ ----- ------
Total Noninterest Expense 4,671 398 5,069 4,067 416 4,483
------ ----- ------ ------ ----- ------
Income Before Income Taxes 2,170 2,426 4,596 1,978 389 2,367
Income Taxes 694 891 1,585 635 161 796
------ ----- ------ ------ ----- ------
Net Income 1,476 1,535 3,011 1,343 228 1,571
Merger & Integration Costs,
Net of Taxes 72 29 101 - - -
Gain on Sale of Retail
Business, Net of Taxes - (1,381) (1,381) - - -
------ ----- ------ ------ ----- ------
Net Income Excluding Merger
& Integration Costs and Gain
on Sale of Retail Business $1,548 $ 183 $1,731 $1,343 $ 228 $1,571
====== ====== ====== ====== ===== ======
Diluted Earnings Per Share $ 1.93 $ 2.00 $ 3.93 $ 1.74 $0.29 $ 2.03
Diluted Earnings Per Share
Excluding Merger &
Integration Costs and Gain
on Sale of Retail Business 2.02 0.24 2.26 1.74 0.29 2.03
Note:
(1) Adjusted results combine continuing and discontinued operations to provide continuity
with historical results.