-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IBqJm6Hq96RBIrfdr7vz9++v+xYuFdEkTwBZVXnZ8afUEoFgZhVcone3OqBYkIvI KxjfgtCuN8tbqz8rYM6qxA== 0000009626-06-000195.txt : 20060719 0000009626-06-000195.hdr.sgml : 20060719 20060719115220 ACCESSION NUMBER: 0000009626-06-000195 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060630 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060719 DATE AS OF CHANGE: 20060719 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK OF NEW YORK CO INC CENTRAL INDEX KEY: 0000009626 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132614959 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06152 FILM NUMBER: 06968711 BUSINESS ADDRESS: STREET 1: ONE WALL ST 10TH FL CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 212-495-1784 MAIL ADDRESS: STREET 1: ONE WALL STREET 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 8-K 1 r8k2q06.txt FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8 - K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 19, 2006 THE BANK OF NEW YORK COMPANY, INC. ---------------------------------- (exact name of registrant as specified in its charter) NEW YORK 001-06152 13-2614959 -------- --------- ---------- (State or other jurisdiction (Commission (I.R.S. employer of incorporation) file number) identification number) One Wall Street, New York, NY 10286 ----------------------------- ----- (Address of principal executive offices) (Zip code) 212-495-1784 ------------ (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 2 ITEM 2.02 Results of Operations and Financial Condition --------------------------------------------- On July 19, 2006, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the second quarter of 2006. Exhibit 99.1 is a copy of such press release and is incorporated herein by reference. The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 shall be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, as amended. ITEM 9.01 Financial Statements and Exhibits --------------------------------- Index to and Description of Exhibits (c) Exhibit Description ------- ----------- 99.1 Unaudited interim financial information and accompanying discussion for the second quarter of 2006 contained in the press release dated July 19, 2006, of The Bank of New York Company, Inc. 3 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: July 19, 2006 THE BANK OF NEW YORK COMPANY, INC. (Registrant) By: /s/ Bruce W. Van Saun ------------------------- Name: Bruce W. Van Saun Title: Chief Financial Officer 4 EXHIBIT INDEX ------------- Exhibit No. Description - ----------- ----------- 99.1 Unaudited interim financial information and accompanying discussion for the second quarter of 2006 contained in the press release dated July 19, 2006, of The Bank of New York Company, Inc. EX-99 2 r8k2q06ex99.txt EXHIBIT 99.1 1 Exhibit 99.1 News Release For Immediate Release THE BANK OF NEW YORK COMPANY, INC. REPORTS RECORD OPERATING RESULTS; 13% INCREASE IN SECOND QUARTER EARNINGS PER SHARE; 16% INCREASE IN SECOND QUARTER EPS FROM CONTINUING OPERATIONS; SIGNIFICANT OPERATING LEVERAGE; RETURN ON EQUITY 18.2% NEW YORK, N.Y., July 19, 2006 -- The Bank of New York Company, Inc. (NYSE: BK) reported today second quarter net income of $448 million and diluted earnings per share of 59 cents, compared with net income of $398 million and diluted earnings per share of 52 cents in the second quarter of 2005, up 13%, and net income of $422 million and diluted earnings per share of 55 cents in the first quarter of 2006. Year-to-date net income was $870 million, or $1.13 of diluted earnings per share, compared to $777 million, or $1.00 of diluted earnings per share in 2005. On April 8, 2006, the Company entered into a definitive agreement with JPMorgan Chase to acquire its corporate trust business, with JPMorgan Chase acquiring the Company's retail and regional middle market banking businesses. In the second quarter of 2006, the Company adopted discontinued operations accounting for its retail and regional middle market banking businesses. Therefore, the results from continuing operations exclude results of the Company's retail and regional middle market banking businesses but do not include the operations of the JPMorgan Chase corporate trust business, which is expected to be acquired in the fourth quarter. Adjusted financial statements combining continuing and discontinued operations are presented in "Supplemental Financial Information." Second quarter 2006 income from continuing operations increased to $391 million, or 52 cents of diluted earnings per share. This compares to income from continuing operations of $343 million, or 45 cents of diluted earnings per share in the second quarter of 2005, up 16%, and $360 million, or 47 cents of diluted earnings per share in the first quarter of 2006. On a year-to-date basis, income from continuing operations was $751 million, or 98 cents of diluted earnings per share, compared to $671 million, or 86 cents of diluted earnings per share in 2005, up 14%. Performance Highlights * Significant positive operating leverage over year-ago and sequential periods. * Return on average common shareholders' equity of 18.2%. * Securities servicing fees up 17% versus the year ago quarter. The growth was led by strong performance in issuer services, broker-dealer services, investor services, and execution and clearing services. * Net interest income up 9% over last year's second quarter reflecting growth in deposits, particularly from the Company's corporate trust and custody businesses. * Foreign exchange and other trading revenues up 29% from the year ago quarter. * Private banking and asset management revenues up 23% from the year ago quarter, reflecting both acquisitions and growth at Ivy Asset Management. * Two major strategic transactions announced: the swap transaction with JPMorgan Chase and the formation of BNY ConvergEx, to better position the Company's execution business for future growth. 2 "This record level of operating results and our strong earnings growth in the second quarter reflect excellent momentum across our businesses," stated Chairman and Chief Executive Officer Thomas A. Renyi. "We are generating attractive top-line growth and maintaining good expense control, resulting in positive operating leverage. "Equally important is the progress we made during the quarter to sharpen our focus, strengthen our business mix and improve the earnings potential of our franchise. Our agreement with JPMorgan Chase and the formation of BNY ConvergEx are bold, creative steps designed to accelerate growth and improve returns by expanding our fast-growing corporate trust business and repositioning the execution services business. "Taken together, our strong financial results and significant progress in enhancing the foundation of our Company establish the quarter as one of our most successful, and one that positions us very well for the future." 3 SUPPLEMENTAL FINANCIAL INFORMATION - ---------------------------------- On April 8, 2006, the Company entered into a definitive agreement with JPMorgan Chase to acquire its corporate trust business, with JPMorgan Chase acquiring the Company's retail and regional middle market banking businesses. The transaction further increases the Company's focus on the securities services and asset management and private banking businesses that are at the core of its long-term business strategy. The transaction has been approved by each company's board of directors and is expected to be completed early in the fourth quarter of 2006, subject to regulatory approvals. For the quarters and six months ended June 30, 2006 and 2005, the Company has prepared supplemental financial information as follows: * Full income statement and balance sheet for continuing operations, which excludes the results of substantially all of Retail & Regional Middle Market Banking Business * Full income statement and balance sheet for the Retail & Regional Middle Market Banking Business, which is reflected as discontinued operations * Adjusted results, which combine continuing and discontinued operations to provide continuity with historical results The Company believes that providing supplemental adjusted non-GAAP financial information is useful to investors in understanding the underlying operational performance of the Company and its businesses and performance trends. Specifically, the Company believes that the results of continuing operations are of limited value in projecting future results because they do not include the net income associated with the acquisition of the JPMorgan Chase corporate trust business, planned to close early in the fourth quarter of 2006. By combining the results of continuing and discontinued operations and comparing the results with prior periods, the Company believes investors can obtain greater insight into the current performance of the Company in relation to historical 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. A reconciliation of the Company's adjusted and GAAP financial results for the quarters and six-month periods ended June 30, 2006 and 2005 are included in Appendix I. Income statements for both continuing operations and adjusted results are provided on the following two pages. 4
THE BANK OF NEW YORK COMPANY, INC. Income Statement - Supplemental Information (In millions, except per share amounts) (Unaudited) Continuing Operations -------------------------------------------------------------------- Quarter Ended Six Months Ended June 30, March 31, June 30, June 30, 2006 2006 2005 2006 2005 ---------- ---------- ---------- --------- ---------- Net Interest Income $ 358 $ 339 $ 329 $ 697 $ 650 - ------------------- Provision for Credit Losses (1) - (3) (1) (20) ------ ------ ------ ----- ------ Net Interest Income After Provision for Credit Losses 359 339 332 698 670 ------ ------ ------ ----- ------ Noninterest Income - ------------------ Servicing Fees Securities 909 831 775 1,740 1,525 Global Payment Services 63 62 67 125 133 ------ ------ ------ ----- ------ 972 893 842 1,865 1,658 Private Banking and Asset Management Fees 138 130 112 268 224 Service Charges and Fees 53 52 64 105 118 Foreign Exchange and Other Trading Activities 130 113 101 243 193 Securities Gains 23 17 23 40 35 Other 50 56 52 106 82 ------ ------ ------ ----- ------ Total Noninterest Income 1,366 1,261 1,194 2,627 2,310 ------ ------ ------ ----- ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 656 604 581 1,260 1,138 Net Occupancy 68 68 65 136 124 Furniture and Equipment 48 51 49 99 98 Clearing 53 50 42 103 88 Sub-custodian Expenses 36 34 24 70 47 Software 53 55 55 108 107 Communications 22 26 21 48 43 Amortization of Intangibles 15 13 10 28 18 Other 183 164 174 347 329 ------ ------ ------ ----- ------ Total Noninterest Expense 1,134 1,065 1,021 2,199 1,992 ------ ------ ------ ----- ------ Income Before Income Taxes 591 535 505 1,126 988 Income Taxes 200 175 162 375 317 ------ ------ ------ ----- ------ Net Income $ 391 $ 360 $ 343 $ 751 $ 671 - ---------- ====== ===== ===== ===== ===== Diluted Earnings Per Share $0.52 $0.47 $0.45 $0.98 $0.86
Diluted earnings per share from continuing operations for the second quarter of 2006 were 52 cents, up 16% from 45 cents a year ago. For the year-to-date period, diluted earnings per share grew 14% to 98 cents from a year ago. 5
THE BANK OF NEW YORK COMPANY, INC. Income Statement - Supplemental Information (In millions, except per share amounts) (Unaudited) Adjusted Income Statement (1) ------------------------------------------------------------------ Quarter Ended Six Months Ended June 30, March 31, June 30, June 30, 2006 2006 2005 2006 2005 --------- --------- -------- --------------------- Net Interest Income $ 512 $ 488 $ 470 $1,000 $ 925 - ------------------- Provision for Credit Losses - 5 5 5 (5) ----- ----- ----- ------ ----- Net Interest Income After Provision for Credit Losses 512 483 465 995 930 ----- ----- ----- ------ ----- Noninterest Income - ------------------ Servicing Fees Securities 909 831 775 1,740 1,525 Global Payment Services 70 70 76 140 151 ----- ----- ----- ------ ----- 979 901 851 1,880 1,676 Private Banking and Asset Management Fees 150 141 123 291 245 Service Charges and Fees 91 89 103 180 195 Foreign Exchange and Other Trading Activities 132 115 103 247 199 Securities Gains 23 17 23 40 35 Other 51 69 53 120 84 ----- ----- ----- ------ ----- Total Noninterest Income 1,426 1,332 1,256 2,758 2,434 ----- ----- ----- ------ ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 723 668 640 1,391 1,258 Net Occupancy 86 88 82 174 160 Furniture and Equipment 50 53 51 103 103 Clearing 53 50 42 103 88 Sub-custodian Expenses 36 34 24 70 47 Software 53 56 55 109 108 Communications 23 27 22 50 45 Amortization of Intangibles 15 13 10 28 18 Other 209 189 197 398 373 ----- ----- ----- ------ ----- Total Noninterest Expense 1,248 1,178 1,123 2,426 2,200 ----- ----- ----- ------ ----- Income Before Income Taxes 690 637 598 1,327 1,164 Income Taxes 242 215 200 457 387 ----- ----- ----- ------ ----- Net Income $ 448 $ 422 $ 398 $ 870 $ 777 - ---------- ===== ===== ===== ====== ===== Diluted Earnings Per Share $0.59 $0.55 $0.52 $ 1.13 $1.00 (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
Diluted earnings per share from adjusted results for the second quarter of 2006 were 59 cents, up 13% from 52 cents a year ago. For the year-to-date period, diluted earnings per share grew 13% to $1.13 from a year ago. 6 SECURITIES SERVICING FEES
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q06 vs. 2Q06 vs. -------------- Inc/ (In millions) 2Q06 1Q06 2Q05 1Q06 2Q05 2006 2005 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Execution and Clearing Services $ 334 $ 339 $ 294 (1)% 14% $ 673 $ 587 15% Issuer Services 207 154 159 34 30 361 298 21 Investor Services 302 277 265 9 14 579 528 10 Broker-Dealer Services 66 61 57 8 16 127 112 13 ------ ------ ------ ------ ------ Securities Servicing Fees $ 909 $ 831 $ 775 9 17 $1,740 $1,525 14 ====== ====== ====== ====== ======
Double-digit securities servicing fee growth over the second quarter and year-to-date periods of 2005 reflects strong performance in all securities servicing businesses. On a sequential-quarter basis, fees were up significantly, reflecting seasonally strong issuer services and good growth in broker-dealer services and investor services. Execution and clearing fees increased from the second quarter and year-to- date periods of 2005, reflecting growth in value-added fees at Pershing and stronger global transition management and cross-border trading activity in execution services. On a sequential basis, execution and clearing fees were down slightly, as good organic growth in fees at Pershing largely offset the full quarter impact of the previously disclosed loss of a significant customer. Excluding the impact of this customer, total active accounts and customer assets at Pershing increased sequentially by 4% and 3%, respectively. The execution and clearing businesses include institutional agency brokerage, electronic trading, transition management services, independent research and, through Pershing, correspondent clearing services such as clearing, execution, financing, and custody for introducing broker-dealers. Issuer services fees increased substantially versus the year-ago periods and on a sequential quarter basis. This quarter's results were the best ever for the depositary receipt business, which is typically strong in the second quarter due to the timing of foreign dividend payments. This quarter further benefited from both a higher level of net issuance, reflecting the continued growth in cross-border investing activity, as well as increased corporate actions related to mergers, acquisitions and spin-offs. Growth in corporate trust revenues was primarily attributable to activity in structured and global trust products. Issuer services includes corporate trust, depository receipts, employee investment plan services, stock transfer, and credit-related services. Investor services fees increased from the year-ago quarter because of higher volumes within securities lending and higher custody fees, reflecting improvements in cross-border transaction volumes and market price levels as well as new business. Sequential performance reflects improved securities lending fees and higher global fund services and custody fees. Investor services includes global fund services, global custody, securities lending, global liquidity services and outsourcing. Broker-dealer services fees improved versus the year-ago and sequential periods as a result of strong performance in domestic and global collateral management fees, an increase in transaction volumes and strong net new business flows. 7 NONINTEREST INCOME Continuing Operations - ---------------------
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q06 vs. 2Q06 vs. -------------- Inc/ (In millions) 2Q06 1Q06 2Q05 1Q06 2Q05 2006 2005 (Dec) ------ ------ ------ -------- ------- ------ ------ ------- Servicing Fees Securities $ 909 $ 831 $ 775 9% 17% $1,740 $1,525 14% Global Payment Services 63 62 67 2 (6) 125 133 (6) ------ ------ ------ ------ ------ 972 893 842 9 15 1,865 1,658 12 Private Banking and Asset Management Fees 138 130 112 6 23 268 224 20 Service Charges and Fees 53 52 64 2 (17) 105 118 (11) Foreign Exchange and Other Trading Activities 130 113 101 15 29 243 193 26 Securities Gains 23 17 23 35 - 40 35 14 Other 50 56 52 (11) (4) 106 82 29 ------ ------ ------ ------ ------ Total Noninterest Income $1,366 $1,261 $1,194 8 14 $2,627 $2,310 14 ====== ====== ====== ====== ======
Adjusted - --------
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q06 vs. 2Q06 vs. -------------- Inc/ (In millions) 2Q06 1Q06 2Q05 1Q06 2Q05 2006 2005 (Dec) ------ ------ ------ -------- ------- ------ ------ ------- Servicing Fees Securities $ 909 $ 831 $ 775 9% 17% $1,740 $1,525 14% Global Payment Services 70 70 76 - (8) 140 151 (7) ------ ------ ------ ------ ------ 979 901 851 9 15 1,880 1,676 12 Private Banking and Asset Management Fees 150 141 123 6 22 291 245 19 Service Charges and Fees 91 89 103 2 (12) 180 195 (8) Foreign Exchange and Other Trading Activities 132 115 103 15 28 247 199 24 Securities Gains 23 17 23 35 - 40 35 14 Other 51 69 53 (26) (4) 120 84 43 ------ ------ ------ ------ ------ Total Noninterest Income $1,426 $1,332 $1,256 7 14 $2,758 $2,434 13 ====== ====== ====== ====== ======
Unless otherwise indicated, the discussion below refers to noninterest income on both a continuing operations basis and on an adjusted basis. The increase in noninterest income versus the second quarter of 2005 and the prior quarter reflects positive revenue trends in securities servicing, foreign exchange and other trading, and private banking and asset management. The increase on a year-to-date basis in noninterest income 8 primarily reflects increases in securities servicing, foreign exchange and other trading, private banking and asset management, securities gains, and other income. On a continuing operations basis, global payment services fees decreased from the second quarter and year-to-date periods of 2005 but increased slightly on a sequential-quarter basis. The decline from last year reflects customers paying with higher compensatory balances in lieu of fees. The sequential quarter increase primarily reflects growth from U.S. financial institutions. On an invoiced services basis, total revenue was up 6% over the second quarter of 2005 and 5% on a sequential-quarter basis. Performance trends on an adjusted basis were relatively consistent with the continuing operations basis. Private banking and asset management fees increased significantly from the second quarter and year-to-date periods of 2005 primarily due to acquisitions and higher fees in private banking. On a sequential-quarter basis, growth is attributable to higher fees at Ivy Asset Management and Alcentra as well as the full quarter impact of the Urdang acquisition, which closed on March 2, 2006. Total assets under management for private banking and asset management were $116 billion, up from $105 billion at June 30, 2005 and $113 billion at March 31, 2006. Service charges and fees were down from the second quarter and year-to-date periods of 2005 reflecting lower capital markets activity. On a sequential-quarter basis, service charges and fees were up reflecting higher underwriting fees. Foreign exchange and other trading revenues were up significantly from the second quarter and year-to-date periods of 2005. Foreign exchange was up from the 2005 periods and sequentially due to higher customer volumes driven by cross-border investment flows, good new business activity, and increased volatility. Other trading was up from the 2005 periods and sequentially primarily due to stronger results in equity and interest rate derivatives, and in fixed income trading. Securities gains in the second quarter were flat with the year-ago quarter and up significantly on a sequential-quarter basis. The gains in the quarter were primarily attributable to exceptionally strong returns on investments in the sponsor fund portfolio. Securities gains were up in the first six months of 2006 versus a year ago reflecting favorable market conditions and liquidity in the private equity markets. Other noninterest income on an adjusted basis decreased slightly versus the second quarter of 2005 and was down from the first quarter of 2006. The first quarter of 2006 includes a pre-tax gain of $31 million related to the conversion of the Company's New York Stock Exchange seats into cash and shares of NYSE. The year-to-date period of 2005 includes a $17 million gain on the sale of the Company's interest in Financial Models Company, Inc. 9 NET INTEREST INCOME Continuing Operations - ---------------------
Percent Inc/(Dec) Year-to-date ----------------- ------------- Percent (Dollars in millions) 2Q06 vs. 2Q06 vs. 2006 2005 Inc/ 2Q06 1Q06 2Q05 1Q06 2Q05 (Dec) ---- ---- ---- ----------------- ------------- -------- Net Interest Income $358 $339 $329 6% 9% $ 697 $ 650 7% Tax Equivalent Adjustment* 7 7 6 14 13 ---- ---- ---- ------ ------ Net Interest Income on a Tax Equivalent Basis $365 $346 $335 5 9 $ 711 $ 663 7 ==== ==== ==== ====== ====== Net Interest Rate Spread 1.29% 1.37% 1.54% 1.33% 1.60% Net Yield on Interest Earning Assets 1.95 1.95 2.01 1.95 2.03 * See Note (1)
Adjusted - --------
Percent Inc/(Dec) Year-to-date ---------------- ------------ Percent (Dollars in millions) 2Q06 vs. 2Q06 vs. 2006 2005 Inc/ 2Q06 1Q06 2Q05 1Q06 2Q05 (Dec) ---- ---- ---- ---------------- ------------ ------- Net Interest Income $512 $488 $470 5% 9% $1,000 $ 925 8% Tax Equivalent Adjustment* 9 7 7 15 14 ---- ---- ---- ------ ------ Net Interest Income on a Tax Equivalent Basis $521 $495 $477 5 9 $1,015 $ 939 8 ==== ==== ==== ====== ====== Net Interest Rate Spread 1.65% 1.73% 1.86% 1.70% 1.90% Net Yield on Interest Earning Assets 2.36 2.35 2.34 2.35 2.35 * See Note (1)
Net interest income on a continuing operations basis and on an adjusted basis increased from the year ago quarter reflecting higher interest earning assets and the higher value of interest-free balances in a rising rate environment. Net interest income increased on a sequential-quarter basis reflecting an increase in interest earning assets due to higher foreign deposits, principally in the Company's corporate trust and custody businesses, one additional day in the quarter, and a $6 million impact of a cumulative adjustment in the Company's reserve position with the Federal Reserve in the first quarter of 2006. On a year-to-date basis, net interest income increased reflecting the same factors impacting the quarterly results. 10 NONINTEREST EXPENSE AND INCOME TAXES Continuing Operations - ---------------------
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q06 vs. 2Q06 vs. -------------- Inc/ (In million) 2Q06 1Q06 2Q05 1Q06 2Q05 2006 2005 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Salaries and Employee Benefits $ 656 $ 604 $ 581 9% 13% $1,260 $1,138 11% Net Occupancy 68 68 65 - 5 136 124 10 Furniture and Equipment 48 51 49 (6) (2) 99 98 1 Clearing 53 50 42 6 26 103 88 17 Sub-custodian Expenses 36 34 24 6 50 70 47 49 Software 53 55 55 (4) (4) 108 107 1 Communications 22 26 21 (15) 5 48 43 12 Amortization of Intangibles 15 13 10 15 50 28 18 56 Other 183 164 174 12 5 347 329 5 ------ ------ ------ ------ ------ Total Noninterest Expense $1,134 $1,065 $1,021 6 11 $2,199 $1,992 10 ====== ====== ====== ====== ======
Adjusted - --------
Percent Inc/(Dec) ----------------- Year-to-date Percent 2Q06 vs. 2Q06 vs. -------------- Inc/ (In million) 2Q06 1Q06 2Q05 1Q06 2Q05 2006 2005 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Salaries and Employee Benefits $ 723 $ 668 $ 640 8% 13% $1,391 $1,258 11% Net Occupancy 86 88 82 (2) 5 174 160 9 Furniture and Equipment 50 53 51 (6) (2) 103 103 - Clearing 53 50 42 6 26 103 88 17 Sub-custodian Expenses 36 34 24 6 50 70 47 49 Software 53 56 55 (5) (4) 109 108 1 Communications 23 27 22 (15) 5 50 45 11 Amortization of Intangibles 15 13 10 15 50 28 18 56 Other 209 189 197 11 6 398 373 7 ------ ------ ------ ------ ------ Total Noninterest Expense $1,248 $1,178 $1,123 6 11 $2,426 $2,200 10 ====== ====== ====== ====== ======
Unless otherwise indicated, the discussion below refers to noninterest expense on both a continuing operations basis and on an adjusted basis. Noninterest expense was up compared with the second quarter of 2005 and the first quarter of 2006. The increase versus the year-ago quarter reflects increased staffing costs associated with new business and acquisitions, and higher incentive compensation as well as higher pension expenses. 11 Relative to the year-ago periods and sequentially, salaries and benefits rose as a result of: a charge of $12 million associated with the implementation of SFAS 123(R) related to the retirement provisions of equity compensation programs; higher incentive compensation related to revenue growth; acquisitions; and increased severance, temporary help, and medical costs. Pension expense was also higher on a year-over-year basis. Severance expense in the second quarter of 2006 included $5 million related to the businesses being sold as part of the transaction with JPMorgan Chase. Clearing and sub-custodian expenses were higher year-over-year and on a sequential-quarter basis reflecting increased transaction volumes. Other expenses were higher compared with the second quarter and year-to- date periods of 2005 reflecting higher costs for advertising, travel and entertainment, employment agency fees, as well as vendor services related expenses associated with business growth. On a sequential-quarter basis, other expenses in the second quarter of 2006 increased due to higher Depository Trust Company expense, consulting, travel, and employment agency fees. The effective tax rate for the second quarter of 2006 on a continuing operations basis was 33.8%, compared to 32.1% in the second quarter of 2005 and 32.7% in the first quarter of 2006. The effective tax rate for the six-month period ended June 30, 2006 was 33.3% compared with 32.1% for the six-month period ended June 30, 2005. The effective tax rate for the second quarter of 2006 on an adjusted basis was 35.1%, compared to 33.4% in the second quarter of 2005 and 33.8% in the first quarter of 2006. The effective tax rate for the six-month period ended June 30, 2006 was 34.4% compared with 33.2% for the six- month period ended June 30, 2005. The increases on a year-over-year basis primarily reflect lower expected Section 29 tax credits related to synthetic fuels. The sequential quarter increase also reflects a non-recurring $5 million negative impact from the loss of foreign sales corporation benefits on certain leveraged leases as a result of recent legislation. 12 CAPITAL The Company repurchased 10.3 million shares in the second quarter of 2006. Included in the buyback were 10.0 million shares that were repurchased on April 3, 2006 through the previously disclosed accelerated share repurchase program. The Company's Tier 1 capital and Total Capital ratios were 7.95% and 12.05% at June 30, 2006, compared with 8.07% and 12.49% at June 30, 2005 and 8.28% and 12.44% at March 31, 2006. The leverage ratio was 6.22% at June 30, 2006, compared with 6.55% at June 30, 2005 and 6.51% at March 31, 2006. The Company's tangible common equity as a percentage of total assets was 5.07% at June 30, 2006, compared with 5.26% at June 30, 2005 and 5.42% at March 31, 2006. Return on average common equity for the second quarter of 2006 was 18.17%, compared with 17.12% in the second quarter of 2005 and 17.31% in the first quarter of 2006. Return on average assets for the second quarter of 2006 was 1.63%, compared with 1.59% in the second quarter of 2005 and 1.61% in the first quarter of 2006. CREDIT PERFORMANCE The Company's loan portfolio continues to experience high credit quality. The provision for credit losses for the second quarter of 2006 on a continuing operations basis was a credit of $1 million, compared with a credit of $3 million for the second quarter of 2005 and zero in the first quarter of 2006. Charge-offs in the second quarter of 2006 on a continuing operations basis were a recovery of $7 million, compared with charge-offs of $6 million in the second quarter of 2005 and a recovery of $3 million in the first quarter of 2006. The allowance for credit losses on a continuing operations basis was $480 million at June 30, 2006, compared with $601 million at June 30, 2005 and $474 million at March 31, 2006. The provision for credit loss for the second quarter of 2006 on an adjusted basis was zero, compared with a provision of $5 million in the second quarter of 2005 and first quarter of 2006. Charge-offs in the second quarter of 2006 on an adjusted basis were a recovery of $1 million, compared with charge-offs of $11 million in the second quarter of 2005 and $4 million in the first quarter of 2006. The allowance for credit losses on an adjusted basis was $567 million at June 30, 2006, compared with $710 million at June 30, 2005 and $566 million at March 31, 2006. 13 OTHER DEVELOPMENTS On July 11, 2006, the Board of Directors raised the quarterly dividend by 5% to 22 cents per share payable August 4, 2006 to shareholders of record on July 26, 2006. The Company was active in redeploying capital during the quarter to sharpen its focus, strengthen its business mix and enhance its long-term growth prospects. In addition to the swap transaction with JPMorgan Chase, the Company announced on June 30, 2006 that it agreed to join forces with Eze Castle Software and GTCR Golder Rauner, LLC, a private equity firm, to form a new company called BNY ConvergEx Group. BNY ConvergEx Group will bring together BNY Securities Group's trade execution, commission management, independent research and transition management business with Eze Castle Software, a leading provider of trade order management and related investment technologies. This transaction enables the Company to achieve several objectives including repositioning its execution services business for faster growth and enhancing the product offering for the Company's client base, while allowing the Company to withdraw capital committed to the business. The new firm is expected to be established by September or October, pending regulatory approval. The Bank of New York Company's Pershing subsidiary, a leading global provider of clearing and financial services outsourcing, is not included in this transaction. On June 12, 2006, the Company acquired the bond administration business of TD Banknorth, N.A. The TD Banknorth portfolio includes bond trustee, paying/fiscal agent, master trustee, transfer agent and registrar appointments. The transaction involves the purchase of approximately 350 bond trusteeships and agency appointments, representing $5.2 billion of principal debt outstanding for an estimated 230 clients. 14 CONFERENCE CALL INFORMATION Thomas A. Renyi, chairman and chief executive officer, and Bruce W. Van Saun, vice chairman and chief financial officer, will review the quarterly results in a live conference call and audio webcast today at 8:00 a.m. EDT. 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 (888) 562-4353 within the United States or (402) 530-7645 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. *************************** 15 FORWARD LOOKING STATEMENTS All statements in this press release other than statements of historical fact are forward looking statements 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 ConvergEx transaction, the completion and timing of proposed 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, the actions that management could take in response to these changes and other factors described under the heading "Forward Looking Statements and Risk Factors That Could Affect Future Results" in the Company's 2005 Form 10-K and First Quarter 2006 Form 10-Q, which have been filed with the SEC and are available at the SEC's website (www.sec.gov). 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.) Contact Information Media: Investors: - --------- ------------- R. Jeep Bryant, MD Joseph F. Murphy, MD (212) 635-1569 (212) 635-7740 Kenneth A. Brause, MD (212) 635-1578 16 Notes: (1) 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. (2) Operating leverage is measured by comparing the rate of increase in revenue to the rate of increase in expenses. The chart below shows the computation of operating leverage. The operating column for 2006 excludes one-time costs associated with SFAS 123(R) and certain costs resulting from the application of discontinued operations accounting. The Company believes excluding these costs provides the reader with supplemental information with which to assess the Company's future performance. Operating Leverage
(Dollars in million) Continuing Operations Adjusted (a) ------------------------------------------------------ --------------------------------------------------- Operating Operating Operating Operating 2Q 2006 2Q 2006(b) 2Q 2005 % Change % Change(b) 2Q2006 2Q2006(c) 2Q 2005 % Change % Change(c) ------- --------- ------- -------- ---------- ------- -------- -------- -------- ----------- Noninterest Income $ 1,366 $ 1,366 $ 1,194 14.4% 14.4% $ 1,426 $ 1,426 $ 1,256 13.5% 13.5% Net Interest Income 358 358 329 8.8 8.8 512 512 470 8.9 8.9 Total Revenue 1,724 1,724 1,523 13.2 13.2 1,938 1,938 1,726 12.3 12.3 Total Expense 1,134 1,122 1,021 11.1 9.9 1,248 1,231 1,123 11.1 9.6 Operating Leverage 2.1% 3.3% 1.2% 2.7% ===== ===== ===== =====
(Dollars in million) Continuing Operations Adjusted (a) ----------------------------------------------------- --------------------------------------------------- Operating Operating Operating Operating 2Q 2006 2Q 2006(b) 1Q 2006 % Change % Change(b) 2Q2006 2Q2006(c) 1Q 2006 % Change % Change(c) ------- --------- ------- -------- ---------- ------- -------- -------- -------- ----------- Noninterest Income $ 1,366 $ 1,366 $ 1,261 8.3% 8.3% $ 1,426 $ 1,426 $ 1,332 7.1% 7.1% Net Interest Income 358 358 339 5.6 5.6 512 512 488 4.9 4.9 Total Revenue 1,724 1,724 1,600 7.8 7.8 1,938 1,938 1,820 6.5 6.5 Total Expense 1,134 1,122 1,065 6.5 5.4 1,248 1,231 1,178 5.9 4.5 Operating Leverage 1.3% 2.4% 0.6% 2.0% ===== ===== ===== =====
17 Operating Leverage
(Dollars in million) Continuing Operations Adjusted (a) ------------------------------------------------------ ---------------------------------------------------- Operating Operating Operating Operating YTD2006 YTD2006(b) YTD2005 % Change % Change(b) YTD2006 YTD2006(c) YTD2005 % Change % Change(c) ------- --------- ------- -------- ---------- ------- -------- -------- -------- ----------- Noninterest Income $ 2,627 $ 2,627 $ 2,310 13.7% 13.7% $ 2,758 $ 2,758 $ 2,434 13.3% 13.3% Net Interest Income 697 697 650 7.2 7.2 1,000 1,000 925 8.1 8.1 Total Revenue 3,324 3,324 2,960 12.3 12.3 3,758 3,758 3,359 11.9 11.9 Total Expense 2,199 2,187 1,992 10.4 9.8 2,426 2,409 2,200 10.3 9.5 Operating Leverage 1.9% 2.5% 1.6% 2.4% ===== ===== ===== =====
(a) Adjusted combines continuing and discontinued operations. (b) Operating excludes the $12 million impact related to SFAS 123(R). (c) Operating excludes the $12 million impact related to SFAS 123(R) and charges and accounting changes resulting from the JPMorgan Chase transaction. (3) The Company's record operating results in the second quarter of 2006 reflect net income of $448 million. The Company reported net income of $773 million in the third quarter of 1999. However, after excluding the $573 million gain on the sale of BNY Financial Corporation, operating net income in the third quarter of 1999 was $200 million. 18
THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) June 30, March 31, June 30, Continuing Operations 2006 2006 2005 - --------------------- ------------- -------------- ------------- Quarter - ------- Net Interest Income $ 358 $ 339 $ 329 Noninterest Income 1,366 1,261 1,194 ------------ ------------- ------------ 1,724 1,600 1,523 Tax Equivalent Adjustment 7 7 6 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 1,731 $ 1,607 $ 1,529 ============ ============= ============ Income from Continuing Operations Before Income Taxes $ 591 $ 535 $ 505 Income Taxes 200 175 162 ------------ ------------- ------------ Income from Continuing Operations 391 360 343 Income from Discontinued Operations, Net of Taxes (1) 57 62 55 ------------ ------------- ------------ Net Income $ 448 $ 422 $ 398 ============ ============= ============ Basic EPS: Income from Continuing Operations $ 0.52 $ 0.47 $ 0.45 Income from Discontinued Operations, Net 0.07 0.08 0.07 Net Income 0.59 0.55 0.52 Diluted EPS: Income from Continuing Operations 0.52 0.47 0.45 Income from Discontinued Operations, Net 0.07 0.08 0.07 Net Income 0.59 0.55 0.52 Cash Dividends Per Share 0.21 0.21 0.20 Return on Average Common Shareholders' Equity 15.85% 14.75% 14.74% Return on Average Assets 1.54 1.50 1.49 Efficiency Ratio 66.4 67.0 67.8
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) June 30, March 31, June 30, Continuing Operations 2006 2006 2005 - --------------------- ------------ ------------- ------------- Year-to-date - ------------ Net Interest Income $ 697 $ 339 $ 650 Noninterest Income 2,627 1,261 2,310 ------------ ------------- ------------ 3,324 1,600 2,960 Tax Equivalent Adjustment 14 7 13 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 3,338 $ 1,607 $ 2,973 ============ ============= ============ Income from Continuing Operations Before Income Taxes $ 1,126 $ 535 $ 988 Income Taxes 375 175 317 ------------ ------------- ------------ Income from Continuing Operations 751 360 671 Income from Discontinued Operations, Net of Taxes (1) 119 62 106 ------------ ------------- ------------ Net Income $ 870 $ 422 $ 777 ============ ============= ============ Basic EPS: Income from Continuing Operations $ 0.99 $ 0.47 $ 0.87 Income from Discontinued Operations, Net 0.15 0.08 0.14 Net Income 1.14 0.55 1.01 Diluted EPS: Income from Continuing Operations 0.98 0.47 0.86 Income from Discontinued Operations, Net 0.15 0.08 0.14 Net Income 1.13 0.55 1.00 Cash Dividends Per Share 0.42 0.21 0.40 Return on Average Common Shareholders' Equity 15.30% 14.75% 14.52% Return on Average Assets 1.52 1.50 1.48 Efficiency Ratio 66.7 67.0 67.8 Assets $ 99,935 $ 94,851 $ 94,370 Loans 35,650 32,191 32,950 Securities 27,355 27,190 25,691 Deposits - Domestic 25,602 20,751 22,611 - Foreign 31,139 30,049 26,076 Long-Term Debt 8,207 8,309 7,586 Common Shareholders' Equity 10,056 10,101 9,471 Employees 20,109 19,989 19,506 Allowance for Loan Losses as a Percent of Total Loans 0.95% 1.04% 1.41% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.10 1.24 1.72 Total Allowance for Credit Losses as a Percent of Total Loans 1.35 1.47 1.82 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 1.57 1.76 2.23
(1) Discontinued operations includes Company's retail and regional middle market banking businesses expected to be sold to JPMorgan Chase & Co in the fourth quarter of 2006 in connection with the definitive agreement the Company entered into with JPMorgan Chase on April 8, 2006. 20
THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights - Supplemental Information (Dollars in millions, except per share amounts) (Unaudited) June 30, March 31, June 30, 2006 2006 2005 Adjusted Results ------------- ------------- ------------ - ---------------- Quarter - ------- Net Interest Income $ 512 $ 488 $ 470 Noninterest Income 1,426 1,332 1,256 ------------ ------------- ------------ 1,938 1,820 1,726 Tax Equivalent Adjustment 9 7 7 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 1,947 $ 1,827 $ 1,733 ============ ============= ============ Net Income $ 448 $ 422 $ 398 Basic EPS 0.59 0.55 0.52 Diluted EPS 0.59 0.55 0.52 Cash Dividends Per Share 0.21 0.21 0.20 Efficiency Ratio 64.9% 65.1% 65.7% Year-to-date - ------------ Net Interest Income $ 1,000 $ 488 $ 925 Noninterest Income 2,758 1,332 2,434 ------------ ------------- ------------ 3,758 1,820 3,359 Tax Equivalent Adjustment 15 7 14 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 3,773 $ 1,827 $ 3,373 ============ ============= ============ Net Income $ 870 $ 422 $ 777 Basic EPS 1.14 0.55 1.01 Diluted EPS 1.13 0.55 1.00 Cash Dividends Per Share 0.42 0.21 0.40 Efficiency Ratio 65.0% 65.1% 65.9% Assets $ 108,881 $ 103,611 $ 103,063 Loans 43,622 40,054 40,681 Securities 27,459 27,288 25,779 Deposits - Domestic 39,280 35,175 37,921 - Foreign 31,139 30,049 26,077 Long-Term Debt 8,207 8,309 7,586 Common Shareholders' Equity 10,056 10,101 9,471 Allowance for Loan Losses as a Percent of Total Loans 0.96% 1.05% 1.38% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.08 1.21 1.62 Total Allowance for Credit Losses as a Percent of Total Loans 1.30 1.41 1.75 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 1.47 1.63 2.05 Employees 23,575 23,500 22,993
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) June 30, March 31, June 30, 2006 2006 2005 ------------- ------------- ------------- Assets Under Custody - --------------------- (In trillions) - Estimated Assets Under Custody $ 12.0 $ 11.3 $ 10.3 Equity Securities 32% 33% 35% Fixed Income Securities 68 67 65 Cross-Border Assets Under Custody $ 4.1 $ 3.7 $ 2.9 Assets Under Management - ----------------------- (In billions)- Estimated Asset Management Sector $ 116 $ 113 $ 105 Equity Securities 36 37 36 Fixed Income Securities 21 21 22 Alternative Investments 28 26 15 Liquid Assets 31 29 32 Foreign Exchange Overlay 11 11 8 Securities Lending Short-term Investment Funds 43 49 39 Total Assets Under Management $ 170 $ 173 $ 152 Capital Ratios - Estimated - -------------------------- Tier 1 Capital Ratio 7.95% 8.28% 8.07% Total Capital Ratio 12.05 12.44 12.49 Leverage Ratio 6.22 6.51 6.55 Tangible Common Equity Ratio 5.07 5.42 5.26 Performance Ratios - ------------------ Quarter - ------- Return on Average Common Shareholders' Equity 18.17% 17.31% 17.12% Return on Average Assets 1.63 1.61 1.59 Year-to-date - ------------ Return on Average Common Shareholders' Equity 17.74% 17.31% 16.82% Return on Average Assets 1.62 1.61 1.57 Other Data - ---------- Common Shareholders' Equity Per Share $ 14.15 $ 13.09 $ 12.29 Market Value Per Share of Common Stock 32.20 36.04 28.78
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) For the three For the six Percent Inc/(Dec) months ended months ended 2Q06 YTD 2006 June 30, June 30, vs. vs. 2006 2005 2006 2005 2Q05 YTD 2005 ------ ------ ------ ------ ---- -------- Interest Income - --------------- Loans $ 350 $ 243 $ 660 $ 476 44% 39% Margin loans 85 62 162 117 37 38 Securities Taxable 280 193 545 359 45 52 Exempt from Federal Income Taxes 9 10 18 18 (10) - ------ ------ ------ ------ 289 203 563 377 42 49 Deposits in Banks 120 67 206 138 79 49 Federal Funds Sold and Securities Purchased Under Resale Agreements 15 20 30 33 (25) (9) Trading Assets 51 39 102 61 31 67 ------ ------ ------ ------ Total Interest Income 910 634 1,723 1,202 44 43 ------ ------ ------ ------ Interest Expense - ---------------- Deposits 348 192 646 352 81 84 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 34 8 54 14 325 286 Other Borrowed Funds 22 13 42 20 69 110 Customer Payables 42 28 82 53 50 55 Long-Term Debt 106 64 202 113 66 79 ------ ------ ------ ------ Total Interest Expense 552 305 1,026 552 81 86 ------ ------ ------ ------ Net Interest Income - ------------------- 358 329 697 650 9 7 Provision for Credit Losses (1) (3) (1) (20) (67) (95) ------ ------ ------ ------ Net Interest Income After Provision for Credit Losses 359 332 698 670 8 4 ------ ------ ------ ------ Noninterest Income - ------------------ Servicing Fees Securities 909 775 1,740 1,525 17 14 Global Payment Services 63 67 125 133 (6) (6) ------ ------ ------ ------ 972 842 1,865 1,658 15 12 Private Banking and Asset Management Fees 138 112 268 224 23 20 Service Charges and Fees 53 64 105 118 (17) (11) Foreign Exchange and Other Trading Activities 130 101 243 193 29 26 Securities Gains 23 23 40 35 - 14 Other 50 52 106 82 (4) 29 ------ ------ ------ ------ Total Noninterest Income 1,366 1,194 2,627 2,310 14 14 ------ ------ ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 656 581 1,260 1,138 13 11 Net Occupancy 68 65 136 124 5 10 Furniture and Equipment 48 49 99 98 (2) 1 Clearing 53 42 103 88 26 17 Sub-custodian Expenses 36 24 70 47 50 49 Software 53 55 108 107 (4) 1 Communications 22 21 48 43 5 12 Amortization of Intangibles 15 10 28 18 50 56 Other 183 174 347 329 5 5 ------ ------ ------ ------ Total Noninterest Expense 1,134 1,021 2,199 1,992 11 10 ------ ------ ------ ------ Income from Continuing Operations before Income Taxes 591 505 1,126 988 17 14 Income Taxes 200 162 375 317 23 18 ------ ------ ------ ------ Income from Continuing Operations 391 343 751 671 14 12 ------ ------ ------ ------
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) For the three For the six Percent Inc/(Dec) months ended months ended 2Q06 YTD 2006 June 30, June 30, vs. vs. 2006 2005 2006 2005 2Q05 YTD 2005 ------ ------ ------ ------ ------ -------- Discontinued Operations Income from Discontinued Operations 99 93 201 176 6% 14% Income Taxes 42 38 82 70 11 17 ------ ------ ------ ------ Discontinued Operations, net 57 55 119 106 4 12 ------ ------ ------ ------ Net Income $ 448 $ 398 $ 870 $ 777 13 12 ====== ====== ====== ====== Per Common Share Data: - ---------------------- Basic Earnings Income from Continuing Operations $ 0.52 $ 0.45 $ 0.99 $ 0.87 16 14 Income from Discontinued Operations, Net 0.07 0.07 0.15 0.14 - 7 Net Income 0.59 0.52 1.14 1.01 13 13 Diluted Earnings Income from Continuing Operations $ 0.52 $ 0.45 $ 0.98 $ 0.86 16 14 Income from Discontinued Operations, Net 0.07 0.07 0.15 0.14 - 7 Net Income 0.59 0.52 1.13 1.00 13 13 Cash Dividends Paid 0.21 0.20 0.42 0.40 5 5 Diluted Shares Outstanding 765 772 769 775 (1) (1)
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) June 30, 2006 December 31, 2005 ------------------ ----------------- Assets - ------ Cash and Due from Banks $ 3,010 $ 2,882 Interest-Bearing Deposits in Banks 11,978 8,644 Securities Held-to-Maturity (fair value of $2,108 in 2006 and $1,847 in 2005) 2,167 1,872 Available-for-Sale 25,188 25,346 ------------------ ----------------- Total Securities 27,355 27,218 Trading Assets at Fair Value 6,065 5,930 Federal Funds Sold and Securities Purchased Under Resale Agreements 2,235 2,425 Loans (less allowance for loan losses of $337 in 2006 and $326 in 2005) 35,313 32,601 Premises and Equipment 963 960 Due from Customers on Acceptances 210 212 Accrued Interest Receivable 394 363 Goodwill 3,784 3,510 Intangible Assets 885 811 Other Assets 7,743 7,710 Assets of Discontinued Operations Held for Sale 8,946 8,808 ------------------ ----------------- Total Assets $ 108,881 $ 102,074 ================== ================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 15,930 $ 12,706 Interest-Bearing Domestic Offices 9,958 10,415 Foreign Offices 30,853 26,666 ------------------ ----------------- Total Deposits 56,741 49,787 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,177 834 Trading Liabilities 2,938 2,401 Payables to Customers and Broker-Dealers 6,638 8,623 Other Borrowed Funds 1,026 860 Acceptances Outstanding 210 212 Accrued Taxes and Other Expenses 3,864 4,123 Accrued Interest Payable 192 172 Other Liabilities (including allowance for lending-related commitments of $143 in 2006 and $144 in 2005) 4,101 2,697 Long-Term Debt 8,207 7,817 Liabilities of Discontinued Operations Held for Sale 13,731 14,672 ------------------ ----------------- Total Liabilities 98,825 92,198 ------------------ ----------------- Shareholders' Equity Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,048,879,688 shares in 2006 and 1,044,994,517 shares in 2005 7,867 7,838 Additional Capital 1,965 1,826 Retained Earnings 7,636 7,089 Accumulated Other Comprehensive Income (231) (134) ------------------ ----------------- 17,237 16,619 Less: Treasury Stock (285,896,449 shares in 2006 and 273,662,218 shares in 2005), at cost 7,174 6,736 Loan to ESOP (203,507 shares in 2006 and 203,507 shares in 2005), at cost 7 7 ------------------ ----------------- Total Shareholders' Equity 10,056 9,876 ------------------ ----------------- Total Liabilities and Shareholders' Equity $ 108,881 $ 102,074 ================== ================= - ------------------------------------------------------------------------------------------------ Note: The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date.
25
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 June 30, 2006 ended June 30, 2005 ---------------------------- --------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate -------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 12,432 $ 120 3.88% $ 9,182 $ 67 2.91% Federal Funds Sold and Securities Purchased Under Resale Agreements 1,565 15 3.98 2,789 20 2.72 Margin Loans 5,506 85 6.20 6,341 62 3.93 Loans Domestic Offices 16,786 193 4.59 15,133 137 3.64 Foreign Offices 11,317 157 5.56 10,141 106 4.19 --------- -------- --------- -------- Non-Margin Loans 28,103 350 4.98 25,274 243 3.86 --------- -------- --------- -------- Securities U.S. Government Obligations 216 3 4.24 282 2 3.21 U.S. Government Agency Obligations 4,009 46 4.60 3,804 38 3.95 Obligations of States and Political Subdivisions 109 2 8.13 148 3 8.52 Other Securities 18,848 245 5.21 15,499 166 4.29 Trading Securities 4,469 51 4.61 3,416 39 4.62 --------- -------- --------- -------- Total Securities 27,651 347 5.03 23,149 248 4.26 --------- -------- --------- -------- Total Interest-Earning Assets 75,257 917 4.88 66,735 640 3.83 -------- --------- -------- Allowance for Credit Losses (344) (463) Cash and Due from Banks 3,089 2,282 Other Assets 18,391 16,445 Assets of Discontinued Operations Held for Sale 13,993 191 5.47 15,462 169 4.40 --------- -------- --------- ------- TOTAL ASSETS $ 110,386 $ 1,108 $ 100,461 $ 809 ========= ======== ========= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,213 $ 34 2.60% $ 6,363 $ 25 1.57% Savings 456 2 2.01 666 1 0.92 Certificates of Deposit $100,000 & Over 4,105 52 5.05 3,054 24 3.10 Other Time Deposits 697 8 4.79 127 1 2.30 Foreign Offices 32,544 252 3.10 26,332 141 2.14 --------- -------- --------- -------- Total Interest-Bearing Deposits 43,015 348 3.24 36,542 192 2.10 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,893 34 4.62 1,152 8 2.58 Other Borrowed Funds 2,323 22 3.82 1,954 13 2.65 Payables to Customers and Broker-Dealers 5,034 42 3.34 5,984 28 1.90 Long-Term Debt 8,146 106 5.15 7,485 64 3.41 --------- -------- --------- -------- Total Interest-Bearing Liabilities 61,411 552 3.59 53,117 305 2.29 -------- --------- -------- Noninterest-Bearing Deposits 10,869 9,581 Other Liabilities 14,231 12,976 Common Shareholders' Equity 9,882 9,325 Liabilities of Discontinued Operations Held for Sale 13,993 37 1.07 15,462 28 0.73 --------- -------- --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 110,386 $ 589 $ 100,461 $ 333 ========= ========= ========= ======= Net Interest Earnings and Interest Rate Spread $ 365 1.29% $ 335 1.54% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 1.95% 2.01% ======= =======
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THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions) For the six months For the six months ended June 30, 2006 ended June 30, 2005 -------------------------- -------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 11,036 $ 206 3.76% $ 9,502 $ 138 2.93% Federal Funds Sold and Securities Purchased Under Resale Agreements 1,625 30 3.81 2,619 33 2.48 Margin Loans 5,580 162 5.87 6,374 117 3.70 Loans Domestic Offices 15,983 360 4.51 14,933 275 3.69 Foreign Offices 11,142 300 5.44 10,221 201 3.97 --------- -------- -------- -------- Non-Margin Loans 27,125 660 4.89 25,154 476 3.81 --------- -------- -------- -------- Securities U.S. Government Obligations 220 5 4.23 320 5 3.12 U.S. Government Agency Obligations 3,981 90 4.53 3,554 69 3.85 Obligations of States and Political Subdivisions 113 5 8.09 153 6 8.36 Other Securities 18,963 477 5.03 15,009 310 4.14 Trading Securities 4,591 102 4.51 2,943 61 4.20 --------- -------- -------- -------- Total Securities 27,868 679 4.88 21,979 451 4.11 --------- -------- -------- -------- Total Interest-Earning Assets 73,234 1,737 4.77 65,628 1,215 3.72 -------- -------- Allowance for Credit Losses (497) (474) Cash and Due from Banks 3,676 2,918 Other Assets 17,711 16,281 Assets of Discontinued Operations Held for Sale 14,147 376 5.36 15,503 327 4.26 -------- -------- -------- -------- TOTAL ASSETS $108,271 $ 2,113 $ 99,856 $ 1,542 ======== ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,319 $ 65 2.45% $ 6,291 $ 44 1.44% Savings 462 3 1.56 629 3 0.88 Certificates of Deposit $100,000 & Over 4,176 100 4.83 2,961 42 2.85 Other Time Deposits 799 18 4.56 133 2 2.07 Foreign Offices 31,388 460 2.96 25,900 261 2.03 --------- -------- --------- -------- Total Interest-Bearing Deposits 42,144 646 3.09 35,914 352 1.98 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,432 54 4.45 1,270 14 2.18 Other Borrowed Funds 2,153 42 3.91 1,890 20 2.12 Payables to Customers and Broker-Dealers 5,132 82 3.22 6,184 53 1.73 Long-Term Debt 8,079 202 4.98 7,047 113 3.21 -------- ------- -------- -------- Total Interest-Bearing Liabilities 59,940 1,026 3.44 52,305 552 2.12 ------- -------- Noninterest-Bearing Deposits 10,496 9,694 Other Liabilities 13,803 13,041 Common Shareholders' Equity 9,885 9,313 Liabilities of Discontinued Operations Held for Sale 14,147 73 1.04 15,503 52 0.68 -------- ------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,271 $ 1,099 $ 99,856 $ 604 ======== ======== ======== ======== Net Interest Earnings and Interest Rate Spread $ 711 1.33% $ 663 1.60% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 1.95% 2.03% ======= =======
27 THE BANK OF NEW YORK COMPANY, INC. Credit Loss Provision and Net Charge-Offs (In millions)
Year-to-date ----------------- 2Q06 1Q06 2Q05 2006 2005 ------- ------- ------- ------- ------- Provision Continuing Operations $ (1) $ - $ (3) $ (1) $ (20) Discontinued Operations 1 5 8 6 15 ------- ------- ------- ------- ------- Total Provision $ - $ 5 $ 5 $ 5 $ (5) ======= ======= ======= ======= ======= Net Charge-offs: Commercial $ 2 $ 1 $ (2) $ 3 $ (2) Foreign 4 2 (4) 6 (4) Other 1 - - 1 - ------- ------- ------- ------- ------- Total Continuing Operations 7 3 (6) 10 (6) ------- ------- ------- ------- ------- Discontinued Operations (6) (7) (5) (13) (15) ------- ------- ------- ------- ------- Total $ 1 $ (4) $ (11) $ (3) $ (21) ======= ======= ======= ======= =======
The sequential increase in the credit to the provision for continuing operations reflects a continued strong credit environment. During the second quarter of 2006, nonperforming loans on a continuing operations basis declined and credit loss recoveries increased. 28 THE BANK OF NEW YORK COMPANY, INC. Loans (Dollars in millions) June 30, March 31, June 30, 2006 2006 2005 ------------ ------------ ------------ Margin Loans $ 5,096 $ 5,312 $ 6,055 Non-Margin Loans 30,554 26,879 26,895 ------------ ------------ ------------ Loans on a Continuing Operations Basis 35,650 32,191 32,950 Margin Loans - - - Non-Margin Loans 7,972 7,863 7,731 ------------ ------------ ------------ Loans related to Discontinued Operations 7,972 7,863 7,731 ------------ ------------ ------------ Total Loans $ 43,622 $ 40,054 $ 40,681 ============ ============ ============ Allowance for Loan Losses $ 337 $ 334 $ 463 Allowance for Lending-Related Commitments 143 140 138 ------------ ------------ ------------ Allowance for Credit Losses on a Continuing Operations Basis 480 474 601 ------------ ------------ ------------ Allowance for Loan Losses 80 85 99 Allowance for Lending-Related Commitments 7 7 10 ------------ ------------ ------------ Allowance for Credit Losses Related to Discontinued Operations 87 92 109 ------------ ------------ ------------ Total Allowance for Credit Losses $ 567 $ 566 $ 710 ============ ============ ============ Continuing Operations The increase in loans primarily reflects the extension of credit to the Company's securities servicing customers. June 30, March 31, June 30, 2006 2006 2005 ------------ ------------ ------------ Continuing Operations - --------------------- Allowance for Loan Losses As a Percent of Total Loans 0.95% 1.04% 1.41% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.10 1.24 1.72 Total Allowance for Credit Losses As a Percent of Total Loans 1.35 1.47 1.82 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 1.57 1.76 2.23 Adjusted - -------- Allowance for Loan Losses As a Percent of Total Loans 0.96% 1.05% 1.38% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.08 1.21 1.62 Total Allowance for Credit Losses As a Percent of Total Loans 1.30 1.41 1.75 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 1.47 1.63 2.05 29 THE BANK OF NEW YORK COMPANY, INC. Nonperforming Assets (Dollars in millions)
Change Percent 6/30/2006 vs. Inc/ 6/30/2006 3/31/2006 3/31/2006 (Dec) --------- --------- ----------- -------- Loans: Commercial $ 10 $ 12 $ (2) (17)% Foreign 10 13 (3) (23) --------- --------- ----------- Total Nonperforming Loans 20 25 (5) (20) Other Assets Owned 12 - 12 - --------- --------- ----------- Nonperforming Assets on a Continuing Operations Basis 32 25 7 28 --------- --------- ----------- Nonperforming Assets Related to Discontinued operations 42 41 1 2 --------- --------- ----------- Total Nonperforming Assets $ 74 $ 66 $ 8 12 ========= ========= =========== Continuing Operations - --------------------- Nonperforming Assets Ratio 0.1% 0.1% Allowance for Loan Losses/Nonperforming Loans 1,685 1,336 Allowance for Loan Losses/Nonperforming Assets 1,053 1,336 Total Allowance for Credit Losses/Nonperforming Loans 2,400 1,896 Total Allowance for Credit Losses/Nonperforming Assets 1,500 1,896 Adjusted - -------- Nonperforming Assets Ratio 0.2% 0.2% Allowance for Loan Losses/Nonperforming Loans 673 635 Allowance for Loan Losses/Nonperforming Assets 564 635 Total Allowance for Credit Losses/Nonperforming Loans 915 858 Total Allowance for Credit Losses/Nonperforming Assets 766 858
The sequential quarter increase in nonperforming assets primarily reflects the buyout of debt associated with a lease on an aircraft that is being positioned for sale as part of a workout strategy. 30 APPENDIX I Supplemental Information (Page 1 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited)
Quarter Ended June 30, 2006 -------------------------------------------- Continuing Discontinued Adjusted Operations Operations Results(1) ------------ ------------ ------------ Net Interest Income $ 358 $ 154 $ 512 - ------------------- Provision for Credit Losses (1) 1 - ----- ----- ----- Net Interest Income After Provision for Credit Losses 359 153 512 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 909 - 909 Global Payment Services 63 7 70 ----- ----- ----- 972 7 979 Private Banking and Asset Management Fees 138 12 150 Service Charges and Fees 53 38 91 Trading Activities 130 2 132 Securities Gains 23 - 23 Other 50 1 51 ----- ----- ----- Total Noninterest Income 1,366 60 1,426 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 656 67 723 Net Occupancy 68 18 86 Furniture and Equipment 48 2 50 Clearing 53 - 53 Sub-custodian Expenses 36 - 36 Software 53 - 53 Communications 22 1 23 Amortization of Intangibles 15 - 15 Other 183 26 209 ----- ----- ----- Total Noninterest Expense 1,134 114 1,248 ----- ----- ----- Income Before Income Taxes 591 99 690 Income Taxes 200 42 242 ----- ----- ----- Net Income $ 391 $ 57 $ 448 - ---------- ===== ===== ===== Diluted Earnings Per Share $0.52 $0.07 $0.59 Notes: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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APPENDIX I Supplemental Information (Page 2 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Quarter Ended June 30, 2005 -------------------------------------------- Continuing Discontinued Adjusted Operations Operations Results(1) ------------ ------------ ------------ Net Interest Income $ 329 $ 141 $ 470 - ------------------- Provision for Credit Losses (3) 8 5 ----- ----- ----- Net Interest Income After Provision for Credit Losses 332 133 465 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 775 - 775 Global Payment Services 67 9 76 ----- ----- ----- 842 9 851 Private Banking and Asset Management Fees 112 11 123 Service Charges and Fees 64 39 103 Foreign Exchange and Other Trading Activities 101 2 103 Securities Gains 23 - 23 Other 52 1 53 ----- ----- ----- Total Noninterest Income 1,194 62 1,256 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 581 59 640 Net Occupancy 65 17 82 Furniture and Equipment 49 2 51 Clearing 42 - 42 Sub-custodian Expenses 24 - 24 Software 55 - 55 Communications 21 1 22 Amortization of Intangibles 10 - 10 Other 174 23 197 ----- ----- ----- Total Noninterest Expense 1,021 102 1,123 ----- ----- ----- Income Before Income Taxes 505 93 598 Income Taxes 162 38 200 ----- ----- ----- Net Income $ 343 $ 55 $ 398 - ---------- ===== ===== ===== Diluted Earnings Per Share $0.45 $0.07 $0.52 Notes: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
32 APPENDIX I Supplemental Information (Page 3 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited)
Quarter Ended March 31, 2006 -------------------------------------------- Continuing Discontinued Adjusted Operations Operations Results(1) ------------ ------------ ------------ Net Interest Income $ 339 $ 149 $ 488 - ------------------- Provision for Credit Losses - 5 5 ----- ----- ----- Net Interest Income After Provision for Credit Losses 339 144 483 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 831 - 831 Global Payment Services 62 8 70 ----- ----- ----- 893 8 901 Private Banking and Asset Management Fees 130 11 141 Service Charges and Fees 52 37 89 Foreign Exchange and Other Trading Activities 113 2 115 Securities Gains 17 - 17 Other 56 13 69 ----- ----- ----- Total Noninterest Income 1,261 71 1,332 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 604 64 668 Net Occupancy 68 20 88 Furniture and Equipment 51 2 53 Clearing 50 - 50 Sub-custodian Expenses 34 - 34 Software 55 1 56 Communications 26 1 27 Amortization of Intangibles 13 - 13 Other 164 25 189 ----- ----- ----- Total Noninterest Expense 1,065 113 1,178 ----- ----- ----- Income Before Income Taxes 535 102 637 Income Taxes 175 40 215 ----- ----- ----- Net Income $ 360 $ 62 $ 422 - ---------- ===== ===== ===== Diluted Earnings Per Share $0.47 $0.08 $0.55 Notes: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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APPENDIX I Supplemental Information (Page 4 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Adjusted Results(1) ------------------------------------------------------------------- Quarter Ended 6/30/06 6/30/06 June 30, June 30, March 31, vs. vs. 2006 2005 2006 6/30/05 3/31/06 ----------- ------------- --------- --------- --------- Net Interest Income $ 512 $ 470 $ 488 9% 5% - ------------------- Provision for Credit Losses - 5 5 ----- ----- ----- Net Interest Income After Provision for Credit Losses 512 465 483 10 6 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 909 775 831 17 9 Global Payment Services 70 76 70 (8) - ----- ----- ----- 979 851 901 15 9 Private Banking and Asset Management Fees 150 123 141 22 6 Service Charges and Fees 91 103 89 (12) 2 Foreign Exchange and Other Trading Activities 132 103 115 28 15 Securities Gains 23 23 17 - 35 Other 51 53 69 (4) (26) ----- ----- ----- Total Noninterest Income 1,426 1,256 1,332 14 7 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 723 640 668 13 8 Net Occupancy 86 82 88 5 (2) Furniture and Equipment 50 51 53 (2) (6) Clearing 53 42 50 26 6 Sub-custodian Expenses 36 24 34 50 6 Software 53 55 56 (4) (5) Communications 23 22 27 5 (15) Amortization of Intangibles 15 10 13 50 15 Other 209 197 189 6 11 ----- ----- ----- Total Noninterest Expense 1,248 1,123 1,178 11 6 ----- ----- ----- Income Before Income Taxes 690 598 637 15 8 Income Taxes 242 200 215 21 13 ----- ----- ----- Net Income $ 448 $ 398 $ 422 13 6 - ---------- ===== ===== ===== Diluted Earnings Per Share $0.59 $0.52 $0.55 13 7 Notes: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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APPENDIX I Supplemental Information (Page 5 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Six Months Ended June 30, ---------------------------------------------------------------------- 2006 2005 6/30/06 Continuing Discontinued Adjusted Adjusted vs. Operations Operations Results(1) Results(1) 6/30/05 ------------ ------------ ---------- ---------- ---------- Net Interest Income $ 697 $ 303 $1,000 $ 925 8% - ------------------- Provision for Credit Losses (1) 6 5 (5) (200) ----- ----- ------ ----- Net Interest Income After Provision for Credit Losses 698 297 995 930 7 ----- ----- ------ ----- Noninterest Income - ------------------ Servicing Fees Securities 1,740 - 1,740 1,525 14 Global Payment Services 125 15 140 151 (7) ----- ----- ------ ----- 1,865 15 1,880 1,676 12 Private Banking and Asset Management Fees 268 23 291 245 19 Service Charges and Fees 105 75 180 195 (8) Foreign Exchange and Other Trading Activities 243 4 247 199 24 Securities Gains 40 - 40 35 14 Other 106 14 120 84 43 ----- ----- ------ ----- Total Noninterest Income 2,627 131 2,758 2,434 13 ----- ----- ------ ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 1,260 131 1,391 1,258 11 Net Occupancy 136 38 174 160 9 Furniture and Equipment 99 4 103 103 - Clearing 103 - 103 88 17 Sub-custodian Expenses 70 - 70 47 49 Software 108 1 109 108 1 Communications 48 2 50 45 11 Amortization of Intangibles 28 - 28 18 56 Other 347 51 398 373 7 ----- ----- ------ ----- Total Noninterest Expense 2,199 227 2,426 2,200 10 ----- ----- ------ ----- Income Before Income Taxes 1,126 201 1,327 1,164 14 Income Taxes 375 82 457 387 18 ----- ----- ------ ----- Net Income $ 751 $ 119 $ 870 $ 777 12 - ---------- ===== ===== ===== ===== Diluted Earnings Per Share $0.98 $0.15 $1.13 $1.00 13 Notes: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
35
APPENDIX I Supplemental Information (Page 6 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Six Months Ended June 30, 2005 -------------------------------------------- 2005 Continuing Discontinued Adjusted Operations Operations Results(1) ------------- ------------- ------------ Net Interest Income $ 650 $ 275 $ 925 - ------------------- Provision for Credit Losses (20) 15 (5) ----- ----- ----- Net Interest Income After Provision for Credit Losses 670 260 930 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 1,525 - 1,525 Global Payment Services 133 18 151 ----- ----- ----- 1,658 18 1,676 Private Banking and Asset Management Fees 224 21 245 Service Charges and Fees 118 77 195 Foreign Exchange and Other Trading Activities 193 6 199 Securities Gains 35 - 35 Other 82 2 84 ----- ----- ----- Total Noninterest Income 2,310 124 2,434 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 1,138 120 1,258 Net Occupancy 124 36 160 Furniture and Equipment 98 5 103 Clearing 88 - 88 Sub-custodian Expenses 47 - 47 Software 107 1 108 Communications 43 2 45 Amortization of Intangibles 18 - 18 Other 329 44 373 ----- ----- ----- Total Noninterest Expense 1,992 208 2,200 ----- ----- ----- Income Before Income Taxes 988 176 1,164 Income Taxes 317 70 387 ----- ----- ----- Net Income $ 671 $ 106 $ 777 - ---------- ===== ===== ===== Diluted Earnings Per Share $0.86 $0.14 $1.00 Notes: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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APPENDIX I Supplemental Information (Page 7 of 7) THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (In millions) (Unaudited) June 30, 2006 December 31, 2005 ------------------------------------- ------------------------------------- Continuing Discontinued Continuing Discontinued Operations Operations Adjusted Operations Operations Adjusted ---------- ------------ -------- ---------- ------------ -------- Assets - ------ Cash and Due from Banks $ 3,010 $ 609 $ 3,619 $ 2,882 $ 633 $ 3,515 Interest-Bearing Deposits in Banks 11,978 - 11,978 8,644 - 8,644 Securities 27,355 104 27,459 27,218 108 27,326 Trading Assets at Fair Value 6,065 - 6,065 5,930 - 5,930 Federal Funds Sold and Securities Purchased Under Resale Agreements 2,235 - 2,235 2,425 - 2,425 Loans 35,313 7,892 43,205 32,601 7,714 40,315 Premises and Equipment 963 112 1,075 960 100 1,060 Due from Customers on Acceptances 210 23 233 212 21 233 Accrued Interest Receivable 394 32 426 363 28 391 Goodwill 3,784 109 3,893 3,510 109 3,619 Intangible Assets 885 - 885 811 - 811 Other Assets 7,743 65 7,808 7,710 95 7,805 -------- ------- -------- -------- ---------- ---------- Total Assets $ 99,935 $ 8,946 $108,881 $ 93,266 $ 8,808 $ 102,074 ======== ======= ======== ======== ========== ========== Liabilities and Shareholders' Equity - ---------------------- Deposits $ 56,741 $13,678 $ 70,419 $ 49,787 $ 14,637 $ 64,424 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,177 - 1,177 834 - 834 Trading Liabilities 2,938 - 2,938 2,401 - 2,401 Payables to Customers and Broker-Dealers 6,638 - 6,638 8,623 - 8,623 Other Borrowed Funds 1,026 - 1,026 860 - 860 Acceptances Outstanding 210 26 236 212 23 235 Accrued Taxes and Other Expenses 3,864 8 3,872 4,123 1 4,124 Accrued Interest Payable 192 11 203 172 - 172 Other Liabilities 4,101 8 4,109 2,697 11 2,708 Long-Term Debt 8,207 - 8,207 7,817 - 7,817 -------- ------- -------- -------- ---------- ---------- Total Liabilities 85,094 13,731 98,825 77,526 14,672 92,198 -------- ------- -------- -------- ---------- ---------- Shareholders' Equity 10,056 - 10,056 9,876 - 9,876 -------- ------- -------- -------- ---------- ---------- Total Liabilities and Shareholders' Equity $ 95,150 $13,731 $108,881 $ 87,402 $ 14,672 $ 102,074 ======== ======= ======== ======== ========== ========== - ---------------------------------------------------------------------------------------------------------- Note: The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date.
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