-----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, B6I7us3ablYVrUTwH9ZRRhIo2ekHFLm6Inx5yelr3qZlZftav2Y/JiLfXRlpbTQ3 1im+lbv9zkRKwc8tWGUl3g== 0000009626-06-000269.txt : 20061019 0000009626-06-000269.hdr.sgml : 20061019 20061019095009 ACCESSION NUMBER: 0000009626-06-000269 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060930 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061019 DATE AS OF CHANGE: 20061019 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: 061152190 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 r8k3q06.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): October 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 October 19, 2006, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the third 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 (d) Exhibit Description ------- ----------- 99.1 Unaudited interim financial information and accompanying discussion for the third quarter of 2006 contained in the press release dated October 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: October 19, 2006 THE BANK OF NEW YORK COMPANY, INC. (Registrant) By: /s/ Thomas J. Mastro ------------------------ Name: Thomas J. Mastro Title: Comptroller EXHIBIT INDEX ------------- Exhibit No. Description - ----------- ----------- 99.1 Unaudited interim financial information and accompanying discussion for the third quarter of 2006 contained in the press release dated October 19, 2006, of The Bank of New York Company, Inc. EX-99 2 r8k3q06ex99.txt EXHIBIT 99.1 1 Exhibit 99.1 News Release For Immediate Release THE BANK OF NEW YORK COMPANY, INC. REPORTS STRONG GROWTH IN OPERATING EARNINGS; ISSUER SERVICES BUSINESS REMAINS ROBUST; GOOD EXPENSE DISCIPLINE NEW YORK, N.Y., October 19, 2006 -- The Bank of New York Company, Inc. (NYSE: BK) reported today third quarter net income of $352 million and diluted earnings per share of 46 cents, including after-tax charges of $74 million, or 10 cents per share, for merger and integration costs. On an operating basis, excluding the merger and integration costs, third quarter net income was $426 million and diluted earnings per share was 56 cents, an increase of 10% from net income of $389 million and diluted earnings per share of 51 cents in the third quarter of 2005. For the nine months ended September 30, 2006, net income was $1,222 million and diluted earnings per share was $1.59, including after-tax charges of $74 million, or 10 cents per share, for merger and integration costs. On an operating basis, excluding merger and integration costs, year-to-date net income was $1,296 million compared with $1,166 million last year and diluted earnings per share was $1.69, an increase of 12% over $1.51 in the prior year period. Performance Highlights * Strong revenue growth in issuer services and broker-dealer services, both up 14% over last year's third quarter. * Private banking and asset management revenues up 23% from the year-ago quarter, led by the Alcentra and Urdang acquisitions. * Disciplined expense control, as adjusted expenses excluding merger and integration costs declined sequentially by $40 million. * Continued excellent asset quality, with a 15% sequential decline in adjusted nonperforming assets. * Completion of balance sheet repositioning actions tied to the JPMorgan Chase swap, taking advantage of favorable market conditions. * Closed the swap with JPMorgan Chase and the BNY ConvergEx transaction on schedule in early October. "The breadth of our securities servicing platform was instrumental in achieving strong growth in operating earnings, despite a pronounced seasonal decline in market activity and exceptionally low market volatility," stated Thomas A. Renyi, Chairman and Chief Executive Officer. "We benefited from our market-leading positions in global depositary receipts and broker-dealer services as well as our continued focus on managing our expense base, which helped offset 2 the impact of lower transaction volumes. Credit quality remained excellent, reflecting the actions we have taken over the past few years to improve our risk profile and realign our use of credit in support of our core businesses. "Of great importance to our future results was the recent completion of two strategic transactions that sharpen our focus on securities servicing and asset management, and enhance our ability to grow and generate attractive returns for our shareholders. We anticipate a smooth integration and are enthusiastic about the long-term potential of our franchise." On October 1, 2006, the Company acquired JPMorgan Chase's corporate trust business and sold to JPMorgan Chase 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 through September 30, 2006 exclude the 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, since the transaction did not close until October 1, 2006. Adjusted financial statements combining continuing and discontinued operations are presented in "Supplemental Financial Information." The following tables show the impact of the merger and integration costs associated with the JPMorgan Chase transaction on diluted earnings per share for the three months and nine months ended September 30, 2006:
Diluted Earnings Per Share ---------------------------------------------------------------------------- Three Months Ended September 30, 2006 Nine Months Ended September 30, 2006 ------------------------------------- ------------------------------------ Continuing Discontinued Continuing Discontinued (In dollars) Operations Operations Adjusted(1) Operations Operations Adjusted(1) ---------- ------------ -------- ---------- ------------ -------- Including Merger & Integration Costs $ 0.39 $ 0.07 $ 0.46 $ 1.36 $ 0.23 $ 1.59 Merger & Integration Costs 0.08 0.02 0.10 0.08 0.02 0.10 ------- ------- ------- ------- ------- ------- Excluding Merger & Integration Costs $ 0.47 $ 0.09 $ 0.56 $ 1.44 $ 0.25 $ 1.69 ======= ======= ======= ======= ======= ======= (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
Merger and integration costs include investment portfolio restructuring costs, employee-related costs, and other transaction-related expenses. Third quarter 2006 income from continuing operations excluding merger and integration costs was 47 cents of diluted earnings per share, up 7% from the 44 cents of diluted earnings per share in the third quarter of 2005. Net income on a continuing operations basis, excluding merger and integration costs, was $360 million in the third quarter of 2006, compared with $333 million last year. Net income from continuing operations was $391 million or 52 cents of diluted earnings per share in the second quarter of 2006. On a year-to-date basis, excluding merger and integration costs, income from continuing operations was $1,111 million, or $1.44 of diluted earnings per share, compared to $1,004 million, or $1.30 of diluted earnings per share in 2005, up 11%. 3 SUPPLEMENTAL FINANCIAL INFORMATION - ---------------------------------- On October 1, 2006, the Company acquired JPMorgan Chase's corporate trust business and sold to JPMorgan Chase 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 businesses that are at the core of its long-term business strategy. For the quarters and nine months ended September 30, 2006 and 2005, the Company has prepared supplemental financial information as follows: * Full income statements and balance sheets for continuing operations, which exclude the results of substantially all of the Retail & Regional Middle Market Banking Business * Full income statements and balance sheets 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 * Continuing operations and adjusted results including and excluding merger and integration costs 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. 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, which closed on October 1, 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. By excluding merger and integration costs, the Company believes investors can gain greater insight into the operating performance of the Company. 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 non-GAAP and GAAP financial results for the quarters and nine- month periods ended September 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 Nine Months Ended September 30, June 30, September 30, September 30, 2006 2006 2005 2006 2005 ----------- --------- ----------- --------- -------- Net Interest Income $ 351 $ 358 $ 346 $1,048 $ 996 - ------------------- Provision for Credit Losses (4) (1) 10 (5) (10) ----- ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 355 359 336 1,053 1,006 ----- ----- ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 839 909 806 2,579 2,330 Global Payment Services 66 63 67 191 200 ----- ----- ----- ----- ----- 905 972 873 2,770 2,530 Private Banking and Asset Management Fees 134 138 109 402 334 Service Charges and Fees 52 53 54 157 172 Foreign Exchange and Other Trading Activities 84 130 90 327 283 Securities Gains 21 23 15 61 50 Other 63 50 44 169 126 ----- ----- ----- ----- ----- Total Noninterest Income 1,259 1,366 1,185 3,886 3,495 ----- ----- ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 644 656 585 1,904 1,721 Net Occupancy 70 68 60 206 184 Furniture and Equipment 46 48 50 145 149 Clearing 47 53 49 150 137 Sub-custodian Expenses 31 36 25 101 72 Software 53 53 54 161 160 Communications 26 22 23 74 66 Amortization of Intangibles 14 15 10 42 28 Merger and Integration Costs 89 - - 89 - Other 172 183 175 519 506 ----- ----- ----- ----- ----- Total Noninterest Expense 1,192 1,134 1,031 3,391 3,023 ----- ----- ----- ----- ----- Income Before Income Taxes, Including Merger and Integration Costs 422 591 490 1,548 1,478 Income Taxes 124 200 157 499 474 ----- ----- ----- ----- ----- Net Income Including Merger and Integration Costs 298 391 333 1,049 1,004 Merger and Integration Costs, Net of Taxes 62 - - 62 - ----- ----- ----- ----- ----- Net Income Excluding Merger and Integration Costs $ 360 $ 391 $ 333 $1,111 $1,004 ===== ===== ===== ====== ====== Diluted Earnings Per Share $0.39 $0.52 $0.44 $1.36 $1.30 Diluted Earnings Per Share Excluding Merger and Integration Costs 0.47 0.52 0.44 1.44 1.30
Diluted earnings per share from continuing operations excluding merger and integration costs for the third quarter of 2006 were 47 cents, up from 44 cents a year ago. On the same basis for the year-to-date period, diluted earnings per share grew 11% from a year ago to $1.44. 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 Nine Months Ended September 30, June 30, September 30, September 30, 2006 2006 2005 2006 2005 ---------- ---------- --------- --------- --------- Net Interest Income $ 506 $ 512 $ 492 $1,506 $1,417 - ------------------- Provision for Credit Losses (5) - 10 - 5 ----- ----- ----- ----- ----- Net Interest Income After Provision for Credit Losses 511 512 482 1,506 1,412 ----- ----- ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 839 909 806 2,579 2,330 Global Payment Services 74 70 75 214 226 ----- ----- ----- ----- ----- 913 979 881 2,793 2,556 Private Banking and Asset Management Fees 145 150 120 436 366 Service Charges and Fees 90 91 93 270 288 Foreign Exchange and Other Trading Activities 86 132 93 333 292 Securities Gains 21 23 15 61 50 Other 70 51 46 190 130 ----- ----- ----- ----- ----- Total Noninterest Income 1,325 1,426 1,248 4,083 3,682 ----- ----- ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 706 723 644 2,097 1,902 Net Occupancy 88 86 79 262 239 Furniture and Equipment 48 50 52 151 155 Clearing 47 53 49 150 137 Sub-custodian Expenses 31 36 25 101 72 Software 54 53 54 163 162 Communications 27 23 24 77 69 Amortization of Intangibles 14 15 10 42 28 Merger and Integration Costs 110 - - 110 - Other 193 209 198 591 571 ----- ----- ----- ----- ----- Total Noninterest Expense 1,318 1,248 1,135 3,744 3,335 ----- ----- ----- ----- ----- Income Before Income Taxes, Including Merger and Integration Costs 518 690 595 1,845 1,759 Income Taxes 166 242 206 623 593 ----- ----- ----- ----- ----- Net Income Including Merger and Integration Costs 352 448 389 1,222 1,166 Merger and Integration Costs, Net of Taxes 74 - - 74 - ----- ----- ----- ----- ----- Net Income Excluding Merger and Integration Costs $ 426 $ 448 $ 389 $1,296 $1,166 ===== ===== ===== ====== ====== Diluted Earnings Per Share $0.46 $0.59 $0.51 $1.59 $1.51 Diluted Earnings Per Share, Excluding Merger and Integration Costs 0.56 0.59 0.51 1.69 1.51 (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
Diluted earnings per share from adjusted results excluding merger and integration costs for the third quarter of 2006 were 56 cents, up from 51 cents a year ago. On the same basis for the year-to-date period, diluted earnings per share grew 12% from a year ago to $1.69. 6 SECURITIES SERVICING FEES
Percent Inc/(Dec) ----------------- Year-to-date Percent 3Q06 vs. 3Q06 vs. -------------- Inc/ (In millions) 3Q06 2Q06 3Q05 2Q06 3Q05 2006 2005 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Execution and Clearing Services $ 298 $ 334 $ 314 (11)% (5)% $ 971 $ 901 8% Issuer Services 194 207 170 (6) 14 555 468 19 Investor Services 282 302 265 (7) 6 861 792 9 Broker-Dealer Services 65 66 57 (2) 14 192 169 14 ------ ------ ------ ------ ------ Securities Servicing Fees $ 839 $ 909 $ 806 (8) 4 $2,579 $2,330 11 ====== ====== ====== ====== ======
Securities servicing fee growth over the third quarter and year- to-date periods of 2005 reflects double-digit growth in issuer and broker-dealer services. Securities servicing fees were down sequentially reflecting the pronounced seasonality that occurred during the third quarter. The increase in execution and clearing fees on a year-to-date basis reflect growth in value-added fees at Pershing and an acquisition as well as increased cross-border trading activity in execution services. The decline in third quarter execution and clearing fees from the year-ago quarter reflect the previously disclosed loss of a significant customer at Pershing, as well as a shift from traditional broker-assisted execution to lower-commission electronic and program trading. The sequential-quarter decline in execution and clearing services reflects a seasonal reduction in trading volumes, as well as lower transition management activity. 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 continued to exhibit strong growth, up 14% for the quarter compared with last year's third quarter and 19% for the first nine months of 2006 compared with the first nine months of 2005. The depositary receipts business continues to benefit 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. On a sequential-quarter basis, depositary receipts were down modestly from the seasonally strong second quarter when the depositary receipts business reported its best results ever. Growth in corporate trust fees over last year's third quarter was primarily attributable to continued strong results in global trust products and structured finance, notably asset-backed and mortgage-backed securities. Corporate trust fees were essentially flat sequentially. Issuer services includes corporate trust, depositary receipts, employee investment plan services, stock transfer, and credit-related services. The growth in investor services fees from the year-ago periods reflects improved performance in global custody activities, consistent with higher volumes of cross-border transactions, as well as continued strong performance in securities lending. The decline in fees from the second quarter is consistent with seasonally lower securities lending revenue and lower transaction volumes in global custody and fund services. Investor services includes global fund services, global custody, securities lending, global liquidity services and outsourcing. Broker-dealer services fees were up 14% from both the third quarter and first nine months of 2005, as a result of continued strong performance in domestic and global collateral management fees, an increase in transaction volumes and strong net new business flows. Broker-dealer services fees were down modestly from the second quarter of 2006 consistent with the seasonal slowdown in fixed income trading. 7 NONINTEREST INCOME Continuing Operations - ---------------------
Percent Inc/(Dec) ----------------- Year-to-date Percent 3Q06 vs. 3Q06 vs. -------------- Inc/ (In millions) 3Q06 2Q06 3Q05 2Q06 3Q05 2006 2005 (Dec) ------ ------ ------ -------- ------- ------ ------ ------- Servicing Fees Securities $ 839 $ 909 $ 806 (8)% 4% $2,579 $2,330 11% Global Payment Services 66 63 67 5 (1) 191 200 (5) ------ ------ ------ ------ ------ 905 972 873 (7) 4 2,770 2,530 9 Private Banking and Asset Management Fees 134 138 109 (3) 23 402 334 20 Service Charges and Fees 52 53 54 (2) (4) 157 172 (9) Foreign Exchange and Other Trading Activities 84 130 90 (35) (7) 327 283 16 Securities Gains 21 23 15 (9) 40 61 50 22 Other 63 50 44 26 43 169 126 34 ------ ------ ------ ------ ------ Total Noninterest Income $1,259 $1,366 $1,185 (8) 6 $3,886 $3,495 11 ====== ====== ====== ====== ======
Adjusted (1) - ------------
Percent Inc/(Dec) ----------------- Year-to-date Percent 3Q06 vs. 3Q06 vs. -------------- Inc/ (In millions) 3Q06 2Q06 3Q05 2Q06 3Q05 2006 2005 (Dec) ------ ------ ------ -------- ------- ------ ------ ------- Servicing Fees Securities $ 839 $ 909 $ 806 (8)% 4% $2,579 $2,330 11% Global Payment Services 74 70 75 6 (1) 214 226 (5) ------ ------ ------ ------ ------ 913 979 881 (7) 4 2,793 2,556 9 Private Banking and Asset Management Fees 145 150 120 (3) 21 436 366 19 Service Charges and Fees 90 91 93 (1) (3) 270 288 (6) Foreign Exchange and Other Trading Activities 86 132 93 (35) (8) 333 292 14 Securities Gains 21 23 15 (9) 40 61 50 22 Other 70 51 46 37 52 190 130 46 ------ ------ ------ ------ ------ Total Noninterest Income $1,325 $1,426 $1,248 (7) 6 $4,083 $3,682 11 ====== ====== ====== ====== ====== (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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 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 and fees and foreign 8 exchange and other trading activities. Most of these same trends explain the year-to-date increase in noninterest income, with the exception of foreign exchange and other trading activities, which were up significantly for the first nine months of the year. The sequential decline in noninterest income reflects a pronounced seasonal slowdown across several businesses. On a continuing operations basis, global payment services fees increased sequentially, reflecting increased funds transfer volume. On the same basis, global payment service fees were down from the year-ago quarter and on a year-to-date basis. While the payments business continues to grow, reflecting increases in funds transfer volume and net new business, the level of fees has been impacted by customers paying with higher compensatory balances in lieu of fees. On an invoiced services basis, total revenue was up 7% over the third quarter of 2005 and 4% 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 third quarter and year-to-date periods of 2005 primarily due to acquisitions and higher fees in private banking. The sequential-quarter decline in fees is attributable to a decline in activity-based fees in the private bank and lower performance fees for certain asset management activities. Total assets under management for private banking and asset management were $120 billion, up from $106 billion at September 30, 2005 and $116 billion at June 30, 2006. Service charges and fees were down sequentially and from prior year periods principally due to lower capital market fees. Foreign exchange and other trading revenues were down sequentially and from the third quarter of 2005, but up significantly from last year on a year-to-date basis. Foreign exchange results were particularly weak in the third quarter, as the typical seasonal slowdown was exacerbated by an eight year historical low in volatility. Other trading was down from the 2005 periods and sequentially primarily due to weaker results in interest rate derivatives and fixed income trading. Securities gains in the third quarter were up significantly from the year-ago quarter and down on a sequential-quarter basis. The gains in the quarter were primarily attributable to continued strong returns on investments in the sponsor fund portfolio. Securities gains were up in the first nine months of 2006 versus a year ago reflecting favorable market conditions and liquidity in the private equity markets. Other noninterest income increased versus the third quarter of 2005 and the second quarter of 2006. The current quarter results include a higher level of asset-related gains. The year-to-date period of 2006 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 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) 3Q06 vs. 3Q06 vs. 2006 2005 Inc/ 3Q06 2Q06 3Q05 2Q06 3Q05 (Dec) ---- ---- ---- -------- -------- ------- ------ ------- Net Interest Income $351 $358 $346 (2)% 1% $1,048 $ 996 5% Tax Equivalent Adjustment* 7 7 7 21 22 ---- ---- ---- ------ ------ Net Interest Income on a Tax Equivalent Basis $358 $365 $353 (2) 1 $1,069 $1,018 5 ==== ==== ==== ====== ====== Interest Rate Spread 1.14% 1.29% 1.52% 1.26% 1.56% Net Interest Margin 1.89 1.95 2.09 1.93 2.04 * See Note (1)
Adjusted** - ----------
Percent Inc/(Dec) Year-to-date ----------------- ------------- Percent (Dollars in millions) 3Q06 vs. 3Q06 vs. 2006 2005 Inc/ 3Q06 2Q06 3Q05 2Q06 3Q05 (Dec) ---- ---- ---- -------- -------- ------- ------ ------- Net Interest Income $506 $512 $492 (1)% 3% $1,506 $1,417 6% Tax Equivalent Adjustment* 8 9 8 23 21 ---- ---- ---- ------ ------ Net Interest Income on a Tax Equivalent Basis $514 $521 $500 (1) 3 $1,529 $1,438 6 ==== ==== ==== ====== ====== Interest Rate Spread 1.54% 1.65% 1.84% 1.64% 1.87% Net Interest Margin 2.33 2.36 2.42 2.34 2.37 * See Note (1) ** Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
Net interest income on a continuing operations basis and on an adjusted basis increased from the year-ago quarter and year-to-date periods reflecting higher interest earning assets and the higher value of interest-free balances in a rising rate environment. Net interest income decreased on a sequential- quarter basis reflecting a seasonal decline in interest-free balances. 10 NONINTEREST EXPENSE AND INCOME TAXES Continuing Operations - ---------------------
Percent Inc/(Dec) ----------------- Year-to-date Percent 3Q06 vs. 3Q06 vs. -------------- Inc/ (In million) 3Q06 2Q06 3Q05 2Q06 3Q05 2006 2005 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Salaries and Employee Benefits $ 644 $ 656 $ 585 (2)% 10% $1,904 $1,721 11% Net Occupancy 70 68 60 3 17 206 184 12 Furniture and Equipment 46 48 50 (4) (8) 145 149 (3) Clearing 47 53 49 (11) (4) 150 137 9 Sub-custodian Expenses 31 36 25 (14) 24 101 72 40 Software 53 53 54 - (2) 161 160 1 Communications 26 22 23 18 13 74 66 12 Amortization of Intangibles 14 15 10 (7) 40 42 28 50 Merger and Integration Costs 89 - - 89 - Other 172 183 175 (6) (2) 519 506 3 ------ ------ ------ ------ ------ Total Noninterest Expense Including Merger and Integration Costs 1,192 1,134 1,031 5 16 3,391 3,023 12 Merger and Integration Costs (89) - - (89) - ------ ------ ------ ------ ------ Total Noninterest Expense Excluding Merger and Integration Costs $1,103 $1,134 $1,031 (3) 7 $3,302 $3,023 9 ====== ====== ====== ====== ======
11 Adjusted (1) - ------------
Percent Inc/(Dec) ----------------- Year-to-date Percent 3Q06 vs. 3Q06 vs. -------------- Inc/ (In million) 3Q06 2Q06 3Q05 2Q06 3Q05 2006 2005 (Dec) ------ ------ ------ -------- -------- ------ ------ ------- Salaries and Employee Benefits $ 706 $ 723 $ 644 (2)% 10% $2,097 $1,902 10% Net Occupancy 88 86 79 2 11 262 239 10 Furniture and Equipment 48 50 52 (4) (8) 151 155 (3) Clearing 47 53 49 (11) (4) 150 137 9 Sub-custodian Expenses 31 36 25 (14) 24 101 72 40 Software 54 53 54 2 - 163 162 1 Communications 27 23 24 17 13 77 69 12 Amortization of Intangibles 14 15 10 (7) 40 42 28 50 Merger and Integration Costs 110 - - 110 - Other 193 209 198 (8) (3) 591 571 4 ------ ------ ------ ------ ------ Total Noninterest Expense Including Merger and Integration Costs 1,318 1,248 1,135 6 16 3,744 3,335 12 Merger and Integration Costs (110) - - (110) - ------ ------ ------ ------ ------ Total Noninterest Expense Excluding Merger and Integration Costs $1,208 $1,248 $1,135 (3) 6 $3,634 $3,335 9 ====== ====== ====== ====== ====== (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
Unless otherwise indicated, the discussion below refers to noninterest expense on both a continuing operations basis and on an adjusted basis. Excluding merger and integration costs, noninterest expense for the third quarter and first nine months was up over last year reflecting increased costs associated with new business and acquisitions as well as higher pension costs. On a sequential-quarter basis excluding merger and integration costs, noninterest expense was down reflecting disciplined expense control, lower incentive compensation and a decline in expenses related to lower transaction volumes. Relative to the year-ago periods, salaries and benefits increased reflecting higher staff levels tied to new business and acquisitions. Pension expense was also higher on a year-over-year basis. The sequential-quarter decline in salaries and employee benefits reflected a lower level of incentive compensation tied to revenues in the current quarter as well as an adjustment in the second quarter of 2006 related to SFAS 123(R). Clearing and sub-custodian expenses were higher on a year-to- date basis reflecting increased asset values and transaction volumes. On a sequential-quarter basis, clearing and sub- custodian expenses declined reflecting the seasonal slowdown in activity. Other adjusted expenses were lower compared with the third quarter of 2005 reflecting lower costs for claims, settlements, legal fees, and advertising. On a sequential-quarter basis, other adjusted expenses in the third quarter of 2006 decreased due to lower claims, advertising, and consulting costs. 12 Merger and integration costs primarily included a loss in connection with the restructuring of the Company's investment portfolio and employee-related costs such as severance. The swap of the corporate trust business for the retail and regional middle market business is expected to result in a more liability- sensitive balance sheet because corporate trust liabilities reprice more quickly than retail deposits. The Company sold $5.5 billion of investment portfolio securities during the period to reduce interest rate sensitivity going forward. The effective tax rate for the third quarter of 2006 on a continuing operations basis was 29.4%, compared to 32.0% in the third quarter of 2005 and 33.8% in the second quarter of 2006. The effective tax rate for the nine-month period ended September 30, 2006 was 32.2%, compared with 32.1% for the nine-month period ended September 30, 2005. The effective tax rate for the third quarter of 2006 on an adjusted basis was 32.0%, compared to 34.6% in the third quarter of 2005 and 35.1% in the second quarter of 2006. The effective tax rate for the nine-month period ended September 30, 2006 was 33.8% compared with 33.7% for the nine- month period ended September 30, 2005. The decreases on both a sequential and year-over-year quarterly basis primarily reflect increased tax credits related to synthetic fuels. The sequential quarter increase in synthetic fuel tax credits was driven by the decline in the price of oil. 13 CAPITAL The Company's estimated Tier 1 and Total Capital ratios were 8.21% and 12.38% at September 30, 2006, compared with 7.93% and 12.20% at September 30, 2005 and 7.96% and 12.06% at June 30, 2006. The estimated leverage ratio was 6.55% at September 30, 2006, compared with 6.59% at September 30, 2005 and 6.22% at June 30, 2006. The Company's estimated tangible common equity as a percentage of total assets was 5.58% at September 30, 2006, compared with 5.32% at September 30, 2005 and 5.07% at June 30, 2006. After quarter end, the Company's capital ratios declined following the close of the swap transaction. The Company repurchased 12.1 million shares of its common stock on October 3, 2006. Return on average common equity for the third quarter of 2006 was 13.70%, (16.56% excluding merger and integration costs) compared with 16.15% in the third quarter of 2005 and 18.17% in the second quarter of 2006. Return on average assets for the third quarter of 2006 was 1.29%, (1.55% excluding merger and integration costs) compared with 1.53% in the third quarter of 2005 and 1.63% in the second quarter of 2006. CREDIT PERFORMANCE The Company's loan portfolio continues to experience high credit quality. The provision for credit losses for the third quarter of 2006 on a continuing operations basis was a credit of $4 million, compared with a provision of $10 million for the third quarter of 2005 and a credit of $1 million in the second quarter of 2006. Charge-offs in the third quarter of 2006 on a continuing operations basis were zero, compared with charge- offs of $4 million in the third quarter of 2005 and a recovery of $7 million in the second quarter of 2006. The allowance for credit losses on a continuing operations basis was $476 million at September 30, 2006, compared with $607 million at September 30, 2005 and $480 million at June 30, 2006. The provision for credit loss for the third quarter of 2006 on an adjusted basis was a credit of $5 million, compared with a provision of $10 million in the third quarter of 2005 and zero in the second quarter of 2006. Charge-offs in the third quarter of 2006 on an adjusted basis were $9 million, compared with charge-offs of $13 million in the third quarter of 2005 and recovery of $1 million in the second quarter of 2006. The allowance for credit losses on an adjusted basis was $553 million at September 30, 2006, compared with $706 million at September 30, 2005 and $567 million at June 30, 2006. 14 OTHER DEVELOPMENTS On October 1, 2006, the Company completed its acquisition of the corporate trust business and the sale of its retail and regional middle market banking businesses to JPMorgan Chase. The transaction significantly strengthens the Company's leadership position in corporate trust both in the U.S. and internationally, serving a combined client base with $8 trillion in total debt outstanding in 20 countries. In addition, it sharpens the Company's focus on the faster growing securities services, asset management and private banking businesses that form the core of the Company. The acquisition also diversifies the Company's growing revenue base by both geography and product and expands its global footprint with the addition of seven new offices in Europe, five in Asia, and three in Latin America. As part of the transaction, JPMorgan Chase acquired the Company's retail bank, which consists of 338 branches in the tri-state region, serving approximately 700,000 consumer households and small businesses with $14.5 billion in deposits. Also included were the Company's regional middle-market businesses that provide financing, banking and treasury services for middle market clients, serving more than 2,000 clients in the tri-state region. On October 2, 2006, the Company completed the transaction that resulted in the formation of BNY ConvergEx Group, LLC. The Company joined forces with Eze Castle Software, LLC and GTCR Golder Rauner, LLC, a private equity firm, to form BNY ConvergEx Group, in which the Company retains a 35% interest. BNY ConvergEx Group brings together the Company's trade execution, commission management, independent research and transition management businesses with Eze Castle Software, a leading provider of trade order management and related investment technologies. BNY ConvergEx Group's comprehensive suite of services, advanced technology offerings and breadth of distribution channels enable its customers to manage all aspects of the investment cycle, including idea generation, research, trade analysis, execution and wholesale clearing, risk management, commission management, transition management, compliance and portfolio management. With approximately 635 employees worldwide, BNY ConvergEx Group has a global presence in New York, Boston, San Francisco, Chicago, Dallas, Stamford, London, Bermuda, Tokyo, Hong Kong, and Sydney. On September 7, 2006, the Company reached an agreement to sell its transfer agency software business, Rufus, to Bravura Solutions Limited ("Bravura"), a leading global supplier of wealth management applications and professional services, for a maximum of GBP 32 million. Under the agreement, Bravura will acquire all of the software and intellectual property comprising Rufus, and all existing employees will transfer to Bravura. The transaction is expected to be completed in the fourth quarter of 2006, and is subject to approval by Bravura Solutions' shareholders. 15 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 8:00 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) 296-6947 within the United States or (402) 998-0538 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. *************************** 16 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 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, 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 Second 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 Kenneth A. Brause, MD (212) 635-1569 (212) 635-1578 Joseph F. Murphy, MD (212) 635-7740 17 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 2006 results exclude merger and integration costs and one-time costs associated with SFAS 123(R). The Company believes excluding these costs provides the reader with supplemental information with which to assess the Company's future performance. Operating Leverage Excluding Merger and Integration Costs 3Q06 vs. 3Q05 - --------------
(Dollars in million) Continuing Operations Adjusted (a) -------------------------------- ---------------------------- 3Q 2006 3Q 2005 % Change 3Q 2006 3Q 2005 % Change ------- ------- -------- ------- -------- -------- Noninterest Income $ 1,259 $ 1,185 6.2% $ 1,325 $ 1,248 6.2% Net Interest Income 351 346 1.4 506 492 2.8 Total Revenue 1,610 1,531 5.2 1,831 1,740 5.2 Total Expense 1,103 1,031 7.0 1,208 1,135 6.4 Operating Leverage (1.8)% (1.2)% ===== =====
3Q06 vs. 2Q06 - -------------
(Dollars in million) Continuing Operations Adjusted (a) ----------------------------------- -------------------------------- 3Q 2006 2Q 2006 (b) % Change 3Q2006 2Q 2006 (b) % Change ------- ----------- -------- ------- ----------- -------- Noninterest Income $ 1,259 $ 1,366 (7.8)% $ 1,325 $ 1,426 (7.1)% Net Interest Income 351 358 (2.0) 506 512 (1.2) Total Revenue 1,610 1,724 (6.6) 1,831 1,938 (5.5) Total Expense 1,103 1,122 (1.7) 1,208 1,231 (1.9) Operating Leverage (4.9)% (3.6)% ===== =====
YTD 2006 vs. YTD 2005 - ---------------------
(Dollars in million) Continuing Operations Adjusted (a) -------------------------------- ---------------------------- YTD 2006(b) YTD 2005 % Change YTD 2006 (b) YTD 2005 % Change ----------- -------- -------- ------------ -------- -------- Noninterest Income $ 3,886 $ 3,495 11.2% $ 4,083 $ 3,682 10.9% Net Interest Income 1,048 996 5.2 1,506 1,417 6.3 Total Revenue 4,934 4,491 9.9 5,589 5,099 9.6 Total Expense 3,285 3,023 8.7 3,617 3,335 8.5 Operating Leverage 1.2% 1.1% ===== =====
(a) Adjusted combines continuing and discontinued operations. (b) Excludes the $12 million impact related to SFAS 123 (R) and charges and accounting changes resulting from the JPMorgan Chase transaction. 18
THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) September 30, June 30, September 30, Continuing Operations (1) 2006 2006 2005 ------------------------- ------------ ------------- ------------ Quarter ------- Net Interest Income $ 351 $ 358 $ 346 Noninterest Income 1,259 1,366 1,185 ------------ ------------- ------------ 1,610 1,724 1,531 Tax Equivalent Adjustment 7 7 7 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 1,617 $ 1,731 $ 1,538 ============ ============= ============ Income from Continuing Operations Before Income Taxes $ 422 $ 591 $ 490 Income Taxes 124 200 157 ------------ ------------- ------------ Income from Continuing Operations 298 391 333 Income from Discontinued Operations, Net of Taxes 54 57 56 ------------ ------------- ------------ Net Income $ 352 $ 448 $ 389 ============ ============= ============ Basic EPS: Income from Continuing Operations $ 0.40 $ 0.52 $ 0.44 Income from Discontinued Operations, Net 0.07 0.07 0.07 Net Income 0.47 0.59 0.51 Diluted EPS: Income from Continuing Operations 0.39 0.52 0.44 Income from Discontinued Operations, Net 0.07 0.07 0.07 Net Income 0.46 0.59 0.51 Cash Dividends Per Share 0.22 0.21 0.21 Return on Average Common Shareholders' Equity 11.61% 15.85% 13.82% Return on Average Assets 1.19 1.54 1.43 Efficiency Ratio Excluding Merger and Integration Costs 69.1 66.4 67.7 (1) Continuing operations exclude the Company's retail and regional middle market banking businesses sold to JPMorgan Chase & Co on October 1, 2006, which are accounted for as discontinued operations.
19 THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) September 30, June 30, September 30, Continuing Operations (1) 2006 2006 2005 ------------------------- ------------ ------------- ------------- Year-to-date ------------ Net Interest Income $ 1,048 $ 697 $ 996 Noninterest Income 3,886 2,627 3,495 ------------ ------------- ------------ 4,934 3,324 4,491 Tax Equivalent Adjustment 21 14 22 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 4,955 $ 3,338 $ 4,513 ============ ============= ============ Income from Continuing Operations Before Income Taxes $ 1,548 $ 1,126 $ 1,478 Income Taxes 499 375 474 ------------ ------------- ------------ Income from Continuing Operations 1,049 751 1,004 Income from Discontinued Operations, Net of Taxes 173 119 162 ------------ ------------- ------------ Net Income $ 1,222 $ 870 $ 1,166 ============ ============= ============ Basic EPS: Income from Continuing Operations $ 1.38 $ 0.99 $ 1.31 Income from Discontinued Operations, Net 0.23 0.15 0.21 Net Income 1.61 1.14 1.52 Diluted EPS: Income from Continuing Operations 1.36 0.98 1.30 Income from Discontinued Operations, Net 0.23 0.15 0.21 Net Income 1.59 1.13 1.51 Cash Dividends Per Share 0.64 0.42 0.61 Return on Average Common Shareholders' Equity 14.03% 15.30% 14.28% Return on Average Assets 1.41 1.52 1.46 Efficiency Ratio Excluding Merger and Integration Costs 67.5 66.7 67.7 Assets $ 97,808 $ 99,935 $ 93,081 Loans 33,958 35,650 34,358 Securities 22,015 27,355 26,127 Deposits - Domestic 20,837 25,602 19,775 - Foreign 34,116 31,139 26,270 Long-Term Debt 8,434 8,207 7,529 Common Shareholders' Equity 10,467 10,056 9,608 Employees 20,340 20,109 19,664 Allowance for Loan Losses as a Percent of Total Loans 1.00% 0.95% 1.37% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.16 1.10 1.68 Total Allowance for Credit Losses as a Percent of Total Loans 1.40 1.35 1.77 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 1.63 1.57 2.16 (1) Continuing operations exclude the Company's retail and regional middle market banking businesses sold to JPMorgan Chase & Co on October 1, 2006, which are accounted for as discontinued operations.
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights - Supplemental Information (Dollars in millions, except per share amounts) (Unaudited) September 30, June 30, September 30, 2006 2006 2005 Adjusted Results (1) ------------- ------------- ------------ -------------------- Quarter ------- Net Interest Income $ 506 $ 512 $ 492 Noninterest Income 1,325 1,426 1,248 ------------ ------------- ------------ 1,831 1,938 1,740 Tax Equivalent Adjustment 8 9 8 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 1,839 $ 1,947 $ 1,748 ============ ============= ============ Net Income Including Merger and Integration Costs $ 352 $ 448 $ 389 Merger and Integration Costs 74 - - Net Income Excluding Merger and Integration Costs 426 448 389 Diluted EPS Including Merger and Integration Costs 0.46 0.59 0.51 Merger and Integration Costs 0.10 - - Diluted EPS Excluding Merger and Integration Costs 0.56 0.59 0.51 Cash Dividends Per Share 0.22 0.21 0.21 Efficiency Ratio Excluding Merger and Integration Costs 66.5% 64.9% 65.5% Year-to-date ------------ Net Interest Income $ 1,506 $ 1,000 $ 1,417 Noninterest Income 4,083 2,758 3,682 ------------ ------------- ------------ 5,589 3,758 5,099 Tax Equivalent Adjustment 23 15 21 ------------ ------------- ------------ Revenue (tax equivalent basis) $ 5,612 $ 3,773 $ 5,120 ============ ============= ============ Net Income Including Merger and Integration Costs $ 1,222 $ 870 $ 1,166 Merger and Integration Costs 74 - - Net Income Excluding Merger and Integration Costs 1,296 870 1,166 Diluted EPS Including Merger and Integration Costs 1.59 1.13 1.51 Merger and Integration Costs 0.10 - - Diluted EPS Excluding Merger and Integration Costs 1.69 1.13 1.51 Cash Dividends Per Share 0.64 0.42 0.61 Efficiency Ratio Excluding Merger and Integration Costs 65.5% 65.0% 65.8%
21 THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights - Supplemental Information (Dollars in millions, except per share amounts) (Unaudited) September 30, June 30, September 30, 2006 2006 2005 Adjusted Results (1) ------------ ------------- ------------- -------------------- Assets $ 106,636 $ 108,881 $ 101,766 Loans 41,726 43,622 42,143 Securities 22,135 27,459 26,230 Deposits - Domestic 33,818 39,280 34,807 - Foreign 34,116 31,139 26,270 Long-Term Debt 8,434 8,207 7,529 Common Shareholders' Equity 10,467 10,056 9,608 Allowance for Loan Losses as a Percent of Total Loans 0.98% 0.96% 1.33% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.11 1.08 1.57 Total Allowance for Credit Losses as a Percent of Total Loans 1.33 1.30 1.68 Total Allowance for Credit Losses as a Percent of Non-Margin Loans 1.49 1.47 1.97 Employees 23,808 23,575 23,081 (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results. See "Appendix I."
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) September 30, June 30, September 30, 2006 2006 2005 ------------- ------------- ------------ Assets Under Custody (1) ------------------------ (In trillions) Assets Under Custody $ 12.2 $ 12.0 $ 10.3 Equity Securities 31% 32% 31% Fixed Income Securities 69 68 69 Cross-Border Assets Under Custody $ 4.2 $ 4.1 $ 3.1 Assets Under Management (1) --------------------------- (In billions) Asset Management Sector $ 120 $ 116 $ 106 Equity Securities 36 36 37 Fixed Income Securities 20 21 22 Alternative Investments 30 28 15 Liquid Assets 34 31 32 Foreign Exchange Overlay 11 11 10 Securities Lending Short-term Investment Funds 48 43 41 ------------ ------------- ------------ Total Assets Under Management $ 179 $ 170 $ 157 ============ ============= ============ Capital Ratios -------------- Tier 1 Capital Ratio 8.21%(1) 7.96% 7.93% Total Capital Ratio 12.38 (1) 12.06 12.20 Leverage Ratio 6.55 (1) 6.22 6.59 Tangible Common Equity Ratio 5.58 (1) 5.07 5.32 Performance Ratios ------------------ Quarter ------- Return on Average Common Shareholders' Equity 13.70% 18.17% 16.15% Return on Average Common Shareholders' Equity Excluding Merger & Integration Costs 16.56 18.17 16.15 Return on Average Assets 1.29 1.63 1.53 Return on Average Assets Excluding Merger & Integration Costs 1.55 1.63 1.53 Year-to-date ------------ Return on Average Common Shareholders' Equity 16.35% 17.74% 16.59% Return on Average Common Shareholders' Equity Excluding Merger & Integration Costs 17.33 17.74 16.59 Return on Average Assets 1.51 1.62 1.56 Return on Average Assets Excluding Merger & Integration Costs 1.60 1.62 1.56 Other Data ---------- Common Shareholders' Equity Per Share $ 13.70 $ 13.18 $ 12.48 Market Value Per Share of Common Stock 35.26 32.20 29.41 (1) Estimated
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) Percent Inc/(Dec) For the three For the nine ----------------- months ended months ended 3Q06 YTD 2006 September 30, September 30, vs. vs. 2006 2005 2006 2005 3Q05 YTD 2005 ------ ------ ------- ------ -------- -------- Interest Income - --------------- Loans $ 367 $ 272 $1,027 $ 749 35% 37% Margin loans 85 71 247 188 20 31 Securities Taxable 282 216 827 576 31 44 Exempt from Federal Income Taxes 10 10 28 28 - - ------ ------ ------ ------ 292 226 855 604 29 42 Deposits in Banks 166 68 372 206 144 81 Federal Funds Sold and Securities Purchased Under Resale Agreements 22 18 52 51 22 2 Trading Assets 28 38 130 98 (26) 33 ------ ------ ------ ------ Total Interest Income 960 693 2,683 1,896 39 42 ------ ------ ------ ------ Interest Expense - ---------------- Deposits 391 217 1,037 569 80 82 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 34 9 88 23 278 283 Other Borrowed Funds 27 13 69 33 108 109 Customer Payables 42 35 124 88 20 41 Long-Term Debt 115 73 317 187 58 70 ------ ------ ------ ------ Total Interest Expense 609 347 1,635 900 76 82 ------ ------ ------ ------ Net Interest Income - ------------------- 351 346 1,048 996 1 5 Provision for Credit Losses (4) 10 (5) (10) ------ ------ ------ ------ Net Interest Income After Provision for Credit Losses 355 336 1,053 1,006 6 5 ------ ------ ------ ------ Noninterest Income - ------------------ Servicing Fees Securities 839 806 2,579 2,330 4 11 Global Payment Services 66 67 191 200 (1) (5) ------ ------ ------ ------ 905 873 2,770 2,530 4 9 Private Banking and Asset Management Fees 134 109 402 334 23 20 Service Charges and Fees 52 54 157 172 (4) (9) Foreign Exchange and Other Trading Activities 84 90 327 283 (7) 16 Securities Gains 21 15 61 50 40 22 Other 63 44 169 126 43 34 ------ ------ ------ ------ Total Noninterest Income 1,259 1,185 3,886 3,495 6 11 ------ ------ ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 644 585 1,904 1,721 10 11 Net Occupancy 70 60 206 184 17 12 Furniture and Equipment 46 50 145 149 (8) (3) Clearing 47 49 150 137 (4) 9 Sub-custodian Expenses 31 25 101 72 24 40 Software 53 54 161 160 (2) 1 Communications 26 23 74 66 13 12 Amortization of Intangibles 14 10 42 28 40 50 Merger and Integration Costs 89 - 89 - Other 172 175 519 506 (2) 3 ------ ------ ------ ------ Total Noninterest Expense 1,192 1,031 3,391 3,023 16 12 ------ ------ ------ ------ Income from Continuing Operations before Income Taxes 422 490 1,548 1,478 (14) 5 Income Taxes 124 157 499 474 (21) 5 ------ ------ ------ ------ Income from Continuing Operations 298 333 1,049 1,004 (11) 4 ------ ------ ------ ------ 24 THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) Percent Inc/(Dec) For the three For the nine ---------------- months ended months ended 3Q06 YTD 2006 September 30, September 30, vs. vs. 2006 2005 2006 2005 3Q05 YTD 2005 ------ ------ ------- ------ -------- -------- Discontinued Operations Income from Discontinued Operations $ 96 $ 105 $ 297 $ 281 (9)% 6% Income Taxes 42 49 124 119 (14) 4 ------ ------ ------ ------ Discontinued Operations, Net 54 56 173 162 (4) 7 ------ ------ ------ ------ Net Income $ 352 $ 389 $1,222 $1,166 (10) 5 - ---------- ====== ====== ====== ====== Per Common Share Data: - --------------------- Basic Earnings Income from Continuing Operations $ 0.40 $ 0.44 $ 1.38 $ 1.31 (9) 5 Income from Discontinued Operations, Net 0.07 0.07 0.23 0.21 - 10 Net Income 0.47 0.51 1.61 1.52 (8) 6 Diluted Earnings Income from Continuing Operations $ 0.39 $ 0.44 $ 1.36 $ 1.30 (11) 5 Income from Discontinued Operations, Net 0.07 0.07 0.23 0.21 - 10 Net Income 0.46 0.51 1.59 1.51 (10) 5 Cash Dividends Paid 0.22 0.21 0.64 0.61 5 5 Diluted Shares Outstanding 767 769 768 773 - (1)
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THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) September 30, 2006 December 31, 2005 ------------------ ----------------- Assets - ------ Cash and Due from Banks $ 2,072 $ 2,882 Interest-Bearing Deposits in Banks 16,753 8,644 Securities Held-to-Maturity (fair value of $1,716 in 2006 and $1,847 in 2005) 1,737 1,872 Available-for-Sale 20,278 25,346 ------------------ ----------------- Total Securities 22,015 27,218 Trading Assets at Fair Value 3,266 5,930 Federal Funds Sold and Securities Purchased Under Resale Agreements 5,139 2,425 Loans (less allowance for loan losses of $339 in 2006 and $326 in 2005) 33,619 32,601 Premises and Equipment 1,009 960 Due from Customers on Acceptances 311 212 Accrued Interest Receivable 406 363 Goodwill 3,801 3,510 Intangible Assets 872 811 Other Assets 8,545 7,710 Assets of Discontinued Operations Held for Sale 8,828 8,808 ------------------ ----------------- Total Assets $ 106,636 $ 102,074 ================== ================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 11,451 $ 12,706 Interest-Bearing Domestic Offices 9,785 10,415 Foreign Offices 33,717 26,666 ------------------ ----------------- Total Deposits 54,953 49,787 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,040 834 Trading Liabilities 2,102 2,401 Payables to Customers and Broker-Dealers 6,673 8,623 Other Borrowed Funds 1,121 860 Acceptances Outstanding 318 212 Accrued Taxes and Other Expenses 4,140 4,123 Accrued Interest Payable 201 163 Other Liabilities (including allowance for lending-related commitments of $137 in 2006 and $144 in 2005) 4,152 2,697 Long-Term Debt 8,434 7,817 Liabilities of Discontinued Operations Held for Sale 13,035 14,681 ------------------ ----------------- Total Liabilities 96,169 92,198 ------------------ ----------------- Shareholders' Equity Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,049,888,635 shares in 2006 and 1,044,994,517 shares in 2005 7,874 7,838 Additional Capital 2,015 1,826 Retained Earnings 7,820 7,089 Accumulated Other Comprehensive Income (66) (134) ------------------ ----------------- 17,643 16,619 Less: Treasury Stock (285,692,282 shares in 2006 and 273,662,218 shares in 2005), at cost 7,169 6,736 Loan to ESOP (203,507 shares in 2006 and 203,507 shares in 2005), at cost 7 7 ------------------ ----------------- Total Shareholders' Equity 10,467 9,876 ------------------ ----------------- Total Liabilities and Shareholders' Equity $ 106,636 $ 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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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 September 30, 2006 ended September 30, 2005 ---------------------------- ---------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate --------- -------- ------- -------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 16,033 $ 166 4.11% $ 8,629 $ 68 3.13% Federal Funds Sold and Securities Purchased Under Resale Agreements 1,907 22 4.63 2,197 18 3.32 Margin Loans 5,158 85 6.54 6,392 71 4.40 Non-Margin Loans Domestic Offices 17,258 199 4.61 15,293 151 3.96 Foreign Offices 11,136 168 5.96 10,561 121 4.53 --------- -------- --------- -------- Total Non-Margin Loans 28,394 367 5.14 25,854 272 4.19 --------- -------- --------- -------- Securities U.S. Government Obligations 198 2 4.24 228 2 3.55 U.S. Government Agency Obligations 3,427 42 4.95 3,956 41 4.19 Obligations of States and Political Subdivisions 99 2 8.67 134 3 9.40 Other Securities 18,395 251 5.48 17,109 187 4.38 Trading Securities 2,477 30 4.69 3,361 38 4.49 --------- -------- --------- -------- Total Securities 24,596 327 5.33 24,788 271 4.38 --------- -------- --------- -------- Total Interest-Earning Assets 76,088 967 5.07 67,860 700 4.12 -------- -------- Allowance for Credit Losses (346) (471) Cash and Due from Banks 2,226 2,423 Other Assets 17,611 16,170 Assets of Discontinued Operations Held for Sale 13,285 193 5.83 14,929 177 4.70 --------- -------- --------- -------- TOTAL ASSETS $ 108,864 $ 1,160 $ 100,911 $ 877 ========= ======== ========= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,117 $ 36 2.83% $ 6,210 $ 29 1.84% Savings 460 1 0.74 614 1 0.77 Certificates of Deposit of $100,000 & Over 4,310 59 5.42 3,124 28 3.57 Other Time Deposits 294 4 5.03 783 7 3.37 Foreign Offices 33,724 291 3.43 25,887 152 2.33 --------- -------- --------- -------- Total Interest-Bearing Deposits 43,905 391 3.54 36,618 217 2.35 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,728 34 5.02 1,245 9 2.96 Other Borrowed Funds 1,834 27 5.99 1,716 13 3.10 Payables to Customers and Broker-Dealers 4,657 42 3.62 5,714 35 2.41 Long-Term Debt 8,339 115 5.37 7,568 73 3.81 --------- -------- --------- -------- Total Interest-Bearing Liabilities 61,463 609 3.93 52,861 347 2.60 -------- -------- Noninterest-Bearing Deposits 10,687 10,333 Other Liabilities 13,167 13,224 Common Shareholders' Equity 10,262 9,564 Liabilities of Discontinued Operations Held for Sale 13,285 38 1.15 14,929 31 0.83 --------- -------- --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 108,864 $ 647 $ 100,911 $ 378 ========= ======== ========= ======= Interest Earnings and Interest Rate Spread (Continuing) $ 358 1.14% $ 353 1.52% ======== ======= ======== ======= Net Interest Margin (Continuing) 1.89% 2.09% ======= ======= 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.
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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 nine months For the nine months ended September 30, 2006 ended September 30, 2005 -------------------------- ---------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- -------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 12,720 $ 372 3.91% $ 9,207 $ 206 2.99% Federal Funds Sold and Securities Purchased Under Resale Agreements 1,775 52 3.99 2,610 51 2.59 Margin Loans 5,438 247 6.08 6,380 188 3.94 Non-Margin Loans Domestic Offices 16,453 559 4.54 15,054 427 3.78 Foreign Offices 11,140 468 5.61 10,336 322 4.16 --------- -------- --------- -------- Total Non-Margin Loans 27,593 1,027 4.97 25,390 749 3.94 --------- -------- --------- -------- Securities U.S. Government Obligations 213 7 4.23 289 7 3.23 U.S. Government Agency Obligations 3,795 132 4.65 3,690 110 3.97 Obligations of States and Political Subdivisions 109 7 8.42 147 10 9.06 Other Securities 18,717 728 5.19 15,732 498 4.22 Trading Securities 3,878 132 4.55 3,084 99 4.30 --------- -------- --------- -------- Total Securities 26,712 1,006 5.03 22,942 724 4.21 --------- -------- --------- -------- Total Interest-Earning Assets 74,238 2,704 4.87 66,529 1,918 3.85 -------- -------- Allowance for Credit Losses (341) (473) Cash and Due from Banks 3,187 2,752 Other Assets 17,532 16,095 Assets of Discontinued Operations Held for Sale 13,856 568 5.48 15,309 504 4.40 --------- -------- --------- -------- TOTAL ASSETS $ 108,472 $ 3,272 $ 100,212 $ 2,422 ========= ========= ========= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,251 $ 101 2.57% $ 6,263 $ 74 1.57% Savings 461 4 1.29 624 4 0.84 Certificates of Deposit of $100,000 & Over 4,221 159 5.03 3,016 70 3.10 Other Time Deposits 629 22 4.67 352 8 3.08 Foreign Offices 32,176 751 3.12 25,896 413 2.13 --------- -------- --------- -------- Total Interest-Bearing Deposits 42,738 1,037 3.25 36,151 569 2.10 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,532 88 4.65 1,262 23 2.44 Other Borrowed Funds 2,045 69 4.54 1,831 33 2.43 Payables to Customers and Broker-Dealers 4,972 124 3.34 6,025 88 1.95 Long-Term Debt 8,167 317 5.13 7,223 187 3.43 --------- -------- --------- -------- Total Interest-Bearing Liabilities 60,454 1,635 3.61 52,492 900 2.29 -------- -------- Noninterest-Bearing Deposits 10,561 9,910 Other Liabilities 13,589 13,104 Common Shareholders' Equity 10,012 9,397 Liabilities of Discontinued Operations Held for Sale 13,856 111 1.07 15,309 83 0.73 --------- -------- --------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 108,472 $ 1,746 $ 100,212 $ 983 ========= ========= ========= ======= Interest Earnings and Interest Rate Spread (Continuing) $ 1,069 1.26% $ 1,018 1.56% ======== ======= ======== ======= Net Interest Margin (Continuing) 1.93% 2.04% ======= ======= 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.
28 THE BANK OF NEW YORK COMPANY, INC. Credit Loss Provision and Net Charge-Offs (In millions)
Year-to-date ----------------- 3Q06 2Q06 3Q05 2006 2005 ------- ------- ------- ------- ------- Provision Continuing Operations $ (4) $ (1) $ 10 $ (5) $ (10) Discontinued Operations (1) 1 - 5 15 ------- ------- ------- ------- ------- Adjusted Total Provision $ (5) $ - $ 10 $ - $ 5 ======= ======= ======= ======= ======= Net (Charge-offs)/Recoveries: Commercial $ - $ 2 $ (2) $ 2 $ (4) Foreign - 4 (2) 7 (6) Other - 1 - 1 - ------- ------- ------- ------- ------- Total Continuing Operations - 7 (4) 10 (10) ------- ------- ------- ------- ------- Discontinued Operations (9) (6) (9) (22) (24) ------- ------- ------- ------- ------- Adjusted Total Net (Charge-offs)/Recoveries $ (9) $ 1 $ (13) $ (12) $ (34) ======= ======= ======= ======= =======
The sequential increase in the credit to the provision for continuing operations reflects a continued strong credit environment. During the third quarter of 2006, nonperforming loans remained at low levels. 29 THE BANK OF NEW YORK COMPANY, INC. Loans (Dollars in millions) September 30, June 30, September 30, 2006 2006 2005 ------------ ------------ ------------ Margin Loans $ 4,719 $ 5,096 $ 6,320 Non-Margin Loans 29,239 30,554 28,038 ------------ ------------ ------------ Loans on a Continuing Operations Basis 33,958 35,650 34,358 Margin Loans - - - Non-Margin Loans 7,768 7,972 7,785 ------------ ------------ ------------ Loans related to Discontinued Operations 7,768 7,972 7,785 ------------ ------------ ------------ Adjusted Total Loans $ 41,726 $ 43,622 $ 42,143 ============ ============ ============ Allowance for Loan Losses $ 339 $ 337 $ 471 Allowance for Lending-Related Commitments 137 143 136 ------------ ------------ ------------ Allowance for Credit Losses on a Continuing Operations Basis 476 480 607 ------------ ------------ ------------ Allowance for Loan Losses 71 80 90 Allowance for Lending-Related Commitments 6 7 9 ------------ ------------ ------------ Allowance for Credit Losses Related to Discontinued Operations 77 87 99 ------------ ------------ ------------ Adjusted Total Allowance for Credit Losses $ 553 $ 567 $ 706 ============ ============ ============ The decrease in loans from June 30, 2006 primarily reflects fewer margin loans, overdrafts and loans to securities industry clients. September 30, June 30, September 30, 2006 2006 2005 ------------ ------------ ------------ Continuing Operations - --------------------- Allowance for Loan Losses As a Percent of Total Loans 1.00% 0.95% 1.37% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.16 1.10 1.68 Total Allowance for Credit Losses As a Percent of Total Loans 1.40 1.35 1.77 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 1.63 1.57 2.16 Adjusted - -------- Allowance for Loan Losses As a Percent of Total Loans 0.98% 0.96% 1.33% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.11 1.08 1.57 Total Allowance for Credit Losses As a Percent of Total Loans 1.33 1.30 1.68 Total Allowance for Credit Losses As a Percent of Non-Margin Loans 1.49 1.47 1.97 30 THE BANK OF NEW YORK COMPANY, INC. Nonperforming Assets (Dollars in millions)
Change Percent 9/30/2006 vs. Inc/ 9/30/2006 6/30/2006 6/30/2006 (Dec) --------- --------- ----------- -------- Loans: Commercial $ 28 $ 10 $ 18 180% Foreign 10 10 - - --------- --------- ----------- Total Nonperforming Loans 38 20 18 90 Other Assets Owned - 12 (12) --------- --------- ----------- Total Nonperforming Assets on a Continuing Operations Basis 38 32 6 19 --------- --------- ----------- Nonperforming Assets related to Discontinued operations 25 42 (17) (40) --------- --------- ----------- Adjusted Total Nonperforming Assets $ 63 $ 74 $ (11) (15) ========= ========= =========== Continuing Operations - --------------------- Nonperforming Assets Ratio 0.1% 0.1% Allowance for Loan Losses/Nonperforming Loans 892 1,685 Allowance for Loan Losses/Nonperforming Assets 892 1,053 Total Allowance for Credit Losses/Nonperforming Loans 1,253 2,400 Total Allowance for Credit Losses/Nonperforming Assets 1,253 1,500 Adjusted - -------- Nonperforming Assets Ratio 0.2% 0.2% Allowance for Loan Losses/Nonperforming Loans 651 673 Allowance for Loan Losses/Nonperforming Assets 651 564 Total Allowance for Credit Losses/Nonperforming Loans 878 915 Total Allowance for Credit Losses/Nonperforming Assets 878 766
The sequential quarter increase in continuing nonperforming assets primarily reflects the addition of an automotive supplier partially offset by the sale of an aircraft. 31 APPENDIX I ---------- Supplemental Information (Page 1 of 9) 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 - ------------------ Servicing Fees Securities 839 - 839 Global Payment Services 66 8 74 ----- ----- ----- 905 8 913 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, Including Merger and Integration Costs 422 96 518 Income Taxes 124 42 166 ----- ----- ----- Net Income Including Merger 298 54 352 and Integration Costs 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.
32 APPENDIX I ---------- Supplemental Information (Page 2 of 9) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited)
Quarter Ended September 30, 2005 -------------------------------------------- Continuing Discontinued Adjusted Operations Operations Results(1) ---------- ------------ ---------- Net Interest Income $ 346 $ 146 $ 492 - ------------------- Provision for Credit Losses 10 - 10 ----- ----- ----- Net Interest Income After Provision for Credit Losses 336 146 482 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 806 - 806 Global Payment Services 67 8 75 ----- ----- ----- 873 8 881 Private Banking and Asset Management Fees 109 11 120 Service Charges and Fees 54 39 93 Foreign Exchange and Other Trading Activities 90 3 93 Securities Gains 15 - 15 Other 44 2 46 ----- ----- ----- Total Noninterest Income 1,185 63 1,248 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 585 59 644 Net Occupancy 60 19 79 Furniture and Equipment 50 2 52 Clearing 49 - 49 Sub-custodian Expenses 25 - 25 Software 54 - 54 Communications 23 1 24 Amortization of Intangibles 10 - 10 Other 175 23 198 ----- ----- ----- Total Noninterest Expense 1,031 104 1,135 ----- ----- ----- Income Before Income Taxes 490 105 595 Income Taxes 157 49 206 ----- ----- ----- Net Income $ 333 $ 56 $ 389 - ---------- ===== ===== ===== Diluted Earnings Per Share $0.44 $0.07 $0.51 Note: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
33 APPENDIX I ---------- Supplemental Information (Page 3 of 9) 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 Note: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
34 APPENDIX I ---------- Supplemental Information (Page 4 of 9)
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Adjusted Results(1) ------------------------------------------------------------------ Quarter Ended 9/30/06 9/30/06 September 30, September 30, June 30, vs. vs. 2006 2005 2006 9/30/05 6/30/06 ------------ ------------ ----------- -------- ------- Net Interest Income $ 506 $ 492 $ 512 3% (1)% - ------------------- Provision for Credit Losses (5) 10 - ----- ----- ----- Net Interest Income After Provision for Credit Losses 511 482 512 6 - ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 839 806 909 4 (8) Global Payment Services 74 75 70 (1) 6 ----- ----- ----- 913 881 979 4 (7) Private Banking and Asset Management Fees 145 120 150 21 (3) Service Charges and Fees 90 93 91 (3) (1) Foreign Exchange and Other Trading Activities 86 93 132 (8) (35) Securities Gains 21 15 23 40 (9) Other 70 46 51 52 37 ----- ----- ----- Total Noninterest Income 1,325 1,248 1,426 6 (7) ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 706 644 723 10 (2) Net Occupancy 88 79 86 11 2 Furniture and Equipment 48 52 50 (8) (4) Clearing 47 49 53 (4) (11) Sub-custodian Expenses 31 25 36 24 (14) Software 54 54 53 - 2 Communications 27 24 23 13 17 Amortization of Intangibles 14 10 15 40 (7) Merger and Integration Costs 110 - - Other 193 198 209 (3) (8) ----- ----- ----- Total Noninterest Expense 1,318 1,135 1,248 16 6 ----- ----- ----- Income Before Income Taxes, Including Merger and Integration Costs 518 595 690 (13) (25) Income Taxes 166 206 242 (19) (31) ----- ----- ----- Net Income Including Merger and Integration Costs 352 389 448 (10) (21) Merger and Integration Costs, Net of Taxes 74 - - ----- ----- ----- Net Income Excluding Merger and Integration Costs $ 426 $ 389 $ 448 10 (5) ===== ===== ===== Diluted Earnings Per Share $0.46 $0.51 $0.59 (10) (22) Diluted Earnings Per Share, Excluding Merger and Integration Costs $0.56 $0.51 $0.59 10 (5) Note: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
35 APPENDIX I ---------- Supplemental Information (Page 5 of 9)
THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Nine Months Ended September 30, --------------------------------------------------------------------- 2006 2005 9/30/06 Continuing Discontinued Adjusted Adjusted vs. Operations Operations Results(1) Results(1) 9/30/05 ---------- ------------ ----------- ----------- ---------- Net Interest Income $1,048 $ 458 $1,506 $1,417 6% - ------------------- Provision for Credit Losses (5) 5 - 5 ------ ----- ------ ------ Net Interest Income After Provision for Credit Losses 1,053 453 1,506 1,412 7 ------ ----- ------ ------ Noninterest Income - ------------------ Servicing Fees Securities 2,579 - 2,579 2,330 11 Global Payment Services 191 23 214 226 (5) ------ ----- ------ ------ 2,770 23 2,793 2,556 9 Private Banking and Asset Management Fees 402 34 436 366 19 Service Charges and Fees 157 113 270 288 (6) Foreign Exchange and Other Trading Activities 327 6 333 292 14 Securities Gains 61 - 61 50 22 Other 169 21 190 130 46 ------ ----- ------ ------ Total Noninterest Income 3,886 197 4,083 3,682 11 ------ ----- ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 1,904 193 2,097 1,902 10 Net Occupancy 206 56 262 239 10 Furniture and Equipment 145 6 151 155 (3) Clearing 150 - 150 137 9 Sub-custodian Expenses 101 - 101 72 40 Software 161 2 163 162 1 Communications 74 3 77 69 12 Amortization of Intangibles 42 - 42 28 50 Merger and Integration Costs 89 21 110 - Other 519 72 591 571 4 ------ ----- ------ ------ Total Noninterest Expense 3,391 353 3,744 3,335 12 ------ ----- ------ ------ Income Before Income Taxes, Including Merger and Integration Costs 1,548 297 1,845 1,759 5 Income Taxes 499 124 623 593 5 ------ ----- ------ ------ Net Income Including Merger and Integration Costs 1,049 173 1,222 1,166 5 Merger and Integration Costs, Net of Taxes 62 12 74 - ------ ----- ------ ------ Net Income Excluding Merger and Integration Costs $1,111 $ 185 $1,296 $1,166 11 - --------------------------- ====== ===== ====== ====== Diluted Earnings Per Share $1.36 $0.23 $1.59 $1.51 5 Diluted Earnings Per Share, Excluding Merger and Integration Costs 1.44 0.25 1.69 1.51 12 Note: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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APPENDIX I ---------- Supplemental Information (Page 6 of 9) THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited) Nine Months Ended September 30, 2005 ----------------------------------------- 2005 Continuing Discontinued Adjusted Operations Operations Results(1) ---------- ------------ ---------- Net Interest Income $ 996 $ 421 $1,417 - ------------------- Provision for Credit Losses (10) 15 5 ----- ----- ----- Net Interest Income After Provision for Credit Losses 1,006 406 1,412 ----- ----- ----- Noninterest Income - ------------------ Servicing Fees Securities 2,330 - 2,330 Global Payment Services 200 26 226 ----- ----- ----- 2,530 26 2,556 Private Banking and Asset Management Fees 334 32 366 Service Charges and Fees 172 116 288 Foreign Exchange and Other Trading Activities 283 9 292 Securities Gains 50 - 50 Other 126 4 130 ----- ----- ----- Total Noninterest Income 3,495 187 3,682 ----- ----- ----- Noninterest Expense - ------------------- Salaries and Employee Benefits 1,721 181 1,902 Net Occupancy 184 55 239 Furniture and Equipment 149 6 155 Clearing 137 - 137 Sub-custodian Expenses 72 - 72 Software 160 2 162 Communications 66 3 69 Amortization of Intangibles 28 - 28 Other 506 65 571 ----- ----- ----- Total Noninterest Expense 3,023 312 3,335 ----- ----- ----- Income Before Income Taxes 1,478 281 1,759 Income Taxes 474 119 593 ------ ----- ------ Net Income $1,004 $ 162 $1,166 - ---------- ====== ===== ====== Diluted Earnings Per Share $1.30 $0.21 $1.51 (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
37
APPENDIX I ---------- Supplemental Information (Page 7 of 9) THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (In millions) (Unaudited) September 30, 2006 December 31, 2005 -------------------------------------- --------------------------------------- Continuing Discontinued Continuing Discontinued Operations Operations Adjusted Operations Operations Adjusted ---------- ------------ -------- ---------- ------------ ------------- Assets - ------ Cash and Due from Banks $ 2,072 $ 578 $ 2,650 $ 2,882 $ 633 $ 3,515 Interest-Bearing Deposits in Banks 16,753 - 16,753 8,644 - 8,644 Securities 22,015 120 22,135 27,218 108 27,326 Trading Assets at Fair Value 3,266 - 3,266 5,930 - 5,930 Federal Funds Sold and Securities Purchased Under Resale Agreements 5,139 - 5,139 2,425 - 2,425 Loans 33,619 7,697 41,316 32,601 7,714 40,315 Premises and Equipment 1,009 113 1,122 960 100 1,060 Due from Customers on Acceptances 311 - 311 212 21 233 Accrued Interest Receivable 406 49 455 363 28 391 Goodwill 3,801 109 3,910 3,510 109 3,619 Intangible Assets 872 - 872 811 - 811 Other Assets 8,545 162 8,707 7,710 95 7,805 -------- ------- -------- -------- ---------- ---------- Total Assets $ 97,808 $ 8,828 $106,636 $ 93,266 $ 8,808 $ 102,074 ======== ======= ======== ======== ========== ========== Liabilities and Shareholders' Equity - ---------------------- Deposits $ 54,953 $12,981 $ 67,934 $ 49,787 $ 14,637 $ 64,424 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,040 - 1,040 834 - 834 Trading Liabilities 2,102 - 2,102 2,401 - 2,401 Payables to Customers and Broker-Dealers 6,673 - 6,673 8,623 - 8,623 Other Borrowed Funds 1,121 - 1,121 860 - 860 Acceptances Outstanding 318 - 318 212 23 235 Accrued Taxes and Other Expenses 4,140 34 4,174 4,123 1 4,124 Accrued Interest Payable 201 12 213 163 9 172 Other Liabilities 4,152 8 4,160 2,697 11 2,708 Long-Term Debt 8,434 - 8,434 7,817 - 7,817 -------- ------- -------- -------- ---------- ---------- Total Liabilities 83,134 13,035 96,169 77,517 14,681 92,198 -------- ------- -------- -------- ---------- ---------- Shareholders' Equity 10,467 - 10,467 9,876 - 9,876 -------- ------- -------- -------- ---------- ---------- Total Liabilities and Shareholders' Equity $ 93,601 $13,035 $106,636 $ 87,393 $ 14,681 $ 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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APPENDIX I ---------- Supplemental Information (Page 8 of 9) THE BANK OF NEW YORK COMPANY, INC. Adjusted(1) Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions) For the three months For the three months ended September 30, 2006 ended September 30, 2005 ------------------------- -------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 16,033 $ 166 4.11% $ 8,629 $ 68 3.13% Federal Funds Sold and Securities Purchased Under Resale Agreements 3,006 37 4.89 4,465 38 3.37 Margin Loans 5,158 85 6.54 6,392 71 4.40 Non-Margin Loans Domestic Offices 25,174 343 5.44 22,955 271 4.69 Foreign Offices 11,135 168 5.96 10,561 121 4.53 -------- -------- -------- -------- Total Non-Margin Loans 36,309 511 5.60 33,516 392 4.64 -------- -------- -------- -------- Securities U.S. Government Obligations 198 2 4.24 228 2 3.55 U.S. Government Agency Obligations 3,427 42 4.95 3,956 41 4.19 Obligations of States and Political Subdivisions 220 4 7.06 231 4 6.59 Other Securities 21,616 284 5.26 21,227 224 4.23 Trading Securities 2,477 30 4.69 3,361 38 4.49 -------- -------- -------- -------- Total Securities 27,938 362 5.18 29,003 309 4.27 -------- -------- -------- -------- Total Interest-Earning Assets 88,444 1,161 5.23 82,005 878 4.25 -------- -------- Allowance for Credit Losses (417) (562) Cash and Due from Banks 2,777 2,974 Other Assets 18,060 16,494 -------- -------- TOTAL ASSETS $108,864 $100,911 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,586 $ 37 2.64% $ 6,827 $ 30 1.74% Savings 7,379 32 1.71 8,637 27 1.23 Certificates of Deposit of $100,000 & Over 4,323 59 5.41 3,137 28 3.56 Other Time Deposits 1,052 10 3.74 1,529 11 2.84 Foreign Offices 33,724 291 3.43 25,887 152 2.33 -------- -------- -------- -------- Total Interest-Bearing Deposits 52,064 429 3.27 46,017 248 2.14 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,728 34 5.02 1,245 9 2.96 Other Borrowed Funds 1,834 27 5.99 1,716 13 3.10 Payables to Customers and Broker-Dealers 4,657 42 3.62 5,714 35 2.41 Long-Term Debt 8,340 115 5.37 7,568 73 3.81 -------- -------- -------- -------- Total Interest-Bearing Liabilities 69,623 647 3.69 62,260 378 2.41 -------- -------- Noninterest-Bearing Deposits 15,743 15,815 Other Liabilities 13,236 13,272 Common Shareholders' Equity 10,262 9,564 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,864 $100,911 ======== ======== Interest Earnings and Interest Rate Spread $ 514 1.54% $ 500 1.84% ======== ======= ======== ======= Net Interest Margin 2.33% 2.42% ======= ======= Note: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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APPENDIX I ---------- Supplemental Information (Page 9 of 9) THE BANK OF NEW YORK COMPANY, INC. Adjusted(1) Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions) For the nine months For the nine months ended September 30, 2006 ended September 30, 2005 ------------------------- -------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 12,720 $ 372 3.91% $ 9,207 $ 206 2.99% Federal Funds Sold and Securities Purchased Under Resale Agreements 3,098 102 4.42 4,813 102 2.82 Margin Loans 5,438 247 6.08 6,380 188 3.94 Non-Margin Loans Domestic Offices 24,349 973 5.34 22,606 760 4.50 Foreign Offices 11,140 468 5.61 10,336 322 4.17 -------- -------- -------- -------- Total Non-Margin Loans 35,489 1,441 5.43 32,942 1,082 4.39 -------- -------- -------- -------- Securities U.S. Government Obligations 213 7 4.23 289 7 3.23 U.S. Government Agency Obligations 3,795 132 4.65 3,690 110 3.97 Obligations of States and Political Subdivisions 220 11 6.87 214 11 7.03 Other Securities 22,395 831 4.94 20,449 617 4.02 Trading Securities 3,878 132 4.55 3,084 98 4.30 -------- -------- -------- -------- Total Securities 30,501 1,113 4.87 27,726 843 4.06 -------- -------- -------- -------- Total Interest-Earning Assets 87,246 3,275 5.01 81,068 2,421 3.99 -------- -------- Allowance for Credit Losses (418) (578) Cash and Due from Banks 3,784 3,342 Other Assets 17,860 16,380 -------- -------- TOTAL ASSETS $108,472 $100,212 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 5,795 $ 103 2.40% $ 6,939 $ 77 1.49% Savings 7,786 95 1.63 8,824 72 1.09 Certificates of Deposit of $100,000 & Over 4,233 159 5.02 3,028 70 3.09 Other Time Deposits 1,377 39 3.77 1,101 20 2.37 Foreign Offices 32,176 751 3.12 25,896 413 2.13 -------- -------- -------- -------- Total Interest-Bearing Deposits 51,367 1,147 2.99 45,788 652 1.90 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 2,532 88 4.65 1,262 23 2.44 Other Borrowed Funds 2,045 70 4.54 1,831 33 2.43 Payables to Customers and Broker-Dealers 4,972 124 3.34 6,025 88 1.95 Long-Term Debt 8,166 317 5.12 7,223 187 3.42 -------- -------- -------- -------- Total Interest-Bearing Liabilities 69,082 1,746 3.37 62,129 983 2.12 -------- -------- Noninterest-Bearing Deposits 15,733 15,533 Other Liabilities 13,645 13,153 Common Shareholders' Equity 10,012 9,397 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,472 $100,212 ======== ======== Interest Earnings and Interest Rate Spread $ 1,529 1.64% $ 1,438 1.87% ======== ======= ======== ======= Net Interest Margin 2.34% 2.37% ======= ======= Note: (1) Adjusted results combine continuing and discontinued operations to provide continuity with historical results.
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