Bank of New York Mellon Corp - FORM 8-K - EX-99.1 - PRESS RELEASE DATED 1/19/2011

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8-K - FORM 8-K - Bank of New York Mellon Corp	d8k.htm

EXHIBIT 99.1


Press Release


Contacts:	MEDIA:	ANALYST:
	Kevin Heine	Andy Clark
	(212) 635-1590	(212) 635-1803

BNY MELLON REPORTS FOURTH QUARTER CONTINUING EPS OF $0.55 INCLUDING $0.04 OF M&I AND RESTRUCTURING EXPENSES

—

TOTAL REVENUE OF $3.8 BILLION +14% YEAR-OVER-YEAR, +10% SEQUENTIALLY

—

TOTAL FEE REVENUE +12% SEQUENTIALLY

—

SECURITIES SERVICING FEES +8%

—

ASSET & WEALTH MANAGEMENT FEES +15%

—

FOREIGN EXCHANGE TRADING REVENUE +29%

—

RECORD LEVELS OF ASSETS UNDER MANAGEMENT AND ASSETS UNDER CUSTODY/ADMINISTRATION

—

CONTINUED STRONG FLOWS IN ASSET AND WEALTH MANAGEMENT

—

$15 BILLION OF NET FLOWS IN 4Q10

—

HIGHER CAPITAL RATIOS SEQUENTIALLY

—

TIER 1 13.4% +120 bps, TIER 1 COMMON 11.8% +110 bps

NEW YORK, Jan. 19, 2011 — The Bank of New York Mellon Corporation (“BNY Mellon”) (NYSE:BK) today reported fourth quarter income from continuing operations applicable to common shareholders of $690 million, or $0.55 per common share, compared with $712 million, or $0.59 per common share, in the fourth quarter of 2009 and $625 million, or $0.51 per common share, in the third quarter of 2010.

Net income from continuing operations applicable to common shareholders totaled $2.584 billion, or $2.11 per common share, for the full-year 2010 compared to a net loss of $1.097 billion, or $0.93 per common share, for the full-year 2009. Net income applicable to common shareholders, including discontinued operations, for the full-year 2010 totaled $2.518 billion, or $2.05 per common share, compared to a net loss of $1.367 billion, or $1.16 per common share, for the full-year 2009.

Fourth Quarter Results - Unless otherwise noted, all comments begin with the results of the fourth quarter of 2010 and are compared to the fourth quarter of 2009, all information is reported on a continuing operations basis and sequential growth rates are unannualized. Please refer to the Quarterly Earnings Review for a detailed review of our businesses.

Total revenue



Reconciliation of total revenue									4Q10 vs.

(dollar amounts in millions)	4Q10			3Q10			4Q09		3Q10			4Q09

Fee and other revenue – GAAP	$	2,972		$	2,668		$	2,577
Less: Net securities gains		1			6			15

Total fee revenue – GAAP		2,971			2,662			2,562		12	%		16	%
Income of consolidated asset management funds, net of noncontrolling interests		45	(a)		49	(a)		-

Total fee revenue – Non-GAAP		3,016			2,711			2,562		11	%		18	%
Net interest revenue – GAAP		720			718			724

Total revenue excluding net securities gains – Non-GAAP	$	3,736	(b)	$	3,429	(b)	$	3,286		9	%		14	%

Total revenue – GAAP	$	3,751	(b)	$	3,423	(b)	$	3,301		10	%		14	%

(a)

Includes $35 million and $36 million previously reported as asset and wealth management fee revenue and $10 million and $13 million previously reported as investment and other income in the fourth and third quarters of 2010.

(b)

Total revenue from the Acquisitions (described below) was $253 million in the fourth quarter of 2010 and $237 million in the third quarter of 2010.

—

Record levels of assets under custody and administration and assets under management in the fourth quarter of 2010 reflect the impact of higher equity markets and new business, partially offset by the decline in the fixed income markets and the relative strength of the U.S. dollar. Assets under custody and administration amounted to $25.0 trillion at Dec. 31, 2010, an increase of 12% compared with the prior year and 2% sequentially. The increase compared with Dec. 31, 2009 primarily reflects the acquisitions of Global Investment Servicing (“GIS”) on July 1, 2010 and BHF Asset Servicing GmbH (“BAS”) on Aug. 2, 2010 (collectively, “the Acquisitions”). Assets under management, excluding securities lending assets, amounted to $1.17 trillion at Dec. 31, 2010. This represents an increase of 5% compared with the prior year and 3% sequentially.

—

Securities servicing fees totaled $1.6 billion, an increase of 29% year-over-year and 8% sequentially. Both increases reflect higher asset servicing revenue as a result of improved market values and new business, higher issuer services revenue primarily driven by increased depositary receipts revenue and higher clearing services revenue. The year-over-year results were also positively impacted by the Acquisitions.

—

Asset and wealth management fees were $800 million in the fourth quarter of 2010, up 15% sequentially. Adjusted for performance fees and income from consolidated asset management funds, net of noncontrolling interests, these fees totaled $762 million, an increase of 11% compared with the prior year period and 6% sequentially (see page 10). Both increases reflect increased market values and net new business.

—

Foreign exchange and other trading revenue totaled $258 million compared with $246 million in the prior year period and $146 million in the third quarter of 2010. In the fourth quarter of 2010, foreign exchange revenue totaled $206 million, an increase of 29% sequentially and 2% year-over-year. The sequential increase was driven by increased volumes, new business and higher volatility. Other trading revenue was $52 million in the fourth quarter of 2010, an increase of $7 million compared with the fourth quarter of 2009 and $66 million compared with the third quarter of 2010. The sequential increase was largely driven by an improvement in fixed income and derivatives trading.

—

Investment and Other income totaled $80 million, a decrease of $1 million year-over-year and $17 million sequentially. The sequential decrease primarily reflects lower foreign currency translation and seed capital revenue, and gains on the sales of assets in the third quarter of 2010.

—

Net interest revenue and the net interest margin (FTE) were $720 million and 1.54% compared with $718 million and 1.67% sequentially. The sequential increase in net interest revenue was primarily driven by higher average interest-earning assets which resulted from a temporary increase in short-term client deposits during the fourth quarter. The spike in short-term client deposits negatively impacted the net interest margin by approximately 10 basis points in the fourth quarter of 2010.

The provision for credit losses was a credit of $22 million in the fourth quarter of 2010 compared with a charge of $65 million in the fourth quarter of 2009 and a credit of $22 million in the third quarter of 2010. The credit in the provision in the fourth quarter of 2010 primarily reflects the repayment of a loan to an asset manager that had previously filed for bankruptcy. The decrease in the provision compared with the fourth quarter of 2009 reflects a reduction in criticized assets. Criticized assets decreased 32% in the fourth quarter of 2010 and 66% in the full-year 2010.

Total noninterest expense



Reconciliation of noninterest expense									4Q10 vs.
(dollar amounts in millions)	4Q10			3Q10			4Q09		3Q10			4Q09

Noninterest expense – GAAP	$	2,803		$	2,611		$	2,564		7	%		9	%
Less: Amortization of intangible assets		115			111			107
Restructuring charges		21			15			139
M&I expenses		43			56			52

Total noninterest expense – Non-GAAP	$	2,624	(a)	$	2,429	(a)	$	2,266		8	%		16	%

(a)

Noninterest expense from the Acquisitions was $196 million in the fourth quarter of 2010 and $185 million in the third quarter of 2010.

—

Total noninterest expense (excluding amortization of intangible assets, restructuring charges and M&I expenses) (Non-GAAP) increased 16% compared with the prior year period and 8% sequentially. The increase compared with the prior year period reflects the impact of the Acquisitions, higher volume driven costs and new business. The sequential increase includes the impact of higher volume driven costs, seasonality and new business. In addition, noninterest expense in the fourth quarter of 2010 includes approximately $50 million of expenses primarily related to the full-year impact of adjusting compensation to market levels, the write-off of equipment and the anticipated settlement of a withholding tax matter with the Internal Revenue Service.

The effective tax rate on a continuing operations basis was 27.3% in the fourth quarter of 2010, 26.4% in the third quarter of 2010 and 28.3% in full-year 2010.

The unrealized net of tax gain on our total investment securities portfolio was $150 million at Dec. 31, 2010 compared with $311 million at Sept. 30, 2010. The decline in the valuation of the investment securities portfolio was driven by higher interest rates.



Capital ratios (a)	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009

Tier 1 capital ratio		13.4	%		12.2	%		12.1	%
Total (Tier 1 plus Tier 2) capital ratio		16.4			15.8			16.0
Leverage capital ratio		5.8			5.9			6.5
Common shareholders’ equity to total assets ratio (b)		13.1			12.7			13.7
Tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP (b)		5.8			5.3			5.2
Tier 1 common equity to risk-weighted assets ratio (b)		11.8			10.7			10.5

(a)

Includes discontinued operations. Preliminary.

(b)

See the Supplemental information section beginning on page 9 for a calculation of these ratios.

The increase in the capital ratios sequentially primarily resulted from earnings retention and lower risk-weighted assets. The increase from Dec. 31, 2009 primarily reflects earnings retention, the third quarter 2010 common equity issuance of $677 million and lower risk-weighted assets, partially offset by the impact of the Acquisitions.

Declaration of quarterly dividend – On Jan. 19, 2011, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.09 per common share. This cash dividend is payable on Feb. 9, 2011 to shareholders of record as of the close of business on Jan. 31, 2011.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $25.0 trillion in assets under custody and administration and $1.17 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com.

THE BANK OF NEW YORK MELLON CORPORATION

Financial Highlights



	Quarter ended									Year ended

(dollar amounts in millions, except per common share amounts and unless otherwise noted)	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009			Dec. 31, 2010			Dec. 31, 2009

Continuing operations
Return on common equity (annualized) (a)		8.5	%		7.8	%		9.8	%		8.2	%		N/M
Non-GAAP adjusted (a)		9.9	%		9.2	%		10.1	%		9.7	%		9.3	%

Return on tangible common equity (annualized) – Non-GAAP (a)		27.5	%		26.3	%		33.0	%		25.7	%		N/M
Non-GAAP adjusted (a)		29.1	%		27.8	%		31.1	%		27.4	%		32.1	%

Fee and other revenue as a percentage of total revenue excluding securities gains (losses)		79	%		78	%		78	%		77	%		78	%

Annualized fee revenue per employee (based on average headcount) (in thousands)		$ 246			$ 234			$ 242			$ 241			$ 241

Percentage of non-U.S. fee, net interest revenue and income of consolidated asset management funds, net of noncontrolling interests		38	%		36	%		36	%		36	%		32	%

Pre-tax operating margin (a)		26	%		24	%		20	%		27	%		N/M
Non-GAAP adjusted (a)		30	%		30	%		29	%		32	%		31	%

Net interest margin (FTE)		1.54	%		1.67	%		1.77	%		1.69	%		1.82	%

Selected average balances
Interest-earning assets		$187,597			$172,759			$164,075			$172,852			$160,955
Assets of operations		$241,734			$226,378			$214,205			$224,670			$212,127
Total assets		$256,409			$240,325			$214,205			$238,025			$212,127
Interest-bearing deposits		$111,776			$104,033			$ 98,404			$104,133			$ 98,206
Noninterest-bearing deposits		$ 39,625			$ 33,198			$ 34,991			$ 35,208			$ 36,446
Total The Bank of New York Mellon Corporation shareholders’ equity		$ 32,379			$ 31,868			$ 28,843			$ 31,361			$ 28,476

Average common shares and equivalents outstanding (in thousands):
Basic		1,232,568			1,210,534			1,200,359			1,212,630			1,178,907
Diluted		1,235,670			1,212,684			1,203,469			1,216,214			1,178,907	(b)

Period-end data
Assets under management (in billions)		$ 1,172			$ 1,141			$ 1,115			$ 1,172			$ 1,115
Assets under custody and administration (in trillions)		$ 25.0			$ 24.4			$ 22.3			$ 25.0			$ 22.3
Cross-border assets (in trillions)		$ 9.2			$ 8.8			$ 8.8			$ 9.2			$ 8.8
Market value of securities on loan (in billions) (c)		$ 278			$ 279			$ 247			$ 278			$ 247

Employees		48,000			47,700			42,200			48,000			42,200

Book value per common share – GAAP (a)		$ 26.06			$ 25.92			$ 23.99			$ 26.06			$ 23.99
Tangible book value per common share – Non-GAAP (a)		$ 8.91			$ 8.59			$ 7.90			$ 8.91			$ 7.90
Cash dividends per common share		$ 0.09			$ 0.09			$ 0.09			$ 0.36			$ 0.51
Closing common stock price per common share		$ 30.20			$ 26.13			$ 27.97			$ 30.20			$ 27.97
Market capitalization		$37,494			$32,413			$33,783			$37,494			$33,783

(a)

See Supplemental information beginning on page 9 for a calculation of these ratios.

(b)

Diluted earnings per share for the year ended Dec. 31, 2009, was calculated using average basic shares. Adding back the dilutive shares would be anti-dilutive.

(c)

Represents the securities on loan, both cash and non-cash, managed by the Asset Servicing business.

N/M – Not meaningful.

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement



	Quarter ended									Year ended
(in millions)	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009			Dec. 31, 2010			Dec. 31, 2009

Fee and other revenue
Securities servicing fees:
Asset servicing	$	914		$	870		$	650		$	3,089		$	2,573
Issuer services		409			364			368			1,460			1,463
Clearing services		278			252			223			1,005			962

Total securities servicing fees		1,601			1,486			1,241			5,554			4,998
Asset and wealth management fees		800			696			746			2,868			2,677
Foreign exchange and other trading revenue		258			146			246			886			1,036
Treasury services		129			132			134			517			519
Distribution and servicing		55			56			57			210			326
Financing-related fees		48			49			57			195			215
Investment and other income		80			97			81			467			337

Total fee revenue		2,971			2,662			2,562			10,697			10,108
Net securities gains (losses)		1			6			15			27			(5,369	)

Total fee and other revenue		2,972			2,668			2,577			10,724			4,739
Operations of consolidated asset management funds
Investment income		176			144			-			663			-
Interest of asset management fund note holders		117			107			-			437			-

Income of consolidated asset management funds		59			37			-			226			-
Net interest revenue
Interest revenue		913			875			854			3,533			3,507
Interest expense		193			157			130			608			592

Net interest revenue		720			718			724			2,925			2,915
Provision for credit losses		(22	)		(22	)		65			11			332

Net interest revenue after provision for credit losses		742			740			659			2,914			2,583
Noninterest expense
Staff		1,417			1,344			1,221			5,215			4,700
Professional, legal and other purchased services		320			282			278			1,099			1,017
Software and equipment		207			187			178			725			676
Net occupancy		158			150			141			588			564
Distribution and servicing		104			94			91			377			393
Business development		88			63			76			271			214
Sub-custodian		70			60			55			247			203
Other		260			249			226			1,060			954

Subtotal		2,624			2,429			2,266			9,582			8,721
Amortization of intangible assets		115			111			107			421			426
Restructuring charges		21			15			139			28			150
Merger and integration expenses		43			56			52			139			233

Total noninterest expense		2,803			2,611			2,564			10,170			9,530

Income
Income (loss) from continuing operations before income taxes		970			834			672			3,694			(2,208	)
Provision (benefit) for income taxes		265			220			(41	)		1,047			(1,395	)

Net income (loss) from continuing operations		705			614			713			2,647			(813	)
Discontinued operations:
(Loss) from discontinued operations		(18	)		(6	)		(183	)		(110	)		(421	)
Benefit for income taxes		(7	)		(3	)		(64	)		(44	)		(151	)

Net (loss) from discontinued operations		(11	)		(3	)		(119	)		(66	)		(270	)

Net income (loss)		694			611			594			2,581			(1,083	)
Net (income) loss attributable to noncontrolling interests		(15	) (a)		11	(a)		(1	)		(63	) (a)		(1	)
Redemption charge and preferred dividends		-			-			-			-			(283	)

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation	$	679		$	622		$	593		$	2,518		$	(1,367	)

(a)

Includes income of $(14) million for the fourth quarter of 2010, a loss of $12 million for the third quarter of 2010, and income of $(59) million for the full year of 2010, related to consolidated asset management funds.

THE BANK OF NEW YORK MELLON CORPORATION

Condensed Consolidated Income Statement - continued



Earnings per common share applicable to the common shareholders of The Bank of New York Mellon Corporation (a) (in dollars)		Quarter ended								Year ended

	Dec. 31, 2010			Sept. 30, 2010		Dec. 31, 2009			Dec. 31, 2010			Dec. 31, 2009

Basic:
Net income (loss) from continuing operations		$ 0.55			$ 0.51		$0.59			$ 2.11			$(0.93)
Net loss from discontinued operations		(0.01	)		-		(0.10	)		(0.05	)		(0.23)

Net income (loss) applicable to common stock		$ 0.55	(b)		$ 0.51		$0.49			$ 2.06			$(1.16)

Diluted:
Net income (loss) from continuing operations		$ 0.55			$ 0.51		$0.59			$ 2.11			$(0.93)
Net loss from discontinued operations		(0.01	)		-		(0.10	)		(0.05	)		(0.23)

Net income (loss) applicable to common stock		$ 0.54			$ 0.51		$0.49			$ 2.05	(b)		$(1.16)	(c)

(a)

Basic and diluted earnings per share under the two-class method were calculated after deducting earnings allocated to participating securities of $6 million in the fourth quarter of 2010, $5 million in the third quarter of 2010, $6 million in the fourth quarter of 2009, $23 million in the full year 2010 and $ - million in the full year 2009.

(b)

Does not foot due to rounding.

(c)

Diluted earnings per share for the year ended Dec. 31, 2009, was calculated using average basic shares. Adding back the dilutive shares would be anti-dilutive.



Reconciliation of net income (loss) from continuing operations applicable to the common shareholders of The Bank of New York Mellon Corporation (in millions)		Quarter ended									Year ended

	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009			Dec. 31, 2010			Dec. 31, 2009

Net income (loss) from continuing operations	$	705		$	614		$	713		$	2,647		$	(813	)
Net (income) loss attributable to noncontrolling interests		(15	)		11			(1	)		(63	)		(1	)
Redemption charge and preferred dividends		-			-			-			-			(283	)

Net income (loss) from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation		690			625			712			2,584			(1,097	)
Net loss from discontinued operations		(11	)		(3	)		(119	)		(66	)		(270	)

Net income (loss) applicable to the common shareholders of The Bank of New York Mellon Corporation	$	679		$	622		$	593		$	2,518		$	(1,367	)

Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation.

THE BANK OF NEW YORK MELLON CORPORATION

Consolidated Balance Sheet



(dollar amounts in millions, except per share amounts)	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009

Assets
Cash and due from:
Banks	$	3,675		$	3,693		$	3,732
Interest-bearing deposits with the Federal Reserve and other central banks		18,549			15,765			7,362
Interest-bearing deposits with banks		50,200			60,293			56,302
Federal funds sold and securities purchased under resale agreements		5,169			4,735			3,535
Securities:
Held-to-maturity (fair value of $3,657, $3,867 and $4,240)		3,655			3,862			4,417
Available-for-sale (includes $483, $481 and $ - previously securitized)		62,652			58,238			51,632

Total securities		66,307			62,100			56,049
Trading assets		6,276			9,860			6,001
Loans		37,808			37,867			36,689
Allowance for loan losses		(498	)		(534	)		(503	)

Net loans		37,310			37,333			36,186
Premises and equipment		1,693			1,677			1,602
Accrued interest receivable		508			580			639
Goodwill		18,042			18,073			16,249
Intangible assets		5,696			5,818			5,588
Other assets		18,790			19,315			16,737
Assets of discontinued operations		278			310			2,242

Subtotal assets of operations		232,493			239,552			212,224
Assets of consolidated asset management funds, at fair value:
Trading assets		14,121			14,149			-
Other assets		645			456			-

Subtotal assets of consolidated asset management funds, at fair value		14,766			14,605			-

Total assets	$	247,259		$	254,157		$	212,224

Liabilities
Deposits:
Noninterest-bearing (principally domestic offices)	$	38,703		$	37,247		$	33,477
Interest-bearing deposits in domestic offices		37,937			35,141			32,944
Interest-bearing deposits in foreign offices		68,699			76,593			68,629

Total deposits		145,339			148,981			135,050
Federal funds purchased and securities sold under repurchase agreements		5,602			3,301			3,348
Trading liabilities		6,911			10,102			6,396
Payables to customers and broker-dealers		9,962			10,895			10,721
Commercial paper		10			9			12
Other borrowed funds		2,858			2,220			477
Accrued taxes and other expenses		6,164			5,540			4,484
Other liabilities (including allowance for lending related commitments of $73, $74 and $125)		7,176			10,100			3,891
Long-term debt		16,517			16,720			17,234
Liabilities of discontinued operations		-			-			1,608

Subtotal liabilities of operations		200,539			207,868			183,221
Liabilities of consolidated asset management funds, at fair value:
Trading liabilities		13,561			13,397			-
Other liabilities		2			1			-

Subtotal liabilities of consolidated asset management funds, at fair value		13,563			13,398			-

Total liabilities		214,102			221,266			183,221

Temporary equity
Redeemable noncontrolling interests		92			41			-
Permanent equity
Common stock-par value $0.01 per common share; authorized 3,500,000,000 common shares; issued 1,244,608,989, 1,243,448,825 and 1,208,861,641 common shares		12			12			12
Additional paid-in capital		22,885			22,808			21,917
Retained earnings		10,898			10,386			8,912
Accumulated other comprehensive loss, net of tax		(1,355	)		(969	)		(1,835	)
Less: Treasury stock of 3,078,794, 2,994,416 and 1,026,927 common shares, at cost		(86	)		(84	)		(29	)

Total The Bank of New York Mellon Corporation shareholders’ equity		32,354			32,153			28,977
Nonredeemable noncontrolling interests		12			20			26
Nonredeemable noncontrolling interests of consolidated asset management funds		699			677			-

Total permanent equity		33,065			32,850			29,003

Total liabilities, temporary equity and permanent equity	$	247,259		$	254,157		$	212,224

Discontinued operations

On Jan. 15, 2010, BNY Mellon sold Mellon United National Bank (“MUNB”), a national bank subsidiary located in Florida. We have applied discontinued operations accounting to this business. The income statements for all periods in this Earnings Release are presented on a continuing operations basis. In the fourth quarter of 2010, we recorded an after-tax loss on discontinued operations of $11 million, primarily reflecting lower of cost or market write-downs on the retained MUNB loans held for sale.

Consolidated net income (loss) applicable to common shareholders, including discontinued operations

Net income applicable to common shareholders, including discontinued operations, totaled $679 million, or $0.54 per common share in the fourth quarter of 2010, compared with $593 million, or $0.49 per common share, in the fourth quarter of 2009 and net income of $622 million, or $0.51 per common share, in the third quarter of 2010.

Supplemental information – Explanation of Non-GAAP financial measures

BNY Mellon has included in this release certain Non-GAAP financial measures based upon tangible common shareholders’ equity. BNY Mellon believes that the ratio of tangible common shareholders’ equity to tangible assets of operations is a measure of capital strength that provides additional useful information to investors, supplementing the Tier 1 capital ratio which is utilized by regulatory authorities. Unlike the Tier 1 capital ratio, the tangible common shareholders’ equity ratio fully incorporates those changes in investment securities valuations which are reflected in total shareholders’ equity. In addition, this ratio is expressed as a percentage of the actual book value of assets, as opposed to a percentage of a risk-based reduced value established in accordance with regulatory requirements, although BNY Mellon in its calculation has excluded certain assets which are given a zero percent risk-weighting for regulatory purposes. This ratio is also informative to investors in BNY Mellon’s common stock because, unlike the Tier 1 capital ratio, it excludes trust preferred securities issued by BNY Mellon. Further, BNY Mellon believes that the return on tangible common equity measure, which excludes goodwill and intangible assets net of deferred tax liabilities, is a useful additional measure for investors because it presents a measure of BNY Mellon’s performance in reference to those assets which are productive in generating income.

BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding. BNY Mellon has presented revenue measures which exclude the effect of net securities gains (losses) and noncontrolling interests related to consolidated asset management funds; and expense measures which exclude special litigation reserves taken in the first quarter of 2010, the FDIC special assessment, restructuring charges, M&I expenses and amortization of intangible assets expenses; and measures which utilize net income excluding tax items such as benefit of tax settlements. Return on equity measures and operating margin measures which exclude some or all of these items are also presented. BNY Mellon believes that these measures are useful to investors because they permit a focus on period to period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon’s control. The excluded items in general relate to situations where accounting rules require certain ongoing charges as a result of prior transactions, or where valuation or other accounting/regulatory requirements require charges unrelated to operational initiatives. M&I expenses primarily relate to the Acquisitions which were consummated in the third quarter of 2010 and the merger with Mellon Financial Corporation in 2007. M&I expenses generally continue for approximately three years after the transaction, and can vary on a year-to-year basis depending on the stage of the integration. BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon’s business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased, typically after approximately three years. Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded. With regards to the exclusion of net securities gains (losses), BNY Mellon’s primary businesses are Asset and Wealth Management and Institutional Services. The management of these businesses is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY

Mellon’s investment securities portfolio. The investment securities portfolio is managed within the Other group of businesses. The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellon’s processing businesses. BNY Mellon does not generally originate or trade the securities in the investment securities portfolio. With regards to higher yields related to the restructured investment securities portfolio, client deposits serve as the primary funding source for our investment securities portfolio and we typically allocate all interest revenue to the businesses generating the deposits. Accordingly, the higher yield related to the restructured investment securities portfolio has been included in the results of our businesses. Restructuring charges relate to migrating positions to global growth centers and the elimination of certain positions.

Excluding the benefit of tax settlements permits investors to calculate the tax impact of BNY Mellon’s primary businesses. The presentation of financial measures excluding special litigation reserves in the first quarter of 2010 provides investors with the ability to view performance metrics on the basis that management views results. The presentation of income of consolidated asset management funds, net of noncontrolling interests related to the consolidation of certain asset management funds, permits investors to view revenue on a basis consistent with prior periods. BNY Mellon believes that these presentations, as a supplement to GAAP information, gives investors a clearer picture of the results of its primary businesses.

In this Earnings Release, certain amounts are presented on an FTE basis. We believe that this presentation provides comparability of amounts arising from both taxable and tax exempt sources, and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.

Each of these measures as described above is used by management to monitor financial performance, both on a company-wide and business-level basis.



Income from consolidated asset management funds, net of noncontrolling interests (in millions)		4Q10		3Q10			4Q09		2010			2009

Operations of consolidated asset management funds		$ 59		$ 37			$ -		$ 226			$ -
Less: Noncontrolling interests of consolidated asset management funds		14		(12	)		-		59			-

Income from consolidated asset management funds, net of noncontrolling interests		$ 45		$ 49			$ -		$ 167			$ -




Income from consolidated asset management funds, net of noncontrolling interests – previously disclosed as (in millions)		4Q10		3Q10			4Q09		2010			2009

Asset and wealth management revenue		$ 35		$ 36			$ -		$ 125			$ -
Investment and other income		10		13			-		42			-

Total		$ 45		$ 49			$ -		$ 167			$ -




Asset servicing revenue (in millions)						4Q10		3Q10			4Q09

Asset servicing revenue							$914		$ 870			$ 650
Less: Securities lending fee revenue							37		38			29

Asset servicing revenue excluding securities lending fee revenue							$877		$ 832			$ 621




Asset and wealth management fee revenue								4Q10 vs.
(dollars in millions)	4Q10		3Q10			4Q09		4Q09			3Q10

Asset and wealth management fee revenue		$800		$ 696			$ 746		7	%		15	%
Less: Performance fees		73		16			59
Add: Revenue from consolidated asset management funds, net of noncontrolling interests		35		36			-

Asset and wealth management fee revenue excluding performance fees		$ 762		$ 716			$ 687		11	%		6	%



Reconciliation of income (loss) from continuing operations before income taxes – pre-tax operating margin
(dollars in millions)	4Q10		3Q10		4Q09		2010		2009

Income (loss) from continuing operations before income taxes – GAAP	$ 970		$ 834		$672		$3,694		$(2,208	)
Less: Net securities gains (losses)	1		6		15		27		(5,369	)
Noncontrolling interests of consolidated asset management funds	14		(12	)	-		59		-
Add: Special litigation reserves	N/A		N/A		N/A		164		N/A
FDIC special assessment	-		-		-		-		61
Asset-based taxes	-		-		-		-		20
Restructuring charges	21		15		139		28		150
M&I expenses	43		56		52		139		233
Amortization of intangible assets	115		111		107		421		426

Income (loss) from continuing operations before income taxes excluding net securities gains (losses), noncontrolling interests of consolidated asset management funds, special litigation reserves, FDIC special assessment, asset-based taxes, restructuring charges, M&I expenses and amortization of intangible assets – Non-GAAP	$1,134		$1,022		$955		$4,360		$4,051

Fee and other revenue – GAAP	$2,972		$2,668		$2,577		$10,724		$4,739
Income of consolidated asset management funds – GAAP	59		37		-		226		-
Net interest revenue – GAAP	720		718		724		2,925		2,915

Total revenue – GAAP	3,751		3,423		3,301		13,875		7,654
Less: Net securities gains (losses)	1		6		15		27		(5,369	)
Noncontrolling interests of consolidated asset management funds	14		(12	)	-		59		-

Total revenue excluding net securities gains (losses) and noncontrolling interests of consolidated asset management funds – Non-GAAP	$3,736		$3,429		$3,286		$13,789		$13,023

Pre-tax operating margin (a)	26	%	24	%	20	%	27	%	N/M
Pre-tax operating margin excluding net securities gains (losses), noncontrolling interests of consolidated asset management funds, special litigation reserves, FDIC special assessment, asset-based taxes, restructuring charges, M&I expenses and amortization of intangible assets – Non-GAAP (a)	30	%	30	%	29	%	32	%	31	%

(a)

Income (loss) before taxes divided by total revenue.

N/A – Not applicable.

N/M – Not meaningful.



Return on common equity and tangible common equity – continuing operations
(dollars in millions)		4Q10			3Q10			4Q09			2010			2009

Net income (loss) applicable to common shareholders of The Bank of New York Mellon Corporation - GAAP	$	679		$	622		$	593		$	2,518		$	(1,367	)
Less: Loss from discontinued operations, net of tax		(11	)		(3	)		(119	)		(66	)		(270	)

Net income (loss) from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation		690			625			712			2,584			(1,097	)
Add: Amortization of intangible assets		72			70			66			264			265

Net income (loss) from continuing operations applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets – Non-GAAP		762			695			778			2,848			(832	)
Less: Net securities gains (losses)		-			4			31			17			(3,360	)
Add: Special litigation reserves		N/A			N/A			N/A			98			N/A
FDIC special assessment		-			-			-			-			36
Restructuring charges		15			8			86			19			94
M&I expenses		29			37			33			91			144
Discrete tax benefits / benefit of tax settlements		-			-			(133	)		-			(267	)

Net income from continuing operations excluding amortization of intangible assets, net securities gains (losses), special litigation reserves, FDIC special assessment, restructuring charges, M&I expenses and discrete tax benefit / benefit of tax settlements – Non-GAAP	$	806		$	736		$	733		$	3,039		$	2,535

Average common shareholders’ equity	$	32,379		$	31,868		$	28,843		$	31,361		$	27,198
Less: Average goodwill		18,073			17,798			16,291			17,029			16,042
Average intangible assets		5,761			5,956			5,587			5,678			5,654
Add: Deferred tax liability – tax deductible goodwill		816			763			720			816			720
Deferred tax liability – non-tax deductible intangible assets		1,625			1,634			1,680			1,625			1,680

Average tangible common shareholders’ equity – Non-GAAP	$	10,986		$	10,511		$	9,365		$	11,095		$	7,902

Return on common equity– GAAP (a)		8.5	%		7.8	%		9.8	%		8.2	%		N/M
Return on common equity excluding amortization of intangible assets, net securities gains (losses), special litigation reserves, FDIC special assessment, restructuring charges, M&I expenses and discrete tax benefit / benefit of tax settlements – Non-GAAP (a)		9.9	%		9.2	%		10.1	%		9.7	%		9.3	%

Return on tangible common equity – Non-GAAP (a)		27.5	%		26.3	%		33.0	%		25.7	%		N/M
Return on tangible common equity excluding net securities gains (losses), special litigation reserves, FDIC special assessment, restructuring charges, M&I expenses and discrete tax benefits / benefit of tax settlements – Non-GAAP (a)		29.1	%		27.8	%		31.1	%		27.4	%		32.1	%

(a)

Annualized.

N/A – Not applicable.

N/M – Not meaningful.



Equity to assets and book value per common share (dollars in millions, unless otherwise noted)	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009

Common shareholders’ equity at period end - GAAP		$ 32,354			$ 32,153			$ 28,977
Less: Goodwill		18,042			18,073			16,249
Intangible assets		5,696			5,818			5,588
Add: Deferred tax liability – tax deductible goodwill		816			763			720
Deferred tax liability – non-tax deductible intangible assets		1,625			1,634			1,680

Tangible common shareholders’ equity at period end – Non-GAAP		$ 11,057			$ 10,659			$ 9,540

Total assets at period end - GAAP		$247,259			$254,157			$212,224
Less: Assets of consolidated asset management funds		14,766			14,605			-

Subtotal assets of operations – Non-GAAP		232,493			239,552			212,224
Less: Goodwill		18,042			18,073			16,249
Intangible assets		5,696			5,818			5,588
Cash on deposit with the Federal Reserve and other central banks (a)		18,566			15,750			7,375

Tangible assets of operations at period end – Non-GAAP		$190,189			$199,911			$183,012

Common shareholders’ equity to total assets – GAAP		13.1	%		12.7	%		13.7	%
Tangible common shareholders’ equity to tangible assets of operations – Non-GAAP		5.8	%		5.3	%		5.2	%

Period end common shares outstanding (in thousands)		1,241,530			1,240,454			1,207,835

Book value per common share		$ 26.06			$ 25.92			$ 23.99
Tangible book value per common share – Non-GAAP		$ 8.91			$ 8.59			$ 7.90

(a)

Assigned a zero percent risk weighting by the regulators.



Calculation of Tier 1 common equity to risk-weighted assets ratio (a) (dollars in millions)	Dec. 31, 2010			Sept. 30, 2010			Dec. 31, 2009

Total Tier 1 capital		$ 13,598			$ 13,026			$ 12,883
Less: Trust preferred securities		1,676			1,680			1,686

Total Tier 1 common equity		$ 11,922			$ 11,346			$ 11,197

Total risk-weighted assets		$101,224			$106,362			$106,328

Tier 1 common equity to risk-weighted assets ratio		11.8	%		10.7	%		10.5	%

(a)

On a regulatory basis using Tier 1 capital as determined under BASEL I guidelines.

Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements on expectations with respect to settlement with the Internal Revenue Service. These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to, among other things, our ability to meet the proposed new capital standards. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this earnings release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon’s control). Factors that could cause BNY Mellon’s results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon’s Annual Report on Form 10-K for the year ended Dec. 31, 2009, BNY Mellon’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 and its other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of Jan. 19, 2011 and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

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