Mellon Financial and The Bank of New York

Harvard Business School Case 208129

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Exhibit 1 Largest Diversified U.S. Depository Institutions,
December 31, 2005

Total Assets
Rank Company ($ millions)

1 Citigroupa 1,494,037
2 Bank of America 1,291,803
3 JPMorgan Chasea 1,198,942
4 Wachovia 520,755
5 Wells Fargo 481,741
6 Washington Mutual 343,573
7 U.S. Bankcorp 209,465
8 Suntrust Banks 179,713
9 National City 142,397
10 BB&T 109,170
11 Fifth Third 105,225
12 The Bank of New Yorka 102,074
13 State Streeta 97,968
14 KeyBank (Keycorp) 93,126
15 PNC Financial 91,954
16 Capital One 88,701
17 Regions Financial 84,786
18 Sovereign 63,679
19 M & T Bank 55,146
20 Northern Trusta 53,414
21 Comerica 53,013
22 Union Bank of California 49,416
23 Marshall & Isley 46,213
24 Zions 42,780
25 Mellon Financiala 38,678
26 Commerce 38,466

Source: CRSP, Standard & Poor's Compustat, company records.

a
Significant income from asset servicing.
Exhibit 2 Financial Highlights for U.S. Diversified Depository Institutions, Fiscal Year Ended December 31, 2005 (in millions, except per-share
data)

Asset servicing banks

The Bank of State Northern Bank of JPMorgan
New York Mellon Street Trust Citigroup America Chase Wachovia Wells Fargo

Net Interest Incomea 1,909 485 907 661 39,345 30,737 19,831 13,681 18,504
Fee and Other Income 4,890 4,027 4,550 1,954 44,255 26,438 34,702 12,219 14,431
Provision for Loan Losses 15 19 0 3 7,929 4,014 3,483 249 2,383
Salaries & Benefits 2,532 1,764 2,231 965 25,772 15,054 18,255 9,671 10,455
Other Operating Expenses 1,934 1,638 1,810 770 15,507 9,428 12,202 3,733 5,873
Income Taxes 796 433 487 303 9,078 8,015 3,732 3,033 3,877

Net Income 1,571 912 838 584 19,738 16,447 8,470 6,643 7,671
Total Loans 40,726 6,573 6,482 19,966 583,503 573,791 384,948 259,015 310,837
Allowance for Loan Losses (411) (63) (18) (125) (9,782) (8,045) (7,090) (2,724) (3,871)
Investments 44,504 21,326 80,588 27,147 622,728 551,254 616,797 186,551 104,281
Other Assets 17,255 10,842 10,916 6,426 297,588 174,803 204,287 77,913 70,494
Total Assets 102,074 38,678 97,968 53,414 1,494,037 1,291,803 1,198,942 520,755 481,741

Deposits 64,424 26,074 59,646 38,520 592,595 634,670 554,991 324,894 314,450
Short-Term Borrowings 1,694 1,146 23,369 3,355 314,656 368,112 166,590 70,779 35,016
Long Term Debt 7,817 4,404 2,608 5,513 178,324 89,660 103,563 40,145 68,544
Other Liabilitiesb 18,263 2,852 5,978 2,426 295,925 97,828 266,587 34,476 23,071
Total Shareholders Equity 9,876 4,202 6,367 3,601 111,412 101,262 107,072 47,561 40,335
Total Liabilities & Equity 102,074 38,678 97,968 53,414 1,494,037 1,291,803 1,198,942 520,755 481,741

Shares Outstanding (FY–end) 771 415 334 218 4,980 4,000 3,487 1,557 1,678
Dividends per Share (FY 2005) 0.87 0.78 0.72 0.86 1.76 1.90 1.36 1.94 2.00
Earnings per Share 2.04 2.20 2.51 2.68 3.96 4.11 2.43 4.27 4.57
Shares Outstanding (9/30/06) 763 411 331 218 4,944 4,526 3,471 1,589 3,367

ROEc 17% 22% 14% 18% 18% 17% 8% 14% 20%

Efficiencyd 66% 76% 74% 66% 55% 46% 60% 52% 53%

Common stock (9/30/06)

- Closing Price 35.26 39.10 62.40 58.43 49.67 53.57 46.96 55.80 36.18
- 52-wk Averagee 33.40 35.51 60.13 54.77 48.16 47.87 42.11 54.60 33.03
- forward P/Ef 14 16 17 17 11 11 12 11 13
- Market Value of Equity 26,908 16,087 20,654 12,738 245,566 242,451 163,018 88,694 121,826
- 60-month Beta 1.41 1.27 1.16 1.23 1.19 0.52 1.59 0.77 0.38

Source: CRSP, Compustat, I/B/E/S, Worldscope.

a
In this exhibit, net interest income is reported before provisions for loan losses.
b
Other liabilities include non-equity reserves, minority interest in subsidiaries, and preferred stock.
c
ROE is measured as 2005 net income divided by book equity of common stock at 2004 fiscal year end.
d
A bank's "efficiency ratio" is its ratio of operating expenses to the total of gross interest income, less gross interest expense and provision for loan losses, and non-interest income.

e
The Wells Fargo 52-week average share price is adjusted for a stock split in August of 2006.
f
Forward P/E is the share price on 9/30/06 divided by the September 2006 consensus earnings-per-share forecast for fiscal year ending 2007.
Exhibit 4 Largest Asset Custodians, Worldwide, September
2006

Assets under Custody

Rank Manager ($ trillions)
1 JPMorgan Chase 12.9
2 The Bank of New York 12.2
3 State Street 11.3
4 Citigroup 9.6
5 Mellon Financial 4.4
6 BNP Paribas 4.3
7 Northern Trust 3.3
8 HSBC 3.0
9 UBS 2.8
10 U.S. Bancorp 2.3

Source: Lehman Brothers.

Exhibit 5 Largest Asset Managers, Worldwide, December 2005

Assets under
Management (AUM)
Rank Manager ($ billions)
1 UBS 2,016
2 Barclays Global Investors 1,513
3 Allianz Group 1,493
4 Fidelity 1,442
5 State Street 1,441
6 AXA Group 1,260
7 Capital Group 1,166
8 Credit Suisse 1,128
9 Deutsche Bank 1,027
10 BlackRock 991
11 Vanguard 958
12 Mellon Financial 856

Source: Lehman Brothers.

Exhibit 6 The Bank of New York Financial Information—Balance Sheets for Fiscal Years Ended
December 31 ($ millions)

2001 2002 2003 2004 2005

Assets

Cash and Due from Banks 3,222 4,748 3,843 3,886 3,515

Trading Account Securities 8,270 7,309 5,406 4,627 5,930

Mortgage Backed Securities 6,761 13,110 18,719 19,395 22,809
Federal Funds 4,795 1,385 4,829 5,708 2,425
Other Securities 6,101 5,190 4,908 5,241 4,696
Other Investments 6,619 5,104 8,286 8,192 8,644

Total Investments 32,546 32,098 42,148 43,163 44,504

Loans, Gross 35,747 31,339 35,283 35,781 40,726

Reserves for Loan Losses (616) (831) (668) (591) (411)

Property Plant & Equipment, Net 992 975 1,079 1,097 1,060
Total Other Assets 9,134 9,235 10,712 11,193 12,680

Total Assets 81,025 77,564 92,397 94,529 102,074

Liabilities

Deposits 55,711 55,387 56,406 58,721 64,424

Short-Term Debta 4,119 1,971 1,873 1,738 1,694
Long-Term Debt 4,976 4,730 6,121 6,121 7,817
Other Liabilitiesb 9,902 8,792 19,569 18,659 18,263
Total Liabilities 74,708 70,880 83,969 85,239 92,198

Total Common Equity 6,317 6,684 8,428 9,290 9,876

Total Liabilities & Equity 81,025 77,564 92,397 94,529 102,074

Source: Worldscope.
a
Short-term debt includes current portion of long-term debt.
b
Other liabilities include non-equity reserves, minority interest in subsidiaries, and preferred stock.
Exhibit 6 (continued) The Bank of New York Financial Information—Income
Statements for Fiscal Years Ended December 31 ($ millions, except per-share data)

2001 2002 2003 2004 2005

Interest Income 3,620 2,613 2,330 2,453 3,356

Interest Expense (1,939) (948) (721) (808) (1,447)
Provision for Loan Losses (375) (685) (155) (8) (15)

Net Interest Income 1,306 980 1,454 1,637 1,894

Foreign Exchange Income 206 165 193 255 274
Gains/Losses on Sale of Securities 154 (118) 35 59 97
Trading Account Income 132 69 134 109 117
Trust Income N/A N/A N/A N/A N/A
Commission & Fees 2,701 2,893 3,485 4,008 3,932
Other Operating Income 267 98 126 147 470

Total Fee and Other Income 3,460 3,107 3,973 4,578 4,890

Salaries and Benefits (1,588) (1,562) (2,002) (2,314) (2,532)

Other Operating Expenses (1,200) (1,170) (1,522) (1,760) (1,934)

Net Operating Income 1,978 1,355 1,903 2,141 2,318

Extraordinary and Other Income, Net 43 (19) (174) 15 5

Income before Tax 2,021 1,336 1,729 2,156 2,323

Income Taxes (715) (470) (605) (759) (796)

Equity in Earnings 37 36 33 43 44
Net Income 1,343 902 1,157 1,440 1,571

Earnings per Share 1.84 1.24 1.49 1.85 2.04

Shares Outstanding (FY end) 729 726 775 778 771
Dividends per Share (full year) 0.72 0.76 0.76 0.79 0.87

ROEa 22% 14% 17% 17% 17%

Efficiency Ratiob 58% 67% 65% 66% 66%
Prov. for Loss/Net Int. Inc. (before Loss) 22% 41% 10% 0% 1%
Fee and Other Income/Total Income 73% 76% 73% 74% 72%

Source: Standard & Poor's Compustat, Worldscope.

a
ROE is measured as 2005 net income divided by book equity of common stock at 2004 fiscal year end.
b
A bank's "efficiency ratio" is its ratio of operating expenses to the total of gross interest income, less gross
interest expense and provision for loan losses, and non-interest income.
Exhibit 7 Mellon Financial Information—Balance Sheets for Fiscal Years Ended December 31 ($
millions)

2001 2002 2003 2004 2005

Assets

Cash and Due from Banks 3,177 2,728 2,602 2,775 2,373

Trading Account Securities 638 792 266 262 269

Mortgage Backed Securities 8,438 10,364 9,757 11,053 12,936
Federal Funds 926 2,229 703 1,850 1,626
Other Securities 1,125 1,217 1 ,230 2,534 4,476
Other Investments 4,119 1,931 2,991 2,823 2,019

Total Investments 15,246 16,533 14,947 18,522 21,326

Loans, Gross 8,540 8,438 7,467 6,754 6,573

Reserves for Loan Losses (126) (127) (103) (98) (63)

Property Plant & Equipment, Net 631 704 668 688 656
Total Other Assets 6,892 7,955 8,402 8,474 7,813

Total Assets 34,360 36,231 33,983 37,115 38,678

Liabilities

Deposits 20,715 22,657 20,843 23,591 26,074

Short-Term Debta 1,395 2,185 1,300 1,888 1,146
Long-Term Debt 5,187 4,925 5,050 4,651 4,404
Other Liabilitiesb 3,581 3,069 3,088 2,883 2,852

Total Liabilities 30,878 32,836 30,281 33,013 34,476

Total Common Equity 3,482 3,395 3,702 4,102 4,202

Total Liabilities & Equity 34,360 36,231 33,983 37,115 38,678

Source: Worldscope.

a
Short-term debt includes current portion of long-term debt.
b
Other liabilities include non-equity reserves, minority interest in subsidiaries, and preferred stock.
Exhibit 7 (continued) Mellon Financial Information—Income Statements for Fiscal Years
Ended December 31 ($ millions, except per-share data)

2001 2002 2003 2004 2005

Interest Income 1,397 1,056 917 862 1,159

Interest Expense (823) (446) (348) (404) (674)
Provision for Loan Losses 4 (172) (7) 11 (19)

Net Interest Income 578 438 562 469 466

Foreign Exchange Income 194 146 147 185 202

Gains/Losses on Sale of Securities N/A 59 62 8 1
Trading Account Income N/A N/A N/A N/A N/A
Trust Income 1,091 1,574 1,484 1,497 778
Commission & Fees 1,711 1,883 1,863 2,063 2,848
Other Operating Income 42 24 83 151 198

Total Fee and Other Income 3,038 3,686 3,639 3,904 4,027

Salaries and Benefits (1,528) (1,865) (1,848) (1,963) (1,764)

Other Operating Expenses (1,033) (1,243) (1,287) (1,356) (1,638)

Net Operating Income 1,055 1,016 1,066 1,054 1,091

Extraordinary and Other Income, Net -- 5 (72) 36 182

Income before Tax 1,055 1,021 994 1,090 1,273
Income Taxes (239) (326) (311) (357) (433)

Equity in Earnings (380) (28) (6) 67 72

Net Income 436 667 677 800 912

Earnings per Share 0.98 1.55 1.59 1.89 2.20

Shares Outstanding (FY end) 447 431 427 423 415
Dividends per Share (full year) 0.82 0.49 0.57 0.7 0.78

ROEa 11% 19% 20% 22% 22%

Efficiency Ratiob 71% 75% 75% 76% 76%
Prov. for Loss/Net Int. Inc. (before Loss) -1% 28% 1% -2% 4%
Fee and Other Income/Total Income 84% 89% 87% 89% 90%

Source: Standard & Poor's Compustat, Worldscope.

a
ROE is measured as 2005 net income divided by book equity of common stock at 2004 fiscal year end.
b
A bank's "efficiency ratio" is its ratio of operating expenses to the total of gross interest income, less gross interest
expense and provision for loan losses, and non-interest income.
Exhibit 9 Business Unit Performance for Mellon Financial and The Bank of New York, Fiscal Year Ending 2005 and Change from 2004 ($ millions and
percent change)

Asset Management Asset Servicing Retail Other Totald

The Bank of New Yorka

Private Bank and Asset Retail and Middle Corporate and

Management Institutional Services Market Other
2005 %Δ 2005 %Δ 2005 %Δ 2005 %A 2005 %A
Revenueb 519 9 5,368 10 895 3 83 67 6,865 9
Expensec 320 10 3,503 10 540 5 135 2 4,498 9
Income before taxes 199 7 1,865 10 355 0 –52 –34 2,367 10
Average assets 2,205 3 75,682 5 13,778 –9 9,770 0 101,435 2
Average AUM 105,000 3 48,000 40 N/A N/A N/A N/A 155,000 13
Average AUC N/A Ν/Α 10,900,000 12 N/A N/A N/A N/A 10,900,000 12

Mellon Financiala
Payment
Mellon Asset Private Wealth Solutions and
Management Management Asset Servicing Investor Services Other
2005 %Δ 2005 %Δ 2005 %Δ 2005 %Δ 2005 %Δ 2005 %Δ
Revenueb 1,894 16 572 7 1,065 22 692 –2 617 16 4,840 13
Expensec 1.389 14 333 5 843 21 527 4 344 11 3,436 13
Income before taxes 505 22 239 9 222 24 165 –16 273 25 1,404 14
Average assets 2,000 0 7,000 13 8,500 18 7,300 3 12,400 14 37,304 10
Average AUM 625,000 7 86 10 103,000 39 N/A N/A N/A N/A 781,000 11
Average AUC 3,000 -63 N/A N/A 3,874,000 21 N/A N/A N/A N/A 3,908,000 21

Source: Company annual reports.

a
Results are based on internal management accounting and do not correspond to exhibits that report results based on GAAP.
b
Where applicable, revenue is interest revenue after interest expense, i.e., net revenue.
c
Expenses include total operating expenses and credit quality expenses, but exclude taxes.
d
Totals of asset measures do not equal business unit sums.
Exhibit 10 Cost Synergy Spreadsheet

Synergies - Costs
Asset Mgmt (***) Total $ x% Target Target *** Principal Location ***
Personal Asset Mgmt 23 20 4.6 22 NYC Midtown 4.4
Inst. Asset Mgmt 10 80 8.0 32 NYC Midtown 5.0
Sales & Admin 23 80 18.4 38 NYC Midtown –
Product Mgmt 6 80 4.8 14 NYC Midtown –
Allocated Bonus 62 58 35.8 106 NYC Midtown –
4.0 9.4
39.8 18.8
Wealth Mgmt 83 20 16.6 85 NYC Midtown 6.0

Asset Servicing
Domestic (***) 831 15% 124.7 875 NYC Everett Tech 100 All other 30
Alternative Services 75 20% 15 75 Somerset NJ –
Eagle/Netik (*** Netik) [58]
FX & *** (Gtlobal/***) 122 20% 24.4 38 NY, London, Pitt 10
See Lending 48 30% 14.4 75 NYC, Pitt 10
Int'l Jr. Agency 144 15% 21.6 250(?) London Dubliln, Edinburgh, Manchester –
[Int'l Custody/JV's = opportunity: need to model]
Global Risk Services 17 100% 17 59 NYC, Wilshire –
1237 18% 217 1297 150
*** Services
Working Capital Solutions (Ex. Retail) 400 10% 40 400 NJ, Utica, Pitt
Institutional Banking (CRM) 83 30% 16.6 78 Pitt, NYC D Town
Financial Mkts/Cap Mkts 99 7.50% 7.9 25 Pitt, NYC D Town
582 11% 64 503
***

Source: Company records.

Exhibit 13 Phase-in of Projected Annual Cost Savings from Merger and Realization of
One-Time Merger-Related Charges

2007 (half
year) 2008 2009 2010

Annual cost savings realized ($ millions) 105 350 595 700

Percent of potential annual cost savings 15% 50% 85% 100%
One-time charges ($ millions)a 692 337 61 0

Source: The Bank of New York SEC filing (S-4), internal company reports.

a
Excludes a reserve of $210 million; three-year total including reserve is $1.3 billion.
Exhibit 16 Historical and Pro Forma Quarterly "Core" Earnings per Share for Two Exchange Rate Assumptions (Core EPS is before
one-time charges and is reported in $ per share; exchange ratios are in units of merged company shares per share of legacy
company)

Before Merger After Merger

2006 2007 2007
Q1 A Q2 A Q3 A Q4E QIE Q2E Q3E Q4E 2008 Ε 2009 Ε 2010 Ε

Actuals and forecasts, no merger

Bank of New York shareholders 0.55 0.59 0.56 0.55 0.57 0.61 0.59 0.64 2.59 2.88 3.20
Mellon Financial shareholders 0.49 0.55 0.53 0.56 0.58 0.61 0.59 0.65 2.68 2.97 3.30

BK exchange ratio = 1:0.9434

MEL exchange ratio = 1:1
without cost synergies
Bank of New York Shareholders 0.55 0.59 0.56 0.55 0.57 0.61 0.58 0.63 2.57 2.85 3.17
Mellon Financial Shareholders 0.49 0.55 0.53 0.56 0.58 0.61 0.61 0.67 2.72 3.02 3.36
with cost synergies
Bank of New York Shareholders 0.55 0.59 0.56 0.55 0.57 0.61 0.61 0.66 2.75 3.16 3.53
Mellon Financial Shareholders 0.49 0.55 0.53 0.56 0.58 0.61 0.64 0.70 2.91 3.35 3.75

BK exchange ratio = 1:0.8859

MEL exchange ratio = 1:1
without cost synergies
Bank of New York Shareholders 0.55 0.59 0.56 0.55 0.57 0.61 0.56 0.62 2.51 2.79 3.09
Mellon Financial Shareholders 0.49 0.55 0.53 0.56 0.58 0.61 0.64 0.69 2.83 3.14 3.49
with cost synergies
Bank of New York Shareholders 0.55 0.59 0.56 0.55 0.57 0.61 0.59 0.64 2.69 3.09 3.45
Mellon Financial Shareholders 0.49 0.55 0.53 0.56 0.58 0.61 0.67 0.72 3.03 3.49 3.90

Source: IBES consensus estimates as of November 16,2006; CRSP; casewriters' estimates.

Note: On Friday, December 1, 2006, the price of Bank of New York shares closed at $35.48, and the price of Mellon Financial shares closed at $40.05.
This exhibit assumes that The Bank of New York and Mellon have and maintain, respectively, 751.8 million and 411.9 million shares outstanding.
Exhibit 17 Large (>$1B) Mergers and Acquisitions in Banking Industry, January 2001 – September 2006

Value of
Transaction Acquisition Consideration
Announced Effective Acquirer Target ($ million) Premium Structure

Apr 2001 September 2001 First Union Corp Wachovia 13,132 7% Shares
Jul 2001 December 2001 Citizens Financial Group Mellon Financial—Retail Banking 2,100 N/A Cash
Sep 2002 April 2003 M&T Bank AIIFirst Financial 2,880 N/A Hybrid (31% cash)
Oct 2003 April 2004 Bank of America FleetBoston 49,261 43% Shares
Jan 2004 July 2004 JPMorgan Chase & Co Bank One 58,761 15% Shares
May 2004 October 2004 SunTrust Banks Inc, Atlanta National Commerce Financial 7,025 22% Hybrid (28% cash)
Jun 2004 November 2004 Wachovia Corp, Charlotte SouthTrust 14,156 20% Shares
Jun 2005 December 2005 Bank of the West Commercial Federal 1,340 34% Cash
Jun 2005 January 2006 Bank of America MBNA Corp 35,810 31% Hybrid (15% cash)
Jul 2005 December 2005 Zions Amegy Bancorp 1,690 4% Hybrid (35% cash)
Jul 2006 January 2007 National City Fidelity Bankshares 1,045 12% Hybrid (51% cash)

Source: SDC, company records.

Exhibit 18 Comparable "Mergers-of-Equals"

Relative Market Percentage

Announcement Values Prior to Ownership Post- Merged Company Management
Merging Banks Date Announcement Announcement Name Split Board Split Executive Officers

KeyCorp – Society Oct 1993 52% - 48% 52% - 48% KeyCorp 8-8 50% - 50% Chairman & CEO: KeyCorp President: Society
First Cliicago – NBD Jul 1995 51% – 49% 50% – 50% First Chicago NBD 8-8 50% - 50% Chairman: First Chicago President CEO: NBD
Cliemical – Cliase Aug 1995 59% - 41% 58% - 42% Chase 12 - 8 57% - 43% Chairman & CEO: Chemical President & COO: Chase
Travelers Group – Citicorp Apr 1998 52% - 48% 50% - 50% Citigroup 1-1 50% - 50% Co-CEOs: Travelers and Citicorp
NationsBank – BankAmerica Apr 1998 55% - 45% 55% - 45% BankAmerica 3-5 53% - 47% Chairman & CEO: NationsBank President: BankAmerica

Banc One – First Chicago NBD Apr 1998 62% - 38% 60% - 40% Bank One 6-8 50% - 50% Chairman: First Chicago President & CEO: Banc One
Norwest – Wells Fargo Jun 1998 49% - 51% 47% - 53% Wells Fargo 5-7 50% - 50% Chairman: Wells Fargo CEO: Norwest
First Union – Wachovia Apr 2001 74% - 26% 73% - 27% Wachovia 6-8 50% - 50% Chairman: Wachovia President & CEO: First Union
Regions Financial – Union Planters Jan 2004 59% - 41% 59% - 41% Regions Financial 8-5 50% - 50% Chairman & CEO: Regions CEO (June 2005) and Chairman
(June 2006): Union Planters
Regions Financial –AmSouth May 2006 62% - 38% 62% - 38% Regions Financial 3-2 57% - 43% Chairman: Regions President and CEO: AmSouth

Source: The Bank of New York SEC filing (S-4).

Exhibit 19 U.S. Interest Rates on December 1, 2006

Term Rate (annual %)

1 month 5.24
3 month 5.04
6 month 5.11
1 year 4.95
2 year 4.64
3 year 4.54
5 year 4.48
7 year 4.48
10 year 4.49
20 year 4.69
30 year 4.58

Source: Federal Reserve Statistical Release, Selected Interest Rates,

http://www.federalreserve.gov/releases/h15/data.htm, visited October 5, 2010.
Table reports Treasury constant maturity rates.