Bank of New York Co Inc – ‘10-Q’ for 3/31/07

On:  Wednesday, 5/9/07, at 3:59pm ET   ·   For:  3/31/07   ·   Accession #:  9626-7-165   ·   File #:  1-06152

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Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      79    454K 
 2: EX-12       Statement re: Computation of Ratios                    1      6K 
 3: EX-31       Exhibit 31.1                                           2±    10K 
 4: EX-31       Exhibit 31.2                                           2±    10K 
 5: EX-32       Exhibit 32.1                                           1      6K 
 6: EX-32       Exhibit 32.2                                           1      6K 

10-Q   —   Quarterly Report
Document Table of Contents

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THE BANK OF NEW YORK COMPANY, INC.  

Quarterly Report on Form 10-Q 
For the quarterly period ended March 31, 2007   

The Quarterly Report on Form 10-Q and cross reference index is on page 72.  

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THE BANK OF NEW YORK COMPANY, INC.  
FINANCIAL REVIEW  
TABLE OF CONTENTS 

   Consolidated Financial Highlights                               1

Management's Discussion and Analysis of Financial             
Condition and Results of Operations                           

    - Overview                                                     3
    - First Quarter 2007 Highlights                                5
    - Consolidated Income Statement Review                         6
    - Business Segment Review                                     12
    - Critical Accounting Policies                                26
    - Consolidated Balance Sheet Review                           30
    - Liquidity                                                   37
    - Capital Resources                                           40
    - Trading Activities                                          42
    - Asset/Liability Management                                  44
    - Statistical Information                                     45
    - Supplemental Information                                    46
    - Merger Agreement with Mellon Financial Corporation          48
    - Forward-Looking Statements and Risk Factors                 48
    - Mellon Transaction                                          49
    - Government Monetary Policies and Competition                50
    - Website Information                                         50

Consolidated Financial Statements                             
- Consolidated Balance Sheets                               
       March 31, 2007 and December 31, 2006                       51
- Consolidated Statements of Income                         
for the Three Months Ended                            
March 31, 2007, December 31, 2006,                    
       and March 31, 2006                                         52
- Consolidated Statement of Changes In                      
Shareholders' Equity for the Three                    
       Months Ended March 31, 2007                                53
- Consolidated Statements of Cash Flows                     
for the Three Months Ended                            
       March 31, 2007 and 2006                                    54
    - Notes to Consolidated Financial Statements                  55

Form 10-Q                                                     
    - Cover                                                       72
    - Controls and Procedures                                     73
    - Legal and Regulatory Proceedings                            73
    - Risk Factors                                                74
- Unregistered Sales of Equity Securities                   
       and Use of Proceeds                                        74
    - Exhibits                                                    75
    - Signature                                                   76

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                                THE BANK OF NEW YORK COMPANY, INC.                  
                                Consolidated Financial Highlights                   
                                           (Unaudited)                              
------------------------------------------------------------------------------------
                                                        Quarter ended               
                                              --------------------------------------
(dollar amounts in millions, except per       March 31,     Dec. 31,   March 31,    
share amounts and unless otherwise noted)          2007         2006        2006    
------------------------------------------------------------------------------------
                                                                                    
Reported Results:                                                                   
-----------------                                                                   

Net income                                    $    434      $  1,789    $    422    
Basic EPS                                         0.58          2.39        0.55    
Diluted EPS                                       0.57          2.36        0.55    

Continuing Operations:                                                              
----------------------                                                              

Key metrics                                                                         
-----------                                                                         
Noninterest income                            $  1,475      $  1,441    $  1,265    
Net interest income                                427           451         339    
                                              --------      --------    --------    
Total revenue                                 $  1,902      $  1,892    $  1,604    

Total expense                                    1,272         1,285       1,069    
Pre-tax operating margin                            34%           33%         33%   
Net interest margin                               2.18          2.27        1.95    
Net interest income on tax                                                          
  equivalent basis                            $    429      $    452    $    346    
Net income                                         437           427         360    
Basic EPS                                         0.58          0.57        0.47    
Diluted EPS                                       0.57          0.56        0.47    

Performance ratios                                                                  
------------------                                                                  
Return on average common equity                  15.70%        14.95%      14.75%   
Return on average common equity excluding                                           
  merger & integration costs                     16.06         15.36       14.75    
Return on average assets                          1.73          1.66        1.50    
Return on average assets excluding                                                  
  merger & integration costs                      1.78          1.70        1.50    

Return on average tangible common equity         39.20         36.45       27.97    
Return on average tangible common equity                                            
  excluding merger & integration costs           40.09         37.39       27.97    
Return on average tangible assets                 1.93          1.87        1.61    
Return on average tangible assets                                                   
  excluding merger & integration costs            1.98          1.92        1.61    

Selected average balances                                                           
-------------------------                                                           
Interest-earning assets                       $ 79,075      $ 79,841    $ 71,035    
Total assets                                   101,975       102,138      91,831    
Interest-bearing deposits                       43,862        44,344      41,263    
Noninterest-bearing deposits                    14,903        14,721      10,119    
Shareholders' equity                            11,277        11,340       9,888    

Employees                                       23,134        22,961      19,989    

Credit loss provision and net charge-offs                                           
-----------------------------------------                                           
Total provision                               $    (15)     $    (15)   $      -    
Total net (charge-offs)/recoveries                   3           (24)          4    

Loans                                                                               
-----                                                                               
Allowance for loan losses                                                           
  As a percent of total loans                     0.76%         0.76%       1.04%   
  As a percent of non-margin loans                0.87          0.88        1.24    
Total allowance for credit losses                                                   
  As a percent of total loans                     1.11          1.16        1.47    
  As a percent of non-margin loans                1.28          1.34        1.76    

Nonperforming assets                                                                
--------------------                                                                
Total nonperforming assets                    $     29      $     38    $     25    
Nonperformance assets ratio                        0.1%          0.1%        0.1%   

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                                THE BANK OF NEW YORK COMPANY, INC.                      
                                Consolidated Financial Highlights                       
                                           (Unaudited)                                  
------------------------------------------------------------------------------------    
                                                        Quarter ended                   
                                              --------------------------------------    
(dollar amounts in millions, except per       March 31,     Dec. 31,   March 31,        
share amounts and unless otherwise noted)          2007         2006        2006        
------------------------------------------------------------------------------------    
                                                                                        
Assets under Custody and Administration                                                 
---------------------------------------                                                 
  (in trillions) (1)                                                                    
--------------------                                                                    
Assets under Custody and Administration        $   13.8     $   13.0    $   11.3        
Equity securities                                    32%          33%         33%       
Fixed income securities                              68           67          67        
Cross-border assets                            $    5.0     $    4.7    $    3.7        

Assets under management (in billions) (2)                                               
-----------------------------------------                                               
Asset and wealth management                                                             
  Equity securities                            $     41     $     39    $     37        
  Fixed income securities                            22           21          21        
  Alternative investments                            33           33          26        
  Liquid assets                                      34           38          29        
                                               --------     --------    --------        
Asset and wealth management                    $    130     $    131    $    113        
Foreign exchange overlay                             12           11          11        
Securities lending short-term                                                           
  investment funds                                   54           48          49        
                                               --------     --------    --------        
Total assets under management                  $    196     $    190    $    173        
                                               ========     ========    ========        

Capital ratios                                                                          
--------------                                                                          
Tier 1 capital ratio                               8.43%        8.19%       8.28%       
Total capital ratio                               12.81        12.49       12.44        
Leverage ratio                                     6.80         6.67        6.51        
Adjusted tangible common equity ratio (3)          5.47         5.30        5.54        

Average shares outstanding (in thousands)                                               
-----------------------------------------                                               
Basic                                           750,737      746,688     763,851        
Diluted                                         763,083      757,981     773,630        

Other                                                                                   
-----                                                                                   
Book value per common share                    $  15.20     $  15.34    $  13.09        
Tangible book value per common share               6.53         6.57        7.08        
Period-end shares outstanding                                                           
  (in thousands)                                758,324      755,861     771,561        

Dividends per share                            $   0.22     $   0.22    $   0.21        
Dividend yield                                     2.17%        2.24%       2.33%       
Closing common stock price per share           $  40.55     $  39.37    $  36.04        
Market capitalization (in billions)                30.8         29.8        27.8        

<FN>                                                                                    
Note:                                                                                   
   (1)  Estimated Assets under Custody and Administration include assets under          
        administration and safekeeping.                                                 
   (2)  Estimated                                                                       
   (3)  Includes deferred tax liabilities of $154 million for the first quarter of 2007,
        $164 million for the fourth quarter of 2006, and $20 million for the first      
        quarter of 2006 related to non-tax deductible identifiable intangible assets.   

</FN>                                                                                   

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION       
AND RESULTS OF OPERATIONS ("MD&A")                                              

The Bank of New York Company, Inc.'s (the "Company") actual results   
of future operations may differ from those estimated or anticipated in          
certain forward-looking statements contained herein for reasons which           
are discussed below and under the heading "Forward-Looking Statements           
and Risk Factors." When used in this report words such as "estimate,"           
"forecast," "project," "anticipate," "confident," "target," "expect,"           
"intend," "think," "continue," "seek," "believe," "plan," "goal,"               
"could," "should," "may," "will," "strategy," "highly attractive,"              
"rapidly evolving financial markets," "synergies," "opportunities,"             
"superior returns," "well-positioned," "trends," "pro forma" and words          
of similar meaning, signify forward-looking statements in addition to           
statements specifically identified as forward-looking statements. In            
addition, certain business terms used in this document are defined in           
the Company's 2006 Annual Report on Form 10-K.                                  

OVERVIEW                                                                        

The Company's Businesses                                                        

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 wealth management.  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 (the "Bank"), 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.        

The Company's strategy over the past decade has been to focus on      
highly scalable, fee-based securities servicing and fiduciary                   
businesses, and it has achieved top three market share in most of its           
major product lines.  The Company distinguishes itself competitively by         
offering one of the industry's broadest array of products and services          
around the investment lifecycle.  These include:                                

*  advisory and asset management services to support the investment             
decision;                                                                 
*  custody, securities lending, accounting, and administrative                  
services for investment portfolios;                                       
*  clearance and settlement capabilities and trade and foreign                  
exchange execution;                                                       
*  sophisticated risk and performance measurement tools for analyzing           
portfolios; and                                                           
*  services for issuers of both equity and debt securities.                     

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By providing integrated solutions for clients' needs, the Company     
strives to be the preferred partner in helping its clients succeed in           
the world's rapidly evolving financial markets.                                 

The Company's long-term financial objectives include:                 

*  achieving positive operating leverage over an economic cycle; and            
*  sustaining top-line growth by expanding client relationships and             
winning new ones.                                                         

To achieve its long-term objectives, the Company has grown both       
through internal reinvestment as well as execution of strategic                 
acquisitions to expand product offerings and increase market share in           
its scale businesses.  Internal reinvestment occurs through increased           
technology spending, staffing levels, marketing/branding initiatives,           
quality programs, and product development.  The Company consistently            
invests in technology to improve the breadth and quality of its product         
offerings, and to increase economies of scale.  The Company has acquired        
over 90 businesses over the past ten years, almost exclusively in its           
securities servicing and asset management areas.                                

The Company has taken recent actions that have significantly          
transformed the Company.  During 2006 the Company:                              

*  Agreed to merge with Mellon Financial Corporation ("Mellon"), a              
global leader in asset management and securities servicing                
*  Sold its retail and regional middle market banking businesses                
("Retail Business")                                                       
*  Purchased the corporate trust business (the "Acquired Corporate              
Trust Business") of JPMorgan Chase & Co. ("JPMorgan Chase")               
*  Formed a joint venture known as BNY ConvergEx Group, LLC, a trade            
execution and investment technology firm                                  

As part of the transformation to a leading securities servicing         
provider, the Company has also de-emphasized or exited several of its           
slower growth traditional banking businesses over the past decade.  The         
Company's more significant actions include selling its credit card              
business in 1997 and its factoring business in 1999, significantly              
reducing non-financial corporate credit exposures, and most recently, the       
sale of the Company's Retail Business.  To the extent these actions             
generated capital, the capital has been reallocated to the Company's            
higher-growth businesses or used to repurchase shares.                          

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The Company's business model is well positioned to benefit from a     
number of long-term secular trends.  These include:                             

*  growth of worldwide financial assets,                                        
*  globalization of investment activity,                                        
*  structural market changes, and                                               
*  increased outsourcing.                                                       

These trends benefit the Company by driving higher levels of          
financial asset trading volume and other transactional activity, as well        
as higher asset price levels and growth in client assets, all factors by        
which the Company prices its services.  In addition, international              
markets offer excellent growth opportunities.                                   

FIRST QUARTER 2007 HIGHLIGHTS                                                   

The Company reported first quarter net income of $434 million and     
diluted earnings per share of 57 cents.  On an adjusted basis, excluding        
merger and integration costs, first quarter net income was $449 million         
and diluted earnings per share was 59 cents.  This compares to net income       
of $422 million, or 55 cents of diluted earnings per share, and income          
from continuing operations of $360 million, or 47 cents of diluted              
earnings per share, in the first quarter of 2006.                               

Performance highlights for the quarter include:                                 

*  Asset servicing revenue grew 17% over the first quarter of 2006,             
driven by custody, fund services, and broker-dealer services;             
*  Asset and wealth management fees were up 20% over the first quarter          
of 2006 reflecting organic growth;                                        
*  Issuer services results were strong following the seasonally robust          
fourth quarter;                                                           
*  Asset quality remained excellent;                                            
*  Good expense discipline drove positive operating leverage.                   

In the first quarter of 2007, the Company continued its strong        
momentum and achieved broad-based growth. The performance reflected the         
strength of the Company's business model, which has been built to benefit       
from global capital flows and investor activity. The Company benefited          
from active capital markets and the increase in net new business remains        
favorable.                                                                      

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CONSOLIDATED INCOME STATEMENT REVIEW                                            

Noninterest Income                                                              
------------------                                                              

Continuing Operations                                                           
---------------------                                                           

                                                                [Download Table]

                                                      Percent Inc/(Dec)         
                                                      -----------------         
                                                      1Q07 vs.  1Q07 vs.        
(In millions)                      1Q07   4Q06   1Q06    4Q06      1Q06         
                                 ------ ------ ------ --------  -------         
                                                                                
Securities servicing fees                                                       
  Asset servicing                $  393 $  355 $  335      11%      17%         
  Issuer services                   319    340    154      (6)     107          
  Clearing services                 278    263    342       6      (19)         
                                 ------ ------ ------                           
Securities servicing fees           990    958    831       3       19          
Global payment services              50     51     51      (2)      (2)         
Asset & wealth                                                                  
  management fees                   153    154    127      (1)      20          
Performance fees                     14     18      7     (22)     100          
Financing-related fees               52     61     63     (15)     (17)         
Foreign exchange and                                                            
  other trading activities          128     98    113      31       13          
Securities gains/(losses)             2      2     (4)      -      150          
Asset/investment income              35     47     34     (26)       3          
Other(1)                             51     52     43      (2)      19          
                                 ------ ------ ------                           
Total noninterest income         $1,475 $1,441 $1,265       2       17          
                                 ====== ====== ======                           
<FN>                                                                            
 (1) Includes net economic value payments of $25 million and $23 million for the
     first quarter of 2007 and the fourth quarter of 2006.                      
</FN>                                                                           

The results of many of the Company's businesses are influenced by     
customer activities that vary by quarter. For instance, consistent with         
an overall decline in securities industry activity in the summer, the           
Company typically experiences a seasonal decline in the third quarter.          
The Company also experiences seasonal increases in securities lending           
and depositary receipts reflecting European dividend distribution during        
the second quarter of the year, and to a lesser extent, in the fourth           
quarter of the year.                                                            

The increase in noninterest income versus the year-ago quarter        
primarily reflects growth in securities servicing, asset and wealth             
management and foreign exchange and other trading activities.  The first        
quarter of 2007 and the fourth quarter of 2006 reflect the new business         
mix including higher revenue from the Acquired Corporate Trust Business         
partially offset by the BNY ConvergEx transaction.  The sequential-             
quarter increase in noninterest income primarily reflects growth in             
securities servicing fees and foreign exchange and other trading                
revenues.                                                                       

Securities servicing fees increased over the first quarter period     
of 2006 reflects strong growth in asset servicing and issuer services.          
Securities servicing fees were up sequentially reflecting growth in             
asset servicing and clearing services.  See "Institutional Services             
Segment" in "Business Segment Review" for additional details.                   

Global payment services fees were down slightly from the first and    
fourth quarters of 2006. Compared with the first quarter of 2006, the           
level of fees has been impacted by customers paying with a higher value         
of compensatory balances in lieu of fees.  Global payment services              
includes fees related to funds transfer, cash management, and liquidity         
management.                                                                     

Asset and wealth management fees increased from the first quarter     
of 2006 primarily due to growth in assets under management, notably in          
alternative investments, as well as the acquisition of Urdang, a real           
estate investment management company, in March of last year.  Total             
assets under management for asset and wealth management were $130               
billion at March 31,                                                            

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2007, up from $113 billion at March 31, 2006 and essentially unchanged from     
December 31, 2006.                                                              

Performance fees were up from a year-ago quarter reflecting strong      
results at two of the Company's alternative asset management                    
subsidiaries, Ivy Asset Management and Alcentra. The sequential-quarter         
decline primarily reflects the robust fourth quarter in performance             
fees.                                                                           

Financing-related fees decreased from a year-ago quarter and fourth   
quarter of 2006 reflecting a lower level of credit-related activities           
consistent with the Company's strategic direction.  Finance-related fees        
include capital markets and investment banking fees, loan commitment            
fees and credit-related trade fees.                                             

Foreign exchange and other trading revenues were up sequentially      
and from the first quarter of 2006 reflecting an increase in other              
trading activities driven by interest rate derivatives and hedging              
transactions. Foreign exchange revenue increased on a sequential quarter        
basis consistent with higher market volatility and volumes in late              
February and early March.  Foreign exchange results were down from the          
first quarter of 2006 reflecting lower market volatility.                       

Asset/investment income in the quarter reflected continued strong     
returns on investments in the sponsor fund portfolio.  Venture capital          
income was $17 million in the first quarter of 2007, down from $29              
million in the fourth quarter of 2006 and $23 million in the first              
quarter of 2006.  In the fourth quarter of 2006, the Company sold one of        
its sponsor fund investments to a third party for a realized gain of $11        
million.  Asset/investment income includes the gains and losses on              
private equity investments, income from insurance contracts, and lease          
residual gains and losses.                                                      

Other noninterest income is comprised of asset-related gains,         
equity investment income, net economic value payments, and other                
transactions.  Asset-related gains include loan and real estate                 
dispositions.  Equity investment income primarily reflects the                  
Company's proportionate share of the income from its investment in Wing         
Hang Bank Limited. Other income primarily includes low income housing,          
other investments and various miscellaneous revenues.                           

The breakdown among these four categories is shown below:                       

Other Noninterest Income                                                        

(In millions)                          1Q07     4Q06     1Q06                   
-------------------------------      -------  -------  -------                  
Asset-related gains                  $    12  $    19  $    34                  
Equity investment income                  13       11       11                  
Net economic value payments               25       23        -                  
Other                                      1       (1)      (2)                 
                   -------  -------  -------
Other noninterest income             $    51  $    52  $    43                  
                   =======  =======  =======

Other noninterest income decreased versus fourth quarter of 2006      
reflecting lower asset-related gains.  The first quarter 2007 results           
include net economic value payments of $25 million compared with $23            
million in the fourth quarter of 2006 on corporate trust deposits that          
have not yet transitioned to the Company's balance sheet.  The first            
quarter of 2006 included pre-tax gain of $31 million related to the             
conversion of the Company's New York Stock Exchange seats into cash and         
shares of NYSE Group, Inc. common stock. The fourth quarter 2006 results        
include a $6 million loss related to low-income housing investments.            

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Net Interest Income                                                             
-------------------                                                             

Continuing Operations                                                           
---------------------                                                           

                                                        [Enlarge/Download Table]

                                             Percent Inc/(Dec)                                
                                             -----------------                                
(Dollars in millions)                        1Q07 vs. 1Q07 vs.                                
                            1Q07  4Q06  1Q06   4Q06     1Q06                                  
                            ----  ----  ---- -------- --------                                
                                                                                              
Net interest income         $427  $451  $339   (5)%       26%                                 
Tax equivalent                                                                                
  adjustment(1)                2     1     7                                                  
                            ----  ----  ----                                                  
Net interest income                                                                           
 on a tax equivalent basis  $429  $452  $346   (5)        24                                  
                            ====  ====  ====                                                  

Net interest margin         2.18% 2.27% 1.95%                                                 

<FN>                                                                                          
(1) Selected items included in net interest income have been adjusted to a tax equivalent     
basis as shown above. To calculate the tax equivalent revenues and profit or loss, the Company
adjusts tax-exempt revenues and the income or loss from such tax-exempt revenues to show these
items as if they were taxable, applying an assumed tax rate of 35 percent. 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.                
</FN>                                                                                         

Net interest income and net interest margin increased from the        
first quarter of 2006 reflecting higher deposit balances associated             
with the Acquired Corporate Trust Business, as well as higher amounts           
of interest-earning assets and interest-free balances and the greater           
value of interest-free balances in a higher rate environment.                   

The sequential-quarter decrease in net interest income and net        
interest margin was driven by a lower volume of low cost deposits               
associated with the securities servicing business and fewer days in             
the quarter. Net interest margin was 2.18% in the first quarter of              
2007, compared with 1.95% in the first quarter of 2006 and 2.27% in             
the fourth quarter of 2006.                                                     

Net interest income does not reflect the impact of certain            
deposits of the Acquired Corporate Trust Business which are expected            
to transition to the Company's balance sheet in the second quarter of           
2007.  Pro forma for the inclusion of these deposits and the                    
associated economic value on these deposits, the net interest margin            
would have been approximately 2%.                                               

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Noninterest Expense and Income Taxes                                            
------------------------------------                                            

Continuing Operations                                                           
---------------------                                                           

                                                                [Download Table]


                                                           Percent Inc/(Dec)
                                                           -----------------
                                                           1Q07 vs. 1Q07 vs.
(In millions)                          1Q07   4Q06   1Q06   4Q06     1Q06   
                                      ------ ------ ------ -------- --------
                                                                            
Staff                                 $  720 $  736 $  604     (2)%     19% 
Net occupancy                             79     73     68      8       16  
Furniture and equipment                   50     45     51     11       (2) 
Clearing                                  37     38     50     (3)     (26) 
Sub-custodian expenses                    34     33     34      3        -  
Software                                  54     59     55     (8)      (2) 
Business development                      30     30     23      -       30  
Communications                            19     23     26    (17)     (27) 
Professional, legal and                                                     
  other purchased services               130    125     82      4       59  
Distribution and servicing                 4      5      4    (20)       -  
Amortization of intangibles               28     34     13    (18)     115  
Merger and integration costs              15     17      -    (12)      NM  
Other                                     72     67     59      7       22  
                                      ------ ------ ------                  
Total noninterest expense              1,272  1,285  1,069     (1)      19  
Merger and integration costs             (15)   (17)     -    (12)      NM  
                                      ------ ------ ------                  
Total noninterest expense excluding                                         
  merger and integration costs        $1,257 $1,268 $1,069     (1)      18  
                                      ====== ====== ======                  
<FN>                                                                        
NM - Not meaningful                                                         
</FN>                                                                       

Noninterest expense was up compared with the first quarter of 2006 and
down on a sequential-quarter basis.                                             

The decline in sequential quarter expenses reflects strong expense          
discipline across many of the Company's businesses.                             

* The decrease in staff expense reflects lower incentive compensation       
and pension expenses.                                                   
Staff expense is comprised of:                                      
- compensation expense, which includes                              
* base salary expense, primarily driven by headcount,       
* the cost of temporary help and overtime, and              
* severance expense;                                        
- incentive expense, which includes                                 
* additional compensation earned under a wide range of        
sales commission plans and incentive plans designed to    
reward a combination of individual, business unit and     
corporate performance versus goals, and                   
* stock option expense; and                                   
- employee benefit expense, primarily medical benefits, payroll     
taxes, pension and other retirement benefits.                   

* The increase in net occupancy primarily reflects the conversion of        
AIB/BNY Securities Servicing (Ireland) Ltd. ("AIB/BNY") to a            
wholly-owned subsidiary.                                                

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* The fourth quarter of 2006's amortization of intangibles included a       
$6 million impairment charge related to the write-off of customer       
intangibles.                                                            

* Other expense included transition services expense and other costs        
related to the Acquired Corporate Trust Business of $21 million in      
the current quarter and $22 million in the fourth quarter of 2006.      

* Merger and integration expense in the first quarter of 2007               
included $11 million related to the Acquired Corporate Trust            
Business and $4 million related to the anticipated merger with          
Mellon.                                                                 

The purchase of the Acquired Corporate Trust Business and the         
remaining 50% of AIB/BNY joint venture, along with the disposition of           
certain execution businesses in the BNY ConvergEx transaction,                  
significantly impacts comparisons of the first quarter of 2007 to the           
first quarter of 2006.  The net impact of these transactions was to             
increase staff expense, net occupancy, business development,                    
professional, legal, and other purchased services, amortization of              
intangibles, and other expense.  The BNY ConvergEx transaction also             
resulted in lower clearing expenses.                                            

The effective tax rate for the first quarter of 2007 was 32.2%,       
compared to 32.7% in the first quarter of 2006 and 31.4% in the fourth          
quarter of 2006.  The decrease from the first quarter of 2006 primarily         
reflects foreign sales corporation benefits for certain leverage leases.        
The sequential quarter increase reflects lower Section 29 tax credits           
related to synthetic fuel.                                                      

The Company's effective tax rate in the future is expected to be      
impacted by the price of oil, which determines the amount of synthetic          
fuel tax credits (Section 29 of the Internal Revenue Code) it will              
receive.  These credits relate to investments that produce alternative          
fuel from coal byproducts.                                                      

To manage its exposure in 2007 to the risk of an increase in oil      
prices that could reduce synthetic fuel tax credits, the Company entered        
into an option contract covering a specified number of barrels of oil           
that settles at the end of 2007.  The option contract economically hedges       
a portion of the Company's projected 2007 synthetic fuel tax credit             
benefit.  The contract does not qualify for hedge accounting and, as a          
result, changes in the fair value of the option will be recorded                
currently in trading income.  The Company may enter into further option         
contracts to protect against fluctuations in oil prices.                        

At March 31, 2007, the Company assumed a $73 average price per        
barrel after March 31, 2007 to estimate the 2007 benefit from synthetic         
fuel credits.  To the extent the average oil price differs from this            
assumption, the table below shows the estimated effect on earnings per          
share ("EPS") for 2007.                                                         

                                                        [Enlarge/Download Table]

          Avg. Price                                                                 
           Per Barrel                                  Option Contract               
      March 31, 2007 -    Phase-       Net Benefit     Benefit/ (Cost)     EPS       
     December 31, 2007    out %       (In millions)     (In millions)      Effect    
    --------------------  --------     -----------     ---------------     --------  
                                                                                     
           $ 67              8.4%       $ 52.1             $(1.5)          $ 0.02    
             69             18.8          46.2               1.5             0.02    
            ---------------------------------------------------------------------    
           | 73             40.0          34.1               7.7             0.01|(1)
            ---------------------------------------------------------------------    
             75             50.2          28.3              10.6             0.01    
             77             60.7          22.4              12.1             0.00    
<FN>                                                                                 
(1) March 31, 2007 assumption used to compute effective tax rate.                    
</FN>                                                                                

If the 2007 annual average price per barrel of oil were to go below   
$64 or above $78, there would be no additional EPS effect.                      

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Credit Loss Provision and Net Charge-Offs                                       
-----------------------------------------                                       

(In millions)                                                                   

         1Q07     4Q06      1Q06
         -------   -------   -------
Provision                      $   (15)  $   (15)  $     -                      
         =======   =======   =======
Net (charge-offs)/recoveries:                                                   
Commercial                   $     3   $   (23)  $     2                    
Foreign                            -        (1)        2                    
         -------   -------   -------
Total net                                                                   
(charge-offs)/recoveries     $     3   $   (24)  $     4                    
         =======   =======   =======

The provision for credit losses for the first quarter of 2007 was a   
credit of $15 million, compared with zero in the first quarter of 2006          
and a credit of $15 million in the fourth quarter of 2006 reflecting            
continuing high credit quality. The Company recorded a net recovery of $3       
million in the first quarter of 2007, compared with a net recovery of $4        
million in the first quarter of 2006 and a net charge-off of $24 million        
in the fourth quarter of 2006.  The first quarter of 2007 reflects a $7         
million recovery related to leased aircraft that were sold.  During the         
fourth quarter of 2006, the Company sold $38 million of domestic airline        
leasing exposure resulting in a charge-off of $23 million.                      

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BUSINESS SEGMENT REVIEW                                                         

Segment Data                                                                    

The Company has an internal information system that produces          
performance data for its three business segments along product and              
service lines.                                                                  

Business Segments Accounting Principles                                         

The Company's segment data has been determined on an internal         
management basis of accounting, rather than the generally accepted              
accounting principles used for consolidated financial reporting.  These         
measurement principles are designed so that reported results of the             
segments will track their economic performance.  Segment results are            
subject to restatement whenever improvements are made in the                    
measurement principles or when organizational changes are made.                 

The Company continuously updates segment information for changes      
that occur in the management of its businesses. In the first quarter of         
2007, in connection with the anticipated merger with Mellon, business           
segment reporting was realigned to reflect the planned new business             
structure of the combined company.  In addition, several allocation             
methodologies were also revised to achieve greater harmonization with           
Mellon's methodologies. All prior periods have been restated to reflect         
these revisions. It is anticipated that most remaining allocation               
methodologies will be harmonized during the second quarter of 2007.             

The Company now provides segment data for three segments with the     
Asset and Wealth Management Segment and Institutional Services Segment          
being further divided into business groupings. These segments are shown         
below:                                                                          

* Asset and Wealth Management Segment                                       
- Asset Management Business                                         
- Wealth Management Business                                        
* Institutional Services Segment                                            
- Asset Servicing Business                                          
- Clearing & Execution Services Business                            
- Issuer Services Business                                          
- Treasury Services Business                                        
* Other Segment                                                             

On October 1, 2006, the Company sold substantially all of the         
assets of its Retail Business.                                                  

Specific segment accounting principles employed include:              

*  Revenue amounts reflect fee revenues generated by each segment.              

*  Revenues and expenses associated with specific client bases are              
included in those segments.  For example, foreign exchange                
activity associated with clients using custody products is                
allocated to Asset Servicing Business within the Institutional            
Services Segment (which includes the Company's custody                    
operations.)                                                              

*  Balance sheet assets and liabilities and their related income or             
expense are specifically assigned to each segment.  Previously            
segments with a net liability position would have also been               
allocated assets from the securities portfolio.                           

*  Net interest income is allocated to segments based on the yields             
on the assets and liabilities generated by each segment.  The             
Company employs a funds transfer pricing system that match funds          
the specific assets and liabilities of each segment based on              
their interest sensitivity and maturity characteristics.                  

*  The measure of revenues and profit or loss by a segment has been             
adjusted to present segment data on a tax equivalent basis.               

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*  The provision for credit losses is allocated to segments based on            
changes in each segment's credit risk during the period. Previously       
the provision for credit losses was based on management's judgment        
as to average credit losses that would have been incurred in the          
operations of the segment over a credit cycle of a period of years.       

*  Support and other indirect expenses are allocated to segments                
based on internally-developed methodologies.                              

*  Goodwill and intangibles are reflected within individual business            
segments.                                                                 

*  The business segment information is reported on a continuing                 
operations basis for all periods presented.                               

*  The operations of the Acquired Corporate Trust Business are                  
included only from October 1, 2006, the date on which it was              
acquired.                                                                 

DESCRIPTION OF BUSINESS SEGMENTS                                                

The activities within each business segment are described below.      

Asset and Wealth Management Segment                                             
-----------------------------------                                             

Asset Management Business                                                       
-------------------------                                                       

Asset Management provides investment solutions predominately to       
institutional investors around the world applying a broad spectrum of           
investment strategies. Asset Management's alternative strategies have           
expanded to include funds of hedge funds, private equity, alternative           
fixed income, and real estate.                                                  

The Company's asset management subsidiaries include:                  

*  Ivy Asset Management Corporation, one of the country's leading               
fund of hedge funds firms, offers a comprehensive range of multi-         
manager hedge fund products and customized portfolio solutions.           

*  Alcentra offers sophisticated alternative credit investments,                
including leveraged loans and subordinated and distressed debt.           

*  Urdang, a real estate investment firm, offers the opportunity to             
invest in real estate through separate accounts, a closed-end             
commingled fund that invests directly in properties, and a                
separate account that invests in publicly-traded real estate              
investment trusts.                                                        

*  Estabrook Capital Management LLC offers value-oriented investment            
management strategies, including socially responsible investing.          

*  Gannett, Welsh & Kotler specializes in tax-exempt securities                 
management and equity portfolio strategies.                               

The Company also provides investment management services directly     
to institutions and manages the "Hamilton" family of mutual funds.              

Wealth Management Business                                                      
--------------------------                                                      

In this business, the Company offers a full array of investment       
management, wealth management, and comprehensive financial management           
services to help individuals plan, invest, and arrange                          
intergenerational wealth transition, which includes financial and               
estate planning, trust and fiduciary services, customized banking               
services, and brokerage and investment solutions. Clients include               
predominately high-net-worth individuals, families, family offices,             
charitable gift programs, endowments, foundations, professionals, and           
entrepreneurs.                                                                  

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Institutional Services Segment                                                  
------------------------------                                                  

Asset Servicing Business                                                        
------------------------                                                        

Asset Servicing includes global custody, global fund services,        
securities lending, global liquidity services, outsourcing, government          
securities clearance, collateral management, credit-related services,           
and other linked revenues, principally foreign exchange. Clients include        
corporate and public retirement funds, foundations and global financial         
institution including banks, broker-dealers, investment managers,               
insurance companies, and mutual funds.                                          

The Company is one of the leading asset service companies with        
$13.8 trillion of Assets under Custody and Administration at March 31,          
2007.  The Company is one of the largest mutual fund custodians for             
U.S. funds and one of the largest providers of fund services in the             
world with over $2.0 trillion in total assets.  The Company also                
services more than 45% of the exchange-traded funds in the United               
States, and is a leading U.K. custodian.  In securities lending, the            
Company is one of the largest lenders of U.S. Treasury securities and           
depositary receipts with a lending pool of approximately $1.8 trillion          
in 27 markets around the world.                                                 

The Company clears approximately 50% of transactions in U.S.          
Government securities. The Company is a leader in global clearance,             
clearing equity and fixed income transactions in 101 markets. With $1.5         
trillion in tri-party balances worldwide, the Company is a leading              
collateral management agent.                                                    

Clearing & Execution Services Business                                          
--------------------------------------                                          

The Company's Clearing & Execution Services Business consists of      
its Pershing clearing business, its 35% equity interest in BNY                  
ConvergEx Group and the Company's B-Trade and G-Trade businesses, which         
are expected to become part of the BNY ConvergEx Group in 2008. The BNY         
ConvergEx transaction changed the accounting from a fully consolidated          
subsidiary to a 35% equity interest recorded in other income.                   

The Company's Pershing subsidiary provides clearing, execution,       
financing, and custody for introducing broker-dealers and registered            
investment advisors.  Pershing services more than 1,150 retail and              
institutional financial organizations and independent investment                
advisors with more than five million active accounts.                           

Through its affiliate, BNY ConvergEx Group, the Company provides      
execution solutions, investment technologies, commission management,            
research, transition management and wholesale and outsourcing solutions         
in over 90 global markets, executing 553 million shares each day and            
clearing more than 1.3 million trades daily.                                    

In execution services, the Company provides broker-assisted and       
electronic trading services.  The Company's execution services business         
is one of the largest global institutional agency brokerage                     
organizations.  In addition, it is one of the leading institutional             
electronic brokers for non-U.S. dollar equity execution.                        

Issuer Services Business                                                        
------------------------                                                        

Issuer Services includes corporate trust, depositary receipts,        
employee investment plan services, and stock transfer.                          

In Issuer Services, the Company is depositary for more than 1,270     
American and global depositary receipt programs, with a 64% market              
share, servicing leading companies from 62 countries.  As the world's           
largest trustee, the Company provides diverse services for corporate,           
municipal, structured, and international debt securities.  The Company          
serves as trustee for some 90,000 clients with more than $8 trillion in         
outstanding                                                                     

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debt securities.  The Company is the third largest stock                        
transfer agent in the United States, servicing more than 17 million             
shareowners.  Employee Investment Plan Services has more than 120               
clients with 650,000 employees in over 54 countries.                            

Treasury Services Business                                                      
--------------------------                                                      

Treasury Services includes global payment services for corporate      
customers as well as lending and credit-related services.                       

Corporate Global Payment Services offers leading-edge technology,     
innovative products, and industry expertise to help its clients                 
optimize cash flow, manage liquidity, and make payments around the              
world in more than 90 different countries.  The Company maintains a             
global network of branches, representative offices and correspondent            
banks to provide comprehensive payment services including funds                 
transfer, cash management, trade services and liquidity management.             
The Company is one of the largest funds transfer banks in the U.S.              
transferring over $1.4 trillion daily via more than 150,000 wire                
transfers.                                                                      

The Company provides lending and credit-related services to large     
public and private corporations and financial institutions nationwide.          
Through BNY Capital Markets, Inc., the Company provides a broad range           
of capital markets services including syndicated loans, bond                    
underwriting, and private placements of corporate debt and equity               
securities.                                                                     

For its credit services business overall, the Company's corporate     
lending strategy is to focus on those clients and industries that are           
major users of securities servicing and global payment services.                

Other Segment                                                                   
-------------                                                                   

The Other Segment primarily includes the Company's leasing            
operations, investing and funding operations, and corporate overhead.           
The tax equivalent adjustment on net interest income is eliminated in           
this segment.  Noninterest income primarily reflects leasing,                   
securities gains, and income from the sale of other corporate assets.           
Noninterest expenses include direct expenses supporting the leasing,            
investing, and funding activities as well as certain corporate overhead         
not directly attributable to the operations of the other segments.              

In addition, this segment includes expenses previously allocated to   
the Company's Retail and Middle Market Banking Segment that did not             
qualify for treatment as discontinued operations expense.                       

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Market Data                                                                     
-----------                                                                     

                                                                [Download Table]

                                                                 Percent Inc/(Dec) 
                                                                ------------------ 
                                                                1Q07 vs.  1Q07 vs. 
                     1Q07    4Q06     3Q06     2Q06     1Q06      4Q06      1Q06   
                   ------- -------- -------- -------- --------  --------  -------- 
                                                                                   
S&P 500  Index(1)    1,421    1,418    1,336    1,270    1,295         -%       10%
NASDAQ Composite                                                                   
  Index(1)           2,422    2,415    2,258    2,172    2,340         -         4 
Lehman Brothers                                                                    
  Aggregate Bond                                                                   
  (service mark)                                                                   
  Index(1)           230.8    226.6    220.0    213.2    205.9         2        12 
MSCI EAFE (registered                                                              
  trademark)                                                                       
  Index(1)         2,147.5  2,074.5  1,885.3  1,822.9  1,827.7         4        17 
NYSE Volume                                                                        
  (In billions)      123.8    114.4    108.8    121.6    113.7         8         9 
NASDAQ Volume                                                                      
  (In billions)      123.5    121.5    114.6    134.2    130.8         2        (6)

<FN>                                                                               
(1) Period End                                                                     
</FN>                                                                              

The results of many of the Company's businesses are influenced by     
customer activities that vary by quarter. For instance, consistent with         
an overall decline in securities industry activity in the summer, the           
Company typically experiences a seasonal decline in the third quarter.          
The Company also experiences seasonal increases in securities lending           
and depositary receipts reflecting the European dividend distribution           
season during the second quarter of the year, and to a lesser extent,           
in the fourth quarter of the year.                                              

The first quarter of 2007 was impacted by a seasonal decline in       
corporate actions that reduced revenue related to depositary receipts           
and securities lending.  Non-program equity trading volumes were up 10%         
sequentially and year-over-year.  In addition, average daily U.S.               
fixed-income trading volume was up 8% sequentially and 4% year-over-            
year.  Total debt issuance increased 4% sequentially and 12% year-over-         
year. The issuance of global collateralized debt obligations is up 47%          
versus the first quarter of 2006.                                               

As of March 31, 2007, Assets under Custody and Administration rose    
to $13.8 trillion, from $11.3 trillion at March 31, 2006 and $13.0              
trillion at December 31, 2006.  The increase in Assets under Custody            
and Administration relative to March 31, 2006 primarily reflects rising         
asset prices, growth in the custody business, and the impact of the             
Acquired Corporate Trust Business.  Equity securities comprised 32% of          
the Assets under Custody and Administration at March 31, 2007, compared         
with 33% at March 31, 2006, while fixed-income securities were 68%              
compared with 67% at March 31, 2006.  Assets under Custody and                  
Administration at March 31, 2007 consisted of assets related to the             
custody, mutual funds, and corporate trust businesses of $9.6 trillion,         
broker-dealer services assets of $2.4 trillion, and all other assets of         
$1.8 trillion.                                                                  

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Segment Analysis                                                                

Asset and Wealth Management Segment                                             
-----------------------------------                                             

Assets Under Management - Asset and Wealth Management                           
-----------------------------------------------------                           

                                                                [Download Table]
(In billions)- Estimated           1Q07    4Q06    3Q06    2Q06    1Q06 
                                  ------  ------  ------  ------  ------
                                                                        
   Equity securities                $ 41    $ 39    $ 36    $ 36    $ 37
   Fixed-income securities            22      21      20      21      21
   Alternative investments            33      33      30      28      26
   Liquid assets                      34      38      34      31      29
                                    ----    ----    ----    ----    ----
   Total assets under management    $130    $131    $120    $116    $113
                                    ====    ====    ====    ====    ====

Assets under management ("AUM") were $130 billion at March 31,        
2007, compared with $113 billion at March 31, 2006, and $131 billion at         
December 31, 2006. The year-over-year increase in AUM primarily                 
reflects the continued good growth across asset classes and strategies.         
Institutional clients represent 76% of AUM while individual clients             
equal 24%.  At March 31, 2007, such assets were invested 32% in                 
equities, 17% in fixed income, and 26% in alternative investments, with         
the remaining amount invested in liquid assets.                                 

Asset Management Business                                                       
-------------------------                                                       

                                                        [Enlarge/Download Table]
                                                                             Inc/(Dec)     
                                                                        ------------------ 
                                                                        1Q07 vs.  1Q07 vs. 
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06    
-------------------        -------  -------  -------  -------  -------  --------  -------- 
                                                                                           
Mutual funds               $     3  $     3  $     2  $     3  $     2  $      -  $      1 
Institutional clients           68       72       64       61       55        (4)       13 
Private clients                 13       13       12       12       11         -         2 
                           -------  -------  -------  -------  -------                     
  Total asset                                                                              
    management fees             84       88       78       76       68        (4)       16 
Performance fees                14       18        3        7        7        (4)        7 
Securities servicing fees        -        1        1        1        1        (1)       (1)
Other                            3        2        2        1        3         1         - 
                           -------  -------  -------  -------  -------                     
Total noninterest income       101      109       84       85       79        (8)       22 
Net interest income              5        6        3        3        2        (1)        3 
                           -------  -------  -------  -------  -------                     
Total revenue                  106      115       87       88       81        (9)       25 
Noninterest expense             65       72       57       54       49        (7)       16 
                           -------  -------  -------  -------  -------                     
Income before taxes        $    41  $    43  $    30  $    34  $    32        (2)        9 
                           =======  =======  =======  =======  =======                     

Average assets             $ 1,387  $ 1,226  $ 1,082  $ 1,055  $   925       161       462 
Average deposits                61       98       86       92      105       (37)      (44)

Income before taxes was up 28% to $41 million for the first           
quarter of 2007 from $32 million in the first quarter of 2006, and down         
5% from $43 million in the fourth quarter of 2006.                              

Noninterest income increased $22 million, or 28%, in the first        
quarter of 2007 compared with the first quarter of 2006 reflecting              
higher asset management fees from institutional clients.  Performance           
fees were up reflecting strong results at two of the Company's                  
alternative asset management subsidiaries, Ivy Asset Management and             
Alcentra.                                                                       

Noninterest income declined on a sequential-quarter basis             
reflecting lower performance fees.                                              

Net interest income increased $3 million compared with the first      
quarter of 2006, driven by higher interest-earning assets. On a                 
sequential-quarter basis, the decline in net interest income reflects a         
lower spread on interest-earning assets. Average deposits were $0.1             
billion in the first                                                            

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quarter of 2007, first quarter of 2006 and fourth quarter of 2006. Average      
assets were $1.4 billion in the first quarter of 2007, compared with $0.9       
billion in the first quarter of 2006 and $1.2 billion in the fourth quarter     
of 2006.                                                                        

Noninterest expense increased $16 million, or 33%, in the first       
quarter of 2007 compared with the first quarter of 2006 reflecting              
higher incentive compensation and outside help.  The sequential-quarter         
decline in noninterest expense primarily reflects lower incentive               
compensation.                                                                   

Wealth Management Business                                                      
--------------------------                                                      

                                                        [Enlarge/Download Table]


                                                                             Inc/(Dec)     
                                                                        ------------------ 
                                                                        1Q07 vs.  1Q07 vs. 
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06    
-------------------        -------  -------  -------  -------  -------  --------  -------- 
                                                                                           
Securities servicing fees  $     -  $     -  $     -  $     -  $     1  $      -  $     (1)
Wealth management fees          50       48       46       50       49         2         1 
Other                            1        1        1        1        1         -         - 
                           -------  -------  -------  -------  -------                     
Total noninterest income        51       49       47       51       51         2         - 
Net interest income             15       14       16       13       16         1        (1)
                           -------  -------  -------  -------  -------                     
Total revenue                   66       63       63       64       67         3        (1)
Provision for credit losses      -        -        -       (2)       -         -         - 
Noninterest expense             53       51       51       51       52         2         1 
                           -------  -------  -------  -------  -------                     
Income before taxes        $    13  $    12  $    12  $    15  $    15         1        (2)
                           =======  =======  =======  =======  =======                     

Average assets             $ 1,448  $ 1,481  $ 1,503  $ 1,446  $ 1,525       (33)      (77)
Average deposits             1,052    1,003    1,039    1,021    1,042        49        10 


Income before taxes was down 13% to $13 million for the first         
quarter of 2007 from $15 million in the first quarter of 2006, and was          
up 8% from $12 million in the fourth quarter of 2006.                           

Total noninterest income was flat on a year-over-year basis. The      
sequential-quarter increase reflects growth in wealth management fees.          

Net interest income decreased $1 million, or 6%, compared with the    
first quarter of 2006, reflecting the decline in the spread on earning          
assets. Average deposits were $1.1 billion in the first quarter of              
2007, compared with $1.0 billion in the first quarter of 2006 and $1.0          
billion in the fourth quarter of 2006. Average assets were $1.4 billion         
in the first quarter of 2007, compared with $1.5 billion in the first           
quarter of 2006 and $1.5 billion in the fourth quarter of 2006.                 

Noninterest expense increased $1 million, or 2%, in the first         
quarter of 2007 compared with the first quarter of 2006 primarily               
reflecting higher salaries, outside help and occupancy expense.  The            
sequential-quarter increase reflects higher outsourcing partially               
offset by lower technology expense.                                             

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Institutional Services Segment                                                  
------------------------------                                                  

Asset Servicing Business                                                        
------------------------                                                        

                                                        [Enlarge/Download Table]


                                                                              Inc/(Dec)    
                                                                        ------------------ 
                                                                        1Q07 vs.  1Q07 vs. 
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06    
-------------------        -------  -------  -------  -------  -------  --------  -------- 
                                                                                           
Securities servicing fees  $   388  $   350  $   351  $   371  $   341  $     38  $     47 
Foreign exchange                68       54       50       79       66        14         2 
Other                           15       17       23       21       17        (2)       (2)
                           -------  -------  -------  -------  -------                     
Total noninterest income       471      421      424      471      424        50        47 
Net interest income            127      132      117      113      103        (5)       24 
                           -------  -------  -------  -------  -------                     
Total revenue                  598      553      541      584      527        45        71 
Noninterest expense            424      410      400      399      383        14        41 
                           -------  -------  -------  -------  -------                     
Income before taxes        $   174  $   143  $   141  $   185  $   144        31        30 
                           =======  =======  =======  =======  =======                     

Average assets             $10,610  $ 9,453  $ 8,641  $ 8,873  $ 7,418     1,157     3,192 
Average deposits            24,648   24,335   24,115   23,937   21,748       313     2,900 
Securities lending revenue      36       35       40       50       45         1        (9)


Income before taxes was up 21% to $174 million for the first          
quarter of 2007 from $144 million in the first quarter of 2006, and up          
22% from $143 million in the fourth quarter of 2006.                            

Total noninterest income increased $47 million, or 11%, in the        
first quarter of 2007 compared with the first quarter of 2006 driven by         
increased transaction volumes and organic growth across all business            
products, especially global custody, domestic and international mutual          
funds, exchange-traded funds, hedge fund servicing and collateral               
management.  European asset servicing continues to gain momentum with           
strong first quarter revenue growth across all products, again                  
reflective of the significant cross-border investment interest and              
capital flow. In addition, the Company benefited from the conversion of         
AIB/BNY to a wholly-owned subsidiary in the fourth quarter of 2006.             
Securities lending revenue was flat on a sequential-quarter basis and           
down from the first quarter of 2006 as increased volumes were more than         
offset by the exceptionally tight spread between the Treasury repo rate         
and Fed funds rate. In hedge fund services during the quarter, the              
Company surpassed the $100 billion mark in assets under administration.         

In broker-dealer services, the continued adoption of tri-party        
repo arrangements remains a key driver. The growth in global clearance          
was due to new business wins and increased volume from existing                 
clients. The Company now handles approximately $1.5 trillion of                 
financing for the Company's broker-dealer clients daily through                 
collateralized financing agreements, up approximately 18% from a year           
ago.                                                                            

Foreign exchange revenue increased on a sequential-quarter basis        
consistent with higher market volatility and volumes in late February           
and early March.  Foreign exchange results were up from the first               
quarter of 2006 reflecting greater cross-border flows.                          

Net interest income increased $24 million compared with the first     
quarter of 2006, primarily driven by deposit growth coupled with the            
higher value of deposits in a rising rate environment. The sequential-          
quarter decline is due to a lower spread on interest-earning foreign            
deposits. Average deposits were $24.6 billion in the first quarter of           
2007, compared with $21.7 billion in the first quarter of 2006 and              
$24.3 billion in the fourth quarter of 2006. The growth in deposits             
reflects greater customer activity in the Company's asset servicing             
businesses.  Average assets were $10.6 billion in the first quarter of          
2007, compared with $7.4 billion in the first quarter of 2006 and $9.5          
billion in the fourth quarter of 2006.                                          

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Noninterest expense increased $41 million, or 11%, in the first       
quarter of 2007 compared with the first quarter of 2006 reflecting              
increased incentive compensation, salaries, outside help, sub-custodian         
fees, net occupancy expense, claims by customers and technology.  The           
sequential-quarter increase is primarily due to increased claims by             
customers, salaries, outside help, net occupancy expense, and sub-              
custodian fees.                                                                 

Clearing & Execution Services Business                                          
--------------------------------------                                          

                                                        [Enlarge/Download Table]


                                                                             Inc/(Dec)     
                                                                        ------------------ 
                                                                        1Q07 vs.  1Q07 vs. 
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06    
-------------------        -------  -------  -------  -------  -------  --------  -------- 
                                                                                           
Securities servicing fees  $   286  $   271  $   293  $   328  $   332  $     15  $    (46)
Asset & wealth management       11       10        9        9        9         1         2 
Foreign exchange and other                                                                 
  trading activities            10       10       10       11       11         -        (1)
Other                            6       10       19        7       34        (4)      (28)
                           -------  -------  -------  -------  -------                     
Total noninterest income       313      301      331      355      386        12       (73)
Net interest income             59       62       58       54       53        (3)        6 
                           -------  -------  -------  -------  -------                     
Total revenue                  372      363      389      409      439         9       (67)
Provision for credit losses      -        2        -       (4)      (2)       (2)        2 
Noninterest expense            272      257      306      307      303        15       (31)
                           -------  -------  -------  -------  -------                     
Income before taxes        $   100  $   104  $    83  $   106  $   138        (4)      (38)
                           =======  =======  =======  =======  =======                     

Average assets             $16,363  $14,825  $16,363  $17,175  $17,381     1,538    (1,018)
Average interest-bearing                                                                   
  payables to customers and                                                                
  broker-dealers             4,747    4,683    4,657    5,034    5,231        64      (484)


Income before taxes was down 28% to $100 million for the first        
quarter of 2007 from $138 million in the first quarter of 2006, and             
down 4% from $104 million in the fourth quarter of 2006.  The decline           
in results from the first quarter of 2006 reflects the $31 million gain         
related to the first quarter of 2006 conversion of the Company's New            
York Stock Exchange seats into cash and shares of the NYSE Group, Inc.          
common stock.                                                                   

Total noninterest income decreased $73 million, or 19%, in the        
first quarter of 2007 compared with the first quarter of 2006.                  
Securities servicing fees declined reflecting the disposition of                
certain execution businesses in the BNY ConvergEx transaction. These            
businesses had revenues of $90 million in the first quarter of 2006.            
On a sequential-quarter basis, securities servicing fees were up $15            
million, or 6%, reflecting solid performance at Pershing as well as the         
benefits of new business acquired.  The decline in other from the first         
quarter of 2006 reflects the aforementioned NYSE Group, Inc.                    
transaction.                                                                    

Net interest income increased $6 million, or 11%, compared with       
the first quarter of 2006, resulting from a higher spread on interest-          
earning assets in a rising rate environment. The sequential-quarter             
decline in net interest income reflects a lower spread on interest-             
earning assets. Average assets were $16.4 billion in the first quarter          
of 2007, compared with $17.4 billion in the first quarter of 2006 and           
$14.8 billion in the fourth quarter of 2006. Average interest-bearing           
payables to customers and broker-dealers were $4.7 billion in the first         
quarter of 2007, compared with $5.2 billion in the first quarter of             
2006 and $4.7 billion in the fourth quarter of 2006. The decline from a         
year-ago quarter reflects loss of a significant customer at Pershing.           

Noninterest expense decreased $31 million, or 10%, in the first       
quarter of 2007 compared with the first quarter of 2006 reflecting              
lower                                                                           

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clearing expense, commissions, incentive compensation, and the                  
disposition of certain execution businesses in the BNY ConvergEx                
transaction.  The sequential-quarter increase in noninterest expense            
reflects higher incentive compensation, salaries, outside help and              
clearing expense.                                                               

Issuer Services Business                                                        
------------------------                                                        

                                                        [Enlarge/Download Table]


                                                                             Inc/(Dec)    
                                                                        ------------------
                                                                        1Q07 vs.  1Q07 vs.
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06   
-------------------        -------  -------  -------  -------  -------  --------  --------
                                                                                          
Securities servicing fees  $   319  $   340  $   197  $   209  $   156  $    (21) $    163
Other                           37       31        8       11        9         6        28
                           -------  -------  -------  -------  -------                    
Total noninterest income       356      371      205      220      165       (15)      191
Net interest income            105      101       47       52       45         4        60
                           -------  -------  -------  -------  -------                    
Total revenue                  461      472      252      272      210       (11)      251
Provision for credit losses      -       (1)       1        -        -         1         -
Noninterest expense            237      236      122      122      110         1       127
                           -------  -------  -------  -------  -------                    
Income before taxes        $   224  $   237  $   129  $   150  $   100       (13)      124
                           =======  =======  =======  =======  =======                    

Average assets             $ 4,235  $ 3,988  $ 1,359  $ 1,316  $ 1,351       247     2,884
Average deposits            11,718   10,942    5,844    6,361    5,843       776     5,875

Income before taxes was up 124% to $224 million for the first         
quarter of 2007 from $100 million in the first quarter of 2006, and             
down 5% from $237 million in the fourth quarter of 2006.                        

Total noninterest income increased $191 million, or 116%, in the      
first quarter of 2007 compared with the first quarter of 2006. Issuer           
services fees continued to exhibit strong growth in the first quarter           
compared with last year's first quarter. The Acquired Corporate Trust           
Business significantly impacts comparisons of the first quarter of 2007         
to the first quarter of 2006. Corporate trust fees increased                    
sequentially over the strong fourth quarter reflecting continued strong         
performance in global products and structured finance, notably asset-           
backed and mortgage-backed securities and CDOs. Depositary receipts had         
another quarter of double-digit growth and the Company continues to see         
strong underlying activity, particularly from emerging markets.  On a           
sequential-quarter basis, depositary receipt fees declined consistent           
with normal seasonal patterns for corporate actions.                            

Net interest income increased $60 million, or 133%, in the first      
quarter of 2007 compared with the first quarter of 2006, primarily              
resulting from the Acquired Corporate Trust Business. The sequential-           
quarter increase in net interest income was driven by higher value on           
both interest-bearing and noninterest-bearing deposits. Average                 
deposits were $11.7 billion in the first quarter of 2007, compared with         
$5.8 billion in the first quarter of 2006 and $10.9 billion in the              
fourth quarter of 2006. The higher levels of deposits reflects the              
Acquired Corporate Trust Business as well as increased liquidity from           
the Company's other issuer services customers compared with 2006.               
Average assets were $4.2 billion in the first quarter of 2007, compared         
with $1.4 billion in the first quarter of 2006 and $4.0 billion in the          
fourth quarter of 2006.                                                         

Noninterest expense increased $127 million, or 115%, in the first     
quarter of 2007 compared with the first quarter of 2006 reflecting the          
impact of the Acquired Corporate Trust Business and expenses associated         
with revenue growth in depositary receipts and corporate trust.  The            
sequential-quarter increase reflects higher salaries, outside help and          
commissions offset by lower incentive compensation, outsourcing and             
sub-custodian fees.                                                             

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Treasury Services Business                                                      
--------------------------                                                      

                                                        [Enlarge/Download Table]


                                                                             Inc/(Dec)     
                                                                        ------------------ 
                                                                        1Q07 vs.  1Q07 vs. 
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06    
-------------------        -------  -------  -------  -------  -------  --------  -------- 
                                                                                           
Global payment services    $    48  $    50  $    53  $    50  $    49  $     (2) $     (1)
Financing-related fees          38       42       46       47       45        (4)       (7)
Other                           46       40       42       59       41         6         5 
                           -------  -------  -------  -------  -------                     
Total noninterest income       132      132      141      156      135         -        (3)
Net interest income             94       99       96       97       95        (5)       (1)
                           -------  -------  -------  -------  -------                     
Total revenue                  226      231      237      253      230        (5)       (4)
Provision for credit losses     (3)      (7)      (3)       7        8         4       (11)
Noninterest expense            117      117      115      120      111         -         6 
                           -------  -------  -------  -------  -------                     
Income before taxes        $   112  $   121  $   125  $   126  $   111        (9)        1 
                           =======  =======  =======  =======  =======                     

Average assets             $17,003  $16,615  $16,680  $16,279  $15,521       388     1,482 
Average deposits            13,576   14,529   12,707   12,261   11,873      (953)    1,703 

Income before taxes was up 1% to $112 million for the first           
quarter of 2007 from $111 million in the first quarter of 2006, and             
down 7% from $121 million in the fourth quarter of 2006.                        

Total noninterest income decreased $3 million, or 2%, in the first    
quarter of 2007 compared with the first quarter of 2006.  Global                
payment services fees were down $1 million from the first quarter of            
2006 and $2 million from the fourth quarter of 2006 as more clients             
used compensating balances to pay for services.  Financing-related fees         
declined sequentially and from the first quarter of 2006 reflecting a           
lower level of credit-related fees.  Other income increased                     
sequentially and from a year-ago quarter reflecting higher foreign              
exchange and other trading income.                                              

Net interest income decreased slightly compared with the first        
quarter of 2006. The sequential-quarter decrease reflects a lower               
spread on trading assets and lower volume of noninterest-bearing                
deposits. Average deposits were $13.6 billion in the first quarter of           
2007, compared with $11.9 billion in the first quarter of 2006 and              
$14.5 billion in the fourth quarter of 2006. Average assets were $17.0          
billion in the first quarter of 2007, compared with $15.5 billion in            
the first quarter of 2006 and $16.6 billion in the fourth quarter of            
2006.                                                                           

Noninterest expense increased $6 million, or 5%, in the first         
quarter of 2007 compared with the first quarter of 2006 reflecting              
higher salaries and outside help.                                               

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Other Segment                                                                   
-------------                                                                   

                                                        [Enlarge/Download Table]


                                                                            Inc/(Dec)      
                                                                        ------------------ 
                                                                        1Q07 vs.  1Q07 vs. 
(In millions)               1Q07     4Q06     3Q06     2Q06     1Q06     4Q06      1Q06    
-------------------        -------  -------  -------  -------  -------  --------  -------- 
                                                                                           
Noninterest income         $    51  $    58  $    31  $    32  $    25  $     (7) $     26 
Net interest income             22       37       14       26       25       (15)       (3)
                           -------  -------  -------  -------  -------                     
Total revenue                   73       95       45       58       50       (22)       23 
Provision for credit losses    (12)      (9)      (2)      (2)      (6)       (3)       (6)
Noninterest expense            104      142      145       85       61       (38)       43 
                           -------  -------  -------  -------  -------                     
Income before taxes        $   (19) $   (38) $   (98) $   (25) $    (5)       19       (14)
                           =======  =======  =======  =======  =======                     

Average assets             $50,929  $54,499  $49,951  $50,249  $47,710    (3,570)    3,219 
Average deposits             7,701    8,147   10,794   10,205   10,761      (446)   (3,060)

Income before taxes was a loss of $19 million for the first           
quarter of 2007, compared with a loss of $5 million in the first                
quarter of 2006, and a loss of $38 million in the fourth quarter of             
2006. The loss in the first quarter of 2007 and fourth quarter of 2006          
reflected $11 million and $17 million of merger and integration costs           
associated with the Acquired Corporate Trust Business.                          

Total noninterest income increased $26 million, or 104%, in the       
first quarter of 2007 compared with the first quarter of 2006                   
reflecting higher gains in the sponsor fund portfolio and transition            
services income. The sequential-quarter decline reflects lower gains in         
the sponsor fund portfolio.                                                     

Net interest income decreased slightly compared with the first        
quarter of 2006. The sequential-quarter decline in net interest income          
reflects certain leasing adjustments recorded in the fourth quarter of          
2006.  Average deposits were $7.7 billion in the first quarter of 2007,         
compared with $10.8 billion in the first quarter of 2006 and $8.1               
billion in the fourth quarter of 2006. Average assets were $50.9                
billion in the first quarter of 2007, compared with $47.7 billion in            
the first quarter of 2006 and $54.5 billion in the fourth quarter of            
2006.                                                                           

Provision for credit losses was a credit of $12 million in the      
first quarter of 2007, compared with a credit of $6 million in the              
first quarter of 2006 and a credit of $9 million the fourth quarter of          
2006.                                                                           

Noninterest expense includes unallocated corporate overhead,          
nonrecurring items including merger and integration costs, and certain          
expenses previously allocated to the Retail and Middle Market Banking           
Segment that are not included in the businesses sold to JPMorgan Chase.         
Noninterest expense increased $43 million, or 70%, in the first quarter         
of 2007 compared with the first quarter of 2006 primarily reflecting            
merger and integration costs, consulting expense, compensation and              
benefits.  The sequential-quarter decline primarily reflects lower              
incentive compensation.                                                         

Other items - The tax equivalent adjustment is eliminated in the      
Other Segment.  Certain revenue and expense items have been driven by           
corporate decisions and have been included in the Other Segment. In the         
first quarter of 2007 and fourth quarter of 2006, these included merger         
and integration costs of $11 million and $17 million associated with            
the Acquired Corporate Trust Business.                                          

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Segment Financial Data                                                          

The consolidating schedule below shows the contribution of the Company's        
businesses to its overall profitability.                                        

                                                        [Enlarge/Download Table]

(Dollars in millions)                                                                                                      
                                         Subtotal                                         Subtotal                         
For the Quarter                          Asset &              Clearing &                  Institut-           Total        
Ended              Asset      Wealth     Wealth     Asset     Execution Issuer   Treasury   ional             Continuing   
March 31, 2007     Management Management Management Servicing Services  Services Services Services    Other   Operations   
---------------    ---------- ---------- ---------  --------- --------  -------- -------- ----------  -----   ----------   
                                                                                                                           
Noninterest                                                                                                                
  income           $     101  $     51    $   152   $    471  $    313  $    356 $    132 $    1,272  $  51   $    1,475   
Net interest                                                                                                               
  income                   5        15         20        127        59       105       94        385     22          427   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Total revenue            106        66        172        598       372       461      226      1,657     73        1,902   
Provision for                                                                                                              
  credit losses            -         -          -          -         -         -       (3)        (3)   (12)         (15)  
Noninterest                                                                                                                
  expense                 65        53        118        424       272       237      117      1,050    104        1,272   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Income before                                                                                                              
  taxes            $      41  $     13   $     54    $   174  $    100  $    224 $    112 $      610  $ (19)  $      645   
                   =========  ========   ========    =======  ========  ======== ======== ==========  =====   ==========   
Operating                                                                                                                  
 margin (1)               39%       20%        31%        29%       27%       49%      50%        37%                      

Average assets     $   1,387  $  1,448   $  2,835    $10,610  $ 16,363  $  4,235 $ 17,003  $  48,211 $50,929  $  101,975(2)

                                                        [Enlarge/Download Table]

(Dollars in millions)                                                                                                      
                                         Subtotal                                         Subtotal                         
For the Quarter                          Asset &              Clearing &                  Institut-           Total        
Ended              Asset      Wealth     Wealth     Asset     Execution Issuer   Treasury  ional              Continuing   
December 31, 2006  Management Management Management Servicing Services  Services Services Services    Other   Operations   
-----------------  ---------- ---------- ---------  --------- --------  -------- -------- ----------  -----   ----------   
                                                                                                                           
Noninterest                                                                                                                
  income           $     109  $     49    $   158   $    421  $    301  $    371 $    132 $    1,225  $  58   $    1,441   
Net interest                                                                                                               
  income                   6        14         20        132        62       101       99        394     37          451   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Total revenue            115        63        178        553       363       472      231      1,619     95        1,892   
Provision for                                                                                                              
  credit losses            -         -          -          -         2        (1)      (7)        (6)    (9)         (15)  
Noninterest                                                                                                                
  expense                 72        51        123        410       257       236      117      1,020    142        1,285   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Income before                                                                                                              
  taxes            $      43  $     12   $     55    $   143  $    104  $    237 $    121 $      605  $ (38)  $      622   
                   =========  ========   ========    =======  ========  ======== ======== ==========  =====   ==========   
Operating                                                                                                                  
 margin (1)               37%       19%        31%        26%       29%       50%      52%        37%                      

Average assets     $   1,226  $  1,481   $  2,707    $ 9,453  $ 14,825  $  3,988 $ 16,615 $   44,881  $54,499 $  102,087(2)

                                                        [Enlarge/Download Table]

(Dollars in millions)                                                                                                      
                                         Subtotal                                         Subtotal                         
For the Quarter                          Asset &              Clearing &                  Institut-           Total        
Ended              Asset      Wealth     Wealth     Asset     Execution Issuer   Treasury   ional             Continuing   
September 30, 2006 Management Management Management Servicing Services  Services Services Services    Other   Operations   
------------------ ---------- ---------- ---------  --------- --------  -------- -------- ----------  -----   ----------   
                                                                                                                           
Noninterest                                                                                                                
  income           $      84  $     47    $   131   $    424  $    331  $    205 $    141 $    1,101  $  31   $    1,263   
Net interest                                                                                                               
  income                   3        16         19        117        58        47       96        318     14          351   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Total revenue             87        63        150        541       389       252      237      1,419     45        1,614   
Provision for                                                                                                              
  credit losses            -         -          -          -         -         1       (3)        (2)    (2)          (4)  
Noninterest                                                                                                                
  expense                 57        51        108        400       306       122      115        943    145        1,196   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Income before                                                                                                              
  taxes            $      30  $     12   $     42    $   141  $     83  $    129 $    125 $      478  $ (98)  $      422   
                   =========  ========   ========    =======  ========  ======== ======== ==========  =====   ==========   
Operating                                                                                                                  
 margin (1)               34%       19%        28%        26%       21%       51%      53%        34%                      

Average assets     $   1,082  $  1,503   $  2,585    $ 8,641  $ 16,363  $  1,359 $ 16,680 $   43,043  $49,951 $   95,579(2)

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                                                        [Enlarge/Download Table]

(Dollars in millions)                                                                                                      
                                         Subtotal                                         Subtotal                         
For the Quarter                          Asset &              Clearing &                  Institut-           Total        
Ended              Asset      Wealth     Wealth     Asset     Execution Issuer   Treasury   ional             Continuing   
June 30, 2006      Management Management Management Servicing Services  Services Services Services    Other   Operations   
------------------ ---------- ---------- ---------  --------- --------  -------- -------- ----------  -----   ----------   
                                                                                                                           
Noninterest                                                                                                                
  income           $      85  $     51   $    136    $   471  $    355  $    220 $    156 $    1,202  $  32   $    1,370   
Net interest                                                                                                               
  income                   3        13         16        113        54        52       97        316     26          358   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Total revenue             88        64        152        584       409       272      253      1,518     58        1,728   
Provision for                                                                                                              
  credit losses            -        (2)        (2)         -        (4)        -        7          3     (2)          (1)  
Noninterest                                                                                                                
  expense                 54        51        105        399       307       122      120        948     85        1,138   
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------   
Income before                                                                                                              
  taxes            $      34  $     15   $     49    $   185  $    106  $    150 $    126 $      567  $ (25)  $      591   
                   =========  ========   ========    =======  ========  ======== ======== ==========  =====   ==========   
Operating                                                                                                                  
 margin (1)               39%       23%        32%        32%       26%       55%      50%        37%                      

Average assets     $   1,055  $  1,446   $  2,501    $ 8,873  $ 17,175  $  1,316 $ 16,279 $   43,643  $50,249 $   96,393(2)

                                                        [Enlarge/Download Table]

(Dollars in millions)                                                                                                       
                                         Subtotal                                         Subtotal                          
For the Quarter                          Asset &              Clearing &                  Institut-           Total         
Ended              Asset      Wealth     Wealth     Asset     Execution Issuer   Treasury  ional              Continuing    
March 31, 2006     Management Management Management Servicing Services  Services Services Services    Other   Operations    
------------------ ---------- ---------- ---------  --------- --------  -------- -------- ----------  -----   ----------    
                                                                                                                            
Noninterest                                                                                                                 
  income           $      79  $     51   $    130    $   424  $    386  $    165 $    135 $    1,110  $  25   $    1,265    
Net interest                                                                                                                
  income                   2        16         18        103        53        45       95        296     25          339    
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------    
Total revenue             81        67        148        527       439       210      230      1,406     50        1,604    
Provision for                                                                                                               
  credit losses            -         -          -          -        (2)        -        8          6     (6)           -    
Noninterest                                                                                                                 
  expense                 49        52        101        383       303       110      111        907     61        1,069    
                   ---------  --------   --------    -------  --------  -------- -------- ----------  -----   ----------    
Income before                                                                                                               
  taxes            $      32  $     15   $     47    $   144  $    138  $    100 $    111 $      493  $  (5)  $      535    
                   =========  ========   ========    =======  ========  ======== ======== ==========  =====   ==========    
Operating                                                                                                                   
 margin (1)               40%       22%        32%        27%       31%      48%       48%        35%                       

Average assets     $     925  $  1,525   $  2,450    $ 7,418  $ 17,381  $ 1,351  $ 15,521 $   41,671  $47,710  $   91,831(2)

<FN>                                                                                                                        
(1)  Income before taxes divided by total revenue.                                                                          

(2)  Including average assets of discontinued operations of $66 million, $51 million,                                       
     $13,285 million, $13,993 million, and $14,302 million for the quarters                                                 
     ended March 31, 2007, December 31, 2006, September 30, 2006, June 30, 2006                                             
     and March 31, 2006, consolidated average assets were $102,041 million,                                                 
     $102,138 million, $108,864 million, $110,386 million and $106,133 million                                              
     for the quarters ended March 31, 2007, December 31, 2006, September 30,                                                
     2006, June 30, 2006, and March 31, 2006.                                                                               
</FN>                                                                                                                       

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CRITICAL ACCOUNTING POLICIES                                                    

The Company's significant accounting policies are described in the    
"Notes to Consolidated Financial Statements" under "Summary of Significant      
Accounting and Reporting Policies" in the Company's 2006 Annual Report on       
Form 10-K.  Four of the Company's more critical accounting policies are         
those related to the allowance for credit losses, the valuation of              
derivatives and securities where quoted market prices are not available,        
goodwill and other intangibles, and pension accounting.                         

Allowance for Credit Losses                                                     
---------------------------                                                     

The allowance for credit losses and allowance for lending-related     
commitments consist of four elements: (1) an allowance for impaired             
credits; (2) an allowance for higher risk rated loans and exposures; (3) an     
allowance for pass rated loans and exposures; and (4) an unallocated            
allowance based on general economic conditions and certain risk factors in      
the Company's individual portfolio and markets.  Further discussion on the      
four elements can be found under "Consolidated Balance Sheet Review" in the     
MD&A section.                                                                   

The allowance for credit losses represents management's estimate of   
probable losses inherent in the Company's credit portfolio.  This               
evaluation process is subject to numerous estimates and judgments.              
Probability of default ratings are assigned after analyzing the credit          
quality of each borrower/counterparty and the Company's internal ratings        
are generally consistent with external ratings agency's default databases.      
Loss given default ratings are driven by the collateral, structure, and         
seniority of each individual asset and are consistent with external loss        
given default/recovery databases.  The portion of the allowance related to      
impaired credits is based on the present value of future cash flows.            
Changes in the estimates of probability of default, risk ratings, loss          
given default/recovery rates, and cash flows could have a direct impact on      
the allocated allowance for loan losses.                                        

To the extent actual results differ from forecasts or management's    
judgment, the allowance for credit losses may be greater or less than           
future charge-offs.                                                             

The Company considers it difficult to quantify the impact of changes  
in forecast on its allowance for credit losses.  Nevertheless, the Company      
believes the following discussion may enable investors to better understand     
the variables that drive the allowance for credit losses.                       

A key variable in determining the allowance is management's judgment  
in determining the size of the unallocated allowance.  At March 31, 2007,       
the unallocated allowance was 27% of the total allowance.  If the               
unallocated allowance were five percent higher or lower, the allowance          
would have increased or decreased by $21 million, respectively.                 

The credit rating assigned to each credit is another significant      
variable in determining the allowance.  If each credit were rated one grade     
better, the allowance would have decreased by $72 million, while if each        
credit were rated one grade worse, the allowance would have increased by        
$123 million.                                                                   

Similarly, if the loss given default were one rating worse, the       
allowance would have increased by $34 million, while if the loss given          
default were one rating better, the allowance would have decreased by $42       
million.                                                                        

For impaired credits, if the fair value of the loans were 10% higher  
or lower, the allowance would have decreased or increased by $1 million,        
respectively.                                                                   

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Valuation of Derivatives and Securities Where Quoted Market Prices Are Not      
--------------------------------------------------------------------------      
Available                                                                     
---------                                                                     

When quoted market prices are not available for derivatives and       
securities values, such values are determined at fair value, which is           
defined as the value at which positions could be closed out or sold in a        
transaction with a willing counterparty over a period of time consistent        
with the Company's trading or investment strategy.  Fair value for these        
instruments is determined based on discounted cash flow analysis,               
comparison to similar instruments, and the use of financial models.             
Financial models use as their basis independently-sourced market parameters     
including, for example, interest rate yield curves, option volatilities,        
and currency rates.  Discounted cash flow analysis is dependent upon            
estimated future cash flows and the level of interest rates.  Model-based       
pricing uses inputs of observable prices for interest rates, foreign            
exchange rates, option volatilities and other factors.  Models are              
benchmarked and validated by independent parties.  The Company's valuation      
process takes into consideration factors such as counterparty credit            
quality, liquidity and concentration concerns.  The Company applies             
judgment in the application of these factors.  In addition, the Company         
must apply judgment when no external parameters exist.  Finally, other          
factors can affect the Company's estimate of fair value including market        
dislocations, incorrect model assumptions, and unexpected correlations.         

These valuation methods could expose the Company to materially        
different results should the models used or underlying assumptions be           
inaccurate.  See "Use of Estimates" in "Summary of Significant Accounting       
and Reporting Policies" of the Notes to Consolidated Financial Statement in     
the Company's 2006 Annual Report on Form 10-K.                                  

To assist in assessing the impact of a change in valuation, at March  
31, 2007, approximately $1.9 billion of the Company's portfolio of              
securities and derivatives is not priced based on quoted market prices          
because no such quoted market prices are available.  A change of 2.5% in        
the valuation of these securities and derivatives would result in a change      
in pre-tax income of $49 million.                                               

Goodwill and Other Intangibles                                                  
------------------------------                                                  

The Company records all assets and liabilities acquired in purchase   
acquisitions, including goodwill, indefinite-lived intangibles, and other       
intangibles, at fair value as required by FASB Statements No. 141 and No.       
142 ("SFAS 141" and "SFAS 142"), "Business Combinations" and "Goodwill and      
Other Intangible Assets."  Goodwill ($5,131 million at March 31, 2007) and      
indefinite-lived intangible assets ($370 million at March 31, 2007) are not     
amortized but are subject to annual tests for impairment or more often if       
events or circumstances indicate they may be impaired.  Other intangible        
assets are amortized over their estimated useful lives and are subject to       
impairment if events or circumstances indicate a possible inability to          
realize the carrying amount.  The initial recording of goodwill,                
indefinite-lived intangibles, and other intangibles requires subjective         
judgments concerning estimates of the fair value of acquired assets.  The       
goodwill impairment test is performed in two phases.  The first step of the     
goodwill impairment test compares the fair value of the reporting unit with     
its carrying amount, including goodwill.  If the fair value of the              
reporting unit exceeds its carrying amount, goodwill of the reporting unit      
is considered not impaired; however, if the carrying amount of the              
reporting unit exceeds its fair value, an additional procedure must be          
performed.  That additional procedure compares the implied fair value of        
the reporting unit's goodwill with the carrying amount of that goodwill.        
An impairment loss is recorded to the extent that the carrying amount of        
goodwill exceeds its implied fair value.  Indefinite-lived intangible           
assets are evaluated for impairment at least annually by comparing their        
fair value to their carrying value.  Other intangible assets ($1,077            
million at March 31, 2007) are evaluated for impairment if events and           
circumstances indicate a possible impairment.  Such evaluation of other         
intangible assets is based on undiscounted cash flow projections.  The          
Company                                                                         

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recorded a $6 million impairment charge in 2006 related to the                  
write-off of customer intangibles in Europe.                                    

Fair value may be determined using: market prices, comparison to      
similar assets, market multiples, discounted cash flow analysis and other       
determinates.  Estimated cash flows may extend far into the future and, by      
their nature, are difficult to determine over an extended timeframe.            
Factors that may significantly affect the estimates include, among others,      
competitive forces, customer behaviors and attrition, changes in revenue        
growth trends, cost structures and technology, and changes in discount          
rates and specific industry or market sector conditions.  Other key             
judgments in accounting for intangibles include useful life and                 
classification between goodwill and indefinite-lived intangibles or other       
intangibles that require amortization.  See Note "Goodwill and Intangibles"     
in the Notes to Consolidated Financial Statements for additional                
information regarding intangible assets.                                        

To assist in assessing the impact of a goodwill, indefinite-lived     
intangibles, or other intangible asset impairment charge, at March 31,          
2007, the Company has $6.6 billion of goodwill, indefinite-lived                
intangibles, and other intangible assets.  The impact of a 5% impairment        
charge would result in reduction in pre-tax income of approximately $329        
million.                                                                        

Pension Accounting                                                              
------------------                                                              

The Company has defined benefit pension plans covering approximately  
14,200 U.S. employees and approximately 2,750 non-US employees.                 

The Company has three defined benefit pension plans in the U.S. and   
six overseas.  The U.S. plans account for 77% of the projected benefit          
obligation.  Pension expense was $38 million in 2006, compared with $26         
million in 2005 and a pension credit of $24 million in 2004.  In addition       
to its pension plans, the Company also has an Employee Stock Ownership Plan     
("ESOP") which may provide additional benefits to certain employees.  Upon      
retirement, covered employees are entitled to the higher of their benefit       
under the ESOP or the defined benefit plan.  If the benefit is higher under     
the defined benefit plan, the employees' ESOP account is contributed to the     
pension plan.                                                                   

A number of key assumption and measurement date values determine      
pension expense.  The key elements include the long-term rate of return on      
plan assets, the discount rate, the market-related value of plan assets,        
and for the primary U.S. plan the price used to value stock in the ESOP.        
Since 2004, these key elements have varied as follows:                          

                                                                [Download Table]

                                           2007      2006      2005      2004  
                                        --------  --------  --------  -------- 
                                                                               
(Dollars in millions,                                                          
  except per share amounts)                                                    
Domestic plans:                                                                
Long-term rate of return                                                       
 on plan assets                             8.00%     7.88%     8.25%     8.75%
Discount rate                               6.00      5.88      6.00      6.25 
Market-related value of                                                        
 plan assets(1)                         $  1,352  $  1,324  $  1,502  $  1,523 
ESOP stock price(1)                        34.85     30.46     30.67     27.88 

Net U.S. pension credit/ (expense)                $    (26) $    (17) $     31 
All other pension credit/ (expense)                    (12)       (9)       (7)
                                                  --------  --------  -------- 
Total pension credit/ (expense)(2)                $    (38) $    (26) $     24 
                                                  ========  ========  ======== 
<FN>                                                                           

(1)  Actuarially smoothed data. See "Summary of Significant Accounting         
     and Reporting Policies" in Notes to Consolidated Financial                
     Statements in the 2006 Annual Report on Form 10-K.                        
(2)  Pension benefits expense includes discontinued operations expense         
     of $6 million in 2006, 2005, and 2004.                                    
</FN>                                                                          

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The discount rate for U.S. pension plans was determined after         
reviewing a number of high quality long-term bond indices whose yields were     
adjusted to match the duration of the Company's pension liability.  The         
Company also reviewed the results of several models that matched bonds to       
the Company's pension cash flows.  The various indices and models produced      
discount rates ranging from 5.91% to 6.10%.  After reviewing the various        
indices and models the Company selected a discount rate of 6.00%.  The          
discount rates for foreign pension plans are based on high quality              
corporate bonds rates in countries that have an active corporate bond           
market.  In those countries with no active corporate bond market, discount      
rates are based on local government bond rates plus a credit spread.            

The Company's expected long-term rate of return on plan assets is     
based on anticipated returns for each asset class.  For 2007 and 2006, the      
assumptions for the long-term rates of return on plan assets were 8.00% and     
7.88%, respectively.  Anticipated returns are weighted for the target           
allocation for each asset class.  Anticipated returns are based on              
forecasts for prospective returns in the equity and fixed-income markets,       
which should track the long-term historical returns for these markets.  The     
Company also considers the growth outlook for U.S. and global economies, as     
well as current and prospective interest rates.                                 

The market-related value of plan assets also influences the level of  
pension expense.  Differences between expected and actual returns are           
recognized over five years to compute an actuarially derived market-related     
value of plan assets.  In 2006, the market-related value of plan assets         
declined as the extraordinary actual return in 2000 was replaced with a         
more modest return. The market-related value of plan assets grew slightly       
for 2007 as the pension fund earned more normal returns.                        

Unrecognized actuarial gains and losses are amortized over the future 
service period (11 years) of active employees if they exceed a threshold        
amount.  The Company currently has unrecognized losses which are being          
amortized.                                                                      

For 2006, U.S. pension expense increased by $9 million reflecting     
changes in assumptions, the amortization of unrecognized pension losses,        
and a decline in the market-related value of plan assets, partly offset by      
a switch to the computation of benefits from final average pay to career        
average pay. U.S. pension expense is expected to decline approximately $30      
million in 2007 primarily due to employees working longer and the Pension       
Protection Act of 2006.                                                         

 The annual impacts on the primary U.S. plan of hypothetical changes
in the key elements on the pension expense are shown in the tables below.       

                                                                [Download Table]

(Dollars in millions,              Increase in                     Decrease in
except per share amounts)      Pension Expense    2007 Base    Pension Expense
                               ---------------  -------------  ---------------
                                                                              

 Long-term rate of return                                                     
  on plan assets                  7.00%   7.50%      8.00%       8.50%   9.00%
 Change in pension expense      $ 18.4  $  9.2        N/A      $  9.2  $ 18.4 

 Discount rate                    5.50%   5.75%      6.00%       6.25%   6.50%
 Change in pension expense      $ 11.8  $  5.8        N/A      $  5.7  $ 11.2 

 Market-related value of                                                      
  plan assets                   -20.00% -10.00%    $1,352      +10.00% +20.00%
 Change in pension expense      $ 50.6  $ 25.3        N/A      $ 25.2  $ 46.9 

 ESOP stock price               $24.85  $29.85     $34.85      $39.85  $44.85 
 Change in pension expense      $ 14.5  $  7.0        N/A      $  6.5  $ 12.5 

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CONSOLIDATED BALANCE SHEET REVIEW                                               

Total assets were $99.8 billion at March 31, 2007, compared with      
$103.6 billion at March 31, 2006 and $103.4 billion at December 31, 2006.       
The decrease in assets from March 31, 2006 primarily reflects the sale of       
the Retail Business and decline in trading assets partly offset by              
increases in short-term high quality interest-bearing deposits in banks and     
loans to financial institutions.  Total shareholders' equity was $11.5          
billion at March 31, 2007, compared with $10.1 billion at March 31, 2006        
and $11.6 billion at December 31, 2006.                                         

On a continuing operations basis, return on average common equity for 
the first quarter of 2007 was 15.70%, (16.06% excluding merger and              
integration costs) compared with 14.75% in the first quarter of 2006 and        
14.95% in the fourth quarter of 2006 (15.36% excluding merger and               
integration costs).                                                             

On a continuing operations basis, return on average assets for the      
first quarter of 2007 was 1.73%, (1.78% excluding merger and integration        
costs) compared with 1.50% in the first quarter of 2006 and 1.66% in the        
fourth quarter of 2006 (1.70% excluding merger and integration costs).          

Investment Securities                                                           
---------------------                                                           

The table below shows the distribution of the Company's securities    
portfolio:                                                                      

                                                                [Download Table]

Investment securities (at fair value)                                      

(In millions)                                          3/31/07     12/31/06
                                                    ----------   ----------
                                                                           
  Fixed income securities:                                                 
   Mortgage-backed securities                       $   20,890   $   17,785
   Asset-backed securities                                 436          464
   Corporate debt                                          284          256
   Short-term money market instruments                     522          531
   U.S. treasury securities                                 86           86
   U.S. government agencies                                673          673
   State and political subdivisions                         82           88
   Emerging market debt (collateralized                                    
     by U.S. treasury zero coupon obligations)             116          116
   Other foreign debt                                       10           10
                                                    ----------   ----------
   Subtotal fixed income securities                     23,099       20,009

  Equity securities:                                                       
   Money market or fixed income funds                      504        1,032
   Other                                                    78           46
                                                    ----------   ----------
   Subtotal equity securities                              582        1,078
                                                    ----------   ----------
  Total investment securities                       $   23,681   $   21,087
                                                    ==========   ==========

Total investment securities were $23.7 billion at March 31, 2007,     
compared with $27.1 billion at March 31, 2006, and $21.1 billion at             
December 31, 2006.  Average investment securities were $22.4 billion in the     
first quarter of 2007, compared with $23.2 billion in the first quarter of      
2006 and $20.7 billion in the fourth quarter of 2006.  The Company's            
portfolio of highly rated mortgage-backed securities are 86% rated AAA, 10%     
AA, and 4% A. In replacing securities that mature or are paid off, the          
Company has been adding either adjustable or short life classes of              
structured mortgage-backed securities, both of which have short durations.      
The effective duration of the Company's mortgage portfolio at March 31,         
2007 was approximately 1.74 years.                                              

Unrealized net loss on securities available-for-sale was $1 million at
March 31, 2007, compared with unrealized net losses of $195 million at          
March 31, 2006, and no unrealized net gain or loss at December 31, 2006.        
The asymmetrical accounting treatment of the impact of a change in interest     
rates                                                                           

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on the Company's balance sheet may create a situation in which an               
increase in interest rates can adversely affect reported equity and             
regulatory capital, even though economically there may be no impact on the      
economic capital position of the Company.  For example, an increase in          
rates will result in a decline in the value of the fixed-rate portion of        
the Company's fixed income investment portfolio, which will be reflected        
through a reduction in other comprehensive income in the Company's              
shareholders' equity, thereby affecting the tangible common equity ("TCE")      
ratio.  Under current accounting rules, there is no corresponding change in     
value of the Company's fixed-rate liabilities, even though economically         
these liabilities are more valuable as rates rise.                              

Loans                                                                           
-----                                                                           

                                                                [Download Table]


(In billions)                                                             
                                                          Quarterly       
                              Period End                   Average        
                      -------------------------  -------------------------
                      Total  Non-Margin  Margin  Total  Non-Margin  Margin
                      -----  ----------  ------  -----  ----------  ------
                                                                          
March 31, 2007        $38.3     $33.2     $5.1   $36.0     $30.6     $5.4 
December 31, 2006      37.8      32.7      5.1    35.3      30.1      5.2 
March 31, 2006         32.2      26.9      5.3    31.8      26.1      5.7 

Total loans were $38.3 billion at March 31, 2007, compared with $37.8 
billion at December 31, 2006.  The increase in total loans from December        
31, 2006 primarily reflects increased lending to financial institutions.        
Average total loans were $36.0 billion in the first quarter of 2007,            
compared with $31.8 billion in the first quarter of 2006. The increase in       
average loans from March 31, 2006 results from increased lending to             
financial institutions and purchases of residential mortgage loans.             

The following tables provide additional details on the Company's      
credit exposures and outstandings for continuing operations at March 31,        
2007 in comparison to December 31, 2006.                                        

Overall Loan Portfolio                                                          
----------------------                                                          

                                                                [Download Table]

                               March 31, 2007              December 31, 2006      
                        ----------------------------  ----------------------------
                                  Unfunded   Total              Unfunded   Total  
(In billions)            Loans  Commitments Exposure   Loans  Commitments Exposure
                        ----------------------------  ----------------------------
                                                                                  
Financial institutions  $   18.3  $   27.1  $   45.4  $   17.4  $   27.5  $   44.9
Corporate                    4.2      20.0      24.2       4.1      19.8      23.9
                        --------  --------  --------  --------  --------  --------
                            22.5      47.1      69.6      21.5      47.3      68.8
                        --------  --------  --------  --------  --------  --------
Consumer                     4.3       0.5       4.8       4.3       0.5       4.8
Leasing financings           4.9       0.1       5.0       5.5       0.1       5.6
Commercial real estate       1.5       1.2       2.7       1.4       1.4       2.8
Margin loans                 5.1         -       5.1       5.1         -       5.1
                        --------  --------  --------  --------  --------  --------
Total                   $   38.3  $   48.9  $   87.2  $   37.8  $   49.3  $   87.1
                        ========  ========  ========  ========  ========  ========

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Financial Institutions                                                          
----------------------                                                          

The financial institutions portfolio exposure was $45.4 billion at    
March 31, 2007, compared to $44.9 billion at December 31, 2006.  The            
increase in exposure from year-end 2006 reflects greater activity in the        
capital markets in the first quarter of 2007, which drove increased demands     
for credit from financial institutions.  These exposures are of high            
quality with 87% meeting the investment grade criteria of the Company's         
rating system.  These exposures are generally short-term, with 77% expiring     
within one year and are frequently secured.  For example, mortgage banking,     
securities industry, and investment managers often borrow against               
marketable securities held in custody at the Company.  The diversity of the     
portfolio is shown in the accompanying table:                                   

                                                        [Enlarge/Download Table]

(In billions)                                                                           
                                  March 31, 2007                  December 31, 2006     
                     --------------------------------------- ---------------------------
                             Unfunded   Total    %Inv   %due         Unfunded   Total   
Lending Division     Loans Commitments Exposures Grade <1 Yr Loans Commitments Exposures
-------------------  ----- ----------- --------- ----- ----- ----- ----------- ---------
                                                                                        
Banks                $ 7.2  $     5.4   $  12.6    73%   86% $ 5.7  $     5.5   $   11.2
Securities industry    5.5        4.7      10.2    86    96    6.0        5.4       11.4
Insurance              0.4        6.0       6.4   100    43    0.6        6.1        6.7
Government             0.1        7.2       7.3   100    64    0.1        6.7        6.8
Asset managers         4.8        2.0       6.8    86    86    4.7        1.9        6.6
Mortgage banks         0.2        0.7       0.9    72    49    0.2        0.7        0.9
Endowments             0.1        1.1       1.2   100    59    0.1        1.2        1.3
                     ----- ----------- --------- ----- ----- ----- ----------- ---------
   Total             $18.3  $    27.1   $  45.4    87%   77% $17.4  $    27.5   $   44.9
                     ===== =========== ========= ===== ===== ===== =========== =========

Corporate                                                                       
---------                                                                       

The corporate portfolio exposure increased to $24.2 billion at March  
31, 2007 from $23.9 billion at year-end 2006.  Approximately 75% of the         
portfolio is investment grade while 15% of the portfolio matures within one     
year.                                                                           

                                                        [Enlarge/Download Table]

(In billions)                                                                            
                                  March 31, 2007                  December 31, 2006      
                     --------------------------------------- --------------------------- 
                             Unfunded   Total    %Inv   %due         Unfunded   Total    
Lending Division     Loans Commitments Exposures Grade <1 Yr Loans Commitments Exposures 
-------------------  ----- ----------- --------- ----- ----- ----- ----------- --------- 
                                                                                         
Media                $ 0.9  $     1.7   $   2.6    73%    6% $ 1.2  $     2.0   $    3.2 
Cable                  0.2        0.3       0.5    74     -    0.2        0.4        0.6 
Telecom                  -        0.4       0.4    85     -      -        0.3        0.3 
                     ----- -----------  --------             ------ ----------- ---------
   Subtotal            1.1        2.4       3.5    74     5    1.4        2.7        4.1 
Energy                 0.7        5.2       5.9    83     6    0.6        5.0        5.6 
Retailing              0.1        2.8       2.9    88    41    0.1        2.3        2.4 
Automotive (1)         0.1        1.0       1.1    56    35    0.1        1.0        1.1 
Healthcare             0.4        1.5       1.9    80    11    0.5        1.8        2.3 
Other (2)              1.8        7.1       8.9    67    14    1.4        7.0        8.4 
                     ----- ----------- --------- ----- ----- ----- ----------- --------- 
   Total             $ 4.2  $    20.0   $  24.2    75%   15% $ 4.1  $    19.8   $   23.9 
                     ===== =========== ========= ===== ===== ===== =========== ========= 

<FN>                                                                                     
(1)  During the third quarter of 2005, the Company eliminated the Automotive division and
     transferred the customers to the other geographic lending divisions.  The amounts   
     in the table were constructed for analytical purposes.                              

(2)  Diversified portfolio of industries and geographies.                                
</FN>                                                                                    

The Company continues to seek to selectively reduce automotive        
exposures given ongoing weakness in the domestic automotive industry.           
Total exposures reported in the Automotive Division were down $11 million       
at March 31, 2007 compared with December 31, 2006. At March 31, 2007, this      
broadly defined industry portfolio consisted of exposures of $188 million       
to Big Three automotive manufacturing companies, $158 million to finance        
subsidiaries, $378 million to highly rated asset-backed securitization          
vehicles, $246 million to suppliers, and $141 million of other.                 

The Company's exposure to the airline industry, at March 31, 2007,    
consisted of a $294 million leasing portfolio, including a $17 million real     
estate lease exposure. At March 31, 2007, the airline-leasing portfolio         

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consisted of $91 million to major U.S. carriers, $141 million to foreign        
airlines and $62 million to U.S. regionals.                                     

During the first quarter of 2007, the airline industry continued to   
face difficult operating conditions. The industry's excess capacity and         
higher oil prices continued to have a dampening effect on aircraft values       
in the secondary market. Because of these factors, the Company continues to     
maintain a sizable allowance for loan losses against these exposures and to     
closely monitor the portfolio.                                                  

Counterparty Risk Ratings Profile                                               
---------------------------------                                               

The table below summarizes the risk ratings of the Company's foreign  
exchange and interest rate derivative counterparty credit exposure for the      
past year.                                                                      

                     For the Quarter Ended
                    --------------------------------------------------
Rating(1)                 3/31/07  12/31/06    9/30/06   6/30/06   3/31/06      
---------------------    --------------------------------------------------     
AAA to AA-                   75%       76%       77%        77%        77%      
A+ to A-                     13        12        10         10          8       
BBB+ to BBB-                  6         6         7          6          9       
Noninvestment Grade           6         6         6          7          6       
                    -------- --------- ---------- --------- ----------
Total                       100%      100%      100%       100%       100%      
                    ======== ========= ========== ========= ==========

(1) Represents credit rating agency equivalent of internal credit ratings.      

Nonperforming Assets                                                            
--------------------                                                            

                                                                [Download Table]

                                                           Change     Percent
                                                        3/31/2007 vs.   Inc/ 
(Dollars in millions)           3/31/2007   12/31/2006   12/31/2006     (Dec)
                                ---------   ----------   -----------  -------
                                                                             
Loans:                                                                       
     Commercial                 $      18   $      28    $      (10)    (36)%
     Foreign                            9           9             -       -  
                                ---------   ----------   -----------         
  Total nonperforming loans            27          37           (10)    (27) 
  Other assets owned                    2           1             1     100  
                                ---------   ----------   -----------         
Total nonperforming assets      $      29   $      38    $       (9)    (24) 
                                =========   ==========   ===========         

Nonperforming assets ratio            0.1%        0.1%                       
Allowance for loan                                                           
   losses/nonperforming loans     1,074.1       775.7                        
Allowance for loan                                                           
   losses/nonperforming assets    1,000.0       755.3                        
Total allowance for credit                                                   
   losses/nonperforming loans     1,574.1     1,181.1                        
Total allowance for credit                                                   
   losses/nonperforming assets    1,465.5     1,150.0                        


The sequential-quarter decrease in nonperforming assets primarily     
reflects a paydown of a loan to an auto parts supplier.                         

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Activity in Nonperforming Assets                                                

                                                                [Download Table]


(In millions)                              Quarter End         Quarter End    
                                         March 31, 2007     December 31, 2006 
                                       ------------------   ------------------
                                                                              
Balance at beginning of period           $           38       $           38  
   Additions                                         10                    8  
   Charge-offs                                        -                   (2) 
   Paydowns/Sales                                   (19)                  (6) 
                                       ------------------   ------------------
Balance at end of period                 $           29       $           38  
                                       ==================   ==================

Interest income would have been increased by $0.5 million and $0.4    
million for the first quarters of 2007 and 2006 if loans on nonaccrual          
status at March 31, 2007 and 2006 had been performing for the entire            
period.                                                                         

Impaired Loans                                                                  
--------------                                                                  

The table below sets forth information about the Company's impaired   
loans. The Company uses the discounted cash flow, collateral value, or          
market price methods for valuing its impaired loans:                            

                                                                [Download Table]

                                           March 31,  December 31,    March 31,
(In millions)                                   2007          2006         2006
                                        ------------  ------------  -----------
                                                                               
Impaired loans with an allowance        $         17  $          8  $        17
Impaired loans without an allowance(1)             -            19            -
                                        ------------  ------------  -----------
  Total impaired loans                  $         17  $         27  $        17
                                        ============  ============  ===========

Allowance for impaired loans(2)         $          2  $          1  $         4
Average balance of impaired loans                                              
 during the quarter                               25            22           17
Interest income recognized on                                                  
 impaired loans during the quarter               0.1           0.5            -

<FN>                                                                           
(1)  When the discounted cash flows, collateral value or market price equals   
     or exceeds the carrying value of the loan, then the loan does not require 
     an allowance under the accounting standard related to impaired loans.     
(2)  The allowance for impaired loans is included in the Company's allowance   
     for credit losses.                                                        
</FN>                                                                          

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Allowance                                                                       
---------                                                                       

                                                                [Download Table]


                                       March 31,   December 31,      March 31, 
(Dollars in millions)                       2007           2006           2006 
                                    ------------   ------------   ------------ 
                                                                               
   Margin loans                     $      5,133   $      5,167   $      5,312 
   Non-margin loans                       33,156         32,626         26,879 
                                    ------------   ------------   ------------ 
Total loans                         $     38,289   $     37,793   $     32,191 
                                    ============   ============   ============ 

  Allowance for loan losses         $        290   $        287   $        334 
  Allowance for lending-related                                                
    commitments                              135            150            140 
                                    ------------   ------------   ------------ 
Total allowance for                                                            
  credit losses                     $        425   $        437   $        474 
                                    ============   ============   ============ 
Allowance for loan losses                                                      
  as a percent of total loans               0.76%          0.76%          1.04%
Allowance for loan losses                                                      
  as a percent of non-margin loans          0.87           0.88           1.24 
Total allowance for credit losses                                              
  as a percent of total loans               1.11           1.16           1.47 
Total allowance for credit losses                                              
  as a percent of non-margin loans          1.28           1.34           1.76 

The total allowance for credit losses was $425 million, or 1.11% of   
total loans at March 31, 2007, compared with $474 million, or 1.47% of          
total loans at March 31, 2006 and $437 million, or 1.16% of total loans at      
December 31, 2006.  The decline in the allowance from the first quarter of      
2006 reflects the continued strong credit quality of the Company's loan         
portfolio.                                                                      

The Company has $5.1 billion of secured margin loans on its balance   
sheet at March 31, 2007.  The Company has rarely suffered a loss on these       
types of loans and does not allocate any of its allowance for credit losses     
to these loans.  As a result, the Company believes the ratio of total           
allowance for credit losses to non-margin loans is a more appropriate           
metric to measure the adequacy of the reserve.                                  

The ratio of the total allowance for credit losses to non-margin loans
was 1.28% at March 31, 2007, compared with 1.76% at March 31, 2006 and          
1.34% at December 31, 2006, reflecting improvement in the credit quality        
since the first quarter of 2006. The ratio of the allowance for loan losses     
to nonperforming assets was 1,000% at March 31, 2007, compared with 1,336%      
at March 31, 2006, and 755.3% at December 31, 2006.                             

The allowance for loan losses and the allowance for lending-related   
commitments consists of four elements: (1) an allowance for impaired            
credits (nonaccrual commercial credits over $1 million), (2) an allowance       
for higher risk rated credits, (3) an allowance for pass rated credits, and     
(4) an unallocated allowance based on general economic conditions and risk      
factors in the Company's individual markets.                                    

The first element, impaired credits, is based on individual analysis  
of all nonperforming commercial credits over $1 million. The allowance is       
measured by the difference between the recorded value of impaired loans and     
their fair value. Fair value is either the present value of the expected        
future cash flows from borrower, the market value of the loan, or the fair      
value of the collateral.                                                        

The second element, higher risk rated credits, is based on the        
assignment of loss factors for each specific risk category of higher risk       
credits.  The Company rates each credit in its portfolio that exceeds $1        
million and assigns the credits to specific risk pools.  A potential loss       
factor is assigned to each pool, and an amount is included in the allowance     
equal to the product of the amount of the loan in the pool and the risk         
factor.  Reviews of higher risk                                                 

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rated loans are conducted quarterly and the loan's rating is updated as         
necessary.  The Company prepares a loss migration analysis and compares         
its actual loss experience to the loss factors on an annual basis to attempt    
to ensure the accuracy of the loss factors assigned to each pool.               

The third element, pass rated credits, is based on the Company's      
expected loss model. Borrowers are assigned to pools based on their credit      
ratings.  The expected loss for each loan in a pool incorporates the            
borrower's credit rating, loss given default rating and maturity.  The          
credit rating is dependent upon the borrower's probability of default.  The     
loss given default incorporates a recovery expectation.  Borrower ratings       
are reviewed semi-annually at a minimum and are periodically mapped to          
third party, including rating agency and default and recovery, data bases       
to ensure ongoing consistency and validity.  Commercial loans over $1           
million are individually analyzed before being assigned a credit rating.        
The Company also applies this technique to its leasing and consumer             
portfolios.                                                                     

The fourth element, the unallocated allowance, is based on            
management's judgment regarding the following factors:                          

*  Economic conditions including duration of the current cycle;       

*  Past experience including recent loss experience;                  

*  Credit quality trends;                                             

*  Collateral values;                                                 

*  Volume, composition, and growth of the loan portfolio;             

*  Specific credits and industry conditions;                          

*  Results of bank regulatory and internal credit exams;              

*  Actions by the Federal Reserve Board;                              

  *  Delay in receipt of information to evaluate loans or confirm existing
credit deterioration; and                                       

*  Geopolitical issues and their impact on the economy.               

Based on an evaluation of these four elements, including individual   
credits, historical credit losses, and global economic factors, the Company     
has allocated its allowance for credit losses on a continuing operations        
basis as follows:                                                               

                                                                [Download Table]

                                               March 31,     December 31,
                                                   2007            2006  
                                            ------------     ----------- 
                                                                         
Domestic                                                                 
   Real Estate                                       2%               2% 
   Commercial                                       64               67  
   Consumer                                          6                6  
Foreign                                              1                2  
Unallocated                                         27               23  
                                            ------------     ----------- 
                                                   100%             100% 
                                            ============     =========== 

Such an allocation is inherently judgmental, and the entire allowance 
for credit losses is available to absorb credit losses regardless of the        
nature of the loss.                                                             

The unallocated allowance increase in the first quarter of 2007       
reflects various factors in the current credit environment, including           
potential spillover into other credit markets from the distress in the sub-     
prime mortgage markets.                                                         

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Deposits                                                                        
--------                                                                        

Total deposits were $59.0 billion at March 31, 2007, compared with    
$50.8 billion at March 31, 2006, and $62.1 billion at December 31, 2006.        
The increase from March 31, 2006 was primarily due to growth in the             
securities servicing businesses and the Acquired Corporate Trust Business.      
The sequential-quarter decline was primarily due to lower customer activity     
levels, which resulted in a reduced level of customer deposits at quarter       
end.  Noninterest-bearing deposits were $17.3 billion at March 31, 2007,        
compared with $19.5 billion at December 31, 2006.  Interest-bearing             
deposits were $41.7 billion at March 31, 2007, compared with $42.6 billion      
at December 31, 2006.                                                           

LIQUIDITY                                                                       

The Company maintains its liquidity through the management of its     
assets and liabilities, utilizing worldwide financial markets. The              
diversification of liabilities reflects the Company's efforts to maintain       
flexibility of funding sources under changing market conditions. Stable         
core deposits from the Company's securities servicing businesses and asset      
management and wealth management businesses are generated through the           
Company's diversified network and managed with the use of trend studies and     
deposit pricing. The use of derivative products such as interest rate swaps     
and financial futures enhances liquidity by enabling the Company to issue       
long-term liabilities with limited exposure to interest rate risk.              
Liquidity also results from the maintenance of a portfolio of assets which      
can be easily sold and the monitoring of unfunded loan commitments, thereby     
reducing unanticipated funding requirements. Liquidity is managed on both a     
consolidated basis and at The Bank of New York Company, Inc. parent company     
("Parent").                                                                     

On a continuing operations basis, non-core sources of funds such as   
money market rate accounts, certificates of deposits greater than $100,000,     
federal funds purchased, and other borrowings were $12.7 billion and $13.6      
billion on an average basis for the first three months of 2007 and 2006.        
Average foreign deposits, primarily from the Company's European-based           
securities servicing business, were $33.6 billion and $30.2 billion for the     
first three months of 2007 and 2006.  The increase in foreign deposits          
reflects greater liquidity from the Company's corporate trust and custody       
businesses.  Domestic savings and other time deposits were $1.0 billion on      
an average basis for the first three months of 2007 compared to $1.4            
billion in 2006. Average payables to customers and broker-dealers decreased     
to $4.7 billion from $5.2 billion in 2006.  The decline in payables to          
customers and broker-dealers primarily reflects lower customer balances and     
loss of a significant customer at Pershing. Long-term debt averaged $8.9        
billion and $8.0 billion for the first three months of 2007 and 2006,           
respectively.  The increase in long-term debt reflects the building of          
liquidity to pay debt maturing in 2007.  A significant reduction in the         
Company's securities servicing businesses would reduce its access to            
deposits.  Noninterest-bearing deposits increased to $14.9 billion from         
$10.1 billion in the first quarter of 2006, reflecting organic growth in        
securities servicing businesses and the acquisition of the Acquired             
Corporate Trust Business.                                                       

The Company's transaction with JPMorgan Chase altered the composition 
of the balance sheet.  When the Acquired Corporate Trust Business is fully      
integrated in 2007, approximately $14 billion of U.S. dollar retail             
deposits will have been replaced with between $11 billion and $14 billion       
of institutional corporate trust deposits.  Between $7 billion and $10          
billion of deposits related to the Acquired Corporate Trust Business have       
not yet transitioned to the Company.  These deposits will transition to the     
Company as regulatory approval is received to operate in certain foreign        
locations and as the novation process proceeds in other foreign locations.      
The Company expects the transition will be substantially complete by June       
30, 2007.  Until the transition is complete, JPMorgan Chase will pay the        
Company for the net economic value of these deposits. In the first quarter      
of 2007, the Company recorded $25 million of net economic value payments in     
noninterest income. On the asset side of the balance sheet, approximately       
$8 billion of retail and                                                        

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middle market loans sold to JPMorgan Chase have been replaced with liquid       
assets and securities.                                                          

The Parent has four major sources of liquidity: dividends from its    
subsidiaries, the commercial paper market, a revolving credit agreement         
with third party financial institutions, and access to the capital markets.     

At March 31, 2007, the Bank can pay dividends of approximately $888   
million to the Parent without the need for regulatory waiver.  This             
dividend capacity would increase in the remainder of 2007 to the extent of      
the Bank's net income less dividends.  Nonbank subsidiaries of the Parent       
have liquid assets of approximately $244 million.  These assets could be        
liquidated and the proceeds delivered by dividend or loan to the Parent.        

For the quarter ended March 31, 2007, the Parent's quarterly average  
commercial paper borrowings were $133 million compared with $447 million in     
2006.  At March 31, 2007, the Parent had cash of $2,097 million, compared       
with $685 million at March 31, 2006 and $908 million at December 31, 2006.      
Net of commercial paper outstanding, the Parent's cash position at March        
31, 2007 increased by $1,506 million compared with March 31, 2006.  The         
Parent has been increasing cash in anticipation of the repayment of long-       
term debt that matures in the next twelve months.                               

On October 10, 2006, the Company entered into a new credit agreement  
of $250 million with 11 financial institutions.  The fee on this facility       
depends on the Company's credit rating and is currently six basis points.       
The credit agreement requires the Company to maintain: shareholders' equity     
of $5 billion; a ratio of Tier 1 capital plus the allowance for credit          
losses to nonperforming assets of at least 2.5; a double leverage ratio         
less than 1.3; and adequate capitalization of all its banks for regulatory      
purposes.  This line of credit matures in October 2011.  There were no          
borrowings under this line of credit at March 31, 2007.                         

The Company also has the ability to access the capital markets.       
Access to the capital markets is partially dependent on the Company's           
credit ratings, which as of April 30, 2007 were as follows:                     

                                                                [Download Table]

                                                          The Bank of           
                   Parent          Parent  Parent Senior     New York           
               Commercial    Subordinated      Long-Term    Long-Term           
                    Paper  Long-Term Debt           Debt     Deposits  Outlook  
               ----------  --------------  -------------  -----------  -------  
                                                                                
Standard &                                                                      
 Poor's            A-1           A              A+            AA-       Stable  

Moody's            P-1           Aa3            Aa2           Aaa       Stable  

Fitch              F1+           A+             AA-           AA        Positive

Dominion Bond                                                                   
 Rating Service    R-1(middle)   A(high)        AA(low)       AA        Stable  

Moody's upgraded the Company's senior debt ratings for the Bank from  
Aa2 to Aaa in March 2007 and for the Parent from Aa3 to Aa2 in April 2007.      

The Parent's major uses of funds are payment of dividends, principal  
and interest on its borrowings, acquisitions, and additional investment in      
its subsidiaries.                                                               

The Parent has $700 million of long-term debt that becomes due in 2007
subsequent to March 31, 2007 and $1,450 million of long-term debt that is       
due in 2008.  The Company has $250 million of subordinated debt that became     
callable and steps up to a higher interest rate in 2007 and $400 million of     
subordinated debt that became callable and steps up to a higher interest        
rate in 2008.  The Company expects that it will call this debt when the         
interest rate steps up.  In addition, the Parent periodically has the           
option to call $339 million of subordinated debt in 2007, which it will         
call and refinance if market conditions are favorable.  The Parent expects      
to refinance any debt it repays by issuing a combination of senior and          
subordinated debt.                                                              

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The Company has $800 million of preferred trust securities that are   
callable in 2007. These securities qualify as Tier 1 Capital.  All of the       
Company's preferred trust securities are swapped to floating rate.  The         
Company has not yet decided if it will call these securities. The decision      
to call will be based on interest rates, the availability of cash and           
capital, and regulatory conditions.  If the Company calls the preferred         
trust securities, it expects to replace them with new preferred trust           
securities or senior or subordinated debt.  See discussion of qualification     
of preferred trust securities as capital in "Capital Resources."                

Double leverage is the ratio of investment in subsidiaries divided by 
the Company's consolidated equity plus preferred trust securities.  The         
Company's double leverage ratio at March 31, 2007 and 2006 was 101.34% and      
106.36%, respectively. The Company's target double leverage ratio is a          
maximum of 120%. The double leverage ratio is monitored by regulators and       
rating agencies and is an important constraint on the Company's ability to      
invest in its subsidiaries to expand its businesses.                            

Pershing LLC, an indirect subsidiary of the Company, has committed and
uncommitted lines of credit in place for liquidity purposes.  The committed     
line of credit of $500 million with four financial institutions matures in      
March 2008. Average daily borrowing under these lines was $4 million, in        
aggregate, during the first quarter of 2007.  Pershing LLC has three            
separate uncommitted lines of credit amounting to $1 billion in aggregate.      
Average daily borrowing under these lines was $9 million, in aggregate,         
during the first quarter of 2007.                                               

Pershing Limited, an indirect U.K.-based subsidiary of the Company,   
has committed and uncommitted lines in place for liquidity purposes. The        
committed lines of credit of $275 million with four financial institutions      
matures in March 2008. There were no borrowings against this line of credit     
during the first quarter of 2007.  Pershing Limited has three separate          
uncommitted lines of credit amounting to $300 million in aggregate. Average     
daily borrowing under these lines was $107 million, in aggregate, during        
the first quarter of 2007.                                                      

The following comments relate to the information disclosed in the     
Consolidated Statements of Cash Flows.                                          

Cash provided by operating activities was $2.0 billion for the first  
three months of 2007, compared with $0.5 billion provided by operating          
activities through March 31, 2006.  The source of funds in 2007 was             
principally due to trading activities and net income.  The source of funds      
in 2006 was principally due to the changes in accruals and other and net        
income.                                                                         

In the first three months of 2007, cash provided by investing         
activities was $0.3 billion as compared to cash used for investing              
activities in the first three months of 2006 of $1.0 billion.  In the first     
three months of 2007, changes in federal funds sold and securities              
purchased under resale agreements and paydowns of securities available-for-     
sale were a significant source of funds. Significant uses of funds in 2006      
were purchases of securities available-for-sale and changes in federal          
funds sold and securities purchased under resale agreements.                    

Through March 31, 2007, cash used for financing activities was $3.0   
billion, compared to $0.4 billion provided by financing activities in the       
first three months of 2006.  In the first three months of 2007, deposits        
were a significant use of funds.  Primary sources of funds in 2006 included     
deposits and net proceeds from the issuance of long-term debt.                  

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CAPITAL RESOURCES                                                               

Shareholders' equity was $11,527 million at March 31, 2007, compared  
with $10,101 million at March 31, 2006, and $11,593 million at December 31,     
2006.  During the first quarter of 2007, the Company retained $266 million      
of earnings.  Capital was also impacted by after-tax adjustments related to     
FSP FAS 13-2 of $389 million and FIN 48 of $27 million.  In April 2007, the     
Company declared a quarterly common stock dividend of 22 cents per share.       

In the first quarter of 2007, the Company issued $55 million of       
callable medium-term subordinated notes bearing interest at rates from          
5.60% to 5.85%.  The notes are due in 2022 and 2032 and are callable by the     
Company after three to five years.  The notes qualify as Tier 2 capital.        

In the first quarter of 2007, the Company also issued $750 million of 
five-year senior holding company debt. The issuance consisted of $500           
million at a floating rate of LIBOR plus 10 basis points and $250 million       
at a fixed rate tranche at five-year treasuries plus 57 basis points.           

Regulators establish certain levels of capital for bank holding       
companies and banks, including the Company and the Bank, in accordance with     
established quantitative measurements. For the Parent to maintain its           
status as a financial holding company, the Bank must, among other things,       
qualify as well capitalized. In addition, major bank holding companies such     
as the Parent are expected by the regulators to be well capitalized.  As of     
March 31, 2007 and 2006, the Company and the Bank were considered well          
capitalized on the basis of the ratios (defined by regulation) of Total and     
Tier 1 capital to risk-weighted assets and leverage (Tier 1 capital to          
average assets), which are shown as follows:                                    

                                                        [Enlarge/Download Table]

                     March 31, 2007      March 31, 2006                    Well      Adequately     
                   ------------------  ------------------     Company  Capitalized  Capitalized     
                    Company    Bank    Company      Bank      Targets   Guidelines   Guidelines     
                   ---------  -------  ---------  -------  ----------  -----------  -----------     
                                                                                                    
Tier 1 (1)             8.43%    8.43%      8.28%    9.14%       8.00%           6%           4%     
Total capital (2)     12.81    11.70      12.44    12.07                       10            8      
Leverage               6.80     6.95       6.51     7.26                        5          3-5      
Tangible common equity 5.31     5.92       5.52     6.67        5.00                                
Adjusted tangible                                                                                   
  common equity (3)    5.47     6.11       5.54     6.70                      N.A.         N.A.     

<FN>                                                                                                
(1) Tier 1 capital consists, generally, of common equity, preferred trust securities (subject to    
    limitations in 2009), and certain qualifying preferred stock, less goodwill and most other      
    intangibles.                                                                                    
(2) Total Capital consists of Tier 1 capital plus Tier 2 capital. Tier 2 capital consists,          
    generally, of certain qualifying preferred stock and subordinated debt and a portion of the     
    loan loss allowance.                                                                            
(3) Adjusted for deferred tax liabilities associated with non-tax deductible identifiable intangible
    assets.                                                                                         
</FN>                                                                                               

In a non-taxable business combination, such as the Company's planned  
merger with Mellon, deferred tax liabilities are recorded in relation to        
identifiable intangible assets.  The recording of this deferred tax             
liability results in an increase in goodwill equal to the amount of the         
liability. Bank regulators and some rating agencies and analysts adjust         
equity upward for the amount of this deferred tax liability since it is a       
liability for accounting purposes and will never require a cash settlement.     
As a result, the Company believes Tier 1 and adjusted TCE should be its         
primary capital metrics.                                                        

The Tier 1 and adjusted TCE ratios vary depending on the size of the  
balance sheet at quarter-end and the impact of interest rates on unrealized     
gains and losses among other factors. The balance sheet size fluctuates         
from quarter to quarter based on levels of customer and market activity. In     
general, when servicing clients are more actively trading securities,           
deposit balances and the balance sheet as a whole, are higher to finance        
these activities. For quarter-ends in 2007, the size of the balance sheet       
will depend on the novation of deposits and the receipt of approval to open     
new subsidiaries related to the Acquired Corporate Trust Business and the       
anticipated merger with Mellon.                                                 

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The Company's Tier 1 capital and Total Capital ratios were 8.43% and  
12.81% at March 31, 2007, compared with 8.28% and 12.44% at March 31, 2006,     
and 8.19% and 12.49% at December 31, 2006.  The leverage ratio was 6.80% at     
March 31, 2007, compared with 6.51% at March 31, 2006, and 6.67% at             
December 31, 2006.  The Company's TCE as a percentage of total assets was       
5.31% at March 31, 2007, compared with 5.52% at March 31, 2006, and 5.13%       
at December 31, 2006.  The Company's adjusted TCE as a percentage of total      
assets was 5.47% at March 31, 2007, compared with 5.54% at March 31, 2006,      
and 5.30% at December 31, 2006.                                                 

Certain accounting charges in the first quarter of 2007 reduced the   
Company's Tier 1 and adjusted TCE ratios to 8.43% and 5.47%.                    

A billion dollar change in risk-weighted assets changes the Tier 1    
ratio by 11 basis points while a $100 million change in common equity           
changes the Tier 1 ratio by 13 basis points.                                    

A billion dollar change in assets changes the adjusted TCE ratio by 6 
basis points while a $100 million change in common equity changes the           
adjusted TCE ratio by 11 basis points.                                          

At March 31, 2007, the Company has $1,150 million of trust preferred  
securities outstanding.  On March 1, 2005, the Board of Governors of the        
Federal Reserve System (the "FRB") adopted a final rule that allows the         
continued limited inclusion of trust preferred securities in the Tier 1         
capital of bank holding companies (BHCs). Under the final rule, the Company     
will be subject to a 15 percent limit in the amount of trust preferred          
securities that can be included in Tier 1 capital, net of goodwill, less        
any related deferred tax liability.  Amounts in excess of these limits will     
continue to be included in Tier 2 capital.  The final rule provides a five-     
year transition period, ending March 31, 2009, for application of               
quantitative limits.  Under the transition rules and the final rules, the       
Company expects all its trust preferred securities to continue to qualify       
as Tier 1 capital.  Both the Company and the Bank are expected to remain        
"well capitalized" under the final rule.                                        

The following table presents the components of the Company's risk-    
based capital at March 31, 2007 and 2006:                                       

                                                                [Download Table]

                                                             March 31,     
                                                        ------------------ 
(In millions)                                             2007       2006  
                                                        -------    ------- 
                                                                           
Shareholders' equity                                    $11,527    $10,101 
Trust preferred securities                                1,150      1,150 
Adjustments: Goodwill and intangibles                    (6,421)    (4,741)
             Other                                          248         88 
                                                        -------    ------- 
Tier 1 capital                                            6,504      6,598 
                                                        -------    ------- 
Qualifying unrealized equity security gains                   4          7 
Qualifying subordinated debt                              2,946      2,745 
Qualifying allowance for loan losses                        425        566 
                                                        -------    ------- 
Tier 2 capital                                            3,375      3,318 
                                                        -------    ------- 
Total risk-based capital                                $ 9,879    $ 9,916 
                                                        =======    ======= 
Total risk-adjusted assets                              $77,130    $79,697 
                                                        =======    ======= 

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TRADING ACTIVITIES                                                              

The fair value and notional amounts of the Company's financial        
instruments held for trading purposes at March 31, 2007 and 2006 are as         
follows:                                                                        

                                                                [Download Table]

                                       March 31, 2007          1Q07 Average   
                                --------------------------- ------------------
(In millions)                   Notional     Fair Value         Fair Value    
                                         ------------------ ------------------
Trading Account                  Amount  Assets Liabilities Assets Liabilities
---------------                 -------- ------ ----------- ------ -----------
                                                                              
Interest rate contracts:                                                      
  Futures and forward                                                         
    contracts                   $ 63,886 $    - $         - $    - $         -
  Swaps                          341,824  1,329         905  1,486       1,071
  Written options                208,423      -         631      -         684
  Purchased options              191,279    181           -    190           -
Foreign exchange contracts:                                                   
  Swaps                            2,457      -           -      -           -
  Written options                 10,593      -         113      -         113
  Purchased options               11,151     55           -     72           -
  Commitments to purchase                                                     
   and sell foreign exchange     125,099    297         267    410         390
Debt securities                        -  1,607         167  2,747         216
Credit derivatives                 1,899      5           6      3           9
Equities                          20,956    195         180    260         323
Commodities & other derivatives      268      6           1      4           1
                                         ------ ----------- ------ -----------
Total trading account                    $3,675 $     2,270 $5,172 $     2,807
                                         ====== =========== ====== ===========

                                                                [Download Table]

                                       March 31, 2006          1Q06 Average   
                                --------------------------- ------------------
(In millions)                   Notional     Fair Value         Fair Value    
                                         ------------------ ------------------
Trading Account                  Amount  Assets Liabilities Assets Liabilities
---------------                 -------- ------ ----------- ------ -----------
                                                                              
Interest rate contracts:                                                      
  Futures and forward                                                         
    contracts                   $ 98,606 $   32 $         - $    9 $         -
  Swaps                          261,730  1,416         826  1,886       1,174
  Written options                220,001      -       1,045      -       1,090
  Purchased options              182,731    190           -    174           -
Foreign exchange contracts:                                                   
  Swaps                            2,404      -           -      -           -
  Written options                  6,070      -         114      -          54
  Purchased options                7,913    125           -    100           -
  Commitments to purchase                                                     
   and sell foreign exchange      81,308    125         123     93         140
Debt securities                        -  5,143         176  4,715         234
Credit derivatives                 1,491      1           6      1           7
Equities                           5,383     97          68    135         118
                                         ------ ----------- ------ -----------
Total trading account                    $7,129 $     2,358 $7,113 $     2,817
                                         ====== =========== ====== ===========

The Company's trading activities are focused on acting as a market    
maker for the Company's customers.  The risk from these market making           
activities and from the Company's own positions is managed by the Company's     
traders and limited in total exposure as described below.                       

The Company manages trading risk through a system of position limits, 
a value at risk (VAR) methodology-based on a Monte Carlo simulation, stop       
loss advisory triggers, and other market sensitivity measures.  Risk is         
monitored and reported to senior management by a separate unit on a daily       
basis.  Based on certain assumptions, the VAR methodology is designed to        
capture the potential overnight pre-tax dollar loss from adverse changes in     
fair values of all trading positions.  The calculation assumes a one-day        
holding period for most instruments, utilizes a 99% confidence level, and       
incorporates the non-linear characteristics of options.  The VAR model is       
used to calculate economic                                                      

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capital, which is allocated to the business units for computing risk-adjusted   
performance.                                                                    

As VAR methodology does not evaluate risk attributable to             
extraordinary financial, economic or other occurrences, the risk assessment     
process includes a number of stress scenarios based upon the risk factors       
in the portfolio and management's assessment of market conditions.              
Additional stress scenarios based upon historic market events are also          
tested.  Stress tests by their design incorporate the impact of reduced         
liquidity and the breakdown of observed correlations. The results of these      
stress tests are reviewed weekly with senior management.                        

The following table indicates the calculated VAR amounts for the      
trading portfolio for the periods indicated.                                    

                                                                [Download Table]


(In millions)                             1st Quarter 2007            
Market Risk                     ------------------------------------- 
-----------                     Average   Minimum   Maximum   3/31/07 
                                -------   -------   -------   ------- 
                                                                      
Interest rate                   $   3.2   $   1.9   $   4.9   $   4.5 
Foreign exchange                    1.2       0.6       2.1       1.6 
Equity                              2.0       0.8       6.6       1.8 
Credit derivatives                  0.9       0.6       1.4       1.3 
Commodities                         1.7         -       3.3       3.3 
Diversification                    (2.0)       NM        NM      (3.4)
Overall portfolio                   7.0       3.0      10.9       9.1 

                                                                [Download Table]


(In millions)                             1st Quarter 2006                    
Market Risk                     -------------------------------------         
-----------                     Average   Minimum   Maximum   3/31/06         
                                -------   -------   -------   -------         
                                                                              
Interest rate                   $   2.8   $   2.0   $   4.4   $   2.9         
Foreign exchange                    1.0       0.6       1.7       0.8         
Equity                              0.8       0.5       1.2       0.9         
Credit derivatives                  0.9       0.6       1.2       0.9         
Diversification                    (1.4)       NM        NM      (1.4)        
Overall portfolio                   4.1       3.3       5.4       4.1         

<FN>                                                                          
NM - Because the minimum and maximum may occur on different days for different
     risk components, it is not meaningful to compute a portfolio             
     diversification effect.                                                  
</FN>                                                                         

During the first quarter of 2007, interest rate risk generated        
approximately 31% of average VAR, credit derivatives risk generated 13% of      
average VAR, foreign exchange risk accounted for 12% of average VAR,            
commodities risk generated 25% of average VAR, and equity risk generated        
19% of average VAR. The commodities VAR reflects the option contract the        
Company uses to hedge its Section 29 synthetic fuel tax credits.  During        
the first quarter of 2007, the Company's daily trading loss did not exceed      
the Company's calculated VAR amounts on any given day.                          

The following table of total daily revenue or loss captures trading   
volatility and shows the number of days in which the Company's trading          
revenues fell within particular ranges during the past year:                    

                                                                [Download Table]

Distribution of Revenues(1)                                                 
--------------------------                                                  
                                         For the Quarter Ended              
                          --------------------------------------------------
(Dollars in millions)      3/31/07  12/31/06   9/30/06    6/30/06   3/31/06 
                          --------------------------------------------------
Revenue Range                            Number of Occurrences              
----------------------    --------- --------- --------- ---------- ---------
                                                                            
Less than $(2.5)               0         0          0         0         0   
$(2.5)~ $ 0                    6         4          3         2         4   
$ 0   ~ $ 2.5                 33        45         52        39        40   
$ 2.5 ~ $ 5.0                 20        11          8        21        18   
More than $5.0                 3         2          0         2         0   

<FN>                                                                        
(1) Based on revenues before deducting share of joint venture partner,      
    Susquehanna Trading.                                                    
</FN>                                                                       

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ASSET/LIABILITY MANAGEMENT                                                      

The Company's asset/liability management activities include lending,  
investing in securities, accepting deposits, raising money as needed to         
fund assets, and processing securities and other transactions.  The market      
risks that arise from these activities are interest rate risk, and to a         
lesser degree, foreign exchange risk.  The Company's primary market risk is     
exposure to movements in U.S. dollar interest rates.  Exposure to movements     
in foreign currency interest rates also exists, but to a significantly          
lower degree.  The Company actively manages interest rate sensitivity.  In      
addition to gap analysis, the Company uses earnings simulation and              
discounted cash flow models to identify interest rate exposures.                

An earnings simulation model is the primary tool used to assess       
changes in pre-tax net interest income.  The model incorporates                 
management's assumptions regarding interest rates, balance changes on core      
deposits, and changes in the prepayment behavior of loans and securities,       
and the impact of derivative financial instruments used for interest rate       
risk management purposes.  These assumptions have been developed through a      
combination of historical analysis and future expected pricing behavior.        
These assumptions are inherently uncertain, and, as a result, the earnings      
simulation model cannot precisely estimate net interest income or the           
impact of higher or lower interest rates on net interest income.  Actual        
results may differ from projected results due to timing, magnitude and          
frequency of interest rate changes and changes in market conditions and         
management's strategies, among other factors.                                   

The Company evaluates the effect on earnings by running various       
interest rate ramp scenarios up and down from a baseline scenario, which        
assumes no changes in interest rates.  These scenarios are reviewed to          
examine the impact of large interest rate movements.  Interest rate             
sensitivity is quantified by calculating the change in pre-tax net interest     
income between the scenarios over a 12-month measurement period.  The           
measurement of interest rate sensitivity is the percentage change in net        
interest income as shown in the following table:                                

                                                                [Download Table]

(Dollars in millions)                  Estimated Changes in Net Interest Income
                                                       Pro Forma               
                                       ----------------------------------------
                                          March 31, 2007     December 31, 2006 
                                             $         %         $        %    
                                        --------- --------   ---------- ------ 
                                                                               
 +200 Basis Point Ramp vs. Stable Rate  $    15       0.8%   $     4      0.2% 
 +100 Basis Point Ramp vs. Stable Rate       18       1.0         17      0.9  
 -100 Basis Point Ramp vs. Stable Rate      (13)     (0.7)       (13)    (0.7) 
 -200 Basis Point Ramp vs. Stable Rate      (25)     (1.4)       (35)    (1.9) 

The pro forma data in the above table reflects the swap with JPMorgan 
Chase as if the transaction was fully integrated into the Company on March      
31, 2007 and December 31, 2006. The Company's swap with JPMorgan Chase would    
have resulted in a more liability-sensitive balance sheet because corporate     
trust liabilities reprice more quickly than retail deposits. However, among     
other actions, the Company restructured its investment portfolio to readjust    
its interest rate sensitivity.                                                  

The baseline scenario's Fed Funds rate in the March 31, 2007 analysis 
and the December 31, 2006 analysis was 5.25%.  The 100 basis point ramp         
scenarios assumes short-term rates change 25 basis points in each of the        
next four quarters, while the 200 basis point ramp scenarios assumes a 50       
basis point per quarter change.  Both the +100 basis point and the +200         
basis point March 31, 2007 scenarios assume a steepening of the yield curve     
with 10-year rates rising 184 and 284 basis points respectively.  These         
scenarios do not reflect strategies that management could employ to limit       
the impact as interest rate expectations change.                                

The above table relies on certain critical assumptions including      
depositors' behavior related to interest rate fluctuations and the              
prepayment and extension risk in certain of the Company's assets.  To the       
extent that actual behavior is different from that assumed in the models,       
there could be a change in interest rate sensitivity.                           

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STATISTICAL INFORMATION                                                         

                                                        [Enlarge/Download Table]

                                 THE BANK OF NEW YORK COMPANY, INC.                                
                     Average Balances and Rates on a Taxable Equivalent Basis                      
                                  (Dollars in millions)                                            

                                             For the three months         For the three months     
                                             ended March 31, 2007         ended March 31, 2006(1)  
                                         ----------------------------  ----------------------------
                                          Average             Average   Average             Average
                                          Balance   Interest   Rate     Balance   Interest   Rate  
                                         --------   --------  -------  --------   --------  -------
                                                                                                   
ASSETS                                                                                             
------                                                                                             
Interest-bearing                                                                                   
 deposits in banks                                                                                 
 (primarily foreign)                     $  13,546  $    146    4.36%  $   9,624  $     86    3.61%
Federal funds sold and securities                                                                  
 purchased under resale agreements           4,435        57    5.23       1,691        15    3.64 
Margin loans                                 5,401        84    6.33       5,655        77    5.54 
Non-margin loans                                                                                   
 Domestic offices                           19,231       244    5.11      16,321       184    4.54 
 Foreign offices                            11,321       163    5.85       9,815       126    5.21 
                                         ---------  --------           ---------  --------         
   Total non-margin loans                   30,552       407    5.38      26,136       310    4.79 
                                         ---------  --------           ---------  --------         
Securities                                                                                         
 U.S. government obligations                    86         1    4.95         225         2    4.22 
 U.S. government agency obligations          2,905        37    5.07       3,953        44    4.45 
 Obligations of states and                                                                         
  political subdivisions                        86         2    8.22         118         3    8.04 
 Other securities                           19,311       255    5.30      18,919       232    4.89 
 Trading securities                          2,753        34    4.99       4,714        51    4.42 
                                         ---------  --------           ---------  --------         
   Total securities                         25,141       329    5.25      27,929       332    4.76 
                                         ---------  --------           ---------  --------         
Total interest-earning assets               79,075     1,023    5.22      71,035       820    4.65 
                                                    --------                      --------         
Allowance for credit losses                   (286)                         (333)                  
Cash and due from banks                      2,424                         4,269                   
Other assets                                20,762                        16,860                   
Assets of discontinued operations                                                                  
 held for sale                                  66         -              14,302       185    5.24 
                                         ---------  --------           ---------  --------         
   TOTAL ASSETS                          $ 102,041  $  1,023           $ 106,133  $  1,005         
                                         =========  ========           =========  ========         

LIABILITIES AND SHAREHOLDERS' EQUITY                                                               
------------------------------------                                                               
Interest-bearing deposits                                                                          
 Money market rate accounts              $   6,169  $     45    2.98%  $   5,426  $     31    2.29%
 Savings                                       416         2    1.85         468         1    1.13 
 Certificates of deposit of                                                                        
  $100,000 & over                            3,133        42    5.43       4,246        48    4.59 
 Other time deposits                           584         7    5.18         903        10    4.41 
 Foreign offices                            33,560       304    3.67      30,220       208    2.80 
                                         ---------  --------           ---------  --------         
  Total interest-bearing deposits           43,862       400    3.70      41,263       298    2.93 
Federal funds purchased and                                                                        
 securities sold under repurchase                                                                  
 agreements                                  1,527        19    4.97       1,966        20    4.19 
Other borrowed funds                         1,870        13    2.88       1,980        20    4.02 
Payables to customers and broker-dealers     4,747        42    3.59       5,231        40    3.10 
Long-term debt                               8,888       120    5.42       8,011        96    4.81 
                                         ---------  --------           ---------  --------         
  Total interest-bearing liabilities        60,894       594    3.95      58,451       474    3.28 
                                                    --------                      --------         
Noninterest-bearing deposits                14,903                        10,119                   
Other liabilities                           14,901                        13,373                   
Common shareholders' equity                 11,277                         9,888                   
Liabilities of discontinued operations                                                             
 held for sale                                  66         -              14,302        36    1.02 
                                         ---------  --------           ---------  --------         
   TOTAL LIABILITIES AND                                                                           
   SHAREHOLDERS' EQUITY                  $ 102,041  $    594           $ 106,133   $   510         
                                         =========  ========           =========   =======         
Interest earnings,                                                                                 
  continuing operations                             $    429                       $   346         
                                                    ========                       =======         
Net interest margin                                             2.18%                         1.95%
                                                              =======                       =======
<FN>                                                                                               
Note:                                                                                              
    (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.                                                                                      
</FN>                                                                                              

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SUPPLEMENTAL INFORMATION                                                        

   On October 1, 2006, the Company acquired JPMorgan Chase's corporate trust
business and sold to JPMorgan Chase the Company's Retail Business.  The         
transaction further increased the Company's focus on the securities services    
and asset management businesses that are at the core of its long-term business  
strategy.                                                                       

   For the quarters ended March 31, 2007 and March 31, 2006, the Company has
prepared supplemental financial information as follows:                         

*  Full income statement for the Retail Business, which is reflected as         
discontinued operations                                                   
*  Adjusted results, which combine continuing and discontinued operations       
to provide continuity with historical results                             
*  Continuing operations and adjusted results including and excluding           
merger and integration costs                                              

The Company believes that providing supplemental adjusted non-GAAP    
financial information is useful to investors in understanding the underlying    
operating performance of the Company and its businesses and performance         
trends, particularly in view of the materiality and strategic significance of   
the JPMorgan Chase transaction.  By combining the results of continuing and     
discontinued operations and excluding merger and integration costs, the         
Company believes investors can gain greater insight into the operating          
performance of the Company in relation to historic results.  Although the       
Company believes that the non-GAAP financial measures presented in this report  
enhance investors' understanding of the Company's business and performance,     
these non-GAAP measures should not be considered an alternative to GAAP.        

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                                                        [Enlarge/Download Table]


                                                  THE BANK OF NEW YORK COMPANY, INC.                         
                                                         SUPPLEMENTAL INFORMATION                            
                                                         ------------------------                            
                                                    Consolidated Statements of Income                        
                                             (Dollars in millions, except per share amounts)                 
                                                              (Unaudited)                                    

                                 Quarter Ended March 31, 2007              Quarter Ended March 31, 2006      
                          ----------------------------------------  -----------------------------------------
                          Continuing    Discontinued    Adjusted    Continuing    Discontinued    Adjusted   
                          Operations     Operations     Results (1) Operations    Operations      Results (1)
                          ----------   -------------    ----------  ----------    ------------    -----------
                                                                                                             
Noninterest income                                                                                           
------------------                                                                                           
Securities servicing fees                                                                                    
 Asset servicing              $  393          $    -        $  393      $  335          $    -        $  335 
 Issuer services                 319               -           319         154               -           154 
 Clearing services               278               -           278         342               -           342 
                              ------          ------        ------      ------          ------        ------ 
   Total securities                                                                                          
     servicing fees              990               -           990         831               -           831 
Global payment services           50               -            50          51               8            59 
Asset and wealth                                                                                             
  management fees                153               -           153         127              11           138 
Performance fees                  14               -            14           7               -             7 
Financing-related fees            52               -            52          63              37           100 
Foreign exchange and other                                                                                   
  trading activities             128               -           128         113               2           115 
Securities gains/(losses)          2               -             2          (4)              -            (4)
Asset/investment income           35               -            35          34               -            34 
Other                             51              14            65          43              13            56 
                              ------          ------        ------      ------          ------        ------ 
    Total noninterest income   1,475              14         1,489       1,265              71         1,336 
                              ------          ------        ------      ------          ------        ------ 
Net interest income                                                                                          
-------------------              427               -           427         339             149           488 
Provision for credit losses      (15)              -           (15)          -               5             5 
                              ------          ------        ------      ------          ------        ------ 
Net interest income after                                                                                    
    provision for                                                                                            
      credit losses              442               -           442         339             144           483 
                              ------          ------        ------      ------          ------        ------ 
Noninterest expense                                                                                          
-------------------                                                                                          
Staff                            720               9           729         604              64           668 
Net occupancy                     79               -            79          68              20            88 
Furniture and equipment           50               -            50          51               2            53 
Clearing                          37               -            37          50               -            50 
Sub-custodian expenses            34               -            34          34               -            34 
Software                          54               -            54          55               1            56 
Business development              30               -            30          23               9            32 
Communications                    19               -            19          26               1            27 
Professional, legal, and other                                                                               
  purchased services             130               2           132          82               8            90 
Distribution and servicing         4               -             4           4               -             4 
Amortization of intangibles       28               -            28          13               -            13 
Merger and integration costs      15               8            23           -               -             - 
Other                             72               -            72          59               8            67 
                              ------          ------        ------      ------          ------        ------ 
    Total noninterest expense  1,272              19         1,291       1,069             113         1,182 
                              ------          ------        ------      ------          ------        ------ 
Income before income taxes       645              (5)          640         535             102           637 
Income taxes                     208              (2)          206         175              40           215 
                              ------          ------        ------      ------          ------        ------ 
Net income                       437              (3)          434         360              62           422 
Merger and integration cost,                                                                                 
  net of taxes                    10               5            15           -               -             - 
                              ------          ------        ------      ------          ------        ------ 
Net income excluding merger                                                                                  
  and integration costs       $  447          $    2        $  449      $  360          $   62        $  422 
                              ======          ======        ======      ======          ======        ====== 

Diluted earnings per share    $ 0.57          $    -        $ 0.57      $ 0.47          $ 0.08        $ 0.55 
Diluted earnings per share                                                                                   
  excluding merger and                                                                                       
  integration costs             0.59               -          0.59        0.47            0.08          0.55 

<FN>                                                                                                         
Note:                                                                                                        
  (1)  Adjusted results combine continuing and discontinued operations to provide continuity with historical 
       results.                                                                                              
</FN>                                                                                                        

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MERGER AGREEMENT WITH MELLON FINANCIAL CORPORATION ("MELLON")                   

On December 3, 2006, the Company and Mellon entered into an Agreement 
and Plan of Merger (the "Merger Agreement"), pursuant to which the Company      
and Mellon will each merge with and into a newly formed corporation to be       
called The Bank of New York Mellon Corporation.  The boards of directors        
of both companies have unanimously approved the Merger Agreement.  The          
parties amended and restated the Merger Agreement on February 23, 2007 and      
again on March 30, 2007.  The board of directors of each company has            
adopted a resolution recommending the adoption of the Merger Agreement by       
its respective shareholders, and each party has agreed to put these             
matters before their respective shareholders for consideration.  Subject        
to the customary closing conditions, the merger is expected to close early      
in the third quarter of 2007. The Company and Mellon filed a joint proxy        
statement/prospectus with the Securities and Exchange Commission ("SEC")        
regarding the proposed merger in late February and filed amendments to the      
joint proxy statement/prospectus with the SEC in April.  The joint proxy        
statement/prospectus became effective on April 17, 2007.  The Company and       
Mellon will each hold separate special shareholder meetings on May 24,          
2007 to approve the merger for shareholders of record as of April 12,           
2007.                                                                           

FORWARD-LOOKING STATEMENTS AND RISK FACTORS                                     

Some statements in this document are forward-looking. These include   
all statements about the future results of the Company, projected business      
growth, statements with respect to the proposed merger with Mellon,             
expectations with respect to operations after the merger, the expected          
outcome of legal, regulatory and investigatory proceedings, predicted loan      
losses, and the Company's plans, objectives and strategies. In this             
report, any press release or any oral statement that the Company or its         
executives may make, words such as "estimate," "forecast," "project,"           
"anticipate," "confident," "target," "expect," "intend," "think,"               
"continue," "seek," "believe," "plan," "goal," "could," "should," "may,"        
"will," "strategy," "highly attractive," "rapidly evolving financial            
markets," "synergies," "opportunities," "superior returns," "well-              
positioned," "trends," "pro forma" and words of similar meaning, signify        
forward-looking statements.                                                     

In addition, with respect to the Mellon transaction, actual results   
may differ materially from the anticipated results or other expectations        
expressed in the forward-looking statements as a result of risks and            
uncertainties, including but not limited to, the businesses of the Company      
and Mellon may not be integrated successfully or the integration may be         
more difficult, time-consuming or costly than expected; the combined            
company may not realize, to the extent or at the time the Company expects,      
revenue synergies and cost savings from the transaction; revenues               
following the transaction may be lower than expected as a result of losses      
of customers or other reasons; deposit attrition, operating costs,              
customer loss and business disruption following the transaction,                
including, without limitation, difficulties in maintaining relationships        
with employees, may be greater than expected; governmental approvals of         
the transaction may not be obtained on the proposed terms or expected           
timeframe; a weakening of the economies in which the combined company will      
conduct operations may adversely affect the Company's operating results;        
the Company's and Mellon's shareholders may fail to approve the                 
transaction; the U.S. and foreign legal and regulatory framework could          
adversely affect the operating results of the combined company; and             
fluctuations in interests rates, currency exchange rates and securities         
prices may adversely affect the operating results of the combined company.      
Additional factors that could cause the Company's and Mellon's results to       
differ materially from those described in the forward-looking statements        
can be found in The Bank of New York Company, Inc.'s and Mellon Financial       
Corporation's Annual Report on Form 10-K for the year ended December 31,        
2006 and any subsequent reports filed with the SEC pursuant to the              
Securities Exchange Act of 1934, as amended, as well as other                   
uncertainties affecting future results and the value of the Company's           
stock.                                                                          

Forward-looking statements, including the Company's discussions and   
projections of future results of operations and discussions of future           
plans contained in the MD&A and elsewhere in this Form 10-Q, are based on       

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management's current expectations and assumptions that involve risks and        
uncertainties and that are subject to change based on various important         
factors (some of which are beyond the Corporation's control), including         
adverse changes in market conditions and the timing of such changes, and        
the actions that management could take in response to these changes.            
Actual results may differ materially from those expressed or implied as a       
result of these risks and uncertainties. The "Risk Factors" discussed in        
the section "Forward-Looking Statements and Risk Factors" in Part I, Item       
1A of the Company's Annual Report on Form 10-K for the year ended December      
31, 2006 could cause or contribute to such differences.  Investors should       
consider all risks mentioned elsewhere in this document and in subsequent       
reports filed by the Company with the SEC pursuant to the Securities and        
Exchange Act of 1934, as amended, as well as other uncertainties affecting      
future results and the value of the Company's stock.                            

All forward-looking statements speak only as of the date on which     
such statements are made, and the Company undertakes no obligation to           
update any statement to reflect events or circumstances after the date on       
which such forward-looking statement is made or to reflect the occurrence       
of unanticipated events.                                                        

MELLON TRANSACTION                                                              

The proposed transaction between The Bank of New York Company, Inc.   
and Mellon Financial Corporation will be submitted to The Bank of New York      
Company, Inc.'s and Mellon Financial Corporation's shareholders for their       
consideration. In connection with the proposed transaction, The Bank of         
New York Mellon Corporation, an entity formed by The Bank of New York           
Company, Inc. and Mellon Financial Corporation for purposes of                  
facilitating the proposed transaction, has filed a registration statement       
on Form S-4 (Registration No. 333-140863) containing a definitive joint         
proxy statement/prospectus that has been mailed to the shareholders of          
each of The Bank of New York Company, Inc. and Mellon Financial                 
Corporation. Shareholders are urged to read the registration statement and      
the joint proxy statement/prospectus regarding the proposed transaction         
and any other relevant documents filed with the Securities and Exchange         
Commission, as well as any amendments or supplements to those documents,        
because they will contain important information. Shareholders may obtain a      
free copy of the joint proxy statement/prospectus, as well as other             
filings containing information about The Bank of New York Company, Inc.,        
Mellon Financial Corporation and The Bank of New York Mellon Corporation,       
without charge, at the SEC's Internet site (http://www.sec.gov). Copies of      
the joint proxy statement/prospectus and other SEC filings that are             
incorporated by reference in the joint proxy statement/prospectus are also      
available, without charge, from The Bank of New York Company, Inc.,             
Investor Relations, One Wall Street, 31st Floor, New York, New York 10286       
(212-635-1578), or from Mellon Financial Corporation, Secretary of Mellon       
Financial Corporation, One Mellon Center, Pittsburgh, Pennsylvania 15258-       
0001 (800-205-7699).                                                            

Directors and executive officers of The Bank of New York Company,     
Inc. and Mellon Financial Corporation and other persons may be deemed to        
be participants in the solicitation of proxies from the shareholders of         
The Bank of New York Company Inc. and/or Mellon Financial Corporation, in       
respect of the proposed transaction. Information about the directors and        
executive officers of The Bank of New York Company, Inc. is set forth in        
the proxy statement for The Bank of New York Company, Inc.'s annual             
meeting of shareholders, as filed with the SEC on March 14, 2007.               
Information about the directors and executive officers of Mellon Financial      
Corporation is set forth in the proxy statement for Mellon Financial            
Corporation's 2007 annual meeting of shareholders, as filed with the SEC        
on March 19, 2007. Additional information regarding the participants in         
the proxy solicitation and a description of their direct and indirect           
interests, by security holdings or otherwise, is contained in the               
definitive joint proxy statement/prospectus.                                    

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GOVERNMENT MONETARY POLICIES AND COMPETITION                                    

Government Monetary Policies                                                    
----------------------------                                                    
The Federal Reserve Board has the primary responsibility for United   
States monetary policy.  Its actions have an important influence on the         
demand for credit and investments and the level of interest rates, and thus     
on the earnings of the Company.                                                 

Competition                                                                     
-----------                                                                     
The businesses in which the Company operates are very competitive.    
Competition is provided by both unregulated and regulated financial             
services organizations, whose products and services span the local,             
national, and global markets in which the Company conducts operations.          

A wide variety of domestic and foreign companies compete for          
processing services. For securities servicing and global payment services,      
international, national, and regional commercial banks, trust banks,            
investment banks, specialized processing companies, outsourcing companies,      
data processing companies, stock exchanges, and other business firms offer      
active competition.  In the asset management and wealth management markets,     
international, national, and regional commercial banks, standalone asset        
management companies, mutual funds, securities brokerage firms, insurance       
companies, investment counseling firms, and other business firms and            
individuals actively compete for business. Commercial banks, savings banks,     
savings and loan associations, and credit unions actively compete for           
deposits, and money market funds and brokerage houses offer deposit-like        
services.  These institutions, as well as commercial finance companies,         
factors, insurance companies and pension trusts, are important competitors      
for various types of loans. Issuers of commercial paper compete actively        
for funds and reduce demand for bank loans.                                     

WEBSITE INFORMATION                                                             

The Company makes available on its website:  www.bankofny.com         

*  All of its SEC filings, including annual report on Form 10-K,                
quarterly reports on Form 10-Q, current reports on Form 8-K               
and all amendments to these reports, SEC Forms 3, 4 and 5 and             
its proxy statement as soon as reasonably practicable after               
such material is electronically filed with or furnished to the            
SEC,                                                                      

*  Its earnings releases and management conference calls and                    
presentations, and                                                        

*  Its corporate governance guidelines and the charters of the                  
Audit and Examining, Compensation and Organization, and                   
Nominating and Governance Committees of its Board of                      
Directors.                                                                

The corporate governance guidelines and committee charters are        
available in print to any shareholder who requests them. Requests should be     
sent to The Bank of New York Company, Inc., Corporate Communications, One       
Wall Street, NY, NY 10286.                                                      

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                                  THE BANK OF NEW YORK COMPANY, INC.                       
                                     Consolidated Balance Sheets                           
                             (Dollars in millions, except per share amounts)               
                                           (Unaudited)                                     

                                                                March 31,      December 31,
                                                                  2007             2006    
                                                              -----------     -----------  
                                                                                           
Assets                                                                                     
------                                                                                     
Cash and due from banks                                       $     2,159     $     2,840  
Interest-bearing deposits with banks                               13,474          13,172  
Federal funds sold and securities purchased                                                
  under resale agreements                                           1,712           5,114  
Securities                                                                                 
  Held-to-maturity (fair value of                                                          
    $1,557 at 03/31/07 and $1,710 at 12/31/06)                      1,572           1,729  
  Available-for-sale                                               22,124          19,377  
                                                              -----------     -----------  
    Total securities                                               23,696          21,106  
Trading assets at fair value                                        3,675           5,544  
Loans                                                              38,289          37,793  
Reserve for loan losses                                              (290)           (287) 
                                                              -----------     -----------  
  Net loans                                                        37,999          37,506  
Premises and equipment                                              1,064           1,050  
Accrued interest receivable                                           409             422  
Goodwill                                                            5,131           5,172  
Intangible assets                                                   1,447           1,453  
Other assets                                                        9,061           9,973  
Assets of discontinued operations held for sale                        21              18  
                                                              -----------     -----------  
     Total assets                                             $    99,848     $   103,370  
                                                              ===========     ===========  

Liabilities                                                                                
-----------                                                                                
Deposits                                                                                   
 Noninterest-bearing (principally domestic offices)           $    17,269     $    19,554  
 Interest-bearing deposits in domestic offices                      9,312          10,041  
 Interest-bearing deposits in foreign offices                      32,435          32,551  
                                                              -----------     -----------  
     Total deposits                                                59,016          62,146  
Federal funds purchased and securities                                                     
  sold under repurchase agreements                                    773             790  
Trading liabilities                                                 2,270           2,507  
Payables to customers and broker-dealers                            6,739           7,266  
Other borrowed funds                                                1,714           1,625  
Accrued taxes and other expenses                                    4,153           5,129  
Other liabilities (including allowance for                                                 
  lending-related commitments of                                                           
  $135 at 03/31/07 and $150 at 12/31/06)                            4,007           3,477  
Long-term debt                                                      9,585           8,773  
Liabilities of discontinued operations held for sale                   64              64  
                                                              -----------     -----------  
     Total liabilities                                             88,321          91,777  
                                                              -----------     -----------  
Shareholders' Equity                                                                       
--------------------                                                                       
 Common stock-par value $7.50 per share,                                                   
  authorized 2,400,000,000 shares, issued                                                  
  1,054,488,125 shares at 03/31/07 and                                                     
  1,053,752,916 shares at 12/31/06                                  7,909           7,903  
 Additional capital                                                 2,203           2,142  
 Retained earnings                                                  9,294           9,444  
 Accumulated other comprehensive income                              (337)           (317) 
                                                               ----------     -----------  
                                                                   19,069          19,172  
Less: Treasury stock (296,062,120 shares at 03/31/07 and                                   
        297,790,159 shares at 12/31/06), at cost                    7,539           7,576  
      Loan to ESOP (101,753 shares at 03/31/07                                             
        and 12/31/06), at cost                                          3               3  
                                                              -----------     -----------  
     Total shareholders' equity                                    11,527          11,593  
                                                              -----------     -----------  
     Total liabilities and shareholders' equity               $    99,848     $   103,370  
                                                              ===========     ===========  

<FN>                                                                                       
Notes:(1) See accompanying Notes to Consolidated Financial Statements.                     
      (2) The balance sheet at December 31, 2006 has been derived from the audited         
          financial statements at that date.                                               
</FN>                                                                                      

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                            THE BANK OF NEW YORK COMPANY, INC.                              
                             Consolidated Statements of Income                              
                          (In millions, except per share amounts)                           
                                       (Unaudited)                                          

                                                               Quarter Ended                
                                                       ----------------------------         
                                                        March 31, Dec 31,  March 31,        
                                                          2007     2006     2006            
                                                        --------- -------  --------         
                                                                                            
Noninterest Income                                                                          
------------------                                                                          
  Securities servicing fees                                                                 
    Asset servicing                                      $  393   $  355   $  335           
    Issuer services                                         319      340      154           
    Clearing services                                       278      263      342           
                                                         ------   ------   ------           
      Total securities servicing fees                       990      958      831           
  Global payment services                                    50       51       51           
  Asset and wealth management fees                          153      154      127           
  Performance fees                                           14       18        7           
  Financing-related fees                                     52       61       63           
  Foreign exchange and other trading activities             128       98      113           
  Securities gains/(losses)                                   2        2       (4)          
  Asset/investment income                                    35       47       34           
  Other                                                      51       52       43           
                                                         ------   ------   ------           
    Total noninterest income                              1,475    1,441    1,265           
                                                         ------   ------   ------           
Net Interest Income                                                                         
-------------------                                                                         
  Interest income                                         1,021    1,057      813           
  Interest expense                                          594      606      474           
                                                         ------   ------   ------           
  Net interest income                                       427      451      339           
  Provision for credit losses                               (15)     (15)       -           
                                                         ------   ------   ------           
    Net interest income after provision                                                     
      for credit losses                                     442      466      339           
                                                         ------   ------   ------           
Noninterest Expense                                                                         
-------------------                                                                         
  Staff                                                     720      736      604           
  Net occupancy                                              79       73       68           
  Furniture and equipment                                    50       45       51           
  Clearing                                                   37       38       50           
  Sub-custodian expenses                                     34       33       34           
  Software                                                   54       59       55           
  Business development                                       30       30       23           
  Communications                                             19       23       26           
  Professional, legal, and other purchased services         130      125       82           
  Distribution and servicing                                  4        5        4           
  Amortization of intangible assets                          28       34       13           
  Merger and integration costs                               15       17        -           
  Other                                                      72       67       59           
                                                         ------   ------   ------           
    Total noninterest expense                             1,272    1,285    1,069           
                                                         ------   ------   ------           
Income                                                                                      
------                                                                                      
  Income from continuing operations before income taxes     645      622      535           
  Provision for income taxes                                208      195      175           
                                                         ------   ------   ------           
  Income from continuing operations                         437      427      360           
                                                         ------   ------   ------           
  Discontinued operations                                                                   
    Income (loss) from discontinued operations               (5)   2,130      102           
    Provision for income taxes                               (2)     768       40           
                                                         ------   ------   ------           
  Income (loss) from discontinued operations, net            (3)   1,362       62           
                                                         ------   ------   ------           
Net income                                               $  434   $1,789   $  422           
                                                         ======   ======   ======           
Earnings per Share                                                                          
------------------                                                                          
  Basic                                                                                     
    Income from continuing operations                    $ 0.58   $ 0.57   $ 0.47           
    Income from discontinued operations, net                  -     1.82     0.08           
  Net income                                               0.58     2.39     0.55           
  Diluted                                                                                   
    Income from continuing operations                    $ 0.57   $ 0.56   $ 0.47           
    Income from discontinued operations, net                  -     1.80     0.08           
  Net income                                               0.57     2.36     0.55           

Average Shares Outstanding (in thousands)                                                   
-----------------------------------------                                                   
  Basic                                                 750,737  746,688  763,851           
  Diluted                                               763,083  757,981  773,630           

<FN>                                                                                        
Note: (1) See accompanying Notes to Consolidated Financial Statements.                      
      (2) Certain prior periods' amounts have been reclassified to conform to current period
          presentation.                                                                     
</FN>                                                                                       

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                                THE BANK OF NEW YORK COMPANY, INC.                          
                      Consolidated Statement of Changes in Shareholders' Equity             
                          For the three months ended March 31, 2007                         
                                    (Dollars in millions)                                   
                                        (Unaudited)                                         

                                                                                            
Common stock                                                                                
Balance, January 1                                                            $       7,903 
  Issuances in connection with employee benefit plans                                     6 
                                                                              ------------- 
Balance, March 31                                                                     7,909 
                                                                              ------------- 
Additional capital                                                                          
Balance, January 1                                                                    2,142 
  Issuances in connection with employee benefit plans                                    61 
                                                                              ------------- 
Balance, March 31                                                                     2,203 
                                                                              ------------- 
Retained earnings                                                                           
Balance, January 1                                                                    9,444 
Adjustments for the cumulative effect of applying FSP FAS 13-2 and                          
  FIN 48, net of taxes of $(214)                                                       (416)
                                                                              ------------- 
Balance, January 1 restated                                                           9,028 

  Net income                                                    $       434             434 
  Cash dividends on common stock                                                       (168)
                                                                              ------------- 
Balance, March 31                                                                     9,294 
                                                                              ------------- 
Accumulated other comprehensive income                                                      
Balance, January 1                                                                     (317)
      Net unrealized derivative gain/(loss) on cash flow hedges,                            
        net of taxes of $13                                             (19)            (19)
      Foreign currency translation adjustment,                                              
        net of taxes of $-                                                1               1 
      Other adjustments, net of taxes of $-                              (2)             (2)
                                                                              ------------- 
Balance, March 31                                                                      (337)
                                                                -----------   ------------- 
Total comprehensive income                                      $       414                 
                                                                ===========                 
Less treasury stock                                                                         
Balance, January 1                                                                    7,576 
  Issued                                                                                (53)
  Acquired                                                                               16 
                                                                              ------------- 
Balance, March 31                                                                     7,539 
                                                                              ------------- 
Less loan to ESOP                                                                           
Balance, January 1                                                                        3 
  Loan to ESOP                                                                            - 
                                                                              ------------- 
Balance, March 31                                                                         3 
                                                                              ------------- 
Total shareholders' equity, March 31, 2007                                    $      11,527 
                                                                              ============= 

------------------------------------------------------------------------------------------- 
<FN>                                                                                        

Comprehensive income for the three months ended March 31, 2007 and 2006 was $414 and $367.  

See accompanying Notes to Consolidated Financial Statements.                                
</FN>                                                                                       

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                           THE BANK OF NEW YORK COMPANY, INC.                   
                          Consolidated Statements of Cash Flows                 
                                 (Dollars in millions)                          
                                    (Unaudited)                                 

                                                           For the three months 
                                                               ended March 31,  
                                                              2007       2006   
                                                            --------   -------- 
                                                                                
Operating activities                                                            
Net income                                                  $    434   $    422 
Adjustments to determine net cash attributable to                               
 operating activities:                                                          
  Provision for credit losses                                    (15)         5 
  Depreciation and amortization                                  127        117 
  Deferred income taxes                                           62        (37)
  Securities gains and venture capital income                    (18)       (17)
  Change in trading activities                                 1,608     (1,074)
  Change in accruals and other, net                             (151)     1,117 
                                                            --------   -------- 
Net cash provided by operating activities                      2,047        533 
                                                            --------   -------- 
Investing activities                                                            
Change in interest-bearing deposits in banks                    (219)     1,100 
Change in margin loans                                            34        777 
Purchases of securities held-to-maturity                           -       (303)
Paydowns of securities held-to-maturity                           35         65 
Maturities of securities held-to-maturity                        129         40 
Purchases of securities available-for-sale                    (4,887)    (3,260)
Sales of securities available-for-sale                            60        890 
Paydowns of securities available-for-sale                      1,071      1,193 
Maturities of securities available-for-sale                      945      1,436 
Net principal disbursed on loans to customers                 (1,055)      (138)
Proceeds from loans held for sale and other loan sales             -         33 
Change in federal funds sold and securities                                     
  purchased under resale agreements                            3,402     (2,356)
Purchases of premises and equipment/capitalized software         (57)       (41)
Acquisitions, net of cash disbursed                              (58)      (339)
Proceeds from the sale of premises and equipment                   -          - 
Other, net                                                       858        (57)
                                                            --------   -------- 
Net cash provided by/(used for)investing activities              258       (960)
                                                            --------   -------- 
Financing activities                                                            
Change in deposits                                            (3,286)       637 
Change in federal funds purchased and securities                                
  sold under repurchase agreements                               (17)        69 
Change in payables to customers and broker-dealers              (526)    (1,067)
Change in other borrowed funds                                    74        302 
Net proceeds from the issuance of long-term debt                 803        600 
Repayments of long-term debt                                     (11)       (12)
Issuance of common stock                                         120        104 
Tax benefit realized on share-based payment awards                15          9 
Treasury stock acquired                                          (16)       (82)
Cash dividends paid                                             (168)      (164)
                                                            --------   -------- 
Net cash (used for)/provided by financing activities          (3,012)       396 
                                                            --------   -------- 
Effect of exchange rate changes on cash                           26        (76)
                                                            --------   -------- 
Change in cash and due from banks                               (681)      (107)
Cash and due from banks at beginning of period                 2,840      3,515 
Cash related to discontinued operations                            -       (544)
                                                            --------   -------- 
Cash and due from banks at end of period                    $  2,159   $  2,864 
                                                            ========   ======== 
------------------------------------------------------------------------------- 
Supplemental disclosures                                                        
    Interest paid                                           $    626   $    510 
    Income taxes paid                                            643        328 
    Income taxes refunded                                          1          2 
------------------------------------------------------------------------------- 

<FN>                                                                            
See accompanying Notes to Consolidated Financial Statements.                    
</FN>                                                                           

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  THE BANK OF NEW YORK COMPANY, INC.
  Notes to Consolidated Financial Statements

1.  General                                                                     
-------                                                                 

The accounting and reporting policies of The Bank of New York Company,
Inc., a financial holding company, and its consolidated subsidiaries (the       
"Company") conform with U.S. generally accepted accounting principles and       
general practice within the banking industry.  Such policies are consistent     
with those applied in the preparation of the Company's annual financial         
statements.                                                                     

The Company provides a complete range of banking and other financial  
services to corporations and individuals worldwide through its business         
segments: Asset and Wealth Management, Institutional Services, and Other.       
"Business Segment Accounting Principles" and "Segment Financial Data" are       
incorporated from the Business Segment Review section of Management's           
Discussion and Analysis of the Company's Financial Condition and Results of     
Operations ("MD&A").  There were no major customers from whom revenues were     
individually material to the Company's performance.                             

The accompanying consolidated financial statements are unaudited.  In 
the opinion of management, all adjustments necessary for a fair                 
presentation of financial position, results of operations and cash flows        
for the interim periods have been made.  Certain other reclassifications        
have been made to prior periods to place them on a basis comparable with        
current period presentation.                                                    

2.  Accounting Changes and New Accounting Pronouncements                        
----------------------------------------------------                    

The Company adopted Statement of Financial Accounting Standards       
("SFAS") No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation,"       
in 1995.  At that time, as permitted by the standard, the Company elected       
to continue to apply the provisions of Accounting Principles Board Opinion      
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," and              
accounted for the options granted to employees using the intrinsic value        
method, under which no expense is recognized for stock options because they     
were granted at the stock price on the grant date and therefore have no         
intrinsic value.                                                                

On January 1, 2003, the Company adopted the fair value method of      
accounting for its options under SFAS 123 as amended by SFAS No. 148 ("SFAS     
148"), "Accounting for Stock-Based Compensation-Transition and Disclosure."     
SFAS 148 permitted three different methods of adopting fair value: (1) the      
prospective method, (2) the modified prospective method, and (3) the            
retroactive restatement method.  Under the prospective method, options          
issued after January 1, 2003 are expensed while all options granted prior       
to January 1, 2003 are accounted for under APB 25 using the intrinsic value     
method.  Consistent with industry practice, the Company elected the             
prospective method of adopting fair value accounting.                           

During the three months ended March 31, 2007, approximately 5.6       
million options were granted. In the first quarters of 2007 and 2006, the       
Company recorded $14 million and $10 million of stock option expense.           

The fair value of options granted in 2007 and 2006 were estimated at  
the grant date using the following weighted average assumptions:                

                   First Quarter
                  2007    2006
                  ------ -------
Dividend yield                             2.46%   2.44%                        
Expected volatility                       23.35   21.94                         
Risk free interest rates                   4.42    4.66                         
Expected options lives (in years)          6       5                            

In December 2004, the Financial Accounting Standards Board ("FASB")   
issued SFAS No. 123 (revised 2004) ("SFAS 123(R)"), "Share-Based Payment,"      
which is a                                                                      

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revision of SFAS No. 123, "Accounting for Stock-Based Compensation."            
SFAS 123(R) eliminates the ability to account for share-based compensation      
transactions using APB 25 and requires that such transactions be accounted      
for using a fair value-based method.  SFAS 123(R) covers a wide range of        
share-based compensation arrangements including share options, restricted       
share plans, performance-based awards, share appreciation rights, and employee  
share purchase plans.  The Company adopted SFAS 123(R) on January 1, 2006       
using the "modified prospective" method.  Under this method, compensation       
cost is recognized beginning with the effective date (a) based on the           
requirements of SFAS 123(R) for all share-based payments granted after the      
effective date and (b) based on the requirements of SFAS 123 for all awards     
granted to employees prior to the effective date of SFAS 123(R) that remain     
unvested on the effective date.  As of January 1, 2006, the Company was         
amortizing all of its unvested stock option grants.                             

Certain of the Company's stock compensation grants vest when the      
employee retires. SFAS 123(R) requires the completion of expensing of new       
grants with this feature by the first date the employee is eligible to          
retire. For grants prior to January 1, 2006, the Company will continue to       
expense them over their stated vesting period.  The adoption of SFAS 123(R)     
increased pre-tax expense in 2006 by $12 million.                               

In February 2006, the FASB issued SFAS No. 155 ("SFAS 155"),          
"Accounting for Certain Hybrid Financial Instruments", an amendment of SFAS     
140 and SFAS 133. SFAS 155 permits the Company to elect to measure any          
hybrid financial instrument at fair value if the hybrid instrument contains     
an embedded derivative that otherwise would require bifurcation and be          
accounted for separately under SFAS 133.  SFAS 155 clarifies which              
interest-only strips and principal-only strips are not subject to the           
requirements of SFAS 133 and that concentrations of credit risk in the form     
of subordination are not embedded derivatives. SFAS 155 is effective for        
all financial instruments acquired, issued, or subject to a remeasurement       
event after December 31, 2006.  On January 17, 2007, the FASB issued            
Derivative Implementation Groups ("DIG") Issue B40 which impacts how SFAS       
155 is applied. The adoption of SFAS 155 and DIG Issue B40 did not have a       
significant impact on the Company's investment activities.                      

In July 2006, the FASB issued FASB Staff Position ("FSP") FAS 13-2,   
"Accounting for a Change or Projected Change in the Timing of Cash Flows        
Relating to Income Taxes Generated by a Leverage Lease Transaction,"            
revising the accounting guidance under SFAS No. 13 ("SFAS 13"), "Accounting     
for Leases," for leveraged leases.  This FSP modifies existing                  
interpretations of SFAS 13 and associated industry practice.  As a result       
in 2007, the Company recognized a one-time after-tax charge to equity of        
$389 million related to a change in the timing of its lease cash flows due      
to the LILO settlement.  See "Commitments and Contingent Liabilities" in        
Notes to Consolidated Financial Statements.  However, an amount                 
approximating this one-time charge will be taken into income over the           
remaining term of the affected leases.  In the first quarter of 2007, the       
Company recognized an after-tax income of $2 million.  Since the Company        
has not yet reached a settlement with the IRS related to LILOs originated       
in 1998, the charge to equity was estimated assuming a December 31, 2007        
settlement date.  The portion of the one-time charge related to 1998 LILOs      
will be taken into income between the settlement date and the end of the        
lease term.                                                                     

In September 2006, the FASB issued SFAS No. 157 ("SFAS 157"), "Fair   
Value Measurements." SFAS 157 defines fair value, establishes a framework       
for measuring fair value in accordance with generally accepted accounting       
principles, and expands additional disclosures about fair value                 
measurements. SFAS 157 clarifies that fair value is the amount that would       
be exchanged to sell an asset or transfer a liability, in an orderly            
transaction between market participants. SFAS 157 nullifies the consensus       
reached in EITF Issue No. 02-3 prohibiting the recognition of day one gain      
or loss on derivative contracts (and hybrid instruments measured at fair        
value under SFAS 133 as modified by SFAS 155) where the Company cannot          
verify all of the significant model inputs to observable market data and        
verify the model to market transactions. However, SFAS 157 requires that a      
fair value measurement technique include an adjustment for risks inherent       
in a particular valuation technique (such as a pricing                          

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model) and/or the risks inherent in the inputs to the model if market           
participants would also include such an adjustment. SFAS 157 will require the   
Company to consider the effect of its own credit standing in determining the    
fair value of its liabilities.  In addition, SFAS 157 prohibits the recognition 
of "block discounts" for large holdings of unrestricted financial instruments   
where quoted prices are readily and regularly available in an active market.    
The requirements of SFAS 157 are to be applied prospectively, except for        
changes in fair value measurements that result from the initial application     
of SFAS 157 to existing derivative financial instruments measured under         
EITF Issue No. 02-3, existing hybrid instruments measured at fair value,        
and block discounts, which are to be recorded as an adjustment to opening       
retained earnings in the year of adoption. The Company expects to adopt         
SFAS 157 on January 1, 2008. The Company is currently evaluating the impact     
of SFAS 157.                                                                    

 In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans - an amendment of    
FASB Statements No. 87, 88, 106 and 132(R)" ("SFAS 158").  SFAS 158 requires    
the Company to (a) recognize in its statement of financial position an asset    
for a plan's overfunded status or a liability for a plan's underfunded          
status, (b) measure a plan's assets and its obligations that determine its      
funded status as of the end of the fiscal year, (c) recognize changes in the    
funded status of a defined postretirement plan in the year in which the         
changes occur (reported in comprehensive income) and (d) provide additional     
disclosure.  The requirement to recognize the funded status of a benefit        
plan and the disclosure requirements are effective as of the end of the         
fiscal year ending after December 15, 2006. The requirement to measure the      
plan assets and benefit obligations as of the date of the employer's fiscal     
year-end statement of financial position is effective for fiscal years          
ending after December 15, 2008.  On December 31, 2006, the Company adopted      
the recognition and disclosure provisions of SFAS 158.  The adoption of         
SFAS 158 resulted in a charge to equity of $264 million.                        

In 2007, the Company adopted FASB Interpretation No. 48, "Accounting  
for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the               
accounting for uncertain tax positions in accordance with SFAS No. 109,         
"Accounting for Income Taxes." FIN 48 requires that a tax position meet a       
"more-likely-than-not threshold" for the benefit of the uncertain tax           
position to be recognized in the financial statements. A tax position that      
fails to meet a more-likely-than-not recognition threshold will result in       
either reduction of current or deferred tax assets, and/or recording of         
current or deferred tax liabilities. The impact of adoption in 2007 was a       
charge to equity of $27 million.  See "Income Taxes" in the Notes to            
Consolidated Financial Statements for further discussion related to FIN 48.     

In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair
Value Option for Financial Assets and Financial Liabilities." SFAS 159          
provides companies with an option to report selected financial assets and       
liabilities at fair value and to provide additional information that will       
help investors and other users of financial statements to understand more       
easily the effect on earnings of the company's choice to use fair value. It     
also requires companies to display the fair value of those assets and           
liabilities for which the company has chosen to use fair value on the face      
of the balance sheet. The Company expects to adopt SFAS 159 along with SFAS     
157 on January 1, 2008 and is currently evaluating the impact of SFAS 159.      

Certain other prior year information has been reclassified to conform 
its presentation with the 2007 financial statements.                            

3.  Acquisitions and Dispositions                                               
-----------------------------                                           

The Company continues to be a selective acquirer of securities        
servicing and asset management businesses.                                      

In the first quarter of 2007, the Company acquired certain clearing   
and custody relationships rights for cash.  The Company frequently              
structures its acquisitions with both an initial payment and a later            
contingent payment tied to post-closing revenue or income growth.  The          
Company records the fair value                                                  

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of contingent payments as an additional cost of the entity acquired in the      
period that the payment becomes probable.                                       

Goodwill and tax-deductible portion of goodwill related to completed  
acquisitions in the first quarter of 2007 was zero. At March 31, 2007, the      
Company was liable for potential contingent payments related to                 
acquisitions in the amount of $130 million. Cash paid or accrued for            
acquisitions and contingent payments was $89 million in the first quarter       
of 2007.                                                                        

2007                                                                            
----                                                                            

In January 2007, certain clearing and custody relationships rights    
were acquired by the Company's Pershing subsidiary. The transaction             
involved 46 organizations, comprised of 30 registered investment advisor        
firms and 16 introducing broker-dealer firms.                                   

In March 2007, the Company sold its 49 percent stake in joint venture 
BNY Mortgage Co. to EverBank Financial Corp. The transaction is consistent      
with the Company's recent strategic moves to focus on asset management and      
securities servicing.                                                           

In April 2007, the Company agreed to sell its 30% equity investment in
RBS International Securities Services (Holdings) Limited to BNP Paribas         
Securities Services.                                                            

2006                                                                            
----                                                                            

On October 1, 2006, the Company sold its Retail Business to JPMorgan  
Chase for the net asset value plus a premium of $2.3 billion.  JPMorgan         
Chase sold its corporate trust business to the Company for the net asset        
value plus a premium of $2.15 billion. The difference between premiums          
resulted in a net cash payment of $150 million to the Company. There is         
also a contingent payment of up to $50 million to the Company tied to           
customer retention.  For further details, see "Discontinued Operations" in      
the Notes to the Consolidated Financial Statements.                             

JPMorgan Chase's corporate trust business comprised issues            
representing $5 trillion in total debt outstanding.  It had 2,400 employees     
in more than 40 locations globally.  Prior to the acquisition, the              
Company's corporate trust business comprised issues representing $3             
trillion in total debt outstanding and had 1,300 employees in 25 locations      
globally.                                                                       

The Company's retail bank consisted of 338 branches in the Tri-State  
region, serving approximately 700,000 consumer households and small             
businesses with $13 billion in deposits and $9 billion in assets at             
September 30, 2006.  The Company's regional middle market businesses            
provided financing, banking and treasury services for middle market             
clients, serving more than 2,000 clients in the Tri-State region.               
Together, the units had 4,000 employees located in New York, New Jersey,        
Connecticut and Delaware.                                                       

The transaction further increases the Company's focus on the          
securities services and wealth management businesses that have fueled the       
Company's growth in recent years and that are at the core of its long-term      
business strategy.                                                              

The Company recorded an after-tax gain of $1,381 million on the sale  
of the Retail Business.  The Company also expects to incur after-tax            
charges of $150 million related to the acquisition.  The transaction is         
expected to be dilutive to GAAP earnings per share through 2009 (4.5            
percent in 2007 to 1.5 percent in 2009), but to be accretive to cash            
earnings per share in 2009 when cost savings are fully phased in.               

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On a pro forma basis, if the acquisition of the Acquired Corporate    
Trust Business had occurred on January 1, 2006, the transaction would have      
had the following impact:                                                       

                        For the three months ended
(Dollars in millions,                       March 31, 2006                      
except per share amounts)             --------------------------              
                      Reported     Pro Forma
                     ---------     ---------
Revenue                                 $  1,604     $   1,810                  
Net income from continuing                                                      
operations                                 360           409                
Net income                                   422           471                  

Diluted earnings per share                                                      
from continuing operations            $   0.47     $    0.53                
Diluted earnings per share                  0.55          0.61                  

The pro forma results are based on adding the pre-tax historical      
results of the Acquired Corporate Trust Business to the Company's results       
and adjusting for amortization of intangibles created in the transaction        
and taxes.  The pro forma data does not include adjustments to reflect the      
Company's operating costs or expected differences in the way funds              
generated by the Acquired Corporate Trust Business are invested. The pro        
forma data is intended for informational purposes and is not indicative of      
the future results of operations.                                               

The Company's transaction with JPMorgan Chase altered the composition 
of the balance sheet.  When the Acquired Corporate Trust Business is fully      
integrated in 2007, approximately $14 billion of U.S. dollar retail             
deposits will have been replaced with between $11 billion and $14 billion       
of institutional corporate trust deposits.  Between $7 billion and $10          
billion of deposits related to the Acquired Corporate Trust Business have       
not yet transitioned to the Company.  These deposits will transition to the     
Company as regulatory approval is received to operate in certain foreign        
locations and as the novation process proceeds in other foreign locations.      
The Company expects the transition will be substantially complete by June       
30, 2007.  Until the transition is complete, JPMorgan Chase will pay the        
Company for the net economic value of these deposits.  In the first quarter     
of 2007, the Company recorded $25 million of net economic value payments in     
noninterest income, compared with $23 million in the fourth quarter of          
2006.  On the asset side of the balance sheet, approximately $8 billion of      
retail and middle market loans included in the sale of the Retail Business      
have been replaced with liquid assets and securities. Goodwill and              
intangibles related to the Acquired Corporate Trust Business were               
approximately $2.3 billion.                                                     

On October 2, 2006, the Company completed the transaction resulting in
the formation of BNY ConvergEx Group. BNY ConvergEx Group brought together      
BNY Securities Group's trade execution, commission management, independent      
research and transition management business with Eze Castle Software, a         
leading provider of trade order management and related investment               
technologies. This transaction enabled the Company to achieve several           
objectives including repositioning its execution services business for          
faster growth and enhancing the product offering for the Company's client       
base, while allowing the Company to withdraw capital committed to the           
business.                                                                       

BNY ConvergEx Group is a leading global agency brokerage and          
technology company offering a complete spectrum of pre-trade, trade, and        
post-trade solutions for traditional money managers, hedge funds, broker-       
dealers, corporations and plan sponsors. BNY ConvergEx Group has a global       
presence in New York, Boston, San Francisco, Chicago, Dallas, Stamford,         
London, Bermuda, Tokyo, Hong Kong, and Sydney.                                  

The Company and GTCR Golder Rauner, LLC each hold a 35 percent stake  
in BNY ConvergEx Group, with the balance held by Eze Castle Software's          
investors and BNY ConvergEx Group's management team. BNY ConvergEx Group,       
with pro forma 2005 revenues of approximately $340 million, is an affiliate     
of The Bank of New York and is reflected on the Company's financial             
statements as an equity                                                         

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investment.  After the use of the proceeds to repurchase shares, the            
transaction is expected to be neutral to earnings per share.                    

The BNY Securities Group businesses included in BNY ConvergEx Group   
are BNY Brokerage, Lynch, Jones & Ryan, G-Port, Westminster Research and        
BNY Jaywalk.  In addition, The Bank of New York's B-Trade and G-Trade           
businesses are expected to become part of BNY ConvergEx Group in 2008,          
although in the interim they will continue to be owned by The Bank of New       
York.                                                                           

On December 1, 2006, the Company sold its transfer agency software    
business, Rufus, to Bravura Solutions Limited ("Bravura"), a leading global     
supplier of wealth management applications and professional services, for       
approximately $38 million. Under the agreement, Bravura acquired all of the     
software and intellectual property comprising Rufus, and all existing           
employees will transfer to Bravura.                                             

On December 3, 2006, the Company and Mellon entered into a definitive 
agreement to merge, creating the world's largest securities servicing and       
asset management firm.  The new company, which will be called The Bank of       
New York Mellon Corporation, will be the world's leading asset servicer         
with Assets under Custody and Administration expected to exceed $18             
trillion and the world's leading corporate trustee with assets under            
trusteeship expected to exceed $8 trillion. It will rank among the top 10       
global asset managers with assets under management expected to exceed $1.1      
trillion.                                                                       

The combined company is expected to have annual revenues of more than 
$12 billion, with approximately 28% derived from asset servicing, 38% from      
issuer services, clearing and execution services and treasury services, and     
29% from asset and wealth management. By the end of 2008, the Company is        
expected to generate over $1 billion tangible capital per quarter.  It will     
be well positioned to capitalize on global growth trends, including the         
evolution of emerging markets, the growth of hedge funds and alternative        
asset classes, the increasing need for more complex financial products and      
services, and the increasingly global need for people to save and invest        
for retirement. Almost a quarter of combined revenue will be derived            
internationally.                                                                

Under the terms of the agreement, the Company's shareholders will     
receive 0.9434 shares in the new company for each share of the Company that     
they own and Mellon shareholders will receive one share in the new company      
for each Mellon share they own.                                                 

To induce Mellon to enter into the merger agreement, the Company      
granted Mellon an option to purchase up to 149,621,546 shares of the            
Company's common stock at a price per share equal to the lesser of $35.48       
and the closing sale price of the Company's common stock on the trading day     
immediately preceding the exercise date; but in no case may Mellon acquire      
more than 19.9% of the outstanding shares of the Company's common stock         
under this stock option agreement. Mellon cannot exercise the option unless     
specified triggering events occur. These events generally relate to             
business combinations or acquisition transactions involving the Company and     
a third party.                                                                  

The option could have the effect of discouraging a third party from   
trying to acquire the Company prior to completion of the transaction or         
termination of the merger agreement. Upon the occurrence of certain             
triggering events, the Company may be required to repurchase the option         
and/or any shares of the Company's common stock purchased by Mellon under       
the option at a predetermined price, or Mellon may choose to surrender the      
option to the Company for a cash payment of $1.15 billion. In no event will     
the total profit received by Mellon with respect to this option exceed $1.3     
billion.                                                                        

To induce the Company to enter into the merger agreement, Mellon      
granted the Company an option to purchase up to 82,641,656 shares of Mellon     
common stock at a price per share equal to the lesser of $40.05 and the         
closing sale price of Mellon common stock on the trading day immediately        
preceding the exercise date; but in no case may the Company acquire more        
than 19.9% of the outstanding shares of Mellon common stock under this          
stock option agreement.  The Company cannot exercise the option unless          
specified triggering events                                                     

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occur.  These events generally relate to business combinations or acquisition   
transactions involving Mellon and a third party.                                

The option could have the effect of discouraging a third party from   
trying to acquire Mellon prior to completion of the transaction or              
termination of the merger agreement. Upon the occurrence of certain             
triggering events, Mellon may be required to repurchase the option and/or       
any shares of Mellon common stock purchased by the Company under the option     
at a predetermined price, or the Company may choose to surrender the option     
to Mellon for a cash payment of $725 million. In no event will the total        
profit received by the Company with respect to this option exceed $825          
million.                                                                        

On December 19, 2006, the Company acquired the remaining 50% stake in 
AIB/BNY Securities Services (Ireland) Ltd. (AIB/BNY) that it did not own        
from Allied Irish Banks, p.l.c. ("AIB"). AIB/BNY was established in 1995 as     
a joint venture between AIB and the Company to provide a range of services      
for a number of fund structures domiciled in Ireland. At acquisition,           
AIB/BNY had $210 billion assets under administration and employed 600 staff     
in its Dublin and Cork offices.                                                 

4. Discontinued Operations                                                      
-----------------------                                                   

On October 1, 2006, the Company acquired JPMorgan Chase's corporate   
trust business and JPMorgan Chase acquired the Company's Retail Business.       
The Company adopted discontinued operations accounting for its Retail           
Business.  Also included in the sales agreement are provisions related to       
transitional services that will be provided for a period of up to 8 months      
after closing, subject to extensions. The results from continuing               
operations exclude the results of the Company's Retail Business and include     
the operations of the Acquired Corporate Trust Business only after October      
1, 2006.                                                                        

Results for all the Retail Business are reported separately as        
discontinued operations for all periods presented. The assets and               
liabilities of the businesses sold are included in assets of discontinued       
operations held for sale and liabilities of discontinued operations held        
for sale on the consolidated balance sheet.  Net interest income has been       
computed by allocating investment securities and federal funds sold and         
related interest income to discontinued operations to match the amount and      
duration of the assets sold with the amount and duration of the liabilities     
sold.                                                                           

Summarized financial information for discontinued operations related  
to the Retail Business is as follows:                                           

(In millions)                1Q07    4Q06    1Q06                               
------  ------  ------  
Noninterest income(1)       $   14  $2,174  $   71                              
Net interest income              -       -     149                              
------  ------  ------  
Total revenue,                                                                
net of interest expense   $   14  $2,174  $  220                            
======  ======  ======  
Income (loss) from                                                              
discontinued operations(1) $   (5) $2,130  $  102                             
Income taxes (benefits)         (2)    768      40                              
------  ------  ------  
Income (loss) from                                                              
discontinued operations,                                                      
Net of taxes               $   (3) $1,362  $   62                             
======  ======  ======  

(1) Including the $2,159 million pre-tax gain on the sale of the Retail 
Business in the fourth quarter of 2006.                         

Assets and liabilities of discontinued operations held for sale as of 
March 31, 2007 and December 31, 2006 were not significant.                      

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5.  Goodwill and Intangibles                                                    
------------------------                                                

Goodwill by reportable segment is as follows:                         

(In millions)                                                                   
                               March 31, 2007    December 31, 2006
                           ------------------    -----------------
Asset and wealth management            $         622      $           605       
Institutional services                         4,509                4,567       
                           ------------------    -----------------
Consolidated total                     $       5,131      $         5,172       
                           ==================    =================

The changes in goodwill during the first quarter of 2007 were as follows:       

(In millions)                                                         

Balance at December 31, 2006           $  5,172                     
Acquisitions                                  8                     
Foreign exchange translation                  2                     
Other (1)                                   (51)                    
                  --------
Balance at March 31, 2007              $  5,131                     
                  ========

  (1) Other changes in goodwill include purchase price adjustments and certain
other reclassifications.                                          

The Company's reporting units are tested annually for goodwill        
impairment.                                                                     

Intangible Assets                                                               
-----------------                                                               

                                                        [Enlarge/Download Table]

                                      March 31, 2007                         December 31, 2006      
                      ----------------------------------------------  ------------------------------
                                                        Weighted                                    
                        Gross                  Net       Average        Gross                 Net   
                      Carrying  Accumulated Carrying  Amortization    Carrying  Accumulated Carrying
(Dollars in millions)  Amount  Amortization  Amount  Period in Years   Amount  Amortization  Amount 
                      -------- ------------ -------- ---------------  -------- ------------ --------
                                                                                                    
Trade names           $    370  $        -  $    370 Indefinite Life   $    370  $        - $    370
Customer relationships   1,253        (176)    1,077        13            1,231        (148)   1,083
Other intangible                                                                                    
   assets                    8          (8)        -         -               17         (17)       -

The aggregate amortization expense of intangibles was $28 million and 
$13 million for the quarters ended March 31, 2007 and 2006, respectively.       
Estimated amortization expense for current intangibles for the next five        
years is as follows:                                                            

                                For the Year Ended        Amortization
(In millions)                              December 31,            Expense      
                                ------------------        ------------
                                        2007                      $114
                                        2008                       114
                                        2009                       112
                                        2010                       111
                                        2011                       111

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6.  Allowance for Credit Losses                                                 
---------------------------                                             

The allowance for credit losses is maintained at a level that, in     
management's judgment, is adequate to absorb probable losses associated         
with specifically identified loans, as well as estimated probable credit        
losses inherent in the remainder of the credit portfolio at the balance         
sheet date.  Management's judgment includes the following factors, among        
others: risks of individual credits; past experience; the volume,               
composition, and growth of the credit portfolio; and economic conditions.       

The Company conducts a quarterly portfolio review to determine the    
adequacy of its allowance for credit losses.  All commercial loans over $1      
million are assigned to specific risk categories.  Smaller commercial and       
consumer exposures are evaluated on a pooled basis and assigned to specific     
risk categories.  Following this review, senior management of the Company       
analyzes the results and determines the allowance for credit losses.  The       
Company's Board of Directors reviews the allowance at the end of each           
quarter.                                                                        

The portion of the allowance for credit losses allocated to impaired  
loans (nonaccrual commercial loans over $1 million) is measured by the          
difference between their recorded value and fair value.  Fair value is          
determined by one of the following: present value of the expected future        
cash flows from borrowers, the market value of the loan, or the fair value      
of the collateral.  See "Critical Accounting Policies" and "Allowance" in       
the MD&A section for additional information.                                    

Commercial loans are placed on nonaccrual status when collateral is   
insufficient and principal or interest is past due 90 days or more, or when     
there is reasonable doubt that interest or principal will be collected.         
Accrued interest is usually reversed when a loan is placed on nonaccrual        
status.  Interest payments received on nonaccrual loans may be recognized       
as income or applied to principal depending upon management's judgment.         
Nonaccrual loans are restored to accrual status when principal and interest     
are current or they become fully collateralized.  Consumer loans are not        
classified as nonperforming assets, but are charged off and interest            
accrued is suspended based upon an established delinquency schedule             
determined by product.  Real estate acquired in satisfaction of loans is        
carried in other assets at the lower of the recorded investment in the          
property or fair value minus estimated costs to sell.                           

Transactions in the allowance for credit losses are summarized as     
follows:                                                                        

                                                                [Download Table]

(In millions)                        Three Months Ended March 31, 2007       
                               ----------------------------------------------
                                                Allowance for                
                                Allowance for  Lending-Related  Allowance for
                                 Loan Losses     Commitments    Credit Losses
                               --------------  ---------------  -------------
                                                                             
Balance, beginning of period      $      287     $        150     $      437 
  Charge-offs                              -               (5)            (5)
  Recoveries                               8                -              8 
                               --------------  ---------------  -------------
  Net (charge-offs)/recoveries             8               (5)             3 
  Provision                               (5)             (10)           (15)
                               --------------  ---------------  -------------
Balance, end of period            $      290     $        135     $      425 
                               ==============  ===============  =============

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                                                                [Download Table]

(In millions)                        Three Months Ended March 31, 2006       
                               ----------------------------------------------
                                                Allowance for                
                                Allowance for  Lending-Related  Allowance for
                                 Loan Losses     Commitments    Credit Losses
                               --------------  ---------------  -------------
                                                                             
Balance, beginning of period      $      326     $        144     $      470 
  Charge-offs                             (2)               -             (2)
  Recoveries                               6                -              6 
                               --------------  ---------------  -------------
  Net (charge-offs)/recoveries             4                -              4 
  Provision                                4               (4)             - 
                               --------------  ---------------  -------------
Balance, end of period            $      334     $        140     $      474 
                               ==============  ===============  =============

7.  Other Assets                                                                
------------                                                            
                                 March 31,    December 31,
(In millions)                                  2007           2006              
-------------                               ---------     ----------            
Accounts and interest receivable            $   2,621     $    3,443            
Fails to deliver                                1,136          1,523            
Other investments                                 963            857            
Prepaid pension assets                            624            635            
Software                                          387            388            
Margin deposits                                   494            324            
Prepaid expenses                                  250            223            
Due from customers on acceptances                 285            213            
Other                                           2,301          2,367            
                                ---------     ----------
Total other assets                       $   9,061     $    9,973         
                                =========     ==========

8.  Net Interest Income                                                         
-------------------                                                     

                                                                [Download Table]

                                                      Quarter Ended            
(In millions)                                --------------------------------- 
                                             March 31,  December 31,  March 31,
                                               2007        2006         2006   
                                              ------      ------      -------  
                                                                               
Interest Income                                                                
---------------                                                                
Loans                                         $  407      $  422      $  310   
Margin loans                                      84          83          77   
Securities                                                                     
  Taxable                                        293         274         265   
  Exempt from federal income taxes                 1           1           9   
                                              ------      ------      ------   
                                                 294         275         274   
Deposits in banks                                146         167          86   
Federal funds sold and securities purchased                                    
  under resale agreements                         57          78          15   
Trading assets                                    33          32          51   
                                              ------      ------      ------   
    Total interest income                      1,021       1,057         813   
                                              ------      ------      ------   
Interest Expense                                                               
----------------                                                               
Deposits                                         400         397         298   
Federal funds purchased and securities sold                                    
  under repurchase agreements                     19          16          20   
Other borrowed funds                              13          30          20   
Customer payables                                 42          43          40   
Long-term debt                                   120         120          96   
                                              ------      ------      ------   
    Total interest expense                       594         606         474   
                                              ------      ------      ------   
Net interest income                           $  427      $  451      $  339   
                                              ======      ======      ======   

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9.  Capital Transactions                                                        
--------------------                                                    

The Company has 5 million authorized shares of Class A convertible    
preferred stock having a par value of $2.00 per share.  At December 31,         
2006, 3,000 shares were outstanding. On January 22, 2007, the Company           
redeemed 300 shares of Class A convertible preferred stock at a per share       
redemption price of $25 plus accrued dividends of $11.03.  The remaining        
2,700 shares were converted into Company common stock with shareholders         
receiving 7.39644 shares of Company common stock for each share of Class A      
convertible preferred stock.                                                    

In addition to the Class A preferred stock, the Company has 5 million 
authorized shares of preferred stock having no par value, with no shares        
outstanding at March 31, 2007 and December 31, 2006, respectively.              

On April 10, 2007, the Board of Directors declared a quarterly        
dividend of 22 cents per share payable May 4, 2007 to shareholders of           
record on April 25, 2007.                                                       

The Company repurchased 363,080 shares of the Company's common stock  
in the first quarter of 2007.                                                   

10.  Earnings Per Share                                                         
------------------                                                    

The following table illustrates the computations of basic and diluted 
earnings per share:                                                             

                                                        [Enlarge/Download Table]


(In millions,                          Three Months Ended                                 
 except per share amounts)                  March 31,                                     
                                       ------------------                                 
                                                                                          
                                         2007      2006                                   
                                       --------  --------                                 
Income from continuing operations      $    437  $    360                                 
Income (loss) from                                                                        
  discontinued operations                    (3)       62                                 
                                       --------  --------                                 
Net income (1)                         $    434  $    422                                 
                                       ========  ========                                 
Basic weighted average                                                                    
  shares outstanding                        751       764                                 
Shares issuable upon conversion                                                           
  of employee stock options                  12        10                                 
                                       --------  --------                                 
Diluted weighted average                                                                  
  shares outstanding                        763       774                                 
                                       ========  ========                                 

Basic earnings per share:                                                                 
  Income from continuing operations    $   0.58  $   0.47                                 
  Income from discontinued operations         -      0.08                                 
  Net income                               0.58      0.55                                 

Diluted earnings per share:                                                               
  Income from continuing operations    $   0.57  $   0.47                                 
  Income from discontinued operations         -      0.08                                 
  Net income                               0.57      0.55                                 

<FN>                                                                                      
    (1) Net income, net income available to common shareholders and diluted net income are
        the same for all periods presented.                                               
</FN>                                                                                     

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11.  Employee Benefit Plans                                                     
----------------------                                                

The components of net periodic benefit cost are as follows:           

                                                        [Enlarge/Download Table]

                              Pension Benefits     Healthcare Benefits                          
                             -------------------   -------------------                          
                             Three Months Ended    Three Months Ended                           
                                  March 31,             March 31,                               
                             -------------------   ------------------                           
                             Domestic   Foreign         Domestic                                
                             --------- ---------   ------------------                           
(In millions)                2007 2006 2007 2006   2007        2006                             
---------------------        ---- ---- ---- ----   -----       -----                            
                                                                                                
Net periodic cost (income)                                                                      
 Service cost                $ 10 $ 12 $  2 $  2   $   -       $   -                            
 Interest cost                 12   13    3    3       3           2                            
 Expected return on assets    (26) (25)  (4)  (3)     (1)         (1)                           
 Other                          5    9    1    1       2           3                            
                             ---- ---- ---- ----   -----       -----                            
Net periodic cost                                                                               
  (income)(1)                $  1 $  9 $  2 $  3   $   4       $   4                            
                             ==== ==== ==== ====   =====       =====                            

<FN>                                                                                            
(1) Pension benefits expense includes discontinued operations expense $1.5 million for the three
months ended March 31, 2006.                                                                    
</FN>                                                                                           

12.  Income Taxes                                                               
------------                                                          

The statutory federal income tax rate is reconciled to the Company's  
effective income tax rate below:                                                
                                                Three Months Ended
                                                 March 31,
                                                ------------------
                                                 2007     2006
                                                 ------   ------
Federal rate                                              35.0%    35.0%        
State and local income taxes,                                                   
net of federal income tax benefit                        3.0      2.2       
Nondeductible expenses                                     0.1      0.2         
Credit for synthetic fuel investments                     (1.2)    (1.0)        
Credit for low-income housing investments                 (1.2)    (1.9)        
Tax-exempt income from municipal securities               (0.1)    (0.1)        
Other tax-exempt income                                   (1.0)    (1.2)        
Foreign operations                                        (0.7)    (0.9)        
Leveraged lease portfolio                                 (1.1)    (0.1)        
Tax reserve - LILO exposure                                0.1      0.6         
Other - net                                               (0.7)    (0.1)        
                                                 ------   ------
Effective rate                                            32.2%    32.7%        
                                                 ======   ======

The Company adopted the provisions of FASB Interpretation No. 48 ("FIN
48"), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB   
Statement No. 109," on January 1, 2007. As a result of the implementation of    
FIN 48, the Company recognized a $27 million increase in its liability for      
uncertain tax benefits ("Tax Reserves"), which reduced the January 1, 2007,     
retained earnings balance.  The Company's total Tax Reserves as of the date     
of adoption were $250 million.  If these Tax Reserves were unnecessary,  $174   
million would affect the effective tax rate in future periods and $76 million   
would impact deferred taxes. Included in the above Tax Reserves is accrued      
interest and penalties, where applicable, of $31 million.  The Company          
recognizes accrued interest and penalties, if applicable, related to income     
taxes in income tax expense.                                                    

The Company's federal consolidated income tax returns are closed to   
examination through 1995.  Although the IRS has completed its examination for   
1996 and 1997, at this time a formal revenue agent's report has not been        
received.  The Company believes it is unlikely that there will be any changes   
to those years that would affect the Tax Reserves.  The IRS is currently        
examining the Company's                                                         

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consolidated income tax returns for tax years 1998 through 2002. The            
Company's New York State and New York City return examinations have been        
completed through 1993. New York State and New York City are currently          
examining the Company's tax returns for the years 1994 through 1996.            
The Company's United Kingdom income tax returns are closed through 1999.        

The Company has Tax Reserves related to transactions occurring in the 
years 1998 through 2002 that are currently under examination by the IRS.  The   
outcome of such examination is not yet determinable.  Additionally, the         
Company has Tax Reserves for uncertain tax benefits associated with certain     
tax credits.  The Company does not expect that the resolution of these and      
other issues over the next twelve months will have a material impact on its     
financial statements.                                                           

13.  Derivatives and Hedging Relationships                                      
-------------------------------------                                 

Derivative contracts, such as futures contracts, forwards, interest   
rate swaps, foreign currency swaps and options and similar products used in     
trading activities, are recorded at fair value.  The Company does not           
recognize gains or losses at the inception of derivative transactions if        
the fair value is not determined based upon observable market transactions      
and market data.  Gains and losses are included in foreign exchange and         
other trading activities in noninterest income.  Unrealized gains and           
losses are reported on a gross basis in trading account assets and trading      
liabilities, after taking into consideration master netting agreements.         

The Company enters into various derivative financial instruments for  
non-trading purposes primarily as part of its asset/liability management        
("ALM") process.  These derivatives are designated as fair value and cash       
flow hedges of certain assets and liabilities when the Company enters into      
the derivative contracts. Gains and losses associated with fair value           
hedges are recorded in income as well as any change in the value of the         
related hedged item. Gains and losses on cash flow hedges are recorded in       
other comprehensive income.  If a derivative used in ALM does not qualify       
as a hedge it is marked to market and the gain or loss is included in net       
interest income.                                                                

The Company formally documents all relationships between hedging      
instruments and hedged items, as well as its risk-management objectives and     
strategy for undertaking various hedge transactions.  This process includes     
linking all derivatives that are designated as fair value hedges to             
specific assets or liabilities on the balance sheet.                            

The Company formally assesses both at the hedge's inception and on an 
ongoing basis whether the derivatives that are used in hedging transactions     
are highly effective and whether those derivatives are expected to remain       
highly effective in future periods.  The Company evaluates ineffectiveness      
in terms of amounts that could impact a hedge's ability to qualify for          
hedge accounting and the risk that the hedge could result in more than a de     
minimus amount of ineffectiveness. At inception, the potential causes of        
ineffectiveness related to each of its hedges is assessed to determine if       
the Company can expect the hedge to be highly effective over the life of        
the transaction and to determine the method for evaluating effectiveness on     
an ongoing basis.  Recognizing that changes in the value of derivatives         
used for hedging or the value of hedged items could result in significant       
ineffectiveness, the Company has processes in place designed to identify        
and evaluate such changes when they occur.  Quarterly, the Company performs     
a quantitative effectiveness assessment and records any ineffectiveness.        

The Company utilizes interest rate swap agreements to manage its      
exposure to interest rate fluctuations.  For hedges of fixed-rate loans,        
asset-backed securities, deposits and long-term debt, the hedge                 
documentation specifies the terms of the hedged items and interest rate         
swaps and indicates that the derivative is hedging a fixed rate item and is     
a fair value hedge, that the hedge exposure is to the changes in the fair       
value of the hedged item due to changes in benchmark interest rates, and        
that the strategy is to eliminate fair value variability by converting          
fixed rate interest payments to LIBOR.                                          

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The fixed-rate loans hedged generally have a maturity of 9 to 12 years
and are not callable.  These loans are hedged with "pay fixed rate, receive     
variable rate" swaps with similar notional amounts, maturities, and fixed       
rate coupons.  The swaps are not callable. At March 31, 2007, $42 million       
of loans were hedged with interest rate swaps which had notional values of      
$42 million.                                                                    

The securities hedged generally have a weighted average life of 10    
years or less and are callable six months prior to maturity.  These             
securities are hedged with pay fixed rate, receive variable rate swaps of       
like maturity, repricing and fixed-rate coupon.  The swaps are callable six     
months prior to maturity.  At March 31, 2007, $227 million of securities        
were hedged with interest rate swaps which had notional values of $227          
million.                                                                        

The fixed-rate deposits hedged generally have original maturities of 1
to 12 years (21% are one year deposits) and, except for three deposits, are     
not callable.  These deposits are hedged with receive fixed rate, pay           
variable rate swaps of similar maturity, repricing and fixed rate coupon.       
The swaps are not callable except for the three that hedge the callable         
deposits.  At March 31, 2007, $880 million of deposits were hedged with         
interest rate swaps which had notional values of $880 million.                  

The fixed-rate long-term debt hedged generally has an original        
maturity of 4 to 30 years.  The Company issues both callable and non-           
callable debt.  The non-callable debt is hedged with simple interest rate       
swaps similar to those described for deposits.  Callable debt is hedged         
with callable swaps where the call dates of the swaps exactly match the         
call dates of the debt.  At March 31, 2007, $6,212 million of debt was          
hedged with interest rate swaps which had notional values of $6,237             
million.                                                                        

In addition to the fair value hedges discussed above, the Company has 
two cash flow hedges utilizing interest rate swaps to hedge the variability     
in expected future cash flows attributable to floating rates on an a            
deposit and a long-term debt issue.  The hedge documentation specifies the      
terms of the hedged items and interest rate swaps and indicates that the        
derivative is hedging future variable interest payments and is a cash flow      
hedge, that the hedge exposure is the variability in interest payments, and     
that the strategy is to eliminate variability by converting floating rate       
interest payments to fixed payments.  For cash flow hedges the interest         
rate swap is marked to market with the changes in value recorded in other       
comprehensive income.  The amount recognized as other comprehensive income      
for the cash flow hedge is reclassified to net interest income as interest      
is realized on the hedged item.                                                 

The deposit hedged has a principal amount of $275 million and has a   
LIBOR based floating rate and an 18 month original maturity. The deposit is     
hedged with a receive LIBOR, pay fixed rate swap with the same maturity and     
interest payment dates as the deposit to eliminate the variability in           
interest payments on the deposit.  During the next twelve months, net           
losses of less than $1 million (pre-tax) included in other comprehensive        
income are expected to be reclassified to income.                               

The long-term debt hedged has a principal amount of $400 million and  
has a LIBOR based floating rate and a 2 year original maturity. The debt is     
hedged with a receive LIBOR, pay fixed rate swap with the same maturity and     
interest payment dates as the debt to eliminate the variability in interest     
payments on the debt.  During the next twelve months, net losses of less        
than $2 million (pre-tax) included in other comprehensive income are            
expected to be reclassified to income.                                          

In addition, the Company enters into foreign exchange hedges.  The    
Company uses forward foreign exchange contracts with maturities of 12           
months or less to hedge its Sterling and Euro foreign exchange exposure         
with respect to forecasted expense transactions in non-U.S. entities which      
have the U.S. dollar as their functional currency.  As of March 31, 2007,       
the hedged forecasted foreign currency transactions and linked foreign          
exchange forward hedges were $93 million with $3 million (pre-tax) gains        
recorded in other comprehensive income.  These gains are expected to be         
reclassified to expense over the next nine months.                              

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Forward foreign exchange contracts are also used to hedge the value of
the Company's investments in foreign subsidiaries.  These forward contracts     
have a maturity of less than six months.  The derivatives employed are          
designated as net investment hedges of changes in value of the Company's        
foreign investment due to exchange rates, such that changes in value of the     
forward exchange contracts offset the changes in value of the foreign           
investments due to changes in foreign exchange rates.  The change in fair       
market value of these contracts is deferred and reported within accumulated     
translation adjustments in shareholders' equity, net of tax effects. At         
March 31, 2007, foreign exchange contracts, with notional amounts totaling      
$1,894 million, were designated as hedges of corresponding amounts of net       
investments.                                                                    

The Company discontinues hedge accounting prospectively when it       
determines that a derivative is no longer an effective hedge, the               
derivative expires or is sold, or management discontinues the derivative's      
hedge designation.                                                              

Ineffectiveness related to derivatives and hedging relationships was  
recorded in income as follows:                                                  

(In millions)                      Three Months Ended March 31,               
Hedges                                 2007           2006                    
-------------------------          -----------    -----------                 
Fair value hedge of loans          $     (0.1)    $       0.2                 
Fair value hedge                                                              
of securities                           0.1               -               
Fair value hedge of deposits                                                  
and long-term debt                     (0.5)            0.5               
Cash flow hedges                         (0.5)           (0.2)                
Other                                       -            (0.3)                
                  -----------    -----------
Total                              $     (1.0)    $       0.2                 
                  ===========    ===========

Other includes ineffectiveness recorded on foreign exchange hedges.   

14.  Commitments and Contingent Liabilities                                     
--------------------------------------                                

In the normal course of business, various commitments and contingent  
liabilities are outstanding which are not reflected in the accompanying         
consolidated balance sheets.  Management does not expect any material           
losses to result from these matters.                                            

The Company's significant trading and off-balance sheet risks are     
securities, foreign currency and interest rate risk management products,        
commercial lending commitments, letters of credit, and securities lending       
indemnifications.  The Company assumes these risks to reduce interest rate      
and foreign currency risks, to provide customers with the ability to meet       
credit and liquidity needs, to hedge foreign currency and interest rate         
risks, and to trade for its own account.  These items involve, to varying       
degrees, credit, foreign exchange, and interest rate risk not recognized in     
the balance sheet.  The Company's off-balance sheet risks are managed and       
monitored in manners similar to those used for on-balance sheet risks.          
There are no significant industry concentrations of such risks.                 

A summary of the notional amount of the Company's off-balance sheet   
credit transactions, net of participations, at March 31, 2007 and December      
31, 2006 follows:                                                               

Off-Balance Sheet Credit Risks                                                  
------------------------------                                                  
                                    March 31,   December 31,
(In millions)                                     2007          2006            
-----------------------------------         ------------   -----------          
Lending commitments                         $     37,530   $    37,364          
Standby letters of credit                         10,410        10,902          
Commercial letters of credit                       1,064         1,195          
Securities lending indemnifications              396,722       398,675          

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The total potential loss on undrawn commitments, standby and          
commercial letters of credit, and securities lending indemnifications is        
equal to the total notional amount if drawn upon, which does not consider       
the value of any collateral.  Since many of the commitments are expected to     
expire without being drawn upon, the total amount does not necessarily          
represent future cash requirements.  The allowance for lending-related          
commitments at March 31, 2007 and December 31, 2006 was $135 million and        
$150 million.                                                                   

A securities lending transaction is a fully collateralized transaction
in which the owner of a security agrees to lend the security through an         
agent (the Company) to a borrower, usually a broker/dealer or bank, on an       
open, overnight or term basis, under the terms of a prearranged contract,       
which generally matures in less than 90 days.  The Company generally lends      
securities with indemnification against broker default.  The Company            
generally requires the borrower to provide 102% cash collateral which is        
monitored on a daily basis, thus reducing credit risk.  Security lending        
transactions are generally entered into only with highly-rated                  
counterparties.  At March 31, 2007 and December 31, 2006, securities            
lending indemnifications were secured by collateral of $407.3 billion and       
$405.5 billion, respectively.                                                   

Standby letters of credit principally support corporate obligations   
and include $1.1 billion that were collateralized with cash and securities      
on March 31, 2007 and $1.0 billion on December 31, 2006.  At March 31,          
2007, approximately $6.8 billion of the standby letters of credit will          
expire within one year, and the remaining balance will expire between one       
to five years.                                                                  

The notional amounts for other off-balance sheet risks (See "Trading  
Activities" in the MD&A section) express the dollar volume of the               
transactions; however, credit risk is much smaller.  The Company performs       
credit reviews and enters into netting agreements to minimize the credit        
risk of foreign currency and interest rate risk management products.  The       
Company enters into offsetting positions to reduce exposure to foreign          
exchange and interest rate risk.                                                

Other                                                                           
-----                                                                           

The Company has provided standard representations for underwriting    
agreements, acquisition and divestiture agreements, sales of loans and          
commitments, and other similar types of arrangements and customary              
indemnification for claims and legal proceedings related to its provision       
of financial services.  Insurance has been purchased to mitigate certain of     
these risks.  The Company is a minority equity investor in, and member of,      
several industry clearing or settlement exchanges through which foreign         
exchange, securities, or other transactions settle.  Certain of these           
industry clearing or settlement exchanges require their members to              
guarantee their obligations and liabilities or to provide financial support     
in the event other partners do not honor their obligations.  It is not          
possible to estimate a maximum potential amount of payments that could be       
required with such agreements.                                                  

In the ordinary course of business, the Company makes certain         
investments that have tax consequences.  From time to time, the IRS may         
question or challenge the tax position taken by the Company.  The Company       
engaged in certain types of structured cross-border leveraged leasing           
investments, referred to as "LILOs", prior to mid-1999 that the IRS has         
challenged.  In 2004, the IRS proposed adjustments to the Company's tax         
treatment of these transactions.  On February 28, 2006, the Company settled     
this matter with the IRS relating to LILO transactions closed in 1996 and       
1997. The settlement did not affect 2006 net income, as the impact of the       
settlement was fully reserved.                                                  

The Company's 1998 leveraged lease transactions are in a subsequent   
audit cycle and were not part of the settlement.  The Company believes that     
a comparable settlement for 1998 may be possible, given the similarity          
between these leases and the settled leases. However, negotiations are          
ongoing and the treatment of the 1998 leases may still be litigated if an       
acceptable settlement cannot be reached.  Under current U.S. generally          
accepted accounting principles, if the 1998 leases are settled on a basis       
comparable to the 1996 and 1997 leases, the Company would not expect the        
settlement of the 1998 leases to have an impact on net income, based on         
existing reserves.                                                              

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In the fourth quarter of 2005 the Company deposited funds with the IRS
in anticipation of reaching a settlement on all of its LILO investments.        

On February 11, 2005, the IRS released Notice 2005-13, which          
identified certain lease investments known as "SILOs" as potentially            
subject to IRS challenge.  The Company believes that certain of its lease       
investments entered into prior to 2004 may be consistent with transactions      
described in the notice. Although it is likely the IRS will challenge the       
tax benefits associated with these leases in 2007, the Company remains          
confident that its tax treatment of the leases complied with statutory,         
administrative and judicial authority existing at the time they were            
entered into.                                                                   

In 2001 and 2002, the Company entered into various structured         
transactions that involved, among other things, the payment of U.K.             
corporate income taxes that were credited against the Company's U.S.            
corporate income tax liability.  The IRS is currently reviewing these           
transactions and it is likely that some or all of the credits will be           
challenged upon completion of the review. If necessary the Company will         
vigorously defend its position and believes that any tax benefits               
associated with these transactions were consistent with the applicable          
statutory, judicial and administrative authority.                               

The Company currently believes it has adequate tax reserves to cover  
its LILO exposure and any other potential tax exposures, based on a             
probability assessment of various potential outcomes.  Probabilities and        
outcomes are reviewed as events unfold, and adjustments to the reserves are     
made when appropriate.                                                          

In the ordinary course of business, the Company and its subsidiaries  
are routinely defendants in or parties to a number of pending and potential     
legal actions, including actions brought on behalf of various classes of        
claimants, and regulatory matters.  Claims for significant monetary damages     
are asserted in certain of these actions and proceedings.  Due to the           
inherent difficulty of predicting the outcome of such matters, the Company      
cannot ascertain what the eventual outcome of these matters will be;            
however, based on current knowledge and after consultation with legal           
counsel, the Company does not believe that judgments or settlements, if         
any, arising from pending or potential legal actions or regulatory matters,     
either individually or in the aggregate, after giving effect to applicable      
reserves, will have a material adverse effect on the consolidated financial     
position or liquidity of the Company although they could have a material        
effect on net income for a given period.  The Company intends to defend         
itself vigorously against all of the claims asserted in these legal             
actions.                                                                        

See discussion of contingent legal matters in the "Legal and          
Regulatory Proceedings" section.                                                

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QUARTERLY REPORT ON FORM 10-Q   
THE BANK OF NEW YORK COMPANY, INC.  

UNITED STATES   
SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549  

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange     
Act of 1934 for the quarterly period ended March 31, 2007                       

Commission file number 001-06152                                                

THE BANK OF NEW YORK COMPANY, INC.                                              
Incorporated in the State of New York                                           
I.R.S. Employer Identification No. 13-2614959                                   
Address: One Wall Street                                                        
New York, New York 10286                                      
Telephone: (212) 495-1784                                     

As of April 30, 2007, The Bank of New York Company, Inc. had                    
758,522,492 shares of common stock ($7.50 par value) outstanding.               

The Bank of New York Company, Inc. (1) has filed all reports required to be     
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the  
preceding 12 months(or such shorter period that the registrant was required to  
file such reports), and (2) has been subject to such filing requirements for    
the past 90 days.                                                               

The registrant is a large accelerated filer (as defined in Rule 12b-2 of the    
Exchange Act).                                                                  

The registrant is not a shell company (as defined in Rule 12b-2 of the          
Exchange Act).                                                                  

The following sections of the Financial Review set forth in the cross-          
reference index are incorporated in the Quarterly Report on Form 10-Q.          

            Cross-reference                                        Page(s)
-----------------------------------------------------------------------------   

PART I         FINANCIAL INFORMATION                                            

Item 1         Financial Statements                                             

Consolidated Balance Sheets as of                 
             March 31, 2007 and December 31, 2006                     51

Consolidated Statements of Income for             
the Three Months Ended March 31, 2007,        
             December 31, 2006 and March 31, 2006                     52

Consolidated Statement of Changes in Shareholders'
             Equity for the Three Months Ended March 31, 2007         53

Consolidated Statement of Cash Flows              
             for the Three Months Ended March 31, 2007 and 2006       54

           Notes to Consolidated Financial Statements            55 - 71

Item 2         Management's Discussion and Analysis of                          
             Financial Condition and Results of Operations        3 - 50

Item 3         Quantitative and Qualitative Disclosures                         
             About Market Risk                                   42 - 44

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ITEM 4.  CONTROLS AND PROCEDURES                                                

Disclosure Controls and Procedures                                              

The Company's Disclosure Committee, whose members include the Chief   
Executive Officer and Chief Financial Officer, has responsibility for           
ensuring that there is an adequate and effective process for establishing,      
maintaining, and evaluating disclosure controls and procedures that are         
designed to ensure that information required to be disclosed by the Company     
in its SEC reports is timely recorded, processed, summarized and reported.      
In addition, the Company's ethics hotline can also be used by employees for     
the anonymous communication of concerns about financial controls or             
reporting matters.  There are inherent limitations to the effectiveness of      
any system of disclosure controls and procedures, including the possibility     
of human error and the circumvention or overriding of the controls and          
procedures. Accordingly, even effective disclosure controls and procedures      
can only provide reasonable assurance of achieving their control                
objectives.                                                                     

As of the end of the period covered by this report, an evaluation was 
carried out under the supervision and with the participation of the             
Company's management, including the Chief Executive Officer and Chief           
Financial Officer, of the effectiveness of the Company's disclosure             
controls and procedures as defined in Exchange Act Rule 13a-15(e) and 15d-      
15(e). Based on that evaluation, the Chief Executive Officer and Chief          
Financial Officer concluded that the Company's disclosure controls and          
procedures were effective.                                                      

Changes in Internal Control Over Financial Reporting                            

In the ordinary course of business, the Company may routinely modify, 
upgrade or enhance its internal controls and procedures for financial           
reporting.  There have not been any changes in the Company's internal           
controls over financial reporting as defined in Exchange Act Rule 13a-15(f)     
and 15d-15(f) during the fiscal quarter to which this report relates that       
have materially affected, or are reasonably likely to materially affect,        
the Company's internal control over financial reporting.                        

PART II.  OTHER INFORMATION                                                     

ITEM 1.  LEGAL AND REGULATORY PROCEEDINGS                                       

In the ordinary course of business, the Company and its subsidiaries  
are routinely defendants in or parties to a number of pending and potential     
legal actions, including actions brought on behalf of various classes of        
claimants, and regulatory matters.  Claims for significant monetary damages     
are asserted in certain of these actions and proceedings.  In regulatory        
enforcement matters, claims for disgorgement and the imposition of              
penalties and/or other remedial sanctions are possible.  Due to the             
inherent difficulty of predicting the outcome of such matters, the Company      
cannot ascertain what the eventual outcome of these matters will be;            
however, on the basis of current knowledge and after consultation with          
legal counsel, the Company does not believe that judgments or settlements,      
if any, arising from pending or potential legal actions or regulatory           
matters, either individually or in the aggregate, after giving effect to        
applicable reserves, will have a material adverse effect on the                 
consolidated financial position or liquidity of the Company, although they      
could have a material effect on net income for a given period.  The Company     
intends to defend itself vigorously against all of the claims asserted in       
these legal actions.                                                            

As previously disclosed in the Company's 2006 Annual Report on Form   
10-K, the U.S. Securities and Exchange Commission ("SEC") is investigating      
1) the appropriateness of certain expenditures made in connection with          
marketing and distribution of the Hamilton Funds; 2) possible market-timing     
transactions cleared by Pershing LLC ("Pershing"); and 3) the trading           
activities of Pershing Trading Company LP, a floor specialist, on two           
regional exchanges from 1999 to 2004. As to market-timing, the Company has      
learned that the SEC is considering not pursuing the matter further.            

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Because the conduct at issue in the Pershing market timing and floor  
specialist investigations is alleged to have occurred largely during the        
period when Pershing was owned by Credit Suisse First Boston (USA), Inc.        
("CSFB"), the Company has made claims for indemnification against CSFB          
relating to these matters under the agreement relating to the acquisition       
of Pershing. CSFB is disputing these claims for indemnification.                

ITEM 1A.  RISK FACTORS                                                          

See "Forward-Looking Statements and Risk Factors" in "Management's    
Discussion and Analysis of Financial Condition and Results of                   
Operations."  There have been no material changes to the risk factors           
discussed in the Company's Annual Report on Form 10-K for the year ended        
December 31, 2006.                                                              

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES                                
AND USE OF PROCEEDS                                       

Shares of the Company's common stock were issued in the following     
transactions exempt from registration under the Securities Act of 1933          
pursuant to Section 4(2) thereof:                                               

(a)  Shares of common stock were issued to former directors who had deferred    
 receipt of such common stock pursuant to the Deferred Compensation Plan
for Non-Employee Directors of The Bank of New York Company, Inc.      

On March 13, 2007, 7,872 shares of common stock were issued to        
three current directors as part of their annual retainer as non-      
employee directors. Richard J. Kogan, John A. Luke, Jr. and Richard   
C. Vaughan each received 2,624 shares.                                

These transactions were exempt from registration under the            
Securities Act of 1933 pursuant to Section 4(2).                      

(c)  Under its stock repurchase program, the Company buys back shares           
from time to time. The following table discloses the Company's        
repurchases of the Company's common stock made during the first       
quarter of 2007.                                                      

Issuer Purchases of Equity Securities                                           
-------------------------------------                                           
                                Total Number         Maximum
             Total      Average       of Shares     Number of Shares
           Number      Price       Purchased as      That May be
Period           of Shares      Paid         Part of         Repurchased        
           Purchased   Per Share      Publicly       Under the Plans
                               Announced Plans     or Programs
               or Programs
--------------  ----------  ----------   --------------- ------------------     
January   1-31     148,423  $    38.38           148,423          7,973,562     
February  1-28     211,620       41.46           211,620          7,761,942     
March     1-31       3,037       39.37             3,037          7,758,905     
----------               ---------------        
Total              363,080                       363,080                        
==========               ===============        

Shares were repurchased through the Company's stock repurchase        
programs announced on July 12, 2005 and June 30, 2006, which permit the         
repurchase of 34 million shares.                                                

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ITEM 6.  EXHIBITS                                                               

Pursuant to the rules and regulations of the Securities and Exchange  
Commission, the Company has filed certain agreements as exhibits to this        
Quarterly Report on Form 10-Q. These agreements may contain representations     
and warranties by the parties. These representations and warranties have        
been made solely for the benefit of the other party or parties to such          
agreements and (i) may have been qualified by disclosures made to such other    
party or parties, (ii) were made only as of the date of such agreements or      
such other date(s) as may be specified in such agreements and are subject to    
more recent developments, which may not be fully reflected in the Company's     
public disclosure, (iii) may reflect the allocation of risk among the           
parties to such agreements and (iv) may apply materiality standards             
different from what may be viewed as material to investors. Accordingly,        
these representations and warranties may not describe the Company's actual      
state of affairs at the date hereof and should not be relied upon.              

2.1         Amended and Restated Agreement and Plan of Merger, dated as of      
    December 3, 2006, as amended and restated as of February 23,
       2007, and as further amended and restated as of March 30, 2007,
    between The Bank of New York Company, Inc., Mellon Financial
Corporation and The Bank of New York Mellon Corporation 
       (incorporated by reference to Annex A to Amendment No. 1 to the
        Registration Statement on Form S-4 filed by The Bank of New York
       Mellon Corporation with the SEC on April 2, 2007), incorporated
      by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K as filed with the Commission on April 5, 2007. 

3.1         The By-Laws of The Bank of New York Company, Inc. as amended        
    through April 12, 2005, incorporated by reference to Exhibit
    3(ii) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.                           

3.2         Restated Certificate of Incorporation of The Bank of New York       
  Company, Inc. dated May 8, 2001, incorporated by reference
to Exhibit 4 to the Company's Registration Statement on 
      Form S-3 filed June 7, 2001 (File No. 333-62516, 333-62516-01,
333-62516-02, 333-62516-03 and 333-62516-04).           

4           None of the outstanding instruments defining the rights of          
    holders of long-term debt of the Company represent long-term
      debt in excess of 10% of the total assets of the Company.  The
Company hereby agrees to furnish to the Commission, upon
request, a copy of any such instrument.                 

12          Ratio of Earnings to Fixed Charges for the Three Months Ended       
March 31, 2007 and 2006.                                

31.1        Certification of Chairman and Chief Executive Officer pursuant      
to Section 302 of the Sarbanes-Oxley Act of 2002.       

31.2        Certification of Chief Financial Officer pursuant to                
Section 302 of the Sarbanes-Oxley Act of 2002.          

32.1        Certification of Chairman and Chief Executive Officer pursuant      
to Section 906 of the Sarbanes-Oxley Act of 2002.       

32.2        Certification of Chief Financial Officer pursuant                   
to Section 906 of the Sarbanes-Oxley Act of 2002.       

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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.                                           

                                      THE BANK OF NEW YORK COMPANY, INC.
                                      ----------------------------------
                    (Registrant)

Date: May 9, 2007                      By:  /s/ Thomas J. Mastro                
                                        --------------------------------
                 Name:  Thomas J. Mastro
           Title:  Comptroller

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EXHIBIT INDEX   
-------------   

Exhibit        Description                                                      
-------        -----------                                                      

2.1         Amended and Restated Agreement and Plan of Merger, dated as of      
    December 3, 2006, as amended and restated as of February 23,
       2007, and as further amended and restated as of March 30, 2007,
    between The Bank of New York Company, Inc., Mellon Financial
Corporation and The Bank of New York Mellon Corporation 
       (incorporated by reference to Annex A to Amendment No. 1 to the
        Registration Statement on Form S-4 filed by The Bank of New York
       Mellon Corporation with the SEC on April 2, 2007), incorporated
      by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K as filed with the Commission on April 5, 2007. 

3.1         The By-Laws of The Bank of New York Company, Inc. as amended        
    through April 12, 2005, incorporated by reference to Exhibit
    3(ii) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.                           

3.2         Restated Certificate of Incorporation of The Bank of New York       
  Company, Inc. dated May 8, 2001, incorporated by reference
to Exhibit 4 to the Company's Registration Statement on 
      Form S-3 filed June 7, 2001 (File No. 333-62516, 333-62516-01,
333-62516-02, 333-62516-03 and 333-62516-04).           

4           None of the outstanding instruments defining the rights of          
    holders of long-term debt of the Company represent long-term
      debt in excess of 10% of the total assets of the Company.  The
Company hereby agrees to furnish to the Commission, upon
request, a copy of any such instrument.                 

12          Ratio of Earnings to Fixed Charges for the Three Months Ended       
March 31, 2007 and 2006.                                

31.1        Certification of Chairman and Chief Executive Officer pursuant      
to Section 302 of the Sarbanes-Oxley Act of 2002.       

31.2        Certification of Chief Financial Officer pursuant to                
Section 302 of the Sarbanes-Oxley Act of 2002.          

32.1        Certification of Chairman and Chief Executive Officer pursuant      
to Section 906 of the Sarbanes-Oxley Act of 2002.       

32.2        Certification of Chief Financial Officer pursuant                   
to Section 906 of the Sarbanes-Oxley Act of 2002.       

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		3/31/09		43
		12/15/08		59
		1/1/08		59
		12/31/07		12		58
		6/30/07		39		61
		5/24/07		50					15-12B,  8-K
Filed on:		5/9/07		78					425
		5/4/07		67					4
		4/30/07		40		74			424B2
		4/25/07		67					4
		4/17/07		50					424B2,  8-K
		4/12/07		50					4
		4/10/07		67					424B2,  425,  DEF 14A
		4/5/07		77		79			4,  425,  8-K
		4/2/07		77		79			4,  424B2
For Period End:		3/31/07		1		79			8-K
		3/30/07		50		79			4,  424B3,  8-K
		3/19/07		51					424B2
		3/14/07		51					4,  DEF 14A
		3/13/07		76					4,  424B2
		2/23/07		50		79			10-K,  8-K
		1/22/07		67					424B2
		1/17/07		58					424B2,  425
		1/1/07		68					4
		12/31/06		2		76			10-K,  11-K,  5,  8-K
		12/19/06		63					424B2,  425
		12/15/06		59					4
		12/3/06		50		79			8-K
		12/1/06		62
		10/10/06		40					424B2
		10/2/06		61					424B2
		10/1/06		14		63
		9/30/06		26		60			10-Q,  8-K
		6/30/06		27		76			10-Q,  8-K
		3/31/06		2		79			10-Q,  8-K
		2/28/06		72					4,  424B3
		1/1/06		58		61
		7/12/05		76					424B3
		4/12/05		77		79			4,  424B3
		3/31/05		77		79			10-Q,  8-K
		3/1/05		43					10-K,  4,  424B3
		2/11/05		73					4,  SC 13G/A
		1/1/03		57
		6/7/01		77		79			S-3
		5/8/01		77		79			DEF 14A
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