The Bank of New York Company, Inc. Reports Fourth Quarter EPS of 45 Ce

    Business Editors/Banking Writers

    NEW YORK--(BUSINESS WIRE)--Jan. 19, 2005--The Bank of New York Company, Inc. (NYSE: BK) reports fourth quarter net income of $351 million and diluted earnings per share of 45 cents, compared with net income of $354 million and diluted earnings per share of 46 cents in the third quarter of 2004, and net income of $307 million and diluted earnings per share of 40 cents in the fourth quarter of 2003. Full year net income for 2004 was $1,440 million, or $1.85 diluted earnings per share, compared to $1,157 million, or $1.52 diluted earnings per share in 2003. A charge related to a reserve for the cost of the anticipated settlement of the RW Professional Leasing Services Corp. matter ("RW Matter"), as well as certain items detailed in "Other Fourth Quarter Developments" reduced EPS by 3 cents for the fourth quarter and full year 2004. Fourth quarter and full year 2003 results included merger and integration costs associated with the Pershing acquisition of 4 cents and 8 cents per share while the full year also included 7 cents per share related to the GMAC settlement.
    Fourth quarter highlights include strong performance in securities servicing fees and foreign exchange and other trading revenues. Securities servicing fees increased 8% sequentially in the fourth quarter to $742 million, reflecting more active equity markets and the conversion of new business wins. Execution and clearing services revenues increased 15% sequentially, reflecting a strong rebound in equity market volumes from the weak third quarter. Issuer services fees increased 6% relative to the third quarter to $149 million, reflecting strong results in depositary receipts, and modest growth in corporate trust. Investor services fees were up 5% sequentially, reflecting higher global funds services fees driven by new business wins. Foreign exchange and other trading revenues increased 34% sequentially, reflecting higher levels of client activity and an increase in volatility.
    For the full year, the growth in earnings was paced by securities servicing growth of 19% (8% adjusted for full year impact of Pershing), core net interest income growth of 6%, strong credit performance, and higher than expected securities gains. Performance was strong across nearly all the Company's securities servicing businesses. Both investor and issuer services increased by 11%. The growth in investor services was driven largely by new business wins and improvements year-over-year in asset values and volumes. Issuer services benefited from increased cross-border activity in depositary receipts and improving market share in global products within corporate trust. Broker-dealer services was up 19% primarily due to strong growth in collateral management. In addition, private client services and asset management fees were up 17%, primarily due to exceptional growth at the Company fund of funds manager, Ivy Asset Management ("Ivy").
    This strength in revenue was partially offset by upward pressure on the Company's expense base. Higher option and pension expenses, business continuity spending, costs associated with legal and regulatory matters, and costs associated with converting new business opportunities in investor services all contributed to higher expense levels.
    Chairman and Chief Executive Officer Thomas A. Renyi stated, "Our securities servicing and fiduciary businesses responded well to the better market environment this quarter, which improved considerably following the November elections. In particular, our equity-linked and foreign exchange businesses benefited from a significant rebound in market volumes and increased cross-border flows and volatility. Net interest income continues to benefit from a well positioned balance sheet and the credit environment remains highly favorable.
    "We did experience a noticeable uptick in expenses as we recognized costs associated with the conversion of new outsourcing wins, hiring of customer service personnel in some of our faster growing businesses, higher incentive compensation in light of the sharp rebound in performance in the last two months of the quarter as well as continuing high costs associated with responding to regulatory inquiries.
    "On balance, I am quite encouraged by our top line growth this quarter which gives evidence to the positive effect an improving investment environment has on our business model. We look forward to 2005 which should offer a stronger operating environment and the revenue momentum it brings along. Our challenge in the new year is to contain the more significant cost pressures we face in order to bring more of our revenue growth to the bottom line."

SECURITIES SERVICING FEES

4th 3rd 4th Quarter Quarter Quarter Year-to-date ------- ------- ------- ---------------- (In millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------- ------- Execution and Clearing Services $ 302 $ 262 $ 290 $ 1,146 $ 885

Investor Services 239 228 210 921 830

Issuer Services 149 141 136 582 522

Broker-Dealer Services 52 54 48 209 175 ------- ------- ------- ------- ------- Securities Servicing Fees $ 742 $ 685 $ 684 $ 2,858 $ 2,412 ======= ======= ======= ======= =======

    Securities servicing fees were $742 million in the fourth quarter, an increase of $57 million, or 8%, from the third quarter of 2004 and $58 million, or 8%, from a year ago. For the full year of 2004, securities servicing fees were $2,858 million, an increase of $446 million from $2,412 million in 2003, principally due to the full year impact of the Pershing acquisition and good organic growth in the remaining business segments.
    Execution and clearing services fees increased $40 million sequentially, or 15%, in the fourth quarter, and were up 4% from the fourth quarter of 2003. The execution business benefited sequentially from increased client activity as well as strong growth in transition management. Pershing's correspondent clearing business benefited sequentially from higher retail activity which increased billable trades. The increase relative to the fourth quarter of 2003 reflects organic growth in both the execution business and Pershing.
    Investor services fees were up $11 million, or 5%, over the third quarter, and $29 million, or 14%, from the fourth quarter of 2003. Both sequential and prior year results reflect higher global funds services fees driven by new business wins and a moderate increase in securities lending fees. As of December 31, 2004, assets under custody rose to $9.7 trillion, from $8.9 trillion at September 30, 2004 and $8.3 trillion at December 31, 2003.
    Issuer services fees recorded a strong quarter, increasing 6% sequentially and 10% versus the fourth quarter of 2003. The sequential quarter increase reflects strong performance in depositary receipts and modest growth in corporate trust. Depositary receipts benefited primarily from increased cross-border investing, a higher level of corporate actions, and higher dividend activity. Corporate trust activity benefited from continued strength in international issuance and corporate specialty products. The increase versus the fourth quarter of 2003 reflects good organic growth in both corporate trust and depositary receipts.
    Broker-dealer services fees declined from $54 million to $52 million, as a result of a seasonal slowdown in collateral management activity. However, fees were up 8% versus the fourth quarter of 2003 primarily due to new business in collateral management.

OTHER FOURTH QUARTER DEVELOPMENTS
    During the fourth quarter, the Company recorded several gains and charges that in the aggregate reduced reported earnings by 3 cents per share. These items are described in the following table:

(In millions)

Income Statement Pre-Tax After-Tax Item Caption Income Tax Income -------------------- ----------------- ------- ----- --------- SFAS 13 cumulative lease adjustment - (cross-border Net Interest rail equipment leases) Income $ 89 $ (37)$ 52

Lease adjustment - Net Interest aircraft leases Income (10) 4 (6) Other Income 3 (1) 2 ------- ----- --------- Net (7) 3 (4)

Provision for Credit Losses 7 (3) 4

Charge for the RW Matter Other Expense (30) 8 (22) Federal tax reserve adjustment related to LILO exposure Income Tax - (50) (50) ------- ----- --------- Total $ 59 $ (79)$ (20) ======= ===== =========

    The first item relates to an after-tax benefit of $52 million resulting from a cumulative adjustment to the leasing portfolio, which was triggered under Statement of Financial Accounting Standards No. 13 "Accounting for Leases" ("SFAS 13") by customers committing to exercising their early buy-out ("EBO") options. The Company's leasing portfolio contained a number of large cross-border leveraged leases in which the lessee had an early buy-out option to purchase the leased assets, generally railcars and related assets. Given a confluence of economic factors, the value of the leased equipment currently exceeds the exercise price of the early buy-out option. During the fourth quarter the Company offered financial incentives to these lessees to accelerate the exercise of their early buy-out options. As a result, several lessees agreed to this proposal, triggering the after-tax $52 million gain. The gain results from the recognition of lease income over a shorter time frame, since the term of the lease has been shortened to the early buy-out date.
    In addition, the Company's net investment in aircraft leases was impacted by a $4 million after-tax adjustment related to aircraft leased to two airlines. This adjustment reduced the amount required for the aircraft-related allowance for credit losses. The Company recorded a $7 million reduction in the provision for credit losses which largely reflects release of reserves on the aircraft leases.
    Although there can be no assurance that a settlement will be reached, in the fourth quarter of 2004, the Company recorded an after-tax expense of $22 million in connection with the cost of the anticipated settlement of the RW Matter. This expense is only partially tax deductible.
    In December of 2004, the Company had several appellate conferences with the IRS related to the Company's cross-border leveraged lease transactions. Based on these conferences, the Company believes it may be possible to settle the proposed IRS tax adjustments related to the portfolio. However, negotiations are continuing and the matter may still be litigated. Based on a revision to the probabilities and costs assigned to litigation and settlement outcomes, the Company recorded an increased fourth quarter tax expense of $50 million associated with increasing the tax reserve on these transactions.

NONINTEREST INCOME

4th 3rd 4th Quarter Quarter Quarter Year-to-date ------- ------- ------- -------------- (In millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------ ------ Servicing Fees Securities $ 742 $ 685 $ 684 $2,858 $2,412 Global Payment Services 71 84 76 317 314 ------- ------- ------- ------ ------ 813 769 760 3,175 2,726 Private Client Services and Asset Management Fees 115 113 103 448 384 Service Charges and Fees 98 98 97 385 375 Foreign Exchange and Other Trading Activities 90 67 81 364 327 Securities Gains 18 14 9 78 35 Other 52 49 52 241 159 ------- ------- ------- ------ ------ Total Noninterest Income $ 1,186 $ 1,110 $ 1,102 $4,691 $4,006 ======= ======= ======= ====== ======

    Total noninterest income for the fourth quarter of 2004 was $1,186 million, an increase of 7% sequentially and 8% from a year ago, reflecting stronger performance in securities servicing and foreign exchange and other trading versus both prior periods as well as higher fees in asset management versus the prior year. Noninterest income for the year ended December 31, 2004 was $4,691 million, an increase of 17% over the comparable 2003 period. The year 2004 result reflects the full year impact of the Pershing acquisition, the $48 million pre-tax gain on the sale of a portion of the Company's investment in Wing Hang Bank Limited and the $19 million gain on four sponsor fund investments recorded in 2004.
    Global payment services fees decreased $13 million, or 15%, compared with the third quarter of 2004 and decreased $5 million, or 7%, from the fourth quarter of 2003. The sequential decline reflects a shift by clients to using compensating balances to pay for services given the increased value of deposits in a rising interest rate environment. The decline versus the fourth quarter of 2003 reflects higher compensating balances partially offset by new business. Global payment services increased by 1% on a year-to-date basis over 2003.
    Private client services and asset management fees for the fourth quarter were up 2% from the prior quarter and 12% from the fourth quarter of 2003. The sequential quarter increase reflects continued growth at Ivy Asset Management and higher fees in private client services. The increase from the fourth quarter of 2003 reflects the same factors involved in the sequential quarter increase as well as higher equity price levels. For the full year 2004, private client and asset management fees increased by $64 million, or 17%, to $448 million. Total assets under management were $102 billion at December 31, 2004, up from $97 billion at September 30, 2004 and $89 billion a year ago.
    Service charges and fees remained flat from the third quarter of 2004 and increased 1% from the fourth quarter of 2003. Service charges and fees on a full year basis were up 3% over 2003, reflecting higher syndication and advisory fees.
    Foreign exchange and other trading revenues increased $23 million, or 34%, sequentially and $9 million, or 11%, from the fourth quarter of 2003. The strong sequential performance this quarter reflects renewed interest in cross-border investing and increased volatility in foreign exchange. For the full year 2004, foreign exchange and other trading activities were up 11% over the year ended December 31, 2003.
    Securities gains in the fourth quarter were $18 million, compared with $14 million in the third quarter of 2004 and $9 million in the fourth quarter of 2003. For the year ended December 31, 2004, securities gains were $78 million, up $43 million from the year ended December 31, 2003, primarily reflecting improvement in the private equity portfolio including $19 million of realized gains on four sponsor fund investments in the first quarter of 2004.
    Other noninterest income was $52 million, compared with $49 million in the prior quarter and $52 million in the fourth quarter of 2003. For the full year 2004, other noninterest income was $241 million, an increase of $82 million from $159 million for the full year 2003, primarily reflecting the gain on the sale of a portion of the Company's investment in Wing Hang Bank Limited.

NET INTEREST INCOME

4th 4th 3rd 4th Quarter Quarter Quarter Quarter (Dollars in millions) -------- ------- -------- -------- Reported Core** Reported Reported -------- ------- -------- -------- 2004 2004 2004 2003 -------- ------- -------- -------- Net Interest Income $ 527 $ 448 $ 428 $ 418 Tax Equivalent Adjustment* 9 9 8 8 -------- ------- -------- -------- Net Interest Income on a Tax Equivalent Basis $ 536 $ 457 $ 436 $ 426 ======== ======= ======== ======== Net Interest Rate Spread 2.26% 1.87% 1.88% 1.92% Net Yield on Interest Earning Assets 2.64 2.25 2.18 2.16

Year-to-date -------------------------- Reported Core** Reported -------- ------ -------- 2004 2004 2003 -------- ------ -------- Net Interest Income $ 1,645 $1,711 $ 1,609 Tax Equivalent Adjustment* 30 30 35 -------- ------ -------- Net Interest Income on a Tax Equivalent Basis $ 1,675 $1,741 $ 1,644 ======== ====== ======== Net Interest Rate Spread 1.78% 1.86% 1.97% Net Yield on Interest Earning Assets 2.07 2.15 2.22

* See Note (1)

** Excludes SFAS 13 adjustments

    Net interest income on a taxable equivalent basis was $536 million in the fourth quarter of 2004, which reflects a net interest rate spread of 2.26% and a net yield on interest earning assets of 2.64%. Excluding the impact of the SFAS 13 leasing adjustments on the leveraged lease portfolio, net interest income on a taxable equivalent basis was up on a sequential quarter basis to $457 million, compared with $436 million in the third quarter of 2004 and $426 million in the fourth quarter of 2003. On the same basis, the net interest income rate spread was 1.87% in the fourth quarter of 2004, compared with 1.88% in the third quarter of 2004, and 1.92% in the fourth quarter of 2003 while the net yield on interest earning assets was 2.25% in the fourth quarter of 2004, compared with 2.18% in the third quarter of 2004 and 2.16% in the fourth quarter of 2003.
    The increase in core net interest income from the third quarter of 2004 is primarily due to the higher value of interest free deposits given the rise in short term rates and an increase in liquid assets. The increase in liquid assets resulted from higher deposit levels reflecting a shift by clients to using compensating balances to pay for services as well as higher activity levels in securities servicing. The increase in core net interest income from the fourth quarter of 2003 reflects the same factors affecting the sequential quarter impact.
    For the full year 2004, reported net interest income on a taxable equivalent basis was $1,675 million, which reflects a net interest rate spread of 1.78% and a net yield on interest earning assets of 2.07%. Excluding the SFAS 13 leasing adjustments on the leveraged lease portfolio, net interest income was $1,741 million compared with $1,644 million for the full year 2003, reflecting the full year impact of the Pershing acquisition and the benefit of rising rates. The core year-to-date net interest income spread was 1.86% in 2004 compared with 1.97% in 2003, while the net yield on interest earning assets was 2.15% in 2004 and 2.22% in 2003.

NONINTEREST EXPENSE AND INCOME TAXES

4th 3rd 4th Quarter Quarter Quarter Year-to-date ------- ------- ------- -------------- (In millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------ ------ Salaries and Employee Benefits $ 617 $ 564 $ 548 $2,324 $2,002 Net Occupancy 75 77 70 305 261 Furniture and Equipment 51 51 49 204 185 Clearing 45 39 44 176 154 Sub-custodian Expenses 22 21 21 87 74 Software 43 52 46 193 170 Communications 23 22 24 93 92 Amortization of Intangibles 9 9 7 34 25 Merger and Integration Costs - - 48 - 96 Other 212 164 159 706 639 ------- ------- ------- ------ ------ Total Noninterest Expense $ 1,097 $ 999 $ 1,016 $4,122 $3,698 ======= ======= ======= ====== ======

    Noninterest expense for the fourth quarter of 2004 was $1,097 million, compared with $999 million in the prior quarter and $1,016 million in the fourth quarter of 2003. The sequential increase principally reflects higher variable costs associated with revenue growth and higher staffing costs. Fourth quarter of 2004 also included $30 million of expenses associated with the RW Matter while the fourth quarter of 2003 results included $48 million of merger and integration costs related to the Pershing acquisition.
    Salaries and employee benefits expense for the fourth quarter was up 9% to $617 million on a sequential quarter basis, reflecting higher costs associated with new business conversions, increased staffing in key growth areas, and higher compensation tied to performance.
    Clearing expenses were up 15% sequentially reflecting higher levels of business activity. Other expenses increased by $48 million sequentially including $30 million of expenses associated with the RW Matter and an additional $18 million primarily related to higher costs for legal, consulting, and employment agencies tied to hiring as well as an increase in travel expenses.
    For the year ended December 31, 2004, noninterest expense was $4,122 million in 2004, up 11% compared to $3,698 million in 2003. Noninterest expense in 2004 includes lease termination and severance costs of $18 million recognized in the first quarter and expenses associated with the RW Matter of $30 million recognized in the fourth quarter. In 2003, merger and integration costs related to the Pershing acquisition and the GMAC settlement costs aggregated $174 million. Noninterest expense for the full year 2004 also reflects the full year impact of the Pershing acquisition, higher stock option expense, a lower pension credit, the upfront expenses associated with the implementation of cost reduction initiatives, higher volume related sub-custodian and clearing expenses and higher technology and business continuity spending.
    The effective tax rate for the fourth quarter of 2004 was 43.7%, compared to 34.3% in the third quarter of 2004 and 34.6% in the fourth quarter of 2003. The effective tax rate for the year ended December 31, 2004 was 34.5%, compared with 34.3% for the year ended December 31, 2003. For the quarter and full year 2004, the increase in the effective tax rate reflects the net of the increase in the tax reserve related to LILO exposures and the impact of the SFAS 13 leasing adjustments.

BALANCE SHEET RETURN AND CAPITAL RATIOS

    Total assets were $94.5 billion at December 31, 2004, compared with $93.2 billion at September 30, 2004, and $92.4 billion at December 31, 2003. The increase in assets from September 30, 2004 reflects an increase in client activity during the quarter, which resulted in a higher level of deposits and liquid investments. Total shareholders' equity increased to $9.3 billion at December 31, 2004, compared with $9.1 billion at September 30, 2004, and $8.4 billion at December 31, 2003. The increase in shareholders' equity from the prior quarter reflects the retention of earnings partially offset by a decline in the securities valuation allowance. The major reason for the increase in shareholders' equity from a year ago is the retention of earnings.
    Return on average common equity for the fourth quarter of 2004 was 15.34%, compared with 15.90% in the third quarter of 2004, and 14.81% in the fourth quarter of 2003. Return on average assets for the fourth quarter of 2004 was 1.40%, compared with 1.45% in the third quarter of 2004, and 1.26% in the fourth quarter of 2003. For the year 2004, return on average common equity was 16.37% compared with 15.12% in 2003, while return on average assets was 1.45% compared with 1.27% in 2003.
    The Company's estimated regulatory Tier 1 capital and Total capital ratios were 8.28% and 12.25% at December 31, 2004, compared with 8.09% and 12.09% at September 30, 2004, and 7.44% and 11.49% at December 31, 2003. The regulatory leverage ratio was 6.41% at December 31, 2004, compared with 6.38% at September 30, 2004, and 5.82% at December 31, 2003. The Company's tangible common equity as a percentage of total assets was 5.57% at December 31, 2004, up from 5.49% at September 30, 2004 reflecting retained earnings partially offset by a decrease in the mark-to-market on the investment portfolio.

CREDIT LOSS PROVISION AND NET CHARGE-OFFS

4th 3rd 4th Quarter Quarter Quarter Year-to-date ------- ------- ------- -------------- (In millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------- ------ Provision $ (7) $ - $ 35 $ 15 $ 155 ======= ======= ======= ======= ====== Net Charge-offs: Commercial $ (1) $ (4) $ (24) $ (22) $(109) Foreign 2 (9) (7) (24) (25) Other (8) (1) (5) (9) (20) Consumer (5) (5) (12) (28) (28) ------- ------- ------- ------- ------ Total $ (12) $ (19) $ (48) $ (83) $(182) ======= ======= ======= ======= ======

Other Real Estate Expenses $ - $ - $ - $ - $ -

    The Company recorded a $7 million credit to the provision in the fourth quarter of 2004, compared to no provision in the third quarter of 2004 and $35 million in the fourth quarter of 2003. The fourth quarter 2004 provision includes a credit of $7 million primarily due to the reduction in exposure associated with the restructuring of a lease to a bankrupt airline. For the full year 2004, the provision was $15 million compared with $155 million in 2003. The lower provision compared with the 2003 periods reflects the Company's improved asset quality and a stronger credit environment. Nonperforming assets and charge-offs have declined, borrower ratings have improved, and large exposures have been reduced.
    The allowance for credit losses was $736 million at December 31, 2004, $756 million at September 30, 2004, and $804 million at December 31, 2003. The allowance for credit losses as a percent of non-margin loans were 2.48% at December 31, 2004, compared with 2.42% at September 30, 2004, and 2.72% at December 31, 2003.

December 31, September 30, December 31, (Dollars in millions) 2004 2004 2003 ------------ ------------ ------------- Margin Loans $ 6,059 $ 5,911 $ 5,712 Non-Margin Loans 29,722 31,208 29,571 Total Loans 35,781 37,119 35,283 Allowance for Loan Losses 591 598 668 Allowance for Lending- Related Commitments 145 158 136 Total Allowance for Credit Losses* 736 756 804 Allowance for Loan Losses As a Percent of Total Loans 1.65% 1.61% 1.89% Allowance for Loan Losses As a Percent of Non-Margin Loans 1.99 1.92 2.26 Allowance for Credit Losses As a Percent of Total Loans 2.06 2.04 2.28 Allowance for Credit Losses As a Percent of Non-Margin Loans 2.48 2.42 2.72

* See Note (2)

NONPERFORMING ASSETS

Change 12/31/04 vs. (Dollars in millions) 12/31/04 9/30/04 9/30/04 ------------ ------------ ------------ Loans: Commercial $ 132 $ 209 $ (77) Foreign 28 27 1 Other 53 50 3 ------------ ------------ ----------- Total Nonperforming Loans 213 286 (73) Other Real Estate 1 1 - ------------ ------------ ----------- Total Nonperforming Assets $ 214 $ 287 $ (73) ============ ============ ===========

Nonperforming Assets Ratio 0.7% 0.9% Allowance for Loan Losses/Nonperforming Loans 277.5 209.0 Allowance for Loan Losses/Nonperforming Assets 276.5 208.1 Allowance for Credit Losses/Nonperforming Loans 345.6 264.4 Allowance for Credit Losses/Nonperforming Assets 344.3 263.3

    Nonperforming assets declined by $73 million, or 25%, during the fourth quarter to $214 million and are down 39% from a year ago. The sequential quarter decrease reflects the sale of $43 million of loans to the operating subsidiaries of a major cable company as well as charge-offs and paydowns of domestic loans. The ratio of the allowance for credit losses to nonperforming assets increased to 344.3% at December 31, 2004, compared with 263.3% at September 30, 2004, and 230.2% at December 31, 2003.

OTHER FULL YEAR 2004 DEVELOPMENTS
    In 2004, the Company recorded several gains and charges that in the aggregate reduced reported earnings by 3 cents per share. These items were recorded in the first and fourth quarters of 2004 and are summarized in the table below. A fuller description of the first quarter items is included in Note 3.

(In millions) After- Applicable Income Statement Pre-Tax Tax Item Quarter Caption Income Tax Income ------------------------------ ---------------- ------- --- ----- Net Interest Income ------------------- SFAS 13 cumulative lease adjustment- First Net Interest (leasing portfolio) Income $ (145) $ 113 $(32)

SFAS 13 cumulative lease adjustment - (cross-border Fourth Net Interest rail equipment Income 89 (37) 52 leases)

lease adjustment - Fourth Net Interest aircraft leases Income (10) 4 (6) ------- ----- ---- Subtotal-Net Interest Income (66) 80 14

Aircraft leases/other Fourth Provision for Credit Losses 7 (3) 4 ------ ----- ---- Subtotal-Net Interest Income After Provision for Credit Losses (59) 77 18

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

Aircraft leases Fourth Other Income 3 (1) 2

Gain on sale of Wing Hang First Other Income 48 (21) 27

Gain on sponsor First Securities fund investments Gains 19 (7) 12 ------- ----- ---- Subtotal-Noninterest Income 70 (29) 41

Noninterest Expense

Charge for the RW Matter Fourth Other Expense (30) 8 (22)

Severance tied to First Salaries and relocations Employee Benefits (10) 4 (6)

Lease terminations First Net Occupancy (8) 3 (5) ------- ----- ---- Subtotal-Noninterest Expense (48) 15 (33)

Federal tax reserve adjustment related to LILO exposure Fourth Income Tax - (50) (50) ------- ----- ---- Total $ (37) $ 13 $(24) ======= ===== ====

ADDITIONAL INFORMATION
    Thomas A. Renyi, chairman and chief executive officer, and Bruce W. Van Saun, senior executive vice president and chief financial officer, will review the quarterly results in a live conference call and audio webcast today at 10:00 am ET. The presentation will be accessible from the Company's website at www.bankofny.com/earnings and also by telephone at (888)790-0319 within the United States or (610)769-3531 internationally. The passcode is "The Bank of New York." A replay of the call will be available through the Company's website and also by telephone at (866) 485-0038 within the United States or (203)369-1610 internationally.
    The Bank of New York Company, Inc. (NYSE: BK) is a global leader in securities servicing for issuers, investors and financial intermediaries. The Company plays an integral role in the infrastructure of the capital markets, servicing securities in more than 100 markets worldwide. The Company provides quality solutions through leading technology for global corporations, financial institutions, asset managers, governments, non-profit organizations, and individuals. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has a distinguished history of serving clients around the world through its five primary businesses: Securities Servicing and Global Payment Services, Private Client Services and Asset Management, Corporate Banking, Global Market Services, and Retail Banking. Additional information on the Company is available at www.bankofny.com.

Notes:
    (1) A number of amounts related to net interest income are presented on a "taxable equivalent basis". The Company believes that this presentation provides comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry standards.

    (2) The Company adopts new accounting policies as they become accepted as a best practice or required by generally accepted accounting principles. Accordingly, at December 31, 2003, the Company split its allowance for credit losses into an allowance for loan losses and an allowance for lending-related commitments such as unfunded loan commitments and standby letters of credit. This resulted in a decrease in the allowance for loan losses of $136 million and a corresponding increase in other liabilities (which includes the allowance for lending-related commitments). Prior period balance sheets have been restated. Credit expenses related to the allowance for loan losses and the allowance for lending-related commitments are reported in the provision for credit losses in the income statement. To aid in the comparison of the Company's results with other companies that have not yet adopted this practice, the Company provides various credit ratios based both on the allowance for credit losses and the allowance for loan losses.

    (3) A description of Other First Quarter Developments follows:

    (a) An after-tax charge of $32 million resulting from a cumulative adjustment to the leasing portfolio, which was triggered under Statement of Financial Accounting Standards No. 13 "Accounting for Leases" ("SFAS 13") by the combination of a reduction in state and local taxes and a restructuring of the lease portfolio completed in the first quarter. The SFAS 13 adjustment impacts the timing of lease income reported by the Company, and resulted in a reduction in net interest income of $145 million, offset by tax benefits of $113 million.

    (b) A $27 million after-tax gain on the sale of a portion of the Company's interest in Wing Hang Bank Limited ("Wing Hang"), a Hong Kong based bank, which was recorded in other income, and $19 million ($12 million after-tax) of higher than anticipated securities gains in the first quarter resulting from realized gains on sponsor fund investments in Kinkos, Inc., Bristol West Holdings, Inc., Willis Group Holdings, Ltd., and True Temper Sports, Inc.

    (c) The Company also took several actions associated with its long-term cost reduction initiatives. These actions included an after-tax severance charge of $6 million related to staff reductions tied to job relocations and a $5 million after-tax charge for terminating high cost leases associated with the staff redeployments.

FORWARD-LOOKING STATEMENTS
    All statements in this press release other than statements of historical fact are forward-looking statements including, among other things, projections with respect to revenue and earnings and the Company's plans and objectives and as such are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. These include lower than expected performance or higher than expected costs in connection with acquisitions and integration of acquired businesses, the level of capital market activity, changes in customer credit quality, the effects of capital reallocation, portfolio performance, changes in regulatory expectations and standards, ultimate differences from management projections or market forecasts, the actions that management could take in response to these changes and other factors described under the heading "Forward Looking Statements and Factors That Could Affect Future Results" in the Company's 2003 Form 10-K and Third Quarter 2004 Form 10-Q which have been filed with the SEC and are available at the SEC's website (www.sec.gov).
    Forward-looking statements speak only as of the date they are made. The Company will not update forward-looking statements to reflect factual assumptions, circumstances or events which have changed after a forward-looking statement was made.

THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) December September December 31, 30, 31, 2004 2004 2003 --------------------------------- Quarter --------- Revenue (tax equivalent basis) $ 1,977 $ 1,747 $ 1,694 Net Income 351 354 307 Basic EPS 0.45 0.46 0.40 Diluted EPS 0.45 0.46 0.40 Cash Dividends Per Share 0.20 0.20 0.19 Return on Average Common Shareholders' Equity 15.34% 15.90% 14.81% Return on Average Assets 1.40 1.45 1.26 Efficiency Ratio 64.4 65.2 66.9

Year-to-date ------------ Revenue (tax equivalent basis) $ 7,174 $ 5,197 $ 6,371 Net Income 1,440 1,089 1,157 Basic EPS 1.87 1.41 1.54 Diluted EPS 1.85 1.40 1.52 Cash Dividends Per Share 0.79 0.59 0.76 Return on Average Common Shareholders' Equity 16.37% 16.73% 15.12% Return on Average Assets 1.45 1.47 1.27 Efficiency Ratio 65.5 66.0 65.8

Assets $ 94,534 $ 93,175 $ 92,397 Loans 35,781 37,119 35,283 Securities 23,808 23,147 22,807 Deposits - Domestic 35,558 34,786 33,730 - Foreign 23,163 23,654 22,676 Long-Term Debt 5,821 6,137 6,121 Common Shareholders' Equity 9,293 9,054 8,428

Common Shareholders' Equity Per Share $ 11.94 $ 11.66 $ 10.85 Market Value Per Share of Common Stock 33.42 29.17 33.12

Allowance for Loan Losses as a Percent of Total Loans 1.65% 1.61% 1.89% Allowance for Loan Losses as a Percent of Non-Margin Loans 1.99 1.92 2.26 Allowance for Credit Losses as a Percent of Total Loans 2.06 2.04 2.28 Allowance for Credit Losses as a Percent of Non-Margin Loans 2.48 2.42 2.72

Tier 1 Capital Ratio 8.28 8.09 7.44 Total Capital Ratio 12.25 12.09 11.49 Leverage Ratio 6.41 6.38 5.82 Tangible Common Equity Ratio 5.57 5.49 4.91

Employees 23,363 23,034 22,901

Assets Under Custody (In trillions) Total Assets Under Custody $ 9.7 $ 8.9 $ 8.3 Equity Securities 35% 33% 34% Fixed Income Securities 65 67 66 Cross-Border Assets Under Custody $ 2.7 $ 2.5 $ 2.3

Assets Under Administration (In billions) $ 33 $ 31 $ 32

Assets Under Management (In billions) Total Assets Under Management 102 97 89 Equity Securities 36% 35% 34% Fixed Income Securities 21 21 22 Alternative Investments 15 15 10 Liquid Assets 28 29 34

Bank of New York Company, Inc. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited)

For the three months For the year ended ended December 31, December 31, ------------------------------------ 2004 2003 2004 2003 -------- ------- ------- ------- Interest Income --------------- Loans $ 401 $ 283 $ 1,080 $ 1,187 Margin loans 48 32 156 86 Securities Taxable 197 174 741 651 Exempt from Federal Income Taxes 11 11 40 48 -------- ------- ------- ------- 208 185 781 699 Deposits in Banks 81 41 305 150 Federal Funds Sold and Securities Purchased Under Resale Agreements 27 17 80 79 Trading Assets 17 26 51 129 -------- ------- ------- ------- Total Interest Income 782 584 2,453 2,330 -------- ------- ------- ------- Interest Expense ---------------- Deposits 164 110 548 507 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 6 3 15 13 Other Borrowed Funds 25 8 52 21 Customer Payables 19 11 57 30 Long-Term Debt 41 34 136 150 -------- ------- ------- ------- Total Interest Expense 255 166 808 721 -------- ------- ------- ------- Net Interest Income 527 418 1,645 1,609 ------------------- -------- ------- ------- ------- Provision for Credit Losses (7) 35 15 155 -------- ------- ------- ------- Net Interest Income After Provision for Credit Losses 534 383 1,630 1,454 -------- ------- ------- ------- Noninterest Income ------------------ Servicing Fees Securities 742 684 2,858 2,412 Global Payment Services 71 76 317 314 -------- ------- ------- ------- 813 760 3,175 2,726 Private Client Services and Asset Management Fees 115 103 448 384 Service Charges and Fees 98 97 385 375 Foreign Exchange and Other Trading Activities 90 81 364 327 Securities Gains 18 9 78 35 Other 52 52 241 159 -------- ------- ------- -------

Total Noninterest Income 1,186 1,102 4,691 4,006 -------- ------- ------- ------- Noninterest Expense ------------------- Salaries and Employee Benefits 617 548 2,324 2,002 Net Occupancy 75 70 305 261 Furniture and Equipment 51 49 204 185 Clearing 45 44 176 154 Sub-custodian Expenses 22 21 87 74 Software 43 46 193 170 Communications 23 24 93 92 Amortization of Intangibles 9 7 34 25 Merger and Integration Costs - 48 - 96 Other 212 159 706 639 -------- ------- ------- ------- Total Noninterest Expense 1,097 1,016 4,122 3,698 -------- ------- ------- ------- Income Before Income Taxes 623 469 2,199 1,762 Income Taxes 272 162 759 605 -------- ------- ------- ------- Net Income $ 351 $ 307 $ 1,440 $1,157 ---------- ======== ======= ======= =======

Per Common Share Data: ---------------------- Basic Earnings $ 0.45 $ 0.40 $ 1.87 $ 1.54 Diluted Earnings 0.45 0.40 1.85 1.52 Cash Dividends Paid 0.20 0.19 0.79 0.76 Diluted Shares Outstanding 780 776 778 759

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

December December 31, 2004 31, 2003 ---------- ---------- Assets ------ Cash and Due from Banks $ 3,886 $ 3,843 Interest-Bearing Deposits in Banks 8,192 8,286 Securities Held-to-Maturity 1,886 261 Available-for-Sale 21,922 22,546 ---------- ---------- Total Securities 23,808 22,807 Trading Assets at Fair Value 4,627 5,406 Federal Funds Sold and Securities Purchased Under Resale Agreements 5,708 4,829 Loans (less allowance for loan losses of $591 in 2004 and $668 in 2003) 35,190 34,615 Premises and Equipment 1,097 1,079 Due from Customers on Acceptances 137 170 Accrued Interest Receivable 285 214 Goodwill 3,477 3,276 Intangible Assets 793 816 Other Assets 7,334 7,056 ---------- ---------- Total Assets $ 94,534 $ 92,397 ========== ========== Liabilities and Shareholders' Equity ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 17,442 $ 14,789 Interest-Bearing Domestic Offices 18,692 19,282 Foreign Offices 22,587 22,335 ---------- ---------- Total Deposits 58,721 56,406 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,205 1,039 Trading Liabilities 2,873 2,519 Payables to Customers and Broker-Dealers 8,664 10,192 Other Borrowed Funds 833 834 Acceptances Outstanding 139 172 Accrued Taxes and Other Expenses 4,454 4,256 Accrued Interest Payable 113 82 Other Liabilities (including allowance for lending-related commitments of $145 in 2004 and $136 in 2003) 2,418 2,348 Long-Term Debt 5,821 6,121 ---------- ---------- Total Liabilities 85,241 83,969 ---------- ---------- Shareholders' Equity Class A Preferred Stock - par value $2.00 per share, authorized 5,000,000 shares, outstanding 3,000 shares in 2004 and 3,000 shares in 2003 - - Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,044,841,603 shares in 2004 and 1,039,968,482 shares in 2003 7,836 7,800 Additional Capital 1,790 1,647 Retained Earnings 6,162 5,330 Accumulated Other Comprehensive Income (3) 72 ---------- ---------- 15,785 14,849

Less: Treasury Stock (266,720,629 shares in 2004 and 264,649,827 shares in 2003), at cost 6,492 6,420 Loan to ESOP (126,960 shares in 2003), at cost - 1 ---------- ---------- Total Shareholders' Equity 9,293 8,428 ---------- ---------- Total Liabilities and Shareholders' Equity $ 94,534 $ 92,397 ========== ========== ----------------------------------------------------------------------

Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date.

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

For the three months ended December 31, 2004 -------------------------- Average Average Balance Interest Rate ------- -------- ------- ASSETS ------ Interest-Bearing Deposits in Banks (primarily foreign) $10,825 $ 81 2.99% Federal Funds Sold and Securities Purchased Under Resale Agreements 5,364 27 2.03 Margin Loans 6,378 48 2.98 Loans Domestic Offices 22,766 316 5.52 Foreign Offices 10,234 86 3.33 ------- -------- Non-Margin Loans 33,000 402 4.84 ------- -------- Securities U.S. Government Obligations 291 2 3.08 U.S. Government Agency Obligations 3,550 31 3.47 Obligations of States and Political Subdivisions 209 4 8.01 Other Securities 19,308 178 3.69 Trading Securities 1,962 18 3.56 ------- -------- Total Securities 25,320 233 3.68 ------- -------- Total Interest-Earning Assets 80,887 791 3.89% ------- -------- Allowance for Credit Losses (595) Cash and Due from Banks 3,759 Other Assets 15,916 ------- TOTAL ASSETS $99,967 =======

LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,648 $ 17 1.04% Savings 9,095 18 0.80 Certificates of Deposit $100,000 & Over 3,285 17 2.02 Other Time Deposits 919 4 1.62 Foreign Offices 25,410 108 1.70 ------- -------- Total Interest-Bearing Deposits 45,357 164 1.44 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,407 6 1.58 Other Borrowed Funds 3,588 25 2.82 Payables to Customers and Broker-Dealers 5,886 19 1.26 Long-Term Debt 6,082 41 2.63 ------- -------- Total Interest-Bearing Liabilities 62,320 255 1.63% ------- -------- Noninterest-Bearing Deposits 15,659 Other Liabilities 12,892 Common Shareholders' Equity 9,096 ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $99,967 ======= Net Interest Earnings and Interest Rate Spread $ 536 2.26% ======== ======= Net Yield on Interest-Earning Assets 2.64% =======

For the three months ended December 31, 2003 -------------------------- Average Average Balance Interest Rate ------- -------- ------- ASSETS ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 7,605 $ 41 2.12% Federal Funds Sold and Securities Purchased Under Resale Agreements 7,124 17 0.97 Margin Loans 5,758 32 2.18 Loans Domestic Offices 21,449 212 3.93 Foreign Offices 10,096 71 2.77 ------- -------- Non-Margin Loans 31,545 283 3.56 ------- -------- Securities U.S. Government Obligations 444 3 2.31 U.S. Government Agency Obligations 4,319 36 3.30 Obligations of States and Political Subdivisions 274 4 6.29 Other Securities 17,220 150 3.48 Trading Securities 4,019 26 2.59 ------- -------- Total Securities 26,276 219 3.32 ------- -------- Total Interest-Earning Assets 78,308 592 2.99% ------- -------- Allowance for Credit Losses (821) Cash and Due from Banks 2,861 Other Assets 16,117 ------- TOTAL ASSETS $96,465 =======

LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,049 $ 12 0.68% Savings 9,142 16 0.71 Certificates of Deposit $100,000 & Over 3,518 12 1.32 Other Time Deposits 1,224 4 1.35 Foreign Offices 24,302 66 1.07 ------- -------- Total Interest-Bearing Deposits 45,235 110 0.96 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,756 3 0.72 Other Borrowed Funds 2,084 8 1.43 Payables to Customers and Broker-Dealers 6,274 11 0.70 Long-Term Debt 6,179 34 2.19 ------- -------- Total Interest-Bearing Liabilities 61,528 166 1.07% ------- -------- Noninterest-Bearing Deposits 13,646 Other Liabilities 13,079 Common Shareholders' Equity 8,212 ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $96,465 ======= Net Interest Earnings and Interest Rate Spread $ 426 1.92% ======== ======= Net Yield on Interest-Earning Assets 2.16%

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

For the year ended December 31, 2004 ------------------------- Average Average Balance Interest Rate ------- -------- ------- ASSETS ------ Interest-Bearing Deposits in Banks (primarily foreign) $11,675 $ 305 2.62% Federal Funds Sold and Securities Purchased Under Resale Agreements 6,562 80 1.22 Margin Loans 6,342 156 2.46 Loans Domestic Offices 21,853 799 3.65 Foreign Offices 9,583 283 2.95 ------- -------- Non-Margin Loans 31,436 1,082 3.44 ------- -------- Securities U.S. Government Obligations 415 11 2.58 U.S. Government Agency Obligations 3,853 128 3.33 Obligations of States and Political Subdivisions 229 17 7.41 Other Securities 18,455 652 3.53 Trading Securities 2,094 52 2.50 ------- -------- Total Securities 25,046 860 3.43 ------- -------- Total Interest-Earning Assets 81,061 2,483 3.06% ------- -------- Allowance for Credit Losses (623) Cash and Due from Banks 3,151 Other Assets 15,751 ------- TOTAL ASSETS $99,340 =======

LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,648 $ 54 0.81% Savings 9,224 65 0.71 Certificates of Deposit $100,000 & Over 3,706 55 1.49 Other Time Deposits 955 15 1.57 Foreign Offices 25,757 359 1.39 ------- -------- Total Interest-Bearing Deposits 46,290 548 1.18 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,551 15 0.99 Other Borrowed Funds 2,699 52 1.94 Payables to Customers and Broker-Dealers 6,361 57 0.89 Long-Term Debt 6,128 136 2.19 ------- -------- Total Interest-Bearing Liabilities 63,029 808 1.28% ------- -------- Noninterest-Bearing Deposits 14,766 Other Liabilities 12,748 Common Shareholders' Equity 8,797 ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $99,340 ======= Net Interest Earnings and Interest Rate Spread $ 1,675 1.78% ======== ======= Net Yield on Interest-Earning Assets 2.07% =======

For the year ended December 31, 2003 ------------------------- Average Average Balance Interest Rate ------- -------- ------- ASSETS ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 6,690 $ 150 2.24% Federal Funds Sold and Securities Purchased Under Resale Agreements 7,326 79 1.07 Margin Loans 3,795 86 2.27 Loans Domestic Offices 20,458 855 4.18 Foreign Offices 11,370 332 2.93 ------- -------- Non-Margin Loans 31,828 1,187 3.73 ------- -------- Securities U.S. Government Obligations 323 10 3.12 U.S. Government Agency Obligations 3,516 129 3.66 Obligations of States and Political Subdivisions 329 23 6.94 Other Securities 15,682 571 3.64 Trading Securities 4,605 130 2.81 ------- -------- Total Securities 24,455 863 3.53 ------- -------- Total Interest-Earning Assets 74,094 2,365 3.19% ------- -------- Allowance for Credit Losses (825) Cash and Due from Banks 2,834 Other Assets 15,211 ------- TOTAL ASSETS $91,314 =======

LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 7,381 $ 60 0.82% Savings 9,014 71 0.78 Certificates of Deposit $100,000 & Over 4,179 65 1.56 Other Time Deposits 1,257 20 1.55 Foreign Offices 24,114 291 1.21 ------- -------- Total Interest-Bearing Deposits 45,945 507 1.10 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,542 13 0.85 Other Borrowed Funds 1,654 21 1.26 Payables to Customers and Broker-Dealers 3,945 30 0.75 Long-Term Debt 6,103 150 2.45 ------- -------- Total Interest-Bearing Liabilities 59,189 721 1.22% ------- -------- Noninterest-Bearing Deposits 12,670 Other Liabilities 11,801 Common Shareholders' Equity 7,654 ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $91,314 ======= Net Interest Earnings and Interest Rate Spread $ 1,644 1.97% ======= ====== Net Yield on Interest-Earning Assets 2.22% ======

--30--SW/ny*

CONTACT: The Bank of New York Company, Inc. Media: R. Jeep Bryant, 212-635-1569 OR Investors: Joseph F. Murphy, 212-635-7740 Gregg A. Scheuing, 212-635-1578

KEYWORD: NEW YORK INDUSTRY KEYWORD: BANKING EARNINGS CONFERENCE CALLS SOURCE: The Bank of New York Company, Inc.

Copyright Business Wire 2005