April 20, 2010

BNY Mellon Reports First Quarter Continuing EPS of $0.49 or $601 Million;


- Net impact of $0.10 mainly due to increased litigation reserves

NEW YORK, April 20, 2010 —The Bank of New York Mellon Corporation ("BNY Mellon") (NYSE: BK) today reported first quarter income from continuing operations applicable to common shareholders of $601 million, or $0.49 per common share, compared with $363 million, or $0.31 per common share, in the first quarter of 2009 and $712 million, or $0.59 per common share, in the fourth quarter of 2009.

"The economic outlook is clearly improving as demonstrated by the performance of the equity and credit markets.  Persistent low interest rates globally continue to be a challenge, but our focus on winning new business together with well-controlled expenses resulted in positive operating leverage," said Robert P. Kelly, chairman and chief executive officer of BNY Mellon.

"We continue to reinvest in our businesses, and during the quarter announced two important asset servicing acquisitions.  Both are expected to be immediately accretive to earnings and close in the third quarter," added Mr. Kelly.

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

    
    
    
    Total revenue
    
    -------------------------------------------------------------------------
    Reconciliation of total revenue                                1Q10 vs.
    (dollar amounts                                             -------------
    in millions)                   1Q10       4Q09     1Q09     1Q09     4Q09
    -------------------------------------------------------------------------
    Fee and other revenue – GAAP  $2,568     $2,595   $2,136
    Less: Net securities gains 
     (losses)                          7         15     (295)
    -------------------------------------------------------------------------
      Total fee revenue – 
       GAAP                        2,561      2,580    2,431     5%      (1)%
    Income from consolidated 
     asset management funds, 
     net of noncontrolling 
     interests                        22(a)       -        -
    -------------------------------------------------------------------------
      Total fee revenue – 
       Non-GAAP                    2,583      2,580    2,431     6%       -%
    Net interest revenue – GAAP      765        724      775
    -------------------------------------------------------------------------
      Total revenue excluding 
       net securities gains 
       (losses) – Non-GAAP        $3,348(b)  $3,304   $3,206     4%       1%
    -------------------------------------------------------------------------
    (a) Includes $6 million previously reported as asset and wealth 
        management fee revenue and $16 million previously reported as 
        investment income.
    (b) Total revenue on a GAAP basis was $3,385 million in the first 
        quarter of 2010.
    
  • Assets under custody and administration amounted to $22.4 trillion at March 31, 2010, an increase of 15% compared with the prior year and flat sequentially.  The year-over-year increase reflects higher market values and new business.  Assets under management, excluding securities lending assets, amounted to $1.1 trillion at March 31, 2010.  This represents an increase of 25% compared with the prior year and a 1% sequential decrease.  The year-over-year increase was primarily due to the acquisition of Insight Investment Management ("Insight") in the fourth quarter of 2009.  The sequential decrease primarily reflects outflows of money market assets under management.
  • Securities servicing fees, excluding securities lending fee revenue, totaled $1.171 billion, an increase of $35 million year-over-year and a decrease of $41 million sequentially.  A year-over-year increase in asset servicing revenue was partially offset by lower issuer and clearing services revenue.  Sequentially, higher clearing services revenue was offset by lower issuer services and asset servicing revenue.  Comparisons to both prior periods were negatively impacted by lower money market distribution fees.  The sequential decrease in issuer services revenue primarily reflects seasonality (depositary receipts) while the lower asset servicing revenue primarily reflects lower volumes and the impact of a stronger U.S. dollar.  Securities lending fee revenue totaled $29 million in the first quarter of 2010 compared with $90 million in the prior year period and $29 million sequentially.  The year-over-year decrease reflects narrower spreads and lower loan balances.
  • Asset and wealth management fees totaled $696 million, an increase of 13% compared with the prior year period and a decrease of 5% sequentially.  Asset and wealth management fees, excluding performance fees, increased 12% compared with the prior year period and 1% sequentially.  Both increases reflect improved market values, the Insight acquisition and the impact of long-term flows, partially offset by a reduction in fees due to money market outflows and higher fee waivers.
  • Foreign exchange and other trading activities totaled $263 million, a decrease of 14% compared with $307 million in the prior year period and an increase of 7% compared with $246 million in the fourth quarter of 2009.  The decrease year-over-year primarily reflects lower foreign exchange revenue, driven by lower volatility, partially offset by increased volumes.  The sequential increase primarily reflects higher fixed income trading revenue and lower mark to market adjustments on credit default swaps partially offset by lower foreign exchange revenue driven by lower volatility.
  • Investment income and Other income totaled $145 million, increasing $147 million year-over-year and $64 million sequentially.  Both increases reflect higher lease residual gains and positive foreign currency translations.  The year-over-year increase also reflects the write-down of certain equity investments in the first quarter of 2009.
  • Net interest revenue (FTE) totaled $770 million compared with $729 million sequentially.  The increase reflects the higher yield related to the restructured investment securities portfolio and higher hedging gains, partially offset by lower spreads.  The increased yield reflects a full quarter's accretion of the restructured investment securities portfolio.  The net interest margin for the first quarter of 2010 was 1.89% compared with 1.77%, sequentially.
  • Investment securities pre-tax net gains totaled $7 million compared to a pre-tax net loss of $295 million in the first quarter of 2009 and a $15 million pre-tax net gain in the fourth quarter of 2009.

The provision for credit losses decreased to $35 million in the first quarter of 2010 compared with $65 million in the fourth quarter of 2009.  The decrease in the provision reflects improvements in our highest-risk asset classes.  During the first quarter of 2010, the total allowance for credit losses increased $10 million and net charge-offs totaled $25 million. Nonperforming assets totaled $459 million, a decrease of $91 million, or 17%, compared with Dec. 31, 2009 primarily due to repayments and charge-offs.

    
    
    
    Total noninterest expense
    
    ------------------------------------------------------------------------
    Reconciliation of noninterest 
     expense                                                      1Q10 vs.
    (dollar amounts                                             ------------
    in millions)                   1Q10     4Q09      1Q09      1Q09    4Q09
    ------------------------------------------------------------------------
    Noninterest expense – GAAP    $2,461   $2,582    $2,280       8%    (5)%
    Litigation reserves              164        -         -
    Restructuring charges              7      139        10
    M&I expenses                      26       52        68
    Amortization of intangible 
     assets                           97      107       107
    ------------------------------------------------------------------------
      Total noninterest expense 
       excluding litigation 
       reserves, restructuring 
       charges, M&I expenses and 
       intangible amortization – 
       Non-GAAP                   $2,167   $2,284    $2,095       3%    (5)%
    ------------------------------------------------------------------------
  • Total noninterest expense (excluding increased litigation reserves relating to several existing matters, restructuring charges, M&I expenses and intangible amortization) increased 3% compared with the prior year period and decreased 5% sequentially, resulting in 600 basis points of positive operating leverage sequentially and 100 basis points year-over-year.  The increase compared with the prior year period primarily reflects the impact of the Insight acquisition, as well as higher incentive expense, subcustodian and clearing expense and software expense.  The sequential decrease principally reflects ongoing expense management, lower professional, legal, and other purchased services expense and seasonally lower business development expense, partially offset by the impact of the Insight acquisition.

The effective tax rate was 29.0% in the first quarter of 2010.  Excluding the impact of the litigation reserves, restructuring charges and M&I expenses, the effective tax rate was approximately 30.8% (Non-GAAP) in the first quarter of 2010.

The unrealized net of tax losses on our investment securities portfolio improved to $189 million at March 31, 2010 from $705 million at Dec. 31, 2009, primarily due to improved credit spreads.

    
    
    
    ------------------------------------------------------------------------
    Capital ratios (a)                     March 31,    Dec. 31,   March 31,
                                                2010        2009        2009
    ------------------------------------------------------------------------
    Tier 1 capital ratio                       13.2%       12.1%    13.8%(b)
    Total (Tier 1 plus Tier 2) capital ratio   17.1        16.0     17.5(b)
    Leverage capital ratio                      6.6         6.5      7.8(b)
    Common shareholders' equity to total 
     assets ratio (c)                          14.1        13.7     12.5
    Tangible common shareholders' equity to 
     tangible assets of operations 
     ratio – Non-GAAP (c)                       6.1         5.2      4.2
    Tier 1 common equity to risk-weighted 
     assets ratio (c)                          11.6        10.5     10.0
    ------------------------------------------------------------------------
    (a) Includes discontinued operations. Preliminary.
    (b) The Tier 1, Total and Leverage capital ratios, excluding the Series 
        B preferred stock and the common stock warrant associated with TARP,
        were 11.2%, 15.0% and 6.4% at March 31, 2009.
    (c) See the Supplemental information section beginning on page 10 for 
        a calculation of these ratios.
    

Declaration of quarterly dividend – On April 20, 2010, The Bank of New York Mellon Corporation declared a quarterly common stock dividend of $0.09 per common share.  This cash dividend is payable on May 11, 2010 to shareholders of record as of the close of business on April 30, 2010.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team.  It has $22.4 trillion in assets under custody and administration, $1.1 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day.  Additional information is available at www.bnymellon.com.

Supplemental Financial Information

The Quarterly Earnings Review and supplemental financial trends for The Bank of New York Mellon Corporation have been updated through March 31, 2010 and are available at www.bnymellon.com (Investor Relations - Financial Reports).

Conference Call Data

Robert P. Kelly, chairman and chief executive officer; Gerald L. Hassell, president; and Thomas P. Gibbons, chief financial officer, along with other members of executive management from BNY Mellon, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on April 20, 2010.  This conference call and audio webcast will include forward-looking statements and may include other material information.  Persons wishing to access the conference call and audio webcast may do so by dialing (888) 677-5383 (U.S.) and (210) 838-9221 (International) Passcode: Earnings, or by logging on to www.bnymellon.com.  The Earnings Release, together with the Quarterly Earnings Review and supplemental Financial Trends, will be available at www.bnymellon.com beginning at approximately 6:30 a.m. EDT on April 20, 2010.  Replays of the conference call and audio webcast will be available beginning April 20, 2010 at approximately 2 p.m. EDT through Tuesday, May 4, 2010 by dialing (800) 214-3608 (U.S.) or (402) 220-3754 (International). The archived version of the conference call and audio webcast will also be available at www.bnymellon.com for the same time period.

    
    
    
                         THE BANK OF NEW YORK MELLON CORPORATION
                                 Financial Highlights
    
    ------------------------------------------------------------------------
                                                     Quarter ended
    (dollar amounts in millions,           ---------------------------------
    except per common share amounts        March 31,    Dec. 31,   March 31,
    and unless otherwise noted)                 2010        2009        2009
    ------------------------------------------------------------------------
    Continuing operations
    Return on common equity 
     (annualized) (a)                         8.2%        9.8%        5.8%
      Non-GAAP adjusted (a)                  10.6%       10.1%       10.6%
    
    Return on tangible common equity 
     (annualized) – Non-GAAP (a)             25.8%       33.0%       28.8%
      Non-GAAP adjusted (a)                  30.2%       31.1%       44.4%
    
    Fee and other revenue as a percent 
     of total revenue                          76%         78%         73%
    
    Annualized fee revenue per 
     employee (based on average 
     headcount) (in thousands)               $246        $243        $234
    
    Percent of non-U.S. fee and net 
     interest revenue including 
     noncontrolling interests related 
     to consolidated asset 
     management funds                          34%         36%         29%
    
    Pre-tax operating margin (a)               26%         20%         20%
      Non-GAAP adjusted (a)                    34%         29%         33%
    
    Net interest margin (FTE) (b)            1.89%       1.77%       1.87%
    
    Selected average balances
      Interest-earning assets            $163,434    $164,075    $167,427(c)
      Assets of operations               $212,694    $214,205    $220,119
      Total assets                       $215,159    $214,205    $220,119
      Interest-bearing deposits          $101,034     $98,404    $101,983(c)
      Noninterest-bearing deposits        $33,330     $34,991     $43,051(c)
      Total shareholders' equity          $29,720     $28,843     $27,978
    
    Average common shares and 
     equivalents outstanding 
     (in thousands):
      Basic                             1,202,533   1,200,359   1,146,070
      Diluted                           1,206,286   1,203,469   1,146,943
    
    Period-end data
    Assets under management 
     (in billions)                         $1,105      $1,115        $881
    Assets under custody and 
     administration (in trillions)          $22.4       $22.3       $19.5
      Cross-border assets (in trillions)     $8.8        $8.8        $7.3
    Market value of securities on 
     loan (in billions) (d)                  $253        $247        $293
    
    Employees                              42,300      42,200      41,700(c)
    
    Book value per common share – 
     GAAP (a)                              $24.48      $23.99      $22.03
    Tangible book value per common 
     share – Non-GAAP (a)                   $8.69       $7.90       $5.48
    Cash dividends per common share         $0.09       $0.09       $0.24
    Closing common stock price per 
     common share                          $30.88      $27.97      $28.25
    Market capitalization                 $37,456     $33,783     $32,585
    ------------------------------------------------------------------------
    (a) See Supplemental information beginning on page 10 for a calculation 
        of these ratios.
    (b) Prior periods calculated on a continuing operations basis, even 
        though the balance sheet, in accordance with GAAP, is not restated 
        for discontinued operations.
    (c) Excludes the impact of discontinued operations.
    (d) Represents the securities on loan, both cash and non-cash, managed 
        by the Asset Servicing segment.
    
    
    
                      THE BANK OF NEW YORK MELLON CORPORATION
                      Condensed Consolidated Income Statement
    
    -------------------------------------------------------------------------
                                                     Quarter ended
                                           ----------------------------------
                                           March 31,    Dec. 31,   March 31,
    (in millions)                               2010        2009        2009
    -------------------------------------------------------------------------
    Fee and other revenue
    Securities servicing fees:
      Asset servicing                           $637        $650        $609
      Issuer services                            333         368         364
      Clearing services                          230         223         253
    -------------------------------------------------------------------------
        Total securities servicing fees        1,200       1,241       1,226
    Asset and wealth management fees             696         736         616
    Foreign exchange and other trading 
     activities                                  263         246         307
    Treasury services                            131         134         125
    Distribution and servicing                    76          85         111
    Financing-related fees                        50          57          48
    Investment income                            108          78         (17)
    Other                                         37           3          15
    -------------------------------------------------------------------------
        Total fee revenue                      2,561       2,580       2,431
    Net securities gains (losses)                  7          15        (295)
    -------------------------------------------------------------------------
        Total fee and other revenue            2,568       2,595       2,136
    Operations of consolidated asset 
     management funds
    Investment income                             61           -           -
    Operating expenses                             9           -           -
    -------------------------------------------------------------------------
        Income of consolidated asset 
         management funds                         52           -           -
    Net interest revenue
    Interest revenue                             883         854         979
    Interest expense                             118         130         204
    -------------------------------------------------------------------------
        Net interest revenue                     765         724         775
    Provision for credit losses                   35          65          59
    -------------------------------------------------------------------------
        Net interest revenue after provision 
         for credit losses                       730         659         716
    Noninterest expense
    Staff                                      1,220       1,221       1,169
    Professional, legal and other 
     purchased services                          242         278         237
    Net occupancy                                137         141         139
    Distribution and servicing                   109         109         107
    Software                                      94          98          81
    Sub-custodian and clearing                    85          83          66
    Furniture and equipment                       75          80          77
    Business development                          52          76          44
    Other                                        317         198         175
    -------------------------------------------------------------------------
        Subtotal                               2,331       2,284       2,095
    -------------------------------------------------------------------------
    Amortization of intangible assets             97         107         107
    Restructuring charges                          7         139          10
    Merger and integration expenses               26          52          68
    -------------------------------------------------------------------------
        Total noninterest expense              2,461       2,582       2,280
    -------------------------------------------------------------------------
    Income
    Income (loss) from continuing 
     operations before income taxes              889         672         572
    Provision (benefit) for income taxes         257         (41)        161
    -------------------------------------------------------------------------
        Income (loss) from continuing 
         operations                              632         713         411
    Discontinued operations:
      Income (loss) from discontinued 
       operations                                (70)       (183)        (65)
      Provision (benefit) for income taxes       (28)        (64)        (24)
    -------------------------------------------------------------------------
        Income (loss) from discontinued 
         operations, net of tax                  (42)       (119)        (41)
    -------------------------------------------------------------------------
        Net income (loss)                        590         594         370
    Net (income) loss attributable to 
     noncontrolling interests                    (31)(a)      (1)         (1)
    Preferred dividends                            -           -         (47)
    -------------------------------------------------------------------------
        Net income (loss) applicable to 
         common shareholders of The Bank of 
         New York Mellon Corporation            $559        $593        $322
    -------------------------------------------------------------------------
    (a) Quarter ended March 31, 2010 includes $30 million related to 
        consolidated asset management funds.
    
    
    
                     THE BANK OF NEW YORK MELLON CORPORATION
               Condensed Consolidated Income Statement - continued
    
    --------------------------------------------------------------------------
    Earnings per common share applicable               Quarter ended
    to the common shareholders of The Bank  ----------------------------------
    of New York Mellon Corporation          March 31,    Dec. 31,   March 31,
    (in dollars)                                 2010        2009        2009
    --------------------------------------------------------------------------
    Basic:
      Net income from continuing 
       operations                              $0.50       $0.59      $0.31
      Net income (loss) from discontinued 
       operations                              (0.04)      (0.10)     (0.04)
    --------------------------------------------------------------------------
        Net income applicable to common 
         stock                                 $0.46       $0.49      $0.28(a)
    --------------------------------------------------------------------------
    
    Diluted: (a)
      Net income from continuing operations    $0.49       $0.59      $0.31
      Net income (loss) from discontinued 
       operations                              (0.03)      (0.10)     (0.04)
    --------------------------------------------------------------------------
        Net income applicable to common 
         stock                                 $0.46       $0.49      $0.28(a)
    --------------------------------------------------------------------------
    (a) Does not foot due to rounding.
    
    
    
    --------------------------------------------------------------------------
    Reconciliation of net income from 
    continuing operations applicable                   Quarter ended
    to the common shareholders of The Bank   ---------------------------------
    of New York Mellon Corporation           March 31,    Dec. 31,   March 31,
    (in millions)                               2010        2009        2009
    --------------------------------------------------------------------------
    Net income from continuing operations       $632        $713        $411
    Net (income) attributable to 
     noncontrolling interests                    (31)         (1)         (1)
    Preferred dividends                            -           -         (47)
    --------------------------------------------------------------------------
      Net income from continuing 
       operations applicable to common 
       shareholders of The Bank of New 
       York Mellon Corporation                   601         712         363
    Net income (loss) from discontinued 
     operations                                  (42)       (119)        (41)
    --------------------------------------------------------------------------
      Net income applicable to the common 
       shareholders of The Bank of
       New York Mellon Corporation              $559        $593        $322
    --------------------------------------------------------------------------
    
    
    
                      THE BANK OF NEW YORK MELLON CORPORATION
                             Consolidated Balance Sheet
    
    ----------------------------------------------------------------------
    (dollar amounts in millions,              March 31,          Dec. 31,
    except per share amounts)                      2010              2009
    ----------------------------------------------------------------------
    Assets
    Cash and due from:
      Banks                                      $3,307            $3,732
      Interest-bearing deposits with 
       the Federal Reserve and other 
       central banks                             14,720             7,362
    Interest-bearing deposits with banks         50,170            56,302
    Federal funds sold and securities 
     purchased under resale agreements            4,449             3,535
    Securities:
      Held-to-maturity (fair value of 
       $4,059 and $4,240)                         4,115             4,417
      Available-for-sale (includes $883 
       previously securitized)                   51,467            51,632
    ----------------------------------------------------------------------
        Total securities                         55,582            56,049
    Trading assets                                5,844             6,001
    Loans                                        33,887            36,689
    Allowance for loan losses                      (520)             (503)
    ----------------------------------------------------------------------
        Net loans                                33,367            36,186
    Premises and equipment                        1,583             1,602
    Accrued interest receivable                     748               639
    Goodwill                                     16,077            16,249
    Intangible assets                             5,449             5,588
    Other assets                                 16,362            16,737
    Assets of discontinued operations               334             2,242
        Subtotal assets of operations           207,992           212,224
    Assets of consolidated asset 
     management funds (at fair value):
      Trading assets                                167                 -
      Loans                                       1,847                 -
      Other assets                                  245                 -
    ----------------------------------------------------------------------
        Subtotal assets of consolidated asset 
         management funds                         2,259                 -
    ----------------------------------------------------------------------
          Total assets                         $210,251          $212,224
    ----------------------------------------------------------------------
    Liabilities
    Deposits:
      Noninterest-bearing (principally 
       domestic offices)                        $30,330           $33,477
      Interest-bearing deposits in 
       domestic offices                          31,528            32,944
      Interest-bearing deposits in foreign 
       offices                                   69,769            68,629
    ----------------------------------------------------------------------
        Total deposits                          131,627           135,050
    Federal funds purchased and securities 
     sold under repurchase agreements             3,882             3,348
    Trading liabilities                           6,277             6,396
    Payables to customers and broker-dealers     10,328            10,721
    Commercial paper                                  7                12
    Other borrowed funds                          1,463               477
    Accrued taxes and other expenses              4,268             4,484
    Other liabilities (including allowance 
     for lending related commitments of 
     $118 and $125)                               4,416             3,891
    Long-term debt                               16,335            17,234
    Liabilities of discontinued operations            -             1,608
    ----------------------------------------------------------------------
        Subtotal liabilities of operations      178,603           183,221
    Liabilities and obligations of 
     consolidated asset management funds 
     (at fair value)                              1,188                 -
    ----------------------------------------------------------------------
          Total liabilities                     179,791           183,221
    ----------------------------------------------------------------------
    Equity 
    Common stock-par value $0.01 per common 
     share; authorized 3,500,000,000 common 
     shares; issued 1,214,641,965 and 
     1,208,861,641 common shares                     12                12
    Additional paid-in capital                   21,994            21,917
    Retained earnings                             9,343             8,912
    Accumulated other comprehensive loss, 
     net of tax                                  (1,612)           (1,835)
    Less:  Treasury stock of 1,701,394 and 
            1,026,927 common shares, at cost        (49)              (29)
    ----------------------------------------------------------------------
        Total The Bank of New York Mellon 
         Corporation shareholders' equity        29,688            28,977
    Noncontrolling interests                         21                26
    Noncontrolling interests of 
     consolidated asset management funds            751                 -
    ----------------------------------------------------------------------
        Total equity                             30,460            29,003
    ----------------------------------------------------------------------
        Total liabilities and equity           $210,251          $212,224
    ----------------------------------------------------------------------
    

Adoption of new accounting standard

On Jan. 1, 2010, we adopted SFAS No. 167, "Amendments to FASB Interpretation No. 46 R" (Topic 810, Consolidations).  At March 31, 2010, our balance sheet included $3.1 billion for the consolidation of certain asset management funds, seed capital investments and securitizations, including $394 million of Class A Notes of the Grantor Trust.  The new statement increased our balance sheet by $2.7 billion, or approximately 1%, from year-end.  

The consolidated asset management funds are disclosed separately on the balance sheet and the securitizations are included in available for sale securities. The income statement separately discloses the operations of consolidated asset management funds ($52 million) and the net income attributable to noncontrolling interests of consolidated asset management funds ($30 million).  The net of these income statement line items ($22 million) was previously disclosed in the income statement as asset and wealth management revenue of $6 million and investment income of $16 million.

Investment securities portfolio

At March 31, 2010, the fair value of our investment securities portfolio totaled $55.5 billion.  The unrealized pre-tax loss on our securities portfolio was $242 million at March 31, 2010 compared with $1.0 billion at Dec. 31, 2009 and $8.0 billion at March 31, 2009.

The following table presents the March 31, 2010 investment securities portfolio.

    
    
    
    -------------------------------------------------------------------------
    Investment securities portfolio – March 31, 2010
                                                      Fair value
                                                      as a % of
    (dollar amounts                Amortized   Fair   amortized   Unrealized
     in millions)                     cost     value    cost(a)   gain/(loss)
    -------------------------------------------------------------------------
    Watch list:
    European floating rate 
     notes (b)                      $5,485    $5,032        91%    $(453)
    Commercial MBS                   2,364     2,360       100        (4)
    Prime RMBS                       1,799     1,613        88      (186)
    Alt-A RMBS                         842       756        70       (86)
    Subprime RMBS                      773       486        63      (287)
    Credit cards                       589       588        97        (1)
    Other                              362       381        53        19
    -------------------------------------------------------------------------
      Total Watch list (c)          12,214    11,216        87      (998)
    Agency RMBS                     18,028    18,349       102       321
    Sovereign debt/sovereign 
     guaranteed                      7,625     7,710       101        85
    U.S. Treasury securities         7,036     7,083       101        47
    Grantor Trust (d):
      Alt-A RMBS                     2,462     2,605        61       143
      Prime RMBS                     1,928     2,024        72        96
      Subprime RMBS                    127       146        63        19
    FDIC-insured debt                2,531     2,586       102        55
    U.S. Government agency debt      1,138     1,157       102        19
    Other                            2,679     2,650        99       (29)
    -------------------------------------------------------------------------
      Total investment securities  $55,768   $55,526        94%    $(242)
    -------------------------------------------------------------------------
    
    
    -------------------------------------------------------------------------
                                               Ratings
                              -----------------------------------------------
    (dollar amounts           AAA/       A+/     BBB+/    BB+ and       Not
     in millions)              AA-        A-      BBB-     lower      rated
    -------------------------------------------------------------------------
    Watch list:
    European floating rate 
     notes (b)                 95%        5%        -%        -%        -%
    Commercial MBS             93         4         3         -         -
    Prime RMBS                 59        23         6        12         -
    Alt-A RMBS                 28         8         1        63         -
    Subprime RMBS              72        16         5         7         -
    Credit cards                2        97         1         -         -
    Other                       1         -        20        68        11
    -------------------------------------------------------------------------
      Total Watch list (c)     76        13         2         9         -
    Agency RMBS               100         -         -         -         -
    Sovereign debt/sovereign 
     guaranteed               100         -         -         -         -
    U.S. Treasury securities  100         -         -         -         -
    Grantor Trust (d):
      Alt-A RMBS                3         4         5        88         -
      Prime RMBS                5         7         7        81         -
      Subprime RMBS            13         5         6        76         -
    FDIC-insured debt         100         -         -         -         -
    U.S. Government agency 
     debt                     100         -         -         -         -
    Other                      72        10         6         1        11
    -------------------------------------------------------------------------
      Total investment 
       Securities              85%        4%        1%        9%        1%
    -------------------------------------------------------------------------
    (a) Amortized cost before impairments.
    (b) Includes commercial MBS, RMBS and other securities.
    (c) The "Watch list" includes those securities we view as having a 
        higher risk of impairment charges.
    (d) The Grantor Trust RMBS were marked to market in the fourth quarter 
        of 2009.  We believe these RMBS would receive a higher credit 
        rating if the rating was based on the written-down amortized cost 
        instead of the current face amount.
    

Nonperforming assets

    
    
    --------------------------------------------------------------------------
    Nonperforming assets                  March 31,    Dec. 31,   March 31,
    (dollar amounts in millions)               2010        2009        2009
    --------------------------------------------------------------------------
    Loans:
      Other residential mortgages              $204        $190        $143
      Financial institutions                    102         172          30
      Commercial                                 40          65          34
      Commercial real estate                     50          61         197
      Wealth management                          58          58           6
      Foreign                                     -           -           2
    --------------------------------------------------------------------------
        Total nonperforming loans               454         546         412
    Other assets owned                            5           4           9
        Total nonperforming assets             $459        $550(a)     $421(a)
    --------------------------------------------------------------------------
    Nonperforming loans ratio                   1.3%        1.5%        1.0%
    Allowance for loan losses/nonperforming 
     loans                                    114.5        92.1       114.1
    Total allowance for credit losses/
     nonperforming loans                      140.5       115.0       135.7
    --------------------------------------------------------------------------
    (a) Nonperforming assets at Dec. 31, 2009 exclude discontinued 
        operations.  Nonperforming assets at March 31, 2009 includes 
        discontinued operations of $130 million.

Nonperforming assets decreased $91 million compared with Dec. 31, 2009.  The decrease primarily resulted from repayments and charge-offs.

Discontinued operations

In the second quarter of 2009, we adopted discontinued operations accounting for Mellon United National Bank ("MUNB") located in Florida.  It was determined that this business no longer fit our strategic focus on our asset management and securities servicing businesses.  On Jan. 15, 2010, we completed the sale of MUNB.  This business was formerly included in the Other segment.  In the first quarter of 2010, we recorded an after-tax loss on discontinued operations of $42 million primarily reflecting lower of cost or market write-downs on the retained loans.

Consolidated net income applicable to common shareholders, including discontinued operations

Net income applicable to common shareholders, including discontinued operations, totaled $559 million, or $0.46 per common share, in the first quarter of 2010 compared with $322 million, or $0.28 per common share, in the first quarter of 2009 and $593 million, or $0.49 per common share, in the fourth quarter of 2009.

Supplemental information – Explanation of Non-GAAP financial measures

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

BNY Mellon has provided a measure of tangible book value per share, which it believes provides additional useful information as to the level of such assets in relation to shares of common stock outstanding.  BNY Mellon has presented revenue measures which exclude the effect of net securities gains (losses) and noncontrolling interests related to consolidated asset management funds and expense measures which exclude litigation reserves, restructuring charges, M&I expenses and intangible amortization expenses; and measures which utilize net income excluding tax items such as discrete tax benefits related to a tax loss on mortgages.  Return on equity measures and operating margin measures which exclude some or all of these items are also presented.  BNY Mellon believes that these measures are useful to investors because they permit a focus on period to period comparisons which relate to the ability of BNY Mellon to enhance revenues and limit expenses in circumstances where such matters are within BNY Mellon's control.  The excluded items in general relate to situations where accounting rules require certain ongoing charges as a result of prior transactions, or where valuation or other accounting/regulatory requirements require charges unrelated to operational initiatives.  M&I expenses primarily relate to the merger with Mellon Financial Corporation in 2007.  M&I expenses generally continue for approximately three years after the transaction, and can vary on a year-to-year basis depending on the stage of the integration.  BNY Mellon believes that the exclusion of M&I expenses provides investors with a focus on BNY Mellon's business as it would appear on a consolidated going-forward basis, after such M&I expenses have ceased, typically after approximately three years.  Future periods will not reflect such M&I expenses, and thus may be more easily compared to our current results if M&I expenses are excluded.  With regards to the exclusion of net securities gains (losses), BNY Mellon's primary businesses are Asset and Wealth Management and Institutional Services.  The management of these sectors is evaluated on the basis of the ability of these businesses to generate fee and net interest revenue and to control expenses, and not on the results of BNY Mellon's investment securities portfolio.  Management of the investment securities portfolio is a shared service contained in the Other segment.  The primary objective of the investment securities portfolio is to generate net interest revenue from the liquidity generated by BNY Mellon's processing businesses.  BNY Mellon does not generally originate or trade the securities in the investment securities portfolio.  With regards to higher yields related to the restructured investment securities portfolio, client deposits serve as the primary funds source for our investment securities portfolio and we typically allocate all interest revenue to the businesses generating the deposits.  Accordingly, the higher yield related to the restructured investment securities portfolio has been included in the segment results.  Restructuring charges relate to migrating positions to global growth centers and the elimination of certain positions.  Excluding the discrete tax benefits related to a tax loss on mortgages permits investors to calculate the tax impact of BNY Mellon's primary businesses.  The presentation of financial measures excluding litigation reserves in the first quarter of 2010 provides investors with the ability to view performance metrics on the basis that management views results.  The presentation of income of consolidated asset management funds, net of noncontrolling interests related to the consolidation of certain asset management funds, permits investors to view revenue on a basis consistent with prior periods.  BNY Mellon believes that these presentations, as a supplement to GAAP information, gives investors a clearer picture of the results of its primary businesses.

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

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

    
    
    
    ----------------------------------------------------------------------
    Reconciliation of net income and EPS
     – GAAP to Non-GAAP                                     1Q10
                                                  ------------------------
    (in millions, except earnings per              Net
    share amounts)                                income          EPS(a)
    ----------------------------------------------------------------------
    Net income applicable to common 
     shareholders of The Bank of 
     New York Mellon Corporation – GAAP – 
     Diluted EPS basis (a)                         $559           $0.46
    Discontinued operations income 
     (loss), net of tax                             (42)          (0.03)
    ----------------------------------------------------------------------
      Income from continuing operations 
       applicable to common shareholders of 
       The Bank of New York Mellon Corporation      601            0.49
    Litigation reserves                              98            0.08
    M&I expenses                                     16            0.01
    Restructuring charges                             5               -
    Net securities (gains) losses                    (5)              -
    ----------------------------------------------------------------------
      Income from continuing operations 
       applicable to common shareholders 
       excluding litigation reserves, M&I 
       expenses, restructuring charges and net 
       securities (gains) losses – Non-GAAP         715            0.59(b)
    Intangible amortization                          62            0.05
    ----------------------------------------------------------------------
      Income from continuing operations 
       applicable to common shareholders 
       excluding litigation reserves, M&I 
       expenses, restructuring charges, net 
       securities (gains) losses and intangible 
       amortization – Non-GAAP                     $777           $0.64
    ----------------------------------------------------------------------
    (a) Diluted earnings per share under the two-class method was 
        calculated after deducting $5 million of earnings allocated to 
        participating securities.
    (b) Does not foot due to rounding.
    
    
    
    -------------------------------------------------------------------------
    Reconciliation of income (loss) from 
    continuing operations before income 
    taxes – pre-tax operating margin
    (dollars in millions)                       1Q10        4Q09        1Q09
    -------------------------------------------------------------------------
    Income (loss) from continuing operations 
     before income taxes – GAAP                 $889        $672        $572
      Less:  Net securities gains (losses)         7          15        (295)
             Noncontrolling interests of 
              consolidated asset management 
              funds                               30           -           -
      Add:   Litigation reserves                 164           -           -
             M&I expenses                         26          52          68
             Restructuring charges                 7         139          10
             Intangible amortization              97         107         107
    -------------------------------------------------------------------------
      Income (loss) from continuing 
       operations before income taxes 
       excluding net securities gains 
       (losses), noncontrolling interests 
       of consolidated asset management 
       funds, litigation reserves, M&I 
       expenses, restructuring charges and 
       intangible amortization – Non-GAAP     $1,146        $955      $1,052
    
    Fee and other revenue – GAAP              $2,568      $2,595      $2,136
    Income of consolidated asset management 
     funds – GAAP                                 52           -           -
    Net interest revenue – GAAP                  765         724         775
    -------------------------------------------------------------------------
      Total revenue – GAAP                     3,385       3,319       2,911
      Less:  Net securities gains (losses)         7          15        (295)
             Noncontrolling interests of 
              consolidated asset management 
              funds                               30           -           -
    -------------------------------------------------------------------------
               Total revenue excluding net 
                securities gains (losses) 
                and noncontrolling interests 
                of consolidated asset 
                management funds – Non-GAAP   $3,348      $3,304      $3,206
    
    Pre-tax operating margin (a)                  26%         20%         20%
    Pre-tax operating margin excluding net 
     securities gains (losses), 
     noncontrolling interests of 
     consolidated asset management funds, 
     litigation reserves, M&I expenses, 
     restructuring charges and intangible 
     amortization – Non-GAAP (a)                  34%         29%         33%
    -------------------------------------------------------------------------
    (a) Income (loss) before taxes divided by total revenue.
    
    
    
    -------------------------------------------------------------------------
    Return on common equity and tangible common 
    equity – continuing operations
    (dollars in millions)                       1Q10        4Q09        1Q09
    -------------------------------------------------------------------------
    Net income (loss) applicable to common 
     shareholders of The Bank of New York 
     Mellon Corporation - GAAP                  $559        $593        $322
    Less:  Income (loss) from discontinued 
            operations, net of tax               (42)       (119)        (41)
    -------------------------------------------------------------------------
      Net income (loss) from continuing 
       operations applicable to common 
       shareholders of The Bank of New York 
       Mellon Corporation                        601         712         363
    Intangible amortization                       62          66          66
    -------------------------------------------------------------------------
      Net income (loss) from continuing 
       operations applicable to common 
       shareholders of The Bank of New York 
       Mellon Corporation excluding intangible 
       amortization – Non-GAAP                   663         778         429
    Less:  Net securities gains (losses)           5          31        (183)
    Add:   Litigation reserves                    98           -           -
           M&I expenses                           16          33          41
           Restructuring charges                   5          86           7
           Discrete tax benefits                   -        (133)          -
    -------------------------------------------------------------------------
    Net income (loss) from continuing 
     operations excluding net securities gains 
     (losses), litigation reserves, M&I 
     expenses, restructuring charges, discrete 
     tax benefits and intangible 
     amortization – Non-GAAP                    $777        $733        $660
    
    Average common shareholders' equity      $29,720     $28,843     $25,189
    Less:  Average goodwill                   16,143      16,291      15,837
           Average intangible assets           5,513       5,587       5,752
    Add:   Deferred tax liability – tax 
            deductible goodwill                  720         720         624
           Deferred tax liability – 
            non-tax deductible intangible 
            assets                             1,660       1,680       1,808
    -------------------------------------------------------------------------
    Average tangible common shareholders' 
     equity – Non-GAAP                       $10,444      $9,365      $6,032
    
    Return on common equity – GAAP (a)           8.2%        9.8%        5.8%
    Return on common equity excluding 
     net securities gains (losses), 
     litigation reserves, M&I expenses, 
     restructuring charges, discrete tax 
     benefits, and intangible 
     amortization – Non-GAAP (a)                10.6%       10.1%       10.6%
    
    Return on tangible common 
     equity – Non-GAAP (a)                      25.8%       33.0%       28.8%
    Return on tangible common equity 
     excluding net securities gains 
     (losses), litigation reserves, M&I 
     expenses, restructuring charges and 
     discrete tax benefits – Non-GAAP (a)       30.2%       31.1%       44.4%
    -------------------------------------------------------------------------
    (a) Annualized.
    
    
    
    ------------------------------------------------------------------------
    Securities servicing fees
    (in millions)                               1Q10        4Q09        1Q09
    ------------------------------------------------------------------------
    Securities servicing fees                 $1,200      $1,241      $1,226
    Less:  Securities lending fee revenue         29          29          90
    ------------------------------------------------------------------------
      Securities servicing fees excluding 
       securities lending fee revenue         $1,171      $1,212      $1,136
    ------------------------------------------------------------------------
    
    
    
    ------------------------------------------------------------------------
    Asset and wealth management                                  1Q10 vs.
     fee revenue                                              --------------
    (dollars in millions)          1Q10     4Q09     1Q09     4Q09     1Q09
    ------------------------------------------------------------------------
    Asset and wealth management 
     fee revenue                   $696     $736     $616       (5)%     13%
    Less:  Performance fees          13       59        7
    ------------------------------------------------------------------------
      Asset and wealth management 
       fee revenue excluding
       performance fees            $683     $677     $609        1%      12%
    ------------------------------------------------------------------------
    
    
    
    -------------------------------------------------------------------------
    Equity to assets and book value 
     per common share
    (dollars in millions, unless           March 31,    Dec. 31,   March 31,
    otherwise noted)                            2010        2009        2009
    -------------------------------------------------------------------------
    Common shareholders' equity at 
     period end - GAAP                       $29,688     $28,977     $25,415
    Less:  Goodwill                           16,077      16,249      15,805
           Intangible assets                   5,449       5,588       5,717
    Add:   Deferred tax liability – tax 
            deductible goodwill                  720         720         624
           Deferred tax liability – 
            non-tax deductible intangible 
            assets                             1,660       1,680       1,808
    -------------------------------------------------------------------------
    Tangible common shareholders' equity at 
     period end – Non-GAAP                   $10,542      $9,540      $6,325
    
    Total assets at period end - GAAP       $210,251    $212,224    $203,478
    Less:  Assets of consolidated asset 
            management funds                   2,259           -           -
    -------------------------------------------------------------------------
      Total assets of operations – 
       Non-GAAP                              207,992     212,224     203,478
    Less:  Goodwill                           16,077      16,249      15,805
           Intangible assets                   5,449       5,588       5,717
           Cash on deposit with the 
            Federal Reserve and other 
            central banks (a)                 14,709       7,375      29,679
    -------------------------------------------------------------------------
    Tangible total assets of operations 
     at period end – Non-GAAP               $171,757    $183,012    $152,277
    
    Common shareholders' equity to total 
     assets – GAAP                              14.1%       13.7%       12.5%
    Tangible common shareholders' equity 
     to tangible total assets of 
     operations – Non-GAAP                       6.1%        5.2%        4.2%
    
    Period end common shares 
     outstanding (in thousands)            1,212,941   1,207,835   1,153,450
    
    Book value per common share               $24.48      $23.99      $22.03
    Tangible book value per common 
     share – Non-GAAP                         $ 8.69       $7.90       $5.48
    -------------------------------------------------------------------------
    (a) Assigned a zero percent risk weighting by the regulators.
    
    
    
    -------------------------------------------------------------------------
    Calculation of Tier 1 common equity 
     to risk-weighted assets ratio (a)     March 31,    Dec. 31,   March 31,
    (dollars in millions)                       2010        2009        2009
    -------------------------------------------------------------------------
    Total Tier 1 capital                     $13,430     $12,883     $16,242
    Less:  Trust preferred securities          1,667       1,686       1,648
           Series B preferred stock                -           -       2,795
    -------------------------------------------------------------------------
    Total Tier 1 common equity               $11,763     $11,197     $11,799
    
    Total risk-weighted assets              $101,705    $106,328    $117,412
    
    Tier 1 common equity to risk-weighted 
     assets ratio                               11.6%       10.5%       10.0%
    -------------------------------------------------------------------------
    (a) On a regulatory basis.
    

Cautionary Statement

The information presented in this Earnings Release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to, among other things, expectations with respect to the economic outlook, reinvestment in our businesses, intended acquisitions, including the expected impact on earnings and the timing of anticipated closing, and credit ratings of the RMBS in the Grantor Trust.  These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this earnings release, are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon's control).  Factors that could cause BNY Mellon's results to differ materially from those described in the forward-looking statements can be found in the risk factors set forth in BNY Mellon's Annual Report on Form 10-K for the year ended Dec. 31, 2009 and BNY Mellon's other filings with the Securities and Exchange Commission.  All forward-looking statements in this earnings release speak only as of April 20, 2010 and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.